SC1842

PAPUA NEW GUINEA
[IN THE supreme court of justice]

SCA No. 156 of 2018

APPEAL PURSUANT TO SUPREME COURT RULES 2012, ORDER 7

BETWEEN:
KIMBE NIVANI PROPERTIES LIMITED (1-11424)
Appellant

AND:
NIVANI LIMITED (1-30946)
First Respondent

AND:
DAVID JOHN STEIN
Second Respondent

Waigani : Salika CJ, Manuhu &Logan JJ.
2019:  27thAugust, 10th September

APPEALS AND REVIEWS – Derivative proceedings – proceedings for breach of fiduciary duties and directors’ duties under the Companies Act 1997 – where National Court struck out what part of the proceedings related to the breach of statutory directors’ duties as time barred under s 16 (1 )(a) of the Frauds and Limitations Act 1988 – whether a claim for breach of directors’ duties under the Companies Act 1997 is an “action upon a specialty” such that the application was lodged in time – definition of “action upon a specialty” –whether “specialty” is limited to contracts under seal and debts due from the Crown or under statute – whether action brought was a common law claim for damages for the tort of breach of statutory duty

After being granted leave to bring a derivative action pursuant to s 143 of the Companies Act 1997, the appellant commenced proceedings in the National Court alleging the second respondent had breached certain duties he owed to the appellant in his position as its director. This included claimed breaches of equitable fiduciary duties, duties as a trustee, and a claim for damages for breach of statutory directors’ duties. The respondents applied to the National Court for the proceedings to be struck out because, inter alia, they were statute barred. The learned National Court judge only struck out as frivolous and vexatious the proceedings in so far as they relate to claims for breach of statutory directors’ duties. The appellant appealed with leave from this interlocutory judgment, submitting that the struck out claim was an action upon a specialty, not an action in tort, and so was not time barred.

Held:

(1)	Actions brought for breaches of directors’ duties under the Companies Act 1997 are actions in tort for the breach of a statutory duty. Accordingly, they are subject to the 6 year time limit imposed by 16(1)(a) of the Frauds and Limitations Act 1988.

(2)    A statute-based cause of action will be an action upon a specialty when the cause of action is upon a right or obligation conferred or created by statute, but it will not be a specialty when the action is upon a common law cause of action constituted by a breach of statutory duty. 

Legislation:

Companies Act 1997 s 143
Frauds and Limitations Act 1988 s 16

Cases Cited:
Papua New Guinea Cases

Bank of South Pacific v Leahy (2002) N2263
John Hiwi v Rendle Rimua (2015) SC 1460
Kimbe Nivani Properties Ltd [1-11424], Re [2017] PGNC 422; N7696
Kimbe Nivani Properties Ltd v Nivani Ltd [2018] PGSC 75; SC1742
Oil Search Limited v Mineral Resources Development Corporation Limited (2010) SC1022

Overseas Cases

Aiken v Stewart Wrightson Members’ Agency Ltd [1995] 1 WLR 1281
Blakeley v BMP Pty Ltd (1998) 29 ACSR 469
Carabelas v Scott (2003) 177 FLR 334
Castlereagh Motels Ltd. v Davies-Roe Motel Narrandera Pty Ltd (1966) 67 SR (NSW) 279
R v Williams [1942] AC 541
State Government Insurance Commission v Teal (1990) 2 WAR 105

Counsel:

Mr I Molloy with Mr S Gor, for the Appellant
Mr T Griffiths, for the First and Second Respondents

10th September, 2019

1.   BY THE COURT: According to the case pleaded by the appellant, Kimbe Nivani Properties Limited (KNPL)  in the action it instituted in the National Court in 2017, the second respondent, Mr David Stein, as a director of KNPL (formerly Nivani Limited) was and has been in control of the management and operations of that company since 1995. 

