Able Demolitions and Excavations Pty Ltd v State of Victoria [2004] VSC 511

(a) An order that the second defendant, Mr Eugene White, be removed pursuant to s.44 of the Commercial Arbitration Act 1984 ("the Act") as arbitrator of a contractual dispute between Able and the first defendant ("the State of Victoria") due to apprehended bias;

(b) a declaration that the arbitration of the dispute which is scheduled to be heard on 13 December 2004, is null and void, because the contractual preconditions of a referral to arbitration have not been satisfied.

8. Mr White, as arbitrator, did not appear in the proceeding and advised the Court of his willingness to abide by its determination.

11. Able conducts a business of demolition and clearance. In 2003 the State of Victoria called for tenders for the demolition of plant and construction on the Lurgi gas plant site at Morwell, ("the site") together with the clearance of the site on specified contractual terms. The State of Victoria owns the site. Able tendered for the work. Its tender was accepted and the parties executed a contract dated 24 December 2003 ("the contract") which provided for Able to perform the specified demolition and clearance work in return for the stipulated contract sum.

14. On or about 16 June 2004, a dispute arose between the parties in relation to the performance of the contract. Able refused to allow certain trade union officers or members access to the demolition site. It appears that Able's refusal of access was based on a history of friction between Able and unions generally, and, in particular, the Gippsland Trades & Labour Council ("GTLC"), to which the specified excluded persons belong.

17. The State of Victoria contended that it was entitled to authorise access to the site by any person for any purpose, pursuant to clause 27.2 of the contract, which relevantly provides:

"27.2 Access for the Principal and Others The Principal and the Principal's employees and agent may at any time after reasonable notice to the Contractor have access to any part of the Site for any purpose. The Contractor shall permit the execution of work on the Site by persons engaged by the Principal and shall cooperate with them and coordinate the Contractor's work with their work. If requested by the Contractor, the Principal shall provide to the Contractor the names of the persons so engaged. The Contractor shall at all reasonable times give the Principal, the Superintendent, the Clerk of Works and inspectors appointed under Clause 22, and other persons authorized in writing by the Principal or by the Superintendent access to the work under the Contract at any place where the work is being carried out or materials are being prepared or stored. The Principal shall ensure that the Contractor is not impeded in the execution of the Contractor's work by any persons referred to in Clause 27.2., whilst exercising the right of access given by Clause 27.2."

21. Able disputed the State of Victoria's construction of clause 27.2, contending that it was, inter alia, subject to an implied term that the State of Victoria's power to authorise site access must be exercised in good faith and reasonably, and not for a purpose extraneous to the contract.

24. The contract provides for dispute resolution as follows:

"47.1 Notice of Dispute If a dispute between the Contractor and the Principal arises out of or in connection with the Contract, including a dispute concerning a direction given by the Superintendent, then either party shall deliver by hand or send by certified mail to the other party and to the Superintendent a notice of dispute in writing adequately identifying and providing details of the dispute. Notwithstanding the existence of a dispute, the Principal and the Contractor shall continue to perform the Contract, and subject to Clause 44, the Contractor shall continue with the work under the Contract and the Principal and the Contractor shall continue to comply with Clause 42.1. A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration, may be included in an arbitration." "47.1A Resolution of Disputes - Mediation Subject to Clause 47.2, a party must not start arbitration or court proceedings in respect of a dispute arising out of this Contract unless it has complied with this Clause. During the 10 day period after a notice of dispute is given under Clause 47.1 (or longer period agreed in writing by the parties to the dispute) each party to the dispute must use its best efforts to resolve the dispute. If the parties are unable to resolve the dispute within the prescribed period, each party agrees that the dispute must be referred for mediation, at the request of either party, to:

(b) if the parties are unable to agree on a mediator within 7 days after the end of the prescribed period, a mediator nominated by the then current Chairman of the Institute of Arbitrators Australia, Victorian Chapter or the Chairman's nominee.

The role of any mediator is to assist in negotiating a resolution of the dispute. Any information or documents disclosed by a party under this Clause must, unless and until that information or those documents come into possession of that party through legitimate means other than the mediation:

(d) not be used except to attempt to resolve the dispute.

Each party must bear its own costs of complying with this Clause and the parties must bear equally the costs of any mediator engaged. After the expiration of the prescribed period, a party that has complied with this Clause may terminate the mediation process by giving notice to the other party. If in relation to a dispute a party breaches any provision of this Clause, the other party need not comply with this Clause in relation to that dispute." "47.2 Further Steps Required Before Proceedings Alternative 2 A party served with a notice of dispute may give a written response to the notice to the other party and the Superintendent within 28 days of the receipt of the notice. Within 42 days of the service on the Superintendent of a notice of dispute or within 14 days of the receipt by the Superintendent of the written response, whichever is the earlier, the Superintendent shall give to each party the Superintendent's written decision on the dispute, together with reasons for the decision. If either party is dissatisfied with the decision of the Superintendent, or if the Superintendent fails to give a written decision on the dispute with the time required under Clause 47.2 the parties shall, within 14 days of the date of receipt of the decision, or within 14 days of the date upon which the decision should have been given by the Superintendent confer at least once to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree on methods of resolving the dispute by other means. At any such conference, each party shall be represented by a person having authority to agree to a resolution of the dispute. In the event that the dispute cannot be so resolved or if at any time after the Superintendent has given a decision either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may, by notice in writing delivered by hand or sent by certified mail to the other party, refer such dispute to arbitration or litigation."

