N11320

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WS NO. 431 OF 2023

BETWEEN
PN ELECTRICAL LIMITED
Plaintiff

AND
MATRIX CONSTRUCTIONS (PNG) LIMITED
First Defendant

AND
AIR NUIGINI LIMITED
Second Defendant

WAIGANI: COATES J
06 JUNE 2025

ARBITRATION – First Defendant joined the Second Defendant claiming it has a cross-claim – First Defendant alleged arbitration pursuant to arbitration clause finalised with no resolution to cross-claim – incontrovertible evidence that arbitration has not finished – First Defendant abuses court process in previous hearing on same matter – Second Defendant seeks to be removed as a party – First Defendant seeks judgement in default.

COSTS – costs awarded on solicitor-client basis as First Defendant declared vexatious in relation to this proceeding against Second Defendant.

Held
While an arbitration is underway, even though parties have let the matter lie, the court should not deal with the same matters upon an application to it.

Cases cited
Telikom v ICCC & Digicel (2008) SC906
Digicel (PNG) Limited v Commissioner General of Internal Revenue: [2019] PGNC 378
Timothy Patrick v. Pepi Kimas (2010) N3913
Gulf Provincial Government -v- Baimuru Trading Pty Ltd [1998] PNGLR 311
Concord Pacific Ltd -v- Thomas Nen [2000] PNGLR 47
Rex Paki v. Motor Vehicles Insurance (PNG) Ltd (2010) SC1015

Counsel
T Kuma for the plaintiff, excused from this hearing
A Jerewai for the first defendant
C Joseph for the second defendant

DECISION

1.	COATES J: The substantive proceeding between the plaintiff and the first defendant concerns monies retained under a subcontract agreement for electrical works on an Air Niugini residential development near Jacksons International Airport in Port Moresby.

2.	The initial proceedings were between the plaintiff and the first defendant.

3.	I was persuaded to have the second defendant, Air Niugini, joined on 6 November 2024, the application being merely to join as a defendant because of an alleged set-off against the plaintiff’s claim. 

4.	I was also told that an arbitration between the first and second defendant had failed.

5.	On the day set to hear two Notices of Motion, counsel for the second defendant put before the court evidence that the arbitration had not failed – with some issues having been heard and decided and others simply left in abeyance.

6.	The second defendant, on that basis, also submitted that a cross-claim being claimed was something different from merely being a defendant with a set-off, a matter I do not need to deal with now, given the following matters I will address.

7.	For the purposes of this application the plaintiff was excused from attending as the matters did not concern it.

MOTIONS BEFORE THE COURT

8.	There are two notices of motion before the court.

9.	For clarity I will refer to the first defendant as Matrix and the second defendant as Air Niugini.

10.	The second defendant, Air Niugini, filed a Motion on 5 February 2025 seeking that proceedings against it be dismissed and that it be removed as a party.

11.	The basis for the Motion being that the proceeding is an abuse of process - as the matter is before an arbitrator, thus leaving the same matter within the legal system being dealt with by an arbitrator as well as the court. 

12.	The first defendant Matrix filed a Motion on 14 March 2025 seeking judgement in default against Air Niugini.

13.	The basis for the claim is that the Air Niugini had not filed a defence after being joined.

14.	Matrix Constructions seeks payment as a default judgment in the sum of K1,753,447.13 although that is not stated in the Notice of Motion, the figure coming from the alleged cross-claim.

BACKGROUND APPLICABLE TO THE FIRST AND SECOND DEFENDANTS

15.	Air Niugini and Matrix executed a Construction Performance Agreement on 13 August 2013 for work on an Air Niugini residential building at Jackson’s Parade, near Jacksons International Airport. 

16.	Clause 9 of the agreement provided for arbitration in the event of a dispute, such providing for notices to be given detailing the issues, determining the arbitrator and the following and relevant clause that “The award made by such arbitrator shall be final and binding on both parties. Such award is to be a condition precedent to any legal proceedings which shall be limited to enforcement of the award.”

17.	A further agreement executed 31 March 2017 also specified the holding of some money in retention by Air Niugini until all works were satisfactorily completed.

18.	 A dispute arose between the parties and the arbitration clause was applied.

19.	Matrix, by letter dated 23 September 2017, gave notice to Air Niugini that it would refer the matter to arbitration pursuant to clause 9.01 of the agreement.

20.	The parties agreed on a former judge of the Supreme Court of Queensland, Mr Richard Chesterman KC, to arbitrate the dispute.

21.	All of the necessary documents to have the points of claim, a number of separate disputes, were put before Mr Chesterman and a number of final decisions were made by him.

