N8561

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 920 OF 2018

BETWEEN:
NIVANI LIMITED
Plaintiff

AND:
WEST NEW BRITAIN PROVINCIAL
GOVERNMENT
Defendant

Waigani: Hartshorn J
2020: 24th August

ARBITRATION – Trial - plaintiff seeking orders for the purpose of giving effect to the arbitration clause - defendant refuses to recognise appointment of arbitrator and cooperate in the arbitration process - parties may rely on the arbitration clause notwithstanding the purported termination - there is no dispute that the arbitrator has been appointment pursuant to provisions contained in agreement - plaintiff is entitled to the relief that it seeks.

Cases Cited:
Papua New Guinea Cases

Shell Papua New Guinea Ltd. v. Speko Investment Ltd (2004) SC767
National Housing Corporation v. Paul Asakusa (2012) SC1165
Vanimo Forest Products Ltd v. Ossima Resources Ltd (2013) SC1275
Peter O’Neill v. Nerrie Eliakim and Ors (2016) SC1522 
Napanapa Landowner Assoc. v. Gaudi Logae (2016) SC1532
Kutubu Catering Ltd v. Eurest (PNG) Catering and Services Ltd (2016) N6255

Overseas Cases

Arnold v. Brittain & Ors [2015] UKSC 36
Oceanic Line Special Shipping Company Inc. Fay [1987-88] 165 CLR 197

Counsel:

Mr. T. Griffiths, for the Plaintiff
Mr. S. Liria, for the Defendant

24thAugust, 2020

1. HARTSHORN J: This is a decision on substantive relief that the plaintiff seeks concerning its purported referral of a dispute that it has with the defendant, to arbitration.

Background

2. The plaintiff submits that the parties in this proceeding are in dispute in respect of a series of nine Minor Works – Civil Engineering Contract Agreements (MWCE Agreements) and in particular, in regard to whether the plaintiff has validly referred the dispute to arbitration pursuant to the relevant arbitration clause.

3. The plaintiff contends and the defendant denies that the MWCE Agreements incorporate the terms and conditions known as New Zealand Standard: Conditions of Contract for Building and Civil Engineering Construction NZS3910: 2013 (NZS3910). The defendant contends that the MWCE Agreements incorporate terms and conditions known as “General Conditions for Major Works Contract [1992]” (GCM1992). The defendant has not been able to produce any document of this description.

4. The defendant pleaded in paragraph three of its defence that the plaintiff through its General Manager, was fully aware of GCM1992 when he signed the MWCE Agreements with the defendant. Paragraph 3 of the defence was deemed struck out as a result of the defendant’s non-compliance with court orders made on 6th August 2019. 

5. The plaintiff is seeking orders for the purpose of giving effect to the arbitration clause in NZS3910. Pursuant to that clause an arbitrator, the Hon. Rodney Hansen QC, has been appointed and has accepted his appointment as arbitrator. The defendant refuses to recognise his appointment and cooperate in the arbitration process.

6. The defendant submits that:

a)	this proceeding is an abuse of process as a previous proceeding concerning the dispute between the parties was struck out and therefore this proceeding is res judicata;

b)	the process relied upon by the plaintiff to refer the dispute to arbitration offends against the MWCE Agreements between the parties as the MWCE Agreements contain references to GCM1992. GCM1992, clauses 13.1 and 13.2, provide a process for disputes and should be followed. This involves a referral to mediation first and if the dispute remains unresolved then the dispute may be referred to arbitration;

c) 	there is no signed agreement between the parties to the effect that NZS3910 applies even though there are references to NZS3910 applying in correspondence between the parties;

d)	the MWCE Agreements were terminated by the defendant and so they cannot be the subject of arbitration.

Preliminary

7. As referred to, the defendant submits that this proceeding is an abuse of process as it is subject to the doctrine of res judicata. 

8. It is not controversial that a previous proceeding OS 637 of 2017 between the parties, was struck out. This proceeding in effect seeks the same relief as that sought in OS 637 of 2017, albeit by writ of summons and statement of claim and not by originating summons. 

