Garms v Telstra Corp. Ltd [1998] VSC 40

Supreme Court of Victoria|1998-08-21|Before: HARPER, J.

I have before me an originating motion issued on 18 September 1996 and amended, pursuant to an order made by Master Kings, on 17 April 1997.

The plaintiffs, who are residents of Queensland and who were at all material times associated with a theatre restaurant known as the "Tivoli", complain about an award made on 8 August 1996 following an arbitration conducted by Dr. Gordon Hughes. The arbitrator found that Telstra Corporation Ltd., trading as Telecom Australia (variously referred to in this judgment as "Telstra" or "Telecom") was liable to three of four claimants. Those claimants were Ann Garms OAM, her husband Harry Garms, a company called Comlaw (No. 62) Pty. Ltd. and another company called Garms Roseville Pty. Ltd. (as trustee for the Harry Garms Family Trust). The sum awarded was $600,000, of which the arbitrator directed that $250,000 be paid to Comlaw (No. 62) Pty. Ltd., $250,000 be paid to Garms Roseville Pty. Ltd., and $100,000 be paid to Mr. Garms. No award was made in favour of Mrs. Garms.

The plaintiffs now seek to set aside the award in part. They submit that the arbitrator failed to consider the claim of Mrs. Garms, and fixed the amount of damages payable to Comlaw (No. 62) Pty. Ltd. and Garms Roseville Pty. Ltd. at a sum which fell far short of the damages which each in fact suffered as a result of what is alleged to have been Telstra's failure to provide the Tivoli with a reasonable telephone service.

The dispute has a long history. Mr. and Mrs. Garms opened the Tivoli Theatre Restaurant at 48/52 Costin Street, Fortitude Valley, Brisbane, Queensland in August 1989. The business has continued ever since to operate at the same premises - a fact which the arbitrator did not appreciate when, at p.7 of his award, he stated that the business "ceased trading in October 1993". The latter date is important because the plaintiffs ceased to operate the business in that month (resuming as operators in January 1996) and because they sought, in the arbitration, "compensation for financial losses and pain and suffering resulting from alleged telecommunications faults which affected their business between August 1989 and October 1993": award, p.6, para. 3.2(a).

The plaintiffs assert, and I have no reason to doubt, that the restaurant provided (and provides) high quality food and entertainment. The Queensland Fire Service has registered it as having a capacity of 950 people. It seats approximately 475 for cabarets, 650 for theatre presentations and in the order of 800 or more at cocktail functions.

From the beginning, the Tivoli's telephone service was provided by Telstra. The plaintiffs assert that the service was, until at least April 1994, well below that which they were entitled to expect. The business depended for its viability upon bookings: it was not a business of the kind which could operate successfully by attracting passing custom. Most bookings were made by telephone. A fully operative telephone service was therefore an essential ingredient in the success of the business. According to the plaintiffs, that ingredient was never provided.

The plaintiffs were not alone as dissatisfied customers of Telstra. A group of them, including the plaintiffs, formed a loose association through which to pursue their complaints against Telstra's alleged failure to provide a telephone service of a reasonably acceptable standard. Those customers call themselves the "COT Cases" or "Casualties of Telecom". It was an acronym which was widely adopted; thus, it was included in the title of a formal report to the then Minister for Communications and the Arts (the Hon. Michael Lee) following an investigation by AUSTEL, the Australian Telecommunications Authority, into the COT complaints: "The COT Cases AUSTEL's Findings and Recommendations April 1994".

By April 1994, the disputes between the COT Cases and Telstra had attracted considerable attention; but they had not been resolved. Telstra had made certain ex gratia payments, including a payment to the plaintiffs of $360,000 pursuant to a settlement executed between the parties on 23 June 1993. This excluded any entitlement to compensation for the period ending on 18 November 1992. Because, however, the settlement was acknowledged as being partial, Telstra suggested that the remaining disputes be resolved out of court. The appointment of an assessor was proposed; and, in accordance with this proposal, Telstra on 18 November 1993 executed a document described as the "Fast Track Settlement Proposal". Five days later, the proposal was counter-signed by Mr. Graham Schorer, one of the COT Cases who signed on behalf of himself as well as others, including the plaintiffs. By paragraph 2(b) of the proposal, an assessor - nominated by the Telecommunications Industry Ombudsman - was to be appointed to conduct a review of the entitlement of each of the relevant COT Cases to compensation from Telstra.

Dr. Hughes was on 17 January 1994 appointed assessor by the Telecommunications Industry Ombudsman. He, however, took the view that his functions could most effectively be discharged if, rather than act as an assessor, he was appointed as an arbitrator. The plaintiffs were (they claim reluctantly - but this is irrelevant) persuaded to agree. At the arbitrator's request, an arbitration agreement was prepared by solicitors and settled after consultations between Dr. Hughes, Telstra and the relevant COT Cases. The agreement as so settled was embodied in a document entitled "Fast Track Arbitration Procedure" which was signed by the plaintiffs on 21 April 1994.

By that time, or very shortly thereafter, the arbitrator had available to him AUSTEL's findings and recommendations into the COT Cases. He read it. He would therefore have been aware that (whether rightly or wrongly) AUSTEL had concluded that Telstra did not always respond appropriately to complaints from its customers. According to AUSTEL, Telstra did not properly understand "the true position with respect to its liability for network service difficulties and faults". This "led to potentially misleading statements": AUSTEL report, p.7, para. 1.30. AUSTEL also found "a system lacking the capability to record reports of a recurrence of a fault that has been reported and recorded as awaiting clearance; thus the full extent of a report experienced by a particular customer is not recorded" and that Telstra lacked "a national procedure in maintaining fault records" some of which, in any event, it disposed of before a dispute had been resolved: ibid, p.8, para. 1.32. According to AUSTEL, Telstra's systems for recording reported faults had been neither comprehensive nor accurate and in certain cases its records "appeared to have minimal worth", while "monitoring records were not retained": ibid, pp.8-9, paras. 1.33-1.35. AUSTEL also concluded that customers who wished to pursue claims against Telstra on an informal basis (and perhaps in other cases as well) were "very much in Telecom's hands and its view whether the case is meritorious": ibid, p.7, para. 1.25.

These references are pertinent because they make a point which ought to have been obvious enough even without AUSTEL's intervention. It was that to a very important extent each of the COT Cases were in Telstra's hands. Telstra held much of the documentation relevant to any attempt to evaluate the extent to which the telephone services provided to the COT Cases had fallen below an acceptable standard; and to the extent that Telstra had failed to keep full and accurate records of the existence, the number and the duration of faults, then no alternative source of information was likely to make good the deficiency. All the more reason, however, to ensure that all the remaining documents of relevance were subjected to proper scrutiny by the claimants and by the arbitrator. Thus, discovery of Telstra documents was necessarily an issue of special significance for the arbitrator. With full discovery of all remaining relevant documents, and on the assumption that he was not distracted by improperly discovered irrelevant documents, the arbitrator's job would be difficult enough (a matter to which I shall return). Without such discovery, the arbitrator was unlikely to reach a proper result.

This, of course, is not to deny the importance of discovery generally. Documents relating to the claimants' alleged financial losses were of obvious relevance, and the claimants were likely to have the majority, if not the entirety, of these. Moreover, the claimants were not without opportunities to enforce the production of Telstra documents by means other than those available in the arbitration. Indeed, it was as early as 19 May 1992 that they lodged their first application under the Freedom of Information Act 1982 (C'wlth.) for Telstra documents relating (or said by the claimants to relate) to their telephone service. A second FOI request, which was signed by or on behalf of the claimants on 27 November 1993, was on 3 December 1993 lodged on the claimants' behalf by the Chairman of AUSTEL. According to the plaintiffs (outline of submissions, 6 May 1998, p.71) the request "was made to assist in the process of obtaining information from the defendant for the plaintiffs to include in their claim submissions". A further FOI request was made by the claimants on 12 April 1994. According to the plaintiffs' outline of submissions, this followed advice given to the claimants by AUSTEL "that further documentation in relation to investigations of the Fortitude Valley [telephone] Exchange and Tandem had occurred after the date of the previous FOI request on 23 November 1993 so that an additional request should be made for this material": ibid.

To the extent that the claimants obtained, through the FOI mechanism, documents of relevance to their case, they were relieved of the need to invoke the procedures of the arbitration for the purposes of the search. In addition, documents obtained through FOI might well point to the existence of other relevant material. It could not, therefore, be said that the claimants were entirely dependent, for the production of important Telstra material, on the good offices of Telstra coupled where appropriate to the coercive powers of the arbitrator.

Nevertheless, Telstra was, in relation to documentation going to the nature, extent and duration of faults affecting the COT Cases, in a position of obvious advantage over the COT claimants. An astute arbitrator, and an astute legal practitioner acting on behalf of the claimants, would I think have appreciated this point from the inception of the arbitration. As the arbitration agreement itself provided (by clause 6) it was to be an arbitration "on the documents and written submissions only". It followed that "the documents" going to faults, and the documents going to the quantum of loss, would be central to the arbitrator's evaluation of the cases for each side. The benefits, therefore, of ensuring that the discovery process was carefully managed, were obvious: it was of great important to Telstra that it not be required to discover irrelevant documents; and it was of equal importance to the claimants that Telstra discover all relevant documents. But, at the same time, an obvious temptation for Telstra would be to flood the claimants with a deluge of documents gathered without any attempt to discriminate between the valueless and the invaluable; while an obvious temptation for the claimants would be to seek documents under broad heads in the hope that somewhere among the dross for which they called would be the nugget for which they hoped. It was therefore potentially of great value to both parties that the parameters of discovery be fixed early and accurately. Only by this means would the possibly overwhelming mass of documentation be contained so far as reasonably practicable while ensuring that the arbitrator and the parties had access to all appropriate material.

Litigators, and the courts, are painfully aware both of the importance (at least in a significant number of cases) of the process of discovery of documents, and also the difficulty of ensuring that its limits are respected while its purposes are advanced. But very often the adversary system, and the constraints imposed by rules of court, place obstacles in the way of the imaginative and creative use of the power to order discovery. An arbitrator operating under arbitration rules specifically designed for the specific case has a golden opportunity to tailor orders and directions concerning discovery so as to encourage, in the particular case, a process of discovery which would achieve the ends desired for it in that arbitration, while avoiding or minimising the difficulties to be overcome in reaching that goal.

There was presented to the arbitrator in this case both the need for, and the opportunity to fashion, a custom-designed discovery process the successful implementation of which would constitute a giant step towards a successful conclusion of the arbitration. It seems to me that this opportunity was missed; and the consequence is this litigation. I must say at once, however, that the arbitrator has not been represented before me. He has not, therefore, been afforded any opportunity to explain or justify the (different) course which he adopted. He may have had good reasons for doing what he did, and for failing to do that which was not done. In this context, it is to be noted that the present plaintiffs had, as claimants, an advantage which other COT Cases may not have, or may not have had. By April 1994, there was available to the claimants a report by a firm of telecommunications experts: George Close & Associates. It is entitled "Telecommunications Survey Analysis and Report on the Tivoli Theatre Restaurant". Its existence may well have influenced the view which the arbitrator took of the appropriate form of the discovery process.

