Tri-Star Engineering Company Ltd v Alu-Plastics Ltd and Others

• Jurisdiction: Jamaica
• Judge: Mangatal J
• Judgment Date: 03 May 2013
• Court: Supreme Court (Jamaica)
• Docket Number: CLAIM NO. 2013 CD 00024
• Date: 03 May 2013

[2013] JMCC Comm. 9

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

IN THE CIVIL DIVISION

CLAIM NO. 2013 CD 00024

Between Tri-Star Engineering Company Limited

Claimant

and

Alu-Plastics Limited

1st Defendant

and

Pamela Josephs

2nd Defendant

and

Judith Josephs

3rd Defendant

Mr. Jerome Spencer and Mr. Hadrian Christie instructed by Patterson, Mair, Hamilton, Attorneys-at-Law for the Claimant.

Mr. Maurice Manning , Ms. Grace Lindo and Ms. Michelle Phillips instructed by Nunes, Scholefield, De Leon & Co, Attorneys-at-Law for the Defendants.

APPLICATION FOR STAY OF PROCEEDINGS — SECTION 5 ARBITRATION ACT — WHETHER FACT THAT CLAIM MADE AGAINST DIRECTORS OF COMPANY IN ADDITION TO COMPANY SHOULD PREVENT REFERRAL —

AFFIDAVIT EVIDENCE ALLOWED AFTER MATTER HEARD AND JUDGMENT RESERVED-TO DEAL WITH READINESS AND WILLINGNESS TO PROCEED AT TIME OF COMMENCEMENT OF PROCEEDINGS — WHAT PROOF REQUIRED OF READINESS AND WILLINGNESS-STAGE DISPUTE/BREAKDOWN HAD REACHED WITH PARTIES RELEVANT-WHETHER GOOD REASON NOT TO REFER TO ARBITRATION

IN CHAMBERS

Mangatal J

1 By Notice of Application for Court Orders filed March 15 2013, the 1st Defendant Alu-Plastics Limited (‘Alu-Plastics’), the 2nd Defendant Pamela Josephs, and the 3rd Defendant Judith Josephs (collectively ‘the Josephs’), applied for the following relief:

‘….3. That there be a stay of proceedings pursuant to section 5 of the Arbitration Act, pending the submission of the matters in dispute herein to arbitration.’

2 The stated ground of the application is that the Claimant Tri-Star Engineering Company Limited (‘Tri-Star’) and Alu-Plastics are parties to a contract that provides that in the event of disputes or differences arising, the matters be referred to arbitration. Alu-Plastics disputed Tri-Star's termination of the Agreement and claimed damages. The application has been vigorously opposed by TrI-Star.

3 Other aspects of the application concerned a freezing order which was first granted by me ex parte on March 1st 2013, and have already been dealt with on earlier hearing dates. My written decision can be found at neutral citation [2013] JMSC Comm. 7. The allegations and background have been set out in that judgment in detail.

4 The clause of the Sub-Contract that is relevant to the present issue is Clause 15, headed ‘Disputes’ and Sub-Clause 15(a) provides as follows:

‘15. DISPUTES

(a) In the event of any dispute or disagreement between the parties touching and concerning this Agreement the same shall be referred to a single Arbitrator to be agreed upon by the parties.’

5 Section 5 of the Arbitration Act provides as follows:

‘5. If any party to a submission, or any person claiming through or under him, commences any legal proceedings against any other party to the submission, or any 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 a Court or a Judge thereof, 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 for the proper conduct of the arbitration, may make an order staying the proceedings.’

THE DEFENDANTS' SUBMISSIONS

6 The Defendants' Attorneys say that they have brought this application for a stay pending referral to arbitration pursuant to clause 15(a), which was clearly agreed by the parties to it and thus it was the common intention of both Tri-Star and Alu-Plastics that any disputes or disagreements between the parties would be referred to arbitration. Mr. Manning submitted that the words of the clause are very wide and cover the issues pleaded by Tri-Star.

7 It was further submitted that Alu-Plastics is a party to the Sub-Contract and that the Josephs are directors of Alu-Plastics and are therefore parties claiming through Alu — Plastics. The submission continues that they are entitled to have the issue of whether the mobilization payment was for the exclusive purpose of procuring raw materials determined by the arbitrator. It was further submitted that all other claims flow from this finding of fact. Tri-Star's claim against Alu-Plastics is for breach of trust and in the alternative breach of contract, and against the Josephs for dishonest assistance in the breach of trust by Alu-Plastics. It was contended that the disputes involve the purpose for which the mobilization payment was to be used and thus fall squarely within the matters of the Sub-Contract.

