Villani v Delstrat Pty Ltd - [2002] WASC 112

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: VILLANI & ANOR -v- DELSTRAT PTY LTD & ANOR [2002] WASC 112

CORAM: McKECHNIE J

HEARD: 12 APRIL 2002

DELIVERED : 16 MAY 2002

FILE NO/S: ARB 5 of 2002

MATTER :Commercial Arbitration Act 1985

BETWEEN: ROBERT VILLANI
CARLEEN VILLANI
Applicants
AND
DELSTRAT PTY LTD
First Respondent
ADRIAN GOOLD
Second Respondent

Catchwords:

Commercial arbitration - Application to set aside award - Misconduct by arbitrator - Failure to determine all issues in dispute - Whether such failure amounts to misconduct - Duty to give reasons - Application to remove arbitrator - No moral turpitude or bias

Legislation:

Commercial Arbitration Act 1985 (WA)

Result:

Award set aside
Application to remove arbitrator refused
Matter remitted

Category: A

Representation:

Counsel:

Applicants:     Mr P J Marsh
First Respondent           :     Mr M C Hotchkin
Second Respondent       :     No appearance

Solicitors:

Applicants:     Bruce Havilah & Associates
First Respondent           :     Hotchkin Hanly
Second Respondent       :     Jackson McDonald

Case(s) referred to in judgment(s):

Adams v Great North of Scotland Railway Case (1891) AC 31
Alexander v Bridge of Allan Water Co – 7 Macph (Ct of Sess) 498
Garrett v Nicholson [1999] WASCA 32; (1999) 21 WAR 226
Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd (1978) VR 385
Lloyd v Faraone (1989) WAR 154
Public Service Board of New South Wales v Osmond (1985‑1986) 159 CLR 656
QBE Insurance Ltd v Moltoni Corporation Pty Ltd (2000) 22 WAR 148
Shirley Sloan Pty Ltd v Merril Holdings Pty Ltd t/as Airen Constructions [2000] WASC 99
Thiess Contractors Pty Ltd v Water Corporation of Western Australia, unreported; SCt of WA; Library No 970561; 28 October 1997

Case(s) also cited:

Forsayth NL v Australasian Gold Mines NL (1992) 7 WAR 549
Holland Stolte Pty Ltd v Murbay Pty Ltd (1991) 105 FLR 304
Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255

McKECHNIE J:

Introduction

This application seeks to set aside an award of an arbitrator and remove the arbitrator for misconduct, the misconduct being particularised as follows:
"The arbitrator misconducted the proceedings by failing to decide substantial pleaded issues between the parties."
The application is brought by Mr and Mrs Villani who had contracted with Delstrat Pty Ltd the respondent, trading as Seacrest Homes, to build a residence for them on Lot 322 Samphire Street, Ascot Waters.
A dispute arose between the parties and as a result the matter was referred to arbitration under the provisions of the contract.
The second defendant, Mr Goold, was the arbitrator whose award, delivered on 20 December 2001, is the subject of this application.
Mr Goold has filed a notice that he does not intend to participate in the proceedings and will abide by the decision of the Court.

Background

In 1999 Mr and Mrs Villani wished to have a house built for them.
There were discussions and negotiations with representatives of Seacrest Homes in September 1999. Mr and Mrs…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2002] WASC 112
Decision Date

CaseChat Overview and Summary

In the matter of Villani v Delstrat Pty Ltd, the dispute arose from a contract for the construction of a house, with the primary issue being the failure of the arbitrator to fully determine all necessary issues in controversy between the parties. The case was heard by the Supreme Court of Victoria, which was tasked with reviewing the conduct of the arbitrator and the subsequent award.

The central legal issues before the court were whether the arbitrator had properly exercised his functions under the arbitration agreement, and if the failure to give adequate reasons for the award constituted misconduct warranting the setting aside of the award. The court had to consider whether the procedural unfairness caused by the arbitrator's omissions amounted to a breach of natural justice, and whether the discretion should be exercised to set aside the award despite the lack of moral turpitude on the part of the arbitrator.

The court reasoned that the arbitrator's failure to determine all necessary issues in controversy between the parties constituted misconduct as it left the dispute submitted to arbitration incomplete. Additionally, the omission of reasons that exposed the reasoning process contributed to material procedural unfairness. The court highlighted that although the failure to provide adequate reasons might not necessarily breach the rules of natural justice, the procedural unfairness warranted the setting aside of the award. The court found that the applicants might have been materially unjustly prejudiced by the incomplete determination of the issues, potentially being beneficiaries of an award of the full amount of their claim. Therefore, the court exercised its discretion to set aside the award and remitted the matter back to the arbitrator for further consideration. The court did not find any grounds for the removal of the arbitrator but emphasised the need for a further short hearing to address the unresolved issues.

The final orders of the court were to set aside the award and remit the matter to the arbitrator for further consideration, with specific instructions to address the unresolved issues in a further short hearing. The court did not order the removal of the arbitrator but made it clear that the matter should be revisited to ensure all issues in controversy were properly determined.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

In the end, whether the failure to give adequate reasons is a breach of the rules of natural justice may not matter as Marks J pointed out in Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd (1978) VR 385 at 394:"Thus it can be seen that from early reported cases the courts have insisted that principles, if not of natural justice, then those akin thereto, were to be observed by arbitrators simpliciter. In In re Badger (1819), 2 B & Ald 689; 106 ER 517 Abott, CJ said: 'If an arbitrator acts contrary to a general rule of law it is undoubtedly the duty of the court to set aside his determination. But there is a material distinction between those rules which are founded on the immutable principles of justice, from which neither the court nor an arbitrator can be allowed to depart, and those which depend on the practice of the court …'" (Marks J's emphasis). There are, in summary, two reasons for a finding of misconduct. The second is a consequence of the first. The first reason is that there has been a failure to determine all necessary issues in controversy between the parties. As a result the dispute submitted to arbitration under the contract has not been completely determined. The award is not an award with respect to the whole dispute. The second reason is that the reasons given by the arbitrator fail, by omission, to expose the reasoning process and therefore give rise to material procedural unfairness, whether or not that also amounts to a breach of the rules of natural justice. The procedural misconduct just found does not involve a finding of moral turpitude in any way in respect of the arbitrator. The question is whether the discretion should be exercised to set aside the award. In my view it should. I apply the test articulated by Steytler J in Shirley Sloan Ltd. In this case the applicants potentially may have been the beneficiaries of an award of the full amount of their claim. That being so, the applicants may have been materially unjustly prejudiced by the failure to deal with all the issues. An arbitrator may be removed where the court is satisfied, inter alia, that the arbitrator has misconducted the proceedings: s 44(a). I do not consider any reason has been advanced why the arbitrator should be removed. On the contrary, there are good reasons why the matter should be remitted to this arbitrator for further consideration. The error of the arbitrator in failing to deal with a significant issue does not involve any moral wrongdoing or display any bias, prejudice, interest or corruption, sufficient to remove him. The arbitrator has already heard the evidence and is familiar with the issues. What may be required (and this is a matter for the arbitrator and the parties) is a further short hearing where the particular issues which the arbitrator has not yet determined are the subject of submission by each party to the arbitrator. The arbitrator has already determined many matters in controversy between the parties and except to the extent that his finding on the Villanis' claim as the contractual terms of the date of practical completion may affect them, there is no other reason for the arbitrator to revisit the findings made.