Geru Holdings Ltd v Kruse [2017] PGNC 370; N7053 (18 October 2017)

N7053

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS (CC4) No.657 of 2017
BETWEEN:
GERU HOLDINGS LIMITED
Plaintiff

AND:
JAMES KRUSE of DELOITTE TOUCHE TOHMATSU
First Defendant

AND:
BANK OF SOUTH PACIFIC LIMITED
Second Defendant

Waigani: David, J

2017: 10 & 18 October

PRACTICE & PROCEDURE – application for interim injunction – relevant considerations – application refused.

Cases cited:
Papua New Guinea Cases

Anderson Agiru v Electoral Commission and The State (2002) SC687
Application by Anderson Agiru (2003) SC704
Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853
National Housing Corporation v Paul Asakusa & Anor (2012) PGSC 6; SC1165
National Executive Council and Luke Lucas v Public Employees Association [1993] PNGLR 264
PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126
Robinson v National Airlines Commission [1983] PNGLR 476
Telikom PNG Ltd v ICCC (2008) SC906

Overseas case

Hubbard v Vosper [1972] 2 W.R.L. 389 at 396:

Counsel:

Camillus M., Gagma, for the Plaintiff
Ian R. Shepherd, for the First Defendant
Klink Manua, for the Second Defendant

RULING

18 October, 2017

1. DAVID, J: INTRODUCTION: This is a ruling on the plaintiff’s application which is moved pursuant to a notice of motion filed on 16 August 2017, seeking an order in the nature of an injunction to restrain the defendants from enforcing or executing or putting into effect a Deed of Appointment of Agent for Sale purportedly signed by Robin Fleming under power of attorney on behalf of the Bank South Pacific Limited on 3 January 2014 and signed by James Kruse on 17 November 2015 (the Deed of Appointment of Agent for Sale) pending the determination of the substantive proceedings.
   
2. In the substantive proceedings commenced by originating summons filed on 16 August 2017, the plaintiff seeks, inter alia, a declaration that the Deed of Appointment of Agent for Sale is illegal therefore null and void.
   
3. The plaintiff’s application is supported by the affidavit of Peter Kama sworn on 15 August 2017 and filed on 16 August 2017 and an Undertaking as to Damages given by the plaintiff under seal dated and filed on 16 August 2017.
   
4. The defendants contest the application.
5. The first defendant relies on the affidavit of Ian Raymond Shepherd sworn on 29 August 2017 and filed on 31 August 2017. The second defendant has not filed any affidavit in response.
   

BRIEF BACKGROUND

6. The plaintiff is or was the owner of several properties located in Kundiawa in the Simbu Province which were all mortgaged to the second defendant. These properties are; Allotment 10 Section 3 and Allotments 10, 11 and 12 Section 4 (the properties). By the Deed of Appointment of Agent for Sale, the first defendant, James Kruse was appointed as agent for the sale of the properties. The first defendant advertised the properties for sale and inviting expressions of interest initially in December 2015 and later in April 2017 in the Post Courier on both occasions. Allotment 10 Section 3 was sold to Morobe Properties Limited for K3,100, 000.00 by the second defendant exercising its power of sale as mortgagee.
   

PLAINTIFF’S EVIDENCE

7. Peter Kama is a director and shareholder of the plaintiff company.

8. The Deed of Appointment of Agent for Sale is invalid on the basis that:

1. it is entered into between the first defendant and the second defendant without his knowledge and consent;
2. there is no execution date on page 3 or anywhere elese;
3. not all pages were signed;
4. the deed is unsealed;
5. the execution dates are different “almost 2 years apart”;
6. the signature of Robin Fleming, Chief Executive Officer of the second defendant is not the same as in the second defendants 2014 Financial Report therefore “forged”.
   

9. Based on the invalid Deed of Appointment of Agent for Sale and without the knowledge and consent of the plaintiff as director and shareholder of the plaintiff company, the defendants have advertised the properties for sale inviting expressions of interest initially in December 2015 and recently in April 2017. One of the properties namely, Allotment 10 Section 3 was sold to Morobe Properties Ltd, a company owned by a Gerard Philip who is a close friend of the first defendant on 3 January 2014.

10. He was not given a notice of default under Section 67 of the Land Registration Act so all transactions performed by the defendants pursuant to the invalid Deed of Appointment of Agent for Sale are being done without his knowledge and consent.

