Crewford Pty Ltd v Transit Australia Pty Ltd

[1999] QCA 81

IN THE COURT OF APPEAL	99.81
SUPREME COURT OF QUEENSLAND

Appeal No. 5600 of 1998

Brisbane

[Crewford P/L v. Transit Aust. P/L]

BETWEEN:

CREWFORD PTY LTD
ACN 010 846 803

(Respondent) Appellant

AND:

TRANSIT AUSTRALIA PTY LTD
ACN 065 794 943

(Applicant) Respondent

Davies J.A. Pincus J.A. Wilson J.

Judgment delivered 23 March 1999

Judgment of the Court

APPEAL ALLOWED WITH COSTS. ORDER MADE BELOW SET ASIDE AND IN LIEU ORDER THAT THE APPLICATION BY THE RESPONDENT FOR LEAVE TO APPEAL BE DISMISSED WITH COSTS.

CATCHWORDS:	ARBITRATION - AWARD - Arbitrators award of costs - whether manifest error of law on face of arbitration award - whether strong evidence of an error of law - whether determination of question would add substantially to certainty of commercial law.
Carpaolo Nominees Pty Ltd v. Marrosan Nominees Pty Ltd (1997) 112 N.T.R. 1 House v. The King (1936) 55 C.L.R. 499 Leighton Contractors Pty Ltd v. South Australian Superannuation Fund Investment Trust (1994) 63 S.A.S.R. 444 Commercial Arbitration Act 1990, s. 38
Counsel:	Mr P Keane Q.C., with him Mr M Amerena for the appellant. Mr L Boccabella for the respondent.
Solicitors:	Clayton Utz town agents for MacDonnells (Cairns) for the appellant. MacGillivrays for the respondent.
Hearing Date:	10 March 1999.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 5600 of 1998

Brisbane

Before Davies J.A. Pincus J.A. Wilson J.

[Crewford P/L v. Transit Aust P/L]

BETWEEN:

CREWFORD PTY LTD
ACN 010 846 803

(Respondent) Appellant

AND:

TRANSIT AUSTRALIA PTY LTD
ACN 065 794 943

(Applicant) Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 23 March 1999

1. This appeal concerns an arbitrator's award of costs in favour of the appellant (Crewford)

   in an arbitration under s. 61 of the Transport Operations (Passenger Transport) Act 1994.

   Under that section Crewford was entitled to a payment of compensation because the respondent

   (Transit) and another company, supplanting Crewford, were granted a contract to operate certain

   bus services in the Cairns region; the proceedings presently involve Transit only, not its co-

   contractor. The arbitrator did not have to decide whether there was a right to compensation - there

   was such a right, for reasons which do not need to be explained - but only what was a proper

   amount of compensation. He decided that an amount a little short of $2M should be paid to

   Crewford and made an order for costs in favour of Crewford, with certain exceptions which are not material.

2. Transit seeks to challenge the award of costs on grounds which are variously expressed;

   the essence of the argument is that the award was unreasonable, that is, obviously wrong, in that

   the arbitrator should have made a substantial allowance in costs in favour of Transit because Transit,

   although required to pay substantial compensation, succeeded on important issues. Such an

   allowance could have been made by awarding Crewford only a fixed proportion, say half, of its

   costs, or by other methods. Transit has sought and obtained from a single judge an order under the

   Commercial Arbitration Act 1990 ("the Act") giving leave to appeal in respect of the costs award

   and this is an appeal against that order.

3. The Supreme Court's power to hear appeals in relation to arbitral awards is given by s.

   38(2) of the Act; the right to appeal is one "on any question of law arising out of an award" and that

   is subject to s. 38(4) of the Act, under which an appeal may be brought by a party to an arbitration

   agreement with the consent of all the other parties or the leave of the Supreme Court. Under s.

   38(5)

   "The Supreme Court shall not grant leave under subsection (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 1 or more 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".

Crewford's argument is, and is only, that this subsection, in the circumstances of the case, prohibited

the grant of leave. It is suggested in Carpaolo Nominees Pty Ltd v. Marrosan Nominees Pty Ltd

(1997) 112 N.T.R. 1 at 13 that one should in proceedings of this sort apply "a strong presumption in favour of the correctness of . . . [the] award of costs"; but there is nothing in the statute to justify

the use, against an applicant for leave, of such a presumption.

