Gingis & Anor v Mount Scopus Memorial College

[1999] HCATrans 460

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M94 of 1998

B e t w e e n -

ARON GINGIS (ALSO KNOWN AS ARKADY GINGIS) and MASYA GINGIS

Applicants

and

MOUNT SCOPUS MEMORIAL COLLEGE LIMITED

Respondent

Application for special leave to appeal

GLEESON CJ
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 10 DECEMBER 1999, AT 3.30 PM

Copyright in the High Court of Australia

MR N. LUCARELLI, QC:   If the Court pleases, I appear on behalf of the applicants, with my learned friend, MR D.B. BAKER.  (instructed by Lewenberg & Lewenberg)

MS R.A. LEWITAN, QC:   If the Court pleases, I appear with my learned junior, MR F.J. HOLZER, for the respondent.  (instructed by Kinos)

MR LUCARELLI:   If your Honours please.  The special leave point in this case involves the construction of section 28 of the Commercial Arbitration Act 1984 Victoria, which is essentially a uniform Code for the regulation of commercial arbitrations throughout Australia.  The issue in connection with section 28 ‑ ‑ ‑

GLEESON CJ:   Where do we find that section in the papers?

MR LUCARELLI:   It is towards the back.  What has been included is a bundle of arbitration Acts at around number 17 – I am not sure whether they are numbered in the bundle that your Honours have.

GLEESON CJ:   This is your bundle of authorities?

MR LUCARELLI:   It is in the applicants’ bundle of authorities, your Honour.

GLEESON CJ:   Yes, we are looking at the Victorian one, presumably.

MR LUCARELLI:   Yes.  Some of the other States have been included so that your Honours can have an appreciation that, in substance, they are the same, certainly for present purposes.  May I start with section 28 of the Victorian Act.  It reads:

Awards to be final

Unless a contrary intention is expressed in the arbitration agreement, the award made by the arbitrator or umpire shall, subject to this Act, be final and binding on the parties to the agreement.

GLEESON CJ:   What is the question of construction?

MR LUCARELLI:   The question of construction is what is meant by the word “final” or the words “final and binding” in section 28, having regard to section 4 and the definition of “award” in section 4, which is the second page of that bundle.  “Award’ is defined to mean “final or interim award”.

GLEESON CJ:   Where is the award here?  Where do we see the award?

MR LUCARELLI:   Yes, your Honour, the award appears in the application book.  It is set out in the reasons for the decision of Justice Charles at application book 65.  This is the letter of 6 March 1995 from the Rabbi, which is what the focus of the application by the applicants at trial was about.  What is said about this award is that whether it be interim as to some aspects or whether it be final as to some aspects, what is important is that it is within the meaning of section 28 “final and binding on the parties”.  What has occurred in the courts below, including the Court of Appeal, is that focus has been placed on what may be described as the common law definition of “final” in order to arrive at the conclusion that the award is not binding on the parties because it is not final in the sense that it finally determined all of the issues between the parties that were referred to the arbitrator for arbitration. 

In that sense, if I might call that the common law sense, the old sense of the word “final”, it would be necessary to have the award rendered valid, or for the award to be valid for it to actually dispose of all the issues.  But in the context of section 28 it is possible not only to have interim awards but to have both interim and final awards as to the particular issues if it may be said in the one award.  That is what has happened here.

In the old sense, a final award rendered the arbitrator functus officio and it did bring the arbitration to an end.  But, in our submission, the word “final”, in particular, in section 28 has a much broader meaning because of the incorporation of the interim award.

GLEESON CJ:   Just going back to the award, on the top of page 65, what was the effect of the award?

MR LUCARELLI:   In our submission, there were three questions which it is now agreed were referred for arbitration.  The first is, what was the amount of the debt; the second was, was there an ability to pay; and the third was, what terms and conditions of payment ought there be.  In our submission, the critical issue here is really in connection with the second question, that is, what is the ability to pay; and a correlative with that is the third question which is, are there any terms and conditions of payment.

What has been determined on the face of this award is that the applicants were not able to pay the debt at that time, and also, that they were only required to pay the debt either if they obtained employment or began to earn income.

