Motor Vehicles Insurance Ltd v Paki [2006] PGNC 130; N3212 (25 May 2006)

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PRACTICE AND PROCEDURE – Notice of Discovery – consent order to produce certain documents –non-compliance with consent order – default in giving discovery – Defence struck out – O. 9 R. 1 – O. 9 R. 2 – O. 9 R. 9 – O. 9 R. 10 – O. 9 R. 15 (1) of National Court Rules

PRACTICE AND PROCEDURE – Notice of Discovery – Distinction between Notice of Discovery and Notice to produce – Notice of Discovery issued after pleadings have closed – Notice to Produce issued only in relation to documents referred to in pleadings and affidavit – O. 9 R. 9 (1) (2) (3) of the National Court Rules

LIQUIDATION – liquidator appointed – termination of liquidation – settlement of liquidators costs by of d of Release – payment of liquidators costs – liquidator failed to keep accounts and records of liquidation – therefore invoices were not d – s. 306 (1) (b) of Companies Act

Gibson v Sykes (1884) 28 Sol J. 533;
Treiguts v Tweedley [1959] VicRp 73; [1959] VR 544;
Mosser v PGH Ceremics Pty Ltd (1964) 82 WN (Pt 1) (NSW) 147;
Donaldson v Harris (1973) 4 SASR 299;
John Cybula v Nings Agencies Pty Limited [1978] PNGLR 166;
Credit Corporation (PNG) Limited -v- Gerald Jee [1988-89] PNGLR 11;
Aisip L. Duwa v Ronald Moyo Senge [1995] PNGLR 140 (N1360);
Public Officers Superannuation Fund Board v Sailas Imanakuan (2001) SC677;
Ace Guard Dog Security Services Ltd v Lindsay Lailai (2003) N2459,
Ritchies Supreme Court Procedure NSW;

1. DAVANI .J: This is the plaintiff’s application moved by way of Notice of Motion filed on 16 February, 2006. The application is made pursuant to Order 9 Rule 15(1) of the National Court Rules (‘NCR’) where the defendant failed to comply with giving discovery, such notice issued pursuant to O. 9 r.1(1) of the NCR. These rules read;

(1) Subject to this rule, where the pleadings between any parties are closed, any of those parties may, by notice for discovery in Form 30 filed and served on any other of those parties, require the party served to give discovery of documents, with or without verification....

(1) A party required under Rule 1 of this Order to give discovery shall, subject to Rule 2 of this Order, give discovery within such time, not being less than 14 days after service on him of the notice for discovery, as may be specified in the notice for discovery."

(1) Where a party makes default in filing or serving a List of Documents or Affidavit or other document, or in producing any document as required by or under this division, the Court may make such order as it thinks fit, including;...

2. The default provision arises from O.9 r.2(1) of the NCR. It states that a party shall give discovery of documents relating to all matters in question between him and the party giving notice for discovery, and that this must be done not less than fourteen (14) days after service on him of the notice of discovery.

3. The plaintiff relies on the following affidavits in support of its application;

4. On 29 September, 2000, the plaintiff (‘MVIL’) was placed into liquidation by Finance Pacific Limited (‘FPL") and the defendant ("Mr Paki") was appointed as liquidator.

5. On 9 January, 2001, the Privatization Commission commenced proceedings in the National Court to terminate the liquidation. This was because the Privatization Commission had taken over the FPL’s functions.

6. On 9 April, 2001, a Deed of Settlement and Indemnity ("the Deed") was entered into between the parties. Clause 10 of the Deed states that Mr Paki’s fees for the liquidation "will not exceed K690,000", unless certain events did not take place as contemplated by the Deed, in which case the liquidators approved rates would apply. The liquidators approved rate was K150.00 per hour.

7. On 9 April, 2001, all conditions in the Deed were satisfied and the liquidation was terminated. Mr Paki was discharged as MVIL’s liquidator. This occurred thirty-nine (39) days after the execution of the Deed. Mr. Paki took or was paid K990,512.00 (from MVIL) during the period he was liquidator.

8. Because the MVIL could not substantiate the payments Mr Paki made to himself whilst he was liquidator, it commenced proceedings by way of Writ of Summons No. 658 of 2002.

(a) overpayment of K792,512. The MVIL alleges that Mr Paki was only due K198,000 based on 33 weeks (29/9/00 to 17/5/01) at 40 hours per week being 1,320 hours at K150/hour = K198,000.00; or

(b) that, if (which the plaintiff denies) the Court finds that Mr Paki is entitled to the maximum amount of K690,000.00 (as per the Deed) and a further payment of 39 days at the agreed rate, the total payment to Mr Paki would be K724,800.00 which would result in an overpayment to Mr Paki of K265,712.00

10. The plaintiff filed the Writ of Summons and Statement of Claim on 25 May, 2002 (the ‘Writ’). The Writ was served on the defendant and on 22 August, 2002, Mr. Paki’s then Lawyers, Namaliu & David, filed his Defence.

