SC735

PAPUA NEW GUINEA

IN THE SUPREME COURT OF JUSTICE

SCA. No. 1 of 2004

SAMSON JUBI & THREE (3) OTHERS
Appellants

v

SUSAN EDNA FRASER & TWO (2) OTHERS
Respondents

WAIGANI: Injia, DCJ
2004: 15th & 28th January

Supreme Court Appeals – Stay of interim injunctive orders – Four Fishing vessels – Principal factors – Arguable grounds of appeal, balance of convenience and maintenance of status quo, damages as an adequate remedy, considered – Application refused.

Counsel:
T. Nonggorr for the Appellant
B. Andrew for the Respondent

RULING

28th January, 2004

INJIA, DCJ: The Appellants apply for a stay of the interlocutory judgment of Davani, J of 2nd January 2004, pending the hearing of the appeal. Her Honour granted interim injunctions in respect of four fishing vessels, the issue of ownership of which was the subject of proceedings commenced by the Respondents in WS No. 1809 of 2003. 

The facts in short are that on 19 November, 2002 the parties entered into written Contracts of Sale in respect of four(4) fishing vessels supposedly "owned" by the Respondents. The vessels were registered in Australia supposedly under the respondents’ names. The appellants agreed to pay fixed prices for the vessels. In compliance with the agreements, when the respondents delivered the vessels at Daru, the Appellants failed to complete the contracts by paying the purchase price. Subsequently, the parties entered into some mutual arrangements to conduct business and commence fishing operations under revenue –sharing arrangements, the precise terms of which are in dispute. The Appellants deregistered the Australian registration of the four (4) vessels and registered them in Papua New Guinea under the Appellants’ names, under different names. The transfer of ownership through registration is in issue. Fishing licences were also obtained from PNG authorities. Fish caught in PNG waters was taken to Cairns and exported by the respondents and revenue received by the Respondents. Disagreements occurred between the parties as the verification of fish caught, revenue earned, distribution of revenue between them and tax liabilities and other things. This resulted in the Appellants reporting the fishing activities of the Respondents to PNG authorities. On 23 October, 2003 PNG authorities seized the vessels and took them to Port Moresby where the business operations underwent investigations. The vessels were later released to the Appellants. On 13 November, 2003, the Appellants filed proceeding in the Supreme Court of Cairns seeking declaratory relief and damages. The Respondents filed their own proceeding s at the Waigani National Court seeking declaratory relief and damages. Justice Davani granted interim injunctive orders in favour of the respondents. These interim orders are now the subject of these appeal proceedings.

The interim injunctive orders appealed from are as follows:

1.	That the Defendants, their servants and or agents are to return the fishing vessels Seahawk, registered in PNG as Mundi 1, registered no. 000944, Freedom, registered as Liberty, registered no. 000946, Prospector, registered no. 00947, Intrepid, registered as Riverlea Star, registered no. 000945 to their original anchorage in Port Moresby Harbour until further order of this Honourable Court.

2.	That the Defendants, their servants and or agents are restrained from any disposition, removal or dealings with the aforementioned vessels.

3.	That the vessels shall in the interim be manned and maintained by a neutral person appointed by the Registrar of the National Court.

4.	The Registrar of the National Court shall supervise the day to day upkeep and maintenance of the vessels together with the neutral person that he will appoint.

5.	That the balance, if any, of the proceeds of the sale of the cargo which was on board the said vessels upon seizure on 23 October, 2003 and now sold at the direction of the PNG Fisheries Authority, after completion of the Authority’s enquiries and or imposition of any penalties for breaches of the Fisheries Act, be paid into the National Court."

An appeal against the decision was filed on 8th January 2004. Pursuant to s.14(3)(b)(ii) of the Supreme Court Act, leave is not required for appeals against an interlocutory judgment in respect of the grant or refusal of an injunction: Gary McHardy v Prosec Security and Communications Ltd trading as Protect Security, unpublished Supreme Court Judgment SC 646 dated 30 June, 2000.

