IN THE SUPREME COURT OF VICTORIA
AT MELBOURNE
ARBITRATION LIST
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JUDGE:
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WHERE HELD:
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DATE OF HEARING:
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CASE MAY BE CITED AS:
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MEDIUM NEUTRAL CITATION:
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ARBITRATION – Enforcement of award – Commercial Arbitration Act 2011 (Vic) s 35 – whether threshold requirement that arbitration be ‘domestic commercial arbitration’ pursuant to s 1(1) – threshold requirement met.
ARBITRATION – Commercial Arbitration Act 2011 (Vic) – ‘domestic’ commercial arbitration in s 1(3) – ‘arbitration agreement’ in s 7 – whether requirement to define matters referred to arbitration in writing – agreement required matters referred to be set out in statement of claim – no statement of claim – arbitration proceeded without objection – agreement not void for incompleteness or uncertainty – agreement valid and enforceable – no requirement under ss 1(3) or 7 that matters referred to arbitration be in writing – waiver of contractual requirement for statement of claim under s 4.
ARBITRATION – Commercial Arbitration Act 2011 (Vic) – domestic ‘commercial’ arbitration in s 1(3) – rental dispute arising from ‘commercial’ dispute – wages dispute unrelated to ‘commercial’ dispute.
ARBITRATION – Enforcement of award – Commercial Arbitration Act 2011 (Vic) ss 35 & 36 – no power to enforce under s 35 where no sum ascertainable from award – grounds for refusal of enforcement under s 36 – inadequate reasons for award – discretion to decline refusal of enforcement where grounds established – discretion where enforcement would be unfair or prejudicial – refusal to enforce award where inadequate reasons.
HIS HONOUR:
1 INTRODUCTION
1 In this proceeding, the Applicant, Rabbi Corey Stephen Tayar, seeks an order pursuant to s 35 of the Commercial Arbitration Act 2011 (Vic) (‘the CAA’) to enforce an arbitral award made on 9 May 2013 (‘the Award’).
2 The Award relates to payment of moneys pursuant to three successful claims determined at arbitration owed to the Applicant by the Respondents, Rabbi Pinchus Feldman and his son Rabbi Yosef Feldman. Those claims, accounting for adjustments of amounts already paid, accrue to an award of $1,849,570.02. The claims that the Applicant seeks to enforce (adopting the numbering used in the Award) are:
2.1 repayment of loans advanced to the Respondents and interest totalling $1,635,802.00 (‘Claim 1’) less an adjustment of $120,400 already paid;
2.2 an amount of $320,168.02 which the Applicant deposes is the ‘intended amount awarded’ for outstanding rental payments owed by the Respondents to the Applicant (it is unclear to what property the rental agreement relates) (‘Claim 2’); and
2.3 an amount of $14,000.00 which the Applicant deposes is the ‘intended amount awarded’ for outstanding salary payments (‘Claim 4’).
3 There were two other claims (Claim 3 and Claim 5) which were determined in the Award but which the Applicant does not seek to enforce.
4 By interlocutory application, the Respondents seek orders refusing recognition or enforcement of the Award pursuant to s 36 of the CAA. In summary, they rely upon four principal contentions.
5 First, the arbitration agreement between the parties (the ‘Agreement’) did not sufficiently identify in writing the matters to be referred to the arbitral tribunal: the Agreement expressly provided that the ‘Disputed Matters’ were to be set out in written points of claim which were never provided. As a result, the Respondents submitted that there was no ‘domestic commercial arbitration’ as defined in s 1 of the CAA and no enforceable or valid ‘arbitration agreement’ as defined in s 7 of the CAA. They submitted that these were threshold issues which were required to be met before an order could be made under s 35 of the CAA. Alternatively, they submitted that these matters were grounds on which the Court should refuse to enforce the Award under ss 36(1)(a)(i), (iii) or (iv) of the CAA.
6 Second, the Respondents submitted that central to Claim 1 was a claim for five properties which the Applicant and the Respondents had agreed would be transferred to the Applicant if the alleged loans were not repaid. However, not all of the owners of these properties were parties to the Agreement. As a result, the Respondents submitted this rendered the Agreement invalid as an arbitration agreement and that the Court should refuse to enforce the Award under s 36(1)(a)(i) of the CAA. Further, they submitted that this issue could not be overcome by the Applicant only to seeking to enforce that part of the Award relating to the loans and not that part of the Award relating to the lien over these properties.
7 Third, the Respondents submitted that there were no reasons given for the findings in the Award that:
(1) the Applicant owed the money to the Respondents on Claim 1; or
(2) for Claims 2 and 4.
8 They submitted that this was in breach of s 31(3) of the CAA which had been incorporated into the Agreement. As a result, the Respondents submitted that the Court should refuse to enforce the Award under s 36(1)(a)(iv) of the CAA.
9 Fourth, the Respondents noted that the Award in respect of Claims 2 and 4 did not provide for the payment of a sum certain. As noted above, the Applicant deposed in this proceeding as to the proper quantification of the ‘intended amount awarded’ on those Claims. In these circumstances, the Respondents submitted that the Court cannot enforce, and should not enforce, the Award in respect of Claims 2 and 4.
10 As to the first contention, for the reasons that follow, I have concluded that:
(1) it is a threshold issue to the enforcement of an award under s 35 of the CAA that the award relates to a ‘domestic commercial arbitration’ as that term is defined in the CAA;
(2) the Agreement was valid and binding, and was an ‘arbitration agreement’ under the CAA;
(3) the arbitration in respect of Claims 1 and 2 was a ‘domestic commercial arbitration’ and the Award in respect of them is entitled to be enforced under s 35 of the CAA; and
(4) the Respondents have not established a proper basis for the Court to refuse to enforce the Award under ss 36(1)(a)(i), (iii) or (iv) of the CAA.
11 As to the second contention, for the reasons that follow, I have concluded that not all of the owners of the properties need to be parties to the Agreement for it to be an ‘arbitration agreement’ to which the CAA applies. As a result, the Respondents have not established a proper basis for the Court to refuse to enforce the Award under s 36(1)(a)(i) of the CAA.
12 As to the third contention, for the reasons that follow, I have concluded that the reasons for the Award published 9 May 2013 (the ‘Reasons’) were adequate in respect of Claim 1. However, no part of the Reasons deals in substance with the underlying basis for Claims 2 nor 4, which are now sought to be enforced. As a result, I would refuse enforcement of the parts of the Award dealing with Claims 2 and 4.
13 As to the fourth contention, in light of my conclusions on the third contention this is unnecessary to decide. For completeness, however, I have concluded that as the Award in respect of Claims 2 and 4 did not set out the amounts to which the Applicant was entitled or the basis upon which those amounts could be calculated on the face of the Award, the Court cannot and should not enforce the Award in respect of these Claims.
14 The consequence of these conclusions is that I would enforce the Award in respect of the monetary relief in Claim 1 only.
2 EVIDENCE
15 At the hearing of this proceeding, the Applicant relied upon the affidavits of:
(1) the Applicant affirmed 6 May 2019, 1 November 2019 and 9 December 2019;
(2) Andrey Levitin affirmed 4 May 2019 translating the Award; and
(3) Menachem Raskin affirmed 3 June 2019 translating the reasons for the Award.
16 The Respondents relied upon the affidavits of:
(1) the First Respondent affirmed 4 July 2019, 11 September 2019 and 4 December 2019;
(2) the Second Respondent affirmed 4 July 2019, 12 September 2019 and 4 December 2019; and
(3) Peter Schwarz (the Respondents’ solicitor) affirmed 11 September 2019.
17 The Respondents objected to [2] of the second Tayar affidavit which set out the substance of exhibit ‘CST-4’, which was also objected to. That exhibit was an article from the Australian Jewish News dated 3 June 2013 relating to the arbitration and the Award. Rabbi Tayar produced the article as evidence that the Respondents ‘publicly accepted the arbitration hearing and the validity of the Award’. In my view, this paragraph and the exhibit are hearsay and are not admissible for that purpose. I have not had regard to them for the purpose of determining this proceeding.
18 I note in passing that the affidavits of the Respondents relied upon other bases for declining to enforce the Award. In oral argument counsel for the Respondent confined the Respondents’ contentions to those in the written submissions dated 11 November 2019.
