NEW SOUTH WALES SUPREME COURT

CITATION: Cargill International SA v Peabody Australia Mining Ltd [2010] NSWSC 887

JURISDICTION:

Equity Commercial List

FILE NUMBER(S): 2010/009966

HEARING DATE(S):

10 June 2010 JUDGMENT DATE:

11 August 2010

PARTIES: Cargill International SA (Plaintiff) Peabody Australia Mining Ltd (Defendant)

JUDGMENT OF:

Ward J LOWER COURT JURISDICTION:

Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL: J Stevenson SC with D McLure (Plaintiff)

F Gleeson SC with K Day (Defendant) SOLICITORS:

Macpherson + Kelley Lawyers (Plaintiff) Freehills (Defendant)

CATCHWORDS:

COMMERCIAL ARBITRATION application under s 38(4)(b) of Commercial Arbitration Act 1984 (NSW) for leave to

appeal from Arbitrator’s award on grounds of manifest error of law or strong

evidence of error or in the alternative to remit questions of law to Arbitrator under article 34(2)(b)(ii) of Model Law

if former, whether leave to appeal should be granted under Commercial Arbitration Act

if latter whether denial of natural justice under the Model Law HELD Model Law applies

referral of dispute under rules of ICC did not operate as an ‘opt-out’ of Model Law under s 21 of the International Arbitration Act 1974 (Cth) – the decision in Eisenwerk

Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd [2001] 1 Qd R 461 is plainly wrong and should not be followed referral of dispute to ICC Rules did not indicate that parties intended to opt-out of

Model Law to extent it applied as the curial law or lex arbitri had Commercial Arbitration Act applied, threshold requirements for grant of leave not

satisfied discretion to grant leave would not have been exercised in any event no denial of natural justice

plaintiff’s application dismissed ADMIRALTY AND MARITIME JURISDICTION

whether dispute was one arising out of a maritime claim HELD dispute did arise out of a maritime claim so that exclusion agreement by adoption of

article 28(6) of the ICC Rules would not apply

LEGISLATION CITED: Admiralty Act 1988 (Cth) Commercial Arbitration Act 1984 (NSW)

International Arbitration Act 1974 (Cth) International Arbitration Amendment Bill 1988 (Cth)

International Arbitration Amendment Act 2010, No 97 (Cth)

CASES CITED: Aerospatiale Holdings Australia Pty Ltd v Elspan International Ltd (1992) 28 NSWLR

321 Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 American Diagnostica Inc v Gradipore Ltd (1988) 44 NSWLR 312

Appleton Papers Inc v Tomasetti Paper Pty Ltd (1983) 3 NSWLR 208 Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15;

(1993) 177 CLR 485 BCCI v Ali [2002] 1 AC 251 Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 AC 266

Beveridge v Whitton [2001] NSWCA 6 Bread Manufacturers of NSW v Evans [1981] HCA 69; (1994) 180 CLR 404

British Sugar plc v NEI Power Projects Ltd (1997) 87 BLR 42 CAL No 14 Pty Limited v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 269

Carbotech-Australia Pty Ltd & anor v Yates & 14 ors [2008] NSWSC 540 Carcione Nominees Pty Ltd & Anor v Western Australian Planning Commission &

Ors [2005] WASCA 56

Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 197 ALR 389;

Durayappah v Fernando (1967) 2 AC 337 Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd

[2001] 1 Qd R 461 Equuscorp v Glengallan [2004] HCA 55; (2004) 218 CLR 471 Export Credits Guarantee Department v Universal Oil Products Co [1983] 2 All ER

205; [1983] 1 WLR 399 Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230

CLR 89 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 Gatoil International Inc v Arkwright–Boston Manufacturers Metal Insurance Co [1985]

AC 255 Gett v Tabet (2009) 254 ALR 504; [2009] NSWCA 76

Gordion Runoff Limited v Westport Insurance Corporation [2010] NSWCA 57 Heilbrunn v Lightwood plc [2007] FCA 1518; (2007) 164 FCR 1 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1

WLR 896 John Holland Pty Ltd aka John Holland Construction & Engineering Pty Ltd v Toyo

Engineering Corp (Japan) [2001] 2 SLR 262 Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1; (2010) 262 ALR 569

Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 Mobil Oil Australia Pty. Ltd. v Federal Commissioner of Taxation [1963] HCA 41;

(1963) 113 CLR 475 Natoli v Walker (1994) 217 ALR 201 Nishina Trading Co Ltd v Chiyoda Fire & Marine Insurance Co Ltd (The Mandarin

Star) [1968] 1 WLR 1325; [1968] 3 All ER 712; [1968] 2 Lloyd's Rep 47 Pacific Carriers v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451

Port of Geelong Authority v The “Bass Reefer” (1992) 37 FCR 374 Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 Raguz v Sullivan [2000] NSWCA 240

Russell v Duke of Norfolk (1949) 1 All ER 109 Sharah v Healey [1982] 2 NSWLR 223

Shell International Petroleum Ltd v Gibbs [1983] 2 AC 375 Smith Ltd v H & S International [1991] 2 Lloyd’s Rep 127 Sunport Shipping Ltd v Tryg-Baltica International (UK) Ltd [2003] 1 Lloyd’s Rep 138

The “Catur Samudra” [2010] SGHC 18 The Kalliopi A [1988] 2 Lloyd’s Rep 101

The Radauti [1987] 2 Lloyd’s Rep 276 The Solon [2000] CLC 593 The Queen v Commonwealth Conciliation and Arbitration Commission: ex parte

Angliss Group (1969) 122 CLR The Zeus [1888] 13 PD 188

Toll v Alphapharm [2004] HCA 52; (2004) 219 CLR 165 Tradhol Internacional SA v Colony Sugar Mills Limited 2009 WL 3929893 (C.A.2(N.Y)) (20/11/09)

Trustees of Henry Smith’s Charity v AWADA Trading & Promotion Services (1983) 47 P&CR 607

Westcott v Hahn [1918] 1 KB 495

Westport Insurance Corporation v Gordion Runoff Ltd [2009] NSWSC 245

TEXTS CITED: Aronson, Dyer and Groves, Judicial Review of Administrative Action, 3rd ed, 2004

Barret-White S., and Kee C., “Enforcement of Arbitral Awards where the seat is Australia – how the Eisenwerk Decision might still be a sleeping assassin: (2007) 24(5) Journal of International Arbitration 515

Blackaby N., Partasides C., Redfern A., and Hunter M., Redfern and Hunter on International Arbitration, 5th edn, Oxford University Press, 2009

Davies S., “International Arbitration: when arbitral rules and procedural rules collide”, Australian Mining and Petroleum Law Association Yearbook, 2002 Chow P., “Issues in International Commercial Arbitration: Conflict between Model

Law and Arbitral Rules” (2003) 19 BCL 426 Croft and Fairlie, “The New Framework for International Commercial Arbitration in

Australia”, ACICA Conference, December 2009 Dicey, Morris and Collins, The Conflict of Laws, Sweet & Maxwell, 2006 and updating October 2009 edn

Gehle B., “The Eisenwerk decision is generally considered as bad law”, Vindobona Journal of International Commercial Law & Arbitration, 2009 13 VJ 251

Greenberg S., “ACICA’s New International Arbitration Rules” (2006) 23 (2) Journal of International Arbitration 189 Heydon, “Limits to the Powers of Ultimate Appellate Courts” (2006) 122 LQR 399

Lewison, The Interpretation of Contracts, 4th edn, Sweet & Maxwell, London, 2007 Megens P. and Cubitt C., “Arbitrators' perspective: the evolving face of international

arbitration - the past, the present and the future”, International Arbitration Law Review, 2010, 13(1), 1-7 Mustill and Boyd, Commercial Arbitration, 2nd edn, Butterworths, 1989

Pryles M., “Exclusion of the Model Law” [2001] Int ALR 175 Submissions made to the Commonwealth Attorney General, in response to the

Discussion Paper of 21 November 2008, by ICC Australia, ACICA, the Chartered Institute of Arbitrators, the NSW Bar Association, the Law Society of NSW, the Law Council of Australia, and the Victorian Bar

DECISION:

Plaintiff's application dismissed

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

COMMERCIAL ARBITRATION LIST

WARD J

WEDNESDAY 11 AUGUST 2010

10/009966 CARGILL INTERNATIONAL SA V PEABODY AUSTRALIA MINING LTD

JUDGMENT

1 HER HONOUR: This application relates to a partial award made by Mr David Jackson QC, as

arbitrator, on 7 December 2009 in a dispute arising out of a Standard Coal Trading Agreement made on

5 December 2005 between Carg ill International SA and Peabody Australia Mining Limited (then

known as Excel Coal Ltd) for the supply of coal to Carg ill. (For convenience, I will adopt the same

terminology as that used in the Arbitrator’s award and refer to the parties as Carg ill and Excel,

respectively.)

2 In the arbitration Excel claimed moneys outstanding in respect of certain coal deliveries made by it in

2009 at the end of the period covered by the agreement and Cargill counterclaimed for demurrage in

respect of the late delivery to it of a number of shipments of coal earlier in the course of the agreement

in mid 2007. Those disputes were referred to arb itration pursuant to the arbitration clause contained in

the parties’ agreement (clause 18.9). It is conceded that the arbitration conducted by Mr Jackson was

an international commercial arbitrat ion for the purposes of the International Arbitration Act 1974 (Cth)

(the Commonwealth Act).

3 The Arbitrator found in favour of Excel’s claim for USD299,822.74 (basically, for the amount of the

short payment by Cargill in 2009) and dismissed the whole of Cargill’s counterclaim, having held that

demurrage was not payable during the force majeure per iod (the duration of which had been one of the

matters in dispute between the parties). In so doing, the Arbitrator found, relevantly, that:

(a) the period of force majeure had commenced at 0815hrs on 8 June 2007 and ran through to

0700hrs on 25 June 2007;

(b) the notice of intention to claim force majeure given by Excel to Cargill on 13 June 2007

satisfied the requirement in clause 17.2 of the agreement that such notice be given as early as

practicable; and

(c) in any event, Cargill was not then entitled (by reason of the fact that it had reached an

enforceable agreement to resolve disputed rights, or had by its conduct waived or would be

estopped in equity from asserting any entitlements, in respect of demurrage fo r that part of the

force majeure period) to raise the question whether demurrage was payable in the period from

0815hrs on 8 June 2007 to 1800 hrs on 21 June 2007 (to which I refer as the estoppel/waiver

finding); though the Arbitrator went on to say that if Cargill had been so entitled he would

have concluded that demurrage was not payable in that period by reference to the conclusion

he had already reached in relation to the force majeure period.

4 There is no challenge to any of the Arbit rator’s findings summarised in (a) to (c) above (t hough Carg ill

does seek to challenge the conclusion that demurrage was not payable during the period of force

majeure as so found). Rather, Cargill challenges the Arbitrator’s December 2009 award by reference to

what is contended to be the Arbitrator’s failure to deal (or to deal correctly) with an alternative

argument said to have been put by Cargill to the Arbitrator in relation to its demurrage claim.

5 That alternative argument, in essence, is that the period between the commencement of conditions

amounting to force majeure (0815 on 8 June 2007) and the giv ing (at 1348 on 13 June 2007) of a force

majeure notice, whether or not that notice had been given as early as practicable (and hence whether

or not that notice was a valid and effective notice in compliance with clause 17.2 of the agreement),

should have been accepted as counting as “laytime” under the agreement.

6 If that alternative argument were to be correct, then it seems not to be disputed that laytime would have

continued to run from 0815 on 8 June 2007 and would have exp ired not long after that at 0956hrs on 8

June 2007. (On any view, this would mean, on the Arbitrator’s findings, that force majeure

commenced before, albeit only very shortly before, the exp iration of laytime.) Once layti me had

expired, the Iron Bradyn would have been on demurrage (and once on demurrage all time lost,

including time lost on account of force majeure, continues to count as demurrage).

7 Leaving aside for the present the import of Excel’s arguments (which were accepted by the Arbitrator)

based on waiver/estoppel or the like, Cargill contends that, had the Arbitrator found that the vessel

went on to demurrage as at 0956hrs on 8 June 2007, this would have meant that Carg ill’s counterclaim

for demurrage ran for the whole of the force majeure period from 8 to 25 June 2007.

8 In the present proceedings, Cargill seeks to challenge the Arbitrator’s award in one of two alternative

ways, depending on the conclusion which is reached as to an initial ju risdictional q uestion, that being

whether the arb itration is governed by the Commercial Arbitration Act 1984 (NSW) (the State Act), as

Carg ill contends, or the UNCITRAL Model Law in accordance with s 16 of the Commonwealth Act, as

Excel contends.

9 The first is under the State Act. Cargill seeks leave pursuant to s 38(4)(b) of the State Act to appeal

from the award (which requires it to establish that the State Act applies and then to satisfy the threshold

requirements of section 38, namely that there was an error of law that substantially affects the parties’

rights and either that there has been a manifest error of law on the face of the award or that there is

both strong evidence of error and the question is one which is likely to add substantially to the certainty

of commercial law).

10 Secondly, if (contrary to Cargill’s primary submission) the State Act does not apply, Cargill seeks an

order setting aside the award under article 34(2)(b)(ii) of the Model Law, on the basis that the award is

in conflict with the public policy of the State due to the failure of the arbitrator to address Cargill’s

alternative argument (that failure, it is said, amounting to a denial of natural justice).

11 In its Amended Summons in these proceedings, Cargill sought not only leave to appeal but also, if

successful in obtaining leave, a determination of the relevant questions of law upon the hearing of that

appeal. However, before me it was conceded that it was not appropriate to entertain any ap peal in the

context of the present application, having regard to what was said by Allsop P (with whom Spigelman

CJ and Macfarlan JA agreed) in Gordion Runoff Limited v Westport Insurance Corporation [2010]

NSW CA 57, from [103] . Accordingly, the relief now claimed by Cargill (in the event that the State

Act applies) is limited to the grant of leave to appeal.

12 I note that it is contended by Excel that, if the Model Law applies, then Article 34 of the Model Law

provides the exclusive recourse against an arbitral award in the present case and that Cargill is thus

precluded from apply ing for leave to appeal under s 38(4)(e) of the State Act because that provision is

inconsistent with the more limited form of recourse against an arbitral award available und er article 34

of the Model Law (and thus the State Act is, to the extent of the inconsistency, invalid by operation of s

109 of the Commonwealth Constitution). It was conceded by Mr Stevenson, though only for the

purposes of this application, that if there were found not to have been an agreement between the parties

to ‘opt out’ of the Model Law, then there would be a section 109 inconsistency between the two modes

of review and that Cargill could proceed for a review of the Arbitrator’s decision only unde r the

provisions of the Model Law.

13 Finally, in the event that the Model Law does apply, and Carg ill succeeds on its application to set aside

the award, then Carg ill requests that the matter be remitted to the Arbitrator pursuant to article 34(4) of

the Model Law for a determination by the Arb itrator o f what I will refer to as the Alternative

Argument.

Background Facts

14 The agreement (a standard form agreement developed by an entity known as globalCOAL and of

which there have been successive versions since May 2001) was for the delivery, over the period from

March 2006 to December 2008, of coal FOB (“free on board”) to three specified vessels at the port of

Newcastle. (There was some dispute as to the extent to which the SCoTA form of agreement was used

in the Australian coal industry in transactions for the sale of coal in and from Australia but it does not

seem to be disputed that it is and can be used for the sale of seaborne thermal coal; and that it is so used

in a percentage of trading contracts entered into in this country.) The version used by the parties in this

case was version 5a (the standard terms of which incorporated all revisions effective as at 0630 GMT

on 19 October 2005); however, there has been no subsequent change to the force majeure p rovisions in

the current version of the agreement (hence any determination of a point of construction on the force

majeure provisions of the earlier version has potentially wider relevance than for this case alone).

15 The coal deliveries were made by rail. Unfortunately, those deliveries which were due to take place in

June 2007 were delayed due to disruption to the rail infrastructure in the Hunter Valley caused by

severe storms in that month. The consequential delay in loading and departure of the three vessels in

question gave rise to a claim for demurrage by Carg ill. For the purposes of the present application, the

particular dispute between the parties relates only to the claim for demurrage in respect of the delivery

of coal to the MV Iron Braydn.

16 Carg ill’s claim for demurrage in respect of the late delivery of coal due in June 2007 seems first to

have been raised shortly after the coal was in fact delivered in Ju ly 2007. Excel relied upon the force

majeure provisions of the agreement to deny the claim for demurrage. There was some correspondence

between the two entities during the latter part of 2007 and early 2008 in relation to that claim.

17 The Arbitrator, in his award, referred to the communications between Excel and Cargill in relation to

that claim from 2007 onwards and expressed the opinion that, as at November 2007, the only matter in

issue between the parties in relat ion to the demurrage claim was whether it extended to the period

beyond 21 June 2007.

18 Relevantly, the Arbitrator noted that, by February 2008 (when Cargill issued an invoice for an

“undisputed amount” of demurrage, without prejudice to its claim for the balance, which was described

as the “disputed amount”), there was no hint that Carg ill was reserving to itself an entitlement to claim

demurrage for the period extending back before 21 June 2007. The so-called “disputed amount” (in

respect of which Cargill had reserved its position at that time) related to the claim for demurrage for the

period from 21 to 25 June 2007. It represents the USD amount for which Excel was ultimately

successful in the arb itration before the Arbit rator. However in relation to the “disputed amount”, the

Arbitrator noted (at [7]) that the effect of the correspondence between the p arties was that it was

accepted that Excel was not liable for demurrage in the period from 8 June to 21 June 2007. (Th is

becomes relevant when considering one of the threshold requirements for the grant of leave under the

State Act, as the Arbitrator’s estoppel/waiver finding, which is not challenged, has the effect that

Carg ill is precluded from revisiting any claim for demurrage at least in the period prior to 21 June

2007.)

19 No further steps seem to have been taken by Cargill, whether in relation to the overall demurrage now

claimed or for the “disputed amount”, until the term of the contract was coming to an end. At that

point, when Cargill made payment in respect of the final invoice issued by Excel for the later (2009)

coal deliveries it withheld an amount which included the “disputed amount” in respect of the 2007 coal

deliveries. Excel then made a claim for short payment of that sum (USD299,882.47), after which

Carg ill served revised invoices claiming demurrage for the whole of the period from 8 to 25 June 2007.

That claim was maintained by it by way of counterclaim in the arbitration (Excel being the moving

party in the arbitral proceedings).

20 The Arbitrator noted that in the arbitration p roceedings Cargill had put in issue every step whic h might

lead to an entitlement on the part of Excel to rely on the force majeure provisions. The issues before

the Arbitrator (which he observed were more numerous than would ordinarily be found in a

commercial arbit ration involving amounts of the kind there involved) included the time at which the

force majeure event had occurred; whether notice of the force majeure event had been given as early as

practicable, as required under the agreement; whether, under the agreement, as properly construed,

demurrage was payable during a force majeure period; and whether Cargill was estopped or otherwise

precluded from then asserting its claim for demurrage.

21 The issue which is the nub of the Alternative Argument (and which Cargill contends the Arbitrator

failed properly to address) relates to the calculation of the period of laytime under the agreement and,

in particular, whether (after commencement of force majeure) laytime continues to run up until the

time at which a force majeure notice (valid or otherwise) is given. As Senior Counsel for Cargill, Mr

Stevenson SC, accepted, the logical extension of this argument (if correct) is that unless a force

majeure notice is given simultaneously with the commencement of a force majeure event, then laytime

continues to run until such notice, valid or otherwise, is given. (By contrast, the effect of the

Arbitrator’s determination is that if a valid force majeure notice is given in compliance with clause 17.1

of the agreement, then clause 17.3 means that a party does not become liable for demurrage during the

period from the happening of the force majeure event the subject of that notice and that the giving of a

notice of intention to claim force majeure under clause 17.2 as early as practicable in the circumstances

means that time lost on account of force majeure does not count as laytime.)

22 The practical context in which this issue arose was as follows. As noted earlier, the coal was to be

delivered on board the Iron Bradyn at the port of Newcastle. The procedure for the delivery and

loading of coal involved the giving of a notice of read iness once the particular ship had arrived in port.

There was then a period of ‘turntime’ (12 hours), following which ‘laytime’ commenced.

23 Laytime (defined in clause 1.1) is the time allowed under the agreement for the loading of the vessel at

the delivery point, after which time demurrage (defined in clause 1.1 as the financ ial compensation

payable if the time used in completing loading was longer than laytime) became payable. Under the

agreement, laytime was to be calculated by reference to the nominated quantity of coal to be loaded on

the vessel according to the formula set out in clause 7.5 (namely, the number of hours or part thereof

calculated by dividing the tonnage of the shipment, expressed in metric tonnes, by the relevant “Cargo

Handling Rate” expressed in Metric Tonnes per hour). (In that regard, I note that Carg ill also asserts

that the Arbitrator made an error of law in placing reliance, for the purposes of addressing the argument

as to laytime, on the definition of Cargo Handling Rate including its reference to Weather Working

Days, a matter I consider in due course.)

24 In respect of the coal to be delivered in June 2007 to the Iron Bradyn, the issue between the parties is

now not as to the time of commencement of force majeure (although that was previously in issue);

rather the question is whether, in the circumstances, laytime continued to run after the commencement

of the force majeure period for the purposes of calculating when Excel became liable for demurrage.

25 It seems to be accepted that, but for the severity of the storms that occurred in early June 2007 and the

consequential disruption to the rail infrastructure over most of that month, laytime (the period in which

the Iron Bradyn was required to be loaded and after which demurrage would have been payable by

Excel) would have ceased (and the Iron Bradyn would have gone on demurrage) at 0956hrs on 8 June

2007. It also seems to be accepted that, had the Iron Bradyn been on demurrage prio r to the

commencement of force majeure, the operation of force majeure would not have affected Excel’s

liab ility for demurrage (it being broadly said that ‘once in demurrage, always in demurrage’, although

there seem to be some exceptions (not material in the present case) to that principle, as identified by the

Arbitrator at [170]).

