WS Nos 1418, 1548 and 1654 of 2004 Niugini Civil and Petroleum Ltd v West New Britain Development Corporation Ltd, Michael Gibson and West New Britain Provincial Government (2005) N2909

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 07 October 2005
• Court: National Court
• Citation: (2005) N2909
• Year: 2005
• Judgement Number: N2909

Full Title: WS Nos 1418, 1548 and 1654 of 2004 Niugini Civil and Petroleum Ltd v West New Britain Development Corporation Ltd, Michael Gibson and West New Britain Provincial Government (2005) N2909

National Court: Cannings J

Judgment Delivered: 7 October 2005

N2909

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NOS 1418, 1548 AND 1654 OF 2004

NIUGINI CIVIL & PETROLEUM LTD

Plaintiff

V

WEST NEW BRITAIN DEVELOPMENT CORPORATION LTD

First Defendant

MICHAEL GIBSON

Second Defendant

WEST NEW BRITAIN PROVINCIAL GOVERNMENT

Third Defendant

KIMBE : CANNINGS J

23 SEPTEMBER, 7 OCTOBER 2005

Practice and procedure – National Court – application for stay of proceedings – actions on contracts – arbitration clauses – powers of court – discretionary power – considerations relevant to exercise of discretion whether to grant a stay of proceedings and refer a dispute for arbitration – Arbitration Act, Chapter No 46, Section 4.

The plaintiff, a corporation, entered into three separate construction contracts with the first defendant, a company managed by the second defendant, an individual, and owned and controlled by the third defendant, a provincial government. Disputes arose over each contract. The plaintiff commenced proceedings against the defendants for money allegedly due under each contract. A writ of summons and statement of claim was filed in relation to each contract. There was a clause in each contract for referral of disputes to arbitration; but the clauses were not uniform. Eight to ten months after the commencement of proceedings the defendants applied for a stay of proceedings under Section 4 of the Arbitration Act and the referral of each matter to arbitration.

Held:

(1) Section 4 of the Arbitration Act allows a party against whom legal proceedings are commenced in relation to a contract, to apply to the court for a stay of proceedings if the contract provides that present or future differences are to be submitted for arbitration.

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(2) A stay of proceedings is not automatic. The court has a discretion to exercise. There are a number of considerations to take into account when deciding whether to grant a stay. Some are set out in Section 4. Others are sourced in the duty of the court under Section 158(2) of the Constitution, when interpreting the law, to give paramount consideration to the dispensation of justice. In particular to ensure that persons abide by their contractual agreements. Mauga Logging Company Pty Ltd v Okura Trading Co Ltd [1978] PNGLR 259 applied.

(3) Eight considerations can be weighed in the balance; most importantly whether the application for a stay of proceedings is made promptly after the commencement of proceedings.

(4) Each arbitration clause must be interpreted on its merits to glean the intention of the parties to the contract.

(5) If an arbitration clause makes arbitration necessary, an application for a stay of proceedings can still be refused if it is not made promptly.

(6) It is reasonable to presume that if a party commences court proceedings notwithstanding the existence of an arbitration clause and the other parties do not object to that course of action within a reasonable time, that they acquiesce in the court proceedings.

(7) The arbitration clause in each contract was interpreted and applied in light of those principles, the court in each case concluding that a stay of proceedings was not warranted and that the dispute would not be referred to arbitration.

Cases cited

The following cases are cited in the judgment:

Delta Constructions Pty Ltd v Administration of the Territory of Papua and New Guinea [196566] PNGLR 381

Huon Electrical Ltd v RD Tuna Cannery Ltd (2000) N2005

Mauga Logging Company Pty Ltd v Okura Trading Co Ltd [1978] PNGLR 259

Olympic Stationery Ltd v The State (2001) N2194

NOTICES OF MOTION

These were applications on notice seeking a stay of court proceedings and referral of contract disputes to arbitration.

Counsel

G Linge for the plaintiff

T Anis for the defendants

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RULING ON MOTIONS

CANNINGS J:

INTRODUCTION

This is a ruling on applications by the defendants for a stay of proceedings commenced by the plaintiff, on the ground that the plaintiff’s contracts with the first defendant require that contractual disputes be referred to an adjudicator for arbitration. There are three applications before the court, one in relation to each contract between the plaintiff and the first defendant. The defendants’ applications are made under Section 4 of the Arbitration Act Chapter No 46, which allows the National Court to stay proceedings when it is apparent that a contractual dispute should be referred for arbitration.

