LAW REFORM COMMISSION NEW SOUTH WALES REPORT on COMMERCIAL ARBITRATION L.R.C. 27 1976 G 22220—1 PREFACE The Law Reform Commission is constituted by the Law Reform Commission Act, 1967. The Commissioners are— Chairman: The Honourable Mr Justice C. L. D. Meares Deputy Chairman: Mr R. D. Conacher Mr D. Gressier Professor J. D. Heydon Mr J. M. Bennett is Executive Member of the Commission. The offices of the Commission are in the Goodsell Building, 8-12 Chifley Square, Sydney. But letters to the Commission should be addressed to its Secretary, Box 6, G.P.O., Sydney 2001. This is the twenty-seventh report of the Commission on a reference from the Attorney General. Its short citation is L.R.C. 27. CONTENTS Page Preface .. .. .. .. .. .. .. .. .. 3 Contents .. .. .. .. .. .. .. .. 5 Chief recommendations in brief .. .. .. .. .. 7 Tables- Cases .. .. .. .. .. .. .. .. 9 Statutes .. .. .. .. .. .. .. .. 20 References to the draft Bill .. .. .. .. .. 31 Abbreviations .. .. .. .. .. .. .. 34 Report— Part 1.—General .. .. .. .. .. .. .. 37 Part 2.—Arbitration agreement .. .. .. .. .. 46 Section 1.—Form of agreement .. .. .. .. 46 Section 2.—Exempt contracts; contracts of adhesion .. 52 Section 3.—Revocation of the authority of an arbitrator 60 Section 4.—Death of a party .. .. .. .. 68 Sections.—Bankruptcy of a party.. .. .. .. 70 Section 6.—Setting aside an arbitration agreement .. 70 Part 3.—The submission as an order of the Court .. .. 72 Part 4.—Arbitration agreement as an obstacle to litigation .. 76 Section 1.—Stay of litigation .. .. .. .. 76 Section 2.—Award as condition precedent .. .. 83 Section 3.—Time limits .. .. .. .. .. 88 Part 5.—Arbitrators and umpires .. .. .. .. 89 Section 1.—Number and appointment of arbitrators .. 89 Section 2.—Umpire .. .. .. .. .. 92 Section 3.—Removal of arbitrator .. .. .. 100 Section 4.—Fees and expenses of arbitrator .. .. 104 Section 5.—Liability of an arbitrator .. .. .. 108 Section 6.—Register of arbitrators.. .. .. .. 110 Part 6.—Conduct of the arbitration .. .. .. .. 111 Section 1.—General .. .. .. .. ..1 11 Section 2.—Extent of the reference .. .. .. 112 Section 3.—Sanctions for an arbitrator's directions .. 113 Section 4.—Interim preservation .. .. .. .. 115 Section 5.—Security for amount in dispute .. .. 119 Section 6.—Admiralty arrest and bail .. .. .. 123 Section 7.—Security for costs .. .. .. .. 126 Part 6.—Conduct of the arbitration—continued Page Section 8.—Evidence before an arbitrator .. .. 130 Section 9.—Third party claims .. .. .. .. 139 Section 10.—Discovery; inspection etc., of person, property or process .. .. .. .. .. 140 Section 11.—Expert assistance .. .. .. .. 142 Section 12.—Statutory procedures and forms .. .. 143 Part 7.—Powers of an arbitrator .. .. .. .. 143 Section 1.—Basis of determination .. .. .. 143 Section 2.—Majority action ... .. .. .. 148 Section 3.—Interest on money claimed .. .. .. 150 Section 4.—Specific performance .. .. .. 151 Section 5.—Costs of arbitration .. .. .. .. 154 Part 8.—Stated cases .. .. .. .. .. .. 158 Part 9.—Award .. .. .. .. .. 162 Section 1.—Finality .. .. .. .. .. 162 Section 2.