06/05/2021 - 12:00

Caratti loses ‘audacious’ appeal

06/05/2021 - 12:00

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Caratti loses ‘audacious’ appeal
Caratti Group was found to have overcharged Weatherford at Malaga. Photo: Google Street View

A Supreme Court judge has signalled a crackdown on ‘backdoor’ appeals against arbitration rulings, saying they were the last refuge of the desperate and should be met with a punitive costs sanction.

In a strongly worded ruling, Justice Kenneth Martin dismissed an appeal brought by Hotchkin Hanly Lawyers on behalf of privately owned property company Caratti Group.

He described the appeal as “truly breathtaking in its audacity”.

Caratti Group went to the Supreme Court after losing a commercial dispute in a private arbitration.

Justice Martin said attempted challenges against non-appealable decisions continued to bedevil and undermine efforts to entrench arbitration as a quick, relatively inexpensive and final medium for private dispute resolutions. 

“Unfortunately, too many unsuccessful arbitration participants still see it as worth their while to 'roll the dice' by manufacturing a pathway to a court, where strained procedural unfairness arguments rise to the fore as something of a last refuge of the desperate,” he said.

“Here, such challenges have been productive of delay to the successful party enjoying the fruits of the award and have necessitated an allocation of resources - equivalent to what would otherwise have been devoted to the hearing of a full-blown appeal by way of a rehearing. 

“This farcical position should no longer be entertained. 

“Where the backdoor strategy is unsuccessfully deployed in future it should be met with a punitive costs sanction.”

The Supreme Court appeal stemmed from a leasing dispute between Caratti Group subsidiary Venetian Nominees and its tenant, international oilfield services company Weatherford.

The court was told the Malaga property was one of about 50 owned by Caratti Group, which is led by John Caratti.

Weatherford had claimed it was overcharged on the basis it was paying too much of the outgoings on its Malaga premises.

The two parties agreed to appoint Marcus Solomon QC as a private arbitrator to resolve their dispute.

After a two-day hearing last year, he ruled in favour of Weatherford, which was represented by Jackson McDonald.

Under the Commercial Arbitration Act 2012 (WA), there is no appeal available against an adverse arbitral decision.

Instead, Venetian and its lawyers argued the arbitration process was unfair but failed to impress Justice Martin.

“No doubt by reason of that inconvenient obstacle, the present challenges directed against the arbitrator's award decision have been grammatically cast as an alleged failure by the arbitrator to hear some of the plaintiff's arguments and, alternatively the too frequently seen allegation of a denial of procedural fairness within the arbitration process,” he said.

Justice Martin found little merit in Venetian’s appeal.

“In the end, on what is put before this court, it simply cannot be reliably shown that Venetian suffered a disadvantage by reason of being denied a reasonable opportunity to present its case, or that the arbitral hearing process overall was unfair to it,” he concluded.

“Venetian must accept that there is no appeal against the arbitrator's award and come to terms with that adverse result.”

In his ruling, Justice Martin concluded that Venetian received an entirely fair two-day arbitral hearing.

“The process followed by the learned arbitrator, on my assessment, was perfectly fair,” he said.

“An opportunity for the arbitrating parties to file even further materials given at the conclusion of two days of arbitral hearing was afforded. 

“The indulgence provided a more than fair opportunity to address any issues as regards further legal submissions or extra documentary expert evidence that Venetian may have wished to have further submitted, arising in the wake of the two days of hearing. 

“But no extra evidence was sought to be added to Venetian's case. 

“Yet there is a process grievance raised to this court.  That is truly breathtaking in its audacity.”

Justice Martin said one aspect of the arbitrator’s ruling – concerning the treatment of a Western Power easement – could have been turned to Venetian’s favour.

However, he said Venetian failed to properly pursue this aspect.

“That argument was ultimately not accepted at the hearing. 

“But that is not a process grievance.  That is just a badly run case.”

He was also highly critical of an affidavit submitted by Caratti Group’s commercial property manager Paul Testar.

His affidavit was variously described as sweeping, generalised, unhelpful, facile, of no weight and ultimately inadmissible.

One aspect of the arbitration that was criticised by Justice Martin was the failure to arrange for a transcript of the two-day hearing.

“This is not at all satisfactory or acceptable in this court,” he said.

“An absence of a verbatim transcript is simply hopeless towards reliably evaluating, after an event, what happened at the hearing from an overall fairness perspective.”

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