Gebauer Nominees Pty Ltd v Cole as Trustee for the Hotrox Charcoal Unit Trust t/as Hotrox Charcoal Company
[2006] WASC 57
GEBAUER NOMINEES PTY LTD -v- COLE as Trustee for THE HOTROX CHARCOAL UNIT TRUST t/as HOTROX CHARCOAL COMPANY [2006] WASC 57
| Link to Appeal : |
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| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 57 | |
| Case No: | CIV:1158/2005 | 1 DECEMBER 2005 | |
| Coram: | HASLUCK J | 30/03/06 | |
| 33 | Judgment Part: | 1 of 1 | |
| Result: | Application for leave to appeal and appeal allowed Application to set aside for misconduct allowed | ||
| B | |||
| PDF Version |
| Parties: | GEBAUER NOMINEES PTY LTD GERHARD JOSEPH COLE as Trustee for THE HOTROX CHARCOAL UNIT TRUST t/as HOTROX CHARCOAL COMPANY |
Catchwords: | Commercial arbitration Application for leave to appeal against award Application to set aside for misconduct Issues of estoppel arising out of a related Arbitration Power to correct an alleged misdescription of a party Meaning of arbitration agreement Whether Arbitrator erred in holding that signatories to a lease were acting as trustees Matter remitted to Arbitrator for reconsideration |
Legislation: | Business Names Act 1962 (WA), s 5 Commercial Arbitration Act 1985 (WA), s 30, s 38, s 42, s 44 Property Law Act 1969 (WA), s 51 |
Case References: | Amalgamated Investment & Property Co Ltd (In liq) v Texas Commerce International Bank Ltd [1982] QB 84 Attorney-General (Hong Kong) v Humpheys Estate (Queen's Gardens) Ltd [1987] AC 114 Blair & Perpetual Trustee Co Ltd v Curran (1939) 62 CLR 464 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Craig v State of South Australia (1995) 184 CLR 163 Dare v Pulham (1982) 148 CLR 658 Forsayth NL v Australasian Gold Mines NL (No 1) (1992) 7 WAR 549 Gas & Fuel Corp (Vic) v Wood Hall Ltd & Leonard Pipeline Contractors Ltd [1978] VR 385 Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 Lamac Developments Pty Ltd v Devaugh Pty Ltd (2002) 27 WAR 287 Manningham City Council v Dura (Australia) Constructions Pty Ltd (1999) 3 VR 13 Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 Milligan Contractors Pty Ltd v Jaxon Construction Pty Ltd [2003] WASC 220 Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd [1994] 2 VR 386 Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd (1999) 21 WAR 350 Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203 Thiess Contractors Pty Ltd v Water Corporation of Western Australia, unreported; SCt of WA (Parker J); Library No 970561; 28 October 1997 UDR Equipment Pty Ltd v Afkos Industries Pty Ltd (2000) 22 WAR 221 Villani v Delstrat Pty Ltd [2002] WASC 112 Walton's Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Woodbud Pty Ltd v Warea Pty Ltd (1995) 125 FLR 346 Amalgamated Investment & Property Co Ltd (In liq) v Texas Commerce International Bank Ltd [1982] QB 84 Bank Mellat v GAA Develoopment & Construction Co [1988] 2 Lloyd's Rep 44 Brewer v Brewer (1953) 88 CLR 1 Commonwealth v Jennings Construction Ltd [1985] VR 586 Compagnie Grainiere SA v Fritz Kopp AG [1978] 1 Lloyd's Rep 511 Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 104 Federated Municipal and Shire council Employees Union of Australia v Shire of Albany (1990) 32 IR 470 Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 Friend & Brooker Pty Ltd v Eurobodalla Shire Council, unreported; SCt of NSW; (Brownie J); 20 June 1991 Hoysted v Federal Commissioner of Taxation (1925) 37 CLR 290 Isaacs v Ocean Accident & Guarantee Corporation Ltd & Winslett (1957) 58 SR (NSW) 69 Johnson v Gore Wood & Co [2002] 2 AC 1 London Export Corp Ltd v Jubilee Coffee Roasting Co Ltd [1958] 1 All ER 494 M&M Civil Engineering Pty Ltd v Sunshine Coast Turf Club [1987] 2 Qd R 401 Masawa Australasia Pty Ltd v JCorp Pty Ltd [2000] WASC 5 McNair v Press Offshore Ltd (1997) 17 WAR 191 MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39 Noall v Middleton [1961] VR 285 Port Sudan Cotton Company v Govindaswamy Chettiar & Sons [1977] 1 Lloyd's Rep 166 Powercor Australia v Pacific Power [1999] VSC 110 Qenos Pty Ltd v Mobil Oil Australia Pty Ltd (No 2) [2002] VSC 524 Queensland v Commonwealth (Second Territory Senators' case) (1977) 139 CLR 585 Roberts v Roberts (1994) 12 WAR 505 Rocci v Diploma Construction Pty Ltd [2004] WASC 18 Squires Transport Pty Ltd v Turnor [2004] WASCA 245 Stannard v Sperway Constructions Pty Ltd [1990] VR 673 Sunny Hills Tennis Centre v Shaw Contracting Pty Ltd, unreported; SCt of Tas; Library No A13/1995; 20 March 1995 Taylor v Ansett Transport Industries; sub nom Secretary, Dept of Aviation v Ansett Transport Industries Ltd (ALR) (1987) 18 FCR 342 The King v Lintrose Nominees Pty Ltd & Ors (2001) 4 VR 619 Thoday v Thoday [1964] P 181 Ukrainian Association of Western Australia in Perth (Inc) v Squire Constructions Pty Ltd [2004] WASC 4 Waterman v Gerling Australia Insurance Pty Ltd [2005] NSWSC 1066 Whitehead v Tattersall (1834) 1 Ad & El 491; 110 ER 1295 Williams v Wallis & Cox [1914] 2 KB 478 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- ARB 6 of 2005
- Applicant (Respondent)
AND
GERHARD JOSEPH COLE as Trustee for THE HOTROX CHARCOAL UNIT TRUST t/as HOTROX CHARCOAL COMPANY
Respondent (Claimant)
Catchwords:
Commercial arbitration - Application for leave to appeal against award - Application to set aside for misconduct - Issues of estoppel arising out of a related Arbitration - Power to correct an alleged misdescription of a party - Meaning of arbitration agreement - Whether Arbitrator erred in holding that signatories to a lease were acting as trustees - Matter remitted to Arbitrator for reconsideration
(Page 2)
Legislation:
Business Names Act 1962 (WA), s 5
Commercial Arbitration Act 1985 (WA), s 30, s 38, s 42, s 44
Property Law Act 1969 (WA), s 51
Result:
Application for leave to appeal and appeal allowed
Application to set aside for misconduct allowed
Category: B
Representation:
Counsel:
Applicant (Respondent) : Mr J G Staude & Mr M J Vallve
Respondent (Claimant) : Mr R J Price & Mr D Vilensky
Solicitors:
Applicant (Respondent) : Mullins Handcock
Respondent (Claimant) : Bowen Buchbinder Vilensky
Case(s) referred to in judgment(s):
Amalgamated Investment & Property Co Ltd (In liq) v Texas Commerce International Bank Ltd [1982] QB 84
Attorney-General (Hong Kong) v Humpheys Estate (Queen's Gardens) Ltd [1987] AC 114
Blair & Perpetual Trustee Co Ltd v Curran (1939) 62 CLR 464
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Craig v State of South Australia (1995) 184 CLR 163
Dare v Pulham (1982) 148 CLR 658
Forsayth NL v Australasian Gold Mines NL (No 1) (1992) 7 WAR 549
Gas & Fuel Corp (Vic) v Wood Hall Ltd & Leonard Pipeline Contractors Ltd [1978] VR 385
(Page 3)
Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40
Lamac Developments Pty Ltd v Devaugh Pty Ltd (2002) 27 WAR 287
Manningham City Council v Dura (Australia) Constructions Pty Ltd (1999) 3 VR 13
Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570
Milligan Contractors Pty Ltd v Jaxon Construction Pty Ltd [2003] WASC 220
Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd [1994] 2 VR 386
Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd (1999) 21 WAR 350
Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203
Thiess Contractors Pty Ltd v Water Corporation of Western Australia, unreported; SCt of WA (Parker J); Library No 970561; 28 October 1997
UDR Equipment Pty Ltd v Afkos Industries Pty Ltd (2000) 22 WAR 221
Villani v Delstrat Pty Ltd [2002] WASC 112
Walton's Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Woodbud Pty Ltd v Warea Pty Ltd (1995) 125 FLR 346
Case(s) also cited:
Amalgamated Investment & Property Co Ltd (In liq) v Texas Commerce International Bank Ltd [1982] QB 84
