Balfour Centre Pty Ltd, Re [1997] QSC 37 [1998] 2 Qd R 112

IN THE SUPREME COURT OF QUEENSLAND Motion. 10876 of 1976 Brisbane Before the Hon. Justice Williams CATCHWORDS: Counsel: Solicitors: Hearing Date: IN THE MATTER of The Commercial Arbitration Act 1990 - and - IN THE MATTER of an Arbitration between PERPETUAL TRUSTEE COMPANY LIMITED and RIVERFIELD TIKI HOLDINGS - and - IN THE MATTER of "Arbitration Determination" by John D Horrigan dated the 18th day of November 1996 and delivered on the 22nd day of November 1996. JUDGMENT - WILLIAMS J Delivered 12 March 1997 Arbitration - issue estoppel - assessment of fair proportion of land tax payable by lessee for particular year - held rejection of contention advanced collateral to detennination - different question at time of each detennination - therefore no issue estoppel - Blair v. CUI'ran 62 CLR 464 at 532, O'Donel v. Commissioner for Road Transport 59 CLR 744, Franciscan Order of Friars v. Kew (1967) V.R.. 732, and Caffoor v. Commissioner of Income Tax (1961) A.C. 584 considered Gore QC & Savage for applicants Muir QC & Cronin for respondent O'Mara Patterson & Perrier T/A for Wendy Cull for applicants Hopgood & Ganim T/A for Primrose Couper Cronin Rudkin for respondent 20 February 1997 permission. -- 1 of 20 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane Before the Hon. Justice Williams Motion. 10876 of 1976 IN THE MA TTER of The Commercial Arbitration Act 1990 - and - IN THE MATTER of an Arbitration between PERPETUAL TRUSTEE COMPANY LIMITED and RIVERFIELD TIKI HOLDINGS - and - IN THE MATTER of" Arbitration Determination" by John D Horrigan dated the 18th day of November 1996 and delivered on the 22nd day of November 1996. JUDGMENT - WILLIAMS J Delivered 12 March 1997 The applicants, Balfour Centre Pty Limited and Kinnington Pty Limited trading as Riverfield Tiki Holdings, seek orders either pursuant to s.42(1) or s.3 8(3) of the Commercial Arbitration Act 1990 setting aside the whole of the determination made by JD Horrigan delivered on 22 November 1996 in an arbitration between the applicants and the respondent, Perpetual Trustee Company Limited. Other consequential relief is also sought. The arbitration in question was conducted pursuant to a clause in a lease between the respondent as lessor and the applicants as lessees. The lease is for a term of 80 years from 29 June 1983. The lease provides for the applicants to pay certain sums to the respondent -- 2 of 20 -- 2 III addition to rent; one of those payments is described as a "fair proportion" of certain specific outgoings for which the respondent is primarily liable. Clause 2(k) is critical for present purposes and it provides: "The Lessee shall pay to the Lessor on request or within fourteen (14) days thereafter the amounts accrued, paid or payable by or levied on the Lessor during the term hereof in respect of the following: (i) all rates charges and assessments including water, sewerage, drainage and cleansing rates and charges at any time or from time to time payable to any government, local government, semi government or any other competent authority in respect of the demised premises; (ii) all land tax or taxes of the nature of a tax on land calculated on the assumption that the whole of the land contained in the Certificate of Title Volume 6115 Folio 3 is the only land owned by the Lessor; Notwithstanding any other provision herein contained if there shall be no separate assessments for the demised premises then the Lessee shall pay a fair proportion of any assessment relating to property which includes the demised premises, such fair proportion being calculated by the Lessor Provided That if the Lessee does not agree with such calculation than the Lessor and the Lessee agreed to be bound by the decision of an Arbitrator as to the assessments for the demised premises, who shall be appointed by the President for the time being of the Real Estate Institute of Queensland. The decision of such Arbitrator shall be final. The costs of and incidental to the preparation of such assessment by the Arbitrator shall be paid by the Lessee." The respondent has been assessed for land tax pursuant to the provisions of the Land Tax Act on the land described in c1.2(k)(ii), but there is no separate assessment for the demised premises. The respondent made a calculation of the fair proportion of the relevant land tax assessment which should be payable by the applicants with respect to the period 1990 - 1995, but that was not acceptable to the applicants. It was that dispute which was then referred in accordance with the provisions of cl.2(k) to Horrigan for arbitration. A similar question had been referred to arbitration at an earlier point of time. The award in question was that ofDAS Cameron delivered on 25 January 1993. That award on its face does not make it clear to what period the determination applied, but the solicitor for -- 3 of 20 -- 3 the respondent, MJ Smith, in paragraph 8 of his affidavit states that the question submitted to Cameron for arbitration was "the fair proportion of land tax on Lot 1 to be borne by the Lessee pursuant to c1.2(k)(ii) of the lease for the year ended 30 June 1989"; that was accepted by both sides on the hearing before me. In its Points of Defence before Horrigan, the respondent made the following, relevant assertions: "6. In determining 'a fair proportion of any assessment', pursuant to c1.2(k) of the lease, improvements are to be disregarded, as determined in the arbitration between the parties by the Arbitrator Mr Cameron in the award dated 25 January 1993. 