Reported Decision : 61 NSWLR 54 New South Wales Supreme Court CITATION : McKensey v Hewitt [2004] NSWSC 636 HEARING DATE(S) : 23/06/04 JUDGMENT DATE : 19 July 2004 JURISDICTION: Equity Division JUDGMENT OF : Young CJ in Eq DECISION : Award to be enforced. Decline application to antedate judgment. CATCHWORDS : ARBITRATION [89]- Agreement between parties for arbitration not stamped- Arbitration conducted without stamping point being taken- Whether award enforceable. PROCEDURE [113]- Judgments and orders- Ante dating order- When to be contemplated. PROCEDURE [616]- Costs- Premature appointment of cost assessor- Consequences. TAXES & DUTIES [418]- Unstamped agreement providing inter alia for arbitration of disputes- Arbitration agreement produced in accordance with its terms- Arbitrator appointed and made award- Stamping point not taken before arbitrator- Whether award void. LEGISLATION CITED : Legal Profession Act 1987, s 202 Stamp Duties Act 1920, ss 29, 41 Acclaim Holdings Pty Ltd v Vlado Pty Ltd (1989) 1 WAR 128 Ash Street Properties Pty Ltd v Pollnow (1987) 9 NSWLR 80 Baker v Nixon (1867) 7 SCR (NSW) 15 Barilla v James (1964) 81 WN (Pt 1) (NSW) 457 Belgian Grain & Produce Co Ltd v Cox & Co (France) Ltd [1919] WN (Eng) 317 Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589 Dent v Moore (1919) 26 CLR 316 Dimmock v Whymark (1964) 65 SR (NSW) 194 Ecroyd v Coulthard [1897] 2 Ch 554 Foppoli v Public Trustee [1970] WAR 73 GIO v Healey (No 2) (1991) 22 NSWLR 380 Hoggett v O'Rourke [2002] 1 Qd R 490 CASES CITED : Loveridge v Healey [2004] EWCA Civ 173 Marx v Estates & General Investments Ltd [1976] 1 WLR 380; [1975] 3 All ER 1064 Mornan Nominees Pty Ltd v Comptroller of Stamps Vic (1982) 13 ATR 947 Owen v Thomas (1834) 3 My & K 353; 40 ER 134 R v Fulham, Hammersmith & Kensington Rent Tribunal [1951] 2 KB 1 Re Keystone Knitting Mills' Trademark [1929] 1 Ch 92 Re Sims (1980) 50 FLR 286 Rothwells Ltd v Connell (1993) 119 ALR 538 Rothwells Ltd v Connell (No 2) [1993] ATC 4593 Routledge v McKay [1954] 1 WLR 615; [1954] 1 All ER 855 Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 Turner v London & Southwestern Railway Co (1874) LR 17 Eq 561 PARTIES : Hugh Stanley McKensey, Victor John Lewis and Peter Charles Hicks (P) Christopher Michael Hewitt (D) FILE NUMBER(S) : SC 1585/95 COUNSEL : T Alexis SC (P) M Ashhurst (D) SOLICITORS : Harris Wheeler (P) Hewitts (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Monday 19 July 2004 1585/95 – McKENSEY v HEWITT JUDGMENT 1 HIS HONOUR: This is yet another episode in the long running litigation over the former partnership of Forsythes Accountants at Newcastle. 2 The present episode concerns the arbitration award made on 28 August 2003. The points argued before me on this motion are: (1) whether the award should be enforced; and (2) whether the order of the Court enforcing the award should be backdated so that there can be no question as to the enforceability of an assessment of costs already made by a costs assessor. 3 I will deal with each of these matters in turn. (1) The enforceability of the award 4 Mr Ashhurst of counsel for the defendant says that, were it not for one point, he would concede that the award was enforceable. That one point is that as the original settlement agreement of 10 September 1994 was never stamped, it is a nullity and that everything that happened pursuant to that agreement was also a nullity including the appointment of the arbitrator. 5 Mr Alexis SC who appears for the plaintiffs raises a series of arguments. His primary argument is that, although the original settlement agreement made provision for the parties to go to arbitration, the arbitrator obtained jurisdiction not from that agreement but rather by an arbitration agreement bearing date 6 February 2002. 6 Mr Ashhurst's riposte was first that the original agreement was the fons et origo of the arbitration procedure and the arbitration agreement a mere mechanical step in the process. Second, that the arbitrator's award deals with the rights under clause 12 of the original agreement so that even if he were validly appointed he was dealing with rights that had not come into existence because of the non-payment of duty, and three, that it is not competent for parties who have purported to create rights and not paid duties in the course of creating them to outflank the revenue statute by entering into a fresh agreement or making some other admissions. 7 Before dealing with these matters I should set out the relevant provisions of the Stamp Duties Act 1920 which governed the agreement. Although that Act has been replaced by the Duties Act 1997, it is the 1920 Act that was in force at the time of the original agreement. 8 Section 41 of the 1920 Act makes agreements generally chargeable without valorem duty. There are some exceptions such as agreements for the sale of goods, wares and merchandise, but it would seem that some duty was payable on the current agreement under s 41 and the evidence would suggest that the duty was not in fact paid. 9 Under s 29, no such agreement "shall … be pleaded or given in evidence, or admitted to be good, useful, or available in law or equity for any purpose whatsoever, unless it is duly stamped …". 