Manihoru v Hudson [2022] PGNC 110; N9527 (28 March 2022)

N9527

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 219 OF 2019

BETWEEN
GODFREY MANIHORU
Plaintiff

AND
ROBIN HANI HUDSON
First Defendant

GEORGE IPI
Second Defendant

AND
ALEX TONGAYU as the Registrar of Companies
Third Defendant

AND
BENJAMIN SAMSON as the Registrar of Titles
Fourth Defendant

AND
TIRI J. WANGA as Acting Secretary of Lands Department
Fifth Defendant

Waigani: Linge AJ
2022: 16^th March

PRACTICE AND PROCEDURE- Claim based on fraud- application for summary judgment under O12r40, NCR inapplicable- Fraud & Limitation Act considered

LIMITATION OF ACTIONS-Fraud & Limitation Act, S 16 – whether contract founded on simple contract - allegation of fraud

Hudihan Limited was the owner of property situated at Section 51, Allotment 7, Port Moresby, National Capital District. The two (2) shareholders and directors of the Company, Agnes Hani and Ian Hudson both passed on in 2008 and 2009 respectively. In 2011 the first defendant purportedly became the sole director and shareholder of Hudihan Limited and on the 25 August 2012, he purportedly sold the said property to the second defendant. In 2015 Hudihan Limited became purportedly de-registered. The plaintiff who claims to have right to the property as an “aggrieved shareholder” claims that the sale of the said property from the first defendant to the second defendant was fraudulent in nature and filed this proceeding.

Held:

1. Dismissal of the proceeding for being statute barred pursuant to Section 16 of the Frauds and Limitation Act, 1988 is refused.
   
2. Dismissal of the cause of action for failure to comply with Section 5 of the Claim By and Against the State Act, 1996 is also refused.
   
3. The alternate order for dismissal pursuant to Order 12 Rule 40 of the National Court Rules is not applicable.
   

Cases Cited:

Alfred Alan Daniel v Pak Domoi Ltd (2009) SC970
Kappo No. 5 Pty Limited v Wong [1998] PNGLR 544
Lerro v Stagg (2006) N3050
Mamun Investment Limited v Nixon Koi (2015)
Oil Search Ltd v Mineral Resource Development Corporation Ltd (2010) SC1022
Philip Takori & Others v Simon Yagari & 2 others (2008) SC905.
Porgera Freighters Limited v Bank South Pacific Limited (2004) N2662
TSC Industries Ltd v Koim (2019) N8781

Counsel:

Ms. G Kubak, for the Plaintiff
Mr. S Japson, for the Second Defendant

RULING ON MOTIONS

28^th March, 2022

1. LINGE A J: On the 15 March 2022 I heard an application by the second defendant filed on the 13 December 2022. The application seeks dismissal of the proceedings on four (4) Grounds pursuant to:
   
   • (1) Section 16 (1) (a) of the Frauds and Limitation Act 1988;
     
   • (2) Failure to give Notice under Section 5 of the Claims by and Against the State Act 1996; or in the alternate pursuant to,
     
   • (3) Order 12 Rule 40, National Court Rules (hereinafter “NCR”);
     
   • (4) Rule 15 (1) (a) and Rule 15 (2) (a) National Court Listing Rules;
     
   • (5) Order for eviction.
     

Facts

2. This case is consolidated with OS NO. 895 of 2018 – George Ipi v Godfrey Manihoru as a consequential relief of reliefs sought in this Notice of Motion.
   
3. The plaintiff is alleging that he is a director and shareholder of Hudihan Limited (hereinafter “the Company”), now deregistered since 27 May 2015 and continues to occupy Allotment 7, Section 51, Granville, Port Moresby, National Capital District (hereinafter “the Property”) the subject of dispute.
   
4. The Company was owner of the Property which it transferred to the second defendant on the 25 August 2012. At time of the Sale the first defendant was the sole shareholder and director of the Company.
   
5. Plaintiff filed similar proceeding in (WS NO. 340 of 2015) which was dismissed by Justice Kariko on the 17 February 2016 for not being a director/shareholder of the company. The decision was never appealed.
   
6. The second proceeding filed by the plaintiff in WS NO. 282 of 2016 was also dismissed by Justice Dingake on the 22 November 2018 for failure to serve the Writ within the two (2) years of filing.
   
