N8177
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 459 OF 2017 (COMM)

BETWEEN:
SUPER VALUE STORE LIMITED
First Plaintiff/Cross-Defendant

AND:
STAR MOUNTAIN SUPERMARKET LIMITED
Second Plaintiff

AND:
JOEL DANGKIM as MANAGING DIRECTOR of STAR MOUNTAIN INVESTMENT HOLDING LIMITED
First Defendant

AND:
STAR MOUNTAIN INVESTMENT HOLDING LIMITED
Second Defendant/Cross-Claimant

Waigani: Anis J
2019: 26th November
2020: 31st January

NOTICE OF MOTION – Dismissal of proceeding – Order 12 Rule 40 – National Court Rules – whether the basis for dismissal apply to all plaintiffs – whether the proceeding should be dismissed in its entirety – whether abuse of process claim has been established – merit of pleadings discussed - whether the second plaintiff should be removed as a party

Cases Cited:

Eremas Wartoto v. The State (2015) SC1411

Counsel:

Mr D Levy, for the Plaintiffs
Ms Igua K Guba, for the Defendants
RULING

31 January, 2020

1.	ANIS J:	The defendants applied to dismiss the proceeding.  The application was contested and it was heard on 26 November 2019.  I reserved my ruling to a date to be advised.

2.	Parties have been notified so I will rule on it now.

BACKGROUND

3.	The plaintiffs commenced the proceeding on 12 May 2017.  They are seeking damages for alleged breaches of 2 agreements, namely, a management agreement and a shareholders’ agreement, against the defendants.  These are set out in their statement of claim.  In damages, they claim a sum of K9, 883,228 plus interest and costs.  

4.	The defendants have filed their defence.  In addition, the second defendant has filed a cross-claim against the first plaintiff.  It says the plaintiff and itself are equal shareholders of the second plaintiff.  It says they (i.e., second defendant and the first plaintiff) have entered into a written shareholders’ agreement and that the first plaintiff has allegedly breached the said agreement.  It seeks damages for breach of contract, interest and cost.

MOTION

5.	The defendants rely on Order 12 Rule 40(1)(a), (b) and (c) of the National Court Rules.  I refer to their submissions and I note that their main argument is based on abuse of process, that is, under Order 12 Rule 40(1)(c) of the National Court Rules.

EVIDENCE

6.	The defendants rely on 1 affidavit which is the affidavit of Ms Guba filed on 11 November 2019.  The plaintiffs, on the other hand, rely on the affidavit of Mr Levy filed on 25 November 2019.

COMMON GROUND

7.	It became apparent during presentation of submissions by both counsel that the some of the material facts were not disputed.  Let me state them.  Firstly, it is not disputed that the second plaintiff has been declared insolvent and that a liquidator has been appointed by an order of the Court, to liquidate its assets.  Secondly, it is not disputed that the first plaintiff had not obtained the consent of the liquidator before it joined the second plaintiff to this proceeding.  Thirdly, the defendants tend to concede that their main argument for dismissal relates to their submissions against the second plaintiff not being properly joined to the proceeding.

ISSUES

8.	To me, the main issues under the circumstances, are, (i), whether the proceeding should be dismissed in its entirety based on the fact that the first plaintiff had not obtained the consent of the second plaintiff before filing this proceeding, and if not, (ii), whether the second plaintiff should continue to remain as a plaintiff.

WANT OF CONSENT

9.	I would firstly refer to Order 5 Rule 3(1) and Order 8 Rule 2, of the National Court Rules.  They state, and I quote in part:

3.	Joint right. (8/3)

(1)	Where, in any proceedings, the plaintiff claims relief to which any other person is entitled jointly with him —
(a)	all persons so entitled shall be parties to the action; and
(b)	any of them who do not consent to being joined as a plaintiff shall be made a defendant.
……
8.	Addition of parties. (8/8)
……
(2)	A person shall not be added as plaintiff without his consent.

10.	I next refer to sections 298(1) and Schedule 8 of the Companies Act of 1997 (Companies Act).  They state, and I quote in part:

298.	Effect of commencement of liquidation.

(1)	With effect from the commencement of the liquidation of a company—
(a)	the liquidator has custody and control of the company's assets; and
(b)	the directors remain in office but cease to have powers, functions, or duties other than those required or permitted to be exercised by this Part; and
(c)	unless the liquidator agrees or the Court orders otherwise, a person shall not—
(i)	commence or continue legal proceedings against the company or in relation to its property; or
(ii)	exercise or enforce, or continue to exercise or enforce, a right or remedy over or against property of the company; and
……

SCHEDULE 8.—POWERS OF LIQUIDATORS.
Sec. 310(2).

