the arbitrator and mediator - june 2017 by Resolution Institute

the

arbitrator

mediator

Volume 36

Number 1

June 2017

the arbitrator & mediator

June 2017 This issue may be cited as (2017) 36 (1) ISSN 1446-0548

General Editor

Russell Thirgood

Editorial Office

Resolution Institute Level 2 13-15 Bridge Street Sydney NSW 2000

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Resolution Institute ABN 69 008 651 232

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Views expressed by contributors are not necessarily endorsed by the Institute. No responsibility is accepted by the Institute, the editors or the printers for the accuracy of information contained in the text and advertisements.

The Arbitrator & Mediator is included on the Australian Government DEST Register of Refereed Journals.

ÂŠ 2017 Resolution Institute

Chair Margaret Halsmith

B. Psych, BA, Dip Ed, Accredited Mediator NMAS, Advanced Accreditation Resolution Institute, Accredited Mediator IMI, Aust. FDRP

Vice Chair Mark Beech

LLB University of Auckland, Admitted to the Bar in New Zealand, Accredited Mediator Resolution Institute, MinstD

Treasurer John P Fisher

BSc CEng, MICE, FAPM (Cert PM), MAIPM, FCIArb, FRI, Accredited Mediator NMAS, Grade 3 Arbitrator, Registered Adjudicator (WA & NT)

Secretary Russell Thirgood

BA, LLB (Hons), LLM (Hons), DipICArb, G Dip Constr Law, FCIArb, FACICA, FRI, Graded Arbitrator, Accredited Adjudicator, Accredited Mediator (NMAS)

Directors Alysoun Boyle

BA, FRI, AIJA, AAAS, Accredited Mediator NMAS

Jon Everest

JP, MSc, DipBsnsStds (Dispute Resolution), Advanced Accredited Mediator Resolution Institute, Accredited Mediator IMI , NZ FDRP, Certificate in Professional Supervision

Rosemary Howell

Bachelor of Laws. Admitted to Practice in NSW and Victoria, Doctor of Judicial Science

Jeanette Kinahan

Registered General Nurse, FRI, GAICD, CDMP - International

Gary Ulman

LLM, MA, LLB, Solicitor of the Supreme Court of NSW, Accredited Mediator NMAS

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THE ARBITRATOR & MEDIATOR JUNE 2017

Contents Chairâ&#x20AC;&#x2122;s message, Margaret Halsmith

Editorâ&#x20AC;&#x2122;s commentary, Russell Thirgood

Articles Advocacy in arbitration, Hon Richard Chesterman AO RFD

Legal representation in mediation: Effective or counter-productive? Practical tips and tricks from mediators to legal representatives, Anne Bihancov

Cross border construction dispute mediation, Chris Lenz

Family law property arbitration, Matthew Shepherd

Better contracting: Changes arising from the review of the Construction Contracts Act 2004 (WA), Phil Evans

Helping parents change, Mieke Brandon

How do I mediate? Let me count the ways, Tony Newport

Confidentiality in arbitration, A. A. de Fina

THE ARBITRATOR & MEDIATOR JUNE 2017

Case notes Expert determination: In what circumstances can an expertâ&#x20AC;&#x2122;s failure to hear oral evidence or question witnesses mean a failure to discharge their mandate?, Brendan Thomas Cullen

Security of payment: Resolution of some divergences between the Eastern states, Michael D.G. Heaton QC

BG Group PLC v. Republic of Argentina 134 S. Ct. 1198 (2014), Stuart Widman

Ottoway Engineering Pty Ltd v. ASC AWD Shipbuilder Pty Ltd [2017] SASC 69, Erika Williams

100

Book reviews International Arbitration: Law and Practice (2nd edition, 2016) by Gary B. Born, Caroline Kirton QC

106

Negotiation: Things Corporate Counsel Need To Know But Were Not Taught by Michael Leathes, Donna Ross

109

Arbitration and Contract Law, Ius Gentium: Comparative Perspectives on Law and Justice by Neil Andrews, Alexis Cahalan

112

Notes for Authors

115

Notes

118

About Resolution Institute

120

THE ARBITRATOR & MEDIATOR JUNE 2017

Chairâ&#x20AC;&#x2122;s message Margaret Halsmith1

Welcome to this 2017 issue of The Arbitrator & Mediator. I am pleased and proud that the Resolution Institute continues to publish The Arbitrator & Mediator, a journal that engages readers throughout Australia and New Zealand through its breadth and depth of commentary and its analysis of ADR. I found it thought-provoking from cover to cover. The variety of ADR practices is considerable. The scope of ADR knowledge is broad. The list of ADR interventions is long. Each ADR practitioner is unique and each set of dispute circumstances is particular to the people involved. Yet amid all the diversity, are the principles, values and aspirations that are the connective tissue of ADR theory and practice. That is the substance of this issue: ADR praxis. Through its examination of praxis, The Arbitrator & Mediator is a prime example of the Mission of Resolution Institute: leading excellence in resolution. Members as well as readers well beyond the membership, having gained new knowledge, understanding and insights from their reading and discussion of the journal, will adapt their ADR practice to accommodate ideas, some new and others affirmed. Excellence in conflict resolution benefits both the users of ADR and their communities. The Arbitrator & Mediator has a ripple effect throughout Australia and New Zealand. It is with appreciation of his dedication that I thank the long-time editor of The Arbitrator & Mediator, Russell Thirgood and all those whose commitment to ADR has resulted in the erudite articles, case notes and book reviews which follow. On behalf of the Board I feel collective pride in this issue.

Chair, Resolution Institute

THE ARBITRATOR & MEDIATOR JUNE 2017

Editor's commentary Russell Thirgood2

Welcome to the June 2017 edition of The Arbitrator & Mediator. Our first contribution is from the Hon. Richard Chesterman AO RFD. In this article, his Honour analyses the role of advocates in arbitration by comparison to the techniques traditionally employed in court. His Honour considers the divergent objects of litigation and arbitration on a theoretical level, and then provides useful practical advice on adapting lawyers’ conduct to arbitral proceedings through each step of the process, from exchange of pleadings, to addressing the arbitrator or tribunal, to resolution of the dispute. His Honour concludes with comments on the flexibility and efficiency of domestic and international arbitration in resolving disputes. Anne Bihancov continues the theme of practical guidance for legal representatives, this time by application to the field of mediation. By comparing adversarial and non-adversarial methods of dispute resolution and analysing the Law Society of New South Wales’ Professional Standards for Legal Representatives in a Mediation and the Law Council of Australia’s Guidelines for Lawyers in Mediation, Ms Bihancov elucidates the specific responsibilities and skills expected of legal representatives in mediation. Ms Bihancov prudently provides key tips and tricks for legal representatives to ensure proceedings are conducted productively and efficiently, and ultimately lead to positive outcomes for those involved. The informative research paper by Chris Lenz lends global perspective by outlining and analysing a hypothetical mediation involving parties from Germany, Australia and the United Kingdom. Mr Lenz provides useful background on common issues encountered in cross-border mediation before exploring the particular cultural values and communication styles of the different participants. By anticipating the likely actions and reactions of the parties, Mr Lenz pragmatically demonstrates how a mediator may address and respect international differences in a successful mediation. Recent amendments to the Family Law Act 1975 (Cth) and the implementation of new rules and regulations for arbitrator registration and conduct have encouraged a rise in the use of arbitration for family law property settlement cases. Matthew Shepherd helpfully outlines these new provisions and draws on lessons learned in the success of family law mediation to facilitate success in arbitration. Mr Shepherd concludes by emphasising the importance of discussing arbitration as an option with family law clients, conveniently including a list of closed questions designed to better understand clients’ aspirations and open discussion on the processes involved. Another area of recent legislative reform is the statutory review of the Construction Contracts Act 2004 (WA) (the CCA) and subsequent introduction of the Construction Contracts Amendment Act 2016 (WA).

Partner and Head of Arbitration, McCullough Robertson Lawyers; Company Secretary, Resolution Institute; Director, Australian Centre for International Commercial Arbitration.

THE ARBITRATOR & MEDIATOR JUNE 2017 Relevantly, the CCA aims to provide a means for adjudicating payment disputes arising under construction contracts, and for related purposes. Phil Evans analyses the conduct of the review and the key changes arising from the recommendations, with a specific focus on those recommendations that were rejected by the Government. By referring to judicial consideration of the existing provisions and the treatment of similar issues by other Australian jurisdictions, Mr Evans highlights uncertainties which arise under the status quo in relation to contract interpretation. In the family law space, Mieke Brandon’s insightful contribution considers the significant emotional impacts of parental separation, and enlightens legal practitioners as to the empathetic support they can provide to clients throughout this challenging process. Clients require a psychologically safe environment, and Ms Brandon suggests this can best be maintained by employing tactics including acknowledging emotional reactions, goal-setting and effective communication. While this article is ostensibly dedicated to family law, each and every practitioner will appreciate its human perspective. Just as practitioners will benefit from Ms Brandon’s advice, mediators will value Tony Newport’s contribution to this edition, wherein mediators are reminded of the importance of managing emotions and applying listening skills in effective dispute resolution. Drawing on his extensive experience in social work and Employee Assistance Programs, Mr Newport extracts and explains key topics presented at the National Mediation Conference 2014. Of particular interest to those who were unable to attend the conference, Newport brings together Jim Cyngler’s themes of self determination, Greg Rooney’s devotion to pre-mediation, Liv Larsson’s focus on empathy, and the practical communication strategies presented by Martha McClintock and Jill Tanz to represent the breadth of ways in which mediation is conducted. The first case note of this edition takes a Trans-Tasman perspective and centres upon expert determination, in particular, the circumstances in which an expert’s failure to hear oral evidence or question witnesses mean a failure to discharge their mandate. Brendan Cullen considers the factually unusual New Zealand case of Waterfront Properties (2009) Limited v Lighter Quay Residents’ Society Incorporated [2015] NZAR 492, which initially arose out of a 2012 expert determination. The contract between the parties provided for the determination to be ‘final and binding’, however, the unsuccessful party filed proceedings to strike out the determination. The respondent then filed a strike out application and, when that was refused, an appeal against the refusal. In this case note, Mr Cullen extracts from the NZ Court of Appeal’s decision pertinent judicial observations about the expert determination process. Readers will appreciate Mr Cullen’s astute observation that a dispute which requires resolution of factual and credibility issues may not suit inquisitorial approach-based expert determination, and litigation may be preferable. In our previous edition of The Arbitrator & Mediator, Michael Heaton QC outlined the divergences between the various security of payment statutes in New South Wales, Victoria and Queensland by evaluating the impending decision in Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd 91 ALJR 233. In this edition, Mr Heaton updates readers on three questions which had been left open and have now been resolved by the High Court and two appellate court decisions in relation to the security of payment legislation on the eastern and southern states of Australia. The first issue is in relation to the identification of a reference date being a jurisdictional fact; the second is whether there can be a reference date after a contract is determined; and the third is whether certiorari lies for non-jurisdictional error of law. Mr Heaton concludes that the eastern states have uniformity in the first and second issues, whilst the third awaits determination by the High Court of two applications for special leave to appeal filed in May 2017. It is well established that failure to comply with contractual preconditions to arbitration may prevent the commencement of an arbitration. However, a recurrent question is who decides – a court or an arbitrator – whether such conditions have been satisfied and the case may proceed? As Stuart Widman explains, the decision in BG Group PLC v Republic of Argentina 134 S. Ct. 1198 (2014) clarifies the position of the United States Supreme Court – procedural arbitrability matters will be decided by arbitrators, whereas

THE ARBITRATOR & MEDIATOR JUNE 2017 substantive arbitrability issues will be determined by the court. Importantly, Mr Widman’s case note highlights that an arbitration panel’s decision on procedural arbitrability is entitled to deference when subject to review in court. In Australia, another area of uncertainty is the standard required of arbitrators’ reasons for decisions, as exposed by Erika Williams in her case note on Ottoway Engineering Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2017] SASC 69. Ottoway and ASC had entered into a contract for pipe fabrication and assembly, which included a clause that disputes between the parties were to be resolved by arbitration. A dispute arose when ASC claimed reimbursement of its capital contribution and Ottoway cross-claimed expenses for carrying out the works. At a preliminary conference, the arbitrator made an award in favour of ASC. Ottoway then sought leave in the Supreme Court of South Australia to appeal the award on the basis of an error of law. In granting leave, the Supreme Court highlighted inconsistencies in current case law on the topic and stated that the outcome of the appeal in this case is a significant opportunity for determination of this matter of public importance. Additionally, Ms Williams analyses the willingness of the courts to imply contractual terms for business efficacy, which is of relevance to practitioners. Readers of The Arbitrator & Mediator remain astutely informed of developments in the alternative dispute resolution space. Our scholarly audience will no doubt appreciate three recently published texts of relevance, which are the subject of review in this edition. First, Caroline Kirton QC commends International Arbitration: Law and Practice by Gary Born as essential reading for both new students and seasoned practitioners. Ms Kirton outlines the significant updates and additions to the second edition and enthusiastically extolls the utility of this updated text. Second, Donna Ross appraises Negotiation: Things Corporate Counsel Need to Know but Were Not Taught by Michael Leathes. Readers will appreciate Ms Ross’s comprehensive consideration of the text’s well-structured chapters, knowledgeable advice and invaluable appendices. Finally, Alexis Cahalan reviews the latest offering by Neil Andrews, Arbitration and Contract Law: Common Law Perspectives. Ms Cahalan praises the text as an invaluable reference for readers who may be unfamiliar with United Kingdom arbitration law, as well as common law contract lawyers who wish to better understand the complexity of English contract law in the arbitration context. I trust readers will find the June 2017 edition of The Arbitrator & Mediator to be stimulating and insightful. I thank our new and returning contributors for their scholarly works and commend their articles to our readers.

THE ARBITRATOR & MEDIATOR JUNE 2017

Advocacy in arbitration Hon Richard Chesterman AO RFD QC3

Abstract Arbitration is an important means of resolving contractual disputes in a timely and efficient manner. Its use is more common than many lawyers realise, in part because the existence of a dispute referred to arbitration as well as the subject matter of the dispute are confidential. This is one of the considerable advantages of arbitration, but the lack of publicity concerning the use of arbitrations has the consequence that many professional advocates are unaware of how the techniques of advocacy in arbitration differ subtly from those traditionally employed before courts. This paper examines the differences on both a theoretical and practical level in an endeavour to assist advocates engaged in arbitrations. - - - - The arbitration of commercial disputes is more common than is usually realised and professional advocates should be aware of its advantages, and be equipped to argue cases in the discipline which differs slightly from litigation. The referral of a dispute to arbitration is a consequence of a contract made between commercial parties who agreed that any dispute arising from their dealings should be arbitrated. The process is consensual and cooperative. The parties give up some of the procedural protections available in litigation such as full disclosure, strict adherence to the rules of evidence and the right of appeal against perceived mistakes of fact or law. The compensation is a faster, more flexible proceeding resulting in an early, final, result. The most obvious difference between arbitration and litigation, which is said to be a particular advantage of the former, is that the parties choose their arbitrator, and do so on the basis of the appointee’s perceived experience, knowledge and ability as a decision maker. If the parties have chosen well, advocates present their cases to an informed and competent tribunal, perhaps with particular expertise in the subject matter of the dispute. There is no need to ‘educate’ the decision maker as, it is sometimes said, one has to do with judges. The given topic suggests that advocacy in arbitration differs from advocacy before a court. The assumption is justified but the differences are subtle. The principles of advocacy, its tactics and strategy, are basically the same in whatever forum the advocate appears. To understand what differences in approach there might be requires an exploration of how the arbitral process differs from litigation. I take my topic to include all aspects of conducting a case, not just the practical techniques of examining witnesses and crafting submissions. Most arbitrations in this State are conducted under the auspices of the Commercial Arbitration Act 2013 (Qld). Each State has an almost identical Act and there is, as well, a Commonwealth act, the International Arbitration Act 1974 (Cth) for international arbitrations. Put simply an arbitration is international if the parties to the arbitration agreement conduct their businesses in different countries, or if they do business in the same country but the agreed place of arbitration is in another country, or if the place where a

The author practised as a Barrister in Queensland for many years before his appointment, in 1998, to the Supreme Court of Queensland on which he served for fourteen years, the last three as a Judge of Appeal. Since his retirement from the Court in 2012, he has practised extensively as an Arbitrator, Mediator and Expert Determiner. The text of the paper was an address given to the Bar Association of Queensland’s Annual Seminar in Brisbane in March 2017.

THE ARBITRATOR & MEDIATOR JUNE 2017 substantial part of the contract is to be performed is in another country; or if the parties have agreed that the subject matter of their agreement relates to more than one country. My experience suggests that the day to day conduct of an arbitration does not vary between domestic and international arbitrations. This is not the time or place to undertake an analysis of the various Acts which would certainly be dreary. As I said, they are all very similar. All of them mandate a particular approach to arbitrations. Section 1AC of our Queensland Act declares that: ‘(1)

The paramount object of this Act is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.

(2)

This Act aims to achieve its paramount object by—

(3)

(a)

enabling parties to agree about how their commercial disputes are to be resolved (subject to subsection (3) and such safeguards as are necessary in the public interest); and

(b)

providing arbitration procedures that enable commercial disputes to be resolved in a cost-effective manner, informally and quickly.

This Act must be interpreted and the functions of an (arbitrator) must be exercised so that… the paramount object… is achieved.’

Note the mandatory ‘must’ in sub-section 3. Arbitrators have a statutory obligation to resolve disputes economically, informally and quickly. Sub-section (2) introduces what has been called ‘proportionality’, allowing parties and the arbitrator to mould procedures in order to determine the case in a manner that is cost effective in relation to the amount in dispute, its complexity, and the capacity of the parties. Section 19 of the Act provides that the parties can agree upon the procedures by which the arbitrator is to conduct the proceedings. This recognises ‘party autonomy’, the right of parties to conduct their cases as they wish. There is, however, a substantial limitation on the right. It is subject to ‘the provisions of th(e) act’, a reference to the paramount objective of economy and efficiency. The agreed procedure must meet the objective. In the absence of agreement, the arbitrator ‘may… conduct the arbitration in such a manner as (he) considers appropriate’. This power is also subject to, and must be exercised to achieve, the paramount objective. Importantly the power extends to determining the admissibility, relevance, materiality and weight of any evidence. This means that arbitrators are not bound by the legal rules of evidence. This has a consequence for advocacy which I will mention later. Section 18 confers an unusual power on arbitrators. It requires them to give the parties a ‘reasonable’ opportunity of presenting their cases. The requirement is not to allow a ‘full’ opportunity to present a desired case. Arbitrators can interrupt and curtail the presentation of evidence or argument. I have never seen the power exercised. I assume it would occur only when a party was acting oppressively against an opponent or was disregarding its obligation to be concise and efficient. However the section does not

THE ARBITRATOR & MEDIATOR JUNE 2017 confine the circumstances in which arbitrators can limit the number of witnesses or experts, or impose time constraints on their evidence. You should note that section 24B puts an obligation on parties to ‘do all things necessary for the ... expeditious conduct of … proceedings’. Section 24 permits arbitral proceedings to be conducted on written materials without hearing oral evidence or oral argument, though if any party requests such a hearing, the arbitrator must accede to it. Obviously where proceedings are conducted entirely on written materials their importance is critical. It is the only chance of persuasion the advocate has. Importantly section 5 provides that no court may intervene in arbitral proceedings ‘except where so provided by this Act’. The scope for judicial intervention is very limited: there is no appeal against findings of fact. Appeals on questions of law in an award can be heard by the Supreme Court only if both parties agree, and if the court grants leave. Section 34A(3) advises the court not to grant leave unless the decision of the arbitrators on a question of law is obviously wrong, and the error had an actual, substantial, effect on the rights of one or more of the parties. Apart from that, a court can only interfere if the arbitrator misbehaves, or was not properly appointed, or decides a dispute not referred to arbitration. So arbitrations are meant to be fast, informal and final. The advocate’s conduct of the case should reflect that philosophy. He or she cannot have at the back of their mind the thought that errors can be tidied up on appeal. You only get one shot of having your arguments accepted. I have mentioned the differences between litigation and arbitrations as mandated by the legislation to give some idea of how arbitrations are required to proceed so that techniques of advocacy can be adjusted accordingly. The combination of sections 1AC, 19 and 24B particularly, results in a substantial departure from the previous philosophy which underlay litigation, the right of parties to conduct the case as they see fit and at the pace that suits them. The Commercial Arbitration Act obliges arbitrators to get on with the job and to actively encourage parties to prepare and prosecute their cases, and to equally actively discourage delay. Arbitral proceedings are compressed and advocacy in them has to adapt to the compression. Interestingly section 24A provides that the parties to an arbitration may appear in person or by a representative who need not be a legal practitioner. You may find yourself arguing against a layman, though one expert in a particular field. Arbitrators have only the powers the parties can agree to give them. They do not have coercive powers. They cannot compel the attendance of witnesses or the production of documents. Parties can, however, apply to the Supreme Court for the issue of subpoenas for the production of documents to the arbitrators, or the attendance of witnesses. They must first obtain the permission of the arbitrator to make the application. Arbitral proceedings are flexible and informal and the parties can choose their own rules. Normally the arbitration clause in a contract which has given rise to the dispute will identify a set of rules which will govern the proceedings. Commonly parties choose rules such as those published by Resolution Institute (formerly IAMA) or the rules of ACICA, the Australian Centre for International Commercial Arbitration. I was once in an arbitration which had no connection with shipping or the United Kingdom but the parties had agreed it should be conducted in accordance with the rules of the London Maritime Arbitrator’s Association. Arbitrations under the auspices of the International Chamber of Commerce (ICC) are quite common. If you are engaged in one, study its rules very carefully. They are proscriptive and elaborate, calling for steps in the proceedings that other sets of rules don’t require, and each case is closely supervised from Hong Kong. There is no point in going into the details of any particular set of rules. They deal with the same sorts of subject matter that you would expect rules of procedure to cover, and in a broadly similar fashion. The

THE ARBITRATOR & MEDIATOR JUNE 2017 point is that professional advocates should make themselves familiar with the particular rules by which the arbitration they are briefed in is to be conducted. Whatever set of rules are applicable they will differ from the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). One topic the rules do not cover is discovery, or disclosure of documents. One might think that discovery has no place in an address on advocacy, but advocacy is about presenting the client’s case and for that he needs material. Normally the parties, through their solicitors, agree upon some form of disclosure, and it is usually limited to categories of documents and/or communications between specified persons. The ‘direct relevance’ test of the UCPR does not apply unless the parties agree it should. If documents are required from an opponent or third party and are not produced voluntarily, you will have to have recourse to subpoenas issued by the court. Given that two applications are necessary, first to obtain the arbitrator’s permission and then the court’s order for the issue of the subpoenas, you may have to act expeditiously to get the documents in time. If you are asked to advise on what discovery regime should be agreed to, obviously the aim is to ensure that the categories of documents are likely to produce what is needed. I mentioned, as one of the attractions of arbitration, the fact that the parties get to choose the arbitrator. Obviously the disputes in which I have been involved have had at least one venerable lawyer as arbitrator, but I once sat with an accountant. In some disputes however, the arbitrators are engineers, architects, valuers, or even builders, sometimes as sole arbitrator and sometimes as one of a panel of three. In such cases a different approach is called for. There is no point in being overly legalistic. This is especially so if you attempt to bamboozle or overbear the arbitrator by a display of your legal knowledge. An intelligent layman will quickly see what is going on and resent it. You should show a lay arbitrator the same respect and courtesy you would show senior counsel or retired judge. If a point of law does have to be raised because the dispute turns upon the meaning of a contractual term, or because there is some proper reason for objecting to evidence, the point should be argued as simply as possible with as little reference to authorities as possible, the object being to clarify things to assist the arbitrator’s understanding of the issues. Arbitral proceedings are informal both in the actual conduct of the hearing and in the relaxation of rules of procedure. This informality should not lead to any display of disrespect to the arbitrators or familiarity. There may be a temptation, especially if the arbitrator is a layman, to make him your friend, but the temptation should be sternly resisted. You will gain more respect from the arbitrator if you exhibit a proper degree of professional deference. There is an unavoidable physical closeness between arbitrators and the parties and lawyers. Hearing rooms are small. The absence of court staff means that documents have to be handed to the arbitrator, usually by solicitor or junior counsel. There is no bailiff to open or adjourn proceedings; there is no standing up when the arbitrator enters. He or she will be sitting at a desk when parties and their lawyers straggle in, or the arbitrator will enter the room when everyone else is there. The examination of witnesses and addresses are conducted with the practitioners seated. Nevertheless it is important to preserve a psychological space between advocate and arbitrator. The deference, or psychological space, facilitates good decision making and, I think, most arbitrators would resent a friendship being imposed on them by a party. Such an approach might be seen as an improper attempt to influence the outcome and is likely to be counterproductive. When I initially thought about preparing this address I intended to be analytical rather than particular, assuming that approach would appeal to an audience of professional advocates. However, early on when speaking about the topic to some junior counsel, I was asked questions which suggested that it might be appropriate to deal with some detail that might seem mundane. I was asked how the arbitrator should be addressed. The problem may appear acute if the arbitrator is a retired judge. Despite natural respect ‘your Honour’ is to be avoided: it is wrong. That particular mode of address is reserved for serving members of the judiciary. Call the arbitrator by name, Mr, or Ms Smith, or Mr (or Ms) Arbitrator. Often there is a panel of three arbitrators (which is a called a Tribunal in the legislation) and if referring to the arbitrators collectively you would use such a phrase as ‘if the Tribunal pleases’ or ‘does the Tribunal wish

THE ARBITRATOR & MEDIATOR JUNE 2017 to have a view’, or whatever the case might be. If an individual arbitrator asks a question he or she should be answered by name. A substantial difference between arbitration and litigation is that arbitrated disputes often arise in the context of an on-going commercial relationship which both parties wish to preserve. Litigation, by contrast, is usually an exercise in pathology where the parties are engaged in working out why the relationship died and allocating fault. Advocacy can take on a sharp edge in that context which will have no place in finding the answer to a dispute between parties who may wish to use each other’s services in the future, or are bound together in a contract of long duration. The conduct of such an arbitration must value civility over forensic point scoring in order to maintain rather than destroy the business relationship. I do not mean to say that the case should not be presented forcefully but I think it should be done in a manner that avoids personal attacks. On occasions even these may be necessary, for example when a witness may be lying on an important point. Most disagreements which go to arbitration commence with a Notice of Dispute, or a Referral to arbitration and there is usually a response, which may be called by different names. These two documents summarise the rival contentions in the case. They are the first documents the arbitrator will see, so advocacy in promoting the parties’ cause should begin with the drafting of the Notice and the Response. I do not suggest that these documents be treated as final submissions, but they are the first chance to articulate a client’s case persuasively, succinctly and clearly. You should take advantage of it. The same is true where the rules under which the arbitration is conducted, or the parties agree, that there should be an exchange of pleadings by whatever named called. The elaborate and prescriptive provisions of the UCPR do not apply. Typically the rules of the arbitration organisations provide that a statement of claim should include: (a) the identification of the parties; (b) a statement of the facts supporting the claim; (c) the points in issue; (d) the relief or remedy sought; (e) the legal grounds or arguments supporting the claim. The defence is required to respond with particularity to the contentions in the statement of claim. It is common, though not universal, for the statement of claim to have attached to it copies of the contract from which the dispute has arisen and, as well, ‘all documents and other evidence relied upon by the claimant’. The same obligation is imposed on the responding side. Evidence in chief by a party’s witnesses is invariably in written form. The statements and expert reports are delivered to the arbitrator when finalised, or when exchanged between parties, depending upon their agreement. The result is that the arbitrator knows a very great deal about the case well before the hearing starts. The conduct of the case should reflect that reality. There is no point in lengthy opening addresses or in explaining the case. The arbitrator will know what the lay witnesses say, what the expert’s opinions are, and they will have read the relevant documents. The presentation of the case, the advocate’s task, needs to be focused and direct. It is also relevant that the arbitrator will have been chosen by the parties for his known competence and/or experience so that you can address the issues confidently knowing the arbitrator understands the case and appreciates the competing arguments. This observation holds good even when the arbitrator, or one of them, is a layman, engineer, accountant, or whatever. It is a mistake of advocacy to treat such people as inferior beings. Avoid being condescending. The advocate’s task is to persuade, not antagonise.

THE ARBITRATOR & MEDIATOR JUNE 2017 There are special problems which sometimes arise in international arbitrations where the arbitrators may come from different legal systems, from different cultural backgrounds and may not have English as their first language. These special problems can be ignored for present purposes. I mentioned section 9(3) which gives an arbitrator the power to determine the admissibility, relevance and weight of any evidence. If you are going to object to the reception of evidence, you will need better arguments than one which says that the impugned evidence should not be received because Cross on Evidence says it is inadmissible or because its reception would contravene one of the many restrictions on receiving evidence. Especially if the arbitrator is a layman, you will need to demonstrate why it would be an affront to the orderly conduct of the arbitration for the arbitrator to have regard to it. Putting technicalities aside, the two basic objections to the reception of evidence is that it is hearsay i.e. the witness had no direct knowledge of the event testified to; or the evidence is an opinion, or a conclusion, and the person expressing it is not duly qualified as an expert, or the opinion is not truly the subject of relevant expertise. As a general rule objections to evidence should be kept to a minimum and only made where the evidence objected to cannot be properly admitted, and will be damaging. It is surely better to ignore harmless or irrelevant hearsay than take up valuable time arguing about its reception. The same is true of objectionable opinion evidence. Arbitrators are professional people. They will want to reach the right decision and for the right reasons, which includes acting only on proper evidence. It is easy to lose sight of the fact that the rules of evidence are designed to ensure that what is put before a court is likely to be reliable. If you can demonstrate to an arbitrator that the evidence you object to looks to be unreliable, for example because it is hearsay and cannot be challenged or because it is opinion and the proper groundwork for the expression of the opinion has not been established, the arbitrator is likely to uphold the objection. Section 19(4) gives an arbitrator ‘The power to make orders …for the examination of a …witness on oath or affirmation’. That has a practical application. It means that witnesses are not necessarily sworn or affirmed when called to give evidence. The arbitrator decides whether he requires that form of binding the witness’s conscience. In my experience the parties will tell the arbitrator if they want the witnesses to testify on oath, or the arbitrator will ask if they want the witnesses sworn. My own preference is to proceed in that way. It is especially important in cases involving contested questions of fact. Even in an apostate age such as ours, the taking of an oath or affirmation brings to the attention of the witness the importance of the occasion, and the need to be both honest and accurate. Arbitrations are often conducted according to an agreed timetable, which may be tight. A fixed period of time is allowed for the entire hearing and it is common for parties to agree to an equal division of time for adducing evidence, cross examining and addressing. There are so-called ‘stop clock’ arbitrations in which the time is divided and regulated to a matter of hours. Where this is the case, or where there are more general time constraints, cross examination in particular has to be thoroughly planned and conducted so as to stick to the point, avoid distractions and irrelevancies, and conclude within the allotted time. Because your time with the witness is limited, the cross examiner must identify the critical point or points and determine how to develop them quickly. Discursiveness and rambling are obnoxious in any jurisdiction but are truly pernicious in arbitrations. Time is of the essence and a hardnosed focusing on the important is essential. Counsel will, in most cases, be involved in the preparation of witness statements. The drafting of these is part of advocacy, just as adducing evidence in chief from a witness orally, is part of the advocate’s task of persuasion. Of course I do not mean that the statement should become the lawyers’, or that a witness should be coaxed or coached. The evidence must be that of the witness but it can be presented in such a way as to be persuasive and incline the decision maker to accept it. Statements should contain facts not arguments. They should be concise, coherent and proceed by way of understandable narrative. They should comply

THE ARBITRATOR & MEDIATOR JUNE 2017 with the rules of evidence because, although an arbitrator can overlook the rules, statements that contain evidence beyond the witnesses own knowledge, or express opinions not facts, will diminish their weight. Written submissions have assumed greater importance in recent years and this is particularly true of arbitrations where, as I have said, time is compressed, arguments and issues are condensed and the arbitrator will have had given to him large amounts of documents which may not have been the subject of oral debate but would have been referenced in statements or pleadings. The written submission is the medium to draw all the threads together and present the party’s case in a clear and compelling manner. You are all familiar with the requirements for producing good written submissions and I will mention only the aspects that may have particular application for arbitration. The submissions must of course be tailored to the particular arbitrator or arbitrators as well, of course, to the subject matter of dispute. You may be dealing with arbitrators who, though competent in their field, may not be used to the discipline of fact finding, analysis or the writing of reasoned judgments. Your written submissions should be designed to help them along that path. At a basic level the submissions should set out what relief or remedy the party contends for and why that result should be given. The submissions should formulate each proposition of fact which the arbitrators is asked to find by reference to the evidence which supports it. Where question of law have to be decided, the propositions contended for should be identified and the legal arguments clearly laid out. In all cases, but especially with lay arbitrators, you should use clear, simple language, short sentences and numbered paragraphs. The subject matter of the submission should be logically structured and each part identified by appropriate headings. Where documents are relied on they should be clearly referenced and should be given to the arbitrator in an easily accessible format. Remember the arbitrator does not have an associate or secretary to help with handling or accessing documents. All cases generate paper, but strive for economy. A folder, as small as possible in the circumstances, containing all the critical documents, is a good start. Sometimes submissions can include the findings of fact that the party contends for so that an arbitrator may incorporate them easily into the award. This can be a convenient way of structuring the submissions. The proposed findings of fact have to be argued for with reference to the evidence, any relevant law, documents, witness statements and oral testimony. Conciseness is a virtue. Succinctness leads to easier comprehension, especially when the arbitrator is not an experienced lawyer. Too much detail, too many references to evidence, or to cases may be a distraction. Where there are copious references it is best to proceed by way of footnotes rather than incorporating them in the text. Only the essence of the evidence, or the propositions of law, should be in the body of the submissions. Take the gospel’s advice: let your speech be plain: ‘yes or no: anything more comes from the devil’’. Avoid adjectives and adverbs, completely if possible. Do not use rhetorical flourishes or any kind of hyperbole. Do not overstate. I recently came across some good advice4 for the drafters of submissions, which was new to me. It was that having prepared the first draft the advocate should put it away for a time then read it afresh as if he or she were the arbitrator. In that process prune anything that smacks of verbosity or repetition, and see to what extent expressions can be shortened and simplified.