11. On 17 December, 2003, the plaintiff served a Notice for Discovery upon the defendant. This is attached as annexure "JMB 1" to the affidavit of Jason Brooks sworn on 16 February, 2006.

12. On 8 March, 2004, the defendant served a copy of his Verified List of Documents. This is attached as annexure "JMB 2" to the affidavit of Jason Brooks sworn on 16 February, 2006.

13. Thereafter, Gadens Lawyers made repeated telephone requests to the defendant’s lawyers for copies of the documents described as items 1, 2 and 3 in Part 1 of Schedule 1 of the List of Documents filed by the defendant.

14. Tiffanny Gaye Nonggorr deposes to this in par (6) to (8) of her affidavit sworn on 12 August, 2004. Ms Nonggorr deposes that on 9 and 10 March, 2004, several telephone calls were made from Gadens Lawyers to the defendant’s Lawyers requesting documents numbered 1, 2 and 3 in the defendant’s verified list of documents. These are described in the said list at part 1 of Schedule 1 as;

Document:	Date:
Deed of Settlement and Indemnity between the defendant, Motor Vehicles Insurance Limited (in Liquidation), PNGBC Limited and the Privatization Commission.	9th April, 2001
Consent order in resort of National Court proceedings OS No. 13 of 2001 in the matter of Motor Vehicles Insurance Limited (in Liquidation)	17th May, 2001
3. Bundle of invoice raised by the Defendant from the date of appointment as liquidator to the date of his termination."
4. Copies of Court Documents filed in these proceedings.
5. Correspondence between lawyers for the parties

15. Gadens Lawyers also sent letters dated 16 March, 2004 and 21 April, 2004 requesting copies of these documents and also for the defendants lawyers to endorse the "Notice to Set Down for Trial" and return to Gadens Lawyers. These letters are attached as annexures ‘TGN6’ and ‘TGN8’ to Tiffany Gaye Nonggorr’s affidavit sworn on 12 August, 2004. But the defendant’s lawyers did not respond to these letters.

16. Because the defendant did not send the plaintiffs lawyers the documents it requested, on 13 August, 2004, Gadens Lawyers then filed a Notice of Motion seeking production by the defendant of the documents it had listed in its List of Documents, particularly documents listed as items 1, 2 and 3 in Schedule 1, Part 1 and that the documents be produced within 7 days from the date of the Courts orders.

17. By letter of 21 October, 2004, to Gadens Lawyers, Mr Paki’s lawyers advised that;

"...We advise that our client is prepared to provide to you the original documents commencing from the date of appointment to the date of termination. However the documents are stored away in the archives and therefore would require some good amount of time to locate the relevant documents. We therefore request that you give our client up till the end of next week to locate the documents which are stored in his archives at Korobosea...."

18. This letter is annexed as annexure ‘TGN1’ to Tiffany Gaye Nonggorr’s affidavit sworn on 17 March, 2006.

19. As for the motion filed by Gadens Lawyers on 13 August, 2004 for the defendant to produce these documents, both plaintiff and defendant consented to orders and on 7 December, 2004, these consent orders were endorsed by the National Court, Waigani.

20. These orders are attached to the affidavit of Jason Brooks sworn on 15 February, 2006, as annexure "JMB 4". These orders read;

"1. That pursuant to Order 9 Rule 10 (i) of the National Court Rules, the defendant produce copies of the documents listed as item 3 in Schedule 1 Part 1 in the defendants List of Documents to the plaintiffs lawyers within 14 days of the date of these orders.

21. In apparent compliance with the consent orders, Namaliu & Company Lawyers sent by facsimile dated 20 December, 2004 to Gadens Lawyers, two (2) tax invoices from RAM Business Consultants dated 10 November, 2000 and 17 November, 2000. These documents are attached as annexure "JMB 5" to the affidavit of Jason Brooks sworn on 15 February, 2006.

22. Jason Brooks deposes at paragraphs 13 and 14 of his affidavit that the invoices sent to Gadens Lawyers were not original invoices nor were they invoices which cover the period of the defendants appointment as liquidator. He states also that the invoices are very illegible and are almost identical.

23. Following receipt of the above mentioned invoices Gadens Lawyers made several telephone enquiries with Namaliu & Company Lawyers and on each occasion was told by Namaliu & Company that they did not have any more invoices from their client and that they did not have any original invoices. This is deposed to in paragraph 15 of Jason Brooks affidavit sworn on 15 February, 2006.

24. By letter of 19 October, 2005, Gadens Lawyers requested Namaliu Lawyers to send to them copies of the documents in compliance with the consent orders made by the National Court on 7 December, 2004. The letter also put the defendant on notice of the plaintiffs intention to apply to strike out the defendants Defence if the documents were not provided. This letter is attached as annexure "JMB 6" to Jason Brooks affidavit sworn on 15 February, 2006. It reads in part;

"We refer to the above matter and specifically to the order made by the National Court on 7th December, 2004.