The Report, which is exhibit 38 to an affidavit sworn by Mrs. Garms, covered the period between 1 August 1989 and 9 October 1993. It is very long (336 pages) and contains much technical detail as well as much background documentation the relevance of which I am unable to assess. In an "Executive Overview" which forms section 1 of the Report, the author refers to the results of an examination of files obtained by Telstra under Freedom of Information legislation. There was in these files, according to the author, "documented evidence of an extraordinary number of exchange and line problems, fault conditions and faults on the Tivoli telephone service, which went far beyond any situation I have ever encountered in my professional life". There followed reference to particular faults experienced by Tivoli patrons and staff resulting in what was said to have been more than 3,800 fault reports being made to Telstra. According to the "Executive Overview", the restaurant lost two out of three calls over "extended periods" and "in some periods almost all calls were lost". This appears to be a reference to the four days between 21 May 1990 and 24 May that year, when (according to the "Executive Overview") the Tivoli was without a telephone service. The "Executive Overview" also asserts that the records of Telstra "established that more than 11,800 calls did not result in a ring tone ... (no ring received)."

In the present context, it is of particular importance to note that the Report contains no suggestion - certainly none in the "Executive Overview", and none of which I am aware in the hundreds of pages which follow - that the author had through lack of documentation experienced problems in coming to his conclusions. On the contrary, the second paragraph of the "Executive Overview" asserts that "[t]he attached evidence clearly establishes that the overall network (end to end) performance and the telephone service provided to the Tivoli Restaurant and Theatre for 50 of the 51 months from 1 August 1989 to 9 October 1993, was grossly inadequate". Then, at p.2, the Report refers to "documented evidence" in files obtained from Telstra under FOI, of the "extraordinary number of exchange and line problems, fault conditions and faults on the Tivoli telephone service" about which comment has already been made. Finally, at pp.4-5, the following passage appears:

"All of the call statistics used in my calculations are from Telecom Australia and were supplied under Freedom of Information. They are all exchange based equipment results recorded on TBAX, TIMS and ELMI Smart testing equipment. Whilst extrapolation may contain some variants, Telecom had monitoring and testing equipment on the telephone service for almost 50% of the total 51 month period, and this is sufficient to provide a firm base for assumption and an accurate guide to results."

Given these assertions, the arbitrator might be forgiven for thinking that further discovery would not cause the difficulty which it since has. What has become clear is that the claimants were, and the plaintiffs are, concerned to press the view either that the evidence available to George Close & Associates was not sufficient "to provide a firm base for assumption and an accurate guide to results" or, if it was, that there is additional documentary evidence available which corroborates and supports the conclusions to which George Close & Associates had by April 1994 come. The plaintiffs submit that, if the arbitrator had only allowed that documentation to be properly put before him, he would not have handed down the award which he did.

This submission can only be taken so far. In this arbitration it was (and is) as important to recognise the impossibility of any precise evaluation of cause and effect as it was (and is) to recognise the importance of discovery as a positive tool in the fact-finding process. No one will ever know how many callers on how many occasions were by reason of faults in the telephone system unable to communicate with the claimants. Even if one were able precisely to calculate those numbers, it would still be impossible to calculate with precision the quantum of the monetary loss thereby suffered by the Tivoli restaurant. Even if the discovery process had operated with maximum efficiency, the arbitrator would nevertheless never have been in a position to make more than an informed estimate of the sum which he should award to the claimants.

It seems to me that, in their increasingly despairing concern that the arbitrator (and others involved in the assessment of their claim) did not share their view of the harm done to them by Telstra, the claimants may have blinded themselves to this ineluctable truth: that the extent of the harm done to them by Telstra was not to be revealed by one document, or perhaps any number of documents. Nobody could do more than make an informed guess about the number of call losses suffered by the business; and having come to a conclusion about that, nobody could do more than make an informed guess about the economic damage which the claimants suffered thereby. The end of the rainbow is as difficult to locate now as ever it was.

I make these points early in this judgment, and before going in detail to the case presented by each side, because it seemed to me to be important that the exploration of the issues not be coloured by misconceptions about the nature of the inquiry on which the arbitrator embarked, or about the difficulties which confronted him. I should also state at the outset that my own views about the proper conduct of the discovery aspect of the arbitration do not necessarily affect the ultimate outcome of this litigation. An arbitral award is not necessarily to be set aside simply because a judge might have conducted the arbitration differently. I must nevertheless occupy myself with these matters because they were incorporated into, and formed an important part of, the plaintiffs' submissions. An altogether secondary reason for giving them some attention is that I may thereby encourage arbitrators in the future to exercise their powers creatively and imaginatively, where by doing so they will advance the interests of justice and increase the likelihood of reaching the correct result.

By their originating motion, the plaintiffs seek the setting aside of the award made by Dr. Hughes on 8 August 1996 "insofar as it fixes and limits the damages payable to Comlaw (No. 62) Pty. Ltd. and Garms Roseville Pty. Ltd. at $500,000". They also seek Dr. Hughes' removal as arbitrator, the appointment of a new arbitrator in his place, and the remission of the matter to the new appointee for re-assessment "of the ... award in relation to loss and damage".

The grounds for seeking Dr. Hughes' removal are that he "misconducted the proceedings", that "there has been an error of law on the face of the award or decision", that "there has been a procedural irregularity or procedural irregularities" and that the arbitrator denied the plaintiffs natural justice and was biased.

No particulars have been given of any error of law on the face of the award, except that under the heading "Particulars of Misconduct" the plaintiffs claim that "on the face of the award [the arbitrator failed] to provide appropriate reasons to justify the award". Extensive particulars, albeit the same in each case, have been given of the remaining grounds.

These particulars seek to paint a picture of an arbitration which failed for reasons which the plaintiffs summarised under six heads:

(i) The arbitrator failed to require Telstra to provide all proper documents.

(ii) The arbitrator failed to allow new evidence to be submitted by the claimants.

(iii) The arbitrator failed to accept late submissions made by the claimants.

(iv) The arbitrator failed to require compliance with rulings and procedure.

(v) The arbitrator failed to provide reasons in the award.

(vi) The arbitrator was unreasonable.

According to the plaintiffs, these failures (whether singly or in combination) amounted to misconduct the effect of which was to vitiate the arbitration.

These allegations must be seen in context. One must therefore begin with the arbitration agreement itself, which (it will be remembered) is to be found in a document headed "Fast Track Arbitration Procedure". Schedule A to that document defines the matters in dispute. They include (the list below is exhaustive):

"1. The liability of Telecom Australia to the claimant[s] in respect of alleged service difficulties, problems and faults in the provision to the claimant[s] of telecommunication services. 2. The adequacy of the amounts paid by Telecom to the claimant[s] under earlier settlements in relation to alleged service difficulties, problems and faults in the provision to the claimant[s] of telecommunication services. 3. The liability of Telecom Australia to the claimant[s] in respect of alleged service difficulties, problems and faults in the provision to the claimant[s] of telecommunication services since the date of the settlement payment for the ... claimant[s'] earlier claims, up to the date of the arbitrator's decision. 4. If Telecom Australia is found liable in accordance with (1) or (3) above, the quantum of compensation payable by Telecom Australia to the claimant[s] for the claimant[s'] proven loss."

Clause 1 of the agreement provides that the arbitration is to be undertaken "pursuant to the Commercial Arbitration Act 1984 (Vic.)" and is to be "a final and binding method of resolving the disputes listed" above. The binding nature of the procedure is emphasised by clause 2, which in effect limits any further disputation to "the appeal provisions of the Act". It follows that, even in the absence of s.28 of the Act, this proceeding must fail unless it is properly described as such an appeal, or may be instituted under some other provision of the Act. But s.28 places beyond any doubt that which in my opinion was in any event perfectly clear. It is in the following terms:

"28. Unless a contrary intention is expressed in the arbitration agreement, the award made by the arbitrator or umpire shall, subject to this Act, be final and binding on the parties to the agreement."

The arbitration agreement in this case expresses not a contrary, but an identical, intention.

In my opinion, this intention must be given effect. The agreement demands no less. The legislation reinforces the agreement. Both are in accordance with a policy which, whether one agrees with it or not, has been given a clear legitimacy by Parliament, and has been endorsed by many commentators concerned about the cost in time and money (and sometimes also in physical and mental strain) with which litigation is often unavoidably associated.

If disputing parties wish to arbitrate rather than litigate, there is every reason why the law should support them in that choice. In the particular case, arbitration may offer benefits (such as a quick and relatively inexpensive resolution of a dispute) which litigation cannot match. Likewise, it will happen that in the particular case arbitration may avoid disadvantages from which litigation cannot escape. Or the parties may simply prefer to have their dispute resolved by one means rather than the other. If that choice is to be respected, both parties must in the usual case continue to be bound by it even - indeed, especially - after the tribunal's conclusion is known, and one disputant is seen to have lost.

The same point may be reached by a slightly different route. If, where the "contrary intention" referred to in s.28 of the Commercial Arbitration Act is not expressed, recourse to the courts following an arbitration under the Act is to be limited, it must follow that mere dissatisfaction with the award cannot form the basis for an invocation of the jurisdiction of the Court. In other words, it cannot be sufficient merely to allege that the arbitrator's award was wrong. Arbitration is not a true alternative to litigation - it is not "final and binding" - if a mere allegation that the arbitrator came to an incorrect conclusion were sufficient to involve the Court in a review of the award. Those who choose arbitration of this kind do so for better or for worse; they must not be allowed to accept its advantages, only to disown the arbitral process when they do not obtain the result they seek. Any other position would relegate arbitration to little more than an opportunity for the parties to attend a (perhaps expensive) dress rehearsal for the subsequent court proceeding.

The Act gives substance to these considerations. Not only does s.28 decree that, subject to the Act and any expression in the arbitration agreement of a contrary intention, an award will be final and binding, but s.38(2) limits any appeal to a question of law; and even then, s.s.(4) requires, before the appeal may proceed, the consent of all parties or the leave of the Court. Neither has been obtained in this case. Moreover - subject to the right of appeal on a question of law - s.s.(1) removes from the Court any jurisdiction it might otherwise have had to set aside or remit an award on the ground that there is on its face an error of fact or law.

There remains s.42. This section gives the Court power to set aside an award, in whole or in part, where there has been misconduct on the part of the arbitrator or where the arbitration has been improperly procured. This is the provision upon which the plaintiffs principally rely in this case. But since there is no suggestion that the Fast Track Arbitration Procedure was improperly procured, the only issue before me is that of misconduct. Subject to the (now unavailable) right of appeal on a question of law, error of fact or law on the face of the record is, it will be remembered, removed by s.38(1) as a basis for an award being set aside or remitted. It follows that, of the grounds specified in the originating motion as those upon which the plaintiffs rely in support of their claim that Dr. Hughes be removed, only misconduct remains - although bias may of itself amount to misconduct, as may other manifestations of a denial of natural justice. The fact that there has or have been "a procedural irregularity" or "procedural irregularities", even if these resulted from an act or omission of the arbitrator, would not necessarily connote misconduct on the arbitrator's part.

