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Derwent Ltd v Pakena [2017] PGNC 366; N7050 (15 May 2017)

N7050

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS No.1144 of 2013

BETWEEN:
DERWENT LIMITED
(formerly known as Telemu No.9 Limited)
Plaintiff

AND:
ANTON PAKENA
First Defendant

AND:
NIYA LIMITED

Second Defendant

Waigani : David, J
2017: 11 & 15 May

PRACTICE & PROCEDURE – pleadings-application for leave to amend statement of claim - discretionary matter for Court – relevant considerations for exercise of discretion- application of considerations — leave granted - National Court Rules, Order 8 Rule 50(1).

Cases Cited:
Papua New Guinea Cases:

Komboro George v Motor Vehicles Insurance (PNG) Trust (1993) PNGLR 477
Michael Kewa v Elias Mai Kombo (2004) N2688
New Guinea Limited v Thomason [1975] PNGLR 454
The Papua Club Inc. v Nusaum Holdings Ltd (2002) N2273

Overseas cases cited:

Coutts & Co v Duntroon Investment Corporation Ltd [1958] 1 All ER 51
Eshelby v Federated European Bank Ltd [1932] 1 KB 254

Counsel:

S Gor, for the Plaintiff
M Philip, for the First Defendant
H Leahy, for the Second Defendant

RULING ON MOTION

11^th May, 2017

1. DAVID J: INTRODUCTION: The plaintiff makes application seeking an order to amend the statement of claim endorsed on the back of its writ of summons filed on 11 October 2013. The application is moved pursuant to a notice of motion filed on 4 April 2017 and reliance is placed on Order 8 Rule 50(1) of the National Court Rules.

2. The application is strongly contested by both defendants.

EVIDENCE

3. The application is supported by the affidavit of Dr Michael Reynolds sworn on 15 April 2017 and filed on 18 April 2017. Attached to the affidavit of Dr Reynolds as annexure “A” is a copy of the proposed amended statement of claim.

4. In response to the application, the first defendant relies on the affidavits of:

(a) the first defendant himself sworn and filed on 13 August 2014;
(b) Andy Sim Boh How sworn and filed on 17 October 2014.

5. In response to the application, the second defendant relies on the affidavits of:

(a) Angeline Sariman sworn and filed on 1 May 2017;

• (b) Andy Boh How Sim sworn on 2 May 2017 and filed on 4 May 2017;
• (c) Philip Liskia sworn on 2 May 2017 and filed on 4 May 2017;
• (d) Dorothy Misitom sworn on 1 May 2017 and filed on 4 May 2017;
• (e) the first defendant himself sworn on 5 May 2017 and filed on 8 May 2017.
  

BACKGROUND

6. In the statement of claim, the plaintiff makes the following allegations. The second defendant was the owner of an Urban Development Lease over Allotment 3 Section 375 Hohola (Ensisi Valley) in the National Capital District (the land) which was granted on 24 January 2006 for a term of 5 years expiring on 23 January 2011 (the UDL). In March 2007, the UDL was converted into a Residential (High Covenant) Lease (the Residential Lease). The Residential Lease was placed in a closed tender through Tender Notice No.019/2007 and was open only to the second defendant because it originally had the land under the UDL. Following the publication of the tender notice, the second defendant applied for the grant of the Residential Lease to it.

7. Whilst the second defendant’s application was being processed by the Department of Lands and Physical Planning, the second defendant as vendor and the plaintiff as purchaser entered into a contract dated 28 August 2007 for the sale of the land to the purchaser for the sum of K1.95 million (the contract). Completion of the contract was subject to; first, the issue of the Residential Lease in accordance with the terms of the tender notice; and second, the plaintiff obtaining finance from a financial institution. The title to the Residential Lease was issued in or about July 2007. The plaintiff obtained a bank loan of K1.95 million on 29 January 2008 and paid the 10 % deposit of the purchase price.

8. Following the receipt of the title of the Residential Lease, the defendants undertook a sub-division of the land into 65 allotments which was not provided for in the contract. Delays caused by the second defendant with respect to lodgement of the originals of the contract and 65 instruments of transfer for stamping with the Internal Revenue Commission and with the Department of Lands and Physical Planning caused the plaintiff to lodge copies of those documents with those governmental bodies for stamping and Ministerial Approval. The second defendant paid all the governmental rentals, rates, taxes and outgoings, fees for Ministerial Approval and all expenses relating to the sub-division of the land. Ministerial Approval of the contract and transfer instruments was delayed due to delays associated with the completion of the sub-division of the land and once completed after the surrender of the Residential Lease and the issuance of new State Leases, Ministerial Approval of the contract and transfer instruments was obtained on 16 August 2011.

