Tzen Niugini Ltd v Dengo [2016] PGSC 30; SC1512 (6 July 2016)

SC1512

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 121 OF 2011

BETWEEN

TZEN NIUGINI LIMITED

Appellant

AND
BENNY DENGO, RHYNOLD GUBARA & KEVIN GUBA, as Executives & Representatives of Shareholders of YEMA GAIAPA DEVELOPERS LMITED
First Respondent

AND
YEMA GAIAPA DEVELOPERS LMITED
Second Respondent

AND
KENDEL GEGERA, JOHN GUBA, LUCAS BIDAPIE, BATHOL MOKARE, BENEDICK BOEBAE, ALBAN ADARI, DAVIS TOWEBAE, IAN BORERE, HELEN COLLIN, ASTON YAVIRO, DAVID BARIGI, JOHN DAVID ORERE as registered directors of YEMA GAIAPA DEVELOPERS LMITED
Third Respondents

AND

LESLIE KARI
Fourth Respondent

AND
VICTOR EU
Fifth Respondent

AND
KANAWI POURU

Sixth Respondent

Waigani: Injia CJ, Makail & Bona, JJ
2015: 26^th October

2016: 6^th July

SUPREME COURT – Practice & Procedure – Appeal against dismissal of contempt proceedings – Frivolous and vexatious – Failure to disclose reasonable cause of action – Abuse of process – Sufficiency of pleadings – National Court Rules – Order 12, rule 40

CONTEMPT OF COURT – Breach of Court Order – Order restraining interference with project and operations of Appellant – National Court Rules – Order 14

Cases cited:
Andrew Daiva & Ome Ome Forests Limited v. Ray Cheong & Ors (2002) N2289
Mt Hagen Local-level Government v. Sek (2009) SC1007
Paias Wingti v. Kala Rawali & Ors (2010) N3982
Tzen Pacific Limited v. Innovest Limited & Ors (2015) SC1454

Counsel:

Mr. G. Purvey with Ms. Gubag, for Appellant
Mr. L. A. Kari, for First, Second, Third, Fourth & Fifth Respondents
Mr. I. R. Molloy, for Sixth Respondent

JUDGMENT

6^th July, 2016

1. BY THE COURT: The Appellant Tzen Niugini Limited (“Tzen Niugini”) appeals against a dismissal of its contempt proceedings brought under Order 14 of the National Court Rules.

Background Facts

2. The facts are, on 29^th October 2004 Tzen Niugini entered into a Logging and Marketing Agreement with the Second Respondent (“Yema Gaiapa”), whereby Yema Gaiapa contracted Tzen Niugini to undertake the harvesting and extraction of timber for export and to convert some logs into sawn timber (“the 2004 LMA”).

3. Soon thereafter in 2004, Tzen Niugini commenced its operations under the 2004 LMA. On 14^th December 2006 the First and Second Respondents filed proceedings OS No. 901 of 2006. It was a result of a dispute between Tzen Niugini and the First, Second and Third Respondents over what these Respondents alleged was primarily under payment of premium and levies by Tzen Niugini under the 2004 LMA. The other aspects were the control of Yema Gaiapa by shareholders and proper recipients of the premium and levies.

4. The Sixth Respondent was the Managing Director of the PNG Forest Authority. Neither he nor the Forest Authority were parties to these proceedings or referred to in the Court Order of 13^th April 2007. On 5^th June 2007 the 2004 LMA was reviewed and superseded by a further LMA between Yema Gaiapa and Tzen Niugini, which had duration of four years from 5^th June 2007 (“the 2007 LMA”).

5. On 13^th April 2007 the Court issued Orders inter alia providing for the premiums and levies to be paid to Yema Gaiapa and ordered the First and Second Respondents and others “restrained from interfering with the project and operations of” Tzen Niugini “either within the project area or outside of same”.

