National Court of Papua New Guinea

A procedure in civil cases by which two or more cases that are pending (i.e. in which the original process has been served) may be amalgamated. It is generally necessary to show that some common question of law or fact will arise in all the cases. The purpose of consolidation is to save costs and time.

The definition in Osborn’s Concise Law Dictionary is the same as in Ord. 4, r. 10 of the English Supreme Court Rules (supra). This lexicon defines joinder of causes of action in the following terms:

The combination in one action of several causes of action against the same defendant. Although any number of causes of action may be joined in the first instance, the Court may order that they be severed if the joinder would cause procedural difficulties.

It is a fact of life that often a case will involve more than one plaintiff or defendant, and more than one cause of action. Thus, the foregoing rules in the three jurisdictions adverted to here (supra) have been developed as to the appropriateness of joining various parties and causes of action so as to ensure that all proper and necessary parties are able to be joined: Grant Reithmuller, Civil Procedure, 1^st edn., LBC Nutshell (1999), page 42. The learned author goes on to add that the question of joinder will usually involve not only the joinder of the parties, but also the causes of action. In this respect, it is useful to note for our present purposes (and assistance) the impact of the Australia High Court decision in Port of Melbourne Authority v. Anshun Pty Ltd (1981) HCA, which is that: a party will be estopped from bringing any further action that arises out of the same subject matter as an earlier action. This decision emphasizes the importance of the doctrine of res judicata, as operating to prevent prejudice and unfairness to a party, more particularly a defendant, being burdened and saddled with multiplicity of allegations and claims to answer. The doctrine also operates to confirm the twin doctrines of finality and certainty in judicial decision-making process.

In all cases of joinder, whether simply of causes of action or also parties, the Court retains the discretion to join or sever (if already joined) if the interests of justice demand so. The learned author of the useful little text I have referred to here (supra) mentions that there are effectively five situations that arise, listing these as follows:

1. ټ J60; Joinder of parties oe defendants where they are liable or entitled to a remedy, jointly, severally or in the alternative, but with respect to one cause of action;

3. &##160;deoinf s oaratp plai plaintiffs and defendants with their respective causes; and

4. &##160;nd oifes efes whe orhe or more plaintiff has separate causes of action against one one or moor more dere defendafendant.

5. & ;&#16inderecesrecessary parties.

There is genergenerally ally much much merit in joining all possible defendants to avoid bringing separate pdingsnst end failing against each. On a tactical ical level, if all possible defendants ares are join joined, often each will tend to run a case designed to show that another defendant is liable. The rules also provide for alternative plaintiffs if there is some issue as to proper plaintiff. For example, in some commercial litigation it may not be certain which legal entity actually entered into a transaction.

It is submitted for the applicant (and Mr Furigi for the defendants acknowledges this) that the proceedings WS 1219/99 is only against the guarantors. And these guarantors, it is argued, gave surety over a financial liability incurred by the defendant company in WS 142/96. Therefore, Mr Bradshaw submits, same parties, same cause of action, and same issues are involved in the two proceedings. For the well-recognised reasons or advantages, this, therefore, calls for consolidation of the proceedings.

A guarantee is a promise or undertaking given by one person (the “guarantor” or “surety” ) to another (the “principal creditor” or merely “creditor”), whereby the guarantor agrees to be secondarily answerable for the debt, default or miscarriage of another person (the “principal debtor” or merely “debtor”): Sunbird Plaza Pty Ltd v. Maloney (1988) 166 CLR 248 at 254; 77 ALR 205 at 207 (cited in RB Vermeeesch and K E Lindgren: Business Law of Australia, 7^th ed., Butterworths, 1992, page 949). I respectfully and gratefully adopt the definitions and discussions therein.

As adverted to already, it is the applicant’s case that all the defendants in the two proceedings can properly be proceeded against in the one action if the Court grants the consolidation sought. Because of this, it is instructive to discuss here, if only briefly, what is involved in a contract of guarantee.

