Hiwi v Rimua [2015] PGSC 60; SC1460 (28 October 2015)

SC1460

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 59 OF 2013

JOHN HIWI FOR AND ON BEHALF OF
THE HIDES LANDOWNERS ASSOCIATION INC
Appellant

V

RENDLE RIMUA, SECRETARY,
DEPARTMENT OF PETROLEUM AND ENERGY
First Respondent

PEPI KIMAS, SECRETARY,
DEPARTMENT OF LANDS AND PHYSICAL PLANNING
Second Respondent

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Respondent

ESSO HIGHLANDS LIMITED
Fourth Respondent

Waigani: Cannings J, Kariko J, Bona J
2015: 3rd September, 28 October

PRACTICE AND PROCEDURE – Limitation periods – Whether an action seeking relief pursuant to three written agreements was "an action ... On simple contract" – Frauds and Limitations Act, Section 16(1) – Whether an action should be regarded as a claim for "specific performance of a contract or for other equitable relief" – Frauds and Limitations Act, Section 18.

The appellant, who claimed that he was the executive of an incorporated landowners association, commenced proceedings by writ of summons in the National Court claiming payments totalling K74.5 million due to the landowners under three agreements with the respondents regarding a gas project. The appellant claimed that the agreements commenced operation in March-April 1990. He commenced the National Court proceedings in November 2009. The third respondent, the State, moved a motion in the National Court seeking dismissal of the proceedings on the ground that they were time-barred. The motion was upheld and the National Court dismissed the proceedings as being time-barred under Section 16(1)(a) of the Frauds and Limitations Act 1988, which provides that "an action that is founded on simple contract ... shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued". The National Court held that the cause of action was breach of simple contracts, which accrued at least 20 years ago, and that the proceedings were statute-barred. The appellant appealed against the order for dismissal of the proceedings, on the grounds that: (1) Section 16(1)(a) did not apply as: (a) the agreements that he was seeking to enforce were not 'simple' contracts; (b) the cause of action was not breach of contract; and (c) he was seeking specific performance of the agreements and therefore under Section 18 of the Frauds and Limitations Act (which provides that "Section 16 does not apply to any claim for specific performance of a contract ...") his claim was not caught by the six-year limitation period in Section 16(1); (2) the respondents had not filed a defence and should not have been permitted to argue that the proceedings were time-barred; (3) the primary Judge erred in law by criticising the appellant's counsel for not putting submissions and authorities to the Court which were, in fact, put to the Court. The appellant sought orders quashing the order appealed from and remitting the matter to the National Court.

Held:

(1) The type of contract on which the appellant's action was founded was "simple" contract (not a "specialty").

(2) The cause of action pleaded in the appellant's statement of claim could only properly be regarded as breach of contract.

(3) Actions only fall within Section 18 if the relief being sought is confined to specific performance, injunction or other equitable relief. Here, though the appellant sought specific performance of the three agreements, he also sought payment of K74.5 million (presumably as a debt) and damages for breach of contract and general damages, so the action did not fall within Section 18. It was caught by Section 16(1)(a).

(4) The date on which a cause of action in breach of contract accrues is the date of the first alleged breach of contract, which in this case was pleaded to be November 1990. The action should have been commenced by November 1996. As it was not commenced until November 2009, its date of commencement exceeded the statutory limitation period by 13 years. The National Court did not err in concluding that the proceedings were time-barred.

(5) The respondents were not prohibited, by their failure to file a defence, from submitting that the proceedings should be dismissed as being time-barred. No error was committed by the National Court in hearing and determining the respondents' motion before hearing the appellant's motion for default judgment. The question of the order in which competing motions are heard is a matter of discretion for the primary Judge and here the discretion was exercised carefully and properly.

(6) The primary Judge gave the appellant's counsel's submissions the attention they deserved and made fair criticism where appropriate. There was no procedural unfairness or other error of law.

(7) The appeal was dismissed with costs.

Cases cited:

The following cases are cited in the judgment:

Bank of South Pacific v Leahy (2002) N2263
Fred Angoman v IPBC of PNG (2011) N4363
John Hiwi v Rendle Rimua, Pepi Kimas and The State WS No 1442 of 2009, 03.05.13, unreported
Letina Rau v Albert Kone (2014) N5804
Louis Medaing v Ramu Nico Management (MCC) Ltd (2011) SC1144
Mamun Investment Ltd v Nixon Koi (2015) SC1409
Michael Nunulrea v PNG Harbours Ltd (2005) N2790
Midland Bank v Hett, Stubbs & Kemp [1978] 3 All ER 571
Oil Search Limited v Mineral Resources Development Corporation Ltd (2010) SC1022
Otto Benal Magiten v Kopina Raka (2002) N2179
Waim No 85 Limited v The State (2015) SC1405

APPEAL

This was an appeal against dismissal of civil proceedings for being time-barred under the Frauds and Limitations Act, Section 16.