Bank Mellat v GAA Develoopment & Construction Co [1988] 2 Lloyd's Rep 44
Brewer v Brewer (1953) 88 CLR 1
Commonwealth v Jennings Construction Ltd [1985] VR 586
Compagnie Grainiere SA v Fritz Kopp AG [1978] 1 Lloyd's Rep 511
Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 104
Federated Municipal and Shire council Employees Union of Australia v Shire of Albany (1990) 32 IR 470
Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630
Friend & Brooker Pty Ltd v Eurobodalla Shire Council, unreported; SCt of NSW; (Brownie J); 20 June 1991
Hoysted v Federal Commissioner of Taxation (1925) 37 CLR 290
Isaacs v Ocean Accident & Guarantee Corporation Ltd & Winslett (1957) 58 SR (NSW) 69
Johnson v Gore Wood & Co [2002] 2 AC 1
London Export Corp Ltd v Jubilee Coffee Roasting Co Ltd [1958] 1 All ER 494
(Page 4)
M&M Civil Engineering Pty Ltd v Sunshine Coast Turf Club [1987] 2 Qd R 401
Masawa Australasia Pty Ltd v JCorp Pty Ltd [2000] WASC 5
McNair v Press Offshore Ltd (1997) 17 WAR 191
MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39
Noall v Middleton [1961] VR 285
Port Sudan Cotton Company v Govindaswamy Chettiar & Sons [1977] 1 Lloyd's Rep 166
Powercor Australia v Pacific Power [1999] VSC 110
Qenos Pty Ltd v Mobil Oil Australia Pty Ltd (No 2) [2002] VSC 524
Queensland v Commonwealth (Second Territory Senators' case) (1977) 139 CLR 585
Roberts v Roberts (1994) 12 WAR 505
Rocci v Diploma Construction Pty Ltd [2004] WASC 18
Squires Transport Pty Ltd v Turnor [2004] WASCA 245
Stannard v Sperway Constructions Pty Ltd [1990] VR 673
Sunny Hills Tennis Centre v Shaw Contracting Pty Ltd, unreported; SCt of Tas; Library No A13/1995; 20 March 1995
Taylor v Ansett Transport Industries; sub nom Secretary, Dept of Aviation v Ansett Transport Industries Ltd (ALR) (1987) 18 FCR 342
The King v Lintrose Nominees Pty Ltd & Ors (2001) 4 VR 619
Thoday v Thoday [1964] P 181
Ukrainian Association of Western Australia in Perth (Inc) v Squire Constructions Pty Ltd [2004] WASC 4
Waterman v Gerling Australia Insurance Pty Ltd [2005] NSWSC 1066
Whitehead v Tattersall (1834) 1 Ad & El 491; 110 ER 1295
Williams v Wallis & Cox [1914] 2 KB 478
(Page 5)
- HASLUCK J:
Introduction
1 The applicant, Gebauer Nominees Pty Ltd, seeks relief in respect of certain matters arising out of an interim award made by an Arbitrator, Mr D A Forrester, on 1 May 2000 and the Arbitrator's second interim award (and formal orders relating to the same) dated 20 January 2005.
2 Two discrete applications have been made being, first, an application for leave to appeal pursuant to s 38 of the Commercial Arbitration Act 1985 (WA) and, second, an application for the setting aside of the interim award and related orders pursuant to s 42 and s 44 of the Commercial Arbitration Act on the grounds that the Arbitrator has misconducted the proceedings or, in the alternative, that the Arbitrator should be removed having regard to the manner in which the proceedings were allegedly misconducted.
3 One of the matters in contention concerns the identity of the respondent. For the time being I will refer to the respondent simply as "Hotrox". I note that the individuals principally behind or associated with Hotrox were Gerhard Joseph Cole and Patrick Edward Mullally. I will return to the issues bearing upon this aspect of the matter in due course.
4 Various documents relating to the present applications have been filed and served by the parties including a statement of agreed facts dated 1 September 2005. I note that the operative application for leave to appeal (in CIV 1158/05) is a clean copy of the relevant amended originating motion dated 1 December 2005. The operative copy of the misconduct application (in ARB 6/05) is a clean copy of the relevant amended originating motion dated 1 December 2005. The applicant relies principally upon the lengthy affidavit of Montgomery James Vallve sworn 3 March 2005. Hotrox relies upon the affidavits of Gerhard Joseph Cole sworn 25 August 2005 and that of David Vilensky sworn 14 October 2005.
Background
5 The applicant, Gebauer Nominees Pty Ltd, is the proprietor of commercial premises known as Units 4, 5 and 6 Ladner Street, O'Connor. By lease agreement dated 1 May 1998 the applicant leased the premises to Hotrox for a period of 2 years with an option for renewal of a further 2 years. It appears from a stamped copy of the subject lease exhibited to the Vallve affidavit that the lessee was described as "Hot Rox Charcoal
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- Company, Suite 1, 771 Wanneroo Road, Wanneroo 6065". The signatures appearing on the document on behalf of the lessee are indecipherable but are said to be the signatures of Mr Cole and Mr Mullally.
6 The permitted use is described in the standard form as any lawful use. It appears to be common ground between the parties that Hotrox planned to install plant and equipment on the subject premises for the purpose of manufacturing briquette wood logs and briquette charcoal both made essentially from sawdust.
7 Hotrox took possession of the premises prior to the commencement of the lease on or about 1 March 1998 for the purpose of installing electrical switchboards, gas supplies and the necessary plant and equipment. This necessitated constructing a hole in the roof to install a surge box and several flues to allow for the escape of heat. Other works were internal and included the construction of several dividing walls to break up the total area of the premises into compartments.
8 The lease was subject to various standard form conditions and covenants. Clause 2.3 provided that if a party is two or more persons, the covenants and agreements on their part bind them jointly and each of them severally. I note in passing that this is consistent with s 51 of the Property Law Act 1969 (WA) whereby a covenant made with two or more jointly to do an act shall be construed as being made with each of them in so far as a contrary intention is not expressed in the covenant.
9 By cl 4.1 the lessee was obliged to maintain, replace, repair and renovate the premises and the lessor's property so that the premises and the property were at all times kept in good condition. By cl 4.3 the lessee was to carry out all the lessee's obligations under cl 4.1 in a proper and workmanlike manner and with materials of the same or similar quality to those used at the date of commencement.
10 By cl 12.3 the lessor was to perform in a proper and workmanlike manner any structural works to the building which are required to keep the premises maintained in good condition or comply with the requirements of an authority unless the lessee is required to perform the structural works under the lease.
The dispute
11 At the beginning of June 1999 Hotrox alleged that leaks were interfering with its operations and requested the applicant as lessor to
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- make the necessary repairs to the structure of the premises. There were then various exchanges between the parties and others with an interest in the matter. It was alleged that a firm called Caesar's Plumbing had done work both to the roof, the walls and the drains to little effect with the consequence that water entered and continued to enter the premises causing damage to an oven and to some of the stock.
12 It was alleged also that the extent of the leakage rendered the premises at times substantially unfit for use and there were disputes with the insurance company over the liability for damage to stock and renewal of policies and insurance. These disputes are not the subject of the arbitration that followed.