Pursuant to this order of the Court your client was required to produce copies of the bundle of invoices raised by him for the entire period in which he acted as liquidator of our client. Your client was appointed liquidator on 29th September, 2000 and his appointment was terminated on 17th May, 2001.

Despite repeated requests made by us and discussions between our respective firms, the only documents you have provided us with are two (2) invoices respectively dated 17th November, 2000 and 30th November, 2000.

Your client is clearly in breach of the order made by the National Court on 7th December, 2004.

Accordingly, we hereby put you on notice that should your client not provide us with copies of invoices issued by himself for the entire period of his appointment as Liquidator of our client, within seven (7) days from the date of this correspondence, we will make application to the National Court to strike out your client’s defence pursuant to Order 9 Rule 15 of the National Court Rules without further notice to you."

25. On 29 October, 2005 Gadens Lawyers received a facsimile from the defendant himself dated 28 October, 2005 stating that the file had been transferred to Henaos Lawyers and requesting a further month for him to talk to Henaos Lawyers and then revert to Gadens Lawyers. This letter attached as annexure "JMB 7" to Jason Brooks affidavit sworn on 15 February, 2006, reads;

"I acknowledge receipt of your letter dated 19th October, 2005 today faxed to me by Namaliu Lawyers.As you may be aware, the principal of Namaliu Lawyers, Mr Robin Namaliu, has been very sick and it appears he has transferred files to Henao Lawyers. I need to check who is handling my file in Henao Lawyers before I respond to you.

I note in your letter that Namaliu Lawyers have provided only two (2) invoices to you. I am surprised that you have mentioned that because I have provided most of the information to my lawyers including the Deed of Settlement and several other documents. I also take this opportunity to inform you that a file with all the invoices are also with the Financial Controller of Motor Vehicle Insurance Ltd (MVIL). Have you asked MVIL? I am happy to sit down with you and MVIL and go through the invoices and any other information you need.In the meantime, I would appreciate if you could allow me at least a month for me to talk to the lawyer at Henao Lawyers and come back to you.

26. Mr. Brooks submits that Gadens Lawyers then did not hear anything further from the defendant or his legal representatives for approximately four (4) months. Gadens Lawyers then took a decision to serve both Namaliu Lawyers and Henaos Lawyers with the Motion to strike out the Defence. But at the time of serving Namaliu Lawyers with the motion, Gadens Lawyers process server was advised that the file had been sent to Steeles Lawyers. This is deposed to in the affidavit of service of Steven Ovia filed on 21 February, 2006. As a result, Gadens Lawyers also served Steeles Lawyers with the motion.

27. Accordingly, Gadens Lawyers have had to serve three (3) Law firms so as to be certain that this motion came to the defendants attention.

28. Jason Brooks deposes in his affidavit sworn on 21 February, 2006, that he was advised on 21 February, 2006 by a representative from Henaos Lawyers that they do not and have never acted for Mr Paki. On that same day, he was also told by a representative from Namaliu Lawyers that they still acted for Mr Paki but had locked his file away because he had not paid their legal fees.

29. This calls into question the defendant’s letter to Gadens Lawyers dated 28 October, 2005. I discuss this obvious misleading information and its effect under the part on my analysis of the evidence and the law.

30. Mr. Brooks submits that since 20 December, 2004 to 16 March, 2006 when Gadens Lawyers was served with Mr Paki’s affidavit filed on 16 March, 2004, Gadens had not heard from either the defendant himself, Namaliu Lawyers, Henaos Lawyers or Steeles Lawyers until this matter was listed before me on 17 March, 2006, when Steeles Lawyers appeared for the defendant. And I have heard that this was the first constructive contact by any law firm with Gadens Lawyers, regarding this matter.

31. Mr. Epor for the defendant opposes the application to strike out the defendant’s Defence. He relies on three (3) affidavits, that of Kerenga Kua sworn on 22 March, 2006 and filed on 23 March, 2006; Rex Paki sworn and filed on 16 March, 2006 and a supplementary affidavit (of Rex Paki) sworn and filed on 23 March, 2006.

32. Mr. Epor’s submissions based on the affidavit material he filed are basically the following;

1.1 That the defendant as liquidator carried out the winding up of the plaintiff and that the terms of this winding up are contained in a Deed of Settlement.

1.2 That a term of the Deed was that the liquidators fees will not exceed K690,000.00 unless clause 1 and 6 (of the Deed) are not complied with within 7 days of the date of the Deed whereupon the liquidators approved rates will apply.

1.3 Because PNGBC and the Privatization Commission did not comply with clauses 1 and 6 of the Deed i.e titles to various properties were yet to be properly transferred and registered under the plaintiffs name, that the defendant and his staff were then entitled to additional fees being normal approved rates (see Kerenga Kua’s affidavit sworn on 22.3.06, para. 6 and 7).