3 BACKGROUND
19 The Applicant worked at the Yeshivah Centre operated by the Respondents. During his time working there, the Applicant made a series of advances or loans to the Respondents for the purposes of meeting the ongoing expenses of the Centre, which he claimed had not been repaid. It would appear that as part of the arrangement to advance funds, five parcels of land owned by the Respondents and others were pledged to the Applicant but which were to be returned if the advances were repaid. This arrangement, whereby the person who advances the funds is categorised as an investor seeking to derive profit from investing capital rather than as a lender seeking to derive interest from a loan, is known in Hebrew as ‘Heter Isko’ or ‘Isko’. There was a related dispute about whether the Respondents had authority to pledge these parcels of land on behalf of all the owners.
20 Further disputes arose between the parties. Relevantly, there was a further dispute about the non-payment of the rent of the Applicant’s home by the Respondents. The Applicant asserted that the Respondents had agreed to do so given that the loans to the Respondents had exhausted the Applicant’s funds to meet his rent. There was a further dispute in relation to non-payment of salary for work done by the Applicant.
21 The parties entered into the Agreement to refer the disputes to arbitration on or about 4 March 2013. The Agreement provided that the arbitration was to be conducted by a panel of three rabbis in accordance with the principles of Orthodox Jewish Law, known by the Hebrew term ‘Halacha’. The parties to the Agreement were the Applicant, the Respondents and the agreed arbitrators: Rabbis Heimlich, Donenbaum and Raskin (the ‘Arbitral Panel’).
22 There was some dispute as to where and when the Agreement was signed. At the hearing, in response to questions from me, both counsel said that it was signed on the first day of the hearing of the arbitration in Melbourne. Later in the hearing, counsel for the Respondents sought to withdraw that concession as he had been instructed that the First Respondent was in Sydney on the first day of the arbitration. I asked for further affidavits to be filed on this issue. These were the affidavits of the Applicant and each of the Respondents affirmed in December 2019 referred to in [15]-[16] above.
23 I note in passing that in the affidavits filed before the hearing, the First Respondent (who lives in Sydney) deposed that he was not present at the arbitral hearings but that he authorised the Second Respondent to appear for him. This was confirmed by the Second Respondent.
24 In the subsequent affidavits, the Respondents were vague. The First Respondent deposed that he did not attend the arbitration and did not believe he signed the Agreement on the day of the arbitration but could not recollect where or when he did sign it. The Second Respondent deposed he could not recall with certainty when or where he signed the Agreement and said no more.
25 The Applicant deposed that to the best of his recollection:
(1) on the morning of the arbitration hearing on 4 March 2013, the First Respondent (who was in Sydney) emailed him a copy of the signature page of the Agreement signed by the First Respondent;
(2) the Applicant printed out the page and took it to the arbitration hearing;
(3) the Agreement was signed by the Applicant and the Second Respondent in the presence of Rabbi Raskin before the hearing; and
(4) the Agreement was then signed by the Arbitral Panel and the hearing commenced.
26 I accept the evidence of the Applicant as to how the Agreement was signed, namely on the first day of the arbitration hearing on 4 March 2013.
4 THE AGREEMENT
27 I will now turn to the Agreement itself. The recitals to the Agreement provide that:
- Disputes have arisen between the Parties concerning certain transactions between them during the period from 2007 to date [4 March 2013], including certain loans, rents, salary payments, the ownership of properties and other matters.
- Pursuant to this Agreement, an Arbitral Panel will be appointed to determine the Disputed Matters in accordance the [sic] processes set out in this Agreement.
28 The definition of ‘Disputed Matters’ in cl 1 of the Agreement states that it means ‘the matters described in Schedule 1 to be determined by the Arbitral Panel and made subject of an Award’. Schedule 1 describes the Disputed Matters as:
The matters to be determined by the Arbitral Panel are to be determined by the Statement of Claim, Statement of Defense [sic] and Cross Claim (if any) and the Reply and Deference [sic] to Cross Claim (if any) to be filed in the arbitration as directed by the Arbitral Panel.
29 The Agreement provides in summary that the Arbitral Panel would act as an arbitral tribunal under the CAA and would conduct the determination of the Disputed Matters in accordance with the CAA and the Rules set out in Schedule 2. Relevantly, Rule 4 provides that, subject to s 28 of the CAA, the parties agreed that the Arbitral Panel may determine any question that arises for determination in the course of the arbitration in relation to the substance of the Disputed Matters by reference to the principles of Orthodox Jewish law (i.e. the Halacha) including its references to local law and local custom.
5 ARBITRAL HEARINGS
30 On the evidence before me, there were at least two hearings as part of the arbitration, but on dates which I do not know. As noted above, the First Respondent was not present at the arbitral hearings but authorised the Second Respondent to appear for him. I note that the Second Respondent deposed that, in addition to being fluent in ‘English, Hebrew and Hebrew/Aramaic legal languages’ he is ‘very familiar with Jewish legal documents and [has] an in depth knowledge of Jewish commercial law’.
31 The Award records in relevant part:
Parts of the decision mainly based on claims frankly made by the Parties on a court hearing and on the claims expressed orally on the second hearing of the Court (as the Court was unable to approve the claims sent and written via email).
32 I note the Second Respondent deposed that the first part of this sentence should properly be translated as:
The contents of the decision are mainly based on the claims which were frankly stated by the Parties at the sitting of the Rabbinical Court.
33 On the evidence before me, there was no document which further identified the Claims like a statement of claim or defence as envisaged by Schedule 1 to the Agreement. Rather, the Claims were further identified by oral submissions during the hearing of the arbitration which immediately followed the execution of the Agreement. There is no evidence to the effect that the Respondents opposed this course at the time or sought an adjournment to ensure the claims for determination by the Arbitral Panel were further identified, as envisaged by the Agreement.
34 I note that the Second Respondent has deposed that the Claims were made ‘entirely orally’ by the Applicant and the response was made entirely orally by the Second Respondent on behalf of himself and his father. The Reasons also suggest that the Second Respondent’s wife gave evidence. The translation reads in part: ‘and in this case Mrs Feldman (wife of R’ Yosef) said to the Court that half of the house that [sic] is in her name …’.
35 Other than the terms of the Award, the Reasons and the matters set out above, there is little evidence before me as to how the hearings were conducted or the documents that were relied upon. It does not appear to be in dispute that the Applicant relied upon at least one document relating to the amount of the advances outstanding. However, that document is not in evidence before me.
36 Regardless, there is no dispute that all five Claims were the subject of evidence and submissions before the Arbitral Panel or that the Respondents were afforded procedural fairness in relation to those five Claims.
6 THE REASONS AND THE AWARD
37 The Arbitral Panel published the Award and the Reasons for the Award to the parties on 9 May 2013. The Award provides:
The Court has decided the proceedings to be held in the Holy Language [Hebrew], Yiddish and English, as required for proceedings and evidence etc., as well as due to the fact those languages are understandable both to the court and the parties involved, also the court decision will be delivered to the parties in the Holy Language[.]Parts of the decision mainly based on claims frankly made by the Parties on a court hearing and on the claims expressed orally on the second hearing of the Court (as the Court was unable to approve the claims sent and written via email).
Claim 1 – the claim on the whole property or a part thereof located at 67&69 Penkivil Street, 7 Park Street, Office within the Adler Building, Dormitory Building
Court decision: The mentioned properties remain in possession of the defendants and nevertheless the defendants are obliged to pay the amount of $1,635,802 to the plaintiff. However, the lender retains a lien on the properties up to the value of the aforementioned amount.
Claim 2 – the claim regarding $17,815.47 pcm rental agreement
Court decision: The defendants must pay the entire amount of the rental agreement $17,815.47 pcm, as agreed between the parties initially (including all outstanding payments, which have not been paid completely yet). This obligation continues until the defendants pay the entire above mentioned amount mentioned in claim 1. Regarding the monthly payments from that time till [sic] September 2013, it depends on the details of initially made agreement and needs further clarification by the Court.
Claim 3 – the claim of apartment rental payment of $850 per week
Court decision: Mr. Joseph Feldman must pay the entire amount of the claim related to the rent that has not yet been paid.
Claim 4 – the claim regarding salary
Court decision: The defendants must pay the entire amount of the salary (that has not yet been paid) to the plaintiff for all the time of his service at the office etc., but not for the time after he resigned from work.
Claim 5 – the claim regarding redundancy payments
Court decision: At the moment, the defendants are exempt from compensating the plaintiff.
38 The Reasons are brief and, on their face, are not entirely clear. They are based very much upon the Halacha. The Reasons record that the Arbitral Panel considered ‘all parts of the Halacha’ and consulted ‘great Torah scholars who sit in judgment around the globe’.
39 The Reasons relate almost entirely to Claim 1, namely the loans or advances, the agreement to transfer property in relation to the advances, the advances outstanding at the time of the hearing and the interest thereon. It is not apparent that there are any reasons relating to Claims 2 or 4.