13 As from 3 June 1999 Hotrox ceased to pay rent claiming a right to an abatement of payment under a clause in the subject lease. The applicant contended that Hotrox was not entitled to such an abatement. It said also that the surge bin and flues were constructed without its authority; structural alterations were made to roof purlins; Hotrox failed to maintain the drains and pipes, clear blockages in the drains or keep the premises free from rubbish. It said also that the leaks complained of were minor and these were fixed by Caesar's Plumbing. The applicant denied that the quantity of water that entered the premises from those sources could have caused the damage alleged and the cause of such damage lay with the default of Hotrox. It was said further that, in any event, even if Hotrox suffered loss and damage as alleged that did not entitle Hotrox to an abatement of rent.
14 It was against that background that the parties referred the dispute to arbitration pursuant to cl 28 of the general terms and conditions of the lease. Clause 28.2 provided, inter alia, that "any dispute arising out of this lease is to be determined by a single Arbitrator under the provisions of the Commercial Arbitration Act 1985".
15 An experienced barrister, Mr D A Forrester, was nominated as Arbitrator by the Chairman of the WA Chapter of the Institute of Arbitrators and Mediators of Australia. He entered upon the reference and held a preliminary conference on 7 October 1999. The parties agreed to the arbitration proceeding notwithstanding that Hotrox as lessee had not paid the money without abatement or deduction prior to the commencement of the arbitration.
16 The pleadings of the parties and their respective submissions are included in the Vallve affidavit. In essence, Hotrox contended that the
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- lessor had refused to carry out repairs to the premises with the result that Hotrox had thereby suffered loss and damage. The lessor counterclaimed for payment of rental, outgoings and interest.
17 The Arbitrator handed down an interim award dated 1 May 2000. In doing so, he observed that "the parties by mutual agreement agreed that I bring down an interim award as to liability only". I note in passing that throughout the interim award the parties are described simply as the "claimant" and the "respondent". In the formal heading to the interim award the name of the claimant is given as "Hotrox Charcoal Company"; the name of the respondent is given as "Gebauer Nominees Pty Ltd" (the latter being the applicant in the present proceedings before me). While commenting upon the pleadings, the Arbitrator observed at par 10.1 of the interim award that initial objections to the right to sue of the claimant (that is, Hotrox Charcoal Company) "were not pursued".
18 It appears from the interim award that Hotrox was held to be in breach of the requirements of cl 4 of the lease as to the lessee's obligation to repair after 11 August 1999. This finding applied to the office and to the western drain outside the doorway of the sawdust room at the south western corner.
19 It was held also that the applicant, as lessor, was in breach of the requirements of cl 12.3 of the lease as to the performance of structural works. This finding applied to the western wall, the eastern side drainage system, the eastern wall, the box gutters, and small areas of the roof.
20 Further, the Arbitrator found that Hotrox was entitled to an abatement of rent under cl 20.4 of the lease as from 15 June 1999.
21 The Arbitrator concluded with these observations at par 11.11 of the interim award:
"Because the Award is an interim one as to liability the question of the extent to which the factory could or could not be used for some operations has not been addressed. As I understand the issues I am asked only to determine whether or not the respondent was in breach of clause 12.3. As stated earlier this clause does not exclude some use being made of the factory but that issue will be one for consideration of the extent of abatement of rent to be allowed and/or damages that might have been suffered."
(Page 9)
Subsequent events
22 It emerges from earlier discussion that the interim award dealt only with matters relating to the liability of the applicant for breaches of the lease and Hotrox's entitlement to abatement of rent. The financial situation between the parties remained to be determined, and it seems that there were ongoing exchanges between the parties as to the financial consequences of the interim award. The dispute between the parties has not yet been finally resolved.
23 It appears from the statement of agreed facts that on or about 5 August 2004 Mullins Handcock took over the conduct of the matter on behalf of the applicant (that is, Gebauer Nominees Pty Ltd). At the 25th preliminary conference held on 1 December 2004 counsel for the applicant raised an issue as to the jurisdiction of the Arbitrator in relation to the description of Hotrox as an alleged non-legal entity. The Arbitrator adjourned the proceedings to allow Hotrox to apply to amend the description of Hotrox on the pleadings.
24 On or about 10 December 2004 Hotrox made application to amend its description in the arbitration proceedings to "Gerhard Joseph Cole as trustee for The Hotrox Charcoal Unit Trust trading as Hotrox Charcoal Company". Hotrox then filed and served an outline of submissions in support of its application dated 21 December 2004. The applicant (Gebauer Nominees) filed and served opposing submissions dated 21 December 2004 and objections to the affidavit of Gerhard Joseph Cole dated 21 December 2004. Further submissions in response to the Hotrox outline of submissions were filed by the applicant on 5 January 2005.
25 The Arbitrator delivered written reasons dated 13 January 2005 allowing the amendment of Hotrox's name to "Gerhard Joseph Cole as trustee for The Hotrox Charcoal Unit Trust trading as Hotrox Charcoal Company". I will call these the "13 January reasons".
26 A further preliminary conference was held on 19 January 2005. The Arbitrator then delivered further reasons for decisions and formal orders dated 20 January 2005 as follows ("the further reasons"):
"A. Upon the application of the claimant [Hotrox] as to the description of the claimant an order is made that the description be amended to read Gerhard Joseph Cole as trustee for The Hotrox Charcoal Unit Trust trading as Hotrox Charcoal Company for the reasons attached to these minutes.
(Page 10)
- B. Upon the application of the claimant [Hotrox] as to the costs incurred in relation to the application to amend the description of the claimant, an order is made that the respondent is to pay the costs of the claimant in relation to the application on a solicitor and client basis for the reasons attached to these minutes such costs to be taxed and paid in accordance with the orders made at the handing down of the final award."
Issues
27 The application for leave to appeal and the misconduct application brought before me by the applicant challenge these rulings. The applications focus on the conduct of the Arbitrator on 19 and 20 January in allowing the description of Hotrox to be changed to the description of the respondent given above, namely, Gerhard Joseph Cole as Trustee for the Hotrox Charcoal Unit Trust trading as Hotrox Charcoal Company ("the second interim award"). According to the applicant, the practical effect of this ruling is to deprive the applicant of its remedies against Mullally and its ability to enforce any award of costs in its favour against him. In other words, the ruling amounts to the substitution of a new party and thus exceeds the power conferred upon the Arbitrator by s 30 of the Act to correct "a material mistake in the description of any person".
28 The applicant contends that the Arbitrator misapprehended the issues and thereby misconducted the proceedings. It is said that the Arbitrator had no jurisdiction to entertain an application from Cole to be named as the claimant, when the true claimant was Cole and Mullally (albeit trading under the name Hotrox Charcoal Company), or effectively to remove Mullally as a party from the arbitration. Further, the Arbitrator misdirected himself in finding at par 3.2 of his 13 January 2005 reasons that his jurisdiction did not come from the lease but from an agreement made at the first preliminary conference on 7 October 1999, the minutes of which refer to the arbitration agreement being constituted by the lease.
29 The applicant submits also that the Arbitrator was functus officio having made an interim award as to liability on 1 May 2000 binding upon Cole and Mullally such that he could not alter the terms or effect of that interim award by changing the identity of the claimant. Various other issues are raised which I will turn to in due course.
30 The applicant refers also to the further reasons dated 20 January 2005 which are said to reveal various errors including errors as to costs.
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31 Put shortly, the applicant contends that the Arbitrator has misconducted the arbitration, with the result that it has miscarried, and his error should be corrected pursuant to the appeal provisions of the Commercial Arbitration Act or otherwise pursuant to the misconduct provisions.
32 The Cole affidavit sworn 25 August 2005 sets out the matters relied upon in opposition to the application for relief. In essence, it is said that the subject lease (as evidenced by a similar version of the same) was executed by Cole and Mullally as trustees for Hotrox Charcoal Company, and various later events, such as the manner in which rent was paid and the conduct of the so-called "second arbitration" by Mr Raymond, gave rise to a general assumption by all those with an interest in the situation, including land agents and solicitors, that the lessee was the Hotrox Charcoal Unit Trust.
