N8781

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 699 OF 2017

BETWEEN:
TSC INDUSTRIES LIMITED
Plaintiff

AND:
JOE KOIM
Defendant

Waigani: Hartshorn J.
2019: 11th February

PRACTICE AND PROCEDURE - Application to dismiss this proceeding –grounds of application for dismissal based on s16 Frauds and Limitations Act – proceedings filed is time barred – proceedings dismissed – costs awarded on indemnity basis

Cases Cited:
Papua New Guinea Cases

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
Oil Search Ltd v. Mineral Resource Development Corporation Ltd (2010) SC1022
Siu v. Wasime Land Group Incorporated (2011) SC1107
Pololi v. Wyborn (2013) N5253
Mamun Investment Ltd v. Onda Koim (2015) SC1409

Overseas Cases

Derry v. Peek (1888) LR 14 App Cas 337
Hubbuck & Sons, Ltd v. Wilkinson, Heywood & Clarke, Ltd [1899] 1 Q.B. 86
H. Stanke & Sons Pty Ltd & Anor v. O’Meara [2007] SASC 246
Magill v. Magill [2006] HCA 51
Counsel:

Mr. N. Tame, for the Plaintiff
Mr. D. Mel, for the Defendant

11th February, 2019

1. HARTSHORN J. This is a decision on a contested application to dismiss this proceeding for being time barred by virtue of s. 16(1)(a) Frauds and Limitations Act 1988.

Background

2. The plaintiff, TSC Industries Ltd, amongst others, claims that the defendant Mr. Joe Koim, fraudulently transferred the plaintiff’s property situated at Allotment 14 Section 32, Boroko (Saraga Street 6 Mile) (property) to himself in November 2010. Further, the defendant fraudulently transferred the property by purportedly exercising his powers and obligations given to him by Mr. Angelo Cresseri, now deceased, under a power of attorney (power of attorney).

This application

3. The defendant submits that this proceeding should be dismissed as:

a)	the plaintiff’s action is founded on fraud, its cause of action is in fraud, the pleading alleges fraud and the primary relief sought are declarations of fraud;

b)	the contract of sale for the property was signed on 24th November 2010 	(contract) and the defendant was registered as proprietor on the State Lease for the property on 15th December 2010;

c)	an action alleging fraud in the transfer of a title is captured by s. 16(1)(a) 	Frauds and Limitations Act and must be commenced within six years from the date that the cause of action arose. The writ of summons and statement 	of claim were not filed within the requisite six years and the delay in filing has not been explained.

4. The plaintiff submits that this application should be refused as:

a)	it is premature, the pleadings are still alive and the plaintiff seeks to amend 	its reply to the defence;

b)	the plaintiff’s cause of action is based upon the power of attorney. The validity of the power of attorney is challenged and the transfer of the property pursuant to the power of attorney is challenged;

c)	the power of attorney and the transfer of the property were both frauds;

d)	the power of attorney is a Deed, a specialty. An action upon a specialty may be brought within twelve years of when a cause of action accrued;

e)	this is not a clear case for dismissal for being time barred.

Jurisdiction

5. The defendant relies upon amongst others, Order 12 Rule 1 National Court Rules and s. 155(4) Constitution. No objection was taken by the plaintiff to the jurisdictional basis relied upon by the defendant. Order 12 Rule 1, although a Rule of general application, does provide this court with the jurisdiction to grant the orders sought.

