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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO. 545 OF 2019
BETWEEN:
SEETO KUI (HOLDINGS) LIMITED trading as MAINLAND PLUMBING & HARDWARE
-Plaintiff-
AND:
MATHIAS HORN
-Defendant-
Lae: Dowa J
2022: 4th March & 2nd December
PRACTICE AND PROCEDURE – application by defendant to dismiss proceedings – grounds of – whether Plaintiffs proceeding is an abuse of the process for duplicity- and for being statute barred under section 16 of Frauds & Limitation Act- consideration of – plaintiff’s proceedings cannot be sustained as it is an abuse of the process and become statute barred– proceedings dismissed
Cases Cited:
Mt Hagen Urban Local Level Government v Sek No.15 (2009) SC1007
PNG Forest Products v State [1992] PNGLR 85
Michael Wilson v Clement Kuburam (2016) SC1489
Counsel:
J. Kais, for the Plaintiff
T. Dawidi, for the Defendant
RULING
2nd December, 2022
1. DOWA J: This is a decision on two competing applications by the parties.
Plaintiff’s Application
2. The Plaintiff seeks summary judgement pursuant Order 12 Rule 38 of the National Court Rules.
Defendant’s Application
3. The Defendant seeks dismissal of proceedings for disclosing no reasonable cause of action, frivolity, and abuse of process pursuant to Order 12 Rule 40 (1) of the National Court Rules.
4. I will deal with the defendant’s application first. If the application is successful, that will be the end of the proceedings.
Background Facts
5. In December 2001, the Plaintiff entered into a Credit Agreement with the Buka Metal Fabricators Ltd and under this agreement, the Buka Metal Fabricators would order and receive various goods on credit from the Plaintiff. The Defendant, Mathias Horn, executed a personal guarantee on the credit agreement for Buka Metal Fabricators. Between 2009 and 2010, Buka Metal received goods to the total value of K137,674.75 and thereafter defaulted in repaying the debt.
6. The Plaintiff commenced recovery proceedings in WS No. 567 of 2016 – Seeto Kui (Holdings) Ltd vs Buka Metal Fabricators Ltd. On 19th April 2018, the Plaintiff obtained Judgment for K137,674.75 with interest to be calculated from the date of default, that is, 28th July 2020. Buka Metal Fabricators settled the principal judgment debt of K137,674.75 on 19th July 2017, but did not settle the interest component.
7. On 13th May 2019, the Plaintiff instituted the current proceedings in WS No. 545 of 2019, against Buka Metal Fabricators Ltd as first defendant and Mathias Horn as second defendant, claiming K187,951.16 for the interest on the principal debt. On 19th August 2019, the Plaintiff, filed an amended Writ of Summons removing the First Defendant, Buka Metal Fabricators, as a party, resulting in Mathias Horn being the sole Defendant.
Issue
8. The issue for consideration is whether the Plaintiff’s proceeding should be dismissed for being frivolous, vexatious and an abuse of the process.
Law
9. The relevant rule is Order 12 Rule 40(1) of the National Court Rules 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.”
10. 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 (2009) SC1007 where the Court stated in 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.
11. A Plaintiff’s case should not be prematurely terminated unless it is untenable. In the case, PNG Forest Products v State (1992) PNG LR84-85 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.
12. In my view, the purpose of Order 12 Rule 40 (1) of the National Court Rules is to provide for summary determination of the Plaintiff’s proceedings where it is plain and clear based on the pleadings that no triable cause of action is disclosed or where some common and proven facts show that the proceedings will not succeed if it proceeds to trial. It is in the interest of all parties to terminate the proceedings early to avoid cost of a prolonged and winding litigation.
Submissions of Counsel
In respect of the abuse of the process, the Defendant submits that the Plaintiff has improperly instituted two proceedings for the same cause of action, seeking the same reliefs involving the same parties which is an abuse of the process. The defendant submits that the plaintiff failed to include the current defendant, Mathias Horn, in the earlier proceedings to avoid duplicity of proceedings especially where the principal judgment debt has been settled.