FIRST DEFENDANT’S EVIDENCE

11. Mr Shepherd is the lawyer for the first defendant. He represented the first defendant in proceedings commenced by OS 797 of 2015 (Geru Holdings Limited v James Kruse & Deloitte Touche Tohmatsu) in which the plaintiff sought similar relief to that sought in the current proceedings, that is, inter alia, that the first defendant and Deloitte Touche Tohmatsu were not “appointed or authorised agents of the plaintiff to deal with the said properties”and injunctions to effectively restrain the sale of the properties. Interim injunctions obtained in those proceedings were discharged by Justice Hartshorn on 23 January 2017 and His Honour also ordered that the proceedings continue on pleadings.

12. However, instead of continuing on pleadings and contrary to the order of Justice Hartshorn, the plaintiff on 3 May 2017 discontinued those proceedings and the next day on 4 May 2017 commenced fresh proceedings by WS No.428 of 2017 (annexure “A”). In those proceedings, the plaintiff is also challenging the sale of the properties and essentially the same parties are defendants in those proceedings. The same argument questioning the validity of the Deed of Appointment of Agent for Sale raised by Mr Kama in OS No.797 of 2015 as demonstrated in paragraphs 12 to 14 of his affidavit sworn on 24 February 2016 (annexure “B”) is also raised in paragraphs 10 to 14 of his affidavit in the current proceedings and they are almost in identical terms.

13. On 26 May 2017 and again on 13 June 2017, Justice Kariko heard an application for interim injunctions to stay the sale and advertisement of the properties which are the subject of the current proceedings. In support of that application, Mr Kama relied on his affidavit sworn on 30 April 2017 (annexure “C”). That affidavit and the affidavit relied upon in the current proceedings are almost identical in every respect with respect to the first thirteen paragraphs. On 5 July 2017, Justice Kariko dismissed the plaintiff’s application on the basis that the plaintiff’s conduct was regarded as an abuse of process.

14. The plaintiff has appealed that ruling in the Supreme Court in SCA 105 of 2017. An application for a stay of Justice Kariko’s ruling pending appeal was heard by Justice Kassman on 24 August 2017 and he has reserved his ruling.

15. The same issues are currently before the National Court in WS No.428 of 2017 and whilst those proceedings remain on foot coupled with the fact that an appeal is pending from an interlocutory ruling of Justice Kariko, the plaintiff has filed the current proceedings.

PLAINTIFF’S SUBMISSIONS

16. The plaintiff submits that the application for an interim injunction should be granted on the basis that:

1. the Deed of Appointment of Agent for Sale is invalid because:
   
   • (a) it is entered into between the first defendant and the second defendant;

(b) there is no execution date on page 3;
(c) the deed is unsealed;
(d) the execution dates are different “almost 2 years apart”;

• (e) the signature of Robin Fleming, Chief Executive Officer of the second defendant is not the same as in the second defendants 2014 Financial Report therefore “forged”.

2. there exists a controversy between the parties with regard to the conduct of the defendants in connection with the sale of the properties for which the plaintiff seeks declarations and permanent injunctions.
3. there is a prima facie case grounded on the invalid Deed of Appointment of Agent for Sale.
4. it was in the interest of justice to grant the injunction because; unless injuncted, there was a real threat that the defendants will sell the rest of the properties as they have done with one already; damages would not be an adequate remedy; and the undertaking as to damages guarantees payment of the defendants’ costs should the plaintiff be unsuccessful at trial.
   

FIRST DEFENDANT’S SUBMISSIONS

17. The first defendant submits that the application should be refused on the basis that:

1. the plaintiff is presumably not qualified to make any comment on the validity of any document at law nor is he qualified to give any opinion as to whether a signature is a forgery.
2. the plaintiff appears to have confused the date of the Power of Attorney under which Mr Fleming executed the Deed of Appointment of Agent for Sale with the date of execution.
3. same issues raised in two earlier proceedings (OS 797 of 2015 and WS 428 of 2017) are raised in the current proceedings.
4. the proceedings are misconceived on the grounds that:
   
   • (i) there is no cause of action because on the face of it, the Deed of Appointment of Agent for Sale appears to be valid and the plaintiff’s challenges to its legality are fanciful.
   • (ii) the proceedings are an abuse of process of the Court as the plaintiff is challenging the same document he has challenged in two previous proceedings so the principles of res judicata and issue estoppel apply.
   • (iii) the plaintiff has instituted multiple proceedings seeking essentially the same remedy which should not be tolerated by the Court.
5. the value of an undertaking as to damages given by a company that was clearly in default of its obligations to the second defendant as found by Justice Kariko is questionable.
6. there is no urgency in this application because there was no evidence to show that the defendants propose to sell any of the properties and of any contract for sale having been entered into.
   

SECOND DEFENDANT’S SUBMISSIONS

18. The second defendant supports the first defendant’s application; it adopts the first defendant’s submissions and makes no additional submissions.

