Kope v Tourism PNG Ltd [2006] PGNC 146; N3175 (8 December 2006)

N3175

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 274 OF 2002

BETWEEN:

DOBIAM KOPE
First Plaintiff

AND:

EVELYN KOPE
Second Plaintiff

AND:

MAURICE KOPE
Third Plaintiff

AND:

Tourism PNG Limited
First Defendant

AND:

TO’ORO AIHI
Second Defendant

AND:

JOHN T WILD
Third Defendant

Waigani: Kandakasi, J.
2006: 20 March
8 December

CAUSES OF ACTION – Claim against shareholders of a company and an employee - Separate legal/corporate personality of company considered – No basis to go behind the corporate veil – Unless basis to go behind the corporate veil is disclosed, there can be no cause of action against a shareholder and or an employee - No cause of action against company employee and shareholder disclosed – Trial appropriate mode to resolve serious contested issue of whether employer in breach of statutory and or common law duty – Summary judgment procedure inappropriate remedy - Section 16 of the Companies Act 1997 – Order 12 r. 40.

COMPANY LAW – Company has separate legal/corporate personality from shareholders and employees – Unless basis to go behind the corporate veil is disclosed, there can be no cause of action against a shareholder and or an employee - No cause of action against company employee and shareholder disclosed - Claim against shareholder and employee dismissed – Section 16 Companies Act 1997.

EMPLOYMENT LAW – Injury to worker in criminal attack – Employer failing to give required notice for compensation under Worker’s Compensation Act – Consequence of – Employer liable to be sued for compensation in addition to damages at common law - Section 41, 42, 82 and 84 of Workers Compensation Act.

PRACTICE AND PROCEDURE – Application for summary judgment – Available only in the clearest of cases –Trial appropriate mode to determine whether employer in breach of statutory and or common law duties when it is seriously contested – Summary judgment procedure not available – Order 12 r. 40 of the National Court Rules.

Case Cited:

Papua New Guinean Cases:

Karawari Lodge v. Bernard Luck (05/06/98) SC553.
Eki Investments Limited v. Era Dorina Limited (decision 06/12/06) WS. 1063 of 2003.
Odata v. Ambusa Copra Oil Mill and National Provident Fund Board (06/07/01) N2106.
Work Cover Authority of NSW v. Placer (PNG) Exploration Limited (13/03/06) N3003.
The State v. Graham Yotchi Wyborn (20/07/04) N2847.
Jim Trading Limited v. Bank South Pacific Limited & Ors (decision delivered on 03/11/06) WS 145 of 2003.
Andrew Daiva and Ome Ome Forests Ltd v. Lawrance Pukali & Anor; Ome Ome Forests Ltd v. Ray Cheong & Ors (08/10/02) N2289.
Kerry Lerro trading as Hulu Hara Investments Limited v. Philip Stag, The State & Ors (20/04/06) N3950.
Tau Gumu v. Papua New Guinea Banking Corporation (07/12/01) N2288.
Tau Gumu v Papua New Guinea Banking Corporation Limited (26/04/02) N2251.

Overseas Cases:

Salomon v. Salomon & Co. Limited [1897] AC 22.

Counsel:
Mr. G. Poole, for the Defendant/Applicant.
Mr. D. Kombagle, for the Plaintiff/Respondent.

8 December, 2006

1. KANDAKASI J: I have before me an application pursuant to Order 12 r. 40 of the National Court Rules (the Rules) by the defendants for a dismissal of the plaintiffs’ claim for failure to disclose a reasonable cause of action. The plaintiffs are of course opposing the application and submit that they have a cause of action against each of the defendants.