6. On 25^th February 2008 Yema Gaiapa purported to issue a termination notice of the 2007 LMA to Tzen Niugini while the Court Order of 13^th April 2007 was in force and effect. Furthermore, while the Court Order was in force and effect, on 19^th November 2010, Yema Gaiapa signed another Logging and Marketing Agreement with a third party, Uni Rise Limited (“the 2010 LMA”).

7. On 19^th November 2008 Yema Gaiapa and others commenced proceeding OS No. 708 of 2008. All of the same parties to the proceedings OS No. 901 of 2006 were parties to the proceeding OS No 708 of 2008, together with the Managing Director, PNG Forest Authority, and the Registrar of Companies.

8. On 24^th September 2010 consent Orders were made in proceedings OS No. 708 of 2008, including that certain persons be appointed to run the affairs of Yema Gaiapa on an interim basis “...... to appoint a new contractor then conduct elections.”

9. On 4^th April 2011 Tzen Niugini filed contempt proceedings against the Respondents for breaching the Court Order of 13^th April 2007, by signing and facilitating the 2010 LMA between Yema Gaiapa and Uni Rise Limited that interfered with Tzen Niugini’s operations.

10. On 14^th April 2011 the lawyers for the Sixth Respondent filed a motion to dismiss the contempt proceedings under Order 12, rule 40 of the National Court Rules. On 31^st August 2011 Davani J, upheld the Sixth Respondent’s motion and dismissed the contempt proceedings on the ground that the contempt proceedings were “plainly frivolous or vexatious or untenable.”

Termination of 2007 LMA

11. The primary judge came to this conclusion after finding that “the orders of 13 April 2007 have long ceased. I do not see how Tzen Niugini can maintain that the orders of 13 April 2007 have been breached. I say this because Tzen Niugini did not challenge the termination of the LMA. Although, it did take out restraining orders, it withdrew the case. The Consent Orders in OS 708 of 2008 allowed or permitted Yema Gaiapa to secure the services of a new developer. When it did that, the Orders of 13 April 2007 were not current. The plaintiff need not have taken steps to vary orders because there was no need to.”

12. Tzen Niugini contends that this finding is erroneous. The 2007 LMA was never terminated. At the same time, the Court Order of 13^th April 2007 was in force and effect when Yema Gaiapa purported to terminate the 2007 LMA on 25^th February 2008. Further and subsequently, Yema Gaiapa signed the 2010 LMA with Uni Rise Limited on 19^th November 2010.

13. According to the First to Fifth Respondents events have taken over the contempt proceedings which rendered them unnecessary, hence untenable. First, the Court Order of 13^th April 2007 entered by consent of the parties had concluded the proceedings OS No. 901 of 2007. This is because the terms of the Court Order are in identical terms as the orders sought orders in the originating summons. Secondly, by reason of this, it paved the way for Yema Gaiapa to engage or contract a new contractor – Uni Rise Limited.

14. In the case of the Sixth Respondent, it was submitted that the Court Order did and could not restrain Yema Gaiapa from exercising its right pursuant to clause 23 of the 2007 LMA. In Paias Wingti v. Kala Rawali & Ors (2010) N3982 the Court said that it must look at the purpose of the Orders. In this case the purpose was to reconfigure the benefits payable under the LMA in exchange for Tzen Niugini to continue the project.

15. It further contends, however, the implied condition is that the project would only continue in accordance with the terms of the LMA which required compliance with various provisions including those of the Forestry Act. It cannot be said that the parties, particularly, Yema Gaiapa waived the requirement for compliance with the LMA or the relevant statutory provisions. Thus, the termination of the LMA for good reason could not possibly be interpreted as a breach of the Court Order.

16. In a case of an application to dismiss proceedings for failing to disclose a reasonable cause of action under Order 12, rule 40 of the National Court Rules, the primary consideration is whether the procedural requirements on pleading of a cause of action have been met. The question is one of sufficiency of pleadings for the judge to consider. Its determination is primarily based on a consideration of the statement of claim. The onus is on the Applicant to establish that the statement of claim does not plead all necessary facts and legal elements or ingredients to establish or prove the claim. The Supreme Court stated these principles in Mt Hagen Local-level Government v. Sek (2009) SC1007.

