Erlinda van den Braak v John Graham Chegwidden - [2005] NSWSC 669

No judgment structure available for this case.

CITATION:
Erlinda van den Braak v John Graham Chegwidden [2005] NSWSC 669
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 08/06/05; 16/06/05

JUDGMENT DATE :

8 July 2005

JUDGMENT OF:
Nicholas J

DECISION:
Para 56

CATCHWORDS:
Inferior Courts - Local Court - civil claim - appeal - jurisdiction - whether jurisdiction to order claim to determination by arbitrator - whether registrar's order a procedural irregularity - whether arbitrator without jurisdiction - whether judgment should be set aside

LEGISLATION CITED:
Arbitration (Civil Actions) Act 1983; s 3(1); s 7(1); s 7(1A); s 18
Local Courts (Civil Claims) Act 1970; s 6(2); s 19(1); s 21H(1); s 21H(3)(d); s 21H(5); s 69(2); s 69(4)(a); s 75A
Local Courts (Civil Claims) Rules 1988; Pt 33, r 1(2)(j); Pt 33, r 9; Pt 38, r 2(d); Pt 38, r 11(b); Pt 38, r 12

CASES CITED:
Craig v The State of South Australia (1995) 184 CLR 163
Hoskins v van den Braak (1998) 43 NSWLR 290
Minister for Immigration v Bhardwaj (2002) 209 CLR 597
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Walton v Gardiner (1993) 177 CLR 378

PARTIES:
Erlinda van den Braak - Plaintiff
John Graham Chegwidden - Defendant

FILE NUMBER(S):
SC 2092/05

COUNSEL:
R W Killalea - Plaintiff
R Lovas - Defendant

SOLICITORS:
Mendika Law Pty Ltd - Plaintiff
Chegwidden Solicitors - Defendant

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Nicholas J

8 July 2005

2092/05 Erlinda van den Braak v John Graham Chegwidden

JUDGMENT

1 His Honour: This is an appeal against a judgment and an order of the Local Court pursuant to s 69(2), alternatively s 69(2B) and (3) Local Courts (Civil Claims) Act 1970 (the Act).

2 By her second amended summons filed 1 June 2005 the plaintiff seeks orders that judgment in the proceedings in Local Court No. 9195/03 be set aside, and that the registrar’s order of 12 July 2004 in those proceedings be set aside, and that the arbitrator’s award in those proceedings be set aside. Further orders are sought that, if necessary, leave to appeal be granted, and that time be extended pursuant to Pt 51A, r 3 for the institution of the appeal to this Court.

3 By consent, all matters relevant to the appeal, leave, and extension of time were heard together.

4 The ground upon which the plaintiff appeals is, essentially, that the arbitrator lacked jurisdiction to hear and determine the action, and to make the award of 31 August 2004 upon which the judgment is founded.

Background

5 It is common ground that the facts which give rise to this appeal are the following.

6 On 2 September 2003 the defendant issued a statement of liquidated claim No. 9195/03 in the small claims division of the Local Court in which he claimed from the plaintiff the sum of $2,296.88, and interest, for costs for legal professional services rendered.

7 On 17 September 2003 the plaintiff filed a notice of grounds of defence in which she denied liability, and pleaded grounds of defence which alleged fraudulent conduct and dishonesty on the part of the defendant in his dealings with her.

8 On 19 December 2003 the registrar moved the proceedings to the general division of the Local Court.

9 On 16 February 2004 the defendant filed an amended statement of claim and, on 5 March 2004, filed a further amended statement of claim.

10 On 19 March 2004 the plaintiff filed an amended notice of grounds of defence in which she maintained allegations of fraudulent conduct and dishonesty against the defendant.

11 On 7 April 2004 the plaintiff filed a cross-claim, which was subsequently amended, in which she claimed damages of $40,000.00 on grounds of fraud, misrepresentation, dishonesty, deception, and negligence.

