Digicel (Fiji) Ltd v Fiji Rugby Union [2014] FJHC 95; HBC30.2014 (21 February 2014)

IN THE HIGH COURT OF FIJI AT SUVA
CIVIL JURISDICTION

Civil Action No. 30 of 2014

BETWEEN:

DIGICEL (FIJI) LIMITED,
a limited liability company having its business address and its registered address at Ground Floor, Kadavu House, Suva, Fiji Islands.

PLAINTIFF

AND:

FIJI RUGBY UNION,
a sports association having its business address at Fiji Rugby Union House, 35 Gordon Street, Suva, Fiji Islands.

DEFENDANT

BEFORE : Hon. Justice Kamal Kumar

COUNSEL : Dr J. Turner and Ms M. Muir for the Plaintiff/Respondent

Mr N. Lajendra for the Defendant/Applicant

DATE OF RULING : 21 February 2014

RULING
(Application for Stay of Proceedings)

1.0 Introduction

1.1 On 11 February 2013 the Defendant/Applicant filed by way of Summons, Application for an Order that the within proceedings be stayed upon the grounds that the parties had agreed pursuant to Clause 25 of the Sponsorship Agreement dated 14 August 2009 between the parties that any dispute will be resolved by Arbitration ("the Stay Application").

1.2 Defendant filed Affidavit of Dr. Berlin Kafoa sworn on 11 February 2014 in support of the Stay Application ("Kafoa's Affidavit") and the Plaintiff/Respondent filed Affidavit in Opposition of Maurice McCarthy sworn and filed on 12 February 2014 ("McCarthy's 2nd Affidavit").

1.3 Parties also filed and served Submissions in respect to Stay Application and on 13 February 2014 made oral submission in respect to Stay Application.

2.0 Background Facts

2.1 On or about 14 August 2009 the Applicant and the Respondent entered into a Sponsorship Agreement which was varied on or about 17 September 2009 by Deed of Variation entered into by the parties ("Digicel Agreement").

2.2 The Digicel Agreement as varied expired on 1 November 2013 and was subject to Clause 13 in relation to exclusive negotiations between parties for renewal of the Digicel Agreement and Option in favour of the Respondent to match any offer for Sponsorship of Applicants' products (Clause 13.5.2).

2.3 On 31 January 2014 Respondent commenced this proceedings by filing:

(i) Writ of Summons and Statement of Claim;

(ii) Ex-Notice of Motion for Interim Injunction;

(iii) Affidavit of Maurice McCarthy sworn and filed on 31 January 2014 (McCarthy's 1st Affidavit).

2.4 The Application for Interim Injunction was brought to my attention in the afternoon of 3rd February 2014 when I directed the Registry to issue the motion for inter-parte hearing on 7 February 2014.

2.5 At the request of Plaintiff's Solicitors I caused the Motion to be listed for hearing on 6 February 2014 at 2.30pm.

2.6 On 5 February 2014 Plaintiff filed Supplementary Affidavit of Ronlyn Sahib sworn on the same date referring to article in the news media in respect to announcement by the Applicant of signing of Sponsorship Agreement between Applicant and Vodafone Consortium ("Vodafone Agreement").

2.7 On 6 February 2014 Applicant caused to be filed Affidavit of Baljeet Singh ("Singh's Affidavit") in opposition to Application for Interim Injunction.

2.8 At paragraph 7 of Singh's Affidavit the deponent states as follows:-

"On 3 February 2014 FRU and Vodafone Fiji Limited ("Vodafone") with its consortium partners had entered into a new sponsorship Agreement after undertaking necessary due diligence and completing its extensive deliberations of all proposals received including from Plaintiff."

2.9 As a result the Order prayed for at paragraph 6 (c) of the Notice of Motion could not be dealt as the Vodafone Agreement had already been signed.

