Cadoroll Pty Limited & Others v Mauntill Pty Limited [2000] ACTSC 79 (19 September 2000)

Last Updated: 17 October 2000

Cadoroll Pty Limited & Others v Mauntill Pty Limited

[2000] ACTSC 79 (19 September 2000)

CATCHWORDS

COMMERCIAL ARBITRATION - appointment of arbitrator - whether valid - whether arbitrator should have disqualified himself for bias - prior relationship between the arbitrator and witness for one of the parties - effect of full and accurate disclosure of the relationship.

COMMERCIAL ARBITRATION - scope of arbitraton clause - whether arbitrator's award was outside arbitration clause.

PRACTICE AND PROCEDURE - power of a Supreme Court judge to set aside an order giving leave to enforce a commercial arbitration award - lack of power to amend award.

PRACTICE AND PROCEDURE -constitutes notice of a commercial arbitration award.

PRACTICE AND PROCEDURE - failure to endorse order giving leave to enforce award - whether stay of execution should be granted on judgment enforcing award.

Commercial Arbitration Act 1986, s 33, s 42

Corporations Law, s 459H, s 109X

Supreme Court Rules, o 83 r 3, r 6 r 9, r 11

Cockatoo Dockyard Pty Ltd v Commonwealth of Australia [No 3] (1994) 35 NSWLR 689

Cameron v Cole [1944] HCA 5; (1943-1944) 68 CLR 571

Re Polites: Ex parte The Hoyts Corporation Pty Ltd [1991] HCA 25; (1991) 100 ALR 634

Livesey v The New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288

Giustiniano Nominees Pty Ltd v Minister for Works (1995) 16 WAR 87

Paper Products Pty Ltd v Tomlinsons (Rochdale) Limited [1993] FCA 346; (1993) 43 FCR 439

No SC 223 of 1993

Judge: Miles CJ

Supreme Court of the ACT

Date: 19 September 2000

1. The respondent to the originating application (Mauntill) proceeds by way of notice of motion dated 28 October 1994 seeking the following orders against Balescope Pty Limited, Southern Plumbing Supplies Pty Limited and Anthony Griffin (the applicants):

1) That execution of the judgment entered in favour of the applicants and Cadoroll Pty Limited (Cadoroll) and Caldpost Pty Limited (Caldpost) against Mauntill on 20 May 1993 be stayed.

2) That the judgment be set aside.

3) That a purported arbitration award of 2 October 1992 be set aside under s 42 of the Commercial Arbitration Act 1986 (the Commercial Arbitration Act).

Facts

2. The uncontentious factual background is as follows.

3. On about 1 August 1987 the applicants entered into a partnership agreement with the respondent and the other two plaintiffs, to carry on business as breeders and dealers in thoroughbred horses. The partnership was known as the "Dream II Syndicate". The agreement included terms that Mauntill would act as manager of the partnership and would be remunerated according to other terms and conditions. The agreement was contained in a document referred to in the evidence as the partnership deed and, although it was not a deed because it was not executed, I shall continue to call it that.

4. The first schedule to the partnership deed contained a number of provisions referred to as Rules. Rule 7(l) provided as follows:

"The Partners may by Special Resolution terminate the appointment of the Manager and appoint another party as Manager subject to the following conditions being fulfilled:

(i) The parties mutually release each other from the obligations contained in this Deed;

(ii) The new Manager accedes to the obligations cast on it by the terms of this Deed and executes an appropriate Deed incorporating these obligations;

(iii) That the Manager be paid by the partnership a termination fee in a lump sum being an amount equivalent to 7½% of the value of the assets of the partnership including all owned or leased bloodstock, and all things comprising the partnership property and in the event of dispute in this regard to be resolved in the same manner provided in sub clause (k) above."

5. The partnership deed also contained the following arbitration clause:

"(12) Arbitration

(a) All disputes and questions whatsoever which either during the partnership or afterwards arise between the Partners or their respective representatives or between any Partners (sic) or Partners and the representatives of any other or others touching this Deed or the construction or application hereof or any Clause or thing herein contained or any account valuation or division of assets debts or liabilities to be made hereunder or as to any act Deed or omission of any Partner or as to any other matters in any way related to the partnership business or the affairs thereof or the rights duties or liabilities of any person hereunder shall be referred to an Arbitrator appointed by the Manager who shall be appointed and who shall adjudicate such dispute to and in accordance with the laws relating to and governing Arbitration in force at the time and whose decision on such matters shall be final

6. A dispute arose between the applicants and the other partners on the one hand and the respondent on the other hand relating to the affairs of the partnership. A general meeting of partners was held on 30 June 1991 and resolutions passed including the following:

"... the partners terminate the appointment of Mauntill Pty. Limited as Manager and appoint Cadoroll Pty. Limited as Manager, the partners noting that:

a) Cadoroll Pty. Limited accedes to the obligations cast on it by the terms of the Deed and as agreed execute (sic) an appropriate Deed incorporating these obligations; and

b) that the terminated Manager is entitled to be paid a termination fee in accordance with Rule 7(1)(iii)."

