Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd
[2000] WASC 141
•31 MAY 2000
OLDFIELD KNOTT ARCHITECTS PTY LTD -v- ORTIZ INVESTMENTS PTY LTD [2000] WASC 141
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASC 141 | |
| Case No: | ARB:9/2000 | 12 & 15 MAY 2000 | |
| Coram: | HASLUCK J | 31/05/00 | |
| 34 | Judgment Part: | 1 of 1 | |
| Result: | Application for removal of Arbitrator dismissed | ||
| PDF Version |
| Parties: | OLDFIELD KNOTT ARCHITECTS PTY LTD ORTIZ INVESTMENTS PTY LTD |
Catchwords: | Commercial arbitration Removal of Arbitrator Misconduct and incompetence Rules of natural justice Role of pleadings Nature of fraud or collusion plea Issues of unfairness Removal of arbitrator refused |
Legislation: | Commercial Arbitration Act 1985, s 14, s 19, s 22, s 28, s 44, s 47 Trade Practices Act 1974, s 52 |
Case References: | Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Anor [1978] VR 385 Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653 Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd (1994) 2 VR 386 Rocci v Diploma Construction Pty Ltd [1999] WASC 195 Shirley Sloan Pty Ltd v Merril Holdings Pty Ltd [2000] WASC 99 Taco Company of Australia v Taco Bell Pty Ltd (1982) 42 ALR 171 Thiess Contractors Pty Ltd v Water Corporation of Western Australia, unreported; SCt of WA; Library No 970561; 28 October 1997 Yorke v Lucas (1985) 158 CLR 661 Associated Leisure Ltd v Associated Newspaper Ltd (1970) 2 QB 450 Bainton v Rajski (1992) 29 NSWLR 539 Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd (1988) 157 ALR 135 Davy v Garrett (1877) 7 Ch D 473 Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 59 Elkateb v Lawindi, unreported; SCt of NSW; BC 9801855; 8 May 1998 Fluor Australia Pty Ltd v State Energy Commission of Western Australia, unreported; SCt of WA; Library No 6682; 10 April 1987 Interbulk Ltd v Aiden Shipping Co Ltd (1984) Lloyds Rep 66 Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 R v Watson (1976) 9 ALR 551 Stannard v Sperway Construction Pty Ltd [1990] VR 673 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Applicant
AND
ORTIZ INVESTMENTS PTY LTD
Respondent
Catchwords:
Commercial arbitration - Removal of Arbitrator - Misconduct and incompetence - Rules of natural justice - Role of pleadings - Nature of fraud or collusion plea - Issues of unfairness - Removal of arbitrator refused
Legislation:
Commercial Arbitration Act 1985, s 14, s 19, s 22, s 28, s 44, s 47
Trade Practices Act 1974, s 52
Result:
Application for removal of Arbitrator dismissed
(Page 2)
Representation:
Counsel:
Applicant : Mr P B O'Neal
Respondent : Mr C B Edmonds
Solicitors:
Applicant : Downings Legal
Respondent : Jackson McDonald
Case(s) referred to in judgment(s):
Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Anor [1978] VR 385
Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653
Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd (1994) 2 VR 386
Rocci v Diploma Construction Pty Ltd [1999] WASC 195
Shirley Sloan Pty Ltd v Merril Holdings Pty Ltd [2000] WASC 99
Taco Company of Australia v Taco Bell Pty Ltd (1982) 42 ALR 171
Thiess Contractors Pty Ltd v Water Corporation of Western Australia, unreported; SCt of WA; Library No 970561; 28 October 1997
Yorke v Lucas (1985) 158 CLR 661
Case(s) also cited:
Associated Leisure Ltd v Associated Newspaper Ltd (1970) 2 QB 450
Bainton v Rajski (1992) 29 NSWLR 539
Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd (1988) 157 ALR 135
Davy v Garrett (1877) 7 Ch D 473
Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 59
Elkateb v Lawindi, unreported; SCt of NSW; BC 9801855; 8 May 1998
Fluor Australia Pty Ltd v State Energy Commission of Western Australia, unreported; SCt of WA; Library No 6682; 10 April 1987
Interbulk Ltd v Aiden Shipping Co Ltd (1984) Lloyds Rep 66
(Page 3)
Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570
R v Watson (1976) 9 ALR 551
Stannard v Sperway Construction Pty Ltd [1990] VR 673
(Page 4)
1 HASLUCK J: This is an application for an order pursuant to provisions of the Commercial Arbitration Act 1985. Section 44 of the Act provides that where the court is satisfied that there has been misconduct on the part of an arbitrator, or the arbitrator has misconducted the proceedings, or an arbitrator is incompetent or unsuitable to deal with the particular dispute, the court may, on the application of a party to the arbitration agreement, remove the arbitrator. The grounds relied on by the applicant, Oldfield Knott Architects Pty Ltd, in its originating motion in the present case are that there has been misconduct on the part of the arbitrator and that he is incompetent to deal with the particular dispute.
2 Section 47 of the Act provides that the Supreme Court shall have the same powers of making interlocutory orders for the purpose of and in relation to arbitration proceedings as it has for the purposes of and in relation to proceedings in court. The applicant in the present case relied on these provisions in seeking an order to restrain the arbitrator appointed by the parties, Mr F McCardell ("the Arbitrator"), from proceeding further with the arbitration on the grounds just mentioned. An interim restraining order was made on the basis that those affected by the order, including the Arbitrator, would be afforded an opportunity to be heard before any final order of the kind contemplated by s 44 was made. In that regard, I note that a copy of the application for removal and supporting affidavits were served on the Arbitrator shortly before the hearing before me of the application for a final order. An affidavit to this effect is now before the court and it appears from the affidavit in question that the Arbitrator does not wish to be heard and will simply abide by any ruling made by the court, this being the stance often adopted by officials and those who are exercising quasi-judicial powers subject to the supervisory jurisdiction of the Supreme Court.
3 I note also, after hearing from counsel for the parties to the arbitration, and having regard to the urgency of the matter, that both parties, by counsel, accepted that the hearing before me should be regarded as giving rise to a final order. To that end, it was put to me that I should deal with the matter on the basis of the affidavit evidence and the submissions made by counsel. The parties did not wish to cross-examine any of the witnesses or obtain directions as to pleadings or discovery.
4 I now turn to the details of the dispute. The respondent in these proceedings, Ortiz Investments Pty Ltd, wished to build a residence at Lot 125, Riversea Drive, Mosman Park. This was to be the home of Mr and Mrs Ortiz, they being the principals of the company owning the site. They engaged the applicant in these proceedings, Oldfield Knott
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- Architects Pty Ltd, as their architect. Thereafter, the principal adviser in that firm was the architect, Mr Robert Strzelecki.
5 With the assistance of Mr Strzelecki, the proprietor of the site eventually entered into a standard form building contract dated 18 September 1997 with a building company called Gatt Constructions Pty Ltd ("Gatt"). I will return to the details of this transaction. For the time being it is sufficient to note that some months after the commencement of the building works, Gatt entered into voluntary administration and various questions then arose as to the adequacy of the work carried out pursuant to the partially-performed building contract. This led to a dispute between the proprietor and its architects. In the manner allowed for by the building contract, this dispute was referred to arbitration before Mr McCardell. Ortiz Investments Pty Ltd is the claimant in the arbitration proceedings (albeit being the respondent in these proceedings), so I will refer to that company as "the claimant" or simply as "Ortiz". For ease of reference, I will refer to the applicant in these proceedings as "the claimant's architects" or otherwise as "Oldfield Knott".
6 The Commercial Arbitration Act contains various provisions dealing with the conduct of arbitration proceedings. By s 14, subject to the Act and the arbitration agreement, the arbitrator may conduct proceedings under that agreement in such manner as the arbitrator thinks fit. By s 19, evidence may be given orally or in writing. Further, an arbitrator is "not bound by rules of evidence but may inform himself in relation to any matter in such manner as the arbitrator thinks fit." By s 22, unless otherwise agreed, any question that arises for determination in the course of proceedings under the agreement shall be determined according to law, although, if so agreed, the arbitrator may determine any question that arises by reference to considerations of general justice and fairness. By s 28, an award made by the arbitrator shall, subject to the Act, be final and binding on the parties to the agreement.
