Westport Insurance Corporation & Ors v Gordian Runoff Limited

[2011] HCATrans 13

Replacement Transcript

[2011] HCATrans 013

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S110 of 2010
  No S219 of 2010

B e t w e e n -

WESTPORT INSURANCE CORPORATION (ABN 48 072 715 738)

First Applicant/Appellant

ASSETINSURE PTY LIMITED (ABN 65 066 463 803)

Second Applicant/Appellant

MUNICH REINSURANCE COMPANY OF AUSTRALASIA LIMITED (ABN 51 004 804 013)

Third Applicant/Appellant

XL RE LIMITED (ABN 54 094 352 048)

Fourth Applicant/Appellant

SCOR SWITZERLAND LTD (ABN 92 098 315 176)

Fifth Applicant/Appellant

and

GORDIAN RUNOFF LIMITED (ABN 11 052 179 647)

Respondent

FRENCH CJ
GUMMOW J
HEYDON J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 4 FEBRUARY, AT 10.02 AM

(Continued from 3/2/11)

Copyright in the High Court of Australia

__________________

FRENCH CJ:   Yes, Mr Jackman.

KIEFEL J:   Mr Jackman, before you proceed could I take up a point that was touched on yesterday?  I think it was in response to a question from the Chief Justice that it was confirmed that the reinsurers accepted that in the concession made and recorded in paragraph 80 of the award that it was intended by the reinsurers to cover D&O policies which covered claims which were made and notified within an extended period of three years.  There does not seem to be any dispute about that concession as recorded.

MR JACKMAN:  I think the answer that I gave was that that is a generalised conclusion of the effect of the policy, once one rolls together all of its relevant provisions, including ‑ ‑ ‑

KIEFEL J:   That is a succinct statement of what the reinsurers intended in the dealings with the brokers?

MR JACKMAN:   Yes.

FRENCH CJ:   I think you accepted, subject to the caveat about its generality, that it was a correct statement of the agreement that was made between your client and the reinsurers?

MR JACKMAN:   It is a correct statement of what the reinsurers accept.  That first sentence is overly generalised because the sentence in itself does not include the language of limitation or exclusion.  One finds that in the rest of the paragraph and then that is what the arbitrators find, contrary to the reinsurer’s argument, that there was an operative exclusional limitation.

FRENCH CJ:   That was a characterisation, but in terms of coverage?

CRENNAN J:   Cover.  It describes a cover, does it not?  It allows one to understand the cover.

MR JACKMAN:   It allows one to understand the cover, including ‑ ‑ ‑

CRENNAN J:   The claims made coverage.

MR JACKMAN:   Including the exclusions or limitations to coverage.

KIEFEL J:   Put aside the characterisation, in the dealings with the brokers in the correspondence it was intended by the reinsurers that it would cover Gordian with respect to policies written by Gordian where the reporting or claims period was three years.

MR JACKMAN:   Yes.  I may be missing your Honour’s point but that was not common ground because we argued, and we maintain this argument in our notice of contention, that the policy, properly construed, did not include a three‑year limitation.  That is a question which is anterior to the application of 18B.  We say there was no such three‑year limitation.

FRENCH CJ:   This is a matter of fact by reference to the letters of December 1998; is that right?

MR JACKMAN:   It is a question of law, being a question of the construction of a written contract.

FRENCH CJ:   But it is relying upon that correspondence.

MR JACKMAN:   Yes.  It is relying upon the correspondence and the written terms of the slip of December 1998.

KIEFEL J:   But you are still characterising this three‑year question as a limitation.  I am not interested in this.

MR JACKMAN:   Putting aside the question of characterisation ‑ ‑ ‑

KIEFEL J:   I am just trying to work out what the reinsurers’ position is with respect to what was agreed - pursuant to the correspondence, what was their promise with respect to the risk that they were covering Gordian for in relation to policies written?  Was it not to cover Gordian for its liability with respect to policies it wrote in the relevant period where those policies had a reporting requirement of three years?

MR JACKMAN:   That was their contention, yes.

KIEFEL J:   To that extent paragraph 80 encapsulates it.

MR JACKMAN:   In a generalised way, yes.

KIEFEL J:   All right.  If that is correct, on one sense the arbitrators could have given effect to that without going to section 18B(1) as a matter of contract.

MR JACKMAN:   As a matter of contract, absolutely.  If that is correct, that there is a three‑year limitation on the underlying policies, we lose as a matter of contract.

KIEFEL J:   So what it might mean is that Mr Walker might – turning to paragraph 92 of the award, if there was an agreement for three years, it might not matter that the agreement did not extend to seven years, that it did not speak to policies with the seven‑year reporting period.  They are completely by the way.  Contractually they do not matter.  Do you see what I mean?

MR JACKMAN:   I am not sure that I do.

FRENCH CJ:   This is a focus on claims rather than on policy.  In other words, if the ‑ ‑ ‑

MR JACKMAN:   Is your Honour putting that we could have won anyway because the claim was ‑ ‑ ‑

KIEFEL J:   On the contractual ‑ ‑ ‑

MR JACKMAN:   No, we did not put that argument and we do not maintain that position.

KIEFEL J:   It might follow from where the arbitrators got to up until paragraph 92 because the arbitrators seem to be saying, “Here is the contractual arrangement and we agree that it does not speak to policies written for seven years”, but then use the Insurance Act to achieve, in a sense – and I am not saying this was a conscious effort, but the Insurance Act is in a way used to achieve what might have been given effect to by way of pure contractual principle giving effect, in a commercial sense, to what was actually agreed between the parties.

MR JACKMAN:   I now see your Honour’s point.  If one takes the first sentence at paragraph 80 in isolation then it does focus on claims.  But the problem for us contractually was that the policy itself was written for a seven‑year period.

KIEFEL J:   The underlying policy?

MR JACKMAN:   Yes.

KIEFEL J:   But that might not matter.  If the true agreement between the parties was that the reinsurers would meet claims reported within a three‑year period ‑ ‑ ‑

MR JACKMAN:   On that view of the matter your Honour is right.  It would not have mattered, yes.

KIEFEL J:   Then in a commercial sense you would simply give effect to what was truly agreed between the parties.

MR JACKMAN:   Yes, yes.

KIEFEL J:   If that is correct and you understand that that is the contractual position between the parties, section 18B(1) might not assume any particular relevance and, in fact, it will not work. 

MR JACKMAN:   Yes I take that point, yes.

KIEFEL J:   But what that means is no one can suggest that the reinsurer is obliged to cover for the seven‑year period, but it is for the three‑year period.

MR JACKMAN:   If the claim is reported within the three years, yes, I accept that and that would be a reflection of the first sentence of paragraph 80.  Yes, I accept that.

CRENNAN J:   It really means the starting point is to look at the coverage and the coverage of the reinsurance treaty is the claims made within a reporting period, not exceeding three years.  Then you have an exclusion from that cover of policies which have a longer reporting period.  But as I understand what Gordian wants to do is to have access to its cover under the reinsurance treaty for claims made within a reporting period not exceeding three years.  That is why ‑ ‑ ‑

MR JACKMAN:   It is certainly an interesting reversal of the way that I think I would have to accept we argued the case, which was that the coverage was for D&O policies and the limitation or exclusion, if it existed, was for three years.  But I take your Honour’s point.

CRENNAN J:   So does that mean cover for those that had reportage within three years?

MR JACKMAN:   The first sentence of paragraph 80 ‑ ‑ ‑

CRENNAN J:   Must follow.

MR JACKMAN:   ‑ ‑ ‑ does tend to reverse the matter, although, the balance of the reasoning, I would have to accept, treats the three years as the limitation or exclusion, rather than reporting within three years as being the coverage.

KIEFEL J:   I mean we probably get a little tied up with language and this happens in insurance because everyone speaks in shorthand terms and insurers expect the courts to fix it up when they do not speak very clearly.  But in terms of what was clearly intended by way of reinsurance it is the risk that Gordian was exposed to with respect to claims and that is really where the focus should be.  So this claims policy dichotomy, I think, and the award is redolent with it, but at the key finding, I think, at paragraph 80 it becomes clearer that it is actually claims that we are talking about.

MR JACKMAN:   I take your Honour’s point, yes.

KIEFEL J:   So if that is right I think, to that extent, Mr Walker might be right about section 18B not having application, but ‑ ‑ ‑

MR JACKMAN:   But we win on contract on that view of it.

KIEFEL J:   ‑ ‑ ‑ the result does not alter.  The seven years still does not ring if the seven‑year period is not covered.

MR JACKMAN:   Yes.

GUMMOW J:   That would be an elaborate reasoning for not allowing special leave on the grounds that are hanging at the moment.

MR JACKMAN:   Yes, it certainly bears on that.  Can I correct something that I put in answer to a question from your Honour Justice Bell yesterday concerning the question of additional premium that was pleaded in the rejoinder at volume 1, page 85 but not actually submitted to the arbitrators and I put yesterday that it was irrelevant on the question of reasonableness because no submission was actually put, but in the course of my answer I made a concession that the reinsurers were not paid any additional premium by reference to the seven‑year FAI policy which Gordian wrote.  That is wrong and can I just briefly explain why. 

If your Honours go to volume 2, page 619.  This is the slip for the 10 - in excess of 10 layer in December 1998.  At the top of 619 the premium is dealt with and your Honours see an amount of $540,000 payable in five instalments and then that is to be adjusted - there will be a final reckoning:

Adjusted at 1.50% of the Reinsured’s –

my clients –

Gross Net Written Premium Income for period hereon.

So whatever we earn they get one and a half per cent on it and there is evidence, volume 1, page 126, from Mr Fletcher, a witness for Gordian, to the effect that a premium was negotiated and paid by FAI to my client for their seven‑year policy, obviously a greater premium than would have been applicable if the policy was only for three years and that part of it was on‑paid in the ordinary course under that premium clause as part of the final reckoning.

BELL J:   I think there was some other evidence going to the different considerations in fixing premiums that apply to run‑off policies which commonly enough are for periods of seven years, but the point that you make is that to the extent that it was relevant went to the special acceptance issue and was not relied on as a reasonableness consideration for the proviso in 18B.

MR JACKMAN:   That is so, yes.

BELL J:   Yes.

MR JACKMAN:   That is right.  Yesterday I was dealing with the futility question in relation to the ground of appeal pertaining to reasons.  Can I ask your Honours to go to my written submissions in‑chief filed on 10 December.  The point is raised, as Justice Heydon identified yesterday, in paragraphs 26 to 29.  Certainly one point that we make in the course of that in paragraph 27, is that special leave on grounds 2 and 3 was dismissed at the special leave hearing.

But we go on to make a separate point in paragraph 27 – and to understand this, your Honours will need the draft notice of appeal in volume 5, 2027.  Ground 2, which was dismissed, relates to a contention that the ingredients of 38(5)(b)(ii) were satisfied – that is, strong evidence of error of law, the determination of which may add substantially to the certainty of commercial law.  Ground 3, which was dismissed, relates to the other limit of 38(5)(b) – namely, manifest errors on the face of the award justifying the grant of leave to appeal.  But nowhere is there any attention paid to what is also an essential integer under section 38 in getting leave to appeal.

If I can take your Honours back to section 38 of the Commercial Arbitration Act, section 38(5) certainly has those alternative ingredients in paragraph (b), but superadded on those is paragraph (a) – that is:

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 –

That is an essential ingredient in getting leave to appeal.  One of the problems with this draft notice of appeal that we expressly refer to in paragraph 27 of our written submissions is that there is no ground of appeal.  There has never ever been an attempt to raise as a ground of appeal an error in failing to find that 38(5)(a) is satisfied.  If it were ever raised, it would require further special leave and an amendment on a matter that has never been raised by the reinsurers, even after we expressly told them that they had a problem and this led to futility in their appeal.  But there is a real problem with the application of paragraph (a) in the context of an insufficiency of reasons.

I am not in a position to debate it.  We have not prepared any argument on it, but the outlines of the argument are essentially that even if the matter were remitted for further reasons to be given, that could not change the outcome of the award.  There is an award which is final and binding.  There are questions of issue estoppel in arbitrations that arise.  We have not researched them, but it would be our contention that even if, which seems fanciful, the arbitrators were to reach a different conclusion subjectively, if they turned their mind to adding further reasons, they are simply not entitled to change the outcome of what is a final and binding award. 

We say it is only a speculative possibility anyway, but it is a possibility my learned friend adverted to yesterday when he addressed the Court on what happens when decision‑makers sit down and write out their reasons.  Nothing could change the outcome of the award.  It might make the reinsurers feel a bit better if they had some more reasons as to why they lost, but that does not substantially affect the rights of the parties and the matter does not go beyond that. 

Now, that is the outline of the argument, but I am in absolutely no position to address the Court further on it.  It has never been raised and we have not prepared to meet the argument.  But it is another problem which is entirely a problem of the reinsurers’ own making in the way in which they have structured their appeal.  There is an essential integer that they have overlooked. 

Now, we did them the kindness of telling them expressly that they had that problem.  They have done nothing about it in almost two months since they received our written submissions.  There is no reference in their written submissions in reply to the problem and even yesterday when your Honour Justice Heydon expressly raised the point with my learned friend and he quite properly took it on notice, he did not have anything further to say about it. 

So that whatever your Honours do in terms of revisiting the question of grounds 2 and 3 of the draft notice of appeal, the matter still remains futile because there has never been any attempt on the reinsurers’ part to address paragraph (a), which they need to do if they were ever to get section 38 leave.

We went so far in our written submissions as to say, in light of the futility of this, consideration might be given to special leave being revoked and even having thrown down that gauntlet, no application was made on the part of the reinsurers to seek leave to amend their notice of appeal, and that is where the matter stands and we are simply not in a position to debate the matter further today.

Can I turn then to the question of special leave to appeal on grounds 5 and 6.  First point, which I will deal with briefly, is that it raises the same problem of futility, namely, the lack of a ground of appeal which is directed to all of the ingredients of section 38(5).  The second problem with it is that the application of section 18B to reinsurance is of purely historical interest.  That is because as from 1 September 2009 18B no longer applies to reinsurance. We put on our list of authorities clause 4 of that regulation and your Honours may or may not have the complete text of it, which your Honours ought to have.  Can I hand up ‑ ‑ ‑

FRENCH CJ:   I think we have it.

MR JACKMAN:   If your Honours have a complete text then I will not.  But your Honours will see in the regulation in clause 2 that the regulation commences on 1 September 2009 and clause 4 is the operative provision:

For the purposes of section 21(1)(b) of the Act: ‑

That is the regulation‑making power –

(b)contracts of insurance that are subject to the Insurance Contracts Act 1984 of the Commonwealth and contracts of reinsurance are exempt from the operation of sections 18, 18A, 18B and 19 of the Act.

What that means is that my learned friend quite correctly said yesterday that section 18B imposes a fetter on the terms of a contract from having their ordinary operation.  Your Honours will find the same construction given by the Court of Appeal in paragraph 157, that is volume 4, 1974.

GUMMOW J:   Are we right in thinking that the federal statute does not apply to reinsurance?

FRENCH CJ:   It is an express exclusion.

MR JACKMAN:   Yes, I am grateful to your Honour.  Yes, it is section 9.  Yes, thank you.  What that means is that from 1 September 2009 that 18B fetter is removed and the terms of reinsurance contracts operate in accordance with their intent.  That means that there is no lingering long tail problem which faces a reinsurer in having to deal with an 18B argument.  Irrespective of when the contract of reinsurance was entered into, and let us assume it was entered into before 1 September 2009, if a reinsured goes along to a reinsurer and says, “You cannot reject my claim because I have an 18B point” the reinsurer has an iron‑clad response, “Well not since 1 September 2009 you do not”. 

That is why the Court of Appeal said in paragraph 264 in volume 5, page 2003 - his Honour Justice Allsop said, having looked at the regulation:

Regulations have been passed removing reinsurance from the operation of s 18B.  That does not answer the question as to the section’s operation beforehand.

That is before 1 September 2009 –

It does, however, mean that an answer to the question –

of whether 18B covers reinsurance –

is unlikely to be of general relevance, and is only relevant to this case –

this being the only case in which anyone, as far as we have been able to ascertain, has relied upon 18B in a reinsurance context.  So, in terms of special leave being granted to debate the construction of 18B in the field of reinsurance, it has absolutely no ongoing effect since 1 September 2009.

There are particular arguments that we make against the grant of a special leave on ground 5 which concern the new and different way in which the argument is being put now which makes it not a proper vehicle for the grant of special leave.  I addressed that yesterday in answer to a question from the Bench.  I will not restate the argument, except to add to it that there are some aspects of the argument that is now put which can be found in my learned friend’s written submissions, paragraphs 27 and 33, that are flatly contradictory of the way in which it was put before.

Arguments advanced in those paragraphs, 27 and 33, to the effect that section 18B applies to consumer contracts, and, by definition, reinsurance is not a consumer contract, are flatly contradictory of the concession that was made before the arbitrators to the effect that 18B did apply to reinsurance.

As I submitted yesterday, my learned friend’s criticisms of the way in which the Court of Appeal dealt with the construction of 18B did faithfully reflect the argument that was then put as to what the relevant error of law was.  The argument now put, which is one germane only to treaty reinsurance, simply was not put to either the arbitrators or to the primary judge.  There is only the vaguest allusion to it in a very brief answer to a question from the Bench in the Court of Appeal.

Turning to ground 6, that raises the question of identifying the circumstances by which loss was caused or contributed to.  That is a matter which must be peculiar to this case.  The Court of Appeal correctly treated it as a question of fact germane to the circumstances of this case and it is not a matter, with respect, which could have any wide or general application.

I will say something briefly about our notice of contention.  There are a number of grounds that are raised there.  They arise only in the event that further special leave is granted.  If special leave is confined to the ground pertaining to the adequacy of reasons then none of those points of contention arise.  But I should indicate that it is not a short argument on the notice of contention and that may be a matter for the Court to take into account in terms of any further grant of special leave.

FRENCH CJ:   Mr Jackman, could I just clarify one question of terminology?  What, in the context of this case, is the treaty – the insurance treaty?  Is it the excess loss insurance agreement which contained the conditions up to 1998 and which were then carried on through the placing slip or is it a combination of those?

MR JACKMAN:   That is a very good question.  Can I try to give your Honour a complete answer to it by reference to the appeal books?

FRENCH CJ:   Yes.

MR JACKMAN:   The first and primary document is in volume 2 beginning at page 618 and going through to page 656.  That is the 10 in excess of 10 placing slip, together with its various attachments.

FRENCH CJ:   I am sorry, up to which page?

MR JACKMAN:   Page 656.

FRENCH CJ:   Thank you.  Everything up to 656, inclusive, is an attachment to the placing slip?

MR JACKMAN:   Yes.  That, as your Honours are aware, picks up by reason of page 619, line 42, the wording of the expiring policy as far as applicable, amendments to be agreed by reinsurers and, fortunately, we do have a fully drawn‑up contract which is to be found in volume 1 beginning at page 466 and going through to 482.

CRENNAN J:   I think the exclusion provision is referred to from to time in the context of Article 5 in the correspondence.  Do you know what that is a reference to?

MR JACKMAN:   I am sorry; I would have to take that on notice.

CRENNAN J:   All right.

MR JACKMAN:   Can I identify the lower layers of insurance?  If your Honours go in volume 2 to page 848 that is the placing slip for the next layer down, 5 million in excess of 5 million that was entered into on 16 August 1999 and it goes through from 848 to 853.  Then if your Honours go back to 841, on the same date, 16 August 1999, there is a placing slip for the next layer down.  That is three million in excess of two million.

CRENNAN J:   I am sorry, what page was that?

