SC1797

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 165 of 2014

BETWEEN:
PETER SHARP
Appellant

AND:
WARWICK ANDREW
Respondent

Waigani: Hartshorn, Yagi & Polume-Kiele JJ
2016: September 1st,
: October 24th

APPEAL – appeal against interlocutory decision of the National Court – application for security for costs – National Court Rules, Order 14 Rule 25(1)(a) – merit of the application dismissed – right of a party to be heard before a decision is made – whether the appellant was given the opportunity to be heard on the merit of the application – principles of natural justice - error of law – miscarriage of justice - appeal upheld – decision to dismiss the application set aside – application remitted for re-hearing. 

Cases Cited:
Papua New Guinea Cases

Breckwold & Co. (NG) Pty Ltd v. Groyke [1974] PNGLR 106
The Government of Papua New Guinea and Richard Harold Davis v Stanley Barker [1977] PNGLR 386, SC123
Sir Julius Chan v The Ombudsman Commission of Papua New Guinea [1999] PNGLR 240 
Odata Ltd v Ambusa Copra Oil Mill Ltd (2001) PGNC 110, N2106
Jimmy Mostata Maladina v. Posain Polok (2004) N2568 
Curtain Bros (PNG) Ltd v. University of Papua New Guinea (2005) SC788 
Stettin Bay Lumber Company Pty Ltd v Arya Ship Management Ltd [1995] PGSC 7; (2005) SC 488
Kumagai Gumi Co Ltd v National Provident Fund Board of Trustees (2006) SC 837 C L Toulik and C L Business Consultants Limited v Andy Kuek and Fincorp Limited (2006) SC 876  
Gibson Nad v Bank South Pacific Limited (2010) SC 1278 
Ramu Nico Management (MCC) Ltd v Tarsie [2010] PGSC 22; SC 1075 
Clive Namuesh, an infant, by next friend Anton Namuesh v Dr. Kisom & Others SCA No. 80 of 2011 & SCA No. 81 of 2011, unreported and unnumbered, (Waigani dated 30 August 2013)
Vanimo Forest Products Ltd v Ossima Resources Ltd (2013) SC1275 
Curlewis v Yuapa [2013] PGSC 54 SC1274 

Overseas Cases cited

Conroy v. Conroy (1917) 17 SR NSW 681 
House v The King [1936] HCA 40; (9136) [1936] HCA 40; 55 C.L.R 499
Australian Coal and Shale Employees Union v The Commonwealth [1953] HCA 25; (1956) 94 C.L.R 621
Will of Gilbert 1946 (NSW) LR 318
Kioa v West (1985) 159 CLR 550
RG v DG [2013] NTSC 66
Russell v Duke of Norfolk [1949] 1 All ER 109

Counsel

Mr. D. R. Copper QC, for the Appellant
Mr. G. Purvey, for the Respondent

DECISION

24th October, 2016

1. HARTSHORN J and YAGI J: This is a decision on an appeal from an interlocutory decision of the National Court that dismissed an application for the respondent to pay security for costs. Leave to appeal was granted on 28th August 2015.	

Background

2.  On 27th March 2013 the respondent instituted an action for damages against the appellant in the National Court in Waigani alleging that the respondent had been defamed as a result of statements allegedly made by the appellant to a reporter and which were subsequently republished in a daily newspaper.

Grounds of appeal

3. The appellant raised 6 grounds in this appeal claiming errors of law and fact in the decision. The grounds are:

“(A)	The National Court failed to exercise its discretion according to law by dismissing the notice of motion with costs in the cause without first hearing the parties with respect to the issues considered by the Court to be relevant in determining if security for costs should be granted, and if so, in what amount.

(B)	The National Court denied the appellant natural justice by dismissing the notice of motion with costs in the cause without first affording the parties the opportunity to make submissions to the Court in respect of whether security for costs should be granted, and if so, in what amount.

