Commonwealth of Australia & the Australian Capital Territory v Rian Financial Services & Developments Pty Ltd

[1992] FCA 325

Re: COMMONWEALTH OF AUSTRALIA AND THE AUSTRALIAN CAPITAL TERRITORY
And: RIAN FINANCIAL SERVICES AND DEVELOPMENTS PTY LIMITED
No. ACT G77 of 1991
FED No. 325
Arbitration
(1992) 36 FCR 101

COURT

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Davies(1), Neaves(1) and Higgins(2) JJ.

CATCHWORDS

Arbitration - application for leave to appeal and appeal from order of Supreme Court of the Australian Capital Territory refusing leave to appeal in respect of an interim award in arbitration under building contract - Notice of cancellation of contract to be given "in writing under the hand of" the Australian Capital Territory - Question whether the person signing the notice was authorised to do so - Whether notice valid only if signed by a person holding a delegation under s.55 of the Australian Capital Territory (Self-Government) Act 1988 (Cth) - Whether manifest error on the face of the award - Whether the determination of the question of law could substantially affect rights of party to arbitration agreement.

Australian Capital Territory (Self-Government) Act 1988 (Cth), s.55 Commercial Arbitration Act 1986 (ACT), s.38

O'Reilly v. Commissioners of the State Bank of Victoria (1983) 153 CLR 1

Deputy Commissioner of Taxation (Vic) v. Boxshall (1988) 83 ALR 175

N. MacDonald Pty Ltd v. Hamence (1984) 1 FCR 45

State of New South Wales v. Bardolph (1954) 52 CLR 455

Pioneer Shipping Ltd v. BTP Tioxide Ltd (1982) AC 724

Promenade Investments Pty Ltd v. State Bank of New South Wales (Court of Appeal - 18 February 1992 - unreported)

HEARING

CANBERRA

#DATE 27:5:1992

Counsel for the appellant: A. Robertson

Solicitors for the appellant: ACT Government Solicitor

Counsel for the respondent: B.A. Meagher

Solicitors for the respondent: Colquhoun Murphy

ORDER

The Court orders that:

1. The appellants have leave to appeal from the order of the Supreme Court of the Australian Capital Territory given on 4 December 1991.

2. The appeal be allowed.

3. The order of the Supreme Court be set aside and in lieu thereof it be ordered that -

(i) leave be granted to appeal to that Court from the interim award of the arbitrator made on 9 September 1991;

(ii) the appeal to that Court be allowed; and

(iii) the interim award of the arbitrator be set aside and the matter be remitted to him for reconsideration in accordance with law.

4. That the respondent pay the appellants' costs of the appeal and of the proceedings in the Supreme Court.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is an application for leave to appeal from an order made by the Chief Justice of the Supreme Court of the Australian Capital Territory (Miles C.J.) refusing leave to appeal in respect of an interim award in a building arbitration. The Court heard argument on the appeal should leave be granted.

1. The matter which was before Miles C.J. arose from an interim award of arbitration made on 9 September 1991 in an arbitration between the Commonwealth of Australia and the Australian Capital Territory on the one hand and Rian Financial Services and Developments Pty Limited ("Rian") on the other. The arbitration was commenced under a building contract between the National Capital Development Commission ("the NCDC") and Rian. As the trial Judge stated:-
   

"By operation of the legislation which brought self-government to the Australian Capital Territory (the Territory), the Commonwealth of Australia was substituted for the NCDC as a party to the contract and the Territory was subsequently substituted for the Commonwealth as a party to the contract and any liability of the Commonwealth under the contract which accrued immediately before Self-Government Day continued to be a liability of the Commonwealth: see s.82 Australian Capital Territory (Planning and Land Management) Act 1988; Regulation 3, ACT. Self-Government (Consequential Provisions) Regulations as inserted by Regulation 5 Statutory Rules 1989, No. 88. Prior to Self-Government Day, 11 May 1989, disputes and differences arose between the parties and on 25 May 1989, after Self-Government Day, the Territory caused to be sent to the respondent a notice to show cause under clause 44 of the contract relating to alleged default on the part of the respondent. The notice was signed by K.H. Alexander, Manager

(Finance).

By letter dated 8 June 1989 the Territory caused to be served on the respondent a notice purporting to be a notice of cancellation under sub-clause 44.6 of the Contract. The notice of cancellation bears the signature of John Price, Acting Senior Contracts Officer."