MR JACKMAN:   Page 841 and it goes through to 846.  Then if your Honours go, in the same volume, to page 993, on 1 March an additional reinsurer came on the scene – that is, Copenhagen Reinsurance.  The placing slip for its participation in the five million, in excess of five million, layer begins at 993 and goes through to 998.  Then going back to page 944 there is the Copenhagen Re placing slip – again made on 1 March 2000 but this time for the three million, in excess of two million, layer.  That document goes from 944 through to 991.  So that list of documents is the answer to your Honour’s question.

KIEFEL J:   Just as a general question about reinsurance, being excess of loss reinsurance attributable to layers, they are not intended to work perfectly back to back, are they, with the original policies?

MR JACKMAN:   I would have to accept that that is the broad spirit and intent.  There is a finding which is not expressed in those terms but is to that effect in the reasons for the award, paragraph 76 on page 13 of volume 1.  It is stated in generality:

although there are some differences between the reinsurance treaties and the reinsurers are not identical, there are no differences which are material to the primary question whether the FAI D&O run‑off policy is covered by all or any of the reinsurance treaties.

For example, some of the professional exclusions were varied in terms of doctors and accountants.  So then 76 is right, that they are not identical but the broad spirit and intent was to roughly the same effect and materially to the issue here we accept.

KIEFEL J:   But the point being that there is no assumption made about the policies matching in every respect.

MR JACKMAN:   Not in every respect.  There was a good deal of evidence, that I hope your Honours do not have to go to, concerning what is known in the industry as dovetailing that one tries and typically succeeds in having some approximate dovetailing of terms, but it is not exact. 

KIEFEL J:   But there is no presumption ‑ ‑ ‑

MR JACKMAN:   Paragraph 76 is probably sufficient for present purposes.

KIEFEL J:   Yes, thank you.

MR JACKMAN:   I am tyring to spare your Honour, at this stage at least, the underlying evidence concerning that.

FRENCH CJ:   I think you have made reference in your submissions to the correspondence between Gordian, or GIO as it then was, and Aon in December of 1998, the 15th and the 22nd.  Can you just succinctly state what the effect of that is from the point of view ‑ ‑ ‑

MR JACKMAN:   Yes.  That is Aon being Gordian’s own broker.  So it is not a communication to the other side.

FRENCH CJ:   Yes, I know.  Yes, I appreciate that.

MR JACKMAN:   The broad effect of it is that Gordian wanted to be able to write underlying policies for more than one year.  Gordian gave as an example of why it wanted that that it had been approached on occasions concerning two or three‑year policies, but what it wanted was multi‑year policies to be able to be written and that communication was then stamped and attached to the placing slip as an indication that the parties intended multi‑year contracts to be applicable. 

Now, that arises on our notice of contention as to whether there was ever a three‑year limitation in the first place.  Apart from the notice of contention, that correspondence, in our submission, is not relevant.  Unless I can be of further assistance to the Court, those are our submissions, at least pending your Honours’ decision as to further special leave.

KIEFEL J:   Mr Jackman, if I might, before you get comfortable, just following on the question I first raised with you about the construction of the policies, you have not had a chance, I suspect, to think this through.  One assumes that the result would – if one applied the contract as found between the parties, the result would be as per the award but by a different route.  You probably have not had a chance to turn your mind to what orders would be appropriate and how that would work in the context of the award?

MR JACKMAN:   I have not, but my ‑ ‑ ‑

KIEFEL J:   Would you like to have some time to think about that?

MR JACKMAN:   I am just having a look at the award itself at volume 1, page 2.  On a quick perusal, paragraph 1 deals with the 10 in excess of 10 layer.  Paragraph 2 deals with the lower layers.  On a quick perusal it does not appear any modification to the terms of the award would have to be made.

KIEFEL J:   So the only order would be dismissal of the appeal?

MR JACKMAN:   Yes.

FRENCH CJ:   Mr Jackman, if there is anything you wish to say orally on the question of the notice of contention, on the assumption that special leave were to be granted you should do so.

MR JACKMAN:   Yes, that will be a lengthy argument, I am afraid.

FRENCH CJ:   I am sure you will be as concise as you can but I think you should proceed on that assumption for the moment.

GUMMOW J:   This is not an unusual state of affairs, Mr Jackman, in this Court.

MR JACKMAN:   Yes.  I accept that, yes.

GUMMOW J:   You should come prepared, fully armed, as it were.

MR JACKMAN:   I am.  I am ready to go.  If your Honours want to hear the points raised on the notice of contention then ‑ ‑ ‑

FRENCH CJ:   Yes.  We have read the submissions, so we ‑ ‑ ‑

MR JACKMAN:   Yes, very well.  It is a little difficult for me to know what I am dealing with if ‑ ‑ ‑

FRENCH CJ:   You have cascading arguments, as I understand it.

MR JACKMAN:   Indeed.  I am dealing with the proposition that special leave is given on grounds 5 and 6, but that seems a somewhat artificial assumption because to give leave on grounds 5 and 6 alone is utterly futile, given that leave has not been granted, it has been dismissed on grounds 2 and 3.  A number of the points of contention relate to aspects of section 38(5). 

So I just need to know what I am dealing with.  No application has ever been made to amend the notice of appeal, despite the points that we have expressly raised.  I need to know what the state of the notice of appeal is before I start addressing hypothetical questions on, for example, leave being granted on grounds 2 and 3 and perhaps leave being granted on some ground never articulated concerning 38(5)(a).

FRENCH CJ:   I think you had better proceed on the assumption that the grounds which have been referred would be relied upon as identifying relevant error and satisfaction of the requirements of 38.  In other words, as I think I said to you yesterday, there was a generality about the grounds in respect of which special leave was refused which does not preclude the more specific grounds being advanced within the framework of 38.

MR JACKMAN:   Yes, but am I also to assume that the ground never articulated concerning 38(5)(a) is also in play?

GUMMOW J:   We are not here to answer interrogations, Mr Jackman, I am afraid.

MR JACKMAN:   Very well, I will do my ‑ ‑ ‑

FRENCH CJ:   You can put the proposition that the grounds cannot succeed for that reason, if that is your argument.

MR JACKMAN:   Yes, very well.  Let me deal with notice of contention ground 1 which concerns further reasons for refusing section 38 leave.  Specifically, ground 1 raises a question concerning the concept of strong evidence of error in relation to grounds 5 and 6.  Shortly stated, as to ground 5 the reinsurers abandoned any argument that there was a manifest error.  That left them only with an argument that there was strong evidence of error and the decision would substantially affect the certainty of commercial law.

Now, as to strong evidence of error it is our submission that evidence means what it means in ordinary usage, that is the means of proving facts.  Read harmoniously, 38(5)(b) means that if all you are relying upon is an error on the face of the award then that has to come within the manifest error requirement, rather than relying upon strong evidence of error.  Strong evidence of error is there to allow an applicant for 38 leave to point to some material – extrinsic material outside the reasons for the award, which shows strongly that there was error.

In support of that construction can I take your Honours to the New South Wales Court of Appeal’s reasoning in Promenade Investments 26 NSWLR 203 at 221 where his Honour Justice Sheller gave consideration to the 1990 amendment of section 38, which was to introduce the presently operative – well the provisions that were operative until this Act was repealed late last year by the New South Wales Parliament as a step towards a new uniform set of statutes on commercial arbitration. At the foot of the page there is an extract from the second reading speech concerning arbitration:

to be encouraged as a settlement procedure and not as a dry run before litigation, a more restrictive criterion for the granting of leave –

Over the page his Honour deals with –

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 court control . . . A manifest error of law 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.

So that is manifest error.  Then dropping down to letter E ‑ ‑ ‑

FRENCH CJ:   Would that depend on how quick and bright the judge is?

MR JACKMAN:   What is stated in Promenade Investments as the process is that one has a quick perusal and not a prolonged argument, short argument in order to ascertain whether there is a manifest error.  One does not hear the entirety of the argument at that stage.  It is a short argument to see whether on a quick perusal there is a manifest error.

Going down to letter E there is reference to the primary judge, Justice Rogers, having referred to the legislature’s intention to overcome a latent problem in applications for leave which had its genesis in the decision of the English Court of Appeal in Universal Petroleum:

To what extent on an application for leave to appeal can either party go behind the award and refer to the materials before the arbitrator for the purpose of supporting or resisting the application?  In concluding that extrinsic material was inadmissible on an application for leave to appeal the Court of Appeal referred to the expression, found also in s 38(2), “arising out of an award”.

Lord Justice Robert Goff said:

“ . . .  if such an appeal is to be brought, it must in our judgment be based upon material which is contained in the award and reasons of the arbitration tribunal, and cannot be based on extraneous evidence as is done where, for example, it is sought to allege misconduct on the part of an arbitrator.”

The Court of Appeal in the Universal Petroleum case accepted, however, that extrinsic evidence could be used not for the purpose of seeking to obtain the reversal of an award by raising questions of law which did not arise out of it but in order to inform the court about matters with which the arbitrator had ex hypothesi failed to deal, which should lead the court to refuse leave to appeal on the ground that leave to appeal would in any event not lead to a different outcome from the arbitrator’s conclusion and could therefore not substantially affect the rights of the parties.

Then Justice Smart in Warley:

remarked that it was not wholly satisfying –

but, dropping down to letter C his Honour says:

This history may explain in part the introduction, as a basis for granting leave, that there be “strong evidence that the arbitrator . . . made an error of law”.  But it does not do so in any satisfactory manner since the limitation in subs (2) remains, namely that the appeal lies only “on any question of law arising out of an award”.

His Honour’s rather tentative observations there, we would submit, are correct, that the strong evidence of error was included in the 1990 amendment in order to overcome a problem where applicants for 38 leave were not entitled to refer to extraneous material, except on a misconduct application.  That supports the submission that read harmoniously if all you want to rely upon are the reasons for the award, you have to come within the manifest error limb, but if what you want to do is to refer to extraneous material then you can rely upon strong evidence of error.

What the Court of Appeal did, on the other hand, was to say, “No, strong evidence of error can be made out simply by reference to the reasons for the award”, so one has a gradation of kinds of error.  You can have a manifest error or you can have strong evidence of error and either of them can be based simply on the reasons for the award.  In our submission, that is wrong.  The correct construction of 38(5) is that in order to rely upon strong evidence of error, it must be an application in which you are seeking to rely upon extraneous material, not simply the reasons for the award.

BELL J:   Another view might be that the provision reflects the statement of the appropriate principles of Lord Diplock in The Nema [1982] AC 724 at 743 where his Lordship said, amongst other things:

But leave should not be given even in such a case, unless the judge considered that a strong prima facie case had been made out that the arbitrator had been wrong –

and so forth.  So one can see perhaps a reflection of that in the ‑ ‑ ‑

MR JACKMAN:   Yes.  We would submit the reflection of that is in the manifest error ground.  The standard which Parliament has adopted is not strong prima facie case but manifest error.  The language has changed yet again in the new Act.

BELL J:   I suppose the contrary view might be that when one reads the whole of Lord Diplock’s observations recorded at the base of 742, going over to 743, the two considerations are open in that his Lordship refers to decisions that require argument, lengthy argument by counsel to reveal error and then he goes on to draw a distinction in relation to those exhibiting prima facie error?

MR JACKMAN:   Yes, indeed.

BELL J:   All I am suggesting is that one might think 38 follows the statements in The Nema.

MR JACKMAN:   Yes, and to some extent it does, but in our submission it would be odd if Parliament were to say, in effect, the court is to hear on a preliminary and short basis whether the 38(5) ingredients are satisfied and as part of that task it is to address some fairly subtle differences between manifest error and strong evidence of error.  That just seems overly subtle for the kind of preliminary task which the statute was intended to require.  A better way of reading 38(5)(b) harmoniously is to say it relates to two different ways of showing error.  One is, manifest error – just looking at the reasons themselves, and the other is to go to extrinsic material - and that is the strong evidence of error – to overcome the problems that Mr Justice Sheller referred to.

GUMMOW J:   What was at the centre of debate in The Nema was a question of frustration, was it not?

MR JACKMAN:   Yes.

GUMMOW J:   A very evidence heavy question.  Maybe that is why at 743 letter D Lord Diplock distinguishes contractual construction debates.

MR JACKMAN:   Yes.  Can I move to ground 2?  That relates to the proposed ground 5 in the draft notice of appeal.  The question that is raised is whether section 38 leave in relation to ground 5 would add to the certainty of commercial law.  Can I take your Honours to the Court of Appeal’s reasons at paragraph 173?  His Honour Justice Allsop says there:

If I be wrong about that –

that is, the section 18B ground which is ground 5 –

and there was a strong prima facie view the arbitrators were wrong about their construction of s 18B, leave would have been correctly granted by the primary judge.  I would accept that the proper construction and interpretation of the Insurance Act, s 18B was the determination of a question that may add or may be likely to add substantially to the certainty of commercial law.  The contrary was submitted by Gordian, but in my view judicial exposition of the meaning of a provision affecting the operation of insurance markets in Australia plainly satisfies that criterion.

Now, that is an observation that was made in the context of the argument that was then put which turned on a dichotomy between scope of cover clauses and exclusion or limitation clauses.  My learned friend now eschews that argument.  What he is putting forward is an argument that relates only to treaty reinsurance and the problem that he faces there is that treaty reinsurance is no longer subject to 18B, as the Court of Appeal observed at paragraph 264. 

So, in our submission, if the argument that is now being advanced had been put to the Court of Appeal, it would have been met very simply with the proposition that 18B no longer applies to treaty reinsurance, therefore it cannot possibly add to the certainty of commercial law for us to work out how 18B applies to treaty reinsurance.  That is the nub of ground 2 in the grounds of contention.

Grounds 5 and 6 raise a question of construction of section 38 as to whether a respondent who wants to raise questions of law by way of contention to support the award needs section 38 leave in order to do so.  I should say at the outset that the points that we raise under this heading are questions of law because they are concerned with the construction of written contracts. 

The Nema itself is probably the best authority for that proposition in Lord Diplock’s speech at page 736 that the construction of written contracts has always been a question of law.  It has an historical origin in the illiteracy of some members of juries, but nonetheless Lord Diplock says it is too late to change the law.

CRENNAN J:   Would you be able to support the award on the basis that even if there were error in the application of section 18B, on the construction of the contract the result was correct?

MR JACKMAN:   Yes, that is what we are trying to do.  This is the precursor to saying there was never a three‑year limitation in the first place on the underlying policies.  We were entitled to write multi‑year policies and there was no specific limitation of that to the three‑year period.  It is logically anterior to the 18B question because, it is our submission, if this is accepted, then 18B does not apply at all.  We just win on the contract.

Can I take your Honours to section 38 of the Commercial Arbitration Act.  Section 38(2) uses the term “an appeal”.  So it is an appeal which lies to the Supreme Court and it is the appeal that is subject to subsection (4):

An appeal under subsection (2) may be brought –

relevantly, we believe, to the Supreme Court.  Subsection (5) then deals with the requirements for leave for an appeal.  Nothing is said whatsoever about any requirement for leave on a party who does not want to appeal, does not want to cross‑appeal, simply wants to uphold the award for different reasons.  As a matter of straightforward construction, in our submission, the section 38 requirement for leave cannot apply to a respondent who wants to uphold the award on different grounds. 

What we are arguing for represents the position in the United Kingdom.  Can I ask your Honours to go to the case of VitolSA v Norelf Ltd [1996] AC 800. It is also known as The Santa Clara.  Relevantly beginning at page 813 in the speech of Lord Steyn, at letter D Lord Steyn extracts the relevant United Kingdom provision at that time:

“No appeal shall lie to the Court of Appeal from a decision of the High Court on an appeal under this section ‑ ‑ ‑

GUMMOW J:   Where are you reading from, Mr Jackman?

MR JACKMAN:   Page 813 letter D –

unless––(a) the High Court or the Court of Appeal gives leave; and (b) it is certified by the High Court that the question of law to which its decision relates either is one of general public importance or is one which for some other special reason should be considered by the Court of Appeal.”

So section 1(7) relates to appeals.  It does not relate to those responding to appeals unless, of course, they are cross‑appealing.  At letter F –

The question whether section 1(7) applies to a respondent must be considered on the basis that the respondent requires no leave to appeal in order to argue that the award ought to be upheld on a ground different from the ground on which the arbitrator made his award.  Given that the respondent requires no leave to appeal, it seems wholly implausible that the legislation would seek to impose on him a procedural barrier of a section (1)(7) certificate by way of a subsection introduced by the words “No appeal shall lie –

The same reasoning applies to us, in our submission –

The contextual scene of section 1(7) further shows that no such procedural barrier was intended in the case of a respondent. 

Then going over the page at the top of 814 –

The primary purpose of the Act of 1979 was to reduce the extent of the court’s supervisory jurisdiction over arbitration awards.  It did so by substituting for the special case procedure a limited system of filtered appeals on questions of law.  The change was intended to tilt the balance toward greater emphasis on the finality of arbitration awards.  Now postulate a respondent in the Court of Appeal who at first instance won on the main point but lost on a sound alternative argument.  He loses on the main point on appeal.  If he requires a certificate to argue the alternative case there is a risk that he may not obtain a certificate.  A perfectly good award may then be set aside.  In a very relevant sense such a risk would imperil the finality of arbitration awards.  It would also be a manifestly unfair consequence in cases when the respondent has a good alternative argument which does not pass the test of being a question of general public importance, e.g. the construction of a “one off” exception clause.  And it is no answer to say that in some cases a judge may grant a certificate for some other special reasons.  Recognising the force of these arguments counsel for the buyers said that the policy of section 1(7) was the improvement of English commercial law and that any injustice to a respondent was the price of the policy.

Lord Steyn was reminded of some irreverent observations of Lord Devlin of feeding the litigious “minotaur”.  This is extracted by the Court of Appeal only up to that point.  The Court of Appeal then leaves out the next paragraph:

The interpretation of the buyers is indefensible.

Very strong language –

It militates against the finality of arbitration awards, it would cause injustice and, if adopted, would be perceived to be a serious flaw in ‑ ‑ ‑

FRENCH CJ:   Textually they focus upon the question of law reference in section 38(2), do they not?  If you raise a question of law it is ‑ ‑ ‑

MR JACKMAN:   Yes, and we are not seeking to go beyond that because the questions we raise are questions of law being the construction of written contracts.

FRENCH CJ:   No.  The Court of Appeal’s justification for applying the leave requirement is that you are raising a question of law in the appeal, albeit not by way of appeal.

MR JACKMAN:   Yes, and they say we are not entitled to do so unless we show manifest error or strong evidence and all of the rest of it, and that is what ‑ ‑ ‑

FRENCH CJ:   Yes, I appreciate that.  That is the point.  The textual hook for that is the question of law term and its general application.

MR JACKMAN:   Yes.  As a matter of generality, arbitration awards are to be immune from challenge at a factual level.  There must be questions of law.

CRENNAN J:   In terms of your statement just before that, contractually speaking you are entitled to write multi‑year contracts.  You agreed, so far as I understood, that the claim in relation to Aegis, which was after the three‑year limit was not one you were entitled to seek indemnity for under the reinsurance treaty.  Can you just explain to me how that all fits together, that is to say, your claim that contractually speaking you are entitled to write multi‑year contracts.  Do you mean under the reinsurance treaty?

MR JACKMAN:   Yes, but I am no longer dealing with the Aegis claim.

CRENNAN J:   No, I know, but I am just trying to understand.

MR JACKMAN:   We are seeking to uphold the award.  We are not trying ‑ ‑ ‑

CRENNAN J:   No, I know, but I am just trying to understand.  We were talking to you before about the cover of the reinsurance treaties and there is no dispute that the cover is in relation to claims made within a three‑year period.

MR JACKMAN:   Yes.  On that basis we went on contract anyway.

CRENNAN J:   I understand that, but you just said before that you were entitled, contractually, to have policies which had multi‑year provisions in them, that is to say, going beyond the three‑year period.

MR JACKMAN:   Yes.

CRENNAN J:   I just did not understand why you were saying that in the context of what we had previously discussed in relation to the cover under the reinsurance treaties.

