Buckley v Bennell Design & Construction Pty Ltd

After the commencement of the proceedings, the Court (Holland J.), by consent of these parties, ordered "That the questions and matters in dispute in these proceedings be referred to" a named person "as arbitrator, being the arbitrator agreed upon by the parties, under the provisions of Section 15 of the Arbitration Act, 1902 ". That was on 8th March 1974. The arbitrator entered upon the reference and published his award. That was on 2nd April 1976.

Thereafter the appellants, by summons in the proceedings, sought of the Supreme Court an order that the award "be set aside or referred back" to the arbitrator or, alternatively, that the arbitrator be ordered to state in the form of a special case his findings as expressed in the award and his reasons therefor. The grounds on which the appellants based their summons included the following:

1. The (Arbitrator) has misconducted himself or misconceived his function

2. the arbitration proceedings were misconducted or miscarried:

(i) The award is inconsistent and bad on its face in that it discloses errors of fact and law.

(ii) The award does not or is uncertain as to whether it does disclose findings determining the matters referred to arbitration by the Court and/or arising from the pleadings in the arbitration and the particulars exchanged by the parties and determine matters outside of those referred by the Court.

(iv) The (Arbitrator) erred in law in that he failed to state a case or bring down the award in the form of a special case when reasonably requested so to do by Counsel for the Plaintiffs

(v) The (Arbitrator) erred in law in failing to observe the rules of procedure and evidence and in excluding, failing to have regard to or giving insufficient weight to material evidence and in bringing down an award which was reasonable and against the evidence and the weight of evidence.

(vi) The (Arbitrator) erred in law in that he misdirected himself as to the nature of and the true construction of the contract, as to the legal effect of the actions of the parties thereunder, as to the doctrine of fundamental breach, as to the law to be applied as to rescission, repudiation, acceptance of repudiation, termination and the ascertainment of damages.

(vii) The (Arbitrator) erred in law in failing to find that the first-named Defendant had committed a breach of fundamental breach of the contract having found that the Defendant Bennell Design & Construction Pty. Ltd. had engaged a hire company R. J. Bennell Pty. Ltd. to hire to the Defendant plant, materials and equipment the cost of which was charged by the Defendant to the Plaintiffs.

Thereafter the respondents, by notice of motion, sought leave to enforce the award. The summons and the notice of motion came before the Supreme Court (Wootten J.) contemporaneously. Upon an application by counsel for what was claimed to be a preliminary question of law to be decided separately from and before the decision of any other question, and for the reference of that preliminary question to the Court of Appeal Division of the Supreme Court, there being no opposition to that course by counsel for the respondent, the learned judge, being satisfied that the preliminary question of law did arise, by order referred the following question to the Court of Appeal Division:

Are the principles which determine whether the Court should set aside or remit an award made by an Arbitrator or referee agreed on or appointed under Section 15 of the Arbitration Act 1902 (as amended) the same as those applicable in relation to an award made on a submission within Section 4 of the Act as was held by the Full Court in Sydney & Suburban Hydraulic Power Co. v. Mercantile Mutual Insurance Co. [1] in relation to the corresponding provisions of the Arbitration Act 1892? He further ordered that the proceedings be removed to the Court of Appeal. These orders were made on 21st September 1976. 1. (1896) 17 N.S.W.L.R. 323.

The matter in due course came before the Court of Appeal which answered the question in the affirmative and ordered the proceedings to be remitted to the Equity Division [2] .

The Court of Appeal considered for itself the construction of the Arbitration Act, 1902 N.S.W., as amended ("the Act"), in particular ss. 15 and 16, round which the submissions of the parties centred. It came to the same conclusion as had the Supreme Court in 1896 in the case of Sydney & Suburban Hydraulic Power Co. v. Mercantile Mutual Insurance Co. [3] upon identical provisions of the Arbitration Act, 1892. In fully expressed reasons published on 4th April 1977, their Honours of the Court of Appeal considered the submissions of counsel and reviewed the decisions of the English and Australian courts to which they were referred. But they concluded that the former decision of the Court had not been shown to be wrong.

On 4th August 1977, this Court gave the appellants special leave to appeal from the judgment and order of the Supreme Court.

I have troubled to recite these facts relating to the proceedings because it is somewhat ironic that the use of a provision for arbitration under an Act basically designed to secure early finality of cases suitable for disposal by arbitration should have delayed the enforcement of an arbitrator's award for the space of some two years.

Before I enter upon a discussion of the construction and operation of the relevant sections of the Act of 1902, I would venture to suggest that an exploration of the grounds put forward by the appellants on their summons for a review of the arbitration proceedings might well have disclosed whether or not there was any basis for the charge of misconduct against the arbitrator, that is to say, misconduct of the kind which entitles a court to displace an award or to refuse to act upon it. What is misconduct in this sense is fairly well evidenced, though perhaps not exhaustively, in the decided cases: see Russell on Arbitration, 18th ed. (1970), p. 378. If there were such misconduct on the part of the arbitrator, or if there were error of law on the face of the award upon a question not itself referred to the arbitrator, no such preliminary question as was thought to arise would have been material. The Court could unquestionably have acted on the proved misconduct of the arbitrator or on the relevant error of law: or, on the other hand, if it did not find misconduct or error of law, could have entered judgment on the award.

Such an examination might also have produced particularity in the submissions of the appellants in relation to an order to review the arbitrator's award. In the arguments we have heard, such precision has, in my opinion, been lacking. The exact parameters of the suggested review have not really been fully specified.

A cursory examination of the grounds set out in the appellants' summons emphasizes the uncertainty and vagueness of the appellants' propositions. I have listed the grounds and would briefly comment on them.

If ground 2 (i) were made out and it was concluded that that question of law had not been referred to arbitration, the Court could have dealt with the award: it would have exhibited relevant error of law on its face. Ground 2 (ii) would not appear in any case to be a relevant ground, and as expressed is obscure. Ground 2 (iv) is ordinarily an irrelevant ground unless the request for the statement of a case had been made during the pendency of the arbitration, a fact not stated in the ground. Ground 2 (v) either is supportive of the ground of misconduct on the part of the arbitrator or is an inadmissible ground. Ground 2 (vi) would not appear to be a relevant ground as the construction of the agreement was clearly itself a question necessarily involved in the reference of the entire matter to the arbitrator. Ground 2 (vii) might appear to be an attempt to appeal from the arbitrator's award.

Had the appellants been driven to be specific at the time the summons came on for hearing, I doubt whether the question in fact referred to the Court of Appeal would have been expressed in the manner it was: or, indeed, whether any question would have been referred. As it is, I have found the question posed for the Court inappropriate to elicit a statement of law germane to this case and of use in its resolution. Indeed, in the course of argument, other formulations have had to be devised in the hope of securing to the parties some utility and finality from the expenditures and loss of time in the proceedings which have taken place.

Courts of first instance need, in my opinion, to be chary of dividing a case so as to attempt first to have determined by an appellate court what is presented as a preliminary point of law and thereafter to determine what I might call the merits or substance of the case. Too often, the suggested preliminary question either does not really arise, or requires the determination of facts to make it of relevance, or, if the question does arise, its resolution fails to be definitive of the rights of the parties. There are, of course, cases which can be disposed of, as it were, on demurrer. But, in my experience, they are very much the exception, rather than the rule. Better, in my opinion, that the court of first instance should decide the whole case at the outset. Its decision may prove acceptable to the parties, even if not satisfying to the academic interests of counsel.

In this case the primary judge was bound by the decision of the Supreme Court in 1896. If he found no misconduct in the arbitrator, as misconduct is understood in relation to arbitration, and no relevant error of law on the face of the award, his order entering judgment on the award might have ended the litigation.

But, when all that is said, it now falls to this Court to decide the construction of the relevant sections of the Act of 1902. That, of course, is the only question involved.

Two matters ought at the outset to be emphasized. First, that at the time of the passage of the Act of 1902 and of the passage of its progenitor, the Act of 1892, the finality of the award of an arbitrator made upon a reference by parties was deeply entrenched in the relevant law. Both questions of law and questions of fact could be referred to arbitration and the conclusiveness of the award extended to both. Error of law on the face of an award might open the way to setting it aside, unless it could be concluded that the particular question of law so exposed in the award itself or in incorporated documents had been specifically, or by necessary inference, referred to the arbitrator for decision. Misconduct on the part of the arbitrator could be visited by an order setting aside the award. The arbitrator might state his award in the form of a case for the opinion of the Court and thus shift from his own shoulders to those of the court the decision of any matter of law: or, during the pendency of the arbitration, the arbitrator might himself state a case for the Court on a point of law or, if at the request of a party made during the pendency he refused to do so, be ordered by the court to state a case. All this was understood in 1892. Arbitration as a legal concept necessarily involved as predominant elements a minimum of formality and a maximum of finality. It is against such a background that the construction of the relevant sections of the Act of 1902 must be essayed.

The second matter to be borne in mind is that, quite apart from the finality of an arbitrator's award, an appeal from the finding of a tribunal was not in the vein of the common law. Essentially, the decision of the primary tribunal, a jury as of other times, was final. Mistakes on the part of a directing judge or perversity on the part of a jury could be corrected: but, in reality, there were no appellate procedures from the verdict of a jury. Consequently, as has been authoritatively pointed out, if there is to be an appeal from any tribunal, it must be given by statute. Because of the basic inclination of the law towards early finality in litigation, the grant of a right of appeal will need to be specific, either express or by necessary intendment. This, too, was an entrenched principle as of 1892.

