Josiah v Raphael [2016] PGNC 436; N7640 (7 April 2016)

N7640

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 4759 OF 2003

BRIAN JOSIAH for himself and & 81 others
Plaintiffs

V

STEPHEN RAPHAEL, Acting Secretary for the Department of Defence
First Defendant

COL KEWA, Chief Personal Papua New Guinea Defence Force
Second Defendant

COMMODORE PETER ILAU, Commander Papua New Guinea Defence Force
Third Defendant

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Defendant

Waigani: Kariko, J
2015: 9^th October
2016: 7^th April

PRACTICE & PROCEDURE – application to dismiss proceedings – O12 r 40 National Court Rules – relevant principles – claim by soldiers for unpaid allowances – service of section 5 notice – whether claims statute-barred – default in giving discovery – O9 r15(1) National Court Rules

EQUITY – equitable estoppel – whether State estopped by its conduct from paying the claims – equity cannot override statutory law

Cases cited:

Ace Guard Dog Security Services Limited v Lindsay Lai (2003) N2459
Curtain Brothers (PNG) Limited v UPNG (2005) SC788
Joe Kerowa v MVIL (2010) SC1100
Kerry Lerro v Phillip Stagg & Ors (2006) N3050
Olympic Stationery Limited v The State (2001) N2194
Phillip Takori & Ors v Yagari & Ors (2008) SC905
Rawson Construction Ltd & Ors v The State (2004) SC 777
Sao Gabi & State v Kasup Nate & Ors (2006) N4020
Simon Mali v The State (2002) SC 690
Tohian and The State v Tau Liu (1998) SC566

Legislation:

Claims By and Against the State Act 1996
Frauds & Limitations Act 1988
National Court Rules

Counsel:

Mr L Karri, for the Plaintiffs
Mrs M Ai, for the Defendants

RULING

7^th April, 2016

1. KARIKO, J: The defendants (collectively, the State) have moved an application to dismiss the proceedings.
   

Brief background

2. The plaintiffs claim outstanding allowances dating back to the period from the 1970s to the 1990s that were to have been paid to them while overseas on training as soldiers of the PNG Defence Force. After 2001 progress in the plaintiffs’ claims gained momentum and were processed for payment by the State (through the Department of Defence and the Department of Finance), but the payments did not eventuate and this suit was then filed on 12^th June 2003.
   
3. On 17^th October, 2003 default judgement was entered in favour of the plaintiffs after the defendants failed to file their Defence. That decision was appealed to the Supreme Court on two main grounds, namely that the primary Judge failed to consider that:
   
   • (1) The proceedings were incompetent for want of a notice under section 5 of the Claims By and Against The State Act 1996 (the Claims Act); and
   • (2) The claims were statute-barred pursuant to section 16 of the Frauds & Limitations Act 1988 (the Frauds Act).
     
4. The Supreme Court in its decision of 1^st March 2005 rejected the first ground holding that the lack of a section 5 notice must be properly pleaded in the Defence to be relied upon. However the appeal was allowed on the grounds that the primary Judge did not properly address his mind to the question of whether the claims may be statute-barred and further, it was not a liquidated claim so the damages ordered contravened section 12(3) of the Claims Act. The Court granted leave to the appellants (the defendants in these proceedings) to file their Defence within 7 days and the matter was remitted to the National Court.
   
5. The State filed a Defence pursuant to the Supreme Court order pleading that the plaintiffs’ claims are not only incompetent for lack of a section 5 notice under the Claims Act, but also for being filed outside the time-limit allowed by the Frauds Act.
   
6. During the Discovery process the defendants gave discovery while the plaintiffs have yet to respond to the Notice for Discovery served on them by the State on 9^th June 2005.
   

Application to dismiss

7. In this application the defendants contend that:
   
   • (1) The proceedings are incompetent and are an abuse of process as the plaintiffs failed to give notice of their claims under section 5 of the Claims Act, and should be dismissed under O12 r40(1)(c) of the National Court Rules;
   • (2) The claims are statute-barred as they were filed well outside the 6 year time-limit prescribed by section 16 of the Frauds Act, and therefore do not disclose a cause of action warranting dismissal also pursuant to O12 r40(1)(c); and
   • (3) The plaintiffs defaulted in giving discovery and that renders the proceedings liable for dismissal under O9 r15(1) of the National Court Rules.
     