The Notice of Motion before me seeks the following orders:

1.	That the judgment and orders of Judge Davani on 2 January 2004 be stayed pending the hearing of the appeal in this matter.

2.	That Mundi No. 1 Limited re-commence fishing operations with the vessels.

3.	That a person nominated by the Maritime Division of the Transport department be present on the fishing runs to monitor the operations.

4.	That the vessels shall be skippered by a person appointed by agreement of all parties, and such skipper shall utilize existing crew.

5.	That the catch from the fishing to be sold to existing and any new overseas and or local buyers and the proceeds from those exports and local sales be deposited into the Supreme Court Trust Account, to be supervised by the Registrar.

6.	That the manager of Mundi No. 1 Limited be allowed to withdraw reasonable amounts from the proceeds in trust for operational and maintenance expenses of the vessels such as crew wages, operational costs of and incidental connected to the running, repair and maintenance of the vessels, staff of Mundi No. 1 Limited and sale of the catch.

7.	All parties shall be furnished with updates of the fishing operations and associated and consequential activities of the vessels on a fortnightly basis and the accounts audited on a monthly basis.

The principles on grant of stay are set out in McHardy’s case. The grant or refusal of stay is discretionary and it is exercised "on proper principles and reasonably according to the natural justice to all parties." The relevant factors and circumstance to be taken into account include the basic premise that the judgment creditor is entitled to enjoy the benefit of the judgment. An applicant must show the following:

a)	Whether leave to appeal is required and whether it has been obtained.

b)	Whether there has been any delay in making the application.

c)	Possible hardship, inconvenience or prejudice to either party.

d)	The nature of the judgment sought to be stayed.

e)	The financial ability of the applicant.

f)	Preliminary assessment about whether the applicant has an arguable case on the proposed appeal.

g)	Whether on the face of the record of the judgment there may be indicated apparent error of law or procedure.

h)	The overall interest of justice.

i)	Balance of convenience.

j)	Whether damages would be sufficient remedy.

The principles on grant of interim injunctions are canvassed by Kandakasi, J, Golubana No. 35 Ltd v Bank of South Pacific, unreported National Court judgment N2309 dated 11 November, 2002. There are three basic requirements – the Applicant must demonstrate serious questions to be tried and determined, that the balance of convenience favours the grant of interim injunction in order to preserve the status quo, and damages is not an appropriate remedy: Also see Employers Federation Care of PNG v PNG Waterside Workers and Seaman’s Union & Anor, unreported National Court judgment N393; AGK Pacific (NG) Ltd v William Brad Anderson & Karson Construction (PNG) Ltd & Anor, unreported National Court judgment N2062 and Markdeal Ltd & Anor v Mineral Resources Development Corporation Pty Ltd, unreported National Court judgment N1472.

The appellants rely on two principal factors. First, they have arguable grounds of appeal which are likely to succeed. It is contended by Mrs Nonggorr for the Applicants that Her Honour erred in the exercise of her discretion to grant the interim injunctions in that the respondents did not have serious issues to be tried, that the balance of convenience did not favour the grant of injunction to maintain the status quo and that damages would have been an adequate remedy. The Respondents lacked evidence to show they were the registered owners of the four vessels when they purportedly sold the vessels under Contracts of Sale and that subsequent investigation revealed that the vessels were registered in the name of other persons. Subsequently the vessels were sold to the Appellants under an oral agreement when the original contracts were not completed. Under the oral agreement, the purchase price was to come from on third of the proceeds of the sale of the catch of fish, paid to Mundi No. 1’s account, out of which 50% would be paid by Mundi No. 1 to the Respondents for the purchase of the vessels. The Respondents did not pay those monies and did not account to Mundi for the catch and the proceeds of the catch. Subsequently, the four vessels were registered in PNG under Mundi’s name. As the registered owner of these vessels, Mundi is entitled to possession and use of the vessels. The vessels were in the possession of the Applicants and conducting fishing operations when they were seized under the Court order and taken to Port Moresby, where they are lying idle.

