SNPF v Westerlund Construction Joint Venture [2016] WSSC 26 (11 March 2016)

SUPREME COURT OF SAMOA\
SNPF v Poloa Westerlund Construction Joint Venture [2016] WSSC 26

Case name:	SNPF v Poloa Westerlund Construction Joint Venture
Citation:	[2016] WSSC 26
Decision date:	11 March 2016
Parties:	SAMOA NATIONAL PROVIDENT FUND, a body corporate established pursuant to s.4 National Provident Fund Act 1972 (Applicant) and POLOA WESTERLUND CONSTRUCTION JOINT VENTURE, a duly incorporated company in Samoa (First Respondent) and Samuel Leslie Petaia, Solicitor of Vaivase (Second Respondent)
Hearing date(s):	-
File number(s):
Jurisdiction:	Civil
Place of delivery:	Supreme Court of Samoa, Mulinuu
Judge(s):	Justice Vaai
On appeal from:
Order:	(1) The notice of motion by the Applicant to stay or set aside the award is struck out. (2) Applicant is ordered to pay costs of $1,000 to each respondent.
Representation:	T Toailoa-Lagaaia for Applicant R Drake for First Respondent R Papalii for Second Respondent
Catchwords:	Set aside award by the Arbitrator – misconduct of proceedings
Words and phrases:
Legislation cited:
Cases cited:	Kneubal v Liugalua (2000) WSSC 29 Samoa National Provident Fund v Apia Construction and Engineering Ltd (unreported Supreme Court of Samoa (30/1/2008). Sinke v Remarkable Residential Homes Ltd (NZ High Court Wellington CP 274 – 98 6/10/2000 D v M (Australia) Pty Ltd v Crouch Development Pty Ltd (2010) WASC 130 Kyburn Investments Ltd v Beca Corp Holdings Ltd (2015) New Zealand Court of Appeal 290 9/7/2015. Samoa National Provident Fund v Apia Construction Mayor of Wellington v Aitken, Wilson & Co [1914] NZGazLawRp 43; (1914) 33 NZLR 897 Manukau City Council v Fletcher Mainline Ltd (1982) 2 NZLR 142 Gillespic Bros & Co v Thompson Bro & Co (1922) 12 Lloyds Rep 519 at 524
Summary of decision:

IN THE SUPREME COURT OF SAMOA

HELD AT MULINUU

BETWEEN:

SAMOA NATIONAL PROVIDENT FUND a body corporate established pursuant to s.4 National Provident Fund Act 1972.
Applicant

AND:

POLOA WESTERLUND CONSTRUCTION JOINT VENTURE a duly incorporated company in Samoa.
First Respondent

AND:

SAMUEL LESLIE PETAIA Solicitor of Vaivase
Second Respondent

Counsel:
T Toailoa-Lagaaia for Applicant
R Drake for First Respondent
R Papalii for Second Respondent
Decision: 11 March 2016

DECISION OF THE COURT

Introduction

1. By Notice of Motion dated 27^th April 2015, the applicant, Samoa National Provident Fund, sought orders:
   • (1) to stay and/or set aside the award by the Arbitrator dated January 2015; and
   • (2) that clause 22 of the Conditions of Contract shall cease to have effect; and
   • (3) to substitute the Award with an appropriate order; and
   • (4) awarding costs to the Applicant.
2. The grounds upon which the notice of motion is based are:
   • (i) That the Arbitrator misconducted the proceedings by:
     • (a) Not directly informing the Applicant that the Second Respondent had not filed closing submissions; and/or
     • (b) making an award without first obtaining closing submissions from the Applicant.
3. The alternative ground is that the Second Respondent breached his duty to the Applicant by not filing closing submissions thus leading to a misconduct of proceedings.
4. A further alternative ground is that the total amount of the award is not supported by the evidence.
5. These proceedings are concerned with the applications by the first and second respondents to strike out the applicant’s notice of motion.

