Yesodei Hatorah College Inc v The Trustees of the Elwood Talmud Torah Congregation

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

ARBITRATION LIST

No. SCI 2011 4643

YESODEI HATORAH COLLEGE INC	Plaintiff
v
THE TRUSTEES OF THE ELWOOD TALMUD TORAH CONGREGATION	Defendants

No. SCI 2011 4797

THE TRUSTEES OF THE ELWOOD TALMUD TORAH CONGREGATION	Plaintiff
v
YESODEI HATORAH COLLEGE INC	Defendant

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JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	28 October 2011
DATE OF JUDGMENT:	22 December 2011
CASE MAY BE CITED AS:	Yesodei Hatorah College Inc v Trustees of the Elwood Talmud Torah Congregation
MEDIUM NEUTRAL CITATION:	[2011] VSC 622

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ARBITRATION – Arbitration under the Commercial Arbitration Act 1984 (Vic) – Judicial review of awards – Application for leave to appeal an award – Section 38 of the Commercial Arbitration Act 1984 (Vic) – Meaning of “manifest error of law on the face of the award” – Meaning of “strong evidence that the arbitrator … made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law” – Procedure for seeking leave to appeal on a question of law arising out of an award – Appeal allowed - Section 38(2), (4) and (5) of the Commercial Arbitration Act 1984 (Vic) – Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275 – Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 (NSWCA) - Westport Insurance Corporation v Gordian Runoff Limited [2011] HCA 37.
ARBITRATION – Arbitration under Commercial Arbitration Act 1984 (Vic) – Meaning of “determination … by reference to considerations of general justice and fairness under s 22(2) of the Commercial Arbitration Act 1984 (Vic) – Woodbud Pty Ltd v Warea Pty Ltd (1995) 125 FLR 346; Allmore Constructions Pty Ltd v Failli [2002] VSC 483; Christ Church Grammar School v Bosnich [2010] VSC 476; Westport Insurance Corporation v Gordian Runoff Limited [2011] HCA 37.

ARBITRATION – Arbitration under the Commercial Arbitration Act 1984 (Vic) – Application to set aside the award – Failure of arbitrator to apply s 22(2) of the Commercial Arbitration Act 1984 (Vic) – Section 42 of the Commercial Arbitration Act 1984 (Vic) – Meaning of “misconduct” – Section 29(1)(c) of the Commercial Arbitration Act 1984 (Vic) – Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 – Requirement for Arbitrator to give reasons – Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 – Westport Insurance Corporation v Gordian Runoff Limited [2011] HCA 37.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A.J. Myers QC with Mr P. Zappia	FC Law
For the Defendant	Mr I.G. Waller SC with Mr P.S. Noonan	Clayton Utz

HIS HONOUR:

Background

The parties entered into an Arbitration Agreement dated 6 August 2010 engaging The Honourable Alan Goldberg AO QC as arbitrator (“the Arbitration Agreement”). The learned Arbitrator is a retired judge of the Federal Court of Australia who is, for convenience, referred to as “the Arbitrator”.

The Arbitration Agreement provided for the appointment of the Arbitrator in the following terms:

“2. Appointment of Arbitrator
(a)The Parties appoint the Arbitrator to determine the Matter in the manner and within the times set out in this Agreement and the Arbitrator accepts the appointment on the basis set out in this Agreement.
(b)The Parties agree that:
(i)the Arbitrator will act as an Arbitrator; and
(ii)the Arbitrator must conduct the determination of the Matters in accordance with the Arbitration Rules.

(c)If, at any time during the arbitration, the Arbitrator becomes aware of circumstances that might reasonably be considered to adversely affect the Arbitrator’s capacity to act independently or impartially (in which case the Arbitrator must inform the Parties immediately) or becomes incapable of acting, unless the YHTC [Yesodei Hatorah College Inc] and ETTC [The Trustees of the Elwood Talmud Torah Congregation] agree otherwise, the Parties agree that the Chairman of the Victorian Bar Council (from time to time) shall appoint a substitute arbitrator on the terms and conditions set out in this Agreement and the substitute arbitrator shall continue the arbitration as if he or she was previously appointed as the Arbitrator.”

The provisions of Clause 2 of the Arbitration Agreement define the dispute which the Arbitrator is to determine, by reference to Schedule 1 of the Arbitration Agreement.

“Schedule 1
The Matters
The matters to be determined by the Arbitrator are to be determined by the Points of Claim, Points of Defence and Cross Claim (if any) and the Reply and Defence to Cross Claim (if any) to be filed in the arbitration.”

The manner in which the Arbitrator is to determine “the Matters” is (as is provided in sub-paragraph 2(b)(ii)): “… in accordance with the Arbitration Rules”. These rules are contained in Schedule 3 of the Arbitration Agreement, in the following terms:

“Schedule 3 – Arbitration Rules
1. Reference to Arbitration
Arbitration pursuant to this Agreement shall be conducted in accordance with the Act and as otherwise set out in these Arbitration Rules (‘Rules’).
The seat of the arbitration will be Melbourne, Victoria.
Nothing in these Rules is intended to modify or vary the rights of appeal contained in the Act.

2. Basic Principles Relating to Arbitration
The Parties agree that the Arbitrator may determine any question that arises for determination in the course of the arbitration by reference to considerations of general justice and fairness.”

The three primary matters for determination as raised by the pleadings referred to in Schedule 1 of the Arbitration Agreement are as follows:

(1)whether, on or about 25 February 2008, the plaintiff, Yesodei Hatorah College Inc (“the College”) had entered into an agreement for lease of land upon which the College operates a school for Jewish boys at 39 Dickins Street, Elwood (“the land”) from the defendants, The Trustees of the Elwood Talmud Torah Congregation (“the Congregation”);
(2)alternatively, whether the Congregation was estopped from denying that the parties had entered into an agreement for lease of the land; and
(3)if the preceding questions were answered in the negative, what period of notice should be given to the College to vacate the land.

At the outset it should be noted that the Arbitration Agreement empowers the Arbitrator to “… determine any question that arises for determination in the course of the arbitration by reference to considerations of general justice and fairness”.[1] It was common ground and a position accepted by the Arbitrator that the effect of these provisions was to enliven the operation of s 22(2) of the Commercial Arbitration Act 1984 (“the Act”).[2]
[1]See Clause 2 of the Arbitration Agreement and the reference in paragraph 2(b)(ii) to Schedule 3 of that Agreement – Arbitration Rules, paragraph 2; see above, paragraph 4.
[2]See below, paragraph 33 and following.

The arbitration was conducted over six days on 16 to 19 and 24 and 25 November 2010. Evidence-in-chief was given by way of witness statements which were filed and served by each of the parties. The witnesses were subject to cross-examination and documents relied upon were tendered at the arbitration hearing.

The Arbitrator published his award on 12 May 2011 (“the Award”), reserving the question of costs for further submissions and award. A further award, which was styled “Amendment to Award”, was published on 8 August 2011 (“the Further Award”).[3] Attention is presently directed to the Award as it follows from the nature of the Further Award that its fate is dependent upon the fate of the former.
[3]The Further Award is dated 5 August 2011, but was issued to the parties on 8 August 2011.

As indicated in the Award, the Arbitrator dismissed the College’s claim that there was an agreement for lease[4] and also dismissed the College’s claim based in estoppel.[5] The Arbitrator determined that the College occupied the land as a tenant at will, a tenancy was subject to termination by the Congregation on reasonable notice.[6] He also determined that the period of reasonable notice for the purpose of terminating such a tenancy at will was five years from the date of the giving by the Congregation to the College a Notice to Quit, being 20 April 2010.[7] In terms of costs, the Further Award directs that the College pay the costs of the Congregation in the amount of $219,745.
[4]See the Award, at [152] and [153].
[5]See the Award, at [155].
[6]See the Award, at [199] and [200].
[7]See the Award, at [215].

Applications

The Congregation, being the successful party in the Arbitration, sought, by way of Originating Motion dated 9 September 2011,[8] to enforce the Award in the same manner as a judgment or order of the Court, together with an order that the College pay the costs of the proceeding.
[8]Proceeding No 4797 of 2011.

The College, by Amended Originating Motion dated 14 September 2011,[9] sought the following orders:
[9]Proceeding No 4643 of 2011.

“1.An order under Rule 3.02(1) of the Supreme Court Rules extending the time for making an application for leave to Appeal the Award of Mr Alan Goldberg AO QC (the Arbitrator) made on 12 May 2011 (but dated 28 April 2011) (the Award).
2.Orders under s 38 of the Commercial Arbitration Act 1984 (Vic) (Act) that:
(a)the Plaintiff has leave to appeal to the Supreme Court on questions of law arising out of the Award and the Amended Award of the Arbitrator made on 8 August 2011 (but dated 5 August 2011) (the Amended Award);
(b)leave having been granted, upon the hearing of the appeal:
(i)the Award and the Amended Award be varied or set aside; or
(ii)the Award and the Amended Award be remitted to the Arbitrator or a new Arbitrator for reconsideration in accordance with the opinion of the Supreme Court on the questions of law the subject of the appeal.

3.An order under Rule 3.02 of the Supreme Court Rules extending the time for making an application under s 42 of the Act to set aside the Award for misconduct.
4.An order under s 42(1)(a) of the Act setting aside the Award and the Amended Award, in that the Arbitrator misconducted the proceedings. In particular, in making the Award and the Amended Award the Arbitrator:
(a)failed to determine all matters before him and in particular whether the defendant had acted unconscionably and was thereby estopped from denying an Agreement for Lease; and
(b)failed to exercise his jurisdiction on the matters for determination in accordance with section 22(2) of the Act as agreed in writing by the parties pursuant to the Arbitration Agreement dated 6 August 2010.

5.Costs.
6.Further or other relief as the Court deems appropriate.”

The parties agreed that if I granted leave to appeal the Award under s 38, I should also determine the appeal without any further hearing or submissions.

This course has, however, been criticised in the authorities and, most recently, by the New South Wales Court of Appeal in Gordian Runoff Ltd v Westport Insurance Corporation.[10] Though the Court indicated that the practice was, for a variety of reasons, undesirable, it did not accept that the equivalent provisions in New South Wales to s 38 of the Act created any jurisdictional bar to the Court hearing an appeal under s 38(2) in the absence of a pre-existing grant of leave to appeal.[11] The concern expressed in Gordian Runoff and other authorities referred to by the Court in that case was that a “rolled up” application for leave to appeal and the determination of the appeal, if leave were granted, is at odds with the legislative purpose of s 38 and related provisions because of the likelihood that the practice would encourage and likely result in more intensive, lengthy and costly interference in the arbitral process than was intended by these provisions. Thus, Allsop J said:[12]
[10][2010] NSWCA 57 (1 April 2010); (2010) 267 ALR 74 at 92-5, [102]-[113] (Allsop P, with whom Spigelman CJ and Macfarlan JA agreed). The High Court referred to the judgment of the Court of Appeal in this respect, apparently with approval, and without qualification (see Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37, [40] (French CJ and Gummow, Crennan and Bell JJ); and see [138] and [166] (Keifel J)).
[11]See [2010] NSWCA 57; (2010) 267 ALR 74 at 92, [102]-[103]; noting that the provisions of s 38 of the New South Wales and Victorian Commercial Arbitration Acts of 1984 are relevantly in the same terms.
[12][2010] NSWCA 57; (2010) 267 ALR 74 at 94-5, [107]-[112].

