Supreme Court New South Wales Medium Neutral Citation: Adrian Beard v Cargill Australia Limited [2011] NSWSC 142 Hearing dates: 8 March 2011 Decision date: 10 March 2011 Before: Ball J Decision: 1) A declaration that the arbitral award (the Award ) purportedly made on or about 30 June 2010 by Alick Osborne, Andrew Wilsdon and Henry Wells in relation to a dispute between the plaintiff and the defendant was not made under an arbitration agreement within the meaning of s 4(1) of the Commercial Arbitration Act 1984 (the Act ). 2) An order that the defendant be restrained from making or causing to be made any application for leave to enforce the Award whether under the Act or otherwise. 3) The defendant pay the plaintiff's costs. Catchwords: CONTRACT - formation - acceptance. ARBITRATION - Commercial Arbitration Act 1984 - no jurisdiction for arbitration as no contract - acceptance in writing not required if terms of arbitration agreement in writing Legislation Cited: Commercial Arbitration Act 1984 Cases Cited: George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387 Tinn v Hoffman and Co (1873) 29 LT 271 Category: Principal judgment Parties: Adrian Beard (Plaintiff) Cargill Australia Limited (Defendant) Representation: Counsel: Mr J S van Aalst (Plaintiff) Mr A J McInerney (Defendant) Solicitors: Cater & Blumer (Plaintiff) Aitken Partners (Defendant) File Number(s): 2010/378871 Judgment 1In these proceedings the plaintiff, Mr Beard, seeks an order restraining the defendant, Cargill, from enforcing an arbitral award handed down in Cargill's favour in June 2010. Alternatively, Mr Beard seeks leave to appeal against the award pursuant to s 38 of the Commercial Arbitration Act 1984 (the CAA ). Factual background 2Mr Beard operates a farming business on a 608 acre irrigation farm at Hanwood, north of Griffith. Each year, he plants a maize crop in about September or October which is harvested in March or April the following year. Cargill is a grain trader. 3It is not clear who approached whom, but on 27 July 2006, Mr Beard spoke with Mr Greg Williams, who at that time was employed by Australian Grain Accumulation, a company which acted as an agent for Cargill, about the possibility of Mr Beard selling Cargill his 2006-2007 maize crop. There is a dispute about what was said during the course of the conversation. However, during it, Mr Williams indicated that Cargill would pay a price of $210 per tonne and there was a discussion about the variety and amount of corn that would be planted. 4Immediately following the discussion, Mr Williams sent Mr Beard a fax. Mr Beard says that he only received the fax by post on 2 August 2006, but nothing turns on that. Relevantly, the fax said: Please find attached our confirmation of our agreement. Could you please: 1. Ensure that all the contract confirmation details are correct; in particular, check that your NGR/ABN/Grower Number matches your trading details. 2. Read all the contract confirmation terms and conditions. 3. Sign and return the confirmation. 5The attached document was described as a "purchase contract" made between Cargill and Mr Beard. It described the commodity being sold as "maize - gritting", the crop year as "2006-2007", the grade as "GM34" and the quantity as "425" (that is, 425 tonnes). The contract also contained a set of standard terms. Clause 15 of the standard terms provided: (a) Any dispute arising out of or relating to this contract or the breach, termination or subject matter thereof shall be submitted to and settled by arbitration in accordance with the NACMA Arbitration Rules current at the date of the contract. (b) Neither party to the dispute, nor any persons claiming under either of them, shall bring any action or other legal proceedings against the other in respect to any such dispute until arbitrated in accordance with NACMA Arbitration Rules. Clause 16 provided: This contract is subject to the standard terms and conditions of the National Agricultural Commodities Marketing Association Ltd (NACMA) Trade Rules. In the event there is inconsistency between this contract and standard terms and conditions of the NACMA Trade Rules, the terms and conditions of this contract shall apply. Clause 26.0 of the then current NACMA Trade Rules relevantly provided: (1)The NACMA Dispute Resolution Rules form an integral part of these NACMA Trade Rules of which all parties subject to these NACMA Trade Rules shall be deemed to be cognisant. (2)If any dispute arises out of or relates to any contract subject to these Trade Rules or the breach, termination or subject matter of a contract, the dispute shall be submitted to and settled by Arbitration in accordance with the NACMA Dispute Resolution Rules in the edition current at the date of the establishment of the Terms of Trade in the contract, such rules forming an integral part of the contract and of which both parties to the contract shall be deemed to be cognisant. (3)Neither party to a dispute, nor any persons claiming under either of them, shall bring any action or other legal proceedings against the other in respect of any such dispute until arbitrated in accordance with the NACMA Dispute Resolution Rules. The NACMA dispute resolution rules were not in evidence. A copy of the contract was at some stage signed by Mr Williams. However, a copy was never signed by Mr Beard. 6On 3 August 2006, Mr Beard rang Mr Williams' office. Mr Williams was not available and Mr Beard spoke to Ms Donna Robertson. There is a dispute about what was said. Mr Beard says that he said that the document sent to him was incorrect because the quantity of maize he discussed with Mr Williams was 350 tonnes not 425, but that he preferred to supply 200 tonnes. According to Mr Beard, Ms Robertson replied that she did not see any problems with that change, but that she would get Mr Williams to ring back. Ms Robertson's evidence before the arbitrator was that Mr Beard said that he wanted to reduce the gritting maize he had agreed to supply to Cargill from 425 tonnes to 350 tonnes. She said that she told Mr Beard that she had no authority to agree to the change, but that she would make a note and pass the request on to Mr Williams. 7Mr Beard and Mr Williams spoke again on a couple of occasions in October about other crops. There is a dispute about whether reference was made to the contract for the 2006-2007 crop during those conversations. Mr Beard says he raised his conversation with Ms Robertson with Mr Williams and that Mr Williams said he would get back to him. Mr Williams says that nothing was said about the 2006-2007 crop during the conversations in October. 