Gordon & Gotch Australia Pty Limtied v Horwitz Publications Pty Limited - [2007] NSWSC 960

No judgment structure available for this case.

CITATION: Gordon & Gotch Australia Pty Limtied v Horwitz Publications Pty Limited [2007] NSWSC 960

HEARING DATE(S): 30-31 July 2007
Written submissions 9 August 2007

JUDGMENT DATE :
4 September 2007

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Bergin J

DECISION: Plaintiff's application to be dismissed.

CATCHWORDS: [ARBITRATION] - Whether leave should be granted to appeal from arbitral awards made pursuant to Commercial Arbitration Act 1984 - Whether manifest error on the face of the awards - Whether technical misconduct by arbitrator.

LEGISLATION CITED: Commercial Arbitration Act 1984
Commercial Arbitration Act 1984 (Vic)

CASES CITED: Abigroup Contractors Pty Limited v Sydney Catchment Authority (No 3) [2006] NSWCA 282
Allen v Tobias (1958) 98 CLR 367
Archibald v Byron Shire Council (2003) 129 LGERA 311
BHP Billiton Limited v Oil Basins Limited [2006] VSC 402
Dobbs v National Bank of Australasia Limited (1935) 53 CLR 643
Doran Constructions Pty Limited v Health Administration Corporation of New South Wales (1994) 12 BCL 59
Lanlex No 29 Pty Limited v Leach (1997) Aust Contract R 90-077
McCann v Switzerland Insurance Australia Limited (2000) 176 ALR 711
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
New South Wales v Coya Constructions Pty Limited (Unreported, New South Wales Court of Appeal, 4 August 1995)
Promenade Investments Pty Limited v New South Wales (1992) 26 NSWLR 203
Raguz v Sullivan (2000) 50 NSWLR 236
RP Robson Constructions Pty Limited v Williams (1989) 6 BCL 219

PARTIES: Gordon & Gotch Australia Pty Limited - Plaintiff
Horwitz Publications Pty Limited - Defendant

FILE NUMBER(S): SC 50187/2006; 50108/2007

COUNSEL: FM Douglas QC / MM Macrossan / DC Price - Plaintiff
N Cotman SC - Defendant

SOLICITORS: Makinson & d'Apice Lawyers - Plaintiff
Heidtman & Co Lawyers - Defendant

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BERGIN J

4 SEPTEMBER 2007

50187/06 GORDON & GOTCH AUSTRALIA PTY LIMITED v HORWITZ PUBLICATIONS PTY LIMITED

50108/07 GORDON & GOTCH AUSTRALIA PTY LIMITED v HORWITZ PUBLICATIONS PTY LIMITED

JUDGMENT

1 The plaintiff, Gordon & Gotch Australia Pty Limited, distributed magazines (the Publications) for a number of years on behalf of the defendant, Horwitz Publications Pty Limited, to newsagents, supermarket proprietors, convenience stores and sub-agents (the Outlets). An agreement dated 1 April 2002 (the Agreement) between the plaintiff, as “the Distributor”, and the defendant, as “the Company” provided, inter alia, that the plaintiff was entitled to deduct from the total purchase price of the Publications payable to the defendant, an amount in respect of Publications that had not been sold by the Outlets (cl 7.2(a), Sch 1 cl 3(ii)).

2 The parties fell into dispute in relation to the basis upon which the plaintiff was entitled to deduct that amount and, pursuant to the Agreement (cl 14), they referred their dispute to arbitration before the Honourable MJ Clarke QC (the Arbitrator). The plaintiff claimed that it was entitled to make the deduction on the basis of the number of Publications the Outlets claimed were unsold without verifying the accuracy of the claim by counting the Publications that had been returned to it by the Outlets. The defendant claimed that the plaintiff was only entitled to make the deduction on the basis of the actual number of the unsold Publications returned to it by the Outlets, requiring the plaintiff to count the returned Publications.

Background

3 At the time the Agreement was entered into the plaintiff received the Publications for sale from the defendant and distributed them to approximately 5,600 Outlets which then offered the Publications for sale for a particular period. On a date determined by the defendant, defined in the Agreement as the “Recall Date”, the plaintiff was required to issue a “returns notice” to the Outlets for return to it of particular unsold Publications. The Outlets, also referred to in the Agreement as the “Designated Purchasers”, then recorded the number of unsold copies of each Publication it was returning to the plaintiff in a “completed form” which they sent, together with all unsold copies of the Publications, to the plaintiff’s warehouse in Albury, in south west New South Wales. The plaintiff then physically counted those returned Publications using its scanning/barcode counting machine and reconciled that figure with the figure given by the Outlet in the completed form.

4 There were exceptions to this practice. Outlets in Western Australia, Northern Territory, Tasmania, remote areas and supermarkets were not required to return the copies of the unsold Publications to Albury for counting (the excluded group).

5 In October 2003 the plaintiff changed its system, apparently because of the excessive costs expended and time taken in the counting of the returned Publications. From October 2003 Outlets, except the excluded group, furnished a returns form recording the number of unsold Publications to the plaintiff’s premises at French’s Forest in Sydney. These Outlets still returned the unsold Publications to Albury, however the plaintiff did not scan or count them but instead instituted a random audit system. When the defendant became aware of the change in the plaintiff’s system it complained that the data relating to returns was increasingly inaccurate. The defendant also had access to the plaintiff’s audit process and after a review of it concluded that it was not sufficiently robust to rely upon the accuracy of the return forms submitted by the Outlets.

The Awards

6 The Arbitrator delivered four Awards; the First Interim Award on 10 May 2005 relating to the construction of the Agreement and the basis upon which the plaintiff was entitled to deduct the amount for returned Publications from the purchase price; the Second Interim Award on 1 November 2006 assessing damages; a Further Interim Award on 3 May 2007 relating to the question of interest; and the Final Award on 4 July 2007. The Arbitrator ordered that the plaintiff pay to the defendant $832,390.27 together with interest calculated to 22 June 2007 in the amount of $203,363.

Relief sought

7 The plaintiff seeks an order pursuant to section 38(4)(b) of the Commercial Arbitration Act 1984 (the Act) that it be granted leave to appeal from the Interim Awards dated 10 May 2005 and 1 November 2006 and the Final Award dated 4 July 2007. The plaintiff also seeks orders pursuant to s 38(3) or s 42 of the Act that the Interim Awards dated 10 May 2005 and 1 November 2006 and the Final Award of 4 June 2007 be set aside. Finally the plaintiff seeks an order pursuant to s 44 of the Act that the Arbitrator be removed.

8 The matter was heard on 30 and 31 July 2007 when Mr FM Douglas QC leading Mr MM Macrossan and Mr DC Price appeared for the plaintiff and Mr NC Cotman SC appeared for the defendant.

Leave to appeal

9 Section 38 of the Act provides relevantly:

(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.
(3) On the determination of an appeal under subsection (2) the Supreme Court may by order -

(a) confirm, vary or set aside the award; or

(b) remit the award, together with the Supreme Court’s opinion on the question of law which was the subject of the appeal, to the arbitrator or umpire for reconsideration or where a new arbitrator or umpire has been appointed, to that arbitrator or umpire for consideration,

and where the award is remitted under paragraph (b) the arbitrator or umpire shall, unless the order otherwise directs, make the award within 3 months after the date of the order.

(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement -

(a) with the consent of all the other parties to the arbitration agreement; or
(b) subject to section 40, 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 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.

10 The real issue in the proceedings on the question of leave under s 38 of the Act is whether there are manifest errors of law on the face of the Awards.

The test

11 A strong and compelling argument is necessary before leave will be granted to appeal from an arbitral award: New South Walesv Coya (Constructions) Pty Ltd (Unreported, NSWCA, 4 August 1995). Any error on the face of the award must be “evident” or “obvious” rather than simply “arguable” to satisfy the epithet “manifest error”: Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203, per Sheller JA at 225. Consistently with the application of this test, Spigelman CJ said when speaking extra-curially, “a high level of self- restraint” should be exercised in exercising the statutory powers under the Act: International Commercial Litigation: An Asian Perspective (20th Biennial Lawasia Conference, Hong Kong, 7 June 2007).

The Agreement

12 The Agreement was for the period 1 April 2002 to 30 June 2005 (cl 3). The Recitals to the Agreement record that: the plaintiff had been distributing the Publications for the defendant for several years under various earlier agreements including the most recent agreement dated 1 July 2000; and that the parties had changed and clarified certain terms of their arrangement with effect from 1 April 2002 and were entering into the Agreement to give effect to those changes as of that date.

13 The Agreement included the following definitions:

‘ Certification of Unsolds’ in relation to a Publication means a certificate prepared by the Distributor setting various information relating to the Publications, including but not limited to the number of unsold copies of each Publication claimed by the Outlets.

‘Designated Purchasers’ means newsagents, supermarket proprietors, convenience stores and sub-agents.

‘Distributorship’ means the right to sell the Publications within the Territory to Designated Purchasers subject to the terms and conditions of this Agreement.

‘Finalisation’ in relation to an issue of a Publication means the date sixty (60) days after the month in which the Recall Date occurs;

…

‘Outlets’ means the Designated Purchasers to whom the Distributors distributes Publications under this Agreement.

‘Publications’ means the respective titles and Publications as the Company may from time to time nominate in writing to the Distributor (which as at the Commencement Date includes the Publications listed in Schedule 3 ), and ‘Publication’ includes any such title or Publication;

‘Recall Date’ in relation to an issue of a Publication means the date specified by the Company on which the Distributor must issue a returns notice to the Designated Purchasers for return to the Distributor of Unsold of that issue;

‘Recommended Retail Price’ and ‘RRP’ means the recommended retail price for the retail sale of each Publication as determined by the Company from time to time;

‘Returns Credit’ means the number of unsold publications set out in the Certification of Unsolds.