10 In Dent v Moore (1919) 26 CLR 316 at 324, Isaacs J, when delivering the decision of the High Court said of the section: " … it strikes that instrument with sterility … unless and until the public requirement of taxation has been complied with. Until that has happened, the instrument … is not 'available' and not 'effectual' – that is, it is has no effect – for any purpose whatsoever at law or in equity: in other words, it cannot be considered as an instrument giving title, or as one which could be made the means of compelling anyone to give title. It is in the eye of the law a nullity … ." The Court then went on to say that no estoppel or admission can circumvent that result. That passage has been applied on many occasions perhaps one of the most significant occasions being Ash Street Properties Pty Ltd v Pollnow (1987) 9 NSWLR 80 especially at 100 to 101, but it is applied every day of the week in this Division when caveats lodged by developers who have not paid stamp duty on their contracts are removed because, until the stamp duty is paid, the developer has no interest in the land despite the contract. 11 It should be pointed out that so far as validity is concerned, an undertaking to pay the duty is not enough. It is only when the duty is paid that the instrument becomes valid ab initio: Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 383. 12 It is with this background that I turn to the arguments and on this first issue I will consider Mr Ashhurst's arguments as (a), (b) and (c). 13 1(a) Mr Ashhurst submits that the original agreement is one inseverable agreement and that one cannot separate the arbitration agreement from the agreement with respect to conveyance of property. He cites Rothwells Ltd v Connell (No 2) [1993] ATC 4593, a decision of Thomas J in the Supreme Court of Queensland. The case went on appeal to the Queensland Court of Appeal where it is reported as Rothwells Ltd v Connell (1993) 119 ALR 538. The only Judge who dealt with the point on appeal was McPherson J whose reasoning is not on all fours with that of Thomas J and the first instance decision must be considered a doubtful precedent. However, this is by the bye because, at least if there is an unseverable agreement the duty must be paid on the agreement before it can have any effect at all and probably the same applies if provisions can be severed if no duty has been paid at all. 14 The critical point is that the parties did not proceed to arbitration under this agreement which they seemed to have regarded in this respect as an agreement to agree and in fact appointed the arbitrator under another agreement. It does not seem to me that the argument that the original agreement was the fons et origo of the arbitration can carry the day. Even if it was the origin of the idea, the instrument which was effective in appointing the arbitrator was the second agreement. 15 Accordingly, in my view there is no reason in point 1(a) why the arbitration should not be enforced. 16 1(b) This argument really raises the same matters as under 1(a) or 1(c). As both of those arguments fail, so also does this one. 17 1(c) Mr Ashhurst relies heavily on the words of the High Court in Dent v Moore that one cannot outflank s 29 by estoppels or admissions. He also noted Routledge v McKay [1954] 1 WLR 615, 617; [1954] 1 All ER 855 at 856-7 that the English Court of Appeal took the view that even if the document had been admitted at first instance it was still the duty of the appellate court when it could see that the document had not been stamped to give it no consideration. 18 The second edition of Hill's Stamp and Death Duties (Law Book Company, Sydney, 1979) says at p 45 that s 29 in its current form does not, as it did in the form considered in Dent v Moore, say that the document was not to be effectual. The learned authors then said: "Accordingly it may be that a less strict view of the consequences of non-stamping would be taken under the present Act." The learned author referred to R v Fulham, Hammersmith & Kensington Rent Tribunal [1951] 2 KB 1 where a rent tribunal (not being a court) was entitled to look at an unstamped tenancy agreement and the King's Bench Division was entitled to consider that instrument on appeal. 19 Furthermore, in Dimmock v Whymark (1964) 65 SR (NSW) 194, the Full Court recognised an equitable assignment in an unstamped document on the basis of a solicitor's undertaking to stamp it as being the then standard practice in this State. 20 More directly in point is Marx v Estates & General Investments Ltd [1976] 1 WLR 380; [1975] 3 All ER 1064. There, proxies had not been stamped but were counted by the chairman of the meeting as valid votes. No-one objected to the votes at the meeting and the chairman accepted them. This was held to be correct even though the proxies should have been stamped. 