KINSELA v ROBINJUR PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MEAGHER and POWELL JJA and BROWNIE AJA 16 April 1997, 18 February 1998 [1998] NSWCA 124 Agriculture — Agricultural holding — Tenancy — Share farming agreement — Termination — Compensation — For improvements — Temporary pasture — Value of — How calculated Arbitration — Commercial Arbitration — Award — Appeal — Leave to appeal — Error of law where "manifest error" on face of award — Principles applicable Discretionary power Meagher JA I agree with Powell JA. Powell JA This is an appeal by leave granted by this Court on 6 March 1995 from a Judgment delivered, and Orders made, by Ireland J on 3 February 1995. On that day his Honour dismissed with costs the Summons which had been filed by the Appellant ("Mr Kinsela") seeking leave to appeal from the determination, by way of award, of an Agricultural Committee which had been established pursuant to the provisions of Division 5 of PtIII of the Agricultural Holdings Act 1941 ("the Act") for the purpose of dealing with a claim for compensation which had been made by Mr Kinsela upon the termination of a share farming agreement which had earlier been made between him and the Respondent ("Robinjur"). That agreement related to a property at Canowindra which was owned by Robinjur and was known as "Cucumber". Put in its most general form, the question for determination upon the appeal is whether Ireland J erred when he held that leave to appeal should be refused upon the grounds, first, that the Arbitration Committee had not fallen into error (AB 149), and that, in any event, the question sought to be raised on the proposed appeal was not one which might, or might be likely to, add substantially to the certainty of commercial law (see Commercial Arbitration Act 1984 ("the Arbitration Act') s38(5)). The facts which gave rise to the making of the award, and the later application to Ireland J, are not really in dispute and may be - as I will do below - shortly stated. Such difficulty as I have had in determining the proper fate of the appeal lies, not in determining what are the relevant facts, but in identifying what it is that Mr Kinsela says was the manifest error on the face of the award, or what he says is the error on the part of the Arbitration Committee, of which it is said there is strong evidence, the determination of which alleged error is said to be likely to add substantially to the certainty of commercial law. Put shortly, the relevant facts would seem to have been as follows: 1. "Cucumber", of which Robinjur was at all relevant times the owner, was in February 1990 a property of some 388 ha (960 ac) located in the Canowindra district. The property comprised river flats, irrigation country, arable dry land, and open grazing and wood land; 2 UNREPORTED JUDGMENTS 2. Mr Kinsela and his family appear to have entered into occupation of "Cucumber" on | February 1990 pursuant to what appears to have been an oral share farming agreement; 3. on 28 June 1990, Mr Kinsela and Robinjur executed a written share farming agreement. Although no copy of the agreement is included in the appeal papers, it appears to be accepted that the term of that agreement was a period of 2 years commencing on | July 1990; 4. in March 1992, Mr Kinsela was informed by Robinjur that "Cucumber" was to be advertised for sale from April 1992, and was to be offered for sale at auction on 21 May 1992. The material before the Court does not permit one to know whether the proposed auction in fact took place and, if so, what was the result of the auction. However, the absence of such knowledge does not appear to affect the fate of this appeal; 5. although it would appear that the draft of a further share farming agreement was submitted to Mr Kinsela prior to 30 June 1992, that draft appears never to have been agreed to nor was a fresh share farming agreement ever executed. Accordingly, the term of the share farming agreement provided for by the agreement of 28 June 1990 came to an end on 30 June 1990; 6. notwithstanding Mr Kinsela's failure to execute a fresh share farming agreement, it would seem that, during July 1992, it was agreed between the parties that Mr Kinsela and his family could remain on "Cucumber" until 31 August 1992; 7. Mr Kinsela was later to claim, and in its award the Arbitration Committee accepted, that, as the result of his pasture improvement activities during the period of his occupation of "Cucumber" improved temporary pastures increased by a total of 110 hectares; 8. at the time of his leaving "Cucumber" on 30 August 1992, Mr Kinsela caused to be delivered to Robinjur a Notice of Claim which, omitting formal parts, was as follows: "TAKE NOTICE that I, Richard Kinsela, pursuant to the termination of my share farming arrangements on your