7 The decided cases suggest that these provisions should be read subject to the requirements of natural justice. That is to say, the arbitrator should be free of any bias, or any reasonable apprehension of bias, and each party to the dispute should be given reasonable notice of the issues to be addressed at the hearing. I note in passing that in civil litigation the statement of claim and subsequent pleadings usually set out the material facts on which a party relies, but not the evidence by which those facts are to be proved. Because a party is usually entitled to a statement of the opponent's case, sufficiently clear to allow the party a fair opportunity to
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- meet it, the details of allegations in the pleadings may have to be fleshed out with particulars. The purpose of particulars is to concentrate and define the issues of fact and to prevent surprise and consequent delay, for the parties will be confined to the issues raised by the pleadings. Fraud, conspiracy and analogous allegations should be distinctly alleged and distinctly proved.
8 It follows from these principles that a distinction must be drawn between the pleadings which, consistently with the rules of natural justice, are intended to put a party on notice as to the issues to be addressed at the hearing, and the evidence that will be used in support. Prima facie, a statutory provision whereby an arbitrator is not bound by the rules of evidence should not be regarded as overriding the rules of natural justice, although the exact limits of the special provision concerning evidence will be a matter of construction within the framework of the Commercial Arbitration Act considered as a whole.
9 In the present case, at an early stage, the Arbitrator ascertained that the parties required the matters in dispute to be dealt with not according to "considerations of general justice and fairness", but rather "according to law". Pursuant to directions given by the Arbitrator on 4 February 1999, arrangements were made for the parties to prepare and exchange pleadings and witness statements. The conventions of civil litigation, as I described them earlier, require that witness statements will only contain testimony relevant to issues reflected in the pleadings. It is apparent to me from the bundle of documents submitted to me by consent in these proceedings that, by and large, the witness statements were prepared accordingly. Not surprisingly, however, as often happens in a building dispute of this kind, various amendments were made to the pleadings on both sides and this, in turn, naturally required the legal advisers to the parties to give thought to the need for responsive statements and to the nature of evidence to be presented at the hearing. I will turn to the details of what happened in that regard later.
10 A hearing date was eventually set for Friday, 5 May 2000, on the clear understanding by the parties, having regard to the complexity of the issues and the exchange of lengthy witness statements, that the hearing would last for many days. So that one can understand the events that then took place on the opening day of the hearing - events giving rise to the present application for removal - it now becomes necessary to look at the nature of the claimant's claim and the procedural preliminaries in greater detail.
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11 I turn first to the pleadings. The Notice of Dispute dated 13 October 1998 by which the matter was referred to arbitration contained allegations by the claimant against Oldfield Knott of breach of s 52 of the Trade Practices Act in relation to their selection of the builder, Gatt. Section 52 provides that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. I pause to note that, according to previously-decided cases, whether or not s 52 is contravened depends on whether or not the statement complained of in fact conveys a meaning that is false and not on the corporation's intention or belief. Whether particular conduct is misleading or deceptive is a question of fact to be determined in the context of the evidence as to the alleged conduct and to the relevant surrounding facts and circumstances: Taco Company of Australia v Taco Bell Pty Ltd (1982) 42 ALR 171; Yorke v Lucas (1985) 158 CLR 661 at 666. At least one learned commentator has suggested that a demonstrated intent to mislead will be of evidentiary value in assessing the nature of the conduct complained of: French, "A Lawyer's Guide to Misleading or Deceptive Conduct" 63 ALJ 250 at 265.
12 By its notice of dispute, the claimant, Ortiz, also alleged that Oldfield Knott was in breach of the relevant client/architect agreement or, alternatively, negligent in relation to the design of the project and in relation to administration of the building contract. Further, the claimant alleged that Oldfield Knott was in breach of the client/architect agreement in that, without approval, it instructed Gatt to vary the work by using Verticore bricks in lieu of the bricks specified and to vary the work by using pine timber roof trusses. It seems that costs could be saved by using Verticore bricks, although a question then arose as to whether Verticore bricks fell within the language of the specification which allowed, as an alternative to the bricks specified, "bricks of comparable strength".
13 These claims were eventually set out with greater precision in the amended points of claim dated 18 February 1999. Reference was made to Oldfield Knott's alleged failure to exercise reasonable skill and care in the performance of its services. The points of claim also referred to the tendering process, whereby Oldfield Knott on behalf of Ortiz, invited six tenderers, including Gatt, to tender and then represented to Ortiz that Gatt had the relevant technical and financial ability to complete the work and that Gatt was a suitable and appropriate party to undertake the building work.
14 These and related representations were said, in par 26 of the points of claim, to be misleading and deceptive conduct for the purpose of s 52.
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- Lengthy particulars of the various heads of claim were subsequently provided. As to these, it was argued before me by counsel for Oldfield Knott, the focus was not upon any alleged dishonesty or lack of integrity on the part of Oldfield Knott in the performance of their services, but upon their alleged lack of care in respect of various technical and financial matters. For example, in regard to the allegation concerning the suitability of Gatt and its alleged lack of relevant experience and technical and financial ability, the particulars asserted that these terms were to be given "their normal meaning in the context of a highly specified architecturally designed residence with a contract price of approximately $1.2 million." The representations complained of were said to have been made by Mr Strzelecki on behalf of Oldfield Knott during meetings with Mr Ortiz at the Oldfield Knott office on a date shortly after the tendering process closed on 22 August 1997.
15 By its defence dated 22 April 1999, as subsequently amended on 1 May 2000, Oldfield Knott denied liability. It said that the claimant, by its quantity surveyor, assumed responsibility for valuing variations and it was the claimant's responsibility to assess any tenders, including the technical ability and financial resources of the tenderer. In addition, Oldfield Knott denied that Ortiz acted in reliance on the representations allegedly made.
16 The date of the amendment to the defence is significant. By its amended defence, dated 1 May 2000 - that is to say, shortly before the hearing was to commence on 5 May 2000 - Oldfield Knott introduced a new plea at par 25.2A. This referred to certain events in September 1997, being events addressed in the witness statements that had by then been prepared and exchanged between the parties. In essence, the new plea alleged that after reception of the various tenders negotiations took place whereby in consideration of Gatt's promise to construct the works for the sum of $1,328,200 less certain savings, the claimant accepted that Gatt would use Verticore bricks extensively in the construction of the work. The particulars relating to this plea asserted that this came about following the rejection of Gatt's tender, but prior to the award of the building contract to Gatt, at the request of the claimant's quantity surveyor. In other words, it was now an issue before the Arbitrator as to whether the use of Verticore bricks should be regarded as a variation to the contract or (as contended for by Oldfield Knott in its new amendment) a matter that had been agreed between the claimant and Gatt, so as to change the subject-matter of the works. The particulars to this plea raised the further issue of whether the claimant by its quantity surveyor knew that the original Gatt quotation was based on the extensive use of Verticore bricks.
(Page 9)
17 This new plea led to the filing and service of an amended reply three days later, on Thursday, 4 May 2000, that is to say, on the day before the hearing was due to commence. The amended reply included a new par 7 directed to the defence plea at par 25.2A. According to the amended reply, the only agreement between the claimant and Gatt in relation to Verticore bricks was that Gatt offered, and the claimant accepted, a saving of $5,038 to change the skins of the basement brickwork, but otherwise all brickwork was to be carried out in accordance with the specifications and drawings. Importantly, at par 7(4) of the amended reply, the claimant, Ortiz, pleaded:
"If the respondent (Oldfield Knott) knew that Gatt's tender price of $1,328,200 was based on the extensive use of Verticore brick in the works instead of the specified bricks and that there was accordingly a substantial saving to Gatt the respondent (Oldfield Knott) wrongfully advised the claimant that Gatt was the lowest tender in circumstances where it was not."
