SC841

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SC REV NO: 13 OF 2005

REVIEW PURSUANT TO SECTION 155 [2] [C] AND 155 [4] OF THE CONSTITUTION

APPLICATION BY JIMM TRADING LTD.

Waigani: Los, Sevua, Lay JJ
2005: 3 November
2006: 11 July

SUPREME COURT ─  application for review ─ security for costs ─  principles ─ particular case ─ company without realizable assets ─ K 20,000 security ordered.

Cases Cited:
Supreme Court Review Number No 11 of 1999: Application to Review Pursuant to Constitution Section 155 and (2) (B); 
Application by David Lambert v Peter Ipatas and Edward Konu (The Provincial Returning Officer) and the Electoral Commission (No. 3) SC601;
Robert James Reynolds V. Kevin Walcott, Dagoatao Pty. Ltd. & Bernard Maladina [1985] PNGLR 316

Counsel:
Mr. S. Ketan, for the Applicant
Mr. D. Wood, for the Respondent

RULING ON APPLICATION FOR SECURITY FOR COSTS

1. BY THE COURT: The Applicant, Jimm Trading Ltd., filed an Application for Review on the 15th March 2005, to seek review of a decision made on 12 July 2002 by Amet CJ sitting as a single judge of the Supreme Court, in Supreme Court Appeal S. C. A. No. 110 2001.

2. On the 26 July, 2005 the Respondent Bank of South Pacific Ltd., filed a Notice of Motion seeking orders that:

a] 	the Applicant, shall within 14 days from the date of this order, give security for costs in the sum of K31,000 for the costs of and occasioned by this proceeding;

b] 	until such security of costs is given, the proceedings be stayed;

c] 	in default of such security for costs being given within the required period of 14 days from the date of this order, the proceedings be dismissed, with costs to be taxed and paid by the Applicant to the Respondent.

Background

3. On 12 December 2001, the National Court ordered in OS No. 665 of 2001 that the Applicant give vacant possession to the Respondent of the land described as a lots 7 and 11 section 387 Hohola (the land).

4. There was a mortgage over the land being one of the securities given by the Applicant to the Respondent in relation to a number of loans advanced by the Respondent to the Applicant. The Applicant was in default of repayment. At 30 June 2005 the Applicant was indebted to the Respondent in the amount of K1, 660,424.64, according to account records maintained by the Respondent, in relation to the Applicant's defaults under the loans.

5. On 21 December, 2001 the Applicant filed an application in the Supreme Court in SCA No. 110 of 2001 for orders that, inter alia, the order made requiring the Applicant to give vacant possession of the land be stayed and that the order obtained by the Respondent for a Writ of Possession in relation to the land be stayed. The Supreme Court dismissed the application on 24 December, 2001.

6. On 5 January, 2002 the Applicant commenced proceedings OS No. 21 of 2002 in the National Court in which the Privatization Commission was Respondent. By consent the court granted orders restraining the Respondent, Privatization Commission, from exercising its powers as mortgagee. 

7. Papua New Guinea Banking Corp. Ltd. as successor to the rights of the Privatization Commission appealed from that consent order in proceedings SCA 8 of 2002. In those Supreme Court proceedings, the Applicant in this proceeding (Jimm Trading Ltd.) applied for an interim order restraining the appellants or its successor, Bank South Pacific Ltd. (the Respondent in this proceeding) from disposing of any further assets or property of Jimm Trading Ltd. until further order. That application was granted by Sakora J on the 28 of March 2003. Jimm trading Ltd. was placed in liquidation on the 10 July 2003 and by consent of the liquidator the order of Sakora J was discharged on 24 of November 2003. The Respondent subsequently abandoned that appeal. 

8. On the 11 July, 2002 the Applicant filed a Notice of Motion in the Supreme Court proceedings SCA No. 110 of 2001 seeking an injunction that the Respondent be restrained from executing the Writ of Possession. The Supreme Court dismissed the application on 12 July, 2002 and the sheriff proceeded with the execution of the writ of possession.

9. On the 14 August, 2002 in Supreme Court proceedings SCA No. 68 of 2002, the Applicant filed an Application for Leave to Appeal and Notice of Appeal, to appeal the decision made on 12 July, 2002. The Supreme Court dismissed that appeal on the 24 of November 2003.