8 Mr. Manning referred to and relied upon a number of cases, including Tauton Collins v. Cromie and others [1964] 1 W.L.R. 633, cited by Mr. Spencer on behalf of Tri-Star, as supporting a position that arbitration between Tri-Star and the three Defendants would be the most sensible solution. Counsel referred to page 637 of the judgment where Pearson L.J., while agreeing with the majority stated:

‘I still feel that the most sensible solution to the problem which has arisen in this case would be to have a tripartite arbitration in which the architect would be concerned as well as the employer and the contractors.’

As Mr. Manning points out, the tripartite arbitration could not occur because the arbitrator was not represented. However, Pearson L.J. felt it important to make the point ‘in case it might have some bearing in possible future cases.’

Counsel argued that the Josephs are clearly persons claiming through Alu-Plastics in accordance with section 5 of the Arbitration Act, and that arbitration would have the effect of resolving the issues between the parties.

9 Counsel further submitted that Tri-Star is now seeking to avoid arbitration in circumstances where it was the party that expressly provided for arbitration. Mr. Manning posited that Tri-Star cannot seek to avoid arbitration by joining third parties to the very dispute it has with a contracting party and then use the fact of joinder to argue multiplicity of claims.

10 It was further Mr. Manning's submission that in any event, the court enjoys an inherent jurisdiction to grant a stay generally and can do so in the instant case with regard to claims by persons who are not parties to the submission since the outcome of the submission to arbitration is binding on the parties. Therefore, no-one can proceed to assert or refute breach of trust since that matter would have been determined by the arbitrator.

11 Mr. Manning comments on the fact that Tri-Star, apart from claiming that reputation and questions of law being involved are reasons not to proceed to arbitration, has also relied upon expense as another factor. Reference was made by Counsel to the case of Ford v. Clarkson [1971] 2 All E.R. 454 where, Davies L.J., at page 454 A-B, and D-F stated:

‘ It is perfectly true that the Plaintiff in this case had, as it were, this arbitration clause imposed on him by the standard form of the Defendant's contract; but he did agree to it; and he is bound by it. I cannot see that the possible extra cost (and I am not very convinced that it would be all that extra) is a proper reason for refusing a stay…. Finally and somewhat surprisingly counsel for the plaintiff submitted that there was no reason why this case should go to arbitration. Edmund Davies LJ pointed out, rightly of course, that from the defendants' point of view there would be every reason for a dispute such as this to be heard in private rather than in public when it might be given a great deal of publicity. The real answer to that point is that it is no good saying that there was no good reason why this case should go to arbitration. The boot is on the other leg. The parties have agreed, in the view I take of the clause, to go to arbitration. The plaintiff has to show solid ground why, having made that agreement, he s hould not be bound by it.’

TRI-STAR' S SUBMISSIONS

12 It was Tri-Star's submission that Alu-Plastics has not met the requirements of section 5 of the Arbitration Act and therefore that the application for a stay ought to be refused.

13 Reference was made by Mr. Christie, one of the Counsel appearing for Tri-Star, to the work of Sir Michael Mustill and Stewart Boyd, The Law and Practice of Commercial Arbitration in England , 2nd Edition, at page 467 and Counsel referred to what he described as a checklist of requirements provided by the learned authors. When all of the requirements of the section are considered, it was submitted that Alu-Plastics' application should fail because:

• a. All the applicants are not parties to the arbitration agreement or a party claiming through it;

• b. This claim involves matters outside the Sub-Contract;

• c. The applicant has not demonstrated any readiness or willingness to do all things necessary to the proper conduct of the arbitration;

• d. There is sufficient reason why the dispute should not be referred to arbitration.

a. All the applicants not parties to the arbitration agreement

14 The only parties to the arbitration agreement are Alu-Plastics and Tri-Star. Counsel for Tri-Star therefore submit that the Josephs are not proper persons to bring this application. Therefore, the submission continues, even if Alu-Plastics were to succeed, the claim against the Josephs lives on. Counsel submit that for that very reason there is sufficient reason not to refer the matter to arbitration.

Response to Alu-Plastics argument regarding inherent jurisdiction

It was Tri-Star's position that the application made by all of the Defendants is expressly made pursuant to section 5 of the Arbitration Act, and not under the Court's inherent jurisdiction....