THE principle of the finality of litigation, referred to as the functus officio doctrine, serves both the parties and wider purposes, including to encourage all participants to “get it right” the first time. A core aspect of the principle is that when a judge finally deals with the litigation in court, the judge is functus officio and their “capacity as the trial judge, has no further power”, as Donaldson M.R. put it in R. v Cripps [1984] 1 Q.B. 686, 695. The same principle applies when parties submit their dispute to arbitration. Once the tribunal delivers a final award, the power to determine the issues dealt with in the award comes to an end and the arbitrators are functus officio. But who gets to decide when a tribunal’s authority has come to an end: the tribunal or court? Recently, in CBI Constructors Pty Ltd. v Chevron Australia Pty Ltd. [2024] HCA 28, the High Court of Australia considered whether an award on quantum in a bifurcated arbitration with split liability and quantum hearings was liable to be set aside for dealing with a matter of liability.
The appellants (together, CKJV) contracted to supply staff to the respondent (Chevron). A dispute over payment was referred to arbitration and the tribunal fixed a date for the substantive hearing. About three months before the hearing, Chevron provided amended particulars of its counterclaim. To give CKJV an opportunity to respond and to preserve the hearing date, the tribunal issued procedural orders bifurcating the proceedings into liability and quantum phases.
In the first interim award on liability the tribunal rejected CKJV’s case that it was entitled to payment on a contractual rates basis and instead accepted Chevron’s counterclaim that CKJV was only entitled to payment for actual costs. The tribunal ordered CKJV to replead its case on quantum to better respond to Chevron’s counterclaim. In the amended case CKJV claimed its costs determined by reference to certain contractual criteria or rates (“Criteria Case”). Chevron objected, arguing that the Criteria Case was a new argument on liability which CKJV was precluded by res judicata and estoppel from raising, and that the tribunal was precluded by functus officio from considering.
The tribunal issued a second interim award rejecting the objections and upholding CKJV’s entitlement to be paid in accordance with the Criteria Case. Chevron applied to the Supreme Court of Western Australia to set aside the second interim award under section 34(2)(a)(iii) of the Commercial Arbitration Act 2012 (WA). Under that section, which is in the same terms as Article 34 of the UNCITRAL Model Law (accepted by over 90 countries worldwide), a court may set aside an award if it “deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration”.
The primary judge held that the tribunal was functus on liability issues and set aside the second interim award. CKJV appealed and the Court of Appeal upheld the primary judge’s decision, finding that the tribunal had overlooked or mischaracterised the effect of many pleadings, submissions and procedural orders. The court held that the effect of the procedural orders bifurcating the proceedings was that the first interim award was the determination of all issues of liability and since the Criteria Case concerned issues of liability not quantum, the tribunal had no residual jurisdiction to consider it.
CKJV appealed to the High Court. First, it contended that the tribunal had exclusive authority to determine whether the first interim award precluded the advancement of the Criteria Case; and second, CKJV argued that the Court of Appeal erred in law in finding that the standard of review was a de novo review applying a correctness standard of intervention.
The High Court unanimously held that the appropriate standard of review was a de novo review applying a correctness standard. On that approach, there was no error below. As to the more significant ground of appeal concerning the appropriate place for the determination of a tribunal’s authority, the Court, by a majority of five justices (Gageler C.J., Gordon, Edelman, Steward and Gleeson JJ.), held that the tribunal had exceeded its jurisdiction, a matter that the court could decide.
The majority held that the first interim award was a final and binding determination of liability, taking a literal approach to the text of the arbitration agreement and the applicable UNCITRAL Arbitration Rules (at [16]–[20]). On functus officio, the majority accepted Diplock L.J.’s decision in Fidelitas Shipping Co. Ltd. v V/O Exportchleb [1966] 1 Q.B. 630 as authority for the proposition that an interim award creates an issue estoppel between the parties and renders the arbitrator functus in relation to the issues addressed in the award (at [26]). Reasoning that both functus and section 34(2)(a)(iii) concern the jurisdiction of a tribunal, the majority held that where a tribunal hands down an award which revisits an issue already dealt with by an earlier award, the subsequent award will be an act in excess of jurisdiction and liable to be set aside under section 34(2)(a)(iii) (at [28]–[30]).
The majority accepted without pause the Court of Appeal’s unchallenged findings that the effect of the procedural orders bifurcating the proceedings was that the first interim award determined all issues of liability and that the tribunal was functus with respect to the Criteria Case (at [13], [25]). Problematically, this approach accepts that for the purposes of section 34(2)(a)(iii), the scope of the submission to arbitration will be determined by close attention to the procedural course of the arbitration.
The minority (Jagot and Beech-Jones JJ.) identified this issue and criticised the Court of Appeal’s approach. They observed that “[t]he parties agreed to submit their dispute to arbitration, not to a court, much less to that level of scrutiny by a court” and that nothing in the parties’ agreement suggested that the parties “intended that a court might closely inspect the entrails of the pleadings, the particulars and the arbitral tribunal’s procedural orders” to determine whether “the arbitral tribunal revisited an issue” (at [87]). The minority’s powerful dissent identified that the real issue at the heart of the dispute was: “which body (i.e. the court or the arbitral tribunal) determines what has been finally decided by an interim award” (at [83]). Their answer was that it was for the tribunal, and not the court, to decide; this will be well received by the international arbitration community.
There are three points of note. First, the minority rightly recognised the misplaced weight given to Fidelitas, which arose in a statutory context where an interim award in the form of a special case could be reviewed by a court on a question of law. The existence of similar mechanisms in the Commercial Arbitration Act (ss. 27J, 34A) serves to confirm the limited right of judicial recourse in section 34 and under the Model Law regime. Thus, on the minority’s view, Fidelitas was no basis for concluding that section 34(2)(a)(iii) justified curial intervention simply because the tribunal wrongly concluded that they were able to determine an issue (at [70], [79]–[81]).
Second, the minority deployed the “admissibility/jurisdiction” distinction applied to an equivalent of Article 34 of the Model Law in C v D (2023) 26 HKCFAR 216. In C v D the Hong Kong Court of Final Appeal differentiated matters of jurisdiction, on which an arbitral tribunal’s ruling may be reviewed by a court, from matters concerning the admissibility of claims, which are exclusively for the tribunal to decide (at [75]). Adopting the “operative principle” from Ribeiro P.J.’s decision, the minority in CBI made clear that while it was open for parties to agree expressly on jurisdictional limits that would be amenable to judicial review, such agreements would not be inferred lightly. In this case, there was nothing to suggest that the parties agreed on a limitation to the effect that a tribunal could not issue an award dealing with a dispute that a court may consider was already determined by an interim award in the same arbitral proceedings (at [84]–[87]).
Third, what the Court of Appeal for Ontario in Clayton v Canada (Attorney General) 2024 ONCA 581 called a “true jurisdictional question” has likely been expanded by CBI, raising for reflection why a decision on estoppel, concerned with finality too, is seen as a matter for the tribunal and how that squares with the perception, evident in the Singapore Court of Appeal’s decision in Voltas Ltd. v York International Pte Ltd. [2024] SGCA 12 that a tribunal may reserve its jurisdiction, a matter entirely for it.
Commercial parties who choose arbitration for efficiency and finality may be alarmed by the majority’s approach. To add to the perceived due process paranoia affecting arbitration, the decision is likely to invite close attention to orders for the splitting of hearings and the prospect of setting aside awards for functus reasons. There are likely to be more decisions on the topic. So, as Yogi Berra would have said, it is not over till it is over.
