Awesa v PNG Power Ltd [2014] PGNC 114; N5708 (4 August 2014)

N5708

[PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS. NO. 528 of 2012

BETWEEN

ALEX AWESA on behalf of himself and NANCY AWESA
Plaintiff

AND

PNG POWER LIMITED
Defendant

Waigani: Kandakasi, J.
2014: 03rd June
04th August

EVIDENCE – Kind of evidence to be tendered and relied upon to argument against sanctions for "bad faith" at mediation – Affidavit to come from responsible officer in the case of an incorporated entity – Such evidence must disclose kind of advice provided and instructions sought, issued and or obtained prior to and after order for mediation and following issuance of "bad faith" certificate – Affidavits must contain only facts and not opinions, arguments and submissions.

MEDIATION – Effect of orders for mediation – Case is appropriate for resolution by mediation - No issue warranting only judicial consideration and determination presented - Parties duties and responsibilities – A party failing to proceed with court ordered mediation - Consequence of - "Bad faith" – Consequence of - Need to provided reasonable explanation and disclose existence of meritorious issue warranting only judicial consideration and determination identified at mediation – Relevant facts to be disclose in affidavit from relevant and appropriate officer in the case of a corporate entity – Failure to – Effect of – Conduct amounting to contempt of court and now issue warranting trial presented – Appropriate orders –Judgment and or orders due against defaulting party.

LAWYERS - Duties and responsibilities of lawyers in mediation – Lawyers to appropriately advice clients of nature of their cases, appropriate form of dispute resolution to use and seek appropriate instructions from clients – Based on instruction either apply for orders for mediation or to proceed with litigation if matter inappropriate for mediation – Need to advice client and secure and secure appropriate instructions to proceed with court ordered mediation – Ensure self and client comply with orders for mediation – Duties of lawyers following certificate of "bad faith" – Advice client of its meaning and consequence - Seek and secure instructions and evidence demonstrating reasonable explanation for conduct leading to such a certificate – Failure and effects of – No issue warranting judicial consideration and determination presented.

Papua New Guinea Cases cited

Koitaki Plantations Ltd v. Charlton Ltd trading as Kookabura Meats & Stuart Fancy (2014) N5656.
Hargy Oil Palm Ltd v. Ewase Landowners Association (2013) N5441
Abel Constructions Ltd v. W.R. Carpenter (PNG) Ltd (2014) N5636
PNG Ports Corporation Ltd v. Canopus No 71 Ltd (2010) N4288
POSF Board v. Sailas Imanakuan (2001) SC 677
NCDC v. Yama Security Services Pty Ltd (2003) SC707
PNG Power Ltd v Ian Augerea (2013) SC1245
Geoffrey R.E. Vaki v. Gari Baki & Ors (2014) N5612
Rage Augera v. Bank South Pacific Ltd (2007) SC869
Credit Corporation (PNG) Ltd v. David Nelson (2011) N4368
Fly River Provincial Government v. Pioneer Health Services Ltd (2003) SC705
Tian Chen Ltd v. The Tower Limited (No.2) (2003) N2319

Counsel:

A. Ona, for the Plaintiff
D. Dusava, for the Defendant

04th August, 2014

1. KANDAKASI J: This is one of the four (4) cases in which a single question has arisen before me for the first time under r.10 (7) of the Rules Relating to the Accreditation, Regulation, and Conduct of Mediators promulgated on 30th March 2010 (the ADR Rules).

Question

2. The question is this. What is an appropriate sanction for a party's "bad faith" at mediation? My decision in Koitaki Plantations Ltd v. Charlton Ltd trading as Kookabura Meats & Stuart Fancy[1], addresses the question in detail. Hence, I will allow myself to be guided by that decision particularly in relation to the legal principles discussed and set out in that case. Of course the application of the legal principles to this case will be varied to suit the particular facts of this case.

Background

3. Turning than to the background leading to the question presented in this case, simple. According to a file endorsement, I note that the need for a mediated outcome in this matter first came up before Sawong J., on 7th September 2012. On that occasion, His Honour directed the parties to seek the assistance of the ADR Services of the Court. After some to and froing about out of court settlement through the parties own direct negotiations which failed to produce any settlement, the Court finally made formal orders for mediation on 29th September 2013. The terms of the order were:

"1. Pursuant to section 7B (2) of the National Court Act and Rule 5(2) (a) of the ADR Rules, this matter is referred to internal mediation by an accredited mediator.

2. Accredited mediator, the Deputy Chief Justice Gibbs Salika is appointed to conduct the mediation in co-mediation with a provisionally accredited mediator assigned by the Acting Assistant Registrar – ADR (AAR-ADR) by no later than 18th December 2013.

3. The parties and if applicable, their lawyers shall also by 10th December 2013 notify the AAR-ADR, of their respective currently functional telephone numbers (land and mobile) and email and mailing addresses.

4. The parties shall pay the mediation services fees per Schedule 3 of the ADR Rules into Consolidated Revenue by 19th December 2013 and provide by both facsimile and email a copy of the receipt to the AAR-ADR and deliver to the mediators the original at the commencement of the mediation process.

5. Provide term 4 of these orders are met, the mediation shall commence with a preliminary intake on 20th January 2014 and conclude with a final mediation conference by no later than 31st January 2014 and in any event shall not exceed 2 months from the date of this orders.

6. The venue for the mediation is the ADR Centre, at the Waigani, National Court or such other venue as the parties and the mediators may agree.

7. During the mediation process, the parties must be represented by a person with full capacity and authority to settle the proceeding who must come prepared with the relevant and necessary instructions and material required at mediation and negotiate in 'good faith.'

8. A failure to comply with all or any of these orders may be taken to mean lack of 'good faith' for the purposes of Rule 10 (7) against the defaulting party.

