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Jimm Trading Ltd v Maddison [2006] PGNC 144; N3174 (3 November 2006)

N3174


PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]


WS NO 145 OF 2003


BETWEEN


JIMM TRADING LIMITED
Plaintiff


AND


JOHN MADDISON
First Defendant


AND:


RICHARD BUSBY
Second Defendant


AND


BANK SOUTH PACIFIC LIMITED
Third Defendant


AND


BARRY TAN
Fourth Defendant


AND


STEPHEN TAN
Fifth Defendant


AND


NEVILLE SEETO
Sixth Defendant


AND


TST 4 MILE LIMITED
Seventh Defendant


AND


TST 4 MILE TRADING LIMITED
Eighth Defendant


Waigani: Kandaksi, J.
2006: 3April,3 November


PRACTICE & PROCEDURE – Application to dismiss proceedings for failure to disclose cause of action, being frivolous, vexatious and abuse of the process of the Court – Earlier application declined and plaintiff granted leave to amend pleadings with particulars – Amended statement of claim failing to comply with previous orders and failing to plead with particulars and pleading serious allegations against a non party - Issues raised could have been raised in earlier proceedings – Mortgagee and registered charge holder exercising its rights with endorsement of the Court – Proceedings failing to disclose a sustainable cause of action in non compliance of orders of the Court and amounting to an abuse of the Court’s process – Proceedings dismissed.


PRACTICE & PROCEDURE — Res judicata — Various decisions and orders made under various National and Supreme Court proceedings – Plaintiff had opportunity to raise issues raised in current proceedings in previous proceedings but did not – Current proceedings res judicata.


PRACTICE & PROCEDURE – Application for default judgment – Application made despite issue taken on sufficiency of pleadings – Good basis to question sufficiency of plaintiff’s pleadings – Application dismissed as misconceived.


COMPANY LAW – Actions of servants and agents of a company - Company correct party to sue for – Not share holders and servants or agents - Servants or agents of companies out on a frolic and detour of their own attract personal liability - Unless personal liability of shareholders and servants and or agents of a company is demonstrated it is inappropriate to sue shareholders and servants and agents of a company or an employer – It may be appropriate to servants or agents of larger companies or employers.


PARTIES & CAUSES OF ACTION – Actions of servants and agents of a company - Company correct party to sue for – Not share holders and servants or agents - Servants or agents of companies out on a frolic and detour of their own attract personal liability - Unless personal liability of shareholders and servants and or agents of a company is demonstrated it is inappropriate to sue shareholders and servants and agents of a company or an employer – It may be appropriate to servants or agents of larger companies or employers.


MORTGAGES – Mortgagee’s rights – Mortgagor defaulting in repayment of loans and other financial advances – Demands to make good the default not adhered to – Mortgagee exercising its powers to enforce its security – No dispute on default – Mortgagee entitled to exercise its powers.


Cases Cited:


National Airline Commission v. Lysenko [1990] PNGLR 226.
Lup Iohoi v. MVIT [1993] PNGLR 360.
Motor Vehicles Insurance (PNG) Trust v. James Pupune, [1993] PNGLR 370.
Timothy Peter Neville and Peter John Dalton Neville v. The Privatization Commission (26/11/01) N2184.
Wyatt Gallagher Bassett Limited v. Benny Diau (16/08/02) N2277.
Ome Ome Forests Ltd v. Ray Cheong & Ors (08/10/02) N2289.
Andrew Daiva and Ome Ome Forests Ltd v. Lawrance Pukali & Anor;
Wilson Thompson v. National Capital District Commission and The City Manager (11/10/04) N2686.
Timothy Peter Neville and Peter John Dalton Neville v. Privatisation Committee [Privatization Commission] (04/11/04) N2724.
Kerry Lerro v. Philip Stagg as Chairman of Central Tenders Board & Ors (20/04/06) N3050.


Counsel:


Mr. D. Wood, for the First, Second and Third Defendants/Applicants.
Mr. R. Lindsay, for the Fourth to the Eighth Defendants/Applicants
Mr. P. Parkop, for the Plaintiff/Respondent.


3 November, 2006


1. KANDAKASI J: There are three motions before me. The first one is a motion filed by the first to the third defendants (the Bank) initially on 18th and later amended on 24 March 2005. The second is one filed by the fourth to the eighth defendants (other defendants) on 29 March 2005. The final motion is by the plaintiff (JTL) filed on 1 April 2005.


2. The motion of the Bank seeks a dismissal of JTL’s amended statement of claim and therefore JTL’s claim with costs for:


(a) a failure to disclose a reasonable cause of action;


(b) an abuse of the Court’s process;


(c) a failure to comply with orders made by this Court on 14th May 2003; and


(d) vexatious and scandalous proceedings against the Bank and a non party, Mr. Peter Mills.


3. The motion of the other defendants seeks in the first part a strike out or a dismissal of the JTL’s amended statement of claim filed on 28 May 2005, with costs for failure to comply with the orders of this Court made on 14 May 2003. Failing that application, they seek leave of the Court for them to file and serve their defence outside the time periods stipulated by the Court in its orders of 14 May 2003.


