N6078

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 475 of 2007

BETWEEN:

NATIONAL FISHERIES AUTHORITY
Plaintiff

AND

NEW BRITAIN RESOURCES DEVELOPMENT LIMITED
First Defendant

AND

EAST NEW BRITAIN PROVINCIAL GOVERNMENT
Second Defendant

AND

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

AND

NEW BRITAIN RESOURCES DEVELOPMENT LIMITED
First Cross-Claimant

AND

EAST NEW BRITAIN PROVINCIAL GOVERNMENT
Second Cross-Claimant

AND

NATIONAL FISHERIES AUTHORITY
First Cross-Defendant

AND

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Cross-Defendant

Waigani: Hartshorn J
2014: 3rd and 5th September
2015: 12th August

 Application to set aside a judgment on the ground of fraud

Cases Cited:
Papua New Guinea Cases

Nil

Overseas Cases

AK Investment CJSC v. Krygyz Mobil Tel Ltd (PC) [2011] UKPC 7
Jonesco v. Beard [1930] AC 298
Kuwait Airways Corporation v. Iraqi Airways Corporation [2003] EWHC 31 
Owens Bank Ltd v. Bracco [1992] 2 AC 443
Owens Bank Ltd v. Etoile Commerciale SA (1995) 1 WLR 44
Owens v. Noble [2010] EWCA 224
Re Munroe Schneider Associates (Inc) and Ors (1992) FCA 367 
Three Rivers District Council v. Governor and Company of the Bank of England [2003] 2 AC 1 
Wentworth v. Rogers (No 5) (1986) 6 NSWLR 534

Counsel:

Mr. G. M. Egan and Ms. M. Mai, for the Second Cross Defendant
Mr. I. R. Molloy and Mr. H. Leahy, for the Cross Claimants

12th August, 2015

1. HARTSHORN J: This is a decision on an application by the State, the second cross-defendant, to set aside a judgment that was entered against it in the cross claim in this proceeding on 24th October 2008 (judgment) on the ground that the judgment was obtained or procured by fraud.

2. The application is opposed by the cross claimants, New Britain Resources Development Ltd (NB Resources) and the East New Britain Provincial Government (ENBPG).

3. The application is made pursuant to Order 12 Rule 1 National Court Rules and s. 155 (4) Constitution. The cross claimants did not object to the jurisdictional basis upon which this application is made.

Background

4. The cross claimants and the State entered into an agreement to create an integrated fishing industry in East New Britain Province (Agreement).

5. Under the Agreement, NB Resources would construct a fish processing facility. The State agreed that when 75% of the first stage of the facility was built, NB Resources would be granted 20 fishing vessel licences. Although the necessary construction was purportedly completed, the licences were not issued.

This application

6. The State contends that the judgment should be set aside as amongst others:

a) at the time of the hearing of the motion for judgment before me, no reference was made in the written submissions handed up that NB Resources had not complied with its obligations under clause 3.2 of the Agreement;

b) as at 22nd July 2006 or thereafter, NB Resources had not achieved 75% of the construction of stage 1 as per the definition of "Stage 1" in the Agreement and NB Resources well knew this to be the case as at the date of the judgment on 24th October 2008;

c) NB Resources well knew that it had failed to satisfy most of the conditions precedent in the Agreement as at the date of the judgment;

d) Mr. Tseng on behalf of NB Resources fraudulently deposed that the State had no defence to the cross claim when he well knew that the cross claimants' right to commence proceedings - the completion of 75% of stage 1 and the satisfying of conditions precedent - had not crystallised;

e) because of a( to d) above, the judgment was obtained by fraud and I was misled into ordering the judgment.

7. The cross claimants contend that the judgment should not be set aside as amongst others:

a) the evidence relied upon by the State in support of its application to set aside the judgment for fraud is not fresh evidence as is required;

b) there was no obligation upon the cross claimants to raise the matters now referred to by the State as the application for judgment was inter partes and any failure to raise the subject matters does not constitute fraud;

c) the allegations and particulars of the alleged fraud have not been properly and adequately drawn in the amended notice of motion . It has not been asserted that the alleged fraud is by non-disclosure or silence, that there was a duty of disclosure and that there was an intention to deceive. Further, the particulars of fraudulent intention have not been asserted;

d) if the application to set aside the judgment is not refused for the above reasons, then as to the merits of the matters that the State submits were not raised:

i) the cross claimants pleaded reliance upon the State's breach of clause 4.8 (b) of the Agreement and so it was unnecessary to plead or prove 75% construction of stage 1 or the other preconditions;

ii) if there was a pre-requisite to the cross claim that 75% of stage 1 was to be constructed, there is evidence on behalf of the State that the construction did occur and a certificate was issued, and that the State would be liable to pay damages for breach of contract if the National Fisheries Authority continued to refuse to issue the fishing licences;

iii) the evidence concerning National Fisheries Authority details, land matters and the Investment Promotion Authority is all unsatisfactory. Further, it concerns matters that were not preconditions to the entitlement to fishing licences on execution of the Agreement;

iv) if there were preconditions requiring satisfaction, a party to a contract is not required to fulfil contractual obligations if the other party has breached the contract and manifested an intention not to perform.

