Re Commonwealth of Australia and the Australian Capital Territory v Rian Financial Services and Developments Pty Limited [1992] FCA 239; (1992) 36 FCR 101 (27 May 1992)

FEDERAL COURT OF AUSTRALIA

Re: COMMONWEALTH OF AUSTRALIA AND THE AUSTRALIAN CAPITAL TERRITORY
And: RIAN FINANCIAL SERVICES AND DEVELOPMENTS PTY LIMITED
No. ACT G77 of 1991
FED No. 325
Arbitration
[1992] FCA 239; (1992) 36 FCR 101

COURT

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Davies(1), Neaves(1) and Higgins(2) JJ.

CATCHWORDS

Arbitration - application for leave to appeal and appeal from order of Supreme Court of the Australian Capital Territory refusing leave to appeal in respect of an interim award in arbitration under building contract - Notice of cancellation of contract to be given "in writing under the hand of" the Australian Capital Territory - Question whether the person signing the notice was authorised to do so - Whether notice valid only if signed by a person holding a delegation under s.55 of the Australian Capital Territory (Self-Government) Act 1988 (Cth) - Whether manifest error on the face of the award - Whether the determination of the question of law could substantially affect rights of party to arbitration agreement.

Australian Capital Territory (Self-Government) Act 1988 (Cth), s.55 Commercial Arbitration Act 1986 (ACT), s.38

O'Reilly v. Commissioners of the State Bank of Victoria [1983] HCA 47; (1983) 153 CLR 1

Deputy Commissioner of Taxation (Vic) v. Boxshall (1988) 83 ALR 175

N. MacDonald Pty Ltd v. Hamence (1984) 1 FCR 45

State of New South Wales v. Bardolph [1934] HCA 74; (1954) 52 CLR 455

Pioneer Shipping Ltd v. BTP Tioxide Ltd (1982) AC 724

Promenade Investments Pty Ltd v. State Bank of New South Wales (Court of Appeal - 18 February 1992 - unreported)

HEARING

CANBERRA
27:5:1992

Counsel for the appellant: A. Robertson

Solicitors for the appellant: ACT Government Solicitor

Counsel for the respondent: B.A. Meagher

Solicitors for the respondent: Colquhoun Murphy

ORDER

The Court orders that:

1. The appellants have leave to appeal from the order of the
Supreme Court of the Australian Capital Territory given on 4
December 1991.
2. The appeal be allowed.
3. The order of the Supreme Court be set aside and in lieu
thereof it be ordered that -
(i) leave be granted to appeal to that Court from
the interim award of the arbitrator made on 9
September 1991;
(ii) the appeal to that Court be allowed; and
(iii) the interim award of the arbitrator be set aside
and the matter be remitted to him for
reconsideration in accordance with law.
4. That the respondent pay the appellants' costs of the appeal
and of the proceedings in the Supreme Court.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This is an application for leave to appeal from an order made by the Chief Justice of the Supreme Court of the Australian Capital Territory (Miles C.J.) refusing leave to appeal in respect of an interim award in a building arbitration. The Court heard argument on the appeal should leave be granted.

2. The matter which was before Miles C.J. arose from an interim award of arbitration made on 9 September 1991 in an arbitration between the Commonwealth of Australia and the Australian Capital Territory on the one hand and Rian Financial Services and Developments Pty Limited ("Rian") on the other. The arbitration was commenced under a building contract between the National Capital Development Commission ("the NCDC") and Rian. As the trial Judge stated:-

