N10745
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS  142 OF 2022

BETWEEN:
NAYAL INVESTMENTS (PNG) LTD
-Plaintiff-

AND:
LIHIR GOLD LIMITED
First Defendant

NEW CREST MINING LIMITED
Second Defendant

Kokopo:   Dingake J
2024: 10th April

CIVIL PROCEDURE- Application to dismiss proceeding  for abuse of process – Order 12 Rule 40 (1) ( c ) of the National Court Rules - Proceedings offending Section 11 (1) of the Fairness of Transaction Act held - Proceedings statute barred.

Cases Cited

Geru Holdings Ltd v Kruse (2023) PGSC 141 
Baulana v Post and Telecommunication Corporation (1996) PGNC 35
Wabia v BP Exploration Operating Co Ltd (1998) PGNC 177
PNG Forest Products Pty Ltd v The State (1992) PNGLR 85

Counsel:

  Mr. Roland Lenalia, for the Plaintiff
 Mr. Anthony Paru, for the Defendants 

RULING
10 April 2024

1.	DINGAKE J: This is my ruling with respect to a contested application brought by the Defendants to dismiss the entire proceedings for being an abuse of process pursuant to Order 12 Rule 40 (1) (c) of the National Court Rules (NCR).

2.	The Defendants submit that the proceeding is an abuse of court process because it is statute barred, and offends Section 11(1) of the Fairness of Transactions Act (FTA).

3.	The facts giving rise to this litigation are largely common cause.  The Plaintiff commenced this proceeding against the Defendants on the 30th of March 2022, by way of a Writ of Summons endorsed with a Statement of Claim.

4.	The Plaintiff’s pleaded case against the Defendants, in a nutshell, is that the parties entered into a contract whose terms were unfair, giving rise to a claim of damages for loss of profits and future economic loss.

5.	On or about the 16th of June 2022, the Defendants filed a defence, in which it asserted its defence that the Plaintiff’s suit is statute barred. 

6.	It is common cause that the parties hereto entered into a contract in terms of which the Plaintiff agreed to provide management, supervision, labour and consumable materials as required and to carry out janitorial services at the LMC Offices and facilities, and in return the Plaintiff was paid fifteen million (K15,000,000.00).

7.	The janitorial services were entered into with respect to three contracts, namely:

(a)	Contract No. LG-TS-0407
(b)	Contract No. 4610001699
(c)	Contract No. 4610002254

8.	It is common cause (and the parties confirmed this during argument) that contracts (a) and (b) are not an issue in this application, and only contract (c) is an issue.

9.	The Plaintiff submits at paragraph seven (7) of its written submissions filed on the 29th of September 2023 that “Both parties agree and take no issue with the fact that the only transaction in issue in these proceedings is Contract No. 4610002254 (hereafter “the Contract”), which came into effect on its commencement date on 1 September 2014”.

10.	It is common cause that contract (c) above exists.  The parties differ on when it commenced. The Defendants say it commenced on the 1st of September, 2014, whilst the Plaintiff says it was entered into in 2016. 

11.	Given the common cause facts, the issue that falls for determination is whether the Plaintiff’s claim is statute barred.

12.	In this case, the Defendants do not dispute the Plaintiff’s rights in law, in terms of Section 4 and 5 of the Fairness of Transactions Act (FTA) to bring an action against the Defendants alleging that the contract entered into between the parties contained terms that are/were unfair.  They contend that any proceedings under the Fairness of Transactions Act (FTA) must be instituted within 3 years from the date of the transaction.

13.	The Plaintiff on the other hand argues that the proceedings are not statute barred.

14.	The Plaintiff argues that: 

“If the commencement date of the original transaction (1 September 2014 is taken to be the starting point of the calculation of the three (3) year time limit under Section 11 (1) of the FTA, then the three (3) year time limit ended on September 2017.  But by that date, the original transaction was already extended and altered by the First Variation.  So the First Variation is still considered part of the original transaction pursuant to the definition of “transaction” under Section 3 of the FTA. It is the Second Variation which occur outside the three (3) year period stipulated by Section 11 (1) of the FTA, and which brings the Contract outside the definition or an original transaction which is subject to Section 11 (1) of the FTA. (Paragraph 16 of the Plaintiff’s extract of submissions – Document No. 31)

15.	The Plaintiff also argues that: “From three (3) years after the commencement of the Contract, which is on the 1 September 2017, every subsequent variation that substantially altered the Contract after that date was now a new transaction.  This is what is stipulated by the definition of transaction under Section 3 of the FTA”. (Paragraph 17 of the Plaintiff’s extract of submissions – Document No. 31)

16.	According to the Plaintiff, with the emergence of a new transaction, the three (3) year time limit under Section 11 (1) of the FTA restarts, because a new contract was being considered and entered into by the parties.  