MR JACKMAN:   This is an entirely separate argument.  I would take your Honour’s point that the first sentence of paragraph 80 construes the contract and the reinsurers accept the construction of the contract in a way which suits me on the only claim that is still in issue which is a claim by the directors and officers of FAI, not Aegis.  I am no longer pursuing Aegis.

CRENNAN J:   This is a completely alternative argument?

MR JACKMAN:   It is a completely alternative argument.

CRENNAN J:   To your acceptance before that the cover was in relation to claims made within the three‑ year period.

MR JACKMAN:   That is correct.  If I win on that first point in paragraph 80, that is fine.  This is a totally separate, independent, alternative argument that if on the other hand the ‑ ‑ ‑

CRENNAN J:   You would not need 18B to win on that argument, would you?

MR JACKMAN:   No. There are two contract arguments in play.  One is the paragraph 80 point and this is an alternative contract argument that if cover is actually referable to the length of the period of the underlying policy then there was not a three‑year limitation on that matter.

CRENNAN J:   Then in relation to your acceptance in relation to the cover point that you do not need to go to 18B, which part of your notice of contention deals with the proposition that the award should be upheld, putting it simply, because the result is correct even though the route to the result was incorrect?

GUMMOW J:   In other words, when you say, “We can win on contract”, to which ground of a notice of contention is that attached?

HEYDON J:   Is it 8?

MR JACKMAN:   Would your Honours give me a moment?  Yes, it is paragraph 8 of the notice of contention on 2255.

HEYDON J:   Which you deal with in paragraphs 69 and 70 of your written submissions.

MR JACKMAN:   Yes.

KIEFEL J:   That is in response to the proposed ground 5 dealing with the construction.

MR JACKMAN:   It is in response to that and it is independent of it, for that matter, because to win on contract does not involve 18B at all.

KIEFEL J:   Do you need to deal in that regard with section 38 with respect to the construction aspect – that is, do you have to track a path through 38 to get to ‑ ‑ ‑

HEYDON J:   If you win on notice of contention 5 and 6, you knock over the barriers which stop you from getting to 8.  That is the structure, is it not?

MR JACKMAN:   That is right, yes.  I still need to establish that I can rely on paragraph 8 without going through the 38(5) filter.

KIEFEL J:   Yes.

MR JACKMAN:   In terms of the reasoning of the Court of Appeal, it begins, relevantly, at paragraph 266 in volume 4.

FRENCH CJ:   Is the core of it really at 275?

MR JACKMAN:   I am sorry, it is volume 5.

FRENCH CJ:   It is really what I was putting to you before.

MR JACKMAN:   Your Honour was putting to me paragraph 275.

FRENCH CJ:   It just strikes me that is the textual basis for it.

MR JACKMAN:   Yes.  Can I just point out one oddity in the reasoning.  The reasoning tends to equate the concept of appeal in section 38 with the concept of a complaint.  One sees that in paragraphs 280 and 282, in 280 Justice Allsop said:

The section should be construed in a manner likely to promote the restricted interference by courts with arbitral awards . . . The consequence of this is that parties who wish to complain about questions of law arising out of an award must obtain leave to appeal.

That is, his Honour is reading the concept of “appeal” as a wider concept of complaint relevantly here about the reasons, without an attack on the award.  Similarly, in 282:

The leave requirement in s 38 should not be seen as a mere gateway through which one party must pass and if it is successful the respondent (and perhaps even the appellant) may then attack the award on legal questions without restriction.

That cannot apply to the appellant because there is clear authority referred to in paragraph 177, I think, to the effect that the appellant can only rely on the matters on which it gets leave.  It is not a question of finding a small peg of leave on which to hang a very large argument by the appellant, but going on:

The purpose of s 38 was to restrict judicial intervention.  It should be construed to further that purpose.  Complaints –

Once again, is the operative term –

about the award and the reasons for it, whether primary or contingent, should be made by way of application for leave to appeal on any question arising out of the award.

That is simply not what Parliament has said, in our submission.  As the House of Lords explained in Santa Clara it potentially leads to grossly unfair results where a perfectly good award would be set aside on the appellants’ argument, which might be a manifest error of law, but the respondent’s argument, which may not comply with the 38(5) ingredients but would have been a sound argument, simply has to be rejected.  It is rather like the unfairness which would obtain in appeals to this Court if a respondent had to pass through the special leave hurdles in order to raise the notice of contention.  Respondents are entitled as of right to support the orders that were previously made on different grounds to guard against the kind of problems which Lord Steyn refers to.

FRENCH CJ:   The procedural mechanism which you adopted to invoke these points in the Supreme Court at first instance is in your commercial list response characterising your points of contention as further answers to the plaintiffs’ claim?

MR JACKMAN:   Yes, that is right.  There was never any application to cross‑appeal because we do not want to disturb the award itself.  We are happy with the outcome.  The Court of Appeal’s reasoning labours very heavily the statutory policy of restricting interference by courts with arbitral awards, but there is no recognition in that of the point made by Lord Steyn, namely, that a respondent deploying points of contention is trying to uphold the award.  It is not trying to lead to a different award.  As Lord Steyn explains, in our respectful submission, quite rightly, liberal scope to defend an award does promote the finality of awards because it gives an alternative route by which that award can be upheld.

So whether one approaches the issue as a narrow question of construing the word “appeal”, which could only be construed, in our submission, as meaning a challenge to the orders, or whether one approaches it from the point of view of policies of non‑interference with arbitral awards together with fairness to the parties facing an appeal from an arbitral award, the result is the same and no 38 requirement is imposed upon the respondent trying to defend the award.

Now, that is the precursor to the argument, then, that the reasoning of the arbitrators was wrong to the extent that it does say that there is contractually a three‑year limitation on the period of underlying policies.  I take your Honour’s point that the first sentence of paragraph 80 says something different which is an alternative way for us to succeed on contract but what I wanted to take your Honours through now is an alternative submission that if what the arbitrators were saying was that there is a three‑year limitation on the period of the underlying policies then that is a misconstruction of the written agreement.  The Court of Appeal did not deal with the argument other than to say that it is not an argument that would have satisfied section 38(5).

Can I take your Honours to the arbitrator’s reasoning on the point?  Beginning at paragraph 20 the arbitrators say that expiring treaty:

did not expressly include, limit or exclude cover in respect of run‑off policies or policies for extended periods or with extended reporting periods other than by a Professional Indemnity North America (“PINA”) clause which excluded claims which arose in the United States of America or Canada ‑ ‑ ‑

FRENCH CJ:   I am sorry, you are referring to what paragraph of the award?

MR JACKMAN:   Paragraph 20 on page 5.

FRENCH CJ:   Thank you.

MR JACKMAN:   Going forward to paragraph 78:

Apart from the PINA clause –

That is the North American one –

neither the 1998 reinsurance treaty nor the slips signed and stamped by the reinsurers in late 1998 expressly included, excluded or limited cover for policies for extended periods or with extended reporting periods.  According to the reinsurers, the context for Gordian’s request in its letter of 15 December 1998 for “multi year” reinsurance cover was that, in accordance with general industry practice, the then current 1998 reinsurance treaty applied to D&O policies which provided cover for a period of 12 months plus odd time not exceeding 18 months –

We disputed that premise.  It is then said we:

did not offer any plausible alternative.  It was effectively left with the unattractive proposition that the 1998 reinsurance treaty covered every Gordian D&O policy irrespective of the period of cover for which it provided, even policies which were for an unlimited period, at least if such policies were within Gordian’s “established acceptance and underwriting policy in respect of” D&O policies.

Can I take your Honours to the evidence that is in volume 2, page 618.

KIEFEL J:   I am sorry, that was?

MR JACKMAN:   We have there the reinsurance placing slip.  The class of business is described as:

Business underwritten by the Reinsured and classified by them as . . . Directors and Officers Liability Insurance –

Then the wording is:  “As expiring as far as applicable”.  That takes us back to volume 1, page 474, Article 16 of the expiring policy, which was picked up by the cross‑reference on 619:

The Reinsured undertakes not to introduce any change in its established acceptance and underwriting policy in respect of the class or classes of business to which this Agreement applies without prior approval of the Reinsurers, and any reinsurance arrangements relating thereto shall be maintained or be deemed to be maintained unaltered for the purpose of this Agreement.

As part of the necessary disclosure in negotiating this treaty, there was a vast amount of disclosure as to what Gordian’s underwriting portfolio and policy was relating to directors’ and officers’ insurance.  Article 16 gives the reinsurers the protection that we are not going to change that, so they know they have the protection that we are not going to change our existing D&O underwriting policy or practice.  That is why the class of policy – the class on page 618 – is expressed in those general terms.  Reinsurers have complete protection from us departing from what is our existing policy as to our best commercial judgment in terms of what underlying risks to bind ourselves to.

CRENNAN J:   That is the point of the special acceptance provision, I presume.

MR JACKMAN:   Yes.  The point of the special acceptance provision is that if we were to depart from our usual practice we need to ‑ ‑ ‑

CRENNAN J:   Yes, you have to go back to it.

MR JACKMAN:   Quite.  I am going to come in due course to the question of whether there was ever any issue about us departing from our usual underwriting practice.  When the arbitrators say that we do not have a plausible alternative, we do in that reinsurers are completely protected by the operation of Article 16 and all of the disclosures that were made as to what our existing underwriting practice was.  It is not a case where they were exposed to some unknown risk that we might start writing very long policies.

I should point out to your Honours while I am in volume 1 – I took your Honours to Article 16 – the PINA special clause on page 471 dealing with North American risk.  So it is not applicable to the claims that were in issue in the arbitration.  At about line 17 your Honours will see:

This Agreement excludes –

These are exclusions –

any claim arising out of:

Then at the very foot of the page:

iii)claims made coverages with an extended reporting period obligation exceeding 36 months beyond the expiry of the policy unless specially accepted.

So for North American risks there is a three-year reporting period which operates by way of exclusion.  Then over the page in v) in the expiring policy it referred to:

policies issued for periods longer than 12 months plus “odd time” not exceeding 18 months in all unless specially accepted.

What happens in the new policy in December 1998 is that v) is deleted.  So for North American risks there is an express provision saying claims are excluded arising out of claims made coverages with more than a three‑year reporting period, but there is nothing said, apart from what I am about to come to, concerning claims otherwise than those in North America.

Now the critical document on this matter is at page 621.  It is the very first of the annexures.  It is a letter from GIO to our broker on 15 December 1998, dealing with the “10 in excess of 10 million” treaty.  Paragraph 4.0 at the foot of that page seeks, among other things, the second‑last bullet point, “equivalent cover to 1998” – sorry, third‑last bullet point, “multi year cover”, so no reference there in what is being sought to any particular timeframe such as three years.  Multi‑year cover is being sought and second‑last bullet point, “equivalent cover to 1998 (or better)”. 
Then paragraph 6.0 is the important paragraph:

As I mentioned earlier, we do not have the treaty contracts for 1998, nor on checking, do we appear to have the wordings for 1997 and will follow up with Flemings, however, I recall that there was a limit on the treaty that it would cover original contracts issued for 12 months plus odd term but not to exceed 18 months in all.  This is certainly the case pertaining to USA/Canada risks –

Well, he was right about US/Canada risks and I have taken your Honours to the PINA Clause.  But his recollection was wrong about other risks because there is simply nothing in the expiring wording that imposes such a temporal limit.  Then the letter goes on to say –

Multi year contracts have gained popularity in recent years and we are frequently asked to write for periods of two to three years, usually as a stretched aggregate over the terms or on annual limits basis.  In some cases, we are asked after the first year of a multi year contract to “roll forward” the contract for another year so that a new (2 or 3 year) period commences.  Our competitors are able to offer this and we have been offering it within our retention but need to obtain reinsurers agreement to use the treaty capacity to write multi year contracts –

That is because of his erroneous understanding that there was an express limit in the treaty terms of 12 months.  As it happens the arbitrators found there was an implied limit and we do not cavil with that for the expiring policy.  But what he wants to do is to write multi year contracts –

and would appreciate the Everest’s –

That is one of the proposed reinsurers who actually never entered into the contract –

comments on this issue, including under the “PINA Special Risks Clause.”

Now, just pausing there, two or three years is given by way of example of what has motivated the author, Mr Fletcher, to write this letter, but what he is really concerned with are multi-year contracts and, apart from specifying the examples which have led to the request, his language begins and ends in that second paragraph of 6.0 with the expression “multi‑year contracts” and that is the expression that he uses at the top of the page in the third bullet point.  So what he wants ‑ ‑ ‑

HEYDON J:   That could be something that goes on for a long time ‑ ‑ ‑

MR JACKMAN:   Yes, indeed.

HEYDON J:   ‑ ‑ ‑ because it could happen at the end of every year.

MR JACKMAN:   That is fine as long as it falls within our established underwriting practice.  That is the protection to the reinsurers.  We would not start writing 40 or 50-year policies, we accept that would be well outside anyone’s usual practice, but the protection for reinsurers is not a specific temporal period.  The protection is that we are bound to adhere to our established underwriting practice unless we get a special acceptance.

BELL J:   That requires reference to evidence as to your established underwriting practice, I take it?

MR JACKMAN:   Well, now, this is the question, and the argument now strays into ground of contention 7.  The arbitrators made a finding – if I can go back to their reasons now – in paragraph 79 on page 14 of volume 1 that:

We are not persuaded that the FAI D&O run‑off policy, which covered claims which were made and notified to Gordian within the extended period permitted by that policy of 7 years from 31 May 1999, was within its then “established acceptance and underwriting policy in respect of D&O policies.

Now, that is utterly fatal to us, that finding, if it was properly made.  Ground of contention 7 is to the effect that the arbitrators had no right to make that finding because the issue concerning that was expressly withdrawn by the reinsurers on day one of the arbitration.  I need now to go to the argument on contention 7 to make good that proposition.

While we are in volume 1, can I ask the Court to go to page 94.  This is part of the amended cross‑claim that begins at page 91 and your Honours will see from page 99 that it is dated 10 March 2008.  So this is the reinsurers amended cross‑claim some four months before the arbitration hearing and that did raise as an issue in paragraph 13 at the foot of 94 whether we breached contractual terms.  The particulars:

The underwriting was contrary to the underwriting standards and practices customarily followed in the market for directors and officers liability insurance and [crucially] represented a change to the established underwriting policy of the claimant having regard to –

three matters.  So as of March 2008 there was an issue as to whether this FAI run‑off policy for seven years was within our established underwriting policy, but on the first day of the arbitration – if your Honours go to page 101 – we received ‑ ‑ ‑

KIEFEL J:   Page 101?

MR JACKMAN:   Page 101.  We received a further amended cross‑claim.  It goes through to 105.  The date there is “10 July 2008”, day one of the arbitration hearing.  If your Honours go to page 102, your Honours will see that paragraphs 4 to 17, three‑quarters of the way down, have been deleted.  That picks up the allegation in paragraph 13 that we had breached the terms by departing from our established underwriting policy.

BELL J:   Paragraph 13 is in rather different terms to that.  It was an assertion, as particularised, that the underwriting was contrary to the standards and practices customarily followed in the market.

MR JACKMAN:   No.  It then goes on, crucially – the real sting in the particulars to 13 is that it is alleged that the FAI seven‑year policy represented a change to the established underwriting policy of my client.

BELL J:   I understand that, but it seems to me that the particulars seem to blend two matters, yes, which may say ‑ ‑ ‑

MR JACKMAN:   Yes, they do.  My simple point is the reinsurers withdrew as an issue any contention that we had departed from our usual underwriting practice.  The arbitrators had no right to make that finding in paragraph 79 and the Court of Appeal correctly considered this, as far as they went, in the reasons beginning at paragraph 290.

KIEFEL J:   In a sense, though, did not the arbitrators have to track through all this in terms of construing what the arrangement was between the parties?

MR JACKMAN:   In terms of ascertaining the terms of the contract, yes.

KIEFEL J:   They had to make a finding.

MR JACKMAN:   No, not on this.  They could not make a finding a finding on the question of whether we had actually departed from our usual underwriting practice because that was no longer in issue.

KIEFEL J:   I see, as a distinct question regardless of ‑ ‑ ‑

MR JACKMAN:   They had to take into account our argument that there was a plausible alternative to the three‑year limitation, namely, they are fully protected by Article 16 that we are bound to adhere to our established practice which they have had full disclosure of in the negotiations.

KIEFEL J:   I see.  This is a discrete question apart from what was the central agreement between the parties.

MR JACKMAN:   Yes - I am sorry, it is in volume 5, paragraph 290.

FRENCH CJ:   You lose because of 38?

MR JACKMAN:   Yes, quite.  Paragraph 209 sets out our complaint.  Paragraph 291 goes a long way towards accepting our argument:

There are powerful considerations in support of this contention:  the pleading of the point appears to have been abandoned, no evidence was led by the reinsurers on the question and the hearing otherwise appears to have been so conducted.  Such matters do not amount, however, to manifest error on the face of the award; nor would the resolution of the issue be likely to add to the certainty of commercial law.

We did not pass through the 38(5) filter but otherwise it was a good point.  I just need to deal with something that is raised by our learned friends, the reinsurers, in their submissions in reply.  Paragraph 20 of their submissions in reply refers to some “Written submissions of both sides” – it is said by my learned friend – “addressed these questions” – a departure from established practices.

Now, the important thing is that those were written submissions that had been lodged with the arbitrators and exchanged before the relevant amendment to the pleading.  The arbitrators adopted a conventional practice of requiring an outline of submissions before the hearing.  The first ones that are referred to my learned friend, appeal book 1, page 231, are dated 24 June 2008.  They are the reinsurer’s opening submissions.  Then appeal book 1, pages 255 to 256 are dated 7 July 2008.  They are our opening submissions.  But the relevant amendment to the pleading did not occur until day one of the arbitration, which was 10 July.  So, yes, there were written submissions, just as there were pleadings, but the written submissions on this point necessarily fell away when the pleading of any departure from our usual underwriting practices was abandoned.

Finally, if your Honours go in volume 1 of the appeal book to page 266, this is part of our closing written submissions in the arbitration.  The submissions begin on page 265 and at the top of 266 we reminded the arbitrators – paragraph 5:

There is no allegation that:

(a)the FAI run-off policy was written unreasonably or contrary to the underwriting standards and practices which were customarily followed . . . 

(b)contrary to the Claimant’s established underwriting policy –

So we were reminding the arbitrators of something that they overlooked when they composed paragraph 79.

HEYDON J:   That was 21 July 2008.  When did the arbitration finish?

MR JACKMAN:   On 22 July.  That was the last day of oral address.

BELL J:   In the reply submissions it is put that your witness was cross‑examined without objection about the unusual features of the policy and the need for a special acceptance, but that, you say, went to the special acceptance point.

MR JACKMAN:   Quite.  One can tell from the way in which the submission is composed by my learned friends.  It was relevant to the special acceptance point.  We could not oppose that because we were relying upon that on our section 18 ground that we lost on and that is finished.

Just before I leave contention 7 and go back to the “10 and excess of 10” policy, my learned friend yesterday referred to this notion of a departure from usual underwriting practices as being a factor relevant to reasonableness.  One finds that also in their written submissions for reference, paragraph 21(e) in their written submissions in‑chief. 

It is not a matter that was ever put to the arbitrators as having any relevance to the question of 18B reasonableness and your Honours should disregard the submission that it is one of, as my learned friend puts it, the central factors bearing upon the question of reasonableness.  It was utterly irrelevant to that matter because it was never put.

Now, just returning then to ground of contention 8, the 15 December letter attached to the slip at 621 to 623 is stamped, as your Honours will observe, by all four of the reinsurers indicating their acceptance that whatever this letter amounts to it is part of the contract and has to be construed as informally as it may be expressed.  It must be construed as part of the written contract and it is our submission that the better construction of it is that it involved an acceptance of multi-year cover as distinct from a more limited acceptance of only multi-year cover up to a three‑year limit. 

