Gebauer Nominees Pty Ltd v Gerhard Joseph Cole as Trustee for the Hotrox Charcoal Unit Trust Trading as Hotrox Charcoal Company

[2006] WASCA 169

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT :  THE COURT OF APPEAL (WA)

CITATION:   GEBAUER NOMINEES PTY LTD -v- GERHARD JOSEPH COLE as Trustee for THE HOTROX CHARCOAL UNIT TRUST Trading as HOTROX CHARCOAL COMPANY [2006] WASCA 169

CORAM:   McLURE JA

HEARD:   21 AUGUST 2006

DELIVERED          :   21 AUGUST 2006

PUBLISHED           :  22 AUGUST 2006

FILE NO/S:   CACV 69 of 2006

CACV 70 of 2006

BETWEEN:   GEBAUER NOMINEES PTY LTD

Appellant

AND

GERHARD JOSEPH COLE as Trustee for the HOTROX CHARCOAL UNIT TRUST Trading as HOTROX CHARCOAL COMPANY
Respondent

ON APPEAL FROM:

Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA

Coram  :HASLUCK J

Citation  :GEBAUER NOMINEES PTY LTD - v - COLE as Trustee for THE HOTROX CHARCOAL UNIT TRUST t/as HOTROX CHARCOAL COMPANY [2006] WASCA 57

File No  :CIV 1158 of 2005, ARB 6 of 2005

Catchwords:

Appeal - Application for a stay - Turns on own facts

Legislation:

Business Names Act 1962 (WA)
Commercial Arbitration Act 1985 (WA), s 38, s 42, s 44
Supreme Court Act 1935 (WA), s 61(1)
Supreme Court (Court of Appeal) Rules 2005 (WA), r 3(1), r 43(2)(h)

Trustees Act 1962 (WA), s 10

Result:

Stay granted

Category:    B

Representation:

Counsel:

Appellant:     Mr J G Staude

Respondent:     Mr D Vilensky

Solicitors:

Appellant:     Mullins Handcock

Respondent:     Bowen Buchbinder Vilensky

Case(s) referred to in judgment(s):

Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308

Case(s) also cited:

Nil

1. McLURE JA:  The appellant in appeal numbers CACV 69 of 2006 and CACV 70 of 2006 applies for a stay of orders made by Hasluck J on 24 May 2006.

2. The applications that came before Hasluck J arose out of an interim award dated 19 January 2005 made by an arbitrator, Mr D A Forrester, in an arbitration between a claimant described as Hotrox Charcoal Company ("the Claimant") and the appellant in these proceedings, Gebauer Nominees Pty Ltd ("Gebauer"). 

3. On 19 January 2005 the Arbitrator ordered that the name of the Claimant in the arbitration be amended to "Gerhard Joseph Cole as Trustee for the Hotrox Charcoal Unit Trust trading as Hotrox Charcoal Company".  The Arbitrator also ordered that Gebauer pay the solicitor and client costs of the application to amend ("the interim award").

4. Gebauer applied for leave to appeal from the Arbitrator's decision pursuant to s 38 of the Commercial Arbitration Act 1985 (WA) and made a separate application under s 42 of the Commercial Arbitration Act to set aside the interim award and under s 44 to remove the Arbitrator on the basis he had misconducted the proceedings and/or was incompetent or unsuitable to deal with the dispute.

5. Gebauer's claims under s 38 and s 42 were successful. Hasluck J ordered that the interim award be set aside and that the issue of the identity of the Claimant in the arbitration and of the cost of the application to amend be remitted to the Arbitrator for reconsideration and determination within three months of the date of the order in accordance with his reasons. Hasluck J dismissed Gebauer's application pursuant to s 44 of the Commercial Arbitration Act seeking the Arbitrator's removal.  The appellant initially sought a stay of the arbitration pending the determination of the appeals.  At the hearing, the appellant narrowed the application to a stay of that part of the order requiring the issue of the identity of the Claimant and the costs of the application to be reconsidered and determined by the Arbitrator.

The background to the litigation

1. Gebauer leased commercial premises it owned in O'Connor to a lessee described as "The Hotrox Charcoal Company".  The lease was signed by Gerhard Cole and Patrick Mullally.  The Hotrox Charcoal Company was a business name registered under the Business Names Act 1962 (WA) and Cole and Mullally were the persons described as carrying on the business.

2. The parties to the lease each contended that the other was in breach of the lease.  The Claimant commenced arbitration proceedings in August 1999.  The Arbitrator conducted a seven‑day hearing on liability which hearing ended in late March 2000.  There is no transcript of the seven‑day liability hearing.  The Arbitrator found that the Claimant was in breach of the lease and that Gebauer was also in breach of the lease, which breach entitled the Claimant to an abatement of rent.  The Arbitrator noted in his reasons that Gebauer's initial objections to the right of the Claimant to sue were not pursued in the arbitration on liability.  It appears there was no challenge to the Arbitrator's liability award.  The quantum of damages remains for determination.  Orders and directions have been made on that subject.