34. On 17 June 2004 the State of Victoria served a Notice of Dispute on Able pursuant to clause 47.1 of the contract in relation to the dispute.

37. It is not disputed that each party attempted to resolve the dispute within the 10 day period allowed by clause 47.1A. By letter to Able dated 29 June 2004, the State of Victoria confirmed its understanding that neither Able nor the State of Victoria wished to proceed to mediation. By a letter in response dated 1 July 2004, Able agreed that each party had used its best endeavours to resolve the dispute and that neither party wished to proceed to mediation.

40. It is also common ground that the parties carried out the steps required by clause 47.2. The Superintendent gave a written decision, and the parties conferred in an attempt to resolve the dispute, but without success.

43. The State of Victoria, in reliance on clause 47.2 of the contract, on or about 11 October 2004 referred the dispute to arbitration and appointed Mr White as arbitrator.

46. Able, on 12 October 2004, objected to the validity of the reference to arbitration, on the ground that there had been no request to refer the dispute to mediation pursuant to clause 47.1A. Able expressly requested a reference to mediation on 5 November 2004.

49. Able also became aware of certain aspects of the professional history of Mr White. It formed the view that they gave rise to a reasonable apprehension of bias, which disqualified him from acting as arbitrator.

52. By applications dated 3 November 2004 and 4 November 2004, Able sought that the arbitrator determine whether he was disqualified from acting as arbitrator on the ground of apprehension of bias, and whether the arbitration was legally ineffectual.

55. On 8 November 2004 Mr White, as arbitrator, heard and determined Able's applications for his disqualification and for a declaration of the invalidity of the arbitration, due to non-compliance with clause 47.1A.

58. Mr White dismissed both of the plaintiff's applications, giving reasons for his decision. He gave directions and fixed a commencement date of 13 December 2004 for the hearing of the arbitration.

61. Although the demolition work under the contract was scheduled to be completed by December 2004, work has been delayed due to the presence on site of a large tank of hazardous contaminated liquid. Able must await the State of Victoria's authorisation of the tank's removal before commencing further substantial demolition work. It is now anticipated that work under the contract will be completed by March 2005.

64. It is therefore desirable to determine the entire proceeding prior to 13 December 2004, as if either of Able's objections to the arbitration are upheld, the costs of the arbitration, if it takes place, will be thrown away. If, on the other hand, the holding of the arbitration is restrained for any length of time as an interim measure, and neither of Able's objections are ultimately upheld, the State of Victoria will be effectively deprived of the arbitration to which it was contractually entitled, given that work under the contract is likely to be completed by March 2005.

67. The plaintiff objects to the impending arbitration on two fundamental bases. First, it asserts that there is a reasonable apprehension of bias on the part of the arbitrator. Secondly, it asserts that the reference to arbitration is a nullity, due to the non-fulfilment of a condition precedent to the entitlement to refer a dispute to arbitration.

71. Clause 47.1A is expressed to be "subject to clause 47.2". It provides that "a party must not start arbitration or court proceedings in relation to a dispute arising out of the contract unless it has complied with clause 47.1A."

74. Clause 47.1A does not specify the time in which a party may request a referral to mediation following the failure to resolve the dispute within the prescribed period. However, the process of nomination by the Chairman of the Institute of Arbitrators under clause 47.1A(b) is set in train within seven days after the end of the prescribed period. That indicates the request for referral must occur within the seven days following the termination of the prescribed period.

77. Clause 47.1A further requires each party to use its best efforts during the 10 day period (or longer if agreed in writing) to resolve the dispute. If they are unable to resolve the dispute within the prescribed period "each party agrees that the dispute must be referred to mediation, at the request of either party, to:

(b) if the parties are unable to agree on a mediator within 7 days after the end of the prescribed period [a nominated mediator]."

82. Clause 47.1A concludes that "at the expiration of the prescribed period, a party that has complied with this clause may terminate the mediation process by giving notice to the other party. If in relation to a dispute a party breaches any provision of the clause, the other party need not comply with the clause in relation to that dispute."

85. Mr Jewell, counsel for the plaintiff, submitted that clause 47.1A must be construed in context, and in accordance with the manifest contractual intention that arbitration and litigation were to be a last resort.

88. He argued that compliance with clause 47.1A required not only an attempt to resolve the dispute within the 10 day period, but also required the making of a request for mediation. He contended that the reference to a "request by either party" in clause 47.1A did not mean that mediation was an option which either party might, by request, require. Rather, a request constituted the trigger for the further action contemplated by the clause, including the possible agreement by the parties upon a mediator, or the nomination of a mediator failing such agreement. He further submitted that there was no requirement that the mediation process take place, or be completed, before the procedures under clause 47.2 could be employed.

