N5851

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS No. 746 of 2013

BETWEEN:

JIMM TRADING LTD
Plaintiff

AND:

BAORO LAXTON
First Defendant

AND:

GRACE LAXTON
Second Defendant

AND:

JUDITH NIKIJULUW
Third Defendant

AND:

VADA NO.10 LIMITED trading as CENTURY 21 SIULE REAL ESTATE
Fourth Defendant

Waigani: Sakora J
2013: 06 March
2015: 04 February

NATIONAL COURT CIVIL JURISDICTION-Summary jurisdiction of the court-Dismissal of proceedings –Statement of claim disclosing no reasonable cause of action-Frivolous and vexatious claims-Inherent jurisdiction of the court to terminate summarily proceedings bad in law-defective pleadings-for the orderly;efficient and effective administration of justice-National Court Rules,O 8 r 27, O 12 r 40(1).

CONTRACT LAW-Doctrine of privity of contract-Law of Agency-Principal and agent-Conveyancing- Role of Lawyers-Citation of case law-Doctrine of Stare Decisis-Lawyers Act,s 60, Constitution, ss 155(1 ) to (4) (inclusive),158,160 to 164(inclusive), and Schs.2.8 and 2.9,Constitution.

Councel: 

L Kari, for the Plaintiff
G Purvey, for the third and Fourth Defendants

JUDGEMENT

04 February, 2013

1. SAKORA J: On 6 March 2013, I heard the applications in respect of the Notice of Motion filed on behalf of the 3rd and 4th defendants. The one in respect of the Notice of Motion filed on behalf of the plaintiff company was not moved,upon and objection raised by Mr Purvey of councel for the applicants, as being short served on the day of the hearing, and thus in breach of the National Court Rules(NCR).

2. The 1st and 2nd defendants have not pleaded to the plaintiff's writ of summons. They reside in New Zealand and they do not appear to have been served with the process. 

3. The 3rd and 4th defendants invoked the relief available under O 12 r 40(1) NCR, seeking dismissal of the proceedings as against them. It was contended that the statement of claim does not disclose a reasonable cause of action and thus frivolous and vexatious, or otherwise an abuse of process.

4. The 3rd and 4th defendants also invoked the relief provided under O8 r 27 NCR, which is somewhat similar language to that under O12 r 40 (1) NCR in support of their application.

5. The background factual circumstances giving rise to the plaintiff's claim involve disputes over the ownership of a rental property the subject of a State Lease (being folio 1385 Volume 6), described as Allotment 6 Section 56 East Boroko in the National Capital District(NCD). The rental of this property to a third party, Al-Amin Holdings Limited by the 3rd and 4th defendants on behalf of the 1st and 2nd defendants, also gives rise to the plaintiff's claim of reimbursement to it of the rental monies.

6. The 3rd defendant is sued in his capacity as an employee of the 4th defendant, proceeded against in its corporate name. It is the plaintiff's claim that, in a purported claim of ownership of the subject property by the 1st and 2nd defendents, the 3rd defendant acting on their behalf upon instruction from them, negotiated the lease of the property to Al-Amin Holdings Limited for a term of five years commencing 1st January 2011.

7. The 4th defendant conducts the business of a duly registered real estate agent on behalf of clients, both corporate and individual. It acts as a selling agent for the sale of corporate and residential properties. It also acts as agent and property manager in the lease of commercial and residential properties. It asserts that it is in the latter capacity that it was engaged by the 1st and 2nd defendants in respect of the property in question.

8. And the 3rd defendant was and acted in the capacity of an employee of the 4th defendant.

9. In its defence filed on 20 August 2013,the 4th defendant asserts that the lease agreement was entered into between the 1st and 2nd defendants and Al-Amin Holdings Limited, such lease agreements have been drawn up by conveyancing lawyers upon instructions.

10. It is further asserted in its Defence that the lease agreement was prepared by the lawyers in the conduct and discharge of their professional legal duties and responsibilities.

11. In this respect, the 4th defendant further asserts in its Defence that it had no knowledge nor information/advice that the 1st and 2nd defendants were not the legal proprietors of the subject property. In paragraph (5) of the Defence, the 4th defendant pleads that in the preparation of the lease agreement, the lawyers identified the 1st and 2nd defendants "as the registered proprietors and by definition the legal owners of the property".