In the present case, the reference was of the whole cause to the arbitration of a person chosen by the parties themselves. No directions were given pursuant to s. 16. Necessarily included in that reference were questions of law, for the appellants' claim was to have lawfully rescinded a building contract. Had the reference been affected by submission by the parties of the whole dispute to such an arbitrator, there could be no question, absent relevant misconduct and error on its face in a matter of law not referred to the arbitrator, that the award would have been final. The evidence and any reasons for the making of the order not incorporated in it would not have been examinable by the court, unless possibly as material relevant to a charge of misconduct.

It would be, in my opinion, a surprising result that, because, instead of submission to arbitration outside any proceedings between the parties, the Court by consent referred the proceeding which had been commenced to the arbitration of a mutually acceptable arbitrator without any special directions, this finality did not attach to any resultant award. But it is the appellants' submission that it does not: that a reference in these circumstances under s. 15, according to the submission, leaves the Court free to review the findings of and the evidence before the arbitrator, and to decide the matter for itself.

Two reasons, in a sense antithetical, are given for this conclusion. First, it is said that, by deeming the arbitrator or referee to be an officer of the court (s. 16 (1)), which an arbitrator upon a submission is not, the Act has authorized the Court to review all that either arbitrator or referee does. This is so, so it is said, because all that an officer of the Court does is always subject to review by the Court.

Secondly, it is said that by treating the award or report of the arbitrator or referee as equivalent to the verdict of a jury, the legislature has exposed the award or report to review to the same extent as might be had of a jury's verdict.

I said that these two grounds were in a sense unable to stand together. On the first ground, there is no limitation to the extent of the review which the Court might undertake: whereas under the second, only a very limited review seems to be claimed to be possible. In my opinion, the two grounds cannot be treated cumulatively to ground a right of appeal or review. I do not find any assistance in the construction of the section from the circumstance that both provisions are in s. 16. If the first ground be right, the second has no validity. On the other hand, if the second be right, the first cannot be.

As to the first of these grounds, I am content to adopt the reasons given by Hutley J.A. in the Supreme Court for rejecting it. His Honour convincingly shows that the general assertion that all the acts of an officer of the Court are so far under its control as to be "reviewable" is incorrect. Further, it would be an extraordinary way for the legislature to effect such a radical departure from basic concepts of arbitration and of the absence of appellate rights merely by making the arbitrator or referee an officer of the Court. There may, of course, be some matters in respect of which the Court may exercise control of its deemed officer. Perhaps these may be expressed to some extent in the directions which s. 15 authorizes the Court to give. But, whatever may be the matters with respect to which the Court may control its officer, they do not, in my opinion, include a power to review or rehear the award of the arbitrator. In this connexion, I should emphasize that the directions of the Court under s. 16 are limited to the manner of the conduct of the reference: they do not extend, in my opinion, to the determination of the consequence of the award. But, of course, the statement of the matter referred may have some influence on the nature and effect of the award. Cases on the judicature provisions for reference of matters to a referee or special referee for trial are, in my opinion, in a different field to a reference to arbitration. In my opinion, the submission based upon the first ground on the deeming of the arbitrator to be an officer of the Court should be rejected.

The second ground, in my opinion, meets an initial difficulty in the language of s. 16 itself. The section in terms provides that if not "set aside", the award is to be "equivalent to the verdict of a jury". That language pre-supposes that any power to set aside the award will exist before the award has become the equivalent of a verdict of a jury. Of course, there are, as I have indicated, grounds of a limited nature on which an award may be set aside, e.g. misconduct or relevant error of law on the face of the award. But if no such grounds have led to the setting aside of the award, it then and for the first time becomes the equivalent of a verdict of a jury. It would, in my opinion, be a strange construction which made the award reviewable, either wholly or partially, simply because, not having been set aside, it was deemed to be the verdict of a jury. In any case, there exists, to my mind, an acceptable explanation of the treatment of the award as the equivalent of a verdict.

In the case of a submission, the rules in the Second Schedule to the Act apply (s. 5). The manner of enforcing an award made on a submission is laid down in s. 14. But the rules in the Second Schedule do not apply to a reference under s. 15. It was therefore necessary to give the Court the power to decide the manner in which the arbitrator should proceed and to provide for a means of enforcing the award. Further, as the reference to arbitration is ordered in proceedings which are not thereby terminated and the whole cause could be referred, it was necessary to provide the means of bringing the proceedings to an end.

Section 16 (1) provides the Court with power to determine the manner in which the arbitration shall be conducted. The Court, by its direction, could tailor the manner of the proceedings to the nature and exigencies of the matter referred, be it a whole cause, part of a cause or a specified question. Section 16 (2) provides the means by which at the one time the award may be enforced and the proceedings terminated by the entry of a judgment appropriate to the terms of the award. It might be remarked that it was predominantly, though not exclusively, in relation to common law proceedings that arbitration might be thought appropriate. The entry of judgment upon the award corresponds to the entry of judgment upon a postea in a trial by jury. Thus the manner of enforcing the award was provided.

As I indicated earlier, the precise extent of the review of the award, which the appellant claims to be possible because it is the equivalent of a verdict of a jury, was not made quite clear in argument. Putting aside the complete review claimed because the arbitrator is a deemed officer of the Court, the most I have been able to gather from the argument, the transcript of which I have recently reread, is that the award could be set aside as being against the evidence and the weight of the evidence. This is a rare ground in practice for setting aside a jury's verdict. The ground is really a species of perversity in that the jury have declined to act upon some irrefragable piece of evidence denying the possibility of the verdict they have returned. If this were to be the consequence of treating the award as a verdict, evidentiary problems immediately intrude themselves. Absent any relevant directions under s. 16, the arbitrator is not bound in his award to review the evidence led before him. Unlike a juryman, he is able to use his own expert knowledge of the subject matter. If sensibly chosen, he is selected because he has such knowledge and perhaps, as well, a certain expertise in its employment. He is not bound to record his views as to the reliability or credibility of witnesses. Of these matters he may have his own decided opinion but not vouchsafe it to his pen. He may use a view to inform himself, not being limited as is judge and jury as to the use to be made of a view, assuming of course he makes the view in the presence of the parties or their representatives or does so in their absence with their concurrence. Without special direction under s. 16 he need not even record the evidentiary material before him. It is very different in the case of a jury, which sits in public.

With due respect to expressions in the English decisions, to some of which I shall later briefly refer, the treatment of the award as equivalent to a verdict is not intended, in my opinion, to create any right of review or appeal. It is solely to provide the mechanism by which the finality of an award in an arbitration can be accommodated to the pendency of the proceedings in the course of which the reference to arbitration has been ordered.

Searching the Act of 1902 as closely as I can, I can find no evidence of an intention on the part of the legislature to differentiate in point of finality the award upon a submission and the award upon a reference ordered by a court in proceedings. The change in the law made by ss. 15 and 16 was to permit of compulsory arbitration, in itself a sufficiently radical departure. To read the sections as creating a new mode of trial with full or even modified appellate rights is to attribute to the legislature a vastly different change in the law, one which I cannot think would be done merely by the enactment of ss. 15 and 16. Accordingly, in my opinion, upon its proper construction the Act does not create any right of review or of appeal from the award of an arbitrator made under an order of reference pursuant to s. 16. On this view, the appellants' summons ought to be dismissed and the respondents' motion granted.

But, having regard to the form of the question referred to the Court of Appeal and to the citation of a number of decisions, I should indicate how in my opinion the question should be answered and my comment on the relevance of the cited cases.

As I have indicated, the question posed is not calculated to produce an answer which is sufficiently related to the circumstances of the case to be useful to the parties. I repeat that the case is one in which a court order has been made referring the whole cause to an arbitrator of the parties' choice without any special directions.

Of course, we have no power to change the terms of the question as it has been referred. But we can refuse to answer it by a simple affirmative or negative. We can expand our answer so as to make a useful contribution to the litigation of the parties. Consequently, I would not favour the answer given by the Supreme Court and would prefer an answer which indicated specifically that, unless the arbitrator has misconducted himself or there appeared on its face an error of law in respect of a matter not referred to the arbitrator (an unlikely event having regard to the subject matter of the reference), the award of the arbitrator in this case was final and not open in any respect to review by the Court.

So far I have not sought to differentiate the case of a reference to an arbitrator from that of a reference to a referee. The result of this case does not depend on any decision as to the extent, if any, to which the report of a referee can be reviewed. But, after a good deal of consideration, I am unable to see that any different result should follow if the whole cause or matter were referred to a referee without any specific directions from the consequence of such a reference to an arbitrator. Neither of the grounds on which the appellants have relied would, in my opinion, warrant a different result in such a case.

But the court may refer part only of a cause or matter, or may simply refer a question. No doubt wisdom will in general preclude the reference of a whole cause or matter, the decision of which involves complicated questions of law. Whilst the incidental presence of a matter of law will be no reason for refusing to refer a cause or matter otherwise suitable for reference, it may be undesirable to refer a major question of law to lay arbitration for decision. Again, in the exercise of a discretion to refer, a court or judge will closely consider whether a cause should be dissected, part being sent to arbitration and the other part retained by the court for its own decision. Doubtless, too, the court or judge will consider what directions pursuant to the powers given by s. 16 ought to be given in each particular case or class of cases as to the manner of conducting the reference and as to the form in which an award or report should be made.

