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Supreme Court of Papua New Guinea |
SC1567 PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]
SCA NO 29 OF 2012
SCA 111 OF 2015
BETWEEN
TERRY SHELLY
First Appellant
AND:
NOWEK LIMITED
Second Appellant
AND:
YAWE RIYONG
Respondent
Waigani: Injia CJ, Logan and Nablu JJ
2017: 20 February; 23 February
LIMIITATION OF ACTIONS – Loan repayable on demand – When cause of action arises – Cause of action arises on making
of loan not making of demand for repayment – Subsequent acknowledgements and part payments of loan debt – Consequential
recommencement of from when time runs for limitation of action purposes – Plaintiff’s claim on one view also entailing
claim for specific performance or other equitable relief – Inapplicability of s 16 - Proceeding for recovery instituted within
time – Statute of Frauds and Limitations, ss 7, 10, 11, 16 and 18
PRACTICE AND PROCEDURE – CIVIL PRACTICE AND PROCEDURE – National Court – Application for leave to amend defence – Consent of parties to proposed amendment – Whether motions judge obliged to make grant leave to amend in terms of consent – Proposed amendment at variance with admissions and positive case advanced in existing defence – Over-riding requirement that judge be satisfied that consensually proposed order is appropriate – No error in refusal of leave to amend
HELD– Appeals dismissed.
Legislation:
Cases Cited:
Counsel:
Mr R Otto, for the First and Second Appellants
Mr B M Koningi, for the Respondent
23rd February, 2017
1. BY THE COURT: These are two appeals, each by leave, from interlocutory judgments delivered in the National Court in proceedings instituted by writ by the present respondent, Mr Yawe Riyong, against the first and second appellants respectively, Mr Terry Shelley and Nowek Limited (Nowek). It was convenient for them to be heard together. An interlocutory order of the Court was made, directed to this end.
2. A noteworthy feature of the proceedings is the unsatisfactory nature of the whole of the pleadings. The statement of claim is a confused document, displaying an absence of precision as to proper parties, causes of action and related relief. The defence is no less imprecise in relation to such admissions as are made and in identifying the appellants’ positive case.
3. The appellants brought two interlocutory applications.
4. The first, filed on 25 November 2009, sought the dismissal of the proceeding pursuant to Order 12, Rule 1 of the National Court Rules on the basis that it was statute- barred, by virtue of s 16(1)(a) of the Statute of Frauds and Limitations Act 1988. That application was dismissed by the National Court (Yagi J) on the 21 February 2012, following a hearing on 17 February 2012. The parties have adopted a leisurely approach to the hearing and determination of the challenge to that order. That challenge has become proceeding SCA 29 of 2012.
5. The second, filed on 27 November 2014, sought, materially, leave to amend the appellants’ defence, which had been filed on 18 June 2009, at a time when other lawyers were acting for the appellants. That application was dismissed by the National Court (Polume-Kiele J) on 12 August 2015. The appeal by leave against that order is proceeding SCA 111 of 2015.
6. Regard to the statement of claim discloses that Mr Riyong alleged that in April, 1994 he had made an oral agreement with Mr Shelley whereby, in consideration of his advancing not less than K100, 000.00 to Mr Shelley for the purposes of Nowek’s business, Mr Shelley would transfer 51% of the shares in Nowek to Mr Riyong’s wife and cause her to be appointed as a director of that company (paragraph 11, statement of claim). It is not alleged by when this transfer and appointment were agreed to occur. Inferentially, in the absence of express provision, it would be necessary, in order to give business efficacy to any such agreement, to imply a term that the transfer and appointment were to occur as soon as reasonably possible. It suffices for present purposes to determine the appeals on that basis.
7. It is further alleged in the statement of claim that, pursuant to this alleged agreement, on three specified dates thereafter in 1994 (26 April, 7 May and 4 July), Mr Riyong made cash advances to Mr Shelley in the total sum of K130,000.00 (paragraph 13, statement of claim). The appellants admit that Mr Shelley received this total sum of K130, 000.00 (paragraph 13 of the defence). They allege that any cause of action arising from the 1994 agreement is barred by virtue of the operation of s16 of the Statute of Frauds and Limitations Act 1988 (paragraph 12 of the defence).
