WARLEY PTY LTD v ADCO CONSTRUCTIONS PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KirBy P, HOPE and MCHUGH JJA 21 October 1988, 30 November 1988 [1988] NSWCA 166 ARBITRATION — commercial arbitration — building dispute — arbitrator finds "minor" flooding of building — rejects proprietor's counter-claim against builder for delays and costs — application for leave to appeal to Supreme Court refused — whether appellant has shown any question of law arising out of the award — appellant concedes that there was some evidence upon which the arbitrator could find as he did — argues that award is one which no reasonable arbitrator would have made upon the evidence — whether any such argument raises a question of law" — held: (1) No question of law is raised. Azzopardi v Tasman UEB Industries Limited (1985) 4 NSWLR 139; Soulemezis vy Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247 applied; (2) It is unnecessary to determine whether, if there were an error of law, it arose "under an award". Universal Petroleum Co Limited v Handels und Transport GmbH (1987) 1 WLR 1178 referred to. APPEAL — question of law — meaning of — arbitration — whether intention that award is one which no reasonable arbitrator could make raises a "question of law" — held: It does not. Azzopardi vy Tasman UEB Industries Limited (1985) 4 NSWLR 139 applied. (Per Kirby P) Semble it does raise a question of law but the decision in Azzopardi requires a contrary conclusion. Pioneer Shipping Limited and Ors vy BPT Tioxide Limited [1982] AC 724, 742 referred to. LAW REFORM — appeal — appeal limited to question of law — allegation that finding of fact perverse, unreasonable or grossly wrong — whether such errors sufficient to constitute a question of law — suggestion (per Kirby P) of the need to reconsider a provision for appellate review of grossly erroneous or perverse fact finding where the appellate court is confined to review of questions of law. WORDS AND PHRASES — "question of law". Commercial Arbitration Act 1984, s29(1), s38. Compensation Court Act 1984, s32(1) Arbitration Act 1979 (UK), s1(5). ORDER (By majority) 1. Leave to appeal revoked. 2. Summons for leave to appeal dismissed. 3. Appellant to pay costs of summons and of appeal. Kirby P Smart J dismissed an application for leave to appeal from an award of an arbitrator. The award was made in a building dispute which arose between the parties to this appeal. Explaining the reason for his refusal to grant leave, Smart J took some pains Co examine decisions of the English courts upon similar applications for review of arbitral awards in that country. He examined the suggested differences between the Commercial Arbitration Act 1984 (the Act) and the legislation of, and court decisions in, other jurisdictions. He also cast a passing glance at the issues of policy which might suggest restraint in curial supervision of arbitral awards. He then concluded: 2 UNREPORTED JUDGMENTS "T can understand the dissatisfaction of the proprietor with the findings of the arbitrator. However, the facts are for the arbitrator and I refrain from expressing any view upon them. This case turned upon the assessment of the facts. The application does not raise questions of law arising out of an award. Leave to appeal is refused". "Question of law arising out of the award" The necessity to establish "a question of law arising out of the award" is required in this State by s38(2) of the Act. It is to be noted that there are two components to the phrase. There is a requirement that there should be a question of law. There is a further requirement that it should be one "arising out of an award". Much of the argument before Smart J, (reviewed in his Honour's judgment and continued in this Court), concerned the importance to be attached to the phrase "arising out of an award". Is it a phrase merely adjectival and descriptive so that any question of law arising out of the arbitration, as finalised by the award, may be brought by an appeal (by leave) to the Supreme Court? See s38(4)(b). Or is the phrase one of delimitation, so that only questions of law which arise "out of the award" (as distinct from out of the arbitration generally), are capable of qualifying as an appeal which, by leave, may be brought to the Supreme Court? The latter, narrower view has been adopted in England. It was first pronounced by Robert Goff LJ in Mondial Trading Co GmbH v Gill and Duffus Zuckerhandelsgesellschaft mbH [1980] 2 Lloyd's L Rep 376. It was restated by his Lordship in Barenbels [1985] 1 Lloyd's L Rep 528, 532. Goff LJ's view was sealed with the approval of the English Court of Appeal in Universal Petroleum Co Limited v Handels und Transport GmbH [1987] 1 WLR 1178. The English view was embraced by the respondent both before Smart J, and in this Court. It relied also upon the reasons of the policy which it suggested lay behind the local legislation. This was, primarily to discourage curial disturbance of fact-finding by arbitrators and even of decisions of law anterior to their awards. The appellant, on the other hand, contested the applicability and acceptability of the English authorities in the context of the local Act. By reference to a close analysis of the language, structure and history of the local Act, and the suggested contrast of its terms with certain provisions of the English legislation, the appellant urged that the phrase "arising out of an award" should not be given the narrow construction given to it in England. It was in this way that a significant question of law was raised by the case. The Court, on 15 August 1988, gave leave to the appellant to appeal. It expedited the hearing of the appeal. However, the respondent filed a notice of contention shortly before the return of the appeal. By it, the respondent urged that the decision of Smart J to refuse leave to the appellant to appeal could be supported upon a different ground, not stated by his Honour. This was that the appellant's attack on the findings of the arbitrator did not give rise to any question of law. Smart J had disposed of the summons before him by deciding the more difficult question of the meaning of the phrase "arising out of an award". But the respondent argued that that question did not have to be dealt with in this case because there was a preliminary and insuperable problem for the appellant. This was that, as formulated, its question was simply one of fact, and not of law. It is convenient to deal with that submission first. If the respondent is correct in its submissions, the Court need not concern itself with whether the question arises out of an award or not. It is simply not such a question as qualifies for leave to appeal, whatever may be the proper categorisation of its origin. URJ WARLEY PTY LTD v ADCO CONSTRUCTIONS PTY LTD (Kirby P) 3 A building dispute is determined by an arbitral award