Unley Property Development P/L v Lelio Bibbo P/L No. Scgrg-00-1127

UNLEY PROPERTY DEVELOPMENT PTY LTD v
LELIO BIBBO PTY LTD
[2000] SASC 388

OLSSON J

Background

This is an application for leave to appeal against an interlocutory order made by a Judge of the District Court on 10 November 2000, which revoked an earlier order dated 19 January 2000. The latter “referred [the plaintiff’s claim] to arbitration before Mr Don Sarah, to be heard as third party proceedings in the arbitration between Prizac Developments Pty Ltd [‘Prizac’] and Unley Property Development Pty Ltd [‘UPD’].” In view of the urgency of the matter I heard full argument both as to the application for leave and also the merits of the proposed appeal.
It is necessary to consider this matter in light of the history of dealings between the relevant parties.
In 1997 Prizac and UPD entered into a building contract with respect to what was termed the Hilton Shopping Complex. UPD was the building contractor for Prizac, the developer. The respondent Lelio Bibbo Pty Ltd (“Bibbo”) was to provide engineering services for the project, although a dispute has arisen as to whether he was contractor to UPD or Prizac.
The building works are said to have been completed in or about May 1998, but Prizac asserted that there were defects in them. The latter activated the arbitration clause in the relevant contract. The resultant arbitration, pursuant to the provisions of the Commercial Arbitration Act 1986 (“the CA Act”) is due to commence before Mr Don Sarah AM today.
The scope of that arbitration widened over time. By the close of 1999 the Prizac claim had escalated by about $400,000 in respect of alleged defects in ceilings and bulkheads.
In June 1999 UPD initiated a claim for about $9,000 against Bibbo in the Magistrates Court, in respect of an allegedly defective cement floor in the complex.
On 23 December 1999 the plaintiff issued an interlocutory summons in the Magistrates Court, seeking the following orders:-
“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;
2.That this Application be made ‘specially returnable’;
3...... Liberty to either party to apply generally.
In the alternative to the aforegoing, the following orders are sought:
4...... That the Plaintiff have leave to amend its claim;
5.That this action be transferred to the District Court.”
The amendment foreshadowed was to encompass the Prizac allegation of defective ceilings and bulkheads.
The application came before a magistrate on 19 January 2000, at which time the following order was made:-
“altho’ matter now exceeds this Court’s jurisdiction Parties consent to matter remaining in this Court
... Orders on application 1, 2, 3 & 4. Trial date vacated.
No order re 5.
time for Mutual Discovery extended by 28 days.
C in C”
In terms, the only consent recorded was as to jurisdiction, not the detailed orders made. However, it seems common ground that there was consent to the orders.
The action subsequently came before a magistrate, on a further interlocutory application on 11 February 2000. By consent, an order was made transferring the action to the District Court.
The proceedings came before Mr Sarah on several occasions. It is said that Prizac challenged his jurisdiction, although on what basis is not clear. On 31 August 2000 Mr Sarah purported to make an order for the consolidation of the two separate matters before him. He invoked s 26 of the CA Act for that purpose. No objection was raised by Bibbo.
I pause, at this juncture, to comment that a very real question arises as to whether Mr Sarah had the power to order as he did. The powers conferred by s 26 relate only to arbitration proceedings to which the CA Act applies. Section 3(6) of that statute operates to exclude so-called “arbitrations” under the Magistrates Court Act or the District Court Act. True it is that the section actually refers to Local and District Criminal Courts Act 1926, pursuant to which the civil jurisdictions of both the District Court and the Magistrates Courts were previously erected and governed. This was later rescinded and replaced by the District Court Act and the Magistrates Court Act respectively, as to the two courts involved. I agree with Mr Besanko QC that s 14B(3)(b) of the Acts Interpretation Act 1915 operates so as to require s 3(6) of the CA Act to be construed as referring to the two later enactments. It follows that a trial conducted by an “arbitrator” pursuant to an order made under s 28(1) of the Magistrates Court Act is not an arbitration proceeding within the meaning of s 26 of the CA Act.
On 7 November 2000 this action came before the learned Judge of the District Court, on an application by Bibbo dated 1 November 2000. That application invited the Judge to make an order:-
“Declaring invalid as beyond jurisdiction, and/or revoking the order made by the Magistrates Court on 19 January 2000 to refer this action for trial by an Arbitrator.”
In essence it was, inter alia, asserted by Bibbo that, in so far as his then solicitor had purported to consent to the order of reference, such solicitor had no authority to do so.

