Plaintiff v Defendant

Plaintiff v Defendant - [2010] VSC 419 - VSC 2010 case summary — Zoe

[14]

"[108] One of the considerations discussed by Lord Diplock in The "Nema"[6] (at 742-743) was the undesirability of review of arbitration awards where the questions in issue took days to argue.

[109] The above considerations of the purpose of the new subss (5) and (6) of s 38 make clear what the approach should ordinarily be to this procedural question. Set against a background of the keen recognition that permitting the conduct of substantive arguments on appeal before granting leave would open up for review more arbitration awards than would occur if only truncated argument on leave were permitted, a clear legislative and contextual policy can be discerned that assists in appreciating that except in special, indeed exceptional, cases an application for leave should be dealt with and finalised before the hearing of the appeal. The relevant tasks on a leave application provided for by the text of s 38 also make it important to deal with leave first. The very assessments contemplated by s 38(5)(b)(i) and (ii) are directed to questions that are interlocutory in character and ones that should in terms be answered before full argument about the asserted error of law as an ultimate decision. That said, I am not persuaded that the text and structure of s 38 deny the court authority to hear argument upon appeal until leave to appeal has been granted.

[110] Section 38 reflects a legislative purpose of the recognition of the autonomy of the parties by the respect the court should give to the arbitrators' award. Procedures should be adopted which support, not undermine, that recognition of autonomy and respect for the award.

[111] The process of hearing full argument on the appeal will almost inevitably subvert the intention to be discerned in the CA Act, s 38 to limit judicial review. It is difficult to decide the questions in s 38(5)(b) if full argument is heard enabling a view to be reached about the ultimate correct answer. A judge will naturally find it difficult, after full argument, to conclude in the negative to both paras (5)(b)(i) and (ii), but to conclude that there was an error. Further, and as importantly, it will, in practical terms, give an appeal to a party without having to satisfy a judge of the character of the error and any other matters contemplated by s 38 (5)(b)(i) or (ii). The procedure of hearing full argument on the appeal undermines the purpose of s 38, as Rogers CJ CommD[7] and Sheller JA[8] said with clarity and force.

[112] The context and purpose of leave to appeal in s 38 make it plain what the approach should be except in special, indeed exceptional, cases. I have no hesitation in concluding that the primary judge was wrong in principle to conduct the application as he did. It is a course that is inimical to the purpose of the statute: Promenade at 187-189 (Rogers CJ Comm D)[9] and 221 and 226 (Sheller JA)[10]; Mowby Pty Ltd v Moose Property Services Pty Ltd [2007] VSC 111 at [4] and Energy Brix Australia Corporation Pty Ltd v National Logistics Coordinators (Morwell) Pty Ltd [2002] VSCA 113 at [31]; [2002] VSCA 113; (2002) 5 VR 353 at 368.

[113] For these reasons, in my view, the primary judge erred in his approach. He should have restricted himself to a consideration of the leave question before embarking on hearing the appeal."

[23]

'In applying s38, as amended, a construction that would promote the purpose or object underlying the Act must be preferred to a construction that would not promote that purpose or object ... The expression "error of law on the face of the award" is one of a type well-known to courts. The award having been examined, the question is whether there is apparent (and such is the denotation of the word "manifest") an error of law. 'Manifest error' is an expression sometimes used in reference to reasons given by judges or the approach taken by juries ... It is used to indicate something evident or obvious rather than arguable .... The matters referred to by Lord Diplock in The Nema remain important factors in determining whether leave should be given.

