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Yaki v Finance Corporation Ltd [2021] PGNC 348; N9190 (10 September 2021)

N9190


PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]


OS NO. 488 OF 2018


BETWEEN:
JOHN MONI YAKI, in his capacity as a Managing Director of the Second Plaintiff
First Plaintiff


AND:
JAAYBEEWILLS TRANS INTERNATIONAL LIMITED (IN RECEIVERSHIP)
Second Plaintiff


AND:
FINANCE CORPORATION LIMITED
First Defendant


AND:
STEPHEN BEACH – RECEIVER/CONTROLLER APPOINTED
Second Defendant


AND:
PRICE WATERHOUSE COOPERS
Third Defendant


Lae: Dowa J
2021: 30th August & 10th September


PRACTICE AND PROCEDURE – application by defendant to dismiss proceedings – grounds of - Plaintiff’s proceedings has no reasonable cause of action, being frivolous and vexatious, cannot be sustained or even allowed to proceed to trial – on the basis of defence of res judicata, whether defence of res judicata made out, consideration of principles of res judicata- whether the pleadings fail to disclose a reasonable cause of action, whether proceedings are so frivolous or vexations, that it is untenable – consideration of – plaintiffs proceedings cannot be sustained, plaintiffs have no reasonable cause of action – proceedings dismissed


Cases Cited:


AGC (Pacific) Ltd v Sir Albert Kipalan (2000) N1944

Kundu Consultants Ltd v The State (2001) N2128 and

Mt Hagen Urban Local Level Government v Sek No.15 SC1007
National Provident Fund vs. Maladina & Others (2003) N2486

National Airline Commission v Lysenko [1990] PNGLR 266
PNG Forest Products vs. State [1992] PNGLR 85
Ronny Wabia vs. BP Exploration Co. Ltd [1998] PNGLR 8
Titi Christian v Rabbie Namaliu (1995), Unreported, Un-numbered Supreme Court Judgment in OS No. 2 of 1995
Telikom PNG Ltd v ICCC (2008) SC906
Wabia vs. BP Petroleum (2019) N4337

Wambunawa Holdings Ltd. vs. ANZ Bank (2020) N8310


Counsel:


W. Kume, for the Plaintiffs
K. Pato, for the First Defendant

RULING

10th September, 2021


1. DOWA J: This is a ruling on an application by the First Defendant seeking dismissal of the proceedings under Order 12 Rule 40(1) of the National Court Rules.


2. By way of Notice of Motion, the First Defendant seeks the following orders:


”1. Pursuant to Order 12 Rule 40(1)(a), (b), (c) of the National Court Rules, the proceeding be dismissed.


(a) For disclosing no reasonable cause of action; or
(b) For being frivolous or vexatious; and/or
(c) For been filed in abuse of process of the Court.
  1. The Respondents/Plaintiffs’ pay the Respondent/First Defendant’s costs of and incidental to his proceeding which if not agreed to be taxed.
  2. In the alternative or dependent on the outcome sought under paragraph I herein and pursuant to Order 12 Rule 1, Rule 8(4), Order 1 Rule 15(1)(2) of the National Court Rules and Section 155(4) of the Constitution Court Orders made on 2nd August 2021 be varied in terms of Orders 2, 4 and 4 as recorded in the court file endorsement notes.
  3. Such further orders this Honourable Court deems fit.
  4. The orders be abridged to the date of settlement by the Registrar which shall take place forthwith.”

BACKGROUND FACTS


3. The First Plaintiff is the Managing Director and owner of the Second Plaintiff. The First Defendant is a finance company. In May 2013 the Plaintiffs obtained several loans for its trucking business and to refinance its previous loan with ANZ Bank. The Plaintiffs allege, they have paid in full the loans by September 2017. (The First Defendant on the other hand disputes this and allege the Plaintiffs have defaulted and owe the First Defendant more than three (3) million kina in outstanding loan).


4. The Plaintiffs allege further that as they have repaid the loan, the First Defendant failed to discharge the various mortgages and charges over the Plaintiffs’ property and assets.


5. The Plaintiffs seek amongst other orders, the following reliefs:


  1. a declaration that the loans with the First Defendant have been paid in full.
  2. a discharge of the mortgages and various security charges over the assets of the First and Second Plaintiff.
  1. reinstate the Second Plaintiff from receivership.

d) damages for breach of duties.