40 The Arbitral Panel issued a supplemental award on 2 March 2014 correcting the Award. This supplemental award and the circumstances which led to it are not relevant to the issues which I now have to determine. A change was made to Claim 3 reflected in the Award set out above.
41 The Applicant issued these enforcement proceedings pursuant to s 35 of the CAA on 6 May 2019, nearly six years after the Arbitral Panel made the Award. The reason for the delay was not explained. The Respondents issued their application for refusal of enforcement under s 36 of the CAA on 11 September 2019.
7 THE CAA
7.1 The operation of the CAA
42 The CAA provides a statutory framework for the resolution, review and enforcement of a particular kind of arbitration, namely ‘domestic commercial arbitrations’. This is made plain s 1(1) of the CAA (in Part 1 entitled ‘General Provisions’) which provides:
This Act applies to domestic commercial arbitrations.
43 Further, s 2(1) of the CAA defines ‘arbitration’ as ‘any domestic commercial arbitration whether or not administered by a permanent arbitral institution’.
44 I note in passing that the note to s 1(1) of the CAA records that the International Arbitration Act 1974 (Cth) (‘IAA’) covers international commercial arbitrations and the enforcement of foreign arbitral awards. As will become evident in these reasons, both the IAA and the CAA are based upon the provisions of the UNCITRAL Model Law on International Commercial Arbitration (the ‘Model Law’) and the jurisprudence in relation to both statutes is very much influenced by each other and the jurisprudence in relation to the Model Law.
45 However, in construing the provisions of the CAA, I have been mindful of the common law principles of statutory construction, in particular that the task of statutory construction is to construe the language of the relevant provision consistently with the language and purpose of all of the provisions of the statute containing the provision.
46 Section 1(3) sets out when an arbitration is ‘domestic’. It provides:
An arbitration is domestic if–(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in Australia; and
(b) the parties have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled by arbitration; and
(c) it is not an arbitration to which the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) applies.
47 Section 1(4)(b) relevantly provides for the purposes of subsection (3) that:
(b) if a party does not have a place of business, reference is to be made to the party’s habitual residence.
48 There is no definition of ‘commercial’ in the CAA for the purposes of the phrase ‘domestic commercial arbitration’. However, the note to s 1 of the CAA entitled ‘Model Law note’ provides:
The term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business co-operation; carriage of goods or passengers by air, sea, rail or road.
49 Part 2 of the CAA is headed ‘Arbitration Agreement’. Section 7 provides the definition and form of a valid arbitration agreement under the CAA. It relevantly provides:
(1) An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) The arbitration agreement must be in writing.
(4) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.
[…]
(7) Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. […]
7.2 Parts 3 to 7 of the CAA
50 Parts 3 and 4 of the CAA relate to the composition and the jurisdiction of the arbitral tribunal respectively. Section 16(4) provides that a plea that the arbitral tribunal does not have jurisdiction must be raised not later the submission of the statement of defence. Section 16(7) provides that the arbitral tribunal may later admit such a plea if it considers the delay is justified. I note that these provisions relate to the competence of the tribunal to rule on its own jurisdiction, rather than challenges to the jurisdiction of the tribunal in later court proceedings.
51 Part 5 of the CAA relates to the conduct of the arbitration. Section 23(1) provides that, subject to contrary agreement or a direction of the arbitral tribunal, the claimant must state the facts supporting his or her claim, the points at issue and the relief or remedy sought and the respondent must state his or her defence in respect of these particulars unless the parties have otherwise agreed as to the required elements of such statements.
52 Part 6 relates to the making of an award and the termination of the arbitral proceedings. Section 31 relevantly provides that:
(1) the award must be made in writing and signed by the arbitrators (s 31(1)); and
(2) the award must state the reasons upon which it is based unless the parties have agreed that no reasons are to be given (s 31(3)).
53 Part 7 is headed ‘Recourse Against Award’. It provides the mechanism by which a party may set aside or appeal from an arbitral award. Under the CAA, the powers of the Court to set aside or appeal from an arbitral award are limited. This is consistent with:
(1) the central tenet of arbitration, namely that it provide an agreed mechanism for a dispute between the parties to be resolved privately and finally; and
(2) the policy of ‘minimal curial intervention’ in arbitration.
54 Section 34 provides the limited bases upon which a party to the arbitration may seek to set aside an arbitral award. Section 34A provides the bases upon which an appeal lies from an arbitral award. In summary, an appeal only lies on a question of law arising out of an award if the parties agree that an appeal may be made or if the Court grants leave. Section 34A(3) provides that the Court must not grant leave unless certain preconditions are satisfied including that the determination of the question will substantially affect the rights of one or more of the parties. These provisions are not at issue in this proceeding.
7.3 Part 8 of the CAA
55 The limited nature of curial intervention in arbitral proceedings is also reflected in Part 8 of the CAA entitled ’Recognition and Enforcement of Awards’. Section 35 of the CAA is entitled ‘Recognition and enforcement’. It provides:
(1) An arbitral award, irrespective of the State or Territory in which it was made, is to be recognised in this State as binding and, on application in writing to the Court, is to be enforced subject to the provisions of this section and section 36.(2) The party relying on the award or applying for its enforcement must supply the original award or a copy of the original award.
(3) If the award is not made in English, the Court may request the party to supply a translation of it into English.
56 At this stage it is appropriate that I refer to Order 9 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2018 (Vic) which contain this Court’s Arbitration Rules (the ‘Arbitration Rules’). Rule 9.21 outlines the procedural requirements for an application to enforce an arbitral award pursuant to s 35 of the CAA. It provides that the application must be accompanied by the documents referred to in s 35 and an affidavit stating:
(1) the extent to which the award has not been complied with, at the date the application is made; and
(2) the usual or last-known place of residence or business of the person against whom it is sought to enforce the domestic award or, if the person is a company, the last-known registered office of the company.
57 Section 36 of the CAA outlines the grounds upon which recognition or enforcement of an award may be refused. I note in passing that these grounds for the most part mirror the grounds upon which an award may be set aside under s 34 of the CAA. Section 36 provides:
(1) Recognition or enforcement of an arbitral award, irrespective of the State or Territory in which it was made, may be refused only–
(a) at the request of the party against whom it is invoked, if that party furnishes to the Court proof that–(i) a party to the arbitration agreement was under some incapacity, or the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication in it, under the law of the State or Territory where the award was made; or
(ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present the party’s case; or
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced; or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the State or Territory where the arbitration took place; or
(v) the award has not yet become binding on the parties or has been set aside or suspended by a court of the State or Territory in which, or under the law of which, that award was made; or
(b) if the Court finds that–
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or
(ii) the recognition or enforcement of the award would be contrary to the public policy of this State.
58 In the context of enforcement proceedings, a prima facie right to recognition and enforcement of the award has been described as ‘consonant with the common law view that the issuing of an arbitral award gives rise to an implied promise that the award will be honoured’. As French CJ and Gageler J said in TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (a case involving an application to enforce an award under s 8 of the IAA):
Enforcement of an arbitral award is enforcement of the binding result of the agreement of the parties to submit their dispute to arbitration, not enforcement of any disputed right submitted to arbitration.
59 The role of the Court under ss 35 and 36 of the CAA is understood to be limited to the enforcement of contractual obligations arising from the arbitration agreement: it is not to determine substantive disputes between the parties as to fact and law, those being the realm of the arbitral tribunal. The Court is concerned with the ‘structural integrity of the arbitration proceedings’. As a result, the arbitral award should be enforced unless any of the grounds contemplated by s 36 apply.
7.4 Waiver under the CAA
60 There is another provision of the CAA which is relevant. Section 4 provides a statutory waiver of a right to object in certain circumstances. It provides that:
A party who knows that any provision of this Act from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating the party’s objection to such non-compliance without undue delay or, if a time-limit is provided for stating the party’s objection, within such period of time, is taken to have waived the party’s right to object.
61 As to the provisions in the Act from which a party may derogate, the authorities and texts suggest that this relates to provisions which expressly state something like ‘unless the parties otherwise agree…’, ‘subject to contrary agreement …’ or ‘the parties are free to …’. An example is s 10(1) of the CAA which provides that the parties are free to determine the number of arbitrators to sit on a tribunal.
7.5 Severance
62 There is one other legal issue I wish to address at this stage. As is evident, the Applicant only seeks enforcement of certain Claims under the Award. I am of the view that the Court may only enforce part of an award provided the portion not sought to be enforced is clearly separate and divisible so that no injustice occurs. The common law position was set out in ACN 006 397 413 Pty Ltd v International Movie Group (Canada) Inc, namely that severance is not possible unless the residue to be allowed to stand is not affected by the part of the Award that is rejected.