The facts relevant to the case may be stated shortly. The dispute between the parties concerns the aftermath of the construction of a block of home units at Port Macquarie for sale by the appellant. The respondent was both the project manager and the builder of the block. It is a building and construction company. The parties entered into an agreement for the construction and management of the project. The construction agreement followed the form of the printed contract produced by the Master Builders' Association of New South Wales. The agreement contained a clause providing for the submissions of disputes to arbitration. The building was completed by the beginning of 1986. The appellant commenced to sell the home units contained in the building. The appellant required certain rectification work to be performed to deal with what it alleged were serious problems of waterproofing. The respondent attended to this work over several months. It purportedly completed it in December 1986. The appellant's case against the respondent was that, as builder and project manager, it had constructed a building with serious defects of waterproofing. A series of storms occurred in the months of January, February, May, June and August 1986. It was alleged that these storms caused extensive flooding of many of the units of the building. Although the respondent agreed to perform certain rectification work between August 1986 and December 1986, this work did not attend to all of the complaints of the appellant. The appellant further alleged problems with respect to plumbing and other building defects. It alleged that, by reason of the defects of waterproofing, it was forced to take the home units off the market in the middle of 1986. It contended that it was not able to recommence the marketing of the units until the beginning of 1987. It claims a loss of profits and interest as a consequence. It also makes claims for the recovery of miscellaneous items. The respondent disputed the appellant's claims. Pursuant to the agreement the dispute was referred to arbitration. The arbitration commenced in September 1987. It was concluded in October 1987. It was heard by Mr B J O'Mara, arbitrator. Mr. O'Mara on 17 November 1987 published and signed an award'. The award, which is of three pages, contained thirteen findings. It concluded that the appellant was obliged to pay the respondent the sum of $200,068.22 together with the costs of the arbitration. The sum awarded was the sum which had been withheld by the appellant against the amount claimed by it for loss of profits etc. Amongst the findings set out in the award, the arbitrator included findings of "minor water penetration" in the various months complained of by the appellant. The appellant was dissatisfied with the award. Its rejected claim for loss of profits from the sale of the home units was just short of $500,000. It claimed interest payable on moneys borrowed to finance the construction of the home units of slightly more than that sum. Together with a claim for miscellaneous items, it therefore sought against the respondent an aggregate award of more than $1 million. At the heart of its complaint about the arbitrator's award was its brevity and the suggested inadequacy of the reasons given by the arbitrator. It criticised the short elliptical findings of the arbitrator and the allegedly inadequate reasons which he published to support his award. The appellant contended that the conclusions reached were, on the evidence, such that no reasonable arbitrator, applying his or her mind to the evidence adduced, the inferences arising from that evidence and the arguments of the parties, could possibly have reached the conclusions which Mr O' Mara reached. 4 UNREPORTED JUDGMENTS It is important to note that the appellant did not contend that there was no evidence upon which Mr O' Mara could conclude as he did. It conceded that there was such evidence. But what it urged was that the conclusion reached was so grossly disharmonious with the evidence that the decision arrived was plainly wrong or perverse. If gross error of fact-finding and perversity were sufficient to elevate findings of fact into an error of law, the appellant would qualify on the first limb of the requirement of s38(2) of the Act. It would establish a "question of law" which it wishes to argue and for which it seeks the leave of the Court. But the respondent's notice of contention urged that none of the appellant's challenges to the findings of the arbitrator raised a question of law. Somewhat unexpectedly, this became the battleground of the appeal. It was not the ground upon which leave had originally been granted. But it is nonetheless a ground of some importance for the review of arbitral awards. The Court, therefore, did not revoke the leave to appeal previously given. It turned to hear argument on the issue. The stringent test in Azzopardi's case Blocking the way of the appellant's argument was the holding of the Court in Azzopardi v Tasman UEB Industries Limited (1985) 4 NSWLR 139. That case concerned an appeal to this Court from the Compensation Court. By s32(1) of the Compensation Court Act 1984, such appeals are, relevantly, limited to cases of a grievance "in point of law". The appellant in that case sought to argue that, by reason of certain "objective facts", the trial judge had misrepresented the evidence. It was therefore argued that, because of gross errors of fact finding, the Court was entitled to hear the appeal. A demonstrably unsound finding of fact amounted, so it was argued, to an error of law. Fact-finding being an essential part of the judicial function, it was so antithetical to that function to ignore demonstrated and serious error in its performance, that a question of law sufficiently arose to justify the intervention of the Court. Various English authorities were referred in Azzopardi in support of this proposition. Drawing on those authorities, I concluded that our law did not authorise a judge to make a perverse, demonstrably wrong or grossly erroneous finding of fact. In such circumstances, I concluded that such errors would be categorised as errors of law. They would thus sustain the intervention of an appellate court, even one whose jurisdiction was reserved to questions or points of law. However, my view did not prevail. Glass JA (with whom Samuels JA agreed) stated a more stringent requirement. After referring to a number of decisions of the High Court of Australia (notably Shepherd v Felt and Textiles of Australia Limited (1931) 45 CLR 359, 379 and Clark v Flanagan (1934) 52 CLR 416, 428) and of the predecessor to this Court (see McPhee v S Bennett Limited (1935) 52 WN (NSW) 8, 9 and De Gioia v Darling Island Stevedoring and Lighterage Co Limited (1941) 42 SR (NSW) 1, 5), Glass JA stated the opinion which constitutes the holding of the Court