Greg Laughton, Advocacy in International Arbitration (April 2016) <http://www.13wentworthselbornechambers.com.au/wpcontent/uploads/2016/04/160422-Advocacy-in-international-arbitration-with-table-of-contents.pdf>.

THE ARBITRATOR & MEDIATOR JUNE 2017 In the same place where I found that advice I came across the statement that arbitrators generally will be annoyed or alienated by written submissions that: (a) are prolix, including irrelevancies; or excessive quotations of fact or authority; or a failure to distil the essence of the argument; (b) include too many points or issues resulting from a failure to cull weak points; (c) are incoherent because they lack a logical theme or fail to organise material into an integrated whole; (d) are inaccurate, containing misstatement of facts or issues; (e) omit or misquote authorities, or quote them out of context; or (f) are mechanically defective because they lack an index; or have an inadequate chronology; or inaccurate references to authorities and transcripts; or because they contain typographical errors, poor grammar or spelling.5 Remember that the calibre of the written submissions establishes the credibility, or lack thereof, of the advocate advancing them. If your written submissions are poor, your oral argument in support or amplification of them is likely to be received doubtfully. Written submissions which are inaccurate or poorly argued or suffer from some of the defects I have identified, are likely to be put aside by the arbitrator who will pick up the opponent’s submissions if they have obeyed the rules of advocacy. You want your submissions to be the ones the arbitrator turns to for help in writing the award. It is, of course, unethical to mislead any tribunal as to the law. The obligation not to do so, and to be absolutely precise and accurate when arguing any point of law is much stronger when the tribunal is not legally qualified, such as a lay arbitrator, and the chance of misunderstanding or confusion is greater than with a trained lawyer. Can I finish with a brief reference to two unrelated concepts. One of the advantages of arbitration is its complete confidentiality. It is not uncommon for an arbitration agreement to provide that even the existence of a dispute between the parties is not to be revealed so that no-one unconnected with the dispute knows that a disagreement has arisen. Only the arbitrator and reporter, if transcription has been agreed, the parties, their legal representatives and their witnesses are allowed into the hearing room. There are ethical constraints on what barristers can reveal about their instructions but there is no constraint on talking of what happened in court, and a day’s excitement is often repeated over an afterwork drink. Section 27E of the Act prohibits the disclosure of confidential information in relation to an arbitral proceeding, subject to some limited exceptions. Confidential information is defined in section 2 to mean any information that relates to the arbitral proceedings including, specifically, the pleadings, the evidence, the rulings and the award. I mentioned the limited right of appeal against awards. There is an additional, though also limited, right to have the award corrected with respect to ‘any errors in computation, any clerical or typographical errors or any errors of similar nature’. The right does not apply so as to change substantial findings of

Ibid.

THE ARBITRATOR & MEDIATOR JUNE 2017 fact, but errors of a kind which give the award an effect different to its stated intention can be corrected. A party who wants the correction to be made must request it within 30 days of receiving the award. There is also a power to request the arbitrator â&#x20AC;&#x2DC;to give an interpretation of a specific point or part of the awardâ&#x20AC;&#x2122;. I have no personal experience of such a proceeding. It would seem appropriate where there is some ambiguity or uncertainty in the reasons for the award, or the award, or some conflict between the reasons and the award itself. The arbitrator can be asked to remove the uncertainty. Can I end as I began by suggesting that arbitrations are a valuable adjunct to dispute resolution and can afford a speedy and therefore economical decision making process. They offer flexible proceedings and competent Tribunals with an interest in efficiency and the delivery of result both legally and factually correct.

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Legal representation in mediation: Effective or counterproductive? Practical tips and tricks from mediators to legal representatives Anne Bihancov6

Abstract In the last decade, there has been a rise in the use of mediation as a method for resolving disputes. The rise has largely been driven by a re-evaluation of the ways we deal with conflict. Traditionally, disputes have been resolved through the use of litigation, which, as Parselle observed, has earned itself a relentless list of metaphors to do with ‘war, battle, conflict, crushing the enemy, scoring a home run, winning, and oh yes, losing’, a place where ‘half of those who step into the ring come out as loser.’7 How then, does a legal representative, who is traditionally known for dealing with conflict in this battlefield setting, fit into a new realm where there has been a movement towards seeing conflict as a positive challenge; ‘a realm whereby the participants, with the assistance of a mediator, identify the disputed issues, develop options, consider alternatives and endeavour to reach an agreement “together”?’8 Is their presence effective or counter-productive? One of the challenges faced by mediators when legal representatives are involved, is that there is a push to follow a familiar process whereby the parties give a short introduction and then swiftly depart into separate rooms and throw simple ‘dollar amounts’ back and forth; with little to no effective communication between the parties. This is often a reflection of the legal representative’s lack of understanding of their roles and responsibilities and skills in mediation. In the author’s view, it is in the best interests of the legal profession to cease being counter-productive in mediation. This paper will explore the challenges faced by traditional legal representatives participating in mediation and their roles and responsibilities, which have continued to develop. The paper will then provide some key tips and tricks for legal representatives which, if adopted, will make legal representation in mediation productive and efficient, leading to more positive outcomes for clients, mediators and legal representatives.

The movement towards a modern process for dealing with conflict Although legal representatives have largely become accustomed to mediation being part of their professional lives, the transition has not been without its challenges. In the author’s view, these challenges stem from the different nature of the process involved (i.e. adversarial v non-adversarial); the different roles, responsibilities and skills required compared to those of the ‘traditional legal representative’; and the evolving regime in Australia which has recognised the importance of mediation for resolving disputes.

Anne Bihancov is an Accredited Mediator NMAS, Principal Lawyer at A&B Lawyers specialising in commercial law and disputes, L.L.M (Usyd), LL.B (Hons), Member of the Law Society of NSW, Resolution Institute and Australian Mediation Association. 7

Charles B. Parselle, ‘The Satisfactions of Litigation’ (2006) Mediate <http://www.mediate.com//pfriendly.cfm?id=2065>.

National Alternative Dispute Resolution Advisory Council (2002) Alternative Dispute Resolution terminology: a discussion paper, 34.

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Adversarial v Non-adversarial The Australian legal system is adversarial. As Creighton describes it, ‘in adversarial legal systems, characteristically judges maintain their independence and impartiality from the dispute; their primary role at hearing is to adjudicate rather than participate - an umpire not a player.’9 The legal representatives do not appear in a case to arrive at a consensual solution, but rather ‘direct the proceedings, control the evidence and questions to witnesses, to paint a ‘black and white picture’ for the judge/umpire to decide which party wins and which party loses.’10 The losing party may have a right of appeal to continue to fight the battle until they’ve ‘won’. Ultimately, legal representatives use the system in a competitive way to enhance their client’s case and the adversarial system becomes about winning and losing. Mediation, on the other hand, is not an adversarial process to determine who is right and who is wrong and the ‘combat’ or ‘battle’ setting is ideally extinguished. Although the parties are encouraged to lay out the issues as they see them, they are not restricted to black and white legal arguments, nor are they restricted by the rigid processes or risks of excessive delay or costs. There is no judge to determine the dispute, but rather a mediator that assists the parties to explore, examine and exchange views that lead to a mutually acceptable resolution. Resolving a dispute by mediation is essentially a problem-solving exercise. It is the parties and their legal representatives that determine the outcome and therefore the very roles of all parties involved are significantly different to those in legal proceedings.

Different roles, responsibilities and skills Naturally, as a result of the different nature of the processes, the roles, responsibilities and skills required of the legal representative for a successful mediation differ to those desirable in advocacy. As Branson J notes in Hopeshore Pty Ltd v Melroad Equipment Pty Ltd, ‘a well-conducted mediation is not simply an occasion for each side to give consideration, with the assistance of the mediator, to the strength of its legal case and concomitantly to the extent to which it may be willing to compromise on its formal legal position.’11 As the Law Council of Australia notes, a legal representative must understand that ‘it is not the other legal representative or the mediator that needs to be convinced; it is the party on the other side of the table.’12 It is important that legal representatives ‘do not dominate the process and defeat the key feature of mediation i.e. being an opportunity for the parties themselves to resolve their dispute, with appropriate assistance, on terms that are satisfactory to the parties.’13 A legal representative essentially assists the process by stepping out of their traditional combat shoes into co-operative shoes, thinking beyond their client’s strict legal arguments. This can be very difficult for some, as it may feel counter-intuitive and may conflict with their desire to resolve the dispute through conventional means. If a legal representative is not aware of these differences, or does not have the required skills to represent their client effectively in mediation, their very involvement may ‘adversely

‘

Alison Creighton, An adversarial system: a constitutional requirement?’(1999) 74 Australian Law Reform Commission Reform Journal 65. 10

Ibid.

(2004) 212 ALR 66 [32].

Law Council of Australia, ‘Guidelines for Lawyers in Mediations’ (2011) <http://www.lawcouncil.asn.au/lawcouncil/images/LCA-PDF/a-z-docs/MediationGuidelines.pdf> rule 6.1. 13

LexisNexis, Australian Encyclopedia of Forms & Precedents vol 30 (at 2013) Alternative Dispute Resolution: Commentary to Alternative Dispute Resolution/Mediation, 3.

THE ARBITRATOR & MEDIATOR JUNE 2017 affect the mediation process by accentuating the division between the disputing parties’14 i.e. increase conflict. It is therefore crucial that legal representatives are aware of their role and responsibilities and adopt appropriate methods and skills required of them in mediation (discussed in detail below).

Key roles and responsibilities of legal representatives in mediation The legal profession has realised the benefits of mediation as a method for peacefully and economically resolving disputes. Increasingly, mediation has become a mandatory step in the litigation process.15 With the increasing involvement of legal representatives in mediation, it became apparent to a range of professional bodies that legal representatives were being faced with new ethical and professional dilemmas whilst trying to adapt to the different processes, and their new roles and responsibilities in this new setting. These challenges led to the introduction of a body of rules and guidelines for legal representatives in mediation such as the Law Society of New South Wales’ Professional Standards for Legal Representatives in a Mediation and the Law Council’s Guidelines for Lawyers in Mediation. These rules and guidelines maintain a sense of flexibility and have assisted in encouraging legal representatives to be involved in mediation whilst maintaining ethical and professional standards in their new role. To summarise the key roles and responsibilities, a legal representative must: (a) have a sound knowledge of the purpose and process involved; (b) effectively prepare for mediation; (c) assist the mediator, their client and other parties in a non-adversarial manner; and (d) give advice and help to formulate offers without misleading anyone involved.

Possess sound knowledge of the purpose and process The responsibilities of a legal representative exist well before they actually participate in mediation. It is now a component of legal professional responsibility for legal representatives to advise their clients on alternative dispute resolution (ADR) options. For example, Rule 12.3 of the Law Council of Australia’s Model Rules of Professional Conduct and Practice provides that: ‘a practitioner must where appropriate inform the client about the reasonably available alternatives to fully contested adjudication of the case unless the practitioner believes on reasonable grounds that the client already has such an understanding of those alternatives as to permit the client to make decisions about the client's best interests in relation to the litigation.’16 A legal representative must know the ins and outs of each ADR option, including the advantages and disadvantages and exactly what is involved with each process, prior to advising on its suitability to

Ibid.

See Federal Court of Australia Act 1976 (Cth) s 53A; Family Law Act 1975 (Cth) ss 10F, 13C, 60I; Civil Procedure Act 2005 (NSW) s 26; Supreme Court of NSW Practice Note No SC Gen 6 ; Supreme Court (General Civil Procedure Act) Rules 2005 (Vic) r 50.07; Supreme Court of Victoria Practice Note 2/2012; Supreme Court Act 1935 (SA) s 65; Rules of the Supreme Court 1971 (WA) r 4A.8; Consolidated Practice Directions of the Supreme Court of WA 2009 Pt 4.2; Supreme Court Act 1935 (WA) Pt VI; Supreme Court Rules 2000 (Tas) Pt 20 r 518; Supreme Court Act 2011 (NT) s 83A. 16

Law Council of Australia, Model Rules of Professional Conduct and Practice (2002) rule 12.3.

THE ARBITRATOR & MEDIATOR JUNE 2017 resolve the dispute. As Robert Angyal S.C., the then Chairman of the NSW Bar Association’s Mediation Committee observed: ‘... you cannot effectively represent a client at mediation without understanding what mediation is (and is not) and, most importantly, why it is a very effective process for resolving disputes. If you do not understand these things, you will not know what you should seek to achieve in representing a client, let alone how to accomplish your objectives.’17 If a legal representative does not understand the process of mediation or the role of the mediator, they may launch into their default position/ comfort zone whereby they present their client’s case in an adversarial manner, ultimately defeating the purpose of mediation. Education and knowledge is therefore crucial for a legal representative to effectively represent a client in mediation. This has been recognised by law schools and law societies around the world that now teach subjects and offer training on mediation as a dispute resolution process.18 There exists a wealth of information and material that aims to educate all parties in mediation, and the author strongly recommends that legal representatives constantly revisit these materials.19

Prepare, prepare, prepare! A legal representative must be aware that preparation for mediation is as important as preparing for legal proceedings. The legal representative must assist the efficiency of the mediation before it has even begun by preparing not only themselves, but also their client(s). A legal representative’s pre-mediation responsibilities are outlined in a number of guidelines including the NSW Law Society’s Mediation and Evaluation Kit20 and the Law Council of Australia’s Guidelines for Lawyers in Mediation.21 A summary of some key pre-mediation responsibilities include the following: (a) Discuss and explain the mediation process and role of the mediator. A legal representative should make it clear to their client what they might expect to happen in the mediation i.e. the process that may be followed and the role of the mediator is not to make a decision but to guide the process. Issues such as confidentiality and the nature of ‘without prejudice’ negotiation should also be discussed.22 (b) Assisting clients to identify their needs, interests and issues. A legal representative must explore with the client why an issue has arisen and what kind of things he or she would like to see

Robert Angyal S.C., ‘Effective representation at mediation: the five key elements’ (2007) Bar News 34; P.R. Callaghan S.C. ‘Roles and Responsibilities of Lawyers in Mediation’ (Paper delivered at CPD Forum, Sydney, 4 April 2007). 18

Judy Gutman et al, ‘Why teach alternative dispute resolution to law students? Part one: Past and Current Practices and some unanswered questions’. See, eg, Sydney University, Bond University. La Trobe Law University, Victoria Australia has, for ten years, offered a suite of conflict resolution subjects taught at a graduate and postgraduate level. 19

See, eg, Law Society of New South Wales, ‘Dispute Resolution Kit’ (2012) <http://www.lawsociety.com.au/cs/groups/public/documents/internetcontent/675694.pdf>. 20

Law Society of New South Wales, ‘Mediation and Evaluation Kit’ (2008) <http://www.lawsociety.com.au/cs/groups/public/documents/internetcontent/026438.pdf>. 21

Law Council of Australia, ‘Guidelines for Lawyers in Mediation’ (2011) <http://www.lawcouncil.asn.au/lawcouncil/images/LCA-PDF/a-z-docs/MediationGuidelines.pdf>. 22

Law Society of New South Wales, above n 15, r 5.1(ii); Law Council of Australia, above n 16, r 1.1.

THE ARBITRATOR & MEDIATOR JUNE 2017 happen.23 In doing so, a legal representative must look beyond the legal issues and consider the dispute in a broader, practical and commercial context.24 (c) Identifying any risks, tactics or objections likely to arise. A legal representative should prepare themselves and their clients for any likely objections in order to identify ways to get around them and/or to prepare a productive response. This involves identifying any risks the client or legal representative might be faced with. A legal representative should undertake a risk analysis and link these risks to the client’s interests. Risks might include advising on the legal costs incurred to date and likely to be incurred if the matter does not resolve at mediation.25 (d) Encouraging clients to speak. A legal representative should give their client the opportunity to speak at the mediation and, if necessary, should assist the client in their preparation to speak. This might include assisting the client to prepare their opening statement. This helps to get all of the parties involved and, by allowing a client to speak, they may be more likely to reach a resolution as they feel they’ve been heard by all parties to the mediation. (e) Assisting the client in thinking through options for resolution. A legal representative should discuss the issues that would be considered by the court and the range of possible outcomes as well as developing strategies to achieve final outcomes. 26 This discussion should include options that may be wider than those remedies available in a court. (f) Being involved in a pre-mediation conference with the mediator. Pre-mediation conferences convened by the mediator are a good opportunity to establish a relationship with the mediator and arrange any practical matters relevant to convening the mediation.27 A legal representative should dedicate as much time as possible towards pre-mediation preparation in order to effectively manage expectations, generate options, and to use time effectively. In doing so, a legal representative will ultimately increasing the effectiveness of mediation before it has even begun, and be in a better position to comply with their roles and responsibilities during and after mediation.

Assist the mediator, client and other parties in a non-adversarial manner28 Whilst a mediator’s role is to guide the process, if a legal representative is not willing to assist the mediator or the other parties through the process in a non-adversarial manner, they will ultimately become a hindrance to the success of the mediation. During mediation, a legal representative should assist all parties and the mediator by ‘discussing with the mediator, with the other party’s legal representative and with clients such legal and evidentiary, or practical and personal matters as the mediator may raise or the clients might wish to raise.’29 The focus is on legal representatives avoiding the situation whereby they become battle-locked on legal arguments when the discussion could otherwise be productive.

Law Council of Australia, above n 17, r 1.2.

Ibid r 5.

Ibid r 5.1(i).

Ibid r 5.1(iv).

Ibidr 5.2.

Law Society of New South Wales, above n 15, rr 2.1,2.3.

Ibid r 2.2.

THE ARBITRATOR & MEDIATOR JUNE 2017 It is important that the legal representative understand that ‘legal arguments or language are not always necessary.’30 Mediators and legal representatives should encourage parties to be involved in the discussion of any arguments that are personal or non-legalistic. In doing so, the process does not become clouded by the complexity of constant legal arguments which may only form part of the issues in dispute. To assist the process in a non-adversarial manner, a legal representative should also ‘listen carefully, even to material which may be irrelevant to litigation, but is conducive to setting an atmosphere for settlement.’ 31 He or she might ‘summarise arguments made against clients to show that the other party’s position has been heard and understood’32 (see below on active listening). Ultimately, these arguments should be presented in ‘appropriate terms and language that is appealing to all of those involved.’33

Give advice and help to formulate offers without misleading anyone A primary aspect of a legal representative’s role in mediation is to ‘give advice, to help formulate offers, assess the practicality/reasonableness of offers made by other parties and assist in drafting settlement terms and conditions.’34 In doing so, he or she should be careful of puffing and must never mislead anyone involved in the mediation. This has been recognised, for example, in the Guidelines for Lawyers in Mediations (2007), the Law Council of Australia stated that lawyers should ‘never mislead and be careful of puffing.’35 The Law Council’s Model Rules of Professional Conduct and Practice (2002) also requires all lawyers to behave in a certain professional way and has extended the definition of ‘court’ to include mediation and arbitration.36 There have been a number of instances whereby a legal representative has been found to have breached their professional obligations in mediation. In Legal Services Commissioner v Mullins37 the Legal Services Commissioner argued that the barrister involved in the mediation misled the insurer by failing to disclose information relating to the reduced life expectancy of the client and was therefore guilty of professional misconduct. The Rules adopted by the Bar Association of Queensland at that time provided that a barrister ‘must not knowingly make a false statement to the opponent in relation to the case (including its compromise).’38 Furthermore, a barrister ‘must take all necessary steps to correct any false statement unknowingly made by the barrister to the opponent as soon as possible after the barrister becomes aware that the statement was false.’39 The Legal Practice Tribunal held that the barrister was guilty of professional misconduct after continuing to rely on reports as to his client’s life expectancy, and ordered that a public reprimand take place and that the barrister pay a $20,000 fine.40

Law Council of Australia, above n 17, comment 6(a).

Law Council of Australia, above n 17, comment 6.1(b).

Ibid.

Law Council of Australia, above n 17, comment 6(a).

Ibid r 6.2.

Law Council of Australia, ‘Guidelines for Lawyers in Mediation’ (2007) <http://www.lawcouncil.asn.au/lawcouncil/images/LCA-PDF/a-z-docs/MediationGuidelines.pdf>.. 36

Law Council of Australia, above n 11.

[2006] LPT 012.

Bar Association of Queensland, Barristers’ Conduct Rules (2007) r 51.

[2006] LPT 012,2; Bar Association of Queensland, Barristers’ Conduct Rules (2007) r 52.

Legal Services Commissioner v Mullins [2006] LPT 012,33, 36; Legal Services Commission v Garrett [2009] WASAT 353.

THE ARBITRATOR & MEDIATOR JUNE 2017 The duty not to mislead and to correct errors or misapprehensions is a broad one and legal representatives should take care in mediation not to breach this duty. This is made clear in Legal Practitioners Complaints Committee v Fleming41 where it was noted that: ‘… the conduct of a practitioner might be regarded as misleading because an affirmative statement is made in circumstances which required some qualification. In this context, misleading and professional conduct might also be made out where a practitioner states a partial truth, or in the context of making statements of fact, omits relevant information. It might extend to statements which are literally true but where a qualification is called for, or where a statement initially true becomes false in the course of the negotiations. And in some circumstances the duty to not bring the legal profession into disrepute and fairness to an opponent may require that the practitioner draw attention to a particular matter, even where the opponent’s misapprehension is not induced by that practitioner.’42 Whilst difficult when tactics may be involved, a legal representative must therefore reconcile their client’s interests in achieving the best outcome possible with their professional obligations. Engaging in misleading conduct, or puffery in mediation will be career-damaging and carry with it significant detrimental consequences that a legal representative must be aware of before participating in mediation. Consequences may also extend to the faith in mediation as a tool for resolving disputes being lost at the hands of the involvement of legal representatives.

Tips and tricks for legal representatives in mediation There are a few key skills which not only assist legal representatives to comply with their roles and responsibilities in mediation but also enhance the effectiveness of the process and reduce the risk that their very presence and involvement may be counter-productive to achieving a successful outcome. In summary, legal representatives should: (a) improve communication through active listening; (b) use a combination of approaches where necessary; (c) be self-aware and identify strengths and weaknesses; and (d) use time effectively and appropriately.

Improving communication Often when a legal representative is involved in mediation they tend to predominately speak on behalf of their client. There are many ways a legal representative can improve their communication skills. As Sourdin observes, when we speak about ‘communication skills’ the focus is usually on the speaker and how they can improve their delivery.43 However, in negotiation and mediation one of the most important

[2006] WASAT 352.

Ibid [74]. In relation to ADR processes specifically, it was noted that: The public interest is served by practitioners encouraging an early settlement of their client’s dispute. Indeed, practitioners are under a duty to seek such a settlement … But, just as in litigation a practitioner may not use dishonest or unfair means or tactics to hinder his opponent in the conduct of his case (citing D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 [111]), so he ought not do so in other areas of practice. Arguably perhaps, for a number of reasons, the proscription against such conduct is more important in settlement negotiations. 43

Tania Sourdin, Alternative Dispute Resolution (Thomson Reuters Australia, 4th ed, 2012) 206.

THE ARBITRATOR & MEDIATOR JUNE 2017 communication skills relates to listening. ‘Active listening’ involves ‘focusing on the words, the pitch and tone, the body language and other non-verbal information e.g. sighs or pauses.’44 Although it may seem counter-intuitive, particularly for legal representatives, effectively listening to the other side and being aware of these key factors will enhance their own client’s interests because active listening lets the other party know that they’ve been heard and their perspective is being taken into account. In doing so, this encourages productive communication and discussion. As a mediator will outline, it is important that parties, including legal representatives, do not interrupt the other side when they are speaking so that their entire position and/or interests can be heard. Interrupting a speaker can increase feelings of ‘stress and anxiety, frustration, that a lengthier period of time is required to recount the store, disappointment, anger, discomfort, confusion’45 i.e. increase conflict. This can be particularly difficult for a legal representative because allowing someone to speak in an uninterrupted way (whilst actively listening), is somewhat contrary to the traditional way of dealing with conflict, whereby one may stand up and object to something said by the other party with the aim of limited the other party’s admissible evidence. However, as the Law Council of Australia has observed, a legal representative who adopts a ‘persuasive rather than adversarial or aggressive approach, and acknowledges the considerations of the other side, is more likely to contribute to a better result.’46

Use a combination of approaches where necessary The approach adopted by legal representatives to the words, strategies, allegations, offers and reactions in mediation is crucial in reducing conflict in mediation and moving towards a successful outcome. As discussed above, the approach should not become adversarial. That is not to say, however, that a legal representative must always adopt a peaceful, collaborate/ integrative approach (also known as joint problem solving where ‘instead of attacking each other, you jointly attack the problem’)47 as it may in some instances be necessary to adopt an approach that has the characteristics of a competitive approach (i.e. where one party seeks to ‘win’ and adopts a ‘position’).48 In this sense the ‘Game Theory’ that was developed by a biologist called John Maynard Smith who invented a game called Hawk and Dove has been noted.49 Essentially, ‘if dove meets dove, the outcome is generally positive’ (much like a collaborative approach): ‘If hawk meets dove, hawk wins but if hawk meets another hawk, hawks can be badly injured. If a dove is in a population of hawks, dove has a long term advantage because the hawks' constantly aggressive behaviour leads to frequent injury, while the dove, refusing to fight, escapes that risk. Importantly, if dove meets hawk over and over again, then the qualities of dove start to improve dove’s chances, particularly if dove can learn to change from dove to hawk when the occasion demands.’50

Ibid.

Ibid 207.

Law Council of Australia, above n 17, r 6.1.

William Ury, Getting Past No: Negotiating Your Way from Confrontation to Cooperation (Bantam Books, 1991) 5.

Ibid.

Charles B. Parselle, ‘No Way Out: Negotiation and the Prisoner’s Dilemma’ (2007) Mediate <http://www.mediate.com/articles/parselle19.cfm>. 50

Ibid; John Maynard Smith, Evolution and the theory of games (Cambridge University Press, 1982).

THE ARBITRATOR & MEDIATOR JUNE 2017 Adopting this theory, a legal representative can assist in effectively managing conflict in mediation, by becoming a ‘retaliator’ or ‘shape shifter’ i.e. a ‘collaborative dove’ that can become a ‘competitive hawk’ when necessary. A practical example is where a party is being aggressive and dominating the mediation without giving reasonable thought or attention to anything other than their position. A legal representative could adopt a peaceful, silent approach thus engaging in ‘active listening’ and simply wait it out until the other side has exhausted their position and the mediator engages them to speak or there is an appropriate opportunity to do so. However, if the other side is persistently missing the point or going on a tangent and does not follow the guidance of the mediator, a legal representative could assist by (a) discussing with the mediator the inappropriateness of the behaviour (dove) and/or, (b) paraphrasing what has been said and heard and proceeding to provide support for why the misunderstanding should be laid to rest (for example, through the use of some evidence), and communicate clearly that their client is here to resolve the dispute (hawk). Of course, care must be taken to ensure that the legal representative is assisting the mediator and the process when shape-shifting so they do not become adversarial. This skill will come from experience; awareness (not only of one’s own actions but also the actions of others) and appreciation for the results that can be achieved from doing so.

Use time effectively and appropriately In addition to the benefits of preparing for mediation (discussed above), a legal representative can have a better understanding of the time that might be spent on discussing and exploring issues and moving through the stages in mediation. When negotiating in mediation, often intuition does not provide legal representatives with a proper sense of timing for negotiation and they tend to ‘consider speedy negotiations to be the most effective approach and are keen to seal the deal quickly’.51 A legal representative should learn to ‘hold off, suspend, put off an answer instead of giving in at that moment, do not answer a question, caucus, or take time out to decide.’52 As Klug and Taylor observe, this allows the legal representative to ‘be co-operative; build trust with the other side; identify, define and clarify the issues; think before [they] act; let the negotiation mature; and achieve a higher probability of synchronicity with the other side.’53 Mediators and legal representatives should take care, however, not to unnecessarily extend the length of the mediation. Often mediations can go on for the entire day, with the only real movement or productiveness being at the very beginning and the very end of the mediation (arguably, because all parties have tired themselves out and want to leave). This is not an effective use of time or mediation and the author does not endorse the tactic of ‘waiting it out’ until the other side gives in. A legal representative should, in every form of communication whether through actively listening or speaking, ensure that time is being used efficiently. This will ultimately become a balancing act between taking enough time to consider the issues and advising one’s client, making statements or offers in relation to the key issues that will progress the mediation. If it is known that there a number of minor issues that the parties can easily agree, these should be dealt with as soon as possible; leaving the parties feeling like they’ve made progress and narrowing the issues in dispute. In comparison, an inefficient use

Michael Klug, Ann Taylor, ‘A Game of Opposites Negotiation is a Counter-Intuitive Discipline’ Clayton Utz <http://claytonutz.com/docs/Negotiation_Insights_100108.PDF>. 52

Ibid.

THE ARBITRATOR & MEDIATOR JUNE 2017 of time would involve getting caught up on the larger issues whilst the underlying minor issues remain unresolved.

Be self-aware and identify strengths and weaknesses A legal representative should have a sound understanding of their own style and pressure points in mediation. There are a number of tools available that can assist in understanding how one might negotiate and what improvements might be able to be made.54 These tools essentially ‘test reactions to conflict situations, personal assumptions that might be made in a negotiation/mediation and identify strengths and weaknesses.’55 If weaknesses are identified, a legal representative should aim to undertake training or further education in this area. This again highlights the importance of education in law schools about ADR theory and practice. As Savage suggests, ‘if lawyers understand ADR and are not afraid to use it appropriately, they can guide the development of ADR processes. In addition, a comprehensive legal education that incorporates ADR ensures that litigation will only be used for appropriate cases, instead of being the only path for every client in every case.’56

Conclusion The presence and involvement of a legal representative in mediation can be counter-productive to the effectiveness of mediation as a dispute resolution process. This is due to the inherent differences between the nature of mediation as a ‘peaceful’ process and that of the traditional process of litigation which is adversarial and ‘battle-like’. However, it is also clear that a legal representative can effectively be involved in mediation if they: (a) have sound knowledge of the process and purpose of mediation and continue to educate themselves; (b) are well aware of their role and responsibilities in mediation and risks involved with non-compliance; and (c) continue to develop the skills discussed in this paper.57 In the author’s view, mediation is a more effective option for resolving disputes than the traditional form of dealing with conflict. It is in the best interests of the legal profession that legal representatives use the process in an effective and productive way so that they do not contribute to the loss of faith in mediation as a method of resolving disputes. To assist legal representatives in mediation, a summary of the key roles and responsibilities as well as the key tips and tricks outlined in this paper appear in Annexure A.

See, eg, Sourdin, above n 39,49-51.

Ibid.

Cynthia Savage, ‘Future Lawyers: Adversaries or Problem Solvers? Two Law School Programs in Alternative Dispute Resolution’ (1989) 7(1) Mediation Quarterly 99, 101. 57

Law Society of New South Wales, above n 16, 5.

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Annexure A Checklist for legal representatives in mediation Checklist

Yes

Do I have a sound knowledge of the purpose and process involved so that I feel comfortable advising my client on the suitability of mediation and participating in the mediation?

Proceed to next question

Educate yourself and then reevaluate.

Have I effectively prepared for mediation including the following: (a) Have I discussed and explained the mediation process and role of the neutral mediator? (b) Have I assisted the client in identifying their needs, interests and issues? (c) Have I identified any risks, tactics or objections likely to arise in mediation? (d) Have I encouraged my client to speak during the mediation? (e) Have I assisted my client in generating options that they can live with if the dispute were to be resolved? (f) Have I had a pre-mediation conference with the mediator?

Proceed to next question

You are not ready to effectively participate in mediation. Attend to each step and then re-evaluate.

Am I assisting the mediator, the client, and other parties in a non-adversarial manner?

Proceed

Re-evaluate your participation

Am I giving advice and helping to formulate offers without misleading anyone involved?

Proceed

Re-evaluate your participation and consider the consequences you may be facing

Am I improving my communication through active listening?

Proceed

Re-evaluate your participation and consider the benefits of active listening in mediation

Am I using a combination of approaches where necessary?

Proceed

Re-evaluate your participation and consider the benefits of the shape-shifting hawk and dove approach

Am I using time effectively and appropriately?

Proceed

Re-evaluate your participation and consider your legal and ethical obligations

Pre-mediation

During mediation

THE ARBITRATOR & MEDIATOR JUNE 2017 Post-mediation Have I identified my strengths and weaknesses when participating in mediation?

Educate yourself on how to improve your weaknesses and proceed to the next mediation

Identify and evaluate your strengths and weaknesses before proceeding to the next mediation

Have I drafted the settlement terms so that they reflect the agreement reached and do not mislead anyone?