ISSUES

19. The main issue that I need to decide is whether the plaintiff’s application seeking an order in the nature of an injunction to restrain the defendants from enforcing or executing or putting into effect the Deed of Appointment of Agent for Sale should be granted?

RELEVANT LEGAL PRINCIPLES

20. The grant of an interlocutory relief is an equitable remedy and it is a discretionary matter. The purpose of an interlocutory injunction is to preserve the status quo until the determination of the substantive action. That position was succinctly put in Robinson v National Airlines Commission [1983] PNGLR 476 where at p. 480, Andrew, J held:

“The purpose of an interlocutory injunction is to preserve the status quo until the hearing of the main action “where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo”, per Frost C.J. in Mt Hagen Airport Hotel Pty Ltd v Gibbs and Anor [1976] PNGLR. 316. No real principles can be laid down as to when they should or should not be granted except they are granted when “just or convenient” and what falls within that description must differ substantially from case to case. As Lord Denning M.R. said in Hubbard v Vosper [1972] 2 W.R.L. 389 at 396:

“In considering whether to grant an interlocutory injunction, the right course for a judge is to look at the whole case. He must have regard not only to the strength of claim but also to the strength of the defence and then decide what is best to be done. Sometimes it is best to grant an injunction so as to maintain the status quo until the trial. At other times it is best not to impose a restraint upon the defendant but leave him free to go ahead... The remedy by interlocutory injunction is so useful that it should be kept flexible and discretionary. It must not be made the subject of strict rules.”

21. The relevant principles governing applications for the grant of interim injunctions in this jurisdiction are well settled and these were restated and reaffirmed by the Supreme Court in Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853. So in order for an injunction to be granted, it is incumbent upon an applicant to demonstrate that:

(a) there is a serious question to be determined (either of law or fact) in the substantive proceedings;

(b) the balance of convenience favours the grant or continuity of the injunction;

(c) damages is not an appropriate remedy if the injunction is not granted;

(d) an undertaking as to damages has been given by the applicant.

22. The determination of these considerations are relevant to the exercise of the Court’s discretion.

APPLICATION OF THE PRINCIPLES TO THE PRESENT CASE
Is there a serious question to be determined (either of law or fact) in the substantive proceedings?

23. The plaintiff’s main contention as I see it essentially is that as the Deed of Appointment of Agent for Sale has defects hence invalid, the defendant should be injuncted from acting on his purported appointment under the Deed of Appointment of Agent for Sale by advertising the properties for sale and inviting expressions of interest or generally.

24. The first and second defendants have raised the defence of res judicata and issue estoppel and the question of multiplicity of proceedings in their submissions so I think I should address that contention first.

25. At common law, the defence of res judicata is a complete defence to an action: per Injia, CJ in Telikom PNG Ltd v ICCC (2008) SC906. Issue estoppel is an extension or species of res judicata: per Injia, CJ in Telikom PNG Ltd v ICCC. Usually, where a court upholds a defence of res judicata, it will also find that the proceedings are an abuse of process: Application by Anderson Agiru (2003) SC704. However, the rejection of a defence of res judicata will not necessarily result in rejection of a submission that the proceedings are an abuse of process of the court because an abuse of process can exist in many different ways: National Executive Council and Luke Lucas v Public Employees Association [1993] PNGLR 264.

26. The principles on res judicata which apply in this jurisdiction were succinctly summarised by Injia, CJ in Telikom PNG Ltd v ICCC. In order for the defence of res judicata to succeed, a party must demonstrate that:

1. the parties in both matters are the same;
2. the issues in both matters are the same;

3. the previous judgment or decision extinguished the foundations of the claim or the right to set up an action. The result is therefore final and conclusive and it binds every other Court; and
4. a court of competent jurisdiction made the first decision.

27. Issue estoppel arises where the causes of action are different, but the parties or their privies are the same and the same issue is raised and conclusively determined by the Court: per Injia, CJ in Telikom PNG Ltd v ICCC; National Housing Corporation v Paul Asakusa & Anor (2012) PGSC 6; SC1165. In order for the defence of issue estoppel to succeed, a party must demonstrate that:

1. the parties or their privies are the same;
2. the same issue is raised in both proceedings;
3. the decision was final; and
4. a court of competent jurisdiction made the first decision.

28. Do the defendants have a defence of res judicata? It suffices to say without addressing all factors that since the parties in earlier matters are not all the same, the defence will not succeed.

29. Do the defendants have a defence of issue estoppel? I will briefly address the relevant factors to determine that question.

30. Are the parties or their privies the same? The parties are different, but the party against whom estoppel is sought to be applied was a party in OS No.797 of 2015 and WS No.428 of 2017.

31. Are the issues in both matters the same? The issue of the appointment of the first defendant as agent for sale under the Deed of Appointment of Agent for Sale is one amongst other issues raised in OS No.797 of 2015 and WS No.428 of 2017.