33 I pause here to note that while the Forrester arbitration was still on foot by notices of dispute issued on 25 January 2001 and 12 February 2001 Hotrox commenced a separate arbitration in which Mr Raymond was appointed Arbitrator. It is apparent from the terms of the Raymond Final Award delivered on 18 September 2001 that the matters in issue concerned the lessor's right to enter the premises and the responsibility for an increase in insurance premiums arising from the Hotrox occupancy. The claimant is described in the heading to the award as "G J Cole as trustee for The Hotrox Charcoal Unit Trust t/as the Hotrox Charcoal Company", and the Award commences with an assertion that the claimant and the respondent (Gebauer Nominees Pty Ltd) are respectively the lessee and the lessor of the premises, but it seems that this was due to the manner in which the Raymond arbitration was commenced. The Award does not expressly purport to determine the identity or correct description of the lessee.
34 It is said further in the Cole affidavit that Mr Cole continued as sole trustee following the resignation of Mr Mullally on 16 October 1999. It is said that at the first preliminary conference with the Arbitrator (Mr Forrester) in the subject arbitration the claimant was described as Hotrox Charcoal Unit Trust and the applicant later filed pleadings that seemed to accept that this was the correct description of Hotrox. The Cole affidavit refers to the Arbitrator's conclusion that there were ample opportunities for the applicant herein (Gebauer Nominees) to raise the issue of the status of Hotrox but it did not take them.
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35 For ease of reference, where the context permits I will refer to the cluster of matters relied upon in the Cole affidavit (including those set out in the outline of submissions dated 21 December 2004 exhibited to the Cole affidavit) as the "Hotrox case". That case proceeds from the premise that at all material times Hotrox Charcoal Company was a business name owned by the Hotrox Charcoal Unit Trust, the lease was entered into upon that basis, and it was therefore open to the Arbitrator to correct what was simply an incomplete description or misdescription of the lessee.
36 It will be useful now to look briefly at the legal principles bearing upon the subject applications for relief. I understand that the Arbitrator has been served but does not wish to be heard.
The appeal provisions
37 The Commercial Arbitration Act 1985 (WA) contains various provisions dealing with the conduct of arbitration proceedings. Section 4 provides that an arbitration agreement means an agreement in writing to refer present or future disputes to arbitration. By s 14, subject to the Act and the arbitration agreement, the Arbitrator may conduct proceedings under that agreement in such manner as the Arbitrator thinks fit.
38 By s 19 of the Act, evidence may be given orally or in writing. Further, an Arbitrator is not bound by rules of evidence but may inform himself as he thinks fit. By s 22, unless otherwise agreed, any question that arises shall be determined according to law, although, if so agreed, the Arbitrator may determine any question by reference to considerations of general justice and fairness. By s 30 the Arbitrator may correct an award containing a material mistake in the description of any person.
39 It is apparent from the decided cases that these provisions are to be read subject to the requirements of natural justice; that is, the Arbitrator must be free of any bias, or any reasonable apprehension of bias, and each party to the dispute shall be given reasonable notice of the issues to be addressed at the hearing.
40 In civil litigation the statement of claim and subsequent pleadings usually set out the material facts on which a party relies, but not the evidence by which those facts are to be proved. Pleadings and particulars provide a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it. Further, they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial. Apart from those cases where the parties choose to disregard the pleadings and to fight the case on issues
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- chosen at the trial, the relief which may be granted to a party must be founded on the pleadings: Dare v Pulham (1982) 148 CLR 658 at 664.
41 In looking at the extent to which an Arbitrator's award can be reviewed, an appropriate starting point is s 28 of the Act which provides that an award shall, subject to this Act, be final and binding on the parties to the agreement.
42 Section 38(1) of the Act provides that without prejudice to the right of appeal conferred by s 38(2), the Court shall not have jurisdiction to set aside or remit an award on the ground of error of fact or law on the face of the award. By s 38(2), an appeal shall lie to the Supreme Court on any question of law arising out of an award, but this right of appeal is expressly made subject to s 38(4)(b), which requires that an appeal may be brought with the leave of the Supreme Court.
43 The criteria in regard to leave are set out in s 38(5), which reads as follows:
"(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."
45 In UDR Equipment Pty Ltd v Afkos Industries Pty Ltd (2000) 22 WAR 221 the applicant contended that the Arbitrator made three manifest
(Page 14)
- errors of law on the face of the award and that in each case the determination of the question of law could, having regard to all the circumstances, substantially affect it rights. Steytler J refused leave to appeal on the grounds that, in the circumstances, the Arbitrator's decision was reasonably open and did not disclose any manifest error of law. His Honour noted that the test prescribed by the subject criteria is more rigorous than it had previously been. In its earlier form the section only required satisfaction of the first limb of s 38(5). However, the new requirements for the grant of leave reflected the guidelines outlined by the House of Lords in Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724.
46 The Nema Guidelines indicated that where the question of law involved was the construction of a "one off" clause, leave to appeal should not normally be given unless it be apparent to the Judge on the face of the award that the meaning ascribed to the particular clause by the Arbitrator is obviously wrong. Somewhat less strict criteria are appropriate where questions of construction of contracts in standard terms are concerned.
47 If the decision on the question of construction in the circumstances of a particular case would add significantly to the clarity and certainty of commercial law, leave should be granted, although even in such a case, not unless the Judge considers that a strong prima facie case has been made out that the Arbitrator had been wrong in his construction.
48 Steytler J gave consideration to what Sheller JA had said in Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203 about the meaning of the words "manifest error". Those words were used to indicate something evident or obvious rather than arguable. The discretion of the Court as to whether or not it will grant leave remains and the matters referred to by Lord Diplock in Nema (supra) remain important factors in determining whether leave should be given. Sheller JA acknowledged the view that decisions on questions of law should be left to the Arbitrator with minimal interference by the courts unless the Arbitrator may establish an erroneous precedent which may affect other cases between other parties.
49 Steytler J indicated that the limitation upon the grant of leave was imposed because it was considered, amongst other things, that the approach previously adopted by the courts was unduly disturbing of the use and finality of arbitral awards. This was reflected in the relevant Second Reading speech in Hansard in which it was said that one of the major objectives of the uniform legislation was to minimise judicial
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- supervision and review. If arbitration is to be encouraged as a settlement procedure and not as a "dry run" before litigation, a more restrictive criterion for the granting of leave is desirable and the parties should be left to accept the decision of the Arbitrator whom they have chosen to decide the matter in the first place.
50 His Honour concluded that what had been said by the New South Wales Court of Appeal in Promenade (supra) should be followed in this State in any consideration of s 38(5) of the Act.
51 This view was endorsed subsequently by Mathews AJ in Lamac Developments Pty Ltd v Devaugh Pty Ltd (2002) 27 WAR 287. In that case, the Full Court was concerned with the question of whether an appeal lies to the Full Court from the grant or refusal of leave. However, Mathews AJ observed at 318 that one of the clearest and most succinct expositions of the meaning to be attributed to the criteria set out in s 38(5)(b) was that enunciated by Sheller JA in Promenade (supra).
52 The reasoning in these cases shows that the criteria to be considered by the Court since the amendments were enacted in 1997 are that the appeal must be based on a question of law arising out of the award; the Court must not grant leave unless it considers, having regard to all the circumstances, that the determination of the questions of law concerned could substantially affect the rights of one or more of the parties; that there is 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 may be likely to add, substantially to the certainty of commercial law. A determination of that kind will usually involve the determination of a question of the construction of a contract in standard terms rather than the construction of a one off clause.
53 It seems that where the point of construction does not concern a standard form contract but is referable to unusual or unique documentation it may be difficult to bring the case within s 38(5)(b)(ii).
The misconduct provisions
54 The Commercial Arbitration Act allows for awards to be set aside under s 42(1) of the Act on the ground of misconduct of the Arbitrator. Leave is not required to bring an application of that kind.
