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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO. 453 OF 2006
TED TARU
First Plaintiff
AND
ELSIE TARU
Second Plaintiff
V
PACIFIC MMI INSURANCE LIMITED
First Defendant
AND
DAVID RANDLE
Second Defendant
AND
HENRY SMITH
Third Defendant
Waigani: Anis J
2023: 9th,17th,19th, 25th May & 22nd June
2024: 20th August
CLAIM FOR FRAUD – Plaintiffs assert fraudulent dealings on foreclosure – residential state lease - property initially owned and mortgaged by plaintiffs – plaintiffs defaulted – mortgagee exercised its legal rights under the mortgage – property sold to a third party – plaintiffs question transfer and sale – plaintiffs assert transfer and sale facilitated through fraud or fraudulently – plaintiffs seek amongst others recovery of property to their names, or alternatively, damages
PRACTICE AND PROCEDURES – res judicata – whether claim had been decided – whether action barred by deed of release – mode of proceeding – whether correct process should have been to allege fraud and seek to set-aside an earlier existing and binding National Court Order – whether claim an abuse of court process
Cases Cited:
Flavalea Ltd v. China Railway Construction Engineering (PNG) Ltd (2020) N8279
Wamp Nga Holdings Ltd v. MMK Transport Ltd (2014) N5664
Rural Development Ltd v. Kuri (2001) N2099
Provincial Government of North Solomons v. Pacific Architecture Pty Ltd [1992] PNGLR 145
Rage Augerea v. The Bank South Pacific Ltd (2007) SC869
Paim Kumbipara Holdings Ltd v. Mountain Catering Ltd (2022) N9473
Atlas Corporation v. Ngangan (2020) SC1995
Kots Investment Ltd (trading as Kots Catering) v. Toa (2020) N8654
Telikom PNG Ltd v. ICCC (2007) SC3144
National Capital District Interim Commission v. Bogibada Holdings Pty Ltd [1987] PNGLR 135
Anthoney Hamaka & Ors v Martin Kombri & Ors (2021) N8959
Talibe Hegele v. Tony Kila and 1 Or (2014) N8119
Pius Nui v. Senior Sergeant Mas Tanda (2004) N2765
Re Peter Naroi [1983] PNGLR 176
Paul Torato v Sir Tei Abal [1987] PNGLR 403
Simon Mali v The State (2002) SC690
Joseph Kupo v Stephen Raphael (2004) SC751
Motor Vehicles Insurance Trust (PNG) Ltd v. Yama Security Services Ltd (2009) SC1004
Counsel:
S Ketan with counsel assisting F So, for the Plaintiffs
W Mai with G Jiki council assisting, for the First Defendant
No appearances by the Second and Third Defendants
DECISION
20th August, 2024
1. ANIS J: This matter was trialed on liability. The trial was conducted on 17, 19 and 25 May 2023. Parties presented their closing submissions on 22 June 2023 before I reserved my decision.
2. Parties have been notified so I will rule on it now.
BACKGROUND
3. The relevant background of the matter is this. The plaintiffs are a couple. They filed this proceeding against the defendants for alleged fraud or fraudulent dealings of a residential property which they once owned. The property is described as Section 40, Allotment 9, Boroko, NCD (Property). The plaintiffs acquired the Property in 1993 whilst the first plaintiff was employed with a company called Niugini Insurance Corporation Pty Limited (NIC). The first plaintiff was employed with NIC from 1992 to 1998. During that time, NIC had a home ownership scheme whereby its employees could borrow money to acquire properties. The first plaintiff borrowed K95,000 from NIC to purchase the Property. The Property was mortgaged by the Plaintiffs to NIC as security for the loan. In 1998, NIC terminated the first plaintiff from employment.
