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Gobe Hongu Ltd v National Executive Council [1999] PGNC 47; N1920 (8 June 1999)

Unreported National Court Decisions

N1920

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

WS 491 OF 1999
BETWEEN: GOBE HONGU LIMITED
PLAINTIFF
AND: THE NATIONAL EXECUTIVE COUNCIL
FIRST DEFENDANT
AND: THE INDEPENDENT STATE OF PAPUA NEW GUINEA
SECOND DEFENDANT
AND: BARCLAY BROS (PNG) LIMITED
THIRD DEFENDANT
AND: SOUTHERN HIGHLANDS GULF HIGHWAY LIMITED
FOURTH DEFENDANT

Waigani

Sevua J
18 May 1999
2 June 1999
8 June 1999

CIVIL – Practice and Procedure – Interlocutory Injunction – Application for – Proper principles reaffirmed.

Cases Cited

JF Stratford & Son Limited -v- Lindley [1964] 3 All ER 102.

American Cyanamid Co. -v- Ethicon Ltd [1975] UKHL 1; [1975] AC 396.

Employers Federation of Papua New Guinea -v- Papua New Guinea Waterside & Seamens Union & Lawrence Titimur & Ors (N393, 11^th October, 1993, unreported).

Craftworks Niugini Pty Ltd -v- Allan Mott (SC 527, 27^th June, 1997, unreported).

Haro Yamis -v- Viviso Seravo, Minister for Lands & Ors (WS 713/98, unnumbered & unreported, 9^th November, 1998).

Norah Mairi -v- Alkan Tololo & Ors [1976] PNGLR 59.

Mt. Hagen Airport Hotel Pty Ltd -v- Gibbes & Anor [1976] PNGLR 216.

Mauga Logging Company Ltd -v- South Pacific Oil Palm [1977] PNGLR 80.

Robinson -v- National Airline Commission [1983] PNGLR 476.

Counsel

R. Saulep for Plaintiff

R. Pato for 1^st & 2^nd Defendants

D. Lightfoot for 3^rd Defendant

G. Sheppard for 4^th Defendant

8 June 1999

INTERLOCUTORY JUDGMENT

SEVUA J: The plaintiff, in its writ of summons filed on 17th May, 1999; claimed contractual losses amounting to K337.5m, third party contractual losses, punitive damages, interest and costs. There is a amended writ of summons which was filed on 28^th May, however, for the purpose of this judgment, it is not relevant because, the interim injunctive orders granted by this Court on 18^th May, was in respect of the original writ. The amended writ was filed subsequent to the grant of interim injunction.

In essence, the plaintiff’s claim alleged “breach of promise or undertaking” by the defendants.

I have highlighted the words “breach of promise or undertaking” in this judgment because those were in the words of the plaintiff’s counsel, and to this Court, they are pertinent. I will revert to this point later.

When this matter initially came before me on 18^th May, the application for interim injunction was made ex parte. The interim orders were therefore granted ex parte. At the outset, I wish to reiterate one aspect of this application. When the application was made ex parte, I expressed my reservation about this application. I considered that, one of the fundamental principles in granting interim injunctions, the balance of convenience, did not favour the plaintiff then. I will address that issue later, now that the Court has had the benefit of full arguments and I will refer to counsel’s submissions later.

The law on the grant of interim injunctions is clear and is well settled in our jurisdiction. There are many case laws on it which I do not intend to canvass. For my purpose, I may only cite a few of these authorities to highlight what I wish to emphasise in this judgment. I should, at this juncture, thank counsel for their assistance in preparing written submissions.

Counsel for the third defendant, Mr Lightfoot has argued several matters extensively, assisted by Mr Sheppard, counsel for the fourth defendant. These submissions are quite helpful, however, I do not propose to canvass all these arguments. Where necessary, I will refer to parts of these submissions including the plaintiff’s counsel’s submissions.

As I alluded to a little earlier, the law on interim injunctions has been settled in Papua New Guinea. An application for interim injunction is required to establish a number of matters to satisfy the Court before the Court grants an interim injunction.