26 Excel gave a notice of intention to claim force majeure of the kind contemplated by clause 17.2 at

1348hrs on 13 June 2007. (It had the day before given a notice of force majeure for the purposes of

clause 17.1 and in that regard I note that the agreement contemplated two separate force majeure

notices, only the second of which was in contention before the Arbitrator.) Whether the 13 June 2007

force majeure notice had been given as early as practicable for the purposes of clause 17.2 of the

agreement was in issue before the Arbitrator, who u ltimately found that it had. (Cargill had asserted

that the failure to give a notice as early as practicable rendered it of no effect.)

27 As noted earlier, the Arbitrator ult imately found that Excel d id not become liable for demurrage in

respect of the Iron Bradyn until 25 June 2007 (after the cessation of the force majeure period).

28 Carg ill’s principal submission in relation to the force majeure notice was that it was not valid or

effective, as it had not been issued as early as practicable in the circumstances. It does not seek the

challenge the Arbitrator’s finding in that regard. It relies now on the alternative submission it says it

raised, namely that, even if the notice was not held to be invalid or ineffect ive, nevertheless the “delay”

in its issue was to be taken into account when calculat ing whether laytime had exp ired and whether the

vessel had gone on demurrage (as Carg ill contended) on 8 June 2007. I consider in more detail below

the content of the submissions put to the Arb itrator. For present purposes I simply note that Cargill’s

complaint, in substance, is that the Arbitrator failed to deal at all (or dealt incorrectly) with the

Alternative Argument identified now as being to the effect that (irrespective of whether the force

majeure notice was a notice compliant with clause 17.2) laytime continued to run until a force majeure

notice was given. (As I understand it, this argument requires acceptance of the proposition that a notice

given as early as practicable in all the circumstances may nevertheless still be a notice the giv ing of

which was the subject of delay for the purposes of clause 17.2.)

29 Senior Counsel for Excel, Mr Gleeson SC, submits that, to the extent that the Alternative Argument

was put to the Arbitrator, it was rejected on the basis that the Arbitrator had concluded that notice was

given as early as practicable (and hence, as I understand the submission, it was not necessary for the

Arbitrator expressly to consider an argument predicated on a proposition antithetical to such a finding –

namely, that there had been a delay in the giv ing of the notice) (as to which it says there was no

manifest error of law) and, alternatively, to the extent that what Cargill is now seeking is to put an

argument which was not in fact put (or put clearly) before the Arbitrator, there cannot be said to have

been any denial of natural justice in the Arb itrator not having considered or expressly addressed the

argument. It is submitted that Cargill was not deprived of a fair hearing of the case as put by it at the

arbitration.

Issues

30 There are a number of jurisdictional and threshold issues which arise on the present application:

(i) Whether the agreement of the parties to refer any disputes to international arbitration und er the

rules of arbitration of the International Chamber of Commerce (the ICC Rules) constitutes an

agreement to opt out of the Model Law for the purposes of s 21 of the Commonwealth Act,

such that the State Act applies.

(ii) If the answer to (i) is yes, whether the dispute is one falling with in the Admiralty jurisdiction

of this Court (so as to override the effect of s 40 of the State Act, which precludes the grant of

leave to appeal where there is an “exclusion agreement” under which the parties have waived

recourse to the court in respect of their agreement).

(iii) If the answer to both (i) and (ii) is yes, whether the threshold requirements in s 38(5) of the

State Act for the grant of leave to appeal are satisfied (namely that (a) the determination of the

relevant questions of law could substantially affect the rights of one or more parties to the

arbitration agreement; and (b) there is either a manifest error on the face of the partial award

or there is strong evidence that the Arbitrator made an error of law and, if so, the

determination of that question may add or be likely to add substantially to the certainty of

commercial law).

(iv) If the answer to (i) above is no, and the Model Law applies, whether the Arbitrator fa iled to

address the Alternative Argument, so as to amount to a denial of natural justice (such that the

award was in conflict with the public policy o f Australia for the purposes of s 34 of the

Commonwealth Act).

(v) Whether, as a matter of discretion, the court should grant the relief sought (under the State Act

or the Model Law, as the case may be) if Cargill has otherwise made out an entitlement to

relief.

Summary

31 For the reasons set out below, I have concluded as follows on the above issues:

(i) I consider that an agreement by parties to refer any disputes to international arbitrat ion under a

particular set of procedural rules (as opposed to an agreement that the lex arbitri should be

other than that of the Model Law) does not constitute an implied agreement to opt out of the

Model Law for the purposes of s 21 of the Commonwealth Act (and that the decision in

Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH v Australian Granites Ltd [2001] 1 Qd

R 461 to the contrary is plainly wrong and should not be followed).

I am further of the view that the parties, when adopting the ICC Rules as the procedural rules

to govern their arbitrat ion in the terms in which they did, cannot be said to have done so with

the knowledge or intention that this would necessarily be construed as an opt out clause for

the purposes of s 21. While I would accept that the parties, represented by experienced legal

representatives as they were, should be taken to have entered into their agreement with

knowledge of the state of the law at that time (which was to the effect that a clause providing

for settlement of d isputes in accordance with ICC Rules had been construed as constituting an

implied agreement to opt out of the Model Law) the clause in fact adopted by the parties was ,

in my view, sufficiently distinguishable from the Eisenwerk clause to cast doubt on such a

result being the objective common intention of the parties at that time.

Accordingly, I find that there was not an agreement between the parties in writing to o pt out

of the Model Law for the purposes of the Commonwealth Act and that the Model Law applies.

(ii) Had I found otherwise on question (i) (ie, that the Model Law had been excluded and the State

Act applied), then I would have found that the dispute was one arising out of a marit ime claim

within the Admiralty jurisdiction of this Court, for the purposes of s 41 of the State Act, so as

to override the operation of the ‘exclusion agreement’ under which the parties waived

recourse to the court in respect of their agreement.

(iii) Had I found for Cargill on (i) above and held that the State Act applied, then given my finding

on (ii) above it would have been necessary to consider the threshold requirements set out in s

38(5) of the State Act for the grant of leave to appeal. In that regard, I am of the view that:

substantial effect on parties’ rights?

In light of the Arbit rator’s findings as to the existence of an enforceable agreement in

2008 in effect to compromise the claim for demurrage (or as to estoppel /waiver) it

seems to me that the determination of the relevant questions of law (assuming

Carg ill’s contentions on those questions were to be accepted) could at most permit

Carg ill to claim demurrage for the short period from 21-25 June 2007 and therefore

would have a lesser impact financially than Cargill has contended.

Excel’s argument, as I understand it, goes further than this and is that, because the

Arbitrator’s finding based on clause 17.3 was that demurrage was not payable during

the force majeure period and this finding is not challenged , any determination in

Carg ill’s favour of the Alternative Argument (i.e. even for the 21-25 June 2007

period) would not sound in any recovery by Cargill. The difficulty I have with that

proposition is that if Carg ill is correct on its interpretation of clause 7.11.2, and

laytime runs (in any particular case) from the period force majeure commences until

the giving of a notice of intention to claim force majeure under clause 17.2, then the

finding that demurrage was not payable by reason of force majeure over a period in

which the vessel was on demurrage would s eem to be inconsistent with this and,

therefore, any reconsideration of the clause 7.11.2 argument must necessarily entail a

review of the position under clause 17.3.

Therefore, I would have been prepared to accept that a determination of the

Alternative Argument was one which could have had a substantial effect on the rights

of Cargill (albeit a lesser financial effect than that for which Carg ill is contending).

(The determination of the weather working day issue is not, however, one which of

itself would be likely to have had a substantial effect on the parties’ rights, as

conceded by Mr Stevenson, and it alone would not have a substantial effect on the

parties’ rights.)

manifest error?

As to the alleged error the subject of the first ground of appeal, namely the

construction of clause 7.11.2 in relat ion to the running of laytime until any notice of

the kind contemplated in clause 17.2 is given, I am not satisfied that there has been

shown to be a manifest error on the face of the partial award. I consider that the

Arbitrator’s construction in this regard was one which was reasonably arguable. Any

error o f construction that might have been made in this regard (and I am by no means

suggesting that there was one) is not so obvious as to satisfy the test of manifest

error.

As to the alleged error the subject of the second ground of appeal, namely the

working weather days argument, again I am not satisfied that there has been shown to

be a manifest error on the face of the partial award. To the extent that the Arbitrator

construed clause 7.11.2 by reference to the definition of ‘Weather Working Days’ in

the definition of Cargo Handling Rate again I think such a construction was

reasonably arguable. A lthough the purpose of the definit ion of Cargo Handling Rate,

on its face, was to enable the calculat ion of the period of laytime to be allowed for

the purposes of a shipment, as opposed to the question whether the period of laytime

so calculated was to be suspended by reason of weather conditions or force majeure

in any particular case, I think the possibility that the definition could be construed as

having the operation for which Excel contended is not so unarguable as to make its

adoption by the Arbitrator a matter in which he made a manifest error of law.

I accept that, insofar as the Arbitrator took into account, when reaching his

conclusion on this point, the parties’ post-contractual conduct as evidence of their

understanding of the clause, as an apparent aid to construction, this would appear to

have been in error. However, the Arbitrator also reached his conclusion on this issue

by reference to the content or operation of the relevant specification schedule.

Therefore, I cannot find that his overall decision was one which was not otherwise

reasonably open to him. I consider that the construction adopted by the Arbitrator by

reference to the Cargo Handling Rate decision was one which was reasonably open

to be reached without reference to the parties’ understanding of the clause at all and

therefore it cannot be said that his conclusion on that point was a manifest error of

law.

Strong evidence of error/certainty of commercial law?

I am not satisfied that there is strong evidence that the arbitrator made an error of law

in relat ion to the first alleged error in relation to the construction of clause 7.11.2.

Had I been satisfied that there was strong evidence as to the making of an error of

law in the construction of clause 7.11.2 of the agreement, then I would have found

that the determination of that question might add or be likely to add substantially to

the certainty of the law in this area, since it relates to the construction of a standard

form document in use in the area of international commerce.

As to the second alleged error, given that the Arb itrator seems to have had regard, as

an aid to construction, to the parties’ post contractual conduct and that th is may have

affected the weight placed by him on the other matter which led to his finding that

the weather working day definit ion had a substantive negative operation (and was not

merely an integer in the definition of Cargo Handling Rate), I am of the view that

although there was not a manifest error of law in relat ion to the construction of

clause 7.11.2 by reference to the concept of weather working days, there is strong

evidence of an error of law in this regard. For the same reason as indicated abov e, I

would have found that the determination of this question was one that might add or

be likely to add substantially to the certainty of the law in this area.

Given the findings summarised above, even had I found for Cargill on the initial jurisdictiona l

question, I would not have found that it had established an entitlement to relief. I would not

have been satisfied that the threshold requirements for the grant of leave to appeal under the

State Act had been satisfied. (In relation to the second ground of appeal where I consider

there was strong evidence of an error of law, the determination of which might add or be

likely to add substantially to the certainty of the law in this area, the determination of that

question alone – ie, not coupled with the determination of the Alternative Argument - would

not have been likely to substantially to affect Cargill’s rights).

(iv) I am not satisfied that there has been a denial of natural justice. I am of the view that the

Arbitrator considered and dealt with the submissions as made to h im in relation to the

construction and operation of clause 7.11.2. I think there is some force in the suggestion by

Excel that what is now sought to be put by Cargill is a modificat ion or reformulation of the

alternative submission that was in fact put before the Arbit rator. If so, he cannot be crit icised

for having not dealt with it. However, even if it can be said that there has been no

modification or reformulation as such, I consider that the Arbitrator’s findings are consistent

with a conclusion that there is no operative delay for the purposes of clause 7.11.2 in

circumstances where there was a force majeure notice issued as early as practicable. The

Arbitrator raised the issue as to the effect of a notice not given timeously, during the course of

debate with Sen ior Counsel then appearing for Carg ill on the arbit ration. He was clearly

appraised of the submission that even if the notice was effective, and had been given as early

as practicable, there might be a continuation of laytime fo r the purposes of Cargill’s claim for

demurrage (and he seems to have dealt with this submission, implicitly, by rejecting the

premise that there could be such a notice which nevertheless amounted to delay for the

purposes of clause 7.11.2). The Arbitrator appears to have addressed the thrust of the

Alternative Argument put to him in his Part ial Award, even if he did not frame h is reasons in

the way in which the argument is now put. Carg ill cannot in my view be said to have been

deprived of a fair hearing in that regard.

(v) Had I been satisfied that the jurisdictional and threshold requirements for the grant of leave to

appeal under the State Act (or for the setting aside or revision of the award for denial of

natural justice under the Model Law) were met, I would nevertheless not have exercised

discretion in this case to grant leave to appeal on the question of law relating to the

construction of clause 17.2 (and hence the question as to the argument based on ‘weather

working days’ does not arise). In summary, it seems to me that it would be inconsistent with

the emphasis placed on judicial restraint in intervention of arbitrat ion awards such as this, to

permit what seems in essence to be a desire to re-litigate what had been a carefully argued

(and analysed) construction argument (particularly since the unchallenged estoppel/waiver

finding, and the doubt as to whether any inconsistency between the existing findings and those

to be challenged could be revisited in light of the clause 17.3 finding, could well mean that

any redetermination of the construction issues may now be of litt le or no practical benefit to

Cargill).

Reasons

32 I have outlined above the factual background to the present dispute. In summary, if the Model Law

does not apply then the relevant questions are whether Cargill has satisfied the threshold requirements

for the grant of leave to appeal under the State Act and whether, as a matter of discretion, leave should

be granted; if the Model Law does apply then the question is as to whether there has been a denial of

natural justice. I consider the issues for determination below.

(i) Is there an opt out agreement?

33 The UNCITRAL Model Law has the force of law pursuant to s 16 of the Commonwealth Act and

appears as schedule 2 to that Act. Section 21 of the Commonwealth Act provides that:

21 If the parties to an arb itration agreement have (whether in the agreement or in any

other document in writ ing) agreed that any dispute that has arisen or may arise

between them is to be settled otherwise than in accordance with the Model Law , the

Model Law does not apply in relation to the settlement of that dispute. (my emphasis)

Is it necessary that the opt-out agreement be express?

34 Section 21 requires that, to exclude the Model Law, there must be an agreement in writing but says

nothing as to whether that agreement must be express or can be implied from the terms of the parties’

written agreement.

35 Mr Gleeson placed emphasis on the fact that (as made clear in the Explanatory Memorandum to the

International Arbitration Amendment Bill 1988 (Cth)) s 21 is an ‘opt out’ provision. The notes to

Clause 7 of the Bill (relating to the then new s 21) stated that:

The Model Law is implemented on an ‘opt out’ basis by the amending legislation.

Accordingly, the provisions of the Model Law will apply to an international comme rcial

arbitration … unless the parties agree otherwise, either in the arbitrat ion agreement or in any

other agreement in writing.

There is nothing in that exp lanatory note to require that there be an express exclusion, as opposed to an

implied exclusion, of the Model Law. That said, in the Outline section of the Explanatory

Memorandum, it is said that the Bill will amend the Act, relevantly, to implement the UNCITRAL

Model Law “on an ‘opt out’ basis so that its provisions will apply unless the parties expressly exclude

it”(my emphasis).

36 Mr Gleeson submits that what the adoption of an opt out procedure makes clear is that the parties must

turn their minds to the issue and do something (in writing) expressly to exclude the Model Law and

that, in the absence of an express exclusion, they should not be taken impliedly to have done so. It

seems to me that it by no means follows that an implied agreement to exclude the Model Law could not

be the result of the parties having turned their minds to the question of the law which should govern

their arbit ration and adopted a different law. The adoption, if that be the case in any particular

agreement, of a d ifferent curial law suggests that the parties have indeed turned their minds to the

question of what law should govern their arbitrat ion. The fact that they may have provided for this in

an indirect way, by way of adoption of a particular system of law as the lex arbitri, rather than by the

direct exclusion of the lex arbitri which would otherwise apply does not seem to me to be any the less

effective a means of indicat ing their intention in that regard. Apart from the brief reference in the

outline to the Explanatory Memorandum (not reiterated in the specific notes to the relevant clause) to

an express exclusion of the Model Law, there is nothing in that Memorandum or in the terms of s 21

itself to preclude the operat ion of an implied agreement as a means of exclusion of the Model Law,

provided that that implied agreement can be discerned from the terms of a written agreement between

the parties.

37 The implication of an agreement to exclude the Model Law must surely arise if the parties in their

written arbitration agreement (or any other document in writing) have chosen a wholly inconsistent

system of law to govern their arbitration. In those circumstances, I am not persuaded that (had they

done so in this case) this would not have been sufficient to enliven the operation of s 21. I do not read

s 21 as requiring that the agreement to ‘opt out’ be in express terms, as opposed to an agreement which

can be inferred from a written agreement. (To the extent that Eisenwerk , to which I refer below, is

authority for the proposition that the relevant opt out agreement can be one which is an implied

agreement, then I would not conclude that it was plainly wrong. Where I differ from the conclusion

reached in Eisenwerk is as to whether the choice of procedural rules to govern an arbitration amounts

to an implied exclusion of the lex arbitri.)

38 Was there an implied agreement between the parties in this case to settle any disputes otherwise than in

accordance with the Model Law?

39 Clause 18.9 of the agreement provided as follows:

In respect of matters which are to be referred to an Expert pursuant to the foregoing provisions

of this clause 18 any appeals from the Experts decisions, and other disputes or claims arising

out of or in connection with a Transaction and/or this Agreement, including any questions

regarding its existence, valid ity or termination, shall be referred to International Arbitration

under the Rules of Arbitration of the International Chamber of Commerce with any arbitrat ion

to be heard in Sydney in the English language before three arbitrators (my emphasis)

40 The agreement to refer disputes for arbitration under the ICC Rules, though with the modificat ion that

only a single arbitrator was to be appointed in this case, was confirmed (after the particular d isputes

had arisen) in an exchange of correspondence between their respective lawyers on 15 A pril 2009

(Cargill’s solicitor having earlier suggested that an ICC arbit ration was not necessary and that the

arbitration, by defau lt, would be governed by the Commonwealth Act (as well as the State Act) and the

Model Law – see p 138 vol 4 Ex A).

41 The question arises, therefore, as to whether the parties’ agreement to “refer” the d ispute for arbitrat ion

“under” the ICC Rules (terminology which in my view may well connote something other than what

would be comprised by an agreement for “settlement” of the dispute “in accordance with” any

particular system of law) constitutes an implied agreement to opt out of the Model Law for the

purposes of the Commonwealth Act. (It seems to me that there is a not immaterial d ifference in this

context between the respective clauses in Eisenwerk and in the present contract, in that the reference to

referral of the dispute for arbitration under the ICC Rules more clearly draws attention to the

procedural aspects or ru les governing the arbitrat ion rather than the ultimat e resolution or

determination of the dispute.)

Eisenwerk

42 Not surprisingly, Mr Stevenson relies (in support of his submission that the parties’ agreement to adopt

the ICC Rules constitutes an implied agreement to opt out of the Model Law for the purposes of the

Commonwealth Act), on the decision of the Queensland Court of Appeal in Eisenwerk , a case

determined in 1999. There, the part ies’ arbitrat ion agreement included a provision in sim ilar (though

not relevantly identical) terms to that contained in the arbitration agreement in the present case before

me, that clause being as follows:

Any dispute arising out of the Contract shall be finally settled, in accordance with the Rules of

Conciliat ion and Arbitration of the International Chamber o f Commerce, by one or more

arbitrators designated in conformity with those Rules.

43 In Eisenwerk , the question whether the parties had, by including the above clause, “opted -out” of the

Model Law for the purposes of s 21 of the Commonwealth Act arose on an appeal from the refusal by

Fryberg J to grant a stay, under s 7(2) of the Commonwealth Act, of court proceedings brought by the

respondent to the appeal and his Honour’s decision to restrain the appellant from pursuing an ICC

arbitration. Pincus JA (with whom Thomas JA and Sheperdson J agreed) took judicial notice of the

existence and content of the ICC Rules and construed the parties’ agreement fo r any dispute to be

‘finally settled in accordance with ICC Rules’ as an agreement that the dispute would be settled

otherwise than in accordance with the Model Law. His Honour thus held that the Model Law did not

apply. Pincus JA said at [11]-[12]:

It might be thought that the question whether a clause such as that contained in the contracts

which are in issue is effective to exclude the Model Law is a matter of some importance, for

the arbitration clause in the present case conforms to an international standard; making

allowances for variances, perhaps due to translation. cl. 13.1 of the General Conditions,

quoted above, is an adoption of the clause recommended by the ICC for use by those wishing

to have their disputes resolved under its rules. The 1988 ICC Rules as set out in Redfern and

Hunter, Law and Practice of International Commercial Arbitration, (2nd., 1991) state the

recommended clause as follows:

“All disputes arising in connection with the present contract shall be finally settled

under the Rules of Conciliation and Arbitration of the International Chamber of

Commerce by one or more arbitrators appointed in accordance with the said Rules.”

If Australian Granites’ argument is right, use of this recommended clause is insufficient to

avoid the, surely highly inconvenient, result that the parties are bound to both a Model Law

arbitration and an ICC arbitration . And the former would not be an arb itration under the

aegis of an established international organisation, as the latter is; it should be noted that the

Model Law has not been widely adopted. Only 19 countries had adopted it, to the month of

February 1998, and those countries did not include Germany: see A. Sh ields, “The

development of a uniform framework for international arbitrat ion” (1998) 16 The Arbitrator

217 at 224.

