N10259
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 19 OF 2023 (IECMS – CC3)

BETWEEN:
NICK RONIOTIS as Director of Cloudy Bay Sustainable Forestry Limited
Plaintiff

AND:
PAKO F & C HOLDINGS (PNG) LIMITED
Defendant

Waigani: Salika CJ
2023: 27th February; 2nd March; 11th May

PRACTICE AND PROCEDURE – Application to dismiss proceedings – Order 12 Rule 40 of the National Court Rules – Is there a reasonable cause of action? – Are the proceedings frivolous and vexatious?  -  Are the proceedings an abuse of the Court process?

Cases Cited:

Pokia v Yallon [2014] PGSC 3; SC1336
Lerro v Stagg [2006] PGNC 2; N3050
Toap v State [2004] PNGLR 624
Pako F & C Holding (PNG) Ltd v Cloudy Bay Sustainable Forestry Ltd [2021] N9141

Counsel:

Mr C Zazeng, for the Applicant.
Mr G Purvey & Mrs. N Numi, for the Respondent.

11th May, 2023

1.	SALIKA, CJ: INTRODUCTION:  These are a series of long drawn out litigations involving the parties in this matter over a long period of time.  

2.	The respondents to this application are Nick Roniotis as Honorary Consul of the Independent State of Papua New Guinea to the Hellenic Republic of Greece; as the First Plaintiff/Applicant, and Linda Paru as the Second Plaintiff/Applicant.

BACKGROUND

1.	Cloudy Bay Sustainable Forestry Limited subcontracting services of Pako F & C Holdings (PNG) Limited and contract termination.

i)	On 18 November 2013, the Cloudy Bay Sustainable Forestry Limited (Cloudy Bay) subcontracted Pako F & C Holdings Limited to provide sawmilling services amongst others.  It was the first timber down streaming services to be operated in the country.

ii)	On 14 April 2014, Cloudy Bay terminated the Contract with Pako-PNG.  At that time, Nick Roniotis was a director of Cloudy Bay and was directly and personally involved in the termination of the Pako-PNG’s contract of service.

2.	Proceedings WS No. 774 of 2014 and WS No. 794 of 2014 on determination of liability for breach of contract

i)	On 11 July 2014, Cloudy Bay filed proceedings styled WS No. 774 of 2014 and sued Pako-PNG for repudiation of Contract.  On 16 July 2014, Pako-PNG filed proceedings styled WS 794 of 2014  and counter sued Cloudy Bay for breach of contract.

ii)	On 10 November 2016, the proceedings WS No. 774 of 2014 and WS 794 of 2014 were consolidated and tried together on the issue of liability.  On 12 July 2018, the National Court rejected Cloudy Bay’s claim and determined liability in favour of Pako-PNG.

3.	Proceedings SCREV No. 85 of 2018 on Supreme Court review regarding determination of liability against Cloudy Bay

i)	On 30 October 2018, Cloudy Bay filed proceedings SC REV No. 85 of 2018 seeking leave to review the determination of liability in WS No. 794 of 2014.

ii)	On 18 December 2019, the full court of the Supreme Court dismissed Cloudy Bay’s Application for Leave to Review in proceedings SCREV No. 85 of 2018.

4.	Trial on Assessment of Damages in proceedings WS No. 794 of 2014 after Court’s refusal on vacation of the trial date for trial on assessment.

i)	On 9 July 2020, trial on Assessment of Damages was conducted for proceedings WS 794 of 2014, despite Cloudy Bay’s application to vacate the trial dates.

ii)	On 31 July 2020 Trial on Assessment of Damages was concluded and the Court reserved its ruling on Quantum to a later date.

