Paul Rawson Investments Pty Ltd & Anor v James Boon Corporation Pty Ltd & Ors

The scope of s 34A of the CAA

1. The question whether the parties agreed to a right of appeal, as to a question of law, arises in the context of s 34A of the CAA. That section relevantly provides that an appeal lies to the Court on a question of law arising out of an arbitral award if, first, the parties agreed that an appeal could be made under that section, being the matter identified in s 34A(1)(a) of the CAA and, second, the Court grants leave to appeal, being the matter identified in s 34A(1)(b) of the CAA. Section 34A(3) of the CAA in turns provides that the Court should not grant leave under s 34A(1) unless it is satisfied of specified matters, but that can be deferred to the point when any question of leave is to be determined.
2. The scope of s 34A of the CAA has been considered in the authorities. In The Nuance Group (Australia) Pty Ltd v Shape Australia Pty Ltd (2021) 395 ALR 720; [2021] NSWSC 1498 at [31]ff ("Nuance"), Rees J referred to the function of that first element of s 34A of the CAA and noted, by reference to authority, that it provided an "opt-in" regime for judicial review of awards, by contrast with the previous position under the Commercial Arbitration Act 1984 (NSW) ("CAA 1984") which provided that the parties to an arbitration may exclude the right of the appeal, being effectively an "opt out" regime. Her Honour also there noted that a term providing for an appeal on questions of law would not ordinarily be implied, because a contract would be effective without such a term, and there was no suggestion here that such a term should be implied.
3. Counsel also drew attention to the further decision of the Court of Appeal of the Supreme Court of South Australia in Inghams Enterprises Pty Ltd v Southern Cross Farms Australia Pty Ltd (2022) 398 ALR 562; [2022] SASCA 7 ('Inghams'), where Doyle JA (with whom Livesey and Bleby JJ agreed) referred, inter alia, to Nuance, in the course of a comprehensive review of the authorities. That case was directed to the question whether the parties had opted in to the appeal regime under s 34A of the corresponding South Australian legislation. Doyle JA noted, at [84], that such an agreement could be made in the parties' arbitration agreement, which did not occur here, or in an ad hoc agreement reached after the parties had fallen into dispute. That is the position for which the Plaintiffs contend here. His Honour went on to note at [85] that: "...the agreement must arise expressly, or by necessary implication, from the words used by the parties. That said, the parties' agreement need not be in any particular form, nor use any particular words. The parties need not mention s 34A of the CAA. But the parties must nevertheless have evinced an objective intention to agree 'that an appeal may be made under this section [s 34A]', further, while I have acknowledged that the agreement might, in an appropriate case, be implied, as the cases reviewed below demonstrate, the implication of an appropriate term will often be problematic."
4. It is not necessary to decide whether his Honour was there taking a different view as to whether a term could be implied from that expressed by Rees J in Nuance, because there is no suggestion that an implied agreement arose here.
5. Doyle JA then noted (at [106]) that the authorities: "underscore the need to scrutinise closely the words used by the parties in order to determine whether they reveal the requisite objective intention, and hence agreement, that an appeal may be made under s 34A of the CAA. In this respect, it is important to identify both (i) an agreement that there will be a right of appeal; and (ii) an agreement that it will be a right of appeal of the type or character contemplated by s 34A."
6. The latter reference is, of course, to the fact that the appeal contemplated by s 34A of the CAA is directed to an appeal on a question of law arising out of the arbitral award.