18 I pause to say, by way of explanation, that the claimant's stance in that regard, before the Arbitrator and before me (this being a matter mentioned in various witness statements), was that a quantity surveyor called Mr Rafferty, who worked in the same building as Oldfield Knott, was engaged by the architects to draft the relevant specification. The same quantity surveyor was also allegedly engaged by the builder at a later stage to negotiate with Ortiz, post-tender, knowing that Gatt's tender was based on the use of Verticore bricks throughout the house rather than upon specified bricks. If Oldfield Knott knew that Gatt's tender price of $1,328,200 was based on the extensive use of Verticore bricks in the house instead of the specified bricks and that there was, accordingly, a substantial saving to Gatt, then Oldfield Knott wrongfully advised the claimant that Gatt was the lowest tender in circumstances where it was not. That is, another tenderer by the name of Cleary was, in fact, the lowest conforming tender and, in effect, Oldfield Knott's conduct in the circumstances was misleading or deceptive. For ease of reference, I will henceforth call this the "lowest tender issue".
19 I observe in passing that the lowest tender issue, as an issue pleaded in par 7 of the amended reply, can be regarded in several ways. On one view of the matter, it could have been presented as an additional constituent of the points of claim, being arguably another instance of misleading or deceptive conduct contrary to s 52 of the Trade Practices Act,or even as another instance of the Oldfield Knott alleged breach of contract or lack of care in the performance of its duties. On the other
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- hand, it could be regarded, this being its purported role, as a plea clarifying the claimant's joinder of issue as to the allegations contained in par 25.2A of the amended defence. The plea seems to have been raised in the latter form on the basis that it was not until the witness statements were exchanged, and the claimant discovered the existence of a relationship of sorts between Oldfield Knott and the quantity surveyor and Gatt, that the matter surfaced as an issue. Thus, as the hearing was imminent, the allegation of presenting the claimant with "wrongful" advice was included in the reply in order to avert any comprehensive revision of the pleadings on both sides immediately prior to the hearing. Either way, it was apparent from the amended pleadings immediately prior to the hearing that the claimant would contend that the circumstances surrounding the extensive use of Verticore bricks should be subjected to rigorous scrutiny, and, likewise, the conduct of Oldfield Knott in regard to the lowest tender issue was said to be questionable.
20 I turn now to the witness statements. Directions having been given that witness statements be prepared and exchanged, a difference of opinion arose between the legal advisers to the parties as to whether copies should be delivered to the arbitrator prior to the hearing. As appears from a letter dated 24 December 1999, written by the solicitors for the claimant to Oldfield Knott's solicitors, the claimant's stance was that the statements were to be delivered to the Arbitrator. Witness statements by Mr Ortiz, and by an architect named Mr Standen brought in by Mr Ortiz to advise on the dispute, were finalised in December 1999. Counsel for Oldfield Knott was troubled not only by the difference of opinion concerning delivery of the statements, but also by certain passages that appeared to him to be irrelevant and could possibly create prejudice in the mind of the arbitrator. The events that followed are summarised in the affidavit of Andrew John Davidson, sworn 8 May 2000, this affidavit being filed on behalf of Oldfield Knott and relied upon by counsel for that party in the course of the hearing before me.
21 According to Mr Davidson's affidavit, at a directions hearing before the Arbitrator on 24 January 2000, Mr O'Neal, as counsel for Oldfield Knott, raised objections to some of the material in the claimant's witness statements. In response to that, the Arbitrator stated that any matters of objection would be dealt with in cross-examination and he would give the evidence such weight as it deserved. However, after a further submission on behalf of Oldfield Knott, the arbitrator directed that a list of objections be sent to the solicitors for the claimant for them to consider and for the parties to mutually work out. Following the receipt of the list of
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- objections, the solicitors for the claimant, Ortiz, responded in writing on 3 February 2000. Their letter reads, in part, as follows:
"We consider that most of the objections are with very few exceptions legalistic and pedantic and totally ignore the fact that the rules of evidence do not apply to arbitration proceedings. Without exception none of the matters raised by way of objection could not be dealt with satisfactorily and much more quickly and efficiently by way of cross-examination and by the respondent's own witnesses providing evidence in rebuttal if the respondent actually denies the evidence objected to. To avoid unnecessary, legalistic and pedantic argument the claimant is prepared to agree to remove some of the paragraphs in the witness statement objected to by the respondent as set out in the claimant's response. If the respondent is not satisfied with the claimant's response we suggest that you make application to the arbitrator for such orders as you consider appropriate. If you have not made such application within 7 days of the date of this letter we will assume that you accept the claimant's witness statements modified as set out in the claimant's response."
23 By letter dated 8 February 2000, the Arbitrator wrote to the parties in these terms:
"I refer to Jackson McDonald's letter of 3 February copied to me. The documents which were objected to by Downings Legal have been removed from the agreed bundle with the exception of 6799 - 6810 which were not in the agreed bundle.
The respondent's objections to portions of the witness statements have been noted."
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24 It was against this background that the parties received a further letter from the Arbitrator dated 3 April 2000, setting out the procedure he proposed. The letter is in these terms:
"The following directions for the conduct of the hearing in this reference are given under the authority of Sections 14 and 19 of the Commercial Arbitration Act 1997.
The basis for the hearing was decided at the first preliminary meeting on 21 January 1999. Legal representation is confined to the cross-examination of witnesses and the usual ancillary matters.
The procedure will be as follows:
1 For Claimant:
A short opening address.
Each witness sworn. Written statement presented as evidence-in-chief.
Cross-examination.
Re-examination if required.
2 For Respondent:
A short opening address.
Each witness sworn. Written statement presented as evidence-in-chief.
Cross-examination.
Re-examination if required.
3 For Respondent:
A written fina1address.
4 For Claimant:
A written final address.
Any documents referred to at the hearing will be identified by the numbers given to them in the agreed bundle of documents.
In view of the fact that all relevant documents should already have been submitted, there should be no need for a tape recording. Should either or both parties so wish they may
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- jointly or separately arrange for a recording. The costs of any recording will not be considered as costs in the arbitration. If a transcript is made a copy is to be given to me.
It is emphasised that this is arbitration, not litigation. Counsel should restrict their cross-examination to the relevant facts and opinions. Oratory will be discouraged."
25 Downings Legal responded to this by letter dated 26 April on behalf of their client, Oldfield Knott. They did not dispute the proposed procedure. Their understanding of the Arbitrator's ruling as to objections concerning witness statements was that irrelevant matter would be disregarded.
26 The affidavit of Mr Davidson goes on to say that on 3 May 2000, a witness statement for Lisa Ortiz was received and on 4 May 2000 a further statement by Mr Standen. Mr Davidson says that on reviewing these new statements, particularly the statement of David Standen, he became concerned that there was objectionable, prejudicial material included. He instructed Mr O'Neal, as counsel for Oldfield Knott, to raise these matters with Mr Fyfe, as counsel for the claimant, and especially his concern that it appeared that a new issue was being raised, namely, that of collusion or conspiracy to injure the respondent as opposed to the case of breach of duty and misrepresentation that had been alleged to date. It seems that Mr Fyfe ultimately agreed to remove some of the objectionable material from that statement as well as some of the objectionable material from the statement of Lisa Ortiz, although the original statements remained with the arbitrator.
27 Downings Legal confirmed these arrangements by a letter to Jackson McDonald for Ortiz dated 4 May 2000 in these terms:
"We accept your proposals with respect to Mr Standen's original statement and Mr & Mrs Ortiz's statements.
As to Standen's responsive statement we do not agree to it being handed to Mr McCardell until we have had an opportunity to consider the revised version.
We otherwise reserve our rights in respect of the other objections made to you and our application to Mr McCardell."
28 In order to complete the narrative, I note that counsel for the claimant, Ortiz, asserted in argument before me that, as far as the claimant
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- and its legal advisers were concerned, by 4 May 2000 - the day before the hearing was to commence - various concessions had been made in response to the objections raised on behalf of Oldfield Knott and, essentially, all the objections made had been dealt with prior to commencement of the hearing.
29 This is affirmed by the affidavit of Paul Anthony Fyfe, sworn 11 May 2000, in support of the claimant's case in these proceedings. He said: "I believed from the statements in Downings' letter dated 4 May 2000 that they were satisfied with the amendments made to Mr Fernando Ortiz's and Mrs Lisa Ortiz's witness statements prior to the commencement of the hearing." He went on to say that he agreed to remove certain paragraphs complained of in Mr Standen's responsive witness statement. Exhibited to Mr Fyfe's affidavit was a copy of the Standen statement with the disputed paragraphs blanked out.