4. Of course, JTL opposes these applications arguing that, its amended statement of claim does disclose a reasonable cause of action; the proceedings are not an abuse of the Court’s process and are not vexatious and scandalous. Also, it argues that, it has fully complied with the terms of the orders of 14 May 2003. Further or in the alternative, it argues that, if the Court finds parts of its pleadings vexatious and scandalous, the Court should exercise the offending pleadings instead of dismissing the entire proceedings. At the same time, JTL argues that, the defendants are in default of the order of 14 May 2003, requiring them to file and serve their defenses within 14 days from the date of the service of the amended statement of claim, which period JTL says has expired without the defendants filing and serving their defenses. Accordingly, JTL seeks judgment in default against the defendants, per its notice of motion filed on 1 April 2005.


5. In its notice of motion, JTL also takes objection to the affidavits of Derek Wood, John Maddison and Robert Lindsay and seeks to have them struck out. In seeking that relief, JTL claims these affidavits contain hearsay, opinions, comments and submissions. A number of affidavits have been filed and it was incumbent on JTL to specify which of the affidavits it is opposed to. JTL did not seriously pursue this point in its written submissions and oral presentation, by identifying the relevant affidavits and point out to offending paragraphs and the basis for the objections over each of them. I take it therefore, that this part of JTL’s motion has been abandoned. Nevertheless, I will allow myself to be guided by the facts deposed to in the other uncontested affidavits as well as the facts in the affidavits objected to.


6. The positions taken by the parties present the following issues for this Court to determine:


(a) Does the amended statement of claim fail to disclose a reasonable cause of action?

(b) Are the proceedings an abuse of the Court’s process?


(c) Are the proceedings vexatious and scandalous?


(d) Has JTL failed to comply with orders made by this Court on 14 May 2003? And


(e) Are the defendants in default of the orders of 14 May 2003?


7. There is quite a history of litigation as between JTL and the Bank from which these issues arise. It is thus necessary to understand the background in order to properly determine the issues presented. Accordingly, I turn to a consideration of the relevant factual background first.


Background


8. The Bank and JTL have filed separate statements of agreed and disputed facts as well as backgrounds to the litigation between the JTL and the Bank. These statements set out the relevant factual background. From these statements, there is no dispute that in August 1999, the Bank, then known as PNGBC Limited trading as Papua New Guinea Banking Corporation, provided at the request of JTL an overdraft facility in the sum of K400,000 as well as a loan of K3.3 million. The loan was for a period of 5 years with a monthly repayment of K88, 000. On 5 December 1999, JTL asked for and the Bank provided a further loan of K600,000. These overdraft and loan facilities were secured by various registered fixed and floating charges, registered mortgages over four real estates or property and an unlimited guarantee given by a Wesley Hui director of JTL in favour of the Bank.


9. Toward the end of 2000, JTL defaulted on its repayment under the overdraft and loan facilities. The Bank therefore, issued a letter of demand on 15 November 2000. On 11 December 2000, the Bank served a further letter of demand on JTL for a total amount of K4, 050,724.06. It seems JTL did not meet the Bank’s demand. Hence, by letter dated 21 June 2001, the Bank’s lawyers, Blake Dawson Waldron, served on JTL a request to vacate allotments 7 and 11, section 387, Hohola, which JTL did not adhere to. So the Bank issued O.S. 665 of 2001 on 26 October 2001, seeking amongst others vacant possession from JTL of the properties specified in the notice to vacate. On 12 December 2001, the National Court, per the then Chief Justice, Sir Arnold Amet, granted those orders.


10. Being aggrieved by the decision of the National Court, JTL on 20 December 2001 filed Supreme Court appeal SCA 110 of 2001. On the next day, JTL filed an application with the Supreme Court seeking a stay of the National Court orders. Sheehan J., heard that application as a single judge of the Supreme Court and dismissed it on 24 December 2001. Thereafter, on 3 January 2002, JTL filed OS No. 2 of 2002 between it as plaintiff and the Privatization Commission as defendant. Then by the consent of the parties to those proceedings Salika J., on 5 January 2002, ordered amongst others:


"1. That the Defendant direct PNGBC to refrain from exercising its power of sale of the mortgage property.


2. That the Defendant direct PNGBC Limited to avoid unnecessary litigation and further stay execution of the writ of possession and any other court orders obtained against the Plaintiff until properly reviewed by the Defendant of the possible damages and liabilities resulting from the execution of the said writ of possession or orders."


11. Under cover of letter dated 4 January 2002 by then Chairman of the Privatization Commission, Mr. Ben Micah to Garth McIllwain of the then PNGBC, attached a copy of the consent orders. About 4 days later, on 8 January 2002, the Bank filed a Writ of Possession, which ordered that the Sheriff enter Allotments 7 & 11 Section 387 Hohola and caused the Bank to have vacant possession.