55 Section 42(1) of the Act reads as follows:
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- "(1) Where -
(a) there has been misconduct on the part of an arbitrator or umpire or an arbitrator or umpire has misconducted the proceedings; or
(b) the arbitration or award has been improperly procured,
the Court may, on the application of a party to the arbitration agreement, set the award aside either wholly or in part."
57 Section 43 of the Act provides that subject to s 38(1), the Court may remit any matter to the Arbitrator for reconsideration.
58 Section 44 of the Act deals with removal of an arbitrator or umpire. It reads as follows:
"44. Removal of arbitrator or umpire
Where the Court is satisfied that -
(a) there has been misconduct on the part of an arbitrator or umpire or an arbitrator or umpire has misconducted the proceedings;
(b) undue influence has been exercised in relation to an arbitrator or umpire; or
(c) an arbitrator or umpire is incompetent or unsuitable to deal with the particular dispute,
the Court may, on the application of a party to the arbitration agreement, remove the arbitrator or umpire."
59 The term "misconduct" has been the subject of discussion in various cases. In Thiess Contractors Pty Ltd v Water Corporation of Western Australia, unreported; SCt of WA (Parker J); Library No 970561; 28
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- October 1997 the applicant complained, that, in dismissing the application for moneys due under a contract, the Arbitrator relied on two implied warranties that had neither been pleaded nor argued before him, with the result that the applicant was not afforded an opportunity to deal with those matters. Parker J refused the application for removal of the Arbitrator. His Honour held that the Arbitrator had not introduced any substantive novelty. The Arbitrator chose the language of implied warranty, but his reasoning could equally, and to similar legal effect, have been outlined in terms of express contractual obligations. The Arbitrator was "not in material substance" going beyond the scope of the fundamental issues which divided the parties.
60 His Honour went on to say at 21 that it is well settled that in contexts such as s 42 of the Act, misconduct may include a mistake in procedure which has, or may have, unjustly prejudiced a party: Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 at 587. His Honour observed also that the consideration of what constitutes misconduct for these purposes outlined by Marks J in Gas & Fuel Corp (Vic) v Wood Hall Ltd & Leonard Pipeline Contractors Ltd [1978] VR 385 has received wide acceptance. Parker J was of the view that procedural fairness may amount to misconduct, but that is not necessarily the case. What is to be discerned is that the procedure has, or may have, unjustly prejudiced a party in some respect material to the outcome. The notion bears similarity to procedural unfairness amounting to a substantial miscarriage of justice.
61 In the Gas & Fuel Corp case (supra) various disputes arising out of a pipeline construction were referred to arbitration. One of the matters complained of as to the conduct of the Arbitrator concerned an evidentiary dispute as to whether part of a diary note should be adduced in evidence.
62 In the course of his review of the relevant principles, Marks J held that, in accordance with the rules of natural justice, each party was to be given a full and fair opportunity to present its case. Incorrect findings of fact, errors of law, and misapprehensions of the nature of the contentions put forward, do not constitute misconduct justifying the removal of an Arbitrator. Nonetheless, matters of this kind may also indicate a trend or pattern which had, or appeared to have had, the effect of unfairly disadvantaging a party. In the circumstances of that case, the Arbitrator's approach in various ways was thought to be non-judicial and his comments support tones adverse to the corporation. Ultimately, the Court held that there was misconduct sufficient to justify a removal.
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63 The reasoning of Smith J in Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd [1994] 2 VR 386 suggests that it is not enough simply to identify a procedural or evidentiary irregularity. The applicant for relief has to identify a breach of the rules of natural justice which might affect or has affected the outcome of the arbitration.
64 Two recently decided cases suggest that where parties under a contract agree to submit a dispute to arbitration there must be implied a condition that the Arbitrator will determine the matters in controversy. There is some limit to the rule. Where the matters in dispute are defined by points of claim and points of defence, unless there is a formal or practical abandonment of any such points, the Arbitrator has a duty to resolve those defined issues. The failure to determine all issues in dispute in an arbitration can amount to misconduct because the procedure has or may have unjustly prejudiced a party in some respect material to the outcome: Villani v Delstrat Pty Ltd [2002] WASC 112; Milligan Contractors Pty Ltd v Jaxon Construction Pty Ltd [2003] WASC 220
65 Let me now return to the issues in the present case.
The applicant's grounds
66 It emerges from earlier discussion that the applicant herein (Gebauer Nominees) by its appeal application and its misconduct application seeks to dispose of the Arbitrator's ruling that the description of the claimant in the arbitration be amended from Hotrox Charcoal Company to Gerhard Joseph Cole as Trustee for the Hotrox Charcoal Unit Trust trading as Hotrox Charcoal Company.
67 It appears from the appeal application that the applicant seeks to rely on the following grounds:
"2.1 The learned Arbitrator erred in finding that the order sought by the Respondent was merely to rectify a misdescription of the Respondent when, in law, the orders sought actually involved the substitution of one party for another i.e. a change in identity of the Claimant in the Arbitration, not just a change in a description.
2.2 The learned Arbitrator had no jurisdiction to make the orders sought by the Respondent.
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- 2.3 The learned Arbitrator erred in law by considering post contractual conduct in order to determine who the Claimant was and should have confined his enquiry to the identity of lessee in the lease agreement which contained the arbitration agreement.
2.4 The learned Arbitrator erred in law by retrospectively amending an interim award dated 1 May 2000 (going to liability) when he was functus officio and had no jurisdiction to do so.
2.5 The learned Arbitrator erred in law by determining the identity of the Claimant to be the trustee for the time being of the Hotrox Charcoal Company.
2.6 As to costs the learned Arbitrator erred by not exercising his discretion to make a costs order in accordance with established principles and should have awarded the Applicant the costs of the application for amendment."
68 The applicant seeks orders that leave to appeal be allowed, the appeal be allowed and the second interim award by set aside or, alternatively, it be remitted to the Arbitrator for reconsideration.
69 By the misconduct application the applicant seeks to set aside the second interim award pursuant to s 42 of the Act on the grounds that it was improperly procured and the Arbitrator has misconducted the proceedings. Alternatively, pursuant to s 44 of the Act the court remove the Arbitrator on the basis that he has misconducted the proceedings and/or is incompetent or unsuitable to deal with the dispute. It became apparent in the course of argument that as to the misconduct application the applicant was relying essentially upon the grounds mentioned above. I will call these grounds the "applicant's case".
General observations about the contractual relationship
70 Before turning to the particular grounds comprising the applicant's case, I must begin by making some general observations about the contractual relationship between the parties. These will assist in the resolution of particular issues.
71 Where an agreement has been reduced to writing it is generally presumed that the writing contains the entire agreement, and the parties' intentions must be ascertained from the words they have used. Parol
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- evidence may be admitted as to the factual matrix in order to illuminate or explain ambiguous phrases. Evidence of the subsequent actions of the parties is generally inadmissible unless it evidences a new agreement or on the basis of an estoppel or falls within the rule concerning the resolution of latent ambiguities: Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd (1999) 21 WAR 350.
72 In Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 Gibbs J made these observations:
"It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. …"
73 It follows from this approach that where the parties have recorded the terms of their contract in a document, the so-called parol evidence rule excludes the use of evidence of extrinsic terms which subtract from, add to, vary or contradict the language of a written instrument. However, evidence of surrounding circumstances is admissible to assist in the interpretation of the document if the language is ambiguous or susceptible of more than one meaning. In such a case one looks not to the actual intentions, aspirations or expectations of the parties but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting: Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 per Mason J at 352; Cheshire and Fifoot's "Law of Contract" (8th Aust ed) par 10.4 and 10.5.
74 I note in passing that by s 27 of the Stamp Act 1921 (WA) no instrument chargeable with duty shall, except in criminal proceedings, be pleaded or given in evidence or admitted to be good, useful or available in
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- law or equity unless it is stamped. It follows that in the present case the stamped copy of the subject lease, which was signed by Cole and Mullally, without any indication that they were acting as agents or trustees, must be regarded as the sole point of reference.