30 The case for removal of the arbitrator rests heavily upon what happened at the hearing on Friday, 5 May 2000. Accordingly, against the background I have described, it will be useful to begin by reviewing the structure of the day's events and then to focus upon those passages of the transcript which were principally relied upon in support of the application to remove the arbitrator.
31 Mr Fyfe, on behalf of the claimant, Ortiz, was invited to open his client's case and did so, referring to the fact that the claimant's case arose out of or in connection with the architect agreement made between the claimant and Oldfield Knott on 20 August 1997. He indicated that he would go into "a bit more detail" on the separate causes of action in the closing submissions, but said that the claims, whether framed in contract, negligence or breaches of the Trade Practices Act,arose substantially out of the failure on the part of Oldfield Knott to exercise reasonable skill and care in the selection of the proposed builder, in the evaluation of tenders and in administration of the contract. He foreshadowed that Mr Standen would be called to describe the procedures usually applied in regard to private or selective tendering, including reference to a booklet published by the Institute of Architects in regard to that matter. It was in that context that Mr Fyfe turned to the recently-amended pleadings and made some observations about the nature of the relationship between Oldfield Knott and Gatt Constructions and the quantity surveyor. The full text of some of his observations is set out in passages from the transcript quoted below. The tenor of this part of his opening address was that the claimant was not aware at any time that Mr Rafferty had been engaged by the architect to draft the specification or that Mr Rafferty was subsequently
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- involved in discussions about savings that could be achieved by the use of Verticore bricks. He then turned to the question of whether Oldfield Knott had made "full and proper inquiries" as to the technical and financial ability of Gatt Constructions to carry out the building works.
32 At the conclusion of Mr Fyfe's opening address, Mr O'Neal, on behalf of Oldfield Knott, raised an objection. The thrust of his objection at this stage was that, notwithstanding the removal from the previously-prepared witness statements of certain objectionable passages which arguably raised evidentiary matters going beyond the pleaded issues, the opening address seemed to revive those issues. He said that he had come on behalf of Oldfield Knott to defend a case concerned with various technical issues such as the nature and extent of an architect's duty to investigate tenders and supervise a building contract. He went on to say that in describing what happened in the tender process, counsel for the claimant was not referring simply to bad advice or ordinary breach of duty. His description went to "fraud or collusion". Mr O'Neal added: "We are not here to defend the case of alleged collusion." He asked the Arbitrator to rule that matters of that kind would not be entertained in the arbitration.
33 Mr Fyfe then rose to say that he had made no mention of fraud or collusion in his opening. He submitted that the cause of action under the Trade Practices Act carried with it an allegation of misleading and deceptive conduct with respect to the failure on the part of the architect to carry out proper investigations in the course of providing advice to the claimant. He went on to suggest that the opening observations complained of were related to the pleadings in that it was a pleaded issue that Oldfield Knott wrongfully advised the claimant that Gatt was the lowest tender in circumstances where it was not.
34 I pause to say that, in effect, Mr O'Neal, on behalf of Oldfield Knott, was asking the Arbitrator to make a ruling that certain matters raised in the opening address, which were reflected to some extent in certain passages of the witness statements (notwithstanding the previous pre-hearing process of objection and removal) should be treated as irrelevant and any evidence related to such matters be ruled inadmissible accordingly. During the course of the debate, Mr Fyfe indicated that various concessions would be made with a view to reassuring his opponent that he was not advancing a case based on fraud or collusion. The exchanges between counsel had the effect of diverting attention from Mr O'Neal's request for a ruling.
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35 It is not entirely clear from the transcript whether the Arbitrator had fully grasped the point of concern or understood that he was being required to make a ruling. In general terms, as reflected in various passages of the transcript, his approach to the issue was that as Mr Fyfe had not used the words "fraud or collusion", and was denying reliance upon such a case, the Arbitrator did not see any cause for alarm. Further, and in any event, any question of irrelevant or objectionable material could be dealt with when the time came to cross-examine. The Arbitrator said: "Perhaps when you come to cross-examination will be the time. You can bring it up in turn then." As the debate continued he went on to say later: "If irrelevant matters have been brought up in examination-in-chief then you will get the chance to cross-examine on those points. It's quicker to do it that way than to mess about as we seem to be doing now if I may say so."
36 In effect, without purporting to make an express ruling upon the point raised by counsel for Oldfield Knott, the Arbitrator's view seemed to be that he was not persuaded by the submissions put to him that certain passages of Mr Fyfe's opening were objectionable and he was therefore minded to allow the hearing to proceed. Evidence about the lowest tender issue would be received upon the basis that it was ultimately a question of what weight should be attributed to the evidence. I pause to say that his response to the objection is possibly open to an alternative interpretation, namely, that, at this early stage, he was not minded to rule upon the point and had decided to defer his ruling for the time being. He would deal with objections when each witness was presented and the question of what portion of the statement in question should be received was then directly under notice. Either way, it is quite clear that he was not prepared to uphold Mr O'Neal's objection at that stage or make a ruling of the kind applied for by Mr O'Neal. It therefore becomes an issue in the present proceedings as to whether Mr Fyfe's observations about the lowest tender issue, being one section of a lengthy opening address, could be thought to have introduced a new issue, or were unduly prejudicial to Oldfield Knott, with the result that Mr O'Neal's objection was well-founded.
37 The passages in Mr Fyfe's opening address which were of particular concern to Mr O'Neal, as counsel for Oldfield Knott, included the following:
"Sir it's the claimant's case that the evidence in this case will show that not only did Oldfield not [sic Knott] fail to properly carry out any necessary enquiries or any of the necessary enquiries but that Oldfield not [sic Knott] in conjunction with
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- the builder's quantity surveyor effectively induced the claimant to accept Gatt Constructions tender. Notwithstanding that it wasn't the lowest tender on the respondent's own case because Gatt Constructions tender was based on Gatt Constructions using verticore throughout the works instead of the specified bricks and more particularly not the standing [sic notwithstanding] that Oldfield not [sic Knott] had not carried out any property [sic proper] enquiries into Gatt Constructions' capacity as a builder.
The respondent now alleges and there is evidence to show that the respondent knew at the time that Gatt Constructions' price was not the lowest because a Mr Rafferty has stated in his statement that he priced the work for Gatt Constructions on the basis of using verticore rather than the specified bricks and there is some evidence from Mr Rafferty that he considered that the use of verticore bricks was made to offer the client a savings in excess of $20,000. That information about that saving sir was never provided to the claimant. It appears now, however, that Oldfield Knott the architect were well aware that Gatt Constructions intended to use verticore bricks throughout the works instead of the specified bricks because no complaint was made by the architect about the use of verticore by Gatt Constructions until a complaint was made by the claimant who didn't know what verticore bricks were at the time they were being used but one of his acquaintances effectively asking why he was using cheap bricks in his house and that led him on a train of enquiries to make the same enquiry of the architect."
38 This passage was followed by Mr Fyfe's references to the involvement of Mr Rafferty. Mr Fyfe then went on to say:
"Oldfield Knott by its letter dated the 29th August 1997 which is only 7 days after tenders closed wrote to Cleary Constructions and stated that 'we regrettably inform you that you were not -successful with the tender, no tender has been accepted. Of the 6 tenders yours was second from the last', so effectively disposing of any involvement on the part of Cleary Constructions in the negotiation process.
It will be the claimant's evidence that this letter was sent without its authority and notwithstanding the claimant's specific instructions to Oldfield Knott to obtain further information from
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- and negotiate with the 2 lowest tenders, tenderers which at that stage the claimant believed to be Gatt Constructions and Cleary Constructions in that order on the basis of what the claimant now knows that is that Gatt Constructions was not the lowest tender and on the basis of the close relationship between Oldfield Knott, Gatt Constructions quantity surveyor and Gatt Constructions it is submitted that the rush to prematurely terminate Cleary Constructions' involvement in the tender negotiation process can only be viewed with some suspicion. To suggest as it now does in its late amendment to the defence and I refer in this context sir to paragraph 25.2A of the amended defence and its [sic] pleaded there in effect that the claimant agreed to the extensive use of verticore brick in the works in or about mid September 1997 and it's the claimant's submission that that just flies in the face of all the evidence. One only has to look at the respondent's own particulars at paragraph 25.2A of the amended defence to appreciate the subterfuge involved in this allegation."