It might be thought that s.42 gives no right in the nature of an appeal. The parties, however, have by clause 2 of the arbitration agreement limited further disputation to "the appeal provisions of the Act". The argument might therefore be that, in this case, s.42 cannot be called in aid.

The answer to a contention of this kind is that s.42 is not expressed to be subject to any contrary intention in the arbitration agreement. The parties to such an agreement cannot, simply by restricting their right to go beyond arbitration, be taken to have agreed to accept, and be bound by, an award made by an arbitrator who has exceeded his or her powers or has otherwise acted unlawfully, or has failed to accord natural justice to the parties.

It does not follow, however, that an arbitrator who has come to a mistaken conclusion has misconducted himself or herself in any of these ways. In short, the word "misconduct" does not encompass mere mistake. There must be "some real dereliction of duty on the part of the arbitrator": Holland Stolte Pty. Ltd. v. Murbay Pty. Ltd. (1991) 105 F.L.R. 304 at 309 per Miles, C.J.

Moral turpitude is not a necessary ingredient of misconduct. Of course, misconduct would almost certainly arise where an arbitrator has consciously sought to abuse his or her position. No question of such abuse arises in this case. The particulars of that which the plaintiffs allege amount to misconduct, none of which (with the possible exception of the alleged bias) raise any issue of moral turpitude, are set out in paragraph 1(b) of the amended originating motion. These are the particulars with which I am concerned. It is therefore for the plaintiffs to satisfy me, if they can, that Dr. Hughes misconducted himself by acting or omitting to act in one or all or some combination of the ways there set out. I shall return to them. In the meantime, it is appropriate to consider further the provisions of the arbitration agreement.

Clause 3 of the "Fast Track Arbitration Procedure" provided that the arbitration would be administered independently by the Telecommunications Industry Ombudsman. It was, in the absence of any specification by the arbitrator to the contrary, to be conducted "on documents and written submissions only": clause 6. If oral hearings were to be held, they were to be held in private in the presence only of the persons described in that clause. They included Mr. Peter Bartlett, a partner of the firm of Minter Ellison, who was appointed as special counsel to the administrator. They also included, with the leave of the arbitrator, a member of a "resource unit" which by clause 8 the arbitrator was empowered to use as he saw fit. This body was made up "of personnel employed by Ferrier Hodgson, chartered accountants ... and DMR Group Australia Pty. Ltd.", a firm whose expertise was in telecommunications. The Unit was to "carry out such ... enquiries or research as [the arbitrator] directs": clause 8.2. A report of any such activities was to be made available to the parties "who shall be entitled to make a written submission upon such report on such terms as the arbitrator thinks fit": ibid.

The procedure by which the arbitration was to be conducted was the particular concern of clause 7 of the arbitration agreement. It set out certain time limits by which certain steps were to be completed, but with the proviso that the arbitrator was to have an overriding discretion in these matters. A statement of claim was to be forwarded within four weeks of receipt of a written notice from the administrator that he had received formal requests for arbitration. That statement of claim was to state (among other things) the service difficulties, problems and faults in the provision of telecommunication services which were alleged to have been suffered; and this information was to include details of the periods over which the difficulties allegedly occurred. In addition, the statement of claim was to contain particulars of the loss allegedly suffered: clause 7.2

For its part, Telstra was within four weeks of receipt of the statement of claim to deliver its statement of defence: clause 7.3; and the claimants had four weeks from that date within which to deliver any reply: clause 7.4. There then followed important provisions concerning the powers of the arbitrator:

"7.5 Without limiting any rights the parties may have to obtain documents or evidence under the Act, either may, upon reasonable notice in writing to the other party, apply to the arbitrator for directions upon any matter in relation to the proceedings including an amendment to the statement of claim, defence or reply, the production of further documents, further particulars of [the] statement of claim, ... defence or reply. Each party is entitled to be heard on any such application. In giving directions, the arbitrator, where appropriate, shall impose time limits for compliance with such directions. On any such application, the arbitrator may not require the production of documents protected by legal professional privilege.

7.6 The arbitrator may by notice in writing require either party to provide any further documentary information and/or particulars which he reasonably considers would assist him."

Clause 10 is designed to assist the arbitrator in assessing both Telstra's liability and the complaints' loss. A number of points are worthy of note. First, by clause 10.1.2, the arbitrator is required to set off (against any amounts found by him to be otherwise owing by Telstra to the claimants) any amounts paid to them by Telstra up to the date on which the Fast Track Arbitration Procedure was agreed. Accordingly, in making the award, the arbitrator set off the sum of $360,000 to which reference is made in paragraph 9 of this judgment. It is also relevant here to note that neither clause 10 nor any other provision in the arbitration agreement says anything about liability for personal injuries; but clause 10 does require the arbitrator to take into account, in assessing the claimants' loss, "any information obtained by the Resource Unit or any advice given to him by the Resource Unit": clause 10.2.1. By clause 10.2.2, the arbitrator "will make a finding on reasonable grounds as to the causal link between the alleged service difficulties, problems and faults in the provision to the claimant[s] of telecommunication services and the losses claimed and, as appropriate, may make reasonable inferences based upon such evidence as is presented by the parties together with any information obtained by the Resource Unit or any advice given to him by the Resource Unit. Unless the arbitrator is able to conclude that Telecom caused the loss claimed, there will exist no basis for a claim against Telecom."

Clause 11 provided that the arbitrator's reasons must be set out, in full, in writing. They must also be referred to in the arbitrator's award. By clause 15, the administrator and arbitrator must "conduct and progress the arbitration as quickly as justice to all the parties reasonably permits."

While bearing constantly in mind the fact that the claimants were parties to the Fast Track Arbitration Procedure, I have nevertheless foreshadowed certain reservations about some of its provisions. They are, I think, too much influenced by the familiarity which those who prepared them have with the procedures of the courts. They fail to reflect the opportunity, then available, to tailor the arbitration in a way which would beneficially reflect the very different positions of the parties. Apart from the probably exaggerated claims of the George Close Report and its supposedly documented evidence, this was a case in which the claimants were not in a position to set any more than the broad parameters of the inquiry which must necessarily be undertaken before the arbitrator would be in a position to bring down an award which, in turn, would properly resolve the dispute. Telstra held the great majority of the documents from which could be ascertained the extent of the faults about which the claimants complained. Moreover, the claimants made it clear from the beginning that, whatever George Close & Associates might say, they thought they needed additional documents from Telstra with which to advance their case.

At the same time, however, this was also a case in which the substance of the dispute was perfectly clear well before the delivery of any formal pleadings. Indeed, the basis for any initial pleading document which the claimants might deliver was known before the Fast Track Arbitration Procedure was drawn up: in substance, the claimants relied for the proper conduct of their business on a telephone service provided by Telstra; that service, according to the claimants' own (alleged) experience was grossly deficient; and as a result, their restaurant business suffered loss. Some anecdotal evidence supported their position, and the report of George Close & Associates had by April 1994 provided expert corroboration - based, it was claimed, upon documents already released. I repeat: the general nature of the dispute was clear well before the delivery of any formal pleadings.

In these circumstances, no purpose was to be served by requiring any more at the initial stage of the arbitration than a formal statement of what was already known to be the claimants' general position, supplemented by such particular allegations as could properly be made on the basis of the report of George Close & Associates. The appropriate course would then have been for the arbitrator to fix the limits of discovery after consultation with the parties. The discovery process should thereafter have been supervised carefully, with time limits being given such practical effect as was appropriate. At the conclusion of this process, Telstra should have been required to deliver its defence. It is possible that, following this step, further discovery would have been warranted. But at least the process would have received a degree of control and direction which, in this case, was lacking.

The course I envisage would have resulted in the arbitrator acting under clause 7.5 or clause 7.6 of the arbitration agreement to require Telstra to discover all documents which would or might assist him to ascertain (a) the existence, (b) the nature and (c) the duration of any fault (and the number of faults) in the telephone system between August 1989 and April 1994 which fault or faults would or might have affected the ability of the claimants to make calls from the restaurant and to receive at the restaurant telephone calls originating within an area of such dimensions as to include within it the residential addresses or places of work of a large majority of the potential customers of the Tivoli. Of course, the status of particular documents or classes of documents in relation to this direction might on occasions be unclear; but leave to apply could be reserved so that these difficulties could be resolved. The arbitrator could also have informed the claimants that, while it was not any function of his to concern himself with such applications for Telstra documents as they may wish to pursue through Freedom of Information legislation, nevertheless they should be aware that (a) he could not assume that documents produced by that means would be relevant for his purposes, and (b) it would be unfair to impose upon Telstra an obligation to produce the same documents both under FOI and the arbitration agreement. Accordingly, pursuit by the claimants of FOI applications might result in loss of time and money (the loss of which would be at the expense of the claimants) if they pursued those applications in parallel with the arbitration.

Not only were these steps not taken, but the parties were, it seems to me, inappropriately left to their own devices. The result was that the statement of claim was not delivered until 30 May 1994, and then under cover of a letter in which the complainants complained about delays in the production of documents under the FOI process and referred to the "enormous pressure" which that caused in the preparation of the statement of claim: early refutation, one might think, of the claims by George Close & Associates to have based their conclusions on (sufficient) documented evidence. Indeed, it was not until 4 October 1994, after much additional material had passed between the parties, that the claimants were satisfied that their claim was complete. In the meantime, however, the claimants had written (by letter dated 4 May 1994) to Dr. Hughes with a request that he direct Telstra "to produce further documents": see the chronology of events prepared by the plaintiffs. In accordance with the procedure which would, in the absence of an application for discovery pursuant to r.29.07 of the Rules of the Supreme Court, apply in litigation in this Court, the arbitrator refused the request. He said in his letter in response that he could not assess the relevance of the material sought by the claimants because he had not perused the statement of claim.

In my opinion, this response serves both to illustrate the arbitrator's general approach to this aspect of his functions, and to reveal its flaws. By 4 May, the arbitrator was in a position to describe, with workable precision, those documents which should have been discovered: I refer to paragraph 48 of this judgment. On such discovery, both sides could move towards satisfactory pleadings. Without such discovery, the statement of claim would not be drawn so as to fully inform Telstra of the case it had to meet; and, consequentially, Telstra could not adequately respond.

It was in these circumstances inevitable that Telstra would not accept as satisfactory the statement of claim delivered on 30 May. On 3 June 1994, it requested the provision of further and better particulars. This was followed, again as a matter of inevitability, by correspondence from the claimants to the arbitrator pointing out that further and better particulars could not be provided without further and better discovery.