2.   KNPL makes these further allegations in its pleading. In March 2001, Mr Stein caused a change in the name of the company from Nivani Limited to Kimbe Nivani Properties Limited. He then changed the name of his own company, Glendowner Limited to Nivani Limited. Mr Stein also then transferred assets and properties of KNPL to Nivani. At the time of the transfer, one Jason Cherret was the majority shareholder of KNPL but was then a minor. The name change to the former Nivani Limited and the transfer of its assets and property were effected without the approval or knowledge of its shareholders. It is alleged that, as a consequence of the transfer of assets and property and the name changes, the customers and goodwill of the former Nivani Limited (now KNPL) migrated to the newly-named Nivani Limited. As a result, it is said that the business profile of KNPL changed and the company was thereby deprived of its assets, goodwill, and future business.

3.   The foregoing summary of the background to this appeal is derived from that offered by the learned primary judge in his reasons for judgement. There was no suggestion on the hearing of this appeal that it was inaccurate. Upon the basis of the allegations summarised, KNPL has claimed:

a.	a declaration that the assets and property of KNPL are held by Nivani as a constructive trustee for the benefit of KNPL;
b.	an order for the assets and property of Nivani be transferred to KPNL;
c.	an order for the defendants to account for and pay to KNPL profits arising out of the business of Nivani;
d.	an order for compensation in equity; and
e.	general damages.

4.   The action claiming this relief was commenced as a sequel to leave granted on 3 August 2017 by Hartshorn  J to Mr Cherrett (by then an adult) as a shareholder, to commence it on behalf of KNPL, pursuant to s 143(1) of the Companies Act 1997 (the Companies Act): Kimbe Nivani  Properties Ltd [1-11424], Re [2017] PGNC 422; N7696. The National Court action is therefore what is termed a derivative proceeding.

5.  Upon the respondents’ application and as a sequel to their pleading the expiry of a limitation period in their defence, the learned primary judge struck out as time barred by virtue of s 16(1)(a) of the Frauds and Limitations Act 1988 (the Frauds and Limitations Act) so much of KNPL’s claims as alleged breaches by Mr Stein of various duties of directors specified by the Companies Act. That did not have the consequence that the proceedings were dismissed, because claims for breach of fiduciary duties owed by directors remained unaffected.

6.   KNPL now appeals by leave (Kimbe Nivani Properties Ltd v Nivani Ltd [2018] PGSC 75; SC1742) against that striking out order.

7.   The issues raised by KNPL’s grounds of appeal may be summarised as follows:

(a)	the questions raised by the strike out application were not apt for summary determination;
(b)	the limitation objection was one which could have been raised on the hearing of the application for leave to commence the derivative action such that KNPL was estopped from later raising them by the grant of leave;
(c)	the alleged breaches of director’s duties were continuing such that, on any view, the action had been commenced within time; and
(d)	the claims struck out ought to have been characterised as claims on a “specialty” such that, considered in conjunction with Mr Cherrett’s attainment of his majority in 2011, the action had been commenced within time.

8.  The first three of these issues may be shortly disposed of in this way (adopting for this purpose the issue designation given in the preceding paragraph):

(a)	It may readily be accepted that the striking out at an interlocutory stage of a particular claim (or an entire action) on the basis that it is time barred ought only occur in clear-cut cases: Oil Search Limited v Mineral Resources Development Corporation Limited (2010) SC 1022; John Hiwi v Rendle Rimua (2015) SC 1460. The assessment of whether the present was such a case entailed a discretionary value judgement by the learned primary judge. The factual premises of the cause of action pleaded for breach of director’s duties specified in the Companies Act were clear on the pleadings. No trial was necessary in order to resolve a factual controversy upon which the limitation objection depended. It was enough to dispose of the objection to assume KNPL’s case at its highest. Further, it did not follow that, because some nice questions of law were entailed, the learned primary judge was bound to reserve their determination to trial. In our view, no error of principle was entailed in the decision by the learned primary judge to exercise a judicial discretion in favour of determining this particular limitation objection at an interlocutory stage. 