63 The New South Wales Court of Appeal applied the same principles in the context of the enforcement and setting aside provisions of the International Arbitration Act 1974 (Cth) in Aircraft Support Industries Pty Ltd v William Hare UAE LLC. In that case, the appellant argued that reference to severance in certain of the provisions meant that severance of aspects of an arbitral award was otherwise unavailable. Bathurst CJ disagreed and stated:
If the argument promoted by Aircraft Support is correct, the result would be surprising. In Evans v National Pool Equipment [1972] 2 NSWLR 410, Jacobs JA (as his Honour then was) pointed out that not since before the time of King James I had an award which was void in part been considered to be void altogether. His Honour cited with approval the statement in the 8th ed of Russell on Arbitration (F Russell, E Pollock and H Russell, A Treatise on the Power and Duty of an Arbitrator: and The Law of Submissions and Awards, 8th ed, Stevens and Sons, 1900) to the effect that, provided the bad portion is clearly separate and divisible, the residue can be enforced: see also ACN 006 397 413 Pty Ltd v International Movie Group (Canada) Inc [1997] 2 VR 31 at 38 following (International Movie Group).
[…]
… it would be surprising, to say the least, if an Act designed to assist international trade and commerce by enforcement of foreign awards was required to be construed to take away a centuries old power to partially enforce awards where no injustice flows as a result.
64 In light of the above, I am satisfied that the same principles of severance apply to awards under the CAA.
8 CONTENTION 1
8.1 Submissions
65 As noted in the Introduction to these reasons, the principal issue in relation to the first contention relates to whether the Disputed Matters referred to the Arbitral Panel for arbitration were sufficiently identified in writing in the Agreement or as envisaged by Schedule 1 of the Agreement. The Respondents relied upon this principal issue in number of different ways.
66 They relied upon this principal issue as part of certain threshold matters to enforcement. The Respondents submitted that there are two threshold issues to be determined before the Court can make an order under s 35 of the CAA. The first issue is whether this is a ‘domestic commercial arbitration’ to which the CAA applies. The second issue is whether there was a ‘valid’ arbitration agreement submitting the parties’ disputes to arbitration. Each of these issues requires the Court to consider the consequence of the fact that the documents referred to in Schedule 1 of the Agreement, which were to set out the Disputed Matters to be determined by the Arbitral Panel, were never provided.
67 The issue of whether there is a ‘domestic commercial arbitration’ has two components. The first component is whether the arbitration is ‘domestic’. This is in issue in this proceeding because s 1(3)(b) of the CAA provides that an arbitration is ‘domestic’ if the parties ‘have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled by arbitration’. The Respondents contended that s 1(3)(b) was not satisfied in this proceeding as the Disputed Matters were not reduced to writing.
68 The second component is whether the arbitration is ‘commercial’. The Respondents concede that Claim 1 is commercial but dispute that Claims 2 and 4 are commercial as they relate to the unpaid rent for the Applicant’s residence and unpaid employment entitlements.
69 The second threshold issue raised by the Respondents also relates to the fact that the Disputed Matters were not reduced to writing as envisaged by Schedule 1 of the Agreement. As such, at the commencement of the arbitration, the Disputed Matters to be determined pursuant to the arbitration were not defined. The Respondents submit that without these documents:
(1) the Agreement is void for uncertainty or incompleteness;
(2) as a fundamental aspect of the Agreement between the parties, referring disputes to arbitration, is not in writing, there is no ‘arbitration agreement’ pursuant to s 7 of the CAA; and
(3) the arbitration was beyond the scope and operation of the CAA.
70 Further, in the event that these are not threshold matters, the Respondents relied upon the absence of any written statement of the matters in dispute to submit that the Court should refuse to enforce the Award under s 36. This is because:
(1) pursuant to s 36(1)(a)(i), there was no valid ‘arbitration agreement’ under Victorian law;
(2) pursuant to s 36(1)(a)(iii), the Award dealt with disputes not contemplated by or not falling within the terms of submission to arbitration set out in the Agreement, or contained decisions on matters beyond the scope of the submission to arbitration; and
(3) the arbitral procedure was not in accordance with the Agreement of the parties.
71 The Applicant disputed that there were any threshold issues of this kind for the purposes of s 35 of the CAA. The Applicant pointed to the limited nature of the matters to be satisfied under s 35 of the CAA and r 9 of the Arbitration Rules. There was no dispute in this case that those matters had been complied with. The Applicant submitted that, once the matters in s 35 and r 9 had been satisfied, the only challenge available was on the grounds set out in s 36.
72 In this regard, the Applicant noted that:
(1) the onus was on the Respondent to establish the grounds in s 36(1)(a);
(2) if any of those grounds is established, the Court may then exercise its discretion to refuse to recognise or enforce the award;
(3) the Court will not ordinarily do so unless it results in real unfairness or prejudice.
73 Further, the Applicant contended that the failure to provide the statement of claim as envisaged by Schedule 1 to the Agreement did not render the Agreement void for uncertainty or incompleteness or otherwise not an arbitration agreement under s 7 of the CAA.
74 This is because the Applicant contended that, on the proper construction of the Agreement, either ‘all’ disputes between them or, alternatively, the disputes referred to in Recital A were to be determined by the Arbitral Panel. The Applicant submitted that the word ‘matters’ in Schedule 1 ‘either refers to the [sic] part A of the Recitals or should be interpreted as “all matters” which is consistent with the Parties’ conduct before and during the course of arbitration’. He referred to the matters set out in Recital A. This is in a context where the Agreement was signed on the first day of the arbitration before the Arbitral Panel. The Applicant noted that it was not contended that the Respondents were denied procedural fairness at the arbitration.
75 As to the requirement that the arbitration agreement must be in writing under s 7(3) and/or s 1(3) of the CAA, the Applicant relied upon s 4 of the CAA, namely that the Respondents waived their right to object to the non-compliance with the requirements under the CAA or the Agreement that the disputes referred to arbitration be in writing.
8.2 Approach to determining Contention 1
76 As is evident, there are a number of overlapping issues in the submissions of the parties. Before considering the legal issues relating to the operation and application of ss 35 and 36, there are some issues of central importance to the determination of this proceeding. Those issues relate to the Respondents’ submission that the failure to identify the ‘Disputed Matters’ in the Agreement or otherwise in writing means the requirements of s 1(3)(b) and/or s 7 of the CAA have not been satisfied and/or that the Agreement is not ‘valid’.
77 It is important to recall that questions of whether a valid, binding and enforceable agreement has been entered into are to be determined according to common law principles, including relevantly uncertainty and incompleteness. Once that matter has been addressed, it is necessary to consider whether the requirements imposed by the CAA in relation to the Agreement in s 1(3) and/or s 7 have been met. As a result, I will first consider:
(1) is the Agreement binding and enforceable?;
(2) have the requirements of s 1(3)(b) and s 7 of the CAA been met?; and
(3) has there been any waiver under s 4 of the CAA?
78 In light of my conclusions on those matters, I will address the operation of ss 35 and 36 in relation to the first contention.
8.3 Is the Agreement binding and enforceable?
79 Questions of uncertainty may go to whether the contract is void for incompleteness, in the sense that some essential term has not been agreed, or void for uncertainty, in the sense that some essential term is so vague that no meaning can be given to it. The task of the Court is to construe the document according to the ordinary canons of construction to determine these questions. However, a contractual construction that renders a commercial agreement certain is generally to be preferred to one which does not. So there is a principle that what can be made certain is certain. It means in substance that if the relevant matter is ascertainable, the contract will not be incomplete or uncertain.
80 As stated by Wootten J in Austra Tanks:
A number of different situations give rise to problems of uncertainty in contracts. Without attempting to be exhaustive, they include the following …A fourth situation is where the parties deal with a matter, but instead of defining their obligations precisely or presently, use words which call for some inquiry. A matter may be left for determination by some nominated authority, even by one of the parties themselves; or for calculation by reference to future events or information not presently available; or for determination by reference to some standard. In all these cases the fundamental approach is id certum est quod certum reddi potest – the contract is good if the inquiry for which the words call is one which will lead to a sufficiently certain result.
81 I note that the principles in Austra Tanks were relied upon by Adamson J in Passlow v Butmac Pty Ltd, in concluding that a dispute resolution clause which included an arbitration clause was not unenforceable by reason of uncertainty or incompleteness.