14. The counsel for the Plaintiff opposes the application and submits that the previous proceedings were against Buka Metal Fabricators Ltd only and not Mathias Horn and that the current Defendant, Mathias Horn, is personally liable for the guarantee he signed in December 2001 and the Plaintiff is at liberty to institute the current proceedings by virtue of section 6 of the Frauds and Limitation Act.
Consideration
15. The facts forming the basis of the defendant’s application are not disputed. The Plaintiffs credit agreement with the first defendant, Buka Metal Fabricators, was signed on 13th December 2001. The Second Defendant, Mathias Horn, was the guarantor. The Defendants defaulted in repaying the debt in 2010. In the first proceedings, WS No. 567 of 2016, the Plaintiff instituted recovery proceedings against Buka Metal Fabricators Ltd only. Judgment was entered for the Plaintiff in the sum of K137,674.75 with 18% interest dating back to July 2010. Buka Metal Fabricators settled the principal debt of K137,675.75 on 19 July 2017 without the interest component. On 13th May 2019, the Plaintiff commenced the current proceedings against Buka Metal Fabricators as First Defendant and Mathias Horn as Second Defendant, claiming interest on the debt. The Second Defendant, Mathias Horn, filed a Defence on 5th June 2019. On 19th August 2019, the Plaintiff filed an amended Writ of Summons, removing Buka Metal Fabricators as a party, leaving Mathias Horn as the only Defendant.
16. Is the current proceeding against Mathias Horn an abuse of the process? The Defendant, Mathias Horn, was not the principal debtor. He became liable as guarantor under the credit agreement when Buka Metal Fabricators defaulted. The defendant pleaded in his defence that he ceased employment with Buka Metal Fabricators Ltd in 2010. The defendant deposed to this fact in his affidavit as well. However, that is a matter for trial if the proceedings survive this application. For now, it is arguable that the Plaintiff is entitled to institute these proceedings against the defendant for the personal guarantee he signed pursuant to section 6 of the Frauds and Limitation Act. Although the Plaintiff acted on the guarantee in commencing proceedings against the defendant, the second court proceeding appears to be improper and abuse of the court process. The Plaintiff chose to institute the first proceedings against Buka Metal Fabricators only and got judgment for the principal debt and interest at 18% to be calculated from 28th July 2010, the date the cause of action arose. The Plaintiff got the principal judgment debt settled in July 2017. According to the affidavit of Divina Camo, the Credit Controller of the plaintiff company, they learnt that the judgment debtor, Buka Metal Fabricators ceased operations. After realising that it could not recover the interest component from Buka Metal Fabricators, the Plaintiff commenced the current proceedings against the Mathias Horn as guarantor on the interest component of the same debt.
17. I agree with the submissions of the defendant, that the present court proceedings by the Plaintiff against the Mathias Horn for interest on the principal debt amounts to an abuse of process as the Plaintiff is instituting more than one proceeding concerning the same subject matter arising out of the same set of facts and seeking the same relief for which the court has already decided on in WS No. 567 of 2016. There is already an order for the interest component of the claim against Buka Metal fabricators Ltd. The plaintiff did not explain what steps they took to execute the orders they obtained against Buka Metal Fabricators especially the interest component of the claim when they had the opportunity. The Plaintiff failed to include Mathias Horn as a party in the first proceedings so that all issues between the parties could be resolved there and then and once and for all especially when the cause of action took place more than nine (9) years at the time of commencement of these proceedings.