The possibilities of the reference being part of a cause or matter or of a specific question to an arbitrator or referee need not be explored in these reasons. Suffice it to express the opinion, as I do, that the answer given by the arbitrator or referee will, in my opinion, have all the finality of an award made upon a submission as to the precise matter referred or the question asked.

I now turn to comment on the cases to which we have been referred. I have preferred myself, as did the Court of Appeal, to construe the statute itself against the background to which I have called attention. In that process I have given no weight to the 1896 decision.

However, I commence my comment by saying that I see no reason to differ from the conclusions reached by the Supreme Court in 1896 in Sydney & Suburban Hydraulic Power Co. v. Mercantile Mutual Insurance Co. [4] . I agree with the Supreme Court in accepting it and in refusing to overrule it. The absence of any discussion in the case in 1896 as to the effect of deeming an arbitrator to be an officer of the court affords, in my opinion, no reason for discounting the affirmative reasoning of the Court in that case. I agree with the Court of Appeal in not placing any significance on the passage of the Act in 1902 after the 1896 decision in terms identical with those of the 1892 Act.

I would take the same view as evidently Day J. took, in Darlington Wagon Co. Ltd. v. Harding and Trouville Pier and Steamboat Co. Ltd. [5] , of the decision of Lord Esher in Longman v. East [6] : the absence of the concepts of arbitration from ss. 56 and 57 of the Judicature Act, 1873 made possible Lord Esher's views in Longman v. East and in Baroness Wenlock v. River Dee Co. [7] (though, for my own part, I would not have drawn the inference which his Lordship drew from the fact that the award was deemed to be the equivalent of the verdict of a jury). It is the background of arbitration which is of significance in the construction of ss. 15 and 16 of the Act. The similarity of language not employed against that background is no warrant, in my opinion, for the transference of the results of the cases on the Judicature provisions into the process of construing the Act in this case.

1. [1891] 1 Q.B. 245. 2. (1877) 3 C.P.D. 142. 3. (1877) 19 Q.B. 155.

Nor would it be right, in my opinion, to rely on the dictum of Vaughan Williams L.J. in Fraser v. Fraser [8] , a case upon the operation of O. XIV, r. 7 and O. XL, r. 6 and 6 (a) of the Supreme Court Rules. The radical distinction of a trial before a Master or referee and a reference to arbitration is recognized in that case: and the precise scope of the dictum is, in my opinion, anything but clear.

Burke v. Lunn [9] was decided upon a provision of the Arbitration Act 1958 Vict. not to be found in the Act here to be construed. Lord Esher's views were adopted but the decision of Menhennitt J. has, in my opinion, no significance in the construction of the Act.

In my opinion, the appeal should be dismissed but the terms of the answer to the question given by the Court of Appeal should be varied in the manner I have indicated.

This appeal turns upon the effect of an order of Holland J. in the Equity Division of the Supreme Court of New South Wales, that "the questions and matters in dispute" in proceedings before him be referred to a named arbitrator agreed upon by the parties. The order was made under the provisions of s. 15 of the Arbitration Act, 1902 N.S.W.. Although relevant extracts from the legislation, together with a full account of the circumstances leading to this appeal, appear in other judgments, I shall set out the terms of three sections of the Act since it is on their interpretation that this appeal turns.

These three sections, ss. 15, 16 and 17, comprise that portion of the Act which appears under a sub-heading which has long been employed in statutes concerned with arbitration, namely "References under order of Court". The sections are as follows:

4. In any cause or matter (other than a criminal proceeding by the Crown), -

(a) if all the parties interested who are not under disability consent; or

(b) if the cause or matter requires any prolonged examination of documents or any scientific or local investigation which cannot, in the opinion of the Court conveniently be made by the Court; or,

(c) if the question in dispute consists wholly or in part of matters of account;

the Court may at any time order the proceedings or any question or issue of fact arising therein, to be tried before an arbitrator agreed on by the parties, or before a referee appointed by the Court for the purpose.

(1) In all cases of reference under an order of the Court in any cause or matter, the referee or arbitrator shall be deemed to be an officer of the Court, and shall have such authority, and shall conduct the reference in such manner, as may be prescribed by rules of Court, and subject thereto as the Court may direct.

(2) The report or award of any referee or arbitrator on any such reference shall, unless set aside by the Court, be equivalent to the verdict of a jury given in proceedings triable with a jury.

(3) The remuneration to be paid to any referee or arbitrator to whom any matter is referred under order of the Court shall be determined by the Court.

6. The Court shall, as to references under the order of the Court, have all the powers which are by this Act conferred on the Court as to references by consent out of Court.

(These sections appear as amended by Act No. 52 of 1970.)

It was under par. (a) of s. 15 that Holland J. made his order. When the nominated arbitrator subsequently made his award one party sought to have it set aside or remitted and the other party sought leave to enforce it. A question then arose as to the principles which should determine whether such an award should be set aside or remitted. This question was asked of, and answered by, the Court of Appeal Division of the Supreme Court. It is from that answer, which was that the principles were the same as applied in the case of a consensual arbitration out of court pursuant to a submission, that this appeal has been taken.

I would allow this appeal. In my view when in any cause or matter a trial is ordered before an arbitrator or referee, pursuant to s. 15, whether of the entire "proceedings" or of a "question or issue of fact arising therein", the outcome of that trial, whether it takes the form of an award by the agreed arbitrator or of a report by the court-appointed referee, is in no way analogous to the award of an arbitrator in a reference by consent out of court. I speak of a "trial" and such it truly is; s. 15 requires that the matter referred "be tried before" an arbitrator or referee. Whether described as a report or as an award, and s. 16 (2) employs both terms, the outcome of such a trial possesses none of the quite special qualities which give to the award of an arbitrator in an arbitration founded upon an out of court submission its own uniquely conclusive character. As Mr. Quintin Hogg, as he then was, said in Law of Arbitration (1936), p. 193, such a reference "is a species of trial, and the decision is now equivalent to a form of judgment or verdict and not an award". In such a reference the court's procedures of adjudication are not abandoned in favour of extra-curial settlement of the dispute by arbitration. Instead the court directs that, for the better resolution of the particular proceedings initiated before it, resort should be had to this special mode of trial which the legislation has made available.

The origin and development of this mode of trial emphasizes how distinct it is from conventional arbitration. The Court of Chancery in England had long been accustomed to refer disputed issues of fact for report by a Master or Chief Clerk or for trial at common law before judge and jury or to be awarded upon by experts specially selected for the purpose: Gyles v. Wilcox [10] . The courts of common law were, by the Common Law Procedure Act, 1854 Eng., in matters of account, given power by ss. 3-10 to refer these to arbitrators or to court officers or, in country causes, to county court judges. The first two classes of persons were described collectively as referees and their conclusions as awards or certificates: see ss. 3 and 6. However that legislation expressly provided, by s. 7, that references made under it should be subject to the same rules as to, inter alia, the enforcing or setting aside of awards as upon references by consent. As Watson B. said in Hogge v. Burgess [11] that section left the matter in no doubt but that "these compulsory references should be governed by the rules of law applicable to ordinary references".

1. (1740) 2 Atk. 141 [26 E.R. 489]. 2. (1858) 3 H. & N. 293, at p. 299 [157 E.R. 482, at p. 485].

Sections 3-10 of this legislation were not copied in New South Wales. That colony's Common Law Procedure Act of 1857 dealt extensively with arbitrations under references out of court, adopting many of the provisions found elsewhere in the English Act of 1854, but not at all with compulsory references.

It was only by the Arbitration Act, 1892 N.S.W. that, for the first time, provision was made for compulsory references under orders of the court. By then significant changes had occurred in the relevant English legislation and it was upon that changed legislation and not upon the original Act of 1854 that the colony's enactment was based. The first change which had taken place in England was effected by the Judicature Act, 1873. That Act was the model for much colonial legislation and that part of the present Arbitration Act, 1902 N.S.W. headed "References under Order of Court" is directly descended from its ss. 57 and 58. Unlike the earlier Act of 1854, the Judicature Act, 1873 did not contain any provisions expressly equating proceedings under its compulsory reference to proceedings upon a voluntary submission to arbitration. On the contrary its s. 57 spoke in terms of matters the subject of a reference being "tried" and of "All such trials" being conducted as Rules of Court should prescribe and otherwise as the court making the reference might order. Then s. 58 deemed referees to be officers of the court and their "report" was to be "equivalent to the verdict of a jury". In Baroness Wenlock v. River Dee Co. [12] Lord Esher M.R. spoke of such a report as therefore only being able to be set aside "in the same way and on the same grounds as a verdict of a jury can be set aside". Somewhat earlier Hawkins J., in Cooke v. Newcastle and Gateshead Water Co. [13] , having referred issues of fact under s. 57 to a barrister as referee and being later asked to set aside his findings, said that the effect of the reference was to substitute the referee for the jury "and to give his findings of fact precisely the same effect as though those facts had been specially found by the jury in open court". His Lordship relied upon Miller v. Pilling [14] , in which both Brett L.J. and Cotton L.J. treated a report by a referee under s. 57 as in all respects the same as a jury's verdict and hence able to be set aside as against the weight of evidence. Hawkins J. went on to say that he himself had no power to set aside, that could only be done by a Divisional Court, the report of the referee being "precisely upon the same footing" as a jury's verdict [15] .