The liquidator of a company has power to do all or any of the following:—
(a)	commence, continue, discontinue, and defend legal proceedings;
……

11.	Based on these provisions, it is clear that the consent of the second plaintiff must be obtained first before it could be joined or named as a party to this proceeding.  As I have stated above, the fact that no such consent was obtained by the first plaintiff to name the second plaintiff, is not in dispute.  This is also confirmed in the evidence of the parties that have been filed.  The second plaintiff is presently under liquidation.  It was put into liquidation by an order of the National Court on 6 June 2016.  Its appointed liquidator is Mr Richard Kuna.  I note that the first plaintiff has not furnished any evidence to say whether it had obtained the consent of the liquidator before naming the second plaintiff as a party to the proceeding.

ABUSE OF PROCESS

12.	The defendants argue that the lack of consent and authority given by the second plaintiff, amounts to abuse of court process.  I have heard submissions from counsel for the plaintiffs on this point.  To me, I do not find any convincing or justifying reasons presented.  Let me elaborate.  Annexure A to Mr Levy’s affidavit is a letter from his firm dated 21 November 2019.  He begins at paragraph 3 and I quote in part, Whilst we may agree with the view that a liquidated company cannot file proceedings….  And at paragraph 4 of the same letter, counsel states, and I quote, Therefore, to avoid multiplicity of proceedings and to avoid waste of time and resources, we intend to apply to have the liquidator, Mr Richard Kuna be joined as a party to this proceedings as a Third Defendant.

13.	The evidence to me clearly indicates that the first plaintiff had not obtained the consent of the liquidator, and that it plans to rectify the situation with corrective measures.  “Does these therefore amount to abuse of court process?”  I think the phrase abuse of court process is better defined by the Supreme Court in the case of Eremas Wartoto v. The State (2015) SC1411.  The Supreme Court stated at paragraph 37, and I quote:

37.	Turning then, to the matters in contest between the parties, we note that it is necessary for us to set out what is involved or is meant by the phrase “abuse of process”.  Firstly what this phrase means in our view is that there is a process which is being abused by someone. That usually entails someone using a process or procedure provided for by law contrary to its intended purpose, objective or proper and intended use. Hence, when there is a claim of an abuse of process, it is necessary to first establish what the process is and when and how it can be properly invoked, before determining if indeed there has been an abuse of that process.

14.	I adopt these view as my own herein.  And I find that the actions and inactions of the first plaintiff amount to abuse of process.  The process herein is that the consent of the liquidator is required before the second plaintiff may be joined as a plaintiff to this proceeding.  The rules and law for that is explained above in my judgment.  In this case, the first plaintiff failed to obtain the liquidator’s consent before it filed its proceeding and named the second plaintiff as a party.

DISMISSAL OF PROCEEDING

15.	Let me now address the first issue.  Should this Court dismiss the proceeding based on its finding concerning the ground, abuse of process?

16.	In my view, the answer may be best considered in reference to the pleadings or the statement of claim.  But even before that, I note that there is serious challenge put by the defendants in their defence to the statement of claim.  Further and perhaps most importantly for this purpose, is their cross-claim against the first plaintiff.  The main issues for trial appear to relate to the two main agreements, namely, the management agreement and the shareholders’ agreement, both of which were alleged to have been signed between the first plaintiff and the second defendant, and if I can put it this way, the pleadings show that both parties are privy to these agreements and they both allege various breaches under them.

17.	I also take into account the fact that the dismissal application is not based on want of reasonable cause of action or frivolity.  With that and given the fact that the pleadings, in my view, appear sufficiently pleaded, particularly between the first plaintiff and the second defendant, I find that this is not the type of case where I should exercise my discretion and dismiss the proceeding in its entirety.  I refuse to do so.  With that, let me now move on to consider the next issue.

SECOND PLAINTIFF AS A PARTY

18.	In light of my earlier findings concerning the second plaintiff’s lack of consent to be joined to this proceeding, and of my latter finding that the first plaintiff had abused the court process when it named or joined the second plaintiff to the proceeding, there is, in my view, no basis for the second plaintiff to remain as a party.  It must therefore be removed from the proceeding.  I will make consequential orders to that effect. 

19.	I note that the approach taken by the Court is also consistent with the alternative submissions by both counsel, that is, their request that the second plaintiff should be removed from the proceeding. 

SUMMARY

20.	I therefore refuse the main relief sought in the defendants’ notice of motion.  However, I will also add an order for the second plaintiff be removed as a party to the proceeding. 

COST

21.	An award of cost is discretionary.  Since I have refused the main relief sought in the notice of motion, I am not inclined to award cost of the notice of motion to the defendants.  I also note that I have found evidence of abuse of the Court process by the first plaintiff, that is, in naming the second plaintiff without obtaining the consent of its liquidator.  

22.	Under the circumstances, I will preserve the cost of the application and order that cost shall be cost in the cause.

ORDERS OF THE COURT

23.	I make the following orders: 

1.	The defendants’ notice of motion filed on 11 November 2019 is substantially refused.

2.	The second plaintiff is removed as a party to this proceeding.

3.	The parties’ costs shall be cost in the cause.

4.	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.
________________________________________________________________
Manase & Co. Lawyers:    Lawyers for the Plaintiffs
Allens Lawyers:                 Lawyers for the Defendants