1.4 That these payments were agreed to by all lawyers for parties after discussions by all parties as to the terms of the consent order.

1.5 That by Mr. Kua’s letter to Steeles Lawyers of 16 March, 2006, a copy of which is attached as an annexure to his affidavit sworn on 22.3.06, he informed Steeles Lawyers of all the above and that he stated therein "Mr Paki’s additional fees are justified and were approved by all parties."

2.1 Relying on the case Aisip L. Duwa v Ronald Moyo Senge [1995] PNGLR 140 (N1360) and O.9 r.9 of the NCR, Mr Epor submits that the plaintiff should first issue a Notice to Produce before he can expect that the defendant make available to him the documentation that he seeks. Order 9, r.9 (1) (2) (3) (a) (b) (c) of the NCR reads;

(1) Where a pleading or affidavit filed by a party refers to a document, any other party may, by notice to produce served on him, require him to produce the document for inspection.

(3) Where a notice to produce a document is served on a party under sub-rule (1) of this Rule, he shall, within four days after that service, serve on the party requiring production a notice –

(a) appointing a time within seven days after service of the notice under this sub-rule when, and a place where, the document may be inspected, or guardian at law;

(b) claiming that the document is privileged from production and sufficiently stating the grounds of the privilege; or

(c) stating that the document is not in his possession, custody or power and stating to the best of his knowledge, information and belief where the document is and in whose possession, custody and power it is."

33. This then takes me to the next part of Mr Epor’s submissions which were in relation to a situation where a notice to produce has not issued and where the defendant does not have the said documents.

3.1 Mr Epor’s submissions are a literal interpretation of certain parts of the verified list of documents which go to suggest that the defendant has passed on the requested invoices and does not have them. He referred the court to the defendants verified list of documents. He pointed out that the requested documents as contained in Part 1 of Schedule 1 of the said list and par. 3, 4 and 5 of the list demonstrate that the defendant does not have the invoices. Paragraph 3, 4 and 5 read;

"3. The defendant has had, but does not now have in his possession, custody or power, the documents enumerated in Schedule 2.

4. To the best of the defendant knowledge, information and belief, the documents referred to in Schedule 2 were last in the defendants possession, custody or power on or about the date they bear and to the best of the defendant knowledge, information and belief, the originals are now in the possession, custody or power of the persons to whom they were addressed to or in the Court Registry.

5. To the best of the defendants knowledge, information and belief, neither the defendant nor his lawyers nor any other person on his behalf has now or ever had in his possession, custody or power any document relating to any matter in question between the plaintiff and the defendant other than the documents enumerated in the said schedules 1 and 2."

1. Deed of Release – Mr Kerenga Kua has deposed that the extra payment to the defendant was justified because all parties had agreed to this being done. But the Writ of Summons and Statement of Claim filed by the plaintiff claims an overpayment to the plaintiff of K792,512.00 or alternatively K265,712.00.

In its Defence filed on 2 August, 2002, the defendant relies on the Deed of Settlement and the relevant paragraphs therein to plead that he was properly paid.

The Deed of Settlement is a valid document and the consent orders have not been set aside. The terms and validity of these documents have never been challenged.

2. Notice to Produce – Mr Epor submits in the strongest terms that Gadens Lawyers should firstly have issued a Notice to Produce under O.9 r.9 of the NCR, to the defendant, for the defendant to comply with the production of the various documents.

35. Mr Epor for the defendant submits that a party is not obliged to comply with the procedural requirement of O.9 r.9 (3) of the National Court Rules when the other party has not issued a notice under O.9 r.9 (1) of the NCR. Mr Epor’s submissions are supported by his reference to Aisip L. Duwa v Ronald Moyo Senge [1995] PNGLR 140 (N 1360) where his Honour Sakora .J said;

"Now, the due compliance with the requirements of sub-rule (3) of rule 9 is dependent upon, or presupposes the occurrence of due notice under sub-rule (1). Thus, if there is no notice to produce, in accordance with Form 32 NCR’s, a party is not legally and procedurally obliged to do anything at that stage. Furthermore, a party can only produce a document that is in one’s possession, power or custody. That is when it is properly said to be discoverable, accessible (physically) to the requesting party and relevant to the issues thrown up by the claim, counter-claim or defence... So it is envisaged that the discoverable documents will be both original and readily accessible. Lost documents cannot be discovered through inspection, nor can privileged documents."

36. In that case, the plaintiff served a notice to produce documents on the defendant in respect of documents listed in the defendant’s list of documents. The plaintiff had previously served a notice for discovery on the defendant before the close of pleadings contrary to O.9 r.1 of the rules of the National Court. The plaintiff sought an order striking out the defence and the cross claim of the defendant, he having failed to provide the documents requested in the notice to produce because they were not in his possession.

(1) the conduct of the plaintiff in seeking production of documents which he knew were not in the possession of the defendant amounted to an abuse of process; and

(2) an order to strike out pleadings should be made in favour of a plaintiff who is himself in breach of the Rules of the National Court.

