Walapali v Parindali [2007] PGNC 54; N3172 (16 January 2007)

N3172

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 933 OF 2006

BETWEEN:

MICHAEL WALAPALI, CHAIRMAN, KAYUMBA AND
URABI LAND GROUPS FOR AND ON BEHALF
OF HIMSELF AND ALL MEMBERS OF
KAYUMBA & URABI LAND GROUPS
AND KAYUMBA & URABI CLANS
First Plaintiff

TAKUBA KAYUMBA INVESTMENT LTD
Second Plaintiff

AND:

LIPE PARINDALI,
MANAGING DIRECTOR,
HUMAKO CONSTRUCTION LTD
& TOKAJU RESOURCES LTD
First Defendant

HUMAKO CONSTRUCTION LTD
& TOKAJU RESOURCES LTD
Second Defendant

LIPE PARINDALI,
Third Defendant

BANK SOUTH PACIFIC LTD
Fourth Defendant

THE SECRETARY,
DEPARTMENT OF
NATIONAL PLANNING & MONITORING
Fifth Defendant

THE INDEPENDENT STATE
OF PAPUA NEW GUINEA
Sixth Defendant

Waigani: Cannings J
2007: 12, 16 January

RULING ON MOTIONS

PRACTICE AND PROCEDURE – Motion to dismiss proceedings for failure to disclose reasonable cause of action and abuse of process – National Court Rules, Order 12, Rule 40 (frivolity etc) –Motion to remove parties – National Court Rules, Order 5, Rule 9 (removal of parties).

PRACTICE AND PROCEDURE – whether appropriate for proceedings commenced by originating summons to be continued by statement of claim and other pleadings – application for directions – National Court Rules, Order 4, Rule 31 (directions).

The plaintiffs claim that they are entitled to K4 million of public funds allocated for a road project to some of the defendants under a memorandum of agreement, to which a petroleum company, the State and various landowner groups are a party. The defendants want the proceedings struck out for disclosing no reasonable cause of action and being an abuse of process. The plaintiffs argue that they have a legitimate claim to the money, there is no abuse of process and they should be allowed to continue the proceedings, which were commenced by originating summons, by filing a statement of claim.

Held:

(1) Proceedings should only be struck out for disclosing no reasonable cause of action when it is clear that the plaintiff has a hopeless case, with little chance of success.

(2) Defendants should not be removed from proceedings if their interests will be directly affected by orders and other relief sought by a plaintiff.

(3) If a plaintiff is making a claim for a particular sum of money based on a contract or other legal document, such as a memorandum of agreement, the efficient disposition of the proceedings will often be aided by requiring the plaintiff to file a statement of claim, setting out the basis of the claim and allowing the case to proceed by pleadings.

(4) In the circumstances, it was not clear that the plaintiffs have a hopeless case as they apparently wish to argue that a memorandum of agreement has been breached and such a breach will constitute a cause of action.

(5) The first, second and third defendants’ interests will be directly affected if the plaintiffs obtain the relief sought in the originating process. Therefore, they ought not be removed as parties.

(6) The issues will be more clearly defined by requiring the parties to file pleadings in this case.

(7) Accordingly, the orders sought by the defendants’ motion were refused and the orders sought by the plaintiffs’ motion were allowed.

Cases cited

In the Land Titles Appeal No 90/101 [1993] PNGLR 310
Kiee Toap v The Independent State of Papua New Guinea, Electoral Commission of Papua New Guinea and Returning Officer/Assistant Returning Officer for Mendi Open Electorate (2004) N2731

NOTICES OF MOTION

This is a ruling on two motions, one by some of the defendants and another by the plaintiffs.

Counsel

I Mileng, for the plaintiffs
D Kop, for the defendants

1. CANNINGS J: Introduction: This case is about K4 million of public funds allocated for a road project in the Southern Highlands Province under a memorandum of agreement regarding the Hides Gas Project. An interdepartmental committee of the National Government recently allocated the money to a company said to represent one group of landowners. The plaintiffs say that the money should be allocated to them, as they are the principal landowners of the place the road is to be built. The plaintiffs commenced proceedings by originating summons, seeking a declaration that they are the authorised beneficiaries of the K4 million and that the money should be allocated to them.

