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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS (COMM) NO. 175 OF 2020
BETWEEN:
LEONG KING NGU for and on behalf of GREEN INVESTMENT LIMITED pursuant to Leave granted by the Court on 9th January 2020
Plaintiff
AND:
WONG KING NGU
First Defendant
AND:
ASL SEAFOOD LIMITED
Second Defendant
Waigani: Anis J
2020: 5th June & 21st July
NOTICE OF MOTION – application to dismiss proceedings – Order 12 Rule 40(1) – National Court Rules – want of reasonable cause of action, frivolous and vexatious – consideration – exercise of discretion
PRACTICE & PROCEDURES – jurisdiction – section 16(1)(a) of the Frauds and Limitations Act – whether jurisdiction or time bar issues should be pleaded beforehand – consideration
Cases Cited:
State v. Brian Josiah (2005) SC792
Albright Ltd v. Mekeo Hinterland Holdings Ltd (2013) N5774
Albright Ltd v. Mekeo Hinterland Holdings Ltd (2014) SC1400
Tzen Resources Ltd v. Kinmas Investment Ltd (2020) N8411
Counsel:
J Poya, for the Plaintiff
J Nandape, for the Defendants
RULING
21st July, 2020
1. ANIS J: On 5 June 2020, the defendants applied to dismiss the proceeding. I heard and reserved my decision to a date to be advised.
2. Parties have been notified so I will rule on it now.
BACKGROUND
3. The plaintiff Leong King Ngu and the first defendant Wong King Ngu are brothers. Their other brother is Mr King Sing Ngu. The 3 are major shareholders of the company Green Investment Ltd (Green Investment). The plaintiff holds the majority share, that is, 55 shares or 55% of the shares in the company. The plaintiff has obtained leave from this Court in a separate proceeding, and now commences this proceeding as a derivative action for or on behalf of Green Investment against the defendants. Leave was granted in proceeding OS 42 of 2018 pursuant to section 143(a) of the Companies Act 1997.
4. The plaintiff’s complaint concerns 2 agreements which he claims were breached by the defendants. Firstly, he claims that in 2009, 30 shares or 30% of the shares of Green Investment were transferred to the first defendant without consideration or payment. He says the 30% shares were valued at K450,000. A material condition, which he claims was agreed to then, was that the first defendant would pay later whilst considering the relationship of the other Directors and Shareholders, as he states in his pleading. He claims that the first defendant has, to date, failed to pay the said money for acquiring the shares. His second claim is this. He says the defendants have been occupying the premises of Green Investment without paying rent for a period of time. He says the defendants owe Green Investment K2,772,000 in rental arrears from 2013 to 2020, and as such, he is suing to recover the arrears for Green Investment.
MOTION
5. The main relief sought in the defendant’s notice of motion (filed on 14 May 2020) is this, That the entire proceeding be dismissed pursuant to Order 12 Rule 40(1) of the National Court Rules. Order 12 Rule 40(1) states that the Court may dismiss a proceeding if it does not disclose a reasonable cause of action, is frivolous and or vexatious, or if it amounts to abuse of Court process.
ISSUES
6. The main issues, in my view, are as follows:
(i) Whether the plaintiff is permitted to plead matters outside what the leave Court has ordered;
(ii) Can a party raise a question of law that is not pleaded?
(iii) Whether no cause of action is pleaded in regard to the second claim.
JURISDICTIONAL ISSUES
7. The defendants submit amongst others that the first claim is time-barred. They submit that the share transfer occurred on or about 28 August 2012. They therefore submit that the claim is statute-barred pursuant to section 16(1)(a) of the Frauds and Limitations Act 1988 (FLA). They also submit, amongst others, that the 30 shares that have been transferred to the first defendant, were transferred out of the 50 shares that had been owned by Mr King Sing Ngu in Green Investment at the material time. They submit that since a share is a personal property as defined by section 36 of the Companies Act 1997 (Companies Act) and that it was transferred out of Mr King Sing Ngu’s shares, the plaintiff and Green Investment do not have locus standi to bring this purported action to recoup the value of these shares.
