N7553

  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. 
                        2018: 19th, 25th January 

Application to Dismiss Proceeding

Cases Cited:
Papua New Guinea Cases

National Capital District Interim Commission v. Bogibada Holdings Pty Ltd [1987] PNGLR 135
Ok Tedi Mining Ltd v. Niugini Insurance Corporation and Ors (No. 2) [1988-89] PNGLR 425. 
TS Tan v. Elcom (2002) SC683 
Kerry Lerro v. Stagg & Ors (2006) N3050
Takori v.Yagari & Ors (2008) SC905
Mt Hagen Urban Local Level Government v. Sek No. 15 (2009) SC1007 Independent State of Papua New Guinea v. Central Provincial Government (2009) SC977
National Fisheries Authority v. New Britain Resources Development Ltd (2009) N4068 
Siu v. Wasime Land Group Incorporated (2011) SC1107 
Placer Dome (PNG) Ltd v. Yako (2011) N4691
Pius Pundi v. Chris Rupen (2015) SC1430 
Dr. Onne Rageau v. Kina Finance Ltd (2015) N6175
Amos Ere v. National Housing Corporation (2016) N6515
Shengtai Investments Ltd v. Chen Jing (2017) N6753

Overseas Cases

Ainsworth v. Criminal Justice Commission [1992] HCA 10; (1991-1992) 175 CLR 564
Hubbuck & Sons, Ltd v. Wilkinson, Heywood & Clarke, Ltd [1899] 1 Q.B. 86 
The Russian Commercial and Industrial Bank v. British Bank for Foreign Trade Ltd [1921] 2 AC 438 

Counsel:

Mr. M. Kombri, for the Plaintiff 
Mr. I.R. Shepherd, for the First and Second Defendants
Mr. P. Kewa, for the Third Defendant

25th January, 2018

1. HARTSHORN J: This is a decision on a contested application to dismiss this proceeding. It is made by the third defendant, Kiwiki Enterprise Limited (KEL) and supported by the other two defendants, Piunde Limited (In Liquidation) (Piunde) and its liquidator, amongst others, Mr. James Kruse (liquidator). 

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 Mr. Kruse as liquidator of Piunde and agent of the 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 liquidator to KEL. The managing director of both plaintiffs has given evidence that amongst others, the plaintiffs must be adequately compensated prior to KEL taking possession of the Property.

This application

4. KEL applies pursuant to Order 12 Rule 40 (1) National Court Rules and s.155(4) Constitution to dismiss this proceeding as amongst others:

a)	the declaratory relief sought in the originating summons does not 	concern any purported right of the plaintiffs;

b)	the relief sought in the originating summons does not identify the 	purported legal rights of the plaintiffs that are sought to be protected;
c)	an incorrect mode of commencing proceedings has been used as in 	effect the plaintiffs are only seeking damages;
d)	the declaratory relief sought will not resolve all of the issues between 	the parties and does not have any practical utility;
e)	there is no controversy between the parties that has been identified.
5. Piunde and the liquidator submit that the proceeding is an abuse of process and should be dismissed as:
a)	no cause of action is disclosed;
b)	the plaintiffs do not have locus standi or standing to bring this 	proceeding;
c)	the Fairness of Transactions Act and s. 319 Companies Act have no 	application.	
6. The plaintiffs’ submit that the proceeding should not be dismissed as:
a)	this court’s jurisdiction relied upon in KEL’s notice of motion is not 	stated concisely and offends Order 4 Rule 49(8) National Court Rules;
b)	there is a dispute as to facts and whether liquidator should have 	disclaimed the Property and also the lease that the plaintiffs have for 	the Property;
c)	Piunde and the liquidator are estopped from challenging the validity 	of the plaintiffs’ lease for the Property as they accepted rental paid 	pursuant to the lease;
d)	a reasonable cause of action is disclosed being whether the liquidator 	is in breach of s. 319 Companies Act and whether the lease should 	have been disclaimed as onerous;
e)	the liquidator should have sought directions from this court pursuant 	to s. 51 Companies Rules.