“[107] In giving the Second Reading Speech in the Legislative Assembly the Attorney-General for New South Wales in dealing with the new s 38(5) said the following, taken from the Working Group’s Report:
One of the major objectives of this uniform legislation is to minimise judicial supervision and review. If arbitration is to be encouraged as a settlement procedure and not as a dry run before litigation, a more restrictive criterion for the granting of leave is desirable and the parties should be left to accept the decision of the arbitration whom they have chosen to decide the matter in the first place.

The same was said in the Second Reading Speech in the Legislative Council.
[108] One of the considerations discussed by Lord Diplock in Nema [[1982] AC 724; [1981] 2 All ER 1030] (at 742–3; All ER 1039-40) was the undesirability of review of arbitration awards where the questions in issue took days to argue.
[109] The above considerations of the purpose of the new subss (5) and (6) of s 38 make clear what the approach should ordinarily be to this procedural question. Set against a background of the keen recognition that permitting the conduct of substantive arguments on appeal before granting leave would open up for review more arbitration awards than would occur if only truncated argument on leave were permitted, a clear legislative and contextual policy can be discerned that assists in appreciating that except in special, indeed exceptional, cases an application for leave should be dealt with and finalised before the hearing of the appeal. The relevant tasks on a leave application provided for by the text of s 38 also make it important to deal with leave first. The very assessments contemplated by s 38(5)(b)(i) and (ii) are directed to questions that are interlocutory in character and ones that should in terms be answered before full argument about the asserted error of law as an ultimate decision. That said, I am not persuaded that the text and structure of s 38 deny the court authority to hear argument upon appeal until leave to appeal has been granted.
[110] Section 38 reflects a legislative purpose of the recognition of the autonomy of the parties by the respect the court should give to the arbitrators’ award. Procedures should be adopted which support, not undermine, that recognition of autonomy and respect for the award.
[111] The process of hearing full argument on the appeal will almost inevitably subvert the intention to be discerned in the CA Act, s 38 to limit judicial review. It is difficult to decide the questions in s 38(5)(b) if full argument is heard enabling a view to be reached about the ultimate correct answer. A judge will naturally find it difficult, after full argument, to conclude in the negative to both paras (5)(b)(i) and (ii), but to conclude that there was an error. Further, and as importantly, it will, in practical terms, give an appeal to a party without having to satisfy a judge of the character of the error and any other matters contemplated by s 38 (5)(b)(i) or (ii). The procedure of hearing full argument on the appeal undermines the purpose of s 38, as Rogers CJ CommD and Sheller JA said with clarity and force.
[112] The context and purpose of leave to appeal in s 38 make it plain what the approach should be except in special, indeed exceptional, cases. I have no hesitation in concluding that the primary judge was wrong in principle to conduct the application as he did. It is a course that is inimical to the purpose of the statute: Promenade Investments at 187–9 per Rogers CJ CommD and at 221 and 226 per Sheller JA; Mowby Pty Ltd v Moose Property Services Pty Ltd[2007] VSC 111 at [4] and Energy Brix Australia Corporation Pty Ltd v National Logistics Coordinators (Morwell) Pty Ltd[2002] VSCA 113 at [31].”

The present case does, in my view, fall within the class of special or exceptional cases where the treatment of an application for leave to appeal and the appeal itself are properly heard and determined in a single hearing if leave is to be granted. First, the parties consented to this course and, although this may not be thought decisive in all cases and circumstances, the Act respects and gives effect to the consent of the parties, in a variety of provisions. This is consistent with the consensual nature of arbitration itself and the importance rightly given in the context of such a consensual process to the principle of party autonomy. Secondly, the principal and decisive issue in these proceedings is the proper construction, and application on this basis, of the provisions of s 22(2) of the Act. In the relative absence of judicial authorities, less than full argument of the issues involved would not necessarily provide the Court with even a reasonably considered basis for deciding whether to grant leave to appeal on the basis of an error of law in the application of its provisions. Thirdly, submissions on this principal and decisive issue did not involve “any prolonged adversarial argument”,[13] which the authorities indicate is the position the legislation seeks to avoid, for reasons both of time and cost and also because it involves interference in the arbitration process beyond that sanctioned by s 38 and the related provisions. Fourthly, in the absence of circumstances which would indicate that a single hearing would be at odds with the legislative intent of the commercial arbitration legislation, regard should be had to the cost and time of separate hearings, one by way of a leave application and the other by way of appeal if leave were given, where it is reasonably clear that full argument of critical issues could be heard expeditiously. In this respect, the very clear intention of Parliament as stated in the overriding purpose provisions of the Civil Procedure Act 2010 must be given effect, consistently with the provisions of the commercial arbitration legislation. Section 7(1) states the overarching purpose as follows:

“The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.”

Sections 8 and 9 require the Court to give effect to the overarching purpose and to exercise its powers in furtherance of that purpose. Fifthly, the application under the provisions of s 42(1) of the Act, which is an application which does not require leave, necessarily involves more than a preliminary approach to the proper construction of s 22(2) of the Act.

[13]See Energy Brix Australian Corporation Pty Ltd v National Logistics Co-ordinators (Morwell) Pty Ltd (2002) 5 VR 353 at [31] (Ormiston JA, with whom other members of the Court of Appeal agreed), referring to Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203 at 226 (Shiller JA); and Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57; (2010) 267 ALR 74 at 93 (Allsop P, with whom the other members of the Court of Appeal agreed).

On this basis, I turn first to consider whether leave to appeal should be granted under the provisions of s 38 of the Act, whether the appeal should be allowed under those provisions and then whether it is established that the Arbitrator misconducted the proceedings within the meaning of s 42(1) of the Act. In the course of so doing, it is necessary to consider the operation of s 22(2) of the Act and the manner in which the Arbitrator had recourse to the powers and discretions which the parties conferred upon him under these provisions by the terms of the Arbitration Agreement.

Review of arbitration awards

The powers of the Court with respect to the review of arbitration awards which are subject to the Act are regulated by ss 38 to 41. The Act only provides for judicial review on a question of law, not questions of fact,[14] though the apparent simplicity of the distinction is always deceptive. For example, findings of fact by an arbitrator as a result of failing to consider or properly consider the relevant admissible evidence may, in particular circumstances, constitute an error of law.[15] In any event, it is clear that the Act does not provide for merits appeals on questions of law but, rather, restricts appeals, principally on the basis provided for in s 38(5).[16] The Act also accommodates appeals on questions of law where all parties to the arbitration agreement consent to the appeal.[17] The position has been changed somewhat by the provisions of the Commercial Arbitration Act 2011 (Vic) (“the 2011 Act”) which applies the provisions of the UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985 with amendments as adopted by the Commission in 2006 (two domestic commercial arbitrations) and thereby eliminates merits appeals to the same extent as they are eliminated by the Model Law, subject to the possibility of an appeal on a question of law if the parties agree or the Court grants leave under the provisions of s 34A of that 2011 Act.[18] Some further background to the introduction by the Act in 1984 and its appeal regime is provided in Thoroughvision Pty Ltd v Sky Channel Pty Ltd.[19]
[14]Section 38(2); and see Leighton Contractors Pty Ltd v South Australian Superannuation Fund Investment Trust (1994) 63 SASR 444 at 448 (Debelle J).
[15]Cf the position with arbitrations to which s 34A(3)(c) of the Commercial Arbitration Act 2011 (Vic) applies.
[16]See Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57; (2010) 267 ALR 74. Allsop P, (with whom Spigelman CJ and Macfarlan JA agreed) emphasised this point in commenting (at [127]), with reference to the equivalent provisions of s 38(5)(b)(ii) of the Act, that: “The remit of arbitrators includes the making of errors; that is an inevitable part of any process of dispute resolution.” This position does not appear to be doubted by the High Court on appeal in Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37.
[17]See s 38(4)(a).
[18]The 2011 Act commenced on 17 November 2011.
[19][2010] VSC 139, at [15]-[17].

The regime provided for in sub-ss 38(2) and (5) of the Act is as follows:

“(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.
…
(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement –
(a)with the consent of all the other parties to the arbitration agreement; or
(b)subject to section 40, with the leave of the Supreme Court.[20]

(5) The Supreme Court shall not grant leave under subsection (4)(b) unless it considers that-
(a)having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and
(b)there is-
(i) a manifest error of law on the face of the award; or
(ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.”
[20]Section 40 of the Act provides for “exclusion agreements”, which exclude rights of appeal.

Even if the requirements of sub-s 38(5) are established, there remains a discretion in the Court to refuse leave.[21]
[21]See Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 at 225-6 (Sheller JA); and Westport Insurance Corporation v Gordian Runoff [2011] HCA 37 at [29] (French CJ and Gummow, Crennan and Bell JJ); see also Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 (Vic) r 4.09(1).
Substantially affecting rights

The first requirement of sub-s 38(5) is that the question of law “could substantially affect the rights of one or more parties …”. It has been held that the question whether the rights of a party “could be” substantially affected is a question of fact.[22] The consideration of this requirement by the Court should not be narrowly confined and, in particular, is not confined to cases in which the nature of the effect is monetary.[23] In circumstances where the arbitrator is required to construe the provision of a contract, it may readily be seen that this is a question of law capable of substantially affecting the rights and obligations of the parties to the contract.[24] It follows, that if the question of law involves the existence or otherwise of a contract, or in this case an agreement for lease or lease, between the parties, then this is a question the determination of which could substantially affect the rights of one or more parties within the meaning of sub-s 38(5)(a). More specifically, the determination of the questions of law which are raised by the College’s application would, in my view, substantially affect the rights of the College to occupy the land and operate a school upon it in the future. I accept that this could, in turn, adversely affect the ongoing viability of the College.[25] In any event, the seriousness of the effect of the Award upon the College was readily acknowledged by the Congregation in the course of the Arbitration.[26]
[22]See Mowby Pty Ltd v Moose Property Service Pty Ltd (in Liq) [2007] VSC 111 at [51].
[23]See Vodafone Pty Ltd v Supercall Pty Ltd [2003] NSWSC 302, at [57] and [58] (Nicholas J).
[24]See Vodafone Pty Ltd v Supercall Pty Ltd [2003] NSWSC 302, at [58] (Nicholas J).
[25]See Affidavit of Gidon Lipkies affirmed 16 September 2011 (“Lipkies affidavit”) at [18], [20], [23] and [24].
[26]See Affidavit of Bettina Louise Evert sworn 16 September 2011 (“Evert affidavit”) at [29].

Manifest error of law on the face of the Award

The authorities indicate very clearly that the word ”manifest” where it is used in s 38(5)(b)(i) carries significant meaning which is not to be read down or effectively ignored. It was against the legislative background of the English Arbitration Act 1979 and the New South Wales Commercial Arbitration Act 1984 that the meaning of the phrase “manifest error of law on the face of the award” was considered in Promenade Investments Pty Ltd v State of New South Wales.[27] A manifest error is one which is “evident or obvious rather than one which is arguable”.[28] More recently, the High Court reaffirmed the position in Westport Insurance Corporation v Gordian Runoff Ltd, where French CJ and Gummow, Crennan and Bell JJ said:[29]
[27](1992) 26 NSWLR 203 (CA); and see Energy Brix Australia Corporation Pty Ltd v National Logistics Co-Ordinators (Morwell) Pty Ltd (2002) 5 VR 353 (CA); Melbourne VV Pty Ltd v Pratt [1995] VSC 21 (App Div); Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 (CA) at 369-70 (Buchanan, Nettle and Dodds-Streeton JJA); Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275 where the approach of Sheller JA in Promenade Investments was approved; and see Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37.
[28]Gunns Forest Products Ltd v North Insurances Ltd & Ors [2006] VSCA 105, at [19] (Mandie AJA); and see Leyton Contractors Pty Ltd v South Australian Superannuation Trust (1994) 63 SASR 444 at 448 (Debelle J); and see Crewford Pty Ltd v Transit Australia Pty Ltd [1998] 1 Qd R 490; and see Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275.
[29][2011] HCA 37, at [42].