1. (1887) 19 Q.B.D. 155, at p. 158. 2. (1882) 10 Q.B.D. 332. 3. (1882) 9 Q.B.D. 736. 4. (1882) 10 Q.B.D., at p. 333.

Two more measures which call for mention were enacted in England before the colony adopted the concept of compulsory references by order of the Court. The Judicature Act 1884 Eng., by s. 9, enabled the whole of an action to be referred for trial to a referee. Then, in 1889, all this earlier legislation was, as Sir William Holdsworth says, History , vol. xiv, p. 197, used as "the foundation for the further reform and restatement of the law in the Arbitration Act 1889 ". That Act contained under the heading "References under Order of Court" five sections, three of which were adopted almost verbatim when, three years later, New South Wales enacted its own Arbitration Act, 1892. This colonial enactment included a part entitled "References under Order of Court" comprised of these three sections, ss. 12, 13 and 14 (which later reappear as ss. 15, 16 and 17 of the Arbitration Act, 1902 N.S.W. being the three sections which I have earlier set out).

I say adopted "almost" verbatim because of the difference in the persons to whom a matter might be referred for trial. In England, as a result of the First Report of the Judicature Commissioners 1869, s. 83 of the Judicature Act 1873 had created the office of Official Referee, appointed specifically for the purpose of hearing trials under references. No similar office existed in New South Wales. Hence, unlike the English Acts, its legislation made no reference to such referees, nor did it refer specifically to special referees or to officers of the Court: it referred only to "arbitrator" and, quite generally, to "referee". There is, however, no significance in this distinction, just as there was none in the use in the English legislation of both "arbitrator" and "special" referee: Mr. Hogg observed, op. cit. p. 197, that the two terms have no distinct meaning the one from the other, they both apply to persons agreed upon by the parties and not being officers of the court.

The position was, then, that when, in 1892, the first statutory provision for references under orders of court was introduced in New South Wales it took as its model English legislation of some twenty years' standing, legislation around which a body of authority had accumulated. One thing which these authorities had put beyond doubt was that these statutory references had nothing in common with conventional arbitrators, despite the legislation's occasional use of the terms "arbitrator" and "award".

The contemporary texts on the subject reflect, accurately enough, this body of authority. The learned editor of Russell on Arbitration and Award observed in the 10th edition (1919), p. 496, that references the subject matter of that part of the Arbitration Act, 1889 appearing under the heading "References under Order of Court" were "not references to arbitration in the ordinary sense of the term and their inclusion in an Arbitration Act, or in a book on Arbitration causes confusion". Such references, he continued, were nothing more than a delegation of the trial to an officer of the court; hence the need, where the delegate was not already such an officer, to deem him one - s. 15 (1) - for that specific purpose. The sections were no more than a part of the machinery of the court for the trial of some cases or for inquiry and report as to questions arising in such cases. It was for this reason that, as stated in the 12th edition of that work, all discussion of such references was wholly omitted from that and all subsequent editions. The first edition of Halsbury's Laws of England, vol. 1 (1907), p. 483 observes the same distinction: references pursuant to an order of the court under the Act are described as "entirely different from arbitrations held pursuant to a submission out of Court". Mr. Hogg, in his Law of Arbitration, notes, at p. 184, that the decision of one to whom a matter is referred by order of the court under its statutory jurisdiction is "both in its effect and by reason of the provisions relating to appeal or review wholly different from an award in a reference by consent out of Court".

In these circumstances it may seem curious that, only four years after this legislation was enacted in New South Wales, the Full Court of the New South Wales Supreme Court should, in Sydney & Suburban Hydraulic Power Co. v. Mercantile Mutual Insurance Co. [16] , adopt quite another view of that legislation: yet this is what occurred. Their Honours, as the headnote says, concluded that the award of an arbitrator under a statutory reference "can only be set aside upon the same grounds as an award in a voluntary arbitration".

How this conflict with well established English authority arose is, I think, clear enough from their Honours' judgments, the relevant passages from which appear in my brother Jacobs' reasons for judgment. Darley C.J. reasoned from the initial (and, in my view, erroneous) assumption that a reference to an arbitrator, made under the Act by order of the court, was a reference to conventional arbitration with all that that entailed. This assumption once made, all else followed in its train: the Act was not intended to alter the law of arbitration as to the setting aside of awards, that law remained as it ever was and applied to the decision of an arbitrator to whom a reference was made under the equivalent of s. 15 of the present Act. His Honour, by reserving his opinion concerning the case where the reference was not to an arbitrator but to a "referee", disclosed the significance which, for him, the Act's use of the words "arbitrator" and "award" must have assumed, a significance which, with respect, the history of the legislation denies. Manning J. took a like view; the court, he thought, was given "the power to say you must go to arbitration".

Cohen J. reached the same conclusion. He relied upon Hogge v. Burgess [17] but without mention of the fact that that was a case under the Common Law Procedure Act, 1854 to which the quite special provisions of s. 7 of that Act, to which I have earlier referred, applied. His Honour also cited Ex parte Jenkins [18] , a case concerned with an arbitration under the Crown Lands Occupation Act, 1861 and having no relevance to references under orders of court. His Honour also relied upon a case which has been much relied upon in the Full Court in the present case and with which I must therefore deal in some detail: Darlington Wagon Co. Ltd. v. Harding and Trouville Pier and Steamboat Co. Ltd. [19] .

1. (1858) 3 H. & N. 293 [157 E.R. 482]. 2. (1871) 10 S.C.R. (N.S.W.) 231. 3. [1891] 1 Q.B. 245.

That case is reported both in the Divisional Court, where Day J. gave the judgment of the Court, and on appeal to the Court of Appeal. Although that appeal was dismissed, Lord Esher M.R., with whose judgment Lopes and Kay L.JJ. concurred, took a quite different view of the matter from that adopted by Day J. Yet it is upon the judgment of Day J. that reliance has been placed in the Full Court. In the Divisional Court Day J. had rejected a submission that the provisions of s. 15 of the Arbitration Act, 1889, equating "the report or award of any official or special referee or arbitrator" to the verdict of a jury, meant that it was open to a party to canvass such an arbitrator's findings as being against the evidence. His Lordship apparently regarded the Act as applicable to the reference to arbitration there in question and was able to arrive at the conclusion he did only by giving to the words of s. 15 a quite limited meaning, one not affecting the finality of the award. However on appeal a quite different view was taken, one that did not involve any limitation upon the effect of s. 15. The reference to arbitration in question was held to be not a reference pursuant to any statutory power, whether conferred by the Arbitration Act, 1889 or by the Judicature Act, 1873 but, rather, a reference to arbitration, after the institution of proceedings, by consent of the parties. The long-established inherent jurisdiction of courts to make such orders, which result in true arbitrations and conclusive awards to which the statutory provision for references under orders of the court have no application, is described in some detail in the judgment of my brother Jacobs. It was upon this ground that Lord Esher M.R., in whose judgment Lopes and Kay L.JJ. concurred, dismissed the appeal. His Lordship remarked [20] that since the order of the court was "made by consent for the reference of all matters in difference" and was a "much larger order" than any which the Arbitration Act, 1889 could authorize, it must have been one made "under the general authority of a judge to act on the consent of the parties and appoint an arbitrator. The whole validity and force of the reference arises from the consent of the parties". There was, then, no question of the application to it of any provision of the Arbitration Act 1889: the award carried with it all the conclusiveness of a purely consensual award without recourse being had to any restrictive interpretation such as Day J. had thought he must place upon s. 15 of the Act if he were to achieve that result. The observations of Day J. as to the interpretation of s. 15 were, thus, consequential upon a misconception concerning the nature of the award in question. It follows that the Darlington Wagon Case is no authority concerning the operation of the legislation presently under consideration, nor does it represent any departure from the line of English authority to which I have already referred and which is reflected in the texts on the subject.

It is, in my view, not just authority that stands in the way of acceptance of the decision in Sydney & Suburban Hydraulic Power Co. [21] . That decision leads, I think, to undesirable consequences in practice. By treating a reference to trial before an arbitrator, ordered pursuant to the Act, as giving rise to no more than a conventional arbitration, there has been, in effect, a rejection of the possible use of those new procedural tools for the trial of issues or of whole cases which, after some years of experience in England, were sought to be introduced into New South Wales by what are now ss. 15-17 of the Arbitration Act, 1902. Instead of there being references, conducted subject to Rules of Court by persons deemed to be officers of the court and whose decisions would be subject to curial review, an order for reference instead leads only to a conventional arbitration, the only novelty in that being that for the first time courts would have power to compel unwilling parties to submit to such an arbitration. The consequences of this novelty lead me, moreover, to doubt that this was ever the intention of the legislature. One consequence is that when the compulsive power conferred by s. 15 (b) or (c) is exercised, the legal rights and obligations of a party to litigation then being determined by extra-curial arbitral process, the resultant award will attract to itself all that relative immunity from judicial review which surrounds a conventional award. This immunity is well enough in a case of a conventional award, being explained by the consensual character of conventional arbitrations. But in a compulsory reference the consensual element is wholly absent. The party, whether plaintiff or defendant, will never have consented to any such determination of his rights or obligations but will nevertheless find himself denied judicial review of an award which he may regard as palpably wrong in fact or in law.

