620 Collins Street v Abigroup (No 1) [2006] VSC 490
In the Supreme Court of Victoria, Osborn J held on an application under section 42 of the Commercial Arbitration Act 1984 that an arbitrator committed technical misconduct by resolving a liquidated damages claim through an extension of time that had not been pleaded or claimed, without giving the principal a proper opportunity to contest that course, rejected the other grounds and reserved the question of orders [1], [68], [111], [129], [143], [144], [148], [149], [150].
What the court decided
In August 2001 620 Collins Street Pty Ltd ("620") and Abigroup Contractors Pty Ltd entered into a contract for Abigroup to design and construct Liberty Tower [2]. The plaintiffs applied to set aside the arbitrator's award for misconduct, not alleging corruption, fraud, partiality or bias [1], [16].
His Honour said that misconduct is not established merely because an arbitrator makes an error of fact or law, adopting earlier authority that there must be "some real dereliction of duty" [20]. Delay may give rise to an inference of misconduct when coupled with a failure to address relevant matters in the award [23], [25]. The plaintiffs did not contend that delay alone amounted to misconduct [28].
On the first ground, his Honour rejected Abigroup's argument that 620 had agreed to an open ended extension [34]. He found instead that the parties had acquiesced in the delay and that no notice requiring compliance with the 21 day period in the arbitration agreement was given [34]. The arbitrator's task was a technically difficult and complex one [35]. The delay was relevant to assessing the reasons, but his Honour was not persuaded it could be characterised as "inordinate and inexcusable" [36].
The arbitrator had concluded, as was clearly open to him, that Abigroup need not prove a contractor's program under clause 33.2 for an extension under the reserve power in clause 35.5 [45]. His Honour also held open, and correct as to the law, the arbitrator's related conclusion about that reserve discretion [49], [50]. If the arbitrator's construction was open, a failure to deal with specific submissions could evidence misconduct only if they necessarily bore relevantly on his framework of reasoning [47]. His Honour applied the principles in Peter Schwarz (Overseas) Pty Ltd v Morton, including the requirement to deal with every "submission worthy of serious consideration" [65]. He also applied Fletcher Construction Australia Ltd v Lines MacFarlane and Marshall Pty Ltd on the duty to give reasons [66]. He was not satisfied that the arbitrator's response to 620's submissions was materially inadequate, and the first ground failed [67], [68].
On the second ground, because the arbitrator rejected 620's framework, an omission to address subsidiary submissions made within it did not necessarily constitute misconduct [74]. His Honour reviewed the individual extensions argued and found no misconduct in the reasoning on any [81], [84], [91], [103], [111]. He did not rule on Abigroup's submission based on the Superintendent's earlier determinations, observing that they made misconduct harder to infer [112], [113].
On the third ground, his Honour held that Abigroup had pleaded and argued agreements consummated on handover, not a purely prospective agreement [120], [123]. The arbitrator's finding that new separable portions were created was responsive to that case [126]. 620 was not taken by surprise or denied procedural fairness, and the third ground failed [128], [129].
On the fourth ground, Abigroup claimed no extension for the Soho Apartments beyond the claims already addressed [131]. In closing submissions it argued that 620's direction had prevented completion of the Soho Apartments, although its pleading raised no issue of prevention [134]. The arbitrator nevertheless used the reserve power in clause 35.5 to extend time for the Soho Apartments, whose deferral he attributed to a direction [137]. His Honour accepted that those findings were responsive to Abigroup's closing submissions, but Abigroup had not applied for an extension for that direction [138]. Even so, the findings went beyond the pleaded claims and the parties' submissions [140]. His Honour was satisfied that 620 was not given a sufficient opportunity to meet the issue, which was not pleaded and for which no extension was claimed [143]. Before allowing an extension, the arbitrator had to give 620 a proper opportunity to contest that an extension was the appropriate mechanism [144]. His Honour held that the case fell within the principle stated in The Vimeira [145]. The arbitrator did not give 620 adequate warning and went beyond the matters that were "in the ring" [148]. Accordingly the fourth ground of misconduct was made out [149]. His Honour left the appropriate orders for further submissions [150].
Why it matters
An arbitrator who resolves a dispute through a mechanism that no party pleaded or claimed, even in response to a party's submissions, risks a finding of technical misconduct unless the affected party is warned and given an opportunity to respond. The decision also shows that delay, although relevant to reading an award's reasons, did not here make them inadequate, and that reasons need address only submissions bearing on the arbitrator's chosen path of reasoning. Readers should check the current Victorian arbitration legislation before relying on it.
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.