Proceed to the next mediation

Re-draft and consider your professional and ethical obligations as well as the consequences involved

THE ARBITRATOR & MEDIATOR JUNE 2017

Cross border construction dispute mediation Chris Lenz58

Abstract Cross-border mediation involves diverse cultures. Mediators are not trained about their characteristics. This research paper considers an hypothetical practical cross-border mediation involving participants from Germany, Australia and the United Kingdom. Firstly, consideration is given to the prominent issue regarding some legal issues associated with crossborder mediation. Secondly, the more important consideration of cultural characteristics of the different participants in the mediation, including the mediator are considered in some detail. By using the hypothetical scenario, the characteristics of, and likely responses of the various participants are put forward to demonstrate how a mediator may take these into account in successfully mediating.

Introduction This research paper embodies a cultural theme throughout which is considered important for mediation, about which mediators are not given much training. An hypothetical set of facts are used to provide context for an analysis of some transnational59 legal issues surrounding mediation. It then considers some of the cross-cultural issues in mediation. The reason for the focus on culture in this paper is that it drives human behaviour at an individual, group and national level, and it is not an aspect covered in mediation training in Australia. Given that mediation sets out to resolve conflict between two or more parties or groups, an analysis of this aspect may inform mediators to study this vitally important topic. The hypotheticals are divided into two scenarios. (a) First scenario - the German lawyers are analysing the law surrounding cross border mediation in Germany strategically for a mediation agreement; (b) Second scenario - a conflict has arisen between the parties, and the appointed mediator should consider cross cultural issues in her approach to the mediation.

Chris Lenz BSc(Eng) LLB (Hons) MBA LLM.

Nadja Alexander, International and Comparative Mediation: Legal Perspectives, Global Trends in Dispute Resolution (Wolters Kluwer, 2009)21, 22.

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Background facts First Scenario A Mittelstand German tunnel boring machine company (Bohrer) from Düsseldorf, is tendering for work with an Australian construction company (Digger), to supply and operate 2 tunnel boring machines (TBM) for a proposed new cross-rail tunnel in Brisbane. In addition, Bohrer expects to carry out further projects in Australia, because several other tunnels are planned during the next 30 years. Whilst it has an enviable reputation worldwide, it needs to develop relationships with the contractors who are likely to carry out the construction of these tunnels. Digger is well established in Australia and started in Queensland by 2 entrepreneurial Australian engineers. However, it has been recently taken over by a large British construction company (Imperial) in a hostile takeover in which there were court proceedings. This angered the founders, Bruce and Dave, who grew the company from scratch. They have agreed to build this cross-rail tunnel, as their last job before they retire, and they must report back to Imperial’s board in London. Digger’s solicitors advise that the head contract with the Queensland Government only requires the subcontract to be made in Queensland. Digger intends remaining in the Australian marketplace, and needs TBM’s for some of the large future projects. Bohrer had problems with two previous tunnel projects in the USA in which it never recovered any money. Its witnesses had to travel from all over the world to give evidence in the USA, which cost Bohrer dearly in lost productivity and personnel who left the company. Bohrer’s senior personnel for this project will be those who had worked in the USA. Bohrer also recently had an unpleasant experience with mediation in Germany where a Judge conciliated a dispute it had with a Munich supplier. It felt that it had been pushed around by the judge (Güterichter) who was a Bavarian, and the result angered the family shareholders. To not repeat those bitter experiences, Bohrer wants a mediation agreement in the contract, to reduce business disruption and maintain good relations with Digger. They have asked their German lawyers to consider whether mediation could be used, and still comply with German law. Second Scenario During the construction of the first tunnel under the Brisbane River, it drilled into very soft and saturated marine clays which had a significant adverse impact upon the productivity of the TBM machines, and markedly increased costs. When Bohrer lodged a claim for its increased costs, Digger disputed the claim which triggered mediation. The appointed mediator, Elizabeth, who is an Australian professionally qualified engineer and practicing lawyer and NMAS accredited mediator needs to consider: (a) the influence of any cultural differences on how the parties and she herself will conduct themselves in the forthcoming mediation; and (b) the attendance of Imperial as the new owner of Digger in the mediation.

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Research issues First Scenario There are chapters in Hopt60 providing an up-to-date comparative Law perspective about the principles and regulation of mediation in Germany (Tochtermann) and in Australia (Magnus). However, they did not deal with some of the underlying German cultural issues, which Alexander grappled with in 1999. Mediation definition Tochtermann says the German mediation definition was adopted from the USA, now enacted in section 1(1) of the Mediationgesetz as a, ‘Confidential and structured procedure, in which parties voluntarily and on their own responsibility try to achieve an amicable resolution of their conflict with the support of one or more mediators.’ Magnus61 explains there is no statutory definition of mediation in Australia. Boulle62 had difficulty defining mediation. However, Australia has a voluntary National Mediator Accreditation System (NMAS) and the NMAS Standards 2.163 state: ‘A mediation process is a process in which the participants, with the support of a mediator, identify issues, develop options, consider alternatives and make decisions about future actions and outcomes. The mediator acts as a third party to assist the participants to reach their decision.’ Whilst this NMAS definition does not describe any particular metamodel64, Practice Standard provides: ‘The mediator has no advisory or determinative role in regard to the content of the matter being mediated or its outcome.’ 65 However, ‘If a mediator, upon request, uses a ‘blended process’ model, such as evaluative mediation or conciliation, this process must be the subject of clear consent normally through a mediation or similar agreement.’66 Both countries therefore, have a similar concept and definition of mediation.

Klaus J Hopt and Felix Steffek, Mediation: Principles and Regulation in Comparative Perspective (Oxford Scholarship Online, 2013). 61

Ulrich Magnus, Mediation in Australia: Development and Oroblems, Mediation: Principles and Regulation in Comparative Perspective (Oxford Scholarship Online, 2013). 62

Lawrence Boulle, Mediation: Principles, Process, Practice (LexisNexis, 3rd ed, 2011) 13-30.

Mediator Standards Board, National Mediator Accreditation Standards: Practice Standards (March 2012) <http://www.msb.org.au/sites/default/files/documents/Practice%20Standards.pdf> Practice Standard No 2. 64

Nadja Alexander, 'The Mediation Metamodel: Understanding Practice' (2008) 26(1) Conflict Resolution Quarterly 97.

Mediator Standards Board, above n 6, Practice Standard No 10.

Ibid 10(5).

THE ARBITRATOR & MEDIATOR JUNE 2017 Germany Alexander (1999) developed an hypotheses of six factors preventing the adoption of mediation in Germany67, which she contrasted with Australia. These included: (a) the German legal tradition which focused on people’s rights, including the right to the justice system68 (Hypothesis 1); (b) the efficiency of the German justice system69 (Hypothesis 6); and (c) the legal profession’s tradition considering what was permissible and not permissible.70 The stereotype of the German abiding by die Regeln, springs to mind. This analysis suggested several practical and cultural differences between mediation in Australia and Germany. Mediation location and agreement Bohrer’s management has already decided that any mediation should be conducted in Brisbane, because that is where the project is situated, and the subcontract must be made in Queensland. Whilst the choice of law issue is open, Bohrer does not want to complicate the negotiations with this issue. Its lawyers therefore need to consider the legal position of cross-border mediation in Germany, to ensure that the Brisbane mediation complies with German law. This raises the issue of Bohrer’s lawyers possibly having a bias in favour of the status quo relying on Germany’s Justice System, because they are part of a professional group, and every group creates culture.71 Gert J Hofstede says, ‘People have cognitive biases about themselves and about the groups to which they belong.72‘ Furthermore, they may have a cultural bias, because the Mediationgesetz 2008/52/EC73 is relatively new. Germany’s Hofstede’s Uncertainty Avoidance of 6574 (which Hofstede says is at the high end), compared to Australia’s 51, suggests that culturally the lawyers (who anecdotally are a risk-averse profession in any event), may be anxious about the uncertainty associated with mediation in another country. However, with private law mediation in Germany in its infancy and therefore also uncertain, the lawyers (influenced

Nadja Alexander, Wirtschaftsmediation in Theorie und Praxis, Reihe II: Rechtwissenschaft Series II (Peter Lang, 1999) 7.

Ibid 8.

Ibid 11.

Ibid 9.

Gert Jan Hofstede, 'Culture's causes: the next challenge' (2015) 22(4) Cross Cultural Management 545, 549.

Ibid 547.

Peter Tochtermann, Mediation in Germany: The German Mediation Act-Alternative Dispute Resolution at the Crossroads, Mediation: Principles and Regulation in Comparative Perspective (Oxford Scholarship Online, 2013). 74

Geert Hofstede, Geert Hofstede: Research <https://geert-hofstede.com/research.html> 2.

THE ARBITRATOR & MEDIATOR JUNE 2017 by Kant, Hegel and Fichte75) may avoid any inductive approaches, and advise their clients against mediation anywhere. This recommendation is unlikely to be accepted by Bohrer, and they are obliged to advise Bohrer about the benefits of ADR76 citing sections 1(3) of the BORA77. However, Tochtermann said that it was doubtful that this would alter the attitude of lawyers to mediation78. This is possibly another example of culture raising its head again. The lawyers will be at any mediation. It would be useful for them to use Alexander’s Content of Mediation Laws79 framework80 because it provides an objective mechanism to view a regulatory mix under various categories, which may reduce the influence of small-group bias. Whilst the framework is shown below, it has not been overly populated by analysis, because only certain aspects need consideration. The essential issue is whether a mediation agreement for cross-border mediation contravenes German law, and given that the EU Directive expressly deals with cross border mediation, which the Mediationgestez enacted, there is no contravention. Tochtermann says that the parties are free to select any mediator, and Elizabeth is obliged by section 3(5) of the Mediationgestez, if requested, to inform about her professional background, training and expertise. Germany A Marketplace / private contract 1.Triggering

B Institutional / industry regulation

C Court regulation

D Case law / General legal principles

E Legislation

In agreement – If not individually negotiated – subject to sections 305 of the Burgerliches Gesetzbuch – unfavourable contract terms.81

Ibid.

Tochtermann, above n 16, 534.

Berufsordnung fur Rechtsanwalte.

Ibid, 534.

Nadja Alexander, Harmonisation and Diversity in the Private International Law of Mediation, Mediation: Principles and Regulation in Comparative Perspective (Oxford Scholarship Online, 2013) 21. 80

Nadja Alexander, 'Mediation and the Art of Regulation' (2008) 8(1) QUT Law & Justice Journal 1.

Tochtermann, above n 16, 538.

THE ARBITRATOR & MEDIATOR JUNE 2017 Not binding and Elizabeth cannot make a decision.82

2. Process

Specifically avoids a code for the mediation procedure.83 Elizabeth may caucus if they consent.84 However, she is not a GĂźterichter, so may not be able to evaluate, but it is unclear.85

3. Accreditation and practice standards

4. Rights and obligations

Mediationgese tz sections 91386 provides requirements, and Elizabeth would fit within these with her qualifications. s4 Mediationgese tz Confidentiality for mediator and parties

In agreement

The Mediation Regulation Mix: Nadja Alexander (Real conflict coaching) 2015

Ibid, citing P. Tochtermann, Die UnabhĂ¤ngigkeit und Unparteilichkeit des Mediators, 126.

European e-Justice Portal, European e-Justice Portal: Germany, 2.

Tochtermann, above n 16, 553.

Ibid.

(Zivilrechts-Mediations-Gesetz - ZivMediatG) StF: BGBl. I Nr. 29/2003 (NR: GP XXII RV 24 AB 47 S. 12. BR: AB 6780 S. 696.)

THE ARBITRATOR & MEDIATOR JUNE 2017 The upshot of this analysis is that from the German law perspective: (a) cross border mediation is allowed; (b) the mediation agreement needs to be specifically negotiated, which would happen in any event; (c) Elizabeth would need to satisfy the sections 9-13 Mediationgesetz mediator qualification requirements; (d) Elizabeth should be asked to provide her qualifications and experience, to satisfy the lawyers; (e) Elizabeth and the parties are bound by confidentiality; and (f) Elizabeth can use her own mediation model, but it is not clear whether she can be evaluative. The author did not analyse whether the advent of the EU Directive87 and the Mediationgesetz 2008/52/EC88 had positively responded to Alexander’s concerns. This could have demonstrated that a notoriously difficult cultural change89 may have occurred at the shallow organisational level90 of the lawyers and the legal system over 17 years. Further discussion about culture will take place, when Elizabeth considers the forthcoming mediation. Mediator’s conduct and model Whilst this will be considered below, NMAS Standard 10 requires Elizabeth to seek consent of the parties if she decides that being evaluative, at least at some stage, is preferable. Lenz has postulated in construction disputes that this is not without risk91 depending on the timing of that decision to become evaluative. Second scenario - Cultural differences The analysis will focus on culture, which influences communication92, and communication in mediation is its lifeblood. Moore93 identifies that communication plays a vital role in conflict, and may be a cause, contributing factor, or both to its escalation, de-escalation, or resolution (author’s underlining). Elizabeth needs to be aware of the cultural differences between Germans, Australians, British, and small groups, as well as herself, to plan and implement a successful mediation process. The reason for

Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters. 88

Tochtermann, above n 16.

Hofstede, above n 17, 548.

Ibid 556.

Chris Lenz, 'Is evaluative mediation the preferred model for construction law disputes?' (2015) 31 Building and Construction Law Journal 134. 92

Carley H Dodd, Dynamics of Intercultural Communication (McGraw Hill, 5th ed, 1998).

Christopher W Moore, The Mediation Process: Practical Strategies for Resolving Conflict (Jossey Bass, 4th ed, 2014) 143.

THE ARBITRATOR & MEDIATOR JUNE 2017 considering the British aspect is that Bruce and Dave have endured a messy takeover by Imperial, such that their short-term cultural Australian orientation, is likely to be exacerbated by their painful experience. Elizabeth is likely to be considering the facilitative model because of her training, and the NMAS requirements. Barkai94 used the definition of culture as ‘the total accumulation of an identifiable group’s beliefs, norms, activities, institutions and communications patterns.’ Dodd explained culture’s influence on communication, which is so important in mediation, and it is useful for Elizabeth to appreciate that culture: (a) teaches significant rules, rituals and procedures; (b) reinforces values; and (c) teaches relationship with others – roles and expectations.95 Cohen, a negotiator, advised that a one sentence definition of culture could only mislead, and he suggested that it had three key aspects: (a) a quality not of individuals, but of a society of which individuals are a part; (b) acquired; and (c) unique.96 Barkai97 and Lee98 both considered the issue of culture in the mediation process. Barkai was considering the issue from the mediator’s point of view, whereas Lee was considering it from the perspective of the appropriate mediation framework. Both are important for Elizabeth. Both authors referred to Hofstede’s Cultural Dimensions, so they are important to use. Hofstede’s on-line charts were also very easy to use, but the anomaly about Germany long-term orientation (LTO) discovered below, means that caution must be applied in their use. Hofstede’s research has been followed up in their Software of the Mind (2005),99 which goes beyond countries to organisations as well. In this text, values are described100 to include: (a) evil v good;

J Barkai, 'What's a Cross Cultural Mediator to do? A low-context solution for a high–context problem' (2008) 10 Cardozo Journal of Conflict Resolution 43, 45. 95

Dodd, above n 35.

Raymond Cohen, Negotiating across cultures (United States Institute of Peace Press, 2004) 11.

Barkai, above n 37.

J Lee, 'Culture and its importance in Mediation' in Danny McFadden and George Lim (ed), Mediation in Singapore: A Practical Guide (Sweet & Maxwell, 2015). 99

Geert Hofstede and Gert Jan Hofstede, Cultures and Organisations: Software of the Mind (McGraw-Hill, 2nd ed, 2005).

100

Ibid 8.

THE ARBITRATOR & MEDIATOR JUNE 2017 (b) forbidden v permitted; (c) decent v indecent; (d) moral v immoral; (e) unnatural v natural; (f) abnormal v normal; (g) paradoxical v logical; and (h) irrational v rational. Deep culture, acquired in infancy, cannot be changed since it resides in unconscious shared values,101 but it is appreciated that national ‘deep culture’ is not the only driver of parties’ behaviour. However, the core of culture is formed by values, which are acquired early in life, after which a person absorbs symbols, recognises heroes and adopts rituals (all known as practices), which surround those values.102 The later-acquired aspects of culture can be changed.103 Barkai Barkai referred to Hofstede’s updated text and relied on Edward Hall, regarding high and low – context communication104 for the mediator’s mediation framework. Hall’s book considers American culture extensively, so a comparison is made between Hofstede’s Australian and USA culture, to see if one can directly apply Hall’s culture theories to Australia. As can be seen below, Australia and America’s characteristics are closely aligned, with only slight differences. Accordingly, it can be expected that Australia would also be considered a low-context communication culture. Barkai stated that high and low-context communication differences were probably the single most important cultural difference in many cross-cultural mediations.105 He explained that in low-context cultures, people communicate directly and explicitly and rely on verbal communication, as opposed to non-verbal communication to express themselves (high context).106 He referred to Cohen who explained the low context communication style of the USA as, ‘A can-do, problem-solving spirit, assuming give-and-take, and influenced by Anglo-Saxon legal habits’.107 Cohen108 also suggested that these were characteristics of a universal paradigm of rational negotiations.

101

Hofstede, above n 17, 548.

102

Hofstede, above n 17, 7.

103

Hofstede, above n 17, 556.

104

Edward T Hall, Beyond culture (Anchor Books, 1977).

105

Barkai, above n 37, 56.

106

Ibid 56.

107

Ibid 57.

108

Cohen, above n 38, 216.

THE ARBITRATOR & MEDIATOR JUNE 2017 Fortunately for Elizabeth, none of the parties fall within a collectivist high-context culture, so negotiations are expected to be blunt and direct, i.e. low-context. Elizabeth, as an Australian, engineer and lawyer is also likely to be a low-context communicator. Fortunately for her, all parties are also likely to be low context, being from the Western world. However, there are likely to be high-context communications taking place within the mediation between Bruce and Dave, Bohrer’s personnel and Imperial’s Board members, which will not be shared with the other groups, because they are ‘outsiders’109 relative to one another. Some of these high-context communications may be difficult for her to follow. However, Elizabeth is in an unusual position of being both and engineer and lawyer, so she may communicate with the parties’ lawyers and engineers in a high context fashion, because she could be considered by the other engineers and lawyers (separately) to be a professional insider. High-context communication may assist the process in certain respects, but may alienate those not within that insider group, during the mediation, if used at the wrong time in front of another outsider group. She should therefore confine high-context communication to meeting privately with the parties, or with their respective engineers jointly, or lawyers jointly, to explore settlement options. Hofstede’s Dimensions of German and Australian culture110 are not at opposite ends of the continuum. However, Barkai’s Hofstede’s chart on page 79111 for the long-term orientation, showed Germany with 31, whilst in the author’s research, it had increased to 83! This is considered an anomaly, because deep culture (national culture) only changes over generations.112 The comparison between Germany and the UK, as well as Australia and the UK, and Australia and the USA are also displayed below. Elizabeth may use the national cultures when initially considering her mediation approach, particularly regarding intake, but it should not be the only or prevailing culture to consider, but rather the starting point to her planning and conducting the mediation.

109

Barkai, above n 37, 57.

110

Hofstede, above n 17.

111

Hofstede, above n 17.

112

Hofstede, above n 17, 556.

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Hofstede’s comparison: https://geert-hofstede.com/australia.html

Hofstede’s comparison: https://geert-hofstede.com/australia.html It is useful to explain Hofstede’s descriptions of each of the first five characteristics, and those of Barkai, because Barkai uses it in the context of mediation, which is very useful for this research. Hofstede’s updated text deals with intercultural cooperation, rather than mediation: (a) power-distance: ‘The extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally’113 Barkai called it respect for the leader or elder;114 (b) individualism: ‘The ties between individuals are loose: everyone is expected to look after himself or herself and his or her immediate family’.115 Barkai called it respect my freedom;116

113

Hofstede, above n 17, 46.

114

Barkai, above n 37, 63.

115

Hofstede, above n 17, 76.

116

Barkai, above n 37, 67.

THE ARBITRATOR & MEDIATOR JUNE 2017 (c) masculinity: ‘Men are supposed to be assertive, tough, and focused on material success’.117 Barkai called it win at any costs;118 (d) uncertainty avoidance: ‘The extent to which the members of a culture feel threatened by ambiguous or unknown situations’.119 Barkai called it respect the law;120 (e) Long term orientation – ‘The fostering of virtues oriented towards future rewards – in particular, perseverance and thrift’.121 Barkai called it sacrifice for the future.122 Power-distance Australia, Germany and the UK, have power distance scores of 36, 35 and 35 respectively. All countries therefore have a low respect for a leader. Elizabeth, if she is a self-perceived high status individual, may need to adjust her mediation strategy. Gert Jan Hofstede referred to Kemper’s Status-Power game which captures the dynamics of everyday social life123. Kemper explains that ‘...everyone plays the status-conferral game, and the danger occurs when the total status claimed by people sooner or later exceeds the status freely given to them.’ He added that, ‘We intend to correct the others to confer upon us the status we think we deserve.’ To do so, ‘this requires a power-move.’ 124 Elizabeth should not make any power moves to claim status, which could be a temptation in a heated cross-cultural conflict to assert control over the process; but rather wait for it to be conferred on her, as she patiently reframes the respective parties expected aggressive opening statements (see Masculinity below) and explores underlying interests. Individualism Australia, Germany and the UK scores of 90, 67 and 89 demonstrate complete congruence between the Anglo cultures, with a Germany significantly less. However, Hofstede125 classifies the Anglo’s as highly individualistic and self-reliant, and Germany as truly individualistic. Germany may have perhaps a tinge of collectivism. However, it is unlikely that these characteristics are likely to inhibit any exploration toward settlement in mediation, because all are self-reliant.

117

Hofstede, above n 17, 120.

118

Barkai, above n 37, 72.

119

Hofstede, above n 17, 167.

120

Barkai, above n 17, 74.

121

Hofstede, above n 17, 210.

122

Barkai, above n 37, 77.

123

Hofstede, above n 17, 548, citing Theodore Kemper, Status, Power and Ritual Interaction; A Relational Reading of Durkeim, Goffman and Collins, Ashgate, Farnham (Routledge, 2011). 124

Ibid 551.

125

Hofstede, above n 17.

THE ARBITRATOR & MEDIATOR JUNE 2017 Masculinity Australia, Germany and Britain’s scores of 61, 66 and 66 respectively are not significantly different. The lower figure for Australia is somewhat surprising, and Elizabeth may find that the Imperial and Bohrer attendees will be the most aggressive negotiators overall. From the point of view of mediation, this information is likely to be useful to her, because she will be dealing with masculinity competitors, some perhaps more so. However, she cannot consider these factors in isolation. Bruce and Dave’s recent painful experience, and their common ‘brotherhood’ in being cofounders (insiders), could well prevail over their national culture score to render them the most competitive. Given that all appear to be highly competitive, Elizabeth may have some initial resistance with the facilitative model, which focuses on the underlying interests of the parties, because of the likely posturing at the intake stage. Nevertheless, she should persist with the model, to find out the underlying interests of the parties, and earn the status necessary (see status above) to influence the parties to reach a negotiated settlement. Long-term orientation Australia, Germany and the UK have scores of 21, 83 and 51. What may emerge with careful exploration is that Bruce and Dave, as short-term cultural Australians, are likely to have an even more short-term view of the dispute, because they are about to retire. Even if a final payout or a bonus to them from Imperial, may be contingent on a successful outcome for Digger in the mediation, i.e. a low payout to Bohrer; it may be that she will need to focus more on Imperial about their LTO in the future relationship with Bohrer. Germany and the UK’s LTO are both above 50. Leaving aside the anomaly about Germany’s strangely high score of 83 compared to previous publications of 31; in her discussions and probing, she should be trying to establish the common ground that not only do their respective national cultures have a long-term view, but their organisational cultures may well be aligned long-term as well. This could allow a focus on future interests, rather than the immediate conflict, to negotiate a satisfactory outcome. If it is the case, that the latest German score of 83 is not correct, indicating that nationally Bohrer has a score of 31, then she would need to establish whether Bohrer indeed has a long-term view of future work in Australia. If it does not, then it may be that positional bargaining may emerge because Bohrer and Bruce and Dave’s short-term interests would be in direct conflict. In this event, it may be necessary for her to mediate the conflict between Imperial and Bruce & Dave separately, to achieve an agreement between them that is not contingent upon the outcome of the success of Bohrer’s claim. Uncertainty avoidance Australia, Germany and the UK have scores of 51, 65 and 35. Uncertainty avoidance has been touched on earlier in relation to the German lawyers. Bohrer should be carefully taken through the mediation process by Elizabeth, possible at an early intake private session, so that they can fully understand how the process works, and what sort of things may be expected when the parties have joint sessions. Interestingly, Australia has a score quite a lot higher than the UK, so time should also be spent by Elizabeth explaining the process to Bruce and Dave, so that they are not confronted with strange surprises during the mediation.

THE ARBITRATOR & MEDIATOR JUNE 2017 Lee Lee suggested that culture was so deeply ingrained within us by the process of socialisation that we often do not realise how we are affected by it,126 and we simply swim through it like a fish in water. His comment that culture was more than rules, etiquette and custom, which were the outward manifestation of the iceberg beneath,127 is particularly useful for mediators. He recognised that thinking about culture in terms of frameworks was more useful, and he referred to Hofstedeâ&#x20AC;&#x2122;s cultural dimensions and how they may impact upon mediation. He was considering culture from an Asian perspective and he only looked at Power-distance and Individualism/Collectivism on how people choose to communicate and deal with face concerns.128 He considered the facilitative interest based model of mediation, and made a distinction between the functional and operational paradigms of the model. He explained that by separating the two: (a) the functional paradigm of the interest-based model of conflict resolution; and (b) the operational paradigm, AND then instead of considering the: (a) behaviours of the primacy of the individual, the individualâ&#x20AC;&#x2122;s priority of interests and direct and open communication (the individualistic, low-context, western behaviours); but rather (b) the behaviours of the primacy of the social hierarchy, proper conduct and high-context communication to preserve harmony and relationships and saving face (the collectivist, highcontext behaviours), THEN the usefulness of the functional paradigm interest based model could be preserved. The upshot of this for Elizabeth, is that whatever cultural behaviours she may encounter in the mediation, providing she separates the two paradigms, and allows the behaviours of the parties to flow whichever way they may, she may still sail the interest-based ship between the cultural icebergs, and assist the parties to reach a resolution to their dispute.

126

Lee, above n 41, 1.

127

Ibid 4.

128

Ibid 7.

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Family law property arbitration Matthew Shepherd129

The family law jurisdiction was an early adopter of mediation in Australia unlike the more cautious approach taken to mediation in commercial disputes. Conversely, arbitration of family law property settlement cases, whilst legislatively possible since 1991, has not been used until recently - unlike commercial disputes which have been frequently arbitrated. This article compares the histories of commercial arbitration and family law arbitration in order to: (a) understand the different uptakes of arbitration in the two different jurisdictions; (b) consider how - with the 2016 amendments to the Family Law Act, Rules and Regulations - family law property arbitration can become, like mediation, one of the standard family law dispute resolution processes; and (c) suggest how family lawyers can discuss arbitration with their clients to determine when arbitration may - and may not - be appropriate for their disputes.

Early history of family law property arbitration The Family Law Act 1975 (Cth) (Family Law Act) was amended in 1991 to allow for arbitration of family law property settlements either voluntarily with party consent or mandated by court order. A party dissatisfied with the arbitral award was entitled to a review via a hearing de novo. Enforcement of the award was subject to judicial review. The 1991 amendments also provided for mediation of property settlements which quickly became a popular process for separating spouses to reach agreements about financial matters and also about parenting arrangements. Arbitration however was not adopted by spouses or family lawyers. One practical difficulty was the lack of a statutory regime for accrediting arbitrators. Another difficulty was the failure of the Family Court to create Rules providing a practical framework for the conduct of arbitrations. The lack of certainty and finality arising from the right of review merely because a party was dissatisfied with the outcome was also a disincentive to arbitration. In 1995 the High Court held that for a party to be compelled to engage in non-consensual arbitration they must have a right to a hearing de novo, and enforcement of an arbitral award must be a matter of judicial discretion.130 Although the 1991 amendments already provided these rights, the Family Law Act was again amended in 2000 to make family law property arbitration purely consensual. The amendments, which were arguably not necessary, did not cause family law arbitration to become any more popular. In 2016, further legislative changes coincided with a crisis in the caseloads of the Family Law Courts to potentially establish arbitration as a standard dispute resolution option for separating spouses. The arbitration sections of the Family Law Act were revamped, and new Rules and Regulations introduced to regulate the registration of arbitrators and the conduct of arbitrations. In the same year, standard court waiting times exceeded three years from first filing to delivery of judgment.

129

Matthew Shepherd LLB, MA, FDRP, MDR, Nationally Accredited Mediator.

130

Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245.

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Commercial arbitration In contrast to family law arbitration, arbitration of commercial disputes has a long and active history. The Australian Constitution recognised arbitration and gave the Commonwealth Parliament power to legislate for arbitration of industrial disputes. The Commonwealth Conciliation and Arbitration Act 1904 was the first in a series of State and Commonwealth Acts establishing the framework of arbitration. The International Arbitration Act 1974 (Cth) (International Arbitration Act) implemented the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards so that an arbitral award issued under the laws of 142 signatory countries is enforceable in any of the signatory countries. All Australian states passed uniform Commercial Arbitration Acts in 1984 (Commercial Arbitration Acts) based on the Arbitration Act 1979 (UK). These have subsequently been updated to reflect the Model Law on International Commercial Arbitration developed by the United Nations Commission on International Trade Law (UNCITRAL).131 In 2013, the High Court of Australia upheld the constitutional validity of the International Arbitration Act operating under UNCITRAL. 132 There are a number of reasons why private arbitration has proved popular to commercial disputants. Domestic Australian commercial disputes can involve multiple causes of action and traverse different state and territory laws making private arbitration an attractive way to overcome jurisdictional complexity. Commercial contracts regularly contain dispute resolution clauses imposing obligations to engage in dispute resolution processes including arbitration if disputes arise in carrying out the contract. In Australia, ‘arbitration is most common in the construction industry, in business disputes generally, and in shipping and commodities disputes.’133 Similarly, international commercial disputes have proved especially amenable to arbitration partially due to the complexities of competing jurisdictions. ‘Arbitration is the most common form of transnational commercial dispute resolution.’134 In addition to parties choosing to arbitrate, or being obliged to arbitrate due to contractual alternative dispute resolution (ADR) clauses, courts were quick to promote arbitration of cases. As early as 1987, thousands of cases had been referred to arbitration by the NSW District and Local Courts.135 In contrast to the Family Law Act, which provides both the substantive law and the arbitral process, commercial arbitration legislation prescribes the process of binding and enforceable arbitration but not the legal remedies which come from a wide range of statutory, equity and common law sources. A significant jurisprudence has developed clarifying the obligations of parties to engage in commercial arbitration, the duties of commercial arbitrators, and the conduct of arbitration. In family law, given arbitration is purely voluntary and the arbitral process is regulated by the same legislation that provides the law and legal remedies to be applied, the comparable jurisprudence should be much simpler. The Commercial Arbitration Acts provide only limited recourse against an arbitral award. This has not dissuaded parties, and their lawyers, from arbitrating and is an attraction to parties wanting finality and

131

For example, in NSW, Commercial Arbitration Act (2010) (NSW).

132

TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 87 ALJR 410.

133

S Colbran, P Spencer, R Douglas, S Jackson, M O’Brien and T Penovic, Civil Procedure: Commentary and Materials (Lexis Nexis, 6th ed) 121. 134

135

Ibid 84. F Herron, ‘Arbitrate or Litigate’ (1987) 25 Law Society Journal 52, 53.

THE ARBITRATOR & MEDIATOR JUNE 2017 certainty. Section 34 of the Commercial Arbitration Act 2010 (NSW) (NSW Commercial Arbitration Act) Act allows a court to set aside an arbitral award only if: (a) a party to the arbitration agreement was under some incapacity, or the arbitration agreement is not valid; (b) a party was not given proper notice of the appointment of the arbitral tribunal or the arbitral proceedings, or were unable to present their case; (c) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration; (d) the arbitral tribunal or procedure was not in accordance with the arbitration agreement of the parties (unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate); or (e) the subject-matter of the dispute is not capable of settlement by arbitration under the law of New South Wales (NSW), or the award is in conflict with NSW public policy. Section 34A provides that parties can appeal with leave of the Court on questions of law only. Leave is only given if the Court is satisfied of all of the following: (a) that the determination of the question of law will substantially affect the rights of one or more of the parties; (b) that the question of law is one which the arbitral tribunal was asked to determine; (c) that, on the basis of the findings of fact in the award, the decision of the tribunal on the question is obviously wrong, or the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and (d) that, it is just and proper in all the circumstances for the Court to determine the question. The attractions of arbitration to commercial disputants are equally attractive to separating spouses. They include: (a) costs; (b) speed; (c) efficiency - the arbitrator has the permission of the parties to closely manage the arbitration process to maintain momentum. This is contrast to case management of court cases which only happens at sporadic mentions and directions hearing, and is handled by rotating judicial officers; (d) privacy and confidentiality - this applies even more so to family law given the personal nature of family law proceedings; (e) the complexities of law and jurisdiction in commercial disputes are greater than in family law. The potentially simpler jurisprudence of family arbitration suggest a greater consistency of procedure and outcome; (f) businesses need to resolve disputes and avoid opportunities foregone due to delay and distraction of court proceedings - especially if the parties need to continue in business with each other. Separating spouses similarly often share the need to continue a relationship with each other if there are children. Court proceedings do not support good relationships.

