Kennedy-Taylor (Qld) Pty Ltd, Re v Civil and Civic Pty Ltd; Re Brier

[1994] QCA 453

IN THE COURT OF APPEAL	[1994] QCA 453
SUPREME COURT OF QUEENSLAND	Appeal No. 17 of 1994
Brisbane
Before	Fitzgerald P. McPherson J.A. Cullinane J.

[Kennedy-Taylor v. Civil & Civic]

IN THE MATTER of the

ARBITRATION ACT 1973

- and -

IN THE MATTER of an Arbitration between KENNEDY-TAYLOR (QLD) PTY LTD

Claimant/Subcontractor

- and -

CIVIL & CIVIC PTY LIMITED
Respondent/Contractor IN THE MATTER of an Application to remove the Arbitrator ERIC BLYTH BRIER and to set aside his interim award made and published on 20 December 1991

- and -

REASONS FOR JUDGMENT - FITZGERALD P.

Judgment 02/11/1994

The circumstances giving rise to this appeal are set out in the reasons for judgment of McPherson J.A. and Cullinane J.

As is apparent from their Honours' summary of events, the parties' choice of arbitration, with engineers as arbitrator and advocates, has not been a spectacular success. More than four years after the arbitrator was appointed, the parties are in dispute as to whether any, and if so what, matters have been decided. And, in a search for tactical advantage, each continues to alter its position, and sometimes adopts the contrary position previously adopted by its opponent. The arbitrator's statements also contradict themselves from occasion to occasion. Overall, the proceedings are riddled with inconsistencies and confusion.

I agree with McPherson J.A. and Cullinane J. that the appeal should be dismissed, and do not intend to add to their reasons except to make clear my opinion that, at this point, the arbitrator has not conclusively determined any issue in the arbitration.

Subject to any material legislation (now the Commercial Arbitration Act 1990, but, relevantly for this dispute, the Arbitration Act 1973), the nature and extent of an arbitrator's jurisdiction and powers are derived from the parties' agreement. Although the matter was not canvassed fully, if at all, my understanding is that, in this instance, the arbitrator's function is (i) to decide what, if any, amount the appellant is entitled to be paid by the respondent under, or for breach of, the subcontract between them, and (ii) to order the respondent to pay that amount to the appellant, or (iii) to dismiss the appellant's claims.

Questions of costs can be ignored for present purposes.

It is unnecessary to decide what determinations by an arbitrator may properly be described as an "interim award"; e.g., whether that description is properly applied to a determination which governs the parties or their conduct or relationship on an interim basis, i.e. temporarily, until the arbitration is heard or concluded. It is not in dispute that a determination which concludes, and binds the parties in respect of, one or more aspects of their dispute, e.g., a final decision on particular factual or legal issues in the arbitration, is an interim award, or that such an interim award may provide the foundation for a final award; e.g., if it decides a question of fact or law adversely to a party whose entire case is founded upon the matter decided against it. That was what the respondent sought from the arbitrator in the present case.

But that was not what the appellant wanted or what the arbitrator agreed, or ruled, that he would provide. His determination in relation to the four points referred to by McPherson J.A. and Cullinane J. was to be, and was, provisional only, not conclusive or binding on the parties, who were, and are, to have a further opportunity to contest the arbitrator's provisional determination.

I am doubtful whether such an expression of a provisional opinion is properly referred to as an interim award, but, even if it is, it was not agreed or intended to be binding on the parties and the arbitrator's functions in relation to the material aspects of the parties' disputes are not exhausted, at least until some further step is taken.

In the present case, the arbitrator's letter to the appellant dated 24 January 1992 and his statements at the hearing on 28 January 1992 quite clearly indicate his acceptance, just in time, of that position.

I agree with the orders proposed by McPherson J.A. and
Cullinane J.
IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 17 of 1994

Brisbane

Before Fitzgerald P.
McPherson J.A.
Cullinane J.

[Kennedy-Taylor v. Civil & Civic]

IN THE MATTER of the

ARBITRATION ACT 1973
and

IN THE MATTER of an Arbitration between KENNEDY-TAYLOR(QLD) PTY

LTD

Claimant/Subcontractor

and

CIVIL & CIVIC PTY LIMITED

Respondent/Contractor

and

IN THE MATTER of an Application

to	remove the Arbitrator ERIC
BLYTH	BRIER and to set aside his
interim	award made and published
on 20	December 1991

JOINT REASONS FOR JUDGMENT - McPHERSON J.A. & CULLINANE J.

Judgment delivered the 2nd day of November 1994

In 1988 Kennedy-Taylor (Qld) Pty. Ltd. was the electrical subcontractor to the head contractor Civil and Civic Pty. Ltd. for the construction of police headquarters in Roma Street, Brisbane. Having done the work, Kennedy- Taylor in 1990 notified Civil & Civic of its intention to lodge a claim for extras, damages for delay, and the like. When the claim was rejected, notice of dispute was given and on 13 July 1990 a Mr Brier was nominated by the President of the Institute of Engineers to conduct an arbitration of the claims.