91. Mr Jewell argued that the party seeking mediation under clause 47.1A had "unfettered discretion" as to when it made the request requiring mediation, which, when made, would trigger the obligation of the "defending" party. If that party were unresponsive to the request, or the mediation did not progress, then the requesting party would, at that stage, be entitled to refer the dispute to arbitration. However, neither party would be entitled to refer the dispute to arbitration until a request requiring mediation had been made, and it had complied with any consequent obligations under the clause.

94. The plaintiff submitted that because, prior to its referral to arbitration, the State of Victoria had neither made a request for mediation itself, nor (given that the plaintiff had made no request either) complied with any requirements following a request by the plaintiff, the necessary precondition of the referral was not satisfied.

97. Mr Collins, senior counsel for the State of Victoria, argued that in accordance with its literal terms and its only commercially realistic construction, clause 47.1A conferred on the parties an option to request mediation following the failure to resolve the dispute during the relevant 10 day period. There was no absolute requirement under clause 47.1A that a mediation occur or that a request for a mediation be made by either party. He argued that that conclusion followed from the ordinary meaning of the phrase "at the request of either party", the reference to "any mediator" (which indicated that the appointment of a mediator was merely a possibility) and the express stipulation that after the expiration of the prescribed period, a party that has complied with the clause may terminate the mediation process by giving notice to the other party. Further, Mr Collins argued that the plaintiff's construction was incompatible with the time frame for nomination of a mediator in clause 47.1A(b).

100. The State of Victoria also contended that a construction which permitted an unlimited time for a party to require a mediation was commercially unworkable or unreasonable.

103. The plaintiff did not, in my opinion, satisfactorily reconcile the time-frame established in clause 47.1A(b), and the entitlement unilaterally to terminate the mediation process after the expiration of the prescribed period, with its contention that an indefinite entitlement to require mediation subsists, which, until exercised, precludes a valid reference to arbitration.

106. In my opinion, the construction of clause 47.1A advanced by the plaintiff is not persuasive.

109. It is clear that, according to the literal terms and plain meaning of clause 47.1A, there is no absolute requirement, and no obligation to request, a referral to mediation. Rather, a referral to mediation is required under clause 47.1A only if one or more of the parties ("either party") requests it.

112. Clause 47.1A refers to "the prescribed period" as the time for the parties to attempt resolution of the dispute. It is upon the termination of that prescribed period that a party may request referral to mediation. In my opinion, on the better construction, "the prescribed period", in the context of clause 47.1A (which is not defined in the contract) relates back to the immediately preceding period of 10 days beginning after the giving of the notice of dispute.

115. I am satisfied that clause 47.1A does not impose mediation, or a request for it, as an absolute precondition of referral to arbitration, or confer upon either party a temporally unlimited entitlement to require mediation. In my opinion, clause 47.1A, on its proper construction, does not operate to preclude the commencement of arbitration or litigation if neither party has requested mediation within, at the latest, seven days after the termination of the 10 day period commencing immediately after the giving of a notice of dispute. On the better view, upon the effluxion of seven days, the entitlement to require a referral to mediation terminates and the operation of clause 47.1A thereafter poses no impediment to referral to arbitration pursuant to clause 47.2.

118. In the present case, the State of Victoria gave a notice of dispute on 17 June 2004. The plaintiff's first express request for referral to mediation was made in the witness statement of Mr Rossignoli dated 5 November 2004, by which date there had been a valid referral to arbitration and any entitlement to require mediation pursuant to clause 47.1A had been lost.

121. It follows that, in my opinion, the arbitrator does not lack jurisdiction, nor the arbitration validity, due to a failure to satisfy a precondition under clause 47.1A of the contract.

125. The plaintiff contends that the arbitrator's professional history gives rise to a reasonable apprehension of bias, which justifies his removal pursuant to s.44 of the Act.

128. There is no allegation of actual bias. Mr White is currently a barrister. His Victorian Bar website entry states:

"Before coming to the Bar Eugene White was a principal of Carlisle Thomas, Solicitors for six years. He practised principally in industrial law and employment law for trade unions and employees and in related areas including administrative law, contracts, equal opportunities and occupational health and safety. He also practised in personal injuries and general civil litigation. At the Bar he continues to practise in those areas."

132. Mr White's areas of practice are listed as follows:

145. By an e-mail dated 31 October 2004, Mr White made the following statement:

"Further to directions made 29 October 2004 and the letter from Barry Kenna & Company To Department of Treasury and Finance of 27 October 2004 I advise the parties as follows:

(b) `--association or connection (if any) with the State of Victoria as litigant and with any State of Victoria personnel involved with litigation and/or the current dispute between the parties;'-----In 2002/2003 I was briefed to appear for the Department of Human Services in a s170MX Workplace Relations Act 1996 arbitration in the Industrial Relations Commission instructed by Corrs Chambers Westgarth (Mr V Gostencnik and Ms M Kossenas). For the purposes of that litigation I conferred with officers of the Department of Human Services.

I have no association or connection with State of Victoria personnel involved with the current dispute between the parties.

(c) `association or connection (if any) with the personnel nominated by the State as having access authorization;'-----In 1999 I appeared for a Steve Dodd against the Secretary and other officers of the Australian Food Metals Engineering Printing and Kindred Industries Union. Since that brief I have had no `association or connection' with that or any other Steve Dodd.

