Able Construction Ltd v W.R. Carpenter (PNG) Ltd

• Jurisdiction: Papua New Guinea
• Judge: Kandakasi, J
• Judgment Date: 18 June 2014
• Citation: (2014) N5636
• Court: National Court
• Year: 2014
• Judgement Number: N5636

Full : OS. No. 314 of 2014; Able Construction Ltd v W.R. Carpenter (PNG) Ltd (2014) N5636

National Court: Kandakasi, J

Judgment Delivered: 18June 2014

N5636

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS. NO. 314 of 2014

BETWEEN

ABLE CONSTRUCTION LTD

Plaintiff

AND

W.R. CARPENTER (PNG) LTD

Defendant

Waigani: Kandakasi, J.

2014: 15th May

2014: 18th June

CONTRACT LAW – Written construction contract - Dispute resolution process incorporated - First part failing for lack of practical provisions - Second part arbitration - An effective arbitration clause and essential elements considered - Essential elements not met - Arbitration by “Alternative Dispute Resolution Track of the National and Supreme Court of Papua New Guinea” - National Courts ADR Track providing for and supporting mediation only - Arbitration clause ineffective.

DISPUTE RESOLUTION - Parties expressing a desire to resolve their dispute by arbitration - Process not adequately provided for and supported by “Alternative Dispute Resolution Track of the National and Supreme Court of Papua New Guinea” - Query - Parties could have meant process provided for and support by the Court - Court cannot impose such a term in the parties contract - Parties have a choice to have their dispute resolved by mediation or litigated if issues inappropriate for mediation arise - Cases inappropriate for mediation outlined - Parties need to demonstrate such a case.

Papua New Guinea Cases cited:

Vitus Kais v. Sali Tagau; Tropic Timbers Ltd v. Vitus Kais (2012) N4810

NCDC v. Yama Security Services Pty Ltd (2003) SC707

Mathias Goma v. Protect Security & Communication Ltd (2013) SC1300.

POSF Board v. Sailas Imanakuan (2001) SC 677

Civil & Petroleum Ltd v. West New Britain Development Corporation Ltd (2006) N4152

Paul Pilimbo Pora v. Larry Hull (2009) N3729

Hargy Oil Palm Ltd v. Ewasse Landowners Association Inc (2013) N5441

Counsel:

G Egan & W.Bige, for the Plaintiff

M Goodwin, for the Defendant

18th June 2014

1. KANDAKASI J: The parties by a written construction agreement having a value of over several millions of Kina, included a two step dispute resolution clause to resolve any dispute between them. An issue has now arisen in relation to the second of the two steps, which is this. Whether a reference to arbitration under the “Alternative Dispute Resolution Track of the National and Supreme Court of Papua New Guinea” is effective and can be enforced?

Background Facts

2. The background to the issue presented is this. By a written contract, executed in November 2012, W.R. Carpenter (PNG) Ltd contracted Able Constructions Ltd for certain construction work. On 31st October 2013, Able completed the work required of it and issued a notice of practical completion with a final claim for payment. W.R. Carpenter took issue with a number work undertaken by Able and took the position that it was not liable to pay. By 18th December 2013, the parties were not able to resolve their dispute. Hence, Able sought legal advice and assistance. Through its solicitors in Brisbane, Australia, Able sought to have the dispute resolved. W.R. Carpenter did not respond until 13th February 2014 raising claims of defects in the various works done by Able and set up a counter claim. By this time, it was clear the parties were not able to have their dispute resolved through their direct negotiations. That led the parties to clause 11 of their own contract.

3. Clause 11 of the parties contract reads:

“11.1 If a dispute or difference concerning this Contract shall arise between the Employer or the Superintendent and the Contractor, it shall in the first place be referred to and settled by a person named in the Appendix, who shall within twenty (28) days given [sic] written notice of his decision to the Employer and the Contractor. If the Employer or the Contractor may, within a reasonable but time but [sic] not later than fifty-six (56) days after the due date of such decision require that the matter or matters be determined be referred to arbitration as herein provided.