2. Two motions are now before the court:

• a motion by the defendants to strike out the proceedings; and
  
• a motion by the plaintiffs to continue the proceedings by filing a statement of claim.
  

BACKGROUND

3. The K4 million at the centre of this dispute is part of K15 million of public money available for allocation to landowner groups for infrastructure projects in the Hides Gas Project area under an MOA. The parties to the MOA are Oil Search Ltd, the State and various landowner groups. The MOA is not in evidence but its existence and its nature seem to have been agreed on by the parties.

4. Ownership of land is not in dispute. Those issues were resolved by the findings of Amet J, as he then was, sitting as a land titles Commissioner in re In the Land Titles Appeal No 90/101 [1993] PNGLR 310.

5. Responsibility for allocating money under the MOA apparently rests with an interdepartmental committee called the Expenditure Implementation Committee (EIC).

6. The EIC apparently decided that K4 million be allocated for a road project, the Para-Komo Road. The plaintiffs say that they are the landowners in that area and that the project, and the K4 million, should be allocated to them. When they heard at the end of 2006 that the project and the money would be awarded to the first, second and third defendants they commenced proceedings against them in the National Court, known as OS No 780 of 2006.

7. Kapi CJ, sitting as a Judge of the National Court, dismissed those proceedings on 17 November 2006. At that stage the money had not been allocated and his Honour was satisfied that there was no current dispute about allocation of the money.

8. However, on 11 December 2006, the money was allocated, when an officer of the Department of Petroleum and Energy wrote to the first defendant, the managing director of the second defendant, Humako Construction Ltd, enclosing a cheque for K4 million.

9. The letter was under the letterhead of "Department of Petroleum and Energy, Office of the Secretary". It stated:

SUBJECT: EIC APPROVAL OF HIDES MOA PROJECT – CONSTRUCTION OF PARA KOMO ROAD

This is to advise you that the Expenditure Implementation Committee (EIC) met on the 09th of November 2006 and after a lengthy process of deliberations, have approved your project.

The EIC noted the difficulty in appraising all the MOA submissions due to landowner sensitivity, and could not invite tenders for competitive bidding to select the best bidder. However, EIC allocated funding based on past precedence and State MOA commitments as well as local political sensitivities. Your company was allocated K4,000,000 [K4 million] for CONSTRUCTION OF PARA KOMO ROAD.

The EIC has also expressed serious concern on landowner companies to efficiently implement projects, and therefore would require quarterly monitoring is done to ascertain project implementation on the ground. You are also duty bound to furnish progress reports to the EIC on a quarterly basis.

Your company has been fortunate to receive this funding and the onus is now on you to effectively implement the project. Future funding to the project would depend on your ability to effectively implement this project.

I thank you for your understanding and patience and wish you every success in your project implementation. Find attached a cheque numbered 14861 for K4,000,000 [K4 million] for this project.

Yours sincerely

[Signed]

Rendle Rimua

Officer In Charge

10. The plaintiffs commenced the current proceedings by OS No 933 of 2006 on 28 December 2006. They are seeking a declaration that they are the "duly recognised and authorised recipients" of the K4 million or an order that the money already allocated to the first, second and third defendants be "reimbursed" to them.

11. The case first came to court on 29 December 2006 when I granted interim orders ex parte (in the absence of the defendants) that put a freeze on the money that was said to be in the bank accounts of the first three defendants. The fourth defendant, Bank South Pacific Ltd, has complied with that order. The funds are frozen until further order of this court. The plaintiffs claim that before I made the freeze order, some of the money had already been misused. That is only an allegation at this stage. It is not something that has to be finally determined now.

12. The case came back to court on 12 January 2007 for hearing of motions by both the defendants and the plaintiffs. The protagonists, at this stage, are:

• the first, second and third defendants – the key person being third defendant, Lipe Parindali – represented by Mr Kop of Daniel Kop Lawyers; and
  
• the first and second plaintiffs – the key person being the first plaintiff, Michael Walapali – represented by Mr Mileng of Mileng Lawyers.
  