9. The proceeding shall return to Court on 4th February 2014 whereupon the Court may endorse any agreement of the parties either with or without modification for the finalizing of the proceedings or make such orders and issue such directions as are necessary to expedite the matter to trial if not fully resolved by mediation or deal with any noncompliance of these orders and expedite the matter to trial or as the case might be.

10. The time for entry of these orders is abridged to the time of settlement by the Registrar which shall take place forthwith."

4. At the time of making the orders, I was of the view that, the case did not present any issue that warranted only a judicial consideration and determination. As can be noted from the terms of the orders for mediation, the learned Deputy Chief Justice, Sir Gibbs Salika who is an accredited internal mediator was appointed as the mediator. This meant that, the parties had nothing more to pay than just the mediation service fees under Schedule 3 of the ADR Rules.

5. The orders for mediation fixed the mediation to commence on 20th and conclude on 31st January 2014. Mediation did not take place on the dates fixed by the Court. Instead, the mediator fixed 25th March 2014 for the mediation to occur. Alex and Nancy Awesa (the Awesas) turned up for the mediation with their lawyer. Sir Gibbs and his co-mediator Ms Lanna Assaigo facilitating also turned up. However, PNG Power and its lawyer failed to turn up. This forced the mediator and his co-mediator to adjourn to a date to be confirmed later after ascertaining a convenient date for everyone involved, particularly PNG Power and its lawyers. Eventually, 3rd April 2014, was fixed for mediation to take place. Again, the Awesas with their lawyer turned up ready to proceed with the mediation. But PNG Power and its lawyer continued with their failure to turn up for the mediation. That forced another postponement with no date fixed as PNG Power and its lawyer failed to cnfirm a convenient date. After waiting in vain for PNG Power and its lawyer to confirm a new date, the mediators on 22nd May 2014, issued a certificate of "bad faith" in Form 1 of the ADR Rules.

6. Upon return of the matter following the certificate of "bad faith", I directed the parties to make their respective submissions as to what should occur under r. 10 (7) of the ADR Rules. I also directed the parties to file affidavits of any evidence they wish to rely upon in support of their respective submissions. On 03rd June 2014, the matter returned before me and counsel for both parties made their respective submissions.

7. Counsel for PNG Power, Mr. Dusava deposed to an affidavit but had not had it filed. He sought to have it handed up in Court. The Court granted him leave to avoid further unnecessary delay. The affidavit he handed up had a number of defects. One of the most glaring one was a failure to enter the date when the deponent deposed to the affidavit. This would usually be stated in the first opening line of an affidavit, but it's not there. Another, is that, the affidavit contains submissions and or arguments. Notwithstanding this and some other defects in the affidavit, I will take into account the factual matters that are set out therein, in the light of no serious objection from the Awesas.

8. In an attempt to explain his client's failure to attend mediation on the more than two occasions, Mr. Dusava makes reference, first to PNG Power not giving him instructions to settle the matter. By reason of that, he says, he had no authority to settle the matter, a fact he says he communicated to the Awesas through their lawyer. Secondly, he says, as he had been on duty travel and was not able to organize the prescribed mediation service fees under Schedule 3 of the ADR Rules. Given that, he goes onto saying, he and his employer were not able to turn up for mediation on the first appointed date. Thirdly, for the failure to attend on the second appointed date, Mr Dusava gives the same reason as for the nonattendance on the first appointed date. Fourthly, for none attendance on the third and final date, he says, he and the Awesas' lawyers were to agree on a date but were not able to do so, with giving any reason as to why they were not able to agree. That resulted in the issuance of the certificate of "bad faith". Finally, he argues that, this case presents legal issues which require a court hearing and determination. Those issues he says, concerns the interpretation of a lease agreement coupled with a question of whether a termination of the lease agreement entitles the Awesas to recover damages. He then refers to the Fairness of Transactions Act and says, there are some questions concerning the application of the provisions of that Act. In neither case, counsel does not depose to any specific parts or provision of the lease agreement or the Fairness of Transactions Act with specifics as to questions, if any, arising and how they arise. Similarly, he does not depose as to how such unspecified questions warrant only a judicial consideration and determination. He also fails to depose, as to how such questions were not identified before, or, at the time the Court ordered the matter to go to mediation. Further, if however, they were identified and presented to the Court before the order for mediation, he fails to indicate, how did the Court ignore or get around any such critical and important question.

Consideration

8. In my recent decisions in Hargy Oil Palm Ltd v. Ewase Landowners Association,[2] Abel Constructions Ltd v. W.R. Carpenter (PNG) Ltd[3] and the Koitaki Plantations Ltd v. Charton Ltd & Anor cases, I went to some length in discussing the development, promotion and use of ADR and in particular, mediation. In these judgments, I highlighted both the reasons why the formal courts and governments worldwide are promoting and encouraging the use of mediation. I wish not to repeat everything discussed in those cases here. However, in so far as is relevant and necessary I will refer to parts of these judgments.

