N7655

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 765 OF 2016

KARL KEREPA YALO
Plaintiff

V

IAN WHITE
First Defendant

ANDREW HOARE
Second Defendant

AUSTRALIAN HELICOPTER TRADERS PTY LTD
Third Defendant

THE HELICOPTER SERVICE AUSTRALIA PTY LTD
Fourth Defendant

AUSTRALASIAN JET PTY LTD
Fifth Defendant

Waigani:  Kariko, J
2016: 6th, 14th & 15th December

CIVIL PRACTICE & PROCEDURE – application for interim injunctions – relevant considerations – claim untenable – damages an adequate remedy  

CIVIL PRACTICE & PROCEDURE – application for interim injunctions – equitable relief - relevant considerations – applicant must have “clean hands” – non-disclosure 

CIVIL PRACTICE & PROCEDURE – power of court to dismiss proceedings – inherent jurisdiction – wrong party named – exercise of discretion   

CIVIL PRACTICE & PROCEDURE – enforcement of undertaking – relevant principles  

Cases cited: 

Airlines of PNG v Air Niugini Ltd (2010) N4047 
Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853
Employers Federation of Papua New Guinea v Papua New Guinea Waterside 
Karl Paul v Aruai Kispe, The Regional Manager, PNG Forest Authority – Lae (2001) N2085 Kerry Lerro v Phillip Stagg & Ors (2006) N3050 
Louis Medaing v Ramu Nico Management (MCC) Ltd (2011) SC1157)
Mainland Holdings Ltd v Paul Stobbs (2003) N2522 
Mark Ekepa v William Gaupe (2004) N2694
Mt Hagen Urban Local Level Government v Sek No. 15 Ltd (2009) SC1007
Phillip Takori & Ors v Yagari & Ors (2008) SC905
PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126
Reverend Andrew Moime v National Housing Corporation (2012) SC1191
Robinson v National Airlines Commission [1983] PNGLR 478
The National Council of Young Mens Christian Association of PNG (Inc.) v Firms Services Ltd (2010) N4569
Workers and Seaman’s Union and Arbitration Tribunal (1982) N393
White Corner Investments Ltd v Regina Waim Harro (2006) N3089

Legislation:

Constitution of PNG 
National Court Rules

Counsel: 

Mr S Ketan, for the plaintiff
Mr E Andersen & Ms G Kagora, for the First, Second, Third & Fourth Defendants
Mr T Griffiths, for the Fifth Defendant

DECISION

15th December, 2016

1.	KARIKO, J: Two applications have been moved: 

(1)	The inter partes hearing of the plaintiff’s notice of motion seeking interim injunctive orders which orders I granted following an ex parte urgent application on 11th November 2016; and 
(2)	an application by the fifth defendant to have the interim orders set aside. 

2.	I have treated the latter application as the fifth defendant’s response in opposition to the continuation of the interim injunctive orders.  
 
3.	Those orders essentially restrain the defendants from exporting two helicopters owned by the third defendant Australia Helicopter Traders Pty Ltd (Australia Helicopter Traders). The helicopters are described as:

(1)	Kawasaki BK117 B2, Serial No. 1987, Reg/Mark P2-PRA
(2)	Eurocopter AS 350 B3, Serial No. 3271, Reg/Mark P2-THS

Brief background 

4.	The plaintiff Karl Yalo is the majority shareholder in the company The Helicopter Service Niugini Ltd (Helicopter Service Niugini). The other shareholder is Ian White, the first defendant, who is also the Chief Executive Officer of The Helicopter Service Australia Pty Ltd (Helicopter Service Australia) and Australia Helicopter Traders Pty Ltd (Australia Helicopter Traders) who entered into a charter agreement with Helicopter Service Niugini for the provision of helicopter charter services in Papua New Guinea. The agreement involved four helicopters including the subject helicopters all owned by the Australia Helicopter Traders. The other two helicopters are no longer in the country. Ian White and Andrew Hoare, the second defendant, are directors of Helicopter Service Australia. Together with Mr Yalo, they are directors of Helicopter Service Niugini.

5.	Apparently the relationship between Messrs Yalo, White and Hoare turned sour around 2012/2013 with the plaintiff alleging that in contravention of the charter agreement and by fraud the helicopters were engaged in business in breach of the charter agreement resulting in income being diverted to the bank accounts of Australian Helicopter Traders and Helicopter Service Australia for the benefit of Messrs White and Hoare and those companies, and to the exclusion and detriment of Helicopter Service Niugini. 

