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Ouna Properties Ltd v Kruse [2017] PGNC 403; N7404 (20 December 2017)

N7404

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (COMM) 606 of 2017

BETWEEN:
OUNA PROPERTIES LIMITED
Plaintiff

AND:
HANDII MAHN INVESTMENT LIMITED
Second Plaintiff

AND:
JAMES KRUSE
as the Court Appointed Liquidator of Piunde
Limited (In Liquidation) and as Agent of
Mortgagee (Bank South Pacific Limited)
First Defendant

AND:
PIUNDE LIMITED (In Liquidation)
Second Defendant

AND:
KIWIKI ENTERPRISE LIMITED
Third Defendant

Waigani: Hartshorn J.
2017: 20^th October
: 20^th December

Application for the disqualification of a Judge

Cases Cited:
Papua New Guinea Cases

PNG Pipes Pty Ltd and Sankaran Venugopal v. Mujo Sefa & Ors (1998) SC592
Paru Aihi v. Sir Moi Avei (2004) N2523
Pacific Equities & Investments Ltd v. Goledu (2008) N3400
Yama v. Bank South Pacific Ltd (2008) SC921
Tzen Pacific Ltd v. Innovest Ltd (2012) N4713
Pastor Steven Bagari v. James Marape (2014) N5675
Petroleum Exploration Joint Venture Ltd v. Stanis Talu (2017) N6665

Overseas Cases

Bienstein v. Bienstein [2003] HCA 7
British American Tobacco Australia Services Ltd v. Laurie [2011] HCA 2
Ebner v. Official Trustee in Bankruptcy [2000] HCA 63
Johnson v Johnson [2000] HCA 48
Lashansky v. Legal Practice Board of Western Australia [2012] WASCA 77
MTI v. SUL [No. 2] [2012] WASCA 87
Porter v. Magill [2002] 2 AC 357
Re JRL; Ex parte CJL [1986] HCA 39
Saxmere Company Ltd & Ors v. Wool Board [2009] NZSC 72; [2010] 1 NZLR 35

Counsel:

Mr. M. Kombri, for the Plaintiff

Mr. I.R. Shepherd, for the First and Second Defendants

Mr. P. Kewa, for the Third Defendant

Oral decision delivered on
20^th December, 2017

1. HARTSHORN J: This is a decision on a contested application by the plaintiffs for my disqualification from hearing this proceeding on the ground that there is a reasonable apprehension of my bias.

Background

2. The plaintiffs claim declaratory and other relief in regard to a property situated at Allotment 1 Section 8, Milinch of Chimbu, Fourmil of Karimui, Town of Kundiawa (Property). The plaintiffs seek a declaration that the first defendant as liquidator of Piunde Ltd (In liquidation) and agent of Bank South Pacific Ltd as mortgagee, breached s. 319 Companies Act, and was unfair, pursuant to s. 4 Fairness of Transactions Act, when he failed to disclaim the Property together with improvements thereon as onerous property.

3. The first plaintiff claims to have leased the Property from February 2013 from a company, the majority shareholder of which was Piunde Ltd. It is claimed that the plaintiffs made substantial improvements to the Property. When Piunde Ltd was placed into liquidation, the second plaintiff made various offers to purchase the Property but the Property was sold by the first defendant to the third defendant, Kiwiki Enterprise Ltd. The managing director of both plaintiffs has given evidence that amongst others, in his view, that the plaintiffs must be adequately compensated prior to the third defendant taking possession of the Property.

This application

4. The plaintiffs seek my disqualification pursuant to Order 12 Rule 1 National Court Rules and s. 155(4) Constitution on the grounds that:

a) It is submitted that I have dealt with two related proceedings involving the same liquidation exercise carried out by the same person in regard to the same properties;

b) I refused an urgent application for interim injunctions in a related proceeding and expressed the view that the plaintiff company should seek damages;

c) I disqualified myself in another related proceeding based upon an application in which it was claimed that there was a reasonable apprehension of my bias as I had refused urgent interim relief as referred to in (b) above;

d) I have refused an application for interim orders in this proceeding.

5. The defendants submit that this application should be refused as:

a) The other proceedings referred to by the plaintiffs, concerned property in respect of which the first defendant was appointed as agent by Bank South Pacific Ltd. In this instance the first defendant sold the Property as a court-appointed liquidator and not as an agent;

b) This proceeding and the other proceedings referred to are different. This proceeding is concerned with whether the Property should have been disclaimed by the first defendant as liquidator and not whether his appointment as agent is valid;

c) I did not disqualify myself in OS 657/17 as a result of my decision in OS 797/15, as submitted by the plaintiffs. I disqualified myself because Bank of South Pacific Ltd is a party to OS 657/17;

d) Proceedings OS 797/15 and OS 657/17 involve different parties apart from the first defendant. In those other proceedings the first defendant acted as agent for the mortgagee Bank of South Pacific Ltd and not as liquidator. Further, the counsel appearing in those other proceedings are different to the counsel appearing in this proceeding apart from the first defendant’s counsel;

e) The evidence relied upon in support of this application does not support the submission that there is a reasonable apprehension that I will not decide this case impartially.