7. This is the third proceeding filed by the plaintiff claiming to be an “aggrieved shareholder” of the Company after the Court found that he is not a director nor a shareholder of the Company.
   
8. The second defendant who has title to the Property, is being denied occupation due to the continuous occupation of the Property by the plaintiff.
   

This Application

Submission by Counsels

9. Mr. Japson for the applicant relies on his own affidavit filed on the 13 December 2021 in support of his client’s case.
   
10. At this juncture, I express a view on the reliance and use of counsel’s affidavit in this proceeding. That while the affidavit cannot ipso facto be declared invalid; it might be considered unethical and contrary to good professional conduct. Counsel places himself prone to enter the witness box and act as witness to his client should the Court seeks oral evidence in support of his affidavit at the same time, he is required to prosecute the motion. Here lies the impropriety of such practice and must be discouraged.
    

Frauds and Limitation

11. Counsel for the applicant/second defendant refers me to the Supreme Court case of Mamun Investment Limited v Nixon Koi (2015) which held that the six (6) years period does not run from the date of discovery of the alleged cause of action but from the date it accrues.
    
12. This ruling is followed in TSC Industries Ltd v Koim (2019) N8781 a similar case to the current, the Court stated in part at paragraph 20 that:
    

“Pursuant to s. 16 (1) (a) Frauds and Limitations Act, a cause of action based upon tort, which includes fraud, must be brought within six years of the date that the cause of action accrued. “

13. Counsel submits that paragraph 14 of the Statement of Claim alleges that in May 2007 the plaintiff lodged his application with the third defendant for change of directorship and that in 2011, the first defendant made change to appoint himself as director as alleges in paragraph 28 of the Statement of Claim. Thus, the cause of action in tort which included fraud against the first and third defendant occurred between 2007 and 2011 and the six (6) years period lapsed at the end of 2018. This proceeding, filed on the 18 March 2019 is outside of the six years period required by Section 16 (1) (a) of the Frauds and Limitations Act is thus statute barred and be dismissed as against the first and third defendants.
    
14. On the sale of property, against the second, fourth and fifth defendants, Counsel submits that the cause of action arose not on the signing of the contract of sale on the 25 August 2012 but on the 11 September 2012 which was registration of the second defendant as proprietor. The six (6) years period lapsed on or around 11 September 2018 and these are proceedings filed on the 18 March 2019 is six months outside the six (6) years requirement of Section 16 (1) (a) of the Frauds and Limitations Act and is statute time barred and be dismissed.
    
15. The Plaintiff/Respondent relies as the affidavit in response of Godfrey Manihoru filed on the 7 March 2022.
    
16. Ms Kubak submits that the proceedings are not statutorily time barred as although there was an alleged transfer of the subject property that occurred in 2012, the knowledge of this transfer only came to the second plaintiff’s knowledge on the 25 March 2015 when he sighted the Sales advertisement published by the Century 21 Siule Real Estate Company magazine.
    

Section 5 of the Claims By and Against the State Act, 1996

17. Mr. Japson for the applicant/second defendant submits that since agents of the State have been named, notice should have been given within the six (6) months limit as provided by Section 5 (2) of (a) of the Act. Also, there is no evidence that extension was sought under Section 5(2) (i) (ii) of the Act to extend the purported notice given on the 19 December 2018. He submits that requirement to give notice under Section 5 of the Claims By and Against the State Act, 1996 is a condition precedent and since this cause of action is based on Tort, the required notice should have been given in compliance with Section 5 of the Act.
    
18. For the respondent/plaintiff, Counsel submits that the plaintiff did issue a Section 5 Notice prior to filing the present proceeding and even served on the third, fourth and fifth defendants and this is confirmed by the Affidavits of service filed in this court. However, despite the issuance of the Section 5 Notice and personal service being affected, the Investment Promotion Authority (hereinafter “the IPA”) and the State on their own volition have opted not to formalize their appearance in this matter or defend this claim.
    

Order 12 rule 40 of the National Court Rules

19. Counsel for the applicant/ second defendant refers to TSC Industries Limited v Joe Koim (supra) which lists and discusses various other cases and principles of law applicable in applications under Order 12 Rule 40 of the NCR.
    
20. Specifically, in this case he submits that the Company had been deregistered and removed from the records of the IPA Registry and the plaintiff claim that he is a director and shareholder of the Company and was illegally removed must be considered in light of Justice Kariko findings in OS 340 of 2015 that the plaintiff was not a director nor shareholder of the Company.
    
21. He submits that because of the above, all powers and properties of the defunct Company are vested in the Registrar of Companies under Section 372 and 373 of the Companies Act and as such the plaintiff cannot still maintain that he has any interest. This proceeding is frivolous or vexatious or an abuse of process and be dismissed with costs, he submits.
    
22. Ms Kubak for the plaintiff/respondent submits that Order 12 Rule 37 of the NCR clearly prohibits a claim based on all allegation of fraud to be dealt with summarily under Division 12.4 of the NCR and as this case involves one of the claims identified in Order 12 Rule 37 of the NCR, this makes Order 12 Rule 40 of the NCR inapplicable.
    
23. She cites Lerro v Stagg (2006) N3050 which stands for the principle that, “our judicial system should never permit a plaintiff or a defendant to be “driven from the judgmental seat “in a summary way,” without a Court having considered his right to be heard. “.
    
24. She submits that this proceeding sufficiently pleads fraud in the tampering of the Investment Promotion Authority (hereinafter “the IPA”) records and irregularities in the sale and transfer of the Property and the Court ought to allow the plaintiff’s claim to be progressed to trial so that the substantive issues of fraud and falsification of company records can be substantively determined.
    

Eviction

25. Counsel submits that if the reliefs sought in the Notice of Motion are granted in these proceeding in dismissing the entire proceeding, the relief sought in the second defendant’s case in OS NO. 895 of 2018 – George Ipi v Godfrey Manihoru be granted.
    
26. He submits that the property was bought in good faith through a person who was the Director and Shareholder of the company at the relevant time. The plaintiff is not the owner of the property and therefore the second defendant be given vacant possession of the property.
    

Legal Considerations

Frauds and Limitation

27. This is enshrined in Section 16 (1) (a) of the Frauds and Limitation Act 1988 which reads:
    

“(1) Subject to Sections 17 and 18, an action –

(a) That is founded on simple contract or on tort”

(b) to enforce a recognisance; or
(c) To enforce an award, where the submission is not by an instrument under seal; or

(d) To recover any sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of penalty of forfeiture, shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued.”

28. However, Section 18 of the Frauds and Limitation Act provides exceptions where a claim is one of specific performance of a contract or seeking injunctive or other equitable relief.
    

Section 18, Frauds and Limitation Act 1988 is as follows:

“Section 16 does not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief”

29. In Mamun Investment Limited v Nixon Koi (2015), PGSC 9; SC14O9 the Supreme Court, noted that in England from which our Fraud and Limitation Act can be traced, their equivalent provision to our Section 16 is their Section 2 of their Limitation Act 1939 which is subject to statutory exceptions under Section 26 of their Limitation Act.
    
30. Section 26, Limitation Act 1939 is relevantly:
    

“Where, in a case of any action for which a period of limitation is prescribed by this Act, either –(a) the action is based upon the fraud of the defendant or his agent... or (b) the right of action is concealed by fraud of any such person as aforesaid, or the action is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake... or could with reasonable diligence have discovered it.”

31. There is no equivalent provision to Section 26 in our Frauds and Limitation Act and thus as the law stands, time limitation is judged from accrual and not upon the discovery of the fraud. It held:
    

“22. Given the above and that our Frauds and Limitations Act does not provide for the exceptions referred to and in particular in respect of a cause of action based on fraud, we are of the view that the decision in Tau Gumu v Papua New Guinea Banking Corporation (2001) N2288 should not have been followed and that the trial judge erred in so doing and in findings as he did that the plaintiffs’ cause of action accrued at the latest, was 13 December 1990, the registration date of the transfer of title. Consequently, as the respondents’ action is founded on simple contract and on tort and it was brought after the expiration of six years commencing on the date on which the cause of action accrued, it is caught by s. 16 (1) Frauds and Limitations Act.”

32. This ruling was followed in TSC Industries Ltd v Koim (2019) N8781, the Court stated in part at paragraph 20 that:
    

“Pursuant to s. 16 (1) (a) Frauds and Limitations Act, a cause of action based upon tort, which includes fraud, must be brought within six years of the date that the cause of action accrued...”

33. In Oil Search Ltd v Mineral Resource Development Corporation Ltd (2010) SC1022 the Supreme Court held amongst others that the determination of whether an action is time barred entails a finding of three (3) matters:
    

(a) identification of the cause of action, (b) identification of the date on which the cause of action accrued and (c) the categorization of the cause of action.

34. The Supreme Court further held:
    

“23 If a claim is clearly time barred and provided the statutory defence is pleaded in defence, a motion for dismissal is warranted and it would-be quite appropriate for the National Court to hear and determine it. Where, however, the case for dismissal is not clear cut, the decision-making process of first identifying the cause of action, identifying the date on which the cause of action arose and deciding the question of whether the cause of action is founded on simple contract or is an action upon a speciality ...”

35. The applicant/second defendant had pleaded the statutory defence in his defence. He also filed his defence on the 24 September 2019. The Statement of Claim filed on the 18 March 2019 seeks orders in terms of declarations and orders. The two (2) categories of declaratory orders being sought are: (a) declarations annulling share transfer, annulment of directorship and lack of proper authority to act for the Company, and (b) the other declaration seeks annulment of transfer of the Property.
    
36. If I accept (which I do not), that in 2011 the first defendant altered the records at the IPA to make him sole shareholder and director of the Company as pleaded, the six (6) years period would have lapsed at the end of 2017 and this cause of action filed on the 18 March 2019 is clearly outside of the six years period required by Section 16 (1) (a) of the Frauds and Limitations Act 1988.
    
37. On the sale of property, against the second, fourth and fifth defendants, I accept the submission of Counsel for the applicant /second defendant that the accrual date is the registration of the second defendant as proprietor of the Property on the 11 September 2012, the six (6) years period lapsed on or around 11 September 2018. This cause of action filed six months outside the six (6) years requirement of Section 16 (1) (a) of the Frauds and Limitations Act is clearly time barred.
    
38. In finding as above, I decline the plaintiff’s contention that the cause of action arose upon his discovery of the allege fraud on the 25 March 2015when the plaintiff allegedly sighted the Sales advertisement published by the Century 21 Siule Real Estate Company.
    
39. 39.Counsels have not addressed whether these declarations are to be regarded as “other equitable relief “in which case, would come under exceptions under Section 18, Frauds and Limitation Act.
    

Section 5 of the Claims by and against the State Act, 1996

40. The requirement for giving notice is a mandatory and critical factor where the State or its entity or agent is named in a proceeding. Section 5 requires that such a notice must be given within six (6) months from the date of the cause of action.
    
41. Section 5 provides:
    

“(1) No action to enforce any claim against the State lies against the State unless notice in writing of intention to make a claim is given in accordance with this section by the claimant to: -

(a) The Department Head of the Department responsible for justice matters; or
(b) The Solicitor – General

(2) A notice under this section shall be given;

(a) within a period of six months after the occurrence out of which the claim arose; or
(b) where the claim is for breach for a contract, within a period of six months after the claimant became aware of the alleged breach; or
(c) within such further period as-

(i) the Principal Legal Advisor; or
(ii) the court before which the action is instituted, on sufficient cause being shown, allows.

(3) A notice under Subsection (1) shall be given by-
(a) personal service on an officer referred to in Subsection (1); or
(b) leaving the document at the office of the officer with the person apparently occupying the position of personal secretary to that officer between the hours of 7.45a.m. and 12 noon, or 1.00p.m. and 4.06p.m., or such other hours as may from time to time be declared by or under the Public Services (Management) Act 1995 to be the normal public service hours of duty, on any day which is not a Saturday, Sunday or a public holiday declared by or under the Public Holidays Act 1953”.

42. In this case, the Section 5 Notice to the State was given on the 19 December 2018. The cause of action arose in 2012 upon the registration of title, although the notice preceded the filing of the Statement of Claim on the 18 March 2019, it was nevertheless not within a period of six months after the plaintiff became aware of the alleged breach.
    
43. Even if as alleged by the plaintiff that he became aware of the allege fraud in 2015, the notice is still beyond the requisite six (6) months.
    

Order 12 Rule 40

44. The applicant/ second defendant also seeks an alternative order for entry of judgement pursuant to Order 12 Rule 40 of the NCR.
    

The Rule reads: “Frivolity, etc. (13/5)

(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings.
(a) No reasonable cause of action is disclosed; or
(b) The proceedings are frivolous or vexatious; or
(c) The proceedings are an abuse of the process of the Court, the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

(2) The Court may receive evidence on the hearing of an application for an order under Sub-rule (1).”