The relevant principles, since the House of Lord’s decision in JT Stratford & Son Limited -v- Lindley [1964] 3 All ER 102; are laid down in American Cyanamid Co. -v- Ethicon Ltd [1975] UKHL 1; [1975] AC 396; which has been adopted as part of the underlying law in this jurisdiction. These principles are set out by Kapi, DCJ in Employers Federation of Papua New Guinea -v- Papua New Guinea Waterside Workers & Seamens Union & Lawrence Titimur & Ors (N.393, 11^th October, 1993, unreported). The Supreme Court in Craftswork Niugini Pty Ltd -v- Allan Mott, (SC 525, 27^th June, 1997, unreported) cited these principles. Those are the principles applicable to an application for interim injunction in this jurisdiction. I referred to these principles recently in Haro Yamis -v- Viviso Seravo, Minister for Lands & Ors, (WS 713/98, unreported, unnumbered, 9^th November, 1998). I reaffirm those principles as the relevant principles applicable.

In JT Stratford (supra) the House of Lords stated the principle to be this, an applicant seeking an interlocutory injunction must establish a prima facie case. However, the House of Lords reconsidered that principle and expanded on it in American Cyanamid (supra) and since then, the principles have had good reception in this jurisdiction. Apart from Craftworks Niugini Pty Ltd (supra), the following are some of the cases soon after Independence which adopted these principles: Norah Mairi -v- Alkan Tololo & Ors [1976] PNGLR 59; Mt Hagen Airport Pty Ltd -v- Gibbes & Anor [1976] PNGLR 216; Mauga Logging Company Ltd -v- South Pacific Oil Palm [1977] PNGLR 80.

The relevant principles established in Employers Federation of Papua New Guinea (supra) are:

“1. ټ&#Is ther there acti action not frivolous or vexatious?

Is there a serious question to be tried?

Is there a real prospect that the applicant wicceedhe claim for an injunction at the trial?

A

All thll these questions laid down the same test. See Smith -v- Inner London Education Authority [1978] 1 All ER 411 at 419.

2. ҈ The Coue Court must then donsider whether the balance of convenience lies in favour of granting or refusing interlocutory relief.

3. &ـo 6hencehence ovenioveniencnience, the Court should first consider wher whetherether if the applicant succeeds, he would be adequately compensated by damfor tss sued between the application and the tria trial, inl, in whic which case no interlocutory injunction should normally be granted.

4. ـ I6 damages would nold not provide an adequate remedy, the Court should then consider whether if the applicant fails, the defendant would be adequately compensated under the applicant’s undertaking in damages, in which case there would be no reasons on this ground to refuse an interlocutory injunction.

5. &ـ T6en onen one goes goes on to consider all the other matters relevant to the balance of convenience, an important factor in the balance should, other theen epresehe status quo; and

6. &#160 &#160 &#160 When all things are equalequal, it may be proper to take into account in tipping the balance, relative strength of each party’s case as reviewed by the evidence before the Court hearing therlocuapplin.

Ha

Having ving stated the law, let me now consider the plaintiff’s application.

Firstly, I have already adverted to the remedies the plaintiff is seeking in this action. Those remedies do not include a claim for an injunction.

It is trite law that a party is not entitled to a remedy he has not pleaded in his claim. In this case, the plaintiff has not claimed an injunction in its statement of claim. I must confess I did not realise this at the time the application was made, and counsel for the plaintiff did not disclose this fact either. Had I known about it, the application may not have been granted. I think it was Mr Lightfoot who raised this issue on 2^nd June when the application was fully argued. Now that I have had the benefit of full arguments by all parties, I have reconsidered my position and I am of the view that the interim injunction should not have been granted then, because the plaintiff did not claim it as a relief.

