N7063

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 771 of 2017 (COMM)

BETWEEN:
IDUTU KOIARI DEVELOPMENT
COMPANY LIMITED
Plaintiff

AND:
TRIBAL INVESTMENT LIMITED
First Defendant

AND:
KAPU RAGEAU, HUBERT KIKIRA and
LIONEL MANUA trading as RAGEAU
MANUA & KIKIRA LAWYERS
Second Defendant

AND:
VADA NO. 10 LIMITED trading as
CENTURY 21 Siule Real Estate
Third Defendant

Waigani: Hartshorn J.
2017:8th &13th November 

Application to dismiss the proceeding against the third defendant

Cases cited: 
Papua New Guinea Cases

Kerry Lerro v. Stagg & Ors (2006) N3050
Kiee Toap v. The State (2004) N2731, N2766
Ronny Wabia v. BP Exploration Operating Co Ltd [1998] PNGLR 8
Siu v. Wasime Land Group Incorporated (2011) SC1107
Soka Toligai v. Sir Julius Chan and Ors (2012) N4842 
Takori v.Yagari & Ors (2008) SC905
Mt Hagen Urban Local Level Government v. Sek No. 15 (2009) SC1007 
National Fisheries Authority v. New Britain Resources Development Ltd (2015) N6078

Overseas Cases

Tampion v. Anderson [1973] VR 321
Three Rivers District Council v. Governor and Company of the Bank of England [2003] 2 AC 1 

Counsel:

Mr. A. Kuria, for the Plaintiff 
Messrs. M. Ranyeta and R. Lains, for the First Defendant
Mr. A. Serowa, for the Third Defendant

13th November, 2017

1.	 HARTSHORN J: This is a decision on a contested application to dismiss this proceeding against the third defendant, Vada No. 10 Ltd trading as Century 21 Siule Real Estate (Century 21).

Background

2.	This proceeding concerns a contract for the sale of certain land between the first defendant Tribal Investment Ltd and the plaintiff Idutu Koiari Development Company Ltd (IKDC) for the purchase price of K6.5 million (Contract). The Contract was terminated after a notice to complete issued on behalf of Tribal was not complied with by IKDC. The 10% deposit held by Century 21 as stakeholder was forfeited and paid to Tribal. IKDC now seeks in this proceeding substantively, a declaration that the termination of the Contract was null and void, that the deposit be paid to IKDC and that damages for breach of the Contract be assessed amongst others.

This application

3.	Century 21 seeks to dismiss this proceeding against it pursuant to Order 12 Rules 1 and 40(1)(a) and (b) National Court Rules as:

a)	Century 21 was not a party to the Contract and so the doctrine of privity of contract applies. Century 21 cannot be held liable for any breach of a contract to which it is not a party;

b)	The statement of claim does not disclose a reasonable cause of action against Century 21, either in contract or fraud or at all.

4.	 IKDC and Tribal submit that the proceeding should not be dismissed against Century 21 as although Century 21 is not a party to the Contract, it was only supposed to receive its commission upon completion of the Contract. There was no completion but Century 21 was paid its commission. Further, if the court finds that the contract was null and void IKDC will require to obtain the deposit from Century 21.

Law

Order 12 Rule 40 National Court Rules

5.	 I will consider the application initially pursuant to Order 12 Rule 40 National Court Rules as Order 12 Rule 1 is of general application. There are numerous authorities in respect of the principles which apply to applications under Order 12 Rule 40 National Court Rules and I refer to the following cases in this regard: Kerry Lerro v. Stagg & Ors (2006) N3050, Takori v.Yagari & Ors (2008) SC905, Mt Hagen Urban Local Level Government v. Sek No. 15 (2009) SC1007 and Siu v. Wasime Land Group Incorporated (2011) SC1107. The Court in Mount Hagen v. Sek (supra) in paragraphs 27 to 30 conveniently sets out the requirements of Order 12 Rule 40 (1) (a), (b) and (c) as follows: 

“27.	The terms “vexatious”, “frivolous”, “abuse of the process of the Court” and “reasonable cause of action” under O.12 r.40 of the National Court Rules have been judicially considered, defined and expounded in a number of decisions in both the National and Supreme Courts. These cases include Ronny Wabia v. BP Exploration Co. Limited & 2 Others [1998] PNGLR 8 (N1697); PNG Forest Products Pty Ltd and Another v. The State and Genia [1992] PNGLR 85; Gabriel Apio Irafawe v. Yauwe Riyong (1996) N1915; Eliakim Laki and 167 Others v. Maurice Alulaku and Others (2002) N2001; Kiee Toap v. The Independent State of Papua New Guinea & Another (2004) N2766; Kerry Lerro trading as Hulu Hara Investments Limited v. Philip Stagg, Valentine Kambori & The State (2006) N3050; Philip Takori & Others v. Simon Yagari & 2 Others (2008) SC 905. These cases say the same thing. 