12. At the same time, being aggrieved by the consent orders under O.S. 2 of 2002, the Bank filed on 13 March 2002, SCA 8 of 2002, with the Supreme Court appealing against Salika J.’s orders of 5 January 2002. Earlier on, by letter dated 28 January 2002, addressed to Emmanuel Hela, Metropolitan Superintendent, the Bank said it would continue with the execution of the writ of possession. Then in July 2002, JTL was served with a notice to vacate Allotments 7 & 11, Section 387, Hohola, National Capital District under the writ of possession. On 11 July 2002, JTL filed a notice of motion in SCA 110 of 2001, seeking an injunction against the Bank, to restrain the Bank from executing the writ of possession issued under OS 665 of 2001. Amet CJ, (as he then was) on 12 July 2001, ordered a dismissal of that motion and directed the Sheriff to execute the writ of possession. Accordingly, the Sheriff executed the writ of possession against allotments 7 & 11 of Section 387, Hohola, National Capital District on 17 July 2002.


13. A stock take of the property and materials present on the property was carried out on or between 18th and 20 July 2002, by agents and servants of the Bank on the Bank’s behalf. After the stock take, the Bank invited the other defendants to inspect the properties and tender for a purchase of the properties, which they did on 1 August 2002. They tendered for a price of K300,000.00 for items listed by the Bank. The Bank accepted the tender and on 5 August 2002, the Bank gave access of the property to the other defendants, their servants, employees or agents and for them to enter the property and do everything necessary and possible to re-open the business.


14. On 14 August 2002, JTL filed an Application for Leave to Appeal against the decision of Amet CJ., in SCA 110 of 2001. Nothing seems to have happened in relation to those proceedings until 24 November 2003 when the Supreme Court dismissed them. Meanwhile, a number of activities took place in other litigation fronts covering the period, December 2002 to May 2003. That started with the issuance of proceedings W.S. 1580 of 2002 on 3 December 2002 by Wesley Hui, one of the principles behind JTL, against the Bank and two of its officers. He also issued W.S. 58 of 2003, against Neville Seeto, Barry Tan, Stephen Tan, TST 4 Mile Limited, the purchasers of the property and the Bank on 20 January 2003. The following month on 6 February 2003, JTL issued these proceedings.


15. The appeal by the Bank under SCA 8 of 2002, against the consent orders under O.S. 2 of 2002 went before Sakora J as a single judge of the Supreme Court. His Honour on 28 March 2003, ordered that the consent order was binding on the Bank. His Honour then issued several restraining orders and ordered a return of the goods and assets seized under the writ of possession. It seems the Bank failed to comply with those orders and that attracted the filing of contempt proceedings against the Bank and its two officers by JTL under SCA 8 of 2002. Eventually, however, the orders of Sakora J., were discharged by the Supreme Court on 24 November 2003.


16. On 14 May 2003, these proceedings came before me on an application by JTL for default judgment on account of the defendants’ failure to file their defence within the time required by the Rules of the Court. I also had before me then an application by the Bank and the other defendants for a dismissal of the proceedings for failure to disclose a reasonable cause of action or the claim being frivolous and vexatious. I refused both of the applications and ordered JTL to file and serve within 14 days an amended statement of claim with particulars bearing in mind the arguments raised by the defendants in their application for a dismissal of the proceedings. I also ordered the defendants to file and serve their defenses within a further 14 days period from the date of the service of the amended statement of claim.


17. On 28 May 2003, JTL filed and served an amended statement of claim in purported compliance of the orders of 14 May 2003. By a detailed letter dated 5 June 2003, the Bank informed JTL that the amended statement of claim did not fully comply with the orders of 14 May and was defective for a number of reasons and requested JTL’s lawyers to withdraw the amended statement of claim. The Bank warned JTL that unless the JTL agrees to withdraw the amended statement of claim by or before close of business the same day, the Bank will apply for a dismissal of the amended statement of claim.


18 On 13 June 2003, JTL filed a notice of motion seeking to enter judgment in default of the Bank and the other defendants defence. The Bank and the other defendants responded with a counter motion seeking amongst others a dismissal of the amended statement of claim and for judgment in their favour. Those motions did not get to a hearing for all manner of reasons, because of the fact that the issues they raised and the relevant background and facts giving rise to the issues were complicated, until they came before me on 15 March 2006. After having heard the arguments of the parties, I reserved a ruling to a time when I would be able to carefully consider the arguments and come to a decision on the applications argued before me.


19. Prior to the matter returning before as alluded to above, further other developments took place. On 10 July 2003, Robert Southwell was appointed liquidator of JTL.


20. Bearing the above background in mind, I now turn to a consideration of the issues before me as outlined in paragraph 4. As already noted, the Bank and the other defendants submitted that the amended statement of claim is caught by O.12 r.40 of the National Court Rules (Rules) in that, they do not disclose a reasonable cause of action, they are frivolous or vexatious and are an abuse of the process of the Court. These cover the first three issues for determination by this Court.


21. Order 12 r. 40 provides:


"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;

(b) the proceedings are frivolous or vexatious;

(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."