82 In the present case, the Agreement contains details of the parties, the Arbitral Panel and how the arbitration was to be conducted. Having recorded in Recital A that disputes had arisen between the parties ‘concerning certain transactions between them during the period from 2007 to date [4 March 2013], including certain loans, rents, salary payments, the ownership of properties and other matters’, the Agreement provided that the Disputed Matters were to be referred to arbitration. Schedule 1 contains the means by which the Disputed Matters were to be identified, namely by the subsequent filing of a statement of claim by the Applicants and a defence by the Respondents. In these circumstances, at the time the Agreement was made, I conclude that there was a binding, valid and enforceable agreement between the parties.
83 I can see no issue of validity or enforceability in the parties agreeing to identify the particular disputes to be referred to arbitration subsequent to the Agreement being entered into. Indeed, many arbitration agreements provide a mechanism for defining disputes which ‘may arise’ between the parties to be referred to arbitration. Such an arbitration agreement does not itself set out the particular disputes which are to be referred. That can only take place at a later point in time. However, it is clear that these kinds of arbitration agreements are valid and binding arbitration agreements under the CAA notwithstanding the precise nature of the dispute is yet to be identified.
84 In my view, the real complaint of the Respondents, at the level of validity and enforceability, is that the Applicant failed to file a statement of claim in accordance with the terms of the Agreement. On its face, that non-compliance may amount to a contractual breach. But in my view, that does not mean that there was not a valid and binding agreement. Rather, it means that the Respondent had the right to complain about that breach: i.e. to seek enforcement of that term of Agreement or to terminate the Agreement for breach. However, that issue is not relevant to the question of whether the Agreement on its face was void for incompleteness or uncertainty.
85 It is inherent in my conclusion that I reject the Applicant’s construction of the matters referred to arbitration set out it at [74] above. It is also inherent in my conclusion that I reject the submission by the Respondents that the statement of claim was incorporated into the Agreement by Schedule 1.
8.4 Does the Agreement comply with s 1(3)(b) and s 7 of the CAA?
86 In summary the Respondent submitted that, given that the Respondents had not agreed in the Agreement or another document in writing about the Disputed Matters to be referred to the Arbitral Panel, the requirements in s 1(3)(b) and ss 7(3) and (4) had not been satisfied.
87 It is appropriate to set out the relevant sections again. Section 1(3) of the CAA provides that an arbitration is ‘domestic’ if:
(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in Australia; and(b) the parties have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled by arbitration; and
(c) it is not an arbitration to which the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) applies.
88 Section 7 of the CAA relevantly provides:
(1) An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) The arbitration agreement must be in writing.
(4) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.
[…]
(7) Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. […]
89 In order to assess the Respondents’ submissions, it is necessary to consider the nature of the agreement required by these sections and the formal requirements imposed by them, which differ from the foundational contractual requirements above. I will deal with each in turn. But as these reasons make plain, I consider the Respondents misconceive the nature of the requirements in each of s 1(3)(b) and s 7 of the CAA.
90 Section 1(3)(b) first requires that the parties have agreed that ‘any dispute’ that ‘has arisen or may arise between them’ is to be settled by arbitration. It also requires that agreement is in ‘the arbitration agreement or in any other document in writing’.
91 In my view, the Agreement satisfies the first requirement of s 1(3)(b). As set out above, it provides that the Disputed Matters are to be settled at arbitration by the Arbitral Panel and sets out the mechanism or procedure for how the Disputed Matters are to be identified, namely by the Applicants filing a statement of claim pursuant to Schedule 1. In this case, as the Agreement is in writing, it satisfies the second requirement in s 1(3)(b).
92 Section 7(1) of the CAA first requires an agreement by the parties to submit to arbitration ‘all or certain disputes’ which ‘have arisen or which may arise between them’ in respect of a defined legal relationship. Section 7(3) requires that agreement ‘must’ be in writing. Section 7(4) provides that it is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.
93 In my view, the Agreement satisfies the first requirement of s 7(1). As set out above, it provides that ‘certain disputes’ are to be settled at arbitration by the Arbitral Panel, namely the Disputed Matters. It sets out the mechanism or procedure for how the Disputed Matters are to be identified, namely by the Applicants filing a statement of claim pursuant to Schedule 1. As that Agreement is in writing, it satisfies the requirement in s 7(3).
94 In my view, the real complaint of the Respondents, at the level of the CAA, is that either s 1(3)(b) and/or s 7 requires the actual matters to be referred for determination by the Arbitral Panel to be in the writing. I am unable to discern any such requirement on the proper construction of these sections. This is in the context, noted above, that many arbitration agreements relate to disputes which ‘may arise in the future’: those disputes can only be identified at a later point in time. In my view, such agreements clearly fall within s 1(3) and s 7, each of which refer to agreements relating to disputes that ‘may arise between’ the parties.
95 Of course, the facts in this case are different. Indeed in my view, they are unusual. As set out above, I have found that the Agreement was signed by the First Respondent in Sydney and emailed to the Applicant in Melbourne on the day of and before the hearing commenced. I have also found that the Agreement was signed by the Applicant and the Second Respondent in the presence of Rabbi Raskin on the day of and before the hearing in fact commenced.
96 One would have expected that the statement of claim would have been filed before or during the early stages of the hearing on that day. However, in the circumstances in which the Agreement was executed, there is no reason to doubt that the parties were aware of how the Disputed Matters were to be defined under Schedule 1. On the evidence before me, there is no reason to doubt that the parties were aware that the Applicant had failed to file a statement of claim in accordance with that Schedule. The Second Respondent deposed to having not drafted a statement of defence because he had not received a statement of claim from the Applicant.
97 Further, there is no reason to doubt that the parties were aware of the matters that were in fact the subject of hearings and determination by the Arbitral Panel. There was no suggestion to the contrary in the evidence or in the submissions before me. The Respondents did not object about the failure to file a statement of claim at any time during the two days of hearing or before the Award was delivered.
98 That is not to say that I do not consider, in the ordinary case, that parties to an arbitration should specify in writing the subject matter of the disputes to be referred to arbitration. Such a practice avoids the problems which might arise if the nature of the subject matter of the disputes are not properly identified including allegations that there was a want of procedural fairness. However, in the unusual circumstances of this case, it is not asserted by the Respondent’s that they were in any way prejudiced or denied procedural fairness by reason of the Applicant’s failure to provide a statement of claim.
99 As a result, I consider that the Agreement does comply with s 1(3)(b) and s 7 of the CAA as there is no requirement under those provisions for the particular matters referred to an arbitrator to be in writing. Further, and as a consequence, I do not consider that the arbitration was beyond the scope of the CAA.
8.5 Waiver
100 It is then necessary to consider the issue of waiver under s 4 of the CAA raised by counsel for the Applicants. For convenience I will set out that section again:
A party who knows that any provision of this Act from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating the party’s objection to such non-compliance without undue delay or, if a time-limit is provided for stating the party’s objection, within such period of time, is taken to have waived the party’s right to object.
101 Counsel for the Applicant submitted that s 4 operates in this proceeding to prevent the Respondents from relying on the absence of statements of claim and defence defining the Disputed Matters as non-compliance with any written requirement under s 7(3) and (4) of the CAA. By logic, that submission would also apply to any written requirement in s 1(3)(b). He submitted that the parties conducted the arbitration understanding what disputes had been referred and the requirement for statements of claim and defence was a procedural matter that could be derogated from. As such, s 4 operated to waive the Respondents’ right to object to the lack of written points of claim.
102 Counsel for the Respondent argued that the requirement under s 7 of the CAA to have an arbitration agreement that is in writing cannot be derogated from, such that s 4 does not operate to allow that requirement to be waived. So too, by logic, that submission would also apply to any written requirement in s 1(3)(b).
103 Counsel referred to the UNCITRAL commentary on the Model Law equivalent of s 4 set out above. It provides that the Model Law ‘contains specific rules concerning objections with regard to certain fundamental defects such as a lack of a valid arbitration agreement or the arbitral tribunal’s exceeding its mandate’. Counsel suggested that these rules relate to non-derogable provisions of the CAA and should be contrasted with the power of waiver of derogable requirements available under s 4. As to the provisions from which a party may derogate, I refer to my comments in [61] above.
104 I accept that this is so. But this argument proceeds on the premise that the CAA requires that the matters to be referred to the arbitrator to be in writing. For the reasons set out in section 8.4, I do not accept that premise.
105 It is important to note that s 4 may apply to waiver of any provision of the CAA from which the parties may derogate and ‘any requirement under the arbitration agreement has not been complied with’. It is the second kind of waiver that assumes some importance for the purpose of the proceeding. That second kind of waiver relevantly requires two elements:
(1) a party knows that any requirement under the arbitration agreement has not been complied with; and
(2) that party proceeds with the arbitration without stating the party’s objection to such non-compliance without undue delay.