(C)	Having found that the respondent/plaintiff was ordinarily resident outside of Papua New Guinea and in consequence Order 14 rule 25(1)(a) allowed the court to consider the exercise of its discretion as to whether and what amount of security may be ordered to be paid by the respondent/plaintiff the National Court erred in fact and law in finding that the notice of motion for security for costs had not been made promptly and, inter alia, had been moved eight months after it had been filed when the court ought to have found that the application for security had been made promptly and that it could not be moved for eight months because civil court 4 had failed to convene to hear that notice of motion.

(D)	The National Court erred in finding that there had been a delay in moving the notice of motion for eight months when such delay was from the failure of the court to convene.

(E)	The National Court erred in law and fact and law in finding that the security sought would nullify the proceedings of the respondent/plaintiff when there was no evidence to justify that conclusion and ought to have considered the amount of security that should be ordered in the circumstances.

(F)	The National Court erred in fact and in law in failing to order that security for costs for the future conduct of the proceedings be provided in an appropriate amount.”

Issue

4. From a consideration of the above grounds and upon hearing the submissions on behalf of both parties the main issue presented for determination in this appeal is whether the parties, and in particular the appellant, were denied natural justice in respect to the arguments and submissions relating to the application for security for costs. We consider this issue first.

Submissions

5. The appellant submits that the primary Judge did not accord the parties an opportunity to be heard fully on all issues before determining the application. It is submitted that the parties had agreed at the outset to argue first the issue of whether the respondent was a non-resident of Papua New Guinea. If the Court found that the respondent was ordinarily resident in Papua New Guinea, the application would fail as a pre-condition under O14 r 25 (1) (a) National Court Rules would not have been met. If the Court found that the respondent was a non-resident, it would then proceed to hear further argument from the parties on the other issues that arise in a consideration of the application. The primary judge, being aware of this agreement, heard counsel on the residency issue, found that the respondent was a non-resident, but then proceeded to give his ruling dismissing the application without hearing further argument.

6. The respondent submits that all parties were given an opportunity to be, and were heard fully, on all issues before the primary judge made his decision. Further, the primary judge did not fall into error in the exercise of his discretion.

Consideration

7. Grounds of appeal A and B relate directly to the principle of natural justice whilst the other grounds concerns issues that go to the merits of the application in the Court below.

8. The appellant relied on a number of overseas cases which stand for the proposition that a denial of a right or opportunity by a party to present his submissions constitutes an error of law. The first is a High Court of Australia decision in Kioa v West (1985) 159 CLR 550 in which the following statement of principle was made:

“It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or the legitimate expectation of a benefit he is entitled to know the case sought to be made against him and to be given an opportunity of replying to it.”

9. The other cases cited dealing with similar principles are RG v DG [2013] NTSC 66, a decision of the Supreme Court of the Northern Territory of Australia which applied the decision of the High Court in Kioa v West (supra) and a decision of Lord Justice Tucker in Russell v Duke of Norfolk [1949] 1 All ER 109.

10. In our view, it is not necessary to look beyond this jurisdiction to find sufficient case authority on the relevant principles of natural justice. 

11. In Gibson Nad v Bank South Pacific Limited (2010) SC1278 the Supreme Court held that a failure to provide an opportunity to a party to be heard constitutes a procedural irregularity and a substantial miscarriage of justice. That case involved the failure by the trial judge to accord the parties an opportunity to be heard orally after the filing of written submissions at the conclusion of the trial. The Supreme Court in that case approved and endorsed the National Court decision in Jimmy Mostata Maladina v Posain Poloh (2004) N2568 which was essentially decided on the same principle. In that case a Committal Magistrate failed to give an opportunity to a defendant to be heard orally after the filing of written submissions.