There is one document that I should take your Honours to that will no doubt be relied upon in opposition to that submission.  At 611, one of the reinsurers, ERC, writes to Aon, our broker, 22 December 1998 confirming a quote and then there are four bullet points.  The fourth of the bullet points is:

Original contracts:  Up to three years is acceptable, PINA Clause to be amended.

The PINA clause was amended.  It is our submission that the reference to three years pertains to the amendment of the PINA clause but if on its proper construction that has a wider operation, it does not go anywhere because of the finding made by the arbitrators that this letter did not go to the other reinsurers.  That finding is made in volume 1 ‑ ‑ ‑

FRENCH CJ:   The relevant reinsurer here is – the stamp is from Gerling, is it not, which is now Assetinsure?

MR JACKMAN:   Yes.  I do not think ‑ ‑ ‑

FRENCH CJ:   I am sorry, I thought you said ERC.

MR JACKMAN:   The finding that I want to take your Honours to is at paragraph 28.  At the end of paragraph 28, four lines up from the bottom:

Each of the reinsurers also initialled and stamped a copy of Gordian’s letter of 15 December and Assentinsure initialled and stamped Westport’s quote of 22 December, which was not sighted by Munich Re or XL or initialled and stamped by Westport itself.

So two of the four reinsurers received that, but not the others and this is not a case where there was a lead underwriter who then, in the language of the industry, binds the following market.  Rather, it is a case where each and every one of the reinsurers had to separately agree the terms.  One finds that on page 620 where each of the four reinsurers has affixed their stamp to the placing slip and each of those stamps has words to the effect:

All terms, wordings, special acceptances and amendments to be agreed by –

the particular reinsurer.  So it would not have been enough for ERC to have agreed on a three‑year limit and everyone else was bound to follow.  Each and every one of the reinsurers had to negotiate its own terms.

HEYDON J:   No one was bound unless all were bound?  Or those who ‑ ‑ ‑

MR JACKMAN:   I think it is theoretically possible that one or two may be bound, but it would be a highly unlikely outcome where the terms are different as between reinsurers with their own apportionable risk.  But it is a theoretically possible outcome that one may be bound and three not bound, yes. 

KIEFEL J:   Where does that leave the three‑year contract point?

MR JACKMAN:   That page at 611 is not affixed to the contract.  So it is a pre‑contractual negotiation, but unlike the 15 December letter it is not affixed to the contract.  So as a matter of contractual construction, in our submission, it is irrelevant.  The intention of the parties is embodied in the placing slip with its attachments. 

KIEFEL J:   But I thought you were saying in paragraph 28 that not all of the reinsurers have accepted Gordians?

MR JACKMAN:   No, they all accepted our request for multi‑year policies because they stamped an attached copy of the 23 December letter to the slip.  So they have all agreed on that.  One of the reinsurers has written in the course of negotiations up to three years is acceptable.  It is not clear whether that just relates to the PINA clause or whether it relates more generally to the terms of the contract.  We say it is outside the contract in any event, because it is not stamped and attached to it.

KIEFEL J:   So on this basis you are denying that there is an agreement by the reinsurers for a three-year period.

MR JACKMAN:   For three years.  The agreement was multi years and their protection lay in our obligation not to depart from our usual practice.

CRENNAN J:   Just so I am clear:  that is an alternative argument ‑ ‑ ‑

MR JACKMAN:   Yes.

CRENNAN J:   To your three-year cover argument.

MR JACKMAN:   Absolutely, yes.

KIEFEL J:   How can you have an alternative argument which denies the first argument?

MR JACKMAN:   It is a completely independent alternative argument.  If I succeed on the first then that is fine and your Honours need not consider this.

KIEFEL J:   How do you succeed on the first?  How do you make out an agreement where all reinsurers are bound to the three‑year claims period?

MR JACKMAN:   That is what the arbitrators say, as your Honours have pointed out, in the first sentence of paragraph 80.

KIEFEL J:   But you are saying that this undermines it.

MR JACKMAN:   I am putting an alternative.  If your Honours reject the alternative, I am still left with the first sentence of paragraph 80.

KIEFEL J:   But they are inconsistent, are they not?

MR JACKMAN:   Yes, they are.  I accept that.  That is why they are true alternatives. Yes.  As long as I win on one or the other I do not particularly care which, with respect.

GUMMOW J:   Assume, Mr Jackman, you do win on one or other of these – or you could win on one or other of these construction points that falls in ground 8 of your notice of contention.  Assume that is right – that is a good answer to any grant of leave on the outstanding grounds – what would be the impact of that on the assumption adverse to you that Mr Walker is right on the deficiency of reasons point?  What I want to ask you is there is a question of construction, I think, of section 38(3) which says:

On the determination of an appeal under subsection (2) the Supreme Court –

We are talking about the Supreme Court in its original jurisdiction, actually –

may by order:

(a)confirm, vary or set aside the award, or

(b)remit –

That word “may”, what is the force of that?  Does it mean that the Supreme Court must do one or other of those things?

MR JACKMAN:   No, it is a discretionary matter whether they do anything at all.  That is part of the residual discretion.  Promenade Investments gives some discussion about that.

GUMMOW J:   I am not worried about Promenade Investments.

MR JACKMAN:   Very well.  There is a residual discretion as to what the court does under section 38.

GUMMOW J:   Wait a minute.  Does that mean that the court could decide nevertheless to confirm the award, despite the deficiency of reasons, because if it had been done properly the award would have been the same?

MR JACKMAN:   Absolutely, yes.

GUMMOW J:   You may be right, but it probably needs some help.  In a case called John Fairfax Publications v Gacic 230 CLR 291 at 302 to 303 in paragraphs 28 and 29 we referred to authorities going back to Chief Justice Jervis that in those circumstances the statute confers a power which must be exercised one way or the other. On the other hand, in Thomas v Mowbray 233 CLR 307 at 340 to 341 at paragraph 57, Justice Crennan and I referred to the same question which arose in that case and we took the view that “may” was not used in an imperative sense. Now, that is where I stand, in a state of perplexity at the moment.

MR JACKMAN:   Dealing with subsection (3), it is a little difficult to see what other possibilities there are apart from the three in paragraph (a) and the remitter in (b).  I cannot think on my feet if anything else ‑ ‑ ‑

GUMMOW J:   Yes.  My question really is – a sub‑question is, as between the various possibilities in (a), does one or other of them have to be achieved and if so, what determines – is there any further discretionary element in the choice between conferring, varying or setting aside?  See what I mean?  What I am putting to you is, would it be open for you to argue that even if your side failed on the sufficiency of reasons point and Mr Walker succeeded, nevertheless the award should not be set aside ‑ ‑ ‑

MR JACKMAN:   Yes, it should be confirmed.

GUMMOW J:   ‑ ‑ ‑ because of these other questions, namely, that you would win anyway because of ground 8 in your notice of contention?

MR JACKMAN:   Yes, and that would be ‑ ‑ ‑

HEYDON J:   Sufficiency of reasons affects 18B.  If one does not get to 18B, the outcome is defensible on some other basis.  Do you adopt that chain of reasoning?

MR JACKMAN:   Yes, I do, and that, in my submission, would involve a confirmation of the award.  So it is the first of the possibilities.

GUMMOW J:   Now, how does Promenade Investments bear on this?

MR JACKMAN:   I am sorry.  It may not.  I misunderstood your Honour’s question when I said that.  Promenade Investments says that even if the subsection (5) integers are satisfied, there is nonetheless a residual discretion as to whether to grant leave to appeal or not.  That is a different point, I am sorry. 

So I think what your Honour is putting to me is that there would be a possible outcome even if there is an error shown.  There is, available to this Court, as an outcome confirming the award because there is no point in any remit of the further reasons because that question does not arise.

GUMMOW J:   Even though their reasons were deficient?

MR JACKMAN:   Yes.  That would be, in our submission, a proper exercise of discretion in those circumstances.

FRENCH CJ: Just for completeness, Mr Jackman, so far as the powers of the court are concerned, is the operation of section 75A of the Supreme Court Act completely displaced by the provisions of section 38.  I had a look at it, I think, in the context of a recent judgment in Kostas which involved an Appeal from a tribunal.  I cannot remember – the Commercial Tribunal and Tenancy Tribunal and 75A has a kind of ambulatory application which is not limited to appeals to the Court of Appeal because it is appeals to the court.  The term “appeal” is not defined, but presumably ‑ ‑ ‑

MR JACKMAN:   Our solution is that the particular would override the general, that is, the particular provisions heavily negotiated and fought over in section 38 ‑ ‑ ‑

FRENCH CJ:   That may be the right answer.

MR JACKMAN:   ‑ ‑ ‑ are the provisions that set an exhaustive code for rights of appeal from arbitral awards.  It would subvert the purpose of section 38 if other discretions were to enter into the picture.  I can indicate that I no longer press grounds of contention 9 and 10.  Now, 9 dealt with an exception dealing with run‑off cover, I do not press that.  Contention 10 related to the lower layers of reinsurance, 5 in excess of 5, 3 in excess of 2.  I no longer press that contention and what we respectfully adopt in its place is the finding of the arbitrators in paragraph 76 that there are no differences which are material to the question here between the various layers.

FRENCH CJ:   So far as contention 10 goes, can I just be sure what paragraphs of your submissions we can, as it were, cross out.  Does that take us right through to 112?

MR JACKMAN:   Yes.

HEYDON J:   That is 85 to 112?

MR JACKMAN:   Yes, that is right.  Then dealing with the rest, contention 7 beginning at 113 I have already addressed and contentions 11 and 12 – contention 12 falls away because that was parasitic on contention 10.

HEYDON J:   So that means 124 goes out?

MR JACKMAN:   Yes, that is correct.  Can I also indicate, one of the arguments that we put in relation to contention 8, if your Honours go back to paragraph 71 of our written submissions, paragraphs 71 to 76 I have not addressed orally.  I actually go further and I withdraw those paragraphs.  They dealt with implied terms from custom and usage which, as the oral argument will have demonstrated, I am not challenging.

BELL J:   I am sorry, so those paragraphs that are withdrawn are 71 to?

MR JACKMAN:   To 76.

BELL J:   To 76.  Thank you.

MR JACKMAN:   May it please the Court, otherwise we rely on our written submissions both as to the section 18B questions in which the Court has reserved the question of leave and the notice of contention generally, other than the paragraphs I have indicated we withdraw.  May it please the Court.

FRENCH CJ:   Thank you, Mr Jackman.  Mr Solicitor.

MR GAGELER:   We bring a different perspective to the important question of principle raised by the appeal.  The Victorian Court of Appeal in Oil Basins and the New South Wales Court of Appeal in this case both equated the duty to give reasons imposed by section 29(1)(c) of the Commercial Arbitration Act with the duty imposed by Article 31(2) of the UNCITRAL model law. 

The New South Wales Court of Appeal in this case and the parties to the appeal before this Court have proceeded upon an acceptance that the choice as to the content of that singular duty lies between, or somewhere between, the judicial standard identified as appropriate in Oil Basins at paragraph 54 and the arbitral standard identified in the judgment of Justice Allsop in the New South Wales Court of Appeal at paragraph 215, a standard which his Honour drew from the judgment of the English Court of Appeal in Bremer and particularly from some observations of Lord Justice Donaldson.

In our submission, the equation of the duty imposed by section 29(1)(c) of the Commercial Arbitration Act with the duty imposed by Article 32 of the UNCITRAL model law is wrong, or at least, and sufficiently for present purposes, not necessarily right and whatever the content of the duty imposed by section 29(1)(c) might be, about which we say nothing, the duty imposed by Article 31(2) of the UNCITRAL model law involves a standard which is lesser than the Bremer standard and which is best stated in the terms we have used in the second sentence of paragraph 7(c) of our submissions and that we have repeated elsewhere in our submissions, and that is that the obligation is discharged if arbitrators give their actual reasons in a form sufficient to demonstrate whether or not they had dealt with the actual dispute referred to their determination.

To use some language of Mr Walker yesterday, it is in our submission sufficient for the reader of an award to say, “Yes, I know that was the issue and I know you have decided it thus.”  It is not necessary that the reader know why the issue was decided thus and it is not necessary that the reader know why alternative views, and particularly arguments put by the parties to the arbitrator, whether they be arguments of law or fact ‑ ‑ ‑

CRENNAN J:   That harks back, does it not, to that observation of Justice Buchanan in Oil Basins, that we look to the actual disputes in order to determine ‑ ‑ ‑

MR GAGELER:    No, your Honour.  What I am seeking to focus on is the context in which the two different duties to give reasons appear and it is by reference to the context of those duties that I draw a different content.  So whatever Justice Buchanan may have said, and whether it be right or wrong it is in the context of section 29(1)(c) of the Commercial Arbitration Act - it may or may not be right in that context - it is wrong, in our submission, in the context of the model law. 

To take an extreme example, your Honours, the reasons for the award actually considered by the Privy Council in the Bay Hotel Case, to which your Honours were taken yesterday are, in our submission, sufficient to meet the standard required by Article 31(2).  As the Privy Council observed in dicta in that case they would not be sufficient to meet the standard in Bremer.

The starting point, as I indicated in answer to your Honour Justice Crennan for the submission we make is that a duty to give reasons, however it might be expressed, takes its content from its context.  Part of the critical context for any duty to give reasons is the function that the giving of reasons serves.  If you look to the context of the 1979 British Act, that is the Arbitration Act 1979 (UK), which your Honours have, under which Bremer ‑ ‑ ‑

GUMMOW J:   Just before you do that, Mr Solicitor, looking at your paragraph 22, you say:

Arbitrators’ decisions are not an exercise of public power –

But their enforcement may be?

MR GAGELER:   Their enforcement may be, yes.  Or their enforcement is, of course.  That is right.  If your Honours look to the content of the United Kingdom Act, under which Bremer was decided, you will see that the duty to give reasons was found in section 1(5) and that it was expressly functionally related to the provision or appeal in section 1(2).  So reading the section from the beginning in subsection (2) it was provided that:

an appeal shall lie to the High Court on any question of law arising out of an award –

Subsection (5) then provided that –

Subject to subsection (6) below, if an award is made . . . 

it appears to the High Court that the award does not or does not sufficiently set out the reasons for the award, the court may order the arbitrator or umpire concerned to state the reasons for his award –

This is important –

in sufficient detail to enable the court, should an appeal be brought under this section, to consider any question of law arising out of the award.

So the very provision provided within it the standard that the reasons were to meet.  That was subject to subsection (6).  Subsection (6) provided that the High Court shall not make an order under subsection (5) unless it is satisfied, and relevantly (a):

that before the award was made one of the parties to the reference gave notice to the arbitrator or umpire concerned that a reasoned award would be required –

That terminology of “reasoned award” is something which your Honours then see appearing peppered throughout the English cases.  The functional relationship between subsection (2) and subsection (5) that in express terms informed the content of the duty imposed by subsection (5) by order of the court is then what informs the English concept of a reasoned award.  This is brought out perhaps most clearly in a subsequent judgment of Lord Donaldson as Master of the Rolls in a case called, in short form, the Ninemia [1986] 1 QB 802 at 807. Your Honours ought have it. If you go to page 807, letter D, this is what is said:

The Arbitration Act 1979 nowhere defines what is meant by a “reasoned award”, but it is clear from section 1(5) that what is meant is one which states the reasons for the award in sufficient detail for the court to consider any question of law arising therefrom if, of course, it were to give leave to appeal.

FRENCH CJ:   We do not seem to have that authority, Mr Solicitor.

MR GAGELER:   Your Honours ought have it, that is all I can say.  There may be a slip between the cup and the lip, but I think I am not responsible for that.  The last sentence I wanted to read is: 

This is what a party is asking for, if he gives notice that a reasoned award is required.

Another case that your Honours may not have, because it is in exactly the same category, is a case call Transcatalana [1995] 1 Lloyd’s Rep 215, where the same link is made at page 217 in about the middle of the left‑hand column between the content of the duty to give reasons and the appeal on the question of law.

Now, if you then go to the terms of the 1996 English Arbitration Act – which I hope your Honours have – which is the legislation mentioned in passing by the Privy Council in the Bay Hotel Case, what you will see, relevantly for my purposes, is two things.  One is there is no wholesale adoption of the structure of the model law, which I will come to in a moment, and there is a continuation of an appeal on a question of law and there is a continued link between the content of reasons and the ability to pursue such an appeal.

You see that, just picking up the most pertinent parts of the Act, if you go to section 52.  Subsection (4) imposes the duty to give reasons in language which is reflective of the actual language of the model law.  If you go, though, to section 69, there is provision for an appeal on a point of law which provides:

Unless otherwise agreed by the parties, a party to arbitral proceedings may . . . appeal to the court on a question of law arising out of an award made in the proceedings.

There is an extra sentence that is added:

An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section.

So if you have reasons, then, subject to any agreement to the contrary, there will be an ability to appeal on a question of law and, clearly enough, the reasons in England under the 1996 Act still seem to be necessarily sufficient to allow such an appeal to occur.  So the Court of Appeal in the present case, in paragraph 222 of Justice Allsop’s reasons for decision, to which your Honours need not turn, mentions a number of post‑1996 English cases, but all of them effectively apply - Bremer, Ninemia and Transcatalana or some combination of them - to the 1996 Act, which is totally understandable given the availability of an appeal on the question of law.

One other aspect that your Honours may be just interested to note.  Under the 1996 Act, in section 70(4), on an application made to the court under either section 68 or 69 – 69 is the one we have just looked at – the court has the ability to order the tribunal to state the reasons for its award in detail, and again there is an express purposive link.  Section 68 I should also mention.  That allows the challenging of an award on the ground of a serious irregularity.  One of the irregularities mentioned in subsection (2)(h) is a:

failure to comply with the requirements as to the form of the award –

Your Honours will recall that section 52, which imposes the duty to give reasons, is headed “Form of award”. If you then go to the terms of the model law, what you see is a very different structure. The model law is Schedule 2 to the International Arbitration Act, which your Honours should have.

If I may mention in passing, Article 2A, which in my print is at page 44.  Article 2A deals with matters of interpretation.  Paragraph (1) says:

In the interpretation of this Law, regard is to be had to its international origin and to the need to promote uniformity in its application –

Hence the relevance of what has been said in Quebec and in Hamburg.  Paragraph (2) says:

Questions concerning matters governed by this Law which are not expressly settled in it are to be settled in conformity with the general principles on which this Law is based.

Context and purpose, therefore, informing interpretation and content.  Article 31 your Honours have seen extracted many times.  It is at page 61 of the print I have.  It is headed “Form and contents of award” and it is Article 31(2) which says:

The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given –

The context in which that occurs, though, in terms of recourse against an award is very different.  If you go to Article 34, it is said in paragraph (1):

Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with ‑ ‑ ‑

GUMMOW J:   I am sorry, where are you reading from, Mr Solicitor?

MR GAGELER:   Article 34, paragraph (1):

Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article.

Paragraph (2) is relevant in two respects.  It says:

An arbitral award may be set aside by the court specified in article 6 only if:

The relevant bits are paragraph (a)(iv) and paragraph (b)(ii).  Paragraph (a)(iv) has as a ground for setting aside an award if the party making the application furnishes proof that, relevantly in (iv), the arbitral procedure was not in accordance with this law - I am omitting a lot of words, but they are the relevant ones – the arbitral procedure was not in accordance with this law and paragraph (b)(ii) allows the setting aside if the court finds that the “award is in conflict with the public policy of this State”.

Can I take those in turn?  Arbitral procedure in terms of paragraph (a)(iv) includes comfortably as a matter of language the requirements of Article 31 as to the form and contents of the award and that has been so held in Hamburg and in Quebec.  I will mention those cases to you in just a moment.  There is absolutely no doubt under the model law that an arbitral award that does not comply with Article 31 remains an arbitral award.  It is just that it can be set aside by a court under Article 34(2)(a)(iv) but that capacity of the court to set aside an award for an absence of reasons must be read with paragraph 4 of Article 34 which says that:

The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside.

