Gas and Fuel Corporation of Victoria v Wood Hall Ltd and Leonard Pipeline Contractors Ltd [1978] VicRp 41; [1978] VR 385 (11 April 1978)







Marks, J.: This is a motion by the Gas and Fuel Corporation of Victoria (hereafter referred to as “the Corporation”) for an order that James M. Antill the arbitrator appointed in a reference to arbitration of a dispute between the Corporation and Wood Hall Ltd. and Leonard Pipeline Contractors Ltd. (hereinafter referred to as “the contractor”) under a submission dated 26 September 1977 be removed on the ground that he misconducted himself in the course of the arbitration.

The grounds of misconduct are set out in the notice of motion and in effect state that the arbitrator denied the Corporation a fair opportunity to present its case at the hearing; that the arbitrator was biased; that he contravened the rules of natural justice in determining questions both of law and fact, in that he did not give the Corporation any or any reasonable opportunity of being heard in respect of these; and generally that the arbitrator’s conduct of the proceedings was in contravention of the rules of natural justice.

The disputes, the subject of the arbitration, were in respect of claims made by the contractor against the Corporation for payment of moneys said to arise out of a contract or its variation for the construction of a gas pipeline from Wollert in Victoria to Albury in New South Wales. The work involved the construction of approximately 279.4 kilometres of pipeline 300 millimetres nominal diameter high pressure steel. [His Honour then dealt with certain matters prior to the execution of the contract. It appeared that the work on the pipeline was executed between 17 November 1975 and 3 February 1977, and although the contract was not signed until 25 October 1976, the contractor’s tender had been based on at least some of the terms included in the eventual contract.

CL43 of the contract provided that the parties would submit to arbitration “any question, dispute, or difference whatsoever” arising between them “upon or in relation to or in connection with the contract”. Thirteen items of dispute were referred to arbitration. In an attempt to have the claims dealt with by a court the Corporation issued a writ seeking certain declarations; but on the application of the contractor, these proceedings were stayed pursuant to s5 of the Arbitration Act. His Honour then continued:]

Eventually the parties agreed that Professor James Antill (referred to hereafter as “the arbitrator”) would be acceptable to both parties, but it appears that the arbitrator made it clear that he would not be able to commence hearing before December 1977.

On 26 January 1978 a preliminary conference was conducted at the offices of the Corporation in Melbourne and the arbitrator and the parties were present together with their legal representatives. At that conference the arbitrator indicated that he would be going overseas in the last week of March 1978 and be absent until July 1978 so that if the arbitration was not completed before he left it would be August or September before it could be resumed.

At that conference it was decided, with the concurrence of the parties, that the arbitration until 23 March be heard in Sydney and sit six days a week between the hours of 10 a.m. and 5 p.m. It was further arranged as follows:–

(a) The issues for determination by the arbitrator would be those appearing in items 1, 3, 4, 5, 11 and 12 in the Schedule to the contractor’s notice of arbitration. It was noted that the balance of the items set out there had been settled subject to formal agreement.

(b) The contractors were to deliver their points of claim on or before 10 February 1978.

(c) The Corporation was to deliver its defence on or before 17 February 1978.

(d) A list of documents was to be made on 20 February 1978 with inspection on that date and thereafter as each party might request the other. Each party expressed the hope that it would be able to deliver its points of claim and defence with sufficient detail to avoid the necessity for particulars.

(e) The hearing was to commence on 8 March 1978 but it was noted that on 15, 16 and 17 March Mr. Cole of Queen’s Counsel for the contractor might be absent and that the question whether the hearing would proceed on those days would be later determined.

(f) The parties were to provide the witnesses’ evidence in the form of written statements to be confirmed on oath and cross-examination taken on oath.

Paragraph numbered 11 of the minutes of that conference states, inter alia:

“(i) The contractors may determine to deliver points of claim in relation to items 1, 3, 4, 5 and 11 as aforesaid postponing the delivery of points of claim in relation to item 12 for the time being. (ii) The arbitrator is agreeable to an arbitration of item 12 in August 1978 upon his said return and will proceed with matters in issue other than item 12 in March 1978. If time is available in March item 12 will be dealt with.”

Following that conference on 8 February 1978 a deed of reference was executed between the parties and submitted the disputes set forth in the Schedule to the arbitrator.

The contractor delivered its points of claim in accordance with the time schedule laid down. The Corporation by letter of its solicitor dated 16 February 1978 claimed to have been taken by surprise by the volume of material delivered and sought an extension of time for delivery of defence until 24 February 1978. It claimed that this was the first occasion on which it had been supplied such extensive documentation and detailed quantification of the claims.

The Corporation claims that until that time it was under the impression that the main area of dispute was in respect to its legal liability and very little, if any, dispute of fact in relation thereto. It assumed that quantification of claims would be a matter of mere demonstration as it had not disputed the bona fides of the contractor’s claim that it had suffered an increase in costs. However the atmosphere changed after 10 February when the Corporation received the details to which I have referred.

Having looked at the documentation I do not find it surprising that the Corporation needed extra time to prepare its points of defence. In fact it achieved delivery of its points of defence to all five claims by 24 February 1978.

Whilst at the preliminary conference on 26 January it was anticipated by the parties that there were some six outstanding heads of claim that had to be determined — the points of claim and defences, with theconcurrence of the parties, were confined to five claims only.

The five claims fall into broad categories, namely: —

(a) Forged Bends;

(b) Barba’s skip;

(c) Radiographic services;

(d) Workers’ Compensation;

(e) Extension of time.

As the hearing before the arbitrator did not proceed beyond the forged bends claim, the claims in respect of the other matters have limited relevance. It is to be noted that the amounts claimed in respect of each of them were substantial. The forged bends claim was for a sum of $588,000; the claim designated as “Barba’s skip” was for $100,000 (a claim arising out of the contractor having to “skip” a property owned by a man called Barba who refused access); the radiographic services claim was for $717,000; the workers’ compensation claim for $263,000 and the claim in respect of delays in granting extensions of time for completion of the contract was for $800,000. The total claims were of the order of $2.5 million.

I have seen the documents with which the Corporation was provided at the time of the delivery of the points of claim. There are a substantial number containing extensive detail.

Some week or so after 20 February 1978 the parties obtained discovery by photocopying a large number of each other’s documents.

On 8 March, the parties asked the arbitration hearing to be stood down whilst they explored settlement of the claims. Settlement negotiations took place throughout what was to be the first day of the hearing, Wednesday 8 March 1978. They failed. However, on that day some time in the afternoon the contractor provided the Corporation with what it claimed to be a statement of a witness named Delaney it intended to call. This “statement” has been put in evidence before me. It comprises a 17-page narrative and several hundreds of pages of attachments. The attachments are said to contain calculations and photocopies of various documents including payroll sheets claimed to be relevant to the quantification of the contractor’s claim.

Now the settlement negotiations having broken down, it was decided to proceed with the arbitration on Thursday morning, 9 March.

On that day Mr. Cole of Queen’s counsel for the contractor opened its case. After some discussion between the arbitrator and counsel for the parties it appears that the arbitration proceeded to deal with the claim in respect of forged bends first and that evidence be led both in relation to liability and quantum.

The contractor’s claim in respect of forged bends was essentially one for a variation of the works or alternatively the contract. It claimed that it had been required by the Corporation to use forged bends of pipe wherever the pipeline deviated horizontally more than 30 degrees. It claimed that it had used 200 forgedbends because the corporation required it, but that under the contract there was no such requirement.

A forged bend is apparently a factory formed bend in a length of pipe. The alternative way of bending a pipe was by a method called “cold bending” which was performed by the use of a machine on the site (or in the “field”). There was some significance in whether a pipe had a forged or cold bend. A forged bend was normally in relatively short lengths of pipe and required welding to transition pieces and wider trench provision than cold bends to permit extra work and inspection. A cold bend could be put into the pipe on site and did not require other than the standard length of pipe used in the straight length construction provided it complied with the specifications.

The angle of a bend and the length of pipe encompassed by the angle had bearing on the line of trench construction and its positioning in the Corporation’s easements over the properties.

However, the issue between the parties was relatively simple to comprehend. The contractor said that its supply and installation of some 200 forged bends was an “extra” or “variation” of the works alternatively the contract and it was entitled to additional payment. The Corporation said two things. Firstly, there was no variation of the works or the contract. This was because the terms of the contract themselves on their proper interpretation provided that the contractor was under an obligation to install forged bends wherever there was a horizontal deviation in excess of 30 degrees. It also said that their interpretation of the contract had been explained by them to the contractor who had agreed at the time of their tender. If it did require forged bends as alleged it was not as an extra. They were allowed for, by agreement, in the tender. Secondly, the Corporation said that it did in fact indicate to the contractor that it would not require it to comply with those terms of the contract and would be satisfied if cold bends were used wherever they could be within the terms of the specification and provided the cold bend was within one length of pipe.