39 Before leaving these passages of transcript, I pause to note that one of the concessions made by Mr Fyfe in the course of the various exchanges on the first day of the hearing was that he would withdraw the words "in conjunction with the builder's quantity surveyor" in an effort, apparently, to remove any suggestion that collusion was being alleged. It was against that background and the Arbitrator's indication that the hearing should proceed that Mr Fyfe called Mr Ortiz as his first witness. The latter was permitted to confirm the contents of his witness statement. This brought Mr O'Neal to his feet with objections of the kind he had raised previously. The Arbitrator did not give any clearly articulated response to the objection, although it rather seems that, as he allowed the witness to continue, he was not prepared to uphold the objection. The first day of the hearing closed on the basis that the cross-examination of Mr Ortiz would begin on Monday.
40 Mr O'Neal had an opportunity to review the transcript in more detail over the weekend. On Monday morning, 8 May 2000, he reiterated his concern that Oldfield Knott could not fairly know the case it was supposed to meet and applied for an adjournment to seek an order for removal of the Arbitrator. He supported his application in these terms:
Mr Arbitrator, the submission that I made to you on Friday was that there is on the pleadings an issue with respect to the Trade Practices Act and misleading and deceptive conduct but it's a
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- very, very limited point. The allegation is that there was a misrepresentation and it was a misrepresentation with respect to two things; (1) that Gatt Constructions was technically able to carry out this work; (2) that Gatt Constructions was financially able to carry out this work and it is those things which are said to be untrue.
There's nothing much of a surprise in those allegations and that case the respondent was prepared to meet. It's this change that emerged from my friend's opening on Friday that's really the source of uneasiness on the part of the respondent."
41 Mr Fyfe responded by saying that the claimant was prepared to agree that the respondent's objections to the various statements in the witness statement should be provided to the Arbitrator and if, at the end of the hearing, the respondent, by counsel, claimed that there had not been an opportunity to adequately deal with any of the statements, then the passages could be struck out or agreement could be reached to give the respondent the opportunity to do whatever was necessary to address the matter, including recalling of witnesses to be cross-examined or otherwise to rebut the evidence.
42 During the course of the various exchanges, Mr O'Neal, on this occasion, did not refer to apprehensions about a case based upon "fraud or collusion". Rather, he contended that the points of claim contained no reference whatsoever to an alleged "improper agreement" between anyone to injure Mr Ortiz with respect to the building contract. And yet, on Mr O'Neal's view of the matter, that was the basis upon which the case had been opened. Mr O'Neal went on to say:
"When the matter was raised you made a ruling in respect of it. It is that ruling we say, with respect, that constitutes the technical misconduct. The point simply is this sir. We have acted throughout in our preparation of this case on what is in the points of claim. Now we cannot know on what basis we are supposed to defend; whether we are supposed to be refuting allegations of some improper agreement or whether it is the case that we understood from the beginning. We can't effectively cross-examine the claimant's witnesses or lead evidence of our own without knowing beforehand the nature of the case."
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43 The Arbitrator was not prepared to grant the adjournment and reminded counsel that, by s 19 of the Commercial Arbitration Act, he was not bound by the rules of evidence. He went on to say that he was minded to proceed as scheduled. Mr O'Neal then obtained leave to withdraw and it was against that background that an interim restraining order was obtained, with the result that, at the time the matter came before me, the arbitration had not proceeded further.
44 In the course of argument before me, Mr O'Neal submitted that when he applied for a ruling on the first day, on the grounds that "fraud or collusion" was being alleged, he was, in effect, confronting the Arbitrator with two alternatives. The Arbitrator could uphold the objection and simply rule that as fraud or collusion was not an issue on the pleadings, any evidence apparently directed to such an issue should be ruled irrelevant or inadmissible. Alternatively, if counsel for the claimant intended to pursue such an issue, he could be required to crystallise the issue in a precisely formulated amendment, so that Oldfield Knott knew the case it had to meet.
45 Counsel for the claimant made submissions to the contrary. He contended that the Arbitrator had handled the matter correctly, that is to say, after some discussion the Arbitrator established that fraud or collusion was not being alleged. This was simply Mr O'Neal's exaggerated perception of what was being alleged in opening. The lesser allegation of a "close relationship" and related observations were simply part of a general submission, arising from the recently amended pleadings, that the tender process should be subjected to rigorous scrutiny. The so-called "close relationship" between Oldfield Knott and the quantity surveyor had a bearing upon credibility and might serve to explain the nature of the advice given concerning the lowest tender issue. The Arbitrator had correctly ruled that there was no substance in the objection and the arbitration should proceed. The pleadings were sufficient to inform each party of the case it had to meet, and the evidentiary issues to be addressed. Any questionable passages in the witness statements were essentially a matter of weight and that could be addressed when the time came for cross-examination.
46 I now turn to the legal principles governing an application for removal of an arbitrator pursuant to s 44 of the Commercial Arbitration Act on the grounds of misconduct on the part of an arbitrator or an alleged incompetence to deal with the particular dispute. I note that in the present case Mr O'Neal has consistently spoken of "technical misconduct", and it is apparent from the way in which the relevant issues have been raised
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- that the incompetence complained of is limited to matters concerning the Arbitrator's handling of the procedural and evidentiary issues - matters closely aligned to the complaint of "technical misconduct". There is no suggest that the Arbitrator has any improper connection to either party or does not possess the appropriate professional qualifications or skills to deal with disputes arising out of a building contract of the kind in question.
47 By s 4(1) of the Act, misconduct includes corruption, fraud, partiality, bias and a breach of the rules of natural justice. I have already noted that those rules require that the arbitration should be conducted without bias, or reasonable apprehension of bias, and each party to the dispute should be given reasonable notice of the issues to be addressed at the hearing.
48 The meaning of the term "misconduct" in this context has been the subject of discussion in a number of recent cases in this Court. In Thiess Contractors Pty Ltd v Water Corporation of Western Australia, unreported; SCt of WA; Library No 970561; 28 October 1997 the applicant complained that, in dismissing the application for moneys due under a contract, the arbitrator relied on two implied warranties that had neither been pleaded nor argued before him, with the result that the applicant was not afforded an opportunity to deal with those matters. Parker J refused the application for removal on the grounds that "in truth he (the arbitrator) had not introduced any substantive novelty." The arbitrator chose the language of implied warranty, but his reasoning could equally, and to similar legal effect, have been outlined in terms of express contractual obligation. The arbitrator was "not in material substance" going beyond the scope of the fundamental issues which divided the parties. In the course of his judgment, Parker J said this, at 21:
"It is well settled that in contexts such as s42 of the Act, misconduct may include a mistake in procedure which has, or may have, unjustly prejudiced a party: Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 at 587, 588. The consideration of what constitutes misconduct for these purposes by Marks J in Gas and Fuel Corporation of Victoria v Wood Hall Ltd [1978] VR 385 at 391ff has received wide acceptance. The analysis by Marks J was relied on by each of the Judges in Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 59, particularly at 62 per Cole JA, Gleeson CJ agreeing
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- and at 63 per Kirby P (as he then was). In that case, as Kirby P pointed out at 63, the term 'misconduct':
'may not, by the authorities, amount to much more than such a mishandling of the arbitration as to be likely to amount to a substantial miscarriage of justice'.
The learned President referred to Williams v Wallis & Cox [1914] 2 KB 478 at 485. There was also acceptance of the decision of Straughton J in Edible Oil Products (Malaysia) BHD v Jayant Oil Mills Private Ltd [1982] 2 Lloyds Rep 95 at 97 for the proposition:
'...the mere failure to put a party on notice of an argument as to a point which might be decided may not, in the context of an arbitration, necessarily amount to misconduct.'
From this brief identification of relevant authority, I would for present purposes accept that procedural unfairness may amount to misconduct, but that is not necessarily the case. What is to be discerned is that the procedure has, or may have, unjustly prejudiced a party in some respect material to the outcome. The notion bears much similarity to procedural unfairness amounting to a substantial miscarriage of justice."