The contractual setting and the affidavit evidence

1. I will shortly turn to the affidavit evidence on which the parties relied in relation to the application. Before doing so, I should refer to the contractual setting in which events arose, and specifically the contractual provisions that give rise to the parties' submission to arbitration. The parties have here entered a Finance Control Partnerships Agreement which, inter alia, governed the relationship between them. Clause 19.2 of that agreement provided that, if a principal was prevented from attending to partnership business by reason of incapacity for 12 months during any continuous period of one year, that principal's Related Partner (as defined) shall be deemed to have retired from the partnership on the expiry of that 12 month period, and certain provisions in cl 22 of that agreement would apply. The position here, arising from the common ground between the parties and the first and unchallenged award of the arbitrator, is that Mr Boon ceased to work by reason of such incapacity on 13 September 2019, giving rise to a deemed retirement on 13 September 2020, so that cl 22 could apply. That clause in turn provided for, inter alia, the payment of the "Retirement value" of the Partnership Interest (as defined) by several equal monthly instalments.
2. Clause 32 of the Finance Control Partnership Agreement in turn provided that, subject to a provision that is not presently relevant, differences which arose between the partners or their representatives during the continuance of the partnership or thereafter, inter alia with regard to the rights and obligations of the partners under that agreement, would be referred to a single arbitrator agreed by the parties to the difference and, in default of agreement, to two arbitrators selected in a particular manner. That clause referred to the provisions of the CAA 1984 or comparable legislation in force at the time of the reference, now the CAA. There is no suggestion in that clause that the parties had agreed, in their agreement to arbitration, that there would be any appeal as to a question of law from the arbitrator's decision for the purposes of the applicable legislation. That in turn is consistent with the Plaintiffs' reliance, in this application, on a subsequent ad hoc agreement said to have arisen between the parties' solicitors.
3. I now turn to the parties' evidence as to that ad hoc agreement. The Plaintiffs rely on the affidavit dated 18 March 2022 of their solicitor, Mr Cutri, who refers, in paragraphs 27ff, to the first directions hearing in the first arbitration before the arbitrator, at which Mr Cutri appeared and, it appears, a partner in his firm was also present. That directions hearing was conducted remotely by Zoom. Mr Cutri's evidence is that, during that directions hearing, a conversation took place in words to the following effect between the arbitrator and the parties' solicitors: Arbitrator: "How should the arbitration be governed? Do the parties consent to the arbitration to be governed under the 2010 Commercial Arbitration Act, subject to any right of appeal?" Ellicott [a reference to the defendant's solicitor]: "The applicants consent to that course." [Cutri]: "The respondents also consent." Arbitrator: "Okay. The chair of the arbitration shall be Sydney, New South Wales."
4. It is apparent, on Mr Cutri's version of that conversation, that at least the parties had agreed that the arbitration would proceed under the CAA, and that question needed to be addressed, given the reference to the CAA 1984 in the agreement between them, and also agreed that the seat of the arbitration would be Sydney. I will return below to the significance of the reference to "any right of appeal" in Mr Cutri's account of that conversation, after I have identified the extent of dispute as to whether such a reference occurred.
5. Mr Cutri annexes a file note which he took in the course of that directions hearing on 28 April 2021, and there has been no challenge to the authenticity of that file note in this hearing. The file note records, initially, an identification of the subject matter of the arbitration, being Mr Boon's rights in respect of the termination of the partnership and the acquisition of his interests in the partnership, and in turn contains a note reading: "Governed under the NSW Commercial Arbitration Act subject appeal. Chair is NSW Syd." It is apparent that that file note is abbreviated, because Mr Cutri's recollection of what the arbitrator said involves, as I have noted above, a reference to "any right of appeal".