—Time for award .. .. .. .. 163 Section 3.—Writing and signature .. .. .. 166 Section 4.—Reasons for award .. .. .. .. 169 Section 5.—Interim award.. .. .. .. .. 171 Section 6.—Setting aside an award .. .. .. 172 Section 7.—Remission .. .. .. .. .. 183 Section 8.—Appeal from an award .. .. .. 188 Section 9.—Correction of award .. .. .. .. 189 Section 10.—Interest on award .. .. .. .. 194 Section 11.—Enforcement of award .. .. .. 195 Part 10.—Judge-arbitrator .. .. .. .. .. 202 Part 11.—Reference by the Court .. .. .. .. 203 Part 12.—District Court .. .. .. .. .. 208 Part 13.—Conflict of laws .. .. .. .. .. 211 Section 1.—General.. .. .. .. .. .. 211 Section 2.—Foreign awards .. .. .. _ 215 Part 14.—Other Acts .. .. .. .. .. .. 222 Section 1.—Statutory arbitrations .. .. .. .. 222 Section 2.—Sundry enactments .. .. .. .. 224 Section 3.—Shipowner's lien .. .. .. .. 226 Part 15.—Conciliation .. .. .. .. .. .. 227 Appendix 1.—Draft Bill .. .. .. .. .. .. 229 Appendix 2.—People who assisted the Commission .. .. 278 Index „ .. .. .. .. .. .. .. . . 2 79 7 CHIEF RECOMMENDATIONS IN BRIEF Here accuracy yields to brevity. All our recommendations for change in the law appear in the draft Bill in Appendix 1. 1. There should be a new Arbitration Act.1 2. Scott v. Avery clauses should be made void.2 3. The Supreme Court should be given power to extend contractual time limits for arbitration.3 4. Agreements for arbitration of future differences should in general be closely regulated.4 5. Where a contract of adhesion has a clause for arbitration of future differences, it should be made easier for an adherent party to resist a stay of litigation or to get leave to revoke the authority of an arbitrator.5 6. Some arbitration agreements should be excluded from 4 and 5 above and the parties to them should have wide freedom of contract. These agreements are— (a) agreements whose parties are government authorities or large corporations; (b) agreements relating to overseas trade; (c) agreements of classes prescribed by regulation; and (d) agreements approved by the Supreme Court.6 7. Parties should have wide freedom of contract in an agree- ment relating to arbitration on an existing difference.7 8. The Supreme Court should not set aside or remit an award for error on the face of the award.8 9. The Supreme Court should be authorized to set aside or remit an award where it appears to the Court that the award is "grossly wrong", that is, an award which a reason- able arbitrator could not have made.8 10. Where the Supreme Court gives a decision at first instance on a stated case or on an application for the setting aside or remission of an award, an appeal should not lie to the Court of Appeal except by leave of the Court of Appeal.9 11. The District Court should have powers of reference to arbitration like those of the Supreme Court.10 12. The District Court should, where the parties have so agreed, have general powers in an arbitration like those of the Supreme Court.11 8 CHIEF RECOMMENDATIONS IN BRIEF—continued 1 Report para. 1.17. 2 Report paras 4.2.1-17. Draft Bill s. 16. 