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Chuan v Goh [2004] PNGLR 8 (16 August 2004)

NATIONAL COURT OF JUSTICE

TIMOTHY LIM KOK CHUAN

V

SIMON GOH SAY BENG; AND MADAM TONG SO CHIN

WAIGANI: GAVARA-NANU J

13 & 16 August 2004

PRACTICE AND PROCEDURE – National Court Rules, Order 10 r 21 – Circumstances in which leave may be granted for any questions or issues in the proceedings to be tried separately from other questions or issues – Criteria for granting such leave.

Facts

The defendants have by a Notice of Motion applied for leave to have certain questions determined separately from the other issues in the proceedings. The application is made pursuant to Order 10 r 21 of the National Court Rules. The questions relate to the issue of whether the contract pleaded in the Statement of Claim is legal.

Held

1. The four conditions precedent or criteria upon which leave may be granted for the questions or the issues raised by the defendants to be determined separately under Order 10 r 21 of the National Court Rules are:

(a) Where there is a preliminary question of fact or law that is critical to the disposition of the proceedings, so that if decided one way, it will necessarily dispose of the proceedings.

(b) Where resolution of separate question may result in early resolution of the proceedings or by narrowing the disputed issues, avoid significant additional expenses or delay.

(c) Where issues are clearly separable.

(d) Where liability issue can be determined ahead of the final assessment of damages.

2. Order 10 r 21 should be used or applied sparingly and only in clear and exceptional cases and where any or all of the four instances or conditions stated above which allow for granting of leave are fully satisfied.

3. "A matter is "ripe" for separate and preliminary determination where it is a central issue in contention between the parties, the resolution of which will either obviate the necessity of litigating altogether or substantially narrow the field of controversy". CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 per Kirby P at pg 606

4. There is a clear demarcation between the questions raised in the Notice of Motion and other questions in the proceedings therefore they can be isolated for separate determinations.

Cases cited

CBS Productions Pty Ltd v O'Neill [1985] I NSWLR 601.
Coenen v Payne [1974] 2 All ER 1109.
Everett v Ribbands and Another [1952] 1 K.B 112.
Carl Zeiss Stiftung v Herbert Smith & Co. and Others [1969] 1 Ch. 93.
Dunstan v Simmie & Co. Pty Ltd [1978] VicRp 62; [1978] V.R 669.

Counsel

T. Manjin, for plaintiff.
K. Kua, for defendants.

16 August 2004

Gavara-nanu j. The defendants have by a Notice of Motion filed on 5 August 2004, applied for leave to have certain questions determined separately. The questions principally relate to the issue of whether the contract pleaded in the Statement of Claim is legal.

The questions raised are:-

1. Whether the plaintiff is estopped from calling evidence on the contract pleaded in the Statement of Claim pursuant to s.19 of the Stamp Duties Act, and for failing to lodge a Statement for assessment and payment of appropriate duty as required under ss.48A and 48B of that Act?

2. Alternatively, whether the purpose and effect of the plaintiff's non compliance with ss.48A and 48B was to avoid or evade paying stamp duty, thus thereby rendering the contract illegal and therefore null and void pursuant to s.92 of the Act?

3. Whether the contract or the understanding allegedly entered into between the plaintiff and the defendants, all of whom were non citizens at all material times was a foreign enterprise, and thus is unlawful and void pursuant to s.41A of the IPA Act?

Ordinarily, under the purported contract, the defendants are obliged to sell their business interests to the plaintiff.

The application is made pursuant to Order 10 r 21 of the National Court Rules.

The defendants' questions also arise because no duty was paid by the plaintiff on the contract which was in breach of s.5 of the Stamp Duties Act.

Mr Kua submitted that the contract is illegal because the plaintiff being a non citizen was bound by the requirements of s.41A of the Investment Promotion Authority Act, 1992, to obtain a certificate to carry on business in Papua New Guinea in the nature of the matters pleaded in the Statement of Claim. The defendants argued that the plaintiff did not obtain such certificate before doing business with the defendants.

Mr Kua further submitted that by reason of the breaches of the Stamp Duties Act and the Investment Promotion Act, the contract is illegal and thus unenforceable. For that same reason, the defendants argued that the contract could not be pleaded in the Statement of Claim.

The application here is only seeking leave to have the questions or the issues raised by the defendants determined separately from the other issues in the proceedings.

The plaintiff's main argument is that the contract was oral and therefore it was incapable of being stamped, and thus this application by the defendants is misconceived and has no basis in law.