22. Recently in Kerry Lerro v. Philip Stagg as Chairman of Central Tenders Board &,[1] I reviewed all of the relevant case authorities on point and summarized the relevant principles emanating from them at pages 7 to 9. I need not repeat them save only to briefly note them as follows:


(a) Order 12 r. 40 vests the Court with discretion to summarily determine a claim or a defence.


(b) The discretion must be exercised sparingly and with careful consideration of a party’s right to be heard before driving him away from the judgment seat.


(c) The discretion can be exercised only in the clearest of cases where it is plain and obvious that the master or judge can say at once that a statement of claim or a defence, as the case might be is "obviously and almost incontestably bad" even if proven, it will not entitle the plaintiff or the defendant the relief he or she seeks.


(d) At the same time however, the law such as the Rules under consideration provide for and the Court has an inherent jurisdiction to protect and safeguard against any possible abuse of the processes of the Court.


(e) The object of O.12 r. 40 is to stop cases which should not have been brought because they are frivolous in that they are obviously unsustainable or untenable and cannot possibly succeed or is bound to fail.


(f) A claim or defence may be vexatious if the case amounts to a sham or one which cannot succeed and is one that amounts to harassment of the opposing party who is unnecessarily put to the trouble and expenses of defending or proving the claim.


(g) There may be a failure to disclose a reasonable cause of action or defence, if the pleadings fail to disclose the form of a legally recognized action by disclosing the necessary legal elements or ingredients of the action and relevant and necessary facts giving rise to the action or defence.


(h) It follows therefore that, a statement of claim or a defence that is so ambiguous and or lacking in particularity that it fails to allow for an orderly and rational pleading and thereby help identify the real issues between the parties may be dismissed.


23. I then added:


"... the pleadings must be so bad and or vague and is not a case of lack of particulars or a lack of better pleading which cannot be cured by a request and or orders for further and better particulars and or amendment respectively under O.8, rr. 36, 50 or 51 of the Rules. Lack of particulars or lack of better pleadings is distinctly separate from a failure to disclose a reasonable cause of action or an action that is frivolous, vexatious or harassment. As such, clear and separate consequences follow. There is provision under the rules for requesting and or orders for further and better particulars or better pleadings as opposed to a right in a defendant or an opposing party to apply for a dismissal straightaway. A party must be careful not to ask for and the Court must stop to ensure that it is not being asked to dismiss a claim because of lack of particulars or lack of proper pleading which can be cured by appropriate amendments to the pleadings. Regard must also be had to the fact that the Rules are not an end in themselves but a means to an end and by reason of which a strict compliance of the Rules can be dispensed in the interest of doing justice in accordance with O. 1, r.7 of the Rules... in appropriate cases."


Reasonable Cause of Action


24. Bearing these principles in mind, I proceed to examine JTL’s amended statement of claim which is the subject of the applications before me. I accept the Bank’s submission that, in essence, JTL in its amended statement claim, claims that the Bank acted contrary to the consent orders under O.S. 2 of 2002, as a mortgagee exercising its power of sale by executing a writ of possession over JTL’s properties. JTL also claims that, the execution of the writ of possession did not entitle the Bank and its two officers to seize and sell JTL’s goods, real property, forklifts, computers, equipment and other assets etc valued at K2,619,758. Further, JTL in its amended statement of claim claims that the execution of the writ of possession prevented JTL from carrying on operations and to earn an income and to recover debts owed to JTL in the amount of K1,500,000


25 In their defence, the Bank and its officers, claim that the consent orders did not prevent the execution of the writ of possession, issued by this Court under O.S. 665 of 2001. But they claim that the goods and assets seized from JTL were under the Bank’s fixed and floating charge dated 24 August 1999, registered as charge no. 13135 on 21 October 1999.


26. The Bank in arguing that the amended statement of claim does not disclose a reasonable cause of action, it refers to the affidavits of Richard Busby filed on 2 May 2003 and three affidavits by John Maddison respectively filed on 5 May 2003 and 18 March 2005 and 20 June 2005, and Peter Mills filed on 1 May 2003. These affidavits disclose that, due to default by JTL in paying its loans to the Bank, the Sheriff, at the request of the Bank executed the writ of possession on the property. The seizure of the other goods and assets of JTL was not under the writ of possession but under the Bank’s registered charge. A copy of the Charge is annexure "A" to John Maddison’s affidavit filed on 20 June 2005.


27. In response, JTL agrees effectively with the Bank’s summation of its claim as against the Bank. It then argues that its amended statement of claim does disclose a reasonable cause of action, which is clearly understood by the Bank. It then submits that my decision of 14 May 2003 confirmed that position. In that decision, I refused to dismiss JTL’s claim and ordered that JTL amends its statement of claim by providing further and better particulars of the matters originally pleaded. In so doing, I decided not to make any decision as to the question of whether JTL could maintain its claim. Rather I decided that there appear to be a cause of action which must be particularized in order to decide whether a cause of action known to law was disclosed. There is acceptance by JTL that the Bank did not seize the goods and assets under the writ of possession. However, it argues that, the seizure did take place in the course of executing the writ of possession. Further, JTL argues that, the Bank should have raised its claim of seizing the goods and assets under its fixed and floating charge in an amended defence filed in answer to the amended statement of claim for determination at the trial but the Bank has not done that. The suggestion implicitly therefore is that, the Bank is now precluded from raising that claim.