(d) `association or connection (if any) with the unions generally and whether [I have] in any capacity acted for or on behalf of any union or personnel representing or connected with any union.'----In the course of my professional life I have practised, inter alia, in industrial and employment law representing, inter alia, unions, their officers and members.

A copy of this email will be sent by facsimile transmission to each party."

155. In the course of the hearing on 8 November 2004 the arbitrator stated that "The only time I've ever acted for the State of Victoria is probably against the interests of the union."

158. In his statement of reasons dated 12 November 2004 dismissing the plaintiff's applications, Mr White relevantly stated:

"17. It was submitted on the part of Able that the material demonstrated that I had an association with the union movement distinct from the traditional barristerial one. Rather, the material was said to demonstrate that the work I performed in the past and in the future would be akin to `an affiliation' (said by Mr Jewell to be used loosely) rather than `cab rank' retainer practice. The material was said to demonstrate that rather than `just acting in the traditional barristerial sense of taking a brief for one party or the other over the course of time and just doing the job of a barrister: there was something akin to an alignment, something akin to an affiliation with the interests of one side rather than the other'. ... In short compass Able's submissions depend upon me having an association of a character something akin to an affiliation with unions and their interests. The facts relied upon Able to make good its submissions are in effect that I was a principal in a law firm which `habitually' acted for unions and their interests prior to coming to the bar in 1996, that in the course of my professional life I have practiced in industrial and employment law representing, among others, unions, their officers and members and that I did so in the Building Industry Royal Commission. Whilst it is true that the briefs I have taken whilst at the bar in industrial matters predominantly (but not exclusively) have been for unions and their members I reject the contention that that amounts to a disqualifying association or affiliation. There is no evidence to sustain the contention I have acted in breach of the bar's `cab rank' rule. At most, the fact that the predominance of my practice in industrial law has been on behalf of unions and their members (without acceding to the following proposition), might evidence a predisposition or inclination that falls well short of that state of mind described in Jia as being `so committed to a conclusion already formed as to be incapable of alteration, whatever evidence or arguments may be presented.' There is no evidence to suggest activity on my part other than me acting in a professional capacity."

162. The plaintiff does not challenge the veracity of the arbitrator's disclosure and evidence but relies upon them to support its contention that the arbitrator is not simply a barrister acting in accordance with the "cab rank" principle but has an affiliation with unions generally. In that context, the plaintiff made the following submissions:

"(a) In the course of his professional life, [the arbitrator] has practised, inter alia, in industrial and employment law representing, inter alia, unions, their officers and members.

(b) Before coming to the Bar, he was a principal in the legal firm of Ryan Carlisle Thomas and worked principally in industrial law and employment law for trade unions and employees and at the Bar he continues to practise in these areas.

- Mr Rossignoli asserts that the firm of Ryan Carlisle Thomas is and has been for many years covering the time of [the arbitrator's] admission to practice, a legal firm habitually acting for unions and union members. [The arbitrator] agreed with such `habitual' nature of that firm's practice at the disqualification hearing.

(c) One of [the arbitrator's] clerking staff has advised that he does industrial work acting for unions and doubts that a brief would be taken for employers.

- [The arbitrator] did not challenge or qualify this evidence.

- At the hearing of the plaintiff's application on 8 November 2004, [the arbitrator] stated `Whilst it is true that the briefs I have taken whilst at the Bar in industrial matters predominantly (but not exclusively) have been for unions and their members ... ".

- He did not identify the non-exclusive matters to be contrary to union and union member interests.

- The only exception seems to be a brief to appears in 2002/2003 for the Department of Human Services in a S170MX Workplace Relations Act 1996 Arbitration in the Industrial Relations Commission. This was a brief by those individuals who instruct the [State of Victoria] in the Arbitration and in this proceeding and was a one off occurrence.

(d) [The arbitrator] acknowledges that he appeared for a number of individuals ... as well as two Queensland registered unions in the Building Industry Royal Commission recently held.

(e) [The arbitrator] did not qualify or state a contrary position to the evidence that generally in industrial law matters, legal practitioners by and large act for either union and union member interests or employer interests but not both."

175. The plaintiff initially argued that the determination of the dispute would involve the construction of clause 27(2) of the contract, including the resolution of an ambiguity involving reference to the "factual matrix" in which the parties contracted.[1] It argued that the factual matrix necessarily included the plaintiff's relationship with unions. The plaintiff contended that the same issues were also necessarily relevant to the consideration of whether the exercise of a contractual power is within the scope of the contract. Similarly, it argued that the implication of terms into the contract on the basis of the principles in BP Refinery,[2] and compliance with any terms so implied, would involve consideration of the history of the plaintiff's relationship with the unions.

178. The plaintiff contended that its relationship with the unions was at the kernel of the contractual dispute between the parties. Its written submissions stated:

"(a) [The arbitrator's] union association is more than a traditional barristerial one where the `cab rank' principle applies and there is no general retainer.

(b) The association is not coincidental but more affiliative in nature and either invariably or mainly aligned with the interests of unions and their members.

(c) The association is such that no brief or retainer will be taken against the interests of unions or their members where those interests are at issue.

