SC2098
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 92 OF 2016

BETWEEN:
TED TARU
First Appellant

AND:
ELSIE TARU
Second Appellant

AND:
PACIFIC MMI INSURANCE LIMITED
First Respondent

AND:
DAVID RANDALL
Second Respondent

AND:
HENRY SMITH
Third Respondent

Waigani: Makail, Toliken, Numapo JJ.
2020: 15th December
 2021: 28th April

SUPREME COURT APPEAL – Mediated agreement – Application to enforce mediated agreement – Application to set aside mediated agreement – Allegations of duress and intimidation by mediator – Discretion to be exercised judicially and not arbitrarily – Right to be heard on matters not adequately addressed in mediation – Conduct of proceedings in accordance with the principles of natural justice – Plaintiff to be put on notice if consideration is given on the question of dismissal – Dismissal of proceedings must be based on judicial reasoning – Appeal upheld – Alternative Disputes Resolution Rules (ADR Rules) Rule 12(2)(a)&(b) – National Court Rules – Order 12, Rule 8

Cases Cited
Following cases were cited in the judgment:
Papua New Guinea cases
Hargy Oil Palm Ltd v. Ewasse Landowners Association Inc. (2013) N5441 
MAPS Tuna Ltd v. Manus Provincial Government (2007) SC857
Kimisopa v Paraka (2009) SC1325
Michael Kuman v. Digicel (PNG) Ltd (2013) SC1232
Jackson Tuwi v Goodman Fielder International Ltd (2016) SC1500.
Workcover Authority of NSW v. Placer (PNG) Exploration Ltd [2006] PGNC 47; N3003 
Mataio v. August (2014) SC1361
New Britain Oil Palm v Sukumaru [2008] PNGLR 479
 
Overseas cases
Farm Assist Ltd (in liq) v. Secretary of State for the Environment, Food and Rural Affairs (No 2) [2009] BLR 399
Mahon v. Air New Zealand Ltd [1984] 3 All ER 20

Counsel:

S. Ketan, for the Appellants
T. Guba, for the Respondents

DECISION ON APPEAL
28th April, 2021

1.	BY THE COURT:  This is an Appeal against the decision of the National Court given on the 30 May, 2016 refusing to set aside a Mediated Agreement (‘Agreement’) signed between the Appellants and the First Respondent on the 23 April 2014. The trial judge proceeded instead and granted the First Respondent’s application to enforce the Agreement.
2.	The terms of the Agreement were these:
“The Parties agree to settle these proceedings and other matters on the following terms:
(a)	The Plaintiffs agree to discontinue these proceedings forthwith and shall file a Notice of Discontinuance within 7 days of the date of this Agreement, and

(b)	The Parties have agreed on the costs of proceedings on the following terms; the Plaintiffs will pay the costs of the First Defendant on party/party basis.” 
3.	The Second and Third Respondents did not participate in the proceedings for various reasons and therefore, are not a party to the Agreement. Only the First Respondent signed the Agreement. 
4.	The proceedings to which the Agreement relates to is; WS No. 435 of 2006: Ted Taru & Elsie Taru -vs- Pacific MMI Insurance Limited & Ors. 
5.	On 14 May 2014, the Court made the following order:

“The Court will give effect to the Mediation Agreement of the 23 April 2014 unless the Plaintiffs file an application by 21 May 2014 seeking to set aside the Mediation Agreement based on acceptable grounds for nullification of contracts.”

6.	On the 28 May 2014, the Appellants applied by way of a motion to set aside the Agreement entered into on the 23 April 2014 whilst the First Respondent seeks to enforce the Agreement to discontinue the proceedings with costs. The application by the Appellants was refused and an order was made to enforce the mediated Agreement hence, this appeal.

A.	GROUNDS OF APPEAL
7.	The Appellants’ Notice of Appeal contained 11 grounds of appeal however, in summary, Appellants claimed that the learned trial judge erred in finding that there were, amongst others, insufficient evidence to substantiate the Appellant’s claim on intimidation, duress and acceptance of strict legal arguments in the mediation proceedings that resulted in the Agreement. The Appellants contended that the mediation was rushed and serious underlying issues that goes to the heart of the dispute has not been adequately addressed, and that the mediation proceedings was being improperly influenced by comments made by a Mediator, not demonstrating partiality, by expressing views and rendering opinions as to the prospects of success of the substantive proceedings if it goes to trial,and then proceeded and imposed a decision on the Appellants and force the Parties to sign under duress contrary to Rules 44, 45, 46(a), (b) and 56 of the Alternative Disputes Resolution Rules (ADR Rules).

