SC1783

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 98 OF 2018

MARK PHILIP – in his capacity as Secretary for Yumbi Incorporated Land Group – Rego No. ILG 9540 and in his capacity as the director of Balana Resources Limited
First Appellant

YUMBI INCORPORATED LAND GROUP – Rego No. ILG 9540
Second Appellant

BALANA RESOURCES LIMITED
Third Appellant

-V-

KEN TILIYAGO for himself and on behalf of the Ikibu Land/Ikibu Clan
Respondent

Waigani:  David, Hartshorn & Kariko, JJ
11th December, 2018, 19th March, 2019 & 3rd April, 2019

PRACTICE & PROCEDURE – representative action – procedural requirements – failure to comply with requirements – direction to comply – failure to comply with direction – application to dismiss proceeding – exercise of discretion 

Cases Cited:

Amos Ere v National Housing Corporation (2016) N6515
Ben Kwayok v Jeremy Singomat (2017) N7097
Hami Yawari v Anderson Agiru & Electoral Commission (2008) N3983
Huriba Andago v Andy Hamaga (2018) N7332
Jackson Tuwi v Goodman Fileder International Ltd (2016) SC1500
Korak Yasona v Casten Maibawa & Electoral (1998) SC552 
Papua New Guinea v Stanley Barker [1977] PNGLR 386
PNG Communication Workers Union v Telikom PNG Ltd (2018) N7322
Ramu Nico Management (MCC) Ltd v Eddie Tarsie (2010) SC1075
Simon Mali v The State (2002) SC690
Stettin Bay Lumber Company Pty Ltd v Arya Ship Management Ltd (1995) SC488
Tigam Malewo v Keith Faulkner (2009) SC960 

Legislation:

National Court Rules
Supreme Court Act 

Counsel:

Mr N Saroa, for the Appellants
 Mr J Poponawa, for the Respondent

JUDGMENT

3rd April, 2019

1.	BY THE COURT:  This is an appeal against the decision of the National Court given on 30th May, 2017 in proceeding OS No. 30 of 2017 - Ken Tigilyo & Ors v Mark Philip & Ors (OS No. 30 of 2017), whereby the primary Judge refused an application by the appellants to have the proceeding dismissed pursuant to Order 12 Rule 40 National Court Rules for disclosing no reasonable cause of action and for being an abuse of process.  

2.	Leave to appeal the interlocutory order was granted on 19th September, 2018. 

National Court proceedings

3.	OS No. 30 of 2017 involves a dispute over accrued royalty payment of just over K13.5 million (the Funds) paid by the State through the Department of Petroleum and Energy in November, 2016 to landowners of the Petroleum Development License 2 (PDL2) area in Hela Province. 

4.	In that proceeding, the plaintiff, now the respondent, claims that although the Ikibu clan is a beneficiary of the royalties derived from PDL2, he and other members of the clan are not aware of how the Funds have been dealt with since the first appellant collected the relevant cheque payment from the State, and suggests the monies have been mismanaged. The plaintiff filed the National Court action on behalf of the members of the Ikibu clan so that they are properly paid their share of the Funds and any other beneficiary payments in the future in respect of PDL2. 

5.	After the originating summons was filed on 15th February, 2017 the respondent moved an urgent ex parte application for interim injunctive orders before the primary Judge essentially to stop the appellants from further dealing with the Funds or what remained of them. That application was granted. However, his Honour noted then that the proceeding is a representative action and accordingly directed the plaintiff to obtain the requisite consents and authorizations for such action before the case returned on 23rd February, 2017.

6.	Based on further evidence coming to hand regarding the bank accounts into which the Funds were allegedly deposited, the plaintiff filed another urgent ex parte application on 17th February, 2018 and similar interim injunctive orders to the previous orders, were made.  

7.	By affidavit filed 22nd February, 2017 the plaintiff deposed that the required consents of and authorizations by the other Ikibu clan members had been obtained as directed by the Court on 15th February, 2017.

8.	The appellants filed a notice of motion on 13th March, 2017 seeking dismissal of the proceeding under Order 12 Rule 40 National Court Rules. 

9.	After service of court documents, the matter progressed through the listing process during which it was referred to mediation which was conducted on 26th May, 2017. 

10.	Mediation was unsuccessful, and the case was then referred back to Court on 27th July, 2017.  

11.	The appellants filed an amended notice of motion on 7th November, 2017 still seeking dismissal of the proceeding under Order 12 Rule 40 National Court Rules. That application was heard and refused on 30th May, 2018 and it is that decision which is the subject of this appeal. 

Decision appealed against

12.	The appellants’ application to dismiss the proceeding in the Court below was based on grounds that no reasonable cause of action is disclosed and the procedural requirements of a representative action had not been met. 

13.	His Honour first found that the amended originating summons appears to raise “a reasonable cause of action based on the equitable remedy of account”, and he decided that the amended originating summons be converted to pleadings to clearly state the cause of action; p.19:5 and p.20:1 of the Judgment. 