Once again I respectfully acknowledge the valuable assistance of the learned authors of Business Law of Australia (supra) for the following discussion (paras. 23.02 and 23.03). A contract of guarantee is a “collateral” or “conditional” contract, as opposed to and distinguished from one that is “original” or “absolute”. It is an immediately binding contract but it is “collateral” or “conditional” in that it is made subject to and conditional upon default by the debtor. Primary liability rests on the debtor; secondary liability rests on the surety. Generally, when the principal contract or liability is discharged, so also is the guarantee. A common instance of guarantee in business is that required by banks and other financial institutions making loans or granting credit.

The learned authors then set out the usual characteristics of a contract of guarantee, which I reproduce in full hereunder:

1. &##160; T60; There mu t bee hretiearties interested: creditor, debtor and guarantor. These terms may be elaborated upon this way:

(a) ; The cor isfit doth the prhe principal debt and the guarantee ande and is p is protecrotected by the guarantee against the possibility of default by theor. (linine).(b) &160; #16e; The Thtodebtor is pris primarily liable for the debt and so for the default which renders his surety liable. Although the debtor is bound by the same instrument as the surety, he is not party to the surety’s contract with the creditor. There is no privity between the surety and the debtor by reason of the guarantee, and they are not jointly liable to the creditor. Rather there are two independent contracts: one between creditor and debtor and another between creditor and surety. This is so, even if both contracts are recorded in one document signed by all three parties (underlining mine).

(c) sure y untertakes to the crhe creditor to be secondarily liable for a debtor or other liability for which the debtor is then, or may subsequently become, or is intended to become, primarily liable to the creditor.

2. &##160; There must be a pria primary liability in some person other than the surety, who is only a secondary or contingent liabili/p> <#160;;ټ The surety is often unconnected with the prin principalcipal cont contract,ract, that is, the contract between the creditor and debtor, i.e.; A has no interest in the contract between B and C.

Mr Justice Hinchliffe has a very useful discussion on one aspect of this subject in his judgment in the case of Niugini-Lloyds Int Bank v. Sakora [1987] PNGLR 275.

CONCLUSION

As at the time of the hearing of this application two proceedings are presently before the Court. And as noted earlier, the first (earlier) proceedings is against Kaime No. 3 Pty Limited, the “debtor”, and the second more recent one against five “guarantors”, presumably in their individual capacities. Thus, the same plaintiff has initiated two proceedings against two sets of defendants, although there was an attempt by the plaintiff to “join” one of the defendants in the latter proceedings to the earlier proceedings by a purported “amendment”. That was one of the things the Supreme Court found in the National Court records and had no difficulty in describing as disclosing “apparent significant anomalies of procedure” and forthwith put an end to: Sir Albert Kipalan’s appeal (supra).

It has to be noted that, despite the repeated assertion of learned counsel for the defendants that proceedings WS 142/96 was “completed” by the decision of the Supreme Court in Sir Albert Kipalan’s appeal (supra), the real situation is as follows. And this comes from Mr Furigi’s useful outline of the circumstances surrounding the appeal.

In the original proceedings (WS 142/96) the applicant/plaintiff had issued against Kaime No. 3 Pty Limited a writ of summons (February 1996) claiming monies due and owing under a leave agreement in respect of plant and machinery. After due service and proper lapse of time, default judgment was entered by the Deputy Registrar against the defendant company in April 1996. That judgment was sealed on 30 April 1996.

In what I consider to be an extraordinary set of circumstances, the plaintiff company applied on 12 July 1996 by Notice of Motion to have the writ amended by the addition of the appellant as a defendant after the entry of default judgment (supra). Thus, having had default judgment entered against the original defendant, and having had a “fresh” defendant “joined” through a purported amendment (without availing of the procedure under Ord. 5, r. 1 or r. 2 NCR, and before such judgment), the plaintiff company proceeded to take enforcement proceedings against the appellant.

Appeal to the Supreme Court challenging the entry of the default judgment and “misjoinder” (by purported amendment) after the judgment of a defendant was successful. The Supreme Court declared the entry of default judgment by the Deputy Registrar to be ultra vires exercise of powers.

Whilst the appeal succeeded, formally, on the first ground, the Supreme Court said this (at page 5):

While the remaining ground would appear to provide an even more compelling reason for setting aside judgement (sic) against the appellant, it was not specifically pleaded. Therefore as this appeal is already decided, there is no need to pursue the matter further although the National Court record before this court discloses apparent significant anomalies of procedure. Accordingly the appeal is allowed. The orders of garnishee and the judgement (sic) against the appellant are set aside. There will be order for costs in favour of the appellant. (my underlining).

