J. S. T Ltd v Arkhfield PTY Ltd [2014] PGSC 27; SC1352 (24 June 2014)

SC1352

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 73 OF 2014

BETWEEN

J.S.T LIMITED
Applicant

AND

ARKHEFIELD PTY LTD
Respondent

Waigani: Makail, J
2014: 18th & 24th June

SUPREME COURT – PRACTICE & PROCEDURE – Application for leave to appeal – Interlocutory ruling – Dismissal of application for security for costs – Security for costs – Principles of – Prior application dismissed for lack of evidence on amount for security – Second application made and dismissed – Issue estoppel raised – Principles of – Whether arguable case established – Supreme Court Act – s. 14(3)(b).

Cases cited:

Matiabe Oberia v. Chief Inspector Charlie (2005) SC801
National Housing Corporation v. Paul Asakusa (2012) SC1165
Osprey Industries v. Hallam [1992] PNGLR 557
Konze Kara v. Public Curator & The State (2010) N4055
Reynolds v. Walcott [1985] PNGLR 316
Hami Yawari v. Anderson Agiru (2008) N3983

Counsel:

Mr N. Kera, for Applicant
Mr M. Goodwin with Mr B. Nutley, for Respondent

RULING

24th June, 2014

1. MAKAIL, J: This is an application for leave to appeal against an interlocutory ruling of the National Court which refused the applicant's application for security for costs pursuant to s. 14(3)(b) of the Supreme Court Act. It is opposed. If leave is granted, the applicant will move its application to stay the proceeding in the National Court pending the appeal. This application will not be opposed.

Background Facts

2. The claim in the National Court is for a debt in the sum of AUD195,000.00 for architectural design works said to have been carried out by the respondent on request from the applicant. On 24th March 2014, the applicant made an application by notice of motion filed on 16th August 2013 for an order that the respondent pay into Court security for costs. The bases of the application were that the respondent was a foreign entity not registered in Papua New Guinea and that the respondent commenced prior multiple proceedings for the same debt, which were either dismissed or withdrawn with costs orders in favour of the applicant.

3. On 26th March 2014, the National Court dismissed the application holding that although a prima facie case had been made out, no evidence was produced which would assist the Court to determine an appropriate amount as security. On 25th April 2014, the applicant made a second identical application to the first application by notice of motion filed on 14th April 2014 for security for costs. On the second occasion, the applicant presented evidence which would assist the Court determined an amount as security for costs. The respondent opposed the application and argued that the issue of security for costs was res judicata, as the Court had previously decided on it when it refused it.

4. On 01st May 2014, the National Court dismissed the applicant's second application holding that the issue of whether security for costs should be paid into Court could not be re-argued based on the principle of issue estoppel. The Court's reasons were:

(a) the principle of res judicata as argued by the respondent could not be invoked rather the respondent's argument could be properly described as issue estoppel.

(b) issue estoppel did not permit re-argument of questions of fact or law already determined by the Court: Hami Yawari v. Anderson Agiru (2008) N3983.

(c) the issue of whether the respondent should pay security for costs was raised in the previous motion.

(d) the issue was finally determined when the previous motion was heard.

(e) the parties in the second motion were the same as the previous motion.

Consideration of Application

5. The main consideration in an application for leave to appeal is whether there is an arguable or prima facie case or has it been demonstrated that the trial judge was wrong. Matiabe Oberia v. Chief Inspector Charlie (2005) SC801. In their respective submissions, parties focussed on this issue.

6. The applicant submitted that in the National Court, the respondent did not argue in its defence to the application issue estoppel and as a result, it did not address it in its submissions. On the other hand, the respondent argued res judicata and it was the issue the National Court was asked to rule on. For this reason, it was not within the discretion of the National Court to find that issue estoppel applied and dismissed the application. If the National Court was to find that issue estoppel applied, it should have given parties, especially it an opportunity to address the Court on that issue. The National Court made an error when it found the application was barred by issue estoppel and not res judicata.

7. Even if it was within the discretion of the National Court to find that the application was barred by issue estoppel, it advanced three reasons to show that the National Court erred in law in holding that the principle of issue estoppel prevented the re-arguing of the application for security for costs. They were:

(i) issue estoppel only applies to judgments which are final in substance or form and not to judgments which are merely interlocutory, and

(ii) issue estoppel arises when a particular issue forming a necessary ingredient in a cause of action has been litigated and decided, and

(iii) a decision on an interlocutory application for costs is not a judgment which is final in nature or form and the issue forming a necessary ingredient in the respondent's cause of action.

