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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS No. 849 of 2019 (COMM)
BETWEEN
AMODE HK LIMITED
Plaintiff
AND:
ANITUA HOUSING SOLUTIONS LIMITED
Defendant
Waigani: Anis J
2020: 17th March & 23rd April
NOTICE OF MOTION – Two applications – security for costs - leave to amend the statement of claim – Order 14 Rule 25(1)(a) and 26, National Court Rules – Order 8 Rule 50(1) – National Court Rules – preliminary point regarding Order 8 Rule 50(1) - whether it is correct or proper to also seek joinder or addition of a party under Order 8 Rule 50(1) - whether want of pleading correct source fatal or should warrant dismissal of application – whether it also amounts to abuse of process – Order 14 Rule 25(1)(a) – considerations for exercise of discretion discussed – whether the circumstances of the case or the interest of justice shall warrant or justify exercise of discretion to grant security for costs – assessment of security for costs - whether it should be set at two thirds of the estimated party/party costs or whether it should be less – exercise of discretion
Cases Cited:
SC Review No. 11 of 1999; Application to Review Pursuant to Constitution s155(2)(b); Application by David Lambu v Peter Ipatas and
Edward Konu (The Provincial Returning Officer) and The Electoral Commission (No. 3)(1999) SC601
Yartlett v. New Guinea Motors Ltd [1984] PNGLR 155
In the matter of the Companies Act 1997, In the matter of Re JCA Lumber Co. (PNG) Limited (2015) N6040
Reynolds v. Walcott [1985] PNGLR 316
Counsel:
Mr A Mana, for the Plaintiff
Mr M Goodwin, for the Defendant
RULING
23rd April, 2020
1. ANIS J: Two applications returned before me for arguments on 17 March 2020. The first was by the defendant for security for cost, and the second was by the plaintiff for leave to amend the statement of claim. I reserved my ruling after that to a date to be advised.
2. Parties have been notified so I will rule on them now.
BACKGROUND
3. Briefly, the claim is one of breach of contract. The plaintiff claims that it had entered into a valid supply agreement (contract) with the defendant on 12 January 2018. Based on it, the plaintiff says it had supplied the defendant various types of pre-fabricated houses. The plaintiff says that according to the contract, the defendant was supposed to order a minimum of 8 pre-fabricated houses per month. On 24 April 2019, about a year later, the defendant terminated the contract.
4. The plaintiff’s complaint is this. It says before the contract was terminated, the defendant had on various occasions been ordering less than 8 houses per month which was contrary to the minimum requirement of 8 houses per month under the contract. The plaintiff says it suffered damages as a result of the alleged breaches. It claims that the defendant owes it a total debt of USD 2, 677, 000 or its equivalent in PNG Kina (PGK). The plaintiff says the sum represents the value of the short fall, that is, of all the less houses per month which the defendant had failed to order. They are calculated from the start of the contract to when it was terminated on 24 April 2019. The total number short fall of the pre-fabricated houses allege is 55.
MOTIONS
5. The main relief sought in the defendant’s notice of motion is this, and I quote, Pursuant to Order 14 Rule 25(1)(a) and 26 of the National Court Rules, the Plaintiff, a company registered in Hong Kong and ordinarily resident outside of Papua New Guinea, provide to the Defendant, security for costs in the sum of PGK332,450, and that the claim by the Plaintiff is stayed until the security is given.
6. I turn to the plaintiff’s notice of motion. The main relief sought therein is this, and I quote in part, Pursuant to Order 8 Rule 50(1) of the National Court Rules, leave be granted to the Plaintiff to amend the Statement of Claim filed on 27 February 2019.
PRELIMINARY ISSUE
7. The defendant raised a preliminary issue in regard to the plaintiff’s application. It argues that Order 8 Rule 50(1), which is the cited source of the application, is an incorrect source thus makes the application incompetent and should be dismissed. It submits that the plaintiff plans to make substantial amendments to the originating process; that it is not a case of a simple amendment. The defendant also submits this. It argues that the plaintiff also proposes, by relying on the same source, to include a new party to the proceeding. It submits that the plaintiff is asking the Court to exercise its power under a wrong rule; powers which the Court does not have to grant such a relief. It submits that the correct source is Order 5 Rules 2, 4(1) and 8(1) of the National Court Rules which the plaintiff has not invoked in its application.
