SC2050
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 105 OF 2017

GERU HOLDINGS LIMITED
First Appellant

HOMELAND JOINT VENTURE LIMITED
Second Appellant

PETER KAMA
Third Appellant

V

JAMES KRUSE
First Respondent

DELOITTE TOUCHE TOHMATSU
Second Respondent

ROBIN FLEMING, CHIEF EXECUTIVE OFFICER,
BANK SOUTH PACIFIC
Third Respondent

BANK OF SOUTH PACIFIC LIMITED
Fourth Respondent

ON THE PAPERS: Cannings J, Makail J, Logan J
2020: 26th November, 24th December

INJUNCTIONS – interim injunctions – whether a serious case to be tried, whether sufficient undertaking as to damages given, whether balance of convenience and interests of justice favoured grant of interim injunction.

LIMITATIONS OF ACTIONS – Frauds and Limitations Act 1988, ss 16, 18 – whether action was on a “speciality”. 

The appellants appealed against the refusal of the National Court to grant their application for an interim injunction to restrain the sale by a bank of various properties over which the bank held registered securities. The appellants argued that the primary Judge erred in fact and law when he ruled that: the claims for alleged deceit or misrepresentation and negligence are statute-barred under s 16 of the Frauds and Limitations Act 1988; the claim for unfair/unconscionable was statute-barred pursuant to s 11(1) of the Fairness of Transactions Act 1993; interlocutory injunctive relief should be refused as damages would be an adequate remedy; the application was an abuse of process as the same interim injunction was sought in previous proceedings and been refused; no consideration was given to the issues of balance of convenience and interests of justice. 

Held: 

(1)	The primary judge approached the question of whether to grant interim injunctive relief in a conventional way, by applying correctly the relevant considerations outlined in Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853.

(2)	No errors of law were disclosed by the grounds of appeal. The appellants did not have a very strong case and all their claims appeared to be statute-barred and/or a rehash of relief refused in previous proceedings. The primary Judge correctly ruled that the application for interim injunctive relief was an abuse of process.

(3)	Appeal dismissed, with costs. 

Cases Cited

The following cases are cited in the judgment:
Papua New Guinea Cases
Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853
Geru Holdings Ltd v Kruse (2017) N6663
Geru Holdings Ltd, Homeland Joint Venture Ltd & Peter Kama v James Kruse, Deloitte Touche Tohmatsu, Robin Fleming, CEO & Bank of South Pacific Ltd (2017) N7650
Kewa v Kombo (2016) SC1542
Kimbe Nivani Properties Ltd v Nivani Ltd (2019) SC1842
Mamun Investment Ltd v Koim (2015) SC1409
Oil Search Ltd v MRDC Ltd & Mineral Resources Enga Ltd [2010] 2 PNGLR 254
Overseas Cases

American Cyanamid Company v Ethicon Ltd [1975] AC 396
House v The King (1936) 55 CLR 499

APPEAL 

This was an appeal against a decision of the National Court to refuse an application for an interim injunction. 
Counsel
C M Gagma, for the Appellants
I R Shepherd, for the First and Second Respondents

24th December, 2020

1.      BY THE COURT: This is an appeal by Geru Holdings Ltd, Homeland Joint Venture Ltd and Peter Kama against the decision of Justice Kariko of 5 July 2017 in the National Court in WS No 428 of 2017. His Honour refused an application by the appellants for grant of an interim injunction to restrain the sale by the respondents of various properties, the subject of those proceedings.  

2.    The hearing of the appeal has been conducted on the papers pursuant to Supreme Court Practice Direction No 3 of 2020. 

NATIONAL COURT PROCEEDINGS

3.     The statement of claim endorsed on the writ by which the appellants claimed relief against the respondents in the National Court is particularly obtuse. Though the respondents filed notices of intention to defend, the case came on by way of an application for an interim injunction before any defence to that statement of claim was filed. The pleaded claim appears to centre around an allegation that various securities (mortgages and guarantees) were in June 2008 procured by the fourth respondent, Bank of South Pacific Limited (BSP) for monies (about K900,000.00) agreed orally in 2007 to be advanced to Piunde Limited, now in liquidation, to consolidate existing borrowings but that in September 2008 BSP declined to advance those funds.