A preliminary conference with the arbitrator took place on 2 August 1990, after which pleadings were exchanged and particulars were provided. It soon became apparent that Civil & Civic was relying on a defence that Kennedy-Taylor's claims were, irrespective of their merits, bound to fail for one or more of four reasons. Briefly stated, they were: (1) cl.47 of the contract; (2) compromise; (3) estoppel; and (4) cl.54 of the contract. Without going into detail, it is sufficient to say here that the effect of cl.47 was to relieve the head contractor of liability for a claim by the subcontractor unless the claim, together with full particulars, was lodged in writing with the subcontractor not later than 14 days after the occurrence of the events or circumstances on which it was based.

The parties were represented before the arbitrator by qualified engineers who appeared as lay advocates. It was the submission of Mr Gore, who appeared for Civil & Civic, that the arbitrator should first rule on the validity of the four points, as they came to be called; if any of them was upheld there would then be no need to enter upon a detailed hearing, examination, and determination of each of the individual claims by Kennedy-Taylor of which there were said to be some 585 in number. Civil & Civic would in that event be entitled to an award in its favour dismissing all claims.

The course contended for by Mr Gore was thus not unlike that envisaged by O.22, r.27 of the Rules of the Supreme Court, by which a point of law raised by the pleadings may be determined in a preliminary way before the trial; or, alternatively, the procedure under O.39, r.12, enabling a particular question or questions to be separately tried and determined before other issues in an action. For his client it had the obvious attraction that, if successful in defeating Kennedy-Taylor's claims at the outset, the arbitration would be quickly brought to an end and much time and expense would be saved.

From the standpoint of Kennedy-Taylor the advantages of the course proposed by Mr Gore were much less obvious. It would mean that the substantial merits, if any, of its many claims might never be fully ventilated and the prospect of achieving a satisfactory settlement with Civil & Civic would be correspondingly diminished. Consequently, Mr Gough, who appeared for Kennedy-Taylor in the arbitration, argued vigorously for a full hearing of all the claims, urging that it was only after all the evidence in support of them had been heard that the arbitrator would be in a position to make rulings on the four points.

The cl.47 point afforded the principal obstacle to the success of Kennedy-Taylor's claims, and it was to the operation and effect of that contractual provision that the parties directed their submissions before the arbitrator. Argument occupied several days and proceeded over more than one sitting period; but in the end the arbitrator decided that there should be a preliminary hearing at which the parties would be entitled to place before him any evidence they wished on the four points, after which he would deliver what he described as an "interim award" on the questions involved.

The preliminary hearing concluded in early December 1991, and the interim award with accompanying reasons was published on 20 December 1991. The award rejected the argument advanced by Civil & Civic with respect to cl.54 of the subcontract, but upheld its contentions that Kennedy- Taylor's claims were barred and defeated by the operation of cl.47; and also by a compromise agreement (or "accord and satisfaction", as it was called by the parties) entered into on 1 May 1990; as well as by estoppel arising from letters dated 21 March 1990 from Kennedy-Taylor, which had it was found been acted on by Civil & Civic. In short, Civil & Civic succeeded on three of the four preliminary points dealt with at the preliminary hearing.

After the interim award had been delivered, Kennedy-Taylor initially wrote to the arbitrator on 10 January 1992 saying that advice was being taken on the three points decided against them, but that "it may well be that we will want to exercise the right ... to question your interim decision and to raise further points at another hearing". They asked for confirmation that the interim award was not a final award but only a preliminary report, similar in nature to a referee's report, which either party would be free to challenge at a further hearing; and that there would in due course be a main or final hearing to deal fully with the claims and defences "and with factual matters and evidence which were excluded from or not canvassed at the preliminary hearing".

The arbitrator wrote back on 16 January 1992 saying that in his view "this interim award should now become final", and that accordingly "the final hearing will be confirmation of the interim award" and the hearing of any submissions on costs. He said that the interim award was not final until confirmed as such, but that it was "not a preliminary report which either party was free to challenge at a further hearing". Further correspondence on the subject followed, including a letter dated 23 January 1992 from Kennedy-Taylor in which a series of specific questions were put to the arbitrator about the view he took of the effect of his interim award.

On 31 January 1992, Kennedy-Taylor filed a notice of motion returnable before the Court of Appeal for orders that (1) the arbitrator be removed; (2) his award be set aside; and (3) the arbitration agreement between the parties cease to have effect. The motion was on 1 September 1992 remitted by this Court to the Trial Division, where as amended on 7 November 1993 it came before Kiefel J., who after a five day hearing delivered extensive written reasons on 23 December 1993 dismissing the motion with costs. This is the appeal by Kennedy-Taylor against her Honour's decision.

