Nae Ltd (1-21320) v Curtain Bros Papua New Guinea Ltd (1-1815) [2015] PGNC 229; N6124 (12 March 2015)

N6124

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 225 of 2014

BETWEEN:

NAE LIMITED (1-21320)
Plaintiff

AND:

CURTAIN BROS PAPUA NEW GUINEA LIMITED (1-1815), CURTAIN BROS HOLDINGS (NG) LIMITED (1-2647) and CLOUGH NIUGINI LIMITED (1-1251) trading as CLOUGH CURTAIN JOINT VENTURE (6-80953)
First Defendant

AND:

ALEX TONGAYU in his capacity as the Registrar of Companies
Second Defendant

Waigani: Hartshorn, J
2014: 10th July
2015: 12th March

APPLICATION TO DISMISS PROCEEDING

Cases cited:
Papua New Guinea Cases

Mango v. Chow Po Khoon (2005) N2907
Re Charlie Carter Pty Ltd v. the Shop, Distributive and Allied Employees' Toap v. The State and Ors [2004] PNGLR 25

Overseas Cases

Gunns Ltd v. Marr [2005] VSC 251
Hunter v. Chief Constable of the West Midlands Police and Others [1981] UKHL 13; [1982] AC 529
Association of Western Australia and Ors [1987] FCA 135

Counsel:

Mr. G. Manda and Ms. A. Kimbu, for the Plaintiff
Mr. M. M. Varitimos Q.C. and Mr. P Tabuchi, for the First Defendant

12th March, 2015

1. HARTSHORN J: This is an application to dismiss the proceeding or to strike out the statement of claim for disclosing no reasonable cause of action, for being frivolous or vexatious or for being an abuse of the process of the court. It is opposed by the plaintiff.

Background

2. This is a dispute concerning two purported contracts between the plaintiff and the first defendant. The plaintiff commenced proceedings by originating summons. In the originating summons the plaintiff seeks declaratory relief pursuant to various sections of the Fairness of Transactions Act (FTA) and s. 155 (4) Constitution in respect of the purported contracts. Consequentially, the plaintiff seeks orders for damages on a quantum meruit basis or pursuant to s. 155 (4) Constitution, that both contracts be reviewed, and that the parties enter into mediation for settlement.

3. Pursuant to a consent order, the plaintiff filed a statement of claim. The relief claimed in the statement of claim is not the same as that claimed in the originating summons although the relief does comprise declaratory relief under the FTA and damages on a quantum meruit basis.

Preliminary

4. The plaintiff questions this court's jurisdiction to hear the application as:

a) it was ordered by consent on 19th May 2014, that amongst others, the matter shall return for confirmation of conclusion of mediation or further orders at 9:30 am on 10th July 2014; and further

b) pursuant to s. 7 (1) FTA, there has not been a mediated order that has failed.

5. As to the consent order argument, it was not ordered that, "the matter shall only return for confirmation of conclusion of mediation or further orders." Moreover, it was ordered that the matter shall return for, "... or further orders." Consequently this contention is rejected.

6. As to the s. 7 (1) FTA argument, s. 7 (1) is as follows:

"(1) In all proceedings under this Act, a Court shall in the first instance, attempt to arrive at an amicable settlement that conforms with the primary object of this Act and only after a mediated order has failed the Court may proceed to exercise its jurisdiction under Section 8."

7. The plaintiff contends, if I understand correctly, that only after a mediated order has failed, is the court able to proceed to exercise its jurisdiction under s. 8 FTA. This begs the question, what if there is no mediated order? I have difficulty with the view that the purpose of this section was to prevent the court exercising its jurisdiction under s. 8 until first, there is a mediated order, and secondly, that mediated order has failed.

8. In any event, the jurisdiction that this court is being requested to exercise is in relation to an application to dismiss or strike out under the National Court Rules. It is not being requested to exercise its jurisdiction under s. 8 FTA.

9. In this instance, it is common ground that, and a Mediators Certificate has been filed to the effect that, the parties participated in a mediation but were unable to resolve the issues in dispute. As the parties have attempted, but have been unsuccessful in settling the proceeding, to any extent that the court may have been, in my view the court should not now be precluded from exercising its jurisdiction in respect of this matter. For the above reasons the preliminary contentions of the plaintiff are rejected.