12. The Supreme Court in Gibson Nad (supra) also referred to the Supreme Court decision in Kumagai Gumi Co Ltd v National Provident Fund Board of Trustees (2006) SC 837. In that case the Court found a breach of natural justice based on very similar facts and circumstances. The Court cited with approval the following passage of the Court in Kumagai Gumi (supra) in circumstances where the appellant was denied a right to be heard after the hearing on the evidence at trial: 

"……… that there was a denial of natural justice to both parties, in particular the Appellant, in that they were denied the opportunity to address on the evidence.  The right to be heard on the evidence before the Court considers the evidence is a fundamental requisite of the judicial process and the Court’s failure to afford this right to the parties is a fundamental error."

13. In a joint decision of the Supreme Court in Clive Namuesh, an infant, by next friend Anton Namuesh v Dr. Kisomb & 4 Others SCA No. 80 of 2011 and Clive Namuesh, an infant, by next friend Anton Namuesh v Martin Ferry & Another SCA No. 81 of 2011, unreported and unnumbered, delivered in Waigani, dated 30th August 2013, a decision of the trial Judge was set aside and a retrial ordered as the appellant was denied natural justice in not being given an opportunity to be heard before a decision was made against him. Amongst others, the decisions in Kumugai Gumi and Jimmy Mostata Maladina were cited in that case.

14. In a more recent decision of the Supreme Court in Vanimo Forest Products Ltd v Ossima Resources Ltd (2013) SC1275 the Court endorsed the principles of law approved in Gibson Nad (supra) and the line of case authorities referred to in that decision.

15. In this case it is clear from the transcript of the proceeding that the parties had agreed on a common position as to how the application was to be dealt with by the primary Judge. The parties through their respective lawyers had agreed that the first preliminary issue for the Court to rule upon was whether the respondent was ordinarily resident outside of Papua New Guinea in accordance with the requirement of Order 14 Rule 25(1)(a) of the National Court Rules. There is also affidavit evidence supporting this position. This is not disputed by the respondent.

16. The transcript of the hearing showed that the application went before the primary Judge for hearing on 7th November 2014. The common position of the parties was explained at the outset and acknowledged by the primary Judge. Thereafter the application was moved on the basis that the preliminary issue of whether the respondent was ordinarily resident out of Papua New Guinea was to be argued and ruled upon before the balance of the issues going to the merit of the application were to be argued and decided. The preliminary issue was treated as a threshold issue for the purposes of the application. The success or otherwise would determine the further progress of the application. It was the understanding that if the ruling on the threshold issue was decided against the applicant then it followed that the whole application would fail. If it was determined favourably then the parties would move on to make further submissions on the merits of the application before a ruling was made.

17. On that basis the parties made submissions. The primary Judge adjourned to consider the threshold issue and to rule upon it. However, when the primary Judge delivered his ruling his Honour dismissed the application after having determined the entire merits of the application. 

18. It is clear in our view that the appellant was denied natural justice in that he or his counsel were not given the opportunity to fully argue the merits of the application after the primary judge had found that the respondent was a non-resident. We concur with the submissions of Counsel for the appellant that this denial constitutes an appealable error of law and vitiates the decision of the primary judge in the court below, even if that decision was made pursuant to a discretion conferred upon the primary judge with respect to a matter of practice or procedure: Conroy v. Conroy (1917) 17 SR NSW 681, at 682-683; RG v. DG [2013] NTSC 66 at [17]-[24]. Consequently an identifiable error has occurred in the exercise of the primary judge’s discretion: Curtain Bros (PNG) Ltd v. University of Papua New Guinea (2005) SC788. We therefore allow the appeal and set aside the decision of the National Court made on 21st November 2014. Given this, it is not necessary to consider the other submissions of counsel.

19. The question arises whether the matter should be remitted back to the National Court for a re-hearing. The powers of the Supreme Court on hearing of an appeal are provided by s. 16 of the Supreme Court Act. It states:

“16.	Decision, etc., on appeal.

On the hearing of an appeal, the Supreme Court shall inquire into the matter and may—
(a)	adjourn the hearing from time to time; or
(b)	affirm, reverse or modify the judgement; or
(c)	give such judgement as ought to have been given 			in the first instance; or
(d)	remit the case in whole or in part for further hearing; or
(e)	order a new trial.” 