7. In determining 'a fair proportion of any assessment', pursuant to c1.2(k) of the lease, such 'a fair proportion of any assessment', is and shall be 47.4%, as determined in the arbitration between the parties by the Arbitrator Mr DAS Cameron in the award dated 25 January 1993. 8. Further, and in the alternative, the Applicants are estopped by the award of the Arbitrator Mr Cameron. 9. The Arbitrator Mr JD Horrigan does not and shall not have jurisdiction to hear or determine, otherwise than in accordance with the arbitration between the parties by the Arbitrator Mr Cameron in the award dated 25 January 1993:- (b) in relation to the issue of 'a fair proportion of any assessment', pursuant to c1.2(k) of the lease, whether or not improvements be disregarded, except as determined in the arbitration between the parties by the Arbitrator Mr Cameron in the award dated 25 January 1993; (c) the issue of 'a fair proportion of any assessment', pursuant to c1.2(k) of the lease, namely that 'a fair proportion of any assessment' is and shall be 47.4%, as determined in the arbitration between the parties by the Arbitrator Mr Cameron in the award dated 25 January 1993." At a preliminary conference held on 10 October 1995 Horrigan indicated there was a preliminary point of law relating to issue estoppel which he wished to have determined -- 4 of 20 -- 4 before the arbitration proceeded. It was then agreed between the parties that he should obtain an opinion from a legal adviser acceptable to both parties. Consequently· the Honourable PD Connolly QC was retained. He was provided with written submissions .from either side as set out in the affidavit of the respondent's solicitor, and he also heard oral submissions on 5 February 1996 when he sat with the arbitrator. Subsequently Connolly QC furnished an opinion dated 7 February 1996. The following question was formulated by the parties to be answered by Connolly QC for the assistance of the arbitrator: "Are the Lessees estopped by the determination of Mr Cameron from contending that the fair proportion of land tax to be borne by the Lessee is to be calculated by reference to the proportion or ratio between the floor area of improvements on the demised land on the one hand and the floor area of improvements on the balance of the land on the other hand". That question was answered in the affirmative by Connolly QC. Thereafter the arbitration hearing took place on 31 July and 1 August 1996. Both sides were represented by Counsel. It is agreed by both parties that the arbitrator should act on the footing that Connolly QC correctly answered the question identified in his opinion, but the lessees reserved the right to challenge the correctness of that answer in any later proceedings in this Court arising out of the award of the arbitrator. The award of JD Horrigan was then handed down on 22 November 1996. His ultimate determination is as follows: "For the reasons outlined, I therefore determine the Lessees proportion of land tax for the relevant periods at 47.4% of the total payable for the entire parcel as contended by Mr Muir, for the Lessor." As noted above the relevant period was for the years 1990 - 1995. It is that determination which the applicants seek to have set aside pursuant to the provisions of the Commercial Arbitration Act 1990. Section 42(l)(a) relevantly provides that where there has been a misconduct on the part of an arbitrator the Court may set aside the -- 5 of 20 -- 5 award wholly or in part. Section 38 deals with review of arbitration awards by this Court. Where there is no consent by all parties (as is the case here - the respondent does not consent) an appeal lies to this Court on any question of law arising out of an award only with the leave of the Court. Sub-section (5) provides that the Court shall not grant leave unless it considers that: "(a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and (b) there is - (i) a manifest error of law on the face of the award; or (ii) strong evidence that the Arbitrator ... made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law." Where, pursuant to such leave, the Court hears an appeal it may confirm, vary or set aside the award or remit it to the arbitrator for further consideration. Before deciding whether or not leave to appeal should be granted it is necessary to consider in more detail the determinations by both Cameron and Horrigan and the opinion of Connolly QC. Relevantly in his reasons Horrigan recorded that senior counsel for the applicants "contended that Mr Connolly did not uphold Mr Cameron's approach and that Mr Connolly could not have intended a total estoppel without other considerations. Otherwise he would have stated that Mr Cameron's approach was correct." He then went on to record the submission by senior counsel for the lessor that "the estoppel