Unreported National Court Decisions
N1919
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
WS 225 OF 1999
BETWEEN: YAMA SECURITY SERVICE LIMITED
PLAINTIFF
AND: ANDREW WARUPI
FIRST DEFENDANT
AND: MOTOR VEHICLES INSURANCE TRUST
SECOND DEFENDANT
Waigani
Sevua J
30 June 1999
2 July 1999
PRACTICE AND PROCEDURE – Stay of proceedings – Action on contract – Arbitration clause – Power of Courts – Discretionary Power – Arbitration Act Ch. 46 – Termination of contract not subject to arbitration clause – Application dismissed with costs.
Cases Cited
Mauga Logging Company Pty Ltd –v- Okura Trading Co. Ltd [1978] PNGLR 259.
Counsel
J. Kuimb, for Plaintiff/Respondent
D. Lightfoot, for 1st Defendant/Applicant
J. Sirigoi, for 2nd Defendant
2 July 1999
SEVUA J: The first defendant, by way of notice of motion, has applied for an order that the whole proceedings in this suit be stayed pursuant to s.4 of the Arbitration Act, Ch. 46.
The plaintiff ‘s claim against the defendants in this proceedings, is for damages for breach of contract.  The evidence before me, from both the first defendant/applicant and the plaintiff, referred to a written contract dated 5th November, 1998.  A perusal of that agreement reveals that it is a security service contract between the plaintiff and the second defendant.
The first defendant/applicant relies on clause 10(c) and (d) of the agreement which I set out fully here.
“(c)    In the event of any misunderstanding or disagreement arising between the company and the Hirer out of this Agreement, the parties shall attempt to reduce the misunderstanding or disagreement by mutual consent.
(d)      However, in the event that the parties are unable to resolve the matter, the Arbitration Act (Chapter 46) apply.”
At the hearing of this application, I enquired of Mr Lightfoot what the “misunderstanding” or “disagreement” was that necessitated arbitration and Mr Lightfoot said termination of the contract was the misunderstanding or disagreement which should be referred to arbitration.  With respect, I do not agree with Mr Lightfoot.
Usually, a dispute as to the interpretation or application of a term of a contract is referred to arbitration pursuant to an arbitration clause.  In my view, termination of a contract is usually not a dispute requiring arbitration, unless the parties to the contract specifically agree to it in the contract.  That is not the case here.
Even if I am wrong on that view, I find it difficult to follow the logic of the applicant’s argument.  On par 3 of his affidavit in support of this application, he denies the existence of the contract.  I note too that in his defence, the applicant denies par 4 of the plaintiff ‘s statement of claim which relates to allegations that he entered into a written contract with the plaintiff.
If he denies entering into a written agreement with the plaintiff, and denies the existence of such a contract, how does he reconcile his denial with his reliance on clause 10(c) & (d) of a contract?
In my view, the applicant either acknowledges the existence of the contract and that he executed it thus placing reliance on the arbitration clause, or if he denies executing the contract and denies its existence, he cannot rely on the arbitration clause.  The plaintiff is simply saying, no there is no contract, but I rely on the arbitration clause if there is a contract.  In my view, this is outrageous and runs contrary to logic and common sense.  Its akin to a rape trial where the defence counsel says his client did not rape the prosecutrix, but if he did, it was by consent.  What nonsense!
I am of the opinion that a termination of a contract or a breach of contract is not subject to arbitration under an arbitration clause.
Mr Lightfoot relies on the decision of His Honour, Kearney, J. in Mauga Logging Company Pty Ltd –v- Okura Trading Co. Ltd [1978] PNGLR 259.  Whilst I agree with His Honour that the Court has a discretionary power to stay proceedings, I am not prepared to follow his decision.
The plaintiff has a right in law to claim damages for breach of contract.  He has exercised that right and come to this Court to seek redress.  He should be permitted to have his right fully determined by the Court.  Contrary to what Mr Lightfoot said, I am unable to agree that an arbitrator has power to determine liability.  That is not found in s.7 of the Arbitration Act, which stipulates the powers of an arbitrator.
I find that termination of the contract is not subject to the arbitration clause.  The first defendant’s application is therefore dismissed with costs to the plaintiff.
Lawyer for plaintiff: Warner Shand
Lawyer for 1st & 2nd Defendants: Carter Newell
Lawyer for 3rd Defendant: Thirlwall Aisi & Koiri