106 As set out in [95] to [99] above, I am satisfied that the Respondents knew of the requirement under the Agreement for the matters to be determined by the Arbitral Panel to be identified in a statement of claim and nevertheless proceed with the arbitration without objection. The First Respondent provided signed execution pages of the Agreement to the Applicant on the first day of the hearing. The Second Respondent signed the Agreement on the first day of the hearing. As set out in [30] above, the Second Respondent deposed that he is very familiar with Jewish legal documents and has an in-depth knowledge of Jewish commercial law. I have inferred, in absence of evidence suggesting anything to the contrary, that the Respondents read and understood the Agreement at the time. The Respondents did not object at any time in the arbitration process to the Applicant’s failure to provide a statement of claim. As a result, I have concluded that the Respondents waived their right to object to the Applicant’s failure to do so.
107 In light of these conclusions, I will now turn to the specific legal issues relating to ss 35 and 36 of the CAA.
8.6 Domestic Commercial Arbitration is a threshold issue
108 I have formed that the view that before considering the enforcement of an Award under s 35 of the CAA, there is a threshold issue as to whether the arbitration is a ‘domestic commercial arbitration’. This is because, pursuant to s 1(1) of the CAA, the CAA only applies to ‘domestic commercial arbitrations’.
109 I am conscious that there is no express requirement to this effect in s 35 of the CAA. I am also conscious of the procedural and evidentiary requirements imposed on an applicant by r 9.21 of the Arbitration Rules for an application under s 35. I am conscious too of the limited nature of curial intervention generally under the CAA, including Part 8.
110 However, reading the CAA as a whole, I consider that the power of the Court to enforce an arbitral award only arises where there is a domestic commercial arbitration to which the CAA applies. Though often not in issue, it is a requirement of establishing the Court’s jurisdiction to enforce the Award under s 35. Of course, very often, the existence of a ‘domestic commercial arbitration’ will not be in issue. Nevertheless, I remain of the view that the Applicant under s 35 of the CAA must establish that the Award was in respect of a domestic commercial arbitration.
8.7 Is this arbitration domestic?
111 As set out above, there are three requirements to be met for the arbitration to be a ‘domestic’ arbitration under the CAA. Section s 1(3) of the CAA provides that an arbitration is domestic if:
(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in Australia; and(b) the parties have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled by arbitration; and
(c) it is not an arbitration to which the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) applies.
112 As to the requirement in s 1(3)(a), as noted above, s 1(4) of the Act provides in substance that if a party does not have a place of business, one has regard to that party’s habitual residence. In the case, it is not in issue that the place of business or habitual residence of each of the Applicant and the Respondents was in Australia when the Agreement was made.
113 As to the requirement in s 1(3)(c), it is not in issue that the Model Law as given effect by the IAA does not apply to this arbitration.
114 As to the requirements in s 1(3)(b), for the reasons set out in [91]-[91] above, I am of the opinion that the Agreement satisfies the requirements of s 1(3)(b). As a result, I am satisfied that this arbitration was a ‘domestic’ arbitration.
115 For completeness, in reaching this conclusion, I have considered whether ss 1(3)(a) and (b), when referring to an ‘arbitration agreement’, refer to an ‘arbitration agreement’ as defined in s 7 of the CAA (a ‘s 7 Arbitration Agreement’). On balance I consider that it is a reference to a s 7 Arbitration Agreement.
116 This is for three main reasons. First, the concept of ‘arbitration agreement’ as defined in s 7 is of central significance under the CAA. Second, ss 1(3)(a) and (b) each refer to an ‘arbitration agreement’ which is a defined term under s 2 of the CAA, with the definition contained in s 7. Third, s 1(3)(a) refers to ‘an arbitration agreement’ and s 1(3)(b) refers to ‘the arbitration agreement’. The change from the indefinite article in s 1(3)(a) to the definite article in s 1(3)(b) suggests that it is this same arbitration agreement referred to in both sub-sections.
8.8 Is this Arbitration Commercial?
117 For the CAA to apply, s 1(1) also requires that the arbitration must be ‘commercial’. To assist in determining what this means, s 1 of the CAA sets out the Model Law note on the interpretation of the word ‘commercial’ referred to at [48] above.
118 It is clear that the CAA intends to give a wide interpretation to when an arbitration is commercial. It covers ‘matters arising from all relationships of a commercial nature, whether contractual or not’. The Model Law note sets out a non-exhaustive list of relationships of a commercial nature, which is wide-reaching.
119 As to Claim 1, I consider that the advances paid by the Applicant to the Respondents which are the subject of this Claim gave rise to a commercial relationship such that the dispute was commercial for the purposes of the CAA. This position accords with the inclusion of financing transactions in the non-exhaustive list set out in the Model Law note.
120 As to Claim 2, I am satisfied that the rental payments that are the subject of this Claim are sufficiently intertwined with the advances relating to Claim 1. As I set out more fully below, Claim 2 is only dealt with briefly in the Reasons. However, Claim 2 is addressed in the context of the advances that are the subject of Claim 1. Further, there is in evidence an email dated 31 March 2012 leading up to the arbitration which records that the First Respondent and his wife “agreed to pay my rent for the house we currently occupy in lieu of my permission to allow you to borrow more against 67-69 Penkivil Street for the sake of your business and Yeshivah”. I consider that I may have regard to this evidence in determining whether the arbitration is ‘commercial’ for the purposes of s 1(1) of the CAA. In these circumstances, I am satisfied that the subject matter of Claim 2 arises from the commercial relationship between the Applicant and the Respondents.
121 As to Claim 4, the UNCITRAL commentary suggests clearly that employment disputes are not covered by the definition to be given to ‘commercial’ in this context. It expressly provides:
Not covered are, for example, labour or employment disputes and ordinary consumer claims, despite their relation to business. Of course, the fact that a transaction is covered by the model law by virtue of its commercial nature does not necessarily mean that all disputes arising from the transaction are capable of settlement by arbitration.
122 Likewise, the learned author of Commercial Arbitration in Australia notes that an employment relationship will likely not be considered ‘commercial’ for the purposes of s 1. He cites the Alberta High Court’s decision in Borowski v Heinrich Fiedler Perforiertechnik GmbH in support of this proposition. In that case, Murray J made the following comments in respect of the contract in question, in the context of whether an arbitration was an ‘international commercial arbitration’:
[T]he evidence before this Court does not alter the fact that this was a contract of employment giving rise to the status of master and servant and was not a contract for services to be performed either by an agent or by an independent contractor. This is not the type of relationship which one would consider to be a ‘commercial’ legal relationship or as containing an agreement which one might describe as an ‘international commercial arbitration agreement’. The relationship between the Plaintiff and Defendant has none of the earmarks of a “commercial” relationship as outlined in the dictionary definitions and indeed by our Court of Appeal and the Supreme Court of Alberta …
123 With respect, I agree with Murray J’s conclusion. On its face, Claim 4, being a claim for wages, is not commercial. Further, while I am conscious that the term ‘commercial’ should be given a wide interpretation, I am not satisfied on the evidence before me that Claim 4 arises from relationships of a commercial nature between the Applicant and the Respondents of the kind which are the subject of Claims 1 and 2. As a result, I have concluded that Claim 4 does not fall within the scope of a ‘commercial arbitration’ under the CAA.
8.9 Conclusion on s 35 application
124 Thus, I have concluded that Claims 1 and 2 are both ‘domestic commercial arbitrations’ under the CAA. Further, I am of the view that the other matters of which the Court must be satisfied have been established in this proceeding, namely:
(1) pursuant to s 35(2) of the CAA, the Applicant has provided to the Court a copy of the original Award and an English translation of the Award;(2) pursuant to r 9.21(2) of the Arbitration Rules, the Applicant’s supporting affidavit exhibits the documents referred to in s 35(2) of the CAA and states the extent to which the Award has not been complied with and the last known address of each of the Respondents; and
(3) pursuant to r 9.21(1) of the Arbitration Rules, the Applicant’s application was made in the correct form.
125 The Court is thus entitled to enforce the Award in respect of Claims 1 and 2 subject to two matters.
126 First, can the Court enforce an award under s 35 when the award itself does not quantify the amount owing or the basis upon which it can be calculated? This is the fourth contention raised by the Respondents and relates only to Claim 2. I will deal with the fourth contention later in these reasons. However, I have concluded that the Court cannot enforce the Award in respect of Claim 2 under s 35 of the CAA.
