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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
WS NO 15 OF 2023 (IECMS-COMM)
ROBERT GANIM
Plaintiff
V
FINANCE CORPORATION LIMITED
trading as FINCORP
Defendant
WAIGANI: ANIS J
9 OCTOBER 2023; 7 MAY 2025
NOTICE OF MOTION – application to dismiss proceeding – Order 12 Rule 40(1)(a), (b) and (c) – National Court Rules – whether cause of action without merit, frivolous and an abuse of court process – whether cause of action time barred under s.11(1) of the Fairness of Transactions Act 1993 – consideration - ruling
Cases cited
Mount Hagen Urban Local Level Government v. Sek No. 15 Ltd (2009) SC1007
Clinton Capital Partners Pty Ltd v. Kumul Petroleum Holdings Ltd (2020) N8668
Toligai v. Chan (2012) N4842
Gotell v. Avenell Engineering Systems (2015) N6605
Idutu Koiari Development Co. Ltd v. Tribal Investment Ltd (2017) N7063
Ketegu Trading v. Gourley (2020) N8334
Ambi v. Exxon Mobil (2012) N4844
Wahune and 1 Or v. Barton and Ors (2017) SC1636
Patterson Lowa v. Akipe [1992] PNGLR 399
Kerry Lerro v Phillip Stagg & Ors (2006) N3050
Philip Takori & Ors v. The State & Ors (2008) SC905
Pinda v Inguba (2012) SC1181, Kisa v. Talok and Ors (2017) SC1650
Kumura v. The Sate and Ors (2022) N10594
Stephen Ian Asivo v. Bank of South Pacific Ltd (2016) N6518
Rage Augerea v. Bank South Pacific Ltd (2007) SC869
Counsel
D Dusal for the plaintiff
P Kepiniu for the defendant
DECISION
1. ANIS J: This matter had not shown as a reserve judgment until recently where it was brought to my attention.
2. Parties have been notified so I will rule on it now.
MOTION
3. The pending decision concerns a notice of motion filed 25 April 2023 (NoM). The NoM was moved on 9 October 2023 where the defendant requested that the matter should be dismissed because it disclosed no reasonable cause of action, was frivolous and that it was an abuse of the Court process.
4. The defendant relied on Order 12 Rule 40(1)(a)(b) and (c) of the National Court Rules (NCR), which states:
40. Frivolity, etc. (13/5)
(1) Where in any proceedings it appears to the Court 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.
5. The NoM was contested.
EXERCISE OF POWER
6. The exercise of my power in considering the NoM is discretionary. I adopt what the Supreme Court said in Mount Hagen Urban Local Level Government v. Sek No. 15 Ltd (2009) SC 1007. At paras. 29 and 30, the Court explained the purpose of Order 12 Rule 40 (1) (a), (b) and (c) as follows:
29. The phrase ‘disclosing a reasonable cause of action’ consist of two parts; cause of action and form of action. A cause of action is defined as a legal right of 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 ... can be summarized as follow:
(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 process 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 claim is seriously wanting where a necessary fact or legal element has not been pleaded.
RELEVANT BACKGROUND
7. This is a claim filed by a defaulting party which is the plaintiff, in regard to a loan agreement that was executed between the plaintiff and the defendant. The plaintiff does not deny or dispute his default on the loan. The loan agreement referred to is dated 9 November 2018 (LA). The plaintiff applied for the loan to purchase a Truck which he had intended for commercial purposes (load oil palm fruits). The plaintiff had presented to the defendant at the material time that he had an agreement in place with his business partner one Seth Timano who owned a company called JST Hire Cars Limited, and that they were going to use the truck to harvest oil palm fruits in Alotau in Milne Bay Province. The defendant approved a loan of K690,558.81. The loan money was used to purchase the truck which was described as Isuzu CYZ51M 10 Tonne Dump Truck, Registration Number LBV158 (Truck). The Truck was then released to the plaintiff in 2018.
8. The plaintiff’s default began almost immediately in January of 2019. The sum that was due at the time when the default notice was issued to him on 17 January 2020, stood at K695,186.41.
9. As stated, the plaintiff does not deny or dispute his default on the LA.
10. The plaintiff’s real or main complaint in filing this proceeding concerns the defendant’s enforcement strategies that were implemented towards recouping the defaulted debts under the LA.