3 Report paras 4.3.1-6. Draft Bill s. 17. 4 Report paras 1.11, 2.2.8, 14, 19. 5 Report paras 1.12, 2.2.15-19, 2.3.14, 16, 4.1.16, 4.1.18. Draft Bill ss. 13 (5) (a), 15 (6) (a). 6 Report paras 1.10, 2.2.1, 8-12, 14, 19. Draft Bill ss. 11, 12. 7 Report paras 2.2.1, 3, 7-9, 13, 14, 19. Draft Bill s. 11 (1) (c). 8 Report paras 9.6.13-17, 23, 24, 9.7.5, 11, 12. Draft Bill ss. 5 (3), 57, 58. 9 Report paras 8.7, 8, 9.6.23, 24, 9.7.11, 12. Draft Bill Sch. 2, amendment to Supreme Court Act, 1970, s. 101 (2). 10 Report paras 12.8, 11. Draft Bill ss. 62, 63. 11 Report paras 12.6, 7, 11. Draft Bill s. 8. CASES Case Paragraph Absalom (F. R. ) Ltd v. Great Western (London) Garden Village Socy Ltd [1933] A.C. 592 .. .. .. .. .. 9.6.10 Administration of Papua and New Guinea v. Daera Cuba (1973) 130 C.L.R. 353 .. .. .. .. .. .. .. 9.1.1 "Agroexport" Entreprise d'Etat pour le Commerce Exteiieur v. N. V. Goorden Import Cy. S.A. [1956] 1 Lloyd's Rep. 319 .. .. 6.8.3 Ajzner v. Cartonlux Pty Ltd [1972] V.R. 919 .. .. .. .. 1.6 Aktiebolaget Legis v. V. Berg & Sons Ltd [1964] 1 Lloyd's Rep. 203 9.7.3 Albeck v. A.B.Y.-Cecil Manufacturing Co. Pty Ltd [1965] V.R. 342 9.1.1, 9.11.3,4 Altco Ltd V.Sutherland [1971 ]2 Lloyd's Rep. 515 .. .. .. 9.6.7 Anderson v. G. H. Mitchell & Sons Ltd (1941) 65 C.L.R. 543 .. 4.2.1,2 4.3.1 Anon (1748) 3 Atk. 644; 26 E.R. 1170 .. .. .. .. 9.9.1 Anon v. Mills (1811)17 Ves. Jun. 419; 34 E.R. 162.. .. .. 9.6.7 Arenson v. Arenson [1972] 1 W.L.R. 1196, [1973] Ch. 346; [1975] 3 W.L.R. 815 .. .. .. .. .. .. .. 1.8 5.5.1, 2 9.6.13 Atlantic Shipping and Trading Co. Ltd v. Louis Dreyfus & Co. [1922] 2A.C. 250 .. .. .. .. . . .. .. .. 4.3.1 A.-G. v. Davison (1825) McCl. & Yo. 160; 148 E.R. 366 .. .. 6.8.2 A.-G. v. Stocks and Holdings (Constructors) Pty Ltd (1970) 124 C.L.R. 262 .. .. .. .. . . .. .. .. 13.2.9 Aubert v.Maze(1801)2Bos. &P. 371; 126 E.R. 1333 .. .. 7.1.1 Auriolv. Smith (1823) Turn. &R. 121; 37 E.R. 1041.. .. .. 9.6.7 Australian Mutual Provident Society v. Overseas Telecommunica- tions Commission (Australia) [1972] 2 N.S.W.L.R. 806.. .. 1.6 Bankruptcy Notice, In re a [1907] 1 K.B. 478 .. .. .. .. 9.11.5 Baxters and The Midland Railway Co., In re (1906) 90 L,T. 20 .. 9.7.3 Beddow v. Beddow (1878) 9 Ch.D. 89 .. .. .. .. .. 5.3.2 Berbette Pty Ltd v. Hansa [1976] V.R. 385 .. .. .. .. 7.5.7 Bhear v. Harradine(1852) 7 Ex. 269; 155 E.R. 947 .. .. .. 3.4 Birtley District Co-operative Society Ltd v. Windy Nook & District Industrial Co-operative Society [1959] 1 W.L.R. 142 .. .. 9.6.7 Bjornstad and The Ouse Shipping Co. Ltd, In re [1924] 2 K.B. 673 6.7.1 Blackman (G. W. J.) & Co. S.A. v. Oliver Davey Glass Co. Pty Ltd [1966] V.R, 570 . . . .. .. .. .. .. .. 4-1.3 Bloemen (F. J.) Pty Ltd v. Gold Coast City Council [1973] A.C. 115 9.1.1 Board of Trade v. Cayzer, Irvine & Co. Ltd [1927] A.C. 610 .. 7.1.2 10 CASES—continued Case Paragraph Boks & Co. and Peters, Rushton & Co. Ltd, In re [1919] 1 K.B. 491 9.11.2, 5 Boodle v. Davies (1835) 3 A. & E. 200; 111 E.R. 389 .. .. .. 9.6.7 Bowker v. Evans (1885)15 Q.B.D. 565 .. .. .. .. .. 