The First Defendant’s Application


6. The First Defendant applies for the dismissal of the proceedings based on the common law principle of res judicata. The facts forming the basis of the application are set out in the Affidavits of Jessy Biar sworn and filed 18th August 2020 and Kent Pato sworn and filed 30th July 2021, and Adam Hughes sworn and filed 16th August 2018.


Proceedings in OS 554 of 2018


7. The summary of the facts is this. The first defendant alleges, contrary to the claims by the Plaintiffs in this proceeding, they (the Plaintiffs) owe the first defendant substantial amount in outstanding loan arrears. The First Defendant therefore commenced recovery proceedings in OS 554 of 2018 at the Waigani National Court against the First and the Second Plaintiffs. In that proceeding the first defendant sought orders for declaration of the outstanding loan and for delivery up of possession of the mortgaged property and assets and other consequential orders. The first defendants proceeding run parallel to the Plaintiffs’ proceeding in Lae.


8. On 17th July 2019, the National Court in Waigani entered summary judgment for the First Defendant. A summary of the terms of the orders of 17th July 2019 are:


  1. Judgment of K3,491,456.06 in favour of the First Defendant.
  2. An order against the Plaintiffs to give up vacant possession of property described as Allotment 08 Section 76, Lae, Morobe Province to the First Defendant.
  1. Leave to the First Defendant to issue a Writ for possession and for the foreclosure on the mortgaged property.
  1. Orders for the Plaintiffs to give up possession of the vehicles particularly described in the various chattel mortgages.
  2. Other consequential orders.

9. The Plaintiffs sought leave to appeal the decision to the Supreme Court in proceedings SCA No. 104 of 2019. On 12th August 2021, the Supreme Court refused to grant leave to the Plaintiff to appeal.


Submissions of Counsel


10. Mr Pato, counsel for the First Defendant submits that the issues before this Court have been effectively dealt with in the proceedings OS554/2018, and therefore the current proceeding is a duplication and an abuse of the process. Mr Pato submits that the parties in both matters are the same. The issues in both matters are the same. The decision of the Court given 17th July 2019 extinguished the foundation of the claim. A Court of competent jurisdiction has made the first decision, which remains effective and unchallenged. Mr Pato submits that the Plaintiffs be stopped from pursuing the current matter.


11. Mr Kume, counsel for the Plaintiffs oppose the application and submits the following:


  1. The cause of action in the current proceeding is different from the matter in OS No. 554 of 2018. The proceedings are not just for the loan but also for unfair business practice and for breach of fiduciary duties.
  2. The decision in the National Court Waigani in OS 554/2018 is not final, as they intend to appeal the decision to the full bench of the Supreme Court.
  1. It is not a clear case for summary dismissal under Order 12 Rule 40(1) of the National Court Rules.

Law


12. The relevant rule of the National Court Rules is Order 12 Rule 40(1) which reads:

“40. Frivolity, etc. (13/5)

(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings.

(a)no reasonable cause of action is disclosed; or

(b) the proceedings are frivolous or vexatious; or

(c) the proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.”

13. The law on Order 12 Rule 40 of the National Court Rules is well settled in the Supreme Court in Mt Hagen Urban Local Level Government v Sek No.15 SC 1007 at paragraphs 27-30:

“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 Otheres 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. Phillip Stagg, Valentine Kambori & The State (2006) N3050; Phillip Takori & Others v. Simon Yagari & 2 Others (2008) SC 905. These cases say the same thing.


  1. 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 Phillip Takori’s case (supra).
  2. 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:
  3. 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.”

14. However, the Court cannot readily dismiss a case on poor pleading or for lack of disclosing a reasonable cause of action unless it is shown that the case is clearly frivolous or vexatious or an abuse of the process and that it is unlikely to succeed even if it proceeds to trial. Refer: PNG Forest Products vs. State ( 1992) PNGLR 84–85, Ronny Wabia vs. BP Exploration Co. Ltd (1998) PNGLR 8, Wabia vs. BP Petroleum (2019)) N4337, Mt. Hagen Urban LLG vs. Sek No. 15 (2009) SC1007, National Provident Fund vs. Maladina & Others (2003) N2486; and Wambunawa Holdings Ltd. vs. ANZ Bank (2020) N8310.


