Supreme Court New South Wales Medium Neutral Citation: Ashjal Pty Ltd -v- Elders Toepfer Grain Pty Ltd [2012] NSWSC 545 Hearing dates: 4 May 2012 Decision date: 04 May 2012 Jurisdiction: Equity Division - Corporations List Before: Hammerschlag J Decision: Separate question whether written contracts contain an implied term answered no Catchwords: COMMERCIAL ARBITRATION - Contract - whether written contracts between the parties contains an implied term amounting to an agreement under s 34A(1) of the Commercial Arbitration Act 2010 (NSW) - implied term contended for does not meet established tests Legislation Cited: Commercial Arbitration Act 1984 (NSW) Commercial Arbitration Act 2010 (NSW) Cases Cited: BP Refinery Western Port Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Texts Cited: Grain Trade Australia ("GTA") Trade Rules Category: Procedural and other rulings Parties: Ashjal Pty Ltd (ACN 074 244 072) - Plaintiff Elders Toepfer Grain Pty Ltd (ACN 126 806 979) - Defendant Representation: Counsel: J. O'Sullivan - Plaintiff K.J. Williams - Defendant Solicitors: Jarratt Webb & Graham - Plaintiff Thompsons Lawyers - Defendant File Number(s): 2012/74342 EX TEMPORE Judgment 1HIS HONOUR:The plaintiff as respondent and the defendant as claimant went to arbitration in relation to disputes between them which arose under two contracts both dated 23 July 2010 ("the contracts") and under which the plaintiff sold Australian origin wheat to the defendant. 2The contracts provided for all disputes, controversies or claims arising out of, relating to or in connection with them to be resolved by arbitration in accordance with Grain Trade Australia ("GTA") Trade Rules. Those rules incorporate the GTA Dispute Resolution Rules. 3The arbitration culminated in a final award dated 17 November 2011 in which the defendant was successful. The arbitration found that the plaintiff had wrongfully cancelled the contracts and was liable to indemnify the defendant for $119,000 for the non-delivery of grain. 4When the contracts were entered into, the Commercial Arbitration Act 1984 (NSW) was in force ("the old Act"). 5Section 38(2) of the old Act provided that: Subject to subsection (4) an appeal shall lie to the Supreme Court on any question of law arising out of an award. 6Section 38(4) of the old Act provided that: An appeal under subsection (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, subject to s 40, with leave of the Supreme Court. 7On 30 September 2010 the old Act was repealed and the Commercial Arbitration Act 2010 (NSW) came into force ("the new Act"). 8Section 34A(1) of the new Act provides: An appeal lies to the Court on a question of law arising out of an award if (a) the parties agree, before the end of the appeal period referred to in subsection (6), that an appeal may be made under the section, and (b) the Court grants leave. 9Section of the new Act 34A(6) provides that: An appeal may not be made under this section after three months have elapsed from the date on which the party making the appeal receives the award or, if a request had been made under s 33, from the date on which that request had been disposed of by the arbitral tribunal (in this section referred to as the appeal period). 10On 6 March 2012 at a time which it is common cause was outside the appeal period, the plaintiff sued out of the Court a summons seeking leave to appeal the award pursuant to s 34A of the new Act. 11The defendant takes the position that no appeal lies on any question arising out of the award because there was no agreement as contemplated in s 34A(1) of the new Act before the end of the appeal period. 12The plaintiff contends that there was such an agreement. It argues that such an agreement is found in or derived from the terms of the contracts including those parts of the GTA Trade Rules and Dispute Resolution Rules which they incorporate. 13On the defendant's Motion I ordered that there separately be tried the question: Did the parties agree within the meaning of s 34A(1)(a) of the Commercial Arbitration Act 2010 (NSW) and before the end of the appeal period referred to in s 34A(6) that an appeal may be made under s 34A of that Act in respect of the dispute that was the subject of the arbitral award? 14At the hearing of the separate question, the plaintiff foreshadowed a contention that s 34A(1) of the new Act is invalid as unconstitutional and that it has a right of appeal either with or without leave irrespective of whether or not an agreement was entered into under s 34A(1)(a). The parties agreed that I should nevertheless determine the separate question and, depending on its outcome, then make appropriate directions for the further conduct of the matter. 15After the dispute between the parties crystallised, that is the dispute which led to the arbitration, there was an exchange of correspondence in which the plaintiff sought the defendant's agreement that the Court have jurisdiction to consider any award on a point of law. The defendant declined to make an agreement consenting to a right of appeal subject to the Court granting leave as contemplated by s 34A(1)(b) of the new Act. 16The plaintiff correctly accepts that there is no express agreement between the parties. It puts that there is to be implied from the terms of the contracts a term that either party may appeal on a question of law with leave of the court. It was accepted that the terms sought to be implied must meet the well known test for an implied term laid down in BP Refinery Western Port Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26 and adopted by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347 which are the following: (1) It must be reasonable and equitable. (2) It must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it. (3) It must be so obvious that it goes without saying. (4) It must be capable of clear expression. (5) It must not contradict any express term of the agreement. 17Those tests must be met at the time that the contract is entered into. The term contended for fails to satisfy at least three of the tests. 18Firstly, as at the date of the contracts the old Act gave a right of appeal with leave or by agreement. The implied term contended for was thus not necessary to give the contract business efficacy at that time. The contracts operated and still operated without it. 19Secondly, given the state of the legislation at the time, the term contended for was not obvious. Indeed, such a term was obviously not required. 20Finally, article 13 of the GTA Dispute Resolution Rules is in the following terms: Unless a fast-track or full arbitration process is governed by the International Arbitration Act 1974 (Cth), the provisions of the Commercial Arbitration Act 1984 (NSW) and any statutory amendments in force shall apply save in so far as such provisions are expressly modified by or are inconsistent with these Rules. 21The parties accordingly contemplated the possibility of amendments to the legislation. The notion that their agreement would be inconsistent with subsequent legislation fails the test that the implied term must not contradict any express term of a contract. 22The plaintiff accepts that the new Act (to the extent that it is valid) governs whatever rights of appeal it has. Its real complaint is that the rights of appeal which it had under the old Act have been significantly curtailed by the new Act because whereas previously either agreement or leave was required, now both are. 23I, accordingly, answer the separate question "no". 24It follows that but for the outstanding proposed constitutional point the Summons for Leave to Appeal would fall to be dismissed. In order to motivate the constitutional point an amended summons seeking leave to appeal is necessitated and I will give leave to the plaintiff to so file such process. ********** 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: 22 May 2012