Western Australian Planning Commission v Corker - [2005] WASC 64

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION: WESTERN AUSTRALIAN PLANNING COMMISSION -v- CORKER [2005] WASC 64

CORAM: TEMPLEMAN J

HEARD: 19 APRIL 2005

DELIVERED : 22 APRIL 2005

FILE NO/S: ARB 4 of 2005

MATTER :The Commercial Arbitration Act 1985
and
An arbitration between Western Australian Planning Commission and Norman Frederick Corker

BETWEEN: WESTERN AUSTRALIAN PLANNING COMMISSION
Applicant
AND
NORMAN FREDERICK CORKER
Respondent

Catchwords:

Arbitration - Application for leave to appeal against award - Whether extension of time should be granted - Whether a manifest error on the face of the award - Whether strong evidence of an error - Whether determination of that question likely to add substantially to the certainty of commercial law - Commercial Arbitration Act 1985, s 38

Legislation:

Commercial Arbitration Act 1985, s38

Result:

Time for appealing extended
Leave to appeal granted
Appeal allowed
Award varied

Category: B

Representation:

Counsel:

Applicant: Ms J C Pritchard
Respondent: Mr T Houweling

Solicitors:

Applicant: State Solicitor for the State of Western Australia
Respondent: Cornerstone Legal

Case(s) referred to in judgment(s):

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Boomalli v Hake (1985) WAR 7
Commissioner of Succession Duties (SA) v Executor & Agency Co of SA Ltd (1947) 74 CLR 358
Esther Investments Pty Ltd v Markalinga Pty Ltd (1989) 2 WAR 196
Girando v Girando (1997) 18 WAR 450
Larkin v Parole Board (1987) 10 NSWLR 57
Mt Lawley Pty Ltd v Western Australian Planning Commission [2002] WASC 307
Mt Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149
Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203
UDR Equipment Pty Ltd v Afkos Industries Pty Ltd (2000) 22 WAR 221

Case(s) also cited:

Nil

TEMPLEMAN J: Norman Frederick Corker was the owner of a property comprising three parcels of land in the West Medina area of Western Australia. They were portions of Cockburn Sound Locations 617, 977 and 978.
Mr Corker, who is now in his eighties, bought the property in 1960. He lived there with his family until 1982. Thereafter, he allowed family and friends to live there and he used the property as a respite area for destitute people.
Subsequently, Mr Corker's property was reserved for parks and recreation pursuant to the Metropolitan Region Town Planning Scheme Act 1959 ("the Metropolitan Region Scheme Act"). Subsequently, again, the Western Australian Planning Commission ("the Commission") elected to acquire the property pursuant to s 36 of the Act. As I understand it, the acquisition date was 1 October 2003.
Following some inconclusive negotiations, it was agreed between the parties that the value of the property should be determined by arbitration in accordance with the Commercial Arbitration Act 1985 ("the Act") pursuant to s 36(2b)(a) of the Metropolitan Region Scheme Act. The parties made a written agreement to that effect on 1 April 2004.
The Agreement was made at a time when an appeal was pending from the decision of McKechnie J in Mt Lawley Pty Ltd v Western Australian Planning Commission [2002] WASC 307. In that decision, McKechnie J held that interest could be claimed by a vendor in Mr Corker's circumstances "as part of the value of the land". The Commission did not agree with his Honour's conclusion.
In these circumstances, Mr Corker and the Commission agreed to include an unusual provision in cl 17 of the Agreement. It was to the effect that Mr Corker would be entitled to interest as a component of purchase price, only if the decision of McKechnie J in relation to interest was upheld on appeal.
I shall refer below to the significance of that provision.
The learned arbitrator appointed under the Agreement was John Kenneth McNamara, a licensed valuer ("the Arbitrator").
The Arbitrator held a preliminary meeting with the parties on 1 April 2004. The formal arbitration hearing took place on 21 May 2004. The Arbitrator delivered an interim award on 15 October 2004 in which he set out his valuation of the property.
By then, the Full Court had delivered its decision on the appeal from McKechnie J: Mt Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149. The Full Court held that McKechnie J had erred in awarding interest on the acquisition price of the subject property as an incident of value.
Following the publication of that decision, the Arbitrator took advice as to whether it was open to him to award interest, not as a component of the value of the property, but pursuant to s 31(1) of the Act, which, unless it had been excluded from the Agreement, gave the Arbitrator a discretion to award interest.
The Arbitrator was advised that cl 17 of the Agreement did not preclude him from awarding interest pursuant to s 31(1) of the Act.
In a final award handed down on 20 December 2004, the Arbitrator awarded interest from 1 October 2003 down to the date of settlement (9 December 2004) at the rate of 6 per cent per annum, that being the rate agreed between the parties if interest was to be payable.
In the interim award, the Arbitrator valued the three lots as follows:

"Location 617 as a single residential site

$175,000

Location 978 as a large single residential site

$225,000

Location 977 as a large site for triplex development

$260,000

Total

$660,000."

The Arbitrator then added $20,200, representing the agreed value of olive trees on the property. The total purchase price was therefore $680,200, exclusive of GST.

Having regard to the Arbitrator's reasons (to which I shall refer below) Mr Corker believed that the Arbitrator had erred in his valuation of Location 977.
Mr Corker had not engaged solicitors for the purpose of the arbitration. However, he instructed his present solicitors, who wrote to the Arbitrator on 16 November 2004, pointing out what they believed to be the error.
The Arbitrator replied on 1 December 2004. He did not accept that he had erred. Thereafter, Mr Corker's solicitors engaged in further correspondence with the Arbitrator, but to no effect. Their final letter was dated 14 January 2005.
On 28 January 2005, the Commission sought leave to appeal against the Arbitrator's award of interest.
Hitherto, Mr Corker had not wished to become involved in legal proceedings. Mr Corker's solicitor, Timothy Houweling, referred to his instructions as at November 2004 in the following terms:
"I was instructed that having regard to the length of time matters had taken to that point and the age of my client, he wanted to have finality to matters and at that point wished to have the award corrected by having the Arbitrator make the necessary amendment rather than pursue an appeal to the Supreme Court."
The amount of interest in issue in the Commission's application for leave to appeal was $48,750. That is a significant amount of money. In order to defend his claim to it, Mr Corker was brought unwillingly to this Court: and having been brought here, he decided to "cross‑appeal" in relation to what he believed to be the Arbitrator's error in the valuation of Location 977.
On 10 February 2005, Mr Corker's solicitors filed what was described as a notice of motion by way of cross‑appeal pursuant to s 38(2) of the Act. That was not the correct way to proceed: there is no provision either in the Act nor in O 81D of the Rules of the Supreme Court for the institution of a cross‑appeal under the Act.
Furthermore, because the Arbitrator's interim award of 15 October 2004 was an award for the purposes of the Act and the Rules, any application for leave to appeal should have been brought by about 5 November 2004; that is, within the 21 day time period prescribed by O 81D r 5(2).

The hearing of the applications

On 19 April 2005, I heard the Commission's application for leave to appeal on the question of interest both in relation to Mr Corker and in relation to a company known as R J Peters Pty Ltd in which precisely the same question arose.
Having heard argument on the interest question, I gave a judgment extempore in which I dismissed the Commission's application. I then heard argument in relation to Mr Corker's "cross‑appeal", which I have regarded as a separate application.

Should Mr Corker be granted an extension of time in which to seek leave to appeal?

The factors to be taken into account in deciding whether an extension of time should be granted are set out in the judgment of Kennedy J in Esther Investments Pty Ltd v Markalinga Pty Ltd (1989) 2 WAR 196 at 198. They are:
•the length of the delay
•the reasons for the delay
•whether there is an arguable case
•the extent of any prejudice to the respondent
The decision of Kennedy J was adopted by the Full Court in Girando v Girando (1997) 18 WAR 450 at 454 and 466.
In his judgment in Girando v Girando (supra) Malcolm CJ referred also to the observations of Burt CJ in Boomalli v Hake (1985) WAR 7 at 9, where his Honour referred to the successful party in litigation having a vested interest in the judgment and the fact that he ought thereafter to be able to conduct his affairs on the basis that the judgment was final, subject only to being displaced by an appeal instituted in accordance with the time requirements of the rules.
Counsel for the Commission advanced that proposition. However, in my view, it carries less weight in the present case. I do not think the Commission should be regarded as being in the same category as an individual litigant. Although the Commission is spending public money and must act with due regard to that fact, it could hardly be suggested that the success or failure of an appeal such as that which Mr Corker seeks to bring, will have any impact on the conduct of its affairs. Indeed, as counsel for the Commission acknowledged, there would be no prejudice to the Commission if the appeal were to be allowed.
So far as the other factors are concerned: the length of the delay is not great and in my view the explanation for it is reasonable. I can well understand that an elderly man such as Mr Corker would not wish to subject himself to the stress of litigation unless obliged to do so.
Mr Corker's solicitors had put the Commission on notice that he believed the Arbitrator had erred. All subsequent correspondence between the solicitors and the Arbitrator was copied to the Commission. The solicitors were still waiting for a response from the Arbitrator to their letter of 14 January 2005, when the Commission made its application for leave to appeal on the interest point.
Having been brought unwillingly to the Court to defend a claim that has been unsuccessful, I think it was reasonable for Mr Corker to institute his own application in an attempt to correct an error on the part of the Arbitrator. Indeed, for the reasons I shall set out below, I consider that Mr Corker has a clear case for relief.
In all the circumstances, I am satisfied that Mr Corker should be given an extension of time in which to bring his application for leave to appeal. I now turn to that application.