Law

Order 12 Rule 1 National Court Rules

6. There are numerous authorities in respect of the principles to be considered in an application for the dismissal of a proceeding. Most of these concern applications made pursuant to Order 12 Rule 40 National Court Rules. Those authorities are applicable in an application made under Order 12 Rule 1. I make reference to the following cases: 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 ApioIrafawe v. YauweRiyong (1996) N1915; EliakimLaki and 167 Others v. Maurice Alulaku and Others (2002) N2001; KieeToap 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.”
7. 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.”
Frauds and Limitations Act
8.Section 16 (1) and (3) Frauds and Limitations Act are as follows: 
“(1)	Subject to Sections 17 and 18, an action—
	(a)	that is founded on simple contract or on tort; or
	(b)	to enforce a recognisance; or
(c)	to enforce an award, where the submission is not by an instrument under seal; or
(d)	to recover any sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture,
shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued.
(2)	……..
(3)	Subject to Subsection (4), an action upon a specialty shall not be brought after the expiration of twelve years commencing on the date when the cause of action accrued.”
9. Section 18 Frauds and Limitations Act is as follows:
“Section 16 does not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief.”
Consideration
10. Although not raised by the plaintiff, as it is declaratory relief that is primarily sought in the amended statement of claim I consider first, whether that relief sought is equitable. If it is, then s. 18 Frauds and Limitations Act precludes s. 16 Frauds and Limitations Act from applying.
11. As to whether a claim for declaratory relief is itself a claim for equitable relief, in Mamun Investment Ltd v. Onda  Koim (2015) SC1409, the Supreme Court, of which I was a member, considered various authorities and applied the principle stated in H. Stanke & Sons Pty Ltd & Anor v. O’Meara [2007] SASC 246, a judgment of the Full Court of the Supreme Court of South Australia. The Supreme Court, after embarking upon a detailed consideration of authority on whether by seeking declaratory relief, an applicant was seeking equitable relief, said:
“There are other cases…. where the plaintiff’s case is founded upon equitable principles and the declaration is simply the device which gives effect to those principles.”
and then:
“Whilst it may be accepted that applications for mere declaratory relief cannot be regarded as seeking equitable relief, it is necessary to examine the pleadings in each case in order to determine the true nature of the relief sought.”
12. In Mamun Investment v. Koim (supra), the Supreme Court held that:
“8. In this instance the underlying basis for the declaratory relief claimed is not in equity. It is based upon a breach of a contract of sale and upon the tort of fraud. After giving consideration to the above authority, in our view the relief claimed in the Originating Summons cannot be categorised as “other equitable relief” in s. 18 Frauds and Limitations Act and so the respondents’ claims do not come within the wording of s. 18 Frauds and Limitations Act.”
13. In this instance when the declarations sought are considered, it is clear that they are founded on or based upon the contract and the power of attorney. It is the case that if there was no contract or power of attorney, there would be no action. I am satisfied that the underlying basis for the declaratory relief claimed is not in equity and so s.18 Frauds and Limitations Act does not apply.
14. The next consideration is whether s. 16(3) or s. 16(1)(a) Frauds and Limitations Act applies - whether the period within which the plaintiff’s cause of action must be brought is twelve years or six years.
15. The plaintiff submits that its cause of action is based upon the power of attorney. It submits that it challenges the power of attorney and the transfer of the property pursuant to the power of attorney. The power of attorney is a Deed and a specialty and therefore the period of twelve years applies, it is submitted.
16. The defendant submits that the plaintiff’s claim is time barred. This is because the claim is for fraud, is founded on tort and has been brought after the expiration of six years from when the alleged cause of action accrued, contrary to s. 16(1)(a) Frauds and Limitations Act.
17. It is pleaded in the amended statement of claim that the transfer of the property was occasioned by fraud. The relief sought is all concerned with the transfer of the property to the defendant. It is apparent that the reason that the power of attorney is attacked is because it is claimed that the defendant transferred the property to himself by relying on the power of attorney. 
18. The plaintiff’s primary cause of action is that its property was transferred by fraud. The fraudulent act is claimed to be by the defendant relying on the power of attorney which itself was a fraud.
19. Fraud or deceit is a tort: Derry v. Peek (1888) LR 14 App Cas 337; Magill v. Magill [2006] HCA 51 and Pololi v. Wyborn (2013) N5253.
20. Pursuant to s. 16(1)(a) Frauds and Limitations Act, a cause of action based upon tort, which includes fraud, must be brought within six years of the date that the cause of action accrued. Even if the transfer of the property was occasioned by the fraudulent act of the defendant based upon the power of attorney, and I make no comment on that, a cause of action founded on that fraudulent act must be brought within six years of the date that the cause of action accrued. That the power of attorney in the form of a Deed may be sued upon within 12 years and not six years does not detract from the requirement in s. 16(1)(a) Frauds and Limitations Act. I am satisfied that s. 16(1)(a) Frauds and Limitations Act applies in this instance.
21. In considering this application, I am mindful of the Supreme Court decision in Oil Search Ltd v. Mineral Resource Development Corporation Ltd (2010) SC1022. In that case it was held amongst others, that the determination of whether an action is time barred entails a finding on three matters: identification of the cause of action, identification of the date on when the cause of action accrued and a categorisation of the cause of action.
22. As to the cause of action in this instance, as mentioned, it is in fraud, concerning the power of attorney and the transfer of the property. The date that the cause of action accrued, submits the plaintiff, is November 2010. The defendant submits it is between 24th October 2010 and 15th December 2010. I agree with these submissions. It is therefore at least 15th December 2010.
23. I mention further, in regard to the submission of the plaintiff that this application is premature as the plaintiff is seeking to amend its reply, as its primary cause of action is based upon fraud, an amendment will not be able to cure the plaintiff’s failure to file this proceeding within the requisite six year period.
24. From the above, and as the plaintiff submits that its cause of action arose in November 2010, and that this proceeding was commenced on 31st July 2017, I am satisfied that s. 16(1)(a) Frauds and Limitations Act applies and that this is a clear case of a proceeding being time barred. Consequently, no reasonable cause of action is disclosed in the amended statement of claim. The defendant has properly made out his claim for the proceeding to be dismissed. 
25. As to the application for his costs to be paid on an indemnity basis, I am satisfied that the plaintiff is entitled to such costs. This is because the evidence is that the plaintiff’s lawyers were put on notice that its claim was time barred and that if this proceeding was not discontinued by the plaintiff, the defendant would seek costs on an indemnity basis if it was successful in its application to dismiss the proceeding. The plaintiff’s lawyers persisted nevertheless, causing the defendant to incur unnecessary costs. Consequently, an indemnity order should be made. 

Orders
26.  The Court therefore orders that:
a)	This proceeding is dismissed;
b)	The plaintiff shall pay the costs of the defendant of and incidental to this proceeding on an indemnity basis;
c)	Time is abridged.
__________________________________________________________________
Nicholas Tame Lawyers: Lawyers for the Plaintiff
Mel & Hennry Lawyers: Lawyers for the Defendant