McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279 (30 June 2000)

[2000] PNGLR 279

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

GARY MCHARDY

V

PROSEC SECURITY AND COMMUNICATION LTD TRADING AS PROTECT SECURITY

WAIGANI: AMET CJ; JALINA, KIRRIWOM JJ
21, 30 June 2000

Facts

This is an application made pursuant to s 19 of the Supreme Court Act for an order staying the execution of the injunctive orders of the National Court made against the applicant pending the hearing of his application for leave to appeal. The respondents, after filing an application in the National Court to enforce a restraint of trade clause against the applicant, obtained an interim order restraining him from continuing employment in similar business activities until the determination of the proceedings.

In refusing the stay application;

Held

1. Because this Court is the highest court of unlimited jurisdiction in this country, vested with inherent discretionary power to do justice, and because it must necessarily exercise such discretionary power on proper principles justly and reasonably, according to natural justice to all parties before it, it can consider and enunciate what factors and circumstances are to be appropriate or relevant for it to take into account when exercising that discretion. The stipulation by the Court of the kinds of factors and circumstances it may consider taking into account cannot be exhaustive. They must necessarily vary from case to case and from time to time depending on differing circumstances. These, in our view, must only be guidelines to assist both the Court and the parties making application before it. They cannot be exhaustive or hard and fast pre-conditions.
   
2. To conclude that the test for a successful application for stay should be whether there are "special" or "exceptional circumstances" or that there is a "good reason" or that it is an "appropriate case" is restrictive. What is important to articulate are the factors and circumstances that may be relevant or appropriate in differing cases from time to time.
   
4. The particular circumstance of this case is that it relates to a restraint of trade clause, which if upheld would restrain the applicant for a period of 12 months from engaging in similar commercial activities. By the time the interim injunctive order was granted, the applicant had been employed for six months already. And so the respondent contends that if the applicant were not restrained, by the time the claim was prosecuted the period sought to be enforced may be overtaken and the successful prosecution of the suit would be fruitless.
   
5. The principal factor, reason, or circumstance that the applicant has advanced in support of his application is the fact that he would be denied employment and thus salary for his and his family's maintenance. It is a compelling reason for wanting a stay of the injunctive order to enable the applicant to continue to be employed, but to our minds it defeats the purpose of the interim injunctive order which is obtained in support of the claim for breach of restraint of trade under the contract of employment.
   

There are no other factors or circumstances that in the interest of justice and on the balance of convenience warrant the grant of stay. We therefore dismiss the application with costs.

Papua New Guinea cases cited

PNG v Daniel Mollen [1997] PNGLR 193.
PNG v Gulf Provincial Government [1994] PNGLR 34.
Post PNG Ltd v Westpac Bank Limited [1999] PNGLR 582.
State v Kapal [1987] PNGLR 302.

Other case cited

Alexander v Cambridge Credit Corp Limited [1985] 2 NSWLR 586.

Counsel

A Kandakasi, for the applicant.
P Korowi, for the respondent.

30 June 2000

BY THE COURT. This is an application made pursuant to s 19 of the Supreme Court Act for an order staying the execution of the injunctive orders of the National Court made against the applicant pending the hearing of his application for leave to appeal.

The respondent commenced action OS No. 109 of 2000 in the National Court against the applicant seeking to enforce a restraint of trade clause under a contract of employment between the parties. The respondent then successfully applied for and obtained an interim order restraining the applicant from continuing to be employed in similar business activities until determination of the proceedings.

Applicant's submission

The applicant has filed affidavit deposing that he would face financial hardship as a result of the injunctive order if it were not stayed. He deposed that he would have no financial means to support himself and his family without any form of employment.

The first ground advanced to support the application for stay therefore was financial hardship and difficulties the restraining order would place upon the applicant. The second ground relied upon was the submission that there is a serious dispute as to the validity of the contract relied upon in the originating claim, pursuant to which the injunctive order was obtained. It was contended therefore that the applicant had a very strong case on the merits in the National Court action. Thirdly, it was submitted that because the applicant has filed an application for leave to appeal it was appropriate to stay execution of the injunctive order to maintain the status quo and avoid prejudice and hardship to him, because he depends upon that employment for his livelihood.

