N11308

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WS NO 3 OF 2020 (COMM) (IECMS)

BANK SOUTH PACIFIC LIMITED 
First Plaintiff/Cross-Defendant

V

EQUIPLANT HIRE LIMITED
First Defendant/Cross-Claimant

UNITED PACIFIC DRILLING (PNG) LIMITED 
Second Defendant/Second Cross-Claimant

THOMAS KAINGE 
Third Defendant/Third Cross-Claimant

WAIGANI: ANIS J
1, 2, 9 April, 26 May 2025

DISCOVERY AND INTERROGATORIES – notice of motion seeking dismissal of claim, striking out of cross-defence, and for judgment to be entered in favour of the cross-claimants for alleged failures to comply with various notices to produce documents – Order 9 Rule 15(1)(a) and Order 10 Rule 9A(15)(2)(c) and (e) – National Court Rules – inherent jurisdiction of the National Court – whether notices to produce documents have not been complied – whether failure deliberate – whether the Court should exercise its discretion to dismiss the entire proceeding – application of various considerations - ruling

Cases cited
Brian Joshia v. Stephen Raphael (2016) N7640
Ace Guard Dog Security Services Limited v Lindsay Lai (2003) N2459
Curtain Brothers (PNG) Limited v UPNG (2005) SC788
Soltuna Ltd v. Paradise Supermarket Ltd (2020) N8530
Las Korowa v. Koi Kala [2004] PNGLR 54
Media Niugini Ltd and Ors v. Anderson Pawa Agiru (2012) SC1203
Westpac Bank-PNG-Ltd and Bank of South Pacific Ltd v. Hugo Canning Co Pty Ltd, SCA No 11 of 1991
Rural Development Bank v Laka (2007) SC897

Counsel
S Kiene for the plaintiff/cross defendant
G J Sheppard with G Kult, for the 1st, 2nd and 3rd defendants/cross claimants

DECISION

1.	ANIS J:  On 9 April 2025, the defendants/cross-claimants (defendants) applied to dismiss the plaintiff’s cause of action and seek judgment to be entered in their favour in regard their cross-claim.  Their notice of motion was filed on 11 October 2024 (NoM).

2.	I reserved my decision thereafter to a date to be advised.  

3.	This is my ruling.

BACKGROUND

4.	Briefly, the claim by the plaintiff concerns purported breaches of 2 loan facilities or agreements that were entered between the plaintiff and the first defendant in 2015.  The first was a business overdraft loan facility with a limit of K750,000, which had existed at the material time, and the second was a tailored business loan for a sum of K7,600,000.  The business tailored loan agreement was signed on 13 August 2015.  The first defendant had intended to purchase all the shares in the second defendant which resulted in the parties entering into the tailored business loan agreement.  Various securities were undertaken or provided by the second and third defendants against the loans.  Also signed together with the loan agreement was a deed called Deed of Guarantee and Indemnity (the Guarantee) dated 19 August 2015.  The guarantors were Pigele Kewanga P K Investment Ltd and the second and third defendants (Guarantors).

5.	The plaintiff asserts that the first defendant had defaulted on its loan obligations, and as a result, having complied with the relevant provisions under the agreements and statute including the requirements to issue notices of defaults, seeks to recover a debt of K18,933,193.04 (Debt).  The plaintiff claims the Debt is outstanding under the 2 loan facilities plus interests and costs.  It is also seeking leave of the Court to enforce its rights to sell various real properties that had been secured under the loan facilities, including its rights and claims against the Guarantors under the Guarantee.

6.	The defendants do not deny the existence of the loan facilities between the plaintiff and the first defendant and the purpose of the loans, which was for the first defendant to purchase the shares in the second defendant.  They also do not deny the existence of the Deed that is referred to by the plaintiff.  However, they filed a defence and cross-claim in response to the plaintiff’s claim.  Briefly, they deny liability.  They deny that the Deed is valid or enforceable.  They also accuse the plaintiff of causing or contributing to the accrued arrears in their loan repayments that had led to the defaults.  In their crossclaim, they claim, amongst others, (i) negligence, (ii) nullity of the Deed upon the second defendant, (iii) breach of provisions of Fairness of Transaction Act 1993 (FTA) by the plaintiff upon the third defendant, and (iv) fraudulent and negligent actions carried out by the plaintiff on their various accounts.