In other words the Corporation maintained by its points of defence and its statements to the arbitrator that there was no variation of the contract so as to entitle the contractor to extra payment. It said there was a requirement in the contract at the time of the tender but none by way of variation. It said it could have insisted on forged bends being used if it wanted to under the contract but had in fact relieved the contractor of strict compliance. If the contractor had put in forged bends then that was something it had been obliged to do in any event under the terms of the contract as construed by the Corporation.

It is worth noting at this stage that under CL32(a) of the contract the contractor was obliged not to alter “in any way whatsoever any part of the pipeline, except as directed in writing by the Corporation”. (My emphasis.) CL32(a) deals generally with the procedure in the event of a variation of the pipeline or the works.

The Law The motion before the Court is pursuant to s12(1) of the Arbitration Act 1958 which provides: “Where an arbitrator or umpire has misconducted himself, the court may remove him”.

Thus the Court is empowered to order the removal of an arbitrator prior to his making an award where it is established that he has “misconducted himself” within the meaning of the subsection. S12(2) may be applied where an award has been made.

The Act does not contain any definition of “misconduct”. A number of authorities cast some light on its meaning withoutproviding any all-embracing elucidation. In general it can be said that misconduct is seen to flow from “irregularity”, and to be disassociated from any concept of moral turpitude or overtone.

In Williams v Wallis and Cox, [1914] 2 KB 478 at p. 485; [1914-15] All ER Rep Ext 1531 at p. 1535 Atkin, LJ said in reference to “misconduct”: “That expression does not necessarily involve personal turpitude on the part of the arbitrator…the term does not really amount to much more than such a mishandling of the arbitration as is likely to amount to some substantial miscarriage of justice….”

In Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 571 at p. 587 Isaacs, J. said: “The last question is whether there has been what is called ‘misconduct’ on the part of the arbitrator. The word is here used only in its technical and often misleading sense. No one suggests, or could suggest, the smallest deviation from the strict path of honour. But the word ‘misconduct’ as employed in this connection includes even a mistake in the procedure which has or may have unjustly prejudiced a party.”

Isaacs, J. referred to the statement of Lord Watson in Adams v Great North of Scotland Railway Co., [1891] AC 31 at pp. 45-6 where his Lordship said: “I think I state the law correctly when I say that it will be a good ground of reduction at the instance of either party, if he is able to show…that in the course of the arbitration he (the arbitrator) has disregarded any one of the express conditions contained in the contract of submission, or any one of those important conditions which the law implies in every submission…and so in those cases where an act innocently committed by the arbiter amounts to misconduct which, in the opinion of the court, would naturally imply that justice had not been done between the parties, the award must be set aside, not according to the regulation, but according to those principles of law which existed before the regulation, and which were not in the least affected by it.”

In London Export Corp. Ltd. v Jubilee Coffee Roasting Co. Ltd., [1958] 1 WLR 661; [1958] 2 All ER 411 at p. 413, Jenkins, LJ as a member of the Court of Appeal said at WLR p. 665: “‘Misconduct’ is, of course, used in the technical sense in which it is familiar in the law relating to arbitrations as denoting irregularity, and not any moral turpitude or anything of that sort.”

The Court of Appeal, of which Jenkins, LJ was a member, affirmed a decision at first instance of Diplock, J. (as he then was) which is reported in [1958] 1 WLR 271; [1958] 1 All ER 494.

That judgment of Diplock, J. (as he then was) provides invaluable guidelines on which a court such as this may approach the question of “misconduct”. To other parts of that judgment I will return. However, at [1958] 1 WLR p. 277; Diplock, J. said the “use of expressions of ‘misconduct’, with its suggestion of moral values, to include the kind of alleged irregularity in procedure with which this case is concerned tends to misunderstanding…”. At pp. 276-7 he referred to “an irregularity in procedure” as more appropriate than “misconduct”.

It is clear that not every irregularity in procedure will constitute misconduct within the meaning of s12(1), or that if it does it should be regarded as compelling an order of the Court for removal.

In E. Rotheray and Sons Ltd. v Carlo Bedarida and Co., [1961] 1 Lloyd’s Rep 220 McNair, J. at p. 225 said: “I have reached the conclusion at this stage that…there has at least been a technical irregularity amounting to misconduct …The more difficult question, however, is whether the extent of that irregularity is such as to justify interference by this court either by way of setting aside the award or remitting the award. The determination of that issue, as it seems to me, depends upon whether the court is satisfied that there may have been–not must have been–or that this irregularity may have caused–not must have caused–a substantial miscarriage of justice that would be sufficient to justify setting aside or remitting of the award, unless those resisting the setting aside or remission could show that no other award could properly have been made than that which was in fact made, notwithstanding the irregularity.”

This test has since been followed in Western Australia (Van Dongen v Cooper, [1967] WAR 143 at p. 145) and in New Zealand (Wilson v Glover, [1969] NZLR 365).

There is a need to determine what constitutes an “irregularity” in proceedings which are not ordinary court proceedings. “Irregularity” connotes a deviation from what is “regular”. This begs the question as to what procedure can be said to be “regular” before an arbitrator in a case such as the one here under consideration. A superficial examination of the authorities indicates various differences of approach to alleged irregularities in such proceedings.

In this regard, the judgment of Diplock, J. (as he then was) in London Export Corporation Ltd. v Jubilee Coffee Roasting Co. Ltd., [1958] 1 WLR 271 at p. 277; [1958] 1 All ER 494 at pp. 497 et seq. contains analysis of principle which greatly assists reconciliation of any previous apparent conflict in the authorities. He said: “The first task of the court is to construe the arbitration agreement–that is, to ascertain to what procedure the parties have agreed. At this stage of its task the court is not directly concerned with whether the agreement ‘violates any rules of what is so often called natural justice’, to use the phrase of Lord Goddard, CJ in Mediterranean and Eastern Export Co. Ltd. v Fortress Fabrics (Manchester) Ltd.; although, as I shall point out later, the court’s views as to what procedure tends to achieve a just result will be one of the considerations which will influence it in deciding what terms as to procedure are to be implied where the written agreement is silent.

“Where the award has been made by the arbitrator in breach of the agreed procedure, the applicant is entitled to have it set aside, not because there has been necessarily any breach of the rules of natural justice, but simply because the parties have not agreed to be bound by an award made by the procedure in fact adopted. Contrast Spence v Eastern Counties Railway Co. (1839) 3 Jur 846.

“When the arbitration agreement has been construed and no breach of the agreed procedure found there may nevertheless arise a second and quite separate question: that is, whether, as a matter of public policy, a particular award, made pursuant to that agreed procedure ought not to be enforced and ought, therefore, to be set aside; for an arbitrator’s award, unless set aside, entitles the beneficiary to call upon the executive power of the State to enforce it, and it is the function of the court to see that that executive power is not abused. “It is in relation to this second and separate question that the rules of what is so often called natural justice may arise directly. There may be a variety of grounds of public policy on which an award may be set aside … “Much of the confusion is caused by the fact that the expression ‘misconduct of the arbitrator’ is used to describe both these quite separate grounds for setting aside an award; and it is not wholly clear in some of the decided cases upon which of these two grounds a particular award has been set aside.

“If my analysis is correct, it follows that where the court in a case such as this is engaged in its first task of construing the arbitration agreement it must first look to see if there is an express term authorising the particular procedure impugned….But arbitration agreements seldom contain a complete code of procedure, and where there is no express written term relating to the point of procedure impugned the court has to ascertain the terms to be implied, which it does from the language the parties have used in their written agreement, the provisions of the Arbitration Act 1950, the surrounding circumstances, and–particularly in the kind of arbitration which comes before this court–any custom or trade practice which must be taken to be incorporated in their agreement. A custom or trade practice is not, however, to be incorporated in an agreement if it is unreasonable–not because the parties to a contract cannot expressly agree to something unreasonable, but because the court will not draw the inference that they have done so by silence. It is in this connection that something like ‘the rules of natural justice’ are blown in by a side wind.

“In considering whether a particular customary procedure in the determination of a dispute is unreasonable, a relevant test must be whether it tends or may tend to an unjust result.”

Again at WLR p. 279: “Where an arbitration agreement is silent as to procedure, what attitude should the court adopt in seeking to imply terms? Obviously it does not imply terms which tend or appear to tend to an unjust award;….”

I have quoted at length from the above judgment as it appeals to me as stating correctly the principles appropriate for guidance in this case (as indeed they did to O’Brien, J. in Haddad v Norman Mir Pty. Ltd., [1967] 2 NSWR 676 at pp. 682-3).