12 On 12 July 2004 the proceedings were before Registrar Davkovski. The plaintiff was unrepresented; the defendant was represented by a solicitor, Mr Jonathon Idas. On that occasion the registrar enquired of the parties whether the matter was ready to be referred to arbitration. After some discussion he ordered the matter be referred to arbitration and fixed the date for hearing for 31 August 2004.

13 On 31 August 2004 an arbitrator heard and determined the claim and cross-claim. An award was made for the defendant in the total sum of $5,327.68 which included the claim, interest, and costs assessed at $2,827.00. The cross-claim was dismissed.

14 On 23 September 2004 the plaintiff applied to the New South Wales Bar Association for legal assistance in the proceedings under its Legal Assistance Referral Scheme. Thereafter there was correspondence until she received assistance in February 2005.

15 On 8 October 2004 the award became effective as a judgment of the Local Court pursuant to s 21H(5) of the Act.

16 On 16 December 2004 the plaintiff filed a notice of motion in which she sought a stay of the judgment, and an extension of time within which to apply for a rehearing of the action under s 18 Arbitration (Civil Actions) Act 1983 (the Arbitration Act). Her affidavit in support included the following statement:

“In my defence and cross action I raised allegations of fraud on the part of the plaintiff. Under Part 38 Rule 2 the case should never have been referred to arbitration because it falls within the class of actions that are not to be referred to arbitration (Rule 2(d))”.

17 On 24 February 2005 the deputy registrar heard and determined the notice of motion. The plaintiff was represented by Mr R Killalea of counsel, and the defendant by his solicitor, Mr Idas.

18 The deputy registrar ordered an extension of time for a rehearing of the cross-claim. An extension of time for a rehearing of the claim was refused. He directed a stay of proceedings until 25 March 2005.

19 In his reasons for decision dated 24 February 2005 the deputy registrar noted that the action should not have been referred to arbitration as it was one of the class of actions to which s 21H(3)(d) of the Act applied. He noted that under s 18A(2) Arbitration Act an order for a rehearing could not be made as the amount claimed was less than $10,000.00 as prescribed by the regulations. He then recorded “… that the extension of time was not considered as it was a fruitless exercise in any event”.

20 His reasons included the following passage:

“(ii) As the Judgement Debtor’s cross-claim was for $40,000.00 and was an action based on inter alia fraud, misrepresentation, deceptive conduct and other serious allegations against a legal practitioner, the action should not have been referred to arbitration, and in my view the arbitrator ought to have returned the cross-claim to the court for hearing by a Magistrate. Part 38 Rule (2) precluded the Arbitrator from jurisdiction to deal with the cross-claim (and in my view the defence to the statement of claim also). Had the cross-claim been returned by the Arbitrator it is likely on the balance of probabilities that the entire action would have been returned, as the defence and the cross-claim relied on substantially the same allegations, and the entire action would then have been listed before a Magistrate. Through no fault of the (unrepresented) defendant, this did not occur and the defendant has effectively been denied the opportunity to present her cross-claim in the appropriate forum. Accordingly, natural justice in my view is served by the granting of the Motion in as much as it allows the defendant to have the cross-claim re-heard by a Magistrate, which is whom it should have been heard by in the first place”.

21 On 3 March 2005 the plaintiff filed a notice of motion in this Court for an order extending time for filing an appeal from the judgment. On 23 March 2005 the summons was filed in which she seeks declarations that the arbitrator and the Local Court acted without jurisdiction, and an order that the judgment be set aside.

The legislation

22 Pursuant to s 69(2) of the Act, a party to proceedings who is dissatisfied with the judgment or order of the court as being erroneous in point of law may appeal to the Supreme Court therefrom. By subs (2B) and (3) leave of the Supreme Court is required to appeal from an interlocutory judgment or order, or where a ground involves a question of mixed law and fact, respectively.

23 By s 6(2) of the Act the jurisdiction conferred by it on a court sitting in its general division is to be exercised by a magistrate sitting alone.