15. In Wambunawa Holdings (supra), I restated this position at paragraphs 15 and 16 of my judgment:


“15. In the case, PNG Forest Products vs. State (1992) PNGLR 84-85 the Court adopting some English Court phrases stated that a court be slow and cautious in entertaining applications for dismissal of proceedings on the grounds of a party disclosing no reasonable cause of action. A Plaintiff should not be driven from the judgment seat unless the case is “unarguable” or the cause of action is “obviously and almost incontestably bad, or plainly untenable. In that case, the Court also said the Court has a discretionary power to dismiss if the proceedings are an abuse of the Court process.”


“16. On the other hand, there are other string of cases that developed the principle that, where the case is vexatious or frivolous and that it is unlikely to succeed, the case can be summarily determined. Ronny Wabia vs. BP Exploration Co. Ltd (1998) PNGLR 8, and Wabia vs. BP Petroleum (2009) N4337 and National Provident Fund Board vs. Maladina & Others (2003) N2486.”


16. I will apply these principles in the present case.

Res Judicata
17. The Defendants application is based on the common law principle of res judicata. The Defendant raised the defence of res judicata. The basic principles on the doctrine of res judicata is set out by the common law. They are adopted and applied in the cases Titi Christian v Rabbie Namaliu (1996) SC1583, National Airline Commission v Lysenko [1990] PNGLR 266; AGC (Pacific) Ltd v Sir Albert Kipalan (2000) N1944, Kundu Consultants Ltd v The State (2001) N2128 and Telikom PNG Ltd v ICCC (2008) SC906.


18. Four basic principles emerge from these cases are that, for the defence of res judicata to succeed, a party relying on the doctrine must show:

  1. The parties in both cases are the same.
  2. The issues(s) in both cases are the same.
  3. The previous judgment extinguished the foundation of the claim or the right to set up the action. The result is final and conclusive, and it binds every other Court.

4. A Court of Competent jurisdiction made the first decision.


19. I adopt and apply the principles to the present case.

Reasons for Decision


20. The facts show between May 2013 and June 2017, the Second Plaintiff obtained several loans, guaranteed by the First Plaintiff. The loans were for purchasing of commercial trucks and for refinancing existing loans. In consideration for and as security for the loans, the Plaintiffs offered registered mortgage over their properties, described as Allotment 08 Section 67 Lae, and Allotment 09 Section 174 Lae. The Plaintiffs have also signed chattel Mortgage Agreements and floating charges over the trucks and company assets. Further, the First Plaintiff has also signed personal Guarantees for the loans.


21. Although the Plaintiffs say they have kept up with their loan repayments, and have settled their loan in full, the First Defendant denies the allegations and maintains that the Plaintiffs have defaulted in the loan repayments. After issuing various letters of demand and notices to enter and take possession of the properties, and to dispose of them to recover the outstanding debt, the First Defendant commenced proceedings at the Waigani National Court in proceedings OS 554 of 2018 between Finance Corporation Ltd trading as Fincorp -v- JaayBeeWills International Limited and John Moni Yaki.


22. The First Defendant exercised its right to commence these proceedings pursuant to Section 74 of the Land Registration Act 1981 which provides:

“MORTGAGEE MAY ENTER AND TAKE POSSESSION, ETC.

(1) Where default is made in payment of any secured money, a creditor may–

(a) enter into possession of the mortgaged or charged land by receiving the rents and profits of the land; or

(b) distrain on the occupier or tenant of the land under the power to distrain conferred by Section 75; or

(c) bring an action of ejectment to obtain possession of the land.

(2) The creditor may bring an action under Subsection (1)(c) before or after exercising a remedy–

(a) referred to in this section; or

(b) conferred by Section 68.

(3) A creditor is entitled by action or other proceedings in the Court to foreclose the right of the debtor to redeem the mortgaged or charged land. “


23. On 17th July 2019, the National Court in Waigani entered summary judgment for the First Defendant, in terms as set out in paragraph 7 of this judgment.


24. The Plaintiff sought leave to appeal the decision to the Supreme Court, in proceedings SCA No.104 of 2019 between Jaaybeewill Trans International Limited and John Moni Yaki -v- Finance Corporation Ltd trading as Fincorp. On 12th August 2021, the leave application was refused. The decision of 17th July 2019 therefore remains effective and in force.


25. I compare the proceeding and orders of the Court given on 17th July 2019 in OS 554 of 2018 and the proceeding and reliefs sought in the current proceeding to determine whether the first defendant has made out a defence on res judicta.

The Parties

26. The parties in the proceeding OS 554 of 2018, and the current proceeding OS 488 of 2018 are same. The First and Second Plaintiffs in the current proceeding are the Defendants in the proceedings OS 554 of 2018. The First Defendant, Fincorp is the Plaintiff in that proceeding.