3. In August 2004, Gebauer appointed new solicitors, being the solicitors on the record in these proceedings. After their appointment, submissions were made to the Arbitrator that the lease was of no effect or unenforceable because the Claimant was "a non‑existent party". The claim was without merit and at some later unspecified stage it was abandoned. However, before being abandoned it resulted in an application made by the Claimant (as described by Hasluck J) 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". As already noted, the application was successful. The Arbitrator's conduct in making that order and the associated costs order was the subject matter of Gebauer's applications under s 38, s 42 and s 44 of the Commercial Arbitration Act.

4. The evidence in the applications established that the Hotrox Charcoal Unit Trust ("the Unit Trust") was set up in November 1997 (that is, after the registration of the business name but before the execution of the lease).  Messrs Cole and Mullally were the trustees of the Unit Trust.  Mullally resigned as a trustee in October 1999.

5. Hasluck J concluded that the Arbitrator erred in his approach to the determination of the amendment application and set aside the interim award and referred the matter back to the Arbitrator for his reconsideration and determination.  In doing so, Hasluck J noted (at [105]) that "a finding might still be open upon a proper interpretation of the subject lease that the lessee was the Hotrox Charcoal Company Unit Trust" but concluded it was unnecessary for him to determine or express a final view about that matter having regard to his view that there should be limited judicial interference in the arbitral process.

6. Hasluck J also concluded that the errors made by the Arbitrator which were said to invalidate his conclusion that the name of the Claimant should be changed also resulted in the Arbitrator having "misconducted the proceedings".  Hasluck J said (at [103]):

   "… [T]he 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."

7. Hasluck J granted relief pursuant to s 42 of the Commercial Arbitration Act and set aside the interim award.  However, he dismissed Gebauer's application to remove the Arbitrator.

Stay principles and application

1. A single judge of the Court of Appeal has jurisdiction to make an order staying the execution of the primary Court's decision (s 61(1) of the Supreme Court Act1935 (WA) and r 43(2)(h) and par (b) of the definition of "interim order" in r 3(1) of the Supreme Court (Court of Appeal) Rules 2005 (WA)).

2. The discretion to stay execution pending an appeal is unfettered and the applicant for a stay carries the onus of showing that the circumstances are appropriate for a stay to be granted.  The Full Court in Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308 at [9] distilled the relevant principles. The applicant must demonstrate that appropriate circumstances exist for a stay. Appropriate circumstances may exist if it is shown that the appeal may be rendered nugatory. Even so, a stay will generally still be refused unless it can be established that the appeal has reasonable prospects of success and if that hurdle can be overcome, a stay may still be refused where it appears the balance of convenience does not lie in the applicant's favour.

3. It is of no consequence in the stay application whether leave is required to appeal from the decisions of Hasluck J.

4. Appeal CACV 69 of 2006 relates to that part of the order in the s 38 application that the matter be remitted to the Arbitrator for reconsideration and determination. Appeal CACV 70 of 2006 is from the same order under s 42 and from the dismissal of the application for the removal of the Arbitrator.

5. I turn now to the decision to refer the amendment application back to the Arbitrator for reconsideration and determination in accordance with the reasons of Hasluck J. There is merit in the appeal which has (at least) reasonable prospects of success. When making contracts in the course of administering a trust, the trustee contracts as principal. The trust is not a legal entity capable of entering into a contract. Hasluck J appears to suggest otherwise. As a result of the trustee's liability as principal, a trustee usually has a right of reimbursement out of the trust assets for amounts personally expended from the trustee's own funds to discharge trust liabilities or a right to be exonerated out of the trust assets in respect of a liability incurred. It is not suggested that s 10 of the Trustees Act1962 (WA) applies on the facts of this case or that the section applies to the contractual "burdens" of the lease. Indeed s 10 does not appear to have been relied on by any party or considered in the appeal to the primary Judge. In the absence of a stay of that part of the order requiring reconsideration and determination of the amendment application based on the primary Judge's reasons, the appeal will be rendered nugatory and will result in further significant costs and possibly a further decision by the Arbitrator which may itself need to be challenged.

6. There being no challenge to its correctness, I would not order a stay of the primary Judge's order that the interim award be set aside which means there will be no change to the name or description of the Claimant pending the determination of the appeal.  However, having regard to the merits of the appeal and the risk of generating further incorrect decisions, I would stay so much of the primary Judge's order sending the matter back to the Arbitrator for reconsideration and determination.  The stay being of a limited nature, the arbitration on the assessment of damages can and should proceed.