Kawaso Ltd v Oil Search PNG Ltd [2012] PGSC 16; SC1176 (29 February 2012)

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PRACTICE AND PROCEDURE – default by appellant in complying with court order to answer interrogatories – intentional no-compliance with that order – principles governing appeal against exercise of judicial discretion in respect of matter of practice and procedure – no error of principle in exercise of discretion – appeal dismissed with costs.

1. BY THE COURT: On 3 June 2010, upon an application by the respondent, Oil Search (PNG) Ltd (Oil Search) pursuant to Order 9, rule 25(1) of the National Court Rules (NCR), the National Court (Hartshorn J), ordered that a proceeding brought in that court by the appellant, Kawaso Ltd (Kawaso) be dismissed in its entirety and that Kawaso pay Oil Search's costs of and incidental to those proceedings. The basis for those orders was a default by Kawaso in complying with an order made by the National Court on 5 March 2010 requiring it to provide by 17 March 2010 answer to the interrogatories set out in Oil Search's notice to answer interrogatories dated 3 December 2009.

2. Kawaso has appealed against the order of dismissal. As will be seen, not all of its grounds of appeal engage with that order of dismissal. Further, in the absence of an objection to competency expressly raising the point, we were not called upon to determine whether or not this particular type of order of dismissal is truly to be regarded as final, as opposed to interlocutory. If the latter, a grant of leave to appeal would be required (s 14(3)(b), Supreme Court Act 1975,Chapter 37) and, in the absence of such a grant, the appeal would be incompetent. The point not having been raised, we consider that in this particular case the interests of justice are served by proceeding on the assumption that the order made below is to be characterized as a find judgment of the National Court. In so doing, we expressly leave open, as unnecessary in this case to determine, the correctness of that assumption.

3.1. refused the Appellant's application seeking leave to dispense with the requirements of three (3) clear days service of the Appellant's Notice of Motion filed on 15 April 2010 short served on the Respondent's lawyer on 16 April 2010 before the Respondent's application seeking dismissal of the proceeding was made in that His Honour failed to consider that there were ample reasons justifying a dispensation of the requirements for service as the Appellant's Notice of Motion seeking leave to file answers to interrogatories was crucial to the entire proceedings which suffered an order for dismissals;

3.2. refused the Appellant's alternative application to adjourn the matter including the Appellant's Notice of Motion filed on 15 April 2010 and the Respondent's Notice of Motion seeking dismissal of the proceedings to a later date to be dealt with concurrently when there were ample reasons advanced justifying an adjournment as the Appellant's claim was a genuine claim which warranted a full hearing by trial on its merits;

3.3. finding that there were no reasonable excuse for not providing the answers to the interrogatories when there were ample reasons disclosed in that the Managing Director of the Appellant Mr. Kossy Sosoro had been away on very important customary obligations due to a death of a very important member for his clan the late Mr. John Kapi Nato and as such the delay in complying with the court order and or directions was not intentional so as to attract a severe consequence of dismissal of the proceeding under Order 9 Rule 25 National Court Rules;

3.4. finding that the circumstances existed showed a lack of good faith on the part of the Appellant in its compliance with the interrogatory procedure and the court order when there were genuine and ample reasons justifying the delay and as such the dismissal of the proceeding under Order 9 Rule 25 National Court Rules;

3.5. finding that the circumstances existed showed a lack of good faith on the part of the Appellant and dismissing the entire proceedings when the Respondent and or their lawyers had themselves on more than one occasions failed to comply with previous court directions to this effect and as such the proceedings should not have been dismissed under Order 9 Rule 25 National Court Rules;

3.6. finding that there was non-compliance with the orders and or directions of the Court by the Appellant without allowing the defaulting party (Appellant) any or any real opportunity to give an explanation as to the default or non-compliance when such explanation would have been genuine and reasonable in the circumstances and as such the proceeding should not have been dismissed under Order 9 Rule 25 National Court Rules;

3.7. dismissed the Appellant's proceeding at the National Court when the answers to the interrogatories sought after by the Respondent were ready and available at all material times and or were already within the knowledge of the Respondent and as such the interrogatory procedure commenced or instigated and insisted upon the Respondent were unnecessary.

4. Before turning to the merits of these grounds it is necessary to make reference to the nature of the proceeding brought by Kawaso in the National Court and to relevant events in the course of that proceeding leading up to the order of 3 June 2010.

5. Kawaso commenced the proceeding by writ on 5 March 2009. In that proceeding it sought damages in the total sum of K5,413,506.00 in respect of alleged underpayment over the period 2002 to 2008 of successively annually renewed contracts with Oil Search for the performance of janitorial services. Having regard to the pleadings and apart from limitation of action, proper law and contractual construction issues, there was an issue on the pleadings as to the rates which were from time to time applicable to the services performed under the annual contracts.

6. It was common ground on the hearing of the appeal that the following chronology, offered by the learned primary judge in his reasons for judgment (para 4,) was accurate and material:

3 December 2009	- Oil Search's notice to answer interrogatories is serviced upon the lawyers for Kawaso

12 December 2009	- Kawaso's lawyers request an extension of time,

21 December 2009	- the time for Kawaso to provide answers expires

12 & 13 January 2010	- Kawaso's lawyers request copies of Oil Search's discovered documents,

28 January 2010	- Oil Search informs that if answers are not received within 5 days, an application to dismiss the proceeding will be made,

15 February 2010	- motion is served upon Kawaso's lawyers,

5 March 2010-	after 2 adjournments for non-attendance of counsel for Kawaso, Kawaso is ordered to provide its answers by 17 March 2010 and the motion is adjourned to the 17 March 2000,

17 March 2010	- there is no appearance of Kawaso and no answers are filed,

19 March 2010	- the present motion seeking dismissal is served upon Kawaso's lawyers.

7. To this chronology, the following additional events should be added, having regard to the grounds of appeal. On 15 April 2010 Kawaso filed a notice of motion seeking leave to file answers to interrogatories and a related abridgement of the time prescribed by the NCR for the service of such a notice of motion. That notice of motion was not served until 16 April 2010, which was the adjourned return date, to which the parties had consented on 26 March 2010, for the hearing of Oil Search's dismissal application. Also on 16 April 2010 and in the alternative, Kawaso sought the adjournment of both its short served application and that of Oil Search to later date so as to enable each to be heard concurrently. For reasons which were given orally that same day, the learned primary judge refused to abridge the time for service, adjourned Kawaso's application to a date to be fixed and refused Kawaso's application for adjournment of Oil Search's dismissal application. He then proceeded with the hearing of that dismissal application. The orders made on 16 April 2010 are not the subject of challenge in the present appeal, which is an appeal only against the orders of 3 June 2010. Further, the orders made on 16 April 2010 were, on any view, interlocutory. Leave to appeal from such an order is required. No such leave has been sought, much less granted. Insofar as grounds 1 and 2 of the notice of appeal seek to challenge orders made on 16 April 2010 they are, for these reasons, misconceived and without merit. Oil Search raised this deficiency belatedly in its further written submissions on the hearing of the appeal rather than, is ought to have, by way of a formal objection to competency in respect of so much of the appeal which concerned grounds 1 and 2 which was filed and served in advance of the hearing of the appeal. The issue though is one which the Court was entitled to raise in any event of its own motion with the parties: Chief Inspector Robert Kalasim v Tangane Koglwa (2006) SC 828. Further, the misconception evident in grounds 1 and 2 was a fundamental one and, in the circumstances of this case, there was no prejudice to Kawaso in it being raised late by Oil Search. If only as to costs, the position may have been otherwise were these are the only grounds of appeal but that is not the case.

8. We add this. The proceeding below was a commercial mater. His Honour has a particular responsibility for such matters in the National Court. Having perused the transcript of His Honour's reasons delivered on 16 April 2010 in respect of Kawaso's applications, which were included in the appeal book, it is obvious that the particular need that commercial matters be conducted with due expedition by practitioners and with regard to times prescribed by the rules of court, a failure on the part of those acting for Kawaso to conduct the litigation accordingly and the fact that 16 April 2010 was a date to which each party had consented for the hearing of the dismissal application were influential in His Honour's decision neither to abridge time for Kawaso's application nor further to adjourn that dismissal application. These were all considerations he was entitled to take into account in the making of a discretionary judgment in respect of matter of practice and procedure.