However, I have difficulty in defining the significance of an error of law by reference to whether it is apparent to a judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument. I understand the views expressed that decisions on questions of law should be left to the arbitrator with minimal interference by the courts unless the arbitrator may be establishing an erroneous precedent on a matter of law which may affect other cases between other parties, as, for example, where the question concerns the construction of a contract in standard terms. But the paragraph requires a determination as to whether or not there is a manifest error on the face of the award and I do not see why a judge should be required to do that without adversarial argument. If the judge concludes after argument that there is not such an error of law an application based on this ground fails ... There is nothing, in my opinion, in the language of the sub-section or in any other material, to which consideration can appropriately be given pursuant to the terms of the Interpretation Act which would allow the judge to proceed to determine the application without hearing argument. However, as McHugh JA pointed out "manifest" in the context of the sub-section, which contemplates the grant of leave before an appeal can be pursued, connotes an error of law which is more than arguable. 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'.[19]

[33]

In this context, the importance of standard form contracts in the operation of commercial markets and the role of the courts in the support thereof by clarity and consistency had, only four years before in 1977, been lucidly and commandingly expressed by his Lordship in Federal Commerce & Navigation Co v Tradax Export SA (The "Maratha Envoy") [1978] AC 1 at 7-8.

[127] What therefore has to be shown, as a first step, is that there was strong evidence, in the sense of a strong prima facie case, that the arbitrators were wrong in law. Only if this exists does one move on to the additional consideration as to whether the determination of the question (of law) may or may be likely to add substantially to the certainty of commercial law. The court needs to be careful not to downgrade the statutory requirement of "strong evidence", that is a strong prima facie case of legal error, because of the "interesting" or important legal question involved. The remit of arbitrators includes the making of errors; that is an inevitable part of any process of dispute resolution. Arbitrators may deal with "interesting" or important questions. How and what errors are to be corrected depends on the statute in question. Here, it must be shown that there is a strong prima facie case that the arbitrators were wrong on a question of law.

[128] An assessment of this question at the procedural level of a leave application requires the demonstration by arguments appropriate to a leave application of a strong prima facie case of legal error. The restriction of argument to a form appropriate to a leave application is not restricted to "manifest error". It might be obvious that in that context argument would necessarily be short. It might also be that a strong prima facie case of error requires the display of something more than obvious error. Nevertheless, it is the evidence of a prima facie case of error that is required to be strong. The longer the debate that is required to demonstrate the asserted error, the likely more contestable is the argument. The procedural context is again important. The strength of any argument and the strength of the prima facie case of error is not assessed after full concurrent argument on appeal. It is to be assessed by reference to argument suitable to a leave application in which the task is to assess the strength of the case for error, not decide the case for error."

[56]

19. That contention is however beside the point. The provision of Section 20 does not deal with a personal covenant or a personal right to sue the borrower. It deals with an action against land, where the rights of other parties can also be affected. If money falls due under a mortgage it represents a burden imposed upon the freehold. That is, it has a proprietary nature. The Act prevents any attempt to recover the amount of that obligation 15 years after it accrues. It is in the nature of that obligation that the property might belong to a person other than the person who created the obligation by the time the creditor seeks to enforce it. When the money falls due under the mortgage, the right to receive it has accrued. The time limit in respect of the land commences to run then. Whatever the owner of the land might agree with its creditor thereafter, the obligation on the land does not go away unless it is either satisfied or forgiven.
20. The arbitrator fell into error by focusing upon causes of action and identifying different causes of action against Mr Winter arising in 1992 and 1994. Equuscorp's claim is not based upon any cause of action against Mr Winter. It is a proprietary claim based upon the fact that the money due under its mortgage is secured against the land. Having fallen due in February 1992 nothing that occurred thereafter was capable of discharging the obligation against the land. The settlement might well have precluded Equus from suing Mr Winter for so long as he complied with the terms. It may also have amounted to a personal covenant with Mr Winter not to seek to enforce its rights against the land. But the debt having accrued, time commenced running under Section 20 and nothing occurred to make the debt accrue.
The arbitrator's error lay in his conclusion that the accrual or otherwise of causes of action against Mr Winter was the relevant test, as it would be in an action on simple debt under Section 5 of the Act, rather than giving effect to the simple language of Section 20(1) which is not concerned with the enforcement of a cause of action against an individual, but instead actions to recover money secured by a charge, irrespective of whom the defendant might be, or the existence of any personal obligation held by them."

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Cases Cited (11)