6. Mr Cutri in turn refers to correspondence, in late December 2021, after the second award in the arbitration, indicating that Mr Rawson and his associated company, the Plaintiffs in this hearing, intended on appealing that second award and asking whether the solicitors for Mr Boon and his associated company had instructions to accept service of appeal proceedings, and to subsequent correspondence from those solicitors in January and February 2022 indicating that they were instructed to accept service and, later, that they were content to proceed on an expedited basis in respect of "any appeal". The Plaintiffs in turn rely on that matter as a further basis for an agreement that there should be a right of appeal, as to a question of law arising from the arbitration. I will return to that submission below.
7. The Defendants in turn rely on the affidavit dated 28 March 2022 of their solicitor, Mr Ellicott, and Mr Boon's affidavit dated 28 March 2022. Mr Ellicott's affidavit indicates that he too prepared a contemporaneous file note of the first directions hearing in the arbitration, and he exhibits his note, the authenticity of which was also not challenged. Mr Ellicott's file note also refers, consistent with Mr Cutri's note, to the identification of the matters in issue, and then records "agree that Commercial Arbitration Act" and refers to "NSW - content with Syd". That file note contains no reference, by contrast with Mr Cutri's file note, to an appeal. Mr Ellicott in turn sets out his recollection of what was said, having refreshed his memory from his file note, which is that the arbitrator asked whether the parties agreed that the arbitration was governed by the CAA, both he and Mr Cutri indicated that that was so, and the arbitrator then sought and obtained agreement that Sydney would be the seat of the arbitration. Mr Ellicott does not recall the arbitrator saying words to the effect of "subject to appeal", or "subject to any appeal" or "subject to any right of appeal", and he indicates that it would have been his practice to make a note of those words, had they been said. He denies, in evidence admitted with a limiting order under s 136 of the Evidence Act 1995 (NSW) as his understanding and as a submission, that the parties had agreed to such an appeal, or that he had understood there had been such an agreement.
8. Mr Boon, in his affidavit dated 28 March 2022, also addresses that directions hearing, which he had also attended by Zoom, and indicates that he did not recall the arbitrator saying words to the effect "subject to appeal", "subject to any appeal" or "subject to any right of appeal"; that it was his understanding (in evidence also admitted with a limiting order under s 136 of the Evidence Act) that all parties to the arbitration would be bound by the arbitrator's decision, and that he had never given instructions to his solicitors, for himself or his company, to agree that an appeal may be brought under s 34A of the CAA. He also denies, again in evidence admitted with a limiting order, that the parties had agreed to such an appeal.
9. There is plainly a difference in the recollection of the solicitors, and in their file notes, as to what was said. Neither party contended that the other party's solicitor was not giving evidence as best he recalled it, and neither solicitor was cross-examined. It is not surprising that recollections differ, where this brief exchange at a first directions hearing in the arbitration has become significant after the event, by reason of the Plaintiff's contention that it gave rise to a right of appeal as to a question of law for the purposes of s 34A of the CAA. Mr Studdy, for the Plaintiffs, submitted that Mr Cutri's evidence should be preferred, on the basis that Mr Ellicott's and Mr Boon's evidence does not amount to a denial, in terms, of a reference to any right of appeal at the directions hearing before the arbitrator, but only to a statement that they lack a recollection to that matter. Mr McInerney in turn relies on the fact that the partner from the firm representing Mr Rawson and his company, who also attended that directions hearing did not give evidence in this hearing to seek an inference that his evidence would not have assisted the Plaintiffs.

