SC1526
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCR No.13 OF 2016

BETWEEN:
SIMON AOAE OVU
First Applicant
AND:
ALLEN IKUI OVU
Second Applicant
AND:
FRANCIS OVU
Third Applicant

AND:
ALLIED ENTERPRISES LIMITED
Fourth Applicant

AND:
AISI LOKO
First Respondent

AND:
CHAMPS TRADING LIMITED
Second Respondent

AND:
IAN AUGEREA as the SHERIFF of PAPUA NEW GUINEA
Third Respondent

AND:
BOLA ENGINEERING & CONSTRUCTIONS LIMITED
Fourth Respondent

Waigani: Higgins, J
2016:26th July& 25th August

PRACTICE & PROCEDURE – Application for judicial review under s.155(2)(b) Constitution – Supreme Court Rules Order 5 rules (1), (2) & (3) – whether leave required – grant of leave made – failure to file application within time – leaves lapses – need for fresh application – whether loss to respondent of usurious claim should be transferred to lawyers.

CASES CITED:
AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170)
Application by Leahy [2009] PGSC 17
Credit Corporation (PNG) Ltd v Nelson [2011] PGNC 83
Dunlop Preumatic Tyre Co Ltd v New Garage & Motor Co. Ltd [1915] AC 79
Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC 1120
Mali v The State [2002] PGSC 4
State & ors v Toka Enterprises Ltd [2013] PGSC 62
The State v Toka Enterprises Ltd [2013] PGSC 62

COUNSEL:
Mr. Nelson Saroa, for the Applicants
Mr.M. Mirou, for the 1st& 2ndRespondents
Mr. T. Griffins, for the 3rd Respondent
Mr. S. Ketan, for the 4th Respondent

RULING ON APPLICATION FOR JUDICIAL REVIEW

25th August, 2016

1.	HIGGINS J:  This application arises out of a Sheriff’s sale of certain real property valued at up to K5m.  The first, second and third applicants are the directors of Allied Enterprises Ltd, the fourth applicant.

2.	Those parties, with one Moses Miva, another director, were sued by the first and second respondents.  The latter alleged a loan to the applicants to be repaid with interest at the rate of 35% per month on the outstanding balance thereof at the end of each month.  It was a litigation loan to fund the applicants’ action against the State in respect of a deceased estate.  The Writ was dated 4 April, 2011.

3.	Legal Impact Lawyers entered an appearance for all applicants, except Mr. Miva, on 15 April 2011, together with Notice of Intention to Defend.  The latter, however, filed a Defence on 16 May, 2011.  He is a lawyer and a principal of Kila Lawyers.

4.	On 1 November, 2011, the first and second respondents sought, by Notice of Motion, default judgment against the applicants for the sum of K325,174.50 being K25,807.50 plus interest thereon at 35% per month from 24 November, 2008.

5.	There had, however, been no written agreement drawn up by Mr. Miva and Mr. Simon Ovu, as managing Director of Allied Enterprises Ltd (Allied), seemed unaware of any such agreement when he wrote to Mr. Miva on 18 September, 2008.  Monies were advanced by Mr. Loko, the first respondent (Mr. Loko), to enable Allied to function in anticipation of funds from the Public Curator.

6.	Correspondence from the first three applicants confirm that Mr. Loko was agreeable to finance the litigation but it is silent on the terms of the loans.  To confuse matters further there was an agreement by Allied to let premises to Mr. Loko’s company, Champs Trading Ltd, the second respondents (Champs).  However, the sum of K2, 707.50 paid was regarded by Allied as a loan and by Champs as a sum to be refunded to it.

7.	On 13 December, 2010, Mr. Loko wrote to Allied requesting payment with interest of 35% per month of K278, 721.00 which was the total sum he alleged still to be owing.

8.	There is no evidence of the response, if any, to that demand.

9.	The applicants’ Defence was filed 14 June, 2012.  It agreed that money was loaned by Mr. Loko to Allied but the rate of interest at 35% per month was disputed as was personal liability for the loan on the part of the individuals, named as defendants, that is, the three directors of Allied, now the first three applicants.

10.	On 25 July, 2012, Default Judgment was entered against the four applicants “with damages to be assessed”.  Their defences were struck out as “irregular”.

11.	On 13 December, 2012 Mr. Loko sought to have “damages” assessed.  He gave credit for K2, 000.00 paid and sought judgment for K493, 504.00 plus interest at 8% pa.

12.	On 16 April, 2013, pre-trial orders were made, including a declaration that the four applicants had forfeited their right to file affidavits in reply.

