SC2328

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCR. NO. 06 OF 2020

APPLICATION TO REVIEW PURSUANT TO SECTION
155 (2) (b) OF THE CONSTITUTION

BETWEEN:

 CHRIS BAIS, CHIEF EXECUTIVE OFFICER, PNG 
POWER LIMITED.
First Applicant 

AND:

PNG POWER LIMITED
Second Applicant

AND:

JOHN ILLIUS AND NIAMAI ILLIUS as Joint Tenants
Respondents

Waigani: David J, Murray J, Geita J 
2022: 25th August; 28th October

CONSTITUTIONAL LAW – Powers of Supreme Court – Review of judicial acts of National Court – Nature of application – Principles applicable – Constitution s. 155(2)(b).

Cases Cited
Able Construction Ltd v W.R Carpenter (PNG) Ltd (2014) N5636
Hargy Oil Palm (sic) v Ewasse Landowners Association. [2013] PGNC 188; N5441
John Illus v Chris Bias N7618).
Koitaki Plantations Ltd v. Charlton Ltd trading as Kookabura Meats & Stuart Fancy;[13]
Alex Awesa & Anor v. PNG Power Limited;
Wantok Gaming Systems Ltd v. National Gaming Control Board[15](Wantok Gaming Systems Decision No 1).
Pius Sankin v Papua New Guinea Electricity Commission (2002) N2257 
Alex Awesa & Onor v PNG Power Limited (2014) N5708.
Motor Vehicles Insurance Limited v Evelyn Api [2015] SC1406 
Roy Manduru v Motor Vehicles Insurance Limited [2018] SC2018
Avia Aihi v The State (1981) PNGLR 81 and Avia Aihi v The State (No.2) (1982)  PNG v Colbert (1988) PNGLR 138

Counsel

Kenneth Imako, and Bathsheba Pora, for the First & Second Applicants 
R. Tamarua, for the Respondents 

28 October, 2022

1.      BY THE COURT:  The Applicants apply for judicial review under s. 155(2)(b) of the Constitution and Order 5 Rule 1 of the Supreme Court Rules to review the decision of Deputy Chief Justice Ambeng Kandakasi made on 6 December 2018. In the National Court proceedings between the same parties in the case of WS No. 1007 of 2016, the following orders, the subject of this application, were made:

1.	“The Defendant (sic) shall within 14 days from today, take all steps necessary to have the mediated agreement in this (sic) proceedings implemented.

2.	A failure to comply with term 1 of these orders will result in the Defendants’ defence and cross claim being struck out and judgment entered for the Plaintiff with the reliefs sought or such other reliefs the court considers appropriate granted.”

2.	An application for leave to review was filed on 7 July 2020. Leave to review granted on 18 September 2020. Consequently, the decision was also stayed. An Application for Review was filed on 30 September 2020.
 
3.	Some background information is necessary to bring this dispute into context. In 2015, PNG Power Limited (PNG Power) identified a list of its properties throughout the country to be disposed off by sale. Included in the list was one of its properties in Nabasa Cresent,  Madang described as Section.50, Allotments 11 and 12 (consolidated). John Illius, one of the Respondents, then an employee of PNG Power offered to buy the property for K300,000.00 in his letter of 30 September 2015. PNG Power obliged  in their letter of 9 November 2015 to sell the property to the Respondents for K270,000.00. The Illiuses’ paid K27,000.00 to PNG Power as 10% deposit of the purchase price. PNG Power, as vendor drew up the contract of sale with eventual execution of the contract of sale and the transfer of property to the Respondents during the same year.

