N6101

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1252 of 2010

BETWEEN:

INDEPENDENT PUBLIC BUSINESS CORPORATION
OF PAPUA NEW GUINEA
Plaintiff

AND

MOTOR VEHICLES INSURANCE LIMITED
First Defendant

AND

NOMINEES NIUGINI LIMITED
Second Defendant/First Contemnor

AND

NATIONAL SUPERANNUATION FUND LIMITED
Third Defendant

AND

BENJAMIN O'DWYER
Second Contemnor

AND

TERENCE O'DWYER
Third Contemnor

AND

JOHN LEAHY, STEPHEN LEWIN, PETER LOWING, MICHAEL SULLIVAN and GIBSON GERORO trading as LEAHY LEWIN LOWING SULLIVAN LAWYERS
Fourth Contemnors

Waigani: Hartshorn J
2015: 24th August
: 28th September

Application for orders for contempt

Cases cited: 
Papua New Guinea Cases

Rex Paki v. MVIL [2010] SC1015 
Ross Bishop and Ors v. Bishop Bros Engineering Pty Ltd [1988-89] PNGLR 533 
Tutuman Development Ltd v. Growmax (PNG) Ltd (2015) SC1407

Overseas Cases

Norton v. Cooper [1856] 3 Sm & Giff 375

Counsel:

Mr. A. Mana, for the Plaintiff
Ms. R. Cullen, for the First Defendant 
Mr. R.J. Webb SC and Mr. W. Yep, for the Fourth Contemnors 

28th September, 2015

1. HARTSHORN J: This is a decision on an application by the plaintiff, Independent Public Business Corporation (IPBC) for orders that each of the five partners of the law firm Leahy, Lewin, Lowing, Sullivan Lawyers (contemnors) be found guilty of contempt of court for breach of a court order dated 10th June 2011 (restraining order). The contemnors deny the charge. 

Background

2. This proceeding concerns an Equity Monetisation Contract (EMC) between the first defendant Motor Vehicles Insurance Ltd (MVIL) and the second defendant Nominees Niugini Ltd (NNL). IPBC as shareholder of MVIL seeks to amongst others set aside the EMC as it is claimed that it was entered into in breach of certain statutory requirements.
3. Pursuant to the EMC, NNL agreed to lend K100 million to MVIL, to be secured by a mortgage to NNL over certain shares that MVIL held in Bank South Pacific Ltd (BSP Shares). NNL as mortgagee subsequently became the registered holder of the BSP Shares.

4. On 10th June 2011 this court made the restraining order which restrained MVIL, NNL and the third defendant National Superannuation Fund Ltd (Nasfund):

" …, their servants, agents, directors, employees or whosoever be restrained from mortgaging, dissipating, selling, pledging, charging, disposing of, trasfering (sic) or assigning to another party where so ever situated or in any way dealing with: [the BSP Shares] until the determination of these proceedings and other than to transfer those shares or any of them back to the First Defendant."

Plaintiff's contentions

5. The plaintiff contends that:

a)	The restraining order was duly served on among others the firm of Leahy, Lewin, Nutley, Sullivan Lawyers (as the firm was then called) (LLLS) as lawyers for NNL;

b)	Notwithstanding the terms of the restraining order, a Deed of Assignment was executed by LLLS, NNL and NNL's directors Terence and Benjamin O'Dwyer on 11th June 2015. The Deed assigned the right to receive present and future dividends on the BSP Shares to LLLS to secure payment to LLLS for future legal services to be provided to NNL, plus a bonus of 40%. The Deed was prepared by LLLS;

c)	On 18th June 2015, without knowledge of the Deed of Assignment, MVIL obtained an order in these proceedings, ordering Bank South Pacific Ltd (BSP) to pay the 2014 final dividend and future dividends payable on the BSP Shares directly into the National Court Registry Trust Account pending determination of these proceedings;

d)	On the same day, 18th June 2015, LLLS delivered a Notice of Assignment to BSP pursuant to the Deed of Assignment and the terms of the Mercantile Act, requiring payment of the 2014 dividend to them;

e)	On 22nd and 23rd June 2015, Michael Sullivan of LLLS, a contemnor, emailed Mr. David Hill, Corporate Services Manager-Legal of BSP (copying Peter Lowing, a contemnor), requiring the payment of the dividends on the BSP Shares to Leahy, Lewin, Lowing, Sullivan Lawyers in accordance with the bank account details already provided by NNL to PNG Registries;

f)	The preparation of the Deed of Assignment and its execution by LLLS, NNL and Terence and Benjamin O'Dwyer were in breach of the restraining order;

g)	The actions of LLLS on 18th, 22nd and 23rd of June 2015, were also in breach of the restraining order;

h)	The restraining order could not be clearer or a more complete prohibition on any dealing, other than the transfer of BSP shares back to MVIL. The preparation and execution of the Deed of Assignment were intentional acts, for the personal advantage of NNL and the contemnors.