10. A search of the records of the Registrar of Companies shows that as at 16 June, 2005 Wesley Hui owned 18 ordinary shares in the Applicant, See Ho Soo & Co Ltd owns 60 ordinary shares and Gulf Oil Trust owns 2 ordinary shares in the Applicant.

11. At 8 July 2005 the records of the Registrar of Companies relating to the share holding of See Ho Soo & Co Ltd shows that Wesley Hui owns 54 ordinary shares, and Gulf Oil Trust owns six ordinary shares.

12. In the Form 15 Consent and Certificate of Director (existing company) dated 23 October 1999, in the records of the Registrar of Companies relating to the Applicant, Mr. Wesley Hui's nationality is shown as Australian. A letter from the Department of Foreign Affairs and Immigration, Office of the Direct-General advises that Mr. Hui was born in Papua New Guinea but his nationality is Australian. The letter also states that it appears that Mr. Hui has not applied for a renewal or extension of his work visa which expired 28 February 2005.

13. At a taxation of costs in respect of SCA, No. 8 of 2002 at the Supreme Court Registry on 11 May, 2005 the lawyer for the Applicant, Mr.Parkop, stated that Mr. Hui lives in Sydney and Mr. Parkop  sought payment of Mr. Hui's costs to travel to Papua New Guinea from Sydney.

14. In proceedings numbered OS 773 of 2003 Mr. Wesley Hui made an application under section 300 of the Companies Act to remove Jimm Trading Ltd. from liquidation. In that proceeding Mr. Wesley Hui deposed to an affidavit on the 2 of December, 2003 in which inter alia he said he is the Managing Director of the company and:

"37.	In a meeting with the Internal Revenue Commission and in separate meetings with other creditors, it was decided that the only way the creditors and contributories can recovered their debts was to have the company pursue enforcement of the Supreme Court order SCA No.8 of 2002.

38.	The Managing Director has made a commitment to fund legal expenses associated with pursuing these enforcement. 

39.	The Managing Director will also fund the legal proceedings against the bank and TST 4 Mile Limited in other proceedings the company has commenced.

40.	In view of the fact that the company have (sic) no realizable assets because the bank has illegally seized all the assets and documents, and the only way for the company to pay its debts is to enforce the order, the creditors will not lose anything by having the winding up orders terminated so that the company is able to continue under the funding and guidance of the Managing Director to fight the bank and to enforce the order to have the assets returned and the debts paid in full.
...

42.	If the company is not able to enforce the order, then only the Managing Director will lose since there are no assets to pay the creditors anyway."
...

15. The Respondent has incurred costs of approximately K5,697 to the end of July and estimates its further costs of the application for review to be K 25, 500.

16. The Applicant relies upon the liquidator's report for the period 13 July, 2003 to 14 January, 2004 which at box 10 indicates total assets of K 19, 251, 063 and liabilities of K 9, 679, 815. Those figures are prefaced with the words "the amount of the estimated assets and liabilities at the data of the commencement of the winding up per the Annual Return for the year ended the 30th June 1999."

Submissions

17. The Respondent submits that from the evidence Mr. Hui is not ordinarily a resident of Papua New Guinea, the company has no realizable assets in Papua New Guinea, the Applicant remains heavily indebted to the Respondent, the Applicant has exhausted all avenues of appeal in the Supreme Court, if the Applicant is not successful it will be unable to pay the Respondent's costs.

18. The Applicant submits that the review is bona fide with reasonable prospects of success including grounds of a judge of the Supreme Court sitting in appeal against his own decision, the court making orders for enforcement of a writ of possession when the application before it was for a stay, conflict of orders made in different proceedings, and whether the orders made against the Privatization Commission bound the successor in title. It is submitted that the application is being used oppressively against the Applicant. The Applicant has a bill of costs for K 70,457.73 awaiting taxation and the liquidator identified K 19.2 million worth of assets. If the Applicant is found to be insolvent the situation has been brought about by the Respondent.

