Geru Holdings Ltd v Kruse [2017] PGNC 411; N7650 (5 July 2017)

N7650

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 428 OF 2017

GERU HOLDINGS LIMITED
First Plaintiff

HOMELAND JOINT VENTURE LIMITED
Second Plaintiff

PETER KAMA as the Director of Geru Holdings Limited and the Director of Homeland Joint Venture Limited
Third Plaintiff

-V-

JAMES KRUSE
First Defendant

DELOITTE TOUCHE TOHMATSU
Second Defendant

ROBIN FLEMING as the Chief Executive Officer of Bank of South Pacific
Third Defendant

BANK OF SOUTH PACIFIC LTD
Fourth Defendant

Waigani: Kariko, J
2017: 26^th May, 13^th June & 5^th July

PRACTICE & PROCEDURE – application for interim injunctions – relevant considerations – serious question to be tried – damages as an adequate remedy – whether abuse of process

Cases Cited:

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
Employers Federation of Papua New Guinea v Papua New Guinea Waterside Workers and Seaman’s Union and Arbitration Tribunal (1982) N393
Michael Wilson v Clement Kuburam (2016) SC1489
OS 797 of 2015: Geru Holdings Limited v James Kruse & Deloitte Touche Tohmatsu, Unreported Judgement dated 23^rd January, 2017
PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126
Robinson v National Airlines Commission [1983] PNGLR 478

Legislation:

Fairness of Transactions Act 1993
Frauds and Limitations Act 1988

Counsel:

Mr C Gagma, for the Plaintiffs
Mr J Brooks, for the First and Second Defendants
Mr S Ahabh, for the Third & Fourth Defendants

RULING

5^th July, 2017

1. KARIKO, J: The plaintiffs have moved for interim injunctions and a stay against the defendants from continuing to advertise for sale three properties owned by the first plaintiff and from selling those properties.
   
2. The Statement of Claim is rather lengthy and somewhat convoluted. As I understand it, the plaintiffs allege:
   
   • (1) negligence against the fourth defendant, Bank of South Pacific Limited (BSP)
   • (2) deceit/misrepresentation against BSP
   • (3) unfair or unconscionable conduct against BSP pursuant to the Fairness of Transactions Act 1993
   • (4) negligence against the second defendant, Deloitte Touche Tohmatsu (Deloitte).
     
3. The negligence claim against BSP is also pleaded against the CEO of the bank, Robin Fleming, the third defendant. Similarly, the negligence claim against Deloitte is also made against its employee, James Kruse, the first defendant.
   

Brief background

4. In brief, BSP has appointed Deloitte as its agent to sell the following properties owned by the first plaintiff , Geru Holdings Limited (Geru Holdings):
   
   • (1) Allotment 10 Section 3 Kundiawa
   • (2) Allotments 10, 11 and 12 Section 4 Kundiawa
   • (3) Allotment 11 Section 12 Kundiawa

(the Properties)

5. BSP has registered mortgages over the properties for loans advanced to Geru Holdings and its related company Piunde Limited (Piunde) which has been placed into liquidation. Both companies are owned by Peter Kama, the third plaintiff. Geru Holdings guaranteed the loans.
   
6. Deloitte has nominated James Kruse to take relevant steps on behalf of Deloitte as agent of BSP to sell the Properties as a result of indebtedness by both Geru Holdings and Piunde to BSP upon defaulting in their loan repayments. Deloitte has in the past and most recently in April this year advertised the Properties for sale calling for expressions of interest. In response to the latest advertisement, the plaintiffs filed this proceeding and now seek the interim relief earlier mentioned.
   

Legal principles

7. Case authorities such as Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853 have established that in order for the Court to grant an interim injunction, an applicant must show that:
   
   • (1) There are serious questions to be tried and that an arguable case exists;
   • (2) An undertaking as to damages has been given;
   • (3) Damages would not be an adequate remedy if the interim order is not granted; and
   • (4) The balance of convenience favours the granting of the interim order.
     
8. Similar factors apply in deciding a stay application, especially the need to show that the applicant has an arguable case.
   
9. In weighing up the evidence at this stage, I am mindful that I need not try to resolve conflicts of evidence as to facts or the relevant legal issues that are for the trial proper.
   

Serious question to be tried

10. In relation to the consideration of whether there is a serious question to be tried, the case authorities state that an applicant must demonstrate that he has an arguable case with a real possibility of ultimate success; see for example Robinson v National Airlines Commission [1983] PNGLR 478.
    