It was upon the decision in the Sydney & Suburban Hydraulic Power Co. Case that the Full Court substantially relied in the present case, both Reynolds and Hutley JJ.A. expressly following it and the former treating as authoritative the judgment of Day J. in the Darlington Wagon Co. Case [22] . Having already expressed my views as to those two decisions, I shall do no more than, in deference to the views of Reynolds J.A., advert briefly to a passage from the judgment of Vaughan Williams L.J. in Fraser v. Fraser [23] . This is a passage which his Honour regarded as involving some obscurity of expression. It reads:

It seems to me, having regard to the terms of ss. 14 and 15 of the Arbitration Act, 1889, that there are some cases of reference under an order of Court made by consent which fall within the operation of s. 15, and in which, according to my view, there is plainly a right of review. When his Lordship speaks of "some cases" I would understand that to refer to those "cases of reference under an order of the Court made by consent" which are referred by orders made in reliance upon the statutory power conferred by the Arbitration Act. With these are to be contrasted those references ordered by consent pursuant to the inherent jurisdiction of the court. To the latter I have already referred in passing, they are discussed in the judgment of my brother Jacobs; the Darlington Wagon Co. Case itself provides an example of just such a reference, as the Master of the Rolls there explained. So understood, the above passage from Fraser v. Fraser expressly acknowledges the state of the authorities as established by the courts in England. 1. [1891] 1 Q.B. 245. 2. [1905] 1 K.B. 368, at p. 372.

If the Sydney & Suburban Hydraulic Power Co. Case [24] is not to be followed and if, instead, the legislation in New South Wales is sought to be given an interpretation similar to that which it has received in England, questions immediately arise as to how this is to be done. These Jacobs J. examines in the latter portion of his reasons for judgment, first demonstrating that the source of the courts' relevant rule-making powers in both countries did not materially differ and that it was by exercise of those powers that the English Court limited the authority of those to whom references were made: then describing the position in New South Wales and concluding, after discussion of authority, that the absence of appropriate Rules of Court or specific directions did not exclude the Court from the exercise of effective supervision over statutory references. With all this I am in respectful agreement and I share my brother's view that if the award or report which is the outcome of such a reference is erroneous as being against the evidence or the weight of evidence, or errs in law, the party aggrieved has his remedy before the Court.

I would allow this appeal and would give the answer "No" to the question asked.

On 12th November 1973 proceedings were commenced by the appellants and by Treasure Island Shopping Centre Pty. Ltd. as plaintiffs against the respondent company in the Supreme Court of New South Wales in its Equity Division. Treasure Island Shopping Centre Pty. Ltd. has since been made a defendant instead of a plaintiff. The proceedings were by summons in which the plaintiffs sought, inter alia, a declaration that they had validly rescinded a building contract between them and the respondent company dated 26th April 1973 and an injunction to restrain that company, its servants and agents from coming upon or remaining on certain land.

By 8th March 1974 the appellants had obtained possession of the land in question and the question whether or not an injunction should be granted was no longer an issue. On the date last mentioned Holland J. ordered

1. That the questions and matters in dispute in these proceedings be referred to Mr. Peter Anderson of Post Office Box 19, Hunter's Hill, New South Wales as arbitrator, being the arbitrator agreed upon by the parties, under the provisions of Section 15 of the Arbitration Act, 1902.

2. Pending the resolution of the said questions and matters by the said arbitrator proceedings herein be stayed.

Fortunately this order makes it clear that the power intended to be exercised was a power under s. 15 of the Act. Otherwise it could be a matter of considerable doubt. The proceedings were by summons. There were no pleadings. What were the questions and matters in dispute? And as the reference was under s. 15 why were proceedings stayed, just as if there were a reference by consent out of court? But in view of the reference to s. 15 it must be assumed that the order was made under that section.

The arbitrator duly entered upon the reference and on 2nd April 1976 he purported to make and publish his award. On 3rd May 1976 the appellants filed a summons in the original action in which they sought, inter alia, an order that the said award be set aside or be referred back to the arbitrator and, alternatively, an order that the arbitrator state in the form of a special case for the opinion of the court his findings in the arbitration as expressed in the award and his reasons therefor. On the following day, 4th May 1976, the respondent company filed a notice of motion in the action for leave to enforce the award. This could not have been an application for leave under s. 14 of the Act because that section deals only with an award on a submission, the latter word being defined in s. 3 as a written agreement to submit. Previously this motion would have been made pursuant to the power of the court under r. 14 of the 1952 Arbitration Rules made under ss. 16 and 20 of the Arbitration Act, 1902 N.S.W.. Under the old r. 14 the judge could make such order as to him seemed fit. But those rules had been superseded by the rules in Pt 72 of the Supreme Court Rules and the new rules make no provision for an order giving leave to enforce the award. Now, if the award was in the form of a general verdict of a jury presumably it could be followed by judgment but I am not clear whether there are any rules covering other cases. Presumably the court could exercise the power to give particular directions from time to time under s. 16 (1).

Particulars were supplied by the appellants in support of their application to have the award set aside or remitted. Extracts from those particulars are set out in the statement of facts and are as follows:

1. The (Arbitrator) has misconducted himself or misconceived his function

2. the arbitration proceedings were misconducted or miscarried:

(i) The award is inconsistent and bad on its face in that it discloses errors of fact and law.

(ii) The award does not or is uncertain as to whether it does disclose findings determining the matters referred to arbitration by the Court and/or arising from the pleadings in the arbitration and the particulars exchanged by the parties and determine matters outside of those referred by the Court.

(iv) The (arbitrator) erred in law in that he failed to state a case or bring down the award in the form of a special case when reasonably requested so to do by Counsel for the Plaintiffs

(v) The (Arbitrator) erred in law in failing to observe the rules of procedure and evidence and in excluding, failing to have regard to or giving insufficient weight to material evidence and in bringing down an award which was reasonable and against the evidence and the weight of evidence.

(vi) The (Arbitrator) erred in law in that he misdirected himself as to the nature of and the true construction of the contract, as to the legal effect of the actions of the parties thereunder, as to the doctrine of fundamental breach, as to the law to be applied as to rescission, repudiation, acceptance of repudiation, termination and the ascertainment of damages.

(vii) The (Arbitrator) erred in law in failing to find that the firstnamed Defendant had committed a breach of fundamental breach of the contract having found that the Defendant Bennell Design & Construction Pty. Ltd. had engaged a hire company R. J. Bennell Pty. Ltd. to hire to the Defendant plant, materials and equipment the cost of which was charged by the Defendant to the Plaintiffs.

Some of these grounds would be appropriate to the exercise of the power to set aside an award made on a reference out of court. Others, it may be taken, would not ordinarily be so.

On 20th September 1976 an unopposed application was made on behalf of the appellants for an order under Pt 31, r. 2, of the Supreme Court Rules for the decision of a question of law arising in the proceedings separately from any other question and for that question to be referred to the Court of Appeal for determination. The Court acceded to these applications and orders were made as follows:

That the following question of law be decided separately from any other question in the proceedings and before the trial of the proceedings namely -

"Are the principles which determine whether the Court should set aside or remit an award made by an Arbitrator or referee agreed on or appointed under Section 15 of the Arbitration Act 1902 (as amended) the same as those applicable in relation to an award made on a submission within Section 4 of the Act as was held by the Full Court in Sydney & Suburban Hydraulic Power Co. v. Mercantile Mutual Insurance Co. [25] in relation to the corresponding provisions of the Arbitration Act 1892 ".

(2) That the proceedings be removed to the Court of Appeal.

The New South Wales Court of Appeal answered the question in the affirmative and remitted the proceedings to the Equity Division. Special leave to appeal was granted by this Court.

The difficulties in the form of the question were adverted to by Mahoney J. in his reasons for judgment in the Court of Appeal and I must confess that I share those difficulties. However, I shall proceed to the substance of the matters argued. A starting point is the decision of the Full Court in Sydney & Suburban Hydraulic Power Co. v. Mercantile Mutual Insurance Co. [25] . In that case an order was made by a judge in exercise of the powers vested in him by s. 12 of the Arbitration Act, 1892 (s. 15 of the 1902 Act) that the matters in dispute being the issues joined between the plaintiffs and defendants be tried before a named person, the arbitrator, agreed upon between the plaintiffs and defendants. The arbitrator made an award in favour of the plaintiffs. A rule nisi was granted calling upon the plaintiffs to show cause why the award should not be set aside, referred back, or amended and instead thereof a new trial granted or a verdict entered for the defendants. Various grounds were set out including the wrongful admission of evidence, the wrong construction of a proposal of insurance and that the verdict was against evidence and the weight of evidence. It was held that the rule should be discharged on the preliminary ground that the grounds upon which it was sought to set aside the award were not grounds on which an award could be set aside.

