ARBITRATION IN PERSPECTIVE THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA ARBITRATION IN PERSPECTIVE This educational video was produced as a joint project of the ACT Chapters of the Australian Institute of Quantity Surveyors and the Institute of Arbitrators and Mediators Australia and filmed at the studios of the University of Canberra on 19 June 2001. The package comprises this booklet and two video tapes: o Tape #1 - The Preliminary Conference o Tape #2 - The Hearing and Awards This booklet contains written material that includes: o Video Guides - setting out the sequence of narration, overheads and role plays to assist following each of the two videos. o Questions and Answers - some questions and brief suggested answers [many answers can be found in the material in the videos]. o Preliminary Conference Agenda - an example, setting out many of the issues that may be addressed in a preliminary conference. For further copies of “Arbitration in Perspective” contact: o The Institute of Arbitrators and Mediators Australia or o The Australian Institute of Quantity Surveyors There are Chapters in each state or contact the National offices: Australian Institute of Quantity Surveyors National Office PO Box 301 DEAKIN WEST ACT 2600 Institute of Arbitrators & Mediators Australia PO Box 13064 Law Courts MELBOURNE VIC 8010 phone: (02) 6282 2222 fax: (02) 6285 2427 phone: (03) 9607 6908 fax: (03) 9602 2833 April 2002 - V1 Page 1 of 22 ARBITRATION IN PERSPECTIVE THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA Video Guide Tape #1 - The Preliminary Conference - 35 minutes Introduction This video is an attempt to present some elements of arbitration to a general professional audience but not necessarily within a particular industry. The subject matter chosen is a building dispute as it is an area where disputes commonly arise and arbitration is used for their resolution. We have sampled and simplified some real subject matter from what was a very complicated dispute. The real dispute was determined in the Supreme Court of Queensland and involved glass in a multi storey building simply falling from the sky onto the footpath below. The facts in the case have been adapted to suit arbitration and further simplified and selectively extracted to provide some data for this video. If you want to read the full judgment of the court we refer you to Robt Jones (363 Adelaide Street) Pty Ltd & Anor v First Abbott Corporation Pty Ltd & Ors [1997] QSC 210 (28 October 1997) Before we get into the Arbitration I will give an outline of where arbitration sits in the scheme of dispute resolution. Forms of Dispute Resolution Non Binding Binding • Negotiation • Alternative Dispute Resolution • Binding Dispute Resolution • Litigation Alternative Dispute Resolution • • • • • Conciliation Mediation Mini Trial Facilitation / Moderation Expert Appraisal The Dispute Resolution spectrum covers the NON BINDING: • Negotiation and Alternative Dispute Resolution Through to the BINDING: • Binding Dispute Resolution and Litigation The Alternative Dispute Resolution group includes what are called: • Conciliation, • • • • • Mediation, Mini Trials, Facilitation, Moderation, and Expert Appraisal. The Binding Dispute Resolution group includes what can be called: Binding Dispute Resolution • Binding Expert Determination • Arbitration • Expert Determination [or Adjudication] and • Arbitration. In this Video we are concerned with ARBITRATION April 2002 - V1 Page 2 of 22 THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA ARBITRATION IN PERSPECTIVE The Story As mentioned previously the story behind this Mock Arbitration involves the Owner of a multi story building seeking damages from the Builder and Architect on a variety of bases but essentially for the losses which they have sustained and will sustain into the future as a consequence of having certain glass installed in the building. They allege that liability arises because the glass being fully toughened had and still has a propensity to shatter spontaneously due to the instability of certain nickel sulphide impurities contained within it and that heat strengthened glass which does not have this characteristic ought to have been used (or advised to be used as the case may be) or alternatively toughened glass which had been heat soaked to remove those impurities. A claim is also made in respect of an allegedly negligently constructed glass and aluminium awning on the Building. This matter involves the Builder but also the Engineers as consultants to the Project Architect. The defendants to the actions in the real dispute made third party claims between themselves and claims for contribution and indemnity. We shall not be concerned with this sort of complication in this video. The Players The players in the real matter were numerous and the relationships complex. For simplicity, this mock Arbitration shall deal with only three main