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Steamships Trading Co Ltd v Inter Oil Pty Ltd [2018] PGNC 531; N7656 (6 February 2018)

N7656

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

W.S. (COMM) NOS. 958 & 959 OF 2017

STEAMSHIPS TRADING COMPANY LIMITED
Plaintiff

V

INTER OIL PTY LIMITED
Defendant

Waigani: Kariko, J
2017: 4^th December
2018: 6^th February

PRACTICE & PROCEDURE – CIVIL JURISDICTION – charter party contract – arbitration clause – arbitration in foreign jurisdiction - application to stay proceedings – considerations

Cases Cited:

Abel Construction Ltd v W.R.Carpenter (PNG) Ltd (2014) N5636
Mauga Logging Company Pty. Ltd. v Okura Trading Co. Ltd [1978] PNGLR 259
Niugini Civil and Petroleum Ltd v West New Britain Development Corporation Ltd (2005) N2909
Newsat Limited v Telikom PNG Limited (2007) N3448

Legislation:

Arbitration Act 1951
Rules Relating to the Accreditation, Regulation, and Conduct of Mediation 2010

Overseas Legislation:

Commercial Arbitration Act 2013 (Qld)
International Arbitration Act 1974 (Cth)

Counsel:

Mr M Goodwin & Mr A Konean, for the Plaintiff
Mr R J Webb SC & Mr T Yalapan, for the Defendant

JUDGEMENT

6^th February, 2018

1. KARIKO J: The defendant Inter Oil Pty Limited (Inter Oil) has moved similar applications in both proceedings WS No. 958 of 2017 and WS No. 959 of 2017 filed against it by Steamships Trading Company Limited (Steamships), seeking a stay of the proceedings pursuant to Section 4 Arbitration Act 1951(Arbitration Act).

2. It is noted that the affidavit material and submissions relied upon by the parties apply equally to each application. This judgement covers both applications.

Background

3. Steamships is a company incorporated in Papua New Guinea (PNG) while Inter Oil is registered here as a foreign company. The proceedings are similar and principally pursue a claim for damages for breach of a time-charter contract (TC Contract) in relation to a shipping vessel entered into between Steamships as the vessel owner and Inter Oil as the time-charterer.

4. The TC Contract initially concerned the MV Kopi Chief and after that vessel was grounded on 9^th June 2014 while on a chartered voyage along the Purari River, Gulf Province, PNG the agreement was amended to apply in respect of another Steamships vessel the MV Kikori Chief. The second vessel was also grounded along the same river about two months later.

5. The damages claimed by Steamships in each of the proceedings are in relation to the separate grounding and salvage of the vessels.

Arbitration clauses

6. The TC Contract contains arbitration clauses, more relevantly Clauses 22C and 39 which read:

Clause 22C

This Charter shall be governed by and construed in accordance with the laws and jurisdiction of Queensland: See clause 39.

Clause 39

Any dispute arising out of or in connection with this contract including any question regarding its existence, validity, or termination, shall be referred to arbitration in Brisbane, Queensland by a sole arbitrator in accordance with the Arbitration Rules of the Maritime Law Association of Australia and New Zealand (MLAANZ).

7. I accept the submission by Mr Webb for the defendant, which was not seriously challenged, that based on the TC Contract, the parties agreed that:

(a) the substantive law of Queensland would be the law of the contract;

(b) any dispute in relation to or arising out of the contract would be submitted to arbitration;

(c ) arbitration would be conducted in Brisbane, Queensland; and

(d) the conduct of the arbitration and the decision would be governed by the written law of Queensland relating to arbitration.

Applications for stay

8. As noted earlier, the present applications are made under Section 4 Arbitration Act which states:

Power to stay proceedings where there is submission.

(1) If a party to a submission or a person claiming through or under him, commences legal proceedings in any court against another party to the submission, or a person claiming through or under him, in respect of a matter agreed to be referred, any party to the proceedings may, at any time after appearance and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings.

(2) If the court to which application is made under Subsection (1) is satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission, and 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, it may make an order staying the proceedings.

(underlining for emphasis)

9. I find the applications for stay are properly before me as they satisfy the requirements of Section 4(1).

10. The plaintiff argued to the contrary stating that apart from breach of contract, it is also claiming in negligence including breaches of duties under maritime custom and trade practice, which it submits are claims that do not arise from the TC Contract. This argument is misconceived for the simple reason that the claims of negligence arise out of or are connected with the TC Contract and therefore fall squarely within the meaning of Clause 39. I also consider that any dispute arising out of or connected with the performance of the contract would come within the ambit of Clause 39.

