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Mauga Logging Co Pty Ltd (Receiver/Manager Appointed) v Okura Trading Co Ltd [1978] PNGLR 259 (24 July 1978)

Papua New Guinea Law Reports - 1978

[1978] PNGLR 259 - Mauga Logging Co Pty Ltd (Receiver/Manager Appointed) v Okura Trading Co Ltd 

[1978] PNGLR 259

N154

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

MAUGA LOGGING COMPANY PTY. LTD.

V

OKURA TRADING CO. LTD.

Waigani

Kearney J

21 July 1978

24 July 1978

PRACTICE AND PROCEDURE - National Court - Stay of proceedings - Action on contract - Arbitration clause - Powers of court - Discretionary power - Principles for exercise - Conditions precedent under s. 8 of the Arbitration Act 1931 - Onus of proof - Constitution of the Independent State of Papua New Guinea s. 158(2).

On an application for a stay of proceedings by the defendant in an action claiming damages for breach of a contract on the ground that the contract sued upon contained a clause requiring that disputes thereunder be referred to arbitration:

Held

(1)      The Court has a discretionary power to stay an action brought in breach of an arbitration clause stemming from its inherent power under s. 158(2) of the Constitution to ensure that persons abide by their contractual rights and from s. 8 of the Arbitration Act 1931;

(2)      Under s. 8 of the Arbitration Act 1931, the Court must be satisfied:

(a)      that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the clause; and

(b)      that the applicant for the stay was, at the time the writ was issued, and is still, ready and willing to do all things necessary to the proper conduct of the arbitration;

the latter condition not however, requiring positive action on the part of the applicant for the stay, to institute the arbitration.

(3)      The conditions precedent under s. 8 of the Arbitration Act 1931 being satisfied, other relevant considerations were the prima facie tendency to stay an action and leave the plaintiff to the tribunal he chose by his contract, (Willesford v. Watson (1873) L.R. 8 Ch. 473 at p. 480), and the need for the plaintiff to show cause why effect should not be given to the agreement to submit to arbitration (Vawdrey v. Simpson [1895] UKLawRpCh 179; [1896] 1 Ch. 166).

(4)      In the circumstances, the action should be permanently stayed.

Interlocutory Proceedings

This was an application by the defendant in an action claiming damages for breach of contract, for a stay of proceedings on the ground that the contract sued upon contained a clause that disputes thereunder be settled by arbitration.

Counsel

M. Wright, for the plaintiff.

R. Wood, for the defendant.

Cur. adv. vult.

24 July 1978

KEARNEY J: Five months ago the plaintiff issued a writ against the defendant, claiming damages for breach of a contract made between them some 3 years ago, involving the sale and purchase of timber.

The defendant is a company incorporated under the laws of Japan and having its principal office in that country. The writ recites that the alleged breach occurred within the jurisdiction of this Court.

The defendant entered an appearance in April and has taken no further step in the proceedings. The jurisdiction of this Court to entertain the writ, has not been challenged. The defendant now moves promptly and upon notice, to have proceedings in the action permanently stayed, upon the ground that the contract sued upon contains a clause that disputes thereunder are to be settled by arbitration, and the defendant desires, that the present dispute be settled by that means.

The plaintiff by its counsel is prepared to consent to the stay, but only if the defendant will undertake to institute within a certain time, the arbitration proceedings mentioned.

The defendant sees no reason for it to institute arbitration proceedings; they constitute simply the mode by which it wishes to have the dispute settled, if inter-party negotiations cannot resolve it. Mr. Wright contends that the institution of arbitration proceedings is a matter for the plaintiff, something which it is competent to do. Mr. Wright also says that a petition to wind-up the plaintiff is pending, and should be heard within the next week, and this should be taken into account, as it will then be for the liquidator and not the present directors of the plaintiff, to decide how to resolve any disputes.

I do not think I should take into account the last matter urged by Mr. Wright; what may or may not happen upon a petition is pure speculation at this stage.

It is clear that there is a discretionary power in the Court to stay an action brought in breach of an arbitration clause: this stems from the Court’s inherent power under Constitution s. 158(2), to ensure that persons abide by their contractual agreements, and also from s. 8 of the Arbitration Act 1931. It is conceded before me that these proceedings are in respect of a dispute competent to be referred under the parties’ arbitration clause; and the clause itself is in clear terms. It is not contended that the relief claimed in the writ, is beyond the powers of the arbitrator. The argument proceeded upon the basis that the contract is subsisting. The conditions precedent to the exercise of the discretion to stay, flows from s. 8(2) of the Act; I must be satisfied:

(a)      that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the clause; and

(b)      that the applicant for the stay was, at the time the writ was issued, and is still, ready and willing to do all things necessary to the proper conduct of the arbitration.

I am satisfied that the condition at (a) above, has been met. No sufficient reason has been advanced by the plaintiff to warrant a nonreferral to arbitration in accordance with the clause to that effect, agreed to by the parties. I therefore assume there is no such reason: Hodgson v. Railway Passengers Assurance Co.[cdlxi]¹. No question of the expense involved in any referral, has been raised.

Upon reading the affidavit of 31st May, 1978 by Mr. Kamiya of the defendant company, particularly par. 15, I am satisfied that condition (b) above has been met. I do not construe this condition, as requiring positive action on the part of the defendant to institute the arbitration.

The conditions precedent being satisfied, I come to the question of the exercise of discretion to stay. Prima facie, in the circumstances which here obtain, the Court tends to stay an action, and leave the plaintiff to the tribunal he chose by his contract: Willesford v. Watson[cdlxii]² per Lord Selborne L.C. This prima facie position is strengthened, as the submission contemplated appears to be to a foreign arbitral tribunal: Radio Publicity (Universal) Ltd. v. Compagnie Luxembourgeoise de Radiodifusion[cdlxiii]³. The burden of showing cause why effect should not be given to the agreement to submit, is upon the plaintiff: Vawdrey v. Simpson[cdlxiv]⁴.

I can see no reason why the action should not be stayed. More to the point, I see no reason why the exercise of discretion in the defendants’ favour in this respect, should be upon condition that it take affirmative steps to institute arbitration proceedings. Either party may take such action as they deem fit, in that regard.

I order that the action be permanently stayed.

The defendant will have his costs of the action and this application.

Orders accordingly.

Solicitor for the applicant (defendant): Craig Kirke & Wright.

Solicitor for the respondent (plaintiff): McCubbery Train Love & Thomas.

[cdlxi](1882) 9 Q.B.D. 188.

[cdlxii] (1873) L.R. 8 Ch. 473 at p. 480.

[cdlxiii][1936] 2 All E.R. 721.

[cdlxiv][1895] UKLawRpCh 179; [1896] 1 Ch. 166.