SC2184

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 160 OF 2019

MEMKITTS INVESTMENTS LIMITED
Appellant

V

PAUL DEPO AIKAL
First Respondent

PDA MAINTENANCE & TRADING LIMITED
Second Respondent

PDA TRANSPORT LIMITED
Third Respondent

Waigani: Cannings J, Geita J, Gora J
2021: 15th, 31st December

PRACTICE AND PROCEDURE – civil proceedings – notice of intention to defend – whether late giving of notice of intention to defend or failure to comply with directions as to filing of defence prevents defendant moving motion for dismissal of proceedings – whether a motion by plaintiff seeking summary judgment should be heard before motion by defendant seeking dismissal of proceedings. 

PRACTICE AND PROCEDURE – Frauds and Limitations Act, s 16 – an action founded on simple contract or tort shall not be brought after the expiration of six years commencing on “the date on which the cause of action accrued” – determination of date of accrual of cause of action – whether the relevant date is when the cause of action first accrued. 

The appellant was the plaintiff in National Court proceedings commenced in 2016 against the respondents, claiming damages in excess of K24 million for breach of contract, conversion and fraud relating to two agreements between it and one or more of the respondents. It was pleaded in the statement of claim that those agreements were entered into in 1999. The dates on which the agreements were breached were not expressly pleaded in the statement of claim. The respondents sought, by notice of motion, dismissal of the proceedings on various grounds including that they were time-barred under s 16(1) of the Frauds and Limitations Act. On the day set for hearing the respondents’ motion, a motion by the appellant for summary judgment was also set for hearing. The primary Judge decided to hear the respondents’ motion first. His Honour upheld the motion and dismissed the proceedings on the ground that they were time-barred. The appellant appealed to the Supreme Court on three grounds, that the primary Judge: (1) erred by hearing the respondents’ motion first as the respondents were in default of a direction as to filing an amended defence and had filed a notice of intention to defend outside the time permitted by the National Court Rules and had not sought or been granted leave to file or move their motion, and should not have been allowed to move a motion that was not supported by a proper defence; (2) erred in holding that the proceedings were time-barred by not finding that the causes of action pleaded in the statement of claim were constituted by recurring damage that was continuing up to the commencement of the proceedings in 2016, and did not simply accrue in 1999 or shortly thereafter; and (3) ignored the appellant’s submissions and dealt with the matter in a way giving rise to a reasonable apprehension of bias. 

Held: 

(1)	There is no rule of law or procedure requiring a defendant who has filed a late notice of intention to defend or is in default of a direction given by the Court as to filing a defence to obtain the leave of the Court to file or move a motion seeking summary dismissal of a proceeding. 

(2)	When competing motions (one by the plaintiff for summary judgment, one by the defendants for dismissal of proceedings) are due for hearing at the same time, the question of which motion is heard first is a matter of discretion. It is conventional for a motion for dismissal to be heard first, even if it has been filed or served later in time than the competing motion. 

(3)	The primary Judge did not err by hearing the respondents’ motion without requiring that they obtain leave to do so and without hearing the respondents’ motion to strike out the defence. Nor was there error in hearing the respondents’ motion first. Ground 1 of the appeal dismissed.

(4)	Section 16(1) of the Frauds and Limitations Act provides that an action “that is founded on simple contract or on tort … shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued”. The cause of action can accrue on a specific date and not recur, or accrue on a specific date and recur on subsequent dates. 

(5)	Here, there were three causes of action (breach of contract, conversion and fraud), but it was not expressly pleaded in the statement of claim when they first accrued or whether they recurred. 

(6)	In these circumstances the primary Judge properly held that “the date that the cause of actions accrued in the statement of claim is in or about 1999”, that s 16(1)(a) of the Frauds and Limitations Act applied and that this was a case of a proceeding being time-barred. Ground 2 of the appeal dismissed.

(7)	Civil proceedings must be conducted in accordance with the principles of natural justice, entailing the duty to act fairly and in principle to be seen to act fairly.

(8)	Nothing in the way the primary Judge dealt with the proceedings, in particular the hearing of the respondents’ motion for dismissal, gave rise to a reasonable apprehension of bias against the appellant or any reasonable concern that his Honour did not act fairly or was not seen to act fairly. Ground 3 of the appeal dismissed.

(9)	Appeal dismissed. Parties ordered to bear own costs due to non-appearance by the respondents.