Law

6. As to an application for the disqualification of a judge for apprehended bias, in PNG Pipes Pty Ltd and Sankaran Venugopal v. Mujo Sefa & Ors (1998) SC592, it was held that:

“the test applied in determining whether apprehension of bias was satisfied was whether an objective observer, knowing all surrounding facts, would be left with an apprehension, not a conviction that the judicial officer was predisposed, by matters extraneous to a proper adjudication, to reach a particular conclusion.”

7. In Tzen Pacific Ltd v. Innovest Ltd (2012) N4713, I noted that the law as to apprehended bias in respect of a judge in this jurisdiction is similar to the law in the United Kingdom, Australia and New Zealand: Saxmere Company Ltd & Ors v. Wool Board [2009] NZSC 72; [2010] 1 NZLR 35, Porter v. Magill [2002] 2 AC 357, Ebner v. Official Trustee in Bankruptcy [2000] HCA 63, though the governing principle is that, subject to qualifications concerning waiver or necessity, a judge is disqualified:

“if a fair minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide”: Ebner (supra), Johnson v Johnson [2000] HCA 48, British American Tobacco Australia Services Ltd v. Laurie [2011] HCA 2.

In essence the tests are the same in all of these jurisdictions.

8. As to the hypothetical observer, in Yama v. Bank South Pacific Ltd (2008) SC921, the Court observed that an objective, fair minded, lay observer is to be attributed with having some knowledge of the way in which lawyers and judges work. The Australian High Court in Johnson v. Johnson (supra) explained further that:

“The hypothetical reasonable observer of the judge’s conduct is postulated in order to emphasise that the test is objective, is founded in the need for public confidence in the judiciary, and is not based purely upon the assessment by some judges of the capacity or performance of their colleagues. At the same time, two things need to be remembered: the observer is taken to be reasonable; and the person being observed is “a professional judge whose training, tradition and oath or affirmation require the judge to discard the relevant, the immaterial and the prejudicial””

9. In cases where the allegation is that the apprehension of bias arises because a judge has presided over an earlier case or cases involving one or other of the parties, it has been held that:

“While it is important that justice must be seen to be done, a judge should not disqualify himself or herself on the basis of bias or a reasonable apprehension of bias unless substantial grounds are established”: Re JRL; Ex parte CJL [1986] HCA 39, Bienstein v. Bienstein [2003] HCA 7, MTI v. SUL [No. 2] [2012] WASCA 87, Lashansky v. Legal Practice Board of Western Australia [2012] WASCA 77.

10. In Re JRL; Ex parte CJL (supra), Mason J stated that an apprehension of bias must be firmly established. His Honour said:

“It seems that the acceptance by this Court of the test of reasonable apprehension of bias in such cases as Watson and Livesey has led to an increase in the frequency of applications by litigants that judicial officers should disqualify themselves from sitting in particular cases on account of their participation in the proceedings involving one of the litigants or on account of conduct during the litigation. It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party. There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way. In cases of this kind, disqualification is only made out by showing that there is a reasonable apprehension of bias by reason of prejudgement and this must be “firmly established”....

Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour.”

11. In the minority decision of the High Court of Australia decision of British American Tobacco Australia Services Ltd v. Laurie [2011] HCA 2, French CJ said in the general context and not specifically as to the matter then before the High Court, that in regard to a finding properly made by a judge in the course of an interlocutory ruling or in earlier proceedings, that:

“It is an area in which courts should be astute not to defer to that kind of apprehension (of bias) that is engendered by the anticipation of an adverse outcome, rather than a legitimate concern about partiality. By way of example, the fact that a judge who has made a finding of fact adverse to a party on particular evidence is likely to make the same finding on the same evidence, is not of itself indicative of bias. It could be indicative of consistency subject to the judge having an open mind when it came to argument about the effect of the evidence.”

12. In considering whether a reasonable apprehension of bias has been established, in Yama v. Bank South Pacific Ltd (supra) at para 19 the Court said:

“ In considering whether a reasonable apprehension of bias has been established, it is necessary first to identify the facts, matters and circumstances by reason of which it is said that a judge might decide a case other than on its merits and secondly, to articulate the logical connection between those facts, matters and circumstances and the apprehended deviation from the course of deciding the case on the merits, Ebner v. Official Trustee in Bankruptcy [2000] HCA 63; Smits v. Roach [2006] HCA 36.”

Consideration

13. The facts, matters and circumstances which it is submitted, might lead me to decide matters other than on their legal and factual merits are that:

a) It is submitted that I have dealt with two related proceedings involving the same liquidation exercise carried out by the same person in regard to the same properties;

b) I refused an urgent application for interim injunctions in a related proceeding and expressed the view that the plaintiff company should seek damages;

c) I disqualified myself in another related proceeding based upon an application that there was a reasonable apprehension of bias as I had refused urgent interim relief as referred to in 13(b) above;

d) I have refused an application for interim orders in this proceeding.