A further example will serve to illustrate how unsatisfactory were the positions taken by the arbitrator on the one hand and the claimants on the other. On 16 June 1994, the claimants - being dissatisfied with the fact that portions of certain documents received by them under FOI had (pursuant to exemptions accorded to Telstra under the FOI legislation) been removed - wrote to the arbitrator in the following terms:

"Whatever may be the position under the Freedom of Information Act, clause 7.5 of the arbitration procedure provides for you as arbitrator to be able to give directions inter alia relating to the discovery of relevant documents. [We] apply to you for a direction requiring Telecom to make available to [us] unobliterated and exempted copies of all the documents in respect of which it has claimed an exemption other than under the ... legal professional privilege or ... relevance categories. The other grounds of exemption available under the Freedom of Information Act are not available in the course of the arbitration process."

Whatever other reasons the claimants may or may not have had for their resort to the FOI process, this letter demonstrates that they saw it as a useful tool in the arbitration. The arbitrator, nevertheless, did not attempt to have the claimants restrict themselves, in their search for documents to be used in the arbitration, to the provisions of the arbitration agreement. Instead, he acquiesced in their continued use of FOI for these purposes. At the same time, he refused to intervene so as to allow the claimants full access to documents which, if produced under the arbitration agreement, would not - or would not necessarily - have been subjected to the interference which Telstra claimed was allowed (or perhaps required) by the FOI legislation. By letter dated 20 June 1994 the arbitrator wrote to the claimants in the following terms:

"You have requested that I direct Telecom to make available 'unobliterated and exempted copies' of all documents which you are seeking under the Freedom of Information Act ... In its response, Telecom has indicated that it believes the balance of outstanding documentation sought under FOI will be forwarded to you within a week ... I believe it would be inappropriate for me to intervene in your FOI claim. It may in due course be appropriate for me to issue directions relating to discovery in the context of the arbitration but I believe such an order would at present be premature, particularly in view of the fact that Telecom is currently processing your FOI application and expects that process to be completed shortly. In the circumstance, I am not prepared to issue the directions which you are seeking."

The result of this correspondence was just what the arbitrator ought to have been concerned to avoid: the production of thousands of documents which, for the purposes of the arbitration, were of very doubtful relevance, while the claimants continued to assert, with increasing rather than diminishing passion, that crucial documents were still being withheld; and somehow the arbitrator had to work this paradox out. It will be remembered that, as early as April 1994, George Close & Associates had contended that the files which had even at that stage been produced by Telstra constituted "documented evidence of an extraordinary number of exchange and line problems, fault conditions and faults on the Tivoli telephone service, which went far beyond any situation I have ever encountered in my professional life." If this be more than mere hyperbole, one would assume that the claimants' already very strong position in this regard would have been further strengthened by 18 September 1995 when, in a letter to the Commonwealth Ombudsman, Mrs. Garms stated that Telstra had provided the claimants with 57,000 documents. Yet three months later, when she came to Melbourne to inspect further documents, she maintained that material of vital importance had yet to be made available by Telstra to the claimants. This is a position to which she continues to adhere.

Mrs. Garms finds support in the report which the Commonwealth Ombudsman (to whom, to distinguish her from the Telecommunications Industry Ombudsman, I will refer simply as "the Ombudsman" or "the Commonwealth Ombudsman") issued in May 1996. In it the Ombudsman recorded (at p.7) the results of her "investigation of a complaint about Telstra's handling of an application made under the Freedom of Information Act 1982".

In an "Overview" to her report, the Ombudsman refers to the agreement of Mrs. Garms and three other COT members to participate in a Fast Track Settlement Proposal developed by AUSTEL. The Ombudsman continues (at p.7):

"To assist in this process, the Chairman of AUSTEL lodged Mrs. Garms' FOI application with Telstra on 3 December 1993 and requested that Telstra give priority to the request so that she could use the information in her submission under the Fast Track Settlement Proposal. When the Fast Track Settlement Proposal was developed two of the specified elements were 'speed is of the essence' and 'the review will be primarily based on documents and written submissions'. It is apparent that speed also was an essential element of the Fast Track Arbitration Process, (sic) which replaced the Fast Track Settlement Proposal, as it was signed on 21 April 1994 and the timetable provided that Mrs. Garms would lodge her claim documents by 25 May 1994.

Although my investigation relates to Telstra's actions under the FOI Act, the foregoing is relevant in establishing the reliance Mrs. Garms placed on the FOI process, and the apparent acceptance by the arbitrator appointed under the Fast Track Arbitration Process that the FOI process was an appropriate method for Mrs. Garms to obtain information from Telstra, and is relevant in assessing the impact of Telstra's failure to provide documentation requested under the FOI Act."

The Ombudsman acknowledged the "size and breadth" of the obligation which, by her use of FOI procedures, Mrs. Garms and the other COT Cases placed upon Telstra. At the time of her report, the number of documents covered by the relevant FOI applications exceeded 200,000. The Ombudsman continued (at 8-9):

"The more recent work of Telstra has shown a heightened awareness of the FOI processing requirement and improved decision making procedures. But in my opinion, had Telstra processed the application correctly at the outset, Mrs. Garms would have received the documents many months earlier and the hours spent by Telstra (and Mrs. Garms) would have been substantially less.

Despite the actions taken to implement my earlier recommendations the processes adopted in the COTs Cases are still characterised by degrees of defective administration. Significantly, further and important documents have recently been discovered and released to Mrs. Garms up to the date of this report (May 1996). These documents were important to ensure an effective and fair Fast Track Arbitration Process."

At this point in her report, the Ombudsman refers to two of its later paragraphs: paragraphs 3.84 and 3.85. There, the Ombudsman sets out the content of the claimants' first FOI application - an application which Telstra chose to construe in a manner criticised by the Ombudsman and in a way which most certainly detracted from the relevance of this exercise for the purposes of the arbitration. As Telstra saw its obligations, it was not required to produce documents which related to telephone exchanges in general and which were not specific to and made no mention of the telephone services provided to the Tivoli Restaurant. The Ombudsman said of this position (at 53):

"I accept that not all documentation relating to all exchanges, including the Fortitude Valley Exchange, is covered by Mrs. Garms' FOI applications; but it is my view that the specific exchange documents which relate to investigation of Mrs. Garms' complaints are covered by the applications, even if she is not named in the documents. It is my understanding that the activities of the Fortitude Valley Exchange, and indeed other exchanges, are critical to the telephone services provided to the Tivoli and to Mr. and Mrs. Garms."

Of course not all documentation relating to all exchanges was necessarily relevant to the issues to be resolved in the arbitration. Equally clearly, documents were not necessarily irrelevant simply because neither the Tivoli Restaurant nor the claimants were named in them. The relevant documents were those which would assist the arbitrator to calculate the rate of call loss to and from the claimants' business: a simple enough proposition, it seems to me, but one which, apparently, nobody involved with the arbitration or with the claimants' FOI applications managed to articulate.

In the particulars of the arbitrator's misconduct which the plaintiffs provide under paragraph 1(b) of the grounds set out in their amended originating motion, the plaintiffs make a number of references to the Ombudsman's report. It is convenient now, I think, to examine those particulars against the reasons given by Dr. Hughes when handing down his award.

The plaintiffs begin with an attack upon the sufficiency of those reasons. The first particular (particular (i)) alleges a failure to give reasons for accepting the estimate of the Resource Unit concerning the percentage of incoming calls which were lost. Particular (xxvii) alleges a failure "on the face of the award ... to provide appropriate reasons to justify the award"; and particular (xxix) complains of a failure "to make clear in the award the material upon which [the arbitrator] based the award". There is no specific allegation of a breach of clause 11 of the arbitration agreement, which (it will be remembered) required Dr. Hughes to "set out [his reasons] in full in writing" and that they be "referred to in the arbitrator's award".

The award is divided into parts A and B. Part A is the award itself; part B, the reasons. These cover one page and over 29 pages respectively. The latter first describes the circumstances of Dr. Hughes' appointment. The arbitrator then makes a number of observations about the conduct of the arbitration. He records (at p.3) that he "acquiesced in a number of requests for extension of time for the compliance" with the "deadlines" for the delivery of pleadings. He did this, he says, in part because he "considered it essential that both parties had every reasonably(sic) opportunity to place relevant material before me, regardless of the time frame set out in the arbitration agreement."

The reasons then turn to, among other things, the work of the Resource Unit. At pp.3-4 of his reasons, the arbitrator refers to a "technical evaluation of the evidence" which was carried out by the Unit during April, May and June 1995. This resulted in an initial report, followed by an addendum, with both parties being given an opportunity to comment upon each. Similarly, when in November 1995 the Resource Unit produced a "financial evaluation report", (reasons, p.4) both parties were again given an opportunity to comment upon it.

The Resource Unit was also involved in evaluating the sufficiency of discovery. In February 1996, it inspected "certain Telstra documents and made recommendations regarding the provision of further documents to the claimants": (reasons, p.4). The following month, Dr. Hughes (according to the reasons accompanying his award) requested Telstra to expedite the production of outstanding documentation; and on 22 March 1996 Telstra "confirmed" that all outstanding material had been provided. In these circumstances, the arbitrator on 1 April 1996 directed that the claimants provide by 15 April a final submission "arising out of the contents of the additional documentation produced by Telstra, and that Telstra submit its response to the claimants' submission within a further week": reasons, p.4.

In the result, the time allowed to the claimants proved to be insufficient. Accordingly, on 19 April 1996, the arbitrator granted an extension of the time within which the claimants' final submission could be lodged; he gave them until 1 May.

The reasons go on to record that, on 20 May 1996 (having received no final submission from the claimants) the arbitrator "advised the parties that it was my preference and intention to proceed to finalisation of the award and that I would only accept submissions from either party thereafter in special circumstances": reasons, pp.4-5. There then appears the following passage (at p.5):

"On 29 May 1996 the claimant (sic) asserted that it would be a grave miscarriage of justice to proceed in the circumstances. Subsequently, between 10 June and 6 August 1996, I received a variety of submissions from the claimant foreshadowing the introduction of new evidence based on material obtained through the intervention of the Commonwealth Ombudsman and expressing general concern about the conduct of the arbitration and participants in it. As part of this award, I propose making a direction in relation to this material. Throughout these proceedings, I have endeavoured to provide the claimants (sic) with as much leeway as possible in submitting late evidence and generally in ensuring that I am able to reach a conclusion based on all the relevant facts. Telstra is, however, entitled to a degree of certainty in the knowledge that submissions by both parties have concluded. By accepting late submissions of evidence, there is a real danger that this arbitration, already greatly protracted, would become almost interminable. This is not in the spirit of the arbitration agreement, nor is it conducive to the finalisation of the arbitration in a just and equitable fashion. Were I convinced that any of the material submitted subsequent to 20 May 1996 was likely to substantially affect my existing view of the evidence or my initial views regarding quantum, I would have had no hesitation in re-opening the proceedings. I have not been convinced, however, that the material submitted or foreshadowed since 20 May 1996 is of this nature. I accordingly direct that no material submitted or foreshadowed by the claimants subsequent to 20 May 1996 is admissible and I note for the record that no such material has been taken into account in the formulation of this award."