8. Notably, other allegations in the statement of claim are that:
(a) also in 1994, Mr Riyong gave two trucks having a total value of K115,000.00 to Mr Shelley for use in Nowek’s business (There is no allegation of a demand for the return of these trucks and a subsequent refusal and wrongful detention thereof. The receipt of the two trucks is admitted in the defence – paragraph 14);
(b) also pursuant to the agreement, and on a date not specified in the statement of claim, Riyong purchased, at a cost of K20,000.00 a used coffee processing equipment for Nowek (paragraph 15, statement of claim). The statement of claim does not make clear whether it is alleged the purchase of this equipment was to be treated as a loan to Mr Shelley for the purposes of Nowek’s business or a grant of possession of the equipment to Nowek on terms that it would be returned on demand, which demand has been refused and the equipment wrongfully detained. It is not necessary for the purposes of either appeal to resolve this ambiguity. The receipt of the coffee making equipment is admitted in the defence (paragraph 15).
(c) in 1997, pursuant to the agreement, Mr Riyong, “financed the purchase of Kamaliki land described as Portion 180 from Livestock Development Corporation” for Nowek, in the total amount of K165, 000.00 (paragraph 16, statement of claim. Once again, the statement of claim does not make clear whether this financing was to be treated as a loan to Mr Shelley for the purposes of Nowek’s business or a loan directly to Nowek. The defence is ambiguous in that it admits (paragraph 16) that Mr Riyong gave “financial assistance” to acquire the land but does not allege to whom that assistance was given. All that is additionally alleged is that it would be, “repaid later on demand”. It is not necessary to resolve any of these ambiguities to dispose of either appeal.
(d) on some unspecified date but pursuant to the agreement, Mr Riyong purchased in a total amount of K 35,000.00, 500 sheets of corrugated iron for fencing of Nowek’s business premises on the Kamaliki land (paragraph 17, statement of claim). Once again, the statement of claim does not make clear whether this purchase of corrugated iron sheets was to be treated as a loan to Mr Shelley for the purposes of Nowek’s business or a loan directly to Nowek. In the defence (paragraph 18), it is alleged that the fencing was undertaken using Nowek’s own resources. The date when the fencing was supposedly undertaken is not specified. It is not necessary for the purpose of either appeal either to resolve the ambiguity in the statement of claim or the merits of the defence).
(e) on some unspecified date but pursuant to the agreement, Mr Riyong paid the sum of K18,000.00 for the hire of a backhoe and trucks for the undertaking of earthworks in connection with the setting up of Nowek’s dry coffee factory (paragraph 18, statement of claim). Once again, the statement of claim does not make clear whether the payment of the hire charge was to be treated as a loan to Mr Shelley for the purposes of Nowek’s business or a loan directly to Nowek. In any event, the incurring of this charge is denied in the defence (paragraph 19), it being alleged that Nowek used funds borrowed from another company in order to construct the factory.
9. The statement of claim then alleges (paragraph 19) that, “on the faith of the agreement” between Mr Riyong and “the Defendants” (i.e. the appellants), Mr Riyong had made a total investment “in the Defendant” of K 483,000.00 (statement of claim, paragraph 19). The allegation that the agreement was with each of the appellants, not just Mr Shelley, is here made for the first time. No less confusingly, the defence (paragraph 20), though denying each and every allegation in paragraph 19 of the statement of claim, nonetheless alleges that Mr Riyong’s “financial assistance to the Defendants [sic] had been substantially repaid in accordance with the custom of trade in the coffee buying industry of Papua New Guinea”. Confusingly implicit in this allegation is an acknowledgement that the “financial assistance” was to each of the appellants. It is not necessary to resolve this confusion in order to dispose of the appeals.
10. In respect of the total “financial accommodation” allegation in paragraph 19 of the statement of claim, and in the
alternative, it is further alleged in the defence (paragraph 21) that, on or about 19 December 2007, a compromise was reached between
Mr Riyong and the appellants whereby he agreed to accept the sum of K375,000.00, “in lieu of any other sum and in full and
final discharge of all his claims against the Defendants herein”. The defence then particularises (paragraph 22) a series of
payments by cheque over the course of 2008 and 2009 to Mr Riyong in the total amount of K 370,000.00.