property known as 'Cucumber' at Canowindra claim compensation for improvements and the value of one-half of the oats and barley crops on the property. Particulars of my claim are as set out in the report of Richard Ivey Consulting Pty Ltd dated 19 August 1992 a copy of which is annexed." In the summary which formed part of that report, Mr Kinsela's claim was said to be: (i) Value of improvements to incoming tenant: - pasture $129,029.00 - lime and superphosphate spreading 4,324.00 (ii) One-half of the value of the barley and oat $14,839.00 crops $148,192.00 9. on or about 30 September 1992, Mr Kinsela caused to be delivered to the Minister for Agriculture, a Notice of Dispute seeking the reference to arbitration of the following "questions, differences, disputes or matters": URJ KINSELA v ROBINJUR PTY LTD (Powell JA) 3 "Quantum of the value to an incoming share-farmer of the improvements effected by the share-farmer. Quantum of the value of the sharefarmer's share of hay stored on the property at the termination of the share-farming agreement. The amount, time and mode of payment of compensation to which the share-farmer is entitled under s7(1) and s29(1) of the Agricultural Holdings Act 1941." In the Schedule to that Notice of Dispute the amount claimed as compensation for improvements was said to be $133,719.00 representing $3,113.00 claimed for the application of lime, $1,213.00 claimed for the application of fertiliser and $129,393.00 claimed for laying down temporary pastures, while compensation in the sum of $7,455.00 was claimed in respect of what was said to be Mr Kinsela's share of the value of 4,260 bales of hay at $3.50 a bale. The reference in the Notice of Dispute to the Holdings Act is explained by the fact that although the provisions of the Agricultural Tenancies Act 1990 ("the Tenancies Act'), which (s30(1)) repealed the Holdings Act, came into force on | May 1991. Schedule 2 - Savings and Transitional provisions to the Tenancies Act provided (inter alia): "SAVINGS 3(1) Nothing in this Act affects any right, power or duty exerciseable or to be performed under the former act in respect of a tenancy: (a) created before the repeal of the former Act; and the former Act and the regulations under that Act are to be taken to continue to apply to a tenancy so created, to the exclusion of this Act and any regulations under this Act. (2) This clause has effect subject to cl4 and any regulation made pursuant to cl2. TRANSITIONAL PROVISIONS 4. If a matter arising under the former Act is referred to arbitration after the commencement of this clause, the arbitration is to be conducted under and according to the provisions of this Act." In the result, Mr Kinsela's right to claim, and to receive, compensation was to be determined in accordance with the provisions of the Holdings Act, while the manner of delamination of any compensation to be paid to Mr Kinsela was to be determined in the manner provided for pursuant to the provisions of the Tenancies Act - s21(1) of the Tenancies Act provides for an arbitration for the purposes of that Act, in the normal course, to be conducted by a committee of three persons selected in accordance with the regulations, while s23 of the Tenancies Act provides that - with exceptions which are not material to the present case - the Commercial Arbitration Act 1984 ("the Arbitration Act") applies to an arbitration for the purposes of the Tenancies Act.. So far as is relevant the Holdings Act provided as follows: "5(1) This Act shall (except where otherwise expressly provided) apply to and in respect of share-farming agreements and the parties to any such agreement in like manner at it applies to contracts of tenancy and the parties to any such contract. (3) In the application of this Act to and in respect of a share-farming agreement and the parties thereto: 4 UNREPORTED JUDGMENTS (b) a reference to a tenancy shall be construed as a reference to the use and occupation of land by a share-farmer; (c) a reference to a landlord shall be construed as a reference to an owner who is a party to a share-farming agreement; (d) a reference to a tenant shall be construed as a reference to a share-farmer; (e) a reference to a holding shall be construed as a reference to land which a share-farmer is authorised to use and occupy pursuant to a share farming agreement. 7(1) Where a tenant of a holding has after the commencement of this Act made thereon any improvement comprised in the First Schedule to this Act he shall, subject as in this Act mentioned, and whether the improvement was or was not an improvement which he was required to make by the terms of his tenancy be entitled, at the termination of the tenancy, on quitting his holding to obtain from the landlord as compensation for the improvement such sum as fairly represents the value of the improvement to an incoming tenant. 