Consequent upon that, to check whether that condition might apply in the future, the arbitrator imposed the condition of review which could either be annual or alternatively could be more than that, it could be more frequent than that ‑ ‑ ‑

CALLINAN J:   Mr Lucarelli, did not the arbitrator say that he had made an award earlier than that, on 31 October 1994, what appears at page 61?

MR LUCARELLI:   Yes, your Honour.

CALLINAN J:   His evidence was - he was called at the trial, was he?

MR LUCARELLI:   He was.

CALLINAN J:   And he said that was his award, and then your clients – then there was correspondence after that, and your clients say what appears on page 65 was in fact the award, although I think earlier they might have said what appears on page 61 was the award.

MR LUCARELLI:   The parties at trial, and also in the Court of Appeal, have all proceeded on the basis that the letter at page 65 of the application book is in fact the award, and the document, or the award, which in fact gives rights to the applicants to prevent the County Court proceeding from being taken, or for judgment being entered.  That was the jurisdictional point that was run.  It was run on that basis.  That was the document that was pleaded, and at all times the parties have operated on the basis that either this document of 6 March is a valid award and therefore able to create the jurisdictional issue, or it is not.

The conjecture that arises in connection with the earlier document is that it refers to the amount of the debt and that is why it is being referred to, and there is some conjecture, of course, as to what the amount of the debt is.  But the focus of the applicants today is to say that there is a finding that has been made; there is an award that is being made which said that they were not required to pay the debt unless they earned income, in effect, and subject to review.  They were entitled at all times thereafter to rely upon that award by reason of section 28 of the Commercial Arbitration Act.  In fact, they were not able to rely upon it because proceedings were commenced and it is our submission that the Court of Appeal has proceeded on the basis that it is necessary to actually determine whether the award as a whole, but particularly as to this issue, was final in what I have termed the common law sense.

GLEESON CJ:   I am looking at page 70 in the reasons of Justice Charles where he dealt with the submission that you have just made about the effect of the document at page 65 and between lines 5 and 20 he sets out his answer to those submissions.  What is the error there?

MR LUCARELLI:   The error, your Honour, is that what is being said by his Honour is that any finding that was made by the arbitrator was only to the effect that there was an inability to pay on only one date, 6 March 1995, which is the date of the award as it would be put by the applicants.  The award has to be read as a whole, and the interim award that was made, if one wants to put it as that for the purpose of section 28, is not only that there was an inability to pay at that date, but what the Court of Appeal ought to also have looked at is the full nature of the conditions imposed by the arbitrator in connection with this finding that there was an inability to pay on 6 March, and that is that there was to be payment if income was earned subject to review.

That is not dealt with and, therefore, the emphasis of the Court of Appeal has always been that because there was an inability to pay on 6 March 1995, that could have no impact on the ability of the College to commence proceedings one year later, on 20 March 1996.

The interesting context of this case, of course, is that proceedings had been earlier issued for the debt, then they were discontinued, in effect, if I might use that word broadly, then the arbitration agreement was made in 1994, and then we have the arbitration, and in 1996 there was a further proceeding issued.  What is said is that the arbitration agreement intended that the parties resolve the question of the debt and how it was to be paid by reason of the arbitration, or pursuant to the arbitration, and that was in fact done.  It was submitted to the arbitrator and the arbitrator made those findings.  So that the error of the Court of Appeal and each of the justices do so, is to confine the award in connection with the ability to pay to one specific date, and to ignore the remainder of the award.

In our submission, the Court of Appeal failed to appreciate that the aspect of the award was final as to this issue, and instead the Court of Appeal held that as the award as a whole was not final, that that award was invalid and therefore not binding on the college.  In our submission, that ignores principles of severability which is that as to this issue it was clear and certain as to what the nature of the award was, and it was final, as is submitted for the purposes of section 28.

In our submission, on the analysis of the Court of Appeal, interim awards or awards which may require some determinations in the future would not be binding on the parties, and the parties seeking the benefit of an interim award could not take the benefit of section 28.

As to the question of public importance, the following points are made:  first, the Commercial Arbitration Act is essentially uniform throughout Australia, therefore the approach of the Court of Appeal as to finality and its impact on section 28 has wide application in the commercial community.

At present that decision is the only appellate decision among very few decisions at all about section 28 and its effect, and therefore the reasoning of the Court of Appeal will be relied upon in the future.

CALLINAN J:   I would be surprised if we were to see a document like this purporting to be an award in the future.  It is a unique sort of an award if it is an award.