The notice of appeal contains some seven distinct grounds of appeal. However, the only substantial matters relied on by Mr Muir Q.C. for Kennedy-Taylor were those identified as grounds 1 and 5 in his written outline of submissions. It is convenient to begin with the latter, which in the written outline is headed "Misleading as to the nature of the hearing". The substance of it is that, in the course of the hearing, the arbitrator had assured the advocates for the parties that, following the interim award, there would be a final hearing at which the parties would have an opportunity to challenge the award and call evidence before it was finally adopted.

In the court below her Honour accepted that such an assurance had been given. There was ample evidence to support such a conclusion. In the course of the hearing on 12 September 1991 the arbitrator, addressing Mr Gore (appeal record, at 2155), had said:

"With my assurance that I will hear the matter in general principle, and prepare an interim award, which will then be the subject of a final hearing, the claimant has said he thinks he can do it in four days.

That should give you some confidence you can do it. It is not going to prejudice your position. It gives you the opportunity when we come to the main hearing of debunking everything I have in my interim award if you so desire, but that the time when you go into it in full detail should you find my interim award is not helpful."

Shortly afterwards, the arbitrator repeated his assurance. In response to a remark by Mr Gore that, having heard the preliminary points, the arbitrator could give a final award as to the matter, the arbitrator said (appeal record, at

2161):

"I won't give you a final award until I have prepared the interim award to you for examination. That would be wrong. It may very well be that it

becomes the final award, but I don't know at this point in time and I would not say it would automatically become."

There is therefore no doubt that the arbitrator said and intended that there would be an opportunity to challenge the findings and conclusions in his interim award before he finally adopted it. In the proceedings below, the amended notice of motion complained in para.(i) that the arbitrator had misled the applicant as to his intention with respect to the nature of the ensuing preliminary hearing when he said that the parties would at a later hearing be able to call further evidence on issues to be dealt with at the preliminary hearing, and that this representation had induced Kennedy-Taylor to prepare its evidence on a limited basis. The relevant paragraph in the notice of motion went on to complain that thereafter the arbitrator proceeded on the limited evidence before him to determine the preliminary issues by way of an interim award in such a way as "to defeat the applicant's claims in toto, leaving only the issue of the costs of the arbitration to be determined by a final award".

In her judgment the learned judge dealt comprehensively with this complaint in a portion of her reasons entitled "confusion". Her conclusion was that, considered in the light of all that had transpired before and during the preliminary hearing on the four points, Kennedy-Taylor or its advocate could not reasonably have believed that, regardless of the view taken by the arbitrator with respect to the operation of cl.47, there would necessarily be a subsequent occasion on which further detailed evidence about each of the individual claims would be led. As regards the remaining three points, the concession was made before her Honour by counsel for Kennedy-Taylor (who was then Mr Wensley) that all relevant evidence had been given and all submissions had been made upon those issues. It followed from this that there was in her Honour's opinion no substance in the complaint put forward in para.(i) of the notice of motion that any confusion engendered by the arbitrator had caused Kennedy-Taylor to refrain from calling evidence in relation to the four points.

An appeal against her Honour's decision on this point was not pursued before us, and it need not be further considered here. Instead, the matter was approached on appeal in a quite different fashion. It was submitted that having promised Kennedy-Taylor or led its advocate to believe there would be an opportunity to challenge the interim award at a further hearing before him, the arbitrator had in the end wrongly refused to allow Kennedy-Taylor to contest it or to call evidence at such a hearing. On this approach to the matter, it was submitted (written outline, paras.28, 29) that it did not matter whether or not Kennedy-Taylor was actually misled as to the scope of the preliminary hearing because the arbitrator had acted contrary to natural justice in denying Kennedy-Taylor a further opportunity of being heard on those matters.

There are several difficulties in the way of this argument. One is that the point was not taken below, and consequently there is no decision of her Honour on the question. Acknowledging this, Mr Muir submitted that it was nevertheless open to him to pursue the point for the first time on appeal, and that the respondent Civil & Civic had raised no objection to his arguing it. The difficulties do not, however, end there. The matter has never been made a ground of the original or amended notice of motion to set aside the award and remove the arbitrator. The motion to set aside was made and falls to be determined under the Arbitration Act 1973, and not the more recent Commercial Arbitration Act 1990. Under O.90, r.10 of The Rules of the Supreme Court as they stood at the time the application was filed on 31 January 1992, there was only a limited time (which expired on that day) in which to move to set aside an award; and by O.62, r.9 it was obligatory to state, at least "in general terms", the grounds of the application. No doubt, as was held in Gold Coast City Council v. Canterbury Pipe Lines (Aust.) Pty Limited [1967] Q.W.N. 2, there is ample power to allow an amendment incorporating new grounds after the time limited has elapsed; but no application for amendment has been made, and it cannot be said that at this late stage it would necessarily be granted whether on terms as to costs or otherwise.