12. Finally, it is part of the 3rd and 4th defendants' Defence (paragraph (5)(c) and (7)(c)that, firstly, they acted only as agents and managers of the subject property and did not prepare the lease agreement,and, secondly, that there was no obligation on their part to conduct any property searches,such obligation being the legal responsibility of the conveyancing lawyers.

13. The plaintiff claims in a purported claim of ownership of the subject property by the 1st and 2nd defendants,the 3rd defendant negotiated with them and A-Amin Holdings Limited for the latter to lease the property on 5 years lease commencing 1st January 2011. A formal lease agreement was entered ino between the parties, pursuant to which the lessee had paid certain monies to the 4th defendant.

14. It is part of the plaintiffs claim that these monies were paid between 1st January 2011 and 31st October 2012, totalling K101,000.00 (inclusive of the K4000.00 bond fee).

15. The sum total of the plaintiff's claim is that, whilst alleging unlawful conveyancing of the subject property on behalf of the 1st and 2nd defendants,who did not own the property, the 4th defendant had defaulted on its obligation to conduct a 'due diligence search' to determine the rightful owner.

16. Thus, it is asserted, the 4th defendant and its employee the 3rd defendant are liable for the rental monies paid by the lessee. The only grievance of the plaintiff in the end is (pursuant to paragraph (18) of the Statement of Claim) in relation to those rental monies, and claims those monies, with the usual ancillary reliefs of interest and costs.

17. It would appear, therefore, that the initial purported issue of unlawfulness in the conveyancing of a property that the plaintiff claimed was the registered owner, is of no, or no immediate concern for the plaintiff. It just wants those rental monies!

18. In relation to the plaintiff's assertion in its Statement of Claim that the conveyancing of the property was unlawful, and that the 4th defendant ought to have undertaken a 'due diligence'search to determine the proprietorship of the property in question, the 4th defendant, after firstly defining the proper role and fuction of a registered real estate agent, invokes and relies on s 6o of the Lawyers Act 1986. The provision, which is headed Offences, is in the following terms: 

(1)	It is an offence for a person who has not been admitted to practise a lawyer-

(a)	to practise, or purport to practise,as a lawyer; or
(b)	to hold himself out or represent himself to be a lawyer;or
(c)	to permit other person to use his name as being admitted to practise as a lawyer.

Penalty: A fine not exceeding K1, 000.00

19. Other activities undertaken on the pretence of being a lawyer are specifically proscribed under sub-ss (2) to (7)(of this provision, carrying similar penalties. But they are not of immediate pertinence of the plaintiff's claim of want of professionalism in the conveyancing of the subject property.

20. This claim of the plaintiff is, therefore, baseless and without merit.

21. The principles governing the courts exercise of its discretion whether to grant or refuse the reliefs available under the two Orders and their respective rules (NCR) that are relied on for the application, are well settled in this jurisdiction. These orders are produced hereunder as follows: 

Order 12 r 40 

40. Frivolity, etc.

(1) Where in any proceedings it appears 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; or 
(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.

Order 8 r 27

27. Embarrassment, etc.

(1) Where a pleading-

(a) disclosed no reasonable cause of action or defence or other case appropriate to the nature of the pleading; or 
(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings; or 
(c) is otherwise an abuse of process of the Court, the Court may at any stage of the proceedings, or terms or otherwise, order that the whole or any part of the pleading be struck out.

22. The principles governing the courts exercise of its discretion whether to grant or refuse the reliefs envisaged under the two Orders and Rules relied on here, are well settled in this jurisdiction by our courts. Counsel for the 4th defendant has cited and relied on three of these:

Lerro v Stagg (2006) N 3050; Toap v State & Ors(2004) N 2766 (per Cannings J); and Mango v Chow Po Khoon (2005) N 2907 (per Cannings J); Irafawe v Yauwe Riong (1999) N 1915 (per Kirriwom J). I have had the opportunity to read this unreported National judgments again, and their pertinence to the exercise of the courts discretion in this application are of course not in doubt.