13.	Notice of Trial for 5 September, 2015 was issued.  On that date, Davani J vacated the trial and ordered parties to appear on 17 October, 2013 for a new trial date.  The times were extended, ultimately, to 13 May, 2014.  On 29 April, 2014, Mr. Loko swore a further Affidavit of Debt, referring to the interest rate on the original loan of K25,807.50 as 35% per month.

14.	On 13 May, 2014, the matter was adjourned by Davani J to 15 July, 2014:

	“… for counsel to comply with directions issued on 12th March, 2014 failing which the proceedings will stand dismissed.”

15.	The non-compliance is not specified.  The further Affidavit of Debt was filed on 5 May, 2014.  It verified a letter sent to the four applicants advising the date for hearing of 13 May, 2014.

16.	On 23 June, 2014, belatedly, lawyers for the applicants issued a notice to cross-examine Mr. Loko on his affidavits.  It was repeated on 27 August, 2014.

17.	On 24 October, 2014, judgment was entered for Mr. Loko and Champs against the four respondents in the sum of K285, 264.00 inclusive of interest and costs.  It was, apparently, a Consent Order.

18.	Mr. Loko and Champs then sought a Writ of Levy of Property.  It was issued on 10 April, 2015.  It issued for the above sum plus interest of K13, 754.00 and costs of K35,000.00.  If they were the costs of the Writ, they seem excessive.  Otherwise, the judgment included costs.

19.	On 8 July, 2015, the four applicants’ lawyers filed a Notice of Motion to stay the enforcement of the Writ.

20.	For the first time the four applicants raised the glaringly obvious issue that the 35% interest rate per month was a penalty particularly considering that the unpaid portion of the original debt was, Mr. Simon Ovu attested, then only K10,735.00.

21.	Nevertheless, there had been consent to the order for judgment and that fact was not disputed nor the consent called into question.

22.	On 6 May, 2015, the Sheriff replied to a request from Allied, the registered proprietor of the land in question that payment by instalments of the judgment debt would be accepted.  The Sheriff had lodged a caveat over the subject property (Section 37, Allotment 8 & 9, Hohola, NCD) to protect the levy.

23.	On July 7, 2015, the Sheriff gave notice to all tenants of the land to vacate by 9 July, 2015.  On 7 July, 2015, the lawyer for the applicants wrote to the Sheriff claiming certain defects in the Writ and advising they would seek to stay the Writ.

24.	A motion to that effect was put to the National Court on 9 July, 2015 and Kandakasi J set aside the Writ as defective.  A fresh Writ was issued on 23 September, 2015.

25.	Payment of K45,000.00 was then made to Mr. Loko’s lawyers on 14 July, 2015.  However, the levy of execution was still on foot.

26.	On 27 October, 2015, Nelson Lawyers for the applicants took out an Originating Summons against the respondents Mr. Loko and Champs.  It sought to set aside the original order for judgment and the current Writ of Levy of Property.

27.	Interim relief was sought by a Notice of Motion filed 27 October, 2015.

28.	The first applicant swore an affidavit claiming, for the first time, that the agreement founding that debt was entered into by the lawyers who were conducting the original litigation to fund their costs (and practising certificates) and that the consent to judgment was without instructions.  He affirmed that the applicants had paid to the respondents a total of  K45,000.00 between 10 July, 2015 and 24 August, 2015.

29.	A valuer has assessed the property as worth K5,000,000.00. That valuation was sought by the first applicant.

30.	 The Originating Summons was struck out by Makail J, holding that it should have been filed in proceedings WS No. 292 of 2011, the original proceedings in which the Writ of Levy had issued.

31.	The original lawyer for the applicants, Mr. Andrew Wasina, was directed, on 8 December, 2015, to provide an affidavit explaining his involvement.  That he did on 15 December, 2015.  He averred that he had obtained the first applicant’s consent to the order for judgment.  Total payments to the respondent, Mr. Loko, by then had totalled K70,452.54.

32.	The matter was to return to Court on 7 January, 2016, but was not listed on that day.

33.	On 25 January, 2016, Nelson Lawyers filed an application to Review the Order of 24 October, 2014, that is, the order for consent judgment.

34.	That came before the Chief Justice on 29 February, 2016 and was adjourned to 1 March, 2016.  It was further adjourned to 3 March, 2016 for hearing.

35.	It came before me on 3 March, 2016.  It was further adjourned to 9 March, 2016.

36.	On that day proceedings were further adjourned pending a decision in the matter then pending before Kandakasi J.

37.	On 16 June, 2016, the question of leave to review was decided by the Chief Justice.

38.	Orders were made granting leave, staying the enforcement proceedings and, relevantly for present purposes, his Honour ordered:

“The Applicant shall file and serve the substantive Application for Review within 7 days from today.”