8. The plaintiff submits, amongst others, these. Firstly, he submits that the time-bar argument was not pleaded and as such, the defendants are prevented from raising it. In regard to the transfer of shares, he submits that these are matters that should be properly trialed given their magnitudes and that it should not be something that should be decided at an interlocutory stage.
9. I note that both counsel have referred to the decision of the leave Court in proceeding OS 42 of 2018. The said decision is in evidence, attached as annexure A to Ms Nandape’s affidavit filed on 14 May 2020. I should, in my view, begin there to address the issue.
10. At paragraph 16, the Court stated:
16. As to s. 143(2)(c), the likelihood of the proceedings succeeding, I am not satisfied on the evidence before the court that there is such a likelihood apart from in regard to the claim for rental and occupation of the subject property. Either in the absence of a lease agreement, or if there is a lease agreement but there are rental arrears, a landlord is entitled to occupation of his property or to an agreed rental or recovery. I am also satisfied that it is in the interest of GIL to pursue such a proceeding in regard to its property as clearly it is an unacceptable commercial scenario for a landlord to have his property occupied without any rent being paid.
11. And term 1 of the Court’s final orders reads:
a) As to the Further Amended Originating Summons filed on 17th May 2018, leave is granted to the applicant to pursue on behalf of Green Investment Ltd all debts owing in respect of the property situated at Section 139 Allotment 4, Portion 1536, Jackson, National Capital District, including all outstanding rental, and in addition or alternatively the recovery of part or all of the said property;
12. So as it is, leave was granted to the plaintiff to commence proceedings on behalf of Green Investment, to recover Green Investment’s outstanding rentals over the property described as Section 139, Allotment 4, Portion 1536, Jackson, National Capital District (the premises). The Court found merit in that regard and it was on that basis that it granted leave to the plaintiff. The leave Court did not find merits in regard to the other claims including the first claim, that is, concerning transfer of shares from the plaintiff to the first defendant based upon a purported agreement or scheme. I make this assumption because if the Court had granted leave in regard to the first claim, it would have been captured in its decision. It therefore seems clear to me that the first claim is pleaded or commenced without leave or outside what the leave Court had ordered or approved. This Court therefore does not have jurisdiction to hear the first claim as pleaded in writ of summons and statement of claim (the writ). I also find that the plaintiff’s action in pleading these into his writ, amounts to abuse of process.
13. For these reasons, I dismiss the first claim of the plaintiff. Let me also say this. The claim as pleaded and with the backing of the evidence that have been adduced, is, with respect, baseless. The transferred shares of the company had belonged to Mr King Sing Ngu. He is not a party in this proceeding. I uphold Ms Nandape’s submission on want of locus standi in that regard. I also uphold Counsel’s submission on law that a share is a personal property. Section 36 of the Companies Act states, and I quote in part, A share in a company is personal property. As such, the plaintiff and Green Investment, in my view, do not have standing to bring this action. Any challenge concerning the transfer of the 30 shares may or would be a private matter between the first defendant and Mr King Sing Ngu and not or it cannot be between the plaintiff or Green Investment and the first defendant.
14. It also seems clear that the first claim is time bared. I had asked counsel for the plaintiff to provide case law that states that a party must also plead the law in his or her pleading before he or she could raise the argument in Court. Counsel was unable to assist in that regard. But let me address Counsel’s submission. Counsel submits that since the defence did not contain pleadings concerning time-bar under section 16 of the FLA, the defendant cannot raise that as the issue in this application. I reject this argument. In so doing, I refer to the case, State v. Brian Josiah (2005) SC792. The Supreme Court, in determining, amongst others, whether the State can raise section 16 of the FLA as a ground of appeal when it had not pleaded it in its defence in the Court below, stated and I quote:
Notwithstanding what we have just said above regarding s. 5 of the Claims by and Against The State Act, we are of the opinion that the learned trial judge, with respect, made some fundamental errors when exercising his discretion whether or not to grant the application by the Respondent for default judgment . His Honour’s mind appears to have been influenced by the continuous default of the Appellant to file its Defence even though it had had the benefit of an extra 7 days to file its Defence such that he just granted the orders sought by the Respondents without directing his mind to the writ and to the statement of claim to determine whether or not it was sustainable at law.