2.10 On Respondent's Counsel's application I granted leave for Respondent to Amend the Notice of Motion and directed parties to file Affidavits and Submissions and listed the Application for Injunction for hearing on 13 February 2014 at 2.30pm.

2.11 On 7 February 2014 Respondent filed Amended Notice of Motion seeking following Orders:-

"a) RESTRAINING ORDER: An order restraining the Defendant and/or its directors, servants and agents from performing, implementing, announcing, displaying, advertising [including but not limited to allowing Fiji 7s players to appear in commercials, advertisements or on billboards], amending, varying and or further concluding sponsorship agreements with Vodafone Fiji Limited, Fiji Airways, CJ Patel and or Fijian Holdings Limited [hereinafter referred to as the "Vodafone Consortium"] or any third party, for the sponsorship of the Fiji 7's team and or the National Provincial Championship for Senior and U20 (currently called the Digicel Cup) until final determination of the matter or further order of this Honourable Court;

b) RESTRAINING ORDER: An order restraining the Defendant and/or its directors, servants and agents from outfitting the Fiji 7's team with jerseys or any other gear or articles of clothing displaying the logos and or names, including trade names or shortened names, of all members of the Vodafone Consortium or any other third party;

c) SUCH OTHER AND FURTHER ORDERS as the Court may think just and equitable in the circumstances; and

d) Costs of this application in favour of the Plaintiff."

2.12 On 10 February 2014 Vodafone Fiji Limited made application by way of Summons for an Order that it be granted leave to intervene and joined as a Defendant solely for the purpose of determination of the Plaintiff's Amended Notice of Motion filed on 7 February 2014 ("Intervening Application").

2.13 On 11 February 2014 Applicant filed the Stay Application.

2.14 On 13 February 2014, Applicant and Respondent by their Counsel made Submissions on Stay Application and the Intervening Application was adjourned to 25 February 2014 for hearing subject to the outcome of the Stay Application.

2.15 At the request of the Respondent this matter was listed to be called on 14 February 2014 at 2.30pm when Counsel for Respondent informed the Court that if the Stay Application is refused then Respondent has no objection to the Intervening Application as prayed for and as such applied that Application for Injunction be heard on 25 February 2014.

2.16 With consent of the parties I granted Orders in terms of prayers 1 and 2 of Intervening Application and gave directions for filing of Affidavits and Submissions in respect to Injunction Application.

3.0 Stay Application

3.1 Applicant submitted that the Respondent should have pursuant to Section 5 of the Arbitration Act Cap 38 and Clause 25 of the Digicel Agreement referred the dispute between the parties to Arbitration rather than instituting this proceeding.

3.2 Clause 25 of the Digicel Agreement (Annexure MM1 of McCarthy's 1st Affidavit) provides as follows:-

"25 Dispute Resolution

25.1 If a party believes a dispute has arisen:

25.1.1 It must serve a dispute notice on the other party stating that a dispute has arisen and identifying with sufficient detail what the dispute is;

25.1.2 The dispute notice must be provided to the other party's (CEO) (or his nominee) following receipt of which the respective officers (or nominees) must meet as soon as possible to attempt to negotiate and to resolve in good faith the dispute.

25.2 The parties agree that all disputes that may arise between them which cannot be amicably resolved within thirty (30) days in accordance with clauses 25.1.1 and 25.1.2 (or such longer period to which the parties consent) shall be settled in accordance with the Fiji Arbitration Act [CAP 38] or by three (3) arbitrators that are knowledgeable about sports sponsorship and endorsement agreements who shall be appointed in accordance with said law unless the parties agree on one (1) arbitrator. The arbitration proceedings, unless the parties otherwise agree, will be conducted before the appointed arbitrators in Fiji in the English language. Any judgment rendered by the arbitrators may be entered in any court having jurisdiction thereof. The parties agree that the arbitrators can, in addition to or in lieu of ordering damages, order specific performance or enjoin any action of the parties in order to enforce the terms of this Agreement. All costs and expenses of the arbitration, including actual attorneys' fees and the arbitrator(s)' fees, will be apportioned between the parties according at the arbitrator(s)' discretion. The arbitrator(s)' award resulting from such arbitration may be confirmed and entered as a final judgment in any court of competent jurisdiction and enforced accordingly.

