N3401 

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 257 OF 2007

BETWEEN:

CANOPUS NO. 16 LIMITED
Plaintiff

AND:

MAISI TRUST COMPANY LIMITED
Defendant

Waigani: Hartshorn, J.
2007: 10 December,
2008: 10 March

MANDATORY INJUNCTION - considerations when granting – least risk of injustice if applicant unsuccessful at trial

Facts:
The plaintiff in its substantive proceedings seeks declaratory orders that the agreement it has with the defendant to harvest timber within the West Gadaisu TRP Area has not been validly terminated by the defendant. The defendant by way of a motion seeks mandatory and prohibitory injunctions compelling the plaintiff to comply with the purported Notice of Termination. The plaintiff by a cross-motion seeks orders to stay the purported termination and that the defendants be restrained from interfering with the plaintiff’s operations.

Held:

1. The risk of injustice is sufficiently less if the injunctive relief sought by Maisi is refused than the risk of injustice upon the granting of an injunction.

2. The relief sought in the notice of motion of Maisi is refused.

3. The relief sought by Canopus seeking orders to stay the termination of Canopus and restraining Maisi from interfering with Canopus’ operations within the WGTRP Area is granted.

Cases cited:

Papua New Guinea Cases
Yama Group of Companies Ltd v. PNG Power Ltd (2005) N2831
Thadeus Kambanei v. The National Executive Counsel & 5 Ors (2006) N3064 

Overseas Cases
Collison v. Warren [1901] 1 Ch 812
Shepherd Homes Ltd v. Sandham [1971] Ch. 340
Nottingham Building Society v. Eurodynamics Systems [1993] FSR 468:
Zockoll Group Ltd v. Mercury Communications Ltd [1997] EWCA Civ 2317 
G & A Ltd. v. HN Jewellery (Asia) Ltd [2004] EWCA Civ 674

Counsel: 
Mr. I. K. Iduhu, for the Plaintiff 
Mr. N. Kera, for the Defendant

10 March, 2008

1. HARTSHORN, J: The plaintiff, Canopus No.16 Ltd (Canopus), in its substantive proceedings, seeks inter alia, a declaratory order that the agreement it has with the defendant, Maisi Trust Company Ltd (Maisi) to inter alia, harvest and extract standing timber within the West Gadaisu TRP area (the WGTRP) has not been validly terminated by Maisi.

2. Maisi seeks by motion inter alia, mandatory and prohibitory injunctions compelling Canopus to comply with the purported Notice of Termination issued by Maisi and to cease all operations and remove its staff and equipment from the WGTRP.

3. Canopus seeks by cross motion inter alia, orders that the purported termination be stayed and that Maisi be restrained from interfering with Canopus’ operations within the WGTRP.

Maisi's motion

4. In support of Maisi's motion it was contended inter alia that;

a) Maisi had issued a notice of termination to Canopus on 10 May 2007 and directed that Canopus cease all its operations and move all its machinery out of the WGTRP.

b) Canopus had obtained an ex parte order of this court on 16 May 2007 restraining Maisi from enforcing its notice of termination. On 12 July 2007 after an inter partes hearing this court refused to allow the restraining order to continue.

c) since then Canopus has refused to comply with the notice of termination and continues to operate in the WGTRP.

d) Maisi has entered into a logging and marketing agreement with Metro Corporation Ltd which has been endorsed by the Papua New Guinea Forest Authority.

e) Maisi has made it clear to Canopus that it does not wish to be in any contractual relationship with it.

5. Maisi seeks its orders pursuant to Order 12 Rule 1 National Court Rules. This provision in essence allows the court at any stage of the proceedings on the application of any party, to make such orders as the nature of the case requires notwithstanding that the applicant does not make a claim for those orders in the originating process. 

6. This provision provides for what was permitted in Collison v. Warren [1901] 1 Ch 812. In that case a defendant successfully obtained a mandatory injunction against a plaintiff even though he had not filed a counterclaim, as what he was seeking arose out of the same contract upon which relief was being sought in the proceedings.

7. Given then that Maisi is entitled to seek its relief, what are the principles to be applied in determining whether a mandatory injunction should be granted?

8. In Thadeus Kambanei v. The National Executive Counsel & 5 Ors (2006) N3064, Injia DCJ quoted with approval the principles listed by Lay J. in Yama Group of Companies Ltd v. PNG Power Ltd (2005) N2831 following his comprehensive consideration of the English, Australian and Papua New Guinean authorities: 

 "1. A mandatory injunction should normally only be granted where a strong case that serious damage will occur to the applicant is made out.

2. The general principles for negative injunctions apply, that is that there is a serious case to be tried, damages are not an adequate remedy and the balance of convenience favours the applicant, but the case should normally be one giving an unusually strong and clear view that the applicant will be successful a trial.

3. The more likely it appears that the plaintiff will succeed at trial the less reluctant the court will be to interfere on an interim basis.

4. But if it is necessary to make some interim order the Court will do so whether or not the high standard of probability of success is made out.

5. The costs to the defendant of performing the mandatory acts should be weighed against the likely damage to the applicant.

6. If the relief sought is such as would normally only be granted after a trial, it should be refused on an interim application unless the prejudice or hardship to the applicant is disproportionate to the prejudice and hardship to be caused to the defendant in performing the order.

7. If the mandatory injunction is simply to restore some activity which has been previously performed by the defendant, rather than to embark upon some new activity, it will be more readily granted.

8. Ultimately, in deciding whether or not to grant a mandatory injunction the overriding consideration is an exercise in deciding which course will do the least damage, or, to put it another way, the lower risk of injustice, if it turns out that the court has made the "wrong" decision.

