N2836

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 126 OF 2003

Between:

LEE & SONG TIMBER (PNG) CO LIMITED
-Plaintiff-

And:

NATHANAEL BURUA as CHAIRMAN
EAST NEW BRITAIN PROVINCIAL
FOREST MANAGEMENT COMMITTEE & FIVE OHERS
- Defendants-

Waigani : Injia, DCJ
2004 : May 20th
2005 : March 8th

Civil – Practice and Procedure – Assessment of damages on Undertaking on Damages following dismissal of action and discharge of interim injunction- Objection to trial on assessment of damages on the Undertaking proceeding - Proper procedures to follow – Common law procedure adopted.

Cases cited in the judgment:
Cheltanham & Gloucester Building Society v Ricketts & Ors [1993] 1 WLR 1545. 
Financiera Avenida v Shiblag
F. Hohomann-La Roche & Co. A.G. v Secretary of State for Trade and Industry [1975] A.C. 295. 
Norwest Holst Civil Engineering Ltd v. Polysius Ltd., The Times, 23 July 1987; Court of Appeal (Civil Division) Transcript No. 644 of 1987

Counsel:
H. Nii for the Plaintiff
Ms Copland for the Fifth Defendant

8th March 2005

INJIA, DCJ: This is a preliminary objection by the Plaintiff to stop the commencement of trial on assessment of damages on the Plaintiff’s Undertaking As To Damages, following the discharge of interim injunctions and dismissal of the Plaintiff’s substantive action.

The short facts are that on 19 March 2003, the Plaintiff filed an Originating Summons seeking declaratory and injunctive orders against the Defendants. On the same day, it filed a Notice of motion seeking leave to apply for Judicial Review under Order 16 of the National Court Rules. The Plaintiff sought judicial review of the decisions of the First and Second Defendants made on 6 February 2003 to, inter alia, recommend the grant of a Timber Permit over the Trans Kerevat Plantation area to the Fifth Defendant. Also, in the Motion, the Plaintiff sought interim injunctive orders against the Defendants. The Motion was heard on the same day, ex-parte and the Court granted the interim orders sought. On the 21 March 2003, the Plaintiff filed an "Undertaking To Pay Damages" ("the Undertaking").

On 23 April 2003, the interim injunctions were "dismissed" or discharged by Justice Sevua. His Honour also ordered the substantive application be listed for hearing. 

On 6 May 2003, the Fifth Defendant filed Notice of Motion seeking assessment of damages pursuant to the Undertaking. 

On 9 May 2003, upon application by the Fifth Defendant, Justice Kandakasi, dismissed the substantive proceedings as being incompetent, and made further order requiring the parties to settle the Fifth Defendant’s damages pursuant to the Undertaking, within 14 days, failing which damages were to be assessed. The Plaintiff did not appeal this order. Parties failed to settle on damages. 

On 21 April 2004, the matter came before me for trial on assessment of damages when the Plaintiff objected. Both parties have filed written submissions for my consideration.

Generally, in a case where an interim injunction is discharged either before or after the Plaintiff’s action is discontinued or dismissed, an assessment of damages should proceed on the Undertaking. There is no contest on the application of this principle. The Plaintiff’s objection is based on the exception to this general principle which is stated in the following passage from Halsbury’s Laws of England 4th Edition, which appears at para 1073:

"The Plaintiff’s Undertaking as to damages on an order for an injunction remains in force notwithstanding the dismissal or discontinuance of the action, and if the Plaintiff ultimately fails on the merits, that the defendant is entitled to an enquiry as to damages sustained by reason of the interlocutory injunctions, unless there are special circumstances" (my emphasis).

An Undertaking is made to the Court and not to the other party. Therefore, it is for the Court to decide whether the Undertaking should be enforced.

At common law, enforcement of an Undertaking is dealt with in two steps. First, a determination is made as to whether the Undertaking should be enforced at all. If the Court decides that it should, the second step is to proceed to assess damages. Damage is assessed in accordance with established principles on damages applicable to breach of contract. In the present case, there is no issue in relation to the second step. I understand the present application is made under the first step - that the Court should not enforce the Undertaking or an inquiry into damages should not be held. 

In the absence of any case on point, both counsel cited the guidelines set out by Niell L.J. in the English Court of Appeal decision in Cheltanham & Gloucester Building Society v Ricketts & Ors [1993] 1 WLR 1545. At p.1551, Niell L. J states:

"(1)	Save in special cases an undertaking as to damages is the price, which the person asking for an interlocutory injunction has to pay for its grant. The court cannot compel an applicant to give an undertaking but it can refuse to grant an injunction unless he does.

"(2)	The undertaking though described as an undertaking as to damages does not found any cause of action. It does, however, enable the party enjoined to apply to the court for compensation if it is subsequently established that the interlocutory injunction should not have been granted.

"(3)	The undertaking is not given to the enjoined but to the court.

"(4)	In a case where it is determined that the injunction should not have been granted the undertaking is likely to be enforced, though the Court retains discretion not to do so.

"(5)	The time at which the court should determine whether or not the interlocutory injunction should not have been granted will vary from case to case. It is important to underline the fact that the question whether the undertaking should be enforced is a separate question from the question whether the injunction should be discharged or continued.

