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Livestock Development Corporation Ltd v Rural Development Bank Ltd [2008] PGSC 14; SC923 (4 March 2008)

SC923

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 6 OF 2008

BETWEEN:

LIVESTOCK DEVELOPMENT CORPORATION LIMITED
Appellant/applicant

AND:

RURAL DEVELOPMENT BANK LIMITED
First Respondent

AND:

RAGA KAVANA – REGISTRAR OF TITLES
Second Respondent

AND:

NIUGINI PROPERTIES LIMITED
Third Respondent

Waigani: Davani .J
2008: 3rd, 4th March

SUPREME COURT – Practice and Procedure – application for interim restraining orders – same orders sought as in court below – jurisdiction and powers of a single judge of the Supreme Court. Section 5 (1) (b) of Supreme Court Act.

SUPREME COURT – Practice and Procedure – Undertaking refiled – Undertaking refused in court below – akin to introduction of fresh evidence – abuse.
Facts

Applicant filed originating summons seeking various declaratory orders, generally to have Contract of Sale between the first and third respondents, declared invalid. The Contract involved sale of land where the first respondent exercised its power of sale as mortgagee to sell to the third respondent. The applicant applied for interim injunctive orders in the National Court which were refused. It appealed to the Supreme Court against that refusal.

On the Supreme Court appeal, it filed an application to restrain the third respondent, similar orders it sought in the National Court, which were refused.

Held

1. A single judge of the Supreme Court cannot grant orders that would effectively determine the appeal, a power that rests only with a full Supreme Court Bench.

2. The applicant cannot correct and rely on an Undertaking as to Damages which was refused in the court below and which it now seeks to rely on in seeking these orders. The applicant is effectively relying on fresh evidence, which can only be done by way of application. That is an abuse of process.

Cases cited
Avia Aihi v the State [1981] PNGLR 81;
Leytrac Pty Limited v. the Independent State of Papua New Guinea [1982] PNGLR 148;
Bill Skate and Peter O’Neil v Jeffrey Nape, speaker of Parliament (2004) SC754;
Wau Ecology Institution v Registrar of Companies (2005) SC794;
National Superannuation Fund Ltd v Pacific Equities and Investments Ltd and 2 others (2006) SC845;

Counsel
J. Nandape, for appellant/applicant
R. Bradshaw, for the first respondent
K. Gamoga, for third respondent
Second respondent did not appear

DECISION

4 March, 2008

1. DAVANI .J: The application comes before me sitting as a single judge of the Supreme Court, amended application filed by Mawa Lawyers on 28th February, 2008, which seeks the following orders;

"(a) That pursuant to Section 5 (1) (b) of the Supreme Court Act and/or Section 155 (3) and (4) of the Constitution, the Third Respondent be restrained from entering onto and dealing with the property described as Portion 5, Milinch, Lae Morobe Province comprising State Lease Volume 126, Folio 229 pending the determination of the appeal and the National Court proceeding described as Os No.4 of 2008.

(b) That pursuant to Section 5 (1) (b) of the Supreme Court Act and/or Section 155(3) and (4) of the Constitution, the Third Respondent be restrained from evicting the employees of the Appellant residing on the property described as Portion 5, Milinch, Lae Morobe Province pending the determination of the appeal and the National Court proceeding described as OS 4 of 2008.

(c) That pursuant to Section 5 (1) (b) of the Supreme Court Act and/or Section 155(3) and (4) of the Constitution, the Third Respondent be restrained from entering into a contract for sale with a third party or entering into any form of agreement or negotiation with a third party with a view of transferring the title of the property described as Portion 5, Milinch Lae Morobe Province pending the determination of this appeal and the National Court proceeding described as OS No. 4 of 2008.

(d) That pursuant to section 5 (ii) (b) of the Supreme Court Act the National Court proceedings described as OS No.4 of 2008 be stayed pending the determination of the appeal herein.

(e) Cost of the Application be paid by the Second and Third Respondents.

(f) That the time for entry of these orders be abridged to the time of settlement by the Registrar which shall take place forthwith."