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Family law property arbitration following the 2016 legislation The Family Law Act now provides for two types of arbitration: (a) where proceedings have already been commenced, the court can pursuant to section 13E of the Family Law Act refer parties to arbitration, but only with party consent, in respect of property division and spousal maintenance between married and de facto spouses. The court cannot refer parties to arbitration over disputes about financial agreements (colloquially known as pre-nuptial agreements); and (b) without the commencement of any proceedings, separating spouses can agree to arbitrate in respect of property division and maintenance as well as financial agreements. Family Law Regulation 67B requires that the arbitrator: (a) be a legal practitioner; (b) be accredited by a legal professional body as a family law specialist, or have practiced as a legal practitioner for at least five years and at least 25% of their work in that time be in relation to family law matters; (c) have completed specialist arbitration training; and (d) be on a list of arbitrators kept by a body nominated by the Law Council of Australia which is currently the Australian Institute of Family Law Arbitrators and Mediators.136 Regulation 67I requires the arbitrator, once appointed, to: (a) determine the issues in dispute between the parties in accordance with the Family Law Act; (b) conduct the arbitration with procedural fairness; and (c) inform parties in writing of anything that could lead to direct or indirect bias. The parties and arbitrator enter into an arbitration agreement pursuant to Regulation 67F which must be in writing and signed by each party and contain: (a) the arbitratorâ&#x20AC;&#x2122;s estimated fees, and arrangements agreed by the parties for the payment of those fees plus possible disbursements such as room hire and transcription costs if necessary; (b) names, address and contact details of each party; (c) name of the arbitrator; (d) date, time and place at which the arbitration is to be conducted; (e) issues to be dealt with in the arbitration (these might be broad such as division of marital property, or as specific as who gets the house, whether superannuation should be split or not etc.);

136

AIFLAM, â&#x20AC;&#x2DC;ADR Practice Areasâ&#x20AC;&#x2122; The national body for family law arbitrators and mediators (2017) <http://www.aiflam.org.au/~aiflam/search-aiflam.php?ADRPracticeArea=2&Name=&Location=>.

THE ARBITRATOR & MEDIATOR JUNE 2017 (f) estimated time needed; (g) how the arbitration will be conducted; and (h) circumstances in which arbitration may be suspended or terminated. A wise arbitrator will also include in the agreement additional matters such as: (a) immunity of the arbitrator; (b) description of the limited rights of appeal and review, process of registration, enforceability etc. so as to avoid parties subsequently complaining they were not aware of these statutory provisions; (c) confidentiality of the arbitration subject to the arbitratorâ&#x20AC;&#x2122;s obligations to report threats to a child, persons or property, or to report the commission or likely commission of offences of violence or intentional damage to property; (d) obligations of financial disclosure pursuant to Family Law Rule 26B.01, and the ability of a party to seek the setting aside of the award due to non-disclosure by the other; (e) decision of the parties as to whether rules of evidence should apply or be waived pursuant to Regulation 67O; (f) the process and arbitration model to be used including how evidence is to be given (e.g. via signed witness statements, sworn affidavits or orally under oath) and whether cross-examination may or not be allowed; (g) timetable for provision of evidence and submissions, and arbitral hearing dates, and the issuing of the award. A wise arbitrator will also endeavour to obtain the agreement of the parties wherever possible to procedural issues about how the arbitration is to be conducted. The satisfaction of the parties with the arbitral award will increase if they feel they have had an input into the process. Party consent to the process is also likely to reduce the possibility of a party seeking to challenge the award on the basis of procedural fairness. Arbitration process choices include: (a) off the papers - parties submit statements or affidavits of evidence plus written submissions as to relevant law sections of the Family Law Act and case law. The arbitrator reads the papers and then issues a written award; (b) off the papers plus oral submissions which might be given via phone or video, or face to face. This is the model used by the Queensland Legal Aid arbitration scheme which has been arbitrating simple property matters since 2001 and (c) full hearing including cross examination. At the completion of the arbitration process, the arbitrator must issue to each party an award including a concise statement setting out: (a) the arbitrator's reasons for making the award; and

THE ARBITRATOR & MEDIATOR JUNE 2017 (b) the arbitrator's findings of fact in the matter, referring to the evidence on which the findings are based. If the arbitration was referred by the court under section 13E of the Family Law Act the arbitrator must inform the court that the arbitration has ended and an award has been issued. The arbitrator does not provide the award to the court. Registration of the award with the court is done by one of the parties. The other party then has 28 days to bring to the attention of the court any reasons why the agreement should not be registered. Professor Patrick Parkinson suggests such reasons might be if the party did not consent to the arbitration, the arbitrator was not qualified in accordance with the Regulations or the award deals with matters outside of that referred to arbitration.137 Once registered the award takes effect as if it were a decree of the court. Section 13J of the Family Law Act allows a party to seek a review of an arbitral award on questions of law only. It is wider than section 34 of the NSW Commercial Arbitration Act discussed above which has additional threshold tests. The lack of a hearing de novo has not perturbed commercial disputants in using arbitration. Some family lawyers have expressed concern that clients may blame them for recommending arbitration if the arbitrator makes the ‘wrong decision.’ This concern is linked to the lack of a right of review if the client is merely dissatisfied. Family law property division is discretionary. The decision maker cannot ‘get it wrong’ as there is no single correct answer - merely a reasonable range. A ‘wrong decision’ is one the client does not like or is different to their lawyer’s educated guesses about possible outcomes. Lawyers cannot be blamed if they discuss process selection carefully with the client (see suggestions below) with the client making the ultimate decision. This discussion may reveal that the lack of automatic review is a lawyer-focused concern, and of little concern to the client (or even seen by them as a bonus giving certainty and finality of outcome) compared to the client’s other concerns about litigation. Section 13K of the Family Law Act provides further grounds for a dissatisfied party to seek that an arbitral award is registered to affirm, reverse or vary the award. The court must be satisfied that: (a) the award was obtained by fraud (including non-disclosure of a material matter); (b) the award is void, voidable or unenforceable; (c) in the circumstances that have arisen since the award or agreement was made it is impracticable for some or all of it to be carried out; or (d) the arbitration was affected by bias, or there was a lack of procedural fairness in the conduct of the arbitration process. These are the same remedies already provided under section 79A for the setting aside of court orders, but with addition of bias and lack of procedural fairness. Bias in arbitration primarily arises from the shared interests or relationships between the arbitrator and the parties. Procedural unfairness includes inadequate opportunity to present one’s case or lack of opportunity to correct or contradict matters prejudicial to one’s case. Arbitrators therefore take great care to avoid any such concerns. Arbitration needs to be a more formal process than mediation with less rapport building between the neutral and parties and no private meetings.

137

Patrick Parkinson, ‘Family Property Arbitration: Exploring the New Potential’ (Speech delivered at the ESFLPG Weekend, Katoomba, June 2016).

THE ARBITRATOR & MEDIATOR JUNE 2017 Arbitrators should avoid informality with parties and lawyers, and err on the side of over disclosing prior relationships before the arbitration commences. At the end of a well run arbitration, the parties on receiving the award should not just have saved time and money compared to litigating at court. In addition, the clients should feel heard and respected. Parties whose needs for procedural fairness and psychological recognition are met, will have a high level of satisfaction even if their substantive needs are not met as much as they may have liked. Research ‘shows that parties are more likely be satisfied with the outcome of a dispute resolution procedure and be more likely to view the overall experience as just, if it was generated by a fair procedure.’138

Learning from the success of family law mediation Whilst separating spouses have been slow to take up arbitration compared to commercial disputants, family law has been at the forefront of the growth of mediation. Many of the attractions of mediation to family law clients apply equally to arbitration: (a) lesser costs mediation compared to litigation. Arbitration is also less costly than litigation; (b) speed - an arbitration can be finalised, including the issue of the award, in less than three months compared to three years for court. The arbitral process can be customised for the individual parties and there is no wasted time waiting one’s turn in busy court lists; (c) privacy and confidentiality compared to open-court. This advantage of mediation applies equally to arbitration; (d) empowerment and autonomy. Many spouses find mediation beneficial in allowing them to design the outcomes to meet their individual needs, and to allow spouses to transition their relationships. This partially applies to arbitration. Mediators are often said to be in charge of the process but the parties are in control of the outcome. The reverse applies to arbitration. The parties choose to give up control of the outcome to the arbitrator. They have control over the decision to arbitrate, choice of arbitrator, and have some input in to the design of the arbitral process. There are therefore more empowered than in a court process; (e) focus on needs and common interests. This is the primary attraction of mediation. An arbitrator however is obliged to make a determination in accordance with the law - irrespective whether it meets the needs of either party. This is why arbitration might be best considered after interests based mediation and negotiation has failed to resolve all issues, or where mediation is not suitable, or where one of the parties is adamant they do not wish or are unable to look at each other’s needs and interest. Arbitration would be useful where parties have resolved some but not all issues at mediation. If they go to court, they will be potentially starting again and litigating all issues. An alternative at the end of mediation is to refer the outstanding issues to arbitration; and (f) minimising damage to the relationships which is especially important where there is an ongoing parental relationship. Given that arbitration is consensual, and parties agree on the choice of arbitrator, at least a partially cooperative relationship can be fostered.

138

Jill Howieson, ‘Family law: the lawyer–client relationship, procedural justice and the dispute resolution process,’ (2007) 10(2) ADR Bulletin http://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1422&context=adr, Article 6

THE ARBITRATOR & MEDIATOR JUNE 2017 In contrast to the above advantages of mediation, a disadvantage of mediation is there is no guarantee of an agreement or outcome. This is not the case in arbitration where a major advantage is the certainty of an outcome being determined within a guaranteed time period.

Discussing arbitration with family law client as part of the spectrum of dispute resolution process choices Family lawyers have obligations to discuss dispute resolution with clients.139 Merely providing a list of process choices does not assist clients in making the best choice for themselves. Lawyers’ opinions about the relative advantages and disadvantages or process options may not match the clients’ perspective. Lawyers should avoid beginning the process selection discussion with what they personally perceive the advantages to be which may have no relevance to the parties’ experience of the dispute. If lawyers are too directive, clients might feel obliged to go along with what they perceive the lawyers preferences to be but without real motivation. This can result in clients not being fully committed explaining client resistance to the timely implementation of the process. The difficulties often experienced in parties making themselves available for mediation meetings, and promptly providing documents might arise from them not perceiving the benefit of the process. Clients who choose a process on the basis of advantages perceived by them - as opposed to doing what is ordinarily done - will have greater commitment to the process. A better approach to process selection is to ask the individual client about how they are experiencing the dispute, and the dispute resolution processes tried unsuccessfully to date. Clients will respond with a litany of complaints. Each of those complaints contain an aspiration for a better process. Through ‘double listening’ these negative complaints can be flipped by the lawyer to make clearer to the client their positive aspirations. For example: (a) ‘It’s been so slow’ can be reframed by the lawyer to ‘So you would like a process that will be quick and resolve the dispute now?’ (b) ‘I don’t get her to have listen to what I think … I don't know what she really thinks about all this’ can be reframed ‘Would you like a process by which we all get to sit in the same room and she listens to what we say, and you hear what she and her lawyer have to say?’ (c) ‘I don't know how much this all going to cost and how I am going to pay’ becomes ‘Would you like to hear about other processes where the two of you can decide the steps involved and therefore the cost?’ (d) ‘I hate those court appearances, all that sitting around, not knowing how much time to take off work and all those people sitting in court rooms waiting their turn’ can become ‘Would you like to discuss some other confidential processes that happened privately at times agreed by us?’ (e) ‘How do I know what judge I will end up with, how do I know if they will get it right?’ becomes ‘So would you like to have a say in the choice of the decision maker, and know that they their decision-making is guided by the established legal principles of fairness and equitable?’ The client’s affirmative answers to these questions give the lawyer permission to explain the range of processes in a way that will resonate with the client. The client will have greater buy-in to their own choices and thus motivation to fully engage in the process. The inquiry into the client’s experience of the

139

See, eg, Family Law Act 1975 (Cth) s 12E; Family Law Council and Family Law Section of the Law Council of Australia, Best Practice Guidelines for lawyers doing family law work (October 2010) Part 2.

THE ARBITRATOR & MEDIATOR JUNE 2017 dispute should start from the first consultation and continue. It should not be commenced at court whilst waiting for the clientâ&#x20AC;&#x2122;s matter to be called in a busy directions hearing list. Arbitration offers a tried and tested process which can meet many of the needs of clients, and avoid many of the downsides of litigation. Like mediation, arbitration can become a standard process option about which clients will expect their prospective family lawyer to be knowledgeable and experienced.

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Better contracting: Changes arising from the review of the Construction Contracts Act 2004 (WA) Philip Evans140

Abstract Following the statutory review of the operation of the Construction Contracts Act 2004 (WA), (CCA) the majority of the report recommendations relating to amendments of the CCA were accepted by the government and the Construction Contracts Amendment Act 2016 (WA) was assented to on 29 November 2016. However three significant recommendations were excluded from the amended CCA. These were: the removal of the mining exclusions, subcontracts agreements should be in writing, and the Australian Standard suite of General Conditions of Contract should be used on state projects. The rationale for the proposed amendments is discussed in this article.

Introduction The review report was tabled in the Western Australian Parliament on 16 August 2016 by the then Minister for Commerce.141 Subsequently the Construction Contracts Amendment Act 2016 (WA) came into operation on 29 November 2016.142 The review report contained 28 recommendations relating to both amendments to the CCA and additionally the introduction of policies and guidelines which would assist in the more efficient and equitable conduct of construction contracting in Western Australia. Twenty-five of the recommendations were accepted in total or part and these have now been incorporated into the amended CCA or introduced through a number of new government policies and initiatives. However three important recommendations were not accepted by the government. It was considered by the reviewer that these recommendations would both ensure a more equitable application of the CCA and to also ensure that both Western Australian government agencies and the building industry generally would conduct themselves in a reputable, equitable and responsible manner within the industry. The three recommendations not accepted are discussed in this paper. They were: (a) the mining exclusions in the CCA should be removed; (b) subcontracts should be in writing; and

140

Philip Evans BSc(Eng) (Merit), ME (Hons), LGE Cert, LLB, PhD, PRI, Professor of Law, University of Notre Dame (Australia). 141

The minister at the time of submission of the review report was the Honourable Michael Mischin LLB (Hons) BJuris (Hons) MLC. 142

The review was conducted by the author. JJ Steensma, PhD candidate at Curtin University assisted with research undertaken as part of the review. This article is based on sections of the review report. The report may be found at <https://www.commerce.wa.gov.au/building- commission/subcontractor-publications>.

THE ARBITRATOR & MEDIATOR JUNE 2017 (c) the Australian Standard Suite of General Conditions of Contract should be used on state government projects. The review also identified matters in the Western Australian construction industry involving unconscionable conduct, economic duress and unfair contract terms. As a consequence in conjunction with the amendments to the CCA, on 5 December 2016 the Western Australian Building and Construction Industry Code of Conduct 2016 was introduced. The code applies from 1 January 2017 to new tendering processes for State projects with a value in excess of $10 million. The issues relating to the implication of the Code will not be discussed in this article.

The Objectives of the Construction Contracts Act 2004 (WA) The objectives of the CCA are described in its long title: (a) to prohibit or modify certain provisions in construction contracts; (b) to imply provisions in construction contracts about certain matters if there are no written provisions about the matters in the contracts; and (c) to provide a means for adjudicating payment disputes arising under construction contracts, and for related purposes. Since its introduction, the CCA has provided greater security of payment for both contractors and principals in an industry which has historically functioned under a hierarchical chain of contracts entered into by parties often where there were significant inequalities in bargaining power and inequitable allocation of risk. At the same time it was never the intention of Parliament to provide comprehensive protection to parties unable to look after their own commercial interests. As noted, in part, by the Hon Alannah MacTiernan, the then Minister for Planning and Infrastructure, in the Second Reading Speech of the Construction Contracts Bill 2004 (WA): ‘Apart from these specific unfair practices, the Bill does not unduly restrict the normal commercial operation of the industry. Parties to a construction contract remain free to strike whatever bargains they wish between themselves, as long as they put the payment provisions in writing and do not include the prohibited terms… Participants in the industry still have to look after their own commercial interests. This Bill will provide the industry with simple and effective tools to clarify rights to be paid and to enforce those rights.’'143

Conduct of the Review Initially, a detailed Discussion Paper was prepared for circulation to all relevant stakeholders. It provided details regarding the purpose of the Review and was written in a form as to assist in the understanding of the operation of the CCA for all stakeholders.144 The Discussion Paper identified a range of issues arising from the operation of the CCA over the period 2005 to 2013. These issues were identified from the Annual Reports of the Construction Contracts Act Registrar (now the Building Commissioner), that had been published at the time of the review,

143

Western Australia, Parliamentary Debates, Legislative Council, 8 April 2004, 1934b-1935a (Alannah MacTiernan).

144

Phil Evans, Statutory Review of the Construction Contracts Act 2001 (WA), Discussion Paper (2014).

THE ARBITRATOR & MEDIATOR JUNE 2017 researching the academic literature on security of payment issues and perusal of all applications for review of adjudication determinations in Western Australia since the introduction of the CCA. The issues were not exclusive and stakeholders were invited to comment on any matter relating to or incidental to the application of the CCA. The Discussion Paper was circulated to all business entities listed in the Building Commission’s main email database and included all of the state’s building surveyors, painters, plumbers. builders, relevant industry and professional associations, local government authorities, statutory bodies and registered adjudicators, together with the Law Society of WA, President of the State Administrative Tribunal and the Chief Judge of the Western Australian District Court and the Chief Justice of the Supreme Court. The Discussion Paper also indicated that the reviewer would be willing to meet with both individuals and representatives from interested organisations and a number of meetings and public forums were held. Additionally the reviewer made presentations to a number of law firms and their major clients as well as to the Society of Construction Law Australia (SOCLA), professional and trade associations and the Construction Law Group of the Law Council of Australia during the conduct of the Review. Subsequently 51 written submissions were received145 from Members of Parliament, consumers, legal practitioners, adjudicators, contracting groups, individuals and associations including the Law Society of WA, SOCLA, the then Institute of Arbitrators and Mediators Australia (IAMA) (now the Resolution Institute), the Australian Institute of Building (AIB), the Small Business Commission, the Property Council of Australia and the Housing Industry Association. As expected, not all submissions were confined to the issues identified in the Discussion Paper and a number related to issues involving commercial contract practices and contract administration. These included allegations of economic duress, intimidation, unfair contract terms and unconscionable conduct. It was considered that these issues were clearly collateral to the CCA and they were considered in the final report recommendations. As expected in a review of this nature, involving a diverse range of interests and parties, many of the submissions were contrasting. Also the submissions to the review were untested. Evidence was not given under oath and the reviewer had no powers of compulsion. Consequently in many instances the information in the submissions reflected opinion or allegations. Additionally as noted above a number of submissions were marked confidential.

Tabling of the Report The final report was submitted to the Minister for Commerce (also the Attorney General) on 2 October 2015. The report contained 28 recommendations which related to both amendments to the CCA and the introduction of policies that were considered would result in a more efficient and equitable conduct of building and construction contracting in Western Australia. The report and the government’s response were tabled in Parliament on 16 August 2016 by the Minister. The Minister commented in part that the reviewer concluded that in its 10 years of operation, the CCA has provided a very useful scheme for resolving payment disputes and continues to provide contractors, subcontractors and suppliers with a rapid low-cost method of resolving payment disputes, albeit with a number of recommended changes.

145

A number of submissions were expressly marked confidential.

THE ARBITRATOR & MEDIATOR JUNE 2017

Main changes arising from the recommendations The main changes to the CCA and the introduction of new policies included: (a) the use of project bank account (PBAs) on government-funded projects under the management of the Department of Finance - Building Management and Works; (b) the reduction of the maximum contractual payment terms permitted under the CCA to 30 business days to ensure prompt payment and increase cash flow in the industry; (c) increasing the time limit in the CCA for lodging an application for adjudication to 90 business days and enabling ‘claims recycling’ so parties to a contract have a greater time frame and increased flexibility in seeking rapid adjudication of a payment dispute; (d) introducing legislation to make it an offence to intimidate, coerce or threaten a person or business in their access to remedies available under the CCA; (e) working with the industry to develop express statutory trust arrangements for retention money on high-value construction projects, which will protect retention moneys during insolvency events and ensure they are not unreasonably withheld from subcontractors; (f) improving the use of the Building Services (Registration) Act 2011 (WA) as a means of investigating and disciplining registered building contractors who have engaged in unfair behaviour or systematic non-payment of subcontractors; and (g) introducing a code of conduct for tenderers on state government–funded construction projects in order to reduce unacceptable behaviour on building sites, poor payment practices and anticompetitive behaviour.

Harmonisation of Security of Payment Legislation An issue identified in the Discussion Paper was whether there was a need for ‘harmonisation’ of security of payment legislation. The divergence in the approaches adopted in what are generally described as the ‘East Code Model’ and the ‘West Coast Model’ have been the subject of considerable academic debate and federal government concern in view of the significant differences between the various security of payment Acts. It is not possible to be definitive in this article, however of the submissions received in the review only one favoured national legislation. The majority of submissions favoured the retention of the CCA. On 4 December 2014, the Commonwealth Senate referred an inquiry into insolvency in the Australian construction industry to the Senate Economics References Committee for inquiry and report. The Committee report of 3 December 2015 made a number of recommendations regarding the relationship between security of payment legislation and insolvency.146 One of the recommendations was that uniform security of payment legislation (or ‘harmonisation’) be introduced to replace the current non-uniform state legislation147. Subsequently on 21 December 2016, the federal government announced a national

146

Senate Economics References Committee, Western Australia, Insolvency in the Australian construction industry (2015).

147

See Building and Construction Industry Security of Payment Act 1999 (NSW); Building and Construction Industry Security of Payment Act 2002 (Vic); Building and Construction Industry Payments Act 2004 (Qld); Construction Contracts (Security of Payments) Act 2004 (NT); Building and Construction Industry (Security of Payment) Act 2009 (SA); Building and Construction Industry Security of Payment Act 2009 (ACT); Building and Construction Industry Security of Payment Act 2009 (Tas); Construction Contracts Amendment Act 2016 (WA).

THE ARBITRATOR & MEDIATOR JUNE 2017 review into security of payment legislation in the building and construction industry particularly to examine security of payment legislation of all jurisdictions to identify areas of best practice for the construction industry.148

The Mining Exclusions An important aspect of the review was whether the current exclusions relating to certain mining operations should be excluded for the provisions of the CCA and was considered in detail in the review report. The review recommendation that the mining exclusions be removed from the CCA was rejected by the government. The following details the information on the issue as taken from the review report. Section 4(3) of the CCA excluded the operation of the CCA with respect to what are described as the ‘mining exclusions’ as follows: ‘(3) Despite subsection (2) construction work does not include any of the following work on a site in WA — (a) drilling for the purposes of discovering or extracting oil or natural gas, whether on land or not; (b) constructing a shaft, pit or quarry, or drilling, for the purposes of discovering or extracting any mineral bearing or other substance; (c) constructing any plant for the purposes of extracting or processing oil, natural gas or any derivative of natural gas, or any mineral bearing or other substance.’ The majority of the submissions favoured the removal of the mining exclusion. In support of the removal of the mining exclusions, the submissions from the major organisations (the Law Society of WA, the AIB, IAMA, and the MBA) were in agreement that the construction work associated with the activities listed in section 4(3) is not fundamentally different from construction work in other contexts and the CCA should be amended to reflect this. A submission in support of maintaining current exclusion came from a major resource company. However the submission noted in part that section 4(3)(c) is unclear and has led to significant debate over the application of the CCA. A submission from another resources company referred to the Second Reading of the Construction Contracts Bill 2004 (WA) where it was stated that the mining industry has been specifically excluded from the CCA. However the submission continued by saying that the CCA excludes activities that are commonly associated with mining, but it does not prevent its terms operating in respect of some aspects that may be incidental to mining such as construction of work other than those set out in the exclusion. The submission referred to the decisions in Conneq Infrastructure Services (Australia) Pty Ltd and Sino Iron Pty Ltd149 and Re Graham Anstee-Brook; Ex Parte Kara Mining Ltd150 and commented that these interpretations do not reflect the intention of the CCA to exclude the mining industry [underlining added] or activities commonly associated with mining. (These two decisions are discussed further below.) The submission stated that section 4(3) of the CCA should be reviewed both to clarify and expand the mining exclusion beyond its current narrow interpretation. The resource company’s submission appears

148

Mr John Murray AM has been appointed to conduct a review of security of payment laws in the Australian building and construction industry. 149

[2012] WASAT 13.

150

[2012] WASC 120.

THE ARBITRATOR & MEDIATOR JUNE 2017 to be based on the notion that it was the intention of the framers of the legislation to totally exclude the mining industry and suggested that section 4(3) of the CCA be reworded as follows: ‘Constructing projects for any plant, infrastructure or buildings, and related equipment, for the purpose of, necessary or incidental to the extraction, processing, or transport of oil, natural gas, any mineral bearing or other substance, or any of their derivatives.’ The proposed additions are shown in bold text. The submission continued that reading the intention of the framers of the CCA to totally exclude all mining activities, the current wording of the exemption has a potential economic impact on mining and resources projects. Rather than paraphrase or summarise the conclusion is reproduced in total as follows: ‘Without this clarification and with the multitude and diversity of work on any mining site or project, owners and operators of mining and resource projects are potentially exposed to significant and complex adjudications, from multiple contractors and over consecutive months. Such activity has the ability to cripple the industry, delay and impede a project, and significantly increase tactical claims as sophisticated contractors continue to litigate around the application of the exception within the mining projects.’ The research associated with the preparation of the Discussion Paper and for the review could not objectively determine the legislative basis for the exclusion and in particular whether the intention was for a total exclusion. The rationale for the exclusion appears to be apparent in the submission of the Queensland Resources Council (which refers to the Western Australian mining exclusion) in its submission to the Wallace Review151 of the Building and Construction Industry Payments Act 2004 (Qld) which stated: ‘The current BCIP Act acts as a surcharge on projects in Queensland, a cost that both the companies producing wealth and the state can ill afford as resource project investment across Australia as well as in Queensland now battles to achieve major cost reductions in the entrenched economic paradigm of collapsed commodity prices. Major companies are entitled to evaluate the total legislative regime in Queensland in their investment risks assessments. The BCIP is a sovereign risk152 factor. Amending s 10(3) of the BCIP Act so as to align with the WA mining exemption would only be adopting the best legislative standard presently in force in Australia. It would only level the playing field for project investment in Queensland tackling investment leakage to WA head-on. Significantly it is not a total exemption and nor would its adoption put Queensland projects ahead of WA on the risk curve.’ The competitive reference to Western Australia is further noted in the Wallace Report where it was stated: ‘The Queensland Resources Council in its written submissions to the review encouraged the Queensland Government to expand upon the exclusionary provisions contained in s 4(3) of the WA

151

Andrew Wallace, Final Report of the Review of the Discussion Paper – Payment Dispute Resolution in the Queensland Building and Construction Industry (24 May 2013) 41 (‘Wallace Review’). 152

Page 28 of the Wallace Review refers to the principles associated with project risks and quotes the Australian Corporate Finance Law as follows: ‘Each project will have a unique set of risks and circumstances for the financier to consider. Part 3 of this chapter discusses the most significant risks that arise in project financing. In this context it is important to note that not all risks demand the same level of importance for each project, for instance, sovereign risk is largely considered to be of minimal concern in a country such as Australia but it may be of paramount importance for a project in more volatile parts of the world like West Africa.’ Citing Lexis Nexis, Australian Corporate Finance Law, (at March 2013) 4 [4.080].

THE ARBITRATOR & MEDIATOR JUNE 2017 Act to strategically position Queensland as being more attractive to investment than the WA resources sector.’153 Wallace did not accept that the BCIPA constitutes an unreasonable sovereign risk to the state of Queensland and concluded that there was little justification to restrict the operation of the BCIPA. Consequently, no recommendation was made concerning the expansion of the BCIPA exclusionary provisions with respect to mining.154 Wallace commented that if the proposed review of the Western Australian CCA recommended an amendment to include claiming for the construction of plant and equipment, then the ‘Queensland Government may consider consulting with the Western Australian Government on this issue to arrive at an appropriate and consistent exclusionary provision for the extraction of oil, gas and minerals’.155 In order to assist in determining this issue, the review considered the provisions of the East Coast and West Coast (WA and NT) security of payment legislation and a number of judicial decisions relating to the mining exclusion. The provisions are detailed above but may be generalised as follows. As noted above the Western Australian CCA provides that: ‘construction work does not include any of the following work on a site in WA — (a) drilling for the purposes of discovering or extracting oil or natural gas, whether on land or not; [or] (b) constructing a shaft, pit or quarry, or drilling, for the purposes of discovering or extracting any mineral bearing or other substance.’ 156 The Northern Territory exclusions are written in similar terms.157 These exclusions have been the subject of limited judicial consideration in both Western Australia and the Northern Territory.158 It appears, as submitted by a major resource company, that the courts have taken a narrow view of what constitutes ‘mining’ activity. It has been suggested that the second exclusion ‘will certainly exclude… contracts to construct mine shafts, quarries and processing plants, as well as

153

Wallace, above n 16, 43.

154

Ibid.

155

Ibid.

156

See Construction Contracts Act 2004 (WA) ss 4(3)(a)-(b); see generally Carine Cruse, ‘Interpreting the “Mining Exclusion” under the Construction Contracts Act (WA)’ (2012) 23(10) Australian Construction Law Bulletin 150. 157

See Construction Contracts (Security of Payments) Act 2004 (NT) s 6(2).

158

Since 2005, the four WA cases pertaining to mining, oil and gas and processing are: Pilbara Iron Ore Pty Ltd v Derek Noel Ammon [2008] WASCA 202; Silent Vector Pty Ltd t/as Sizer Builders and Squarcini [2008] WASAT 3; Conneq Infrastructure Services (Australia) Pty Ltd and Sino Iron Pty Ltd [2012] WASAT 13; and Re Graham Anstee-Brooke; Ex parte Karara Mining Ltd [2012] WASC 129.

THE ARBITRATOR & MEDIATOR JUNE 2017 professional services contracts for the design of the same.’159 Perhaps surprisingly, the West Coast provisions do not expressly exclude the extraction of minerals or tunnelling or boring for that purpose.160 The East Coast exclusions are expressed in different terms. Specifically: ‘(a) construction work does not include any of the following work: i. the drilling for, or extraction of, oil or natural gas; [or] ii. the extraction (whether by underground or surface working) of minerals, including tunnelling or boring, or constructing underground works, for that purpose.’161 In some respects the exclusions under the East Coast Acts are narrower than those in the West Coast legislation. While the West Coast provisions refer to drilling for the purposes of discovery or extraction, the East Coast provisions are limited to extraction.162 However, the East Coast provisions exclude the extraction of minerals, while the West Coast Acts do not. The East Coast exclusion relating to oil or natural gas has not been generally subject to extensive judicial consideration. However, the exclusion for the extraction of minerals has been narrowly interpreted in Queensland. In the Thiess case,163 the Queensland Court of Appeal held that this exclusion was not to be given a broad construction, given the ‘beneficial purpose’ of the Act in ensuring the quick interim payment of claims.164 The exclusion was for the extraction of minerals, not work associated with the extraction of minerals. A broader meaning would have required broader language.165 While the definition of extraction expressly included ‘tunnelling or boring, or constructing underground works’, it did not expressly refer to ‘equivalent surface works’.166 If Parliament had intended the exclusion to extend to activities that were

159

Simon Davis, ‘Pay up or Else! The New Reality in Resource Projects’ (2004) Australian Mining and Petroleum Law Association Yearbook ,157 [164]. 160

Jeremy Coggins, Robert Fenwick Elliott and Matthew Bell, ‘Towards Harmonisation of Construction Industry Payment Legislation: A Consideration of the Success Afforded by the East and West Coast Models in Australia’ (2010) 10(3) Australasian Journal of Construction Economics and Building 14, 18. 161

Building and Construction Industry Security of Payment Act 1999 (NSW) s 5(2);see also Building and Construction Industry (Security of Payment) Act 2009 (ACT) s 7(h); Building and Construction Industry Payments Act 2004 (Qld) s 10(3); Building and Construction Industry Security of Payment Act 2009 (SA) s 5(2); Building and Construction Industry Security of Payment Act 2009 (Tas) s 5(2); Building and Construction Industry Security of Payment Act 2002 (Vic) s 5(2). 162

Coggins, Elliott and Bell, above n 26.

163

Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2013] 2 Qd R 75.

164

Ibid [62].

165

Ibid [63].

166

Ibid [66].

THE ARBITRATOR & MEDIATOR JUNE 2017 necessary for mineral extraction, it would have been a simple matter to include express words to that effect.167 The construction of dams and drains thus did not fall within the exclusion.168 In HM Hire,169 the appellant hired dump trucks and a loader from the respondent.170 Under a subcontract with another party the appellant was obliged to carry out clearing and grubbing, topsoil stripping and placement at a coal mine.171 The appellant did not undertake any excavation of coal.172 Applying its ruling in the Thiess case, the Queensland Court of Appeal held that the preparatory earthworks performed by the appellant were not an extraction of minerals.173 In J & D Rigging ,174 the appellant had undertaken to dismantle and remove a mineral treatment plant that was bolted onto concrete footings on land that was subject to mining leases.175 The Queensland Court of Appeal held that the security of payment legislation applies to construction work carried out on land that is subject to a mining lease except in the narrow area where the mining exclusion applies.176 The High Court refused special leave to appeal this decision, indicating that there were insufficient prospects for its success.177 In summary, as can be seen from the above the current wording of the mining exclusion has created considerable debate and uncertainty where provisions in the CCA apply to a number of (but not all) construction contracts for work on mining sites in Western Australia.178 Due to the resources exclusions, the resources industry has operated independently from the security of payment legislation in many respects. For example, the CCA prohibited contractual payment periods of over 50 days.179 However, comments were made during the Review that such terms are commonplace in the resources sector. Whilst it is acknowledged (as noted in one of the submissions) that the removal of the mining exclusions in the current security of payment legislation may involve a major adjustment to longstanding practices, nevertheless when viewed objectively, construction work involves common issues and risks whether it be for a multi-storey commercial building or a mining construction. Provided the construction work falls within the provisions as set out in sections 4(1) and 4(2) of the CCA, and overall the review indicated that the mining and resources sector should not be considered so different as to fall outside the provisions of the CCA. The submissions, with the exception of the two discussed above, stated that the commercial pressures being felt by the mining industry, apart from those generated by the size of the projects, are no

167

Ibid [68].