Background

6. A Building contract for the construction of a two storey office building was executed on the 26^th October 2006 by the Applicant as the principal and the first respondent as the contractor, at a contract price of $2,662,166. A dispute over the costs of variations and payment of retention money was referred to arbitration pursuant to the relevant clause of the contract.
7. Both parties agreed in September 2010 to the appointment of Fonoti Ioane a respected, qualified Architect with years of experience in Architectural Consultancy Services as the Arbitrator. After a series of meetings and site inspection by the Arbitrator and counsels for the Applicant and first Respondent, arbitration was conducted on the 24^th and 25^th August 2011.
8. The second Respondent, as Manager Legal of the applicant was the applicant’s counsel. Ms Drake was counsel for the first respondent.
9. There was delay in the completion of the transcript which was finally completed in May 2013. By this time the Arbitrator had been posted to Sydney Australia as Consul General for Samoa, but maintained contact with counsels by emails concerning delivery to him of the copies of the transcript and counsels submissions.
10. It was eventually agreed on the 5^th July 2013 that submissions were to be filed by the 30^th August 2013. On the 5^th July 2013 the second respondent e-mailed the Arbitrator and Ms Drake endorsing the filing of submissions by the 30^th August 2013 and any rebuttal submissions by the 7^th September 2013. He also said:
    • “We also propose that both parties file their submissions in electronic form to expedite our proceedings”.
11. Ms Drake couriered her submissions to the Arbitrator on the 30^th July 2013 before she went off-shore, but before doing so, she instructed her secretary to serve a copy of her submission on the second respondent on the 30^th August 2013 upon, and in exchange with the second respondents submissions. When Ms Drake returned to the office in September 2013, no submissions were received from the second respondent. An email was sent to the second respondent inquiring about his submissions. No reply was received. Ms Drake also emailed the Arbitrator requesting acknowledgement of receipt of her submissions and inquiring about the second respondent’s submissions.
12. By email dated 5^th December 2013 the Arbitrator advised Ms Drake that the second respondent has not filed submissions nor responded.
13. On the 2^nd February 2015 Ms Drake received the Arbitrator’s written award dated January 2015. He awarded the first respondent its claim together with interest.
14. Upon receipt of the Arbitrator’s award the applicant’s Chief Executive Officer on the 9^th February 2015 requested the Arbitrator for leave to file submissions by the 20^th February 2015. A further extension to file was made and submissions were eventually submitted by the applicant’s current counsel on the 9^th March 2015.
15. On the 7^th April 2015 the Arbitrator advised the parties that his award remains and prevails. He also directed the applicant to pay his fees.

Strike Out principles

16. It is common ground that in addition to the powers under the Supreme Court Rules 1981 the court has an inherent jurisdiction to strike out any proceeding which is frivolous and vexatious or an abuse of process and which is without a solid basis and must fail. It is a jurisdiction which must be exercised with great circumspection and only where it is clear the plea cannot succeed. It ought to be exercised sparingly and only in exceptional circumstances. See Kneubal v Liugalua (2000) WSSC 29.

The Second Respondent

17. The power of the Court to set aside an award and remove an arbitrator is provided under section 13 Arbitration Act 1972. An arbitrator who has misconducted himself or the proceedings or if any award has been improperly procured, the Court may remove the Arbitrator and may set the award aside. Although not relevant for present purposes, the Arbitrator may also be removed for failing to use all reasonable dispatch in entering on and proceeding with the reference and making the award.
18. The allegation by the applicant in paragraph 3 above against the second respondent namely that the second respondent breached his duty to the Applicant by not filing closing submissions thus leading to the misconduct of the proceedings is irrelevant and immaterial for the purpose of section 13 (2). It is the misconduct of the Arbitrator in the conduct of the arbitration which is the concern of section 13 (2).
19. Grievance by the Applicant against the Second Respondent for neglecting his duty as counsel arising from the Arbitration can be addressed in another way. The proceedings are concerned with the conduct of the Arbitrator.
20. Accordingly the pleading should be struck out.

Misconduct

21. Misconduct as indicated is to be found in section 13 of the Arbitration Act 1972. The concept of misconduct in the context of arbitration was thoroughly canvassed by Sapolu CJ in Samoa National Provident Fund v Apia Construction and Engineering Ltd (unreported Supreme Court of Samoa (30/1/2008). Circumstances in which an arbitrator may be found to have misconducted himself or the proceedings are listed in Halsbury 4^th edition volume 2 at paragraph 622. They include (interalia):
    • (i) where the arbitrator fails to decide all matters which were referred to him,
    • (ii) where the arbitrator purports to decide matters which were not referred to him,
    • (iii) where he has failed to act fairly. The author acknowledged it is difficult to give an exhaustive definition of what may amount to misconduct on the part of an arbitrator.
22. Ms Drake who was counsel for the Applicant in Samoa National Provident Fund v Apia Construction (30/1/08) referred to in paragraph 20 has also in her written submissions addressed the same authorities cited by Sapolu CJ. It is suffice to say that most heads of misconduct involves, usually, merely a procedural lapse.
23. The first allegation of misconduct is that the Arbitrator failed to notify the Applicant directly, to inform the Applicant that its counsel has failed or neglected to file submissions. Ms Drake for the first Respondent contended the Arbitrator was not obliged to.
24. Prior to the commencement of the Arbitration hearing in 2011 rules and procedures were agreed to between the parties. What transpired post trial is contained at page 3 of the Award:
    • “Apart from the Arbitrators find recommendation it was also agreed that both legal counsels were to produce individual assessment and write up following the hearing session. The individual counsels write up were to be presented to the Arbitrator for information and reference where required before final assessment is made. To that regard I wish to acknowledge receipt of Ms Ruby Drake’s write up of 29^th July 2013. Unfortunately I have yet to receive Mr Sam Petaia representing SNPF.
    • I asked Ms Ruby Drake several times if she had heard of Mr Leslie Petaia or would she had known the whereabouts of Sam Petaia. Unfortunately according to Mrs Ruby Drake she had sent messages to Leslie on email and that her staff had been ringing him at NPF on several occasions. They had apparently left messages for him to reply or return calls but unfortunately had not heard from him.
    • Therefore the process must proceed.”
25. The Arbitrator as Ms Drake contended did not sway away from the agreed procedure. The last date agreed to for the filing of submissions was in fact suggested by counsel for the Applicant. Apart from not filing the submissions he did not respond to the emails from the Arbitrator and Ms Drake.