10. If the tenant of a holding claims to be entitled to compensation, whether under this Act or under custom or agreement or otherwise, in respect of any improvement comprised in the First Schedule to this Act and made after the commencement of this Act, and if the landlord and tenant fail to agree as to the amounts and time and mode of payment of the compensation, the difference shall be settled by arbitration under this Act. 17(1) Any question, difference, dispute or other matter whatsoever which by or under this Act is required or permitted to be referred to arbitration shall, notwithstanding any agreement under the contract of tenancy or otherwise providing for a different method of determination, be determined by an agricultural committee as arbitrators in accordance with the provisions set out in the Second Schedule to this Act. (2) Any claim to compensation under this Act shall cease to be enforceable after the expiration of two months from the termination of the tenancy unless particulars thereof have been given by the landlord to the tenant or by the tenant to the landlord, as the case may be, before the expiration of that period: Provided that, where a tenant lawfully remains in occupation of part of the holding after the termination of the tenancy, particulars of a claim relating to that part of the holding may be given within two months of the termination of the occupation. (3) Where a claim for compensation has been referred by arbitration and the compensation payable under an agreement is by this Act to be substituted for compensation under this Act, such compensation as is to be so substituted shall be awarded in respect of any improvement provided by the agreement. (4) If in any arbitration under this Act the agricultural committee states a case for the opinion of the District Court on any question of law, the opinion of the court on any question so stated shall be final. URJ KINSELA v ROBINJUR PTY LTD (Powell JA) 5 (23) Laying down temporary pasture with clover, grass or other seeds insofar as the value of the temporary pasture on the holding at the time of quitting exceeds the value of the temporary pasture on the holding at the commencement of the tenancy for which the tenant did not pay compensation. So far as is relevant, the Tenancies Act provides: "20(1) A dispute arising out of anything contained in this Act, and any other dispute arising from an agreement creating a tenancy, may be referred to arbitration. (3) A court has no jurisdiction: (a) in respect of any issue in a dispute arising out of anything contained in this Act, except to the extent that it cannot be referred to arbitration; or (b) in respect of any issue in a dispute that has been referred to arbitration and has not been withdrawn or dismissed for want of jurisdiction. 21(1) An arbitration for the purposes of this Act is to be conducted by a committee of three persons selected in accordance with the regulations... 22(1) An application for arbitration must be made in accordance with the regulations not later than 3 months after the date the tenant left the farm. 23(1) Subject to this Act and the regulations, the Commercial Arbitration Act 1984 (except Pt2 of that Act) applies to an arbitration for the purposes of this Act. 29(1) The Governor may make regulations, not inconsistent with this Act, prescribing all matters that by this Act are required or permitted to be prescribed or that are necessary or convenient to be prescribed for carrying out or giving effect to this Act. (2) In particular, regulations may be made for or with respect to: (a) the constitution of committees to conduct arbitrations for the purposes of this Act... (b) proceedings in any arbitration for the purposes of this Act. Prior to its repeal in 1996, the Agricultural Tenancies Regulation 1991 provided (inter alia) as follows: "DIVISION 2 - ARBITRATION BY COMMITTEE Membership of Committee 7. A committee is to consist of: (a) a Chairperson appointed by the Director-General from the panel of Chairpersons; and 6 UNREPORTED JUDGMENTS (b) an owner nominated by the owner concerned in the arbitration from an available members list (containing not fewer than 3 names) selected by the Director-General from the panel of owners and furnished to the owner concerned: and (c) a tenant nominated by the tenant concerned in the arbitration from an available members list (containing not fewer than 3 names) selected by the Director-General from the panel of tenants and furnished to the tenant concerned. Awards 12(1) The Chairperson or single arbitration must: (a) serve a signed copy of the award on each of the parties; and (b) in the case of a committee, serve a signed copy of the award on the other members of the committee. (2) An award