(g) Any other or further orders as this Honourable Court deems fit.

2. The application is opposed by the first and third respondents. The second respondent did not appear.

Background

3. The substantive proceeding in the National Court is an originating summons filed on 11th January, 2008. The orders sought are in the nature of declarations, being;

1. The loan agreement executed by the third respondent Livestock Development Corporation Ltd (LDC) and the then Rural Development Bank, presently known as the National Development Bank Ltd (NDB) be declared illegal and void for breaching the provisions of Companies Act 1997 and the LDC’s constitution.

2. The basis for seeking these declarations are that;

- Persons signing on behalf of the LDC did not have the authority nor was there any resolution from the Board of Directors of the LDC.

- The loan agreement was not sealed with the LDC’s common seal.

- The loan agreement was not witnessed.

- The loan application was made 8 days after the loan had been approved, being quite irregular.

4. On the substantive proceedings, the applicant filed a notice of motion seeking injunctive orders. This motion for injunctive orders was heard by the National Court on 11th February, 2008 which was subsequently refused on 12th January, 2008.

5. The land the subject of the proceedings is Portion 5 Milinch Lae fourmil Markham in the Morobe province (the property). It houses an abattoir and other dwellings.

6. The application arises as a result of a mortgagee sale conducted by the NDB after it sold the property to the third respondent. The present status of the sale is that the third respondent through the second respondent has registered the transfer of title of the property, to the title deed. I have heard from Mr Bradshaw that the NDB’s interests as mortgagee will also be registered on the title very shortly.

7. The mortgagee sale arose because the LDC failed to repay principal loan of K460,000.00 together with interest, which loan it applied for on 24th March, 2003 and which was approved on 6th May, 2003. The NDB submits that the mortgagee sale was conducted because since the LDC’s receipt of the loan in 2003 up to late 2007, the LDC has not made a single repayment to the NDB. (See affidavit of Hubert Namani, lawyer and company secretary for first respondent sworn on 18th February, 2008 and filed on 19th February, 2008.)

The Supreme Court appeal

8. The appeal filed by the applicant, relates to the refusal by the trial judge to make the interim injunctive orders that it sought. The appeal filed on 14th February, 2008 was filed together with application for interim injunctive orders pending the determination of the appeal. This was followed by the amended application which was filed on 28th February, 2008.

9. On perusing the notice of appeal, the extensive grounds of appeal relate basically to the refusal to grant the interlocutory interim injunction. It is based on this appeal, that the applicant now seeks orders restraining the second and third respondents from taking any further steps.

This application

10. Ms Nandape moves for orders pursuant to s. 5 (1) (b) of the Supreme Court Act and/or s. 155 (3) and (4) of the Constitution. Section 5 (1) (a) – (e) of the Supreme Court Act reads;

"5. Incidental directions and interim orders.

(1) Where an appeal is pending before the Supreme Court—

(a) a direction not involving the decision on the appeal; or

(b) an interim order to prevent prejudice to the claims of the parties; or

(c) an order in any proceedings (other than criminal proceedings) for security for costs; or

(d) an order dismissing an appeal in any proceedings (other than criminal proceedings) for default in furnishing security; or

(e) an order admitting an appellant to bail,

may be made by a Judge."

11. Section 155 (3) (4) of the Constitution reads;

"(3) The National Court—

(a) has an inherent power to review any exercise of judicial authority; and

(b) has such other jurisdiction and powers as are conferred on it by this Constitution or any law,

except where—

(c) jurisdiction is conferred upon the Supreme Court to the exclusion of the National Court; or

(d) the Supreme Court assumes jurisdiction under Subsection (4); or

(e) the power of review is removed or restricted by a Constitutional Law or an Act of the Parliament.

(4) Both the Supreme Court and the National Court have an inherent power to make, in such circumstances as seem to them proper, orders in the nature of prerogative writs and such other orders as are necessary to do justice in the circumstances of a particular case."

