Supreme Court of Western Australia Court of Appeal refuses to set aside an arbitration award made by two arbitrators notwithstanding a finding of misconduct on the part of the third arbitrator by reason of his non-participation in the arbitral process.

In Structural Monitoring Systems Ltd v Tulip Bay Pty Ltd [2019] WASCA 16 (29 January 2019) the Supreme Court of Western Australia Court of Appeal unanimously dismissed an application to set aside an arbitral award on the ground of misconduct based on excessive delays in delivering the award and where the matter was determined by only two of three appointed arbitrators

Under a Technology Agreement, the parties agreed that all claims arising were to be exclusively settled by arbitration. The agreement provided that where there was more than one arbitrator, all decisions would be made by majority vote of the arbitrators. Three arbitrators were appointed to deal with the dispute. Two of them were barristers, the third, L, was a patent and trademark attorney.

There were delays during the reference. The primary judge observed that it fell well short of an efficient and cost-effective dispute resolution process. More than 16 months elapsed between the lodgement of evidence and submissions (July 2015) and the delivery of reasons by the two arbitrators (November 2016) and a further 18 months elapsed before the third arbitrator, L, indicated his agreement to the decision of the majority (December 2016) [88].

Prior to L indicating his agreement, the appellant had commenced proceedings to set aside the award for misconduct on the basis that the matter had been decided by only two of the three appointed arbitrators. It was only after the proceeding had been commenced that L provided a letter in which he advised that he had read the decision of the two other arbitrators and agreed with their reasons.

The Court of Appeal considered the power to set aside an award for misconduct.[1] Under the Commercial Arbitration Act 1985 (WA), at the time the relevant legislation, “misconduct” was defined inclusively and extended to “corruption, fraud, partiality, bias and a breach of the rules of natural justice”. The court observed that in Oil Basins[2],Victorian Court of Appeal observed that the expression “misconduct” as used in relation to arbitration “does not necessarily or indeed often involve moral turpitude on the part of the arbitrator”. It amounts to no more than a mishandling of the arbitration that is likely to amount to some substantial miscarriage of justice.

The Court of Appeal disagreed with the primary judge, finding on balance that L had failed to independently consider the evidence and submissions of the parties [114] and that the failure by L to engage in the arbitration, by independently considering the submissions and evidence, constituted misconduct [116]. Nevertheless, in the exercise of its discretion, the Court was not satisfied that there had been a substantial miscarriage of justice or that the appellant had been prejudiced [120]; [127]. Accordingly, the Court refused to exercise its discretion to set aside the award or to remove the arbitrators [128].

However, the Court observed that the provision for a majority decision should not be regarded as a licence to disregard involvement of a minority of the arbitrators [130]. The appeal was accordingly dismissed.

[1]The application was made under ss42 and 44 of the Commercial Arbitration Act 1985(WA) which has since been repealed and replaced by the Commercial Arbitration Act 2012(WA), s43(2)

[2]Oil Basins Ltd v BHP Billiton Ltd [2007] VSCA 225; (2007) 18 VR 346

Ian Percy

MTECC seminar Wednesday 20 March 2019 RACV Club Melbourne

MTECC is presenting a 3-speaker seminar from 5.30pm on Wednesday 20 March 2019 at the RACV Club in Melbourne. The seminar will be followed by drinks and canapés The topics and speakers will be released shortly.

If you would like to attend please RSVP to miriam@chancery.com.au.

MTECC member publication

MTECC member Laina Chan is about to publish a book with John Carter titled ‘Contract and the Australian Consumer Law’. Details of the book are here.