Secondly, as a result of the injunction, the Mundi’s business operations has been shut down. This is unfair on the appellants. The injunction should be discharged to allow the Appellants to continue fishing operations pending the trial, under proposed arrangements set out in the Notice of Motion. If this Court were to set aside the injunctive orders, there is evidence to show that the National Fisheries Authority may renew the fishing license held by the Appellants. They also seek the release of AU$30,000, the proceeds of sale of fish, currently held in the National Court Trust Account to meet maintenance and operational expenses.

Thirdly, Mundi has a good chance of succeeding in their action instituted in Cairns and defending the Respondent’s action commenced at Waigani. In any case, if the Appellants were successful in the National Court proceedings, they will not be adequately compensated in damages because in the past, they have failed to account for the catch and revenue from the catch and pay the Appellants their share of the revenue. 

These arguments are elaborated in Mrs Nonggorr’s extensive written submissions. Mrs Nonggorr has made many references to the evidence before Her Honour in an effort to demonstrate areas where Her Honour failed to understand the evidence as a whole or the contradiction in the evidence as to ownership rights and evidence which favoured the Appellants. Mrs Nonggorr also pointed out to deficiencies in parts of the pleadings in the Statement of Claim, as to terms of the Contracts.

Mr Andrew for the Respondents submits that there was overwhelming evidence before Her Honour to warrant the conclusion that the Respondents had a serious case to be tried on the issue of ownership of the vessels, that the balance of convenience favoured the maintenance of the status quo to preserve the vessels pending trial, and that damages would not be an adequate remedy. The writ alleged fraud in the Appellant’s acquisition of registered titles over the four vessels, that there was never an issue of the Respondent’s ownership of the four vessels when they were purportedly sold to the Appellants under the Contracts of Sale, that the Appellants failed to complete the Contract on the due date by paying the purchase price when the vessels were delivered to the Appellants and that they never entered into any subsequent oral agreement to pay for the four vessels from the proceeds of the catch. Under the Contracts of Sale, the property in the vessels were to transfer to the Appellants upon completion, but since this did not eventuate, the property in the vessels never passed to the Appellants. The vessels were registered in PNG based on false representation to PNG authorities that they owned the vessels. Therefore, the vessels belong to the Respondents and this will be proven at the trial.

 Also, the Appellants conspired with PNG authorities to seize the four vessels when they were conducting fishing operations and the vessels were later returned to the Appellants. They have now been seized under the Court order and are now moored at the Port Moresby wharf. The vessels should be retained at the wharf under arrangements made for their maintenance and upkeep under the Court order, so that their present condition and value is preserved. If the vessels are released to the Appellants to be used for fishing operations, they face risk of damage through use and the risk of damage or loss at sea. Damages will not be an appropriate remedy to compensate the Respondents if the Appellants were not successful in the appeal or successful in defending the proceedings in the National Court because they do not have the money to pay for the four ships which are valued at around K1.2 million.

 In the alternative, if the Court were minded to grant the application, they seek orders that the vessels be released to, maintained and fishing operations conducted with both parties’ involvement, that the vessels be insured and the proceeds of the catch paid into the National Court Trust Account.

In determining the application, I apply the relevant criteria set out by the Supreme court in the McHardy case.

On the evidence before me and the arguments advanced by both parties, I make the following findings and conclusions:

1.	Leave to appeal - Pursuant to s.14(3)(b)(ii) of the Supreme Court Act, leave to appeal is not required to appeal interlocutory judgment, in the form of interim injunctive orders such as the principal orders appealed from in the present appeal.