25.4 No action may be brought or maintained in any court with respect to any dispute arising under this Agreement, except for the institution of a civil action to maintain the status quo when any arbitration proceeding is pending, to compel arbitration pursuant to this Clause or to confirm or enforce an arbitrator's award.

25.5 During any dispute, each party must continue to perform its obligations under this Agreement."

3.3 Section 5 of the Arbitration Act Cap. 38 provides:-

"5. If any party to a submission, or any person claiming through or under him, commences any legal proceedings in any court against any other party to the submission, or any other 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 taking any other steps in the proceedings, apply to the court to stay the proceedings, and that court, if 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."

3.4 Onus is on the Defendant as Applicant to satisfy the requirements of s5 of Arbitration Act Cap 38 and to show that there is a dispute which is subject to the arbitration clause. Gisborne Harbout Reed v. Spencer [1961] 1 NZLR 204 at 213 (para 50).

3.5 Whether any party to an Agreement has agreed to submit to arbitration any particular dispute will depend on the facts of the particular case and the alleged dispute. Apparel Holdings Ltd v. Jones [1992] 3 NZLR 713 at 717.

3.6 The Court has discretion to try the dispute or stay the proceedings if the Applicant complies with the requirements of s5 of the Arbitration Act. Heyman v. Darwin Ltd [1942] 1 ALL ER 337.

3.7 The Respondent in its Opposition to the Stay Application submitted that Applicant has failed to satisfy the requirements of s5 of Arbitration Act by taking steps in the proceeding by:-

(i) filing Singh's Affidavit in Opposition to Application for Interim Injunction;

(ii) appearing at the hearing of the Application for Interim Injunction on 6 February 2013 and arguing against grant of interim injunction.

3.8 Respondent's Counsel relied on the case of Ford's Hotel Company Limited v. Bartlett [1895] Appeal Case (Privy Council); The County Theatres and Hotels Limited v. Knowles [1902] UKLawRpKQB 8; [1902] 1 KB 480; and Sheetal Investments Ltd v. Australia and New Zealand Banking Group Ltd [2011] FJHC 271, HBC 227.2010 (13 May 2011).

3.9 The Arbitration provision in Ford's case was same as s5 of Arbitration Act Cap 38.

3.10 In Ford's case the Defendant sought time from Plaintiff solicitors for filing Statement of Defence three times and when fourth request for extension of time was declined it applied by Summons for extension of time to file defence which application was granted. Rather than filing Statement of Defence, Defendant applied for Stay of proceedings on the ground that dispute should have been referred to Arbitration. At first instance the Master granted stay which was confirmed by the Judge who gave leave to appeal. The Court of Appeal set aside Order for Stay on the ground that by seeking time to file Defence, Defendant had taken step in the proceedings within the meaning of s4 of the Arbitration Act. Defendant applied to Privy Council which affirmed decision of the Court of Appeal. Lord Wilson at page 5 of the Judgment stated as follows:-

"I see no reason to doubt that an order obtained upon a summons for extension of time for deliver of defence is a "step in the proceedings" by the defendant within the meaning of s.4 of the Arbitration Act."