4.     It is singularly difficult to reconcile these allegations with such evidence as the appellants led in the National Court in support of their application for interim injunctive relief.

5.     The position which emerges from the affidavits filed in the National Court is that, on 2 June 2008, Piunde accepted in writing an offer made to it by BSP, by a letter dated 16 May 2008, to loan to it the sum of K971,000.00 on terms more particularly described in that letter. The loan was expressed to be for a period of nine years, commencing on its drawdown date, on the basis of the following securities:

•	Registered Fixed & Floating Charge No 15501 over the whole of the company’s assets and undertakings including called but unpaid and uncalled capital;

•	Registered Mortgage No H3848 over property situated at Allotment 1 Section 8 Kundiawa, Simbu Province and more particularly described in the State Lease Volume 61 Folio 34;

•	Deed of Guarantee and Indemnity for K1,300,00.00 given by Peter Kama Kepi (the third appellant – Mr Kama) and Anna Kama Kepi and Geru Holdings Limited, the first appellant supported by:

o	Registered Mortgage No H3850 over property situated at Allotment 10 Section 4 Kundiawa, Simbu Province and more µparticularly described in the State Lease volume 29 Folio 161;

o	Registered Mortgage No H3852 over property situated at Allotment 10 Section 3 Kundiawa, Simbu Province and more µparticularly described in the State Lease volume 28 Folio 156;

o	Registered Mortgage No H3854 over property situated at Allotment 11 Section 12 Kundiawa, Simbu Province and more µparticularly described in the State Lease volume 45 Folio 232;

o	Master Lease Agreement over a Hino vehicle with a specified engine and chassis number;

o	“Supplemental Offer” over a Toyota Landcruiser.

6.     The deed of guarantee and indemnity described in BSP’s letter of offer was entered into by, materially, Mr Kama and Geru Holdings on 2 June 2008. At that time, and now, Mr Kama was and is a director of Geru Holdings, as he was and is of Piunde.

7.     After 2 June 2008, the loan was (seemingly) drawn down by Piunde. However, by October 2008, Piunde was in default of its various obligations to BSP. By a letter dated 7 October 2008, hand delivered on 27 October 2008, BSP gave Piunde notice of that default and requested the payment in full of monies then outstanding under the loan. At the same time and by notices hand delivered on the same day, BSP made demand on, materially, Mr Kama and Geru Holdings to pay in full the loan monies owing by Piunde, payment of which had been guaranteed by them. Such payment was not made. In January 2009, formal notices of default were served on Piunde and the guarantors.

8.     As long after the events just related, as 4 May 2017, the appellants, as plaintiffs, commenced WS No 428 of 2017 (the 2017 proceeding) by which they sought to challenge BSP’s ability to rely upon the various securities for the monies owing by Piunde, including the deed of guarantee and indemnity and its ability to enforce those securities by the sale of various properties. That was not the first occasion on which the appellants had instituted proceedings to that end. It will later in these reasons for judgment be necessary to detail those earlier proceedings and their fate. 

9.     On 12 June 2017 the appellants filed and later served on the respondents a notice of motion by which they sought to restrain by interim injunction the sale by BSP of the various properties by which monies owing by Piunde to BSP were secured.

10.     On 5 July 2017 that motion was dismissed by the National Court, and it is the primary Judge’s decision to dismiss the motion that is the subject of this appeal (Geru Holdings Ltd, Homeland Joint Venture Ltd & Peter Kama v James Kruse, Deloitte Touche Tohmatsu, Robin Fleming, CEO & Bank of South Pacific Ltd (2017) N7650).