The plaintiffs have included, among their particulars of alleged misconduct, particular (iii): "failing to allow the plaintiffs to tender new evidence obtained through the intervention of the Commonwealth Telecommunications Ombudsman (the Ombudsman) when the late production of such evidence was entirely the fault of the defendant". They have also included particular (xxviii): "making a ruling ... in relation to the documents sought to be tendered by the plaintiffs without giving the plaintiffs an opportunity to challenge that ruling prior to a final award being made". Another particular that arises out of the passage set out in paragraph 63 above is particular (xxv): "preferring the entitlement of the defendant to certainty to the entitlement of the plaintiffs to a fair hearing".

Although these particulars seem, clearly enough, to be based upon the above passage from the arbitrator's reasons, the reference in particular (iii) to "the Commonwealth Telecommunications Ombudsman" is mistaken; as the arbitrator says in his reasons, it was the Commonwealth Ombudsman, not her Telecommunications counterpart, whose intervention led to the foreshadowed introduction of new material.

The arbitrator then proceeded to explain his position in relation to the claimants' continued attempts to obtain documents through the FOI process. In a passage which again attracted a particular of misconduct, he said (at p.6):

"I have throughout the proceedings been concerned to ensure that my function did not become confused with any parallel FOI applications. I have at all times, however, remained willing to order production of appropriate documentation where necessary. I was concerned on the one hand to ensure that all relevant documentation was placed before me, and on the other hand to ensure that I was not overwhelmed by irrelevant or unanalysed material. Whilst I had occasion to order the production of documents by Telstra, for the most part I was able to rely upon its co-operation with requests made by me through the Resource Unit in the course of the Resource Unit's deliberations and also upon assurances by Telstra from time to time that relevant material was in the process of being made available to the claimant (sic) under FOI. I am aware the claimants, (sic) have been concerned at my refusal to order the production of documentation relating to certain exchanges but my rulings in this regard were based upon my opinion that those exchanges were either not relevant to the claim or that the production of the immense volume of documentation being sought was unlikely to materially affect the issues in dispute or the quantification of the claimants' entitlement".

By particular (xi) the plaintiff alleged that the arbitrator misconducted himself by "relying on the co-operation of the defendant to produce documents when all the evidence including the report of the Ombudsman, demonstrated that such reliance was not appropriate".

The claim and the defence are summarised in the arbitrator's reasons. Dr. Hughes here acknowledges (reasons, p.7) that the Tivoli "relied almost exclusively upon telephone bookings ... and ... heavily upon the phone for the general running of the business." Moreover:

"The claimants' problems were allegedly exacerbated by a virtual disconnection for four days in 1990 due to problems in the exchange and a failure by Telstra, following a change of telephone number in November 1992, to place a voice recorded announcement of the change on the old number until February 1993.

Evidence that the telecommunications service was deficient throughout the period of the claim is said to be found in the fact that a major upgrade of the Fortitude Valley Exchange in September 1993 resulted in an improvement to the Tivoli's telephone service, albeit too late.

The claimants estimate business losses arising out of their telephone difficulties at $8,110,080 less $360,000 paid under a previous settlement, leaving a net total of $7,750,080. The claimants further seek compensation totalling $334,500 for pain and suffering, making the net value of the claim $8,084,580."

In his summary of the defence (reasons, pp.7-8), the arbitrator said (among other things):

"Telstra disputes that the difficulties experienced by the Tivoli were attributable to faults with its telephone service. Telstra dismisses the claimants' technical evidence as unconvincing and as being of little or no probative value. Telstra denies 'a major upgrade' of the Fortitude Valley Exchange occurred in September 1993 and therefore the claim is fundamentally flawed to the extent it seeks to derive support from this event. Telstra submits that the claimants' complaints were extensively tested and investigated in a diligent manner by experienced and appropriately qualified personnel, and most of the complaints were not proven or verified in any way. To the extent that faults were detected, rectification was achieved at a very high level, far in excess of the usual level of service appropriate for similar configurations."

George Close & Associates made much in their analysis of the effect which, according to them, the "major upgrade" had on the Tivoli's telephone service. Equally, Telstra made much of what it claimed was the real reason for a large increase in the number of calls received by the restaurant in the months following September 1993. According to Telstra, this increase did not demonstrate that the system was sub-standard before the upgrade and improved thereafter; there simply was no upgrade. The increase in calls received was, Telstra argued, entirely explicable on the basis of seasonal factors: spring and the pre-Christmas period is the time when the citizens of Brisbane resort to theatre restaurants.

Dr. Hughes did not reveal, in his reasons, which of the two opposing views he accepted. His reasons are, I think, open to criticism for this omission.

The next portion of the arbitrator's reasons is taken up with a brief analysis of the results of a number of previous inquiries into the problems, real or alleged, of the COT Cases. I have already referred to the report which resulted from one of these inquiries: that conducted by AUSTEL, which was published in April 1994. In his summary of it, the arbitrator does not mention the report's comments about the less than satisfactory way in which (according to the report) Telstra maintained its records, but he does note other conclusions which are not favourable to Telstra. The arbitrator said (amongst other things, reasons, p.10):

"The report accepted that the COT Cases had each experienced like service difficulties and faults but these faults were 'intermittent and their causes difficult to trace'. Specific reference was made to Telstra's older analogue equipment. The report emphasised, however, that these observations were not necessarily relevant to the determination to be made by me as to whether Telstra had failed to meet acceptable service standards or whether these deficiencies had caused the losses claimed by the COT Cases ...

Specifically in relation to the claimants (or, more precisely, Mrs. Garms), the report makes the following observations:

* the claimants had complained of numerous faults including 'no ring received', 'call drop out', 'incorrect recorded voice announcements', 'false busies' and 'rotary problems';

* the claimants had been pressured into accepting an inadequate settlement (in June 1993) and in any event, had continued to receive an inadequate telephone service subsequent to that settlement;

* Telstra had endeavoured to minimise the seriousness of their complaints, exemplified by an attempt in 1990 to attribute the claimants' problems to their Commander system when at the same time Telstra was aware of problems with the Fortitude Valley Exchange which could also have been responsible for the reported service difficulties."

Dr. Hughes then turned to the Ombudsman's report. It will be remembered that, in this, the Ombudsman noted the arbitrator's "apparent acceptance" of "the FOI process [as] an appropriate method for Mrs. Garms to obtain information from Telstra". She also noted, as being "relevant in establishing the reliance Mrs. Garms placed on the FOI process", the lodgment, by the Chairman of AUSTEL as her agent, of the first FOI application "so that [Mrs. Garms] could use the information in her submission under the Fast Track Settlement Proposal". More importantly, perhaps, the Ombudsman spoke in her report of the recent discovery of "further and important documents" - documents which "were important to ensure an effective and fair Fast Track Arbitration Process".

The arbitrator adverts to the Ombudsman's report at pp.10-12 of his reasons. He acknowledges (pp.10-11) the claimants' initial FOI application (lodged through the good offices of AUSTEL) and adds that:

"Telstra had been requested to give [this] application priority so that the information so gained could be used in the claimants' submissions to this arbitration. The report noted that Telstra had progressively provided documents to the claimants over a period of more than two years, the latest release being in April 1996."

Dr. Hughes also acknowledges, if only by simply reiterating (p.11), the Ombudsman's observations (a) "that Telstra had incorrectly processed the application initially", (b) that "this had delayed the production of documents",

(c) "that some records, considered important by the claimants and other COT members, had either been lost or destroyed" and (d) "this reflected an inadequate record keeping practice by Telstra". The arbitrator continues:

"The report speculates as to certain factors which may have influenced assumptions by me in relation to the process of production of documents by Telstra under FOI. In relation to this arbitration, the Ombudsman expressed concern that the claimants had been disadvantaged financially and personally because of defective administration by Telstra in its handling of applications under the FOI Act."

The arbitrator, as is stated at p.11 of his reasons, took account of the findings contained in the AUSTEL report, the Ombudsman's report, and other documents to which in this section of his reasons he refers. He did not, however, accept as evidence the material upon which those findings were based "unless that material has been corroborated or (where relevant) incorporated by reference in the present claim". There follows a particular statement about the Ombudsman's report (pp.11-12 of the arbitrators' reasons). This should be set out in full:

"In relation to the Ombudsman's report, it is not necessary for me to comment upon her observations concerning these proceedings, save that I am satisfied that, regardless of any difficulties the claimants may have faced in collating material relevant to their submission and irrespective of where the fault (if any) for delayed production of documentation lies, the claimants were ultimately provided with a reasonable opportunity to adequately present their case."

I have already recorded that, in particular (iii) of the particulars of misconduct listed under paragraph 1(b) of the amended originating motion, the plaintiffs allege a failure by Dr. Hughes to allow them to tender new evidence obtained through the Ombudsman's intervention. Likewise, I have noted particular (xi) by which the plaintiffs allege that the arbitrator relied on the co-operation of Telstra to produce documents when "all the evidence, including the report of the Ombudsman, demonstrated that such reliance was not appropriate". Other particulars of misconduct are here relevant, given the coincidence in timing of the release of the Ombudsman's report and the arbitrator's "direction" (quoted in paragraph 65 above) "that no material submitted or foreshadowed by the claimants subsequent to 20 May 1996 is admissible".

According to the plaintiffs, these particulars may be grouped under the first of their broad categories (or, as earlier described, "heads") of misconduct: that the arbitrator failed to require Telstra to provide all proper documents. The plaintiffs submit that, here, the relevant particulars are, in addition to particular (xi):

(a) particular (xii): "failing to order production of Telstra files which were ultimately and at a late stage produced by [Telstra] to the Ombudsman under the Freedom of Information Act";

(b) particular (xiii): "in March 1996 accepting the statement of [Telstra] that all documentation had been provided when such was not the case";

(c) particular (xvi): "failing to order appropriate discovery by [Telstra]";

(d) particular (xvii): "on 23 October 1995 ordering only limited discovery by [Telstra] when there were many more documents relevant to the plaintiffs' claim";

(e) particular (xviii): "failing to order [Telstra] to produce all relevant documents to the Resource Unit";

(f) particular (xix): "failing to provide to the Resource Unit all relevant documents";

(g) particular (xxii): "failing to allow evidence to be produced concerning the Central West EMG";

(h) particular (xxiii): "failing to direct that documents held at the Central West EMG in respect to the Fortitude Valley Exchange be produced by [Telstra]";

(i) particular (xxviii): "making a ruling ... in relation to the documents sought to be tendered by the plaintiffs without giving the plaintiffs an opportunity to challenge that ruling prior to a final award being made".