B.	BACKGROUND
8.	The relevant background is set out in pleadings book but briefly, the First Appellant, whilst in the employ of Niugini Insurance Corporation (NIC), borrowed K90, 000 from NIC to purchase a house under the Home Ownership Scheme operated by NIC for its employees. The subject property is located at Section 40 Allotment 9, Puapua Place, Boroko, National Capital District. The repayment of that loan was secured through a registered mortgage by the Appellants in favour of NIC over the property. 
9.	The First Appellant’s employment with NIC was terminated in January, 1998. The Appellant defaulted in his loan repayments and following the issue of a notice of default and a notice to quit the property was advertised for sale and was sold to the Third Party. Ejectment proceedings (OS No 31 of 2000) were commenced to eject the Appellants from the property prior to the sale.
10.	The Appellants did not dispute the default in the loan repayments but contended that the sale of the property was fraudulently effected by the First and Second Respondents without the knowledge, consent and authority of the NIC. Appellants argued that the First Respondent had no right legal or otherwise over the property to take action as an agent or as representing the interests of NIC when such right of foreclosure and sale is vested only in the NIC to whom the property was mortgaged.
11.	The Appellants sought orders to have the title to the property reinstated to them including general damages for loss of property in the eviction and sale of the property. 
12.	In its defence, the First Respondent denied the Appellants’ claim and contended that the Ejectment Proceedings had extinguished any claim of right the Appellants might have over the property thereby, ordering the Appellants to deliver vacant possession of the property. Furthermore, the First Respondent only facilitated the exercise of NIC’s powers under the mortgage and was authorized under the asset sale agreement to sell on its behalf. 
Parties agreed to have the matter referred to mediation when the trial of the matter could not eventuate for various reasons. Furthermore, that an earlier attempt to have the matter settled through negotiation also failed. The mediation was set for two days however, it was completed within a day. 

C.	MEDIATION PROCEEDINGS
13.	The appeal gives rise to two important considerations in mediation proceedings. Firstly, the discretion of the court to set aside a mediated Agreement and, secondly, the right to be heard on matters not adequately addressed in mediation proceedings including any new evidence that maybe relevant to the dispute. 
14.	The basic principles of mediation require parties to negotiate in good-faith and without prejudice, exploring all possible options to amicably resolve the dispute. Confidentiality and privilege in the negotiations between parties underpins the very essence of mediation as without it the parties would be unwilling to negotiate for fear of the other party using it against them in court. In a mediation context, rights and obligations of confidentiality not only arose from the mediation agreement itself but also from statutes such as the ADR Rules as well as from other common law and equitable principles.
15.	There are a number of options available to the parties where there is evidence of duress; firstly, a party or parties may exercise their rights to opt-out of the mediation and walk away, secondly, they could refuse to sign the Agreement as they are not obliged to sign, and thirdly, if the Agreement is signed under duress it can be appealed against. The Appellants in this case opted for the third option and appealed the decision on the grounds of duress and if proven, it can be relied on to nullify an Agreement.
16.	There is a limited number of case laws on mediated Agreement in this jurisdiction and the Appellants made reference to the National Court decision in Hargy Oil Palm Ltd v. Ewasse Landowners Association Inc. (2013) N5441, an earlier decision of His Honour, the trial judge, and contended that the Respondents acted in bad faith resulting in an Agreement reached, that was unfair and unreasonable and should have been set aside in the interest of justice. 

D. PROCEDURE TO ENFORCE MEDIATED AGREEMENT
17.	In the event of a breach, the procedure to enforce a mediated Agreement is set out in Rule 12(2)(a) and (b) of the ADR Rules.  Rule 12(2)(a) and (b) allows a party to a mediated Agreement to apply to the Court to enforce it in two ways:
(a)	In a case where the proceeding is still pending, by notice of motion (Rule 12(2)(a)): and
(b)	In a case where the proceeding has been concluded, by fresh proceeding (Rule 12(2)(b)).	
18.	However, in each case Rule 12 does not prescribe the criteria or grounds for enforcement of a mediated Agreement.  Neither has counsel referred to a case on point.  We too have not been able to find one.  However, it would appear that given that a mediated Agreement is reached in good faith, it is open to be enforced in the event of default by the aggrieved party on the ground of good faith. 