9. In the Hargy Oil Palm case, I noted that, a very serious and ever increasing problem of backlogs in the formal courts' lists, forced on a movement toward the promotion, and use of ADR by the formal Courts and governments worldwide. Then I noted that, backlogs in the Courts "are in the main contributed to by many people involved in disputes either deliberately deciding not to or simply neglecting to reason with their opponents to have their disputes resolved." I also noted that even after the introduction of ADR and mediation, the backlog problem has not gone away. I attributed one of the main contributing factors to be the parties' failure to enter into fair, frank and open discussions of the matters in dispute between them and jointly explore options and resolve their disputes. This, I noted was the position despite provisions being made in a number of legislation and elsewhere, both, internationally and locally where the parties are encouraged to have their disputes resolved out of court. I noted, this may be due to a failure to appreciate the benefits of mediation and listed the various benefits.[4]

10. I then went on to note in the Hargy Oil Palm case as well as the Able Construction and Koitaki cases that, the Courts were not favorably viewing parties who fail to use mediation in good faith to resolve their disputes. Further, I noted that, the Courts were taking that position because of the objectives behind the introduction and promotion of mediation as well as its benefits.[5] With reference to my decision in PNG Ports Corporation Ltd v. Canopus No 71 Ltd,[6] I went on to observe that, the Courts were repeatedly making it clear that, "almost all disputes that enter the Court are capable of settlement, by the parties' direct negotiations." In so doing, I noted that, the Supreme Court in its decision in Public Officers Superannuation Fund Board v. Sailas Imanakuan[7] had already made that observation and highlighted the fact that, the "Courts are there only to help resolve or determine disputes that cannot be resolved by the parties themselves despite their best endeavors to do so."[8] Finally, I noted that, as high as the Supreme Court in PNG, in NCDC v. Yama Security Services Pty Ltd,[9] the Courts were repeatedly calling for more use of mediation. Finally, I noted that, in PNG, in 2008, Parliament endorsed the Courts call by amending the National Court Act. The new provisions in the Act allow for Court Annexed ADR with more emphasis on mediation and empowered the Judges by s. 7E to promulgate rules to make a system of court annexed mediation work. The Judges appropriately responded on 30th March 2010, when they promulgated the ADR Rules.

11. All of these developments have come about because, as I noted in Able Construction Ltd v. W.R. Carpenter, it is now almost universally accepted that all disputes are capable of resolution by mediation. At the same time, I noted that the exceptions to that position by way of inappropriate cases for mediation are few. They include cases in which:

• a real possibility of setting a legal precedent is presented; or

• any out of court settlement is not in the public interest; or

• protective orders such as injunctions are required; or

• there is a clear case warranting summary judgment; or

• there is a genuine dispute requiring the Court to give a declaratory relief; or

• there is a family dispute especially involving child abuse, domestic violence, or the like; or

• the parties are in a severely disturbed emotional or psychological states that they cannot negotiate for themselves or others; or

• there is a genuine dispute requiring interpretation of a Constitutional or other statutory provision; or

• there is a genuine dispute over the meaning and application of a particular provision in a contract or an instrument, a determination of which will help finally determine the dispute; or

• a preliminary issue, such as, questions on jurisdiction, condition precedents,[10] statutory time bars and a failure to disclose a valid cause of action is presented; or

• there is a need for public sanction as in a criminal case for public health, safety and good order.

12. Then in the Koitaki case, I gave a detailed consideration to the kinds of sanctions the Courts have been imposing from orders for costs to dismissal of cases or judgments and orders against parties acting in "bad faith". Thereafter, I found in Koitaki's case, that Koitaki acted in "bad faith" when it deliberately decided against participating in a Court ordered mediation. The decision not to participate in the court ordered mediation came in three forms. First, Koitaki deliberately decided not to proceed with the mediation. Second, in line with that, it decided not to pay its share of the external mediator's fees. Third, it refused to turn up on the scheduled date, time and venue for the mediation. I further found that, Koitaki took that position, after having consented to the matter being referred to mediation. I found an order dismissing Koitaki's claim and entry of judgment against it in a cross-claim for a liquidated amount was warranted and I made orders in those terms.

13. In arriving at the decision in the Koitaki case, I noted three factors were pertinent when it comes to deciding what penalty is appropriate for parties acting in "bad faith". The first factor I noted was this:

"...once an order has been made to refer a matter to mediation, the parties and everyone else who is required to do certain things for the purpose of giving effect to the [Court ordered] mediation must comply. This need for compliance is in the fact that a court of competent jurisdiction has made an order which needs to be fully complied with unless the orders are otherwise varied or set aside by subsequent and formal orders of the court. A failure to comply with a court order lends itself to the inevitable consequence of the defaulter being in contempt of court."

14. I then made reference to the unanimous decision of the Supreme Court in PNG Power Ltd v Ian Augerea,[11] where the Court emphasized the fact that:

"...contempt of Court is a very serious matter as it is an affront to the rule of law and in particular the administration of justice. It is a serious offence that is not defined by any written law and its penalty not limited by any legislation. The courts have an almost unlimited power to impose such sanctions as it considers appropriate in the particular circumstances of each case.

15. I then added that, in recent times, persons who have been found guilty of contempt of court, have been given custodial sentences of not less than 7 months. In this regard, I cited the Deputy Chief Justice, Sir Gibbs Salika's decision in the matter of contempt by Toami Kulunga delivered on 13th June 2014 in the case of Geoffrey R.E. Vaki vs. Gari Baki & Ors[12] is a case on point.

16. Bearing the above legal position on contempt of court in mind, I said in the case of an order for mediation:

"... the order is from a court of competent jurisdiction. Unless it is varied or otherwise set aside, all parties and anyone else who is covered by an order for mediation have an obligation to comply with each of the terms of the orders in so far as they apply to them. A failure to comply with such orders without good cause, no doubt amounts to contempt of court. Where a party deliberately decides against compliance and takes a position which runs contrary to the grain of the orders for mediation that would in my view be contempt in the worse form or category, calling for serious penalties."

17. Turning then to the second factor, I said:

"... ... courts and governments all over the world are calling for the use of mediation as a preferred form of dispute resolution, given its benefits. Many countries have now gone further and required mandatory mediation either prior to the issuance of proceedings or before any trial takes place in court. In our case, the combined effect of rr. 4 and 5 of the ADR Rules ... presupposes mediation unless the court otherwise determines on the application of a party. The imperative therefore, is to explore prospects of out of court settlement through the direct negotiations of the parties and failing any settlement, through mediation in 'good faith'. This would apply to all kinds of cases that enter the formal court system. The only exception to this would be the cases which raise one or more of the kind of questions or issues outlined in paragraph 14[13] above."

