Thoroughvision Pty Ltd v Sky Channel Pty Ltd

[2010] VSC 139

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST C

No. 206 of 2010

THOROUGHVISION PTY LTD (ACN 100 040 033)

Plaintiff

v

SKY CHANNEL PTY LIMITED (ACN 009 136 010)

TABCORP HOLDINGS LIMITED (ACN 063 780 709)

First Defendant

Second Defendant

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JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	22 and 29 March 2010
DATE OF JUDGMENT:	22 April 2010
CASE MAY BE CITED AS:	Thoroughvision Pty Ltd v Sky Channel Pty Limited & Anor
MEDIUM NEUTRAL CITATION:	[2010] VSC 139

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ARBITRATION – Arbitration under the Commercial Arbitration Act 1984 (Vic) – Judicial review of awards – Application for leave to appeal an award – s 38 of the Commercial Arbitration Act 1984 (Vic) – Meaning of “manifest error of law on the face of the award” – Reference to arbitration of the question of construction of a document – Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275 – Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 – Thiess Pty Ltd v ConnectEast Nominee Company Pty Ltd [2008] VSC 287

ARBITRATION – Arbitration under the Commercial Arbitration Act 1984 (Vic) – Application to set aside the award – s 42 of the Commercial Arbitration Act 1984 (Vic) – Meaning of “misconduct” – s 29(1)(c) of the Commercial Arbitration Act 1984 (Vic) – Requirement for Arbitrator to give reasons – Standard of reasons required – Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 – Gordian Runoff Limited v Westport Insurance Corporation [2010] NSWCA 57

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N.J. Young QC with Mr P.H. Solomon and Ms K. Foley Lowe	Clayton Utz
For the Defendants	Mr A.C. Archibald QC with Mr P.J. Brereton SC and Ms R.C.A. Higgins	Freehills

HIS HONOUR:

Background

1. The parties entered into a Deed of Arbitration dated 25 November 2009 engaging the Honourable Peter Heerey QC as arbitrator (“the Deed of Arbitration”).  The learned arbitrator is a recently retired judge of the Federal Court of Australia (who is referred to, for convenience, as “the Arbitrator”).

1. The Deed of Arbitration was entered into for the purposes of the dispute resolution provisions of clause 8 of a Memorandum of Understanding made between the parties, dated 1 February 2007 (“the MOU”).

1. The Deed of Arbitration recites that various disagreements had arisen between the defendants, Sky Channel Pty Ltd and Tabcorp Holdings Limited (“the Sky parties”) and the plaintiff, Thoroughvision Pty Ltd (“TVN”).  The Deed also recites that the Sky parties and TVN had attempted to resolve their disagreements without success and, in these circumstances, agreed to submit to a binding arbitration in relation to the issues remaining in dispute between them.[1]  The MOU makes provision for arbitration of this nature in Clause 8.[2]

   [1]Deed of Arbitration, Recital 4.

   [2]See Clause 8(d) which provides: “The Expert will first attempt to mediate between the Notifying Party and each Other Party but if such mediation is unsuccessful the Expert shall, unless otherwise required by the parties, require the parties to submit to a binding arbitration before such person as the parties agree or in default of agreement as the Expert appoints. The Expert or arbitrator, as the case may be, may, in the absence of agreement between the parties, determine the means and procedures for such mediation or arbitration as the case may be and, if relevant, conduct such arbitration in accordance with the Commercial Arbitration Act 1984 (Vic). The costs of the Expert or arbitrator will be shared equally between the Notifying Party and the Other Party unless the Expert or arbitrator determine otherwise.”

1. The Deed of Arbitration is significantly more than an arbitration agreement that meets the core requirements of the definition of “arbitration agreement” contained in sub-section 4(1) of the Commercial Arbitration Act1984 (Vic) (“the Act”). The Deed contains, among other things, a defined “Overriding Objective”[3] together with extensive provisions in relation to the procedure of the arbitration[4] and the duties of the arbitrator.[5]

   [3]See Clause 1.1 which provides:

   “Overriding Objective - that the arbitration is conducted:

   ·     fairly, expeditiously and cost effectively; and

   ·     in a manner which is proportionate to:

   (1)the amount of money involved;

   (2)the complexity of the issues;

   (3)the importance of the issues to any party; and

   (4)any other relevant matter.”

   [4]See Deed of Arbitration, Clause 4.

   [5]See Deed of Arbitration, Clause 5.

1. The provisions with respect to procedure and arbitral duties both required the Arbitrator to conduct the arbitration in accordance with the Overriding Objective.[6]  Procedurally, the arbitration was to be conducted in accordance with the Deed of Arbitration, the MOU and the Overriding Objective.[7]  In terms of duties, the Arbitrator was required to conduct the arbitration in accordance with the Overriding Objective, with further requirements which, in any event, might appear to be express or implied aspects of the Overriding Objective.[8] Clause 3(a) of the Deed of Arbitration provides that the arbitration was to be conducted in accordance with the Act, but subject to the Deed and the MOU. The Deed is governed by the law in force in Victoria.[9]

   [6]See Clauses 4(a) and 5(a)  of the Deed of Arbitration.

   [7]See Clause 4(a) of the Deed of Arbitration.

   [8]See Clause 5(a) of the Deed of Arbitration, where the further requirements are that the Arbitrator “… shall adopt procedures suitable to the issues for determination, avoiding unnecessary delay and expense so as to provide a fair, expeditious and cost-effective process for determination of the issues for determination.”

   [9]See Clause 12.1(a).

1. The issues for determination were specified in Clause 2 of the Deed of Arbitration as those set out in the TVN Dispute Notice and the Tabcorp Dispute Notice, as confined by the parties’ respective Fast Track Statements and Fast Track Responses served in accordance with the Arbitrator’s Directions made on 11 November 2009.[10]

   [10]See Clause 2(a) of the Deed of Arbitration.  Provision was made in Clause 2(b) for the scope of the arbitration to be expanded with the agreement of all parties, but this did not occur.

1. Clause 6 of the Deed of Arbitration also imposed duties on the Sky parties and TVN.  Their duties were to use all reasonable endeavours in the course of the arbitration for it to be conducted in accordance with the Overriding Objective and to be finalised before 1 March 2010.  As agreed, the parties were represented by legal counsel for the arbitration.[11]

   [11]See Clause 9(b) of the Deed of Arbitration.

1. The Arbitrator and the parties attended to the resolution of matters with expedition.  The arbitration hearing was held over two days on 14 and 15 December 2009 and a reserved award was published, dated 21 December 2009[12] (“the Award”).

   [12]And see Clause 5(c) of the Deed of Arbitration which required the Arbitrator “… to deliver a determination with written reasons in respect of the issues for determination within a reasonable time of the conclusion of the hearing and in any event shall take all reasonable steps to ensure that the Arbitration is finalised before 1 March 2010”.

Applications

1. This proceeding involves an application by TVN for leave to appeal the Award under s 38(5) of the Act on the basis that there is “a manifest error of law on the face of the award”.[13] It was common ground that the requirements of s 38(5)(a) of the Act are satisfied in that “having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement”. The provisions of s 38(5)(b)(ii) were not relied upon. Consequently, the critical issue for the purposes of s 38(5) of the Act is whether there is a “manifest error of law on the face of the award” for the purposes of s 38(5)(b)(i).

   [13]See sub-s 38(5)(b)(i).

1. In the event that leave was granted under s 38(5), TVN sought to appeal the Award under s 38(2) on the basis that the Arbitrator made an error of law in making various findings and in failing to provide a proper or adequate statement of reasons as required by the Act.[14]

   [14]See paragraph 29(1)(c) of the Act.

1. TVN also sought to have the Award set aside under s 42(1)(a) of the Act on the basis that the Arbitrator mis-conducted himself by failing to provide a proper or adequate statement of reasons as required by the Act with respect to the three points appealed.[15]

   [15]See paragraph 29(1)(c) of the Act for the requirement to give reasons; and below, paragraph 12 as to the three points appealed.

1. On this basis, I turn first to consider whether there is “a manifest error of law on the face of the award” for the purposes of s 38(5)(b)(i) of the Act, and then whether misconduct is established for the purposes of s 42(1)(a) of the Act. TVN, in its proposed notice of appeal, identifies issues of construction which were the subject of the Award, together with the adequacy of the Arbitrator’s reasons. The issues of construction are, for convenience, referred to as (1) the New Channel issue; (2) the Race Coverage issue; and (3) the Replay issue.