Thus it can be seen that from early reported cases the courts have insisted that principles, if not of natural justice, then those akin thereto, were to be observed by arbitrators simpliciter. In In re Badger (1819) 2 B and Ald 689; 106 ER 517 Abbott, CJ said: “If an arbitrator acts contrary to a general rule of law it is undoubtedly the duty of the court to set aside his determination. But there is a material distinction between those rules which are founded on the immutable principles of justice, from which neither the court nor an arbitrator can be allowed to depart, and those which depend on the practice of the court…” (my emphasis).

See also Re an arbitration between Camillo Eitzen and Jewson and Sons (1896) 40 Sol Jo 438 in which the court comprising Pollock, B. and Bruce, J. said:

“Whether the arbitration was conducted on the footing that it was a mercantile or a legal arbitration, the first principles of justice must be equally applied in every case. Whatever, therefore, were the terms agreed to the arbitrator had acted wrongly, and the award must be set aside.”

See also A-G. v Davison, [1827] M’Cl and Y 158; [1825] EngR 405; 148 ER 366; Ramsden and Co. v Jacobs, [1922] 1 KB 640; Franklin v Minister of Town and Country Planning, [1947] UKHL 3; [1948] AC 87 at p. 103; Bunge (Aust.) Pty. Ltd. v Craft, [1961] NSWR 181; Wood v Woad (1874) LR 9 Ex 190 at p. 196; Andrews v Mitchell, [1905] AC 78; Owners of SS “Catalina” v Owners of MV “Norma” (1938) 82 Sol Jo 698; and de Smith: Judicial Review of Administrative Action 3rd ed. p. 223.

But, subject to the overriding principles of natural justice, arbitrators clearly have a discretion as to the way in which they conduct arbitrations (see Tillam v Copp [1847] EngR 937; (1847) 5 CC 210; 136 ER 857; Knox v Symonds [1791] EngR 1438; (1791) 1 Ves 369; 30 ER 390; Archin v Ellis (1862) 11 WR 281; Haigh v Haigh [1861] EngR 530; (1861) 31 LJ Ch 420; 3 De GF and J 157; Mediterranean and Eastern Export Co. v Fortress Fabrics (Manchester) Ltd., [1948] 2 All ER 186).

The proceeding before the arbitrator is still nonetheless judicial; (Haigh v Haigh (1861) 3 De GF and J 159; [1861] EngR 530; 45 ER 838 at pp. 841-2; Government of Ceylon v Chandris, [1963] 1 Lloyd’s Rep 214 at p. 225; Owners of The MV Myron v Tradex Exports SA, [1970] 1 QB 527 at p. 533; [1969] 2 All ER 1263; Gartside v Outram (1857) 26 (NS) Ch D 113; Enoch v Zaretzky, Bock and Co., [1910] 1 KB 327 at pp. 333, 334; [1908-10] All ER Rep 625), or quasi-judicial; (Franklin v Minister of Town and Country Planning, supra).

The proceeding being judicial or quasi-judicial in nature, the arbitrator was bound, unless expressly absolved from so doing, to observe the ordinary rules which are laid down for the administration of justice, (see Haigh v Haigh, supra) and to apply the existing law (see Ram Dutt Ramkissendass v E.D. Sassoon and Co. (1929) 56 LR Ind App 128, and the statement in that case of Lord Salveson approved by the House of Lords in Naamlooze Vennootschap Handels-En-Transport Maatschappij “Vulcaan” v ASJ Ludwig Mowinckels Rederi, [1938] 2 All ER 152 at p. 156; see also Chandris v Isbrandtsen- Moller Co. Inc., [1951] 1 KB 240 at p. 261; [1950] 2 All ER 618).

In a number of cases the courts have declined to intervene because normal court procedures were not followed by arbitrators. In general, the basis of this declination has been the Court’s interpretation of what the parties agreed, expressly or impliedly, as to the procedures to be followed. Thus in Owners of The MV Myron v Tradex Exports SA, [1970] 1 QB 527; [1969] 2 All ER 1263 Donaldson, J. held that in the context of London shipping arbitration the parties had impliedly agreed to waive an oral hearing. (See also Government of Ceylon v Chandris, [1963] 1 LR 214 per Megaw, J. at p. 225; Haddad v Norman Mir Pty. Ltd., [1967] 2 NSWR 676; Hounslow LBC v Twickenham Garden Developments Ltd., [1971] Ch 233 (concerning an architect’s certificate).)

Before turning to the agreement of reference to arbitration in this case, it is pertinent to observe that the principles enunciated by Diplock, J. (as he then was) in the Jubilee Coffee Case, supra, parallel almost precisely those observed by the courts in determining whether natural justice must be met by bodies, ministers or tribunals on whom certain duties affecting rights of individuals are conferred by statute. There, the courts have held that recourse is to be had to the statute solely for the purpose of determining whether, on its proper interpretation, it displaced the common law rule that a statutory authority having the power to affect the rights of a person is bound to observe the rules of natural justice (see Mobiloil Australia Pty. Ltd. v Commissioner of Taxation [1963] HCA 41; (1963) 113 CLR 475 at p. 504; [1964] ALR 517; [1963] HCA 41; 9 AITR 133; R v Commonwealth Conciliation and Arbitration Commission; ex parte Angliss Group (1969) 122 CLR 546 at pp. 552, 553-4: [1969] ALR 504; Cooper v Wandsworth Board of Works [1863] EngR 424; (1863) 14 CB (NSW) 180; 143 ER 414; R v Electricity Commissioners; ex parte London Electricity Joint Committee Co. (1920) Ltd., [1924] 1 KB 171 at p. 205; Twist v Randwick Municipal Council [1976] HCA 58; (1977) 51 ALJR 193 at p. 194; [1976] HCA 58; 12 ALR 379; Salemi v Minister for Immigration and Ethnic Affairs [1977] HCA 26; (1977) 51 ALJR 538; 14 ALR 1; Re McKellar; ex parte Ratu [1977] HCA 35; (1977) 51 ALJR 591; 14 ALR 317). On this aspect of the law the court approaches the construction of a statute with a presumption that the legislature does not intend to deny natural justice to the citizen (see Barwick, CJ at ALJR p. 194 of Twist’s Case, supra).

The approach of the courts to an arbitration agreement is similar, but, if anything, goes further. In so far as principles of natural justice are equated with “public policy” they may be held to apply irrespective of what the agreement provides.

However, in my view, it is necessary to look at an arbitration agreement in any particular case to determine whether the parties have in fact agreed to waive a particular procedure normally associated with the principles of natural justice.

The reference in this case was to private arbitration of the dispute between the Corporation and the contractor. The source of that reference is to be found in CL43 of the abovementioned contract dated 25 October 1976 and the deed of submission dated 8 February 1978. The contractual obligations therein contained must be considered in conjunction with the provisions contained in the Arbitration Act 1958. I make particular reference to s8(b), s11(1),s12 and s19 which would appear to import into any reference to arbitration a requirement that the arbitrator apply to the dispute existing substantive law.

In London Export Corporation Ltd. v Jubilee Coffee Roasting Co.Ltd., [1958] 1 WLR 661 at p. 675; [1958] 2 All ER 411 at p. 421, Jenkins, LJ said: “In my view, the provisions of the standard form of contracts relating to arbitration contain upon their true construction sufficient indications to support the conclusion that the arbitration in this case was to be carried out, in each of its two stages, in accordance with the ordinary manner of carrying out formal arbitrations as distinct from references of a less formal nature.”

Neither counsel for the parties in this case contended that the reference to arbitration was other than of the normal type, and neither contended that there was other than a requirement on the part of the arbitrator to conduct the arbitration in a judicial manner, in accordance with the rules of natural justice and to decide the questions submitted according to the legal rights of the parties (see Chandris v Isbrandtsen-Moller, [1951] 1 KB 240; [1950] 2 All ER 618).

In my view, in this case the reference to arbitration was by agreement between the parties, and having regard to the terms of that agreement and the circumstances in which it was executed I hold that the arbitrator was bound to act judicially, to decide the issues in accordance with the legal rights of the parties, and to conduct the proceedings in accordance with the ordinary rules which apply to legal proceedings (save where the parties were in agreement as to reception of written statements) and to observe the principles of natural justice.

As appears hereafter, the arbitrator from time to time made certain assertions about the rules of evidence and what he described as “legal technicalities”. The arbitrator was clearly bound to apply the rules of evidence. This must follow from what I have already said, but was clearly articulated in Enoch v Zaretzky, Bock and Co., [1910] 1 KB 327; [1908-10] All ER Rep 625 (see particularly Farwell, LJ at (KB) p. 336).