Law

8. In Wentworth v. Rogers (No 5) (1986) 6 NSWLR 534, a case relied upon by both counsel, Kirby P set out the principles which were established by law relating to proceedings to have a judgment set aside on the ground that it was obtained by fraud. This case was adopted and applied in the Supreme Court case of Aircair Pty Ltd v. Co-Ordinated Air Services Pty Ltd [1988-89] PNGLR 549 and was referred to by Bredmeyer J as a very good review of some Australian and English authority. In Wentworth (supra), Kirby P, with whom Hope JA and Samuels JA concurred, at p538-539, stated a number of principles, "which are established by law":

"First, the essence of the action is fraud. As in all actions based on fraud, particulars of the fraud claimed must be exactly given and the allegations must be established by the strict proof which such a charge requires: Jonesco v Beard [1930] AC 298 at 301; McHarg v Woods Radio Pty Ltd (at 497). 

Secondly, it must be shown, by the party asserting that the judgment was procured by fraud, that there has been a new discovery of something material, in the sense that fresh facts have been found which, by themselves or in combination with previously known facts, would provide a reason for setting aside the judgment: see Lord Selbourne LC in Boswell v Coaks (No 2) (1894) 6 R 167 at 170, 174; 86 LT 365 at 366, 368; Cabassi v Vila (1940) 64 CLR 130 at 147; McDonald v McDonald (1965) 113 CLR 529 at 533; Everett v Ribbands (1946) 175 LT 143 at 145, 146; Birch v Birch [1902] P 130 at 136, 137-138; Ronald v Harper [1913] VLR 311 at 318. This rule has an ancient lineage: see, eg, Shedden v Patrick (1854) 1 Macq 535 at 615, 622; Halsbury's Laws of England, 4th ed, vol 26, par 560 at 285. It is based upon a number of grounds. There is a public interest in finality of litigation. Parties ought not, by proceeding to impugn a judgment, to be permitted to relitigate matters which were the subject of the earlier proceedings which gave rise to the judgment. Especially should they not be so permitted, if they move on nothing more than the evidence upon which they have previously failed. …..

Thirdly, mere suspicion of fraud, raised by fresh facts later discovered, will not be sufficient to secure relief: Birch v Birch (at 136, 139); McHarg v Woods Radio Pty Ltd (at 498); Ronald v Harper (at 318). The claimant must establish that the new facts are so evidenced and so material that it is reasonably probable that the action will succeed. This rule is founded squarely in the public interest in finality of public litigation and in upholding judgments duly entered at the termination of proceedings in the courts.

Fourthly, although perjury by the successful party or a witness or witnesses may, if later discovered, warrant the setting aside of a judgment on the ground that it was procured by fraud, and although there may be exceptional cases where such proof of perjury could suffice, without more, to warrant relief of this kind, the mere allegation, or even the proof, of perjury will not normally be sufficient to attract such drastic and exceptional relief as the setting aside of a judgment: Cabassi v Vila (at 147, 148); Baker v Wadsworth (1898) 67 LJQB 301; Everett v Ribbands (at 145, 146). The other requirements must be fulfilled. ……….. The unsuccessful party in the litigation will often consider that failure in the litigation has been procured by false evidence on the part of the opponent and the witnesses called by the opponent. If every case in which such an opinion was held gave rise to proceedings of this kind, the courts would be even more burdened with the review of first instance decisions than they are. For this reason, and in defence of finality of judgments, a more stringent requirement than alleged perjury alone is required.

Fifthly, it must be shown by admissible evidence that the successful party was responsible for the fraud which taints the judgment under challenge. The evidence in support of the charge ought to be extrinsic: cf Perry v Meddowcroft (1846) 10 Beav 122 at 136-139; 50 ER 529 at 534, 535. It is not sufficient to show that an agent of the successful party was convicted of giving perjured evidence in the former proceeding, the result of which it is sought to impeach. It must be shown that the agent, in so acting, was in concert with the party who derived the benefit of the judgment: Ronald v Harper (at 318); Sheddon v Patrick (at 643).