parties: • OWNER • BUILDER • ARCHITECT Real Players OWNER Guarantor Development Project Manager Project ARCHITECT Owner’s Architect BUILDER Subcontractor Supplier US Manufacturer Simplifying the Details In watching this video you should not be concerned about fully understanding the details of the subject matter. You can not possibly piece together the complexities that would be involved in such a matter in the time we have in this video. It is common in building works to encounter variations to the work required, delays in completion and problems in construction. This gives rise to differences of opinion in relation to the cost of variations to be paid by the Owner to the Builder and in relation to the amount of time that various events or circumstances delay the Builder in completion of the work. In this mock arbitration we shall not deal with the many other issues that would have been involved. We shall limit the role plays to the issues of the defective panes of window glass and the defective glass awning. April 2002 - V1 Page 3 of 22 ARBITRATION IN PERSPECTIVE THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA Arbitration Agreement The Building Contract contained an arbitration clause as follows Arbitration Agreement CONTRACT - Owner / Builder If a dispute occurs between the parties then either party may serve upon the other a Notice of Dispute setting out the particulars of the dispute. If such dispute is not resolved within 28 days of the service of the Notice of Dispute then the dispute shall be referred to arbitration. If a dispute occurs between the parties then either party may serve upon the other a Notice of Dispute setting out the particulars of the dispute. If such dispute is not resolved within 28 days of the service of the Notice of Dispute then the dispute shall be referred to arbitration Arbitration Agreement CONTRACT - Owner / Builder • Arbitration shall be effected by a single arbitrator who shall be nominated by the Chairperson of the Chapter of the Institute of Arbiters Australia of the ACT. Such arbitration shall be held in the ACT. Arbitration Agreement CONSULTANCY - Owner / Architect • If a dispute or difference between the Consultant and the Principal arises out of or in connection with the Contract either party shall deliver by and or served by certified mail to the other party a notice in writing adequately identifying and providing details of the dispute. Arbitration Agreement CONSULTANCY - Owner / Architect • If the representatives are unable to resolve the dispute to the mutual satisfaction of the parties within seven (7) days after the commencement of the meeting of the representatives, then either party shall have the right to pursue the resolution of the dispute or difference by arbitration or litigation. • Unless the parties agree to the contrary the arbitration shall be by an Arbitrator appointed by the President of the Institute of Arbitrators and Mediators Australia. Arbitration shall be effected by a single arbitrator who shall be nominated by the Chairperson of the Chapter of the Institute of Arbiters Australia of the ACT. Such arbitration shall be held in the ACT. The Consultancy Agreement between the Architect and the Owner also contained a dispute resolution clause which provided as follows: If a dispute or difference between the Consultant and the Principal arises out of or in connection with the Contract either party shall deliver by and or served by certified mail to the other party a notice in writing adequately identifying and providing details of the dispute. If the representatives are unable to resolve the dispute to the mutual satisfaction of the parties within seven (7) days after the commencement of the meeting of the representatives, then either party shall have the right to pursue the resolution of the dispute or difference by arbitration or litigation. Unless the parties agree to the contrary the arbitration shall be by an Arbitrator appointed by the President of the Institute of Arbitrators and Mediators Australia. The arbitration clauses are common in building and construction contracts. Though frequent, they are less common in consultancy agreements. In this situation we have arbitration clauses that are effective and do cover the matters in dispute. An important aspect to be noted at the commencement of arbitration is: Does the arbitration agreement cover the actual dispute? and Has the arbitrator been validly nominated? April 2002 - V1 Page 4 of 22 ARBITRATION IN PERSPECTIVE THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA Nomination of Arbitrator In this matter the parties via their solicitors could not agree on the identity of the arbitrator despite an exchange of several names by letter and by telephone. So the Owner applied to the Institute of Arbitrators and Mediators Australia to nominate an arbitrator pursuant to both arbitration agreements - that with the Builder