Goldflax Pty Ltd v Reefield Pty Ltd

IN THE SUPREME COURT

OF QUEENSLAND

CAIRNS O.S. No. 4 of 1999

[Goldflax Pty Ltd v Reefield Pty Ltd]

BETWEEN: GOLDFLAX PTY LTD

Applicant

AND: REEFIELD PTY LTD

Respondent

REASONS FOR JUDGMENT

BEFORE THE HONOURABLE JUSTICE JONES

DELIVERED THE 6th DAY OF SEPTEMBER, 1999

Before me are two applications as follows:
(i)An application for leave, pursuant to s.38(4)(b) Commercial Arbitration Act 1990 (“the Act”), to review and set aside an award made by the Professional Standards Tribunal (“the Tribunal”) of the Real Estate Institute of Queensland (“REIQ”) made on 30 September 1998, and upheld by the Appeal Tribunal on 9 December 1998; and alternatively
(ii)An application for a prerogative order of review to remove into this Court, for the purpose of quashing, the decisions of the Tribunal and the Appeal Tribunal of the REIQ.

Background

The applicant and respondents are both real estate agents trading in the Innisfail area and both are members of the REIQ. The applicant, Goldflax Pty Ltd (“Goldflax”), trades as Ray White (Innisfail) and the respondent, Reefield Pty Ltd (“Reefield”), trades as Campbell Realty Innisfail.
In late July 1997, Mrs. Barbera contacted Mr. Moyle, principal of Goldflax, asking him to provide a market appraisal of the property at 1 Owen Street, Innisfail which was owned by Mr. and Mrs. Barbera and Mr. Caruso (“the vendors”). The property, named “Rivavilla”, includes a 4 bedroom home, a shop of approximately 80 square metres with a three-bedroom residential flat above it, and an 11 bedroom hostel with two kitchen facilities. The vendors believed that the appraisal provided was not high enough and, although the property remained on Goldflax’s listings, the vendors did not then sign an appointment to act as a real estate agent. Shortly thereafter, the vendors listed “Rivavilla” with Reefield.
The ultimate purchaser was SS & M Pty Ltd (“the purchaser”). Mr Mate Buljubasich, a businessman from Victoria was a director of SS & M Pty Ltd which owned the property adjoining “Rivavilla”.
In mid-August 1997, Mr. Strano of Reefield phoned Mr. Buljubasich and offered “Rivavilla” to him on behalf of the vendors at a price of $1,000,000, but it seems that he was not interested in the property at that price. The vendors were informed that this offer had been made to the purchaser but had been refused. No further action was taken by Reefield until a “For Sale” sign was erected on the property by Reefield at the end of January 1998.
Despite his earlier lack of interest, the purchaser contacted Reefield in late April 1998 indicating that he wished to expand his existing shopping centre development on the adjoining land and would now be interested in purchasing “Rivavilla” for $600,000. This verbal offer was apparently rejected by the vendors and there was a counter-offer of $800,000 which was rejected by the purchaser. After three weeks Mr. Buljubasich regarded this avenue for his desired purchase as “ineffectual and at an end”, although Reefield apparently thought that Mr. Buljubasich was merely considering his options during this period.
The purchaser then contacted Goldflax and gave it instructions to negotiate the purchase of “Rivavilla” on his behalf (Mr. Buljubasich, however, told Reefield that Goldflax had approached him). On 22 May 1999 the vendors in writing appointed Goldflax as their agent, which may explain why there is some confusion over who was approached first.
Regardless of this issue, Goldflax went to some effort in conferring and negotiating with both parties until on 28 May 1999 they signed a contract for the sale of the property for $780,000. Goldflax received $19,500 by way of commission for this sale, and it is this amount about which this application is concerned.