(b)	There is no symmetry of parties as between the application for leave to commence the action and the action itself. The respondents were not obliged to take a limitation expiry objection. Having decided to do so, the appropriate time for the pleading of their objection was in their filed defence. They were not estopped from so doing by the earlier grant of leave to commence the proceeding. The granting of that leave entailed the determination of issues distinct from any limitation question.

(c)	Such cause of action, if any, as KNPL had for breach of director’s duties specified in the Companies Act accrued in 2001 at the time of the conduct alleged. There is no relevant analogy to be drawn as between that alleged conduct and, for example, a continuing trespass.  

9.   That then leaves for consideration and determination KNPL’s submission that the cause of action ought to have been characterised as a claim on a specialty. Embarking on that task requires that we set out material extracts from the Frauds and Limitations Act:

“16.	   LIMITATION OF ACTIONS IN CONTRACT, TORT, ETC.
(1) … , an action–
(a)	that is founded on simple contract or on tort; or
      …	
(d)	to recover any sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture,
shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued.
…
(3) Subject to Subsection (4), an action upon a specialty shall not be brought after the expiration of 12 years commencing on the date when the cause of action accrued.
(4)   Nothing contained in Subsection (3) shall be construed as affecting any action for which a period of limitation is specified by any other Act, and that subsection shall be read and construed accordingly”.

10.   KNPL submitted that, contrary to the conclusion of the learned primary judge, a claim for breach of statutory duty was “an action upon a specialty” in terms of s 16(3) of the Frauds and Limitations Act, not an action founded on tort to which s 16(1)(a) of that Act applied.

11.   In this jurisdiction, occasion for consideration of what constitutes “an action upon a specialty” has been infrequent and, unlike the present case, has not required a detailed examination of authority, if indeed on those earlier occasions the court had the benefit, as we have had, of comprehensive submissions on the subject. Earliest in time is Bank of South Pacific v Leahy (2002) N2263 in which, by reference to a definition which appeared in “Osborne’s Concise Law Dictionary”, 6th Edition, Davani J construed the term “specialty”, as it appears in s 16(3) of the Frauds and Limitations Act to mean, “A contract under seal. A specialty debt is one due under a deed.”That case was referred to by this Court in John Hiwi v Rendle Rimua where, at [14],  a like view of what constitutes a “specialty” was adopted: “We consider that any contract in the form of a deed is a specialty”. Earlier in time in this Court is Oil Search Limited v Mineral Resources Limited, in which reference was also made to Bank of South Pacific v Leahy, but it was unnecessary in the circumstances of that case for the Court to reach any concluded view as to the meaning of the term, “specialty”. That was because, in the particular circumstances of that case, which were different from the present, the outcome turned on whether the case and thus the meaning of that term had been apt for summary determination. In none of these cases was it necessary on the facts for the Court to consider whether the term, “action upon a specialty” extended to an action grounded in statute and, if so, to what extent?

12.   That question did arise in a Canadian case determined at that country’s then ultimate appellate level, the Judicial Committee of the Privy Council –R v Williams [1942] AC 541. In that case, in delivering the advice of the Judicial Committee, Viscount Maughan, at 555, made these observations in relation to the meaning of the word, “specialty”: 

The word " specialty" is sometimes used to denote any contract under seal, but it is more often used in the sense of meaning a specialty debt, that is, an obligation under seal securing a debt, or a debt due from the Crown or under statute: see Royal Trust Co. v. Attorney­ General for Alberta. Such an obligation was for centuries treated as very different from an ordinary debt.  Indeed, the act of creating a specialty by deed was at one time possible only to men of the highest rank.  Unlike debt, it was enforced by an action of covenant:  Holdsworth, A History of English Law, 3rd ed., vol. iii., p. 417. The deed itself was the foundation of the action, the original debt, if any, being merged. The terms of the deed were conclusive. Specialty debts till recent times conferred special rights. They used to rank in the administration of the estate of a deceased person in priority to simple contract debts; and, unlike such debts, were enforceable against the real estate.  They were said to be "of a higher nature" than debts by contract.
[Footnote reference omitted]

13.   As can be seen from the passage quoted, the understanding as to what constitutes a “specialty” voiced in R v Williams includes but is not limited to the understanding evident in the cases in this jurisdiction to which we have referred. It is said to extend to “a debt due from the Crown or under statute”.  Reference was not made to R v Williams in those local judgements but, as we have observed, neither was it necessary in those cases to pass upon whether the word had any wider meaning.  

