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Nominees Niugini Ltd v Motor Vehicles Insurance Ltd [2017] PGNC 402; N7343 (6 January 2017)

N7343

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1300 of 2013

BETWEEN:
NOMINEES NIUGINI LIMITED
Plaintiff

AND:
MOTOR VEHICLES INSURANCE LIMITED
Defendant

WS 1252 of 2010

BETWEEN:
INDEPENDENT PUBLIC BUSINESS CORPORATION
OF PAPUA NEW GUINEA
Plaintiff

AND:
MOTOR VEHICLES INSURANCE LIMITED
First Defendant/First Cross Claim Defendant/Second Cross Claimant

AND:
NOMINEES NIUGINI LIMITED
Second Defendant/First Cross Claimant/First Cross Defendant to Second Cross Claim

AND:
NATIONAL SUPERANNUATION FUND LIMITED
Third Defendant

AND:
BENJAMIN TERENCE O’DWYER. TERENCE JAMES O’DWYER and BACKWELL LOMBARD CAPITAL PTY LTD
Second Cross Defendants to Second Cross Claim

AND:
DR JOHN MUA
Third Cross Defendant to Second Cross Claim

AND:
BERNARD FONG
Fourth Cross Defendant to Second Cross Claim

Waigani: Hartshorn J
2016: 10^th February
2017: 6^th January

Application to dismiss proceeding - Application for consolidation or joinder

Cases Cited:

Kerry Lerro v. Stagg & Ors (2006) N3050
Motor Vehicles Insurance Ltd v. Nominees Niugini Ltd (2015) SC1435
Mt Hagen Urban Local Level Government v. Sek No. 15 (2009) SC1007
Siu v. Wasime Land Group Incorporated (2011) SC1107
Takori v.Yagari & Ors (2008) SC905

Counsel:

Mr. R. Mulina, for Nominees Niugini Limited in both proceedings;
Mr. E.G. Anderson, for Motor Vehicles Insurance Limited in both proceedings;
Mr. K. Imako, for Independent Public Business Corporation in WS 1252 of 2010;
Mr. J. Brooks, for National Superannuation Fund Limited in WS 1252 of 2010.

6^th January, 2017

1. HARTSHORN J: This is a decision on contested applications to dismiss proceeding WS 1300 of 2013 and an application for proceeding WS 1300 of 2013 to be consolidated or join ed with proceeding WS 1252 of 2010. Both applications were heard together.

Background

2. In proceeding WS 1300 of 2013 Nominees Niugini Limited (NNL) claims against Motor Vehicles Insurance Limited (MVIL) the sum of K22,261,650.00 or alternatively damages for a breach of warranties under an Equity Monetisation Contract (EMC). Default judgement was entered against MVIL in the sum of K 22,261,650.00, but the Supreme Court amongst others, allowed MVIL’s appeal and quashed the default judgment.
3. Proceeding WS 1252 of 2010 concerns the EMC between MVIL and NNL. The Independent Public Business Corporation (IPBC) seeks amongst others to set aside the EMC as it is claimed that it was entered into in breach of certain statutory requirements.

These applications

4. MVIL applies for dismissal and opposes consolidation or joinder. NNL applies for consolidation or joinder and opposes dismissal. The Independent Public Business Corporation and National Superannuation Fund Limited, parties to proceeding WS 1252 of 2010, oppose consolidation or joinder of WS 1300 of 2013 with WS 1252 of 2010.

Preliminary

5. As to the application for consolidation or joinder, it is made pursuant to Order 5 Rules 1 and 2 National Court Rules. NNL, the applicant, in written submissions, submits that there is no specific or primary provision that enables this court to consolidate proceedings except by invoking this court’s inherent jurisdiction. This submission in my view is correct. NNL has not however concisely referred to this court’s inherent jurisdiction in its notice of motion and it therefore is in breach of Order 4 Rule 49(8) National Court Rules as its motion does not contain a concise reference to the court’s jurisdiction to grant an order for consolidation.
6. Further, Order 5 Rules 1 and 2 National Court Rules only provide for jurisdiction in respect of causes of action and parties, not “proceedings”. Consequently, the notice of motion for consolidation or joinder should be struck out.
7. Notwithstanding this, I will proceed on the basis that the notice of motion is not struck out. I will consider the application for dismissal first as if it is successful, it will not be necessary to hear the application for consolidation or joinder.