On 29 May 1998, Reefield telephoned Goldflax accusing if of taking its sale. The dispute ultimately was referred to the REIQ Arbitration and Professional Standards Tribunal.
At the ensuing hearing on 10 September 1998, Reefield argued that it was entitled to the full amount of the commission on the following bases:-
(a)They first introduced the purchaser to the vendor;
(b)At no time did they conclude their negotiations with the purchaser and the vendor;
(c)At no time did the purchaser inform them that he had ceased wishing to negotiate a purchase of the vendor’s property; and
(d)They contributed effectively to the sale of the property before Goldflax became involved.
Goldflax claimed that they should retain the $19,500 because:-
(a)No conjunctional arrangements were made between the agents;
(b)They did hold a proper, though subsequent, listing authority;
(c)They had been dealing with the purchaser in relation to the subject property for almost as long as Reefield;
(d)The purchaser regarded his agency agreement with Reefield as non-productive, which is why he then contacted Mr. Moyle; and
(e)The purchaser states that Goldflax contributed effectively to the sale and not Reefield.
On 30 September 1998, the Tribunal published its findings as follows:-
(a)At all material times Goldflax ought to have been aware of Reefield’s involvement with the vendors and their authority to sell;
(b)Goldflax contributed effectively to the sale in that they were able to have the purchaser commit to a binding contract, which completed;
(c)Goldflax interfered with Reefield’s relationship with the vendors; and
(d)The proper course for Goldflax would have been to conjunct the sale with Reefield.
Accordingly, the Tribunal ruled that Reefield was entitled to one-half of the commission and to costs.
Apparently discontented with these findings, Goldflax requested a hearing with the Appeal Tribunal. The appeal was dismissed based on the following findings of the Tribunal:-
(a)At all material times Goldflax was aware of Reefield’s agency in respect of “Rivavilla”, if for no other reason than Reefield’s “For Sale” sign thereon;
(b)Both Goldflax and Reefield contributed effectively to the sale;
(c)Goldflax did not have regard to the agency relationship between the vendor and Reefield, which predated the formal agency appointment to Goldflax; and
(d)Goldflax failed to meet its commitments under the REIQ Code of Ethics, in particular Article 2.1 [1].
[1] Article 2.1 “Members must conduct their business so they minimise controversies and avoid conduct that demeans the Institute or is contrary to good agency practice. In all dealings, Members must treat each other in a manner that does not disadvantage existing negotiations and with strict professional conduct and integrity.”
The Appeal Tribunal upheld the earlier ruling that Reefield was entitled to one-half of the commission on the sale of “Rivavilla”.
Goldflax now seeks to challenge these rulings. The grounds of this appeal, which shall be dealt with in turn, are:-
1.That the proceedings before the REIQ Arbitration and Professional Standards Tribunal were not, in fact, an arbitration under the Act.
2.That the REIQ Arbitration and Professional Standards Tribunal had no power to make the order it did.
3.That the ethical rules of the REIQ do not found a civil liability.
4.That there was no satisfactory evidence upon which the Appeal Tribunal could have found that Reefield effectively contributed to the sale of “Rivavilla”.