13. The fourth, fifth and sixth defendants – BSP Ltd, the Secretary for National Planning and Monitoring and the State – are not directly involved at this stage and were not represented at the hearing on 12 January 2007.

THE DEFENDANTS’ MOTION

14. The defendants’ motion, filed on 8 January 2007, is two-pronged. They seek:

• an order under Order 12, Rule 40 of the National Court Rules that the proceedings commenced by the plaintiff be dismissed in their entirety as they disclose no reasonable cause of action and are an abuse of process; or, in the alternative –
  
• an order under Order 5, Rule 9(a) of the National Court Rules that the first, second and third defendants be removed as parties.
  

Defendants’ submissions

15. As to the no reasonable cause of action point, Mr Kop, for the defendants, argued that the plaintiffs did not own the K4 million at any time. The money belonged to the State before it was released lawfully to the defendants pursuant to the MOA. Special support grants are allocated this way for other mining or petroleum projects, eg Porgera and Lihir. The EIC awards contracts to local landowner companies after it screens bids and examines the track record of the bidders. The EIC made its decision in this case as the defendants have a good track record. The K4 million in dispute is not royalty money that the plaintiffs or anybody else can claim ownership to. The awarding of contracts and allocation of funds under the MOA is a matter of discretion. The discretion rests with the EIC. It has exercised its discretion. The court should not interfere in the exercise of discretion. If it does that, the court will stand in the shoes of an executive body and take over its functions and the court will exceed its jurisdiction.

16. As to the alleged abuse of process, Mr Kop submitted that, if the plaintiffs had a cause of action, it was res judicata (already decided) by virtue of dismissal of the proceedings in OS No 780 of 2006.

17. As to the alternative order about removal of parties, the first, second and third defendants are only recipients of the money. They did not make the decision to allocate the money. It is only the decision-makers who should be subject to these proceedings, Mr Kop argued.

Plaintiffs’ submissions

18. Mr Mileng urged the court not to dismiss the proceedings as the plaintiffs had legitimate reason to complain that the EIC had not made its decision fairly. The plaintiffs are the landowners and had a legitimate expectation that they would be awarded development projects relating to their land. Mr Mileng submitted that Kapi CJ did not in OS No 780 of 2006 examine or make a decision on the merits of the plaintiffs’ claims so the matter is not res judicata.

19. All defendants should remain as parties. In particular the first, second and third defendants should remain, as they are the recipients of the money.

Order 12, Rule 40 (frivolity etc)

20. It states:

(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings—

(a) no reasonable cause of action is disclosed; or

(b) the proceedings are frivolous or vexatious; or

(c) the proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

(2) The Court may receive evidence on the hearing of an application for an order under Sub-rule (1).

21. The defendants rely on Order 12, Rules 40(1)(a) and 40(1)(c).

Is there no reasonable cause of action?

22. I summarised the tests to apply in Kiee Toap v The Independent State of Papua New Guinea, Electoral Commission of Papua New Guinea and Returning Officer/Assistant Returning Officer for Mendi Open Electorate (2004) N2731, as follows:

• If it is plain and obvious that the statement of claim, even if proved, will not entitle the plaintiff to what he is asking for, it is appropriate to strike out the proceedings on the ground that no reasonable cause of action is disclosed. But the procedure should be confined to cases where the cause of action is obviously and almost incontestably bad. The plaintiff should not be driven from the judgment seat unless the case is unarguable. (PNG Forest Products Pty Ltd and Another v The State and Genia [1992] PNGLR 85, National Court, Sheehan J.)
  
• If the statement of claim is so ambiguous or lacking in particularity that it does not facilitate orderly and rational pleadings, which would enable the real issues to be identified, it should be struck out. (Gabriel Apio Irafawe v Yauwe Riyong (1996) N1915, National Court, Kirriwom J.)
  
• If the statement of claim just leaves a defendant guessing as to what the plaintiff’s allegations are, it should be struck out. (Eliakim Laki and 167 Others v Maurice Alaluku (2002) N2001, National Court, Sevua J.) ...
  