“… but the words ‘a manifest error of law on the face of the award’ comprise a phrase which is to be read and understood as expressing the one idea. An error of law either exists or does not exist; there is no twilight zone between the two possibilities. But what is required here is that the existence of error be manifest on the face of the award, including the reasons given by arbitrator, in the sense of apparent to that understanding by the reader of the award.”

The plurality continued, turning their attention to the character or quality of the error, and so doing emphasising that the effect of paragraph 38(5)(b)(i) is not to include “facile errors and exclude those of complexity”; the latter including difficult questions of law presented to the arbitrator, which are open to competing arguments. On these points, their Honours said:[30]
“[45] Much difficulty in the operation of these provisions has been occasioned by the majority decision of the New South Wales Court of Appeal in Natoli v Walker (Kirby P and Mahoney JA; Meagher JA dissenting).[31] The majority appear to have treated the use of “manifest” in para (b)(i) of s 38(5) not as directed to what is presented upon the face of the award but as requiring the error of law itself to have a particular quality or character so as to include within para (b)(i) facile errors and to exclude those of complexity. This would exclude from para (b)(i), for example, an error in the construction of a complex law such as s 18B of the Insurance Act. Yet, as para (b)(ii) indicates, the policy of the statute is not to leave entirely to the operation of the arbitration agreement questions of law the determination of which may be likely to add to the certainty of commercial law. In an age when much commercial activity is regulated by statute, such questions are likely to be matters of statutory interpretation. It would be incongruous to favour judicial determination merely of egregious error apparent on the face of the award.
[46] In the present case, counsel then appearing for the reinsurers in the Court of Appeal, no doubt aware of what had been said in Natoli by the Court of Appeal, conceded that he did not press a case of manifest error of law on the face of the award. However, in his reasons, Allsop P said that he did not take the concession as going beyond the particular point of construction of s 18B upon which the primary judge had based his decision.[32] Nevertheless, his Honour applied Natoli to the construction of para (b)(i) of s 38(5),[33] so that answers given by arbitrators upon difficult questions of law, which had been open to competing arguments, did not qualify as errors of law.
[47] In this court the reinsurers relied upon para (b)(i) as well as para (b)(ii) of s 38(5) and were at liberty to do so. Natoli should not be accepted in this court as correctly construing s 38(5)(b)(i) of the Arbitration Act. The character or quality of the error of law falls for consideration, if relied upon, at the next stage, namely when the Supreme Court is considering under s 38(4)(b) whether to grant leave.”

[30]Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37, at [45]-[47].

[31](1994) 217 ALR 201 at 215–17 and 223 (Natoli).

[32]Gordian at [178].

[33]Gordian at [116].

Against this statement of the law by the High Court it is helpful to have regard to Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd,[34] where Dodds-Streeton J commented that the power of judicial review is “enlivened by an obvious departure from settled principles of law”.[35] The emphasis in this comment lies in the word “obvious” as it prefaces reference to the principles relevant to determination of an application for leave to appeal under sub-ss 38(4) and (5). Dodds-Streeton J continued:[36]
[34][2003] VSC 275.
[35][2003] VSC 275 at [30].
[36]Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275 at [38] to [43]; noting that the first paragraph in the passage from the judgment of Sheller JA in Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 at 225 was referred to with approval in Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 at 369-70 (Buchanan, Nettle and Dodds-Streeton JJA).

“[38] The Commercial Arbitration Acts, in broadly uniform format, were subsequently enacted in Australian States and Territories. An apparent goal of the legislation was to minimise judicial supervision and review of arbitral decisions. In Promenade Sheller JA observed:
‘The added requirements of manifest error of law on the face of the award or strong evidence that the arbitrator made an error of law and that the determination of the question may add substantially to the certainty of commercial law suggest that the draftsman was seeking to constrain the exercise of control over arbitral awards in the manner described by the House of Lords in The Nema. A manifest error on the face of the award may be an error which would be apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument.’[37]
[37](1992) 26 NSWLR 203 at 222.

[39] His Honour noted the recommendation of the New South Wales Working Group that ‘s38(5) should incorporate the guidelines enunciated in The Nema and other relevant authorities with the effect that leave may only be given if an error of law is apparent on the face of an award without hearing argument’.[38]
[38](1992) 26 NSWLR 203 at 222 (being a reference to the February 1988 Report of the Working Group requested by the Standing Committee of Attorneys-General to review the operation of the uniform commercial arbitration legislation); and see Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57 at [105] and [106] (Allsop P with whom Spigelman CJ and Macfarlan JA agreed).
[40] Sheller JA relevantly observed:
‘In applying s38, as amended, a construction that would promote the purpose or object underlying the Act must be preferred to a construction that would not promote that purpose or object ... The expression “error of law on the face of the award” is one of a type well-known to courts. The award having been examined, the question is whether there is apparent (and such is the denotation of the word “manifest”) an error of law. ‘Manifest error’ is an expression sometimes used in reference to reasons given by judges or the approach taken by juries ... It is used to indicate something evident or obvious rather than arguable .... The matters referred to by Lord Diplock in The Nema remain important factors in determining whether leave should be given.
However, I have difficulty in defining the significance of an error of law by reference to whether it is apparent to a judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument. I understand the views expressed that decisions on questions of law should be left to the arbitrator with minimal interference by the courts unless the arbitrator may be establishing an erroneous precedent on a matter of law which may affect other cases between other parties, as, for example, where the question concerns the construction of a contract in standard terms. But the paragraph requires a determination as to whether or not there is a manifest error on the face of the award and I do not see why a judge should be required to do that without adversarial argument. If the judge concludes after argument that there is not such an error of law an application based on this ground fails ... There is nothing, in my opinion, in the language of the sub-section or in any other material, to which consideration can appropriately be given pursuant to the terms of the Interpretation Act which would allow the judge to proceed to determine the application without hearing argument. However, as McHugh JA pointed out “manifest” in the context of the sub-section, which contemplates the grant of leave before an appeal can be pursued, connotes an error of law which is more than arguable. There should, in my opinion, before leave is granted be powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law’.[39]
[39](1992) 26 NSWLR 203 at 225-226.

[41] Windeyer J in Gold Coast City Council v Canterbury Pipe Lines[40] stated:
‘An error of law on the face of the award is not to be discovered by looking behind its back. It is not permissible to treat the limited jurisdiction by which a court ensures that an arbitration is conducted in accordance with law as if it were the equivalent of an appeal from an arbitrator’s decision.’[41]

[42] In Leung v Hungry Jacks Pty Ltd,[42] Hedigan J stated that the error must be ‘evident and obvious rather than merely arguable.’
[43] In Natoli v Walker,[43] Kirby P stated:
‘Obviously, there is difficulty in the word “manifest”. What may be “manifest” to one judicial officer may fail to persuade another. The criterion cannot be the swiftness of mind of the sharpest intellect. Nor can it be the perception of one whose whole career has been devoted to examining and reflecting upon building contracts. An objective, not a subjective, test for what is “manifest” is contemplated. But the word will not go away. Against the background of its history in this context it requires swift and easy persuasion and rapid recognition of the suggested error.’”
[40](1967) 118 CLR 58.
[41](1967) 118 CLR 58 at 77.
[42][2000] V ConvR 64,348 (54-614).
[43](1994) 217 ALR 201 at 215.

Although these authorities indicate that a manifest error on the face of the award “is not to be discovered by looking behind its back”,[44] the Court is entitled to consider documents referred to by the arbitrator where it is necessary to understand those reasons.[45] They also indicate that the Court may consider complex questions of law in an application for leave to appeal and, further, that the complexity of the issues involved is not, in truth, a reason to dismiss the application for leave. There first must be undertaken an analysis to identify whether there is, in fact, an error of law.
[44]Gold Coast City Council v Canterbury Pipelines (1967) 118 CLR 58, at 77 (Windeyer J).
[45]Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275, at [49] (Dodds-Streeton J).

In the context of the manifest error issue, the Congregation also argued that when the relevant law is unclear and unsettled, it cannot be said that an arbitrator has plainly departed from settled law or legal principle in a manner which could constitute a “manifest error”. The Congregation sought to support this position on the basis of the lack of a settled judicial interpretation of s 22(2) of the Act.[46] This argument does, however, rely upon the approach applied to the consideration of complex questions of law by arbitrators in this context, which was applied in Natoli v Walker,[47] an approach rejected by the High Court in Westport Insurance Corporation v Gardian Runoff Ltd.[48] Echoing the words of the plurality in that case, “an error of law exists or does not exist”.[49] Consequently, however difficult or uncertain determination of the state of the law may be, the primary analysis remains one of the Court identifying whether an error of law exists.
[46]See below, paragraphs 40 and following.
[47](1994) 217 ALR 201.
[48][2011] HCA 37, at [42] and [45]-[47]; set out above, paragraph 19.
[49][2011] HCA 37, at [42].

Strong evidence of error of law

The other basis upon which leave to appeal may be obtained is in circumstances where the Court finds strong evidence that the Arbitrator made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law, within the meaning of s 38(5)(b)(ii) of the Act.

Although the provisions of s 38(5)(b)(ii) refer to an “error of law” rather than a “manifest error of law”, as is the position in s 38(5)(b)(i), there is no basis, having regard to the provisions of ss 38 to 41 of the Act which constrain merits appeals, for supposing that this second basis upon which leave might be granted could be used to avoid the apparently stricter requirements of the first ground, where the reference to an error of law is qualified by the word “manifest”. This is clear from the judgment of Allsop P in Gordian Runoff Ltd v Westport Insurance Corporation.[50] The position is made particularly clear in the following passage from that judgment:
[50](2010) 267 ALR 74 (with whom Spigelman CJ and Macfarlan JA agreed).

“[126] The positing of these two levels of strictness for the identification of legal error (“manifest error”: (b)(i) and “strong evidence that the arbitrator made an error of law”: (b)(ii)) can be seen to be a reflection of aspects of Lord Diplock’s speech in The “Nema”. In The “Nema”, at 742–743 Lord Diplock discussed the proper approach to the construction of “one-off” clauses and the “rather less strict criteria” that were appropriate for the construction of standard form contracts in respect of which a high degree of legal certainty for the relevant market was required. In such cases where there was a standard form contract operating in a market (implicitly overseen by English courts according to English law) Lord Diplock said at 743:
‘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 in his construction; and when the events to which the standard clause fell to be applied in the particular arbitration were themselves “one-off” events, stricter criteria should be applied on the same lines as those that I have suggested is appropriate to “one-off” clauses.’