and that with the Architect. The President of the Institute considered the application noting that the same subject matter and issues were to be determined and duly nominated the same Grade 1 Arbitrator for both arbitration agreements. The Nominee Arbitrator then arranged for the parties to attend a preliminary conference where it is intended that the following can be dealt with. Legal Representation The Arbitration Agreement Conflicts of Interest Nature of the Proceedings Arbitrators Fees Matters to expedite the Hearing Timetable for Pre Hearing Matters General Administrative Arrangements Preliminary Conference • • • • • • • • Legal Representation The Arbitration Agreement Conflicts of Interest Nature of Proceedings Arbitrators Fees Matters to expedite the Hearing Timetable for Pre Hearing Matters General Administrative Arrangements Note in the role play that the Nominee is not the Arbitrator until he gets to a point where he consents to ‘enter on the reference’ [to arbitration] The Preliminary Conference is a very important part of arbitration as it sets most of the ‘rules’. Apart from those set out in the Commercial Arbitration Acts or the arbitration agreements there are no formal rules. The Players the nominee arbitrator: Sir Laurence Street the owner: Mark de Jager the owner’s lawyer: John Harris the builder: Mark Southwell the builder’s lawyer: Chris Whitelaw the architect: Rodney Moss The Seating Plan Nominee Arbitrator The Owner’s Lawyer The Builder’s Lawyer The Owner The Builder The Architect The Preliminary Conference Role Play #1 27 minutes April 2002 - V1 Page 5 of 22 THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA Video Guide ARBITRATION IN PERSPECTIVE Tape #2 - The Hearing & Awards - 50 minutes Preparation for the Hearing Prelim Conference >> Hearing • Delay in documentation • Inadequate particulars • Objections After the preliminary conference the many steps in the Timetable have to be completed. In a major matter and particularly if there are more than two parties the steps are important to distil what are generally complex issues. This usually does not go to plan. The submissions and responses invariably run late. When a party makes a claim he is required to set it out clearly with sufficient particulars for the respondent to know the case against which it must answer in defence. Without such information the respondent is unable to prepare properly its defence and would therefore be denied natural justice. In long and complex matters the procedures adopted by courts have been found to be applicable. However in arbitration slavish adherence to court procedures is not essential to ensure natural justice. Strict control by the Arbitrator will often be necessary to prevent impasses. Often the simple warning suffices: that if a Claimant does not set out his case fully and sufficiently he will stand or fall on the adequacy of his case. Late amendments or introducing information for the first time at the hearing will be met with either exclusion or, the penalty of paying for the costs thrown away by the other side. The Hearing • Time to ‘hear’ the matter • If not presented then not considered April 2002 - V1 The hearing is the time when the cases are put on and argued. It has to be in the hearing or it is not in there to be considered. It is very important that parties are well prepared as once the hearing is over there will be very limited grounds for introducing any more evidence or argument. In our mock arbitration we shall role play some aspects of a hearing of this building matter. You won’t get the whole story - well no one ever does but to make this somewhat palatable we shall abbreviate most elements to provide the essence of what might go on Page 6 of 22 ARBITRATION IN PERSPECTIVE THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA The General Order of proceedings is: Opening Statements by the Claimant and the Respondent Witnesses are then ‘put on’. They may be witnesses of Fact or Opinion – In Chief – Cross Examination – Re Examination Each witness is dealt with sequentially: In Chief Hearing • General Order: Claimant then Respondent • Opening Statements • Witnesses: Fact or Opinion putting the evidence for who ever calls them • Summing Up Cross Examination being challenged by the other side Re Examination where new matter brought up in cross examination can be addressed by the first party. The Hearing concludes with a ‘Summing Up’ by each party. Note that we have simplified the hearing by having only two parties to the arbitration: The Players the nominee arbitrator: Sir Laurence Street the owner: Mark de Jager the owner’s lawyer: John Harris the builder: Mark Southwell the builder’s lawyer: Chris Whitelaw The Witnesses Witnesses of FACT The Architect: Rodney Moss The Engineer: Phil Milton EXPERT Witnesses Eric Schick Quantity Surveyor: [for the Owner] Pat Copping Quantity Surveyor [for the Builder] The Seating