‘Re-issue Publication’ mean the respective Publications specified in the Schedule being additions of such Publications which are to be re-distributed subsequent to the first distribution.

‘Territory’ means the Commonwealth of Australia and Papua New Guinea.

‘Unsolds’

14 The duties of the plaintiff were set out in clause 4 of the Agreement and included relevantly the following:

4. DUTIES OF DISTRIBUTOR

(a) The Distributor must:
…

(3) allow nominated representatives of the Company access to supply and sales data at a State level, as well as access to State Merchandising Managers, merchandisers and other key personnel as is deemed necessary to perform their duties on behalf of the Company.

…

(8) observe all reasonable directions and instructions given by the Company in relation to the sale, distribution and exploitation of the Publications and, in the absence of any such directions or instructions in relation to any matter, otherwise act in the Company's best interests.

(9) The Distributor will distribute the Publications to the Outlets as per the onsale schedule provided by The Company and agreed by the Distributor provided that the Publications are delivered to The Distributor’s warehouse seven days prior to the nominated onsale day.
(10) allow inspection of the following records by authorised officers of the Company at all reasonable times (and provide the Company with copies of such records promptly after request):

(a) all documentation relating to the supply, invoicing and return of the Publications to the Outlets (and their sub-agents when this information is made available to the Distributor) including but not limited to details of quantities and dates of transactions;

(b) address and contact details of all Designated purchases;

(c) merchandiser’s call and cycle information relating to the Publications for all designated purchasers;

(d) estimated sales data from a sample panel of newsagents, such panels determined by the Distributor or as agreed between the parties from time to time.

(e) any other correspondence with the Outlets that relates to the publications.

(11) establish (if not already available) an up to date web based reporting system (‘ On-line System ’) whereby the Company can gain access via the Internet to all relevant information relating to the Distributorship including all sales and returns of the Publications) and continually upgrade the On-line System so that it remains consistent with industry best practice.
(12) provide the following reports to the Company:

(a) on a quarterly basis, an updated list of all products (that is, other than the Publications) currently being distributed by the Distributor;

(b) on a half-yearly basis (and as from January 1999), a report of the quantities of publications supplied by the Distributor broken down into local and imported, general and adult publications;

(c) on a quarterly basis, in respect of Publications, a report of the variance between Unsolds claimed by the Designated Purchasers and the actual number of Unsolds returned to the Distributor during that period; and

(d) such other reports and information relating to the Distributorship as the Company may reasonably request from time to time in writing.

15 Clause 7 provided:

7. DISTRIBUTION FEES AND TERMS OF SALE

(b) Unless agreed in writing between the Company and the Distributor, the Distributor must purchase the Publications in accordance with the terms specified in Schedule 1 of this Agreement.

(c) The Company will retain control of the number of copies of each Publication to be distributed by the Distributor. The Company must consult with the Distributor on the number of copies of each Publication required by the Company.

(d) The parties acknowledge that the Publications are provided by the Company to the Distributor on a sale or return basis, and the Distributor will purchase copies of a Publication in accordance with clause 3(iv) of Schedule 1. Notwithstanding any pre-payment or part payment of an invoice by the Distributor to the Company, title in copies of a Publication will not pass from the Company to the Distributor until they are purchased by the Distributor in accordance with clause 3(iv) of Schedule 1. The Company acknowledges that during the period that copies of the Publications are in the possession of Outlets risk will be with the Outlet and the Distributor will have no liability in respect of any loss or damage to the Publications whilst they are in the possession of an Outlet.

Schedule 1.

(i) Unless otherwise instructed by the Company, Re-issue Publications shall be re-issued by the Distributor on or about the first anniversary of the initial issue.

(ii) Copies of Re-issue Publications intended for re-issue shall at the discretion and cost of the Company remain in the care and at the risk of the Distributor until re-issued.

(iii) In respect of each Re-issue Publication, the Distributor must either destroy or return to the Company those copies in excess of the number of copies prescribed for re-issue. If the Distributor elects to destroy those excess copies, it must provide to the Company reasonable evidence that it has done so. Those excess copies will be deemed returned to the Company when that evidence of their destruction is provided to the Company.

(b) The Distributor must undertake ongoing spot checking of returns in line with its normal procedures:

(c) The Distributor undertakes that unless requested in writing by the Company at least sixty (60) days prior to Finalisation to hold Unsolds of an issue of a Publication, it will destroy all those Unsolds (except the Re-issue Publications as the Company may specify in writing for return to it) within thirty (30) days of Finalisation. The Company shall promptly pay to the Distributor all storage, freight and other handling expenses, charges and fees incurred by the Distributor as a result of any request to hold any Unsolds. Unsolds held by the Distributor at the Company’s request will be held for 30 days following the month in which the relevant Recall Date occurs. The Company acknowledges that the Distributor does not warrant the condition or quantity of the Unsolds returned by the Designated Purchasers.

(d) Within three (3) calendar months of the termination of this Agreement the Distributor may return or dispatch for return any copies of a Publication which were supplied to the Distributor pursuant to this Agreement, remain unsold at the date of such termination and which are held by the Distributor. Within sixty (60) days of receiving the Distributor with the purchase price and all storage, freight and handling expenses, charges and fees paid or payable by the Distributor in respect of such copies.

(b) Each package shall be clearly marked with the name of the Publication, issue and number of copies of the Publication contained in the package. Parcels shall be palletised and overall height of each package including the base shall not exceed 122cm.

(c) The Company must have printed on either the front or back cover of each Publication a bar code specific to that issue of the Publication having a magnification factor of no less than 0.80 as specified by the EAN barcode symbols size gauge for an EAN-13 barcode symbol. If a Publication does not have such a barcode the Company must pay the Distributor its reasonable costs for hand processing the relevant Unsolds, the cost to be advised to the Company from time to time.

(d) Delivery terms are FIS (free in store) to the Distributor’s warehouse as nominated by the Distributor.

(b) The Distributor shall liaise with the various censorship authorities in each State on behalf of the Company to the extent necessary to perform its obligations under this Agreement.

(c) All clearance and customs charges in relation to Publications shall be at the Company’s cost.

Schedule 1

7.5 If any copies of a Publication are lost or destroyed (other than at the direction of the Company) after delivery to the Distributor by the Company and before return to the Company they will be deemed to have been sold at retail and the Distributor must pay the purchase price for the expected sale of those copies (based on the sales of the last three finalised issues) in accordance with Schedule 1 of this Agreement.

Schedule 1

(a) a Distribution Fee for each copy of a Publication distributed by the Distributor; and

clause 7.

16 The Agreement also included the following:

16. AUTHENTIC TEXT

The text of this Agreement herein written in the English language is the authentic text and any difficulties or uncertainties in the interpretation arising shall be solved solely by reference to this text

17. CANCELLATIONS OF PREVIOUS AGREEMENTS

All previous agreements and arrangements if any between the Company and the Distributor (including the Agreement dated 1 July 2000 which is cancelled as of 31 March 2002) are hereby cancelled but without prejudice to any rights which have already accrued thereunder to either party.

18. IMPLIED TERMS

This Agreement embodies the entire understanding of the parties and there are no promises, terms, conditions or obligations, oral or written, express or implied other than those contained herein.

17 Schedule 1 of the Agreement provided as follows:

SCHEDULE 1

Contract Year	Distribution Fee
Year 1 (1 July 2000 to 30 June 2001)	$0.16 per copy distributed
Year 2 (1 July 2001 to 30 June 2002)	$0.175 per copy distributed
Year 3 (1 July 2002 to 30 June 2003)	$0.19 per copy distributed
Year 4 (1 July 2003 to 30 June 2004	$0.205 per copy distributed
Year 5 (1 July 2004 to 30 June 2005)	$0.215 per copy distributed

1. The Company shall pay the Distributor a Returns Collections Fee of $0.075 per Unsold collected by the Distributor from a Designated Purchaser and held at the direction of the Company under clause 7.2 . If the Company advises the Distributor to store Unsolds in accordance with clause 7.2(c) the Company shall pay the Distributor a storage fee which will be agreed in writing from time to time.

2. The Distribution and Returns Collections Fees set out above are exclusive of GST and fixed for the term of this Agreement. The Distribution Fees and the Returns Collection Fees shall be increased to allow for GST in accordance with clause 8.2.

‘Purchase Price’

(i) on or before the tenth day of the month following the month of delivery, the Distributor shall pay, in respect of all Publications EXCEPT reissued publications, but including Packs:

clause 8.2

Clause 8.2

(ii) on the tenth day of the month following Finalisation, the Distributor agrees to pay the total Purchase Price in respect of the final sales of the Publication as shown in the Certification of Unsolds. The Distributor is entitled to deduct from the total Purchase Price the following:

(A) Returns Credit;

(C) any other fees or charges pursuant to Clause 7

(D) the Advance Amount already paid in the Company under clause 4(i)(A).

(iii) If the Advance Amount paid to the Company exceeds the total Purchase Price, the Distributor may deduct an amount equal to the excess from any current or subsequent payment due from the Distributor to the Company under this Agreement.

(iv) The Distributor will provide a final accounting in respect of each Publication to the Company on or before Finalisation. The Distributor will, on the date of such final accounting, be deemed to have purchased from the Company the number of copies of each Publication which that final accounting indicates have been sold by the Distributor.