(d) The firm of solicitors, Ryan Carlisle Thomas in which the arbitrator was formerly a principal, is widely known to act for Unions and their members collectively and individually and the arbitrator's position as a principal of that firm until 1996 and the continuation of work as counsel thereafter in alignment with such interest suggests an association akin to a retainer.

(e) The arbitrator's holding out as to suitable work remains in line with union and union membership interests which is likely to be ongoing into the future.

(f) The informed lay observer might reasonably apprehend the unconscious influence or infiltration of partiality, bias or prejudice along the way to coming to a decision.

(g) The association is such that it falls into the `unthinkable' (per Ormiston JA in Gascor v Ellicot 1997 IVR 332 at 349) category for the Secondnamed Defendant to remain as Arbitrator."

188. The State of Victoria disputed the plaintiff's assertion that the construction of clause 27(2), which is central to the dispute between the parties, would involve any consideration of the conduct of union members or officials or of the plaintiff's relationship with unions.

191. At the hearing of the matter on 7 December 2004, the State of Victoria reduced the scope of the dispute. It conceded that if, in the arbitration, the plaintiff succeeded in its argument that a "good faith" term should be implied into clause 27.2, the State of Victoria would not seek a determination of the factual issues to which that holding would give rise. Mr Jewell, however, contended that the concession did not entirely eliminate the relevance of factual matters (including the plaintiff's relationship with unions) because they would remain relevant to the implication of the term. The concession therefore did not sidestep the claim of apprehended bias.

Mr Collins submitted that, ultimately, it was unnecessary to determine whether the plaintiff's relationship with the unions would be a relevant factor in the determination of the dispute. The State of Victoria submitted that there could be no basis for a reasonable apprehension of bias as that term has been construed in the relevant authorities in circumstances where:

"(a) the arbitrator is a barrister who observes the "cab rank" principle;

(b) he does not act only for unions and their members, and has acted against them;

(c) he does not have a retainer for unions or any particular union and does not have a general affiliation with unions and their interests as the plaintiff seeks to assert; and

(d) he has no connection with the parties, save that he once acted for the State, against a union,"

199. In my opinion, the evidence establishes that the arbitrator, as a solicitor and subsequently a barrister practising in industrial law, has acted predominantly for unions and union members, rather than for employers. It was common ground that practitioners in industrial law commonly to act predominantly either for union interests or for employer interests. However, the evidence also establishes that the arbitrator observes the "cab rank" principle in his practice as a barrister. He stated that "there is no evidence to sustain the contention that I have acted in breach of the bar's `cab rank' rule." I take that to be a statement that the arbitrator does not act in breach of the "cab rank" principle, rather than that there is no evidence of such a breach. The plaintiff does not challenge the arbitrator's veracity or bona fides. The plaintiff relies on the speculation of an unidentified member of the staff of the arbitrator's clerk that the arbitrator could, in the future, breach the "cab rank" rule. The statement is inadmissible, because it is both speculation and hearsay. It cannot detract from the arbitrator's direct statement to the contrary.

202. It is not disputed that the arbitrator has, on at least one occasion, acted against a union. The evidence does not establish that that was the only occasion on which he has so acted.

205. Further, the arbitrator's website entry does not, on a fair construction, do more than set out the nature of his experience and areas of practice. It does not provide any basis on which to conclude that he would breach the "cab rank" principle.

208. It is not alleged that the arbitrator has any general or special retainer from, or any formal affiliation or association with, unions generally, or with any particular union, or that he has ever acted for the union principally involved in the background to this case.

211. Section 44 of the Act provides, so far as is relevant, that:

(a) there has been misconduct on the part of an arbitrator ...

... or ...

(c) an arbitrator ... is ... unsuitable to deal with the particular dispute -

the Court may, on the application of a party to the arbitration agreement, remove the arbitrator ... ".

Relevant Legislation and Case Law

218. Section 4(1) of the Act relevantly provides:

"In the Act unless inconsistent with the context or subject-matter ... ... `misconduct' includes corruption, fraud, partiality, bias and a breach hof the rules of natural justice. ... "

222. I recently considered the principal authorities dealing with apprehended bias on the part of a judge or arbitrator in Mond v. CHC[3]. For convenience, I now set out the relevant section of my reasons for judgment.

225. "In Webb v The Queen,[4] Mason C.J. and McHugh J. stated:[5]

"When it is alleged that a judge has been or might be actuated by bias, this Court has held that the proper test is whether fair-minded people might reasonably apprehend or suspect that the judge has prejudged or might prejudge the case. ... The Court has specifically rejected the real likelihood of bias test. The principle behind the reasonable apprehension or suspicion test is that it is of `fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done'."[6]

229. In Livesey v New South Wales Bar Association,[7] the High Court stated:

"It was common ground between the parties to the present appeal that the principle to be applied in a case such as the present is that laid down in the majority judgment in Reg. v Watson; Ex parte Armstrong [(1976) [1976] HCA 39; 136 C.L.R. 248 at pp.258-263]. That principle is that a judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the question involved in it."[8]

233. In Grassby v The Queen,[9] Dawson J. observed that the test is:

" ... whether in all the circumstances the parties or the public might entertain a reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the resolution of the matter before him. See Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 C.L.R. 288; Reg v Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 C.L.R. 248."