21 In the Rothwells' case at p 550, McPherson J considered the abandonment of the words "or effectual" was a matter of significance. 22 However, speculation on this matter cannot go too far because there is no doubt at all that the Court of Appeal in Ash Street Properties Pty Ltd v Pollnow supra held that in the form in which it existed as at the relevant date, despite the loss of the word "effectual", the section made the instrument in the eye of the law a nullity. 23 The extent to which the section can be outflanked is not as black and white as the High Court suggested in Dent v Moore. In Mornan Nominees Pty Ltd v Comptroller of Stamps Vic (1982) 13 ATR 947, 951, Kaye J suggested some circumstances in which a court should rely on admissions despite the fact there might be an unstamped document which had brought about those admissions. In Hoggett v O'Rourke [2002] 1 Qd R 490, Holmes J, in the Supreme Court of Queensland, refused to follow that view saying that she could not see how it was consistent with Dent v Moore. 24 On the other hand, one does not have to look very far in the reports to see a number of instances where the courts have in fact considered rights even though a contract has been unstamped. One example is Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466. 25 The attitude in England recently again seems to be against too strict an application of statutes which say that a transaction is void unless statutory mandates are observed. Thus in Loveridge v Healey [2004] EWCA Civ 173, the English Court of Appeal was not unduly concerned with a statute which prevented a landlord from evicting a tenant unless a particular notice was given where the tenant had on the pleadings admitted (contrary to the fact) that the notice was given. 26 Mr Ashhurst's position is that cases like that are not only inconsistent with decisions of the Full Court here in Barilla v James (1964) 81 WN (Pt 1) (NSW) 457, but are contrary to what the High Court said in Dent v Moore. 27 It is certainly a very powerful position to take to rely on the unanimous decision of the High Court in Dent v Moore and that of the Court of Appeal in the Butler Pollnow case. However, in my view it is reading too much into those decisions to say that the invalidity of a document necessarily affects subsequent transactions between the parties even if the parties have treated that document as valid. The decision in Marx has never, as far as I am aware, been adversely commented on and it seems with great respect to be in accordance with the modern approach to the present sort of problems and, to my mind, does not cut across the general principle enunciated in Dent v Moore, it merely maps out its limits. See the analysis of Kennedy J in Acclaim Holdings Pty Ltd v Vlado Pty Ltd (1989) 1 WAR 128, 133. 28 I had some hesitation in reaching this result because of the decision of the Full Court in Baker v Nixon (1867) 7 SCR (NSW) 15. In that case a verdict was taken "subject to" an award of an arbitrator so that the awards when made became substituted for the verdict. An award was made but not stamped and the Full Court set it aside because the officer entering the judgment had no right to look at the award for the purpose of effecting the verdict because it had not been stamped. The Court also observed that they were setting aside the judgment without costs, "The point being new, very arguable and quite beside the merits". Baker's case is distinguishable however because there the award itself had to be stamped and this was the document on which the court officer proceeded. In the instant case all that was not stamped was the initial agreement which led to a further agreement which led to an award and it seems to me that the unstamped document is too remote and Marx's case applies. 29 However, Mr Ashhurst says that the arbitrator had to look to the rights under clause 12 of the original agreement and indeed when making his determination referred to clause 12. Clause 12 could give rise to no rights, the arbitrator accordingly erred. He acknowledges that no-one ever submitted to the arbitrator that clause 12 gave no rights because the document had not been stamped. He says that this is of no moment because one cannot have any estoppel or make any admissions contrary to the effect of the revenue statute. The reference to Routledge's case reinforces that. 30 In my view, in this day and age and in the light of other decisions of courts, I should not follow what the English Court of Appeal said in Routledge's case which on any view was obiter dicta because the members of the English Court of Appeal held that the relevant instrument was not liable to duty in any event. 