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CL Toulik Business Consultant Ltd v Kuek [2006] PGSC 32; SC876 (6 November 2006)

SC876

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]


SCA NO. 63 OF 2004


BETWEEN:


C. L. TOULIK
First Appellant


AND:


CL TOULIK BUSINESS CONSULTANT LTD.
Second Appellant


AND:


ANDY KUEK
First Respondent


AND:


FINCORP LIMITED
Second Respondent


Waigani: Hinchliffe, Davani, & Lay, JJ.
2006: 29 August and
3 November


SUPREME COURT APPEAL- National Court practice and procedure- remedy granted not sought by a party- parties had no opportunity to be heard on remedy granted- whether unfair to parties- whether denial of right to be heard.
SUPREME COURT ACT S16(C) -whether Court should grant order not sought on appeal-whether party had full opportunity to be heard.


Cases Cited:


Papua New Guinea Cases:


Papua Club Inc v Nusaum Holdings Ltd (2005) SC812


Overseas Cases
Kanda v Government of Malaya [1962] UKPC 2; [1962] AC 322;
Bhalla v One Stop Lighting [2001] VCAT 1976 (11th of October 2001).


Other Authority:
Aronson Dyer Groves, Judicial Review of Administrative Action; 3rd Ed


Legislation:


Banks and Financial Institutions Act 2000
National Court Rules Order 4 rule 31


Facts


The Respondent applied by motion in the court below to vacate the trial date of the action on the ground that the Second Respondent was under statutory management pursuant to the provisions of the Banks and Financial Institutions Act and the Appellants had not obtained the consent of the Central Bank or leave of the Court pursuant to Section 44 of that Act. Alternatively the Respondents applied for the proceedings to be struck out on the basis that the Statement of Claim did not disclose a good cause of action. The judge did not rule on the alternative application. On the application relating to the Banks and Financial Institutions Act Section 44 the judge found that the Appellants had not complied with the
Act and struck out the action.


Held


  1. Fourteen (14) days from notice that a statutory manager has been appointed to a party is a reasonable time to make application for consent or leave pursuant to the Banks and Financial Institutions Act.
  2. A judge should not grant relief on a basis not argued nor grant a remedy not sought without giving the parties an opportunity to be heard on the basis or remedy. To do so is unfair to the parties as it deprives them of full knowledge of the case to be met and the possible consequences.
  3. This court will exercise the powers granted to it by Supreme Court Act Section 16 (c) to give such judgment as or to have been given in the first instance because it is satisfied that the Appellant had full opportunity to be heard before it on the merits of the pleaded cause of action in the Court below.
  4. There could have been no cause of action based on copyright at the time the writ was issued, hence the statement of claim did not disclose a good cause of action.
  5. Appeal refused. Orders of the trial judge confirmed.

Counsel:


N. Kiuk, for the Appellants
F. Waleilia, for the Respondents


1. BY THE COURT: This is an appeal from an interlocutory judgment of the National Court, Waigani on the 28 of April 2004. Leave to appeal was granted on the 19 of May 2005.


Background


2. The Appellants issued proceedings under WS No. 1469 2001 claiming infringement of the First Appellant’s copyright in a concept called a "microcredit scheme". Pleadings were exchanged and the matter was set down for trial.


3. On the 27 of March 2003 the Respondent advised the Appellants in writing that the Second Respondent had been placed under statutory management in February 2002 pursuant to the Banks and Financial Institutions Act ("BFIA)" and that the Appellants should seek the consent of the Central Bank or the leave of the Court pursuant to the provisions of BFIA s.44 to continue with the proceedings. This did not happen and on the 14 October 2003 the Respondents filed a motion seeking the following orders:


"3 .The trial of this action be vacated on the ground that the Plaintiffs had not obtained leave to continue with the action per Section 44(1) of the Banks and Financial Institutions Act 2000;


4. Alternatively, the Plaintiffs statement of claim herein be dismissed as disclosing no reasonable cause of action."


4. The motion was heard in November 2003 and a decision delivered on the 28 of April 2004 in which the cause of action was dismissed on the sole ground of noncompliance with s.44(1) of the BFIA by the Appellants. That decision is the subject of this appeal.


5. The grounds of appeal read as follows:


"3.1 His Honour erred in law in dismissing the substantive matter for non compliance with Section 44(1) of the Banks and Financial Institutions Act 2000, when that provision is merely directory and does not warrant such an order


3.2 His Honour erred in law and in fact when he failed to consider that Section 44(1) of the Banks and Financial Institutions Act did not impose a time limitation to seek leave or obtain permission from the Central Bank.


3.3 His Honour erred in law when he dismissed the substantive proceedings on a different ground that was not before the court for its determination.


3.4 His Honour erred in law and in fact when he found that there is no cause of action when in fact the cause of action is founded on copyright law.


3.5 There was a total miscarriage of justice in the entire conduct of the hearing which resulted in the decision made.


Submissions


6. Both the Appellants and the Respondents relied upon written and oral submissions. The Appellants submitted that the BFIA Section 44 does not impose any time limit as to when a person can make application for leave of the Court or for consent of the Bank. Leave or consent could be sought at any time. The Appellants did seek consent by letter dated 30 March, 2004. Failure to obtain leave or consent does not automatically terminate legal proceedings. In their written submissions the Appellants submitted that the provisions of s.44 of the BFIA were directory. However, in oral submission counsel agreed with the court that the opening words of the provision were mandatory.


7. The Respondents submission on the BFIA s.44 was solely oral. It was submitted that the Respondents did not take issue with the Appellants point and that it was open to the Court to draw an inference that the trial judge was in error. We were asked to note that at the time the motion was moved there was no consent or leave pursuant to BFIA s.44.


8. Both counsel made submissions on the merits of the application to dismiss the proceedings for failing to show a good cause of action, and the Respondents invited us to substitute an order dismissing the National Court proceedings on the basis of failure to comply with BFIA s.44, with an order dismissing the proceedings on the basis that there was no reasonable cause of action disclosed by the pleadings. The Respondents advanced arguments on the merits of the cause of action submitting that at the relevant time there was no copyright law, whereas the Appellants restricted their written argument to the procedural law on dismissing proceedings for failing to show a good cause of action. Orally it was submitted that the micro credit scheme deserved copyright protection because it was a literary work where "labour, sound judgment and literary skill were required": Intellectual Property Law of Australia p139, 2nd Ed McKeogh and Stewart.


Our Reasons


Ground 3.1 of the appeal


9. The BFIA s.44 reads as follows:


"44. Effect on legal proceedings of statutory manager taking control of the business of an Authorized Institution.


(1) A person cannot begin or continue a proceeding in a court against an Authorized Institution while a statutory manager is in control of the business of the Authorized Institution unless


(a) the court grants leave on the ground that the person would be caused hardship if leave were not granted; or


(b) the Central Bank consents to the proceedings beginning or continuing.


(2) A person intending to apply for leave of the court under Subsection (1)(a) shall give the Central Bank at least 10 days notice of the intention to apply, and the Central Bank may apply to the court to be joined as a party to the proceedings for leave.

(3) In this Section, a reference to a proceeding against an Authorized Institution includes a reference to a cross-claim or third party claim against an Authorized Institution."


10. Counsel for the Respondent submitted that the words in s.44 (1) are mandatory in nature. Although the Appellants written submissions suggested that those words were directory in nature, counsel for the Appellants agreed with the court of that they are mandatory. We agree with both counsel that the words are mandatory in nature. Consequently Ground 3.1 of the Notice of Appeal is not made out and fails.


Ground 3.4.


11. We deal with this ground next as it can be quickly disposed of. We carefully perused the reasons of the trial judge and we could not find any reference to the substantive cause of action or the merits of the substantive cause of action. We invited counsel to draw our attention to any part of the judgment which dealt with the cause of action and nothing was drawn to our attention. This ground is simply wrong in that his Honour did not find "that there is no cause of action". His Honour made no findings in relation to the cause of action. There has been no appeal from his Honour's failure to make a ruling on the submissions made by both counsel in the court below with respect to the application to dismiss the proceedings as disclosing no cause of action. Ground 3.4 therefore fails.


12. There are no other grounds which raise the merits of the substantive action.


Ground 3.2


13. Whilst his Honour did not specifically refer to a finding that the BFIA s.44(1) did not impose a time limitation, he quite clearly did consider the issue of time in relation to it. He makes the following references:


"... the Plaintiff's lawyers were notified of the statutory manager in March 2003 and reminded of the need to obtain leave under Section 44(1) of the Act


The Respondents have not filed any affidavit material to dispute the claims by the Applicants nor have they raised any substantive response to the effect of Section 44 of the Act.


The Defendants have consistently reminded the Plaintiffs on the need to obtain leave from the Court or obtain consent from the Central Bank but for reasons only known to themselves have not taken any steps to observe these helpful hints."


14. And we consider that his Honour correctly directed himself to the issue of time. The words of BFIA s.44(1) are mandatory. Every day after the appointment of a statutory manager during which a cause of action already commenced continues to subsist, it does so contrary to the provisions of the mandatory words. Therefore, once a Plaintiff is aware of the appointment of a statutory manager to a defendant, application for consent or leave must be made within a reasonable time. Evidence before us, which was not before the trial judge, shows application for the consent of the Central Bank was made one year and three days after the Appellants were made aware of the requirement to seek that consent. In the interim the matter had been set down for trial and thus the action was continued in breach of the provision. One year and three days could not be considered a reasonable time. Subject to any extraordinary delay by the lawyer in obtaining his client's instructions, which occur for good reason, we consider 14 days from becoming aware of the appointment of a statutory manager a reasonable period in which to make such application.


15. We do not consider that his Honour was in error, in the observations he made in his judgment concerning the time which elapsed after the Appellants knew of the requirement to obtain leave or consent pursuant to BFIA s.44, nor in not specifically finding that there is no time limit. This ground fails.


Ground 3.3


16. The bases of the application before the court in the motion which is set out above were to vacate the trial date because consent or leave had not been obtained pursuant to BFIA s.44 and to strike out the proceedings as disclosing no cause of action. They were the grounds which were argued. There was no application to strike out the proceedings for failure to comply with BFIA s.44. His Honour did not indicate to counsel during argument or before the application was reserved for decision that the court was contemplating whether or not the proceedings ought to be struck out for non compliance with BFIA s.44. Counsel had no opportunity to address that issue.


17. There is no doubt that a judge has power to give directions in proceedings on his own motion pursuant to National Court Rules O.4 r.31 including " any orders relating to the conduct of the proceedings which it might make on motion by a party." Which includes orders pursuant to O.8 r.27 to strike out pleadings as disclosing no cause of action.


18. However the court is required to act fairly and the basic minimum requirement of acting fairly is that the party brought to court ought to know the nature of the case brought against him and the consequences which are likely to flow from a successful application by the opposing party. "Notice and the opportunity to be heard before a decision is made, are generally regarded as fundamental...the major requirement is to notify the subject matter and potential consequences": Aronson Dyer Groves, Judicial Review of Administrative Action; 3rd Ed. Pp499 and 500 and at p.501:


At the heart of the courts’ approach to the content of notice is the well known proposition of Lord Denning that, if a right to be heard is worth anything, it must carry with it the right to know the case that has to be met: Kanda v Government of Malaya [1962] UKPC 2; [1962] AC 322 at 337 (PC)."


19. Where a judge proceeds to decide a case on an issue not argued between the parties or to provide a relief not sought or opposed by the parties, the parties are deprived of a worth while right to be heard, because the judge has not heard submissions from the parties on that issue or that relief. This is where we find the judge at first instance has fallen into error in this case. The Respondent had not sought to strike out the proceedings for failure to comply with BFIA s.44, the Appellant had not used the opportunity to address the court on the relief. The Court should not have proceeded to grant relief not sought or argued without first hearing the parties.