23. It has to be noted though, with respect, that these are not freshly enunciated principles of law. They have their source of origin from and restate previously decided cases where these principles had been established by courts higher than trial courts, and, with respect, duly reported in the formal law reports. Thus, the undoubted authority of those precedents ought to have been duly acknowledged. In this respect, in consonance with the established hierarchy of our courts system, under the Constitution1, every endeavour ought to be made to cite Supreme Court precedents.

24. Be that as it may, the principles can be conveniently summarized by stating that: 

It is part of our law that the court may terminate an action or defence, and give judgment if the pleadings disclose no reasonable cause of action or defence. Our O 12 r 40 NCR specifically authorizes the court, in the exercise of its discretion, to strike out pleadings that fail to demonstrate a reasonable cause of action. Thus, the power also extends under the Rules to frivolous and vexatious claims in the statement of claim. Similarly, it is demonstrated that a plaintiff's claim is an abuse of process.

25. Conversely, the Rules give the court power to strike out a defence. Our courts are, as noted above, replete with case law on the exercise of this power to terminate proceedings or defence because of defective pleadings.

26. It should be noted that, apart from this summary jurisdiction of the court under the Rules, the court also has an inherent jurisdiction to strike out proceedings or defence that is bad in law. Bad in law because they constitute what are envisaged under O12 r 40 (1)(a), (b) and (c),and O8 r 27 NCR. 

27. Obviously, this inherent jurisdiction does not flow from a particular statute or Rules of Court (as Orders 12 and 8 provide). Attempts to define the nature and extent (if any) of this jurisdiction have been numerous. 2 This may be due to what the author of 'The White Book' 3 noted the invoking of this jurisdiction in an apparently inexhaustible variety of circumstances, and exercised in different ways. The learned author described this jurisdiction as a peculiar concept that was: 

"so amorphous and ubiquitous and so pervasive in its operation that is seems to defy the challenge to determine its quality and to establish its limits."4

28. The exercise of this jurisdiction has everything to do with and is essential to the existence, dignity, and functions of the court of law, and it is inherent as such for the orderly, efficient and effective administration of justice. And the exercise of this jurisdiction, as in this instance, involves using the courts coercive powers to summarily dismiss this proceeding in the way Rules 40(1) and 27 of Orders 12 and 8 respectively, that is, power to terminate proceedings without a trial.

29. Thus, by a combination of its inherent and rules-based jurisdiction, the court can control useless or unmeritorious litigation, and ensure that the rules of pleading are observed. Needles to say, this power or jurisdiction is discretionary, and to be exercised in appropriate circumstances. It has been said that the court will proceed summarily in this way only if it would be improper to allow the litigation to continue. If the action or defence is clearly hopeless, then the sooner it is halted the better.

30. It should be emphasized that the powers of the court under its inherent jurisdiction are complementary to its powers under the NCR; one set of powers supplements and reinforces the other. It has been said that the inherent jurisdiction of the court is most valuable adjunct to the powers conferred on the courts by the Rules5. The learned author elaborates as follows: 

The usefulness of the Rules of Court is that they regulate with some precision the circumstances in which the court can apply coercive measures for disobedience of or non-compliance with the requirements of the rules or orders of the court. These measures are simply convenient and effective to uphold the authority of the court. . .6

31. The powers of the court discussed in the foregoing are invoked soon after proceedings have been instituted, in what is described as "interlocutory" procedures, when disputes arise before substantive hearing and determination of the respective rights and obligations of the parties (that is to say, a trial). These preliminary disputes may concern matters of procedure, or the preservation of property or rights. For example, disputes as to pleadings (as in this case), discovery and the need for injunction to preserve property the subject of proceedings.
32. In its defence, the 4th defendant also referred to and relied on case law supportive of the general principle of the law of agency. This directly concerns the plaintiff's claim for reimbursement of rental monies allegedly paid to it by A-Amin Holdings Limited. I accept the discussion on the general principles governing the relationship of an agent with his principal vis-a-vis third parties, especially under contract law. Counsel for the plaintiff did not deal with this issue, although it was the plaintiff who raised it.