Counsel:

M Nasil, for the appellant
P Nii, for the first respondent
D Doiwa, for the third respondent

28th October, 2015

1. BY THE COURT: This is an appeal against an order of the National Court in civil proceedings, dismissing the proceedings for being time-barred under the Frauds and Limitations Act, section 16.

NATIONAL COURT PROCEEDINGS

2. The National Court proceedings, WS No 1442 of 2009, were commenced in November 2009 by the appellant, John Hiwi. He claimed that he was the executive of Hides Landowners Association Inc. He commenced proceedings for and on behalf of that Association, against four defendants: Rendle Rimua (Secretary of the Department of Petroleum and Energy), Pepi Kimas (Secretary of the Department of Lands and Physical Planning), the State and Esso Highlands Ltd, who are now the respondents to this appeal.

3. In his statement of claim the appellant claimed payments totalling K74.5 million due to the landowners under three agreements with the respondents regarding the Hides Gas project. He claimed that the agreements were entered into at Goroka and commenced operation in March-April 1990. On 19 April 2013 the third respondent, the State, moved a motion in the National Court, constituted by Justice Davani, seeking dismissal of the proceedings on the ground that they were time-barred.

4. Her Honour upheld the motion and dismissed the proceedings as being time-barred under Section 16(1)(a) of the Frauds and Limitations Act 1988, which provides that "an action that is founded on simple contract ... shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued". Her Honour held that the cause of action was breach of simple contracts, which accrued at least 20 years ago, and that the proceedings were statute-barred (John Hiwi v Rendle Rimua, Pepi Kimas and the State WS No 1442 of 2009, 03.05.13, unreported).

THE APPEAL

5. The appellant has appealed on 14 grounds, one of which (No 9) has been abandoned. The remaining overlap considerably. We quote them verbatim, before summarising them:

(1) The learned judge erred in law and in fact in dismissing the entire proceedings when the cause of action was not statute or time barred.

(2) The learned judge erred in law in dismissing the entire proceedings pursuant to Section 16 of the Frauds and Limitations Act 1988 when the cause of action was not founded on a simple contract.

(3) The learned judge erred in law and fact in dismissing the proceedings as being time barred pursuant to Section 16 of the Frauds and Limitations Act 1988 when the claim or action was essentially seeking specific performance of the Agreements of 31 March 1990 and that is allowed by Section 18 of the Act.

(4) The learned judge erred in law and fact by failing to enquire properly and establish when the cause of action actually accrued before deciding to dismiss the proceedings for being statute barred.

(5) The learned judge erred in law and fact in dismissing the proceedings as being time barred when the agreement of 31 March 1990 giving rise to the cause of action in the proceedings still remains valid and has not been breached and terminated.

(6) The learned judge erred in law and fact in dismissing the proceedings when the defendants have not actually filed a defence raising the defence of time bar before moving the application to dismiss the proceeding on that ground.

(7) The learned judge wrongly exercised her discretion by not allowing the plaintiff to move his application on foot for default judgement when the defendants have not filed a defence raising the defence of time bar and when the action was not clearly time barred.

(8) The learned judge wrongly exercised her discretion in not allowing the defendants to move their applications on foot seeking leave to file defence out of time when the defence of time bar was raised at the outset by the defendants and when the action was not clearly time barred. [sic]

(9) ...

(10) The learned judge in making her decision erred in law and fact in concluding that the plaintiff's counsel did not make submissions on "simple contract and special contract" in light of the cause of action raised in the proceedings when in fact that was actually done.

(11) The learned judge in making her decision erred in law and fact in concluding that the plaintiff's counsel has not put before her Honour case authorities that show that time in a cause of action in contract runs from the time of breach and not from the date of the contract when in fact that was actually done reflecting the cause of action therein.

(12) The learned judge in making her decision erred in law and fact in concluding that there was a breach of the agreement of 31 March 1990 when there was in fact merely non-performance of the agreement on the part of the defendants and the proceedings therefore required specific performance of the said agreement.

(13) The learned judge erred in law and fact in finding that there was a breach of the agreement of 31 March 1990 some 20 years ago to dismiss the proceedings when the Hides Gas Project was and is currently operating pursuant to the said agreement and that there was no breach but non-performance of the said agreement.

(14) The learned judge erred in law and fact in dismissing the proceeding as being time barred when the proceedings was merely seeking specific performance of the Hides Gas Field Project Development Heads of Agreement dated 31 March 1990, the Hides Gas Field Compensation Agreement dated 4 April 1990 and the Hides Gas Community Benefits Trust Funds Deed dated 4 April 1990 pursuant to Section 18 of the Frauds and Limitations Act 1988.

6. Those grounds can be distilled into three:

(1) Section 16(1)(a) did not apply as:

(a) the agreements that he was seeking to enforce were not 'simple' contracts (grounds 1, 2);

(b) the cause of action was not breach of contract (grounds 1, 4, 5, 12, 13); and

(c) he was seeking specific performance of the agreements and therefore under Section 18 of the Frauds and Limitations Act (which provides that "Section 16 does not apply to any claim for specific performance of a contract ...") his claim was not caught by the six-year limitation period in Section 16(1)(a) (grounds 1, 3, 14);

(2) the respondents had not filed a defence and should not have been permitted to argue that the proceedings were time-barred (grounds 6, 7, 8); and

(3) the primary Judge erred in law by criticising the appellant's counsel for not putting submissions and authorities to the Court which were, in fact, put to the Court (grounds 10, 11).

RELIEF SOUGHT

7. The appellant seeks an order quashing the order appealed from, and remitting the matter to the National Court.

ISSUES

8. As the grounds of appeal raise three main arguments we will address them in the order in which we have summarised them, before addressing the final issue of what orders we should make. The issues are:

1. Did the primary Judge err by regarding the action as time-barred under Section 16(1)(a) of the Frauds and Limitations Act?
   
2. Did the primary Judge err by allowing the third defendant to move a motion for dismissal without filing a defence?
   
3. Did the primary Judge unlawfully or unfairly criticise the appellant's counsel's submissions?
   
4. What orders should the Court make?
   

1 DID THE PRIMARY JUDGE ERR BY REGARDING THE ACTION AS TIME-BARRED UNDER SECTION 16(1)(a) OF THE FRAUDS AND LIMITATIONS ACT?

9. The appellant argues that her Honour erred in law as this was a case in which Section 16(1)(a) did not apply, and therefore there was no six-year limitation period, because:

(a) the agreements that he was seeking to enforce were not 'simple' contracts (grounds 1, 2);

(b) the cause of action was not breach of contract (grounds 1, 4, 5, 12, 13); and

(c) he was seeking specific performance of the agreements and therefore under Section 18 of the Frauds and Limitations Act (which provides that "Section 16 does not apply to any claim for specific performance of a contract ...") his claim was not caught by Section 16(1)(a).

10. To appreciate these arguments we set out the whole of Sections 16 and 18. Section 16 (limitation of actions in contract, tort etc) states:

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

(a) that is founded on simple contract or on tort; or

(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 or forfeiture,

shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued.

(2) An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.

(3) Subject to Subsection (4), an action upon a specialty shall not be brought after the expiration of twelve years commencing on the date when the cause of action accrued.

(4) Nothing contained in Subsection (3) shall be construed as affecting any action for which a period of limitation is specified by any other Act, and that subsection shall be read and construed accordingly.

(5) An action shall not be brought upon any judgment after the expiration of twelve years commencing on the date when the judgement became enforceable.

(6) No arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years commencing on the date when the interest became due.

(7) Subject to Subsection (8), an action to recover any penalty or forfeiture, or sum by way of penalty or forfeiture, recoverable by virtue of any enactment shall not be brought after the expiration of two years commencing on the date when the cause of action accrued.

(8) For the purpose of Subsection (7) the word "penalty" does not include a fine to which any person is liable on conviction of a criminal offence.

11. Section 18 (claims for specific performance, etc) states:

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

(a) The argument that these were not 'simple' contracts

12. Mr Nasil for the appellant referred to the distinction drawn by Section 16 between actions "founded on simple contract" (which have a limitation period of six years under Section 16(1)(a)) and actions "upon a specialty" (which have a limitation period of 12 years). He submitted, relying on Halsbury's Laws of England, in a passage we have been unable to verify, that a "special contract is a contract of record or a contract under seal", and that a simple contract is any contract not fitting that description. He submitted that the three agreements that the appellant sought to enforce were in writing, they were contracts of record, they were special contracts, and therefore this was an action "upon a specialty".

13. We reject this submission. We are unable to find the passage in Halsbury's referred to by Mr Nasil, which he cited vaguely as '4th edition, Volume 28'. Halsbury's is a classic and authoritative legal encyclopaedia but if counsel propose to quote from it they must cite the relevant page and paragraph. Volume 28 of the Fourth Edition contains 851 pages and 1,403 paragraphs. It ill-behoves counsel to provide such a vague citation. With respect, we doubt the correctness of the quote and therefore disregard it.

