"Last Refuge of the Desperate"—Western Australia Supreme Court Rebuts Procedural Fairness Challenge to Arbitrator's Award
The Situation: In line with other UNCITRAL Model Law jurisdictions, in Australia, the grounds on which to challenge the outcome of a commercial arbitration are narrowly circumscribed. Having chosen to resolve their disputes via binding and final arbitration, parties will not be readily afforded a second chance to re-agitate their claims before national courts.
The Development: A recent decision of the Supreme Court of Western Australia has powerfully articulated growing judicial frustrations with the all-too-frequent efforts of unsuccessful parties in commencing impermissible merits appeals dressed up as a procedural fairness challenge.
Looking Ahead: With Australian courts holding firm that they are not to be treated as a "last refuge of the desperate", dissatisfied parties to the arbitral process have been put on notice that adverse costs sanctions may become more commonplace as a means of deterring and rebuking spurious set-aside applications.
A Judicial Dressing-Down
The recent decision of the Supreme Court of Western Australia in Venetian Nominees Pty Ltd v Weatherford Australia Pty Ltd  WASC 137 comes as the latest in a long line of cases (from both Australian and foreign courts) in support of the mantra maximum arbitral support, minimum curial intervention. With this established bank of pro-arbitration authority to draw upon, the opening paragraph of Kenneth Martin J's reasons succinctly and unapologetically set out the Supreme Court's stance:
Linguistic camouflage aside, this is an attempted appeal by the plaintiff against a decision of an arbitrator delivered in a wholly private arbitration. There presents the problem. There is, by the clear words of the local arbitration statute, no appeal available against the adverse arbitral decision. No doubt by reason of that inconvenient obstacle, the present challenges directed against the arbitrator's award decision have been grammatically cased as an alleged failure by the arbitrator to hear some of the plaintiff's arguments and, alternatively the too frequently seen allegation of a denial of procedural fairness within the arbitration process. Curial challenges attempted against non-appealable award decisions continue to bedevil and undermine legislative policy endeavours to entrench arbitration as a quick, relatively inexpensive and final medium for private dispute resolutions. Unfortunately, too many unsuccessful arbitrations participants still see it as worth their while to 'roll the dice' by manufacturing a pathway to a court, where strained procedural unfairness arguments rise to the fore as something of a last refuge of the desperate. Here, such challenges have been productive of delay to the successful party enjoying the fruits of the award and have necessitated an allocation of resources—equivalent to what would otherwise have been devoted to the hearing of a full blown appeal by way of a rehearing. This farcical position should no longer be entertained. Where the backdoor strategy is unsuccessfully deployed in future, it should be met with a punitive costs sanction.
The decision considered the procedural integrity of an arbitration about a lease dispute between Venetian Nominees Pty Ltd ("Venetian") as Lessor and Weatherford Australia Pty Ltd ("Weatherford") as Lessee. In the arbitration, Weatherford claimed it had been overcharged after Venetian incorrectly apportioned outgoings payable to it.
Due to COVID-19 restrictions, the arbitration was conducted remotely by telephone link over two days (although, interestingly, no claim was pursued that there had been any unfairness attributable to the virtual nature of the hearing), following which the parties exchanged further written submissions and documentary evidence.
In detailed reasons, the arbitrator found in favour of Weatherford. After determining the correct contractual interpretation of the lease provision dealing with the allocation of outgoings, the arbitrator concluded that Venetian was unable to sustain its position that the outgoings it had charged were proportionate to the area leased by Weatherford, which formed only a subset of the larger property held by Venetian.
The Set-Aside Application
Aggrieved by this decision, Venetian sought to set aside the award pursuant to section 34(2)(a)(ii) and (iv) of the Commercial Arbitration Act 2012 (WA) on the grounds that it had been unable to properly present its case and, alternatively, that the arbitral procedure had been unfair by denying Venetian a reasonable opportunity to present its case.
Drawing on existing domestic and international precedent on the scope of s 34 of the CAA and the legislative policy of minimal curial intervention, Kenneth Martin J emphasised that courts in Model Law jurisdictions do not and must not interfere in the merits of an arbitral award. Notwithstanding the often-ingenious efforts of parties to dress up attempted appeals as process grievances, it is not the role of the court to bail out losing parties who have found themselves regretting their choice of arbitration as a final and binding dispute resolution process.
The court proceeded to dismiss Venetian's application, finding that no process or procedural failure adverse to Venetian could be identified. His Honour soundly rejected Venetian's submissions that it had been ambushed during the oral hearing with additional arguments that it had not been afforded a reasonable opportunity to respond to. Instead, it was held that the process followed by the arbitrator, which included an opportunity for the parties to file further submissions and documentary evidence after the conclusion of the hearing, was perfectly fair.
The fact that Venetian had failed to avail itself of this opportunity to provide further materials only served to reveal the true nature of Venetian's poorly disguised set-aside application:
Indeed, despite the many layers of lipstick, the essential nature of Venetian's grievance is ultimately exposed to being that its advocated rival interpretation of the clause's true meaning was rejected by the arbitrator. Such a grievance is not a true process grievance. It is a poorly disguised attempted appeal raised against a decision reached against it. Save to say, losing is not a violation of procedural fairness principles.
The court reserved its decision as to costs pending submissions from the parties.
Two Key Takeaways
- Consistent with other Model Law jurisdictions, the Supreme Court of Western Australia has confirmed the limited avenues available to parties wishing to overturn an arbitrator's decision. While a serious and tangible failure of the arbitral process will merit judicial intervention, the courts are alive to efforts by parties to camouflage merits appeals as process grievances.
- As a means of deterring illegitimate set-aside applications, the spectre of adverse costs orders looms large. Parties seeking to dispute the findings of an arbitrator will need to carefully consider whether their complaint falls within the narrow circumstances in which an award can be set aside or challenged.
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