14.   In turn, but not in relation to the reference to “a debt due from the Crown or under statute”, the correctness of the observations made in R v Williams as to the meaning of “specialty” has been questioned in later overseas authority. This is evident from this passage in the judgement of Potter J in Aiken v Stewart Wrightson Members’ Agency Ltd [1995] 1 WLR 1281, at 1291-1292. Though lengthy, it is desirable to set it out in full, because the statements made and conclusions reached in it were made in the context of considering the meaning of the word “specialty” in the context of a limitation provision analogous to s 16(3). His Lordship stated:

It is the argument of Mr. Strauss for the syndicate that those provisions reflect a well-recognised distinction between a "simple contract" and a "contract under seal," or "specialty," albeit the word "specialty" has historically also applied to obligations arising under statutes. As stated in Franks on Limitation of Actions (1959), pp. 188-189, the word "specialty" is: "an archaic word of somewhat imprecise meaning; it includes contracts and other obligations in documents under seal, and also, traditionally, obligations arising under statutes." See also Halsbury's Laws of England,4th ed., vol. 28, (1979), p. 303, para. 675 and Holdsworth's  History  of English Law, 5th ed., vol. 3, (1942), p. 103.

It is further submitted for the Syndicate that neither principle nor authority justifies limiting the action upon a specialty to an action for specific performance of the obligation it creates. To find that such limitation exists would be to suggest that the matter was successively misunderstood in the Fifth Interim Report of the Law Revision Committee (Statutes of Limitation (Cmd. 5334 (December 1936)), which preceded the Limitation Act 1939, and the Law Reform Committee 21st Report: Final Report on Limitation of Actions (Cmnd. 6923 (September 1977)), which preceded the Act of 1980.The 1936 report stated and recommended as follows, at p. 8, para.5:

"In the case of specialty actions . . . we consider that the present period of 20 years is too long, but that there should be a longer period for these actions than for actions of simple contract. There ought, we think, to be a method by which rights can be protected from the operation of statutes of limitation for a considerable period.  Money is frequently advanced on bonds or debentures or similar instruments, which is not expected or intended to be repaid for a long period and on which payment of interest is waived or suspended. It would be an inconvenience to insist that the lender should call in his loan within six years or lose his rights. Again, there are  occasional cases where the nature of a transaction is  such  that  claims  arising from it will not become known for many years. See Lynn v. Bamber [1930] 2 K.B. 72. It should at least be possible for a prudent man to secure his position by executing an instrument under seal. Accordingly we recommend that the period of limitation for actions upon instruments under seal should be 12 years."

It will be observed from the above paragraph that the recommendation was made in relation to actions upon instruments under seal generally; further Lynn v. Bamber [1930] 2 K.B. 72 was not an action for debt but an action for breach of warranty in respect of a contract for the sale and purchase of young plum trees in circumstances in which the plaintiff did not discover the breach of warranty sued on until eight years after the event.

The 1977 report stated, at pp. 20-22:

"2.55. As the law stands, it is open to  parties to a contract  to stipulate by their contract that a claim for any breach must be brought within a specified  period  of its occurrence, a period  which may be (and often is)  much  shorter  than  the  normal  six  years,  and,  by  recourse  to  a deed under seal which creates a 'specialty,' they can attract the longer 12-year period prescribed by section 2(3) of the Limitation Act 1939....  2.59.  Although   usually  considered   as  a  separate  subject, 'specialties' are relevant to the extension of time  by agreement, since (as we have stated above) the adoption of this particular form of obligation  automatically  attracts  a  12-year  limitation  period.... For practical purposes, a specialty may be treated as an obligation  entered into by deed under seal, a form often used for, among other transactions, major building contracts." (Emphasis added.)