45. The law pertaining to application for dismissal of proceedings based on O 12 r 40 NCR is settled in our jurisdiction. There are long lists of cases both in the Supreme Court and the National Court which have dealt with and confirmed the principles. See TSC Industries Limited v Joe Koim (2019) N8781; Kerry Lerro t/a Hulu Hara Investment Limited v Philip Stagg & Ors, (2006) N3050; Philip Takori & Others v Simon Yagari & 2 others (2008), SC 905.
    
46. The principles are:
    

(i) a plaintiff should not be driven from the judgement seat in a summary manner and the Court should be cautious and slow in exercising its discretionary power.

(ii) The court has an inherent jurisdiction to protect and safeguard its processes from abuse.

(iii) The purpose of O,12 r,40 is to give the Court power to terminate actions or claims which are plainly frivolous or vexatious or untenable.

(iv) A frivolous claim is one that is characterized as a claim that is plainly and obviously untenable, that cannot possibly succeed and bound to fail if it proceeds to trial.

(v) A vexatious claim is one that is said to be a sham and cannot succeed where it seeks to merely harass the opposing party and put that party to unnecessary trouble and expense in defending or proving the claim.

47. The cause of action here is based on allegations of fraud. Order 12 r 37 of the NCR succinctly states that where a claim is based on allegation of fraud, summarily procedure is inapplicable. Cases on point include Kappo No.5 v Wong [1998] PNGLR 544 wherein the Supreme Court at p. 549 stated:
    

“It is clearly intended that such allegations must be dealt with at the substantive trial”, see also Porgera Freighters Limited -v- Bank South Pacific (2004) N2662 and Alfred Alan Daniel -v- Pak Domoi Ltd [2009] PGSC 7; SC 970 wherein the Supreme Court at p.9 held “...it is abundantly clear that summary judgement is not available in a claim based on fraud”.

48. The present proceeding sufficiently pleads fraud, albeit in a convoluted way, relating to the tampering of IPA records and irregularities in the whole sale and transfer and registration of the Property.
    
49. Even though the applicant / second defendant pleads O12 r40, NCR as an alternate, I find this as a critical legal point for consideration in this application in the interest of dispensing justice, which can be properly dealt with in a proper hearing of the substantive issues/ allegations of fraud.
    

Conclusion

50. I have taken judicial notice that on the 17 February 2016 Justice Kariko in OS 340 of 2015, Godfrey Manihoru v Robin Hani Hudson & others wherein he considered the plaintiff’s claim of sole shareholding and directorship of the Company and found that the claim was without legal basis and held that Godfrey Manihoru has no legal standing.
    
51. The Company stands deregistered, and the law requires the properties of the company vests with the Registrar of Companies pursuant to Section 372 and 373 of the Companies Act 1997.
    
52. The pleading of fraud relating to the plaintiff’s appointment and fraudulent removal as director/shareholder by the Registrar of Companies and the that pertaining to the registration of the second defendant as the proprietor of the property are matters for substantive hearing.
    
53. Unless dispel in a hearing, Robin Hani Hudson became director and shareholder of Hudihan Limited on the 24 August 2015 according to the Company Extract as of 24 January 2020.
    
54. I draw no conclusion on the plaintiff’s claim of being an “aggrieved shareholder” in this proceeding.
    

Findings

55. In the end, I find that the substantive issues based on allegation of fraud will need to be resolved in a proper hearing. Defendants have the liberty of raising issues of time limitation and relevant notices during the substantive hearing.
    

Order

56. I order as follows:

1. The application for dismissal of the proceeding for being statute barred pursuant to Section 16 of the Frauds and Limitation Act, 1988 is refused.

2. Dismissal of the cause of action for failure to comply with Section 5 of the Claim By and Against the State Act 1996 is also refused.

3. The alternate order for dismissal pursuant to Order 12 Rule 40 of the National Court Rules is not applicable.

4. A further alternate order pursuant to Rule 15 (1) (a) and Rule 15 (2) (b) of the National Court Listing Rules is not considered.

5. Parties bear own costs.
______________________________________________________________
Kubak & Kubak Lawyers: Lawyers for the Plaintiff
Japson & Associates Lawyers: Lawyers for the Second Defendant