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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO 1350 OF 2006
NEWSAT LIMITED
Plaintiff
AND
TELIKOM PNG LIMITED
First Defendant
INDEPENDENT CONSUMER AND COMPETITION COMMISSION
Second Defendant
THE INDEPENDENT STATE OF
PAPUA NEW GUINEA
Third Defendant
Waigani: Cannings J
2007: 24-26 April, 3 May
RULING
PRACTICE AND PROCEDURE – National Court – application for stay of proceedings – actions on contracts – arbitration clauses – whether a stay of proceedings should be granted in view of an arbitration clause in a contract.
PRACTICE AND PROCEDURE – National Court – application to dismiss part of claim – whether a reasonable cause of action disclosed – questions of constitutional interpretation and application raised in originating process – whether National Court has jurisdiction to hear or determine constitutional questions – Constitution, Section 18.
The plaintiff entered into a written contract with the first defendant. A dispute arose as to performance of the contract. A clause in the contract provided for referral of disputes to arbitration. The plaintiff commenced proceedings by writ of summons against the first defendant, claiming damages and other relief for breach of contract. In addition, the plaintiff sought declarations that various Acts of the Parliament and other laws regulating the industry in which it and the first defendant did business, are unconstitutional. The first defendant moved the court for two orders. First, a stay of proceedings, so that the dispute could be referred for arbitration. Secondly, dismissal of a part of the statement of claim that raised questions of constitutional interpretation and application.
Held:
As to the arbitration issues:
(1) When deciding whether to grant a stay of proceedings and refer a dispute for arbitration, eight considerations should be taken into account:
- Is there a good reason for not going to arbitration?
- Was the defendant ready and willing to go to arbitration when the plaintiff instituted court proceedings?
- Is the defendant still ready and willing to go to arbitration?
- Has the defendant filed a defence or taken any other step in the court proceedings?
- Does the arbitration clause make it mandatory for disputes to be referred to arbitration?
- Was the application for a stay of proceedings brought within a reasonable time after commencement of the court proceedings?
- Has the defendant waived its right to arbitration?
- Has the plaintiff rushed to court?
(2) Three of the considerations favoured a stay. Five did not. It is a matter of weighing the considerations. As there were more considerations weighing against arbitration than in favour of it, Telikom’s application for a stay was refused.
As to the constitutional issues:
(3) If a person wishes to seek a declaration that a certain Act of the Parliament or other written law is unconstitutional the appropriate way of doing that in almost all cases is by originating summons in the Supreme Court under Section 18(1) of the Constitution.
(4) The National Court has jurisdiction to determine a constitutional issue that arises in the course of proceedings before it if its jurisdiction has been invoked under a specific provision of the Constitution that confers such jurisdiction on it (eg Sections 23 or 57) or if the issue is so clear and straightforward that it requires little interpretation or the issue has already been determined by the Supreme Court.
(5) None of those circumstances applied in the present case so the part of the statement of claim that posed constitutional questions was struck out.
Cases cited
Papua New Guinea Cases
Delta Constructions Pty Ltd v Administration of the Territory of Papua and New Guinea [1965-66] PNGLR 381
Eliakim Laki and 167 Others v Maurice Alaluku and Others (2002) N2001
Gabriel Apio Irafawe v Yauwe Riyong (1996) N1915
Huon Electrical Ltd v RD Tuna Cannery Ltd (2000) N2005
Kiee Toap v The State (2004) N2731
Lowa v Akipe [1992] PNGLR 399
Mauga Logging Company Pty Ltd v Okura Trading Co Ltd [1978] PNGLR 259
Niugini Civil & Petroleum Ltd v West New Britain Development Corporation and Others (2005) N2909
Olympic Stationery Ltd v The State (2001) N2194
PNG Forest Products Pty Ltd and Another v The State and Genia [1992] PNGLR 85
Overseas Cases:
Ford’s Hotel Company Ltd v Bartlett [1895] UKLawRpAC 48; (1896) AC 1
NOTICE OF MOTION
This was an application on notice seeking (a) a stay of court proceedings and referral of a contract dispute to arbitration and (b)
an order for dismissal of a part of the plaintiff’s claim that sought declarations that certain laws are unconstitutional.
Counsel
D Cooper SC, G Poole and T Imal, for the plaintiff
I Molloy, C Scerri QC and A Mana, for the 1st defendant
J Brooks, for the 2nd defendant
3 May, 2007
1. CANNINGS J: The plaintiff, Newsat Ltd, and the first defendant, Telikom PNG Ltd, entered into a contract. A dispute arose between them and one week before the contract was due to terminate Newsat commenced legal proceedings against Telikom claiming damages and other relief for breach of contract. In addition, the plaintiff sought declarations that various Acts of the Parliament and other laws regulating the industry in which it and Telikom did business, are unconstitutional. Telikom responded by seeking two orders:
SHOULD A STAY OF PROCEEDINGS BE GRANTED?