28. There is no contest that the Bank did have a registered floating and fixed charge over the goods and assets of JTL in addition to the Bank’s mortgages over the real estate properties. There is also no dispute that JTL defaulted on its various loan repayments. That caused the Bank to exercise its powers and or rights under the mortgages and charges. On the evidence before me, it is clear that there was no impediment to the Bank taking those steps except for the orders of Sakora J made on 28 March 2003.


29. Sakora J’s orders, ordered that the consent orders signed by Salika J under O.S. 2 of 2002, on 5 January 2002, as between JTL and the then Privatization Commission was binding on the Bank. In my view however, that was not a serious impediment for three reasons. First, by the time those orders were made the Bank had already exercised its powers. Secondly, the consent orders signed by Salika J merely said:


"1. That the Defendant direct PNGBC to refrain from exercising its power of sale of the mortgage property.


2. That the Defendant direct PNGBC Limited to avoid unnecessary litigation and further stay execution of the writ of possession and any other court orders obtained against the Plaintiff until properly reviewed by the Defendant of the possible damages and liabilities resulting from the execution of the said writ of possession or orders."


30. There can be no doubt that these orders were only for the defendant, the Privatization Commission to direct the PNGBC to refrain for exercising its powers of sale of the mortgaged properties. Those orders also were for the Privatization Commission to direct the PNGBC to avoid unnecessary litigation and further stay the execution of a writ of possession and other court orders obtained against JTL, until a proper review of the possible damages and liabilities resulting from the execution of the said writ of possession or orders. They did not go far enough to require the Bank to comply with any directions the Privatization Commission may issue under the orders. Further, those orders were not specific as to which mortgages and properties, the writ of possession, the other proceedings and orders those orders related to, and how and who was to review the defendants possible damages and liabilities. The orders of Sakora J on 28 March 2003 did not improve on the situation as they were in furtherance of the consent orders made by Salika J. They merely declared that the consent orders were binding on the Bank without clarifying the uncertainties that were apparent on the face of the consent orders and required a return of unspecified goods and chattels.


31. Thirdly, the Supreme Court discharged the orders of Sakora J., on 24 November 2003. Hence, if the position was not clear by reason of the consent orders made by Salika J., as furthered by the orders made by Sakora J., the orders of the Supreme Court on 24 November 2003, clarified the position that there was no impediment to the Bank proceeding with the steps it took under its registered mortgage and charge. Indeed, I note that the Bank proceeding to exercise its powers under its registered mortgages and charges. This was with the approval and or endorsement of this Court per the orders of Amet CJ on 12 December 2001 and effectively allowed execution by the Supreme Court, when Sheehan J., sitting as a single judge of the Supreme Court refused a stay of Amet CJ’s orders pending JTL’s appeal SCA 110 of 2001, which appeal the Supreme Court dismissed on 24 November 2003. It follows therefore that, by the time the defendant’ motion was argued before me, it was clear to JTL that there was absolutely no impediment to the Bank taking the steps it took.


32. Leaving aside the issue of JTL’s authority to issue and maintain these proceedings, the question that remains for me to determine is what was JTL’s cause of action? That was one of the pertinent questions when this matter initially came before me on 14 May 2003. Issues of res judicata, abuse of the Court’s process and possible duplication of proceedings arose. Bearing these and other factors in mind, rather than dismissing these proceedings, I ordered JTL to file and serve an amended statement of claim so as to enable the defendants and the Court to identify and determine how these proceedings were different from the proceedings and issues that were earlier determined or raised in the other related proceedings. It is therefore, appropriate that I should turn to a consideration of whether or not JTL complied with this Court’s orders of 14 May 2003.


Compliance with Orders of 14 May 2003


33. The defendants argue that JTL’s amended statement of claim although filed within the time required; does not comply fully with the orders of 14 May 2003. In particular they point out to the lack of particulars as to the goods and assets JTL claims were illegally seized by the Bank and sold to the other Defendants and the other matters pleaded against all of the defendants. They further argue that JTL has introduced a new allegation against its former lawyer, Mr. Peter Mills, without making him a party to the proceedings.


34. The precise terms of the orders of 14 May 2003, in so far as they are relevant required JTL to file and serve "an amended statement of claim properly particularizing matters [pleaded] and excluding matters of evidence...." The crux of JTL’s claim is that the Bank seized its goods and assets and sold them to the other defendants. Paragraphs 25 to 31 and 38 to 41 (b) speak of the goods and assets. Of these, paragraphs 25 and 29 are critical. The rest of the pleadings rely on these paragraphs. Paragraph 25 makes reference to a "wholesale and other equipment and assets that are particularized and described in the particulars in Schedule I hereto valued at K2, 619.758." Similarly, paragraph 29 makes reference to "a list of items alleged to contain grocery items provided to RH Trading Limited described in particulars in Schedule II." The amended statement of claim neither attaches nor does it plead the contents of Schedule I and Schedule II or any of the details of the alleged goods, assets and debtors as pleaded in these and the other paragraphs.


