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Markscal Ltd v Mineral Resource Development Company Pty Ltd [1996] PGNC 72; N1472 (5 September 1996)

N1472

PAPUA NEW GUINEA
[In the National Court of Justice]

OS 395 of 1996

BETWEEN:

MARKSCAL LIMITED and ROBERT NEEDHAM
-Plaintiff-

AND:

MINERAL RESOURCE DEVELOPMENT COMPANY PTY LIMITED
-First Defendant-

AND:

OROGEN MINERALS PTY LIMITED
-Second Defendant-

AND:

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
-Third Defendant-

AND:

CHARLES LEPANI
-Fourth Defendant-

WAIGANI: Doherty, J.
1996: September 5

DECISION

Ex parte interim injunctions

Conditions for grant of interim injunctions.

Held: Applicant must show

(1) there is a strong case which, on the evidence presented, would support a permanent injunction.

(2) Is the balance of convenience in favour of the plaintiff.

(3) Will damages be an adequate remedy if the plaintiff succeeds.

Cases Cited:
Mauga Logging Company Pty Ltd v. South Pacific Oil Palm Development Pty Ltd [1977] PNGLR 80
American Cyanamid Company v. Ethicon [1975] UKHL 1; [1975] A.C. 396
Shercliff v. Engadine Acceptance Corporation [1978] 1 NSWLR 729
N.R. Burns: Injunctions A Practical Handbook

Mr Ketan, for the Plaintiffs

The joint plaintiffs Markscal Limited and Robert Needham have on foot a claim for damages for breach of contract on WS 850/96. The writ shows that it was filed on 27 August 1996. It is not clear if it has yet been served; it has a similar parties to this action the plaintiffs are the same and it involves the same first and fourth defendants.

The originating summons on which the motion before me is based, seeks orders that the defendants by their servants or agents be restrained from transferring the first defendants assets to the second defendant, an order restraining the second defendant from dealing in or with the assets transferred from the first defendant by way of a public float of shares or in any other way and that those orders remain in force until the plaintiffs claim on WS 850/96 is determined.

The notice of motion seeks an ex parte interim injunction restraining the first defendant Mineral Resource Development Company Pty Limited (MRDC) from transferring its assets to Orogen Minerals Pty Limited, restraining the Orogen Minerals and the State from transferring or facilitating the transfer of MRDC's assets and thirdly restraining Orogen Minerals P/L from floating its shares or dealing with any of its assets and from floating the shares of MRDC through the second defendant. The background to the case is explained in the affidavit of Mr Pena and certain facts are also apparent from the pleadings in WS 850/96.

The first joint plaintiffs had entered into a contract, both as the company Markscal Limited and as the individual, Robert Needham, with the first defendant to supply consultancy and other services for a period of five years commencing in 1992. The contract was terminated, the plaintiffs say wrongfully, in or around 1994 and the claim arises from that termination.

Markscal Pty Limited is owned by the family of the second joint plaintiff Robert Needham. The claim by Mr Needham is, as Mr Ketan says, substantial, it is in the region of K17 million kina. I have asked Counsel why this matter could not be dealt with as a liability on the assets of the first defendant when both liabilities and assets are transferred. It is submitted, relying on newspaper and other reports, that it will be the third defendant (the State) which will retain and take over liabilities of the first defendant when the proposed float on the stock exchange is made, the assets (mainly shares in various mining and other companies) will be transferred to the new company, the second defendant. It is submitted the plaintiffs are not secured or preferred creditors and they are therefore at risk bearing in mind the provisions of the Claims By and Against the State Act.

Mr Ketan submits that given the amount of damages claimed by his client there will no longer be sufficient assets to apply to meet the claim and therefore he seeks to restrain the defendants from transferring the assets of the first defendant and preventing the floating on the public stock exchange until the claim by his client is heard and disposed of.

In considering the provisions and powers of the Court when the Court should exercise the powers and jurisdiction vested by s.155(4) the Constitution certain equitable principles that were originally part of the common law appeared to have been adopted by our Courts. For example in Mauga Logging Company Pty Limited v. South Pacific Oil Palm Development [1977] PNGLR 80 at page 85 when discussing the application of s.155(4) the then Chief Justice said "Where a case for interlocutory relief falls within the well established principles of equity, there is no need for the claimant to have recourse to s.155(4). It is sufficient for the purposes of this case to hold that the full regards must be given to the balance of considerations affecting each party in reaching a conclusion whether or not a particular order is necessary under this section to do justice in the circumstances of a particular case." He then applied that principle to the case before him.

The principles that apply in applications for interim injunctions appear to show that the Court must have certain matters in mind. I look to the precedents of Mauga Logging Company Pty Limited [supra] and to the textbook Injunctions, A Practical Handbook by Mr N.R. Burns which also sets out the principles to be applied. The text at page 5 and the Mauga Logging [supra] at page 83 refer to the following matters.