O12 r40 - Principles

8. The applicable principles in relation to applications under O12 r40 are well settled; see for example Kerry Lerro v Phillip Stagg & Ors (2006) N3050 and Phillip Takori & Ors v Yagari & Ors (2008) SC905. These principles include:
   
   • (1) The purpose of O12 r40 is to give the Court power to terminate actions or claims which are clearly frivolous or vexatious or untenable.
   • (2) The Court should be cautious and slow in exercising its discretionary power to summarily dismiss a claim.
   • (3) The phrase “a reasonable cause of action” means a legal right or form of action known to law.
   • (4) The Court has an inherent jurisdiction to protect and safeguard its processes from abuse.
   • (5) A frivolous claim is one that is characterized as a claim that is plainly and obviously untenable, that cannot possibly succeed if it proceeds to trial.
   • (6) A vexatious claim is one that is said to be a sham and cannot succeed where it seeks to merely harass the opposing party and put that party to unnecessary trouble and expense in defending or proving the claim.
     

Section 5 notice

9. Section 5 of the Claims Act provides, among others, that a claim against the State must be made within six months after the claim arose. A notice of an intention to make a claim pursuant to that section is a condition precedent to issuing proceedings against the State; Tohian and The State v Tau Liu (1998) SC566. It is mandatory that the notice is given to the State prior to issuing the proceedings; Olympic Stationery Limited v The State (2001) N2194.
   
10. The State submitted that no section 5 notice was served in respect of the plaintiffs’ claims. Evidence was produced to confirm that the Case Management System of the Department of Justice & Attorney-General does not contain any record of receipt of a section 5 Notice in relation to the present proceedings. A print-out from the computer database of the initiating page of the present court action indicates the Solicitor-General’s file was opened on 19^th June 2005, which happens to be a week after service of the writ on the State. The field for date of receipt of a section 5 notice however is blank.
    
11. The plaintiffs have not produced a copy of the notice they allege in their statement of claim was served on 30^th April 2003. They argued that the State has not conclusively proved that the notice was not given and that it should have produced extracts of the register of inward correspondence for the period around 30^th April 2003 to confirm the State’s position. That argument is misconceived. The onus is on the plaintiffs to prove their claims and that includes satisfying the Court on the balance of probabilities of the relevant facts supporting their claims. That includes proving that a section 5 notice was served. The State has presented credible evidence in support of its argument whereas the plaintiffs merely rely on their pleadings, which of course is not evidence.
    
12. I find that no section 5 notice was given to the State prior to commencing this litigation.
    
13. Even if a section 5 notice was given on 30^th April, 2003, that would have been outside the time-limit within which to give such notice. Section 5(2)(a) requires the notice to be given within 6 months of when a claim arises. As I note later in discussing section 16(1) of the Frauds Act, the claim for unpaid entitlements, being the cause of action, accrued when each plaintiff completed his overseas training, which between all the plaintiffs ranged from between 9 to 28 years prior to 2003. I also note in that discussion that the plaintiffs say that the cause of action started to run in 2001. If that is correct, the supposed section 5 notice of 30^th April, 2003 is not valid as it was served out of time.
    

Statute-bar

14. Section 16(1)(a) of the Frauds Act states that “Subject to Sections 17 and 18, an action ... that is founded on simple contract or on tort ... shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued.” Sections 17 and 18 are irrelevant for purposes of the present case.
    
15. The claims are for unpaid entitlements. The State emphasized that the incidental allowances were due to the plaintiffs while on training overseas. The majority of the plaintiffs completed their training in the 1970s and the 1980s while a few underwent their training in the 1990s, and 1994 appears to be the last year. The allowances would have been due to the soldiers at the time of their training. The cause of action for each claimant accrued when training completed and that occurred more than 6 years before this court action was filed.
    
16. Mr Karri for the plaintiffs responded that while his clients’ did not dispute the claims are more than 6 years since they arose, the plaintiffs’ cause of action accrued in 2001 when payments were made for similar claims by other soldiers and when at the same time, the Department of Defence “revisited” the claims and “acknowledged the indebtedness” by letter dated 28^th June 2001 to the Department of Finance requesting for settlement of outstanding claims including incidental allowances for overseas training.
    
17. I do not accept Mr Karri’s submissions. His clients admit that their claim arose more than 6 years before the court proceedings were filed. The cause of action accrued when the plaintiffs became aware the entitlements were due but not paid, and that was at the time of their training. As the various training completed well before the time-limit stipulated in Section 16(1)(a) of the Frauds Act, the plaintiffs’ claims are clearly statute-barred.
    

Default in discovery

18. O9 r15(1) of the National Court Rules grants the National Court discretionary power to make “such order as it thinks fit” where a party has defaulted in complying with the requirements of the Rules in relation to discovery and inspection. Where the proceedings are by way of a writ of summons and the defaulting party is the plaintiff, the Court may dismiss the proceedings; O9 r15(1)(a).
    
19. It is well-settled that dismissal of proceedings following default in giving discovery should not be ordered readily. In Ace Guard Dog Security Services Limited v Lindsay Lai (2003) N2459 Sakora, J emphasised the caution that the discretionary powers under O9 r15(1)(a) to dismiss proceedings should not be quickly applied and that dismissal may be considered in circumstances where there is repeated default in compliance verging on chronic, or discovery is inadequate prejudicing a fair trial and proper conduct of the defendant’s case. These principles were approved by the Supreme Court in Curtain Brothers (PNG) Limited v UPNG (2005) SC788.
    