11. Other features of the statement of claim which should be noted are:
(a) an allegation of fraud on the part of Mr Shelley in leading Mr Riyong to believe that he could transfer 51% of the shares in Nowek to Mr Riyong’s wife and cause her to be made a director of that company;
(b) an entitlement on the part of Mr Riyong, on the strength of this alleged fraud, to “reclaim title” to the Kamaliki land (paragraph 25, statement of claim). Material facts as to how any such entitlement is said to arise are not pleaded; and
(c) a claim for “reimbursement” of the sum of K483,000.00, together with interest “at about” 30% per annum “from date of investment”, calculated to be K1,449,000.00 (calculated by applying 30% per annum on K483,000.00 over 10 years (paragraph 24, statement of claim);
(d) the so-called “summary of claims”, which is expressed (paragraph 28, statement of claim) as follows:
“(1) title to the [Kamaliki land]; and
(2) K1,932,000.00 being value of return on investment in [Nowek] together with K120,000.00 being reimbursement of land occupation fee or rental bringing total money claim to K 2,052,000.00 (relating to a claim made in paragraph 27 of the statement of claim against Nowek only).
12. We turn then to the merits of the respect of appeals.
The refusal of an order of dismissal
13. As can be seen from the summary which we have offered of the pleadings and our related observations, the task faced by the learned
primary judge in identifying, for the purposes of dealing with the interlocutory application, exactly what causes of action Mr Riyong
advanced, was not an easy one. His Honour approached the application on the footing that the claim was one for breach of an agreement
between Mr Riyong and the appellants made in April 1994 for the provision of financial accommodation to them, pursuant to which Mr
Riyong had progressively made loans to them in the total amount of K483,000.00. Approaching the matter in this way, his Honour held
that the claim being one founded on a contract, here a contract to make loan advances, the cause of action for the purposes of the
6 year limitation period found in s 16(1) of the Statute of Frauds and Limitations Act 1988 accrued not on the making of that contract in 1994 but rather on the failure to repay in accordance with the demand for the repayment
of all advances, which did not occur until December 2007. That being so, his Honour held that the proceeding had been instituted
within time. Accordingly, the appellants’ application for the dismissal of the proceeding was dismissed.
14. The appellants put at the forefront of their challenge to the dismissal of the application that causes of action accrued in
1994 when the agreement was made. They submitted that Mr Riyong’s claim was not for repayment of loans but for transfer of
shares and possession of land. The limitation period for these claims, they submitted, ran from when the April 1994 agreement was
made and had long expired prior to the institution of the proceeding.
15. As pleaded, the agreement provided for the making of advances by Mr Riyong to total not less than a specified maximum. There being no particular provision for when any advance was to be repaid, each was repayable on demand.
16. The statement of claim does not, in terms, plead when a demand for repayment was made, only to “various and numerous requests” (paragraph 20, statement of claim), although it is, perhaps, implicit in the reference to an assurance having been given by Mr Shelley to Mr Riyong in December 2007 “about his investment in [Nowek]” that a repayment demand was made then. The appellants never sought particulars of the “various and numerous requests”.
17. Our first blush reaction, according with the view of the primary judge, was that, for limitation of action purposes, time did not run until the making of a demand for repayment and that this was a complete answer to the appeal insofar as the cause of action concerned the failure to repay loans. The true position in relation to this limitation issue is to the contrary of this first blush reaction.
18. If a loan agreement specifies a time or condition for repayment, the limitation period in respect of the lender’s cause of action commences at the expiration of the specified time or on the occurrence of the specified condition: Re McHenry; McDermott v Boyd (Barker’s Claim) [1894] 1 Ch 290. That is not this case. In the absence of any such specified time or condition, and where the loan is repayable on demand, time runs for limitation purposes from the date of the loan: Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 566 per Dixon CJ, McTiernan and Taylor JJ, referring with approval to an observation made by Parke B in Norton v Ellam (1837) 2 M & W 463 at 464 [1837] EngR 183; [150 ER 839 at 840], “Where money is lent, simply, it is not denied that the statute begins to run from the time of lending.”