5)	Proceedings SCA No. 56 of 2020 regarding Appeal on Trial judge’s decision refusing vacation of trial date for trial on assessment and subsequent withdrawal of said Appeal.

i)	On 21 July 2020, Cloudy Bay filed proceedings SCA No. 56 of 2020 seeking leave to appeal the trial judge’s decision refusing vacation of the trial date for trial on assessment of damages in proceedings WS 794 of 2014.

ii)	On 18 September 2020, leave to appeal on refusal of Vacation of the said Trial date was granted by His Honour Chief Justice Salika sitting as the Supreme Court.  The National Court proceedings WS No. 794 of 2014 was also stayed.

iii)	On 24 September 2020, following grant of leave, Cloudy Bay on que filed its Notice of Appeal regarding appeal on trial judge’s decision refusing the vacation of trial date for trial on Quantum.

iv)	On 3 September 2021, Cloudy Bay obtained leave to withdraw its appeal in proceedings SCA of 2020 just before the appeal was fixed to be heard, after noting competency issues.

6)	Determination of Quantum of damages in proceedings WS No. 794 of 2014 following withdrawal of SCA No. 56 of 2020.

i)	On 20 September 2021, the National Court determined quantum of damages for breach of contract by Cloudy Bay in the sum of K117,480,118.92 inclusive of interest.  The determination was made after withdrawal of the proceedings of SCA No. 56 of 2020.

7)	Proceedings SCA No. 126 of 2021 regarding Appeal on determination of Quantum and subsequent dismissal of said Appeal.

i)	Thereafter on 30 September 2021, Cloudy Bay being aggrieved filed proceedings SCA No. 126 of 2021, appealing the determination of quantum of damages in proceedings WS No. 794 of 2014.

ii)	On 25 October 2021, Cloudy Bay filed a Supplementary Notice of Appeal in the proceedings SCA No. 126 of 2021.

iii)	On 22 November 2022, the full bench of the Supreme Court on application by Pako-PNG, dismissed the proceedings SCA No. 126 of 2021 for want of prosecution.

8)	Slip Rule Application in proceedings SCA No. 126 of 2021 regarding dismissal of Appeal on Quantum and subsequent dismissal of the Slip Rule Application.

i)	On 29 November 2022, Cloudy Bay filed a Slip Rule Application seeking leave to challenge the Supreme Court’s decision to dismiss the proceedings SCA No. 126 of 2021 for want of prosecution.

ii)	On 22 December 2022, the Supreme Court dismissed Cloudy Bay’s Slip Rule Application after refusal of leave.

9)	Writ of Execution:  Writ of Levy of Property and current interim stay

i)	On 25 October 2021, Pako-PNG filed a Writ of Levy of Property to execute the National Court Order of 20 September 2021 regarding Quantum.

ii)	However, due to the appeal on quantum, Pako-PNG was not able to have the Sheriff execute that Writ of Levy of Property.

iii)	On 22 November 2022, following dismissal of the appeal in proceedings SCA No. 126 of 2021, Pako-PNG filed a second Writ of Levy Property to execute the Court Order with regards to Quantum.  The Notice of Judgment Debtor, Writ of Levy of property has been duly served on 28 November 2022 has been enforced by the Sheriff on 9 December 2022.

iv)	Cloudy Bay has to date failed to pay the damages ordered by the National Court as per the Order of 20 September 2021.

v)	Cloudy Bay has no substantial asset except for its property known as Portion 2486, Milinch of Granville Fourmil of Moresby, National Capital District, being whole of the land described in State Lease Volume 27 Folio 91 (9 Mile Land).

vi)	Following conclusion of the protracted court proceedings lasting over 8 years, the Sheriff has now executed the Writ of Levy of Property and has already seized 9 Mile Land to auction and sell off in order to satisfy the judgment debt.

10)	Current Proceedings OS No. 19 of 2023 and related Proceedings OS No.  3 of 2023.

i)	The Plaintiffs/Applicants filed two (2) fresh proceedings via Originating Summons in order to get a stay in the above proceedings.  Both proceedings sought identical interim relief which the Chief Justice Salika granted stay of execution of Writ of Levy.

3.	The plaintiffs in this matter took out an Originating Summons claiming the following orders and declarations:

“1.	An order in the nature of a declaration that Pako F & C Holdings (PNG) Limited is a foreign enterprise carrying on business in Papua New Guinea since 1st July 2008.

2.	An order in the nature of a declaration that Pako F & C Holdings (PNG) Limited since its incorporation on 1st July 2008 has been carrying on business in Papua New Guinea illegally without a certificate of foreign enterprise in breach of Section 25 of the Investment Promotion Act 1992.

