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Geru Holdings Ltd v Kruse [2017] PGNC 44; N6663 (23 January 2017)

N6663

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS No. 797 OF 2015

BETWEEN:

GERU HOLDINGS LIMITED

Plaintiff

AND:
JAMES KRUSE
First Defendant

AND:
DELOITTE TOUCHE TOHMATSU
Second Defendant

Waigani: Hartshorn J
2017: 23^rdJanuary

Whether interim injunctive relief already granted should continue

Cases:

Airlines of Papua New Guinea Ltd v. Air New Guinea Ltd (2010) N4047
American Cyanamid Company v. Ethicon Limited [1975] UKHL 1; (1975) AC 396
Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853
Craftworks Nuigini Pty Ltd v. Allan Mott (1997) SC 525
Independent Public Business Corporation of Papua New Guinea v. Motor Vehicles Insurance Limited (2015) N6584
Ramu Nico Management (MCC) Limited and Ors v Tarsie and Ors [2010] SC 1075

Sioti Bauf & Anor v. Poliamba Pty Ltd [1990] PNGLR 278

Counsel:

Mr. C. Gagma, for the Plaintiff
Mr. I.R. Shepherd, for the Defendants

23^rd January, 2017

1. HARTSHORN J: This is a decision following a contested hearing as to whether interim injunctive orders already granted should be extended.

Background

2. The plaintiff, a company, seeks substantively various declarations, an order and two orders “in the nature” of permanent injunctions. The declarations sought include that the plaintiff is the sole registered holder and proprietor of certain property, that it is not in liquidation, that the defendants are not agents of the plaintiff authorised to deal with the property and that the defendants advertisements inviting expressions of interest to purchase the property are illegal, and null and void. The order sought seeks that the advertisements be withdrawn or removed. The permanent injunctions sought are to restrain the defendants from dealing with the property.

This application

3. Pursuant to a notice of motion of the plaintiff seeking interim relief, this court ordered by consent that the defendants are restrained from amongst others, dealing with the property. The order remains in effect until this court delivers its decision on whether the interim relief should continue. This is that decision.

4. The plaintiff submits that the interim relief already granted should continue as:

a) There is a cause of action disclosed in the originating summons. The plaintiff is the owner of the property, and has a right to bring this proceeding. It has a prima facie case as the validity of the mortgages registered on the property are in question and also the subject of proceeding WS 157/11. Further, it is alleged that Bank of South Pacific Ltd breached an agreement to provide loan finance despite mortgages over the property being given; and the plaintiff has not appointed the defendants to sell the property;

b) It is likely that the property will be sold, and the object of this proceeding is to protect the property;

c) It is in the interests of justice.

5. The defendants submit that the interim relief already granted should not continue as:

a) There is no valid undertaking as to damages which is a condition precedent to the granting of an interlocutory injunction;

b) There was a non-disclosure of a material fact by the plaintiff, being the discontinuance of the proceedings in which it obtained an order, upon which it relies in the current proceedings;

c) There is no serious question to be tried. The plaintiffs argument, apparently that the sale of their property should be prevented as the defendants have no authority to sell the property, is contrary to the evidence before the court. The plaintiff is in default and the Bank of South Pacific Ltd has appointed the first defendant as its agent for the sale of the property and there is no valid challenge to this process;

d) The balance of convenience favours the refusal of the continuation of the injunctive orders as the plaintiff is protected by its equity of redemption and the first defendant, the agent for the sale of the property, is under a duty of care. The plaintiff’s remedy if any, is in damages.

Consideration

6. The principles upon which the court can grant an interlocutory injunction are well settled. The leading authority is a decision of the House of Lords in American Cyanamid Company v. Ethicon Limited [1975] UKHL 1; (1975) AC 396. This case has been followed on many occasions in this jurisdiction and cited with approval by the Supreme Court in Craftworks Nuigini Pty Ltd v. Allan Mott (1997) SC 525. These principles have been reaffirmed by the Supreme Court in Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853.

7. In Chief Collector of Taxes v. Bougainville Copper Limited [2007] SC 853, the Supreme Court said at 31:

“In our jurisdiction the principles relevant to injunctive reliefs (sic) are well settled. In Golobadana No. 35 v. Bank of South Pacific, Kandakasi J. ... concluded as follows:

“A reading of these authorities shows consistency or agreement in all of the authorities that the grant of an injunctive relief is an equitable remedy and it is a discretionary matter. The authorities also agree that before there can be a grant of such a relief, the Court must be satisfied that there is a serious question to be determined on the substantive proceedings. This is to ensure that such a relief is granted only in cases where the Court is satisfied that there is a serious question of law or fact raised in the substantive claim. The authorities also agree that the balance of convenience must favour a grant or continuity of such a relief to maintain the status quo. Further, the authorities agree that, if damages could adequately compensate the applicant then an injunctive order should not be granted”.”

8. Similarly, in Ramu Nico Management (MCC) Limited and Ors v Tarsie and Ors [2010] SC 1075 at 53, in a decision in which I dissented on matters not currently relevant, I said:

“The law on injunctions is settled in this jurisdiction. Injunction is an equitable remedy. It is a matter for the discretion of the Court to refuse or grant the relief sought. In order for an injunction to be granted, the applicant must demonstrate to the Court that there is a serious case to be tried on the substantive proceedings. The leading authority is a decision of the House of Lords in “American Cyanamid Company v Ethicon Limited (1975) 1 All ER 594. This case has been followed on many occasions in this jurisdiction and cited with approval by the Supreme Court in Craftworks Niugini Pty Ltd v Allan Mott (1997) SC525 and Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853.”