The Threshold Test. Were the proceedings an “arbitration” under the Act?

Before proceeding with the merits of this application, it must first be determined whether the hearing before the REIQ Arbitration and Professional Standards Tribunal was an “arbitration” as defined by the Act. That Act only “applies to an arbitration agreement (whether made before or after the commencement of the Act) and to an arbitration under such an agreement”. [2] “Arbitration agreement” is defined as “an agreement in writing to refer present or future disputes to arbitration”. [3]
[2] s.3.(2)(a) Commercial Arbitration Act 1990.
[3] s.4 ibid.
Where then is the agreement in writing? Counsel for Goldflax contends there is no such agreement. He makes reference to Article 2.2. of the REIQ Code of Ethics, which states that “[a] complaint or dispute between Members should be submitted to the Institute for adjudication in accordance with the by-laws of the Institute”. It was argued that this did not amount to an “agreement in writing” as required by the Act.
Counsel for Reefield, however, draws attention to the REIQ’s Articles of Association and the by-laws made pursuant to those Articles. “Dispute” is defined, inter alia, as a “dispute between any two or more members” or a “complaint against a member made by another member”. [4] Both Goldflax and Reefield are members of the REIQ.
[4] Definitions - 2(10) Articles of Association of Real Estate Institute of Queensland Ltd
The by-laws are made by the Board of Directors of the REIQ pursuant to the Articles of Association. Both the Articles and the by-laws are documents of a private or domestic nature. But they are rules to which each member of the REIQ subscribes by becoming, and remaining, a member. The acceptance of such rules is an agreement which binds members to pursue their disputes about another member before the Tribunal. [5]
[5] see By-laws 42.1 - “Any Dispute or Complaint concerning the Regulations or the conduct of members must be heard and dealt with by the Arbitration and Professional Standards Tribunal.”
On behalf of Goldflax it was argued that an essential element of an arbitration agreement is that it must relate to a justiciable issue triable civilly. In so doing, counsel relied upon a passage from Halsbury's “Laws of Australia” [25-20] as follows:-
“The dispute or difference which the parties to an arbitration agreement agree to refer must consist of a justiciable issue triable civilly.”
That statement is not a complete description of an arbitration agreement. The cases used to support the statement do not suggest it to be. In earlier passages in Halsbury it is noted that the term “arbitration” is used in several senses. It may refer either to a judicial process or to a non-judicial process. A judicial process is concerned with the ascertainment, declaration and enforcement of rights and liabilities as they exist, in accordance with some recognised system or law. However, statutory arbitrations take their character from the statutes providing for them. Here we are concerned with the reference of a dispute to a private tribunal for a hearing which is to be conducted in a judicial manner in accordance with a fixed recognisable system of law. [6] In any event, the rights and obligations of members of the REIQ inter se are matters which can give rise to justiciable issues in respect of which declaratory relief could be sought.
[6] Halsbury’s Laws of England 4^th Ed. Vol 2 [502]
Some of the characteristics of an arbitration agreement were considered by the House of Lords in Arenson v Arenson[7] in which Lord Simon said (at 423):-
“The main issue in this part of the case was whether it was of the essence of a judicial decision that it answers a question.. or decides a dispute. The latter seems to me to be the right view both in principle and on authority.”
[7] [1977] AC 405 at p.423 per Lord Simon of Glaisdale

This characteristic of an arbitration was considered by McPherson J in Capricorn Inks Pty Ltd v Lawter International (Australasia) Pty Ltd[8] after referring to the above passage from the judgment of Lord Simon His Honour said:-
“There is no doubt that on occasions courts have selected the existence of a dispute requiring resolution or determination as the feature distinguishing arbitration from appraisement or valuation, which is said to be the process which prevents or precludes disputes from arising… But the existence of a “dispute”, although a factor, is not necessarily a decisive factor in determining whether arbitration or appraisement is involved. It is quite possible for parties to be become involved in a dispute about something, such as the value of premises or goods, which they agree to submit for appraisal without intending that an arbitration should follow. The distinction depends upon a range of factors of varying importance and weight depending on the circumstances; but generally what must be in contemplation is that there will be “an inquiry in the nature of a judicial inquiry”: see Re Carus-Wilson and Green (1886) 18 QBD 7/9 per Lord Esher MR. His Lordship there went on to say that the intention must be that the arbitrator should “hear the respective cases of the parties and decide upon evidence laid before him...” … but as a general proposition it remains true that the proceeding is an arbitration if the parties intend that they should have the right to be heard if they so desire: Hammond v Wolt (1975) BR 108, 112.” (emphasis added)
[8] [1989] 1 Qd R 8 at p.15 - 16. These comments were approved by members of the Full Court - see at p.33 (per Connolly J) and p.39 (per Thomas J).
In Hammond v Wolt, Menhennitt J was considering the nature of an arbitration provided for in a building contract. After qualifying the scope of his task, he identified certain characteristics by saying (at p.112):-
“It is unnecessary and undesirable for the purposes of this case to attempt an exhaustive definition of the concepts of arbitration and arbitrator. However, the authorities appear to me to establish the following proposition:-
(a)     Arbitration involves “an inquiry in the nature of a judicial inquiry”...
(b)     ... on an arbitration the parties have the right to be heard if they so desire. It has been held that where on an arbitration there was no request for an oral hearing but both parties wrote to the arbitrator setting out their cases and put documents and information before the arbitrator, partly in response to his written request, the award made by the arbitrator should not be set aside:....
(c)     If the parties have the right to call evidence if they so desire, that is an indication that the reference is to arbitration:...
(d)     It is unnecessary to decide whether it is an essential element of an arbitration that the parties have the right to call evidence if they so desire....
(e)      it is not inconsistent with arbitration for the arbitrator to be entitled to rely upon his own expertise in arriving at a determination:...”
Whilst there does not appear to be any all-encompassing identification of the characteristics by which a proceeding is classified as an arbitration, the features of the proceedings provided for by the REIQ rules lead me to the view that an arbitration in the strict sense was intended. There is a formal process for the identification of and notification of the dispute. The Tribunal is required to hear each of the parties to the dispute. Each had the right to call evidence. Importantly there would be a determination of the issue in dispute which would be binding on the parties subject to any right of appeal. In my view, the threshold test is satisfied that there was an agreement in writing to refer the dispute to arbitration.