12. Ms Nandape urges the court to grant the restraining orders to maintain the status quo. She submits that it is important this interim injunction remain in place to allow the National Court proceedings to progress because the issue of the validity of the contract of sale entered into by the parties must be properly determined. The contract of sale between the NDB and the third respondent was executed on 17th December, 2007.

13. Both Messrs Bradshaw and Gamoga submit the following;

1. That the application is an abuse of process because the applicant is applying for the same orders that were sought in the National Court but which were refused. They submit that if these orders are granted, that this court will effectively be making the orders sought in the appeal, a power that rests only with a full Supreme Court bench (i.e a 3 man bench);

2. That this court should not deliberate or make such orders because it does not have the jurisdiction to do so. This is so because s. 5 (1) (a) of the Supreme Court Act states that "a direction not involving the decision on the appeal may be made by a judge." (my emphasis)

Both counsel submit further that an appeal is usually by way of re-hearing of the evidence given in the court from which the decision is appealed against, subject to the right of the Supreme Court to allow fresh evidence and to draw inferences of fact. (s. 6 of Supreme Court Act)

3. That the interim injunctive orders were refused because the Undertaking as to Damages was not sealed and further, that the National Court found that the applicant could not have been in a position to meet the undertaking because it was unable to repay the loan. The National Court could not reconcile that fact and so refused the orders sought. Messrs Bradshaw and Gamoga submit that the applicant cannot now bring to the court material that was refused in the court below i.e the Undertaking as to Damages. That they are effectively introducing fresh evidence, a matter that should be done by way of proper application.

4. Mr Bradshaw submits that the act sought to be restrained has already occurred. He submits that the alternative remedy is to proceed to seek Declarations which action the LDC has already commenced in the National Court and which it should continue to pursue. In saying that, Mr Bradshaw referred the court to Leytrac Pty Limited v. the Independent State of Papua New Guinea [1982] PNGLR 148, which is a case on point. In that case, the court held that where the act intended to be restrained has already occurred, an injunction to restrain is not available. That an alternative remedy by way of Declaration may be available.

14. I discuss these submissions below under the following subheadings;

i. Application before a single judge – I agree with Lay .J sitting as a single Judge of the Supreme Court in National Superannuation Fund Ltd v Pacific Equities and Investments Ltd and 2 others (2006) SC 845, that in any application before a single judge, the first examination must be to determine that what is sought is not outside the powers of a single judge as expressed in s. 5 (1) (a) of the SCA or O. 3 r. 3 (2) (a) of the Supreme Court Rules (SCR), i.e that the orders sought are not involving the decision on the appeal or a final decision in the proceedings. His Honour referred to Wau Ecology Institution v Registrar of Companies (2005) SC 794 where the Supreme Court, in deciding on what is meant by "not involving the decision on the appeal" said;

"...the meanings" entail", "include" and "affect in its operations" are the meanings intended by the legislature in using the word "involved" in the provision...s. 5 (1) (a) is not speaking of the decision "on appeal", that is decision appealed from,... but is referring to the decisions which will have to be made by the court to determine the issues raised on the appeal".

15. If I were to make the orders sought now by the applicant, I will actually be determining the appeal, which is to seek restraining orders.

16. Although the application seeks orders to restrain NPL from entering into and dealing with the property, restrain from evicting the employees of the appellant residing on the property and restrain NPL from entering into a contract of sale with a third party pending the determination of the appeal and National Court proceedings, the third respondent NPL has already registered the transfer to the title deed. The mortgage will shortly be registered. In my view, those are orders that should be sought in trial court, not at the Supreme Court. They are before me now, if I may say, in the guise of an appeal. The applicant has already filed proceedings for declaratory orders. Rightly, it should pursue those proceedings. If a decision is made in its favour, then it can seek to recoup its losses by way of a damages claim. However I note the claim may be one of fraud because the applicant alleges that "certain persons" conspired with "relevant officers" of the NDB to commit a fraud on it i.e to obtain the loan of K450,000.00 from the NDB. (See also par. 7, 8 and 23 from the affidavit of J Akipe sworn on 9th January, 2008).

