Plaintiff v First Defendant Second Defendant

Plaintiff v First Defendant Second Defendant - [2010] VSC 139 - VSC 2010 case summary — Zoe

[29]

'In applying s38, as amended, a construction that would promote the purpose or object underlying the Act must be preferred to a construction that would not promote that purpose or object ... The expression "error of law on the face of the award" is one of a type well-known to courts. The award having been examined, the question is whether there is apparent (and such is the denotation of the word "manifest") an error of law. 'Manifest error' is an expression sometimes used in reference to reasons given by judges or the approach taken by juries ... It is used to indicate something evident or obvious rather than arguable .... The matters referred to by Lord Diplock in The Nema remain important factors in determining whether leave should be given.

However, I have difficulty in defining the significance of an error of law by reference to whether it is apparent to a judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument. I understand the views expressed that decisions on questions of law should be left to the arbitrator with minimal interference by the courts unless the arbitrator may be establishing an erroneous precedent on a matter of law which may affect other cases between other parties, as, for example, where the question concerns the construction of a contract in standard terms. But the paragraph requires a determination as to whether or not there is a manifest error on the face of the award and I do not see why a judge should be required to do that without adversarial argument. If the judge concludes after argument that there is not such an error of law an application based on this ground fails ... There is nothing, in my opinion, in the language of the sub-section or in any other material, to which consideration can appropriately be given pursuant to the terms of the Interpretation Act which would allow the judge to proceed to determine the application without hearing argument. However, as McHugh JA pointed out "manifest" in the context of the sub-section, which contemplates the grant of leave before an appeal can be pursued, connotes an error of law which is more than arguable. There should, in my opinion, before leave is granted be powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law'.[35]

[53]

"[76] ... The expression 'misconduct' as used in relation to arbitration does not necessarily or indeed often involve moral turpitude on the part of the arbitrator.[71] As was said in Williams v Wallis and Cox,[72] 'misconduct' does not really amount to much more than such a mishandling of the arbitration as is likely to amount to some substantial miscarriage of justice.[73] In our view, failure of an arbitrator to deal in his or her reasons with relevant evidence and substantial submissions is a mishandling of the arbitration and thus is "misconduct" within the meaning of s 42.

[77] We acknowledge that there have been doubts expressed about the point.[74] Significantly, in Sydney Water Corporation Ltd v Aqua Clear Technology Pty Ltd,[75] Rolfe J said that, while it has generally been accepted that it is an error of law[76] for an arbitrator to fail to give proper reasons or to fail to address substantial and serious submissions, he had some doubts as to whether the failure to give reasons as required by s 29 or to deal with substantial and serious submissions amounts to technical misconduct. In his Honour's view, it was perhaps better thought of as a failure properly to consider the material in the sense of not exposing the reasoning process and, in the course of doing so, indicating to the parties the way in which substantial and serious submissions have been determined so that the parties and the court can consider whether the award is infected with relevant error, namely, manifest error on its face.

[78] With respect, however, we do not share those doubts. It is true that not every error of law committed by an arbitrator will amount to misconduct. To take a simple example, an arbitrator might make a mistake about the substantive law of contract. That would be an error of law, but it would not be misconduct.[77] It is also true that not every act of misconduct will amount to an error of law (of the kind to which s 38(5) applies). For instance, an arbitrator might so restrict argument or cross-examination as to misconduct the arbitration within the meaning of s 42, but that would not be an error of law within s 38(5). But where, as here, an error of law consists in an arbitrator's failure to include in reasons what the Act requires to be included, it is in our view both logical and appropriate to regard the omission as constituting technical misconduct as well as error of law (in the same way that Megaw J did in Re Poyser and Mills' Arbitration[78] and McKechnie J did in Villani v Delstrat Pty Ltd).[79]

[79] It is suggested in Jacobs that the failure of an arbitrator to deal with submissions worthy of serious consideration and seriously advanced would be better thought of as a 'procedural mishap' justifying remission under s 43 than 'misconduct' justifying that the award be set aside under s 42. But, with respect, that distinction will not always be useful. Granted, not every technical irregularity is sufficient to warrant setting aside an award.[80] Indeed, the court will not intervene at all unless it is demonstrated that the misconduct in question may have been productive of 'a substantial miscarriage of justice' (as it was put by Marks J in Gas & Fuel)[81] or 'some injustice' (in the sense explained by Lord Donaldson in King v Thomas McKenna Ltd).[82] Hence the aphorism that the court will not permit s 43 to be used as a backdoor method for circumventing the statutory restrictions on the court's power to intervene in arbitral proceedings.[83] But if a 'procedural mishap' is productive of some fundamental injustice, in our view it is apt to be described as 'a mishandling of the arbitration ... likely to amount to some substantial miscarriage of justice" and, therefore, as 'misconduct'."

[75]

"High Court authority makes it clear that I must construe the terms of the MOU objectively, and without regard to the subjective beliefs, intentions and expectations of the parties, but in the light of surrounding circumstances which are either known to the parties or notorious. Also relevant is what is, objectively, the 'genesis' and 'aim' of the transaction: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 348-352, Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [35]-[40]. The question is what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean: Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101 at [14].

The MOU is a complex, formal document intended to create substantial rights and obligations between sophisticated commercial bodies. It bears the hallmarks of detailed negotiation between parties and careful drafting by experienced and skilled lawyers. In construing contracts one should 'not easily accept that people have made linguistic mistakes, particularly in formal documents': Chartbrook at [14] citing Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896 at 912-913. In the present case, neither side contended that something has gone wrong with the language or that this is a case of 'correction of mistakes by construction': East v Pantiles (Plant Hire) Ltd (1981) 263 EG 61. Nor, contrary to what may have been said in one of the notices of dispute, was any implied term advanced. No claim for rectification is made.