In my opinion the better view is that, by expressly opting for one well-known form of

arbitration, the parties sufficiently showed an intention not to adopt or be bound by any quite

different system of arbitration, such as the Model Law. It follows that, insofar as Australian

Granites relies upon (and succeeded below on) the argument that Article 8 of the Model Law

precluded the grant of a stay of the action in favour of Hensel, after delivery of its defence,

that view must be rejected. In consequence, the provision of domes tic law which governs the

right to a stay is s. 7(2) of the Act, quoted above. (my emphasis)

44 Eisenwerk has since been followed by the Supreme Court of Singapore in John Holland Pty Ltd aka

John Holland Construction & Engineering Pty Ltd v Toyo Engineering Corp (Japan) [2001] 2 SLR

262.

45 Eisenwerk stands as authority for the proposition that, by expressly adopting a different ‘form of

arbitration’ (there, that being the ICC Rules), parties will be taken to have shown a sufficient intention

not to adopt the form or system of arb itration provided fo r under the Model Law (and that this is

sufficient to amount to an opt-out agreement for the purposes of the Commonwealth Act).

46 What the Court of Appeal in Eisenwerk did not appear expressly to address was the question whether,

by providing for their d isputes to be settled by arbitration in accordance with the ICC Rules, the parties

had done any more than to adopt a particular set of arbitral rules, rather than the lex arbitri or curial law

as the law governing any such arbitration.

47 It is the conceptual distinction between the lex arbitri and the procedural rules of an arb itration on

which Mr Gleeson bases his primary submission that the decision in Eisenwerk is plain ly wrong and

should not be followed by this Court. Mr Gleeson submits that where the Queensland Court of Appeal

erred in Eisenwerk was that it was not taken to, or failed to appreciate, the critical d istinction between

the lex arbitri or curial law governing an arbitrat ion (which, if the seat of arb itration is within Australia

is likely, unless excluded by the parties, to be the Model Law) and the procedural rules of the

arbitration (which may be chosen by the parties themselves as a matter of contrac t to govern the

operation of the arb itration itself). (The Queensland Court of Appeal does appear, however, to have

been taken in argument to the fact that the provisions of the Model Law were capable of being varied

by agreement between the parties and that the ICC Rules were capable of applying as a partial

modification of the Model Law, leaving untouched other provisions of the Model Law such as the

recognition and enforcement provisions – at least so far as reference is made to the summary report,

appearing in the published reasons, of Counsel’s submissions on that appeal.)

Deference to be accorded to Eisenwerk decision

48 The need for me to be convinced (in o rder to accept Mr Gleeson’s submission that Eisenwerk should

not be followed) that the conclusion reached in Eisenwerk is plain ly wrong arises from the deference

that I am bound, as a first instance judge, to accord to decisions of intermediate appellate courts and,

here, to the interpretation there placed on s 21 of the Commonwealth Act by the Queensland Court of

Appeal and its application having regard to the clause there being considered. The High Court in

Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR

485, at 492, has said that:

[U]niformity o f decision in the interpretation of uniform national leg islation … is a

sufficiently important consideration to require that an intermediate appellate court -- and all

the more so a single judge -- should not depart from an interpretation placed on such

legislation by another Australian intermediate appellate court unless convinced that that

interpretation is plainly wrong.

49 To similar effect was the statement in Beveridge v Whitton [2001] NSWCA 6, by Heydon JA (as his

Honour then was), with whom Mason P and Powell JA agreed, apply ing that approach also to well-

considered dicta of intermediate appellate courts, at [30].

50 In Gett v Tabet (2009) 254 ALR 504; [2009] NSW CA 76, the Court of Appeal considered (at [274]-

[293]) the meaning of the phrase “plainly wrong”, in the context of the question as to when an

intermediate appellate court ought to depart from its own decisions in relation to a matter of common

law. At [283], the Court (comprised of Allsop P, Beazley and Basten JJA) noted that the adverbs

“plainly” and “clearly” in the context “bespeak the quality of the error or the level of conviction of

error that must be perceived” (and do not limit the circumstances of departure from previous authority

to those in which the error is patent or obvious or easily perceived). Their Honours concluded (at [294]

– [295]):

The phrases “plainly wrong” or “clearly wrong” can be understood to focus on at least one or

more of the following attributes of a ruling:

(a) the fact of error is immediately (in the sense mentioned in [283] above) apparent

from reading the relevant judgment;

(b) the strong conviction of the later court that the earlier judgment was erroneous

and not merely the choice of an approach which was open, but no longer preferred

(compare Chamberlain and Clutha), and

(c) the nature of the error that can be demonstrated with a degree of clarity by the

application of correct legal analysis.

In our view, the first possibility is liable to be h ighly subjective and should not be required,

where the other two possibilities are satisfied. The existence of (b) and (c) is a precondition to

the exercise of the power to depart from earlier authority.

51 At [301], their Honours said:

The phrase “plainly wrong” (or any like phrase) tends to focus attention on the jurisprudential

nature and character of the error and underly ing principle or course of authority or the

conviction as to the existence of the error. Factors considered by Aickin J in Queensland v

Commonwealth and in the joint judgment in John, on the other hand, suggest that there are

other considerations bearing on the question as to whether the earlier decision should be

overruled, erro r having been exposed to the requisite degree of conviction. These

considerations are properly invoked because they are relevant to the underlying principles of

certainty, predictability and transparency upon which the theory of precedent is founded. As

explained by Nettle JA in RJE (at [104]), there must be “compelling reasons” for departure

from earlier authority, whether in the same court or in a court of co -ordinate jurisdiction, a

phrase encompassing both jurisprudential and practical considerations.

52 The position stated in Marlborough was reiterated in Farah Constructions Pty Limited v Say-Dee Pty

Limited [2007] HCA 22; (2007) 230 CLR 89 (where the High Court also emphasised the need for

regard to be had to “long-established authority and seriously considered dicta of a majority of this

Court”, at [134]). (In CAL No 14 Pty Limited v Motor Accidents Insurance Board [2009] HCA 47;

(2009) 239 CLR 269, at [50], the High Court rejected the suggestion that Farah had altered the

doctrine of precedent (in a d ifferent regard) by expanding the principle in Marlborough to the common

law generally (the application of the relevant principle to the common law being well-established).)

53 In Justice Heydon’s article “Limits to the Powers of Ultimate Appellate Courts” (2006) 122 LQR 399,

at 415 n 114), when considering the factors which may affect the weight to be attributed by an ultimate

appellate court to its own dicta, Justice Heydon referred, among other things, to various circumstances

in which that dicta may have fallen from the court otherwise than in the course of considered argument

on the point. By analogy, the weight to be accorded to the conclusion in Eisenwerk may potentially be

affected by the fact that it does not appear from the court’s reasoning th at attention was drawn to the

distinction between the lex arbitri and the procedural rules of an arbitration, as such.

Other authorities

54 In his submissions, Mr Stevenson noted that there has been no demur by other courts to the reasoning

in Eisenwerk (though having been cited on seven or eight occasions on other points); that there is no

judicial expression of opin ion that it is wrong; and that there is no example of any court in Queensland

or any other State refusing to fo llow it. Nevertheless, I was not taken to any authority in which the

question as to whether Eisenwerk should be followed in this respect had been expressly argued before

the court and hence had been the subject of considered review.

55 In addition to the absence of express authority overturning or rejecting Eisenwerk , Mr Stevenson

pointed to the decision of Cole J in Aerospatiale Holdings Australia Pty Ltd v Elspan International Ltd

(1992) 28 NSWLR 321. There, his Honour (at 325) considered an arb itration clause which referred

disputes to arbitration “by a single arb itrator appointed at the request of either party by the President for

the time being of the Institution of Engineers of Australia in accordance with the Commercial

Arbitration Act 1984 (NSW)”. His Honour held that, by referring to the State Act, the parties had

agreed that the Model Law was not to apply for the purposes of s 21 of the Commonwealth Act.

56 Relevantly, Mr Stevenson submitted that, to the extent that his Honour was of the view that a specific

reference to a different set of arbitration procedures to the Model Law involved exclusion of it, this

decision supports the result in Eisenwerk . However, in Elspan, the reference was to an arbitrat ion

under the State Act itself (and therefore can be seen as a choice of the lex arbitri, not an adoption of a

particular set of procedural rules as such) and it seems to me to be distinguishable from Eisenwerk in

this regard.

57 Similarly, although reference was made by Mr Stevenson to the decision of Giles CJ Comm D (a s his

Honour then was) in American Diagnostica Inc v Gradipore Ltd (1988) 44 NSW LR 312, there again

the relevant choice was of the State Act (albeit in conjunction with the UNCITRAL Arbit ration Rules).

There, Giles CJ found (at 323) that an agreement to use the UNCITRAL Arb itration Rules for an

arbitration in conjunction with the “Arbitrat ion Act current in New South Wales, Australia” was a

sufficient agreement for the purposes of s 21 of the Commonwealth Act to opt out of the UNCITRAL

Model Law. Again, this decision is distinguishable by reference to the particular wording of the clause

in question. I agree with the submission by Mr Gleeson that American Diagnostica and Elspan

(neither of which expressly referred to or applied Eisenwerk ) do not support the reasoning in Eisenwerk

as in both cases what the parties expressly chose was the State Act (as the lex arbitri). I also note that

in American Diagnostica (at 324), h is Honour recognised that the lex arbitri, as the law governing the

conduct of the arbitration, went beyond matters of procedure, saying that:

Although the law governing the conduct of the arbitration (the lex arbit ri) is said to be

concerned only with procedural matters, it goes beyond, for example, the produ ction of

documents or the order of witnesses. The appointment, removal, and replacement of

arbitrators, time-limits, interim relief, consolidation of arbit rations, representation before the

arbitrator, the form and validity of the award, and the finality o f the award, are amongst the

matters which can fall within the lex arbitri.

Is reasoning of Eisenwerk plainly wrong?

58 Is the conclusion reached in Eisenwerk plainly wrong, such that it would be open for me to find that the

adoption by the parties of the ICC Rules did not necessarily amount to an agreement to opt out of the

Model Law (assuming for this purpose, though I think that such an assumption is doubtful, that the

respective arbitration clauses can be said to be relevantly indistinguishable)?

59 Mr Gleeson’s principal contention, as noted earlier, is that the adoption of arbitral rules by the parties

does not of itself constitute an opting out of the Model Law for the purposes of s 21 of the

Commonwealth Act and that in this regard the decision in Eisenwerk is plainly wrong and should not

be followed.

60 What was the reasoning underlying the conclusion in Eisenwerk? Although reference was made by

Pincus JA, first, to the perceived high level of inconvenience which would follow from a result tha t the

parties are bound to both a Model Law arb itration and to an ICC arbitrat ion; secondly to the fact that

the former would not be an arbitration under the aegis of an established international organization, as

the latter would be; and, thirdly, to the fact that the Model Law had not then been widely adopted, the

basis for the conclusion that there had been an implied opting out of the Model Law was the perceived

inconsistency and irreconcilability as between the provisions of the Model Law and those of t he ICC

Rules. In that regard, as noted above, had the provisions in fact been wholly irreconcilab le and had the

systems in question performed the same function in relat ion to an arbitration, then I would accept the

logic on which the Court of Appeal proceeded. However, fo r the reasons set out below that does not

appear to be the case.

61 Turning first to what I might describe as the peripheral or background matters raised (as to

inconvenience and the like), it seems to me that the perceived inconvenience of there being two sets of

rules is overstated in that many of the arbitral rules provided for under the Model Law are rules which

apply in default of any choice to the contrary by the parties. Therefore, as submitted by Mr Gleeson,

there is no reason why the two systems could not operate together (and, I might add, any inconvenience

in reconciling which of any two potentially applicable ru les was intended to apply, apart from being

something of the parties’ own making, would thus be readily able to be resolved by ignoring all default

rules which covered a matter dealt with in the ICC Rules). As to the second matter, it is not suggested

how the question whether an arbitration would or would not be under the aegis of an established

international organization is relevant in pointing to the intention of the parties whether or not to opt a

form of arbit ration not under the aegis of any such organization. Third ly, apart from the question of

how this would be relevant in any event, the breadth of acceptance worldwide of the Model Law is now

very different from that which was the case in 1999. (Mr Gleeson noted that, to the extent that it is

relevant, more than 60 countries have now adopted the Model Law, referring to statistics available

from the UNCITRAL website.)

62 Mr Gleeson, recognising the high test that must be met in order to come to such a conclusion, put

forward a series of propositions as to why Eisenwerk should be held to have been wrongly decided,

each in essence turning on the distinction between the lex arbitri governing an arbitrat ion and the

procedural ru les applicab le to an arb itration. In summary, those propositions were that the Court of

Appeal in Eisenwerk had:

(i) (this being the fundamental focus of the criticis m of this decision) failed to appreciate and

apply the distinction between the lex arbitri or curial law governing the conduct of the

arbitration (being the legislat ive framework in which the arbitration takes place, here the

Model Law unless excluded) and the procedural rules applicable to an arbitration by

agreement between the parties (here, the ICC Rules);

(ii) failed to appreciate that the ‘opt out’ provision in s 21 o f the Commonwealth Act allows the

parties to substitute an alternate law under which their d ispute will be resolved and is not

concerned with the parties’ choice of procedural rules;

(iii) failed to appreciate that the Model Law is a form of lex arbitri, not a different system of

arbitration procedure from that comprised by the ICC Rules and hence the Model Law

provisions can logically apply to arb itrations administered by a variety of permanent arbitral

institutions, such as the ICC (M r Gleeson referring there to Art icles 2(a), (d) and (e) of the

Model Law);

(iv) failed to take into account that the Model Law contains provisions which allow part ies a wide

degree of autonomy or control over how their d ispute is to be resolved (referring , in particular,

to Article 19 of the Model Law, the importance of which has been stressed in other contexts as

noted below) including the right (under Article 2(d) of the Model Law) to authorise a third

party (which would include an institution such as the ICC) to determine the procedure to be

followed and contemplates that the parties may include in their arbitrat ion agreement matters

as to arbitration rules (institutional or otherwise) (there referring to Article 2(e) of the Model

Law), this autonomy being subject only to the mandatory provisions of the Model Law

concerning the conduct of the proceedings or the making of an award (referring to Article 18);

(v) incorrectly assumed that the Model Law and the procedural rules as chosen by the parties (or

as determined by the arb itrator) cannot operate in conjunction with each other (the contrary

position being contemplated by Article 19, which allows the parties to determine the rules of

procedure to govern their arbitrat ion); (in support of which proposition Mr Gleeson referred

to the Report of the Secretary General, UNCITRAL Secretariat, Analytical Commentary on

draft text of a Model Law on International Commercial Arbitration , presented to the United

National Commission of International Trade Law, 18th

Session, Vienna, 3-21 June 1985, at

44-45 which identified Article 19 as the most important provision of the Model Law in that

the parties are thereby given a choice as to the procedures to be adopted for their arbitration);

(vi) incorrectly suggested that the provisions of the Model Law and the ICC Rules are inconsistent

and that such inconsistency is irreconcilab le (in particular, Mr Gleeson noted that the example

given by Pincus JA as to the differences in respect of provisions concerning the number and

identity of arbitrators under the Model Law and ICC Rules (comparing Article 10 of the

Model Law and s 18 o f the Commonwealth Act and Articles 1 and 8 of the ICC Rules) d id not

support the conclusion that there was any inconsistency in light of the fact that Articles 10(1)

and 11(2) o f the Model Law provide that the parties are free to determine the number of

arbitrators and to agree upon a procedure of appointing the arbitrator or arbitrators); and

(vii) wrongly assumed that there would be a high level of inconvenience if an arbitrat ion were to be

held in accordance with the ICC Rules but was subject to the Model Law as the lex arbitri.

63 As noted by Mr Gleeson, insofar as the Model Law deals with procedural matters, the provisions in the

Model Law generally apply by way of default or fall back provisions in the absence of specific

agreement by the parties or where the p rocedural rules selected are unable to apply for some reason

(referring by way of example to the wording “unless otherwise agreed by the parties” used in Articles

3, 11(1), 17, 24, 26 and 29) or the statement that “the parties are free to agree” on certain matters in

Articles 10, 11(2), 13, 19, 20, and 22). This illustrates the autonomy given to parties under the Model

Law and the ability to reconcile the two sources of potential ru les applicable to an arbitrat ion

conducted under the Model Law as the lex arbitri but adopting procedural rules from another source.

64 Apart from the express recognition in the Model Law that the parties may choose the procedural rules

of a part icular institution (Articles 2(a) and (d) of the Model Law) and hence contemplates that another

institution may have a procedural role to p lay in the conduct of the arbitration, the Model Law reserves

to the court the power to intervene where an institution fails to perform its procedural function and thus

contemplates that the Model Law may have a supervisory or supplementary role over and above the

role accorded to other institutions by reason of the parties’ contrac tual choice of rules. In this regard,

Mr Gleeson referred to the procedure for the appointment of arbitrators outlined in Article 11(4)(c) of

the Model Law.

65 As the parties’ freedom to choose the procedural rules governing the arbitration is expressed by Article

19 to be subject to any mandatory provisions of the Model Law, Mr Gleeson submitted that the parties’

choice of p rocedural rules cannot of itself constitute ‘opting out’ of the Model Law for the purposes of

s 21 of the Commonwealth Act and that the choice of procedural rules does not involve the parties

selecting any alternate law (such as the lex arbitri) under which their dispute will be resolved.

66 It seems to me that the critical d istinction is as to whether the opt out provision contemplated by s 21 is

one which focusses on the adoption of the Model Law as the lex arbitri or simply as the source of the

procedural ru les for the arbit ration. In its terms, clause 18.9 of the arb itration agreement in the p resent

case expressly focusses on the adoption of particular procedural rules (by reference to the ICC Rules,

those being of a procedural nature). That does not necessarily involve any adoption of a different

system of law as the lex arbitri (which, as exp lained in Dicey, Morris and Collins, The Conflict of

Laws, Sweet & Maxwell, 2006, at [16-035], is the law chosen by the parties to govern arbitral

procedure that is, the procedural law of arbit ration (at [16-039]) from that which would apply under the

Model Law, nor is it inconsistent with the application of the Model Law as the lex arbitri. (This is also

referred to as the ‘curial law’ of the arb itration (see Mustill and Boyd, Commercial Arbitration, 2nd

edn,

Butterworths, 1989, at 64). Ord inarily, the lex arbitri is that of the seat of the arbitration for the

reasons noted in Raguz v Sullivan [2000] NSWCA 240, where Spigelman CJ and Mason P (with whom

Priestley JA agreed) said at [93]:

The seat of arbitration is not necessarily where it is held, although where the parties have

failed to choose the law governing the conduct of the arb itration it will prima facie be the law

of the country in which the arb itration is held because that is the country most closely

connected with the proceedings: see James Miller & Partners Ltd v Whitworth Street Estates

(Manchester) Ltd [1970] AC 583 at 607, 609, 616; Black Clawson International Ltd v

Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyd’s Rep 446 at 453-454; Bank Mellat v

Helliniki Techniki SA [1984] QB 291 at 301.

67 Recently, Dicey and Morris in their updating companion (October 2009) to the 2006 edit ion, have

stated (affirming the position that parties can choose procedural ru les different to the seat of the

arbitration) (at [16-034]) that:

Where parties have expressly chosen the seat of their arb itration , it is the courts at the seat

which have exclusive supervisory jurisdiction to determine claims for a remedy going to the

existence or scope pf the arbitrator’s jurisdiction, or to allegations of bias.

Difference between the lex arbitri and procedural rules of the arbitration

68 In the private international law context, there are a number of laws which may govern different aspects

of or relat ing to an arb itration. Those may be summarised as being the proper law governing the

substantive rights of the parties in respect of their underlying dispute (here the proper law of the

contract), the proper law of the arbitration agreement (which may differ from the proper law of the

contract itself) which governs the obligation of the part ies to submit their d isputes to arbitration and to

comply with any arbitral award made in the context of that arb itration, and the lex arbitri or curial law

governing the conduct of the arbitration of any particular dispute referred to in accordance with the

arbitration agreement (to which I have referred above). (See Mustill and Boyd, Commercial

Arbitration, at 61-62)

69 As explained by Dicey and Morris (at [16-035]) the lex arbitri is the law chosen by the parties to

govern arbitral procedure that is, the procedural law of arbitrat ion (at [16-039]). The extent to which

the parties may choose the lex arbitri (or the extent to which such a choice may be given recognition by

the law applicable at the seat of the arbitration) will be determined in much the same way as in other

contexts the courts determine when to recognise and give effect to a choice by the part ies of the proper

law of their contract. However, the lex arbitri is recognised as being distinct from the proper law of the

contract (Smith Ltd v H & S International [1991] 2 Lloyd’s Rep 127, at 129-130; American

Diagnostica, at 324-328; Blackaby N., Partasides C., Redfern A., and Hunter M., Redfern and Hunter

on International Arbitration, 5th

edn, Oxford University Press, 2009, at 3.39-3.43). It is also to be

distinguished from the procedural ru les by which, in accordance with the lex arbitri, the parties may

agree that the arbitration will be conducted.

70 Giles CJ in Comm D in American Diagnostica, referred to the lex arbitri as the law governing the

conduct of the arbitration (at 324), and explained that the scope of the lex arbitri (or curial law of the

arbitration) goes beyond matters of procedure:

Although the law governing the conduct of the arbitration (the lex arbit ri) is said to be

concerned only with procedural matters, it goes beyond, for example, the production of

documents or the order of witnesses. The appointment, removal, and replacement of

arbitrators, time-limits, interim relief, consolidation of arbit rations, representation before the

arbitrator, the form and validity of the award, and the finality of the award, are amongst the

matters which can fall within the lex arbitri.

