High Court clarifies the standard required of reasoning in
Last year we reported on the tension between the positions taken
by the NSW and Victorian Courts of Appeal in relation to the
standard of reasoning required in an arbitral award
click here). That tension has now been resolved by a recent
decision of the High Court in Westport Insurance Corporation v
Gordian Runoff Ltd  HCA 37 click
here for the case).
In 2006, the Victorian Supreme Court (VSC) was asked to
interpret section 29(1) of the Commercial Arbitration Act
1984 (Vic) and the requirement that arbitrators "include
in the award a statement of the reasons for making the award."
The case raised the simple question: what level of standard of
reasoning is required from an arbitrator?
At first instance (BHP Billiton Ltd v Oil Basins Ltd
 VSC 402), Hargrave J of the VSC read section 29(1) as
mandating arbitrators, at least in the context of a complex
commercial arbitration, to provide reasons in their awards which
were of the same standard expected from a judge, namely an
intelligible explanation of why one set of evidence has been
preferred over another, why substantial submissions have been
accepted or rejected and why the arbitrator prefers one case over
The decision was upheld by the Victorian Court of Appeal.
New South Wales position
In Gordian Runoff Ltd v Westport Insurance Corporation
 NSWCA 57 (Gordian Runoff) the NSW Court of Appeal (NSWCA)
declined to follow the approach taken in Oil Basins. After
an examination of Oil Basins, the UNCITRAL Model Law,
international arbitration practice and authorities, and the
legislative history of the uniform Commercial Arbitration Acts, the
NSWCA found that there was no basis for requiring an arbitral award
to contain reasoning of the same standard as a judge.
High Court position
Not surprisingly, special leave was sought, and granted, to
appeal the NSWCA's decision in Gordian Runoff in the
On 5 October 2011, the High Court handed down its findings to
resolve the tension between the Victoria and NSW positions.
First, the joint-judgment of French CJ, Gummow, Crennan and Bell
JJ (Joint-Judgment) found that Oil Basins' requirement
of "judicial standard" of reasons for arbitral awards
placed an unfortunate gloss on the requirements in section
29(1)(c). Kiefel J, in a separate judgment (Kiefel Judgment),
agreed with that view and observed that there was nothing in the
uniform Commercial Arbitration Acts to suggest that reasons for
arbitral awards had to be of judicial standard.
Secondly, both the Joint-Judgment and the Kiefel Judgment found
that a "reasoned award" requires arbitrators to
"explain succinctly why, in the light of what happened, they
have reached their decision and what that decision is."
Thirdly, the Joint-Judgement and the Kiefel Judgment shared the
view that what is required by way of reasons in a given case will
depend upon the circumstances of that case.
The High Court's findings serve as a welcome clarification
of what has been a contentious issue. It is clear then that the
standard of reasoning in an arbitral award will need to be
considered on a case by case basis, factoring in numerous factors
including the complexity of the dispute.
Additionally, whilst the High Court decision was in relation to
the old uniform Commercial Arbitration Acts, it should also serve
as guidance to the recently revised uniform Commercial Arbitration
Acts as well (which has been enacted in NSW and Tasmania, and with
Victoria, South Australia, Western Australia and the Northern
Territory expected to follow soon).
Section 31(c) of the new Commercial Arbitration Acts requires
that: "The award must state the reasons upon which it is
based, unless the parties have agreed that no reasons are to be
given or the award is an award on agreed terms under section."
It is prudent then that where arbitrators are required to provide
reasons pursuant to the new Commercial Arbitration Acts, that they
be guided by the observations made by the High Court.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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