Case Cited

The following cases are cited in the judgment:

Habolo Building & Maintenance Ltd v Hela Provincial Government (2016) SC1549
Memkitts Investments Ltd v Paul Depo Aikal & PDA Maintenance & Trading Ltd (2019) N8053
Oil Search Ltd v MRDC & Mineral Resources Enga Ltd (2010) SC1022
Public Curator v Konze Kara as Administrator of the estate of Kibikang Kara [2014] 2 PNGLR 428
Takori v Yagari (2008) SC905
Telikom PNG Ltd v ICCC & Digicel (PNG) Ltd [2008] PNGLR 303
Waim No 85 Ltd v The State [2015] 1 PNGLR 100
Wialu v Andreas (2020) SC1970

Counsel

G Lau, for the Appellant

31st December, 2021

1.      BY THE COURT: Memkitts Investments Ltd appeals against the dismissal by the National Court of proceedings it commenced against the respondents, Paul Depo Aikal, PDA Maintenance & Trading Ltd and PDA Transport Ltd.

2.     In WS No 1629 of 2016, it claimed damages in excess of K24 million for breach of contract, conversion and fraud relating to agreements between it and one or more of the respondents for lease-purchase of a truck and management of its freight and transport business with another company. It was pleaded in the statement of claim that those agreements were entered into in 1999. The dates on which the agreements were breached were not expressly pleaded in the statement of claim.

3.     The respondents sought, by notice of motion, dismissal of the proceedings on various grounds including that they were time-barred under s 16(1) of the Frauds and Limitations Act. On the day set for hearing the respondents’ motion, 13 April 2018, a motion by the appellant to strike out the respondents’ amended defence and enter summary judgment was also set for hearing. The primary Judge decided to hear and determine the respondents’ motion first before deciding whether it was necessary to hear the appellant’s motion. 

4.     His Honour on 15 August 2019 upheld the respondents’ motion and dismissed the proceedings on the ground that they were time-barred (Memkitts Investments Ltd v Paul Depo Aikal & PDA Maintenance & Trading Ltd (2019) N8053). 

GROUNDS OF APPEAL 

5.     The grounds of appeal are set out in part 2 of the notice of appeal, in paragraphs 2.1, 2.2, 2.3, 2.4, 2.5, 2.6.1, 2.6.2, 2.6.3, 2.6.4 and 2.6.7. Paragraphs 2.5, 2.6.1 and 2.7 have been abandoned. The remainder can be reduced to three main grounds, that the primary Judge: 

(1)	erred by hearing the respondents’ motion first as the respondents were in default of a direction as to filing an amended defence and had filed a notice of intention to defend outside the time permitted by the National Court Rules and had not sought or been granted leave to file or move their motion, and should not have been allowed to move a motion that was not supported by a proper defence (paragraph 2.4);

(2)	erred by not considering that the causes of action pleaded in the statement of claim were constituted by recurring damage that was continuing up to the commencement of the proceedings in 2016, and did not simply accrue in 1999 or shortly thereafter, as found by the primary Judge (paragraphs 2.1 and 2.2); 

(3)	ignored the appellant’s submissions and dealt with the matter in a way giving rise to a reasonable apprehension of bias (paragraphs 2.3, 2.6.2, 2.6.3, 2.6.4 and 2.6.7).

6.      The respondents did not participate in the appeal, despite being given ample opportunity to appear.

GROUND (1): HEARING THE RESPONDENTS’ MOTION FIRST

7.     The appellant argues that the respondents should not have been permitted to argue their motion without seeking and obtaining leave of the Court to file and move the motion, and without the Court first hearing the appellant’s motion to strike out the respondents’ amended defence and enter summary judgment, for two reasons:

•	the respondents were in default of a direction given by the primary Judge on 8 March 2018 to file an amended defence within seven days, in that they did not file an amended defence but filed a new defence (which included the defence that the proceedings were time-barred) without leave, and they had filed a notice of intention to defend later than the time permitted by the National Court Rules; 

•	the respondents should not have been allowed to move a motion that was not supported by a proper defence.

8.     The appellant argues that its counsel tried to raise these points as preliminary issues at the hearing on 13 April 2018, but was given short shrift by the primary Judge who incorrectly allowed the respondents’ motion to be moved. 

First limb of first ground of appeal: alleged error by primary Judge not insisting on leave being sought by respondents to move their motion for dismissal

9.     It is argued that his Honour acted contrary to Order 7, Rule 6 of the National Court Rules, which provides:

(1)	A defendant may give notice of intention to defend at any time without leave.

(2)	Where a defendant gives a notice after the time limited for doing so, he shall not, unless the Court otherwise orders, be entitled to file a defence or do any other thing later than if he had given a notice of intention to defend within that time.