9. In the judgment of the trial judge in OS637 of 2017, at [26] His Honour said:

“Based on the various reasons stated above in my judgment, I note that I am not placed in a position where I would be able to determine the merits of the matter…”.

10. Then at [28]:
“Consequently, I find that I would not be in a position to consider the material issue, that is, whether the purported clauses in the NZS3910:2013 guideline … form part of the contract documents for the 9 contracts.”
and at [29]:
“I must emphasise that my ruling does or will not in any way prejudice the rights of the parties in regard to the 9 contracts. This includes any substantive arguments that the parties had and have brought to the attention of this Court at the trial of the matter. I have not considered them (i.e. the substantive arguments) herein.”
11. As to whether this proceeding offends against the  doctrine of res judicata because of the earlier proceeding OS 637 of 2017, I refer to the Supreme Court decision of Peter O’Neill v. Nerrie Eliakim and Ors (2016) SC1522 at [12] in which the Supreme Court decision in National Housing Corporation v. Paul Asakusa (2012) SC1165 is cited with approval as to issue estoppel, and Napanapa Landowner Assoc. v. Gaudi Logae (2016) SC1532 at [48] as to res judicata. It is clear from a consideration of these cases that there has to be an earlier final determination and of the particular issue before these doctrines apply. There is no evidence here that there was such a final determination. Consequently, the defendant’s application for this proceeding to be dismissed is refused.
Consideration
12. The plaintiff contends that NZS3910 was incorporated into the MWCE Agreements between the parties at the time they were entered into. Further, from a consideration of the course of dealing between the parties, that the terms of NZS3910 had been adopted and relied upon during the course of the performance of the MWCE Agreements. It is necessary that it be found that NZS3910 was so incorporated in order for the relief which the plaintiff seeks, to be granted.
13. The defendant contends that GCM1992 was incorporated into the MWCE Agreements by virtue of the MWCE Agreements referring to GCM1992 in clause 1.2 of each of the nine separate contracts. GCM1992 was not produced before the court. The purported copy of GCM1992 annexed to the affidavit of Mr. Bruno Kotnei does not state that it is “General Conditions for Major Works Contract [1992]”. It is not described as such by Mr. Kotnei and the footer to every page of the document annexed to Mr. Kotnei’s affidavit is, “Proforma Tender Contract Template V2 Rev 8-Aug 18”. This indicates, and the court finds, that this document so annexed was not in existence when the parties entered into the MWCE Agreements in 2016.
14. The plaintiff pleads that at no time did the defendant provide a copy of GCM1992 to the plaintiff. The defendant’s pleading that the plaintiff’s General Manager was aware of GCM1992 cannot be entertained as it is deemed struck out.
15. Given the evidence, not disputed, that GCM1992 was not attached to any contractual document, that a copy of it was never produced before, during or after the works were performed, that a copy was never provided to the plaintiff and was not produced to the court, I concur with the contention of the plaintiff that GCM1992 was not incorporated into the contractual relationship between the parties.
16. I am fortified in my view with reference to the following passage of Brennan J. in the High Court of Australia case, Oceanic Line Special Shipping Company Inc. Fay [1987-88] 165 CLR 197 at 228-229: 
(omitting citations) 
“If a passenger signs and thereby binds himself to the terms of a contract of carriage containing a clause exempting the carrier from liability for loss arising out of the carriage, it is immaterial that the passenger did not trouble to discover the contents of the contract. But where an exemption clause is contained in a ticket or other document intended by the carrier to contain the terms of carriage, yet the other party is not in fact aware when the contract is made that an exemption clause is intended to be a term of the contract, the carrier cannot rely on that clause unless, at the time of the contract, the carrier had done all that was reasonably necessary to bring the exemption clause to the passengers notice:”
17. The next issue is whether NZ3910 was incorporated into the MWCE Agreements. 
18. In determining if there is an enforceable contract and its terms the court applies an objective test based on a reasonable person. In Shell Papua New Guinea Ltd. v. Speko Investment Ltd (2004) SC767, the Court said at 6:
“….. the intention of the parties to enter into an enforceable contract is critical. The Court will have to infer from the conduct as would a reasonable person would do. The test is an objective one.”
19. In Vanimo Forest Products Ltd v. Ossima Resources Ltd (2013) SC1275 at [18], the Court said:
“18	In principle, the existence of a contract can be inferred by the conduct of the alleged parties to it. As was stated in Household Fire Insurance Co v Grant (1879) 3 Ex D 216:

Agreement is not a mental state but an act, and, as an act is a matter of inference from conduct. The parties are to be judged, not by what is in their minds but by what they have said or done.”

