Fairyglen v Lunsmann

[2003] NSWSC 696

CITATION:	Fairyglen v Lunsmann & Anor [2003] NSWSC 696
HEARING DATE(S):	15 July 2003, 23 July 2003
JUDGMENT DATE:	31 July 2003
JURISDICTION:	Common Law Division
JUDGMENT OF:	Master Malpass
DECISION:	The Summons is dismissed. The plaintiff is to pay the costs of the Summons. The Exhibits may be returned.
CATCHWORDS:	Leave to appeal from an arbitrator - manifest error of law on the face of the award - strong evidence of error of law - substantial addition to the certainty of commercial law.
LEGISLATION CITED:	Agricultural Holdings Act 1941. Agricultural Tenancies Act 1990. Commercial Arbitration Act 1984, s 38, s 38 (2) and (4), s 38 (5), s 38 (5) (b) (i) and (ii), s 40.
CASES CITED:	Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203.
PARTIES :	Fairyglen Pty Ltd (Plaintiff) v June Lunsmann (First Defendant) Ian Sell (Second Defendant)
FILE NUMBER(S):	SC 13464 of 2001
COUNSEL:	Mr I Young/C M Morris (Plaintiff) Mr I E Davidson/Mr C G Catt (First Defendant) N/A (Second Defendant)
SOLICITORS:	Andrew Boog (Plaintiff) Paul L Henke & Co (First Defendant) I V Knight - Crown Solicitor - Submitting Appearance (Second Defendant)

LOWER COURTJURISDICTION:	Arbitration
LOWER COURT FILE NUMBER(S):	N/A
LOWER COURT JUDICIAL OFFICER :	Ian Sell, Sole Arbitrator

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

Master Malpass

Thursday 31 July 2003

13464 of 2001 Fairyglen Pty Ltd v June Lunsmann & Anor

JUDGMENT

1 MASTER: In or about 1976, Mr Jack Baker and others had discussions with the late Mrs Neta Evans (she and the first defendant owned the property known as “Earndell” as joint tenants) concerning share farming on Portion 8 of the property. It seems to be common ground that the discussions brought about an oral share farming agreement (the oral agreement). The terms of the oral agreement included terms that the tenants bear the cost of the planting of the crop and that the expenses and profits were to be shared (the ratio was 66.66% in the tenant’s favour).

2 In 1983, members of the Baker family incorporated Fairyglen Pty Ltd (the company). It was intended to act as a corporate trustee of the Baker Family Trust. It became involved in the share farming activities. No express change was made to the oral agreement.

3 Mrs Evans managed the property until 1986. Thereafter the first defendant took over the management. In about 1990, Mrs Evans died. Her daughter (Mrs June Lunsmann) became the sole owner of the property. The share farming activities continued. The first defendant moved to terminate the share farming arrangements in August 1996. They came to an end in January 1997.

4 A claim for compensation was made under the Agricultural Tenancies Act 1990 (the 1990 Act) (by application dated 26 February 2001). The first defendant made a Cross-Claim. These matters became the subject of an arbitration pursuant to the Commercial Arbitration Act 1984 (the Act). Mr Sell was appointed as the Sole Arbitrator. The arbitration took place on 31 July 2001 at Walgett Court House.

5 Although confusion arose from the form of the application itself and other material relied on by the applicant, during the arbitration, Mr Jack Baker presented the application as being made by the company. The application had been executed under the company seal. Mr Jack Baker and his son (Mr Jeffrey Baker) appeared as directors thereof. His daughter-in-law was also present (another director). In response to an inquiry from the Arbitrator, Mr Jack Baker confirmed that the company was the applicant.

6 The application can be read as alleging an oral agreement. It contains inter alia the following:-

“ Share-farming agreement:
Oral agreement between Mr. Baker and Mrs.Evans (mother of present lessor) (the “parties”).
The parties agreed that due to longstanding friendship and association there was no need for written agreement.
Terms: The share-farmer (Baker) prepare the land, plant the wheat and thereafter the lessor (Mrs Evans) share expenses with Baker in the same proportion as the share of proceeds which was agreed as 66.66% to farmer and 33.33% to owner.
Share-farming agreement commenced 1976.”

For completeness, I should mention that the alleged oral agreement (including the alleged commencement date) is inconsistent with evidence given by Mr Jack Baker inter alia in the arbitration and in an affidavit sworn in these proceedings.