18 The Arbitrator’s reasoning in relation to the interpretation of the Agreement and the plaintiff’s claim that it was not obliged to count the returned Publications is set out, inter alia, in paragraphs 21 to 33, as follows:

21. The argument supporting these submissions is notable for its simplicity. The distributor is entitled to deduct from the total purchase price, inter alia, the Returns Credit. That is, to deduct the cost of the number of unsold publications set out in the Certification of Unsolds, By virtue of the definition of 'Certification of Unsolds' the entitlement related to "the number of unsold copies of each publication claimed by the outlets". Where, as in the scheme after October 2003, the outlets set out in their return form the number of copies which they claimed were unsold it was the figure there set out that was properly claimed by the distributor as its Returns Credit. In short, the distributor was not bound to count any returned publications and was entitled by virtue of the contractual scheme to claim its credit upon the basis of the number of unsold copies which each outlet claimed as set out in its return.

22. This approach has a superficial attraction, but assumes that a simple statement by an outlet in a returns form constitutes a claim. In ordinary parlance this may be so but in the context of this agreement it is a large assumption. I say that because there is a definite scheme in the agreement relating to the payment and credit obligations and there is not to be found in these provisions an express statement that a claim in a return form is sufficient. This is not surprising because, from a commercial point of view, there is a lack of reality in the idea that the company would entrust its financial returns to a significant extent to the unverified statement of an outlet with which it had no contractual relationship. Thus it is necessary to examine the terms of the agreement in order to ascertain, objectively, what the parties intended by the expression in the Certification of Unsolds "claimed by the outlets".

23. Two observations should be made at the outset. One, there is elaborate provision for the return by outlets to the distributor of unsolds and, two, there are provisions consistent only with the distributor checking the number of unsolds returned and confirming the actual number to the outlets.

24. Having said that I turn to schedule 1 which provides for payment. In broad terms clause 3 provides for an advance payment by the distributor; a final accounting by the distributor on or before finalisation and then later payment of the purchase price less "Returns Credit" and other allowances.

25. "Finalisation", it will be recalled, is defined as the date sixty days after the month in which the Recall Date occurs. That last expression is defined as the date 'specified by the company on which the distributor must issue a return notice to the outlets for the return of unsolds'.

26. Pausing there, it is significant that the notice relates to an actual return of publications and not to the provision by the outlet of a document specifying the number of unsolds.

27. From this scheme it can be discerned that the company specifies the Recall Date and that finalisation (at or about which time the final accounting is provided) occurs over sixty days thereafter. During that period the distributor will be able to ascertain, inter alia, the Returns Credit to which it is entitled.

28. While it may be that, as between the distributor and outlets, the latter may furnish a notice specifying the number of returns, there is no obligation on the distributor in the agreement the subject of this award to seek from the outlets a returns notice while there is an obvious requirement to recall unsolds.

29. In these circumstances it is reasonable to infer that the outlets make their claim by returning unsolds and whether or not they specify their own count is irrelevant. What is critical is that the outlets actually return unsolds. It would follow that it is then a contractual obligation of the distributor to determine , by its own count, the number of unsolds actually returned.

30. This view is supported by a number of provisions in the body of the agreement. These are mainly, but not exclusively, to be found in cl 7. They include -

(a) The contract is a sale or return contract (cl 7.1(d)). That is, prima facie, that the distributor pays for all publications except those which it returns or, in the context of this agreement, regains possession (there are specific provisions dealing with the return.).

(b) The distributor is to make confirmations of returns issued by it to the outlets available to the company for inspection. (Confirmations obviously setting out the number of unsolds returned and therefore implying a form of counting (cl 7.2(a)).

(c) The distributor must undertake ongoing spot checking 'in line with its normal procedures' (cl 7.2(b)). (Those procedures clearly being the ones in existence at the time of the execution of the agreement.)

(d) Subject to exceptions the distributor must destroy unsolds returned to it (cl 7.2(c)).

(e) The company must print a barcode on all publications, failing which it must pay the reasonable cost of hand processing the relevant unsolds (cl 7.3(c)). This provision is important for barcodes are essential for mechanical counting. Hence, where the counting cannot be done mechanically because of the absence of a barcode the company must pay for the additional costs of hand counting.

(f) Copies lost or destroyed (other than at the direction of the company) are deemed to be sold at retail and the Distributor must pay the purchase price (cl 7.5).

"on a quarterly basis, in respect of Publications, a report of the variance between Unsolds claimed by the Designated Purchasers and the actual number of Unsolds returned to the Distributor during that period; and "

On the one hand this sub-clause provides support for the distributor's submission in its reference to the words 'claimed by the designated purchasers (outlets)'. On the other it expressly requires a form of check to enable there to be a report of the variance. In the context of the other terms of the contract the reference to claims by the designated purchasers cannot be understood to override the obligation on the distributor to count, physically or mechanically, the unsolds and to claim only a credit for those established by that count.

32. In the result I would conclude that the expression "claimed" in the definition of "Certification of Unsolds" means claimed by the outlets by the physical return of the unsold publications.

33. Not only does the distributor's submission lack commercial sensibility but it effectively renders nugatory the elaborate provisions relating to the counting and checking of returned unsolds. Further, it would be a consequence of the distributor's argument that even if it carried out a check and found that an outlet's claim was overstated it would nevertheless be entitled to claim for the inflated amount set out in the returns notice by the outlet. The counting and checks, in that context, would lack real meaning.

34. In the remarks I have just made I have excluded consideration of the special cases of remote areas, distant states and supermarkets. It seems clear that specific arrangements were made and/or accepted by the company in relation to some of those circumstances. In others it may be that the company was ignorant of the precise practices of the distributor. These facts do not, in my opinion, bear on the construction of the agreement. Accordingly, this award deals only with those publications which were dealt with under the agreement and not subject to any specific exemption from its terms.

19 The Arbitrator then referred to the further submission that was put by the plaintiff on the assumption that the defendant had established a breach of contract, that there was no evidence of a causal connection between that breach and any loss by the defendant (par 36). The defendant did not claim damages at that time but reserved its right to advance a claim in the future (par 37). The Arbitrator heard submissions in respect of the declarations sought by the defendant and concluded as follows (par 38):

In my opinion a declaration should be made and it should be in the following form: That on its proper construction, and subject to the exceptions relating to Western Australia, Northern Territory, Tasmania, remote areas and supermarkets, the 2002 distribution agreement permits the distributor to a Returns Credit only in respect of those publications which have been returned by the outlets to the distributor and in respect of which the distributor has confirmed by count that the return is actually occurred.

Manifest error of law?

20 The plaintiff claims that there is a manifest error on the face of the Award in that the Arbitrator failed to apply the plain meaning of the word “claimed” where it is used in the definition of “Certification of Unsolds”. It was submitted that the plain meaning of the word “claim” is the mere assertion of a right or entitlement and that it does not require or entail any specific or particular physical act or action of verification. It was submitted that the statement by an Outlet in a returns form of the number of Publications that were unsold was sufficient to constitute a “claim”. It was also submitted that there is a manifest error of law on the face of the Award by the improper implication of a term that the plaintiff was required to determine the number of unsold Publications by reference only to those unsold Publications that had been physically returned by the Outlets.

21 It was submitted that paragraphs 23-32, extracted above, and in particular paragraph 30, indicate that the Arbitrator made the implication based on the other express terms of the Agreement. It was submitted that, contrary to the Arbitrator’s findings, the matters in paragraph 30 of the Award do not support the interpretation given to the Agreement by the Arbitrator. The plaintiff accepted that clause 7.1(d) specified that Publications were provided on a “sale or return” basis but submitted that such a description does not assist the determination of the basis of the plaintiff’s entitlement to a credit. It was submitted that the question to be determined is whether the plaintiff can rely upon the Outlets “claimed” returns or only those Publications which have actually been returned and counted. It was submitted that clause 7.1(d) does not assist in the answer to this question. Further it was claimed that whilst there is a definition of “Unsolds” meaning the “full copy unsold copies of any of the Publications returned to the Distributor by the Outlets”, such definition is not used in the definition of “Certification of Unsolds”. Emphasis was placed on the fact that in the definition of “Certification of Unsolds” the expression “unsold copies” is used and the word “Unsolds” with a capital “U”, is not.

22 The plaintiff submitted that properly understood, clause 7.2(a) confirms the position of the plaintiff’s entitlement to claim a credit based on the claims made by the Outlets, without the obligation of having to count them, but as a condition of that entitlement it is to make confirmations of returns issued by it to the Outlets available to the defendant for inspection, and otherwise comply with the reasonable evidence requirements of the provision. Clause 7.2(a) provided a regime for the defendant to view the systems and records of the plaintiff relating to a Returns Credit “including the confirmations thereof issued by“ the plaintiff to the Outlets. One of the matters for consideration in the interpretation of the Agreement was the meaning of the expression “confirmations thereof”. The word “confirm” means to “establish the truth or correctness of” something; The New Oxford Dictionary of English; or “to make certain or sure; corroborate; verify”; The Macquarie Dictionary Federation Edition. If the parties had intended that when the Outlets made a claim that they had not sold a certain number of Publications, the only obligation on the plaintiff was to send a communication to the Outlet acknowledging that it had received the claim, it is reasonable to expect that clause 7.2(a) would have used the words “including the acknowledgement(s) of receipt(s) thereof” instead of the words “including the confirmations thereof”.

23 In my view the meaning of the expression “confirmations thereof” in the context of this Agreement is not the mere acknowledgment of receipt of the communication and/or delivery but rather as the Arbitrator observed, in my view correctly, it implies a form of counting. That is, the plaintiff having received the claim from the Outlet did not merely acknowledge that the Outlet claimed a particular number of Publications had not been sold but rather it confirmed or verified that a particular number of unsold Publications had been received.

24 Clause 7.2(b) required the plaintiff to “undergo ongoing spot checking of returns in line with its normal procedures”. The plaintiff submitted that if there were a necessity to count the returned Publications there would be no need for “spot checking”. I disagree. This clause deals with something different. It refers to the “returns” with a small “r”. This sub-clause does not refer to the checking of the “number of” returns nor does it refer to checking the “Returns Credit” which is defined as the “full copy unsold copies of any of the Publications returned to the distributor by Outlets”. I am satisfied that the normal procedures, whatever they were at the time of the entry into this Agreement, were to be complied with for spot checking of the returns in general. It seems to me that clause 7.2(b) is a quality control clause rather than a quantity control clause.

