Australian Construction Law Newsletter
RECENT CASES
Arbitration - Consolidation of Proceedings
Melville Homes PtyLtd v Prime Ceramics Services PtyLtd
and500 Collins Street PtyLtd, Supreme Court ofVictoria,
Southwell J., 12 July, 1990.
500 Collins Street Pty Ltd ("the proprietor") was the
owner of a building under construction at that address.
Melville Homes Pty Ltd ("the builder') was constructing
the building. Prime Ceramic Services Pty Ltd ("the
subcontractor") was carrying out certain tiling work under
a contract with the builder.
There was an arbitration clause in the agreement
between the proprietor and the builder and a further clause
in the agreement between the builder and the subcontrac-
tor. A dispute had arisen in relation to the tiling works.
The builder submitted that the two arbitrations, that is the
arbitration under the head contract and the arbitration
under the subcontract, should be consolidated pursuant to
section 26 of the Commercial Arbitration Act 1984 (Vic).
The proprietor opposed the application. The proprietor
submitted that section 26 required an application for con-
solidation to be made to the court by all of the parties and
not some of the parties.
The court examined a number of sections in the
Commercial Arbitration Act and noted that different ex-
pressions in relation to parties appeared throughout the
Arbitration - Removal of Arbitrator for Misconduct,
Arbitrator Ordered to Pay Costs
Road Rejuvenating & Repair Services v Mitchell Water
Board & Anor, Supreme Court of Victoria, Nathan J., 15
June 1990.
This case concerned an application by a building
contractor to remove an arbitrator for misconduct. The
application was made pursuant to Section 44 of the Com-
mercial Arbitration Act 1984 (Vic). Nathan J. noted that,
in Gas & FuelLimitedv Hallwood [1978] VR 385, despite
the absence of moral turpitude on the part of the arbitrator
and in the light on technical breaches of the rules of
conduct required under the previous Commercial Arbitra-
tion Act, the Court had ordered the removal of the arbitra-
tor. Nathan J. noted that the case before him was of a
different and stronger character.
In this case" the arbitrator had accepted into evidence
a book of documents prepared by Mitchell Water Board
and did so without the approval ofthe legal representatives
of all parties. The arbitrator read and had before him
inadmissable documents, documents which were legally
privileged, some delivered without prejudice and others
Issue #15 52
Act. In various sections, the expressions "a party", "the
parties", "any parties", "any of the parties", and "all of the
parties" appear. The use of the different expressions
suggests that the use of the word "all" in section 26 was
significant. Significance had been attached to the use of
the word by SmartJ. inKB HutchersonPtyLtdvJanango
Pty Ltd (unreported) 25 May 1988, when considering the
corresponding New South Wales Act.
SouthwellJ. referred toRV Parsons [1983] 2 VR499
in which the Full Court of the Victorian Supreme Court
held that State Courts should give a consistent meaning to
a Commonwealth Statute. By analogy, said Southwell J.,
the courts should attempt to give consistent interpretations
to common state legislation.
Having regard to the above comments, His Honour
concluded that for the court to make an order for consoli-
dation pursuant to section 26, it was necessary that the
application be made by all of the parties.
- Phillip Greenham, Partner, Minter Ellison,
Solicitors, Melbourne.
Editorial Note:
The problem of consolidation is discussed in Issue #6 of
the Newsletter at page 3. See Issue #12 at page 48 for a
report on KB Hutcherson v Janango.
which contained "much hearsay".
In ordering the removal of the arbitrator, Nathan J.
said:
" ... Although an arbitration is not to be conducted
with the precision and formality of a court process,
there are nevertheless constraints upon arbitrators
in dealing with irrelevant material. In this case the
arbitrator went much further and he accepted into
evidence without the consent of the parties docu-
mentary material which was extremely damaging
to one of the parties before him. Secondly, the
arbitrator, despite being aware of the fact that the
parties before him were represented by solicitors
and counsel, persistently communicated with the
first defendant directly, despite being requested by
the plaintiffnot to do so. I have evidence before me
of letters and phone calls passing directly between
the first defendant and the arbitrator and I have
evidence of a servant of the first defendant telling
the arbitrator that he could feel free to contact the
Board directly. These matters are sad lapses from
Australian Construction Law Newsletter Issue #15 53