75 These principles suggest, having regard to cl 2.3 of the lease and s 51 of the Property Law Act, that the two persons who signed the stamped copy of the lease on behalf of the lessee (named as Hotrox Charcoal Company) Cole and Mullally were jointly and severally liable to perform the lessee's covenants, unless it could be said that the reference to Hotrox Charcoal Company gave rise to an ambiguity concerning the identity of the lessee which, upon the admission of evidence to resolve the ambiguity, pointed to a different conclusion. In other words, prima facie, in the absence of any assertion that an ambiguity existed, or indications that Cole and Mullally were contracting as agents for some other party, the lease was valid and enforceable by and against Cole and Mullally as the persons signing on behalf of the lessee.
76 At the hearing before me, counsel for Hotrox contended, in various ways, that the applicant as lessor was estopped from asserting that the lessee under the subject lease (and thus the claimant in the subject arbitration) was Cole as trustee. Counsel for Hotrox placed reliance upon issue estoppel and upon the ruling in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 602 which prevents a party raising in subsequent proceedings matters which might properly to have been raised in prior proceedings. It was said, in effect, that references by Mr Raymond in the second arbitration to Hotrox Charcoal Company Unit Trust precluded the applicant from raising the matter now in issue because it had been or ought to have been disposed of by the Arbitrator on that occasion.
77 Hotrox contended also that, in any event, pursuant to conventional estoppel, the applicant was estopped from proceeding against Cole and Mullally as individuals because the parties to the lease transaction had always proceeded on the basis of an underlying assumption that Mr Cole was acting as trustee for The Hotrox Charcoal Company Unit Trust.
78 I am not persuaded by these lines of argument. As to issue estoppel and the Anshun rule, the Raymond arbitration was concerned essentially with a dispute about access to the premises and responsibility for increased insurance premiums. The identity of the lessee was not put in issue. As in the Forrester arbitration, it seemed that the parties did not in any decisive way direct their minds as to who exactly the lessee was, with
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- the result that the Arbitrator did not feel obliged to resolve the issue. In circumstances where Mr Cole was a signatory to the subject lease, and was therefore, prima facie, bound to comply with the terms of the lease and of the Raymond Award, it cannot be said that the Arbitrator's assumption that Cole was acting as a trustee was legally indispensable to his conclusion that the lessor was liable and had to meet the claims of the lessee. An issue estoppel applies only to those matters which the prior judgment necessarily established as the legal foundation of its conclusion: Blair & Perpetual Trustee Co Ltd v Curran (1939) 62 CLR 464 at 531.
79 As to the conventional estoppel, it follows from my general observations concerning cl 2.3 and the parol evidence rule that an assumption of the kind contended for was inconsistent with the language of the lease; that is, in the absence of any express term or other indication that Cole and Mullally were contracting as agents for or trustee of another legal entity, proper weight had to be given to cl 2.3 of the lease which purported to attach liability to the two individuals who signed the lease. Clause 2.3 makes it difficult for Hotrox to contend that it relied upon an assumption created or contributed to by the applicant that The Hotrox Charcoal Company Unit Trust was to be regarded as the lessee with the result that no personal liability would attach to Cole and Mullally: Attorney-General (Hong Kong) v Humpheys Estate (Queen's Gardens) Ltd [1987] AC 114; Walton's Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 406.
80 Moreover, in circumstances where the question of the lessee's exact identity had been left unresolved, I am not persuaded on the evidence before me that the applicant (Gebauer Nominees) can be said to have acted unconscionably in departing from a shared assumption to the detriment of Hotrox. Estoppel by convention can usually be relied upon only when the parties to the transaction proceed upon the basis of an underlying assumption on which they have conducted the dealings between them so that it would be unfair to allow one party to go back on the assumption: Amalgamated Investment & Property Co Ltd (In liq) v Texas Commerce International Bank Ltd [1982] QB 84 at 122.
81 I am conscious that in exploring this issue I must look at Woodbud Pty Ltd v Warea Pty Ltd (1995) 125 FLR 346, being a case mentioned at the hearing before me. In that case a sub-contract was entered into by "Sherwood Detailed Cabinet Makers t/as Warea Pty Ltd". There was evidence that after the contract was formed both parties assumed that the contract had been informally novated so that the contracting party was Woodbud Pty Ltd. The Court held that the issue was what person traded
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- under the name in question. This gave rise to a disputed issue of fact as to the true identity of the relevant party which could not be treated simply as a misdescription and corrected pursuant to s 30(c) of the Commercial Arbitration Act. Moreover, the Arbitrator was functus officio and acted beyond power in attempting to make the purported correction. However, Woodbud was estopped from denying it was the person described as Sherwood Detailed Cabinet Makers and was therefore bound by the Award.
82 I am not persuaded that this decision applies to the circumstance of the present case. The issue in the present case concerns the exact identity of the person or legal entity behind the business name. In Woodbud's case the issue concerned the attempt to substitute Woodbud for the entity (Warea Pty Ltd) which was described originally as being the entity behind the name. Moreover, and more importantly for present purposes, there was a significant body of evidence that Woodbud had contributed to a shared assumption that it was bound by the contract. The evidence in the present case is equivocal. Mr Cole may have nurtured (or come to nurture) an assumption that the lessee was the Unit Trust but, to my mind, given the presence of cl 2.3 of the lease, and the various indications that the parties failed to turn their minds directly to the exact identity of the lessee, there is insufficient evidence to support the Hotrox plea of estoppel by convention.
83 It follows from all of this that, in my view, it cannot be said in the present case that the applicant is estopped from denying that at all material times the lessee (and thus the party bound by the interim award) was The Hotrox Charcoal Unit Trust, with the result that it was open to the Arbitrator to exercise his power to correct a misdescription.
84 These observations about the contractual ownership bring me to some general observations about the identity of the lessee.
General observations about the lessee
85 Section 5 of the Business Names Act 1962 (WA) provides that a person shall not either alone or in association with other persons carry on business under a business name unless the business name consists of the name of that person or other persons or the business name is registered under the Act. By s 5(5) a contravention of or failure to comply with any provision of the Act does not operate to avoid any agreement, transaction, act or matter.
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86 It is clear from the evidentiary materials before me that towards the end of 1997 Mr Cole and Mr Mullally were proceeding with plans to operate a business concerned with the production of charcoal from the subject premises at 4 Ladner Street, O'Connor. It appears from the copy entry in the business names register which appears at page 204 of the Vallve affidavit that on 17 October 1997 they registered the business name "The Hotrox Charcoal Company" with the persons described as carrying on the business being Gerhard Joseph Cole and Patrick Edward Mullally. That entry in the register does not suggest that the two named individuals were acting as agents or trustees for any other party and there is no reference to a body called The Hotrox Charcoal Unit Trust.
87 It appears from the materials at page 162 to 191 of the Vallve affidavit that The Hotrox Charcoal Unit Trust was constituted some weeks later by the execution of a Unit Trust Deed by Mr Cole and Mr Mullally on 4 November 1997. The unitholders were described in that document as the Larkent Trust (as to 2 units), the Cullion Grove Trust (as to 1 unit) and the D'Amico Trust (as to 1 unit).
88 It is common ground that the subject lease was executed on 1 May 1998. By then The Hotrox Charcoal Unit Trust had been constituted and it would clearly have been open to Mr Cole and Mr Mullally to provide expressly that they were executing the document as agents and trustees on behalf of The Hotrox Charcoal Unit Trust to the intent that the lessee would be identified as The Hotrox Charcoal Unit Trust. However, they failed to do so. The lessee was described simply as "Hot Rox Charcoal Company" and the document was signed by Mr Cole and Mr Mullally without any qualification. Prima facie, the party contracting as lessee was a business or firm known and registered as The Hotrox Charcoal Company being a business owned and operated by the two individuals who signed the lease. The effect of cl 2.3 was to make them jointly and severally liable for the covenants to be performed by the lessee. Likewise, they were both entitled to enforce claims against the lessor.