168

Ibid [69].

169

HM Hire Pty Ltd v National Plant and Equipment Pty Ltd [2013] QCA 6.

170

Ibid [2].

171

Ibid [11].

172

Ibid [8].

173

Ibid [9].

174

J & D Rigging Pty Ltd v Agripower Australia Ltd [2013] QCA 406.

175

Ibid [2]–[3], [45].

176

Ibid [47]–[53].

177

Agripower Australia Ltd v J & D Rigging Pty Ltd [2014] HCATrans 106, 10, line 338.

178

Davis, above n 25, 163–164.

179

Construction Contracts Act 2004 (WA) s 10.

THE ARBITRATOR & MEDIATOR JUNE 2017 different to those experienced by other sectors of the construction industry and there can be no justification for legislation discriminating against a party because of the size of the work. As was noted in a number of the submissions, large claims are not necessarily more complex than smaller claims. Whilst acknowledging the economic benefits to the state as a consequence of the mining and resource sector,180 it could not be objectively concluded that contracting parties in this sector should be treated differently to other parties in all other sectors of the building and construction industry. The wording relating to the mining exemption in section 4(3) was subsequently amended in the Construction Contracts Amendment Act 2016 (WA) as shown below. However it essentially maintains the intention of the exemption despite what are considered to be cogent reasons for its removal. ‘(a) fabricating or assembling items of plant used for constructing any plant for the purposes of extracting or processing oil, natural gas or any derivative of natural gas, or any mineral bearing or other substance;’ The interpretation of the words ‘for the purposes of’ by both the State Administrative Tribunal and the Supreme Court of Western Australia have suggested a broad interpretation which limited the scope of the exclusion in practice. Hopefully the amendment to section 4(3)(c) removing the words ‘constructing any plant for the purposes of’ has responded in part to the difficulties of interpretation. However whilst acknowledging the economic benefits to the state as a consequence of the mining and resource sector, which conjecturally appears to be a significant factor with respect to the rejection of the review recommendation, it could not be objectively concluded that contracting parties in this sector should be treated differently to other parties in all other sectors of the building and construction industry in Western Australia.

Subcontracts should be in writing The review report also recommended that construction contracts for the purpose of the CCA should be in writing. Further there should be a pecuniary penalty for noncompliance and the contract should be voidable at the option of the aggrieved party for failure to comply with the writing requirement. No recommendation was made regarding any monetary limits with respect to the writing requirement. It was noted that these should be determined by the state government. This recommendation was not accepted apparently on the basis that the implied terms provisions in the CCA181 were appropriate where oral agreements were entered into. Examples were given during a number of stakeholder meetings of difficulties experienced by smaller parties who have entered into wholly oral contracts. A number of examples were also given of large projects where the agreement was constituted by a simple purchase order giving a brief description of the work and a lump sum amount. The CCA provides that there is no requirement for writing for a construction contract.182 Section 3 of the CCA provides [underlining added]:183 ‘3.

Interpretation

180

P Downes, K Hanslow, P Tulip, ‘The Effect of the Mining Boom on the Australian Economy’ (Research Discussion Paper 2014-08, Reserve Bank of Australia, 2014). 181

Construction Contracts Act 2004(WA) Div 2.

182

In State Side Electrical Services Pty Ltd v WA Commercial Constructions Pty Ltd [2012] WADC 27 an oral agreement entered into by telephone was held to be a construction contract for the purposes of the Act. 183

Construction Contracts Act 2004 (WA) s 3.

THE ARBITRATOR & MEDIATOR JUNE 2017 construction contract means a contract or other agreement, whether in writing or not, under which a person (the contractor) has one or more of these obligations —‘ The provision acknowledges the widespread practice, particularly at the lower end of the contracting chain that numerous contracts for the supply of goods and services are entered into on an oral basis. Where written evidence of a contract is required, this will be due to the operation of statute.184 The reference to ‘or other agreement’ in the definition is relevant. Put simply, for the purposes of the CCA a ‘construction contract’ is something less than a formal contract. This would appear to include an arrangement which is not legally binding.185 In Machkevitch v Andrew Building Constructions186 it was held: There must be something more than a mere undertaking; or something which can be said to give rise to an engagement, although not a legally enforceable engagement, between two parties; or a state of affairs under which one party undertakes to the other to do something; or an arrangement between parties to like effect.187 By way of comparison, section 4 of the Home Building Contracts Act 1991 (WA) does contain a writing requirement for home building construction work currently valued between $7,500 and $500,000. The provision requires that contracts must be in writing setting out all of the terms conditions and provisions of the contract. Whilst it is acknowledged that many oral contracts do run smoothly, nevertheless it is considered that construction contracts for the purpose of the CCA should be in writing to avoid evidentiary problems and uncertainty and reduce the problems arising from the incorporation of implied terms. It is difficult to comprehend why a contract for home building works costing up to $500,000 is required to be in writing whilst other construction contracts for works of similar amounts may be by way of oral agreement. In rejecting this recommendation it appears, albeit conjecturally, that the government considers that the provisions dealing with implied terms in the CCA are sufficient to for the protection of parties where the agreement is oral.

The use of AS Standard Form Contracts There has been widespread publicity given to issues relating to sub contractors entering into ad hoc or bespoke contracts which contain terms which might be generally described as ‘unfair’ or ‘onerous’.188 In a confidential submission the reviewer was handed a contract which he was informed has been used in a number of large subcontracts in Western Australia. In this instance it had been used on a project where

184

See, eg, Home Building Contracts Act 1991 (WA); Property Law Act 1969 (WA); Insurance Contracts Act 1984 (Cth).

185

Machkevitch v Andrew Building Constructions [2012] NSWSC 546; IWD No 2 Pty Ltd v Level Orange Pty Ltd [2012] NSWSC 1439. See also Andrew Chen and Shaun Bailey, Construction Contracts – A Wider Net Than You Think (3 December 2012) Corrs Chambers Westgarth <http://www.corrs.com.au/publications/corrs-in-brief/construction-contracts-a-wider-net-thanyou-think/>. 186

[2012] NSWSC 546.

187

Ibid [29].

188

See ‘Subbies reform crawls along’, The West Australian, (Perth) 17-18 September 2016, 47; and ‘Subbies squeezed from both sides of building sites’, The West Australian (Perth) 26 January 2017, 10.

THE ARBITRATOR & MEDIATOR JUNE 2017 the state government department was the principal. It was not a standard form contract189 and was not balanced in terms of allocation of risk as would be found for example in the Australian Standard suite of contracts.190 There were a number of exclusion clauses and a termination for convenience clause, which prompts one to wonder why a party would enter into such a contract. The response by stakeholders when questioned during the meetings regarding this issue was that it simply reflects the commercial realities in the construction industry. Unfortunately, under common law, harshness alone is not an invalidating factor as held in South Australian Railways Commissioner v Egan.191 The advantages of the use of standard form contracts in the Australian construction industry have been well documented. As far back as 1990 it was noted that standard forms of contract are preferred by the industry to contracts that are individually drafted for each project, if for no other reason than that as both parties are more likely to be fully familiar with the obligations assumed by each party using a Standard form they will thereby reduce incidents of dispute caused by concealing obligations in unfamiliar documents.192 More recently, the benefits of standard form contracts have been noted in the research report by the Melbourne University School of Law.193 The report states, in part, that 68% of contracts reported on are based upon standard form contracts and the dominating factor identified by participants was the familiarity with the forms. Their widespread use over time and familiarity enables participants to clearly understand the meaning of terms and their rights and obligations under the contract. The dispute resolution procedures used in these standard forms are well understood. The forms have been prepared after long consultation with relevant stakeholders and interested parties and are subject to review and revision from time to time. A significant benefit in their use is that the risk is balanced between the contracting parties. Whilst it is acknowledged that the state government may be reluctant to interfere with the commercial agreements between two commercial parties who have entered into contracts at arm’s length, nevertheless it is considered that state government has a public policy obligation to assist (subject to law) even in commercial contracts where the behaviour of a party (particularly the stronger party) has the effect of seriously damaging the rights of the other.

Conclusion The review and the subsequent amendments to the CCA have been described as the sectors ‘biggest shakeup’ in a decade.194 Additionally the introduction of Western Australian Building and Construction Industry Code of Conduct 2016 hopefully will ensure that all Western Australian government agencies,

189

A list of the standard form contracts used in the building and construction industry may be found in J Sharkey, M Bell, W Jocic and R Marginean, ‘Standard Form Contracts in the Australian Construction Industry’ (Research Report University of Melbourne, 2014). 190

The Standards Australia (SA) Technical Committee MB-010, General Conditions of Contract, has deferred the revision of the suite of standards related to the general conditions of contract, AS2124-1992 and AS4000-1997. It had been proposed that the two Standards should be merged into a new Standard, AS11000: General Conditions of Contract. 191

(1973) 130 CLR 506.

192

NPWC/NBCC Joint Working Party, ‘No Dispute – Strategies for the Improvement in the Australian Building and Construction Industry’, (Report, National Public Works Conference, May 1990). 193

Sharkey, Bell, Jocic and Marginean above n 55.

194

Beth Cubitt, Glen Warwick and Luke Carbon, Amendments to the Western Australian Construction Contracts Act Unveiled, (27 October 2016) Clyde and Co <http://www.clydeco.com/insight/article/amendments-to-the-western-australian-constructioncontracts-act-unveiled>.

THE ARBITRATOR & MEDIATOR JUNE 2017 when expending public funds, contract with building contractors that conduct themselves in a reputable, fair, safe and responsible manner, both in dealings with the State of Western Australia and within the building and construction industry more broadly. Whilst the state government acted positively and quickly with respect to the majority of the review recommendations it is difficult to comprehend on balance the reasons for the rejection of the recommendations relating to the mining exclusions, the need for written contracts and the use of Australian Standards General Conditions of Contract. With respect to the mining exclusions the interpretation of the words ‘for the purposes of’ by both the State Administrative Tribunal and the Supreme Court of Western Australia have suggested a broad interpretation which limited the scope of the exclusion in practice. Hopefully the amendment to section 4(3)(c) removing the words ‘constructing any plant for the purposes of’ has responded in part to the difficulties of interpretation. However whilst acknowledging the economic benefits to the state as a consequence of the mining and resource sector, which seems anecdotally to be a significant factor with respect to the rejection of the review recommendation, it could not be objectively concluded that contracting parties in this sector should be treated differently to other parties in all other sectors of the building and construction industry in Western Australia. It is considered that a requirement that subcontracts under the CCA be evidenced in writing would clearly assist in the application of the CCA through the avoidance of the problems associated with the enforcement of oral terms and problematic implied terms. The problems associated with the use on ad hoc or bespoke contracts in the Western Australian construction industry are well known. Objectively there are strong reasons for the adoption of the Australian Standard suite of general conditions of contract on government projects. As noted above, while the state government may be reluctant to interfere in the freedom of parties to choose or select the types of contract they wish to be bound by, government intervention is clearly necessary to assist where the behaviour of a party has the effect of seriously damaging the rights of others through the use of what we might describe in the vernacular as ‘take it or leave it’ or unbalanced contracts.195

195

In August 2015 the Competition and Consumer Act 2010 (Cth) was amended to extend the unfair contract terms protection provisions to businesses with less than 20 employees where ‘standard form’ contracts valued at less than $100,000 or $250,000 or if the duration of the contract is more than 12 months are used. See Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 (Cth).

THE ARBITRATOR & MEDIATOR JUNE 2017

Helping parents change Mieke Brandon196

Abstract Separation can have a significant impact on the traditional role of parents, like being no longer: a couple, a full time mother or father, a husband or a wife, a family member of a nuclear or extended family or lack of recognition as a legal partner. Parents’ sense of identity, self-image, and belonging may have changed due to feelings of rejection and exclusion. This article suggests some techniques to assist in creating change in the emotional communication patterns between the parents attending family dispute resolution. ‘Everyone who wants to work with couples needs to understand the depth and range of losses that the parties experience. For all our focus on the future, we need to acknowledge, whether with words, gestures, or silence, that we stand with them in their pain even as we are helping them move beyond it.’197

Parents’ emotional triggers in FDR For many separating or separated parents, considered suitable for family dispute resolution (FDR), and participating in a process of joint decision making additional triggers could surface as their underlying emotional reactions will influence their negotiation abilities. Parents, who want to make decisions about the future parenting of their children, need to be able to trust the process and the family dispute resolution practitioners’ (FDRPs). The practitioner needs to have the ability to create a ‘safe’ and a ‘hopeful’ space for them to change from what is not working between them to a workable plan for managing their parenting and financial arrangements in the best interest of their children. The process of separating can be seen as a fluctuating rollercoaster of emotions, because differences between the parents’ reactions and ways of coming to terms with their separated lives is based on their faith, social and cultural backgrounds, gender, sexuality, age and family of origin experiences. Severe stress and despair can lead to mental health issues as the grief and loss stages are in no way linear and can continue for a lifetime. The unresolved issues between parents greatly influence the children’s well-being and their emotional safety. Some parents can deeply clash with each other’s unresolved feelings and try to hurt each other.198 Others are used to fighting and arguing, or cultural norms permit them to strongly state their views before they can move onto re-establishing a way of interacting that is considered ‘respectful’. As the ‘leaver’ or the ‘left’ of the marriage or partnership,199 the parent’s role in previously joint decision making may now be significantly diminished as an unilateral decision to separate may have left one

196

Mieke Brandon BA MSc(App) is a registered FDRP; accredited under the NMAS; self-employed DR consultant, trainer, coach, supervisor, assessor and author of many articles. She co-authored with Linda Fisher, Mediating with Families (3rd ed. Thomson Reuters, 2012) and with Leigh Robertson, Conflict and Dispute Resolution (Oxford University Press, 2007). This article is based on the paper prepared for NMC Melbourne presentation in 2014. 197

Richard Barbieri, ‘A Song of Loss for Divorce Mediators’ (June 2014) <http://www.mediate.com/articles/BarbieriR2.cfm>.

198

See Marshall B Rosenberg, Non-Violent Communication: A Language of Life (PuddleDancer Press, 2007) 44-46, with regard to likely feelings when needs are not being met and expression of feelings when needs are met. 199

Linda Fisher and Mieke Brandon, Mediating with Families (3rd ed. Thomson Reuters, 2012) 80-83.

THE ARBITRATOR & MEDIATOR JUNE 2017 parent most likely relieved and another perhaps crushed. How each party sees an ‘event’ through their subjective perspectives differs and may result in a range of accusations, such as put downs, finger pointing, bad mouthing, and name calling.200 Other issues creating acrimony between parents are about their values and beliefs that have changed as a result of no longer being in partnership. In relationships, beliefs and values often become joint attitudes which guide the joint parental role; however, in the process of separating, each parent may retreat back to some of their family of origin and cultural values and beliefs with which they grew up. Scott states that ‘When two parties differ significantly in their core values, their repetitive arguments about events rigidify into on-going themes that, in mediation, get expressed as positions.’201 Strong emotions can also erupt as a result of a sense of having being wronged, hurt, let down, misunderstood, mocked, or undermined, or believing that unfair or wrong assumptions are being made by the other parent, their family and friends.202 These are often not only directly expressed, but also aired on social media, even during the process when parents are seen in private sessions (or in shuttle and telephone negotiations), creating additional angst.

One cannot change what one does not acknowledge Practitioners, through active listening, help each parent to recognise that they feel what they feel and help them to gain insight into those emotional reactions that fuel their dispute and often stall them into moving forward, so they can chose to alter their behaviour to foster more collaboration. Changing from so called ‘negative emotions’, such as from feeling sad to the question: ‘What would you like to feel instead? How can you achieve this?’ to focusing on positive emotions that leads to actions.203 Acknowledging emotions is helpful; however, dwelling on these feelings is usually not constructive.204 The skill of responding empathically requires practitioners to respond to the inner emotional world of each disputant.205 However, allowing parents to continue to vent may become inappropriate to maintain a psychologically safe atmosphere. ‘Venting is a little like salt. It can be healthy or harmful depending on how it is managed and monitored. It is the mediator’s responsibility to set the tone, mentor thoughtful reflection and facilitate productive discussions.’206 There are many non-verbal reactions as well and practitioners must be able to become ‘… aware of signs of increasing hyper-arousal and de-escalate the anxiety cascade before it has the chance to cycle out of control.’207 By calming the emotional reactivity, some parents may be able to learn to stop, think, and mindfully act in the best interests of their children. Parents have a choice, continuing their arguments or to move forward with the assistance of the process and the practitioners interventions, to create a co-parenting relationship as far as this is possible. Practitioners can empathetically normalise the parents’ concerns and frame that their concerns are typical

200

Rosenberg, above n 3, 37.

201

Michael Scott, ‘Themes in Mediation’ (2014) <http://www.mediate.com/articles/Themes.cfm>.

202

See Mieke Brandon, ‘Loss and Hope in Family Dispute Resolution’ (2014) 25(3) Australasian Dispute Resolution Journal 172. 203

Fredrike Bannink, Handbook of Solution-Focused Conflict Management (Cambridge, 2010) 89-91.

204

See also Bill Eddy, ‘Why Healing is Hard for High-Conflict People’ (2014), <http://www.highconflictinstitute.com/articles/parenting-a-divorce-articles>. 205

See also Robert Benjamin , ‘Negotiating Happiness: Managing People’s Predictability Irrational ‘Focusing Illusions’ – Part 1’ (November 2010), <http://www.mediate.com/articles/BenjaminR55.cfm>. 206

Caroline Petrilla, ‘Just Venting’ (2014) <http://mediationoffice.org/mediationmusings/just-venting/>.

207

Wayne F Regina, Applying Family Systems Theory to Mediation (University of America, 2011) 86-87.

THE ARBITRATOR & MEDIATOR JUNE 2017 struggles between parents at this stage of their separation. By normalising and neutralising that it is normal to be upset or angry about certain events or proposals made in mediation, parents can be put at ease and this may curb their hurtful interchange, because this also neutralises their interactions or the situation they are both facing.

Motivation for change Helping parents change can occur through the use of motivational interviewing, which is described by Miller and Rollnick as ‘a collaborative, goal-oriented style of communication with particular attention to the language of change. It is designed to strengthen personal motivation for and the commitment to a specific goal by eliciting and exploring the person’s own reasons for change within and atmosphere of acceptance and compassion.’208 It is a style of being with parents to foster motivation for change by integrating a range of specific practical skills.209 Emotions influence how we see and react to everyday events, and it affects motivation: ‘How we feel influences the way we think, perceive events, remember, and make decisions.’210 ‘Hopeful thought reflects the belief that one can find pathways to desired goals and become motivated to use those pathways’.211 When parents become inspired by their short and longer term goals their attitude changes towards restoring their belief that the future can be different and potentially their strained post separation relationship can be improved.212 For this purpose practitioners successfully use the children’s birthdays, school carnivals, teacher pupil or prize nights, graduations, engagements, weddings and birth of grandchildren and any other cultural, traditional, religious or spiritual events.213 Any motivation to think beyond the ‘now’ towards events both parents would want to partake in will create change in parents’ perceptions and interests.

Questioning to create change Scaling questions that focus on the parents’ effective communication can be used in pre-mediation, for example, ‘On a scale of 0-10, to what extend does the issue of not being able to make joint decisions controls you? or ‘What do you do when he/she seems to have the upper hand?214 In joint sessions, these include: ‘If you were both to give a mark on a scale of 0-10, one being problematic and ten being efficient where would you see your communications?’ ‘How did you succeed to be at this mark?’ ‘Why is it not

208

209

William R Miller and Stephen Rollnick, Motivational Interviewing (3rd ed, The Guilford Press, New York, NY, 2013) 29. Ibid 35.

210

Cheryl Picard and Janet Siltanen, ‘Exploring the Significance of Emotion for Mediation Practice’ (2013) 31(1) Conflict Resolution Quarterly 31, 47. 211

Bannink, above n 8, 11.

212

Ibid 9-17, on Hope-Theory and positive emotions.

213

Mieke Brandon and Beth Dababneh, ‘Children’s rights to culture in Australia: How FDR mediation can support these rights’, (2016) 6 (2) Family Law Review 77, 85-92. 214

Fredrike Bannink, 1001 Solution-Focused Questions (WW Norton, 2nd ed, 2010) 110-111.

THE ARBITRATOR & MEDIATOR JUNE 2017 less?’ The focus is here on achievement rather than a ‘failure’, for example, how did the parents got to that mark and what does each need to do differently to better communicate in the future.215 Scaling questions during the negotiation phases can establish what each party is fighting for. For example, practitioners can ask each: ‘On a scale of 10-0 (this time the numbers are reversed to see if the scale of importance is higher, because, of starting with 10) how important is this concern or issue to you?’ If an issue is a three for one and an eight for the other party, it may assist a party to give up something as something else may be much more important.216 Paradoxical questions are sometimes helpful by asking if things could get worse or if things could be happier; Coaching questions provoke parents to think, feel or react differently about the issues, such as: ‘What if you did nothing?’ or ‘What would be your first step to change things?’ These questions encourage parents to change their perspectives and ambitions, motivating them to create a vision of how their situation could look like once the problems are resolved.217 Questions that elicit and evoke talking about change218 explore how willing parents are to change their current situation for the betterment of their co-parenting relationship. The focus is on what is desirable in contrast to what is undesirable.219 Miracle questions and questions of vision encourages parents to create a hypothetical image of how it could be for them or how an absence of fighting, for instance, might be feeling for each of them and their children.220 Parents are ideally validated for what they can do and how they intend to achieve this, so they feel complimented for their efforts. Even the apparently smallest effort may be a big step for some parents. Parents’ fear of missing out can prevent them from being able to negotiate, they may need to understand that: ‘If each parent has opportunity to nurture, educate, play, discipline, and know the child intimately, the exact amount of time will not matter in the long run to the child’s development.’221 Solution-focused questions, Bannink suggests inviting a dramatic angry person ‘to act the way they wish they felt by finding a calm way to express their feelings, or take steps to distract themselves’.222 While it may be useful to acknowledge the impact the problem has on one or both parents, solution focused

215

Mieke Brandon, ‘Questioning our questions-expanding facilitative dispute resolution questioning techniques’ (2011)The ADR Bulletin 6, 134-135 <http://epublications.bond.edu.au/adr/vol12/iss6/6>. 216

Ibid 135.

217

Alain Cardon, ‘Coaching Questions and Powerful Questions’ (2008) <www.metasysteme.eu(http://www.metasteme.eu/>.

218

See Linda C Sobell and Mark B Sobell , ‘Motivational interviewing strategies and techniques: rationales and example’ (2008) <http://www.nova.edu/gsc/forms/mi-rationale-techniques.pdf>. 219

220

Bannink, above n 8, 90. Brandon, above n 20, 134-135.

221

Marsha Kline Pruett, ‘Parenting plans following separation/divorce: Developmental considerations’ (2011) <http://www.childencyclopedia.com/divorce-and-separation/according-experts/parenting-plans-following-separationdivorce-developmental>. Robert E Emery, topic ed. In: Tremblay RE, Boivin M, Peters R De V, eds. Encyclopedia on Early Childhood Development. Montreal, Quebec: Centre of Excellence for Early Childhood Development and Strategic Knowledge Cluster on Early Child Development (2011) <http://www.child-encyclopedia.com/sites/default/files/dossiers-complets/en/divorce-and-separation.pdf>. 222

Fredrike Bannink, ‘Venting Anger Feeds the Flame’ (2014) <http://www.mediate.com/articles/BanninkF10.cfm>..

THE ARBITRATOR & MEDIATOR JUNE 2017 questioning focuses on the goal of the emotion, is it a cry for help, how does it influence the negotiations, or can it be replaced by solution talk about parents preferred future?223 Parents can build on what worked for them before when they had happier times; as such the practitioner helps them to build on their strengths. With the focus on their best hopes or their intended goals for their roles as separated parents and how to co-parent also creates discussions regarding possible solutions. The outcomes may be ‘best’, ‘better’ or ‘good enough’.224 Many parents look for practitioners who can act as their change agent so that they can be assisted to identify positive steps towards their desired hopes and the path towards their longing for workable outcomes on behalf of their children and themselves. From a solution-focused perspective, this hope is created by the parents’ own visions drawn from their frames of reference.225 Solution-focused questions include: ‘What needs to come out of this mediation?’ ‘What are your best hopes?’ ‘What would be different once the conflict is resolved?’226 Irobi confirms that ‘Overall, sustaining hope in individuals after long drawn conflict will not be successful without a hope-mediator, armed with creative pathways, distinct goals and commitment to help disputant exit their conflict environment for a better life.’227

Conclusion Despite the losses and for some rewarding gains, both parents must establish new roles with each other and in the lives of their children to remain emotionally engaged and available for their children, and to manage the changes resulting from separation or divorce. The FDR process and the use of appropriate skills can encourage parents’ to gain a new attitude towards their goals. Reframing past problems to future hopeful possibilities motivates parents to change. Through explorative conversations facilitated by competent facilitative practitioners, parents can reorganise their lives, be self-determined, make wise decisions for their future, and fulfil their parental responsibilities and obligations. With a new awareness of their goals it is more likely that their hopes inspire them to move on, cope better with their new status in society and learn to negotiate for the immediate and long term benefit of the wellbeing of the children. ‘… the awake-ness that inspires disputants to change course in a dispute is Hope’.228

223

Bannink, above n 19, 68-75.

224

Bannink, above n 8, 38-44.

225

Ibid 38.

226

Ibid 43.

227

Emmy Irobi, ‘Sustaining and Nurturing Hope in A Mediation Process’ (2009), <http://www.mediate.com/articles/irobiE2.cfm>. 228

Ibid.

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How do I mediate? Let me count the ways (With apologies to Elizabeth Barrett Browning) Tony Newport229

Abstract Mediation is now a well established practice within our society at large. Mediators can now get accredited to National Mediation Standards and training courses for new mediators are accessible through peak bodies and universities around the country. All the hallmarks for establishing a profession are in place. But is it a profession in the strictest sense? Is it possible that the orthodoxy attendant to a professional discipline is potentially counter-productive in stifling the creativity that lies at the heart of such a diverse and dynamic practice?

Back Story My stomping ground is the workplace. One way or another I have been involved in workplace conflict resolution since the mid 1970's. In 1976 I was elected AWU secretary at The Rosebery EZ Company mine site on Tasmania's west coast. I was 23 years old and knew nothing. My two principal colleagues were tough and canny â&#x20AC;&#x2DC;no nonsenseâ&#x20AC;&#x2122; miners and negotiators twice my age. I learned a lot in a short space of time. I also learned of the recurrent futility and hostility of adversarial negotiation and grand standing. What I can say is this: for the most part we were honourable and likewise our adversaries but a lot of wasted time, energy and posturing was extended on not achieving very much - except perhaps for safety. This was a time when the forty hour week prevailed and the workforce was sourced from the local community. Around this time nearby Mt Lyell in Queenstown announced the retrenchment of 400 workers. For an unskilled worker such as myself the signs were too ominous to ignore. I struck out on an odyssey that would see me ultimately sign on to a University Social Work, course complete my degree and venture into the embryonic Employee Assistance Program (EAP) field almost a decade later. In the interim the small mining communities that had waned and waxed for the better part of seven decades began an immediate and steady decline. By the early 1980's Rosebery was on the receiving end of massive retrenchments and the twelve hour shift drive/fly in fly out culture was to become the new norm. Unions were blindsided almost overnight and their influence was dramatically reduced. In the EAP field the key focus then was on alcohol and drug counselling under the broad brush approach of providing employees access to free confidential counselling for problems ranging from family/marital to financial - for the extremely practical and relevant reason of avoiding the stigma of being referred to an alcohol and drug counsellor (mental health professionals please take note). It was not long before conflict began to frequently walk in the counselling door. At the same time I was being approached by supervisors and managers to assist with conflicts between team members and between themselves and team members. This time whilst I certainly knew something from my social work training and union experience it was a little knowledge of the dangerous kind. My first port of call for assistance and new knowledge was The Conflict Resolution Network - a substantial and generous resource headed by Stella Cornelius and backed by capable and professional

229

Tony Newport has worked as a workplace mediator since 1994 and is accredited to national mediation standards. He is a past co-chairman of The National Mediation Conference and served on the board for four years. He was awarded the Tasmanian Practitioner Award for commitment to excellence in DR practice in 2015.

THE ARBITRATOR & MEDIATOR JUNE 2017 staff including the wonderful Shoshana Faire. This led me on to tertiary study at Latrobe University and the completion of a Conflict Resolution Certificate under the tutelage of Professor Tom Fisher. I have now been practising as a workplace mediator since 1995. In my early years as a workplace mediator I likened myself to an amateur fly fisher fishing in thongs. I stepped into some very deep holes. Nothing teaches you about mistakes that can be readily learned and remedies applied like mediation in the workplace. In terms of the fly fisher I am willing to stride into deep and flowing waters but I am now wearing chest deep waders and seeking out firm footholds. At an Advanced Mediation course conducted in Melbourne in 2005 by Professor John Wade I could not help but compare his business sized cards containing dot point strategies for duelling experts and various forms of apologies in mediation - to my own journey. There was a man, I said, who has also learned from his own unforseen experiences. And so here I am. Still engaged in workplace conflict and casting a keen eye over our striving for professional status and the challenges and pitfalls of orthodoxy. We may know which brand of waders is best but we still have to know where and how to fish. Let's start with how today's mediators are trained and fledged.

Contemporary Mediator Training Imagine you are training to be a pilot. You need the skills and knowledge. You need a flight plan. You need a well maintained and trusted conveyance. You need an appropriate screening process before take off. You need to be able to return to land. The basics. With a model with a proven ability to do all of the above and with methods similar to those used with a flight simulator this is how today's mediators are taught and assessed. Once we are up and flying - and able to return safely to land - we may be ready for new knowledge and experience but we are in no mind to be told what we should be doing because our model is basic and someone else's is better. We are flying. I have fallen into this trap and I see it repeated over and over to the point that the only thing that makes sense to me is this: there is no one way with mediating human beings and our relationships - we are complex, paradoxical creatures whose very contrariness rests at times on the fact that someone has assumed that they know what we want and who we are. In this context the opposite also applies in regard to any model we have learned - it is not a prescription. It is an option - one among many. At the National Mediation Conference in Melbourne in 2014 I attended some sessions where there was a presumption that a certain model, a certain practice - a certain orthodoxy if you like - was the faithful umbrella under which we all practice. Now I acknowledge this is now several years ago but if anything the concerns I am addressing here have intensified. A very old friend who attended Cambridge as an undergraduate once told me that in his first year you could attend whatever lectures and tutorials you liked as long as you passed whatever subject you sat for. He eventually sat and studied for what he became interested in and not what he entered University for in the first place. With this in mind - and I was unable to attend a number of sessions that did particularly interest me - I want to identify some variations to practice and at the same time make reference to those speakers who seem to be encouraging such practices, at least in spirit.

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Conflict Management Assessment Well respected South Australian mediator Greg Rooney230 is one practitioner who puts a fair bit of work into the front end. This is a whole subject on its own involving intake and pre-mediation among other things. In our own practice we have dispensed with pre-mediation meetings and now just call them conflict management assessments with the express purpose of determining the most suitable intervention(s) and appropriate levels of support. If someone needs conflict coaching or counselling we separate these roles from that of mediator. In our practice a mediator generally cannot coach and mediate the same parties. We still have a pre-mediation agreement document. The role of the workplace mediator, which is where we practice, is increasingly taking on that of a facilitator in which you are often negotiating support for the process and communicating with a range people including participants, support persons, rehab coordinators, unions, HR, managers, doctors, insurance companies etc. Better to have all of these on board and working with you than to have them sit completely outside the process not knowing what is going on and influencing the outcome in isolation.

Just leave them to it Greg also spoke about situations where the parties have fallen out over a single issue - a much less common occurrence than the complexity that comes with most conflicts, particularly workplace conflicts - where there is often a long history of conflict with much more than personality/relationship issues at stake. Where a misunderstanding can be cleared up in a relatively short space of time the relief felt by both parties is often palpable. There is often history surrounding this conflict in the sense that what has occurred since the first falling out has polarised the parties and left them feeling quite distressed, but the fundamental underpinnings of their relationship still appear to be quite intact. Whenever this occurs and the issue between them has all but resolved I offer them the opportunity to stay in my room and I withdraw to just leave them to it. Mostly I go for a walk and by the time I return they have gone. My staff always report that they walked out conversing and relaxed, that the shortest amount of time they stay chatting is 20 minutes and sometimes they stay for close to an hour.