Review of Arbitration Awards

1. The powers of the Court with respect to the review of awards in arbitrations which are subject to the Act are regulated by ss 38 to 41. The Act only provides for judicial review on a question of law, not questions of fact,[16] though the apparent simplicity of the distinction is always deceptive. For example, findings of fact by an arbitrator as a result of failing to consider or properly consider the relevant admissible evidence may, in particular circumstances, constitute an error of law. In any event, it is clear that the Act does not provide for merits appeals on questions of law but, rather, restricts appeals, principally on the basis provided for in s 38(5).[17]  The Act also accommodates appeals on questions of law where all parties to the arbitration agreement consent to the appeal.[18]

   [16]Section 38(2); and see Leighton Contractors Pty Ltd v South Australian Superannuation Fund Investment Trust (1994) 63 SASR 444 at 448 (Debelle J).

   [17]See Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57 (1 April 2010). Allsop P, (with whom Spigelman CJ and Macfarlan JA agreed) emphasised this point in commenting (at [127]), with reference to the equivalent provisions of s 38(5)(b)(ii) of the Act, that: “The remit of arbitrators includes the making of errors; that is an inevitable part of any process of dispute resolution.”

   [18]See s 38(4)(a).

1. The regime provided for in sub-ss 38(2) and (5) is as follows:

“(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.

…

(5) The Supreme Court shall not grant leave under subsection (4)(b) unless it

considers that-

(a)having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and

(b)there is-

(i)  a manifest error of law on the face of the award; or

(ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.”

Even if the requirements of sub-s 38(5) are established, there remains a discretion in the Court to refuse leave.[19]

[19]See Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 at 225-6 (Sheller JA); and see Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 (Vic) r 4.09(1).

1. Prior to the enactment of the Act, in 1984, the former “case stated” procedure permitted a high degree of court control and review of the arbitration process and its outcomes. Consequently, arbitration became unattractive as a result of the cost and delay involved: there was little point in parties choosing arbitration if the merits of their dispute would ultimately be litigated in the courts as a result of these control and review powers.[20]  The tide turned in favour of finality of arbitration awards with the enactment of the English Arbitration Act 1979.[21]

   [20]Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 at 216 (Sheller JA).

   [21]See Pioneer Shipping Ltd v BTP Tioxide Ltd (“The Nema”)(No. 2) [1982] AC 724 at 742-3 (Lord Diplock).

1. The Act, which was enacted as part of a scheme for national, state and territory uniform commercial arbitration laws,[22] was based on the philosophy and approach of the 1979 English legislation.[23]  In essence, the approach was to facilitate court assistance for arbitration, but at the same time minimise court interference in the process.  This represented a fundamental shift of thinking whereby party autonomy was given pre-eminence.  In other words, the legislature and the courts would henceforth respect and facilitate the decision of commercial parties to choose a final and binding adjudicative dispute resolution process outside the state civil court system.  No longer would this choice by commercial parties be effectively denied by treating arbitration as an “inferior jurisdiction” to be controlled and reviewed at every turn, through the case stated procedure.[24]

   [22]The, so-called, uniform Commercial Arbitration Acts have varied in the extent of their uniformity in some respect at various times in various States and Territories, but for present purposes their provisions may be treated as substantially in the same terms.

   [23]See, particularly, ss 1 to 4 of the English Arbitration Act 1979; and the paper given by Ormiston J (as he then was), “Arbitrators and the Courts” (1986) The Arbitrator, 92; and a paper by Stephen Charles QC (as he then was), “Appeals from Arbitration Awards” (1988) The Arbitrator, 105; and see Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57.

   [24]A position further reinforced internationally by the provisions of the UNCITRAL Model Law on International Commercial Arbitration, which was adopted in Australia under the International Arbitration Act1974 (Cth), with some amendments and additions with respect to its operation under the provisions of that Act.

1. This change in legislative approach did not, however, involve the complete removal of all safeguards. The Act retained, for example, provisions for limited judicial review, the power to set aside an award for arbitral misconduct, and the power to remove an arbitrator.[25] Those safeguards were, nevertheless, cast against the background of the underlying philosophy of the Act, party autonomy supported by court assistance rather than court interference. Consequently, judicial review was limited to cases of “a manifest error of law”,[26] or to circumstances where there is “strong evidence” of an error of law and “the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law”.[27]  The latter circumstance does not apply with respect to these proceedings, but those provisions emphasise and implement the same legislative philosophy by providing a balance to ensure that questions of commercial law which are of general importance are settled by the courts.  In both cases the threshold that “having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement” must be met.[28]  It was common ground that this threshold was met in the present proceedings.

   [25]See ss 38, 42 and 44 of the Act, respectively.

   [26]s 38(5)(b)(i).

   [27]See s 38(5)(b)(ii) of the Act; and see Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57 at [119] to [129] (Allsop P, with whom Spigelman CJ and Macfarlan JA agreed).

   [28]See s 38(5)(a) of the Act.

Manifest error of law on the face of the award

1. The authorities indicate very clearly that the word “manifest” where it is used in s 38(5)(b)(i) does carry significant meaning which is not to be read down or effectively ignored. It was against the legislative background of the English Arbitration Act 1979 and the New South Wales Commercial Arbitration Act 1984 that the meaning of “manifest error of law on the face of the award” was considered in Promenade Investments Pty Ltd v State of New South Wales.[29]

   [29](1992) 26 NSWLR 203 (CA); and see Energy Brix Australia Corporation Pty Ltd v National Logistics Co-Ordinators (Morwell) Pty Ltd (2002) 5 VR 353 (CA); Melbourne VV Pty Ltd v Pratt [1995] VSC 21 (App Div); Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 (CA) at 369-70 (Buchanan, Nettle and Dodds-Streeton JJA); and Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275 where the approach of Sheller JA in Promenade Investments was approved.

1. In Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd, Dodds-Streeton J commented that the power of judicial review is “enlivened by an obvious departure from settled principles of law”.[30] I take the emphasis in this comment to lie in the word “obvious” as it prefaces reference to the principles relevant to determination of an application for leave to appeal under s 38(5) as summarised by Debelle J in Leighton Contractors Pty Ltd v South Australian Superannuation Trust, which include:[31]

   [30][2003] VSC 275 at [30].

   [31](1994) 63 SASR 444 at 448; and see Crewford Pty Ltd v Transit Australia Pty Ltd [1998] 1 Qd R 690.

“5. The epithet ‘manifest’ in the expression ‘manifest error of law’ is used to indicate an error which is evident or obvious rather than one which is arguable.”

Dodds-Streeton J continued:[32]

[32]Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275 at [38] to [43]; noting that the first paragraph in the passage from the judgment of Sheller JA in Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 at 225 was referred to with approval in Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 at 369-70 (Buchanan, Nettle and Dodds-Streeton JJA).

“[38] The Commercial Arbitration Acts, in broadly uniform format, were subsequently enacted in Australian States and Territories. An apparent goal of the legislation was to minimise judicial supervision and review of arbitral decisions. In Promenade Sheller JA observed:

‘The added requirements of manifest error of law on the face of the award or strong evidence that the arbitrator made an error of law and that the determination of the question may add substantially to the certainty of commercial law suggest that the draftsman was seeking to constrain the exercise of control over arbitral awards in the manner described by the House of Lords in The Nema. A manifest error on the face of the award may be an error which would be apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument.’[33]

[33](1992) 26 NSWLR 203 at 222.

[39] His Honour noted the recommendation of the New South Wales Working Group that ‘s38(5) should incorporate the guidelines enunciated in The Nema and other relevant authorities with the effect that leave may only be given if an error of law is apparent on the face of an award without hearing argument’.[34]

[34](1992) 26 NSWLR 203 at 222 (being a reference to the February 1988 Report of the Working Group requested by the Standing Committee of Attorneys-General to review the operation of the uniform commercial arbitration legislation); and see Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57 at [105] and [106] (Allsop P with whom Spigelman CJ and Macfarlan JA agreed).

[40] Sheller JA relevantly observed:

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

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

[35]Ibid, at 225-226.

[41] Windeyer J in Gold Coast City Council v Canterbury Pipe Lines[36] stated:

‘An error on the face of the award is not to be discovered by looking behind its back. It is not permissible to treat the limited jurisdiction by which a court ensures that an arbitration is conducted in accordance with law as if it were the equivalent of an appeal from an arbitrator’s decision.’[37]

[42] In Leung v Hungry Jacks Pty Ltd,[38] Hedigan J stated that the error must be ‘evident and obvious rather than merely arguable.’