31 It might also be observed that in Dent v Moore Isaacs J's reliance on Owen v Thomas (1834) 3 My & K 353, 357; 40 ER 134, 136, seems with respect to have overstated the effect of that decision: moreover, that decision is now out of kilter with more modern authority such as Loveridge v Healey supra. It is impudent for a single judge to say that of a Full High Court decision. 32 However, it can be said that all that Isaacs J said in Dent v Moore was that it was not to be assumed that an estoppel could defeat the operation of the Stamp Acts. Subsequent decisions have shown that in certain cases there can be other principles, including estoppels, which outweigh the policy matters in the revenue statutes, one of which is that a document can have a collateral effect notwithstanding that it is not stamped and another is, as I have indicated earlier in these reasons, based on Marx's case, that one can have a transaction sufficiently removed from the unstamped document which cannot now be challenged. 33 It would seem to me that a further exemption is that where there has been litigation before a court (or an arbitrator) which has been fully fought out and no-one including the judge or arbitrator has taken the stamp duty point, that thereafter the rights of the parties have emerged in the decision and the appellate court is no longer concerned with the admissibility of the document at first instance because of sections such as s 29. Cases such as R v Fulham, Hammersmith & Kensington Rent Tribunal supra, seem to illustrate this point. 34 Accordingly, in my view the failure to take objection before the arbitrator does estop Mr Ashhurst's client from taking the point now. 35 Thus, in my view the award should be enforced as a judgment of this Court. 36 (2) This now brings me to the second part of the motion. The problem here is that s 202 of the Legal Profession Act 1987 provides that a person who is entitled to receive costs as a result of an order for the payment of an unspecified amount of costs made by a court or tribunal may apply for an assessment of those costs. At the time when the application was made there was an order for costs in the arbitrator's award but there had been no order of the court that the costs be paid. That order has only just been made on this motion. Mr Alexis seeks me to backdate my order to immediately before the time when the request was made under s 202 of the Legal Profession Act. 37 The backdating of orders was addressed by the High Court in Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589 at 597. The problem in that case was that a creditor had presented a petition for sequestration but before that could be heard the debtor presented his own petition and a sequestration order was made automatically. The Full Federal Court ordered sequestration on the creditor's petition and backdated it to before the debtor's petition. The High Court said at 597: "The Court has, in our opinion, no power to backdate a sequestration order to make it take effect either before, or contemporaneously with, the commencement of the bankruptcy resulting from the acceptance of the debtor's petition. … Neither the general power conferred by s 30(1)(b) of the [Bankruptcy] Act to make such orders as the Court considers necessary … nor the power given to the Federal Court by its rules to antedate its orders (O 35 r3) extends to permit the Court to make an order which would bring about a result different from that prescribed by the express provisions of the Act and so serious in its possible consequences." 38 Order 35 r3 of the Federal Court Rules as in force in 1984 provided: "A judgment or order shall take effect on the date on which it is pronounced or made, unless the court orders that it take effect at an earlier or later date." 39 The present rule in this Court is Part 40 r3 which provides that, generally speaking, a judgment takes effect on the date on which it is given but sub-rule 5 says that notwithstanding the general rules: "The Court may order that a judgment or order take effect as of a date earlier or later than the date fixed by those sub-rules." 40 This rule has been interpreted as authorising the Court to antedate a judgment only on some good ground, that is, where there is something exceptional in the facts; see Re Keystone Knitting Mills' Trademark [1929] 1 Ch 92, 98. The most common case in which an order will be antedated is where a party has died after the case has been heard and whilst judgment is reserved (see Turner v London & Southwestern Railway Co (1874) LR 17 Eq 561; Ecroyd v Coulthard [1897] 2 Ch 554 [unless the cause of action dies with the person: Foppoli v Public Trustee [1970] WAR 73; Re Sims (1980) 50 FLR 286]). In the Keystone Knitting Mills' case itself, a vital time had elapsed without anyone noticing whilst the trial was in progress and the Court antedated the order. In Keystone, Clouson J at 98 said: "The principle upon which the Court has always proceeded is that in a case where justice requires it, the Court will treat itself as making its order as at the date at which it is necessary to treat it as made in order to do justice." 