Relevant provisions of "The General Conditions of Contract" provided:-

"44.1 Procedure on Default of Contractor If the Contractor defaults in the performance or observance of any covenant, condition or stipulation in the Contract or refuses or neglects to comply with any direction as defined in clause 23 but being one which either the Principal or the Superintendent is empowered to give, make, issue or serve under the Contract and which is issued or given to or served or made upon the Contractor by the Principal in writing or by the Superintendent in accordance with clause 23, the Principal may suspend payment under the Contract and may call upon the Contractor, by notice in writing, to show cause within a period specified in the notice why the powers hereinafter contained in this clause should not be exercised. ...

If the Contractor fails within the period specified in the notice in writing to show cause to the satisfaction of the Principal why the powers hereinafter contained should not be exercised the Principal, without prejudice to any other rights that he may have under the Contract against the Contractor may -

(a) take over the whole or any part of the work remaining to be completed and for that purpose and in so far as it may be necessary exclude from the site the Contractor and any other person concerned in the performance of the work under the Contract; or

(b) cancel the Contract, and in that case exercise any of the powers of exclusion conferred by sub-paragraph

(a) of this paragraph. ...

44.6 Cancellation of Contract If the Contract is cancelled under sub-clause 44.1 or under any other provision of the Contract it shall be deemed cancelled as from the date when notice of cancellation in writing under the hand of the Principal is served upon the Contractor ...".

The notice under clause 44.6 read:-

"NOTICE OF CANCELLATION WHEREAS the Australian Capital Territory (hereinafter referred to as `the Principal') and Rian Financial Services and Developments Pty Ltd (hereinafter referred to as `the Contractor') are parties to a contract dated 8 September 1988 for Phillip Motor Vehicle Registry Extensions (hereinafter referred to as `the Contract') AND WHEREAS by virtue of Section 82 of the Australian Capital Territory (Planning and Town Management) Act the Commonwealth was substituted as Principal to the Contract for the National Capital Development Commission AND WHEREAS by virtue of Regulation 3 of the ACT Self Government (Consequential Provisions) Regulations the Australian Capital Territory was substituted as Principal to the Contract for the Commonwealth of Australia AND WHEREAS a Notice dated 25 May 1989 was issued to the Contractor requiring the Contractor to show cause why the Principal should not exercise the powers in Clause 44.1 to the General Conditions of Contract AND WHEREAS the Contractor has failed to show cause to the satisfaction of the Principal NOW THEREFORE TAKE NOTICE that the Principal hereby cancels the Contract and under the powers in Sub Clause 44.6 of the General Conditions declares forfeited all the monies and sums stipulated in Sub Clause 44.6 JOHN PRICE

ACTING SENIOR CONTRACTS OFFICER INFRASTRUCTURE DIVISION"

1. After the service of the notice of cancellation, the parties appointed Mr Ronald Fitch as arbitrator under clause 45 of the agreement for the settlement of the dispute between them. The arbitrator commenced the reference at a conference between the parties on 24 September 1990. The arbitrator subsequently received submissions on what he called "the technical legal issue", namely "whether the person executing the notice to show cause and notice of determination was properly authorised so to do and, accordingly, whether the notices were valid".

2. In an interim award dated 9 September 1991 the arbitrator determined that the notice to show cause under sub-clause 44.1 was not required to be signed and, with regard to the notice of cancellation under sub-clause 44.6, that the notice was required to be served under the hand of the principal, but that the person who signed the notice, Mr John Price, did not have authority to do so.

3. On this latter point, the arbitrator's reason was, shortly, that the Commonwealth and the Australian Capital Territory "has not established that the (Legislative) Assembly (of the Australian Capital Territory) had, at the relevant times, made any law under Section 55 providing for the delegation of powers of City Manager". The reference was to s.55 of the Australian Capital Territory (Self-Government) Act 1988 (Cth) ("the Self-Government Act").

4. The arbitrator did not embark upon a consideration of the meaning of the words "in writing under the hand of the Principal" in their context in cl.44.6 of the "General Conditions of Contract", which were a standard form available for use whether the principal be an individual person, a company, a body politic or an agency of a body politic. The arbitrator did not discuss whether these words permitted signature by a duly authorised servant or agent of the principal or, if a corporation were the principal, whether the words required the notice to be under the seal of the corporation or whether the hand of an appropriate officer of the corporation would suffice.

5. Nor did the arbitrator embark upon a consideration of whether, assuming that the hand of an officer was sufficient, Mr Price was the appropriate officer to sign on behalf of the Australian Capital Territory, or whether, if Mr Price was authorised to do so, the notice should have been signed by Mr Price in the form "Australian Capital Territory per J. Price" rather than in his own name.