237. As recognised by Toohey J. in Webb v The Queen,[10] "the underlying principle is the same, whether judges, jurors or members of a tribunal are concerned, though naturally its application will differ in those cases."[11]

240. In Gascor v Ellicott[12] the Court of Appeal upheld the trial judge's rejection of an application to remove an arbitrator for misconduct pursuant to s. 44 of the Act.

243. The appellant sought to remove the arbitrator appointed to determine a payment due by the appellant to the respondent under an agreement for the purchase of natural gas. The appellant alleged that the arbitrator had previously acted as counsel for the producers of the gas product in an earlier arbitration involving some similar issues and had cross-examined expert witnesses whom the appellant intended to call; had acted as an arbitrator in another arbitration and had rejected evidence of persons to be called as expert witnesses for the appellant; and had not disclosed those matters. It alleged that the arbitrator's conduct gave rise to a reasonable apprehension of bias.

"There is no suggestion in this case of actual bias. The question of apprehended bias as a disqualification from adjudication in a court of law was most recently considered by this court in Rozenes v Kelly [1996] VicRp 20; [1996] 1 V.R. 320. As it was there stated at 329 the essential issue in such a case is whether in all the circumstances, a fair-minded lay observer with knowledge of the material objective facts might entertain a reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the resolution of the matters before him."[13]

"Although the criterion of apprehension of partiality or prejudice is [sic] possibility, not likelihood, a reasonable apprehension is to be established to the court's satisfaction: it is a reasonable and not a fanciful or fantastic apprehension that is to be established; and the apprehension is to be attributed to an observer who is `fair-minded' - which means `reasonable.'. . . ... Moreover, it is for the court to determine what knowledge the fair-minded or reasonable lay observer is to apply to an appraisal of the situation."[14]

254. He referred to Laws v Australian Broadcasting Tribunal[15] where Mason C.J. and Brennan J. said:

"In assessing what the hypothetical reaction of a fair-minded observer would be, we must attribute to him or her knowledge of the actual circumstances of the case."[16]

Tadgell JA also referred to Webb v The Queen[17] where Deane J considered that the hypothetical figure should have :

"A broad knowledge of the material objective facts as ascertained by the appellate court."[18]

"However one describes the knowledge, the observer whose view the court is to seek is in my opinion to be fastened with sufficient knowledge to enable a rational and reasonable view - not just a perfunctory or superficial view - to be formed. Of course that is really to say no more than that there must be attributed to the fair-minded observer knowledge which would afford an opportunity to consider all the relevant circumstances of the case ... ".[19]

"... it is not uncommon for judges to decline to sit in cases where a witness who is a close friend will give evidence, certainly where it is of a kind which is likely to be challenged. Nor is it uncommon to find in any authorities and elsewhere numerous examples of cases where judges, arbitrators and tribunal members have been held disqualified or have disqualified themselves by reason of a former (or existing) professional relationship with a witness or party. Even there the nature and extent of the relationship is all important for, by reason of the cab-rank principle, most judges will have acted on a number of occasions for certain parties, particularly corporations, in cases of no great consequence and in circumstances where it would be almost impossible to recall every such occasion. Likewise arbitrators may have acted, if barristers, as counsel or, if expert witnesses, may have given evidence, on behalf of a wide variety of clients who may become a party to a particular arbitration. The perception of possible bias will vary according to whether the tribunal is a judge holding a permanent appointment or whether the tribunal member is an arbitrator appointed amended defence hoc for a particular case, for there the frequency of appearances for a particular client may reasonably lead to a perception that the client might in the future only retain the arbitrator in his professional role if the dispute is resolved in its favour. Likewise it would be unthinkable for a barrister with a general retainer or a solicitor whose firm is ordinarily retained by a client to accept appointment as an arbitrator in a matter involving that client, unless the other party were to waive any objection. Disputes as to apprehension of possible bias, however, may arise where a judge has been briefed before appointment on one or more occasions by a particular client in respect of complex matters or relating to its business as a whole, as can be seen from the discussion in cases such as S. & M. Motor Repairs Pty. Ltd. v. Caltex Oil (Aust.) Pty. Ltd. (1988) 12 N.S.W.L.R. 358 and Precision Fabrication Pty. Ltd v. Roadcon Pty. Ltd (1991) 104 F.L.R. 260."[20]

268. It is clearly established that a determination of whether there are grounds for a reasonable apprehension of bias depends upon the particular facts of the case.

271. Further, as the High Court has emphasised in Ebner v Official Trustee in Bankruptcy; Clenae Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd,[21] a trial judge should not "too readily" accede to objections based on apprehensions of bias, in order to avoid the dangers of forum shopping "or manipulation of the composition of the bench" which may attend such an approach.

274. The fair minded lay observer, while not fixed with detailed knowledge of the particular case, or the ability and character of a particular judge, is assumed to be reasonable and to have knowledge of ordinary judicial practice and the actual circumstances of the case.[22]

277. In Kilpatrick Green Pty Ltd v Leading Synthetics Pty Ltd[23] a defendant sought that a special referee be removed, on the ground of apprehension of bias. The special referee (who was appointed in February 1997) had, in June 1997 disclosed, inter alia, that he had been retained in May 1997 by the solicitors for the plaintiff, in relation to proceedings which were entirely separate from the dispute between the parties. There was no costs agreement between the special referee and the solicitors for the plaintiff.

