Local councils are often required to engage in arbitration as a result of defective construction works.

The Supreme Court of NSW has recently considered the procedural flexibility of expert arbitration, and the implications this may have on procedural fairness, in the decision of Blacktown City Council v Statewide Civil Pty Ltd [2026] NSWSC 176.

Chief Justice Bell determined that the arbitrator had complied with the requirements of the Commercial Arbitration Act 2010 (NSW) (the Act), and there was ultimately no denial of procedural fairness as the arbitrator afforded both parties equal treatment, acted impartially, and allowed both parties to provide further evidence.

Background

Blacktown City Council (BCC) originally commenced proceedings against Statewide Civil Pty Ltd (Statewide) on the basis that a tennis court complex, constructed by Statewide, was defective and the replacement costs were in excess of $5 million. By application made by Statewide, the proceedings were stayed in favour of arbitration under the Act.

Pursuant to the building contract, the arbitration was required to be conducted in accordance with Rules 5-18 of the Institute of Arbitrators & Mediators Australia Rules for the Conduct of Commercial Arbitrations (the Rules). Prior to final submissions, the arbitrator raised with the parties an alternative (and cheaper) means of rectifying the defects than that which had been advocated for by BCC.

An award was made by the arbitrator in favour of BCC, that Statewide pay to BCC the amount of $835,854.00 (the Award). BCC commenced proceedings seeking an order be made in respect of the Award.

Statewide’s Arguments

Statewide opposed the enforcement of the Award on the basis that:

• It was denied procedural fairness;
• The arbitrator breached section 18 of the Act; and
• Enforcement of the Award would be contrary to public policy.

Procedural Fairness

Statewide contended that what had occurred was that the Council had been permitted to re-open its case, and this was said to amount to a denial of procedural fairness.

Section 18 of the Act

Statewide relied upon s.36(1)(a)(ii) which permits the Court to refuse to recognise or enforce an award if the party against whom the award is invoked was “unable to present its case”.

Statewide sought this to link s.18 of the Act, which states that parties must be treated with equality and each party must be given a reasonable opportunity of presenting the party’s case, to this discretionary basis for non-recognition and enforcement.

Public Policy

Statewide contended that the recognition or enforcement of the Award would be contrary to the public policy of New South Wales and so recognition and enforcement should be refused pursuant to s.36(1)(b)(ii) of the Act.

Decision

His Honour Bell CJ did not agree that the characterisation of the course of the arbitration denied Statewide procedural fairness, given that as noted above, it was the Arbitrator and not the Council who said that he would be assisted by further evidence and submissions on the scope and cost of rectification.

Chief Justice Bell considered that the present case was analogous to the decision of Rainbow Builders Pty Ltd v Queensland [2020] QSC 25, where Rainbow Builders argued, on the basis of s.18 of the Act, the seeking of further evidence and submissions from the parties was wrong to give the State the opportunity to put in further evidence and submissions. Bell CJ noted that His Honour did not think that case entailed any breach of s.18 of the Act.

His Honour also noted that the course taken by the arbitrator was well within his power, and an arbitrator may raise a new point and must give the parties a fair opportunity to lead evidence or make submissions in relation to it – which is what was done in this instance.

His Honour stated at [55] that “the nature and the essence of arbitration is that it has a degree of procedural flexibility to it” so long as fairness and equality are supplied in the process. Bell CJ considered that the aims of arbitral procedure impossible to achieve if the procedures of a court are mimicked.

For the above reasons, His Honour Bell CJ found in favour of the Council.

Implications

For council clients, this case affirms that arbitrators have broad discretion in conducting arbitration proceedings, provided that they adhere to principles of natural justice and procedural fairness. It is necessary that arbitration agreements and proceedings are conducted in a manner that allows all parties to present their cases fully and fairly. The Courts have shown on a consistent basis that arbitrators can adapt procedures to achieve a fair and cost-effective resolution of disputes.

Councils should be prepared for arbitrators to exercise their discretion in procedural matters and should ensure that their legal teams are equipped to respond effectively to such developments during arbitration. Councils should also be aware of the Courts’ reluctance to interfere with arbitration awards unless there is a clear breach of procedural fairness or public policy.