9. The second defendant is now reluctant to complete the contract despite the plaintiff’s request to settle and this has given rise to this action. In the prayer for relief, the plaintiff claims; a declaration that the Residential Lease, the subject of the contract shall now refer to the existing State Leases which were issued following the sub-division of the Residential Lease which was surrendered in order for the said State Leases to be issued; an order for specific performance of the contract on terms proposed; special and general damages; and costs of the proceedings to be paid by the defendants on an indemnity basis.

PLAINTIFF’S SUBMISSIONS

10. It was submitted by the plaintiff through Mr Gor of counsel that the proposed amendments are necessary as they will give detail, clarity and correct any defect or error to the existing pleadings without raising any new issues or facts or new cause(s) of action. In addition, Mr Gor submitted that any document filed in the proceedings can be made at any stage of any proceedings including at trial in such manner as the Court thinks fit pursuant to Order 8 Rule 50(1) of the National Court Rules. He said the amendments will not cause undue prejudice to the defendants and that the defendants will be fairly compensated with costs for such amendment.

FIRST DEFENDANT’S SUBMISSIONS

11. Mr Philip of counsel for the first defendant essentially submits that whilst the rule under consideration allows the application to be made, it was incumbent upon the plaintiff to demonstrate to the Court that the defendants will not be prejudiced by the proposed amendments for which no explanation was provided for omitting the kind of pleadings it wishes to make now. It was submitted that it was too late to seek the amendments and the application should be refused because; the defendants will be prejudiced. They will be prejudiced on the basis that:

(a) there would be a further delay in progressing the matter to trial as responding pleadings will have to be filed and served;
(b) the first defendant has already disposed of its interest in the second defendant; and
(c) the contract was rescinded due to delays in completing the contract and this led to developments having taken place on the land including a high rise building which is in excess of the purchase price of the land.

SECOND DEFENDANT’S SUBMISSIONS

12. Mr Leahy of counsel for the second defendant submits that the application should be refused on the basis that:

(a) the proposed amendments are a mere duplication of the statement of claim which already shows that the real controversy between the parties is the alleged breach of the contract and that paragraph 99 was raising a new cause of action on the basis of estoppel;

• (b) the amendments do not seek to correct any defect or error in the proceedings;

(c) the amendment will cause real prejudice or injustice to the second defendant as its investments on buildings on site worth millions of kina remain under a cloud with the proceedings hanging over it;
(d) there is no evidence of mala fides;
(e) parties can be compensated with costs, but that should not be the only consideration because more time will be consumed to reach a final conclusion of the matter with regard to a transaction entered into about 10 years ago;
(f) the plaintiff is prevented by its conduct or the manner in which the proceedings have been progressed from being permitted to amend its pleadings more particularly its failure to comply with the direction of the Court issued on 1 October 2016 to settle and file a Statement of Agreed and Disputed Facts and Legal Issues by or before 25 November 2016;
(g) the interests of justice do not warrant the amendment sought as the amendment, if allowed, will only confuse the issues between the parties when the principal issue is whether there was a mutual rescission of the contract;
(h) the proposed amendments will not enable the efficient and effective determination of the issues between the parties because they seek to raise a number of peripheral issues which will detract from the main issue which was whether there was in fact a mutual rescission of the contract.

ISSUES

13. The main issue is for me to consider and determine is whether or not the plaintiff’s application to amend its statement of claim should be granted?

LAW

14. The power of the Court to either grant or not to grant the leave sought by the plaintiff is derived from Order 8 Rule 50 of the National Court Rules. Sub-rule (1) of the rule provides that at any stage of the proceedings, the Court may grant leave to a party to make an amendment to any document in the proceedings either on application of a party or of its own motion in such manner as the Court thinks fit. Sub-rule (2) then provides that all necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, or of correcting any defect or error in any proceedings, or of avoiding multiplicity of proceedings.

15. The Court’s power under this rule, is discretionary and broad, and in exercising that discretion, the Court has the duty to do so judicially and on proper principles, so that justice is done in the case even at the late stage of the proceedings: see New Guinea Limited v Thomason [1975] PNGLR 454; Komboro George v Motor Vehicles Insurance (PNG) Trust (1993) PNGLR 477.

16. In The Papua Club Inc. v Nusaum Holdings Ltd (2002) N2273, Gavara-Nanu, J set out five considerations to be taken into account when deciding whether or not to grant leave to amend. These are:

(a) Will the amendment enable the Court to determine the real question in controversy between the parties?

(b) Will the amendment correct any defect or error in the proceedings?

(c) Will the amendment cause real prejudice or injustice to other party?

(d) Is the application for such amendment made mala fide or bona fide?

(e) Can the other party be fairly compensated with costs for such amendment?

17. Three other considerations were added to that list by Cannings, J in Michael Kewa v Elias Mai Kombo (2004) N2688. These are:

(a) Is the party applying prevented by its conduct or the manner in which the proceedings have been progressed from being permitted to amend its pleadings?
(b) Where do the interests of justice lie?