The application for leave to appeal

The jurisdiction to review arbitration awards is created by s 38 of the Act. Section 38(1) provides, in effect, that the court shall not have jurisdiction to review an award except in accordance with s 38(2). That subsection gives the court jurisdiction to entertain an appeal on any question of law arising out of an award, subject to s 38(4).
Section 38(4)(b) provides that an appeal under s 38(2) may be brought with the leave of the court (subject to s 40, which has no application in the present case).
Section 38(5) provides that:
(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."
Before considering how these provisions apply in the present case, it is necessary to explain what is, in my view, a clear error of law on the part of the Arbitrator.

The Arbitrator's error

The area of Location 977 is 9,409 square metres. The Arbitrator approached the valuation of Location 977 on the basis of sales of comparably situated properties having a smaller area. On page 18 of his interim award the Arbitrator said:
"I therefore consider that, if the subject Location 977 had an area of approximately 2,500 to 4,500 square metres, the availability of the nearby community services outlined earlier, and was connected to scheme water and upgraded power supply as indicated earlier, the site would have a potential price in the range of $180,000 to $190,000."
The Arbitrator continued by noting that Location 977 had an area of 9,409 square metres. He continued:
"I am therefore of the view that an appropriate allowance for the size of the site would be in the range of 30% to 40%. On that basis I consider that the actual 9,409 square metre site would have a potential price in the range $245,000 to $265,000."
Pausing there, it is not clear how the Arbitrator derived the 30 to 40 per cent factor. However, there is no complaint about his valuation thus far. It is clear that the range is derived from the range of values produced by multiplying $180,000 and $190,000 by 1.3 and 1.4 (ie, an increase of 30% - 40%).
In fact, Location 977 was not connected to the services referred to above. The water supply was from a bore and the power supply was of an old and apparently inferior standard.
The Arbitrator therefore deducted from the range of values referred to above, a total cost of $37,020 to reflect the cost of connection to scheme water and upgrading the power supply. Thus the value range for Location 977 was $207,980 to $227,980. On that basis, the Arbitrator fixed the value at $228,000.
Pausing again, I note that Mr Corker complains about the fact that the Arbitrator made the deductions for the cost of providing services. In my view, the Arbitrator did not err in so doing. But for the reservation, Lot 977 would have been developed for housing. Had it been so developed, the purchaser could reasonably have been expected to spend $37,000 to have the property connected to scheme water and to an upgraded power supply. The Arbitrator was therefore correct to make that allowance in the valuation.
The valuation of $228,000 for Location 977 was on the basis that, but for the reservation, it would have been a large single residential site. However, on page 19 of his interim award the Arbitrator said:
"In addition to the assessment of the value range of Location 977 having regard for its large area, I have also considered its value on the basis that the parties have agreed that the site has the capacity to have three houses erected upon the land. I have interpreted that agreement as meaning that it is a triplex site."
The Arbitrator then referred to the evidence of two valuers called on behalf of Mr Corker. They were Ms Le Fevre and Mr Fforde. The Arbitrator said:
"Ms Le Fevre indicated in her evidence at the Arbitration hearing that a duplex site could have a value of 2/3rds of the value of two single residential sites. Ms Le Fevre also suggested that a triplex site could have a value of 50 per cent of the value of three single residential sites. Mr Fforde suggested during his evidence that a duplex site could have a value of 50 per cent greater than the value of a single residential site. He added that a triplex site could have a value of 75-80 per cent greater than the value of a single residential site.