8Due to the drought, Mr Beard ultimately only planted 40 acres of maize. That crop was not successful and, in the end, Mr Beard turned the crop into silage and sold it as cattle feed. 9Cargill took the view that Mr Beard was in breach of contract by failing to deliver 350 tonnes of gritting maize. After putting a number of options to Mr Beard to remedy the breach, which Mr Beard rejected, Cargill commenced arbitration proceedings. As I have said, the NACMA dispute resolution rules were not in evidence. However, it was accepted by both parties that the arbitration was conducted in accordance with those rules. Mr Beard was represented during the course of the arbitration, but contested the tribunal's jurisdiction on the basis that there was no contract between him and Cargill. The tribunal rejected that submission. It observed that there was a dispute between the evidence of the parties and, in those circumstances, it elected to place greater emphasis on the "objective evidence", rather than the parties' version of events. The tribunal pointed to a number of matters which led it to conclude on the balance of probabilities that there was a contract. Those matters included the following: For example, and while this is by no means decisive, Mr Beard's evidence is that on receipt of the contract document and covering letter on 2 August his reaction was that it was "not correct", but not that no contract existed. He then spoke to Ms Robertson and said "I want to change the tonnage ...". He did not deny the existence of a contract, it appears objectively that he wanted to vary it, albeit unsuccessfully. We note the Claimant's submission that it is "entirely unlikely" that Mr Williams would have prepared the contract document and sent it to Mr Beard if Mr Beard's version of events was accurate. By its award, the tribunal found that Mr Beard was in breach of a contract by which he agreed to sell to Cargill 350 tonnes of gritting maize at $210 per tonne. The tribunal ordered Mr Beard to pay Cargill the amount of $89,250 plus interest and costs. Should the court restrain Cargill from enforcing the award? 10Although now repealed, there is no dispute that the arbitration in this case is governed by the CAA. 11Section 33(1) of the CAA provides: An award made under an arbitration agreement may, by leave of the Court, be enforced in the same manner as a judgment or order of the Court to the same effect, and where leave is so given, judgment may be entered in terms of the award. "Arbitration Agreement" is defined in s 4(1) to mean "an agreement in writing to refer present or future disputes to arbitration". 12It follows that the court will not give effect to an award unless it is satisfied that the award arises from an agreement in writing to refer the dispute to arbitration. The decision of the tribunal is not determinative of that question. 13In my opinion, the answer to the question whether there is an agreement which satisfied the requirements of s 33(1) of the CAA turns on whether the terms of the document sent by Mr Williams to Mr Beard on 27 July 2006 (as varied by the substitution of 350 tonnes for 425 tonnes) were accepted by Mr Beard. There was a suggestion in the material before the arbitrators and, indeed, in the award itself that an agreement was reached during the conversation on 27 July 2006 and that the fax and the document it contained simply confirmed the terms of that agreement. In my opinion, however, that is not correct. Many of the terms of the contract - including the arbitration clause itself - were clearly not the subject of the discussion on 27 July 2006. Rather, they were terms that were incorporated in the written document proposed by Cargill. The question is whether those terms were ever accepted by Mr Beard. 14In my opinion, Mr Beard's acceptance did not need to be in writing. Although the covering fax contemplated that acceptance would occur by Mr Beard signing and returning the document sent to him, I do not think that it was within the contemplation of the parties that that was the only means by which the terms proposed by Cargill could be accepted: see Tinn v Hoffman and Co (1873) 29 LT 271 at 274 per Honyman J; George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387. In my opinion, Mr Williams was simply indicating one way in which the offer contained in the fax and accompanying document could be accepted. Mr van Aalst, who appeared for Mr Beard, submitted that the acceptance needed to be in writing because otherwise the agreement itself was not in writing - it would only be partly in writing. However, I do not accept that submission. In my opinion, the requirement that the agreement be in writing is satisfied if the terms of the arbitration agreement are in writing. The fact that the parties manifest their acceptance of those terms in some other way does not mean that the agreement itself was not in writing. In this case, the terms of the arbitration clause were clearly in writing. 15However, the question remains what act or acts of Mr Beard's amounted to acceptance of those terms. In my opinion, Cargill is unable to point to any. Mr McInerney, who appeared for Cargill, suggested that Mr Beard accepted the terms proposed by Mr Williams in his conversation with Ms Robertson on 3 August 2006. But I cannot accept that submission. Although there is a dispute about what happened during that conversation, it is clear that Mr Beard proposed that he should provide a quantity which was different from the amount shown in the written document (425 tonnes) and Ms Robertson did not have authority to agree to any change to that document. Nor did anything happen after than conversation that could amount to acceptance of the terms proposed by Cargill. It follows that there was no agreement; and no agreement to submit the dispute to arbitration. 16It is unnecessary, therefore, to consider whether Mr Beard should be given leave to appeal from the award. Orders 17The court makes the following orders: (1)A declaration that the arbitral award (the Award ) purportedly made on or about 30 June 2010 by Alick Osborne, Andrew Wilsdon and Henry Wells in relation to a dispute between the plaintiff and the defendant was not made under an arbitration agreement within the meaning of s 4(1) of the Commercial Arbitration Act 1984 (the Act ). (2)An order that the defendant be restrained from making or causing to be made any application for leave to enforce the Award whether under the Act or otherwise. (3)The defendant pay the plaintiff's costs. ********** 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. Decision last updated: 11 March 2011