The Corporation has contended in this case that the arbitrator misconducted himself in breaching one or more of the principles of natural justice. It is necessary to say something about what those principles involve.

There are two rules or principles of natural justice (de Smith: Judicial Review of Administrative Action 3rd ed. p. 134; Fairness and Natural Justice, by GDS Taylor (1977), 3 Monash Law Review 191 at p. 202) The first is that an adjudicator must be disinterested and unbiased. This is expressed in the Latin maxim–nemo judex in causa sua. The second principle is that the parties must be given adequate notice and opportunity to be heard. This in turn is expressed in the familiar Latin maxim–audi alteram partem. In considering the evidence in this case, it is important to bear in mind that each of the two principles may be said to have sub-branches or amplifications. One amplification of the first rule is that justice must not only be done but appear to be done; (Lord Hewart, CJ in R v Sussex Justices; ex parte McCarthy, [1924] 1 KB 256 at p. 259; [1923] All ER Rep 233). Sub-branches of the second principle are that each party must be given a fair hearing and a fair opportunity to present its case. Transcending both principles are the notions of fairness and judgment only after a full and fair hearing given to all parties.

The principles of natural justice and their ramifications have been the subject of much judicial discussion. It is now only necessary to refer shortly to what the High Court has said recently on the question.

I refer to R v Watson, J.; ex parte Armstrong [1976] HCA 39; (1976) 9 ALR 551. At p. 564 the majority cited with approval the exposition of the Master of the Rolls in Metropolitan Properties Co. (FGC) Ltd. v Lanon, [1969] 1 QB 577; [1968] 3 All ER 304, as follows: “Those requirements of natural justice are not infringed by a mere lack of nicety but only when it is firmly established that a suspicion may reasonably be engendered in the minds of those who come before the tribunal or in the minds of the public that the tribunal or a member or members of it may not bring to the resolution of the questions arising before the tribunal fair and unprejudiced minds. Such a mind is not necessarily a mind which has not given thought to the subject matter or one which, having thought about it, has not formed any view or inclination of mind upon or with respect to it.”

The High Court majority went on to say at p. 564: “The view that a judge should not sit to hear a case if in all the circumstances the parties or the public might reasonably suspect that he was not unprejudiced and impartial, and that if a judge does sit in those circumstances prohibition will lie, is not only supported by the balance of authority as it now stands but is correct in principle… It is of fundamental importance that the public should have confidence in the administration of justice. If fair-minded people reasonably apprehend or suspect that the tribunal has pre-judged the case, they cannot have confidence in the decision.”

At p. 565: “The question is not whether there was a real likelihood that Watson, J. was biased. The question is whether it has been established that it might reasonably be suspected by fair-minded persons that the learned judge might not resolve the questions before him with a fair and unprejudiced mind.”

The Court held that in the unusual circumstances of that case it had been established that the wife might reasonably suspect the Watson, J. had pre-judged an important question in the case and that she might therefore reasonably have no confidence in the result if he proceeded to decide the matter.

Before turning finally to what happened in the arbitration proceedings here under consideration, it is desirable that I say something related to the submissions on behalf of the contractor.

Without conceding that he did, counsel for the contractor contended that if the arbitrator did make errors as to law or fact then those errors could not be said to constitute misconduct. Similarly it was put that a misconception by the arbitrator of contentions put forward on behalf of a party or his mis-statement of those contentions could not amount to misconduct.

It is true, I think, that there is much authority to support what was there put forward in its bald form. In Gillespie Bros. and Co. v Thompson Bros. and Co (1922) 13 Ll LR 519 it was by Atkin, LJ at pp. 524-5 that it is no ground for overturning an award that the facts were wrongly found. He said: “The facts have got to be treated as found… 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.”

Following Gillespie’s Case in Tersons Ltd. v Stevenage Development Corp., [1965] 1 QB 37 at p. 51; [1963] 3 All ER 863 at p. 869, Upjohn, LJ said: “It is not misconduct to go wrong in law so long as any mistake of law does not appear on the face of the award.”

Upjohn, LJ also said: “All questions of fact are, and always have been, within the sole domain of the arbitrator and only a limited control will be exercised over him in relation to questions of law.”

(See also RS Hartley Ltd. v Provincial Insurance Co. Ltd., [1879] LRSC 2; [1957] 1 LlR 121; A-G for Manitoba v Kelly, [1922] 1 AC 268; [1922] All ER Rep 69; Gold Coast City Council v Canterbury Pipelines (Australia) P/L [1968] HCA 3;(1968) 41 ALJR 307; [1968] ALR 97; Oleificio Zucchi STA v Northern Sales Ltd., [1965] 2 LlR 496; Giacomo Costa Fu Andrea v British Italian Trading Co. Ltd., [1962] 2 All ER 53 at p. 63.)

In my view, the principle is clear. In so far as questions of fact have been referred to an arbitrator for his decision then there is no provision in the law for overturning his decision on appeal. As in cases before the courts, it would be necessary to find some defect in his finding that amounted to an error of law. But there is limited provision in the arbitration scheme for reviewing errors of law. It may be done if a party asks the arbitrator to state a case (s8(b)), or an arbitrator may be directed by the Court or a judge to state a special case on a question of law (s19), or the Court may set aside an award on the face of which there appears an error in law. As to what constitutes the award and therefore its face need not be discussed here. But all this necessarily means that errors of law otherwise occurring are not subject to correction. They cannot be said to constitute misconduct because like questions of fact they have by agreement of the parties been referred to the arbitrator for his decision. (See Fidelitas Shipping Co. Ltd. v V/O Exportchleb, [1966] 1 QB 630; [1965] 2 All ER 4, per Diplock, LJ at (QB) pp. 643-4.)

Similarly there is authority that the mere misconception of the nature of contentions put forward on behalf of a party or mis-statement of the contentions do not constitute misconduct (see McPherson Train and Co. v J. Milhem and Sons, [1955] 2 Lloyd’s Rep 59).

All this is consistent with misconduct being related more to irregularity in procedure. Irregularities in law and fact in themselves are outside the concept of misconduct.

In so far as the arbitrator mis-stated and/or misconceived the submissions or contentions of counsel and/or was mistaken in fact or law, I hold that such things in themselves did not constitute misconduct capable of founding an order for his removal.

This is not to say however, that if he did one or more such things that they are deprived of significance for all purposes. In my view such things may be looked at, particularly in their setting, for the purpose of determining in the context of the rules of natural justice what impression may have been made by them on the fair-minded observer, whether a party or member of the public.

I have said that they must be considered in their setting. In saying “setting”, I refer, but not exclusively, to the nature of the mistake, mis-statement or misconception, the educational standard, qualifications and experience of the arbitrator and thus what might reasonably be expected of his powers of comprehension, the simplicity or otherwise of the submissions or contentions concerned and the procedure by which and manner in which they were handled by the arbitrator. In considering the question of technical bias a court must be able to look at a mistake or alleged mistake or misconception or mis-statement of argument by an arbitrator in combination with the process or path by which he came to make the impugned pronouncements. Further, a mistake, misconception or mis- statement in one setting may take on a more suspect appearance when considered together with other impugned pronouncements made in another.

In my view, a mistake in law or fact or a misconception or mis-statement of argument by an arbitrator is capable of scrutiny in order to determine whether it was so expressed and/or occurred in such a setting and/or was itself of such a nature, that a reasonable suspicion might be aroused in the mind of a fair-minded observer that the mistake, misconception or mis-statement stemmed from or was associated with a failure to consider relevant contentions and/or submissions with a fair and unprejudiced mind. Further, such examination may be made to determine whether particular mistakes, misconceptions or mis-statements occurring in one setting, when considered in a general context in which there were other mistakes, misconceptions, mis-statements and/or irregularities, contribute to an overall or generally based suspicion of the kind with which we are concerned.

A further point of such an exercise may be to determine whether there developed a trend or pattern which had the effect or appeared with reason to have the effect or unfairly disadvantaging a party.

The Proceedings before the Arbitrator As I have said the proceedings before the arbitrator took place on Thursday and Friday, 9 and 10 March 1978. In accordance with the understanding between the parties those proceedings were transcribed and a transcript of some 102 pages has been agreed by the parties.

It is convenient, I think, to consider what took place under four main topics.

The topic description is mine and has no significance as such:–

A. The Shaw Memorandum.

B. The Sittings Application.

C. The Delaney Statement.

D. The Defence Evidence Ruling.

In considering what I have had to determine I have had recourse to the whole of the proceedings as revealed in the transcript, the pleadings and documentary material which were at the relevant times before the arbitrator. I attribute relevance to all of it as necessarily providing the background against which specific parts of the proceedings must be considered. I propose to set out excerpts from the transcript which in the said context command particular attention. I will deal with each topic separately, and discuss the context which helps to explain the significance, if any, of the excerpts which follow.