Determination as to right of appeal

1. It is not necessary to determine between the differing accounts of what was said at the first directions hearing in the arbitration, because this matter can be fairly resolved on the basis of Mr Cutri's evidence of what was said, assuming without deciding that it were correct, and the Plaintiffs would still fail to establish an agreement to an appeal under s 34A of the CAA on that basis. It is important to bear in mind that, on Mr Cutri's account of what was said, it was the arbitrator who raised the question: "Do the parties consent for the arbitration to be governed under the 2010 Commercial Arbitration Act, subject to any right of appeal?" [emphasis added]
2. On Mr Cutri's evidence, both solicitors then consented to that course. Several matters should be noted about that. First, there is no reason to read that conversation, construed objectively, as amounting to the arbitrator seeking to obtain the parties' agreement that there existed a right of appeal for the purposes of s 34A of the CAA, still less that he would have done so in such a cryptic way, without making clear that he was seeking a commitment to a significant decision by the solicitors and their respective clients. Second, it seems to me that the words "any right of appeal", when said by the arbitrator, would be objectively construed in their content as the arbitrator simply recognising the possibility that there may or may not be a right of appeal, depending upon any agreement that the parties had reached for the purposes of s 34A of the CAA, a matter which he had no reason to know and no reason to be concerned with. The language "any right of appeal" in that situation is neutral, and entirely consistent with the fact that such a right of appeal may or may not exist, because it may or may not have been agreed between the parties, quite apart from whether the Court would ultimately grant leave in respect of such an appeal for the purposes of s 34A(1)(b) of the CAA.
3. Third, I reach that conclusion on the basis that it is consistent with both solicitors' ready agreement to the arbitrator's statement, which they plainly rightly understood, in the context, as focusing upon the application of the CAA, a matter which would squarely have been in issue. There is no suggestion that either solicitor, either before this time or in the course of the directions hearing, sought his respective clients' instructions as to whether there should be any right of appeal as to any question of law for the purposes of s 34A(1)(a) of the CAA, and it is inconceivable that solicitors who are both competent and experienced (and there is no suggestion that these solicitors did not fall in that category), would have reached the important decision whether there should be a right of appeal as to a question of law, not contained in the parties' substantive agreement, without first seeking their respective clients' instructions. Plainly, they did not understand that they were being asked to commit to that course, and that understanding was entirely comprehensible, where the arbitrator's language was neutral as to the existence or non-existence of that right.
4. Fourth, even if there had been an agreement, contrary to the view that I have formed for the reasons noted above, it plainly did not address the nature of any right of appeal, and would not satisfy the requirements identified by the Court of Appeal in Inghams, to which I have referred above. The arbitrator or the solicitors had not there focused their minds, on Mr Cutri's account, to the question whether any right of appeal would be an appeal as to a question of law, in respect of matters arising from the arbitration. The language "any right of appeal" would be equally consistent with an appeal at large, if the CAA permitted that course, or a narrower right of appeal and does not involve any delineation of the scope of the appeal. For these reasons, I am comfortably satisfied that no agreement as to the existence of a right of appeal, as to a question of law, for the purposes of s 34A of the CAA was reached at the first directions hearing in the first arbitration.
5. The Plaintiffs also relied on correspondence commencing in late December 2021 and continuing in January and February 2022, to which I referred above, which was addressed to whether the Defendants' solicitor would accept service of the appeal and to the possibility of expedition of the appeal. Mr Studdy asks, rhetorically, why, if the parties had not agreed to an appeal, did the solicitor for the Defendants then not point out that no right of appeal was available was available to the Plaintiffs. I note, first, that that submission may be relevant more to the question whether an agreement had been reached at an earlier point, rather than to whether an agreement was reached by the correspondence from December 2021. Second, it is perhaps to set an unduly high bar to expect that, immediately before Christmas, when a solicitor was asked whether his firm would accept service, and when answering, in a constructive way, that it would accept service, he should also engage with the substantive question whether a right of appeal on a question of law, subject to the Court's leave, would have available under s 34A(1) of the CAA. That might, sensibly enough, be a matter that is deferred to a future day. The same result follows as to the correspondence as to service and expedition in early 2022, which did not require the solicitor for the Defendants to engage in a substantive analysis of the existence or non-existence of an appeal under s 34A of the CAA.
6. That is perhaps another way of saying, more fundamentally, that there is nothing in the correspondence in December 2021 and early 2022 that goes beyond an acceptance of service, and an acceptance that, to the extent any appeal was a proper one, the Defendants were content to it being expedited. There is nothing in that correspondence that involves a substantive recognition of the fact that an appeal could be brought, still less a substantive agreement to a right to an appeal, specifically on a question of law, which did not previously exist.

Ostensible authority

1. The parties addressed the question of ostensible authority of the solicitors to reach such an agreement. They referred to CIC Insurance Ltd v Bankstown Football Club Ltd [1985] 8 ANZ Ins Cas 61-232; to the subsequent reference to that decision in Lucke v Cleary [2011] 111 SASR 134; [2011] SASCFC 118 at [61], and to the further consideration of a solicitor's ostensible authority by the Court of Appeal the Supreme Court of New South Wales in Pavlovic v Universal Music Australia Pty Ltd [2015] 90 NSWLR 605; [2015] NSWCA 313, and the observations of Bathurst CJ at [21] and of Beazley P at [150] ff.
2. The question whether a solicitor would have ostensible authority, in the course of a directions hearing in an arbitration, to agree that the parties should have a substantive right, namely a right of appeal on a question of law, subject to the Court's leave, which their substantive agreement did not provide, is an interesting one. It turns, first, on whether the references in the authorities to the ostensible authority of a solicitor in respect of the conduct of litigation should be extended to the conduct of an arbitration. I would be inclined to think, if it were necessary to decide the question, that they should.
3. A second question, of greater difficulty, would be whether a decision as to the substantive scope of any right to appeal, extending the previous substantive agreements between the parties, could fairly be treated as an issue arising in the pursuit of the arbitration, within the solicitors' ostensible authority, or as a more substantive matter. A further question may arise as to whether that matter could properly be treated as relating to the conduct of the arbitration, where it is, in a sense, a matter relating to the right of appeal beyond the arbitration, and the arbitrator would have no power to confer such a right upon parties who had not agreed to it, or to deprive parties of such a right if they had agreed to it, by his decision in the arbitration. It is not necessary to decide these matters, and it is preferable that I not do so, where I have found that, as a matter of fact, the solicitors did not, whether between themselves or with the arbitrator's assistance, agree that an appeal on a question of law should exist for the purposes of s 34A(1)(a) of the CAA in the present case.