Even if that problem is overcome, it is not the only or
even the principal obstacle now confronting Kennedy-Taylor.
In the course of the appeal the Court was initially taken

to the transcript of the arbitration proceedings and the correspondence passing between the arbitrator and Kennedy- Taylor up to and including, but not beyond, the arbitrator's letter dated 16 January 1992. At that stage the arbitrator was resisting the claim by Kennedy-Taylor in its letter dated 10 January 1992 that it was open to the parties at a subsequent hearing to contest the interim award delivered on 20 December 1991. At that time there may, therefore, have been some justification for the complaint that the arbitrator was denying the parties an opportunity of contesting the findings and conclusions he had made, which was contrary to what he had previously led them to believe would be the case.

After that, however, the arbitrator changed his attitude. In a letter dated 24 January 1992, replying to a letter from Kennedy-Taylor of the previous day, he repeated

that the interim award was not a final award until
confirmed as such. In paras. (c) to (f) of his letter he
went on to say:

"(c) The purpose of further process is to consider other relevant matter which has not been canvassed during the Preliminary Hearing.

(d) (i) At the final hearing, decision of the interim award will be limited to -

(ii)      challenge of the correctness of the interim award

(iii)      Submissions that the interim award should not be confirmed as the final award.

(iv)      Evidence and submissions on relevant matter which has not been canvassed at the Preliminary Hearing.

Notice of issues which you wish to raise should be notified to the Respondent prior to the meeting.

(e) The interim award will be incorporated in a final award and that final award will include such things as a determination in relation to the costs of the arbitration and other matters which have not been determined in the interim award.

(f) The issues ruled on in the interim award may limit some of the items included in your amended points of claim."

In the meantime the arbitrator had fixed 28 January as a date for a further meeting with the parties. According to the transcript of proceedings on that day, when the advocates for the parties appeared before the arbitrator again, Mr Gough announced that:

"The meeting does not constitute what you have called the final hearing, nor the hearing which you have foreshadowed for the purpose of confirming your interim decisions, nor for dealing with any question of costs, and that includes setting of the dates for any hearing."

The arbitrator confirmed this statement as "quite correct". He proceeded to refer to the correspondence and to deal seriatim with each of a series of questions which had been

raised by Kennedy-Taylor in their letter to him of 23 January 1992. It is apparent that in what he said on that occasion he was reading from his letter of 24 January 1992.

Although some repetition is involved, it remains necessary

to set out in full the relevant portion of the transcript:

"THE ARBITRATOR: The letter of 23 January asked me to answer a number of specific questions, and I think you may have that letter in front of you. The first question was, 'Do you intend that your interim award will only take effect as an award once it has been confirmed at a final award?' My answer to that is: as stated in my letter of 21 January, the interim award is not a final award until such time as it is confirmed as a final award".

(b), the question is, 'If the answer to (a) is 'no' do you consider that your interim award is already effective as an award?' As my answer to that is 'Yes', no answer to (b).

Item (c), 'If the answer to (b) is 'Yes', what is the purpose of the further process of confirmation which you mention?' My reply to that is: the purpose of further process is to consider other relevant matters which have not been canvassed during the preliminary hearing.

(d), the question is, 'If a further hearing is held before you for the purpose of confirming your interim award as a final award, would we be permitted at the hearing (1) to discuss the interim award? (2), to challenge and argue the correctness of the interim award? (3), to submit that the interim award should not be confirmed or made final or confirmed as a final award; and (4), to lead evidence and make submissions about many matters which were expressly omitted or excluded from the preliminary hearing?'

My reply to that is: at the final hearing discussion of the interim award will be limited to challenge of the correctness of the interim award, submissions that the interim award should not be confirmed as a final award, evidence that submissions on relevant matters which have not been canvassed at the preliminary hearing, and notices of which you wish to raise should be notified to the respondent prior to the meeting.

Reply to (e), the question was, 'Have you already made up your mind that the interim award will be confirmed as a final award?' My answer to that is: the interim award will be incorporated in the final award and that the final award will include such things as determination in relation to the costs of the arbitration and any other matters which have not been determined in the interim award.

(f): 'Will there be a main hearing to deal with our claims in full?' The answer to that is: the issues ruled on at the interim award may limit some of the items included in your amended points of claim."

The remainder of the meeting on 28 January 1992 was taken up with debate about an appropriate date for a final hearing, as to which 14 February 1992 was "pencilled in" by the arbitrator for that purpose.

It is clear, therefore, that whatever his attitude may previously have been, the arbitrator was on and after 24 January 1992 not refusing, but offering, to afford the parties an opportunity to be heard on matters which Kennedy- Taylor wished to contest in the interim award. The contemplated further hearing never took place because it was intercepted by Kennedy-Taylor's application to set aside the award.