by Mr Connolly was in place and the parties have to accept this fact with the only approach to the 'fair proportion' being that adopted by Mr Cameron". The applicants called as a witness a valuer, Mr Brett, who referred to a number of ways in which improvements on the land might be relevant to the determination of the issue before the arbitrator. Horrigan in his reasons recorded the -- 6 of 20 -- 6 submission of counsel for the respondent that Brett's evidence should be rejected because it "was rejected by Mr Cameron in his determination" and his approach was "one which the Lessee is now estopped from advancing. It is a thinly disguised apportionment by reference to proportional floor areas." Then come some critical paragraphs in Horrigan's reasoning and it is necessary to set them out in full: "I have considered all the evidence before me in this matter and the various submissions made by the parties. It was generally agreed that it was somewhat unique and not strictly a valuation exercise with no set guidelines or principles to be followed. It maybe that there is no correct basis for the apportionment of land tax payable with the final decision, in the event of dispute under clause 2(k) of the lease being solely decided at the discretion of the Arbitrator. It was stated that if the estoppel did not apply, future Arbitrations could be in direct conflict with the decision ofMr Cameron. However, the contrary would also apply in that if Mr Camerons decision was in any way incorrect, future Arbitrators would be bound under an estoppel to continue with any such error. Having said that, I cannot take the matter further as I feel that I am bound by the estoppel of Mr Connolly. This arose out of various legal issues in relation to the arbitration of this matter and it was agreed by the parties to appoint an independent person to determine such issues. In view of the agreement between the parties, I consider that I am bound by the opinion of Mr Connolly and have no alternative but to apportion the land tax for the relevant years based on Mr Cameron's report by having regard to site areas as submitted by Mr Muir, for the Lessor. Should I be incorrect in this conclusion in relation to the estoppel, I feel that consideration could have been given to building areas but not necessarily on the basis submitted. It is difficult to totally ignore the improvements but to sirl1ply compare floor areas on an equal basis is, to me, incorrect. However, in view of the agreement between the parties and Mr Connolly'S opinion, I consider I am estopped from taking the matter further. For the reasons outlined, I therefore determine the Lessees proportion of land tax for the relevant periods at 47.4% of the total payable for the entire parcel -- 7 of 20 -- 7 as contended by Mr Muir, for the Lessor." In my view it is clear from those quoted passages that the arbitrator was heavily influenced by the opinion of Connolly QC. Feeling he was bound to accept and apply the advice, it appears that he felt constrained to apply the precise formula used by Cameron in arriving at a fair apportionment. It seems clear from the third last paragraph in the quoted extract that Horrigan may well have come to some other conclusion if he was not so constrained; at least he would have given detailed consideration to other arguments were it not for the estoppel. Cameron commenced his award by stating that the arbitration required him "to determine as between the parties hereto the fair proportion of Land Tax which should be paid by the Lessee pursuant to the Lease between the parties dated the 29th day of June 1983". He considered that a number of provisions of the lease had to be interpreted as a prelude to his making that determination. One of the clauses he said he had to interpret was cl.2(k)(ii). Of that he said: "Unfortunately, the Lease Draftsman's intentions are not clear from this clause. Interpretation is therefore necessary and an I interpret this clause strictly." He did not elaborate on that statement and it is unclear to me just what he meant by it. Then he went on to deal in paragraph 2.2 with what he called the "Definition of Land Tax"; under that heading this appears: "Land Tax is a property tax which is calculated using the unimproved valuation of the land .established by the Valuer-General in this State. This value is determined on the basis that the land is vacant with no improvements but with the land's current zoning in place and the various services provided by the relevant local authorities and a Government instrumentally available to the land. Land Tax does not take into account any improvements which may be erected upon the land. During these proceedings there were numerous submissions about value comparisons both insofar as comparisons of commercial and residential land and, comparisons of strata title developments and single holding developments. -- 8 of 20 -- 8 It is my opinion that Land Tax should be based upon the unimproved value of the land owned by the Lessor and I have therefore not placed any weight on the submission with regard to the different valuation comparisons based on developed land." Then in paragraph 2.3 under the heading "Assessment of