in that case: "Tt is clear from these extracts that numerous pejorative expressions in common usage possess a single meaning and are interchangeable. To say of a finding that it is perverse, that it is contrary to the overwhelming weight of the evidence, that it is against the evidence and the weight of the evidence, that it ignores the probative force of the evidence which is all one way or that no reasonable person could have made it, is to say the same thing in different ways. Upon proof that the finding of a jury is vitiated in this way, it will be set aside URJ WARLEY PTY LTD v ADCO CONSTRUCTIONS PTY LTD (Kirby P) 5 because it is wrong in fact. Since the Act does not allow this Court to correct errors of fact, any argument that the finding of a Workers' Compensation Commission judge is vitiated in the same way discloses no error of law and will not constitute a valid ground of appeal. It is also pointless to submit that the reasoning by which the court arrived at a finding of fact was demonstrably unsound as this would not amount to an error of law". Glass JA did concede one exception to the immunity of erroneous fact-finding from appellate review. This was where the fact in question was "necessarily within or outside a statutory description and a contrary decision has been made". Established authority in the Full Court (see Australian Gas Light Co v Valuer General (1940) 40 SR (NSW) 126, 138) and in the High Court of Australia (see Hope v Bathurst City Council (1980) 144 CLR 1, 10) allows this exception to the general rule. But, apart from such exception, the fact-finder is immune from review of decisions on the facts where an appeal is limited to one on a point or question of law. According to Azzopardi, the fact finder, unless concerned with the application of a statute, may make gross, shocking, unreasonable, irrational and even perverse findings of fact. But they did not lose, for those reasons, their character as findings of fact. The pejorative epithets would not elevate fact finding into an error of law. Accordingly, an appellate court, limited to correction of errors of law, had no warrant to intervene in such cases. Application to review Azzopardi is refused The decision in Azzopardi is binding on this Court until overruled by the High Court of Australia or by this Court, after leave to reargue its correctness is given. Proctor v Jetway Aviation Pty Limited [1984] 1 NSWLR 166, 180. The decision has been applied many times in reported decisions of this Court. See eg Mahoney v Industrial Registrar of New South Wales and Anor (1986) 8 NSWLR 1, 2, 6; Haines v Leves and Anor (1987) 8 NSWLR 442, 456, 459, 470, 475; Harris and Ors v Mackenzie and Ors (1987) 9 NSWLR 139; Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 347, 254. It has also been applied in unnumbered cases in this Court which have not found their way into the reports. I content myself with referring to Guven v Goodyear Tyre and Rubber Co (Aust) Limited, unreported, CA 2 December 1986; (1987) NSWJB 18; and Ladado Pty Limited v Kranis, unreported, CA 5 March 1987; (1987) NSWJB 68. Recognising the problem presented to it by the holding in Azzopardi, and by the respondent's notice of contention, the appellant (properly I believe) sought the leave of the Court to reargue the correctness of Azzopardi. It did so upon three grounds. The first of these was that the decision was given per incuriam, because the Court had not been referred to an authority in the High Court of Australia which had applied the English line of decisions to which I referred and which I preferred. The second ground was that the decision was contrary to a substantial stream of decisions in the English courts, in the Federal Court of Australia and in other courts. The third ground was that the decision was wrong, presumably for the kinds of reasons which I had elaborated in my minority decision in Azzopardi and repeated in my decision in Soulemezis (above, at 253-4) where I nevertheless applied Azzopardi. The majority of the Court was of the view that leave to reargue Azzopardi should be refused. It was said, during argument, that the decision was recent, that it merely restated long standing authority (including of the High Court) and was, in any case, right. 6 UNREPORTED JUDGMENTS The objection to sustaining perverse fact finding Consistent with the views which I have stated and restated in the cases referred to, I would have granted leave to reargue Azzopardi. I would have done so because I find it so fundamentally offensive to my notion of the rule of law that a judge, arbitrator or other decision-maker is immune to make perverse, unreasonable, grossly erroneous or otherwise unsustainable decisions on the facts, that I do not believe that our law sanctions such a result. It would be tedious to repeat the reasons which bring me to this view. In Soulemezis (at 253) I summarised them thus: [They] were, (1) the development of the modern history of appeals, the normality of the modern appellate process and the desirability of appropriate appellate scrutiny of primary decisions; (2) the fact that many of the early decisions on the meaning of "questions of law" were based upon a review of jury verdicts which could readily be distinguished from the reasoned decisions of judges which are more susceptible to useful appellate review; (3) the frequency, in other contexts, of full appellate review of factual findings, at least when the appeal court is in as good a position as the trial judge to reach conclusions on the facts; and (4) the conceptual difficulties of distinguishing satisfactorily so-called questions of law from questions of fact and the much wider interpretation given to the phrase "point of law" in at least one stream of English authority; see eg Edwards v Bairstow [1956] AC 14; Instrumatic Ltd v Supabrase Limited [1969] 1 WLR 519, 521...". The same obligation of reasoned decisions which falls upon judges is applied by the Act to arbitrators who make awards. They are required by s29(1)(c) to include in the award "a statement of the reasons for making the award". This statutory obligation to provide reasons appears to be equivalent to the common law obligation imposed on judicial officers to provide such reasons. In the case of arbitrators, the reasons must be such as the Act envisages. I cannot believe that Parliament meant that expression to include reasons which were perverse, irrational, or unreasonably or grossly erroneous, when compared to the evidence which was placed before the arbitrator. The statutory obligation to give reasons is the badge of a rational and just system of arbitration. It is true that Parliament confined an appeal to one arising "on any question of law'. It therefore excluded appeals which are not so categorised. Thus an appeal on a pure question of fact would not come within the statutory