Itutu Investment Ltd v Nafy Co Ltd [2021] PGNC 128; N8897 (30 June 2021)

N8897

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1774 OF 2019 (COMM)

BETWEEN:
ITUTU INVESTMENT LIMITED
Plaintiff

V

NAFY COMPANY LIMITED
First Defendant

AND:
JIMMY SIMIK
Second Defendant

AND:
EBON TIPAIYO
Third Defendant

AND:
SAMSON APINAI
Fourth Defendant

Waigani: Anis J
2021: 22^nd & 30^th June

NOTICE OF MOTION – 2 notice of motions – one for leave to file defence out of time and the other for default judgment – Order 7 Rule 6(2) and Order 12 Rule 28 – National Court Rules – considerations – exercise of discretion

Cases Cited:

Lina Kewakali v. The State (2011) SC1091
Agnes Kunton & Ors v John Junias & Ors (2006) SC929
David Lambu v Paul Paken Torato (2008) SC953

Counsel:

G.Kaore, for the Plaintiff
J Lome, for the Defendants

RULING

30^th June, 2021

1. ANIS J: I heard 2 applications on 22 June 2021. One was by the plaintiff for judgment to be entered, and the other was by the defendants for leave to file their defence out of time. I heard and reserved on the applications to a date to be advised.

2. Parties have been notified of today’s hearing, so I will proceed with my ruling.

BACKGROUND

3. With respect, it is quite difficult to understand the plaintiff’s pleadings as stated in its writ of summons and statement of claim filed 19 December 2019. But in summary, the plaintiff claims that its current shareholders were former shareholders of the first defendant. It alleges that the shareholders or at least the majority of them, sold their shares in the first defendant. It further alleges that by a resolution in 2009, the shareholders agreed to dissolve the first defendant and also divide the company assets of the first defendant. It claims that at the material time, the second, third and fourth defendants were not shareholders of the first defendant but were executives, and that without their knowledge, had taken steps to restore the first defendant back onto the company register.

4. It concludes by alleging that the actions or inactions of the defendants amount to malicious intent or intention, and it seeks damages including special damages for a liquidated sum of K240,000.

THE 2 MOTIONS

5. The plaintiff’s notice of motion was filed on 5 October 2020. The main relief reads, Judgment shall be entered for the Plaintiff for Un liquidated damages pursuant to Order 12 Rule 28 of the National Court Rules. The defendants’ notice of motion was filed on 3 December 2020. The main relief sought therein is, and I will paraphrase, that pursuant to Order 7 Rule 6(2) of the National Court Rules, leave be granted to them to file their defence out of time within 7 days.

SOURCE

6. The first thing I must consider for completeness, is the source or the jurisdictional basis of the motions. Order 12 Rule 28 and Order 7 Rule 6(2) of the National Court Rules (NCR) read:

28. Unliquidated damages. (17/5)

Where the plaintiff's claim for relief against a defendant in default is for unliquidated damages only, the plaintiff may enter judgement against that defendant for damages to be assessed and for costs. (Underlining mine)

......

6. Late notice. (11/6)

......

(2) Where a defendant gives a notice after the time limited for doing so, he shall not, unless the Court otherwise orders, be entitled to file a defence or do any other thing later than if he had given a notice of intention to defend within that time.

7. I begin with the plaintiff’s notice of motion. I must say at the outset that I find 2 problems with the relief and jurisdictional basis, as is pleaded therein. In relation to jurisdiction, I make this observation. Order 12 Rule 28 is a reference or instructive rule which may be invoked depending on the nature of the relief or claim concerned but only after when default has been established (Order 12 Rule 26 - NCR). It cannot, in my view, stand alone as the source in an application for default judgment that is based on want of filing of a defence within the prescribed time. The correct source for that is Order 12 Rule 25(b), which reads:

25. Default. (17/2)

A defendant shall be in default for the purposes of this Division—

......

(b) where he is required to file a defence and the time for him to file his defence has expired but he has not filed his defence; or

8. The second problem I see in the plaintiff’s notice of motion concerns the pleaded relief together with the source or Order 12 Rule 28. Order 12 Rule 28 is express. Further to what is stated above, it may be invoked if the sought relief in the statement of claim, where based upon which default is alleged, only relates to unliquidated damages. This is, however, not the case here because the plaintiff herein also seeks a liquidated damage of K240,000 which is pleaded in its statement of claim. Based on this liquidated relief, Order 12 Rule 28 therefore and in my view, is inapplicable.

9. For these reasons, I find the plaintiff’s notice of motion incompetent and will dismiss it.

OTHER MATTERS

10. Even if I may be wrong, there are, in my view, other serious defects I see with the plaintiff’s claim generally and also in regard to its pleadings.

11. Having had the opportunity to fully consider the claim and the pleadings, I make these observations. Firstly, the plaintiff’s standing appears to be in serious doubt, that is, for bringing this cause of action which appears to be really a claim by former shareholders of the first defendant against the first defendant. These shareholders are legal persons, and the proceeding appears to concern matters that are personal in nature in terms of their interests in the first defendant. As such, there are processes under the Companies Act 1997 (the Companies Act) where these former shareholders may commence against the first defendant. The plaintiff is a legal person, which is established under s. 16 of the Companies Act, and there seems to be lack of pleadings on how its interest has or will be affected, or why it has commenced proceeding in this nature. My second observation is this. The cause of action appears ambiguous as is pleaded in the statement of claim. The pleadings suggest a cause of action for malicious intent or malicious intention. There is no tort of malicious intent or malicious intention. There is, however, the tort for malicious prosecution, and malicious intent or intention is one of its elements that may be established in a court of law. It is therefore not proper, in my view, to plead malicious intent or intention as a tort or a cause of action.

12. Courts in this jurisdiction have held that an act of default does not automatically entitle the granting of default judgment. The Court must also be satisfied that the cause of action and the relief that is pleaded have foundations in law and are properly pleaded or construed in the statement of claim. The Supreme Court in Lina Kewakali v. The State (2011) SC1091, in view of earlier decisions in Agnes Kunton & Ors v John Junias & Ors (2006) SC929 and Lambu v Torato (2008) SC953, stated at paragraph 23:

23. In applications for default judgment, the applicant is saying that the defendant has not complied with the Rules of Court and that therefore, the plaintiff is, as of right, entitled to default judgment. A Court hearing an application for default judgment, should not just ‘tick the boxes’ so to speak but must also review the Statement of Claim to see if the action is one where default judgment can be entered. O.12 R.32 of the National Court Rules gives the Court a wide discretion to enter or not to enter, default judgment. Even when proof of due service or process on a defendant or proof of the default is established by the plaintiff/applicant, the Court still has a discretion to refuse to enter default judgment in cases where, for instance, the effect of the default judgment would affect the rights of other co-defendants or do not disclose a reasonable cause of action or that the default judgment cannot be sustained in law. (Kante Mininga v. the State (1996) N1458; Anton Kaluni v. Aiyale Warole (2001) N2114; Beecroft No. 51 Ltd v. Neville Seeto (2004) N2561; Urban Giru v. Luke Muta (2005) N2899). In this case, the Trial Judge obviously saw the inadequacies in the Statement of Claim and ordered as he did. In Bala Kitpa v. Vincent Auali (1998) N1773 another category was added that where a claim in a Writ raises serious allegations of fraud or deceit on the part of the plaintiff, in certain cases, the interest of justice would require those allegations to be proved by evidence in trial before judgment is given on the merits.

13. With this line of authorities and reasonings, I would also refuse to grant default judgment for the reason that the cause of action appears to lack merit. I will add that there is also reasonable basis to query whether the proceeding may also be regarded as frivolous given the questionable standing of the plaintiff and of its role, that is, to sue for the shareholders and their personal interest in the first defendant as pleaded, which may not concern its interest.

WAY FORWARD

14. Based on these preliminary considerations and rulings, I will dismiss the plaintiff’s notice of motion.

15. I ask myself this. What is the way forward? Should I proceed to hear the defendants’ notice of motion for leave to file their defence out of time? Or should I issue directional or consequential orders after my decision to dismiss the plaintiff’s notice of motion? I would prefer the latter. In my view, it is not necessary to deal with the defendants’ notice of motion. I will order the motion to be withdrawn. I will in its stead issue directional orders for the plaintiff to reconsider its position, and should it wish to pursue the matter, I will grant leave to it to amend its statement of claim and have that served on the defendants. I will also issue directions for the defendants to file and serve their defence.

COST

16. An order for cost of this nature is discretionary. I will order cost to follow the event on a party/party basis to be taxed if not agreed.

ORDERS OF THE COURT

17. I make the following orders:

1. The plaintiff’s notice of motion filed on 5 October 2020 is dismissed.
   
2. For the reasonings that I have given in my ruling and the consequential orders that I will make, they render the defendants’ notice of motion filed on 3 December 2020 unnecessary, and as such, I order its withdrawal.
   
3. The plaintiff is directed to re-consider its position, standing, and cause of action, that is, of whether it should seek leave to discontinue the proceeding.
   
4. If the plaintiff intends to pursue with the claim, leave is granted to it to file and serve its Amended Writ of Summons and Statement of Claim before or by 15 July 2021.
   
5. If the plaintiff utilizes term 4 of the order herein, the defendants shall file and served their defence before or by 29 July 2021.
   
6. The matter shall return to Court for directions hearing at 9:30am on Thursday 5 August 2021.
   
7. The plaintiffs shall pay the defendants’ cost of the application on a party/party basis which may be taxed if not agreed.
   
8. Time for entry of these orders is abridged to the date and time of settlement of these orders by the Registrar which shall take place forthwith.
   

The Court orders accordingly

________________________________________________________________
George Kaore Lawyers: Lawyers for the Plaintiff
Jeffersons Lawyers: Lawyers for the Defendants