7 The Arbitrator received evidence (both oral and written material). There were seven exhibits (including a folder of written evidence and supporting documents tendered by the company). Both of the male directors gave oral evidence. He received submissions (both oral and written). The written submissions made in support of the application were prepared by the legal team acting for either the company or members of the family under the heading “Mr Jack Baker and Mr Jeffrey Baker” (the initial submissions). Following the completion of the arbitration, the parties were given the opportunity to make further written submissions. Further written submissions were made in support of the application (the further submissions). In his oral evidence, Mr Jack Baker said that these submissions were his work. The content of the material would suggest that this was highly unlikely. The submissions were made under inter alia the headings “Baker v Lumsmann” and “Submissions on behalf of the Tenant”.

8 On 15 October 2001, the Arbitrator determined the application. He prepared a document headed “DETERMINATION OF AGRICULTURAL TENANCY DISPUTE”. It contained material inter alia under the sub-headings “EVIDENCE”, “APPLICATION”, “FINDINGS” and “DETERMINATION”.

9 Under the heading “FINDINGS” the following appeared:-

“Mr Jack Baker gave evidence that the tenancy was formed by discussion and agreement during 1976 between Mrs Neta Evans (as the then owner of the property ‘Earndell’, Walgett) and Mr Tony Dellbridge, Mr Joe Andrews, Mr Jeffrey Baker, and Mr Jack Baker (as tenants of the property ‘Earndell’, Walgett).

Mr Jack Baker gave further evidence that there was never any re-negotiation or change to the tenancy agreement (other than Mr Tony Dellbridge and Mr Joe Andrews ceasing their respective involvements in the tenants’ partnership in 1980 and 1984) from its commencement in 1976 until termination of the tenancy in 1997.

Mr Jack Baker stated that there was no re-negotiation or change agreed with Mrs Neta Evans before her death in 1990. He also stated that there was no re-negotiation or change agreed with Mrs June Lunsmann during her ownership of ‘Earndell’ from 1990.

Mrs June Lunsmann also gave evidence that (sic) was no re-negotiation or change agreed between herself and the tenants.

There was no evidence given by either party to the dispute to support the assertion by Messrs Jack and Jeffrey Baker that Fairyglen Pty Ltd was the tenant under an agricultural tenancy agreement concerning the property ‘Earndell’, Walgett.”

10 Under the heading “DETERMINATION”, the following appears:-

“On the basis of the evidence presented at the hearing it is decided that:
1. There was no tenancy agreement between Mrs Neta Evans or Mrs June Lunsmann (during their respective periods of ownership of the property ‘Earndell’, Walgett) as owners and Fairyglen Pty Ltd as tenant.
2. In accordance with the findings stated above:

(a) all of the requests for orders stated in Fairyglen Pty Ltd’s application dated 26 February 2001 are refused, and

(b) no findings or determination are made in relating (sic) to the respondent’s cross claim.”

11 The present proceedings were commenced by Summons filed on 7 November 2001. The plaintiff purports to challenge the determination pursuant to s 38 of the Act. The only avenue of challenge is by way of leave granted by this Court.

12 They were commenced by three plaintiffs. One of them, Mr Jeffrey Baker died in July 2002. Mr Jack Baker ceased to be a party on or prior to the hearing. The company is now the only plaintiff. The summons was not served until May 2002.

13 The court has before it a number of affidavits and a significant volume of documentation. Mr Jack Baker has sworn two affidavits. An affidavit has been sworn by each of Mr and Mrs Lunsmann. There has been cross-examination of Mr Baker and Mrs Lunsmann. The affidavit of Mr Lunsmann inter alia annexed a copy of the notes made by him during the arbitration. He was not cross-examined.

14 There was no transcript taken during the arbitration. Accordingly, the conduct of it has to be discerned from the evidence tendered as to what happened during it (which gives rise to some dispute) and the award of the Arbitrator.

15 The Arbitrator determined the application on the basis that the company was the applicant. Subsequent to the determination, Mr Boog (purporting to act for Mr Jack Baker) requested the Arbitrator to correct the determination to reflect the applicant as Mr Jack Baker. By letter dated 5 November 2001, the request was refused.

16 I should add that Mr Jack Baker gave some unconvincing evidence that Mr Boog was not his solicitor and had only acted for the company.

17 The cross-examination has been extensive for a case that involves an appeal. This took place even though credibility is not a significant matter in the determination of this appeal. To the extent that any matters of credibility need to be determined, I should record that I have closely observed the witnesses during the giving of evidence and that in dealing with these matters I have had regard both to demeanour and evidence.

18 The cross-examination saw the eliciting of material, without objection, which seemed to go to issues concerning the merits of the case rather than issues of credibility. In dealing with the issues that arise on the application for leave to appeal, I have not taken that material into account.

19 It is common ground that a statutory right to compensation was conferred by the Agricultural Holdings Act 1941 (the 1941 Act). It was repealed by the 1990 Act. It was common ground that savings provisions operated to enable the entitlement to claim compensation to subsist under the 1941 Act whilst the method of calculating any entitlement to compensation was to be found in the 1990 Act.