127 Second, should the Court refuse to enforce the Award pursuant to s 36 of the CAA? This involves consideration of the first, second and third contentions. I will now deal with the grounds for refusal of enforcement in the context of the first contention.
8.10 Conclusion on s 36: Grounds for refusal of enforcement
128 The Respondents relied upon the absence of any written statement of the matters in dispute to submit that the Court should refuse to enforce the Award under s 36 of the CAA. This is because:
(1) pursuant to s 36(1)(a)(i), there was no valid ‘arbitration agreement’ under Victorian law;
(2) pursuant to s 36(1)(a)(iii), the Award dealt with disputes not contemplated by or not falling within the terms of submission to arbitration set out in the Agreement, or contained decisions on matters beyond the scope of the submission to arbitration;
(3) the arbitral procedure was not in accordance with the agreement of the parties.
129 As is evident from this summary and the summary of the submissions in section 8.1 above, there is a complete overlap with these grounds and the issues addressed in sections 8.3, 8.4 and 8.5. For the reasons set out in those sections, I have concluded that:
(1) the Agreement was a valid, binding and enforceable contractual agreement;
(2) the Agreement was an ‘arbitration agreement’ as defined in the CAA;
(3) there was no obligation under the CAA to provide written notice of disputes in fact referred to the Arbitral Panel;
(4) notwithstanding the statement of claim was not filed, the parties were aware of the matters that were in fact the subject of submission to the Arbitral Panel and the Respondent did not object at any time prior to the delivery of the Award; and
(5) as a result, the Respondents waived their right to object to the disputes not being defined in writing in a statement of claim in accordance with the terms of the Agreement.
130 For completeness, in the circumstances set out in [129] above, I do not consider that the Respondents have established on the evidence that the Award dealt with disputes not contemplated by or not falling within the terms of submission to arbitration set out in the Agreement, or contained decisions on matters beyond the scope of the submission to arbitration.
131 As a result, the Respondents have not established the grounds set out in s 36 relied upon relating to the first contention.
132 Given this conclusion, it is not necessary for me to determine whether I would refuse to enforce the Award under s 36(1) of the CAA in respect of Claim 1 on these grounds. However, in the event that I am wrong, it is appropriate that I express shortly my view as to whether I would refuse to enforce that aspect of the Award.
133 First, I have concluded that, by reason of the use of the word ‘may’ in the chapeau to s 36(1) of the CAA, the Court has a discretion to refuse enforcement of an award even if the grounds under s 36(1) are made out. In reaching this conclusion, I have relied upon the judgment of Croft J in Indian Farmers, a case in relation to the International Arbitration Act 1974 (Cth). In that case, Croft J relied upon the commentary of Professor Born in International Commercial Arbitration relating to the enforcement provisions of the New York Convention, in particular the discretion given to the Court by Article V, which is couched in very similar to terms to s 36 of the CAA. His Honour concluded that the Court retained a discretion under the equivalent provision of the IAA.
134 I am satisfied that the comments of Croft J and of Professor Born in his commentary apply equally to the enforcement provisions of the CAA such that the Court has a discretion to decline refusal of enforcement of an award.
135 Second, I have formed the view that the discretion must align with the grounds for curial intervention more generally: that is, that the Court should intervene where there is unfairness or prejudice or the award is beyond the scope of the arbitration agreement. As the Chief Justice of Singapore, Menon CJ, stated in AKN v ALC:
the grounds for curial intervention are narrowly circumscribed, and generally concern process failures that are unfair and prejudice the parties or instances where the arbitral tribunal has made a decision that is beyond the scope of the arbitration agreement. It follows that, from the courts’ perspective, the parties to an arbitration do not have a right to a “correct” decision from the arbitral tribunal that can be vindicated by the courts. Instead, they only have a right to a decision that is within the ambit of their consent to have their dispute arbitrated, and that is arrived at following a fair process.
136 So much is made clear in respect of enforcement proceedings by the decision of the Full Federal Court in TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd, in which the Court noted in relation to breaches of natural justice under the Model Law enforcement provisions:
There is sometimes, however, a tendency of some to speak of a technical or minor breach of the rules of natural justice: see for instance the primary judge here at J[30]. To the extent that such expression may be acceptable in some contexts, it will be important to recognise that for the discretion under Arts 34 and 36 to be exercised, real unfairness or real practical injustice will need to be demonstrated. Whilst the IAA does not use phraseology of “prejudice” as does the Singapore Act, such a notion inheres in the conceptions of fairness, unfairness, practical justice and practical injustice. Thus, the expression of view by the Court in Soh Beng Tee at [65] that “only meaningful breaches of the rules of natural justice that have actually caused prejudice are ultimately remedied” can be seen to be concordant with a notion that real unfairness or real practical injustice must be demonstrated.
137 The Full Court’s comments apply equally to the CAA. In my view they are consistent with the limited role the Court has to play in arbitral proceedings. As such, I consider that the discretion under s 36 of the CAA ought only to be exercised to refuse enforcement of an Award where to enforce it would lead to real unfairness or prejudice, or it is beyond the scope of the arbitration agreement.
138 Third, for the reasons set out above, in this case I am not satisfied that the failure to reduce to writing the Disputed Matters caused any practical unfairness or prejudice in any way to the Respondents. None was asserted by the Respondents at the arbitral hearings, before the Award and the Reasons were finalised, or in this proceeding.
139 As a result, I would enforce the Award in respect of Claim 1.
9. CONTENTION 2
140 Counsel for the Respondents submitted that the Court should refuse to enforce the Award in respect of Claim 1 because the Respondents were not the sole registered owners of the land securing the advances made. Counsel for the Respondents noted that the Award in respect of Claim 1 related to both monetary and proprietary relief, and that the propriety relief was in the form of a lien over five parcels land. The registered owners of two of the parcels of land, and the joint owners of the remaining three parcels at the time of arbitration were not parties to the Agreement. This was not disputed by the Applicant.
141 As a consequence, counsel for the Respondent submitted that because the Agreement was not between all parties to the dispute this rendered it ‘invalid’, relying upon s 36(1)(a)(i) of the CAA to refuse enforcement.
142 Counsel for the Applicant submitted that the joint ownership of the land with entities that were not party to the arbitration does not render the Agreement invalid. Further, he submitted that no practical injustice occurred against those entities in this case. This is because the Applicant did not seek to enforce that part of the Award in respect of Claim 1 relating to the lien.
143 In my view, I do not consider that the fact that the Respondents jointly owned the five parcels of land with entities that were not party to the arbitration renders the Agreement invalid.
144 In Giedo Van Der Garde BV v Sauber Motorsport AG, Croft J discussed the arbitrability of a dispute where there were interested non-parties in the context of an enforcement claim under the IAA. His Honour stated that:
A dispute does not lose its “arbitral quality” merely because a non-party or parties have an interest in the outcome of the arbitration. Indeed, to find otherwise would be to undermine the essence of arbitral proceedings as fundamentally contractual. While non-parties may suffer prejudice as a result of an arbitral proceeding to which they are not parties, arbitral proceedings are necessarily inter partes in nature and, as such, whether the arbitrator could have heard the other drivers [as non-parties] is not a matter for this court.
145 His Honour’s comments are of some relevance to the determination of this issue. In my view, the fact that some owners of the properties securing Claim 1 are not parties to the Agreement does not render that agreement or the arbitration invalid. This is because those non-parties are not bound by the Agreement or the Award made pursuant to that agreement. It follows, in my view, that the non-involvement of the other registered proprietors does not bear on the application of the enforcement provisions of the CAA in this proceeding.
146 Further, the application for enforcement does not relate to the lien over the properties owned by the non-parties, but only to the amount owed by the Respondents. In the event that I am wrong and the failure to join these non-parties renders the Agreement invalid for the purpose of s 36(1)(a)(i), in the exercise of my discretion, I would not refuse to enforce the monetary component of Claim 1 of the Award. This is because enforcement of the monetary component of the Claim does not prejudice the Respondents or the non-parties. To the contrary, it allows the Applicant to seek recovery of the money which the Arbitral Panel found was owing by the Respondents.
10 CONTENTION 3
147 The Respondents contended that the Court should refuse to enforce the Award because the Reasons provided were inadequate. The Respondents submitted that the Arbitral Panel failed to discharge their mandate to conduct an arbitration in accordance with s 31(3) of the CAA as required by the Agreement. As noted above, that section relevantly requires that an award ‘must state the reasons upon which it is based’. As a result, the Respondents submitted that for the purposes of s 36(1)(a)(iv) of the CAA, the conduct of the arbitration was not in accordance with the agreement of the parties.