35. Further in paragraph 42, the JTL pleads a number of losses namely, business profits, business standing, business credibility, goodwill and business opportunities. However, JTL did not particularize and quantify the actual or estimated loss for each of these items. Furthermore, in its prayer for relief JTL claim without any particulars and foundation in the pleadings claims an amount of K2,619,758. Similarly in paragraph 2 of its prayer for relief, JTL claims without providing any details and foundation in the pleadings an amount of K1,500,000. Finally, in paragraph 3 of its pray for relief, JTL refers to paragraphs 50(c) to (g). However, there is no paragraph 50 whether with or without subparagraphs (c) to (g).


36. It is abundantly clear to me that, the defendants were in no position to clearly identify what goods, assets and debtors list the Bank is alleged to have seized and sold off to the other defendants and other third parties. Similarly the pleadings as they are, fail to give any details of each item of goods or assets seized and their value to arrive at the alleged K2,619, 758 loss. Likewise, there are no details given as to the basis for the alleged business loss and the connection with the alleged seizure and sale of the unspecified goods and assets and actual or estimated amount of monetary loss and how they have been arrived at.


37. From annexure "C-1" to the Affidavit of Robert Lindsay sworn and filed on 7 June 2003 and annexures "PVM1" and "PVM2" of the affidavit of Peter Mills sworn 27 June 2003 and the affidavit of John Maddison sworn on 16 February and filed on 18 March 2005, it is clear that, all of the defendants requested JTL to provide them with a copy of the two schedules as well as the necessary missing details and or particulars and they warned that if JTL failed to do that, they would apply for appropriate orders from the Court.


38. Instead of considering the basis for the defendant’s requests, JTL took the position that, there was no need for it to provide any of the particulars requested. It took the position that the defendants should file their defenses within the 14 days period the Court had stipulated in its orders of 14 May 2003. Accordingly, when the defendants did not file and serve their defenses, to the amended statement of claim, JTL proceeded to file and serve an application for judgment in default. In the course of submissions, counsel for JTL, Mr. Parkop conceded that some of his client’s pleadings did lack and therefore required particulars. However, he still maintained his position that the defendants were under an obligation, just like his client was to file and serve their defenses within 14 days from the date of the service of his client’s amended statement of claim but they did not.


39. The position JTL took through its counsel was clearly misconceived. Its original pleadings had the very problems identified by the defendants in terms of lack of particulars in the important respects of JTL’s claims against the defendants, which were necessary, given the history of the various litigations between the Bank and JTL. Rather than having the proceedings dismissed, the Court in the exercise of its discretion granted JTL leave to file and serve an amended statement of claim with particulars of the matters it was claiming against the defendants. In my view, the amended statement of claim clearly failed to comply with the orders of 14 May 2003, when it failed to provide the necessary details and particulars of each of the goods, assets, debtors list, the consequential loss of business and other alleged losses, which the Court ordered JTL to plead. I accept the defendants’ submission that JTL’s pleadings did not place them in a position to appreciate and do a proper defence to the matters pleaded against them. In the circumstances, I am of the view that the defendants were entitled to apply for a dismissal of the amended statement of claim and consequentially the whole claim for failure to comply with the orders of the Court.


40. However, the defendant’s were kind enough to request JTL to supply the missing details. Rather than seriously taking up that opportunity, JTL chose to ignore and apply for judgment in default. It did so under the clear misconception that the defendants were and would be required to plead to an amended statement of claim that did not disclose the necessary particulars and details forming the foundation for the claim against them. Logically and the law is that, before a second party to any proceedings could be required to plead, the first party must first plead its claim concisely and precisely with a view to fully disclose all of the relevant and necessary particulars and details. After all, as many authorities such as the Supreme Court decision in Motor Vehicles Insurance (PNG) Trust v. James Pupune,[2] say, the functions or objectives of pleadings and particulars is to:


"1. furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it;


2. define the issues for decision in the litigation and, thereby, enable the relevance and admissibility of evidence to be determined at the trial; and


3. give a defendant an understanding of a plaintiff's claim in aid of the defendant’s right to make a payment into court."


41. In this case, JTL failed in its original pleadings to furnish the defendants with a statement of its case sufficiently clear to allow the defendants a fair opportunity to meet it. They failed to define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at a trial. More importantly, it failed to give the defendants an understanding and appreciation of JTL’s claim in aid of their right to assess and if need be make a payment into Court in satisfaction of the claim against them. This Court therefore granted JTL leave to meet its obligations to plead in those terms. Then after the grant of leave in the exercise of the Court’s discretion for JTL to do so, JTL has once again, failed to discharge its obligation. It is clear law that once discretion is exercised in favour of an erring party, any further exercise of discretion in favour of such a party is not readily available.[3] In the particular circumstances of this case, JTL cannot be granted another leave to further amend its statement of claim, particularly when the Court has already exercised its discretion in JTL’s favour and JTL has taken the position that its pleadings are in order despite the reasons for ordering JTL to amend its statement of claim and the requirements the amended statement of claim was to meet. That being the case, the proceedings remain defective.