Secondly, there was no undertaking as to damages. The plaintiff’s counsel submitted that the plaintiff had filed an undertaking as to costs which include damages. I do not accept that submission. The undertaking filed on 18^th May which is document no. 4 in the Court file, is an undertaking as to costs, not damages. The undertaking reads, “I, Leslie Umai Ope, Chairman of Gobe Hongu Limited, of Port Moresby, Box 66, Mendi, Southern Highlands Province, make an undertaking as to the reasonable costs of the Defendants necessary arising out of this application......”(my emphasis). The plaintiff filed an amended undertaking on 28^th May, but that is not relevant to the application made on 18^th May, in any event, it is also an undertaking as to costs, not damages.

The usual undertaking as to damages is a condition precedent to the granting of an interlocutory injunction. Such undertaking must therefore be given by the applicant at the time of making the application, ie. filed at the time of, or prior to the making of the application. The usual undertaking as to damages is given by a plaintiff who applies for an interlocutory injunction . It is a condition for obtaining the order to give the usual undertaking as to damages. Counsel have not referred me to any provision of the National Court Rules or any other statute, which provides for the undertaking, however it has become the practice in this jurisdiction, as in New South Wales and other jurisdictions that, an undertaking as to damages must be given.

New South Wales has codified this in its Supreme Court Rules and perhaps we should do likewise in Papua New Guinea.

I do not accept Mr Saulep’s submission that reference to costs in his client’s undertaking includes damages. I cannot read the plaintiff’s undertaking that way simply because it is not worded in that way. The strict literal meaning of the plaintiff’s undertaking is that the plaintiff has given an undertaking as to costs only, not damages. The plaintiff’s failure to give the usual undertaking as to damages mean it has failed to give an undertaking to this Court that it will submit itself to any order the Court may consider as fair compensation which may be due to the defendants as a result of the interlocutory injunction.

One important aspect of this issue, in my view, is the fact that the plaintiff company has only 98 issued shares at K1.00 per share totalling K98.00. As its liability is limited to the paid up capital, one questions whether any undertaking as to damages would adequately compensate the defendants if the plaintiff loses this case. There is no other evidence that the plaintiff has substantial assets sufficient to cover any undertaking it may give. Its liability is limited to the paid up sum of K98.00, and that, in my opinion, is quite inadequate to support an undertaking as to damages. In any event, the undertaking given by the plaintiff is an undertaking as to the reasonable costs of the defendants, it is not a usual undertaking as to damages.

Another aspect of the undertaking raised by Mr Lightfoot is that the undertaking was not given by the plaintiff, but by its Chairman. Whilst the undertaking is documented in such a way that it is read in that manner, I am aware that in many cases, undertaking as to damages are signed and filed by lawyers, not the parties themselves. In spite of my accepting that argument, I do not consider it serious enough to warrant this Court to say that the interim injunction ought to be discharged for that reason.

I find that the plaintiff has failed to comply with the condition to give the usual undertaking as to damages, therefore, that is one reason to discharge the interim injunction granted ex parte on 18^th May.

Thirdly, does the plaintiff have a legitimate claim, which raises a serious question to be tried? The plaintiff, in its statement of claim, and in its address on 18^th May and 2^nd June, has repeated that the plaintiff’s claim arose out of a “breach of promise”. The plaintiff has not pleaded a breach of contract, but a “breach of promise”. The alleged contract was not placed in evidence before me on 18^th May, although, I was not dealing with the substantive issues. In my view, it is relevant to the issue of whether there is a serious question to be tried, that the plaintiff ought to be able to point confidently to the basis of its claim and argue that its case contains serious legal issues to be tried. In my view, the breach of promise or undertaking argument advanced by the plaintiff does not point to a cause of action known in law, but that argument can be left to another time.

As I alluded to, no contract has been pleaded in the statement of claim, and one wonders how the plaintiff could say it is entitled to damages in the sum of K337.5m, when all it could say was that its claim is founded on a breach of a promise or undertaking.

The plaintiff relied on the affidavit evidence of Leslie Ope sworn on 17^th May, and Mr Saulep sworn on 18^th May. Mr Ope’s affidavit annexed a copy of Heads of Agreement made on 27^th August, 1998, between the third defendant and the plaintiff. Clause 2.1 of that agreement clearly stipulates that the “agreement is intended to record the parties’ initial understanding.......and is not intended to create a contractual relation in any way between the parties” (my emphasis). That clause is clear and unambiguous. Under Clause 3, the parties were to enter into a contract, and until they do so, there is no legal binding obligation.