Get the parties to active listen Coming from a Social Work background and working in Employee Assistance Programs for almost ten years before I began mediating, practising and applying listening skills and managing emotions were essentially my bread and butter. Swedish mediator Liv Larsson231 draws heavily on the power of empathy in mediation. In her presentation she made the fascinating observation that Shame and Empathy are two parts of the same whole. That the sense of shame one feels builds up a powerful sense of denial because within our heart it is what we feel that makes us ashamed just as what we feel underpins our capacity for empathy. I have been asking the parties to actively listen to each other right from the start of the first joint session - for the past two decades of my practice. They don't always get it right. Sometimes they get very defensive and sometimes they just refuse to listen. Mostly though they do a good enough job, some of them do an exceptional job. The mediator is always there to help. The parties are told that it is natural to feel defensive and that if they do - that is okay and I will just remind them that this first session is different to most discussions they have been involved in and that I just want them to listen. For many parties this is the first time that they hear the other party acknowledge their concerns and I think this is a powerful first step to take in a mediation. They are reminded that acknowledging is not agreeing

230

Greg Rooney, 'How Mediators Think Matters' (Speech delivered at the National Mediation Conference, Melbourne, September 2014). 231

Liv Larsson, 'Reclaiming Diversity and Transforming Shame: An Approach to Mediation' (Speech delivered at the National Mediation Conference, Melbourne, September 2014).

THE ARBITRATOR & MEDIATOR JUNE 2017 - nonetheless you can often sense any defensiveness beginning to dissipate during this session. This of course is not true for all. Sometimes parties are very stuck and find it very hard to move beyond continual justification of their own grievances. Sometimes they just refuse to listen. We always plan our mediation sessions for two hours on the understanding that most of us spend more time with the people we work with than the people we live with. This is potentially a medium to long term relationship. It makes absolutely no sense to us to attempt to resolve everything in one go. When someone is struggling to listen we will curtail that session and recommend some one-on-one work for that party with a conflict coach, counsellor or both before we conduct another joint session. We would do the same thing for someone who is struggling to assert themselves. Whilst I do find this to be constructive and achievable there is one other very good reason for encouraging such a practice and this the educational benefit. We are literally encouraging them to work on their communication skills and their relationship from within the mediation.

Self determination under serious constraint In a presentation by well known Melbourne mediator Jim Cyngler232 he read a passage from Viktor Frankl's Man's Search For Meaning where Frankl is considering escaping from the Death Camp and he looks into the eyes of a fellow prisoner he is administering and changes his mind. Frankl concludes that he felt at peace with himself after making his decision. Liv Larsson in her presentation speaks of the anguish she felt at a failed outcome for a difficult mediation between indigenous displaced people of the Arctic Circle and a Swedish Government agency. The connection in both of these instances is what resides within the heart of the carer/mediator. In both instances there are sufficient reasons to justify escaping or why agreement was not found. In both instances justification is cast aside and a deeper reflection is conjured on the choices we make and how we apply them. There will always be reasons why outcomes are less than satisfactory. Often we could not have reasonably predicted what may eventually undo a mediation process. Nonetheless with hindsight it is far better to apply what we learn as a means of generating better outcomes for the future. This seems almost unnecessary to even state. Yet if we do go down a path of justification and fail to reflect on our own practice and what we can do better we can equally begin to justify our own methods at the expense of opening ourselves up to more enlightened strategies and processes. Orthodoxy is necessary to some degree in establishing a profession such as mediation. It is also an ever present straight jacket into which we must ceaselessly ensure we are not being cast. In mediation we learn far more from our failures than we do from our successes.

Stop, summarise re-state In their session on neuroscience and particularly on an experiment in which testosterone levels were measured and raised and - in conjunction - aggression and anger, North American neuroscience researchers Martha McClintock and Jill Tanz233 somewhat reassuringly remind us of the need for and the existence of sound strategies in managing aggressive situations within mediation. As it turns out prominent American psychologists of the fifties and sixties, Carl Rogers and Gerald Egan, were right on the money. I have a slide which contains the above heading which I refer to in supervisor and manager training for conducting difficult conversations when the temperature begins to rise. Stop at once from problem solving and call for a break. You can use a pretext or you can name it up. You

232

Jim Cyngler, 'Maximising Self- Determination - Deal or No Deal' (Speech delivered at the National Mediation Conference, Melbourne, September 2014). 233

Martha McClintock and Jill Tanz, 'The Neuroscience of Conflict: Lessons for Mediators' (Speech delivered at the National Mediation Conference, Melbourne, September 2014).

THE ARBITRATOR & MEDIATOR JUNE 2017 can stop for five minutes, an hour, a day or a week. Summarise - when you return make the effort to summarise what you have been hearing from the other party. Check in with them. Ask them what they have been hearing you or the other party say. You may be very surprised at their perceptions or lack of them.

Re-state your needs and change them if you need to. I was listening to an interview with the Australian actress Jackie Weaver. She was relating a story in which during a live play a member of the audience collapsed and had to be treated by a doctor in the audience before being taken from the theatre. During this time the audience came immediately back to the present as did the actors. Once the play resumed the reverse occurred and all present were now back in the play. I have seen parties engaged in rising emotional conflict respond to the request to stop, go outside and share a coffee and start conversing amiably about the football. Does this make mediation a drama? Well we know it is so. Nonetheless our difficultly to resolve and discuss issues when emotions are high is all too real just as our desire to be connected and understood is all too real. Sometimes we need to know just when to stop because if we do this well we will almost always be able to resume - and in so doing we also be giving our selves the confidence and opportunity to acknowledge emotions and not suppress them.

Bringing things to a head Greg Rooney talked about irritation. This was almost like watching Greg have a conversation with his shadow. His angst was palpable as was his degree of sensitivity to the intangibles of a mediation process the 'holding of the energy and intimate dynamics' generated within a mediation and the ultimate responsibility of the mediator to honour and respect such. My take on Greg's irritation is a little more mundane. Even though I think a serious connection can be made. In the workplace we are often requested to mediate after a series of conflict misadventures generally conducted over a significant period of time. By the time it reaches us there are many strands and missed opportunities that need 'bringing to a head'. We are effectively concentrating the drama and identifying a range of accountabilities that need to be accepted in order for the essence of the conflict to be satisfactorily distilled. In this light the level of irritation is at a quite inflammatory stage by the time we get to roll up our sleeves. We know we will be making significant progress in the workplace when mediation is a genuine early intervention and not a bail out option. We spend most of our mediation conferences talking to ourselves. A few years ago I put it to our peak body that it was time for a workplace mediation conference where we were meeting and conversing with our clients and the panoply of players that regularly engage around workplace conflict. That time is surely due.

THE ARBITRATOR & MEDIATOR JUNE 2017

Confidentiality in arbitration A.A. de Fina234

Introduction Arbitration is distinct from, but supported by a public system of law. It is a private determinative alternative to a public trial. Many training courses and some arbitral institutes propose ‘confidentiality’ as one of the basic advantages of arbitration. Coupled with confidentiality is privacy as a concurrent advantage of arbitration. Commercial disputants sometimes appreciate the facility of confidentiality in arbitration to protect such things as intellectual property, corporation value or potential of major assets.

Privacy and confidentiality Encouraged either directly or indirectly by some arbitration training courses and some arbitral institutes, there is a general assumption that arbitrations are both confidential and private. Whilst there is some limited degree of commonality in the concepts of privacy and confidentiality, they are certainly not the same. As a consequence of the consensual nature of arbitration, the privacy and/or confidentiality of an arbitration can be agreed by the parties to apply, or to not apply, even if governing rules might provide otherwise, allowing the Tribunal to make orders, except where precluded by the governing law. Examples of some institutional rules referring to confidentiality and privacy are as follows: (a) Malaysia - Kuala Lumpur Regional Centre for Arbitration (KLRCA) Arbitration Rules (as revised in 2010), Rule 10: Confidentiality: ‘The Arbitral Tribunal, the parties and the KLRCA shall keep confidential all matters relating to the arbitral proceedings. Confidentiality extends also to any award, except where its disclosure is necessary for purposes of implementation and enforcement.’ (b) UAE - Dubai International Arbitration Centre (DIAC) Arbitration Rules: ‘Article (41) - Confidentiality 41.1

Unless all parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep confidential all awards and orders in their arbitration, together with all materials in the proceedings created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain – save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal

234

Antonino Albert de Fina O.A.M, Past President Institute of Arbitrators and Mediators Australia, Past President Australian Centre for International Commercial Arbitration.

THE ARBITRATOR & MEDIATOR JUNE 2017 right or to enforce or challenge an award in bona fide legal proceedings before a state court or other judicial authority. The deliberations of the Tribunal are likewise confidential to its members, except where an explanation of an arbitrator’s refusal to participate in the arbitration is required of the other members of the Tribunal under Articles 13, 14 and 15 of the Rules.’ (c) International - International Chamber of Commerce (ICC) Rules: ‘Article 22(3) – Upon the request of any party, the Arbitral Tribunal may make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for protecting trade secrets and confidential information.’ (d) United Kingdom - London Court of International Arbitration: ‘Article 30 – Confidentiality 30.1

The parties undertake as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right or to enforce or challenge an award in bona fide legal proceedings before a state court or other legal authority.

30.2

The deliberations of the Arbitral Tribunal are likewise confidential to its members, save as required by any applicable law and to the extent that disclosure of an arbitrator’s refusal to participate in the arbitration is required of the other members of the Arbitral Tribunal under Articles 10, 12, 26 and 27.’

(e) International - United Nations (UNCITRAL) Arbitration Rules: ‘Article 28(3) – Hearings shall be held in camera unless the parties agree otherwise…’ ‘Article 34(5) – An Award may be made public with the consent of all parties or where and to the extent disclosure is required of the party by legal duty, to protect or pursue a legal right or in relation to legal proceedings before a court or other competent authority.’ Similarly, some countries have enacted legislation covering confidentiality in arbitration. For example:

Australia - International Arbitration Act 1974 (Cth): ‘Section 23C – Disclosure of confidential information (1) The parties to arbitral proceedings commenced in reliance on an arbitration agreement must not disclose confidential information in relation to the arbitral proceedings unless: (a) the disclosure is allowed under section 23D; or (b) the disclosure is allowed under an order made under section 23E and no order is in force under section 23F prohibiting that disclosure; or

THE ARBITRATOR & MEDIATOR JUNE 2017 (c) the disclosure is allowed under an order made under section 23G. (2) An arbitral tribunal must not disclosure confidential information in relation to arbitral proceedings commenced in reliance on an arbitration agreement unless: (a) the disclosure is allowed under section 23D; or (b) the disclosure is allowed under an order made under section 23E and no order is in force under section 23F prohibiting that disclosure; or (c) the disclosure is allowed under an order made under section 23Gâ&#x20AC;&#x2122; â&#x20AC;&#x2DC;Section 23D â&#x20AC;&#x201C; Circumstances in which confidential information may be disclosed (1) This section sets out the circumstances in which confidential information in relation to arbitral proceedings may be disclosed by: (a) a party to the arbitral proceedings; or (b) an arbitral tribunal. (2) The information may be disclosed with the consent of all of the parties to the arbitral proceedings. (3) The information may be disclosed to a professional or other adviser of any of the parties to the arbitral proceedings. (4) The information may be disclosed if it is necessary to ensure that a party to the arbitral proceedings has a full opportunity to present the party's case and the disclosure is no more than reasonable for that purpose. (5) The information may be disclosed if it is necessary for the establishment or protection of the legal rights of a party to the arbitral proceedings in relation to a third party and the disclosure is no more than reasonable for that purpose. (6) The information may be disclosed if it is necessary for the purpose of enforcing an arbitral award and the disclosure is no more than reasonable for that purpose. (7) The information may be disclosed if it is necessary for the purposes of this Act, or the Model Law as in force under subsection 16(1) of this Act, and the disclosure is no more than reasonable for that purpose. (8) The information may be disclosed if the disclosure is in accordance with an order made or a subpoena issued by a court. (9) The information may be disclosed if the disclosure is authorised or required by another relevant law, or required by a competent regulatory body, and the person making the disclosure gives written details of the disclosure including an explanation of reasons for the disclosure to: (a) if the person is a party to the arbitral proceedings--the other parties to the proceedings and the arbitral tribunal; and (b) if the arbitral tribunal is making the disclosure--all the parties to the proceedings.

THE ARBITRATOR & MEDIATOR JUNE 2017 (10)

In subsection (9): ‘another relevant law’ means: (a) a law of the Commonwealth, other than this Act; and (b) a law of a State or Territory; and (c) a law of a foreign country, or of a part of a foreign country: (i) in which a party to the arbitration agreement has its principal place of business; or (ii) in which a substantial part of the obligations of the commercial relationship are to be performed; or (iii) to which the subject matter of the dispute is most commonly connected.’

‘Section 23E – Arbitral tribunal may allow disclosure in certain circumstances (1) An arbitral tribunal may make an order allowing a party to arbitral proceedings to disclose confidential information in relation to the proceedings in circumstances other than those mentioned in section 23D. (2) An order under subsection (1) may only be made at the request of one of the parties to the arbitral proceedings and after giving each of the parties to the arbitral proceedings the opportunity to be heard.’ ‘Section 23F – Court may prohibit disclosure in certain circumstances (1) A court may make an order prohibiting a party to arbitral proceedings from disclosing confidential information in relation to the arbitral proceedings if: (a) the court is satisfied in the circumstances of the particular case that the public interest in preserving the confidentiality of arbitral proceedings is not outweighed by other considerations that render it desirable in the public interest for the information to be disclosed; or (b) the disclosure is more than is reasonable for that purpose. (2) An order under subsection (1) may only be made on the application of a party to the arbitral proceedings and after giving each of the parties to the arbitral proceedings the opportunity to be heard. (3) A party to arbitral proceedings may only apply for an order under subsection (1) if the arbitral tribunal has made an order under subsection 23E(1) allowing the disclosure of the information. (4) The court may order that the confidential information not be disclosed pending the outcome of the application under subsection (2). (5) An order under this section is final.’

THE ARBITRATOR & MEDIATOR JUNE 2017 ‘Section 23G – Court may allow disclosure in certain circumstances (1) A court may make an order allowing a party to arbitral proceedings to disclose confidential information in relation to the arbitral proceedings in circumstances other than those mentioned in section 23D if: (a) the court is satisfied, in the circumstances of the particular case, that the public interest in preserving the confidentiality of arbitral proceedings is outweighed by other considerations that render it desirable in the public interest for the information to be disclosed; and (b) the disclosure is not more than is reasonable for that purpose. (2) An order under subsection (1) may only be made on the application of a person who is or was a party to the arbitral proceedings and after giving each person who is or was a party to the arbitral proceedings the opportunity to be heard. (3) A party to arbitral proceedings may only apply for an order under subsection (1) if: (a) the mandate of the arbitral tribunal has been terminated under Article 32 of the Model Law; or (b) a request by the party to the arbitral tribunal to make an order under subsection 23E(1) allowing the disclosure has been refused. (4) An order under this section is final.’

New Zealand New Zealand has provided legislative obligations of confidentiality in the Arbitration Act235 in the following terms: ‘Section 14C – Limits on disclosure of confidential information in section 14B A party or an arbitral tribunal may disclose confidential information– (a)

To a professional or other adviser of any of the parties; or

(b)

If both of the following matters apply: (i)

235

The disclosure is necessary(A)

to ensure that a party has a full opportunity to present the party’s case, as required under article 18 of Schedule 1; or

(B)

for the establishment or protection of a party’s legal rights in relation to a third party; or

(C)

for the making an prosecution of an application to a court under this Act; and

Arbitration Amendment Act 2007 (NZ).

THE ARBITRATOR & MEDIATOR JUNE 2017 (ii)

the disclosure is no more than what is reasonably required to serve any of the purposes referred to in subparagraph (i)(A) to (C); or

(c)

if the disclosure is in accordance with an order made, or a subpoena issued, by a court; or

(d)

if both of the following matters apply:

(e)

(i)

the disclosure is authorised or required by law (except in this Act) or required by a competent regulatory body (including New Zealand Exchange Limited); and

(ii)

the party who, or the arbitral tribunal that, makes the disclosure provides to the other party and the arbitral tribunal or, as the case may be, the parties, written details of the disclosure (including an explanation of the reasons for the disclosure); or

if the disclosure is in accordance with an order made by – (i)

an arbitral tribunal under section 14D; or

(ii)

the High Court under section 14E.’

‘Section 14D – Arbitral Tribunal may allow disclosure of confidential information in certain circumstances This section applies ifA question arises in any arbitral proceedings as to whether confidential information should be disclosed other than as authorised under section 14C (a) to (d); and At least 1 of the parties agrees to refer that question to the arbitral tribunal concerned. The arbitral tribunal, after giving each of the parties an opportunity to be heard, may make or refuse to make an order allowing all or any of the parties to disclose confidential information.’ As indicated in the examples above, there is no common approach among legislators of differing jurisdictions. The privacy element of arbitration is the characteristic, which distinguishes arbitration from court proceedings, which in most jurisdictions are public forums open to all persons and not restricted solely to the parties.

Curial Interpretations Curial rulings on issues of confidentiality in arbitration have been relatively limited. In Australia, in the case of Esso Australia Resources Ltd v Plowman236 the High Court of Australia found that documents produced by a party under an order by a tribunal were not confidential, but otherwise, arbitration was private.

236

(1995) 183 CLR 10.

THE ARBITRATOR & MEDIATOR JUNE 2017 In England, the Court of Appeal in Ali Shipping237 found that an implied term of confidentiality should be applied as a matter of law. Both Australia and England are common law jurisdictions, but adopt differing interpretations. The Swedish Court in Bulbank v AIT238 found that under Swedish Law, there exists an implied duty of confidentiality. In the USA (also a common law jurisdiction), in a seminal judgement in the case of United States v Panhandle Eastern Corp,239 the court did not accept arbitration documents were confidential. In France, in Aïta v Ojjeh240 the Court found that bringing of proceedings for annulment of an award rendered in England breached obligations of confidentiality.

Confidentiality of documents Save for particular trade or commercial arbitrations, almost all international commercial arbitrations are governed by the laws of one of the three great legal systems of the world: Common Law, Civil Code or Sharian Law. Each has, to some extent, differing procedural requirements in respect of documents or records involved in an arbitration. Under common law, the attitude is that a plea of confidentiality does not preclude the ordered production of documents or records in an arbitration hearing, particularly when those documents or records are the property of a third party not involved in the arbitration. Civil Code law allows courts (and by analogy, arbitral tribunals) to order production of documents, whether internal or of a third party, when requested to do so by one party, or where the tribunal perceives that those documents are necessary for the administration of justice. Notwithstanding that, this capacity may develop a culture of deliberately avoiding the keeping of accurate records, or pre-trial destruction of internal records. Where a party seeks an order from a tribunal for discovery or disclosure of documents, the tribunal must be satisfied that the documents are necessary to determine the case before it. To protect confidentiality, the tribunal may conduct an in camera assessment, or may appoint an expert to conduct a confidential independent review.241

Enforcing Confidentiality Rules Where an arbitration is governed by institutional rules, or by agreement between the parties (whether or not adopting arbitral institutional rules) a confidentiality provision may be required to be enforced by a court. Under the provisions of the Convention on the Recognition and Enforcement of Arbitral Agreements (The 1958 New York Convention), courts of subscribing nation states are required to enforce agreements to

237

[1998]2 All.E.R. 136.

238

Bulgarian Foreign Trade Bank v AI Trade Finance Inc. Stockholm District Court, 1998-09-10, Case T 6-111-98.

239

118 FRD 346 (D Del 1988).

240

(Paris Court of Appeal) 18 February 1986; 1986 Revue de L’Arbitrage 583.

241

See the IBA Rules on the taking of Evidence in International Arbitration 2010 Articles 3(13) and 6(1). Article 6(1) provides in part: ‘The Arbitral Tribunal, after having consulted with the Parties, may appoint one or more independent Tribunal-Appointed Experts to report to it on specific issues designated by the Arbitral Tribunal…’

THE ARBITRATOR & MEDIATOR JUNE 2017 arbitrate. Courts have taken a contractual approach, that is to enforce a valid agreement made between two or more parties subscribing to an arbitration agreement. Problems arise where no contracting parties to an arbitration are subject to a confidentiality order made by an arbitral tribunal. Such an order cannot be interpreted as part of the initiating arbitral agreement and is likely to be unenforceable, unless subject to a separate confidentiality agreement made by a party to the arbitration agreement with the third party.

Confidentiality in subsequent proceedings Enforcement of arbitral awards or challenges to matters arising from an arbitration are the province of courts of relevant jurisdiction. Unless there is a compelling reason for court hearings to be held in camera it is unlikely that a court will be other than open, and prior conditions of confidentiality will be lost.

Modern Developments Notwithstanding limitations imposed by confidentiality rules and/or legislation, it appears that, as a result of the great competition between arbitrators or potential arbitrators, as well as the rise of publications promoting or reporting on arbitrations242, the listing by arbitrators of cases they have dealt with, or publication of the parties involved in an arbitration, sometimes with the results of the arbitration, has become quite common. Such practices appear in direct conflict with the obligations of confidentiality and, in some instances, in breach of governing rules or law. Some dispute resolution organisations promote accolades such as ‘International Arbitrator of the Year’.243 To achieve such a ranking, it is necessary for an applicant or associate to disclose the arbitrations by naming parties, similarly in breach of a confidentiality obligation.

The Future If the rapid development occurring in recent years in relation to interpretation and application of obligations of privacy and confidentiality in arbitration continues along the lines of recent applications, it is possible to assume that where arbitrations involve matters of public interest issues and are of public importance, arbitration proceedings will be neither private nor confidential, and that the presence of TV or press in an arbitration hearing and the public reporting of arbitral proceedings and outcomes will be the norm. If this occurs, a major benefit of traditional arbitration will be lost, but modern public perceptions appear antagonistic to what might be described as ‘secret’ determination of disputes, whether public or private.

242

See, eg, Global Arbitration Review.

243

See, eg, Australian Dispute Centre.

THE ARBITRATOR & MEDIATOR JUNE 2017

Case Note Expert determination: In what circumstances can an expert’s failure to hear oral evidence or question witnesses mean a failure to discharge their mandate? Brendan Thomas Cullen244

This case note considers the New Zealand Court of Appeal decision in Waterfront Properties (2009) Limited v Lighter Quay Residents’ Society Incorporated.245 It needs to be noted that the Court of Appeal was dealing with a strike out application and therefore there was no final determination of the proceeding in the decision that has been reviewed. Notwithstanding that the Court was dealing with a strike out application, the Court of Appeal made some interesting comments and observations about the expert determination process.

Background to the case The appellant, Waterfront Properties (2009) Limited (Waterfront), was the building manager of a residential apartment complex. The complex consisted of four unit titled buildings each with their own body corporates. The first respondent managed the common facilities shared by the body corporates. The other respondents were three of the body corporates. The appellant had entered into written contracts with each of the respondents. Within these contracts was a termination clause providing the respondents with the ability to terminate their contracts with Waterfront on the grounds of gross misconduct or gross negligence by Waterfront. The contracts also contained a dispute resolution clause. The dispute resolution clause provided for resolution of disputes by way of expert determination. The clause stipulated for the person nominated under the clause to act as an expert and not as an arbitrator. The parties to the dispute were entitled to make written submissions to the expert. The expert’s decision was to be final and binding on the parties. Each of the respondents purported to terminate their respective contracts with Waterfront. No reasons for the purported terminations were provided. Waterfront disputed the respondents’ right to terminate and proceeded to trigger the dispute resolution clause. Waterfront also sought resolution of other disputes that had arisen between the parties. Subsequently, Mr Gray QC was appointed as the expert. It was agreed that Mr Gray would determine the termination dispute as a preliminary issue. The lawyer for the respondents informed Mr Gray that the respondents were proposing to make two of their key witnesses available at the hearing. This was opposed by Waterfront. Mr Gray proposed that witnesses from either party should be permitted to attend and whether they provided oral evidence could be addressed at the hearing. The respondents agreed but Waterfront continued to oppose this course of

244

LLB, BA, DipBS, FAMINZ, Acc.M.LEADR, Director of McCaw Lewis Lawyers and Zane Tyrel Mora, Law Clerk at McCaw Lewis Lawyers. 245

[2015] NZCA 62, [2015] NZAR 492.

THE ARBITRATOR & MEDIATOR JUNE 2017 action on the grounds that the dispute resolution clause did not provide for oral evidence and the process was not an arbitration. The hearing subsequently took place. The majority of the hearing was taken up by counsel addressing the relevance of the documents within the common bundle of documents that had been prepared for the hearing. The respondents’ witnesses were not questioned at the hearing. Neither party nor Mr Gray raised the possibility of cross-examining the witnesses at the hearing. However, it was made known to Mr Gray that the witnesses would be available to provide further evidence once he had read all the documents in the common bundle. Subsequently, Mr Gray issued his preliminary determination holding that the respondents had not validly terminated the contracts. Within his determination Mr Gray stated that he was unable to resolve certain conflicts in the evidence as no witness gave oral evidence or was cross examined. He made, inter alia, the following comments: ‘It is very difficult to be in a position to find intentional misconduct without having an opportunity to hear oral evidence and assess the witnesses who gave that evidence. … if I had been given an opportunity to hear witnesses give evidence orally, it may have been possible for me to find that there was … gross negligence. … I am unable to resolve conflicting evidence …’ 246 Subsequently, the respondents filed proceedings in the High Court against both Waterfront and Mr Gray. The statement of claim pleaded six causes of action. Only the first cause of action is relevant for our purposes. It alleged that Mr Gray misdirected himself as to the procedure to be followed and as a result failed to determine the dispute. Consequently, Waterfront filed an application in the High Court of New Zealand to strike out or stay all but one of the respondents’ claims. Justice Ellis declined Waterfront’s strike out application. Waterfront appealed against that decision to the Court of Appeal.

The appeal Against the above background the key issue before the Court of Appeal was: ’Whether it is arguable that an expert making an expert determination materially breached his mandate by failing to question witnesses in circumstances where he considered himself unable to resolve critical conflicts in the evidence without the benefit of such questioning.’ 247 The Court of Appeal pointed out that where an expert’s decision is to be final and binding, case law has established that the courts will only intervene where the expert has departed from his/her mandate in a material respect and did not do what they were appointed to do. Establishing that the expert has been negligent, made a mistake or was simply wrong, is not sufficient. Waterfront’s argument was that, in this instance, the expert did make a decision and regardless of the merits of the actual decision, it was final and binding. It followed, based on the argument put forward by Waterfront, that there had been no departure from the experts mandate as what Mr Gray was appointed to

246

Ibid [20].

247

Ibid [2].

THE ARBITRATOR & MEDIATOR JUNE 2017 do had been done; namely to decide if the respondents’ had validly terminated their contracts with Waterfront. The Court of Appeal’s analysis boiled down to two main points. Firstly, it was pointed out that this was not a situation where an expert was simply applying their expertise without reference to external evidence. Mr Gray was undertaking a factual inquiry into an issue that, as the High Court stated, was inherently contestable. Secondly, Mr Gray expressly stated he could not resolve conflicts within the evidence which were central to the issue. In light of this the Court of Appeal stated: ‘… we consider it distinctly arguable that in proceeding to issue a determination despite, by his own admission, being unable to resolve issues of fact that were fundamental, Mr Gray thereby departed from his mandate in a material respect.’ 248 The Court of Appeal found that, since Mr Gray was acting as an inquisitor, this did distinguish the situation from the usual adversarial approach of determining issues on the evidence available. That finding also removed the argument that as the respondents did not request cross-examination at the hearing they were prevented from challenging the determination by the expert. Also, the Court of Appeal agreed with the High Court in stating it was arguably Mr Gray’s responsibility to ensure the processes he employed was sufficient to achieve his mandate. It followed that the Court of Appeal dismissed the appeal by Waterfront and upheld the decision of the High Court declining to strike out or stay the various claims brought by the respondents against Waterfront and Mr Gray.

Evaluation and analysis The Court of Appeal decision has some potentially important implications for parties who agree to resolve disputes by expert determination. This case, as pointed out by the Court of Appeal, is factually unusual and unlikely to be repeated. But, the facts of the case and the decision of the Court of Appeal highlight the point that an expert determination process based on an inquisitorial approach will often not sit easily with a dispute where factual and credibility issues need to be resolved. In the latter situation the adversarial model may be a more appropriate model for the parties to adopt to resolve the dispute. The Court of Appeal decision also highlights that it is arguably the responsibility of the expert appointed to ensure that the process adopted is sufficient to achieve the mandate. That in turn means that if an expert is appointed and the issues to be determined include factual and or credibility issues, the process put in place needs to include adequate procedures to resolve factual and or credibility issues. Finally, we note that the judgment of Justice Ellis in the High Court contains a very useful summary of the characteristics of an arbitration and an expert determination and goes on to note that the practice of

248

Ibid [35].

THE ARBITRATOR & MEDIATOR JUNE 2017 appointing lawyers as ‘experts’ appears to be a burgeoning one and has led to an unhelpful blurring of traditional distinctions between arbitration and expert determination.249

249

Lighter Quay Residents’ Society Inc v Waterfront Properties (2009) Ltd 2013 NZHC 2678, 49.

THE ARBITRATOR & MEDIATOR JUNE 2017

Case Note Security of payment: Resolution of some divergences between the Eastern states Michael Heaton QC250

Abstract This article addresses three questions referred to in an Article in the last edition of the Arbitrator and Mediator left open and now resolved by the High Court and two recent appellate court decisions on reference dates and non-jurisdictional errors of law in relation to the Security of Payment Acts on the Eastern and Southern Seaboard States of Australia.

Introduction In an article (the Article) in the last edition of the Arbitrator & Mediator251 I identified four issues which there were divergent views between the Courts on the Eastern Seaboard. They were: 1. Is identification of the reference date a jurisdictional fact;252 2. Reference dates: ‘calculated by reference to that date’ section 9(1) Vic compared with section 8 (NSW) and section 12 (Qld);253 3. Can there be a reference date after a contract is determined;254 and 4. Does certiorari lie for non-jurisdictional error of law (on the face of the record).255 Since writing the Article, issues 1 and 3 have received clarification by the High Court in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd & ors.256 Issue 4 has been the subject of a five judge appellate decision in New South Wales in Shade Systems Pty Ltd v Probuild Constructions

250

LLM (University of Melb), LLB, BJuris (Monash University), Barrister, MRI formerly IAMA (Grade 1 Arbitrator), FCI Arb (UK), FACICA, Adjudicator Victoria Western Australia, and Northern Territory, Nationally Accredited Mediator and Victorian Bar Accredited Advanced Mediator. Former Chair and current member of the Victorian Bar ADR Committee. Member Resolution Institute Victorian Arbitration and Determinative Subcommittee.

251

Michael Heaton QC, ‘Security of Payment – Divergences between the Eastern States’ (2016) 35(1) The Arbitrator & Mediator 49.

252

Ibid 49-51.

253

Ibid 53-60.

254

Ibid 60-64.

255

Ibid 64-67.

256

[2016] HCA 52; 91 ALJR 233.

THE ARBITRATOR & MEDIATOR JUNE 2017 (Aust) Pty Ltd (No. 2)257 and followed, albeit reluctantly, by the South Australian Full Court in Maxcon Constructions Pty Ltd v Vadasz (No. 2)258. The issues are however still alive and leave to appeal to the High Court has been granted.

First issue – identification of a reference date is a jurisdictional fact The conclusion of the High Court, comprising Kiefel J (as she then was) Bell, Gageler, Keane and Gordon JJ, was that the existence of a reference date under a construction contract is a pre-condition to the making of a valid payment claim and no such reference date existed in the present case.259 The High Court approached the matter as one of statutory construction no reference being made to the Queensland authorities which had been referred to in the NSW Court of Appeal or to Saville v Hallmarc Construction Pty Ltd260 which had been referred to in the Article.261 The High Court referred to the definition of progress payment in section 4 as follows: ‘progress payment means a payment to which a person is entitled under section 8, and includes (without affecting any such entitlement): (a)

the final payment for construction work carried out (or for related goods and services supplied) under a construction contract, or

(b)

a single or one-off payment for carrying out construction work (or for supplying related goods and services) under a construction contract, or

(c)

a payment that is based on an event or date (known in the building and construction industry as a 'milestone payment').’

The High Court referred to Part 2 and sections 8 and 9: ‘[9] [10]

Part 2 of the Act is headed “Rights to progress payments”. The central provisions of Pt 2 are ss 8 and 9. Section 8 provides: (1)

on and from each reference date under a construction contract, a person: (a)

who has undertaken to carry out construction contract, or

(b)

who has undertaken to supply related goods and services under the contract, ss entitled to a progress payment.

(2)

In this section, reference date, in relation to a construction contract, means: (a)

257

[2016] NSWCA 379.

258

[2017] SASCFC 2.

a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related

THE ARBITRATOR & MEDIATOR JUNE 2017 goods and services supplied or undertaken to be supplied) under the contract, or (b)

if the contract makes no express provision with respect to the matter – the last day of the named month in which the construction work was first carried out (of the related goods and services were first supplied) under the contract and the last day of each subsequent named month.’

The Court also noted that section 9 deals with ‘the amount of a progress payment’. The Court then referred to Part 3 of the Act headed ‘Procedure for recovering progress payments’. Part 3 begins with s13, which relevantly provides: ‘(1)

A person referred to in section 8(1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.

(2)

A payment claim: (a)

must identify the construction work (or related goods and services) to which the progress payment relates, and

(b)

must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and

(c)

must state that it is made under this Act. ...

(5)

A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.

(6)

However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.’