In this context, the importance of standard form contracts in the operation of commercial markets and the role of the courts in the support thereof by clarity and consistency had, only four years before in 1977, been lucidly and commandingly expressed by his Lordship in Federal Commerce & Navigation Co v Tradax Export SA (The “Maratha Envoy”) [1978] AC 1 at 7–8.
[127] What therefore has to be shown, as a first step, is that there was strong evidence, in the sense of a strong prima facie case, that the arbitrators were wrong in law. Only if this exists does one move on to the additional consideration as to whether the determination of the question (of law) may or may be likely to add substantially to the certainty of commercial law. The court needs to be careful not to downgrade the statutory requirement of “strong evidence”, that is a strong prima facie case of legal error, because of the “interesting” or important legal question involved. The remit of arbitrators includes the making of errors; that is an inevitable part of any process of dispute resolution. Arbitrators may deal with “interesting” or important questions. How and what errors are to be corrected depends on the statute in question. Here, it must be shown that there is a strong prima facie case that the arbitrators were wrong on a question of law.
[128] An assessment of this question at the procedural level of a leave application requires the demonstration by arguments appropriate to a leave application of a strong prima facie case of legal error. The restriction of argument to a form appropriate to a leave application is not restricted to “manifest error”. It might be obvious that in that context argument would necessarily be short. It might also be that a strong prima facie case of error requires the display of something more than obvious error. Nevertheless, it is the evidence of a prima facie case of error that is required to be strong. The longer the debate that is required to demonstrate the asserted error, the likely more contestable is the argument. The procedural context is again important. The strength of any argument and the strength of the prima facie case of error is not assessed after full concurrent argument on appeal. It is to be assessed by reference to argument suitable to a leave application in which the task is to assess the strength of the case for error, not decide the case for error.”

The High Court did not disturb the position expressed by the New South Wales Court of Appeal with respect to the operation of s 38(5)(b)(ii) of the Act in Gordian Runoff Ltd v Westport Insurance Corporation.[51] Thus, the present state of the law in this respect is that the requirement of strong evidence of error is satisfied where a “strong prima facie case” of error is established.[52] Thus, the same circumstances may attract both of the sub-paragraphs of paragraph 38(5)(b) of the Act.[53]
[51](2010) 267 ALR 74.
[52]See Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWSCA 57, at [127]; (2010) 267 ALR 74 at 98, [127] (Allsop P).
[53]Westport Insurance Corporation v Gordian Runoff Ltd [2010] HCA 37, at [48] (French CJ and Gummow, Crennan and Bell JJ).

Further, in this respect, it should not be overlooked that an appeal on the basis of “strong evidence that the arbitrator … made an error of law” also requires a finding that the determination of the relevant question “may add, or may be likely to add, substantially to the certainty of commercial law”.

In this context, the College submitted that a determination of the legal questions arising from the alleged errors made by the Arbitrator with respect to s 22(2) of the Act and the principles of estoppel may add to or be likely to add substantially to the certainty of commercial law within the meaning of these provisions. It submitted that s 22(2) of the Act has not been the subject of authoritative judicial determination by any Court: noting that the Arbitrator expressed this view in the Award.[54] It was submitted that the consideration of the operation of s 22(2) and the principles of estoppel in this context will have significance beyond the present case and affect other parties who agree to invoke those provisions in Arbitrations. With particular reference to the equitable doctrine of estoppel, it was said that the operation of this doctrine in defining the rights of parties in circumstances where the evidence may not establish the existence of a legally binding agreement between them is also a matter of general significance. I did not understand the Congregation to be seriously contending that an authoritative judicial interpretation of s 22(2) of the Act would not substantially add to the certainty of commercial law.[55] In any event, having regard to the state of the authorities, particularly the lack of common law authority, in relation to these provisions I am satisfied that such an authoritative determination would add to the certainty of commercial law an essential element to the operation of these provisions of the Act. I find it difficult to accept that the same could be said in relation to the estoppel issue; as being a matter of significance with respect to the certainty of commercial law. In any event, I am of the view that the estoppel issue does not itself arise in a sense relevant to the requirements of paragraph 38(5)(b)(ii) from the perspective of equity (in the Chancery sense), but rather from the perspective of the operation and application of sub-s 22(2) of the Act. Thus, the proper interpretation of sub-s 22(2) of the Act is significant in terms of substantially adding to the certainty of commercial law and satisfies the paragraph 38(5)(b)(ii) requirements. Consequently, the estoppel issue falls to be considered in the course of the arbitration in which sub-s 22(2) is applied, as properly construed. The same applies to the determination of what period of notice should be given to the College to vacate the land in the event that the issue is reached in the arbitration, again applying sub-s 22(2), properly construed.
[54]See at [134].
[55]The interpretation of which remains relevant with respect to the provisions of s 28 of the Commercial Arbitration Act 2011; and see Jones, Commercial Arbitration in Australia (LBC, 2011), 377-381.

Basis of appeal and discretionary considerations

The College relies upon both limbs of paragraph 38(5)(b) – manifest error and strong evidence of an error of law – in support of its application for leave to appeal the Award. In any event, the discretion to grant leave is “to be exercised after considering all the circumstances of the case”.[56]
[56]Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37, at [29] (French CJ and Gummow, Crennan and Bell JJ) referring to the judgment of Sheller JA in Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203 at 225-6 and in Qantas Airways Ltd v Joseland and Gilling (1986) 6 NSWLR 327 at 333 (McHugh JA, giving the judgment of himself and Glass and Priestley JJA). Similar views were also expressed by Kiefel J in Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37, at [165].

It is clear, however, that the discretion under sub-s 38(4) is not unfettered, in the sense that it involves the balancing of various factors. Thus, in Westport Insurance Corporation v Gordian Runoff Ltd, the plurality said:[57]

“[38] However, some assistance in considering the operation of the leave requirement in s 38 is provided by Lord Diplock in The Nema.[58] Having described the power to refuse leave in the 1979 UK Act as conferring an ‘unfettered’ judicial discretion, he added:
‘[T]his, in the case of a dispute that parties have agreed to submit to arbitration, involves deciding between the rival merits of assured finality on the one hand and upon the other the resolution of doubts as to the accuracy of the legal reasoning followed by the arbitrator in the course of arriving at his award, having regard in that assessment to the nature and circumstances of the particular dispute.’”
[57][2011] HCA 37, at [38].
[58]The Nema at [1982] AC 724 at 739.

Misconducted proceedings

The law with respect to the misconduct of proceedings for the purposes of s 42(1) of the Act was summarised in my judgment in Thoroughvision Pty Ltd v Sky Channel Pty Ltd.[59] The statement of the law was adopted by the Congregation in its submissions, which I set out as a convenient summary of the position for present purposes:[60]
[59][2010] VSC 138, at [26]-[30].
[60]Defendants’ Submissions (13 October 2011), para 26.

“26. The Congregation respectfully adopts paragraphs [26] to [30] inclusive of the Court’s reasons in Thoroughvision Pty Ltd v Sky Channel Pty Ltd [2010] VSC 139 as constituting an accurate statement of the law with respect to s 42 of the Act. In particular:
(a)section 42 gives the Court the power to set aside an award based on misconduct;
(b)section 42 does not impute any personal misconduct or moral turpitude on the part of the arbitrator;
(c)section 42 does not impute a requirement that the arbitrator give weight to everything said by the parties and all evidence led by them, but rather misconduct may (but does not necessarily) include a failure to refer in reasons to ‘relevant evidence’ or ‘substantial submissions’;[61]
[61]Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 at 373-374 at [76]-[79] and the authorities referred to therein, per Buchanan, Nettle and Dodds-Streeton JJA; quoted with approval in Thoroughvision at [29].
(d)an error of law is not of itself misconduct and there must be some ‘real dereliction of duty on the part of the arbitrator’;[62]
[62]Holland Stolte Pty Ltd v Murbay Pty Ltd (1991) 105 FLR 304 at 309 per Miles CJ; quoted with approval by Harper J in Garms v Telstra Corp Ltd [1998] VSC 40 at [38] and by Dodds-Streeton J in Anaconda Operations Pty Ltd v Fluor Australia Ltd [2003] VSC 275 at [65]; cited with approval in Thoroughvision at [30].
(e)‘misconduct’ does not encompass mere mistake;[63]
(f)section 42 must be understood and applied in light of:[64]
(i)the limitations on appeals in s 38; and
(ii)the underlying policy of the Act as stated in the Second Reading Speech[65] to the 1993 amendments to s 38 that ‘in most cases the parties should have to accept as the final decision of the arbitrator they have chosen to decide the matter in the first place’; and

(g)the Court will not permit s 42 to be used as a ‘back door’ mechanism to circumvent the leave requirements in s 38;[66] and
(h)if s 42 is otherwise satisfied, the Court retains a discretion whether or not to grant relief.[67]”
[63]Ibid; also Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 at 373-374 at [78], citing King v Thomas McKenna Ltd [1991] 2 QB 480 at 491 per Lord Donaldson MR; quoted with approval in Thoroughvision at [29].
[64]Anaconda Operations Pty Ltd v Fluor Australia Ltd [2003] VSC 275 at [66]-[67] per Dodds-Streeton J, citing Harper J in Garms v Telstra Corp Ltd [1998] VSC 40 at [107]-[108] cited with approval in Thoroughvision at [30].
[65]Hansard, Vol 410, Legislative Assembly, 11 March 1993, p 171-173.
[66]Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 at 374 at [79] and the authorities cited therein; Tony J Boulos Pty Ltd v Doug Reid Pty Ltd BC9102985, unreported, Cole J, Supreme Court of New South Wales, 16/08/1991, quoted with approval by Harper J in Garms v Telstra Corp Ltd [1998] VSC 40 at [107] and by Dodds-Streeton J in Anaconda Operations Pty Ltd v Fluor Australia Ltd [2003] VSC 275 at [66].
[67]Thoroughvision at [62].

Claimed errors of law

The College submitted that the Arbitrator made errors of law in failing to apply s 22(2) of the Act to the determination of the matters in dispute, particularly in determining whether the parties had entered into a legally binding agreement for lease. Further, it was claimed that the Arbitrator had made an error in his interpretation of the provisions of s 22(2) of the Act. The next head of error relied upon was the Arbitrator’s alleged failure to properly construe the correspondence between the parties which, the College claimed and the Congregation denied, produced an enforceable agreement for lease as a result of correspondence which culminated, as it was put, in a letter from the College to the Congregation dated 25 February 2008. Within this head of error there are also two possible perspectives or approaches. The first is whether the conclusions drawn by the Arbitrator from the correspondence between the parties are erroneous when viewed solely through the eyes of the common law and equity as administered by equity courts and the second is whether the same is true viewed from the perspective of an arbitrator empowered under the provisions of s 22(2) of the Act, properly construed.

A third claim with respect to error is that the Arbitrator misapprehended the elements of the doctrine of estoppel and failed to appreciate that the College’s claim in estoppel was not confined to representations made on and prior to 25 February 2008, but extended to representations and conduct after that date. Again, issues may vary depending upon whether the common law perspective, broadly described, is applied or the s 22(2) of the Act perspective. Finally, it was claimed that the Arbitrator was in error in determining the reasonable period of notice for the purpose of determination of a tenancy at will. Again, issues may vary depending upon whether the common law perspective, broadly described, is applied or the s 22(2) of the Act perspective.

Failure to apply s 22(2) of the Act

It was submitted that the Arbitrator was in error in failing to apply s 22(2) of the Act to the determination of the matters in dispute and, in particular, determining whether the parties had entered into a legally binding agreement for lease.

