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PNG Power Ltd v Paradise Building Supplies Ltd [2022] PGNC 316; N9816 (3 August 2022)

N9816

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 715 OF 2015

BETWEEN
PNG POWER LIMITED
Plaintiff

AND
PARADISE BUILDINGS SUPPLIES LIMITED
First Defendant

AND
HAPPY ENTERPRISES LIMITED
Second Defendant

AND
KR SUPERMARKET
Third Defendant

AND
DAC REAL ESTATE
Fourth Defendant

Waigani: Linge A J
2022: 18^th July

PRACTICE AND PROCEDURES - seeking dismissal of the proceeding - disclosing no reasonable cause of action - claim for fraud and restitution- whether time barred- Fraud and Limitation Act

The first defendant acquired leasehold property, Allotment 1, Section 110, Boroko, Port Moresby on the 31 May 2005. It had been paying land rent as the registered proprietor. On the 30 November 2012 the plaintiff filed an Originating Summons seeking declaration that it is the registered proprietor and Head Lease Holder of said property and thus entitled to receive rent as such and further for the applicant to enter into lease agreement with the plaintiff. On the 11 July 2014 the proceeding was converted to Statement of Claim and Amended Statement of Claim by order of the Court and defendants filed their defence. The plaintiff claims that the Sub Lease was fraudulently obtained by the defendants on the basis that as Head Lease Holder it was never consulted nor consented to the sale and transfer of the lease and seeks restitution and land lease rental. The lease contains an arbitration provision in Clause 3 (b) which requires disputes relating to construction and application to be referred to arbitration.

Held:

1. The first defendant Notice of Motion filed on the 1 July 2022 seeking to dismiss the proceeding is refused.

2. This proceeding will be set down for hearing.

Cases Cited:

Huon Electrical Ltd –v- RD Tuna Canning Ltd (2000) N2005
Kitchepak v Imanau [2014] PGNC 189; N5678
Lavongai Equities Ltd –v- Club 21 Ltd (2009) SC1001
Lakani v Ikupu [2015] PGNC 164; N6067
Mamun Investment Ltd v Nixon Koi [2015] PGSC 409; SC1409
Mond v Okoro [1992] PNGLR 501
Mamun Investment Ltd v Koim [2015] PGSC 9; SC1409
Nodepa Plantation Ltd v Balat [2020] PGSC 25; SC1927
Oil Search Limited v Mineral Resources Development Corporation Limited (2010) SC1022
Tian Chen Limited v The Tower Limited (No. 2) (2003) N2319

Counsel:

Mr K Collin, for the Plaintiff.
Mr S Dewe, for the First Defendant.
Mr R Awalua, for Second Defendant

RULING

3^rd August 2022

1. LINGE A J: My ruling is on an application by the first defendant seeking dismissal of the proceeding in its entirety for disclosing no reasonable cause of action as the plaintiff’s claim for fraud is time barred pursuant to Section 16 of the Fraud and Limitation Act 1988 (“the Act”). Also, the first defendant seeks the Court to order that the entire proceeding is an abuse of process for noncompliance with the arbitration provision in the lease agreement that requires arbitration of disputes arising from the lease.
   
2. The application is filed on the 1 July 2022 pursuant to Order 8 Rule 27 (i)(a) and Order 8 Rule 27 (i) (c) of the (“the Rules”). Counsels appeared for the applicant/ first defendant, second defendant and plaintiff/ respondent.
   

Facts

3. The applicant/first defendant acquired leasehold property, Allotment 1, Section 110, Boroko, Port Moresby on the 31 May 2005 through a contract of sale. It had been paying land rent as the registered proprietor.
   
4. On the 30 November 2012 the plaintiff/respondent filed an Originating Summons seeking declaration that it is the registered proprietor and thus entitled to receive rent as Head Lease Holder and further for the applicant to enter into lease agreement with the plaintiff.
   
5. On the 10 March 2014 the Court ordered the plaintiff to convert the proceeding to a Statement of Claim (SOC) and on the 11 July 2017 plaintiff filed the SOC which was further varied to Amended Statement of Claim and filed on the 21 August 2017. The applicants filed their defence on the 3 October 2017 and 4 October 2017 respectively.
   
6. The plaintiff’s claim in the SOC is that the Sub Lease was fraudulently obtained by the defendants on the basis that as Head Lease Holder it was never consulted nor consented to the sale and transfer of the lease.
   
7. Further, the lease contains an arbitration provision in Clause 3 (b) which requires that any dispute arising from the lease agreement shall be referred to arbitration.
   

This Application

8. First defendant/applicant filed this Notice of Motion on the 15 July 2022. A similar application also filed by the first defendant was struck out by this court on the 2 February 2021.
   