Application for dismissal

8. In proceeding WS 1300 of 2013, MVIL applies pursuant to Order 12 Rule 40 (1)(a) and (c) National Court Rules for the proceeding to be dismissed on the basis that no cause of action is disclosed and that it is an abuse of the process of the court, or that pursuant to Order 8 Rule 27 (1) (a) and (c) National Court Rules, the statement of claim be struck out for not disclosing a reasonable cause of action and for it otherwise being an abuse of the court process.
9. Alternatively, MVIL seeks that it be granted leave to file and serve its defence within 14 days, pursuant to Order 1 Rule 15 (1) and Order 7 Rule 6 (2) National Court Rules.
10. MVIL submits that the above orders should be made as amongst others:
    1. The Supreme Court in its decision in SCA 44 of 14 delivered on 25^th June 2015, being Motor Vehicles Insurance Ltd v. Nominees Niugini Ltd (2015) SC1435, after a thorough consideration of NNL’s statement of claim, concluded at [35] that the statement of claim failed to disclose a cause of action;

b) This court is bound by that Supreme Court decision and NNL has not amended or made application to amend its statement of claim;

c) The relief sought in the statement of claim is “plainly untenable”.

11. NNL submits that proceeding WS 1300 of 2013 should not be dismissed as amongst others:
    1. This court should only strike out an action where “the cause of action is obviously and almost incontestably bad”. The cases of PNG Forest Products Pty Ltd v. The State [1992] PNGLR 85, Michael Kuman v. Digicel (PNG) Ltd (2013) SC1232 and Kerry Lerro v. Philip Stagg (2006) N3050 are relied upon;

b) The pleadings in the statement of claim, if inadequate can be cured by amendment;

c) MVIL has not exhausted other avenues to allow NNL to rectify its pleadings such as filing a request for further and better particulars;

d) NNL has filed the application for consolidation or joinder in WS 1252 of 2010.

Law

Order 12 Rule 40 National Court Rules

12. 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

13. NNL in its submissions, whilst submitting that this court should only strike out an action where the cause of action is obviously and almost incontestably bad, did not address the finding of the Supreme Court in MVIL v. NNL (supra) that in this instance, NNL’s statement of claim failed to disclose a (or any) cause of action, as distinct from one that is bad, and also, that this court is bound by that Supreme Court decision.
14. As to NNL’s pleadings in its statement of claim being capable of amendment, no application has been made to amend notwithstanding that the Supreme Court decision was delivered on 25^th June 2015. That MVIL filed a notice of motion to dismiss does not prevent NNL filing a notice of motion to amend.
15. As to MVIL not exhausting other avenues to allow NNL to rectify its pleadings, NNL is the plaintiff. It is incumbent upon a plaintiff to prosecute its proceeding with all due diligence and not wait for a defendant to take some action that will allow a plaintiff to amend.
16. As to the application for consolidation or joinder, if there is no cause of action disclosed in the subject proceeding, there is nothing to consolidate or join.
17. I am satisfied that the court is bound by the decision of the Supreme Court in MVIL v. NNL (supra). As it has found that the statement of claim of NNL does not disclose a cause of action, the requirement of Order 12 Rule 40 (1)(a) National Court Rules is satisfied. Further, as NNL has not made application to amend and the statement of claim has not been amended notwithstanding the Supreme Court decision, I am satisfied that this court should exercise its discretion and dismiss this proceeding. Given this it is not necessary to consider the other submissions of counsel as to the dismissal motion and the consolidation or joinder motion.

Consequential relief

18. In WS 1300 of 2013 MVIL seeks additional consequential relief that any money received by NNL in payment of the judgment of Justice Sakora delivered on 13^th March 2014 in this proceeding which was subsequently quashed by the Supreme Court in MVIL v. NNL (supra) be declared to have been the property of MVIL at all material times and only held by NNL in constructive trust for MVIL.
19. NNL submits that an application for such relief should not be permitted to be made by MVIL as it has not filed a defence and therefore has not sought this relief. Further, the application for such relief is not properly before this court.
20. In this instance, notwithstanding that MVIL has not filed a defence, it has filed a notice of intention to defend and is entitled to be heard. Further, the relief that is sought is only being sought because of its compliance with a judgment that has subsequently been quashed. I am satisfied in the circumstances that the application by MVIL is properly made.
21. As to the merits of the application for consequential relief, MVIL contends that the uncontested evidence is that NNL received from MVIL the benefit of the National Court judgment in its favour. The funds were subsequently garnisheed by the Internal Revenue Commission apparently because of NNL’s taxation position.
22. MVIL submits that where money is properly paid under a judgment but that judgment is subsequently overturned it is clear that the original plaintiff/judgment creditor is not entitled to retain the judgment money paid: Burrows “The Law of Restitution” 3^rd Ed, 2012 Reprint p. 602; Lee v. Mallam [1910] TWN 203 NSWSC. In Woolworths Ltd v. Strong (No. 2) [2011] NSWCA 72; (2011) 80 NSWLR 445, 449 72 the Court said:

“There is ample authority that when a judgment that has been paid in whole or part is reversed on appeal, the appellant is entitled as of right to the sum paid, with interest.”