4. The first plaintiff did not complete his loan repayments with NIC at the time of his termination. His defaults (on his loan repayments) started on or about February of 1997 whilst he was still employed with NIC. Two court proceedings ensued afterwards. The plaintiff sued NIC for unlawful termination in proceeding WS 146 of 1999 (WS 146 of 1999). Judgment was entered in his favour with damages to be assessed. On 10 November 2005, the parties settled out of court on damages. The first plaintiff executed a deed of release (Release) with Independent Public Business Corporation (IPBC). Why IPBC and not NIC one may ask? On 30 April 2003, the National Executive Council issued a notice in the National Gazette No. G55, pursuant to the Independent Business Corporation Act 2002, vesting all of NIC’s assets and liabilities, under IPBC. Before that (i.e., 30 April 2003), the first defendant had been managing the business and assets of NIC under an asset sale agreement dated 7 October 1998 (A S Agreement) that was had between NIC, the first defendant and Papua New Guinea Banking Corporation (PNGBC).
5. The second court proceeding was commenced by the first defendant against the plaintiffs, which was OS No. 31 of 2000 (OS 31 of 2000). The purpose of OS 31 of 2000 was to seek vacant possession of the Property against the plaintiffs. On 10 April 2000, the then Deputy Chief Justice, the late Sir Mari Kapi (who later became the Chief Justice of Papua New Guinea), granted the orders as sought in the originating summons, that is, upon being satisfied that the plaintiffs had defaulted on their loan repayments, and also, upon recognizing the rights of NIC’s interest as the registered mortgagee over the Property. The final orders were as follows:
6. On 19 May 2000, the plaintiffs appealed the decision to the Supreme Court in proceeding SCA No. 36 of 2000 (SCA 36 of 2000). On 25 May 2004, the plaintiffs withdrew their appeal after the first defendant filed an application to have the appeal dismissed for want of prosecution. SCA 36 of 2000 was discontinued.
7. On 20 April 2006, about 2 years later, the plaintiffs filed this proceeding.
EVIDENCE
8. Parties gave evidence in oral and written testimonies. All the tendered evidence were marked with exhibit numbers. As for the plaintiffs, they tendered 4 documents which were marked as exhibits P1, P2, P3 and P4. There were objections. I allowed the evidence on the basis that the Court will later consider what weight it should give to each of the exhibits subject to submissions received from the parties.
9. The first defendant also tendered a total of 4 exhibits. They were marked as exhibits D1, D2, D3 and D4. Again, I allowed the evidence to be tendered on the basis that the Court will later consider what weight it should give to each of the exhibits subject to submissions received from the parties. Deponents Andrew Gogo and David Randle, who had given affidavit evidence which were marked as Exhibit D1 and Exhibit D2 respectively, were not available for cross-examination. The affidavits were accepted with leave of the Court, but on the basis that the Court should caution itself when considering them given that the evidence were not subjected to or tested in cross-examination.
10. The plaintiff also strenuously objected to the tendering of Exhibit D4. I overruled the objection and gave a brief ruling on it, and I would refer to the transcript of proceeding for that. But let me summarize and give further reasonings as follows. A company, which is a legal person (s.16, Companies Act 1997), when required to give evidence in Court, will require natural persons to testify on its behalf. It is these natural persons that own or operate companies. And no one can be employed in a company in perpetuity; perhaps artificial intelligence or AI which already exists, may prove us wrong in the not too distant future. But people who work in companies come and go, (i), premised on their terms and conditions of employment, (ii), for personal reasons including death, or (iii), for other reasons. Company records, files or database, are kept and managed by natural persons (owners/employees) who are bestowed with such responsibilities. Such persons, and in a case where a company is giving evidence in a court of law, may be regarded as responsible persons who could give evidence on behalf of the company. It is also not mandatory that such a person must always have personal or detailed knowledge of every company record, every event, or every document, that is or was under his or her care at a particular time. The person responsible could be giving evidence based on his or her general understanding of the matter based on his or her personal knowledge, or based on what he or she has read from the company records concerning the matter regardless of whether the event or information had existed or occurred before, during, or after his or her employment with the company. The person could also be called to merely tender a document as its custodian, for or on behalf of the company. See cases: Flavalea Ltd v. China Railway Construction Engineering (PNG) Ltd (2020) N8279, Wamp Nga Holdings Ltd v. MMK Transport Ltd (2014) N5664, Rural Development Ltd v. Kuri (2001) N2099, Provincial Government of North Solomons v. Pacific Architecture Pty Ltd [1992] PNGLR 145 at pages 148-149, and Rage Augerea v. The Bank South Pacific Ltd (2007) SC869.