7. Mauntill, represented by Mr William Sinclair, was present at the meeting and voted against the resolution. Mauntill does not dispute the validity of the resolution and the termination of its appointment as manager. However, at all material times, Mauntill remained a member of the partnership.

8. A document dated 31 July 1991 in the form of a deed and entitled "Deed of Accession" (the deed of accession) appointed or purported to appoint Cadoroll as "incoming manager" to manage the partnership business "in accordance with the Partnership Deed in place of Mauntill Pty Limited". All partners except Mauntill were expressed to be parties. The deed of accession contained covenants that the incoming manager would observe the covenants and conditions in the partnership deed and would be subject to all the duties and obligations contained in the partnership deed. However, the deed of accession was executed only by Cadoroll and Caldpost.

9. Mauntill took legal advice on these developments and was advised by letter from Messrs Moray Agnew dated 27 August 1991 that the appointment of Cadoroll was invalid on the ground that the "Deed is clearly incomplete in that it does not include all partners of the syndicate agreement and, therefore, cannot be an effective Deed of Accession".

10. On about 23 July 1991 the partnership paid Mauntill the sum of $19,557.64 as a termination fee in accordance with Rule (1)(iii) in the first schedule to the partnership deed. There is no dispute about the adequacy of the amount paid.

11. However, a dispute arose about the calculation of management fees paid to Mauntill during the period of its appointment as manager.

12. On or about 12 March 1992 Cadoroll wrote to Mr W T Sullivan inquiring whether he would be prepared to accept appointment as arbitrator pursuant to cl 12(a) of the partnership deed. The following day Mauntill received from Cadoroll a copy of the letter. Mr Sullivan responded to the letter by expressing interest and, after further dealings between him and Cadoroll, he accepted appointment as arbitrator. The exact date of the appointment is unclear.

13. Mr Sullivan entered upon the arbitration. Points of claim dated 5 May 1992 named the present applicants, as well as Cadoroll and Caldpost, as applicants in the arbitration and Mauntill as respondent. The present applicants assert in the present application that Mauntill and its solicitors were kept fully informed of the developments in the arbitration at all relevant times. Mauntill asserts that it made known to the applicants and to Mr Sullivan orally and in writing, either by itself and by its solicitors then acting, Messrs Blake Dawson Waldron, its objections to the "purported" arbitration occurring or continuing. It will be necessary to return to the evidence on this aspect.

14. On 25 August 1992 (the date originally set for the hearing) Mr Sullivan gave notice of the place, time and date of hearing. On 2 September 1992, the notified date, Mr Sullivan conducted a hearing at which Mauntill neither appeared nor was represented.

15. Mr Sullivan determined the dispute by an award dated 2 October 1992 accompanied by written reasons. The award was in the following terms.

"I FIND AND AWARD that the APPLICANTS are entitled to payment by the RESPONDENT as a result of the issues referred to me for determination of an amount of $171,578.86 including interest up to the making of this award excluding costs of the reference and the award.

I FURTHER FIND AND AWARD that the RESPONDENT is to pay to the APPLICANTS the Applicants' costs as agreed between the parties and failing agreement then as taxed by the Taxing Master of the Supreme Court of the Australian Capital Territory on a solicitor/client basis.

I FURTHER FIND AND AWARD that my fees and expenses are payable by the Respondent which fees and expenses I settle in accordance with and as set forth in Appendix 1 attached.

I FURTHER DIRECT that interest at the full rate as that at which interest is payable on a judgment debt of the Supreme Court of the Australian Capital Territory shall be payable on and from the date of making this award on so much of the money as is from time to time unpaid."

16. On the same day Mr Sullivan wrote to Mauntill stating:

"I wish to advise that the final award is now available for collection from the office of Contract Administration Group Pty Ltd at Fyshwick.

My account for fees and expenses is attached and is payable at the time of collection of the award."