23. MVIL submits that the judgment sums paid by MVIL to NNL are held on a constructive trust by NNL for MVIL. In support of this submission reference was made to the case of Dumal Dibiasco Incorporated Land Group v. Kola Kuma (2005) SC805 in which the Supreme Court said:

“A constructive trust is a trust raised by construction of law or arising by operation of law, as distinguished from express trust. They do not arise by agreement or from intention of the parties but by operation of the law. Blacks Law Dictionary 6th edition -Centennial Edition (1891-1991) states, ‘where the circumstances of a transaction are such that the person who takes the legal estate in property cannot also enjoy the beneficial interest without necessarily violating some established principles of equity, the court will raise a constructive trust, and fasten it upon the conscience of the legal owner, so as to convert him into a trustee for the parties who in equity are entitled to the beneficial enjoyment’.”

24. Further, in Paragon Finance Plc v. D. B. Thakerar & Co (A Firm) [1998] EWCA Civ 1249 in the English and Wales Court of Appeal, Millett LJ said the following:

“A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another.”

25. I referred to these two passages in Hi Tech Industries Ltd v. PNG Institute of International Affairs (2012) N4585.
26. MVIL submits that in this instance the judgment sums paid by MVIL to NNL are held on a constructive trust because whilst NNL had the legal estate, using the words in Paragon Finance (supra), by virtue of its judgment it would clearly be unconscionable for NNL to assert its beneficial interest in light of the subsequent quashing of its judgment by the Supreme Court.
27. MVIL submits that this court has jurisdiction to create a remedial constructive trust and relies upon the following definition: T. Todd “The Remedial Constructive Trust, August 2013:

“A remedial constructive trust is a trust imposed by court order as a remedy for a wrong. The entitlement to that remedy may be a matter of substantive law, but the trust itself is not created by the acts of the parties, or even by the obligation to make restitution, but by the order of the court. As with other court orders, the trust will come into being when the order is pronounced, unless, in an appropriate case, the order is made retroactive or its coming into force is deferred. It may be that in many cases where the remedial constructive trust is imposed, the court will order that it be imposed with effect from the time when the situation arose which gave rise to the unjust enrichment.”

28. Further, in Hussey v. Palmer [1972] EWCA Civ 1; [1972] 1 W.L.R 1286, at p. 1290 (quoted by Dixon J. in Rathwell v. Rathwell [1978] 3 (SCC), [1978] 2 S.C.R. 436, at p. 455, Lord Denning MR noted that a constructive trust “may arise at the outset when the property is acquired, or later on, as the circumstances may require”
29. MVIL submits that in the present case an order should be made to be effective from the date of payment of the judgment sum by MVIL and seeks that the court declare that any money received by NNL in payment of the judgment of Justice Sakora delivered on 13^th March 2014 in this proceeding, which was subsequently quashed by Order of the Supreme Court made on 25^th June 2015 in appeal SCA No. 44 of 2014: Motor Vehicle Insurance Ltd v. Nominees Niugini Ltd, be declared to have been the property of MVIL at all material times and only held by NNL in constructive trust for MVIL.
30. In the absence of argument on behalf of NNL as to the merits of MVIL’s application for consequential relief, and for the reasons submitted on behalf of MVIL, I am satisfied that MVIL is entitled to the consequential relief that it seeks.

Costs

31. MVIL seeks costs on a solicitor and own client basis as in essence NNL did not consent to MVIL’s dismissal application. I am not satisfied that MVIL has properly made out its application for such costs to be paid.

Orders

32. It is therefore ordered that:
    1. Proceeding WS 1300 of 2013 is dismissed;
    2. Any money received by NNL in payment of the judgment of Justice Sakora delivered on 13^th March 2014 in proceeding WS 1300 of 2013 which was subsequently quashed by order of the Supreme Court made on 25^th of June 2015 in appeal SCA No. 44 of 2014: Motor Vehicle Insurance Limited v. Nominees Niugini Limited, is declared to have been the property of MVIL at all material times and only held by NNL in constructive trust for MVIL;
    100. The costs of and incidental to proceeding WS 1300 of 2013 of MVIL shall be paid by NNL to be taxed if not otherwise agreed;
    4. The notice of motion of Nominees Niugini Limited filed 9^th October 2015 in proceeding WS 1252 of 2010 is dismissed;
    5. The costs of MVIL, National Superannuation Fund Limited and Independent Public Business Corporation of and incidental to the notice of motion of NNL filed 9^th October 2015 in proceeding WS 1252 of 2010 shall be paid by NNL;
    6. Time is abridged.

__________________________________________________________
Leahy Lewin Lowing Sullivan Lawyers: Lawyers for Nominees Niugini Limited
Gadens Lawyers: Lawyers for Motor Vehicles Insurance Limited
Allens Lawyers: Lawyers for Independent Public Business Corporation
Ashurst Lawyers: Lawyers for National Superannuation Fund Limited