11. Apart from that, and as I have already ruled, I will apply or discount the adduced evidence accordingly or where necessary when considering them to address the issues for trial.
PRELIMINARY ISSUE – ABUSE OF PROCESS
12. The first preliminary issue raised by the first defendant is alleged abuse of court process. The first defendant argues the plaintiffs are re-litigating the matter; they argue that the matter or the issues raised had been dealt with in OS 31 of 2000. As such, they rely on the principle of res judicata or the principle of finality.
13. The plaintiffs oppose this claim. They submit (my summary), (i), that the decision of the National Court in OS 31 of 2000 to grant vacant possession of the Property to the first defendant was based on fraudulent misrepresentations committed by the first defendant, (ii), that the matter was appealed to the Supreme Court in SCA 36 of 2000 but was not determined on its merit because the appeal was withdrawn; therefore the issues were never determined on their merits, (iii), that the final decision of the Court in OS 31 of 2000 did not vest any right in the Defendants to sell or dispose the Property, and (iv), that the issue of fraud was not raised and argued before the National Court in OS 31 of 2000 therefore is properly raised herein.
14. I note the submissions of the parties on this matter.
15. The defence or principle of res judicata also reinforces the principle of finality. Paim Kumbipara Holdings Ltd v. Mountain Catering Ltd (2022) N9473, Atlas Corporation v. Ngangan (2020) SC1995, Kots Investment Ltd (trading as Kots Catering) v. Toa (2020) N8654, Telikom PNG Ltd v. ICCC (2007) SC3144, National Capital District Interim Commission v. Bogibada Holdings Pty Ltd [1987] PNGLR 135 and Motor Vehicles Insurance Trust (PNG) Ltd v. Yama Security Services Ltd (2009) SC1004.
16. In Paim Kumbipara, the National Court, on the principle of finality, stated in part at para. 27:
There has to be finality in litigation, and issues that are raised on or in relation to a dispute must or ought to be raised together and be addressed in the same proceeding rather than on a piece meal basis.
17. The Supreme Court in Atlas Corporation discussed the principle of finality. At para. 40, Justice Logan, stated:
40. It is impossible to over-emphasise the importance of the principle of finality in relation to the exercise of judicial power. On that subject and the need and importance for finality, we are attracted to the following statement made by Gleeson CJ, Gummow, Hayne and Heydon JJ in the High Court of Australia in D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2006) 223 CLR 1 at [34]- [36]:
18. Let me address the present matter this way, which I think is a better approach to begin. There is already a decision made by the National Court in OS 31 of 2000, where the Court, upon being satisfied that the plaintiffs had defaulted on their loan repayments, made orders that allowed the first defendant to facilitate foreclosure on the Property. The final orders of the Court was made on 10 April 2000. On 30 August 2002, the Property was sold and transferred to the third defendant. The Property was then sold twice thereafter to third parties. It is not disputed that its current registered proprietor, whoever that is, is not named as a party to this proceeding.
19. The plaintiffs are alleging fraud against the defendants in regard to the first defendant’s action when it foreclosed on the Property between 2000 and 2002. So, the first question I have is this. Can the plaintiffs do that? Is that the correct process, that is, to sue for fraud in a case such as this where there exists an earlier court order that was made by the National Court? When I consider the pleadings and refer to the plaintiffs’ Amended Statement of Claim filed 1 September 2006 (ASoC), the plaintiffs make no mention of OS 31 of 2000 and the final order of the Court of 10 April 2000. This fact was only revealed by the first defendant in its Verified Defence filed 29 November 2006. And now, when I consider the plaintiffs’ 4 reasonings as summarized above, I begin to wonder whether the proceeding is proper, or whether it is an abuse of the court process. I say this because there is already set precedence and process in place in situations like this, that is, in a case where a litigant intends to allege that a final order or judgment of the Court was procured by fraud by the other party. The correct process would be for a litigant to file a separate National Court proceeding to seek orders that will primarily require setting aside of the earlier National Court decision complained of, premised on allegations of fraud. See cases: Anthoney Hamaka & Ors v Martin Kombri & Ors (2021) N8959, Talibe Hegele v. Tony Kila and 1 Or (2014) N8119, Pius Nui v. Senior Sergeant Mas Tanda (2004) N2765, Re Peter Naroi [1983] PNGLR 176, Paul Torato v Sir Tei Abal [1987] PNGLR 403, Simon Mali v The State (2002) SC690, Joseph Kupo v Stephen Raphael (2004) SC 751.