[43] In Natoli v Walker,[39] Kirby P stated:

‘Obviously, there is difficulty in the word “manifest”. What may be “manifest” to one judicial officer may fail to persuade another. The criterion cannot be the swiftness of mind of the sharpest intellect. Nor can it be the perception of one whose whole career has been devoted to examining and reflecting upon building contracts. An objective, not a subjective, test for what is “manifest” is contemplated. But the word will not go away. Against the background of its history in this context it requires swift and easy persuasion and rapid recognition of the suggested error.’”

[36](1967) 118 CLR 58.

[37]Ibid, at 77.

[38][2000] V ConvR 64,348 (54-614).

[39](1994) 217 ALR 201 at 215.

Construction of documents

1. The Sky parties also relied upon the decision of the High Court in The Melbourne Harbour Trust Commissioners v Hancock[40] in support of the position that where a question of construction of a document is referred to arbitration, the decision of the arbitrator cannot be set aside merely because the court would have come to a different conclusion on construction.

   [40](1927) 39 CLR 570.

1. The Melbourne Harbour Trust Commissioners case was referred to relatively recently in Thiess Pty Ltd v ConnectEast Nominee Company Pty Ltd[41] where Byrne J said:[42]

“A further argument was presented based upon the old House of Lords decision in Kelantan Government v Duff Development Co[43] which has been applied in this country by the High Court in Melbourne Harbour Trust Commissioners v Hancock.[44] Pursuant to this principle, in a case such as the present, the award of an arbitrator upon a question as to the construction of a contract which question is specifically referred for consideration, will not be set aside for error of law on its face only because the court would have come to a different conclusion. The party impugning the award must show that the arbitrator proceeded illegally.[45] The examples of illegality offered in the Kelantan case were that the arbitrator made the decision upon inadmissible evidence or upon erroneous principle of construction.[46] It will be apparent that there is no such illegality here. If the Kelantan principle applies this is a further reason for rejecting the proposed appeal. It is, however, not necessary that I consider this point further and, in particular, the question as to the continuing application of the principle to arbitration law in Australia given the passage of the uniform Commercial Arbitration Acts.”

[41][2008] VSC 287.

[42][2008] VSC 287 at [21].

[43][1923] AC 395.

[44](1927) 39 CLR 570.

[45]See also NSW Rutile Mining Co Pty Ltd v Hartford Fire Insurance Co (1972) 46 ALJR 391 at 392, per Gibbs J.

[46]Kelantan Government v Duff Development Co [1923] AC 395 at 409, per Viscount Cave LC.

1. The approach of the High Court in The Melbourne Harbour Trust Commissioners case appears from the joint judgment of Knox CJ and Gavan Duffy J:[47]

   [47](1927) 39 CLR 570 at 580-1; and see NSW Rutile Mining Company Pty Ltd v Hartford Fire Insurance Company (1972) 46 ALJR 391 at 392 where Gibbs J (as he then was) referred, with approval, to the remarks of Viscount Cave LC in Kelantan Government v Duff Development Co Ltd [1923] AC 395 at 409.

“The principal ground of attack on the validity of the award was that the decision of the arbitrator that the omission in question was not such as could properly be made under the contract was wrong in law. It was argued for the appellants that it appeared from the reasons that the arbitrator in arriving at this conclusion had wrongly construed clause 13 of the contract and had in doing so proceeded on wrong principles of construction. This, it was said, amounted to error in law appearing on the face of the award and afforded sufficient ground for setting it aside. If we assume this to be so, the first question to be considered is whether the decision of the arbitrator that the omission was not such as could properly be made under the contract is subject to review. In Kelantan Government v Duff Development Co,[48] it was decided by the House of Lords that where a question of construction is specifically referred, or is the very question referred, to arbitration, the decision of the arbitrator on that point cannot be set aside because the court would have come to a different conclusion unless it appears on the face of the award that the arbitrator has acted illegally, eg, by deciding on evidence which is inadmissible or on principles of construction which the law does not countenance. In that case Viscount Cave LC, with whose reasoning Lord Shaw of Dunfermline agreed, said[49] —

‘The reference, therefore, was a reference as to construction. If this be so, I think it follows that, unless it appears on the face of the award that the arbitrator has proceeded on principles which were wrong in law, his conclusions as to the construction of the deed must be accepted. No doubt an award may be set aside for an error of law appearing on the face of it; and no doubt a question of construction is (generally speaking) a question of law. But where a question of construction is the very thing referred for arbitration, then the decision of the arbitrator upon that point cannot be set aside by the Court only because the Court would itself have come to a different conclusion. If it appears by the award that the arbitrator has proceeded illegally — for instance, that he has decided on evidence which in law was not admissible or on principles of construction which the law does not countenance, then there is error in law which may be ground for setting aside the award; but the mere dissent of the Court from the arbitrator’s conclusion on construction is not enough for that purpose’.”

The other members of the High Court, Isaacs and Starke JJ, approached the issue in the same way.  In so doing, Isaacs J added, with reference to the Kelantan case:[50]

“… I think that Lord Trevethin, in the Kelantan Case,[51] collected in a short passage the broad sense of the matter as found in the cases from Hodgkinson v Fernie[52] to the Kelantan Case. His Lordship said that the arbitrator’s decision cannot be questioned, though the law be bad on the face of the award, only ‘when the submission is of a specific question of law, and is such that it can fairly be construed to show that the parties intended to give up their rights to the King’s Courts, and in lieu thereof to submit that question to the decision of a tribunal of their own’.”

[48][1923] AC 395.

[49][1923] AC 395, at p 409.

[50](1927) 39 CLR 570 at 585.

[51][1923] AC 395 at p 421.

[52](1857) 3 CB (NS) 189.

1. The House of Lords decision in Kelantan Government v Duff Development Co Ltd,[53] which was applied by the High Court in The Melbourne Harbour Trust Commissioners v Hancock,[54] was, as the Lord Chancellor Viscount Cave noted, fully supported by English authorities, some of which were then of long standing.[55]  In my view, this, together with the decisions in Kelantan and The Melbourne Harbour Trust Commissioners, is significant when consideration is given to the possible effect of the provisions of the Act on the current authority of those decisions.[56]  Additionally, the language used in the speeches of their Lordships in Kelantan and the reference to the need for the party seeking to challenge the award to show error “on the face of the award” is consistent with the relevant provisions of the Act.[57]

   [53][1923] AC 395.

   [54](1927) 39 CLR 570.

   [55]See [1923] AC 395 at 410.

   [56]Noting that this question was left open by Byrne J in Thiess Pty Ltd v ConnectEast Nominee Company Pty Ltd [2008] VSC 287 at [21]; see above, paragraph 21.

   [57][1923] AC 395 at 409 (Viscount Cave LJ, with whom Lords Dunfemline and Sumner agreed), at 416 (Lord Parmoor) and at 421 (Lord Trevethin).

1. As has been discussed, the Act, and the uniform commercial arbitration legislation generally, marked a very significant departure from the earlier “regime” of intensive court supervision and court intervention, particularly through the case stated procedure.[58]  In this context, it is, in my opinion, particularly significant that the Kelantan and The Melbourne Harbour Trust Commissioners cases were decided in the pre-Act environment where the case stated procedure prevailed.[59]  In spite of the then prevailing regime of close court supervision and intervention in arbitration,[60] the House of Lords and the High Court gave pre-eminence to the principle of party autonomy, as now described, in circumstances where parties had referred a question of construction of a document to arbitration. In my opinion, the force of these authorities is strengthened dramatically by the provisions of the Act and the approach of the uniform commercial arbitration legislation.

   [58]See above, paragraphs 13 to 17.

   [59]See above, paragraphs 15 and 16.

   [60]That is, the case stated procedure which, in Victoria, was then provided for in s 19 of the Arbitration Act 1915 (Vic), as follows:

   “19.  Any referee arbitrator or umpire may at any stage of the proceedings under a reference and shall if so directed by the Court  or a Judge state in the form of a special case for the opinion of the Court any question of law arising in the course of the reference.”

