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PNG Forest Products Pty Ltd v Independent State of Papua New Guinea [1992] PGNC 111; [1992] PNGLR 85; N1058 (4 March 1992)

N1058

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

PNG FOREST PRODUCTS PTY LTD AND INCHCAPE BERHAD

V

THE INDEPENDENT STATE OF PAPUA NEW GUINEA AND JACK GENIA, MINISTER FOR FORESTS

Waigani
Sheehan J

4 March 1992

PRACTICE AND PROCEDURE - National Court - Motion to strike out claim - Grounds - No reasonable cause of action disclosed - Allegation of abuse of court process - National Court Rules Order 12 r 40.

PRACTICE AND PROCEDURE - National Court - Motion to strike out claim - Privity of contract - Illegality of clause pleaded - Whether purported claim relies on an unlawful letter on a ministerial discretion.

PRACTICE AND PROCEDURE - National Court - Plaintiffs' motion for continuance of restraining order.

Facts

The plaintiffs' motion by way of a writ of summons sought the continuance of an ex parte order made on 20 December 1991 restraining the defendants from further dispositions of timber and logging rights which were the subject matter of their pending (substantive) case, in which they claimed specific performance and damages under a contract they entered into.

The defendants, in response, sought motions that the plaintiffs' statement of claim be struck out on the ground that it failed to disclose a cause of action. In the alternative, the defendants sought orders to have the first plaintiff dismissed from the proceedings on the grounds that no privity of contract existed between that plaintiff and any of the defendants since it was not a party to any contract between them.

The defendants' motion was dealt with first.

Issues

1. Whether the plaintiffs' statement of claim fails to disclose any cause of action and, therefore, should be struck out under Order 12 r 40 National Court Rules. It reads:

"(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:

(a) no reasonable cause of action is disclosed;

(b) the proceedings are frivolous or vexatious; or

(c) the proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

(2) The Court may receive evidence on the hearing of an application for an order under sub-rule (1) of this Rule."

2. Whether the first plaintiff has any cause of action against the defendants.

3. Whether the plaintiffs' motion for the continuance of an ex parte order of 20 December 1991 restraining the defendants from further disposition of the timber and logging rights (the subject of their substantive case) can be upheld.

Held

1. A party has a right to have his case heard, as guaranteed by the Constitution and the laws of this country. Such a right cannot be lightly set aside. Hence, the National Court Rules are designed to enhance those rights and to ensure the prompt and fair disposal of matters coming before the court. For the same reason and in the interest of justice, the rules include prohibitions against abuse of the court process.

2. Quite apart from the powers given to the court by the National Court Rules O 12 r 40 to strike out or stay any proceedings which:

a) do not disclose a reasonable case of action; or

b) are frivolous or vexatious; or

c) are an abuse of the court process,

the Court also has an inherent jurisdiction to protect itself from abuse of its process.

If the court is satisfied that the conditions of O 12 r 40 are or have been established, it may strike out that offending action. Hence, it can in appropriate cases prevent a party from presenting its case in court or from defending one brought against it. But the refusal to try a party's claim or the striking out of its defence is not lightly done, and there has been a long history of case law determining what is a "reasonable" cause of action or defence and what is "frivolous or vexatious". See Republic of Peru v Peruvian Guano Company [1887] UKLawRpCh 186; (1887) 36 Ch D 489 per Chitty J, Hubbuck and Sons Ltd v Wilkinson, Heywood & Clerk Ltd [1898] UKLawRpKQB 176; [1899] 1 QB 86 per Lord Lindley MR;

3. An action should only be struck out in cases where "the cause of action is obviously and almost incontestably bad."

4. There is a distinction between seeking to have an action decided on a preliminary point of law and moving to have it struck out for want of a reasonable cause of action. See Hubbuck and Sons Ltd v Wilkinson Heywood and Clerk Ltd [1898] UKLawRpKQB 176; [1899] 1 QB 86 per Lord Lindley MR; Lonrho plc v Fayed [1991] 3 All ER 303 per Lord Bridge.

5. On the plaintiffs' motion for continuance of the restraining orders, if the orders were not continued, there would be no specific performance of the contracts pleaded if the plaintiffs succeed at trial. Furthermore, at this stage, there appears to be no prejudice to any party in continuing the orders sought. Accordingly motion granted.

Cases Cited

Allen v Gulf Oil Refining [1980] UKHL 9; [1981] 1 All ER 353.
Dyson v AG [1910] UKLawRpKQB 203; [1911] 1 KB 410.
Hubbuck and Sons Ltd v Wilkinson, Heywood & Clerk Ltd [1898] UKLawRpKQB 176; [1899] 1 QB 86.
Lonrho plc v Fayed [1991] 3 All ER 303.
Nagle v Feilden [1966] 1 All ER 689.
Republic of Peru v Peruvian Guano Company [1887] UKLawRpCh 186; (1887) 36 Ch D 489.