2.4.4 Bradbee v. Christ's Hospital (1842) 4 Man. & G. 714; 134 E.R. 294 8.2 Bremer Oeltransport G.m.b.H. v. Drewry [1933] 1 K.B. 753 .. .. 9.11.2 Brighton v. Dungog Municipal Council (1943) 15 L.G.R. 74.. .. 12.4 British Metal Corpn. Ltd and Ludlow Bros. (1913) Ltd, In re [1938] 1A11E.R. 135 .. .. .. .. .. ... .. 5.2.6 British Westinghouse Electric and Manufacturing Co. Ltd v. Under- ground Electric Rlys. Co. of London Ltd [1912] A.C. 673 .. 9.6.10 Broadhurst v. Darlington (1833) 2 Dowl. 38 .. .. .. .. 7.1.2 Brown v. Brown (1683) 1 Vern. 157; 23 E.R. 384 .. .. .. 9.6.3 Bruce (W.) Ltd v. Strong [1951] 2 K.B. 447 .. .. .. .. 4.1.6 Buccleuch v. Metropolitan Board of Works (1870) L.R. 5 Exch. 221 9.6.7 Bulk Oil (Zug) A.G. v. Trans-Asiatic Oil Ltd S.A. [1973] 1 Lloyd's Rep. 129 .. .. .. .. .. .. .. .. 4.1.17 Cameron v. Cuddy [1914] A.C. 651; (1911) 16 B.C.R. 451 .. .. 4.2.4 Canterbury Pipe Lines Ltd v. A.-G. [1961 ] N.Z.L.R. 785 .. .. 2.3.8 Carr v. Wodonga Shire (1924) 34 C.L.R. 234 .. .. .. .. 9.7.5 Catalina v. Norma (1938) 61 Ll.L.Rep. 360 .. .. .. .. 5.3.3 Cayzer, IrvineA Co. Ltd v. Board of Trade [1927] 1 K.B. 269 .. 7.1.1 Centrala Morska Importowo Eksportowa v. Companhia Nacional de Navigacao S.A.R.L. [1975] 2 Lloyd's Rep. 69 .. .. 7.5.7 Chandrisv. Isbrandtsen-Moller Co. Inc. [1951] 1 K.B. 240.. .. 7.1.2 7.3.1, 3 Charles Osenton & Co. v. Johnston [1942] A.C. 130 .. .. .. 2.3.9 Chicotv. Lequesne (1751) 2 Ves. Sen. 315; 28 E.R. 203 .. .. 9.6.7 Chingv.Ching(1801)6Ves.Jun.282; 31 E.R. 1052.. .. .. 7.1.2 City Centre Properties (I.T.C. Pensions) Ltd v. Matthew Hall & Co. Ltd [1969] 1 W.L.R. 772 .. .. .. .. .. .. 2.3.3, 6,12, 15 City of Vancouver v. Brandram-Henderson of B.C. Ltd (1960) 23 D.L.R. (2d) 161 .. .. .. .. .. .. 9.7.6 Cocker v. Tempest (1841) 7 M.&W. 502; 151 E.R. 864 .. .. 4.1.2 Cole v. Mosman M. C. (1960) 6 L.G.R.A. 31 .. .. .. .. 9.6.9, 20 Coleman and Royal Insurance Co., Re (1905) 24 N.Z.L.R. 817 .. 5.3.3 Commonwealth v. Bogle (1953) 89 C.L.R. 229.. .. .. .. 1.18 Compagnie d'Armement Maritime S.A. v. Compagnie Tunisienne de Navigation S.A. [1971 ] A.C. 572 .. .. .. .. .. 7.1.3,13.1.2 11 CASES—continued Case Paragraph Compagnie des Messageries Maritimes v. Wilson (1954) 94 C.L.R. 577 .. .. .. .. .. .. .. .. .. 4.1.3 Compagnie du Senegal etc. v. Woods & Co. (1883) 53 L.J. Ch. 166 .. 6.4.3 Coombs, In re (1850) 4 Ex. 839; 154 E.R. 1456 .. .. .. 5.4.1,4 Corneforth v. Geer(1715)2 Vern.705; 23E.R. 1058.. .. .. 9.6.3 Crampton & Holt v. Ridley & Co. (1887) 20 Q.B.D. 48 .. .. 5.4.1 Crawford v. Prowting Ltd [1973] Q.B. 1 .. .. .. .. 6.3.1 Crooke r. Swords (1868) 5 W.W.&a'B 136 .. .. .. .. 1.16 Cuerton, Ex parte (1826) 7 Dow. & Ry. K.B. 774 .. .. .. 9.7.2 Curtisv. Potts (1814) 3 M. &S. 145; 105 E.R. 565 .. .. .. 9.2.1 Czarnikow v. Roth, Schmidt & Co. [1922] 2 K.B. 478 .. .. 2.2.1 7.1.2, 3 8.1 Dalmia Cement Ltd v. National Bank of Pakistan [1975] Q.B. 9 .. 13.2.3 Darlington Wagon Co. Ltd v. Harding [1891]! Q.B. 245 .. .. 11.1 Darnley v. London, Chatham, and Dover Rly. Co. (1867) L.R. 2 H.L.43 .. .. .. .. .. .. .. .. 9.2.1 David Taylor & Son Ltd v. Barnett Trading Co. [1953] 1 W.L.R. 562 7.1.1 Dawsonv.Newsome(1860)2Giff.272; 66E.R. 114.. .. .. 