2. Telikom relies on an arbitration clause in the contract, called ‘dispute resolution’, which states:
25.1 Mediation
Any dispute, controversy or claim arising out of or relating to this agreement or the breach, termination or invalidity thereof must first be the subject of mediation, administered by the Papua New Guinea Commercial Dispute Centre ("PNGCDC") and conducted in accordance with the Commercial Mediation Guidelines of PNGCDC in force at the date of the dispute, controversy or claim.
25.2 Arbitration
In the event that the dispute, controversy or claim has not been resolved within 28 days (or such other period as agreed to in writing between the parties hereto) after the appointment of the mediator of the dispute, controversy or claim must be submitted to arbitration, administered by PNGCDC and conducted in accordance with the Expert Arbitration Guidelines of PNGCDC in force at the date of the dispute, controversy or claim. The arbitrator maybe as agreed between the parties from a panel suggested by PNGCDC and if they cannot agree, the arbitrator will be as appointed by PNGCDC. The arbitrator must not be the same person as the mediator.
25.3 Venue
Any conciliation or arbitration meetings and proceedings conducted by the PNGCDC must be held in Port Moresby.
3. Mr Molloy, for Telikom, argued that that clause is very clear: if the parties have a dispute about performance of the contract, the dispute must first be referred for mediation and if that doesn’t work, the dispute goes to arbitration. Newsat breached the contract when they brought their dispute directly to the National Court. They by-passed the mediation and arbitration procedure they were obliged to invoke. Telikom should be granted a stay of the court proceedings.
Governing law
4. Mr Molloy pointed out that the contract had a clause saying that its governing law is the law of Victoria, Australia. Therefore the court must refer to the Commercial Arbitration Act of Victoria to determine the rights and obligations of the parties. Mr Cooper, for Newsat, agreed that that was so. Therefore I have to look at Section 53 (power to stay court proceedings) of the Victorian Act, which is similar to Section 4 of the PNG Arbitration Act, to see what happens.
5. It is a rather convoluted provision but it is similar. After quoting it I will try to say in plain English what it means. It states:
(1) If a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect to a matter agreed to be referred to arbitration by the agreement, that other party may, subject to Subsection (2), apply to that court to stay the proceedings and that court, if satisfied –
- (a) that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement; and
- (b) that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration –
may make an order staying the proceedings and may further give such directions with respect to the future conduct of the arbitration as it thinks fit.
(2) An application under Subsection (1) shall not, except with the leave of the court in which the proceedings have been commenced, be made after the applicant has delivered pleadings or taken any other step in the proceedings other than the entry of an appearance.
What considerations does the court take into account when deciding whether to grant a stay?
6. That means that if a plaintiff, such as Newsat, brings court proceedings against another party, such as the Telikom, the defendant can apply to the court for a stay of proceedings as a way of enforcing the arbitration clause in their contract. In deciding whether to grant the application the court looks at a number of things, for example:
7. If the answers are these –
than the chances are that the court will grant a stay of proceedings.
8. Telikom does not have a right, as such, for a stay of proceedings. Whether a stay is granted is a matter of discretion. There are a number of other considerations, besides those expressly set out in the legislation, that the court can take into account. These have been applied in a number of PNG cases, eg Delta Constructions Pty Ltd v Administration of the Territory of Papua and New Guinea [1965-66] 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.
9. I summarised them in a Kimbe case Niugini Civil & Petroleum Ltd v West New Britain Development Corporation and Others (2005) N2909. For example:
10. In the Niugini Civil & Petroleum case I identified eight considerations that the court should weigh in the balance when deciding whether to grant a stay. Four emerged expressly from the legislation and four from previous cases.
Telikom’s argument re the eight considerations
11. Mr Molloy submitted that they be applied this way:
Who bears the onus of proof?
12. Mr Molloy submitted that Newsat bears the onus of proving that the matter should not go to arbitration, rather than Telikom having to prove that the matter is suitable for arbitration. Once an applicant has established that a dispute falls within an arbitration clause the tendency of the courts is to stay the proceedings unless the party opposing the stay can show cause to the contrary. I agree.
Has Newsat discharged the onus of proof?
13. I will make my own assessment of the eight considerations, to find that out.
1 Is there a good reason for the matter not to go to arbitration? Mr Cooper, for Newsat, did not squarely address this issue. I agree with Mr Molloy that the international flavour of the contract is something that favours sending the dispute to arbitration.
However, both parties have overlooked what I think is a very weighty factor making this case unsuitable for arbitration. Within three days of the writ being filed, Newsat approached the court applying for an interim injunction. The application was heard by Salika J on 22 September 2006. Both parties were represented. On 26 September 2006 Salika J granted an injunction: an order requiring Telikom to do certain things in relation to the contract, which was due to expire that day.