4.	When the matter came before the primary Judge he was satisfied that the matter could be resolved through mediation as none of the prohibitions listed at paragraph 18 in the Able Construction Ltd v W.R Carpenter (PNG) Ltd (2014) N5636, was present. We have taken the liberty to reproduce them here:

• a real possibility of setting a legal precedent through a judicial determine which would clarify the law or inform public policy is presented;
• any settlement out of court is not in the public interest;
• protective orders such as injunctions are required immediately;
• there is a clear case warranting summary judgment; 
• a genuine dispute requiring the Court to give a declaratory relief is presented;
• family disputes especially involving child abuse, domestic violence, etc, is presented;
• the parties are in a severely disturbed emotional or psychological state, such that they cannot negotiate for themselves or others; 
• a genuine dispute requiring interpretation of a constitutional or other statutory provision is presented;
• there is a genuine dispute over the meaning and application of a particular provision in a contract or an instrument, a determination of which will help finally determine the dispute;
• a preliminary issue such as questions on jurisdiction, condition precedents, statutory time bar and the disclosure of valid cause of action requires determine before anything else; or
• a public sanction as in a criminal case is needed for public health, safety and good order.

5.	On 24 April 2017 the Court ordered mediation commenced and concluded on 16 August 2017 in which a set of agreements were reached: (RB volume 3, pages 924 onwards at Paragraphs 8-9). Both parties undertook to remain committed and to see that the agreement they entered into materialised.

6.	On 16 August 2017 a PNG Accredited Mediator  who conducted the mediation issued  a “ Bad Faith Certificate” pursuant to Rule 9 (5) of the ADR Mediation Rules. The certificate was issued on account of the Applicant/Defendants failure and  inaction, including omissions. ( Refer full text from the Certificate.)

7.	On 16 April 2018 the Primary Judge heard both counsel on the issuance of a Bad Faith Certificate by a Mediator and ruling reserved.

8.	On 6 December 2018  the matter returned before the primary Judge who lamented in his written Judgment: “ After some delay, this matter finally returned to the Court from mediation with a “ bad faith”  certificate issued against the Defendants (PNG Power). Under Rule 10 (7) of the ADR Rules, the Court must decide what consequences should follow against PNG Power, against whom the bad faith certificate has been issued.” 
 
9.	On 14 December 2018 the Appellant filed an Application for Leave to Appeal against the order of 6 December 2018 as well as an Application for Stay Order in proceedings between the parties in SCA of 2018. 

10.	On 31 January 2019 the Applicant filed their Notice of Appeal in SCA 194 of 2018 but was filed out of time, contrary to Order 7 Rule 6 of The Supreme Court Rules and dismissed the appeal on 28 February 2020.    

11.	On 21 December 2018, the Supreme Court granted leave to appeal within 21 days and an application for stay granted, staying the  order of 6 December 2018.  

Arguments:

12.	The Applicants are seeking review of the following issues:

1.	Whether there was a valid and enforceable mediation agreement;

2.	Whether the Applicants have a prima facie cross claim which should be heard on the merits;

3.	Whether there were triable issues warranting a trial in the Respondent’s claim and in the Applicants cross claim and

4.	Whether the primary judge failed to consider or sufficiently consider that there were more proportionate orders which could be made in response to the Bad Faith certificate?

13.	It is the Applicant’s submission that the order for enforcement of the draft mediation agreement or order for the striking out of a meritorious defence and cross-claim that has not been defended were not appropriate orders. The Applicants submitted that its staff members who attended the mediation lacked the capacity to bind the Applicants. Furthermore they submitted that the draft mediation agreement was unsigned by the parties hence it was not in the interest of justice, but would result in substantial injustice. The Mediator cannot impose his will on either party in mediation (ADR Rule 5(5) whereas at a trial a judge may make an order against a party. The Applicants submitted that the primary judge erred in arriving at a decision contrary to the principle as presented in the Hardy Oil Palm (sic) v Ewasse Landowners Association. [2013] PGNC 188; N5441), in that the essential elements of a legally binding contract were not present.

14.	It is our considered view that the answers to questions 2 and 3 will be  determined by the outcome of question one (1) and question four (4). 	