42. Quite apart from the lack of proper pleadings with particulars, there is a further problem with JTL’s amended statement of claim. Without naming Peter Vincent Mills, the lawyer than having the carriage and conduct of the various proceedings for the Bank, JTL has introduced serious allegations against Mr. Mills. The defendants argue that, this and other factors render these proceedings as amended, an abuse of the Court’s process, and as such, they should be dismissed. I thus turn to a consideration of that issue now.


Abuse of Process


43. In this context, I reiterate that, it is erroneous for JTL to premise its claim on the basis that, its unspecified goods and assets were allegedly seized by the Bank under the writ of possession when in fact the Bank merely enforced its rights under its registered fixed and floating charges. Similarly, the claim by JTL that the Bank did not have any authority to execute the writ of possession is also baseless because the orders under O.S. 665 of 2001 and SCA No. 110 of 2001 were for the execution of that writ on the basis of the registered mortgages, a position later affirmed with the dismissal on 24 November 2004 of JTL’s appeal under SCA 110 of 2001.


44. The Bank argues that the proceedings under O.S. 2 of 2002 were intended to prevent it from properly exercising its legal rights and powers under the various registered mortgages and charges and as such they were an abuse of the process of the Court. This, its says was the case because JTL being fully aware of going for that relief, neither made the Bank a party to the proceedings, nor did it inform the Bank of the proceedings until the consent orders under those proceedings were entered. In advancing that argument, the Bank argues that, it was a separate legal entity from the Privatization Commission which was only the Bank’s shareholder. As such, the Commission did not have any authority to bind it, when it consented to the orders made by Salika J under O.S. 2 of 2002.


45. The Bank, then PNGBC directly raised this issue before me in the case of Timothy Peter Neville and Peter John Dalton Neville v. The Privatization Commission.[4] In that case, the plaintiffs were the sole shareholders of a company called Coecon Limited. The State who was the sole shareholder of PNGBC then, forced Coecon into a serious debt position by failing to settle substantial amounts of monies due and owning to Coecon. Coecon successfully sued the State for what was due to it and there were delays in the State meeting the judgment. In the meantime, PNGBC had moved to exercise its mortgagee powers and rights under a number of registered mortgages. With the consent of the Commission, I granted interim restraining orders against the PNGBC from enforcing its registered mortgages until the State fully satisfied the judgment against it.


46. Sometime later the PNGBC applied to be joined as a party and subject to a grant of that application; it sought orders setting aside the interim restraining orders for the same reasons advanced in this case by the Bank. I considered the issues raised before me at some length and decided in these terms at pp. 10 - 11:


"In my view, the protection of the corporate veil or separate legal personality upon registration under the Companies Act was lifted by s.14 of the Act [Privatization Act 199]. This was by virtue of the s.14(2) of the Act, when Parliament removed and placed in the Commission the assets, management, administration and control of enterprises to be privatized.


Generally the law allows for a lifting of the corporate veil even in situations in which, there is no clear statutory or (sic) other sources of vesting control in any other entity or an authority. The few cases on this issue in the country to date appear ready to lift the corporate veil if the control of a company is in somebody else. I referred to the cases on point in my recent judgment in Odata v. Ambusa Copra Oil Mill and National Provident Fund Board (... 6/07/01) N2106. In that case, I ordered a lifting of the corporate veil to enable the plaintiff to sue the NPF who was ultimately in control of Ambusa. In this case, Parliament by specific legislation provided that the Commission is to take control of the management and the assets of the enterprises declared to be privatized.


In the Odata’s case, I also found that, if the circumstances of the case warrant a lifting of the corporate veil, than the Court should not hesitate to so order. In this case, it is common knowledge that PNGBC is the one set to be privatized through the declaration for privatization of Finance Pacific Ltd. The parties in the Kenneth Winston Bromley case (supra) acknowledged this at page 3 of the judgment. The Nevilles are indebted to PNGBC because of a failure on the part of the State who is the sole shareholder of PNGBC through the Commission. Without first meeting the Nevilles demand against the State, the State is, through its business arm, PNGBC seeking to foreclose on the Nevilles and drive them out of business. In my view the Nevilles are quite correctly concerned with this conduct. It appears most unfair for the State through PNGBC to force the Nevilles to the point of bankruptcy and then seek to gain from such conduct."