17. Between 2 October and 15 October 1992 Mr Sinclair telephoned the office of Mr Sullivan and was told that he could not be provided with a copy of the award unless he paid the arbitrator's fees. He did not inquire, nor was he told anything about the terms or effect of the award.

18. On 15 October 1992 Messrs Minter Ellison Morris Fletcher, solicitors for the applicants, wrote to Mauntill in the following terms:

"We refer to the award handed down by the arbitrator in this matter on 2 October 1992 in the sum of $171,578.86 plus costs.

We require payment of this sum within 14 days, failing which we will apply to the court under Order 83 rule 9.01 of the Supreme Court Rules for enforcement of the award. We are in the process of preparing an assessment of our costs and will forward that to you in the near future."

19. Mauntill did not respond to the letter. Nor did Messrs Minter Ellison Morris Fletcher forward an assessment of their costs.

20. On 31 March 1993, the applicants, together with Cadoroll and Caldpost, issued a summons pursuant to s 33 of the Commercial Arbitration Act and o 83 r 3 and r 9 of the Supreme Court Rules seeking leave to enforce the award against Mauntill and seeking also judgment in terms of the award. The summons bore the notation "It is not intended to serve this summons on any person". The summons was not served on Mauntill nor on anyone on Mauntill's behalf.

21. On the return of the summons on 2 April 1993, at which Mauntill was neither present nor represented, the Master made the following orders:

"1. The applicants have leave to make an oral application to amend the Award made by William Timothy Sullivan on the 2^nd day of October 1992.

2. The necessity to serve notice of that oral application on the respondent be dispensed with.

3. The Award be corrected by:

(a) substituting $45,036.14 for $48,306.28 shown on page 14 of the Award as being the total interest up to the making of the Award;

(b) substituting $168,308.72 for $171,528.86 shown on page 1 of the Award for which the applicants are entitled to payment by the respondent as a result of the issues referred to by the arbitrator in his Determination.

4. Leave be granted to the applicants to enforce the Award made by William Timothy Sullivan on the 2^nd day of October 1992 as corrected by him in his letter which is Annexure A to the affidavit of Alison Mary Pert affirmed on the 31^st day of March 1993 and filed herein, and as corrected by Order 3 herein, in the same manner as a judgment of this Court, and judgment may be entered in terms of the Award, that is, for the sum of $168,308.72 found by the arbitrator to be payable by the respondent to the applicants, together with the costs of the arbitration and interest from the date of the making of the Award as also determined by the arbitrator.

5. The respondent pay the costs of this application."

22. On 20 May 1993, pursuant to the orders made by the Master, judgment was entered for the applicants and Cadoroll and Caldpost against Mauntill in the sum of $168,308.72 together with interest of $15,908.63 and costs to be taxed.

23. On 13 July 1994 the applicants Cadoroll and Caldpost served upon Mauntill a statutory demand under s 459H of the Corporations Law seeking payment of the judgment sum and interest. On 2 September 1994, on the application of Mauntill, Higgins J made an order setting aside the statutory demand.

24. On 20 October 1994 Mr Sullivan sent a copy of the award to Messrs Blake Dawson Waldron, by then again acting for Mauntill and received by them on Mauntill's behalf.

25. On 28 October 1994 the present notice of motion was filed.

Relevant statutory provisions and rules

26. The relevant sections of the Commercial Arbitration Act and the Rules of Court provide as follows:

"33 Enforcement of award

An award made under an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect, and where leave is so given, judgment may be entered in terms of the award.

38 Judicial review of awards

(1) Without prejudice to the right of appeal conferred by sub-section (2), the court shall not have jurisdiction to set aside or remit an award on the ground of error of fact or law on the face of the award.

(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.

......

(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement -

(a) with the consent of all the other parties to the arbitration agreement; or

(b) subject to section 40, with the leave of the Supreme Court.

(5) The Supreme Court shall not grant leave under paragraph (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.

42 Power to set aside award

(1) Where -

(a) there has been misconduct on the part of an arbitrator or umpire or an arbitrator or umpire has misconducted the proceedings; or

(b) the arbitration or award has been improperly procured;

the court may, on the application of a party to the arbitration agreement, set the award aside either wholly or in part.

(2) Where the arbitrator or umpire has misconducted the proceedings by making an award partly in respect of a matter not referred to arbitration pursuant to the arbitration agreement, the court may set aside that part of the award if it can do so without materially affecting the remaining part of the award.