phrase. But that is not what the appellant asserts. It asserts such a gross misuse of the fact-finding function as constitutes an error of law. In my opinion this is right. Such errors qualify for consideration if they are otherwise within the statutory requirement as being a question of law "arising out of an award". The High Court decision which the appellant claimed had been overlooked in this Court in Azzopardi was Australian Iron and Steel Pty Limited v Luna (1969) 123 CLR 305. The Court was taken specifically to the judgment of Windeyer J in that case (at 319ff). However, it is plain from a reading of his Honour's reasons and those of the other judges in Luna that the Court was there concerned with the application of an Act (namely the Factories, Shops and Industries Act 1962 s40) to proved facts. Windeyer J recognised this (at 319) when he said: "[W]hen there is uncontradicted, full and indisputable evidence of all relevant factors, whether a particular thing is a thing of a kind referred to in a statute is not a question of whether there is any evidence of a fact. It is whether the facts being known, the thing in question is such a thing. That, I consider, is a matter URJ WARLEY PTY LTD v ADCO CONSTRUCTIONS PTY LTD (Kirby P) 7 for the Court to decide - applying the statutory definition, if there be one, or according to the ordinary meaning of words if there is not". Therefore, I do not consider that his Honour's analysis of the distinction between questions of law, questions of fact and mixed questions of law and fact, constitute part of the holding of Luna. It is simply another example of the exception to the general rule which was acknowledged by Glass JA in Azzopardi It is true that some of the language of Windeyer J in Luna suggests acceptance of the wider test which has been followed in England. Thus at 321, his Honour states: "TW]hen all relevant facts are established, an incorrect conclusion therefrom can amount to an error in point of law". Windeyer J cites in support of this proposition Lord Radcliffe's dictum in Edwards (Inspector of Taxes) v Bairstow [1956] AC 14, 36 to which I made reference in Azzopardi. Nevertheless, it cannot be said that these words, in the context being considered in Luna, demonstrate that Azzopardi was decided by the Court upon a mistaken oversight of binding High Court authority to the contrary. Nor do the decisions of the Federal Court of Australia to which the Court was taken throw new light on this issue. They also represent decisions which can be explained as falling within the statutory definition exception. See e.g. Blackwood Hodge (Australia) Pty Limited v Collector of Customs (NSW) (1980) 47 FLR 131, 145, 152. Nevertheless, to the reasons which I have previously given for preferring the view which I expressed in Azzopardi (and for favouring leave to reargue the point in this appeal), I would now add the following. The unconceptual exception for finding statutory facts It is scarcely conceptual to allow an exclusion from the general rule in the case of the application of a statutory provision but to deny the same conclusion where what is in issue is fact-finding to attract a common law rule, e.g. as to the parties' contractual rights. Why should the origin of the binding rule require, or permit, a different approach to the function of the appellate court? The law is the law, whether established by an Act of Parliament or by a rule of the common law. To give content to a rule of the common law, it is necessary to find facts. Such findings can result in the effective determination of legal rights. The distinction sanctioned by Hope in the High Court and acknowledged by the majority in Azzopardi is, with every respect, one without substance. The decision in Luna and that in Hope represent an acknowledgment in the High Court of the unacceptability of surrendering completely to the tribunal of fact the right, where facts are established, to misapply the statute. But it is surely equally unacceptable to countenance a misapplication of the common law, e.g., as here, the respective common law rights of the parties under their contract. Appellate review in cases of clear error Furthermore, it is important to recognise that, in analogous areas of appellate review, the courts have reserved to themselves the right to review decisions which are plainly wrong or which represent a misuse by the decision-maker of the advantages which he or she enjoys as such. Thus, in the review of discretions, an appellate court is not at large. It may intervene only if the primary decision-maker has taken into account irrelevant considerations, failed to take into account relevant ones, acted on a wrong principle or otherwise reached a conclusion which is plainly wrong. In G v G (Minor's Custody Appeal) [1985] 1 WLR 647, the last mentioned criterion was explained in these terms: 8 UNREPORTED JUDGMENTS "The course followed by the judge is one that no reasonable judge, having taken into account all of the relevant circumstances, could have adopted". This formula was approved in Brennan J in Norbis v Norbis (1985-86) 161 CLR 513. See also Mallet v Mallet (1983-4) 156 CLR 605 and The Pambula District Hospital v Herriman, unreported, CA, 5 August, 1988, p 28 (1988) NSWJB 137. The additional ground for appellate intervention provided by this criterion is, as it were, in reserve. It is kept for the case where the appellate court may not be able to put its finger precisely upon the irrelevant or omitted consideration or the error of principle. But, looking at the facts and at the decision, the court may nonetheless conclude that the case requires intervention because the conclusion is "plainly wrong". In a rational system of justice, courts properly baulk at sanctioning perverse and plainly wrong decisions. That is why this criterion has been acknowledged in the case of appellate review of discretionary decisions. There is another analogy which it is apposite to mention. It concerns appellate review of fact-finding which depends, in part or whole, upon the primary judge's conclusions about the credit, i.e. the truth-telling of the witnesses, or some of them. In such cases too the High Court, in a series of decisions, has stressed that the appellate court is not at large. Yet it has approved the well known words of Lord Sumner in SS Hontestroom v SS Sagaporack [1927] AC 37, 47 in the following terms: [N]ot to have seen the witnesses puts appellate judges in a permanent position of disadvantage as against the trial judge, and, unless it can be shown that he has failed to use or has palpably misused his advantage, the higher Court ought not to take the responsibility of reversing conclusions so arrived at, merely on the result of their own comparisons and criticisms of the witnesses and of their own view of the probabilities of the case". See Paterson and Anor