11. Mr Goodwin for the plaintiff also submitted there is confusion in interpreting and applying the provisions relating to resolution of disputes, as Clauses 22C refers to “this Charter” while Clause 39 refers to “this contract”, and elsewhere “the Charterparty” is referred to. In my view, those differences are irrelevant when clearly the Charter (the hire of a ship) is the subject of the Charterparty which is the contract itself.

General principle

12. Prima facie, when there is a dispute arising from a contract, an arbitration clause contained in the contract should be pursued instead of litigating the dispute. The Court is granted discretionary power by legislation to stay litigation so the agreed arbitration process may be first pursued. In that way, the contract and the intention of the parties when entering into the contract is seen as being enforced; Mauga Logging Company Pty. Ltd. v Okura Trading Co. Ltd [1978] PNGLR 259; Niugini Civil & Petroleum v West New Britain Development Corporation [2005] N2909.

Issues

13. The issues for my determination in these applications are:

(a) Is there sufficient reason why the dispute should not be referred to arbitration?

(b) Has the applicant been ready and willing to arbitrate from when this proceeding was commenced to now?

Reasons not to refer to arbitration

14. In opposing the applications the plaintiff relies on an affidavit sworn 1^st November 2016 by its lawyer Nou Vada in which Mr Vada contends that:

(a) The laws of Queensland do not give jurisdiction for hearing of the arbitration;
(b) Under the principles of forum non conveniens PNG is the appropriate jurisdiction to deal with the dispute; and
(c) The laws of sea-carriage in PNG support the dispute being litigated in PNG.

15. Counsel for Steamships further expanded on these points in submissions.

16. The parties are in agreement that factors that the Court may take into account in deciding whether or not to grant a stay include those proposed by Canning, J in Niugini Civil and Petroleum Ltd v West New Britain Development Corporation Ltd (supra) and Newsat Limited v Telikom PNG Limited (2007) N3448 and based on those, Mr Goodwin raised a number of matters in support of his client’s contention that its claims ought not to be referred to arbitration.

17. It was argued that pursuant to the decision in Abel Construction Ltd v W.R.Carpenter (PNG) Ltd (2014) N5636, the arbitration clauses in the present case are deficient. In that judgement, his Honour Kandakasi, J generalised from case authorities in this jurisdiction and a survey of various arbitration clauses that such clause should contain the following elements but in particular elements numbered (1)-(5) and (7):

(1) Specifically stating that any dispute arising out of or relating to a contract is to be resolved by arbitration;
(2) Name the body administering the arbitration;
(3) Name the arbitrator (s);
(4) Name the place of arbitration;
(5) State the applicable law and rules;
(6) Provide for payment of the arbitrator’s fees;
(7) Describe the process of appointing the arbitrator (s); and
(8) Specify relevant time frames for whole arbitration process.

18. In my opinion, the observation by his Honour is obiter and the facts and issues of that case are distinguishable from the current case. In the Able case, the parties to the contract had, amongst other things, agreed to disputes regarding the contract be resolved through arbitration in the ADR Track of the National and Supreme Court (although no such track exist in the higher Court). While mediation and arbitration are both modes of alternative dispute resolution or ADR, the essential procedural steps for the conduct of arbitration such as referral, registration and actual arbitration are not provided for in the Rules Relating to the Accreditation, Regulation, and Conduct of Mediation 2010 unlike the process of mediation. The elements proposed by Kandakasi, J are in line with the present practice and procedure for court-annexed mediation pursuant to the Rules.

19. I am not satisfied the arbitration clauses in the present case are defective. The parties agreed to arbitration pursuant to the laws of Queensland. That process is governed by the applicable laws.

20. Steamships then relied on a number of “PNG factors” to argue against their claims being referred to arbitration. It argued that neither of the parties are based in Australia but are related to PNG, and the incidents occurred in PNG territory involving PNG-flagged vessels crewed by PNG personnel. I consider these factors as irrelevant for the reason that upon signing the contract the parties well knew the status of each other, the type of vessels that were to be hired (including the crew), and the nature of the charter voyages, that is, to trade along PNG rivers.