Neither of the [Commission's] valuers appears to have considered this approach and so they did not express an opinion as to the factor that might apply in this circumstance."
In considering what allowance should be made for the fact that Location 977 was a triplex site, the Arbitrator said:
"There is no relevant evidence available other than the opinion of (Mr Corker's) valuers. If an allowance for this factor was added at say 55% - 60% of the value range of the site as a 3,000 to 4,000 square metre single residential site, a price range for Location 977 as a triplex site of $280,000 to $300,000 would be shown. After deducting the costs of servicing ($37,000) as set out earlier, a value range of approximately $243,000 to $263,000 is demonstrated." (my emphasis)
With the greatest of respect to the Arbitrator, I consider that his approach, as set out above, discloses an error on his part. The error is this: having accepted that a factor of 55 per cent to 60 per cent should be applied to the value of Location 977 to reflect its potential as a triplex site, he applied that factor to the value of a small site of 2,500 – 4,500 square metres, not to the 9,409 square metre site that it actually is.
This is clear from the fact that the value range $243,000 to $263,000 is derived from the small site range of $180,000 to $190,000, by multiplying those figures by 1.55 and 1.6 respectively and deducting from the product the amount of $37,000 for the cost of services. This produces a range of $242,000 to $267,000: hence the Arbitrator's range of $243,000 to $263,000.
In my view, it is clear, having regard to the approach taken previously by the Arbitrator, that he should have applied the factor of 55‑60 per cent to the range $245,000 to $265,000, being the value of Lot 977 as a single residential site, and then deducted $37,000, being the cost of connecting to the water and upgraded electricity services. This would have produced a range of $342,750 to $383,800.
As I have noted above, the Arbitrator took the approach he did because, as he put it:
"There is no relevant evidence other than the opinion of [Mr Corker's] valuers."
In other words, the Arbitrator disregarded the evidence of Ms Le Fevre and Mr Fforde, because it was only an opinion. However, the opinion of those experts was their evidence: and in my view, there being no contrary evidence, and no stated reason for rejecting it, that evidence should have been accepted and applied.
The error was an error of law, because "the question whether there is any evidence of a particular fact, is a question of law": Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 355, per Mason CJ.
In my view, therefore, it was an error of law which was manifest on the face of the award.
There was, I think, a further error. The Arbitrator went on to say:
"While I cannot confirm the demand for a rural/residential site with triplex potential nor verify with comparable evidence the appropriate allowance or loading location 977 should have because of that triplex potential over and above the sites value as a large site I am of the opinion that the site is more valuable with that triplex potential than it is as a large single residential site." (my emphasis)
The error here, lies in the assumption apparently made by the Arbitrator, that in the absence of comparable sales of triplex lots he could not properly value Location 977 on that basis. However, the Arbitrator was not thereby relieved of the obligation to value the property on the best evidence available, that being the uncontradicted opinion evidence of Ms Le Fevre and Mr Fforde.

The application of s 38(5) of the Act

In reaching this conclusion, I am mindful of the policy underlying s 38 of the Act, of minimising judicial supervision and review of arbitrations. However, I do not overlook the fact that Mr Corker's application was prompted by the fact that the Commission sought judicial review of the Arbitrator's award in relation to interest.