When confronted with the correspondence after 16 January 1992 and the transcript of the proceedings on 28 January 1992, Mr Muir's response was twofold. One was to submit that it demonstrated a lack of candour on the part of the arbitrator in offering an opportunity to make submissions on the interim award that was "completely illusory", so as to create a mere pretence of addressing the complaints advanced by Kennedy-Taylor. There is nothing to support such a conclusion in either the arbitrator's letter of 24 January or in his remarks at the meeting on 28 January. His change of attitude is explained by the fact that late in January 1992 he received advice from his solicitor, who had previously been on holiday. In any event, the only reliable method of testing the genuineness of the offer made to the parties would have been to take advantage of it and see what happened. Kennedy-Taylor never took that critical step, and so is not now in a position to complain of having been denied natural justice or to establish that it has been denied the hearing that it claims is its right.

The other response by Mr Muir was, as we understood it, that the contention of Kennedy-Taylor had always been that delivery of the interim award itself had of its own force the effect of shutting out the parties from challenging the findings and conclusions contained in it. This contention has the appearance of inconsistency with the attitude so vigorously maintained by Kennedy-Taylor on or after the award was delivered on 20 December 1991, which was that it had, in accordance with the arbitrator's rulings and intimations at the preliminary hearing, a right to a further hearing in order to challenge the correctness of the findings and conclusions in that award. In this respect, however, it must be said that Civil & Civic cannot be accounted blameless. On 30 January 1992 (which was the day before the application was made to set aside the award) it wrote to the arbitrator claiming that the interim award had determined his authority in respect of the matters dealt with in that award (which were the four points alluded to in his reasons); and that, although confirmation in a final award of the already "binding" interim award was "not strictly necessary", it was noted that the arbitrator would incorporate it in the final award together with his ruling on costs.

The arbitrator's task of holding the balance between the lay advocates and their clients has not been easy. It is difficult to avoid the impression that in the course of these lengthy and drawn out proceedings both sides have allowed their attitudes to be influenced by whatever seemed to their representatives to be the tactical advantage of the moment without much concern for the virtues of consistency in the long term. The result is that less reliance than usual can be placed on the attitudes taken up and the contentions advanced from time to time by the parties or their representatives. In these circumstances the only safe guide to what was really intended in making the award is to be found in what the arbitrator said and did.

Power to make an interim award is conferred by s.21 of the Arbitration Act 1973. The section does not specify the form that such an award is to take, or its effect when made, beyond saying that a reference in the Act to an award includes an interim award. Texts and decided cases suggest that a purpose for which interim awards may be made is to resolve a distinct question or issue in an arbitration as a preliminary to deciding the whole matter under reference, in much the same way as under O.22, r.27 of The Rules of the Supreme Court : see Fidelitas Shipping Co. Ltd. v. V/O Exportchleb [1966] 1 Q.B. 630, 642, per Diplock L.J. In the same case Lord Denning M.R. spoke ([1966] 1 Q.B. 630, 638) of "an interim decision given on a particular issue or issues between the parties pending final determination of the amount due". The case there bore some resemblance to this in that it involved an interim award on a preliminary question whether a claim for demurrage was at the outset barred by a "cesser clause" in the relevant contract or charterparty between the parties to the arbitration.

The decision in Fidelitas is authority for saying that an interim award may have the effect of determining issues of fact or law conclusively as between the parties, so as to create an issue estoppel capable of preventing either of them from subsequently raising a point which could have been, but was not, litigated in the proceedings leading to the award. It does not follow that the arbitrator is necessarily precluded from reconsidering an interim award he has made. Statute apart, such a rule admittedly prevails in the case of a final award : See Mordue v. Palmer (1870) L.R. 6 Ch.App. 21, where the arbitrator was held to be functus officio on signing his award. Even that does not prevent the court from remitting an award under a provision like s.30(1) of the Arbitration Act for reconsideration by the arbitrator. See, on this, Re Arbitration of Stringer and Riley Brothers [1901] 1 Q.B. 105; and Re Scibilia and Lejo Holding's Arbitration [1985] 1 Qd.R. 94, 98-100.

In Fidelitas Shipping Co. Ltd. v. V/O Exportchleb [1966] 1 Q.B. 630, the umpire requested that the interim award be remitted to him for reconsideration after receiving from the Court the opinion he was requesting on a matter of law. It was at the further hearing of the remitted award that the question arose whether it was open to a party to litigate an issue which could have been but had not been raised in the proceedings leading to that award. It was never in doubt that, although the interim award was held to have created an estoppel between the parties as regards the issue determined by it, the award had been properly remitted to the umpire in accordance with his request to enable him to reconsider it. That was accepted by Lord Denning, with whom Danckwerts L.J. agreed, in the Fidelitas case [1966] 1 Q.B. 630, 637. Indeed, the earlier decision of the Court of Appeal ordering the award to be remitted is reported under the same name in [1963] 2 Lloyd's Rep. 113.