(3) Where an application is made under this section to set aside an award, the court may order that any money made payable by the award shall be paid into court or otherwise secured pending the determination of the application.

ORDER 83

DIVISION 1 - AWARDS

Interpretation

1 In this Order, unless the contrary intention appears:

"Arbitration Act" means the Commercial Arbitration Act 1986;

"proceeding" means a proceeding of any kind in the Court under the Arbitration Act.

......

Time for appeal or application

6(1) ...

(2) An application for an order -

...

(b) under subsection 42(1) of the Arbitration Act ("Power to set aside award") to set an award aside; or

...

must be made not later than 21 days after -

(d) if, by agreement of the parties to the arbitration agreement, the award is made without inclusion of a statement of reasons the day the statement of reasons is given to the appellant; or

(e) in any other case - the day notice of the award is given to the appellant; or within such extended time as the Court allows.

Application for leave to enforce award

9(1) Unless the Court otherwise orders, an application for leave under subsection 33(1) of the Arbitration Act ("Enforcement of award") to enforce an award -

(a) must be supported by an affidavit that states:

(i) the extent to which the award has not been complied with at the date the application is made; and

(ii) the usual, or last known place of residence or business of the person against whom it is sought to enforce the award or, if the person is a corporation, its last known registered office; and

(b) may be made without giving notice to any person.

(2) If leave is given, any party to the award may enter judgment in terms of the award.

Indorsement and service of order for enforcement

11(1) An order under subsection 33(1) of the Arbitration Act giving leave to enforce an award must -

(a) be indorsed with a statement that the person on whom the order is served may, before the expiration of 5 days after service (or such longer period as the Court order) apply to have the order set aside; and

(b) be served on the person against whom it is sought to enforce the award.

(2) An order does not operate to enable an award to be enforced until:

(a) the expiration of the period referred to in subrule (1); and

(b) if the person against whom it is sought to enforce the award applies, within the period referred to in subrule (1), to have the order set aside - the determination of that application."

27. It should be observed that it is not clear that the Master had power to amend the award at the ex parte hearing before him on 2 April 1993, and counsel was not able to point to the source of any power. The power in the Court and the power exercised by the Master on that date is conferred by s 33 and regulated by o 83. There is nothing in the section or the rules which goes beyond the conferral of power to give leave to enforce the award. Where leave is given any party to the award is entitled by operation of law (without further order, so it seems to me, but see Cockatoo Dockyard Pty Ltd v Commonwealth of Australia [No 3] (1994) 35 NSWLR 689) to enter judgment in accordance with o 83 r 9(2). But judgment may be entered only "in terms of the award". There is no power to alter or amend the award or any of its terms. The requirement under o 83 r 9(1)(a)(i), that an application be supported by an affidavit stating the extent to which the award has not been complied with, suggests that execution of the judgment may not be levied except to the extent that the award has not been complied with. Thus, insofar as the Master's order resulted in a reduction of the monetary amount for which judgment was entered from that which was the subject of the award, the point about the Master's lack of power is not taken by either side in the present application. It does, however, illustrate the care which must be taken in ex parte applications.

Is there power to set aside the order giving leave to enforce the award?

28. Power to set aside the order is clearly envisaged, if not conferred, by o 83 r 11(2)(b), but the terms of the subrule make that precise power dependent upon the person served making application within the time stipulated in the endorsement on the order. It could hardly have been intended that a failure by the other party to endorse the order served as required by the rule excludes the power of the Court to set aside the order if there is such a power independent of the rule.

29. There is an inherent power in a court, certainly a superior court, to set aside an order made without notice to the party against whom it is made. Examples abound in the authorities, for instance, Cameron v Cole [1944] HCA 5; (1943-1944) 68 CLR 571, which was cited by Mr Nicol for Mauntill. On the other hand, Mr Mossop, for the applicants, submitted that the normal requirement of notice of the hearing was specifically excluded by o 83 r 9(2) and that, in the words of Latham CJ at 584, notice was not a "condition of jurisdiction". A different emphasis was given by Rich J, who said at 589:

"A fortiori, in the absence of clear words, a statute should not be treated as depriving a court of the inherent jurisdiction possessed by every court to ensure that trials before it are conducted in accordance with the principles of natural justice. There is nothing in s 26 [of the Bankruptcy Act 1924-1933] which suggests any intention on the part of the legislature to interfere with the principles to which I have referred, nor is there in s 124."