71 The learned authors go on to say, at 62;

The curial law governs: the manner in which the reference is to be conducted; the procedural

powers and duties of the arbitrator; questions of evidence; the determination of the proper law

of the contract .

72 Dicey and Morris note (in a passage substantially in the same form from the 1987 edn which was

approved by Giles CJ in American Diagnostica, at 325) that the choice of the seat of arbitrat ion is in

effect the choice of the lex arbitri to govern the arbitrat ion but that there remains the potential, after

choice of the lex arbitri for parties to choose a different set of procedural rules governing the

arbitration to those of the seat, save for the mandatory rules that will still apply according to the

relevant law of the seat, (at [16-035]);

Party autonomy in the choice of the law to govern arbitral procedure (the lex arb itri) is

expressed in the choice of a seat for the arbitrat ion. This “seat” is in most cases sufficiently

indicated by the country chosen as the place of the arb itration. For such a choice of place not

to be given effect as a choice of seat, there will need to be clear evidence that the parties (or

the arbitrators, if so authorised by the arties) agreed to choose another seat for the arbitra tion;

and that such a choice will be effect ive to endow the courts of that country with jurisdiction to

supervise and support the arbitration. The concept of the “seat” of the arbitrat ion is a juridical

concept. The legal “seat” must not be confused with the geographically convenient place

chosen to conduct particular hearings (there citing Naviera Amazonica)

The courts of the seat will have sole supervisory and primary supportive function in relation to

the conduct of the arbitration save where there has been an express and effective choice of a

different lex arbitri, in which event the role of the courts of the seat will be limited to those

matter specified by their own law as internationally mandatory, is non-derogable, even where

an express choice of a different lex arbitri has been made by the parties.

73 The dual source of procedural rules in the context of arb itration is referred to by Dicey and Morris (at

[16-030]) as follows:

The dual character of procedural law in arbitrat ion is reflected in the dual source of procedural

rules. All of the major international arbit ral institutions have their own procedural rules,

which will apply to arbitrat ions conducted under their auspices (save to the extent that the

parties expressly provide otherwise). From the perspective of the part ies to an international

arbitration (and of the arbitral institution) these rules will form the primary procedural code.

Even where the parties have chosen ad hoc rather than institutional arbitration, the parties may

select a set of procedural rules such as the UNCITRAL Arbitration Rules.

The other source of procedural law for arb itration is those provisions of national law which

deal specifically with arbitration – the lex arbitri properly so called. Such rules may perform

one of three functions: (a) directory: they may provide a source of arbitral rules which may be

applied to the extent that the parties have not expressly chosen their own rules of procedure

(whether by drafting specific ru les into their arbitration agreement or more commonly by

choosing a set of standard procedural rules, such as those of the ICC or LCIA or the

UNCITRAL Arbitrat ion Rules); (b) mandatory: national law may also however place

mandatory limits on the autonomy of the parties in arbitrat ion, by prescribing certain matters

of arb itral procedure from which no contracting out is permitted; (c) supportive; national law

may extend the support of national court processes to arbitration, by making availab le to the

parties certain judicial procedures to deal with matters which are outside the scope of the

arbitrators’ authority, since they require the coercive powers of the State.

74 Thus, as recognised in American Diagnostica and explained in the academic text referred to above it is

possible for part ies to choose different procedural rules to those applying under the lex arbitri of the

seat of the arbitration, though the mandatory procedural rules of the seat of the arbitration will apply

notwithstanding any attempt by the parties to preclude their applicat ion by choice of a different set of

procedural rules.

75 In American Diagnostica his Honour said:

That there can be a lex arbit ri different from the law of the country in which the arbitration is

held is implicit in what was said in James Miller & Partners Ltd v Whitworth Street Estates

(Manchester) Ltd, Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg

AG and Bank Mellat v Hellenik Techniki SA referred to above. The place where the arbitrat ion

is held is not necessarily conclusive of the seat of the arbitrat ion, as is obvious when one

considers a peripatetic arbitrat ion, and in Naviera Amazonica Peruana SA v Compania

Internacional de Seguros del Peru , Kerr LJ said (at 120):

“There is equally no reason in theory which precludes parties to agree that an

arbitration shall be held at a place or in country X but subject to the procedural laws

of Y. The limits and implications of any such agreement have been much discussed

in the literature, but apart from the decision in the instant case there appears to be no

reported case where this has happened. This is not surprising when one considers the

complexities and inconveniences which such an agreement would involve.”

Can agreement on a lex arbit ri different from the law of the country in which the arb itration is

held entirely escape the local rules? The foundation for agreement on a lex arbitri is that all

arbitrations are consensual, party autonomy being the cornerstone of modern arbitrat ion, and

so Grad ipore said that the consensual nature of the arbitration permitted American

Diagnostica and Gradipore to agree to exclude the Act if it would otherwise have applied to

their arbitrat ion. But there must be a limit to the parties' freedom, because their choice of the

place of their arb itration may carry with it application to the arbitration of the law of that place

according to its terms so as to govern the conduct of the arbit ration. The freedom is to choose

the place. So far as the local rules compulsorily apply and are inconsistent with the chosen lex

arbitri, they can not be put aside by agreement that they do not apply.

76 In addition, his Honour said (at 328);

There is thus some judicial and other guidance contrary to Gradipore's submission. In

principle, party autonomy does not mean complete freedom to exclude a system of law, or

particular elements of a system of law, from the relationship between the parties. Confining

attention to statutory law, if the statute on its proper construction and with regard to the

legislative power of the legislature applies to the parties and their conduct of the arbitration,

and expressly or by necessarily implication can not be excluded by agreement, the agreement

of the parties to exclude it will count for nothing. If the statute applies to the arbitration, a

prohibition against contracting out cannot be avoided by contracting out of the prohibition.

77 Another means of distinction between the differing sources of law concerning how the arbitration is

governed is made by Mustill and Boyd (at 52) in their more recent 2001 Companion to the Second

Edition published in 1989. Mustill and Boyd distinguish between external and internal rules. The

internal rules being those rules (as chosen by the parties – whether they be rules formulated by

institutions such as UNCITRAL Arbitrat ion Rules, or ru les as set out in individual state legislation) and

the national laws of a state in which the arbitration is seated, which as a matter of that state’s law will

apply to the arbitration. Mustill and Boyd suggest that strictly speaking the internal rules are not laws

at all, but are simply the procedures by which, (as a matter of contractual force) the parties have agreed

(either implicitly or explicitly) to be bound.

Academic and other criticism of Eisenwerk

78 It is fair to say that the decision in Eisenwerk has been roundly criticised both for policy reasons (there

being concerns as to the impact it would have on the willingness of parties to engage in international

arbitration with Australia as the seat of the arbitration) and as to the perceived failure to recognise the

distinction between the lex arbitri and the procedural rules governing arbit ration (that being a

consistent theme of the criticism levelled at the decision).

79 The existence of academic criticism of a judicial decision does not, of course, compel the conclusion

that the judgment is plain ly wrong (although that does appear to be the academic consensus) but it

supports the contentions made by Mr Gleeson to that effect and, of some relevance to the question as

to the parties’ intention, it indicates the extent to which the parties or their legal advisers might be taken

to have been aware, as at 2005, of the state of the common law fo llowing the Eisenwerk decision in

relation to the effect of adoption of procedural ru les such as the ICC Rules on the question as to

whether there was an implied exclusion of the Model Law.

80 In particular, I was referred by Mr Gleeson to the following:

(i) Pryles M., “Exclusion of the Model Law” [2001] Int ALR 175, where reference is made to the

“fundamental juristic difference” between the arb itral procedural law and the arb itral ru les

selected by the parties to an arbitration, at 176, and the author expresses the view that the

selection of a set of arbitral ru les (which, insofar as they apply by virtue of the parties’

agreement, are contractual and not legislat ive in character) does not constitute the selection of

a different arbitral p rocedural law even though there may be some overlap between the two

(noting that the law governing the arbitral procedure will deal with some matters beyond the

authority of the parties to settle in the rules).

(ii) commentary in relation to, and legislative amendments in Singapore to overcome the effect of,

the John Holland decision (s 15(2) of the International Arbitration Act (Singapore) and Chow

P., “Issues in International Commercial Arb itration: Conflict between Model Law and Arbitral

Rules” (2003) 19 BCL 426, at 427 and footnote 6).

(iii) Greenberg S., “ACICA’s New International Arb itration Rules” (2006) 23 (2) Journal of

International Arbitration 189 (at p191) Greenberg expresses the view that the choice of a set

of institutional arb itration ru les where the seat of the arb itration is in a Model Law jurisdiction

does not impliedly exclude the application of the Model Law given that Article 19(1) of the

Model Law expressly allows the parties to do so.

(iv) Barret-White S., and Kee C., “Enforcement of Arbitral Awards where the seat is Australia –

how the Eisenwerk Decision might still be a sleep ing assassin: (2007) 24(5) Journal of

International Arbitration 515 (at 523-525), where (in a section entitled “Why Eisenwerk

should not be followed” (at 324) the authors address the argument that the Model Law and

ICC Rules are reconcilable and place emphasis on the default operation of the former.

(v) Justice Croft and DG Fairlie, “The New Framework for International Commercial Arbitrat ion

in Australia”, in a paper presented at the ACICA Conference, December 2009, in which the

authors note that the proposed amendments to the Commonwealth Act (now enacted in

Schedule 1 of the International Arbitration Amendment Act 2010, No 97 (Cth)) are intended to

clarify that the adoption of arbitral ru les by the parties does not constitute an ‘opting out’ of

the Model Law (at 5).

(vi) Submissions made to the Commonwealth Attorney General, on the Review of the

Commonwealth Act, in response to the Discussion Paper of 21 November 2008 – by ICC

Australia, ACICA (at 10), the Chartered Institute of Arbitrators (at 8), the NSW Bar

Association (at 7-10), the Law Society of NSW (at 2), the Law Council of Australia (ADR

Committee) (at 6-7), and the Victorian Bar (at 13) (all favouring amendment of the

Commonwealth Act to reverse the Eisenwerk decision).

81 Much of that criticis m, it can be seen, was published in the period after the part ies entered into their

agreement (and therefore cannot be said to have informed the minds of their lawyers in relation to the

Eisenwerk issue as at the date of entry into the agreement). There was, however, at least one other

published criticis m of the decision in the interim to which the respective legal advisers may have had

regard (that by Davies S., “International Arbitration: when arbitral ru les and procedural rules collide”,

Australian Mining and Petroleum Law Association Yearbook , 2002, at 649, which again, at 653)

criticises Eisenwerk for failing to take into account the fundamental ju rid ical difference between

arbitral rules on the one hand and the procedural law of an arbitration on the other (at 659).

82 More recently, the volume of dissent has increased with that expressed by Gehle B., “The Eisenwerk

decision is generally considered as bad law” (Vindobona Journal of International Commercial Law &

Arbitration 2009 Article The Arb itration Rules of the Australian Centre for International Commercial

Arbitration [FNa1] 13 VJ 251) and by Megens P. and Cubitt C., “Arbitrators' perspective: the evolv ing

face of international arb itration - the past, the present and the future”, International Arbitration Law

Review, 2010, 13(1), 1-7, at 6, where it was observed that the Eisenwerk decision was not only “at

odds with international practice and the objectives of the model law” but had, together with the John

Holland decision, “caused instant consternation in international arbitration circles” (my emphasis).

83 The above criticis m confirms the v iew I would in any event have formed (based on the analysis set out

earlier in these reasons) that there is a distinction between adoption of procedural rules and the

application of the lex arbitri and that since the Model Law (assuming that be the lex arbitri of an

arbitration the seat of which is in Sydney, as it was in this case) permits the adoption of rules other than

those for which it would in default of an alternative choice have provided, the choice by the parties of

the ICC Rules to apply in their arbitration would not of itself constitute an opting out of the Model

Law.

Conclusion

84 The distinction between the lex arbitri (or the laws of the seat relat ing to arbitrat ion) and procedural

rules which may be adopted consensually by the parties (subject to any mandatory provisions of the lex

arbitri) to govern the conduct of the arbitration (or internal rules, to adopt the terminology used by

Mustill and Boyd) is well recognised and is expressly accommodated under the Model Law.

85 Insofar as Article 19 of the Model Law allows the parties to adopt a set of procedural rules different

from those which would otherwise apply under the Model Law, it cannot be said that the Model Law

and ICC Rules are inconsistent and irreconcilable. In the context of an arbitration the seat of which is

in Australia, as a matter of law of the lex arbitri (that is the Model Law, as enacted by the

Commonwealth Act) the parties are permitted, within the framework of the Model Law provisions, to

apply some or all of another set of procedural rules to apply to their arbitration.

86 If, under the lex arbitri, the parties are able to opt out whether entirely or in part of the application of

the Model Law, then the decision to adopt ICC Rules as the procedural rules governing the arbitration

(which are not inconsistent with the application of the Model Law as the lex arbitri) cannot logically

amount to an implied agreement of the parties to have their disputes settled otherwise than in

accordance with the Model Law. Rather, they can be seen to be electing to utilise the options available

under the Model Law to choose different procedural rules to apply within the overall context of the

Model Law provisions. Any “opting out” which is (as seems to be the case here) limited to the

selection of the internal or procedural rules governing the arbitrat ion, is consistent with the Model Law

itself.

87 Accordingly, I am not persuaded that, simply by referring their d isputes to arbitration under the ICC

Rules, the parties in the present case could be said to have impliedly opted out of the Model Law for

the purposes of s 21 of the Commonwealth Act.

88 Given that the terms used in the p resent arbitration agreement are different from those considered in

Eisenwerk , it is possible that the above conclusion could be reached simply by distinguishing the facts

here from those in that case. That would arguably be the case if it could be said that the phrase “settled

otherwise than in accordance with the Model Law” in the arbitra tion clause there under consideration

operated as a selection of the lex arbitri and not the procedural rules of that Model Law. However,

insofar as the reasoning in Eisenwerk appears to be based on the perceived inconsistency between the

respective systems of procedural rules, it seems to me that it is by no means clear that it can be

distinguished in that fashion.

89 Mr Stevenson submitted that the question whether Eisenwerk was plainly wrong was one that I should

not entertain on an application for leave to appeal in the present case. However, in both Sharah v

Healey [1982] 2 NSWLR 223, at 227 and Appleton Papers Inc v Tomasetti Paper Pty Ltd (1983) 3

NSW LR 208, McLelland J (as his Honour then was) (dealing with a decision of the English Court of

Appeal in the first case and with conflict ing non-binding statements in the High Court and the House of

Lords in the latter case) emphasised the duty of the trial judge when faced with persuasive but non -

binding authority or dicta to which the judge was bound to accord great weight and respect. In

Appleton, his Honour said (at 218):

My duty in these circumstances, as I conceive it, is to decide for myself, invidious task as that

may be, what the relevant principles are or should be, obtaining such assistance as I can from

the persuasive authorities to which I have referred . In this connection I refer to what I said in

Sharah v Healey [1982] 2 NSW LR 223, at 227, 228 [namely that it is the duty of this Court to

apply the law as (rightly or wrongly) it finds it to be, not as another court states it to be in a

manner by which this Court is not bound], and to the passage from the speech of Lord

Dunedin in Leeds Industrial Co-operative Society Ltd v Slack [1924] AC 851, there quoted.

(my emphasis)

90 It seems to me that my duty, notwithstanding that this is an application for leave to appeal, is to

consider the application of Eisenwerk on the question as to whether there should be found (by referral

of the dispute to arbitration under the ICC Rules) to have been an implied agreement of the parties to

opt out of the Model Law – that being a necessary question to determine in considering the first of the

jurisdictional issues posed before me. In circumstances where there is a doubt as to how far, if at all,

the relevant arb itration clauses can be distinguished (and it was submitted for Cargill that they were

relevantly indistinguishable) it seems to me (consistent with my duty) necessary that I must form a

view on the correctness of the decision in Eisenwerk .

91 The conclusion to which I have come is that the decision does not properly recognise or give effect to

the distinction between the lex arbitri and the procedural ru les governing an arbitration. I am not

satisfied that there is any inability to reconcile the application of the Model Law with the adoption of

the ICC Rules as the procedural rules to govern the conduct of the parties’ arbitration. Accordingly,

insofar as Eisenwerk is authority for the proposition that the adoption by the parties of procedural rules

(such as the ICC Rules) to govern the conduct of the arbitration of their disputes amounts of itself to an

implied agreement to opt out of the Model Law (and while conscious of the respect to be accorded to

decisions of an intermediate appellate court such as this), I have formed the view that that decision is

plainly wrong and is one which should not be followed by this Court.

Is there otherwise an effective opting-out of the Model Law?

92 Mr Stevenson submitted that, even if I were to form the view (as I have) that Eisenwerk is plainly

wrong and should not be followed in this case, the objective intention of the parties must have been to

exclude the Model Law since the parties (represented as they have been by experienced practitioners in

this area) should be taken to have intended (knowing the effect of the Eisenwerk decision as it applied

at the time) to opt out of the Model Law for the purposes of s 21 of the Commonwealth Act. This

submission is put on the basis that the proper construction of a contract is to be determined by what a

reasonable person in the parties’ position would have understood it to mean in the circumstances

existing at the time of the contract’s execution (reliance being placed in that regard on Pacific Carriers

v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, at 461-462; Equuscorp v Glengallan [2004]

HCA 55; (2004) 218 CLR 471, at 483; Toll v Alphapharm [2004] HCA 52; (2004) 219 CLR 165, at

179; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407, at [14]; [305]; [322]).

93 Thus, Mr Stevenson submits that the contracting parties should be taken to have known, when entering

their agreement in 2005, the effect of their adoption of the ICC Rules, by reference to what had been

decided in Eisenwerk in 1999 (and reported in the authorised reports from 2001) (BCCI v Ali [2002] 1

AC 251; Lewison, The Interpretation of Contracts, 4th

edn, Sweet & Maxwell, London, 2007, at

[4.06]). That being part o f the common law of Australia (Kirk v Industrial Relations Commission of

New South Wales [2010] HCA 1; (2010) 262 ALR 569, at [99]), it is said that any party wishing to

avoid the effect of Eisenwerk could easily have done so (say, by noting in the arb itration agreement

that the Model Law is to apply notwithstanding the adoption of the ICC Rules or by noting that the

parties are not to be taken to be entering into an agreement to opt out of the Model Law for the

purposes of s 21 of the Commonwealth Act). Not having done so, it is submit ted in effect that the

parties should be taken to have intended the result which would have followed had Eisenwerk been

correctly decided and followed in this Court.

94 In response, Mr Gleeson emphasised that “opting out” means “real opting out” and not ed that the

standard form contract entered into by the part ies in 2005 was the then version of a form of agreement

in place before the Eisenwerk decision was reported. It is submitted that there was no settled practice

or procedure arising from the Eisenwerk decision per se and that, having regard to the comment and

discussion on that case, one could not say that it was accepted as a general princip le that the proper

construction of s 21 would always lead to the conclusion that choice of arb itral rules of an institution is

an opting out of model law.

95 In the absence of a settled practice, and any evidence of any shared or mutual intention of the parties to

opt out of the result in Eisenwerk, Mr Gleeson argued that reliance on Lewison did not avail Cargill. In

that regard, I would have been inclined to think that experienced practitioners in the area of arbitrat ion

would have been well aware by 2005 of the risk that, by reference to Eisenwerk , an adoption of ICC

Rules might lead to the conclusion that they had opted out of the Model Law and to have made express

provision to indicate (if that be the case) that that was not the intention. The fact that a standard form

of contract, the subject in its various iterations of copyright from an earlier date, had been used does

not seem to me to detract from such a conclusion.

96 Whilst the House of Lords in BCCI v Ali did not expressly consider the relevance of case law upon the

interpretation of contracts, Lord Hoffman did there make the following observations (at [37]-[39]):

I agree with my noble and learned friend that the first issue raises an ordinary question of

construction. What would a reasonable person have understood the parties to mean by using

the language of the document against all the background which would reasonably have been

available to them at the time? But I regret that I cannot agree with his answer. It appears to me

to give too little weight to the actual language and background and to rely unduly upon the

expressions of judges used in other cases dealing with different documents.

The background is however very important. I should in passing say that when, in Investors

Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913, I

said that the admissible background included "absolutely anything which would have affected

the way in which the language of the document would have been understood by a reasonable

man", I did not think it necessary to emphasise that I meant anything which a reasonable man

would have regarded as relevant. I was merely saying that there is no conceptual limit to what

can be regarded as background. It is not, for example, confined to the factual background but

can include the state of the law (as in cases in which one takes into account that the parties are

unlikely to have intended to agree to something unlawfu l or legally ineffective) or proved

common assumptions which were in fact quite mistaken. But the primary source for

understanding what the parties meant is their language interpreted in acco rdance with

conventional usage: "we do not easily accept that people have made linguistic mistakes,

particularly in formal documents". I was certainly not encouraging a trawl through

"background" which could not have made a reasonable person think that the parties must have

departed from conventional usage.

97 Statements to this effect had been made by Lord Hoffman previously in Investors Compensation

Scheme Ltd v West Bromwich Building Society [1998] 1 W LR 896, at 912; [1998] 1 All ER 98, at 114.

Both cases have been cited by the High Court in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001]

HCA 70; (2001) 210 CLR 181, where the following observations were made by Gleeson CJ, Gummow

and Hayne JJ (at [11]):

Interpretation of a written contract involves, as Lord Hoffmann has put it : ‘the ascertainment

of the meaning which the document would convey to a reasonable person having all the

background knowledge which would reasonably have been available to the parties in the

situation in which they were at the time of the contract’. That knowledge may include matters

of law, as in this case where the obtaining of intellectual p roperty protection was of central

importance to the commercial development of Mr A llen's ironing board (my emphasis,

citations omitted).