8. It submitted that these points demonstrate that there is an arguable case and justify a further consideration by the Court.

9. The converse of these arguments is that the National Court heard the first application on its merits and dismissed it. It dismissed it because the applicant failed to prove the amount as security. The amount is an essential ingredient of a security for costs. The applicant failed to prove it and that is the end of the matter. It cannot be re-litigated. To allow the applicant to raise the issue of security for costs for the second time by way of presentation of evidence to prove the amount as security is in effect inviting it to have a "second bite of the cherry" and is tantamount to an abuse of process.

10. Firstly, contrary to the applicant's submission that the respondent did not argue in its defence to the application issue estoppel and as a result, it did not have an opportunity to address it in its submissions, there is evidence based on the respondent's written submission that it did address the issue of issue estoppel together with the principle of res judicata and merger in the judgment. It was on this premise that the National Court found that the principle of issue estoppel applied and not principle of res judicata, and dismissed the application. I find that this is not a case where the applicant was not given an opportunity to address the Court on that issue. Rather it is a case of missed opportunity. I am not satisfied that the National Court made an error when it found that the application was barred by issue estoppel and not res judicata. This proposed ground is not arguable.

11. Secondly, the National Court applied the principles relevant to the principle of issue estoppel as stated by the Supreme Court (Cannings, Manuhu, and Kassman, JJ) in National Housing Corporation v. Paul Asakusa (2012) SC1165. I quote them hereunder:

"(a) the issue raised in the current proceedings is the same issue as that raised in the prior proceedings;

(b) the issue was finally determined in the prior proceedings; and

(c) the parties in the current proceedings are the same as those in the prior proceedings or, if they are not the same, the party against whom the estoppel is sought to be applied was a privy of a party to the prior proceedings and reasonably expected to be aware of the prior proceedings and entitled to be joined but failed without explanation to do so."

12. It is common ground that the issue before the National Court in the prior application and in the second application is security for costs. Security for costs is a discretionary matter and to appreciate why the National Court dismissed the second application on the ground of issue estoppel, it is important to know what sort of considerations the Court applies when deciding the issue. The applicable principles are stated in Osprey Industries v. Hallam [1992] PNGLR 557 and adopted and applied in subsequent numerous cases including Konze Kara v. Public Curator & The State (2010) N4055. The National Court referred to these principles and decided cases in its ruling and they are:

1. whether there has been delay in making the application.

2. the bona fides of the plaintiff's claim.

3. nullification of proceedings.

4. whether the defendant has a cross-claim.

13. The decided cases also held that the amount of security is also discretionary and there must be evidence to prove it. Proof of it is an important consideration because the amount that the Court may fix must be fair and reasonable. Security for costs must not be used as a tool to oppress the plaintiff and deny or delay the plaintiff the right to prosecute its claim. As to what is a fair and reasonable amount, in Reynolds v. Walcott [1985] PNGLR 316, the Court fixed the sum of security to about two thirds of the estimated party and party costs, but said that there is no hard and fast rule.

14. In other words, for an applicant to succeed in an application for security for costs, it is not sufficient to prove that the application is promptly made, that the plaintiff's claim is not bona fide, that the making of the order for security will not nullify the proceeding and that the respondent has a cross-claim, but there must also be evidence of the amount. Proof of the amount is a question of fact as the National Court must make findings of fact as to whether an amount should be ordered and if so, what the amount should be based on the evidence before it. Where evidence is lacking, there would be no evidentiary basis for the Court to make these findings. As to the type of evidence to prove the amount, the Court in the above decided cases relied on print out of bill of costs or stated that evidence must be given of the likely costs and outlays.

15. In this case, no such evidence was presented before the National Court in the prior application to enable the Court to assess an appropriate amount. As a result, although the National Court was satisfied that there was a prima facie case for security for costs, it dismissed the application. The applicant sought to produce and did produce evidence of the amount in the second application in the form of three separate bills of costs in taxable form in the total sum of about K180,000.00.

16. But producing the evidence of the amount came after the event. The National Court had dismissed the prior application because the applicant had failed to prove the amount as security. It is too late now to produce evidence to prove the amount. Such evidence should and ought to have been produced at the prior application.