14. In regard to an apprehension of my bias because of my involvement with proceeding OS 797/15 Geru Holdings Ltd v. James Kruse and Deloitte Touche Tohmatsu, the plaintiffs submit that the main issue in that proceeding was the propriety of the Deed of Appointment for Agent for Sale and that I accepted that the said Deed of Appointment was in order.

15. Putting aside whether I did accept that the said Deed of Appointment was valid, the said Deed of Appointment is between Bank of South Pacific Ltd and James Kruse, the first defendant in this proceeding. The said Deed of Appointment is in respect of mortgages registered over properties that are not the subject of this proceeding. Further, this proceeding concerns a property which has been sold by the first defendant as liquidator and not as the agent of the Bank of South Pacific Ltd pursuant to the said Deed of Appointment.

16. The plaintiffs also submit that in proceeding OS 657/17 Geru Holdings Ltd v. James Kruse of Deloitte Touche Tohmatsu and Bank South Pacific Ltd, I upheld an application for my disqualification that had been filed. The reasons that the plaintiffs state were given for the application for disqualification were that the proceeding OS 657/17 concerned the propriety of the said Deed of Appointment.

17. Notwithstanding that I did disqualify myself from presiding in OS 657/17, it was not because the plaintiff’s notice of motion for my disqualification was successful. That notice of motion was not heard. Before that notice of motion was heard, of my own volition, I disqualified myself because Bank South Pacific Ltd is a party to OS 657 of 2017. I am unable to preside in a matter in which Bank of South Pacific Ltd is a party because of a close association and friendship that I have with a person who is now a senior executive of the Bank of South Pacific Ltd.

18. The plaintiffs further submit that because I refused the interim injunctive relief in this proceeding and that the first defendant in this proceeding was appointed pursuant to the said Deed of Appointment in OS 797 of 2015 and OS 657 of 2017, there is an apprehension of my bias.

19. As referred to above, in regard to the property the subject of this proceeding being Allotment 1, Section 8, Milinch of Chimbu Fourmil of Karimui, Town of Kundiawa, the first defendant acts in his capacity as the court appointed liquidator of Piunde Ltd (In liquidation) and not by appointment as agent pursuant to the said Deed of Appointment.

20. As I said in Pastor Steven Bagari v. James Marape (2014) N5675 at [20], I am not satisfied that there is evidence in this instance to suggest, and I am not of the view that my decision on the application for injunctive relief in this proceeding gives rise to an application that I will approach the remainder of the proceeding with a closed mind. In this regard I refer to the statement of French CJ in British American Tobacco Australia Services Ltd v. Laurie [2011] HCA 2, reproduced earlier.

21. The mere fact that a judge has previously decided cases in favour or against a party does not provide a foundation for a reasonable apprehension that the judge might not consider another case involving one or both of the parties with other than an impartial and unprejudiced mind; MTI v. SUL [No. 2] [2012] WASCA 87. To my mind, this applies equally to interlocutory decisions made by a judge in the same proceeding.

22. In this regard, I refer to the decision of Sevua J. in Gobe Hongu v. National Executive Council & Ors (1999) N1964 where His Honour rejected an application for disqualification made on the basis that he had ruled against the applicant in an earlier application for interlocutory relief; of Injia DCJ (as he then was) in Paru Aihi v. Sir Moi Avei (2004) N2523, where His Honour refused a disqualification application made on the basis that he was a member of the bench of 3 previous Supreme Court election review cases which had ruled against the applicant; and my decision in Pacific Equities & Investments Ltd v. Goledu (2008) N3400, where I refused a disqualification application that was made on the basis amongst others, that I had refused injunctive relief in earlier proceedings that had related issues involving two of the parties and from which an appeal was pending. I also refer to my decisions in Bagari v. Marape (supra) and Petroleum Exploration Joint Venture Ltd v. Stanis Talu (2017) N6665 in which I refused disqualification applications that were made on the basis amongst others, that I had refused injunctive relief in the same proceedings.

23. I reject the contention that because of my previous decisions on interlocutory matters in this proceeding, and the other matters referred to, that an objective, fair minded, informed observer would reasonably apprehend that I may be predisposed to find against the plaintiffs. The plaintiffs are not entitled to the relief that they seek.

Orders

24. It is ordered that:

a) The relief sought in the notice of motion of the plaintiffs’ filed 9^th October 2017 is refused;

b) The plaintiffs shall pay the defendant’s costs of and incidental to the said notice of motion;

c) Time is abridged.

_____________________________________________________________
Kombri & Associates: Lawyers for the Plaintiffs
Ashurst: Lawyers for the First and Second Defendants
Boma Lawyers: Lawyers for the Third Defendant