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Toea Homes Ltd v Cardno (PNG) Ltd [2022] PGNC 305; N9807 (4 August 2022)

N9807

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 851 OF 2017 (COMM)

BETWEEN:
TOEA HOMES LTD
Plaintiff/Cross Defendant to Firs Cross-Claim

-V-

CARDNO (PNG) LIMITED
Defendant/First Cross Claimant/Second Cross-Claimant

AND:
CHINA RAILWAY CONSTRUCTION ENGINEERING (PNG) LIMITED
Cross Defendant to Second Cross-Claim

Waigani: Anis J
2022: 1^st & 4^th August

NOTICE OF MOTION – application to refer matter to mediation – Rule 4(2)(c) and Rule 5(2) of the Rules Relating to the Accreditation, Regulation and Conduct of Mediators – whether the matter should be referred to mediation to be conducted by an accredited external mediator- considerations – Rules 4(2) and 5(2) & (3)(a)(b)(f) and (i) considered – whether referral should be voluntary – whether the court was better assisted to refer matter to mediation

Case Cited:

Ruben Kandiu v. Isaiah Kumbi (2021) SC2160

Counsel:

M.Tusais, for the Plaintiff/First Cross-Defendant
E. Heagi, for the Second Cross-Defendant

RULING

4^th August, 2022

1. ANIS J: I heard the second cross-defendant’s notice of motion which was filed on 3 March 2022 (NoM), on 1 August 2022, and reserved my ruling to today at 1:30pm.

2. This is my ruling.

BACKGROUND

3. The plaintiff claims damages based on breach of contract and negligence, against the defendant, that is, in drawing civil engineering designs for a housing project called Defence Force Housing Scheme Project at Taurama, NCD (the project). Cross and counter claims have also been filed and as a result the second cross defendant, which is applicant herein, has been added as a party to the proceeding.

APPLICATION

4. The NoM of the second cross-defendant seeks to, and I will paraphrase, refer the matter to mediation to be conducted by an external mediator. The NoM is made pursuant to Rule 4(2)(c) and Rule 5(2) of the Rules Relating to the Accreditation, Regulation and Conduct of Mediators (ADR Rules).

5. The sources of the NoM were not disputed. For clarity, Rule 4(2)(c) and 5(2) read:

4. Exhaustion of or Dispensation with Mediation.

......

(2) Subject to Subrules (3) and (4) on the hearing of an application for leave, the Court may make any one or more of the following orders:

......

(c) that the matter be mediated and a mediator appointed in accordance with Rules 5 and 6 respectively.

......

5. Ordering Mediation

......

(2) The Court shall on the request of all parties to a proceeding or on the application of any party to a proceeding or on its own motion order mediation for

(a) a resolution of all or any parts of the proceedings; or

(b) failing settlement, identify and limit the real and meritorious issues in the proceedings that warrant judicial consideration and determination; and or

(c) enable the parties to reach consensus on the conduct of litigation.

6. I do not find Rule 4(2)(c) relevant for this purpose. The rule, in my view, may be invoked at the time when the Court is hearing of an application for leave, that is, leave to dispense with mediation and to proceed to a hearing. In the present matter, the second cross-defendant’s NoM is requesting referral of the matter to mediation, thus, the applicable source, in my view, is Rule 5(2) of the ADR Rules.

7. With that clarity, let me address the merit of the NoM.

REQUIREMENTS FOR MEDIATION

8. The wording of Rule 5(2) of the ADR Rules appears as mandatory. If an application is made by one of the parties like in the present case, the Court shall order mediation based on one or more of the 3 options that are stated under subrule 2.

9. But before ordering mediation, Rule 5(3) states that the Court shall have regard to the following factors, and it lists 9 factors in total. It appears, in my view, that subrules (2) and (3) may be in conflict with each other, or perhaps not. Let me elaborate. Subrule (2) states that once a request is made, or an application is made by a party, or the Court decides on its own volition, that the matter should be mediated, that would be that, and the matter shall be referred to for mediation following the 3 options under subrule (2). But then, we have subrule (3). Subrule (3) appears to say that the Court still has the discretion to consider whether the matter should be mediated or not, and it sets out the 9 factors where the Court must first consider. Rule 5(3) reads:

(3) At the time of considering whether or not to order mediation, the Court shall have regard to the following factors:

(a) whether the mediation will result in prejudice to the rights of any of the parties;

(b) whether it is reasonably within the ability and the power of a party to comply with an order for mediation having regard to matters such as any urgency in the proceedings, costs, multiplicity of parties or lack of resources;

(c) whether the mediation will require substantial work which could be better directed to preparation for trial;

(d) the nature of the relief sought and the suitability of a mediation result;

(e) the timing of the mediation including by reference to the status of the pleadings, discovery and the alternatives of when trial is likely and the length and costs of trial;

(f) the attitude of the parties to mediation though not significant;

(g) whether mediation was earlier attempted and whether any good purpose will be served by an order for further mediation;

(h) the appropriateness of deferring any final decision on a application for orders for mediation; and

(i) what the interest of justice in the particular circumstances of the case require.

10. I will proceed on the basis as required under Rule 5(3). In so doing, I will say this. I have considered the 9 factors which are stated therein. What stood out as relevant to the present matter which I find should require more detail considerations, are factors (a), (b), (f) and (i).

CONSIDERATION

11. In regard to factors (a), (b), and (f), I make these observations. The defendant/cross-claimant was not presented at the hearing of the NoM. It was not disputed that its lawyers had ceased to act for it on 7 June of 2022. I was, however, satisfied that the defendant had been served with and notified of the second cross-defendant’s NoM thus allowed the hearing to proceed.

12. So, what I have before me essentially is a request by the third party to the proceeding (i.e., the second cross-defendant who is defending the crossclaims filed by the defendant) that the matter should be referred to mediation. The plaintiff, however, opposes mediation and contests the NoM. I observe that the plaintiff’s claim as pleaded, is confined to the defendant and not against the second cross-defendant. And so, I ask myself this. Should I order mediation under these circumstances?

13. Firstly, I observe that the issues appear complex in general as acknowledged by both counsel. I prefer not to discuss them now in any detail including the complex nature of the claims and crossclaims. Moving on, if I am to order mediation, I would require guidance, particularly from the principal parties which are the plaintiff and the defendant. The plaintiff, in this case, says it is unwilling to agree to a mediation. It submits, amongst others, that given the complex nature of the matter, and of the lack of interest shown by the defendant, that the matter should progress to trial. The defendant, on the other hand, is not present to also assist including stating its position on whether the matter should be referred for mediation. Mediation, I note, can also prove to be a very expensive exercise as well, particularly in complex matters. Courts should also be made wary of that fact or risk when determining whether to exercise its discretion. For example, in the present matter, in addition to its complexity, not every party is in agreement to the proposition that the matter should be mediated, thus if I proceed and issue an order for mediation, I will do so blindly or without any knowledge of whether the defendant will approve of it and also whether it would be able to comply or meet the preconditions that may be set; or whether it may be able to afford the costs that would be involved.

14. I observe that the second cross-defendant has not filed any affidavit of its own to explain why it says the matter should be mediated or that mediation would be a better outcome for this case for the parties, and with stated supportive reasons. The affidavit in support of Ms Heagi, who is counsel for the second cross-defendant, in my view, is insufficient. Counsel simply states that her firm has received instructions from the second cross-defendant to refer the matter to mediation. The said instruction was the basis for filing the NoM. However, and as stated, there is no further explanation or supportive affidavits provided by the second cross-defendant.