1. More particularly, I am of the opinion that the Kelantan and The Melbourne Harbour Trust Commissioners decisions should be treated as informing the concept of “manifest error of law on the face of the award”, as applied in s 38(5)(b)(i) of the Act. In other words, where a question of construction of a document is referred to arbitration, there is no manifest error of law on the face of the award for the purposes of s 38(5)(b)(i) of the Act merely because the court would or may have come to a different conclusion on the question of construction.  The position is otherwise when it is apparent “on the face of the award” that the arbitrator has acted contrary to law in, for example, applying wrong principles of construction, applying correct principles wrongly or relying upon evidence which is not properly admissible for the purposes of construction.[61]  In these circumstances it might be said, in the language of Viscount Cave in the Kelantan case, that the arbitrator has acted “illegally”.[62] In my opinion, this approach is also entirely consistent with the authorities already considered in the meaning of the expression “manifest error on the face of the award” as used in s 38(5)(b)(i) of the Act.[63]

   [61]Obvious instances of the latter would be the admission of evidence of the subjective intent of parties, contrary to the principles enunciated in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 or the admission of evidence of subsequent conduct, contrary to the position in FAI Traders Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343.

   [62]See [1923] AC 395 at p 409 (the passage set out in the judgment of Knox CJ and Gavan Duffy J in The Melbourne Harbour Trust Commissioners case (1927) 39 CLR 570 at 581, which is set out, above, at paragraph 22).

   [63]See above, paragraphs 18 and 19.

Misconduct

1. Section 42 of the Act empowers the Court to intervene in situations of misconduct by the arbitrator or where the arbitrator has misconducted the proceedings. The critical provisions are contained in s 42(1), as follows:

“42. Power to set aside award

(1) Where-

(a)  there has been misconduct on the part of an arbitrator or umpire or an arbitrator or umpire has misconducted the proceedings; or

(b)  the arbitration or award has been improperly procured-

the Court may, on the application of a party to the arbitration agreement, set the award aside either wholly or in part.”

“Misconduct” is defined in s 4(1) of the Act as including “… corruption, fraud, partiality, bias and a breach of the rules of natural justice”.

1. Section 42(2) enables the Court to set aside an award in part where the arbitrator has misconducted the proceedings by making an award in respect of a matter not referred to arbitration. Any money made payable by the award may, on the order of the Court, be paid into court or otherwise secured pending determination of any application under s 42.[64]

   [64]See s 42(3).

1. It is clear from the authorities that “misconduct” for the purposes of these provisions does not necessarily involve personal misconduct.[65]  In The Melbourne Harbour Trust Commissioners v Hancock,[66] Isaacs J made this clear:[67]

“The last question is whether there has been what is called "misconduct" on the part of the arbitrator. The word is here used only in its technical and often misleading sense. No one suggests, or could suggest, the smallest deviation from the strict path of honour. But the word ‘misconduct’ as employed in this connection includes even a mistake in the procedure which has or may have unjustly prejudiced a party”.

The failure to deal with all matters referred for arbitration or the dealing with matters not referred to arbitration is likely to amount to misconduct for the purposes of s 42, subject to the particular circumstances.[68]

[65]See Williams v Wallis and Cox [1914] 2 KB 478 at 484 (Lush J); The Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570; and Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275 at [51] to [67] (Dodds-Streeton J).

[66](1927) 39 CLR 570.

[67](1927) 39 CLR 570 at 587-88.

[68]See Interbulk Ltd v Aiden Shipping Co Ltd (“The Vimeira”) [1984] 2 Lloyd’s Rep 66; and see Anaconda Operations Pty Ltd v Fluor Australia Ltd [2003] VSC 275.

1. More recently, in Oil Basins Ltd v BHP Billiton Ltd,[69] the Court of Appeal considered the nature of “misconduct” for the purpose of s 42 of the Act:[70]

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

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

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

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

[69](2007) 18 VR 346.

[70](2007) 18 VR 346 at 373-4 (Buchanan, Nettle and Dodds-Streeton JJA).

[71]Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 at 587-8 per Isaacs J; Gas & Fuel Corporation of Victoria v Wood Hall Ltd (1978) VR 385 at 391 per Marks J.

[72][1914] 2 KB 478 at 484 per Lush J and at 485 per Atkin J, to which the judge referred.

[73]See also Melbourne Harbour Trust Commissioners v Hancock at 588 per Isaacs J: a mistake in procedure which has or may have unjustly prejudiced a party; and Van Dongen v Cooper [1967] WAR 143 at 146 per Virtue J: “no reflection on the integrity of the arbitrator.”

[74]See Jacobs, Commercial Arbitration Law and Practice, Vol 1B (at Update 74), at [40.780] and [40.798].

[75]Unreported, NSW Supreme Court, Common Law Division, Rolfe J, 17 December 1996.

[76]See, for example, Pettit v Dunkley[1971] 1 NSWLR 376; Dennis Willcox Pty Ltd v Federal Commissioner of Taxation(1988) 79 ALR 267 at 276-7 per Jenkinson J with whom Woodward and Foster JJ agreed; Kalwy v Secretary, Department of Social Security (No 2)(1993) 32 ALD 451 at 458; Warley Pty Ltd v Adco Constructions Pty Ltd (1992) 8 BCL 300 and Chadwick Industries Pty Ltd v Costain Australia Ltd (unreported, NSW Supreme Court, Common Law Division, Smart J, 15 February 1988), to which the judge referred.

[77]King v Thomas McKenna Ltd [1991] 2 QB 480 at 491 per Lord Donaldson MR.

[78][1964] 2 QB 467 at 478.

[79][2002] WASC 112 at [40]–[43].

[80]Peter Shwarz (Overseas) Pty Ltd v Morton (2004) 20 BCL 133 at 140, [29] per Byrne J; compare Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd[2003] VSC 275 at [65].

[81][1978] VR 385 at 392.

[82][1991] 2 QB 480 at 489; Bovis Lend Lease Pty Ltd v WGE Pty Ltd[2002] NSWSC 939 at [31].

[83]Allgold Foods Pty Ltd v Conagra International (Aust) Pty Ltd (unreported, NSW Supreme Court, Giles J, 11 July 1990); Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd(1991) 22 NSWLR 653 at 670.

1. This passage from the judgment of the Court of Appeal in the Oil Basins case indicates that the provisions of s 42 do not provide something in the nature of a “back door” mechanism to enable appeals on the merits of arbitral awards – on questions of law or otherwise – because not every error of law by an arbitrator will amount to misconduct and not every instance of misconduct will involve an error of law, thus the two concepts do not necessarily coincide.[84]  This is emphasised in the discussion of the decision of Garms v Telstra Group Ltd[85] by Dodds-Streeton J in Anaconda Operations Pty Ltd v Fluor Australia Ltd:[86]

   [84]See (2007) 18 VR 346 at 373-4 (Buchanan, Nettle and Dodds-Streeton JJA), paragraph 78 (which is set out, above, at paragraph 29).

   [85][1998] VSC 40.

   [86][2003] VSC 275 at [65]-[67] (Dodds-Streeton J).

“In Garms v Telstra Corp Ltd[87] Harper J observed that parties agreeing to an arbitration cannot be taken to have agreed to be bound by ‘an award made by an arbitrator who has exceeded his or her powers or has otherwise acted unlawfully, or has failed to accord natural justice to the parties’. It does not follow, however, that an arbitrator who has come to a mistaken conclusion has misconducted himself or herself in any of these ways. In short, the word ‘misconduct’ does not encompass mere mistake. There must be ‘some real dereliction of duty on the part of the arbitrator.’ Holland Stolte Pty Ltd v Murbay Pty Ltd (1991) 105 FLR 304 at 309 per Miles CJ.[88]

[87][1998] VSC 40 (21 August 1998).

[88]Ibid, at 9.

Harper J also reiterated the comment of Cole J in Tony J Boulos Pty Ltd v Doug Reid Pty Ltd[89] where his Honour noted:

[89]BC9102985, unreported, Supreme Court of New South Wales, 16 August 1991.

‘It should be very clear from the commencement that the power under s 42 to set aside [an] award is not to be used as an endeavour or means to overcome the restrictive rights of appeal.^’[90]

[90]Ibid, at 3.