22.	The outcome of each and every point of claim between the parties as determined by Mr Chesterman are not relevant here, and were not put before me as being relevant, however, it is apparent from the submissions that the decisions generally favoured Air Niugini, as well as orders going to costs.

23.	Relevant here is that Matrix ventilated what is said to be this set-off before the arbitrator.

24.	That being said, and of great and decisive relevance, the arbitration has not been completed, a condition precedent before bringing the matter to court, and then only in relation to enforcement.

25.	Further, while the arbitration was on foot, Matrix had brought a very similar application before this court which was dismissed as an abuse of process by his Honour Deputy Chief Justice Kandakasi, because the matter appeared to be before Mr Chesterman. 

26.	In his judgement given 9 February 2023, Kandakasi DCJ stated “The arbitration… has concluded only in part… it is settled law as learned counsel for the defendant says per the Supreme Court decision in Telikom v Digicel [Telikom v ICCC & Digicel (2008) SC906] which arose out of a primary decision by myself in the National Court, which says … if issues have gone before arbitration or to a court of law and the issue has been determined, that remains determined. No party can agitate that, except in the usual way of trying to get around such findings or determination. And when a party does issue fresh proceedings, that amounts to duplication and therefore, abuse of the process of the court.”

27.	This decision was appealed and the appeal was dismissed.

28.	In the affidavit of Mr Benneth Kome, Chief Legal Officer of Air Niugini, filed 5 February 2025, correspondence from Mr Chesterman to Air Nuigini’s lawyers, properly copied to Matrix’s lawyers, is attached as an exhibit, dated 26 November 2021.

29.	I will produce the correspondence in whole, because it puts into context the nature of the abuse of process which is being claimed here. The letter states:

“Dear Mr Griffiths, I acknowledge receipt of your most recent email on the topic of the status of the arbitration which I conducted between Air Niugini and Matrix Constructions (PNG) Limited.
I understand that the Honourable Deputy Chief Justice Kandakasi has asked for a clear answer to what appears to be a contest about the status.
I endeavoured to answer the Deputy Chief Justice’s questions in my earlier responses to your emails. I gather those responses may not have been put before the Deputy Chief Justice.
Will you please bring them to his Honour’s attention when you put my present response before the court. I would not like it to be thought that I did not respond to a request for information from the National Court. 
To the extent that my previous emails did not address the particular questions asked by the Deputy Chief Justice I say that:

1.	The arbitration is partially concluded. The part which is concluded is the claim which Matrix Constructions bought (by counter-claim) against ANG [Air Niugini]. The subject matter of that claim is, on my reading of the claims, identical to that advance by Matrix Constructions in WS180 of 2020 in the National Court. The conclusion of that part of the proceeding was adverse to Matrix Constructions. That is, Matrix Constructions claim for the payment of monies alleged to be due under the contract between the parties was dismissed. The award I made decided that Matrix Constructions had no right to be paid any of the monies it claimed.

2.	That part of the arbitration which has concluded comprised the bulk of the dispute between the parties.

3.	The part which is not concluded consists of a ANG’s claims for
(a)	Liquidated damages for delay,
(b)	damages for defective work; and
(c)	Matrix Construction’s claim for the return of the retention monies.

4.	The issues in the three claims are interdependent. The evidence relevant to (a) and (b) will also determine (c).

5.	I cannot say when the remaining part of the arbitration will be determined. Since the award dismissing Matrix Construction's counter-claim was made the parties have shown no interest in proceeding with the remnant claims. I think it is very unlikely that I will ever be asked to make an award on them. However, ANG has asked me to retain my appointment as arbitrator in case it does decide to prosecute its claims, and I have agreed.”

30.	In considering point 1 and point 3 (c) of that correspondence, this is the matter which was brought before the Deputy Chief Justice and the same matter bought before me.  Point 4 of the letter indicates that determination of the retention monies is dependent on the finding of an assessment of damages for delay and defective work.

31.	What that means of course is that, should the arbitrator be correct in that assessment, this court was merely being asked to determine the return of the retention monies to Matrix – in other words, only part of the case was being put before this court.

32.	In its response to the Notice of Motion seeking to have Matrix’s claim dismissed, the primary submission for Matrix was that there was inadequate evidence of the arbitration having been concluded and that Air Niugini’s Notice of Motion is the abuse of process.

33.	Counsel for Matrix did argue that the motion was defective for not meeting the requirement of Order 12 Rule 40 (1) for not disclosing a reasonable cause of action and such cause was not specified or “lumped” together, as he put the case.

34.	This type of technical argument is deeply flawed.

35.	On reading draft order 1 in the Notice of Motion, it is immediately apparent that what is being claimed is that there is no case because there is no reasonable cause of action, and/or the proceeding is frivolous or vexatious, and/or the proceeding is an abuse of process – per Sub-rule (1) of Order 40.

