Murdoch v Food For Less [2019] KIHC 114; Miscellaneous Application 80 of 2019 (30 October 2019)

IN THE HIGH COURT OF KIRIBATI 2019

MISCELLANEOUS APPLICATION NO 80 OF 2019
(ARISING FROM HIGH COURT CIVIL CASE NO. 47 OF 2014)

[TOM MURDOCH
[KIRI TRADING LTD APPLICANTS
[
BETWEEN [AND
[
[FOOD FOR LESS RESPONDENT

Before: The Hon Chief Justice Sir John Muria

23 September 2019

Ms Kiata Kabure for Applicants
Mr Banuera Berina for Respondent

JUDGMENT

Muria, CJ: The applicants/defendants in this case have applied to set aside the Award made by the arbitrator on 25 May 2018. By an order of this Court made on 3 June 2019 and signed on 6 June 2019 the Award was ordered to be enforced as a judgment of the High Court.

Background

2. On 25 August 2010, the plaintiff (a Fijian incorporated body) and the first and second defendants entered into a Franchise Agreement (“the agreement”). The objective of the agreement is set out in Clause 2(a) which states as follows:

“2. Purpose of this Franchise Agreement

The purpose of this Franchise agreement is to set up an “Import, wholesale and retail business venture in Kiribati to be registered under the name “KIRI TRADING LTD” which will be owned by Mr Tom Murdoch Jr and Mr Ngatau Neneia, and from here onwards to be known as the “Business” and Food4Less will be the Franchiser with the following terms and agreements:

(a) Food 4 Less will provide all the trading goods at a price at least 4% cheaper than what others can supply in Kiribati or as mutually agreed together with its computer software package, management and training of local staffs etc. for the purpose of running of the ‘Business’ successfully in Kiribati. Kiri Trading Ltd would provide Land & Building in both Kiribati and Christmas Island as well”.

3. Pursuant to the agreement, the plaintiff supplied goods to the defendants. As of 31 January 2013, the defendants owed the plaintiff the sum of $480,939.27 FJD in unpaid goods and other charges. Demands for payment were made by the plaintiff to the first and also to the second defendants who is a guarantor under Clause 8 of the agreement.

4. The defendants, in breach of the agreement, failed to pay the amount owing to the plaintiff for goods supplied. Consequently, under the agreement, the plaintiff notified the defendants on 18 October 2013 that it had intended to take the matter to arbitration.

5. The plaintiff first brought its claim to this Court in Civil Case No. 47/14. However on 24 October 2016, the parties agreed to refer their dispute to a sole arbitrator, Ms Tetiro Semilota. The High Court (Zehurikize J) adjourned the case to enable the arbitration process to be pursued.

6. The dispute was heard and determined by a sole arbitrator,
Ms Tetiro M Semilota who made the Award in her decision delivered on
25 May 2018. The arbitrator found on the evidence before her, that the respondents/defendants were liable to pay to the claimant/plaintiff the balance of the purchase price in the sum of $480,939.27 at 12.5% interest from
January 2013 and costs to be agreed.

7. There is no reference as to the currency in which the amount awarded is expressed. However, it should be in Fijian dollars (FJD) as shown by the claim itself.

8. Due to non-compliance with the Arbitrator’s Award, the plaintiff sought and was granted an order dated 6 June 2019 to enforce the Award as a judgment of the High Court.

Applicants/defendants argument for setting aside

9. The main argument relied upon by Ms Kabure on behalf of the applicants/defendants to set aside the arbitrator’s Award is that the arbitration should not have been done by a single arbitrator, but rather by more than one arbitrator. Counsel relied on Clause 16 of the Franchise Agreement which states as follows:

“16. Arbitration

Any dispute relating to the interpretation or performance of this Franchise Agreement shall be resolved at the request of either party through binding arbitration. Arbitration shall be conducted in Kiribati in accordance with the then existing rules of the Kiribati Government or any other appropriate arbitration rules.

Judgment upon any award by the arbitrators shall be entered for enforcement by the High Court of the Kiribati Government having jurisdiction over it. Both the parties hereby agree that this agreement to arbitrate is irrevocable”. (underlining added).

10. In response, Mr Berina of Counsel for the respondent/plaintiff, argued that Clause 16 does not restrict the rights of the parties to choose a single arbitrator if they so agreed as in the present case. Counsel also submitted that as the parties agreed to a sole arbitrator, the defendants cannot now retract the consent that they had given on 24 October 2016.

11. Further, Mr Berina contended that section 8 of the Arbitration Act 1990, deems it a reference to a single arbitrator unless a reference is expressly made for more than one arbitrator. As such the intention of section 8 is deemed always to have a reference of an arbitration to a single arbitrator, unless the contrary intention is expressed by the parties to the arbitration agreement.

Decision

12. The first question for the Court to decide is whether Clause 16 relied upon by the applicants/defendants that any arbitration between the parties in this case must be before more than one arbitrator. In the Court’s view Clause 16 of the Franchise Agreement between the parties in this case does not bear the construction contended for it by the applicants/defendants. I accept the argument put forward by Mr Berina that Clause 16 does not restrict the parties’ right to choose a sole arbitrator instead of more than one arbitrator.