The defendants' reply to that argument is that the plaintiff was still obliged to lodge a Statement for assessment, so that an appropriate amount in duty could be determined by the Collector of Stamp Duties on the contract which the plaintiff was obliged to pay.

Order 10 r 21 of the National Court Rules is similar to Order 31 r 2 of the New South Wales Supreme Court Rules. From the discussions of this Rule in Ritchie's Supreme Court Procedure New South Wales-; Vols. 1 and 2, at p 2661, following instances or conditions emerge, upon satisfaction of which, certain issues or questions arising in the proceedings may be determined separately from the other issues or questions:-

1. Where there is a preliminary question of fact or law that is critical to the disposition of the proceedings, so that if decided one way, it will necessarily dispose of the proceedings.

2. Where resolution of separate question may result in early resolution of the proceedings or by narrowing the disputed issues, avoid significant additional expenses or delay.

3. Where issues are clearly separable.

4. Where liability issue can be determined ahead of the final assessment of damages.

Following instances also emerge from the discussions of that Rule, which would operate as a bar to certain questions or issues in the proceedings from being determined separately:-

1. Where the question proffered for separate determination involves the whole subject matter of the proceedings.

2. Where the question involves alternative causes of action or defences.

3. Where the question to be determined would require findings of fact on matters likely to be contentious on remaining issues in the proceedings.

4. Where the question may involve the credibility of witnesses which is material to the remaining issues in the proceedings (and thus would require the question to be dealt with by another judge).

5. Where the parties propose that the question be determined on the basis of limited agreed facts.

These instances or conditions provide relevant guides in deciding whether Order 10 s.21 of the National Court Rules can be invoked in a particular situation.

Looking at the Statement of Claim, it is clear that the claims against the defendants are totally based on the oral contract made between the parties on or about July 2000.

In other words, the claims of specific performance, general damages and reimbursement of monies allegedly paid to the defendants in the Statement of Claim are all based on the oral contract, which the defendants argue is illegal and therefore unenforceable.

The questions raised here have been pleaded by the defendants in their defence and they are fundamental to the plaintiff's claims.

The plaintiff has only addressed one aspect of the questions raised by the defendants and that is whether the contract was capable of being stamped. The plaintiff has not addressed the other two aspects, namely, whether he was still obliged to lodge a Statement for assessment so that an appropriate duty for him to pay could be assessed on that oral contract, as required under ss.5, 48A and 48B of the Act, and whether he had breached s.41A of the Investment Promotion Authority Act, in carrying on business whilst being a foreigner, without an appropriate certificate.

The pertinent question now is - have the defendants satisfied all or any of the four instances or conditions emerging under Order 31 r 2 of the New South Wales Supreme Court Rules, which are also the conditions precedent or criteria upon which leave may be granted for the questions or the issues raised by the defendants to be determined separately under Order 10 r 21 of the National Court Rules? In deciding this question, I find the case of CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601, which considered Order 31 r 2 of the New South Wales Supreme Court Rules helpful. At 606, Kirby P. in stating the criteria or test to be applied in deciding whether a question should be determined separately said:

"A matter is "ripe" for separate and preliminary determination where it is a central issue in contention between the parties, the resolution of which will either obviate the necessity of litigating altogether or substantially narrow the field of controversy".

Then at 607, his Honour in re-emphasizing the significance and the benefits of the facility under the Rule said:

"Thirdly, it is my view that the court should be facilitative in the matter of separate decisions on questions arising in the course of the trial. The rules now provide for it. Where the exceptional circumstances exist that make it sensible to do so (and no reason exists to suggest the contrary) the procedure can be beneficial. It can contribute not only to the prompt disposal of crucial issues in the litigation (sometimes resulting in disposal of the whole action and even judgment for a party). It can also contribute to the saving of time and costs where an authoritative decision narrows the issues for trial substantially, excluding the necessity to explore factual matters which, on one determination of a preliminary question, are entirely unnecessary. Such may be the present case. Additionally, there is a practical consideration. If the court provides an authoritative determination of the key question in difference between the parties, it is quite likely that it will, in some cases at least, contribute to the settlement of the litigation because the parties know the basis upon which the remaining disputes will be dealt with by the court"

Then at 608, his Honour said:

"These observations apply with equal force to the new facility for the separate decision of questions. That facility should be used by the court as a sensible and practical provision which will sometimes reduce the burdens and delays of litigation".

