Case Note: Feldman v Tayar  VSCA 185
Adequacy of Reasons and Sufficiency of Arbitration Agreement
Prepared by Dr Andrew Hanak QC
The Victorian Court of Appeal considers the validity of an arbitration agreement and the adequacy of reasons in the recent decision of Feldman v Tayar  VSCA 185.
The dispute arose out of an arbitration between Mr Tayar and Pinchus and Yosef Feldman. Mr Tayar worked at the Yeshivah Centre in Sydney. The centre was operated by Pinchus and Yosef Feldman. Mr Tayar advanced various sum of money to the Feldmans for the purposes of meeting the ongoing expenses of the centre.
A dispute arose between the parties in relation to the repayment of the money advanced. The dispute was referred to a three-member arbitral panel pursuant to a written arbitration agreement. The arbitration agreement provided that:
(a) the arbitral panel was to determine the “disputed matters”;
(b) the “disputed matters” were to be identified in pleadings to be filed in the arbitration; and
(c) the arbitral panel was to determine the dispute according to the principles of Orthodox Jewish Law known as Halacha.
Despite the requirements in the arbitration agreement for pleadings, when the arbitration commenced, the parties and the arbitrators agreed that pleadings would not be required. The matters to be determined were identified by the parties orally.
The arbitral panel found in favour of Mr Tayar in relation to three claims. The arbitral panel published its award together with short reasons.
The issues raised in the appeal
Mr Tayar commenced an enforcement proceeding pursuant to s. 35 of the Commercial Arbitration Act 2011 (Vic) (Act). In response, the Feldmans issued an application under s. 36 of the Act seeking orders for refusal of enforcement of the award. At first instance and on appeal, there were two grounds on which enforcement was resisted. First, the Feldmans argued that the arbitration did not comply with s. 7(3) of the Act because there was no agreement in writing as to which disputes were to be submitted to arbitration. Second, the Feldmans argued that the arbitrators failed to give adequate reasons for the award. The Court of Appeal (McLeish, Sifris and Kennedy JJA) rejected both grounds.
The validity of the arbitration agreement
The parties and the arbitrators entered into an arbitration agreement which provided that the arbitration would be conducted in accordance with the Act. The recitals to the arbitration agreement provided that:
“A. Disputes have arisen between the Parties concerning certain transactions between them during the period from 2007 to date, including certain loans, rents, salary payments, the ownership of properties and other matters.
B. Pursuant to this Agreement, an Arbitral Panel will be appointed to determine the Disputed Matters in accordance the processes set out in this Agreement.”
The arbitration agreement defined the “disputed matters” as the “the matters described in Schedule 1 to be determined by the Arbitral Panel and made subject of an Award”. Schedule 1 stated that the disputed matters were to be described by reference to the pleadings to be filed in the arbitration. As noted above, the parties subsequently agreed that pleadings would not be filed.
The argument as to the validity of the arbitration agreement relied on s. 7(1) and (3) of the Act. Section 7 of the Act relevantly provided as follows:
“7. Definition and form of arbitration agreement (cf Model Law Art 7)
(1) An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) The arbitration agreement must be in writing.
(4) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.”
The Feldmans argued that the arbitration agreement did not comply with s. 7 of the Act because, until pleadings were filed, there was no agreement to submit defined disputes to arbitration.
The Court of Appeal concluded that a valid and enforceable arbitration agreement had been entered into by the parties. It was sufficient for the agreement to identify the general nature of the disputes. In the present case, this was satisfied by the way that the recitals described the disputes. The fact that the parties intended that the “disputed matters” were to be further identified in the pleadings which would be filed in the arbitration did not alter the position in relation to the validity of the arbitration agreement. The Court stated:
“…the parties may agree in writing to a mechanism or process for determining which disputes that have arisen or which may arise between them are to be submitted to arbitration. As long as there is a process to determine with certainty which disputes are to be submitted, there is a valid and binding arbitration agreement. The particular disputes need not be identified in the arbitration agreement.”1
Adequacy of the reasons
It is apparent from the judgment of the Court of Appeal that the reasons of the arbitral panel were difficult to follow. It was not clear whether the difficulties arose from the translation of the reasons or from the way the reasons were written. The Feldmans argued that there was nothing in the reasons which constituted a reasoning process, or which would set out how the arbitral panel came to its decision. The reasons were described by the Court of Appeal as being:
“… short (3 pages) and not easy to understand. The language is often disjointed. They are very much based upon the Halacha.”2
The Court of Appeal applied the test for adequacy of reasons formulated by Donaldson LJ in Bremer Handelsgesellschaft mbH v Westzucker GmbH [No 2]:3
“All that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. That is all that is meant by a ‘reasoned award’.”
The Court of Appeal noted that this test had been endorsed by the High Court in Westport Insurance Corporation v Gordian Runoff Ltd.4
The Court of Appeal stated that the adequacy of the reasons had to be assessed in light of the evidence, the nature and the complexity of the issues raised, and the findings ultimately made by the arbitral panel.5 The issues on which Mr Tayar succeeded in the arbitration were relatively simple and straightforward. The reasons set out the rival arguments. The Court found that there was a sufficient process of reasoning disclosed in the three pages of the reasons provided by the arbitral panel. Even though the reasons may have been out of sequence and not fully or precisely stated, this did not lead to the conclusion that they were inadequate. Accordingly, the challenge to the enforcement of the award failed.
1  VSCA 185 at .
2 Ibid at .
3  2 Lloyd’s Rep 130, 132-3.
4 (2011) 244 CLR 239 at  – .
5  VSCA 185 at .