Whenever a plaintiff brings a case to court, the originating document – in the present case, the writ of summons and statement of claim – must demonstrate that the plaintiff has a ‘cause of action’. The document must clearly set out:

• the legal ingredients or the elements of the claim; and
  
• the facts that support each element of the claim.
  

The plaintiff does not have to say what evidence there is of the facts being alleged. In fact, the National Court Rules prohibit that. But the plaintiff must outline the claim and demonstrate that it has a clear legal basis. If the plaintiff’s originating document does that, there is a reasonable cause of action. If not, it does not disclose a reasonable cause of action.

23. Those tests are particularly applicable to proceedings commenced by writ of summons, where there is a statement of claim that is required to set the parameters of the claim and the relief sought. The tests should be applied less strictly in the case of proceedings commenced by originating summons, as that form of originating process requires the plaintiff to focus on the relief sought more than the elements of the cause of action.

24. To test whether an originating summons discloses a reasonable cause of action it might be necessary to briefly consider the affidavits that have been filed. I have done that in this case and I think the plaintiffs’ case can reasonably be regarded as an action based on breach of the MOA.

25. Put another way, the plaintiffs are seeking to enforce rights and expectations conferred on them by the MOA. As I understand the plaintiffs’ case, they are saying that, as landowners in the area covered by the MOA they have a right to have decisions about allocation of projects and public money made fairly, in a way that gives effect to the MOA. They also appear to argue that they have a right, by virtue of their landowner status, to be allocated projects and money ahead of individuals and companies who are non-landowners; and they allege that the first, second and third defendants fit into that category.

26. Viewed in that light, it cannot be said that it is plain and obvious that if the case goes to trial the plaintiffs will not obtain the relief that they are seeking. The originating summons is not so ambiguous and lacking in particularity that it cannot enable the real issues to be identified. It does not leave the defendants guessing as to what the plaintiffs’ allegations are. The plaintiffs’ case is, as presently drafted, not so obviously untenable that it cannot possibly succeed.

27. Proceedings should only be struck out for disclosing no reasonable cause of action when it is clear that the plaintiff has a hopeless case, with little chance of success. This is, on the face of it, not such a case, especially in view of the impression I have gained from the affidavits filed so far of how the EIC made and implemented its decision to award K4 million to the second defendant, Humako Construction Ltd.

28. There is no evidence that the decision was made in a careful, considered manner or even that the deliberations of the EIC were documented. At this stage all that the court knows is that an officer of unknown rank within the Department of Petroleum and Energy sent a letter to the second defendant to notify it that its project has been "approved".

29. Other matters for concern are that it appears:

• no tenders were called;
  
• the reasons given for allocating the project to the second defendant – difficulties in appraising all submissions due to landowner sensitivity and funds allocated based on political sensitivities – are alarming;
  
• the successful bidder was given a cheque for K4 million up-front, without doing any work;
  
• no contract was entered into;
  
• the bidder was simply asked to furnish progress reports on a quarterly basis.
  

30. Allocating public money in this way seems irresponsible. It may be contrary to the Public Finances (Management) Act. It could be in breach of the MOA. It gives the appearance of being a sham or a scam.

31. The court cannot bury its head in the sand when matters like this come before it. The power to dismiss proceedings for failing to disclose a reasonable cause of action is a discretionary one. The court has to look at all the circumstances of the case that have become known.

32. I will therefore refuse the motion to dismiss the proceedings under Order 12, Rule 40(1)(a).

Abuse of process?

33. I have considered the transcript of the proceedings before Kapi CJ on OS No 780 of 2006 on 17 November 2006. Mr Mileng was correct in submitting that his Honour did not address the merits of the claim. Mr Kop represented Mr Parindali in those proceedings and gave his Honour the impression that there was no dispute. That is why it was dismissed. A few weeks after that, the dispute – which was nascent on 17 November 2006 – crystallised when the money was allocated to Humako Construction Ltd.

34. The subject matter of the current proceedings is not res judicata. It was disingenuous of Mr Kop to submit that it is.

35. I will refuse the motion to dismiss the proceedings under Order 12, Rule 40(1)(c) of the National Court Rules.

Order 5, Rule 9

36. It states:

Where a party—

(a) has been improperly or unnecessarily joined; or

(b) has ceased to be a proper or necessary party,

the Court, on application by any party or of its own motion, may, on terms, order that he cease to be a party and make orders for the further conduct of the proceedings.