v Paterson (1953) 89 CLR 212, 222; Warren v Coombes and Anor (1978-79) 142 CLR 531, 537; Brunskill and Anor v Sovereign Marine and General Insurance Co Limited and Ors (1985) 59 ALJR 842. It is to be noted that an exception to the general rule was reserved by Lord Sumner in Hontestroom and approved by the High Court. It is the case where the trial judge can be shown to have "failed to use.. or palpably misused..." the advantage of being present at the trial. The exception has been formulated in various ways, e.g. that the trial judge's conclusion is "glaringly improbable" or "contrary to compelling inferences". Cases exist where, notwithstanding decisions on credit, appellate courts, including the High Court itself, have reached a different conclusion. See e.g. Voulis v Kozary and Ors (1976) 50 ALJR 59. See also Chambers v Jobling (1986) 7 NSWLR 1, 11. It will be noticed in the foregoing examples that a primary rule is laid down. But because the primary rule may not cover every instance requiring intervention (or not cover it satisfactorily), an exception is allowed In the case of the review of the - exercise of judicial discretion, it is the instance where the decision is "plainly wrong". In the case of the review of a decision of the trial judge reliant upon an assessment of witness' credit, it is where that decision leads to a result which is "glaringly improbable". In my opinion an analogous principle defines what a "question of law" is. Clearly, it is not one involving mere findings of fact. Ordinary findings of fact are excluded by the specific restriction of an appeal to those findings which involve "a question of law'. But that primary rule would mask a serious risk of injustice if the decision maker could immure himself or URJ WARLEY PTY LTD v ADCO CONSTRUCTIONS PTY LTD (Kirby P) 9 herself from appellate review, no matter how perverse etc the decision reached was. Even if the decision were "plainly wrong". Even if the conclusion reached were "glaringly improbable". Running through the English decisions in the three fields which I have chosen has been that sensible and mollifying pragmatism of the common law which avoids rigidity and promotes justice. The English decisions are consistent in permitting a "failsafe" for cases of (1) review of the exercise of judicial discretion; (2) review of the determination of an issue based on the credit worthiness of witnesses; and (3) review of "findings of fact'. The English courts have preserved this "fail-safe" out of a recognition of the great injustice that can be occasioned by perverse findings, whether such perversity was intended or not. It is a negation of the very essence of judicial conduct - or of the lawful conduct of an arbitrator, as I perceive it, - to make such gross errors or to indulge such perversity. To restore the consistency in the approaches of our courts to these issues, I believe that it is necessary to adopt the approach which the English courts have taken on the review of plainly erroneous findings of fact. Thus, in my view, where a fact-finder finds facts which no reasonable decision-maker would find on the same evidence, that is an error of law. To the extent that Azzopardi holds otherwise, it is, in my respectful view, wrong. The false spectre of the flood of factual appeals Thirdly, there is evident a recurring sense of injustice occasioned by the Azzopardi rule. Thus in Guven v Goodyear Tyre and Rubber Company (Aust) Limited, unreported, CA, 2 December 1986, (1987) NSWJB 18, Hope JA suggested that the injustices which could follow from plainly erroneous findings of fact were such as to require consideration of amendment to the Workers' Compensation Act to permit, by leave of this Court, review of such decisions. In Haines v Leves and Anor (1987) 8 NSWLR 442, Street CJ suggested that Azzopardi may require reconsideration in the future. The obvious policy concerns which lie behind the refusal to review even perverse factual findings where appeals are confined to those on "a question of law", include the difficulty of drawing a line between fact finding which is "perverse" and that which is simply "wrong". There is also the understandable disinclination to involve appellate courts in the time consuming examination of facts in appeals which, by statute, are confined to questions of law. It would be undesirable to permit a back-door way of allowing appeals at large when Parliament has declined to afford that facility. On the other hand, as Hope JA recognised in Guven (and as is in any case obvious) the present rule can lead to serious injustice. What system of justice can feel satisfied with a rule which denies appellate review to a perverse finding of fact as Azzopardi does? I do not consider that the danger of a flood of litigation on facts requires appellate courts, in self protection, to erect such a rigid barrier to the limited class of appeal which I would envisage. Apparently the English courts cope. Australian courts cope in the analogous areas of erroneous exercise of discretion and the misuse of the advantage of assessing witnesses' credit. An appellate court would soon detect a case of an illicit attempt to bring an appeal on facts alone. But by the present principle the aggrieved person has no access to a "failsafe" against plain injustice. That is not right. Avoiding rigidity in the meaning of "question of law" Fourthly, to the English authorities which I cited in Azzopardi and Soulemezis there can be added, in the context of arbitration, the decision of Lord Diplock in Pioneer Shipping Limited and Ors v BTP Tioxide Limited [1982] AC 724, 742. His Lordship was there considering the meaning of the provisions in the English 10 UNREPORTED JUDGMENTS statute which substituted for the former procedure for challenging an arbitrator's award, an appeal to the High Court "on any question of law arising out of" an award. His Lordship said: "[E]ver since the decision of this House twenty five years ago in Edwards v Bairstow [1956] AC 14, [an appeal on a question of law] has been understood (at least where the tribunal from which such appeal lies is not itself a court of law) as bearing the precise meaning as to the function of the court to which an appeal on a question of law is brought that is stated in the classic passage to be found in the speech of Lord Radcliffe at p36: "Tf the case contains anything ex facie which is bad law and which bears upon the determination, it is, obviously, erroneous in point of law. But without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene. It has no option to assume that there has been some misconception of the law and that this has been responsible for the determination. So there, too, there has been error in point of law". Or, as Lord Denning MR summarised it in dealing with the question of frustration in the instant case: to justify interference