14.	His Honour acknowledged that while the procedural requirements of a representative action had not been met, a list of the members of the Ikibu clan had been obtained. His Honour therefore suggested the plaintiff could rectify the deficiencies when the statement of claim is drafted; p.20:5 of the Judgment.

15.	Pertinently, the formal orders of his Honour include the following:

(1)	The orders sought in the defendants’ amended notice of motion of Tuesday 7 November 2017 are refused;
(2)	The plaintiff shall by 6 July 2018 file and serve a comprehensive statement of claim particularizing the cause of action of the plaintiff and the members of the Ikibu clan he represents;
(3)	The plaintiff’s statement of claim shall include: 
(a)	An averment of the capacity in which the plaintiff sues;
(b)	A schedule setting out a revised list of the full names and corresponding signatures or other identifying marks of all the members of the Ikibu clan who have authorized the plaintiff to represent them in this proceeding;
(4)	The plaintiff shall by 6 July 2018 also file and serve evidence in writing of the lawyer or firm of lawyers authorized by each of the persons referred to in term 3(b) of this order to act for him or her in this proceeding; each authorization to be contained in either in the schedule to the plaintiff’s statement of claim or evidenced by affidavit material;  

Grounds of appeal

16.	Summarized, the grounds of appeal allege that the primary Judge erred in not deciding that the proceeding: 

•	did not disclose a reasonable cause of action known in law; and
•	constituted an abuse of process for not complying with the procedural requirements for a representative action.

Submissions

17.	Mr Saroa for the appellants only argued the issue of representative action submitting that it is a jurisdictional issue, and a ruling on it may bear upon his clients’ position regarding the other ground of appeal.

18.	Mr Saroa referred the Court to the procedural requirements of Order 5 Rule 13 National Court Rules that deals with representative or class actions and that were confirmed in the leading case of Simon Mali v The State (2002) SC690. That is, there must be evidence that every plaintiff has given specific written instructions to their lawyer to act for them and that each plaintiff has given specific written authority to the lead plaintiff to represent them and file the proceeding.

19.	Counsel requested the Court to find that OS No. 30 of 2017 is clearly a representative action, a fact that has not been disputed. The primary Judge recognized this when the case first came before him on 15th February, 2017 and he consequently directed the respondent to obtain the necessary consents and authorisations before the return date of 23rd March, 2017. However, the direction was not complied with.

20.	Mr Saroa urged this Court to find that the primary Judge wrongly exercised his discretion in not dismissing the proceeding because: 

(1)	the mandatory procedural requirements were not met, even after the respondent was alerted to the deficiencies some nine months earlier; and
(2)	no good reason was advanced to explain the failure to correct the deficiencies as directed by the Court.  

21.	For the respondent, Mr Poponawa requested the Court to note that this is an appeal against a decision of the National Court in the exercise of its discretionary power on an interlocutory application. Based on case authorities such as Papua New Guinea v Stanley Barker [1977] PNGLR 386, Stettin Bay Lumber Company Pty Ltd v Arya Ship Management Ltd (1995) SC488, Ramu Nico Management (MCC) Ltd v Eddie Tarsie (2010) SC1075, that decision should be disturbed only if the National Court:

•	acted upon a wrong principle of law;
•	gave weight to extraneous or irrelevant matters; 
•	failed to take into account relevant considerations;
•	made a mistake as to the facts; or 
•	in the absence of identifiable error made a decision that is unreasonable or plainly unjust.

22.	The respondent first contended that the respondent had in fact complied with the Court direction of 15th February, 2017 and the necessary consents and authorisations were obtained. Secondly, it was argued that the appellants have not demonstrated that any of the relevant circumstances exist to justify interfering with the primary Judge’s decision. Thirdly, the Court was requested to note that a similar application, being the notice of motion filed 13th March, 2017 was refused on 17th March, 2017. The submission suggested that the motion filed 7th November, 2017 was an abuse of process based on the doctrine of issue estoppel.  

Representative action

23.	Order 5 Rule 13 (1) National Court Rules provides for representative actions and is as follows:

“Where numerous persons have the same interest in any proceedings the proceedings may be commenced, and, unless the Court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them”.

24.	The leading cases on a representative or class action are Simon Mali v The State (supra) and Tigam Malewo v Keith Faulkner (2009) SC960 which held that where a plaintiff is acting in a representative capacity for other persons:

•	all intended plaintiffs (those who he claims to represent) must be named in the originating process;
•	each and every intended plaintiff must give specific instructions (evidenced in writing) to their lawyers to act for them;
•	any person who commences proceedings and claims to represent other intended plaintiffs must produce an authority to the court to show that he was authorized by them to file proceedings as a class representative.

25.	As it is not in controversy that OS No. 30 of 2017 is a representative action, we will first determine if the procedural requirements established by the above Supreme Court cases had been satisfied. If not, then we will decide if the primary Judge properly exercised his discretion in dismissing the appellants’ motion. 