2.	Delay – There has been no delay in making this application.

3.	Arguable grounds of appeal - The Applicant does not have an arguable case on appeal on the issue of how her Honour exercised her discretion as to the issue of ownership of the four vessels. Her Honour found that there was serious issues on ownership to be tried, as to how the Appellants obtained registered title. Given the absence of evidence of any evidence issue of the respondents’ ownership of the vessels at the time of the Contracts of Sale, the absence of evidence of any written Contracts of Sale supplementing or amending the original Contracts of Sale as to how the four vessels were to be paid for by the Appellants, and the absence of evidence of any issue of ownership of the four vessels by the Respondents at the time of the original Contract of Sale; the Respondents had a serious issue to be tried as to how the Appellants came to register the vessels in PNG under their name. There is no other evidence placed before me, of any written correspondence including the unexecuted Management Agreement entered into between the parties subsequent to the original Contracts, which shows the Respondents’ acknowledgment of the Appellants ownership of the vessels. Therefore, the Respondents had serious issues to be tried. I do not think there is any arguable issue as to Her Honour’s finding on this issue on appeal. I also think the grounds of appeal relating to Her Honour’s conclusions on balance of convenience and damages as an adequate remedy are not arguable. 

4.	Balance of convenience/hardships – Financial liability of Applicant: The balance of convenience favours the maintenance of the status quo in terms of preservation of the present condition and value of the four vessels. The release of the four vessels to the Appellants will expose the vessels to the risk of damage or loss at sea. There is no evidence of the Appellants’ financial ability to repair or replace the vessels. It seems that the appellants do not have sufficient resources to pay the purchase price for the vessels, fund maintenance of the vessels, pay staff and conduct fishing operations. They seem to be entirely reliant the proceeds from the catch of fish to fund these activities, make a profit and pay for the vessels. The Appellants are not offering their own finances to fund the operations but instead asking this court to order the release of AUS$30,000 paid into court under clause 5 of the interim injunctive order to finance the initial maintenance and fishing operations. It will require injection of substantial working capital in excess of this amount which the applicants do not seem to have. The release of the vessels to the appellants will expose the vessels to greater risks in management, technical, business, staffing and other difficulties. Given the present breakdown of trust between the parties, these difficulties will not be addressed or resolved satisfactorily. In other words, the fishing business operations proposed by the appellants will be impractical.

5.	Nature of the judgment to be stayed – If the orders are stayed, the effect of this would mean returning the vessels to the Appellants for operational use. This will defeat the purpose of the appeal and the pending substantive proceedings in the National Court. When the Appellant’s ownership rights are in serious contention, it is not equitable to release the vessels to the applicants and place the security of the vessels and the operation exclusively or substantially in the hands of the Appellants.

6.	Damages – Damages would not be an appropriate remedy because there is no evidence of the Appellants’ financial ability, independent of the projected revenue to be raised from the proceeds of the sale of any catch, to pay for the ships if they are damaged or lost in operation, pending the determination of the appeal and the National Court proceedings. For a start, a successful catch, capable of yielding sufficient income to cover management expenses and profit is speculative. Then the commencement of fishing operations is dependant on the renewal of fishing licenses by the National Fisheries Authority (NFA), for which there is no evidence of any firm commitment by NFA, to grant the license if the injunctions were lifted and the four vessels returned to the Appellants. Conversely, I am satisfied that the undertaking on the damages given by the Respondents to support the application for injunctive orders in the National Court is sufficient.

7.	Overall interest of justice and balance of convenience – The overall interest of justice and balance of convenience favours the retention of the four vessels at minimal maintenance and running costs, in order to preserve their current value, pending trial, and the hearing of this appeal. The security, financial and management risks are greater if they are released to the Appellants and used for fishing operations.

8.	Error of law or procedure on the face of the judgment – The judgment of Her Honour is not contested on the basis that she erred in law or procedure, but on the principal basis that she wrongly exercised her discretion in the circumstances and the facts before Her Honour. I am therefore not satisfied that any such error apparent in the face of the record have been made out by the Appellants.

For those reasons, notwithstanding my findings in respect of items No. 1 and 2 above, I am not satisfied that the Appellants have made out a case for a stay of the order appealed from. I dismiss the application with costs to the Respondents.
_____________________________________________________________
Lawyer for the Appellants :	Gadens Lawyers
Lawyer for the Respondents:	Maladinas Lawyers