3.11 Lord Halsbury LC in relation to the intention and purpose of enacting s4 of the Arbitration (UK) Act which equally applies to s5 of our Arbitration Act stated as follows:-

"My Lords, there can be no doubt that what was in the mind of the Legislature was this - one of the great scandals which induced the Legislature to interfere by statutory provision was the delay, and another was the costs incurred, notwithstanding that the proceedings did not go on, so that there were a great number of proceedings for which the parties had to pay although they furnished no ultimate decision of their rights. The intention of the Legislature in giving effect to the contract of the parties, and saying that one of them should be entitled to make an application to insist that the matter should be referred according to the original agreement, was that they should at once, and before any further proceedings were taken, specify the terminus a quo, and that if an application stay proceedings was made under those circumstances, then that the Court should enforce the contractual obligation to go to arbitration. My Lords, that seems to me a very wise provision: that costs should not be thrown away in beginning to litigate." (pp 4 and 5) (emphasis added)

3.12 In Knowles case an Order was for made on Summons for Direction for parties to file Statement of Claim, Statement of Defence and discovery of documents. Defendant instead of filing Statement of Defence moved the Court for Stay of proceedings under section 4 of Arbitration Act (UK) which application was refused by the judge at Chambers. Defendant appealed. Collins M.R. with whom Romer L.J. and Mathew L.J. concurred stated as follows:-

"That which Order XXX has done is to enable the parties to obtain on one summons an order, with respect to all interlocutory proceedings to be taken in the action, which they might, before this rule took effect, have obtained on several distinct summonses. The parties appear before the master with, as it were, a blank sheet on which he may make this inclusive order. When he does so, with the acquiescence of both parties, there is just as much a step in the proceedings by each of the parties as if an order had been made on his separate application. The defendant might have objected to the making of the order on the ground of the agreement to refer differences; but he did not do so, and is not in a position to ask for a stay under s.4 of the Arbitration Act."

3.13 In Sheetal Investment's case his Lordship Justice Hettiarachchi (as he then was) dealt with Defendant's Application to strike out claim under Order 18 Rule 18(1) of the High Court Rules on the ground that the Plaintiff had instituted the proceeds without initiating arbitration proceedings was an abuse of court process.

3.14 In Sheetal Investment case the Defendant made the Application after filing of Notice of Intention to Defend and Statement of Defence.

3.15 His Lordship Justice Hettiarachchi after reviewing relevant authorities held that filing of Notice of Intention to Defend and Statement of Defence, Defendant submitted to jurisdiction of the Court and could not invoke the provision of section 5 of Arbitration Act Cap 38.

3.16 His Lordship adopted the principle in Ford's case and quoted following passages from Eagle Star Insurance Company Limited v. Yuval Insurance Company [1978] 1 Lloyds Report 357:

"It seems to me that if a defendant who is being sued in the Courts asks that a matter should go to arbitration in accordance with their agreement, prima facie that agreement ought to be honoured: the action should be stayed and the matter should be allowed to go to arbitration. Subject to this statutory qualification: if the defendant has taken a "step in the proceedings" then he is too late. He can no longer apply for the Court proceedings to be stayed." (Lord Denning pp 360 and 361)

3.17 On the term "step in proceedings" his Lordship quoted the following statement of Lord Denning in Eagles case:-

"On principle it is a step by which the defendant evinces an election to abide by the Court proceedings and waives his right to ask for an arbitration. Like any election, it must be an unequivocal act done with knowledge of the material circumstances."

3.18 Counsel for the Applicant referred to Consort Shipping Line Limited v. Fai Insurance (Fiji) Limited High Court Civil Action No. 383 of 1997; Fai Insurance (Fiji) Limited v. Consort Shipping Line Limited Civil Appeal No. ABU0075 of 1998S; and Shambu Lal Construction (Fiji) Ltd v. Warren [2011] FJHC 63; Action No 44.2008 (11 February 2008).

3.19 In Consort Shipping v. Fai Insurance (Supra) his Lordship Justice Scott (as he then was) at first instance in dealing with Application for matter to be referred to Arbitration pursuant the Contract dealt with the Application as Application for Stay pursuant to s5 of the Arbitration Act.