Submissions

For the first defendant/applicant

Disclosing no reasonable cause of action.

9. Mr. Dewe of Counsel for the first defendant submits that pursuant to Order 8 Rule 27 (i) (a) of the Rules the entire proceeding should be dismissed for disclosing no reasonable cause of action.
   
10. Counsel relies exclusively on noncompliance of Section 16 of the Fraud and Limitation Act 1988 (the Act) by the plaintiff as the basis for seeking this order. That is, the claim of fraud against the defendant is time barred by virtue of Section 16 (i) of the Act and this must be dismissed.
    
11. Counsel refers me to several cases which I will consider in my summation in the later part of my ruling. These cases are:
    

(a) Lakani v Ikupu [2015] PGNC 164; N6067;

(b) Mamun Investment Ltd v Koim [2015] PGSC 9; SC 1409;

(c ) Tau Gumu v Papua New Guinea Banking Corporation (2001) N2285;

(d) Nodepa Plantation Ltd v Balat [2020] PGSC 25; SC 1927; and

(e) Oil Search Limited –v- Minerals Resource Development Corporation Limited (2020) SC 1022.

Mond v Okoro [1992] PNGLR 501:

12. Mr Dewe contends that in the Amended Statement of Claim filed on the 21 August 2017, the plaintiff pleads and claims that the defendants had fraudulently obtained their titles.
    
13. He submits that the six (6) years period runs from date of acquisition of Lots 1 and 2 being 6 August 2012 and 31 May 2005 respectively. Thus, the six (6) years’ time frame would have lapsed on the 6 August 2017 and 31 May 2011 respectively and thus the cause of action is time barred by virtue of Section 16 of the Act and must be dismissed.
    

Abuse of process

14. The second limb of the application by the first defendant is made pursuant to Order 8 Rule 27 (i) (c) of the Rules. The first defendant seeks to an order that the entire proceeding is an abuse of process as it was brought before the Court contrary to Clause 3 (b) of the Lease Agreement which requires disputes arising from the lease to be referred to arbitration.

15. Counsel relies on Tian Chan Limited –v- the Tower Limited (No.2), (2003) N2319; Huon Electrical Ltd –v- RD Tuna Canning Ltd (2000) N2005; Lavongai Equities Ltd –v- Club 21 Ltd (2009) SC1001. He submits that these cases demonstrate the Courts view that arbitration is available to parties to resolve differences and to give effect to the terms of an agreement.

16. He submits that this proceeding is an abuse of process for not complying with Clause 3 (b) of the sublease agreement that provides for arbitration as a means to settle dispute, before invoking the jurisdiction of the Court.

For the second defendant

17. Mr. Awalua for the second defendant adopts the submission by Counsel for the first defendant/ applicant in relation to the time bar issue and adds that it cannot be considered as an exception to Section 16 of the Frauds and Limitation Act as envisaged in Section 18 of the Fraud and Limitation Act.

18. In respect to the second limb of the application, Counsel submits that the dispute is of a type envisaged by Clause 3(b) of the Lease Agreement. In such a situation, the proper process is to refer the matter to arbitration. It is not proper and an abuse of process for the plaintiff to come to court when the arbitration process has not been exhausted.

Submission for the plaintiff/respondent

19. Mr. Koi for the plaintiff submits that this case must not be driven from the judgment seat. The Court should be cautious in dismissing the case.

20. He further submits that the case falls into the category of cases contemplated in the exception contained in Section 18 of the Frauds and Limitation Act. The case is one of restitution which is an equitable relief and therefore an exception by virtue of Section 18.

21. Counsel also submits that fraud and restitution are properly pleaded in the Amended Statement of Claim and must be allowed to full hearing. On the other hand, the applicant had denied the existence of a lease agreement with the plaintiff.

22. Counsel also submits that the applicant had not pleaded the orders he now seeks and must be precluded from seeking and cannot be entitled to the orders he seeks.

The Law

23. The legal principles embodied in Order 8 Rule 27 (1) (a) of the National Court Rules (Rules) provides for a striking out of a pleading where it discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading. It reads: “Where a pleading –

(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading

(b)...

(c)...

the Court may at any stage of the proceedings, on terms or otherwise, order that the whole or any part of the pleading be struck out.”

24. There is plethora of case law in this jurisdiction that have made judicial pronouncements on what an application made under Order 8 Rule 27 (1) (a) of the Rules must contain. Injia and Lay, Papua New Guinea Civil Procedure in the National Court, at page 144 summarized the principles as:

“(1) If it is plain and obvious that the statement of claim, even if proved, will not entitle the plaintiff to what he is asking for, it is appropriate to strike out the proceedings on the ground that no reasonable cause of action is disclosed. But the procedure should be confined to cases where the cause of action is obviously and most incontestably bad. The plaintiff should not be driven from the judgment seat unless the case is unarguable. (PNG Forest Products Pty Ltd v The State [1992] PNGLR 85, Sheehan J.