13. There is no suggestion in the second paragraph of Clause 16 that the arbitration must be done by more than one arbitrator. The use of the word “arbitrators” in the second paragraph of the Clause bears no relation to the arbitration which the parties agreed to and entered into in this case. The word “arbitrators” in the paragraph in my view is used generically, referring to judgment upon “any award” made by arbitrators, be it the award made in the present case by a sole arbitrator or any other award made by a panel of arbitrators. The applicants’ argument on Clause 16 cannot succeed.

14. If, however, for argument’s sake that Clause 16 of the Agreement envisages a requirement of more than one arbitrator to deal with the dispute between the parties in this case, the parties have waived their right to choose more than one arbitrator when they agreed to have a sole arbitrator to consider and determine their dispute. The case of Patel –v- Patel [1992] FJCA 22 referred to by Mr Berina is in point on the issue of waiver. In that case, Clause 15 of the Partnership Agreement provided for an interest at the rate of six pounds (6.0.0.) per centum per annum payable on profits. At a meeting between the parties everyone agreed not to implement Clause 15. The plaintiff never asked for interest. The Partnership was dissolved five years later and the plaintiff now claimed interest. The Court found that the plaintiff had waived her right to claim interest in the partnership. The principle clearly applies in the present case, if Clause 16 of the Franchise Agreement were to be given the construction suggested by the applicants/defendants.

15. An additional submission was filed on behalf of the applicants/defendants on 29 October 2019 in which reliance was placed on section 7 of the Arbitration Act. That section is concerned with staying Court proceedings where a dispute is submitted to arbitration process. Subsection (1) states that:

“7(1) If any party to an arbitration agreement, or any person claiming through or under him, commences any legal proceedings in any court against any other party to the agreement, or any person claiming through or under him, in respect of any matter agreed to be referred, any party to those legal proceedings may at any time after appearance, and before delivering any pleadings or taking any other steps in the proceedings, apply to that court to stay the proceedings”.

16. Subsection (2) then empowers the Court to stay Court proceedings and allow the parties to refer them to arbitration in accordance with their agreement. The application has to be made by a party to the agreement before the Court can make an order staying proceedings. No application has been made for stay of proceedings in this case. So section 7 of the Act did not arise in this case.

17. Ms Kabure referred the Court to the case of Sheetal Investment Ltd
–v- ANZ Banking Group Ltd [2011] FJHC 271; HBC 227.2010 (13 May 2011) and the other cases cited in that case. The distinguishing features in those cases from the case before this Court now, is that applications were actually made in those cases to challenge the Court proceedings for by-passing the arbitration proceedings. In the present case, neither of the parties to the Franchise Agreement made any application of the sort provided in section 7 of the Act. The process provided in section 7 does not operate automatically. Any of the parties “may apply to the Court” and the Court “may make an order” staying proceedings. A party has to activate the process before section 7 can have any application in this case. There is no basis to rely on section 7 of the Arbitration Act in this case.

18. Section 8 of the Arbitration Act supports the choice of the parties in this case to agree to a sole arbitrator. The parties were free to choose the number of arbitrators in Clause 16 of the Agreement and they chose a sole arbitrator to conduct a binding arbitration between them. Neither party can now retract from that binding decision.

19. In so far as the application to set aside the arbitrator’s award, the applicant relied on one ground only which is already dealt with above. That is the end of it. However, the affidavit in support of the application raises other issues including the question of interest and that the Franchise Agreement was a misrepresentation. The applicant alleged that the negotiation on the Agreement had not yet completed when they (applicants) were made to sign only the last page of the Agreement. I am afraid this argument is too late in the day to make. It had not been raised before the arbitrator and cannot now be made in this application.

20. There is a further point that needs to be made (although not for the purpose of deciding this application) which the parties, especially the applicant in this case, should bear in mind. Section 17 of the Arbitration Act makes it clear that in every arbitration agreement the award made by the arbitrator “shall be final and binding on the parties and the persons claiming under them”. This was an arbitration and the parties in this case have consented to a binding arbitration by a sole arbitrator. Both parties are bound by the decision of the sole arbitrator.

21. On the issue of interest, the applicants complain in his affidavit in support of their application that the 12.5% interest rate per annum is excessive. No argument has been advanced to justify that it was excessive apart from comparing it with the Bank’s lending rate in Kiribati. However, the 12.5% interest was the rate agreed to by the parties in Clause 4(b) of the Agreement. The parties are bound by the interest rate they agreed to. Only where the parties have not agreed to a rate of interest, that the rate of interest applicable in Kiribati on judgment debt is 5% per annum. See Attorney-General –v- Kum Kee [2011] KICA 8; Korieta –v- Broadcasting and Publications Authority [2011] KIHC 40; Civil Case 08 of 2011
(31 October 2011).

22. The review power of the Court is preserved under section 22 of the Act. However in the present case, it would take a strong and a convincing case for this Court to set aside the award by the sole arbitrator. The case for setting aside the award by the arbitrator has not been made out.

23. For the above reasons and save for the fact that the amount in the award in the sum of $480,939.27 is in Fijian Dollars (FJD), the application to set aside the award made by the sole arbitrator, Ms Tetiro Semilota, in this case is refused.

24. Costs to the respondent to be taxed if not agreed.

Dated the 30^th day of October 2019

SIR JOHN MURIA
Chief Justice