Unimproved Value" he referred to certain authorities dealing with the concept of "unimproved value" and went on: "The Lessor's land contains an overall area of 4,598m 2 (more or less) and the unimproved value has been assessed upon the entire area of land as if it was vacant land but with current zoning 'and local services. I have also disregarded submissions made about the multi-level building constructed upon the site." Then he states his conclusion in various paragraphs under the heading "Findings and Determination"; the following extract is relevant for present purposes: "3.3 I find that the Valuer-General's unimproved value for the Lessor's land is the relevant value for assessment of Land Tax for the entire parcel of land owned by the Lessor. Improvements erected upon the Lessor's land should be disregarded for the purpose of calculating Land Tax for the entire parcel. The zoning of the Lessor's land and the amenities and services available to the Lessor's land should be taken into consideration. 3.4 Given that Land Tax itself is based upon the unimproved valuation, I do not consider it fair to include the basement areas for the purposes of calculating that proportion under which the Lessee is to pay Land Tax. 3.6 I find that the Lessee is responsible for payment of Land Tax proportionate to the area occupied as the demised premises constituting the ground level. This is the area of the demised premises less the basement areas. I find the relevant area to be 2,179m2• I therefore find the Lessee responsible for payment of 47.4% of the Land Tax payable by the Lessor for the entire parcel of land." It is that determination by Cameron which is said to create the issue estoppel binding future calculations of the fair proportion' of land tax payable by the applicants throughout the remaining years of the lease. Before me it was accepted by each side that an award in arbitration proceedings could give rise to an issue estoppel. There is no reason in principle -- 9 of 20 -- 9 why that should not be so in an appropriate case, and it is recognised in Spencer Bower and Turner, Res Judicata (2nd edition) at paragraph 218 that issue estoppel may arise from issues decided as the fundamental basis of an award in arbitration proceedings. Connolly QC in his opinion accurately summarised the issues before Cameron in 1993 and Horrigan in 1996. He then went on: "In the 1991 arbitration the Lessees had drawn attention to the high rise development on the balance of RP174652 to the east of the demised premises and invited comparison of the density of that development with the area of the premises demised, obviously arguing that fairness demanded an apportionment which reflected the relative profitability of the two. This argument was rejected by the Arbitrator who pointed out (para 2.2) that land tax is calculated on the unimproved value of the land which is, of course correct: ... From this he concluded that the Lessor's land must be viewed as vacant land and not as developed (para 2.3). While this is plainly right for the purpose of the assessment of land tax by the Valuer-General it is not necessarily applicable to the Arbitrator's function under cI.2(k)(ii) of the lease which does not necessarily involve an independent determination of the valuation which would be appropriate if the Valuer-General were to value the demised premises separately for land tax purposes. The Arbitrator's duty is to determine a fair apportionment of the assessment made by the Valuer-General in relation to RP174652 as a whole. In so doing he may, one would think, take into account all relevant factors. The question however is not whether the Arbitrator was correct in his rejection of the Lessee's reliance on the comparative developed floor space of the two areas of RP174652 but whether that rejection created an "issue estoppel" so as to preclude, in new arbitration proceedings for a subsequent period or periods, reliance on comparison of the developed state of the land in the possession of the Lessor with the demised premises." I agree entirely with all that is said in that extract. Cameron does appear to have assumed that, because land tax was assessed on unimproved value which regarded the land as not developed, any apportionment of that tax for purposes of cI.2(k) of the lease must also of necessity ignore improvements. Clearly that is not necessarily so. One starts with the assessment of land tax based on unimproved value, but the exercise in question is one which requires an apportionment with respect to a defined developed area. If only because the lease is of an improved area it is, to my mind, impossible to ignore totally the improvements when -- 10 of 20 -- 10 one is speaking of a fair apportionment of the land tax. But that, of course, does not mean that any particular argument referring to the improvements either .on the total area of land or being the demised premises should be adopted in order to arrive at a fair apportionment. The rather veiled criticism by Connolly QC of Cameron's approach is, however, relevant in my view when one comes to consider what was determined by Cameron and what, if anything, in his award can create an issue estoppeL That is a point