It is important to bear in mind the facts in Southern Han as they bear on the High Court’s determination in relation to issue 3. Southern Han and Lewence were parties to a contract for the construction by Lewence of an apartment block at Breakfast Point in New South Wales. The High Court set out the relevant contractual provisions as follows: ‘[21]

Clause 37 of the Contract dealt with payment. Clause 37.1, read with Item 28 of Annexure Part A to the Contract, made provision for Lewence to "claim payment progressively" from Southern Han by making a "progress claim" on the 8th day of each calendar month for work under the Contract done to the 7th day of that month. Clause 37.2 then made provision for a progress certificate evidencing the Superintendent's

259

Ibid [2].

260

[2015] VSCA 318.

261

Heaton, above n 2, 50,51.

THE ARBITRATOR & MEDIATOR JUNE 2017 opinion of the moneys due from Southern Han to Lewence pursuant to the progress claim and for Southern Han to pay the amount certified. [22]

Clause 39 of the Contract dealt with default. Clause 39.2 entitled Southern Han, in the event of Lewence committing a "substantial breach of the Contract", to give Lewence a "notice to show cause". Clause 39.4 provided: “If [Lewence] fails to show reasonable cause by the stated date and time, [Southern Han] may by written notice to [Lewence]:

[23]

take out of [Lewence's] hands the whole or part of the work remaining to be completed and suspend payment until it becomes due and payable pursuant to subclause 39.6; or

terminate the Contract.”

Clause 39.5 obliged Southern Han to complete work taken out of Lewence's hands. Clause 39.6 provided: “When work taken out of [Lewence's] hands has been completed, the Superintendent shall assess the cost thereby incurred and shall certify as moneys due and payable accordingly the difference between that cost (showing the calculations therefor) and the amount which would otherwise have been paid to [Lewence] if the work had been completed by [Lewence].”

[24]

Clause 39.7 entitled Lewence, in the event of Southern Han committing a "substantial breach of the Contract", to give Southern Han a "notice to show cause" following which, if Southern Han failed to show cause, cl 39.9 permitted Lewence to suspend the whole or any part of the work under the Contract and then to terminate the Contract if Southern Han failed to remedy the breach, or if the breach was irremediable and Southern Han did not make other arrangements to Lewence's reasonable satisfaction.

[25]

Clause 39.10 provided: “If the Contract is terminated pursuant to subclause 39.4(b) or 39.9, the parties' remedies, rights and liabilities shall be the same as they would have been under the law governing the Contract had the defaulting party repudiated the Contract and the other party elected to treat the Contract as at an end and recover damages.”

The High Court then set out salient facts as follows: ‘[26]

On 10 October 2014, Southern Han gave Lewence a notice to show cause under cl 39.2 of the Contract. Then, on 27 October 2014, Lewence having responded to the notice to show cause, Southern Han gave Lewence a further notice purporting to exercise its right under cl 39.4 to take out of Lewence's hands the whole of the work remaining to be completed under the Contract. Lewence treated the giving of that further notice as repudiation of the Contract by Southern Han and, on 28 October 2014, purported to accept the repudiation and terminate the Contract.

[27]

On 4 December 2014, Lewence served on Southern Han a document which purported to be a payment claim for work carried out under the Contract. The document complied with the formal requirements of s 13(2) of the Act but it did not nominate a reference date. There is no dispute, however, that it claimed payment for work carried out by Lewence under the Contract up to 27 October 2014, including for work carried out to 7 October 2014 which had been the subject of a prior payment claim which Lewence had

THE ARBITRATOR & MEDIATOR JUNE 2017 served on Southern Han on or after 8 October 2014. Southern Han replied by providing a payment schedule to Lewence indicating that the scheduled amount Southern Han proposed to pay was nil.’ The adjudication procedure was invoked and the adjudicator rejected Southern Han’s submission that he lacked jurisdiction to determine the application and proceeded to determine the application. I dealt with the New South Wales’ Court of Appeal’s judgment in Lewence Construction Pty Ltd v Southern Han Breakfast Point Pty Ltd,262 Queensland and Victorian authority in the Article.263 Southern Han had three grounds of appeal to the High Court. The first was that the Court of Appeal was wrong to conclude the existence of a reference date is not a pre-condition to making of a valid payment claim. The second was that the majority of the Court was wrong to consider 8 November 2014 was an available reference date on the hypothesis that Lewence had accepted Southern Han’s repudiation and terminated the contract. The third ground was a repetition of Southern Han’s contention in the Court of Appeal that the purported payment claim was in respect of a reference date of 8 October 2014, and that its service was for that reason, precluded by section13(5) of the Act. Lewence supported the reasoning of the Court of Appeal. The High Court disposed of Southern Han’s third ground of appeal stating the mere fact that the purported payment claim served on 4 December 2014 claimed payment for work carried out before 7 October 2014, cannot be treated as indicating it was in respect of a reference date of 8 October 2014. The Court suggested, rather, the fact that it also claimed payment for work carried out to 27 October 2014 indicates that it is to be characterised as made in respect of some reference date after 27 October 2014. The Court stated that the purported payment claim was not in respect of reference date of 8 October 2014 and section 13(5) was therefore not engaged. In respect of the remaining issues, the Court identified two principal issues of statutory construction. The first issue was whether the existence of a reference date is a pre-condition to making of a payment claim and the second issue, which arose if the first issue was determined in the affirmative, was how a reference date is to be determined. Once those issues were determined, the Court stated the Act properly construed, could be applied to the circumstances postulated in the alternative hypotheses. Under the heading ‘The need for a reference date’ the Court stated the contest between the parties focussed on the opening words of section 13(1). The difference between them being what is connoted by the reference to ‘[a] person referred to in section8(1)’. The High Court summarised the contentions of the parties as follows: ‘Lewence argues, consistently with the view of the Court of Appeal, that the reference is to a person who meets the description in s 8(1)(a) or s 8(1)(b): a person who has undertaken to carry out construction work or supply related goods and services under a construction contract. Southern Han argues, consistently with the view of the primary judge, that the reference is to a person who, by operation of s 8(1), is entitled to a progress payment: a person who has undertaken to carry out construction work or supply related goods and services under a construction contract in respect of which a reference date has arisen.’264

262

[2015] NSWCA 288.

263

Heaton, above n 2, 49-52.

264

[2015] NSWCA 288 [46].

THE ARBITRATOR & MEDIATOR JUNE 2017 The Court stated the statutory analysis required to resolve the competing constructions of section 13(1) ultimately involves forming a view as to the place of that provision within that structure of the Act read in light of its legislative history. The Court then proceeded to examine the legislative history. The Court concluded: ‘The construction of s 13(1) consonant with the structure of the Act is accordingly that advanced by Southern Han. The description in s 13(1) of a person referred to in s 8(1) is of a person whom s 8(1) makes entitled to a progress payment. Section 8(1) makes a person who has undertaken to carry out construction work or supply related goods and services under a construction contract entitled to a progress payment only on and from each reference date under the construction contract. In that way, the existence of a reference date under a construction contract within the meaning of s 8(1) is a precondition to the making of a valid payment claim under s 13(1). That construction of s 13(1) affords to s 13(1) an operation that is harmonious with s 13(5). Section 13(1) operates to require that each payment claim be supported by a reference date and s 13(5) operates to require that each reference date support no more than one payment claim. Section 13(5) has been held to produce the result that "a document purporting to be a payment claim that is in respect of the same reference date as a previous claim is not a payment claim under the [Act]"[47]. Section 13(1) correspondingly produces the result that a document purporting to be a payment claim that is not in respect of a reference date is not a payment claim under the Act. The document is ineffective in either case to trigger the procedure established by Pt 3.’265 The High Court’s conclusion is consistent with the Queensland authorities referred to by the New South Wales Court of Appeal in Lewence v Southern Han and with the Victorian Authority of Saville v Hallmarc Construction Pty Ltd which were referred to in the Article. There is then, now, uniformity in the Eastern States that the reference date is a pre-condition to a valid payment claim.

Third issue – Can there be a reference date after a contract is determined? In Southern Han the High Court then turned to how any reference date is to be determined. It referred to the definition of progress payment and stated the definition picks up the statutory entitlement created by section 8(1) by providing that a progress payment means a payment to which a person is entitled under section 8. The High Court drew a distinction between the situation where a contract has expired and where a contract is terminated on acceptance of repudiation. The Court said: ‘…s 8(1) is to be read in light of the definition as capable of creating a statutory entitlement not only to a payment in the nature of an instalment but also to a final payment under a construction contract, to a single or one-off payment under a construction contract and to a payment of a type known in the construction industry as a milestone payment. This makes clear that the Act is not concerned only with providing a statutory mechanism for securing payments that are to occur

265

Ibid [61]-[62].

THE ARBITRATOR & MEDIATOR JUNE 2017 during the currency of an existing construction contract. The statutory contemplation is that a claim for a progress payment might be made after the contract has expired. The repeated references in s 8, and in the extended definition of progress payment, to payment "for" work carried out or to be carried out (or goods and services supplied or to be supplied) "under" a construction contract nevertheless point to an important limitation that is implicit in the overall design of the Act, and that has been so from the time of its original enactment. That limitation is that the Act is concerned to provide a statutory mechanism for securing payment of an amount claimed to be payable in partial or total discharge of an obligation to pay for work (or for goods and services supplied) imposed by the contractual force of a construction contract. The Act is not concerned to provide security for payment of an amount claimed by way of damages for breach of a construction contract. Nor is the Act concerned to provide security for payment of an amount which, according to prevailing authority, might be claimed as an alternative to damages by way of restitution for work carried out (or goods and services supplied) in the event of the construction contract terminating on acceptance of repudiation.’266 Then under the Heading ‘The absence of a reference date’ the Court said: ‘…the question whether the document served by Lewence on Southern Han on 4 December 2014 answered the description of a payment claim in s 13(1) turns on whether Lewence was on that date entitled under s 8(1) to make a progress payment in relation to work carried out to 27 October 2014; and the question whether Lewence on that date had that entitlement under s 8(1) turns on whether a reference date under the Contract had then come to exist in relation to that work under s 8(2).’267 The Court stated: ‘…the potential application of s.8(2)(a) leads finally to the contractual question whether cl 11CL37 of the contract continued to operate so as to fix the 8th of November 2014 as a reference date, notwithstanding the events of 27 to 28 October 2014. Further, that question needed to be addressed on the alternative hypotheses considered by the primary judge and Court of Appeal.’268 In respect of the hypothesis that Southern Han exercised its right under clause 39.4 to take the whole of the work remaining to be completed out of Lewence’s hands under the contract on 27 October 2014 meant clause 39.4 operated expressly to suspend payment until completion of the process for which clause 39.6 provided. The Court said: ‘The commercial purpose of the suspension in the event of such a breach, as the primary judge explained [55], was to provide a form of security to Southern Han in the event that the costs of completion of the work taken out of Lewence's hands were greater than the amount Southern Han would have had to pay if Lewence had completed the work itself. That commercial purpose

266

Ibid [65]-[66].

267

Ibid [72].

268

Ibid [74].

THE ARBITRATOR & MEDIATOR JUNE 2017 would be undermined were cl 39.4 to be interpreted as suspending payment only for the work taken out of Lewence's hands.’269 The Court concluded the suspension of payment was a suspension of the totality of the rights conferred and obligations imposed in relation to payment by cl. 37. The rights so suspended included Lewence’s right to make a progress claim under cl 37 for work carried out up to the time of work being taken out of its hands. In relation to the alternative hypothesis, the Court said: ‘On the hypothesis that Lewence accepted Southern Han's repudiation and terminated the Contract on 28 October 2014, the effect of termination was that Lewence and Southern Han were both discharged from further performance of the Contract and that Lewence's rights under the Contract were limited to those which had then already accrued under the Contract except in so far as the Contract is properly to be interpreted as stipulating to the contrary [56]. The right to make a progress claim under cl 37.1 of the Contract in relation to work carried out to 27 October 2014 had not accrued as at 28 October 2014. Had the Contract not then been terminated, the right would have accrued only on 8 November 2014. Nothing in the Contract was indicative of a contractual intention that cl 37 was to survive termination. Rather, as the primary judge observed [57], to the extent that the Contract adverts to its termination at all, its assimilation by cl 39.10 of the rights of the parties following termination under the Contract to their rights following termination of the Contract on acceptance of repudiation suggests that the parties were content to abide by the default position at common law in the event that the Contract were to be terminated on acceptance of repudiation.’270 The Court said the application of these principles is to substitute for Lewence’s future right to obtain payment under the contract an immediate right to damages for breach of the contract or restitution outside the contract. The Court considered the Act would have operated to secure payment under the Contract on and from the future date on which a contractual right to claim payment arose, but it is beyond the scope of the Act to secure payment of damages and amounts by way of restitution. Thus I consider the following two propositions can be derived on the High Court’s judgment on this issue. First, if the contract expires, say by performance, and the definition of progress payment includes, for instance, a final payment, then a reference date will arise after the contract expires. This is consistent with comments of Vickery J in Gantley Pty Ltd v Phoenix International Group Pty Ltd271 referred to in the Article272. Second, if a contract is suspended or determined on the basis of acceptance of a wrongful repudiation and the contract does not expressly or by implication provide for reference dates to continue upon suspension

269

Ibid [76].

270

Ibid [79]-[80].

271

[2010] VSC 106 at [171]-[175] in respect of earlier legislation in Victoria and at [177]-[189] in respect of the Victorian Act as amended in March 2007.

272

Heaton, above n 2, 62, 63.

THE ARBITRATOR & MEDIATOR JUNE 2017 or determination, no reference date will arise after suspension or determination. This second proposition is consistent with the Queensland authorities referred to in the Article273.

Fourth issue – certiorari does not lie for non-jurisdictional error of law on the face of the record or does it? In the Article274, I referred to Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd 275 where Emmett AJA preferred the traditional administrative law approach holding that an error of law on the face of the record in an adjudication determination was reviewable, notwithstanding dicta in Brodyn Pty Ltd t/as Time Cost and Quality v Davenport & anor.276 Shade Systems appealed and a five member Court of Appeal was constituted comprising Bathurst CJ, Beazley P, Baston, Macfarlan and Leeming JJA. The Court of Appeal allowed the appeal. The Court of Appeal unanimously held that the Security of Payment Act did not permit review of the determination of an adjudicator otherwise and for jurisdictional error. Bathurst CJ and Beazley P agreed with the orders of Baston JA and with his conclusion that, as a matter of construction of the Building and Construction Industry Security of Payment Act 1999 (NSW), judicial review of a determination of an adjudicator is precluded except for jurisdictional error. Baston JA gave the judgment with which both Macfarlan and Leeming JJA agreed. In essence, Baston JA considered the Security of Payment Act came within the exception in section 69(5) of the Supreme Court Act. He considered the apparent purpose of section 69(5) of the Supreme Court Act was to ensure that the enactment of the two previous subsections did not derogate from existing privative clauses which had been construed as limiting the supervisory jurisdiction, in particular areas to jurisdictional errors, thus excluding relief based on error of law on the face of the record. Baston JA noted there being no explicit privative clause in the Security of Payment Act, it remained to consider whether on some other basis, the Security of Payment Act could be understood to preclude judicial review for error of law on the face of the record. Baston JA referred277 to the remedial nature of the legislation noting the practical consequence of the legislation is well understood. Baston JA stated: ‘…..Dealing with equivalent provisions in the Building and Construction Industry Payments Act 2004 (Qld), Keane JA stated in R J Neller Building Pty Ltd v Ainsworth:278 “[39] It is evidently the intention of the BCIP Act, and, in particular, s 31 and s 100[65] to which reference has been made, that the process of adjudication established under that Act should provide a speedy and effective means of ensuring cash flow to builders from

273

Heaton, above n 2, 60-63.

274

Heaton, above n 2, 64-66.

275

[2016] NSWSC 770.

276

(2004) 61 NSWLR 421; [2004] NSWCA 394 [51]-[53].

277

Ibid [66].

278

(2009) 1 Qd R 390; [2008] QCA 397.

THE ARBITRATOR & MEDIATOR JUNE 2017 the parties with whom they contract, where those parties operate in a commercial, as opposed to a domestic, context. This intention reflects an appreciation on the part of the legislature that an assured cash flow is essential to the commercial survival of builders, and that if a payment the subject of an adjudication is withheld pending the final resolution of the builder's entitlement to the payment, the builder may be ruined. [40] The BCIP Act proceeds on the assumption that the interruption of a builder's cash flow may cause the financial failure of the builder before the rights and wrongs of claim and counterclaim between builder and owner can be finally determined by the courts. On that assumption, the BCIP Act seeks to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the cash in circumstances where the builder's financial failure, and inability to repay, could be expected to eventuate. Accordingly, the risk that a builder might not be able to refund moneys ultimately found to be due to a non-residential owner after a successful action by the owner must, I think, be regarded as a risk which, as a matter of policy in the commercial context in which the BCIP Act applies, the legislature has, prima facie at least, assigned to the owner.” This reasoning was adopted and applied to the Security of Payment Act by McDougall J in Chase Oyster Bar. The fact that the inter-relationship with contractual rights and proceedings for enforcement of contractual rights is expressly addressed in the Act is inconsistent with the conclusion adopted by the primary judge that judicial review could lie in order to correct errors in the construction of the contract adopted by the adjudicator. To a significant extent, the coherent and expeditious procedure provided by the Security of Payment Act would be undermined if the determination of the adjudicator were to be subject to judicial review in the supervisory jurisdiction of this Court for any error of law which might be identified in the reasons given by the adjudicator. Indeed, were such relief available, even an arguable error would provide a basis for the respondent to seek a stay of enforcement, potentially displacing the transfer of risk noted by Keane JA.’279 Baston JA concluded: ‘It is the unanimous view of cases in this Court that both McDougall J in Musico and this Court in Brodyn concluded that relief is not available to quash an adjudicator’s determination on a ground other than jurisdictional error. (Brodyn may have gone further.) The contrary conclusion would undermine the underlying purposes of the Security of Payment Act, which are manifest in the statement of the object of the legislation (s 3), the scheme revealed by the structure of the Act and, to make the same point from a different perspective, the combined effect of the provisions discussed above. The reasoning has been accepted in numerous cases, not only here but in other jurisdictions. No sufficient reason has been put forward to doubt its correctness.’280 In Maxcon Constructions Pty Ltd v Vadasz (No. 2)281 the Full Court decided by majority that an error by the adjudicator in concluding that the contractual provisions in respect of the retention sum were ‘paid when paid’ provisions rendered void by section 12 of the South Australian Act comprised a nonjurisdictional error of law on the face of the record. However, the Full Court also stated certiorari on the

279

Ibid [66]-[67].

280

Ibid [85].

281

[2017] SASCFC 2.

THE ARBITRATOR & MEDIATOR JUNE 2017 grounds of error or law on the face of the record is, on the basis of the authority of Shade Systems impliedly excluded by the Act. Ultimately, after a very detailed and long excursus in relation to administrative law, Blue J with whom Lovell and Hinton JJ agreed on this point, that the construction adopted by the New South Wales Court of Appeal in Shade Systems was not plainly wrong. He considered it was a decision of the five members of the Court of Appeal especially convened to determine the issue of construction authoritatively. It followed a line of authority dating back to 2004, albeit, the issue had not been considered in detail before Shade Systems. Blue J stated: â&#x20AC;&#x2DC;While I do not find the reasoning in favour of implied exclusion persuasive for the reasons given above, equally, I recognise that there are arguments in favour of implied exclusions.â&#x20AC;&#x2122;282 Blue J considered that in the circumstances, the Court was bound to follow the decision of the New South Wales Court of Appeal in Shade Systems that the Act impliedly excludes certiorari in respect of an adjudication determination on the ground of non-jurisdictional error of law on the face of the record, following what the High Court had said in Farah Constructions Pty Ltd v Say-Edee Pty Ltd283 that an intermediate appellate court should follow a decision of another intermediate appellate court on uniform national legislation unless it is persuaded the decision is plainly wrong. There is dicta in Saville v Hallmarc Construction Pty Ltd284 suggesting the strict administrative law approach is applicable to the Security of Payment Act in Victoria. However, the ratio in Saville is that the reference date is a jurisdictional fact. The Court of Appeal in Victoria did not have to determine whether there was a non-jurisdictional error of law on the face of the record and hence, whether certiorari would have been applicable to that non-jurisdictional error on the face of the record. Thus, while the approach of the Court of Appeal in Saville is consistent with the analysis of Emmett AJA in Probuild which has now been reversed and as the comments of the Victorian Court of Appeal were dicta in respect of the non-jurisdictional error of law on the face of the record, one might have thought it likely that the Victorian courts would now follow Shade Systems and Maxcon Constructions. However on 12 May 2017 both Probuild and Maxcon obtained special leave to appeal to the High Court. Thus this fourth issue is still uncertain and alive until determined by the High Court.

Conclusion Southern Han has unified the divergences between the Eastern States in respect of the first, and third issues referred to above. Uniformity on the fourth issue awaits determination by the High Court of appeals by Probuild and Maxcon. It is pertinent to note there is a review of security of payment laws by John Murray AM who is due to report to the Australian government in December 2017. The terms of reference include identification of areas of best practice and measures to overcome the current fragmented nature of the security of payments acts. This may ultimately result in uniformity throughout Australia.

282 Ibid

[208]-[209], [240], [286].

283

(2007) 230 CLR 89.

284

[2015] VSCA 318.

THE ARBITRATOR & MEDIATOR JUNE 2017

Case note BG Group PLC v Republic of Argentina: 134 S. Ct. 1198 (2014) Stuart M. Widman285

If not satisfied, procedural preconditions to arbitration may bar a party’s right to pursue a case in arbitration. But who decides – a court or an arbitrator – whether those conditions have been performed and the case may proceed? In an international treaty case, the United States Supreme Court recently reiterated that those questions are for the arbitrator to determine. The Court noted the long-accepted distinction between procedural and substantive arbitrability, where only the latter are presumed to be for courts to decide. The procedural condition here, prior litigation, was deemed to have been frustrated by the respondent (Argentina), and therefore Argentina could not assert that claimant BG Group lost its right to arbitrate by not first engaging in that process. A recurring issue in arbitration in the United States is ‘Who decides?’ – courts or arbitrators – gateway questions whether arbitration can occur or has been properly held. In a case involving an international investment treaty, the United States Supreme Court reiterated in 2014 that arbitrators, not courts, make the decisions on procedural arbitrability issues. BG Group PLC v Republic of Argentina286 also held that an arbitration panel’s decision on procedural arbitrability is entitled to deference when reviewed by courts, so that the arbitrators’ ruling will stand if it arose out of an interpretation of the parties’ agreement. This ruling is also instructive because it treated an international treaty like any other contract when assessing whether procedural preconditions to arbitration existed and were waived. Background A 1990 investment treaty (the Treaty) between the United Kingdom and Argentina contained a dispute resolution clause applicable to disputes between one of those nations and an investor from the other. The clause provided for two-step arbitration, under which either side could initiate arbitration if one of two conditions were met: (a) the parties submitted the dispute to court litigation, but the court did not rule within 18 months; or (b) the court did timely rule but a dispute still existed. In other words, under (b), neither side was bound by the initial court ruling but could seek another outcome in arbitration (and the court ruling was not binding on the arbitrators either). The case concerned the court litigation requirement, and specifically whether Argentina could assert that the non-occurrence of that first step deprived the arbitration panel of jurisdiction to decide the merits of the parties’ dispute. In 1992, the claimant in the dispute (BG Group), a British firm, invested in

285

Stuart M. Widman is a well-known commercial arbitrator, mediator and litigator in the United States. A lawyer for 40 years, he has focused on arbitration and mediation over the past 29 years. He has been a neutral in over 200 domestic and international arbitrations and 100 mediations with claims totaling over $2 billion. A prolific author (this Case Note is his 29 th published piece), he has also been a speaker at over 70 programs and professional meetings, has taught in law schools and for arbitration administrators, and has consulted internationally on arbitration and mediation. Details of his experience are on his website www.swidmanlaw.com. He can be reached at swidman@swidmanlaw.com. 286

134 S. Ct. 1198 (2014).

THE ARBITRATOR & MEDIATOR JUNE 2017 MetroGAS, an Argentina-owned gas utility. After the investment, Argentina changed its laws regarding the ways that gas tariffs would be calculated. BG Group contended that the new laws violated the Treaty by either effecting an expropriation of BG Group’s investment or by not treating BG Group fairly and equitably. Argentina denied the allegations. In 2003, BG Group sought arbitration under the Treaty. However, BG Group did not first proceed in court. Argentina proceeded with the arbitration while also claiming that the arbitrators lacked jurisdiction because the first-step litigation had not occurred. The arbitration panel concluded in 2007 that it had jurisdiction because Argentina had taken other action that excused the litigation requirement. Specifically, Argentina had passed yet other laws that: (a) interfered with its courts’ authority and ability to issue judgments; and (b) imposed obligations to renegotiate such public contracts. The arbitrators concluded that those new rules hindered recourse to Argentina courts, thereby excusing BG Group’s litigation. Essentially, the arbitrators found that the litigation requirement was either fully frustrated or rendered futile. On the merits, the panel awarded BG Group damages of US$185 million for Argentina’s denial of fair and equitable treatment. Argentina sought to vacate the award, and BG Group asked the United States District Court to confirm it. The District Court agreed with BG Group, but on appeal, the Court of Appeals for the District of Columbia reversed the decision. The Court of Appeals concluded that the determination whether litigation was a precondition was to be decided by a court, not the panel, and also that the circumstances which the panel relied on did not excuse the BG Group from first-step litigation. Thus, the Court of Appeals held that the panel lacked jurisdiction on all aspects of the dispute, and the award should be vacated. The United States Supreme Court agreed to hear the case because of ‘the importance of the matter for international commercial arbitration.’287 The question before the Court was ‘who – court or arbitrator – bears primary responsibility for interpreting and applying [the] local court litigation provision.’288 Second, the Court considered whether judicial review of the panel’s decisions should be afforded the usual deference that arbitration rulings get as opposed to being evaluated without that (de novo). Reviewing prior Supreme Court authority on contracts generally, the Court noted that ‘procedural preconditions’ to arbitrations are for arbitrators to decide. Those include matters such as waiver, delay, notice, and estoppel.289 Those procedural arbitrability issues contrast with substantive arbitrability matters – whether an arbitration agreement exists between the parties, and whether the dispute falls within the scope of the arbitration clause – which courts are presumptively empowered to make. With that distinction, the Court concluded that the ‘litigation provision is consequently a purely procedural requirement [regarding] when the arbitration may begin, but not whether it may occur….’290 The Court noted there was nothing in the Treaty that signalled a contrary intent of the parties regarding delegation of decision making authority on that issue.

287

Ibid 1205.

288

Ibid.

289

Ibid 1207.

290

Ibid 1206–1207.

THE ARBITRATOR & MEDIATOR JUNE 2017 The Court then concluded that those contract principles apply to the Treaty, which is merely a contract between nations.291 Moreover, international arbitrators regularly have the power to decide their own jurisdiction under international rules, and they are more familiar with the expectations of treaty partners. The ‘upshot’ was that the arbitrators had jurisdiction to decide the applicability of the litigation condition, and also that their conclusion was entitled to deference on review. Applying that deferential standard, the Court easily held that the panel reasonably concluded that Argentina’s suspension of court rulings and imposition of the renegotiation process warranted excusal from the litigation requirement. The panel’s ruling was, under long-standing U.S. arbitration principles, based on the terms of the agreement (the Treaty) and not derived from other sources. A concurring opinion emphasized that Argentina’s active participation in the arbitration showed its belief that the litigation requirement was not a condition on the formation of the agreement to start. The lone dissent took the contrary approach: there was no agreement to arbitrate at all because the litigation requirement was a condition whose performance was a predicate to the creation of the contract. The decision in BG Group PLC v Republic of Argentina underscores the importance in international arbitration of the difference between arbitrability decisions that United States courts and arbitrators share. Generally, courts will decide substantive arbitrability issues (existence or scope questions), whereas arbitrators will decide procedural arbitrability matters. Recognizing that distinction is key to effective representation in arbitration in the United States. In particular, it shows the risk of waiver and loss of a jurisdictional objection when the wrong ‘decider’ is allowed to proceed with a matter.

291

Ibid 1208.

THE ARBITRATOR & MEDIATOR JUNE 2017

Case note Ottoway Engineering Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2017] SASC 69 Erika Williams292

In Ottoway Engineering Pty Ltd v ASC AWD Shipbuilder Pty Ltd,293 the Supreme Court of South Australia (the Court) heard an application by Ottoway Engineering Pty Ltd (Ottoway) for leave to appeal against an arbitration award on the ground that the arbitrator erred in law by not providing reasons or sufficient reasons for key findings. The Court identified inconsistencies in current case law considering the standard required of an arbitrator’s reasons, and concluded this was a matter of general public importance which necessitated the granting of leave to appeal.

Facts In September 2009, Ottoway entered into a contract for pipe fabrication and assembly (Contract), whereby Ottoway was required to provide piping to ASC AWD Shipbuilder Pty Ltd (ASC) for the Australian government’s $9 billion Air Warfare Destroyer project. Clause 25 of the Contract provided for disputes between the parties to be referred to, and resolved by, arbitration in accordance with the Institute of Arbitrators and Mediators Australia (IAMA) Rules for the Conduct of Commercial Arbitrations. In March 2016, ASC gave the Resolution Institute (the IAMA’s successor) a notice of arbitration claiming $387,266 reimbursement of its capital contribution for the purchase of certain equipment used by Ottoway. Ottoway cross-claimed $1,045,469 for the additional overhead allegedly expended in carrying out the works. In April 2016, the parties attended a preliminary conference before the nominated arbitrator, Colin Fullerton. In November 2016, the arbitrator made an award in favour of ASC’s claim including interest and dismissed Ottoway’s cross claim (Award). Ottoway sought leave to appeal against the award on the ground that the arbitrator erred in law by not providing reasons or sufficient reasons for key findings. In particular, Ottoway contended that the decision was obviously wrong, or at least open to serious doubt, and the question of the standard required of an arbitrator’s reasons was one of general public importance.

Opt in or opt out? When the parties entered into the Contract in 2009, the Commercial Arbitration and Industrial Referral Agreements Act 1986 (SA) (the 1986 Act) was in place and created an ‘opt out’ regime whereby parties could agree to opt out from the right of appeal against awards.

292

Senior Associate, McCullough Robertson Lawyers; Member, Chartered Institute of Arbitrators; Director, ArbitralWomen; BA, LLB (Hons). 293

[2017] SASC 69.

100

THE ARBITRATOR & MEDIATOR JUNE 2017 When the Commercial Arbitration Act 2011 (SA) (the Act) came into force, section 34A conferred a similar right of appeal, however, on an ‘opt in’ basis whereby parties can agree to include the right of appeal against awards in their agreement. While section 34A of the Act is consistent across all states and territories since the introduction of uniform domestic commercial arbitration acts in each jurisdiction between 2010 and 2017,294 the requirements of section 34A have not yet been the subject of much judicial interpretation. In the present case, ASC relied upon another judgment that refused leave to appeal in similar circumstances. In Ashjal Pty Ltd v Elders Toepfer Grain Pty Ltd295 (Ashjal), Hammerschlag J rejected there was an implied contractual term allowing parties to appeal on a question of law with leave of the Court.296 However in the present case, Blue J disagreed with the reasoning of Hammerschlag J, instead finding that the implied term was in fact necessary to give the contract business efficacy, despite the 1986 Act giving a right of appeal. He explained: ‘…the fact that it was not necessary for the parties under the existing statutory regime to opt in to a right of appeal explains why they did not include an express provision that there should be a right of appeal, but does not negate the necessity to imply a term to ensure that their contractual intention that there be a right of appeal was achieved in the event of future change to a statutory opt in regime.’297 In refusing to follow the decision in Ashjal, Blue J commented that the question of whether a decision of a single judge in a different jurisdiction has the same level of persuasive authority as a decision of an intermediate appellate court in a different jurisdiction did not apply in the present case. His Honour stated that this question of precedential value only applies to decisions about the content of the law and not to the application of settled principles of law to the facts. Justice Blue found that in this case, there was no dispute about the settled legal principles; rather the only question was the application of those principles to the facts of the contract in this particular case.298 Section 34A allowing for the right to appeal on an opt in basis is unique to the uniform domestic commercial arbitration regime. There is no equivalent provision in the International Arbitration Act 1974 (Cth) (IAA) to which the courts could turn for assistance with judicial interpretation of section 34A of the domestic acts, nor is there an equivalent provision in the UNCITRAL Model Law which would allow Australian courts to look to foreign jurisdictions for guidance. Ottoway submitted that the parties had agreed to opt in to the right to apply for an appeal either at the preliminary conference in 2016 or as an implied term of the Contract in 2009. ASC denied that any such opt in had occurred, and therefore Ottoway had no right to appeal against the arbitrator’s award.

294

Commercial Arbitration Act 2010 (NSW); Commercial Arbitration (National Uniform Legislation) Act 2011 (NT); Commercial Arbitration Act 2013 (Qld); Commercial Arbitration Act 2011 (SA); Commercial Arbitration Act 2011 (Tas); Commercial Arbitration Act 2011 (Vic); Commercial Arbitration Act 2012 (WA); Commercial Arbitration Act 2017 (ACT). 295

[2012] NSWSC 545.

296

[2017] SASC 69 [23]-[24].

297

Ibid [55].

298

Ibid [57].