Harper J further observed:

‘That rights of appeal were intended to be restricted was emphasised by the Minister for Industry, Commerce and Technology (Mr Cathie) in his Second Reading Speech when the Commercial Arbitration Bill was debated in Parliament in September 1984 (Hansard, vol 375, Legislative Assembly, 13 September 1984, p434). The Minister then said:

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

This theme was echoed in the Attorney-General’s second Reading Speech in the debate on the Commercial Arbitration (Amendment) Bill in March 1993 (Hansard, Vol 410, Legislative Assembly, 11 March 1993, p171-p172). Mrs Wade noted that clause 16 of the Bill inserted a new s 38(5) into the Commercial Arbitration Act. This was intended to restrict judicial review of awards by the Supreme Court. The Attorney continued:

‘The reasons for restricting judicial review of awards by the Supreme Court are: (a) to provide for uniformity across Australia; and (b) if arbitration is not to be viewed as a dry run before litigation it was thought that more restrictive criteria are desirable. The underlying policy is that in most cases the parties should have to accept as final the decision of the arbitrator they have chosen to decide the matter in the first place’.”[91]”

[91][1998] VSC 40 (21 August 1998) at 26.

1. In the present circumstances, it follows that where there is no basis for granting leave for an appeal under s 38(5)(b)(i), it is not open to a party to simply resort to an application under s 42 to achieve this result. Something more must be established for an application under these latter provisions to succeed.

The Award

1. The Arbitrator identified three principal issues for determination, as follows:[92]

   [92]Award, p 1.

“Sky proposes to launch two channels in April 2010:

·‘Sky Racing 2’, broadcasting primarily back-to-back thoroughbred, harness and greyhound races from Australia and overseas as well as some sporting, sports betting and news coverage; and

·‘Sky Racing World’, broadcasting thoroughbred racing 24 hours a day, 12 from Australia, New Zealand, Hong Kong and Singapore and 12 from the United Kingdom, Europe and South Africa.

The parties are in dispute as to whether the rights conferred under Schedule 2 clauses 1(a) and (4)(a) and Schedule 3 clauses 1(a) and 4 of the MOU include the right to broadcast the proposed content on Sky Racing 2 and Sky Racing World (the New Channels Issue).

There is a second issue as to whether ‘audio-visual coverage of … races’ in the MOU is confined, as TVN contends, to the period between the opening of the barrier stalls and the last horse passing the finishing post, or alternatively some small extension of that period, or extends, as the Sky Parties contend, to the period commencing with the horses entering the mounting yard and concludes with the weigh ins and the official declaration of the result (the Race Coverage Issue).

There is a third issue as to whether the right to broadcast ‘racecourse feed archival material’ under Schedule 2 clause 4(a) and Schedule 3 clause 4 includes, as the Sky Parties contend, replayed extracts of TVN Content on the same day as the race the subject of a live broadcast.  Alternatively, the Sky Parties contend that Sky can broadcast same day replays under its primary right to live coverage (the Replay Issue).”

1. The Arbitrator concluded the Award with the following declarations, each of which was in favour of the Sky Parties:[93]

   [93]Award, p 11.

“Declare that:

1.  Sky’s rights to broadcast TVN Content as conferred by Schedule 2 clauses 1(a) and 4(a) and Schedule 3 clauses 1(a) and 4 of the MOU

a.may be exercised in connection with any racing service provided by Sky over pay TV or commercial subscription television, including the proposed Sky Racing 2 service and Sky Racing World service,

b. are not limited to the channels operated by Sky at the date of the MOU, and

c. are not limited to channels showing ‘wall to wall’ racing

d. include broadcast on a ‘thoroughbred showcase’ channel.

2.  For the purpose of Sky’s said rights a ‘race’ commences from the time the horse has entered the mounting yard and concludes with the official declaration of a winner and placegetters.

3.  For the purposes of Schedule 2 clause 4(a) and Schedule 3 clause 4 of the MOU ‘racecourse feed archival material’ extends to any footage which is not live.”

1. The Arbitrator provided a brief background to the MOU with particular reference to the problems of “split vision”.  Split vision was said to be unpopular with punters and had a serious adverse effect on betting turnover which resulted in decreased funding to racing clubs and loss of patronage to pubs and clubs.  The Arbitrator noted:[94]

“The TVN Channel broadcast only races at thoroughbred race meetings from the courses of TVN Shareholders and Darwin and Alice Springs clubs.  The channel also broadcast content relating to all aspects of thoroughbred racing such as interviews with breeders, owners, trainers and jockeys.  This kind of content (that is the actual races plus interviews and other thoroughbred-related background material) is referred to in the industry as ‘thoroughbred showcase’.

Sky Channel, on the other hand, broadcast thoroughbred races from elsewhere in Australia and internationally, along with harness and greyhound racing (the three codes).  Sky’s broadcasts took the form of what is called ‘wall to wall’ coverage; when one race finishes the channel switches to another race on another course.  Every day in Australia and New Zealand there is a race, of one code or another, every five to seven minutes.  All the while detailed wagering information is broadcast.”

The Arbitrator also noted, briefly, the history of steps taken to overcome the problem of “split vision” and the dealings that the parties had with the Australian Competition and Consumer Commission (“ACCC”) which resulted in the replacement of, what was termed, their Heads of Agreement with the MOU to satisfy the requirements of the ACCC.

[94]Award, p 2.

1. In these respects, the Arbitrator noted:[95]

“In an attempt to overcome the problems of split vision the parties on 15 May 2006 entered into an agreement called the Heads of Agreement (HOA) which was subject to approval by the Australian Competition and Consumer Commission (ACCC).  The ACCC however insisted on a formal application for authorisation under the Trade Practices Act1974 (Cth). Accordingly, the parties negotiated the MOU, which they executed on 1 February 2007.

For the purposes of authorisation under Pt VII of the Trade Practices Act the parties made a joint written submission (the ACCC Submission) to the ACCC dated 15 February 2007.  The personnel on both sides who were responsible for the MOU commenced joint preparation of the ACCC Submission well before the MOU was executed.  The MOU was conditional on the ACCC granting authorisation: MOU clause 3.1.”

[95]Award, p 2.

1. The Arbitrator then turned to consider the provisions of the MOU which gave rise to the disputes the subject of the arbitration.[96]  In particular, reference was made to the provisions of Schedule 2 and 3 of the MOU which grant a TVN Pay TV Licence to Sky and a TVN Commercial Licence to Sky, respectively.  The Arbitrator also highlighted differences between the two Schedules which he regarded as relevant.  The Award also contains a brief description of other provisions of the MOU which the Arbitrator regarded as relevant.[97]

   [96]Award, pp 2 and 3.

   [97]Award, pp 4 and 5.

1. Having referred to the provisions of the MOU giving rise to the present disputes and other relevant provisions of the MOU, the Arbitrator considered the approach to contract construction with respect to the MOU. In view of the importance of the Arbitrator’s approach in this respect, both for the purposes of s 38(5) and s 42 of the Act, I set out the Arbitrator’s statement of his approach to construction:[98]

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

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

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

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

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

[98]Award, pp 5 and 6.

1. Neither TVN nor the Sky parties submitted that the Arbitrator’s statement of the law with respect to the principles of construction to be applied with respect to the MOU were erroneous. TVN submitted that the statement was brief, probably incomplete, and did not focus on certain aspects of particular pertinence in the case, but conceded that there was no detectable error in the statement.  In any event, I find no error in the statement of the law in this respect.[99]  Issues were, however, raised by TVN in relation to the application of the Arbitrator’s stated approach to contract construction with respect to the MOU as applied to particular issues considered by the Arbitrator.

   [99]It is a statement consistent with current authority and commentaries: see, for example, Carter, Peden and Tolhurst, Contract Law in Australia (5^th ed, Lexis Nexus Butterworths, 2007), particular at [12-13] to [12-15]; Lewison, The Interpretation of Contracts (4^th ed, Sweet and Maxwell, 2007) at paragraph 314 (see also the First Supplement to the 4^th Edition, paragraph 3.14); and see Spigelman, “From Text to Context: Contemporary Contractual Interpretation”, (2007) 81 ALJ 322.

1. In relation to the New Channels issue, the Arbitrator observed that none of the licences granted by TVN under the MOU limited Sky’s use of the TVN Content to broadcasting on the channels operated by Sky at the date of the MOU.  The Arbitrator also observed that there was no mention at all in the MOU of the identity or the content of the channels over which broadcasts by Sky may or must occur.  The Arbitrator then considered the definition of “Sky Channel” in sub-clause 1.1 of the MOU, noting that the definition uses the plural, is affirmatively defined in broad terms, indicates non exhaustivity, refers to “from time to time” as indicating its application as the occasion may arise and contains only one exclusion, namely the TVN Channel.  Consequently, the Arbitrator said:[100]

“The result is that an indefinite number of channels, both present and future, is brought within the definition of ‘Sky Channel’.  By contrast, ‘TVN Channel’ is defined in clause 1.1 of the MOU in its restricted numerical aspect as ‘the thoroughbred racing showcase channel distributed by TVN from time to time’.