25 The plaintiff submitted that the Arbitrator’s reliance on clause 7.2(c) to support the interpretation he placed on the Agreement was misconceived. It was submitted that the acknowledgement within the sub-clause that the plaintiff "does not warrant the condition or quantity of the Unsolds returned by the Designated Purchasers" provides strong confirmation of the view that because these are items which lose their value after a period of time, there would be no necessity to conduct a physical count, as distinct from the system of relying upon the "claim" made by the Outlets, monitored by spot-checks. The plaintiff submitted that the express negativing of a warranty in respect of a quantity of the Unsolds returned appears contrary to the interpretation of the expression "claimed" reached by the Arbitrator.

26 The Arbitrator did not refer to that part of clause 7.2 (c) containing the acknowledgment that the plaintiff did not give the warranty as to condition or quantity of the Unsolds returned by the Outlets as support for his interpretation of the Agreement. He limited the reference to clause 7.2(c) to the plaintiff's obligation to destroy the Unsolds returned to it, subject to the identified exceptions. The plaintiff's point is that the recognition that there is no warranty by the plaintiff as to the quantity of the Unsolds returned to it by the Outlets, seems inconsistent with a requirement for it to count the Unsolds. I disagree. The two things are quite separate. The context in which the acknowledgment in relation to the lack of warranty appears was an “undertaking” by the plaintiff that subject to certain exceptions it was to destroy all the Unsolds within 30 days of Finalisation. The exceptions were: (1) the Unsolds of an issue of a Publication that the defendant requested the plaintiff to “hold” which the plaintiff was obliged to hold for 30 days following the month in which the Recall Date occurred; and (2) Re-issue Publications that had to be returned to the defendant. The defendant was obliged to “promptly” pay to the plaintiff “all storage, freight and other handling expenses, charges and fees” incurred as a result of the request to hold the Unsolds. The acknowledgment of the lack of warranty as to condition and quantity of the Unsolds destroyed or held or returned to the defendant pursuant to the regime in this clause meant that the defendant could not pursue the plaintiff for breach of any warranty in respect of these Unsolds. The plaintiff was obliged to “confirm” the number of Unsolds to the Outlets but it was not obliged to give a “warranty” to the defendant.

27 The plaintiff next attacked the Arbitrator’s reasoning in respect of clause 7.3(c). The plaintiff accepted that this provision is against its position in so far as it refers to the “reasonable cost of hand processing” the relevant Unsolds, however it was submitted that this is a very indirect means of imposing an obligation upon the plaintiff to carry out a physical count of the number of Unsolds claimed by the Outlets. It was submitted that whilst this clause may provide limited support for the defendant’s argument it is also support for, or at least consistent with, the plaintiff’s interpretation. It was claimed that there are circumstances contemplated by the Agreement in which the plaintiff would actually have carried out a physical count of Unsolds. One of those circumstances includes where a report is required as to the variance between the claimed Unsolds and the actual Unsolds (cl 4(a)(12)(c)).

28 I agree with the Arbitrator’s observation in paragraph 30(e) in relation to the importance of clause 7.3(c). If a Publication did not have the required barcode printed on it, the defendant was obliged to pay the plaintiff “its reasonable costs for hand processing the relevant Unsolds”. The counting system in Albury was an automatic mechanical system reliant upon the barcodes. I agree with the Arbitrator that where the counting could not be done mechanically because of the absence of a barcode the plaintiff was obliged to “hand process” or hand count the Unsolds (“the full copy unsold copies of any of the Publications returned to the Distributor by the Outlets”) and the defendant was obliged to pay for the extra cost incurred in that hand counting. This aspect of the matter was relied upon by the Arbitrator, correctly in my view, as supportive of the interpretation he placed on the Agreement.

29 The Arbitrator also referred to clause 4(a)(12)(c) (the sub-clause) pursuant to which the plaintiff was required to report to the defendant on a quarterly basis any "variance" between the “Unsolds claimed by the Outlets” and the “actual number of Unsolds returned” to the plaintiff during that period. It was submitted that the clause was intended to ensure, by a form of audit or checking, that there was no significant variance between the actual count and the claims made. The following submission was then made:

“claimed”

“Certification of Unsolds”

30 The Arbitrator recognized that "on the one hand" the sub-clause provided “support” for the plaintiff's submission in relation to the meaning of the word "claimed". Certainly the sub-clause anticipates a difference between what is "claimed" and what is the "actual number of " Unsolds" returned to the plaintiff. Although the Arbitrator did not explain further the "support" provided by the sub-clause, it is fairly clear that he recognised that the expression "claimed" in the sub-clause could be understood as the "number" of "Unsolds" claimed but not counted, or verified, by the plaintiff as against the "actual" number of "Unsolds" to be ascertained by verifying, or counting, the number of " Unsolds claimed" by the Outlets. The plaintiff submitted that if the expression "claimed" in this sub-clause is to be given that meaning then it must be applied to the meaning of "claimed" in clause 1.1, in the definition of "Certification of Unsolds".

31 It is important to remember that the sub-clause uses the expressions “Unsolds claimed” and the “actual number of Unsolds returned”. The expression “Unsolds” is defined as “the full copy unsold copies of any of the Publications returned” to the plaintiff by the Outlets. The definition of “Certification of Unsolds” uses a different expression. It refers to “the number of unsold copies of each Publication claimed by the Outlets”. It makes no reference to “full copy unsold copies” although a Certification may include other details. That much is clear from the words “including but not limited to” in the definition. What the plaintiff was obliged to do under the sub-clause was to report to the defendant every quarter the variance between the claimed “full copy unsold copies of any of the Publications returned” to the plaintiff by the Outlets and the actual “full copy unsold copies of any of the Publications returned” to the plaintiff by the Outlets.

32 The Arbitrator's recognition in paragraph 31 of his reasons of the different meaning to be attributed to the word "claimed" in the sub-clause is manifested by his reference to the fact that it could not be "understood to override the obligation" on the plaintiff "to count, physically or mechanically, the unsolds and to claim only a credit for those established by that count”.

33 There was no mechanism within the Agreement for any adjustment, either by way of credit to or debit from the plaintiff's account, in respect of any variance reported pursuant to the sub-clause. The parties included a mechanism for adjustment to the amount of the Purchase Price payable by the plaintiff to the defendant if the Advance Amount exceeded the total Purchase Price (Sch 1; par 3 (iii)). Although there was a deeming provision in respect of the number of copies “sold” by the plaintiff in what was referred to as the “final accounting”, there was no express recognition of any adjustment to any amount paid or payable by the plaintiff by reason of any “variance” reported under the sub-clause (Sch 1; par 3(iv)). The absence of such a mechanism seems to me to suggest that the sub-clause is not, as the plaintiff described it, a "critical" clause, at least in respect of the regime for payment. It is a clause in the context of the audit structure or regime the defendant required the plaintiff to put in place, but had no bearing on the way in which the plaintiff was able to deduct an amount for the "Returns Credit". In those circumstances the fact that the Arbitrator's interpretation of the meaning of the word "claimed" in clause 1.1 may be different to the meaning of the word "claimed" in the sub-clause does not do violence to the language of the Agreement.

34 The plaintiffs referred to the regime for the calculation of the Returns Collection Fee in Schedule 1 for the purpose of comparing it with the process for the calculation of the Purchase Price. The Returns Collection Fee was to be paid to the plaintiff “per Unsold collected” by the plaintiff and “held at the direction” of the defendant. The Purchase Price was to be adjusted by the deduction, inter alia, of the Returns Credit. The amount to be deducted for the Returns Credit was the relevant amount for the “number of unsold publications set out in the Certification of Unsolds.

35 The plaintiff submitted that the number set out in the Certifications of Unsolds is conclusive because there is no process stipulated in the Agreement for the defendant to challenge the Certificate. In support of this submission the plaintiff relied upon Dobbs v National Bank of Australasia Limited (1935) 53 CLR 643 in which the High Court held, at 651, that a certificate provided for in a guarantee enabled the Bank to dispense with the proof of the “actual” indebtedness of the customer/guarantor. The indebtedness was able to be ascertained “conclusively” by the certificate. In Dobbs the bank manager was required to state the balance of principal and interest “due” to the Bank in the certificate. It is obvious that the Bank was required to review the account of the customer for the purpose of stating the amount accurately.

36 The plaintiff also relied upon Lanlex No 29 Pty Ltd v Leach (1997) Aust Contract R 90-077. That was a case in which the Court considered inconsistent special conditions in a contract for the sale of land and the effect of builder’s certificate of completion. Sheller JA, with whom Mahoney P and Simos AJA agreed, said at 90,553:

The parties agree that the builder’s certificate of completion substantially in accordance with the approved plans and specifications shall be deemed to be conclusive evidence that the vendor has fully and completely complied with its obligations under special condition 26, that is to say that the vendor has proceeded with all due diligence to cause the building to be constructed in accordance with the finishes. The word “deemed” indicates an artificial extension of what the certificate evidences on its face. … It has this effect … because the parties have agreed that the builder’s certificate will have this effect.