98 Lewison refers to the decision of Scrutton LJ in Westcott v Hahn [1918] 1 KB 495, at 511, where h is

Lordship said:

A flood of authorities in and since the seventeenth century were poured out upon the Court in

which somewhat similar words to this covenant had received a construction from the Courts.

In my view, however, the first thing to be done is to endeavour to ascertain from the words the

parties have used in this case their actual intention. If they have used words which by a settled

course of authority have acquired a technical meaning, the court will give effect to those

authorities; but, unless this is so, it appears to me very unprofitable to consider what Courts

have thought that other words in other documents meant and to see which reported case has

the lease differences from the present.

99 Reference was also made to the decision of Waller LJ in British Sugar plc v NEI Power Projects Ltd

(1997) 87 BLR 42, at 50, where his Lordship said:

Once a phrase has been authoritatively construed by a court in a very similar context to that

which exists in the case in point it seems to me that a reasonable businessman must more

naturally be taken to be having the intention that the phrase should bear the same meaning as

construed in the case in point. It would again take very clear words to allow a Court to

construe the phrase differently.

100 Lewison goes on to state:

Even if one might consider that the parties to the contract themselves might not have had the

previous decisions of the Courts in mind when making their contracts, their lawyers will have

done so in deciding whether or not to pursue a dispute subsequently.

citing The Radauti [1987] 2 Lloyd’s Rep 276 CA; The Kalliopi A [1988] 2 Lloyd’s Rep 101; The Solon

[2000] CLC 593 as authority for this proposition.

101 However, the comment is also made in Lewison (at 103, o f the 3rd

edn) that where an erroneous

decision has departed from orthodoxy, and a contract is entered into while the erroneous decision was

thought to represent the law, that will not provide a reason for applying the erroneous decision to the

contract in question, there cit ing Shell International Petroleum Ltd v Gibbs [1983] 2 AC 375; Trustees

of Henry Smith’s Charity v AWADA Trading & Promotion Services (1983) 47 P&CR 607.

102 Shell International supports the view that, simply because contracts may have been drafted on the

assumption that a specific legal interpretation of a phrase made in a case is good law and b inding, a

court will not necessarily be p recluded from later overru ling a particular interpretation placed upon that

phrase (at 390 – 391). There, the House of Lords in considering the meaning to be attributed to a

particular phrase in a contract, considered whether an earlier decision (Nishina Trading Co Ltd v

Chiyoda Fire & Marine Insurance Co Ltd (The Mandarin Star) [1968] 1 W LR 1325; [1968] 3 All ER

712; [1968] 2 Lloyd's Rep 47) construing the same phrase in a manner differently from that which their

Lordships considered was the correct interpretation should be overruled despite the uncertainty that

may be created in relation to agreements drafted on the basis of or with the interpretation placed on the

phrase by the erroneous decision of The Mandarin Star in mind.

103 Lord Roskill was of the view that, despite the uncertainty created in relation to contracts drafted on the

assumption that The Mandarin Star was good law, this was not (although it could be in other cases) a

relevant consideration when determining whether to overrule the decision. It should be noted that in

Shell International, the House of Lords did not expressly consider whether it should, despite the

overruling of and subsequent non-application of the erroneous legal interpretation made in The

Mandarin Star, nonetheless conclude that such an interpretation was intended by the parties (who

would have known of the interpretation and by adopting such a phrase migh t have impliedly intended

that such an interpretation apply). It was submitted before their Lordships that it should be taken that

the parties intended the decision to apply to the contract, on the basis that it was assumed to be good

law and because no s teps had been taken by relevant commercial bodies to change the standard form

contract adopted. However, Lord Roskill dealt with this submission not by considering what the

objective intention of the parties would have been by adopting the particular phrase in question (that is

whether it could be said that they intended the interpretation to apply in circumstances where they did

not take steps to draft the phrase differently to avoid its applicat ion) but instead dealt with this

submission as an appeal for promoting commercial certainty by not overruling the erroneous decision

(The Mandarin Star) in question, (which submission was not accepted).

104 While Lewison cites this case as authority for proposition that where a contract is entered into

assuming that decision correctly represents the law, that will not provide a reason for applying the

erroneous decision to the contract in question (which can be implied from the outcome of the decision,

although not the express reasoning), it might perhaps be more precise to read Shell International as

authority for the proposition that the fact that a contract has been drafted assuming the correctness of a

decision will not necessarily prevent the courts from finding that the decision is incorrect (and as a

consequence to refuse subsequently to apply the erroneous decision to the interpretation of the

contract). That was the approach of Sir John Donaldson MR in The Mandarin Star, who rejected an

argument of this kind as follows:

Mr. Joseph also submitted that as the terms of the lease were agreed before the decision of the

House of Lords in United Scientific Holdings Ltd. v. Burnley Borough Council , the lease had

to be construed and the intention of the parties deduced on the basis of the law as it was

thought to be at that time. Whilst this argument is not without its attractions, I think that it

must be rejected as involving an undesirable extension of the doctrine of stare decisis. A

somewhat similar argument was rejected by the House of Lords in Shell International

Petroleum Ltd v Gibbs.

105 In relation to the ability of parties who adopt a standard form contracts to do so against a background of

previous case decisions on the meanings of the words in the standard form contracts, Lewison refers (at

104 of 3rd

end) to the statement of Lord Hoffman in Beaufort Developments (NI) Ltd v Gilbert-Ash (NI)

Ltd [1999] 1 AC 266, where his Lordship states:

It is also important to have regard to the course of earlier judicial authority and practice on the

construction of similar contract. The evolution of standard forms is often the result of

interaction between the draftsmen and the courts and the efforts of the drafts men cannot be

properly understood without reference to the meaning which the judges have given to the

language used by his predecessors.

106 Clarke LJ in Sunport Shipping Ltd v Tryg-Baltica International (UK) Ltd [2003] 1 Lloyd’s Rep 138

similarly stated:

When a contract has been professionally drawn … the draftsmen is certain to have in mind

decisions of the courts on earlier ed itions of the clauses. Such decisions are part of the context

or background circumstances against which the particular contract falls to be construed. If the

draftsmen chooses to adopt the same words as previously construed by the courts, it seems to

me to be likely that, other things being equal, he intends that the words should continue to

have the same meaning.

107 While it might be difficult to say that a “settled practice” o f draftsmanship had arisen following one

judgment (Eisenwerk) in Australia in which the construction of a particular clause seems to have been

addressed, I think it might well be said that the apparent notoriety within arbitral circles of the decision

in the period at least from 2001 was likely to have given rise to an awareness on the part of lawyers

advising their clients on contracts containing arbitration clauses of this kind of the prudence of ensuring

that any doubt as to the parties’ intentions in respect of the lex arbitri should be removed (and I see no

reason to think that the practice would have differed where what was in consideration was a standard

form contract).

108 That said, the force of Mr Stevenson’s submission depends on the similarity (or otherwise) between

what I might refer to as the Eisenwerk clause and the clause adopted by the parties in their agreement.

It seems to me that this is where the argument fails.

109 While I would have been inclined (had the clauses mirrored each other in all relevant respects) to infer

that reasonable parties in the position of Carg ill and Excel, knowing the law and acting on the advice of

the experienced solicitors, must have intended to exclude the Model Law when they chose a form of

arbitration agreement relevantly the same as that construed in Eisenwerk and did not take steps to

ensure that the result in that case was avoided in their case, the fact is that here the parties adopted a

clause which uses somewhat different terminology (referring their disputes for arbitration under the

ICC Rules, not provid ing for the settlement of their disputes in accordance with those Rules). It seems

to me that I cannot properly draw the inference for which Mr Stevenson contends in light of that

difference, which I see as more than a mere semantic difference but as having potential substance

(insofar as the emphasis to referral of the arbitration to take place under particular ru les, in the present

formulat ion, in my mind highlights the very distinction between procedural rules and the overriding

role of the lex arbitri which I consider was not taken into account in Eisenwerk ).

110 Therefore, I have concluded that there was no implied agreement between the parties to opt out, for the

purposes of s 21 o f the Commonwealth Act, of the Model Law nor is any such intention to be in ferred

from the fact that the parties chose to adopt an arbitration clause similar to that which had been used in

Eisenwerk at a time when the potential consequence of using such a clause should have been well

known to those practising in the area of international arbitration.

111 The answer to the init ial jurisdictional issue, therefore, is that the Model Law applies. Strictly

speaking, that means that the balance of the issues in relation to the application for leave to appeal

under the provisions of the State Act do not arise. However, they were argued before me and I address

them as follows.

(ii) Does the claim arise out of a maritime contract?

112 The second jurisdictional issue arises from the provisions of the State Act under which leave to appeal

may be granted in respect of questions of law arising out of arbitral awards. Subject to subs (4), s 38(2)

of the State Act confers a right to appeal to this Court on any question of law arising out of an award.

In the absence of consent of all other part ies, an appeal can only be brought with the leave of the court

(s 38(4)(b)) and the grant of leave is subject to s 40, which provides that the court shall not grant leave

to appeal with respect to a question of law arising out of an award if there is in force an exclusion

agreement, that being defined as being an “agreement in writ ing …between the parties to the

arbitration agreement which excludes the right of appeal under section 38(2) in relat ion to the

award…”

113 Section 40(3) provides that an agreement may be an exclusion agreement for the purposes of the

section whether or not it forms part of the arb itration agreement. Mr Gleeson noted (and Mr Stevenson

accepts) that Article 28(6) of the ICC Rules in its terms amounts to an exclusion agreement for the

purposes of the Act and hence that, by the submission of the dispute to arbitration under the ICC Rules,

there was an exclusion agreement.

114 Pursuant to s 41(a), an exclusion agreement shall have no effect in relation to the award or question

where the award or question of law arising in the course of the arb itration relates in whole or in part to

a question of claim falling within the Admiralty jurisdiction of this Court. Accordingly, to avoid the

effect of the exclusion agreement, the Cargill needs to establish that the claim before the Arbitrator was

a maritime claim.

115 Section 9(1) of the Admiralty Act 1988 (Cth) confers jurisdiction on this Court, amongst others, in

respect of marit ime claims. A reference to a marit ime claim is a reference to a proprietary marit ime

claim or to a general maritime claim. The latter includes (s 4(3)(f)) “a claim arising out of an

agreement that relates to the carriage of goods or persons by a ship or to the use or hire of a ship,

whether by charterparty or otherwise”.

116 Reliance was placed by Mr Stevenson relies on Heilbrunn v Lightwood plc [2007] FCA 1518; (2007)

164 FCR 1 for the submission that the claim brought by Cargill for demurrage under a contract for the

delivery of coal FOB to a ship (for the subsequent carriage of the coal by ship) was a marit ime claim

(and hence the exclusion clause is overridden). Mr Gleeson relies, inter alia, on The Zeus [1888] 13 PD

188 for the contrary conclusion.

117 It is accepted that the relevant test in determining whether there is a maritime claim is that applied in

Heilbrunn - the ‘reasonably direct connection’ test, namely whether there is a reasonably direct

connection between the claims made and an agreement fo r the use o f a ship or the carriage of goods by

ship. In this case, as outlined earlier, the claims made in the arbitrat ion were for payment due in

respect of the delivery of goods to a ship and a counterclaim for demurrage fo r delay in loading the

ship.

118 In Heilbrunn, Allsop J (as his Honour then was) was considering whether a claim, against a

warehouseman in England, fo r damage which occurred when a vintage car was loaded into a sea

container to be transported by road to the port of Tilbury fo r loading on a s hip for sea carriage to

Australia was a maritime claim with in the Admiralty jurisdiction under the Act. His Honour held that

it was. In essence, his Honour considered that the agreement to load a shipping container was

sufficiently directly related to the anticipated carriage of goods by sea to satisfy s 4(3)(f), at [52]-[54].

The agreement under which the claim was made was for the loading of the sea container which was

then to be to the port and then by sea to Australia.

119 By contrast, in The Zeus, to which his Honour referred to in Heilbrunn, the claim was made under what

was described as an undertaking (by way of guarantee) by a colliery company to load a cargo of coal

onto a ship within a part icular period (and thereafter to pay demurrage). That claim was held not to be

an agreement “made in relation to the use or hire of any ship, or in relation to the carriage of goods in

any ship” within the meaning of the County Courts Admiralty Jurisdiction Amendment Act 1869 (32 &

33 Vict. c.51). The agreement was characterised as “merely an engagement to deliver coals at a

particular place” with a penalty to be paid if the contract was not performed within a limited t ime. The

use of the word ‘demurrage’ was said to be immaterial (when considering whether this was a claim

having the necessary relationship to the use or hire of or carriage of goods in a ship), it being a word of

different meanings, “… unless it can be established that the agreement is one in relation to the use or

hire of a ship”. Admiralty jurisdiction was there found not to have been established.

120 As is apparent, the present facts are broadly analogous with those in both Heilbrunn and Zeus in that

(as in Heilbrunn) the coal was to be delivered by Excel on board a ship for the purpose of its carriage

by sea (albeit that it was not being loaded into a sea container as such but was being transported by rail

for delivery over the ship’s rail) and the claim (as in Zeus) was for demurrage by reference to the delay

in loading the ship.

121 In Heilbrunn, Allsop J said from [22]:

The relevant question to address is whether the assertions of right or interest recognised by

law and carry ing an entitlement to relief made by the plaintiff in the application and statement

of claim (being the claim of the plaintiff) have (and has) the legal character of that which is set

out in s 4(3)(f): Owners o f Shin Kobe Maru v Empire Shipping Co Inc (1994) 181 CLR 404 at

422 and 426; and The ‘Global Peace’ 154 FCR at 459-60 [73]-[76].

This task is to be undertaken with the meaning and content of s 4(3)(f) understood.

Mr Cutler argued that the correct approach to the interpretation of s 4(3)(f) could be found in

Port of Geelong Authority v The ‘Bass Reefer’ (1992) 37 FCR 374 at 380-382 in which case

Foster J adopted the approach of Lord Keith of Kinkel in Gatoil International Inc v

Arkwright-Boston Manufacturers Mutual Insurance Co [1985] AC 255 at 270-271 and said

that the relationship connoted by the words "that relates to" in s 4(3)(f) must be "some

reasonably direct connection". The same passage from Lord Keith’s speech in Gatoil [1985]

AC at 270-271 was cited with apparent approval by Gummow J in Empire Shipping Company

Inc v Owners of the Ship ‘Shin Kobe Maru’ (1991) 32 FCR 78 at 95 (at first instance).

…Before dealing with these cases, it is appropriate to set out, by reference to settled

Australian law, some important considerations that attend the construction and interpretation

of the Act. The first consideration is the proper approach to the construct ion of the Act. In

Tisand Pty Limited v The Owners of the Ship MV ‘Cape Morton’ (Ex ‘Freya’) (2005) 143

FCR 43 at [59]- [65], the Full Court set out relevant governing principles. It is unnecessary to

repeat those passages other than to say the Act should be read in its legal and historical

context, and that the Act and the definitions of maritime claims have an international as

well as a domestic maritime context , including the International Convention for the

Unification of Certain Rules Relating to the Arrest of Sea-Going Ships 1952, done at Brussels

on 10 May 1952 (the "1952 Convention") and the Australian Law Reform Commission, Civil

Admiralty Jurisdiction, Report No 33 (1986) (the "ALRC Report").

The second consideration is that provisions conferring jurisdiction or granting powers to

courts should be interpreted liberally and without imposing limitations not found in the

express words: The ‘Shin Kobe Maru’ 181 CLR at 421 and see the numerous other High

Court authorities to like effect referred to in Hewlett Packard Australia Pty Limited v G E

Capital Finance Pty Limited (2003) 135 FCR 206 [187].

The third consideration is a particular aspect of the importance of the context provided by the

ALRC Report. In Owners o f MV Iran Amanat v KMP Coastal Oil Pte Ltd (1999) 196 CLR

130 at 138 the High Court in a jo int judgment (Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ) stressed the importance of the background of English legislation and authority

and any settled international construction:

… When the Parliament has enacted legislat ion, affecting the subject of international

shipping, and followed a statutory precedent from overseas which has by then

received a settled construction, there is every reason to construe the statutory

language in the same way in th is country unless such construction is unreasonable or

inapplicable to Australian circumstances. ...

Thus, both Gatoil [1985] AC 255 and The Antonis P Lemos [1985] AC 711 can be seen as

unanimous decisions of the final court of appeal in the United Kingdom interpreting domestic

legislation having its origins in an international convention, one aim of which was to bring

uniformity of approach among different legal systems. The existence of those decisions, the

desirability of international uniformity, or at least broad consistency, and an expressed

suggestion by the ALRC (which was heeded) that Parliament follow the word ing of the 1981

UK Act, which had been (recently) interpreted (as well as the antecedent provision in the 1956

UK Act) by the House of Lords in Gatoil [1985] AC 255 and The Antonis P Lems’ [1985] AC

711 necessarily constrain the interpretation of s 4(3)(f), certainly at first instance. Further, two

judges, of this Court (Foster J in The Bass Reefer 37 FCR 374 and Gummow J in The Shin

Kobe Maru 32 FCR 78) at first instance have applied Gatoil [1985] AC 255. (My emphasis)

122 From [38], in a passage on which Mr Stevenson places reliance, Allsop J said:

After discussion at 725-731, and for the reasons expressed at 731, Lord Brandon [in the

Antonis P Lemos] rejected the first contention of the owners. A wide and liberal, not narrow,

construction was, his Lordship said, to be given to the phrase "arising out of", equivalent to

"in connection with". In his discussion, Lord Brandon said at 727:

With regard to the first point, I would readily accept that in certain contexts the

expression "arising out of" may, on the ordinary and natural meaning of the words

used, be the equivalent of the expression "arising under," and not that of the wider

expression "connected with".

In my view, however, the expression "arising out of" is, on the ordinary and natural

meaning of the words used, capable, in other contexts, of being the equivalent of the

wider expression "connected with". Whether the expression "arising out of" has the

narrower or the wider meaning in any particular case must depend on the context in

which it is used.

I should apply The Antonis P Lemos [1985] AC 711 in this regard. All the reasoning of Lord

Brandon is equally applicable to s 4(3)(f). I would only add the following remarks. Given the

need for the 1952 Convention to apply to a wide variety of legal systems and given the

capacity of maritime claims to arise by reference to chartering and carriage arrangements

often of some complexity, it would make little p ractical sense to limit the types of claims to

which this paragraph was directed to contractual claims between part ies to the agreement.

Secondly, the provision is one in which jurisdiction is given to a court. It should be read

liberally: The Shin Kobe Maru 181 CLR at 421. Th ird ly, The Antonis P Lemos [1985] AC 711

was recently applied by a Full Court of this Court, though in a different context: that of

construing an arbitration clause containing the phrase "arising out of", in Comandate Marine

Corporation v Pan Australia Shipping Pty Limited (2006) 157 FCR 45 at 45 at [171]. The Full

Court, though in that different context, gave the same wide meaning to the phrase "arising out

of"’: Comandate Marine v Pan Australia 157 FCR 45 at [162]-[176].

123 Accordingly, a liberal v iew should be taken in determin ing when a claim arises out of an agreement but

the second part of the test is whether that agreement has a reasonably direct connection with the

carriage of goods by sea and a narrower view is taken on that aspect. In Heilbrunn, Allsop J said of

this question, from [44]:

The next question is whether any one or more of these agreements answers or answer the

description of "an agreement that relates to the carriage of goods... by a ship", as that phrase

was interpreted by the House of Lords in Gatoil [1985] AC 255.

In Gatoil [1985] AC 255 Lord Keith of Kinkel (with whose speech Lords Fraser of

Tullybelton, Scarman, Wilberforce and Roskill agreed) concluded that the phrase "related to"

should not be construed widely, but rather there should be "some reasonably direct

connection" with the activ ities described in the provisions (there ss 1(1)(h) and 47(2)(e) of the

1956 UK Act).

It is also be noted that in The Antonis P Lemos [1985] AC at 730 Lord Brandon expressed the

view that what "tilted the balance in favour of g iving a narrow meaning to the expression

‘relating to’" was the existence of two authorities, The Zeus (1888) 13 PD 188 and The

Aifanourios [1980] SC 346 (the reasoning in which latter case can be seen as contrary to some

of the comments of Lord Brandon about the natural and inevitable overlap in the list of

marit ime claims). Lord Brandon said (at [1985] AC at 730 G-H) that in the absence of these

authorities it might not be right to give the expression "relating to" (in s 4(3)(f) "relates to") a

narrow meaning as given by the House in Gatoil [1985] AC 255.

This apparent degree of tension between the two decisions (though the word "tension" is not

used in any way disrespectfully, in part icular since Lords Scarman and Roskill concurred in

both decisions) can be set against the background of the clear injunction of the High Court in

The Shin Kobe Maru 181 CLR at 421 (and the numerous other High Court decisions earlier

referred to) to read provisions conferring jurisdiction and discretion on courts liberally.

For the reasons that I have earlier given, however, it is not appropriate that, sitting at first

instance, I do other than apply Gatoil [1985] AC 255. Further, in what might be said to be in

support of a wide construction of "arising out of" and a narrower approach to "relates to", the

former expression should be wide to catch all claims that have a connection with an agreement

that has the appropriate maritime connection or character. The appropriate marit ime

connection or character fo r s 4(3)(f) might be seen to be assisted by the recognition that all the

general marit ime claims in Article 1 of the 1952 Convention and in s 4(3) are expressed to be

the foundation of an action in rem against a ship and to found the remedy of arrest. The

relational connection in the phrase "that relates to" is to be seen in that context. It also may be

important to see the appropriate marit ime connection by reference to the Constitutional reach

of s 76(iii). Section 4(3) must at all times be construed within the confines of the

Constitutional authority given to Parliament: cf the Acts Interpretation Act 1901 (Cth), s 15A.