In relation to the application of s 22(2), the Arbitrator stated the position in the Award as follows:[68]

“I am satisfied that in determining whether a concluded agreement for lease was entered into on 25 February 2008 between the Congregation and the College I must apply the law, and in particular the common law principles, relating to the formation of enforceable contracts. Section 22(2), in my opinion, has no operation in determining this question”. [Plaintiff’s emphasis]

[68]See the Award, at [143].

It was submitted by the College that there was no basis for the Arbitrator to conclude that s 22(2) of the Act had no operation in determining whether the parties had entered into an agreement for lease. The question whether this constituted a relevant error does, however, also depend upon the proper interpretation of s 22(2) of the Act because if, properly construed, it were a provision of narrow application inapplicable to determining such questions or a provision which gave an absolute discretion to the Arbitrator whether or not to apply its provisions, then the position would be otherwise. However, for the reasons which follow, I am of the opinion that, properly construed, s 22(2) is not so confined in its operation to exclude the question whether the parties had entered into an agreement for lease and nor does it confer an absolute discretion on the Arbitrator whether or not to apply its provisions. I will come to those matters in due course but, for the present, focus on the terms of the Arbitration Agreement.

The relevant provisions of the Arbitration Agreement have already been set out and reference made to them. In the present context, it is noted that clause 2(b)(ii) of that agreement provides that “The Arbitrator must conduct a determination of the Matters in accordance with the Arbitration Rules”. (Emphasis by the College). It is clear that the definition of “Matters”, which defines the ambit of the dispute referred to arbitration by reference to the pleadings, includes the question whether the parties had entered into an agreement for lease. The Arbitration Rules contained in schedule 3 of the Arbitration Agreement clearly adopted, by reference, the provisions of s 22(2) of the Act and thereby conferred discretions and powers and imposed a duty on the Arbitrator to “determine any question that arises for determination … by reference to considerations of general justice and fairness”. In this respect, in the context of the formation of the Arbitration Agreement, the College submitted that as an Orthodox Jewish institution subject to Jewish law, it only agreed to the arbitration on the basis that the Arbitrator determine the dispute by reference to the principles in s 22(2) of the Act.[69]
[69]See Evert affidavit, at [28]; see also Lipkies affidavit, at [26]-[31].

It was submitted by the College that the failure by the Arbitrator to apply s 22(2) of the Act in determining whether there was an agreement for lease was a breach of the terms of the Arbitration Agreement. The Arbitrator’s failure to give effect to the Arbitration Agreement was, it was submitted, a “manifest error of law” on the face of the Award and also constituted “technical” misconduct. In this respect, reference is made to the judgment of McDougall J in Hewitt v Mckensey[70] where, in considering the reverse position, it was found that an arbitrator who had determined the matter under s 22(2) of the New South Wales equivalent of the Act[71] and in the absence of any written agreement to do so was “almost invariably” guilty of misconduct.[72] This follows in the present circumstances as, for the reasons indicated below, I do not regard s 22(2) of the Act, properly construed, as not extending to the question whether the parties had entered into an agreement for lease or allowing the Arbitrator to decline to apply its provisions on the basis of discretionary considerations.
[70][2003] NSWSC 1186.
[71]i.e. s 22(2) of the Commercial Arbitration Act 1984 (NSW).
[72]See Hewitt v Mckensey [2003] NSWSC 1186, at [58].

Finally, the College submitted that the significance of the error made by the Arbitrator is apparent on the face of the Award, particularly as the Arbitrator stated in his reasons that the authorities did not establish the extent of the jurisdiction given to him under s 22(2) of the Act.[73] Consequently, it was submitted that had the Arbitrator applied s 22(2) of the Act to the determination of the dispute, he would have been required to determine the meaning and ambit of that provision (notwithstanding the perceived difficulty of the task) and then apply it in determining whether the parties had entered into an agreement for lease. The Arbitrator did not proceed on that basis.
[73]See Award, at [142]; and the same statement or acknowledgment was made by the Arbitrator during the course of oral argument during the arbitration hearing (see Exhibit “BL 9” of the Evert affidavit, particularly at transcript, pp 472.5-.24 and 474.11-.17

At this point I should emphasise that it is neither open nor possible for a court such as this, which only has jurisdiction to apply common law and equitable principles (in the narrow sense derived from the Court of Chancery), to substitute its own views as to “considerations of general justice and fairness” with respect to the application of provisions such as s 22(2) of the Act. As made clear in the discussion of the proper interpretation of s 22(2) of the Act, it is, depending on all the circumstances, open to an arbitrator to ameliorate strict rules of law or equity which, for example, might include a more flexible view as to the possible application, or otherwise, of the classes referred to in Masters v Cameron[74] or the rules with respect to essential terms of leases or agreements for lease and the like. These examples are not intended to be limiting or proscriptive in any way, but to illustrate the problem that arises where an arbitrator does not apply “considerations of general justice and fairness” in accordance with s 22(2) to issues in dispute. The court cannot then speculate as to whether there would or would not have been “errors” in relation to particular matters or issues had the arbitrator proceeded in this way. Rather, it must take the view that a relevant error arises where the s 22(2) provisions are not applied in a manner in conformity with their proper construction, without speculation as to the possible outcome or outcomes of their application. Additionally, as discussed further below, an arbitrator may decide on a proper application of s 22(2) of the Act that the law should be strictly applied. This position cannot be reached, however, on a proper application of these provisions without consideration of the merits, or otherwise, of their application in the particular circumstances and the reasons why, on the basis of considerations of general justice and fairness, the law should nevertheless be applied strictly. Again a court applying the law is not able to undertake this process itself as it cannot apply “considerations of general justice and fairness” in the s 22(2) context – even though the end result is a strict application of the law. That is only the conclusion of a process which the court cannot undertake.
[74](1954) 91 CLR 353.

Misinterpretation of s 22(2) of the Act

The College submitted that the Arbitrator was in error in not applying s 22(2) and in holding that is provisions would have required him to apply the common law principles of contract law in determining whether there was an agreement for lease.[75] Properly construed, it was submitted, s 22(2) did not require the Arbitrator to determine that issue strictly in accordance with the law but, rather, permitted and required him to have regard to wider considerations. The position of the Congregation was that the provisions of s 22(2) “… enables an arbitrator to temper the effect of evidentiary, procedural and technical rules, may enable an arbitrator to have particular regard to the party’s response, rather than to a technical or literal construction, but the matter must otherwise be determined according to law”.[76] As the College submitted, such a constrained view of the operation of s 22(2) flies in the face of the ordinary and natural meaning of the words of this statutory provision – a provision which directs that when enlivened by party agreement the arbitrator may determine “any question that arises for determination” in the course of the arbitration proceedings in accordance with its provisions (emphasis added). Further, the College submitted that it is the ordinary and natural meaning of the statute that governs and not any accretions to the law dealing with private agreements, other enactments or practice and procedure in international arbitrations. The position put by the College in this respect is clearly in conformity with long established authority[77] and s 22(2) of the Act is to be construed on this basis save that, for the reasons discussed, what might be termed the international provenance of s 22(2) is also relevant.[78]
[75]See Award, [142], [143].
[76]See Award, [141], being a reference by the Arbitrator to the submissions of the Congregation in this respect.
[77]See, for example, Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 384 (McHugh, Gummow, Kirby and Hayne JJ).
[78]See below, paragraphs 61 to 69.

The authorities relied upon by the Arbitrator in support of the position that he must apply substantive rules relating to principles of contract law arising in relation to the matter are set out and discussed in the immediately preceding part of the Award.[79] The only authorities referred to which considered the meaning of s 22(2) of the Act in any detail was Woodbud Pty Ltd v Warea Pty Ltd,[80] a decision of Young J (as he then was) in the Supreme Court of New South Wales, Allmore Constructions Pty Ltd v Failli[81] and Christ Church Grammar School v Bosnich[82]. The other cases referred to generally dealt with different statutory and contractual provisions and in different settings. In my view, for the reasons indicated below, they are of little value with respect to the interpretation of s 22(2) of the Act. It is, as the College submitted, trite that a court seeking the meaning of a particular statutory provision is not bound by the interpretation placed on similar or like words in other legislation;[83] though, in this respect, regard must be had to the statement of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd[84] in the following terms:[85]

“Intermediate appellate courts and trial judges in Australia should not depart from decisions in intermediate appellate courts in another jurisdiction on the interpretation of Commonwealth legislation or uniform national legislation unless they are convinced that the interpretation is plainly wrong.”

Although the cases which might be thought to cast some light on the meaning of s 22(2) of the Act may not all be decisions of intermediate appellate courts there is, nevertheless, much to be said for applying this approach more generally with respect to uniform legislation such as the uniform commercial arbitration acts in aid of a uniform and predictable commercial arbitration regime in Australia. This is particularly so having regard to the clear intention of the various State and Territory legislatures to achieve this result by the enactment of this uniform legislation in the 1980s and, more recently, uniform legislation in the form of the Commercial Arbitration Act 2010 (NSW) and the 2011 Act in Victoria.

[79]See Award, [135]-[139].

[80](1995) 125 FLR 346.

[81][2002] VSC 483 (Harper J)

[82][2010] VSC 476 (Sifris J)

[83]See DC Pearce & RS Geddes, Statutory Interpretation in Australia, 6^th ed, LexisNexis Butterworths, Australia, at [1.6] and [1.7].

[84](2007) 230 CLR 89.

[85](2007) 230 CLR 89 at 150 (Gleeson CJ and Gummow, Callinan, Heydon and Crennan JJ).

In contrast, the other case of closest relevance to the interpretation of these provisions was a decision of Harper J (as he then was) in Allmore Constructions Pty Ltd v Failli.[86] The Allmore Constructions case was an application for leave to appeal against an interim award under s 38 of the Act. The provisions of the relevant contract submitted any dispute in relation to any matter arising from or in connection with the contract to arbitration.[87] More particularly, Harper J said:[88]
[86][2002] VSC 483.
[87]See [2002] VSC 483, [4].
[88]See [2002] VSC 483, [4].

“The general approach which the arbitrator must take is likewise laid down – in sub-clause (d) – without mincing words:
‘The arbitrator must hear and decide any matter by reference to considerations of general justice and fairness, and is not bound to apply the rules of evidence and procedure.’”