11. The claims against BSP relate to alleged actions and conduct of BSP in 2007/2008 in relation to an additional loan sought by Piunde to inject into Homeland Joint Venture Limited (Homeland JV) a joint venture company formed with the Simbu Provincial Government to distribute liquor in Simbu.
    
12. In my view, there is a good argument that the claims of negligence and deceit/misrepresentation are statute-barred pursuant to Section 16 Frauds and Limitations Act 1988 which provides that an action based on tort must be brought within six years from when the cause of action accrued.
    
13. Similarly, there is a strong case to assert that the claim of unfair/unconscionable conduct is statute-barred pursuant to Section 11(1) Fairness of Transactions Act 1993 which basically provides that proceedings under the Act shall be commenced:
    
    • (1) soon after a party to a transaction suffers a disadvantage or realizes the transaction is unfair; and
    • (2) within three years of the transaction.
      
14. Negligence pleaded against Deloitte and James Kruse is grounded on the claim that they owed a duty of care:
    
    • (a) to disclose to the loan debtor and the guarantor that it had been appointed as agent for the sale of the mortgaged properties.
    • (b) to notify the loan debtor and the guarantor about the sale of the properties
    • (c) to be transparent, open and fair with the guarantor or mortgagor
    • (d) to ensure (sic) plaintiffs get independent legal advice as to its fairness and legalities.
      
15. In my view, there is no legal basis to claim that an agent, appointed to sell a property on behalf of a bank exercising its rights to sell as a secured mortgagee over that property, owes the duty of care that are claimed by the plaintiffs.
    
16. Ultimately, I therefore find there is no serious question to be tried.
    

Damages as adequate remedy

17. If I am wrong and there is a serious question to be tried, I next determine whether damages would compensate the applicant should it be found that his legal rights have been infringed by the party he is seeking to enjoin: Employers Federation of Papua New Guinea v. Papua New Guinea Waterside Workers and Seaman’s Union and Arbitration Tribunal (1982) N393. Interlocutory injunctive relief should be refused if damages would be an adequate remedy: PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126.
    
18. The plaintiff is claiming damages as relief so I have no difficulty finding that damages would be an adequate remedy if the interim injunction is not granted and the plaintiffs suffer loss between now and if they eventually succeed with their claims.
    
19. I am also satisfied that BSP would be able to meet those damages.
    

Abuse of process

20. I also find the present application to be an abuse of process.
    
21. In Michael Wilson v Clement Kuburam (2016) SC1489 Gavara-Nanu, J noted that circumstances amounting to an abuse of process includes where the processes of the court have been improperly used. Cases have emphasised that an abuse of process will exist if a claimant who is unsuccessful in one proceeding makes the same claim in another proceeding – when he returns to Court for “a second bite at the cherry”; see Anderson Agiru v Electoral Commission and The State (2002) SC687, Application by Anderson Agiru (2003) SC704.
    
22. In the recent proceeding filed by Geru Holdings (OS 797 of 2015: Geru Holdings Limited v James Kruse & Deloitte Touche Tohmatsu, Unreported Judgement dated 23^rd January, 2017) Hartshorn J refused the continuation of interim injunctions restraining the sale of the Properties that he had earlier granted ex parte. Further to that refusal, his Honour ordered the action proceed by way of pleadings.
    
23. Rather than acting pursuant to that order and seeking leave to add Homeland Joint Venture Limited and Peter Kama as plaintiffs and BSP and Robin Fleming as defendants, OS 797 of 2015 was discontinued and this proceeding was then filed the very next day together with the present application that seeks effectively the same interim injunctions sought in OS 797 of 2015.
    
24. In my opinion, the plaintiffs and in particular Mr Kama and Geru Holdings are having “a second bite at the cherry”. The present proceeding was filed in order to again seek interim injunctions that were recently refused in a related action. This amounts to improper use of the court’s process and is therefore an abuse of process.
    

Conclusion

25. For the reasons above, the application for interim injunctions and the alternative stay application must therefore be refused with costs awarded in favour of the defendants.
    

Order

26. The Court orders:
    
    • (1) The plaintiffs’ notice of motion filed 12^th May 2017 is dismissed.
    • (2) The plaintiffs shall pay the defendants’ costs of and incidental to the notice of motion to be taxed if not otherwise agreed.

_____________________________________________________________
Gagma Legal Services: Lawyer for the Plaintiffs
Ashurst Lawyers: Lawyer for the First & Second Defendants
BSP Legal Division: Lawyer for the Third & Fourth Defendants