"(6)	In many cases injunctions will remain in being until the trial and in such cases the propriety of its original grant and the question of the enforcement of the undertaking will not be considered before the conclusion of the trial. Even then, as Lloyd L, J. pointed out in Financiera Avenida v Shiblag, The Times, 14 January 1991; Court of Appeal (Civil Division) Transcript No. 973 of 1990 the court may occasionally wish to postpone the question of enforcement to a later date.

"(7)	Where an interlocutory injunction is discharged before the trial the court at the time of discharge is faced with a number of possibilities.

(a)	The Court can determine forthwith that the undertaking as to damages should be enforced and can proceed at once to make an assessment of the damages. It seems probable that it will only be in rare cases that the court can take this course because the relevant evidence of damages is unlikely to be available. It is to be noted, however, that in Columbia Pictures Inc. v Robinson [1987] Ch. 38, Scott J. was able, following the trial of an action, to make an immediate assessment of damages arising from the wrongful grant of an Anton Piller order. He pointed out that the evidence at the trial court not be relied on to justify ex post facto the making of an ex parte order, at the time the order was made, it ought not to have been made: see p.85H.

(b)	The court may determine that the undertaking should be enforced but then direct an inquiry as to damages in which issues of causation and quantum will have to be considered. It is likely that the order will include directions as to pleadings and discovery in the inquiry. In the light of the decision of the Court of Appeal in Norwest Holst Civil Engineering Ltd v. Polysius Ltd., The Times, 23 July 1987; Court of Appeal (Civil Division) Transcript No. 644 of 1987 the court should not order an inquiry as to damages and at the same time leave open for the tribunal at the inquiry to determine whether or not the undertaking should be enforced. A decision that the undertaking should be enforced is a precondition for the making for an order of an inquiry as to damages.

(c)	The court can adjourn the application for the enforcement of the undertaking to the trial or further order.

(d)	The court can determine forthwith that the undertaking is not to be enforced."

Another English case cited by Mr Nii, is F. Hohomann-La Roche & Co. A.G. v Secretary of State for Trade and Industry [1975] A.C. 295 at 361. In that case, Lord Diplock described the nature of the two-step approach as follows:-

"Two questions arise whenever there is an application by a defendant to enforce a cross-undertaking in damages. The first question is whether the undertaking ought to be enforced at all. This depends on the circumstances in which the injunction was obtained, the success or otherwise of the plaintiff at the trial, the subsequent conduct of the defendant and all the other circumstances of the case. It is essentially a question of discretion. The trial judge usually exercises the discretion since he is bound to know more of the facts of the case than anyone else. If the first question is answered in favour of the defendant, the second question is whether the defendant has suffered any damage by reason of the granting of the injunction. Here ordinary principles of the law of contract apply both as to causation and as to quantum: see F.Hoffmann-lae Roche & Co. A.G. v. Secretary of State for Trade and Industry [1975] A.C. 295 per Lord Diplock, at p.361." (emphasis added)

I consider the guidelines and principles set out by Niell LJ and Lord Diplock in the two English cases to be useful and appropriate to our jurisdiction, and adopt them. 

It is clear from the above guidelines that the inquiry on the first step should be conducted by the trial judge who determines the substantive proceedings or discharges the injunctions because that judge will know more about the facts of the case and the reasons for discharging the injunctions and dismissing the action. In the exercise of this discretion, all relevant considerations should be taken into account. In addition to those set out by Lord Diplock, they include procedural irregularities committed by the Plaintiff in applying for and obtaining the injunction; the Plaintiff’s failure to disclose all relevant factual information to obtain the injunction; whether as a matter of law, the injunction sought and granted was proper or justified and; whether the injunction was warranted in the light of all relevant circumstances. The decision to grant or refuse the enquiry is an interlocutory ruling. If the Plaintiff is aggrieved by this interlocutory ruling, he/she may either appeal against the decision or await the outcome of the assessment of damages and then appeal against the whole judgment.

Applying these principles to the facts of the present case, I am of the view that an application to enforce the Undertaking should have been made before Justice Sevua and determined by His Honour when His Honour discharged the interim injunction. Alternatively, the application should have been made before Justice Kandakasi, when His Honour dismissed the substantive proceedings and decided that the Undertaking should be enforced, and made an order for assessment. Both parties were presumably heard on the matter before His Honour made the decision. I accept Ms Copland’s submission that the Appellant should have appealed against Justice Kandakasi’s decision but chose not to. Instead, both parties took steps to prepare for the trial on assessment of damages. In the circumstances, the issue raised by this objection, is res judicata. Consequently, the trial on assessment on damages on the Undertaking must now proceed. All the other arguments raised by the Plaintiff as to success of the Plaintiff in or similar related proceedings involving the same parties may be relevant on the question of damages and may be raised in the trial. 

For these reasons, I dismiss the objection and order that the matter proceed to assessment of damages on the Undertaking. Costs on the objection shall be in the cause of the trial on assessment of damages on the Undertaking.
__________________________

Lawyer for the Plaintiff			:	Harvey Nii Lawyers
Lawyer for the First Defendant		:	Maladina Lawyers