148 In this regard, counsel for the Respondents relied upon the decision of the High Court in Westport Insurance Corporation v Gordian Runoff Limited. In that case, the majority (French CJ, Gummow, Crennan and Bell JJ) adopted the standard of reasons required from an arbitrator set out by Donaldson LJ in Bremer Handelsgesellschaft mbH v Westzucker GmbH [No 2]. His Lordship considered that:
All that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. That is all that is meant by a ‘reasoned award’.
149 Counsel for the Respondents contended that there is no process of reasoning present in the Reasons. Rather, the Reasons merely summarise the evidence and state the conclusion, such that there is no nexus between the Reasons and the Award now sought to be enforced.
150 In support of the adequacy of the Reasons given by the Arbitral Panel, counsel for the Applicant referred to the decision of Thomas Au J of the High Court of Hong Kong in R v F. In that case, his Honour noted that:
Of course, the reasoning process expressed in an award must be one that the readers of the award (who are mostly if not always the parties themselves only) can understand how and why the conclusion is reached on a particular issue. However, the way the reasons expected to be given in an arbitral award for a particular issue should be proportional to the complexities of how that issue is contended (or not contended) before the arbitral tribunal. Depending on how the issues are contended, the reasons do not necessarily need to be elaborate or lengthy, provided they could be understood in its proper context. It must be borne in mind that an arbitration award is the result of a private consensual process, which is intended and expected to be cost effective, and shorn of complexities and technicalities.
151 In my view, Au J’s comments are not at odds with the High Court’s decision in Gordian Runoff. Rather, they merely suggest that in determining whether the arbitral tribunal’s reasons are adequate, the Court may take into account:
(1) the weight of the particular issue proportionate to the other issues in dispute; and
(2) the position of the parties and what they may understand the reasons to mean.
152 Taking these matters into account, there must still be some reasoning process setting out how the tribunal came to its decision. When considering the adequacy of reasons the Court is not concerned with assessing the merits of the reasons given for an award beyond determining whether they adequately indicate how the arbitral tribunal came to its decision. In the context of enforcement proceedings, Croft J in Giedo noted that:
In this respect the court does nevertheless stress that this enforcement application does not involve anything in the nature of a merits appeal from the award. Indeed, it is not the function of the court to investigate this issue, save to indicate that on the basis of the material, including the submission to arbitration, it was clearly open to the arbitrator to make the relevant findings as set out in the award.
153 With these principles in mind, I now turn to consider the adequacy of the Reasons.
154 The Reasons are not easy to understand. The language is often disjointed. These issues may be the result of the translation or the way in which the original Reasons were written.
155 The Reasons focus predominantly on the dispute over the advances that were the subject of Claim 1: nearly all of the three pages of the Reasons deal with Claim 1. That is understandable given that it was the largest claim before the Arbitral Panel. Without assessing the merits of the Reasons, I note that the Reasons on Claim 1 set out the relevant arguments, the Halachic principles upon which they rely, and the conclusions arrived at consequential to those facts. As such, in my view, they are adequate.
156 As to Claim 2, it is referred to in a very limited way on the third page of the Reasons. The Reasons provide:
And consequently we have come to the conclusion that regarding the principal which is approximately 1,000,000 certainly he is liable to pay and concerning the portion of 831,360 which is the amount of profits of the obligation to pay the Interest, and this is dependent on the doubt concerning the law of Interest alone therefore the claimant will receive a third of the main amount as is the custom of Courts that where a doubt exists one receives a third, also on the matter of the rental agreement that remains an obligation they are obligated to pay, also all of the loans (small ones relatively) that were done as separate deals that were done at a stage after the large deal of the 1,831,360 they are obliged to pay the principal (126,000)…
157 The Reasons do not set out any facts relevant to the conclusion that there remains ‘an obligation’ to pay rent or why the conclusion was reached.
158 As to Claim 4, the Reasons do not appear to mention this Claim at all.
159 In these circumstances, the Reasons do not on their face satisfy the requirements to give reasons as required by s 31(3) of the CAA in respect of Claims 2 and 4. As a result, in the exercise of my discretion, I would refuse to enforce the Award in respect of Claims 2 and 4 under s 36(1)(a)(iv) of the CAA.
11 CONTENTION 4
160 In light of my conclusions in respect of the third contention, it is unnecessary to decide the fourth contention. However, it is appropriate that I set out my views on this contention.
161 The Respondents submitted that the Award in respect of Claims 2 and 4 did not set out the amounts to which the Applicant was entitled. In these circumstances, the Respondent submitted that the Court cannot enforce the Award in respect of Claims 2 and 4. This is because it is not part of the role of the Court in an application under s 35 to determine, on the basis of evidence not produced before the Arbitral Panel, the amount to be paid under the Award.
162 The Award relevantly provides:
Claim 2 – the claim regarding $17,815.47 pcm rental agreementCourt decision: The defendants must pay the entire amount of the rental agreement $17,815.47 pcm, as agreed between the parties initially (including all outstanding payments, which have not been paid completely yet). This obligation continues until the defendants pay the entire above mentioned amount mentioned in claim 1. Regarding the monthly payments from that time till [sic] September 2013, it depends on the details of initially made agreement and needs further clarification by the Court.
[…]
Claim 4 – the claim regarding salary
Court decision: The defendants must pay the entire amount of the salary (that has not yet been paid) to the plaintiff for all the time of his service at the office etc., but not for the time after he resigned from work.
163 As to Claim 2, while the Award refers to an agreement to pay $17,815.47 per calendar month, the period of time over which it is to be paid is not addressed. It refers to ‘as agreed between the parties initially’ but does not record when this was. It indicates that the monthly payments ‘from that time till [sic] September 2013, it depends on the details of initially made agreement and needs further clarification by the Court’. Thus it would appear that the amount referred to earlier in the Award of $17,815.47 per calendar month may require some unspecified and unascertained reduction.
164 As to Claim 4, the Award does not refer to a period of employment or a rate of pay.
165 As noted above, the Applicant deposed in this proceeding as to the quantum of those claims. In [11] of his affidavit affirmed on 9 May 2019 he relevantly deposed:
I am seeking an award of $1,849,570.02 comprising:11.1 $1,635,802.00, being the amount awarded under claim 1 of the Award
11.2 $320,168.02 being the intended amount awarded under claim 2 of the Award, which was calculated in 2014 and advised to the Second Respondent, who did not dispute it, and to the arbitrators then,
11.3 $14,000 being the intended amount awarded under claim 4 of the Award, which was calculated in 2014 and advised to the Second Respondent, who did not dispute it, and to the arbitrators then…
166 Counsel for the Applicant properly conceded that, as these calculations were not in evidence and were not included in the Award, there was a difficulty with enforcing the Award for the amounts claimed in respect of Claims 2 and 4.
167 As set out above, I am conscious of the limited nature of curial intervention generally under the CAA, including s 35. I am conscious too of the need to avoid a narrow or pedantic operation of the section. But s 35 section only allows a Court to recognise and enforce an ‘award’. In my view, given the absence of a sum certain in respect of Claim 2 or 4 or a means of determining each amount on the face of the Award, there is not an award capable of recognition and/or enforcement. This is consistent with the decision of Muir J in Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd (No 1). It may be different if the means of determining the amount is evident from the reasons for the award. However, it is unnecessary for me to decide this issue because the Reasons in this case do not provide a means for calculating the amounts in respect of Claims 2 and 4.
168 In the circumstances of this case, the Court cannot recognise or enforce the Award in respect of Claims 2 and 4 under s 35 of the CAA.
12. CONCLUSION
169 As a result I have concluded that the monetary component of Claim 1 of the Award should be enforced. In the course of reaching this conclusion, I have considered whether the monetary component in Claim 1 can be severed from the unenforceable aspects of the Award. Consistent with the principles set out in [62] to [64] above, I have concluded that it can be severed.
170 This is because the Award in respect of Claim 1 is not so mixed up with the unenforceable aspects of the Award that it cannot be severed. It was decided on its own basis and stands on its own reasons that are not contingent upon or otherwise affected by the aspects of the Award that I have concluded above are unenforceable. Severance of the Award in respect of Claim 1 does not result in any injustice to the Respondents. In these circumstances, I consider that severance is available and I would enforce only the monetary component in Claim 1.
171 Further, I consider that the amount awarded in respect of Claim 1 ought to be adjusted to take into account the amounts acknowledged by the Applicant as having already been paid by the Respondents. This adjustment is of $120,400.00. As such, the amount enforced will be $1,515,402.02. I wish to hear from the parties on the questions of interest and costs.