Judicial Review of the Tribunal’s Decision

The relevant provisions for judicial review under the Act are as follows:
Judicial review of awards
38. (2)       Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.
…
(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement -
…
(b)… with the leave of the Supreme Court.
(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 1 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.

Thus it is seen that any resort to these provisions is quite restricted. They apply only where an error of law has been identified and even then only with leave.
Counsel for Reefield contends that there is no “manifest error of law on the face of the award” nor could the determination of the questions “add substantially to the certainty of commercial law.” For those reasons, counsel for Reefield argues that leave should not be granted.
The meaning of s.38(5)(b)(i) was considered by Justice Moynihan in Re: Caf-Grains. [9] His Honour was of the view that the sub-section required “that the error be ‘obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator.’”
[9] [1994] 2 Qd. R 252 at 258.
The error of law suggested by Goldflax was that “the evidence disclosed that Reefield was not the effective cause of the sale”. There was clear evidence of Reefield’s involvement in the sale. [10] The challenge so framed is really a challenge to the fact-finding undertaken by the Tribunal and the Appeal Tribunal. Being of this view, there is no place for my embarking upon any review pursuant to the provisions of the Act.
[10] See paras 12 and 14 herein.
Nor am I inclined to believe that, even if there was strong evidence that the arbitrator made an error of law, the determination of this appeal would add substantially to the certainty of commercial law.
Further, as noted by the Court of Appeal in Crewford Pty Ltd v Transit Australia Pty Ltd, [11] the granting of leave pursuant to s.38(5) of the Act remains discretionary. Thus, leave to appeal may still be refused, despite all of the section’s requirements being met. This is most likely because the provisions relating to judicial review of awards “are the manifestation of a statutory intention to limit the circumstances in which the court may intervene in respect of an award. This is in the interest of finality of the resolution of disputes by the means to which the parties have agreed.” [12] I would also be most reluctant to interfere with the decision of the Tribunal on other grounds. Firstly, these Tribunals were established primarily to deal with disputes of this very nature. Secondly, they are far more aware of the applicable principles and of acceptable practices and are thus better equipped than the Courts to deal with what are essentially internal disputes between members of voluntary associations.
[11] [1999] QCA 81 (23 March 1999), para. 4.
[12] supra at 257.
I will indicate that, even if it were open to me to grant leave, the appeal would almost certainly have failed on the grounds proffered. The findings of the REIQ Professional Standards Tribunal and the Appeal Tribunal appear to me to be quite sound in all of the circumstances.
In the light of my findings, no separate consideration of the alternate application for prerogative relief is necessary.
Leave to appeal to this Court will, therefore, be refused.

Orders

My orders are:-
(i)that the applications be dismissed; and
(ii)that Goldflax pay Reefield’s costs of and incidental to this application.

[1999] QSC 211

6 September 1999