36.	Order 40 ends with the words, after claiming no reasonable cause of action, or frivolity or vexatiousness or an abuse, with “The Court may receive evidence on the hearing of an application for an order under Sub-rule (1).

37.	That means of course that it will be the evidence which will be used to determine the claim.

38.	That part of Matrix’s case cannot succeed as Air Niugini, relying on the correspondence above which is part of the correspondence of the arbitration, as well as dismissal of the matter by the DCJ, provides the evidence relevant and cogent to its application.

39.	The evidence was not objected to by Matrix, nor could it be as it is relevant and cogent.

40.	As to the claim that Air Niugini’s Notice of Motion, pursuant to Order 4 Rule 49.9 applies only to interlocutory orders and not final orders and so cannot be allowed, is also misconceived.

41.	Air Niugini is not seeking substantive relief in the sense that such will end a dispute between itself and Matrix.

42.	Air Niugini is claiming that it has now been wrongly joined and such joinder shows no reasonable cause of action, that proceedings are frivolous and vexatious and that they are an abuse of process, as much of the dispute between the parties has been determined elsewhere and the arbitration remains open to resolve the rest of the dispute.

43.	Air Niugini claims that the legal concept of res judicata should be applied to this matter and referred to a number of cases as well as the principles, as well as raising the concept of issue estoppel arising as there are two cases occurring on the same matter.

44.	In my view this court does not have to examine those issues, and I noted that Kandakasi DCJ while referring to such matters, required more evidence.

45.	Firstly, resolution of any dispute is apparent on a proper reading of clause 9 of the agreement which puts or dictates or forces dispute resolution before an arbitrator.

46.	In fact, counsel for Matrix did not argue that the clause had any other meaning – his case being that the arbitration was over and as some issues were unresolved, it was properly a matter for the court.

47.	That he ignored the statement by the arbitrator that he had little faith in the matter coming back before him, and that Air Niugini had asked and he agreed to allow the matter to remain open, was not adequately addressed by Matrix.

48.	It is apparent that Air Niugini is (allegedly) holding retention monies and that there is a dispute, retention monies being held to address costs with regard to remediation of the subject matter of the dispute.

49.	That being the case, it is Matrix which comes to court stating that there is a dispute still, but with no admissible evidence of why it will not go back to the arbitrator to resolve the issue.

50.	Mr Chesterman clearly stated how the retention monies were tied up with liquidated damages for delay and damages for defective work.

51.	The machinery for resolution is the arbitration clause the parties agreed to use and this has legislative backing.

52.	The agreement was executed in 2013 when the Arbitration Act 1951 applied and since then the Arbitration (Domestic) Act 2024 has been passed, subsuming the former Act where there is conflict, see s.66 of the new Act.

53.	Further, the new Act very clearly has as its objectives, under s.2, encouragement of arbitration as a method of resolving disputes, redefining the limits of judicial review and stating that the court must have regard to the parties having an agreement for arbitration and whether such is an appropriate method of dispute.

54.	In line with those objectives, and the evidence that the arbitration has not ended, this matter is subject to the agreement of the parties and there is nothing by way of evidence that the arbitration process is not an appropriate method of dispute.

55.	That Matrix may have had a number of decisions unfavourable to it by the arbitration process is not the measure or evidence to determine that a court determination is an appropriate, or better method of dispute resolution in this case.

56.	Section 15 of the new Act deals with that circumstance where a matter subject of an arbitration agreement comes before the court.

57.	This matter does not purport to come before the court under s.15 – it just arrived despite being dismissed previously, and consequently it is not a matter the court will refer to arbitration as it is already before an arbitrator.

58.	The court has not been asked to make any findings about the arbitration agreement as to whether it is null and void, inoperative or incapable of being performed, unsurprising, because decisions have already been made of a final nature by the arbitrator.

59.	The section gives the court the power to stay this matter however so does Order 12 Rule 40.

60.	The Arbitration (Domestic) Act is legislative assistance the court may utilise when the matter is properly before it and until then, the Act insists that the court encourage the arbitration agreement the parties entered. There is no case here or rather evidence produced to show that the court should not attend to the Act’s objectives in any way other than to encourage the arbitration to be completed.

61.	Given the incontrovertible evidence from the correspondence that a cross-claim for retention monies is still an outstanding issue, to be determined when also considering liquidated damages for delay and damages for defective work, and the former application Matrix made before the DCJ, Air Niugini has proven its case on the balance of probability that there is no reasonable cause of action, that the proceedings are frivolous and vexatious and that this is an abuse of process.