does not have to include a statement of the reasons for making the award " So far as is relevant, the Arbitration Act provides as follows: "JUDICIAL REVIEW OF AWARDS 38(1) Without prejudice to the right of appeal conferred by subs(2) the Court shall not have jurisdiction to set aside or remit an award on the ground of error of fact or law on the fact of the award. (2) Subject to subs4 an appeal shall lie to the Supreme Court on any question of law arising out of an award. (4) An appeal under subs(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 s40, with the leave of the Supreme Court. (5) The Supreme Court shall not grant leave under subs4(b) unless it considers that: (a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and (b) there is: (i) a manifest error of law on the face of the award; or (ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law. Such was the statutory context in which the hearing before the Arbitration Committee, from the award brought down by which Mr Kinsela sought leave to appeal, took place. That hearing took place before a Committee comprising Messrs. Sell, McLean and Eslick on 29 June, 4, 5 and 26 August 1993, at the conclusion of which hearing the Committee reserved its decision. Although, as will be apparent from what I have earlier recorded, Mr Kinsela's claim for compensation included a number of sub-claims, for the purposes of these proceedings, it is sufficient - since that is the only item in dispute - to deal with the evidence which was tendered in relation to Mr Kinsela's claim for compensation for laying down temporary pasture. URJ KINSELA v ROBINJUR PTY LTD (Powell JA) 7 The evidence which was tendered in respect of that item was, for the most part, limited to the report of Richard Ivey Consulting Pty Ltd which had been prepared prior to Mr Kinsela's giving of notice of his claim, but which was revised in October 1992, and a report prepared in July 1993 by Hassall & Associates Pty Ltd - the relevant officer of employee of which appears to have been a Mr Cummings - which report had been prepared for Robinjur. As will be apparent from the passage from the award which was later delivered by the Arbitration Committee which I set out below, there was a considerable divergence in the methodology adopted, on the one hand, by Mr Ivey and, on the other, by Mr Cummings, for the purpose of calculating the appropriate amount of compensation to be allowed to Mr Kinsela in respect of the temporary pasture which he claimed to have laid down. When, in the course of its award - which, although dated 1 October 1993, is said not to have been served on Mr Kinsela until 4 November 1993 - the Arbitration Committee came to deal with this item in Mr Kinsela's claim, it said (AB 118-119): "The claim for the laying down of temporary pastures was substantiated by the clear evidence given of the pasture improvement activities of the tenant during the period of the tenancy. In this regard the Committee has found that the tenancy ran for a period commencing in February 1990 and concluded at the time that the tenant vacated the property 'Cucumber' at the end of August 1992. The evidence of the tenant was supported by evidence given by Mrs Kinsela and also the evidence given by Anthony Kinsela. On the basis of information provided by the tenant Richard Ivey provided a detailed report on the pasture improvement activity during the period of the tenancy and by that report demonstrated that the activities resulted in the increase of improved temporary pastures by a total of 110 hectares during the period of the tenancy. The report by Mr Cummings disputes that increase and would show an amount of increase of improved pasture of 90 hectares for the relevant period. The report by Mr Ivey is preferred to the report of Mr Cummings in this regard However, the method of calculation of compensation proposed by Mr Ivey is not accepted by the Committee. At the same time the proposal by Mr Cummings as to the method of calculation of compensation is also not accepted by the Committee. The method of calculation of compensation proposed by Mr Ivey is not appropriate to the circumstances of this case in that his method of calculation of loss is applicable to a situation where a tenant who has a right to continue to sharefarm for a period of say five (5) years is denied that right by breach of contract by the landlord. The circumstances does not arise in this case. At the same time the method of calculation of compensation proposed by Mr Cummings is really a method of assessing an amount payable to the contractor for work performed on farm. Again, the circumstance does not arise in this case. Although the method of calculation of compensation of both experts is not accepted by the Committee, the projected returns as proposed by Mr Ivey are accepted by the Committee. The method of calculation adopted by the Committee varies from the Ivey proposal in that the claimant tenant has not been denied a right to continue to farm the property. The compensation therefore needs to be assessed having regard to the fact that the claimant tenant is from the time of the termination of the agreement no longer an active player in the managing of farming activities on the property 'Cucumber'. 