"By operation of the legislation which brought
self-government to the Australian Capital
Territory (the Territory), the Commonwealth of
Australia was substituted for the NCDC as a
party to the contract and the Territory was
subsequently substituted for the Commonwealth as
a party to the contract and any liability of the
Commonwealth under the contract which accrued
immediately before Self-Government Day continued
to be a liability of the Commonwealth: see s.82
Australian Capital Territory (Planning and Land
Management) Act 1988; Regulation 3, ACT.
Self-Government (Consequential Provisions)
Regulations as inserted by Regulation 5
Statutory Rules 1989, No. 88.
Prior to Self-Government Day, 11 May 1989,
disputes and differences arose between the parties
and on 25 May 1989, after Self-Government
Day, the Territory caused to be sent
to the respondent a notice to show cause under
clause 44 of the contract relating to alleged
default on the part of the respondent. The
notice was signed by K.H. Alexander, Manager
(Finance).
By letter dated 8 June 1989 the Territory caused
to be served on the respondent a notice
purporting to be a notice of cancellation under
sub-clause 44.6 of the Contract. The notice of
cancellation bears the signature of John Price,
Acting Senior Contracts Officer."

Relevant provisions of "The General Conditions of Contract" provided:-

"44.1 Procedure on Default of Contractor
If the Contractor defaults in the performance or
observance of any covenant, condition or
stipulation in the Contract or refuses or
neglects to comply with any direction as defined
in clause 23 but being one which either the
Principal or the Superintendent is empowered to
give, make, issue or serve under the Contract
and which is issued or given to or served or
made upon the Contractor by the Principal in
writing or by the Superintendent in accordance
with clause 23, the Principal may suspend
payment under the Contract and may call upon the
Contractor, by notice in writing, to show cause
within a period specified in the notice why the
powers hereinafter contained in this clause
should not be exercised.
...
If the Contractor fails within the period
specified in the notice in writing to show cause
to the satisfaction of the Principal why the
powers hereinafter contained should not be
exercised the Principal, without prejudice to
any other rights that he may have under the
Contract against the Contractor may -
(a) take over the whole or any
part of the work remaining
to be completed and for that
purpose and in so far as it
may be necessary exclude from
the site the Contractor and any
other person concerned in the
performance of the work under
the Contract; or
(b) cancel the Contract, and
in that case exercise any
of the powers of exclusion
conferred by sub-paragraph
(a) of this paragraph.
...
44.6 Cancellation of Contract
If the Contract is cancelled under sub-clause
44.1 or under any other provision of the
Contract it shall be deemed cancelled as from
the date when notice of cancellation in writing
under the hand of the Principal is served upon
the Contractor ...".

The notice under clause 44.6 read:-

"NOTICE OF CANCELLATION
WHEREAS the Australian Capital Territory
(hereinafter referred to as `the Principal') and
Rian Financial Services and Developments Pty Ltd
(hereinafter referred to as `the Contractor')
are parties to a contract dated 8 September 1988
for Phillip Motor Vehicle Registry Extensions
(hereinafter referred to as `the Contract') AND
WHEREAS by virtue of Section 82 of the
Australian Capital Territory (Planning and Town
Management) Act the Commonwealth was substituted
as Principal to the Contract for the National
Capital Development Commission AND WHEREAS by
virtue of Regulation 3 of the ACT Self
Government (Consequential Provisions)
Regulations the Australian Capital Territory was
substituted as Principal to the Contract for the
Commonwealth of Australia AND WHEREAS a Notice
dated 25 May 1989 was issued to the Contractor
requiring the Contractor to show cause why the
Principal should not exercise the powers in
Clause 44.1 to the General Conditions of
Contract AND WHEREAS the Contractor has failed
to show cause to the satisfaction of the
Principal NOW THEREFORE TAKE NOTICE that the
Principal hereby cancels the Contract and under
the powers in Sub Clause 44.6 of the General
Conditions declares forfeited all the monies and
sums stipulated in Sub Clause 44.6
JOHN PRICE
ACTING SENIOR CONTRACTS OFFICER
INFRASTRUCTURE DIVISION"

3. After the service of the notice of cancellation, the parties appointed Mr Ronald Fitch as arbitrator under clause 45 of the agreement for the settlement of the dispute between them. The arbitrator commenced the reference at a conference between the parties on 24 September 1990. The arbitrator subsequently received submissions on what he called "the technical legal issue", namely "whether the person executing the notice to show cause and notice of determination was properly authorised so to do and, accordingly, whether the notices were valid".