18. This then led me to the third and final factor, which was the Courts in PNG being ready in appropriate cases to:

"... dismiss or order judgment against defaulting parties for failure to comply with orders or directions of the Courts aimed at expediting a matter to trial or otherwise final resolution without further unnecessary delay and costs. "

19. I cited the decision of the Supreme Court in Kalang Advertising Limited v. Visvanathan Kuppusamy (2008) SC924. There, Visvanathan sought damages in the National Court against Kalang for breach of contract. At a directions hearing, Kalang failed to turn up. That caused the Court to adjourn to a new date with a conditional order, which required Kalang to turn up in court on the new adjourned date and provide reasonable explanations for not turning up in court on the previous occasion. The Court also warned that failure to do so will result in a strike out of the Kalang's defence and entry of judgment for Visvanathan.

20. On the next appointed date, Kalang's lawyer turned up and gave an unsatisfactory explanation. The explanation was without the support of a supporting affidavit either for his client or himself. Hence, the Court found the condition in the conditional orders was met and proceeded to make the orders it had forewarned. Kalang appealed to the Supreme Court against both the conditional order and the consequential judgment. The Supreme Court dismissed the appeal and held that both the conditional order and the consequential orders constituted a proper exercise of judicial discretion.

21. I then turned specifically to consider the provisions of r.10 (7) of the ADR Rules and said of them:

"The Court has a wide discretion or power to make such orders as it may think appropriate in the proceedings once a case of "bad faith" is made out against a party. I note this is not a vesting of a new power that the Court does not already have. Instead, as it has been repeatedly and abundantly made clear by this and the Supreme Courts under the first and third factors outlined above, r.10 (7) merely restates and reinforces a power the Court already has. It would follow therefore that, a case of "bad faith" could be met by any one or more of the following orders depending on the seriousness of the conduct and whether the conduct is deliberate or inadvertent:

(a) dismissal of the claim;

(b) permanent stay of the claim; or

(c) a stay of the claim pending a meeting of certain conditions; or

(d) a strike out of a defence and entry of judgment; and or

(e) order costs.

... Sanctions under (a) - (c) could be imposed in appropriate cases, if the defaulting party is the plaintiff or a cross claimant. Obviously, the sanction under (d) could be imposed against a defendant or a cross-defendant. Sanctions under (a) and (d) could be considered drastic. However, if the circumstances leading to a finding of "bad faith" is serious, such sanctions might very well be called for and warranted, when considered in the light of the kind of sanctions that could be and are being imposed for contempt of court or for breach of court orders. The final possible sanction of costs could be either on a solicitor/client or party/party basis. Such a sanction could be in addition to any of the sanctions under (a) - (d). If possible, the court could at the time of the order, fix the actual amount of costs payable or allow for taxation."

22. Consideration was also given to the provisions of r. 10 (1) - (5) of the ADR Rules. I then noted that, the orders for mediation as used in that case and as are being presently used by the ADR Services of the Court in its pro forma orders, are in fact a restatement of the requirements of the provisions of the ADR Rules. Speaking of the objectives of both the provisions of the rules and the Court orders I noted that, they were intended to ensure that, court ordered mediations proceeded smoothly on the dates and times fixed at the venues specified. That in turn was to expedite outcomes and avoid unnecessary delays. Then with reference to the decision in Hargy Oil Palm case, I observed that, in order to achieve that objective, the parties need to take the following steps (in so far as they are relevant for this case):

"(d) Promptly calculate and pay the mediation service fees as prescribed in Schedule 3 of the ADR Rules, ...;

...

(g) Ensure to attend all mediation sessions from preparatory meetings to the first per party intake to the joint conferences and all other sessions required by the mediator until the mediation process is concluded;

(h) Where the parties are legally represented, the lawyers:

(i) advising their respective clients and properly preparing them for mediation;

(ii) providing and ensuring to provide accurate legal advice throughout the entire mediation process with a view to enabling the parties to reach an agreement unless there is a serious legal impediment; and

(iv) attending mediation with their respective clients on time and be ready to help with jointly drafting any agreement that might be reached at the mediation;

(i) Ensuring in the case of a corporate entity, that all of the above and in particular the various mediation sessions and process are attended to by an officer of the corporation who has the necessary power and authority to negotiate and settle the proceedings and thus bind the corporation;

(j) Attending the mediation in good faith ready and willing to genuinely explore ways and means of satisfactorily resolving the matters in controversy between the parties rather than treat the process as a fishing trip;

(k) Taking all other steps as are necessary to ensure that the mediation commences and concludes on the days and times stipulated by the Court appreciating that the Rules allow for mediation to conclude within 2 months from the date when the order for mediation was made."

23. Thereafter, I went on to discuss the development of ADR and in particular, mediation and the objectives behind that development. I then concluded by highlighting the fact that there was an imperative for business or corporations to settle through direct negotiations and failing that mediation. I went on to note that, this imperative could be achieved by well in advanced proper preparations followed by faithful participation at all of the relevant and necessary stages for instances in mediation from preliminary in-take conferences to all other subsequent conferences until final conclusion or closure of the process. In order to meet this imperative, I outline what the servants and agents of corporations must do especially in the context of mediation as follows:

"(1) seek and secure the relevant governing bodies or authorities' full and unrestricted authority or instructions to negotiate in good faith and find a solution;

(2) seek and secure their legal advices and if need be secure appropriate legal services for and during the mediation process;

(3) consult and get the inputs of other important and critical people where that is needed;

(4) have readily available persons they will need to consult or seek their approval during the course of mediation to promptly provide the required inputs or instructions;

(5) gather and put together all documentary and other evidence which they may required or wish to table at the mediation;

(6) carry out investigations and researches as may be considered relevant and necessary with results ready for use during the mediation process if need be;

(7) allow for quality undivided time and attention to the mediation process; and

(8) prepare and make full disclosure of information critical to arriving at a fair, just and a reasonable agreement."

