Why couldn’t the chicken cross the road? Obtaining leave to appeal in a domestic arbitration

Inghams Enterprises Pty Ltd v Southern Cross Farms Australia Pty Ltd [2022] SASCA 7

Facts

In Inghams Enterprises Pty Ltd v Southern Cross Farms Australia Pty Ltd (2022) 398 ALR 562, the respondents grew free-range chickens for the applicant under four relevantly identical contracts which each contained an arbitration agreement. Under the contracts, the respondents were entitled to a fee per bird, comprising an annually-variable component and a fixed bonus component. Subsequently, an agreement between the applicant and several growers (including the respondents), which referred to an annual review of the fee payable to the growers, provided that the fee per bird would be an amount that it specified. The applicant and the respondents fell into dispute about whether the fixed bonus component of the fee specified in the initial agreements was to be added to the amount specified in the subsequent agreement. The parties submitted the dispute to arbitration under the arbitration agreements. The arbitrator (the Honourable David Byrne QC) determined the dispute in favour of the respondents. The applicant sought leave to appeal.

The respondents opposed any grant of leave, including on the threshold basis that the parties had not agreed that an appeal could be made under s 34A of the Commercial Arbitration Act 2011 (SA). The applicant relied upon the dispute resolution provisions in the four initial agreements, which included a clause in the following terms: “The written determination of the arbitrator of any matter referred is final and binding on the parties (except for manifest error or fraud).” The applicant argued that the exception in parentheses revealed an objective intention that any arbitral award resolving a dispute between the parties would be subject to appeal under s 34A in circumstances of manifest error. Section 34A relevantly provided:

(1) 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 this section; and
     (b) the Court grants leave.
[…]

(3) The Court must not grant leave unless it is satisfied—[…]
     (c) that, on the basis of the findings of fact in the award—
          (i) the decision of the tribunal on the question is obviously wrong; or
          (ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and
[…]

These provisions are in the same terms in the Commercial Arbitration Act 2011 (Vic).

Decision

The Court of Appeal (Doyle JA; Livesey JA and Bleby JA agreeing) dismissed the application for leave to appeal.

After reviewing authorities, including Jacobs Group (Australia) Pty Ltd v The Commonwealth [2020] VSC 127 (Riordan J), Doyle JA concluded that the availability of the right of appeal under s 34A required more than that the dispute resolution provisions within the parties’ agreement contemplated or assumed that there may be an appeal against any arbitral award, at least insofar as they sought to preserve whatever rights of appeal may exist or contemplate and allow such appeals to occur: [108]. His Honour expressed the view that, in considering whether the parties have evinced an intention to agree to an appeal, the court should not approach the task in a manner than involves any overly zealous attempt to find such an intention. Rather, the task is to identify a “real choice” by the parties to confer upon each other a right to appeal: [113].

Further, following Justice Riordan’s decision in Jacobs Group, Doyle JA concluded that the right of appeal that the parties expressly choose must be a right to an appeal of the character provided for under s 34A, namely, on a question of law arising out of the award. That said, this does not require express reference to s 34A: [110].

On the facts in Inghams, Doyle JA held that the parties had not made the requisite agreement. First, his Honour held that the words in parentheses simply assumed and allowed for the existence of a right of appeal otherwise conferred on the parties; there was no indication of an affirmative choice to subject any arbitral award to a right of appeal: [131]. Further and in any event, the appeal contemplated by the reference to “manifest error” was different from the type of appeal contemplated by s 34A (an appeal on a question of law). First, the former would include appeals in relation to manifest errors of fact: [137]. In addition, even assuming the equivalence of the concepts of “manifest error” and “obviously wrong”, a grant of leave to appeal under s 34A was not confined to such cases; it extended to cases in which the question was one of general public importance and the decision was at least open to serious doubt: [138]. Accordingly, the application for leave to appeal had to be dismissed.

Justice Doyle went on to consider the other questions arising under s 34A in any event. His Honour concluded that the question of construction that the applicant sought to raise was a question of law (but that another question was a question of fact). Importantly, his Honour considered the content of the requirement for the grant of leave to appeal that “the decision of the tribunal on the question is obviously wrong”. His Honour held that this required something more than arguable error or for the existence of doubt based upon the complexity of the relevant issue; it connoted an error that was apparent from a perusal of the arbitrator’s reasons for the award, without the need for any prolonged adversarial argument: [169].

In the present case, his Honour held that whilst the question of construction was “finely balanced” ([179]), the arbitrator’s reasoning exposed a sound basis for the conclusion that he reached, there was no obvious error in his conclusion and the s 34A(3)(c)(i) requirement was not satisfied: [171]-[172].

Comment

The Court’s decision in Inghams is significant. It is fair to say that it sets a relatively high bar both for the nature of the manifestation of the parties’ agreement that there be an appeal on a question of law under s 34A(1)(a) and the obviousness of the error required to be shown to obtain leave under s 34A(3)(c)(i). In doing so, the Court sought to give effect to the policy underlying the commercial arbitration acts: to prioritise efficiency and certainty in the resolution of commercial dispute by limiting the scope for curial intervention: [109]. Simply getting to first base (establishing an agreement that there be an appeal on a question of law) may be problematic for many would-be applicants, given that agreements may have been drafted on the assumption that there is a right of appeal, as was the case under the Commercial Arbitration Act 1984 (Vic). As Inghams demonstrates, that is not sufficient. This may not be a legacy issue either: the contracts in Inghams post-dated the repeal of the domestic commercial arbitration legislation but nevertheless appear to have been drafted with the same assumption in mind.