10.     Mr Lau, for the appellant, submitted that the respondents could not take any step in the proceeding, including moving a motion for dismissal of the proceedings, without leave of the Court. They did not seek or obtain leave, therefore their motion should not have been entertained. It was an error of law for the primary Judge to hear the motion in the first place, and the error was exacerbated by upholding it and dismissing the proceedings. Mr Lau refers to the following dicta of the Supreme Court (Kirriwom J, Gavara-Nanu J and Kandakasi J) in Takori v Yagari (2008) SC905 to support the submission:

11.	A reading of these rules make it clear that, no person can take any step in any proceeding unless, he or she is the person who issued the proceedings at the first place or has filed a notice of intention to defend in the proceedings, within the time periods stipulated in the Rules of the Court. Nevertheless, a defendant may still file and serve his or her notice of intention to defend any time passed the time period for him or her to do so without leave of the Court.  But he or she is not entitled to file and serve his or her defence or do anything else except with the leave of the Court.  That means no defendant is at any liberty to file and serve his or her defence or take any other step in the proceedings without first seeking and obtaining the permission to do so from the Court. We cannot put it any clearer than that.

11.    We have difficulty with this submission. We doubt that the Court in Takori v Yagari was actually saying that if a notice of intention to defend is given late or a defence is filed late without leave, a defendant cannot move for dismissal of the proceeding without obtaining the leave of the Court. If we are wrong in our view of that case, and that is what the Court was really saying, we would respectfully depart from that view. 

12.     The argument that the late giving of a notice of intention to defend means that a defendant requires leave of the Court to move for dismissal of the proceedings was addressed by the Supreme Court (Cannings J, Murray J, Kassman J) in Waim No 85 Ltd v The State [2015] 1 PNGLR 100 at 109-110:

The argument is that the motion seeking dismissal of the proceedings should not have been entertained as the first respondent had not sought or been granted the leave of the Court to take any step in the proceedings and such leave was necessary as the notice of intention to defend was given after the time limited for doing so. We reject this argument as it involves a misconstruction of the provision. Rule 6(2) does not say that a defendant who gives a late notice of intention to defend cannot file a defence or do any other thing or take any step without the leave (or more correctly an order) of the Court. It simply says that where the Rules limit the time for taking some step, such as filing a defence, the time is not extended by virtue of having filed a late notice of intention to defend.

That this is the effect of Rule 6(2) is made clear by the Supreme Court decision in MVIL v Sossie Joe (2007) SC863. MVIL was the defendant in the National Court. It filed a late notice of intention to defend and when it attempted, within the period of 44 days after service of the writ, to file its defence, the Registrar refused to accept it, taking the position that leave of the Court was required. The Supreme Court held that the Registrar was wrong. Rule 6(2) did not mean that if notice of intention to defend was filed late, leave of the Court was required to take any step in the proceeding. Leave was only required if the time for taking that step had expired. The Court (Injia CJ, Manuhu J, Hartshorn J) stated:

The natural and ordinary meaning of Order 7, Rule 6(2), in our view, is quite clear. It is to ensure that the defendant does not have further time to file a defence or do any other thing because he gave a notice of intention to defend after the prescribed time. It does not penalise the defendant by requiring him to seek the leave of the Court to file his defence if he has failed to file his notice of intention to defend within time.

Their Honours distinguished the facts of the case before them with those in Luke Tai v Australia and New Zealand Banking Group (PNG) Ltd (2000) N1979. In Tai the defendant filed a defence without the leave of the Court, 20 months after the time permitted by the Rules. The fact that it gave a late notice of intention to defend was not held against it. It was the fact that its defence was filed late and without the leave of the Court that put it in default of the Rules. The effect of Order 7, Rule 6(2) was that the late notice of intention to defend did not extend the time for filing a defence.  That was a different scenario to that in Joe, where the defence was not filed late.

The effect of filing and serving a notice of intention to defend was to confer on the first respondent the right to take any step in the proceedings, provided the step was taken in compliance with the Rules and in particular within time limits imposed by the Rules (Badastal Ltd v Dr Puka Temu (2011) SC1092). Neither the National Court Rules nor any other law imposes a time limit on a defendant for filing a motion for dismissal of proceedings. The first respondent therefore had the right to make interlocutory applications such as moving a motion for dismissal of the proceedings.

13.     We adopt the reasoning in Waim No 85 Ltd. We find that even though the respondents gave late notice of intention to defend and even if they were in default of the primary Judge’s direction to file an amended defence (by filing what the appellant contends was a new defence rather than an amended defence) within seven days, they did not require leave of the Court to move for dismissal of the proceedings. 