Discussion

In the course of reasons published by her, the learned District Court Judge directed attention to the scheme and wording of s 28 of the Magistrates Court Act, which mirrors corresponding provisions of the Supreme Court Act 1935 and the District Court Act 1991.
Section 28 is expressed in these terms:-
“28 (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 or by the Court.
(3)     The arbitrator becomes for the purposes of the reference an officer 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.”
It is at once to be noted that neither the original application before the learned magistrate, nor the order which he purported to make on 19 January 2000 followed the terminology of the section. Both seem to have assumed that an arbitration under the CA Act and proceedings dealt with by an arbitrator appointed under s 28 of the Magistrates Act are of the same nature. Clearly, as the learned District Court Judge identified, they are not.
So much readily appears from the judgment of Stephen J in Buckley & Anor v Bennell Design & Constructions Pty Ltd & Anor (1977-1978) 140 CLR 1, where he made these points (at p 15):-
“... In my view when in any cause or matter a trial is ordered before an arbitrator or referee, pursuant to s 15, whether of the entire ‘proceedings’ or of a ‘question or issue of fact arising therein’, the outcome of that trial, whether it takes the form of an award by the agreed arbitrator or of a report by the court-appointed referee, is in no way analogous to the award of an arbitrator in a reference by consent out of court. I speak of a ‘trial’ and such it truly is; s 15 requires that the matter referred ‘be tried before’ an arbitrator or referee. Whether described as a report or as an award, and s 16(2) employs both terms, the outcome of such a trial possesses none of the quite special qualities which give to the award of an arbitrator in an arbitration founded upon an out of court submission its own uniquely conclusive character. As Mr Quintin Hogg, as he then was, said in Law of Arbitration (1936), p 193, such a reference ‘is a species of trial, and the decision is now equivalent to a form of judgment or verdict and not an award’. In such a reference the court’s procedures of adjudication are not abandoned in favour of extra-curial settlement of the dispute by arbitration. Instead the court directs that, for the better resolution of the particular proceedings initiated before it, resort should be had to this special mode of trial which the legislation has made available.
(at p 18):-
... One thing which these authorities had put beyond doubt was that these statutory references had nothing in common with conventional arbitrators, despite the legislation’s occasional use of the terms ‘arbitrator’ and ‘award’.
The contemporary texts on the subject reflect, accurately enough, this body of authority. The learned editor of Russell on Arbitration and Award observed in the 10th edition (1919), p 496, that references the subject matter of that part of the Arbitration Act, 1889 appearing under the heading ‘References under Order of Court’ were ‘not references to arbitration in the ordinary sense of the term and their inclusion in an Arbitration Act, or in a book on Arbitration causes confusion’. Such references, he continued, were nothing more than a delegation of the trial to an officer of the court; hence the need, where the delegate was not already such an officer, to deem him one - s 15(1) - for that specific purpose. The sections were 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. ...”
Whilst it is true that these dicta relate to a statutory provision which, in its entirety, is not in pari materia with s 28, that portion of the provision under discussion, so far as is relevant, is expressed in virtually identical terms.
Debelle J held that the reasoning of Stephen J was directly applicable to provisions such as those contained in s 28 in the course of his judgment in Leighton Contractors (SA) Pty Ltd v Hazama Corporation (Australia) Pty Ltd & Ors (1991) 56 SASR 47 at 54-55.
For the reasons expressed by Stephen J, the use, in the statute, of the words “arbitrator” and “award” are apt to be misleading, because they are not used in the same sense as corresponding expressions found in the CA Act. The “arbitrator” appointed becomes an officer of the court, delegated the task of conducting a “trial” of the action or issue referred. The so-called “award”, if translated, in accordance with s 28(4), into a judgment of the court, then has attached to it all other statutory incidents of a judgment, including rights of appeal quite different from the limited forms of potential intervention authorised by Part V of the CA Act.
It follows, then, that the application of 23 December 1999 and the order made in pursuance of it on 19 January 2000 were misconceived. There was no power in the magistrate to refer anything “to arbitration” whether as third party proceedings to another commercial arbitration or otherwise. The only power vested in the learned magistrate was to direct that the action be tried by Mr Sarah. The word “arbitrator” employed by s 28(1) is no more than a descriptor to identify a person who is not a judicial officer (and may not even be a lawyer), but who is to be appointed an officer of the court delegated the responsibility and power to try the matter.
Because the order is an act of delegation it then becomes necessary for the court, pursuant to s 28(3), specifically to delegate, by order, “such of the powers of the Court” as it deems necessary to the delegatee.
As the learned District Court Judge concluded, these aspects are fundamental features of the statutory scheme. The defects in the order made cannot be cured simply by arguing that the court must have intended to make an order for trial in terms of the section; and that an intention to confer all of the powers of the court on Mr Sarah must be inferred.
An act of delegation pursuant to s 28 is an important matter which takes an action out of the mainstream course of litigation. Not only must the relevant order clearly stipulate for a delegation of the type envisaged by the section, but it must also specifically express the nature and range of powers to be exercised.
It seems to me that, in the instant case, a failure to do either of these things merely reflected an imperfect comprehension by both the parties and the learned magistrate of the nature of the process created by s 28 and the reason why the powers of the delegate had to be spelt out.
With respect, I agree with the conclusion of the learned District Court Judge that the order made was misconceived and ineffectual, by reason of its failure to define the powers to be exercised. That, in turn, led to a misconception by Mr Sarah of the nature of the exercise upon which he thought himself to be embarking and of his power to “consolidate” it with the primary matter before him. The learned District Court Judge was well justified in revoking it.
Having regard to her initial conclusions, the learned District Court Judge did not find it necessary to consider those grounds of the application before her which raised discretionary issues.
I would merely comment as to this that, having regard to the widely differing exercises involved and the marked differences of evidentiary approach mandated by the CA Act and the Magistrates Court Act respectively, an attempt to deal with the two types of proceeding together is akin to an attempt to mix oil and water. It would certainly be fraught with major procedural and evidentiary difficulty.
As an exercise of discretion I would have revoked the order in any event, particularly in light of how the “arbitrator” proposed to deal with the situation. It is obvious that he, too, had misconceived the nature of his task.
That is not to say that there may not be considerable merit in the making of some new, properly structured order, now, pursuant to s 33 of the District Court Act, which, perhaps, envisages a specialist “arbitrator” such as Mr Sarah trying the issues arising in this action as an “end on” third party process to the primary arbitration. However, that is for another day.
I simply content myself with concluding that I am not persuaded that there is a fairly arguable and substantial basis for contending that the learned District Court Judge fell into error.
The application for leave to appeal must be dismissed.

[2000] SASC 388

15 November 2000