The Law

19. In Supreme Court Review Number No 11 of 1999: Application to Review Pursuant to Constitution Section 155 and (2) (B); Application by David Lambert V Peter Ipatas and Edward Konu (The Provincial Returning Officer) And the Electoral Commission (No. 3) SC601 (Kapi DCJ, Salika J, Injia J.) the court held that it is within the inherent jurisdiction of the court under section 155 (2) (b) of the Constitution to impose security for costs. The court also noted that it had previously taken the same general approach as in the National Court but that the ultimate test is, is it in the interest of justice to make the order. Two issues are considered particularly relevant, (1) the merits of the application and (2) whether there is evidence to believe that the appellant will not be able to pay the respondent's costs if it should be unsuccessful on the appeal.

This Case

20. We do not propose to examine in detail the merits of the Applicant's application. Suffice to say that the review seeks to reverse a decision made almost 4 years ago in circumstances in which the Applicant has had three applications to the Supreme Court refused. Added to that is the fact that the property in respect of which the Applicant seeks relief, has been sold. Without prejudging the matter the delay must be a significant hurdle to the success of the application. Irrespective of the merits of the substantive application, the preliminary issue of delay raises a real prospect that the application will fail.

21. Wesley Hui is the end holder of the majority of shares in the Applicant either directly, or through his ownership of the great majority of shares in See Ho Soo Ltd., he is an Australian citizen and currently, for what ever reason, ordinarily resident in Australia. He has given evidence in related proceedings that the Applicant company has no realizable assets and it can only finance and maintain proceedings if those proceedings are financed by Mr. Hui.

22. Counsel for the Applicant has, we consider, misunderstood the effect of the report filed by the liquidator, referred to in his submissions as evidence that the company had assets of K 19.2 million. That is clearly not the liquidator's figure in the report, it is a figure taken from the accounts of the company which were available immediately prior to the appointment of the liquidator. There is no evidence that the company now has any assets. The evidence before the court is that the liquidator and Mr. Hui believe that there are no further assets to be realized. In the absence of evidence to the contrary, we find that the Applicant has no assets with which it could pay an order for costs, apart from a potential judgment for costs on a bill pursuant to an order for costs, where the bill was yet to be taxed at the time of hearing.

23. We therefore find that there are strong reasons for believing, that if the application for review is unsuccessful, the Applicant will not have means to pay the respondent's costs. In those circumstances the proper course is to order that security for costs be paid.

24. The Respondent has estimated its costs of the review at K 31,000. We have not been provided with a draft bill costs (in the sense of provision of details of the time anticipated to be involved), which in the National Court has been considered an appropriate course: Robert James Reynolds V. Kevin Walcott, Dagoatao Pty. Ltd. & Bernard Maladina [1985] 316 (Bredmeyer J.), although we acknowledge the skeletal bill included in Mr. Wood's affidavit of 25th July 2005 in which it seems to us there is some duplication in items 5 (g) & (h).

25. It is not all solicitor/ client costs which are recoverable on the taxation of a party/party bill. Obviously the proceedings will have as much importance for the Respondent, as for the Applicant, as the evidence is that the assets which the Applicant seeks to have returned to it, have been sold on behalf of the Respondent. A considerable sum of money is involved and the matter will have to be prepared with some care. Nevertheless, in our view, an amount less than the Respondent 's estimate of its costs is appropriate for security. Security is not always ordered on a full indemnity basis: Reynolds v Walcott (supra). We order that the Applicant pay into court, as security for costs, the sum of K 20,000 within 30 days of order. These proceedings are stayed until that amount has been paid. The respondent shall have liberty to apply should the Applicant default.

26. Finally, we note, that in the Applicant's submissions, it was suggested that the effect of the order of Sakora J made on 28 March 2003, was to order the return from the possession of the liquidator, of all of the assets of the company. That was neither the effect of his Honour's order, nor was it what the company sought in making its application. Both the application and the order clearly only related to an injunction to restrain the disposal of further assets. 

ORDER: 

1.	The Applicant shall pay into court within 30 days of order the sum of K 20,000 as security for the Respondent's costs; 

2.	The proceedings are stayed until the said sum is paid into court; 

3.	Liberty to the Respondent to apply on the Applicant's default; 

4.	The Applicant is to pay the Respondent's costs of this application to be taxed if not agree.
________________________________________________________________________
Blake Dawson Waldron: Lawyers for the Applicant Respondent
Ketan Lawyers: Lawyers for the Respondent Applicant