21. Steamships also argued that arbitration in Brisbane would be more expensive than litigation in PNG and that the relevant witnesses (the Master and the crew of the vessels) are based in PNG and it may also be necessary for the National Maritime Safety Authority of PNG to give evidence. However, Steamships did not present any evidence to show that arbitration would be more expensive. On the other hand, Inter Oil filed an affidavit by Ernest John Van Buuren (a specialist maritime lawyer and Master Mariner) filed 3^rd November, 2017 who deposes that the nature of the issues arising from the disputed claims are such that the relevant evidence would be expected from the Master or person in charge of the navigation of the vessels and independent experts from both sides. Accordingly, I reject the plaintiff’s arguments on costs and witnesses.

22. In submissions, Steamships advanced an argument based on the principle of forum non conveniens to say that pursuant to that doctrine, PNG is the more convenient forum for litigation. But that doctrine concerns deciding between two forums of court litigation – that a court may stay proceedings if it finds that the dispute at hand may be properly tried in another country. In my view the doctrine and the case authorities cited regarding the subject have no application to the present case. The issue here is whether litigation of the case should be stayed to allow for arbitration or should litigation be allowed to continue.

23. Steamships further argued that there is no jurisdiction for arbitration in Brisbane because the laws of Queensland do not allow for arbitration of international disputes such as the present. The parties are in agreement that arbitration of domestic disputes in Australia is governed by the respective State laws so in Queensland the relevant legislation would be the Commercial Arbitration Act 2013 (Qld) and legislation would not apply arbitration of international disputes. However, contrary to the suggestion by Steamships, that does not mean that there are no laws in Queensland providing for the arbitration of international disputes. Those disputes are governed by the International Arbitration Act 1974 (Cth), which is a part of the laws of Queensland.

24. Steamships also proposed that the National Court intervene to develop the underlying law covering safe-ports and also consider declaring that an arbitration or jurisdictional clause in a charter party involving carriage of goods within PNG which invokes the jurisdiction of another country as illegal and null and void. I agree with Mr Webb that this is asking the Court to unnecessarily interfere with a commercial contract that parties have freely entered into after agreement to terms, including how disputes between them are to be resolved. That is consistent with the prima facie position or presumption that the Court is inclined to stay litigation for the plaintiff to pursue the tribunal he chose by his contract; Mauga Logging Company Pty. Ltd. v Okura Trading Co. Ltd (supra) and Niugini Civil & Petroleum v West New Britain Development Corporation (supra).

25. In the end, I am not satisfied that the applicant has demonstrated sufficient reason why its claims should not be referred to arbitration.

Readiness & willingness to arbitrate

26. As to the second issue, the plaintiff submitted that the defendant by its letter of 4^th July 2017 (a copy of which is annexed to Mr Vada’s affidavit) Inter Oil refused the proposal to have the dispute mediated and for that reason has not shown a readiness or willingness to take the dispute to arbitration.

27. As pointed out earlier, arbitration and mediation are two distinct modes of dispute resolution. Clause 22D of the TC Contract allows the parties to agree at any time to refer any difference or dispute regarding the Charter to mediation. If arbitration has already begun, the procedure to follow for the agreed mediation is then prescribed. I accept that by virtue of Clause 22D the parties may agree to mediation at any time but I am not satisfied the provision describes mediation as a pre-condition to arbitration, because the Clause contemplates that the parties may wish to pursue mediation even when arbitration has already commenced.

28. I am satisfied Inter Oil has been ready and willing to go to arbitration. I find from the exchange of correspondence in evidence that the defendant attempted to settle issues relating to liability in good-faith before turning to arbitration for resolution.

29. Steamships also submitted that Inter Oil has not shown that arbitration is necessary but that proposition is contrary to the law that the onus is on the party arguing against a stay application under Section 4 to present satisfactory reasons why a dispute should not proceed to arbitration; Niugini Civil & Petroleum v West New Britain Development Corporation (supra) and Newsat Limited v Telikom PNG Limited (supra).

Conclusion

30. I am persuaded that Inter Oil has properly met the requirements of Section 4 Arbitration Act and I would grant the applications.

Orders

31. The Court orders that:

(1) Pursuant to section 4 Arbitration Act 1951 the proceedings WS No. 958 of 2017 and WS No. 959 of 2017 are stayed.
(2) The parties shall submit to arbitration pursuant to Clauses 22C and 39 of the Time-Charter Contract entered into between them on 24^th September, 2012 (as amended).
(3) The defendants’ costs of and incidental to both applications shall be paid by the plaintiff to be taxed if not otherwise agreed.

___________________________________________________________
O’Briens Lawyers: Lawyers for the Plaintiff
Norton Rose Fullbright PNG: Lawyers for the Defendants