6.	The plaintiff filed this proceeding claiming monies due to him as the executive director of and a shareholder in Helicopter Service Niugini. Mr Yalo is seeking: 

(1)	Unpaid salaries of K750,000;
(2)	Unpaid Director’s fees of K360,000; and 
(3)	Unpaid Dividend payments.

7.	At the time of the ex parte application the plaintiff presented evidence that the helicopters were already loaded on a ship en route to Lae for export out of the country. The plaintiff argued then that while he is owed a substantial amount of money by the first four defendants, both Australia Helicopter Traders and Helicopter Service Australia are unregistered foreign companies whose only assets in the country are the two helicopters. Mr Yalo contended that if the helicopters are allowed to leave the country that would make it difficult to satisfy any judgment in favour of the plaintiff. It was in those circumstances put to the Court that the ex parte application was upheld, mainly to maintain the status quo. The matter was then made returnable for inter partes hearing to determine whether or not the interim orders should continue.

8.	After the grant of the ex parte interim orders, Australasian Jet Pty Ltd (Australasian Jet) was joined as the fifth defendant on the basis that it has an equitable interest in the subject helicopters, in that it is in the process of buying them from Australia Helicopter Traders pursuant to a contract of sale dated 2nd June 2016. The deposit for the sale has been paid while completion awaits the delivery of the helicopters to Australia. 

Legal principles

9.	The relevant legal principles for the grant of an interim injunction are well settled and that is that an applicant must show that: 

(1)	There are serious questions to be tried and that an arguable case exists; 
(2)	An undertaking as to damages has been given; 
(3)	Damages would not be an adequate remedy if the interim order is not granted; and
(4)	The balance of convenience favours the granting of the interim order.
(See for example Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853)

Serious question to be tried

10.	As to the first consideration of whether there is a serious question to be tried, the plaintiff must prove he has a serious and not a speculative case with a real possibility of ultimate success; Robinson v National Airlines Commission [1983] PNGLR 478. 

11.	If it is true that the plaintiff is owed salaries, director’s fees and dividends as Executive Director and shareholder of Helicopter Service Niugini, those monies are payable by that company which has not been named as a defendant in this proceeding nor is there any claim pleaded against Helicopter Service Niugini in the plaintiff’s Statement of Claim.   I asked Mr Ketan of counsel for the plaintiff to address this issue, and while he conceded that his client’s claim should be against Helicopter Service Niugini he argued that Helicopter Service Niugini’s liability is “extended” to the first four defendants as a result of the fraudulent activities of the defendants. I had great difficulty understanding the basis for the submission and in the end I reject the submission as tenuous and misconceived. For that reason alone, I am satisfied there is no serious question to be tried, that is, no arguable case exists and the interim orders should discontinue.  I will revert later to the issue of incorrect defendants.  

Damages as adequate remedy

12.	If I am wrong and there are serious questions to be tried, I next determine whether the plaintiff would be adequately compensated in damages. Interlocutory injunctive relief should be refused if damages would be an adequate remedy: Airlines of PNG v Air Niugini Ltd (2010) N4047 and PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126. The Court is to consider whether damages would compensate the applicant should it be found that his legal rights have been infringed by the party he is seeking to enjoin: Employers Federation of Papua New Guinea v. Papua New Guinea Waterside Workers and Seaman’s Union and Arbitration Tribunal (1982) N393.

13.	Mr Ketan argued that the defendants do not own any assets in this country, and therefore damages would not be an adequate remedy because the defendants may not be able to satisfy judgement in the plaintiff’s favour as there is a real risk of the assets being dissipated.  He submitted that his client is seeking a mareva injunction and referred to relevant case authorities.    

14.	In my view however, the plaintiff’s claim is clearly a “money” claim so I have no trouble finding that damages would be an adequate remedy if the interim injunction is not granted or discharged. In relation to enforcement of a judgement, the plaintiff would be at liberty to apply in Australia for the registration of the judgement of this Court pursuant to the relevant laws regarding reciprocal enforcement of judgements. The plaintiff responded that such an application involves a prolonged process but there is no evidence to substantiate that submission. 
Non-disclosure

15.	An interim injunction like other interlocutory orders is an equitable relief granted at the discretion of the Court.  The Court’s power to make such orders is derived from the principles of common law and equity as applied in England prior to Papua New Guinea’s independence on 16th September 1975 and adopted as part of the Underlying law pursuant to schedule 2.2 of the Constitution.