Counsel

E Anderson, for plaintiffs.
P Harricknen and J Wanjik, for defendants.

4 March 1992

SHEEHAN J: On 19 December 1991 the PNG Forest Products Pty Ltd, the first plaintiff, and Inchcape Berhad, the second plaintiff commenced proceedings against the State as first defendant and the Minister of Forests, the Honourable Mr Jack Genia, as second defendant. They claimed specific performance and damages under a contract between the parties regarding certain timber and logging rights in the Morobe Province.

The Court now has motions before it from both plaintiffs and defendants.

The plaintiffs' motion is for the continuance of an ex parte order made on 20 December 1991 restraining the defendants from further disposition of the timber and logging rights the subject of their claim.

The defendants' motions seek that the plaintiffs' statement of claim be struck out as failing to disclose any cause of action. In the alternative, the defendants seek orders dismissing the first plaintiff from the proceedings on grounds that no privity of contract exists between that plaintiff and any of the defendants since it is not a party to any relevant agreement or contract between them.

Though it would seem to have been more appropriate to have heard the defendants' motion first, by agreement of the parties it was the plaintiffs who first presented their case.

Counsel for the plaintiffs argued that the facts and law pleaded and sworn to readily supported an arguable case. Once that proposition was accepted, then the balance of convenience plainly lay with continuing the orders restraining the State and Minister from making any disposition of the timber and logging rights that it had now procured and which, contrary to its contractual obligation with the plaintiffs, it proposed to dispose of elsewhere.

Counsel submitted that it was open to the plaintiffs to pursue specific performance of the contracts and that remedy was one which would provide an obvious and appropriate result. The alternative of damages could not seriously be entertained, at least at this stage, because of the almost insuperable difficulties of establishing the facts on which specific claims for damages could be made.

It was further argued that a restriction on the issue of licences at this stage would cause no loss or serious inconvenience to either party. In any case, the plaintiffs' undertaking as to damages on this point was already before the Court.

The defendants contend in the first place that PNG Forest Products Pty Ltd, the first plaintiff, can have no right of action against the defendants because it was never party to the 1980 contract pleaded by it. There is, therefore, no privity between the parties from which any rights arise. It is the defendants' contention that the only contract that can be spelt out from the documents between the parties is one made in 1984, but no cause of action can arise from that agreement since it but confirms certain arrangements made between the second plaintiff and the defendants.

But even as between the second plaintiff and the defendants neither the 1980 agreement nor that of 1984 that ratifies it creates obligations on the defendants that give right to a cause of action as the plaintiffs' claim. Counsel for the defendants submitted that even in its most liberal interpretation, the State's only obligation under this contract can at most be to "use its best effort" to procure certain timber rights. But the agreements never amounted to an obligation to grant such rights to the plaintiff.

However, even were the wording of the contract to be interpreted as meaning just that, then such a clause (on the defendants' submission) is void ab initio as being unlawful because an executive government cannot fetter the discretionary power granted to a Minister under statute.

It seems sensible that the defendants' motion be dealt with first since, if that is successful, then there will be no need to consider the motion of the plaintiffs.

The protection of the law guaranteed by the Constitution and laws of Papua new Guinea, carry with them the right for persons to present petitions and actions before the courts of this country for the protection of rights and resolution of disputes with others. In short, a party has the right to have his case heard. Those rights cannot be lightly set aside.

The Rules of Court in particular the Rules of the National Court are designed to enhance those rights and to ensure the prompt and fair disposal of matters coming before the court. For the same reason, and in the interests of justice, the rules include prohibitions against abuse of the court process.

Thus O 12 r 40 reads:

"(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:

(a) no reasonable cause of action is disclosed;

(b) the proceedings are frivolous or vexatious; or

(c) the proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

(2) The Court may receive evidence on the hearing of an application for an order under sub-rule (1) of this Rule."

Quite apart from this rule, the court also has an inherent jurisdiction to protect itself from abuse of its process. Thus, if the court is satisfied that the conditions of this rule have been satisfied, it may strike out that offending action. It can in appropriate cases, therefore, prevent a party from presenting its case in court or from defending one brought against it. But the refusal to try a party's claim or the striking out of its defence is not lightly done, and there has been a long history of case law determining what is a "reasonable" cause of action or defence and what is "frivolous or vexatious".

In this case both counsel have submitted full and detailed written submission on the law relevant to the motions they have put before the Court. The Court is, therefore, well aware of the contentions of both sides.