with the arbitrator's award it must be shown (i) that the arbitrator misdirected himself in law or (ii) that the decision was such that no reasonable arbitrator could reach". (emphasis added). Although it is possible that Lord Denning MR in Pioneer went further than Lord Radcliffe in Edwards v Bairstow Lord Diplock embraced his test. In doing so, he acted consistently with the disinclination of the House of Lords to countenance the elevation of a common law principle into a rigidity which would be productive of injustice. For all of these reasons I consider that Azzopardi is ripe for review. This case provides an appropriate vehicle for permitting its reargument. Unless the appellant can show an error in point of law, the other important question in the case, which had earlier attracted leave from the Court, would simply not be reached. As [have stated, the majority of the Court ruled that they would not give leave to the appellant to reargue Azzopardi. Accordingly, as in Soulemezis (at 254) I must approach the matter on the basis that Azzopardi binds me. There is no ground for distinguishing it. As I have said, the appellant agreed that this was not a case where it could argue that there was no evidence at all to sustain the arbitrator's decision. There being evidence, but the challenge to it being one of the class which Azzopardi declares not to be "a question of law", the other matters in the appeal do not arise. The appeal is not one which attracts the statute. Accordingly Smart J's decision, although on another ground, must be upheld. The United Kingdom legislation is different I say that this case is an appropriate vehicle for allowing re-argument of the decision in Azzopardi for two reasons. First, it will be rare that an arbitrator does not have any evidence at all upon which to found his or her conclusion and award. It could happen if, for example, an expert report were tendered based upon premises which were never proved. But, clearly, it will be a rare or exceptional case. Accordingly, unless the appellant's argument can be mounted in a case such as the present, it can never be mounted. Factual decisions will never amount to the qualifying "question of law". URJ WARLEY PTY LTD v ADCO CONSTRUCTIONS PTY LTD (Kirby P) 11 Secondly, enough was said in the argument of the appellant which preceded the consideration of the point raised by the Notice of Contention to demonstrate that there is a real question in this State as to whether the English decisions to which Smart J referred are applicable to the legislation as enacted in this State. $38(1) of that Act expressly abolished the previous requirement that an error of law had to be shown "on the face of the award". Cf Minister for Works for Western Australia v Civil and Civic Pty Limited (1966-1967) 116 CLR 273, 284. S38(2) appears to be dealing with an appeal after a decision. It would seem curious, following the abolition of the restriction to errors of law "on the face of the award", effectively to reintroduce such a requirement by the necessity to show that the impugned question of law arose out of the award in the limited sense of out of the award document. There is an important provision which exists under the English Act, which does not exist under the local statute. By s1(5) Arbitration Act 1979 (UK) it is enacted: "[If] it appears to the High Court that the award does not or does not sufficiently set out the reasons for the award, the court may order the arbitrator concerned to state the reasons for his award in sufficient detail to enable the court [...] to consider any question of law arising out of the award". It is true that under the Act of this State, reasons must be given. A failure to give "reasons" as the Act envisages would amount to an error of law. It would be such as to attract the operation of s38 of the Act. Nevertheless, the facility to order reasons in sufficient detail does not appear in our statute. The appellant argued that this distinction warranted a less restrictive approach to the review of perverse or grossly erroneous findings of fact than was necessary in England, because of this added facility available there to the High Court. In the instant case, for example, it would be possible, under the-English provision, but not under the local Act, to order Mr O'Mara to give sufficient reasons to justify his conclusion (challenged by the appellant) that the flooding was "minor" etc. Finally, the appellant pointed to the legislative history of the Act. It originated from a report of the New South Wales Law Reform Commission on Commercial Arbitration (LRC 27, 1976). That report reviewed the history of arbitration legislation and the problems which had arisen in it. But the Commission concluded: "Some means had to be left, however, for the correction of gross errors in cases where the parties had not agreed to exclude review of the award for error". The Commission suggested a procedure by way of stated case. (See Report p 180). It adhered to the opinion that there should be a remedy in the case of an award which was "grossly wrong (Report, p 182). Its machinery for doing this (a power of remission) was not, ultimately, accepted by the Government and Parliament. Explaining the variation, the Attorney-General (Mr D P Landa) referred to discussions in the Standing Committee of Attorneys-General aimed at securing a uniform Act which could be adopted throughout Australia. It was for this reason that the stated case procedure proposed by the Law Reform Commission was rejected. It was replaced by provisions for "an appeal, by leave, to the Supreme Court on questions of law". See New South Wales Parliamentary Debates (Assembly) 18 October 1984, 2159, 2160. "Arising out of an award" may have a wider meaning From these variations conflicting inferences arise. What it is important to note is that our legislation is not identical to that of the United Kingdom. At least one difference is relevant. It is misleading to say, as Smart J said, that the decision of 12 UNREPORTED JUDGMENTS the English Court of Appeal in Universal Petroleum Co Limited v Handels und Transport Gmbh [1987] 1 WLR 1178 does not "preclude" the Supreme Court from following the course which he proposed. Preclusion can only arise where there is authority to require a contrary decision. There is no such authority in a decision of the English Court of Appeal. Its decisions are no more than comparative law material to assist in the ascertainment of applicable local law. It is a mistake to think of such decisions as "precluding this Court". In point of legal theory, it has no more authority than a decision of any other foreign Court. See Parramatta City Council v Lutz (1988) 12 NSWLR 293, 312, 335. This may, however, have been nothing more than a verbal slip. Arbitration is, nowadays, an international business. The policy considerations for