N4067

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 253 OF 2008

BETWEEN:

INTEROIL PRODUCTS LIMITED
(formerly BP Papua New Guinea Limited)
Plaintiff

AND:

MICHAEL PUNDIA
Defendant

Waigani: Hartshorn J.
2009: June 17th and 19th,

Application for joinder – Application for Mareva injunction

Facts:

The plaintiff commenced this proceeding seeking money owed by the defendant under a personal guarantee. The plaintiff now wishes to preserve assets of the defendant so that they can be used to meet a judgment it is likely to obtain against the defendant. For this purpose the plaintiff applies for orders to, among others, have ANZ joined as a defendant to this proceeding, and also to restrain ANZ from handing to the defendant the residual of the proceeds of the sale of the defendant's property after payment of debt under ANZ's security. The defendant submits that the plaintiff's application should not be granted as, among others, ANZ's joinder as a defendant is not necessary to resolve the issues in this proceeding and so ANZ should not be joined.

Held:

1. The requirements necessary to have ANZ joined as a party under Order 5 Rule 8 (1)(b) National Court Rules are not met. The application to join ANZ as a defendant is refused.

2. There is a risk of the residual proceeds being dissipated before judgment if the restraining orders sought are not granted.

3. ANZ is restrained from either crediting the defendant's bank account with, or handing any cheque to the defendant for the balance of any money received from the sale of the property in question.

4. ANZ shall, after any required payments pursuant to s. 279 Companies Act and the secured debt to ANZ have been paid, pay the balance into the Trust Account of the National Court.

Cases: 

Wawa Trading Co Pty Ltd v. Lie Tat Swie & Anor [1982] PNGLR 375
Mt Uriwaka Enterprises Pty Ltd v. Baxter & ANZ Bank [1988] PNGLR 244 
Ome Ome Forests Ltd v. Ray Cheong (2002) N2289 
Paul Paraka v. Eastern Highlands Provincial Government (2005) SC809 

Counsel:

Mrs. M. Ai, for the plaintiff
Mr. J. J. Lome, for the defendant

19th June, 2009

1. HARTSHORN J: Interoil Products Ltd commenced this proceeding seeking money owed by Mr. Michael Pundia under a personal guarantee.

2. Interoil now wishes to preserve assets of Mr. Pundia so that they can be used to meet a judgment it is likely to obtain against Mr. Pundia.

3. For this purpose Interoil makes application for:

(a) Australia and New Zealand Banking Group (PNG) Ltd (ANZ) to be joined as a defendant to this proceeding, and

(b) ANZ to be restrained from handing to Mr. Pundia the residual of the proceeds of the sale of Mr. Pundia's property after payment of debt under ANZ's security (residual proceeds).

4. Mr. Pundia submits that Interoil's application should not be granted as:

(a) ANZ's joinder as a defendant is not necessary to resolve the issues in this proceeding and so ANZ should not be joined.

(b) there is a conflict of interest in Interoil and ANZ being represented by the same lawyer which is prejudicial to Mr. Pundia in relation to settlement negotiations he has with ANZ.

(c) it is premature as liability has not been determined and this application pre-empts the court's decision as to liability.

(d) it would defeat the purpose of s. 279 Companies Act which provides for payments where a Receiver is appointed.

(e) it would be prejudicial to a claim that Mr. Pundia has against ANZ and Deloittes.

5. 

(a) as to 4 (e) above, any proceedings Mr. Pundia has against ANZ and Deloittes are not before me and so I give no consideration to them.

(b) as to 4 (d) that any order to restrain payment of the residual proceeds would defeat s. 279 Companies Act, if any restraining order was made, it would be constructed in such a way that s. 279 Companies Act would be complied with.

(c) as to 4 (c) that the application pre-empts the determination of liability, the application to restrain assets before judgement is in essence seeking a "Mareva" injunction. This type of injunction is recognized in this jurisdiction: Wawa Trading Co Pty Ltd v. Lie Tat Swie & Anor [1982] PNGLR 375, Mt Uriwaka Enterprises Pty Ltd v. Baxter & ANZ Bank [1988] PNGLR 244, Paul Paraka v. Eastern Highlands Provincial Government (2005) SC809 and so application for such relief is entitled to be made.

(d) as to 4 (b) that there is a conflict of interest in Interoil and ANZ being represented by the same lawyer which is prejudicial to Mr. Pundia's settlement negotiations with ANZ:

(i) if there is a conflict then that is a matter for Interoil and ANZ to resolve. Counsel for Interoil has informed the court that both Interoil and ANZ consent to having the same representation. As ANZ is a secured creditor of Mr. Pundia and Interoil potentially an unsecured creditor, a conflict is not likely to arise between them unless it is over what is covered by ANZ's security. That is not an issue in this proceeding.

(ii) as to being prejudicial to settlement negotiations that Mr. Pundia has with ANZ, there is no issue in this proceeding between Mr. Pundia and ANZ. I am unable to consider any prejudice as alleged on an issue that is not before me.

6. Given the above, the issues are whether:

(a) ANZ should be joined as a defendant, and

(b) ANZ should be restrained from handing the residual proceeds to Mr. Pundia.

Whether ANZ should be joined as a defendant

7. Interoil submits that ANZ should be joined as a defendant as it is necessary that ANZ be restrained from paying the residual proceeds to Mr. Pundia. The implication is that before restraining orders can be made against an entity it must be a party to the proceeding in which application is made. Interoil further submits that ANZ consents to being joined and is aware of the reason why.

