CBI Constructors Pty Ltd v Chevron Australia Pty Ltd [2024] HCA 28

What the court decided

The appeal concerned section 34(2)(a)(iii) of the Commercial Arbitration Act 2012 (WA) (the Act), in a domestic arbitration governed by the UNCITRAL Model Law and the UNCITRAL Arbitration Rules [1]. Under a contract for Chevron's Gorgon Project, the appellants (CKJV) provided staff whose cost Chevron reimbursed [3].

By procedural orders, the tribunal confined the first hearing to all issues of liability, excluding quantum [5], [6]. In substance, the First Interim Award held that CKJV was entitled to be paid its actual costs, not contractual rates [7]. CKJV then repleaded its case on quantum as what was called the Contract Criteria Case [8]. Chevron objected that the case was precluded by res judicata, issue estoppel or Anshun estoppel, and that the tribunal was functus officio [9]. In the Second Interim Award, a majority of the tribunal rejected those objections [10]. The primary judge accepted the functus officio objection, and the award was set aside [11], [57]. The Court of Appeal dismissed CKJV's appeal [12]. Its findings that the First Interim Award decided all issues of liability and that the Contract Criteria Case was a case on liability were not challenged in the High Court [13].

By majority, with Gageler CJ, Gordon, Edelman, Steward and Gleeson JJ giving joint reasons, the High Court dismissed the appeal with costs [1], [50], [51]. The majority held that, unless the parties otherwise agree, a tribunal has authority to decide the dispute submitted to it "finally and only once" [22]. By the arbitration agreement and the UNCITRAL Rules, the First Interim Award was to be a final and binding determination of the issues it dealt with [19]. Once such an award is made, a tribunal that revisits an issue decided in it acts in excess of jurisdiction [28]. An award made beyond the tribunal's authority is liable to be set aside under section 34(2)(a)(iii), but an error made within jurisdiction cannot be challenged under that provision [29].

The majority read Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 as distinguishing the effect of an interim award on the arbitrator, who is functus officio as to the issues it decides, from its effect on the parties as an issue estoppel, and said that Australian and English courts have accepted that reasoning [26]. Chevron's estoppel objections alleged an error within jurisdiction, while its functus officio objection alleged that the tribunal lacked jurisdiction [34]. The majority accepted that if a tribunal, otherwise acting within jurisdiction, wrongly finds that no estoppel arose, that finding is not a ground for setting aside under section 34(2)(a)(iii) [35]. However, the tribunal's findings on the estoppels did not prevent the Supreme Court considering Chevron's application [36]. Whether a tribunal has exhausted its authority precedes and is separate from any preclusion by estoppel [36]. Deciding the two kinds of objection together could not expand the tribunal's jurisdiction [37], [38].

On the Court of Appeal's unchallenged findings, the Supreme Court was empowered to consider Chevron's application [40]. The majority noted the policy of "minimal curial intervention", but said that this was one of the cases where intervention is necessary [41].

On CKJV's second ground, the standard of review, the majority held that it is a de novo review of the tribunal's decision as to its jurisdiction [43]. Its reasons included that the text of Article 34(2)(a)(iii) of the Model Law, which it compared with section 34(2)(a)(iii) of the Act, requires the applicant to "furnish proof" and does not provide for "absolute or substantial deference" to the tribunal [44].

In dissent, Jagot and Beech-Jones JJ would have allowed the appeal and dismissed Chevron's application, reasoning that whether the First Interim Award precluded the Contract Criteria Case was a matter for the tribunal, not for a court hearing an application to set the award aside [51], [94]. They read Fidelitas differently, as treating an arbitrator being functus officio as following from an issue estoppel, not as separate from it [80]. The real issue, they said, was which body determines what an interim award has finally decided [83]. In their view, the parties' agreement that awards would be final did not show a sufficiently clear intention that a court, not the tribunal, would decide that question [86], [88]. Their Honours would also have dismissed the second ground: a jurisdictional issue, properly raised, is reviewed de novo on a correctness standard [92].

Why it matters

In my view, where an arbitration is split into stages, the procedural orders should define precisely the issues reserved to each stage. That is because, on the majority's reasoning, a court asked to set aside a later award under section 34(2)(a)(iii) decides for itself, de novo, whether the tribunal was functus officio [2], [29]. The majority also said that a tribunal's wrong finding on estoppel, made within jurisdiction, does not stop the courts deciding whether that finding was made within or beyond jurisdiction [38].

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.