Further, one of the surrounding circumstances at the date of the MOU was that Sky was operating more than one channel.

If the parties have intended to restrict Sky’s use of its rights to the channel operated by it at the time of the MOU, they could have said so – as they did in other contexts: see clause 4.1(a)(1) and (6) of the Operative Part.”

[100]Award, p 7.

1. The Arbitrator also considered and rejected submissions by TVN that regard should be had to the versions of the Heads of Agreement, which preceded the MOU.  The Arbitrator, referring to submissions with respect to the interpretation of the MOU by reference to the provisions of the Heads of Agreement said:[101]

“This explanation involves impermissible delving into the pre-contractual negotiations between the parties.  Moreover, in the entire agreement clause the parties expressly excluded, among other things, prior understandings and agreements.”

In my opinion, the task of the Arbitrator was clearly to construe the terms of the MOU according to the proper principles of construction which the Arbitrator stated in the Award.[102]  The Arbitrator was, in my view, quite correct in giving pre-eminence to the provisions of the MOU construed according to its terms over and above the provisions of the Heads of Agreement which had been entered into prior to the MOU; and, as appears from the Award, prior to an application to the ACCC which was called upon to provide an authorisation under the Trade Practices Act 1974 (Cth) with respect to the Heads of Agreement. As appears from sub-clause 3.1 and paragraph 3 of the Background to the MOU, the MOU was conditional upon the ACCC granting authorisation under the Trade Practices Act and superseded the Heads of Agreement.  The “entire agreement” clause contained in the MOU is also a matter to which reference was made.

[101]Award, p 7.

[102]See above, paragraph 37.

1. TVN submitted that the Arbitrator ought to have taken into account the ACCC Submission as part of the surrounding circumstances for the purpose of construing the MOU.  The Arbitrator clearly considered the extent to which regard ought to be had to the ACCC Submission consistently with the proper approach to the construction of the MOU.  In this respect, the Arbitrator said:[103]

   [103]Award, p 8.

“The ACCC Submission might have been part of the surrounding circumstances known to the parties, but it was a document prepared for the purpose of persuading the ACCC that the MOU would result in a benefit to the public which would outweigh the detriment to the public caused by the lessening of competition: Trade Practices Act, s 90(6). This was quite a different purpose from that of the MOU, which was to set out, with legally binding effect, the rights and liabilities of the parties inter se. Anyway, it is hard to see that restricting Sky to one or two channels, or to particular content, would add weight to a public benefit argument. The more channels Sky ran, and the more varied content it provided on those channels, the greater would be the range of choice for consumers and the less anti-competitive the MOU would be.”

Continuing, the Arbitrator made reference to a submission on behalf of TVN by Mr Anderson SC, as follows:[104]

[104]Award, p 8.

“Mr Anderson submitted:

Any construction of (the MOU) which would allow Sky to use the TVN feed … to produce a thoroughbred ‘showcase’ channel in direct competition with TVN would be in tension with the essential structure of the MOU.’

On the contrary, since the MOU would need authorisation by the ACCC, which would involve demonstrating public benefit with as little anti-competitive effect as possible, the essential structure would need to be exactly the opposite.”

The Arbitrator’s reasoning clearly indicates his views as to the limits of the extent to which the ACCC Submission could be said to be relevant as part of the surrounding circumstances or factual matrix known to the parties to the MOU.  In my opinion, the Award discloses no manifest error of law with respect to the treatment of the ACCC Submission and the surrounding circumstances or factual matrix to the MOU for the purposes of construing its provisions.  More generally, I am also of the opinion that the Award discloses no manifest error of law with respect to the New Channels issue.

1. In relation to the Race Coverage issue, the Arbitrator noted that TVN’s case involved a number of alternatives as to the period covered by the “races” for the purposes of the licence for the broadcast of audio-visual coverage conferred by the MOU.  Further, the Arbitrator commented that:  “It would seem TVN’s main concern is that Sky’s rights do not extend to showing the horses when they are in the mounting yard before entering the race track”.  The Arbitrator continued:[105]

“In some contexts no doubt ‘race’ would connote no more than the time or distance from start to finish.  Thus if one said: ‘The race is over 1,000 metres’, the term ‘race’ would be a reference to the period from start to finish over that distance, and nothing before or after.  However, in the context of television broadcasting, more is necessarily involved.  Nobody would suggest that a right to broadcast a Test only commences when the first ball is bowled and does not continue beyond stumps and that, for example, the inspection of the pitch or the tossing of the coin cannot be included.

The hypothetical reasonable observer would regard the parade of the horses in the mounting yard as part and parcel of the race.  The mounting yard is where the competing horses are first brought together.  The true aficionado can compare the condition of the horses.  The punter is reminded that the time to put on a bet is drawing to a close.”

The Arbitrator then considered the textual support provided by a number of provisions of the MOU, which he specifically identified.

[105]Award, p 9.

1. In my opinion, the Award discloses no manifest error with respect to the Arbitrator’s treatment of the Race Coverage issue.  Some criticism was made of the reference to the “hypothetical reasonable observer” in the passage of the Award which is set out above.  Reference was made to evidence given before the Arbitrator by Mr Parnell on behalf of the Sky parties and Mr Sweeney on behalf of TVN which, it was said, respectively do not support the Arbitrator’s findings.  In my opinion, the reference to the “hypothetical reasonable observer” is merely a shorthand reference to the principles of construction which the Arbitrator set out in the Award[106] and applied to the task of construing the provisions of the MOU.  Consequently, where the Arbitrator’s findings or observations with respect to the parade of horses in the mounting yard are not based on his interpretation of the language of the MOU, they were made taking into account the evidence heard by him during the course of the arbitration hearing.  It is not necessary in the circumstances of this arbitration to include in the Award an elaborate discussion and assessment of evidence of extrinsic circumstances given with respect to matters in a narrow compass.

   [106]Award, p 5-6.

1. In relation to the Replay issue, the Arbitrator noted that: “TVN’s case is that the phrase ‘TVN Shareholder racecourse archival material’ means any recording of the TVN feed of a race held on any previous day at a TVN Shareholder racecourse but not on the day of the race itself”.  To this, the Arbitrator said that the language of the MOU provided no support “for such an arbitrary demarcation”.  Consideration was then given to the Macquarie Dictionary definition of “archives” which, the Arbitrator said, speaks of the “noncurrent documents or records relating to the activities, rights, claims, treaties, constitutions, etc of a family, corporation, community or nation”.  The Arbitrator found, in the absence of TVN being able to point to any language in the MOU to support its submission, that the MOU “is simply drawing a distinction between broadcast material which is live, that is to say, current, and that which is recorded”.  The Arbitrator also said that the fact that something is archival does not mean that it necessarily needs to be “ancient”.  He said, “What is important is that it is not current, or live.  It is something to be kept and replayed when necessary”.

1. In the course of the application, TVN submitted that the Arbitrator’s construction of the MOU provisions with respect to the Replay issue were not sustainable as the licence fees for live and archival rights were different.  The Arbitrator clearly considered this issue, as he said in relation to this point:[107]

“Given the language of the MOU, I do not find any assistance in TVN’s argument based on the relative cheapness of the payment for archival rights.  Mr Anderson said that because live rights are given far greater value than archival rights the latter are not intended to be ‘merely live’ rights.  But, as Mr Brereton pointed out, Sky did not buy the rights separately.  Sky cannot seek a refund of the amount paid for live rights and seek merely to exploit its archival rights.  In any case, it is understandable that once Sky has acquired the vital live rights the archival rights would be seen as a much less value.  Indeed, under Schedule 1 clause 3 Sky grants archival rights to TVN for nothing.”

[107]Award, p 10.

1. Additionally, the Arbitrator rejected the alternative argument advanced by Sky parties “that replays very soon after the live race fall within their live rights (assuming, without deciding, that this claim is within the ambit of the arbitration).”[108]

   [108]Award, p 11.

1. In my view, one cannot approach consideration of the Arbitrator’s construction of the MOU provisions with respect to the Replay issue with any preconceived idea as to the “historical” nature of archive material.  The process of construction is governed, primarily, by the language which the parties have used in the MOU.  In my opinion, the absence of any basis in the language of the MOU for a temporal demarcation of the type advanced by TVN lends support for an interpretation such as that given by the Arbitrator to the provisions.  In my opinion, there is no manifest error of law on the face of the Award with respect to the Replay issue.