MOTION

7.	The NoM seeks the following main relief:

2.	Pursuant to Order 9, Rule 15(1)(a) and/or Order 10, Rule 9A 15. (2)(c) and (e) of the Rules and the inherent jurisdiction of the Court, the whole of the Plaintiffs claim contained in the Amended Writ of Summons & Statement of Claim filed 2 May 2022 (CD No. 32) against the First, Second and Third Defendants be dismissed due to the Plaintiffs non-compliance of five (5) Notices to Produce Documents:

(a)	Notice to Produce Documents filed 31 October 2023 (CD No. 76);
(b)	Notice to Produce Documents filed 29 December 2023 (CD No. 81);
(c)	Notice to Produce Documents filed 2 February 2024 (CD No. 84):
(d)	Notice to Produce Documents filed 31 May 2024 (CD No. 101);
(e)	Notice to Produce Documents filed 9 September 2024 (CD No. 106.

3.	Pursuant to Order 9 Rule 15(1)(b) and/or Order 12, Rule 1 of the Rules and the inherent jurisdiction of the Court;

(a)	the Cross Defendant’s Amended Defence to Cross Claim filed 30 August 2022 (CD No. 44) be struct out; and
(b)	that judgement be entered against the Cross Defendant in favour of the First, Second and Third Cross Claimants as pleaded in its Amended Defence & Cross-Claim filed 12 August 2022 (CD No. 42).

4.	Alternatively to term 2 above, pursuant to Order 9 Rule 15(1)(a) and/or Order 12, Rule 1 of the Rules and the inherent jurisdiction of the Court, the whole of the Plaintiffs claim contained in the Amended Writ of Summons & Statement of Claim filed 2 May 2022 (CD No. 32) against the First, Second and Third Defendants be stayed  pending the Plaintiffs full compliance of the five (5) Notices to Produce listed in term 2 above.

EVIDENCE 

8.	No cross-examination was required for the defendants’ evidence.  As such, they were read into the Court’s record by their counsel.  A total of 10 affidavits were tendered.  Of the 10, 8 were deposed by the third defendant whilst 2 were deposed by Chris Malib and Aki Koriyomba.  

9.	The plaintiff tendered 1 affidavit which was deposed by Hillary Masiria.  Ms. Masiria was also cross-examined by the defendants.

ISSUES

10.	The main issues, in my view, are (i), whether the plaintiff defaulted or failed to comply with the defendants’ various notices to produce documents, (ii), if there were defaults or non-compliances, whether the plaintiff should be penalized with a dismissal of its entire claim and whether its defence to the cross-claim should also be struck out, and also, whether judgment should be entered in favour of the defendants/cross-claimants, and (iii), if the answer to the second issue is negative, what orders should the Court make under the circumstances?

COMMON GROUND

11.	Premised on the evidence adduced and submissions of the parties, the 2 contentious notices to produce documents were, (i), Notice to Produce Documents filed 31 May 2024 (CD No. 101) and (ii), Notice to Produce Documents filed 9 September 2024 (CD No. 106) (2 Notices).  

12.	It is not disputed that the plaintiff did not adduce evidence to address the earlier 3 notices to produce documents, that is, (i) Notice to Produce Documents filed 31 October 2023 (CD No. 76), (ii), Notice to Produce Documents filed 29 December 2023 (CD No. 81) and (iii), Notice to Produce Documents filed 2 February 2024 (CD No. 84) (3 Notices).  But having considered the submissions of the parties, I note that the defendants had applied to the Court and on 21 February 2024, the Court ordered the plaintiff to comply with the 3 Notices within a specific timeframe.  So, it would seem that non compliances with the 3 Notices had been addressed.  However, defendants in the present NoM are also arguing that they are still not satisfied that all the documents requested or ordered by the Court in regard to the 3 Notices were provided for inspection.