to which I will return subsequently. After that extract set out above, Connolly QC quoted from the judgment of McHugh JA in Egri v. DRG Australia Ltd (1988) 19 NSWLR 600 at 603 which itself included a quotation from thejudgment of Dixon J in Blair v. Curran (1939) 62 CLR 464 at 532. In large measure those passages set out the relevant approach in determining whether there is an issue estoppel created - though in my view, as will appear later, some refinements are required. Then comes the critical passage in the reasoning of Connolly QC: "... there being no criterion of fairness in c1.2(k)(ii) the Lessees may, in my opinion, raise any consideration which is persuasive in point of fact, for fairness is a question of fact, unless they are estopped from doing so to the extent contended by the Lessor. Now the Arbitrator in the 1991 case rej ected the contention that a fair apportionment for the purposes of c1.2(k)(ii) could be found by comparing the improved floor areas of the high rise building with those of the demised premises. Whether his reason for rejecting this contention is good in law is immaterial, not having been challenged for error of law. It seems to me therefore the Lessor makes good its contention. The point is not open in the new arbitration." (my emphasis) When pressed senior counsel for the respondent had to concede that the proposition highlighted in the above extract was "not replicated precisely" in the award of Cameron. From a reading of Cameron's award I can find nothing to support the contention that he made a fInding of fact that a fair apportionment could not be found by comparing the improved , . -- 11 of 20 -- 11 floor areas of the high rise building with those of the' deinised premises. As Connolly QC pointed out,correctly in my view, fairness is a question of fact for these purposes. Cameron recorded that the assessment of Land Tax by the Valuer~General must be restricled to the unimproved val ue of the land in question, but such a finding' does not support the proposition highlighted above in the opinion of Connolly QC. Saying that improvements erected' on the land should be disregarded for calculating land tax does not support that proposition, Bearing in mind, as correctly stated by Horrigan, that there are no set guidelines or principles tobe followed in determining what is a fair apportionment of land tax and that there is no universally correct basis for such an apportionment, all that Cameron did was find that for the period in question before him the lessee should pay 47.4% of the land tax assessed for the entire parcel of land. Indeed on a careful reading of his award it could be argued that Cameron did not answer the question for his determination because he did not find that 47.4% was a "fair" apportionment. Though he stated the question accurately earlier in his award he made no specific finding thereon, and clause 3.6 does not involve a finding that making the lessee "responsible for payment" of 47.4% of land tax assessed constitutes payment of a "fair proportion". It is true that if one looks behind the award, and perhaps that can properly be done in this case (Rogers v. The Queen (1994) 181 CLR 251 per Brennan J at 263 and 268), it will be seen that the lessees before Cameron led evidence to support the contention that a fair apportionment for purposes of c1.2(k) could be found by comparing the improved floor areas of the high rise building with those of the demised premises. But a careful reading of the award does not show that Cameron rejected that contention as a basis for a fair apportionment; he did not expressly find that the contention in question .. could never be relevant. Insofar as his award deals with that evidence with respect to the assessment of land -- 12 of 20 -- 12 tax it is beside the point (as also observed by Connolly QC). But Cameron did not expressly reject that contention as providing a basis for a fair apportionment; all that he did was to find that - assuming that he has assessed a fair apportionment - the ratio between the total area of the land and the area of the demised premises affords provided a preferable answer in his VIew. In terms of estoppel the critical question is whether or not the determination by Cameron finally answered the question whether opinions of experts referring to improvements on the subject land could be relevant to the determination of the fair proportion of land tax payable by the applicants. The passage from Blair v. Curran at 532 quoted by McHugh JA in Egri at 603 poses as the relevant question whether or not it was necessary for the arbitrator to finally decide the relevant issue in order to arrive at his determination. Again, and this is supported by those passages, there will be no estoppel if all that was decided concerned evidentiary facts, albeit facts fundamental to the chain of proof. In considering the application of those principles to the facts of this case it is important to bear in mind the line of authority of which O'Donel v. Commissioner for Road Transport (1938) 59 CLR 744 is a leading example. In proceedings in the Supreme Court of New South Wales,it was held that under the Transport Act 1930 the appellant was entitled to