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THE ARBITRATOR & MEDIATOR JUNE 2017 Preliminary conference Ottoway’s first contention was that the requisite agreement that an appeal may be made against an award was made at the preliminary conference in April 2016. At the preliminary conference, various matters were discussed and agreed, including that there was no written agreement prohibiting any question being determined according to law, or dispensing with the requirement for the arbitrator to include a statement of reasons for making the award. The arbitrator subsequently produced minutes recording this, which were signed by all parties as correct. Implied term Ottoway’s second contention was that the requisite agreement that an appeal may be made against an award was an implied term of the Contract. ASC’s argument was based on the principle that it is for contracting parties to formulate their agreement and the court can not rewrite a contract merely to address eventualities the parties did not foresee.299 However, the Court found that this principle was not offended when a term is implied in accordance with the presumed intention of the parties in the manner accepted by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW300 (that is, it is appropriate to look to the circumstances surrounding the making of a contract when deciding on the implication of a term).301 Justice Blue held that it was in fact an implied term of the Contract that such an appeal may be made.302 In doing so, his Honour found that the parties had made a deliberate decision under the 1986 Act that they would not opt out of a right of appeal,303 and therefore it objectively followed that it was the contractual intention of the parties that there was to be a right of appeal against any award.304 Justice Blue considered that each of the conditions identified in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council305 had been satisfied in respect of the implied term as follows: (a) it is reasonable and equitable to imply the term; (b) it is necessary to give business efficacy to the Contract because otherwise the Contract would operate capriciously, unreasonably and inequitably; (c) it goes without saying because the parties hypothetically and objectively assessed would have said ‘of course’ that should be the position if the issue had been raised; (d) it is capable of clear expression;

299

Citing Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 372; Trollope & Coles Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 at 609; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 407. 300

(1982) 149 CLR 337.

301

(1982) 149 CLR 337 at 348-353 per Mason J.

302

[2017] SASC 69 [59].

303

Ibid [41].

304

Ibid [42].

305

(1977) 180 CLR 266.

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THE ARBITRATOR & MEDIATOR JUNE 2017 (e) it does not contradict the express terms of the Contract; and (f) it is entirely consistent with the effect of the contract under the statutory ‘opt-out’ scheme prevailing at the time of the Contract.306

Failure to give reasons Having been satisfied that the parties had agreed to include a right to appeal an award, Justice Blue then had to determine whether leave to appeal should be granted. Pursuant to section 34A(3), leave to appeal may be granted where: (a) the determination of the question will substantially affect the rights of one or more of the parties; and (b) the question is one which the arbitral tribunal was asked to determine; and (c) on the basis of the findings of fact in the award: (i) the decision of the tribunal on the question is obviously wrong; or (ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and (d) despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the Court to determine the question. Noting that it was difficult to comprehensively understand the case, evidence and arbitration in its entirety due to the limited material before him on appeal, Justice Blue found that the arbitrator’s reasoning for the denial of Ottoway’s cross claim was insufficient.

Decision obviously wrong In respect of the arbitrator’s rejection of the cross claim, Ottoway submitted that the arbitrator ‘did not refer to much of the evidence given by the witnesses, did not refer to any oral evidence, did not accept or reject the evidence of any witness and did not give reasons for preferring the evidence of any witness over any other witness’,307 and therefore the arbitrator’s decision was ‘obviously wrong’. The Court refused to conclude that it was ‘obvious’ that the arbitrator’s reasons did not comply with the form and content requirements in subsection 31(3) of the Act which provides that an award ‘must state the reasons on which it is based, unless the parties have agreed that no reasons are to be given…’. The Court said that, to do so, it would be necessary to hear arguments as to the standard of reasons required of an arbitrator, and no such arguments were presented on the application for leave to appeal.308

306

[2017] SASC 69 [44].

307

Ibid [125].

308

Ibid [134].

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Decision open to serious doubt In evaluating the arbitrator’s decision (in particular, the 17 pages of reasons for the dismissal of the cross claim), Justice Blue noted that the arbitrator’s references to written evidence were confined to evidence that supported ASC’s case.309 Further, His Honour stated that it was difficult to identify from the reasons a clear picture of Ottoway’s case on the cross claim or the evidence relied on by Ottoway.310 Accordingly, His Honour concluded that the failure to give reasons for key findings made it at least open to serious doubt that the arbitrator’s reasons did not comply with subsection 31(3) of the Act.311

General public importance Finally, the Court found that judicial consideration of the standard required of an arbitrator’s reasons under subsection 31(3) of the Act is a matter of general public importance.312 The history of litigation in this area is conflicted. In Oil Basins Ltd v BHP Billiton Ltd,313 the Victorian Court of Appeal provided detailed guidance as to the nature and extent of the reasons required to be given by an arbitrator. Later, in Gordian Runoff Limited v Westport Insurance Corporation,314 the New South Wales Court of Appeal gave similarly detailed but contradictory guidance. Then, in Westport Insurance Corporation v Gordian Runoff Limited,315 the High Court of Australia imputed that ‘a gloss should not be put on the words of the statutory requirement for reasons to be given, the subject matter and extent of reasons will depend on the circumstances of the case, and more specific guidance will need to await subsequent cases’.316 As such, Justice Blue concluded that there is a pressing need to ‘determine afresh the nature and extent of the reasons required to be given by an arbitrator’.317 Ottoway’s case required such a determination, therefore leave to appeal to the Supreme Court of South Australia was granted.318

Broader implications? This jurisprudence on the effect of amendments to legislation that change ‘opt out’ provisions to ‘opt in’ need not cause concern in relation to the relatively recent changes to the IAA whereby the confidentiality provisions conversely changed from ‘opt in’ to ‘opt out’. These amendments brought the IAA into line with the expectation that arbitration proceedings are confidential unless parties agree otherwise. This case need not cause concern however, because the amended legislation specifically states that it applies

309

Ibid [113].

310

Ibid.

311

Ibid [134]-[135].

312

Ibid [136].

313

(2007) 18 VR 346.

314

(2010) 267 ALR 74.

315

(2011) 244 CLR 239.

316

[2017] SASC 69 [78].

317

Ibid [136].

318

Ibid [142]. Note that as this is an appeal from an award, the appropriate court is the Supreme Court of South Australia, rather than the Court of Appeal of the Supreme Court of South Australia.

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THE ARBITRATOR & MEDIATOR JUNE 2017 only to international arbitration agreements concluded on or after 14 October 2015, and any arbitration proceedings arising out of those agreements. The clear transition date in the IAA means that these amendments should not cause the same confusion as the adoption by the domestic commercial arbitration acts of the â&#x20AC;&#x2DC;opt inâ&#x20AC;&#x2122; right of appeal against awards which seemingly apply to all arbitration agreements, whether made before or after the commencement of the new legislation. Legislators in each state and territory may wish to consider addressing the ambiguity in this space. As seen in Ashjal and Ottoway, different approaches have been taken in relation to section 34A in different jurisdictions. As it stands, the absence of clear transitional provisions, and the lack of consistency in judicial interpretation across Australia may continue to cause problems for parties to contracts that predate any of the domestic commercial arbitration acts. * The author would like to thank Hannah Fas, research clerk of McCullough Robertson, for her assistance in the preparation of this article.

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Book Review International Arbitration: Law and Practice (2nd edition, 2016) by Gary B. Born Caroline Kirton QC319

This book should be compulsory reading for anyone who is embarking on their studies in international arbitration and for practitioners who want an overview of the international arbitral process. It aims to provide an introduction to international commercial arbitration, international investment arbitration and state-to-state arbitration. Its target is an audience of readers who are law students, general practitioners and others seeking an introduction to the international arbitral process.320 However for the more seasoned practitioner practicing in international arbitration it is nevertheless a useful book. It provides a rich source of information and also a clear and concise treatment of each of the topics covered. The text is liberally referenced with footnotes with extensive commentary and references. Some of the footnotes are cross-referenced to the commentary in the author’s three volume publication International Commercial Arbitration.321 This book is written from a comparative law perspective, focusing on international and comparative authorities and practices rather than the approach of any single jurisdiction. It aims to introduce to the reader the ‘emerging constitutional structure and practice of international arbitration rather than the domestic approach to arbitration in particular jurisdictions’.322 International Arbitration: Law and Practice starts with a chapter ‘Introduction to International Arbitration’. The book is then divided into three parts. Part I covers arbitration agreements, Part II covers arbitral proceedings and Part III covers arbitral awards and also investor state and state-to-state arbitration. The book also conveniently includes as annexures the UN Convention on the Recognition and Enforcement of Foreign Awards (New York Convention); the UNCITRAL Model Law on International Commercial Arbitration;323 and the UNCITRAL Model Law on International Commercial Arbitration – 2006 Revisions. The chapter ‘Introduction to International Arbitration’ commences with a discussion of the definition of arbitration and distinguishing arbitration from other forms of alternative dispute resolution. The chapter considers the reasons that arbitration is widely regarded as the preferred method of resolving international commercial disputes and usefully summarises the discussion in a boxed checklist. Boxed checklist summaries are used throughout the book and are helpful in concisely focusing main discussion points.

319

Caroline Kirton QC, FCIArb, DiplCArb. Victorian Bar, Owen Dixon Chambers West.

320

Gary Born, International Commercial Arbitration: Law and Practice (Wolters Kluwer, 2nd ed, 2016) xxvii.

321

Gary Born, International Commercial Arbitration, (Wolters Kluwer, 2nd ed, 2014).

322

Born, above n 2, xxvii.

323

Adopted 21 June 1985 by United Nations Commission on International Trade Law.

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THE ARBITRATOR & MEDIATOR JUNE 2017 The introductory chapter considers the popularity of international arbitration with a table and graph demonstrating that caseloads at leading arbitral institutions have increased between ‘two and tenfold in the past 20 years’.324 The chapter considers contemporary international arbitration conventions and the multi-tiered legal regime with national arbitration legislation, institutional arbitration rules and arbitration agreements. This multi-tiered regime is helpfully depicted by a flow chart.325 The chapter then considers ad hoc and institutional arbitration and significant elements of international arbitration agreements. There is an overview of the choice of law issues and then a brief introduction to investor-state arbitration and state-to-state arbitration. Chapters 2 to 5 are included in Part I covering international arbitration agreements. Chapter 2 covers the legal framework for international arbitration agreements, including the jurisdictional requirements for the New York Convention and national arbitration legislation. It also covers the separability of arbitration agreements, the competence-competence doctrine and the law relating to formation, validity and interpretation of international arbitration agreements. Chapter 3 covers the formation and validity of arbitration agreements and Chapter 4 covers the interpretation of these agreements. Chapter 5 discusses the circumstances in which non-signatories may be held to be parties to the arbitration agreement and consequently bound by an arbitration agreement. Chapters 6 to 14 are included in Part II covering international arbitral proceedings from a practical perspective. Chapter 6 covers the legal framework applicable to the arbitral proceeding and in particular the significance of the ‘arbitral seat’ and the ‘procedural law’ or ‘lex arbitri’. This chapter includes a pragmatic discussion on the selection of the arbitral seat and the arbitral seats that are commonly selected by parties in practice. Chapter 7 covers the selection and removal of arbitrators. Chapter 8 covers procedural issues, where key procedural steps are discussed. A diagram of ‘Key Procedural Events in Many International Arbitrations’326 is most useful. The role of disclosure or discovery is considered in Chapter 9 and the nature and scope of confidentiality of international arbitrations in Chapter 10. The final chapters in Part II cover provisional (or interim) relief; the procedural treatment of multiparty disputes; the choice of law applicable to the merits of the parties underlying dispute; and the representation of the parties and the standards of professional conduct applicable to party representatives. Chapters 15 to 18 are included in Part III. Chapter 15 covers the legal framework that is applicable to international arbitral awards. It also discusses the form and content of awards, different types of awards as well as the issues of relief, costs and interest in international awards. Chapters 16 and 17 cover the setting aside or annulment of awards and the recognition and enforcement of awards. The final Chapter 18 covers investor-state and state-to-state arbitration and provides an excellent introduction to these topics which can to the uninitiated seem impenetrable. International arbitration law is plagued by acronyms. A glossary of selected acronyms would further enhance this useful book. As the book is targeted to an audience that includes students, it would be most helpful to have a glossary as a single point of reference to assist in reminding the reader the meaning of various acronyms used throughout the book.

324

Born, above n 2, 15.

325

Born, above n 2, 17.

326

Born, above n 2, 167.

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THE ARBITRATOR & MEDIATOR JUNE 2017 This book is well priced and is excellent value for money. The other book that targets a similar audience is the student version of Redfern and Hunter on International Arbitration.327 Both are excellent books. International Arbitration: Law and Practice should be on the bookshelf of all who are seriously studying or practicing in the area of international commercial arbitration and all who simply want to get a thorough understanding of this area.

327

Nigel Blackaby, Constantine Partasides QC et al., Redfern and Hunter on International Arbitration (Oxford University Press, 6th ed, 2015).

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Book Review Negotiation: Things Corporate Counsel Need To Know But Were Not Taught by Michael Leathes Donna Ross328

In NEGOTIATION - Things Corporate Counsel Need To Know But Were Not Taught329 Michael Leathes shares his vast experience as corporate counsel and mediator and offers us, under the cover of one book, a treasure trove of knowledge and references to a wealth of leading works and studies. The bibliography and the appendices alone constitute an invaluable resource. While aimed at corporate counsel, the book, which provides detailed descriptions of negotiation methods for deal-making and dispute resolution, is a must read not only for in-house counsel, but for external counsel, mediators, business owners and anyone interested in learning or honing negotiation, deal-making and dispute resolution techniques. The author laments, and rightly so, that law schools do not offer negotiation courses - the assumption is that negotiation is a soft skill that, unlike hard skills, cannot be taught. Yet this book is peppered with references, tools, guidelines for choosing appropriate techniques and practical, commercial examples making it extremely valuable as a didactic tool and proof that these are hard skills that can be learned. This view may explain why many lawyers approach negotiation with little preparation, the key factor to a successful outcome. Preparing for the negotiation involves a number of steps, enumerated in Chapter 2, but as important, is preparing yourself. The latter includes what Leathes refers to as a ‘brand essence’, which is supported by your on-line persona. All-important first impressions of a negotiator or mediator may be forged prior to the first handshake or telephone call. Preparing the other side, as well as counsel for a dialogue or ‘thinking together’ rather than positional sparring is also part of this process. One of the highlights is the definitions found in Chapter 8 on Disputes. First, that mediation is ‘negotiation facilitated by a trusted neutral person’. And that negotiation and mediation are not ‘alternative’, but should be the prime method of resolving disputes with litigation and arbitration being the alternative means when negotiations fail. Having heard the various definitions of ADR, from alternative to appropriate to amicable, this is by far the most logical in my opinion. Thus, Leathes refers to negotiation and mediation almost interchangeably. As a rule, he favours the use of a neutral to handle the process, including in deal facilitation as he terms it. In the same Chapter 7 on Process, he also states that among the prime reasons negotiators are reluctant to use a neutral are habit, fear and ego. Chapter 3 on Neuroscience gives a fascinating overview of the brain’s three ‘operating systems’ and how they can be used to control emotional reactions and improve negotiating skills, including the impact of

328

LL.M., Maîtrise en droit (Hons); Nationally-Accredited Mediator, Arbitrator (FCIArb), Attorney-at-Law.

Michael Leathes, NEGOTIATION – Things Corporate Counsel Need To Know But Were Not Taught, (Kluwer Law International, 2017). 329

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THE ARBITRATOR & MEDIATOR JUNE 2017 eating schedules on decision-making due to glucose and oxygen requirements of different parts of the brain. One recurrent theme is early relationship building. This is elucidated in Chapter 4 on Culture, which is devoted to cultural understanding, models and to some extent the East-West divide, although in my opinion, many of the tools used and described by Leathes reflect a combination of cultures or at times are low context in nature. The section entitled Facework, on saving and restoring face is particularly informative. No negotiation book would be complete without mentioning BATNAs, ATNAs and the techniques promulgated by Fisher and Ury in Getting to Yes. However, in addition to the usual suspects, which also include ZOPA (Zone of Potential Agreement), anchoring and reality testing, Chapter 10 on Techniques introduces us to defrosting, contra-flow, low hanging fruit, reciprocity and parking. I would urge all to read this book to uncover the meaning of these seemingly esoteric but extremely useful tools. With respect to both negotiation and anchoring, Leathes calls upon his extensive experience to disprove the myth that making the first overture is a sign of weakness. Throughout the book he offers tips on how to do this wisely. Although counsel is often of the view that it is better to react to an offer from the other side, anchoring (described in detail in Chapter 5 on Leverage) can have subconscious effects and provide leverage to the party making the first offer. Negotiation and communication - that is communication for understanding - are inseparably intertwined. Chapter 6 on Communicating provides precious tips and tools with concrete examples of how to build trust and create bonds, and discusses in depth non-verbal signals and EI or emotional intelligence. The takeaways of this chapter are the sections on apologizing, framing to appeal to the ‘safe mode’ of a riskadverse party and having meals together and walking, an exercise that has the parties moving together in the same direction. Although the majority of lawyers pay little attention to process, it is important to select the right process as well as the right neutral for each negotiation. Chapter 7 deals primarily with deal facilitation and through commercial examples focuses on how to get the other party’s agreement to engage a deal facilitator. One rationale for this is that dispute-wise companies are seemingly more profitable and successful. Another recurrent theme is early dispute resolution through negotiation, before an adversarial process has begun and disputants lose control as the lawyers, judges or arbitrators take over and opportunities for consensus-building and dialogue are lost. One example of this in Chapter 8 is the Glasl Escalator, which illustrates the phases of conflict escalation. A win-win outcome can usually be achieved in the first phase, when negotiation is still possible. As the dispute advances it becomes harder and harder to deescalate the conflict, after which win-lose or even lose-lose outcomes are more probable. However, often external counsel’s only modus operandi is what has been coined Litigation as Usual or LAU. Lawyers of this type are referred to as ‘warriors’. At times the reason for refusing negotiation is the alleged need for more information to assess settlement options, yet the delay itself can thwart the process. Other times the reason is less lofty, as it is just to keep the fee clock ticking. Or it can be simply that lawyers are not versed in true advocacy, defined as the ability to effectively represent parties in assisted or one-on-one negotiation. And then there are of course cases in which litigation or arbitration might be the necessary choice, for instance if a legal right or precedent needs to be established or the other party simply refuses to negotiate despite all efforts. As a strong proponent of multi-step clauses, I couldn't agree more with the proposition that the most effective way to bring the other party to the negotiating table is to include a multi-step dispute resolution clause. Outside counsel, who often provide DR clauses, tend to prefer court or arbitration. I have heard many say that the parties can always mediate or negotiate if they want. I wholeheartedly agree with

110

THE ARBITRATOR & MEDIATOR JUNE 2017 Leathes that once a dispute has arisen, parties become entrenched in their positions and make emotional, rather than rational decisions. Hence the value of having a formal dispute resolution process early in the life cycle of a dispute. The smart approach is to use step clauses in all contracts, according to the author who proffers several novel ideas for particular circumstances, such as a collaborative law â&#x20AC;&#x2DC;stepâ&#x20AC;&#x2122;, a guanxi clause entitled Amicable Resolution from the Chinese concept of reciprocity (described more fully in Chapter 4 on Culture) or, for example, the Singapore Arb-Med-Arb Clause and Protocol (found in Appendix 5). Last, but far from least, a constant thread in this book is the importance of ethics and integrity. Chapter 9 on Ethics includes strategies to avoid crossing the line between accepted forms of bluffing and misrepresentation and the need for ethical courage, defined as the willpower to do the right thing despite the consequences. Leathes shares with the reader his seven principles for achieving this and proposes the creation of an International Code of Negotiation Ethics. With the roles of lawyers changing and companies taking a more hands-on approach to deal-making and dispute resolution, the days of external counsel dictating strategy and tactics directly to the client or to corporate counsel will soon be gone. This book is a clarion call to litigators to learn to work with corporate counsel to find creative strategies and processes for successful outcomes, and to corporate counsel to retain or regain control of the negotiation process. Not only would this be in line with their respective ethical duties, but it would be a perfect example of a win-win situation.

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Book Review Arbitration and Contract Law, Ius Gentium: Comparative Perspectives on Law and Justice by Neil Andrews Alexis Cahalan330

Lawyers and experts in London have historically had the opportunity to gain experience in the field of international commercial arbitration by virtue of being at the centre of a vibrant commercial and mercantile community. Increasingly with the incorporation of London arbitration clauses in international commercial contracts, non-English based lawyers have a need to become familiar with English arbitral jurisprudence. Professor Andrews’ Arbitration and Contract Law provides a critical text to inform all practitioners, but especially those unfamiliar with the workings of the English arbitral system, of the content and workings of English arbitration law. Professor Neil Andrews was educated at Brasenose College Oxford and is currently a Professor of Civil Justice and Private Law at the University of Cambridge, UK, where he has been a member of the teaching staff since 1983. Professor Andrews has written prolifically in the field of common law contract law and is also a renowned academic and author in the field of English civil procedure.331 His area of expertise has more recently expanded into the areas of dispute resolution and arbitration.332 Professor Andrews has also acted as an expert on aspects of procedure and contract law in transnational disputes. The text helpfully divides this extensive topic into three manageable and understandable areas. Firstly, it examines the agreement to arbitrate itself. Secondly, it considers the extent to which the agreement to arbitrate monitors the fidelity of the tribunal and its accuracy in applying the substantive law which governs the dispute. Thirdly, because the agreement to arbitrate often has its genesis in a contract, the author analyses the types of contractual rules which often arise in an arbitration. Advocates of arbitration will be familiar with the consensual nature of an arbitration clause which is examined in some detail in the first part of the book. For those new to the arbitration environment, the author unpacks the nature of the agreement while highlighting the features of an arbitration agreement. These include the need for a clear commitment to arbitrate, identifying the ‘seat’ of the arbitration, the identification of the law of the dispute, the law governing the agreement to arbitrate and the law which applies to the arbitral process. The text also helpfully explains some of the practical considerations in conducting an arbitration such as appointing the Tribunal and the circumstances in which related disputes can be consolidated. Overall, it also provides important information for those involved in drafting arbitration clauses or in activating an arbitration clause. For practitioners unfamiliar with the Arbitration

330

BA, LLB, LLM, University of Sydney, Principal Lawyer Thomas Miller Law Pty Ltd, Sydney.

331

Neil Andrews, Contract Law (Cambridge University Press, 2nd Edition, 2015); Neil Andrews, Andrews on Civil Processes (2 vols) (Intersentia, 2013). 332

Neil Andrews, The Three Paths of Justice: Court Proceedings, Arbitration and Mediation in England (Springer International Publishing, 2012).

112

THE ARBITRATOR & MEDIATOR JUNE 2017 Act 1996 (UK) the text comprehensively analyses the relevant provisions of the legislation which seeks to balance efficiency and fairness subject to the constraints of the parties’ agreement to arbitrate.333 The second part of the book deals with the way in which English courts maintain the ability to monitor the arbitral tribunal’s compliance with substantive law, notwithstanding the balance required to be struck with ensuring the finality of arbitral awards. Professor Andrews considers that it is an important feature of the English system which allows appeals from an award where a point of English substantive law is in issue and he discusses in some detail the ability to do so pursuant to section 69 of the Arbitration Act 1996.334 There is also a useful discussion on drafting techniques in the event parties wish to exclude the avenues to appeal questions of substantive law pursuant to section 69.335 The balance of this chapter clearly evidences Professor Andrews’ expertise and interest in civil procedure and dispute resolution taking into account cross border perspectives. He was, relevantly, a co-author of the American Law Institute, Unidroit Principles of Transnational Procedure (2006). Some consideration is given in this part to instances of cross border enforcement of commercial awards under the New York Convention (1958) and the situations in which an enforcing court can refuse the recognition and enforcement of awards.336 With over 140 countries signatories to the Convention, Professor Andrews considers ‘this instrument is the greatest success of modern international commercial arbitration’.337 The third part of the book is a comprehensive review of contractual doctrines.338 Practitioners will be familiar with arbitrations which have their provenance in a contract where other aspects of the contract are in dispute. This could be the terms or the timing of performance, breach of terms of the contract and what compensation might be payable as a result or termination of a contract. This section of the work provides an informative analysis of the main, rather than all the doctrines which might apply of English contract law: freedom of contract, the objective principal, in other words conduct and language are to be given their apparent meaning, the binding force of agreement (pacta sunt servanda) and estoppel. Professor Andrews opines that there is a fifth principle in the waiting, one of good faith and fair dealing together with a summary of the basis of the hierarchy of the English courts. The value in this text for lawyers who practice in arbitration is the ordered presentation of central contractual doctrines ranging from the interpretation of written contracts, implied terms and typical processes of terminating contracts. Finally there is a discussion of judicial remedies for the enforcement of debts along with interim remedies such as injunctions and specific performance. In an increasingly dynamic international legal environment where arbitration is intertwined with traditional court-based dispute procedures, Professor Andrews’ work is an invaluable reference for those who may be unfamiliar with English contract law and common law contract lawyers who require assistance with understanding the complexity of English contract law in the context of arbitration. The extensive footnoting with case citations and comprehensive bibliographical references will be extremely

333

Neil Andrews, Arbitration and Contract Law, Ius Gentium: Comparative Perspectives on Law and Justice (Springer International Publishing, 2016) [1.1-7.6]. 334

Ibid 131-137 [8.2-8.4].

335

Ibid 138-140 [8.5-8.7].

336

Dallah Real Estate & Tourism Holding Co v Pakistan (2010) UKSC 46 which held that a Paris award could not be recognised in the UK under the New York Convention (1958). 337

Andrews, above n 4, 144.

338

Ibid 165-335 [10.01-17.10].

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THE ARBITRATOR & MEDIATOR JUNE 2017 useful for those who require further elaboration of particular issues, case law, legislation and academic treatises.

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Notes for Authors Contributions to the Journal are welcome, and should be sent to: Russell Thirgood General Editor of The Arbitrator & Mediator Resolution Institute Level 2, 13-15 Bridge Street Sydney NSW 2000 P: 02 9251 3366 E: infoaus@resolution.institute

If you are interested to contribute an article, book review or case note, the following criteria are required for acceptance:

Manuscript 1.

Authors are required to denote their details including postnominals, position, organisation and other relevant information (50 words or less) in the first footnote of the manuscript.

In all submissions, the first footnote should denote the author’s name, position and other relevant information.

The manuscript should be provided electronically via email in Word format.

Authors should provide an abstract of the manuscript (60 to 100 words) to be included at the beginning of the published submission.

Word length for the manuscript should be approximately 3000 to 5000 words for articles, 1000 to 2000 words for case notes, and 750 to 1000 words for book review. Case notes should provide a brief outline of the facts and judgment together with evaluation and analysis of the importance of the decision for alternative dispute resolution.

The manuscript should be in its final form, as corrections on proofs will generally be limited to literal errors or changes necessitated by legislative developments. However, manuscripts may on occasion be edited to correct spelling and syntax errors, clarify meaning, or enhance expression. Minor amendments may occur without the editor seeking the author’s approval. The author will normally be consulted should major changes be considered advisable.

When preparing the manuscript, please refer to the, Style Points, on the next page. More detailed information is available from the Australian Guide to Legal Citation (AGLC), published by Melbourne University Law Review Association. An online copy of the AGLC is available at: www.law.unimelb.edu.au/files/dmfile/FinalOnlinePDF-2012Reprint.pdf. The recommended dictionary is the Macquarie Dictionary.

Authors are totally responsible for the accuracy of case names, citations and other references, spelling of judges names, accuracy of quotations, etc.

It is assumed that submissions for The Arbitrator & Mediator have not been sent to another publisher or journal or that the material published in the journal has not been already published elsewhere. (It is the author’s responsibility to inform the editor if the article has been submitted to

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THE ARBITRATOR & MEDIATOR JUNE 2017 another publisher or journal.) It is Resolution Institute’s Policy to publish material that has been published only with the agreement and/or acknowledgement of the previous publisher. 10. Articles published in The Arbitrator & Mediator are critically appraised or reviewed by external academic or professional peers of the authors.

Style Points General 1.

Levels of headings should be clearly indicated (no more than five levels).

Authorised reports should be used in citations.

Gender-neutral language should be used.

Quotations use single quotation marks. Double quotation marks are reserved for use within a quotation. Use a colon to introduce block quotations.

Ensure that hyphens and dashes are differentiated.

Use a colon to introduce lists set off from the text, and to introduce run-on lists except those that begin with for example, that is, including, such as and so on, which do not require punctu- ation.

Abbreviations (except those that begin with an initial capital, e.g.‘Mon.’) and contractions do not take a full stop.

Citations In all submissions, case, legislation, book, journal and internet citations should appear not in the text but as footnotes, numbered consecutively throughout. All citations must conform to the AGLC (see 7 above). The following style is preferred: Cases: Case citation follows case name. Case names should generally be omitted in accompanying footnote when referred to in the text. Abbreviated case names may be used in references subsequent to the initial citation. Abbreviated case names should be italicised in parenthesis following initial citation, e.g. Imperial Leatherware Co Pty Ltd v Macri & Anor (Imperial Leatherware). Legislation: International Arbitration Act 1974 (Cth). Abbreviations should be used in pinpoint references to delegated legislation, excepting at the start of a sentence. Books: Doug Jones, Commercial Arbitration in Australia (Thomson Reuters (Professional) Australia Limited, 2011) 14. Tania Sourdin, Alternative Dispute Resolution (Thomson Reuters (Professional) Australia Limited, 4th ed, 2012) 10. Journal Articles: Scott Ellis,‘Arbitrators and Self Represented Parties’ (2004) 23 (3) The Arbitrator & Mediator 20, 20–25.

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THE ARBITRATOR & MEDIATOR JUNE 2017 Internet references: References should include (where available): author, document title, year, website name, pinpoint reference, URL and date of retrieval. The URL should be enclosed within angle brackets. The following style is preferred: Pat Marshall, ‘Understanding Mediation from the Client’s Perspective’ (2015) LEADR & IAMA ‘kon gres <www.resolution.institute/documents/item/1735>. In footnotes,‘op cit’,‘loc cit’, ‘supra’ and ‘infra’ should not be used. The abbreviated form of the title and surname of author(s) should appear in subsequent references. Ibid should not be used to refer to a source of legislation, but the legislation should be cited in full in all subsequent references. Cases and treaties should be cited in full in all subsequent references. Subsequent references to a source other than legislation, cases and treaties should use ‘above n’. Ibid should be used to refer to source in the immediately preceding footnote (whether ‘above n’ or full citation). Pinpoint references should only appear if a different page number is referred to. For example: Doug Jones, Commercial Arbitration in Australia (Thomson Reuters (Professional) Australia Limited, 2011) 14. 1.

Ibid. 57.

Scott Ellis, ‘Arbitrators and Self Represented Parties’ (2004) 23(3) The Arbitrator & Mediator 20, 20– 25. 3.

Jones, above n 1, 33.

Deadline for Submissions The Journal is published two times a year and submissions are due eight weeks before publication. Late submissions may be considered for future editions. Further details are available on our website at: www.resolution.institute/membership-information/journal.

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THE ARBITRATOR & MEDIATOR JUNE 2017

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THE ARBITRATOR & MEDIATOR JUNE 2017

About Resolution Institute Resolution Institute is a vibrant community of mediators, arbitrators, adjudicators, restorative justice practitioners and other DR professionals. Created as a result of the integration of LEADR with IAMA in 2014, we are a not-for-profit organisation with more than 3,500 members in Australia, New Zealand and the Asia Pacific region. Our offices are in Sydney (Australia) and Wellington (New Zealand). What our organisation does • Keeps members informed - our website, newsletter and events provide up to date news and information • Develops the skills of DR practitioners - we have lots of CPD offerings • Establishes and supports state and regional Chapters and special interest groups - DR practitioners come together to connect, network and learn • Provides high quality mediation training and accreditation • Promotes the use of mediation and DR - DR can help prevent, manage and resolve conflict and disputes in business, workplaces, families and communities • Provides a voice for DR practitioners in public discussion about DR - we gather and represent members' views • Provides an up to date listing of mediators and other DR practitioners - on this website, look for these in Resolving a Dispute • Administers building and construction industry payment disputes and domain name disputes in Queensland, South Australia, Western Australia, Northern Territory, New South Wales, Victoria and Tasmania • Assists organisations to develop effective dispute resolution processes.

10 great reasons to join Resolution Institute 1. We are a community of more than 3,500 members with an influential presence across

Australasia and in the Asia Pacific region 2. We are owned by our members 3. Our members govern our organisation - the Board of Directors are members elected every

two years by the membership 4. Members set our strategic direction - the Board of Directors regularly engages in strategic

planning processes 5. Members have a voice on the organisation's future directions and on ADR issues - we

regularly seek input and feedback from members 6. We reinvest any financial surplus to secure its future, to deliver services to members and to

promote DR in the community 7. We keep members informed through monthly editions of our e-newsletter, Pulse, through

regular news and issue specific communications and through the extensive range of relevant resources on this website 8. We deliver opportunities to connect with colleagues and engage in CPD through regular webinars, local networking events, training programs, masterclasses and conferences 9. We provide quality accreditation and grading services in mediation, arbitration, adjudication, probity services and conflict management coaching, including national mediation accreditation (NMAS). Resolution Institute is the only qualifying assessment program for international accreditation with the International Mediation Institute (IMI) in Australasia 10. Our Professional and Fellow members have access to a competitive Professional Indemnity and Public Liability Insurance package and complaints handling service. We undertake to handle complaints sensitively, respectfully and carefully. To find out more, visit http://www.resolution.institute/membership-information/become-a-member.

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Resolution Institute is a vibrant community of dispute resolution (DR) professionals including mediators, arbitrators, adjudicators, restorative justice practitioners. Resulting from the integration of IAMA into LEADR, Resolution Institute is a not-for-profit organisation with more than 3,500 members in Australia, New Zealand and the Asia Pacific region. Resolution Institute encourages business, government and the community to use resolution processes to prevent, manage and resolve disputes, to assist in robust planning and decision making and to foster sound relationships.