Newsat have since filed contempt proceedings against Telikom. I heard the contempt motion against Telikom at the same time I heard Telikom’s motion for a stay. I have given the ruling on the contempt matter just before handing down this ruling. I have found Telikom guilty of contempt: they did not comply with Salika J’s order and their failure to comply was deliberate. I will now need to conduct another hearing to decide on what penalty, if any, Telikom is subject to. In these circumstances, it makes sense for the National Court to continue to exercise jurisdiction over the dispute between the parties.
2 I agree that the evidence shows that Telikom has been ready and willing for mediation and arbitration since the dispute erupted. Mr Cooper pointed out that Telikom has become immersed in the court proceedings by vigorously defending the injunction motion and filing a couple of motions of their own. That is so but I don’t think it follows from that that they have been unwilling to go down the arbitration road.
3 Likewise I accept that Telikom’s current position is that they remain ready and willing for arbitration and will by-pass mediation if Newsat is agreeable. Both the second and third considerations favour a stay of proceedings.
4 I disagree with Mr Molloy’s submission that Telikom’s motion for an extension of time to file a defence, granted by Injia DCJ on 30 October 2006, is not a "step in the proceedings". It is a step. Mr Cooper cited an ancient case to show that it is: the decision of the House of Lords in Ford’s Hotel Company Ltd v Bartlett [1895] UKLawRpAC 48; (1896) AC 1. I am not bound to follow that case of course but Mr Molloy had no effective counter-argument. The law on stay applications in contract disputes involving arbitration clauses is fairly similar across many countries. The rule in the Ford’s Hotel case seems to have stood the test of time and I apply it here.
5 I agree with Mr Molloy’s submission that the arbitration clause in the present case made it mandatory for any dispute between the parties, including the present one, to go to mediation and arbitration. The clause said "any dispute, controversy or claim ... relating to this agreement ... must first be the subject of mediation". Mr Cooper tried to convince me that that did not cover the present case but I could see little sense in his argument. He submitted that Telikom’s conduct amounted to a unilateral and absolute refusal to perform the agreement for no legitimate reason other than raising a dispute about performance of it. Mr Molloy obviously disagreed with that assessment. Telikom and Newsat were clearly at loggerheads over implementation of their contract. That is why Newsat filed its writ. If that is not a dispute relating to the contract, I don’t know what is.
6 I disagree with Mr Molloy’s submission that Telikom made their stay application within a reasonable time. The critical dates are:
It took Telikom five weeks to file the application and in the meantime a contested injunction was granted. Telikom was dragging the chain.
7 I also disagree with Mr Molloy’s submission on the waiver issue. I agree with Mr Cooper that Telikom’s conduct amounts to an implied waiver of its right to arbitration. They waited too long to file their stay application. They filed an appeal against the injunction. They have not obtained a stay of the injunction. They have not done what they were required by the injunction to do. They have not prosecuted their stay motion with any sense of urgency. Six months have passed between filing and hearing it.
8 I agree with Mr Molloy that Newsat appears to have rushed to court rather than seeking mediation. However, given that, upon going to court, they soon afterwards obtained an injunction against Telikom, they achieved something that they could not have achieved through mediation: a court order requiring Telikom to do something forthwith. This was therefore a justifiable rush.
Weighing the considerations
14. Summing up, the considerations favouring a stay are these:
No 2 – Telikom ready and willing for arbitration;
No 3 – Telikom still ready and willing;
No 5 – current dispute falls within arbitration clause.
15. Those working against a stay are:
No 1 – good reason for not going to arbitration: injunction and contempt;
No 4 – Telikom has taken a step in the proceedings;
No 6 – Telikom too slow in making application;
No 7 – Telikom waived right to arbitration;
No 8 – Newsat justifiably rushed to court.
16. Three considerations favour a stay. Five work against it. Of the five working against the stay, No 1 is compelling. In terms of Section 54(1)(a) of the Victorian Act, I am satisfied that there is a sufficient reason the dispute should not be referred to arbitration. Newsat has discharged the onus of proof. I will therefore refuse the motion for a stay of proceedings.
17. I now move to the second part of Telikom’s motion.
SHOULD THE PART OF NEWSAT’S CASE THAT RAISES CONSTITUTIONAL ISSUES BE STRUCK OUT?
18. The short answer is yes and it is easy to see why. Newsat’s statement of claim (which has been amended twice) is based on two distinct causes of action:
19. Newsat seeks two distinct sorts of remedies:
20. Telikom’s application (which is supported by the ICCC) is to strike out the part of the statement of claim that makes the constitutional claim and seeks constitutional remedies. Mr Molloy based the application on two grounds and I uphold both of them.