20. The appellant seeks various relief in paragraph 4 of his notice of appeal. We have considered these requests. In our view the matter should be remitted back to the National Court for a rehearing before another Judge on the basis that there may be an apprehension that the primary judge has a preconceived view as to the merits of the application. Whilst it may be possible for this Court to exercise its power under s.16(c) of the Supreme Court Act and determine the merits of the application we are of the view that if it were to do so, it would defeat the underlying reason for which the appeal has been pursued and that is that the parties have not had the opportunity to fully argue the merits of the application.

Orders

21. We make the following orders:

1.	The appeal is allowed.

2.	The decision of the National Court made on 21st November 2014 is set aside.

3.	The matter shall be remitted to the National Court for a re-hearing before another Judge.

4.	The respondent shall pay the appellant’s costs of and incidental to this appeal on a party – party basis to be taxed if not agreed.

22. POLUME-KIELE J: (Dissenting) This is a decision on an appeal against an interlocutory order refusing an application for security for costs handed down on the 21st of November 2014, in the proceedings (WS No. 236 0f 2013 at the National Court in Waigani. 

23. The substantive claim in the National Court is a claim seeking damages against the appellant for publication of certain defamatory matters against the respondent.

24. On 19th March 2014 the respondent filed an application in the proceedings seeking, amongst others, an order that the Appellant/Defendant give security for cost pursuant to Order 14 Rule 25(1) of the National Court Rules. Parties had agreed prior to the hearing of the application that this is the only matter to be pursued in the interlocutory application to be moved on the 7 November 2014.  

The Appeal 

25. Leave was granted to the appellant on 28 August 2015 to file an appeal against 
that decision. The Notice of Appeal was filed on 15 September 2015. 

Grounds of appeal

26. Six grounds of appeal were raised by the appellant. These are set out below:

“(A)	The National Court failed to exercise its discretion according to law by dismissing the notice of motion with costs in the cause without first hearing the parties with respect to the issues considered by the Court to be relevant in determining if security for costs should be granted, and if so, in what amount.

(B)	The National Court denied the appellant natural justice by dismissing the notice of motion with costs in the cause without first affording the parties the opportunity to make submissions to the Court in respect of whether security for costs should be granted, and if so, what amount.

(C)	Having found that the respondent/plaintiff was ordinarily resident outside of Papua New Guinea and in consequence Order 14 rule 25(1)(a) allowed the court to consider the exercise of its discretion as to whether and what amount of security may be ordered to be paid by the respondent/plaintiff the National Court erred in fact and law in finding that the notice of motion for security for costs had not been made promptly and, inter alia, had been moved eight months after it had been filed when the court ought to have found that the application for security had been made promptly and that it could not be moved for eight months because civil court 4 had failed to convene to hear that notice of motion.

(D)	The National Court erred in finding that there had been a delay in moving the notice of motion for eight months when such delay was from the failure of the court to convene.

(E)	The National Court erred in law and fact and law in finding that the security sought would nullify the proceedings of the respondent/plaintiff when there was no evidence to justify that conclusion and ought to have considered the amount of security that should be ordered in the circumstances

(F)	The National Court erred in fact and in law in failing to order that security for costs for the future conduct of the proceedings be provided in an appropriate amount.”

Issue

27. The relevant issue for consideration is whether the parties, and in particular the appellant, was denied natural justice in respect to the presentation of arguments and submissions relating to the application for security for costs heard on the 7th of November 2014.

Submissions

28. Parties were heard on the appeal on the 1st of September 2016.

29. The appellant submits that he was not given an opportunity to be heard fully on all issues relating to the application for security for costs and to determine whether the respondent (plaintiff in proceedings WS No.236 of 2013) was ordinarily resident outside Papua New Guinea.  

30. The appellant submitted that a right to be heard is a fundamental principle of natural justice. He was denied the right or opportunity to present his arguments and submissions to the Court below for determination. 