62.	Only one party, in particular Matrix, needs to make a decision to pursue what it says rightfully belongs to it, or desist with its claims. 

63.	Given referrals here to the Arbitration (Domestic) Act 2024, one could envisage a further application by Matrix.

64.	In case Matrix forms the view that it could simply tell the arbitrator the matter has ended, I have some real doubt that such a course would simply allow the matter back before the court other than on an enforcement, but that is something no doubt Matrix will consider. It is not up to Air Niugini to do anything further, given that it has indicated it is ready to continue the arbitration. 

65.	Without Matrix taking the step to continue the arbitration, as the matter has remained open before the arbitrator, any further application to court would more likely than not simply be a further abuse of process, wasting valuable court time.

66.	To prevent that, and only in that case, I will declare that Matrix is a vexatious litigant, and order that any further proceedings require leave of the court, in order to protect prevent further frivolous claims as a matter of public policy, pursuant to its inherent power to control its own proceedings under s.166 and s.155(4) of the Constitution.

67.	I will remove Air Niugini from the proceedings and consequently order that the first defendant amend its defence to exclude any reference to Air Niugini.

68.	In light of the decision, I will dismiss Matrix’s Notice of Motion for default judgment against Air Niugini.

COSTS

69.	The second defendant seeks costs on an indemnity basis.

70.	Costs are discretionary but there can be no doubt that costs will follow the events here, however the question is whether they should be awarded on an indemnity basis.

71.	Order 22 Rule 35 of National Court Rules applies to costs on a solicitor and client basis which have been referred to in the sense of awarding costs on an indemnity basis, as the rule allows for all costs other than those which are unreasonable, unless incurred with the approval of the client.

72.	Digicel (PNG) Limited v Commissioner General of Internal Revenue Hartshorn J Digicel (PNG) Limited v Commissioner General of Internal Revenue [2019] PGNC 378 stated:

“12. In regard to an application for costs on a solicitor client basis or on an indemnity basis, in Timothy Patrick v Pepi Kimas (2010) N3913, Gavara Nanu J said as to costs being awarded on a solicitor client basis:

“…the applicant must demonstrate that there are grounds upon which such award may be made; for instance, the applicant having to defend proceedings which are frivolous and vexatious and are an abuse of process. See, Gulf Provincial Government -v- Baimuru Trading Pty Ltd [1998] PNGLR 311; or that the applicant is being dragged into the Court and is made to suffer and incur unnecessary costs. See, Concord Pacific Ltd -v- Thomas Nen [2000] PNGLR 47.”

13. In Rex Paki v. Motor Vehicles Insurance (PNG) Ltd (2010) SC1015, the Supreme Court stated that:

“The award of costs on an indemnity basis is discretionary.   An order for costs on an indemnity basis may be made where the conduct of a lawyer or a party to the proceedings is so improper, unreasonable or blameworthy that he should be so punished by such an order.  The question is whether the conduct of the appellant in this matter is such that it caused the respondent to incur unnecessary costs.”

73.	This is a matter where the first defendant has been unwilling to utilise the arbitration case still on foot and has attempted to disregard its own agreement to settle disputes by arbitration.

74.	Matrix has taken a totally unreasonable approach to this matter, has incurred costs by improperly joining Air Niugini, has already had a similar case to be determined as an abuse of process and has wasted valuable court time – time which could have been offered to deserving parties who require their matters to be resolved.

75.	In those circumstances it is properly a case for an order above the usual costs order and I will award costs on a solicitor client basis.

ORDERS

1.	The Notice of Motion filed on 14 March 2025 by the first defendant against the second defendant is dismissed.
2.	Pursuant to Order 5 Rule 9 of the National Court Rules, the second defendant is removed as a party in preceding WS No. 431 of 2023 (IECMS-CC4).
3.	The first defendant shall amend its defence to exclude the cross-claims against the second defendant and will file and serve an amended defence within 14 days of the date of these orders.
4.	Pursuant to s.166 and s.155 (4) of the Constitution, the first defendant is declared to be a vexatious litigant with regard to litigation against the second defendant for the purposes of the claim made here and until it exhausts all avenues of dispute resolution pursuant to the arbitration agreement made 13 August 2013 must seek leave of the court to litigate any matter coming within the arbitration agreement before proceeding to serve the second defendant.
5.	Pursuant to Order 22 Rule 35, the first defendant shall pay the second defendant’s costs of and incidental to the proceedings on a solicitor client basis as agreed or as taxed.
________________________________________________________________
Lawyers for the plaintiff: Bradshaw Lawyers 
Lawyers for the first defendant: Jerewai Lawyers
Lawyers for the second defendant: Ashurst Lawyers