20. A primary reason why it is necessary to file a separate proceeding to set aside an earlier court order premised on allegations of fraud, is because of the fact that an order from a court of competent jurisdiction such as the National Court, once final, is binding, enforceable, and cannot be questioned if it has not been successfully appealed against or set aside. The principle of finality of litigation, and the defence of res judicata, supports or enforces this reasoning.
21. In the present matter, the final National Court order of 10 April 2000 in OS 31 of 2000, has never been successfully challenged on appeal or set aside by the plaintiffs. This Court Order therefore remains binding. The plaintiffs are raising allegations of fraud against the defendants, but not with the intention to set aside the Court Order of 10 April 2000. Their pleadings are premised differently according to the relief that they are seeking. It is possible that they may have, by their pleadings, deliberately concealed OS 31 of 2000 and the Court Order of 10 April 2000, or that they did not want this fact to constitute issues that may be raised before this Court. If that is true, then that is a matter for them, that is, to choose how they wish to pursue their case against the defendants. However, having chosen the path as they have done herein, they have put themselves in this peculiar situation.
22. I note that a court of competent jurisdiction has already found the plaintiffs liable in default on their loan repayments. The Court was satisfied and granted the first defendant permission to secure and foreclose on the Property. And that process was completed in 2002. The plaintiffs also exhausted their right of appeal when they withdrew their appeal in SCA 36 of 2000. The only option that was available to them then, had they wanted to raise allegations of fraud against the defendants in obtaining the final orders of the Court on 10 April 2000 which resulted in them foreclosing on the Property, should have been to commence an action for fraud with proper pleadings in that regard, where they would have sought to set aside the Court Order of 10 April 2000.
23. The plaintiffs have not done that in this case.
24. I also note that the plaintiffs are represented by counsel. However, their actions, evidence and submissions before this Court also appear contemptuous in the eyes of this Court. For example, I refer to the first defendant’s affidavit which is Exhibit P1. Most of the depositions consist of submissions and not deposition of facts. But besides that and coming back to the issue of appearance of possible contempt in the eyes of the court, at paras. 27 and 28, the first plaintiff states:
(Bold lettering mine)
25. The plaintiff is making accusations on matters that were heard and determined before the National Court which is a Court of competent jurisdiction. And unless that decision is set aside either on appeal or is subject of a proceeding that seeks to set aside the Court Order of 10 April 2000 premised on fraud, it remains final and binding, and it is mischievous, wrong, and contemptuous, in my view, for the first plaintiff to criticize or make accusations against findings of the said Court. Mr. Ketan has also restated some of the accusations to the Court, in his client’s written submission dated 22 June 2023. In their first argument as summarized above, which is contained at para. 64(a), page 13 of their written submission, they submit:
The National Court ordered the Plaintiffs to give vacant possession of the Property to the First Defendant on the 11 April 2000 in proceedings OS No. 31 of 2000 as a result of fraudulent misrepresentations and misleading by the Defendants.
(Bold lettering mine)
26. This Court is not hearing allegations of fraud to set-aside the Court’s Order of 10 April 2000. Therefore, submissions made in that regard or that tend to raise challenges on the findings of the Court in OS 31 of 2000 will not be permitted or are prohibited before this Court. The actions and submissions of the plaintiffs may amount to gross abuse of the court process. I find that to be the case herein and, in so doing, dismiss the plaintiffs’ first reasoning to the preliminary issue.