24 The following provisions are also relevant:

Arbitration (Civil Actions) Act 1983

(3) A court shall not make an order under subsection (1) if:

(d) the action is an action within a class of actions prescribed by the rules as a class of actions that may not be so referred; or

Arbitration (Civil Actions) Act 1983

(a) the failure is to be treated as an irregularity and is not to nullify the proceedings, or any step taken in the proceedings, or any document, judgment or order in the proceedings, and

(b) subject to subsections (2) and (3), the court may, on terms, set aside wholly or in part the proceedings or any step taken in the proceedings or any document, judgment or order in the proceedings, or exercise its powers under the rules to allow amendments and to make orders dealing with the proceedings generally.

(2) The court must not wholly set aside any proceedings on the ground that, although not constituting an action for the recovery of a debt or liquidated demand, they were commenced by the lodging of a statement of liquidated claim.

(3) The court must not set aside any proceedings or any step taken in any proceedings or any document, judgment or order in any proceedings on the ground of a failure to which subsection (1) applies on the application of any party unless the application is made within a reasonable time and before the applicant has taken any fresh step after becoming aware of the irregularity”.

25 Of the Local Courts (Civil Claims) Rules 1988 the following rules are relevant:

(j) under section 21H (1) of the Act;”

Pt 33, r 9 “Where the registrar gives a direction or makes an order or does any other act in any proceedings, the court may, on application by any party, review the direction, order or act, and may make such order by way of confirmation, variation, discharge or otherwise as the court thinks fit”.

Arbitration (Civil Actions) Act 1983

(d) if the defendant has included in the notice of grounds of defence filed in the action any allegation to the effect that the claim of the plaintiff is fraudulent, either as to the whole of the claim or as to a substantial part thereof”.

26 Part 38, r 11(b) prescribes a period of 28 days after the expiration of which the arbitrator’s award is deemed to be a judgment or order of the court for the purposes of s 21H(5) of the Act.

27 Part 38, r 12 enables application to be made to the court by the aggrieved party for the rehearing of an action determined by an arbitrator.

28 Under the Arbitration Act s 3(1) defines “referred action” to include an action the subject of an unrevoked reference to an arbitrator under s 21H of the Act.

29 Relevantly, the Arbitration Act includes the following provisions:

“7(1) The jurisdiction conferred on an arbitrator by this Act in relation to a referred action is part of the jurisdiction of the court by which the action was referred.

(2) An order for rehearing cannot be made if the amount claimed in the action, or the value of the property to which the action relates, does not exceed the amount prescribed by the regulations for the purposes of this section”.

Time for appeal

30 Part 51A, r 3(1) requires that, subject to time being extended, an appeal to this Court must be instituted within 28 days after the material date. In this case the material date is that on which the award became effective as a judgment of the Local Court, namely 8 October 2004. Under r 3(3) the court may extend time at any time. It is a wide discretion to be exercised with regard to the overall requirements of justice in the circumstances of the particular case.

31 The uncontradicted evidence shows that the plaintiff made application for legal assistance promptly after the arbitrator made the award on 31 August 2004, and prior to the material date for the purpose of instituting an appeal to this Court. It was not until 28 October 2004 that she received a letter from the New South Wales Bar Association which sought clarification and further information about her application, and which advised her to protect herself with regard to lodging an appeal.

32 By her notice of motion filed in the Local Court on 16 December 2004 the plaintiff sought a stay, and an extension of time within which to apply for a rehearing. In her affidavit in support sworn the same day she referred to her application for legal assistance for the purpose of a rehearing, and stated that during the intervening period she suffered illness from stress caused by the case. She also asserted that the action should never have been referred to arbitration as allegations of fraud had been raised in the defence and cross action which attracted the application of s 21H(3)(d) of the Act and Pt 38, r 2(d) of the Local Court Rules.