17. Order 4 r. 2 (b) of the National Court Rules states that where a claim made by a plaintiff is based on an allegation of fraud, proceedings shall be commenced by writ of summons. Order 8 r. 30 of the NCR states also that a party pleading "shall give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which he relies." Although I asked Ms Nandape why her client should not focus on pursuing the claim in the National Court and even suggested the filing of a writ of summons and statement of claim and that her clients can claim damages at the end of the day if they were successful, Ms Nandape continued to pursue the line of argument that there must be interim injunction in place to preserve the status quo. I find that to be an incorrect position taken by the applicant, considering the points raised above. Besides there is no status quo to preserve as the purchaser and mortgagees rights have been and will shortly be registered on the title deed.

ii. Introduction of fresh evidence - Mr Bradshaw submits that by the applicants filing a fresh Undertaking as to Damages, under seal, they are effectively filing fresh evidence. The unsealed Undertaking as to Damages was a reason why the National Court refused the injunctive orders in the National Court. This situation is akin to that in Wau Ecology Institution & 2 ors (supra), a decision of the Supreme Court which held that an order of that nature would create rather than prevent prejudice to the claims of the parties before the appeal court, contradictory to s. 5 (1) (d) of the Supreme Court Act. It held that a single judge of the Supreme Court exercising s. 5 power should not make an order which has the potential effect of changing the fact situation out of which the appeal arises. In that case, the Supreme Court held that the trial judge wrongly exercised his discretion when he granted certain orders which did not fall within the scope of s. 5 (1) (a) (d) of the Supreme Court Act. The Supreme Court quashed all the orders made by the trial judge.

18. I find that I would be wrongly exercising my discretion if I were to make the orders sought, because I would be determining the appeal, a power, a single Judge of the Supreme Court does not have.

iii. Section 155 (3) (4) of the Constitution – section 155 (4) cannot override clear provisions of the Supreme Court Act and Supreme Court Rules. (See Bill Skate and Peter O’Neil v Jeffrey Nape, speaker of Parliament (2004) SC 754). The Supreme Court there held that this provision has been interpreted to apply to remedial orders in respect of primary rights in particular circumstances of a case. It is not intended to cover every situation. If this was the case, s. 155 (4) would override specific provisions of the law. The Supreme Court referred to Avia Aihi v the State [1981] PNGLR 81 where the Supreme Court held that s. 155 (4) of the Constitution could not override the provision of the Supreme Court Act on the 40 days period in which to appeal against the decision of the National Court. Section 155 (4) of the Constitution can have no application when s. 5 (1) (b) of the SCA and O. 3 r. 2 (b) of the SCR is available to the parties.

19. I find s. 155 (3) and (4) of the Constitution do not apply.

Conclusion

20. The applicant filed an appeal against an order refusing interim injunctive orders. The options available to the applicant are to either proceed with the hearing of the appeal or to progress its application for declaratory orders in the court below. Because the applicant alleges fraud in its substantive proceedings in the National Court, it should seriously consider applying to change the mode of proceedings to allow for those claims of fraud to be properly pleaded.

21. The third respondent now has title to the property but to which the first respondent’s mortgage has priority. The first respondent is a secured creditor. I do not find any circumstances that allow me to make the orders sought by the applicant because there is no basis upon which to make those orders.

22. I also find it strange that the applicant seeks a stay of the National Court proceedings that it filed, pending the determination of the appeal. I would have thought that the applicant would be seriously pursuing those proceedings, if not in the form now before the court, then by way of pleadings.

23. I will dismiss the application with costs.

Formal orders

24. These are the courts formal orders;

1. The amended application filed by Mawa Lawyers on 28th February 2008 is dismissed.

2. The applicant shall pay the first and third respondents costs of this application, to be taxed if not agreed.

_______________________________
Mawa Lawyers: Lawyer for the appellant/applicant
Bradshaw Lawyers: Lawyer for the first respondent
Gamoga Lawyers: Lawyer for the third respondent
No appearance for the second respondent