Plan Arbitrator The Owner The Owner’s Lawyer The Witnesses The Builder’s Lawyer The Builder The Hearing April 2002 - V1 Role Play #2a 37 minutes Page 7 of 22 ARBITRATION IN PERSPECTIVE THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA The Awards Once the Hearing is over the Arbitrator is on his own. He must make his decisions and give them in writing in what is called an Award. An Award must be produced by the Arbitrator in writing, with reasons and be signed. There are two types of Award: Interim and Final. Interim Award • Substantive Issues • Decides the matter An Interim Award deals with the substantive matters. They are the actual issues in dispute between the parties. Once determined those issues can only be re-addressed on very limited grounds. A Final Award deals with payment of the costs of the Arbitrator and whether one party pays for the costs of the other party. Final Award • Costs of the parties • Costs of the Arbitrator • Costs follow the event Generally the party who pays money to other party will also pay that party’s costs - or “costs follow the event”. The event being the net payment of money by one party to another in the Interim Award. We return to the role play after the Interim Award has been given and where the Owner and Builder are addressing the Arbitrator on the issue of costs. The arbitrator awarded in favour of the Owner. Role Play #2b 5 minutes April 2002 - V1 The Interim Award Page 8 of 22 ARBITRATION IN PERSPECTIVE THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA The Arbitrator considers the submissions on costs given by the Parties and makes his decision in a Final Award. We shall hear the Arbitrator explain simply the basic principles on costs. The Final Award Role Play #2c 2 minutes A common question is: How final is an Award? The Commercial Arbitration Act in section 38 (5) states the Supreme Court shall not grant leave to appeal 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 Finality s38(5) • (b) there is• (i) a manifest error of law on the face of the award; or 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 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. (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. This provision makes the appeal on an Arbitral Award generally more difficult than a judgment of the courts. Arbitral Awards are enforceable by the successful party as if they were a judgement of the relevant court. If a party fails to pay then the usual enforcement procedures of a judgement of the court applies. Conclusion That ends this brief and simple introduction to Arbitration. We trust that most of the audience will never need to resort to the determinative processes of arbitration or litigation but either prevent disputes arising in the first place or resolve them quickly and amicably by negotiation or mediation. April 2002 - V1 Page 9 of 22 ARBITRATION IN PERSPECTIVE THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA Questions and Answers Questions The questions below are provided to stimulate discussion. Many of the answers can be found in the videos. Some brief suggested answers are provided in the following pages. The Preliminary Conference 1. Why is legal representation an issue at the start of the Preliminary Conference? 2. Why is the arbitration agreement so important? 3. What is the jurisdiction of the arbitrator? 4. What are some reasons that jurisdiction may be an issue? 5. Why did the arbitrator consolidate the two arbitrations? 6. Why were the arbitrator’s connections with the parties of such importance? 7. Why did the arbitrator ask the parties to briefly describe what the dispute was about? 8. What is the value of having evidence in chief being by affidavit? 9. Why would parties want the arbitrator’s decision [the award] to include the reasons? 10. Why did the arbitrator order the parties to provide money as security for his costs? 11. Why did the arbitrator not agree to adjourn the conference for the Architect to obtain legal representation? 12. What special requirement was there if any party wanted a subsequent telephone conference with the arbitrator? April 2002 - V1 Page 10 of 22 THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA ARBITRATION IN PERSPECTIVE The Hearing 13. What important step does the arbitrator take once it was announced that the Architect was in liquidation? 14. What is the purpose of the opening statements by the parties? 15. What are the basic steps of examination of witnesses? 16. What makes a witness an expert? The Awards 17. What is the difference between an interim and final award? 18. Why does the arbitrator deal with the costs separately from the substantive matters? 19. What are the terms “party and party”, “solicitor and client” and “indemnity”? 20. What does “taxed in court” mean? 21. What happens to the arbitrator once a final award is given? 