38. Sakora .J held that the plaintiff had acted in breach of the rules of the National court in serving a notice for discovery before the close of pleadings. The court held that the plaintiffs lawyer’s action in seeking orders for the production of documents which he knew were not in the defendants possession amounted to harassment and an abuse of

39. On perusal of the rules, it is clear that O.9 r.9 of the NCR is not in mandatory terms. Also, a Notice to Produce is a process adopted by a party if it wishes to have access to a document that is pleaded in the other party’s pleading or affidavit whereas a Notice of Discovery is issued after pleadings have closed. A Notice to Produce is a separate process from a Notice of Discovery although serving the same aim, which is to have access to a document. And O.9 r.3 (a) (b) (c) of the NCR assists in this process, which is that four (4) days after service of the Notice to Produce, a party must by notice, appoint a time within seven (7) days after service of Notice to Produce, and the place, for the document to be inspected. The Notice should also state whether the document/s is/are privileged or available for inspection. And it should be noted that the notice to be served can be in any form when the rules do not provide for the form to be used. Halsburys fourth Edition par. 58 reaffirms the above when it states this;

"58. Production for inspection of documents referred to in pleadings and affidavits. Any party to a cause or matter is entitled at any time to serve a notice on any other party in whose pleadings or affidavits reference is made to any document requiring him to produce that document for the inspection of the party giving the notice and to permit him to take copies of it. The party on whom such notice is served must within four days after its service, serve on the party giving the notice, a notice stating a time within seven days after the service thereof at which the documents, or such of them as he does not object to produce, may be inspected at a place specified in the notice, and stating which, if any, of the documents he objects to produce and on what grounds. (my emphasis)

The object of these provisions is to place the opposite party in the same position as if the document had been fully set out in the pleading or affidavit. The notice may be served at any time after the document in question has been so referred to; and the document need not be identified or specifically described, since a general reference to or description of it is sufficient to entitle the opposite party to inspection. The rule extends only to documents referred to in pleadings and affidavits.

The court has a discretionary power to order inspection if the notice is not complied with." (my emphasis)

40. As stated earlier, no doubt, there is a clear distinction between when a Notice of Discovery can issue and when a Notice to Produce can issue which is that Notice of Discovery is issued after pleadings have closed and a Notice to Produce can be issued at any time as long as the document is referred to in pleadings or affidavit.

41. Another reason why Mr Epor’s submissions are misconceived and misleading is that both the plaintiff and the defendant have consented to adopting the procedure under O.9 r.10 of the NCR which is where the court had ordered the production of these invoices, by way of a consent order. And Notice of Discovery was issued after pleadings had closed (see O. 9 r.1 of NCR), a different situation from Aisip L. Duwa (supra) where a Notice of Discovery was issued before pleadings were closed and where the plaintiff filed an application to strike out Defence before making use of avenues available to him under O.9 r.9 and O.9 r.10 of the NCR. In this case, the order to produce documents was made because the defendant had informed Gadens Lawyers by letter of 21 October, 2004 that the documents were stored away in archives at Korobosea and that he needed till the end of the week to locate these documents. Mr Epor’s reliance on Aisip L. Duwa (supra) has no relevance because the facts in that case are very different to this case.

42. However the principles of discovery discussed in that case and Public Officers Superannuation Fund Board (‘POSFB’) v Sailas Imanakuan (2001) SC 677 are relevant. Halsburys fourth Edition, par. 57 states this in relation to the requirement to produce for inspection, documents referred to in a list of documents as opposed to the procedure in O.9 r.3 (a – c) of the NCR;

The disclosure of documents in a list of documents, whether in compliance with the requirement to serve such a list automatically without an order or pursuant to an order of the court, carries with it a prima facie obligation to permit their inspection. Accordingly, when a party serves a list of documents on any other party he must allow that other party to inspect the documents referred to in the list, other than those which he objects to produce, and to take copies of them, and for this purpose he must at the time when he serves his list on the other party also serve on him a notice stating a time within seven days after the service thereof at which the documents referred to may be inspected at a place specified in the notice. There is therefore no need to serve a notice requiring inspection of documents disclosed in a list." (my emphasis).

43. In POSFB, the Supreme Court Bench comprising Amet CJ, Gavara-Nanu .J and Kandakasi .J said of the process of discovery;

"and one of the most important processes of the pre-trial procedure employed in an endeavor to achieve those aims is that of discovery. In ordinary parlance discovery is the ascertainment of that which was previously unknown. In procedural law, it is one of those pre-trial devices that can be used by one party to obtain facts and information about the case from the other party in order to assist the party’s preparation for trial."

