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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NOS 1132 OF 2004
LAWRENCE MANGO AND JOSEPH SALANG
Plaintiffs
V
PETER CHOW PO KHOON
First Defendant
PETER AND PNG GROUP LIMITED
Second Defendant
KIMBE: CANNINGS J
5, 14 OCTOBER 2005
PRACTICE AND PROCEDURE – application for summary disposal of proceedings – whether statement of claim, or proceedings generally, disclosed no reasonable cause of action – whether proceedings frivolous or vexatious –National Court Rules, Order 8, Rule 27 (embarrassment etc); Order 12, Rule 40 (frivolity etc) – tests to apply.
The plaintiffs claimed to be directors and shareholders of the second defendant, a company that carries on business at Kandrian. The first defendant is the manager of the company. The plaintiffs brought proceedings against the defendants, claiming that the first defendant had excluded them from involvement in the management and affairs of the company and that the company had not paid any dividends to shareholders for three years. The plaintiffs claimed that they were entitled to a sum of money, representing the value of their shares in the company, and damages. The defendants brought a motion to strike out the statement of claim and generally dismiss the proceedings on the ground that no reasonable cause of action was disclosed and that the proceedings were frivolous and vexatious.
Held:
(1) Whenever a plaintiff brings a case to court, the originating document must demonstrate that the plaintiff has a cause of action. The document must clearly set out the legal ingredients or the elements of the claim and the facts that support each element of the claim. Failure to do so means no reasonable cause of action is disclosed.
(2) Other tests to be applied include: whether it is plain and obvious that the statement of claim, even if proved, will not entitle the plaintiff to what is being sought; whether the statement of claim is so ambiguous or lacking in particularity that it does not facilitate orderly and rational pleadings; and whether the statement of claim just leaves a defendant guessing as to what the plaintiff’s allegations are.
(3) If a pleading or a proceeding can be categorised in any of those ways, it will not disclose a reasonable cause of action and the court will have a discretion whether to strike out the pleading or dismiss the entire proceedings.
(4) Proceedings are frivolous if the plaintiff’s claim is so obviously untenable that it cannot possibly succeed or if the plaintiff would be bound to fail if the matter went to trial.
(5) Proceedings are vexatious where the case amounts to harassment of the defendant or the defendant is being put to the trouble and expense of defending proceedings which are either a sham or which cannot possibly succeed.
(6) In the present case, the statement of claim, and the proceedings generally, were properly categorised as above, thus no reasonable cause of action was disclosed and the pleading and the proceedings were ripe to be struck out and dismissed. The proceedings were also frivolous and vexatious.
(7) There being no appearance by the plaintiffs, the defendants satisfied the court that it should exercise its discretion to summarily dispose of the proceedings; and the proceedings were dismissed, generally.
Cases cited:
The following cases are cited in the judgment:
Attorney-General of the Duchy of Lancaster v London and North Western Railway Co [1892] UKLawRpCh 134; [1892] 3 Ch 274
Kiee Toap v The Independent State of Papua New Guinea, Electoral Commission of Papua New Guinea and Returning Officer/Assistant Returning
Officer for Mendi Open Electorate (2004) N2731
Mt Hagen Airport Hotel Pty Ltd v Gibbes and Another [1976] PNGLR 216
Ronny Wabia v BP Exploration Co Ltd and Others [1998] PNGLR 8
NOTICE OF MOTION
This was an application on notice seeking orders to strike out a statement of claim and to dismiss the proceedings commenced by the plaintiffs.
Counsel:
No appearance for the plaintiffs
D Poka for the defendants
RULING ON MOTION
CANNINGS J:
INTRODUCTION
This is a ruling on an application by the defendants to strike out a statement of claim and dismiss the proceedings, on the grounds that no reasonable cause of action was disclosed and that the proceedings were frivolous and vexatious.
BACKGROUND
This case is about a company called ‘Peter and PNG Group Ltd’, which operates a retail business at Kandrian, West New Britain Province. This company is the second defendant.
The plaintiffs, Lawrence Mango and Joseph Salang, say that they and the first defendant, Peter Chow Po Khoon, are directors and shareholders of the company. The first defendant is also the manager of the company.