20 It is not in dispute that a share farming agreement confers a bare licence which is not assignable at common law. It is also not in dispute that such an agreement may be instantly terminated on inter alia the death of the owner and that the continuance of share farming activities thereafter may give rise to an implied agreement. The plaintiff concedes that no oral agreement came into being between the plaintiff and the first defendant (or her predecessor). The only finding that is challenged is the ultimate one (that there was no evidence that the company was the tenant).

21 It is now convenient to turn to the appellate provisions contained in the Act. Subsection (2) provides that subject to subs (4) an appeal shall lie to this Court on any question of law arising out of an award. Subsection (4) enables an appeal under subs (2) to be brought by any of the parties to an arbitration agreement inter alia subject to s 40, with the leave of the Supreme Court. Section 40 has no present application.

22 Subsection (5) is in the following terms:-

“(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 one 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.”

23 The present provisions are the product of amendments made in 1990. The second reading speech records that one of the major objectives of the amending legislation was to minimise judicial supervision and review. It was thought that a more restrictive criterion for the granting of leave was desirable.

24 The plaintiff has argued that it is entitled to leave under either of (i) or (ii) of (b). The first defendant resists the granting of leave under either provision.

25 There was no issue that the determination of any question of law involved in this application for leave could substantially affect the rights of one or more of the parties to the Arbitration Agreement.

26 The plaintiff says that there are three errors which are manifest on the face of the award. In written submissions, counsel for the plaintiff has put his client’s case as follows:-

“18. The arbitrator has made three errors which are manifest on the face of the his determination as follows:


(a) He has concluded as a matter of law that a sharefarming agreement did not arise by express re-negotiation or change agreed between Mrs. Evans and/or Mrs. Lunsmann and Fairyglen, but failed to consider whether such a sharefarming agreement between Mrs. Evans and/or Mrs. Lunsmann and Fairyglen was implied or inferred by the conduct of the parties.

(b) He has failed to consider whether in all the circumstances Mrs. Evans and/or Mrs. Lunsmann were estopped from denying the existence of a sharefarming agreement with Fairyglen.

(c) Additionally, the Arbitrator has failed to accord procedural fairness to the parties, and in particular Fairyglen by not raising as an issue, and inviting submissions on the critical ultimate issue in the case, namely, in the absence of an express re-negotiation or change agreed, then by what legal principle was Fairyglen a sharefarmer.”

27 “Manifest” is defined in the Dictionaries as “readily perceived, evident, obvious, apparent or plain.” The words “manifest error” were considered in Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203 at 221 – 222 and 225 – 226. Sheller JA took the view that they contemplated something that was evident or obvious, as opposed to something that was merely arguable. It is common ground that a meaning to that effect should be given to the words “manifest error” in the context of the Act.

28 An award is not the subject of any prescribed form. There is no express requirement for an Arbitrator to provide reasons for the determination.

29 The words “on the face of the award” did not excite any conflicting submissions. At least in this case, they did not throw up the problems that can be encountered in dealing with a similar expression “on the face of the record”. It was common ground that in determining what was “on the face of the award” regard could be had only to the material to be found in the entirety of the award itself.

30 The plaintiff contends that a finding of no evidence, where there is in fact some evidence, is an error of law. This question was not fully debated and for present purposes need not be determined.

31 The first defendant submits that there is no error of law on the face of the award. In my view, that submission is correct.

32 The submission that was advanced by the plaintiff requires the court to examine the material that was placed before the Arbitrator and form a view as to the correctness of the finding of no evidence.

33 What is contemplated by subs (5) (b) (i) is to be contrasted with what is contemplated by subs (5) (b) (ii). The former requires the court to look at the award. The latter would appear to enable the court to look at evidence and determine whether or not there is “strong evidence” in the relevant sense.

34 Subsection (5) (b) (ii) first requires that there be “strong evidence that the arbitrator…..made an error of law”. This collocation of words may be thought to be somewhat odd. However, for present purposes, it is unnecessary to determine what it means. The Arbitrator determined in effect that there was no tenancy agreement under which the company became the tenant. On the material before the Arbitrator, I am of the view that this was a determination that was reasonably open to him. I am not satisfied that there is even an arguable case of error of law. In my view, the material discloses no error of law which should be disturbed by this Court.

35 What is contemplated by the second requirement found in (5) (b) (ii) has to be also a matter of considerable conjecture. It requires the court to be satisfied that a determination of the said error of law would have the effect of making the requisite substantial addition to the certainty of commercial law. The ambit of “commercial law” does not need to be determined in this case. It may well be that this question is best dealt with on a case by case basis.