 Whether there was a valid and enforceable mediation agreement?

15.	In order to appreciate the significance of what constitutes a valid and an enforceable mediated agreement we predicate our discussions on the governing legislation:- (ADR Rules 2010). 

16.	We first look at the rule relating to the conduct of a Mediation. Under Rule 3-Interpretations here is what is stated:

"ADR" means alternative dispute resolution which includes mediation, arbitration, conciliation, expert case appraisal, early neutral evaluation, any combination of them and such other forms of dispute resolution that are different from the formal court process and includes any process undertaken to avoid or otherwise minimise prolonged disputes in the future; (Underlining ours)

“ blended process" means a form of ADR that combines two or more forms of ADR employed to help resolve a dispute or conflict;

17.	We also look at the parties’ duties. Under Rule 10 (2) & (5) here is what is stated: 

(2)	 Unless the Court or the mediator otherwise directs, each mediation session shall be attended by each party or, if a party is a corporation, by an officer of the corporation having authority to settle the proceedings.

(5) 	Each party must participate in good faith in the mediation and not impede the mediator in conducting and completing the mediation process within the time set by these Rules or by the Court.

18.	Grounded on this footing we state here that all mediations are conducted when the key ingredients of good faith participation with authority to settle, during the process or at the end of the process are met. An Accredited Mediator then conducts the mediation and employs any one of those forms of dispute resolution methods described in Rule 3 Interpretations.(ADR Rules 2010). This include the blended process which are slightly different from the formal court process and includes any process undertaken to avoid or otherwise minimize prolonged disputes in the future. 

19.	A mediation grounded on good faith and authority to settle during any stage of the process forms the basis for early mutual and valid agreements or settlement along the way instead of the prolonged long-drawn-out outcomes at the back end of the process.

20. 	As to the question of whether there was a valid and enforceable mediation agreement we agree that there indeed was a valid agreement. It is not disputed that the parties participated during a Mediation conducted by an Accredited Mediator on 24 April 2017 under Rule 9 (2) ADR Rules 2010 and came up with a set of agreements which will resolve their dispute. The plaintiff was well represented by three very senior officers and a Lawyer of their choice, whereas the respondents appeared for themselves without a lawyer. If there were issues relating to authority to settle, they were not brought to the attention of the Mediator or made known during the course of the mediation. Since the question of authority to settle during mediation is a key ingredient, the mediator would have enquired into this lack and confirmed from the Plaintiff a possible way forward. We find no evidence in the material before us or in the judgment of  6 December 2018 of the primary Judge. 

21.	We pause here at this juncture to deliberate on the legislative scheme of how mediated agreements may be referred to the Court for directions and or enforcement. First up is founded in Rule 12 (1) (2) (3) ADR Rules 2010 in which the mediation was conducted in good faith resulting in either partial or full agreements, signed for and seeking Court endorsement. The second process comes to play when a  party attending the mediation has not participated in good faith and has impeded the mediation. (Rule 10 (5) (6) ADR Rules 2010. A Bad Faith Certificate is issued by the Mediator under Form 2 pursuant to Rule 9 (5) ADR Rules 2010. 

22.	As to the question before us we answer in this manner. Yes the mediation agreement was a valid agreement , drawn up and entered into by both parties in good faith at the time and each had final authority to settle at the material time. It follows that, that mediated agreement is valid and enforceable pursuant to Rule 10 (7) (c ) ADR Rules 2010. A mediation agreement without proper validation of authority to settle will render that agreement invalid and unenforceable. In the present case we are satisfied, based on the evidence and associated affidavits that there were implied and ostensible authority from PNG Power which would make the agreement valid. The sworn affidavit of its legal officer Philip Porei and filed on 16 August 2017 deposes to this fact. Review ground one is dismissed.

 Whether primary judge failed to consider or sufficiently consider that there were more proportionate orders which could be made in response to the Bad Faith certificate?