These are not the only particulars of misconduct which relate to the discovery or use of documents. Even alone, however, they demonstrate the importance of this issue to the claimants (and now to the plaintiffs) and its especial significance for the purposes of this litigation. Indeed, the arbitrator's statement recording his satisfaction that "the claimants were ultimately provided with a reasonable opportunity to adequately present their case" is as important as anything else to be found in his reasons.

It cannot be doubted that the claimants were entitled to a reasonable opportunity adequately to present their case. It being impossible to conduct an arbitration fairly unless each party is afforded that opportunity, it would be misconduct in an arbitrator to proceed on any other basis. Even if no other particular directly challenged the arbitrator's conduct of the arbitration in terms which, if made out, would enliven the jurisdiction conferred by s.42 of the Commercial Arbitration Act, particular (x) has that effect. It is, as the plaintiffs would contend, supported by particular (xxx): "failing to accord fairness to the plaintiffs".

It is of course true that neither the absence of misconduct nor its obverse - the provision of a reasonable opportunity to present a case - can be demonstrated by mere assertions to that effect by an arbitrator. No matter how restricted may be the right of parties or the courts to go behind an arbitrator's decision, there can be no barrier to the ability of the courts to ensure that each party to an arbitration be given a fair hearing. What is or is not fair in this context may, doubtless, be agreed between the parties or even dictated by legislation; but in practice it is difficult to envisage either private or parliamentary sanction for an unfair restriction of the right to be heard. The disputes in this area are generally confined to whether a restriction exists and, if it does, whether it is unfair. At all events, the question whether in fact the claimants were enabled a proper opportunity to put their case to Dr. Hughes cannot be determined simply by his declaration that he was satisfied that they were. The Court must examine the issue for itself. If the Court is satisfied that the arbitrator has failed to allow the proper presentation of the case for the claimants, then the conditions for the invocation of s.42 of the Act will have been established.

It is an exercise upon which the Court must embark with some diffidence. There can be no question of the Court shirking its responsibility to ensure that an arbitration is conducted according to law. But the law itself recognises the duality of which I have already spoken and which the Court is bound by law to respect. While therefore Dr. Hughes' satisfaction that the claimants were ultimately provided with a reasonable opportunity adequately to present their case cannot by the mere recording of it be transferred to me, nor am I empowered to revisit the discovery issues as if I were the arbitrator.

Having in chapter 3 of his reasons given what he describes as an "overview" which concludes with his reference to the "reasonable opportunity" provided to the claimants "to adequately present their case", Dr. Hughes proceeds in chapter 4 to examine the contractual and statutory bases "for awarding compensation": reasons, p.12. The arbitrator notes, as Telstra acknowledged, "that a theoretical basis for the claim might lie in negligence": reasons, p.19. The arbitrator also touches upon the quantification of losses and the significance for his purposes of the previous settlement. At p.21 of his reasons, Dr. Hughes refers specifically to the fact "that the AUSTEL report cites the earlier settlement as being the subject of a complaint by Mrs. Garms that Telstra 'pressured them into accepting initial inadequate settlements of their claim' and that 'notwithstanding the settlements, they have continued to receive an inadequate telephone service'." The arbitrator then, in chapter 5 of his reasons, gives a summary of the fault allegations. This includes a reference to the George Close Report of April 1994, including the reference in that Report to exchange and line problems, fault conditions and faults which went far beyond any situation that the author of the Report had ever encountered in his professional life.

It is particularly important to identify, at this point, the criticisms made of Telstra by George Close in the April 1994 Report. These criticisms, as I understand it, formed the basis of the claimants' submissions to the arbitrator about the inadequate level of service provided to the Tivoli by Telstra. It follows that, if the plaintiffs are right, then the misconduct of the arbitrator prevented them making good the assertions put forward in the George Close Report: assertions which the Report itself maintains were based upon documented evidence.

At p.23 of his reasons, the arbitrator lists the "major problems" which, according to George Close & Associates, were experienced by the claimants before April 1994. They are recounted by the arbitrator as follows:

* "[F]or extended periods, calls in the order of two out of three were lost and in some periods almost all calls were lost;

* more than 3,800 faults were reported by the claimants to Telstra during the claim period;

* only 60 job numbers were issued by Telstra in response to these 3,800 fault reports;

* there were more than 3,000 unanswered calls on the old telephone number following the change of telephone number on 18 November 1992 when the telephone service was transferred from the older ARE equipment to the newer AXE equipment at the Fortitude Valley Exchange, due to the fact that Telstra had failed to connect the RVA;

* for three years the Tivoli was omitted from the Yellow Pages listing under "Restaurants";

* for four continuous days (21 May to 24 May 1990), there was no service;

* Telstra records establish that more than 11,800 calls did not result in a ring tone;

* the claimants' Commander system was changed three times until Telstra declared it "fault free" and not the cause of the problems;

* in September 1993, Telstra undertook major upgrading of the Tivoli lines, amounting to an effective complete refurbishment of the 'customer specific' exchange equipment and lines, resulting in call averages rising from 69 per day to 215 per day;

* known call losses occurred between the Fortitude Valley Exchange and the Tivoli - call losses within the host exchange (Fortitude Valley), or occurring exchange-to-exchange would be additional, as would drop outs and fading calls;

* overall, Telstra had inadequately documented faults and tests throughout the claim period."

The above seems to me to be a reasonably accurate précise of pp.3-5 of the George Close Report. It will be noted that issues of discovery would not be significant in the exploration of a number of the criticisms to which the Report there refers. For example, the alleged omission from the Yellow Pages was or was not a fact. If the latter, its proof ought not to depend on the tender of large numbers of documents.

I have already noted that the plaintiffs' present allegations about their inability to obtain and put before the arbitrator documents of vital importance to their case seems directly to contradict the assertions of their own consultant that documented evidence supported the conclusions expressed in the April Report. This could only be explained, consistently with the plaintiffs' position in this proceeding, on the basis that the true picture, never revealed to the arbitrator, was much worse than George Close & Associates appreciated in April 1994; or that what was then clear to the author of the Report, but which the Resource Unit and the arbitrator failed to appreciate up to the time when the award was handed down, would have been made clear to the arbitrator, if only the additional documents had been to hand. For the plaintiffs are not in a position to argue, and do not submit, that the arbitrator refused to afford them a reasonable opportunity to put before him the material upon which the April 1994 Report was based, or that he refused to take that material into account. Nor is this Court in a position to interfere with the arbitrator's award simply on the basis that, having considered the George Close Report and the evidence upon which it was based, Dr. Hughes disagreed with its conclusions. Any such interference would amount to a violation of the general proposition that the arbitrator's decision is not open to appeal.

It would be difficult for the plaintiffs to assert that the additional documents, which the arbitrator refused to consider, would have revealed a scenario worse than that initially conveyed by George Close & Associates. This follows because the plaintiffs have consistently maintained the position which the author of the Report adopted in April 1994: that for extended periods between 1 August 1989 and 9 October 1993 calls in the order of two out of three were lost. This, in other words, is the foundation of the plaintiffs' claim, maintained throughout the proceedings both before the arbitrator and before me, for an estimated call loss of 50% and above (up to 65%). How then can the plaintiffs maintain that call losses of this magnitude represent the fact, and that the documents to which the arbitrator refused to have regard prove it, whereas (as they must accept, because they cannot appeal against the arbitrator's decision) the documents to which George Close & Associates had regard do not?.

It seems to me that, for these reasons, the plaintiffs are, in effect, reliant upon the proposition that George Close & Associates were correct in the conclusions which they drew on the material at hand as at April 1994; that the arbitrator failed to appreciate this; but that with the aid of the then unavailable material, George Close & Associates would have been vindicated. This issue must be revisited later in this judgment. For the present, it is appropriate to return to the arbitrator's reasons.

Having described the position taken by George Close & Associates, the arbitrator next briefly summarises the response of both Telstra and the Resource Unit. He concludes chapter 5 of his reasons with these words:

"The Resource Unit could ... find no basis to support the very high estimates of incoming call losses which underpinned the claimants' quantification of losses. Whilst the claimants had estimated a call loss of 50-65%, the Resource Unit considered a reasonable upper limit of confirmed faults on the basis of material then available would have been in the vicinity of 4%."

Chapter 6 of the arbitrator's reasons is headed "Conclusion Regarding Fault Allegations". It contains five paragraphs, which cover a little more than one page (pp.26-27). I set out below three of those paragraphs:

"(a) I have reviewed all the material submitted by both parties, together with the results of the independent analysis of that material by the Resource Unit's technical personnel. I accept in essence the conclusions reached by the Resource Unit.

(d) Accepting as I do the essence of the Resource Unit's analysis of the evidence, it follows that I also accept the Resource Unit's estimate that the loss of incoming calls was in the vicinity of 2.7%, significantly lower than the claimants' estimate of up to two thirds of incoming calls lost for extended periods. Obviously this estimate is highly speculative. I note the Resource Unit's concession that the call loss could have been as high as 4% and theoretically higher.

(e) In summary, I accept that the Tivoli had persistent and not insignificant problems with its telephone lines. I accept that the claimants' complaints were not well handled by Telstra, either at a technical or at a PR level. The final question to address is, therefore, the financial impacts of these difficulties upon the claimants' business, and to a lesser extent, the health of Mr. and Mrs. Garms."

This hardly amounts to either a detailed analysis of the evidence, or a set of fully articulated conclusions to which the arbitrator has come based upon that evidence. On the other hand, the Resource Unit's reports had been made available to the parties, and they had been given an opportunity to comment upon them. For his part, the arbitrator "was greatly assisted by the calculations made by the Resource Unit's financial personnel": reasons, p.27.

The final chapter in the reasons which the arbitrator prepared to accompany the award is headed "Compensation". Dr. Hughes there sets out the calculations put forward by the claimants as justifying a claim for business losses in the sum of $8,110,080, from which (as all parties acknowledge) is to be deducted the amount ($360,000) paid in June 1993 by way of partial settlement. The total claimed for business losses was therefore $7,750,080. Dr. Hughes continues (reasons, p.28):

"In Telstra' financial response ... dated 16 December 1994, it is asserted that the claimants have no entitlement to compensation. This conclusion is based on a number of factors but essentially reflects a dispute as to the claimants' methodology in calculating their loss, differing views as to viability of the business and differing views as to the existence or the level of compensable call loss. At my request, the Resource Unit made a series of calculations based on a variety of scenarios, taking into account the realistic range of options open to me in the event that I were to accept that the claimants had experienced compensable call loss. As indicated above, I have accepted the essence of the technical findings of the Resource Unit and, in broad terms, its estimate of the likely general call loss over the claim period. Overall, I consider the most realistic estimate of loss in my view was the Resource Unit's 'High Range'. This calculation assumed a general call loss of 4% over the claim period and it further assumed that faults and incidents classified as indeterminate in the Resource Unit's technical evaluation reports were in fact the responsibility of Telstra and that those incidents and faults resulted in loss of profits to the Tivoli. I am mindful, nevertheless, that the general call loss could, according to the Resource Unit, theoretically have been higher than 4% and I acknowledge that the claimants have submitted a considerable amount of material, supported by an expert witness, in support of their contention that the call loss was significantly higher. Accordingly, I have proceeded on the basis of a 6% general call loss throughout the claim period."