14. The Supreme Court in Oil Search Limited v Mineral Resources Development Corporation Ltd (2010) SC1022 commented that the issue of whether an action is "upon a specialty" is not at all straightforward. There is no definition of "specialty" in the Frauds and Limitations Act or the Interpretation Act or any other written law. Davani J found in the Bank of South Pacific v Leahy (2002) N2263 that a guarantee was a specialty because of its nature and form, it being in the form of a deed, but that appears to be the only PNG case that has touched on the issue. We consider that any contract in the form of a deed is a specialty. However, we cannot accept Mr Nasil's submission that any contract 'of record' is a specialty, as that would lead to the absurd result that any written contract would be so regarded, and that any action in breach of a written contract would attract a 12-year limitation period. Clearly that is not the intention of the legislature.

15. We consider that her Honour correctly regarded the three written agreements that were pleaded in the statement of claim to have commenced operation in March-April 1990, and to have given rise to the claim for a debt of K74.5 million and damages, as 'simple contracts", attracting a six-year limitation period under Section 16(1)(a).

(b) The argument that the cause of action was not breach of contract

16. This is a curious argument. Mr Nasil submitted that the appellant was not pleading that the defendants had breached any of the three agreements; rather he was pleading that the agreements had not been performed. This is a fine but illusory distinction in which we find no merit. If a plaintiff pleads that a contract has not been performed according to its terms, he is, surely, pleading that the contract has been breached. That the cause of action that was being pleaded in this case was breach of contract is evident from paragraph 17 of the statement of claim, which states, after pleading the particulars of the three agreements which were said to give rise to liability, and immediately before the prayer for relief:

The defendants have therefore breached the Goroka (MOU) Heads of Agreement with the Hides Gas Compensation Agreement and the Hides Gas Community Trust Fund Deed.

17. We consider that her Honour properly regarded the proceedings as an action in breach of contract (to be precise, breach of three contracts) and therefore – subject to the argument about Section 18 – subject to a six-year limitation period under Section 16(1)(a).

18. The limitation period commenced "on the date on which the cause of action accrued". It is settled law that a cause of action in breach of contract accrues on the date of the breach, not on the date of the contract (Otto Benal Magiten v Kopina Raka (2002) N2179, Michael Nunulrea v PNG Harbours Ltd (2005) N2790, Midland Bank v Hett, Stubbs & Kemp [1978] 3 All ER 571). In this case the statement of claim pleaded that the defendants had breached each of the three agreements "for the last 19 years". As the action was commenced in November 2009, the pleading was that the defendants first breached the agreements, by failing to make payments to the landowners in accordance with the agreements, in November 1990. That is when the "cause of action accrued" for the purposes of Section 16(1)(a). The proceedings should therefore have been commenced by November 1996. The proceedings were not commenced until November 2009, which exceeded the limitation period by 13 years.

19. Her Honour did not err by regarding the cause of action as breach of contract or by finding that the cause of action accrued more than 20 years ago (in her Honour's judgment of May 2013) or by concluding that the proceedings were time-barred under Section 16(1)(a).

(c) The argument that Section 18 applied

20. Mr Nasil submitted that the appellant was seeking specific performance of the three agreements and therefore under Section 18 (which provides that "Section 16 does not apply to any claim for specific performance of a contract ...") his claim was not caught by Section 16(1)(a). It is also relevant to note that Section 16(1) begins with the qualification "Subject to Sections 17 and 18". Mr Nasil further submitted that because the substantive relief being claimed by the appellant was specific performance, Section 18 applied, and therefore the proceedings were not subject to any limitation period under Section 16.

21. This is a logical and alluring submission but it is undone by the prayer for relief in the statement of claim, which, immediately after pleading in paragraph 17 that the defendants breached the three agreements, states:

AND THE PLAINTIFF THEREFORE CLAIMS:

1. The outstanding payment in the total sum of K74,452,061.36 for Compensation, Land Damage and Community Benefits Trust Fund owed to the Hides Gas Field Landowners as per the Goroka Heads of Agreement to be paid by the defendants.
   
2. An order for specific performance of the Goroka Heads of Agreement of 31 March 1990.
   
3. An order for specific performance of the execution of the Hides Gas Field Compensation Agreement of April 1990.
   
4. An order for specific performance of the execution of the Hides Community Trust Fund Deed of April 1990.
   
5. Damages for breach of contract.
   
6. General damages.
   
7. Costs.
   
8. Such other orders the Court deems fit.
   

22. It will be observed that the appellant was not just seeking specific performance of the agreements. He was also seeking payment of a total debt of K74.5 million and two categories of damages (for breach of contract and general damages). Neither debt nor damages is an equitable remedy. Each is properly regarded as a common law remedy.