23.	In order to appreciate and answer the above question, we endeavour to put the contention into context in this manner. It is not disputed that both parties entered into a legally binding contract of sale of the property described as Allotments 11 & 12 Section 50 Madang on 21 January 2016. The primary Judge, having satisfied himself that no questions of the type identified at paragraph of 18 in the case of Able Construction Ltd v. W. R. Carpenters (PNG) Ltd (2014) N5636 applied,  referred the matter for resolution by mediation on 24 April 2017. 

24.	On 16 August 2017 the mediation concluded with the filing of the Bad Faith Certificate. When the matter returned to court on 16 April 2018  after almost 17 months from the time the Contract of Sale was entered into both parties were heard and orders made on 6 December 2018. The Plaintiff/Defendant was given 14 days to give meaning to the orders. Within a week the Plaintiff filed application for leave to appeal and stay the orders of 6 December 2018. On 21 December 2018 the plaintiff succeeded in obtaining Supreme Court Orders granting leave to appeal and successfully stayed the 6 December 2018 Orders. On 28 February 2020 the full Supreme Court after hearing submissions from both parties on whether to dismiss the proceedings upheld the Respondents application and dismissed the proceedings as it was filed out of time. 

25.	 So after 14 months from 6 December 2018 when the orders for compliance were made by the primary Judge to 28 February 2020, the date the proceedings was dismissed by the Supreme Court, the Plaintiffs have not made genuine attempts to comply with the Orders 6 December 2018. Instead, they have mounted yet another proceeding, which is the matter now before us. To our mind their conduct still has the elements of bad faith. We pose to ask the clean hands doctrine which is based on the Latin maxim of equity: “ those seeking equity must do equity” or “equity must come with clean hands”.  It is our considered view that the Plaintiffs have not come to the Mediation table and or before the primary Court with clean hands. The second  part of the question is adequately answered. 

26.	As to part one of the same question: whether primary judge failed to consider or sufficiently consider that there were more proportionate orders, we answer in this manner. Prior to the matter reaching Court proper, parties had already entered into a valid contract of sale and the property had legally changed hands. That is not disputed. What remains to be resolved were the finer details of leasing arrangement between both parties. When the matter eventually reached court after a lapse of some considerable time with the Mediator’s Bad Faith Certificate against the Plaintiff, the primary court employed enforcement proceedings. The primary Judge, having satisfied himself that a valid contract of sale and transfer of land existed between the parties save for exigencies made the orders of 6 December 2018. 

27.	The primary Judge having addressed his mind to other sanctioning options available to him settled on one he considered most appropriate and applicable in this case pursuant to Rule 7 ( c) ADR Rules 2010. Having satisfied himself that a valid and legally binding contract existed between the parties in that all essential elements of a legally enforceable contract existed he made the orders the way he saw fit. (Hargy Oil Palm Ltd v Ewase Landowners Association (2013) N5441.) It follows that a definitive and an  achievable order must follow suit. We are satisfied that the primary judge’s  exercise of discretion was not disproportionate and was the correct one, considering the concerns raised by the Mediator in the Bad Faith certificate. Review ground 4 is dismissed.

(7) Where the Court is satisfied that a party has not participated in good faith in the mediation or has impeded the mediation, it may:

(c) make such further or other order as it may think appropriate in the proceedings. 

28. 	This is what the primary Judge said at para 50 of the Judgment: ( Para 50  John Illus v Chris Bias N7618).We quote: 

“In these circumstances, the most important question is what is an appropriate remedy for PNG Power’s “bad faith” conducts? I consider a most appropriate remedy in the circumstances of this case is to order PNG Power to take all steps necessary to have the mediated agreement fully implemented rather than ordering judgment for the Illiuses. If, however, PNG Power fails to comply with any such orders, its defence and cross-claim could then be struck out and judgment entered with the reliefs sought by the Illiuses or such other reliefs the Court considers appropriate, granted. Canvassed” 

29.	As to review grounds 2 and 3 we are of the view it is not necessary for us to address them separately as they have been adequately covered in the main body of this judgment.  

