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Rustproof Ltd v Eastpac Ltd [2015] PGNC 311; N7038 (29 September 2015)

N7038

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1052 of 2015

BETWEEN:
RUSTPROOF LIMITED
Plaintiff

AND:
EASTPAC LIMITED
First Defendant

AND:
MELVIN SOO KEE GHWEE
in his capacity as the Owner and
Managing Director of Eastpac
Limited
Second Defendant

Waigani: Hartshorn J
2015: 25^th September
: 29^th September

Whether interim injunctive orders should be continued or whether proceeding should be stayed pending referral of dispute to Arbitration

Cases:

Delta Constructions Pty Ltd v. Administration of the Territory of Papua and New Guinea [1965-66] PNGLR 381
Niugini Civil and Petroleum Limited v. West New Britain Development Corporation Limited (2005) N2909
Chief Collector of Taxes v Bougainville Copper Limited (2007) SC853
Telikom PNG Limited v. ICCC (2007) N3143
National Council of Young Men’s Christian Association of Papua New Guinea (Inc) v. Firms Services Limited (2010) N4569

Counsel:

Mr. J. Tolopa, for the Plaintiff
Mr. A. Mana, for the Defendant

Oral decision delivered on
29^th September, 2015

1. HARTSHORN J: The defendants apply for the injunctive relief already granted to be set aside and further or in the alternative the entire proceedings be stayed while any disputes arising between the parties pursuant to the subcontract agreement dated 12^th March 2012 be referred for arbitration, in accordance with clause 6 of the relevant Subcontract Agreement.

2. The plaintiff seeks that the injunctive relief already granted be extended until the determination of the proceeding.

3. Both applications were heard together.

Background

4. The plaintiff alleges that amongst others, the first defendant owes money to the plaintiff for services it performed under a subcontract agreement. A liquidated sum of K1,952,211.00 is claimed together with interest, damages and costs.

5. The plaintiff further claims a lien over machinery and equipment of the defendants that presently is located at the premises of the plaintiff.

6. The subcontract agreement provided amongst others, for the plaintiff to provide services in respect of road maintenance along the Hiritano Highway, between Laloki and Vamauri Bridge in the Central Province.

7. This court granted interim injunctive relief restraining the defendants from entering the plaintiff’s property and from removing equipment, following an ex parte application on 14^th August 2015.

8. I will consider whether the injunctive relief should be set aside or extended, first.

9. The law concerning whether to discharge or vary an interlocutory order was applied by Gabi, J in National Council of Young Men’s Christian Association of Papua New Guinea (Inc) v. Firms Services Limited (2010) N4569. In that case his Honour said that there are six considerations to take into account in deciding whether to discharge or vary an interim injunctive order. The six considerations are:

“First, has there been any change in circumstances since the previous orders were made, which render their continuation unnecessary or inappropriate? Second, what has been the relative conduct of the parties since the earlier orders were made? Third, are there previously undisclosed relevant facts which have been discovered since the interim orders were made? Fourth, has it subsequently been discovered that the order was granted on an erroneous legal basis? Fifth, where (sic) the grounds relied on to support the setting aside or variation of the interim order, argued before the Court when it granted the earlier order? Or did the party wanting to discharge or vary the earlier order have the opportunity to raise those grounds? Finally, was the court misled when it issued the ... order? If yes, was that attributable to the conduct of the party which sought the ... order?”

10. As to the first consideration: whether there has been a change of circumstances since the injunctive relief was granted on 14^th August 2015. There has not.

11. As to the second consideration: the relevant conduct of the parties since the injunctive relief was granted. The plaintiff complains about the defendants not filing a notice of intention to defend. However, it appears that there were issues concerning service of the writ. A notice of intention to defend has now been filed. I am satisfied that no adverse inference can be taken from the conduct of any of the parties since the injunctive relief was granted.

12. The third consideration: whether there are previously undisclosed relevant facts which have been discovered since the injunctive relief was granted. It became apparent to the court that the subcontract between the parties has an arbitration clause – clause 6, which provides amongst others that, “any and all disputes arising out of the subcontract shall be resolved by submission to the Institution of Engineers”. Notwithstanding that the subcontract is in evidence in an affidavit of Nixon Laime that was before the court, when the ex parte application was made, the court was not made aware of the arbitration clause in submissions and there is no reference to it in the paragraphs of the affidavits of Mr. Laime.