On 27 August 2004 Norbert Kubak & Co, Solicitors and Barristers of Boroko, filed a writ of summons and statement of claim. This claimed that the first defendant had excluded the plaintiffs from involvement in the management and affairs of the company and that the company had not paid any dividends to shareholders for three years. The plaintiffs claimed that they were entitled to a sum of money, representing the value of their shares in the company, and damages.
Since filing the writ the plaintiffs have, it appears, done nothing to prosecute their claim. There is no affidavit of service of the writ on the court file. All the remaining documents have been filed by the defendants’ lawyers, Pryke & Bray, of Lae.
On 8 October 2004 the defendants filed a notice of intention to defend and on 26 October 2004 they filed a defence.
On 16 November 2004 the defendants filed a notice of the motion now before the court, which is to dismiss the proceedings on the ground of failure to disclose a reasonable cause of action. The defendants rely on Order 8, Rule 27 and Order 12, Rule 40 of the National Court Rules. In support of the motion are two affidavits. One is by David Poka, a lawyer acting for the defendants, deposing to the various courses of action available to the plaintiffs under the Companies Act which could be used if they are not happy with the way the company’s business was being conducted. The other is by the first defendant, who deposes, amongst other things, that the company’s financial problems are due in large part to interference by the shareholders, particularly the first plaintiff, Lawrence Mango.
On 8 September 2005 the motion came before the court for the first time but I refused to entertain it. Mr Poka, for the defendants, could not satisfy me that the plaintiffs were properly served, especially as notice of the motion had been filed almost nine months previously.
The motion returned on 5 October 2005 and on this occasion I was satisfied the plaintiffs had been given proper notice.
NATIONAL COURT RULES
Order 8, Rule 27 (embarrassment etc) of the National Court Rules states:
(1) Where a pleading—
(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; or
(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings; or
(c) is otherwise an abuse of the process of the Court,
the Court may at any stage of the proceedings, on terms or otherwise, order that the whole or any part of the pleading be struck out.
(2) The Court may receive evidence on the hearing of an application for an order under Sub-rule (1).
Order 12, Rule 40 (frivolity etc) states:
(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings—
(a) no reasonable cause of action is disclosed; or
(b) the proceedings are frivolous or vexatious; or
(c) the proceedings are an abuse of the process of the Court,
the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.
(2) The Court may receive evidence on the hearing of an application for an order under Sub-rule (1).
The two rules are very similar. The first is found in Order 8 (pleadings) and Division 8.1 (preliminary). Rule 1 provides that the rules in Division 8.1 (Rules 1 to 28) apply to proceedings commenced by writ of summons but, subject to the Rules, not to proceedings commenced by originating summons. Rule 27 applies to the present case as the proceedings have been commenced by writ of summons. Under Rule 27 it is a pleading that can be struck out, and not necessarily the whole proceeding. The second rule at the centre of this motion is found in Order 12 (judgments and orders) and specifically within Division 12.4 (summary disposal). Rule 27 states that Division 12.4, which consists of Rules 37 to 43, applies to all proceedings (whether commenced by writ of summons or originating summons) except for proceedings involving a claim by the plaintiff for libel, slander, malicious prosecution, false imprisonment, seduction, breach of promise of marriage, fraud or a claim for damages arising from death or personal injury. The present case involves none of those sorts of claims so Rule 40 is clearly capable of applying. Rule 40 gives the court discretion to stay the proceedings or dismiss the proceedings, either generally or in relation to any claim for relief.
THE DEFENDANTS’ SUBMISSIONS
The defendants are the applicants for the purposes of this motion. Mr Poka, for the defendants, submitted that there was no reasonable cause of action disclosed by the plaintiffs’ statement of claim. There were a number of questions the court should ask: is the plaintiffs’ case so obviously untenable that it cannot possibly succeed? Is it manifestly groundless? Does the statement of claim disclose a case that cannot succeed? Is it manifestly the case that to allow the pleadings to stand would involve useless expense?
In support of that approach, Mr Poka referred to the judgment of Frost CJ in the National Court in Mt Hagen Airport Hotel Pty Ltd v Gibbes and Another [1976] PNGLR 216. Mr Poka argued that all of the questions posed should be answered ‘yes’. He asked the court to note that the claims made in the statement of claim are vigorously opposed by the defendants. The first defendant has explained that the problems in the company have been brought about mainly by the plaintiffs’ interferences. There are many procedures and remedies available under the Companies Act, of which the plaintiffs should have availed themselves before commencing these proceedings. The plaintiffs’ case is baseless.