22. What can be done if a party is dissatisfied with the award? April 2002 - V1 Page 11 of 22 ARBITRATION IN PERSPECTIVE THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA Answers The Preliminary Conference 1. Why is legal representation an issue at the start of the Preliminary Conference? Arbitration is traditionally seen as less formal than court proceedings and the presence of lawyers is seen as not being conducive to that informality. If a lawyer represents one party there is a default expectation that the other party(s) should have legal representation as well or they would be at a disadvantage. Once lawyers are involved then the costs of a simple arbitration will be increased. Conversely in more complicated matters the presence of lawyers should make the arbitration more efficient and consequently less costly overall. When a party is not capable of running a case without assistance then of course legal representation may be necessary to ensure fairness. 2. Why is the arbitration agreement so important? Arbitration is consensual in that the parties must have agreed to use arbitration to settle their disputes. This is often agreed prior to any disputes having arisen. It is not infrequent that one party does not want an arbitration to proceed on a particular dispute once it has arisen. If there is no arbitration agreement then the only other avenue may be the courts. 3. What is the jurisdiction of the arbitrator? The jurisdiction is the arbitrator’s power to act and this comes from the arbitration agreement, the common law and the statutes. When the arbitration agreement does not cover the type of dispute or the subject matter of the dispute(s) that have arisen then there may be no jurisdiction for an arbitrator seeking to decide those matters. 4. What are some reasons that jurisdiction may be an issue? A common reason to avoid arbitration is that a party does not have the money or does not want to pay what is in dispute and may seek to delay any resolution of the matter by disputing the arbitrator’s jurisdiction. The reasons cited may be for example: that there is no arbitration agreement at all; that it does not cover the subject matter that is in dispute; the preliminary steps in the disputes clause in the contract have not been followed; or the arbitrator has not been validly nominated in accordance with the arbitration agreement. In this instance the name of the nominating body was misquoted in the arbitration agreement. The Builder’s lawyer raises an objection on the basis of the appointment not being validly made. Note that the Builder does not press the point as he is anxious for the matter to proceed because the Builder believes that he is owed money. 5. Why did the arbitrator consolidate the two arbitrations? Where the subject matter and witnesses in two arbitrations are similar then it is more efficient and effective to deal with them at the same time. In this case it was very sensible to do so and all the parties agreed particularly as the arbitrator was nominated to arbitrate both matters. The Arbitrator referred to section 26 of the Commercial Arbitration Act 1986 which in subsection (1) permits the arbitrator to order such consolidation upon the application of one of the parties. 6. Why were the arbitrator’s connections with the parties of such importance? As arbitration is binding on the parties it must be seen to be without any inherent unfairness. Public policy requires that there not be any apprehension of bias or partiality in the arbitrator. This can arise from a relationship or dealing that the arbitrator has or has had with a party, a witness, an expert witness or a legal representative. Such connections may, at worse, be that the arbitrator has a financial interest in the actual dispute or has a financial interest with a party otherwise. At a lesser scale but still of concern is a relationship by blood or marriage or a close social friendship. The parties and the arbitrator must declare at the earliest opportunity any issue that could give rise to such a bias or partiality. If the issue has some substance then the arbitrator must not continue unless all parties, once sufficiently informed of the issue, agree to the arbitrator continuing. It is a failure of the arbitrator to disclose that is more of the problem than the actual relationship itself. April 2002 - V1 Page 12 of 22 THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA 7. ARBITRATION IN PERSPECTIVE Why did the arbitrator ask the parties to briefly describe what the dispute was about? The arbitration agreement is only effective for disputes that fall within the scope of the words or expressions used. Some arbitration agreements may not cover claims under certain areas of law or claims that may not be in relation to the particular contract but to do with another relationship between the parties. Additionally the nominee must confirm that the subject matter and the nature of the claims are within the nominee’s experience and ability. 