E. PROCEDURE TO SET ASIDE MEDIATED AGREEMENT
19.	There is no procedure to set aside a mediated Agreement in the ADR Rules.  The ADR Rules also does not prescribe a criteria or grounds for setting aside a mediated Agreement.  Even case laws are of no assistance.  In this case, the Appellants relied on duress and intimidation as grounds to set aside the mediated Agreement.  It was also to thwart the First Respondent’s application to enforce the mediated Agreement which application was grounded on the mediated Agreement being reached in good faith.

(i)	Discretion to Dismiss Proceedings
20.	The discretion of the court to set aside or dismiss proceedings on application or on its own motion must be exercised sparingly and properly and based on judicial reasonings. This is important to ensure that a significant decision to dismiss proceedings requires the exercise of the discretion judicially and not arbitrarily. (MAPS Tuna Ltd v. Manus Provincial Government (2007) SC857, Kimisopa v Paraka (2009) SC1325; Michael Kuman v. Digicel (PNG) Ltd (2013) SC1232; and Jackson Tuwi v. Goodman Fielder International Ltd (2016) SC1500).
21.	In the present case, the application by the Appellants to have the mediated Agreement set aside and have the matter properly heard was by notice of motion based on the Court’s power under Order 12, rule 8 of the National Court Rules (NCR) and its inherent power under Section 155(4) of the Constitution.  The notice of motion was dismissed by the trial judge on the grounds that the claim on duress and intimidation by the Appellants were unfounded and not supported by any credible evidence.  The trial judge found that the Affidavits deposed by the Appellants were merely general statements based on assumptions and refused to accept it and further, ruled that the Appellants bearing the onus to prove duress had not discharged the burden to the satisfaction of the Court. The trial judge then dismissed the application to set aside the mediated Agreement.
22.	As it appears, the trial judge relied heavily on the affidavits alone to dismiss the case without giving the Appellants the opportunity to be heard to support their claim on duress especially, when the trial judge found that what is contained in the affidavits is insufficient to sustain the allegation.
23.	Despite the Appellants’ best efforts in explaining the failures, anomalies and abuse of rules with respect to the conduct of the mediation proceedings and the manner it was rushed through, all contained in his affidavits, the trial judge formed a view that it was not sufficient to warrant the setting aside of the mediated Agreement. Furthermore, significant issues raised regarding the impartial conduct of the Mediators and the adverse comments made on the success or otherwise of the case, that resulted in the eventual imposition of a decision contrary to Rules 44, 45, 46(a) (b) and 56 of the ADR Rules, were also being overlooked.
24.	In deciding to dismiss the proceedings, the trial judge did not state the jurisdictional basis for the dismissal other than to say that the claim on duress was far too generalized and not properly supported by any credible evidence with clear legal arguments on points of law to uphold the application to set aside the Agreement. The trial judge made no reference to any law on the power of the court, on its own motion, to dismiss the proceedings such as for example, under Order 12, Rule 40 (frivolity etc.) of the NCR for disclosing no reasonable cause of action, or to summarily determine the proceedings under Order 10, Rule 9A (15) (summary disposal), on competency grounds. This is necessary, to ensure that the significant decision to dismiss proceedings is based on law and not on any other considerations. It requires the Court to exercise the discretion judicially, and not arbitrarily. 
25.	In the circumstances, we find that the learned trial judge erred by exercising the discretion to dismiss the proceedings arbitrarily without making any reference to any law that gives the jurisdictional basis for such decisions.