1. It will be noted that the Court is not obliged to grant leave if the conditions set out in s. 38(5)

   are satisfied; the grant is discretionary. In the present case no question arises as to an erroneous

   exercise of discretion; Crewford says that neither the condition mentioned in para. (i) nor that

   mentioned in para. (ii) of s. 38(5)(b) is satisfied. It should be added, for the sake of completeness,

   that some reliance was placed by Crewford on s. 38(5)(a), but little was said about that and the

   point is not of sufficient substance to require discussion.

2. The error of law relied on by an aspiring appellant must be one which is capable of being

   formulated whether reliance is placed on para. (i) or para. (ii) of s. 38(5)(b). If it is not, it can hardly

   be manifest within para. (i). Further, in that situation the basis of the intended appeal cannot be

   established, that basis being a "question of law arising out of an award", as stated in s. 38(2) of the

   Act. If the wrong legal proposition complained of by an applicant for leave is not expressed in the

   award, it must, for the error to be "manifest", be clearly implicit in the reasons given by the

   arbitrator. Where, as is the present case, the arbitrator's reasons which are attacked are capable

   of more than one interpretation, there may be difficulty in determining whether either of the situations

   mentioned in s. 38(5)(b) exists. The learned primary judge's opinion as to the nature of the error

   of law, on which his Honour's order granting leave is based, is contained mainly in the following

   sentence:

   "The above statements by the arbitrator that the sole issue in this case was the quantum of compensation and that the manner and methods of calculation are subordinate to the primary issue, are not separated from it, are interrelated, and form part of the arbitration as a whole, manifestly demonstrate a wrong approach and constitute an error of law".

3. It is correct that the arbitrator made statements, in giving reasons for his award, to the effect

   stated by his Honour. But counsel for Crewford argue that if those statements were erroneous, they

   did not constitute legal errors. The view of the issues mentioned by the primary judge was not put

   forward as expressing a universal truth; what the arbitrator said was merely a description of the way

   in which he saw the case before him, which was one of some complexity. The arbitrator's view can

   be said to be legally erroneous only if, as a matter of law, such a description of an arbitrated dispute

   could never be right.

4. The arbitrator was referred, as he said in his reasons, to authorities on the question of giving

   costs on the basis of success on separate issues and declined to apply them, saying that they were

   distinguishable on their facts although "a useful enunciation of the principles". The arbitrator's

   reasons do not explain very clearly why he was unwilling to make an order for costs on an issues

   basis; it is possible that the main ground of his decision was merely an impression that the issues

   on which Transit succeeded were not, or should not be treated as, separable from the central

   question of the amount of compensation. Whether or not that is the proper view, no "manifest error

   of law" is disclosed by the passage we have quoted from the learned primary judge's reasons; the

   word "manifest" here means "evident or obvious": Leighton Contractors Pty Ltd v. South Australian

   Superannuation Fund Investment Trust (1994) 63 S.A.S.R. 444 at 448.

8 The conclusion that the error relied on by Transit is not in this category derives support from
the way in which the point is formulated in Transit's outline of argument; it is there said that the

manifest error of law was that:

". . . the arbitrator did not appreciate that the method of calculation of

compensation was central to the issues before the arbitrator".

If, as this suggests, the arbitrator was wrong in his description of the relative importance of the

factual issues he had dealt with, that would not be an error of law at all, let alone a manifest one.

1. In the course of argument in this Court, counsel for Transit put forward the submission that

   the arbitrator's view of the matter was wholly unreasonable, suggesting that the unreasonableness

   of the outcome showed that there must have been legal error involved. He argued that the

   arbitrator's failure to give an adequate reason for not awarding costs on an issues basis was a

   manifest error of law within para. (i) of s. 38(5)(b) and that his failure to award costs on that basis

   was strong evidence of unreasonableness, i.e. strong evidence of an error of law within para. (ii).

   In House v. The King (1936) 55 C.L.R. 499, it was pointed out that a decision which is on the

   facts unreasonable or plainly unjust may be inferred to be based on a "failure properly to exercise

   the discretion which the law reposes in the court of first instance" (505). If the arbitrator's costs

   award was wholly unreasonable then that might perhaps have been due to an error of law having

   been made; but it would still be necessary to identify it. We should add that it would be

   inappropriate for this Court to attempt to decide, in this appeal, whether the costs award was in

   truth unreasonable.