3.	An order in the nature of a declaration as a consequence of the relief sought in paragraphs 1 and 2 above, that Pako F & C Holdings (PNG) Limited is removed from the Register of Companies Papua New Guinea by the Registrar of Companies  as at 1st  August 2008.

4.	An order in the nature of a declaration as a consequence of the relief sought in paragraphs 1 and 2 above, the contracts, agreements or undertakings between the Defendant and Cloudy Bay Sustainable Forestry Limited, especially the Contract for Harvesting of Logs and Saw Milling dated 18 November 2013 is unlawful and void pursuant to section 41A of the Investment Promotion Act 1992.

5.	The Defendant shall pay the Plaintiffs costs of and incidental to these proceedings and 

6.	Such further orders as the Court deems fit.”

4.	In relation to this Originating Summons, the applicants Chin Sik Son, First Defendant/Respondent and Pako F & C Holdings (PNG) Limited make this application to dismiss the Originating Summons pursuant to Or 12 Rule 40 (a), (b) and (c) of the National Court Rules.

5.	Order 12 Rule 40 says:
“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.”

6.	In support of their application, the applicants rely on the following:

i)	Notice of Motion filed on 17 March 2023 (December 13);
ii)	Affidavit of Chin Sik Son sworn and filed on 28 February 2023 (Doc. 10);
iii)	Affidavit of Chin Sik Son sworn and filed on 16 March 2023 (Document 12);

Submissions of the Applicants

7.	The applicants submitted that this proceeding and the related proceedings in OS 03 of 2023 are ploys by the plaintiffs to frustrate the due process and payment of the legally determined judgment debt of K117,480,118.92 million which has been confirmed after all the legal avenues were exhausted including a slip rule application.

8.	They further submitted that these proceedings by the respondents is an abuse of the process to commence two civil suits being OS 3 of 2023 and OS 19 of 2023 to nullify and negate the already completed proceedings in WS 794 of 2014.

9.	It was further submitted on behalf of the applicants that the proceeding is res judicata in that the proceedings WS 794 of 2014 determined the issue of validity of the subject contract in SCA No. 126 of 2022.

10.	The applicants argued that the Court must ensure that multiplicity of proceedings is not commenced by unsuccessful litigants, that is that the litigants have elected one mode of proceedings and having failed to obtain a remedy they want under that mode cannot be entitled to institute fresh or alternate proceedings under another mode.

11.	The applicants also argued that they were subcontracted by Cloudy Bay and that they used Cloudy Bay’s permits to enter into contract with Cloudy Bay to do their work.  

12.	They further argued that there must be finality in the litigation.

13.	It was submitted the litigant should not come back to Court to have a second chance to  prosecute the same cause of action and that even when they have the right under the Rules to bring fresh proceedings after the dismissal of earlier proceedings, it is unfair to the other party to allow this to happen repeatedly as this brings disrepute to the administration of justice amongst right thinking people and asked  the Court to dismiss the originating summons with costs.

THE RESPONDENT’S ORAL SUBMISSIONS

14.	The Respondents to this application failed to comply with the orders of the Court to file submissions, and so their application to file their submissions late was refused.  Counsel however made oral submissions.

15.	The Respondents in response to the applicant’s written and oral submissions after conceding that Pako did have foreign certificate after a copy of it was produced in Court submitted that Pako F & C Holdings (PNG) Limited (Pako) did not have the necessary foreign certification as a foreign enterprise to enter into the business arrangements with them in that it could not cut logs and mill them.  They argued that the applicants were not entitled to enter into any contractual arrangements without a permit to cut logs and mill them.  They argued that the applicants in those circumstances could only enter into such a contract simply because they were not permitted under the IPA Act s. 29.  For that reason, they submitted the contract was not a valid contract right from the outset.  This submission is made based on s. 25, s. 25 A and s.29 and s. 41A of the Investment Promotion Act.