8. Mr. Pundia submits that pursuant to Order 5 Rule 8 (1)(b) National Court Rules, the rule upon which Interoil relies, for a person to be joined, such joinder has to be necessary to ensure that all matters in dispute in the proceedings may be effectually and completely determined and adjudicated on. Here, as there is no issue concerning ANZ in the proceeding, there only being issues between Interoil and Mr. Pundia, it is not necessary for ANZ to be joined for all matters in dispute in the proceedings to be determined and adjudicated on.

9. I agree with the submissions of Mr. Pundia in this regard. Put simply, it is not necessary that ANZ be joined for it to be determined whether Mr. Pundia is liable to Interoil. Consequently the requirements of Order 5 Rule 8 (1)(b) National Court Rules are not met. I refuse the application to join ANZ as a defendant.

Whether ANZ should be restrained

10. On a preliminary point, as to whether ANZ can be restrained from paying the residual proceeds to Mr. Pundia, without it being joined as a party, if the court makes such an order and ANZ does not comply with it, ANZ could be liable for contempt of court. It is not necessary that an entity be a party to proceedings for it to be punished for contempt. In Ome Ome Forests Ltd v. Ray Cheong (2002) N2289, Kandakasi J. cited with approval the following passage from Halsbury's Laws of England (4th ed) vol. 9, para 57:

"A person not a party to a cause or matter, who obtains an order or in whose favour an order is made is entitled to enforce obedience to it by the same process as if he were a party; and a person not a party against whom any judgment or order may be enforced is liable to the same process for enforcing obedience to it as if he were a party."

It is not necessary then that an entity be a party to proceedings before restraining orders can be made against it.

11. The guidelines for determining whether a Mareva injunction should be granted were referred to with approval by the Supreme Court in Paul Paraka v. Eastern Highlands Provincial Government (supra) and are:

"(i) The plaintiff should make full and frank disclosures of all matters in his knowledge which are material to the Judge to know….

(ii) The plaintiff should give particulars of his claim against the defendant,….fairly stating the ground of his claim and the amount thereof, and fairly stating the points made against it by the defendant.

(iii) The plaintiff should give some grounds for believing that he (the defendant) has assets within the jurisdiction.

(iv) The plaintiff should give some grounds for believing that there is a risk of the assets being dissipated before the judgment.

(v) The plaintiff must give an undertaking as to damages." 

12. As to these guidelines, from a perusal of the pleadings, the evidence and the undertaking as to damages filed, I am satisfied as to those referred to in paragraphs 11 (i), (ii), (iii) and (v).

13. As to whether Interoil has given grounds for believing that there is a risk of the assets being dissipated before judgment, it is submitted by Interoil in essence, that the actions of Mr. Pundia since 2005 when demand was made for payment of arrears, give rise to the inference that the residual proceeds will be placed out of Interoil's reach or be disposed. These actions include Mr. Pundia not taking any substantive steps to rectify the demands made by Interoil, such as not giving any commitment that there would be repayment of the money owed. This is notwithstanding that although in response to the allegation in paragraph 8 of the statement of claim that Mr. Pundia owes K1,131,388.39, in paragraph 6 of his defence Mr. Pundia first pleads that he denies paragraph 8, Mr. Pundia then pleads that the "… amount owed by the Defendant to the Plaintiff is less than K1,131,388.39.". This is an admission that some amount is owed by Mr. Pundia to Interoil.

14. I note also that in the affidavit of Mr. Pundia's lawyer Mr. Lome, it is deposed amongst others that if the residual proceeds are, "restrained by the Court it will unnecessarily curtail our clients investment portfolios and attending to other commitments.". Given the admission in the defence referred to that an amount is owed by Mr. Pundia to Interoil, one would have thought that Mr. Pundia or his lawyer would have given some indication that the residual proceeds would be used to pay the amount that Mr. Pundia believes he owes to Interoil. The fact that there is no such indication, in my view, leads to the inference that the residual proceeds would not be used to pay what Mr. Pundia believes he owes Interoil but would likely be used on investment portfolios and other commitments and as a consequence be dissipated.

15. I am satisfied that there are grounds for believing that there is a risk of the residual proceeds being dissipated before judgment if the restraining orders sought are not granted.

Orders

16. As to the relief sought in the Amended Notice of Motion of the plaintiff filed on 6th May 2009:

(a) Paragraphs 1, 2 and 3 are withdrawn.

(b) The relief sought in paragraph 4 is refused.

(c) As to paragraph 5, it is ordered that:

(i) The Australia and New Zealand Banking Group (PNG) Ltd (ANZ) is restrained from either crediting the Defendant's bank account with, or handing any cheque to the Defendant for, the balance of any money received from the sale of the property described as Portion 1513 Milinch of Hagen, Fourmil of Ramu, until the final determination of this proceeding.

(ii) If ANZ receives any such balance as referred to in 16 (c)(i) above, it shall, after any required payments pursuant to s. 279 Companies Act and the secured debt to ANZ have been paid, pay the balance into the Trust Account of the National Court forthwith and such balance will remain in the Trust Account until the final determination of this proceeding.

(d) Costs are in the cause.

(e) Time is abridged.

___________________________________________
Posman Kua Aisi Lawyers: Lawyers for the Plaintiff 
Jerry Kiwai Lawyers: Lawyers for the Defendant