THE THREE CONTRACTS

The plaintiff, Niugini Civil & Petroleum Ltd, entered into three separate construction contracts with the first defendant, West New Britain Development Corporation Ltd. The second defendant, Michael Gibson, is the first defendant’s executive director. The third defendant is West New Britain Provincial Government. It owns and controls the first defendant.

Disputes arose over each contract. The plaintiff commenced separate proceedings against the defendants for money allegedly due under each contract. The details of the court proceedings and the contracts they relate to are shown in the table below.

TABLE 1 – COURT PROCEEDINGS AND CONTRACTS

WS No Contract date Description of works Amount claimed due

1418/2004 10.01.02 Upgrading and extension work on the outpatient department, accident and emergency wing and antenatal clinic, Kimbe General Hospital. K267,437.66 + K200,000.00 + damages

1548/2004. 03.12.01 Kimbe town roads K63,047.05 + damages

1654/2004 30.04.02 KimbeKandrian highway, stage K171,542.85

THE ARBITRATION CLAUSES

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There is a clause in each contract for referral of disputes to arbitration; but the clauses are not uniform.

WS 1418/2004: Kimbe General Hospital contract

Clause 13 (dispute resolution) states:

13.1 NOTICE OF DISPUTE

If any dispute or difference concerning this Agreement shall arise between the Proprietor, or the Architect on the Proprietor’s behalf, and the Builder then either party may give to the other written notice sent by certified mail.

13.2 SECURITY

In serving such notice of dispute or difference the party so serving the same shall provide evidence that the party has deposited with either the Papua New Guinea Institute of Architects or the Society of Professional Engineers the sum of K500.00 by way of security for costs.

13.3 REFERENCE OF DISPUTES

At the expiration of 5 days after serving of notice under clause 13.1, unless it shall have been otherwise settled, such dispute or difference shall be and is hereby submitted to arbitration in accordance with the procedures stated in this Section.

13.4 IDENTITY OF ARBITRATOR

The Arbitrator shall be at the option of the party who first shall serve the notice, either:

13.4.1 The nominee of the President of the Papua New Guinea Institute of Architects.

13.4.2 The nominee of the President of the Society of Professional Engineers.

13.5 FURTHER SECURITY

The Arbitrator shall have the power to make from time to time any order in regard to further security for costs of the arbitration proceedings. Such security shall be applied in accordance with the direction of the Arbitrator.

13.6 CONSOLIDATION OF DISPUTES

In any arbitration either party may raise in the proceedings by way of a further claim or by way of defence set off or counterclaim or otherwise and subject any conditions as to costs or otherwise that may be imposed by the

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Arbitrator any dispute or difference whatever relating to the construction of this Contract or as to any matter or thing whatsoever arising thereunder whether or not a notice of dispute in respect thereof has been given. [sic]

13.7 REPRESENTATION

Where the amount in dispute is less than K10,000 and unless otherwise agreed in writing, the parties shall appear before any arbitrator personally or, where the party is a body of persons whether corporate or unincorporated, be presented by an officer, employee or agent of the body; neither party shall be represented by a legal practitioner before the Arbitrator. [sic]

WS 1548/2004: Kimbe town roads contract

Clause 11 (disputes) states:

11. DISPUTES 11.1

If a dispute or difference concerning this Contract shall arise between the Employer or the Superintendent and the Contractor, it shall be in the first place referred to and settled by the Adjudicator named in the Contract Data, who shall, within twenty eight (28) days give written notice of his decision to the Employer and the Contractor. If the Employer or the Contractor is dissatisfied with any such decision then the Employer or the Contractor may, within a reasonable time, but not later than fifty six (56) days after the due date of such decision require that the matter or matters in dispute be referred to Arbitration as hereinafter provided. [sic]

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11.2 Arbitration under PNG Arbitration Act:

All differences or disputes which have not been settled in accordance with Clause 11.1 shall be finally settled by Arbitration in Papua New Guinea under the provisions of the Arbitration Act of 1951 of Papua New Guinea.

WS 1654/2004: KimbeKandrian highway stage 1 contract

Clause 11 (disputes) of this contract is the same as clause 11 of the Kimbe town roads project. The contract data is also the same.

PROCEDURAL HISTORY

Each case has a different procedural history.

WS 1418/2004: Kimbe General Hospital...