11. The plaintiff asserts in his Writ of Summons and Statement of Claim filed 15 March 2023 (Writ), that the defendant breached the terms and conditions of a deed which had been signed as a security to the LA. The said deed is called Deed of Guarantee and Indemnity (Deed), and it was executed on 9 November 2018 together with the LA. The parties to the Deed were Seth Timano, JST Hire Cars Limited and the defendant. The plaintiff is not a party to the Deed. He also appears to make a claim for breach of a ‘purported’ Loan Facility Agreement. I used the terms “appears” and “purported” in relation to the Loan Facility Agreement for reasons I will explain or expound on below.
EVIDENCE
12. The defendant relies on the affidavits of Helanie Onzem filed 25 April 2023, Pokup Kepiniu filed 25 April 2023 and Ezron Ulach filed 8 May 2023. The plaintiff, in response, relies on his affidavit filed 31 May 2023.
ISSUES
13. The main issues are (i), whether the claim discloses a reasonable cause of action, (ii), whether it is frivolous, and (iii) whether it an abuse of court process.
REASONABLE CAUSE OF ACTION
14. Having perused the Writ, I note that the claim is primarily premised on the Deed. There is also no such thing as a ‘Loan Facility Agreement,’ and I uphold the submissions of the defendant in that regard. The relevant documents that were signed together with the LA were (i), the Deed, (ii), Mortgage Instrument, and (iii) Bill of Sale.
15. The plaintiff’s cause of action is therefore premised on purported breaches of the Deed.
16. The defendant, in its defence, submits, amongst others, that the plaintiff was not privy to the Deed thus the principle - privity of contract applies. The defendant relies on the cases, Clinton Capital Partners Pty Ltd v. Kumul Petroleum Holdings Ltd (2020) N8668, Toligai v. Chan (2012) N4842, Gotell v. Avenell Engineering Systems (2015) N6605, Idutu Koiari Development Co. Ltd v. Tribal Investment Ltd (2017) N7063, Ketegu Trading v. Gourley (2020) N8334 and Ambi v. Exxon Mobil (2012) N4844. The defendant also submits that the plaintiff did not plead whether he qualifies under an exception to the principle – privity of contract. Further, it submits that even if the plaintiff qualifies under the exception that it may be the beneficiary of the Deed, such a claim would be misconceived because the only beneficiary would be the defendant and not the plaintiff. As such, it submits that the claim does not disclose a reasonable cause of action and must be dismissed.
17. The plaintiff concedes that he is not privy to the contract. But counsel submits that since the plaintiff is the beneficiary of the Deed, that he qualifies as an exception to the principle - privity of contract.
18. I refer to the Writ. The plaintiff expressly pleads purported breach of various clauses of the Deed and the purported Loan Facility Agreement. There is nothing in the pleadings that states that the plaintiff is suing as a third party or as a beneficiary to the Deed. It is settled law that pleading of facts are mandatory and are essential for constituting a case of action; without pleading the relevant facts and in some cases the law, a cause of action would be termed as baseless or without merit and susceptible to dismissal. See cases: Wahune and 1 Or v. Barton and Ors (2017) SC1636, Patterson Lowa v. Akipe [1992] PNGLR 399, Kerry Lerro v Phillip Stagg & Ors (2006) N3050, Philip Takori & Ors v. The State & Ors (2008) SC905, Mt Hagen Urban Local Level Government v Sek No. 15 Ltd (2009) SC1007, Pinda v Inguba (2012) SC1181, Kisa v. Talok and Ors (2017) SC1650 and Kumura v. The Sate and Ors (2022) N10594.
19. But one may argue that want of pleading certain or sufficient facts is something that can be cured or corrected by amending the pleadings, and that the Court should not dismiss the matter for this reason. Such an argument is valid, and Courts do take that into account. However, in the present case, let me make these observations:
I acknowledge that my guarantee is in addition to any other rights the Financier has in respect of the Debt. [Underlining mine]
20. I therefore uphold the submissions of the defendant in this regard. Perhaps more damaging is the plaintiff’s concession that it is not privy to the Deed. I say this because the pleadings in the Writ are premised on the basis that the plaintiff is a party to the purported Loan Facility Agreement which does not exist, and to the Deed which the plaintiff is not a party to.
21. I observe that the plaintiff’s claim on breach of purported implied terms of the contract are also premised on the non-existent Loan Facility Agreement and the Deed. For the same reasons, I find want of merit or reasonable cause of action in that regard. I also observe that no amount of amendments to the pleadings would cure these assertions; and no amount of amendments, in my view, would make the claim credible or as having reasonable issues that may warrant a trial.