6. We need not discuss these issues save to refer to the observation of Gibbs C.J. in O'Reilly v. Commissioners of the State Bank of Victoria (1983) 153 CLR 1 at 11 where his Honour said:-
   

"There can be no doubt that as a general proposition at common law a person sufficiently `signs' a document if it is signed in his name and with his authority by somebody else ..."

and to the remarks of Lockhart, Burchett and Gummow JJ. in Deputy Commissioner of Taxation (Vic) v. Boxshall (1988) 83 ALR 175 at 178:-

"At common law, where a person authorises another to sign for him, the signature of the person so signing is the signature of the person authorising it: R v Justices of Kent (1873) LR 8 QB 305 per Blackburn J at 307. There are cases in which a statute may require personal signature. Whether a particular case is in that category is a question of construction of the terms of the particular statute. In some cases concerning some statutes the courts have concluded that personal signature was required. In other cases on other statutes the courts have held that signature by an authorised agent was sufficient: See R v Justices of Kent; Re Whitley Partners Ltd (1886) 32 Ch D 337; O'Reilly v Commissioners of State Bank of Victoria (1983) 153 CLR 1; 46 ALR 225. There is some division of opinion as to the form which a signature of a person signing for another, but with his authority, should take. In some cases, for example R v Justices of Kent, the mere writing of the authorising person's name has been held to be sufficient; see also Ex parte Hirst; Re Hirst (1874) LR 18 Eq 704; France v Dutton (1891) 2 QB 208. On the other hand, in London County Council v Agricultural Food Products Ltd (1955) 2 QB 218, Denning L.J. said (at 222) that: `... where a man is allowed to sign by the hand of another who writes his name for him ... the one who does the writing should add the letters `pp' to show that it is done by proxy, followed by his initials to indicate who he is.'"

1. Rather than considering the issues in this light, the arbitrator relied solely upon s.55 of the Self-Government Act which provided:-
   

"(1) The Assembly may make laws providing for the delegation of powers of the Head of Administration and of the Associate Heads of Administration.

(2) Subsection (1) extends to the sub-delegation by Associate Heads of Administration of powers delegated to them by the Head of Administration."

It was common ground that, at the date of the service of the notice of cancellation of the contract, no such laws had been passed by the Assembly.

1. In our opinion, s.55 was irrelevant to the issues before the arbitrator. The absence of laws providing for the delegation of the powers of the Head of Administration did not have the effect that no officer of the Public Service of the Australian Capital Territory had authority to act on behalf of the Australian Capital Territory. A body politic, like a corporation, may act through its duly authorised officers.

2. A power which is to be exercised personally by a person designated may not be exercised by another unless the designated person is granted or holds an appropriate power of delegation. If the person designated has a power to delegate and there has been a delegation, the delegate may exercise this power conferred upon the designated person. But much of the business of government is carried on not through the process of delegation but through the grant of authority to act. As Gibbs C.J. said in O'Reilly's case at 11:-
   

"However, I should mention the line of authorities which commenced with Carltona Ltd. v. Commissioners of Works (1943) 2 All ER 560 and which are discussed in In re Golden Chemical Products Ltd. (1976) Ch 300. Those authorities established that when a Minister is entrusted with administrative functions he may, in general, act through a duly authorized officer of his department. This result depended in part on the special position of constitutional responsibility which Ministers occupy, and in that respect these authorities are distinguishable from cases such as the present. However, they also rest on the recognition that the functions of a Minister are so multifarious that the business of government could not be carried on if he were required to exercise all his powers personally. Ministers are not alone in that position. This has been judicially recognized."

Neaves J. said in N. MacDonald Pty Ltd v. Hamence (1984) 1 FCR 45 at 50:-

"There are many activities in the ordinary course of administering the affairs of government that may be carried on independently of any statutory provision expressly or impliedly authorising the particular activity."

Particularly is this so when a contract is the subject of the relationship between the body politic and another. Dixon J. said in State of New South Wales v. Bardolph (1934) 52 CLR 455 at 508:-

"No statutory power to make a contract in the ordinary course of administering a recognized part of the government of the State appears to me to be necessary in order that, if made by the appropriate servant of the Crown, it should become the contract of the Crown, and subject to the provision of funds to answer it, binding upon the Crown."

1. It follows that, as the relevant power in the contract was not conferred upon a designated person but upon the Australian Capital Territory, which was required by cl.44.6 to act by writing under its own hand, the absence of laws under s.55 of the Self-Government Act did not touch the issue before the arbitrator.

2. The Commonwealth of Australia and the Australian Capital Territory applied to Miles C.J. under s.38(2) of the Commercial Arbitration Act 1986 (ACT). Section 38 provided inter alia:-
   

"(2) Subject to sub-section (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award. ...

