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Which disputes? Consideration of the requirements of identifying disputes in arbitration agreements and adequacy of reasons

Feldman v Tayar [2021] VSCA 185

A recent decision of the Victorian Court of Appeal (VCA) has confirmed there is no requirement under the Commercial Arbitration Agreement Act 2011 (Vic) (CAA) to define in writing the matters referred to arbitration, and the published reasons for an award do not need to be of a judicial standard to be adequate.

Background
The applicants, Feldman and Feldman operated the Yeshivah Centre in Sydney where the respondent, Tayar, worked. Between 2008 and 2013, Tayar made a series of advances to Feldman and Feldman for the purpose of meeting the expenses of the Centre, which he claimed had not been repaid. Further disputes arose between the parties.

On 4 March 2013, the parties (and arbitrators) entered into a written arbitration agreement (Arbitration Agreement) pursuant to which they appointed three arbitrators (Arbitral Panel) to determine what was defined as 'Disputed Matters' by reference to the principles of Orthodox Jewish Law.

The agreement
'Disputed Matters' was defined as ‘the matters described in Schedule 1 to be determined by the Arbitral Panel and made subject of an Award’. Schedule 1 stated that ‘the matters to be determined by the Arbitral Panel are to be determined by the Statement of Claim, Statement of Defense [sic] and Cross Claim (if any) and the Reply and Deference [sic] to Cross Claim (if any) to be filed in the arbitration as directed by the Arbitral Panel.

The arbitration commenced on the same day the Arbitration Agreement was entered into. None of the documents identified in Schedule 1 were ever created. Instead, the 'Disputed Matters' were defined orally over the course of the hearing, a course agreed to by all parties.

On 9 May 2013, the Arbitral Panel published an award (Award) recording its decision in respect of five claims by Tayar, together with reasons. A monetary sum was awarded to Tayar in respect of the successful claims.

Enforcement
In 2019, Tayar brought enforcement proceedings under s 35 of the CAA. Feldman and Feldman in turn sought refusal of enforcement under s 36, arguing there was no domestic commercial arbitration and no enforceable or valid arbitration agreement because the 'Disputed Matters' were not identified in writing. They also argued that there were no reasons given for findings in the Award, in breach of s 31(3) of the CAA.

On 2 March 2021, the Court below made an enforcement order entitling Tayar to a monetary sum related to claim 1. The primary judge held, relevantly, that:

  • The Arbitration Agreement complied with ss 1(3)(b) and 7 of the CAA, as those provisions do not require the matters being referred to arbitration to be in writing; and
  • The parties were aware of how the 'Disputed Matters' were to be defined and determined, and Feldman and Feldman did not complain about, and were not prejudiced by, Tayar's failure to file a statement of claim. As a result, they waived their right to object in the context of s 4 of the CAA.

The appeal
Feldman and Feldman appealed the decision on two grounds, being that the primary judge erred in:

  • finding that the parties had entered into an arbitration agreement; and
  • not finding that the Arbitral Panel failed to give reasons in respect of claim 1.

The VCA rejected both grounds and dismissed the appeal.

Agreement
'Arbitration agreement' is defined under s7(1) of the CAA as ‘an agreement by the parties to submit to arbitration all or certain disputes…’. In respect of the requirements under ss 1(3)(b) and 7(1) for 'all or certain disputes' to be submitted in writing to arbitration, the VCA stated that a submission that embraces ‘all’ disputes would meet those requirements, even though the disputes in question have not been particularised in the agreement. More precise identification can instead await the arbitral process. Accordingly, "there is no reason why a submission of ‘certain’ disputes should demand any greater specificity".

In the present case, the general nature of the disputes submitted to arbitration were identified in Recital A, with more precise articulation of claims to be set out in pleadings. The parties ultimately agreed that pleadings did not need to be provided; instead agreeing to make their claims orally. The VCA found that it did not matter that this approach gave the defined term 'Disputed Matters' no work to do. The Arbitral Panel gave no direction for pleadings and no such direction was mandatory under the Arbitration Agreement.

Reasons
Referring to the decision of the High Court in Westport Insurance Corporation v Gordian Runoff Ltd (2011) 244 CLR 239, which clarified that arbitral awards do not have to be of a judicial standard, the VCA stated that adequacy of or sufficiency of reasons ‘will depend on the evidence, the complexity and nature of the issue, and the relevant finding’, adding that reasons ‘must address why the arbitrators have reached a particular decision’.

The reasons for the Award in this case were described by the primary judge as 'not easy to understand', with language that is 'often disjointed' (perhaps because the reasons had been translated). Even so, the VCA found that the reasons set out the relevant rival arguments, and ‘[g]ood or bad, out of sequence, not fully or precisely stated, there is a sufficient process of reasoning in dealing with Claim 1’.

Conclusion
For organisations whose preference is to use arbitration as a primary, or key, method of dispute resolution, this is a timely reminder that thought should be given to whether arbitration agreements included in commercial contracts should define in detail the scope or nature of disputes to be referred to arbitration, and the nature of the reasons to be given by the arbitrator/s.

It may be strategically beneficial for an entity to allow the scope of 'Disputed Matters', and the nature of reasons for award, to remain undefined until such time as an arbitration commences. However, there may be circumstances in which it is critical to put parameters around the extent to which matters in dispute are determined via arbitration, as opposed to another resolution process. In that scenario, while there is no requirement to particularise in writing the disputes to be referred to arbitration, care should be taken in drafting an arbitration agreement to include a process to determine with certainty which disputes are to be referred.

The decision also reflects Australian courts' pro-enforcement approach, and reinforces the high threshold to resist enforcement of an award based on inadequate reasons.[i]


[i] [Disclaimer: The above material provides a summary only of the subject matter covered, without an assumption of a duty of care by Resolution Institute or Clayton Utz. The material is not intended to be nor should it be relied upon as a substitute for legal or other professional advice. Copyright in the material is owned by Clayton Utz.]