41 In GIO v Healey (No 2) (1991) 22 NSWLR 380, 387, Kirby P said that the current rule allows the Court to do what is just in a particular case where the usual position would produce unfairness. 42 In Belgian Grain & Produce Co Ltd v Cox & Co (France) Ltd [1919] WN (Eng) 317, the English Court of Appeal ruled that the provision must be used with great caution and something exceptional must be shown before a judgment is antedated and it refused in that case to direct that interest be payable in a case where a plaintiff had lost at first instance but succeeded in the Court of Appeal from the date of the first instance judgment partly on the basis that that could apply to many cases. 43 It is to be noted that under the new English Civil Procedure Rules 40.7 the power to antedate a judgment has been taken away, but the Court has power to order that a judgment take effect at some later date. 44 The only reason put forward for antedating the judgment in the instant case is to validate the reference to the costs assessor. 45 At this stage it is appropriate to refer to the costs assessor provisions. Mr Ashhurst says that s 202 makes it quite clear that there is only a limited number of situations where a person who may be entitled to costs can approach the "manager costs assessment" for reference to a costs assessor. Those are the matters set out in s 202 and the Court cannot by antedating an order or otherwise alter what the legislature has said. That argument is weakened to some degree by the fact that under Part 10 of the Act matters may be referred to costs assessors by the Legal Services Commissioner or the Bar Council or the Law Society's Council. 46 The jurisdiction under s 202 is not given to the Supreme Court but is given as persona designata to the manager costs assessment, a term which is defined in s 3(1) as "the person holding office under Part of the Public Service Management Act 1988 as 'manager, costs assessment' in the Attorney General's Department." The Act has not made that person a corporation so that on each occasion the person for the time being in that position must exercise the statutory duties and is to take responsibility for such exercise. 47 In the instant case it seems that that person exceeded his or her powers by allocating the current matter to an assessor. 48 Ordinarily, one would have expected someone to challenge that purported exercise of power under one of the orders in lieu of the prerogative writs. The person could then have an opportunity to be heard. 49 Before me, however, both parties seemed to take the view that the referral was invalid. 50 There is no evidence as to what happened subsequent to the filing of the application, save that the manager costs assessment seems to have allocated it to a costs assessor on 17 February 2004. 51 If the situation is that nothing has happened since the application was filed, there is no reason why a fresh application cannot be filed now. If, on the other hand, there has been consideration of the application by the costs assessor and orders made in default of the defendant putting any material before the costs assessor (on the basis that there was no jurisdiction to consider the matter), then there might be considerable prejudice. To a degree that prejudice is the defendant's own fault because he did not do what a sensible person would have done, and that is, protest the jurisdiction at an early stage. 52 This case comes close to the borderline of the test propounded in the authorities as to when the court antedates judgment. It is not a situation where what has happened has been beyond the control of the parties or a date has slipped by by inadvertence. There is no particular reason in justice why the position of the plaintiffs should be preferred to that of the defendant especially as the plaintiffs brought about the problem by applying too early for the costs assessor to come into the picture. Accordingly, in my view there is not the special or exceptional circumstances which are required to trigger the Court's power to antedate a judgment. Even if one applied the lesser test of Kirby P in GIO v Healey, I could not see how the balance of justice requires a different answer. 53 Accordingly, the application to antedate the judgment is refused and the judgment will take effect as from the date it is pronounced. 54 As to costs, each party has partly succeeded and partly failed and it seems to me that there should be no costs of the notice of motion before me. 55 According to the calculations in MI02, the amount due under the arbitrator's award for 23 June 2004 was $33,326.00. To the date of handing down these reasons an extra $101 interest has accrued, so that the amount to which the plaintiff is entitled is $33,437.00 plus the costs for the arbitrator. As I indicated earlier, there should be no costs of the motion before me. *********************** Last Modified: 07/26/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.