14.	The plaintiff’s witness, Ms. Masiria, conceded that the plaintiff did not comply within the strict requirements of Order 9 Rule 9(3), that is, in terms of appointing times for inspections of documents as required.  Ms. Masiria, however, gives her reasons, including her claims that most of what had been requested had already been provided or furnished to the defendants.  The other main reason, which has been the subject of controversy, is her claim that those documents that could not be made available for inspection were not available because the plaintiff was not obligated to keep them after a period of 7 years from the date of their dealings or transactions.  Issues arose in relation to interpretation of s.40 of the Bank of Papua New Guinea Prudential Standard BPS253 Customer Due Diligence Policy (BPNGPS).  A copy of the policy was tendered and marked as Exhibit BPNG - A.

COURT’S POWER, ORDER 9

15.	Order 9 Rules 9, 10 and 15(1) reads:

9.  Document referred to in pleading or affidavit. (23/9)

(1)  Where a pleading or affidavit filed by a party refers to a document, any other party may, by notice to produce served on him, require him to produce the document for inspection.

(2)  A notice to produce under this Rule shall be in Form 32.

(3) Where a notice to produce a document is served on a party under Sub-rule (1), he shall, within four days after that service, serve on the party requiring production or his guardian at law, a notice—

(a)	appointing a time within seven days after service of the notice under this Sub-rule when, and a place where, the document may be inspected; or
(b)	claiming that the document is privileged from production and sufficiently stating the grounds of the privilege; or
(c)	stating that the document is not in his possession, custody or power and stating to the best of his knowledge, information and belief where the document is and in whose possession, custody and power it is.

(4)  A notice under Sub-rule (3)(a) shall be in Form 33.

10. Order for production. (23/10)

(1)  Where—

(a)	it appears from a list of documents filed by a party under this Division that any document is in his possession, custody or power; or
(b)	a pleading or affidavit filed by a party refers to any document; or
(c)	it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceedings that there are grounds for a belief that any document relating to any matter in question in the proceedings is in the possession, custody or power of a party, 

the Court may, unless the document is privileged from production, order the party—

(d)	to produce the document for inspection by any other party at a time and place specified in the order; or
(e)	to file and serve on any other party a copy of the whole or any part of the document, with or without an affidavit verifying the copy made by a person who has examined the document and the copy.

(2)  An affidavit made pursuant to an order under Sub-rule (1)(e) shall, unless the Court otherwise orders, state whether there are in the documents copied any and, if so what, erasures, interlineations or alterations.
……

15. Default. (23/15)

(1)  Where a party makes default in filing or serving a list of documents or affidavit or other document, or in producing any document as required by or under this Division, the Court may make such order as it thinks fit, including—

(a)	if the party in default is a plaintiff—an order that the proceedings be stayed or dismissed as to the whole or any part of the relief claimed by him in the proceedings; or
(b)	if the proceedings were commenced by writ of summons and the party in default is a defendant—an order that his defence be struck out and that judgement be entered accordingly.

16.	The Court’s power to grant or refuse the NoM or applications that are made for default or summary judgment of this nature, is discretionary.  See cases:  Brian Joshia v. Stephen Raphael (2016) N7640, Ace Guard Dog Security Services Limited v Lindsay Lai (2003) N2459, Curtain Brothers (PNG) Limited v UPNG (2005) SC788 and Soltuna Ltd v. Paradise Supermarket Ltd (2020) N8530.  I also adopt what I stated at para. 9 in Soltuna which was as follows:

9.  I fully adopt the above as my own. See also cases: Ace Guard Dog Security Services Limited v Lindsay Lai (2003) N2459; Curtain Brothers (PNG) Limited v UPNG (2005) SC788. In the present case, the plaintiff is seeking judgment to be entered under Order 9 Rule 15 (1)(a) and (b) of the National Court Rules (NCR).  Order 9 Rule 15 (1) begins and I quote,.....Where a party makes default in filing or serving a list of documents or affidavit or other document, or in producing any document as required by or under this Division, the Court may make such order as it thinks fit, including —. To me, the rule permits a wider use of the Court’s power under Order 9, that is, in addition to what it may order under sub-rules (a) or (b) under Rule 15 of Order 9.  [Underlining mine]