• (c) Is the proposed amendment efficacious? That is, is it a proper amendment?
  

REASONS FOR RULING - APPLICATION OF CONSIDERATIONS

18. I adopt the foregoing considerations and apply them to the facts and circumstances of the present case below. In doing so, I have considered the parties’ submissions presented orally and the second defendant’s written submissions handed up by Mr Leahy at the hearing and the affidavit evidence before me.

Will the amendment enable the Court to determine the real question in controversy between the parties?

19. Yes. I accept the plaintiff’s submissions in that regard. In my opinion, whilst there is no explanation provided by the plaintiff, the proposed draft amended statement of claim appears to be generally designed to achieve that outcome.

20. A new cause of action may be added or a cause of action substituted by amendment provided it existed at the date on which the proceedings were commenced: Eshelby v Federated European Bank Ltd [1932] 1 KB 254; Coutts & Co v Duntroon Investment Corporation Ltd [1958] 1 All ER 51. In my opinion, paragraph 99 of the proposed amended statement of claim falls within this principle.

21. However, an amendment which would add or substitute a cause of action after the time limited for bringing the cause of action is a ground for refusal. The second defendant has raised the issue in relation to paragraphs 35 to 46 and paragraphs 47 to 54 of the proposed amended statement of claim concerning the sub-division of the land and the 10% deposit payable under the contract. If these are new causes of action as is suggested by the second defendant, they would have arisen either under or in connection with the contract at the time when the proceedings were commenced. In my opinion, any question of statutory limitation in relation these causes of action which may not be entirely clear on the facts should be raised at trial when evidence is called and tested and I think that is warranted in the present case.

22. A general rule about pleadings in proceedings commenced by writ of summons is that a statement of claim should contain only a statement in summary form of the relevant and material facts on which he or she relies, but not the evidence by which those facts are to be proved: Order 8 Rule 8 of the National Court Rules. Paragraphs 23 to 30 of the proposed amended statement of claim will offend this rule. The proposed pleadings need to be revisited so that only the ultimate or issuable facts should be pleaded.

Will the amendment correct any defect or error in the proceedings?

23. Yes. I think it will.

Will the amendment cause real prejudice or injustice to other party?

24. Again, whilst there is no explanation provided by the plaintiff, the defendants naturally will be prejudiced by any delay in the progress of the matter to trial and its final disposition given the contract was executed some 10 years ago and the proceedings commenced over 3 years ago. Concerns expressed in evidence adduced for and on behalf of the defendants about the first defendant having disposed of his interest in the second defendant and that the value of developments that have taken place on the land far outweighs the purchase price in my opinion are matters that ought to be addressed at trial when deciding the main issue correctly identified by the second defendant, i.e., whether or not the contract was mutually rescinded? Whatever the outcome, it will no doubt have an impact on the concerns raised one way or another.

Is the application for such amendment made mala fide or bona fide?

25. I agree with the second defendant that there is no evidence of any mala fides.

Can the other party be fairly compensated with costs for such amendment?

26. Yes. I think they will.

Is the party applying prevented by its conduct or the manner in which the proceedings have been progressed from being permitted to amend its pleadings?

27. This matter has progressed through directions hearing. The Court issued directions on 6 October 2016 indicating steps required to be taken by parties to progress the matter to trial. The plaintiff was required to settle and file a statement of agreed and disputed facts and legal issues by or before 25 November 2016 and it has not complied. This consideration favours the defendants and the refusal of the application.

Where do the interests of justice lie?

28. I am of the opinion that it is the interests of justice to grant the application.

Is the proposed amendment efficacious? That is, is it a proper amendment?

29. For reasons stated already, I am of the opinion that it is a proper amendment.

CONCLUSION

30. In balancing the considerations, I have found seven of the considerations in favour of the plaintiff and one against it. That favours the exercise of my discretion in favour of granting the application. I therefore answer the main issue in the affirmative.

ORDERS

31. The formal orders of the Court are:

(a) The plaintiff is granted leave to amend the statement of claim endorsed on the back of its writ of summons filed on 11 October 2013.
(b) The plaintiff shall file and serve its amended statement of claim on each defendant within 7 days from today.
(c) Each defendant shall file and serve their defence within 14 days of service of the amended statement of claim.
(d) The plaintiff shall be at liberty to file any reply within 14 days of service of each of the defendant’s defence.
(e) The parties are at liberty to take other steps permitted by the National Court Rules thereafter.
(f) The plaintiff shall bear the costs of each defendant on a party and party basis, to be taxed, if not agreed.

_______________________________________________________________

Fiocco & Nutley: Lawyers for the Plaintiff
Korerua & Associates: Lawyers for the First Defendant
Pacific Legal Group: Lawyers for the Second Defendant