Contemnors' contentions

6. The contemnors' contend that certain procedural and substantive requirements necessary for a charge of contempt to succeed have not been met. These are that:

a)	The plaintiff has failed to prove the charge against each contemnor beyond reasonable doubt;

b)	The statement of charge can only be read as an allegation that each contemnor aided or abetted the breach of the order by NNL and not that each contemnor wilfully breached the order, as the contemnors themselves are not bound by the restraining order;

c)	The Deed of Assignment dated 11th June 2015 does not attempt to deal with the BSP Shares which are the property the subject of the restraining order. Rather, the Deed deals with dividends. To read the restraining order to include dealing with the dividends as being restrained is to construe the wording of the restraining order in an ambiguous manner;

d)	As NNL has not committed a contempt of the restraining order by dealing with dividends as distinct from the BSP Shares, the charge against the contemnors that they were an accessory to the contempt of NNL, must fail;

e)	As the Deed was between NNL and LLLS, it precludes any finding that each of the contemnors acted for NNL in relation to the Deed;

f)	The restraining order was not served personally on each or any of the contemnors.

Law

7. To succeed on a charge for contempt of an order of the court, the Supreme Court held in Ross Bishop and Ors v. Bishop Bros Engineering Pty Ltd [1988-89] PNGLR 533, that amongst others, the order must be unambiguous, the failure to obey the terms of the order must be wilful and the standard of proof is beyond reasonable doubt. Further, at p545 Barnett J said:

"To sustain an action for contempt of a court order there must be proof beyond reasonable doubt that it has been properly served "upon the alleged contemnor":…… Mere technical service will not be sufficient as the major element of the offence is that it must be a wilful refusal to obey the order."

8. I will consider this issue first.

Whether the restraining order was properly served

9. It is not disputed that the restraining order was not personally served on each of the contemnors. The restraining order was served at the usual place of business of the firm LLLS and was acknowledged by an employee of LLLS.

10. The plaintiff contends that this constitutes sufficient service upon the contemnors as they are all partners of the firm of LLLS and the firm of LLLS are the lawyers for NNL in this proceeding.

11. The plaintiff relies on the following passage from Norton v. Cooper [1856] 3 Sm & Giff 375:

"Litigation is conducted by a series of transactions, the records of which, in the books of a partnership of solicitors, should be open to all of the partners; and, where the partnership is stated on the records of this Court to be the solicitors of a litigant, each member of the partnership whose name so appears must be held responsible to the Court for all the proceedings in the cause, unless some reason be shewn to the contrary."
 
12. The plaintiff further contends that it cannot be suggested that the restraining order was not personally known, at the least, to the partners of LLLS actually engaged in conducting this litigation. Further, s. 17 Partnership Act provides that a notice of any matter relating to partnership affairs given to a partner who habitually acts in the partnership business operates as notice to the firm, except in the case of a fraud on the firm committed by or with the consent of the partner.

13. The Supreme Court has considered the question of service in Bishop (supra) and also recently in Tutuman Development Ltd v. Growmax (PNG) Ltd (2015) SC1407. In Tutuman v. Growmax (supra), the Court after referring to the comments of Barnett J in Bishop (supra) as to service said at para 11:

"Further, one of the authorities that was followed by Barnett J, was Ronson Products Ltd v. Ronsen Furniture Ltd [1966] 1 Ch. 603. At p614, Stamp J in considering the distinction between an order to do an act and an order prohibiting an act stated that:

"If a man be ordered to do an act, so that his failure to do it may lead him to prison, justice requires that he know precisely what he has to do and by what time he has to do it,….."

"The practical difference between an order under which a positive act is to be done and one where an act is prohibited must lead to the conclusion that the former class of order ought not to be enforced against a director unless he has been served with it so that he, like the company, knows precisely what is to be done and the period during which it has to be done.""