It is now settled that for an error of law to be "manifest", it must be "more than arguable". That was the test proposed by McHugh JA in Larkin v Parole Board (1987) 10 NSWLR 57 at 70 - 71. The test was adopted by Sheller JA in Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203 in which, his Honour said at 225 - 226:
"There should, in my opinion, before leave is granted be powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law."
That approach was adopted by Steytler J in UDR Equipment Pty Ltd v Afkos Industries Pty Ltd (2000) 22 WAR 221, and has been applied consistently in this jurisdiction.
These considerations are, of course, relevant to the question of whether leave to appeal should be granted. In the present case, by order of a Master, that question was to be determined together with the hearing of the appeal. It was therefore appropriate to subject the award to close scrutiny. Clearly, a reasoned award such as this must be considered in some detail in any event, in order that it may be understood properly. This was done during the course of argument, in which, I regret to say, I failed to grasp the point. However, on subsequent reflection, it appeared to me to be clear that the Arbitrator had erred in the way described above.
I would therefore grant Mr Corker leave to appeal pursuant to s 38(5)(a) and (b)(i), and allow the appeal.
If I am wrong in my conclusion that there is a manifest error of law on the face of the award, I consider that in any event, there is "strong evidence" that the Arbitrator made an error of law, within s 38(5)(b)(ii) of the Act.
Without objection from counsel for the Commission, I received (as Exhibit A) a letter dated 1 December 2004 written by the Arbitrator to representatives of the Commission and Mr Corker in response to the letter written by Mr Corker's solicitors in which they requested the Arbitrator to reconsider his decision.
In relation to this point, the Arbitrator said, referring to the solicitor's letter:
"The letter … refers to the 'evidence' of Ms Le Fevre and Mr Fforde as to the allowance to be made for the added value of a triplex site as compared to the value of a single site. They did not provide any evidence – they expressed their opinion as to what the 'added value' might be – and in any case my assessment of 'added value' for the triplex potential was greater than that of Ms Le Fevre but lower than that of Mr Fforde."
This, I think, confirms the Arbitrator's erroneous view that the opinion of an expert witness is not evidence. Further, it is clear from the Arbitrator's summary of the evidence of Ms Le Fevre and Mr Fforde, (which he annexed to the award) that they did express the opinions referred to above.
If s 38(5)(b)(ii) does apply here, it is necessary to consider whether the determination of the question of the error, "may add, or may be likely to add, substantially to the certainty of commercial law".
In my view, "commercial law" in this context must be taken to include the law relating to the valuation of land acquired by the Commission pursuant to the Metropolitan Region Scheme Act. I think it will contribute substantially to the certainty of the law in that area if it is established that:
(1)the absence of a comparable sale does not relieve the valuer of an obligation to value on a proper basis, on the best evidence available; and
(2)the opinion of an expert witness is evidence for that purpose.
I would therefore grant leave to appeal and allow the appeal on that basis also.

What is to be done?

Upon the determination of an appeal under s 38(2) of the Act, the Court is given a discretion by s 38(3). The Court may:
"(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."
In the present case, Mr Corker seeks an order setting aside the interim award and remitting it to the Arbitrator.
However, I think it may be preferable to vary the award by making the arithmetical calculation which, in my view, the Arbitrator should have made. In order to resolve uncertainties in the appropriate percentage in favour of the Commission, I would adopt the lower percentage from the Arbitrator's range of 55‑60 per cent and the lower value of Location 977 as a 9,409 square metre site. Making the allowance of $37,000 for connection to the services, I would arrive at the value of $342,750 by way of the calculation set out in par [48] above.
I appreciate that in Commissioner of Succession Duties (SA) v Executor & Agency Co of SA Ltd (1947) 74 CLR 358 at 374, Dixon J held that if there was a doubt as to the amount properly payable by way of compensation, the doubt should be "resolved in favour of a more liberal estimate".
However, it is equally important to be fair to the acquiring authority: see the discussion in Brown on Land Acquisition 5^thed 2004, at [3.18].
I would be prepared to deal with the matter summarily for a number of reasons. First, as I have noted above, Mr Corker is in his eighties and the matter has been protracted. I therefore think it desirable to bring the matters to a conclusion as rapidly as possible, so as to minimise the amount of stress likely to be suffered by Mr Corker as a result of further delay and any further arbitration proceedings.
Secondly, although the increased amount which Mr Corker will receive is no doubt substantial for him, I do not think it could be so regarded as far as the Commission is concerned.
Thirdly, I think the error is so clear and the solution so obvious, that there is no point in referring the matter to the Arbitrator.
Fourthly, I think it undesirable to remit the matter to the Arbitrator when he has already declined to review his decision.
If requested to do so, therefore, I would order that the award be varied by increasing the value of Location 977 from $260,000 to $342,750 and awarding interest on that increased amount of $82,750 to be paid from 1 October 2003 to the date of payment, calculated at 6 per cent per annum.
I will hear from counsel as to the form of the order sought.

"Location 617 as a single residential site	$175,000
Location 978 as a large single residential site	$225,000
Location 977 as a large site for triplex development	$260,000
Total	$660,000."