HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 027 of 2001

AGRICOM PTE LIMITED

V

RUSSEL ISLANDS PLANTATION ESTATES

High Court of Solomon Islands
(Kabui J)

Date of Hearing: 9th April, 2001
Date of Judgment: 11th April, 2001

J. Sullivans for the Plaintiff
A. Radclyffe for the Defendant

JUDGMENT

(KABUI J): By Summons filed on 30th March, 2001, the Defendant has asked the Court to make the following orders -

1.	that the order of 9th March 2001 be revoke;

2.	that the proceedings be stayed in accordance with section 5 of the Arbitration Act (Cap 2) on the grounds set out in the affidavit filed herewith

The Order of 9th March, 2001 was an Order I made upon the application of the Plaintiff for an injunctive order restraining the Defendant from dealing with the remaining quantity of coconut oil in the Defendant’s Yandina storage tanks or elsewhere in the possession or control of the Defendant. I also made consequential orders. However, the main purpose of the Defendant’s present application is to remove the proceedings commenced by the Plaintiff against the Defendant in the Court to be dealt with by way of arbitration under section 5 of the Arbitration Act (Cap. 2). Section 5 of the Act states,

“If any party to a submission, or any person claiming through or under him, commences any legal proceedings in the Court against any other party to the submission, or any person claiming through or under him, in respect of any matter agreed to be referred, any party to such legal proceedings may at any time after appearance, and before delivering any pleadings or before taking any other steps in the proceedings, apply to the Court to stay the proceedings, and the Court, 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 to the proper conduct of the arbitration, may make an order staying the proceedings.”

The Facts

The Plaintiff is a Company incorporated in Singapore and carries on business there. It deals in commodity trading in coconut oil, copra cake and cocoa in the Western Pacific and South East Asia for many years. It had done business with Solomon Islands Commodities Marketing Authority (CEMA) and Russell Islands Plantation Limited (RIPEL) for about 20 years. In July/August 2000, the Defendant, through its General Manager, one Solomon Ilala and its Financial Controller, one Eric Notere, obtained from the Plaintiff the sum of US$600,000 to enable the Defendant to continue in business. The Plaintiff and the Defendant agreed that in return for the sum of US$600,000, the Defendant would supply to the Plaintiff 2600 metric tonnes of coconut oil from the Yandina storage tanks. The agreed price was US$235.00 per metric tonne. In early December, 2000, the Defendant supplied to the Plaintiff 1829.92 metric tonnes of coconut oil. The remaining balance of coconut oil comprised 770.08 metric tonnes. The Defendant had sold to International Comtrade (ICSL) 1469 metric tonnes on 18th November, 2000 and again sold 424 metric tonnes to that same buyer on 31st December, 2000. The Defendant still has not supplied the Plaintiff with the remaining 770.08 metric tonnes of coconut oil being the property of the Plaintiff. The agreement dated 3rd November, 2000 which contains the terms of the transaction is subject to arbitration in the United Kingdom. The agreement is also governed by the terms of the standard contract 53 used by the Federation of Oils, Seeds and Fats Associations Limited FOSFA International.

The Issues

The issues in this case are whether or not on the facts of this case, the proceedings already commenced in the Court by the Plaintiff be stayed so that they can be dealt with by arbitration in London according to clause 29 of contract FOSFA 53 and whether or not the Order I made on 9th March, 2001 be revoked accordingly.

The Law

I have already cited section 5 of the Arbitration Act in the beginning of this judgment. There is no dispute that the agreement of 3rd November, 2000 between the Plaintiff and the Defendant is a submission within the terms of section 5 of the Act. Counsel for the Plaintiff, Mr. Sullivan, conceded this point. The other matters to be considered in terms of the content of section 5 or what it says are whether (i) any party has commenced legal proceedings in the Court (ii) any matter was agreed to be referred to arbitration, (iii) appearance has been entered by the other party to the proceedings in the Court and (iv) no pleadings or any other steps have commenced in respect of the proceedings commenced in the Court. If these matters are satisfied, the other party may then apply to the Court to stay the proceedings commenced in the Court. If the Court is satisfied the matter should be referred to arbitration and that the applicant is ready and willing to do all things necessary to the proper conduct of the arbitration at the time of the proceedings and since then, the Court may make an order staying the proceedings.

The Applicant’s Case

Counsel for the Defendant, Mr. Radclyffe, argued that there was a matter to be referred to arbitration in London, the matter being the failure of the Plaintiff to collect the oil at Yandina. He argued that all the conditions specified in section 5 of the Act had been satisfied so that the Court in its discretion should be able to grant the order to stay the proceedings as asked for by the Defendant. He argued that there was a dispute in this case in terms of clause 29 of the FOSFA contract 53 and for that purpose, the word “dispute” should be given its ordinary meaning. He pointed out that the Defendant had filed appearance on 12th March, 2001 but had not pleaded or taken any other steps in the proceedings before filing the Summons on 30th March, 2001. He urged me to disregard the filing of account as Exhibit 2 filed on 23rd March, 2001 as constituting anything like “taking any other steps in the proceedings” within the meaning of section 5 of the Act as Exhibit 2 was merely an act of compliance with the Court Order of 9th March, 2001. He however admitted that the Defendant’s financial situation did not allow arbitration to take place in London but nevertheless it was a possibility in the light of Government assistance to the tune of $5.5 million. He however urged me to place weight on the fact that the agreement of 3rd November, 2000 does have an arbitration clause which in my view speaks for itself. On the whole, Mr. Radclyffe urged me to grant the Defendant’s application and make the orders sought in the Defendant’s Summons.