14.     That they did not formally seek leave to file and serve their notice of motion, and that the primary Judge did not formally order that they were granted leave, are matters of no consequence. The primary Judge properly reasoned, after hearing counsel for both sides, which is borne out by the transcript, as follows:

The defendants have filed an appearance, is that right? And so they are entitled to apply to have the proceedings dismissed and so I am going to hear the dismissal application first. 

15.     We therefore dismiss the first limb of the first ground of appeal.

Second limb of first ground of appeal: alleged error by primary Judge allowing respondents to move their motion, which was not supported by a proper defence

16.     The appellant argues that the respondents should not have been allowed to move for dismissal of the proceedings on the time limitation ground as it is a substantive and complete defence that must be properly pleaded. In this case it was not properly pleaded as the s 16(1) Frauds and Limitations Act defence was only raised in the new defence filed by the respondents without leave of the Court. 

17.       In support of this argument the appellant cited the opinion of Injia DCJ in Telikom PNG Ltd v ICCC & Digicel (PNG) Ltd [2008] PNGLR 303, at 305: defences such as res judicata and statutory time limitations must be properly pleaded and preferably argued at trial rather than being used as grounds of summary dismissal of proceedings. That is not an unreasonable view; though we note, as acknowledged by Mr Lau, that it was expressed in a dissenting opinion. 

18.     We also note the unanimous decision of the Supreme Court (Injia CJ, Cannings J, Makail J) in Oil Search Ltd v MRDC & Mineral Resources Enga Ltd (2010) SC1022, where similar views were expressed in these terms:

If a claim is clearly time-barred and provided the statutory defence is pleaded in the defence, a motion for dismissal is warranted and it would be quite appropriate for the National Court to hear and determine it. … 

it further demonstrates why applications to dismiss proceedings for being time-barred are best left, except in the clearest of cases, for thorough determination at a trial.

19.      There are no hard and fast rules about dealing with motions for summary dismissal. It involves a discretionary value judgment by a Judge in deciding whether to hear the motion or whether to take the view that it is an issue that should go to trial or whether – as the appellant wanted to happen here – to hear a plaintiff’s motion to strike out the defence that pleads the ground of dismissal.

20.     When competing motions (one by the plaintiff for summary judgment, one by the defendants for dismissal of proceedings) are due for hearing at the same time, the question of which is heard first is a matter of discretion. It is conventional for a motion for dismissal to be heard first, even if it has been filed or served later in time than the competing motion. 

21.     In the present case, if the primary Judge had decided to hear the appellant’s motion to strike out the defence first, before hearing the respondents’ motion for dismissal, it could hardly be argued to have been an error of law. 

22.     By the same token we consider that there was no error of law in his Honour’s decision to hear and determine the respondents’ motion first. His Honour was obviously concerned that it involved a threshold issue that needed to be addressed before heading for a trial. His Honour decided that it was a clear case and that the statutory defence had been pleaded in the defence. We find no error in his Honour allowing the respondents to move the motion for dismissal before hearing the appellant’s motion to strike out the defence and enter summary judgment. We dismiss the second limb of the first ground of appeal.

GROUND (2): THE ISSUE OF RECURRING DAMAGE 

23.     The appellant argues that the primary Judge erred in upholding the respondents’ submission that the proceedings were time-barred under s 16(1) (limitation of actions in contract, tort, etc) of the Frauds and Limitations Act, which states:

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. 

24.     His Honour dealt with that submission in this way:

8. The defendants submit that the plaintiff’s claim is statute-barred. This is because its claim alleges fraud and conversion and the breach of two agreements. The plaintiff’s claim has been brought after the expiration of six years from when the alleged causes of action accrued, contrary to s 16(1)(a) Frauds and Limitations Act.

9. In the statement of claim are purported particulars of the breach of the lease/purchase agreement, of the management agreement, of conversion and of fraudulent acts.

10. The plaintiff’s causes of action are that the two agreements were breached, that the defendants converted the plaintiff’s property and that the defendants’ dealings amounted to fraud. The two agreements are simple contracts. Conversion and fraud or deceit are torts. For conversion: OBG Ltd v Allan [2007] UKHL 21; [2008] 1 AC 1; for fraud or deceit: Derry v Peek (1888) LR 14 App Cas 337; Magill v Magill [2006] HCA 51 and Pololi v Wyborn (2013) N5253. 

11. Pursuant to s 16(1)(a) Frauds and Limitations Act, a cause of action based upon simple contract or upon tort, must be brought within six years of the date that the cause of action accrued. That date is when the cause of action accrued and not from the date that the act giving rise to the cause of action is discovered: Mamum Investment Ltd v Koim (2015) SC1409 at [22].