Sixthly, the burden of establishing the components necessary to warrant the drastic step of setting aside a judgment, allegedly affected by fraud or other relevant taint, lies on the party impugning the judgment. It is for that party to establish the fraud and to do so clearly. In summary, he or she must establish that the case is based on newly discovered facts; that the facts are material and such as to make it reasonably probable that the case will succeed; that they go beyond mere allegations of perjury on the part of witnesses at the trial; and that the opposing party who took advantage of the judgment is shown, by admissible evidence, to have been responsible for the fraud in such a way as to render it inequitable that such party should take the benefit of the judgment."

Consideration

The assertions and particulars of fraud

9. The cross claimants submit that the proper method of impeaching a judgment for fraud is by separate action and reference in that regard is made to amongst others Aircair (supra) and Jonesco v. Beard [1930] AC 298. It is acknowledged by the cross claimants though, that a motion to set aside a judgment may be made in the same proceeding. If so made by motion, the allegation of fraud must be made with the same particularity as in an action, must be strictly proved, and the same rules apply as to burden of proof and admissibility of evidence: Aircair (supra) quoting 1985 Supreme Court Practice (UK) (Vol 1), para 59/11/59; Jonesco v. Beard (supra) and Wentworth (supra).

10. As to whether the amended notice of motion is deficient as it does not contain the requisite particularity, the cross claimants submit that it does not assert a fraudulent intent, does not plead a duty of disclosure and who breached that duty, and the parties and persons involved are not properly identified. Counsel for the State submitted that the particulars as set out in the amended notice of motion are sufficient.

11. I will assume that the reference to the second cross claimant in paragraph 2 of the amended notice of motion is a mistake and should be to the second cross defendant, and that the first reference to the second cross claimant in paragraph 2 (A) should be a reference to the first and second cross claimants.

12. In the amended notice of motion it is stated that the judgment is sought to be set aside on the ground that it was, "obtained or alternatively procured by fraud". Then particulars of fraud are listed. Particular (A) states amongst others that at the hearing for summary judgment before me, no-one on the part of the cross claimants, well knowing it to be the case, advised the court of certain matters. Those certain matters are then listed.

13. So presumably the allegation is that it was fraud by non-disclosing matters as distinct from fraud by making a positive misrepresentation. It is not stated and asserted in the amended notice of motion that the cross claimants had a duty at the hearing of an inter partes application for summary judgment to disclose certain matters to the court and that there was fraud committed by non-disclosure. The identity of the persons who allegedly owed the duty and who allegedly breached the duty are not stated. There are also no particulars of fraudulent intention. The cross claimants rely on Court Forms, Precedents & Pleadings, NSW, Vol 3, Representations by silence [37, 030] and Bullen & Leake & Jacob's Precedents of Pleadings, Thirteenth Edition, page 428 in support of their submission.

14. As to the pleading and particulars requirement when fraud is alleged, I have had recourse to the House of Lord's case of Three Rivers District Council v. Governor and Company of the Bank of England [2003] 2 AC 1. This case concerned whether the order of the Court of Appeal upholding that an action should be struck out, should be upheld on the grounds that the plaintiffs had no reasonable prospects of succeeding on the claim at trial. I reproduce the following passage from the opinion of Lord Millet at para 183, as although His Lordship was in the minority, his comments concerning the requirements of pleading and particularising a case of fraud are in my view relevant here:

"In Jonesco v. Beard [1930] AC 298 Lord Buckmaster, with whom the other members of the House of Lord's concurred said at p. 300:

"It has long been the settled practice of the court that the proper method of impeaching a completed judgment on the ground of fraud is by action in which, as in any other action based on fraud, the particulars of the fraud must be exactly given and the allegation established by the strict proof such a charge requires" (my emphasis).

184. It is well established that fraud or dishonesty…. must be distinctly alleged and as distinctly proved; that it must be sufficiently particularised; and that it is not sufficiently particularised if the facts pleaded are consistent with innocence: see Kerr on Fraud and Mistake 7th ed (1952), p 644; Davy v Garrett (1878) 7 Ch D 473, 489; Bullivant v Attorney General; for Victoria [1901] AC 196; Armitage v Nurse [1998] Ch 241, 256. This means that a plaintiff who alleges dishonesty must plead the facts, matters and circumstances relied on to show that the defendant was dishonest and not merely negligent, and that facts, matters and circumstances which are consistent with negligence do not do so.

185. It is important to appreciate that there are two principles in play. The first is a matter of pleading. The function of pleadings is to give the party opposite sufficient notice of the case which is being made against him. If the pleader means "dishonestly" or "fraudulently", it may not be enough to say "willfully" or "recklessly". Such language is equivocal. …….