4. In an interim award dated 9 September 1991 the arbitrator determined that the notice to show cause under sub-clause 44.1 was not required to be signed and, with regard to the notice of cancellation under sub-clause 44.6, that the notice was required to be served under the hand of the principal, but that the person who signed the notice, Mr John Price, did not have authority to do so.

5. On this latter point, the arbitrator's reason was, shortly, that the Commonwealth and the Australian Capital Territory "has not established that the (Legislative) Assembly (of the Australian Capital Territory) had, at the relevant times, made any law under Section 55 providing for the delegation of powers of City Manager". The reference was to s.55 of the Australian Capital Territory (Self-Government) Act 1988 (Cth) ("the Self-Government Act").

6. The arbitrator did not embark upon a consideration of the meaning of the words "in writing under the hand of the Principal" in their context in cl.44.6 of the "General Conditions of Contract", which were a standard form available for use whether the principal be an individual person, a company, a body politic or an agency of a body politic. The arbitrator did not discuss whether these words permitted signature by a duly authorised servant or agent of the principal or, if a corporation were the principal, whether the words required the notice to be under the seal of the corporation or whether the hand of an appropriate officer of the corporation would suffice.

7. Nor did the arbitrator embark upon a consideration of whether, assuming that the hand of an officer was sufficient, Mr Price was the appropriate officer to sign on behalf of the Australian Capital Territory, or whether, if Mr Price was authorised to do so, the notice should have been signed by Mr Price in the form "Australian Capital Territory per J. Price" rather than in his own name.

8. We need not discuss these issues save to refer to the observation of Gibbs C.J. in O'Reilly v. Commissioners of the State Bank of Victoria [1983] HCA 47; (1983) 153 CLR 1 at 11 where his Honour said:-

"There can be no doubt that as a general
proposition at common law a person sufficiently
`signs' a document if it is signed in his name
and with his authority by somebody else ..."

and to the remarks of Lockhart, Burchett and Gummow JJ. in Deputy Commissioner of Taxation (Vic) v. Boxshall (1988) 83 ALR 175 at 178:-

"At common law, where a person authorises
another to sign for him, the signature of the
person so signing is the signature of the person
authorising it: R v Justices of Kent (1873) LR 8
QB 305 per Blackburn J at 307. There are cases
in which a statute may require personal
signature. Whether a particular case is in that
category is a question of construction of the
terms of the particular statute. In some cases
concerning some statutes the courts have
concluded that personal signature was required.
In other cases on other statutes the courts have
held that signature by an authorised agent was
sufficient: See R v Justices of Kent; Re
Whitley Partners Ltd (1886) 32 Ch D 337;
O'Reilly v Commissioners of State Bank of
Victoria [1983] HCA 47; (1983) 153 CLR 1; 46 ALR 225.
There is some division of opinion as to the form
which a signature of a person signing for
another, but with his authority, should take.
In some cases, for example R v Justices of Kent,
the mere writing of the authorising person's
name has been held to be sufficient; see also Ex
parte Hirst; Re Hirst (1874) LR 18 Eq 704;
France v Dutton (1891) 2 QB 208. On the other
hand, in London County Council v Agricultural
Food Products Ltd (1955) 2 QB 218, Denning L.J.
said (at 222) that: `... where a man is allowed
to sign by the hand of another who writes his
name for him ... the one who does the writing
should add the letters `pp' to show that it is
done by proxy, followed by his initials to
indicate who he is.'"

9. Rather than considering the issues in this light, the arbitrator relied solely upon s.55 of the Self-Government Act which provided:-

"(1) The Assembly may make laws providing for
the delegation of powers of the Head of
Administration and of the Associate Heads of
Administration.
(2) Subsection (1) extends to the
sub-delegation by Associate Heads of Administration
of powers delegated to them by the Head of
Administration."