Approaching the matter by applying Gatoil [1985] AC 255, does or do any one or more of the

agreements referred to in [43] above have a reasonably direct connection with the activity of

carriage of goods by a ship and thereby "relates or relate to the carriage of goods by a ship"

for s 4(3)(f)?

124 Adopting the reasoning of his Honour, the question whether a claim is a maritime claim is thus to be

determined by applying a liberal approach to the question whether there is claim ‘arising out of’ an

agreement but a narrower approach should be taken when considering the question of whether the

agreement has the appropriate maritime character. In Heilbrunn, there was the necessary relationship

or connection between the agreement and the carriage of goods by sea because the agreement for the

loading of the container was seen as being “essential to the performance of the sea carriage”. His

Honour said, at [52]:

The cars had to be loaded into the shipping container in preparation for sea transport. That is

what the defendant undertook to do. The loading of the container was, in substance, for the

sea carriage. … The agreement to load the shipping container between the arranger of the

carriage and its subcontractor had a reasonably direct relat ionship with the carriage of goods

by the ship. (my emphasis)

125 In the present case, although the coal was not being loaded into a separate sea container to be put on

board the ship, it is clear that the coal was being delivered for the purpose of and in preparation for its

carriage by sea. The specificat ion standards in the agreement make clear that aspects of the loading

obligations were referable to conditions relevant to the carriage of goods by sea.

126 It seems to me that this is not a case, such as Gatoil International Inc v Arkwright–Boston

Manufacturers Metal Insurance Co [1985] AC 255, where the contract in question is separate from the

action involved in putting the ship in readiness for goods to be carried by sea. Rather the steps to be

taken under the present contract were an essential part of putting the ship in readiness for the carriage

of goods by sea. In Gatoil, by contrast, there was a claim for a contract for insurance of goods that

were carried by ship and the House of Lords said this was not a sufficient connection. It can be seen

that in that case the contract was not entered into to make possible or to facilitate or to further the

purpose of carriage of goods by sea, but rather was to deal with the financial risk attaching to such

carriage. Similarly, in the Port of Geelong Authority v The “Bass Reefer” (1992) 37 FCR 374, claims

in relation to a lease of a cargo assembly at the port and a licence for priority berthing at a nominated

berth did not satisfy the reasonable connection test . Neither o f those cases is factually similar to the

present. Mr Gleeson referred also to The “Catur Samudra” [2010] SGHC 18 where the High Court of

Singapore held that to satisfy the direct connection test a claim under an agreement which is collateral

or ancillary to the contract of carriage must be intrinsically related to the use or hire of a vessel.

127 Mr Gleeson submitted that the distinction between the present case and the Heilbrunn case was that in

the present case the claim related to a contract anterior to something which subsequently happened on a

ship. It was submitted that the reasonably direct connection must be with the use of the ship itself

(relying on Geelong Authority and Heilbrunn). Further, it was submitted that the only connection with

a ship was that the obligation was to deliver foods over the ship rail, with t itle to the goods and risk of

loss or damage passing progressively to Cargill as the goods passed over the rail of the vessel.

128 It was said that the mere place for delivery could not transform the subject matter of the agreement

from one for the sale and delivery o f goods into a charterparty or the like. (As I understand it, this

argument assumes that the fact that the goods were ult imately to be transported by sea was incidental to

the contract, which could just as easily (assuming that were possible logistically) have been for

delivery of coal to, say, a trucking terminal for delivery by road and with no suggestion of a marit ime

flavour.) In that regard, the fact that there might have been a different result had Cargill chosen to

carry the coal it purchased by a different means seems to me not to be relevant – it might equally be

said that had the vintage Vauxhall been transported by air, the contract for the loadin g of it into a

container for transport by plane would not have been a maritime contract.

129 Here, the connection between the agreement for the delivery of coal and the carriage of that coal by

ship is obviously closer to the position in Heilbrunn than the relationship of the contracts in the Gatoil

and Geelong Authority cases to the use/hire of carriage of goods by ship.

130 If the contract to load and deliver a sea container to port was sufficiently connected to the use of a ship

to give rise to a marit ime claim (and not construed simply as a contract for the transport by road of

goods to a place o f delivery for later shipment by sea), then it is by no means clear why the agreement

in question (which involves the physical delivery of the goods onto the ship for subsequent transport by

sea) is not also sufficient to enliven the Admiralty jurisdiction. Indeed, but for the decision in Zeus, I

would find it difficult to see any reasonable basis for distinguishing between a situation where the

delivery is made by way of loading goods into a container to be transported to the port and placed on a

ship and the situation where the delivery is made not by loading a container but by way of loading a

freight car to be transported by rail to the port and then for the goods to be placed directly into the ship.

131 Does Zeus, which (but for the fact that it seemed to involve a claim for demurrage under a guarantee or

‘undertaking’ of performance of the work within time, as opposed to a claim for demurrage u nder a

contractual provision not labelled by reference to a guarantee or undertaking) seems almost on all fours

with the present factual situation, require a d ifferent conclusion from that reached in the similar

situation in Heilbrunn?

132 Zeus, considered without apparent disapproval in Heilbrunn and approved in Gatoil, was a very b riefly

reasoned judgment on appeal from the County Court of Northumberland in 1888. (It is perhaps not far

from the category of case the citation of which was “strongly deprecated” by the House of Lords, as

noted in Export Credits Guarantee Department v Universal Oil Products Co [1983] 2 All ER 205;

[1983] 1 W LR 399.) In terms of persuasive authority, the considered analysis of Allsop J in the

Heilbrunn case is, with respect, entitled to more deference than the decision in Zeus and seems to me

more likely to be reflective of maritime practice in the modern business world.

133 I note that reference was also made by Mr Gleeson to Tradhol Internacional SA v Colony Sugar Mills

Limited 2009 W L 3929893 (C.A.2(N.Y)) (20/11/09) as being broadly consistent with Zeus and

involving an FOB contract for sale of goods. In that case, the Court of Appeals held that the seller had

failed to establish a prima facie admiralty claim and was not entitled to an order of marit ime attachment

and garnishment. The relevant law to be applied as to whether there was a prima facie maritime claim

raised issues as to whether a contract including both marine and non-marine elements could be brought

within one of the two exceptions to the “mixed contracts rule” – which turned on whether the non-

marit ime obligations were severable or whether the non-maritime claims were merely incidental to the

marit ime ones, hence a different context from the question presently under consideration. The court

considered that the demurrage clause in a contract for the sale and loading of goods FOB was not the

focal point of the contract and that “In the context of the contracts at issue demurrage alone does not

raise a claim to which the remaining claims are merely incidental so as to support the second exception

to mixed contracts”, and held that Tradhol had failed to exp lain how its demurrage and ‘dead freight’

claims fitted within the mixed contract prohibition. As I read the decision, the court seems to have

proceeded on the assumption that a demurrage claim was a marit ime claim but that the remain ing

claims were not merely incidental to it or severable so as to overcome the problem for Tradhol that the

contract contained both maritime and non-maritime elements. If that is the proper conclusion to be

drawn from the reasons then it would seem to me to support the view that a claim for demurrage could

be seen as having a maritime flavour when linked with a contract for the carriage of goods by sea.

134 Applying the test enunciated in Heilbrunn, had this issue been necessary to determine, I would have

held that the claims the subject of the arbitrat ion in this case were marit ime claims falling with in the

Admiralty jurisdiction by reference to s 4(3)(f) of the Act on the basis that the loading of the coal onto

the ship was an essential step in the preparation of the vessel for the carriage of goods by sea and,

hence, the maritime exception would apply.

135 In the written submissions served for Excel, Mr Gleeson next argued that the Admiralty exception did

not apply in any event because the “exclusion agreement” was entered into after the commencement of

the arbitration (s 41(1)(d) of the State Act). That submission was based on the arbitration proceedings

having commenced on 18 March 2009 (upon receipt of the request by the ICC Secretariat) and the

reliance placed by Cargill in its written submissions on the exchange of correspondence in April 2009

as amounting to the arbitration agreement in question.

136 However, in oral submissions before me, Mr Stevenson made it clear that Carg ill accepted the

contention (which had been made by Excel’s lawyers in April 2009) that the reference to arbitrat ion

had occurred by virtue of the arb itration agreement itself (not an agreement comprised by the exchange

of correspondence) (T8.8). It was conceded (as noted above) that Article 28(6) of the ICC Rules, as

adopted by the parties by their arbitrat ion agreement in clause 18.9 of the standa rd coal trading

agreement entered into in 2005, amounted to an exclusion agreement for the purposes of s 40 of the

State Act. Therefore, it was contended by Mr Stevenson that the exclusion agreement was not one

entered into after the arb itration commenced and thus s 41(1)(d) d id not apply. In those circumstances,

I did not understand Excel’s written submission to the contrary to be pressed but, if it were, it would

not have succeeded.

137 Accordingly, had I been satisfied that the State Act applied, I would have determined the second

jurisdictional question in favour of Cargill.

(iii) Have the threshold requirements in s 38(5) of the State Act been satisfied?

138 Having considered the jurisdictional issues, I turn then to whether (had those been found in favour of

Carg ill) the threshold requirements for the grant of leave to appeal would have been satisfied. As

already noted, Cargill is seeking leave to appeal in relat ion to two issues – the first is as to the

construction of clause 7.11.2 of the agreement (namely, whether laytime should have continued until

the giving of a force majeure notice irrespective of whether that was a notice compliant with clause

17.2 in terms of its timing) and the second is as to whether laytime was suspended during any time that

was not a “Weather Working Day”.

Could determination substantially affect the rights of one or more parties

139 The first threshold requirement is that the court be satisfied that the determination of the relevant

question of law, having regard to all the circumstances, “could substantially affect the rights of one or

more parties to the arbitration agreement”. Factors relevant to the determination of this question

include the quantum of the amount in issue and the relationship between the costs of the appeal and the

significance of the question of law to be determined (Westport Insurance Corporation v Gordion

Runoff Ltd [2009] NSWSC 245, at [15]; Natoli v Walker (1994) 217 ALR 201, at 9).

140 For Cargill, it was submitted that if its contention as to the construction of clause 7.11.2 were to be

correct this would make a substantial difference to its rights as it would then have had an entitlement to

demurrage from 8 June (at a rate of USD50,000 per day), rather than only from 25 June 2007. (The

additional demurrage charges amount to USD850,000.)

141 Mr Gleeson contended that this submission failed to take into account the effect of the determination

made by the Arbit rator as to the estoppel/waiver issues that are not now the subject of any challenge by

Carg ill. It is said that because of those findings, the determination of neither of the grounds of appeal

could now have any substantial effect on the parties’ rights.

142 As to the first ground of appeal, the findings to which Mr Gleeson refers are the findings that the force

majeure notice was g iven as early as practicable (para 223(b) of the Part ial Award); tha t clause 17.3

applied and had the effect that laytime was suspended during the force majeure period (in effect, para

223(a) of the Part ial Award); and that Cargill was not entitled to resile from the position it had earlier

adopted (in February 2008) and seek demurrage for the period from 8 to 21 June 2007 (para 223(c)).

143 As to the second ground of appeal, it is said, first, that any appeal would be futile (because the

conclusion as to the weather working day issue was in the context of responding to an alternative

argument) and the Arb itrator’s finding as to the principal contention, ie that time d id not count towards

laytime by reason of the force majeure provisions, is not challenged. Thus it is said that whatever the

result of an appeal by reference to the alternative “Weather Working Day” argument, the outcome will

remain the same by reference to the principal finding). Secondly, it is said that it has been conceded by

Carg ill that there is no difference in monetary terms if an allowance was not made for wet weather but

was made for force majeure. Thirdly, it is submitted that (as per the first ground of appeal) this issue

could affect the parties’ rights only if Cargill were to be permitted to claim demurrage for the period up

to 21 June 2007 and the Arbitrator has found otherwise.

144 (Mr Stevenson concedes, as I understand it, that if leave to appeal is not granted in respect of the first

ground of appeal then there is no utility in a grant of leave in relat ion to the weather working day

point.)

145 Turning to the first ground of appeal, it is contended by Cargill that the Arbitrator should have found in

all the circumstances that the Iron Bradyn went on demurrage shortly after the commencement of the

force majeure period. While there is no challenge to the finding of the period over which force majeure

was operative, Carg ill’s position is that had there been a finding that the vessel was on demurrage as at

0956 hrs on 8 June 2007 then demurrage would have been payable from that time.

146 The interaction between clauses 7 and 17 (which I consider in more detail below) is relevant when

considering what would be the effect if, as Cargill contended, the time from the beginning of the

interruption did count as lay time.

147 Before the Arb itrator, Excel had claimed (in its Summary of Claimant’s Claims, as set out in the

Arbitrator’s award para 154) that clause 17.3 governed the situation and that it was not liab le for

damages for delay or failure to perform its primary contractual obligations in th e period from 8 to 25

June 2007 (and it sought a declaration to that effect). Clause 17.3, which I set out later in these

reasons, made express reference to the counting of laytime (but was subject to the proviso that the

affected party had complied with the requirements of clause 17.1). The Arbit rator considered that,

although they might have been better expressed, the opening words of clause 17.3 made clear that, in

the counting of laytime, delay caused by a force majeure was to be taken into account (a t [198]) and

that this meant that the running of laytime was suspended during the force majeure period.

148 It is by no means clear, therefore, how a finding that clause 17.3 operated (as the Arbitrator seems to

have found) such that laytime (and any liability for delay) was suspended during a force majeure period

(provided the notice requirements of clause 17.1 were complied with), would have been reconcilable

with a finding that, notwithstanding the commencement of a force majeure period, demurrage was

payable for part of that period if a notice under clause 17.2 was not issued immediately the force

majeure event occurred and the vessel went on demurrage during the course of the force majeure

period. A finding that laytime continued to run from the commencement of the force majeure period

(and demurrage was payable once laytime expired early in that period) until the giving of the force

majeure notice (and therefore that the Iron Bradyn went on demurrage earlier than 25 June 2007)

would seem to be inconsistent with the Arbitrator’s finding (para 223(a)) that no demurrage was

payable during a force majeure period.

149 Mr Gleeson contended that if leave were to be obtained by Cargill the issue whether there had been an

error of law would be immaterial as its counterclaim has already been rejected and there is no attempt

by Cargill to seek leave to appeal against the finding of the arbitrator rejecting the counterclaim the

whole of which was dis missed (para 224(e)), there being no immediate entitlement to claim demurrage

in any event.

150 Mr Stevenson’s response was that the Arbitrator’s findings in relation to waiver, election and the like

are encapsulated in para 139 of the word (namely that Carg ill was not then entitled to raise the

possibility that Excel had no entitlement to rely on the force majeure provisions of the agreement at all

in the relevant period) but that this said nothing as to whether Carg ill could raise the question of the

proper construction of the force majeure provisions. Mr Stevenson contends that nothing in the

Arbitrator’s findings justifies the conclusion that Cargill was not entitled to make the Alternative

Argument as to the proper construction of clause 7.11.2.

151 If the two findings (ie a rev ised finding on clause 7.11.2 and the existing finding on 17.3) could not

stand together then it would seem that the conclusion reached in relation to Excel’s claim for a

declaration that amounts had become payable under clause 17.3 would need to be revisited (whether or

not that finding had been the subject of a separate challenge) since there would seem to be an

inconsistency in saying both that a vessel goes onto demurrage during the force majeure period and that

liab ility for demurrage is suspended in that period. Therefore I am not persuaded that the overall

conclusion reached by the Arbitrator as to clause 17.3 necessarily renders futile an appeal o n the first

ground.

152 However, in my view (leaving aside the clause 17.3 argument) the effect of the Arbitrator’s

estoppel/waiver finding (which is not challenged) would seem to deprive a finding in relation to the

first ground of appeal of much of its effect. At best, Cargill would in those circumstances seem to be

limited to a claim for demurrage for the period from 21 to 25 June 2007 (a claim of much less than the

USD850,000 figure which Carg ill contended would be recoverable if it succeeded on this issue – being

a claim of USD250,000 at most, assuming the first and last day of that period are both included in the

calculation).

153 I have outlined above the circumstances in which Cargill did not press, as at February 2008, its claim

for the so-called “undisputed” amount and reserved its position only in relat ion to the “disputed”

amount. The Arbitrator d ismissed the whole of Cargill’s counterclaim on the basis that there was an

agreement by Carg ill to compromise its claim for demurrage and/or waived or was estopped from any

claims to demurrage in the period from 8 to 21 June 2007 (paras 142-144). That counterclaim was for

the “undisputed” amount referable to the period (from 8 to 21 June 2007 but also, as I understand it, for

the “disputed” amount referable to the period from 21 to 25 June 2007. There seems to be nothing in

the award to suggest that Cargill had waived or would be p recluded from raising the claim for

demurrage in that latter period.

154 Therefore, I accept the submission by Mr Glees on that a re-consideration by way of appeal of the

proper construction of clause 7.11.2 will not overcome the problem for Cargill of the estoppel/waiver

finding, but that finding seems to me to be confined to any claim for demurrage for the period 8 to 21

June 2007, not the later period.

155 Balancing a claim of that lesser magnitude against what would surely be the limited cost of arguing a

discrete construction point before the arbitrator, I would not accept that there could not be a substantial

effect on the parties’ rights arising from the determination of that discrete issues and thus would have

been prepared to conclude that the first threshold requirement was met and that the determination of the

question of law posed by the first ground of appeal could substantially affect the parties’ rights.

156 If so, then to the extent that the second ground of appeal can be called in aid to support the argument

based on the first ground of appeal (as Carg ill seeks to do in the manner I consider below), the

determination of that question of law may also be said to have the potential substantially to affect the

parties’ rights (though in an indirect way). However, if leave to appeal is not granted in relat ion to the

first alleged erro r, then it is not disputed that there would be no utility in granting leave in respect of the

second alleged error and thus the first threshold requirement would not be met in that case.

Requirement that there be manifest error of law on the face of the record

157 Although I have summarised above the errors said to have been made by the Arb itrator, in considering

this threshold requirement (and the alternative argument that there is a strong likelihood that there was

an error of law) it is necessary to focus in some detail on how it is said that the Arbitrator has erred in

his award.

158 Before so doing, I note that emphasis was placed by Mr Gleeson on the high hurdle confronting a party

seeking to establish manifest error of law on the face of an award for the purposes of s 38(5) of the

State Act. In Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSW LR 203,

Sheller JA said (at 225):

The expression “error of law on the face of the award” is one of a type well -known to courts.

The award having been examined the question is whether there is apparent (and such is the

denotation of the word “manifest”) an error of law. “Manifest error” is an expression

sometimes used in reference to reasons given by judges or the approach taken by juries: see,

eg, s 107(c)(iii) of the Supreme Court Act 1970 and the judgments of Kirby P in Azzopardi v

Tasman UEB Industries Ltd (at 151) and Otis Elevators Pty Ltd v Zitis (1986) 5 NSWLR 171

at 181. It is used to indicate something evident or obvious rather than arguable: see generally

per McHugh JA in Larkin v Parole Board (1987) 10 NSWLR 57 at 70-71. (my emphasis)

159 His Honour later went on to say (at 226), in the context of considering whether (and determining that it

was not) it would be appropriate for the judge to proceed to determine whether there was manifest error

without hearing adversarial argument:

… However as McHugh JA pointed out “manifest”, in the context of the subsection, which

contemplates the grant of leave before an appeal can be pursued, connotes an error of law that

is more than arguable. There should, in my opinion, before leave is granted be powerful

reasons for considering on a preliminary basis, without any prolonged adversarial argument,

that there is on the face of the award an error of law. (my emphasis)

160 For there to be manifest error, the error must be evident or obvious, not something which is reasonably

arguable and not something that takes prolonged adversarial argument to deduce. As is the case when

considering whether a decision is plainly wrong, it is the quality that bespeaks the error. The fact that I

might have come to a d ifferent conclusion on a point of construction would not be to the point (as I was

reminded more than once, no doubt lest I be tempted to stray down the path of construing the relevant

clauses afresh).

161 In that regard, the very fact that the argument as to the construction of the relevant clauses required

careful and detailed analysis by Counsel on the hearing before me (and, I should a dd, has given me

pause when considering whether and how the relevant submissions were put to and/or addressed by the

Arbitrator) seems to me to compel the conclusion that any error of law which the Arbitrator might have

made in construing the respective clauses is certainly not manifest on the face of the award. It is not

the case that there was an obvious point which could be said to have been overlooked or misconstrued

in the Arbitrator’s analysis. Rather, the construction adopted by the Arbitrator in respect of the

relevant clauses for the purpose of addressing the question whether demurrage was payable during the

force majeure period seems to be one which was reasonably arguable and open for him to find. I set

out below the basis on which I have come to that conclusion.

Clause 7.11.2 ‘error’

162 As to the first error, it is said that on the natural and ordinary meaning of clause 7.11.2 the t ime

between the beginning of an interruption for force majeure and the giving of a force majeure notice

should have counted as laytime.

163 Clauses 7.11.1 and 7.11.2 provided, relevantly, (with my emphasis) that:

7.11.1 Time spent or lost on account of Force Majeure shall not count toward Laytime

(unless the Vessel is on Demurrage) provided that either:

(a) Seller gives notice pursuant to clause 17.2; or …

7.11.2 If Seller does not give any notice or Statement of Facts to Buyer as required in clause

7.11.1, the time lost shall count as Laytime and any delay in giving such notice from

the beginning of the interruption shall count as Laytime…

164 The giving of a force majeure notice was dealt with in clause 17 (not surprisingly headed Force

Majeure):

17.1 Upon the occurrence of any event which affects or is likely to affect the ability of a

Party to perform its obligations under this Agreement, that Party shall give the other

Notice in Writing thereof, which shall include details of the event, and shall give

further notices of any change in the situation as may be appropriate from t ime to

time.