(2) If the statement of claim is so ambiguous or lacking in particularity that it does not facilitate orderly and rational pleadings, which would enable the real issues to be identified, it should be struck out. (Irafawe v Ryong (1996) N1915, Kirriwom J)

(3) If the statement of claim just leaves a defendant guessing as to what the plaintiff’s allegations are, it should be struck out. (Laki v Alaluku (2002) N2001, Sevua J).

(4) The originating process for example the writ of summons and statement of claim – must demonstrate that the plaintiff has a ‘cause of action’. The document must clearly set out:

(5) The legal ingredients or the elements of the claim; and

(6) The facts that support each element of the claim”: Toap v State (2004) 1 PNGLR 191, 206, Cannings J.”

24. The jurisdiction of the Court under O 8 r 27(1) (a) is to ascertain if the pleadings plead an almost incontestably bad cause of action which cannot possibly succeed and cannot be cured by amendment, see PNG Forest Products Pty Ltd and Inchape Berhad v The State (supra).

25. “The phrase ‘cause of action’ has two components. First, there must be a right which is given by a law, such as, entitlement of reasonable damages for breach of human rights under s58 of the Constitution. This is what is referred to as the ‘form of action.’ Secondly, a cause of action is a right which is given by law (the “form of action”) and which should be pleaded disclosing all of the necessary facts which give rise to the form of action: Lowa v Akipe [1992] PNGLR 399 at 429, Kidu CJ, Kapi DCJ, Woods J. Hinchliffe J, Sheehan J.

26. The applicant makes no submission based on any of the principles enumerated in the case laws cited in the foregoing passage. I will defer consideration to later and instead will deal with the submission by the applicant which is based exclusively on the time bar consideration pursuant to Section 16 (1) of the Frauds and Limitation Act 1988.

Section 16 (1) reads:

“(1) Subject to Sections 17 and 18, an action –

(a) That is founded on simple contract or on tort”

(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 of forfeiture, shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued.”[my underling]

27. The application of Section 16 (1) is subject to Section 18 of the Frauds and Limitation Act provides exceptions where a claim is one of specific performance of a contract or seeking injunctive or other equitable relief. I will consider this aspect later.

26. Section 16 (1) is applicable where the cause of action is founded on simple contract or on tort. In Mamun Investment Limited v Nixon Koi (2015), PGSC 9; SC14O9 the Supreme Court, found that the action was based on simple contract and tort (fraud) and went on to consider the matter of accrual date of the transfer of the title.

27. This ruling was followed in Lakani v Ikupu [2015] PGNC 164; N6067, wherein the Court held where the cause of action is based on fraud, it shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued. Also, in TSC Industries Ltd v Koim (2019) N8781, the Court stated in part at paragraph 20 that:

“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...” See also Nodepa Plantation Ltd v Balat [2020] PGSC 25; SC 1927

28. In Oil Search Ltd v Mineral Resource Development Corporation Ltd (2010) SC1022 the Supreme Court held amongst others that the determination of whether an action is time barred entails a finding of three (3) matters:

(a) Identification of the cause of action, (b) identification of the date on which the cause of action accrued and (c) the categorization of the cause of action.

29. The Supreme Court further held:

“23 If a claim is clearly time barred and provided the statutory defence is pleaded in defence, a motion for dismissal is warranted and it would-be quite appropriate for the National Court to hear and determine it. Where, however, the case for dismissal is not clear cut, the decision-making process of first identifying the cause of action, identifying the date on which the cause of action arose and deciding the question of whether the cause of action is founded on simple contract or is an action upon a speciality ...”

30. This case is not one of simple contract. As pleaded in the Amended Statement of Claim filed on the 21 August 2017 the plaintiff pleads fraud and the equitable relief of restitution of proprietary rights over lots 1-5. Plaintiff further claims the defendants are estopped from disputing the plaintiff’s title.

31. In my view the statutory time barred considerations do not apply here because of the clear intent of Section 18 of the Frauds and Limitation Act which provide exceptions where a claim is one of specific performance of a contract or seeking injunctive or other equitable relief.

Section 18, Frauds and Limitation Act 1988 reads:

“Section 16 does not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief”

34. While not specifically mentioned, restitution as a relief is by description encompassed in “...other equitable relief.” Restitution is an equitable relief in the same class as injunction and specific performance. It restores to one party what he/she gave to the other.

