LEGAL PRINCIPLE: ARBITRATION LAW – Arbitral Proceedings – Raising Issue Suo Motu – Whether Constitutes Breach of Natural Justice When Arising from Claim
PRINCIPLE STATEMENT
The question of contract termination was put before the arbitrator by the appellant when they claimed damages for respondent's failure to complete work as stipulated; it was the appellant, by claiming damages for breach of contract, who put the validity of their termination of the contract in issue; although the question of law as to validity of termination was not specifically referred to the arbitrator, it is however material in deciding the matter referred.
RATIO DECIDENDI (SOURCE)
"The question of the termination of the contract was put before the arbitrator by the Appellant when he claimed for damages for Respondent's failure to complete the building work in 10 months as stipulated in the contract.... I have explained earlier that it was the Appellant by claiming damages for breach of contract, who put the validity of his termination of the contract in issue. I cannot fault the arbitrator for deciding that issue. Although the question of law as to the validity of the termination of the contract was not specifically referred to the arbitrator, it is however material in the decision of the matter referred, in this case by the Appellant."
EXPLANATION / SCOPE
Arbitrators can decide issues necessarily arising from claims presented, even if not expressly referred. When a claim necessarily raises an issue: the party making the claim puts that issue before the arbitrator, arbitrator must decide it to resolve the claim, and deciding it doesn’t constitute breach of natural justice. Here, damages claim for breach required determining: whether contract termination was valid (if invalid termination, no breach by other party). This issue, though not explicitly referred, was: material to deciding the referred claim, necessarily raised by the claim itself, and properly decided by arbitrator. This differs from: deciding wholly unraised issues, addressing matters outside the dispute, or determining points neither party presented. “Material in the decision” means: essential to resolving referred matters, logically necessary for determination, and arising from claims actually made. Arbitrators need not: have every subsidiary issue explicitly referred, if issues necessarily arise from referred matters, and can decide logically necessary questions to resolve submitted disputes. This serves: efficient arbitration, complete dispute resolution, and recognizing that referring main issues implicitly includes subsidiary necessary issues.