The first error relates to the claim itself. It would appear from the particulars of claim specified under paragraph 13, that a large number of claims dated back to the 1970’s and 1980’s which were more than 20 years ago. They clearly raise issues as to whether or not the court had jurisdiction at the outset to entertain the claims in view of s.16 of the Frauds and Limitations Act. We therefore cannot accept Mr. Dataona’s submissions that it is a statutory defence which should have been raised in the pleadings. If a claim is not sustainable at law which most of the claims herein appear to be, what difference would pleading of statute of frauds and limitations make? Can failure to plead cure a clear defect in law? Certainly not. We find, with respect, that the Respondents lawyer had not directed his mind to the possibility that most of the Respondents claims may be statute barred before he instituted proceedings herein.
15. The decision is binding upon this Court. Courts have a duty to ensure that matters that are pleaded, regardless of the defence(s) filed against them, are sustainable in law. To refrain from making such an assessment, in my view, is insufficient, unjust and against public interest or public policy considerations. Want of such consideration may even be viewed or perceived as turning a blind eye on the law. The same should apply, in my view, to a Court’s consideration of a defence. Defence filed should be reasonably valid and must have the backing of the facts and or the law. The duty to ensure of these, in my view, is initially bestowed upon the parties, that is, to ensure of proper pleadings. But it should also be bestowed upon the Courts in the exercise of our discretions or inherent powers, that is, to be prepared to hear or raise issues particularly of law that may not have been pleaded or captured in the pleadings but which are or may be relevant to the particular case. I note that such measures are already put in place in the National Court Rules, that is, Order 10 Rule 9A (7)(4). Matters that have passed pleadings and interrogatories, are mentioned before the National Court under sub-rule 7(4). Sub-rule 4 states the considerations that the Court is required to consider. I set out the provision below as follows:
(4) At the mention, the Court will consider, amongst other things, the following—
(a) Legal representation of the parties;
(b) The Courts jurisdiction and locus standi and the capacity of the parties to sue and be sued;
(c) Sufficiency of pleadings and the need for further pleadings;
(d) Whether any condition precedent to the action or statutory time bar issues arise;
(e) Whether there are any related proceedings and their consolidation;
(f) Nature of the case;
(g) Joinder of all necessary and relevant parties and causes of action;
(h) Any cross-claim or set-off;
(i) Whether parties have attempted out of court settlement;
(j) An identification of the relevant factual and legal issues raised in the proceedings;
(k) Whether any documents will be relied upon and any need for discovery of documents;
(l) Whether any expert or independent assessment is required;
(m) The likely length of time for trial and time within which the matter is likely to be ready for trial;
(n) Number of witnesses the parties wish to call and their relevance and necessity;
(o) Filing of any witness statements and or affidavits;
(p) Issue of witnesses summonses;
(q) Whether parties wish to file statement of agreed and or disputed facts and issues for trial;
(r) Medium and or mode of giving evidence;
(s) Any requirement for translation;
(t) Whether any further interlocutory steps need to be completed before trial;
(u) The necessity to transfer the proceedings to a different Court or venue;
(v) Preparation and compilation of a pleadings book as required by Order 10 Rule 8 of the National Court Rules which contains, amongst other relevant documents, the Originating Process, Statement of Claim, Defence (& Cross Claim if any), Reply (& Defence to Cross Claim if any), Reply to Defence on Cross Claim if any, and Further and Better Particulars;
(w) The date, time and venue for pre-trial conference; and
(x) Such other matters as may aid in the prompt disposition of the matter.
(Underlining mine)
16. These to me emphasizes the Court’s wider power to consider and determine matters or issues that may not necessarily be pleaded but which are relevant in terms of jurisdiction or preparation for trial. See cases: Albright Ltd v. Mekeo Hinterland Holdings Ltd (2013) N5774; Albright Ltd v. Mekeo Hinterland Holdings Ltd (2014) SC1400 and Tzen Resources Ltd v. Kinmas Investment Ltd (2020) N8411.
17. For these reasons, I dismiss the first part of the claim, that is, for alleged breach of agreement or a scheme for the transfer to shares by Green Investment to the first defendant.