8 UNREPORTED JUDGMENTS It is therefore been decided by the Committee to award the claimant tenant a portion of the income projections as compensation for the improved pastures developed by him during the relevant period of the tenancy. The Committee has decided that amount in the sum of $12,500.00." In the event, the Arbitration Committee awarded Mr Kinsela the sum of $23,352.62 being made up as follows: Application of lime $3,113.00 Application of fertiliser 1,213.00 Laying down temporary pastures 12,500.00 Share of value of bales of hay 5,325.00 Interest from 1 September 1992 1,201.62 $23,352.60 and further awarded Mr Kinsela his costs of the arbitration hearing, such costs to be taxed (see Arbitration Act s34(1)(c)). Thereafter, on 2 December 1993 there was filed a Summons in which Mr Kinsela sought leave to appeal from the award of the Arbitration Committee. In the statement pursuant to SCR Pt72A r6 which formed part of the Summons there appeared the following (inter alia) (AB 9-10): B. Question of Law The question of law is whether the Arbitration Committee misdirected itself as to the proper test to be applied in the circumstances of the case to ascertain the sum due to the plaintiff as fairly representing the value of the improvement to an incoming tenant. D. Error of Law (1) The plaintiff contends that the Arbitration Committee's award contains a manifest error of law on its face in respect of the part of the award under challenge. The plaintiff will submit that the Committee misdirected itself as to the true test to be applied. The Committee was required by s7 of the Act (referred to above) to ascertain the sum as fairly representing the value of the improvement to an incoming tenant but it did not address this question or discharge this requirement. Instead, the Committee awarded a portion of the income projections set forth in Mr Ivey 's report as a sum for compensation for the improved pastures developed by the plaintiff. The plaintiff contends that the Committee's failure to find the sum that fairly represented the value of the improvement to an incoming tenant constitutes a manifest error. (2) (a) Alternatively, there was no evidence which could have entitled the Committee acting reasonably to have made the award it did; and (b) the determination of the question is likely to add substantially to the certainty of commercial law, because the words in s7(1) of the Agricultural Holdings Act 1941, 'such sum as fairly represents the value of the improvement to an incoming tenant' will be the subject of judicial clarification. While this Act had been repealed, the notion of the value of an improvement to an incoming URJ KINSELA v ROBINJUR PTY LTD (Powell JA) 9 tenant has been continued in the Agricultural Tenancies Act, 1990. Though the notion is expressed in a more qualified form, the same valuation principles are applicable. There have been no reported judicial interpretations in respect of this aspect of either Act, and the determination of the question would add in a substantial way, to the certainty of the law in this respect." In the Judgment which he delivered on 3 February 1995, Ireland J dealt with the matters which Mr Kinsela thus sought to raise as follows (AB 148-150): "The error of law for which the plaintiff contends is that in seeking to arrive at an amount to compensate the plaintiff under s7 of the Act by awarding '...such sum as fairly represents the value of the improvement to an incoming tenant' as required by the section, the Arbitration Committee, so the submission runs, erroneously awarded '... compensation for the improved pastures developed by him (the tenant) during the relevant period of the tenancy.' The plaintiff seeks to draw a significant conceptual distinction between "compensation for improved pasture developed' on the one hand and 'the value of that improvement to an incoming tenant' on the other. The further criticism is offered that in assessing compensation on the basis that, following termination of the agreement, the tenant is, to use the terminology of the award "... no longer an actual player'. This expression, so it is submitted, indicates '... an erroneous focus on the outgoing tenant' rather than the hypothetical 'incoming tenant' referred to in s7. Iam unable to accept these arguments. In referring to the fact that the tenant was no longer in occupation (ie. no longer a player), the Committee was, in my view, doing no more than explaining why it found the basis for Mr Ivey 's assessment unacceptable. Mr Ivey's six year comparison postulates a tenancy of that duration. That is to say a tenancy as long as the period during which the improved 'temporary pasture' would be capable of generating income in excess of its productivity prior to 'laying down'. I find it quite unremarkable that the Arbitration Committee rejected this formulation as defining the appropriate amount of compensation, obviously taking the view that an amount of the order of $129,000 was excessive in the extreme. Given the vagaries of rural enterprise as exemplified by Mr Ivey's footnote to "Lucerne area killed by | in 34 year flood during 1990' and recognising that the Committee's task was to assess the value to an incoming tenant of unspecified length of tenure as compared, for example, to a purchaser who may benefit throughout the full period during which the temporary pasture may generate higher returns, I am not persuaded that in accepting the correctness of the method of calculation employed by the plaintiff's expert and heavily discounting the figure arrived at, the Arbitration Committee fell into legal error. It is further submitted by the plaintiff that for the purposes of arriving at a valuation under s7, it is necessary to assume that the incoming tenant will remain in occupation for the whole of the potential useful life of the improvement. The researches of counsel for the plaintiff have not disclosed any authority for this proposition and this is not surprising. The inequality of such an interpretation is to my mind readily to be seen and were that the legislative intention, one would expect it to be clear from the terms of the act and this is not the case. The submission is rejected. 10 UNREPORTED JUDGMENTS The defendant contends that this is not a case in which leave should be granted: that the stringent requirements for leave now incorporated in the Commercial Arbitration Act, 1984 and endorsed by the Court of Appeal in Promenade Investments Pty Ltd v State of New South Wales (1991) 26 NSWLR 203 require the demonstration of 'manifest error' which must be an apparent error of law, that is, something evident or obvious rather than arguable, per Sheller JA with whom Mahoney and Meagher JJA agreed and that no such manifest error is apparent in the Arbitration Committee's determination, that alternatively there must be strong evidence that the arbitrator 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 and that in the present case there is no such error of law demonstrated nor is the question at issue one of significance to the certainty of commercial law. The determination of the Arbitration Committee so far as it relates to the award of compensation under s7(1) of the act in the circumstances of this case is a discretionary assessment of compensation turning on its facts. This, together with the fact of the repeal of the act and the enactment of the Agricultural Tenancies Act, 1990 providing for assessment of compensation on a different basis, in my view, operates to divest the issues here to be decided of any likelihood of contribution to the certainty of commercial law. The approach adopted by the Court of Appeal in Promenade Investments and the view I have expressed as to the propriety of the Arbitration Committee's determination are consonant with the submissions of the defendant and leave to appeal should, in the circumstances of the case be refused." Thereafter, on 16 February 1995, there was filed on behalf of Mr Kinsela the Summons pursuant to which this Court was later to grant leave to appeal. In the statement under SCR Pt51 13(7) which formed of the Summons, the following appeared (AB 2-5): "THE NATURE OF THE CASE 6. The claimant contends that the Committee determined the amount of this award on an incorrect basis, namely income foregone by the claimant upon his vacating the property rather than on the basis specified in s7 of the Agricultural Holdings Act, 'such sum as fairly represents the value of the improvement to an incoming tenant'. 7. The claimant contends in the alternative that there was no evidentiary or other basis for the Committee determining the amount of compensation in the sum determined. QUESTIONS INVOLVED 1. Whether the Agricultural Committee applied the correct test in determining the amount of the compensation due from the opponent to the claimant. 2. If not, whether its failure to do so was a manifest error of law on the face of the award. 3. Alternatively, whether there was any evidentiary or other basis for the amount of compensation determined by the Committee; 4. If not, whether its determination of an amount of compensation without any evidentiary or other basis was a manifest error of law on the face of the award. 