14. When an application for contempt is made against someone who is not a party, in my view it is akin to commencing a new proceeding against that person. When a new proceeding by either writ of summons or originating summons or petition is commenced, the defendant is put on notice as to the claim made against it. Similarly, the initial step to be taken before an application for contempt is made, is for the contemnor to be put on notice of the order with which he must comply. A new proceeding is required to be served on the defendant personally. Similarly, an order with which a non- party must comply should be required to be served on the contemnor personally. This is so as the consequences of being found guilty of contempt are serious. In my view, as this is the case regardless of whether the obligation in the order with which the contemnor must comply is positive or negative, the contemnor must know precisely, the terms of the order. It is necessary therefore that for the contemnor to be made aware precisely of the terms of the order, especially when the contemnor is not named in the wording of the order, in addition to being a non-party, as is the case here, he must be served personally.

15. As to the contention of the plaintiff that some if not all of the contemnors were aware of the restraining order, it may be that a contemnor is aware that an order has been made particularly if he is a party to the proceeding in which the order is made. Similarly, it will likely be the case that a defendant will be aware generally of claim to be made against him before he is personally served with either a writ of summons, originating summons or petition. Being aware of an order made, is not however, the same as being put on notice of the precise terms of an order, that if breached could result in serious consequences, such as imprisonment. It is in this context in my view, that the statement of Barnett J in Bishop (supra) as to proper service upon a contemnor should be read.

16. In this instance, it is not in dispute that none of the contemnors were personally served with the restraining order. A copy of the restraining order was served at the offices of LLLS and an acknowledgement of service by an employee was given. There is no evidence to the effect that the restraining order was then personally given to each of the contemnors. Consequently as notice was not given to a partner, s. 17 Partnership Act does not require further consideration. 

17. As to the passage in Norton v. Cooper (supra) that is relied upon, that case concerned a petition for the recovery of costs from the firm of solicitors. The petitioner sought to recover costs that had been ordered against him in proceedings that had been commenced without his authority by a partner of the firm of solicitors. The case did not involve an application for contempt against the individual partners of a law firm by an entity that is not a client of the law firm, as is the case here, and is therefore not on point or of assistance.

18. In the above circumstances I am not satisfied beyond reasonable doubt that the contemnors or any of them were personally or properly served with the restraining order or that they were aware of the precise terms of the restraining order. Consequently, the notice of motion of the plaintiff should be dismissed.

19. If the restraining order was properly served, the next issue I will consider is whether the wording of the restraining order is clear and unambiguous. 

Whether restraining order is clear and unambiguous

20. The plaintiff contends that amongst others that the language of the restraining order indicates that the prohibition contained in the restraining order was intended to be a complete prohibition on any dealing at all with the BSP Shares other than to transfer them back to MVIL, that the proper construction of an order is a matter of law not fact, the order is clear and unambiguous and must be complied with to the letter in strict compliance with its terms.

21. As to the meaning of the wording of the restraining order, for the plaintiff's contention that the contemnors have breached the restraining order to be successful, the restraining order must be read to mean that the assignment of a dividend of a share constitutes a dealing with that share. This is because, amongst others, the word, "dividend" is not used in the wording of the restraining order. Further, this contention assumes that either a dividend is synonymous with a share or that any affect upon a share when there is conduct concerning a dividend payable for the share, constitutes a dealing with the share. 

22. It can be argued though that the words used in the restraining order that describe the conduct that is restrained only affects the proprietary right or interest in the shares. This is because the word, "dividend" is not used in the wording. Secondly, the verbs, "..mortgaging, dissipating, selling, pledging, charging, disposing of, trasfering (sic) or assigning.." are concerned with the proprietary right or interest in the shares only and not any right that is conferred on the owner of a share by virtue of ownership, such as a right to the payment of dividends. Consequently, the words, "..or in any way dealing with.." and, "..other than.." are qualified by these verbs and can be read subject to this qualification. On this construction, an assignment of a right conferred by a share, such as a dividend, that does not affect or have an effect on the proprietary right or interest to the shares, does not breach the wording of the restraining order. 

23. This construction that the conduct that is restrained only affects the proprietary right or interest in the shares is supported by use of the words, "transfer those shares". Again, it can be argued that these words qualify the words, "..or in any way dealing with.." and, "..other than.." as referred to above.

24. A further construction of the wording of the restraining order is that the words, "..another party.." refer only to another party in this proceeding. 