17.2 In the event that a Party wishes to claim Force Majeure (the “Affected Party”) in

accordance with clause 17.3 it shall g ive notice to such effect to the other Party (the

“Non-Affected Party”) as early as practicable which notice may be given orally and

confirmed by Notice in Writing as soon as possible.

17.3 Neither Seller nor Buyer shall be liable in any way whatsoever for delay and/or

failure to comply with this Agreement (other than a failure to make any payment due

under it) to the extent that and for as long as such failure is caused by Force Majeure

including the counting of Laytime, provided that the Affected Party;….

17.3.3 has complied in substance with the notice requirements of clause 17.1

165 I interpose to note that it seems to be accepted (and was treated as such by the Arbitrator) that the

notice provided for under clause 17.1 is different from (and logically would be likely to precede) a

notice of intention to make a clam in 17.2. Further, insofar as clause 7.11.2 refers to a notice “as

required” in clause 17.11.1, in that clause what is required is a notice “pursuant to” clause 17.2 (which

arguably might mean no more than a notice o f the kind referred to in that clause – a notice of intention

to claim force majeure – as opposed to a notice issued in accordance with the time specified in clauses

17.2, namely as early as practicable).

166 On a first reading of 7.11.1, it has the effect that laytime is suspended during periods of force majeure

(unless the vessel is already on demurrage) provided, relevantly, that notice is g iven pursuant to clause

17.2. Clause 7.11.2 then deals with the consequences of there being no notice “as required under

clause 7.11.1” and those consequences are, first, that time lost [on account of force majeure] shall

count as laytime and, secondly, that “any delay” in giving such notice from the beginning of the

interruption shall count as laytime. The second consequence (so specified) seems of itself to

contemplate that a notice “as required” under clause 7.11.1 could be given albeit with some delay. In

other words, if “as required” relates to the time at which a notice is issued, clause 7.11.2 seems to

contemplate that there might be some delay even if the notice was given as early as practicable.

167 For completeness, I note that clause 7.11.6 provides that:

7.11.6 Notwithstanding the provisions of clauses 7.11.1, 7.11.2 and 7.11.3, once the Vessel

is on Demurrage, all time lost (including time lost by reason of Force Majeure) shall

continuously count as Demurrage …

Cargill’s submissions to the Arbitrator

168 The Outline of Submissions, dated 14 August 2009, served by Cargill in relation to the arb itration were

contained volume 3 of the Court Book (Exhibit A).

169 The manner in which the clause 7.11.2 submission was put is highly relevant. At para 18 of Cargill ’s

written submissions, Cargill pointed to the fact that the provision in clause 7.11.1 (that time spent or

lost on account of force majeure did not count towards laytime) was qualified by the provision that the

notice of intention to claim force majeure be given as early as practicable and went on to say that “This

requirement that there be no delay in the service of this notice is reinforced by the terms of clause

7.11.2”; and that this provision applied unless the vessel was already on demurrage in which case it

would continue to run and be payable by Excel notwithstanding force majeure (clause 7.11.1 and 17.8)

(my emphasis). In that submission, it seems to me, the notion that notice be given as early as

practicable was equated with the situation of there being ‘no delay’ in the service of the notice (said to

have been reinforced by clause 7.11.2.

170 Carg ill d isputed not only that the events gave rise to force majeure but also that the notice was in

compliance with clause 17.2 “in part icular such that laytime would not count from 8 June 2007 or at

any time prior to service of that notice” (para 21(b) submissions) and submitted that even if the events

amounted to force majeure nevertheless that force majeure period (during which time would not count

against laytime) commenced when Excel contended it did or ended when Excel said that it did.

171 Of the issues there identified as requiring determination, Carg ill noted that one was whether there had

been compliance with the requirement for a valid and effect ive declaration of force majeure (and, if

not, the effect of non-compliance (para 34(b)) and as to whether and to what extent time d id not run for

the purposes of calculating laytime as a result of the events claimed to amount to force majeure (para

34(c)).

172 At para 40 of its then submissions, Cargill said:

If the seller (Excel) does not give any notice to the buyer (Cargill) in accordance with clause

17.2, the t ime lost shall count as laytime. Further any delay in giving such notice from the

beginning of the interruption shall count as laytime (clause 7.11.2). (my emphasis)

173 There was thus a distinction there drawn by Carg ill between the situation where there was no notice

compliant with the timing requirements of clause 17.2 and the situation whe re there was a ‘delay’ in

giving of the notice (the latter being the very submission now sought to be made and which it is said

the Arbitrator did not address or properly determine).

174 Mr Gleeson submitted that the key submission put by Cargill at the arb itration was that contained in

para 72 of Cargill’s then submissions, namely that:

In those circumstances [ie non compliance with the requirements] it is submitted that the

Force Majeure notice g iven by Excel on 13 June 2007 was not given as early as practicable as

required by clause 17.2 and is therefore not a valid and effective notice for the purposes of

that clause and thereby the Agreement generally

(that being in a section headed “Whether there has been compliance with agreement in claiming force

majeure” and thus the context in which it was put related to compliance with clause 17.2 from a timing

point of view).

175 An alternative submission was in paragraph 79 of the submissions:

Alternatively, even if Excel’s failure to give notice pursuant to clause 17.2 of the Agreement

as early as practicable does not invalidate the notice completely the delay in giving that notice

has the effect that time lost from the beginning of the interruption caused buy the Force

Majeure event until the notice was given shall count as laytime. This is pursuant to the first

sentence of clause 7.11.2 of the Agreement which provides…

176 Thus para 79 was clearly putting the proposition that there could b e a notice given as early as

practicable but one which also involved a delay for the purposes of clause 7.11.2. The result was said

in para 80 to be that:

Accordingly in those circumstances any Force Majeure period does not commence (and time

does not cease to count for the purposes of laytime) prior to the service of Excel’s Force

Majeure Notice on 13 June 2009 [sic] and until the time it was served.

177 In its submission as to whether and to what extent Excel is relieved from liability, Cargill again p ut

submissions in the alternative; as to where there was no force majeure event; as to whether, if there was

a force majeure event an effect ive notice had been given; and then, thirdly, as to whether (if the events

and circumstances did amount to force majeure fo r the purposes of 7.11 “but the delay in giv ing the

notice pursuant to clause 17.2 means that any time spent or lost from the Force Majeure) the delay

(prior to the issue of the notice) nevertheless did not count against laytime (para 85) and in tha t last

situation it was submitted that the force majeure period did not commence until the notice was given to

Cargill on 13 June 2007.

178 Those written submissions were supplemented by the oral submissions made on behalf of Carg ill by its

then Counsel (Mr Nell SC). Relevantly, the transcript records as follows:

MR NELL: That is the first scenario. The second scenario, which is really the same outcome

and which is picked up by the respondent’s [Cargill’s] submissions, is if the force majeure

notice that was purportedly given was not valid or effective at all, in part icular because it was

not given as soon as practicable in compliance with clause 17.2, the respondent’s primary

submission in that regard is that the clause is then effect ive; therefore time spent or lost as

result of the force majeure event will still count against laytime and the exception that is found

in clause 7.11 would not operate in those circumstances. As a practical matter, the effect of

that is the same as if there was no force majeure event and the figures should therefore be the

same as the first situation.

The third situation, which is also a reflection of the claim made by Excel, is if there was a

delay in giving the force majeure notice, and consistent with clause 7.11.2 … the time between

the force majeure event and the giving of the notice, in effect the period of the delay, will not

count for the purposes of laytime. (my emphasis)

179 Reliance was placed on the second half of the first sentence in clause 7.11.2 that “ If Seller does not

give any notice or Statement of Facts to Buyer as required [by the clause], the time lost shall count as

Laytime”.

180 Mr Nell submitted that if no notice [compliant with clause 17.2] is given, the effect of that would be

that the force majeure notice was given on 13 June and that if there was found to have been a delay in

the giving of the notice for the purpose of that clause, then any time lost or spent because of the force

majeure event from the commencement of that event, whenever it might have been up to that time on

13 June would count again laytime (and then from 13 June onwards). The Arb itrator’s response to that

submission was “If you don’t give the notice the time lost counts as laytime”, to which Mr Nell

responded:

MR NELL: We read that as saying not only if you don’t give a notice but in light of what is

7.11.1, if you don’t give a notice, that complies with 17.2.

THE ARBITRATOR: Well, it says pursuant to 17.2.

MR NELL: Yes. The point that I’m making, and perhaps I’m not making it clear enough, is

that 17.2 requires not only a notice to be physically g iven but that it be given as early as

practicable. If it is not given as early as practicable, then that notice is not a notice pursuant to

17.2 and in those circumstances the first half of 7.11.2 will say that time lost shall count as

laytime.

If however the notice is given and it is construed as having been given but delayed then

the second part of the sentence of 7.11.2 applies, and that is that the delay in giving the

notice from the beginning of the interruption up to the time the notice is given is laytime .

(my emphasis)

THE ARBITRATOR: But assuming that it wasn’t given timeously, why wouldn’t that

second part of the fist sentence of 7.11.2 apply? (my emphasis)

181 (What is said by Mr Gleeson is thus that any reference to clause 7.11.2 in the submissions made to the

Arbitrator was made in the context of the overarching submission that the notice was not given as early

as reasonably practicable. Mr Stevenson accepted that this was true to some extent.)

182 Carg ill contends that the Arbitrator failed to deal with its argument that, by reason of clause 7.11.2,

“any delay” between commencement of the force majeure period and the g iving of the notice meant

that laytime continued (notwithstanding the commencement of the force majeure period) until Excel

gave notice of force majeure in accordance with clauses 7.11.1 and 17.2 of the agreement (and Mr

Stevenson submits that, for the purposes of this argument it is irrelevan t whether or not that notice was

given as early as practicable).

183 Mr Gleeson submitted that the premise on which the A lternative Argument was based was that the fact

that notice was not given as early as pract icable d id not render the notice a nullit y but nevertheless still

meant that there was a delay in giving of the notice. Thus Mr Gleeson submitted that the premise of

both the primary and the alternative argument was that the notice had not been given as early as

practicable; whereas the premise of the argument put to me (which Mr Stevenson says was also put to

the Arbitrator) was that even if a notice was given as early as practicable there could still be delay for

the purposes of clause 7.11.2.

184 As I read the written submissions which were before the Arb itrator, it seems to me arguable that the

submission put to the Arbitrator was premised, as Mr Gleeson suggested, on there being a valid notice

albeit one not given as early as pract icable (as opposed to the argument that there was both a notice

given as early as pract icable and delay); but that the more straightforward reading of the submission

was that advanced by Mr Stevenson. (However, the very fact that there is any serious debate as to how

this submission was premised indicates the difficu lty for Cargill is establishing any manifest error by

the Arbitrator in the dealing by him with this submission.)

185 Accepting that the submission was premised as Mr Stevenson contends, that gives rise to what would

seem to be a contradiction in terms – how can there have been a delay if the notice was given as early

as practicable? The concept of delay, ordinarily, suggests something more than a mere lapse of time.

It suggests that there has been a procrastination or putting off of something that could have happened

earlier (see Macquarie Dictionary defin ition of the word in its usage respectively as verb and noun). It

is in this sense of the word that the Arbitrator himself seemed to approach the argument during the

course of the hearing, when he raised the question as to whether what was being put to him was that

there had been a failure to act ‘timeously’ and the consequences of that.

186 The semantic argument as to whether there can be an operative concept of delay where a notice has

been given as early as practicable does not appear to be one around which there was much debate

before the Arbit rator (there seems to have been no suggestion, for example, that if the two concepts

were mutually exclusive it might be thought that there was no work left to be done by the words in the

second half of the first sentence in 7.11.2). What was not, it seems, made clear to the Arbitrator was

that the alternative argument in para 79 of Cargill’s written submissions was one that meant that any

period of time which elapsed between the commencement of an interruption and the giving of a force

majeure event amounted to ‘delay’ fo r the purposes of the clause (and the Arbitrator cannot in my view

be crit icised or accused of a denial o f natural justice for having not dealt with that particular argument,

albeit that it seems to be the logical extension of what Cargill is now and was then putting). Mr

Gleeson thus contends that what has been done in the present application is to re-cast the ‘delay

argument’ as one which means that if there was any gap in time between the occurrence of the force

majeure event and the giving of the notice then that is delay and has the consequence that time

continues to count towards laytime.

187 Whether or not the alternative argument was art iculated as clearly before the Arbitrator as it was before

me, the notion that delay could be taken into account for the purposes of laytime even if there had been

a valid notice (by which Cargill seemed to be referring to one given as early as possible) seems to me

to have been before the Arbitrator.

188 Mr Gleeson submitted that once it was found that notice had been given as early as practicable there

could be no operative concept of delay in clause 7.11.2 – in effect that this was a contradiction in

terms. (I think there is force in that submission, though the construction of these clauses is not the task

before me.) The concept of delay, it was submitted, must be a reference to a notice which was n ot

given as early as pract icable (ie in respect of which there has been found to be some delay), in contrast

to a notice g iven as early as pract icable. (One might have thought that if any lapse of time was

sufficient for the purposes of calcu lating laytime during a force majeure event then it would have been

simple to p rovide for that expressly, without the need to employ the concept of delay – and that the

failure to give a notice as early as practicable would sound in a different consequence (such as any

damage resulting from the seller not having been on notice of a claim at an early enough time) rather

than one linked to the calculat ion of laytime (which would, on Cargill’s argument, be running in any

event up until a notice was ultimately given).)

189 What did the Arbitrator do?

190 The Arbitrator set out the issues he had identified for determination on the reference in paras 65-66 of

his reasons.

191 The first issue was the ‘disputed amount’ of USD 299,822.47 which related to the demurrage cla imed

for the period 21 to 25 June 2007. The Arb itrator expressly dealt with this on the basis (which he said

accorded with the way the part ies had dealt with it) of an assumption that there was a relevant event of

force majeure attracting the operation of clause 17 and as to whether that had come to an end by 21

June 2007 (as Cargill contended) or 25 June 2007 (as Excel contended). Pausing there, there was no

suggestion that Cargill was in any way estopped or precluded from raising its claim for demurrage for

this period. If, therefore, the Arbitrator’s conclusion as to the construction of clause 7.11.2 was in

error, then the finding as to estoppel/waiver would not preclude recovery for that amount. (The

Arbitrator found against Cargill on this first issue.)

192 The second issue was whether Cargill was entitled to re-open its claim for the undisputed amount (put

by the Arbitrator as ‘whether there was fo rce majeure in terms of the Agreement in respect of the

period 8 to 21 June 2007).

193 The third issue was as to when the force majeure event commenced. The Arb itrator noted that this was

one that arose if the second issue was determined in favour of Cargill (which it was not) but

nevertheless seemed to recognise that Cargill might contend it was entitled to raise the substance of the

third issue irrespective of the finding on the second issue. (That would presumably only be the case if

the commencement of the force majeure period had any relevance to the claim for demurrage in respect

of the later part of the force majeure period, which would seemingly arise only when considering how

laytime was to run for the purposes of that later claim ie whether, on Carg ill’s argument, laytime

continued to run over the force majeure period such that by the commencement of the disputed period

the vessel was already on demurrage. However, it was not suggested before me that there was any

significance to be attributed to the Arbitrator’s comment in this regard.)

194 The fourth and fifth issues related to what part of the defin ition of force majeure was to apply and what

consequences flowed therefrom and the seventh and eighth related to an argument in relation to clause

17.7 of the agreement, none of which are relevant in the present context.

195 The issue which gave rise to the first alleged erro r of law was the sixth issue, namely whether Carg ill

was given the force majeure notice as required by clause 17.2. The Arbitrator addressed this issue from

paragraph 199 of his award. He referred to the notification given by Excel under 17.1 (that being

distinct from a notice of intention to make a claim of force majeure which is dealt with in clause 17.2).

In paragraph 200 the Arb itrator recorded Cargill’s (p rimary) contention, which was that the notice

given on 13 June 2007 was not given as early as practicable after the alleged force majeure event

occurred (there being an issue in that regard as to whether the requirement that the notice be issued as

early as practicab le was to be tested by reference to the alleged force majeure event or the formation of

an intention to make a claim). The Arb itrator found it unnecessary to determine that issue as he was

satisfied that the notice given on 13 June 2007 had been given as early as practicable. (There was no

suggestion that it should, or could feasibly have been expected to, have been given simultaneously with

the force majeure event.)

196 The Arbitrator noted that clause 17.3 p laced importance on compliance with clause 17.1 rather than

17.2 (ie to a notice o f the existence of force majeure events rather than of intention to bring a claim)

and then said that the significance of that factor might be mit igated by the fact that, when clause 7.11

was applicable, reliance is placed on compliance with 17.2. The Arbitrator there s eemed to

contemplate that the circumstances in which a party was not liable by reason of force majeure (clause

17.3) had some connection in terms of its operation with the operation of clause 7.11 as to when and

how time lost on account of force majeure was to be affected by the giving of notice in relation thereto.

197 What the Arbitrator does not seem direct ly to have addressed in his reasons (and this is the nub of the

criticis m now directed by Cargill at the award) is the submission that was put in paragraph 18 of

Carg ill’s submissions (that even if the notice had been given as early as possible, there was

nevertheless an operative delay in the issue of that notice and laytime continued during that period).

198 However, apart from the brief reference during argument to the significance of the notice not being

given timeously, the manner in which Carg ill’s alternative submission was put seems to have been put

was not expressly linked to the proposition that the lapse of any period whatsoever between happening

of a force majeure event and the giving of notice would mean that laytime continued to run.

199 And, insofar as the written submissions referred to the requirement to give the notice as early as

practicable being reinforced by the requirement that there be no delay, there is force in Mr Gleeson’s

submission that the ‘delay’ argument was predicated on there being a finding that notice was not given

as early as practicable (the only distinction between the two arguments being said to be as to whether in

that event the notice was a nullity or had some room for operat ion).

200 Mr Gleeson submits that what the Arbitrator did was to reject the factual premise of the alternative

argument (namely that Excel had failed to give the notice as early as practicable) and thus the delay

argument failed and there was no error by the Arbitrator (nor any need for him separately to articulate

his conclusion in that regard).

201 As the above discussion should illustrate, there were arguments open on both sides in relat ion to the

question as to how clause 7.11.2 should be construed. Insofar as it seems that the Arbitrator formed the

view that if notice was given as early as practicable then there was no relevant delay for the purposes of

clause 7.11.2, I consider that this was a conclusion reasonably arguable and open for him to fin d. That

being the case, whether or not ultimately it might be said to have been wrong, there was no manifest

error of law in the drawing of that conclusion. That disposes of the second threshold requirement for

the grant of leave to appeal.

Weather Working Day ‘error’

202 As to the second error, it is said that the Arbitrator (in accepting the submission of Excel to the effect

that the definition of Weather Working Days in the defin ition of Cargo Handling Rate had the effect

that laytime was suspended during any period in which loading was hindered by bad weather)

misconstrued the agreement (by treating an integer in the calcu lation of Cargo Handling Rate, which

was necessary to determine the allowable period of laytime, as having a substantive negative operation)

and that the Arbitrator impermissibly used the parties’ post -contractual conduct as an aid to

construction (contrary to Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238

CLR 570, at [35], [163]; Franklins v Metcash, at [10]-[13], [58], [306]-[329]).

203 It was conceded that if leave to appeal on the clause 7.11.2 issue were not to be given, then this issue

would not arise.

204 Mr Gleeson noted, by way of background, that the Weather Working Days argument had been rais ed

by Excel as an alternative argument in the eventuality that the Arbitrator did not find that force majeure

had started at 8.15am on 8 June 2007 (but found that it had started at some later time on that day). As I

understand it, Excel’s argument was that if the Iron Braydn came on to demurrage at around 9 o’clock

on 8 June 2007 (as Cargill contends), there was nevertheless an allowance to be made in Excel’s favour

for bad weather and that this operated to reduce the claim for demurrage.

205 The Arbitrator noted Excel’s contention in that regard as being that the approach reflected in Cargill’s

earlier acceptance (that time did not count against Laytime from 7 June 2007 because of bad weather)

could also justify a conclusion that Laytime did not run from at least the time from which Excel relied

on force majeure.

206 “Cargo Handling Rate” was defined in clause 1.1 to mean the rate, as specified in the relevant

specification schedule at which the coal was to be discharged at the Delivery Point “fo r the purposes of

calculating Laytime”. The relevant specification schedule stated that the min imum shipment size was

to be 15,000 Metric Tonnes and that “the Seller shall load shipment aboard the Vessel at the following

average rates per WWD being a day of twenty-four (24) consecutive hours SHINC” (Sundays and

holidays included).

207 The Arbitrator noted in his award that, prima facie, the reference to WWD (Weather Working Day)

appeared to be an integer in the calculat ion of a Cargo Handling Rate but he ult imately accepted the

contention of Excel that it had a substantive negative operation in that any obligation to load, and the

counting of laytime, was suspended during the period when the loading was hindered by bad weather.

208 In coming to a view on this question (which the Arb itrator noted was a difficult issue because in his

view the agreement was not very clear in this respect), the Arbitrator express ly had regard, first, to the

description of Cargo Handling Rate in the Schedule (which he considered was something more than

simply part of a definition - perhaps because it expressed an obligation for the Seller to load the

shipment at the specified average rates) and, secondly, to the conduct of the parties “before Carg ill

sought to resile from its earlier position” (ie their conduct before Cargill reinstated its claim to

demurrage for the whole of the period) which he considered suggested that the partie s understood that

the agreement had the meaning for which Excel contended.