280. McDonald J held that no reasonable apprehension of bias was established. His Honour stated:[24]

"In my view the first matter that a fair minded observer would have regard to as part of his or her knowledge when considering the facts and circumstances relied on by the defendant would be the fact that [the special referee's] professional dealings with the plaintiff's solicitors subsequent to 21 April and before 25 June did not in any way relate to the subject proceedings, nor did it relate to any party the subject of the proceedings. It related to an entirely separate matter which was the subject of this professional relationship between [the special referee] and the plaintiff's solicitors. In Aussie Airlines v Australian Airlines [1996] FCA 1308; (1996) 65 FCR 215, Merkel, J, when considering whether a personal relationship which existed between himself and counsel appearing for one of the parties in proceedings before him might give rise to a reasonable apprehension of bias, drew a distinction between such personal relationship between a judge and counsel appearing before him as against the relationship existing between the judge and the party to the proceedings on which he was sitting. At p231 His Honour expressed the view that a fair minded observer would be aware of the importance and substance of such a distinction. With respect to the latter relationship he said `there may, by reason of the perceived prospect of favour, be a cogent and rational link between the association and its capacity to influence the decision to be made'; whereas in the former situation `there was no such link as the observer must be taken to have understood the professional role of counsel'. In my view, in so drawing this distinction, his Honour expressed in another manner that for a possible apprehension of partiality or prejudice to arise from the association or relationship between the presiding judge and another to be a disqualifying factor, the possible apprehension on the part of the observer arising out of such a relationship , must in all the circumstances be reasonable. In the circumstances of this case, a fair minded observer would be aware and have knowledge that [the special referee] was a practising barrister, who, in addition to acting as a mediator and a special referee, acted for persons in a professional capacity, having been retained to do so by solicitors for such persons. The observer would know and appreciate that in consequence [the special referee] would from time to time have a professional relationship with such solicitors while acting on behalf of their clients. Such observer would know that a barrister may be acting professionally for a person against another whose solicitor had at the time retained him to act for another client or had previously done so or was likely to do so in the future. The observer would know that the relationship existing by acting for another client of that solicitor, or having done so, would not affect the manner in which counsel performed his professional duties to his client. Such is the common role, duties and functions of counsel and could not be said reasonably by a person aware of such facts to give rise to any conflict of interest or disqualify counsel from acting for his client."

284. In Wintle v Stevedoring Industry Finance Committee[25] Ashley J declined to disqualify himself on the application of the defendant asbestos manufacturers, who alleged apprehended bias on the basis that the judge, had, as a barrister, appeared against the defendants in cases in which the same, or closely related arguments, which involved evidentiary disputes, had been raised.[26] Further, they contended that credibility had been at issue in those cases, and could bear on the exercise of the judge's discretion in the case currently before him. The defendants also relied on the fact that the judge had been quoted as criticising a witness in the cases in which he had been involved as counsel.

287. Ashley J did not accept that the issues in the cases in which he had appeared as counsel were the same as in the case before him. He noted that his criticism of the witness, when taken in context, was at a personal level. He had criticised only one of many witnesses, who was not a deponent in the current matter or an author of any relevant material. His Honour stated:

"The question of apprehension of bias has been addressed in the context of judges who have previously acted for or against a party to litigation, whether as counsel or as solicitor; and as well a case in which advice was given concerning legislation which then fell for judicial construction. Those cases show that the general test of reasonable apprehension of bias applies. They emphasise the need to identify the issue to be judicially decided and the detail of the judge's prior connection with a party to, or the subject matter of, litigation. They emphasise also that, whilst justice must be seen to be done, this requiring that a judge withdraw if there is reasonable apprehension of bias, at the same time a judge has a significant duty to hear any case in which there is no proper reason to disqualify himself."

"In my opinion, viewed from the perspective of the hypothetical bystander, the case for apprehended bias ... was not at all persuasive. The only involvement I was shown to have had in [the relevant] litigation was a long time ago, and only in the precursors to trials which never took place. ... The highest that the matter could possibly be put is that by reason of my transient involvement in litigation many years ago I might be taken by the reasonable bystander to have formed some view about the opinions expressed in [a certain affidavit]. But it seems to me, with respect, that a fair-minded and reasonably informed observer would dismiss such an hypothesis."

295. In S & M Motor Repairs Pty Ltd and others v Caltex Oil (Australia) Pty Ltd & Anor,[27] the New South Wales Court of Appeal upheld a trial judge's refusal to disqualify himself for apprehended bias on the ground that, while a barrister, he had appeared for Caltex, (or its associated companies), on a number of occasions. Caltex or (its associated companies) was one of the parties to the litigation. The judge had represented Caltex in significant civil proceedings, a number of smaller litigations, public inquiries and in a Royal Commission, although he did not have a retainer, general or special, for that party and had, as a barrister, acted for hundreds of persons, including corporations and governments.

