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

Transcription

1 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/ 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

2 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

3 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 (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

4 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, 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 / CARGILL INTERNATIONAL SA V PEABODY AUSTRALIA MINING LTD

5 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 Cargill International SA and Peabody Australia Mining Limited (then known as Excel Coal Ltd) for the supply of coal to Cargill. (For convenience, I will adopt the same terminology as that used in the Arbitrator s award and refer to the parties as Cargill 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 Those disputes were referred to arbitration 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 arbitration 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, (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 period (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 for 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 Arbitrator s findings summarised in (a) to (c) above (t hough Cargill does seek to challenge the conclusion that demurrage was not payable during the period of force

6 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 giving (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 expired not long after that at 0956hrs on 8 June (On any view, this would mean, on the Arbitrator s findings, that force majeure commenced before, albeit only very shortly before, the expiration 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 Cargill s counterclaim for demurrage ran for the whole of the force majeure period from 8 to 25 June 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 jurisdictional q uestion, that being whether the arbitration is governed by the Commercial Arbitration Act 1984 (NSW) (the State Act), as Cargill 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).

7 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 applying 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 Cargill succeeds on its application to set aside the award, then Cargill requests that the matter be remitted to the Arbitrator pursuant to article 34(4) of the Model Law for a determination by the Arbitrator of 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 provisions 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

8 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 Cargill. 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 Cargill 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 July 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 relation to the demurrage claim was whether it extended to the period beyond 21 June 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 Cargill was reserving to itself an entitlement to claim demurrage for the period extending back before 21 June 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 It represents the USD amount for which Excel was ultimately successful in the arbitration before the Arbitrator. 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 (This 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 Cargill 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 Cargill served revised invoices claiming demurrage for the whole of the period from 8 to 25 June 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 proceedings 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

9 the Arbitrator (which he observed were more numerous than would ordinarily be found in a commercial arbitration 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 readiness 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 financial 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.

10 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 It also seems to be accepted that, had the Iron Bradyn been on demurrage prior to the commencement of force majeure, the operation of force majeure would not have affected Excel s liability 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 (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 ultimately 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 ultimately found that Excel did not become liable for demurrage in respect of the Iron Bradyn until 25 June 2007 (after the cessation of the force majeure period). 28 Cargill 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 ineffective, nevertheless the delay in its issue was to be taken into account when calculating whether laytime had expired and whether the vessel had gone on demurrage (as Cargill contended) on 8 June I consider in more detail below the content of the submissions put to the Arbitrator. 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 giving 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

11 namely, that there had been a delay in the giving 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 Arbitrator 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 within 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 of 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

12 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 arbitration 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 arbitration 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 disputes 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 maritime 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 Arbitrator 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 Cargill s contentions on those questions were to be accepted) could at most permit

13 Cargill to claim demurrage for the short period from 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 Cargill s favour of the Alternative Argument (i.e. even for the June 2007 period) would not sound in any recovery by Cargill. The difficulty I have with that proposition is that if Cargill is correct on its interpretation of clause , 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 argument must necessarily entail a review of the position under clause 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 Cargill 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 in relation 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 of 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 by reference to the definition of Weather Working Days in the definition of Cargo Handling Rate again I think such a construction was

14 reasonably arguable. Although the purpose of the definition of Cargo Handling Rate, on its face, was to enable the calculation 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 relation to the first alleged error in relation to the construction of clause Had I been satisfied that there was strong evidence as to the making of an error of law in the construction of clause 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 Arbitrator seems to have had regard, as an aid to construction, to the parties post contractual conduct and that this may have affected the weight placed by him on the other matter which led to his finding that the weather working day definition 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 relation to the construction of clause 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.

15 Given the findings summarised above, even had I found for Cargill on the initial jurisdictional 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 him in relation to the construction and operation of clause I think there is some force in the suggestion by Excel that what is now sought to be put by Cargill is a modification or reformulation of the alternative submission that was in fact put before the Arbitrator. If so, he cannot be criticised 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 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 Senior Counsel then appearing for Cargill on the arbitration. 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 for 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 ). The Arbitrator appears to have addressed the thrust of the Alternative Argument put to him in his Partial Award, even if he did not frame his reasons in the way in which the argument is now put. Cargill 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 arbitration 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

16 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 little 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 arbitration agreement have (whether in the agreement or in any other document in writing) 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 arbitration agreement or in any other agreement in writing. There is nothing in that explanatory 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).

17 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 arbitration and adopted a different law. The adoption, if that be the case in any particular agreement, of a different curial law suggests that the parties have indeed turned their minds to the question of what law should govern their arbitration. 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 indicating 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 operation 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, validity or termination, shall be referred to International Arbitration under the Rules of Arbitration of the International Chamber of Commerce with any arbitration 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 modification that only a single arbitrator was to be appointed in this case, was confirmed (after the particular disputes had arisen) in an exchange of correspondence between their respective lawyers on 15 A pril 2009

18 (Cargill s solicitor having earlier suggested that an ICC arbitration was not necessary and that the arbitration, by default, 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 dispute for arbitration 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 difference 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 rules governing the arbitration 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 There, the parties arbitration agreement included a provision in similar (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 Conciliation and Arbitration of the International Chamber of 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 for 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 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: