Kohu v Rapis [2019] PGNC 7; N7680 (6 February 2019)

N7680

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 716 OF 2017

BETWEEN:
AROS KOHU
Plaintiff

AND:
LORAH RAPIS
First Defendant

AND:
PAUL MOLAKA
Second Defendant

AND:
SAMSON SEVEN
Third Defendant

AND:
LIHIR MAINTENANCE SERVICES LIMITED
Fourth Defendant

AND:
ALEX TONGAYU, as the Registrar of Companies
Fifth Defendant

Kokopo: Anis J
2018: 23 November
2019: 6 February

NOTICE OF MOTION – Dismissal of proceeding – National Court Rules - Order 12 Rule 40(1) – want of reasonable cause of action, frivolity and abuse of court process – whether the Court should exercise its discretion and dismiss the proceeding

Case Cited:

John Kotape v. McConnell Dowell Construction PNG Ltd (2015) N6505

Counsel:

Mrs N. Rainol, for the Plaintiff

Ms J. Marubu, for the Defendants

RULING

6^th February, 2019

1. ANIS J: Two (2) applications returned before this Court on 23 November 2018. The first was by the plaintiffs for leave to amend the originating summons, and the second was by the first, second, third and fourth defendants (the defendants) to dismiss the proceeding.

2. I heard both applications. In regard to the plaintiff’s application, which was filed on 30 October 2018, I granted leave to amend the originating summons on 23 November 2018, that is, after both parties consented to the said relief.

3. This is my ruling in relation to the defendants’ application that was filed on 12 November 2018 seeking to dismiss the proceeding.

BACKGROUND

4. The plaintiff is a former shareholder of the fourth defendant. He alleges that the first, second and third defendants have removed him as a shareholder of the fourth defendant in breach of the various provisions of the Companies Act 1997 (the Companies Act) and the Articles of Association of the fourth defendant. He seeks various declaratory orders which include orders to reinstate him as a shareholder of the fourth defendant.

MOTION

5. The defendants, in their application, say the proceeding should be dismissed. They rely on Order 12 Rule 40(1) of the National Court Rules. They claim that the proceeding (i) discloses no reasonable cause of action; that it is frivolous and vexatious; and thirdly, that it amounts to an abuse of the court process. The defendants, however, did not make any submissions to the allegation of want of reasonable cause of action.

ISSUES

6. The main issues are as follows, (i), whether the claim is based on fraud, and if so, whether the plaintiff has commenced the proceeding using an incorrect originating process, and, (ii), whether this proceeding amounts to multiplicity of proceedings and therefore should be regarded as an abuse of the court process and should be dismissed.

FRAUD ALLEGATIONS

7. As their first ground, the defendants say the proceeding is frivolous and vexation. They claim that the allegations that are being raised by the plaintiff in the proceeding, relate to fraud, and that being the case, they say that the plaintiff should have commenced proceeding using the correct mode, namely, a writ of summons that is supported by a statement of claim. They say that by filing the originating summons herein therefore means that the proceeding is frivolous and vexatious and must be dismissed.

8. The plaintiff denies the defendants’ claim. He says that he is exercising his right to claim or acquire back his personal property, namely, his shares in the company which he says had been acquired from him by the defendants, in breach of the provisions of the Companies Act and the Articles of Association of the fourth defendant. He says that his claim is not based on fraud.

9. My attention was first drawn to the manner in which the defendants had laid out their argument on the subject matter. I ask myself this. Would an act of filing an incorrect originating process itself constitute the ground, frivolous or vexatious? I would answer, “no”, to this question. Let me explain. The ground frivolous and vexatious under Order 12 Rule 40(1) refers to a total lack of merit of a claim; that an action is incredible, silly or incontestably bad that it should not or never have been filed in the first place. For example, in the case of John Kotape v. McConnell Dowell Construction PNG Ltd (2015) N6505, Justice Hartshorn stated at paragraph 43 of his judgment, and I quote in part:

43. A proceeding is frivolous if it does not merit serious attention, is manifestly futile, discloses no reasonable cause of action, or is otherwise unsustainable: Wabia (supra), Siu v. Wasime (supra), Dengo v. Tzen Niugini (2011) N5043. A proceeding is vexatious if a defendant is put to the trouble and expense of defending claims that are a ‘mere sham’ or are incapable of succeeding: Wabia (supra), Siu v. Wasime (supra), Dengo v. Tzen Niugini (supra).

10. I would adopt these as my own. In this case, to argue that since a correct originating process (namely a writ of summons and statement of claim) was not used to plead fraud, that it therefore means that the action is frivolous and vexatious, is, in my view, misconceived. The National Court has the power to convert a proceeding to the one that may require pleadings in appropriate cases or circumstances. Such an argument raised by the defendants may be met with corrective measures because they relate to correct modes or mechanisms rather than to the substance or the merit of a claim. The only way I see where the defendants may argue the ground frivolous and vexatious in this instance, is if they contend that the claim is without merit. However, I note that that is not their contention. That said, even if such a claim is made (i.e., want of merit or reasonable cause of action), I would still dismiss it. I find that the claim is properly made and is properly before the Court. The plaintiff has asserted his purported right as a former shareholder of the fourth defendant. In my view, such claim is allowed under the provisions of the Companies Act.

11. I also uphold the plaintiff’s submission in reply where he has said that fraud was not pleaded as a cause of action. Again, the plaintiff is asserting his purported rights under the provisions of the Companies Act or under the Articles of Association of the fourth defendant. The National Court, in my view, has jurisdiction (section 1 of the Companies Act) to consider and make findings on allegations that are raised concerning breaches or application of the provisions of the Companies Act. The matter is properly before this Court. Suggestion or implication of fraud, or fraudulent activity or activities that may be found in the evidence that is filed by a party, is not, in my view, the same as a cause of action or an assertion of right by a plaintiff; it is not the same as the intention of a party in a matter which is reflected in the proceeding or in the pleadings. I note that the plaintiff has filed evidence that is already before the National Court in support of his claim, that is, for alleged breaches of the provisions of the Companies Act and the Articles of Association of the fourth defendant, by the defendants. One example would be to refer to his affidavit which was filed on 12 September 2017. In my view, the evidence therein shows a prima facie case, or it disclose a reasonable cause of action. By that, I of course mean that the pleading or the originating summons, is supported with evidence that is filed, and in the normal course, this should be left to the trial Court to determine. These would of course also require the defendants to call in their evidence at the trial to disprove the allegations.

12. I will dismiss this ground of argument. That said, this is not all. Let me now deal with the other ground why the defendants say the proceeding should be dismissed.

MULTIPLICITY OF PROCEEDINGS

13. The defendants also argue that there are other proceedings filed that are related to this proceeding. That being the case, they submit that the present proceeding amounts to multiplicity of proceedings and therefore should be dismissed. They rely on the affidavit of Paul Molaka filed on 12 November 2018. The plaintiff denies this.

14. I note that there were proceedings filed at the District Court by the defendants. What appear to be declaratory orders were obtained against the plaintiff in the Court below. And it seems that the plaintiff was out of time to challenge the District Court’s decision, and the plaintiff has applied to the National Court for extension of time to lodge his appeal. That proceeding appears to be pending before the National Court. In my view, I do not see the present proceeding, compared with the other proceedings, as amounting to multiplicity of proceedings. Assertion of the plaintiff’s right as a shareholder or a proceeding that concerns determination of a shareholder’s interest or rights can only be determined by the National Court. District Courts do not have jurisdictions over such matters. I refer to section 1 of the Companies Act where it gives exclusive jurisdiction to the National Court. And the plaintiff has, in my view, properly commenced this proceeding before this Court to ascertain his rights and to seek the relief as he is seeking for the first time. Whether he is able to establish his rights or not would be a matter for trial. And this. The sum of money involved or the value of the dispute by the plaintiff herein, involves money or monetary value that exceeds K10,000 which is well beyond the jurisdiction of the District Court. See section 21(1) of the District Courts Act Chapter No.40.

15. I therefore dismiss the second ground.

SUMMARY

16. In summary, I will dismiss the defendants’ application to dismiss the proceeding.
COST

17. Cost is discretionary. I will award cost to follow the event. Cost of the application will therefore be awarded to the plaintiff on a party/party basis to be taxed if not agreed.

THE ORDERS OF THE COURT

18. I make the following orders:

1. The first, second, third and fourth defendants’ application filed on 12 November 2018 is dismissed.
   
2. The first, second, third and fourth defendants shall pay the plaintiff’s cost for this application on a party/party basis which may be taxed if not agreed.
   
3. Time for entry of these orders is abridged to the date of settlement by the Registrar of the National Court which shall take place forthwith.
   

The Court orders accordingly.
________________________________________________________________
NatPhil & Associate Lawyers: Lawyers for the Plaintiff
Marubu Lawyers: Lawyers for the First, Second, Third and Fourth Defendants