44. Their Honours then examined the South Australian case of Donaldson v Harris (1973) 4 SASR 299, where Wells .J traced the development of procedural rules on discovery and found that one of the essential features of discovery is fairness. They said:-

"Its function is to ensure not only that so far as possible there should be no surprises at the trial, and also that before the trial, each party should be informed or be capable of becoming informed of all the relevant material evidence whether in the possession of the opposite party or not, so that he can make an intelligent appraisal of the strength or weaknesses of the respective cases of the parties either for the purpose of the trial or for the purpose of arriving at a fair or favourable settlement or compromise."

45. Their Honours also examined Justice Woods’ decision in Credit Corporation (PNG) Limited -v- Gerald Jee (1988 – 89) PNGLR 11 at page 12, where he elaborated on the purpose of Discovery. He said;

"The function of the discovery of documents is to provide the parties with the relevant documentary material before the trial so as to assist them in appraising the strength or weakness of their respective cases, and thus to provide the basis for the fair disposal of the proceedings before or at the trial."

46. Their Honours found that Order 9 Rule 15 of the National Court Rules provides that where a defendant is in default, the Court can order that his Defence be struck out and judgment entered accordingly. They said "there is no pre-requisite that a party must first seek a court order to enforce discovery before the default provision can be availed of."

47. In POSFB (supra) their Honours held that Order 9 Rule 15 of the National Court Rules clearly provides –

"that in an action commenced by Writ of Summons default action can be sought and there is no pre-condition that a court order must first be sought; the wording in the Rule is "as required by or under this division" and the words in the rule makes no reference to "as ordered".

48. In this matter, on 7 December, 2004, orders were made by the National Court for production of documents. To date, Mr Paki has not complied with these orders. Thus, Mr Paki’s position is more compelling and precarious than as discussed by the Court in POSFB (supra).

49. In POSFB (supra), their Honours quite clearly found that a default judgment was open to an applicant who complained of deficient discovery rather than a total lack of discovery. The judgment reads;

"A closer look at the wording in sub-rule 1 of Rule 15 of Order 9 makes it clear that, a party would be in default and therefore be liable for a judgment or order against him if he fails to file a List of Documents or affidavit or other document or produce any document as required under this division. In our view, that does not restrict a default in terms of filing and serving a List of Documents but also includes default of a party required to give discovery failing to list any document whether it be in its original form or a copy and is relevant to the proceedings unless it is privileged from production."

50. POSFB (supra) is a binding Supreme Court decision and clearly gives authority to the National Court to dismiss an action commenced by Writ of Summons if the party required to give discovery has failed to give discovery of a document whether it be in its original form or a copy and is relevant to proceedings unless it is privileged.

51. In John Cybula v Nings Agencies Pty Limited (1978) PNGLR 166, at p. 167 Mr. O’Regan noted that Pritchard, J quoting the authors in Odgers Principles of Pleading and Practice (20th ed 1971) said;

"The Court is reluctant to exercise its power to strike out the defence and will only do so when a party has at least once disobeyed a peremptory order insisting that he make discovery within a specified time ... "These are highly penal provisions and will only be enforced in the last resort, where it seems clear that the party in default really intends not to comply with an order of the court".

53. In this case, the invoices are critical to the plaintiffs case. Notwithstanding the existence of the Deed of Release, the plaintiff is quite correct in insisting that it be furnished with these invoices. As Sakora .J said in Ace Guard Dog Security Services Ltd v Lindsay Lailai (2003) N2459, the discretion under O.9 r.15(1) (a) should only be exercised against the defaulting party after a full and careful consideration and appreciation of the entire circumstances of the case. Sakora .J said further;

"I would further suggest that proceedings should be dismissed under the rule if failure or default in complying were, such as I find in this case, repeated, verging on what could properly be described here as chronic. Another ground for the exercise of discretion against defaulting party would, I suggest, be where discovery was insufficient or deficient rendering a fair and expeditious trial nigh on impossible, and thereby causing prejudice and disadvantage to the opposing party."

54. The plaintiff can only establish that work was properly done (by the defendant) if they have in their possession the invoices the defendant should have issued for services rendered. And this will not in anyway affect the contents of the Deed of Release because in my view, the Deed of Release is evidence of agreement by all parties of work done or to be done by the defendant and how much he should be paid. And as with any relationship between vendor and purchaser or buyer and seller etc, the vendor or seller always issues an invoice for work done. And the defendant should have issued or rendered those invoices to the plaintiff before paying himself a salary.

55. I find that Mr Epor’s submissions are misconceived because in this case, as discussed above, parties agreed for the defendant to produce certain documents and this agreement was confirmed by a consent court order. A notice to produce need not be issued first.

56. I have earlier pointed out the basis of Mr Epor’s submissions under this part, which is basically that the defendant does not have the invoices. He submits that in the List of Documents, the defendant disclosed the bundle of invoices which the plaintiff’s lawyers have been requesting. Paragraph 3 to the said list states that "the defendant has had but does not now have in his possession, custody or power, the documents enumerated in Schedule 2".

57. He pointed out that the documents enumerated in Schedule 2 are "1.the original of all correspondences dispatched by the defendant to the parties therein, copies of which have been discovered in Schedule 1".