In the present case the arbitrator's decision was, as Mr Muir emphasised, expressed in the form of an interim award. The parties have, without objection on either side, freely referred to the evidence of what took place during and after the preliminary hearing in order to show what the effect of the arbitrator's decision on the four points was intended to be. From that material, it is apparent that, although at times confused, the arbitrator evinced a clear intention to afford the parties an opportunity of challenging, or, as he said on one occasion, "debunking" any findings and conclusions he might reach. He expressed himself to that effect in the course of the hearing preceding the interim award. After publishing the award on 20 December 1991, there was a period during which the arbitrator adopted a contrary attitude; in the end, however, in his letter of 24 January 1991 and at the meeting on 28 January 1991, he confirmed in unqualified terms that he would provide the parties with the opportunity he had originally held out to them.

It is therefore not possible to view the publication by the arbitrator on 20 December 1991 of his decision in the form of an interim award as placing it beyond his power to reconsider it as he had promised he would. It is true that the interim award itself did not, as in the Fidelitas case, expressly claim to reserve it for his reconsideration, or request that it be remitted to him for that purpose; but the course of proceedings showed it was his intention to do so.

For good measure, the proper course for the Court in a case like this is to remit the matter under s.30(1) of the Act to enable the arbitrator to take the step he foreshadowed.

This raises for consideration the other of the two grounds of appeal, designated ground 1, which was relied on by Kennedy-Taylor. It is that the arbitrator had been guilty of misconduct justifying his removal by the Court, that being the first of the three forms of relief sought by Kennedy-Taylor in the notice of motion.

Section 20(1) of the 1973 Act provides that the Court may remove an arbitrator if satisfied there has been misconduct on his part or in his conduct of proceedings. In relation to setting aside an award, the word "misconduct" has acquired a technical meaning extending beyond the more obvious instances of corruption and bias to include error in law appearing on the fact of the award. See Kent v. Elstob (1802) 3 East 8, which was confirmed, although not without regret, in Hodgkinson v. Fernie (1857) 3 C.B.N.S. 189; 140 E.R. 198. See also Re Scibilia and Lejo Holding's Arbitration [1985] 1 Qd.R. 94, 98, where an account of the development is given.

In s.4 of the 1973 Act the term "misconduct" is defined to include four distinct matters, of which the first two are (a) corruption, fraud and undue influence; and (b) evident partiality or bias. It is not clear whether the use of the word "includes" in this definition in s.4 is meant to ensure that instances of purely technical "misconduct", such as error of law, is available as a ground for removal of an arbitrator as well as for setting aside an award. It may perhaps be doubted whether it is. For present purposes, however, it will be assumed without deciding that the forms of misconduct justifying removal of an arbitrator are capable of including partiality and bias, actual and "imputed", and that they extend to denials of justice like that charged against the arbitrator in this case.

The complaint that the arbitrator exhibited partiality or bias in the conduct of the proceedings was considered at length in the court below. In so far as it rested on allegations that the arbitrator had treated Mr Gough, or his submissions, with manifest unfairness, it was disposed of by the learned judge and has not been revived on appeal. The same is true of an allegation of incompetence on the part of the arbitrator, which was abandoned at the hearing of the appeal. The complaint that there was a denial of natural justice, arising from the refusal of the arbitrator to afford the parties with an opportunity of challenging the correctness of his interim award, has been disposed of in the course of these reasons. With it goes the further suggestion that the arbitrator had deliberately set out to mislead Kennedy-Taylor's advocate into believing that some such an opportunity would be afforded, when in reality he had no intention of doing so. Having regard to the conclusion already reached that at the meeting on 28 January 1992 the arbitrator did in fact offer to afford such an opportunity, the assertion that a reasonable person would infer the existence of bias on his part against Kennedy- Taylor cannot be maintained.

What remains of this ground of appeal is a complaint
that communications passed between the arbitrator and Civil
& Civic without the knowledge or consent of Kennedy-Taylor.

A series of particular instances relied on in support of this complaint was dealt with in detail and effectively refuted in the respondent's written outline, leaving only one that was made the subject of oral submissions on the appeal. It concerned a letter dated 14 February 1991 from the arbitrator to Civil & Civic marked "Attention : Mr Richard Horton". It is to be taken with a telephone conversation between the arbitrator and Mr Horton, which occurred on the day before the letter, of which a handwritten attendance note from the arbitrator was in evidence. It is apparent that both communications related to the same subject matter, and it is sufficient here to set out the contents of the letter, which was naturally in more detailed terms:

"Dear Sir

In the Matter of Arbitration
between
Kennedy-Taylor (Qld) Pty Ltd (Claimant)
and
Civil & Civic Pty Ltd (Respondent)
concerning
Supply, Installation and Commissioning of

Electrical Services to the New Police

Headquarters,

Brisbane

I am in receipt of your letter dated February 13 together with attachments and note that you have sent a copy to Messrs Kennedy-Taylor.