The Plaintiff’s Case

Counsel for the Plaintiff, Mr. Sullivan, applied that judgment be entered in favour of the Plaintiff on the ground that Mr. Solomon Ilala did admit in evidence from the witness-box when being cross-examined by Mr. Sullivan that there was no dispute between the Plaintiff and the Defendant as regards the rights of the Plaintiff to 770.08 metric tonnes of coconut oil in the storage tanks at Yandina. Mr. Sullivan cited Order 34, rule 6 of the High Court (Civil Procedure) Rules 1964 (the High Court Rules) in support of his position.

Mr. Sullivan argued that Mr. Radclyffe failed in four ways to substantiate the Defendant’s case. First, he said, Mr. Radclyffe failed to show that any matter was agreed to be referred to arbitration. Second, Mr. Radclyffe failed to show that the Defendant had not taken steps in the proceedings. Third, Mr. Radclyffe failed to show that there was reason for the Court to be satisfied that the matter should be referred to arbitration. Fourth, Mr. Radclyffe failed to show that the Defendant was ready and willing to do all things necessary to the proper conduct of the arbitration. Mr. Sullivan concluded his submission by reiterating his stand under Order 34, rule 6 of the High Court Rules.

The Evidence

The position was that the Plaintiff advanced US$600,000 to the Defendant paid in four tranches, the last being paid on 17th October, 2000. By letter dated 22nd November, 2000, Solomon Ilala, the General Manager of CEMA and Eric Notere, the Financial Controller of RIPEL told Mr. Chek Ai Ming that as of 15th November, 2000, there were 3068 metric tonnes of coconut oil in the storage tanks at Yandina of which 2,600 metric tonnes belonged to the Plaintiff (see Exhibit “CAM-3” attached to Mr. Chek Ai Ming’s affidavit filed on 7th March, 2001). The fact was that 2,600 metric tonnes of coconut oil had already been paid for by the Plaintiff. That tonnage of coconut oil was already the property of the Plaintiff as from 17th October, 2000. This fact was admitted by Solomon Ilala, the Managing Director of the Defendant when being cross-examined by Mr. Sullivan on his affidavit evidence filed on 30th March, 2001. Solomon Ilala confirmed that Exhibit “CAM-3” attached to Mr. Chek Ai Ming’s affidavit filed on 7th March, 2001 was correct in terms of its content. In his own words, Solomon Ilala said, “2600 tonnes of oil is the property of the Plaintiff”. When asked by Mr. Sullivan to explain the second sentence in paragraph 5 of his affidavit filed on 30th March, 2001, Solomon Ilala in his own words said, “Earlier contract was similar and also had an arbitration clause. Plaintiff defaulted earlier. I feel there is a case under the earlier contract for arbitration … Under 2nd contract there is no case to answer”. Furthermore, Solomon Ilala admitted under cross-examination that the Defendant had no funds from the start and would not be in a position to arbitrate in London although the Defendant had thought about it. He also admitted that funding from the Government though looked promising was no guarantee for arbitration to take place immediately or soon in London. He said the possibility was there but could not say when the funds would be made available for use by the Defendant.

Decision

Clearly, Solomon Ilala was confused over two contracts each of which has an arbitration clause. The first contract which he called the “earlier contract” (see paragraph 5 of his affidavit) seemed to be the one that called for arbitration in his view because the Plaintiff had failed to collect the coconut oil from the Defendant at Yandina. There was in his view a dispute to be arbitrated. As regards the contract of 3rd November, 2000, he said there was nothing to arbitrate about. 770.08 metric tonnes of coconut oil belonged to the Plaintiff. In other words, the Defendant should not have filed the Summons and asked for the orders therein in the first place. That is to my mind what Solomon Ilala was telling the Court from the witness-box. Clearly, Solomon Ilala was admitting that the Order I made on 9th March, 2001 should not be revoked and that the proceedings already commenced by the Plaintiff in the Court should continue and conclude in the Court. There is no dispute in this regard between the Plaintiff and the Defendant. The Defendant’s application must therefore fall on this ground. I do not need now to consider the arguments for and against the Defendant’s application put to the Court by Counsel of both parties. There is however, Mr. Sullivan’s application to invoke Order 34, rule 6 of the High Court Rules. Rule 6 states

“Any party may at any stage of a cause or matter, where admissions of facts have been made, either on the pleadings, or otherwise, apply to the Court for such judgment or order as upon such admissions he may be entitled to, without waiting for the determination of any other question between the parties; and the Court may upon such application made such order, or give such judgment, as the Court may think just.”

Whilst I can see where Mr. Sullivan is coming from, I do not think I can accept his position. It is the Defendant’s application that I must decide and no other. I feel it is inappropriate to decide Mr. Sullivan’s application under Order 34, rule 6 of the High Court Rules on an admission by the Defendant over another issue though between the same parties. Normally, such application is heard on the Summons for directions or if it is made at any other time, it is made by way of motion for judgment to be heard by the Court. (see page 438 of the Supreme Court Practice 1973, Volume 1, Part 1). As much as I am tempted by Mr. Sullivan’s powerful argument, I would reject it on the ground of its inappropriateness in the context of this case. The issues here are whether the proceedings commenced in the Court by the Plaintiff by Writ of Summons filed on 7th March, 2001 should be stayed in view of the application of section 5 of the Arbitration Act and whether the Order I made on 9th March, 2001 be revoked accordingly. I have already decided these issues in favour of the Plaintiff on Solomon Ilala’s own admission. The Defendant’s application is refused with costs.

(F.O. Kabui)
Judge