89 I digress briefly at this point to say that I can see no force in the suggestion that the lease was of no effect or unenforceable in that the lessee was a non-existent party. On the face of it, the persons undertaking the obligations of lessee were the two individuals who signed the lease. The name given to the lessee was simply a business name. The presence of that name might arguably give rise to a degree of ambiguity which would permit a court to have regard to parol evidence in determining the identity of the person operating a business of that name. However, as appears from s 5(5) of the Business Names Act, a failure to update or
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- correct the business names register after constitution of the Trust would not operate to avoid any agreement entered into.
90 The question to be determined is (by reference to the language of the agreement) which persons, or legal entity such as a company or a constituted trust, agreed to act as lessee. In the absence of any indication in the agreement for lease that the persons who signed on behalf of the lessee were signing as agents or trustees for any other party it would be open to a court or arbitrator to conclude that those individuals who signed the lease undertook the relevant responsibilities in that they owned and operated the business trading under the name Hotrox Charcoal Company.
91 It is common ground that in cl 28.2 the agreement for lease contained an arbitration clause which obliged the parties to refer any dispute to a single arbitrator. By s 4 of the Commercial Arbitration Act an arbitration agreement means an agreement in writing to refer present or future disputes to arbitration. There is some authority for the proposition that an agreement which simply allows the parties to elect whether to proceed to arbitration does not constitute an arbitration agreement, in that, until an election is made there is no agreement to arbitrate: Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 at 46. However, reasoning of this kind does not appear to apply to an arbitration clause of the present kind which requires the parties to refer a dispute to arbitration: Manningham City Council v Dura (Australia) Constructions Pty Ltd (1999) 3 VR 13. To my mind, it follows from this that a determination as to the identity of the parties to the lease/arbitration agreement, and thus a determination as to who is bound by the interim award, will be governed not by any position taken at conferences with the Arbitrator but by a finding as to the identity of the parties to the lease, for the lease must be regarded also as the arbitration agreement.
92 The pleadings exchanged by the parties after the commencement of the arbitration arguably raised an issue to be determined as to the identity of the contracting party. The applicant, Gebauer Nominees Pty Ltd, pleaded at par 2 of its amended defence that it did not enter into a lease with Hotrox Charcoal Unit Trust and said that, in any event, Hotrox Unit Trust was not a legal entity that was capable of bringing any action against Gebauer Nominees Pty Ltd. As it happened, the Arbitrator by his interim award did not appear to rule upon that issue. The interim award refers only to the "claimant" described as "Hotrox Charcoal Company" and the "respondent" described as "Gebauer Nominees Pty Ltd". The issue was adverted to but not resolved. It follows from earlier discussion that, in my view, the parol evidence rule and the presence of cl 2.3 were
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- sufficient to set up a prima facie position that the two signatories (Cole and Mullally) were bound by the lease, and that position, in turn, was probably sufficient to negate any plea of estoppel based upon the creation of an underlying assumption that they had signed as agents or trustees on behalf of some other entity.
93 It was against this background that, some years after the interim award, the present applicant (Gebauer Nominees Pty Ltd) returned to the question of the lessee's identity, apparently with a view to suggesting that the interim award was unenforceable because the party named as claimant – Hotrox Charcoal Company – was a non-existent party. This prompted the Arbitrator, upon the application of the solicitors for Hotrox to deal with an application by Hotrox for the name of the claimant to be altered to reflect the position contended for by Hotrox, namely, that the lessee was a trust entity, of which Cole (after Mullally's resignation) was the sole trustee.
94 It appears from the Arbitrator's 13 January 2005 reasons that the Arbitrator purported to rule upon the matter in issue. In doing so, he was of the view (at par 3.2) that his authority as Arbitrator came not from the lease but from "the agreement between the parties to arbitrate on the dispute as evidenced by the signed minutes of the preliminary conference of 7 October 1999". Those minutes (at page 42 of the Vallve affidavit) included a heading in which the claimant is described as "Hotrox Charcoal Unit Trust". It seems that this reinforced the Arbitrator's conclusion that the lessee and the claimant in the arbitration proceedings had always been and should properly be described as The Hotrox Charcoal Unit Trust. Thus, the Arbitrator allowed the application to amend.
95 I pause here to say that, in my view, the learned Arbitrator made an error of law in that regard. It follows from my previous observations that, in my view, in the circumstances of the present case, the arbitration agreement is contained in the lease agreement. Thus, the crucial matter to be determined was whether the lessee should be characterised as the two individuals (Cole and Mullally) who signed the lease without qualification, or whether, upon its proper construction, they should be regarded as having signed the document for and on behalf of The Hotrox Charcoal Unit Trust. The resolution of this question could not be and ought not to have been affected by later discussion at a preliminary conference before the Arbitrator. The Arbitrator's task was to construe the lease pursuant to the language used in the operative document.
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96 In support of his conclusion that the party bound by the interim award (when correctly described) was Hotrox Charcoal Unit Trust the Arbitrator observed at par 3.3 of his 13 January 2005 reasons that the lease was signed by the trustee of the Trust. He said further at par 4.2 that "at all times the respondent accepted that the claimant was two trustees, namely, Mr Mullally and Mr Cole, who comprised the responsible party on the lease and in the arbitration proceedings".
97 However, it follows from earlier discussion, that there is nothing on the face of the stamped lease itself to indicate or suggest that Mr Cole and Mr Mullally were signing as trustees for The Hotrox Charcoal Unit Trust. Such a conclusion could only be arrived at in the event of it being held that the document was ambiguous and that it was permissible to resort to parol evidence in order to resolve the ambiguity. However, it is apparent from the learned Arbitrator's reasoning, that he did not proceed in that way.
98 The Arbitrator seems to have assumed that because the Trust was in existence at the date the lease agreement was signed, and because cheques were drawn upon an account operated by the Unit Trust, an inference could be drawn that Mr Cole and Mr Mullally executed the document on behalf of the Trust. To my mind, the learned Arbitrator was in error in arriving at his conclusion in that way. He was obliged to construe the document by reference to the words used by the parties. It was only if he concluded that the description of the lessee gave rise to a latent ambiguity that he would be entitled to look at the matrix of surrounding circumstances in order to arrive at a conclusion as to which person or persons was intended to be the lessee.
99 For reasons which will become apparent, I do not consider that it is necessary for me to determine or to express a final view as to which person (or persons) is to be regarded as the lessee. However, I must now turn to the consequences flowing from the errors of law I have just described.
100 To my mind, the errors made by the Arbitrator undoubtedly had the potential to prejudice the rights and entitlements of the applicant. If, upon its proper interpretation, consistently with what I have called the prima facie position, the effect of cl 2.3 and the parol evidence rule was to render Cole and Mullally jointly and severally liable for the covenants of the lessee (or for costs incurred in the course of an arbitration), then the Arbitrator's second interim award amounted to more than the correction of a misdescription. It amounted to the substitution of a new party (the
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- Hotrox Charcoal Unit Trust) for the original party (Cole and Mullally as the owners and operators of the business bearing the name Hotrox Charcoal Company).
101 In my view, it follows from my appraisal of the relevant statutory provisions and decided cases that in these circumstances of the present case the applicant is entitled to relief.
102 As to the appeal application, the question of law to be determined could affect the rights of the applicant as a party to the arbitration agreement, there is strong evidence that the Arbitrator made an error of law concerning principles of construction and the effect of cl 2.3, the determination of these questions may add to the certainty of commercial law.
103 Further, as to the misconduct application, I am of the view that in acting or purporting to act pursuant to these errors, the Arbitrator has misconducted the proceedings in the manner alleged in the application in allowing events at the preliminary conference and subsequently to override the terms of the agreement entered into between the parties. The error is more than a mere evidentiary or procedural irregularity. It amounts to an interference with the rights of the applicant. It can be regarded as a breach of the rules of natural justice. It follows that relief is available to the applicant pursuant to s 42 of the Act.