Application to dismiss or strike out

10. The first defendant seeks to dismiss the proceeding pursuant to Order 12 Rule 40 as:

a) the proceeding is an abuse of process, as there are major disparities between the relief sought in the originating summons and the relief sought in the statement of claim. Neither a defendant nor the court, it is submitted, should be required to deal with a case where there are disparities in the relief sought between the originating summons and the statement of claim.

b) no reasonable cause of action is disclosed to support the relief claimed in the statement of claim. Even if all of the material facts contained in the statement of claim were proved, the plaintiff could not succeed in obtaining the relief sought therein. Further, the statement of claim is more in the nature of a statement of evidence, much of which is irrelevant, and submissions, rather than being a pleading that pleads material facts in accordance with proper pleading principles.

Abuse of process

11. As to the contention of the first defendant that there are major disparities between the relief sought in the originating summons and the statement of claim, counsel for the plaintiff submitted that what the plaintiff was seeking in the statement of claim did not deviate from what was sought in the originating summons. The plaintiff's claim is an action under s. 5 FTA.

12. Notwithstanding that the first defendant makes application pursuant to Order 12 Rule 40 National Court Rules to dismiss the proceeding on the ground amongst others, that it is an abuse of process, the following classic statement of Lord Diplock in the House of Lord's decision of Hunter v. Chief Constable of the West Midlands Police and Others [1981] UKHL 13; [1982] AC 529, as to the inherent jurisdiction of a court to deal with an abuse of its process is worthy of reproduction:

"This is a case about abuse of the process of the High Court. It concerns the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people. The circumstances in which abuse of process can arise are very varied;......... It would, in my view, be most unwise if this House were to use this occasion to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty (I disavow the word discretion) to exercise this salutary power.

13. In this instance, the first defendant contends that it should not be required to deal with a case where there are disparities in the relief that the plaintiff seeks in the originating summons and the statement of claim. That there are disparities is clear. Examples of this are that in the originating summons, amongst others, ten declarations are sought concerning two purported contracts, other orders are sought for damages and that the two contracts be reviewed, and that the parties enter into mediation. In the statement of claim, two declarations and damages in varying amounts, are sought.

14. From a perusal of the documentation, the declarations in the originating summons are sought pursuant to s. 1(a) (i) and (ii), 1(b), 4, 5 (2) (b) and 12 FTA as well as s. 155 (4) Constitution. The declarations in the statement of claim however are sought pursuant to s.8 FTA and the FTA generally. It is clear that the submission of the plaintiff that what it seeks in the statement of claim does not deviate from what is sought in the originating summons, is not correct.

15. The lawyers for the first defendant by letter dated 17th June 2014 wrote to the lawyers for the plaintiff and amongst others, requested whether the plaintiff was seeking the relief sought in the statement of claim, and was abandoning the relief sought in the originating summons that was not being sought in the statement of claim.

16. By letter dated 18th June 2014, the lawyers for the plaintiff replied. In regard to the query concerning the relief claimed, they stated that they reserved their right to respond as they considered it is not appropriate to discuss "strictly or legalistically" at that stage of the mediation. So instead of replying to the lawyers for the first defendant and clarifying exactly what the relief is that is being claimed, the lawyers for the plaintiff reserved their right to respond because of mediation.

17. The disparities in the relief claimed in the originating summons and the statement of claim render the pleadings of the plaintiff as to the relief sought, to be an embarrassment. In this regard I refer to the case of Mango v. Chow Po Khoon (2005) N2907 in which in regard to Order 8 Rule 27 and Order 12 Rule 40 National Court Rules applications, the Head Note records amongst others, that:

"Other tests to be applied include..... whether the statement of claim is so ambiguous or lacking in particularity that it does not facilitate orderly and rational pleadings; and whether the statement of claim just leaves a defendant guessing as to what the plaintiff's allegations are."

18. Further, in Gunns Ltd v. Marr [2005] VSC 251 at para 14-15 the Court said:

"A pleading is embarrassing where it is unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him."

I reproduce these passages as amongst others, they highlight an essential point - the opposite party is left guessing.

19. In this instance the first defendant does not know the relief or the particular relief claimed against it given the disparity between the originating summons and the statement of claim, and quite legitimately requested clarification from the plaintiff's lawyers. The plaintiff's lawyers, instead of supplying the clarification, reserved their rights to reply on the pretext that it was not appropriate to reply because of mediation.

20. That it was not appropriate to give clarification as to the relief claimed because of mediation, is not a legitimate reason. To my mind it is necessary that the parties know precisely what the other is claiming to increase the likelihood of an attempt at mediation being successful. What can be a legitimate reason for not clarifying exactly what it is that your client is claiming?

21. In my view, the stance taken by the lawyers for the plaintiff has exacerbated the disparities in the relief claimed. This is so especially in circumstances where the lawyers for the plaintiff have deliberately refrained from answering a legitimate query concerning exactly what it is that is being claimed against the first defendant. The actions of the lawyers for the plaintiff can be properly described as evasive and can be considered as evidence of improper purpose.