There is a long and very full history of decided cases where one party or another has sought to strike out the proceedings of an opponent to obviate the need for trial. As long ago as 1887 in Republic of Peru v Peruvian Guano Company [1887] UKLawRpCh 186; (1887) 36 Ch D 489, Chitty, J said:

"if, notwithstanding defects in the pleading, ... the Court is of the view that a substantial case is presented the Court should, I think, decline to strike out that pleading: but when the pleading discloses a case which the Court is satisfied will not succeed, then it should strike it out and put a summary end to the litigation".

This line of reasoning was followed in the decision of the Court of Appeal in Hubbuck and Sons Ltd v Wilkinson, Heywood & Clerk Ltd [1898] UKLawRpKQB 176; [1899] 1 QB 86 at 91, where Lord Lindley MR was emphasising the distinction between seeking to have action decided on a preliminary point of law and moving to have it struck out for want of a reasonable cause of action:

"Two courses are open to a defendant who wishes to raise the question whether, assuming a statement of claim to be proved, it entitled the plaintiff relief. One method is to raise the question of law as directed by Order XXV, r 2; the other is to apply to strike out the statement of claim under Order XXV, r 4. The first method is appropriate to cases requiring argument and careful consideration. The second and more summary procedure is only appropriate to cases which are plain and obvious, so that any master or judge can say at once that the statement of claim as it stands is insufficient, even if proved, to entitle the plaintiff to what he asks."

The recent English House of Lords decision, Lonrho plc v Fayed [1991] 3 All ER 303 reviewed the exercise of discretion by courts required when considering applications for striking out. Lord Bridge cited the history of this procedure commencing with the cases just referred to. He went on to quote from Dyson v A G [1910] UKLawRpKQB 203; [1911] 1 KB 410 where Fletcher Moulton L J said that the procedures should be confined to cases where the cause of action was "obviously and almost incontestably bad".

He quoted from Salmon LJ in Nagle v Feilden [1966] 1 All ER 689 (also cited by counsel for the plaintiff in this appeal), where he said, "It is well settled that a statement of claim should not be struck out and the plaintiff driven from the judgement seat unless the case is unarguable".

Lord Bridge went on to say that though the rule is not inflexible and depends on the particular circumstances of particular cases, essentially:

"the only possible reason for departing from the application of the ordinary test, would be if the House was satisfied that it was possible to distil from the pleading a clearly defined issue of law which it would have been appropriate to determine as a preliminary question if the correct procedure to that end had been followed and which can be answered in a way which disposes of the action."

He said that, unfortunately, that was not often achieved. He referred to the comments of Wilberforce J in Allen v Gulf Oil Refining Ltd [1980] UKHL 9; [1981] 1 All ER 353, who said that so often:

"The fact is that the result of the case must depend on the impact of detailed and complex findings of fact on principles of law which are themselves flexible. There are too many variables to admit of a clear-cut solution in advance."

In the case before me, there are affidavits lodged with these motions deposing to the "facts" of the claims. Order 12 r 40(2) specifically provides for this and in this regard our National Court rules differ from the English R S C. Nonetheless, I consider the rationale to be drawn from the English decisions yesterday and today (and inherited at Independence) still reflects the essential approach to be taken when considering applications to strike parties from proceedings and preventing them trying their action or advancing a defence.

As regards the defendants' motion to strike out, those arguments of both defendant and plaintiff depend on a particular view of facts and/or an interpretation of the provisions of agreements not agreed to by the parties. The law to be applied is also not absolute in its application. It has certainly not been shown before me that it is "plain and obvious" that the plaintiff cannot succeed or that the defence is unarguable.

The fact is that both plaintiffs and defendants have extensive arguable cases on fact and law. That provides all the more reason for the action to be set down for trial, rather than attempt to exclude a party from contention without hearing. For these reasons the defence motion is refused.

As to the plaintiffs' motion for continuance of the restraining orders' I accept the plaintiffs contention that, at this stage at least, the assessment of any claim for damages presents severe difficulties for the plaintiffs. I also note that if the orders were not continued there could be no specific performance of the contracts pleaded. It is clear from what I have already said that both plaintiffs have raised arguable causes of action, that is, claims that contractual rights are under threat through action of the defendants adverse to the plaintiffs' interests.

If the plaintiffs succeed at a trial, then the claim for specific performance sought by them would be a remedy available to the Court hearing the action. There would seem to be no prejudice to any party in continuing the orders at this stage, and such damage as might occur can be met pursuant to the undertaking for damages filed. Accordingly, the order restraining the issue of a TRPA over the Morobe lands the subject of these claims shall continue until trial of the issues between the parties.

_______________

Lawyer for the plaintiffs, Gadens Ridgeway.
Lawyer for the defendants, State Solicitor Waigani.