APPEAL 

11.     There are five grounds of appeal. It is argued that the primary Judge erred in fact and law:

1.	when he ruled that the claims for alleged deceit or misrepresentation and negligence are statute-barred under s16 of the Frauds and Limitations Act 1988 and concluded that there are no serious questions to be tried; instead failed to consider among others that:

(a)	BSP concealed the loan transactions until disclosure in December 2015 through the affidavit evidence of Bevan Clark in matter OS 797 of 2015 and such conduct of concealment is tantamount to equitable fraud;

(b)	the deeds of charge, mortgage, guarantee and indemnity are a specialty which has a time limitation of 12 years under s 16 of the Fraud and Limitations Act;

(c)	the cause of action accrued at the time when BSP sought to enforce the indemnity by way of public advertisement to sale which was in December 2015; 

2.	when he ruled that the claim for unfair/unconscionable was statute-barred pursuant to s 11(1) of the Fairness of Transactions Act 1993; instead failed to consider the time limitations commences from the time the applicants realize the disadvantages they suffer from the transactions when the said properties were advertised for sale and disclosure of concealed transactions in the affidavit of Bevan Clerk from BSP in OS of 2015 and such a concealment is tantamount to fraud in equity; 

3.	when he refused the interlocutory injunctive relief on the basis that damages would be an adequate remedy having been satisfied that BSP would be able to meet those damages; when in fact BSP did not oppose the application for interim orders or make submissions to pay damages, as there was no representation at the first hearing on application for interim injunction and also at the second hearing on issues of time limitations, resulting in the appellants being denied a fair and just hearing;

4.	when he ruled that the application was an abuse of process based on his opinion that the same interim injunction was sought in OS 797 of 2015 and was refused; when in fact the declaratory orders pleaded in OS 797 of 2015 were only a bit similar but the cause of action was different and that the reasons for refusal of that interim injunction were for lack of proper undertaking as to damages and non-disclosure of previous proceedings, which the presiding Judge, Hartshorn J, considered as “unclean hands"; 

5.	when he failed to consider and deliberate on the issues of balance of convenience and interests of justice; if his Honour had considered the evidence and submissions by the appellants his Honour would not have arrived at the decision to refuse the application for an interim injunction, resulting in the appellants being denied a fair and just hearing.

PREVIOUS PROCEEDINGS

12.     The notice of appeal refers to one previous proceeding, OS 797 of 2015 (the 2015 proceeding). In fact, there had been two, yet earlier, broadly related proceedings.

13.     One was OS 305 of 2009 (the 2009 proceeding), instituted by Piunde and Mr Kama against BSP in relation to three properties which were the subject of the 2015 proceeding and which are also the subject of the 2017 proceeding. For a time, there was in the 2009 proceeding, subsisting interim injunctive relief, obtained ex parte, in force against BSP restraining action to dispose of those three properties. But the 2009 proceeding was discontinued in August 2012. 

14.     The 2015 proceeding was instituted in the National Court by Geru Holdings against the first respondent, James Kruse, and the second respondent, Deloitte Touche Tohmatsu. Then, as now, Deloitte had been appointed by BSP to sell properties which secured the loan. In turn Mr Kruse then, as now, acted as agent for Deloitte for the purposes of the selling of the properties. 

15.     On 23 January 2017 the National Court (Hartshorn J) refused to extend interim injunctions restraining Deloitte and Mr Kruse from doing this: Geru Holdings Ltd v Kruse (2017) N6663. On that day, the National Court also ordered that the 2015 proceeding continue on pleadings. 

16.     That did not occur. Instead, the 2015 proceeding was discontinued and the 2017 proceeding was instituted the very next day.

17.     The other proceeding was WS No 157 of 2011 (the 2011 proceeding), instituted by Piunde and a related company, Homeland Joint Venture Limited, against BSP and two of its officers. Homeland Joint Venture was a joint venture company majority-owned by Mr Kama in which the Simbu Provincial Government held the balance of the shares. Its purpose was to distribute liquor in Simbu pursuant to a licence. The claim made in the 2011 proceeding was that BSP had by an ultimate refusal in 2008 to lend funds, breached an oral agreement made in 2007 to lend funds to Homeland Joint Venture which, in turn, had caused a need for Piunde to have to fund Homeland Joint Venture’s operations, thereby putting pressure on Piunde’s ability to meet its own liabilities. 

18.    It was also alleged that Piunde had “granted mortgages over its own commercial properties together with guarantees from the directors and other related companies to BSP third defendant as securities” for the agreed borrowing. Ultimately, the 2011 proceeding was dismissed for want of prosecution.