25. Thereafter I pointed out that, a proper understanding of the matters discussed above "should pave the way for a better understanding of the requirement to 'participate in good faith.'" In other words, if the parties ordered to go to mediation appreciate these duties and responsibilities and meet or discharge them fully, they would be no doubt participating in "good faith." That would pave the way for possible resolutions. No doubt, the opposite would be the result, if either or both of the parties fail to appreciate their duties and responsibilities, and fail to discharge them fully, and, hence act in "bad faith".

26. With the assistance of some very useful work done by some learned man,[14] the I pointed out that an absence of any of the following list of behaviors would lead to a finding of a party acting in "bad faith":

"(1) Complying with the various legislative provisions and other rules, standing orders or practice directions' or provisions that govern mediation;

(2) Complying with orders referring a matter to mediation;

(3) Personally attending (excluding attendance by telephone) at the mediation by all persons who are fully authorized to settle the dispute,

(4) Preparing for mediation by the parties and their representatives, which includes the exchange of any documents requested or as set forth in a rule, order or request of the mediator;

(5) Participating in meaningful discussions with the mediator and all other participants during the mediation;

(6) Acting in accordance with all contractual terms regarding mediation, the parties may have agreed to;

(7) Following rules set out by the mediator during the introductory phase of the process;

(9) Remaining in the mediation process until the mediator determines that the process is at an end or excuses the parties;

(10) Engaging in direct communication and discussions between the parties to the dispute, as facilitated by the mediator;

(11) Engaging in accurate and honest representations to the other parties or the mediator during and for the purpose of the mediation; and

(12) Refraining from filing any new motions until the conclusion of the mediation, in pending lawsuits."[15]

27. Taking the matters outlined in foregoing into account I found in Koitaki's case that, the company failed to:

(1) comply with the call and encouragement for the use of mediation by legislation,[16] including the ADR Rules, the various Supreme and National Court decisions and many learned and authoritative publications;

(2) comply with the orders of the Court that referred the matter to mediation with its consent;

(3) personally attend through a duly authorized person having the necessary power and authority to bind it at the appointed time, date and venue for mediation as did the other parties and the mediators;

(4) prepare for mediation, which included:

(a) seeking and securing its board's full and unrestricted authority or instructions to negotiate in good faith and find a solution;

(b) the exchange of any documents requested or as set forth in a rule, order or request of the mediator;

(c) seeking and securing its legal advice and if need be, secure appropriate legal services for and during the mediation process;

(d) consulting and getting the inputs of other important and critical people where that was needed;

(e) ensuring the ready availability of persons who needed to consulted or seek their approval during the course of mediation to promptly provide the required inputs or instructions;

(f) gathering and putting together all documentary and other evidence which they may required or wish to table at the mediation;

(g) carrying out investigations and researches as may be considered relevant and necessary with results ready for use during the mediation process if need be; and

(h) allowing for quality undivided time and attention to the mediation process; and

(i) preparing to make full disclosure of information critical to arriving at a fair, just and a reasonable agreement.

(5) participate in meaningful discussions with the mediator and all other participants during the mediation;

(6) act in accordance with all contractual terms regarding mediation that the parties may have agreed to, given that the mediation orders were with the consent of the parties;

(7) follow rules that may have been set by the mediator during the introductory phase of the process or in his earlier communication with the parties;

(9) remain in the mediation process until the mediator determined that the process was at an end or excused the parties;

(10) engage in direct communication and discussion with the defendants with the mediator's facilitation;

(11) engage in accurate and honest representations to the defendants or the mediator during and for the purpose of the mediation;

28. Consequently, I found these failures of Koitaki seriously impeded the Court ordered mediation from taking off the ground from the first important stage of intake per party, through to the critical part of identifying the real issues and the possible resolution of those issues to final closure possibly with a mediated agreement or as the case might have been. I found that left the defendants and this Court in the dark as to what were the real, serious and meritorious issues that were presented in the case and how they required only a judicial consideration, how and where it might be on the list of cases or issues inappropriate for mediation. Further, I found that, if indeed the case presented the kind of issues in question, that should have been made known and clearly presented to the Court prior to the order referring the matter to mediation. Furthermore, I went on to find that, if indeed there was an issue of the kind in question, Koitaki, should not have consented to the matter being referred to mediation and instead argue against it for such a reason.

29. In respect of the last point, I made this observation, which I consider is very important:

"It should be noted that, once a Court makes an order for mediation, it effectively means there is no serious and meritorious issue which falls into the list of cases or questions inappropriate for mediation. This immediately obligates the parties to use their best efforts and endeavors to resolve their dispute through the mediation process. If they faithfully discharged their respective duties and responsibilities in the way outlined above, settlement would be inevitable. The only exception to that would be cases in which the parties are able to agree that there is a serious impediment to settlement which was not clear as at the time of the order for mediation."

30. Applying the principles outlined above, in Koitaki's case, I found a number of failures on Koitaki's part. Firstly, it failed to demonstrate to the Court's satisfaction that there existed the kind of impediment and or type of issue discussed above. Secondly, I found that Koitaki's conduct was contemptuous of the orders for mediation. Thirdly, I found Koitaki's conduct ran against the various legislative, judicial and learned publications, encouraging and supporting the use of mediation to resolve human conflicts from the more simple disputes to the most complicated. Fourthly, I found Koitaki's conduct forced the defendants, the Court and the mediator to waste their time, energy and effort in arriving at the decision to have the matter referred to mediation and setting aside time and generally preparing for mediation. Fifthly, I found that, save only to point out that, it made a decision not to comply with the orders for mediation and hence not to proceed with the Court ordered mediation, Koitaki failed to provide any good reason for taking that position.