Applying these principles or tests to this case, there is no doubt in my mind that the legality of the contract is the central or the key issue surrounding this action. Therefore separate determination of the questions, which raise the issue of the legality of the contract one way at this stage, would necessarily dispose of the proceedings.

Thus, it is necessary, just and convenient that the questions raised by the defendants be determined separately. It would be complete waste of time and expenses to allow the questions to be determined together with the other questions at the trial, where evidence would be called and thus spend days to try the questions, when they can be properly and conveniently determined at this stage. The significance of this approach was emphasized by Lord Denning MR, in Coenen v Payne [1974] 2 All ER 1109. There, the court was considering Order 33 r 4 (2) of the Rules of the Supreme Court which is similar to Order 10 r 21 of the National Court Rules and Order 31 r 2 of the New South Wales Supreme Court Rules. His Lordship at 1112 said:

"In future the courts should be more ready to grant separate trials than they used to do. The normal practice should still be that liability and damages should be tried together. But the courts should be ready to order separate trials wherever it is just and convenient to do so.

In this case, there is strong point to be made in favour of separate trials. It is the time and expense which will be involved in trying the issue of damages. It will take four or five days to try; witnesses will have to come from Germany and surgeons and experts from London. All will be unnecessary if Dr Coenen should fail".

In that case, the court was deciding on whether the question of liability against the plaintiff should be determined separately first from the question of damages. The plaintiff, Dr Coenen, was involved in a motor vehicle accident and was claiming damages against the defendant, but the defendant also counter claimed damages against Dr Coenen for negligence. The Court said, in those circumstances, it was just and convenient that the question of liability against the plaintiff be determined separately first under Rules of the Supreme Court, Order 33, r. 4(2).

Order 10 r 21 is a facility which provides the extreme course, which if invoked would dispose of the proceedings entirely. Therefore every care must be taken in deciding whether it should be invoked at all, in a particular case. In my view, it should be used or applied sparingly and only in clear and exceptional cases and where any or all of the four instances or conditions stated above which allow for granting of leave are fully satisfied. In such cases, the court has an unfettered and inherent discretion which must be exercised in favour of granting leave. See, Everett v Ribbands and Another [1952] 1 K.B 112. See also Carl Zeiss Stiftung v Herbert Smith & Co. and Others [1969] 1 Ch. 93.

Whilst the court must use its discretion with caution in invoking Order 10 r 21, the court must also be ready to use the facility where it is just and convenient and for the purposes of speedy and effective disposition of a case. Only then would the benefit provided by the facility be fully realized by the litigants and the courts.

In making these observations, I find support in the observations made by the Supreme Court of Victoria in Dunstan v Simmie & Co. Pty Ltd [1978] VicRp 62; [1978] V.R 669. At 671, the court said:

"...Nevertheless it remains true that it is a power to be exercised with great caution.

...Nevertheless, although every case must depend upon its own facts, it will as a general rule only be appropriate to order that a preliminary issue be isolated for determination before trial where the determination of the issue in favour of the plaintiff or the defendant will put an end to the action, or where there is a clear line of demarcation between issues and the determination of one issue in isolation from the other issues in the case is likely to save inconvenience and expense.

...The question or issue to be isolated must of course, appear clearly from pleadings and this means that, before an order is made, the parties must take special care to ensure that all aspects of the matter are raised."

In that case, the court was considering Rules of Supreme Court, Order 35 r 8, which is similar to Order 10 r. 21 of the National Court Rules. The questions the court was considering arose from a building case.

In this case, as part of the process under Order 10 r 21, the defendants have rightly formulated the questions in the Notice of Motion. Without the questions being stated in the Notice of Motion or application, the application would be incompetent. The reason is quite obvious, the Court cannot formulate the questions. The party seeking leave has the duty to raise and formulate its own questions in the application for the court to determine.

The questions before me arise out of the matters pleaded both in the Statement of Claim and the Defence. Thus, looking at the matters pleaded in the Statement of Claim and the Defence, there is in my view a clear demarcation between the questions raised in the Notice of Motion and other questions in the proceedings. Thus, they can be isolated for separate determinations.

It is quite plain that instances or conditions 1, 2 and 3 for granting of leave for separate determination of the questions raised by the defendants have been satisfied by the defendants.

I therefore grant leave to the defendants for the questions raised in the Notice of Motion to be determined separately.

Costs to be in the cause.

Lawyer for the plaintiff: Ketan Lawyers.
Lawyer for the defendants: Posman Kua Aisi Lawyers.