(4) An appeal under sub-section (2) may be brought by any of the parties to an arbitration agreement -

(a) with the consent of all the other parties to the arbitration agreement; or

(b) subject to section 40, with the leave of the Supreme Court.

(5) The Supreme Court shall not grant leave under paragraph (4)(b) unless it considers that -

(a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more of the parties to the arbitration agreement; and

(b) there is -

(i) a manifest error of law on the face of the award; or

(ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law."

1. Miles C.J. was of the view that there was no manifest error of law on the face of the award. His Honour thought that the issue before the arbitrator was a debatable one. His Honour said:-
   

"I do not see that if there was an error, it was so obvious or perceptible, that it may be characterised as `manifest'. That the person who signed the notice of cancellation of the contract required and lacked authority that derived from a law made pursuant to s.55 of the Self-Government Act are, in my view, not propositions that are shown without argument to be incorrect as a matter of law. It is not manifestly wrong to assert that unless the Legislative Assembly had, at the relevant time, made a law pursuant to s.55 providing for the delegation of powers of the City Manager, then the person signing the notice of cancellation was not authorised to do so."

1. However, in our opinion, it is manifest, that is to say plain on the face of the award, that the arbitrator failed to consider the issue before him, namely the interpretation and operation of cl. 44.6 of the contract in the circumstances which occurred, and did so because he limited his consideration to an irrelevant circumstance, namely, that the Assembly had not enacted a law providing for the delegation of powers of the Head of Administration or of the Associate Heads of Administration.

2. It was submitted by counsel for Rian that, to be "manifest", the error of law must fit the words of Lord Diplock in Pioneer Shipping Ltd v. BTP Tioxide Ltd (1982) AC 724 at 742 where his Lordship said:-
   

"... leave should not normally be given unless it is apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument, that the meaning ascribed to the clause by the arbitrator is obviously wrong."

However, Lord Diplock was not there considering the present legislation, and he was discussing only a point arising in a "one-off" clause, not, as in the present case, the meaning of a clause in a standard set of conditions. See the discussion of his Lordship's observations by Sheller J.A., with whom Meagher J.A. agreed, in Promenade Investments Pty Ltd v. State Bank of New South Wales (New South Wales Court of Appeal, 18 February 1992, unreported). Sheller J.A. referred to Qantas Airways Ltd v. Joseland and Gilling (1986) 6 NSWLR 327; Leighton Contractors Pty Ltd v. Kilpatrick Green Pty Ltd (Full Court of the Supreme Court of Victoria, 22 October 1991, unreported); Abignano Ltd v. Electricity Commission of New South Wales (1987) 3 BCL 290.

1. In the course of his reasons, Sheller J.A. said that the term "manifest" is "used to indicate something evident or obvious rather than arguable". His Honour referred to the remarks of McHugh J.A. in Larkin v. Parole Board (1987) 10 NSWLR 57 at 70 where his Honour, in considering the term "patent error", said that "the error must be clear ... I think that, in its context in s.23 (of the Probation and Parole Act 1983 (NSW)), `patent' simply means manifest or evident." Sheller J.A. then commented:-
   

"But the paragraph requires a determination as to whether or not there is a manifest error on the face of the award and I do not see why a judge should be required to do that without adversarial argument. If the judge concludes after argument that there is not such an error of law an application based on this ground fails. If there is such an error of law, a question arises as to whether as a matter of discretion leave should be granted ... "

1. We respectfully agree. Leave may not be granted in respect of an error of law on the face of the record unless the error be manifest. But that is not to say that the counsel for the aggrieved party may not be heard to point out the error or to remind the court of the relevant principles and authorities or that counsel for the respondent should not be heard to the contrary.

2. The error of law in the reasons of the arbitrator being manifest, the question arises whether the correction thereof could substantially affect the rights of one or more of the parties to the agreement. In this case, the correction would do so as the issue goes to the validity of the arbitrator's determination that the contract had not validly been cancelled by the Australian Capital Territory. The correction of the error would necessarily have a substantive effect upon the rights and liabilities of the parties.

3. Finally, the question is whether in all the circumstances, leave should be granted. In our opinion, the issue of law involved is of such significance to the parties, especially to the Australian Capital Territory which must act in relation to contracts whether or not laws have been passed under s.55 of the Self-Government Act, that we are of the view that the discretion should be exercised in favour of granting leave to appeal to the Supreme Court from the award of the arbitrator. Leave to appeal from the order of Miles C.J. should similarly be granted.

4. The orders should be:-
   

1. That leave be granted to appeal from the order of the Supreme Court and that the appeal be allowed.

2. That the order of the Supreme Court be set aside and that in lieu thereof it be ordered:

(i) that leave be granted to appeal from the interim award of the arbitrator.