17. In the context of this case the Respondents were obliged to establish that the statement of charge did not plead all necessary facts and legal elements or ingredients to establish or prove the charge. It was not for the primary judge to delve into the merits of the allegation of contempt. In that respect, we note that there were eighteen alleged contemnors and a statement of charge has been preferred against each one of them.

18. The gist of the alleged contemptuous conduct is that these persons purportedly terminated the 2007 LMA between Yema Gaiapa and Tzen Niugini and subsequently engaged Uni Rise Limited under the 2010 LMA. This conduct is said to be in breach of the Court Order which was in force and effect and which “restrained from interfering with the project and operations of the Defendant Company (Tzen Niugini) either within the project or outside of same.” see paragraph 4 of the Court Order.

19. We are satisfied that the statement of charges pleaded all the necessary facts and legal elements or ingredients to establish or prove the charge against the alleged contemnors.

20. On the other hand, in our view the arguments advanced by the parties before the primary judge and before us are quite substantive. For instance, it is arguable that the Court Order restrained Yema Gaiapa from terminating the 2007 LMA beyond the conclusion of the proceedings OS NO. 901 of 2006 so that the project is not sabotaged by the First, Second and Third Respondents.

21. There is also merit in the Respondents’ argument that the Court Order did not waive the parties’ obligations to the terms of the LMA and the Forestry Act. These are valid arguments but they do not address the question of sufficiency of pleadings in the statement of charges. By the same token, they also do not support the finding that it is plain and obvious that the contempt proceedings are obviously unsustainable. As a consequence the primary judge erroneously proceeded to consider them and in so doing, considered the merits of the contempt proceedings.

22. We find that the primary judge fell into error in this respect. This ground is upheld.

Non-Party

23. Secondly, the primary judge held that the Fourth, Fifth and Sixth Respondents were not parties to the proceedings OS No. 901 of 2007 and contempt proceedings should not have been brought against them. That being the case, it rendered the contempt proceedings frivolous, vexatious and untenable. This was despite the contrary view advanced by Tzen Niugini based on decided cases of Andrew Daiva & Ome Ome Forests Limited v. Ray Cheong & Ors (2002) N2289 and others.

24. The First, Second, Third, Fourth and Fifth Respondents contend that the primary judge was correct. In the case of the Sixth Respondent, it was submitted that he was not involved in the termination of the 2007 LMA and if the primary judge erred, it could not have affected her ruling with respect to Sixth Respondent.

25. We uphold Tzen Niugini’s submission. The Court Order of 13^th April 2007 applied to all persons, regardless of whether or not they were parties to the proceedings. They were obliged to not act in contempt of such Order and ensure compliance with it.

26. The assertion that the Fourth, Fifth and Sixth Respondents were not parties to the proceedings and not even referred to in the Court Order does not necessarily mean that they are not subject to or obliged to comply with it. There is a line of authority that says that a Court Order applies to all persons regardless of whether or not they are parties to the proceedings. All persons are obliged to not act in contempt of an Order and ensure compliance with it. A case on point is Andrew Daiva & Ome Ome Forests Limited v. Ray Cheong & Ors (supra). This proposition supports Tzen Niugini’s argument and goes to establish that the contempt proceedings are not frivolous or vexatious or untenable.

27. As was explained by the Supreme Court in Mt Hagen Local-level Government v. Sek (supra) a frivolous claim is one that is characterised as a claim that is plainly and obviously untenable, that cannot possibly succeed and bound to fail if it proceeds to trial. 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.

28. We are unable to agree with the primary judge that as the Respondents were not parties or referred to in the Court Order, the contempt proceedings are frivolous or vexatious or untenable. We find the primary judge erred in this respect. This ground is upheld.