36 In my view, a question involving the determination of the parties to an agreement or of the making of an implied contract may be unlikely to satisfy (ii). Generally speaking, these matters can be expected to turn on the facts of each particular case. In this case, it certainly would not add in any sense to the certainty of law.

37 It is said also that there was a public interest in this Court laying down what are proper principles, practices and procedures for arbitration. It is further said that matters such as an arbitrator should make proper findings of fact, apply the proper law and accord procedural fairness to the parties would satisfy the test. The question of whether or not such matters fall within the province of “commercial law” was not really argued. Assuming for present purposes that it does, I am not satisfied that a determination of the questions raised in this appeal would have the effect of making any addition to the certainty of commercial law.

38 For the assistance of the parties, although they do not have to be now determined I shall now express my views on various other questions that were agitated.

39 It was an arbitration with the parties themselves appearing in person. The applicant had legal assistance (inter alia in the preparation of the initial submissions). The case presented involved an allegation of an oral agreement. It is not said that during the arbitration the Bakers raised matters of implied agreement and estoppel. At the very least, such matters were not expressly raised in written submissions. In my view, the Arbitrator was entitled to determine the application on the basis that the applicant was alleging an oral agreement only. If he did determine it on a wider basis (such as to deal with also an allegation of an implied agreement), I consider that a determination of no tenancy agreement with the company was reasonably open to him. In my view, it is unrealistic to expect that he would have had regard to principles of estoppel. If he had, it could be expected that the respondent would justifiably be entitled to complain about lack of procedural fairness.

40 It is not in dispute that the Arbitrator raised the matter of the identity of the applicant. This necessarily threw up the question of the identity of the tenant. The Arbitrator put questions to Mr Jack Baker (concerning, inter alia, the matters of the company not being the original tenant and there being no new agreement with the first defendant). In my view, his conduct should have made it apparent to all parties that the identity of the tenant was an issue that concerned him. I am not satisfied that the plaintiff was denied procedural fairness.

41 The plaintiff has alleged that it was common ground before the Arbitrator that there was a share farming agreement (as propounded in the further submissions). The first defendant takes issue with that allegation. This is a dispute which really does not need to be resolved.

42 There was conflicting evidence on the question. I do not accept the evidence of Mr Jack Baker on this and other matters. I found him to be an unimpressive witness. He gave evidence that was extraordinary. He gave evidence that seemed highly unlikely to be true. He has given conflicting evidence and his recollection was in my view unreliable. The evidence of the first defendant received support from her husband (who was also present during the arbitration) and his evidence was not challenged.

43 The real question was whether or not there was dispute as to who were the parties to any such agreement. The alleged common ground did not contemplate that question and the parties were really in dispute over what was a false issue. Be that as it may, I am not satisfied that there was common ground as alleged by the plaintiff.

44 It may be that the first defendant laboured under some confusion as to there being no enforceable agreement in the absence of express consensus. Her belief may have also been fuelled by her concern as to a lack of agreement on matters pertaining to the terms of the share farming activities.

45 In support of the contention that the Arbitrator erred in not finding an implied tenancy, the plaintiff has identified a number of matters. I shall mention some of them (the first defendant’s awareness of the existence of the company (at least, since about 1989) and the correspondence and other documentation passing between the company and the first defendant). There was a body of material which showed involvement of the company in or about the share farming activities (inter alia which sees it both paying and receiving moneys in respect thereof).

46 However, the precise role in these activities was uncertain. There is also correspondence between members of the Baker family and the first defendant concerning the activities. The correspondence with the company itself contains material which throws doubt on the allegation that it was the tenant and could be seen as showing that a tenancy may have been on foot with Mr Jack Baker or Mr Jeffrey Baker or a partnership. It seems to me that the material discloses a confused state of affairs.

47 Competing views could be taken as to its role. One such view was that the company was a vehicle of convenience used by the Baker family for taxation purposes and to regulate internally the respective family entitlements. There were relatively complex family arrangements (probably involving a trust deed). There was a mention of loan accounts (by Mr Jack Baker). The plaintiff did not put before the Arbitrator the material that may have clarified the position. It could be seen as such a vehicle used in a context where the business interests were really carried on by a member of the family or a partnership.

48 Perhaps I should also add that it is hardly surprising that the Arbitrator was not satisfied that the company had become a tenant, when the Baker family and their legal team seemed from time to time to have similar doubts.

49 I am not satisfied that this is a case in which leave should be granted. The Summons is dismissed. The plaintiff is to pay the costs of the Summons. The Exhibits may be returned.

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Last Modified: 08/05/2003