28.	The law with regard to an application for dismissal of proceedings based on O.12 r.40 is settled in our jurisdiction. We note that the principles are succinctly set out in Kerry Lerro’s case (supra) and which has more recently been approved and applied by the Supreme Court in Philip Takori’s case (supra). 

29.	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 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.

30.	In an application under O.12 r.40 of the NCR, the Court may dismiss a proceeding or action where it is satisfied that the pleading in the statement of claim is seriously wanting where a necessary fact or legal element has not been pleaded.”

Consideration

6.	 The submissions made on behalf of IKDC and Tribal, apart from acknowledging that Century 21 was not a party to the Contract, did not specifically address the submissions made on behalf of Century 21 that it cannot be held liable for a breach of the Contract as it was not a party to it and that the statement of claim does not disclose a reasonable cause of action against Century 21, either in contract or fraud or at all.

7.	As to the privity of contract issue, as I said in Soka Toligai v. Sir Julius Chan and Ors (2012) N4842:

“5. Pursuant to the doctrine of privity of contract, “…. no person can sue or be sued on a contract unless he or she is a party to it: Dunlop Pneumatic Tyre Co Ltd v. Selfridge & Co Ltd [1915] AC 847. The doctrine of privity means a contract cannot as a general rule confer rights or impose obligations arising under it on any person except the parties to it.” : Christian Life Centre v. Associated Mission Churches of PNG & Ors (2002) N2261, per Lenalia J.

6. Other decisions in this jurisdiction have considered and ruled pursuant to the doctrine of privity of contract: PNGBC v. Barra Amevo & Ors (1998) N1726, The Papua Club Inc v. Nusaum Holdings Ltd (No. 2) (2004) N2603 and Ben Maoko v. Kevin Ling (2008) N3293.

7. In Ben Maoko (supra), Cannings J referred to exceptions to the doctrine of privity of contract. In the case before him no exceptions were pleaded. In this case as well, no exceptions are pleaded, or referred to in submissions.”

8.	In this case also, no exceptions have been pleaded. I am satisfied that no reasonable cause of action in contract has been disclosed against Century 21.
9.	 As to whether a reasonable cause of action is disclosed in fraud, as I did in National Fisheries Authority v. New Britain Resources Development Ltd (2015) N6078, I reproduce the following passage from 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. Notwithstanding that 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.”

10.	In this instance, the particulars in the statement of claim concerning fraud relating to Century 21 are clearly inadequate. For instance, there are no facts, matters and circumstances pleaded to show that Century 21 was dishonest. The particular that Century 21 wrongfully withheld the deposit, is consistent with innocence and is equivocal.

11.	 Consequently, I am satisfied that no reasonable cause of action is disclosed against Century 21. Further, the substantive relief sought against Century 21 would not be granted and would be bound to fail. When a proceeding is bound to fail, it has been held to be frivolous: Ronny Wabia v. BP Exploration Operating Co Ltd [1998] PNGLR 8, Kiee Toap v. The State (2004) N2731, N2766, Lerro v. Stagg (2006) N 3050 and Tampion v. Anderson [1973] VR 321. 

12.	The proceeding against Century 21 should be dismissed. Given this it is not necessary to consider the other submissions of counsel. As to costs, although they are sought on a solicitor client basis by Century 21, submissions to that effect were not made and I am not satisfied that Century 21 has sufficiently presented a case that such costs are justified. 

Orders

13.	 The Orders of the Court are:

a)	The proceeding against the third defendant is dismissed;

b)	The plaintiff shall pay the third defendant’s costs of and incidental to this proceeding on a party party basis to be taxed if not otherwise agreed;

c)	Time is abridged.

_____________________________________________________________
Kuria Lawyers : Lawyers for the Plaintiff                                        
Hardy & Stocks Lawyers: Lawyers for the First Defendant                           
Jema Lawyers : Lawyers for the Third Defendant