Respondent's submissions

The respondent first contended that the application is incompetent and misconceived because it says there was no formal appeal before this Court. It would not be proper for this Court to grant a stay when the application for leave has not yet been determined by this Court. Section 14(3)(b)(ii) of the Supreme Court Act was relied upon to support the proposition that no appeal lies to the Supreme Court without the leave of the court from an interlocutory judgment granting an injunction. It was submitted therefore that it is premature to grant an order staying enforcement of that order when the application for leave is yet to be determined.

Alternatively, it was submitted that there are no "special" or "exceptional circumstances" warranting a stay of the interim orders of the Court. The National Court decision of the State v Phillip Kapal [1987] PNGLR 302 was relied upon wherein the learned trial judge preferred to adhere to the test that an applicant must show "special" or "exceptional circumstances" before a stay will be granted. It was contended that the applicant had not deposed to any special or exceptional circumstances that warranted a grant of stay of the interim order of the National Court. The fact that the applicant is effectively restrained from employment resulting in financial hardship, is not a special or exceptional circumstance. The balance of convenience did not warrant a grant of stay order. If the Court were inclined to grant a stay then an order be made for the applicant to pay into Court a sum of money as deposit for security of costs, it was added.

Appeal from Interlocutory Judgment

Section 14(3) of the Supreme Court Act provides that:-

"No appeal lies to the Supreme Court without leave of the Supreme Court —

(a) .....

(b) from an interlocutory judgment made or given by the National Court except —

(i) where the liberty of the subject or the custody of infants is concerned; or

(ii) in cases of granting or refusing an injunction or appointing a receiver; or

(iii) in such other cases prescribed by the Rules of Court as are in the nature of final decision."

In ss (3)(b)(I)(ii) and (iii) are the exceptions where no leave of the Court is required. It is clear therefore that an appeal from an interlocutory judgement granting an injunction, such as in this case, does not require leave.

Test in application for stay

Section 19 — Stay of Proceedings on Appeal

Unless otherwise ordered by the Supreme Court or a Judge, an appeal, or an application for leave to appeal, to the Supreme Court does not operate as a stay of proceedings.

In PNG v Gulf Provincial Government [1994] PNGLR 34, the Supreme Court held that the power of the Supreme Court to grant a stay pending appeal is an unfettered discretion but should only be exercised where "special" or "exceptional circumstances" are shown. In PNG & The Commissioner, Corrective Institution Services v Daniel Mollen [1997] PNGLR 193, the Court, by reference to this principle noted that s 19 of the Act does not specifically require that "special" or "exceptional circumstances" need be established for the grant of stay and that such a requirement may be imposing a restriction on the discretion of the Court. The test that only a "reason" or an "appropriate case" need be demonstrated to warrant the exercise of discretion in favour of the applicant was advocated by reference to the New South Wales, Australia, Court of Appeal decision in Alexander v Cambridge Credit Corp Limited [1985] 2 NSWLR 586 but because the issue of the proper test was not fully argued by the parties the Court declined to determine it. The Court was thus content to apply the test as at that time of "special" or "exceptional circumstance".

Subsequently, in Post PNG Limited v Westpac Bank PNG Limited [1999] PNGLR 582, the Court considered that in PNG v Daniel Mollen (supra) the Court had sufficiently clarified the test and concluded that the previous test of "special" or "exceptional circumstance" no longer applied and that an applicant for stay need only show or demonstrate "a reason" or "an appropriate case" by evidence to warrant the exercise of discretion in his favour.

This latter proposition is derived from two decisions of the New South Wales, Australia, Court of Appeal dealing with its Supreme Court Rules relating to stay of execution or proceedings. The New South Wales Court of Appeal in Alexander v Cambridge Credit Corp Limited (supra) concluded that:

"in our opinion it is not necessary for the grant of a stay that special or exceptional circumstances should be made out. It is sufficient that the applicant for the stay demonstrates "a reason" or "an appropriate case" to warrant the exercise of discretion in his favour".