20. Further, in Arnold v. Brittain & Ors [2015] UKSC 36, at [15] Lord Neuberger stated: (omitting citations)

“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, …. And it does so by focusing on the meaning of the relevant words … in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provision of the lease [contract], (iii) the overall purpose of the clause and the lease [contract], (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions.”

21. In this instance, the defendant has not denied the pleadings of the plaintiff which detail the numerous references by the defendant’s representatives that NZS3910 would form part of the MWCE Agreements. There is undisputed evidence concerning all of those references.

22. In determining the intention of the parties, in light of the conduct of the parties, the overall purpose of the MWCE Agreements, the facts and circumstances known or assumed by the parties at the time that the MWCE Agreements were executed, and commercial and common sense, a reasonable person would have understood that NZS3910 was incorporated into the MWCE Agreements and also was relied upon during the performance of the MWCE Agreements. In this regard, I note from the evidence, that the various representatives of the defendant in the course of their dealings with the plaintiff during the performance of the MWCE Agreements, acted and relied upon provisions of NZS3910, and as though the provisions of NZS3910 had been adopted, including in particular, the referral of the parties to mediation pursuant to the terms of NZS3910.

23. Consequently, I find that NZS3910 was incorporated into the MWCE Agreements.

24. As to the contention that as the MWCE Agreements were purportedly terminated by the defendant and therefore arbitration cannot occur pursuant to a provision in a terminated contract, I am satisfied that an arbitration clause survives a contract termination. I refer to the decision of David J. in Kutubu Catering Ltd v. Eurest (PNG) Catering and Services Ltd (2016) N6255, in which his Honour at [17] reproduced the following passage from Chitty on contracts 27th Ed:

“Accordingly, an arbitration clause in a contract will survive a repudiatory or fundamental breach of the contract and maybe relied on even by the party by whom the breach is committed. And if the contract, initially valid, is alleged for some other reason to have been brought to an end, an arbitration clause contained in it will nevertheless survive and the arbitrator has jurisdiction to determine the issue.”

25. Consequently, the parties may rely on the arbitration clause notwithstanding the purported termination.

26. Given the above and noting that there is no dispute that the Hon. Rodney Hansen QC has been appointed and has accepted his appointment as arbitrator pursuant to provisions contained in NZS3910, the plaintiff is entitled to the relief that it seeks.

Orders

27.  The court orders:

a) A declaration pursuant to Order 12 Rule 1 of the National Court Rules and/or s.155 (4) of the Constitution that the parties have entered a written agreement to submit their differences in relation to the Project Works for the 7th PNG Games in Kimbe, West New Britain to arbitration by a single arbitrator and are bound by that agreement.

b) A declaration pursuant to Order 12 Rule 1 of the National Court Rules and/or s.155 (4) of the Constitution that the Honourable Rodney Hansen QC is the duly appointed arbitrator of the dispute the subject of the Notice of Referral to Arbitration dated 28th June 2017 served by the plaintiff on the defendant.

c) A declaration pursuant toOrder 12 Rule 1 of the National Court Rules and/or s.155 (4) of the Constitutionthat the seat of arbitration is Papua New Guinea and the law applicable to the arbitration is the law of Papua New Guinea.

d) The defendant shall pay the plaintiff’s costs of and incidental to this proceeding.

e) The time for entry of these orders is abridged to the time of settlement by the Registrar which shall take place forthwith.
__________________________________________________________________
Ashurst: Lawyers for the Plaintiff
Liria Lawyers: Lawyers for the Defendant