The case concerned an arbitration under seven grain contracts for the future delivery of grain at fixed prices. The contracts contained arbitration clauses providing for arbitration under the National Agricultural Commodities Marketing Association (NACMA) rules. A three person arbitral panel was appointed, each party appointing one arbitrator and NACMA appointing the chair. None of the arbitrators were lawyers.

One of the issues in the arbitration was the capacity in which the parties had entered into the contracts. The claimant, Barry Smith Grains Pty Ltd (BSG), was trustee of two trusts, and it asserted that it had entered into the seven contracts as a trustee. The respondent, Riordan, asserted that all parties had entered into the contract in their own right and not as trustees. Riordan asserted that it had a set-off claim worth $AUS369,465.64 against BSG, which had subsequently gone into liquidation, and submitted that set-off to the liquidators of pursuant to the Corporations Act 2001.

The arbitrators found that although BSG was a trustee, it had not entered into the contracts as trustee but rather as principal. While internally BSG had accounted for the transaction as part of the trusts, the documents between BSG and Riordan did not make this clear. Accordingly, the arbitrators held that the set-off defence was available and that BSG was liable for $AUS140,534.40.

BSG sought leave to appeal the award as required under the old Act (under the 2010 Act, leave is still required but additional constraints are also imposed, including, importantly, the agreement of the parties).

Einstein J granted leave to appeal on the basis that the award disclosed a manifest error in that when considering the set-off, the arbitrators had focused on the activities at the time of entering into the contract when considering capacity and had not dealt sufficiently with BSG's financial records and the question of capacity at the time in which the set-off was asserted against BSG's liquidators.

Hammerschlag J dismissed the appeal. He held that awards are frequently made by non-lawyers. Such awards should not be reviewed with an over-critical or pedantic eye and should be read with common sense and without undue legality. The judge also noted that the arbitrators were not bound to apply strict rules of evidence.

Hammerschlag J also analysed the pleadings and noted that it had not been asserted that the transaction had been impressed with trust after it had been entered into. Therefore, although the Corporations Act required the arbitral tribunal to consider whether there was a trust at the date of winding up, the only pleaded trust was said to have arisen at the date of the contract. Hence, the tribunal was justified in focusing on that date for determination of the existence of the trust.

Further, the focus on the absence of evidence of the existence of the trust at the time of entering into the contract was reasonable. The tribunal was entitled to focus on a failure of a party to adduce evidence that was within that party's power to adduce.

Similarly, regarding the alleged failure to sufficiently consider the accounting evidence, that was evidence which came into existence after the parties entered into the contract Therefore, the tribunal was entitled to give it little or no weight.

The judge found no evidence to warrant varying or setting aside the award and found that on the material before him, he would have reached the same conclusion as the arbitrators.

While the reasoning in this case does not apply to the 2010 Act, the decision is pleasing for the support it provides to considering the arbitrators' award in a pragmatic and not overly-critical manner.