30. Whilst o 83 r 9(1)(b) allows a party to obtain leave to enforce an award without notice to the person against whom it is to be enforced, the principles of natural justice are, in my view, not excluded. On the contrary, they are enshrined in the requirement that the party obtaining the ex parte order is enjoined from enforcing it until the other party, once properly served with the order when made, fails to take the opportunity within the time limited to apply to set the order aside. The situation is not unlike the long-standing procedure of an order nisi followed by an application for an order absolute. Finality of the order is not achieved until the party against whom it is made has had an opportunity of responding to it and showing cause why it should not have been made in the first place.

31. I conclude, therefore, that, on the facts, o 83 r 11(2)(b) does not apply, and that there is power to set aside the Master's orders of 2 April 1993.

Should the order giving leave to enforce the award be set aside?

32. The answer to this question depends on whether the award itself should be set aside.

33. The Commercial Arbitration Act gives no indication as to the principles to be applied in an application to enforce an award. But in Cockatoo Dockyard, Rolfe J said at 694:

"In my opinion s 33 of the Act does not provide another method whereby a party may call in question the award of an arbitrator and, although perhaps under another guise, provide the Court with a power to reverse what the arbitrator has done."

34. At 695-696, his Honour continued:

"In my opinion s 33 is not a dispute resolving provision referring a matter the subject of arbitral proceedings to the Court. It provides a summary procedure whereby awards may be enforced "in the same manner as a judgment or order of the Court to the same effect", and allows judgment to be entered in terms of the award. In the context of the Act that cannot, in my opinion, mean the Court is given power under s 33 to reconsider whether the award should have been made and, if for some reason it concludes it should not, to refuse to enforce the award.

It is necessary for a party resisting an order under s 33 to establish a reason why the award should not be enforced. A reason may be that the Court considers the award is arguably vitiated by appealable error, or by other circumstances making it susceptible of being set aside in accordance with a provision of the Act. In other words it may well be an appropriate exercise of the Court's discretion not to grant leave if an application for leave to appeal is on foot or if an application has been made to set aside to award, for example, on the ground of misconduct. However unless an attempt is being made to have the award set aside I have difficulty envisaging other circumstances in which the discretion can be exercised. Certainly I do not regard s 33 as a "back door" method of appealing against an award in so far as it constitutes a decision by the arbitrator how he should exercise his discretion. The discretion given does not include, in my opinion, an ability to re-visit the way in which the arbitrator exercised his discretion where, otherwise, his discretion is not subject to attack in accordance with the Act. A contrary conclusion would, I believe, be totally at odds with the obvious intention and philosophy of the Act."

35. In the present case there is on foot, as there was in Cockatoo Dockyard, an application to set aside the award. In Cockatoo Dockyard the application to set aside the award failed and leave was granted to enforce the judgment. That outcome was consistent with his Honour's reasoning in the passages quoted, and, I think, with respect, with the terms of the Commercial Arbitration Act.

36. In order to determine the question whether the order giving leave to enforce the award should be set aside, it is necessary, therefore, to turn to the alternative relief sought, the application to set aside the award itself.

Is the application to set aside the award out of time?

37. Mr Mossop submitted that the application to set aside the award is out of time since it was made later than 21 days after the day notice of the award was given to Mauntill: see o 83 r 6(2)(e) set out above at [25]. Mr Nicol submitted that, if notice of the award was given at all, it was not until Mr Sullivan sent a copy of the award to Messrs Blake Dawson Waldron on 20 October 1994, five days before the filing of the present notice of motion.

38. It is necessary to make findings of fact here before examining the terms of the rule. As explained above at [15], the award is dated 2 October 1992. It purports to be "published" that day but the assertion is true only in the sense that Mr Sullivan wrote to Mauntill (and, I infer, to the other parties) that it was available at his office. I accept Mr Sinclair's evidence that he rang Mr Sullivan's office and was told that the award was available only if Mr Sinclair paid Mr Sullivan's fees. I infer that this meant the whole of the fees for the arbitration and not simply the cost of copying or supplying the award.

39. Mr Mossop submitted that notice of the award was given in the letter of 2 October 1992. Clearly the letter was notice that the award had been made. The question is whether that was sufficient for the purposes of o 83 r 6(2)(e). It does not make sense to provide for an "appellant" to be given a limited time in which to take steps to set aside an award, unless notice is given, at the very least, of whether the decision is favourable or unfavourable. Mr Nicol submitted that it was not enough to inform Mauntill, who had taken no part in the arbitration, that an award had been made in the light of Mr Sinclair having been told that a copy of the award could be obtained, only on payment, by Mr Sinclair of Mr Sullivan's fees. Neither counsel referred to any authorities. I think that Mr Nichol's submission is correct. However, it does not mean that notice of the award was not given until a copy of the award was sent to the solicitors on 20 October 1994.