the behaviour expected of arbitrators. Their func-
tion is to stand between the parties, hearing submis-
sions and adjudicating if required. Arbitrators are
not mediators. It is not their function to deal
directly with disputants where legal representa-
tives are retained. It must not be done. A further
matter of disquiet is that, despite being requested,
the arbitrator refused to give a written undertaking
that he would abide by the orders of this court.
Compounded to that lapse is an even more serious
breach of etiquette and conduct and that is the
arbitrator wrote directly to the Judge, despite being
given the opportunity to be heard or joined as a
party by the plaintiff. I perceive in some of the
arbitrator's conversation irritation with legal forms
and solemnities and a desire to despatch the arbitra-
tion. Both those expressions of view may be
laudable in many circumstances, but in this case
they were misplaced. An arbitrator must present
himself to the parties as an unbiased adjudicator.
This he failed to do. On one occasion he arrived at
the building site in dispute in a vehicle driven by an
officer of the first-named defendant. That journey
was over twenty kilometres, took some time and
had been arranged directly between the arbitrator
and the first defendant. This is an inexcusable
alignment of the arbitrator with one party and
cannot be tolerated. The law in Victoria is clear: an
adjudicator in the position of an arbitrator must
isolate himself in any social or convivial context
with the 'disputants (see The Queen v The Magis-
trates at Lilydale, Ex Parte Ciccone, [1973] VR
127 which was explicitly affirmed in Re J>R.L.
(1986) 161 CLR, 342.) ..."
will not be contributing to any of the cost ordered against
the arbitrator. Further, that Form 3 ofPractice Note 3Ahas
been redrafted to protect the Institute and its arbitrators
against the possibility ofsuch an order for costs. To protect
the Institute and individual arbitrators, the Institute has
suggested that arbitrators should not accept nomination
until the parties have agreed to the inclusion of the dis-
claimercontained in paragraph 6, which is in the following
terms:
"6 Disclaimer
Do parties agree that neither the nominating bodies
(if any) nor any officer, member, servant or agent
thereof, nor the arbitrator(s) shall be liable to any
party for any act or omission in connection with the
arbitration save that the arbitrator(s) shall be liable
for fraud in respect of anything done or omitted to
be done in that capacity Yes/No."
It is also understood that the Institute is likely to
publish a disclaimer in future with its lists of arbitrators,
conciliators and mediators.
Other nominating organisations should pay heed to
this case. Whilst Nathan J's comments "in passing" about
the nominating organisation standing behind its nominee
were of no effect in this case, one can imagine that they
could encourage action to join a nominating organisation
as a co-defendant in future proceedings. If this were to
occur, the sentiment expressed by Nathan J. might then
have effect. Yet further reason for industry organisations
to vacate nomination and leave it to neutral disputes or-
ganisations such as the Institute of Arbitrator~,Australia or
the Australian Commercial Disputes Centre.
- John Tyrril.

In addition to ordering the removal of the arbitrator,

Nathan J. ordered that the defendants pay the contractor's
costs. In making this order, Nathan J. said:
"... the Board should have known and its officers
should have been instructed that they should not
communicate directly with the arbitrator or allow
him to communicate directly with them."

Interestingly, the matter does not rest there, as Nathan

J. went on to say:
"It is appropriate in these circumstances to order
that the arbitrator indemnify the first-named defen-
dant in respect of its costs, but I add this observa-
tion: the arbitrator was appointed by the President
of the Institute of Arbitrators. That body is not
before me, but it should stand behind its appointed
officers, and I would expect the Institute itself to
bear the costs of all the parties to this dispute."

The effect of this final order is to make the arbitrator

responsible for Mitchell Water Board's costs. So far as the
Institute ofArbitrators, Australia is concerned, in response
to Nathan J's comments, it has published a memorandum
stating that the Institute has no liability in the matter and