21. The National Court does not have jurisdiction to determine the questions of constitutional application and interpretation raised by Newsat. The Supreme Court, the highest court in PNG’s hierarchy, is the court that has authority to determine such questions. This is due to Section 18 (original interpretative jurisdiction of the Supreme Court) of the Constitution, which states:
(1) Subject to this Constitution, the Supreme Court has original jurisdiction, to the exclusion of other courts, as to any question relating to the interpretation or application of any provision of a Constitutional Law.
(2) Subject to this Constitution, where any question relating to the interpretation or application of any provision of a Constitutional Law arises in any court or tribunal, other than the Supreme Court, the court or tribunal shall, unless the question is trivial or vexatious or irrelevant, refer the matter to the Supreme Court, and take whatever other action, including the adjournment of proceedings, is appropriate.
22. If a person wishes to seek a declaration that a certain Act of the Parliament or other written law is unconstitutional the appropriate way of doing that in almost all cases is by originating summons in the Supreme Court under Section 18(1) of the Constitution.
23. The National Court has jurisdiction to determine a constitutional issue that arises in the course of proceedings before it if its jurisdiction has been invoked under a specific provision of the Constitution that confers such jurisdiction on it (eg Sections 23 or 57) or if the issue is so clear and straightforward that it requires little interpretation or the issue has already been determined by the Supreme Court. The Supreme Court has consistently said so in a number of cases especially Lowa v Akipe [1992] PNGLR 399.
24. None of those circumstances exist here. For that reason alone the constitutional claim must be struck out.
25. Even if the constitutional claim were properly before me, I would strike it out as the way it is pleaded is so vague and lacking detail it does not deserve consideration. The grounds on which the three Acts of Parliament Newsat wants declared unconstitutional are:
26. Section 38 of the Constitution (general qualifications on qualified rights) is a provision that links to some, not all, of the human rights provisions of the Constitution. The human rights, more correctly known as Basic Rights, are the:
27. The rights conferred by Sections 43, 44, 45, 46, 47, 48, 49, 51 and 52 have a link to Section 38. They each say that the right being given can be regulated or restricted (but not prohibited) by a law that complies with Section 38.
28. A law complies with Section 38 when it fulfils a number of procedural and substantive requirements. It must, for example:
29. Now, getting back to Newsat’s statement of claim, their first grievance is that none of the three Acts they want declared unconstitutional specify the purpose for which "those rights" should be qualified or restricted. But hang on, what rights are they referring to? As Mr Molloy pointed out, none are specified. Their second grievance is that the three Acts are not reasonably justifiable in a democratic society etc. In what regard? How? Why? The statement of claim is silent.
30. Mr Cooper argued that I should not insist on the sort of detail Mr Molloy seeks to impose. Those details can be obtained simply by Telikom making a request for further and better particulars. I disagree.
31. In Kiee Toap v The State (2004) N2731 I summarised the principles to apply when determining a motion to strike out a claim on the ground of failure to disclose a reasonable cause of action:
32. I agree with Mr Molloy that all of those principles apply here. The constitutional claim is extremely vague and should be struck out for that reason.
HOUSEKEEPING MATTERS
33. So far, I have (1) dismissed Telikom’s motion to strike out the whole case and refer it for arbitration and (2) upheld their motion to strike out the constitutional claim.
34. There is one other substantive order they sought under the same notice of motion: for Newsat to give security for costs and for a stay of proceedings until they do. Telikom did not pursue that motion and in the circumstances the most convenient and neat thing to do is for me to dismiss it.
35. That means there are only two things still to be resolved: giving effect to the strike-out of the constitutional claim and costs.
36. I will order that Newsat file an amended statement of claim within seven days, removing the constitutional claim and the corresponding prayer for relief; and that Telikom have 14 days from the day of service of the amended statement of claim to file a defence. That ties in with Injia DCJ’s order of 30 October 2006.
37. As for costs, Newsat and Telikom have shared success equally on the two major issues so they will bear their own costs. The second defendant, the ICCC, was drawn into the matter and supported Telikom on the constitutional issue, so ICCC will have its costs for that paid by Newsat.
ORDERS
(1) Telikom’s application for a stay of proceedings is dismissed.
(2) Telikom’s application for striking out the constitutional claim and prayer for relief is granted and that part of the claim is struck out.
(3) Newsat shall file an amended statement of claim within seven days after the date of entry of this order.
(4) Telikom has 14 days after service of the amended statement of claim, to file a defence.
(5) Telikom’s motion for security for costs and stay is dismissed.
(6) Newsat and Telikom shall bear their own costs subject to Newsat paying the ICCC’s costs regarding the constitutional issue.
(7) Time for entry of this order is abridged to the date of settlement by the Registrar, which shall take place forthwith.
Order accordingly.
O’Briens Lawyers: Lawyers for the plaintiff
Allens Arthur Robinson: Lawyers for the first defendant
Gadens Lawyers: Lawyers for the second defendant
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