8. The plaintiff in response submits as follows. It submits that the source cited is the correct source for amendments. It submits that its aim is to ensure that all matters of facts are sufficiently pleaded so as to assist the Court determine the real questions in the matter. In regard to the claim that an incorrect rule has been pleaded to join a party, the plaintiff simply submits this. It says it was done to save time and cost of filing a separate application; it submits that to file separate applications would create more work which is why the joinder is also sought in this fashion. It submits that even if the Court rejects the manner in which joinder is sought herein, the plaintiff would make a separate application anyway thus the approach now should be allowed.
9. Let me begin by looking at Order 8 Rule 50(1). It states:
50. General. (20/1)
(1) The Court may, at any stage of any proceedings, on application by any party or of its own motion, order, on terms that any document in the proceedings be amended, or that any party have leave to amend any document in the proceedings, in either case in such manner as the Court thinks fit.
10. Also relevant for this purpose is Rule 3, which reads:
(3) Where there has been a mistake in the name of a party, Sub-rule (1) applies to the person intended to be made a party as if he were a party.
11. I note the submissions and case law on point that have been presented by counsel. In my view, the answer to all these is simple. Whilst I agree with counsel for the plaintiff that Order 8 Rule 50(1) is the correct source for amending a pleading, I note that that is not the only reason why the plaintiff has invoked the said rule. The plaintiff has also relied on it join or add a party to the proceeding, that is, Anitua Limited. Evidence of the draft amended writ of summons and statement of claim (draft amended writ) is attached to the affidavit of Joseph Webb (Document No. 24).
12. I will remark that the draft amended writ is 38 pages long whilst the present writ of summons and statement of claim consists of 6 pages. The proposed amendment clearly appears substantive in nature. It proposes to contain an enormous amount of pleaded facts. But apart from my remark, I will not spend any more time looking into the competency, correctness, sufficiency or otherwise of the draft amended writ. I do not think that this is the time for it. I say this for the following reasons. Firstly, I uphold the defendant’s submission that I may not have jurisdiction to consider joinder of a party together or whilst at the same time considering whether to grant leave to the plaintiff to amend its amended pleading. The closest this Court can go in terms of its powers under Order 8 Rule 50 to consider both matters may be under sub-rule (3). However, I note that this is not a case of a mistake to the name of party to the proceeding. It is quite clear from the draft amended writ that the plaintiff proposes to add Anitua Limited, which is a new party, as the second defendant in the proceeding.
13. I uphold the defendant’s submission that the correct rule to ask the Court to invoke to join or add a party to the proceeding, is Order 5 Rules 2, 4(1) and 8(1) of the National Court Rules. It reads, and I quote in part:
Two or more persons may be joined as plaintiffs or defendants in any proceedings —
(a) where —
(i) if separate proceedings were brought by or against each of them, as the case may be, some common question of law or of fact would arise in all the proceedings; and
(ii) all rights to relief claimed in the proceedings (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions; or
(b) where the Court gives leave to do so.
......
(1) The Court may grant leave under Rule 1 or 2 before or after the joinder and may grant leave under Rule 3(2) before or after the non-joinder.
......
(1) Where a person who is not a party —
(a) ought to have been joined as a party; or
(b) is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceedings may be effectually and completely determined and adjudicated on,
the Court, on application by him or by any party or of its own motion, may, on terms, order that he be added as a party and make orders for the further conduct of the proceedings.
14. I note that the draft amended writ is drafted to substantially also cover pleadings concerning the intended new party. So this is not the case where I could simply consider the proposed amendments to the pleading and if I am satisfied, grant leave to the plaintiff to amend without regard to the intended party which the plaintiff proposes to add. The plaintiff’s application is moved with the aim that the Court would consider and make orders that would include the addition of an intended second defendant. And I think this is where the plaintiff has erred. It may also be viewed as an abuse of court process. But I must add that I do not think the plaintiff’s intention was deliberate, that is, to abuse the court process. Counsel for the plaintiff has, in my view, clearly explained why they have applied in the manner as they have done, and I have already stated that above. It seems, based on arguments that have been presented during the hearing that the plaintiff may not have anticipated that the source of its application would be challenged in this manner.