31. Taking into consideration, the above factors, I was of the view that, the most appropriate sanction should be an order for a dismissal of Koitaki's claim. In summary, in arriving at that decision, I found first that, Koitaki failed to demonstrate an existence of a meritorious issue warranting only a judicial consideration and determination and hence rendering the case inappropriate for mediation. Secondly, I found Koitaki did not provide any reasonable and convincing reason for its deliberated refusal to comply with the orders for mediation and hence give mediation a fair chance of looking at the issues presented in the case and help find a solution. Consequently, I decided to make an order in the first part to dismiss Koitaki's claim, and in the second part order a struck out of its defence and enter judgment against it on a cross claim by the defendants.

32. In arriving at the second part of the judgment, I noted that the case concerned a simply supply of goods contract, namely live animals, and a claim of nonpayment for them according to Koitaki's claims and in the defense and cross-claim a claim of a failure to supply the animals and or an over payment for them. This, in the Courts view, presented no meritorious issue that was beyond the reach of mediation and resolution by the parties. All that the parties had to do was to sit down with the facilitation of a mediator at mediation, and go through the various and relevant purchase orders, delivery dockets, invoices, payment slips and evidence of payments and settle the claim after establishing the correct record of what happened in the various transactions.

Present Case

33. In the present case, there is no affidavit from the managing director or the relevant and appropriate officer within the employ of PNG Power that has the power and authority to bind it. The only affidavit is from Mr. Dusava, who is a lawyer employed by PNG Power. In his affidavit, Mr. Dusava makes reference to the fact that, he does not have the power or authority to make any binding decision. That power or authority is vested in the Board. There is no evidence of the kind of advice provided to the board of the company by Mr. Dusava or the company's lawyer or the proper officer who was to advice the board and evidence of the board's specific consideration of each of the advice and specific instructions. Such advice and instructions with the evidence of that should be at three different but related and follow on levels. The first should be prior to the case being referred to mediation. The second should be immediately post an order for mediation. The third and final level should be immediately post a failed mediation or lack thereof resulting in an issuance of a "bad faith" certificate.

34. The advice provided with the evidence of that for the first level should cover amongst others the following:

(1) a statement on the nature of the case outlining the kinds of issues presented, and an outline of the correct, relevant and applicable legal principles;

(2) then of the issues presented, whether any or all of them presented any question that was inappropriate for mediation;

(3) that should be followed by an outline of the kind of processes available namely, direct negotiations and failing any resolution, mediation and failing any resolution through that, the formal court process with advice on the advantages and disadvantages of employing any of those processes;

(4) in the context of item (3) there should be an outline of the party's worse alternative to a negotiated outcome (WATNO) or agreement (WATNA) and the party's best alternative to a negotiated outcome (BATNO) or agreement (WATNA).

(5) if the advice identifies the case as presenting issues inappropriate for mediation, it should also identify the issues, how such issues are presented, seek specific instructions to apply under r. 4 of the ADR Rules to proceed to litigation and thereby take the matter out of the pre-supposed requirement for mediation and outline the kinds of evidence required and who is to depose to them in support of any such application; and

(6) if the opposite of item (5) was the case, advice should have been provided to that effect and seek appropriate instructions to apply for appropriate orders, prepare for and proceed with mediation once ordered without delay.

35. Immediately post an order for mediation, the advice and the evidence of that should cover the following:

(1) the fact that the Court has made an order for mediation with an emphasis on the need to comply with the order and why, including an avoidance of any possible contempt of court charges;

(2) an outline of the parties duties under r.10 (1) – (6) of the ADR Rules as elaborated and detailed in the case of Hargy Oil Palm and how those duties could be or should be discharged;

(3) following on from item (1) and (2) above, an outline of the possible consequences that would follow for any noncompliance of the orders and the requirements of the ADR Rules as elaborated and set out in the Koitaki case.

(4) seeking specific instructions for an unrestricted authority to negotiate and settle on behalf of the company[17] but between its WATNO and BATNO, the board or the person with the power to bind the company to be on standby for any further or additional or alternative instructions that might be needed and provide any endorsement or approval that might be required.

36. Moving onto post a certificate of "bad faith", the advice and the evidence of that should cover the following:

(1) an outline of what could amount to a reasonable explanation for the conduct leading to the failure of mediation and the issuance of the certificate of "bad faith";

(2) highlight a need for instructions going into a provision of evidence disclosing a reasonable explanation for the conduct leading to the mediation failing and the eventual issuance of the "bad faith" certificate; and

(3) where the failure of mediation is due to an identification of an issue that is inappropriate for mediation to resolve, highlight; (1) the need to demonstrate how that issue could not be identified prior to the order for mediation despite an exercise of due care and attention to do so; (2) how it was revealed after the order for and or during mediation; (3) the need to get the other party and the mediators agreement on such an issue surfacing during mediation; and (4) how it is an issue that is beyond the parties ability to resolve with the mediators help.

(4) an outline of what steps the party against whom a "bad faith" certificate was issued took at the mediation to have any factual issue arising in the case resolved, which would clearly be an aspect the parties would be able to achieve, unless there were serious technical facts in issue which are incapable of resolution through any joint appropriate testing, inquiry and or assessment.

