Proctor : September 2018
15 PROCTOR | September 2018 Arbitration Mango Boulevard Pty Ltd v Mio Art Pty Ltd1 (the original judgment) is an example of a case in which a party sought to set aside an arbitral award under section 34 of the Commercial Arbitration Act 2013 (Qld) (the Act). This decision was then appealed in Mango Boulevard Pty Ltd v Mio Art Pty Ltd 2 on the basis that the primary judge erred in not setting aside the award for the arbitrator’s failure to afford procedural fairness. Ultimately, the court found that the primary judge’s findings were accurate, and that it was not possible to conclude any real unfair or practical prejudice because Mango Boulevard had been afforded a reasonable opportunity to present its case at arbitration. Circumstances in which a court will set aside an arbitral award are extremely limited. Another avenue to challenge an arbitral award is by applying to appeal the award on a question of law. However, since the introduction of the Act in 2013, an application to appeal may only be made if the parties have agreed. In this article, we consider when and how this agreement should be reached. Case background The dispute between the parties originated from a joint venture for the development of land, specifically that the parties were unable to determine the share price pursuant to clause 4.1 in the share sale agreement (SSA). At arbitration, it was stipulated that the arbitrator, in reaching his decision, “must adopt the same methodology as provided in clause 4.4”. 3 This required the arbitrator to make assumptions agreed by the parties, particularly that the project would achieve a profit on cost percentage return of 25%. In determining the subject property’s market value under the SSA, the arbitrator was required to consider the “real life market considerations” and “commercial reality” of the project. In rejecting Mango Boulevard’s expert evidence, the arbitrator concluded that a “competent”, “prudent” or “rational” developer would not purchase the subject property unless they reasonably believed they could return a profit of 30% to 45%. 4 Judgment and appeal It is on this point that Mango Boulevard sought to set aside the arbitrator’s decision on two grounds – firstly, that the methodology used by the arbitrator to determine the share price departed from the requirements of the SSA and was beyond the scope of the submission to the arbitration, and secondly, that the arbitrator failed to accord procedural fairness or acted in breach of the rules of natural justice by rejecting Mango Boulevards’ expert witness, which meant it was unable to present its case and that the award was in conflict with the public policy. Mango Boulevard first sought to set aside the arbitral award in the Supreme Court of Queensland under sections 34(2)(a)(ii) or 34(2) (b)(ii) of the Act, which provide that the court may only set aside an arbitral award under the Act in the circumstance whereby: (a) the party making the application furnishes proof that it was otherwise unable to present the party’s case, or (b) the court finds that the award was in conflict with the public policy of the State. The primary judge concluded that the arbitrator had appropriate reasons to reject the evidence of Mango Boulevard’s expert witness, and that his error to not put this to the witness or counsel for Mango Boulevard did not amount to or cause a real practical injustice such as to set aside the award under section 34 of the Act.5 Mango Boulevard appealed the original judgment in the Queensland Court of Appeal, on the basis that: (a) the primary judge erred in not finding that the arbitrator had conducted or resolved the arbitration in a manner that caused real unfairness or real practical injustice to the appellant, and (b) on the basis of the error in paragraph (a), the primary judge erred in not finding that the arbitral awards delivered by the arbitrator should be set aside pursuant to sections 34(2)(a)(ii) or 34(2)(b)(ii) of the Act.6 Ultimately, the court held that, contrary to Mango Boulevard’s contentions, it was not possible to conclude that there had been a real unfairness or real practical prejudice in this case. Mango Boulevard had been provided with ample opportunity to present its case. This was evidenced by the arbitrator’s willingness for Mango Boulevard to recall its witness to give further evidence. However, Mango Boulevard failed to do so on multiple occasions, choosing to present its case in the way it determined was appropriate. In conclusion, his Honour found that s34 of the Act was not intended to “protect a party from its own failure or poor strategic choices”. 7 To set aside the award would effectively “bail out parties who have made choices that they might come to regret”. 8 Accordingly, the court dismissed the appeal. Difference between s34 and s34A In the original judgment, Justice Jackson referred to the judgment of Cameron Australasia Pty Ltd v AED Oil Ltd9 (Cameron) to provide an explanation as to the difference when seeking to set aside under s34 or appealing against an award under s34A of the Act. Cameron held that the provisions of s34A allow for “an appeal on a question of law arising out of an arbitral award, but only in limited circumstances, and only on an ‘opt-in’ basis.” 10 In other words, a party can only appeal an arbitral award in circumstances whereby the parties to the arbitration agree that an appeal may be made on a question of law. When should you apply to set aside an arbitral award, or just appeal against it? Russell Thirgood and Erika Williams look at a recent Court of Appeal case which provides some guidance.