15. But a challenge has been put by the defendant, and having said all these, I will now make my findings. Firstly, whilst I may have the jurisdiction under Order 8 Rule 50(1) to hear the application, because the application also indirectly attempts to add a new party to the proceeding, I find that it amounts to abuse of process. The proper processes for joinder or addition of parties are provided for under Order 5 of the National Court Rules. This leads me to the second reason, which is this. The plaintiff has failed to state in its application the correct source for joinder of a party. The Court rules require that it must be pleaded. See Order 4 Rule 49(8) of the National Court Rules. And thirdly, l will say this. Even if I am to deal only with my powers under Order 8 Rule 50(1) and proceed to consider the merit of the plaintiff’s application, it would serve no purpose because it would be contrary to the intention of the plaintiff in its application. The plaintiff’s draft amended writ is drafted in the manner that the intended new defendant is also joined or added in as the second defendant to the proceeding which I cannot grant.
16. In all, I will dismiss the plaintiff’s application, not on its merit but on the preliminary reasons, namely, want of proper source and abuse of process.
SECURITY FOR COSTS
17. I now turn to the defendant’s application. The question I have is this. Should I exercise my discretion and order the plaintiff to provide security for costs? Order 14 Rule 25(1)(a) and 26 of the National Court Rules states, and I quote in part:
(1) Where in any proceedings, it appears to the Court on the application of a defendant—
(a) that a plaintiff is ordinarily resident outside Papua New Guinea; or
......
the Court may order that plaintiff to give such security as the Court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the security is given.
Where the Court orders a plaintiff to give security for costs, the security shall be given in such manner, at such time, and in such terms (if any) as the Court may by order direct.
18. In this case, the defendant’s submission is confined to the claim that the plaintiff is ordinarily resident outside the country. In this case, the plaintiff has stated that it is a Hong Kong based company so the fact is not disputed. What does the case law say? Does it automatically mean that the Court should exercise its power under Order 14 Rule 25, that is, once it is established that a party is non-resident to Papua New Guinea? I note the submissions and case authorities presented and cited by both counsel. In my view, the relevant case authority that considered or briefly discussed security for costs under section 18 of the Supreme Court Act, section 395(1) of the Companies Act 1997 and under Order 14 Rule 25 of the National Court Rules, is the case SC Review No. 11 of 1999; Application to Review Pursuant to Constitution s155(2)(b); Application by David Lambu v Peter Ipatas and Edward Konu (The Provincial Returning Officer) and The Electoral Commission (No. 3)(1999) SC601. The primary consideration as summarized by the Supreme Court is and I quote:
We bear these general principles in mind in considering the question of security for costs pending the determination of a judicial review. However, the ultimate test should be; whether, it is in the interest of justice to make or not to make an order for security for costs having regard to all the circumstances of the case (adopting the words of s 155 (4) of the Constitution). This Court adopted the same test in an application for stay pending the determination of a judicial review in Viviso & Electoral Commission v John Giheno (supra). The onus is on the party applying to demonstrate why the discretion should be exercised in his favour.
19. The said consideration is binding upon this Court. I note at the same time that the Supreme Court therein also stated, which I agree, that the real question is how should this discretion be applied? I also refer to the case of Yartlett v. New Guinea Motors Ltd [1984] PNGLR 155. This is a case where an application was made under Order 14 Rule 25 (1) (a) of the National Court Rules. McDermott J followed Sir Lindsay Parkinson & Co Ltd v. Triplan Ltd [1973] 2 All ER 273 at 285, and held that, and I quote:
The order sought is one of discretion. In exercising discretion under this rule, all the circumstances of the case have to be considered. Speaking of a similar discretion under s. 447 of the Companies Act 1948 (Imp.) in Sir Lindsay Parkinson & Co. Ltd v. Triplan Ltd [1973] 2 All E.R. 273 at 285 Lord Denning mentions matters which the court might take into account:
(1) whether the claim is bona fide and not a sham;
(2) whether there is a reasonably good prospect of success;
(3) whether there is an admission by the defendants on the pleadings, or elsewhere that money is due;
(4) whether money has been paid into account;
(6) whether the application for security was being used oppressively;
(7) whether a plaintiff’s want of means has been brought about by any conduct of the defendants.