Background

2. The plaintiffs are claiming damages under several heads of damages, including exemplary damages for the defendants’ failure to provide a safe system of work. The claim arises out of a criminal attack of a lodge owned and operated by the first defendant. The lodge is located at Woitape in the highlands of the Goilala area of the Central Province. The plaintiffs allege that the lodge was open to criminal attack given past criminal activities in the area and as such, the defendants should have provided for more security in addition to having constructed a 1.6 meter fence and employing one unarmed man as security guard. The plaintiffs further allege that as a result of the defendants’ failure, a criminal attack took place and the defendants suffered various loss and damages including personal injuries. They also claim that, the defendants did not maintain and failed to lodge workers compensation insurance and claims under the Workers Compensation Act.[1] In the circumstances, the plaintiff alleged that, the defendants failed to discharge their duty at common law to provide a safe system of work and also their statutory duties under Workers Compensation Act.

3. The defendants deny the plaintiffs’ claims and raise a number of points. First, they refer to the decision of the Supreme Court in Karawari Lodge v. Bernard Luck,[2] where the Court in a similar case reversed a National Court decision holding the appellant liable for injuries occasioned to the respondent in a situation similar to the present one. In so doing, the Supreme Court held that an employer is not liable to its employees for the intentional harm and injury caused by criminal elements. The plaintiff submits, that case is distinguishable from the present.

4. Secondly, the defendants say further or in the alternative that, there is no proper or legal basis for the plaintiffs’ to sue the second and third defendants. The defendants point out that, the second defendant is an employee of the first defendant as its chief executive officer, while the third defendant is only a shareholder of another company which is a majority shareholder in the first defendant company. As such, the defendants argue that the second and third defendants have been wrongly named and in any case, there is no cause of action disclosed against them.

5. Finally, the defendants point out that the first defendant is also wrongly sued before this Court. They submit that the plaintiffs should have proceeded under s. 82 of Workers Compensation Act by going before the Worker’s Compensation Tribunal. Accordingly, the defendants are arguing for a dismissal of the plaintiffs’ claim on the basis that, it does not disclose a reasonable cause of action and or the matters pleaded are frivolous and vexatious.

Relevant Issues

6. The different positions taken by the parties present a number of issues for this Court to determine. The main issue is whether, there is a disclosure of a cause of action against each of the defendants? In order to determine that issue, it will be necessary to consider the following three issues first:

(a) Whether this is an appropriate case for the lifting of the corporate veil of the first defendant so as to enable the plaintiffs to sue the second and third defendants who are respectively an employee and a shareholder of another company that owns majority of the shares in the first defendant?

(b) Whether the Workers Compensation Act applies and the defendants are correctly sued?

(c) Whether this case is distinguishable from the case of Karawari Lodge v. Bernard Luck?

7. I will deal with the first issue on its own first. I will then deal with the last two issues jointly as both concerns the conduct of the defendants.

Evidence and facts

8. Before proceeding to deal with the issues presented, it is necessary to outline the evidence and the relevant facts emanating from them. Accordingly, I note that, in support of their application, the defendants have filed and relied on the affidavits of To’oro Aihi sworn on 29 August 2005 and filed on 20 September 2005 and Ivoro Eve sworn on 19 August 2005 and filed on 27 October 2005. The plaintiffs have in their response filed and relied on the affidavits of Dobaim Kope, Evelyn Kope and Vincent Meia all sworn on 20 November 2002 and filed on 12 June 2003.

9. Without departing from their arguments against the naming of the second and third defendants, the defendants say with the support of their affidavits that, they did provide a safe system of work for the plaintiffs and have thus not failed in their duties to do so. By way of specifics, the defendants say that the lodge owned and operated by the first defendant was and is located at a very peaceful place where there has never been any history of criminal attack on the lodge, its employees and or its guests. They point out that, they nevertheless built a 1.6 meter high parameter fence and employed a single unarmed security guard which they say was sufficient for security purposes. The plaintiffs say the opposite.

10. The evidence discloses that the second defendant is an employee of the first defendant as its chief executive officer, whilst the third defendant is a shareholder of another company that owns a majority of the shares in the first defendant.

Naming and suing the second and third defendants

11. I will deal first with the issue of the propriety of naming and suing the first and second defendants. As I just said in the case of Eki Investments Limited v. Era Dorina Limited,[3] one of the essential attributes of a company is its separate legal or corporate personality, which it acquires upon registration. That attribute has a long history. It dates back to the often cited case of Salomon v. Salomon & Co. Limited.[4] That case is authority for the proposition that, a company is distinct and separate from its shareholders unless the corporate veil can be lifted.