In any event, one would expect, that between September 2010, when the Arbitrator was appointed, and May 2015 when the transcript was completed that the Applicant would have requested or demanded from its counsel a feedback as to the status of the Arbitration particularly considering that the costs of disbursements were shared between the parties and the quantum contested was quite substantial.

26. Ordinarily, an Arbitrator, like a judge should not make contact with a party represented by counsel, particularly when the hearing is completed and a decision is pending. It would undoubtedly tantamount to misconduct if he did make contact. I accept Ms Drake’s contention that the Arbitrator was not obligated to notify the Applicant that its counsel has not filed submissions.
27. The second allegation of misconduct, related to the first, is that the Arbitrator proceeded to make the award without first obtaining legal submissions from the Applicant. This allegation is grounded on the rules of natural justice, namely that the Applicant was not given the chance to be heard and the Arbitrator therefore failed to treat the parties equally.
28. It is true that the award was given in the absence of submissions by the Applicant, but it is also true that the Arbitrator did not deny to the Applicant the right to be heard. Whatever internal events or non-event within the Applicant which led to the failure of the Applicant’s counsel to file submissions as agreed to between the parties, neither the Arbitrator, nor the first Respondent nor this court has been told of the reasons. There has been no breach of natural justice.

Additional Evidence

29. Counsel for the Applicant in her written submissions at paragraph 14 exposed several emails between the Arbitrator and Ms Drake as Counsel for the first respondent, a few months prior to the making of the award. These are:

3/10/2014	Drakes follow up email to Arbitrator
14/11/2014	Drakes follow up email to Arbitrator
17/11/2014	Response from Arbitrator
8/12/2014	Drake’s email to Arbitrator
	Response from Arbitrator
15/12/2014	Attendances on Arbitrator requesting further documents.
23/12/2014	Email from Arbitrator requesting further documents.
20/1/2015	Email from Arbitrator requiring confirmation of transcript and evidence.
	Response to Arbitrator relaying information.
22/1/2015	Email from Arbitrator requesting information.
26/1/2015	Conveying information to Arbitrator regarding amount for mindous, after checking contract and relevant records.

30. Counsel for the Applicant submitted that as the Applicant was not privy to the correspondences which were exchanged immediately prior to the release of the award suggests that a substantial miscarriage of justice has indeed occurred. As this contention was introduced during delivery of submissions Ms Drake could not address the allegation fully and adequately.
31. I understand counsels submissions to mean that there has been a breach of the rules of natural justice as the parties were not treated the same. It must be said however that Arbitrator at the time was stationed in Australia, and what he did request from Ms Drake was nothing more than copies of documents, transcript and information which was not available to him in Australia but was readily available here where the Arbitration was conducted. No other person could provide the needed documents and information except counsel. In my view there has been no breach of the rules of natural justice.

Exercise of discretion

32. In the event however that the evidence justify a finding of a breach of the rules of natural justice, it does not necessarily follow that the arbitral award must be set aside. The power of the court to set aside an award pursuant to section 13 is discretionary and will not be exercised automatically in every case. The discretion enables the court to evaluate the nature and impact of the particular breach in deciding whether the award should be set aside. Where the breach is relatively immaterial, or was not likely to affect the outcome, will dissuade a court from exercising its discretion. Sinke v Remarkable Residential Homes Ltd (NZ High Court Wellington CP 274 – 98 6/10/2000; D v M (Australia) Pty Ltd v Crouch Development Pty Ltd (2010) WASC 130.
33. No single factor is decisive or necessary for an award to be set aside. Sometimes the breach would be sufficiently serious to speak for itself. In other cases, the Court will need to consider the materiality of the breach and evaluate whether it was likely to have affected the outcome. See Kyburn Investments Ltd v Beca Corp Holdings Ltd (2015) New Zealand Court of Appeal 290 9/7/2015. The same NZ Court of Appeal also held that there is the ordinary onus or burden on the applicant to make out his or her case that the award should be set aside.
34. Following this approach in the present case, if there was breach of the rules of natural justice, the failure by the Applicant to file submissions did not in my judgment have any material effect on the outcome of the arbitration. In the first place the Arbitrator correctly identified the five topics of dispute and dealt with each issue. He assessed the documentary and oral evidence given at the hearing and reached conclusions based on the best evidence.