20. Finally, I note that the Court’s discretion is unfettered. This means that I am not bound by each of the factors or considerations that may be prescribed by the case authorities. I note that Justice Hartshorn has explained that with clarity in several of his judgments, including the case, In the matter of the Companies Act 1997, In the matter of Re JCA Lumber Co. (PNG) Limited (2015) N6040. His Honour stated, and I quote:
9. As to the discretion conferred by Order 14 Rule 25 (1), I refer to the following statement that I reproduced in Albright Ltd v. Mekeo Hinterland Holdings Ltd (2013) N5774 at para 21. It is a statement by Bowen LJ in Gardner v. Jay (1885) 29 Ch 50, at p59:
“When a tribunal is invested by Act of Parliament or by Rules with a discretion, without any indication in the Act or Rules of the grounds upon which the discretion is to be exercised, it is a mistake to lay down any rules with a view of indicating the particular grooves in which the discretion should run, for if the Act or the Rules did not fetter the discretion of the Judge why should the Court do so?”
10. This statement was also quoted by Lord Wright in the House of Lord’s decision of Evans v. Bartlam [1937] AC 473; 2 All ER 646, and recently in Albright v. Mekeo Hinterland Holdings Ltd (2014) SC1400 at para 29.
11. As there is no indication in Order 14 Rule 25 (1) of the grounds upon which the discretion is to be exercised once the criteria in either (a) – (d) are met, I am of the view that the discretion is unfettered and should be exercised with regard to all of the circumstances of the case.
12. In this instance it is not disputed that the applicants are ordinarily resident outside of Papua New Guinea and so the requirement of Order 14 Rule 25 (1) (a) has been met.
21. So having said all that, let me address the matter. Firstly and as stated above, it is not disputed that the plaintiff is ordinarily resident outside of Papua New Guinea. So, in my view, the plaintiff has met one of the expressed grounds, that is, Order 14 Rule 25(1)(a), for me to exercise my discretion and order security for costs. In fact, that is the only ground relied upon by the defendant in its application. So it leads me to the next question, which is this: What factors should I take into account under the circumstances of the case? And also, whether the circumstances of the case or the interest of justice requires that I should exercise my discretion.
22. I have considered the 7 factors or considerations that have been adopted and applied by McDermott J in the Yartlett case. Because of my unfettered discretion, I am not obliged to restate and meet each of these factors. Let me begin by saying this. In a case where a plaintiff is an overseas based company, that mere fact alone should, in my view, cause reasonable basis or raise a red flag, so to speak, to reasonably expect that some form of security must be shown or be provided by the plaintiff. Once an applicant has established that a respondent is an overseas based company or is a non-resident, the burden should shift, in my view, and it should be left to the respondent or in this case the plaintiff, who should then be tasked to show that it has assets or means of assets within the country; that it is liquidated; it should provide evidence to show that it is serious and will not abandoned its action or the jurisdiction of the Court until the matter is fully resolved whether it be in Court or otherwise. And one of the measures to show its seriousness would be the very act of committing funds into court like giving security for costs. That may perhaps be the only reasonable way in which the Court and a defendant can be rest assured of the genuine intention of a plaintiff, that is, in commencing an action in a foreign jurisdiction, which is PNG, against a defendant with the aim to obtain judgment or relief in the said jurisdiction.
23. In my view, I would not necessarily regard bona fide and arguable or meritorious claim or defence, as paramount considerations, than the first requirement as discussed or other factors that may arise depending on the circumstances of the case. The obvious example is that a plaintiff may show that it may have an arguable case or one that is likely to succeed. However, there is no absolute guarantee that that will occur in the future. No one can see the future is perhaps a better illustrative way of expressing my view. There are real risks that exist when a plaintiff commences proceedings in a foreign jurisdiction, that is, in addition to or perhaps say other than the 7 factors as stated in Yartlett’s case. For example, it is possible that a party may become insolvent or bankrupt during the course of the proceeding; or a party may decide to withdraw the proceedings at some point in time even if the party may be said to have a meritorious claim; or the Court may make orders in interlocutory hearings that may involve payment of costs, and the list may go on.