25. Given the above, if the construction of the words of the restraining order upon which the plaintiff relies is able to be accepted, and I make no determination on that at this juncture, then I am of the view that the wording of the restraining order is not clear and is ambiguous as it is capable of more than one meaning as demonstrated.

26. As I am unable to conclude beyond reasonable doubt that the restraining order was properly served upon each of the contemnors and that the restraining order is clear and unambiguous, it follows that I must find each of the contemnors not guilty of contempt of court as charged.
Costs
27. The contemnors contend that the plaintiff should be ordered to pay their costs on an indemnity basis including certification for southern counsel as:

a)	The charges were alleged on a speculative basis as the plaintiff hoped that other contemnors may adduce evidence proving contempt against these contemnors. This was highlighted by the unsuccessful attempt to cross examine one of the contemnors;

b)	The charges as pleaded could not succeed;

c)	The plaintiff resisted particularising the charge;

d)	A charge of contempt is serious, but a charge of contempt against a lawyer is particularly grave. The mere allegation of contempt has the ability to affect the confidence of the Court in its officer and of other lawyers in their ability to deal with a colleague in matters in court day-to-day;

e)	The plaintiff did not prove personal service on any partner and made no evident attempt to do so;

f)	Since all partners were charged, they had to brief out. It was not appropriate that they instruct an employee to respond to serious allegations against his partner employers;

g)	The charges should never have been brought;

h)	The principles summarised in Rex Paki v. MVIL [2010] SC1015 at para 28 are relied upon.

28. The plaintiff contends that costs should not be ordered on an indemnity basis and certification for southern counsel should not be given as:

a)	The charges were brought on a proper basis, were not brought on a speculative basis and the conduct of the plaintiff in making the application is not blameworthy as it was thought that the application would be successful;

b)	If the contemnors were unable to have an employed lawyer from their firm appear on their behalf, they could have instructed a senior lawyer from within the country to appear. It was not necessary to instruct southern counsel as the application and defence thereof was not of a complex nature.

29. In Rex Paki v. MVIL (supra), the Supreme Court of which I was a member, at para 28 said:

"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."

30. As to the contention that the charges of contempt were brought on a speculative basis, reliance is placed upon a letter in evidence written by the lawyers for the plaintiff to LLLS dated 10th August 2015. The reference in that letter to the possibility of other contemnors wishing to give evidence against these contemnors, does not, to my mind, lead to the conclusion that the plaintiff was bringing the application for contempt orders on a speculative basis, as there is no suggestion or inference that the plaintiff was reliant upon such evidence. I am of the same view as to the unsuccessful attempt to cross examine one of the contemnors.

31. As to the charge as pleaded not being able to succeed and the plaintiff not supplying particulars, it was not necessary for me to consider the statement of charge and so I do not consider these contentions.

32. As to a charge of contempt against a lawyer being particularly grave, this in my view, should not lead to a court making an award of costs on an indemnity basis on an unsuccessful contempt application against a lawyer, on a different basis than for other unsuccessful applications.

33. As to the restraining order not being personally served or there being any evident attempt to do so, notwithstanding that I have found in this instance that personal service of the restraining order was necessary, there is case authority to the effect that personal service of orders requiring compliance is not necessary. It can be argued therefore that the plaintiff should not be penalised by way of a costs order for relying on such case authority.

34. Given the above, I am not satisfied that the conduct of the plaintiff has been so improper, unreasonable or blameworthy that it should be punished by an order of indemnity costs.

35. As to certification for southern counsel, the contemnors could have briefed any of a number of senior experienced lawyers within the country to appear on their behalf on this application. The application and its defence were not of a complex nature and southern counsel was not required to be briefed.

Orders

36. The formal orders of the Court are:

a)	Each of the fourth contemnors is found not guilty of contempt of court as charged;
b)	The relief sought against the fourth contemnors in the notice of motion of the plaintiff filed 8th July 2015 is refused;
c)	the plaintiff shall pay the costs of each of the fourth contemnors of and incidental to the said notice of motion on a party - party basis to be taxed if not agreed;
d)	time is abridged.
_________________________________________________________
Allens Lawyers: Lawyers for the Plaintiff 
Gadens Lawyers: Lawyers for the First Defendant 
Leahy Lewin Lowing Sullivan Lawyers: Lawyers for the Fourth Contemnors