2. To return to the learned primary judge's reasons, his Honour went on to say, after the

   sentence we have quoted above:

   "In circumstances such as this it does not follow that a party entitled to compensation who receives an amount no matter how little above the amount offered and no matter how much below the amount which that party claims, is entitled to costs if the amount of the award exceeds the offer made by the other side. Nor is it irrelevant in circumstances like this that the successful party may have protracted the arbitration very substantially by embarking upon issues, particularly issues involving expert evidence, that greatly enlarge the amount claimed but are rejected".

   Although little reliance was placed on this passage in argument before us, it implies, first, that the

   arbitrator acted, or might have acted, on the basis that because the award was, as in truth it was,

   higher than any offer of compensation made, Crewford was entitled as of right to all its costs;

   secondly, that the arbitrator thought it would not be relevant to costs that Crewford had protracted

   the arbitration very substantially by embarking upon issues on which it failed.

3. It has to be conceded in favour of Transit that the first proposition might possibly have

   attracted the arbitrator. Whether it did so or not depends on the meaning of an obscure sentence

   in his reasons:

   "The decision on who succeeded in the arbitration is one taken on balance".

   (emphasis added)

   Immediately prior to that sentence the arbitrator had, as we have mentioned, asserted that some

   authorities concerning the making orders for costs of issues were distinguishable on their facts.

   Immediately after the sentence, the arbitrator said in effect that the award of compensation

   exceeded that argued for by Transit, and that offered as a settlement, and therefore Crewford had

   succeeded in the arbitration. It is not clear what "on balance" implies; it could have been a

   reference to the process of comparing the merits of factors favourable to each side's argument. But

   whatever was meant, we do not accept that it is clear ("manifest") that the arbitrator decided the

   costs issue without reference to any consideration other than that the amount of the award exceeded
   what was offered, or argued for, by Transit.

4. As to the second point which emerges from the part of the primary judge's reasons last

   quoted, it cannot be concluded (nor was it argued) that the arbitrator adopted the view that success

   on very substantial issues by a party in the position of Transit could never, as a matter of law,

   produce a costs order in its favour.

5. The conclusion that there was a "manifest error of law" within the meaning of the Act

   apparent from the arbitrator's reasons cannot be supported. It might well be said, by way of

   criticism of the reasons, that they do not elucidate why it was that the arbitrator was unwilling to

   apply in favour of Transit authorities, to which he was referred, illustrating the circumstances in

   which an order for costs of issues might be made; and by way of criticism of the result, it might be

   urged that, in the exercise of his costs discretion, the arbitrator could not have accorded sufficient

   weight to Transit's success on issues. But neither of these criticisms, assuming them to be valid,

   would establish the existence of a manifest error of law.

6. As to para. (ii) of s. 38(5)(b), even if there were strong evidence that the arbitrator had

   made an error of law, it is not easy to see how it could be decided, in favour of Transit, that

   determination of "the question" could add "substantially to the certainty of commercial law". The

   unlikelihood of its doing so follows from the fact that the legal question is unidentified. If, as the

   argument for Transit seemed to convey, the matter to be agitated on the appeal is merely that the

   result is, on the facts of the present case, unreasonable, decision of the appeal would not necessarily make prediction of the results of future similar cases easier. What, it may be expected, would ensue

   from the appeal would merely be an application of established principles, with respect to the

   discretion to award costs of issues, to the circumstances of a particular arbitration. Counsel for

   Transit urged earnestly upon us that an appeal from the arbitrator might, if decided in favour of

   Transit, have a beneficial effect, in encouraging arbitrators to consider giving costs of issues. But

   that is not the test in para. (ii) of s. 38(5)(b); what one has to look for under the second part of that

   paragraph is added legal certainty, not merely an increase in the tendency of arbitrators to accept

   a particular line of argument.

7. It is possible to feel some sympathy for Transit's position and to harbour the suspicion that

   its argument on costs before the arbitrator might possibly have deserved better success than it

   achieved. But the legislature has imposed a stringent limitation on the grant of leave to appeal from

   an arbitrator's award to the Supreme Court; that limitation was in our respectful opinion

   transgressed by the order under appeal.

8. We allow the appeal with costs, set aside the order made by the judge below and in lieu

   order that the application by Transit for leave to appeal be dismissed with costs.