16.	The applicant’s response to that argument was that they did not need the logging and the milling permits because Cloudy Bay had the license to log and mill and the agreement is that they the applicants, relied on Cloudy Bay’s logging and milling license to do their business or work.  That in my view is an arguable proposition or point.  They argued that, that issue was determined by the Court in WS 794   of 2014 and SCA 126 of 2022.

17.	The Respondent to this application to dismiss the proceedings also submitted that, they conceded that Pako had foreign certification.  They, however, submitted that after doing a search of the Pako Company extract at IPA, they found that while Pako had foreign certification, it was not permitted to harvest logs and mill.   They submitted that Pako’s foreign certification did not include logging, sawmilling and harvesting of logs as its business activities pursuant to S. 29 of the Investment Promotion Act and as such to enter into such sub contractual arrangement with Cloudy Bay was outlawed and therefore the Contract was null and void pursuant to s. 41A of the IPA.    

18.	The Respondents further argued that on their search of IPA records they found that Pako had applied to change its business activities to logging, saw milling and harvesting of logs but that Pako did not complete the process properly and that IPA had written to them on two separate occasions asking them to complete the process and that to date had not been done.   This fact they submit is not disputed by the applicant and that the fact that Pako had applied to change its business activities is an indication, they knew they had to comply with s. 29 of the IPA.  Their submission is that since Pako has not completed its application to properly change its business activities it is non-compliant with s. 41A of the IPA since its certification as a foreign enterprise to meet any of the terms and conditions under the Act.  They also submitted that the requirement also included provision of their tax returns to the IRC which  they have not complied with either.

ISSUES

19.	The issues raised in the application to dismiss the proceedings are:

(i)	Whether the plaintiffs have a reasonable cause of action;
(ii)	Whether the proceedings are frivolous or vexatious; and 
(iii)	Whether the proceedings are an abuse of the Court process.

DO THE PLAINTIFFS HAVE A REASONABLE CAUSE OF ACTION?

20.	  Before I embark on addressing this application, I am concerned with the manner Cloudy Bay and its lawyers have handled all the litigations in this case.  Cloudy Bay and its previous lawyers acted in a manner that frustrated the Court processes and its lawyers failed to meet deadlines and Court orders.  Their conduct in my respectful view has been annoying.   In my respectful view its lawyers were far from being diligent and in some instances outright negligent.  The Court’s role is to find the truth and do justice and that justice must be according to law.

21.	I note the basis of the Plaintiff’s claim that the contract between the plaintiffs and the respondents was invalid.  The applicant in this application submitted that the issue of the validity of the Contract is res judicata, meaning the issue has been dealt with and determined in WS 774 of 2014 and WS 774 of 2014 and liability was in favour of Pako.  Therefore, under Order 12 Rule 40 (a), (b) and (c), these proceedings be dismissed.

22.	The applicants relied on the case precedents of Lerro v Stagg (2006) N3050 and Toap v The State and Others.  On the face of the pleadings, one might say that the principles those cases stand for, squarely apply to this case.  I note here that the plaintiff in this case is different from the plaintiff in WS 794 of 2014.  The plaintiff in this case is a director of the original plaintiff company in WS 774 of 2014.  I note too that WS 774 of 2014 and WS 794 of 2014 were heard together in a consolidated way.    The two matters were heard together as WS 794 of 2014.    

23.	To me with respect, the factual circumstances of this case are different from the circumstances of the case authorities relied on by the applicant in this case for the reasons outlined above.    I distinguish the case authorities relied on by the applicant from this case because of the factual differences in this case to those cases.  Moreover, I note that the validity of the Contract was confined to arguments under the Forestry Act and no mention of compliance with IPA was ever mentioned in the decision of the National Court in N9141.

24.	The case authority of Pokia  v Yallon (2014) SC1336, is also distinguished for that reason as well.  There were two different original proceedings but were instead consolidated and heard together.   Cloudy Bay took out proceedings in WS 774 of 2014; and the Defendants instead of defending the plaintiffs cause of action filed their own WS 794 of 2014.  

25.	While I agree with the sound principles of law the Courts have developed over the years, I do not, with respect, believe the circumstance has, has happened in this case have been covered in previous decisions of the Courts.  With respect, it is for those reasons I distinguish this case from the case precedents cited to me.