37 Both of the cases relied upon by the plaintiff are distinguishable from the present case. In my view the fact that there was no mechanism for the defendant to challenge the Certificate in the Agreement in this case, supports the commercial common sense and businesslike interpretation given to the Agreement by the Arbitrator. There is also the additional factor that in the Arbitration Agreement contained in paragraph 14 of the Agreement there was express reference in clause 14(b) to a “conclusive” Certificate in disputes in which only the amount is in issue. The absence to such a reference in relation to the Certificate in relation to Unsolds in those circumstances makes it even more unlikely that the parties intended such a consequence. To suggest that the parties to the Agreement in this case intended that third parties would be able to dictate the plaintiff’s entitlement to payment and the defendant’s obligation to pay, without any obligation to check the accuracy of the numbers in a Certificate that is immune from challenge, seems to me to be inconsistent with the commercial intentions of the parties

38 Although the plaintiff claimed that there was no proper basis for the Arbitrator to reach the conclusion that he did in paragraphs 32 and 33 of the First Interim Award, I disagree. This was a commercial contract and required a businesslike interpretation: McCann v Switzerland Insurance 176 ALR 711 per Gleeson CJ at par [22]. I am not satisfied that there is a strong and compelling argument supporting a grant of leave. The commercial reality and commercial common sense of the Arbitrator’s reasoning and the businesslike interpretation of the Agreement is compelling. I see no manifest error on the face of this Award.

39 Leave to appeal from the First Interim Award is refused.

Second Interim Award

40 In the Second Interim Award the Arbitrator dealt with estoppel and damages. The only matter that is the subject of these proceedings is the question of damages. The Arbitrator referred to two matters that he regarded as distinct from the assessment process. The first was that the defendant could not include in any claim for damages the amount in respect of the distribution of publications owned by Multimedia Publications (UK) Limited. The second matter was that the plaintiff claimed that, if the agreement for the “concession” and payment under it, did not provide it with a defence, the amount of the concession was a benefit to the defendant and acted in reduction of the damages it had suffered as a result of the breach of contract (par 23). The “concession” referred to by the Arbitrator was a reference to the plaintiff's concession on rates in the amount of $443,439 which the plaintiff claimed the defendant had accepted in full and final discharge of any claim it may have against the plaintiff (par 11). The Arbitrator held that the evidence did not support the claim made by the plaintiff that the concession was granted in consideration of the defendant promising not to sue in respect of any of the consequences "of what it claimed (correctly) to have been a breach of contract" by the plaintiff (par 14). The concession was offered by the plaintiff to the defendant in the course of negotiations "to assuage" the defendant without reference to any past or future claim (par 25).

41 The defendant quantified its losses on two bases; "lost sales per prior sales rate and lost sales per prediction rates” (par 26). The Arbitrator explained that the concession did not operate as a defence but it was to be applied to diminish the damage suffered and was most conveniently dealt with by deducting the appropriate figure from the assessment of damages (par 27). The Arbitrator also dealt with the onus of proof. He referred to but rejected the defendant's "intricate argument" that the concession reversed the onus of proof referring to the fundamental principle that the onus is on the party that claims damage for breach of contract to establish the loss that flows from the breach (par 28). The Arbitrator noted that the system provided for under the Agreement was a process whereby the plaintiff could ascertain accurately the relevant Returns Credit, referring to it as a “reliable system for measuring accurate sales (including lost or pilfered publications)" (par 30).

Manifest Error of Law?

42 The Arbitrator’s reasons included the following:

31. The [plaintiff's] breach of contract destroyed that system and, at the least rendered it very difficult to assess with any degree of certainty the appropriate compensation to [the defendant]. It is trite law that the wrongdoers should not benefit from its wrong and where, by its action, it renders the assessment of appropriate compensation difficult it cannot be heard to complain if the Tribunal of fact concludes that inferences and interpretations of given facts supportive of the [defendant's] view of the extent of loss to the [defendant] should more readily be accepted by it.

…

43 It was submitted that the Arbitrator’s statements in these paragraphs amount to an impermissible extension of what was said in McRae & Ors v Commonwealth Disposals Commission (1951) 84 CLR 377 and is a manifest error of law on the face of the Award. McRae was a case in which the Commonwealth Disposals Commission, authorised by the Commonwealth to make contracts, invited tenders for the purchase of an oil tanker which it claimed was "lying on Jourmaund Reef, which is approximately 100 miles north of Samarai. The vessel is said to contain oil". The Commission accepted the plaintiffs tender and sent a "sales advice note" that included the description of the tanker and recorded the price at £285.

44 The plaintiff was unable to locate the Reef on a map and the Commission supplied the latitude and longitude at which the tanker was alleged to be lying. It was common ground that there was no oil tanker on the Reef at any material time, however there was at one stage a barge present on the Reef. The plaintiffs went to the expense of searching for the oil tanker that never existed. At first instance Webb J held that the contract for the sale of a tanker was void but that the claim in deceit was made out. He assessed the plaintiffs damages for deceit in the amount of £756 10s 0d. The plaintiffs appealed asserting that they were entitled to far greater damages. The Commission cross-appealed claiming that the maximum amount recoverable by the plaintiffs was the price paid, £285. The High Court held that the plaintiffs were entitled to recover damages for breach of contract in the amount of £3,285 and dismissed the cross appeal: Dixon and Fullager JJ at 419; McTiernan J at 419-420.

45 The following passage of Dixon and Fullager JJ’s judgment was relied upon in support of the plaintiff’s submission (at 414):

If we regard the case is a simple and normal case of breach by non-delivery, the plaintiffs have no starting point. The burden of proof is on them, and they cannot establish that they suffered any damage unless they can show that the tanker delivered in performance of the contract would have had some value, and this they cannot show. But when the contract alleged is a contract that there was a tanker in a particular place, and the breach asssigned is that there was no tanker there, and the damages claimed measured by expenditure incurred on the fate of the promise that there was a tanker in that place, the plaintiffs are in a different position. They have now a starting-point. They can say: (1) this expense was incurred; (2) it was incurred because you promised us that there was a tanker; (3) the fact that there was no tanker made it certain that the expense would be wasted. The plaintiffs have in this way a starting-point. They make a prime-facie case. The fact that the expense was wasted flowed prime facie from the fact that there was no tanker; and the first fact is damage, and the second fact is breach of contract. The burden is now thrown on the Commission of establishing that, if there had been a tanker, the expense incurred would equally have been wasted. This, of course, the Commission cannot establish. The fact is that the impossibility of assessing damages on the basis of a comparison between what was promised and what was delivered arises not because what was promised was valueless but because it is impossible to value a non-existent thing. It is the breach of contract itself which makes it impossible even to undertake an assessment on that basis. It is not impossible, however, to undertake an assessment on another basis, and, in so far as the Commission's breach of contract itself reduces the possibility of an accurate assessment, it is not for the commission to complain.

46 This passage supports the proposition that where the inability to make an accurate assessment of damages for breach of contract has been caused by the nature of the breach of contract it is not for the contract breaker to complain about the lack of precision in the measurement of damages. What the learned Arbitrator said in paragraph 31 of the Award is consistent with that proposition.

47 The plaintiff also relied upon the following passage of Dixon CJ, McTiernan and Williams JJ’s judgment in Allen v Tobias (1957-58) 98 CLR 367 at 375 in support of its submission:

omnia praesumuntur contra spoliatorem

Arthur Channell

The Ophelia

48 The presumption referred to in this passage covers two circumstances; the first in which a party intentionally destroys a document that the parties expected would be available to support a particular circumstance; and the second where the absence of such document was not intentionally caused by the party. The consequence in the first situation is the application of a stronger presumption against the defendant than in the second situation. In the first situation there is evidence that is unable to be corroborated by reason of the intentional destruction of the material and the presumption is adverse to the defendant. In the second situation there is evidence that is unable to be corroborated by evidence that would be expected to be available but which may have been innocently lost and any adverse finding may depend upon what other evidence is available touching upon the issue.

49 The plaintiff submitted that the Arbitrator concluded in paragraph 31 that “all necessary presumptions can be drawn against the contract breaker”. I do not agree that this is what the Arbitrator was saying in that paragraph. It does not seem to me that the Arbitrator went any further in that paragraph than to say that where the nature of the breach by the plaintiff caused difficulty in the precise measurement of damages, the plaintiff cannot be heard to complain if and when the propositions put by the defendant that lack some precision in relation that assessment are accepted. I do not read paragraph 31 to mean that the Arbitrator would more readily accept less precise evidence if more precise evidence were available. Nor do I read paragraph 31 as extending the proposition found in the passage above from the judgment of Dixon and Fullager JJ in McRae.

50 In paragraph 34 the Arbitrator limited the consequences of the plaintiff’s failure to produce the proof (ie to create or keep the relevant records) to instances in which there were equally competing inferences and then the inference would be against the plaintiff because it had ceased to keep the corroborative records. I do not agree with the plaintiff’s characterisation of what the Arbitrator did in these paragraphs. I am not satisfied that it was an impermissible extension of particular principles or presumptions referred to in Allen v Tobias to a class of persons, “contract breakers”, not previously amenable to such application. Irrespective of whether a party may be a so-called “contract breaker” or a tortfeasor, I am of the view that the Arbitrator was simply applying the ordinary processes of inferential reasoning in these paragraphs. Where as here the plaintiff claims that the defendant suffered no damage and the plaintiff has failed to produce the working records that could have corroborated that claim, in circumstances where: (a) there are equally available inferences; and (b) it was the plaintiff and not the defendant, who had the responsibility to create and/or keep those records, it is permissible to favour the inference of the party who was not obliged to make available the corroborative evidence. I am not satisfied that paragraphs 31 and 34 contain a manifest error of law on the face of the Award.

51 After dealing with and rejecting the plaintiff's submission that the defendant was essentially charging the retailers with fraud, the Arbitrator continued:

35. In these circumstances I propose, initially, considering three general propositions urged by the Distributor in support of the argument that the Company has not shown that it suffered loss.