20. The provision in BFIA s.44 is almost word for word identical with s.15 of the Banking Act 1959 of the Commonwealth of Australia, which on our researches has not been the subject of judicial interpretation. It has some similarities to the provision in the Companies Act 1997 s.298(1) which requires agreement of the liquidator or leave of the Court to commence or continue proceedings against a company placed in liquidation. A similar provision was before an Administrative Tribunal in Australia in the case of Bhalla v One Stop Lighting [2001] VCAT 1976 (11th of October 2001) (Deputy President Kate McKenzie) where the plaintiff brought proceedings against the defendant company under antidiscrimination legislation. The defendant company was placed in liquidation. The tribunal ordered that the proceedings be stayed until the plaintiff informed it that the consent of the liquidator or leave of the Supreme Court had been obtained to continue the action before it. We consider that was the appropriate order to make in these proceedings in the court below on the issue of the BFIA section 44. However, we do not make that order because it was not sought or argued in the Court below or before us.


21. Counsel for the Respondents invited us to substitute for the trial judge's order, an order that the substantive proceedings be struck out on the basis that the pleadings did not disclose a cause of action. Whilst that issue was argued by both parties in the court below, his Honour did not rule upon it and neither party has appealed from that failure to rule.


22. The Supreme Court Act Section 16) C.) provides that this Court:


"... can give such judgment as or to have been given in the first instance." So there is no doubt that this Court has power to make the orders the Respondent's counsel invites us to make. The question is, should we do so? In the case of Papua Club Inc v Nusaum Holdings Ltd (2005) SC812. this court said:


3 Can the Supreme Court grant relief not sought in the notice of appeal?


Yes, but it should be cautious in doing this and ensure that it only grants relief that all parties have had an opportunity to make submissions on. There is no appeal against a decision of the Supreme Court and it must be acutely aware of its duty to accord procedural fairness to all parties.


23. The Respondents made substantial submissions orally and in writing on whether or not there could be a cause of action founded on copyright law, with reference to all the arguments made by the Appellants on that subject in the court below. Before us the Appellants written argument was confined to the procedural law relating to dismissal of proceedings for disclosing no reasonable cause of action. Brief oral submissions were directed to the issue of the merits of the cause of action, and in particular copyright law. It was submitted that the Copyright and Neighbouring Rights Act adopted international treaties and that the treaties are superior to the Act. What treaties were adopted, how they apply and why they are superior to an Act of Parliament was not addressed. The arguments advanced in the court below on the Statute of N were not advanced before us.


  1. We are satisfied that both parties had a full opportunity to address

us on the merits of the cause of action and that Counsel for the Appellants could have raised in reply any objection he might have to this Court accepting the Respondents invitation to make any order the court below should have made on the issue of the merits of the cause of action.


  1. It is fundamental to our system of bringing proceedings to court

that there must be a cause of action which has accrued to the plaintiff before proceedings are commenced. As the Appellants conceded in the Court below the Copyright Act 1978 was never brought into force as law (see Appeal Book p293) and it was repealed by the Copyright and Neighbouring Rights Act 2000 which was brought into force (on 1 July 2002) after these proceedings were instituted (see Appeal Book p292 line 10.) Section 3 of the Act clearly applies the Act prospectively, although it can apply to works "existing at the coming into operation of this Act". No copyright law was adopted at Independence as part of the law of this country pursuant to Constitution Schedule 2.6. To the extent that the Copyright and Neighbouring Rights Act s.32 recognises treaties dealing with copyright it does so from the coming into force of the Act. Pursuant to Constitution s.117(7) no treaty has effect as domestic law until it is given that effect by an Act of the Parliament or a Constitutional Law. Prior to the Copyright and Neighbouring Rights Act there was no copyright law in force in this country. The Appellants do not argue that they have a cause of action independent of copyright law. It follows they had no cause of action at the time of issue of the writ. Consequently the Statement of Claim discloses no good cause of action.


  1. For those reasons we confirm the order of the Court below

dismissing the proceedings.


Orders:


  1. Appeal refused
  2. Orders of the trial judge confirmed.
  3. Appellants to pay the Respondents costs of the appeal.

___________________________________________


Lomai and Lomai: Lawyers for the Appellants
Posman Kua Aisi Lawyers: Lawyers for the Respondents.


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