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Teleoks Wokman Ltd v JDA Wokman Ltd [2017] PGNC 412; N7648 (15 May 2017)

N7648


PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]


OS. NO. 715 OF 2014


TELEOKS WOKMAN LIMITED
Plaintiff


-V-


JDA WOKMAN LIMITED
Defendant


Waigani: Kariko, J
2017: 6th & 15th May


PRACTICE & PROCEDURE – CIVIL JURISDICTION – breach of contract – arbitration clause - application to dismiss proceedings – reasonable cause of action – abuse of process - whether relief sought tenable – correct mode of proceeding – claim converted to pleadings


Cases Cited


Kerry Lerro v Phillip Stagg & Ors (2006) N3050
Lavongai Equities Ltd v Club 21 Limited (2009) SC1001
Niugini Civil and Petroleum Ltd v West New Britain Development Corporation Ltd (2005) N2909
Olympic Stationary Limited v The State (2001) N2194
Phillip Takori & Ors v Yagari & Ors (2008) SC905


Legislation


Arbitration Act 1951
National Court Rules


Counsel:


Mr J Kaki, for the Plaintiff
Mr I Shepherd, for the Defendant


RULING


15th May, 2017


  1. KARIKO, J: This is an application by the defendant JDA Wokman Limited (JDA) pursuant to Order 12 Rule 40 National Court Rules to have the proceeding dismissed for disclosing no reasonable cause of action and for being an abuse of process.

Background


  1. Based on the affidavit evidence filed in relation to this application, I set out a summary of the relevant background facts.
  2. The plaintiff Wokman Teleoks Limited (Teleoks) was established by landowners from the Ok Tedi Mine area to provide labour management services being primarily the recruitment and provision of citizen labour for the Ok Tedi Mine in the Western Province.
  3. JDA is a company specializing in recruitment and provision of labour management and management consultancy services.
  4. On 22nd July, 2003Teleoks and JDA entered into a management agreement for JDA to manage Teleoks’ business on terms provided in the agreement (the 2003 Agreement).
  5. On 28th May 2008 the parties amended the 2003 Agreement (the 2008 Agreement) and added the following arbitration clause:

“6.6 Disputes and Arbitration


In the event of a serious dispute arising such that after a period of not more than six months, the dispute is not reconciled than the Company and the Manager agree to engage in arbitration by a mutually agreed independence arbitrator. Such arbitration to be concluded not more than 3 months after commencement of the arbitration. In the event that this arbitration process does not resolve the dispute, both parties agree to terminate this agreement.”


  1. A provision in the 2003 Agreement that remained unaffected by the amendments was Clause 9.3 which stated:

“9.3 Financial consequences of termination


The termination of this document does not effect:

(a) any pre-existing claim that either party may have against the other;
(b) any entitlement by either party for monies accrued due but unpaid; or
(c) ..........”.
  1. The plaintiff claims the effect of Clauses 6.6 and 9.3 is that any disputes between the parties arising from either the 2003 Agreement or the 2008 Agreement is subject to the arbitration clause.
  2. On 23rd July 2013 the parties entered into another management agreement (the 2013 Agreement) that superseded the previous agreements. The new agreement did not contain an arbitration clause.
  3. In 2014 the plaintiff in reviewing the performance of the defendant since its engagement as its Manager, allegedly discovered that JDA had breached a number of its contractual obligations under the 2003 and 2008 Agreements.
  4. By mutual agreement, the 2013 Agreement was terminated in April 2015.
  5. Consequently Teleoks served its first purported Notice for Arbitration in August 2015 to which JDA’s lawyers responded by letter dated 15th September 2015 that it would agree to mediation rather than arbitration as the 2013 Agreement (wrongly referred to as the agreement dated 23rd July 2014) did not contain an arbitration clause.
  6. In response, Teleoks by letter dated 24th September 2015 corrected JDA’s apparent misunderstanding and advised that it was seeking arbitration in relation to the first two Agreements and not that of 2013. Nevertheless, Teleoks agreed to mediation of issues relating to all three Agreements, on conditions. It is not clear whether JDA responded to that letter and if those conditions were agreed to and complied with.
  7. On 22nd October 2015 however, JDA issued court proceeding WS 1455 of 2015: JDA Wokman Limited v Wokman Teleoks Limited claiming damages from Teleoks for alleged breaches of the 2013 Agreement and seeking payment of all outstanding management fees and expenses.
  8. WS 1455 of 2015 proceeded to mediation on 27th May 2016. According to JDA’s evidence Teleoks was allowed during the mediation to raise issues regarding the 2003 and 2008 Agreements. That is rebutted by Teleoks in submissions rather than by evidence. In any case, mediation was unsuccessful and the matter WS 1455 of 2015 returned to Court and is now pending before Kandakasi J.
  9. The plaintiff through its lawyers served its second purported Notice for Arbitration by letter dated 17th October 2016, forewarning that legal action would be initiated if JDA failed to submit to arbitration.
  10. When there was no positive response from JDA, Teleoks filed this proceeding on 14th December 2016, seeking an order pursuant to Section 5 Arbitration Act for arbitration to be conducted by a court-sanctioned arbitrator to resolve the issues arising from the 2003 and 2008 Agreements. Further, Teleoks is seeking declaratory orders to the effect that JDA breached the arbitration clause and is liable to pay damages suffered by Teleoks which damages are to be assessed.