Law

Order 12 Rule 40 National Court Rules

7. There are numerous authorities in respect of the principles which apply to applications under Order 12 Rule 40 National Court Rules and I refer to the following cases in this regard: Kerry Lerro v. Stagg & Ors (2006) N3050, Takori v.Yagari & Ors (2008) SC905, Mt Hagen Urban Local Level Government v. Sek No. 15 (2009) SC1007 and Siu v. Wasime Land Group Incorporated (2011) SC1107. The Court in Mount Hagen v. Sek (supra) in paragraphs 27 to 30 conveniently sets out the requirements of Order 12 Rule 40 (1) (a), (b) and (c) as follows: 

“27.	The terms “vexatious”, “frivolous”, “abuse of the process of the Court” and “reasonable cause of action” under O.12 r.40 of the National Court Rules have been judicially considered, defined and expounded in a number of decisions in both the National and Supreme Courts. These cases include Ronny Wabia v. BP Exploration Co. Limited & 2 Others [1998] PNGLR 8 (N1697); PNG Forest Products Pty Ltd and Another v. The State and Genia [1992] PNGLR 85; Gabriel Apio Irafawe v. Yauwe Riyong (1996) N1915; Eliakim Laki and 167 Others v. Maurice Alulaku and Others (2002) N2001; Kiee Toap v. The Independent State of Papua New Guinea & Another (2004) N2766; Kerry Lerro trading as Hulu Hara Investments Limited v. Philip Stagg, Valentine Kambori & The State (2006) N3050; Philip Takori & Others v. Simon Yagari & 2 Others (2008) SC 905. These cases say the same thing. 

28.	The law with regard to an application for dismissal of proceedings based on O.12 r.40 is settled in our jurisdiction. We note that the principles are succinctly set out in Kerry Lerro’s case (supra) and which has more recently been approved and applied by the Supreme Court in Philip Takori’s case (supra). 

29.	The phrase ‘disclosing a reasonable cause of action’ consists of two parts; cause of action and form of action. A cause of action is defined as a legal right or form of action known to law whereby a plaintiff in a statement of claim must plead all necessary facts and legal elements or ingredients to establish or prove his claim.  The principles stated by these cases can be summarized as follows:

(i)	A plaintiff or claimant should not be driven from the judgment seat in a summary manner and that the Court should be cautious and slow in exercising its discretionary power.
 	
(ii)	The Court has an inherent jurisdiction to protect and safeguard its processes from abuse.

(iii)	The purpose of O.12 r.40, is to give the Court power to terminate actions or claims which are plainly frivolous or vexatious or untenable.

(iv)	A frivolous claim is one that is characterized as a claim that is plainly and obviously untenable, that cannot possibly succeed and bound to fail if it proceeds to trial.

(v)	A vexatious claim is one that is said to be a sham and cannot succeed where it seeks to merely harass the opposing party and put that party to unnecessary trouble and expense in defending or proving the claim.

30.	In an application under O.12 r.40 of the NCR, the Court may dismiss a proceeding or action where it is satisfied that the pleading in the statement of claim is seriously wanting where a necessary fact or legal element has not been pleaded.”

8. Notwithstanding all of the various judicial pronouncements since, the position is succinctly summarised in Hubbuck & Sons, Ltd v. Wilkinson, Heywood & Clarke, Ltd [1899] 1 Q.B. 86. At 90-91 the Court of Appeal said:

“The second and more summary procedure is only appropriate to cases which are plain and obvious, so that any master or judge can say at once that the statement of claim as it stands, is insufficient, even if proved, to entitle the plaintiff to what he asks.”

Declaratory relief

9. As the plaintiffs’ seek declaratory relief, it is necessary to consider the factors that are required to be established before a declaratory order can be made. These factors are set out in The Russian Commercial and Industrial Bank v. British Bank for Foreign Trade Ltd [1921] 2 AC 438. This case has been referred to in various cases including Ok Tedi Mining Ltd v. Niugini Insurance Corporation and Others (No 2) [1988-89] PNGLR 425; Placer Dome (PNG) Ltd v. Yako (2011) N4691; Independent State of Papua New Guinea v. Central Provincial Government (2009) SC977; Dr. Onne Rageau v. Kina Finance Ltd (2015) N6175 and National Fisheries Authority v. New Britain Resources Development Ltd (2009) N4068

10. The factors are:

a)	There must exist a controversy between the parties;

b)	The proceedings must involve a right;

c)	The proceedings must be brought by a person who has a proper or 	tangible interest in obtaining the order;

d)	The controversy must be subject to the court’s jurisdiction;

e)	The defendant must be a person having a proper or tangible interest in opposing the plaintiff’s claim;

f)	The issue must be a real one. It must not be merely of academic 	interest, hypothetical or one whose resolution would be of no practical utility.