As to the second limb of the motion – that the proceedings are frivolous and vexatious – Mr Poka relied on an ancient English case, Attorney-General of the Duchy of Lancaster v London and North-Western Railway Co [1892] UKLawRpCh 134; [1892] 3 Ch 274, at 277. Lindley LJ stated that the object of a rule of a court that allows a court to strike out cases on the ground of frivolity or vexatiousness is:
... to stop cases which ought not to be launched – cases which are obviously frivolous or vexatious or obviously unsustainable.
Mr Poka also referred to passages from Bullen and Leake and Jacob’s Precedents and Pleadings, Sweet & Maxwell, 12th edition 1975, to provide the framework for his submission.
He submitted that both of the rules relied on allowed the court to go behind the pleadings and to enquire summarily what the true circumstances of the case are, by looking at the affidavits that had been filed.
THE PLAINTIFFS’ SUBMISSIONS
No submissions were made by the plaintiffs. There was no appearance by them, even though there was on the date of the hearing of this motion a lawyer on the record, Norbert Kubak & Co.
THE ISSUES
The issues are straightforward:
DO THE STATEMENT OF CLAIM, AND THE PROCEEDINGS GENERALLY, FAIL TO DISCLOSE A REASONABLE CAUSE OF ACTION?
Mr Poka more or less cited the correct tests when he was addressing this issue. However, as I indicated at the hearing I could not understand why he only wanted to cite one of the first post-Independence cases on this issue – the Mt Hagen Airport Hotel case – together with a passage from Bullen & Leake & Jacobs, the 1975 edition. The latter is a famous, crusty and authoritative tome. But well nigh 30 years have passed and there have been many National Court cases on this issue. They are the authorities that should have been cited. I summarised the principles emerging from them in a recent Mt Hagen case, Kiee Toap v The Independent State of Papua New Guinea, Electoral Commission of Papua New Guinea and Returning Officer/Assistant Returning Officer for Mendi Open Electorate (2004) N2731, as follows:
Whenever a plaintiff brings a case to court, the originating document – in the present case, the writ of summons and statement of claim – must demonstrate that the plaintiff has a ‘cause of action’. The document must clearly set out:
The plaintiff does not have to say what evidence there is of the facts being alleged. In fact, the National Court Rules prohibit that. But the plaintiff must outline the claim and demonstrate that it has a clear legal basis. If the plaintiff’s originating document does that, there is a reasonable cause of action. If not, it does not disclose a reasonable cause of action.
When I apply those principles – as well as those in the Mt Hagen Airport Hotel case and in Bullen & Leake & Jacobs – I find myself in agreement with the thrust of Mr Poka’s submission. The plaintiffs’ case, as it is presently pleaded, stands no chance of success. The statement of claim is too vague. Paragraph 4 states that the company has issued 100,000 shares; 40,000 to the first plaintiff, 10,000 to the second plaintiff and 50,000 to the first defendant. But how many of these shares have been paid up? Paragraph 6 states that the plaintiffs "injected a very substantial amount of money into the company". How much? How was the money injected? This sort of pleading begs too many questions. Paragraph 13 pleads that the first defendant acted ultra vires (contrary to) the Companies Act and in breach of the duties and obligations he owed to the other shareholders and directors. But what provisions of the Companies Act were breached? What was the nature and legal basis of the first defendant’s duties? The defendants are forced to guess answers, which is a sure-fire indication that the statement of claim is not disclosing a reasonable cause of action. Is this a case based on breach of statutory duty? Is it a common law action for negligence? Is it an action founded in equity and breach of fiduciary duties by a director to shareholders?
I conclude that it is plain and obvious that if the case goes to trial the plaintiffs will not obtain the relief that they are seeking. The statement of claim is so ambiguous and lacking in particularity that it does not enable the real issues to be identified. It leaves the defendants guessing as to what the plaintiffs’ allegations are. The plaintiffs’ case is, as presently pleaded, so obviously untenable that it cannot possibly succeed. It is manifestly groundless.
For all these reasons the plaintiffs’ statement of claim does not disclose a reasonable cause of action.
ARE THE PROCEEDINGS FRIVOLOUS OR VEXATIOUS?