It is of course the position that the construction and engineering industry has for many years proceeded on the basis that a contract underseal  is  effective  to  create  a  limitation  period  of  12  years  in relation  to actions for breach of the obligations comprised in such a contract.

In the face of this authority and practice; Mr. Sumption for  the  members' agents has none the less argued  to the contrary.  As to  point  (a) of the members' agents' defence above-mentioned, he relies upon an obiter dictum of Viscount Maugham in Rex v. Williams [1942] A.C. 541, 555 to the effect that:	

"The word 'specialty' is sometimes used to denote any contract under seal, but it is more often used in the sense  of  meaning  a  specialty debt, that is, an obligation under seal securing a debt, or a debt due  from the Crown or under statute: see Royal Trust Co. v. Attorney­ General for Alberta [1930] A.C. 144."

In that connection, I have no hesitation in accepting the argument of Mr. Strauss. It seems to me that the distinction between simple contracts and specialties is too well established and universally accepted to be gainsaid. A single sentence from the advice of Viscount Maugham in Rexv. Williams [1942] A.C. 541 is fragile ground from which to launch an assault   upon   the  broad  classification  adopted   for  the  purposes  of  the modern  statute  law  relating  to  limitation.  The  dictum  relied  on  in  any event  recognises  occasional   use  of  the  term  "specialty"   to denote  any contract under seal; further, in Royal Trust Co. v. Attorney-General for Alberta [1930] A.C. 144, the Privy Council case referred to by Viscount Maugham, the matter did not turn on  the  question  whether  a  contract other than a contract for debt  was a specialty.  The passage in the advice of Lord Merrivale [1930] A.C. 144, 150, to which Viscount Maugham presumably referred, was no more than a passing reference to "a debt under seal, or specialty ..."

I share the view clearly stated (also obiter) by Oliver L.J. in Collin v. Duke of Westminster [1985] Q.B. 581, 601:

"The obvious and most common case of an  action  upon  a  specialty is an action based on a contract under  seal, but  it  is clear that 'specialty' was not originally confined to such contracts but extended also to obligations imposed by statute."

As to point (b) of the members' agents' defence, I do not consider that there is any warrant to limit the action which may be brought to one of specific performance for the debt or other obligation procured by the contract. So to limit it would in my view be inconsistent with authority in the House of Lords in Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331 in which Lord Diplock made clear in a different context, at pp. 349-350, that where one party elects to exercise his right to treat a contract as rescinded, by accepting a repudiatory breach by the other party, he is exercising a right conferred upon him by law of which the sole source is the original contract which he is enforcing, and the obligation of the other party to pay damages is a secondary obligation which is just as much an obligation arising from the contract as the primary obligations which it replaces: see also Photo Production Ltd. v. Securicor Transport Ltd. [1980] A.C. 827, 848B-850D, per Lord Diplock.

In support of his submissions, Mr. Sumption relied in particular upon Thomson v. Lord Clanmorris [1900] 1 Ch. 718; Aylott v. West Ham Corporation [1927] 1 Ch. 30 and Gutsell v. Reeve [1936] 1 K.B. 272. He suggested that the analysis of Vaughan Williams L.J. in the Thomson case [1900] 1 Ch. 718, as approved in the two later cases, was of assistance. However, in none of those three cases  was there any direct  reference  to  the suggested distinction between the enforcement of a promise by an action for specific performance and its enforcement by an action for damages and I derived no benefit from them.