11. In the High Court of Australia decision, Ainsworth v. Criminal Justice Commission [1992] HCA 10; (1991-1992) 175 CLR 564, Brennan J. referred to the Russian Commercial case (supra) and said that notwithstanding the wide discretion that exists in deciding whether a declaration should be made, it was not appropriate to grant a declaration if there was no real controversy to be determined.

12. Also, recently, the Supreme Court in considering the issue of standing to seek declaratory orders in Pius Pundi v. Chris Rupen (2015) SC1430 held amongst others that:

“A declaration is a discretionary remedy that should only be granted where there exists a real controversy between the parties to the proceedings, a legal right is at issue, the party seeking it has a proper or tangible interest in obtaining it, the controversy is within the court’s jurisdiction, the defendant has a proper or tangible interest in opposing the plaintiff’s claim and the issues involved are real, and not merely of academic interest or hypothetical.”

13. It has been held to be an abuse of process to seek declaratory relief that will not resolve all of the issues between the parties or relief that will not finally settle the real dispute between the parties: TS Tan v. Elcom (2002) SC683 and the National Court decisions of National Capital District Interim Commission v. Bogibada Holdings Pty Ltd [1987] PNGLR 135 and Ok Tedi Mining Ltd v. Niugini Insurance Corporation and Ors (No. 2) [1988-89] PNGLR 425 and Shengtai Investments Ltd v. Chen Jing (2017) N6753.

Consideration

KEL’s motion

14. As to the plaintiffs’ submission that this court’s jurisdiction is not stated concisely, and offends Order 4 Rule 49(8) National Court Rules, this Rule confers a discretion upon the court whether to strike out the motion for being incompetent and for lack of form, once the motion has been accepted by the Registry staff for filing. The motion has been accepted for filing.

15. In this instance, notwithstanding that KEL in its motion refers to Order 12 Rule 40(1) and not Order 12 Rule 40(1)(a) National Court Rules, the ground of, “showing no reasonable cause of action” is stated in the motion. If therefore, KEL’s motion does offend against Order 4 Rule 49(8) National Court Rules, and I make no determination on that question, then I exercise this court’s discretion to not strike out the motion, on the basis that the plaintiffs’ are not prejudiced or taken by surprise given the ground stated in the motion.

Declaratory relief sought

16. KEL supported by the other defendants submits that the declaratory relief sought in the originating summons does not concern any purported right of the plaintiffs.

17. From a perusal of the wording of the declaration and the other relief sought, there is no claim that the plaintiffs’ are entitled to, or have any right to the Property, whether that be for instance, a right to remain on the Property by virtue of a tenancy agreement or a right to purchase the Property. Further, there is no claim that the plaintiffs’ have a right of any nature which entitles them to sue any or all of the defendants. I refer to Amos Ere v. National Housing Corporation (2016) N6515 and the cases cited therein, in this regard.

18. In the absence of any claim stated in the originating summons to any 
right of the plaintiffs’ in the Property or at all, there does not exist a 
controversy between the parties, the proceeding does not involve a right, 
(because no right has been claimed in the originating summons) and the 
proceeding has not been brought by a person who has a proper or tangible 
interest in obtaining the substantive orders sought. These three factors are 
some of the factors that must exist before a declaration will be granted. As 
these factors do not exist in this instance, the plaintiffs’ are not entitled 
to the declaratory relief sought. No reasonable cause of action is disclosed: Amos Ere v. NHC (supra).

19. Further, the declaratory relief sought concerns the liquidator failing to disclaim the Property. Even if that declaration was granted, and the liquidator was declared to have breached s. 319 Companies Act and s. 4 Fairness of Transactions Act, such declaration would not resolve the issues that the plaintiffs’ purportedly have with the defendants and would not confer any rights upon the plaintiffs. I refer to Shengtai Investments Ltd v. Chen Jing (supra) and the cases referred to therein in this regard.

20. Consequently for the above reasons the proceeding should be dismissed. Given this it is not necessary to consider the other submissions of counsel.

Orders

21. It is ordered that:

a)	This proceeding is dismissed;

b)	The plaintiffs shall pay the costs of all of the defendants of and 	incidental to this proceeding;

c)	Time is abridged.
_________________________________________
Kombri & Associates: Lawyers for the Plaintiff                                           
Ashurst: Lawyers for the First and Second Defendants
Boma Lawyers: Lawyers for the Third Defendant