39.	On 8 July, 2016, when the matter was again mentioned before me, there was no appearance for the applicants.

40.	The Court file reveals that an Application for Review was filed on 25 February, 2016.  It is in proper form save that it does not disclose a grant of leave.

41.	On 26 February, 2016 an Application for interim relief was filed.

42.	On 29 February, 2016, an application for leave to review the order of 24 October 2014 was filed, relying upon s.155(2)(b) of the Constitution.  That provision affirms that the Supreme Court:
“has an inherent power to review all judicial acts of the National Court.”
43.	Pursuant to that provision and s.155(4)  of the Constitution the Court has adopted rules, particularly Order 5rule 3.  It provides that:

“An application for leave for review shall be made before a Judge.”

44.	Rule 1 is somewhat confusing.  It states:

 “An application to the Court under Constitution Section 155(2)(b) lies with leave only, or without leave.”

45.	The Rules require leave in the case of an election petition (see Order 5 rule 9).  If leave is required for an application such as the present one, a Judge may grant that leave (see O.5 r.3&6).

46.	The Supreme Court Act 1975, s.4(2)(c) requires leave for an appeal to the Supreme Court where it is “on a question of fact”.  (see also s.21(c) S.C.A)

47.	Leave is not required for any other appeal.  An application for review under s.155(2)(b) is dependent on any right of appeal having been exhausted, usually by lapse of time, or not being provided for (see eg. Application by Leahy [2009] PGSC 17, per Batari, Cannings & Kariko JJ).

48.	Mali v The State [2002] PGSC 4 (per Hinchcliffe, Sakora & Batari JJ) illustrates the scope of s.155(4) (Constitution).  That was a case involving a consent order, but, even so, it was held that for good cause it was open to the Supreme Court to set it aside.  Leave to review the primary decision was not said to be required.  It was not sought.

49.	The State v Toka Enterprises Ltd [2013] PGSC 62 was an application under s.155(2)(b)for leave to review certain National Court decisions. The applications were subject to Order 5 rules 1-3. The criteria for the grant of leave, where leave is required are settled and expressed in Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC 1120.  The issues are, delay, the interests of justice, clearly arguable issues of such gravity that leave should be granted.  The overriding question is whether grave injustice will be done if leave is refused.  That may be decisive even where the delay has been unreasonable and unsatisfactory.  Suffice to say that Injia CJ was persuaded to grant leave in this case notwithstanding such a delay had occurred, as well as some questionable activities by the initial lawyers for the applicants.

50.	The question as to whether leave was required was not argued nor the proper construction of O.5 r.1.  When is such an application able to be made “without leave”?  Clearly, a remedy via s.155(2)(b) is discretionary.  The Court may, even if error is manifest, refuse to entertain the matter on discretionary grounds.  In that sense, the Court may well decline to hear the application unless persuaded there is a good case for so doing.

51.	It is apparent that Injia CJ was persuaded that there was a good case for the review of the original decision.

52.	Given the outrageously high interest rate (420% per annum on monthly rests) it is a reasonable conclusion that the rate was penal.  The fairness of the contractual arrangement imposing that rate of interest might also be examinable under the Fairness of Transactions Act 1993.  Indeed, Kandakasi J in Credit Corporation (PNG) Ltd v Nelson [2011] PGNC 83, found a rate of interest of 28% pa and a default rate 33% pa to be unconscionable and, as it involved a chattel mortgage, a clog on the equity of redemption.  It was unenforceable.  Whether any of the companies had any cause of action or liability as opposed to the individuals was also unclear.

52A. It appears that the original loan in this case was to enable the lawyers who negotiated it to obtain their practising certificates and fund their fees for the litigation.  It is arguable that the entire transaction was fraudulent and oppressive.  The interest rates charged by unscrupulous usurers are a bargain by comparison with the rate negotiated in this case.  The validity of such provisions has been the subject of discussion throughout the common law world.  Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co. Ltd [1915] AC 79 is an early and authoritative example.  (see also AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170).

53.	There is now the delay between the date of the Chief Justice’s order and further, the default in compliance with it.  Whilst a filing of the Application for Review within 21 days in compliance with Order 7 rule 6 would have been valid, notwithstanding the shorter time in the order, that time has also elapsed.

54.	The non-compliance is surprising in that all that was required was for the original application to be redated and refiled, citing the grant of leave.

55.	The expiration of time since the order does not seriously prejudice the respondents.  It is only a question whether, on the undisputed facts as asserted by the first respondent, the proceedings represent such an injustice that the judgment should be set aside.

