Unley Property Development P/L v Lelio Bibbo P/L No. DCCIV-00-195

Unley Property Development Pty Ltd v Lelio Bibbo Pty Ltd
[2000] SADC 135

Her Honour Judge Vanstone
Civil

This is an application by Lelio Bibbo Pty Ltd dated 1st November 2000 to declare invalid as beyond jurisdiction and to for that reason revoke an order made by a Magistrate on the 19th January 2000, referring an action which was then in the Magistrates Court to arbitration.
The background to the application is as follows. In 1997 Prizac Developments Pty Ltd (“Prizac”) and Unley Property Development (“UPD”) entered into a building contract with respect to the Hilton Shopping Complex. Lelio Bibbo Pty Ltd (“Bibbo”) was the engineer for the project.
In September 1999 Prizac commenced arbitration proceedings with UPD pursuant to an arbitration clause in the building contract. The nominated arbitrator, Mr Sarah A.M. is to commence the hearing of that arbitration on the 15 November 2000, only a few days hence. The provisions of the Commercial Arbitration Act 1986 govern that arbitration.
In June 1999 UPD took out proceedings in the Magistrates Court seeking damages of just over $9,000 in respect of the concrete floor of the building.
Late in December 1999 UPD made application in the Magistrates Court for leave to amend to enlarge its claim markedly, so to encompass asserted deficiencies in relation to ceilings and bulkheads. This was the main point of dispute to be arbitrated before Mr Sarah. UPD also sought (inter alia) the following order:
“1. That the plaintiff’s claim be referred to arbitration before Mr Don Sarah, to be heard as third party proceedings in the arbitration between Prizac Developments Pty Ltd and Unley Property Development Pty Ltd”.
An affidavit in support of the application referred to Section 28 Magistrates Court Act as providing the power to make such an order.”
On the 19 January 2000 the Magistrate granted leave to amend the claim and also made an order in terms of paragraph 1 set out above. Mr S Hay then appeared for Bibbo and consented to the making of the orders. However in an affidavit before me Mr Bibbo disputes that he gave instructions to Mr Hay to give such consent. I shall say more about that.
Following upon that hearing the claim was in fact amended and the action was transferred to this court on the 7th February 2000.
Meanwhile I am told Mr Sarah has made an order “consolidating” the two arbitrations.
There is a clear distinction between references to an arbitrator “out of court” as they are often called, and arbitrations under the Commercial Arbitration Act 1986.
This is acknowledged in Section 3(2) and (6) of the Commercial Arbitration Act. Those subsections provide:
“3(2) Subject to subsection (3)
(a)     this Act applies to an arbitration agreement (whether made before or after the commencement of this Act) and to an arbitration under such an agreement;
and
(b)     a reference in an arbitration agreement to the Arbitration Act 1891, or a provision of that Act, shall be construed as a reference to this Act or to the corresponding provision (if any) of this Act.
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3(6) Nothing in this Act applies to-
(a) an arbitration under the Supreme Court Act 1935 or the Local and District Criminal Courts Act 1926 (except to the extent that those Acts expressly provide for the application of this Act);
(b)     an arbitration under the Industrial Conciliation and Arbitration Act 1972 or
(c)     an arbitration, or class of arbitrations, prescribed as an arbitration, or class of arbitrations, to which this Act does not apply.”
The differences are discussed by Stephen and Jacobs JJ in Buckley v Bennell Design and Constructions Pty Ltd and Another (1977-1978) 140 CLR 1, and by Justice Debelle in Leighton Contractors (SA) Pty Ltd v Hazama Corporation (Australia) Pty Ltd and Others (1991) 56 SASR 47. At page 54 of his judgment His Honour said:
“2. A reference out of court is no more than a delegation of the trial to an officer of the court. Thus it is necessary, where the delegate was not already an officer of the court, to deem him to be one for that specific purpose. (This is achieved in South Australia by s 67(1) of the Act.)
3. the procedure was no more than a part of the machinery of the court for the trial of some cases or for inquiry and report as to questions arising in such cases.”
Therefore if the two arbitrations are in effect “joined” or heard side by side, Mr Sarah will be required to wear two different hats.
Mr Besanko QC for the applicant argued that in addition there are practical difficulties. Section 19(3) of the Commercial Arbitration Act provides:
“Unless otherwise agreed in writing by the parties to the arbitration agreement, an arbitrator or umpire in conducting proceedings under an arbitration agreement is not bound by rules of evidence but may inform himself or herself in relation to any matter in such manner as the arbitrator or umpire thinks fit.”
In a court ordered arbitration the rules of evidence would normally apply. (See generally East and West India. Co v Kirk (1887) 12 AC 738; Re Enoch and Zaretzky [1910] 1KB 327.) Whilst a superficially easy reconciliation of the two positions might be for the arbitrator to determine to apply the rules of evidence throughout that could conceivably derogate from the rights of Prizac which might have pursued arbitration as opposed to court action because of the informality and absence of technical rules offered by it.
Then Mr Besanko QC pointed to the differing rights of review afforded to the parties depending on the source of the arbitrator’s power. Again it is superficially attractive to gloss over that difference observing that each party may in due course pursue its separate and different avenues of review. But both these distinctions highlight the lack of efficacy in purporting to align or join the two types of arbitration.
Section 28 of the Magistrates Court Act, which mirrors Section 33 of the District Court Act, provides as follows:
“(1)   The Court may refer an action or any issues arising in an action for trial by an arbitrator.
(2)    The arbitrator may be appointed either by the parties to the action of by the Court.
(3)    The arbitrator becomes for the purposes of the reference an offer of the Court and may exercise such of the powers of the Court as the Court delegates to the arbitrator.
(4)    The Court will, unless good reason is shown to the contrary, adopt the award of the arbitrator as its judgment on the action or issues referred.
(5)    The costs of the arbitrator will be borne, in the first instance, equally by the parties or in such other proportions as the Court may direct, but the Court may subsequently order that a party be reimbursed wholly or in part by another party for costs incurred under this subsection.”
Mr Besanko QC pointed to the fact that the Magistrate’s order failed to specify what powers of the court were being delegated, as required by subsection (3). That could indicate, he submitted, a misunderstanding of what the Magistrate was being asked to do. In any event, he submitted, the order was by its terms ineffectual and should be declared invalid.
Mr Walsh QC for the respondent argued that the delegation of the powers necessary to hold a trial of a plaintiff’s claim were to be implied in that order.
The delegation of the court’s powers, either those of the Magistrates Court or this court, must be seen to be a matter of moment requiring careful consideration. In my view the powers being delegated should be specified. If there are shades of the pedantic in saying that the reference of the plaintiff’s claim “to arbitration before Mr Don Sarah to be heard as third party proceedings” fall short of delegating the powers necessary to hear and determine the matter then in my view there is justification in the weighty nature of the power to refer.
It is easy to see that the Magistrate may have glossed over the need to consider the requirements of Section 28 (3), the order sought ostensibly being a consensual one. In my view though, its terms were deficient and there was no delegation of power.
Accordingly I propose on these grounds to grant the application and revoke the Magistrate’s order.
I return to the question of whether Mr Bibbo instructed Mr Hay to consent to making of the relevant order. As I said, Mr Bibbo has filed an affidavit asserting he did not. Mr Walsh QC did not seek to cross examine him on it, rather taking the position that the applicant is in any event bound by his subsequent conduct (which I will not pause to describe) and is effectively estopped from taking the point. Not accepting that argument I am left with the assertions in Mr Bibbo’s affidavit, which, in view of the history of the matter and the difficulties which plainly existed between Mr Bibbo and his then solicitor, are not hard to accept. True it is that the utilisation of Section 28 does not rely on the parties’ consent, but the Magistrate did not consider the application in a context of opposition, and it is by no means clear to me that the Magistrate, or indeed a judge of this court, would necessarily have made the order against Bibbo’s opposition. In the end I have not found it necessary to consider those grounds of the application which appeal to an exercise of discretion.

ORDER

Pursuant to Rule 3.04 I revoke the order of the Magistrate made the 19th January 2000 referring the Plaintiff’s claim to arbitration.

[2000] SADC 135

10 November 2000