Under the same clause, the equity percentage which is 55% to the third defendant, and 45% to the plaintiff, was to be incorporated into a Joint Venture Agreement between the parties. No joint venture agreement has been produced to this Court as evidence of that understanding, therefore I do not see how the plaintiff could place reliance on a purported equity share of 45% when there is no Joint Venture Agreement between the plaintiff and the third defendant.

Annexure “B” of Mr Ope’s affidavit is the National Executive Council (NEC) Decision No. 282/98. That document basically refers to the NEC deliberations and approval in principle in respect of the National Road to link the Southern Highlands and Gulf provinces. It is not a contract or agreement between the parties to this action. Similarly, Annexure “C”, which is the NEC.

Decision No 96/99 also relates to the same project, and in fact, Clause 1 of that decision states that the plaintiff is not the umbrella company or representative of the landowners along the project route. Again, that decision is not a contract between the parties to this action.

The plaintiff sought to rely on another affidavit of Mr Ope sworn on 27^th May and filed on 28^th May. The third defendant objected to use of that affidavit, however that objection was overruled. In perusing the Memorandum of Agreement annexed to that affidavit (Annexure “A”), the Court notes that that agreement was executed between the second defendant and the Gobe Project Area Landowners. Most importantly, the agreement was executed by one Phillip Kende as Chairman of Gobe Leadership Committee. Mr Ope also signed as a Clan Leader. That document is neither a agreement between the second defendant and the plaintiff, nor between the plaintiff and all the defendants. The plaintiff is not the same entity as the Gobe Leadership Committee, therefore it cannot be said that the plaintiff executed that agreement. I find therefore that, that is not a contract between the plaintiff and the second defendant or the rest of the defendants, the breach of which, has given rise to these proceedings.

What then is the legal basis for the plaintiff’s claim? What is the contract or the agreement that has been breached that has given rise to this cause of action? In my view, the plaintiff has not shown that it has a good cause of action that raises a serious question to be tried. There is no contract between the plaintiff and the defendants, the breach of which, could entitle the plaintiff to the sum of K337.5m it claims in its statement of claim. If there is a contract, it has not been pleaded, and it has not been put into evidence before this Court. Although I am not determining the substantive issues here, I consider it appropriate for the plaintiff to establish, by proper evidence that it has a legitimate claim, which has a proper legal basis. That, in my view, is relevant when determining whether or not there is a, or there are serious legal issues to be tried.

The agreements and NEC decisions I have adverted to do not constitute a legal binding contract between the plaintiff and the defendants. In fact, there is evidence that the plaintiff does not represent the landowners and that alone, casts doubts as to the locus standi of the plaintiff, however, I am not determining the issue of locus standi here.

From all the evidence before me, I am unable to find that there is a valid existing contract between the plaintiff and the defendants which has been breached, and which breach would entitle the plaintiff, in law, to damages in the sum of K337.5m. In fact, I see no basis for a claim for a breach of promise or undertaking. The only cause of action based on a breach of promise I can think of is the common law cause of action for breach of promise to marry.

It is my view that the plaintiff has a speculative case for the reasons I have alluded to. To use the words of Andrew,J. in Robinson -v- National Airline Commission [1983] PNGLR 476 at 480:

“What the plaintiff must prove is that he has a serious, not a speculative case which has a real possibility of ultimate success and that he has property interests which might be jeopardized if no interlocutory relief were granted. (my underlining)

In order to determine this, the Court will have regard to such factors as the adequacy of damages, the possibilities of alternative remedies, whether there has been any laches and delay, the strength of the grounds of defence suggested by the defendant, what, if any, undertakings the defendant is prepared to give and most importantly, hardship and the balance of convenience.”

I find therefore that the plaintiff has not established that there is a serious question to be tried, which warrants the extension of the interim injunction.