recover salary for the period 14 September 1934 to 15 February 1935 on the basis that he was disabled as a result of blindness during that period caused by an injury sustained in the course of his employment on 19 March 1933. The appellant subsequently sued for workers compensation from 15 February 1935 on the basis that his incapacity, namely blindness, resulted from an injury suffered in the course of his employment on 19 March 1933. The High Court held that the judgment of the Supreme Court, although it created an estoppel in respect of the cause of the appellant's blindness during the period 14 September 1934 to 15 -- 13 of 20 -- 13 February 1935, did not estop the respondent from proving that the appellant's blindness after 15 February 1935 was not caused by the injury of 19 March 1933, but was solely due to other causes. It had been argued that the determination as to the cause of the appellants' blindness was fundamental to the decision of the Supreme Court. Latham CJ referred to a passage from the judgment in the Duchess of Kingston's Case [1776] Smith's Leading Cases, 13th Ed, Vol II, p.645 wherein it was said: "Neither the judgment of concurrent or exclusive jurisdiction is evidence of any matter which came collaterally in question, though within their jurisdiction, nor of any matter incidentally cognizable, nor of any matter to be inferred by argument from the judgment." His Honour then went on to say of the judgment of the Supreme Court: "That judgment did create an estoppel as to one proposition - but that estoppel cannot operate to establish by estoppel another proposition which follows from the former proposition only when that proposition is combined with others the establishment of which depends upon evidence or assumption." (758-9) Essentially what His Honour was saying was that the matter decided in the first case was not "eadem quaestio" with that raised in the second (750). Evatt J agreed with that reasoning and added: "Estoppel by judgment estops not only as to the res determined but also as to the fundamental issues necessarily involved in the determination, but it does not authorise the use of each issue originally determined merely as the first but unbreakable link in establishing a separate and independent issue. In other words, as against a successful party the unsuccessful party is bound by the authoritative determination of every fundamental issue but when a distinct and separate issue arrises subsequentlY,he is not bound to submit to the second issue being established by the combination of the former issue with additional evidence, no matter how strong such evidence may be." (763) The reasoning in O'Donel has been applied in a number of subsequent cases. The majority in Lizzio v. Ryde Municipal Council (1983) 57 ALJR 582 did not find it necessary to consider the estoppel argument. But it was dealt with by Deane J at 59l. He pointed out that the issue before the Magistrate in that case related to flower selling activities on the land -- 14 of 20 -- 14 on or about 26 October 1978. The issue previously before Cripps J related to the flower selling activities on the land immediately before the Ryde Ordinance came into force on 1 June 1979. After referring to O'Donel Deane J held that a "finding that what was being done on the land in October 1978 does not found an estoppel in relation to what was being done on the land immediately prior to 1 June, 1979." O'Donel was also cited with approval by Clarke JA, with whom Mahoney JA agreed, in Egri at 608-9. The decision in Egri provides a helpful analysis of the problems which now confront me. Clarke JA observed at 607 that the "principles are not in doubt but the difficulty lies, as Dixon J pointed out, in distinguishing between those matters fundamental to the decision, or necessarily involved in it as its legal justification or foundation, from matters which are not in point of law the essential groundwork of the conclusion." In that case the estoppel fixed "on the ultimate fact which was ... a question of incapacity." But, as he then pointed out at 610, even ultimate findings will not create estoppels in later litigation between the same parties where the issues are different. Another good illustration of that limited application of issue estoppel is seen in the decision iri Falk v. Haugh (1935) 53 CLR 163. It is sufficient to quote the following passages from the joint judgment of Rich, Dixon, Evatt and McTiernan JJ at 171: " ... the present application raises a different issue from that determined by the County Court. . .. The decision in the County Court was that interest had not at that time been paid up to a given date. The question at issue here is whether it has now been paid up to another and later date. An affirmative answer to that question involves no necessary contradiction of the County Court decision. The issues are not the same. . .. An estoppel of this kind arrises from a decision inter partes of an ultimate issue identical with one of the ultimate issues that are again raised. But it does not arise from the adoption of a process of reasoning -in the decision of the issue. although the same process may be applicable in the decision of a second