12. Again as I said in the Eki Investments Limited case, s.16 of the Companies Act 1997 codifies that long established legal position in these terms:

"A company is a legal entity in its own right separate from its shareholders and continues in existence until it is removed from the register."

13. As earlier note, there is an exception to the above rule. In certain circumstances, the corporate veil can be lifted. I outlined the circumstances in which that can be done in Odata v. Ambusa Copra Oil Mill and National Provident Fund Board.[5] Apart from my own decisions, Odata has been cited and applied with approval in a number of cases as for example in Work Cover Authority of NSW v. Placer (PNG) Exploration Limited,[6] and The State v. Graham Yotchi Wyborn.[7]

14. As was in the Eki Investments Limited case, there is no submission by the plaintiffs here that, one or more of the circumstances outlined in Odata’s case exists here to warrant a lifting of the corporate veil of the first defendant in order for the plaintiffs to name and sue the second and third defendants in the particular circumstances of this case.

15. In my recent decision in the case of Jim Trading Limited v. Bank South Pacific Limited & Ors,[8] I observed that, it has become a matter of course for lawyers who draw up pleadings on behalf of plaintiffs these days to name all sorts of parties as defendants without first ensuring that their clients do have a course of action against them. I then referred to what I said in Andrew Daiva and Ome Ome Forests Ltd v. Lawrance Pukali & Anor; Ome Ome Forests Ltd v. Ray Cheong & Ors.,[9] in the context of the liability of a company. There I said:

"The company can only be liable for the acts of its employees if they act in the course of their employment pursuing their employers (the company’s) interest. If they are out on a frolic and detour of their own they could become personally liable."

16. I then consider what this could mean and said:

"This means where an employee or an officer of a company is in the course of his employment pursing his employer or principal’s business or interest and incurs a liability, that liability becomes that of the company or the principal. The correct party should therefore, be the company or the principal and not the employee or the officer. If however, the employee or the officer goes out on a frolic and detour of his own and incurs any liability, that employee becomes personally liable and is therefore the correct party to be named and not the company."

17. Applying these principles to the present case, I note that the plaintiffs have not pleaded anywhere in their statement of claim that the second defendant did engage in a conduct that was not pursing or furthering the cause and or interest of the first defendant so as to make him personally liable. The evidence clearly shows that the second defendant was at all relevant and material times an employee of the first defendant carrying out his duties and responsibilities as an employee of the first defendant.

18. As for the naming of the third defendant, the pleadings and evidence confirm that the third defendant was at all material times, the chief executive and a shareholder of Airlines PNG, formerly MBA limited, which is the majority shareholder of the first defendant company. The plaintiffs are therefore effectively suing the third defendant despite two separate corporate seals in front of him. As with the second defendant, the plaintiffs have not pleaded any foundation for going behind the two corporate seals to name and sue the third defendant.

19. In the circumstances, I find that the plaintiffs have not laid any foundation in the pleadings for them to name and sue the second and third defendants. Clearly, the plaintiffs have named the second and third defendants in total ignorance if not in deliberate disregard of the separate corporate personality of the first defendant. Further, the plaintiffs have not disclosed any cause of action against the second and third defendants. In my view, the actions of the plaintiffs amount to an abuse of the Court’s process. Furthermore, I find that the claims as against the second and third defendants are indeed frivolous and vexatious. Accordingly, I order a dismissal of the claims against these defendants with costs against the plaintiffs leaving only the first defendant to face the plaintiffs’ claim. Thus, all reference to the defendant from hereon will be the first defendant only.

Application of Karawari Lodge v. Bernard Luck

20. Of the two remaining issues, I am of the view that, the issue of whether this case is distinguishable from the case of Karawari Lodge v. Bernard Luck is the easiest to resolve. So I turn to that issue first. I accept the plaintiffs’ submission that, in that case, there was no history of any prior criminal attacks. I also accept the plaintiffs’ submissions that the injured employee in that case was paid workers compensation. The issue of provision of armed security guards was discussed between the employee and his employer and an armed security guard was subsequently employed.