33 It is apparent from his reasons and orders that the deputy registrar was satisfied that an extension of time for an application for a rehearing of the cross-claim was justified. The application for an extension of time in respect of the claim was simply not considered following his conclusion that the amount in issue was below the prescribed limit. It may be inferred that had it been considered, as a matter of consistency, it would have been granted. In any event, he directed a stay of proceedings including enforcement of the judgment until 25 March 2005.

34 The plaintiff’s notice of motion in this Court was filed on 3 March 2005 well within the period of the stay, and shortly after the deputy registrar’s decision. The effect of the decision was to hold that it was not open to the plaintiff to obtain a rehearing of the action in the Local Court even though he found that the arbitrator lacked jurisdiction to hear and determine it and, consequently, that the award was made without jurisdiction.

35 In the circumstances it seems that the only avenue open to be taken by the plaintiff for the purpose of litigating the jurisdiction issue is by way of an appeal to this Court pursuant to s 69 of the Act. In my opinion the question is of such importance that the interests of justice in the case require that her appeal be determined by this Court, and that an extension of time be granted for this purpose. Furthermore, I am satisfied that the defendant will suffer no prejudice if the extension is granted and the issue is decided on the merits.

36 Accordingly, and in order to remove any doubt, I propose to order that time for institution of the appeal be extended until 1 June 2005, the date of filing of the second amended summons.

Leave to appeal

37 By s 69(2) of the Act a dissatisfied party has a right to appeal to this Court on an error of law. By subs (3) where a ground involves a question of mixed law and fact a dissatisfied party may only appeal by leave of this Court. The central issue in this case is whether the judgment should be set aside on the ground that the arbitrator had no jurisdiction to hear the action and make the award.

38 For the defendant it was submitted that leave was required as the question of jurisdiction involved questions of mixed law and fact. It was further submitted that, on various grounds, leave should be refused.

39 As to the first point, it was put that as there had been no previous determination of the facts and circumstances upon which the action was referred to the arbitrator and the award was made it was necessary for this Court to make relevant findings. Thus, it was put, the ground upon which the appeal is based necessarily involves questions of fact. It was put that for the purposes of s 69(3) a ground of appeal is properly described as one which involves a question of mixed law and fact although the issues of fact are not contentious.

40 In my opinion the submission is without substance and must be rejected. In this case the facts relevant to the referral of the action to the arbitrator, the hearing of the action by the arbitrator and the making of the award were agreed. There was no fact in issue in this appeal which required the decision of the court. It was accepted by the parties that the plaintiff’s notice of grounds of defence raised allegations to the effect that the defendant’s claim was fraudulent within the terms of Local Court Rules Pt 38, r 2(d) and thus the action was within the class of actions to which s 21H(3)(d) applied. It was accepted that the registrar did not have power to make the order of 12 July 2004 by which he referred the action to determination by the arbitrator.

41 In the circumstances the question raised in this appeal is one of law only on which the plaintiff is entitled to appeal under s 69(2) without leave. It is unnecessary to deal with the defendant’s submissions in support of refusal of leave.

Jurisdiction

42 The jurisdiction of the arbitrator to determine the action in No. 9195/03 derived from s 7 Arbitration Act. The jurisdiction so conferred is expressed to be in relation to a referred action (s 7(1), s 7(1A)). A referred action is an action the subject of an unrevoked reference to an arbitrator under s 21H of the Act (s 3(1) Arbitration Act).

43 In these proceedings the action was referred to the arbitrator by the order of the registrar made on 12 July 2004. As the plaintiff’s notice of grounds of defence filed in the action included allegations of fraudulent and dishonest conduct it was an action in respect of which the court was precluded from making an order referring it to arbitration (s 21H(3)(d); Pt 38, r 2(d)). In making the order the registrar acted ultra vires and without regard to the prohibition in s 21H(3)(d). He thus fell into jurisdictional error as explained in the following passage from Craig v The State of South Australia (1995) 184 CLR 163 at p 177:

44 As the action was not one which had been lawfully referred under s 21H of the Act it was not a referred action within s 3(1), s 7(1) and s 7(1A) Arbitration Act. The consequence was that the arbitrator had no jurisdiction to determine the action and make an award. Absent a referred action as defined the condition precedent to the valid exercise of his jurisdiction had not been fulfilled. “A decision that involves jurisdictional error is a decision that lacks legal foundation and is properly regarded, in law, as no decision at all”. (Minister for Immigration v Bhardwaj (2002) 209 CLR 597 para 51, per Gaudron, Gummow, JJ).