20. The plaintiffs explained that they did not think it necessary to reply to the State’s notice for the simple reason that all the indications at the time were that the State was going to settle the claims.
    
21. While the explanation is not entirely acceptable, clearly the default was not repeated nor verging on chronic. I would exercise my discretion against dismissal for defaulting in giving discovery. And if the proceedings were to continue, the plaintiffs could have been directed to give discovery.
    

Representative action

22. Mrs Ai for the State also pointed out that 46 of the 82 plaintiffs (namely plaintiffs numbered 6,11 and 39-82) did not give specific instructions (evidenced in writing) to their lawyers to act for them, which is a procedural requirement for a representative action, confirmed by case authorities including Simon Mali v The State (2002) SC 690.
    
23. As that submission is not grounded in the State’s amended notice of motion, I am not inclined to consider it now as the failure to include the issue in the notice has not allowed the plaintiffs to properly respond to it.
    

Equitable estoppel

24. The plaintiffs submitted that even if the grounds raised by the State for dismissal of the proceedings are established, the State is estopped from denying the claims for a number of reasons, including the following undisputed facts:
    
    • (1) Similar claims by other soldiers were paid out;
    • (2) The processing of the plaintiffs’ claims by the State (principally through the Department of Defence, Department of Justice & the Attorney-General and the Department of Finance) had progressed to an advanced stage where payments were to be made except for an issue concerning their legal representation;
    • (3) a total of K400,000 (in the form of 2 cheques) were actually been paid to the plaintiffs – K300,000 after the order for default judgement and K100,000 after the Supreme Court appeal - settling a part of the total claim;
    • (4) Senior officers from the Department of Defence and the Department of Justice & the Attorney-General had assured the plaintiffs the claims would be settled and payments were forthcoming; and
    • (5) The State showed no interest in the proceedings when they were listed for summary determination earlier.
      
25. The plaintiffs submitted that by its conduct, the State had waived its right to contest the claims and that it would be most unfair to the plaintiffs if the State did not now settle their claims.
    
26. It is trite law however that the equitable doctrine of estoppel cannot be used to validate or sanction an illegal act, illegal action, illegal deed, illegal contract or transaction. A leading authority confirming this principle is Rawson Construction Ltd & Ors v The State (2004) SC 777, a case where the Solicitor General allowed a number claims to proceed against the State without complying with the requirements of section 5 of the Claims Act. The Court explained the legal position in these terms:
    

“It therefore follows in our view that, if indeed the Solicitor General allowed those other claims without meeting the condition precedent in s. 5 of the Claims By and Against the State Act 1996, they would be nothing short of illegal claims. Thus, if we admitted the evidence in question, they will not advance the Appellants’ claim in any respect. The law cannot simply permit one illegal claim to proceed merely because another illegal claim proceeded. After all, one wrong or illegal act does not justify or correct another.” (My underlining)

27. After referring to a number of relevant case authorities including the Rawson Construction case, his honour Injia, DCJ (as he then was) again stressed the principle this way in the case of Sao Gabi & State v Kasup Nate & Ors (2006) N4020at [57]:
    

“In my view, the law is very well settled in this jurisdiction that the equitable doctrine of estoppel cannot override clear mandate of statutory law. Equity cannot override statutory law. Equity simply follows the law. For this reasons, whilst it is true that the State had settled a number of NLC awards made without jurisdiction; a Court of law cannot ignore clear breaches of the law once the breach is brought to its attention.” (My underlining)

28. The Supreme Court stated succinctly in Joe Kerowa v MVIL (2010) SC1100 that “an estoppel cannot be invoked in respect of a statutory condition precedent.”
    
29. The plaintiffs’ submission on equitable estoppel therefore cannot stand. Equity cannot override the statutory law, and that of course includes the Claims Act and the Frauds Act.
    

Conclusion

30. These proceedings must therefore be dismissed for want of a section 5 notice under the Claims Act and for being statute-barred pursuant to section 16(1) of the Frauds Act.
    
31. While costs normally follow the event, this matter has come thus far partly due to the conduct of the State in addressing the claims and in particular the representations by senior officers of the State that the claims would be settled.
    

Orders

32. The orders of this Court are::
    
    • (1) The defendants’ motion is granted.
    • (2) These proceedings are dismissed as an abuse of process, for not disclosing a reasonable cause of action and for being frivolous.
    • (3) The parties shall bear their own costs.
      

PNG Legal Services: Lawyer for the Plaintiffs
Posman Kua Aisi Lawyers: Lawyer for the Defendant