56.	Nevertheless, it is clear that if, as is the case, the terms of the leave granted by the Chief Justice have not been complied with, the leave is no longer valid.  It was granted conditionally.  Those conditions have not been fulfilled.  That grant of leave has lapsed accordingly.  Indeed, even if the order for filing the substantive application had been silent on the time for filing it, a failure to comply with the Rules would have led to the same result.

57.	The question is whether leave is mandatory.  If so, there is a further question as to whether a fresh application for leave is possible.  The Amended Supreme Court Rules, effective from 19 December, 2012 first introduced a reference in Order 5 Rule 1 to leave for a review process pursuant to s.155(2)(b) of the Constitution.  Whilst the power conferred upon the Court is not able to be displaced otherwise than by a constitutional amendment, the manner of its exercise is, by virtue ofs.162 (2), subject to statute law or Rules of Court.  That would enable a Rule to require leave and the conferring of the power to grant leave upon a single Judge rather than a Full Court.  The form of Order 5 r.1 is such that it would be expected that other Rules would specify the matters requiring leave and those that do not require leave, if that was not already legislated for.  There does not seem to be any in the latter class of matter.

58.	The position here is that an application for judicial review under s.155 (2) (b) was filed without leave and, then, an application for leave.  The latter has now lapsed leaving the original application still pending.

59.	The Supreme Court Rules require leave for judicial review in election petition matters – Order 5 Rule 9.  Leave for judicial review in the National Court is required under Order 16 of the National Court Rules but that relates to judicial review of an administrative or judicial decision that is not subject to appeal. If it is, the Court may adjourn the application for leave (NCR O.16 r3 (6)) until that appeal has been determined or the time for appeal has expired.  Appeals from those orders, including an order granting leave, are governed by O.10 of the Supreme Court Rules.

60.	Section 14 of the Supreme Court Act 1975does not apply to applications under s.155(2)(b) of the Constitution. No doubt the provisions of that section as to leave would be relevant to a question as to whether the Supreme Court would exercise the extraordinary jurisdiction so conferred.

61.	In the first case under the 2012 rules, an application was made before Injia CJ for leave to review a number of decisions of the National Court.  Appeals had not been instituted and the right to appeal had been lost as a result.  His Honour explained the background to those new provisions in State & ors v Toka Enterprises Ltd [2013] PGSC 62:

“[3] … prior to 19 December 2012, the SCR contained provisions for instituting supplications for judicial review but no provisions for separate leave for review applications … There were no separate procedures for leave applications.

[5] with regard to application for review in other matters [other than election petitions], SCR 2012, Order 5 Rules 1, 2 and 3 made provision for separate application and determination on the question of leave.”

62.	The terms of O.5 r.1 are then cited but the matter proceeded on the basis that leave was required.  Leave was granted.  There is however no explanation offered as to what O.5 r.1 means when it refers to the alternative “or without leave”.

63.	If no application pursuant to s.155(2)(b) can be made without leave, then those words are redundant.  Whilst I am reluctant to regard words in a legislative instrument as meaningless, it seems to me that the clear intent of Order 5 Rule 1 as amended was to require leave to be granted before a Full Court would be convened to consider the matter.

64.	 In this case, regrettably for the applicants, the leave granted has lapsed.  That does not preclude a further application given there has been no hearing on the merits of the application.  That is a matter for the applicants to pursue if so advised.

65.	I did have regard to the decision in Kupo v Raphael [2004] SC 751 (Salika, Sawong & Gavara-Nanu JJ).  There it was held that s.155 (2) (b) was not designed to protect lawyers in civil matters who, by incompetence fail to appeal or otherwise negligently cause a loss to a client.  However, even in civil matters there can be exceptional cases where the interests of justice demand otherwise.

66.	Even on the respondents’ case this egregiously usurious agreement appears to have been hatched between the respondents and the applicants’ original lawyers. For whatever reason the latter seem to have diverted Mr. Loko’s attention to those of the respondents in whose name the deal was done.  No doubt the valuable asset now subject to the levy was a relevant factor.  It is an asset of Allied.

67.	Now, due to a lapse by the applicants’ lawyers, instead of being denied the unjust enrichment represented by the current judgment there is the prospect of that injustice being borne by the applicants’ current lawyers.

68.	It is just that they and not the respondents bear the costs thrown away by their failure to comply with the Chief Justice’s orders, including costs incurred by the respondents.  It is not just that they are obliged to take on the burden of the principal debt represented by the judgment.

69.	I will hear the parties as to costs but the order is that the current application for Review is incompetent and dismissed accordingly.

_______________________________________________________________
Nelson Lawyers: Lawyers for the Applicants
Legal Service: Lawyers for the 1st& 2ndRespondentsEda
Ashurst Lawyers: Lawyers for the 3rd Respondent
Ketan Lawyers: Lawyers for the 4th Respondent