Continuing, in relation to the conduct of the arbitration, Harper J said:[89]
[89][2002] VSC 483, [65]-[69].
“[65] I referred in paragraph [4] above to the fact that the arbitrator was required by the contract to hear and decide any dispute before him by reference to considerations of general justice and fairness. He was not bound to apply the rules of evidence and procedure.
[66] The plaintiff submits that:
‘where an arbitrator either … self-evidently purports to determine questions arising during an arbitration according to law (and without any reference, express or implied, to considerations of justice and fairness); or … purports to determine questions arising during an arbitration by reference to considerations of general justice and fairness, but only relies upon the law (without any reference, express or implied, to considerations of general justice and fairness) … the arbitrator is obliged to make those findings in accordance with the law. If he repeatedly does not do so, this must constitute misconduct.’[90]

[67] This passage encompasses the plaintiff's allied complaints that the arbitrator did not spell out the basis upon which he was proceeding, so that one side (the defendants) could depose in affidavit material before me that he ‘heard and decided the dispute by reference to considerations of general justice and fairness’[91] while the other party (the plaintiff) swore that the arbitrator applied the rules of evidence and generally followed the usual rules of procedure.[92]
[68] I have analysed those of the arbitrator’s findings which were the subject of the application for leave to appeal. It is unnecessary to say more about whether or not they were in accordance with the law, although it is pertinent to point out that they were so to the extent that they were the result of the application of considerations of general justice and fairness.
[69] It is important in this context to discredit the assumption, which seems to be implicit in the plaintiff's submission on this point, that ‘the law’ and considerations of general justice and fairness are frequently different and readily distinguishable, and that an arbitrator whose duty it is to apply considerations of general justice and fairness will fail in that duty if he or she applies ‘the law’. This in my opinion is clearly not the effect of clause 2(d) of the form of contract adopted by the parties in this case. That clause requires an arbitrator to avoid legal technicalities if, when applied, they would be inconsistent with considerations of general justice and fairness. It does not require, or necessarily allow, an arbitrator to disregard legal principle. It does not allow an arbitrator to decide a matter by reference to considerations which appear to the arbitrator, but to no one else, to be just and fair. Nor does it require an arbitrator to categorise his or her approach as being in accordance with the law on the one hand or general justice and fairness on the other. The efficacy of arbitration as a mechanism for resolving disputes would be seriously compromised were arbitrators required to perform the mental gymnastics which adherence to that proposition would involve. An arbitrator acting under clause 2(d) will fulfil his or her duty under that clause if he or she adheres to considerations of general justice and fairness. If this is the approach, no misconduct will occur.” [Footnotes, which referred only to affidavit evidence and submissions, omitted]

[90]Written submissions of the plaintiff dated 12 September 2002.

[91]First affidavit of Angpal Singh, paragraph 7.

[92]First affidavit of Peter Unsworth, paragraph 16.

The Allmore Constructions case was not, apparently, argued on the basis of s 22(2) of the Act but rather on the basis of the arbitrator’s mandate with respect to “considerations of general justice and fairness” contained in the contract containing the submission to arbitration; in other words, the arbitration agreement. It follows that, to this extent, the decision cannot be regarded as an interpretation of s 22(2) of the Act, though I think the general proposition stated in [69] of the extract of the judgment of Harper J which is set out above is equally apposite and applicable with respect to s 22(2) of the Act. For the reasons indicated below, I am of the opinion that the mandate provided by s 22(2) is in aid of greater flexibility of decision-making by an arbitrator but that, quite clearly, in particular circumstances an arbitrator might quite properly and appropriately decide that application of strict rules of law in relation to some or all issues the subject of the dispute is appropriate in terms of “considerations of general justice and fairness”. Nevertheless, it is incumbent upon the arbitrator holding such a mandate to explain why the arbitrator is of this view, and I do not see anything in the judgment of Harper J in the Allmore Constructions case as being inconsistent with such a general proposition. Additionally, having regard to the reliance in Allmore Constructions on the contractual provisions of the arbitration agreement as the basis for the “general justice and fairness” mandate, it is important to emphasise that the mandate conferred by s 22(2) of the Act, though triggered by the written agreement of the parties, is a mandate conferred by statute and not by the terms of the arbitration agreement. This is, in my view, a very important matter to be borne in mind when considering the authorities which have considered the effect of such a mandate, particularly the English authorities decided at a time when the issues involved in considering such a mandate were both the extent of the mandate itself but also the extent to which English law could accommodate a provision in an arbitration agreement in this form. The latter raises issues which are not relevant to a statutory mandate.

Reference was also made by the Arbitrator to a recent decision of this Court, Christ Church Grammar School v Bosnich,[93] where Sifris J was called upon to consider the operation of s 109 of the Fair Trading Act 1999, which provides:
[93][2010] VSC 476.

“In addition to its powers under Section 108, the Tribunal, in determining a consumer dispute or a trader-trader dispute, may make any order it considers fair, including declaring void any unjust term of a contract or otherwise varying a contract to avoid injustice”.

In seeking guidance from authorities and decisions of the Victorian Civil and Administrative Tribunal in which s 109 of the Fair Trading Act had been construed, Sifris J made reference to s 22(2) of the Act, as follows:[94]
“[39] Section 22(2) of the Commercial Arbitration Act 1984 (Vic) specifically permits parties to agree to an arbitrator or umpire deciding any question by reference to ‘considerations of general justice and fairness.’ If the parties do not agree, the question must be decided according to law.[95] However, even an agreement for the matter to be determined by reference to considerations of general justice and fairness does not mean an arbitrator is entitled to disregard the law entirely. In Woodbud Pty Ltd v Warea Pty Ltd,[96] Young J noted that ‘it was most debatable’ whether s 22(2) of the Commercial Arbitration Act 1984 (NSW), which is equivalent to s 22(2) of the Commercial Arbitration Act 1984 (Vic), goes much further than permitting the arbitrator to disregard evidentiary and procedural rules and technical rules relating to evidence, deeds and contracts.[97]”

For the same reasons as indicated with respect to the decision of Harper J in the Allmore Constructions case, I am of the opinion that this approach is entirely consistent with that adopted in the earlier case and takes matters no further than re-affirming that in certain circumstances the application of “considerations of general justice and fairness” would require application of the law.

[94][2010] VSC 476, [39].

[95]Commercial Arbitration Act 1984 (Vic) s 22(1).

[96]Unreported, Supreme Court of New South Wales, Young J, 15 June 1995.

[97]See also comments of McDougall J in Hewitt v McKensey [2003] NSWSC 1186 at [59].

The other cases relied upon by the Arbitrator, namely Sue v Hill,[98] and Seers v The Exhibition Centre Pty Ltd,[99] are decisions on the meaning of different statutory provisions which were neither applicable in a commercial arbitration context and had none of the provenance of s 22(2) of the Act, the relevance of which is discussed further below.
[98](1999) 199 CLR 462.
[99](2009) 232 FLR 415 (Refshauge J, Supreme Court of the Australian Capital Territory).

More particularly, Sue v Hill[100] was a case which involved the consideration of the powers of the High Court when sitting as a court of disputed returns under the provisions of the Commonwealth Electoral Act 1918. Section 364 of that Act provided that:
[100](1999) 199 CLR 462.

“The Court shall be guided by the substantial merits and good conscience of each case without regard to legal forms or technicalities, or whether the evidence before it is in accordance with the law of evidence or not.”

As for these provisions, Gleeson CJ, Gummow and Hayne JJ said, in a joint judgment:[101]
[101](1999) 199 CLR 462 at 485.
“Provisions of this type are not inimical to the exercise of the judicial power of the Commonwealth. They do not exonerate the Court from the application of substantive rules of law and are consistent with, and indeed require the application of, the rules of procedural fairness.” [Footnote omitted]

Sub-section 360(2) of the Commonwealth Electoral Act also provided:
“The Court may exercise all or any of its powers under this section on such grounds as the Court in its discretion thinks just and sufficient.”

As to these provisions, their Honours said:[102]
“In the context in which s 360(2) appears in the Act, it does not confer some uncontrolled discretion exercisable by recourse to other than legal norms.”

In my view, the decision in Sue v Hill is not relevant to the interpretation of s 22(2) of the Act as the legislation there considered by the High Court is of an entirely different character and, particularly, is legislation which goes to the manner in which a court of law is to exercise its functions and in the context of the Commonwealth Constitution and the extent to which such jurisdiction and empowerment might be said to purport to enable or require the court to act in a manner inimical to the exercise of the judicial power of the Commonwealth. This is an entirely different context from legislation conferring powers or discretions on an arbitrator who is not exercising the powers or performing the functions of a court of law.

[102](1999) 1999 CLR 462 at 486; and see also at 520-521 (Gaudron J).

In Seers v The Exhibition Centre Pty Ltd,[103] consideration was given to the meaning of the provisions of s 56 of the Workers Compensation Act 1951 (ACT) which provided for matters arising under it to be settled by arbitration by the Magistrates’ Court and the procedure to be observed. Introducing the issue, Refshauge J said:[104]
[103](2009) 232 FLR 415 (Refshauge J, ACT Supreme Court).
[104](2009) 232 FLR 415, at 421-2, [24]-[26].

[151]ie at para 709 of their text, as follows:

“While the amiable compositeur was originally a third party requested by the parties to propose to them a settlement, in the nineteenth century he became an arbitrator vested with additional powers. The Cour de Paris gave the following definition [CN France, Rev arb 1997, p 380, with a note by Loquin]: ‘The clause providing for amiable composition is a contractual waiver of the effects and benefits of rules of law, by which the parties lose the prerogative of requiring their strict application, and the arbitrators in turn receive the power to modify or moderate the consequences of the contract where equity or the parties’ common interests so require’. From this we retain two characteristics, which we shall examine below, together with their effects: first, the waiver of a strict application of the law, but not its total eviction, and, secondly, a power to moderate the contractual provisions, the effect of which appears unfair. …” [Footnotes omitted].

[152]De Boisséson, p 299.

[153]Poudret and Besson, Comparative Law of International Arbitration (2^nd ed, 2007, Thomson Sweet & Maxwell, London), pp 625-6 [717]; and see Christie, op cit, 265.

[154]Poudret and Besson observe in this respect at pp 618-19, [7.10] and [7.11]:

“7.10 … Alongside arbitration in law, the Italian and German codes similarly only mention arbitration in equity, and not amiable composition. However, this does not mean that the parties could not agree on the latter since it does not go so far in ousting the law. It should be noted that in all the laws mentioned above, amiable composition and arbitration in equity are not confined to international arbitration.

7.11 Besides these two types, the expression ‘arbitration ex aequo et bono’ is also frequently encountered. While Art 33(2) of the UNCITRAL Rules uses it together with amiable compositeur in its French version, the English version and Art 28(3) of the Model Law rightly distinguish the two by using the word ‘or’. It can be inferred therefrom that, at least according to these texts, arbitration ex aequo et bono is not the same thing as amiable composition but, rather, corresponds to arbitration in equity. While the former version of Art 1q3.4 of the ICC Rules only mentioned amiable composition, Art 17.3 of the new versions has added arbitration ex aequo et bono, thus recognising the specific role of the latter. While PILS, Art 187(2) only mentions the power to decide ‘en équité’ (nach Billigkeit, secondo equità), s 33.2 of the Swiss Rules use the terms ‘ex aequo et bono’ in the same sense. The same applies to s 28.2 of the AAA Rules, while s 22.4 of the LCIA Rules adds a third, typically English concept, that of ‘honourable engagement’, which we shall examine below. Finally, while the Swedish law contains no provision on this subject, Art 24.3 Stockholm Chamber of Commerce Rules distinguishes between arbitration ex aequo et bono and amiable composition, both of which require an authorisation by the parties. According to Hueman, such an agreement is unusual in Sweden.

Certain authors have submitted that any distinction between amiable composition and arbitration in equity is ‘artificial’, because in both cases an arbitrator can allow his feelings of justice or equity to prevail, or even that the two expressions are synonyms. While terminological confusion is indeed frequent and it is necessary in consequence to establish the real intent of the parties behind the unfortunate expressions which they may have used, we have sufficiently shown above, along with other scholars familiar with arbitration in equity, that the latter is not the same as amiable composition. This will be confirmed by a study of the effects of the two.”