(ii)	Right to be Heard
26.	The requirements of natural justice on the right to be heard is a common law principle adopted as part of the underlying law under section 59 of the Constitution.
27.	The Court is required to observe the minimum requirements of principles of natural justice to act fairly and be seen to act fairly that includes affording the parties the right to be heard (Workcover Authority of NSW v. Placer (PNG) Exploration Ltd [2006] PGNC 47; N3003). 
28.	The Appellants raised concerns in relation to the manner in which the mediation proceeding was conducted that resulted in the signing of the Agreement. Those issues have not been properly considered and addressed by the trial judge before dismissing the application to set aside the mediated Agreement. The least the trial judge should have done is to accord the Appellants the right to be heard on the issues raised and properly dealt with them before a decision is reached. Hearing entails full hearing of all necessary and relevant evidence both in the form of written affidavits and oral evidence relating to the matter. This did not happen and clearly the Appellants were denied the right to be heard.
29.	The requirement of putting the parties on notice is important. If the Court, in considering, on its own motion, making any finding, order or other decision adverse to any parties to the proceedings, it must put the party on notice that consideration is being given to such a decision so that party has an adequate opportunity to address the court on the relevant issues and deter the court from making such decision: (Mahon v. Air New Zealand Ltd [1984] 3 All ER 20; Mataio v. August (2014) SC1361; New Britain Oil Palm v. Sukumaru [2008] PNGLR 479). 
30.	The importance of the notice is to enable the Appellants to appreciate the possible consequences of the proceedings being dismissed and for them to be heard before a decision is made. 
31.	The trial judge in this case did not give the required notice that considerations was being given to the question of dismissal. The trial judge raised the issues on the lack of credible evidence to support the claim on duress, refused to hear the Appellants on the issues raised, and proceeded straight onto dismissing the proceedings. This is in breach of procedural fairness.
32.	The trial judge failed to observe the minimum requirements of natural justice by not giving the Appellants the opportunity to give oral evidence and be cross-examined on their affidavits filed and served pursuant to Order 4 Rule 49 (12) of the NCR.  Furthermore, he did not give the Appellants an opportunity to be heard, as according to evidence, the First Appellant was present in court and sought leave to give oral evidence to further substantiate his claim on duress alleged in his affidavits but was refused because of lack of time.  This was crucial as the evidence in relation to duress and intimidation by both parties was conflicting.

F.	EXCEPTIONS TO CONFIDENTIALITY: INTERESTS OF JUSTICE

33.	The notion of interest of justice is subjective and refers generally to fairness and equity in the exercise of discretion in a particular case. In mediation proceedings, the Courts will generally lend their support to upholding confidentiality except where it is necessary in the interests of justice for the evidence to be given (Farm Assist Ltd (in liq) v. Secretary of State for the Environment, Food and Rural Affairs (No 2) [2009] BLR 399). 
34.	Interests of justice essentially provide an exception to the general rule on confidentiality in mediation proceedings that must be balanced against the reasons for maintaining confidentiality.   
35.	The Appellants contended that the mediation was conducted in bad-faith and the problem was compounded further by Mediators not adhering to mediation rules in resolving the dispute and arriving at an amicable resolution. Matters of strict legal issues were raised during mediation when such is not required under the ADR Rules and, evidence considered to be of significant relevance to the dispute were being overlooked by the Mediators.
36.	The Appellants had a bona fide belief that disclosure was necessary to support their contention that the mediation was handled poorly. Based on this, the trial judge, in the interest of justice, should have granted the Appellants leave to give oral evidence on what transpired at the mediation hearing that resulted in the Agreement that is considered unfair and unreasonable. The disclosure is necessary to prevent the court from being misled on the proceedings of the mediation hearing. In the circumstances, confidentiality must give way to interest of justice, a paramount consideration, to ensure fairness and justice, and therefore, allow for evidence to be adduced. Mediation should not be characterized as merely a private and consensual dispute resolution mechanism protected by this notion of confidentiality and therefore, cannot be challenged. It should be seen as part of the overall civil jurisdiction from which case laws and precedents may be developed and therefore, must, at the minimum, adhere to the principles of fairness and equity.
37.	Interests of justice lies in the heart of all dispute resolution processes and supports the integrity of the dispute mechanisms whether it be mediation or litigation, and therefore, the Courts must readily grant leave when an application for disclosure is made in circumstances where there is unfairness in the process. This is ensure that the matter is given a full and proper hearing to achieve the desired outcome in the interests of justice and in the public interests. The refusal by the trial judge to grant leave for a proper hearing in the interests of justice, is without basis.
38.	It is clear to us that the basic rules of mediation had been breached and the rights and obligations arising from the mediated Agreement pertaining to confidentiality cannot stand.

G.	CONCLUSION
39.	The National Court decision is quashed and the appeal is upheld on the grounds that; (a) the discretion to dismiss the proceedings was made arbitrarily and not in the careful exercise of a judicial discretion and, (b) the Appellants were denied their rights to be heard on application. There was a denial of natural justice.
40.	The proceedings are reinstated in the National Court. Costs will follow the event.

H.	ORDER

(i)	The appeal is allowed.

(ii)	The Order of the National Court on the 30 May 2016 in the matter; WS No. 453 of 2006, is hereby quashed.

(iii)	The proceedings WS No. 453 of 2006 are reinstated and remitted to the National Court for directions.

(iv)	The Respondents shall bear the costs of the Appellants on a party-to-party basis, to be taxed, if not agreed.

Judgment Accordingly
______________________________________________________________
Ketan Lawyers:   Lawyers for the Appellants			
Allens Lawyers:  Lawyers for the Respondents