judicial restraint, repeatedly mentioned in the English cases, need also to be considered here. The statutes of the two jurisdictions bear close similarity of language and apparent purpose. The legal difficulties which preceded the enactment of new legislation to govern arbitrations were substantially similar in New South Wales, as in England. In these circumstances it was natural that Smart J should pay close attention to the judgment of the experienced commercial judges in England of which he made mention. Nevertheless, there are points of difference between the two statutes. In this circumstances, I am far from saying that the appellant's case for urging a broader construction of the phrase "arising out of an award" would not succeed. But because the appellant has failed to show that the question it wishes to argue is one of law, as that phrase has been construed in this State, the correctness or otherwise of the English decisions need not now be finally determined. It is enough to say that the matter is arguable. And that is a further reason why the appellant should not, in my view, be closed out of the argument as it is by the current state of authority. Conclusion and the consequence of this decision It is true that the result of this appeal will be to reserve to arbitrators a substantial measure of immunity from appellate review in the Supreme Court. This will occur in a jurisdiction where the Court has no power to order further reasons; simply a power to find that purported reasons given are so inadequate as to amount to an error of law. This immunity will doubtless gladden those who believe that, typically, curial intervention in arbitration has not, on the whole been happy or useful. Such observers will doubtless regard this decision as an important victory for the finality of arbitration and of the right of arbitrators to find facts without any effective danger of appellate review. Such a conclusion may well enhance the efficiency of arbitration. This is itself a laudable objective. But it may do so at too high a price. It may place too great a store on the objective of finality. As the Law Reform Commission pointed out, there is a competing consideration. It is the justice of the particular case. By the present approach, that consideration may be neglected, no matter how unreasonable and perverse is the decision of the arbitrator. I do not consider that conclusion necessary. I do not think it is desirable. But it is required by the authority of this Court's decision in Azzopardi. Orders Because the Court has, by majority, declined to give leave to the appellant to reargue the decision in Azzopardi, that decision is binding on me. Because of the holding in that decision, the appeal must be dismissed with costs. Hope JA I agree with McHugh JA. URJ WARLEY PTY LTD v ADCO CONSTRUCTIONS PTY LTD (McHugh JA) 13 McHugh JA Many statutes distinguish between an appeal on a "question of law" and an appeal on a "question of fact". The Commercial Arbitration Act 1984 is one of them. Under that Act an appeal against the findings of an arbitrator can only be brought on a question of law arising out of an award. In this appeal the appellant contends that the findings of an arbitrator did give rise to a question of law because they were perverse. Whether or not a finding in a particular case gives rise to a question of law is often a difficult question to determine. But one proposition has been settled for more than a century. If the only question in the case is whether evidence ought to be accepted or whether evidence which has been accepted established a particular fact, no question of law is involved: Clarke v Flanagan (1934) 52 CLR 416 at 428; McPhee v 5 Bennett Ltd (1935) 52 WN (NSW) 8 at 9; De Gioia v Darling Island Stevedoring and Lighterage Co Ltd (1941) 42 SR (NSW) | at 5; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156. It is not a rule of law that a tribunal of fact must accept the evidence of one side because it is uncontradicted or superior in cogency to the evidence of the other side: McPhee v S Bennett Ltd at 9. By itself a perverse verdict does not involve a question of law. If no more appeared in a case than that the tribunal of fact preferred the evidence of a witness of unsavoury reputation to the evidence of six bishops, no question of law would arise. The point is illustrated by Hocking v Bell (1947) 75 CLR 12 where the issue was whether upon the evidence the Full Court of the Supreme Court of this State should enter a verdict for the defendant. It could only do so "'as a matter of law". There had been four trials of the action. At the first trial the plaintiff succeeded. The Full Court ordered a new trial on the ground that the verdict was perverse. At the second and third trials the jury disagreed. After the third trial the defendant moved the Full Court for a verdict. The motion was refused. At the fourth trial the plaintiff succeeded. A majority of the Full Court, however, set aside this verdict and entered a verdict for the defendant. The Full Court's decision was upheld by a majority of the High Court. But the Privy Council restored the plaintiff's verdict and upheld the judgments of Latham CJ and Dixon J who had dissented in the High Court. In his judgment, Latham CJ approved ((1945) 71 CLR 430 at 442) the following passage in the judgment of Jordan CJ in De Gioia v Darling Island Stevedoring and Lighterage Co Ltd (1942) 42 SR 1 at 5: "if the stage is reached that a prima facie case has been made out, the question whether the jury should accept that case, or should accept rebutting evidence called for the defendant, is one for them, no matter how overwhelming the rebutting evidence may be; and the trial Judge must leave it to them. If the jury find for the Plaintiff, and the Full Court rules that the rebutting evidence is overwhelming, it is expressing the opinion that the defendant was, as a matter of fact, not of law, entitled to a verdict'. Nor does any question of law arise because the reasoning of the tribunal of fact is illogical or unsound: R v District Court of the Metropolitan District Holden at Sydney Ex P White (1966) 116 CLR 644 at 654. If, however, a finding of fact involves the application of a legal standard, it is possible that the reasonableness of the finding may indicate that the tribunal of fact has misdirected itself as to the standard applicable: cf R v Australian Stevedoring Industry Board; Ex p Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 at 120. But such a case can only arise in respect of an ultimate fact falling for determination. It cannot arise in a case where the only question is whether a Primary fact has or has not been established: Azzopardi at 156. 