Born, in his commentary, International Commercial Arbitration,[155] distinguishes between arbitration ex aequo et bono and arbitration amiable compositeur. Nevertheless, he observes:[156]
[155]Wolters Kluwer, 2009, (in two volumes).
[156]Vol 2, pp 2238.

“… The essential principles of each term is that arbitrators are not obliged to decide the parties’ dispute in accordance with a strict application of legal rules; rather, the arbitrators are expected to decide in light of general notions of fairness, equity and justice. (Definitions of both of these terms vary, with, for example, some authorities concluding that amiable compositeurs are obliged first to reach a ‘legal’ result, and then adjust it (if necessary) in light of equitable considerations).” [Footnotes omitted]

In spite of divergent views of commentators and courts in various countries, Born also observes that there is a common thread or consensus:[157]
[157]Vol 2, pp 2240-2242; and see Christie, op cit, 264.
“Although there is consensus that amiable composition and ex aequo et bono clauses free arbitrators from the strict legal terms of otherwise applicable law, there is debate about what precisely the arbitrators’ mandate and powers then are. Some authorities suggest that arbitrators are freed entirely from legal rules and left to decide according to their own sense of fairness and commercial practice, while other authorities suggest that the arbitrators should first apply national law and then adjust or mitigate its results if they consider that appropriate and fair. Where parties combine a choice-of-law clause with an amiable composition or ex aequo et bono provision, arbitrators will typically take the latter approach.
…
It is unclear whether an arbitral tribunal acting pursuant to an amiable composition or ex aequo et bono clause could decide a dispute based solely upon a strict application of the relevant law. The mere fact that a result accords with that prescribed strictly by the law does not, in the least, imply that it is not ‘equitable’, as some national courts have recognized. On the other hand, if a tribunal merely applied the law, without taking into account ‘equitable’ considerations, then they would violate their mandate.
It is also unclear whether arbitrators acting as amiable compositeurs or ex aequo et bono may refuse to give effect to the parties’ contract, as well as applicable law. According to some authorities, answering in the negative:
‘an arbitrator acting as amiable compositeur remains bound by the contract … the considerations which may lead the arbitrator to correct distortions which may result from a strict application of the provisions of the law to the particular circumstances of the case are not valid with regard to the contract, which is a special set of rules resulting from the parties’ own intentions.’

This is consistent with the UNCITRAL Model Law, which provides that ‘in all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction’. On the other hand, it would be peculiar to conclude that an arbitrator sitting ex aequo et bono or in an amiable composition had no greater authority, for example, to reduce a penalty, or excuse non-performance, than an arbitrator applying national law. The better view, adopted by a majority of commentators and other authorities, is that arbitrators may depart from the terms of the parties’ contract in fashioning a fair and equitable result, provided that they do not rewrite the structure of the agreement. Of course, arbitrators sitting ex aequo et bono or as amiable compositeur may not ignore applicable mandatory law.”

The reference to the mandatory law at the conclusion of these observations also emphasises the difference between the position in Victoria affecting this arbitration, namely that arbitration ex aequo et bono and amiable compositeur is given a statutory mandate by the mandatory law, s 22(2) of the Act.

On the basis of the authorities, legislative context and discussion of statutory interpretation and the commentaries in relation to ex aequo et bono and amiable compositeur arbitration, it is clear, in my opinion, that the provisions of s 22(2) of the Act do not require an arbitrator to determine matters the subject of the arbitration in accordance with strict legal principles. The arbitrator may have regard to such principles, but is permitted and required to depart from them and to have regard to wider considerations in determining issues in dispute “by reference to considerations of general justice and fairness” according to the statutory mandate provided by s 22(2), a mandate which provides him or her with a very broad canvass encompassing the possibility of deciding matters ex aequo et bono or amiable compositeur. In this context, the “or” derived from Article 33(2) of the UNCITRAL Arbitration Rules which have, as indicated previously, effectively been incorporated into s 22(2) is to be read permissively and expansively, not limiting the arbitrator to one or other of these concepts or requiring him or her or the parties to choose between them. I should also note that even if it were to be found that the proper construction of the expression “according to general justice and fairness” as used in s 22(2) were to be equated only with one of these concepts, or such elements as are common to both, the Arbitrator has, nevertheless, failed to discharge his mandate for the reasons I have indicated. Finally, it should be emphasised that, as discussed previously, the plain meaning of s 22(2) is that it is a legislative mandate for arbitrators, once enlivened by the agreement of the parties, for the determination of any question that arises in the course of the arbitration in accordance with its provisions.[158]
[158]See above, paragraph 40.

Turning to the present case, the College submitted that the Arbitrator was in error with respect to s 22(2) of the Act for a variety of reasons:[159]
[159]Plaintiff’s outline of submissions (17 October 2011), [54] and [55].

“54. In the presence case, the Arbitrator wrongly determined that he was required to decide whether the parties had entered into an agreement for lease according to law. In doing so, he disregarded the matters which were favourable to the College’s case and which he could and should have considered ‘by reference to considerations of general justice and fairness’. Those matters included:
(a)evidence as to the actual intention of the parties as to whether they intended to enter into an agreement for lease.[160] The Arbitrator disregarded such evidence because of the strict legal approach which he adopted (at [9] and [12])
[160]See Exhibit “BLE 4” of Evert affidavit being witness statement of Lipkies tendered in the arbitration. See in particular at [47] and [48]. Greenberg, Kee, Weeramantry, International Commercial Arbitration, Cambridge University Press, 2011 at p 143 suggest that in deciding a matter ex aequo et bono, the parties’ true intentions should prevail over the plain language of a contractual clause.
(b)evidence of the parties’ belief and conduct post 28 February 2008 to the effect that they had an agreement for lease. That evidence consisted of:
(i)the acknowledgment by Dr Degen at a meeting of the Congregation on 31 July 2008, that the parties had reached an agreement. The arbitrator disregarded such evidence because of the strict legal approach which he adopted (at [122]).
(ii)unchallenged statements by the College on 14 July 2008 (at [106]), 25 July 2008 (at [110]), 13 July 2009 (at [124]) and 29 September 2009 (at [127]), to the effect that the parties had made an agreement for lease.[161] The Arbitrator determined the dispute without reference to such evidence (at [132]).
(iii)the fact the parties were exchanging drafts of the lease as contemplated and communicated in the College’s letter of acceptance dated 25 February 2008.[162]
(iv)the fact the College was proceeding with its development plans as communicated in its letter of acceptance dated 25 February 2008 and its letter to the Congregation dated 17 July 2008.[163]

55. In addition, the Arbitrator decided the case against the College on the basis that by 25 February 2008 the parties had not agreed upon all terms.[164] For the reasons advanced below that conclusion was unjustified and in any event, did not preclude a finding that the parties had entered into a binding agreement.[165] However, had the Arbitrator determined the matter by reference to considerations of general justice and fairness, he could have filled in any gaps that existed in the agreement for lease. So much is clear from the observations of Young J in Woodbud cited above.”

[161]The only thing that the Congregation had challenged was that the actual Lease had been consummated. See the correspondence between the parties at [109] and [110].

[162]See for example at [106] and [120] of reasons.

[163]At [71] of Lipkies affidavit and [108] of reasons.

[164]At [100] and [101] of the reasons.

[165]See paragraph [68] below and footnotes referred to therein.

On the basis of what is, in my view, the proper construction of s 22(2) of the Act, I accept these submissions with respect to s 22(2) as illustrative, but not necessarily comprehensive, of the matters to which the Arbitrator should have had regard for the purposes of discharging his mandate under these provisions. As indicated, the Arbitrator’s mandate under these provisions is broad and is not a mandate which can be “second guessed” by a court which can only apply the law (including equity in the Chancery sense). Also, as I have explained, I base my analysis and views as to the proper construction of s 22(2) beyond the observations of Young J in Woodbud Pty Ltd v Warea Pty Ltd,[166] though I say this with great respect for the observations and statements of Young J in that case. Thus, from the point of view of a court applying the law, the primary and clear error made by the Arbitrator with respect to s 22(2) of the Act was his determination, without reasons, that s 22(2) had no operation in determining whether an agreement for lease had been reached between the parties and whether the binding or enforceable nature of any such agreement, if entered into, was subject to any subsequent event, such as the entering into a formal document, applying the approach and categories of Masters v Cameron,[167] and whether, in the particular circumstances, it contained all essential terms.
[166](1995) 125 FLR 346.
[167](1954) 91 CLR 353.

For these reasons, I regard the error made by the Arbitrator in failing to apply the mandate conferred on him under the provisions of s 22(2) of the Act as constituting a manifest error on the face of the Award on the basis of the principles in this respect already discussed. Further, to the extent that it might be said that the error is not manifest there is, in my view, certainly strong evidence of an error of law in this respect and having regard to the present state of the authorities on s 22(2), a question that may or is likely to add substantially to the certainty of commercial law. Thus, both limbs of paragraph 38(5)(b) of the Act are satisfied. As indicated previously, it is clear that determination of the question of law could substantially affect the rights of one or more of the parties to the Arbitration Agreement and, consequently, the requirements of paragraph 38(5)(a) of the Act are also satisfied. There is, as has been indicated previously, a discretion in the Court as to the grant of leave to appeal under s 38(4) of the Act. On the basis of the nature of the dispute and the significant consequences for each of the parties depending on the manner in which matters in dispute are resolved and the fundamental nature of the error of law identified, which goes to the foundation or basis of the Arbitrator’s decision-making process, it is appropriate that leave be granted and that an order be made under s 38(3) of the Act.

Reference was made earlier to a number of other errors which the Arbitrator was said to have made apart from the error with respect to s 22(2) of the Act. These were a failure to properly construe the relevant correspondence, the treatment of estoppel claims and the determination of a reasonable period of notice on the basis that the College was merely a tenant at will. In my opinion, it is not necessary or appropriate to explore these matters further in any detail, as their assessment by this Court would necessarily be on the basis of legal principles, strictly applied, which may or may not be appropriate from the perspective of the Arbitrator properly applying his mandate under s 22(2). In other words, the whole basis of the decision-making by the Arbitrator is called into question by reason of the failure to act under s 22(2) and no purpose is now served by my consideration of these issues from a narrow, merely legal, perspective.

More particularly, in relation to the estoppel issue, the basis upon which the Arbitrator was not prepared to entertain a claim on this basis flowed significantly from his approach to the contract (agreement for lease) formation issue in that he found himself precluded from finding any basis for any relevant representation, having found the essentials for any agreement lacking. This finding, in turn, depended on his interpretation of s 22(2) and the ambit of its application. There are also issues in relation to whether the Arbitrator was correct in dismissing the estoppel claim on the basis that no representation sufficient to found an equitable estoppel existed on the basis that it did not suffice to establish a contract under the objective theory of contract.[168] There were also issues raised by the Congregation as to the sufficiency of the estoppel pleading by the College, but I think it is clear from the pleadings, the manner in which the issue was raised in the course of the arbitration and treated by the Arbitrator in the Award that these submissions are without merit. In any event, these issues do not affect the position that these particular estoppel issues and any proprietary estoppel issues as may arise need to be considered by an arbitrator acting under the s 22(2) mandate.
[168]See Byrnes v Kendle [2011] HCA 26 at [100], [101] and [115] (Heydon and Crennan JJ); EK Nominees Pty Ltd v Woolworths [2006] NSWSC 1172 (White J); Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582 (CA); and Waltons Stores (Interstate) Ltd v Maher (1984) 164 CLR 387 at 428-9 (Brennan J).