The sum of K50 m which was underwritten by the Papua New Guinea Banking Corporation to kick start, the construction of the project, is not owned by the plaintiff. The plaintiff has no proprietary rights or interest in or over that money which requires continued protection by injunction. See the first passage in Robinson (supra) at 480, which I have quoted. I accept the third and fourth defendants’ submissions on this issue. Upon review of the transcript of proceedings on 18^th May, I note that the Court had raised the issue then, however the plaintiff’s counsel did not adequately canvass it.

As I have found that the plaintiff has no proprietary rights or interest in or over that money, it follows that the plaintiff cannot restrain the use or disbursements of it by injunction.

The last issue I want to consider is hardship and balance of convenience.

At this juncture, I wish to say that when the ex parte application was made on 18^th May, I expressed a view that the balance of convenience did not favour the plaintiff. Having heard full arguments, that view remains unchanged.

I have already referred to Clause 2.1 of the Heads of Agreement in my discussion of the issue of whether there is a serious question to be tried. I am of the view that, that aspect is also relevant in considering whether the balance of convenience favours the plaintiff. I maintain my view that, that agreement has no legal effect on the parties to it. The plaintiff therefore could not rely on it to seek an injunction.

Furthermore, in view of the fact that there is no existing contract between the plaintiff and the defendants that can be enforced in law, the balance of convenience does not favour the plaintiff. I think the plaintiff has placed too much reliance on the decision of the first defendant, ie Decision No. 282/98, to launch these proceedings. However, it is evident that the plaintiff’s claims for the 45% equity which it said amounted to K337m, is clearly misconceived, in my view.

The equity shares between the plaintiff and the third defendant were to be incorporated into a contract. There is no evidence that a contract exists between them showing the allocation of the equity percentage I have alluded to. If such a contract exists, it is not in evidence before me. That is also one reason that the balance of convenience does not favour the plaintiff.

As I understood, the plaintiff says it’s claim is founded on a breach of promise or undertaking. In my view, that is not the same thing as a claim founded on a breach of contract. That threshold issue to me is relevant in considering whether the balance of convenience favours the plaintiff, although it is also relevant on the issue of serious question to be tried.

For these reasons, I find that neither the plaintiff has been placed in a position of hardship than before the proceedings were instituted, nor does the balance of convenience favours it.

There are other issues that were addressed by the third and fourth defendants which I have not canvassed in this judgment. I have considered those, however, in view of what I have addressed, it is not necessary to discuss them here.

In passing, I wish to address briefly, the apparent threat and intimidation in the plaintiff’s evidence, particularly, the affidavits of Mr Ope. Whilst I appreciate Mr Saulep’s assurance that these were not intended to blackmail the Court, they were nevertheless placed in the Court documents as part of the plaintiff’s case to be relied upon. This Court will not accept or tolerate threats of violence and intimidation perpetrated by litigants who exercise their rights to come to Court to seek redress and justice. The Court is concerned that the plaintiff’s Chairman has seen fit to issue threats and intimidation in his affidavit evidence to achieve its objectives. In my view, there is no place for that type of conduct in this Court.

This Court will not be used by litigants as a tribal fighting zone to achieve their goals and aspirations. Whilst it may be true that the threats and intimidation were directed at the second and third defendants, it is my view that they are serious enough to warrant the concerns expressed by this Court. They are contained in an affidavit which has been filed and used as evidence. The Court will not allow its process to be abused by litigants. References to Sandline and Pansat are not relevant to this case. The threats and intimidation should not have been included as part of a document to be used in this proceedings.

Finally, it is the judgment of this Court that, for the reasons I have stated, the interim injunction obtained on 18^th May, should not continue. I therefore order that it be discharged. I also order that the plaintiff pays the costs of the second and third defendants.

Lawyer for Plaintiff: Saulep Lawyers

Lawyer for 1^st & 2^nd Defendants: Acting Solicitor General

Lawyer for 3^rd Defendant: Carter Newell

Lawyer for 4^th Defendant: Maladina Lawyers