The relevant language of the MOU consists of ordinary English words and not technical terms.

The hypothetical reasonable person, while not a racing expert, is to be credited with a general awareness of the way horse racing is conducted in Australia and the televised broadcasting of such races.

Evidence of broadcasts by Sky at the time of the MOU is apparently no longer available. The Sky Parties tendered DVDs of recent broadcasts (18 and 21 November 2009) which were said to 'reflect the style and content of broadcasts on the Sky Channels as at the time of entry into the MOU'. There was some disputation as to whether the DVDs were fairly reflective as alleged. I do not think such evidence assists. The rights and obligations of the Sky Parties under the MOU were not linked to, or conditional on, an analysis of the nature of the programmes which Sky was broadcasting in early 2007. Rather, the MOU uses non-technical language to define rights and obligations in a way which would be understandable to a hypothetical reasonable observer with the most rudimentary understanding of horse racing in Australia."

[109]

"213 A perusal of the contemporary writings on commercial arbitration, in particular international commercial arbitration does not identify any express support for the standard of reasons in Art 31(2) to be that of a judge in a common law system. (See generally: Binder op cit at [6-074]; A Redfern & M Hunter Law and Practice of International Commercial Arbitration (4th Ed, 2004, Sweet & Maxwell) at 381-384; A Walton & M Vitoria Russell on the Law of Arbitration (20th Ed, 1982, Stevens & Sons Ltd) at 291-292; Mustill & Boyd op cit at 377-379; Holtzmann & Neuhaus op cit at 837-838; E Gaillard & J Savage (Eds) Fouchard Gaillard Goldman on International Commercial Arbitration (1999, Kluwer Law International) at 590 and 763; M Rubino-Summartano International Arbitration Law (1990, Kluwer Law and Taxation Publishers) at 437; J Lew et al Comparative International Commercial Arbitration (2003, Kluwer Law International) at 648-649; Jacobs op cit at [28.20]; Poudret & Besson op cit at 666-673; J Parris Arbitration Principles and Practice (1983, Granada) at 141; P Rowland Arbitration Law and Practice (1988, Institute of Chartered Accountants in England and Wales in association with Sweet & Maxwell) at 75-76; A Tweedale & K Tweedale Arbitration of Commercial Disputes: International and English Law and Practice (2005, Oxford University Press) at 341-342 and 866-867; J Tackaberry & A Marriott Bernstein's Handbook of Arbitration and Dispute Resolution Practice Vol 1 (4th Ed, 2003, Sweet & Maxwell) at 347-348; R Merkin Arbitration Law (2004, LLP) at 718-720; Lord Bingham "Reasons and Reasons for Reasons: Differences Between a Court Judgment and an Arbitration Award" (1988) 4 Arbitration International 2, 141 at 152-154 and (1997) 16 The Arbitrator 19; Sir Harry Gibbs "Reasons for Arbitral Awards: the John Keays memorial lecture, Sydney 7th September 1988" (1988) 7 The Arbitrator 3, 95-130; P Gilles & N Selvadurai "Reasoned awards: How extensive must the reasoning be?" (2008) 74 Arbitration 125-132).

[113]

The reasons required are those for making the award. To the extent that a crisp summary of that is required, I would adopt the statement of principle of Donaldson LJ in Bremer v Westzucker employed by the Privy Council as recently as 2001. That the language in s 29(1)(c) describes at one level what a judge does and is obliged to do does not as a matter of language or logic impose all the obligations upon judicial officers in this respect on to arbitrators.
The above is not inconsistent with what the High Court (Mason, Wilson, Brennan, Deane and Dawson JJ) said in Askew v Fields [1985] HCA 4; 156 CLR 268 at 270-271 in relation to the Arbitration Act 1902 (NSW), s 12 that 'arbitrators are bound to decide the issues submitted for their determination'. This is a statement of the requirement to fulfil the contractual task. In doing so, they must comply with s 29(1)(c).
The above is sufficient to explain why I disagree with the view of the Court in Oil Basins if that conclusion can be taken from the reasons that the legal obligation of an arbitrator to give reasons is to be equated with a judge in the common law system. It is unnecessary to discuss the particular requirements of individual circumstances other than those obtaining in this case, or the many cases on the adequacy of arbitrators' reasons in the context of particular facts, such as Transcatalana de Commercio SA v Incobrasa Industrial Commercial Brazileira SA (The 'Vera') [1995] 1 Lloyd's Rep 215; Universal Petroleum Co Ltd v Handels und Transport GmbH [1987] 1 Lloyd's Rep 517; Ascot Commodities NV v Olam International Ltd [2002] CLC 277; Checkpoint Ltd v Strathclyde Pension Fund [2003] EWCA Civ 84; World Trade Corp Ltd v C Czarnikow Sugar Ltd [2004] EWHC 2332 (Comm); Protech Projects Construction (Pty) Ltd v Al-Kharafi & Sons [2005] 2 Lloyd's Rep 779; Petroships Pte Ltd v Petec Trading & Investment Corp of Vietnam (The 'Petro Ranger') [2001] 2 Lloyd's Rep 348; Hawk Shipping Ltd v Cron Navigation Ltd [2003] EWHC 1828 (Comm); and Torch Offshore LLC v Cable Shipping Inc [2004] 2 Lloyd's Rep 446."

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