24. Let me now turn to the evidence. I refer to Mr Webb’s affidavit filed on 11 March 2020 which he has deposed to on behalf of the plaintiff. I note that there is nothing there to assist me tell whether the plaintiff has assets in the country. There is no account given as to the financial capacity or liquidity status of the plaintiff, or information that would provide some guidance as to whether the plaintiff is capable of paying any costs for the duration of the proceeding, and of course costs in the event that the proceeding is dismissed, or in a case where the proceeding may not proceed due to foreseeable or unforeseeable circumstances. The defendant on the other hand, has provided evidence to show otherwise through the affidavit of Daniel Woulfe (Document No. 8). He deposes confirming the foreign status of the plaintiff. He also states that the plaintiff does not have assets in the country.
25. When I consider all that, I must say that I am inclined towards exercising my discretion. In my view, the circumstances of the case warrants me to do so. Also, I find that the interest of justice requires that I make such an order under Order 14 Rule 25(1) of the National Court Rules.
26. This now brings me to the final leg or issue under this sub-heading, that is, what amount should I order or award as security for cost? I note that the defendant has provided a guideline. I refer to the affidavit of Mr Woulfe. He attaches at annexure G a letter dated 14 October 2019 by the defendant’s lawyers to the plaintiff’s lawyers. The letter attaches a draft estimated bill of costs of the defendant of the proceeding. It was prepared on the basis, that is, starting from preparation for trial right through to taxation of bill of costs, on the premise that the matter was trialed and dismissed. The defendant estimated its party/party cost at K332, 449.70.
27. The plaintiff submits that if the Court is minded to grant security for costs, than it should be far less than the estimate that is provided by the defendant.
28. To set a figure for security is discretionary. I refer to the case Reynolds v. Walcott [1985] PNGLR 316. The Court therein set the security for costs by about two thirds of the estimated party/party costs. I could do the same here. However, for this case, I am inclined to order security for costs by half or less than what is estimated by the defendant in its draft party/party bill of costs. I do so considering the fact that it is also possible that the plaintiff may succeed in the end. I note that I should be mindful or considerate not to impose a sum that may be regarded as impeding the plaintiff in progressing the matter to trial. I also take into account the foreseeable and unforeseeable circumstances that may arise during course of the proceeding. Finally, I also note the lack of evidence demonstrated by the plaintiff to show that it is financial sound or that it has assets that are more than sufficient to meet legal costs that may arise in the proceeding. On that note, I will set security for costs in the sum of K150, 000, which is below half of the defendant’s estimated bill of costs. I will order for the said sum to be paid into the National Court Trust Account to be held pending the outcome of the proceeding. I will also order that the proceeding shall be stayed until the said sum is paid in full.
SUMMARY
29. In summary, I will refuse the plaintiff’s notice of motion filed on 11 March 2020. And I will grant the defendant’s notice of motion filed on 26 November 2019 with variations in relation to the sum that has been sought as security for costs, and replace that with the reduced sum awarded which is K150, 000.
COST
30. An award of cost to be made for the 2 applications is discretionary. I will award cost to follow the event. In this case, I will order the plaintiff to pay the defendant’s costs in relation to both applications, on a party/party basis to be taxed if not agreed.
THE ORDERS OF THE COURT
31. I will make the following orders:
(i) Pursuant to Order 14 Rule 25(1)(a) and 26 of the National Court Rules, the Plaintiff, a company registered in Hong Kong and ordinarily resident outside of Papua New Guinea, provide security for costs in the sum of PGK150, 000, and that the claim by the Plaintiff is stayed until the security is given.
(ii) The security for cost shall be paid into the National Court Trust Account to be held pending the final determination of the matter or until further order from the Court.
The Court orders accordingly.
_______________________________________________________________
Corrs Chambers Westgarth: Lawyers for Plaintiff
O’Briens: Lawyers for the Defendant
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