The power of an arbitrator to revisit an award you find in Article 33 where, and I will not read this out, it is possible, particularly if you read paragraph (1) and paragraph (5), for an arbitrator to provide, if you like, supplementary reasons which then form part of the award. 

There was some debate yesterday concerning the suggestion of Justice Allsop in the Court of Appeal at page 225 as to whether or not the power conferred by section 43 of the New South Wales Act was an appropriate remedy in a case of apparently defective reasons.  There is no doubt that what would be able to occur, in any event, in relation to the model law is that the court in conducting the hearing to set aside the arbitral award would be able to adjourn to allow the arbitrator to give supplementary reasons which the arbitrator would have power to do under Article 33.

HEYDON J:   Is there a specific provision in the Commercial Arbitration Act which corresponds to the material in the Code that you have taken us to?

MR GAGELER:   In the International Arbitration Act, your Honour?

HEYDON J:   No, in the New South Wales Act.

MR GAGELER:   The 2010 New South Wales Act?

HEYDON J:   No, the 1984 one?

MR GAGELER:   No.

HEYDON J:   Do you say Justice Allsop was correct in paragraph 225?

MR GAGELER:   I do not say anything about it.

HEYDON J:   You just mentioned it, but you do not want to say anything about it.

MR GAGELER:   I mentioned it only to contrast it with what would occur – contrast the uncertainty which may have been raised in argument with the certainty as to the position under the model law enacted by the Commonwealth, your Honour.

HEYDON J:   But how does the certainty of the model law assist us in the present case, which is not directly about the model law?

MR GAGELER:   Your Honour, I want to avoid collateral damage.

HEYDON J:   Collateral?

MR GAGELER:   Collateral.  The difficulty is, as I pointed out in the beginning, that two appellate courts and the parties before your Honours have all proceeded on the common assumption that what is good for the New South Wales Act is as articulated, or potentially as articulated, in the United Kingdom, and is good for the model law.  I want to dispel that.

GUMMOW J:   But the model law you have shown us contains no provision for complaint as to manifest error of law.  That is your point, is it not?

MR GAGELER:   That is my point, yes.  You just cannot equate the two.  I have taken you to what I wanted to say about Article 34(2)(a)(iv).  I wanted to mention also Article 34(2)(b)(ii) – that is, “conflict with the public policy of this State”.  Your Honours have, I know, an extract from the UNCITRAL commentary on the model law dealing with Article 34(2)(b).  What is there relevantly said at page 36, at the top of the right‑hand column, is that:

It was understood that the term “public policy” . . . covered fundamental principles of law and justice in substantive as well as procedural respects.  Thus, instances such as corruption, bribery or fraud and similar serious cases would constitute a ground for setting aside.

It has been held in Quebec and we think held in Hamburg, although I have not got that bit of the judgment translated, that the public policy ground does not extend to deficiency of reasons.  I should point out that in the International Arbitration Act in section 19, paragraph (b), it is enacted for the purposes of the incorporation of the model law into Australian law that conflict with public policy includes a case where a breach of the rules of natural justice occurred in connection with the making of an award.

It is for that reason that we have quite carefully constructed in the submission in paragraph 7(b), second sentence, the content of the duty to give reasons as incorporated into Australian law through the International Arbitration Act, picking up the model law, that it has nothing to do with error of law.  Error of law is not a ground for setting aside an award, but it is important that procedural fairness be able to be seen or not seen, as the case may be, to be complied with.

I mentioned that what I said appears to us to be consistent with the Quebec and Hamburg position, which is important, your Honours, because of the requirement of Article 2A, paragraph 1 of the model law that:

regard is to be had to its international origin and to the need to promote uniformity –

In Quebec - your Honours have been taken to the extract of the judgment of Justice Gonthier which we included in our bundle of material.  We have separately given your Honours the complete case because the extract, I think, is for present purposes deficient.  The complete case is headed up in a volume of Model Arbitration Law Quarterly Reports.  Your Honours may be assisted by glancing at the minimalist form of the award that is actually before the Court in that case.  It is at pages 10 through to 12. 

What was argued was that it was so minimalist as to breach the public policy provision of the Quebec Commercial Arbitration Code, which was in the same terms as Article 34(2)(b)(ii) of the model law.  That submission is dealt with by Justice Gonthier at pages 12 to 14 where his Honour extracts the same commentary that I have taken your Honours to and I read from paragraph 297, that his Honour extracts at page 13 and he says after that:

Thus it is the civilian notion of public policy which underlies art.34(2)(b)(ii).

Then after some more commentary he says at page 14, middle of the page –

In other words the fact that there were no reasons given for the award or that the reasons given were insufficient will not, in itself, make it contrary to the public policy of Canada.

In our respectful submission precisely the same position in Australia.  Then his Honour at page 16 goes on to consider another possible argument, which appears not to have actually been put by the parties in the case, that the inadequacy of reasons may go so far as to be a breach of the duty imposed by Article 31(2) and be able to lead to the court setting aside the award under Article 34(2)(a)(iv), a possibility which he contemplates, but ultimately and without reading what he says over the next couple of pages, he says that a modest form of award is sufficient. 

Now, it is true, as Mr Walker submitted yesterday, that this actual decision may be capable of being justified even on the Bremer test, but the Bremer test is not actually used by Justice Gonthier.  Your Honours, we have in our bundle of material provided an extract from the Hamburg Appellate Court decision.  We have, with the assistance of Mr Jackson’s well‑resourced legal team, been able to turn up the actual report of the Hamburg Court, in German, overnight.  What we have not done is yet come up with an agreed translation, but we will do that and when we have done that – I can provide the judgment in German if it would assist your Honours now, but we will also attempt to provide a translation which we will seek to agree with the other parties.  If your Honours want the German, I will provide it now.

KIEFEL J:   Yes, please.

CRENNAN J:   Give it to Justice Kiefel.

FRENCH CJ:   Some of us do.

MR GAGELER:   I thought I might meet that response.

FRENCH CJ:   Some of us may find it more useful than others.

MR GAGELER:   If the Court pleases, those are our submissions.

FRENCH CJ:   Thank you, Mr Solicitor.  Yes, Mr Jackson.

MR JACKSON:   Your Honours will have our outline of propositions and may I deal first with the matters that are set out in paragraphs 1 to 7 of that outline.  Section 29 – and I want to deal with the requirement for reasons in section 29(1)(c).  Your Honours, it requires, of course, that unless the parties are otherwise agreed in writing that the award is to include a statement of the reasons for making the award that has both positive and negative results in a way. 

The positive implication is that the arbitrator is to say why the arbitrator made the award which the arbitrator did and, secondly, the negative implication, as it were, is that the arbitrator does not have to set out other reasons which might have led to that result or another result, nor do there have to be reasons which did not lead to that result and, thirdly, your Honours, in our submission, the arbitrators do not have to give, as has been put in some of the cases, reasons for the reasons.

What they have to do is give a statement of reasons for making the awards.  Your Honour, error in the reasons does not in itself mean that reasons have not been given.  The second point, your Honours, is this, and it is referred to in paragraph 5 of our outline of propositions and that is that very many arbitrations have more than one arbitrator.  All that is required is a statement of the reasons for the making of the award and it has been held – and I say that with the qualification to which I shall come in just a moment – that a dissenting arbitrator’s reasons are not required.

The qualification, your Honour, is that that derives from a decision of the English Court of Appeal in which there was an agreement for arbitration but the agreement provided in terms for there to be reasons.  The decision, your Honours, is Cargill International SA against a body which I describe as SIMSA for brevity [1998] 1 Lloyd’s Rep 489. The relevant rule is set out at page 491 in the right column about a third of the way down. It is rule 7.2:

The award shall state the arbitrators’ reasons therefore and whether any sum awarded carries interest thereon.

Your Honours will also see the rules set out at the start of Lord Justice Waller’s reasons at page 494, the left column, about point 7 on the page.  Your Honours, there was, it was assumed, a dissenting arbitrator.  You will see that referred to at page 495 in the left column about point 8 on the page, commencing “The argument before the Judge”.  Then your Honours will see at page 495, also in the right column, about two‑thirds of the way down the page, where it was said by Lord Justice Waller:

It is undoubtedly common practice where reasons are given for an award in an arbitration in England, for an arbitrator who dissents to be allowed to give his dissenting reasons.

The issue was discussed further at page 496 in the right column.  In the first new paragraph on that page your Honours will see that his Lordship said:

That being the position under English law, it seems to me that it is clear that the proper construction to place on r. 7.2 . . . is that the reasons that have to be stated 
-

and your Honours will see that he emphasised the words “have to be” 0

are only those in favour of the award.  As I see it the only argument for saying that dissenting reasons are reasons “for” the award would have to be on the lines that where there are three arbitrators, the “reason” why there is an award in favour of A, is because two arbitrators thought X and one arbitrator thought Y, and the majority win -

But your Honours will see in the reasons given, the numbers 1, 2 and 3, his Lordship took a different view for the reasons there set out.  Your Honours will also see that at page 497 in the right column at the top and bottom of that column that the other two members of the Court of Appeal agreed.

Your Honours, if I could just move on to another matter, which is referred to in our outline of propositions in paragraph 8 but has, if I may say so, with respect, developed somewhat in the course of the submissions - in the course of the argument doing the case.  We set out there in very short form a number of restraints on arbitrators’ conduct, the point being to say that the arbitrator cannot behave in a wilful way in relation to reasons or something else.

But, your Honours, reference has also been made in the course of the hearing to section 43 of the Commercial Arbitration Act – I will come back to it in a moment – to the concept of “award” in the 1984 Act and to denial of the jurisdiction of the Supreme Court.  May I just say a number of things about that, and I will do so as briefly as I may.  Could I start – your Honours, I am going to go to the terms of the 1984 Act – with section 4(1) of that Act.  It defines, your Honours, not especially helpfully, the term “award” as meaning “final or interim award”.  Interim awards are provided for by section 23 and that is an empowering provision.

Your Honours, the common example might be where there are issues to be decided by an arbitrator, one being liability and the other being quantum.  It will vary from case to case, no doubt.  But there is a discussion of the term “award” and “interim award”, the meaning of “interim award”, as used in the Victorian Act by Justice Dodds‑Streeton in Mond v Berger (2004) 10 VR 534. Your Honours, could I just say, particularly at pages 583 to 591, it is a very long set of reasons, those pages deal with that issue. There is a summary of those reasons, relevantly, at page 589, paragraph [321].

Your Honours, I am sorry to say that we were not able to get a couple of cases I wanted to refer to photocopied in time to give to the Court before we started this morning.  Could I give your Honours those cases to the Court now, or if the Court proposes to adjourn at quarter to, I will do so then, but I am happy to do whatever way your Honours ‑ ‑ ‑

FRENCH CJ:   You can hand them up now, I think.

MR JACKSON:   Yes, thank you.  Your Honours, the relevant passage in Mond is at page 589 and it is paragraph 321. To put it shortly, your Honours, the view taken by her Honour was that essentially – it is set out in subparagraph 2:

An interim award, although not statutorily defined, refers to an award which deals with only some of the referred issues.  It must deal with those issues finally.

There is some discussion, your Honours, also of interim awards in a decision of Justice Lee in Queensland in Resort Condominiums International v Bolwell [1995] 1 Qd R 406. Your Honours, I do not think I need to take your Honours to the passages there. They are referred to by Justice Dodds‑Streeton in her reasons.

Your Honours, the term “award” does appear to be used in the 1984 Act in several senses.  One is that it is referred to as meaning the operative part of the award, the part that would equate to the judgment or orders of a court, if one were talking about orders of a court.  That is one meaning given to it.  Another meaning given to it appears to be as meaning the document in which those decisions are to be found and the third is as meaning the decision and the reasons for it.  It affects, your Honours, section 38 and perhaps section 43 also.  Could I just indicate, your Honours, if one goes to section 29 one sees the term “award” used in each of the three subparagraphs of section 29(1) and it appears to be used in several senses there.  Your Honours, I do not think I need to go through it.

In section 29(2) a distinction appears to be drawn between the terms of the award and the reasons for making the award, in the last part of section 29.  When one goes to section 30, the power to correct an award, it seems likely that the terms being used are in the sense of both the actual decision and the reasons and then, your Honours, if one comes more specifically to a provision discussed in the argument earlier – section 33 enforcement of the awards, it is apparent, in our submission, that there is a discretion conferred by section 33 on the court whether to enforce an award or whether, for example, to leave the matter as one where the parties’ remedies are to be in contract.

Now, your Honours, that is discussed in a decision of the New South Wales Court of Appeal, which is Tridon Australia Pty Ltd v ACD Tridon Inc [2004] NSWCA 146. It is one of the decisions which we have given your Honours and your Honours will see that referred to in the reasons for judgment of the Court of Appeal per Justice Giles in paragraph 6 and in a passage which goes through to paragraph 11 in those reasons.

GUMMOW J:   Do we have this decision?  Do we have a copy of this?

MR JACKSON:   Yes, your Honour.  It is one of the ones I have just given your Honours.

FRENCH CJ:   No, I think we only received the first of those.  It is in the bundle which is coming.

MR JACKSON:   Your Honour, I am sorry.

FRENCH CJ:   No, it is not your fault.

MR JACKSON:   Your Honours, it is very short reasons for judgment.  Your Honours will see paragraphs 6 through to 11, and particularly paragraphs 9 and 11.  Could I say also, your Honours, that although the actual decision has been criticised on various occasions, the reasons for judgment of Justice Lee in the Resort Condominiums Case [1993] 1 Qd R 421 to 424, to which I referred earlier, discussed a similar issue and the result of that case was that enforcement of an award made overseas was not permitted because of the nature of the orders that were contained in the award and also because of the nature of the orders and the lack of some conditions that would be applied to such orders if they were made in Australia, for example, the absence of any undertaking as to damages in the case of an injunction.

Your Honours, if one goes from section 33 to section 38 and the use of the term “award” there, section 38(1) appears, clearly enough, to be denying the jurisdiction of the Supreme Court to do the things that are set out in that provision and that is to set aside or remit an award on a ground referred to there.  Prima facie, we would submit, the term “award” when first used in section 38(1) would refer to the operative part of the award otherwise there would seem to be really nothing to set aside or remit.  However, the term, “face of the award” used in the last part of section 38(1) would seem to include the reasons for the award because of the terms of section 29(1)(c).

The result of those things, in our submission, would be this.  First, the old jurisdiction that existed under the prior Acts to set aside award on the ground of error of law on the face of the award, a kind of quasi certiorari, had gone.  Instead, a right to appeal is given.  “Appeal” I use in inverted commas, in a sense, because as your Honour Justice Gummow referred to a moment ago, it is original jurisdiction being conferred on the Supreme Court.

Secondly, however, the ground of appeal is a question of law arising out of an award that would seem to include the reasons for the award.  Your Honours, whilst that might be the ground for appeal the appeal, one would expect, must ultimately seek to set aside or vary the operative parts of the award.  The legislature chooses the term “appeal” – I appreciate original jurisdiction but uses the term “appeal” – appeals against orders not against reasons.

Deficiencies in reasons may give rise to successful appeals, but one cannot appeal for reasons just on their own because one just does not like them.  Your Honours, if one goes then to section 38(3), the award referred to there, in our submission, is the formal or operative part of the award.

Your Honours, could I just say this.  There was some debate by my learned friend, Mr Jackman, on the question of the correctness of the decision of the Court of Appeal in this case that one has to have leave to seek to maintain an order, an award, if one is not seeking to, in effect, cross‑appeal.  Your Honours, there are some difficulties with that view, in our submission, one being that the question of the relief given under section 38(3)(a), for example, must depend, in our submission, on the question whether the award is correct.

I put that very loosely, but what I am seeking to say is that it would be very difficult to find a substantial basis for saying that, although there has been an error on a question of law, the award itself should be set aside if it appears that the award was properly made on some other ground.  In our submission, your Honours, there are some difficulties in the limitations imposed by the Court of Appeal in that regard and the considerations that were referred to in the English decision by our learned friends are, in our submission, valid.  Could I turn then to section 43, your Honours ‑ ‑ ‑

GUMMOW J:   What is the relationship between 38(3)(b) and 43?

MR JACKSON:   Your Honour, I am just seeking to come to that now, if I may.  If one goes to section 43, it is a provision which is broadly expressed but it is subject to the opening words provision.  Now, your Honours, unless the opening words apply, it would seem to be within the power conferred by section 43 to remit a matter to an arbitrator for reconsideration if proper reasons have not been given.  That gives rise to the question whether the opening words of section 43 would apply and they take one back to section 38(1), and may I come back to that now.

Your Honours, section 38(1) is the denial of jurisdiction to do the things that are set out there, that is, to set aside or remit an award on a ground which is referred to in that provision.  Your Honours, that raises the question whether an award which does not contain a statement of reasons satisfying section 29(1)(c) is yet an award.  If it is, then section 38(1) would seem to bite and section 43 would not because it would be difficult to see that an order requiring reconsideration by the arbitrator by absence of reasons would not amount to remitting an award in terms of section 38(1).

Now, your Honours, could I just say then, coming back to the question your Honour Justice Gummow was asking, one sees that section 38(3)(b) applies in the circumstances that are referred to in the opening words of that provision, that is, one starts with the assumption that there is an appeal under section 38(2). 

In those circumstances, the possible courses available to the court are set out in paragraphs (a) and (b) and what seems to be contemplated by (b) is that there has not been a confirmation of the award, there has not been a variance, there has not been a setting aside of the operative decisions, but there is a remittal of the award which presumably means at least the operative part of it together with the court’s view on the question of law and the court’s view on that question of law may be one which affects the way in which the arbitrator would then deal with the matter.

Now, your Honours, the relationship more specifically between 38(3)(b) and 43 is, I think, to be found in the opening words of 43 and in the question whether because of that you have section 38(1) apply.  Your Honours, I do not know that I can advance it beyond that, but that is, in our submission, what we would say.

Your Honours, could I just say in relation to what I have been saying that in Oil Basins 18 VR 346, paragraph 63, there is a suggestion that – there is a decision of the New South Wales Court of Appeal holding that reasons are part of – your Honours will see that there is a reference to what Justice Kirby had said as a member of the Court of Appeal in Warley Pty Ltd v Adco Constructions. 

We have given your Honours a copy of the case.  It contains the two passages that are extracted there at the pages that I referred to in the footnote, pages 305 and 309.  It is No 4 on the respondent’s list of authorities, I should have said also.  You will see, your Honours, at page 305, left column, last paragraph, that is where one sees the observation made first quoted by the joint Court of Appeal.  You will see the other observation at page 309.  That is in the left column, last paragraph, second sentence, where his Honour had said:

A failure to give “reasons” as the Act envisages would amount to an error of law.

Your Honours, his Honour’s reasons were not the reasons of the other two members of the court, as one can see commencing at page 310, and the other members of the court did not deal with this issue.  In fact, leave had been refused on the ground that no question of law arose and so his Honour’s observations, to the extent they might be potentially relevant, are in a sense obiter.  Could I say those passages do not deal with the meaning of the term “award” in section 38(1).

Your Honours, there is an observation – I am sorry to burden your Honours with these, but there is in the decision of the Tasmanian Full Court in Ridler v Walter [2001] TASSC 98 an observation at paragraph 9. Your Honours, this was a case where no reasons for the award were given. The award was made. There were reasons given as to the order for costs and nothing as to the substantive position. Your Honours will see that referred to in paragraph 7. Then in paragraph 8 there is a reference to section 29(1)(c). In paragraph 9 it was said that:

The failure to include in the award a statement of the reasons for making the award amounts to an error of law –

There is a reference to RP Constructions.  I am sorry, I cannot give your Honours a copy of that because the copy in the library has been taken out by the Court.  Your Honours will then see a reference in the remaining parts to the fact that:

a party to an arbitration who is aggrieved by an award can apply to the Court for it to be set aside pursuant to s42 –

That is the misconduct provision.  Your Honours will see misconduct is defined by section 4 –

or can apply to the Court for it to be remitted to the arbitrator for reconsideration pursuant to s43, or can seek leave to appeal –

The court does not there ‑ ‑ ‑

GUMMOW J:   Can I just interrupt, Mr Jackson.  Is it a result of your submission that a failure to observe 29(1)(c) does not give rise to a question of law within 38(2)?