DECISION UNDER APPEAL 

19.     The learned primary judge, in his decision the subject of this appeal, offered a fair summary of what he accurately described as the appellants’ “rather lengthy and somewhat convoluted” statement of claim in the 2017 proceeding. His Honour stated:

As I understand it, the plaintiffs allege:

(1)	negligence against the fourth defendant, Bank of South Pacific Limited (BSP); 
(2)	deceit/misrepresentation against BSP;
(3)	unfair or unconscionable conduct against BSP pursuant to the Fairness of Transactions Act 1993
(4)	negligence against the second defendant, Deloitte Touche Tohmatsu (Deloitte).

The negligence claim against BSP is also pleaded against the CEO of the bank, Robin Fleming, the third defendant. Similarly, the negligence claim against Deloitte is also made against its employee, James Kruse, the first defendant.

20.     The learned primary judge approached the question of whether or not to grant interim injunctive relief in a conventional way. His Honour directed himself by reference to Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853, which applies to this jurisdiction principles set out in American Cyanamid Company v Ethicon Ltd [1975] AC 396, so as to require consideration of amongst other things whether there is a serious question to be tried and the balance of convenience. 

21.     His Honour concluded that there was no serious question to be tried, stating:

 [T]here is a good argument that the claims of negligence and deceit/misrepresentation are statute-barred pursuant to s 16 Frauds and Limitations Act 1988 which provides that an action based on tort must be brought within six years from when the cause of action accrued. 

Similarly, there is a strong case to assert that the claim of unfair/unconscionable conduct is statute-barred pursuant to s 11(1) Fairness of Transactions Act 1993 which basically provides that proceedings under the Act shall be commenced:
 
(1)	soon after a party to a transaction suffers a disadvantage or realizes the transaction is unfair; and 
(2)	within three years of the transaction.

22.     Accurately, having regard to the statement of claim, the learned primary Judge considered that the negligence pleaded against Deloitte and Mr Kruse is grounded on the claim that they owed a duty of care:

(a)	to disclose to the loan debtor and the guarantor that it had been appointed as agent for the sale of the mortgaged properties;
(b)	to notify the loan debtor and the guarantor about the sale of the properties
(c)	to be transparent, open and fair with the guarantor or mortgagor;
(d)	to ensure the plaintiffs get independent legal advice as to its fairness and legalities.

23.    As to this, the learned primary judge concluded: 

There is no legal basis to claim that an agent, appointed to sell a property on behalf of a bank exercising its rights to sell as a secured mortgagee over that property, owes the duty of care that is claimed by the plaintiffs.

24.     On the premise that his conclusion that there was no serious question to be tried might be wrong, the learned primary judge also addressed the balance of convenience. His Honour concluded that damages would be an adequate remedy for the appellants and that BSP would likely be able to meet any damages award. 

JURISDICTION

25.     Provided a ground of appeal raises a question of law or a mixed question of fact and law, or that leave to appeal on a question of fact has been granted, there is an appeal as of right to this court against the refusal of an application for an interim injunction: ss 4(2) and 14(3)(b)(ii), Supreme Court Act 1975.

26.     This acknowledged, given that the refusal of the interim injunction ultimately turned upon the exercise of a judicial discretion, based on a conclusion that damages would afford the appellants an adequate remedy, one way of dealing with this appeal would be to inquire into whether any error of principle attended the exercise of that discretion: Collector of Taxes v Bougainville Copper, applying in this jurisdiction principles attending the review of a judicial discretion enunciated for Australia in House v The King (1936) 55 CLR 499. 

27.     Hardly unfairly, the respondents chose not to press such a submission but instead addressed each of the grounds of appeal on their merits. It is to merits of these grounds that we now turn.

GROUND 1: FRAUDS AND LIMITATIONS ACT

28.    We have stated that the learned primary Judge offered a fair summary of what appear to be the causes of action pleaded by the appellants in the 2017 proceeding, because it is by no means clear that any of them was a party to any contract with BSP to advance funds to Homeland Joint Venture (or Piunde). In their submissions, the appellants do not assert that there was any such contract and that it was breached by BSP. Even if there were any such contract, a cause of action for breach of contract accrues on the breach. If it occurred at all, that could only have occurred in September 2008. 

