Murray & Roberts Australia Pty Ltd v G B Lifestyles Pty Ltd [No 2]
[2014] WASC 9
•17 JANUARY 2014
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: MURRAY & ROBERTS AUSTRALIA PTY LTD -v- G B LIFESTYLES PTY LTD [No 2] [2014] WASC 9
CORAM: MARTIN CJ
HEARD: 12 NOVEMBER 2013 & ON THE PAPERS
DELIVERED : 17 JANUARY 2014
FILE NO/S: ARB 2 of 2013
BETWEEN: MURRAY & ROBERTS AUSTRALIA PTY LTD
Applicant
AND
G B LIFESTYLES PTY LTD
Respondent
Catchwords:
Commercial arbitration - Appeal from decision of arbitrator - Denial of natural justice or procedural fairness - Decision of arbitrator based on construction of contract neither party raised or argued - Issues to be remitted where not doing so would usurp arbitrator's function
Legislation:
Commercial Arbitration Act 1985 (WA), s 38(5)
Commercial Arbitration Act 2012 (WA), s 43
Result:
Appeal allowed
Interim award quashed
Matter remitted to arbitrator
Application to vary order for costs dismissed
Category: B
Representation:
Counsel:
Applicant: Mr P J Ward
Respondent: Mr P G Clifford
Solicitors:
Applicant: Ashurst Australia
Respondent: Alan Rumsley
Case(s) referred to in judgment(s):
Murray & Roberts Australia Pty Ltd v G B Lifestyles Pty Ltd [2013] WASC 345
Straits Exploration (Australia) Pty Ltd v Murchison United NL [2005] WASCA 241; (2005) 31 WAR 187
MARTIN CJ:
Summary
For reasons which I published on 16 September 2013, see Murray & Roberts Australia Pty Ltd v G B Lifestyles Pty Ltd [2013] WASC 345, I ordered that the appellant, Murray & Roberts Australia Pty Ltd, be granted leave to appeal from an interim award issued by an arbitrator pursuant to s 38(5) of the Commercial Arbitration Act 1985 (WA) (the Act) on certain grounds, and that the question of whether leave be granted in relation to another ground be adjourned to the hearing of the appeal. I also ordered that the respondent pay the appellant's costs of the application for leave to appeal, to be taxed if not agreed, and that the parties exchange written submissions in relation to the appeal which was, with their consent, to be determined on the papers. Those submissions have now been exchanged, and the matter was mentioned briefly before me in the course of a hearing of other proceedings between the same parties.
For the reasons which follow I have concluded that:
(a)the appeal should be allowed and the interim award issued by the arbitrator quashed;
(b)leave to appeal in respect of ground 3 of the grounds of appeal should be refused;
(c)the matter should be remitted to the arbitrator to receive further evidence and any further submissions of the parties; and
(d)the respondent's application to vary the order for costs made in respect of the application for leave to appeal should be dismissed.
The application for leave to appeal
The arbitration the subject of these proceedings was commenced prior to the commencement of the operation of the Commercial Arbitration Act 2012 (WA), with the consequence that the legal regime governing the arbitration is provided by the Act (see s 43 of the 2012 Act). Consistently with established procedure relating to applications for leave to appeal pursuant to s 38 of the Act, the application was heard separately from the substantive appeal. For the reasons which I published, and which should be read in conjunction with these reasons, I concluded that leave to appeal should be granted on the basis of manifest error of law on the face of the award in respect of grounds 1, 2, 4 and 5, and reserved the question of whether leave should be granted in respect of ground 3 to the hearing of the appeal. The reason for the latter course was that if it was concluded that the grounds of appeal which, in essence, challenged the decision of the arbitrator on the ground of denial of procedural fairness were upheld, it would seem highly likely that the matter would have to be remitted to the arbitrator, in which case it seemed highly likely that the question of whether the contract between the parties did give rise to a call option should also be referred to him.