22. Finally, in regard to the pleaded claim of fairness, I note that it is made subjective to the purported Loan Facility Agreement. As this agreement does not exist, the claim appears frivolous and vexatious. I fail to see how the plaintiff can succeed at trial without the primary claim which does not exist. I also observe that the pleadings on the subject matter do not match their corresponding relief. The plaintiff intends to declare a charged penalty interest rate of 5% per annum as unfair and unreasonable. I observe that what the parties had agreed upon, which was the LA, was a commercial transaction which was contractual in nature. However, in the Writ and under relief 5 and 6, the 5% interest rate is sought under a non-existent agreement which is the purported Loan Facility Agreement.
23. Apart from the above observations on the purported claim of fairness, the defendant submits that the claim is time barred under s.11(1) of the Fairness of Transactions Act 1993 (FTA). The section states:
11. LIMITATION OF PROCEEDINGS.
(1) Any proceedings under this Act shall, subject to Subsection (2), be commenced soon after the party aggrieved by the transaction to which they relate suffers the disadvantage or becomes aware of the matters which amount to or constitute the unfairness, as the case may be, but no action shall lie later than three years after the date of the transaction. [Underlining mine]
24. The plaintiff concedes that his claim was filed outside the 3 year period as required by s.11. However, he argues that his claim of fairness is not made as a cause of action under the provisions of the FTA. Instead, he submits that he is relying on the Act to ask the Court to make policies on fairness premised on the grounds and particulars that he has pleaded. He submits that he is following the second leg as held in the case of Stephen Ian Asivo v. Bank of South Pacific Ltd (2016) N6518. He also emphasized what the Supreme Court had stated in in the case of Rage Augerea v. Bank South Pacific Ltd (2007) SC869.
25. I note the submissions of the parties on the matter.
26. The claim of fairness under the second leg and as pleaded, is dependent on or may be made subject to an existing cause of action that is filed, for example, a claim for breach of contract. In Stephen Asivo, Cannings J stated at paras. 23 and 24:
The other way the Act operates is by evincing the legislative policy, set out in its long title as:
Being an Act relating to the effect of certain transactions, to ensure that they operate fairly without causing undue harm to, or imposing too great a burden on, any person, and in such a way that no person suffers unduly because he is economically weaker than, or is otherwise disadvantaged in relation to, another person,
That legislative policy can be drawn upon by the courts in the interpretation of contracts and other legal documents. The Supreme Court held in Rage Augerea v Bank South Pacific Ltd (2007) SC869 and Pija Grannies Ltd v Rural Development Bank Ltd (2011) SC1327 that an implied term of many standard banking transactions is that the bank has a duty to be fair to its customer. That principle was put into effect in the first of Mr Asivo’s cases against the bank, in which I stated: [Underlining mine]
27. I do agree with the plaintiff that s.11 of the FTA does not apply to the case. His cause of action as pleaded in the Writ is not premised on the FTA. However, premised on considerations made on whether there is a reasonable cause of action, it significantly weakens this pleading or purported cause of action. And again, I must re-emphasis the main premise of the claim, which is based on the Deed, something which the plaintiff has conceded not been privy to. The party that is affected by the Deed is not suing under it but a third party which is the plaintiff, is. The plaintiff has also expressly acknowledged that his cause of action is premised primarily on the Deed, which is also significantly reflected in his written submission.
28. In the end, I must find that there is no reasonable cause of action disclosed by the plaintiff in this proceeding.
FRIVOLITY
29. For the above stated reasonings, I also find the cause of action frivolous.
ABUSE OF COURT PROCESS
30. In regard to abuse of court process, I make these observations: The plaintiff did not contest his defaults under the LA. Enforcement actions had been taken by the defendant against some of the securities held under the LA. The plaintiff’s main intention in commencing this proceeding is premised on the Deed which he was not a party to. And his main contention for trial is to argue that the Deed should have been enforced first in time before the other security documents, which would be a frivolous and baseless argument to make. He also pleaded a purported Loan Facility Agreement which does not exist.
31 In my view, the actions of the plaintiff may be regarded as absurd and should also amount to abuse of the court process, that is, in addition to the other reasons that I have stated above in my decision.
SUMMARY
32. This proceeding will therefore be dismissed.
COST
33. An order for cost of this nature is discretionary. Premised on my findings on abuse of court process, I will order cost using a higher cost scale, that is, on a solicitor/client basis to be taxed if not agreed.
ORDERS
34. I make the following orders:
The Court orders accordingly
________________________________________________________________
Lawyers for the plaintiff: Millennial Legal
Lawyers for the defendant: Posman Kua Aisi
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