I will state my findings as far as I consider it necessary in respect of each topic, and then, bearing in mind any inter-relationship between the proceedings related to each topic, state my final conclusion.

A–The Shaw Memorandum

The Context The contractor, in its points of claim, alleged that the claim for forged bends was by way of a variation to the works; or alternatively, an addition to, alteration, variation or amendment of the works within the meaning of CL32 of the conditions of contract, which clause provided for consequent additions to the contract price.

CL32 provided that the contractor in effect would not make any alteration of the nature alleged except as “directed in writing” by the Corporation. There is no need to set out CL32 in full. Although it had not done so in its points of defence to date, it was open to the Corporation to submit that any direction or requirement for variation relied on by the contractor had to be in writing and that there was none.

In his opening which took place on Thursday 9 March Mr. Cole of Queen’s counsel for the contractor made no reference to any requirement or direction in writing by the Corporation. For that matter, nor did he make any reference to the evidence on which he proposed to rely in order to establish the variation. It must be remembered, as was conceded by counsel in argument before me, that the contractor had the burden of establishing its claim. Further, there was no indication by the contractor in its points of claim as to how the requirement or direction or “ordering” of the forged bends by way of extra was sought to be established. This was so despite the understanding stated at the preliminary conference of 26 January that each party would provide details of the points of claim and defence with a view to avoiding a need for particulars.

What happened, then, was that the first witness called on behalf of the contractor was John Mervyn Shaw, the assistant general manager of the Corporation. On 6 August 1976 a letter had been sent by the contractor to the Corporation setting out its point of view on a number of matters in dispute between them. Included in para. 8(1) of that letter was the contractor’s statement of requirement for extra payment for “factory bends” (which are the same as “forged” bends). The contractor’s letter did not claim that the forged bends had been ordered as an extra by the Corporation, but merely that the claim was based on the lack of specification of them in the plans and specifications. The letter of 6 August was signed by George W. Noe, director of the contractor. On 13 August 1976 Mr. Shaw had made rough notes following a telephone conversation with Mr. Noe on 12 August 1976 relating to his letter dated 6 August 1976.

Now what happened in the proceedings before the arbitrator was that Mr. Cole, QC for the contractor called Mr. Shaw and put to him an extract from those rough notes. The extract which was put to Mr. Shaw in that way was as follows:–

“13 August” 76.

JMS:GG: 36


APC-JL. 12/8/76, relating to his letter dated 6/8/76:

(Item Nos. as per G. Noe letter.)

(1) I advised that as far as GFC is concerned, forged bends have to be installed at all horizontal direction changes above 30 degrees.”

As appeared from [certain excerpts set out in the judgment] Mr. Shaw was called by the contractor and simply asked whether he had in fact made that note. Mr. Shaw said he had no recollection of making it but agreed that he must have. In the excerpts it was to be seen that the full note in which the above sentence appeared was eventually placed before the arbitrator. I set out below the full note:–

“(1) I advised that as far as GFC is concerned, forged bends have to be installed at all horizontal direction changes above 30 degrees. While this requirement is admittedly not specifically stated in the contract documents it is clearly implied in a number of places but, in any case, the point was made clear to all of the ‘short list’ tenderers prior to our awarding the Contract, to ensure that our Contract comparisons were on a fair basis. At that time, GFC’s interpretation was accepted without question by APC-JL representatives and this is recorded in our letter dated October 17, 1975. It would be quite wrong for GFC to now make additional contract payments. This is fundamental to GFC and not negotiable.

“Noe replied that additional payments for forged bends are also fundamental to APC-JL and not negotiable. Arbitration may be necessary.”

On this topic I refer to the following six excerpts from the transcript of the proceedings. Mr. Shaw was the only witness at this time. [The six excerpts, numbered A.1-A.6 were then set out.]

Comment. In my view the single sentence statement when taken out of context was most misleading. In context it was capable of bearing a meaning that was consistent with the defence as the Corporation had explained it and as counsel for the Corporation again explained it in excerpt A.6. The plausibility, feasibility or maintainability of that defence was not, at the relevant time, pertinent. I make no comment in that regard at all. The only relevant matter is that it was a defence in respect of which the Corporation was entitled to be heard and heard fully.

It is to be observed that counsel for the contractor resisted the tender of the entire note showing the context of the single sentence which he had tendered. In my view the single statement, out of context, was capable of misleading the arbitrator. It is to be noted that the “requirement” suggested within the single sentence was not stated to arise from the contract, a variation or otherwise. When looked at in the context of the whole note, it is clear that Mr. Shaw from his point of view maintained the source was in the contract or as agreed by the parties to be in the contract, certainly not in a variation.

No criticism of counsel for the contractor was made by the arbitrator, although in my view it would have been well merited. This is only of significance when one comes to consider criticisms, with which I will deal later, made by the arbitrator of counsel for the Corporation.

I further observe that, as appears in A.4, the arbitrator did not apply his mind to whether the meaning of the single sentence was in any way qualified by looking at it in context but rather the weight that he could give to the single sentence, in the light of the witness Shaw’s inability to remember writing it. The arbitrator’s remarks (particularly those in A.6) indicate that he paid little or no heed to the repeated submission by counsel for the Corporation that the single sentence statement in context was consistent with the Corporation’s defence as explained at the proceedings.

Further, despite the entitlement of the Corporation to have the whole note (1) of Mr. Shaw tendered so that consideration could properly be given to the meaning to be attributed to the single sentence, the arbitrator said: “I do not want to admit the document now. I want to see if he can recollect the writing of this.” (A.4) When Mr. Charles, QC for the Corporation said that was not the point, but that his opponent was seeking to tender the document out of context, the arbitrator again said: “I have not let it in. I have it in front of me but have not let it in yet because I do not want to let that in. To me that is not admissible as such.”

In excerpt A.5, the arbitrator said, “I do not want to see the document. If you want to tender it, I cannot stop you doing so.” The arbitrator addressed this remark to counsel for the Corporation and referred to the document containing the whole of the note made by Mr. Shaw.

Although at the invitation of counsel for the Corporation, the arbitrator said that he had read the statement in context, his remarks in A.6 indicate that he did not or did not appear to give full consideration to the submission available to the Corporation as to the true relationship between the entire note (1) of Mr. Shaw’s telephone conversation with Mr. Noe and the Corporation’s defence as described. It must be remembered that at this stage of the proceedings there was still no evidence before the arbitrator that the forged bends were required by the Corporation as a variation and none had been opened by counsel for the contractor.

Before me, Mr. Cole, QC for the contractor conceded that the whole note (1) was capable of placing a different construction on the single sentence that if it were looked at in isolation. He submitted it did not in fact alter the meaning of the single sentence but he conceded that there was an argument that it could.

I also observe that it is contended that the arbitrator’s remarks set out in excerpt A.6 might reasonably be suspected by a fair-minded person as containing a flavour of prejudgment on a vital issue going to the heart of the defence of the Corporation.

In my opinion, however, the arbitrator was bound to receive the whole of Mr. Shaw’s note (1) on the basis contended for by counsel for the corporation. Although he did receive it, it does not appear that he so received it on the correct basis or with a proper understanding of its true significance. The tender by Mr. Charles of the whole note was proper and should have been received. The objection by counsel for the contractor in my view was untenable.

In themselves, the misconceptions and errors to which I have referred were not themselves such as to constitute misconduct and it has not been so contended.

On the other hand, each error and misconception to which I have referred operated adversely to the Corporation, as indicated particularly by what the arbitrator said in A.6.

What Mr. Charles, QC submitted, in my opinion, was simple, that is, the single sentence in context of the whole note bore no meaning helpful to the contractor. The arbitrator, who was a professor of engineering, appeared not to grasp it and appears to have drawn an opposite inference.

Nevertheless, the excerpts A.1-A.6 do not by themselves, in my opinion, reveal a case of denial of natural justice. Considered in conjunction with the remainder of the proceedings, however, I consider them relevant and capable of adding to a reasonable suspicion of bias.

B–The Change of Sitting Times Application

Context The parties and their representatives had met on 26 January 1978 in the presence of the arbitrator at the premises of the Corporation, 171 Flinders Street, Melbourne. The points of claim at that time had not been delivered. It was agreed that there would be a hearing of the arbitration which would commence on 8 March 1978 and proceed to 23 March 1978 when it was anticipated that the arbitrator would leave for overseas. The timetable involved sitting hours between 10 a.m. and 5 p.m. each day for six days per week. The minutes of that conference noted that “On 15, 16 and 17 March Mr. Cole, QC may be absent and that the question whether the hearing will proceed on those days will be later determined”. Also, the location was to be in Sydney and evidence was to be taken on oath.