and different issue." (my emphasis) The words I have emphasised are, in my opinion, particularly apposite here. -- 15 of 20 -- 15 Another decision which I have found of great assistance IS that of Lush J in Association of Franciscan Order of Friars Minor v. City of Kew (1967) y.R. 732. The issue in that litigation was whether or not land was exempt from rates because it was used for "the advancement of religion". In' an action brought in 1944 the Court refused to make a declaration that the lands were exempt from rates on that basis and the local authority alleged that there was an estoppel which prevented the' Court from making a declaration to the contrary effect with respect to the years 1964 and 1965. Lush J rejected the submission that the earlier decision created an issue estoppel on a number of grounds. Relevantly he referred to O'Donel and said at 737: "In the 1944 case the 'ultimate fact' was the nature of the use made of the lands at the relevant time or times. The classification of this use was such a question of fact, and is a different question o(fact from the classification of the use at a different and later time. If I am right in regarding the classification of the use, for present purposes as an issue of fact, I can see no issues of law which were determined in the earlier case and which the parties, therefore, cannot now raise again. There is a further related ground for rejecting the plea of estoppel. Once it is appreciated that the declaration sought in the earlier action must have related to some relevant point of time not later than the date of judgment it becomes apparent that the suggested estoppel can only operate if other evidence is given that the use now made of the property is the same or substantially the same as the use then made of it." When a matter is referred to arbitration pursuant to c1.2(k) the question for determination will always be the fair proportion of the relevant charge or tax· payable by the Lessee for the period in question. The authorities discussed above clearly indicate, in my view, that in such circumstances the rejection in one case of a contention that a particular approach would result in a fair proportion being determined cannot create an estoppel preventing that approach from being put forward as an indication of a fair proportion in some other year. The question will never be ,the same. What is "fair" may well vary from time. to time and will frequently, if not always, be dependent upon circumstances existing at the -- 16 of 20 -- 16 particular time. Further, the rejection of a contention on the ground that it does not provide a basis for a fair apportionment is collateral to the finding that the application of some other formula results in a fair apportionment. Put another way, there is no ultimate finding with respect to the rejected proposition; but even if there was, there would be no estoppel in later proceedings where the issues were different if only because the question was directed to a different time when circumstances could well be different. The decision by Cameron to rej ect an apportionment based on the ratio between the floor area of improvements on the demised land to the floor area of improvements on the total area of land was not fundamental to his decision. That can be seen by applying the test adopted by Gleeson CJ (with whom Kirby P and Rolfe A-JA agreed) in Murphy v. Abi-Saab (1995) 37 NSWLR 280. In dealing at 288 with the difficulty in distinguishing between decisions fundamental to the judgment and other decisions he said: "Only a decision about a matter which it was necessary to decide can create an issue estoppel. It is, therefore, essential to approach reasons for judgment which are said to create an estoppel with an accurate understanding of what the author of the reasons was required to decide. A practical test of whether a decision is fundamental is to ask whether it is possible to appeal against the finding ... , Since finality of litigation is a primary object of the principle underlying issue estoppel, it would be incongruous if the doctrine operated so as to force a litigant to appeal in order to displace part of the reasoning of the Court whilst having no intention, and perhaps no hope, of displacing the judgment." Assume for the moment that there was a right of appeal against the award of Cameron. If it be accepted that he made a determination of a fair proportion of land tax payable by the lessee there would be little or no point in the lessee appealing against the rejection of the evidentiary basis of some other apportionment which the lessee had contended was fair. Even if the appellant tribunal held that there was some error of reasoning in rej ecting the contention that would not necessarily mean that the determination made as to what constituted a fair ~. -- 17 of 20 -- 17 proportion was wrong. Indeed, the lessee may have been prepared to accept that determination for the year in question and was only interested in having the question as to the rejected basis left open for argument in future years. Counsel for the respondent referred at some length to the judgments in Cachia v. Isaacs (1985) 3 NSWLR 366, but I can find noting therein