40. There may be situations in which a party is estopped from denying that notice has been given, but that issue was not raised in the present case. However, Mr Nicol, as I understand him, submitted that notice required compliance with s 109X of the Corporations Law, as it then stood, that is "by leaving it at, or by sending it by post to, the head office, a registered office or a principal office of the body corporate". Section 109X applies for the purposes of any provision of "this law" that requires or permits a document to be served, whether the expression "serve", "give" or "send" or any other expression is used. In my view, the parties were at liberty to agree amongst themselves as to the method of notice notwithstanding the facultative provisions of s 109X.

41. But cl 12 of the partnership deed provided that notices may be served by post to the last place of address shown in the Register as the address of that partner. On 15 October 1992 Messrs Minter Ellison Morris Fletcher wrote to Mauntill in terms set out at [18] above. The contents of the letter informed Mauntill that the award required payment of $171,578.86 together with costs. In my view, that letter notified Mauntill of the essential contents of the award, that is that Mauntill had incurred liability for the sum awarded together with costs.

42. There was no evidence of what constituted the Register, but the second schedule to the partnership deed set out the addresses of the partners. The address of Mauntill was shown as c/o Farnham Sinclair & Associates, 13 Altree Court, Phillip. That was the location of Mr Sinclair's accountancy practice. Although it ceased to be the location of his practice sometime in 1990, it had the postal address of PO Box 48, Woden and all relevant documents were posted to that postal address and that remained the postal address at all relevant times. In any event, Mr Sinclair did not complain of lack of notice of any relevant document. I am satisfied that Mauntill had notice of all relevant documents and, in particular, it had notice of the award when Mr Sinclair received the letter of 15 October 1992 in the ordinary course of post within a day or two of that date.

43. The application to set aside the award under s 42(1) is therefore out of time and there is no power in the Court to grant the application.

Was there misconduct on the part of the arbitrator?

44. It was submitted on behalf of Mauntill that there was misconduct on the part of the arbitrator or alternatively that the arbitrator misconducted the proceedings within the meaning of s 42(1) of the Commercial Arbitration Act. The alleged misconduct was the failure of Mr Sullivan to disqualify himself for apprehended bias.

45. "Misconduct" for the purposes of the Commercial Arbitration Act is defined in s 4(1) to include corruption, fraud, partiality, bias and a breach of natural justice. It was common ground that apprehended bias is sufficient.

46. The apprehension of bias, according to the submission, arose from Mr Sullivan's association with a Mr Commisso, an accountant who carried out accountancy work for Mr Sullivan and for a company or companies associated with Mr Sullivan. Mr Commisso was a director of a company, Horwarth & Horwarth Pty Limited, into which Mr Commisso's accountancy practice was somehow or other incorporated. Mr Commisso prepared a report dated 12 February 1992 for the purposes of the arbitration in which he set out a series of arithmetical calculations of the value of bloodstock based on various alternative factual hypotheses supplied to him. However, Mr Commisso's report was not tendered as evidence, nor did Mr Commisso give oral evidence in the arbitration. What happened was that Mr Commisso's "partner" or fellow director, Mr Henry Rous Smith, used Mr Commisso's report as a basis for a further series of calculations, and it was Mr Smith's report of 28 July 1992 and not Mr Commisso's that was used as evidence in the arbitration. Mr Smith and Mr Sullivan both provided expert evidence for a mutual client in an arbitration in Sydney in which they had "a close involvement from time to time". Otherwise, and apart from one casual meeting in a professional context, there was no professional or social association between Mr Smith and Mr Sullivan and no appearance of any.

47. Mr Commisso attended a directions hearing or preliminary conference on 25 March 1992 in the preparatory stages of the arbitration but took no active part in it.

48. Mr Smith's report was under the letter head of Horwarth & Horwarth Pty Limited. It was signed by Mr Smith as a director. The views expressed in it were expressed in the first person plural ("We provide a further report", "It is our opinion", etc). Further, the printed names of both Mr Smith and Mr Commisso appeared as directors at the foot of the first page of the report.