298. Priestley and Clarke JJA, in their joint judgment, observed that Caltex was a large and shifting body, which had been reconstituted and had changed hands over the years. The impersonality of a "large industrial corporation" did not, in their view, support the reasonable apprehension of bias which might arise by reason of an association with a smaller continuing group.[28]

301. In my opinion, as Mr Collins contended, the above observation is equally applicable to the indiscriminate affiliation asserted with "unions" generally by the plaintiff in the present case.

304. Priestly and Clarke JJA also emphasised that, in the context of determining reasonable apprehension of bias:

"We ... emphasise that in this case the court must choose between the apprehension of the average (and relatively uninformed) citizen and that of the ordinary citizen with sufficient knowledge of the subject to make a reasonable judgment. In other words, justice must be seen to be done, but by what observers? We think, in a case such as the present, where some particular knowledge is needed for a sensible opinion to be formed, the only apprehension of possible bias worth considering is that of the moderately informed observer rather than an observer at first uninformed, and when informed unable to explain adherence to his or her first opinion. This conclusion is related to our earlier comment that the reasonable observer would want to know, at least in outline, the relevant information, before deciding whether or not to be apprehensive of possible bias. We stress that whenever a court is called on to decide whether disqualifying bias or apprehension of bias exists all the circumstances of the particular case must be looked at. Take one example only, similar to the present but which could be harder to decide, depending on the facts; the question whether a judge should hear a case concerning a company, when he is a close friend of a shareholder in it. Much might depend on the size of the company and the size of the shareholding. The need to look closely at the facts is shown, for example, by the possibility of different decisions being arrived at if the judge did know, or should have known or did not know of his friend's shareholding. It would also be necessary to know what was meant by `friend' in the circumstances, as that word can describe relationships of many different kinds."[29]

309. In the present case, the objection to the arbitrator is not a prior connection or current affiliation to either party, or to any prospective witnesses, or to any particular union, including the union relevant to the dispute. No union or union member is a party to the proceeding. It is not contended that the arbitrator has any retainer, general or special, for any union. The evidence establishes that he observes the "cab rank" principle, and has occasionally acted against a union or union member. Rather, the objection is that the arbitrator has acted predominantly for unions, or union members generally, in his professional capacity, first as a solicitor, and subsequently at the bar. It is said that that pattern of professional practice constitutes "an affiliation" with unions generally, and, because the primary issue of construction in the arbitration may involve background concerning the plaintiff's relationship to unions, bias may reasonably be apprehended.

312. There is no allegation that the dispute involves identical or similar issues to those in previous cases in which the arbitrator has acted as a solicitor or barrister. The potential relevance of union conduct, or the plaintiff's relationship with unions, is, in my opinion, indirect and debatable.

315. The facts of the present case are very far from the "unthinkable" position contemplated by Ormiston JA in Gascor v Elliott of a barrister with a general retainer from, or a solicitor whose firm is ordinarily retained by, a particular client, who accepted appointment as an arbitrator in a matter involving that client.

318. In my opinion, a fair minded lay observer with knowledge of the material objective facts, including knowledge of the issues to be determined on arbitration, the professional history of the arbitrator, the nature of, and rules governing, his professional practice, and other relevant circumstances, would not conclude that there was any cogent and rational basis to apprehend that the arbitrator's predominant representation of unions generally would influence the decision to be made in the arbitration.

321. In those circumstances, the plaintiff has not established any basis for a reasonable apprehension of bias in the arbitrator.

324. It follows that, in my opinion, the proceeding should be dismissed.

[1] Coldelfa Construction Pty Ltd v State Railway Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 352.

[2] BP Refinery (Western Port) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283.

[3] Mond v Berger [2004] VSC 45, 23 February 2004.

[4] [1994] HCA 30; (1993-1994) 181 CLR 41.

[6] R v Sussex Justices, Ex parte McCarthy [1924] 1 KB 256, at 259, per Lord Hewart CJ; Re JRL, Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342 at 351-352.

[7] [1983] HCA 17; (1983) 151 CLR 288.

[9] [1989] HCA 45; (1989) 168 CLR 1.

[10] [1994] HCA 30; (1993-1994) 181 CLR 41.

[12] [1997] 1 VR 332.

[15] [1990] HCA 31; (1990) 170 CLR 70.

[17] [1994] HCA 30; (1993-1994) 181 CLR 41.

[19] [1997] 1 VR 332 at 342.

[21] [2000] HCA 63; (2000) 205 CLR 337.

[22] Gascor v Ellicott [1997] 1 VR 332 at 342; Dovade Pty Ltd v Westpac Banking Group & Anor [1999] NSWCA 113; (1999) 46 NSWLR 168 at 188 [92]; Barbosa v Di Meglio [1999] NSWCA 307 at [8]; Webb & Hay v R [1994] HCA 30; (1994) 181 CLR 41; Laws v Australian Broadcasting Tribunal [1990] HCA 31; (1990) 170 CLR 70.

[23] No 4990 of 1996 SCV, McDonald J, 22 July 1997.

[25] Wintle v Stevedoring Industry Finance Committee [2002] VSC 39.

[27] (1988) 12 NSWLR 358.