33. It is a general principal of contract law that that the only person who acquire rights and liabilities under a contract are the parties to it. This principle has its origins in the well known common law doctrine of the privity of contract. This doctrine concerning the relationship that exists between the parties to a contract, establishes that only the parties to a contract can sue and be sued on it. As the useful legal lexicon, Oxford Dictionary of Law,7 defines further, it can neither confer rights nor impose liabilities on others. An example cited in this definition succinctly explains the situation, which I respectfully reproduce hereunder: 

If, for example, X and Y agree that X will paint Y's house, in return for which Y will $1000 to Z, Z cannot sue Y for the money. If he could, the contract would be creating a jus quasitum tertio (Latin: right acquired for a third party), and English law does not recognize such a right.

34. At this juncture, it needs to be noted that the preceding discussions have dealt with the 3rd and 4th defendants co-jointly as employee-employer parties in their joint defence. It now transpires, from further perusal of the documents that, firstly, the plaintiff does not plead the well- known principle of vicarious liability in what is obviously such a relationship. Thus, merely an assertion of the relationship without addressing the court on the principle or doctrine of law that is supposed to create consequence(s) of liability.

35. Counsel for the 3rd and 4th defendants made a separate submission in relation to the filing of a Notice of Intention to Defend on behalf of both defendants. The 3rd defendant had been in the employ of the 4th defendant at the relevant time, but when the proceedings were instituted by the plaintiff, the 3rd defendant was not longer in the 4th defendant's employment. 

36. In any case, counsel submitted that at the time of filing of the Notice of Intention to Defend, the 3rd defendant had not been duly served with the originating process now before me.

37. What the 3rd defendant seeks now, upon limited to the lawyers for the 4th defendant is to have the Notice of Intention to Defend in respect of him to be withdrawn.

38. Mr Kari of counsel for the plaintiff company, focusing primarily on the rental payments by the lessee of the property in question, relies on the law of agency to assert responsibility of the 4th defendant to reimburse the proceeds of the rental payments. As with the lack or absence of any claim in the Statement of Claim in respect of the purported dispute as to title to the property, counsel for the plaintiff makes no submissions on this.

39. Apart from asserting agency on the part of 4th defendant, no submission is made on the well recognized principles that favour his client's case.

40. The plaintiff's claim as asserted in the Statement of Claim is for monies to be paid to it.

Conclusion

41. In the end result the claim of the plaintiff is without merit. The Statement of Claim fails to disclose a reasonable cause of action, for which relief or remedy could properly flow from it. If the proceedings were allowed to proceed to a substantive hearing, which this court is satisfied should not be, it would be, in my respectful opinion, a fruitless and wasteful exercise.

42. As counsel for the 4th defendant quite properly noted there is an absence of pleading the title to the property in question. To be entitled to claim unlawfulness in the entering into of the lease agreement, there ought to have been a proper pleading of title to the property accompanied by reliance on principles of law, such as that envisaged in and by the well known doctrine of the indefeasibility of title. There are none of these here. Only a claim for monies presumably "had and received". 

43. The plaintiff's claim is frivolous and vexatious, qualifying as such by virtue of O12 r 40(1)(b) NCR.

44. In relation to the 3rd defendant, his joiner as a party was not supported by assertion or pleading of the doctrine of vicarious liability. In any case, he was not served the originating process, and the arguments counsel advanced in respect of the 4th defendant would apply equally to him.

45. I am satisfied in the end result that the plaintiff's Statement of Claim should be dismissed pursuant to O 12 r 40 (1)(a) and (b), and O 8 r 27 NCR, and I so order. 

46. I am satisfied also that I should be granted to have the Notice of Intention to Defend mistakenly filed on his behalf withdrawn as sought in respect of the 3rd defendant.

Orders
	
47. I make the following orders, terminating the proceedings at this juncture: 

1.	The plaintiffs Statement of Claim indorsed on the Writ of summons is dismissed pursuant to Orders 12 and 8, rules 40 (1)(a) and (b), and 27 respectively NCR.
2.	Leave is granted to withdraw the Notice of Intention to Defend filed on behalf of the 3rd defendant pursuant to Order 8 Rule 60 NCR.
3.	The 4th defendant to have its costs of and incidental to this proceedings paid for by the plaintiff. 

Judgment Accordingly
_____________________________________________________________
PNG Legal Services: Lawyers for the Plaintiff
Young and Williams Lawyers: Lawyers for the 3rd and 4th Defendants