Finally, Mr. Sumption submitted that, if it were not the case that an action "upon" a specialty meant an action for the specific enforcement  of  the obligation created by the specialty and excluded an action for damages or breach, then every action for damages for breach of statutory duty would be an action on a "specialty" to which a longer limitation period applied, since it is clear  law that obligations  under statute are obligations  on a specialty: see Collin v. Duke of Westminster [1985] Q.B. 581. Such submission appeared to overlook the terms of section 8 of the Act of 1980, which provides: "(2) Subsection (1) above shall not affect any action for which a shorter period of limitation is prescribed by  any  other provision of this Act."

So for example, any breach of statutory duty which will sustain an action in tort will be subject to the six-year limitation provided for such actions under section 2 or, in cases of personal injury, to the three-year period provided for in section 11.

Thus, I accept the arguments of Mr. Strauss.  I hold that an action for damages for breach of a contract under seal is governed by section 8(1) of the Act of 1980, so that a 12-year period applies. Accordingly, the contractual claims for damages of the 11 plaintiffs whose contracts are agreed to have been made under seal are not barred by limitation.

15.  With respect, it seems to us that the critique offered by Potter J in Aiken v Stewart Wrightson Members’ Agency Ltd of the observations made in R v Williams in relation to “specialty” is, for the reasons given by his Lordship, well-founded. Thus, to the extent that “specialty” has earlier locally been regarded as meaning “a specialty is an action based on a contract under seal”, that understanding is well-supported by authority.  But it is clear from this passage from Aiken v Stewart Wrightson Members’ Agency Ltd, as indeed from the observations made in R v Williams in, that “specialty” was not originally confined to such contracts but extended also to obligations under by statute. 
	
16.  The question then is whether an action for breach of statutory duty can be regarded as an action upon   an obligation under statute and thus a specialty. In this jurisdiction, that question is not readily answered by reference to the concluding part of the passage which we have cited from Aiken v Stewart Wrightson Members’ Agency Ltd, because, unlike the limitation statute applicable in that case, the qualification of s 16(3) in s 16(4) subjects s 16(3) to other Acts but not, expressly, to other limitations in the Act itself.

17.   In support of this proposition that an action for breach of statutory duty can be regarded as an action upon an obligation under statute and thus a specialty, KNPL relied upon a line of Australian authority concerning the meaning to be given to the term “specialty” in provisions in limitation of actions statutes analogous to s 16(3). Of these, the root authority is a judgment given by Mr D R Williams QC, sitting as a Commissioner of the Supreme Court of Western Australia, in State Government Insurance Commission v Teal(1990) 2 WAR 105 (SGIC v Teal).

18.   In SGIC v Teal, the appellant insurance commission had instituted recovery proceedings pursuant to a provision in compulsory third party motor vehicle insurance legislation the effect of which as summarised by Commissioner Williams QC (at 108), was, “Where an insured person liable in respect of an accident commits a breach of a term, condition or warranty of a policy, the Commission may by action recover from the insured person the amounts paid by the Commission by reason of the policy in the settlement of the claim against the insured person and for costs and expenses.” Having regard to this provision, his Honour characterised the action was as one for a debt on the statute, which he held was an action on a specialty, as opposed to  an action for a debt which a statute enables to be brought.  

19.  SGIC v Teal, at 114,contains an instructive discussion of the origins of analogues of s 16(3) and what, for the purposes of such a provision is a “specialty”:

The Limitation Act 1623 (UK) (21 Jae 1 cap 16) provided in its third section for a limitation period of six years for "all actions of debt grounded upon any lending or contract without specialty''. A specialty is a term usually used to denote a contract under seal and a specialty debt is an obligation under seal securing debt. However a specialty may  also be  a  debt  due under a statute: Cork & Bandon Railway Co v Goode (1853) 13 CB 826; 138 ER 1427; Royal Trust Co v Attorney-General for Alberta [1930] AC 144  at 151; Commissioner of Taxation v Official Liquidator  of  E  O  Farley Ltd  (In liq) (1940) 63 CLR278 at 300; R v Williams [1942] AC 541 at 555; Collin v Duke of Westminster [1985] QB 581 at 601-602. Early in its history it was held that the 1623 Act did not apply to a debt recoverable by virtue of a statute: see Leivers v Barber, Walker & Co [1943] .1 KB 385 at 398, per Goddard Ll and cases there cited. The Civil  Procedure Act  provided  ins  3 for a limitation period of 20. years in respect of "all actions of covenant or debt upon any bond or other specialty''. This section was, as mentioned above, ·adopted in Western Australia in 1836 and was then repealed by the 1935 Act. The relevant1833 provision is .now incorporated in s 38(1)(e)(i) effectively in the same terms. (The references in s 38(1)(e)(i)  to s 4, s 32 and s 38(1)(d) of the Act are not relevant for present purposes.)

The effect of the 1833 provision was stated by Darby and Bosanquet to be that in the words "bond or other specialty'' are included "all specialties from the highest to the lowest" (op cit p 144). The provision, the learned authors stated, "would apply to all actions grounded upon a statute ... which are not brought within the provisions of the statute of James I ... " (ibid). The first edition of Halsbury summarised the operation of the two provisions as being that, first, an "action which a statute expressly enables to be brought, but which  is  not  an  action  for  ,a  statutory  debt,  is· within  the  Act  of  1623"(Vol 19, par 57, p 39); secondly, the Act of 1623 does not "apply to an action brought on a  statute  for  a  statutory  debt  '...  or  other  specialty''  (par  59, p 40); and, thirdly, all actions grounded upon a statute which are not within the Limitation Act •1623, are actions on a specialty within the meaning of the 1833Act (pars 127-128, p 76-77). (Compare Halsbury (2nd ed), Vol 20, par 751, p 599; par 753, p 600; and pars 823-824,1pp 647-648;)
[Emphasis added]	

20.  Next in the line of authority relied upon by KNPL was Blakeley v BMP Pty Ltd (1998) 29 ACSR 469 in which, adopting and applying the reasoning of Commissioner Williams QC in SGIC v Teal, Master Bredmeyer (as he became following the conclusion of his judicial service in Papua New Guinea) held that a claim for compensation under s 229 of the Companies (Western Australia) Code was an action on specialty.  In turn, each of those cases was referred to with approval by Doyle CJ (Prior and Vanstone JJ agreeing) in Carabelas v Scott (2003) 177 FLR 334, which was the culmination of the line of authority relied upon by KNPL. On closer examination, we consider that Carabelas v Scott is of greater assistance to the respondents than to KNPL. In that case, at [75] to [77], Doyle CJ stated, with reference to a provision in South Australia’s limitations statute analogous to s 16(3):

75	In any event, and contrary to the view of the Judge, I consider that the action is an action on specialty for the purposes of s 34 of the LAA. In that event it was commenced within time.

76	The claim made under s 229 of the Code is one that rests entirely on s 229. The provisions of s 229 largely restate or replicate what would be the duty of a director at common law. But it must be borne in mind  that  sub-s  (1)  and sub-s (4) of s 229 each create an offence, punishable by fine, and imprisonment in the case of sub-s (4). Judgment was entered for ALS under s 229 (7), which confers the right to recover loss suffered as a result of a contravention of s 229. The claim by ALS is not a claim for a common law remedy in respect of a breach of a statutory duty. Nor is it a claim for a breach of duty owed at common law, the duty being in some way modified by a statutory provision.  Nor is the claim merely affected in some way by the statutory provision. Both the right and the remedy are to be found within s 229. It is no answer to this to say that the claim is one that might have been made apart from the provisions of s 229, or that s 229 is a convenient method of enforcing rights which would exist had s 229 not been enacted. In my respectful opinion the answer to those observations is that in the present case both the right and the remedy are based wholly on the statute.

