Blanalko Pty Ltd v Lysaght Building Solutions Pty Ltd 2017 VSC 97

​What was the background to the decision?

Two parties largely settled a Supreme Court proceeding. There were some unresolved questions that were referred to arbitration. One such question was whether Lysaght Building Solutions Pty Ltd (“Lysaght”) was required to pay the legal costs of Blanalko Pty LTD (“Blanalko”) in relation to the Court proceeding.  The arbitrator sought submissions from the parties regarding the issue of costs. In an award styled “Final Award” the arbitrator found that he did not have enough evidence to make a finding on the referred question of costs. He said in his award that the parties were free to make application to the Supreme Court to resolve this question. Neither party requested an additional award under section 33(5) of the Commercial Arbitration Act 2011 (“the CAA”) to determine the unresolved question. This section, based on Article 33(3) of the Model Law permits parties to request, within thirty days of receipt of the award, that the arbitral tribunal make an additional award as to claims presented in the arbitral proceedings which were omitted in the award.  Blanalko made application to set aside the award under section 34 of the CAA which empowers the Court to set aside the award in limited specific circumstances, notably here, on the basis that the arbitrator had no power to decline to determine the question of the Supreme Court costs. Blanalko made a separate application that the Supreme Court determine the unresolved question. Lysaght sought to stay this application.

On what grounds was a stay requested?

Lysaght sought a stay under section 8 of the CAA, arguing that the parties had agreed to arbitrate this question. The parties did not dispute the existence of the arbitration agreement but issues were raised as to whether the arbitrator was functus officio. The issue became where Blanalko could claim the costs of the Supreme Court.

What did the court decide?

Lysaght’s application for a stay was successful. The Court held that the arbitrator’s award could not properly be characterised as “final” as his mandate subsisted since he consciously did not decide all of the questions he was asked to determine at that time, but reserving to himself (impliedly) the power to revisit the unresolved question if and when proper evidence was put before him. Therefore, it was open to both parties to apply to the arbitrator to engage the arbitral procedure once more for the determination of the unresolved Supreme Court costs claim, notwithstanding that he had rendered a purported Final Award.

What guidance was provided on Art 33(3) of the Model Law?

A party is not required to rely on 33(3) of the Model Law (legislated as 33(5) in the CAA) where an arbitrator has made ‘a conscious decision not to deal with an issue’ but only where the arbitrator inadvertently omits to decide such an issue or overlooks an issue. The Court’s reasoning for this was that the arbitrator was not functus officio given that although he labelled his award as final, as a matter of substance, the award deliberately did not deal with all claims presented in the arbitration.

What are the implications for arbitration lawyers?

The difference between an arbitrator deliberately omitting to address an issue and inadvertently omitting to address an issue is a relevant factor in analysing whether to apply article 33(3) of the Model Law (at least for Australian courts). Arbitration lawyers should nevertheless be aware that in some cases this distinction may be difficult to apply. It is also a reminder that in determining whether an arbitrator is functus officio it is important to look at the substance of their award notwithstanding it may be labelled as a “final award”.