37. According to the evidence adduce for or by PNG Power and in particular, paragraph 9 and annexure "A" to the affidavit of Mr. Dusava, Mr Dusava with the endorsement of a Vincent Henry and a Linda Maru (their respective positions not disclosed) took the view that this matter was inappropriate for mediation. In arriving at that view, there is a mere reference to a possible application of the Fairness of Transactions Act and the need for an interpretation of provisions of a lease agreement between the company and the Awesas. However, he does not disclose or state the issues that are presented in either case. Similarly, and more importantly, he does not disclose how such issues arise and how they warrant only a judicial consideration and determination, by reason of which the issues are inappropriate for mediation.

37. Further, as was the case in Koitaki's case, the Court made a decision to refer this matter to mediation for the parties to jointly consider the real issues between them, explore all possible options and arrive at an option that would satisfactorily and finally resolve the matter. The effect of that decision was that, this case did not present any issue that warranted only a judicial consideration and determination and therefore present an inappropriate case for mediation. That meant, once the Court arrived at that decision, all the parties were obliged to fairly and openly discuss the matters of importance and concern to them, then jointly identify their issues, concerns or interests, consider all possible options for a resolution of each of the issues presented and arrive at an outcome that would finally resolve all issues between them. Instead of doing that, PNG Power took a position unilaterally and failed to take any real and meaningful step to give the Court ordered mediation a real go in good faith.

38. As did the plaintiff in the Koitaki case, PNG Power by its conduct choose to act against the order for mediation. In so doing the company failed specifically to:

(1) comply with the call and encouragement for the use of mediation by legislation,[18] including the ADR Rules, the various Supreme and National Court decisions and many learned and authoritative publications;

(2) comply with the orders of the Court that referred the matter to mediation;

(3) personally attend through a duly authorized person having the necessary power and authority to bind it at the appointed time, date and venue for mediation as did the other parties and the mediators;

(4) prepare for mediation, which included:

(a) seeking and securing its board's full and unrestricted authority or instructions to negotiate in good faith and find a solution;

(b) the exchange of any documents requested or as set forth in a rule, order or request of the mediator;

(c) seeking and securing its legal advice and if need be, secure appropriate legal services for and during the mediation process;

(d) consulting and getting the inputs of other important and critical people where that was needed;

(e) ensuring the ready availability of persons who needed to be consulted or seek their approval during the course of mediation to promptly provide the required inputs or instructions;

(f) gathering and putting together all documentary and other evidence which it might have wishede to table at the mediation;

(g) carrying out any investigations and researches as may be considered relevant and necessary with results ready for use during the mediation process if need be; and

(h) allowing for quality undivided time and attention to the mediation process; and

(i) preparing to make full disclosure of information critical to arriving at a fair, just and a reasonable agreement.

(5) participate in meaningful discussions with the mediator and all other participants during the mediation;

(6) act in accordance with all contractual terms regarding mediation that the parties may have agreed to;

(7) follow rules that may have been set out by the mediator during the introductory phase of the process or in his earlier communication with the parties;

(9) remain in the mediation process until the mediator determined that the process was at an end or excused the parties;

(10) engage in direct communication and discussion with the defendants with the mediator's facilitation;

(11) engage in accurate and honest representations to the Awesas or the mediator during and for the purpose of the mediation;

39. Having failed in this way, PNG Power also failed to provide any reasonable and convincing reason for its failures. This failure also includes a failure to clearly identify and specify the issue or issues that a meritorious and how they warrant only a judicial consideration and determination and hence, beyond the reach of resolution through mediation. Without any such specification, it is hard to tell how an issue not previously determined in either the application of the Fairness of Transactions Act or an interpretation of any particular provision of the parties' contract in this case arises.

40. I note that we already have cases dealing with the application of the Fairness of Transactions Act. A quick survey of the cases dealing with this particular Act reveals a number of judgments of both this Court and the Supreme as in the cases of Rage Augera v. Bank South Pacific Ltd[19] a decision of the Supreme and my decision in Credit Corporation (PNG) Ltd v. David Nelson.[20] Given this, there is no disclosure of what if any, new issues arise that were not already raised and resolved by or covered by any of these decision, so much so that the parties are left with no guidance for a resolution of their dispute here.

41. In relation to the undisclosed issues going into the interpretation of the also undisclosed provisions of the contract in this case, I note that the PNG Law Reports and many numbered and unnumbered judgments of both the Supreme and National Courts are loaded with contract cases. Some of these for instance, include the decision in Fly River Provincial Government v. Pioneer Health Services Ltd[21] and my decision in Tian Chen Ltd v. The Tower Limited (No.2)[22] and many others restated rules for the interpretation or construction of contractual provisions and giving effect to the free agreement of the parties. As with any possible issues under the Fairness of Transactions Act, PNG Power does not disclose, what if any new issues arises in this case, that has not yet been considered, covered or resolved by any of these decisions, thereby leaving them with no guidance for a resolution of their dispute here.

42. A careful consideration of all of the foregoing, places this case in much the same position as the case in the Koitaki case. It thus calls for an outcome similar to that case but duly noting the difference that, the defaulting party here is a defendant and the claim for damages here goes beyond a simple claim for a liquidated amount. In these circumstances, I am persuaded to arrive at the decision that, PNG Powers defence should be dismissed and judgment entered for the Awesas with damages to be resolved through direct negotiations of the parties and failing that mediation at PNG Power's costs by an external accredited mediator whose fees PNG Power should fully and solely bear. Failing any resolution at mediation and if such failure is attributable to PNG Power's bad faith again, there should be judgment for the Awesas on figures established and verified at mediation and certify as and such and reasonable by the mediator. Given the time and costs that have been wasted by the Awesas and that of the Court, I am of the view that the Court should fix a specific time frame for an expedited outcome on the question of damages.

43. Accordingly, I make the following orders:

(1) The Defendants defence headed Statement in Defence filed on 13th June 2012 is dismissed.