29.     The limitation period in respect of any breach of contract-based cause of action is six years from when the cause of action accrued: s 16(1)(a), Frauds and Limitations Act. Necessarily that period expired, in any conceivable circumstances of this case, in September 2014, as the respondents correctly submitted.

30.     In so far as in some way, difficult to discern on the pleaded statement of claim, the various securities (mortgages and guarantees) were procured by deceit or misrepresentation or a negligent breach of some duty of care owed to the appellants (and we assume in the appellants’ favour that there was a duty of care) in June 2008, any cause of action in tort accrued on the occurrence of damage. If the appellants suffered any damage, that occurred in October 2008 when demand was made on them under the securities for payment of monies owing by Piunde. Here, too, the limitation period is six years from the date of accrual of the cause of action: 16(1)(a), Frauds and Limitations Act. That, too, expired in 2014.

31.     Though the various mortgages and guarantees were executed under seal, none of the pleaded causes of action, contrary to the appellants’ submissions, is an “action on a specialty” (as to the nature of which, see Oil Search Ltd v MRDC Ltd & Mineral Resources Enga Ltd [2010] 2 PNGLR 254 and Kimbe Nivani Properties Ltd v Nivani Ltd (2019) SC1842). 

32.    The appellants’ causes of action are not based on these securities at all but rather upon allegations that they were procured by the tortious conduct of BSP or by conduct of BSP in contravention of the Fairness of Transactions Act or by equitable fraud on the part of BSP. So the 12-year limitation period specified in s 16(3) of the Frauds and Limitations Act is completely irrelevant in this case.

33.    As to the Fairness of Transactions Act, the prima facie limitation period is, by virtue of s 11(1) of that Act, “three years after the date of the transaction”. The securities in question were given in June 2008. There is nothing in the circumstances which would engage the longer limitation period for which s11(2) of that Act provides; but, even if there were, that period is six years after the date of the transaction. That period, too, had long expired prior to the institution of the 2017 proceeding. 

34.     The position is no different in terms of expiry of the prescribed three-year limitation period if one regards the relevant transaction as the declining by BSP in September 2008 to advance funds.

35.     Contrary to the appellants’ submission, in none of the causes of action mentioned did the limitation periods run from any actions taken by or on behalf of BSP in 2015 to realise its securities. The case has not been pleaded as one in which BSP as mortgagee breached a duty it owed to a mortgagor in relation to the sale of secured property. Rather, the focus of the various causes of action pleaded was on the procuring of the securities. For these reasons, there is no merit in ground 1.

GROUND 2: FAIRNESS OF TRANSACTIONS ACT

36.     As to the Fairness of Transactions Act, the prima facie limitation period is, by virtue of s 11(1) of that Act, “three years after the date of the transaction”. 37.     The securities in question were given in June 2008. There is nothing in the circumstances which would engage the longer limitation period for which s11(2) of that Act provides but, even if there were, that period is six years after the date of the transaction. That period, too, had long expired prior to the institution of the 2017 proceeding. 

38.     The position is no different in terms of expiry of the prescribed three-year limitation period if one regards the relevant transaction as the declining by BSP in September 2008 to advance funds. There is no merit in ground 2.

GROUND 3: ADEQUACY OF DAMAGES 

39.     Regard to the transcript of the hearing of the application for the interim injunction and to the related written outlines of submissions discloses that ground 3 is based on the false premise that the application was not contested by the respondents. It was. Further, the bases upon which the relief was contested included a submission that limitation periods had expired and that damages were an adequate remedy such that the balance of convenience did not favour the granting of any injunctive relief. 

40.    The appellants were afforded every reasonable opportunity by the learned primary judge to make submissions in response to the bases upon which the respondents contested the granting of any interim injunctive relief. No new basis was introduced by his Honour in refusing that relief. There was no denial of procedural fairness to the appellants. Accordingly, ground 3 must fail.