9. If an injunction is granted the order should specify exactly what it is the defendant has to do, leaving the defendant in no doubt as to what is required to comply with the order."

9. The above principles are to my mind, concisely summarised by the English Court of Appeal in Zockoll Group Ltd v. Mercury Communications Ltd [1997] EWCA Civ 2317 and subsequently approved in G & A Ltd. v. HN Jewellery (Asia) Ltd [2004] EWCA Civ 674. In Zockoll’s case (supra), Phillips L.J. quoted the following passage from Nottingham Building Society v. Eurodynamics Systems [1993] FSR 468:

"In my view the principles to be applied are these. First, this being an interlocutory matter, the overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be ‘wrong’ in the sense described by Hoffman J.

Secondly, in considering whether to grant a mandatory injunction, the court must keep in mind that an order which requires a party to take some positive step at an interlocutory stage, may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo.

Thirdly, it is legitimate, where a mandatory injunction is sought, to consider whether the court does feel a high degree of assurance that the plaintiff will be able to establish this right at a trial. That is because the greater the degree of assurance the plaintiff will ultimately establish his right, the less will be the risk of injustice if the injunction is granted.

But, finally, even where the court is unable to feel any high degree of assurance that the plaintiff will establish his right, there may still be circumstances in which it is appropriate to grant a mandatory injunction at an interlocutory state. Those circumstances will exist where the risk of injustice if this injunction is refused sufficiently outweigh the risk of injustice if it is granted." 

10. Waller L.J. in G & A Ltd (supra) referred with approval to the comment of the other judge in Zockoll’s case (supra), Simon Brown LJ, who did not disagree with the above formulation but was inclined to put the matter quite shortly in relation to the granting of a mandatory injunction as follows:

""Where does the balance of convenience lie?" or, to my mind the preferable formulation of the issue: "which course carries the lower risk of injustice?"".

11. The position in this case is that Maisi the defendant, is not seeking any substantive relief. It is Canopus the plaintiff that is doing so. Canopus contends inter alia, that Maisi in issuing its notice of termination has breached the agreement it has with Canopus as inter alia:

a) Maisi did not give proper notice under the agreement,
b) the purported notice of termination did not raise matters of default going to the root of the fundamental undertakings of Canopus contained in the agreement,
c) as Canopus had contested that it was in default, Maisi was precluded from taking any further action without submitting the issue to arbitration which it had failed to do.

12. Canopus contends that it has a serious question to be tried. Maisi contends that it does not. 

13. Adopting the above principles, given that this is an interlocutory matter, which course is likely to involve the least risk of injustice if it turns out to be ‘wrong’? By this is meant, "the granting of an injunction to a party who fails to establish its right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial" Megarry J. in Shepherd Homes Ltd v. Sandham [1971] Ch. 340, 351.

14. If Canopus is successful at trial it will be able to continue with its operations under the agreement with Maisi but Maisi will not be able to have Metro Corporation Ltd perform its agreement in the WGTRP. If Canopus is not successful, its operations in the WGTRP will cease, it will have to leave the WGTRP and Metro Corporation Ltd will begin to perform its agreement with Maisi.

15. If Canopus is required to cease its operations and leaves the WGTRP but is subsequently successful at trial, it will have lost a substantial amount of production in performing its obligations under the agreement and will have incurred substantial costs associated with ceasing operations and removing its plant and equipment from the WGTRP. It will also have lost the quantity of timber that Metro Corporation Ltd is likely to have harvested.

16. If Canopus is not required to cease its operations and leave the WGTRP, it will do so if it is unsuccessful in its defence at trial.

17. Maisi on the other hand will continue to receive the benefits to which it is entitled under the agreement with Canopus if Canopus is not required to cease its operations. Maisi will not be able to have Metro Corporation Ltd operate in the WGTRP but that company has not started operations in the area and Maisi has not received any associated benefits as a result. Metro Corporation Ltd is also not a party to the proceedings. 

18. In this regard, I keep in mind that an order requiring Canopus to cease operations and to leave the area may well carry a greater risk of injustice if it turns out that Canopus is successful in its defence at trial, than an order that preserves the status quo.

19. By only giving a cursory consideration to the substantive merits I do not have a high degree of assurance as to who will be successful at trial. Consequently I am not of the view that it is appropriate to grant a mandatory injunction at this interlocutory stage. The circumstances exist to my mind, where the risk of injustice if the injunction is refused is sufficiently less than the risk of injustice if the injunction was granted.

20. Accordingly the relief sought in the notice of motion of Maisi is refused.

Canopus’ motion

21. It is noted that since the decision of Davani J. on 12 July 2007 refusing the application of Canopus for injunctive relief, Canopus, pursuant to the order of Davani J., has filed a statement of claim seeking inter alia, a permanent injunction to restrain Maisi and damages. It is also noted that there is an undertaking as to damages filed by Canopus.

22. Given the refusal of the relief sought by Maisi and that in essence, the relief sought by Canopus is the opposite to that sought by Maisi, the relief sought by Canopus should be granted.

Orders

23. The orders sought in paragraphs 1, 2, 3 and 4 of the defendant’s notice of motion dated 3 December 2007, filed on 24 December 2007 are refused. The defendant shall pay the plaintiff’s costs of and incidental to this motion

24. The orders sought in paragraphs 1, 2, 3 and 5 of the plaintiff's notice of motion filed on 6 December 2007 are granted. The defendant shall pay the plaintiff's costs of and incidental to this motion.

_______________________________________
Fairfax Legal: Lawyers for the Plaintiff
Young & Williams: Lawyers for the Defendant