209 Mr Gleeson conceded that the second reason given by the Arbitrator was not strict ly a matter referable

to interpretation of the contract. Nevertheless, it was said that this was simply a recognition that the

parties had acted in a particu lar way, the Arbit rator having observed that this was a belated submission

and seemed to be a response to Excel taking the matter to arbitrat ion. On that aspect, I have difficu lty

accepting that the Arbitrator’s view of the parties’ post-contractual conduct was no more than a

recognition that the parties had acted in a particular fashion and not a factor which had (in conjunction

with the other matter to which reference was made) led the Arbitrator to view the operation of the

Cargo Handling Rate definit ion in the way he did. The Arbitrator exp licit ly made reference to this as

the second of the reasons he had for coming to that view of the definit ion (para 163) and treated it

almost as an admission by conduct (though explaining it in terms of an indication of the parties’

understanding of the operation of the clause). In that regard, it seems to me that to the extent that the

Arbitrator had regard to post-contractual conduct in construing the definition there was strong evidence

of an error of law in so doing.

210 What is not clear is that but for this error the Arbitrator would not still have come to the same

conclusion based on the first matter to which he said he had had regard. (Although expressed as one

of the two matters to which he had regard, this part of the Arbitrator’s reasoning seems to read as if the

Arbitrator was drawing some comfort (from the post-contractual conduct) for the conclusion he was

proposing to draw on the wording of the definition itself.)

211 If the Arbitrator’s conclusion could have been sustained by reference to the first reason set out above,

then the fact that one part of the Arbitrator’s reasoning could not be sustained might not be to the point.

However, it is not clear from the award whether the first reason advanced for treating the definition as

having negative operation would have been sufficient, in the Arbitrator’s eyes, to stand alone and, in

any event, this does not address the issue as to whether the definition could objectively be said to be

intended to have any substantive operation in relation to laytime at all.

212 It is submitted by Mr Gleeson that the finding as to the Weather Working Days issue (though

apparently conceding that reliance on post contractual conduct would not strictly be correct) was not a

manifest error because the approach which the Arbitrator took to the matter was reasonably arguable.

Mr Gleeson pointed to the outline given by the Arbitrator of the circumstances in which this issue had

arisen (Carg ill having initially submitted demurrage calculations with an allowance for bad weather up

to a particular time and then from that time basing the allowance on force majeure, but, by the time of

the arbitration Cargill had submitted that the earlier demurrage calculation had been mistaken), the

Arbitrator’s view being that this was a belated attempt to resile from the earlier approach.

213 As explained by Mr Gleeson, Excel’s argument was that the Cargo Handling Rate defin it ion, which

included the concept of Weather Working Days, encapsulated the concept that if there was not a usable

period of time to load the coal on the ship because of bad weather, that was not taken into account

when calculat ing at what average rate the coal had to get onto the ship. Insofar as the Arb itrator noted

that he considered the argument difficult but made a finding which was reasonably open to him to do

(whether or not he had acted in error in taking into account subsequent conduct) it is submitted by Mr

Gleeson that this does not surmount the high hurdle for manifest error of law. In other words, it is said

that if this is reasonably arguable and a question of construction, whether or not the Arbitrator in fact

reached the wrong conclusion (and how he did so) is immaterial.

214 Mr Stevenson contended that the relationship between the two alleged errors was that the Arbitrator’s

failure to consider Cargill’s alternative clause 7.11.2 argument led him into error in relation to the

weather working point. It is submitted that if the Arbitrator had accepted Cargill’s Alternative

Argument then that would have given rise to an inconsistency with the proposition that laytime d id not

run on any day which was not a weather working day, i.e. for some days after 8 June. (Mr Stevenson

submitted that the weather working day argument was irreconcilab le with the Alternative Argument

advanced by Excel.) (In that regard, the Arbitrator does seem to have had regard to the

interrelationship between the respective clauses in that he saw the weather working day point as

reaching the same outcome as that he had reached on the clause 7.11.2 argument.)

215 It seems to me that the proposition put by Cargill (that WWD was no more than an integer in the

definit ion of the Cargo Handling Rate and thence a step in determining the amount of time to be

allowed as laytime) has considerable force but I do not see this as a manifest error of law on the face of

the award (as opposed to an issue on which there is strong evidence of error). It seems to me that there

were d ifferent conclusions reasonably open as to the construction of the relevant definit ion and its

operation in the context of the agreement as a whole.

216 At para 163 the Arb itrator makes it clear that the reliance made by h im on the defin ition argument was

as support for his primary conclusion on the construction of clause 7.11.2, saying (after having first

concluded that time does not count towards delay from 8.15am on 8 June by reason of force majeure)

that: “I would also accept the same result would be achieved by reliance on the concept of weather

working days”. Mr Gleeson submitted that the finding that loading was hindered by bad weather from

8.15am on 8 June 2007 was a finding of fact. The only question of law was whether, as a matter for

construction, whether the Arbitrator should have accepted the proposition that the reference to weather

working days had a substantive negative operation in the definition. Mr Gleeson says that is not a

manifest error in the sense required by the authorities. I agree.

217 In any event, the Arbitrator’s finding on this issue was not ultimately determinative of Cargill’s claim.

It was an expression of opinion that the same result could have been achieved by a different ro ute. The

Arbitrator was of the view that in the circumstances time did not count towards laytime from 8 June by

reason of force majeure. The fact that he was also prepared to accept that the same result would be

achieved by reliance on the concept of weather working days (paras 162/163) does not take the matter

any further. (Th is, it seems to me, also counts heavily against the exercise of discretion to revisit the

issue assuming the basis for such relief were otherwise made out.)

Strong evidence of error of law and effect of determination on certainty of commercial law?

218 Again, it is noted that the test on this alternative threshold requirement is not who is u ltimately right or

wrong as a matter of law on the disputed question(s) of construction, but the strength of the claim that

there has been an error of law on the construction issues. In the absence of a finding that there has

been a manifest error of law, what is necessary is that there be “strong evidence” that the Arbitrator

made an error of law and that the determination of that question is one which may add or be likely to

add substantially to the certainty of commercial law.

219 In Promenade Investments, at 226, Sheller JA said:

Assuming that there is not a manifest error of law on the face of the award it may be argued

that there is strong evidence that the arbitrator made an error of law and that the determination

of the question may add, or may be likely to add, substantially to the certainty of commercial

law. The requirement that the question be one the determination of which may add

substantially to the certainty of commercial law indicates that it should be one of wider and

greater importance than, for example, the construction of a one-off clause in the context of a

particular agreement between the parties. One can discern here the sort of limitation which

Lord Diplock had in mind. The expression “commercial law” should be given no narrow

construction. The expression “strong evidence that the arbitrator … made an error o f law”

suggests first what might otherwise be called on the leave application a strong prima facie

case and second an error of law not manifest on the face of the award and demonstrable by

evidence. (my emphasis)

220 Is there a strong prima facie case that the Arbitrator made an error of law in not holding that the period

of time between the occurrence of a force majeure event and the giving of a notice of intention to claim

force majeure (whether or not that be as early as practicable) should be counted as laytime? The issues

as framed by the Arbitrator did not require a d irect determination of that question but it was thrown up

by the argument in relation to the adequacy or validity of the clause 17.2 notice.

221 To my mind, both arguments were reasonably available as a matter of construction. As against that

contended for by Cargill, it seems to me that had the parties intended laytime to continue after the

occurrence of a force majeure event up until the time that a notice of intention to cla im force majeure

was given (irrespective of whether that notice was given as early as practicable) then there was a very

simple way to do so and it would not have necessitated the use of any concept of delay. In that regard,

there seems a contradiction in terms between the situation where the notice was given as early as

practicable and that where there was in any event an operative delay for the purposes of counting

laytime. However, whatever the prospects of success for Carg ill’s argument on that point ult imately

may have been, I am not convinced that there is strong prima facie ev idence that the Arbitrator erred in

his construction of the clause.

222 As to the second of the alleged errors, for the reasons adverted to above, I would have been inclined to

find that the weather working days point was one as to which there was strong evidence that an error of

law had been made in this regard (both by reference to the use of post -contractual conduct and by

reference to the application o f a definition used in context for the purposes of another). On this issue I

would have been satisfied that the determination of the construction of clause 7.11.2 and the extent to

which it was affected by the reference to Weather Working Days in the definition of Cargo Hand ling

Rate was one which would be likely to add certainty to commercial law. Th is relates to an issue of

construction of clauses in a standard form agreement (not a one-off determination on the facts of this

particular case.) Even if its use is not as wide as that suggested by Cargill, the construction of such a

clause would in my view have potential significance beyond that of the present case. While the

particular form of the agreement in use has changed, the force majeure provisions have not changed in

the current version and hence I accept that the validity of the construction put by Cargill is one which

would be likely to add to the certainty of commercial law.

223 However, as Mr Stevenson accepts, the alleged error as to the operation of the weathe r working days

definit ion is of no moment unless Cargill obtains leave to appeal on the Alternative Argument in

relation to clause 7.11.2. Therefore this is not an error that of itself would have affected the overall

outcome of the dispute (and thus the first of the threshold requirements is not met in relat ion to this

error).

(iv) Has there been a denial of natural justice for the purposes of a review under the Model Law?

224 It is conceded that there is a more limited basis for review of arbitral awards under the Model Law, that

being contained in article 34. The only relevant basis for review asserted in the present case is that

contained in article 34(2)(b)(ii), namely that the award is in conflict with the public policy of the State.

225 By reference to s 19 of the Commonwealth Act, there is a conflict with the public policy of Australia if

there has been a breach of the rules of natural justice. Mr Stevenson submitted th at the Arbitrator did

not deal with Cargill’s clause 7.11.2 Alternative Argument and thus there has been a breach of the

hearing rule of natural justice.

226 The “hearing rule” (to use the terminology adopted by Aronson, Dyer and Groves, Judicial Review of

Administrative Action, 3rd ed, 2004, at 370) (or audi alteram partem rule), is one of the twin pillars of

natural justice, the other being the bias rule (nemo debet judex esse sua in propria causa) (as explained

in Carbotech-Australia Pty Ltd & anor v Yates & 14 ors [2008] NSWSC 540, at [46], per Brereton J).

(There is no suggestion of bias in this case.) At the most basic level, the hearing ru le requires a

decision-maker to hear a person before making a decision affecting that person's interests.

227 The High Court in Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26;

(2003) 197 ALR 389, said at [24];

To fail to respond to a substantial, clearly articulated argument relying upon established facts

was at least to fail to accord Mr Dranichnikov natural justice.

228 The operation of the hearing rule depends on the circumstances of the case in which it is applicable

(Bread Manufacturers of NSW v Evans [1981] HCA 69; (1994) 180 CLR 404, at [18], per Gibb CJ;

Durayappah v Fernando (1967) 2 AC 337, at 414). In Russell v Duke of Norfolk (1949) 1 A ll ER 109,

at 118, Tucker LJ said:

The requirements of natural justice must depend on the circumstances of the case, the nature

of the inquiry, the rules under which the tribunal is acting, the subject -matter that is being

dealt with, and so forth.

229 In Mobil Oil Australia Pty. Ltd. v Federal Commissioner of Taxation [1963] HCA 41; (1963) 113 CLR

475 (at 504) Kitto J stated:

What the law requires in the discharge of a quasi-judicial function is judicial fairness. This is

not a label for any fixed body of rules. What is fair in a given situation depends upon the

circumstances.

230 (The above passages from Mobil Oil and Russel were cited with approval in The Queen v

Commonwealth Conciliation and Arbitration Commission: ex parte Angliss Group (1969) 122 CLR at

546, 552.)

231 The mere fact that a decision is made that is adverse to the interests of a party does not mean that the

party has been ignored or denied natural justice in breach of the hearing rule (Carcione Nominees Pty

Ltd & Anor v Western Australian Planning Commission & Ors [2005] WASCA 56, at [93]).

232 In Bread Manufacturers, whilst it was found that the hearing rule did not apply to the decision maker in

question, Gibbs CJ was of the view that, even if the rule did apply, it would have been satisfied in the

circumstances of that case where “the Commission had received and no doubt considered the

submissions of the Association that prices should be increased, and did make an increase in prices

generally” (at [18]).

233 The Alternative Argument is, I accept, an argument of substance. It cannot be said to be trifling or to

have insignificant consequences if successful. The relevant facts upon which the argument was based

(namely the giving of the notice on 13 June 2007 some days after the event amounting to force

majeure) were established.

234 (So far as the second alleged error is concerned, it is not submitted that there was a denial o f natural

justice by failing to deal with the point - because the argument was clearly dealt with – rather, the

submission is that the Arbitrator was led into the error by his denial of natural justice on the 7.11.2

argument. It is said that had the Arbitrator addressed the clause 7.11.2 argument and seen that it

contradicted the weather working days argument (which he had found to be a d ifficu lt issue) he would

not have come to the conclusion he did on weather working days. Thus it is said that if the matter were

to be re-agitated, the submission would be that if the clause 7.11.2 argument was correct, then the

“tentative” conclusions in relation to weather working days could not be correct.)

235 Where I have some difficulty, however, is as to whether the clause 7.11.2 argument was clearly

articulated. That would be the case only insofar as the Alternative Argument as now put can be said to

emerge clearly from the written submissions and the exchange extracted earlier above.

236 There is considerable doubt in my mind is as to whether what was being clearly articulated in the

submissions put to the Arbitrator is the proposition for which Carg ill now contends, namely that

laytime continues to run unless and until a notice of intention to claim force majeure is given

(irrespective of whether the notice was given as early as practicable) and that on the proper

construction of clause 7.11.2, “delay” in the giv ing of a notice will occur whenever the notice is not

given simultaneously with the force majeure event. There is no suggestion in the Arbitrator’s reasons

that such a proposition was clearly articulated nor does it emerge clea rly from the written submissions

(particularly when reference is made to the statement contained in the submissions that the requirement

for notice to be given as early as practicable is reinforced by the reference to delay in clause 7.11.2).

237 Although Mr Stevenson submitted that there was no need for Mr Nell, Counsel appearing for Cargill on

that application, to make any argument about whether notice was given as early as pract icable in order

to run the Alternative Argument, the argument was linked in the sense that it was predicated on a

determination against Cargill on its principal submission that a notice which was not given as early as

practicable was not valid and effective for the purposes of the agreement.

238 Mr Gleeson’s submission, as I understand it, on the natural justice issue was that on the clause 7.11.2

argument, there are two possibilities: either Excel is correct in its submission that the argument was not

put before the Arbitrator in exactly the way it was put to me (and accordingly Carg ill cannot be heard

to complain that there was a denial of natural justice by reason of any failure to deal with the argument

in the way in which it was put) or, if the argument put to the Arb itrator was, as Excel contends,

predicated on there being a notice which was not given as early as practicable (but nevertheless still a

valid notice), then the Arbitrator dealt with it and there was no denial of natural justice (even if the

Arbitrator may have been wrong).

239 I accept Mr Gleeson’s submission that there is nothing in what was put to the Arbitrator which squarely

raised the proposition that if the notice is valid and effective (because it was given as early as

practicable) clause 7.11.2 nevertheless has the effect that time does not count on force majeure because

any gap in time between the objective event of force majeure and the giving of the notice is delay. The

proposition that one can satisfy a contractual obligation to do something as early as practicable but at

the same time there can be an operative delay was not one that seems to me to have been clearly put to

the Arbitrator.

240 If, closely read, the written submissions did go so far, is there anything to suggest that the Arbitrator

did not properly consider the argument just because it was not articulated in those terms in the award?

The Arbitrator clearly addressed his mind during the course of argument to the question of what

consequence might flow from the fact that the notice was not given t imeously. Ult imately, his finding

was that the notice was given as early as practicable and, by reference to the result which followed

from that, he must have considered that there was no delay for the purpose of clause 7.11.2 where there

was a notice which had been given as early as practicable.

241 In the circumstances, I am not satisfied that the argument now sought to be put by Cargill was clearly

articulated before the Arbitrator. That disposes of the claim that there has been a denial of natural

justice. Insofar as a version of the argument was put, it seems to have been heard by the Arbitrator and

what he has done is to reach a conclusion which implicitly rejected it. I am not satisfied that this

amounts to a denial of natural justice.

(v) Discretionary issues

242 This issue does not arise on the application fo r leave to appeal under the State Act, as the jurisdictional

and threshold requirements for leave under the State Act have not all been established. Had they been,

then I would have approached the question of discretion cognisant of the weight evident from the

legislation placed on the exercise of judicial restraint in interference with or intervention in arbitral

decisions which otherwise would be final and binding. I accept that there should be only limited curial

intervention. Similar issues arise when considering the exercise of discretion under the Model Law,

though they do not strictly arise for determination in the present case as I have not found a denial of

natural justice.

243 In its Commercial List Response, Excel raises the following matters in relation to whether the court

should exercise discretion to grant leave to appeal (assuming the jurisdictional and threshold

requirements have been satisfied:

(a) the one-off nature of the force majeure events giving rise to the dispute;

(b) the qualifications of the arbitrator (he being an experienced Queen’s Counsel and former

Federal Court Judge) appointed by agreement of the parties as sole arbit rator in order to

resolve their dispute;

(c) the amount in dispute (demurrage from 8 June being calculated at USD850,000, or from 21

June as being in the order of USD300,000) weighed against the (unquantified) cost of further

proceedings to review the partial award;

(d) the assertion that this is an attempt generally to re-litigate the subject matter of the arbitration;

(e) that the contentions, to the extent that they raise questions of law, are inappropriate for leave

to appeal as they involve issues of fact that must be reviewed or decided in order to d ispose of

the alleged questions of law;

(f) that the contentions, to the extent that they raise questions of law, do not involve bare

questions of law, but rather the examinat ion of how, against the contractual structure, the

parties acted in the particular case; and

(g) that, if leave is granted, the court is asked to determine the rights arising from the parties’

conduct rather than to determine questions of law arising from contractual documents o r

referred to in the partial award or on other discrete questions of law arising out of the partial

award.

244 As to the last three grounds, they were not raised in oral submissions and it is not clear to me how it is

said that the determination o f the construction questions as put to me would involve any need to revisit

factual findings of the Arbitrator.

245 What seems to me to be more relevant is that the determination of the first alleged error would not

overcome the finding in relation to estoppel/waiver in respect of the claim for demurrage fo r the bulk

of the period claimed and the determination of the second alleged error would take the matter no

further as this was no more than an alternative means of reaching a conclusion already. As to the other

grounds, the most relevant seem to me to be the fact that the financial consequences to flow from any

re-determination are by no means as substantial as have been asserted (and, in view of the find ing as to

the clause 17.3 operation, there may be little practical benefit at all from a reconsideration of the

matters of which complaint is made) and the fact that Cargill has had a considered hearing (and one on

far more than the usual number of issues for this kind of arbitration in the opinion of the Arbitrator).

246 In Promenade Investments, after considering the language used in the expression “manifest error”,

Sheller JA went on to say, at 225:

Nothing more is to be learnt from the language used but of course the discretion of the court

as to whether or not it will grant leave remains and regard must be had to the requirement of

subs (5)(a). The matters referred to by Lord Diplock in The Nema remain important factors in

determining whether leave should be given. [His Lordship there having raised the reluctance

to grant leave for a one-off question]

247 As to the discretion, in Promenade Investments, at 221, Sheller JA said:

In his second reading speech the then Attorney-General said that one of the major objectives

of this uniform legislat ion was to min imise judicial supervision and review (New South Wales

Parliamentary Debates, 22 November 1990, 10376 at 10378):

“If arbitration is to be encouraged as a settlement procedure and not as a dry run

before lit igation, a more restrict ive criterion for the granting o f leave is desirable and

the parties should be left to accept the decision of the arbitrator whom they have

chosen to decide the matter in the first place.”

The added requirements of manifest error of law on the face of the award or strong evidence

that the arbitrator made an error of law and that the determination of the question may add

substantially to the certainty of commercial law suggest that the draftsman was seeking to

constrain the exercise of court control over arbitral awards in the manner described by the

House of Lords in The Nema. A manifest error of law on the face of the award may be an error

which would be apparent to the judge upon a mere perusal of the reasoned award itse lf

without the benefit of adversarial argument. A determination which adds substantially to the

certainty of commercial law may be a determination of a question of the construction of a

contract in standard terms rather than the construction of a one-off clause. In such a situation,

strong evidence that the arbitrator made an error of law may equate with a strong prima facie

case that the arbitrator had been wrong in his construction.

248 I am not satisfied that this is a case (had the jurisdictional and threshold requirements been satisfied for

the grant of relief either under the State Act or the Model Law) in which, as a matter of discretion,

leave to appeal or the remission of the matter to the Arbit rator should be granted or ordered as the case

may be. The complexity of the construction issues as now put, when coupled with the fact that they do

not appear to have been clearly art iculated in that fashion before, suggests strongly that this is an

attempt to re -lit igate the issues which have already been dealt with in some detail. There should be

finality in that exercise, as provided for under the parties’ arbitration agreement.

Conclusion

249 For the reasons outlined above, I am of the view that the parties did not opt out of the Model Law and

hence the State Act does not apply. (Had I found otherwise, I would have held that the claims made in

the arbitration were maritime claims for the purposes of overriding the parties’ exclusion agreement

and hence this Court would have had jurisdiction to entertain the application for leave to appeal.)

250 Had the State Act applied, I would not have been satisfied that the threshold requirements for the grant

of leave to appeal were met. Although I consider there is strong evidence of error in relat ion t o the

conclusion drawn as to the operation of the definition of weather working days for the purposes of

calculating laytime, and I accept that this question is one the determination of which is likely to add to

the certainty of commercial law, it is a question which (considered in isolation of the Alternative

Argument in relat ion to clause 7.11.2) would not substantially affect the parties’ rights. In any event I

would not have been satisfied that this was a case in which I should have exercised discretio n to grant

leave to appeal in relation to that alleged error.

251 I am not satisfied that there has been a denial of natural justice.

252 I therefore d ismiss the application by Carg ill. As Mr Gleeson indicated that, in that event, Excel would

wish to be heard in relation to costs, I will deal with that aspect of the matter at a time convenient to

Counsel.

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LAST UPDATED: 11 August 2010