1. The Plaintiff must establish that there a serious question to be tried to obtain interlocutory relief. In the Mauga Logging Company cases of American Cyanamid Company v. Ethicon Limited [1975] UKHL 1; [1975] A.C. 396 and Mt Hagen Airport Hotel v. Gibbes & Gibbes [1976] PNGLR 216 were cited as authority for that first principle. The "serious question" in Burns is stated as follows (quoting from the American Cyanamid case) "the Court is not entitled to take any account of the balance of convenience unless it has first been satisfied if the case went to trial upon no other evidence than is before the court at the hearing of the application the plaintiff would be entitled to judgment for a permanent injunction in the same terms as the interlocutory injunction sought."
   

Then there are various references to what exactly that amounts to, is it "a prima facie case", a "strong prima facie" case or is it "on the probabilities" these are all matters and forms which the writer considers.

The Court in American Cyanamid had no doubt it must be satisfied that the claim is not frivolous or vexatious, in other words that there is a serious question to be tried. That particular principle was approved by the House of Lords when the matter went before it. It was further expanded in case Shercliff v. Engadine Acceptance Corporation [1978] 1 NSWLR 729 at 737". "The degree of probability or likelihood of success (to which the High Court is referring) is simply that which the Court thinks sufficient, in the particular case to warrant preservation of the status quo".

Hence I consider the first questions I must ask myself, applying that principle, are "has the plaintiff got a prima facie case? Would the evidence support a permanent injunction? I do not think I need to go as far as, asking 'is there a strong prima facie case'.

The second principle that appears to apply is a balance of convenience which Mr Ketan has addressed upon at some length. I cite from page 9 and 10 of the Text. "The Court's second enquiry is directed to whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused, outweighs or is outweighed by the injury which the defendant would suffer if an injunction was granted. The expression "balance of convenience" used is more widely but it includes that particular question." That is expanded on in American Cyanamid [supra]. The court must consider if a plaintiff succeeds will damages be an adequate remedy for the loss sustained between the application and the trial. If so, no interlocutory injunction should normally be granted. This question not only involves the consideration of whether common law damages would be sufficient but also whether the defendant will be able to pay them.

Next, the Court is to consider whether, if the plaintiff fails, the plaintiffs undertaking as to damages would entitle the defendant to adequate compensation. (Although an undertaking to damages has been filed in this matter). That same question arose in the Mauga Logging case. It also held that the balance of convenience was a matter which the Court should also take account of but there the Plaintiff was unable to give an undertaking as to damages.

The Court observed at P.83 "The Plaintiff's financial position is in a further difficulty if resort can be had only to principles of equity."

The precedents also appear to show there is a difference of opinion whether the Court has to decide questions of law initially arising from undisputed facts (when there are questions of law), is it open to the Judge to determine finally the question of law if it appears desirable and practical in the case. I consider in the case before me there are questions of law which would be more appropriately determined in the final hearing of WS 850/96.

Hence it appears from the precedents that the matters which I have to bear in mind are is there a serious question and the balance of convenience whether damages between application and trial are an adequate remedy.

It is apparent that the plaintiffs have no actual proprietary rights per se to the assets of the first defendant. They come to the Court as potential debtors of the company seeking an ex parte injunction to protect what they may subsequently achieve in damages.

That particular situation was looked at Mauga Logging Company Pty Limited v. South Pacific Oil Palm Development Pty Ltd [supra] and the then Chief Justice relied on a particular citation from Robinson v. Pickering (1980-81) 16 Ch 660 at 661 an old English Chancery case where it was held.

"You cannot get an injunction to restrain a man who is alleged to be debtor from parting with his property."

It is apparent to me that this injunction would be very far reaching, it would affect the rights of other companies (including those which are shareholders of MRDC) and the intention to float a company on a public stock exchange. I consider those repercussions go over and above the protection that the plaintiff requires to protect potential debts that are owed to him by the first defendant. It would appear from the submissions that he would eventually have a remedy against the third defendant The State but has reservations on how and when that remedy (if it is forthcoming) would be met. I do not consider that is an appropriate ground in assessing the balance of convenience between the parties. I consider that he does have a remedy that will be available to him even if there is no injunction in place. It is open to him to seek to trace the assets of the first defendant if they are transferred to avoid judgement.

I do not consider that the balance of convenience is one that permits Court to restrain the third defendant and the first defendant from seeking a transfer of assets and the floating on the public stock exchange.

It appears to me that whist the Mauga Logging case is a clear precedent for an injunction the facts in Mauga Logging show the assets were being taken off shore to a jurisdiction where we had no reciprocal judgment enforcement. That is not the situation here. The assets will be remaining on shore. I do not consider that this is an appropriate case for an injunction. It may however be an appropriate case for an application pursuant to O.14 R.10 of the rules for some form of interim protection of assets.

I will therefore give leave to the plaintiff to seek that form of protection of some of the assets of the first defendant but it will have to be by way of a motion served on the first and third defendants. I do not consider that the second or fourth defendant, on the facts before me, need be parties to such an application as they have no relevant assets.

In the circumstances I refuse the injunction sought. I give leave to bring an application for interim preservation of part of the assets of the first defendant but it will have to be argued. I give permission, if Counsel consider it urgent, to serve the first and third defendants only.

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Lawyers for the Plaintiffs: PENA