It was common ground that, at the date of the service of the notice of cancellation of the contract, no such laws had been passed by the Assembly.

10. In our opinion, s.55 was irrelevant to the issues before the arbitrator. The absence of laws providing for the delegation of the powers of the Head of Administration did not have the effect that no officer of the Public Service of the Australian Capital Territory had authority to act on behalf of the Australian Capital Territory. A body politic, like a corporation, may act through its duly authorised officers.

11. A power which is to be exercised personally by a person designated may not be exercised by another unless the designated person is granted or holds an appropriate power of delegation. If the person designated has a power to delegate and there has been a delegation, the delegate may exercise this power conferred upon the designated person. But much of the business of government is carried on not through the process of delegation but through the grant of authority to act. As Gibbs C.J. said in O'Reilly's case at 11:-

"However, I should mention the line of
authorities which commenced with Carltona Ltd.
v. Commissioners of Works (1943) 2 All ER 560
and which are discussed in In re Golden Chemical
Products Ltd. (1976) Ch 300. Those authorities
established that when a Minister is entrusted
with administrative functions he may, in
general, act through a duly authorized officer
of his department. This result depended in part
on the special position of constitutional
responsibility which Ministers occupy, and in
that respect these authorities are
distinguishable from cases such as the present.
However, they also rest on the recognition that
the functions of a Minister are so multifarious
that the business of government could not be
carried on if he were required to exercise all
his powers personally. Ministers are not alone
in that position. This has been judicially
recognized."

Neaves J. said in N. MacDonald Pty Ltd v. Hamence (1984) 1 FCR 45 at 50:-

"There are many activities in the ordinary
course of administering the affairs of
government that may be carried on independently
of any statutory provision expressly or
impliedly authorising the particular activity."

Particularly is this so when a contract is the subject of the relationship between the body politic and another. Dixon J. said in State of New South Wales v. Bardolph [1934] HCA 74; (1934) 52 CLR 455 at 508:-

"No statutory power to make a contract in the
ordinary course of administering a recognized
part of the government of the State appears to
me to be necessary in order that, if made by the
appropriate servant of the Crown, it should
become the contract of the Crown, and subject to
the provision of funds to answer it, binding
upon the Crown."

12. It follows that, as the relevant power in the contract was not conferred upon a designated person but upon the Australian Capital Territory, which was required by cl.44.6 to act by writing under its own hand, the absence of laws under s.55 of the Self-Government Act did not touch the issue before the arbitrator.

13. The Commonwealth of Australia and the Australian Capital Territory applied to Miles C.J. under s.38(2) of the Commercial Arbitration Act 1986 (ACT). Section 38 provided inter alia:-

"(2) Subject to sub-section (4), an appeal
shall lie to the Supreme Court on any question
of law arising out of an award.
...
(4) An appeal under sub-section (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 of the 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."

14. Miles C.J. was of the view that there was no manifest error of law on the face of the award. His Honour thought that the issue before the arbitrator was a debatable one. His Honour said:-

"I do not see that if there was an error, it was
so obvious or perceptible, that it may be
characterised as `manifest'. That the person
who signed the notice of cancellation of the
contract required and lacked authority that
derived from a law made pursuant to s.55 of the
Self-Government Act are, in my view, not
propositions that are shown without argument to
be incorrect as a matter of law. It is not
manifestly wrong to assert that unless the
Legislative Assembly had, at the relevant time,
made a law pursuant to s.55 providing for the
delegation of powers of the City Manager, then
the person signing the notice of cancellation
was not authorised to do so."

15. However, in our opinion, it is manifest, that is to say plain on the face of the award, that the arbitrator failed to consider the issue before him, namely the interpretation and operation of cl. 44.6 of the contract in the circumstances which occurred, and did so because he limited his consideration to an irrelevant circumstance, namely, that the Assembly had not enacted a law providing for the delegation of powers of the Head of Administration or of the Associate Heads of Administration.