"Before the present Arbitration Act it was often felt that the Court ought to have the power of sending cases to arbitration, and consequently s. 12 was enacted, which enabled the Court, in certain cases, to refer the matter to arbitration. But the law of arbitration has not been altered with respect to setting aside an award. If a matter is referred to arbitration by consent under the first ten sections of the Act, the award is binding, and the Court cannot interfere, except in certain specific cases, such as if the award is not final or it is uncertain. The parties having made the arbitrator judge of the law and facts, the Court cannot set aside the award because it is erroneous in point of law or on the facts. It is said, however, if the reference to arbitration be by the Court then the Court can deal with the award as if it were the finding of a jury. In my opinion that is not so. A reference to arbitration by the Court stands in the same position as an arbitration under the earlier part of the Act, and as it was before this Act came into force. Sect. 16" (now s. 19) "provides against any danger of the arbitrator giving a wrong decision in law, because that section enables either party to obtain an order from the Court directing the arbitrator to state a special case for the opinion of the Court on any question of law arising in the course of the reference. But if no action is taken under that section during the reference, it is too late after the award has been made to ask for an order under that section. With respect to the power of the Court to set aside the award of a referee appointed by the Court, it is not necessary to say anything. The point does not arise in this case." 1. (1896) 17 N.S.W.L.R., at pp. 328-329.

I am of the same opinion. What was intended by this Act was this, that in cases where parties ought to go to arbitration and they refused, the Court should have the power to say you must go to arbitration.

Then careful provision is made in s. 16 (now s. 19) "to enable the parties to take the opinion of the Court on any question of law which may arise during the arbitration. But after the arbitrator has made his award and a party has taken his chance of getting a finding in his favour, I do not think the Court should refer the matter back to the arbitrator."

"I am of the same opinion. The cases of Hogge v. Burgess [29] and Ex parte Jenkins [30] shew that the rules as to setting aside an award are the same in the case of compulsory references as in the case of voluntary references. The argument that the award of an arbitrator under a reference by the Court may be treated as the verdict of a jury for the purpose of setting it aside, based on sub-s. 2 of s. 13," (now s. 16) "where it is provided that the "award shall be equivalent to the verdict of a jury," is disposed of by the case ofDarlington Wagon Co. v. Harding and Trouville Pier Co. [31] . If the Legislature had intended that there was to be an appeal from the award of an arbitrator, it should have been given by express enactment. In Sandback Charity Trustees v. North Staffordshire Railway Co. [32] Bramwell, L.J., says: "An appeal does not exist in the nature of things. A right to appeal from any decision of any tribunal must be given by express enactment." And when we find that a right of appeal is provided in certain cases under s. 16," (now s. 19) "then, on the principle expressio unius exclusio alterius, we may presume that the Legislature intended that there should be no appeal except under that section."

For these reasons I agree with their Honours in thinking that the rule should be discharged.

1. (1896) 17 N.S.W.L.R., at pp. 329-330. 2. (1858) 3 H. & N. 293 [157 E.R. 482]. 3. (1871) 10 S.C.R. 231. 4. [1891] 1 Q.B. 245. 5. (1877) 3 Q.B.D. 1, at p. 4.

It has been submitted that this decision was wrong and ought to be overruled. Reliance has been placed upon the course of English authority whereby decisions of official referees and special referees or arbitrators under an order of the court have been regarded as subject to review by the court upon a much wider basis than the court would review the decision of an arbitrator in submissions not made under an order of the court. The English decisions are consistent in this respect and Darlington Wagon Co. v. Harding and Trouville Pier and Steamboat Co., which is referred to by Cohen J. in the Sydney & Suburban Case and which is also referred to in reasons for judgment in the Court of Appeal in the instant case, is no exception. If the decision of the Divisional Court in the Darlington Wagon Case had stood, then it would be an exception but the Court of Appeal took a different view. In the Divisional Court the reference was treated as one to which s. 15 of the Arbitration Act, 1889 Eng. (in terms similar to s. 16 of the New South Wales 1902 Act) applied. The order for reference to arbitration was made before the 1889 Act came into force but the arbitration itself did not commence until after the commencement of the Act. Therefore, s. 25 (s. 27 in the New South Wales 1902 Act) could apply. The Court of Appeal assumed that if the case were one that could be brought within the Arbitration Act it would be so brought by s. 25. It examined the question whether the particular case could be brought within the Act. The agreement for references and the order made by consent was an order for reference of all matters in difference, not simply matters in difference in the action. Therefore, the agreement for arbitration went beyond the special matter of s. 14 of the Arbitration Act (s. 15 in the New South Wales 1902 Act); consequently, s. 15 of that Act (s. 16 in the New South Wales 1902 Act) did not apply.

The decision of the Court of Appeal in the Darlington Wagon Case was short because it was given against a background of knowledge of the previous procedures, a subject matter which has become dim over the years. It is necessary shortly to go back in order to understand the kind of problem which faced the Court in the Darlington Wagon Case and the problem which faced the New South Wales Court in the Sydney & Suburban Case.

Certainly since the end of the seventeenth century the courts had been familiar with arbitration under a rule of court or judge's order. Since the statute 9 & 10 Will. III c. 15 any written submission to arbitration which included an agreement that the submission should be made a rule of court could by a simple procedure be made a rule of court with the result that disobedience to the award made under the submission became subject to all the penalties of disobedience to a rule of court. In the same statute provision was made for cases where the award might be set aside in the court in which the rule was entered in place of the necessity of commencing proceedings in equity.

The power of the court to enter a submission as a rule of court was a common law power preceding the statute of William III. This is made clear by the preamble:

Whereas it hath been found by experience, that references made by rule of court have contributed much to the ease of the subject, in the determining of controversies, because the parties become thereby obliged to submit to the award of the arbitrators, under the penalty of imprisonment for their contempt, in case they refuse submission:

It became established that it was not necessary to have the submission made a rule of court before the arbitration. It was sufficient that it be made a rule of court before enforcement of the award or application to set aside the award.

As well as the procedure whereby a submission to arbitration could be made a rule of court, there was the procedure in all the courts of common law and in Chancery whereby the parties to an action or suit could consent to the questions arising in the action or suit being determined by an arbitrator of their choice. Upon so agreeing, the court would make appropriate orders for arbitration in terms of the parties' own agreement or submission. In the case of actions at law a common procedure appears to have been one under which a jury found a pro forma verdict and an order for arbitration of the amount payable was made by consent. The amount of the award could thereafter be entered as the amount payable under the verdict of the jury and judgment could be obtained accordingly. However, an action could be referred at an earlier stage by order of the court and if the terms of the submission were wide enough the arbitrator could by his award direct what verdict and what judgment should be entered in the action. The procedures in equity were analogous.

The great difference between a submission under a rule of court independently of any action and a submission of a cause or questions at issue in a cause was that in the first case proceedings for enforcement were by attachment whilst in the second case the award of the arbitrator could become a judgment of the court and could be enforced as such. This could be either by the award taking the place of the pro forma verdict, or, if no verdict was taken subject to the reference, where the submission was in terms wide enough to empower the arbitrator to direct what verdict or judgment should be entered. The strength of these differences was diminished during the early nineteenth century by statutes dealing particularly with that question. See 1 & 2 Vict. c. 110, s. 18. But in England the power to attach for disobedience to an award remained at least until the judicature system was introduced. In New South Wales it was provided by the Imprisonment on Civil Process Amendment Act, 1874, s. 6, that thereafter no writ of attachment should be issued to enforce payment of any money but that writs fi. fa. or ca. sa. and such other writs as might be necessary should be issued. Thus the difference between enforcing an award for payment of money made under a rule of court and enforcing an award in a cause or action on a reference to arbitration under a judge's order was reduced.

I have attempted to give the barest outline of the place of arbitration in the courts before the Judicature Act, 1873 and the Arbitration Act, 1889 in England and the Arbitration Act, 1892 in New South Wales. The detail of the law was complex and a study of it resulted in the 3rd ed. of Russell , the 1864 edition, being a volume of over 800 pages.

Both under a submission which could be made a rule of court and a submission in an action by order of the court or a judge the terms of the submission were of primary importance. There were early Arbitration Acts in England and in New South Wales during the nineteenth century dealing with some of the problems which had arisen. Many of those provisions were reproduced in the Arbitration Act of 1889 in England and that of 1892 in New South Wales. The question remained unresolved, in relation to submissions in a cause, as to how far the arbitrator could determine questions of law which arose. I do not propose to elaborate, but it would appear that there was significance in the difference between the submission of a whole cause to the arbitrator in which case he might decide questions of law arising on the pleadings, and submission of particular issues arising in the cause in which case there was no power to decide issues of law arising on the pleadings. But on a reference of a cause in which there were only issues of fact, the arbitrator had no implied power to direct judgment to be entered up for either party even though the submission empowered him to direct the entry of a verdict and to determine what he should think fit to be done by either of the parties: Russell , op. cit. p. 349. And even where there was submission of a cause it was not clear whether the arbitrator ought to decide issues of law as well as of fact. See Russell , p. 118. But certainly when the cause and all matters in difference were referred not on the trial but at some other stage as for instance by a judge's order before trial, the power and duty of the arbitrator to determine a demurrer was quite settled: Russell , at p. 119; Mathew v. Davis [33] .

It should next be observed that when there was a reference after pro forma verdict of a cause and of all matters in difference between the parties, that is to say, matters going beyond the differences arising in the cause, the award could only be entered as a judgment of the court in respect of the matters arising in the cause. The enforcement of the award beyond the matters in issue in the cause lay outside the enforcement of any judgment in the cause itself. See Chitty's Archbold, 10th ed. (1858), vol. 2, p. 1630. The reference by judge's order, before verdict, of a cause and all matters in difference was, it seems, a reference either under common law power or under the statute of William III and the submission was made a rule of court under one or other power. It was enforceable by attachment, subject to statutory provision otherwise.