21. Whether the facts in this case are similar or different from the Karawari Lodge v. Bernard Luck is dependant upon a finding of the relevant facts. In this case, the facts are very much in contest between the parties. Despite that, the defendants have applied for a summary dismissal of the plaintiffs’ claims against them. The law is very clear, where the facts are very much in issue between the parties, it must be resolved by a trial. The summary procedures under the rules are there for a party to use only in the clearest of cases. I recently discussed and summed up the relevant legal position in the case of Kerry Lerro trading as Hulu Hara Investments Limited v. Philip Stag, The State & Ors.[10] Accordingly, I find that this is not an appropriate case to be resolved by summary judgment but by trial. I would therefore decline to sign judgment for the defendants on this basis.

Naming and cause of action against the first defendant

22. This now leaves me to deal with the remaining question of whether the first defendant is correctly named as a party given the provisions of the Workers Compensation Act? Recapping the arguments of the parties, the plaintiffs claim that, the defendants failed to give the required notice under the Workers Compensation Act. As such, they claim that, they are entitled to bring the action against them. On the other hand, the defendants argue that if the plaintiffs did in fact suffer injury of the type compensable under the workers compensation legislation and the defendants are in default of the obligation to keep current cover, the Plaintiff’s remedy is clearly set out in section 82 of the Workers Compensation Act.

23. Relying on s. 82, the defendants argue, first, that the plaintiffs may be entitled to bring a claim to the Tribunal under the Workers Compensation Act and that the Insurance Commissioner could join in. Secondly, they argue that if the Tribunal at the hearing is satisfied, it may make an award and if it cannot be met because of lack of insurance, it can order that the short fall be paid from the Fund and the Registrar of Workers Compensation may then take action against the defaulting employer and recover the funds he has outlaid. Finally, the defendant argues that there is thus no right in the plaintiffs to seek damages for breach of statutory duty from the employer. If they have a claim, it is to be brought before the Tribunal and that is the end of it.

24. Section 82 starts of with the phrase "Where - (a) an award of compensation is made or has been made under this Act or the repealed Act..." It is thus clear to me that, that provision comes into play only after an award has been made. The entitlement and the right to make and maintain a claim for compensation under the Act is governed by the other provisions of the Act. Most importantly, s.41 (2) provides that:

"... proceedings for recovery under this Act of compensation are not maintainable unless – (a) notice of injury has been given as soon as practicable and ... the claim for compensation ... has been made within 12 months after the occurrence of the injury ..."

(Emphasis supplied)

25. Then subsection (5) provides that notice must be given to the employer. Once the employer has notice or knowledge of the employee’s injury or death in the case of a death, the employer is required by s.42 to give notice in a prescribed form to the Registrar. This must take place within 7 days from the date of the occurrence of the injury or death as the case might be or where the employer has no immediate knowledge of the injury or death within 7 days from the date the employer becomes aware.

26. In this case, it is clear from the facts that, the plaintiffs notified the defendant (employer) almost immediately after the criminal attack on them. The plaintiffs claim and the evidence seem to suggest that, the defendant did not give the required notice to the Registrar. It also seems that, by reason of the defendant’s failure to give notice, the plaintiffs have not made a claim. Hence, no award appears to have been made to bring into operation the provisions of s. 82 as is argued for by the defendant.

27. A situation as in the present case arose in the case of Tau Gumu v. Papua New Guinea Banking Corporation.[11] There the plaintiff was injured in the cause of his employment with the defendant. The defendant was aware of the plaintiff’s injuries. However, the defendant did not give any notice under s. 42 of the Workers Compensation Act. The plaintiff was of the view that, his then employer had given notice of his claim. However, well after the expiry of the statutory time limit of 6 years under the Fraud and Limitations Act, the plaintiff became aware that, his then employer did not give the required notice.