1. I accept the submissions by the Sky parties that there was no suggestion by TVN of confusion or equivocation or inconsistency which affects the reasoning contained in the Award. In my view, it is correct to say that TVN essentially disagrees with the Arbitrator’s conclusions and seeks to establish error by having the Court reconsider the whole of the arbitration process, including the detail of the submissions, and the evidence led on behalf of, the parties. Doing so would be embarking on a fresh process of construction of the provisions of the MOU. Apart from submitting that this is impermissible for the purposes of an application for leave to appeal under s 38(5)(b)(i) of the Act, the Sky parties also submit that this process involves, on TVN’s part, the advancing of a different case with respect to the construction of the relevant provisions of the MOU and the manner in which extrinsic evidence or the factual matrix should be treated.

1. In my opinion, the issues for determination as specified in clause 2 of the Deed of Arbitration and the documents to which reference is made make it clear that this arbitration concerns a reference of a question of construction of a document to an arbitrator, and in this case a person well qualified for such a task.  Consequently, on the basis of the authorities to which reference has been made, including The Melbourne Harbour Trust Commissioners v Hancock,[109] it is entirely inappropriate for this Court, in effect, to re-open the whole arbitration for the purpose of forming its own view as to the proper construction of the relevant provisions of the MOU and, on that basis, deciding whether the Arbitrator has made an error of law on the face of the Award. As this process would be inappropriate and is not open, I am of the opinion, for the reasons indicated, that the Award does not disclose any manifest error on its face with respect to the construction of the relevant provisions of the MOU and, consequently, it would not be appropriate to grant leave to appeal under s 38(5) of the Act.

   [109](1927) 39 CLR 570; and see above, paragraphs 20 to 25.

Reasons

1. It was submitted on behalf of TVN that the Award does not contain adequate reasons as required by s 29(1)(c) of the Act which is, in itself, an error of law which would justify leave to appeal under s 38(5) of the Act. It was common ground that a failure to provide adequate reasons may constitute an error of law for the purposes of these provisions.[110]

   [110]See Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346; Housing Commission of New South Wales v Tatmar Pastoral Company Pty Ltd [1983] 3 NSWLR 378; and Saulmezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247; and see Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57.

1. For the reasons indicated with respect to the application to set aside the Award on the basis of misconduct within the meaning of s 42 of the Act, I am of the opinion that the reasons provided by the Arbitrator in the Award are adequate in all the circumstances and, consequently, there was no manifest error of law on the basis of any failure to provide reasons.[111]

   [111]See above, paragraphs 26 to 31 and, below, paragraphs 52 to 61.

Conduct of the Arbitrator

1. The TVN application to set aside the Award on the basis of misconduct within the meaning of s 42 of the Act substantially relied upon an alleged failure, under s 29(1)(c) of the Act, by the Arbitrator to give adequate reasons in the Award. To the extent, if at all, that TVN put as a separate ground under s 42 that the Arbitrator failed to adequately consider and address a substantial body of evidence and submissions, for the reasons I have set out there was no such failure established for the purposes of these proceedings.[112] Having regard to the nature of these proceedings and the arbitration itself, it is no more open to a party challenging the award to, in effect, re-open the arbitration for the purposes of an application under s 42 than it would have been for an application under s 38(5)(b)(i).[113]

   [112]See above, paragraphs 32 to 49 and, below, paragraph 61.

   [113]See above, paragraph 48.

1. The position of the Sky parties was that the reasons provided by the Arbitrator were adequate in the circumstances of an arbitration concerned with a simple construction suit where little evidence was adduced and extremely limited discovery sought.  TVN, in its outline of submissions, suggests that there was “substantial oral argument” and that “lengthy oral submissions” were made during the arbitration.[114] This is, however, not supported by the duration of the arbitration, nor by the transcript or the content or tone of the Award. It is common ground that a failure to include reasons in an award can, in certain circumstances, constitute both misconduct for the purposes of s 42, albeit technical misconduct, as well as an error of law.[115]

   [114]See paragraphs 14 and 44 of the TVN Outline of Submissions.

   [115]See Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346; and Warley Pty Ltd v Adco Constructions Pty Ltd (1992) 8 BCL 300.

1. In my opinion, it is clear from the authorities that a principle of proportionality applies with respect to the nature and extent of reasons which an arbitrator is obliged to provide in an arbitration award.  An example of a case in which very extensive and comprehensive reasons were required is Oil Basins Ltd v BHP Billiton Ltd.[116]  This was, however, an arbitration that involved 15 hearing days, an arbitral tribunal of three, conflicting and substantive expert evidence and substantial submissions.  The present arbitration is, on the other hand, an arbitration confined with respect to the proper construction of the MOU.  Further, as indicated, the Deed of Arbitration requires that the arbitration be conducted in accordance with the overriding objective referred to in that Deed, adopting procedures suitable to the determination of the type of issues involved and at the same time avoiding unnecessary delay and expense so as to provide a fair, expeditious and cost effective process for the determination of these issues.[117]

   [116](2007) 18 VR 346 at 367, [57] (Buchanan, Nettle and Dodds-Streeton JJA).

   [117]See above, paragraphs 4 to 7.

1. It is well established that the reasons need show only that the arbitrator grasped the main contentions advanced by the parties, and communicated to the parties, in broad terms, the reasons for the conclusions reached.[118]  The reasoning process must be exposed so that the reader of the award can understand how and why the conclusion was reached;[119]  It is clear that reasons need not be elaborate or lengthy, provided that these requirements are met.[120]  The decision of the Court of Appeal in Oil Basins Ltd v BHP Billiton Ltd[121] confirms that an arbitrator must address each issue raised for decision within the scope of the arbitration agreement.[122]  However it does not follow that the position outlined on the basis of the authorities to which reference has been made is rendered any different, or that the nature and extent of reasons is not to be fashioned by reference to the nature of the matters in dispute and, proportionately, having regard to the complexity of the issues, the importance, monetary or otherwise, of the arbitration proceedings and the nature of the arbitral proceedings, expeditious or otherwise, as agreed between the parties.

   [118]See UCATT v Brain [1981] IRLR 224 at 228 (Donaldson LJ); and see Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 at 364-8 [50] to [59] (Buchanan, Nettle and Dodds-Streeton JJA); and Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57.

   [119]Davidson v Fish [2008] VSC 32 at [12] (Pagone J); and see Rashid v Minister for Immigration and Citizenship [2007] FCAFC 25 at [18] (Heerey, Stone and Edwards JJ).

   [120]See Stefan v General Medical Council [1999] 1 WLR 1293 at 1304.

   [121](2007) 18 VR 346.

   [122]See (2007) 18 VR 346 at 364 (Buchanan, Nettle and Dodds-Streeton JJA).

1. The importance of proportionality with respect to the nature and extent of reasons required of an arbitrator was made particularly clear by the Court of Appeal in Oil Basins Ltd v BHP Billiton Ltd[123] in the following passage:[124]

“As has been noticed, what is needed to satisfy that requirement will depend upon the particular circumstances of the case.  If a dispute turns on a single short issue of fact, and it is apparent that the arbitrator has been chosen for his or her expertise in the trade or calling with which the dispute is concerned, a court might well not expect anything more than rudimentary identification of the issues, evidence and reasoning from the evidence to the facts and from the facts to the conclusion.[125]  Byrne J captures the point in this dictum in his Honour’s judgment in Schwarz:[126]

In what are often called trade arbitrations, the parties and the Arbitrators are all engaged in a particular trade.  In such an arbitration the reasons may be expressed in the jargon of the trade or they may ignore matters which will be well known to the participants.  Such an award which may appear deficient to an outsider, may nonetheless satisfy the fundamental purpose of the statement of reasons.  It cannot be the case that an award should be drafted only with an eye to informing an appeal court which may be unfamiliar with the trade and its practices.

Contrastingly, however, in complex commercial arbitrations, it may appear that the determination of the dispute demands reasons considerably more rigorous and illuminating than the mere ipse dixit of a ‘look-sniff’[127] trade referee.  And in cases like the present, which involve an intellectual exchange with reasons and analysis advanced on either side, conflicting expert evidence of a significant nature and substantial submissions, the parties to the dispute are almost certain to be left in doubt as to the basis on which an award has been given unless the reasons condescend to an intelligible explanation of why one set of evidence has been preferred over the other; why substantial submissions have been accepted or rejected; and, thus, ultimately, why the arbitrator prefers one case to the other.  Hence, in our view, the reasons in this case should have been of that standard.[128]

[123]{2007] 18 VR 346.