49 An application for removal was also refused in Rocci v Diploma Construction Pty Ltd [1999] WASC 195. In that case, the main issue before the arbitrator was whether a builder was entitled to a progress claim. The arbitrator ruled that it was and the builder was, therefore, entitled to suspend work on the project. The applicant complained that the arbitrator had become involved in irregular and incorrect procedures in bringing to account certain variation and delay claims. Miller J held that the award of an arbitrator is intended to be a practical guide to the parties in the resolution of the dispute between them and, as the arbitrator had answered the question put to him, relief by way of removal should not be granted.
50 I pause to note that Miller J cited with approval Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Anor [1978] VR 385 to the effect that not every irregularity and procedure will constitute misconduct for the purpose of the section.
51 In the Gas & Fuel Corporation case various disputes arising out of a pipeline construction were referred to arbitration and arrangements were
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- made for delivery of pleadings and witness statements. One of the matters complained of as to the conduct of the arbitrator concerned an evidentiary dispute as to whether part of a diary note should be adduced in evidence. Although the arbitrator correctly admitted the entire note, a further question arose as to whether this was done in a way which suggested the arbitrator did not have a proper understanding of its true significance and indicated some pre-judgment of a key issue. In the course of his review of the relevant principles, Marks J held that, in accordance with the rules of natural justice, each party was to be given a full and fair opportunity to present its case. Incorrect findings of fact, errors of law, and misapprehensions of the nature of the contentions put forward, do not constitute misconduct justifying the removal of an arbitrator. Nonetheless, matters of this kind may also indicate a trend or pattern which had, or appeared to have had, the effect of unfairly disadvantaging a party. In the circumstances of that case, the arbitrator's approach in various ways was thought to be non-judicial and his comments bore tones adverse to the corporation. Ultimately, the court held that there was misconduct sufficient to justify a removal.
52 Counsel for Oldfield Knott relied heavily upon the recent decision of this Court in Shirley Sloan Pty Ltd v Merril Holdings Pty Ltd [2000] WASC 99.
53 In that case, the specifications to a building contract provided that the roof framing timber would be "dry dressed Oregon". Oregon was, in fact, used for the purposes of the roof framing, but the parties were in dispute on the question of whether it was "dry dressed" Oregon. The arbitrator noted that there was, in the witness statements provided to him, general agreement that the word "dry" commonly equated to seasoned. He went on to hold that the respondent builder was not in breach of the relevant clause because the evidence did not support the claim that ship-dried Oregon was installed in lieu of dry dressed Oregon or the proposition that the timber installed, if it was ship-dried Oregon, was not dry dressed Oregon. The applicant contended that it was taken by surprise by what was done by the arbitrator, and it was denied the opportunity of placing any additional evidence before him, in that, had it known that the arbitrator would be influenced by the dimensions of the timber in the course of resolving the key issue, the applicant would have placed additional evidence before him establishing that the roof timber, when purchased by the sawmiller who supplied it to the respondent, had dimensions which were consistent with those of unseasoned timber.
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54 In the course of his judgment Steytler J cited with approval the observation of Parker J in Thiess Contractors Pty Ltd v Water Corporation of Western Australia (supra). He also said, in regard to the case before him, that there was a breach of the rules of natural justice in that, had the arbitrator mentioned to the parties that he considered the dimensions of the timber to be significant, the additional evidence would have been placed before him. How that would have affected the ultimate determination, if at all, was a matter for speculation, but, in the opinion of his Honour, it could not be said with any confidence that it would have made no difference to the result. His Honour concluded by saying, at par 36:
"In the end it seems to me to be plain that there was, in this case, a breach of the rules of natural justice. It also seems to me, as I have said, that the consequence of the breach was one which might have affected the result. That being so the applicant may have been materially unjustly prejudiced."
55 I must also take account of those cases in which some attention has been directed to the way in which the concepts of misconduct and incompetence should be related to the context in which they appear, that is to say, a statute providing for commercial arbitration as an alternative to litigation.
56 In Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653, Rogers CJ held that the legislative purpose and intent of the Commercial Arbitration Act 1984 (NSW) was such that the court did not have power under s 43 - which allowed for remitting matters referred to arbitration to an arbitrator for consideration - to review the conduct of or procedural orders in the course of arbitration proceedings unless they are inconsistent with the requirements of the principles of natural justice. The power to remit should not be invoked as a backdoor method of circumventing the statutory restrictions in the court's power of intervention in arbitration proceedings.
57 This decision was cited with approval by Smith J in Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd (1994) 2 VR 386. In that case, the applicant had made application for an order striking out a claim as an abuse of process and an order for the provision of further and better particulars. In the course of reviewing the policy of the Commercial Arbitration Act 1984 (Vic), Smith J noted that the policy was to encourage arbitration as a flexible procedure. The arbitrator was given a wide discretion to control the
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- procedural aspects of the arbitration. Further, the heart of the arbitral procedure lies in its ability to provide speedy determination of the real issues. In his view, the Commercial Arbitration Act did not confer a special supervisory jurisdiction on the court for dealing with procedural error by arbitrator. However, it did give the court a discretion to intervene in the procedural stages of an arbitration in appropriate cases. Nonetheless, a court should take account of the various considerations weighing against judicial intervention. The reasoning in this case is consistent with the notion visible in the other cases I have mentioned, that it is not enough simply to identify a procedural or evidentiary irregularity. The applicant for relief has to identify a breach of the rules of natural justice which might affect or has affected the outcome of the arbitration.
58 I now turn to the circumstances of the present case. In doing so I take account of the precept reflected in the decided cases that an arbitrator must proceed in accordance with the rules of natural justice with the result that each party is entitled to forewarning of the case to be advanced by the other side at the hearing. Nonetheless, it is apparent from various provisions of the Commercial Arbitration Act that arbitration is a special procedure which allows for some relaxation of the procedural and evidentiary rules governing civil litigation in the courts with a view to effecting economies as to both time and expense, and allowing a degree of flexibility to the parties. It follows from this that one should not assume too easily that evidentiary materials or procedural steps which might be characterised as prejudicial in the course of civil litigation should be regarded in exactly the same manner in the context of arbitration. Section 19(3) of the Act, for example, as I have already noted, provides that the arbitrator is not bound by the rules of evidence.
59 The central issue in the present case is whether the arbitrator, by his various rulings, or by his failure to make clear rulings when called upon to do so, allowed the claimant to raise an unpleaded issue of fraud or collusion against Oldfield Knott, arising out of a supposedly close relationship between that firm and Mr Rafferty, in a way that could effect the outcome of the arbitration, either because an unpleaded issue of this kind might prove to be decisive without Oldfield Knott being allowed a sufficient opportunity to know precisely what was being alleged and to adduce evidence to meet the allegation, or because the presence of such an issue and related evidence could have an unduly prejudicial effect. I remind myself in passing that counsel for Oldfield Knott initially spoke of "fraud or collusion" in describing the so-called unpleaded issue, but finally, on Monday morning, 8 May 2000, in a more subdued tone, spoke of "allegations that were made of an apparent improper agreement to harm
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- the claimant with respect to the construction agreement." It follows from this sequence of events, however, that, when Mr O'Neal as counsel for Oldfield Knott raised an objection to the opening of counsel for the claimant at the commencement of the hearing on Friday, 5 May 2000, the Arbitrator was being called upon to review the pleadings and to deal with counsel's objection upon the basis that an unexpected allegation of "fraud or collusion" had taken Oldfield Knott by surprise. For ease of reference, I will henceforth refer to this as the "collusion issue", but upon the basis that this term is intended to embrace the various formulations of the objection relied on by Mr O'Neal before the Arbitrator, and before me.