Multiplicity of Proceedings

29. The other reason given by the primary judge for dismissing the contempt proceedings was that Tzen Niugini did not come to Court with clean hands, having attempted in other proceedings to raise the same issues. These were proceedings MP No. 8 of 2011 where Tzen Niugini attempted to wind up Yema Gaiapa, alleging monies totalling K1.014 million were owed to it. This matter went before His Honour Kandakasi J who refused to grant the winding up orders finding that Yema Gaiapa had not breached the orders and that Tzen Niugini was abusing the Court’s process.

30. Another set of proceedings OS No. 348 of 2008, Tzen Niugini Ltd v. Yema Gaiapa Developer Ltd, Kanawi Pouru as Managing Director of PNG Forest Authority and PNG Forest Authority was filed where Tzen Niugini sought a Declaration in one of its reliefs that the termination of the LMA was contemptuous. The action was not pursued further.

31. This was the third time Tzen Niugini has brought contempt proceedings against all former directors, directors and the Managing Director of the PNG Forest Authority. These were the primary judge’s findings which led to the conclusion that it was a case of multiplicity of proceedings, hence an abuse of process.

32. As to the proceedings MP No. 8 of 2011, Tzen Niugini contends that Kandakasi J never made such findings and there was no evidence before the primary judge to support such findings as having been made by his Honour in those proceedings.

33. We uphold this submission. Except for the assertion in the affidavit of counsel for the First to Fifth Respondents, there no is evidence of a copy of the MP proceedings, Court Order, or either a written decision or transcript of proceedings providing reasons for decision to verify counsel’s assertion that Kandakasi J held that Yema Gaiapa did not breach the Court Order and dismissed the proceedings for being an abuse of process.

34. We find that this finding is unsupported by evidence.

35. As to the proceedings OS No. 348 of 2008, there is no evidence that the remedies and issues were the same as proceedings OS No. 901 of 2006. The evidence is that the proceedings concerned different remedies and issues and there was no previous denial or refusal by the Courts of the remedies sought by Tzen Niugini in the other proceedings which prevented the primary judge from finding that there was “multiplicity of proceedings covering the same issues.”

36. In any case, both sides raise valid arguments. These arguments can be appropriately considered at trial, after all the evidence is received including any evidence of MP proceedings and reasons for decision to enable the judge to make an informed decision. The Respondents’ argument that Tzen Niugini is raising the same issues and seeking the same remedies can be also considered in detail at trial. These matters support Tzen Niugini’s submission that this not a clear case of abuse of process.

37. We are satisfied the primary judge erred. This ground is upheld.

Competency of Appeal

38. A final matter before we close is that the Sixth Respondent objects to the competency of the appeal. He objects on the ground that there is no right of appeal against a dismissal or acquittal of a charge of contempt of Court. He contends that it is an issue that goes to the jurisdiction of the Court to deal with the appeal and can be raised at any time during the appeal.

39. Accepting that competency of an appeal can be raised at any time during the appeal, it is our view that this issue has been considered by the Supreme Court in Tzen Pacific Limited v. Innovest Limited & Ors (2015) SC1454. The Court held that there is a right of appeal against a dismissal or acquittal of a charge of contempt of Court. In this case as this appeal arises from a dismissal of the contempt proceedings and following the case of Tzen Pacific Limited v. Innovest Limited (supra), we are of the view that a right of appeal is available to the Appellant. We are satisfied the appeal is competent. The objection is, accordingly, dismissed.

Order

40. We conclude that the appeal must be upheld and dismissal, set aside. The orders are:

1. The objection to competency by the Sixth Respondent is dismissed.
   
2. The appeal is upheld.

3. The dismissal of the contempt proceedings is set aside.
   
4. The contempt proceedings shall be remitted to the National Court to be heard before another Judge on a date and time to be fixed.
   
5. The Respondents shall pay the Appellant’s costs of the appeal, to be taxed, if not agreed.

________________________________________________________________

Young & Williams Lawyers : Lawyers for the Appellant

PNG Legal Services : Lawyers for First, Second, Third, Fourth & Fifth Respondents
Ashurst Lawyers : Lawyers for Sixth Respondent