In 1854 in England limited provisions were introduced for the compulsory reference of questions of account to an arbitrator by the Common Law Procedure Act, 1854, s. 3. Section 7 provided, inter alia, that the proceedings should be conducted subject to the same rules and enactments as to, inter alia, enforcing or setting aside the award as upon a reference made by consent under a rule of court or judge's order. It was decided in Hogge v. Burgess [34] and other cases that an award made under a compulsory reference could only be set aside on the same grounds and in the same circumstances as an award made under a submission by consent. The provisions of the Common Law Procedure Act, 1854, to which I have referred, were not adopted in New South Wales. There had been power given to the Supreme Court by ss. 18 and 19 of 5 Vict. No. 9 compulsorily to refer matters of account in causes to arbitration but these sections were repealed by s. 4 of 12 Vict. No. 1.

This brief outline shows that the Court of Appeal in the Darlington Wagon Case [35] was drawing the distinction along the lines of the previously existing distinction between the reference of a cause to arbitration and the reference of all matters in difference as well as the cause. With that distinction in mind, the court examined the language of s. 14 of the English Act (s. 15 in the New South Wales 1902 Act) and concluded that the reference of all matters in difference between the parties could not be a reference under an order of the court in a cause or matter even though an action was pending and was indirectly referred to. It went beyond. Therefore, it was held that there was no power to review the award on any ground upon which an award made on reference by consent could not be reviewed. Thus the Darlington Wagon Case is no exception to the line of English authority. It is distinctly an authority in line.

I return now to the Sydney & Suburban Case [36] . The judges were clearly familiar with reference to arbitration by order of the court and they were of course also familiar with submissions to arbitration which had been made Rules of Court under the common law power and the power given by the statute of William III. And there was a New South Wales statute dealing with various matters relating to arbitration, 31 Vict. No. 15. References under a rule of court could not be revoked without leave, s. 2. There were provisions for appointment of arbitrators or umpires, much as under the existing provisions. Section 10 went beyond the provisions of the statute of William III in that thereby any reference by consent in writing could be made a rule of court unless the agreement disclosed an intention that it should not be so. (Now, by s. 4 of the 1902 Act the submission unless a contrary intention appears therein, has itself the effect of a rule of court.) There were a number of other provisions for examination of witnesses, enforcing attendance of witnesses, examination on oath and for sending awards back to an arbitrator where application was made to set aside an award. Again much as in the existing legislation.

The members of the Full Court took the view that s. 12 of the Arbitration Act, 1892 was intended to take up those cases where previously the court could by consent order a cause or matter or any matter or question of fact or issue arising therein to arbitration and as well to extend that power to make orders by consent on a submission to cases where there was no consent provided the conditions of the section were satisfied. It would appear that the Chief Justice was inclined to consider a distributive operation of the section whereby in the case of orders to refer to an arbitrator agreed upon between the parties the old law should apply whereas in the case of an order of reference to a referee appointed by the court a different principle might be applied. However, the distributive operation, if any, would surely have to be between an order of reference by consent and an order for compulsory reference. It would appear that in the Sydney & Suburban Case the order was for compulsory reference but with an arbitrator agreed between the parties and not an order by consent for reference to such an arbitrator. I do not think that anything can turn on the distinction in the case of compulsory reference between an arbitrator agreed between the parties and a referee appointed by a court.

The principal argument on behalf of the appellants in the present case is that the New South Wales decision is inconsistent with the line of English authority. This line of authority commenced with the cases dealing with provisions similar to ss. 15 and 16 of the New South Wales 1902 Act which appeared in ss. 57 and 58 of the Judicature Act, 1873. See Longman v. East [37] ; Miller v. Pilling [38] ; Dyke v. Cannell [39] ; Baroness Wenlock v. River Dee Co. [40] . The line of authority continued thereafter when ss. 57 and 58 were replaced by ss. 14 and 15 of the Arbitration Act, 1889. There are many cases, particularly on the question whether the decision should be reviewed in the Divisional Court or the Court of Appeal: Clark v. Sonnenschein [41] ; Munday v. Norton [42] ; Wynne-Finch v. Chaytor [43] ; Fraser v. Fraser [44] . See also Hayward v. Mutual Reserve Association [45] .

1. (1877) 3 C.P.D. 142. 2. (1882) 9 Q.B.D. 736. 3. (1883) 11 Q.B.D. 180. 4. (1887) 19 Q.B.D. 155. 5. (1890) 25 Q.B.D. 226; 464. 6. [1892] 1 Q.B. 403. 7. [1903] 2 Ch. 475. 8. [1905] 1 K.B. 368. 9. [1891] 2 Q.B. 236.

It must, however, be considered whether the rule-making power of the English Court is different from the power in New South Wales to make rules or give directions under ss. 16 (1) and 20 of the New South Wales Act. Concurrently with the coming into force of the Judicature Act in England, Rules of the Supreme Court came into force. The original rules had statutory force. One of those original rules found in O. 36, r. 34 provided that the Court should have power to require any explanation or reasons from the referee and to remit the cause or matter or any part thereof for retrial or further consideration by the same or any other referee.

Then in 1879 this rule which subsequently became O. 36, r. 52 was amplified by adding the words "or the court may decide the question referred to any referee on the evidence taken before him either with or without additional evidence as the court may direct". In December 1889, after the passing of the 1889 Act, r. 55c was added to O. 36. This provided that r. 52, amongst others, should apply where any cause or matter or any question or issue of fact therein, was referred to an officer of the Court or to a special referee or arbitrator.

The form of the English Rules has changed from time to time, always, it would seem, in the direction of a widening of the power of review. In 1919 O. 59a was introduced, its subject matter being "Appeals from Special Referees". Order 59a, r. 1 provided that there should be a right of appeal from any finding, decision or direction and from any judgment entered or signed by leave, order or direction. The appeal was to the Divisional Court or to a judge of other divisions. Now there is an appeal to the Court of Appeal under the present O. 58, r. 6.

The significance of this account of the courses followed in England is that the power in England to make rules relating to references to special referees and arbitrators under s. 14 of the Arbitration Act, 1889 sprang from the same source as the power of the Supreme Court of New South Wales to make such rules. Section 15 (1) of the English Act provided that the special referee or arbitrator should have such authority and should conduct the reference in such manner as might be prescribed by rules of court and subject thereof as the court or a judge might direct. There does not appear to have been any wider rule-making power such as appears in s. 20 of the New South Wales Act. Order 36, r. 52, applicable to special referees and arbitrators by O. 36, r. 55c, provided by 1900 as follows:

R. 52. The referee may, before the conclusion of any trial before him, or by his report under the reference made to him, submit any question arising therein for the decision of the court, or state any facts specially, with power to the court to draw inferences therefrom, and in any such case the order to be made on such submission or statement shall be entered as the court may direct; and the court shall have power to require any explanation or reasons from the referee, and to remit the cause or matter, or any part thereof, for re-trial or further consideration to the same or any other referee; or the court may decide the question referred to any referee on the evidence taken before him either with or without additional evidence as the court may direct. It was established that this rule was applicable not only to cases where the referee submitted a question for decision but generally in other cases. See Clark v. Sonnenschein [46] and Wynne-Finch v. Chaytor [47] . Thus wide powers were given to the Court. But the powers given to the Court were essentially limitations on the authority of the referee or arbitrator and provisions on how the reference or arbitration should be conducted. It was a matter which under s. 15 (1) of the 1889 Act could be prescribed by Rules of Court. If rules provide that an arbitrator or referee should not have authority finally to determine particular questions, then the arbitrator or referee would not have that authority. That, it seems to me, is the real basis of the English decisions. 1. (1890) 25 Q.B.D. 226; 464. 2. [1903] 2 Ch. 475.

I therefore turn first to the Rules of Court under the New South Wales Arbitration Act in order to see whether they disclose any such limitations upon the authority of an arbitrator appointed by the court. The old 1952 Rules and those preceding them did so to some extent. Rule 7 provided:

7. The Arbitrator or Referee may state a case for the opinion of the Court or a judge upon any point of law arising out of any facts found by him upon the hearing of the reference.

4. If either party be dissatisfied with the report or award of the Arbitrator or Referee, he may, within fourteen days from service of the notice mentioned in rule 13, apply to a judge for an order that the report or award be set aside, referred back, or amended.

These Rules were not duplications of the provisions of s. 19 and ss. 12 and 13 of the 1902 Act. No doubt there was a degree of overlap but the basis of the powers given to the Court or a judge was quite different. A good example of how r. 15 could operate in a way in which s. 12 could hardly do so is found in O'Donoghue v. Oliphant [48] . 1. (1903) 3 S.R. (N.S.W.) 47.

Those Rules have been repealed. The only relevant Rule is Pt 72, r. 12 whereunder a party dissatisfied with the award may, within twenty-eight days after service of a copy of the award, apply to the court for an order that the award be set aside or referred back. In my opinion, particular directions could be given under s. 16 (1). No directions have so far beeen given but there is nothing in s. 16 (1) to suggest that directions cannot be given from time to time and in the light of the course of the reference before the arbitrator.