16. It was submitted by counsel for Rian that, to be "manifest", the error of law must fit the words of Lord Diplock in Pioneer Shipping Ltd v. BTP Tioxide Ltd (1982) AC 724 at 742 where his Lordship said:-

"... leave should not normally be given unless
it is apparent to the judge upon a mere perusal
of the reasoned award itself without the benefit
of adversarial argument, that the meaning
ascribed to the clause by the arbitrator is
obviously wrong."

However, Lord Diplock was not there considering the present legislation, and he was discussing only a point arising in a "one-off" clause, not, as in the present case, the meaning of a clause in a standard set of conditions. See the discussion of his Lordship's observations by Sheller J.A., with whom Meagher J.A. agreed, in Promenade Investments Pty Ltd v. State Bank of New South Wales (New South Wales Court of Appeal, 18 February 1992, unreported). Sheller J.A. referred to Qantas Airways Ltd v. Joseland and Gilling (1986) 6 NSWLR 327; Leighton Contractors Pty Ltd v. Kilpatrick Green Pty Ltd (Full Court of the Supreme Court of Victoria, 22 October 1991, unreported); Abignano Ltd v. Electricity Commission of New South Wales (1987) 3 BCL 290.

17. In the course of his reasons, Sheller J.A. said that the term "manifest" is "used to indicate something evident or obvious rather than arguable". His Honour referred to the remarks of McHugh J.A. in Larkin v. Parole Board (1987) 10 NSWLR 57 at 70 where his Honour, in considering the term "patent error", said that "the error must be clear ... I think that, in its context in s.23 (of the Probation and Parole Act 1983 (NSW)), `patent' simply means manifest or evident." Sheller J.A. then commented:-

"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. If there is such an error of law, a
question arises as to whether as a matter of
discretion leave should be granted ... "

18. We respectfully agree. Leave may not be granted in respect of an error of law on the face of the record unless the error be manifest. But that is not to say that the counsel for the aggrieved party may not be heard to point out the error or to remind the court of the relevant principles and authorities or that counsel for the respondent should not be heard to the contrary.

19. The error of law in the reasons of the arbitrator being manifest, the question arises whether the correction thereof could substantially affect the rights of one or more of the parties to the agreement. In this case, the correction would do so as the issue goes to the validity of the arbitrator's determination that the contract had not validly been cancelled by the Australian Capital Territory. The correction of the error would necessarily have a substantive effect upon the rights and liabilities of the parties.

20. Finally, the question is whether in all the circumstances, leave should be granted. In our opinion, the issue of law involved is of such significance to the parties, especially to the Australian Capital Territory which must act in relation to contracts whether or not laws have been passed under s.55 of the Self-Government Act, that we are of the view that the discretion should be exercised in favour of granting leave to appeal to the Supreme Court from the award of the arbitrator. Leave to appeal from the order of Miles C.J. should similarly be granted.

21. The orders should be:-

1. That leave be granted to appeal from the order
of the Supreme Court and that the appeal be
allowed.
2. That the order of the Supreme Court be set aside
and that in lieu thereof it be ordered:
(i) that leave be granted to appeal from the interim
award of the arbitrator.
(ii) that the appeal be allowed.
(iii) that the interim award of the arbitrator be set
aside and that the matter be remitted to him for
reconsideration in accordance with law.
3. That the respondent pay the costs of this appeal
and of the proceedings in the Supreme Court.

I have had the advantage of reading in draft the judgment of Davies and

Neaves JJ.

2. I agree with their Honours that whether or not s.55 of the Self-Government Act 1988 (ACT) had given a power of delegation, it was open to the Territory to have issued a notice of cancellation of the contract herein over the hand of any duly authorised officer. The arbitrator therefore has given a reason for his conclusion that the notice of cancellation was signed without authority that was erroneous.