22. The position in which the first defendant was in, in guessing the relief against it, was unfair. The response of the lawyers for the plaintiff to a legitimate query has elevated the position in which the first defendant finds itself from unfair to manifestly unfair and can be properly viewed as an abuse of the process of the court. Consequently the proceeding should be dismissed.

Whether a reasonable cause of action is disclosed

23. As to there not being a reasonable cause of action, the first defendant refers to the prayer for relief in the statement of claim which specifically seeks a declaration that both contracts were manifestly unfair pursuant to the provisions of the FTA. Paragraph 6 of the statement of claim pleads particulars of unfairness in paragraphs 7 to 32 inclusive and paragraph 79 in respect of the first contract. A perusal of those particulars however does not reveal circumstances of the first contract being manifestly unfair. Even if the material facts pleaded were established in relation to the alleged unfairness, the plaintiff could not succeed as manifest unfairness would not be established. The same scenario exists in respect of the second contract. Again, if all of the material facts pleaded were established, this would not result in manifest unfairness being established as claimed by way of declaration.

24. The first defendant contends that to invoke the discretionary jurisdiction of the court under the FTA to review a transaction, and make orders under s. 8 FTA the transaction must be "manifestly unfair" and not merely "unfair". Further, the first defendant submits, the plaintiff has been given ample opportunity to establish by pleading that it has a reasonable cause of action. Its lawyers have been put on notice about the first defendant's application to dismiss if the pleadings were not rectified, but no action has been taken by the plaintiff to rectify its pleadings.

25. The plaintiff submits that the statement of claim was prepared primarily to facilitate mediation and should be considered in that light. In any event, submits the plaintiff, this is a clear case of breach of contracts and that the contracts were unfair. A reasonable cause of action is disclosed in the statement of claim. Further, sections 5 (2) (a), (b), (c) and (d) FTA are relied upon by the plaintiff. These sections provide that unless the court is satisfied that a transaction was entered into on an equal footing in all material respects, a transaction shall be deemed not to be genuinely mutual or manifestly unfair if a party to the transaction complaining unfairness shows amongst others that he did not understand the transaction, the other party was in a predominant position, information was not disclosed or there was a mistake as the consequences.

26. The plaintiff further submits that if the first defendant is not satisfied with the pleading, it can request further and better particulars.

27. As to the statement of claim being prepared primarily from mediation; the rules concerning the purpose and content of a statement of claim are clear. Even if the statement of claim was prepared primarily for mediation purposes, it still has to comply with the requisite rules and proper pleading principles. From a perusal of the statement of claim, I agree with the description of counsel for the first defendant. It is more in the nature of a statement of evidence rather than being a pleading that pleads material facts.

28. As to the plaintiff relying upon sections 5 (2) (a), (b), (c) and (d) FTA, this is not specified in the statement of claim. What is claimed in the statement of claim is amongst others, a declaration that both contracts were manifestly unfair pursuant to the provisions of the FTA, generally.

29. As to the contention that the first defendant should request further and better particulars, I refer to the case of Re Charlie Carter Pty Ltd v. the Shop, Distributive and Allied Employees' Association of Western Australia and Ors [1987] FCA 135 at para 50 in which French J stated that particulars whatever their content and nature, cannot rectify defective pleading. Then at para 51 His Honour said that:

"51. Particulars cannot be used to fill gaps in the statement of claim which ought to have been filled by appropriate statements of the various material facts together constituting the cause of action..."

30. In regard to a failure to disclose a reasonable cause of action, in Toap v. The State and Ors [2004] PNGLR 25 at 36, Cannings J considered the key principles in relation to the striking out of proceedings. His Honour said:

"The following principles emerged:

·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.

·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.

·If the statement of claim just leaves a defendant guessing as to what the plaintiff's allegations are, it should be struck out.

I pointed out that whenever a person 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."

31. In this instance, in my view the submissions of counsel for the first defendant have merit. The plaintiff would not be entitled to the declaration sought that both contracts were manifestly unfair pursuant to the FTA, if the material facts pleaded were established. I am not satisfied that a reasonable cause of action is disclosed. Consequently the proceeding should be dismissed on this ground also.

32. Given the above it is not necessary to consider the other submissions of counsel.

Orders

33. The Orders of the Court are:

a) This proceeding is dismissed,

b) The plaintiff shall pay the costs of the first defendant of and incidental to this proceeding and the notice of motion of the first defendant filed 25th June 2014,

c) Time is abridged.

___________________________________________________________

Greg Manda Lawyers: Lawyers for the Plaintiff
Young & Williams Lawyers: Lawyers for the First Defendant