5. Whether the determination of those questions could substantially affect the rights of the claimant. URJ KINSELA v ROBINJUR PTY LTD (Powell JA) 11 6. Whether Ireland J should have granted the claimant leave to the Supreme Court to appeal from the Committee's determination. 7. Whether Ireland J should have upheld the claimant's appeal. REASONS WHY LEAVE SHOULD BE GIVEN 1. Ireland J erred in holding that there was not a manifest error on the face of the award 2. The claimant has thereby been deprived of his entitlement to have his claim for compensation determined according to law. 3. The claimant's substantive rights are affected by Ireland J's decision; he contends that he is entitled to compensation in a much larger amount than the $12,500.00 that will remain in place if the decision is not reversed." When the appeal came on for hearing, Mr D H Murr appeared with Mr J A Trebeck for Mr Kinsela, while Mr J C Campbell QC appeared with Mr M A Wigney for Robinjur. As I have indicated earlier in these reasons, the principal difficulty in determining the fate of this appeal was in ascertaining what was the basis, and then testing the validity, of the submission made on behalf of Mr Kinsela that there was a manifest error on the face of the Arbitration Committee's award or, alternatively, that it was likely that there was such an error and the elucidation of the question involved would clarify the commercial. The nature of the difficulty to which I have just referred is made apparent by the following passage in the written submissions which had been prepared by Mr Murr and Mr Trebeck which passage, after referring to the award of the Arbitration Committee and providing what was said to be a summary of the reasoning of the members of the Arbitration Committee, was as follows: Thus, although the precise basis on which it did so is obscure, the Committee seems clearly to have determined the compensation on the basis of income derived from the improvements made by the appellant but which were unavailable to him because of the termination of his share farming agreement. The amount of the compensation was calculated by discounting the whole of the income on an unstated basis. 24. In assessing the compensation as it did, the Committee clearly did not apply the required statutory test of 'such sum as fairly represents the value of the improvement to an incoming tenant.' Its failure to do so was a manifest error of law on the face of the award. GROUND 2: ERROR OF LAW AND CERTAINTY OF COMMERCIAL LAW 25. In the alternative, the matters identified in relation to Ground | constitute "strong evidence that the arbitrator or umpire made an error of law' for the purposes of s38(5)(b)(ii) of the Commercial Arbitration Act. Nor was the position made any more clear during the course of Mr Murr's oral submissions on behalf of Mr Kinsela, as Mr Murr did not, during the course of those submissions, identify the valuation principle which it was said ought to have been, but was not, applied by the Arbitration Committee. At best, Mr Murr submitted that the approach to valuation adopted by Mr Ivey - that is, to take the cash commuted value of the income to be derived from the pasture during the period for which it was said the pasture would generate income - was one which, so it was submitted, might legitimately have been taken. That this was so is revealed by the following passage in the transcript of argument on the hearing of the appeal (T 4) which passage follows a reference by Mr Murr to the provisions 12 UNREPORTED JUDGMENTS of s5(1), s5(2) of the Tenancies Act, which provisions deal with compensation for tenants' - not share-farmers' - improvements: "MURR.... It is a measure which is not just been sanctioned by the legislature but is sanctioned to the extent that it is the sole measure adopted. Parliament may have thought it was necessary to confine the old tests but not necessarily to change it. It still maintains the test to a value of an incoming tenant as the basis upon which something is to be valued. POWELL JA: But says the value shall be calculated by reference to the expected financial return which is not the same thing as saying the value to an incoming tenant. It is saying for this purpose the value to the incoming tenant is to be determined in a particular way which has never been said before. Brownie J points out the Parliamentary craftsman thought that the approach required to be changed or stated in a different way. MURR: The approach was at large and the various methods were advocated to quantify different things. The approach of taking the expected return of income is one approach, it's one approach with the legitimacy is evidenced by its adoption by the new Act as the sole method of