MR JACKSON:   Yes.  Your Honours, could I just say this also, that the observations in paragraph 9 of that decision do not seem to take into account the opening words of section 43, referring back to section 38(1).  The Tasmanian Act was in relevant similar terms.  Your Honours, I would be about perhaps 10 minutes.

FRENCH CJ:   Yes, all right.  We will adjourn until 2.00 pm.

AT 1.01 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.01 PM:

FRENCH CJ:   Yes, Mr Jackson.

MR JACKSON:   Thank you, your Honours.  Your Honours, may I come back to the question Justice Gummow asked me just before lunch.  I gave an answer to it, but did not elaborate on the reasons for that answer.  The question that your Honour asked me was about the case of an award with no reasons and whether it gave rise to a question of law in terms of section 38(2) and I simply answered it did not. 

Your Honours, I would draw a distinction between a “no reasons” case and a “some reasons” case, if I can put it that way.  If one goes to a “no reasons” case, in our submission, there would not be in terms of section 38(2) a question of law arising out of an award.  If one says what is the question of law that arises out of the award then presumably one is speaking of a question of law which involves, in one way or another, the operative part of the award.

Now, of course, in a case like that there are some remedies.  One remedy would be there is a complete absence of reasons that might well amount to misconduct in terms of section 42.  There is a discussion, your Honours, of that issue in Oil Basins.  Could I just take your Honours to it for a moment?  In paragraphs 74 to 79 and, your Honours, it commences at page 372.  I do not want to go through the detail of that, but your Honours will see that at the end of paragraph 78 in page 374 the members of the court thought it was logical and appropriate to treat an “omission as constituting technical misconduct” if there was some failure to comply fully with section 29(1)(c).

CRENNAN J:   I think at one stage in Queensland a failure to give reasons was misconduct, was it not?

MR JACKSON:   Yes, your Honour, I do not think there was any other provision allowing for appeals at the relevant time.  Yes, your Honour, I think that was the position.  Your Honours, there is a reference to that in footnote 31 to the Commonwealth’s submissions, I am sorry.  Could I just say this also?  In relation to that passage in Oil Basins our submission would be that it really goes too far to say that a mistake in the reasons or an error in the reasons would amount to misconduct.

Indeed, your Honours, if I may say so, with great respect to the Court of Appeal in Victoria, regarding the conduct of the arbitrators in that case as misconduct, be it technical or something that one might expect gave a great deal of offence in some quarters, rightly or wrongly, but, your Honours, may I just say, however, that there is the possibility if there are no reasons given, that the failure to comply with 29(1)(c) would amount to misconduct.

There is also the possibility, your Honours, in that case of the use of section 43 and that will apply if the case is one to which section 38(1) does not and that itself depends on whether the broad or narrow meaning is given to “award” in section 38(1).  Your Honours, where there are reasons and the complaint is one of their inadequacy in terms of content, there is more likely to be a question of law arising out of an award in terms of section 38(2), but the question of law relates really to the content of the reasons in terms of their legal or factual content, as it were, rather than to the fact of the brevity or length of the reasons. 

I am not putting it a hundred per cent clearly, but the mere fact that there is not some relevant reasons does not mean that there is necessarily a question of law.  Your Honours, that one is looking to the content of the reasons is supported by section 38(5)(a) where it is the determination of the question of law concerned.  That really suggests that one is looking at what the content of the reasons as a matter of legal reasoning is.

FRENCH CJ:   Mr Jackson, could I just take you back to 43 for a moment.  Is 43 a power in aid of the exercise of some jurisdiction which has to be found elsewhere?

MR JACKSON:   I am sorry, I am not quite sure I picked up your Honour’s point.

FRENCH CJ:   Is section 43 a section which confers on the court a power in aid of a jurisdiction, the source of which is to be found elsewhere?

MR JACKSON:   Your Honour, I think the answer to that is, in a sense, yes and no.  The no part is that one starts from a matter referred to arbitration by an arbitration agreement.  That seems to be something that has happened outside the purview of the Act, speaking of ‑ ‑ ‑

FRENCH CJ:   Something gets to the court which can be remitted, but it does not have to be the award, it is the matter.

MR JACKSON:   No, your Honour, but can I just say that it does not arise, it would seem to be, unless there is a first consideration of a matter, then there is a reconsideration.  That is the way in which the provision operates.  The yes part of it arises perhaps in relation to the second part of 43 where your Honours will see that a new arbitrator has been appointed.  That could happen because of what is, for example, in section 44.  That is the removal of an arbitrator and replacement.  So, your Honours, section 43 is, in a sense, freestanding but it does not come into operation unless the occasions referred to in it have occurred.

Your Honours, what I was going to move to then, if I may, was the provision of section 47 in relation to interlocutory orders because the Court will see that the Supreme Court by that provision is given an apparently wide power to make interlocutory orders.  That power has been held to be subject to some constraints.  Could I just give your Honours a reference to where those restraints have been discussed.  It is in the decision of Justice Croft in Victoria in Arnwell Pty Ltd v Teilaboot Pty Ltd [2010] VSC 123. Could I endeavour to summarise very briefly, your Honours, what is said.

In paragraphs 12 to 15, it is said that that provision is not to be used as a route for appeal from arbitrators.  Then in paragraph 16, the references to cases where it has been said that it is available only to exercise powers that are beyond the powers of arbitrators themselves.  There is a discussion, your Honours, of the inherent power of a Supreme Court referred to at paragraphs 19 and following.  Your Honours, I do not seek to elaborate upon that, but the issue of inherent power was raised by the Court yesterday. 

Your Honours, may I move to a couple of matters by way of conclusion, as it were.  The first is in relation to the question of the analogy between courts and arbitrators.  Your Honours will see in paragraph 9 of our outline of propositions that we endeavour to summarise matters that we have put elsewhere in our written submissions dealing with the question of equating the reasons of courts and the reasons of arbitrators.  Your Honours, I just would refer to those questions raised by your Honour Justice Bell yesterday and I refer to the matters to which we have there set out.

Your Honours, could I just say in relation to paragraph 9(c) that the emphasis in section 38(5) of the – that the relatively rare occasions on which there will be leave to appeal and the reference to the case being one where there has to be, in section 38(5)(a) and also (b)(ii) demonstrates, in our submission, that it will be the rare case where an arbitration decision has a precedent value.  Of course, your Honours, there are cases where the resulting one arbitration, for example, whether an insurance exemption for flood covers or does not cover recent flooding, for example.

The issues of economy and matters of that kind and grouping of people will have the result that sometimes an arbitrator’s decision is followed and sometimes not followed by other arbitrators, other people, but at the same time this is not the same basis for treating the decision as one which has a legal precedential value.

Your Honours, the next matter with which I wish to deal concerns the question of the identity and qualifications of arbitrators. This relates to the statements in Oil Basins which contain a suggestion – I will elaborate on this in a moment – that the content of the obligation in section 29(1)(c) may be affected by the identity and qualifications of the arbitrators and the procedures involved in the arbitration.

Your Honours, the issue arises because there are observations in the Court of Appeal’s reasons on this aspect which to the untutored perhaps can be confusing.  If I could go to those reasons in 18 VR at page 365, paragraph 53, your Honours will see that there is a reference to Justice Hargrave - references to the matters set out in paragraphs (a) to (f) and the contention was that the judge had erred in referring to those matters.

At paragraph 54 the Court of Appeal says in the first two sentences – or perhaps I should put it this way, your Honours – the first two sentences suggest that what is in paragraph 53 is correct.  The third sentence of paragraph 54 is itself correct and one has to read it, of course, with the paragraph to which reference has been made earlier, paragraph 59, the last sentence of that:

it is the nature of a dispute which sets the standard for reasons, not the nature of the arbitrator.

Your Honours, putting it simply, that would seem to be, ultimately, the position that was arrived at by the Court of Appeal.  The issue, however, with respect, is blurred by the last sentence of paragraph 56.  Your Honours will see there:

the scope of an arbitrator’s obligation to give reasons is logically the same as that of a judge.

Also, if one goes to the last six lines of paragraph 57 commencing on page 367 and going to the next page your Honours will see that it is said:

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.

Your Honours will see, in our submission, that that does rather give a lot more work, we would say, to section 29(1)(c) than it provides.  The starting point, in our submission, and the end point, are the requirement of a statement of reasons for making the award.

Your Honours, could I finally say this.  In relation to the question of there being a public element in relation to awards, there is no doubt that there is some public element.  The public element is that which is required by section 29(1)(c).  It is encapsulated in that provision, and that provides, with respect, the extent of it.

Could we give your Honours a reference, and in that regard, your Honours, we refer to what we have said about the legislative history.  It is important to bear in mind that arbitrators are not public bodies.  They

are bodies which are – the arbitrations are private, and if one goes, your Honours, to the decision of the House of Lords in Westminster City Council v Great Portland Estates Plc [1985] 1 AC 661 at 673, Lord Scarman’s reasons, he gave the principal reasons, your Honours will see that at page 667, about letter D, speaking of the statutory arbitration, in effect, required, he said:

Unless, therefore, the Secretary of State intervenes . . . the council as local planning authority has the power of decision.  But the power is subject to a requirement . . . Where a local inquiry to consider objections has been held, the local planning authority shall:

“consider the report of the person appointed to hold the inquiry –

and there is the provision set out –

prepare a statement of their decisions, giving their reasons therefor.”

Then at page 673, letter D, it is said – this is in reference to In re Poyser –

When a statute requires a public body to give reasons for a decision, the reasons given must be proper, adequate, and intelligible.

That goes down to paragraph G.  Your Honours will recall also that the English Arbitration Act was differently expressed as to the need for reasons, and the sufficiency of the reasons.  Your Honours have been taken to the provision on a number of occasions already, and I do not think I need to do so.  Your Honours, those are our submissions.

FRENCH CJ:   Thank you, Mr Jackson.  Yes, Mr Walker.

MR WALKER:   May I start, your Honours, in relation to the Commonwealth Attorney as intervener the culmination of the argument which concentrated on the arguably different relations between the statute, the 1984 New South Wales statute in this case, and the International Arbitration Act (Cth) with the model law and for that matter laws in Quebec or Hamburg or Germany, all culminated in the proposition that what we put in‑chief as a self-evidently inadequate statement of reasons was in fact to be treated within the meaning of Article 31 and thus the Commonwealth law of which my learned friend, the Solicitor, is jealous, as a satisfactory statement of reasons.

My learned friend summarised that proposition as saying it would be a statement of reasons for making an award to say “I make it thus” and for the reasons we have put in-chief, that is simply to defy English language and to defy the statements that one finds from the civilian countries as well involved in the production of Article 31.  I do not wish to repeat those matters.

The course of the argument for the Commonwealth does not explain why the oft cited formulation by Lord Justice Donaldson in Bremer is either wrong for the purposes it was stated, that is, under the 1979 United Kingdom Act, or why its repetition in the different statutory context it has been repeated in around the world was in either all or some of those, including New South Wales 1984, wrong or inappropriate.

CRENNAN J:   I did not understand him to say it was wrong.  I understood him to say that the model contained a different standard.

MR WALKER:   Yes.  My point is simply this, that the same word is the subject of explication in Bremer as it is found in the article and the article gives rise to the same words which in other jurisdictions have led to the citation of Bremer as being an explanation of what it means.  So whether one uses the word wrong or inappropriate, there has been no attempt in the Commonwealth argument to say, well, what’s wrong with the repetition and application or the Bremer description of what a reason is or what a reason does in the different context.  Of course, we accept that are different contexts.  What the Commonwealth’s argument does not show is why a simple word like “reasons” should be, by its particular context, Article 31 or any other context, so read down as to deprive it of the essential character of matters which explain why an outcome has followed.  

It is obviously of significance in relation to the way in which the Commonwealth put the English jurisprudence to note, as we did in‑chief, the particular role of section 1(5) of the 1979 Act in the United Kingdom.  True it is there is an express function of providing for the capacity to perceive an appeal of law point which is the jurisdictional condition for the order or reasons or further reasons under that regime.  There is no such nexus in the 1984 Act and it would be – I do not suggest the Commonwealth did this – but it would be, of course, an egregious error to read the 1984 New South Wales Act as if it had a provision similar to the 1979 United Kingdom Act somehow between the lines. 

But there is a more substantive reason to dispute the proposition that the functional purpose of informing as to the possibility of an appeal exhausts the nature of what reasons are so as to bring its content down in some reductive way below that which ordinary English would suggest, and that is that in the 1984 Act it is not inevitable that there can be at all any consideration of an application for leave to appeal and that is because section 29 requires reasons but section 40 provides, of course, that parties can agree to an exclusion agreement and agreements to the contrary of what is otherwise required or permissible under the 1984 Act allow parties to pick and choose. 

They may agree not to require reasons under section 29.  They are bound always if they agree not to have reasons also not to have an appeal.  The converse is true.  They may agree under the highly regulated section 40, and see also section 41, to exclude the possibilities of appeal under section 38.  That does not require then to give up reasons and so the scheme of the New South Wales Act which is under consideration like, in our respectful submission, the scheme of the model law itself it cannot be seen to have that link of the United Kingdom kind upon which the Commonwealth Solicitor General relied.

Could I then come to matters raised by my learned friend, Mr Jackson, for the arbitral body interveners in order to provide our response in particular to some of the answers my learned friend gave to some of your Honours’ questions.  I think I have already said in‑chief how we seek to read section 43 with, that is, alongside subsection 38(3), bearing in mind the reference to 38(1) found at the beginning of section 43.  It suffices to say that, in our submission, they cannot be in parallel available if, as we urged in‑chief, and it is not clear to us where the arbitral bodies stand on this, if an appeal available under subsection (2) of section 38 is that which stands in place of the jurisdiction taken away by subsection (1) of section 38, that is, that is, “Subject to 38(1)” means subject to the denial of jurisdiction or the removal of jurisdiction in subsection (1) which is – note the opening words of subsection (1):

Without prejudice to the right of appeal conferred by subsection (2).

It is not the most prelusive drafting but, in our submission, “Subject to subsection 38(1)” at the beginning of section 43 necessarily involves this idea of the unprejudiced new statutory right to appeal conferred by subsection (2), as well as the removal of jurisdiction.  That would mean that these are alternatives, not parallel or concurrent courses under 38(3)(b) and 43.  However – and we do not understand the arbitral bodies’ interveners to dispute this – under either of them there may be reconsideration. 

It is reconsideration of the award, it would appear, although the language is not clear to demonstration of that.  There is no grammatical object of the activity of reconsideration contained in the wording.  An obvious alternative is to reconsider the matters antecedent to making a decision then embodied in an award.  If that rather longer way of putting the matter is accepted, then, of course, it is even clearer that reconsideration, or reconsideration of the award, necessarily involves the possibility of a different conclusion. 

Now, we know that must be right for what I will call the paradigm case coped with by paragraph 38(3)(b).  We know that because the remitter there contemplated is accompanied by the Supreme Court’s opinion on the question of law which was the subject of the appeal and there would not be a remitter with the opinion on the question of law which was the subject of the appeal if there was no error found.  There would be no point in reconsideration if there was no error found, that is, error of law, being that which is raised by the question of law.  It is for those reasons, in our submission, that reconsideration surely means in 38(3)(b) and 43 more or less the same thing.  It means that within the area circumscribed by the order of remitter prescribed by it there is the possibility of changed conclusion, thus, of course, a changed award. 

Now, that gives rise to a matter that I think everyone at the bar table has put more or less uniformly, though with some variations, that is, that the word “award” is used in fluctuating ways in some very closely linked provisions of the Commercial Arbitration Act, including even in the same sections.  I do not need to rehearse the examples that have already been drawn to your Honours’ attention.  The most obvious one is, of course, to be found in the terminology of section 29 which both talks about reasons for making the award and for the need for them to be included in the award.  There is no need for absurd infinite progression as already been put to your Honours.

When one comes to the question of “the face of the award” in section 38(1), plainly enough that includes the included reasons.  It would make no sense otherwise and, in our submission, for those reasons – and that jurisdiction has been excluded, of course under subsection (2), which is the jurisdiction being constituted “arising out of an award” must include that which is given rise to by consideration of the reasons included in the award; “included in” being the expression derived from paragraph 29(1)(c). 

However, we know when we come to at least vary or set aside and certainly set aside in paragraph 38(3)(a) that reasons now become a rather awkward inclusion.  The idea of setting aside reasons is not grammatically impossible, but it is in the tradition of the legal profession, at least an odd idea.  It is not at all linguistically odd to talk about varying reasons, but it is conceptually odd to talk about a court varying an arbitrator’s reasons.  The arbitrators’ reasons will remain the arbitrators’ reasons and the court may see the virtues of different reasons.

So vary or set aside contextually surely means the outcome of the award, what is called in section 29 “the terms of the award” and what I am bound to draw to your Honours’ attention in this case the arbitrators called “award” in the opening paragraphs of the document which then has a next heading “Reasons for the award”.

However, “confirm” may be somewhat different.  Now, “confirm” is a bit odd because we are talking, as my friends have all, for their own purposes, not all friendly to our cause, pointed out that this is an appeal.  The usual idea with an appeal that fails is that the appeal is dismissed.  However, here, we have the idea of a court by order confirming an award.  I draw to attention that in terms of what that is, and whether it is the Supreme Court’s award, as it were, that one may compare with the provisions of subsection (7) of section 38, which renders the outcome of a Supreme Court interference, intervention as if it were the award of the arbitrator or umpire, but that is only for varying.  Confirming seems to be simply that which the Supreme Court does by an order.

A confirmed award, in our submission, seems, by order of the Supreme Court, to be a rather excessive or extravagant thing to say of an award, the outcome of which the Supreme Court thought was correct, but for reasons which were wholly flawed, or might well include, for example, findings of fact for which there was no evidence at all, which may even include findings of fact which were gravely damaging of reputation, but for which there was no evidence at all.  Now, if that is correct, in our submission, it would be odd not to accept that confirming an award is when one says “This is all okay”. 

Leaving the alternative in (b), where one sees it is not necessary for a remitter for reconsideration that there be a set aside, logically, it is easy to see why some lawyers may have preferred to say “Before I can send it back for reconsideration, I must, as it were, displace that which is presently in place, so that the new may emerge.”  That course has not been taken as a matter of language or intellectual structure.  Rather, there is remitter.  Reconsideration, of course, may end up with the same result, and even the same reasons following, who knows, subject to how the Supreme Court’s opinion is dealt with by the arbitrators.

For all those reasons and accepting the difficulties of these not completely explained or elaborated provisions, in our submission, a remitter under 38(3)(b) is an available route by which the vice that flows from a failure to comply fully with 29(1)(c) may be repaired, but otherwise, for the reasons we put in‑chief, the matter is, of course, not futile because reconsideration may produce a different outcome.

CRENNAN J:   Would there be the possibility of having different supplementary submissions on a remitted hearing?

MR WALKER:   Your Honour, it may be that the notion of reconsideration, bearing in mind section 37 and probably subject to the arbitrators’ determination, would result in some such assistance.

GUMMOW J:   What is the question of law being spoken of in (3)(b)?

MR WALKER:   Your Honour, yesterday I enunciated it as follows, and we still propose this.  For the reasons point, the question of law is whether the reasons supplied by the arbitrators are reasons complying with section 29(1)(c) with respect to the conclusion under the proviso to subsection 18B(1) of the Insurance Act.