The Corporation received from the contractor on or about 10 February 1978, in accordance with the timetable, the points of claim relating to the various claims including the forged bends claim. The contractor’s points of that claim set out in Schedule G the quantification of its additional costs in respect of the installation of forged bends at horizontal changes of direction greater than 30 degrees. The quantification covered some 14 pages of calculations and attached some seven appendices covering some further 16 pages of figures, tables and schedules. Although the contractor gave the Corporation discovery on or about 27 February 1978, it is not clear that the precise documents on which were based the calculations contained in Schedule G and the appendices were identified. It is true that this discovery took place some few days later than was envisaged by the timetable.

On 8 March 1978, the first day of the intended hearing of the arbitration, the contractor provided the Corporation with Delaney’s statement. On that day negotiations for settlement of all the claims took place pursuant to the wishes of both parties and with the concurrence of the arbitrator. Delaney’s statement was delivered in the afternoon and purported to provide the Corporation for the first time with the actual documents or copy documents on which the contractor intended to rely to substantiate its calculations by way of quantification of its claim. The statement and annexed documents contained several hundreds of pages. Delaney’s statement has been put in evidence before me but I have not attempted to count the number of pages involved. They would take many hours to peruse and absorb.

On Friday morning, 10 March, counsel for the Corporation applied to the arbitrator for alteration of the sitting times and days. His application was that the arbitrator sit five days a week between the hours of ten till four in order to give the Corporation a chance to obtain full instructions on the material with which it had then been provided. Counsel for the Corporation said that after receipt of the material which had taken place since the time of the preliminary conference on 26 January 1978, a reassessmentof the matters at issue had taken place. He said that, having received the points of claim and the documents, the Corporation now wished to contest the correctness of methods of quantification and challenge fundamental matters associated with it. The Corporation by its counsel conceded that it had misapprehended the true areas of conflict between itself and the contractor. He said that the Corporation had, in effect, thought that the main issue was in relation to the legal liability of the Corporation to pay additional moneys and that in respect of the legal aspects the Corporation had considered there was little, if any, issue as to fact, Having received the material, it now saw that there was a live issue as to what additional costs, if any, the contractor had incurred as a result of installation of “forged” as distinct from “cold” bends.

In the course of his submission Mr. Charles, QC told the arbitrator that there now was a factual dispute on almost every issue in Mr. Delaney’s document. He referred by way of example to the number of blasting locations in the pipeline where forged bends were used. He said that the Corporation claimed there were only five such blastings whilst the contractor apparently alleged there were 46. He said that the differences in fact were as great as that. He also intimated that it must have taken the Contractor a considerable number of weeks to prepare the documents and the Corporation would be at a great disadvantage if it had to work within the timetable originally agreed upon, as it would leave little or no time for the obtaining of instructions and doing whatever else was necessary to prepare proper cross-examination and assemble witnesses who now appeared to be necessary in the light of the information provided by the contractor.

Mr. Charles, QC, in his submissions, also referred to the conditions under which he and his instructors were endeavouring to work in Sydney. He pointed out that the Corporation was Victorian based and that because of the Easter Show in Sydney, accommodation in Sydney had been impossible to obtain near the locality of the arbitration, and that it was difficult to obtain ready access to a law library and that the room set aside for counsel for conferences at the site of the arbitration was unsatisfactory.

Counsel for the contractor opposed the application and put his opposition on the basis that they delay in the hearing was due to the fault of the Corporation and that the Corporation had agreed at the preliminary conference to the hours and they should not be changed. It said that the records had been available for discovery by the Corporation since 20 February and that since that time the Corporation could have checked the documents. It also said that the Corporation had known for a considerable time that there was to be an arbitration in relation to the forged bends and had eight to twelve months to prepare themselves for the case.

Reference to the following excerpts is made but again in the context of the whole of the proceedings as recorded in the transcript: [Certain excerpts, numbered B. 1-B.9 were then set out.]

Comment In my opinion, the application on behalf of the Corporation should have been granted. There was no contravention of the basic reality that the Corporation was handicapped, in the circumstances, in the presentation of its case. The arbitrator had a duty, if he was to consider the matter judicially, to consider the application fairly on its merits. That meant that he should have considered only relevant matters and satisfied himself that no unfairness to the Corporation would result from his ruling. His statement that he had by his ruling put pressure on the Corporation was a concession that the Corporation was handicapped, at least in part, in the way it contended.

The fundamental importance, in a judicial hearing, of ensuring that each party has equal and proper opportunity to present his own case (which involves full and proper challenge to the case of the opposite party) has been well expressed in a number of the authorities. In R v Medical Appeal Tribunal (Midland Region); ex parte Carrarini, [1966] 1 WLR 883, Parker, LCJ at p. 888 said: “…It seems to me that the Deputy Commissioner’s decision could only have been arrived at because he misdirected himself in some way as to the law or as to the facts. Put another way, once the decision of the Medical Appeal Tribunalis analysed, and once one directs oneself properly as to the law, the only conclusion which any reasonable tribunal could come to is that the Medical Appeal Tribunal were not acting judicially in refusing the adjournment and accordingly that the appeal should have been allowed on the ground of an error of law.”

Parker, LCJ was speaking in respect of a case where an appellant before the Medical Tribunal had sought an adjournment in order to call a medical witness to contradict evidence already provided.

In the setting of a commercial arbitration Megaw, J. said in Montrose Canned Foods Ltd. v Eric Wells (Merchants) Ltd. [1965] 1 Lloyd’s Rep 597 as one of three justices sitting in the Queen’s Bench division at p. 602: “In my judgment, it is incumbent upon arbitrators to take steps to ensure, so far as is reasonably possible, before they make an award, that each of the parties to the dispute before them know the case which has been put against them, and have had the opportunity to put forward that party’s own case….It was the duty of the arbitrators as a matter of natural justice, before they proceeded to make an award on the basis of the arguments and submissions of one side only, to make sure that the buyers did not wish to put their case before the arbitrators.”

In the Owners of the MV Myron v Tradex Exports SA, [1970] 1 QB 527; [1969] 2 All ER 1263 Donaldson, J. said at (QB) p. 535: “If, however, the arbitrators have the slightest grounds for wondering whether one of the parties has fully appreciated what is being put against him or whether he might reasonably wish to supplement his evidence or argument in the light of what has been submitted by the other party, it is their duty to take appropriate steps to resolve these doubts….If either party wishes to see the whole of the other party’s evidence and to be informed in detail of its arguments, he should require a formal hearing. Any such request must be granted and at the hearing the usual court procedure will be followed. The usual court procedure includes the granting of an adjournment on appropriate terms if the justice of the case so requires.”

Donaldson, J. was, of course, in that case referring to a situation which arose from time to time in informal arbitration hearings. The importance of his remarks is, however, that even in such hearings the duty of the arbitrators was clear and required their ensuring that each party had full and proper opportunity to consider the case of the other. It is common in the performance of such duty to grant adjournments or any necessary time to a party requiring it for the same purposes. (See also Whatley v Morland (1833) 2 Dowl 249; 3 LJ Ex 58.)

In my view, the audi alteram partem rule of natural justice commanded that the Corporation be not handicapped at all in the presentation of its case. I also express the view that the statements by the arbitrator about the preparedness of the Corporation and its previous stand at the conference, were diversionary of the main point with which he was obliged to deal. In any event, they reflected a lack of fair consideration of the total information at his disposal at the time he was asked for the amendment of sitting times.

The failure itself to grant the application in the circumstances constituted, in my view, a denial of natural justice and therefore misconduct.

I should add, that the arbitrator was also wrong to delay final ruling on the application on the basis of him seeing how, as he put it, the Corporation was “going to perform” on the Monday and Tuesday of the following week. It is not part of the function of a judicial officer to make judgments on how a party “performs”. He must judge an application on its apparent merits as stated to him and on the material at his disposal.

It is to be noted that in so far as the arbitrator made observation on the conduct of the parties or the merits of their contentions or submissions only those in respect of the Corporation were adverse. In my view, none appeared to have been properly merited. Further, what the arbitrator said on a number of occasions showed that he misconceived what was being put to him. Every misconception was adverse to the Corporation, for example, as to the nature and purpose of the February discovery by the Corporation (B.8), as to the basis on which originally sitting times were fixed (B.6), as to the change in all the circumstances which the Corporation claimed, as to the ramifications of the recent delivery of the Delaney documents, as to the practicalities of an early conclusion to the hearing of all the claims (B.9), as to the reason why counsel referred to the dispute as to the degree of blasting (B.4), as to the content of the Corporation’s defence (B.4,B.5), by referring to the contractor’s documentation as “back-up material” in the context of its true or potential significance (B.1), as to the distinction between inadmissible evidence and evidence (B.1), and as to the distinction between a general unpreparedness and a particular unpreparedness to contest the contents of material recently delivered (B.7).