16.	In considering the exercise of the discretion, equitable principles are relevant including the maxim “He who seeks equity must come with clean hands”. An interlocutory order may be refused or set aside if it is shown that the party that obtained the order or is seeking that relief has not come to the Court with “clean hands”; Mainland Holdings Ltd v Paul Stobbs (2003) N2522. This necessarily includes the situation where the applicant has not made full disclosure of all relevant facts, which is also a ground for setting aside an injunctive order; Mainland Holdings Ltd v Paul Robert Stobbs (supra), Mark Ekepa v William Gaupe (2004) N2694, The National Council of Young Mens Christian Association of PNG (Inc.) v Firms Services Ltd (2010) N4569, Louis Medaing v Ramu Nico Management (MCC) Ltd (2011) SC1157).

17.	At the ex parte hearing the plaintiff did not inform the Court that there is a related proceeding pending in the National Court, OS 529 of 2015, in which the plaintiff claims ownership of the subject helicopters. In that matter Hartshorn J discharged an interim injunction preventing the sale of the helicopters. That decision would obviously be a relevant matter for the Court’s consideration in the present case. Also by not disclosing the fact of the related proceeding, the Court was not made aware that the defendants had lawyers on record and that would have been a relevant factor in considering the preliminary relief for the dispensation of the requirements of service.

18.	The plaintiff’s answer to the non-disclosure is that OS 529 of 2015 relates to a separate and different claim, namely for a poll meeting to be conducted by the shareholders and the directors of Helicopter Service Niugini. Be that as it may, the plaintiff was obliged to disclose. It is now revealed that OS 529 of 2015 concerns the same parties and involves the same helicopters and arises from the same dispute between the parties. I find the plaintiff did not come to Court with “clean hands” when he obtained the interim injunction, and he is therefore not entitled to the continuation of that equitable relief. 
Conclusion re: the applications
19.	Each of my following determinations is sufficient for this Court to set aside or discharge the ex parte interim orders of 11th November 2016:

(1)	There is no serious question to be tried or no arguable case;
(2)	Damages would be an adequate remedy if the plaintiff suffers any loss from the interim injunction being set aside or discharged;
(3)	 The plaintiff has not sought the equitable relief of an interim injunction with “clean hand”.

20.	Given these findings, I deem it not necessary to consider the other submissions of counsel in relation to the two applications.
Whether proceedings should be dismissed

21.	I now come back to the point that the wrong parties have been named as defendants. I initially raised this matter with counsel during submissions on whether, there is a serious question to be tried, and after adjourning for a ruling, I recalled the matter and invited counsel to make submissions on whether or not the Court could on its own motion dismiss the entire case pursuant to Order 12 Rule 40 National Court Rules because if the plaintiff’s claim has been made against the incorrect parties, there is an argument that the proceeding discloses no reasonable cause of action.

22.	Mr Ketan firstly argued that only a party may apply for a dismissal under O12 r40 and that should be by way of a motion (O4 r38), and that a party cannot insist on a relief not applied for.  Mr Ketan conceded that his client’s claim should properly be made against Helicopter Services Niugini, but he added that this may be cured by the Court on its own motion adding that company as another defendant to the proceedings by virtue of O5r8. He maintained that the liability of Helicopter Services Niugini is “extended” to the first four defendants on the basis that they fraudulently diverted monies that should have been earned by or was payable to Helicopter Services Niugini. 

23.	Mr Andersen submitted that the Court clearly has the power to summarily dispose of proceedings. Order 12r40 clearly states that the Court may, among others, dismiss proceedings for not disclosing a reasonable cause of action, for being frivolous and vexatious, and for being an abuse of the Court’s process. The Rule undoubtedly emanates from the principle that the Court has an inherent jurisdiction to control proceedings before it.  Counsel referred to authorities stressing this principle including Reverend Andrew Moime v National Housing Corporation (2012) SC1191. Mr Andersen also pointed out that O10 r9A(15) permits the Court on its own initiative to summarily dismiss proceedings on any ground set out in O12r40. 

24.	Mr Griffiths re-emphasized his earlier submission that there is no arguable case and added that the pleadings do not disclose a reasonable cause of action against the defendants for the reason that the monies claimed by the plaintiff should be properly made against Helicopter Service Niugini, a party not named as a defendant. 

25.	I agree with the submissions made on behalf of the defendants. It is an entrenched principle that the Court has an inherent jurisdiction to control proceedings before it; Karl Paul v Aruai Kispe, The Regional Manager, PNG Forest Authority – Lae (2001) N2085 where his Honour Injia, J (as he then was) stressed that the Court must ensure proceedings are conducted fairly and in an orderly fashion and timely manner so justice is done. The Court shall therefore weed out claims that are an abuse of process or for irregularity. His Honour went to state that the Court may exercise that discretion on its own initiative for it is open to the Court to raise and determine questions concerning the regularity or competency of proceedings at any stage. This discretionary power to dismiss a case summarily is obviously available where no reasonable cause of action is disclosed.

