Australian Court provides guidance on Art 33(3) of the Model Law, the doctrine of functus officio and when a ‘Final Award’ is not ‘final’

In Blanalko Pty Ltd v Lysaght Building Solutions Pty Ltd [2017] VSC 97, Croft J of the Victorian Supreme Court confirmed that a party is not required to rely on, or comply with the time constraint in, Art 33(3) of the Model Law to obtain a further Award in circumstances where the arbitrator has made ‘a conscious decision not to deal with an issue’.  The decision also provides useful commentary on the functus officio doctrine and the circumstances in which an Award labelled ‘Final Award’ is not, relevantly, a ‘final Award.’

How the dispute arose

Blanalko v Lysaght Building Solutions is a decision under the Commercial Arbitration Act 2011 (Vic) (the Victorian Arbitration Act, being the Act with governs domestic arbitrations occurring in the State of Victoria, Australia).  However, the relevant provisions of the Victorian Arbitration Act are materially the same as the equivalent Articles of the UNCITRAL Model Law and the decision is therefore of broader application.

The parties had been engaged in a dispute before the Supreme Court of Victoria.  They agreed to resolve most issues in dispute and refer the remaining issues (including all issues of costs) to arbitration.  The arbitrator confirmed in an Award labelled ‘Final Award’ that the parties had included in their submission to arbitration the issue of the costs of the original Supreme Court of Victoria proceedings, but the arbitrator declined to make any award for those costs due to a lack of evidence.

Blanalko subsequently returned to the Supreme Court to apply for a costs order and Lysaght sought to stay that application on the grounds that the matter had been referred to arbitration. 

Amongst other things, Blanalko argued that the stay should not be granted because the arbitration agreement had become ‘inoperative or incapable of being performed’ because the 30 day period for requesting an additional award in relation to claims that were ‘omitted’ from an award under s 33(5) of the Vic Arbitration Act (materially the same as Art 33(3) of the Model Law) had expired.  For its part, Lysaght argued that the arbitrator, who had issued an award labelled ‘Final Award’, was functus officio having reached a final decision not to determine the Supreme Court costs on account of the lack of evidence.  Those arguments were rejected by Croft J.

Guidance on Art 33(3) of the Model Law

Section 33(5) of the Vic Arbitration Act (materially the same as Art 33(3) of the Model Law) allows a party to request an additional award where claims presented in the arbitral proceedings were ‘omitted’ from the award provided the request is made within 30 days. 

Justice Croft found that this provision ‘is only applicable to inadvertent omissions and not to a situation where an arbitration decides not to decide a ‘claim’ which was ‘presented in the arbitral proceedings’ (emphasis added).  In contrast, where an arbitrator makes ‘a conscious decision not to deal with an issue’, this ‘leaves the arbitral tribunal with [an] undischarged mandate to complete the task’.  As a result, it was not necessary to rely on s 33(5) (Art 33(3)) and this was not a basis for suggesting the arbitration agreement was ‘inoperative’.

Discussion on when a tribunal is functus officio and when a ‘Final Award’ is not ‘final’

The decision usefully discusses the proper characterisation of an award as ‘final’ or otherwise, observing that, even though the award was labelled ‘Final Award’, it did not decide all issues, and thus the arbitrator’s mandate remained to decide the outstanding issue.  Consequently, the arbitrator was not functus officio and it was open to either to apply to the arbitrator to continue the arbitration and seek a determination of the Supreme Court costs claim. 

Comment

The judgment usefully clarifies that a party is not required to rely on, or comply with the time constraint in, Art 33(3) of the Model Law to obtain a further Award in circumstances where the arbitrator has made ‘a conscious decision not to deal with an issue’.  It is interesting to note that Croft J made extensive reference to the UNCITRAL Secretarial Notes on the drafting of the Model Law as well as other international literature in reaching that view.

The judgment also usefully clarifies that the assessment of whether an Award is a ‘Final Award’ so as to  render the tribunal functus officio should be assessed as a matter of substance not form.  The label ‘Final Award’ does not render the tribunal functus where the tribunal has left questions open for further resolution. 

For further information, please contact Brenda Horrigan, Partner; Leon Chung, Partner; Chad Catterwell, Senior Associate; or your usual Herbert Smith Freehills contact.