28. By reason of the lack of notice under s.42, the plaintiff was not able to bring a claim under the Workers Compensation Act. Upon becoming aware of the defendant’s failure, the plaintiff issued proceedings seeking damages against the defendant for amongst others, its failure to give the relevant and required notice under the Workers Compensation Act. The defendant applied to dismiss the proceedings for being time bared. I refused the application and held amongst others that, the plaintiff was entitled to sue the defendant for its failure to give the required notice under the Worker Compensation Act. In so holding, I was of the view that, the plaintiffs time started to run from the date he became aware of the defendant’s failure to give notice of his claim under s. 42 of the Workers Compensation Act. Going by that view, I found that the plaintiff was within time.

29. Subsequently, the matter went before my brother Gavara-Nanu J. This was on the plaintiff’s application for summary judgment on the basis that there was no valid defence against the plaintiff’s claim, following the defendant’s failure to give the required notice under s. 42 of the Workers Compensation Act. In his decision in Tau Gumu v. Papua New Guinea Banking Corporation Limited,[12] His Honour Gavara-Nanu J., upheld the plaintiff’s application and entered summary judgment against the defendant.

30. In the present case, the plaintiffs’ claim that, the defendant failed in its common law duty to provide a safe system of work. They also claim that the defendant did not have in place insurance covers and lodge a claim for their compensation under the Workers Compensation Act. As for the claim based on the Workers Compensation Act, I am of the view that the issue has been determined by the two decisions in the Tau Gumu case, which say that, where an employer having notice or knowledge of an injury or death occasioned to an employee fails to give the required notice under s. 42 and the employee misses out on the compensation, the employee can sue the employer for damages. We have the same situation in the present case. I am thus of the view that the plaintiffs are entitled to sue the defendant for its alleged breaches of its duties and or obligations under the Workers Compensation Act.

31. Further, as noted earlier, the plaintiff is also claiming that the defendant breached its common law duty to provide a safe system of work. Provisions of the Workers Compensation Act such as s. 84 do allow for injured employees to sue for damages independent of the Act. The only obligation the injured worker must be ready to discharge is to reimburse any payment he or she may have received in compensation under the Act in the event of a successful claim for damages and an award is made. In the present case, this issue does not arise because no award has been made under the Workers Compensation Act because of the defendant’s failure.

32. Having regard to the foregoing, I find that the defendant either has no proper understanding of the applications of the relevant provisions of the Workers Compensation Act, in so far as they apply to it as an employer or that it has taken a deliberate evasive or difficult approach to the claim against it. This is evidenced by the defendant’s own submission based on s. 82 of the Act and the kind of position it has taken in relation to the pleadings such as paragraph 10 and 16 of the Statement of claim.

33. In the circumstances, I find that, the plaintiffs have correctly proceeded against the remaining defendant in the way they have. They have in their pleadings disclosed a reasonable cause of action against the defendant. That cause of action needs to be properly tried in the normal way and determined in the light of the contest on the relevant facts giving rise to the claim. Accordingly, I dismiss the defendant’s application seeking a dismissal of the action as against the first and only remaining defendant. I order costs of that part of the application to be paid by the first defendant. I further order that the parties take the necessary steps to have the matter listed for trial without delay, for which purpose, I order that this matter be placed on the first available mentions date in the Listings and ADR Court. Further I order an abridgment of time for the entry of the orders.

_________________________________

O’Brien Lawyers: Lawyers for the Defendant/Applicant.
Parua Lawyers: Lawyers for the Plaintiffs/Respondents.

---

^[1] Chapter 179 as consolidated to 1990
^[2] (05/06/98) SC 553.
^[3] (decision 06/12/06) WS. 1063 of 2003.
^[4] [1897] AC 22.
^[5] (06/07/01) N2106.
^[6] (13/03/06) N3003, Lay J.
^[7] (20/07/04) N2847, per Salika J.
^[8] (decision delivered on 03/11/06) WS 145 of 2003.
^[9] (08/10/02) N2289 at pp 27-28.
^[10] (20/04/06) N3950.
^[11] (07/12/01) N2288.
^[12] (26/04/02) N2251.