3. However, the issue in the matter is whether Miles C.J. should have granted leave to appeal against the finding made in the interim award.

4. That in turn depends on the construction of s.38 of the Commercial Arbitration Act 1986 (ACT).

5. Their Honours have set out the terms of that section, I will not repeat them.

6. Suffice it to say that to get leave, the appellant had to show (per s.38(5)):-

. there was a question of law concerned in the
matter;
. the determination of that question of law
could substantially affect the rights of one
or more of the parties to the agreement;
. there was "a manifest error of law on the face of the
award" OR "strong evidence" that the arbitrator
made an error of law and that the determination of
the "question" may add (or be likely to add)
"substantially to the certainty of commercial law".

7. There was a question of law as to whether authority for the notice of cancellation derived or needed to derive from s.55. It did not follow as a matter of law that the person who signed the notice of termination had no authority to do so because no law had been made under s.55.

8. I also agree with their Honours that the error made by the arbitrator in relation as to the effect of s.55 can be characterised as "manifest". It appeared on "the face of the award". It would be wrong to interpret "manifest" as precluding argument from an aggrieved party pointing to the error and explaining by reference to relevant principles and authorities why the error may be found to exist. Argument to the contrary would also be proper.

9. However, an aggrieved party must go further than to show a manifest error of law on the face of the award. The party must show that the correct determination of that question of law would or would be likely to have a "substantial effect" on the rights of one or more of the parties.

10. The two propositions may in many cases be synonymous. I do not think they are in this case. There was no evidence that the validity or otherwise of the Notice of Determination will have any effect at all on the sum to be awarded to the successful party to this arbitration. There was no evidence that, but for the error of law, the notice would, in any event, have been held, or probably held, to be valid. The respondent did not tender any evidence to show whether the person who signed the notice of cancellation had any, and if so what authority to execute and issue it.

11. Although the arbitrator relied on an incorrect reason, that error does not seem to me to have been shown to have affected the decision which the arbitrator was asked to make. That was,

"...whether the person executing the Notice to
Show Cause and the Notice of Determination was
properly authorised so to do and, accordingly,
whether the notices were valid."

12. There is, however, another consideration. Even if the applicant had shown s.38(5) was satisfied, the grant of leave is discretionary. Section 38(5) was inserted into the Commercial Arbitration Act to limit appeals from arbitrators. Parties who refer matters to arbitrators are taken to eschew any right to seek judicial intervention whether on questions of fact or questions of law.

13. It may be important for the Australian Capital Territory, in a theoretical sense, to know if it needs a law giving powers of delegation in order to give a valid notice under contracts such as the present. However, the issue raised on the application for leave to appeal has and had nothing to do with that or with the Territory's power to enter into contracts in the future. It has to do only with a "one-off" clause in an agreement which quite inappropriately used words requiring an individual person's signature and applied them to a body politic. That arose only because of the quite unusual substitution of the "ACT" for the "NCDC" (a corporation sole) following self-government in the ACT. It is also relevant to note, on the question of discretion, that the appellants chose not to put any direct evidence of the authority of the person executing the Notice of Determination before the arbitrator.

14. If the parties to this agreement had expressed themselves differently in the form of the agreement, the issue of authority would have been avoided. The form of the agreement was that proffered by the appellants' predecessor.

15. As Hilary Astor points out in her book, Dispute Resolution in Australia, the development of arbitral expertise free from restrictive judicial interference was a deliberate objective of the commercial community (p 116). It was also an objective of the legislature in enacting the current form of s.38(5).

16. In this case, that objective is not well-served by the taking of preliminary points and then seeking judicial intervention to correct the response even before the end result of the arbitration is known. It is less well-served when the party complaining of the error has, in any event, failed to place before the arbitrator evidence which might have indicated whether the determination of the question of law referred to would have altered the end result of the arbitration.

17. I would have refused leave to appeal.

18. Accordingly, I would dismiss this appeal with costs.