Westport Insurance Corporation v Gordian Runoff Ltd: Arbitrators must give adequate reasons

The High Court yesterday allowed the appeal in Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37, disagreeing with the NSW Court of Appeal’s strict distinction between arbitration as a wholly private matter and Court decisions as an act of state authority.

The majority, in holding that the arbitrators had given inadequate reasons for their decisions (and thus opening the way for an appeal) stated at paragraph 20 that:

However, it is going too far to conclude that performance of the arbitral function is purely a private matter of contract, in which the parties have given up their rights to engage judicial power, and is wholly divorced from the exercise of public authority.   

The Court of Appeal’s decision had been lauded by some as recognising the need for efficiency in the arbitration process.

The origin of the dispute was over a contract of reinsurance over which the reinsurer denied liability.

The High Court in finding that the arbitrator’s reasons with regard to s18B of the Insurance Act 1902 (NSW) were inadequate, held that s18B did not apply in this instance as the treaties did not exclude or limit the reinsurer’s liability.

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