37. I can see no merit in the part of the defendants’ motion that relies on this rule. I cannot understand why the first, second and third defendants would want to be removed.

38. Defendants should not be removed from proceedings if their interests will be directly affected by orders and other relief sought by a plaintiff.

39. At the heart of this case is the question of who should be given the job of building the Para-Komo Road and who should get K4 million for building it. The first, second and third defendants have already got the money but apparently have not spent it all. They stand to lose considerably if the substantive issues are decided against them.

40. I will refuse the motion to remove the first, second and third defendants under Order 5, Rule 9(a).

PLAINTIFFS’ MOTION

41. The plaintiffs’ motion, filed on 11 January 2007 seeks an order in the form of directions to allow them to file and serve a statement of claim.

Plaintiffs’ submissions

42. Mr Mileng submitted that this would allow the issues to be defined more clearly.

Defendants’ submissions

43. Mr Kop did not address this motion in detail in view of the emphasis he gave to the first motion (which is refused) about dismissing the proceedings.

Order 4, Rules 31 and 35

44. Order 4, Rule 31 (directions) is the rule relied on in the notice of motion. It states:

(1) The Court may exercise its powers under this Rule at any time after the commencement of the proceedings.

(2) The Court shall give such directions as are convenient for the just, quick and cheap disposal of the proceedings.

(3) Without limiting the generality of Sub-rule (2), the Court may—

(a) make orders for defining the issues by pleading or otherwise; and

(b) direct that the whole or any part of the evidence be given on affidavit or orally; and

(c) make any orders relating to the conduct of the proceedings which it might make on motion by a party.

Order 4, Rule 35 (continuation of pleadings) is also relevant. It states:

(1) The Court may order that the proceedings continue on pleadings.

(2) The Court may, on or after making an order under Sub-rule (1)—

(a) order that any affidavits stand as pleadings; or

(b) make orders for the filing of a statement of claim or other pleadings.

(3) The provisions of these Rules concerning proceedings commenced by writ of summons shall, except as far as the Court otherwise orders, and except so far as the context or subject matter otherwise indicates or requires, apply to proceedings ordered under this Rule to continue on pleadings.

Directions appropriate?

45. I agree with Mr Mileng’s submission that this is the sort of matter that lends itself to being continued on pleadings. This is the best way for the issues to be defined. If a plaintiff is making a claim for a particular sum of money based on a contract or other legal document, such as a memorandum of agreement, the efficient disposition of the proceedings will often be aided by requiring the plaintiff to file a statement of claim, setting out the basis of the claim and allowing the case to proceed by pleadings. That will mean that the defendants will have the opportunity to file a defence. Once the pleadings are closed the matter can be set down for trial.

46. I will make appropriate orders under Order 4, Rules 31(2), (3)(a), 35(1) and 35(2)(b).

INTERIM ORDERS

47. There being no motion to vary or discharge the interim orders of 29 December 2006, those orders will continue until further orders.

COSTS

48. Both aspects of the defendants’ motion have been refused and the orders sought in the plaintiffs’ motion have been granted. It is therefore appropriate that the plaintiffs have the costs of the proceedings of 12 January 2007.

ORDERS

1. the orders sought in the first, second and third defendants’ motion of 8 January 2007 are refused;
   
2. the plaintiffs shall file and serve a statement of claim, particularising their cause of action, by 23 January 2007;
   
3. the defendants shall thereafter be at liberty to file a defence and the proceedings shall continue on pleadings;
   
4. the provisions of the National Court Rules concerning proceedings commenced by writ of summons shall from now on apply to these proceedings;
   
5. the first, second and third defendants shall pay the plaintiffs’ costs of the proceedings of 12 January 2007, irrespective of the outcome of the substantive proceedings, on a party-party basis, to be taxed if not agreed.
   

Ruling accordingly.
_________________________

Mileng Lawyers: Lawyers for the plaintiffs
Daniel Kop Lawyers: Lawyers for the defendants