27. I will also dismiss the plaintiffs’ second reason in defence to the preliminary issue. The plaintiffs’ argument that because they withdrew their appeal, the issues and findings by the National Court in OS 31 of 2000 remain alive or has not been determined on their merits, is misconceived and wrong. When a final decision of the National Court remains unchallenged, the facts and issues that were decided by the Court have been resolved; they cannot be rehearsed elsewhere later in the future. A separate challenge premised on fraud with the intention to set aside a final order or judgment of the Court in an earlier proceeding, is an exception. However, and as explained, this is not what is before this Court.
28. I also dismiss the plaintiffs’ 2 remaining reasons as summarized above which is stated at para. 64(c) and (d), page 14 of their written submission. I dismiss them for the same stated reasons I give above. I also find them frivolous and vexatious. Reasoning (iii) is misconceived, and I have this to add. A mortgagee’s legal right to foreclose on a property is granted under the mortgage document itself, which is a contract. The standard terms and conditions, including the rights of the mortgagee, would be inscribed in the mortgage document. Strictly speaking, a mortgagee does not require court intervention to enforce its rights to foreclose on a property that is the subject of a mortgage when there is default by the mortgagor. In a perfect world, that can be achieved easily where for example, upon default, the mortgagor would agree and allow the mortgagee possession and sale of the property. However, lenders have adopted the practice of seeking Court intervention, to reinforce their legal rights under the mortgage as well as validate their claims that the mortgagor has defaulted and that the mandatory steps set out under “Part VII” of the Land Registration Act Chapter No. 191 have been fully met by the mortgagee in its bid to foreclose on the Property. In the present matter, status of the plaintiffs and NIC as mortgagors and mortgagees at the material time was not contested or in dispute. And the first defendant’s role at the material time, premised on its rights and obligations as set out in the A S Agreement, was to facilitate foreclosure on the Property. The A S Agreement also subrogated NIC’s interest in the Property over to the first defendant. All these information were before the Court in OS 31 of 2000.
29. Let me also make this observation under this sub-heading. At the material time when the plaintiffs failed to exercise their rights of redemption, their equitable interest over the Property also ended as well. What that meant was that the first defendant, or NIC, or IPBC, were at liberty to transact with third parties to sell the Property. In this case, the Property had been sold to the third defendant. The contractual arrangements, whether it was between NIC and the first defendant, between the first defendant and the third defendant, or between other persons, concerning the Property, were separate matters where the plaintiffs would not have been privy to or have any standing or interest to question or challenge. This includes the present claim or this proceeding. I note that the first defendant has provided explanations of how it had acquired its interest on the Property from NIC, which was as a facilitator under the A S Agreement. Again, that was a separate contractual arrangement had between NIC, the first defendant and the PNGBC. The plaintiffs, by that time, had lost their legal as well as equitable interests over the Property.
30. This consideration and findings is yet another reason why the claim is regarded as frivolous and an abuse of the Court process.
PRELIMINARY ISSUE – DEED OF RELEASE
31. Let me also address the second preliminary issue. The first defendant asserts that the existing Release bars the plaintiffs from commencing this action.
32. It is not disputed that the parties signed the Release on or about 10 November 2005. The first plaintiff deposes at para. 55 to Exhibit P1 where he acknowledges signing the Release. However, he did not attach a copy of the Release to his affidavit. That said, a copy (of the Release) is attached as Annexure C to Exhibit D1 and Annexure PH-8 to Exhibit D4.
33. I note the submissions of the parties on this matter.
34. Having perused the Release, the relevant clauses in my view are clauses 1, 3, 5, 6, 16 and 22, and I set them out herein:
1.1 The following definition apply unless the context require otherwise.
Disputes means the dispute between the Parties concerning the damages that are payable to the Releasor in the proceedings, WS 146 of 1999 for the unlawful termination of his employment by NIC and other general damages sought by the Releasor for the loss personal items as stated in his letters to the Releasee dated 27 January 2005 and 7 February 2005.
Liabilities means debts or liabilities of any kind, including those which are prospective or contingent and those the amount of which is not ascertained.
3. Mutual Release
On and from the Settlement Date, the Parties release each other from all claims in respect of:
(a) The Disputes
(b) The Circumstances giving rise to the Disputes and
(c) Any claim or allegation which was or could reasonably have been known to the Parties (or either of them) as at the date of this Agreement arising from or in connection with the relationship between them.
......
5. Covenant not to sue and indemnity
Each Party:
(a) Covenants in favour of the other Party and each other person in favour of whom a release is given under Clause 3, not to bring or pursue, procure that a third party bring or pursue, provide financial support for or other wise support any claim, action, dispute, demand or proceeding in any court or tribunal in respect of any matter which is the subject of a release under Clause 3; and
(b) Will indemnify the other Party and each other person in favour of whom a release is given under Clause 3 from and against any costs, expenses, losses and Liabilities arising from or in any way connected with a breach by that Party of paragraph (a)
6. Acknowledgment
Each Party acknowledges that:
(a) it enters into this Agreement fully and voluntarily on its own information and investigation;
(b) is aware that, its legal advisers or other agents or advisers may discover facts different from or in addition to the fact it now knows or believes to be true with respect to the subject matter of this Agreement; and
(c) it fully, finally, absolutely and forever settles according to the provisions of this Agreement and all claims in respect of the matters the subject of a release under Clause 3.
......
16. Absolute bar
The Agreement may be pleaded and tendered by any Party as an absolute bar and defence to any proceeding brought or made by the other Party in breach of the terms of this Agreement.
......
22. Enurement
The provisions of this Agreement will ensure for the benefit of and be binding on the Parties and their respective successors and permitted substitutes and assigns and (where applicable) legal personal representatives.
(Underlining mine)
35. The key provision there is clause 3 which is also mentioned in the other relevant clauses of the Release including some of the clauses that are cited above. Clause 3 is mentioned therein as a whole; it is not for example referred to as subject to or in accordance with clause 3(a), or 3(a) and (b) only. Clause 3(a) and (b), as stated above, refers to the immediate dispute that had caused the parties to sign the Release, which was damages for unlawful termination which was awarded by the National Court in WS 146 of 1999, and loss of personal items.
36. Clause 3(c), however, is distinct and separate from 3(a) and (b), and in my view, is crucial and may determine the second preliminary issue.
37. So, I ask myself this? Does Clause 3(c) extend to this fraud claim which is pursued by the plaintiffs herein? Could this claim have been reasonably known to the parties as at the date of signing the Release on 10 November 2005? And is this claim connected to the relationship between the partes that existed at the material time? I will answer all these questions in the affirmative subject to my earlier ruling. Assuming that the present proceeding is valid and is properly before the Court, the plaintiffs knew or ought to have known of this claim back in 2000 or even well before that. OS 31 of 2000 was filed, not by NIC, which was the first plaintiff’s former employer, but by the first defendant. Evidence that were adduced at the time before the Court would have shown the transition period, or the acquisition by the first defendant of NIC’s properties and or the existence of the A S Agreement. The plaintiffs had lawyers acting for them at the material time. The plaintiffs could have challenged the first defendant with the fraud allegation soon or immediately after OS 31 of 2000 was completed, by filing proceedings to set aside the Court Order of 10 April 2000 premised on fraud. They have not done so and chose to wait, and they may have been overcome by time or statute to pursue this option. The plaintiffs also had no issue with signing the Release with IPBC in 2005, but then, a year after, they filed this proceeding.
38. When I consider all these, save for my earlier ruling, the plaintiffs, pursuant to Clause 16 of the Release, are barred from bringing this proceeding. I therefore also uphold the second preliminary issue in favour of the first defendant.
SUMMARY
39. In summary, this case fails and therefore will be dismissed.
COST
40. An order for cost for this matter is discretionary. I am minded to order cost to follow the event on a party/party basis to be taxed if not agreed.
ORDERS OF THE COURT
41. I make the following orders:
The Court orders accordingly
________________________________________________________________
Ketan: Lawyers for the Plaintiffs
Allen: Lawyers for the First Defendants
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