The Arbitrator, having treated s 22(2) as having quite a narrow operation, then apparently proceeded to apply its provisions to ameliorate or otherwise modify the position which would have been reached at common law with respect to the calculation of a “reasonable notice” period for the determination of a tenancy at will. In so doing, the Arbitrator neither explained how or to what extent the operation of s 22(2) modified the position that would have been reached applying the strict law, why s 22(2) was applied in these circumstances and how the application of its provisions with respect to the reasonable notice issue was consistent with the Arbitrator’s previous findings as to the narrow ambit and application of these provisions.

As indicated previously, it was agreed that the application for leave to appeal under s 38 of the Act and any appeal under those provisions should be determined without any further hearing or submissions; hence both issues were, if leave were granted, to be the subject of the one hearing and submissions.[169] For the reasons set out previously, I adopted this course.[170] Having, as indicated, had the benefit of full argument and submissions on the principal issue in the leave question, namely the proper construction of s 22(2) of the Act, I find, on this basis and for the reasons indicated, that the requirements of s 38(5)(a) and (b)(i) (manifest error) are satisfied and that leave to appeal should be granted. It also follows, on this basis and for the reasons indicated, that the requirements of s 38(5)(a) and (b)(ii) (strong evidence of error) are satisfied and that leave to appeal should also be granted on this basis to the extent that it might be doubted that the Arbitrator’s error of law is manifest. In terms of discretionary considerations, it is clear, in my view, that the matters in dispute are of such importance to the parties and the critical error of law is of such significance that these considerations must weigh heavily in favour of the grant of leave to appeal.
[169]See above, paragraph 12.
[170]See above, paragraphs 13 and 14.

The error of law made by the Arbitrator in the construction and application of s 22(2) does, as discussed previously, goes to the whole and fundamental basis of his mandate as arbitrator, the consequences of which cannot be readily defined or assessed by this Court which only has jurisdiction to apply the law. For the reasons indicated, the basis upon which the parties agreed to refer matters in dispute to arbitration has not formed the basis of the arbitration as conducted and, consequently, the appeal must be allowed. It also follows, for these reasons, that the Award in its entirety cannot be allowed to stand.

Misconducting proceedings

There also remains the issue of the application under s 42 of the Act on the basis of the, so called, “technical” misconduct of the Arbitrator in failing to apply his mandate under s 22(2) of the Act and thereby misconducting the proceedings. In my view, it is clear from the authorities, particularly from Hewitt v Mckensey[171] (where it was found that an arbitrator in determining a matter under s 22(2) without the agreement of the parties, misconducted himself in terms of s 42 of the Act), that the Arbitrator’s failure to apply the provisions of s 22(2) of the Act, properly construed, was a misconducting of the arbitration proceedings for the purposes of s 42. In relation to s 42, McDougall J said in that case:[172]

“[63] I hasten to say that the misconduct that I have found is of what is often called a technical kind. I do not intend to suggest that Mr Wayland was guilty of any form of personal impropriety. There is no evidence whatsoever to support such a conclusion, nor was any submission put to me that there was. However, it is clear that, although there is no personal impropriety, an arbitrator may misconduct himself or herself where he or she makes a mistake ‘which has or may have unjustly prejudiced a party’: Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 571, 588 (Isaacs J). See, generally, Doran Constructions Pty Ltd v Health Administration Corp of NSW (CA, 10 October 1994, unreported), where the authorities are reviewed.
…
[70] Section 42 itself is not expressed in mandatory terms: when (among other things) misconduct is established, the Court ‘may’ set aside the award either wholly or in part. To read the word ‘may’ as ‘must’ would be inconsistent with the underlying philosophy of, so far as possible, minimising curial interference with arbitral awards. It may be noted that this philosophy was manifested, in relation to appeals, by the amendments to s 38 that were effected by the Commercial Arbitration (Amendment) Act 1990 (No 100). I do not accept that the legislature intended that any misconduct, even of the most technical kind and involving the most minimal of consequences, must require that the award be set aside in whole or in part. In my view, a recognition of the discretion that the word ‘may’ ordinarily implies is necessary both to give effect to the underlying legislative philosophy and to avoid expense and multiplicity of proceedings.”

On the basis of the serious consequences that a failure in the present circumstances to apply the s 22(2) mandate one might think it appropriate to set aside the Award on this basis. I do, however, adopt the statement by McDougall J and emphasise that in the present circumstances there is no personal impropriety on the part of the Arbitrator which has been alleged or which I have found. The Arbitrator sought to deal with a complex dispute and has done so thoroughly, expeditiously and diligently in the discharge of his mandate as he saw it. The fact that the Court, on appeal, takes a different view of the extent of the mandate on an analysis and determination of the relevant law does not detract from this position. Nevertheless, it cannot be the case that an arbitrator’s understanding and view of the relevant law, however complex or difficult the task of discernment might be, can govern the Court either in considering whether there has been an error of law or misconduct on the part of the Arbitrator. In the present circumstances and in light of my consideration of and position reached as to the proper construction of s 22(2) of the Act and its fundamental importance to the determination, by the Arbitrator, of matters in dispute, a finding that the Arbitrator misconducted the proceedings by failing to apply these provisions, as indicated previously, must follow. Applying the approach in Hewitt v Mckensey,[173] the Arbitrator has made a mistake “which has or may have unjustly prejudiced a party”.[174]

[171][2003] NSWSC 1186.

[172]Hewitt v Mckensey [2003] NSWSC 1186, [63] and [70].

[173][2003] NSWSC 1186.

[174][2003] NSWSC 1186, [63], referring to Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 571 at 588 (Isaacs J).

On the basis of my views as to the proper construction of s 22(2) of the Act, it follows that the Arbitrator’s treatment of its provisions as not being applicable was, as indicated previously, one reached without the provision of reasons,[175] as required by s 29(1) of the Act, the parties not having agreed to dispense with reasons. This is a further aspect of the misconducting of the proceedings by the Arbitrator, and constitutes misconduct for the purposes of s 42(1) of the Act. Again, this involves no personal impropriety of any kind.[176]
[175]See above, paragraphs 31 and 32.
[176]See Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 (CA); Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37; and Thoroughvision Pty Ltd v Sky Channel Pty Ltd [2010] VSC 139.

Extension of time

There remains one further matter which needs to be considered, namely whether the College requires an order to extend the time within which to bring an application under s 38(5) or 42(1) of the Act. This issue arises because rule 4.06 of Chapter II of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 (“the Rules”) provides that an application for leave to appeal should be made within 28 days after the day of the “order” of the tribunal. The Rules define “tribunal” as including an arbitrator.[177] An “order” is defined in Rule 4.02 to include a “decision or determination”. In Commonwealth v Bank of New South Wales,[178] the Privy Council referred with approval to the remarks of Lord Davey (in an earlier case) that the “natural, obvious and prima facie meaning of the word ‘decision’ is decision of the suit by the Court”.[179]
[177]See Rule 4.02.
[178](1949) 79 CLR 497 at 625.
[179]Rajah Tafadduq Raful Khan v Manik Chand (1902) LR 30 Ind App 35.

As submitted by the College, it is not apparent that an award which remains “subject to” a costs determination under s 34(4) of the Act constitutes an order for the purposes of rule 4.06. On the other hand, in Clay Group of Companies v ThornQuest,[180] Duggan J held that the time for leave to appeal commenced to run notwithstanding that the Award was subject to a direction as to costs under s 34(4) of the Act. However, as noted by the College, the relevant rule under which the question was decided in this case differed in terms from rule 4.06 in that it provided that an appeal under the Act “shall be instituted within 14 days of the making of the award”.[181] [Emphasis added].
[180]Unreported, BC9701820.
[181]At p 5. The relevant rule in force at the time in the South Australian Supreme Court Rules was r 120.07(1). It provided “Any appeal under Section 38 of the Act and any action under Section 42 of the Act shall be instituted within 14 days of the making of the award to which the appeal or the action relates …”.

It is the case that conventionally, and generally, orders are not formally entered by a court until the question of costs is determined, a practice which promotes finality in litigation. It is, naturally, preferable that one appeal be commenced in respect of all matters. In my view, the same considerations support a construction of rule 4.06 in favour of the view that time does not run until all directions making up the award, including costs, are finalised. On this basis, the College does not require an order that the time for making its application be extended.

However, if I am wrong in this respect, the Court has power under rule 3.02 of the Supreme Court (General Civil Procedure) Rules 2005 to extend the time within which to bring an application under s 38(5) or s 42(1) of the Act.[182] The Court also has inherent jurisdiction to extend the time within which to bring such applications.[183] In Peter Schwartz (Overseas) Pty Ltd v Morton,[184] Byrne J, considered an application for an extension of time for an application under s 38(5) and s 42(1) and said that the applicant must show “first, an explanation for the delay, second, a substantial point to be argued and third, a demonstration of injustice if the applicant is prevented from arguing the point”.[185] Byrne J also noted that the task for the Court in exercising its discretion is “to determine where the justice of the case points” having regard to “the evident purpose of the arbitral regime that there be finality to disputes at an arbitral level”.[186]
[182]Rule 1.07 of Chapter II has the effect of incorporating the power to grant extensions under Rule 3.02 of Chapter I in relation to applications made pursuant to Chapter II.
[183]Biala Pty Ltd v Manilla Holdings Ltd [1989] 2 WAR 381.
[184][2003] VSC 144.
[185][2003] VSC 144, at [12].
[186][2003] VSC 144, at [12].

On this basis, the College submits that the interests of justice favour an extension of time having regard to the fact that:

(a)the delay was not lengthy;
(b)on any view, the arbitration was not finalised until the Amendment Award was made on 8 August 2011 and so it could not be said that the delay compromised the need for finality of the dispute;
(c)the delay was not deliberate. The reason for the delay was, on the evidence, that the College only became aware that there may be grounds to appeal the Award after the Amendment Award;[187]
(d)the College’s application raises substantial points which if successful will affect the validity of the Award;
(e)the Award affects the rights of the College and has the potential to affect adversely its future viability and to disrupt the education of its students;[188] and
(f)the delay has not caused any material prejudice to the Congregation.

[187]Affidavit of Mr Max Casen affirmed on 21 September 2011 at [7] and [8].

[188]Lipkies affidavit (16 September 2011) at [18], [20], [23] and [24].

On the bases put by the College and having regard to the authorities to which reference has been made, I am satisfied that there is a proper basis for ordering an extension of time in which to bring its application under s 38(5) and 42(1) of the Act and will make an order as sought on this basis.

Summary and Conclusions

For the preceding reasons, leave to appeal the Award is granted and I determine that the appeal should be allowed, on the bases indicated. This leaves the question whether to vary or set aside the Award or remit the Award for consideration by the Arbitrator, or a new arbitrator, under the provisions of s 38(3) of the Act.

I have also found, for the preceding reasons, that the Arbitrator misconducted the proceedings within the meaning of s 42(1) of the Act. Consequently, there is also the additional question whether to set aside the Award in whole or in part under the provisions of s 42(1) of the Act.

I will hear the parties further in relation to the appropriate course under those various provisions. It follows that questions of enforcement do not arise.

I reserve the question of costs and will hear the parties further on that question and on the form of orders to give effect to the above.

[2011] VSC 622

22 December 2011