It would appear that you have written this letter before you received my letter and directions dated February 8th, as I believe my letter addressed the matters referred to in your letter.
I note your request that I summon the parties before me to rule on the matter of submissions and I will be happy to do this.
However if both parties adhere to my directions and timetable for pleadings set out in my letter of February 8, such a meeting may not be necessary.
Please consider my letter of February 8th and confirm within 14 days your acceptance of the directions given and the proposed revised table of pleadings.
Yours faithfully,
Eric B. Brier
Arbitrator."

The explanation for the telephone conversation and the letter is straightforward. On 8 February 1991 the arbitrator wrote to both parties enclosing a revised timetable for points of claim by Kennedy-Taylor fixing 1 March 1991 as the date for delivery of that document. On 13 February 1991 Civil & Civic wrote to the arbitrator complaining of Kennedy-Taylor's failure to provide proper particulars of its claim. Upon receipt of that letter the arbitrator made the telephone call to Mr Horton that is the subject of the handwritten attendance note, following it on the next day with the letter dated 14 February 1991. As appears from both the handwritten note and the letter, the arbitrator's purpose was to draw attention to his letter of 8 February and the revised timetable it contained, to which the letter dated 13 February from Civil & Civic had made no reference.

Both communications are, as the judge described them below, quite "innocuous". The complaint about them is that they took place without notice of them being given to Kennedy-Taylor, which is said to have flouted an objection, made earlier by Mr Gough and recorded in the transcript of proceedings, to documents being forwarded to the arbitrator without providing a copy to Kennedy-Taylor. The arbitrator's response to Mr Gough's objection on that occasion was that he had assumed that the parties had been exchanging copies of all documents that were sent to him, which was an impression with which Mr Gough said he agreed.

A practice existed under which the arbitrator sent copies of his letters to both parties, either addressing them to both, or, if to one only, marking the letter "c.c." to the other party and sending a copy to it. Failure to adhere scrupulously to this practice in the case of the letter dated 14 February 1991 was characterised by the learned judge in her reasons as a mere "slip" on the part of the arbitrator. It was made less heinous by the circumstance that Kennedy-Taylor was duly provided with a copy of the letter dated 13 February 1991 from Civil & Civic and so was aware of the communication to the arbitrator, but not of his response to it.

It was submitted on behalf of Kennedy-Taylor that the fact that the two communications, oral and written, from the arbitrator had taken place without notice to Kennedy-Taylor raised against him a reasonable apprehension of bias or partiality on his part sufficient to justify his removal and the setting aside of the interim award. The basis of the submission was the decision of the Appellate Division of the Supreme Court of Victoria in City of St. Kilda v. Evindon Pty. Ltd. [1990] V.R. 771, setting aside a decision of the Planning Division of the Administrative Appeals Tribunal for breach of the rules of procedural fairness. On that occasion the Tribunal of three members had been reconstituted by the substitution of another member in place of a Mr Buckley, who had originally been listed to sit, after senior counsel for Evindon Pty. Ltd. (which proved in the result to be the successful party on the appeal) had privately telephoned the presiding member of the Tribunal and advised him that Mr Buckley was an old friend of the solicitors for the appellant.

The gravamen of the decision holding that the rules of procedural fairness had been infringed seems in that case to have rested on the action of the presiding member of the Tribunal in continuing to sit without disclosing to the parties at the outset of the hearing that there had been a private communication to him from senior counsel for one of the parties, and without giving the parties an opportunity to object to his sitting ([1990] V.R. 771, 774). In consequence, as the Appellate Division held, there had been "an undisclosed departure from proper practice which would have tended to produce doubts and reduce confidence in the member of the tribunal who presided at the hearing. People would be inclined to wonder why the breach of practice had occurred and how far it had gone" ([1990] V.R. 771, 774).

Whether in the same or similar circumstances the decision would be followed in Queensland is a matter that does not arise for determination here. The Victorian case is plainly distinguishable from the circumstances which this Court is asked to consider. It concerned a communication that resulted in a late change in the constitution of a public tribunal, involving what was described as the "disappointing" replacement of a town planner by an engineer, hearing an appeal about which a large number of ordinary members of the public had it seems evinced a particular concern. In these circumstances, the Court said ([1990] V.R. 771, 779):

"It is not to the point whether there was any justification for their disappointment. It is not surprising .. that when they learnt that this change had been prompted by an undisclosed approach on behalf of Evindon to the member to preside at the hearing of the appeal, they would connect that with Evindon's success before the tribunal on appeal."