(2) Judgment is entered for the Plaintiffs with damages to be resolved through direct negotiations of the parties and failing that mediation facilitate by Mr. Jeff Shepherd who is an external accredited mediator.

(3) Failing any resolution at mediation and if such failure is attributable to PNG Power's bad faith, there shall be judgment for the Awesas on figures established and verified at mediation and certify as reasonable by the mediator.

(4) The defendant, PNG Power Ltd, should fully and solely bear the external mediators fees as well as the mediation service fees under Schedule Three of the ADR Rules.

(5) The defendant shall pay the plaintiff's costs of the failed mediation inclusive of any payment of any professional fees for the now failed mediation and costs leading to this judgment.

(6) The Plaintiffs costs under term (4) of these orders shall be resolved by the agreement of parties within 7 days of the Plaintiffs providing the defendants with a bill of costs in taxable form and in any event prior to any further mediation.

(7) Failing any resolution on the Plaintiffs costs, it shall be an issue for consideration and resolution at mediation.

(8) The parties shall return to this Court on 13th August at 9:30 with draft orders for mediation in the pro forma orders presently used by the ADR Division of the Court.

(9) Upon return of the matter, the Court will endorse any draft order for mediation under term (7) or in the absence of any such draft orders, make orders in terms of the pro forma orders for mediation presently used by the ADR Division of the Court.

(10) Time is abridged for the entry of these orders which shall take place forthwith upon the signing of the orders by the Court.

____________________________________________________________

Ona Lawyers: Lawyers for the Plaintiff
In House Lawyer Mr. Derek Dusava: Lawyer for Defendants

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^[1] (2014) N5656 (delivered on 11^th July 2014)
^[2] (2013) N5441 (delivered on 02/12/13).
^[3] (2014) N5636 (delivered on 18^th June 2014).
^[4] Listed and appearing at paragraph 32 of my decision in the Hargy Oil Palm case and repeated in Abel Construction and Koitaki cases.
^[5] From Koitaki case at page.., paragraph...?
^[6] 2010) N4288 (delivered on 30/07/10).
^[7] (2001) SC 677.
^[8] See also Mark Ankama v. PNG Power Ltd ...
^[9] (2003) SC707.
^[10] This could include question for instance over the compliance or non compliance of provisions like s.54(6) of the Motor Vehicle (Third Party Insurance) Act or s.5 of the Claims by and Against the State Act in PNG
^[11] (2013) SC1245.
^[12] (2014) N5612.
^[13]Also paragraph 11 in this judgment.
^[14] Like Professor Kimberlee Kovach as pointed out by Professor John Lande in an article entitled “Using Dispute System Design Methods to Promote Good-Faith Participation in Court-Connected Mediation Programs”
^[15] As set out in my decision in the Hargy Oil Palm, Able Constructions and Koitaki cases.
^[16] This included a list of legislation providing for the support and or use of mediation and other forms of ADR, namely ss. 333 - 336 of the PNG Constitution; ss. 42, 44 and 118 of the Organic Law on Provincial Governments and Local-level Governments; ss. 7A-7E of the National Court Act (Chp.38) as amended s.10 and 11 of the Adultery and Enticement Act 1988, ss. 22B -22D of the District Court (Chp.40) as amended; s.7 of the Fairness of Transactions Act 1993; s.11 of the Family Protection Act 2013, s.51 Industrial Relations Act (Chp.174) as amended; s.15 of the Inter-group Fighting Act (Chp.344) as amended; ss. 9 - 73 of the Land Disputes Settlement Act (Chp.45) as amended; s.5(5) of the Lukautim Pikinini (Child) Act 2009; ss.140(4), 143(4), 151(3)(d) of the National Information and Communications Technology Act 2009; s.121 of the Oil and Gas Act 1998, s.29 of the Public Services Conciliation and Arbitration Act (chp.69) as amended; ss.29 (c), 31 (2)(a)(iv), 32(2)(a)(i) of the Security (Protection) Industry Act 2004; s 95 (a) of the Superannuation (General Provisions) Act 2000; ss. 52 - 54 Village Courts Act 1989 and s. 4 of the Village Courts Regulations (Chp. 44) and finally, ss. 10 - 13 of the Y2K Fairness in Litigation Act 1999

^[17] If one of the parties is a company as in this case.
^[18] This included a list of legislation providing for the support and or use of mediation and other forms of ADR, namely ss. 333 - 336 of the PNG Constitution; ss. 42, 44 and 118 of the Organic Law on Provincial Governments and Local-level Governments; ss. 7A-7E of the National Court Act (Chp.38) as amended s.10 and 11 of the Adultery and Enticement Act 1988, ss. 22B -22D of the District Court (Chp.40) as amended; s.7 of the Fairness of Transactions Act 1993; s.11 of the Family Protection Act 2013, s.51 Industrial Relations Act (Chp.174) as amended; s.15 of the Inter-group Fighting Act (Chp.344) as amended; ss. 9 - 73 of the Land Disputes Settlement Act (Chp.45) as amended; s.5(5) of the Lukautim Pikinini (Child) Act 2009; ss.140(4), 143(4), 151(3)(d) of the National Information and Communications Technology Act 2009; s.121 of the Oil and Gas Act 1998, s.29 of the Public Services Conciliation and Arbitration Act (chp.69) as amended; ss.29 (c), 31 (2)(a)(iv), 32(2)(a)(i) of the Security (Protection) Industry Act 2004; s 95 (a) of the Superannuation (General Provisions) Act 2000; ss. 52 - 54 Village Courts Act 1989 and s. 4 of the Village Courts Regulations (Chp. 44) and finally, ss. 10 - 13 of the Y2K Fairness in Litigation Act 1999

^[19] (2007) SC869.
^[20] (2011) N4368.
^[21] (2003) SC705.
^[22] (2003) N2319.