8. What is the value of having evidence in chief being by affidavit? In an affidavit the evidence being led by a party is put in writing and sworn to by the witness. Each party can then see in advance what is going to be led by the other and thus properly prepare a defence. If the evidence is compelling the other party may concede some issues before a hearing. Much time can be saved at the hearing where witnesses can simply identify themselves and confirm their affidavits. That leaves the hearing to deal with only the parts that are truly in contention and moving straight into cross examination. 9. Why would parties want the arbitrator’s decision [the award] to include the reasons? The parties invest much time and money in the arbitration and like to know that they have been listened to and that the arbitrator came to a substantiated decision. The Commercial Arbitration Acts require awards to include reasons unless the parties agree in writing otherwise. If the parties want a faster and cheaper arbitration then an award without reasons may be appropriate. An award without reasons will be even harder to appeal against however most arbitrators do need to write out their reasons to confirm to themselves that they have come to a proper and correct decision. 10. Why did the arbitrator order the parties to provide money as security for his costs? The arbitration is private and is paid for by the parties unlike the courts which are funded by the state. The costs of the arbitrator are shared by the parties and when the determination is made the whole of those costs are generally paid for by the party that was unsuccessful. The unsuccessful party generally means the party that pays a net amount of money to the other party. The arbitrator would be unwise to proceed to conduct an arbitration and then seek payment from the parties as the party that is unsuccessful and then responsible for the whole of the arbitrator’s costs may consider that the arbitrator got it wrong and would not want to pay. The unsuccessful party may also have to pay the other party a substantial sum of money and may not have the capacity to promptly pay or to pay at all. There is no need for the arbitrator to put himself at risk so sufficient money should be held in trust to cover the arbitrator’s fees and expenses. Security in this manner should not be confused with one party providing security for the costs of another party. The arbitrator has no power to direct that form of security which can only be ordered by the courts. 11. Why did the arbitrator not agree to adjourn the conference for the Architect to obtain legal representation? The preliminary conference was well advanced and many issues had been, and would continue to be, dealt with without any prejudice to the Architect. The Arbitrator directed that if the Architect sought to later change or review any agreements or directions given that could be entertained in a further conference. If any such matters were not changed then the responsibility for the additional costs of the further conference would be taken into account in the final award. 12. What special requirement was there if any party wanted a subsequent telephone conference with the arbitrator? All parties must be in attendance so they can hear what is said or presented to the arbitrator by another party. This is necessary to maintain natural justice - one principle being that a party must know what case is made against him so he can be heard and controvert that case. A party can’t defend against what it does not know has been alleged. April 2002 - V1 Page 13 of 22 THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA ARBITRATION IN PERSPECTIVE The Hearing 13. What important step did the arbitrator take once it was announced that the Architect’s company was in liquidation? The proceedings that were previously consolidated were de-consolidated and left in abeyance pending whatever action the administrator of the Architect’s insolvency chose to take. 14. What is the purpose of the opening statements by the parties? The statements serve to confirm what it is that remains in dispute and what it is that each party is now claiming. During the pre hearing period the clarification of the claims and the exposure of the evidence can result in the settlement of parts or the whole of the claims. It is important to make sure that the arbitrator knows exactly what a party is trying to prove - so when evidence is being presented and examined its relevance and connection to the issues is clear. 15. What are the basic steps in examination of witnesses? Each witness puts on Evidence in Chief - usually by affidavit. Then the other party tests the Evidence in Chief by Cross Examination, directly in relation to the facts themselves and indirectly by challenging the credibility of the witness. Re-Examination is where the party who presented the witness can address matters that were raised within the cross examination that were not dealt with in Evidence in Chief. 