3.20 In Consort Shipping, Plaintiff after filing the Writ of Summons and prior to filing of the Defence or any steps taken by the Defendant moved the Court for declaration that dispute be referred to arbitration pursuant to the Agreement between the parties. His Lordship Justice Scott initially granted stay on an Extempore Ruling but gave his reasons when dealing with Application for Leave to Appeal the decision to stay the proceedings.

3.21 Applicant's Counsel submitted that the decision in Consort Shipping and the Appeal is authority for the proposition that an Application for Stay of Procedure pursuant to Section 5 of the Arbitration Act can be made at any stay of the proceedings.

3.22 With respect to Applicants Counsel I do not agree with the Counsel's submission in this regard.

His Lordship Justice Scott (as he then was) in his reasons stated as follows:-

"Having closely examined section 5 of the Act I concluded that an appearance having been entered and no pleadings having been delivered the Court had jurisdiction to stay the legal proceedings commenced by the Plaintiff and to refer the matter to arbitration providing it was satisfied that:

(a) there was no sufficient reason not to refer the matter to arbitration; and

(b) the Plaintiff was first, when the writ was issued and secondly, now ready and willing to "do all things necessary to the proper conduct on the arbitration."

3.23 Also his Lordship Justice Ian R Thompson J. A. in respect to the Appeal stated:-

"In my view the applicant's attempt to rely on section 5 of the Arbitration Act is misconceived. That section requires a party seeking to have an action stayed to show that he "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." It is difficult to see why the commencement of the action by the respondent's solicitors before they became aware of the requirement of arbitration in the applicant's standard policy should be regarded as preventing the respondent from showing that it was not in breach of the requirement of section 5, that is to say that at all relevant times it was "ready and willing to do all things necessary for the conduct of the arbitration". The commencement of an action in a court of law will often indicate a lack of such readiness and willingness but I agree with Scott J. that it will not necessarily do so and, more particularly, that in the circumstances of the present case it did not do so."

3.24 His Lordship further went on to state as follows:-

"The matter in dispute between the parties in pre-eminently suited to determination by arbitration by an arbitrator with experience of ships, their navigation, marine accidents and marine insurance. Doubtless that is why the applicant made it a term of its standard policy referral of disputes to arbitration was to be mandatory. In those circumstances I can find no good reason why the instant dispute should not have been referred to arbitration. I cannot accept that the applicant will suffer detriment from the referral ordered by Scott J. Nor can I accept that any important questions of law are raised that require determination by this Court."

3.25 The High Court and Court of Appeal decision in Consort Shipping does not in any way discount or relieve the Applicant to satisfy the requirement of Section 5 of the Arbitration Act, that is the need for the Applicant to apply to stay the proceedings before the Applicant delivers any pleadings or take any other step in the proceedings.

3.26 Once the requirements in s5 of the Arbitration Act are met then the Court is to be "satisfied that there is no sufficient reason why the matter should not be referred to arbitration 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...". The use of the word "and" means that the Applicant has to satisfy both these limbs.

3.27 It appears that the learned Master in Warrens case did not fully appreciate the requirements of section 5 of the Arbitration Act and the reasoning in Consort Shipping's case (both High Court and Court of Appeal).

3.28 Applicant by its Counsel submitted that Applicant had not filed any pleadings and made Stay Application after first appearance on 6th February 2014.

3.29 He further submitted that even if filing of Singh's Affidavit and appearing in court on 6th February 2014 were steps in the proceedings Applicant can still apply for stay of proceedings because Applicant had not filed any pleadings.

3.30 This submission of the Applicant is misconceived and misconstrued for the very fact of the use of the word "or" precludes the Applicant from applying for Stay of proceedings pursuant to section 5 of the Arbitration Act if Applicant does either one of the following after first appearance, that is:-

(i) deliver any pleading;

(ii) takes any other steps in the proceedings.