104 I will apply these general observations to the specific grounds comprising the applicant's case in a moment. However, before doing so, I must turn to the form of relief. In considering the form of relief I must keep steadily in mind that the issue now before me was brought into play initially by the applicant's assertion that the interim award was unenforceable because Hotrox should be regarded as a non-existent party. This line of argument has now been abandoned. I have little doubt that this assertion contributed to the Arbitrator's error. I must keep in mind also that the Arbitrator is familiar with the case, and the general rule (echoed in Woodbud's case at 350) is that the Court should interfere in the conduct of an arbitration as little as possible.
105 It will be apparent from earlier discussion that although errors of law in the Arbitrator's line of reasoning have come to light, a finding might still be open upon a proper interpretation of the subject lease that the lessee was the Hotrox Charcoal Company Unit Trust. For present purposes, as I have indicated, it is not necessary for me to express a final view about that matter. That is because, having regard to my review of
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- the decided cases, I must keep steadily in mind that the statutory provisions reflect an intention to limit judicial interference in the arbitral process.
106 I am of the view, as allowed for by s 43 of the Act and by the applications for relief before me, that the appropriate form of relief is to set aside the second interim award and to remit the matter to the Arbitrator for reconsideration in the light of these reasons. In other words, I will set aside the award in question so as to render the Arbitrator's formal order A (as to the misdescription issue) and his formal order B (as to the costs issue) of no force and effect.
107 Put shortly, the Arbitrator had an application before him pursuant to s 30 of the Act to correct the award as to the description of a party. It follows from my analysis of Woodbud's case in earlier discussion that in the present case, which is concerned with determining the identity and accurate description of the person or persons or legal entity behind the business name in question, it may be open to the Arbitrator to exercise the power to correct a misdescription allowed to him by s 30(c) of the Act (if it be held that the lessee was the Unit Trust) provided that his ruling does not amount to the substitution of a new party for an existing party (that is, it would not be open to the Arbitrator, having regard to Woodbud's case, to hold that the lease was entered into by Cole and Mullally trading as Hotrox Charcoal Company, but then go on to hold that the lessee, and thus the party bound by the Award, should nonetheless now be described and treated as the Unit Trust).
108 It follows that the Arbitrator should deal with the application to correct a misdescription in the light of these reasons for decision by construing the lease/arbitration agreement in order to determine who was the contracting party as lessee. This will be done by looking first at the language of the agreement. That examination may or may not lead to the reception of parol evidence to resolve an ambiguity. However, I have held that the applicant herein (Gebauer Nominees Pty Ltd) is not estopped from denying that the lessee, and thus the party bound by the Award, was Gerhard Joseph Cole as trustee for The Hotrox Charcoal Unit Trust.
109 Let me now apply these general observations to the specific grounds comprising the applicant's case.
Ground 2.1
110 The applicant alleged that the learned Arbitrator erred in finding that the order sought by the respondent was merely to rectify a misdescription
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- of the respondent when, in law, the order sought actually involved the substitution of one party for another; that is, a change in identity of the claimant in the arbitration, not just a change in a description.
111 It follows from my general observations that, in my view, the leave to appeal application and the misconduct application should succeed upon this ground. I have identified the manner in which the Arbitrator was in error, and indicated that the error had the potential to prejudice the rights and entitlements of the applicant in that it had the potential to substitute one party for another.
112 For the reasons I have given, I consider that the appropriate form of relief is to set aside the award upon the basis that the matter must be remitted to the Arbitrator for reconsideration in accordance with these reasons for decision. If he finds that the lessee was Cole and Mullally trading as Hotrox Charcoal Company then he will be obliged to dismiss the application to correct a misdescription in the manner proposed because to allow it would be to allow for the substitution of a new party. On the other hand, if he finds that the lessee was the Unit Trust it will be open to him to allow the application. Either way, his ruling is likely to give rise to an issue estoppel as to who is bound by the interim award now that the issue of identity has been fully canvassed.
Ground 2.2
113 The applicant contended that the learned Arbitrator had no jurisdiction to make the orders sought by the respondent.
114 It is apparent from s 30 of the Commercial Arbitration Act that the Arbitrator had power to correct a misdescription. However, the crucial question was whether the conclusion he arrived at amounted to the correcting of a misdescription or the substitution of a new party. If, upon a proper interpretation of the lease agreement, the Arbitrator had concluded that The Hotrox Charcoal Company Unit Trust was a party to the lease, then it would have been open to the Arbitrator to correct the incomplete description of the lessee (or misdescription) in the manner contended for by Hotrox. However, as it happened (on my finding) the Arbitrator took into account irrelevant considerations.
115 The general rule is that a body obliged to act judicially falls into jurisdictional error if it misapprehends the nature or limits of its functions and powers. Further, such a body is said to fall into jurisdictional error if it misconstrues the operative instrument and thereby misconceives the nature of the function it is performing: Craig v State of South Australia
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- (1995) 184 CLR 163 at 177. Thus, in Forsayth NL v Australasian Gold Mines NL (No 1) (1992) 7 WAR 549 at 558 Ipp J said in respect of the case before him:
"Had the arbitrator been expressly instructed, by the reference, to apply an objective test then in my view his failure to do so could well have been in excess of jurisdiction and thereby could have constituted misconduct."
Ground 2.3
117 The applicant alleged that the learned Arbitrator erred in law by considering post-contractual conduct in order to determine who the claimant was and should have confined his enquiry to the identity of the lessee in the lease agreement which contained the arbitration agreement.
118 I consider that the applicant is entitled to relief upon this ground. It follows from my general observations that the learned Arbitrator erred in failing to look principally at the language of the lease agreement in making a determination as to who was the lessee. It was not open to him to look at post-contractual conduct unless the language used in the agreement allowed him to look beyond that language pursuant to the parol evidence rule.
Ground 2.4
119 The applicant alleged that the learned Arbitrator erred in law by retrospectively amending an interim award dated 1 May 2000 (going to liability) when he was functus officio and had no jurisdiction to do so.
120 I do not consider that relief should be afforded to the applicant on this ground. It was open to the Arbitrator to determine who was bound by his first interim award. He cannot be regarded as being functus officio, or lacking jurisdiction. I am of the view that Woodbud's case can, and should be, distinguished because, unlike the present case, it concerned a final award.
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Ground 2.5
121 The applicant alleged that the learned Arbitrator erred in law by determining the identity of the claimant to be the trustee for the time being of the Hotrox Charcoal Company.
122 It follows from my general observations that the applicant is entitled to obtain relief on this ground. The Arbitrator erred in the way in which he arrived at the conclusion that the party to the lease was the trustee for the time being of The Hotrox Charcoal Company Unit Trust.
Ground 2.6
123 The applicant alleged that as to costs the learned Arbitrator erred by not exercising his discretion to make a costs order in accordance with established principles and should have awarded the applicant the costs of the application for amendment.
124 It follows from my general observations that the applicant is entitled to succeed on this ground. In circumstances in which the Arbitrator, on my finding, erred in ruling that the application to amend the name of Hotrox should succeed, he ought not to have awarded the applicant the costs of the application for amendment. He proceeded (incorrectly) from the premise that Hotrox was the successful party.
125 It follows from my determination that the matter must be remitted to the Arbitrator for reconsideration that the question of costs must be reconsidered too. The costs of the application to amend will properly be dealt with after the Arbitrator has reconsidered the matter remitted to him pursuant to these reasons for decision, and determined which of the two parties to the application to amend should be characterised as the successful party.
Summary
126 As appears from my general observations, I consider that the learned Arbitrator erred in the manner in which he arrived at the conclusions reflected in his formal orders A and B of the second interim award. Leave to appeal and an appeal against those orders will be allowed. The applicant's application for relief pursuant to s 42 of the Commercial Arbitration Act will be allowed upon the basis that the Arbitrator misconducted the proceedings. In respect of both the appeal and the misconduct application the appropriate form of relief is to set aside the orders in question upon the basis that the matter is to be remitted to the
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- learned Arbitrator for reconsideration. I will hear from the parties as to whether any further orders or directions are required.
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