23. We agree with the approach recently taken by the Supreme Court (Sakora J, David J and Hartshorn J) in Mamun Investment Ltd v Nixon Koi (2015) SC1409 that only where the relief sought by a plaintiff is confined to specific performance of a contract or an injunction or other equitable relief can an action fall within Section 18. It is, however, not sufficient for a plaintiff to seek specific performance or an injunction or some other equitable relief if such remedies are sought in addition to non-equitable remedies. It is only where the plaintiff seeks purely equitable relief that the action will fall within Section 18.

24. The rationale is that equitable remedies are discretionary in nature and that in deciding whether to grant such relief the court is bound to take into account, according to the doctrine of laches, any undue delay by the plaintiff in commencing the proceedings (Louis Medaing v Ramu Nico Management (MCC) Ltd (2011) SC1144, Fred Angoman v IPBC of PNG (2011) N4363, Letina Rau v Albert Kone (2014) N5804).

25. Here, the appellant was not seeking purely equitable relief so the action did not fall within Section 18. It was caught by Section 16(1)(a). Her Honour did not err by not upholding the appellant's Section 18 argument.

26. We therefore dismiss grounds of appeal 1, 2, 3, 4, 5, 12, 13 and 14.

2 DID THE PRIMARY JUDGE ERR BY ALLOWING THE THIRD DEFENDANT TO MOVE A MOTION FOR DISMISSAL WITHOUT FILING A DEFENCE?

27. It is argued, through grounds of appeal 7, 8 and 9, that her Honour erred in law by allowing the third defendant (the third respondent, the State) to move its motion for dismissal of the proceedings on the ground that the proceedings were time-barred, even though it had filed no defence, and though the appellant had filed a motion for default judgment which was set to be heard on the same day that her Honour heard the motion for dismissal.

28. We reject this argument for three reasons. First, there is no rule of practice and procedure that prohibits a defendant who has not filed a defence, from moving the Court to dismiss proceedings on the ground that they are time-barred (Waim No 85 Limited v The State (2015) SC1405). The third defendant filed a notice of intention to defend and that was sufficient.

29. Secondly, when a Judge is deciding the order of hearing of competing or alternative motions that have been set down for hearing at the same time, the question of the order in which the motions are heard is a matter of discretion for the Judge. It is a common, proper and sensible practice to hear and determine a motion for dismissal first, because if the motion is upheld (as occurred here) other motions become otiose.

30. Thirdly, though the Supreme Court in Oil Search Limited v Mineral Resources Development Corporation Ltd (2010) SC1022 cautioned against the practice of hearing motions for dismissal of proceedings on the ground that they were time-barred, as distinct from requiring that the issues be pleaded in a defence and argued at trial, the caution was qualified by the proviso that hearing such motions can be justified in clear-cut cases. We consider that this was a clear-cut case and that her Honour exercised the discretion of the Court as to the order of hearing the motions carefully and properly and committed no error. We dismiss grounds of appeal 7, 8 and 9.

3 DID THE PRIMARY JUDGE ERR BY UNLAWFULLY OR UNFAIRLY CRITICISING THE APPELLANT'S COUNSEL'S SUBMISSIONS?

31. Grounds of appeal 10 and 11 are really complaints that the primary Judge unfairly criticised Mr Nasil for the lack of detail or authority in his submissions, rather than a serious allegation of error of law. We have examined the transcript. The criticisms her Honour made were mild, fair and constructive. Her Honour gave Mr Nasil's submissions the attention they deserved. There was no procedural unfairness or other error of law. We dismiss grounds of appeal 10 and 11.

4 WHAT ORDERS SHOULD BE MADE?

31. All grounds of appeal have been dismissed, so the appeal must be dismissed and the order of the National Court affirmed. Costs will follow the event.

ORDER

(1) The appeal is dismissed.

(2) The order of the National Court of 3 May 2013 in WS No 1442 of 2009 is affirmed.

(3) Costs of the appeal shall be paid by the appellant to the first respondent and the third respondent, on a party-party basis, which shall, if not agreed, be taxed.

Judgment accordingly.

_________________________________________________________________
Nasil Lawyers: Lawyers for the Appellant
Greg Manda Lawyers: Lawyers for the First Respondent
Makap Lawyers: Lawyers for the Third Respondent