13. To my mind this constitutes an undisclosed relevant fact that was not brought to the attention of the court.

14. As to the fourth consideration: whether it has been subsequently discovered that the injunctive relief was granted on an erroneous legal basis. It has been brought to the attention of the court that the undertaking as to damages is not executed under the seal of the plaintiff and is not signed by a person in his capacity as a director of the plaintiff company. In this regard I refer to Chief Collector of Taxes v Bougainville Copper Limited (2007) SC853 and Telikom PNG Limited v. ICCC (2007) N3143. As the plaintiff is a company and has not given an undertaking as to damages under seal, an undertaking has not been given. An undertaking as to damages has been held to be mandatory. Consequently, it can be legitimately argued that the injunctive relief was granted on an erroneous legal basis.

15. A further basis for contending that the injunctive relief was granted on an erroneous legal basis is that, as damages would be an adequate remedy - the plaintiff is claiming money – the injunctive relief should not have been granted pursuant to normal principles. The reason that damages were not considered an adequate remedy was because the shareholder is not a citizen of the country and was thought to have left the county. The evidence now discloses however, that this is not the case. The second defendant is residing in Papua New Guinea.

16. As to the fifth and sixth considerations, as the application was made ex parte, the defendants were not able to put their arguments.

17. As to whether the court was misled, notwithstanding my comments concerning not being informed about the arbitration clause, I will give counsel for the plaintiff the benefit of the doubt in this regard, given that the subcontract containing the arbitration clause was before the court when the injunctive relief was granted.

18. Taking into account that there were undisclosed facts concerning the arbitration clause to which I have referred, that the injunctive relief can be said to have been granted on an erroneous legal basis, and that the defendants did not have the opportunity to put their arguments to the court. I am satisfied that the injunctive relief should be set aside, and I so order.

19. I now consider the arbitration question. Clause 6 is a follows:

“6. ARBITRATION

Any and all disputes or claims between the Contractor and the Subcontractor arising out of this Subcontract shall be resolved by submission of the same to the Institution of Engineers, for resolution by binding arbitration according to International Rules of Arbitration. In so agreeing the parties expressly waive their right to a jury trial, if any, on these issues and further agree that the award of the arbitrator shall be final and binding upon them as though rendered upon them by a court of law and shall be enforceable in any court having jurisdiction over the same.”

20. It is clear that the clause is sufficiently wide to cover this present dispute and that the clause is mandatory because of the use of the word “shall”.

21. Counsel for the plaintiff submitted that this court has the power to waive this clause. No application is before the court for waiver, however in written submissions the court is requested to effectively waive this clause.

22. The law as to motions or applications made under s.4 Arbitration Act was considered in detail by Cannings, J in Niugini Civil and Petroleum Limited v. West New Britain Development Corporation Limited (2005) N2909.

23. His Honour listed factors to be taken into account after considering s. 4 Arbitration Act and s.158(2) Constitution. His Honour also noted that where arbitration clauses are concerned, the onus of proof is in effect reversed. Once an applicant has established that a dispute falls within an arbitration clause, the tendency of the courts is to stay the proceeding unless the party opposing the stay can show cause to the contrary Delta Constructions Pty Ltd v. Administration of the Territory of Papua and New Guinea [1965-66] PNGLR 381.

24. Here, the plaintiff submits that the defendants have no base and cannot be located, the second defendant is a Singaporean national, his past conduct is “very bad”, he is not a civil engineer, he has been avoiding the plaintiff, he left when he was paid without paying the plaintiff and it is doubtful that the second defendant will stay in Papua New Guinea.

25. The evidence now however, is that the second defendant can be contacted, that he is in Papua New Guinea and has work, and a new substantial contract within Papua New Guinea. Further, there is no evidence in support of the submissions made by counsel for the plaintiff apart from the defendants not paying the plaintiff.

26. As I am satisfied that the dispute the subject of the proceeding falls within the arbitration clause, and that the plaintiff has not satisfactorily demonstrated why a stay should not be granted and why it should not be held to the terms of the arbitration clause to which it agreed, under seal, I grant the stay order that is sought in paragraph 2 of the defendant’s notice of motion.

Orders

27. It is ordered that as to the notice of motion of the defendant filed 27^th August 2015 and the notice of motion of the plaintiff filed 2^nd September 2015:

a) The orders of the court that were made on 14^th August 2015 are set aside;

b) This entire proceeding is stayed while any disputes arising between the parties pursuant to the subcontract agreement between the plaintiff and first defendant dated 12^th March 2012 are referred for arbitration, in accordance with clause 6 of the said subcontract agreement;

c) The costs of and incidental to both notices of motion shall be paid by the plaintiff to the defendants;

d) Time is abridged.
__________________________________________________________
Justin Tolopa: Lawyers for the Plaintiff
Allens Lawyers: Lawyers for the Defendant