36. The first is that the returns provided by the retailer provided the best evidence of the sales effected and that there was no reason to go behind these. Accordingly, no loss had been shown. While I accept entirely the principle that decisions must be based on the best evidence this submission fails to recognise that the distributor unilaterally determined not to follow the contractual procedure designed to ensure the accuracy of the returns. The agreement between the parties was structured, inter alia, to ensure that as far as possible the Company received payment for all the publications sold by the various sellers. The mechanism contained in it for the return of publications to the Distributor was, undoubtedly, an important aspect of the strategy to ensure this occurred. It was important for it provided the Distributor with a sound basis for ensuring retail returns were based in fact and did not reflect careless, convenient or even untruthful statements.

37. It is, I think, important to appreciate that retailers' returns might be unreliable for a number of reasons, that the parties understood this and inserted the return provisions to guard against this potential unreliability. By its unilateral action the Distributor breached its agreement and rendered virtually nugatory the protection that it had promised. In short, the parties had appreciated the potential risks, had sought to guard against them, and the Distributor had wrongly removed an important part of the safety mechanism. In these circumstances I find it difficult to accept that the returns should be regarded as the best evidence. In particular where other evidence supports the proposition that the returns are, indeed, unreliable. It is incumbent, in my view, for a tribunal of fact to give full weight to that evidence and if it is found compelling, to accept it in preference to the returns.

38. I should interpose at this stage, reference to two particular events. In August/September 2005 independent accountants, Horwarth, carried out a review in relation to the Distributor's returns audit process concluding that it was not sufficiently robust to enable management to conclude on the level of accuracy of return forms submitted by agents. That exercise was followed by a stock take carried out on 27 and 28 October by representatives of the Company and a team of independent contractors from Labourforce Solutions Pty Ltd. That stock take concluded that there was a discrepancy between the stock take and "the returned stocks claimed by Gordon & Gotch of more than 10 per cent for the newsagents returns on the stocks presented to Horwitz Publications for accounting". As I have earlier commented this is not surprising in the light of the fact that an important safety valve had been removed.

39 The second argument is that the approach adopted by the Company (to which I will refer) can not be accepted in light of the declining sales pre- October 2003 of the Company's publications. I am prepared to accept that, in general, the Company's sales were declining but that is no reason to reject out of hand projections of loss which, on the probabilities and as broad assessments, take account of the past history. In short that history should be taken into account but of itself it does not destroy a reasonable assessment of the probable loss which takes account of the history. Particularly it is so where the assessment difficulties are created by the Distributor.

40. It is then said that the sales of competitors did not decline. That may be so but there has not been, for obvious practical reasons, a careful analysis of the circumstances pertaining to the other publishers and while I take note of the fact as a general proposition I do not find it provides me with any substantial assistance.

41. Thirdly, it is said that the supermarket trade reflected the same trade as the retailers. Again, that is a matter of interest but it is not of sufficient weight to reject out of hand the claim or to desist from any analysis of the specific claims made by the Company.

42. I turn to the ways in which the Company puts its claim. In doing so I propose, in recognition of the fact that I am not carrying out a precise scientific analysis but an assessment of the probabilities in circumstances where the evidence provides only the broadest guidance, to carry out the assessment across the board rather than to examine each publication separately. In adopting that course I do not mean to suggest that I have not looked at the various publications but it seems to me more satisfactory in the light of the undertaking on which I am embarking to deal with the publications together.

43 The Company puts its case in two alternative ways. First, it says, that prior to October 2003 reliable figures were available to determine the actual sales and the ratio of sales to deliveries. Applying that ratio to the deliveries after October 2003 the Company contended that a figure was derived which was the best evidence, or, at least a useful guide, to an assessment of the loss. Excluding the Multimedia claim but disregarding the concession the resulting figure was $1,682,383.00. If account be taken of the concession the figure would be reduced to $1,245,039.

44. The fundamental objection advanced by the Distributor was that this approach assumes a steady ratio and fails to take account of the trend of falling sales. Of course I must take account of that trend and not simply proceed on the basis that the ratio would necessarily continue into the future but, as I have indicated, the failing sales pre-October 2003 do not destroy the usefulness of the guide by providing the ratios to which I have referred.

45. As a side argument the Distributor also contends that the post-October 2003 period under examination is 21 months and that has been weighed against 12 months only pre-2003. I note the submission but derive little assistance from it.

46. The alternative basis for the claim is described as "lost sales per sales prediction rates". Using this method the Company quantifies its claim (excluding Multimedia and allowing the concession of $437,344) at $598,901. This assessment is based on sales checks that the Distributor carried out on behalf of a number of publishers including the Company and is described in Mr Verity's statement of 27 April 2006. In short, representatives of the Distributor visited selected retailers (Verity says 165 retailers out of a total of 8,500) during the selling period (generally on days 7, 14, 21, 28 and sometimes 35) in order to determine how sales were progressing. The publications checked included some, but not all, of the Company's. The stated purpose was to enable the Distributor to give publishers a guide on the sale progress to enable them better to assess the size of later runs.

47. Verity was at pains to point out the inherent limitations of such a system. But the truth is that it has been in operation since 1990 and was regarded by the Company as a valuable tool. Indeed it used the sales check figures as a guide for its print runs and, whilst it recognised the capacity for error, it found historically that there was a consistency of error and the Company was able reasonably accurately to determine its print runs.

48. This situation prevailed until about February/March 2004 when the Company noticed that the sales check figures became increasingly inaccurate. This startling change to the accuracy of sales check figures is graphically illustrated in Annexure H to Fitzpatrick's affidavit of 11 May 2006. What that shows up is an alarming increase in the gap between the sales check and actual sales between early 2004 and about June 2004.

49 At the latter time the two came close together again. On the face of the graphs this sudden convergence would be inexplicable. There is, however, an explanation of some importance in deciding an issue which arises concerning Ms Day's assessment of loss according to the sales check method. Her figure of $209,945 is to be compared with the Company's assessment of $598,901.

50. The difference flows from the Company's adoption of the sales check figures for three months prior to June 2004 while Ms Day utilises the figures for all months from October 2003 to June 2005.

51. The Company rejected the basis on which Ms Day relied because, in its submission, the sales check figures were adjusted significantly from June 2004 onwards and did not represent the raw data. This assertion was undeniably true. What, in short, occurred was that the Distributor appreciated from about February actual sales had dropped significantly below sales check predictions and rendered the latter apparently unreliable. Accordingly, the Distributor adjusted the raw data downwards so that the earlier correspondence between the two figures was maintained in broad terms. Although the sales check figures had become unreliable, one explanation was that a hiccough in the system had occurred which had not existed over the previous many years. If that was the correct explanation then the adjustment process carried out by the Distributor was justified. On the other hand the sudden unreliability of the sales check figures could readily be explained upon the basis that the final sales returns were inaccurate. In circumstances where there had been consistency between the two sets of figures over many years and the sudden emergence of the divergence following the change in system it seems to me that the overwhelming probability is that the returns themselves lodged by retailers, or some of them, were inaccurate. If that be the correct explanation then the adjustment process simply adjusted the sales check figures to an incorrect base and became, themselves, completely wrong.

52. On that premise what the Distributor was doing was using false sale figures to generate false sales check figures. Having regard to all the circumstances, including the marked drop in the ratio between sales and deliveries, the sudden and marked drop in sales of the Company's publications and the sudden divergence between the sales check figures and the sales figures in about February 2004 I hold strongly to the view that the probabilities favour the Company's argument that the sales figures from early 2004 were completely unreliable and from June 2004 the sales check figures were also unreliable.

53. This finding has two consequences - it invalidates the adjustment process and Ms Day's assessment and it provides general support for the proposition that the sales figures were not accurate. Accordingly, I accept the broad thrust of the Company's case that the loss on the second basis was approximately $598,901.

54. There are, however, a number of difficulties in seeking to assess the damages on the sales check basis. Most of these were identified in Verity's evidence - small number of outlets sampled, human error etc. - but there also were some publications not the subject of sales check figures. Nonetheless, the sales check comparison provides some general guidance particularly as the sudden apparent unreliability of the sales check figures would indicate something dramatic had occurred.
55. In my opinion the prior sales ratio provides the better guide but, again, it is only a guide and it must be recognised that in general there had been a falling off in sales prior to October 2003 and that falling off was likely to continue. I should reiterate my earlier statement that I am not seeking mathematical precision. The evidence renders that impossible. But in an assessment of this nature in the circumstances of the particular breach of contract on the part of the Distributor it is possible only to arrive at an approximate assessment of the probable loss caused by the breach. In taking account of all the factors which I have mentioned, including the previous decline in sales and the limited nature of the sales check process I have concluded that it is appropriate and fair to award the Company the sum of $900,000 by way of compensation for the breach. My final award will therefore incorporate that figure.

Technical Misconduct

52 It was submitted that the Arbitrator “entirely disregarded” the evidence of Dr Francis, the expert relied upon by the plaintiff in the arbitration, to explain the decline in sales and why the decline subsequent to October 2003 was to be expected based on prior experience. The plaintiff submitted that the Arbitrator made no attempt to consider the calculation of damages on any basis other than that most favourable to the defendant and thus the assessment of damages was flawed and should be set aside. It was submitted that the Arbitrator was guilty of technical misconduct in failing to deal with or consider evidence vital to the determination and assessment of damages and that the Award should be set aside pursuant to s 42 of the Act. It also seeks an order that, if there is to be a remittal, the Arbitrator should be removed pursuant to s 44 of the Act on the basis that he is “unsuitable” having regard to the findings he has made in the defendant’s favour.

53 Section 42 of the Act provides:

(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

the Court may, on the application of a party to the arbitration agreement, set the award aside either wholly or in part.

(2) Where the arbitrator or umpire has misconducted the proceedings by making an award partly in respect of a matter not referred to arbitration pursuant to the arbitration agreement, the Court may set aside that part of the award if it can do so without materially affecting the remaining part of the award.