12. In considering this application, I am mindful of the Supreme Court decision in Oil Search Ltd v Mineral Resource Development Corporation Ltd (2010) SC1022. In that case it was held amongst others, that the determination of whether an action is time barred entails a finding on three matters: identification of the cause of action, identification of the date on when the cause of action accrued and a categorisation of the cause of action.

13. As to the causes of action in this instance, as mentioned, they are in fraud, conversion and breach of contract concerning the alleged breaches of the two agreements, the conversion of the plaintiff’s property and fraudulent dealings. The date that the cause of actions accrued in the statement of claim is in or about 1999. 

14. From the above, I am satisfied that s 16(1)(a) Frauds and Limitations Act applies and that this is a clear case of a proceeding being statute or time barred. Consequently, no reasonable cause of action is disclosed in the statement of claim. I am of the view that the defendants have properly made out their claim for the proceeding to be dismissed. 

25.     We find no error in the primary Judge’s characterisation of the causes of action pleaded in the appellant’s statement of claim as breach of two agreements, which were simple contracts, and fraud and deceit, which were torts. 

26.     As to the alleged error in his Honour’s assessment that “the date that the cause of actions accrued in the statement of claim is in or about 1999”, we appreciate the appellant’s argument that a cause of action can accrue on a specific date and not recur or accrue on a specific date and recur on subsequent dates. In the latter scenario, we agree, as pointed out in Public Curator v Konze Kara as Administrator of the estate of Kibikang Kara [2014] 2 PNGLR 428, Habolo Building & Maintenance Ltd v Hela Provincial Government (2016) SC1549 and Wialu v Andreas (2020) SC1970, that, if appropriately pleaded, the cause of action can properly be regarded as recurring. In such cases, the six-year limitation period does not commence to run until the date of the latest accrual of the cause of action, which, if pleaded, might be immediately prior to the date of commencement of the proceedings.

27.     However, we cannot agree with the appellant’s submission that the present case falls into the latter category of cases. Though the three causes of action (breach of contract, conversion and fraud) were, in general terms, adequately pleaded, it was not expressly or adequately pleaded in the statement of claim when they first accrued or whether they recurred, and if they did recur, the dates on which they recurred.

28.     In these circumstances the primary Judge’s finding that “the date that the cause of actions accrued in the statement of claim is in or about 1999”, was one fairly open to him to make. We agree with his Honour that this was indeed a clear case of a proceeding being time-barred. Ground 2 of the appeal is dismissed.

GROUND (3): REASONABLE APPREHENSION OF BIAS 

29.      The appellant argues that the primary Judge ignored the appellant’s submissions and dealt with the matter in a way giving rise to a reasonable apprehension of bias, as his Honour “took almost two years to come up with a four-page written judgment” and his Honour’s “behaviour and reactions in Court during and before hearing of the defendants’ notice of motion indicated that he had predetermined the court in favour of the respondents”.

30.     These arguments were not strongly pressed at the hearing of the appeal, which is a good thing as they are in the circumstances of this case nothing much more than gratuitous criticism of a Judge by a party that did not get the result it wanted. 

31.     Civil proceedings must be conducted in accordance with the principles of natural justice, entailing the duty to act fairly and in principle to be seen to act fairly. Nothing in the way the primary Judge dealt with the proceedings, in particular the hearing of the respondents’ motion for dismissal, gave rise to a reasonable apprehension of bias against the appellant or any reasonable concern that his Honour did not act fairly or was not seen to act fairly.

32.     His Honour might have appeared to ignore the appellant’s submissions but frankly, as we have already indicated, the argument about this being a case of recurring causes of action was only vaguely pleaded in the statement of claim. It was not clearly articulated by counsel for the appellant at the hearing of 13 April 2018. His Honour was evidently not persuaded by the appellant’s submission and was persuaded by the respondents’ submission. His Honour reserved his decision from 13 April 2018 to 15 August 2019, a period of 16 months, which is not “almost two years”. The judgment was seven pages in length, not four. As for his Honour’s “behaviour and reactions” being an indication of predetermination of the case, we reject this allegation. His Honour’s exchanges with counsel for the appellant were direct and to the point, respectful and proper.

33.     The arguments in support of the third ground of appeal are meritless and we dismiss that ground. 

CONCLUSION

34.    The appeal will be dismissed. The respondents have not appeared in the appeal. The parties will therefore bear their own costs. 

ORDER

(1)	The appeal is dismissed.

(2)	The order of the National Court of 15 August 2019 in WS No 1629 of 2016 is affirmed.

(3)	The parties shall bear their own costs of the appeal. 
_____________________________________________________________
Niuage Lawyers: Lawyers for the Appellant