GUMMOW J:   What is the force of the word “may”?

MR WALKER:   I am sorry.  I should have come to that earlier.  It is our submission that bearing in mind the jurisdiction that has been ousted by subsection (1) and the collection of possibilities in subsection (3) and, most importantly, the word “determination” a the outset of subsection (3), “of an appeal” which “shall lie”, see subsection (2), that “may” describes the available choices, one at least of which must be made.  It is “an appeal shall lie”.  The court has a duty to hear and determine it. 

The determination explicitly contemplated under subsection (3) does not leave open the possibility of the court saying, “I won’t determine this appeal” and there is no way of determining it, that is, bringing it to an end, a conclusion, final within the court system, except by one or other, query combination, probably only one or other of the possibilities set out in paragraphs (a) and (b).

That much is – I was about to say confirmed, I will not – that much is corroborated by consideration of the likely content of those four possibilities - confirm, vary, set aside, remit for reconsideration appears to cover everything that is necessary, at least, on our argument, concerning how one deals, for example, with the error committed by failing to comply with 29(1)(c). 

If we are correct in that analysis then “may” does not leave what in other contexts has been described occasionally by expressions such as “residual discretion” and it does not leave the matter of exercise of power facultative merely available but not to be exercised, it requires the court to make a choice.  That is, as I say, in the nature of the fact that there is an appeal once leave be granted and that it calls for determination.  I need only add the fact that it is in the nature of courts deciding things that there is a duty to decide and not, as it were, a choice to let work go undone.

Your Honours in relation to the point raised concerning the orders in relation to the grant of special leave in this Court as in‑chief, and as was raised for consideration with my learned friend, Mr Jackman, by members of the Bench we would simply say this.  The grant of special leave would not be construed as being in itself futile and, as we put in‑chief, just as the Court of Appeal dealt with the matter for which we got the grant of special leave on the basis that it was on the assumption that there was a section 38 grant, so too in this Court.

Could I then come to the question of the reasons themselves very briefly in reply to my learned friend, Mr Jackman.  It is our submission that nothing in the matters following paragraph 88 in the arbitrators’ statement of reasons, particularly including those designated by my friend which culminate in 93 but touch on 90 and 92 on the way through, none of those matters supply the answer to the question that we submit is raised by the use of the word “reasons” and in particular we would in reply point out that to assert that section 18B is remedial, particularly when one is talking about what was in the pre‑enactment dealings referred to as a safeguard, that is the proviso, cannot supply its own explanation of a particular outcome in any particular case.

If it be useful in analysis for present purposes to characterise the provision as remedial or beneficial, and it is clearly in the usage both of those , it is equally important to observe that the legislators understood that there would be an ad hoc balance requiring to be struck or perceived by the decision‑maker in every case according to the circumstances of that case.  Hence the proviso to subsection (1) of section 18B.  It therefore follows that the remedy for the mischief is not one which ever is easily indicated as saying that a decision that 18B relief, if I can call it that, should be extended always explains itself because the grant of a remedy is always explained by the fact that it is under a remedial piece of legislation.  That, in our submission, is illogical and inadequate to elevate those observations made for quite different purposes to reasons for reasonableness.

It is equally, in our submission, inappropriate on consideration of all of the material thoroughly canvassed in written submissions and the various addresses your Honours have heard concerning the dealings between these parties culminating in the unsatisfactorily scrappy contractual paper between them.  It is obviously inappropriate to describe any of that, including the later and persisted in attitude of my clients, as amounting to any of the following descriptions attached to it by my learned friend, Mr Jackman, in address.

First he said it was an unfair exercise of contractual rights by insurers.  There is nothing unfair about what we did.  Section 18B is not like a Contracts Review Act provision triggered by a requirement to perceive unfairness.  But we need to observe, of course, that at that point in my learned friend’s address and understandably bearing in mind the issues before the arbitrators and ever thereafter framed in courts, it was accepted that but for his arguments about what the contract was, on the basis of what the arbitrators had found the contract to be, there was a right under the contract to decline to pay as demanded.

The second inappropriate description was that it prevents opportunistic reliance on exclusions and similar observations can be made.  There is nothing opportunistic about somebody saying, “Is this within my reinsurance promise?  If it is, I will pay.  If it is not, I will not.”  Or to put it another way, if taking that attitude in dealings between contracting parties is regarded as opportunistic, the word “opportunistic” ought to be read shorn of any of its usual derogatory overtones.  Second, of course, in relation to that observation by my learned friend, that description by my learned friend, it can be very plainly seen that it accepts as well, as he very plainly did as a premise both in writing and address at this point in the argument, that the exclusion, as he characterised the defining description of policies permitting notification up to three years, was, of course, effective as a matter of contract.

The third inappropriate description was that it stops the conduct of insurers which would otherwise – that is, but for the exercise of 18B power – be unreasonable.  Now, that, of course, is much closer to the money in relation to the proviso under section 18B.  In our submission, of course, what it highlights is the inadequacy of the reasons to convey any such conclusion. 

My learned friend noted at various points what it was that had been argued before the arbitrators in relation to unreasonableness.  I do not wish to rehearse it in detail.  Your Honours have all the references, but I do wish to focus in particular on the matters that start at volume 1 of the appeal book, page 362 at line 40 on that page under the heading of “Unreasonableness”.  Could I note that the opening words under that section are, “The reasons set out above also”, et cetera.  It means that in order to understand what was in play concerning the proviso to section 18B(1) included the matters that one sees in particular concerning the insured, that is, FAI, and the occasion for the requested extension, namely, the takeover and the extra length of run‑off at first five and then seven years requested by the insured, or the would be insured, FAI, in those circumstances.

Those matters are in fact picked up from 359, line 42, right through to 362, line 38, and they include much that is highly particular and very prejudicial, as was successfully argued for the section 18 point, including obviously, to put it bluntly, page 360, line 29, “The original insured was FAI” and what is there said of an unkind type under that heading.  That is repeated, of course, at 362 at (b), about line 30.  It is for those reasons, in our submission, that when one looks then at the matters which are added to those reasons under the heading of “Unreasonableness”, 362, about line 55 through to the end of 363, there was, in our submission, as we sought to make good in‑chief and contrary to the matters raised against us by Mr Jackman, there was a formidable set of reasons, wholly successful for the cognate notion of prejudice under section 18, that we had also raised for the reasonableness issue for the proviso under subsection 18B(1).  None of them gets any answer either in the argument culminating today or, of course, in the reasons of the arbitrators.

It is thus not correct that the risk rating and the question of premium was not put to the arbitrators in relation to reasonableness.  Neither, of course, in relation to this idea of special acceptance, which we have proved both for section 18 and 18B purposes, they are clearly related, prejudice and reasonableness.  Neither is there the slightest indication that FAI, who grabbed a five‑year run‑off and agreed a seven‑year run‑off, was in the market for a three‑year run‑off.  So, in our submission, there was for the arbitrators and there remains considerable force in the proposition that the evidence was all one way, as the arbitrators effectively held, in relation to whether there would have been, for reasons of the prejudice perceived by them, a simple refusal to give what in the reinsurance market would be called a facultative cover.

That distinguishes from a treaty cover in this important sense and this then feeds into the 18B argument.  Facultative means, as it were, that the reinsurer and the would‑be reinsured both, as it were, get to choose in relation to the particular risk, “Will I take this on?”  Treaty reinsurance is critical for the regulated and commercially responsible conduct of insurers, as well obviously as reinsurers, because it lacks that “will I, will I not” discretionary choice with respect to particular risks.  Treaty reinsurance binds the reinsurer as policies within the description of the reinsurance contract attach.  I stress policies. 

Now, one can put to one side as entirely speculative and bereft of any suggestion as to private practice, I should point out, the idea that reinsurance might be written in such a way as to attach to claims, regardless as the kind of policy, rather than to policies because in this case it is crystal clear from what you have been shown in the slip, volume 2, page 618, that it is claims under policies attaching.  The attachment of policies depends entirely upon the description of the policy matching what was agreed by the parties and that was the subject of the factual investigation to which I will be turning in reply shortly but not quite yet. 

Assuming that we were correct below, that is, before the arbitrator as the arbitrator has held and assuming that my learned friend’s acceptance of that contractual finding for the purposes of the 18B argument was also well founded, as it must have been, it is clear, of course, that it is 18B only gets to be considered because the arbitrators, and for the 18B argument accepted by everybody including Gordian, treated the reinsurance obligation as not extending to the FAI D&O policy because it permitted notification up to seven years and thus fell outside the description extended, as we put in‑chief and agreed to between reinsurers and reinsured, for the treaty to apply, that is, to apply for policies attaching which permitted notification up to three years.

KIEFEL J:   Do we have an appropriate definition of a treaty that is accepted in commercial usage?

MR WALKER:   Yes, as I shall show in a moment.  If your Honour is asking me whether the – well, the essential point I have been trying to make is between here the difference between facultative and treaty.  The idea of a treaty is that in advance – the word “treaty” has magic ‑ ‑ ‑

KIEFEL J:   You accept policies written in the future?

MR WALKER:   And you do not have a choice.

KIEFEL J:   Yes.

MR WALKER:   You cannot say that your insured is FAI.  If it falls within the class you, accept their risk acceptance.

KIEFEL J:   Yes, I understand that.

MR WALKER:   That makes it very important to understand what is the reinsurance promise and you need to know literally as policies attach, not least because of adjustable premium obligations, but you need to know as they attach, does this policy fall within the reinsurance promise, and we stress that as the slip here shows and as the practice to which the authority of Wasa refers ‑ ‑ ‑

GUMMOW J:   Are we looking at page 618?

MR WALKER:   Yes, 618.

GUMMOW J:   Under the heading “Period”, or beside the heading “Period”?

MR WALKER:   Yes.  The period at line 20, “Claims made on policies attaching ‑ ‑ ‑

GUMMOW J:   Yes.  Claims made when?  Claims made in what period?

MR WALKER:   Claims made in accordance with the policies and that is why – you do not find it on this page.  I have referred several times, including in‑chief, to the scrappy paper.  As your Honours all know, it is not the most punctilious clerical exercise.

KIEFEL J:   That is why the case is replete with statements that insurance contracts and, probably even more so, reinsurance contracts have to be read in a way which makes commercial sense.

MR WALKER:   Quite.

KIEFEL J:   It makes them work as between the parties, not one which does not give effect to an obvious intention.

MR WALKER:   Yes is the answer to all of that, but that cuts entirely in our favour for all the reasons the arbitrators have put and the arbitrators who, with their insurance experience, perceived no sense at all in a reinsurance obligation which would place no distinction between the risk involved in someone taking a seven‑year run‑off policy for a company that was not going to be in business, in effect, it had been taken over, as opposed to a three‑year policy for companies not in run‑off, et cetera.  The difference in risk is accepted.  A finding of fact not available ever for canvassing. 

It is for those reasons, in our submission, that the commercial considerations referred to by the arbitrators in the passages you have now been taken to I think three or four times make it clear that given the difference in risk, given the difference in class, given the significance of what they observe concerning the practice and given what is the obviously properly accepted fate for section 18 by reason of prejudice and all the material to which I have referred in the last five minutes, there is the world of difference between saying that reinsurance applies, that is, payment must be made when the insurer has paid on a claim, notified within three years under a policy that permits notification for any period –we will just pick seven – that is the one case, the world of difference between that and saying this reinsurance covers – and it is a treaty reinsurance – we cannot say no if you write without consulting us ‑ ‑ ‑

KIEFEL J:   You are starting to combine a number of things.

MR WALKER:   No, if you write without consulting us, that is, no special acceptance, if you write business of this class, we reinsure it.

KIEFEL J:   There is a number.  You have to separate them, do you not?  Treaty insurance is one thing and given your point about how policies attach under treaties is one thing, then you have the extra complication here that this is an excess of loss policy, so you do not expect the terms to be identical, the underlying policy and the reinsurance terms ‑ ‑ ‑

MR WALKER:   No, it depends what you mean by “identical”, your Honour.

KIEFEL J:   You do not expect them to correspond necessarily.  They are not going to be back to back.

MR WALKER:   Well, there are questions of retentions, for example, and the obvious commercial need to consider whether or not you want your reinsured to have some skin in the game.  That is one point.

KIEFEL J:   But just in general terms.  In the same way you are talking about treaties ‑ ‑ ‑

MR WALKER:   Otherwise there is back to back ‑ ‑ ‑

KIEFEL J:   That is correct.  We are not talking about proportional policies here.

MR WALKER:   No, quite.  It is layers.

KIEFEL J:   So you are talking about layers.

MR WALKER:   Yes.  But when your Honour says it is not back to back, I just wanted to make it clear that if the reinsured is not liable under the policy, then the reinsurance does not answer.

KIEFEL J:   Yes.

MR WALKER:   That does not make it liability insurance.

KIEFEL J:   No.  It is still fundamental to your reinsurance.

MR WALKER:   It is fundamental and ‑ ‑ ‑

KIEFEL J:   It will not answer to the reinsurance otherwise.

MR WALKER:   Exactly.

CRENNAN J:   It has always got a net loss clause, these sorts of –anyway, so they are pure indemnity policies.

MR WALKER:   Yes.  The indemnity principle is observed by saying, as some have put it, the reinsured cannot make a profit out of this.

KIEFEL J:   In terms of the risk the reinsurer had agreed to take, you are left with paragraph 80 of the award and the concession in terms ‑ ‑ ‑

MR WALKER:   With great respect, what your Honour has raised with my learned friend, Mr Jackman, is based on a misreading of paragraph 80; (a) in the context of the whole reasons and (b) in its own contest.  The arbitrators were not finding that the reinsurance contract was to pay when a claim was made under a policy, regardless how long the permitted notification was, so long as that particular claim in question had been made within three years.  They were not saying that.  If they had meant that, and they do not say it, but if they had meant that, the whole of their following reasons are surplusage and, in fact, misleading and, indeed, the whole of the stance of Gordian has been mistaken, fundamentally so, and that is unlikely to the point of impossible, that is, the arbitrators said the contract of reinsurance does not cover for this, 18B needs to be invoked.

KIEFEL J:   No, they did not quite answer the question of what the contract between the parties might be having regard to what the reinsurers thought that they were covering.  They went to 18B without having really determined that question.

MR WALKER:   With great respect, absolutely no.  The first sentence of paragraph 80 makes my point utterly, “to cover D&O policies”.

KIEFEL J:   “[W]hich covered claims which were made and notified ‑ ‑ ‑

MR WALKER:   Well, that does not meant which covered claims including those ‑ ‑ ‑

KIEFEL J:   ‑ ‑ ‑ which had this particular term.

MR WALKER:   “Within” means “up to”, your Honour.

KIEFEL J:   We are not talking about policies which have a term, which has an event which has to occur within a term.

MR WALKER:   We are.  Indeed we are.

KIEFEL J:   We are talking about reinsurers who have the event occurring within a term but also that the policy has a term which requires claims to be notified within a particular period.  That is the point of the arbitrators’ decision there.

MR WALKER:   No.  The expression in question is, policies which covered claims which were made and notified to Gordian within an extended period of three years.  That means and no longer.  The policy here does not fall within that description because it covers claims which were made and notified to Gordian within an extended period of seven years.

So what the arbitrators are saying the first sentence of paragraph 80 is, with great respect, pellucid, that we accepted that we had a contract.  We were not saying no contract.  It must be one of the only pleas you do not find in the history.  But we said we do have a contract.  It is important to reinsurers to say they have contracts, to be people of honour.  It had to be sorted out from what I will call scraps of paper. 

I took your Honours in opening and, in answer to one of your Honour Justice Kiefel’s questions yesterday, to the material which, as my learned friend correctly points out, starts back on paragraph 28, but I focused on that which you find between paragraphs 34 and 39 and what that showed was there was one way or the other an understanding, it does not matter whether it was a misunderstanding, anyhow, an occasion for a negotiation where 12 and with the possibility up to 18 months was the limit and with the expectation that in order to have up to three years claims policies covered by the reinsurance, there needed to be an alteration to the expiring reinsurance cover.

KIEFEL J:   Up to three years claims notified, is that what you say?

MR WALKER:   Yes, your Honour.  The polices cover claims notified up to three years and not claims otherwise.  Now, a policy that covers claims notified up to seven years is not a policy which covers claims covered up to three years.

CRENNAN J:   Well, it includes, does it not, claims made and notified up to three years?

MR WALKER:   Of course it includes that, but that is trivially true ‑ ‑ ‑

CRENNAN J:   And the reinsurer is at risk in relation to claims made and notified within the three‑year period also happens to be at risk in relation to claims made and notified beyond the three‑year period.

MR WALKER:   No, the insurer is on risk under the policy according to its terms for claims notified up to seven years, and it is not true to say that that is an insurer who is also to be seen as somebody liable on claims notified up to one year.  Yes, one is less than seven and is included within it, but it is unrealistic, not the way in which commercial people work to say, well, policy for claims up to seven years, that includes policies for claims up to one day, two days, three days and, absurdly, up to the seven years.  A policy for claims up to five years is different from a policy up to claims seven years because the five is a maximum, the seven is a maximum.  A policy permitting claims notified up to seven years is therefore not a policy permitting claims up to three years.  That is absurd to suggest.

GUMMOW J:   What is the critical nature of the difference, apart from chronology?

MR WALKER:   The critical nature of the difference is that the reinsurance provides cover for losses for which claims may be made under policies of a particular description.  That is what the idea of “class” means.  That is why the correspondence which produced draft wording and out of which the poor arbitrators had to work out what is the objective intention that we can call animus contrahendi, they looked at all of that and they said you lot agreed on what they called in the context of the commercial negotiation an extension, from the 12 months which would have reigned, governed in any event, if you had done nothing. 

Two, because you needed – one of the words used – or wanted to, you had been asked about writing business for two to three years, multi year is not left to any period.  The dealings of the parties talked about two to three years, and that is why matters of fact were looked at concerning what the dealings of these parties revealed as to their objective intention, contractual purposes, and the arbitrators held it came to this, that the policies for which reinsurance would be granted, under a treaty that is, as the policies attach from time to time.  There might never have been any, but there were, as it happens.

FRENCH CJ:   Was there any finding about the difference in risk from the reinsurers’ perspective in relation to a policy which would allow a notification of claims up to three years on the one hand and in relation to reinsurance in respect of claims made within the first three years of a seven‑year run‑off policy?

MR WALKER:   There was certainly evidence and argument.  I have referred to that already adequately.  That seems to be compendiously accepted in paragraph 85 by the arbitrators because that is the material to which I have already been and you will recall the material set out at 363 to which I have already taken you in volume 1 of the appeal book.

KIEFEL J:   No, that is talking about whether or not they especially accepted a seven‑year run‑off policy.  That is a totally different thing.

MR WALKER:   Your Honour, that is for the purposes of section 18 which was turned to double purpose, in our submission, for section 18B expressly.  These are reasons which also support 18B.  The Chief Justice’s question was not about 18 or 18B but was about ‑ ‑ ‑

KIEFEL J:   No, it is what is the difference to the reinsurer if it is called upon to pay the reinsured where there has been a claim notified within three years if it is under a three‑year policy or a seven‑year policy?  What is the difference?  The reinsurer is ‑ ‑ ‑

MR WALKER:   Your Honour, that is not a rhetorical question.  It was a question addressed in the evidence which was the subject of submission to these expert arbitrators and there were differences.

KIEFEL J:   What is the answer, Mr Walker?

MR WALKER:   The answer is that a seven‑year run‑off is an altogether different risk calculus.  It is not a matter of simply extending in linear fashion from a three‑year run‑off.  Now I am going into hypotheses because these are matters, with respect, which are elementary.  Somebody who wants a seven‑year run‑off, that is, they would be insured, has a particular view about what might happen in terms of claims compared to somebody who only wants a one‑year run‑off or a two‑year.