54 Section 44 of the Act provides relevantly to the plaintiff’s application:

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;

…

(c) an arbitrator or umpire is incompetent or unsuitable to deal with a particular dispute,

55 The concept of misconduct in s 42 of the Act and also in this case in respect of the application under s 44 of the Act, does not involve any personal turpitude: Doran Constructions Pty Ltd v Health Administration Corp of New South Wales (1994) 12 BCL 59 per Cole JA at 62. In BHP Billiton Ltd & Ors v Oil Basins Ltd [2006] VSC 402 in which Hargrave J said in relation to similar provisions in the Commercial Arbitration Act 1984 (Vic):

Commercial Arbitration Act 1984

Williams v Wallis & Cox

Misconduct is not necessarily personal misconduct. If an arbitrator for some reason which he thinks good declines to adjudicate upon the real issue before him, or rejects evidence which, if he had rightly appreciated it, would have been seen by him to be vital, that is, within the meaning of the expression, ‘misconduct’ in the hearing of the matter which he has to decide, and misconduct which entitles the person against whom the award is made to have it set aside.

With regard to the main question it appears to me that the deputy county court judge formed a misconception as to the meaning of "misconduct." That expression does not necessarily involve personal turpitude on the part of the arbitrator, and any such suggestion has been expressly disclaimed in this case. The term does not really amount to much more than such a mishandling of the arbitration as is likely to amount to some substantial miscarriage of justice, and one instance that may be given is where the arbitrator refuses to hear evidence upon a material issue.

Commercial Arbitration Ac 1984

Re Poyser and Mills’ Arbitration

56 An arbitrator is required to include in an Award a statement of reasons for making the Award: (s. 29(1)(c) of the Act). Reasons are given, inter alia, to enable the parties to know that the conclusion reached is not arbitrary or influenced by improper considerations: Abigroup Contractors Pty Limited v Sydney Catchment Authority (No 3) [2006] NSWCA 282 at 131-132. The reasons should be in terms sufficient for the parties to understand why they won or lost with an explanation as to why the Arbitrator preferred one case over the other: Archibald v Bryon Shire Council (2003) 129 LGERA 311 per Sheller JA at 323, [54]. In R.P.Robson Constructions v D & M Williams (1989) 6 BCL 219, Giles J, as his Honour then was, said at 221-222:

Menna v. H.D. Building Pty Ltd

"Elaborate reasons finely expressed are not to be expected of an arbitrator. Further, the court should not construe his reasons in an overly critical way. However, it is necessary that the arbitrator deal with the issues raised before him and make all necessary findings of law. … The reasons must not be so economical that a party is deprived of having an issue of fact dealt with by the court."

Soulemezis v Dudley (Holdings) Pty Ltd

57 The submission to be addressed in this regard is whether the Arbitrator “entirely disregarded” the evidence of Dr Francis and if he did not, whether he gave adequate reasons for disagreeing with Dr Francis’ conclusion that the defendant had not suffered any loss. The approach to be adopted in making this assesssment should be robust but fair: Raguz v Sullivan & Ors (2000) 50 NSWLR 236 per Spigelman CJ and Mason P at 248.

58 The plaintiff’s expert, Dr Ivor Francis, is a director of ActiveCapital, a consulting practice in competitive corporate governance and management and statistics. Dr Francis was a Professor of mathematical statistics for three years at New York University’s Stern Graduate School of Business Administration and for fourteen years at Cornell University’s School of Industrial and Labour Relations. He was appointed to the Chair in Mathematical Statistics at Otago University, and held adjunct professorial positions at the business schools of Auckland and Sydney Universities.

59 In the arbitration the plaintiff relied upon Dr Francis’ report entitled “Analysis of Sales Trends”. Dr Francis was instructed to provide an opinion, based on sales and other information, on whether or not the defendants suffered any lost sales as a consequence of the change in the return systems in October 2003. The parties utilised a Table before the Arbitrator that was divided into two sections. The top half of the table referred to “lost sales per prior sales rate”, referred to as table 1, and the bottom half referred to “lost sales per sales prediction rates” referred to as table 2. Dr Francis analysed table 1 and noted that the figure for calculated sales of a particular publication, “Mad”, was 387,471. He observed that the number used as an estimate of the sales in the 21 months from October 2003 to June 2005 assumed: (a) the clearance rate was the same for all titles; (b) the clearance rate was constant for the period; (c) deliveries were constant for the period; and (d) the clearance rate was the same for the period as for the prior 12 month period prior to October 2003. Dr Francis expressed the opinion that the assumptions were untenable and that the calculations were fatally flawed such that an estimate of value lost as a result of the changes in October 2003 could not be relied upon.

60 The Arbitrator referred to the first way in which the defendant put its case in paragraph 43 of the Award being the lost sales per prior sales rate. He referred in paragraph 44 to the fundamental objection raised by the defendant being that the approach assumed a steady ratio and failed to take account of the trend of falling sales. Dr Francis had concluded that the only logical way to forecast future sales would be to examine the history of sales with a view to extending that into the future. However he also observed that, “given the erratic behaviour of sales, forecasting their future is difficult”. The Arbitrator said that he “must take account” of the trend of falling sales and not simply proceed on the basis that the ratio would necessarily continue into the future. Indeed he said that it must be recognised that “the falling off in sales” was likely to continue (par 55). This seems to me to be a recognition of the opinion expressed by Dr Francis.

61 Dr Francis then looked at the second way in which the defendant put its case which was the lost sales per sales prediction rates. That claim was contained in table 2 and was based on “sales checks” during the period October 2003 to June 2005. Dr Francis posed the question as to whether the sales check data could be relied upon as more than a guide. He referred to the small number of issues used observing that there were far too few for drawing any kind of inference about future sales even if they were accurate. He expressed the opinion that they completely ignored variability, seasonal cycles, trends and the like. The Arbitrator referred to the deficiencies of the sales check figures in paragraphs 51 to 54 of the Award.

62 Dr Francis reached the conclusion that the sales checks figures were meaningless. He was critical of the small sample and concluded that there was no way that the figures could constitute a scientific sample but noted that they were not selected for that purpose. He expressed the opinion there was no justification for using them to estimate total sales. The Arbitrator effectively agreed with the thrust of Dr Francis’ observations. He concluded that the sales checks figures were “unreliable” albeit that he said that the “comparison” provided general guidance in relation to the indication of something dramatic happening (par 52 and 54).

63 Dr Francis addressed whether there was any evidence of material negative change in the pattern of sales figures beginning in or after October 2003 from which a conclusion could be reached that such change was due to the changed sales environment beginning in October 2003. He examined the sales of the publication Garden & Outdoor Living and described the methodology used to test whether there was a “structural break” due to the change made by the plaintiff to its returns system in October 2003. After this analysis Dr Francis concluded that “if anything, there is an improvement in sales post October 2003” and that sales became much better after January 2004 than before that time. However, he conceded that the analysis of the sales data for the publication Garden & Outdoor Living revealed several possible breaks but that none of them indicated a negative influence arising from the change in the returns system in October 2003.

64 Dr Francis then moved to the forecasting of future sales based on an examination of the history of prior sales. He used the Auto-Regressive Integrated Moving Average (ARIMA) model that he referred to as the “econometrician’s preferred class” of models for forecasting. Two graphs were produced showing the forecasted estimates for sales post October 2003 based on the actual sales data before October 2003 with the realised sales post October 2003 superimposed on the graph for comparison with the forecast values. Dr Francis once again referred to the difficulty of forecasting especially for a long period into the future. However, although the margin for error gets wider the longer the period is, there was, in his view, no significant difference between the estimates for sales post October 2003 and the realised sales post October 2003.

65 Dr Francis then made the same analysis of five other titles, “Inside Sport”, “Golf”, “Mad”, “TV Soap” and “Penthouse”. He found similar results although some of the publications required additional modelling. He expressed the opinion that in no case was there significant evidence of a negative break in reported sales on or after October 2003 that would prove a negative impact due to the change in the returns system post October 2003. Having referred to the individual titles in detail, Dr Francis concluded that the results were a “convincing argument against the proposition that there was a material negative break” in the sales figures that was caused by a change in the returns system in October 2003.

66 The defendant submitted that although the Arbitrator does not refer to Dr Francis by name in the Award, it is perfectly clear that, for instance, in paragraphs 54, he dealt with the whole sampling issue and the validity of using samples by themselves as a predictor as distinct from a guide. Additionally, the Arbitrator referred to the sales trends. Dr Francis’ proposition was that there were market forces impacting on the sales of the defendant’s Publications and that this explained entirely the decline in the sales after October 2003 rather than the plaintiff’s conduct in changing the system in October 2003 causing the decline in the numbers of reported sales.

67 Neither party propounded an assessment based on precise scientific analysis. Indeed the Arbitrator noted that he was not carrying out such an analysis, but rather an assessment of the probabilities in circumstances where the evidence provided only the broadest guidance (par 42). The Arbitrator analysed the differences in outcome in the assessment of loss according to the sales check method in paragraphs 49 and 50 of the Award. There is no doubt that the Arbitrator addressed the alternative inferences available from the evidence, including from the evidence of Dr Francis, in respect of the cause of the drop in sales post-October 2003.

68 The Arbitrator agreed with Dr Francis, although not naming him, that the prior sales ratio provided a better guide. He also concluded, consistently with the opinion expressed by Dr Francis that there had been a falling off in sales prior to October 2003 and that the falling off was likely to continue. It seems to me that the Arbitrator did address the evidence of Dr Francis by way of identifying the various arguments that were propounded in each party’s case. In my view, in the exposure of his reasoning as to why he concluded that the cause of the reported decline in sales was the inaccurate returns as opposed to Dr Francis’ theory of general market forces, the Arbitrator gave adequate reasons. I do not accept the plaintiff’s submission that the Arbitrator “entirely disregarded” Dr Francis’s evidence. Although the specific reference in arbitral awards to the detail of the evidence and the name of the witness, as opposed to the issues and arguments raised thereby, would have been more prudent in that it would have avoided what has happened in this case, I am not satisfied that the way in which the Arbitrator dealt with the matter amounts to technical misconduct. I am satisfied that he provided adequate reasons for his Award in this regard.