It appears to me that the provision in s. 16 (1) that the referee or arbitrator shall be deemed to be an officer of the Court is to be read together with the later words of the sub-section. They do not themselves add to the powers of the referee or arbitrator or to those of the Court. They assist to express the nature of the control and supervision which the Court may exercise pursuant to its powers under the later words in the sub-section.

Then s. 16 (2) provides that the report or award of any referee or arbitrator on any reference under s. 15 shall, unless set aside, be equivalent to the verdict of a jury in proceedings triable with a jury. It has been submitted on behalf of the appellant that this provision has the effect that the report or award is subject to the same examination by the Court as a jury's verdict and is liable to be set aside for the same reasons. However the sub-section is dealing with the report or award at a time when it has not been set aside by the Court. It has been said that the purpose of the sub-section is to provide that the report or award should be enforced as a verdict of a jury: Glasbrook v. Owen [49] . But not all juries' verdicts are general verdicts on which judgment can be signed, nor will all reports or awards be of this kind. In my opinion s. 16 (2) also expresses the conclusiveness of the report or award unless it is set aside. The issue of fact is finally determined. This accords with the view expressed in Dyke v. Cannell [50] but at the same time is not inconsistent with the view that, on issues of fact, a report or award should only be set aside in circumstances analogous to those in which a jury's verdict may be set aside. See Longman v. East [51] . It is not inconsistent with the conclusion reached by Menhennitt J. in Burke v. Lunn [52] though he was primarily directing his attention to s. 14 of the Victorian Act, a section which has no counterpart in the New South Wales Act. But the arbitrator or referee cannot determine questions of law which arise on the pleadings, questions which would previously have been the subject of demurrer.

1. (1890) 7 T.L.R. 62. 2. (1883) 11 Q.B.D. 183. 3. (1877) 3 C.P.D., at p. 155. 4. [1976] V.R. 268.

When ss. 15 and 16 were introduced in New South Wales they were novel, and it does not seem to me that the extent of their novelty was recognized by the Supreme Court in theSydney & Suburban Case [53] . The Court was of course familiar with arbitrations under Rules of Court or, in causes or suits, under orders of the Court. But essentially all these were arbitrations by submission and the powers and authority of the arbitrator depended upon the terms of the submission agreed upon between the parties. Under ss. 15 and 16 the parties may agree on the issues of fact to be determined by the arbitrator and on the person of the arbitrator but that is the limit of their consensual power. Once those matters have been agreed and the order has been made the matter is governed by Rules of Court or, subject thereto, directions of the Court. I have already attempted to explain how the Court's power of supervision arises under s. 16 (1). It follows that the words in s. 16 (2) "unless set aside by the Court" do not refer only to the setting aside of the report or award under s. 13 by virtue of s. 17. They also refer to cases where the report or award is set aside pursuant to s. 16 (1) and Pt 72, r. 12. Section 17 is not exhaustive of the powers of the Court. Otherwise no effective limit under s. 16 (1) could in many cases be placed on the authority of the referee or arbitrator. Even if s. 17 be regarded as exhaustive of the powers of the Court it does not follow that a report or award may only be set aside or remitted by the Court in the same circumstances as an award on a reference out of Court. The principles developed by the courts in respect of arbitrations by submission have been held to be applicable to the powers of the Court to set aside and remit in the case of references out of court. But those principles do not limit the powers; they define how the powers may in those circumstances be exercised. When the circumstances are different, that is to say, when the reference is by order of the Court under s. 15, the question whether and in what circumstances the powers will be exercised must be determined afresh. This must be so as a result of the terms of s. 16 (1). The authority of the referee or arbitrator is only that given by Rules of Court or directions of the Court. If a referee or arbitrator is given express or implied authority to determine questions of law, including the admissibility of evidence it cannot be implied that he has authority to determine those questions against the law. If he decides contrary to law or acts perversely or unreasonably, as he would do if he decided against the evidence and weight of evidence, he exceeds his authority and the report or award may be set aside, or remitted.

The question remains, however, whether the Sydney & Suburban Case, having stood for so many years, should now be questioned. This question has caused me much difficulty, but I have come to the conclusion that it has had such a stultifying effect upon the very real reform which ss. 15 and 16 introduced that it should be reviewed. The power to refer should have been one which the Court could frequently exercise. As it is, I do not recall in my years on the bench any order of reference under these powers being sought from me at common law or in equity. I can understand that when the view was taken that the report or award and the proceedings leading up to it could not be supervised by the Court or reviewed any more widely than an award on a submission by consent, parties would not lightly agree to such a course. If, after proceedings had commenced, parties wanted a reference of the whole dispute to arbitration, they could enter into a submission out of court or in terms which went beyond the terms of s. 16 as, for instance, by referring questions of law to an arbitrator and providing for the finality of his award. Then the proceedings could be stayed pending the arbitration. Indeed the form of order in the present case could be construed so as to disclose that intention if it were not for the specific reference to s. 15. But parties to an action do not often want to forgo the rights of a litigant to have questions determined according to law correctly applied, including questions of evidence. More importantly, the Court will hardly be prepared to compel parties to forgo its effective control and supervision of proceedings commenced before it in favour of a determination subject to the very limited powers of review which the Court has in the case of an arbitration by consensual submission. That, I think, is one important reason why the Court's power under s. 15 (b) and (c) has remained largely unexercised.

I am reinforced in my conclusion that the Sydney & Suburban Case ought to be reviewed by the decision of this Court in Murray v. Munro [54] . There had been a reference of the case to arbitration under an order of the Supreme Court. Special leave to appeal was granted, one of the grounds being "that the question involved was one of general importance, both as to the effect of the Arbitration Act and as to the remedies available to parties in the case of a reference to arbitration". See per Griffith C.J. [55] and per O'Connor J. [56] . Special leave was rescinded because it emerged that the Supreme Court's decision was based on an estoppel and the question of importance did not arise. But there are dicta in the judgments which, to say the least, cast some doubt upon the strength of the decision in the Sydney & Suburban Case.

1. (1906) 3 C.L.R. 788. 2. (1906) 3 C.L.R., at p. 794. 3. (1906) 3 C.L.R., at p. 797.

In essence, the question in the present case is - what authority, in the absence of Rules of Court governing the matter and in the absence of any special directions given by the Court by the order of reference, has an arbitrator to make an award based on an error of law "as to the nature of and the true construction of the contract, and as to the legal effect of the actions of the parties thereunder, as to the doctrine of fundamental breach, as to the law to be applied as to rescission, repudiation, acceptance of repudiation, termination, and the ascertainment of damages"? See the particulars which I have set out above. Also, what authority has an arbitrator in such circumstances to make an award against the evidence and the weight of evidence? These are different questions but I think that they can be considered together. I do not think that the absence of Rules of Court or of directions given before the arbitration excludes all the Court's powers of supervision except those powers which it possesses in respect of references out of court. In respect of errors of law there can be no implied authority given to an arbitrator under s. 16 (1) to make errors of law. As to an award against the evidence and weight of evidence the dicta in Murray v. Munro [54] strongly support the view that where justice requires it the Court can intervene in much the same way as it can intervene in the case of a jury verdict and grant a new trial. But it must be emphasized that the occasions for any court's interference on the ground that a decision is against the evidence and weight of evidence are rare.

In conclusion I would state that it appears worthy of consideration whether Rules of Court are not desirable to provide definite procedures and practices and a specific statement of the authority of referees and arbitrators and of the limitations on that authority (with consequent power in the Court). Then these potentially useful provisions of the Arbitration Act may well bear the fruit which the legislature intended.

I would for these reasons allow the appeal, set aside the orders of the New South Wales Court of Appeal and in lieu thereof answer the question "No". The appellants should have their costs of this appeal but the costs of the reference of the preliminary question of law before the Supreme Court should be costs in the proceedings in the Equity Division.

This is an appeal by special leave from a judgment of the Court of Appeal of the Supreme Court of New South Wales [57] .

The Court of Appeal followed the decision in Sydney & Suburban Hydraulic Power Co. v. Mercantile Mutual Insurance Co. [58] in answering adversely to the appellant a preliminary question of law on the meaning of s. 16 of the Arbitration Act, 1892 N.S.W..

I agree with Jacobs J. that the Sydney & Suburban Case was wrongly decided. There is merit in not disturbing a longstanding interpretive judgment if it has been working satisfactorily, but s. 16 has hardly been used during this century. It is a fair inference that its disuse has been contributed to by the interpretation given to it in that case. Such an arbitral provision is important enough that it should be reinterpreted so that it may operate properly.

The appeal should be allowed, the orders of the Court of Appeal set aside, the question answered "No", and the costs dealt with as Jacobs J. has proposed.

I have had the advantage of reading the reasons for judgment prepared by Stephen J. and those prepared by Jacobs J. I agree with their reasons for regarding Sydney & Suburban Hydraulic Power Co. v. Mercantile Mutual Insurance Co. [58] as having been wrongly decided. The question remains whether it should after this interval of time be overruled.

It does not appear that it is likely that inconvenience will follow from its being now overruled. On the contrary the likely consequence will be beneficial in allowing a useful and flexible procedure to be adopted. I would therefore agree that the appeal should be allowed and an order made in the form proposed by Jacobs J.