CLAIM FOR OUTSTANDING RENTALS
18. I turn to the second claim. As stated, the plaintiff claims that the defendants have and continue to occupy the premises of Green Investment from December of 2013 to January of 2020 without paying any rent.
19. The defendants’ main argument is this. They submit that no cause of action that is known to law has been pleaded. The defendants argue that if the claim is for breach of agreement to pay rent, then that is not pleaded with detailed particulars in the writ. As such, they claim that the matter should be dismissed with costs. The plaintiff submits that his claim is sufficiently pleaded. Counsel submits that the defendants’ concern could be easily resolved through discovery or by requesting further and better particulars; that dismissing the claim cannot be an appropriate remedy to resolve the matter. The plaintiff submits that it is not a clear-cut case where the Court should exercise its discretion and summarily dismiss the proceeding; that the matter should be properly argued at trial.
20. The relevant pleadings disputed are contained at paragraphs 18 to 21 of the writ. They read, and I quote in part:
......
21. I uphold the plaintiff’s submission. The first reason is this. The leave Court has found substance to the plaintiff’s claim for outstanding rentals. The proceeding is filed based on that and both parties are, in my view, fully aware of this. The second reason is this. Evidence adduced by both parties herein shows that they are aware of their occupations on the premises that is in question. Both parties concede that the premises’ head lease is under the name of Green Investment as the sub-lessee. But they both have their arguments as to what the arrangements were for their set ups, occupations or continued use of the premises for their businesses. I note with interest that despite the lease agreement that Green Investment has with the National Airport Corporation (NAC), the defendants have adduced evidence which shows that they have been paying rent directly to NAC and not the plaintiff or Green Investment. So was there in fact arrangements in place as alleged by the defendants? And this. If the rents have been due since 2013, why wait until 2020 to sue for them? Does it mean that there is more to the story then a simple lease arrangement to pay rent which is still owing? All these to me can be properly addressed at the trial proper or otherwise through mediation. It is not something that is straight forward where the Court may consider and make a decision at an interlocutory stage such as this.
22. So with that I will say that if the defendants require further clarity to the pleadings, they should make the necessary request or application to the Court. To dismiss the matter summarily, in my view, would do injustice and prejudice the interests of the plaintiff.
OTHER MATTERS
23. The defendants also raise the argument regarding the name of the first defendant. The defendants claim that the name is not correct and as such the matter should be dismissed.
24. I have considered the arguments of the parties. I will dismiss the defendants’ contention. The argument had been raised and determined by the leave Court in proceeding OS 42 of 2018. It is therefore an abuse of process, in my view, to raise that again before another Court of competent jurisdiction. The way forward, if the defendants are unhappy, should be to appeal the leave Court’s decision to the Supreme Court.
25. The other reason is this. The pleadings and evidence disclosed show that the plaintiff and the first defendant are biological brothers including Mr King Sing Ngu. These facts are not disputed. That being the case, it is disingenuous or a futile exercise indeed, in my view, for the defendants to raise this argument concerning the exact placements of the first, middle and last name of the first defendant. What the first defendant could have done was to apply to the Court to amend or correct how his name is pleaded in the writ. That option is still open to him.
SUMMARY
26. For these reasons, I refuse to dismiss the entire proceeding. But I partially grant the application on the basis that I dismiss the first claim concerning allege breach of an agreement or scheme for the transfer or sale of shares and for the sum of K450,000. The balance of the claim concerning allege breach of a rental agreement or arrangement shall continue to trial.
MEDIATION
27. I am of the view that this matter may qualify as an appropriate matter for referral for mediation. I will therefore also make orders for this matter to return whereby the parties will be asked to argue or show cause why it should not be referred to for mediation.
COST
28. Cost is discretionary. I will order the plaintiff to pay half of the defendants’ cost of their application on a party/party basis which may be taxed if not agreed.
ORDERS OF THE COURT
29. I make the following orders
The Court orders accordingly.
________________________________________________________________
Poya Legal Services: Lawyers for the Plaintiff
Nandape & Associates: Lawyers for the Defendants
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