I refer further to the following statements the arbitrator made:

“If you are worrying about the shortage of time your client can take a good deal of the problem.” (B.1) “It is not my fault surely, or Mr. Cole’s fault, if your people cannot tell us how long they want to do things.” (B.1) “I get up at five o’clock in the morning or so and I can work till 10 or 11 o’clock at night.” (B.1) “You pick up one hour a day which is a day a week and then you want to take a sixth day off, which is two days a week we are losing.” (B.1) “…my impression is that nothing was done by your people until all of a sudden we are right on the case.” (B.1)

In answer to the suggestion that certain material put before the arbitrator was mostly inadmissible the arbitrator said:–

“I do not know but the point is that is the evidence.” (B.1) “What I do not want to do, quite frankly, is to go back to a 10 till 4 situation unless there is absolutely irrefutable evidence that you cannot possibly get ready because you are not ready now.” (B.3) “I do not like procrastinating the matter any further.” (B.6) “The impression I have is that the Corporation came along and now finds itself somewhat unprepared.” (B.7) “I am not au fait with the details of your case but it seems extraordinary to me that you are taken by surprise by what is in there–I do not know what is in there yet–you are taken by surprise by disputation as to fact.” (B.7)

In my view, a fair-minded observer mightreasonably have suspected that the arbitrator was minded to criticize the Corporation in respect of matters he had not fully investigated and without giving proper understanding to the problem with which the Corporation claimed it was faced. Further, it might reasonably have been suspected that the arbitrator had it in mind that his own convenience was a matter of some importance in dealing with the application and further that he had tentatively, at least, set a time limit on the total duration of the hearing of the arbitration and that tentative fixation of time limit bore some influence on his ruling(see Van Dongen v Cooper,[1967] WAR 143). It was not proper for the arbitrator to allow matters of personal convenience to have influenced his ruling. It is contrary to the concept of fairness to put “pressure” (as he admitted) on one party so as to disadvantage it.

The remarks of the arbitrator in the various excerpts (B.1-B.9) showed a reluctance to deal with the actual merits of the Corporation’s application and in my view, contained criticisms of the Corporation which were unfair in the light of the information with which he was then seized. The arbitrator’s demand for irrefutable evidence (B.3) of the Corporation’s inability to present its case satisfactorily was unreasonable and clearly unsupportable. Not only his ruling then, but the process by which his ruling was arrived at and his remarks in the course of that process are relevant to the question of technical bias in his conduct of the entire proceedings.

C — The Delaney Statement Context Immediately following the arbitrator making his ruling by which he, in effect, refused the application for alteration in sitting times (save as to the Saturday, 11 March) and deferred further consideration until the following week, Mr. Charles on behalf of the Corporation indicated that it desired the evidence of Mr. Delaney to be given on oath and without reference to the statement, a copy of which had been supplied to him. He made it clear that as his client had not been able to provide him with sufficient instructions as to its accuracy, and because on the face of it the statement contained inadmissible evidence, he would require strict proof of the matters contained in it.

It appears that the witness Delaney, whom the contractor proposed to call immediately, had not been on the pipeline construction site before October 1976. Therefore it was not clear in respect of what matters he could give direct evidence. The Corporation at that time had not been provided with the statement of any other witness. It therefore did not know what eye witness evidence was to be called on behalf of the contractor. It expressed the fear that its non-objection to Delaney’s statement might deprive it of the opportunity of cross-examining persons who were directly associated with the work the subject of the contractor’s claim.

There can be little doubt that the Corporation was entitled in law to take the stand which its counsel took. There was nothing improper in it. The transcript of the proceedings shows that the arbitrator did not entirely accept the situation which Mr. Charles, QC said he took and was entitled to take. It was in this context by reference back to the ruling as to sitting times that the exchange took place as set out in B.9. But in addition there was lengthy exchange between the arbitrator and counsel in which it was apparent that the arbitrator expressed some disaffection with the course proposed. In that exchange there are excerpts as follows to which I now refer: [Excerpts numbered C.1-C.10 were set out.] Comment

The interchange between the arbitrator and counsel for the Corporation in respect of this topic extended over some 17 to 18 pages of the transcript. The objection raised by counsel for the Corporation was one which could have been ruled upon in a relatively short space of time. The excerpts C.1 to C.10 in their context indicate that the arbitrator discussed critically with counsel for the Corporation the stand that it took rather than rule on it.

Counsel for the contractor has submitted to me that no complaint could be made about the arbitrator’s conduct in relation to the Delaney statement because he ruled as requested that Mr. Delaney give his evidence in the normal way. However, what the arbitrator said was contained in C.2 above, namely, “If you (the Corporation) want it conducted that way, then I am afraid I am bound to do it, otherwise you are going to object to the evidence and dash off to the Supreme Court and get an award or this arbitration stayed.” This did not reflect a proper judicial approach to his function.

The excerpts C.1-C.10 show that the arbitrator might well have appeared non-judicial in approach:–

(1) in designating proper objections by counsel to the admissibility of evidence as “taking technical points” (C.1, C.6, C.10);

(2) in asking the defence what he, the arbitrator, was to do if the maker of a statement was unavailable (C.1) or a witness for the contractor was not available (C.4);

(3) in suggesting that a document was admissible so long as it was “authentic” (C.2);

(4) in saying he, the arbitrator, did not want a witness to be called but he could not stop the Corporation’s counsel from insisting (C.2);

(5) in failing to rule according to law on whether a witness had been established as an expert, and, if so, in what field or fields (C.5, C.6);

(6) in stating in advance that he would not grant adjournments to enable consideration of evidence (C.6);

(7) in stating that the objection of counsel for the Corporation to the statement of the witness Delaney was “not wanting to be forewarned” (C.6);

(8) in saying that the taking of the objection to admissibility of evidence and tendering of a statement of evidence was “endeavouring to bamboozle” the arbitrator (C.7);

(9) in interpreting the submission of counsel for the Corporation as “trying to delay the proceedings” (C.8);

(10) in stating in advance that he would not accept evidence to be called by the Corporation (C.9);

(11) in describing submissions of counsel as “beating the air” (C.10);

(12) in referring, without it being relevant to do so, to the contractor being “out of his money”.

In each instance what was said by the arbitrator bore overtones which were adverse to the Corporation.

D — The Defence Evidence Ruling Context In the course of his opening, counsel for the contractor referred to para. 2 of the Corporation’s defence to its forged bends claim and submitted to the arbitrator that the Corporation thereby was attempting to adduce evidence in aid of interpretation of the written contract and that this was not in law permitted. He said to the arbitrator that the contractor would be objecting to any evidence which was sought to be led in relation to sub-paras.(a), (b), (c) and (d) of the said para. 2. As soon as that submission was made the arbitrator said: “It is my position — perhaps I should ask you if you will let me interrupt you to ask Mr. Charles what he has to say to this?”

Mr. Charles, QC then said: “We are in total conflict on this point, Mr. Arbitrator.”

After some further discussion Mr. Charles, QC said that the time and place to argue the point was for the arbitrator to decide. The arbitrator then requested Mr. Charles to be ready to argue it in due course “because it is not going to be very long before I have to decide whether I have to admit it or not admit it”.

Counsel then agreed to argue the question of what broadly had been described as the admissibility of “pre-contract negotiations”. This took place just before and just after the mid-day adjournment on Friday 10 March. Mr. Cole put his argument, as appears from the transcript, without any interruption whatsoever from the arbitrator. After the adjournment at 1:30 p.m., junior counsel for the Corporation Mr. Hayes commenced his argument in favour of the admissibility of the evidence. In the course of his argument the arbitrator sought the submissions of Mr. Hayes on the meaning of CL32 of the contract which provided: “Save as provided by supplemental deed of even date between the parties this Contract supersedes and annuls all previous agreements between the parties hereto, and there are no extraneous agreements representations or understandings expressed or implied except as they may relate to the quality of the Works, affecting this agreement.”

In the course of the discussion on this aspect, the arbitrator said:–

D.1 — “Mr.Hayes, I may stand corrected, if I had an Oxford English Dictionary to look up the word annuls — I have no doubt in my mind what it means here when it says that there are no extraneous agreements, representations or understandings. All the cases that Mr. Cole has put to me and the texts that you have have not qualified an annulment clause — no extraneous agreements, representations or understandings clause. To me, we are just wasting time. As far as I am concerned nothing before this contract has any bearing on the matter.”