9. It is convenient next to consider ground 6. Contrary to the premise of this ground, the hearing of the dismissal application on 16 April 2010 was the "real opportunity" for Kawaso to explain the reasons for its default and why it was, having regard to that explanation and any other relevant considerations, that an order of dismissal of the proceeding was not warranted. It was afforded an opportunity to be heard. It was incumbent on Kawaso on that day to take advantage of that opportunity and to put forward its evidence and submissions on the subject of dismissal for default. An appeal to the Supreme Court in which it is sought to challenge the exercise of a judicial discretion in respect of a matter of practice and procedure is not the place to rehearse submissions made below on the relative factual merits whether or not that discretion should be exercised. Yet this is what Kawaso did.

10. This leads naturally to a consideration of Grounds 3 to 5, which may conveniently be considered together. The vice in these grounds is that they seek to appeal, in one way or another, to the merits of whether or not a discretion to dismiss should have been exercised instead of alleging in, in respect of the exercise of that discretion, some error of principle, material error of fact, relevant consideration not taken into account, irrelevant consideration taken into account or manifest unreasonableness.

11. Order 9, rule 25 (1) of the NCR confers on the National Court a discretionary power to make "such order as it thinks fit" where, materially, a party has made default in compliance with an order under Order 9, rule 21 requiring the making of an answer to interrogatories. Where, as here, the party in default is a plaintiff, the orders which the court may make include, but are not limited to, an order that the proceeding be stayed or dismissed as to the whole or any part of the relief claimed in the proceeding.

12. In Micallef v ICI Australia Operation Pty Ltd [2001] NSWCA 274 at [45] (Micallef), Heydon JA(as His Honour then was), Sheller JA and Studdert AJA agreeing, made the following observations in respect of a New South Wales District Court rule of a similar nature and breadth of discretion to Order 9, rule 25(1) of the NCR.

As a result, Garling DCJ had to make a discretionary decision on a matter of practice and procedure – an extremely important one, having potentially serious consequences for the plaintiff, but a discretionary decision on a matter of practice and procedure nonetheless. Any attack on decisions of that character must fail unless it can be demonstrated that the decision-maker:

(d) failed to take into account, or gave insufficient weight to, some relevant matter, or

(e) arrived at a result so unreasonable or unjust as to suggest that one of foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning.

13. These observations are equally applicable to Order 9, rule 25(1) of the NCR.

14. Also equally applicable are further observations made by Heydon JA in Micallef, at [50], with respect to a submission, for which there is some support in English authority (see Birkett v James [1978] AC 297 at 318 per Lord Diplock), that an order of dismissal for default ought not to be made unless there had been "an inordinate and inexcusable delay" giving rise to "the substantial risk that a fair trial would not be possible resulting in serous prejudice to the Defendants":

The English formulae would compel the exercise of the discretion one way unless particular circumstances were established, in which case the discretion would have to be exercised another way. A "discretion" which can only be exercised one way is not in truth discretion at all. The English tests are thus inconsistent with Part 18 rule 3(1) [the District Court Rule]. Part 18 rule 3(1) is, after all, a statutory enactment in the sense that it was made by the Rule Committee in the exercise of the Statutory power conferred by the District Court Act 1973, s 161. Restrictive words are not lightly to be read into it.

15. Order 9, rule 25(1) of the NCR is likewise a statutory enactment in the sense that it has been made by the judges of the National Court pursuant to the rule making power conferred by s 9 of the National Court Act (Chapter 38). In respect of this rule also restrictive words ought to not lightly be read into it.

16. Micallef was later applied by the New South Wales Court of Appeal in Commonwealth of Australia v Lewis [2007] NSWCA 127 and by the Australian Capital Territory Court of Appeal in Air Marshal McCormack v Vance [2008] ACTCA 16. Micallef and these other Australian authorities are persuasive only in this jurisdiction. However, they exemplify the application, in the context of a challenge to the exercise of a discretion in respect of a matter of practice and procedure, of principles which are well settled in this jurisdiction in respect of the review of the exercise of a discretionary power by cases such as Bean v Bean [1980] PNGLR 307; Curtain Brothers (PNG) Ltd v UPNG (2005) SC 788 and Telikom PNG Limited v ICCC (2008) SC 906. We therefore regard the observations made in Micallef as equally applicable in this jurisdiction.