26.	The respondent relies on Annexure “D” to his affidavit filed 22nd February, 2017 to argue that the annexure comprises the necessary consents and authorisations. We do not agree. The documents that comprise the annexure are merely: 

•	a list of names of purported members of the Ikibu Clan bearing their signatures or marks alongside the respective names; and  
•	Photographs of the purported members of the Ikibu Clan signing against their names on the list,  

27.	None of the documents can be properly construed as constituting the required consents and authorisations. 

Exercise of discretion

28.	We accept that this Court should be reluctant to interfere with his Honour’s decision unless the circumstances pronounced by Papua New Guinea v Stanley Barker (supra) and the other cases cited by Mr Poponawa, exist. Of the circumstances described in those cases, we consider His Honour failed to take into account two relevant considerations:

•	That by a court direction, the respondent had previously been given sufficient opportunity to rectify the irregularity in the proceedings; and
•	That the respondent had failed, without good reason, to comply with the court direction.

29.	The Courts have expressed the view that failure to meet the procedural requirements of a representative action under Order 5 Rule 13 means the plaintiff lacks standing and therefore no reasonable cause of action is disclosed, and it also amounts to an abuse of process. Recent cases reflecting this position include Huriba Andago v Andy Hamaga (2018) N7332, Dingake, J; Ben Kwayok v Jeremy Singomat (2017) N7097, Nablu, J; Amos Ere v National Housing Corporation (2016) N6515, Hartshorn, J.

30.	The Supreme Court in Jackson Tuwi v Goodman Fielder International Ltd (2016) SC1500, decided that the National Court properly exercised its discretion in dismissing a proceeding for failing to comply with a Court direction to conform with the procedural requirements of a representative action in accordance with Order 5 Rule 13 National Court Rules.    

31.	In PNG Communication Workers Union v Telikom PNG Ltd (2018) N7322 Cannings, J dismissed the proceeding as an abuse of process under Order 12, Rule 40(1)(c) National Court Rules when the plaintiffs failed to rectify the deficiencies in the representative action although they were given ample opportunity to correct them, and no reasonable explanation was offered for the failure. 

32.	We approve of the approach by Cannings, J and endorse the proposition that non-compliance with the procedural requirements of a representative action under Order 5 Rule 13 National Court Rules should normally attract dismissal of a proceeding. However, if the Court allows a plaintiff time to correct the non-compliance but the plaintiff does not rectify the default and without good reason, the Court should then dismiss the proceeding. 

33.	We also regard the following principles to be relevant in deciding this appeal: 

(1)	Court orders and directions must be complied with and non-compliance shows disrespect to the Court and is at the peril of the defaulting party; and 
(2)	the defaulting party must provide a reasonable explanation for the default. 
(Korak Yasona v Casten Maibawa & Electoral (1998) SC552; Hami Yawari v Anderson Agiru & Electoral Commission (2008) N3983).

34.	As noted earlier, the respondent has never offered any reasonable explanation why he did not comply with the Court direction of 15th February, 2017 to conform with the procedural requirements of this representative action. The respondent’s lawyer should have been aware of the requirements and attended to them at the outset upon receiving his client’s instructions and before filing the proceeding. The lawyer overlooked the prerequisites but fortunately, both he and his client were alerted to the default and given time to comply. They failed to oblige and seemingly without good reason. We believe the primary Judge erred when he did not consider this factor or gave little weight to it.

35.	Under Order 10 Rule 9A(15)(2)(c) National Court Rules, the primary Judge could have on his own motion summarily dismissed the proceeding for non-compliance with a court order or direction. While that argument was not raised in the Court below, the obvious fact is that a court direction concerning an important procedural matter was not complied with. We find his Honour erred in not taking into account this important factor.

Issue estoppel

36.	The respondent’s argument on issue estoppel cannot be sustained for these reasons:

(1)	The issue is neither mentioned nor addressed in the Judgment thereby suggesting that it was not an issue before the primary Judge;
(2)	 The only order contained in the Appeal Book that is dated 17th March, 2017 is an order for adjournment. 
(3)	The Appeal Book does not disclose a copy of an order that dismissed the notice of motion filed by the appellants on 13th March, 2017.  

Conclusion

37.	For the foregoing reasons, we find that the primary Judge fell into error in exercising his discretion against the appellants’ motion. 

38.	We also think it appropriate that this Court acts pursuant to s.16(c) Supreme Court Act and give judgment that should have been given in the first instance. 

Order

39.	The Court orders that:

(1)	This appeal is upheld.
(2)	The decision of the National Court given on 30th May, 2018 in proceeding OS No. 30 of 2017 - Ken Tigilyo & Ors v Mark Philip & Ors is set aside and in lieu, it is ordered that the proceeding is dismissed for disclosing no reasonable cause of action and for being an abuse of process.
(3)	The respondent shall pay the appellants’ cost of this appeal and the National Court proceeding, to be taxed if not otherwise agreed.
(4)	Time for entry of these orders is abridged to the time for settlement by the Registrar which shall take place forthwith.
________________________________________________________________
Nelson Lawyers: Lawyer for the Appellants/Applicants
Jopo Lawyers: Lawyer for the Respondent