26.	I understand the plaintiffs’ arguments on the validity of the contract to be on the basis that Pako had no capacity to Contract and not on who executed the Contract.  They argue that the validity of the contract was res judicata on the issues of who executed the contract, but not whether Pako had the capacity to contract on the issues now raised in s. 25, s. 25A, s. 29 and s. 41A of the IPA.   This argument flows on from the non-compliance issue by Pako not permitted under the IPA Act to carry on business in logging, sawmilling and harvesting logs.  

27.	The argument is that the contract in this case is for activities which Pako was not permitted to engage in thus raising the capacity issue under IPA.   I note the issue of validity of Contract was determined only under the Forestry Act.  The decision of Anis J in WS 794 of 2014, with respect, did not address the issue of compliance under ss. 25, 25A and 29 of the IPA Act and whether non-compliance affected Pako’s capacity to contract with Cloudy Bay.  The Court’s attention in WS 794 of 2014 was not drawn to the IPA and  as a result only concentrated on the issues and arguments under the Forestry Act.  To me, with respect, this proceeding raises legal issues not addressed by the Court in the WS 794 proceedings in relation to issues raised in WS 774 of 2014 in relation to the capacity of Pako to contract with Cloudy Bay.

28.	Following those reasons, I am minded to find that there is a reasonable cause of action to be mounted.  

ARE THE PROCEEDINGS FRIVOLOUS AND VEXATIOUS?

29.	The Oxford Advanced Leaners Dictionary new 8th Edition defines the word “frivolous” as having no useful or serious purpose” and  “vexatious is defined by the same dictionary as a verb, the root word is vex and vex as a verb means “to annoy or worry somebody”.  Vexatious as an adjective means “making you feel upset or annoys you”.  Vexatious as a noun means “state of feeling upset or annoyed or a thing that upsets or annoys you.”

30.	Is the Originating Summons filed by the plaintiff frivolous in that it serves no useful or serious purpose?  The contention by the applicant to dismiss the proceedings is that the issue of the validity of the Contract in question has been determined in proceedings WS 774 of 2014, and WS 794 of 2014.  None of those two judgments were produced to me to read.  I note from my own search that WS 774 of 2014 and WS 794 of 2014 were trialed together by Anis J in a decision numbered N9141.  I have read that decision.  I note from that decision that indeed the issue of breach of contract was determined in that decision by Anis J.   However, I note from that decision with respect that matters raised now in this application were never put to Anis J and as a result he did not address the IPA requirements.  Matters of compliance under the Investment Promotion Act Sections 25, 25A, s. 29 and s. 41A were never mentioned by Anis J in his judgment.  I say this with respect because counsel did not assist him on that point.

31.	The only matters addressed by Anis J, in that decision of 20 September 2021 are recorded in paragraphs 10 to 20 of the decision.  I take it then that compliance issues under the Investment Promotion Act were never raised before Anis J.  They were not raised in those proceedings.  In that regard, the issues raised here now are not res judicata.  They are new now and this is a new proceeding.

32.	In that regard, I find that non-compliance issues under the Investment Promotion Act were not addressed at all in WS 774 of 2021 and WS 794 of 2021 and as such, I further find there is a reasonable cause of action and that this proceedings are not frivolous and vexatious.  In relation to the issue of abuse of process of the Court, to me with respect, this is arguable because these matters ought to have been fully addressed at the proceedings in WS 774 of 2021 and WS 794 of 2021.  None of the parties raised them in those proceedings nor did the learned trial judge, with respect.

33.	Accordingly, I dismiss the application to dismiss the proceedings as contended.

34.	In passing, I note that the applicant Chin Sik Son did meet with the Elemor brothers in Sydney.  The explanation he gives for visiting them while accepted does not erase the security threat.  No amount of explanation will erase the lurking security issue. This too was a serious issue and remains a serious issue in my respectful view.

35.	Costs will be in the cause.

________________________________________________________________

Lakakit Lawyers: Lawyer for the Plaintiff	  
Young & Williams Lawyers: Lawyer for the Applicant