From this point, Dr. Hughes turns to the calculation of the particular amounts which, in his opinion, represent the financial loss sustained by the claimants as a result of what he had earlier described (at p.27) as the "persistent and not insignificant problems" experienced by the Tivoli Restaurant "with its telephone lines". The most significant single item in his calculation was the loss of trading income suffered by the claimants. Dr. Hughes quantified this at $586,111, which for the purposes of his award he treated as $590,000. The claimants, by contrast, had claimed $4,821,399 under this head, together with an additional amount of $1,650,000 by way of interest. The amount allowed by the arbitrator under this head was $158,000, which he rounded up to $160,000. The claimants therefore sought a total for trading losses and interest of $6,471,399. They were awarded $748,000.

The difference between these latter amounts ($5,723,399) is explicable by reference to the differing views, taken by the arbitrator on the one hand and the claimants on the other, of the extent of the call losses experienced by the Tivoli Restaurant. The claimants asserted that, over the claim period, they lost half their calls. The Resource Unit, it will be remembered, thought that the true percentage of calls lost was in the vicinity of 2.7%. The arbitrator was prepared to increase this to 6%. The plaintiffs now allege that the arbitrator got the relevant figure very wrong indeed; and they seek to attribute the error to Dr. Hughes' misconduct. On the other hand, Telstra asserts that the arbitrator was too generous to the claimants. It nevertheless refutes any suggestion of misconduct on his part, and does not seek to upset his findings.

It is easy enough to postulate the most extreme example of the circumstances which the plaintiffs allege confronted them in the arbitration. A fact, crucial to the proper determination of the issues between the parties, is in dispute. Evidence tending to prove - indeed, evidence which is very strongly probative of - one party's version of that fact is contained in documentary form and is admissible against the other party. The arbitrator irrationally refuses to allow the first party to rely upon that document, but rather forces her to close her case while the document is on its way to the place where the arbitration is being held. A case of misconduct against the arbitrator may very well be made out.

But then again, it might not. Misconduct would have to be proved; and this would necessitate proof by the disappointed party that the decision to disallow reliance on the document was not merely wrong, but amounted to a denial of natural justice. If, therefore, the arbitrator had given the party seeking to rely upon the document a reasonable opportunity to produce it, then no question of misconduct would arise even if, in ultimately denying the right to use it, the arbitrator had (for example) taken an irrelevant consideration into account, or had omitted to consider a relevant issue. For such would be errors of law; they would not amount to misconduct as that expression is in this context properly understood.

The plaintiffs' case in the present proceeding is much more complicated, and the issues to which it gives rise are much more subtle, than those of the example. This case has as its initiating factor the claimants' dissatisfaction with the telephone service which Telstra provided to their business. They alleged that that service was well below an acceptable standard. They claimed to have evidence to support this allegation: principally, the George Close Report of April 1994. They claimed that that Report was based upon an adequate foundation; and they pointed to what they said were Telstra's own documents as supporting the conclusions to which their telecommunications expert had come. As for the expert himself, he was strident in his references to "documented evidence of an extraordinary number of exchange and line problems, fault conditions and faults on the Tivoli telephone service, which went far beyond any situation I have ever encountered in my professional life". But even as the George Close Report was being put forward by them, the claimants were pursuing additional documents; documents which they hoped would tend to confirm those conclusions.

For there could be no question here of a document or documents which, if put before the arbitrator, would prove the case which the claimants were endeavouring to make out. A document might corroborate a point here, or confirm an assertion there. But no document or collection of documents could prove the assertion that, as a result of an inadequate telephone service, the claimants suffered call losses of 50%, or 65%,or any other percentage; still less that they suffered consequential business losses of any particular amount (such as the amount claimed, $8,110,080). These were and are matters for judgment, not calculation.

A very significant additional consideration arises from these circumstances. For the very reason that no document or group of documents could prove the extent of the claimants' call losses, so it was difficult for Telstra - and even more difficult for the claimants - to identify with precision the documents which might be relevant as tending to confirm - or as tending to refute - the claimants' case.

The consequence was that the claimants made repeated requests for the production of documents. Telstra repeatedly produced documents - thousands of them. And the claimants repeatedly asserted that those produced were irrelevant, or only partially relevant, and that additional, relevant, documents remained which it was Telstra's duty to discover. Of those produced before the end of 1995, many if not all were forwarded to the arbitrator and the Resource Unit. As a result of studying them, and doubtless undertaking other inquiries and studying the parties' submissions, the Resource Unit arrived at a call loss of 2.7%; while the arbitrator arrived at a call loss of 6%.

It is in my opinion impossible to point to anything the arbitrator did or failed to do before the end of 1995 which amounts to misconduct. He may have made mistakes. If he did, and I make no finding one way or the other, they were mistakes of law not amounting to misconduct. That he may have made some mistakes is therefore nothing to the point.

In this context, it is relevant to remember that an arbitrator appointed under the Commercial Arbitration Act may exercise a very wide discretion in matters of procedure. In the words of Rogers, J. in Imperial Leatherware Co. Pty. Ltd. v. Macri & Marcellino Pty. Ltd. (1991) 22 N.S.W.L.R. 653 at 666-667:

"So far as the letter of the Act is concerned, it gives the parties the greatest possible freedom in the conduct of arbitration. Even the requirements of s.22 may be relaxed. The laws of evidence need not be followed ... The sole requirement in the 'letter and spirit' of the Act is the call of natural justice which, whilst requiring that each party may have a proper opportunity of putting its own case, and meeting the case for the other party, does not regard adherence to court procedures as necessary."

By clause 7.4 of the Fast Track Arbitration Procedure, Dr. Hughes was given a discretionary power to order discovery; but there was no right to orders for discovery. Accordingly, the arbitrator had a wide discretion in these matters. A close examination by me of the course of the arbitration up to the end of 1995, and of particular decisions made during that period by the arbitrator, is therefore, and for all the reasons which I have thus far endeavoured to articulate, not only unnecessary but inappropriate.

By the end of 1995, almost two years had passed since the arbitration began. After all the claimants' requests for documents, and after the production of so many in response, it would obviously be in any arbitrator's contemplation that a "fast track" process could not properly be extended much further. It is true that criticism could be, and has been, made about Telstra's role in the production of documents. Telstra was, at times at least, slow in its response to requests for such production. Nor were Telstra's efforts to respond always properly directed. There were unnecessary haggles over the scope of particular requests. Telstra might have been at least partially responsible for the fact that, of the thousands of documents produced, many must have been irrelevant. But a revelationary conclusion to the case by the production of documents which totally changed the picture already in the minds of the Resource Unit and the arbitrator was in the nature of things, by December 1995, next to impossible. One or two points might be clinched either way; but this was a case of hundreds of points which collectively would admit of no more than general assessments or conclusions. Was there, for example, a particular fault on 1 November 1990 which, as the plaintiffs now claim, prevented incoming calls from being received that day (a Thursday)? If there was, did it result in any loss of business? Suppose that the internal Telstra memo of that date, which the plaintiffs claim to have received only in or about March 1996, proved beyond doubt the fact of the "lock-up". How long did it last? Were potential customers turned away as a result? Even if otherwise made out, this was one incident in the period of a little over four years which was under investigation in the arbitration. Assuming that the arbitrator did not take the relevant memorandum into account in making his award, does that amount to misconduct?

I have already touched upon the applicable principles of law. One principle which is relevant whenever arbitral misconduct is alleged was succinctly stated by Cole, J. in Tony J. Boulos Pty. Ltd. v. Doug Reid Pty. Ltd. (unreported, Supreme Court of New South Wales, 16 August 1991 at p.3). After noting that an allegation of misconduct, even technical misconduct, is a serious matter, his Honour continued:

"It should be very clear from the commencement that the power under s.42 [of the Commercial Arbitration Act] to set aside [an] award is not to be used as an endeavour or means to overcome the restrictive rights of appeal."

That rights of appeal were intended to be restricted was emphasised by the Minister for Industry, Commerce and Technology (Mr. Cathie) in his Second Reading Speech when the Commercial Arbitration Bill was debated in Parliament in September 1984 (Hansard, vol. 375, Legislative Assembly, 13 September 1984, p.434). The Minister then said:

"The new commercial arbitration system is intended to supplant the jurisdiction of the Court where an agreement permits arbitration as a means of dispute resolution. It will encourage the development of a speedy and economical means for resolution of disputes by experts in their field."

This theme was echoed in the Attorney-General's Second Reading Speech in the debate on the Commercial Arbitration (Amendment) Bill in March 1993 (Hansard, vol. 410, Legislative Assembly, 11 March 1993, pp.171-172). Mrs. Wade noted that clause 16 of the Bill inserted a new s.38(5) into the Commercial Arbitration Act. This was intended to restrict judicial review of awards by the Supreme Court. The Attorney continued:

"The reasons for restricting judicial review of awards by the Supreme Court are: (a) to provide for uniformity across Australia; and (b) if arbitration is not to be viewed as a dry run before litigation it was thought that more restrictive criteria are desirable. The underlying policy is that in most cases the parties should have to accept as final the decision of the arbitrator they have chosen to decide the matter in the first place."

In the light of these principles, and in the light of the circumstances outlined above, could it be said that the arbitrator was guilty of misconduct in not taking into account the material received by him between 10 June 1996 and 6 August 1996 - even supposing that that material threw new light on, and (insofar as it was capable of doing so) wholly supported, the plaintiffs' claim? The decision that this material would not be considered was made on 20 May 1996. Dr. Hughes, it will be remembered, then told the parties that it was his intention to complete the arbitration and that he would only accept submissions thereafter - from either party - in special circumstances. He made this decision against a background which included the assertion by George Close & Associates that there was available by April 1994 sufficient evidence "to provide a firm base for assumption and an accurate guide to results." Moreover, the claimants had on 4 October 1994 told the arbitrator that they had completed the documentation of their claim, and on 8 May 1995, following an inquiry by him about further discovery, Mrs. Garms had written to him in the following terms:

"Subsequent to my correspondence to you of 24 April 1995 and 1 May 1995 I have consulted Mr. Peter Bartlett ... regarding the progress of our arbitration including the time frame applicable to the finalisation of our claim. I have also sought from my professional advisers legal opinion as to Telecom's conduct in the provision of documents. Contrary to my request for the production of documents and after very careful consideration of all the circumstances, I wish to advise that I will leave the discovery of documents entirely at your discretion in conjunction with the requirements of the Resource Unit."