45 Thus it came about that the plaintiff was wrongfully deprived of her entitlement to have the action, including her defence and cross-claim, tried by the appropriate tribunal. It is plain from the terms of s 21H(3)(d) that the legislature intended that actions within the prescribed class, such as those in which issues of fraud are raised, should not be determined by an arbitrator and should be left for the court. It may be inferred that a court is, by reason of the qualification and experience of its members, and its practice and procedures, regarded by the legislature as the appropriate tribunal to hear and determine such actions.

46 For the defendant it was submitted that the registrar’s order of 12 July 2004 was a procedural irregularity within the meaning of s 75A(1)(a) of the Act by reason of his failure to comply with the requirements of s 21H(3)(d) and Pt 38, r (2)(d). It was put that the effect of s 75A(1)(a) is that such irregularity is not to nullify the proceedings, or the judgment in the proceedings. It was put that it was a matter of procedure and administration only that the registrar elected to refer the matter for determination by an arbitrator, although to do so was expressly prohibited, instead of directing it to be heard by a magistrate or by an assessor in the small claims division.

47 In short, the defendant submitted that the effect of s 75A(1)(a) is to save the order from being a nullity so that it operated as a valid referral of the action to the arbitrator, and hence the arbitrator had jurisdiction to determine it. Accordingly, it was put that the award was made in the proper exercise of the arbitrator’s jurisdiction, and should stand.

48 Having regard to what I have already said it is inevitable that the defendant’s submissions must be rejected. Section 75A is concerned with irregularities of practice and procedure arising out of a failure to comply with the requirements of the Act or the Rules. I discern nothing in s 75A(1)(a) which permits jurisdictional error to be treated as an irregularity, or that provisions of the Act which impose limitations on jurisdiction, for example s 19(1) and s 21H, are to be read subject to s 75A. Furthermore, and of particular relevance where an appeal lies to this Court, nothing in the language of s 75A(1) detracts from the common law right to relief ex debito justitiae from a judgment or award made without jurisdiction. (cf. e.g. Hoskins v van den Braak (1998) 43 NSWLR 290 at p 298).

49 The defendant further submitted that the plaintiff was estopped from appealing to this Court. It was put that on 24 February 2005 the deputy registrar heard and determined, inter alia, the jurisdiction issue, and that from his reasons it may be inferred that he held that the award was made without jurisdiction although the judgment was allowed to stand. It was put that it was open to the plaintiff to have applied to the Local Court for a review of that decision pursuant to Local Court Rules Pt 33, r 9, but she chose not to do so. It was put that having declined to take that course she remains bound by his decision. As she does not appeal from that decision to this Court it is argued that she is estopped from agitating afresh the same issues on jurisdiction which were raised before the deputy registrar. Alternatively, it was put that in the circumstances the institution and conduct of this appeal constitutes an abuse of process. Reliance was placed on passages from the judgments in Walton v Gardiner (1993) 177 CLR 378; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.

50 In my opinion the submissions are misconceived. The plaintiff derives her right to appeal to this Court from s 69 of the Act. There is nothing in that section which requires exhaustion of avenues of review to the Local Court before the institution of an appeal to this Court. Furthermore, nothing from the reasons and orders of the deputy registrar of 24 February 2005 establish any estoppel as contended. Relevantly, he did not disturb the judgment the subject of this appeal. In my opinion there is nothing arising from those reasons and orders, or from the failure to seek a review of them, which operates in any way to prevent the plaintiff from challenging the judgment in this Court.