58. Mr Epor submits that the documents/correspondence discovered in Schedule 1 include, inter alia, the very bundle of invoices that the plaintiff has been requesting. He submits further that when paragraph 3 and schedules 1 and 2 are read together, the combined effect is that the defendant once had in his custody, but does not now have, the originals of those invoices because they have been dispatched to the plaintiff. Mr Epor also submits that even if the defendant has them, that he is not legally and procedurally obliged to produce the invoices because of the following reasons;

1. That the plaintiff has not issued Notice to Produce Documents under Order 9, Rule 9(1) (Form 32).

2. That the defendant does not have the original documents for inspection. Mr Epor submits that they have been dispatched to the plaintiff as is confirmed and admitted by Mr Michael Jason Brooks of Counsel for the plaintiff in paragraph 11 of his affidavit filed on the 16 February 2006.

3. That the originals of the invoices are no longer with the defendant, that they have been dispatched to the plaintiff and that therefore, the plaintiff’s lawyers should get them from the plaintiff.

59. On considering Mr. Epor’s submissions, it appears they are misconceived to a certain extent. I say this because par. 1 of the verified list of Documents are documents that are in the defendants possession, custody or power and these are listed in Part 1 of Schedule 1, which documents include the bundle of invoices.

60. The ‘correspondence’ referred to in Schedule 2 of the said list have been discovered and which are listed as item 5 in part 1 of Schedule 1 as "5. correspondence between lawyers for the parties". Clearly, this does not include the invoices. If it did include the invoices that this fact would have been made known earlier to the plaintiffs lawyers or the plaintiffs would have given those instructions to its lawyers. But this did not transpire because the plaintiff does not have these invoices.

61. As regards Jason Brooks statement at par. 11 of his affidavit sworn on 15 February, 2006 reads;" the documents as listed in item 3 of schedule 1, Part 1 of Defendants List of Documents are the invoices as rendered by the defendant to the plaintiff for the period of his appointment as liquidator of the plaintiff". He states in no uncertain terms that these are the invoices that were raised by the defendant to the plaintiff from the date of his appointment as liquidator to the date of his termination, if at all. And these are the invoices that the defendant must produce. At best, the defendant could only produce two which are illegible, indecipherable and do not relate in any way to the liquidation. Therefore, Mr Brooks submissions on this are that the defendant has not rendered invoices for the period in question.

62. I have also had careful consideration and appreciation of the entire circumstances of this case to assist me in the exercise of my discretion under O.9 r.15(1) of the NCR (see Ace Guard Dog Security Services Ltd (supra)). Having done that, I note there to be several issues for determination. These are;

1. Whether or not there was default on the part of the plaintiffs in complying with the defendants Notice of Discovery according to the rules; and

2. If so, whether or not the default provisions of the rules ought to be enforced against the plaintiffs; and

3. In the alternative, whether or not, if discovery is found to have been made in accordance with the rules, such discovery was sufficient and adequate.

5. Were the invoices put before the lawyers prior to agreement being reached and the endorsement of the Deed of Release?

63. Issues 4, 5, 6 and 7 would under normal circumstances, be raised at trial and they all relate to the defendant having to justify the payments he received, because it is the plaintiffs claim that the defendant was overpaid by K792,512.00 or alternatively K265,712.00. Mr Kerenga Kua’s evidence is that the defendants additional fees are justified and were approved by all parties, before payment. If that is the case, then the defendant must show that. He must put before this court the invoices that were issued for
that extra period worked. Another issue that the defendant has not clarified is as to whether the subject invoices were put before Messrs Kua, Frecker, Molloy, Shepperd and Barwick at their meeting at the precincts of the National Court Waigani on 17 May, 2001 (see Kerenga Kua’s affidavit sworn on 22 March, 2001 par. 8, 9, 10, 11 and 12).

64. In my view, that would not have been possible because the defendant had yet to perform the services, now the subject of the plaintiffs case. And Mr Kua was clear on this when he said at par.10 and par. 11 of his affidavit;

"10. A disagreement ensued and I refused to sign the consent order unless the other side agreed to all of Mr Paki’s costs incurred after the date of the Deed i.e Mr Paki’s costs for continuing to act as the plaintiffs liquidator owing to the non-compliance by the PNGBC and the Commission of Clauses 1 and 6 of the Deed.

11. After some discussions, Messrs Frecker, Barwick and Shepperd agreed to my proposal to pay all of Mr Paki’s post execution costs in consideration of which I then signed the consent order of the same date." (my emphasis)

65. And that was the basis on which the Deed of Settlement was signed. It was an agreement to a proposal to pay all of the defendants post execution costs.