GROUND 4: ABUSE OF PROCESS

41.    The learned primary judge observed: 

Rather than acting pursuant to that order and seeking leave to add Homeland Joint Venture Limited and Peter Kama as plaintiffs and BSP and Robin Fleming as defendants, OS 797 of 2015 was discontinued and this proceeding was then filed the very next day together with the present application that seeks effectively the same interim injunctions sought in OS 797 of 2015. 

In my opinion, the plaintiffs and in particular Mr Kama and Geru Holdings are having “a second bite at the cherry”. The present proceeding was filed in order to again seek interim injunctions that were recently refused in a related action. This amounts to improper use of the court’s process and is therefore an abuse of process. 

42.    Having regard to the fate in January 2017 of the application for continuation of interim injunctive relief, to the claims made in the 2011 proceeding and to the direction that the 2015 proceeding continue on pleadings, these conclusions as to an abuse of process were clearly open to the learned primary judge. 

43.     Further and in any event, those conclusions formed but one of multiple bases upon which his Honour refused to grant the interim injunctive relief sought. There is no merit in ground 4.

GROUND 5: BALANCE OF CONVENIENCE

44.     Contrary to the assertions made in ground 5, the learned primary Judge did consider the issue of balance of convenience. Further, his Honour’s reasons for judgment disclose he had full regard to the evidence before him. The end result of that consideration was adverse to the appellants but, for reasons already given, no unfairness attended that adversity. Ground 5 must fail.

EQUITABLE FRAUD

45.     In so far as the appellants also asserted equitable fraud on the part of BSP, it is desirable to make some observations in relation to the applicable limitation period in the apparent circumstances of the present case. Particularly that is so in light of the reliance by the respondents in their submission on Mamun Investment Ltd v Koim (2015) SC1409. In reliance on that case, the respondents submitted that the appellants’ claim was “statute-barred”, because the relevant date is not when fraud was realised but the date that it is alleged to have occurred. 

46.    As we understood it, the point of the submission was that, assuming, as the appellants contended, that there had been concealment until 2015 of the appellants’ fraud in procuring the securities (a large assumption), any such fraud nonetheless occurred in 2008, such that the statutory limitation period in s 16 had expired.
 
47.     However, the limitation periods for which s16 of the Frauds and Limitations Act provide do not apply to a claim for equitable relief: see s 18 of that Act.
 
Mamun Investment Ltd v Koim was one of a number of cases considered by this court in Kewa v Kombo (2016) SC1542, in relation to limitation periods applicable to claims for equitable relief. The end result of that consideration was that claims for equitable relief “are time limited by reference to the equitable defences of laches and acquiescence”. 

48.      In this case, notice of any fraud in equity on the part of BSP by its officers in relation to the procurement of the securities must necessarily have come to Mr Kama’s attention if not in September 2008 when BSP advised that the loan had not been approved or in October 2008 when notice of demand was given. 

49.     Obtuse though the statement of claim in the 2017 proceeding is, regard to the allegations in it and to the evidence before the primary Judge makes it tolerably clear that the respondents had good defences of laches and acquiescence such that there was no serious question to be tried in relation to any equitable fraud claim.

CONCLUSION 

50.     The primary Judge approached the question of whether to grant interim injunctive relief in a conventional way, by applying correctly the relevant considerations outlined in Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853. 

51.     No errors of law were disclosed by consideration of the grounds of appeal. The appellants did not have a very strong case at all and all their claims in the National Court appeared to be statute-barred and appeared to be a rehash of relief refused in previous proceedings. The primary Judge correctly ruled that the application for interim injunctive relief was an abuse of process.

52.     With all respect to the appellants and to those advising them, it is rather odd to see an appeal against the refusal of an interim injunction pressed three years after that refusal. However that may be, for the reasons given above, the appeal must be dismissed, with costs.

ORDER

(1)	The appeal is dismissed.

(2)	The judgment of the National Court of 5 July 2017 in WS No 428 of 2017 is affirmed.

(3)	The appellants shall pay the respondents’ costs of the appeal on a party-party basis which shall if not agreed be taxed.

Judgment accordingly.
_______________________________________________________________
Gagma Legal Services: Lawyers for the Appellants
Ashurst Lawyers:  Lawyers for the Respondents