KIEFEL J:   I think we understand that, but what is the difference to the reinsurer in terms of payment when it comes to indemnifying the reinsured?

MR WALKER:   Because the class of business is different and ‑ ‑ ‑

KIEFEL J:   In dollars terms, is there any difference?

MR WALKER:   Of course.  They have not got the premium that reflects the risk constituted by describing the class of business as that which has run‑off no longer than three years.  Now, the class of business run‑off no longer than three years is qualitatively different from the class of business run‑off seven years and you cannot just say, well, every seven or nine year run‑off period has a simple aliquot share of premium for claims up to three years and we can just deal with them in that fashion.  The business does not say so.  They say it is a different exercise.  When you have earned your premium, et cetera, does not come out in a simple linear way. 

That is what the material said, it is what the arbitrators accepted and there are no findings of fact which says, in effect, that from the insurance markets point of view, either their propensity to accept risk or their pricing of it, there is no evidence to suggest that they see no difference between claims in the first three years of a seven‑year run‑off period and claims in the only three years of a three‑year run‑off period.  You would need to know that that was the same in order to proceed as your Honour is proposing I should consider.  There is no evidence of that and, with respect, it is axiomatically not likely to be true.  These are different assessment and calculus of risk.  They are different insureds.  An insured who wants seven years is not an insured who wants three years.

Of course, this links up with what my learned friend, Mr Jackman, vigorously put as the reason why in any event in his alternative, completely alternative argument that the contract was not as the arbitrators found it, there was the special acceptance provision.  The special acceptance provision is designed to cope exactly for someone like Gordian who says, “Now, look, back in 1999 we said that we were being asked to write business multi year two to three years.  Now we are finding the requests are coming through multi year five to six years”. 

In our submission, the material which was on the making of the contract and on the objective intention of the parties properly before the arbitrators, leads to findings which include the contested first sentence of paragraph 79, not least because of cross‑examination, not withdrawn material, cross‑examination such as one sees in volume 3 at 1329, lines 22 to 32 where once you put aside Mr Fletcher’s captious distinction between operational and run‑off policies, he agreed that the extension in period was such as would call for special acceptance.  Now, Mr Fletcher, of course, is a weak read for us to rely upon but absolutely unavailable for my learned friend to rely upon in terms of evidence, but it is a concession.  We do rely upon and did rely upon it.  Mr Fletcher, of course, had spent a page or two beforehand seeking to deny the applicability of special acceptance to such an increased risk. 

In our submission, the evidence was all one way, precisely as the arbitrators saw it, and paragraph 85 cannot be swept away, as my friend said, by saying, well, it just applies to special acceptance.  Well, so it does, and that is because special acceptance is about what you would have done, given the facts and considering your risk portfolio and how you were prepared to price.  They were precisely the matters which would inform section 18, not just special acceptance, but section 18 and are obviously relevant under the proviso to 18B(1).  That is how, in our submission, it can be seen that the arbitrators put paid to this notion of ‑ ‑ ‑

KIEFEL J:   Would the reinsurers have taken all of those matters into account when they sought rectification in the terms set out in paragraph 80?

MR WALKER:   When your Honour says ‑ ‑ ‑

KIEFEL J:   Rectification of the reinsurance treaty to add an exclusion simply to 36 months.  I do not think they sought the change of any other relevant term?

MR WALKER:   No, that is right.  I may have misunderstood your Honour.

KIEFEL J:   Including as to price.

MR WALKER:   I may have misunderstood your Honour’s question.  That rectification, and it is a rectification after all, is to have the instrument accord with the bargain.  They were successful on the bargain.  The only reason they did not get the rectification was – I am not quite sure why – the arbitrators, in effect, said, “Well, you do not need to rectify because I just hold that these ragbag of documents make up what you want.”

KIEFEL J:   My only question is that there was no other terms to the rectification sought that do not appear in the award, for instance, as to premium or ‑ ‑ ‑

MR WALKER:   No.  We were not – your Honour, with respect, mistakes the nature of rectification.  Rectification would not permit us to fiddle with the price.  The price is part of the bargain.  Rectification will only affect its expression if its expression needed to be recorded better than it was.

KIEFEL J:   Quite so.  The terms would accord with what was agreed for the price.

MR WALKER:   Yes.  The prices were agreed ‑ ‑ ‑

KIEFEL J:   Thank you, Mr Walker.

MR WALKER:   ‑ ‑ ‑ so that there is no question of rectification ever even being able to include a change of price.  All it was doing is saying if there be any doubt – I do not wish to defend seeking rectification – but as we understand it, or as I understand it, it is this.  If there be any doubt about what the document recording the bargain should say in light of the concluded agreement of the parties, they agreed reinsurance is provided for policies which provided cover for claims notified up to three years and not beyond, within three years and not beyond.  That was the definition of “policy” which in turn becomes the definition or scope of cover of reinsurance, not scope of cover of the original insurance, but scope of cover of the reinsurance.  It is for those reasons, in our submission, that there is neither anything new, novel, or wrong about the way in which we put the operation of the reinsurance treaty.

BELL J:   Can I just take one matter up with you arising out of that?  Just going back to the 1998 treaty, which is at appeal book 466 in volume 1, one sees that your clients’ agreement was to indemnify Gordian in respect of losses under business underwritten in respect, amongst other things, of directors and officers’ liability insurance.

MR WALKER:   That is right.

BELL J:   One sees Article 16 with its undertaking:

not to introduce any change in its established acceptance and underwriting policy ‑ ‑ ‑

MR WALKER:   That is correct.

BELL J:   I think it is accepted by Mr Jackman that it was necessary for the arbitrators in determining what was the agreement between the parties to then have regard to evidence concerning what was the established acceptance and underwriting policy, but what Mr Jackman says is that the issue resolved in the first sentence of paragraph 79 of the arbitrators’ reasoning at appeal book 14 had been withdrawn.  What is your response to that?

MR WALKER:   I confess I do not really know, your Honour, because all I have is the record and the record shows the cross‑examination to which I have referred, otherwise I am bound to say Mr Jackman took you to documents which, if I can put it this way, speak for themselves.  All I can say is that the question whether there needed to be special acceptance was treated as live so as to have the cross‑examination in which I – now, that is a slightly different – somewhat different, I should say – issue from class of business.  However, it comes down to the same thing via Article 16. 

Now, that is not a satisfactory answer to your Honour’s question, but it is the best I can do in terms of what the record below reveals.  Yes, in what I will call pleadings there is the – I do not mean to belittle them at all – in what are called pleadings there is the manoeuvre that my learned friend accurately fully fairly took you to.  All I can say is that the issues in the case continued to include, not least at their instance, the question whether this was within or outside the contractual promise. 

In relation to both 18 and 18B the case continued to include our proposition this not the sort of risk we would ever have taken on.  No doubt it was by a combination of those continuing controversies between the parties that the material that I have referred to was in.  I do not think I can say any more about it.

BELL J:   Amongst the material that was before the arbitrators was the expert report of Mr Hassos?

MR WALKER:   Yes.

BELL J:   Were submissions directed to that?

MR WALKER:   Yes.  There is no doubt about that.  That is not the only aspect of this case that is said to be what I will call an ill‑fitted or ill‑assorted Chinese boxes and lots of overlaps, but there does not seem in terms of fairness of process or opportunity to controvert any doubt about the fact that Gordian came along and people answered propositions and argument was put for and against, whether or not this was special acceptance material and what we would have done, et cetera.  That is as far as I can take the matter in relation to the pleading changes to which my friend drew attention.

GUMMOW J:   Mr Walker, could you give some assistance with construing section 38(5)?

MR WALKER:   I will try, your Honour. 

GUMMOW J:   Of the Commercial Arbitration Act.  Subsection (b)(i) talks about “a manifest error” on the face of the award and then (b)(ii) talks about “evidence” that there was an error.  Does that suggest that (b)(ii) is talking about an error not manifest on the face?

MR WALKER:   It naturally does suggest that simply because they are expressed as alternatives.  Now, it would not be the first time that alternatives are not true alternatives, but any reader, in my submission, would say, “Well, it looks like we are talking about two different cases.”

GUMMOW J:   Yes.  You then have to look at - Mr Jackman says you have not looked sufficiently at (5)(a), particularly in your proposed ground 6.

MR WALKER:   I understand the argument and I apologise.  I should have included 38(5)(a) in what I put earlier this afternoon, namely, this.  Obviously if there is reconsideration and a different outcome there is your substantial effect on the rights of one or more parties to the arbitration agreement.

GUMMOW J:   Why?

MR WALKER:   Because the outcome may differ.  Instead of the proviso getting a tick it gets a cross – a cross rather than a tick, I mean, yes.

FRENCH CJ:   Does (5)(b)(ii) incidentally suggest that the question of law which is raised, or the alleged error of law is not so obvious that one says, yes, that is plainly an error of law and anybody can tell by looking at it, but rather it is a contentious point of some importance in respect of which there is “strong evidence” that there has been an error made?  It seems to me that it has to be read, the notion of strong evidence has to be read with the purpose of this ground for the grant of leave.

MR WALKER:   Yes.

GUMMOW J:   The evidence seems to be off the face of the award, as it were, or at least permit you go to off the face of the award.

MR WALKER:   Well, the latter is the way we would put it.  A couple of observations.  It is interesting that having not used what I will call the old language, I do not mean outdated, but the old language of “face of award” found in subsection (1), having not used it in subsection (2), we come back to it in subparagraph (5)(b)(i).  Now, that is probably just an oddity, but ‑ ‑ ‑

GUMMOW J:   They have used “arising out of” in (2), but “arising out of” in (2) may be designed to accommodate (b)(i) and (b)(ii).

MR WALKER:   Quite so, but on any view of it “face of the award” must mean the included reasons.  In this case we maintained, as it were, the double, “manifest” and “strong evidence”, but not “for reasons”.  In any event, in our submission, as soon as you have resort to a record of what the parties submitted to the arbitrator, and there has been copious resort made to that in the arguments in relation to both section 38 below and here, then you have a resort permitted by subparagraph 38(5)(b)(ii).

Next, with respect, we would adopt the thrust of what the Chief Justice put to me, namely, that an understanding, particularly in a collocation that starts with manifest error on face, that an understanding of strong evidence that the arbitrator made an error of law is assisted by the immediate context of the strong evidence expression, namely, the possibility of adding to the certainty of commercial law.  That is because, in our submission, an error of which there is strong evidence, the correction of which would increase the certainty of commercial law, has been seen by the legislature as an appropriate, perhaps desirable, object of judicial attention notwithstanding the parties’ choice of arbitration with the supposed earlier finality that that is by some of its propaganda said to give.

Now, that may be the contrast between a manifest error on the face of the award and here one might suppose the different policy was a manifest error is, as it were, an offence to justice and simply should be corrected even if it is of something of no interest to anybody except the parties.  Now, doing the best I can, that would appear to be a policy explanation of the difference in the expression of the nature of the error in each of subparagraphs (i) and (ii) plus the addition of the promise of transcendent benefit which is attached as a requisite for the second of those descriptions.

When it comes to the question of, what does it mean to be strong evidence, in our submission, synonyms such as “substantial arguments”, “respectable argument”, perhaps that is a little pallid, but “impressive argument” or “weighty considerations”, those not unfamiliar expressions perhaps suggest the synonyms that might give meaning to the notion of strong.  We are, however, talking about strong evidence of error.  It is not, as my friend put it, simply just any old fact.  Whether the arbitrator made an error of law is, as a matter of English, a fact.  However, it is not a fact in the same sense as facts that fall under the rubric of the Evidence Act 1995 can be seen.

So for those reasons, in our submission, we are talking about material which suggests or supports a possibility when we are talking about evidence and in this case it, on any view of it, answers that description to be referring to arguments that had been made, for example.

GUMMOW J:   Bearing in mind your ground 6 we have been talking about, 18B, and ground 7, inadequacy of reasons dealing with the proviso, if you succeeded on both, how would it go back, or would it go back?

MR WALKER:   If we succeeded on both?

GUMMOW J:   Yes.

MR WALKER:   If we succeeded on 18B, the ‑ ‑ ‑

GUMMOW J:   You would not need the ‑ ‑ ‑

MR WALKER:   No.  The other would be supererogatory because it would be fatal on the finding of contract.  It would require ‑ ‑ ‑

GUMMOW J:   Would the award go?  What would happen?

MR WALKER:   No, Justice Einstein’s order would be restored.  But I am bound to point out that requires anterior or simultaneous consideration of my friend’s contention points about the contract, about which I do not need to say much more, and that in turn involves the question of section 38 applied to so‑called contention points about which I should say something brief and I can come directly to that question. 

With great respect, it is idle to deny whether there are merits in the arguments against us concerning the contention point, idle to deny it not least because of the English dicta to that effect, and I accept that although that is framed in relation to leave within a court it is expressly by reference to the arbitral provisions which antedate the court proceedings in that case, that is the Santa Clara. 

However, as we put in‑chief, a decision has to be made where there are, we submit, weighty considerations on both sides.  There is a little bit of irony to be observed in the fact that now I am the one talking about minimising court interference with arbitral process and my friend is the one saying let there be judicial wide‑ranging intervention.

Our proposition is that the expressions I address the Court on in reply in 38(3) particularly “confirm” and the expression in subsection (2) of 38 “arising out of an award” are, for the reasons Justice Allsop attempted to articulate, and we respectfully adopt his articulation of it, apt to include complaint about an award which includes its reasons by a party that says, “You, the Court, should not either grant leave or, if you grant leave, vary or set aside the award as sought by the plaintiff.  Rather, I have a complaint to make that”, et cetera.

Now, a stark choice is presented which, with respect, the dicta in Santa Clara do not resolve.  Is it to be said that there is something in the text of the Act which says of contentions that my friend would have it do not need section 38 leave that they cannot be matters of fact.  Now, my friend tactically, with respect, has very clearly tried to take that off the table and has, as recorded in the judgments below, volunteered or conceded, it matters not which, that his point does not leave open either mixed questions of fact and law or questions of fact. 

Now, of that it can be said as a matter of advocacy it is understandable in order to remove a rebarbatively unattractive possibility, but it can also be said that it lacks any footing in the text and it is, after all, a question that has to have footing in the text.  What my friend has done is said, read the word so as not to require section 38 leave, but because one cannot imagine the legislator so intending, that is, that there could be a vast factual canvassing, construe it as applying only to matters of law.

My next point is this.  How odd then by this atextual volunteering of a restriction on the implications of his argument my friend has produced no leave necessary for precisely the kind of controversy, namely, is there an error of law, that Parliament has entirely devoted its attention to in section 38 as being the ground upon which leave must be given and, furthermore, leave that requires proper specified gateways, either subparagraph (i) or subparagraph (ii).

It must be, therefore, in order to address that puzzle that my friend is proposing that there is some difference between a plaintiff’s errors of law, and a defendant’s errors of law, but why would that be so?  The award is ex hypothesi one which may be, for example, wholly bad.  It does not have any presumptive claim that any bits of it, like a curate’s egg, would be good.  So it cannot have to do with the fact that someone is a plaintiff because they are the loser under the award and the other person is a defendant because they were the winner under the award and again, in our submission, there is no footing in the text which would provide for any such distinction. 

These are matters which, in our submission, are ways of rephrasing the considerations which Justice Allsop and the Court of Appeal have fully taken into account in a case which requires in interpreting a statute a decision is to be made as to what it means in circumstances not explicitly addressed by it.

FRENCH CJ:   Supposing, just to take a simple example, the arbitrator could have said, “I decide legal issue A this way.  If I am wrong, I need to move to legal issue B and decide it this way”.  Instead of doing that, the arbitrator simply says, “I decide legal issue A this way”, full stop, found to be erroneous and legal issue B becomes live.  How does that get up in the Supreme Court?

MR WALKER:   It would track – up and down perhaps is worth tracing.

FRENCH CJ:   Yes.

MR WALKER:   It would track, we think, this way.  The loser as plaintiff in the Supreme Court would, let us imagine, bring itself within one or other of the gateway descriptions of error.  The Supreme Court – and, after all, the parties agreed on an arbitrators’ decision subject to the possibility of the Supreme Court being involved - looks at the award, examining in relation to the raised question the putative error, decides it exists, can thereby reject the possibility of confirmation and has three available possibilities. 

Assuming there is only one reason, we call it proposition A, that is in question and that is available, then vary also goes, unless perhaps it can be seen that it is one of those extremely simple flip‑flop questions, and it was inevitable that as soon as the error has been pronounced, nothing by way of reconsideration or a new hearing could alter the position the award should be varied by putting “not” in front of the word “liable”, as it were; so just reversing the result. 

You could do that if it is a simple flip‑flip point.  But if it was a point that could not be said to be solved utterly by the detection of the error, then the two further choices for the judge, the choice being signified by the word “may” in 38(3), would be whether to set aside, in which case the parties are left to their arbitration agreement to be worked out again, that is, there is no award, the arbitration starts again, presumably before new arbitrators, if they are content, otherwise it just starts again, or, and this, in our submission, is likely as the years go on with any provisions for remitter such as they may be from time to time and place to place, this is likely to be the, as it were, bias.  If it can be fixed by remitter rather than wholesale destruction, that will probably turn out to be a judicial self‑direction.

FRENCH CJ:   Is it open to the respondent in the Supreme Court to say if you find that the manifest error is made out, I suppose that is – the manifest error in respect of legal proposition A is made out, you should still confirm the award because legal proposition B leads inevitably to the same result on the facts found by the arbitrators. 

MR WALKER:   Only if they could add the rider, because that would be or that, to hold otherwise, would be a manifest error or the arbitrators holding otherwise is a manifest error.

FRENCH CJ:   They have not held anything about it, of course.

MR WALKER:   Now, if the arbitrator has said nothing about it, in our submission, then, no, not least because why would you distinguish between matters of law as opposed to matters of fact at that point.  The text does not permit you to do and a feeling for justice would not permit you to do so.  The party who wants to say that can be heard on the reconsideration under 38(3).  It goes back to the arbitrator for reconsideration in light of the opinion of the Supreme Court on the question and the person who was the former winner stripped of the benefit of the win says to the arbitrator, “Well, this is all very well, but I can outflank the effect of that success by my friend in the Supreme Court by pointing out X, Y and Z”, assuming ‑ ‑ ‑

FRENCH CJ:   Do you say he has contracted to take the risk of error which is less than manifest or error of the kind covered in (5)(b)(ii)?

MR WALKER:   Yes.  Let me stress, not only he, she or it having taken the risk, they have taken the risk and that is judged at the outset of their agreement before it is known who the loser is.  So they both agreed that.  There is no call later for them to be treated differently as to the consequences of that risk simply because one happens to be first time round a winner.  May it please the Court.

FRENCH CJ:   Thank you, Mr Walker.  The Court will reserve its decision.

MR WALKER:   Would your Honours excuse me.  I had overlooked that there is an affidavit that is referred to in our – and has been served, but for some reason has not been filed.  If my friends consent, may I do that now?

FRENCH CJ:   What does this relate to?

MR WALKER:   This is in support of the special leave application.

FRENCH CJ:   Yes, all right.

MR WALKER:   I have nothing to say about it.

GUMMOW J:   Has it been filed in the Registry?

MR WALKER:   Your Honour, I understand it has not been and that is why I am ‑ ‑ ‑

GUMMOW J:   Well, it had better be, had it not?

MR WALKER:   I am so sorry, your Honour?

GUMMOW J:   It is not good handing it to us.  It has to be filed in the Registry.

MR WALKER:   In which case, your Honour, may I reverse what has just happened?

FRENCH CJ:   You can have it back and file it in the Registry.

MR WALKER:   Thank you, your Honour.

FRENCH CJ:   Yes, all right.  The Court will reserve its decision.  The Court adjourns to 10.15 am, Tuesday next, 8 February 2011.

AT 3.39 PM THE MATTER WAS ADJOURNED