18. In Michael Wilson v Clement Kuburam (2016) SC 1489, the Supreme Court (per Gavara-Nanu J) in discussing the principles applicable in determining the issue of abuse of process said this at paragraph 35 of the judgment:
“35. The above principles in my respectful opinion affirm that the Court can in the exercise of its inherent power consider and determine abuse of process, an issue which both counsel have fully addressed in their respective submissions. In my view, such an approach by the Court is in harmony with the view held in Application by Anderson Agiru (supra), where the Supreme Court stated among other things, that the Court can in the exercise of its inherent power summarily dismiss a proceeding which is an abuse of process. In my respectful opinion, Lord Diplock stated this same principle in Hunters v. Chief Constable of West Midlands Police and Others (supra), which Hartshorn J referred to in NAE Limited (supra). See also; Breckwoldt & Co. (N.G.) Pty v. Gnoyke [1974] PNGLR 106 at 121 per. Prentice J (as he then was) and PNG Forest Products and Inchcape Berhad v. The State & Jack Genia, Minister for Forests [1972] PNGLR 85. The types of abuses of process may vary from case to case but to establish an abuse of process there must be evidence showing that the processes of the court have been improperly used; or have been used for an improper purpose; or have been used in an improper way; or that such abuse of process have resulted in the right of the other party being denied, defeated or prejudiced: National Executive Council v. Public Employees Association [1993] PNGLR 264 and The State v. Peter Painke [1976] PNGLR 210.”.
19. In the present case I find, although the Plaintiff was entitled to issue recovery proceedings against the defendant in the first instance, the processes of the court were abused such that the right or interest of the defendant is prejudiced for reasons given above.
Statute Barr
20. The second leg of the Defendant’s application is that the claim is time barred pursuant to section 16(1) of the Frauds and Limitation Act. Section 16 of the Frauds and Limitation Act reads:
“16 LIMITATION OF ACTIONS IN CONTRACT, TORT, ETC.
(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) An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.
(3) Subject to Subsection (4), an action upon a specialty shall not be brought after the expiration of 12 years commencing on the date when the cause of action accrued.
(4)[1] [2]Nothing contained in Subsection (3) shall be construed as affecting any action for which a period of limitation is specified by any other Act, and that subsection shall be read and construed accordingly.
(5) An action shall not be brought upon any judgment after the expiration of 12 years commencing on the date when the judgement became enforceable.
(6) No arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years commencing on the date when the interest became due.
.......”
21. The Defendant submits that the claim for interest commenced on 28th July 2010 being the date the cause of action arose. The six (6) year period lapsed on 28th July 2016, and the current proceeding filed 13th May 2019 is about three (3) years after the deadline of filing its claim.
22. The Plaintiff submits that the cause of action against the Defendant, Mathias Horn, is based on a guarantee executed in writing and the cause of action commenced on 18th October 2016 when it issued a Notice of Default in accordance with clause 1 of the Credit Agreement.
23. Clause 1 of the Personal Guarantee for Credit executed by Mathias Horn reads:
“1. NOTICE OF DEFAULT
Notice in writing of any default on the part of the Purchaser is to be given by the Vendor to the Guarantor(s) and within fourteen days of its receipt, payment shall be made by the Guarantor(s) of all sums then due and owing under this guarantee”.
24. The plaintiff’s action is based on a credit agreement. The cause of action is for breach of contract. It is a claim for outstanding debt for goods supplied with accrued interest at 18 %. The plaintiff’s claim is in the category of actions that falls within the time limitations set by section 16 of the Frauds and Limitation Act. The cause of action in this case commenced on 28th July 2010, when the defendants defaulted, and the claim became time barred by 28th July 2016. Although the plaintiff argues that the cause of action commenced on 18th October 2016 when the plaintiff issued Notice of Default under section 1 of the Credit Agreement, nothing in this clause, saves the cause of action which is subject to the time limitations under section 16 of the Frauds and Limitation Act. I find the plaintiff’s action was brought after six years from the date of the cause of action and has, therefore, become statute barred.
Conclusion
25. In conclusion, for the reasons given in my findings, I will uphold the defendant’s application and dismiss the Plaintiff’s proceedings.
26. It follows that it is not necessary to consider the plaintiff’s application for summary judgment.
Costs
27. The defendant has succeeded in his application. He is entitled to the costs of the proceedings.
Orders
28. The court orders that:
_____________________________________________________________________
Huon Lawyers: Lawyers for the Plaintiff
Pacific Legal Group Lawyers: Lawyers for the Defendant
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