77	I am persuaded by the approach of Commissioner Williams QC in State Government Insurance Commission v Teal (1990) 2 WAR 105 at 118, and I agree also with the view of Master Bredmeyer in Blakeley v BMP Pty Ltd  (1998) 29 ACSR 469 that a claim for compensation under s 229 of the Code is an action on specialty. I am content to adopt the reasoning of each of them. I agree with the observation of Commissioner Williams that it should not be necessary to delve into the legal complexities that arise in considering this issue these days. This is a matter that calls for statutory reform.
[Emphasis added]

21.   Section 229 of the Companies Code legislation once in force in the Australian States created a statutory cause of action for debt in respect of breaches of director’s statutory duties. In contrast, the Companies Act in this jurisdiction creates no such statutory cause of action. Instead, if there is a cause of action at all for a breach of those statutory duties, which is unnecessary to decide but which we assume in KNPL’s favour, it is, as Doyle CJ stated at [76] in Carabelas v Scott in the sentence to which we have given emphasis, “a claim for a common law remedy in respect of a breach of a statutory duty”. In each of SGIC v Teal, Blakeley v BMP Pty Ltd and Carabelas v Scott, the causes of action were upon a right or obligation conferred or created by statute, not upon a common law cause of action constituted by a breach of statutory duty. For the reasons given by Commissioner Williams QC in SGIC v Teal in the passage cited, only the former category of case additionally falls within the meaning of the word, “specialty”. It follows that we accept the principal submission of the respondents, which was grounded in this distinction.

22.  The cause of action struck out was, in character, a claim at common law for damages for breach of statutory duty. It was thus, as the learned primary judge correctly concluded, a claim in tort. The applicable limitation period was therefore that prescribed by s 16(1)(a) of the Frauds and Limitations Act. The applicable limitation period was therefore 6 years. Even assuming, as the learned primary judge did, that, given the derivative nature of the action, time ought to be calculated from when Mr Cherret attained his majority in 2011, the cause of action was statute-barred by the time the action was commenced. The expiry of the limitation having been pleaded and relied upon by the respondents in their defence, the learned primary judge thus made no error in striking out the claim for breach of statutory duty.

23.   For completeness, we should mention that, without having, as they should have, filed and served in advance a notice of contention, the respondents also sought to defend the strike out order made below by additionally relying upon a submission that a breach of the statutory duties of directors did not give rise to an action at common law for damages in any event. For this purpose, they relied upon Castlereagh Motels Ltd. v Davies-Roe Motel Narrandera Pty Ltd (1966) 67 SR (NSW) 279. It is not necessary to determine that point in order to determine this appeal. Neither would it be procedurally fair to KNPL so to do, given the lateness of when it was raised and the related absence of opportunity for KNPL to respond to it in submissions. We therefore expressly refrain from passing upon the correctness or otherwise of the point.

24.  What follows from the above is that the appeal must be dismissed. 

25.  We conclude with these observations. It should be apparent from the above consideration of authorities relating to the word, “specialty” that this Court’s earlier observation in Oil Search Limited v Mineral Resources Development Corporation Limited, cited with approval in John Hiwi v Rendle Rimua, at [14], that, “the issue of whether an action is ‘upon a specialty’ is not straightforward” was, if anything, an understatement. It is apparent from the judgements of Commissioner Williams QC in SGIC v Teal and Doyle CJ in Carabelas v Scott that their Honours considered that the obscure and archaic qualities of the word meant that its continued use in limitation statutes created unnecessary difficulties of understanding as to the meaning intended by parliament. What was true in those jurisdictions is most certainly also true in Papua New Guinea. As did those judges in those jurisdictions, we consider that the subject of the aptness of the word’s continued use in a statutory limitation is one ripe for law reform. 

Orders:

1.	The appeal be dismissed.

2.	The appellant pay the respondents’ costs, of and incidental to the appeal, to be taxed if not agreed.
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Fiocco & Nutley:  Lawyer for the Appellant				
Ashurst Lawyers:  Lawyer for the First and Second Respondents