Secondly counsel who represented the Applicant at the Arbitration was obviously not co-operating with the Applicant and would certainly not assist the Applicant.

Thirdly and more importantly the arbitral award is based principally on the Arbitrator’s evaluation of the contractors evidence through the two key witnesses and the Applicant’s evidence through its Project Manager. He focussed on the matters not agreed between the witnesses. He gave valid, solid reasons for the conclusions he reached.

Fourthly, based on documents in the possession of the Applicant’s Project Manager, the Arbitrator correctly in law criticised the Project Manager (page 16) for her lack of transparency in the procuring process, to the disadvantage of the first respondent and in favour of the Project Manager’s brother in law, who was eventually sub-contracted by the Applicant to provide louver windows contrary to the express provisions of the contract. This was another issue of the dispute.

Amount of the Award is not supported by the Evidence

35. The applicant’s second alternative ground is that the award is not supported by the evidence. In her written submissions counsel for the applicant submitted that there is significant evidence contained in the Applicant’s late submissions which supports her contention that the Award is not supported by the evidence before the Arbitration. She also cautioned against the adoption by this court of decisions in other jurisdictions like New Zealand, Australia and England which came about as a result of amendments to their Arbitration laws which purposely restricted court intervention in Arbitration proceedings due to commercial concerns in those countries. Taking New Zealand as an example, the New Zealand Arbitration Act 1908 was repealed by the 1996 Arbitration Act and section 5 says the purpose of the Act (interalia):
    • (1) To encourage the use of Arbitration as an agreed method of resolving commercial and other disputes (s5(a)); and
    • (2) To re-define and clarify the limits of judicial review of the arbitral process and of arbitral awards: (s.5 (d)).
36. She concludes that any overseas authorities particularly those after 1996 should be read against this statutory background in which overseas jurisdictions have repealed or amended their statutes to restrict court interference and also to prohibit questions of law based on whether there was any evidence to support an award.
37. The alternative ground suggests that the Arbitrator was erroneous on the facts as the award is not supported by the evidence. If that is so, the ground must fail since the only grounds for impeaching an arbitral award are the statutory ground of misconduct and the common law ground of error of law on the face of the record. See Samoa National Provident Fund v Apia Construction (para 21).
38. If however the alternative ground is that the amount of the award was arrived at through the misconduct of the Arbitrator by making an assessment contrary to the evidence, the concerns of the Applicant can be addressed by reference to the New Zealand and English authorities decided before the amendments to their Arbitration legislations.
39. In Mayor of Wellington v Aitken, Wilson & Co (1914) 33 NZLR 897, the headnote reads:
    • “Where parties have agreed to refer certain matters to arbitration, and have nominated their own tribunal the decision of which is not subject to the approval of the court, the mere inadequacy of the amount awarded, even if such award be against the weight of the evidence, is no proof of partiality or misconduct on the part of the arbitrator of such a nature as to enable the court to set aside the award.”

By analogy the same principle would apply in a case of over assessment.

The New Zealand line of authority prior to the 1996 Amendment was exemplified by the NZ Court of Appeal in Manukau City Council v Fletcher Mainline Ltd (1982) 2 NZLR 142 where Woodhouse P at page 146 adopted a statement in Russel on Arbitration 20^th edition (1982) at page 422:

“It is not misconduct on the part of an arbitrator to come to an erroneous decision, whether his error is some of fact or law and whether or not his findings of fact are supported by evidence.”

And in Gillespic Bros & Co v Thompson Bro & Co (1922) 12 Lloyds Rep 519 at 524 Atkin LJ said:

“It is not ground for coming to a conclusion on an award that the facts are wrongfully found. The facts have to be treated as found. Nor is it a ground for setting aside an award that the conclusion is wrong in fact. Nor is it even a ground for setting aside an award that there is no evidence on which the facts could be found, because that would be a mere error of law, and it is not misconduct to come to a wrong conclusion in law and would be no ground for ruling aside the award unless the error in law appeared on the face of it.”

Functus Officio

40. Once the Arbitrator issued his award in January 2015 he was functus officio and could not reconsider or change the award. When present counsel for the Applicant filed her late submissions she ought to have known that the Arbitrator was functus officio.

Result

(1) The notice of motion by the Applicant to stay or set aside the award is struck out.
(2) Applicant is ordered to pay costs of $1,000 to each respondent.

JUSTICE VAAI