51 The defendant also submitted that the plaintiff was estopped by conduct from proceeding with the appeal. The defendant’s written submissions, at para 5.4.3, stated:

“The Local Court had jurisdiction to make the judgment now being appealed. By her conduct, whether that be express consent, implied consent or merely acquiescence, the plaintiff is now estopped from denying that the judgment was arrived at with the proper procedural conditions precedent having occurred”.

52 Mr R Lovas, counsel for the defendant elaborated the submission as follows (T p 42, 08/06/05):

“Now, I appreciate that the course taken is one which is proscribed by the act. It overlaps with the irregularity argument and it overlaps with this estoppel by conduct argument.

All that was erroneous was not the exercise of power by the court in entering the judgment but the mechanism by which that judgment was arrived at and it is not a mechanism which denied procedural fairness and like necessities. That is the gravamen of the irregularity argument and the estoppel by conduct argument”.

53 I have earlier held that the registrar’s order of 12 July 2004 was not an irregularity within the meaning of s 75A(1)(a) of the Act, and that the arbitration was without jurisdiction. Those are sufficient reasons for rejecting the submission to the effect that the plaintiff’s involvement in those proceedings precluded her from moving to set aside the judgment.

54 For the above reasons I hold that the judgment lacks legal foundation, and I propose to order, pursuant to s 69(4)(a) of the Act, that it be set aside.

55 As the question of costs remains outstanding it is appropriate to afford the parties the opportunity to make submissions on this issue if the appropriate order cannot be agreed upon. Arrangements should be made with my associate by 27 July 2005 for the re-listing of this matter.

Conclusion

56 Accordingly, I make the following orders:

(1) that time for filing the summons be extended to 4pm 1 June 2005;

(2) that the appeal be allowed;

**********

29/07/2005 - typographical error - Paragraph(s) para 25

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Citations

Erlinda van den Braak v John Graham Chegwidden [2005] NSWSC 669

Cases Citing This Decision

0

Cases Cited

7

Statutory Material Cited

3

Kirk v Industrial Court of New South Wales [2010] HCA 1

Multitecfbm (Asia Pacific) Pty Ltd v Seong Myeon (Chris) Han [2008] NSWSC 1339

Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11

CITATION:	Erlinda van den Braak v John Graham Chegwidden [2005] NSWSC 669 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	08/06/05; 16/06/05
JUDGMENT DATE :	8 July 2005
JUDGMENT OF:	Nicholas J
DECISION:	Para 56

CATCHWORDS:	Inferior Courts - Local Court - civil claim - appeal - jurisdiction - whether jurisdiction to order claim to determination by arbitrator - whether registrar's order a procedural irregularity - whether arbitrator without jurisdiction - whether judgment should be set aside
LEGISLATION CITED:	Arbitration (Civil Actions) Act 1983; s 3(1); s 7(1); s 7(1A); s 18 Local Courts (Civil Claims) Act 1970; s 6(2); s 19(1); s 21H(1); s 21H(3)(d); s 21H(5); s 69(2); s 69(4)(a); s 75A Local Courts (Civil Claims) Rules 1988; Pt 33, r 1(2)(j); Pt 33, r 9; Pt 38, r 2(d); Pt 38, r 11(b); Pt 38, r 12
CASES CITED:	Craig v The State of South Australia (1995) 184 CLR 163 Hoskins v van den Braak (1998) 43 NSWLR 290 Minister for Immigration v Bhardwaj (2002) 209 CLR 597 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Walton v Gardiner (1993) 177 CLR 378
PARTIES:	Erlinda van den Braak - Plaintiff John Graham Chegwidden - Defendant
FILE NUMBER(S):	SC 2092/05
COUNSEL:	R W Killalea - Plaintiff R Lovas - Defendant
SOLICITORS:	Mendika Law Pty Ltd - Plaintiff Chegwidden Solicitors - Defendant