Principles of evidence

Arbitration is inherently flexible. Parties are able to agree the rules governing evidential matters and how evidence is presented. 

Absent agreement, the arbitral tribunal has discretion to manage the proceeding and evidentiary matters as it considers appropriate [1]. This is subject to the mandatory provisions of procedural fairness and equality [2]. An arbitrator can cut off or reduce cumulative or repetitious testimony but cannot refuse to hear evidence that is pertinent and material to the dispute [3]. The assessment of evidence and the way in which the arbitrator regards it is up to the arbitrator, the Court has no jurisdiction to interfere (subject to natural justice considerations) [4].

Admissibility of evidence

An arbitration is not a “proceeding” under section 4 of the Evidence Act 2006 (Act) so the Act does not apply to evidence presented in an arbitration. However, the parties can agree, or the arbitrator may state (in the absence of the parties’ agreement) that the Act will apply. Under the Act, the fundamental principle is that all relevant evidence is admissible unless it is inadmissible, or otherwise excluded, under the Act or any other Act. In our experience, arbitrators are often broadly guided by principles linked to the Act, because they are arguably a potential measure of the application of natural justice.

In an arbitration, the parties may agree that hearsay evidence is admissible or otherwise, and likewise the arbitrator has discretion to admit hearsay evidence if appropriate (subject to whether the evidence is probative, reliable or just). 

The arbitrator must listen and consider all evidence put before them. However, they are not obliged to accept all the evidence of a witness. If they do not accept evidence, they must provide reasons for the non-acceptance. For example, evidence can be disregarded if it was not proved to a sufficient degree [5]. If an expert refuses to appear in an arbitration, the arbitrator does not have the power to issue a subpoena. Instead, the court may issue a subpoena duces tecum upon request by the arbitrator (so a party will need to obtain the approval of the arbitrator before applying for and then serving a subpoena) [6].  

Expert evidence

Rules governing expert evidence 

The code of conduct for expert witnesses (Code) forms part of the High Court Rules 2016. The Code may be used in an arbitration if the parties agree to adopt it, or where there is no agreement, if the arbitral tribunal rules that it is appropriate. The Code must be given to an expert witness upon engagement, and experts must expressly state in their oral or written evidence that they agree to comply with the Code. Ultimately, arbitrators consider the helpfulness and credibility of expert evidence and what weight to put on it. For this reason, in most arbitrations, experts cite the Code.

If an expert witness is part of a professional body, such as an accountant, lawyer, valuer, or member of the medical field, then they are also held to the professional standards of those bodies. 

Basis of expert opinion

Expert witnesses may be required to consult and submit a joint report to the arbitrator, identifying the areas where they agree and those where they disagree, and the reasons why. Expert witnesses must form their opinions independently of the parties and with reference to their experience and professional knowledge, and must not tailor their evidence to a party’s position.

Recording evidence

Parties may agree that evidence be recorded, and this cost is treated as one of the costs and expenses of the arbitration to be decided by the arbitrator in an award or in a final costs award (Arbitration Act 1996, schedule 2 clause 6). There are various options of record keeping; a tape recorder, electronic record with transcript or a stenographer using shorthand are all valued options. Recordings are treated as confidential information that must not be disclosed [7].

Factual witnesses

Parties in arbitration will usually provide factual evidence, in addition to expert evidence, on the matters in dispute. This factual evidence is given by people with knowledge of the events in question: often, these are employees (former or current) of the parties to the arbitration.

While it is generally straightforward to obtain evidence from current employees, it can be challenging to obtain information or evidence from employees once they have left a company. This is heightened when the former employee is asked to spend significant time on a witness brief or to provide oral testimony at the arbitration itself. This can be difficult to navigate in the intense and time-sensitive lead-up to an arbitration. It is rare for employment agreements to include a clause to the effect that an employee will assist in future litigation even if the employment relationship has terminated. These clauses are usually reserved for the most senior employees. Often former employees will request payment at their new hourly rate for preparing and giving evidence. This is not prohibited: a balance must be struck between reasonable compensation on one hand and incentivising a witness on another. 

It can be challenging to retain confidential information held by an employee once they leave a company. It is advisable that employment agreements include a term defining the scope of confidential information, and that after the employment relationship comes to an end the employee must not directly or indirectly use, disclose, or copy for any purpose any confidential Information without the employer’s written consent.

Points that require consideration include: 

• Payment (who pays the witness for their time spent working on the evidence);
• Time (do they have to take leave from their current company to prepare evidence, when can the ex-employee be available to the party to prepare evidence, can the current employer dictate the ex-employee’s availability for arbitration/evidence preparation);
• Confidential information (how does a party ensure that the ex-employee’s new employer does not have access to the party’s confidential information, are there restrictions on what equipment the employee uses to prepare evidence, etc); and
• Relationships (if the ex-employee left under undesirable circumstances, does the party have to use them as a witness, and if the party decides to seek their assistance, how do they navigate this new dynamic).

It may be necessary to ask former employees who are assisting as factual witnesses to execute non-disclosure agreements or have them sign consultancy agreements for the period of their assistance. It is essential that factual witnesses secure the approval of their current employer before assisting an ex-employer in a proceeding. If litigation is imminent, or reasonably foreseeable at the time of the employee’s termination, it may be possible to have them swear an affidavit in respect of factual matters before they leave. 

Record keeping

It is vital that records are stored in an appropriate and accessible format during a project’s life cycle. Proper documentation ensures that the project runs smoothly, and that parties can present evidence if any dispute is later referred to court or an alternative dispute resolution forum. As projects may span years or decades, it is important to have a centralised system of storage from the project’s conception. Many claims fall over once it is realised that there are no, or insufficient, supporting documents. 

Having good record keeping can sometimes reduce the reliance a party has on a factual witness who is a former employee.

Footnotes

[1] Arbitration Act 1996, sch 1 art 19(2).
[2] In particular, Arbitration Act 1996, sch 1 art 18 which states that “parties shall be treated with equality and each party shall be given a full opportunity of presenting that party’s case”. 
[3] Gallagher v Schernecker 60 Wis 2d 143, 151 (Wis 1973).
[4] Fencible Court Howick Ltd v Howick Borough Council HC Auckland M481/87, 9 June 1989.
[5] Fox v PG Wellfair Ltd [1981] 2 Lloyd’s Rep 514 (CA).
[6] Arbitration Act 1996, sch 1 art 27; and Stephen Blakeley Green & Hunt on Arbitration Law & Practice (online looseleaf ed, Thomson Reuters) at [D6.7] and Chapter 27.
[7] Arbitration Act 1996, ss 2(1) and 14B.