31. The appellant cited a number of overseas cases to support his argument on the denial of right or opportunity to be heard, which he says is tantamount to an error of law. In Kioa v West (1985) 159 CLR 550, the Court made the following statement of the principle:

“It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or the legitimate expectation of a benefit he is entitled to know the case sought to be made against him and to be given an opportunity of replying to it.”

32. There are a number of case authorities within this jurisdiction equally applicable to this case; none however have been relied upon to support the Appellant’s arguments on the appeal.

33. The respondent submits however that all parties were given the opportunity to be heard on the matter at issue before the trial judge. The application for security for costs was made pursuant to 14 Rule 25 of the National Court Rules, which confers discretion on the Court. The cause of action being pursued by the appellant is in effect seeking to interfere with the Court’s exercise of discretion.

34. The respondent submits further that parties were given every opportunity to present their arguments on the application for security for costs. The trial judge has all materials before him. Parties were heard on the question of whether or not the plaintiff/respondent in this appeal was ordinarily resident outside the jurisdiction of Papua New Guinea. Upon hearing counsels, the trial judge took into consideration all relevant matters that were presented including the materials referred to before the Court and in the exercise of discretion; a decision made accordingly by the Court. There was no error of law and denial of the principles of natural justice (see Ramu Nico Management (MCC) Ltd v Tarsie [2010] PGSC 22; SC 1075 (paragraphs 35-38)

35. The respondent further submits that this appeal is in regard to the exercise of discretion by the trial Judge. The jurisdiction of the Supreme Court to interfere with the exercise of discretion has been discussed in a number of case authorities by the Courts in this jurisdiction (see Stettin Bay Lumber Company Pty Ltd v Arya Ship Management Ltd [1995] PGSC 7; (2005) SC 488; Sir Julius Chan v The Ombudsman Commission of Papua New Guinea [1999] PNGLR 240, Ramu Nico Management (MCC) Ltd (supra), Curtin Bros (PNG) Ltd v University of Papua New Guinea (2005) PGSC 35; SC 788  including Australian case authorities were relied upon by the Respondent in support of his arguments. 

Considerations

36. The principles of natural justice which are an integral part of the underlying law of Papua New Guinea, the minimum requirement of which, expressly recognised under s 59 of the Constitution is “the duty to act fairly, and, in principle, to be seen to act fairly; (see C L Toulik and C L Business Consultants Limited v Andy Kuek and Fincorp Limited (2006) SC 876 which held that: 

“A judge should not grant relief on a basis not argued nor grant a remedy not sought without giving the parties an opportunity to be heard on the basis or remedy. To do so is unfair to the parties as it deprives them of full knowledge of the case to be met and the possible consequences”. 

37. In the instant case the Appellants did have a right to defend the application for security for costs in accordance with the principles of natural justice “they were heard” as per the requirement of Order 14 Rule 25(1)(a) of the National Court Rules. Judgment is regularly obtained. 

38. The manner in which this Court may exercise its discretion to set aside such a judgment is set out in The Government of Papua New Guinea and Richard Harold Davis v Stanley Barker [1977] PNGLR 386, SC 123, the Court examined the principles applicable as follows:

“This being an appeal against the exercise of discretion, it must I think, be shown to this Court that the Judge in Chambers exercised his discretion upon a wrong principle, has allowed extraneous or irrelevant matters to guide or affect him, mistaken the facts, or not taken into account some matter for consideration”. 

39. In Curlewis v Yuapa [2013] PGSC 54 SC1274; (appeal against an ex parte order), the Supreme Court held that for an appeal to succeed, the appellants must demonstrate that the learned trial judge erred in exercising his discretion in entering judgment for the respondent. In applying this principle to the present case, the decision appealed against here relates to exercise of discretion regarding practice and procedure. It is trite law that for the appeal to succeed the appellants must demonstrate that the learned trial judge erred in exercising his discretion in entering judgment for the respondent. 

