Clarke Energy (Australia) Pty Ltd v Power Generation Corporation (Trading as Territory Generation) and Robert Holt KC [2025] QSC 64

Andrew Orford | Petrina Macpherson | Rose Dillon

Key takeouts

• An applicant looking to set aside an arbitral award on the grounds of a denial of natural justice must demonstrate that it has suffered a practical injustice, which is obvious and capable of being demonstrated with a detailed re-examination of the facts of the case.
  
• A significant denial of procedural fairness may warrant the setting aside of an arbitral award on public policy grounds. However, there is a high threshold to reach and evidence of real injustice or unfairness must be demonstrated.

Facts

In December 2015, Clarke Energy (Clarke Energy) and Power Generation Corporation (Trading as Territory Generation (Territory Generation) entered into two separate, but identical, EPC contracts for the whole of the works at the Owen Springs Power Station and the Tenant Creek Power Station (contracts).

During the course of the works, disputes arose as to variations and extensions of time (EOT) under both contracts. The contracts required the parties to refer disputes to arbitration. In July 2019, Clarke Energy gave Territory Generation notices of arbitration under the contracts. The arbitration was to be conducted in accordance with the ACICA Rules. The arbitrator issued an award dismissing all of Clarke Energy’s EOT claims and variation claims (award).

In October 2023, Clarke Energy commenced proceedings in the Queensland Supreme Court to set aside the award. Clarke Energy contended that the award conflicted with public policy, owing to an alleged denial of natural justice. Clarke Energy argued that the arbitrator did not conform with the ‘hearing rule’ in that he failed consider or address an issue put before him.  The issue that Clarke Energy alleged the arbitrator failed to consider was defined in the pleadings and the decision as the ‘fairly and reasonably requirement’, being an obligation to act fairly and reasonably in the determination of whether Clarke Energy was entitled to an EOT.

Clarke Energy contended that there were three issues in dispute:

1. Whether the fairly and reasonably requirement arose for determination before the arbitrator.
2. If that issue did arise for consideration, did the arbitrator determine the issue.
3. If the arbitrator failed to determine the issue, whether that resulted in Clarke Energy suffering practical injustice such that the award should be set aside.

Clarke Energy sought a declaration that the arbitrator failed to consider the pleaded and litigated contractual provisions in the contracts to assess an out of time EOT claim fairly and reasonably.

Decision

The court dismissed Clarke Energy’s application, finding that it had failed to demonstrate there had been a breach of natural justice and suffered no practical injustice as a result of the award.

In reaching that conclusion, the court considered that as Clarke Energy failed to address the fairly and reasonably requirement until its closing submission; that the matter was not included in the notice of arbitration or the pleaded case; and therefore fell outside the scope of the arbitrator’s jurisdiction.

Did the fairly and reasonably requirement arise for determination?

In considering whether the fairly and reasonably requirement arose for determination, the court formed a view that it was necessary to look at the award and other documents that threw light on what happened in the arbitral proceedings. Although the argument by Clarke Energy was that the issue was ‘central’, Clarke Energy’s late submission of the issue was not accepted as being easily reconcilable with Clarke Energy’s submission to the court that the fairly and reasonably requirement issue was before the arbitrator from the notices of arbitration onwards.  

Did the arbitrator determine the issue?

Clarke Energy attempted to argue that the arbitrator had made it clear that he was not considering the issue by focusing on one paragraph of the award, which comprised more than 3000 paragraphs. In considering whether the arbitrator determined the issue, the court concluded that despite the requirement not arising appropriately for determination, the arbitrator addressed the issue of the construction of the clause in question. Therefore there had been no breach of the hearing rule.

Did the alleged failure to consider the issue result in Clarke Energy suffering practical injustice such that the award should be set aside?

The court considered it was necessary to adopt a reasonable and commercial approach. The unfairness and practical injustice required to set aside the award, had to be ‘obvious’ and able to be expressed and demonstrated shortly without a detailed re-examination of the facts, which the court concluded was not the case in this matter. The court concluded that Clarke Energy had not suffered any practical injustice as a result of the award.