26.	The relevant principles in relation to applications under Order 12 Rule 40 are well settled; see for example Kerry Lerro v Phillip Stagg & Ors (2006) N3050 and Phillip Takori & Ors v Yagari & Ors (2008) SC905. In Mt Hagen Urban Local Level Government v Sek No. 15 Ltd (2009) SC1007 at paragraph 29 the Supreme Court restated the principles as set out in Kerry Lerro’s case and Phillip Takori’s case as follows: 

“The phrase ‘disclosing a reasonable cause of action’ consists of two parts; cause of action and form of action. A cause of action is defined as a legal right or form of action known to law whereby a plaintiff in a statement of claim must plead all necessary facts and legal elements or ingredients to establish or prove his claim.  The principles stated by these cases can be summarized as follows:
(i)	A plaintiff or claimant should not be driven from the judgment seat in a summary manner and that the Court should be cautious and slow in exercising its discretionary power. 	
(ii)		The Court has an inherent jurisdiction to protect and safeguard its processes from abuse.
(iii)	The purpose of O.12 r.40, is to give the Court power to terminate actions or claims which are plainly frivolous or vexatious or untenable.
(iv) A frivolous claim is one that is characterized as a claim that is plainly and obviously untenable, that cannot possibly succeed and (is) bound to fail if it proceeds to trial.
(v)	A vexatious claim is one that is said to be a sham and cannot succeed where it seeks to merely harass the opposing party and put that party to unnecessary trouble and expense in defending or proving the claim.” (My underlining)

27.	I bear in mind these principles, and note that in his Statement of Claim at paragraph 23, the plaintiff seeks “outstanding” salaries and director’s fees and dividend. These are monies he says are due to him from Helicopter Service Niugini but have not been paid. I again stress that I am unable to see how this liability is “extended” to the defendants. There simply is no legal basis for this proposition nor has Mr Ketan cited any authorities in support of that submission.  In fact, the pleadings do not state how it is alleged that the defendants are liable for the outstanding monies that are claimed. If indeed business and income for Helicopter Service Niugini were “fraudulently diverted” to the defendants, then Helicopter Service Niugini is at liberty to take the necessary court action against the defendants to recover its loss and damages. 

28.	I do not consider it appropriate as submitted by Mr Ketan to add Helicopter Service Niugini as a defendant. That would not correct the fact that there is no reasonable cause of action against the present defendants. Further, the pleadings in the Statement of Claim would necessarily have to be redrafted to plead the cause or causes of action alleged against Helicopter Service Niugini and set out the relevant facts in support of the claim. Rather, a separate action ought to be filed.
Conclusion

29.	In my opinion therefore, I not only find that no reasonable cause of action is disclosed, but I also view the plaintiff’s claim against the defendants as untenable and one that is frivolous and vexatious. In the circumstances and for the reasons just explained, I dismiss the proceeding with costs to follow the event. 
Enforcement of undertaking

30.	In relation to the point raised by Mr Andersen regarding any claim by the defendants based on the undertaking as to damages given by the plaintiff,  I refer to the case of White Corner Investments Ltd v Regina Waim Harro (2006) N3089 in which Gabi, J offers a very instructive discussion on the relevant guidelines and principles in relation to undertaking as to damages given for an injunction, and these include:

(1)	that an undertaking as to damages does not found any cause of action, but enables the party enjoined to apply to the court for compensation if it is subsequently established that the interlocutory injunction should not have been granted;
(2)	if at the end of the trial the defendant is found to be right and the interim injunction ought not have been granted, the defendant will be entitled to damages; and 
(3)	an application to enforce an undertaking must be made in the proceedings in which that undertaking is given. 

I will take those principles into account in the orders I propose to make.

Orders

31.	The orders of this Court then are: 

(1)	The interim injunctive orders granted on 11th November, 2016 are discharged immediately.
(2)	This proceeding is dismissed in its entirety for disclosing no reasonable cause of action and for being frivolous and vexatious.
(3)	The plaintiff shall pay the defendants’ costs of this proceeding, to be taxed if not agreed.
(4)	The defendants are at liberty to make application in this proceeding to enforce the undertaking as to damages given by the plaintiff and filed 10th November, 2016.
(5)	Time is abridged.

Ketan Lawyers: Lawyer for the Plaintiff
Dentons PNG: Lawyer for the First, Second, Third & Fourth Defendants
Ashurst Lawyers: Lawyer for the Fifth Defendant