3.4 Delver v. Barnes (1807)1 Taunt. 48; 127 E.R. 748 .. .. .. 7.1.2 Dennis & Sons Ltd v. Cork S.S. Co. Ltd [1913] 2 K.B. 393 .. .. 14.3.3 Deutsche Springstoff A.G. v. Briscoe (1887) 20 Q.B.D. 177 .. .. 2.3.1, 2 Dineen v. Walpole [1969] 1 Lloyd's Rep. 261 .. .. .. .. 7.5.1 Dobbsv. National Bank of Australia Ltd (1935) 53 C.L.R. 643 .. 9.1.1 Doleman & Sons v. Ossett Corpn. [1912] 3 K.B. 257 .. .. .. 2.2.1 2.3.2 3.3 4.1.2, 12 Dougan v. Ley (1946) 71 C.L.R. 142 .. .. .. .. .. 7.4.2 Drew v. Drew (1855) 25 L.T. (O.S.) 282 .. .. .. .. 2.3.4 Dubois v. Medlycott (1737) Barnes 55; 94 E.R. 803 .. .. .. 9.6.7 East and West India Dock Co. v. Kirk and Randall (1887) 12 App. Cas. 738 .. .. .. .. .. .. .. .. 2.3.4 Eaton v. Eaton [1950] V.L.R. 233 .. .. .. .. .. 4.1.11 4.2.8 6.4.3 7.4.3 Eckman v. Midland Bank Ltd [1973] Q.B. 519 .. .. .. 6.4.2 Elliot v. Klinger [1967] 1 W.L.R. 1165 .. .. .. .. 6.4.2 12 CASES—continued Case Paragraph Emery v. Wase(1801)5 Ves. Jun. 846; 31 E.R. 889 .. .. .. 9.6.7 Enoch and Zaretzky, Bock & Co., In re [1910] 1K.B. 327 .. .. 5.3.3 6.8.2 Evans v. National Pool Equipment Pty Ltd [1972] 2 N.S.W.L.R. 410 7.3.1 9.10.1 Exormisis Shippings. A. v. Oonsoo [1975] 1 Lloyd's Rep. 432 .. 9.7.11 Falk v.Sernack Manufacturing Co. Pty Ltd [1965] N.S.W.R. 17 .. 9.9.2 Faure, Fairclough Ltd v. Premier Oil & Cake Mills Ltd [1968] 1 Lloyd's Rep. 236 .. .. .. .. .. .. 6.8.4 Federated Saw Mill, Timber Yard, and General Woodworkers Employees' Association of Australasia, The v. James Moore and Sons Pty Ltd (1909) 8 C.L.R. 465 .. .. .. .. -.. 1.7 Fehmarn, The [1958] 1 W.L.R. 159 .-. .. ..- .. .. 4.1.2,3 Fenwick, In re (1897) 18 L.R. (N.S.W.) 405 .. .. .. .. 1.7 Ferguson v. Norman (1837) 4 Bing. N.C. 52; 132 E.R. 708 .. .. 8.2 Fernley v.Branson(1851)20L.J.Q.B. 178 .. .. .. .. 5.4.1 Fidelitas Shipping Co. Ltd v. V/O Exportchleb [1966]! Q.B. 630 .. 9.5.1,2 Ford v. Clarksons Holidays Ltd [1971]! W.L.R. 1412 .. .. 4.L16 Forsythv. Manton (1820) 5 Madd. 78; 56 E.R. 824 .. .. .. 3.4 Foster v. Hastings Corpn. (1903) 19 T.L.R. 204 .. .. .. 6.4.3 Franz Haniel Ag. v. Sabre Shipping Corpn. [1962] 1 Lloyd's Rep. 531 9.7.3 Freame v. Pinnegar (1774) 1 Cowp. 23; 98 E.R. 947 .. .. .. 9.6.7 Freeman v. Kempster, In re [1909] V.L.R. 394 .. .. .. 2.3.6 2.5.1 French Government v. Tsurushima Maru (1921) 37 T.L.R. 961; 8 Ll.L. Rep. 403 .. .. .. .. .. .. .. 5.2.2 Frota Nacional de Petroleiros v. Skibsaktieselskapet Thorsholm [1957] 1 Lloyd's Rep. 1 .. .. .. .. .. .. 2.3.6, 7 Fuerst Bros. & Co. Ltd and Stephenson, Re [1951] 1 Lloyd's Rep. 429 .. .. .. .. .. .. .. .. .. 5.2.2 5.3.6 9.7.6 Fuller v. Fenwick (1846) 3 C.B. 705; 136 E.R. 282 .. .. .. 7.1.2 Fussell v. Silcox (1814) 5 Taunt. 628; 128 E.R. 836 .. .. .. 3.4 Gibbsv.Ralph(1845) 14M. &W.804; 153E.R.701.. .. .. 4.1.2 Golden Trader, The [1975] 1 Q.B. 348 . . .. .. .. 6.6.2, 3, 6 Goode v. Bechtel (1904) 2 C.L.R. 121 .. .. .. .. .. 7.1.2 Gosford Meats Pty Ltd v. Queensland Insurance Co. Ltd (1970) 4.3.7 92 W.N. 897 .. .. .. .. .. .. .. 7.5.1 Government of Ceylon v. Chandris [1963] 1 Lloyd's Rep. 214 .. 5.2.2 5.4.2,4,5 6.8.3 7.5.1