Conclusion and costs

1. For these reasons, I am comfortably satisfied that there was no agreement between the parties, for the purposes of s 34A(1)(a) of the CAA, that an appeal could be brought on a question of law from the arbitration. It would, in those circumstances, strictly not be necessary to determine any other issue, in order to determine the proceedings before me. However, I have recognised above that, against the contingency the Plaintiffs may wish to appeal this decision, and given the desirability of all issues being decided before any appeal is brought, so that it is not necessary to remit the matter to a trial judge at a future date, then it may be necessary to decide the other issues in this case. It does not seem to me that my decision on this issue, would prevent me from doing so, since both Counsel had proceeded on the basis that other issues are discrete.
2. Following the delivery of my ex tempore judgment dealing with these matters, I adjourned for a period to allow the Plaintiffs to determine whether they wished other matters in the proceedings to be determined. They have indicated that they do not, because they do not contemplate pursuing an appeal against the decision that I have reached and, on that basis, there is no utility and would be wasted costs in respect of determining the other issues, which would not arise unless my determination of that first issue was reversed. Mr McInerney, for the Defendants and Cross-Claimants, seeks orders under the First Cross-Claim, to recognise the awards in the arbitration under s 35 of the CAA. Mr Studdy fairly does not oppose such orders. I will also make an order for the parties to bring in agreed short minutes to give effect to judgment as the principal amount, interest and any other necessary orders, and the parties can address any dispute as to form of those orders in written submissions.

Costs

1. Turning now to the question of costs. Mr Studdy, valiantly, drew attention to the possibility that the Defendants could have contested the existence of any agreement for the purposes of s 34A of the CAA, whether in the email sent in late December 2021, or at least in further correspondence in mid-January and early February 2022. No doubt, they could have done so. However, it has been apparent at least since their Commercial List Response that they did contest the fact of that agreement and, fairly and unsurprisingly, the Plaintiffs pursued their claim while on notice of that matter. That is not by any means a criticism of the Plaintiffs, because they were entitled to do so, and that claim has now been determined on its merits. In those circumstances, it does not seem to me that the Defendants' position in December 2021, or January or February 2022 has any impact upon the question of costs.
2. Mr Studdy also points out that the issue as to the grant of leave, had there been an agreement to create a right of appeal on a question of law, would have been the more complex and more costly issue. That, however, is the unfortunate consequence of a second issue, which is dependent on the determination of the first, being more complex, and does not impact on the way in which the Court should approach the question of costs.
3. Here, it seems to me that the Plaintiffs must pay the Defendants' costs, as agreed or as assessed, simply as an application of the usual rule that costs follow the event.

Orders

1. Accordingly, I make the following orders:
2. The Summons filed by the Plaintiffs on 18 March 2022 be dismissed.
3. Order under s 35 of the Commercial Arbitration Act 2010 (NSW) ("CAA") that the First Award dated 1 June 2021, with typographical errors corrected on 24 June 2021, made by Mr D F Jackson QC AM, Arbitrator, is to be recognised in New South Wales as binding, and is to be enforced, by the Court.
4. Order under s 35 of the CAA that the Second Award dated 20 December 2021, and the Amendment to Second Award dated 4 February 2022, made by Mr D F Jackson QC AM, Arbitrator, is to be recognised in New South Wales as binding, and is to be enforced, by the Court.
5. Order under s 35 of the CAA that the further award dated 25 February 2022, made by Mr D F Jackson QC AM, Arbitrator, is to be recognised in New South Wales as binding, and is to be enforced, by the Court.
6. Direct the parties to submit agreed short minutes of order as to judgment, interest on judgment, any declarations and other orders, in favour of the Cross-Claimants against the Cross-Defendants, by 4pm on 17 May 2022, or, if there is no agreement, their respective draft orders and short submissions as to the differences between them.
7. The Plaintiffs pay the Defendants' costs of the proceedings, as agreed or as assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 May 2022