32. Was the decision final? No. The reasons for dissolving the interim injunctions granted by consent on 16 December 2015 (annexure “C” of Mr Kama’s affidavit) by Justice Hartshorn in OS 797 of 2015 on 23 January 2017 are not before the Court so I cannot speculate on the reason(s) behind that decision. The written reasons for refusing to grant interim injunctions by Justice Kariko in WS No.428 of 2017 however are in evidence which I have perused. Those proceedings also raise the issue of the appointment of the first defendant as agent for sale. At paragraph 9 of that ruling, His Honour cautioned himself not to try and determine legal issues properly for trial based on conflicting evidence as to facts before him. His Honour also made an observation at paragraph 15 of his ruling about the appointment of an agent, but did not go to the extent of addressing the purported defects on the Deed of Appointment of Agent for Sale. That to my mind is a live issue.

33. Did a court of competent jurisdiction make the first decision? Yes.

34. All prerequisites to the defence of issue estoppel are absent so the defence must fail.
35. The principle enunciated by Application by Anderson Agiru is that where a person goes to court and has his or her case finalised and then goes back to court with the same grievance, such a multiplicity of proceedings, in the absence of a good explanation, will amount to an abuse of process of the court.

36. In Anderson Agiru v Electoral Commission and The State (2002) SC687, the Supreme Court explained abuse of process in the following terms:

“.... the court’s inherent power is its authority to do all things that are necessary for the proper administration of justice. Such inherent power consists of all powers reasonably required to enable the court to perform efficiently its judicial functions and to protect its dignity and integrity. Essential to these inherent powers is the court’s duty to protect itself by ensuring that vexatious litigants do not abuse the court’s process by instituting frivolous or vexatious suits.....

In The State v Peter Painke [1976] PNGLR 210, O’Leary AJ emphasized that:

“mere motive, however reprehensible, will not be sufficient” (to constitute abuse of process) “it must be shown that, in the circumstances in which the interposition of the court is sought, the remedy would be unsuitable, and would enable the person obtaining it fraudulently to defeat the rights of others, whether legal or equitable”.

The court must ensure that a multiplicity of proceedings is not commenced by unsuccessful litigants. That is that a litigant having selected one mode of proceeding and having failed to obtain a remedy, cannot generally be entitled to then institute an alternative proceeding seeking the same remedy that was denied in the earlier proceeding.”

37. Clearly, these proceedings amount to an abuse of the process of the Court given the issue about the legality or not of the appointment of the first defendant as agent for sale under the Deed of Appointment of Agent for Sale was raised in OS No.797 of 2015 and WS No.428 of 2017. The affidavits of Peter Kama relied on to pursue applications for interim injunctions in those proceedings and the current proceedings which are in evidence all place reliance on that supposition.

38. My initial impression is that there appears to be a strong argument advanced by the first defendant about the validity of the Deed of Appointment of Agent for Sale as opposed to the plaintiff’s, but that is matter for substantive determination. So whilst there is a serious question to be determined (either of law or fact) in the substantive proceedings, I agree with the defendants’ submission that multiple proceedings filed by the plaintiff seeking essentially the same relief should not be tolerated and the plaintiff should make an election as to which proceedings he intends to pursue.

Does the balance of convenience favour the grant of the injunction?

39. I adopt my reasons above in stating that the balance of convenience does not favour the grant of the injunction sought.

Are damages not an appropriate remedy if the injunction is not granted?

40. In PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126, it was held that if damages could adequately compensate an applicant, then an injunction should not be granted. In WS No.428 of 2017, the plaintiff and others seek damages under various heads, so if its application for an injunction is not granted and they eventually succeed in their claims, damages would be an appropriate remedy.

Has an undertaking as to damages been given by the applicant?

41. The plaintiff has, but I agree with the defendants’ submission that its value is questionable in circumstances where its ability to meet its loan obligations with the second defendant is in dispute.

CONCLUSION

42. As the plaintiff has failed to meet all requirements for a grant of an injunction, I would exercise my discretion in favour of the defendants by refusing the application for an order in the nature of an injunction with costs which I now do.

ORDERS

43. The formal orders of the Court are that:
    
    • (a) the plaintiff’s notice of motion filed on 16 August 2017 is dismissed.
    • (b) all relief sought in the notice of motion are refused.
    • (c) the plaintiff shall pay the defendants’ costs of and incidental to the motion, if not agreed, to be taxed.
      

___________________________________________________________________
Gagma Legal Services : Lawyers for the Plaintiff
Ashurst : Lawyers for the First Defendant
In-house lawyers : Lawyers for the Second Defendant