Court review of an arbitrator’s preliminary jurisdictional ruling: de novo or appellate review?

The Supreme Court of Victoria’s Arbitration List judge has confirmed that the appropriate standard of review by a court of an arbitral tribunal’s preliminary ruling on jurisdiction is a de novo review.

Lin Tiger Plastering Pty Ltd v Platinum Construction (Vic) Pty Ltd [2018] VSC 221

 

There has been a surprising lack of authority in Australia regarding the standard of review to be adopted by a court when reviewing a preliminary ruling on jurisdiction by an arbitral tribunal. Such review is provided for by Article 16(3) of the UNCITRAL Model Law on International Commercial Arbitration (Model Law), given the force of law in Australia by the International Arbitration Act 1974 (Cth), and the equivalent section 16(9) of the new uniform Commercial Arbitration Acts which regulate domestic arbitration in each State and Territory of Australia. The issue has now been considered by Croft J in the context of s 16 of the Commercial Arbitration Act2011 (Vic) (CAA).

 

Facts

A builder entered into two subcontracts with a sub-contractor for the latter to perform plastering and related works on two domestic building projects. Each subcontract contained an arbitration clause. A dispute arose and the builder commenced arbitration proceedings. The sub-contractor objected to the jurisdiction of the arbitrator, contending that by reason of the Domestic Building Contracts Act 1995 (Vic) (DBCA), VCAT had exclusive jurisdiction to hear and determine the dispute, and therefore the dispute was not arbitrable.

In a preliminary ruling on jurisdiction, the arbitrator found that he had jurisdiction to hear and determine the dispute. The sub-contractor applied to the Supreme Court for review of the preliminary ruling on jurisdiction under section 16(9) of the CAA, which provides:

If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within 30 days after having received notice of that ruling, the Court to decide the matter.

 

Issues

Croft J identified two dispositive issues:

(a)     first, what was the nature of the power of the Court under section 16(9) of the CAA; and

(b)     secondly, did the subcontractor carry out “domestic building works” under the subcontracts, such that the DBCA was engaged with the consequence that the dispute was not arbitrable?

The first question is of greater interest given its more significant precedential value.

 

Decision

Standard of review

Justice Croft noted at [25] that there was a lack of Australian authority on the nature of the review by a court under Article 16 of the Model Law or section 16(9) of the new uniform domestic arbitration Acts, and that the Model Law neither prescribed nor expressly resolved the question of the standard of judicial review of jurisdictional rulings.[1]

His Honour then surveyed the law in Singapore, Hong Kong, England and New Zealand, and the views expressed in the major commentaries.[2]

Two approaches are available. First, the “de novo” review approach, which involves the court (at the seat) determining the jurisdictional question afresh based on the evidence before the arbitral tribunal.[3] Alternatively, “appellate-type” review, which involves finding some fault in the arbitral tribunal’s approach or conclusion in its ruling on jurisdiction.

His Honour noted that the de novo review approach was generally adopted in the common law jurisdictions surveyed by him, and that to allow the arbitral tribunal to be the final arbiter of its own jurisdiction is a “classic case of pulling oneself up by one’s own bootstraps”.[4]

His Honour concluded (at [40]):

“On the basis of these authorities and commentaries, the position is, in my view, that a hearing de novo is the correct standard of review to be applied under s 16(9) of the CAA. Deference should duly be given to the cogent reasoning of the arbitral tribunal but the Court is the final “arbiter” on the question of jurisdiction. As has been observed, this is an aspect of court assistance and support of arbitral processes and is not at odds with the policy of minimal court intervention or “interference”.


Was the DBCA engaged?

Section 54 of the DBCA relevantly provides that a domestic building dispute is a dispute arising between a builder and a subcontractor in relation to the carrying out of domestic building work. “Domestic building work” is defined in section 3 as any work referred to in section 5 that is not excluded from the operation of the Act by section 6. Section 5 states that the Act applies to the erection or construction of a home, including any associated work. Section 6 provides that the Act does not apply to any work that any regulations (made under the Act) state is not building work to which the Act applies. Regulation 7 of the Domestic Building Contracts Regulations 2017 (Vic) relevantly provides that if work is to be carried out under a contract for only a single type of work, (relevantly, in this case, plastering), such work is not building work to which the DBCA applies. Finally, section 14 provides:

Any term in a domestic building contract or other agreement that requires a dispute under contract to be referred to arbitration is void”  .

 

The definition of “domestic building contract” in section 3 expressly excludes a contract between a builder and a subcontractor.

 

Croft J interpreted section 14 as effectively providing that any term in a contract that requires a domestic building dispute to be referred to arbitration, is void.

 

The scope of works under the two subcontracts, albeit headed “Scope of Works: Plastering” included framing, insulation [5] and plastering works. Accordingly, the builder argued that regulation 7 was not engaged as the subcontracts were not for a single type of work. On the other hand, the director of the builder gave evidence which explained why each item of work in the scope of works was properly undertaken by a plasterer, and therefore was properly to be regarded as plastering works only. Notwithstanding the apparent self-serving nature of this (expert) evidence, Croft J accepted it.[6] On that basis, his Honour concluded that the subcontracts provided for a single type of work within the meaning of regulation 7. Consequently, the DBCA was not engaged, VCAT did not have exclusive jurisdiction to hear and determine the dispute, and the dispute was arbitrable.

Ultimately, the decision of the Court for the purposes of section 16(9) of the CAA was that “the arbitral tribunal had correctly determined in favour of its own jurisdiction and therefore should proceed to discharge its arbitral mandate”: [48].


Comment

The decision is a valuable addition to Australia’s arbitration jurisprudence. It enhances regional coherence towards the interpretation of the Model Law.

It is very unlikely that there will be any appeal. While Article 16(3) of the Model Law provides that the court’s decision “shall be subject to no appeal”, section 16(10) of the CAA provides that “a decision of the court under subsection (9) that is within the limits of the authority of the court is final”. Whatever may be the substantive difference in the wording of the two provisions (if any), it is tolerably clear that a single judge’s decision under Article 16(9) on an arbitrator’s jurisdiction is generally final.

 

[1] Citing GB Born, International Commercial Arbitration (Kluwer Law International, 2nd ed, 2014), 1108.

[2] Including GB Born, International Commercial Arbitration (Kluwer Law International, 2nd ed, 2014); HM Holtzman and JE Neuhaus, A Guide To The UNCITRAL Model Law On International Commercial Arbitration (Kluwer Law International, 2015); P Binder,  International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions (Thomson Reuters, 3rd ed, 2010); DAR Williams and A Kawharu, Williams & Kawharu on Arbitration, (LexisNexis, 2011).

[3] Or even, perhaps, with additional evidence that was not adduced in the arbitration.

[4] Citing Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46, [2011] AC 763, [159] (Lord Saville).

[5] “Insulating” was a separate type of work listed in Regulation 7.

[6] Compare Doyle v Hornsby Shire Council [2018] NSWLEC 45, where an expert witness has a pecuniary or other direct or indirect interest in the outcome of the proceedings, his or her evidence may be excluded.

 

 

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