3.31 The word "pleadings" in the Arbitration Act is not defined and as such one has to have recourse to the definition in the High Court Rules which defines pleadings as:-

"includes any petition or summons, and also includes the statements in writing of the claim or demand of any plaintiff, and of the defence of any defendant thereto, and of the reply of the plaintiff to any counter-claim of a defendant; but does not include a petition, summons or preliminary act;" Order 1 Rule 2 of High Court Rules

3.32 It is obvious and that after filing of Notice of Intention to Defence, Defendant did not deliver any pleadings as defined in the High Court Rules.

3.33 The Applicant's first appearance in the proceeding was filing of its Notice of Intention to Defend on 5 February 2014. After that Applicant:-

(i) on 6 February 2014 filed Singh's Affidavit;

(ii) appeared by its Counsel at the hearing of Application for Interim Injunction on 6 February 2014.

3.34 It must be noted that in Consort Shipping apart from the Statement of Claim no other pleadings were filed or steps taken in the proceedings. Also as found by the Court of Appeal the Applicant was not aware of the existence of the arbitration clause in the policy at the commencement of the proceedings (paragraph 3.23 of this Ruling refers).

3.35 I hold that the actions taken by the Applicant in the preceding paragraph amounts to step in the proceedings and having taken such steps Applicant is now precluded from seeking Stay of proceedings pursuant to Section 5 of the Arbitration Act.

3.36 Even if the actions taken by the Applicant are not deemed to be steps in the proceedings it has failed to satisfy the Court that the Applicant was at the commencement of this proceedings was ready and willing to do all things necessary to the proper conduct of the arbitration. In response to query by the Court the Applicant's Counsel admitted that the Applicant and the Counsel were at all material times aware about the existence of the arbitration clause.

3.37 The Applicant and the Respondent were in contact by correspondence immediately prior to the institution of these proceedings but at no time did either of them served notice for parties to submit the dispute to arbitration.

3.38 There is no statement or evidence produced by on behalf of the Applicant that at the commencement of this proceedings was ready and willing to do all things necessary to the proper conduct of the arbitration. Obviously if the Applicant was ready then it would have moved the Court for a Stay of Proceedings instead of filing Singh's Affidavit and attending Court by its Counsel on 6th February 2014 to oppose the Application for Interim Injunction.

3.39 Furthermore I take note of the following in respect Clause 25.0 of the Digicel Agreement and the claim filed by the Respondent:-

(i) No dispute notice have been served on by either party on the other (clause 25.1.1);

(ii) If either believed that there was a dispute to be resolved by arbitration then it should have served dispute notice on the other;

(iii) Since, there is no arbitration pending there is nothing stopping a party from instituting court proceedings (Clause 25.4);

(iv) If the matter is referred to arbitration then Applicant and Respondent must continue to carry out its obligation under the Digicel Agreement which may be impossible given the existence of the Vodafone Agreement (Clause 25.5);

(v) Respondent's claim is for breach of contract and alleged failure by Applicant to exclusively negotiate renewal of Digicel Agreement with it and alleged failure by Applicant to let Plaintiff match the sponsorship offer of Vodafone Consortium;

(vi) Whether the Defendant has breached the Digicel Agreement; the enforceability of the matching clause in the Digicel Agreement are questions of law which can only be determined by Court of Law;

(vii) The reliefs sought by the Respondent are for specific performance of the Digicel Agreement and mandatory Injunction to direct Applicant to acknowledge Respondent's matching on offer which needs to be determined by Court;

(viii) Subsequently if there is a need for any issue or matters to be referred to experts either party may apply to Court pursuant to Order 40 of the High Court Rules.

3.40 For the reason stated at paragraphs 3.32 to 3.39 above I exercise by discretion to refuse to stay the proceedings.

4.0 Conclusion

I make following orders:-

(i) Defendant/Applicant's Application for Stay of Proceedings by way of Summons dated 11 February 2014 be dismissed and struck out;

(ii) Costs of the Application be costs in the cause.

......................
K. Kumar
Judge

At Suva
21 February 2014