The Issues

27. I note, the issues in the two proceedings are same. The main issue in both proceedings is whether the Plaintiffs in the current proceeding owe Fincorp, the First Defendant, any outstanding loan which entitle the First Defendant to exercise its mortgagee rights under Section 74(1) of the Land Registration Act to foreclose and take vacant possession of the mortgaged land, and for the repossession of Mortgaged trucks to sell them to offset its outstanding loans.

The previous judgment, that is the decision of 17th July 2019, extinguished the foundations of the claim.

28. In the previous proceeding, the Court made a finding that the Plaintiffs defaulted in settling their outstanding loan. The Court thereafter made a judgment of K3,491,456.06 against the Plaintiffs. The Court made further orders against the Plaintiffs to give up possession of the mortgaged property, and for the repossession of all trucks secured under various Chattel Mortgages and security contracts duly signed between the parties. This decision effectively extinguished the foundations of the Plaintiffs’ current claim. The decision in my view is final and conclusive, and it binds every other Court, including this Court.

Court of Competent Jurisdiction made the first decision
29. It is clear, the National Court in Waigani which made the first decision in OS 554 of 2018, had the competence and the jurisdiction to make the orders. Unless this decision is set aside by the Supreme Court, it is effective and binding on all parties.


30. It appears, the Plaintiffs were heard before the decision was made. This is evident from grounds 5.5 to 5.6 of the Application for Leave to Appeal in SCA No.104 of 2021. Grounds 5.5 and 5.6 states and I quote:

“5.5 The trial judge failed to acknowledge of the submission made by the Appellants lawyer of the fact that, there were duplication Court proceedings over the same matter, same issues and same facts, one was initially commenced at Lae National Court on 9th July 2018, entitled OS No. 488 of 2019, John Yaki Moni & Jee Bee Wills Trans International Ltd vs Finance Corporation Limited by the Appellant against the Respondents.

5.6 And a duplicated proceeding was instituted at Waigani National Court on 16th August 2018, entitled OS No.554 of 2019, Finance Corporation vs John Yaki Moni, by Respondents against the Appellants, in which these subject Proceedings came about.

  1. The Lae Court proceedings in which Moni & JaayBeewills Trans International Limited sued Finance Corporation Limited in seeking declaratory orders that, he owes no debts to Fincorp.
  2. The appellants Lae Notice of Discovery to Fincorp to produce bank statement of debts owing. But the Respondents had failed to give Discovery of required documents meaning John Moni Yaki and his company owed no more loan debts to Fincorp as alleged.
  1. The matter at Lae National Court, a trial was conducted in May 2019 before His Honour Justice Numapo and the decision is pending to be delivered.
  1. By the failures to give Discovery of required documents by Respondents in Lae Court Proceedings, the Respondent had foreseen the outcome of Lae Court, therefore, they quickly instituted duplicated Court Proceedings in Waigani over the same matter, same issue and same facts and abuse the Court Procedures in our Jurisdiction. “

31. Clearly, the Plaintiffs acknowledge that this proceeding and the proceeding in OS 554 of 2018 are a duplication involving the same parties and same legal and factual issues.

32. Although the Plaintiffs filed a recent statement of claim, the allegations and reliefs sought are substantially the same.

33. I am of the view that the decision of 17th July 2019 in proceedings OS 554 of 2018 has conclusively determined the issues between the parties raised in this proceeding. The decision has effectively extinguished the foundations of the Plaintiff’s current proceedings. It is not open for this Court to deliberate on these issues again.

Conclusion

34. For reasons given in my judgment, I am satisfied that the first Defendant has successfully established the defence of res judicata. The current proceeding will become a duplication of a proceeding which has been decided between the parties. To maintain the proceeding in the face of a decision which resolved the issues between the parties is an abuse of the Court process. The proceeding, even if allowed to continue, will be untenable and is unlikely to succeed. For these reasons, I am inclined to grant the orders sought by the first defendant.
Orders


  1. The Court orders that:
    1. The Plaintiffs proceeding is dismissed for being frivolous, and for an abuse of the process and for disclosing no reasonable cause of action.
    2. The Plaintiffs’ pay the First Defendant’s costs of and incidental to this proceeding which, if not agreed, to be taxed.

3. Time be abridged
_____________________________________________________________________
George Koare Lawyers: Lawyers for the Plaintiffs

Posman Kua Aisi: Lawyers for the first Defendant

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