60 I note also that, in support of Oldfield Knott's claim for relief by removal of the Arbitrator, Mr O'Neal, as counsel for that party, relied upon various acts and utterances of the Arbitrator which were said to reveal a fundamental unfairness in his approach amounting to a breach of the rules of natural justice. These acts and utterances, considered either in conjunction with the central issue, or independently, were said to justify the grant of relief. In that regard, counsel argued, certain passages of the transcript showed that, without having resolved the collusion issue, the Arbitrator intended to admit witness statements that were still subject to objection, he did not regard himself as being bound or confined by the pleadings, he was unduly peremptory in dealing with objections concerning the collusion issue, and refused an adjournment so that the question of his alleged misconduct could be referred to the Supreme Court for a ruling. Counsel for Oldfield Knott contends, additionally, that, even if these various matters do not amount to misconduct, they reveal that the Arbitrator is incompetent. It follows from the decided cases mentioned earlier that, in this context, misconduct does not mean moral turpitude.
61 It will be useful to look firstly at the period leading up to the arbitration hearing. It appears from the preceding narrative that, at an early stage, the Arbitrator gave directions in a comparatively conventional form concerning pleadings and the preparation and use of witness statements. When Oldfield Knott's legal advisers raised certain objections to the statements, partly referable to the collusion issue and partly of a more general kind referable to the rules of evidence, the objections were noted, certain disputed passages were removed from the statements and directions were given that would allow any further differences of opinion to be dealt with at the hearing.
62 Late amendments were made to the pleadings on both sides, but to those familiar with the course of civil litigation this should not be thought surprising in the context of a complex arbitration of this kind, especially
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- where witness statements have been exchanged in the period leading up to the trial date. Oldfield Knott's legal advisers seemed to accept, as evidenced principally by the Downings' letters of 26 April and 4 May 2000, that matters were proceeding in an acceptable manner, although clearly some further questions might arise at the commencement of the hearing as to the state of the pleadings and the exact use to be made of witness statements in circumstances where various objections had been conceded and various amendments had been or were still to be made to the relevant documents. To this point, there is nothing to suggest that the Arbitrator did not intend to treat the pleadings and the witness statements as the primary and appropriate point of reference in the course of resolving the matters in dispute. I am not satisfied that there is anything in the events preceding the commencement of the hearing on Friday, 5 May that would, of itself, justify an order for removal on any of the grounds relied on, that is to say, for misconduct or for incompetence.
63 I have already described the sequence of events at the commencement of the hearing, including reference to the structure of the opening address of Mr Fyfe, as counsel for the claimant. Counsel for Oldfield Knott raised the collusion issue at the conclusion of that address. He said that his client had come to defend a building and construction case involving the nature and extent of an architect's duty to investigate tenders and administer the contract. The question of any breach of the Trade Practices Act on the grounds of misleading and deceptive conduct was limited to matters such as the technical and financial ability of Gatt to carry out the contract. He went on to say: "We are not here to defend the case of alleged collusion and in my respectful submission it is appropriate and I am making an application that you rule that such matters as those that I have referred to and I am happy to give you further details of those if it is necessary to formulate it - matters of those kind will not be entertained in the course of the arbitration." He made it clear that, against the background of his objections, he wished to revisit the witness statements to remove irrelevant and prejudicial passages.
64 Various exchanges then took place in the course of which Mr Fyfe said specifically that he was not relying on fraud or collusion and suggested that he was referring to the "close relationship" as a matter related to the issue of wrongful advice referred to in his recently-amended reply. He agreed - simply to avoid unnecessary controversy at the start of the case, it seems - to delete certain passages from the statements. He agreed to withdraw the words he had used to describe one aspect of Oldfield Knott's association with the lowest tender price, namely, "in conjunction with the builder's quantity surveyor". It was against that
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- background, after exchanges that seemed to have had the effect of diverting the Arbitrator from the initial application for a ruling, that the Arbitrator went on to make a ruling of sorts. He said: "I see no reason why the evidence as set out in the witness statement shouldn't be given and I'll give what weight I think should be given in every case." A little later he added: "Perhaps when you come to cross-examination will be the time. You can bring it up in turn then."
65 I have already noticed that this stance is open to various interpretations. On balance, however, having considered the surrounding discussion, I find that the Arbitrator was not prepared to uphold Mr O'Neal's objection on behalf of Oldfield Knott. The Arbitrator took the view that Mr Fyfe's references to "a close relationship" and his other observations was simply a submission that the tender process should be subjected to rigorous scrutiny, in circumstances where the recent exchange of amended pleadings had led to a joinder on the lowest tender issue. This lay within the boundaries of the pleaded issues. Mr Fyfe's characterisation should not be regarded as the introduction of an entirely new plea of "fraud and collusion", this being a gloss upon what Mr Fyfe had said formulated by Mr O'Neal.
66 The Arbitrator then, additionally, took the view that what remained in controversy as a result of Mr O'Neal's objection was an evidentiary issue as to whether certain passages of the witness statements went too far. It was a question of what weight should be given to any such passages - if they still remained in the statements after the foreshadowed deletions - and in that regard cross-examination would be allowed to challenge the effect of the disputed passages. Mr O'Neal continued to raise objections on the basis of the collusion issue after Mr Ortiz was called to give evidence, but the stance of the Arbitrator on the opening day of the hearing remained essentially the same, namely, that no new, unpleaded issue of fraud or collusion had been introduced and that the passages in the witness statements complained of were a matter of weight.
67 I pause here to say that, with the benefit of hindsight, it is certainly unfortunate that, in responding to the collusion issue raised by Mr O'Neal, the Arbitrator did not clearly articulate his ruling. This is part of a arbitrator's quasi-judicial function: to listen and to rule upon any procedural or evidentiary matters that are raised with him at the hearing, clearly and without prevarication or delay. Nonetheless, I do not consider that the failure to make a clear ruling, of itself, amounts to misconduct within the meaning of the Commercial Arbitration Act, especially in the context of an ongoing debate in which a threshold issue had to be resolved
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- as to whether what had been said by Mr Fyfe in opening, without any use of the words fraud and collusion, could properly be characterised as a plea of fraud and collusion. The important question is whether the stance adopted by the Arbitrator in making his ruling, as I have described it, was unfair or potentially unfair in a way that could affect the outcome of the arbitration.
68 I am not satisfied that, to this point, the Arbitrator's stance was unfair. To my mind, Mr Fyfe, having made it clear that fraud or collusion was not being alleged, and that the evidence he proposed to lead was relevant to issues on the pleadings, including the lowest tender issue arising from the recently-amended pleadings, the Arbitrator was entitled to assume that the case before him would be governed by the pleadings. Looked in that light, Oldfield Knott had formal notice of the case it was required to meet and, as to evidentiary materials, as a consequence of the preparation and exchange of witness statements - bearing in mind that much of the evidence of the so-called "close relationship" was reflected in Oldfield Knott's own witness statements - Oldfield Knott was not taken by surprise. Counsel for that party was in a position to cross-examine with a view to reducing the effect of the disputed passages.
69 In my view, the evidence proposed to be led by Mr Fyfe concerning the so-called close relationship was relevant and admissible because it served to explain the nature of the relationship between the claimant and his architect, and other interested parties, and could be said to have a bearing upon whether the architects exercised due care and whether their actions amounted to misleading and deceptive conduct. I have already noted that, as to the latter issue, although proof of a dishonest intent is not a necessary constituent of a case based upon misleading and deceptive conduct, there is some authority for the proposition that a demonstrated intent to mislead will be of evidentiary value in assessing the nature and consequences of the conduct complained of. Further, evidence concerning the so-called close relationship and the lowest tender issue was also relevant to assessing the credibility of the parties and their witnesses.
70 On this view of the matter, at the end of the first day, the Arbitrator had acted fairly and reasonably in refusing to uphold the objections and in being determined to proceed. Witness statements containing some of the disputed passages, which were bound to be superseded in the light of the pre-trial exchanges and Mr Fyfe's further concessions, were still in the possession of the Arbitrator, but in the pragmatic atmosphere of a commercial arbitration where it is not unusual for various adjustments to
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- be made to documentation in the course of proceedings, I cannot accept that this amounted to misconduct likely to affect the outcome of the arbitration, or should be characterised as misconduct or incompetence. An arbitrator with professional qualifications in the context of a commercial arbitration, should not be thought to have the sort of potentiality to succumb to misinformation and prejudice as is often attributed to a juror in criminal proceedings. Counsel for both parties would undoubtedly have an opportunity to define by further debate the materials that should be before the Arbitrator at the end of the hearing as a result of his various rulings and the concessions made by counsel.