35. The plaintiff pleads this relief in the Amended statement of claim, to restore the benefit (title) given to other parties and ultimately to the first and second defendants. The plaintiff as the injured party is thus seeking restitution of its title and to be paid sublease rental in respect thereof. Thus, as it is clearly a relief in the context of Section 18 of the Frauds and Limitation Act, it bars the application of Section16 (1) of the Frauds and Limitation Act.

36, The second limb in this application is founded on Order 8 Rule 27 (1)(c) of the National Court Rules which reads:

“Where a pleading –
(a) ...; or
(b) ...; or
(c) is otherwise an abuse of the process of the Court

the Court may at any stage of the proceedings, on terms or otherwise, order that the whole or any part of the pleading be struck out.”

37. The procedure is used to determine whether the process of the court has not been used bona fide and properly. It connotes the use of judicial process by a party in an improper way.

38. An example of this sort of abuse of the process of the court is Cal Exports Ltd v Camp Administration Ltd (2009) SC1050, where the Supreme Court held that an application can be made under this rule to stay a petition presented under the Companies Act, before the company is put into liquidation, to prevent an abuse of process of the Court.

39. The first defendant/applicant is submitting that it is an abuse of process for not referring the dispute to arbitration as required by Clause 3 (b) of the sublease agreement but instead to invoke the jurisdiction of the Court.

40. Clause 3(b) of the Lease Agreement reads, “In the event of any dispute arising hereunder touching this lease or the construction or application thereof the matter shall be referred to arbitration in accordance with the provisions of the Arbitration Act 1951 or any statutory modification thereof for the time being in force.” [my underlining]

41. Counsels have not submitted whether the cause of action and in particular the pleading in the Amended SOC relating to fraud and restitution are matters properly to be arbitrated upon. Are these simply disputes “touching this lease or the construction or application” or are they substantial legal questions for judicial consideration. My view is that these are issues which fall outside the intent of the arbitration clause and are properly for the court to deliberate upon.

42. The pleading rules guide the Courts when it sits to determine each case. In Kitchepak v Imanau [2014] PGNC 189; N5678 it states that each case must be determined in accordance with the law of pleadings: the parties are confined to bringing evidence and asserting arguments that are raised in a statement of claim (in the case of the plaintiff) or a defence (in the case of the defendants). Sakora AJ, as he then was, made this clear in Mond v Okoro [1992] PNGLR 501:

“The purpose of pleadings in civil actions is to ensure that the scope of the dispute between the parties is defined with some precision. Every party is thereby made aware of the case to be made by his opponent, and his preparation for the trial can be directed to the actual controversy. They are intended to inform each party of the case he will have to meet at the trial, and to inform the court of the issues for adjudication. And pleadings require the parties to plead facts in support of a claim of defence. Facts must be specifically alleged so that the opposite party is not surprised. Certain rules of pleadings such as notices and time limits come into play also to ensure parties do not attempt” trial by ambush”.

40. This principle has been reinforced by numerous decisions of the Supreme Court, including Cresseri v Halla Resources Corporation [1985] PNGLR 294, MVIT v Pupune [1993] PNGLR 370, MVIT v Etape [1994] PNGLR 596, MVIT v Waige [1995] PNGLR 202, PNGBC v Tole (2002) SC694, Raim v Korua (2010) SC1062 and Pundari v Niolam (2011) SC1123.

Conclusion

41. The application made pursuant to Order 8 Rule 27 (1)(a) and Order 8 Rule 27 (1) (c) of the National Court Rules seeking dismissal of the proceeding in its entirety for disclosing no reasonable cause of action for breach of Section 16 (1) of Frauds and Limitation Act 1988, and as an abuse of process for failure to subscribe to the arbitration clause 3 (b), it is my view that the application is misconceived.

42. The proper relief the Court can grant is to strike out application under this Rule. Counsels for the first defendant nor for the second defendants have not submitted to me any reason why I should dispense with the clear intent of the Rule.

43. I find that this case covers title, sub leases and is intertwined with proper pleadings in fraud and restitution and thus deserve proper treatment in a trial.

43. Therefore, in the exercise of my inherent and judicial power under Sections 155 and 168 of the Constitution and for dispensation of justice I will defer the matter for trial of the cause of action.

Order

44. The Court’s formal orders are:

1. The first defendant’s Notice of Motion filed on the 1 July 2022 is refused.

2. The cause of action will be set down for listing.

3. First defendant to pay cost of this application.

4. Time is abridged.

I order accordingly
_______________________________________________________________
In-house Lawyer – PNG Power: Lawyers for the Plaintiff
Jema Lawyers: Lawyers for the First Defendant
Awalua & Associates: Lawyers for the Second Defendant