40. In Sir Julius Chan v the Ombudsman Commission of Papua New Guinea, the majority decision (Justice Sheehan and Jalina JJ) in this discussion on the case authorities on the ‘exercise of discretion” relating to interlocutory decisions of a lower court, noted that Australian decisions show that an appellate court will be very cautious in reviewing interlocutory decisions particularly those involving an exercise of discretion in matters of practice and procedure. In their discussion, reference were made to the decision of Jordon J in Will of Gilbert (1946) NSW LR 318:

“there is a material difference between an exercise of discretion on a point of practice and procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein is not kept upon interference with orders of Judges at first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercise of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal”.

41. In Curtain Bros (PNG) Ltd v University of Papua New Guinea (2005) PGSC 35; SC 788, the Supreme Court adopted the oft cited principles which an appellate court should have regard to when deciding whether it should interfere with the decision of the primary judge. The principles were adopted from a passage from the judgment of Kitto J. in Australian Coal and Shale Employees Union v. The Commonwealth [1953] HCA 25; (1956) 94 C.L.R 621 at 627 which was adopted by Clarkson J, in Breckwold & Co. (NG) Pty Ltd v. Groyke [1974] PNGLR 106 at 112- 113. In Curtain Bros (PNG) Ltd (supra) the Supreme Court stated the principles in this way:

'The appellant Court will not interfere with a discretionary judgment on a procedural matter within its jurisdiction except where the exercise of that discretion is wrong. A discretionary judgment will be set aside if an identifiable error occurred in the exercise of the discretion. Alternatively, it may be set aside where there is no identifiable error, but the resulting judgment or order is unreasonable or plainly unjust" and such an error can be inferred." 

42. These principles were stated broadly by the High Court of Australia in much earlier case of House v. The King [1936] HCA 40; (9136) [1936] HCA 40; 55 C.L.R 499 at 504 505 per Dixon, Evatt and McTiernan JJ:

"The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred." 

43. The above principle has been agreed to and adopted by the Supreme Court in the case of Ramu Nico Management (MCC) Ltd v Tarsie (supra). All materials presented before this Court including transcript of the hearing of 3rd October 2014 and 21st November 2014 show that both parties were heard. As I am unable to find a copy of the transcript of 7th November 2014 in the Appeal Book, I am guided by the submissions handed up by the Respondent during the hearing of the appeal, more particularly the reference made to a copy of a transcript annexed to the Affidavit of Akuna Arua filed on the 31st of March 2015 (Annexure “B”). According to the transcript, sufficient materials and arguments for and against the application for security for costs were made by both parties during the hearing of the application for security for costs.

44. This is not a case where the primary Judge exercises his discretion upon a wrong principle of law, or allowed extraneous or irrelevant matters to guide or affect his determination or mistook the facts. The primary Judge took into account all relevant matters into consideration and applied the proper principles and test applicable to the circumstances of the matter in dispute and in the exercise of discretion arrived at his decision (Odata Ltd v Ambusa Copra Oil Mill Ltd (2001) PGNC 110, N2106).

45. All parties were heard on the application for security for costs, there was no denial of natural justice. The Appellant or his counsel was given opportunity to fully argue the merits of the application. No error of law has been committed having regard to the authorities discussed. 

46. I would make the following orders:

Orders

1.	The Appeal is dismissed

2.	The decision of the National Court made on 21 November 2014 is re-affirmed.

3.	The appellant shall pay the respondent’s costs of and incidental to this appeal on party-party basis to be taxed if not agreed.

ORDERS OF THE COURT BY MAJORITY DECISION:

(a)	The appeal is allowed.

(b)	The decision of the National Court made on 21st November 2014 is set aside.

(c)	The matter shall be remitted to the National Court for a re-hearing before another Judge.

(d)	The respondent shall pay the appellant’s costs of and incidental to this appeal on a party – party basis to be taxed if not agreed.

__________________________________________________________________Warner Shand Lawyers:  Lawyers for the Appellant		
Young & Williams Lawyers: Lawyers for the Respondent