11.2 All disputes or differences, which have not been settled in accordance with Clause 11.1, may be brought before the Alternative Dispute Resolution Track of the National and Supreme Court of Papua New Guinea for arbitration by a [sic] expert well versed in the building and construction trade. ”

4. The Appendix to the Contract did not name any person for the purposes of clause 11.1. Hence, both parties accepted that, this provision failed for that reason. They however, took different views about clause 11.2. Able took the view that, arbitration was possible under the Alternative Dispute Resolution Track of the National and Supreme Court of Papua New Guinea. Able's argument is based on what it submits as the combined effect of the provisions of s. 7A, the heading to s. 7B of the National Court Act

(Chp.38).

1 as amended; r.3(2) of the Rules Relating to the Accreditation, Regulation, and Conduct of Mediators promulgated on 30th March 2010 under s. 7E of the Act (the ADR Rules) and s.5 of the Arbitration Act.

(Chp.46).

2

5. On the other hand, W.R. Carpenter took the view that, the Court's ADR program did not have the necessary rules, facilities and accredited or approved arbitrators to support and provide arbitration services. Consequently, it took and maintains the view that this provision also fails in the same way as does clause 11.1. At the same time, W.R. Carpenter, took the view that, the Court's ADR program does have the necessary provisions, in terms of rules, facilities and appropriately trained, experienced and accredited mediators to which the parties should submit their disputes for resolution.

6. Following lack of agreement on arbitration or mediation, Able issued this proceeding on 7th May 2014. Differentiated only by reference to relevant legislative provisions, Able seeks in three alternative relieves, an order appointing John Griffin QC or alternatively David Gole as an arbitrator or referee or umpire for the resolution of the dispute or difference between the parties. Then by notice of motion Able seeks exactly the same relieves as per the Originating Summons. Of course, W.R. Carpenter is opposed to the relieves sought and instead asks for an order for mediation in accordance with the ADR Rules.

Consideration and reasons for decision

7. Before anything else I note that Able has breached established practice and procedure in relation to the kinds of relieves that can be sought by motion. It is settled law that, no substantive relief can be sought and granted on motion. Motions are mainly for interim and interlocutory matters. As my brother Cannings J observed in His Honour's decision in Vitus Kais v. Sali Tagau; Tropic Timbers Ltd v. Vitus Kais,

(2012) N4810.

3 this is:

“a basic rule of practice and procedure which has been well entrenched since the decision of Kapi DCJ in John Momis v. Attorney-General [2000] PNGLR 109. It has been endorsed by the Supreme Court in cases such as NCDC v Yama Security Services (2003) SC707 and Yer v Yama (2009) SC996. The rule is now expressly stated in Rule 9 of the Motions Rules the National Court Rules, Order 4, Rule 49(9)) which states that except as otherwise expressly provided by the Rules:

‘motions shall be for relief on interlocutory matters only and not for the substantive relief claimed in the originating process.’”

8. This means, Able's application is not properly before me.

9. I now turn to the substantive aspects of the application. This in essence concerns what kinds of ADR processes the current National and Supreme Courts ADR Track is providing. When one talks about the Courts' ADR Track, one needs to understand first up that, only the National Court has an ADR Track presently focused only on mediation with the support of the Supreme Court through its decisions such as the one in NCDC v. Yama Security Services Pty Ltd.

(2003) SC707; For others on point see: Mathias Goma v. Protect Security & Communication Ltd (2013) SC1300 and POSF Board v. Sailas Imanakuan (2001) SC 677.

4

10. The statutory foundation of ADR in the National Court is sections 7A - 7E of the National Court Act (chp.38) as amended and the ADR Rules. These legislative provisions are not alone but are two out of many others which provide support for and or are calling for the use of mediation. At the highest for instance is ss. 333 - 336 of the Constitution and ss. 42, 44 and 118 of the Organic Law on Provincial Governments and Local-level Governments as amended.

For almost a completed list of other legislation providing for the support and or use of mediation and other forms of ADR see:ss.10 and 11 of the Adultery and Enticement Act 1988, ss. 22B -22D of the District Court (Chp.40) as amended; s.7 of the Fairness of Transactions Act 1993; s.11 of the Family Protection Act 2013, s.51 Industrial Relations Act (Chp.174) as amended; s.15 of the Inter-group Fighting Act (Chp.344) as amended; ss. 9 - 73 of the Land Disputes Settlement Act (Chp.45) as...