9. There is also an obligation on an applicant for an injunction to disclose all material facts. A failure to disclose material facts is fatal to an injunction application. I referred to this duty of disclosure in Airlines of Papua New Guinea Ltd v. Air New Guinea Ltd (2010) N4047 and Independent Public Business Corporation of Papua New Guinea v. Motor Vehicles Insurance Limited (2015) N6584. In those cases I made reference to the decision of Sheehan J in Sioti Bauf & Anor v. Poliamba Pty Ltd [1990] PNGLR 278. In that case it was held that:

“1) A party seeking to obtain an interim injunction, ex parte, is under an obligation to demonstrate utmost good faith and to bring to the attention of the court:

a) all facts material to the applicant’s right to the injunction; and

2. any material which could be put in favour of the defendant’s position.

2) Failure to make full and proper disclosure of relevant material is sufficient to justify the court dissolving an interim injunction made ex parte.

3) A statement of claim seeking an injunction must disclose a reasonable cause of action.

4) The interim injunction should be dissolved for non-disclosure of relevant material.

5) The originating summons should be dismissed for failure to disclose a cause of action.”

10. In this instance the defendants submit that the plaintiff has breached its obligation of disclosure to this court as it did not disclose that proceeding OS 305 of 2009 was discontinued on 7^th August 2012. This proceeding is relied upon by Mr. Peter Kama, a director and shareholder of the plaintiff, in his affidavit sworn 10^th December 2015. He specifically refers to restraining orders made in OS 305 of 2009 against the Bank of South Pacific Ltd in respect of three properties which are the subject of this proceeding. He also makes allegations concerning the defendants and Bank of South Pacific Ltd being in contempt of orders made and determined under OS 305 of 2009.

11. Counsel for the defendants submitted that because of the evidence of Mr. Kama to the effect that the orders in OS 305 of 2009 were in force, they were prepared to and did consent to the restraining orders sought. Counsel for the defendant submits further that even though the discontinuance of OS 305 of 2009 has presumably been brought to the attention of Mr. Kama, he has not retracted his evidence in his latest affidavit or acknowledged that OS 305 of 2009 is no longer current. Mr. Kama has also not explained the circumstances concerning the lawyer for the plaintiff preparing and signing the notice of discontinuance.

12. Counsel for the plaintiff submitted that the board of the plaintiff was not aware of the discontinuance of OS 305 of 2009, although there is no evidence of this, and that this originating summons had to be filed urgently because of the publication of the advertisements concerning the proposed sale of the property.

13. In my view, the non-disclosure of the discontinuance of OS 305 of 2009 is indicative of a lack of good faith on behalf of the plaintiff when initially making application for the interim injunction orders in this proceeding. A party to a proceeding, or in this case its directors are presumed to know the status of proceedings to which they are a party, especially if that party is a plaintiff. The notice of discontinuance of OS 305 of 2009 was filed over 3 ¼ years ago. Even if the lawyer for the plaintiff filed a notice of discontinuance without instructions as is submitted, one would have thought that the plaintiff by its directors would have ascertained the status of the proceeding in the time since the discontinuance was filed. Not to make enquiry and ascertain the status of a proceeding that a company, of which you are a director, commenced, for over three years, to my mind raises questions, first as to the negligence of the directors in acting on behalf and in the interests of the plaintiff company, and secondly whether the plaintiff is serious in wishing to proceed with the proceeding that it has commenced.

14. If however, it was not known that a notice of discontinuance had been filed, once its filing had been brought to the attention of the plaintiff or its directors, the plaintiff or directors should have given evidence concerning their lack of knowledge of the filing of the discontinuance and all other circumstances concerning the non-disclosure of the discontinuance. Here, Mr. Kama has given further evidence but has not referred at all to the filing of the discontinuance.

15. Further, to my mind, before permitting a client to make an allegation of contempt, which is a serious allegation, against an opposing party, a lawyer should check the facts first to see whether there is credible and reliable evidence to support such an allegation being made. Clearly that did not occur in this instance.

16. As to the submission of counsel for the plaintiff that the originating summons needed to be filed urgently, that this may be so does not diminish the responsibility of counsel to ensure that there is credible and reliable evidence upon which allegations are able to be made.

17. Taking into account all of these considerations I am satisfied that the plaintiff has not demonstrated the utmost good faith and to my mind has demonstrated a lack of good faith in the manner that the application for interim injunctive relief has been brought in this proceeding.

18. Consequently, in accordance with the authorities referred to, the injunctive relief that was granted, is dissolved and the interim injunctive relief sought is refused. Given this it is not necessary to consider the other submissions of counsel as to the injunctive relief question.

19. As to the proceeding continuing on pleadings, as there is no opposition by the defendants, this relief is granted.

Orders

20.

a) The relief sought in paragraphs 2, 3 and 4 of the notice of motion of the plaintiff filed 11^th December 2015 is refused;

b) The interim relief already granted is dissolved;

c) The relief sought in paragraph 5 of the said notice of motion is granted;

d) The plaintiff shall pay the defendants’ costs of and incidental to the said notice of motion;

e) Time is abridged.

____________________________________________________________
Gagma Legal Services: Lawyers for the Plaintiff
Ashurst Lawyers: Lawyers for the Defendants