17. It is also wrong to suggest that the dismissal of the second application is not a judgment which is final in nature or form and the issue forming a necessary ingredient in the respondent's cause of action. As noted, the issue before the National Court was security for costs. That was the issue before the National Court for determination. The onus of proof was on the applicant to establish it and it included proving by appropriate evidence the amount as security. The amount was part and partial of the application for security for costs and its proof is necessary for a successful application. The applicant failed to do so and the National Court dismissed the application.

18. The National Court's finding was that there was no evidence to assist it to determine an appropriate amount as security. It had made a judicial determination in relation to the question of fact. This is the rule of issue estoppel which Sevua, J was referring to in the election petition case of Hami Yawari v. Anderson Agiru (2008) N3983 and applied by the National Court in this case.

19. For these reasons, I accept the respondent's submission that to allow the applicant to raise the issue of security for costs for the second time by way of presentation of evidence to prove the amount as security is in effect inviting it to have "second bite of the cherry" and tantamount to an abuse of process. For the foregoing reasons, I am not satisfied that these points established an arguable case.

20. The other considerations are whether substantial injustice will be caused if the decision were allowed to stand and has cause been shown that the trial process should be interrupted by an appeal? Matiabe Oberia (supra). According to the affidavit of Mr Mark Chan, a director of the applicant filed in support of the application, Mr Chan deposed, amongst others, that there have been three previous Court proceedings, two were winding up proceedings and the third was a Supreme Court appeal against the decision of the National Court in dismissing one of the winding up proceedings. In the other winding up proceeding, after finding that the applicant was trading solvently at the time it was put into liquidation, the National Court ordered the termination of the liquidation and also ordered the applicant to pay security for costs in the sum of K1,300,000.00 into Court which it did.

21. Mr Chan also deposed that the respondent is a foreign entity and is not registered in Papua New Guinea. By defending those previous Court proceedings, the applicant has paid close to K180,000.00 in legal fees which it cannot fully recoup if successful in defending the claim in the National Court.

22. As for the respondent, firstly, it submitted that the applicant went into liquidation during proceeding which had to be abandoned by the respondent. The payment of K1,300.000.00 into Court by the applicant has a different character, being consequent upon termination of liquidation, and cannot be construed as a payment for security for costs in the same manner of this application by the applicant.

23. Secondly, it submitted that it is a reputable Architectural Company in Australia, has the financial capacity to meet any judgment or costs order and cannot escape from its liabilities if the National Court makes a decision in the applicant's favour. There is a clear procedure for enforcing judgments for costs in Queensland. If leave is refused and the National Court dismisses the claim and any costs order remains unpaid, the applicant can always enforce it in the State of Queensland, Australia but it will slightly be difficult with additional costs.

24. Finally, it submitted that the proposed appeal is vexatious. The National Court properly applied the principle of issue estoppel after it made oral and written submissions on the principles of res judicata, issue estoppel and merger in the judgment. The National Court properly considered these principles and considered the relevant case authorities on these issues. It ultimately dismissed the application under the principle of issue estoppel. The applicant cannot be allowed to have its application re-heard when it failed to put all matters in evidence in the original application. For these reasons, there is no basis to interrupt the proceeding in the National Court by an appeal.

25. I accept the respondent's submissions in their entirety and further say that I am not satisfied that the respondent is financially incapable to meet any judgment and costs order in the event that it is unsuccessful in the National Court. I am also not satisfied that the applicant will be greatly prejudiced if leave were refused. It has recourse and may enforce any costs order in the normal way within and outside jurisdiction.

26. The ultimate consideration is that the applicant had the opportunity to put all matters in evidence in the original application and it failed. It had the opportunity to put in evidence of payment of K180,000.00 in legal costs and it failed. As it failed, the National Court was bound and correctly so to dismiss the application. It cannot seek to remedy its failure by bringing the same application with new evidence. There is no arguable or prima facie case and for these further reasons, there is no reason to interrupt the trial in the National Court by an appeal. I refuse the application. That being the decision, it is not necessary for the applicant to move the application for stay.

Order

27. The orders are:

1. The application for leave to appeal filed on 30th May 2014 is refused.

2. The whole proceeding is dismissed.

3. The applicant shall pay the respondent's costs of the proceeding, to be taxed, if not agreed.
______________________________________________________________

Young & Williams Lawyers: Lawyers for Applicant
O'Briens Lawyers: Lawyers for Respondent