Section 5 Arbitration Act


  1. The defendant’s application to dismiss the proceedings is based on grounds including the argument that Section 5 Arbitration Act 1951 does not provide for submission to arbitration by order of the Court.
  2. It is clear that the plaintiff is insisting that its disputes with JDA are resolved through arbitration. The plaintiff argues that Section 5 gives this Court power to appoint an arbitrator where the parties are unable or one is unwilling to appoint an arbitrator. That proposition is consistent with my reading of that provision which is that an application may be made to Court for the appointment, among others, of an arbitrator where one party to a submission gives notice of an appointment of an arbitrator where the parties have not agreed to the appointment. However the application must be made to Court if the other party fails to respond within 14 days of the notice. There is no evidence to confirm that process was followed before this application was filed. Accordingly, I find the first order sought by the plaintiff as incompetent and untenable and must be struck out.
  3. I agree with the Supreme Court’s observation in Lavongai Equities Ltd v Club 21 Limited (2009) SC1001 that failure by a party or its lawyer to cooperate with the arbitration process cannot be condoned. I also accept the statement of Sevua J in Olympic Stationary Limited v The State (2001) N2194 that a party to an arbitration clause should submit to arbitration before taking court action. But arbitration may be refused if steps to submit to arbitration are either waived or not made promptly; see Niugini Civil and Petroleum Ltd v West New Britain Development Corporation Ltd (2005) N2909. It is arguable that in the present case:

Cause of action/Abuse of process


  1. It is evident from the affidavit of Michael Trintenmok the Chairman of Teleoks filed 13th February, 2017, in response to the defendant’s notice of motion, that the plaintiff’s cause of action is grounded on breach of contract. A reasonable cause of action is therefore disclosed.
  2. In the affidavit and in the initial Notice for Arbitration, the plaintiff alleges that JDA breached a number of its obligations as the Manager for Teleok’s business pursuant to the 2003 and 2008 Agreements as a result of which Teleoks states that it suffered substantial loss and damages. In the Originating Summons, the plaintiff bases its claims on breach of the arbitration clause. Whether the suit is for breaches of a number of provisions of the Agreements or simply for breach of the arbitration clause alone, the plaintiff’s claims must be properly pleaded with adequate particulars. In my opinion, this proceeding should have been commenced by way of a writ of summons. The pleadings should cover description of the contract, circumstances of the contract, relevant terms of the contract, provisions alleged to have been breached, how they were breached, and the loss and damages suffered.
  3. I am mindful that a plaintiff or claimant should not be easily driven from the judgment seat in a summary manner and that the Court should be cautious and slow in exercising its discretionary power to summarily dismiss proceedings; Kerry Lerro v Phillip Stagg & Ors (2006) N3050 and Phillip Takori & Ors v Yagari & Ors (2008) SC905. In my view the present proceeding should be converted to pleadings in accordance with Order 4 Rule 35 and pursuant to Order 4 Rule 35(b), a statement of claim is filed properly pleading the plaintiff’s claim with sufficient particulars.
  4. Otherwise, I do not find the filing of this proceeding to be an abuse of process as argued by the defendant.

Costs


  1. As the application is successful in part, I consider it proper to order that costs be in the cause.

Order


  1. The orders of this Court are:

_______________________________________________________________
Kawat Lawyers: Lawyer for the Plaintiff
Ashurst Lawyers: Lawyer for the Defendant


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