determining value. I don't suggest the latter Act is or should be used as an aid to construction of the former, but it is evidence that the approach that was taken by Mr Ivey, the appellant's expert in the matter, is an approach which is not eccentric or unreasonable approach. POWELL JA: Is it an approach that was either required or permitted under the Act? MURR: Certainly permitted but certainly not required. POWELL JA: That creates a real problem. If you say it is permitted in the sense that it is a way in which you can try and work out what the value is but it's not required, where's the point of law?" Mr Murr's inability, either, to submit that the approach taken to determining the relevant amount of compensation adopted by Mr Ivey was required to be applied by the Arbitration Committee, or, to demonstrate that, in the approach which it took, the Arbitration Committee applied some wrong principle, or overlooked some relevant fact or matter, in my view, has a considerable bearing upon the fate of this appeal. It is to be recalled that the task required of the Arbitration Committee was to determine the value to an incoming share-farmer of the temporary pasture. The task of "valuation" is no more and no less than one of estimation - usually, but not always, by a professional valuer - of a thing's worth. Of that task Lord Hobhouse, when delivering the advice of the Judicial Committee in Secretary of State for Foreign Affairs v Charlesworth Pilling & Co!, said: "\.. in all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such as inquiry as the present, relating to subjects bounding with uncertainties and on which there is little experience, there is more than ordinary room for such guesswork; and it would be very unfair to require an exact exposition of reasons for the conclusions arrived at." 1. [1901] AC 373, 391 URJ KINSELA v ROBINJUR PTY LTD (Brownie AJA) 13 That this is the nature of the task of valuation leads almost inevitably to the approach taken by the courts when an assessment of compensation is sought to be challenged. A classic exposition of that approach may be found in the Judgment of Dixon J (as he then was) in The Commonwealth v Reeve? where his Honour said: "In Commissioners of Success and Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd ((1947) 74 CLR 358, 367), the following passage occurs in the Judgment of Latham CJ, Rich and Williams JJ: 'It would not be proper for this court on an appeal of this nature to substitute its own opinion for that of the court below unless it were satisfied that the court below acted on some wrong principle of law, or that the value was entirely erroneous.' Their Honours then refer to the statement of Lord Buckmaster in Charan Das v Amir Khan ((1920) LR 47 Ind. App. 255, 264) that the 'Board will not interfere with any question of valuation unless it can be shown that some item has improperly been made the subject of valuation or excluded therefrom or that there is some fundamental principle affecting the valuation which renders it unsound." The rule thus laid down is almost indispensable to the administration of justice in compensation cases. For the estimation of the money sum is usually so much a result of judgment and sound discretion and so little the product of analytical reasoning, that, were it otherwise, every appeal would mean an assessment of compensation de novo without any assignment of error in the reasoning or conclusions of the court appealed from." I am far from persuaded that the Arbitration Committee acted on some wrong principle of law or that the amount of compensation which it determined upon was entirely erroneous, it following, in my view, that there is no manifest error of law on the face of the award and no strong evidence that the Arbitration Committee had made an error of law when formulating its award. I would add that, even if I had been of the view that it was arguable that the Arbitration Committee had made an error of law when formulating its award, the fact that the Holdings Act has been repealed and replaced by the Tenancies Act which provides for the assessment of compensation in such cases as that which is now under consideration upon a different basis from that contained in the Holdings Act, would have led me to the view that the determination of the question said to be raised by the award would not be likely to add substantially to the certainty of commercial law. For these reasons I would propose that the appeal be dismissed with costs. Brownie AJA I agree with Powell JA. Appeal dismissed with costs Counsel for the appellant: D H Murr and J A Trebeck Solicitors for the appellant: Garden and Montgomerie (Cowra) Counsel for the respondent: J C Campbell QC and M A Wigney Solicitors for the respondent: P A Somerset and Co 2. (1949) 78 CLR 410, 423