As the entry of judgment against the appellant Sir Albert Kipalan by the Deputy Registrar, in purported exercise of statutory powers, was declared ultra vires, it is my respectful opinion that similar and earlier entry of default judgment against Kaime No. 3 Pty Limited would have to be visited with the same declaration. Thus, the plaintiff would be left now, in respect of proceedings WS 142/96, with no judgments, default or otherwise, regularly entered against the original defendant company and the “misjoined” second defendant.

Furthermore, from the definitions and discussions on the nature of contracts of guarantee (supra), there would be no proper proceedings against Sir Albert Kipalan in WS 142/96 presently pending in the National Court. Only the proceedings against him (jointly or severally) and the other four defendants is pending against him in WS 1219./98.

In the light of the discussions on the law and procedure (supra), it is the judgment of this Court that the application for consolidation of the two proceedings should be refused. There are two separate and distinct proceedings. Although the two contracts, the contract of guarantee (involving the WS 1219/98 parties) and the “original” lease agreement (between the plaintiff/creditor and the debtor/defendant), were concerned with the same subject-matter, financing of plant and machinery, there is, in my opinion, no common question(s) of law or fact arising in these proceedings.

The two contracts, as discussed above gave rise to different rights and obligations that have to be pursued or enforced in separate actions. Their very nature suggests very strongly that they could not have been joined in the one statement of claim. Two different contracts give rise to two different liabilities, one primary and the other secondary, one contingent or conditional upon the other.

What is the respective present status of each of these two proceedings? In relation to WS 142/96, after the decision of the Supreme Court (supra), what is left pending before the National Court is, in my opinion, merely a civil claim for monies due and owing, particularised in the Statement of Claim of the Writ of Summons against Kaime No. 3 Pty Limited. There being no debt proven (by operation only of procedural as opposed to substantive law through the regular entry of a default judgment under the NCRs), it cannot, in my judgment, properly be said that there is a default on the part of the “debtor”. This writ needs to be properly served to initiate pleadings, if it is not re-issued as a fresh proceedings.

This then brings into contention the issue of WS1219/98. What is its real status, if any, now? In the light of the law as discussed (supra), it is my opinion that proceedings WS1219/98 is premature and, therefore, unnecessary. There being no debt proven, and, thus no inability or refusal to pay or settle that debt, so that a default can properly be said to arise, or have arisen, on the part of the “debtor”, the “creditor” cannot issue proceedings against the “guarantor(s)”. The debtor and the guarantor(s) are not jointly liable to the creditor under the debtor’s lease agreement with the creditor. The guarantors are on an entirely different contract with the creditor. The necessity or the legal justification for invoking the terms and conditions of the “contract of guarantee” has not arisen yet.

Finally, this Court, concerned as it is with maintaining its authority and regulating its processes to prevent them from being abused, would be more inclined, in the circumstances of this application, to resort to its inherent jurisdiction against consolidation or amalgamation of the two proceedings.

It is, therefore, the judgment of the Court that the plaintiff’s application be refused.

Learned counsel for the defendants, more particularly in respect of Sir Albert Kipalan’s situation, raised the issue of the proceeds of the garnishee order against his account. There is no application before me on this matter. In any case, the legality or otherwise of the garnishee order is presently before the Supreme Court on appeal. From the circumstances as found by the Supreme Court (supra) in order to grant Sir Albert Kipalan’s appeal and set aside that irregularly entered default judgment, it would seem to me that the plaintiff has and had no legal right and authority to have taken garnishee proceedings against Sir Albert Kipalan. The power and authority purportedly given by the ultra vires entry of default judgment by the Deputy Registrar was overturned by the Supreme Court.

Thus, in my respectful opinion the plaintiff ought to voluntarily return the monies, the proceeds of the garnishee order, to Sir Albert Kipalan. Failing which, Sir Albert’s legal representatives are at liberty to, of course upon proper instructions, make the appropriate application to the Supreme Court.

Lawyers for the Plaintiff: Blake Dawson Waldron Lawyers

Lawyers for the Defendants: Maladina Lawyers