MR LUCARELLI:   It is unique in the sense that, of course, every award is going to be unique.  It is going to be rare that you are going to have awards being duplicated time and again.  What is important about this award, though, is that one of the questions that was submitted was whether there was an ability to pay consistent with the policy of the school which was that Jewish education would be extended, and if there was an inability to pay, effectively, being one of the questions to be determined, then payment should not be required until there was an ability to pay.

So that it is an award which, in effect, could be replicated in circumstances where parties were asking for issues as to whether rights ought to be deferred or not, because this was clearly a case where one of the questions was whether a right ought be deferred, pending ability to pay.  But the difficulty with any award, as I said earlier, is that it is going to be very difficult to find the same award time and time again.  What is, however, important is the impact of section 28 and what the word “final” or the words “final and binding” in section 28 mean.

What the special leave point as it is put on behalf of the applicants would enable this Court to do is to give an interpretation of section 28 for the community that uses commercial arbitrations, not only the commercial community but as in the broader sense but also as can be seen from the very facts of this case, less commercial members of the community, if I might put it that way without any disrespect to any of the persons involved in the matter. 

GLEESON CJ:   I understand an argument to the effect that from one point of view the apparent lack of finality of this award was simply a reflection of the nature of the right concerning which the parties were in dispute, but assuming that there was an award that said they cannot pay now and the position will have to be reviewed in a year’s time, there was no review of the position in a year’s time, and after more than a year elapsed the proceedings in the County Court to recover the debt were commenced, how then did that award operate as a bar to those proceedings?

MR LUCARELLI:   Because the temporal effect of it was that there was no requirement to pay unless income is earned subject to review.  The school took some steps in asking the arbitrator to bring about the review.  I do not think that is in dispute.  The review did not occur.  The fact that the review did not occur may well constitute  - if it was the fault of the applicants, which it is not because there is no evidence that the applicants did not subject themselves to review – the fault may lie on the school for not pursuing the review; it may lie in the fact that the arbitrator resigned, in effect; it may lie in a number of matters, but the fact is no review took place.

GLEESON CJ:   But one of the things that, as I understand it, Mr Justice Charles pointed out was that even assuming this was an award, which was itself a highly contentious matter, it was of its nature only capable of operating as a bar to proceedings for 12 months.

CALLINAN J:   That was Justice Phillips’ view, too, I think.

MR LUCARELLI:   It was, your Honour, but the point about that is that that is one view of the award but not the only view of the award.  The other view of the award is that it continued to operate until a review, either before the end of the 12 months, or at the time of the review in 12 months’ time, or thereafter because it was not closed.  It was not only to be one review, there may have been many more reviews thereafter.  What was important about it was that the review had to take place but if it did not take place it did not relieve the other part of the award which was that money was not due to be paid because of inability.  But, the important part is that there is no evidence other than some attempts by the College to bring about the review which demonstrates that they, themselves, considered that the award was binding, that there was no attempt to bring about the review other than to ask the Rabbi to conduct the review. 

If there had been a refusal on the part of the applicants to be involved in the review, then that may well have been a matter which the Rabbi could take into account, in effectively granting leave to the College to bring proceedings, because it is said as part of the award that leave may well be granted if the review was unsatisfactory.  I am reading from page 65, at about line 18:

Mr and Mrs Gingis will be obliged to cooperate and fulfil this requirement and failure to do so will immediately entitle Mt Scopus College to take action whenever it may legally do so, subject to application to me.

CALLINAN J:   If you were right on everything that you said and you were to succeed on the appeal, it seems to me that the decision would have

no possible bearing upon any other cases at all because of the very special nature and the provisions are what you rely upon as the award.

MR LUCARELLI:   I cannot resile from that in the sense that of course it is a specific award. 

CALLINAN J:   It is more than specific, it is very unusual.

MR LUCARELLI:   I have to concede that it is not a type of award that one would see ordinarily.

CALLINAN J:   I have never seen anything like it in nearly 40 years.

MR LUCARELLI:   I cannot agree as to the number of years in my own case, but I understand precisely what your Honour is saying, but, the point goes beyond that.  It goes to the question of it does not matter what the substance of the award is, in our submission, what is critical is what the words in section 28 mean.  Then, of course, you can apply them to the particular award in question.  At the moment there is uncertainty as to whether the courts in the future are to apply the finality test at common law, if I might call it that, or to read section 28 in broad terms so as to catch both interim awards and final awards in the common law sense. 