(ii) that the appeal be allowed.

(iii) that the interim award of the arbitrator be set aside and that the matter be remitted to him for reconsideration in accordance with law.

3. That the respondent pay the costs of this appeal and of the proceedings in the Supreme Court.

JUDGE2

I have had the advantage of reading in draft the judgment of Davies and Neaves JJ.

1. I agree with their Honours that whether or not s.55 of the Self-Government Act 1988 (ACT) had given a power of delegation, it was open to the Territory to have issued a notice of cancellation of the contract herein over the hand of any duly authorised officer. The arbitrator therefore has given a reason for his conclusion that the notice of cancellation was signed without authority that was erroneous.

2. However, the issue in the matter is whether Miles C.J. should have granted leave to appeal against the finding made in the interim award.

3. That in turn depends on the construction of s.38 of the Commercial Arbitration Act 1986 (ACT).

4. Their Honours have set out the terms of that section, I will not repeat them.

5. Suffice it to say that to get leave, the appellant had to show (per s.38(5)):-
   

. there was a question of law concerned in the matter;

. the determination of that question of law could substantially affect the rights of one or more of the parties to the agreement; . there was "a manifest error of law on the face of the award" OR "strong evidence" that the arbitrator made an error of law and that the determination of the "question" may add (or be likely to add) "substantially to the certainty of commercial law".

1. There was a question of law as to whether authority for the notice of cancellation derived or needed to derive from s.55. It did not follow as a matter of law that the person who signed the notice of termination had no authority to do so because no law had been made under s.55.

2. I also agree with their Honours that the error made by the arbitrator in relation as to the effect of s.55 can be characterised as "manifest". It appeared on "the face of the award". It would be wrong to interpret "manifest" as precluding argument from an aggrieved party pointing to the error and explaining by reference to relevant principles and authorities why the error may be found to exist. Argument to the contrary would also be proper.

3. However, an aggrieved party must go further than to show a manifest error of law on the face of the award. The party must show that the correct determination of that question of law would or would be likely to have a "substantial effect" on the rights of one or more of the parties.

4. The two propositions may in many cases be synonymous. I do not think they are in this case. There was no evidence that the validity or otherwise of the Notice of Determination will have any effect at all on the sum to be awarded to the successful party to this arbitration. There was no evidence that, but for the error of law, the notice would, in any event, have been held, or probably held, to be valid. The respondent did not tender any evidence to show whether the person who signed the notice of cancellation had any, and if so what authority to execute and issue it.

5. Although the arbitrator relied on an incorrect reason, that error does not seem to me to have been shown to have affected the decision which the arbitrator was asked to make. That was,
   

"...whether the person executing the Notice to Show Cause and the Notice of Determination was properly authorised so to do and, accordingly, whether the notices were valid."

1. There is, however, another consideration. Even if the applicant had shown s.38(5) was satisfied, the grant of leave is discretionary. Section 38(5) was inserted into the Commercial Arbitration Act to limit appeals from arbitrators. Parties who refer matters to arbitrators are taken to eschew any right to seek judicial intervention whether on questions of fact or questions of law.

2. It may be important for the Australian Capital Territory, in a theoretical sense, to know if it needs a law giving powers of delegation in order to give a valid notice under contracts such as the present. However, the issue raised on the application for leave to appeal has and had nothing to do with that or with the Territory's power to enter into contracts in the future. It has to do only with a "one-off" clause in an agreement which quite inappropriately used words requiring an individual person's signature and applied them to a body politic. That arose only because of the quite unusual substitution of the "ACT" for the "NCDC" (a corporation sole) following self-government in the ACT. It is also relevant to note, on the question of discretion, that the appellants chose not to put any direct evidence of the authority of the person executing the Notice of Determination before the arbitrator.

3. If the parties to this agreement had expressed themselves differently in the form of the agreement, the issue of authority would have been avoided. The form of the agreement was that proffered by the appellants' predecessor.

4. As Hilary Astor points out in her book, Dispute Resolution in Australia, the development of arbitral expertise free from restrictive judicial interference was a deliberate objective of the commercial community (p 116). It was also an objective of the legislature in enacting the current form of s.38(5).

5. In this case, that objective is not well-served by the taking of preliminary points and then seeking judicial intervention to correct the response even before the end result of the arbitration is known. It is less well-served when the party complaining of the error has, in any event, failed to place before the arbitrator evidence which might have indicated whether the determination of the question of law referred to would have altered the end result of the arbitration.

6. I would have refused leave to appeal.

7. Accordingly, I would dismiss this appeal with costs.