Grounds 1, 2 and 4 of the grounds of appeal essentially challenge the arbitrator's conclusion that the contract between the parties gave rise to a call option in favour of the respondent which had been exercised by the respondent thus giving rise to a contract for the purchase of the blast unit, on the grounds that neither party had contended that the contract should be construed in this way in the proceedings before the arbitrator, nor had the arbitrator given notice to the parties that he was proposing to determine the case in that way, thereby denying them the opportunity to put evidence or submissions before him in relation to that issue. In the proceedings before the arbitrator the appellant contended that the contract between the parties, properly construed, gave it an option to compel the respondent to purchase the blast unit (a put option). The respondent had contended that, under the contract properly construed, it had retained property in the blast unit at all times, and that the amount which it was required to pay to recover the blast unit was in respect of the costs of demobilisation, and was not consideration for the transfer of title.
I also found that there was a manifest error of law on the face of the award as asserted in ground 5 of the appeal, in that the arbitrator failed to appreciate the difference between the amount specified in the contract as the amount which the respondent was required to pay for the return of the blast unit ($42,625), and the amount which it actually paid ($42,265), and the potential legal significance of that distinction in a context in which payment of that sum was one of the matters upon which he relied to sustain the conclusion that the respondent had duly exercised the call option which he had found.
Following publication of my reasons for granting leave to appeal, the respondent now apparently accepts that the arbitrator erred in the respects which I identified in those reasons. It submits that the matter should be remitted to the arbitrator to receive further evidence and submissions limited to the following issues:
(i)whether the call option found by the arbitrator had been validly exercised; and
(ii)whether there was a separate contract between the parties for the acquisition of the blast unit for a sum of $42,000.
The respondent also submits that the order which I made to the effect that it pay the appellant's costs of the application for leave to appeal should be set aside and that it should receive the costs of those proceedings.
The appellant contends that leave to appeal should be granted in respect of ground 3, which contends that the arbitrator erred in concluding that the contract conferred a call option upon the respondent. The appellant contends that the arbitrator should have found that the contract gave the appellant an option to 'put' the blast unit to the respondent, and that the appellant never exercised that option, with the result that there was no contract for the sale of the blast unit from the appellant to the respondent. Alternatively, if that submission is not accepted and it is decided to remit the matter to the arbitrator, the appellant submits that the question of whether the contract does give rise to a call option in favour of the respondent should be remitted, together with the question of whether that option was validly exercised. It does not agree that the arbitrator should be permitted to deal with the respondent's contention that there was another arrangement entered into between the parties for the sale of the blast unit from the appellant to the respondent for a price of $42,000. The appellant opposes any reopening of the order which I made in respect of the costs of application for leave to appeal.
Resolution of the competing contentions
It is of the utmost significance to the resolution of the competing contentions now advanced by the parties that, by their contract, they agreed that their dispute should be resolved by arbitration, and not by litigation. It is now well established that courts respect and give effect to such agreements, and approach both the exercise of the court's inherent jurisdiction and the supervisory powers conferred upon the court by the Act in that light (see for example Straits Exploration (Australia) Pty Ltd v Murchison United NL [2005] WASCA 241; (2005) 31 WAR 187).
In support of its application for leave to appeal the appellant contended that the arbitrator had denied the parties procedural fairness by deciding the case on a basis which neither party had put. I concluded that this contention was strongly arguable, and neither party now contends that I should not find that the arbitrator erred in this way. However, the appellant now contends that rather than remit the matter to the arbitrator for the purpose of receiving further evidence and submissions in relation to those issues, I should instead resolve them by deciding that the contract, properly construed, conferred upon it an option to put the blast unit to the respondent, which option was never exercised. That proposition was rejected by the arbitrator for reasons which he enunciated in his interim award, in favour of his conclusion that the contract gave rise to a call option capable of exercise by the respondent. Having found that the parties were denied procedural fairness in relation to that conclusion, in my view it would inappropriately usurp the functions which the parties agreed to confer upon the arbitrator for the court itself to determine whether, on its proper construction, the contract gave rise to a put option capable of exercise by the appellant or a call option capable of exercise by the respondent.
I might have taken a different view if I was satisfied, on the basis of the materials before the court and the argument which had been presented to the court, that there was only one way in which the contract between the parties could be construed, and that a construction of the contract in any way other than that for which the appellant contends would be a manifest error of law on the part of an arbitrator. However, that is not the view which I take. While there are arguments in support of the construction for which the appellant contends, there are considerations which point against that construction, as the arbitrator found in his interim award. On the other hand, he may well have been influenced in that conclusion by his view that the contract, properly construed, gave rise to a call option capable of exercise by the respondent, which conclusion should, for the reasons I have given, be set aside by reason of denial of procedural fairness. In these circumstances it is consistent with the agreement of the parties to resolve their disputes by arbitration that these issues be remitted to the arbitrator for determination. This is essentially the conclusion which I foreshadowed in my earlier reasons at [86].