The circumstances of the subject communication by the arbitrator in the present case are very different from those in City of St. Kilda v. Evindon Pty. Ltd. Here, at the best for Kennedy-Taylor, the matter falls to be tested not according to the reaction of possibly over-anxious members of the public to the result of a single appeal decided by an unexpectedly reconstituted tribunal, but by the response reasonably to be expected from two presumably experienced lay advocates and their construction industry clients to what, on a fair view, can only be considered a simple oversight on the part of a professional engineer chosen to act as arbitrator in the manner specified by the parties in their contract. To suggest that a slip of that character in mid-February 1991 was capable of inducing a belief that a decision given in December 1991 on a point of mixed fact and law was not impartially arrived at, it would be necessary to impute to the parties something approaching an irrational suspicion of the arbitrator's motives going well beyond a reasonable apprehension of bias that brings the rules of natural justice or procedural fairness into play. It is not a function of the law to encourage or to indulge attitudes of that kind.

The incident complained of took place in the course of administering a lengthy and complex arbitration. It happened at an early stage between hearings at a time when rulings on points of practice, pleading or procedure were being given. Under conditions like those, and without the benefit of the clerical and administrative facilities available to the judiciary in comparable cases, it is not altogether surprising that an arbitrator may, in order to expedite the proceedings, sometimes be betrayed into saying or doing something which on mature reflection might have been done differently or perhaps not at all. One would, however, fairly expect the parties acting reasonably to understand that such an oversight is capable of happening without viewing it as a manifestation of a general and more sinister form of behaviour. Indeed, as it happens, Civil & Civic was able to point to another occasion, on which Mr Gough himself had on behalf of Kennedy-Taylor unilaterally communicated with the arbitrator by telephone to request a hearing on a particular day, to which the arbitrator later confirmed he had acceded. Both incidents are noteworthy only as tending to show that at the time neither party viewed sporadic instances of private communication with the arbitrator as in some way fatally compromising the integrity of the whole proceedings.

It is plainly desirable that unilateral communications of that kind should be avoided, or, if they happen to take place at all, that they should be reported to the other side fully, frankly, and without delay. There is, however, nothing in what took place in the course of this arbitration to justify a reasonable suspicion about the impartiality of the arbitrator, or to provide a legitimate reason for his removal on the ground of misconduct. In view of these conclusions, it follows that there is also no basis on which the authority of the arbitrator could properly be revoked by the Court under s.7(1) of the Act of 1973.

The appeal therefore fails and must be dismissed with costs. The further processes envisaged in paras. (d) and (e) of the arbitrator's letter dated 24 January 1992 to Kennedy-Taylor are yet to be carried out. The appropriate course now is to order under s.30(1) of the Arbitration Act 1973 that the matters referred be remitted to the reconsideration of the arbitrator with the direction that he proceed to the making of a final award.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 17 of 1994

Brisbane

[Kennedy-Taylor v. Civil & Civic]

IN THE MATTER of the

ARBITRATION ACT 1973
and

IN THE MATTER of an Arbitration between KENNEDY-TAYLOR(QLD) PTY

LTD

Claimant/Subcontractor

and

CIVIL & CIVIC PTY LIMITED

Respondent/Contractor

and

IN THE MATTER of an Application

to	remove the Arbitrator ERIC
BLYTH	BRIER and to set aside his
interim	award made and published
on 20	December 1991

Fitzgerald P.
McPherson J.A.

Cullinane J.

Judgment delivered 02/11/94

Joint reasons for judgment by McPherson J.A. & Cullinane J.

Separate concurring reasons by Fitzgerald P.

APPEAL DISMISSED WITH COSTS. UNDER s.30(1) ARBITRATION ACT 1973 THE MATTERS REFERRED ARE REMITTED TO THE RECONSIDERATION OF THE ARBITRATOR WHO IS DIRECTED TO PROCEED TO THE MAKING OF A FINAL AWARD.

CATCHWORDS	ARBITRATION - INTERIM AWARD - Setting aside - Natural justice - Whether appellant denied opportunity to be heard before interim award adopted - Appellant moved to set aside award before further proposed hearing - Whether delivery of interim award itself prevented challenge to findings contained in it - Fidelitas Shipping Co. Ltd. v. V/O Exportchleb [1966] 1 Q.B. 630 discussed.
ARBITRATION - MISCONDUCT - Removal of Arbitrator - Communications between arbitrator and respondent concerning timetable for pleadings - No notice of these communications given to appellant - Whether reasonable apprehension of bias - City of St. Kilda v. Evindon Pty. Ltd [1990] V.R. 771 discussed - General nature of misconduct discussed.
Counsel:	J. Muir Q.C. for the appellant
W. Sofronoff Q.C., with him S. Lumb, for the respondent
Solicitors:	Clayton Utz for the appellant
Freehill Hollingdale and Page for the respondent

Hearing Dates: 19, 20 and 22 September 1994