April 14, 2025
The recent case of Clarke Energy (Australia) Pty Ltd v Power Generation Corporation (Trading as Territory Generation) and Robert Holt KC [2025] QSC 64 serves as a timely reminder to parties of the high threshold applicable to claims surrounding an alleged denial of natural justice. The case also looks at the practical considerations that the court should take into account when determining whether an injustice has been suffered by the party (or where, on the facts before the court, there has been no practical injustice suffered).
BACKGROUNDS
The applicant, Clarke Energy (Clarke), was contracted by the first respondent, Power Generation Corporation (trading as Territory Generation – ‘TG’) to perform works related to TG’s Owen Springs and Tenant Creek Power Stations. The contracts for the works at Owen Springs and Tenant Creek were largely the same and entered into on 22 December 2015. The works under both contracts generally related to the installation and upgrade of gas-fired power plants. During delivery of the Works, a number of issues arose between the parties, namely around entitlement to variations and extensions of time (which also impacted claims by TG that it was entitled to liquidated damages).
In 2019 these disputes were referred to arbitration before Mr Holt KC (the second respondent).
In 2023, the arbitrator delivered a partial award largely in favour of TG (dismissing Clarke’s EOT claims and a majority of its variation claims, and upholding a number of TG’s counter claims, including in respect of load banks, delay and performance liquidated damages, and non-compliant compaction (Arbitration Award).
Clarke subsequently elected to commence proceedings before the Supreme Court of Queensland seeking to have the arbitration award set aside under section 34 of Commercial Arbitration Act 2013 (Qld).
SUPREME COURT APPLICATION
Clarke’s primary contention was that the Arbitration Award should be set aside (under section 34 of Commercial Arbitration Act 2013 (Qld)) on the basis that the Arbitration Award conflicted with the public policy of the State of Queensland, because there was a denial of natural justice. The basis for such was non-compliance with the hearing rule, as Clarke contended that the arbitrator had failed to consider (or otherwise address) an issue that was put before them.
Clarke relevantly contended in respect of the above matters that the arbitrator had failed to consider if, under the respective contracts, TG was obliged to exercise its determination function regarding claims for an EOT in accordance with an alleged “Fairly and Reasonably Requirement” to grant the extension.
Key Issues
Clarke’s arguments can be articulated through reference to the three grounds identified in the proceedings as to which they alleged constituted a breach of natural justice. These allegations were that the arbitrator failed to determine the issue of whether:
- TG acted fairly and reasonably when assessing Clarke’s extension of time claims;
- there was a substantive and factual relationship between the extension of time claims and the variation claims; and
- TG failed to assess Clarke’s ability to comply with the contractual notice requirements for its extension of time and variation claims.
In response TG argued that the Fairly and Reasonably Requirement was not contained within the Notice of Arbitraton or the parties pleaded cases, and was first raised by Clarke as part of its closing submissions. On this basis, TG argued that the issue of the Fairly and Reasonably Requirement did not arise for determination, and therefore the arbitrator was not required to determine such matters.
Decision
Justice Kelly found that Clarke Energy had only addressed the Fairly and Reasonably Requirement issue in their closing submissions and this matter was not included in the Notices of Arbitration or the pleaded case, thus falling outside of the arbitrator’s jurisdiction.
Justice Kelly goes further to acknowledge that it would be unreasonable to require an arbitrator to address every argument that goes beyond the ‘essential issues’ in an arbitration.
Notwithstanding the above, Justice Kelly in any event considered the arbitrator had fairly identified and considered the construction of clause 38.4 (which the Fairly and Reasonably Requirement was alleged to have arisen in respect of), and therefore there would be no grounds in any event to argue that the arbitrator was in breach of the hearing rule. Practically, because the arbitrator had considered the matter (even if not required), there could not be a failure to consider an essential issue.
Justice Kelly also determined that Clarke had failed to prove delay. This was therefore an independent reason for concluding that, had there been a breach of natural justice, Clarke would not have suffered practical injustice that would warrant the setting aside of the Arbitration Award.
Practical Considerations
This case highlights the key threshold questions that may be satisfied to set aside any arbitration award on the grounds of a breach of natural justice, which have a high bar for the applicant to exceed.
Notably, the case serves as an important reminder to parties of the importance of making sure a parties arguments are clearly articulated and adduced during the preliminary stages of a matter, to ensure there is no argument that such matters may fall outside the scope of the dispute and do not ultimately need to be determined.
Contact: Peter Lamont or Ryan Bryett
Email: [email protected] or [email protected]
Phone: (07) 3248 8500
Address: Suite 2, Level 2, 349 Coronation Drive, Milton Qld 4064
Postal Address: PO Box 1133, Milton Qld 4064