71 It is against this background that I turn to the events of the second day of the hearing on Monday, 8 May 2000. By then, as I have noted, Mr O'Neal had had an opportunity to review the transcript. Being understandably attentive to the interests of his client, his concerns had not abated, although it emerges from what followed that even he seemed to accept that his characterisation of Mr Fyfe's opening remarks as raising a plea of "fraud and collusion" might have been putting his concerns too strongly. He now sought to characterise the problematic remarks as a plea of some improper agreement.
72 If the collusion issue had to be revisited on the Monday morning, one can see (with the benefit of hindsight) that it was open to Mr O'Neal to seek a clear ruling from the Arbitrator as to how the issue would be dealt with, bearing in mind that the previous debate on that subject had been somewhat inconclusive and confusing. If, in response to such a further application, the matter was brushed aside, or he was told plainly by the Arbitrator that the Arbitrator did not consider that he was bound by the pleadings and was at liberty to make a finding of fraud or collusion against Oldfield Knott, then this would probably be sufficient to bring the matter within the principles mentioned in Shirley's case (supra) and in some of the other decisions. Such a scenario would suggest that there was a likelihood that the case could be decided upon a ground that Oldfield Knott had not been given a sufficient opportunity to meet. In the event, however, Mr O'Neal proceeded immediately to apply for an adjournment on the ground that, as a result of what had taken place on Friday, the Arbitrator had been "led into error with respect to the nature of the case to be tried" and Oldfield Knott wished to make an application pursuant to the Commercial Arbitration Act for removal of the Arbitrator for technical misconduct.
73 The application for an adjournment was refused. It follows from my earlier findings that the Arbitrator was entitled to hold that he had not
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- been led into error, because fraud and collusion, or "some improper agreement", was not, in fact, being raised as an issue additional to the issues disclosed by the pleadings. Further, evidence relevant to the "close relationship" between Oldfield Knott and other interested parties was relevant and admissible as evidence properly related to issues on the pleadings. With a view to being scrupulously fair, and recognising, perhaps, that the application for an adjournment was not being made lightly, should the Arbitrator have allowed an adjournment for the proposed purposed in any event?
74 One immediately notices that the entire process of resolving disputes by arbitration could be subverted if parties were at liberty to invoke the supervisory jurisdiction of the Supreme Court whenever a disagreement arose as to the meaning of the pleadings. It must also be remembered that the Commercial Arbitration Act allows other avenues of relief by way of appeal or an application for removal at a later stage, as happened in Shirley's case (supra). In the present case, it must also be remembered that on the claimant's side the application for an adjournment was met by a willingness on the part of Mr Fyfe to allow a further review of the witness statements to find out what exactly was required in order to ensure that Oldfield Knott was not taken by surprise. Controversies concerning the pleadings and the witness statements had occurred previously in the lead-up to the hearing, and had been resolved. There was, therefore, reason to suppose that any further difficulties could be ironed out as the matter proceeded. In essence, then, the situation confronting the Arbitrator was that, after many months of preparation, the effect of the application, if allowed, was to require the claimant to abandon a previously arranged hearing date for an indeterminate period in circumstances where the grounds for an adjournment depended on a view of the pleadings and the evidentiary issues which, on my earlier finding, was misconceived. In these circumstances, I consider that the Arbitrator was justified in refusing the application for an adjournment because the prejudice to the opposing party, the claimant Ortiz, was too severe.
75 I have already indicated that the central issue is accompanied not only by subsidiary issues, such as the way in which the application for an adjournment should be viewed, but also, consistently with the views expressed by Marks J in the Gas & Fuel Corporation case (supra), by a submission that various actions of the arbitrator, when viewed in combination, could have engendered in the mind of a fair observer that the arbitrator did not and would not bring to the resolution of the question before him a fair and unprejudiced mind.
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76 In addition to the matters previously described, counsel for Oldfield Knott relies on various passages in the transcript for the second day of the hearing which are said to disclose a lack of fairness on the part of the Arbitrator. When Mr O'Neal returned to the collusion issue on that day and went on to observe that the case was supposed to proceed on pleadings, the Arbitrator responded: "Yes, but I'm not bound by the rules of evidence." It was apparent from this, counsel argued, that the Arbitrator was not sufficiently aware of an important distinction between the role of pleadings and the use of evidence and had indicated that he did not regard himself as bound by the pleadings. Reference was also made to certain passages in which the Arbitrator had made remarks which allegedly showed that he was treating the collusion issue, or variations of the concerns underlying that issue, as a live issue, with the result that Oldfield Knott was put in the position of having to rebut allegations concerning its honesty because the Arbitrator seemed to be influenced by such allegations. Reference was also made to the fact that, at one stage, the Arbitrator described concerns raised by counsel for Oldfield Knott as "nonsense", and this too was said to disclose a pattern of unorthodox and potentially unfair conduct which could affect the outcome of the arbitration.
77 As to this aspect of the matter, I am not satisfied that the grounds referred to in the originating motion have been made out. It is true that a degree of impatience seems to colour some of the remarks made by the Arbitrator in the course of exchanges with counsel, but these are partly explicable by the context. He was being called upon to deal with an application for an adjournment based essentially on a view of the law and of the pleadings which he considered to be without merit. If allowed, the application for an adjournment was bound to delay the hearing for an indefinite period when, as an arbitrator, he was entitled to assume that the parties wished to obtain a resolution of their dispute in a speedy and expeditious manner and to take advantage of the flexible rules allowed by the Commercial Arbitration Act as an alternative to the rigorous procedures usually accompanying civil litigation. The nature of the application, which sought to invoke the supervisory powers of the Supreme Court, seemed to challenge his powers as an arbitrator. It was still not entirely clear to the Arbitrator whether the debate concerning the collusion issue was directed to the pleadings or principally to evidentiary concerns. In my view, his comment about not being bound by the rules of evidence was made essentially to remind counsel that special rules applied to arbitration proceedings, especially in regard to evidentiary matters. I am not satisfied that one can deduce from the brief exchange in question
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- that he intended to abandon reliance on the pleadings, especially in circumstances where the pre-hearing procedures which had been taking place for more than 12 months under the supervision of the Arbitrator had given a proper weight to the role of the pleadings. Likewise, the Arbitrator's passing comments in the course of debate about the implications of the collusion issue do not seem to be sufficient to show that he did not have an open mind as to various issues revealed by the pleadings. His comments do not suggest that he was inclining against Oldfield Knott. He was principally concerned by the prospect of delay.
78 It is true that, in making the remarks complained of, he seemed to be echoing what had been put to him by Mr Fyfe in the course of the opening address, but I am satisfied that this was done with a view to defining and putting up for discussion the nature of the case being advanced by the claimant so that comment could be made upon it by opposing counsel. I am not satisfied that these matters, considered either individually, or in conjunction with earlier matters complained of, reveal a potentially prejudicial pattern of unfairness that might defeat the outcome of the arbitration or otherwise establish the grounds relied on in the originating motion.
79 Reference was also made to the fact that when an application was made by counsel for Oldfield Knott to have Mrs Ortiz excluded from the hearing room while her husband gave evidence, upon the basis that an order was usually made for witnesses to be out of court where issues of credibility were involved, this application was refused. Again, in the context of a commercial arbitration where both Mr and Mrs Ortiz were, in a sense, representatives of the claimant company, and closely involved with work being undertaken on the site, I do not consider that a refusal of the application amounted to misconduct or incompetence. It was a matter that lay within the discretion of the Arbitrator in circumstances where he was not bound by the rules of evidence and I therefore consider that his ruling was justifiable. In building disputes, where a mass of detail is involved, it is not uncommon for both husband and wife to be closely associated with what happened on the site. It can be very time-consuming if each witness in turn has to be educated in the shorthand descriptions of various matters in controversy that inevitably evolve as the hearing proceeds. In the exercise of his discretion it was open to the Arbitrator to rule that considerations of this kind outweighed the matters raised in support of the usual orders that witnesses should be out of court.
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80 It follows from this review of the various issues that the application for removal of the Arbitrator pursuant to provisions of the Commercial Arbitration Act will be dismissed.
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