14 UNREPORTED JUDGMENTS When a tribunal of fact is not required to give reasons, the possibility of concluding that it has misdirected itself as to the legal standard or criterion applicable is remote. The inscrutable face of the tribunal's decision ordinarily Prevents an appellate court from determining whether any error has occurred at the level of Ultimate fact. Nevertheless even in that class of case, material external to the finding or verdict may indicate that the tribunal has misdirected itself: Quinn v Rocla Concrete Pipes Ltd (1986) 6 NSWLR 586; Cousins v Bradford Kendall Foundries Pty Ltd (1986) 7 NSWLR 428. Moreover, the investing of fact finding roles in tribunals which are required to give reasons has increased the opportunity to conclude that the perversity of a decision is the product of legal misdirection. The principles for determining whether an error of law has occurred, however, remain the same whether or not the tribunal is required to give reasons. What Glass JA said in Azzopardi concerning the Workers Compensation Court is applicable to all tribunals which are required to give reasons. His Honour declared (at 156-157): "Tt is important, I believe, to remember that whether an error is one of fact or law is determined by legal theory and the theory is the same whether the tribunal be divided or undivided. Errors may be committed by a Workers' Compensation judge at any one of three points viz determining the facts by way of primary findings and inferences, directing himself as to the law and applying the law to the facts found. At the first stage the determination of facts by a reasoning process marred though it be by patent error, illogicality or perversity will, as has been said, never be vulnerable to attack as an error of law by an applicant for compensation. At the second stage any error made will by definition be an error of law. At the third stage when the law correctly stated is applied to the facts found in order to produce a conclusion error may intrude again. An erroneous conclusion that facts properly determined fail to satisfy a statutory test, for example, injury arising out of the cause of employment, substantial interruption to journey, or failure to provide employment, substantial interruption to journey, or failure to provide suitable employment will ordinarily be an erroneous conclusion of fact. It is only in marginal cases that the statutory test is satisfied or not satisfied as a matter of law, because no other application is reasonably open. Accordingly this Court will not entertain unexplained perversity of result as a ground for intervention although it will correct perverse or unreasonable applications of law to the facts found." In my opinion no assistance in this area of law is obtained by reference to the approach in appeals against discretionary judgments. They are not appeals on questions of law. They are appeals on questions of fact or perhaps more accurately on questions of opinion. Where a discretionary judgment is involved, the same body of evidence may reasonably lead different persons to opposite conclusions. Consequently, appellate courts have imposed upon themselves the rule that they will not interfere with a discretionary judgment unless it is the product of error (fact or law) or is plainly wrong. But that class of appeal does not concern and in my opinion does not provide any analogy with appeals on questions of law. Nor does the right of an appellate court to interfere with a trial judge's finding on a question of credibility on the ground that his finding is "glaringly improbable" throw any light on whether a perverse verdict involves a question of law. Accordingly, I am unable to accept the conclusion that a question of law is involved where a tribunal of fact makes a finding which no reasonable decision-maker would make on the evidence. Of course, courts could say that a URJ WARLEY PTY LTD v ADCO CONSTRUCTIONS PTY LTD (McHugh JA) 15 perverse decision was a question of law. But to do so would require the invention of a new legal rule. Moreover, since ex hypothesi the perversity of the verdict does not necessarily involve the application of legal criteria, such a rule would be a fiction. It is true that the courts hold that the question of the sufficiency of evidence is a question of law although in truth it is a question of fact. But that rule was formulated long ago so that the judges would have some measure of control over jury verdicts. And the judges were always careful to proclaim that, if there was evidence to support the verdict, they could not enter a verdict for the opposite party. All they could do with a perverse verdict was to order a new trial and hope another jury would reach a different verdict. To succeed in the present appeal the appellant must show that the appeal involves a question of law. The allegation that the findings of the arbitrator were perverse does not raise any question of law. The findings are concerned with questions of truth, not law. Counsel for the appellant accepted that there was evidence which, if accepted, could support the findings. Moreover, no question of the misapplication of a legal standard to an ultimate fact is involved. In the course of the present appeal, however, counsel for the appellant sought leave to challenge the correctness of this Court's decision in Azzorpardi. He wished to argue that a perverse verdict involves an error of law. Hope JA and myself declined to give him leave to do so. My reasons for refusing to give leave were as follows. First, Azzorpardi gave effect to the law as it has been settled for more than a century. Secondly, it is a recent decision of the Court which has been frequently followed. Thirdly, the decision is the logically correct result of the distinction between questions of law and fact. Fourthly, to alter the law would be to alter the meaning and effect of the numerous statutes which confine appeals to questions of law. Accordingly, I thought that it would be wrong to give leave to challenge the correctness of Azzopardi. Since the appellant relies only on an allegation that the decision of the arbitrator was perverse, no question of law is involved in the appeal. In my opinion the leave to appeal which was given should be revoked. The summons for leave to appeal should be dismissed. The appellant should pay the costs of the summons and the appeal. Since the appellant relies only on an allegations that the decision of the arbitrator was perverse, no question of law is involved in the appeal. In my opinion the leave to appeal which was given should be revoked. The summons for leave to appeal should be dismissed. The appellant should pay the costs of the summons and the appeal. 1. Leave to appeal revoked. 2. Summons for leave to appeal dismissed. 3. Appellant to pay cost of summons and of appeal. COUNSEL: Appellant: R H MACREADY Respondent: T M JUCOVIC QC / M G RUDGE SOLICITORS: Appellant: BRADFIELD and SCOTT 16 UNREPORTED JUDGMENTS Respondent: COLIN BIGGERS and PAISLEY