It is nevertheless true that, on 28 September 1995, the claimants forwarded a 4 page letter and an 18 page "Request for Production of Documents from Telstra" to the arbitrator. But, as the letter's opening paragraph clearly indicated, its primary objective was not to obtain documents which might assist the claimants in the presentation of their own case. Rather, the claimants sought a direction from the arbitrator that "Telstra ... provide supporting historic documentation and data to substantiate the statements, assertions and hearsay contained in Telstra's defence ... and further submissions by Telstra in response to the Resource Unit's questions."

I have never understood the claimants to complain that the arbitrator failed to insist upon the production by Telstra of documents which would prove that Telstra had a good defence. Of course, if any point in this context has any validity, it is that the failure (if any) by Telstra to produce the documentation to which the claimants refer would reduce - perhaps to the point of extinction - the weight to be given to its submissions. From this perspective, the correspondence of 28 September is not in the claimants' own interest. But it seems that, by this time, the claimants were having difficulty in maintaining a coherent position. This appears from the following passage of the letter of 28 September, which is to be read in the light of the assertion by George Close & Associates that, by April 1994, there was in the Tivoli files "documented evidence of an extraordinary number of exchange and line problems ..." and that "[f]or extended periods there appears, from my calculations, to have been in the order of two out of three calls lost ...", and "[a]ll of the call statistics used in my calculations are from Telecom Australia and were supplied under Freedom of Information." Against these statements, the letter of 28 September reads oddly when it says:

"On an assessment of the progress of the arbitration and an analysis of the documentation provided by Telstra we can but disagree with the basis upon which Mr. John Rundell [of the Resource Unit] has made the statement in his correspondence to you of 5 September 1995: 'We also had in mind the context in which our statement of 5 June 1995 was made, namely the claimants' concern to find documentation to substantiate a very high proportion of lost calls over the period of the case (whether it be 50% or 57% or 67%). Based on our reviews to that date, we believed that such documentation did not exist.' In the face of conclusive evidence that Telstra has provided incorrect misleading statements throughout the history of the dispute it is a denial of natural justice for the Resource Unit to speculate 'Based on our reviews to date, we believed that such documentation did not exist.' As the Resource Unit had in their requests to Telstra not requested Telstra to provide historic documentation it cannot be conclusively established that the information provided by Telstra is factual when it is not supported by historic documentary evidence."

One must, finally, ask the hard question: what, and where, was the documentation about which George Close & Associates spoke if it was not produced with their report in April 1994?

The letter from Mr. Rundell is significant in that he there puts the Resource Unit's position in relation to further documentation. The Unit had, according to Mr. Rundell, "on its own professional judgment [formed the view] that the processes already carried out had almost certainly extracted all the usable documentation." Mr. Rundell continued:

"In reaching this position, we had the view that any further information that might be sourced from Telecom pertaining to this case ... would be unlikely to contradict the material already provided, to the extent that it would affect the arbitrator's ruling. We also had the view that any documentation the claimant could bring to bear to support her case would already have been presented."

The arbitrator was entitled to rely upon these statements.

I have reviewed this correspondence at some length because it formed the springboard for a series of rulings by the arbitrator on discovery issues. These extended through until 9 February 1996. The first of them was dated 23 October 1995. It invited further submissions, albeit on a limited basis. These having been received, an additional ruling was made on 20 November 1995.

Each of the rulings of 23 October and 20 November contained explicit statements of the arbitrator's concern to balance the interests of both parties, and to ensure that each was fairly treated. They are, in my opinion, not only unappellable but also unimpeachable - on any ground, including misconduct. Nevertheless, the claimants were dissatisfied. Submissions, and submissions in reply, were put to the arbitrator. These were further examined at an oral hearing which took place on 25 January 1996. Following that hearing, Dr. Hughes made his ruling of 9 February. He then confirmed his earlier rulings, and provided some additional clarification. He also directed that the production of documentation be completed by 20 February with the claimants having the right to make supplementary submissions within seven days thereafter and Telstra having the right to respond within a further period of seven days. The arbitrator concluded with a direction that there "will be no further interlocutory steps ... taken in this arbitration prior to the delivery of my final ruling."

Telstra submits that, by this stage in the arbitration, "the [claimants'] principal case had long since closed and [they] were only at liberty to submit material in reply." It was plain, according to this submission, "that the material sought to be submitted was not of this character": defendant's outline of submissions, 21 April 1998, para. 6.3.

In my opinion, it is inappropriate to speak, in an arbitration of this kind, of "claim" and "defence" and "reply" as if each was, or ought to have been seen as, a separate compartment of a process closely akin to litigation. In an arbitration on the documents, in which the arbitrator is assisted by a Resource Unit with relevant expertise, the procedures ought not to be constricted or confined by concepts appropriate to the adversarial system under which the courts determine legal rights. A skilled arbitrator will exploit that flexibility which, when applied with fairness, and when properly tailored to suit the speedy and economical resolution of the dispute in question, is one of arbitration's principal attractions.

I am not, therefore, attracted to the proposition that Dr. Hughes ought not to have allowed the further pursuit of documents because the claimants had "closed" their "case". I am, however, of the view that by April 1996 the claimants had turned the search for those missing but (they hoped) significantly revealing Telstra documents into an endless and largely empty exercise. Here was a world of a thousand burrows, in which lived a million rabbits. The claimants were intent upon chasing and capturing every one of them, but with no real prospect that in the end their appetites would be satisfied.

At least that is how, by April 1996, Dr. Hughes was entitled to regard the possible future of his arbitration. Indeed, in a letter to him dated 18 April 1996, the claimants sought to re-open an FOI request made by them as early as June 1992. They claimed that an investigation undertaken by the Office of the Commonwealth Ombudsman had revealed that Telstra had not fully responded to that request. The letter does not describe the documents thus "withheld" save to say that they included "Exchange Maintenance and Network documentation". The letter goes on to challenge the correctness of a ruling made by the arbitrator "on the provision by Telstra of relevant Exchange Maintenance documentation ... requested under arbitration".

Whatever the impugned ruling was, it cannot be the subject of an appeal to the Court. Whatever the documentation "withheld", the claimants' failure to describe it robs the letter of such force (if any) as it otherwise might have had. Further delay in bringing down the award could not be justified simply because some unidentified documents, which the claimants had not earlier realised were missing, had been noted by someone in the Ombudsman's office. The fact that the claimants were not previously aware that these documents had not been produced is, of course, not necessarily relevant; but unless the arbitrator were given a description of the documents which enabled him to assess their importance, he could not responsibly accede to the claimants' request for additional time. He could certainly not assume that an officer in the Ombudsman's office would necessarily know what issues were relevant and what were not; or how to distinguish important documents from those which were of no importance at all. In my opinion, the letter of 18 April gave the arbitrator no basis whatsoever for putting the balance of the arbitration on hold while the process of inspection, submissions and counter-submissions took its course. In these circumstances, the arbitrator was in my opinion justified in responding, on 19 April, in the following terms:

"I acknowledge receipt of your facsimile dated 18 April 1996 ... I direct as follows: (1) The claimants' submission in relation to the documentation produced by Telstra during March 1996 is to be made by 1 May 1996; (2) Telstra shall, within a week of receiving the claimants' submission, submit its response to the claimants' submission. My intention is to conclude this arbitration as expeditiously as possible. In doing so, I shall ensure the rights of either party are not materially compromised. I am not satisfied that the outstanding FOI requests to which you refer are of sufficient relevance to warrant a further extension. My current intention is to be in a position to hand down an award on or about 31 May 1996."

The claimants failed to put in, by 1 May 1996, any submission in relation to the documentation produced by Telstra the previous March. On 2 May, the arbitrator wrote to them, giving reasons why in his opinion he should not "reconsider my ruling that your outstanding FOI requests are of [in]sufficient relevance to the claim to warrant a further extension." He concluded by saying:

"You must appreciate that, in the interests of both parties, I am endeavouring to conclude this arbitration in the spirit of speed and efficiency with which was (sic) the common goal of both parties at the commencement. I do not believe that it is in the interests of either party to pursue documentation which in all probability will be of minimal, if any, relevance to the final outcome and the production of which can only have the effect of delaying the conclusion of these proceedings."

The arbitrator wrote to the claimants again, on 20 May 1996 - by which time no further material had yet been filed. It will be recalled that that letter was referred to by the arbitrator in giving his reasons for his award: see paragraph 65 of this judgment. In the letter of 20 May, Dr. Hughes informed the parties that he would only accept further submissions in special circumstances. It was by that time almost three weeks since the expiry, on 1 May, of the deadline imposed on the claimants by the arbitrator in his letter to them of 19 April. As recorded in the quotation from the arbitrator's reasons included in paragraph 65 above, it was not until 10 June 1996 that the first of the "late" submissions arrived. Dr. Hughes refused to accept them.

In all the circumstances of this case, I can find no misconduct in the arbitrator in adopting the position he took in relation to those submissions. In my opinion, he then had every reason to think that the further pursuit of Telstra documents would not be worth the inevitable cost in further delay and further expense. In any event, he qualified his position by stating that, were he convinced of the relevance of the material submitted after 20 May, he would have had no hesitation in re-opening the proceedings.

In his award, the arbitrator allowed $1,000 to Mr. Garms "in respect of pain and suffering": reasons, p.31. Dr. Hughes said, in a passage commencing at p.30:

"I have had reservations on the basis that whilst Mr. Garms has clearly experienced an immense amount of anxiety due to the failure of the Tivoli business, clearly there have been factors (as emphasised in this award) other than Telstra's poor service which had contributed to that business failure. To the extent that Mr. Garms has experienced anxiety as a direct consequence of Telstra's poor service, there is a limit to the extent to which Telstra should be held accountable for what appears to me to be something of a pre-occupation by one or two individuals ... Notwithstanding these reservations, I am aware the claimants, particularly Mr. Garms, have suffered considerable distress, and understandably so, as a consequence of Telstra's inability to provide a suitable level of service over a period of many years."

Despite the fact that she was one of the claimants, and therefore (as Dr. Hughes was aware) "suffered considerable distress ... as a consequence of Telstra's inability to provide a suitable level of service over many years" Mrs. Garms received nothing for her pain and suffering. Not only this, but no explanation for her exclusion was given. On this point, the arbitrator was inexplicably silent; and in this respect his reasons are unsatisfactory. On the other hand, the amended originating motion does not raise the question of compensation for Mrs. Garms' pain and suffering. More importantly, I can see nothing in the Fast Track Arbitration Procedure, or in the general law, which would justify an award of this kind. Although Telstra does not seek to challenge the amount awarded to Mr. Garms, that aspect of the arbitration might well be open to challenge.

Another issue touched upon before me was that of the allegedly missing Yellow Pages reference. This was not the subject of an allegation in the amended originating motion, and for that reason forms no part of my consideration of this case.

In these circumstances, the plaintiffs have not made out a case of misconduct. There must, accordingly, be judgment for the defendant.

Arbitration Act 1984

Information Act 1982

At a glance

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Judgment (187 paragraphs)

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