69 The plaintiff also submitted that the Arbitrator failed to provide any or any proper reasons as to the way in which he reached the figure of $900,000 awarded to the defendant for “compensation” for the breach. The plaintiff accepted that if it is difficult to assess damages it is permissible to make approximations. However it was submitted that the Arbitrator had to have evidence upon which he could conclude that the decline in sales figures was brought about by the conduct of the plaintiff in failing to count the returns after October 2003. It seems to me that the analysis on which the Arbitrator embarked did just that. He referred to the evidence of both parties in respect of pre-October sales and post-October predictions. He referred to the forecasting of future sales based on prior sales ratios and he referred to the evidence in relation to the history of the sales checks. He then weighed up that evidence and concluded that more probably than not (indeed overwhelmingly probably) the reason for the decline in sales was not that customers had decided not to purchase the defendant’s publications or other market forces, but rather that the returns, or some of them, lodged by the retailers were inaccurate and the plaintiff failed to pick this inaccuracy up by actually counting the returns. This is abundantly clear from what the Arbitrator said in paragraph 51 of the Award.

70 The Arbitrator did not award the amount claimed by the defendant because he was dissatisfied with the nature of the evidence upon which the defendant relied. He was met with a very difficult task of making an assessment in circumstances where the returns had not been counted and did his best to approximate the loss to take account of the deficiencies of the system, the lack of records and the “overwhelming” probability of inaccurate returns. The difference between the figure of $598,901 and the amount awarded of $900,000 and the amount claimed did not require a precise breakdown on a dollar by dollar basis to those matters which he had taken into account. It was truly an approximation in very difficult circumstances which in my view was permissible. I am not satisfied that the Arbitrator was guilty of technical misconduct in this regard.

Final Award

71 The Final Award includes the following:

1. That on its proper construction, and subject to the exceptions relating to Western Australia, Northern Territory, Tasmania, remote areas and supermarkets, the Distribution Agreement permitted Gordon & Gotch to a Returns Credit only in respect of those publications which had been returned by the outlets to Gordon & Gotch and in respect of which Gordon & Gotch had confirmed by count that the return had actually occurred.

72 The carving out the excluded group became a matter of controversy during final submissions in this application. It seems to be common ground that absent an agreed position or understanding that such carve out should occur, it would amount to a manifest error on the face of the Award. I allowed written submission on this aspect of the matter after the hearing had concluded. Written submissions were filed by the defendant on 3 August 2007 and by the plaintiff on 9 August 2007. Put shortly the defendant’s position is that the carve out was “agreed” or was not part of the “dispute” referred to arbitration. The plaintiff denied that there was any agreement or common ground between the parties that the Arbitrator should, in construing the Agreement, carve out the excluded group. The plaintiff’s submission dated 9 August 2007 included the following:

2. It would be expected that learned Arbitrator would have recorded in the Awards any such agreement or common ground. The absence of any such recording by the Arbitrator points against the existence of such an agreement or common ground as asserted by the defendant.

73 It is true that there is nothing recorded in the Final Award in respect of any such agreement. However in the First Interim Award the Arbitrator under the heading “Background of the dispute” referred to the system pursuant to which the Outlets recorded the number of unsold copies and returned them with the completed form to Albury. The Arbitrator referred to this in paragraph 4 of that Award and said that such system was “subject to some exceptions referred to below”. In paragraph 6 the Arbitrator said:

As indicated there were exceptions to this practice. The distributor had never required some outlets to return full copies of unsold publications. These included outlets in Western Australia, Northern Territory and Tasmania and outlets from far country regions. As well supermarkets were excluded. These facts were said to be known to the company but, apart from these exceptions, the general practice applied. For its part the company asserted that it had always believed that, apart from the instance of supermarkets in respect of which it acknowledged that there was a specific agreement, unsold publications from Western Australia, Northern Territory and Tasmania (and other remote regions) were returned to the distributors’s relevant State office rather than Albury (either by way of full copy returns or by “cover returns”), and that these returns were in some way reconciled against the unsold publication claimed by the relevant outlets. I should add that there is some difference between the parties as to whether those outlets which returned copies were required to send return forms but that is presently of no moment in this dispute.

74 In the First Interim Award the Arbitrator also said:

34. In the remarks I have just made I have excluded consideration of the special cases of remote areas, distant states and supermarkets. It seems clear that specific arrangements were made and/or accepted by the company in relation to some of those circumstances. In others it may be that the company was ignorant of the precise practices of the distributor. These facts do not, in my opinion, bear on the construction of the agreement. Accordingly, this award deals only with those publications which were dealt with under the agreement and not subject to any specific exemption from its terms.

35. Confining my remarks in that way I would conclude that in changing its system, departing from its normal procedures for checking and counting of the publications which were returned to it, and making claims for credit based merely on the statement of numbers returned proffered by an outlet the distributor was making claims from returns credits on a false basis and not one authorised by the contract. The consequence is that the company is entitled to a declaration that states, in effect, that the distributor is only entitled to make a claim for a Returns Credit in respect of publications returned to it, the number of which is confirmed by counting with mechanical or hand counting. …

…

38. … In my opinion a declaration should be made and it should be in the following form: That on its proper construction, and subject to the exceptions relating to Western Australia, Northern Territory, Tasmania, remote areas and supermarkets, the 2002 distribution agreement permits the distributor to a Returns Credit only in respect of those publications which have been returned by the outlets to the distributor and in respect of which the distributor has confirmed by count that the return is actually occurred.

75 After the First Interim Award was made, the defendant amended its Points of Claim in the arbitration which included the following:

not

76 The plaintiff responded to that amendment with an Amended Reply in which it claimed that the relevant calculations for the Purchase Price did not depend upon "actual returns" but rather upon the return is "claimed close quotes by the Outlets. The Amended Reply then claimed:

all

77 The defendant filed a Response to the plaintiff's Reply which included the following:

subject to the agreed exceptions,

78 In opening submissions before the Arbitrator reference was made to the fact that "supermarket figures" would be ignored and there was also a reference to "agreed remote areas". There was also an exchange with the Arbitrator that he was dealing with "newsagents only". The defendant submitted that the dispute that was referred to arbitration did not include supermarkets or remote areas. It was submitted that the Arbitrator's observation in paragraph 34 of the First Interim Award correctly identified the areas of dispute between the parties.

79 On balance, I am satisfied that the Arbitrator understood that the areas of dispute that had been referred to him for arbitration did not include the excluded group. That understanding seems to me to have been justified by reason of the way in which the parties conducted the arbitration. I am satisfied that the Arbitrator was justified in carving out the excluded group from the Award.

Conclusion

80 The plaintiff’s applications will be dismissed. The parties are to bring in Short Minutes of Order reflecting this result together with an agreed costs order. If the parties are unable to agree on a costs order I will hear argument when the matter is listed at 9.15 on 14 September for the filing of the Short Minutes of Order.

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Citations

Gordon and Gotch Australia Pty Limtied v Horwitz Publications Pty Limited [2007] NSWSC 960

Cases Citing This Decision

0

Cases Cited

11

Statutory Material Cited

1

Ainger v Coffs Harbour City Council (No 2) [2007] NSWCA 212

Dobbs v National Bank of Australasia Ltd [1935] HCA 49

CITATION:	Gordon & Gotch Australia Pty Limtied v Horwitz Publications Pty Limited [2007] NSWSC 960
HEARING DATE(S):	30-31 July 2007 Written submissions 9 August 2007
JUDGMENT DATE :	4 September 2007
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Bergin J
DECISION:	Plaintiff's application to be dismissed.
CATCHWORDS:	[ARBITRATION] - Whether leave should be granted to appeal from arbitral awards made pursuant to Commercial Arbitration Act 1984 - Whether manifest error on the face of the awards - Whether technical misconduct by arbitrator.
LEGISLATION CITED:	Commercial Arbitration Act 1984 Commercial Arbitration Act 1984 (Vic)
CASES CITED:	Abigroup Contractors Pty Limited v Sydney Catchment Authority (No 3) [2006] NSWCA 282 Allen v Tobias (1958) 98 CLR 367 Archibald v Byron Shire Council (2003) 129 LGERA 311 BHP Billiton Limited v Oil Basins Limited [2006] VSC 402 Dobbs v National Bank of Australasia Limited (1935) 53 CLR 643 Doran Constructions Pty Limited v Health Administration Corporation of New South Wales (1994) 12 BCL 59 Lanlex No 29 Pty Limited v Leach (1997) Aust Contract R 90-077 McCann v Switzerland Insurance Australia Limited (2000) 176 ALR 711 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 New South Wales v Coya Constructions Pty Limited (Unreported, New South Wales Court of Appeal, 4 August 1995) Promenade Investments Pty Limited v New South Wales (1992) 26 NSWLR 203 Raguz v Sullivan (2000) 50 NSWLR 236 RP Robson Constructions Pty Limited v Williams (1989) 6 BCL 219
PARTIES:	Gordon & Gotch Australia Pty Limited - Plaintiff Horwitz Publications Pty Limited - Defendant
FILE NUMBER(S):	SC 50187/2006; 50108/2007
COUNSEL:	FM Douglas QC / MM Macrossan / DC Price - Plaintiff N Cotman SC - Defendant
SOLICITORS:	Makinson & d'Apice Lawyers - Plaintiff Heidtman & Co Lawyers - Defendant