66. So was the defendant correct when he deposed in his affidavit sworn on 16 March, 2006 at par. 11 that he did provide copies of the invoices and details of payment (of salaries) at the meeting of 17 May, 2001? The defendant also deposes therein that he has yet to locate copies of these invoices. He deposed in his further affidavit sworn on 23 March, 2006 of his meeting with the plaintiffs Financial Controller Mr Gavera Bitu, on 15 March, 2006. He deposed that Mr Bitu had told him that he would give the defendant copies of those invoices. However, Mr Bitu in his affidavit sworn on 23 March, 2006 deposes otherwise. He denies what the defendant has deposed and also deposed that he did tell the defendant that he would give him copies of invoices if he found any. Mr Bitu deposes further that he has since, conducted a thorough search of the plaintiff’s records for the liquidation period between September, 2000 and May, 2001 and has not located invoices rendered by the defendant during that period. Furthermore, if those invoices were produced at the meeting of 17 May, 2001, where are they now? Clearly, throughout, the defendant’s evidence on the production of these invoices is very contradictory. Although in one breath he deposes that he has provided these invoices, in the same breath, he deposes that he is still searching for them, that he cannot locate them etc. This court finds itself in a position where it can rely only on credible evidence and will conclude that the defendant is lying.

67. It is not disputed that the defendant paid his own salaries. So, he should have issued invoices for services rendered. He was the liquidator. His records of the liquidation should be intact, and that would include invoices issued. He has not said why he has not kept copies, if he did issue them. I find that incredible indeed. He held a very important office and yet is unable to produce records, in this case, invoices. And additionally, as submitted by Mr Brooks, the defendant shall retain the accounts and records of the liquidation and of the company for not less than seven years after completion of the liquidation (see s. 306 (1) (b) of the Companies Act). And he has not been able to produce those records since termination of liquidation on 9 April, 2001 and the entering of the consent orders to produce (on 7 December, 2004). Those records should still be intact up to the 9 April, 2008. Section. 306 (1) (b) of the Companies Act reads;

68. At this time, the plaintiffs instructions to its lawyers are that the defendant overcharged and overpaid himself for the period worked. The plaintiff has asked for the defendants invoices, as it should. The defendant consented to providing certain invoices, endorsed by a court order, but has failed to produce those invoices. Although the defendant strongly contends that the Deed of Settlement authorized his being paid the extra monies, he should still substantiate these payments by the production of invoices. And he is unable to do that.

69. Furthermore, the events portrayed to me suggest that the defendant is somehow trying to avoid the production of these invoices. I have thoroughly set out the background to this application which shows that the defendant had on several occasions, misled the plaintiffs lawyers. Several of the events that I refer to are;

i. The defendant continuously misleading Gadens Lawyers by advising in writing and verbally that Namaliu’s and Henaos Lawyers were acting for him when they were not which resulted in Gadens Lawyers serving this present application on three (3) Law firms to avoid a situation where the defendant would say that neither he nor his lawyers were served.

ii. The defendant’s earlier advice to the plaintiff’s lawyers that the invoices were with Henao’s lawyers, when it is obvious now that they are not.

70. No doubt, the defendants inability to produce invoices is because he did not issue them. He was under an obligation to have kept invoices as records of the liquidation. He has not. Which means he did not issue any.

"The purpose of the power to strike out ... is to ensure that the proper conduct of litigation and the interests of justice are not defeated by the failure or refusal of parties to comply with procedural requirements. That being the purpose of the power, the court has a discretion whether to make any order under the rule. (see Gibson v Sykes (1884) 28 Sol J. 533; Treiguts v Tweedley [1959] VicRp 73; [1959] VR 544..

The power to dismiss proceedings or to strike out a pleading will not normally be exercised unless it is the only way to ensure compliance with the order (see Mosser v PGH Ceremics Pty Ltd (1964) 82 WN (Pt 1) (NSW) 147, and only in the case of a failure to comply "so insufficient as to show want of boni fides)...

Accordingly it will be inappropriate to make an order of dismissal under this rule;

(a) unless the court is satisfied that the plaintiff is endeavoring to avoid giving discovery;

73. The circumstances of this case confirms that the defendant is indeed avoiding giving discovery. Although he relies on the Deed of Release in submitting that payment to him is justified, he must and is required, to produce invoices which are part of records a liquidator must hold intact for seven (7) years from when liquidation ended. If he does not have these invoices, then he did not issue them. He has defaulted. In accordance with O.9 r.15 (1), his Defence must be struck out.

1. The defendants Defence filed on 22 August, 2002 is struck out;
2. That damages shall be assessed;
3. That this matter shall be referred to the listings court to be pre-trialed and when appropriate, a date be given for the hearing of the assessment of damages, interest and costs to be borne at the hearing for assessment of damages;
4. That the defendant shall pay the plaintiffs costs of this application including costs of the proceedings, not including the costs of the hearing on the assessment of damages.

Gadens Lawyers: Lawyer for the plaintiff/applicant
Steeles Lawyers: Lawyer for the defendant/respondent

National Court of Papua New Guinea

Motor Vehicles Insurance Ltd v Paki [2006] PGNC 130; N3212 (25 May 2006)