PRELIMINARY FINDINGS

17.	Premised on the submissions and evidence adduced by the parties, including evidence adduced from cross-examination of Ms. Masiria, I make the following observations:

•	The plaintiff did not strictly comply with the 2 Notices;
•	However, it appears that the plaintiff complied with some of the requests where it considered that it was ‘obligated’ to do so;
•	Two main contentious issues arose, which are, (i), whether the plaintiff has the originals of the share transfer certificates, and, (ii), whether those documents that could not be produced by the plaintiff as requested in the 2 or 3 Notices, was because of the fact that the documents had surpassed the 7 year period for keeping them as stipulated under s.40 of the BPNGPS;
•	In regard to the question of whether the plaintiff kept the original share transfer certificates at the material time, and of whether the originals were used to effect the share transfers with the office of the Investment Promotion Authority (IPA), they are, in my view, part of the substantive contested facts as pleaded; that is something which this Court cannot make a determination on now; the plaintiff asserts in its pleadings that it had copies and not originals of the share transfer certificates at the material time; as such, it is futile, in my view, to insist upon the plaintiff through discovery to provide the original share certificates for inspection; that would or may be a matter for trial where evidence may be called to establish which party is to be believed on the subject matter;
•	In regard to s.40 of the BPNGPS, there were differing or different interpretations given by the parties;
•	Section 40 reads:

40.	Each AI (Authorised Institution) must record retention policies and procedure for periods not less than 7 years.

a.	following the termination of business relations for customer identification information, and other documents relating to the establishment of business relations, as well as account files and business correspondence; and

b.	following the completion of the transaction for records relating to a transaction, including any information needed to explain and reconstruct the transaction.

•	I will agree with the defendants’ interpretation of s.40.  Section 40(a) must be read together with s.40(b), which means that both conditions have to be satisfied.  In the present case, the customer-client relationship between the parties may have turned sour or ended.  However, the transaction of records of the defendants’ accounts would normally be kept safe given the plaintiff’s purported claims of default and enforcement.  In fact, it is logical that all the records of a customer of a bank would be preserved for use as evidence especially in the case where the file is referred to the recovery section of the bank or if a customer sues the bank over a transaction or dealing it had or has with the bank;
•	I also uphold the submissions by the defendants that the defendants’ transactions with the plaintiff has not concluded as yet; the transactions or business dealings between the parties are under dispute at the moment given the actions that is taken by the plaintiff and given the cross-claim that is filed by the defendants; my understanding of a transaction coming to an end is that it may depend on the circumstances of each case.  If a customer closes his or her account with an Authorised Institution (AI), the AI such as a bank may destroy the customer’s records or transactions after 7 years because pursuant to s.40 of the BPNGPS, the AI is not obliged to continue to keep the account beyond the said period.  If the customer takes out a loan with the bank, the loan account may be closed and all the documents used may be destroyed after 7 years from the date that the customer fully repays the loan with interest and costs.  But it makes no sense that a bank will destroy a customer’s loan records if the customer continues to maintain his or her account with the bank.  These records would ordinarily be kept together under the customer’s name and records.  I believe that is why the policy makers who created s.40 deliberately chose and used the phrase for periods not less than 7 years, which is to give leverage to AIs to extend their policies on record keeping beyond the minimum requirement of 7 years.  In the 3rd scenario or example, a customer may default on his or her loan transaction or business with his or her Bank.  If that occurs, the customer’s transaction or dealing with the bank may end after he or she fully settles the debt, plus the default fees, interests and associated costs, and provided the bank no longer wishes to have further dealings with the customer and closes the customer’s account.  In that type of scenario, the 7 year limitation period may be computed from the date when the customer’s account is closed.  Moving on to the 4th scenario or example which is in a case where a customer defaults on his or her loan and the bank sues the customer, or it may be a case where the customer is the one that sues the bank premised on his or her loan with the bank.  In such cases, the 7 year limitation period may commence 7 years after the dispute has been resolved by the parties whether it be in Court or through other means, and again, provided the bank has black-listed the customer and decides not to continue any business transactions with the customer after the dispute has been resolved.  The present case appears to fit into this 4th scenario;
•	I also note that s.39 of BPNGPS, like s.40, implies that records kept by AIs ought to be securely kept and held for a longer period that may extend beyond 7 years for various reasons including evidence to be used in a court of law.  An AI or a bank would need the records to reconcile a defaulting customer’s account for debt recovery purpose or exercise, and also to use as evidence in a court of law in general;
•	It appears that the wrong interpretation of s.40 by the plaintiff has significantly contributed towards want of full compliances with the 2 Notices or all the notices to produce documents, that had been issued by the defendants.