49. Mr Sinclair, on behalf of Mauntill, protested to Mr Sullivan by letter dated 11 May 1992 about the association between Mr Sullivan and Mr Commisso. Mr Sullivan replied by letter of 13 May 1992 disclosing his association with Mr Commisso and denying any conflict of interest or "perceived bias" on his part. By the terms of the letter he impliedly declined to disqualify himself as arbitrator. He also invited Mauntill to "move the court" on the matter of his jurisdiction.

50. The complaint of bias was repeated in a letter dated 25 June 1992 to Mr Sullivan by Messrs Blake Dawson Waldron on behalf of Mauntill. They expressed the view that if the arbitration proceeded it would be "void ab initio" by reason of the rules of natural justice.

51. Disqualification for bias is a well-worked area of the law as it applies to arbitrators in much the same way as it applies to judicial officers. A good example is Re Polites: Ex parte The Hoyts Corporation Pty Ltd [1991] HCA 25; (1991) 100 ALR 634, as it contains statements of principle in a unanimous judgment of the High Court. It concerned a Deputy President of the Australian Industrial Relations Commission, who had previously been a legal adviser to a group of employers. Hoyts was a member of the group. The Court referred at 639 to the previous enunciation in Livesey v The New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288 at 293-294 that:

"The principle is that a judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the question involved in it."

52. The Court in Polites continued at 640:

"... the test in Livesey cannot be pressed too far when the qualifications for membership of the tribunal are such that the members are likely to have some prior knowledge of the circumstances which give rise to the issues for determination or to have formed an attitude about the way in which such issues should be determined or the tribunal's powers exercised. ...

The prior involvement of a Deputy President with associations or with governments who are frequently parties to proceedings before the Commission cannot be sufficient by itself to amount to a disqualification from sitting in a particular case; nor can the prior acquisition of "skills and experience" amount to such a disqualification."

53. In contrast, as to its outcome, is Giustiniano Nominees Pty Ltd v Minister for Works (1995) 16 WAR 87, in which an arbitrator conducted private seminars exclusively for one of the parties during the course of the arbitration, charged a discounted fee to the party because it was regarded as a client of prestige, and failed to disclose the relationship to the other parties to the arbitration. The Full Court of the Supreme Court of Western Australia held, allowing the appeal, that there was a reasonable apprehension of bias. The evidence was that it was a widely accepted fact of commercial life in Perth that a person considered suitable for appointment as an arbitrator was likely to have had previous business dealings in another capacity with one or more parties to the arbitration. However, it was the communications and dealings of a private nature between the arbitrator and the party whilst the arbitration was on foot, including discussions which, though of a general nature, had a bearing on the issues in the arbitration which gave rise to the apprehended bias.

54. Although the line may sometimes be fine, I think that the facts in the present case are much closer to Polites than to Giustiniano. The prior association between Mr Commisso and Mr Sullivan was the sort of association that might be expected amongst professional people in the financial and commercial community in Canberra, and, although there was a continuing association, it was not between Mr Sullivan and Mr Commisso, but between Mr Sullivan as arbitrator and Mr Commisso's partner or fellow director, Mr Smith, as witness in the arbitration. There was nothing to suggest that the partnership in any way bore upon the professional opinion offered by Mr Smith or its assessment by Mr Sullivan. Mr Commisso, although somewhat inexplicably present at a directions hearing before Mr Sullivan, took no part in the arbitration and there was a disclosure by Mr Sullivan to Mauntill on the correspondence which has not been shown to be anything but a full and accurate disclosure of the relationship. There could not be, in my view, a reasonable apprehension that Mr Sullivan would not bring an unbiased and unprejudiced mind to any of the issues in the arbitration. There was no misconduct on the part of Mr Sullivan and no ground for setting aside the award under s 42(1) of the Act.

Was the arbitration outside the arbitration agreement?

55. I deal now with the submission on behalf of Mauntill that the arbitration was outside the arbitration agreement, or, alternatively, the arbitrator exceeded his powers having regard to the scope of the arbitration clause set out at [5] above. The clause is couched in very wide terms with regard to the nature of the disputes that are to be referred to arbitration. They include any dispute or question "touching this Deed or the construction or application hereof or any Clause or thing herein" and extend to "any account for a valuation or division of assets, debts or liabilities to be made hereunder".