15. In any intended mediation, it is vital that the parties themselves must or should consent to it. It may be a pointless effort or option to take, if there are disagreements amongst the parties that mediation should occur. A court ordered or sanctioned mediation, cannot guarantee a successful outcome. Secondly, I do not think that “public interest” requires or demands that courts should impose mediation on the parties against their will. The Supreme Court in Ruben Kandiu v. Isaiah Kumbi (2021) SC2160 has expressed similar remarks. At para 21, it states:

21. We will end our decision with these general remarks. It is not the role of the National Court or any Court, to impose upon any party or parties to settle on a dispute or matter that has been filed that is properly before the Court for hearing. And settlement proposal or attempts should always remain voluntary. It must come primarily from the parties themselves to the dispute. And if a party refuses to settle, that should be within his or her prerogative to do so, and the matter should be trialed on its merit regardless of what chances he or she may be perceived to have in the matter. Notwithstanding what we have said above, we wish to also restate here that a self-executing order remains a valuable remedy that may be sought or issued against a litigant who repeatedly fails to comply with procedural rules or orders of court.

(Underlining mine)

16. In the present matter and taking into account its circumstance, it is possible that the plaintiff and the defendant may be prejudiced if I am minded to order mediation. Secondly, I do not have sufficient information from the defendant including its ability to comply with any referral or mediation orders that may be ordered. I also do not have these information from the plaintiff and the second cross-defendant. Thirdly, I take into account the attitudes of the parties. In this case, the plaintiff prefers to go to a trial rather than for the matter to be mediated. If I am to insist upon the plaintiff to justify its reasons, that to me would amount to the Court imposing or attempting to impose mediation upon a party which I think is simply plain wrong. Fourthly, I do not have any relevant evidence adduced by the second cross-defendant stating its reasons or justifying why the matter should be referred for mediation for the benefit of the parties, or evidence stating the reasons that mediation is the better option for the parties under the present circumstance of the matter.

17. I therefore find the 3 factors not satisfactorily established to my satisfaction.

18. I turn to the factor, interest of justice. In my view, I will simply say this. Interest of justice always prefers amicable resolutions of civil or commercial disputes that may arise and for court processes to be avoided or be regarded as last resorts. On the same token, it (i.e., interest of justice) also requires that any intended mediation must be made in good-faith or will of the parties themselves. Although I find the former understanding of interest of justice to favour the second cross-defendant, I cannot say the same in regard to the latter. Here, we have a situation where only one party is willing to go for mediation, and I am unassisted with relevant or sufficient information to make an informed decision on whether the matter should be referred for mediation.

SUMMARY

19. In the end, I am reluctant to exercise my discretion to grant the NoM, at least, not at this present time, and I refuse to do so for the stated reasons.

REMARK

20. I note the parties’ submissions in regard to Rule 5(2) of the ADR Rules and on the question of which party shall have the burden of proof. I find the arguments misconceived. I have stated the purpose of the said rule above in my decision. The use of the term the Court shall does not impose any burden on any party that is opposing mediation of a matter. It rather simply obligates the Court to order mediation, but before so doing, that it must first consider the factors that are stipulated under Rule 5(3). Thus, if a party is requesting a matter to be mediated, it should provide its reasons for consideration by the Court. But I think the requirements under Rule 5(3) requires a collective effort and assistance by the parties to the Court, that is, to provide guidance so that the Court can see that there is indeed a clear or rational pathway for mediation thus be in a better position to make appropriate orders. I also do not think that the idea behind Rule 5(2) is to permit a party a leeway to simply invoke it and then ‘pass the buck’ of justifying why the matter should be mediated, to another unsuspecting party or to a party who does not wish for the matter to be mediated.

COST

21. An order for cost herein is discretionary. I will order cost of the application to follow the event, that is, on a party/party basis to be taxed if not agreed.

ORDERS OF THE COURT:

22. I make the following orders:

1. The second cross-defendant’s notice of motion filed on 3 March 2022 is dismissed.
   
2. The second cross-defendant shall pay the plaintiff/first cross-defendant’s costs of the application on a party/party basis which may be taxed if not agreed.
   
3. Time for entry of these orders is abridged to the date and time of settlement by the Registrar of the National Court which shall take place forthwith.
   

The Court orders accordingly

________________________________________________________________
Dentons Lawyers Lawyer for the Plaintiff/First Cross-Defendant
Ashurst Lawyers: Lawyer for the Second Cross Respondent