LAW TESTS

18.	Having made these preliminary findings and clarities, I note that Courts have over the years stated various tests or considerations in situations like this.  The cases include Las Korowa v. Koi Kala [2004] PNGLR 54, Media Niugini Ltd and Ors v. Anderson Pawa Agiru (2012) SC1203, Westpac Bank-PNG-Ltd and Bank of South Pacific Ltd v. Hugo Canning Co Pty Ltd, SCA No 11 of 1991, Rural Development Bank v Laka (2007) SC897 and Curtain Bros (PNG) Ltd v UPNG (2005) SC789.

19.	In Las Korowa, Cannings J stated which I adopt herein as follows:

The order made by Gavara-Nanu J was an order made under Division 1 of Order 9 and it was not complied with. Therefore the circumstances are ripe for the Court making an order, including that the defendants' defence be struck out and that judgment be entered against the defendants. However it is a discretionary matter and the Court must be satisfied that it is appropriate to make an order in those terms. There is a range of matters relevant to the exercise of the discretion.

I consider the relevant considerations to be:

the extent or seriousness of the default;
whether there are good reasons for the default;
the terms of previous orders made by the Court;
whether there are any unresolved issues in the case;
the conduct of the lawyers; and
the interests of justice.

20.	In Westpac Bank and Hugo Canning, the Supreme Court discusses remedial options that a Court may impose or order for this type of application:

a.	the remedies that the Court may impose include the dismissal of the offending party from the action, but it is only one of the options open to the Court; not necessarily the first course of action that the Court should take;
b.	other courses include the obvious imposition of costs; in an appropriate case, the exclusion of documents not disclosed; and, or conditional orders rendering greater or lesser penalties, in the event discovery is not made within a fixed time, including once again the option of dismissal of action or defence;
c.	dismissal of a party from the action for failure to give discovery can only be justified when the Court finds that the failure or refusal can be seen as a tactic to abort the trial;
d.	"if when pleadings are completed an action is ready to be heard, it is indeed a serious and the severest penalty to strike out a defence so that a party suffers judgment without trial";
e.	"the only justifiable pursuit of a motion to strike out, is to either enforce discovery or, in a case of refusal, where there has been blatant avoidance, for the purpose of delaying or avoiding trial, to recognise the refusal by closing out the offending party's case".

CONSIDERATION

21.	Having considered the submissions of the parties, the following factors appear relevant, and I take them into account:

•	Multiplicities in the notices to produce documents issued by the defendants;
•	The different interpretations of s.40 of the BPNGPS by the parties, which was evident during cross-examination of Ms. Masiria for the plaintiff and in the submissions;
•	The defendants’ attempt to raise and resolve a triable issue at the discovery stage, namely, the issue of whether the plaintiff kept the original share transfer certificates at the material and to date; those are triable issues that should be left to the trial Court to determine;
•	the circumstances of this case demonstrate that it may be unfair to label the default actions or inactions of the plaintiff as deliberate;
•	The defendants had the option to obtain orders from the Court to compel the plaintiffs to produce documents that they had requested in the 2 Notices; although there is no strict requirement for that, practice and procedures require, and it is in my view, that the said option ought to have been exhausted before applying to seek summary judgment or order one’s defence to be struck-out; see cases:  Soltuna Ltd v. Paradise Supermarket Ltd (supra);
•	The fact that the matter is at an advanced stage of the proceeding; see case: Soltuna Ltd v. Paradise Supermarket Ltd (supra) and Westpac Bank-PNG-Ltd and Bank of South Pacific Ltd v. Hugo Canning Co Pty Ltd, SCA No 11 of 1991;
•	Premised on the pleadings and submissions of the parties, there is a lot at stake here in terms of the claims of the parties, with the likely possibility of damages that may be awarded into 10s of millions of kina;
•	Again, premised on the pleadings and submissions of the parties, there is no issue that more than 7 million kina had been advanced by the plaintiff to the first defendant and that the money was used by the first defendant to purchase all the shares of the second defendant; and there appears to be no issue that there was default on the part of the first defendant in repaying the loan money; the arrangements were contractual in nature and a default would in the ordinary course trigger the enforcement options and rights of the non-defaulting party; in this case, the plaintiff took steps to enforce its rights including commencing this proceeding;
•	The defendants, in response to the claim, are making a counter-claim against the plaintiff to allege or hold the plaintiff negligent and responsible for the defaults; their other primary counter-claim is focused on the Guarantee; premised on the pleadings, there appears to be no issue at the time when the Guarantee was signed; however, the defendants, in their defence, are asserting that the Guarantee is void because the person that executed the Guarantee for the second defendant did not have authority to do so; they also allege through the third defendant that the plaintiff committed breaches under the FTA;
•	Interest of justice therefore does not appear to warrant dismissal of the plaintiff’s claim nor its defence to the cross-claim; in fact, great injustice may be perceived against the plaintiff if its claim is summarily dismissed, especially when the pleaded facts show that the first defendant had borrowed more than K7 million kina from the plaintiff and has defaulted, and the plaintiff is presently attempting to recoup its money back; interest of justice dictates that all the issues should be properly tried including the defence and cross-claim of the defendants.

22.	When I weigh all these, I am not minded to exercise my discretion in the manner as proposed by the defendants in their NoM.

23.	Instead and given the circumstances of this case as described above, I intend to make orders for the defendants to issue a fresh notice for production of documents upon the plaintiff with additional orders to follow through.

SUMMARY

24.	In summary, I dismiss the defendants’ NoM.  

COST

25.	Costs that are awarded in this type of application is discretionary.  I will order each party to bear their own costs.  It appears overall that there was a need to seek clarity from the Court in relation to the tussle between the parties concerning production of documents and in relation to the interpretation of s.40 of the BPNGPS. As such, I think it is only fair that despite refusing the defendants’ NoM, that I should order each party to bear their own costs.

ORDERS

26.	I make the following orders:

1.	The defendants’ notice of motion filed 11 October 2024 is refused.

2.	I will instead issue the following orders:

(i)	The defendants shall file and serve a fresh Notice to Produce Documents (Form 32) on the plaintiff within 7 days from the date of this order;
(ii)	The defendants shall avoid filing several or multiple notices to produce documents upon the plaintiff without good causes or justifications;
(iii)	The plaintiff shall, within 14 days (as opposed to 4 days) after the date of service of the Notice to Produce Documents, file and serve on the Defendants a notice (Form 33):

(a)	appointing a time within 7 days after service of the Notice to Produce Documents when, and a place where, the document(s) may be inspected; or
(b)	claiming that the document(s) is privileged from production and sufficiently stating the grounds of the privilege; or
(c)	stating that the document(s) is not in its possession, custody or power and stating to the best of its knowledge, information and belief where the document is and in whose possession, custody and power it is. 

3.	I order each party to bear their own costs of the application.

4.	Time for entry of these orders is abridged to the date and time of settlement by the Registrar of the National Court which shall take place forthwith.

The Court orders accordingly

________________________________________________________________
Lawyer for the plaintiff/cross defendant: Bank South Pacific In-House Counsel
Lawyers for the 1st, 2nd and 3rd defendants-cross/claimants: Young & Williams