As I have noted, the parties do not agree as to the ambit of the matters that should be remitted to the arbitrator for determination. The respondent contends that only the question of whether the call option was duly exercised, or whether there was an alternative arrangement for the purchase of the blast unit at a price of $42,000, should be further considered by the arbitrator. On the other hand, the appellant contends that whether there was a call option, or whether there was a put option, should be considered by the arbitrator, who should not be permitted to consider whether there was another arrangement between the parties for the purchase of the blast unit at a price of $42,000.
In my view the proceedings before the arbitrator miscarried by reason of the denial of procedural fairness which I found. The arbitrator's rejection of the appellant's contention that there was a put option may well have been influenced by his conclusion that there was a call option. His conclusion that the call option had been validly exercised may well have been different had he appreciated the difference between the amount specified to be paid under the contract, and the amount that was actually paid by the respondent. Further, had the respondent appreciated that difference, and its potential significance to a case put upon the basis of the exercise of a call option, it may well have contended that the true arrangement between the parties was a separate contract for the acquisition of the blast unit at a price of $42,000. In these circumstances justice requires that the parties be permitted to advance their respective cases on proper notice, and on the basis of any further evidence or submissions they wish to bring before the arbitrator.
Accordingly, the arbitrator's interim award should be quashed and the matter remitted to him for determination on the basis of such further evidence and submissions as he chooses to receive. Following receipt of that evidence or submissions it will be open to him to decide whether there was a put option in favour of the appellant, or a call option in favour of the respondent, and if so, whether such option was exercised or whether, as the respondent wishes to assert, there was a separate contract for the purchase of the blast unit at a price of $42,000. However, it is neither necessary nor desirable to constrain the matters which the arbitrator may take into account in the orders remitting the matter to him.
The costs of the application for leave to appeal
As I have noted, the respondent seeks to reopen my order to the effect that it should bear the appellant's costs of the application for leave to appeal. No jurisdictional basis for reopening that order has been provided in the written submissions filed by the respondent. In particular, it is not suggested that the order was based upon a slip, or fraud, or that there was some defect in the process which preceded the making of the order which results in its invalidity. In those circumstances, if the respondent is aggrieved by the order for costs which I made, the proper course is to seek leave to appeal from that order rather than to simply invite me to re‑exercise the discretion afresh.
I should however observe that I have given consideration to the matters asserted by the respondent in support of the proposition that I should re‑exercise the discretion afresh, notwithstanding my view as to the inappropriateness of that course. Those considerations have not caused me to conclude that there was any error or misapprehension in my earlier exercise of the discretion, or any proper basis upon which I could re‑exercise the discretion afresh on the basis of such an error or misapprehension. In particular, it is in my view clear that the appellant always contended that leave to appeal should be granted on grounds which included, amongst other things, the arbitrator's denial of procedural fairness by determining the case on the basis of a proposition which neither party put before him. That is a contention which has now been upheld.
The costs of the appeal
I will give the parties the opportunity to put any further submissions before me in relation to the costs of the appeal before making orders on that subject. However, it is my provisional view that each party has met with roughly equivalent success and failure in relation to the contentions advanced in the appeal. The appellant has failed to sustain its contention that the matter should not be remitted to the arbitrator and that instead the court should determine that there was a put option in its favour. However, it has succeeded in contending that the question of whether there was a put option should be remitted to the arbitrator and in its opposition to the proposal that the costs order which I made in relation to the application for leave to appeal should be varied. On the other hand, the respondent succeeded in its contention that the matter should be remitted to the arbitrator and in its contention that the matters remitted should include its assertion that there was a separate agreement for the purchase of the blast unit at a price of $42,000. On the other hand it has failed to persuade me that the question of the costs of the application for leave to appeal should be revisited, and a significant portion of the exchange of written submissions between the parties was directed to that issue. For these reasons, subject to anything more the parties might wish to put before me, I am provisionally inclined to the view that the costs of the appeal should lie where they fall.
I will receive submissions from the parties as to the precise terms of the orders properly made to give effect to these reasons.
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