30. 	We reiterate here that Mediation is here to stay and its benefits are many and varied including a win-win situation for both parties. The National Court Act ss. 7B (1) and Rules Relating to the Accreditation, Regulation and Conduct of Mediators rr 4 and 5 ADR 2022 now give meaning to this process. Already there is a growing body of published judgments on the question of “bad faith” at mediation and consequences that should flow from bad faith. Some of these include those in Hargy Oil Palm Ltd v. Ewase Landowners Association;[12]Abel Constructions Ltd v. W.R. Carpenter (PNG) Ltd (supra); Koitaki Plantations Ltd v. Charlton Ltd trading as Kookabura Meats & Stuart Fancy;[13]Alex Awesa & Anor v. PNG Power Limited;[14] and Wantok Gaming Systems Ltd v. National Gaming Control Board[15](Wantok Gaming Systems Decision No 1).

31.	Concerning the matter before us the primary Judge relied on the principles in the judgments of Pius Sankin v Papua New Guinea Electricity Commission (2002) N2257 and Alex Awesa & Onor v PNG Power Limited (2014) N57080. These cases detail specific references to incorporated entities, their duties and those of their servants and agents as regards “bad faith”.

32.	We find no error of judgment or application of law in this case. We would dismiss this ground.

Remarks.

33.	We are compelled to make observation at this stage as regards the length of time it has taken for this matter to slowly wind down to a closure since 2015. We believe that the sentiments expressed in the following case equally applicable to this case and urge compliance and closure. His Honour Cannings J said in the case Motor Vehicles Insurance Limited v Evelyn Api [2015] SC1406:  

"6. …
7.     Thirdly, the appellant is a well-resourced litigant compared to the respondent, who appears to be a village woman of limited means. This gives rise to the appearance that by unnecessarily prolonging the appeal, the appellant could be engaging in oppressive conduct. We make no finding against the appellant in that regard. However, we caution against the spectre of oppressive conduct by parties in as dominant a position as the appellant in this case viz-a-viz a single person of limited means. We consider that there is a special obligation on an institutional litigant to prosecute appeals with due diligence. All these factors reinforce our conclusion that we should uphold the application for dismissal and dismiss the appeal."

34.	The sentiments expressed in the paragraph above were also followed in the SC Case of Roy Manduru v Motor Vehicles Insurance Limited [2018] SC 2018. We would adopt and apply them here in this case. 

Jurisdiction

35.	In this matter leave has been granted and so we need not labour ourselves with the question of leave.  The grounds upon which a judicial review may be brought are limited by the criteria set out in Avia Aihi v The State (1981) PNGLR 81 and Avia Aihi v The State (No.2) (1982) PNGLR and conveniently set out in PNG v Colbert (1988) PNGLR 138 where the Court concluded that the discretionary power of the Court should be exercised only where:

1.	it is in the interest of justice;
2.	there are cogent and convincing reasons and exceptional circumstances, when some substantial injustice is manifest or the case is of special gravity; and
3.	there are clear legal grounds meriting a review of the decision.”

Determination

36.	It is our considered view that the interest of justice is favourable to the respondents than the applicants. The applicants has not successfully shown to us how their interest was affected. Furthermore, we find no convincing reasons or exceptional circumstances warranting that some injustice was manifested. Finally any and all legal grounds that may be present were adequately addressed before and after the mediation process and not in issue. Ultimately the whole of the application for review is refused.   

ORDERS

(1)	The application for review is refused and dismissed.
(2)	The Appellant shall pay the Respondents costs, which if not agreed , shall be taxed.
__________________________________________________________________
Allens Lawyers: Lawyer for the Applicant		
Lomai & Lomai Attorneys: Lawyer for the Respondent