16. What makes a witness an expert? Expert witnesses have by their training and experience expertise that should be able to assist the arbitration tribunal. Unlike witnesses of fact, they are permitted to give their opinion as evidence and can have leading questions put to them in Evidence in Chief. The Awards 17. What is the difference between an interim and final award? An interim award deals with the substantive matters in dispute whereas the final award deals with the costs of the arbitrator and the costs of the parties. 18. Why does the arbitrator deal with the costs separately from the substantive matters? The parties’ arguments in relation to the costs are predicated on the result of the arbitration. This is particularly so if there have been any offers of compromise that were more advantageous than the eventual award. You will note the term “Calderbank offer” is used. A Calderbank offer is a formal offer to settle the case, together with a warning that, in the circumstances of such an offer if the receiver of that offer does not achieve a result in the proceedings which is more favourable to him than the offer made, the offer will be disclosed in the context of the question of costs. That form of offer has become known as a Calderbank letter, taking its name from the comments of Cairns LJ in Calderbank v Calderbank [1976] Fam 93; [1975] 3 WLR 586; [1975] 3 All ER 333. 19. What are the terms “party and party”, “solicitor and client” and “indemnity”? These are legal terms referring to scales of recovery of legal costs. They relate to the obligation that one party may owe to another based on his success in the matter or the way he conducted his case. Generally the legal costs of the dealings between the parties [party and party] are awarded when one party is simply more successful than another. If there are other factors that make it not reasonable that one party should have continued his action such as rejection of a more advantageous offer of compromise then the costs of the legal advice between the party and his solicitor [solicitor and client] would be awarded which is a greater recovery than simply costs of party and party. April 2002 - V1 Page 14 of 22 ARBITRATION IN PERSPECTIVE THE AUSTRALIAN INSTITUTE OF QUANTITY SURVEYORS THE INSTITUTE OF ARBITRATORS & MEDIATORS AUSTRALIA Where some unconscionability is present then the level of “indemnity” may be appropriate. This means all costs of the action are recoverable provided the charges are reasonable. It is unlikely that an arbitrator has the power to award on an indemnity basis. Therefore whenever a party enters arbitration there will always be some costs that are not reimbursed even if that party is ultimately completely successful. 20. What does “taxed in court” mean? Due to the nature of legal costs the arbitrator usually awards legal costs by use of the expressions noted above: “party and party” or “solicitor and client”. Arbitrators can determine the exact amount of costs but they generally decline to do so. Where the parties can not agree on the amount of legal costs in accordance with the award of the arbitrator then any dispute over costs can be resolved in the same manner that it would be in legal proceedings. The courts have a taxing master who can deal with the voluminous and detailed items in a legal costs claim and apply various scales to arrive at a figure for payment. 21. What happens to the arbitrator once a final award is given? The role of the arbitrator ceases once a final award is given. Even in relation to interim awards the arbitrator cannot amend an award once it is given unless it is remitted by the court or to correct some minor error or omission under the “slip rule” in s30 of the Commercial Arbitration Acts. After the final award the arbitrator ceases to have any role and becomes what is known as “functus officio”. 22. What can be done if a party is dissatisfied with the award? Unless there has been some denial of natural justice or misconduct by the arbitrator then an award of an arbitrator is final and binding. The provisions of s38 of the Commercial Arbitration Acts allow only very limited grounds for appeal on the award itself. The original cause of action will also be extinguished and the matter can not be subsequently litigated in court by the parties save in exceptional circumstances. Preliminary Conference Agenda The following pages contain an example of an Agenda for a Preliminary Conference. Note that the form of any particular agenda will be a function of the anticipated nature of the dispute and the particular nominee arbitrator’s prior experience with arbitration. Further information about arbitration, mediation and expert determination may be found on the Institute of Arbitrators and Mediators Australia’s website: www.iama.org.au. April 2002 - V1 Page 15 of 22