17. In this case, the learned primary judge made no material error of fact as to the reasons advanced by Kawaso, via the affidavit of its Managing Director, Mr. Sosoro, for the default in compliance with the National Court's order. In summary, Mr. Sosoro cited as reasons for non-compliance, a period of leave, a death in his clan requiring him to attend to cultural obligations, later travel to Fiji and then to his village and a deliberate withholding of instructions to Kawaso's solicitors so as not to allow the proceeding to intrude on negotiations with Oil Search concerning a new contract for services. Mr. Sosoro appears to us to have been candid in his explanation. Commendable though that candor was, it did not compel the dismissal of Oil Search's application.

18. It is clear from the reasons for judgment (para 6) of the learned primary judge that His Honour has not treated the discharge of cultural obligations as incapable of providing a reasonable explanation for default incompliance. Had he so done, that may well have amounted to an error of principle. Instead and quite properly, he focused upon the period which followed discharge of those obligations viewed against the course of proceedings to date.

19. On the evidence before him, His Honour was entitled to make the observation (para 6), "One would have thought that as this court had ordered that answers be provided by 17 March 2010, the Managing Director of a company claiming in excess of K5 million would have made time to ensure compliance with the court order to avoid being in breach and to avoid the claim being dismissed." Orders made by the National Court are not inspirational statements. Unless stayed or on appeal set aside, they must be obeyed. To countenance anything less than this strikes at the heart of the rule of law in this country. That is not to say that, in a case such as this, a sanction of dismissal or stay of proceedings must attend a proven breach of an order. Where a reasonable explanation is provided all that may follow is the dismissal with costs of the default application and the allowance of such further time for compliance as is reasonable in the circumstances. Further, where an application for dismissal for default has been prosecuted in the face of such an explanation already having been communicated in advance to the other party, together with an assurance of compliance with a nominated reasonable period and a related proposal for a consent order extending time accordingly, the dismissal of that application might be attended with a special order as to costs.

20. Here, His Honour was entitled to find on the evidence before him that Kawaso's non-compliance with the National Court's order was intentional. As His Honour correctly identified (reasons for judgment, para 7), that has under comparable English and Australian rules of court provided the basis for an order of dismissal of a proceeding. Putting aside the period when cultural obligations intruded, what remained was a lengthy period of inattention to the answering of the interrogatories within such time as was limited by the rules or agreed by the parties and, following the making of an order for their answering, intentional non-compliance with that order.

21. Even after the dismissal application was filed, no sense of urgency attended any attempt to rectify Kawaso's position. The attempt which was made was made at the last possible moment and exhibited in the draft answers in evidence a misunderstanding of a basis for objecting to the answering of an interrogatory. As the learned primary judge also correctly identified (para 9), there is longstanding authority that an answer to an interrogatory is not objectionable merely because the answer is known to the interrogator or because the interrogator has other means of proving the matter: Attorney- General v Gaskill (1882) 20 Ch D 319 and Lyell v Kennedy (1883) 8 App Cas 217 at 228. This explains why ground 7 in the notice of appeal lacks merit. Further and in any event, as His Honour noted (para 9), no attempt had been made by Kawaso to apply for an order to limit or prevent unnecessary interrogatories.

22. Dismissal of a claim without a trial on the merits is doubtless a strong thing. So, too, is an intentional non-compliance with an order directed to mandating compliance with an obligation which had already long since fallen on Kawaso under the NCR following the service of the notice to answer interrogatories. The learned primary judge was entitled in the circumstances to conclude that this was symptomatic of a failure to prosecute the proceeding. In turn, he was entitled to conclude that this warranted an order of dismissal. The authority cited (para 7) by His Honour, Danvillier v Myer [1883] WN 58, was apt. The sanction of an order of dismissal is not reserved for the worst of cases. So to hold would again place an unwarranted restriction on the breadth of language employed in Order 9, rule 25(1) of the NCR. Rather, the matter was one for the exercise of a judicial discretion in the particular circumstances of the case. It would not be enough to overturn the exercise of that discretion, even if we were of the opinion, that we would not have so exercised the discretion in those circumstances in that way. We would have to be persuaded that the decision was unreasonable or otherwise flawed in the sense described in Millacef. We are not so persuaded.

1. The appeal be dismissed.
2. The appellant pay the respondent's taxed costs of and incidental to the appeal.

_____________________________________________
Warner Shand Lawyers: Lawyers for the Appellant
Bradshaw Lawyers: Lawyers for the respondent

Supreme Court of Papua New Guinea

Kawaso Ltd v Oil Search PNG Ltd [2012] PGSC 16; SC1176 (29 February 2012)