In PNG v Gulf Provincial Government (supra), the Court did not discuss the terms of s 19. It merely concluded that the power of the Court to grant a stay is an unfettered discretion, which should only be exercised where special or exceptional circumstances are shown. The National Court case referred to, PNG v Kapal [1987] PNGLR 302 is a decision of Hinchliffe J who was the president of the Court in PNG v Gulf Provincial Government (supra). In the PNG v Kapal (supra), Hinchliffe J referred to Alexander v Cambridge Credit Corporation Ltd (supra) and considered that Rule 10 Part 51 of the New South Wales Supreme Court Rules 1970 was not similar to O 13, r 21 of the National Court Rules that he was dealing with. By reference to a number of very old English cases His Honour concluded that, "certainly the traditional view has been that the court has an absolute and unfettered discretion as to the granting or refusing of a stay". His Honour continued:

"The case of Alexander v Cambridge Credit Corporation Ltd seems quite particular to New South Wales where appeals particularly in the commercial area come at a great rate and I would not be anxious to break away from the traditional view and follow New South Wales. It seems to me that the new course taken by the court of appeal is not necessarily suitable for Papua New Guinea."

These seem to us to be the circumstances and the precedent cases from which the supposed test or tests for the exercise of discretion on an application for a stay of proceedings have been propounded. To our mind, they do not demonstrate a very satisfactory way of dealing with the issue. We have in the past simply been influenced by or copied from what foreign courts have said about their provisions. Although our provision is similar and may well have derived its origin from the Australian statutory provisions, we ought to consider for ourselves what ought to be the relevant factors and circumstances for the exercise of this discretionary power in this jurisdiction. We have simply imported into our discussion and consideration of the ambit of this discretionary power the concepts or notions of "special" or "exceptional circumstance" and "a reason" or "an appropriate case" from these foreign cases.

What is important, to our mind, is that if no specific proviso or precondition is stipulated in a particular provision such as s 19 and the Court is simply empowered to exercise its discretion then that discretion ought not to be constrained by importation of epithets such as absolute, unfettered, special, exceptional, a reason or appropriate case.

Because this Court is the highest court of unlimited jurisdiction in this country, vested with inherent discretionary power to do justice, and because it must necessarily exercise such discretionary power on proper principles justly and reasonably, according to natural justice to all parties before it, it can consider and enunciate what factors and circumstances are to be appropriate or relevant for it to take into account when exercising that discretion. The stipulation by the Court of the kinds of factors and circumstances it may consider taking into account cannot be exhaustive. They must necessarily vary from case to case and from time to time depending on differing circumstances. These, in our view, must only be guidelines to assist both the Court and the parties making application before it. They cannot be exhaustive or hard and fast pre-conditions.

To conclude that the test for a successful application for stay should be whether there are "special" or "exceptional circumstances" or that there is a "good reason" or that it is an "appropriate case" is restrictive. We think what is important to articulate are the factors and circumstances that may be relevant or appropriate in differing cases from time to time.

We distil from these precedent cases the kinds of factors and circumstances that the Court will consider, amongst others, in the exercise of the discretion whether or not to grant a stay order. We start with the principal premise that the judgment creditor is entitled to the benefits of the judgment. The others factors include the following:

• Whether leave to appeal is required and whether it has been obtained;
  
• Whether there has been any delay in making the application;
  
• Possible hardship, inconvenience or prejudice to either party;
  
• The nature of the judgement sought to be stayed;
  
• The financial ability of the applicant;
  
• Preliminary assessment about whether the applicant has an arguable case on the proposed appeal;
  
• Whether on the face of the record of the judgment there may be indicated apparent error of law or procedure;
  
• The overall interest of justice;
  
• Balance of convenience;
  
• Whether damages would be sufficient remedy.
  

The particular circumstances of this case is that it relates to a restraint of trade clause, which if upheld would restrain the applicant for a period of 12 months from engaging in similar commercial activities. By the time the interim injunctive order was granted, the applicant had been employed for six months already. And so the respondent contends that if the applicant were not restrained, by the time the claim was prosecuted the period sought to be enforced may be overtaken and the successful prosecution of the suit would be fruitless.

Decision

The principal factor, reason, or circumstance that the applicant has advanced in support of his application is the fact that he would be denied employment and thus salary for his and his family's maintenance. It is a compelling reason for wanting a stay of the injunctive order to enable the applicant to continue to be employed, but to our minds it defeats the purpose of the interim injunctive order which is obtained in support of the claim for breach of restraint of trade under the contract of employment.

There are no other factors or circumstances that in the interest of justice and on the balance of convenience warrant the grant of stay. We therefore dismiss the application with costs.

Lawyer for the applicant: Young & Williams Lawyers.
Lawyer for the respondent: Paul Paraka Lawyers.