19. The agreement in April 1994 provided for the making of advances. If the statement of claim is to be read as alleging a series of advances, only in respect of some of these has a time of advance been alleged. Further and as we pointed out to counsel during the course of submissions, there have been later acknowledgements and part payments on the appellants’ own pleaded case. An acknowledgment occurred at the time of the alleged compromise in December 2007 and there were part payments in 2008 and 2009. The effect of ss 7, 10 and 11 of the Statute of Frauds and Limitations Act 1988 was that Mr Riyong’s right to sue for the debt is deemed to have accrued on and not before the date of acknowledgement or the date of the last payment as the case may be. Referring to an English equivalent, Lawton J described its effect in this colourful but accurate way in Busch v Stevens [1963] 1 QB 1 at 6: “the right [of action] shall be given a notional birthday and on that day, like the phoenix of fable, it rises again in renewed use – and also like the phoenix, it is still itself”.
20. It is not necessary to identify any particular such deemed date as, on any view as to what that date may be, the proceeding was instituted within time thereafter. That also means that it is unnecessary further to consider what might have been the limitation position had there been no acknowledgement or part payment.
21. The appellants also alleged that the claim went beyond a claim for repayment of loan monies. As we have observed, the statement of claim is a confusing document. On one reading of it, the characterisation adopted by the primary judge was correct. Assuming though that the “summary of claims” indicates that it went beyond this, that hardly helps the appellants. Any claim for the transfer of shares to Mr Riyong’s wife or for the transfer of the land would, in the circumstances of this case, entail specific performance or other equitable remedies, to which the s 16(1) limitation period is inapplicable: see s 18 of the Statute of Frauds and Limitations Act 1988
Refusal of Amendment of Defence
22. The appellants made by amended notice of motion in the National Court application for a number of interlocutory orders, one of which was their being granted leave to amend the defence. The parties came to an agreement between themselves with respect to the making of these orders and lodged with the court a consent to that effect, signed by their respective lawyers.
23. The motions judge made each of the orders sought, save the granting to the appellants of leave to amend. Brief reasons for this were apparently delivered orally by her honour but a transcript thereof is not included in the appeal book.
24. The amendment proposed sought to add to the defence further paragraphs (22 and 23) the material effect of which was to seek to raise by way of defence that, because Mr Riyong was, “at all material times”, a member of Parliament he had “conveniently used his wife in his alleged business transactions with [the appellants] on the alleged promise, which is denied, of 51% shares and Director of [Nowek]”. A further allegation was that because he was, at the time, a member of Parliament, he was subject to the Leadership Code and, particularly, disclosure to the Ombudsman Commission requirements. The amendment proposed then alleged that, “[Mr Riyong] has no signed authority or consent from the wife to act in a representative capacity to sue [the appellants]”.
25. On such evidence as is available, it appears that her Honour declined to grant leave to amend because Mr Riyong’s case and the evidence to hand was that the advances or “investment” in Nowek had come solely from him, not his wife nor even on behalf of his wife. She evidently regarded the proposed amendments to the defence as embarrassing.
26. It is a mistake to assume that, in respect of issues of practice and procedure, the consent of the parties compels a judge to make an order as consensually proposed. It remains the case that the judge must be satisfied that it is appropriate to make the order. Of course, if a judge were minded to depart from what was consensually proposed it would be necessary to observe procedural fairness by offering the parties an opportunity to be heard as to why the orders should not be made. There is no complaint on this basis.
27. The proposed amendment does, with respect, look distinctly at odds with the way in which the defence engages with the statement of claim, particularly the admissions as to advances by Mr Riyong. We are not persuaded that there was any error in the refusal to grant leave. Further, the refusal of the amendment would not prevent the leading of evidence or the making of submissions at trial on the existing pleadings as to Mr Riyong’s then background and status to give context to the alleged term that shares would be transferred to his wife and that she would be made a director.
Disposition of Appeals
28. Each appeal should be dismissed, with costs
____________________________________________________
Themis Lawyers: Lawyer for the First Appellant
Koningi Lawyers: Lawyer for the First Respondent
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