17.	Section 11(1) of Fairness of Transactions Act (FTA) provides that:  “Any proceedings under this Act shall, subject to Subsection (2), be commenced soon after the party aggrieved by the transaction to which they relate suffers the disadvantage or becomes aware  of the matters which amount to or constitute the unfairness, as the case may be, but no action shall lie later than three years after the date of the transaction”

18.	Section 3 of the Fairness of Transactions Act (FTA) defines transaction as follows:

“transaction” means any contract, promise, agreement, dealing or undertaking of an economic or commercial nature whether supported by consideration or not entered into between parties and includes – 

(a)	an informal, complete or incomplete transaction; and

(b)	a transaction governed by customary law, 
but does not include – 

(c)	a transaction that is renegotiated and its terms are substantially altered after three years of the date of the original transaction...(emphasis mine)

19.	 In this case the Writ of Summons endorsed with a Statement of Case was filed on the 30th of March 2022.

20.	As is clear from the provisions of Section 11 of Fairness of Transactions Act (FTA) reproduced earlier, any proceedings under the Fairness of Transactions Act (FTA) should be commenced soon after the party aggrieved by the transaction to which they relate suffers the disadvantage or becomes aware of the matters that constitute unfairness.  However, no action shall lie later than three years after the date of the transaction.

21.	 In this case, it is not in dispute that the original contract (contract (c) referred to earlier, was entered into on the 1st of September 2014.  Any complaint by the Plaintiffs that its terms  are/were unfair must be brought within 3 years of the date of the transaction.

22.	It follows from Section 3 of the Fairness of Transactions Act (FTA) that defines “transaction” that in computing the three year prescribed by Section 11 (1) of the Fairness of Transactions Act (FTA), a renegotiated transaction that came later than three years of the date of the original transaction, being variations that came in 2019 and 2020 are excluded.

23.	The exclusion of all variations that came after 2017 means that only the variation that remained valid in  September 2016 is included. It follows from my conclusion therefore that this proceeding, that were brought on the 30th of March 2022, is clearly statute barred, and amount to an abuse of court process. (Geru Holdings Ltd v Kruse (2023) PG SC 141).

24.	 There are many decisions of this Court and the Supreme Court interpreting Order 12 Rule 40 (1) (c) of the National Court Rules.  These decisions make it clear that this Court should protect itself from abuse of process (Baulana v Post and Telecommunication Corporation (1996) PG NC 35; Wabia v BP Exploration Operating Co Ltd (1998) PG NC 177).

25.	It seems to me that other than the power to dismiss proceedings pursuant to Order 12 Rule 40 (1) (c) of the National Court Rules, this Court also has the inherent power to dismiss proceedings which are an abuse of its process (PNG Forest Products Pty Ltd v The State (1992) PNGLR 85).

26.	In my opinion proceedings that are statute barred are an abuse of the Court process and offend Order 12 Rule 40 (1) (c) of the National Court Rules, as such proceeding should not have been commenced at all.

27.	The Defendants have asked that if the proceedings are dismissed, the Plaintiff should be ordered to pay costs or an indemnity basis since the Plaintiff was forewarned and failed to withdraw the proceeding.

28.	It is trite law that costs are the discretion of the Court.  The Court may award costs on an indemnity basis if it is in the interest of justice to do so or the circumstances so warrant.

29.	In this case I do not think costs on an indemnity basis are warranted.

30.	In the result, this Court orders that:

(a)	The Plaintiff’s proceeding be dismissed for being an abuse of Court process.

(b)	Costs are awarded to the Defendants on a party to party scale – such costs to be taxed, if not agreed.
________________________________________________________________
Warner Shand Lawyers: Lawyers for the Plaintiff
Allens Lawyers: Lawyers for the Defendants