which supports a contrary conclusion to that which I have drawn. Indeed the reasoning of McHugh JA commencing at 386 in my view supports the conclusion I have reached. Counsel for the appellants based an alternative argument on the line of authorities dealing with the application of the principle of issue estoppel to taxation and rating cases. In Spencer-Bower & Turner, Res Judicata (2nd edition), the taxation and rating cases are referred to as "an interesting exception" and "sui generis". (193). The relevant cases in that line of authority are then dealt with in a separate chapter commencing at 260. The leading authority is Caffoor v. Commissioner oflncome Tax Colombo [1961] A.c. 584 approving and applying Broken Hill Proprietary Co. Ltd v. Broken Hill Municipal Council [1926] A.C. 94. Caffoor was cited as providing the appropriate test in the judgment of the majority in Chamberlain v. Deputy Commissioner of Taxation (1988) 164 CLR 502 at 510. It was also relied on by Lush J in Association of Franciscan Order of Friars Minor v. City of Kew (discussed above) as affording an alternative basis for holding there was no issue estoppel in that case. Other illustrations of the application of that principle are to be found in Commissioners oflnland Revenue v. Brooks [1915] A.C. 478 and Society of Medical Officers of Health v. Hope [1960] A.C. 551. Counsel for the respondent argued that that line of authority was not relevant here because this was not a question of the assessment of rates, duties or taxes. Rather it was a question of making a fair apportionment between lessor and lessee of a tax which has already -- 18 of 20 -- 18 been assessed. That is so, and I accept that the line of authority has no direct application. But those authorities in my view do support the conclusion that in situations such as this the questiQn of a fair apportionment of the tax in one year is a different question from the determination of what constitutes a fair apportionment in some other year where the circumstances may well be different. Whilst not directly determinative of the question for my consideration, this line of authority supports the general conclusion that I have reached. It follows that in my view the opinion expressed by Connolly QC was wrong; there was no relevant issue estoppel created by the determination of Cameron. Even if the opinion expressed by Connolly QC be accepted as correct there was still a serious error of law by Horrigan in applying that estoppel in the case for his determination. As Connolly QC pointed out the estoppel which in his view existed was "strictly limited". It went no further than estopping the lessee from contending that the fair proportion of land tax to be borne by the lessee should be calculated by reference to the proportion or ratio betwe.en the floor area of improvements on the demised land on the one hand and the floor area of improvements on the balance of the land on the other hand. What Horrigan did was to conclude that he was "bound by the opinion of Mr Connolly and have no alternative but to apportion the land tax for the relevant years based on Mr Cameron's report by having regard to site areas as submitted by Mr Muir, for the Lessor." Because Cameron had determined that the Lessee should pay 47.4% of the land tax, and for no other reason than that, he concluded that for the period in question before him the lessee should pay 47.4% of the land tax assessment. In other words it seems clear that Horrigan considered that there was an estoppel which operated so that 47.4% was the relevant apportionment. He did not direct his mind, as he should have, to whether or not there were any changed circumstances such as would necessitate finding that some other percentage represented a fair apportionment. -- 19 of 20 -- 19 I am satisfied that the errors I have identified in the reasoning of Horrigan constitute manifest errors of law which substantially affect the rights of the applicants, particularly as the lease in question still has many years to run. I'm also satisfied that Horrigan gave no adequate reasons justifying his conclusion that the lessees should pay 47.4% of the land tax assessment pursuant to c1.2(k); that constituted at least a technical breach of the rules of natural justice and therefore constituted misconduct on his part within s.42(1)( a) of the Act. Clause 2(k) of this lease does not only apply to the determination of a fair proportion of land tax payable by the lessee but applies to the fair proportion of other rates, charges and taxes payable by the lessee. Similar clauses are frequently found in leases of commercial premises. The question as to the extent to which a determination by an arbitrator for one period creates an issue estoppel is an important question of law and answering that question will add, or would at least be likely to add, substantially to the certainty of commercial law. For all those reasons leave to appeal pursuant to s.38 of the Act should be given. In all of the circumstances the whole of the award should be set aside and the matter remitted for further determination. I will hear submissions as to the form of order which should be made in the circumstances. -- 20 of 20 --