Mr. Hayes then asked whether the arbitrator was ruling to that effect and the arbitrator said he was. Mr. Hayes then asked the arbitrator to state a case and he then said he would.

There followed some discussion about the appropriate time for the preparation of the case stated. In the course of that discussion the arbitrator said:–

D.2– “I am not prepared to postpone this arbitration hearing because you want a case stated for the court to determine whether any previous evidence is admissible or not.”

Later on he said:–

D.3– “We will take the evidence this afternoon and we will write the case after 5, if it takes till midnight.”

The arbitrator was then asked by Mr. Charles to disqualify himself on the grounds of bias and Mr. Hayes also said to him that he had decided the point before he had argued it. The arbitrator said that he was repeating his argument but did not invite Mr. Hayes to put any further argument in support of his submissions.

The following also took place:–

D.4– To Mr. Hayes–

“THE ARBITRATOR: Do you mind. I would just like to ask you something. We have come here to arbitrate an engineering contract, that is one thing. If we have come here to argue all legal technicalities, that is another.

“MR. HAYES: Which legal technicality was it, I ask?

“THE ARBITRATOR: I do not mind what you ask, sir. I do not have to answer you. What I have come here today, as I understand it, is to settle a dispute over an engineering contract between two parties. They selected me as the arbitrator and I remind you, you might look up Halsbury on that one…”

D.5– “MR. CHARLES: I merely would ask that it be noted that the ruling was given when argument had not been completed in relation to our side of the case.

“THE ARBITRATOR: I am quite happy for you to make that because Mr. Hayes did not wish to answer what he understood by the word annuls.

“Mr. Hayes: I would like it on record that I was answering the question and that you, sir, would not listen to my answer.

“THE ARBITRATOR: You can have that noted. Where do we proceed from here, Mr. Cole?”

After Mr. Charles for the Corporation had indicated that he would apply to this court for removal of the arbitrator, the following further exchanges took place:–

D.6– “THE ARBITRATOR: It is quite obvious to me that the Corporation rightly or wrongly, expects the forged bends for nothing– by nothing I mean for no extra cost.”

D.7– “THE ARBITRATOR: … I am not objecting to you taking the right course. What concerns me of course, as I said already today, is I thought this was an arbitration about a dispute with respect to forged bends and, that is the only one we have dealt with, that has been delayed by your statement that if I would not grant you shorter hours — and I will have to get the transcript to quote you precisely — that you would insist on taking objection to everything…

“MR. CHARLES: Every proper objection.

“THE ARBITRATOR: Everything proper, in spite of the hours we agreed to and in spite of the method of presentation of evidence that we agreed to.”


The question on which the arbitrator was asked to rule was not an easy one particularly at that stage of the proceedings. It was also particularly difficult in the light of the pleadings. On one view, the submission which counsel for the contractor had put was attractive and the arbitrator may well have thought with all honesty that Mr. Cole’s submission was unarguably correct. I am not satisfied that the arbitrator’s actual ruling, although it was expressed somewhat generally, has any direct relationship to a denial of natural justice.

However, the arbitrator did cut off counsel for the Corporation before he had finished putting his argument. Although counsel for the Corporation before me submitted that there were many other arguments that it proposed to put, I cannot in my deliberations take cognisance of any fact other than that its submission had not been completed. In my view, there were a number of arguments that were open to the Corporation to put in support of the admissibility of the evidence under discussion. One of them clearly was that the evidence may very well have become admissible as a result of Mr. Shaw’s evidence about what the Corporation had required. The facts and circumstances surrounding that requirement were capable of being admissible on the question as to whether or not an “extra” or “variation” had been duly requested by the Corporation. However, I do not regard those matters as necessary for me to determine or particularly pertinent.

What does seem germane is the fact that the arbitrator did make a premature ruling — premature, that is, in the sense that he had effectively prevented the completion of the submission to be put on behalf of the Corporation. From the Corporation’s point of view, the admissibility of the evidence under consideration was vital to its defence.

Although, as I have said, the arbitrator may have been forgiven for thinking at that stage that his ruling was unarguably correct, I think that he was obliged to hear counsel for the Corporation complete his argument.

Further, there were features of his approach to this question which can only be described as non-judicial. He attempted to decide the point when, in my view, he was insufficiently informed about all the facts and circumstances of the case. It was not necessary for him to have decided the question so early and in my view it was difficult for him to have come to a conclusive opinion, as he purported to do, without being better informed or having a better understanding of the way in which the contractor was to establish his claim and the precise evidence by which the Corporation proposed to refute it.

Further, in describing the submissions of counsel as “wasting time” he might be reasonably suspected of refusing to give to the arguments the consideration to which they were entitled.

It is also to be noted that the arbitrator mis-stated counsel for the Corporation’s stance on admissibility of evidence and imputed to him deliberate delaying tactics (D.7).

In D.6 he mis-stated in a tendentious way the nature of the Corporation’s defence.

It is also to be noted that the ruling which the arbitrator purported to make was based on an argument which he himself originated and which was different from what was put on behalf of the contractor.

There can be little doubt that the failure on the part of the arbitrator to hear out fully the submission made by the Corporation on a vital issue constituted a breach of the audi alteram partem principle of natural justice and therefore misconduct.

Conclusion It follows from what I have already said that I regard the arbitrator as having misconducted himself in respect of topic “A” in failing to permit at least the time requested on behalf of the Corporation for preparation of cross-examination and presentation of its case; and in pre-judging and/or failing to hear fully the submissions of counsel for the Corporation on topic “D”.

Nevertheless, I believe I should express my view, those matters apart, on whether, when the proceedings are looked at as a whole, the arbitrator misconducted himself by displaying technical bias, that is, bias as defined in Watson’s Case, supra. For this purpose I do no more than consider, in the light of what I have already said, the rulings, approaches and conduct of the arbitrator referable to topics A, B, C and D in combination against the following background:–

(a) the contractor had the civil onus of proving its claim against the Corporation to the satisfaction of the arbitrator. But although the contractor by its counsel had not opened any evidence or called any to show how it would prove the “variation” relied on in its points of claim, let alone one in writing, no question was directed by the arbitrator to counsel for the contractor on these aspects;

(b) although the arbitrator had described his discussions with counsel for the Corporation on his submissions as “beating the air” and had said of that counsel that he was not wanting to speed the hearing, that he was just wasting time and that he had attempted “to bamboozle him”, that the Corporation had done nothing until all of a sudden it was right on the case, and that it could take a good deal of the problem, no criticism at any time was directed to counsel for the contractor. In my view, the criticisms and statements made against the Corporation and against their counsel, to a fair-minded observer, might well appear to have been unwarranted and unfair in the circumstances.

(c) although the arbitrator appeared to misconceive and/or mis-state a number of submissions made on behalf of the Corporation, for example, as to the nature of its defence, the true basis of its objections to Delaney’s statement and the true basis for its application for amendment of sitting times, no misconceptions adverse to the contractor appeared to have occurred in respect of any submission made on its behalf:

(d) the arbitrator at the preliminary conference and impliedly at the hearing indicated his willingness not to sit for three of the allotted days should counsel for the contractor have requested it;

(e) the proposal to sit six days per week between the hours of 10 a.m. and 5 p.m. was only to operate until 23 March 1978 after which the arbitrator was to be away overseas until August. The period till 23 March was critical for the Corporation if it wished to refute at all the contractor’s claim by cross-examination of its witnesses. It was important from its point of view that cross-examination be well prepared on instructions some of which required perusal by the Corporation’s experts of the figures and documents presented on behalf of the contractor. There was no arrangement as to times for sitting days for the period or resumption after August. In any event, the contractor would have the benefit of five intervening months to prepare for cross-examination of the witnesses to be called on behalf of the Corporation;

(f) the arbitrator was a professor of engineering and presumably therefore a man of high intellectual capacity;

(g) all the excerpts under topics A, B, C and D contain a large number of statements by the arbitrator adverse to the Corporation, its case and its counsel;

(h) the transcript shows that the arbitrator did not make any statements adverse to the contractor, its case or its counsel.

As a consequence, it has, in my view, been firmly established that a suspicion may reasonably have been engendered in the minds of the Corporation or in the minds of the public that the arbitrator did not and would not bring to the resolution of the questions arising before him a fair and unprejudiced mind. On this basis also, I am satisfied the arbitrator misconducted himself within the meaningof s12(1) of the Arbitration Act 1958.

The order of the Court will be that in the arbitration between Wood Hall Ltd. and Leonard Pipeline Contractors Ltd. on the one part and the Gas and Fuel Corporation of Victoria on the other part, the arbitrator, Professor James Antill, be removed with costs to be paid by the said Wood Hall Limited and Leonard Pipeline Contractors Ltd.

Order accordingly.