[124]{2007) 18 VE 346 at 367-8.

[125]Lord Mustill and Boyd QC, The Law and Practice of Commercial Arbitration in England, 1^st ed, (1982), p 552.

[126]Peter Schwarz (Overseas) Pty Ltd v Morton [2003] VSC 144 at [35].

[127]Bremer Vulkan Schiffbau and Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909 at 919.

[128]Compare Eckersley v Binnie at 77-8 per Bingham LJ; Archibald v Byron Shire Council (2003) 129 LGERA 311 at 323 per Sheller JA; Jacobs, Commercial Arbitration Law and Practice, Vol 1B, (Update 80), at [28.109].

1. The standard of reasons required of arbitrators in arbitral awards was also considered very recently[129] by the New South Wales Court of Appeal in Gordian Runoff Limited v Westport Insurance Corporation[130].  In this respect Allsop P said:[131]

   [129]So recently that TVN and the Sky Parties were invited to make submissions with respect to the Gordian Runoff appeal; and all parties did so.

   [130][2010] NSWCA 57 (1 April 2010).

   [131][2010] NSWCA 57 at [213] to [222] (with whom Spigelman CJ and Macfarlan JA agreed).

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

214The history of the development of the uniform commercial arbitration legislation in Australia reveals the same compromise on reasons.  A number of States prepared reports on commercial arbitration.  Some suggested that there be no requirement of reasons in aid of finality.  Others suggested reasons should be required.  See generally the discussion in the NSWLRC Report on Commercial Arbitration (LRC 27 1976) at 169-170.  The compromise reached under the auspices of the Standing Committee of Attorneys-General (“SCAG”) that can be seen in the uniform CA Acts was that a statement of reasons was required.  The documents reflecting the reaching of this compromise in SCAG are not publicly available.

215The Privy Council (comprising Lord Nicholls of Birkenhead, Lord Cooke of Thorndon, Lord Clyde, Lord Hutton and Lord Millett) in 2001 in a Turks and Caicos Island appeal, Bay Hotel and Resort Ltd v Cavalier Construction Co Ltd [2001] UKPC 34, expressed the English position as to what is a reasoned award since the 1996 Act as governed by what Donaldson LJ had said in Bremer Handelsgesellschaft mbH v Westzucker GmbH (No 2) [1981] 2 Lloyd’s Rep 130 at 132-133, as follows at [25]:

‘All that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. That is all that is meant by a ‘reasoned award’.

216The underlying difference between arbitration and court litigation should be borne in mind at all times: see in particular the article by Lord Bingham “Reasons and Reasons for Reasons: Differences Between a Court Judgment and an Arbitration Award” op cit.  Though courts and arbitration panels both resolve disputes, they represent fundamentally different mechanisms of doing so.  The court is an arm of the state; its judgment is an act of state authority, subject generally in a common law context to the right of appeal available to parties. The arbitration award is the result of a private consensual mechanism intended to be shorn of the costs, complexities and technicalities often cited (rightly or wrongly, it matters not) as the indicia and disadvantages of curial decision making.

…

220The reasons required are those for making the award.  To the extent that a crisp summary of that is required, I would adopt the statement of principle of Donaldson LJ in Bremer v Westzucker employed by the Privy Council as recently as 2001. That the language in s 29(1)(c) describes at one level what a judge does and is obliged to do does not as a matter of language or logic impose all the obligations upon judicial officers in this respect on to arbitrators.

221The above is not inconsistent with what the High Court (Mason, Wilson, Brennan, Deane and Dawson JJ) said in Askew v Fields[1985] HCA 4; 156 CLR 268 at 270-271 in relation to the Arbitration Act 1902 (NSW), s 12 that ‘arbitrators are bound to decide the issues submitted for their determination’. This is a statement of the requirement to fulfil the contractual task. In doing so, they must comply with s 29(1)(c).

222The above is sufficient to explain why I disagree with the view of the Court in Oil Basins if that conclusion can be taken from the reasons that the legal obligation of an arbitrator to give reasons is to be equated with a judge in the common law system.  It is unnecessary to discuss the particular requirements of individual circumstances other than those obtaining in this case, or the many cases on the adequacy of arbitrators’ reasons in the context of particular facts, such as Transcatalana de Commercio SA v Incobrasa Industrial Commercial Brazileira SA (The ‘Vera’) [1995] 1 Lloyd’s Rep 215; Universal Petroleum Co Ltd v Handels und Transport GmbH [1987] 1 Lloyd’s Rep 517; Ascot Commodities NV v Olam International Ltd [2002] CLC 277; Checkpoint Ltd v Strathclyde Pension Fund[2003] EWCA Civ 84; World Trade Corp Ltd v C Czarnikow Sugar Ltd [2004] EWHC 2332 (Comm); Protech Projects Construction (Pty) Ltd v Al-Kharafi & Sons [2005] 2 Lloyd’s Rep 779; Petroships Pte Ltd v Petec Trading & Investment Corp of Vietnam (The ‘Petro Ranger’) [2001] 2 Lloyd’s Rep 348; Hawk Shipping Ltd v Cron Navigation Ltd [2003] EWHC 1828 (Comm); and Torch Offshore LLC v Cable Shipping Inc [2004] 2 Lloyd’s Rep 446.”

1. The present arbitration is, as indicated, to be distinguished from the very substantial, complex and lengthy arbitration proceeding the subject of the Oil Basins appeal.  Additionally, this is not a case where, as in Oil Basins, the Arbitrator has omitted to deal with an entire and substantial issue, possibly, of critical significance to the arbitration.  In this context I do not take the view that there is any relevant inconsistency for present purposes in the decisions of the Victorian and New South Wales Courts of Appeal in Oil Basins and Gordian Runoff, respectively.[132]

   [132]I am strengthened in this view by the conditional language adopted by Allsop P with respect to the extent of inconsistency between these decisions (see [2010] NSWCA 57 at [222] and [224]).

1. In the present circumstances, I am of the opinion that the Arbitrator rendered carefully considered reasons which identified all the issues in dispute, the context of the dispute, the relevant provisions of the MOU and the proper approach to construction in the case.  The Arbitrator then resolved each issue sequentially and, in my opinion, appropriately in the sense that there was no reasonable doubt as to what the Arbitrator decided in respect of each issue and the reason for his decision on each issue.  It is apparent from the Award that the Arbitrator’s reasoning process is transparent and fairly arguable.

1. TVN in its outline of submissions states that the Award does not refer to the evidence of Mr Sweeney, Mr Cole or Mr Parnell.[133]  In my opinion, the principle of proportionality[134] applies so that it was not necessary in the circumstances of this arbitration to include an elaborate discussion and assessment of the evidence.[135]  Consequently, I find that the Arbitrator’s reasons were not only transparent and fairly arguable, but also dealt with the evidence to the degree necessary in this arbitration.

   [133]TVN’s Outline of Submissions at paragraph 48.

   [134]See above, paragraphs 54 to 56.

   [135]See above, paragraph 43.

1. Consequently, I am of the opinion that the Arbitrator provided adequate reasons in the Award as required by s 29(1)(c) of the Act, on the basis of the authorities to which reference has been made.

Discretion to refuse to grant leave or set aside an award

1. Even if there were a manifest error of law on the face of the Award or misconduct by the Arbitrator, there are still residual discretions available under s 38(4)(b) to refuse leave to appeal, and under s 42(1) to refuse to set aside the award. Given my conclusions it is not necessary to decide whether, in the circumstances of this case, those discretions should be utilised. However, having regard to the nature of the arbitration, the scope of the arbitration as a question of construction, the Overriding Objective in the Deed of Arbitration, the purpose of the Act to favour finality of awards, and my view that TVN, in essence, disagrees with the conclusions of the Arbitrator rather than the law or the reasoning applied, this is an instance where the discretion to refuse leave to appeal or to set aside the Award under ss 38 and 42, respectively, could be reasonably exercised.

Conclusion

1. For these reasons I find: first, that there is no manifest error on the face of the award; secondly, that there has been no misconduct on the part of the Arbitrator; and thirdly, that the Arbitrator has not misconducted the arbitration proceedings. Accordingly, the application for leave to appeal under s 38 of the Act is refused, and the application to set aside the award pursuant to s 42 of the Act is dismissed.

1. I will hear the parties in relation to consequential orders and in relation to the issue of costs.