In our submission, as the law presently stands, having regard to this Court of Appeal decision, there is grave doubt as to whether interim awards are caught by section 28 because if one always has to find a final award in the common law sense, in the old sense, then section 28 as to interim awards is, in our submission, rendered nugatory.  They are the submissions on behalf of the applicants, if the Court pleases.

GLEESON CJ:   Thank you, Mr Lucarelli.  Yes Ms Lewitan.

MS LEWITAN:   In relation to my learned friend’s submission that the review was not conducted through no fault of the applicant, in paragraph 12 of our submission, which is at page 99 of the application book, we set out what the Rabbi himself said about that matter when he said:

The Rabbi himself noted that “any response has had to be forced and cajoled out of him”…..and that “I feel that you have taken unfair advantage of my willingness to be involved with your case and have taken up many hours of my time for which I made no charge.  Indeed, I feel you have used my good offices in order to delay or avoid your obligations”.

Basically what we submit is that there is no point of construction in this case because there was no award.  That was so held by the trial judge after a

trial which took some three weeks in the County Court, and then upheld unanimously by the Court of Appeal. 

There is no point of construction because there is no award, and there is no award because the terms of that letter of 6 March 1995 was so uncertain, so incomplete, and lacked finality to such an extent that we submit that it cannot be argued that that constituted an award.  As to the submission that there was an interim award, we submit that the applicants have in fact acted inconsistently with that submission.

First of all, that defence was not raised in the County Court.  In the County Court proceeding the applicants defended the proceeding on two grounds.  Their first defence was that the respondent was precluded from issuing proceedings to recover the unpaid fees in the County Court, and what they said in paragraph 2 of their defence was that on or about 6 March 1995 the said arbitrator handed down his decision, which decision the defendants abide by.  Then secondly, they denied that they were liable at all, which is inconsistent with what they are now alleging, that there was some sort of interim award.  Because, as the Court of Appeal said, if they had maintained that there was an interim award then they should have taken steps to stay the proceedings before the County Court to say that the arbitration was still on foot, and to try to ensure that the arbitration was concluded.  They did not do that.  What they did was, first of all they said that there had been a final award and, secondly, it was that they were not liable at all.

GLEESON CJ:   Yes, thank you, Ms Lewitan.  Yes, Mr Lucarelli.

MR LUCARELLI:   As to the point at page 99 of the application book, if your Honours please, that may well be the exasperation of the Rabbi as to the conduct between himself and the parties including the applicants, but it does not go to the question of review.  The way in which it was put on behalf of the applicants was simply that the review did not take place although it had been requested, and it is not evidence that it is due to the fault of the applicants that the review did not take place in March of 1996.  As we understand it, that is not what is being said.

With respect, to repeat that, a stay ought to have been applied for, is to do no more than to go to the way in which the Court of Appeal has dealt with one aspect of the matter, and does not deal with the central question with respect of which we have submitted in connection with section 28.

The fact that the question of the interim defence was not raised in the County Court is to put it too narrowly, in our submission.  The fact is in the County Court the applicants conducted their own defence of the matter.  The question of jurisdiction, as I understand it, on my instruction, ran for a

number of days, and after that the matter went to trial on the question of whether the debt was due. 

The question of the award being interim was raised in the Court of Appeal and was part and parcel of the submissions that were made on behalf of the applicants in that respect, and it does not matter whether the award is interim or otherwise for the purpose of section 28, and particularly it does not matter how it was run in the County Court, particularly having regard to the fact that the applicants ran the matter through the first applicant who is, as I am instructed, not a lawyer.  They are the submissions on behalf of the applicants in reply.  If the Court pleases.

GLEESON CJ:   Thank you.

The decision of the Court of Appeal in this matter turned on the application of the provisions of the Commercial Arbitration Act 1984 to the special and very unusual facts and circumstances of this particular case, which does not raise an issue appropriate to the grant of special leave to appeal.  The application is refused with costs.

MR LUCARELLI:   If the Court pleases.

MS LEWITAN:   If the Court pleases.

AT 3.58 PM THE MATTER WAS CONCLUDED