I make the same comment here about counsel relying on old authority from another land. On this occasion Mr Poka took us even further back in time, to the 19th century, well before, I imagine, that there were any retail outlets of the type operated by the second defendant in Kandrian. Why do that, when there have been many local cases decided on the point? One of the leading cases is Ronny Wabia v BP Exploration Co Ltd and Others [1998] PNGLR 8, where Sevua J clearly spelt out the circumstances in which proceedings would be labelled "frivolous" or "vexatious".
If a case can be characterised in the following way, it is frivolous:
Proceedings are vexatious where:
With respect, I think Sevua J’s analysis of the legal concepts involved here is more helpful than that offered in the passage from Lindley LJ’s dictum in the North-Western Railway Co case, relied on by Mr Poka. And that is another reason counsel should discipline themselves to cite recent, Papua New Guinean cases.
In any event, I accept Mr Poka’s submissions on this issue. In its current condition, if this case went to trial, the plaintiffs would have no chance of success. They are bound to fail. Therefore the proceedings are vexatious. The defendants are being put to the trouble and expense of defending a case, which cannot possibly succeed. Therefore the proceedings are vexatious.
THE COURT’S DISCRETION
I remind myself that under the rules being relied on by the defendants – Order 8, Rule 27(1) and Order 12, Rules 40(1)(a) and (b) – the court has a discretion, on proof of the preconditions prescribed, to strike out the pleadings or dismiss the proceedings. It would be most unusual for the court, having concluded that there was no reasonable cause of action disclosed or that the proceedings were frivolous or vexatious, not to strike out the pleadings or dismiss the proceedings generally. However, both rules use the word "may" to describe the enlivening of the court’s power, which usually indicates that the exercise of the power is a matter of discretion. I can find nothing in the circumstances of this case to warrant the exercise of discretion against the defendants.
I will therefore order that the plaintiffs’ statement of claim be struck out and that the entire proceedings be dismissed.
REMARKS
At the risk of sounding like a broken record I reiterate my criticism of Mr Poka’s submission, which relied on old cases and texts and ignored recent authority on the propositions of law being advanced. The principles involved here are rules of practice and procedure that go back many years. They are essentially the same now as they were in 1892 in England. However, this is Papua New Guinea in the 21st century. The Constitution enjoins the courts, and the lawyers who work in them as officers of the courts, to develop a Papua New Guinean jurisprudence. To develop the law, PNG style. The Judges have been doing it for the last 30 years – restating, fine-tuning, clarifying old laws, as well as interpreting and applying laws that are unique to this country, such as the Constitutional Laws and customary law. Judges adapt and evolve the law, in light of the here and the now of Papua New Guinea. They put a lot of time and effort into it. It will only be wasted if lawyers ignore local cases.
These days the task of lawyers in keeping up with the law is much easier than it ever was. Sure, there is more law, but locating it is a breeze. All PNG judgments that have been reported in the Papua New Guinea Law Reports or which have an official N number (plus some that do not) are electronically published. It is a simple procedure to keep track of developments; even for those of us who suffer from technophobia and would perhaps prefer to be living back in the 1970s or even the 1870s in Kandrian. A lawyer does not have to be a computer whiz to be a good researcher. However, every lawyer practising in this jurisdiction, in 2005, should possess the basic skills of computer research, and have the ability to quickly check the latest developments in cases and legislation, and then present the court with contemporary law.
COSTS
Normally costs follow the event, ie the parties that lose are ordered to pay the other side’s legal costs. This would mean that the plaintiffs, Lawrence Mango and Joseph Salang, would have to pay the defendants’ legal costs. What troubles me about that is that there is no sign of the plaintiffs in the court’s file. They have had lawyers on the record, Norbert Kubak & Co. But on 10 October 2005, five days after the hearing of the motion, those lawyers filed a notice of ceasing to act. This makes me wonder whether the two plaintiffs actually knew about the motion. As a matter of law, they were given notice, as the documents were served on their lawyers. But perhaps there is an argument to say that the order for costs should be made against their lawyers – not against them personally. I will therefore reserve my decision on costs. Parties are at liberty to apply for whatever orders they consider are appropriate, provided of course that recent and local authority is relied on.
ORDER
The order of the court will be that:
_____________________________________________________________
Lawyers for the plaintiffs : Norbert Kubak & Co
Lawyers for the defendants : Pryke & Bray
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