186. The second principle, which is quite distinct, is that an allegation of fraud or dishonesty must be sufficiently particularised, and that particulars of facts which are consistent with honesty are not sufficient. This is only partly a matter of pleading. It is also a matter of substance. As I have said, the defendant is entitled to know the case he has to meet. But since dishonesty is usually a matter of inference from primary facts, this involves knowing not only that he is alleged to have acted dishonestly, but also the primary facts which will be relied upon at trial to justify the inference. At trial the court will not normally allow proof of primary facts which have not been pleaded, and will not do so in the case of fraud. It is not open to the court to infer dishonesty from facts which have not been pleaded, or from facts which have been pleaded but are consistent with honesty. There must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved.

187. In Davy v Garrett 7 Ch D 473, 489 Thesiger LJ in a well known and frequently cited passage stated:

"In the present case facts are alleged from which fraud might be inferred, but they are consistent with innocence. They were innocent acts in themselves, and it is not to be presumed that they were done with a fraudulent intent."

This is a clear statement of the second of the two principles to which I have referred."

15. The particulars in the amended notice of motion to my mind are facts consistent with innocence and are equivocal. That no one advised the court of certain matters does not demonstrate that for instance, there was fraud allegedly involved, or that there was an intention to deceive.

16. To my mind, on the authority of Aircair (supra), Jonesco v. Beard (supra) and Wentworth (supra), the allegations and particulars of the alleged fraud have not been properly and adequately drawn as it has not been asserted that the alleged fraud is by non-disclosure or silence, that there was a duty of disclosure and that there was an intention to deceive. Further, the particulars consist of facts consistent with innocence and are equivocal. Consequently, the amended notice of motion should be dismissed.

Fresh evidence

17. The cross claimants submit that the evidence relied upon by the State is not fresh evidence as it is evidence that was available to the State and could have been discovered with reasonable diligence before the judgment was delivered. It is submitted that the State has to establish that the evidence upon which it relies was not reasonably discoverable before the judgment was given. The cross claimants rely upon: Owens Bank Ltd v. Bracco (HL) [1992] 2 AC 443, at 483 and 489 (per Lord Bridge); AK Investment CJSC v. Krygyz Mobil Tel Ltd (PC) [2011] UKPC 7, para 109; Kuwait Airways Corporation v. Iraqi Airways Corporation [2003] EWHC 31, para 146 and Owens v. Noble [2010] EWCA Civ 224, para 54.

18. The State submits that it is entitled to rely upon the evidence that it does.

19. As referred to, the allegations in this instance are that no one on the part of the cross claimants advised the court of certain matters. Those matters were the alleged non-compliance with certain preconditions under the Agreement - at the time that the application for judgment was made.

20. The cross claimants submit that the State as a party to the Agreement could read its terms and decide whether there were possible grounds for defending the cross claim. Whether the cross claimants had complied with the alleged preconditions in the Agreement could be discovered with reasonable diligence and, submit the cross claimants, was known by the State. This is because the construction at Kokopo was there to inspect and it was inspected. The other matters all involved applications or the provision of information to government entities. The evidence now relied upon by the State was in fact known to the State at the time of the application for judgment, or at least could have been discovered then with reasonable diligence.

21. There is no evidence on behalf of the State to the effect that the evidence upon which it now relies was not reasonably discoverable at the time that the application for judgment was made. Further, no submissions have been made to that effect. The cases relied upon by the cross claimants are authority for the requirement concerning fresh evidence for which they are cited and in this regard I have also had recourse to the cases of Owens Bank Ltd v. Etoile Commerciale SA (1995) 1 WLR 44 at 48 and Re Munroe Schneider Associates (Inc) and Ors (1992) FCA 367 at para 32. I also concur with the submission of the cross claimants that the requirement that the evidence relied upon must be evidence that was not able to be reasonably discovered, is consistent with the requirements as to new arguments and fresh evidence in an appeal.

22. On an appeal, a party is not usually entitled to raise an argument not raised in the court below: Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853; Tomscoll v. State (2012) SC1208. Similarly, there are strict rules concerning fresh evidence. The evidence must not have been discoverable by reasonable enquiry: PNG v. Barker [1977] PNGLR 386; Aircair (supra). So in this instance, the State cannot make a complaint about matters of law or fact which it failed to raise at the hearing of the application for judgment.

23. Consequently, as the evidence upon which the State relies is not fresh evidence as it has not been established that it was not reasonably discoverable before the judgment was given, the State is not able to rely on that evidence. There is insufficient evidence on behalf of the State therefore in support of the orders that it seeks for the court to find in the State's favour and so the amended notice of motion should be dismissed.

24. Given the above, it is not necessary to consider the other submissions of counsel.

Orders

a) the amended notice of motion of the second cross defendant filed on 2nd September 2014 is dismissed;

b) the costs of the cross claimants of and incidental to the hearing of the said amended notice of motion shall be paid by the second cross- defendant;

c) time is abridged.

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Office of the Solicitor General: Lawyers for the Second Cross Claimant
Pacific Legal Group Lawyers: Lawyers for the Cross Claimants