N7936

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/Cross Claimant

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
Cross Defendant

Waigani: Hartshorn J.
2019: 24th May

Application to dismiss cross claim

Cases Cited:
Papua New Guinea Cases

 Ronny Wabia v. BP Exploration Operating Co Ltd [1998] PNGLR 8
Kiee Toap v. The State (2004) N2731, N2766
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 
Siu v. Wasime Land Group Incorporated (2011) SC1107
Bank of South Pacific Ltd v. Tingke (2014) SC1355 
Panamaseier Resources Pacific Company Ltd v. Sikani (2015) N6166

Overseas Cases

Hubbuck & Sons, Ltd v. Wilkinson, Heywood & Clarke, Ltd [1899] 1 Q.B. 86
Tampion v. Anderson [1973] VR 321

Counsel:

Mr. R. Lains, for the First Defendant/Cross Claimant 
Mr. A. Serowa, for the Cross Defendant

24th May, 2019

1. HARTSHORN J: This is a decision on a contested application to dismiss the cross claim of the first defendant/cross claimant Tribal Investment Ltd (Tribal) against the cross defendant Vada No. 10 Ltd trading as Century 21 Siule Real Estate (Century 21). The cross claim is sought to be dismissed pursuant to Order 12 Rule 40 (1) (a), (b) and (c) National Court Rules on the grounds that it is frivolous, vexatious and does not disclose a reasonable cause of action.

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 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.

3. Century 21 successfully applied to have the proceeding against it dismissed.

4. Tribal in its cross claim seeks amongst others, a declaration that the purported Agent Agreement between Tribal and Century 21 is null and void pursuant to the Fairness of Transactions Act 1993 and consequential orders.

This application

5. Century 21 seeks to dismiss the cross claim against it as amongst others:

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

b)	Tribal has not disclosed a reasonable cause of action in its pleading in its cross claim against Century 21 and has failed to plead the necessary elements under the Fairness of Transactions Act 1993.

6. Tribal submits that its cross claim should not be dismissed against Century 21 as amongst others, a reasonable cause of action is disclosed and the court should be slow to drive the cross claimant from the judgment seat in a summary manner. Reliance was placed upon Takori v.Yagari & Ors (2008) SC905.

Law

Order 12 Rule 40 National Court Rules

7. 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.”

8. Further, notwithstanding all of the various judicial pronouncements since, the position is succinctly summarised in Hubbuck & Sons, Ltd v. Wilkinson, Heywood & Clarke, Ltd [1899] 1 Q.B. 86. At 90-91 the Court of Appeal said:

“The second and more summary procedure is only appropriate to cases which are plain and obvious, so that any master or judge can say at once that the statement of claim as it stands, is insufficient, even if proved, to entitle the plaintiff to what he asks.”

Consideration

9. The claim of Tribal is for relief pursuant to the Fairness of Transactions Act 1993. From a perusal of that Act, certain statutory pre-requisites are required to be satisfied before the court’s jurisdiction to make orders under that Act is invoked.

10. As I said in Panamaseier Resources Pacific Company Ltd v. Sikani (2015) N6166 at [10.8]:

“10.8 As to the defendants being unfair in their business dealings with the first plaintiff, in their submission, the plaintiffs’ refer to and presumably rely upon the Fairness of Transaction Act 1993. In this regard I make reference to my decision of James Geama, Koim Kopun v. OTML Shares In Success Ltd (2011) N4269 at para 3b. As in James Geama (supra), as far as I am aware, no application has been made under the Fairness of Transactions Act 1993 and such an application is a prerequisite: s.5 (1), this court has not attempted to arrive at an amicable settlement: s. 7 (1), the second prerequisite, and this court has not formed an opinion that an attempt at a mediated settlement has failed: s. 8 (1). As the plaintiffs’ have not followed the provisions of the Fairness of Transactions Act 1993, this court has no jurisdiction to deal with a matter under that Act.”

11. I refer also to the following passage in Bank of South Pacific Ltd v. Tingke (2014) SC1355 at [19]:

“Section 7 of the Fairness of Transactions Act 1993 requires the Court in “proceedings under this Act” to, at the first instance, attempt to arrive at an amicable settlement that conforms with the primary object of the Act, and only after a mediated order has failed may the Court proceed to exercise its jurisdiction under section 8 to review the matter. The matters before his Honour were clearly not “proceedings under” the Fairness of Transactions Act 1993. None of the mandated procedures under the Fairness of Transactions Act 1993 were followed, primarily because no party to the loan agreements in these cases sought to invoke the Act.”

12. In this instance in the cross claim, the necessary and essential elements that would form the foundation to invoke the jurisdiction of this court under the Fairness of Transactions Act 1993 have not been pleaded.

13. Consequently, I am satisfied that no reasonable cause of action is disclosed. 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. 

14. The cross claim 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, I am not satisfied that Century 21 has sufficiently presented a case that such costs are justified. 

Orders

15.    The Orders of the Court are:

a)	The cross claim against the cross defendant is dismissed;

b)	The first defendant/cross claimant shall pay the cross 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.
_____________________________________________________________
Hardy & Stocks Lawyers: Lawyers for the First Defendant/Cross Claimant
Jema Lawyers: Lawyers for the Cross Defendant