56. Rule 7(k) provides a formula for the calculation of the management fee being a percentage of assets of the partnership, including bloodstock. In the event of a dispute over the value of bloodstock, r 7(k) provides that the dispute is to be referred to a valuer appointed by the President of the NSW Bloodstock Breeders Association, whose decision on the value of the bloodstock shall be final. It was submitted on behalf of Mauntill that these provisions meant that the calculation of management fee, or, at least, the value of the bloodstock raised matters which were excluded from the operation of the arbitration clause and that the arbitrator had no power to make an award which took those disputes into account. However, in my view, as an ordinary exercise in construction, far from falling outside the scope of the arbitration, the matters in r 7(k) were matters to which the arbitrator was bound to have regard in the reasoning and fact-finding process leading to his award. If there was no dispute about the value of bloodstock, he was bound to accept the uncontested value as disclosed by the evidence or agreed by the parties. If there was a dispute about the bloodstock, he was bound to refer that matter to the President of the NSW Bloodstock Breeders Association and to accept the decision of the President on that matter as final.

57. The arbitrator may or may not have correctly applied the provisions of r 7(k), but, if he did not, the error might be one of law which is not and cannot be the subject of attack in the present proceedings; alternatively the error might be one of fact, which cannot be attacked at all by way of judicial review: s 38(1) Commercial Arbitration Act. My conclusion already reached is confirmed by the recognition of a presumption that where the language of an arbitration clause is sufficiently "elastic" (as it is in the present case), it is unlikely that the parties intended to artificially divide their dispute between arbitration and the courts: Paper Products Pty Ltd v Tomlinsons (Rochdale) Limited [1993] FCA 346; (1993) 43 FCR 439.

Was the arbitrator validly appointed?

58. I assume, without deciding, that if the arbitrator was not validly appointed then the arbitration is null and void. Rule 7(l) of the rules in the first schedule to the partnership deed is set out above at [4].

59. There was no issue that Mauntill's appointment was not validly terminated, but it was submitted on behalf of Mauntill that the appointment of Cadoroll as manager in Mauntill's place was not valid because Mauntill was not a party to the deed of accession.

60. On the evidence, the deed of accession was executed only by Cadoroll and Caldpost. I do not understand how the absence of Mauntill as a party to the deed of accession invalidates the appointment of Cadoroll as manager. The execution of the deed by Cadoroll was in compliance with the resolution of the partnership on 30 June 1991. It was not necessary for any other partner to be named as party to the deed or to execute it. The deed of accession was not contrary to the partnership deed and execution of the deed of accession was not a breach of the partnership deed. It follows that the appointment of Cadoroll as manager was valid and that the appointment by Cadoroll of Mr Sullivan as arbitrator was also valid. My conclusion is contrary to the advice received by Mauntill in the letter dated 27 August 1991.

Stay of execution

61. Order 83 r 11(2) provides that the order "does not operate to enable an award to be enforced" until the expiration of five days after service of the order on the person against whom it is sought to enforce the award, or such further time as the Court may order. Moreover, the effect of o 83 r 11(1)(a) is that the order may not be enforced unless it is endorsed as provided. It is common ground that the order or copy order served on Mauntill was not so endorsed. It follows that the Master's order has never operated to enable the award to be enforced. The applicants are not entitled to execute on the judgment since that would amount to an enforcement of the award. A stay of execution of the judgment may therefore not be strictly necessary, since the Sheriff might decide not to act to levy execution on the judgment unless satisfied that the requirements of o 83 r 11 had been met. However, it is a moot point, and I do not think that the decision should be deferred until the applicants seek to levy execution on the judgment. I think that in principle a stay is appropriate in order to preserve the status quo, until time for appealing against the stay has expired. Subject to that the applicants ought be able to enforce the award notwithstanding non-compliance with o 83 r 11(1)(a).

Outcome

62. Subject to what counsel have to say, I will make orders as proposed or allow time for the bringing in of short minutes of orders.

I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, the Chief Justice.

Associate:

Date: 19 September 2000

Counsel for the applicant: Mr I Nicol

Solicitor for the applicant: Blake Dawson & Waldron

Counsel for the respondents: Mr DJC Mossop

Solicitor for the respondents: Colquhoun Murphy

Dates of hearing: 16 and 17 August 2000

Date of judgment: 19 September 2000

IN THE SUPREME COURT OF THE )

) No. SC 223 of 1993

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: CADOROLL PTY LIMITED

CALDPOST PTY LIMITED

BALESCOPE PTY LIMITED

SOUTHERN PLUMBING SUPPLIES PTY LIMITED

ANTHONY GRIFFIN

Applicants

AND: MAUNTILL PTY LIMITED

Respondent

ORDER

Judge: Miles CJ

Date: 2000

Place: Canberra

THE COURT ORDERS THAT:

1. There be a stay of the execution of the judgment.