47. The PNGBC was not happy with that decision and it appealed to the Supreme Court. The Supreme Court dismissed that appeal.[5]


48. My decision in Timothy Peter Neville and Peter John Dalton Neville v. The Privatization Commission (supra), determined the issue of separate legal personality and the ability of the Commission to bind the PNGBC. Nevertheless, that case is distinguishable from the present case having regard to the particular facts of that case and this case. In that case, there was no pre-existing litigation and litigation history as is the case in the present case. In view of the history of litigation between the Bank and JTL, it was necessary for JTL to name the Bank and or serve or give notice to the Bank of the proceedings JTL took against the Commission, before getting to the consent orders. There is no explanation provided by JTL as to why it chose to issue proceedings only as against the Commission and keep the Bank in the dark. There is also no evidence of JTL disclosing the previous proceedings as between itself and the Bank and the earlier orders made by both the National and Supreme Courts, before the subsequent orders were signed by Salika J. In the absence of any convincing explanation to the contrary, I find that JTL deliberately chose to keep the Bank in the dark and get to a result that was against the Bank and in particular get around the effect of the previous orders of both this and the Supreme Courts.


49. I find that the actions of JTL in issuing the proceedings under O.S. 2 of 2002 and securing the consent orders behind the Bank’s back without fully disclosing to the Court the previous proceedings and orders amounted to an abuse of the process of the Court and infringed the law on res judicata. Halsbury’s Law of England (4th Ed), Vol. 16, para 1528, succinctly sums up the relevant principles in these way:


"In order that a defence of res judicata may succeed it is necessary to show not only that the cause of action was the same but also that the plaintiff had the opportunity to recovering and but for his own fault might have recovered in the first action that which he seeks to recover in the second. A plea of res judicata must show either an actual merger or that the same point has been actually decided between the parties." (Emphasis supplied)


50. These principles have been adopted and applied in our jurisdiction. Hence I noted in Wilson Thompson v. National Capital District Commission and The City Manager,[6] that the principles governing the doctrine of res judicata are well settled.[7] As I noted in that case:


"in order for the defence of res judicata to succeed, it is necessary to show not only that the cause of action was the same but also that the plaintiff has had an opportunity of recovering in an earlier proceeding that which he seeks to recover or have determined in the subsequent proceeding. ...[W]hen a court of competent jurisdiction decides on an issue on its merits, it reaches finality on the rights of the parties and those claiming through them. Hence, such a decision is a bar to any new action involving the same parties and essentially the same claim or cause of action."


51. When Amet CJ initially approved the Bank’s actions as a registered mortgagee in terms of the orders he made on 12 December 2001 under O.S. 665 of 2001, JTL had a right of appeal to get around that order and prevent the Bank from taking the steps it was taking if JTL had any valid basis to take such steps. Indeed, JTL did lodge appeal, SCA 110 of 2001, and sought an interim injunctive order, which the Supreme Court refused. When that happened, it was incumbent on JTL to prosecute its appeal with urgency but it did not and its appeal eventually got dismissed. That effectively ended any right in JTL to challenge the Bank’s power and the Bank’s right to take the steps it took. There is no evidence before me as to what became of the proceedings under O.S. 665 of 2001.Whatever the position is, the fact remains, both the Supreme and this Court in effect did not recognize any right in JTL to prevent the Bank from proceeding with its actions. That ended any right in JTL to challenge the Bank’s right to enforce its securities by its various actions. It follows therefore that, JTL abused the process of the Court not once but twice by issuing O.S. 2 of 2002 and later these proceedings.


52. In the course of arguments, counsel for JTL, Mr. Parkop argued that the issues raised in these proceedings were not raised in the earlier proceedings. However, he and his client failed to provide the appropriate evidence or clearly demonstrate in the pleadings with the kind of particulars ordered on 14 May 2003, as to how these proceedings are different from the earlier proceedings. If JTL did that and if indeed the pleadings show that these proceedings raise totally new or different issues and raises issues that could not be raised in the earlier proceedings, there would be basis for JTL to argue and for the Court to consider whether there is any merit in that argument. As it is, there is simply no reasonable basis for me to consider whether there is merit in JTL’s argument. Instead, the evidence before me suggests that the earlier proceedings raised if not, did present the occasion for JTL to advance the very issues and arguments it seeks to pursue under these proceedings. It follows therefore that, these proceedings are res judicata. Further, even if these proceedings are not res judicata, JTL failed to provide any reasonable explanation for it to issue these proceedings having regard to the history of litigation as outlined in the earlier part of this judgment. The issuance of these proceedings therefore, amount to an abuse of the Court’s process.


Scandalous and Vexatious Pleadings


53. To make matters worse for itself, JTL introduced fresh claims against the Bank’s then lawyer Mr. Mills. That it has done without naming Mr. Mills as a defendant. To date, JTL has not served the amended statement of claim on Mr. Mills, who has since left the employ of the Bank’s lawyers and is working and living in Australia as a lawyer.


54. The allegations against Mr. Mills in the Amended Claim are numerous. In summary, JTL alleges that Mr. Mills:


(a) misled the Court and conspired to defeat the orders of the National Court under O.S. No. 2 of 2002 (paragraph 32);


(b) attempted to deceive the Sheriff to execute the writ of possession after he failed to obtain a stay on the consent orders under SCA No. 8 of 2002 (paragraph 32(1));


(c) On instructions from the Bank he was mischievous and deceived the Sheriff in order to obtain an order to execute the writ of possession (paragraph 32(2));


(d) "caused the Chief Justice to breach section 5(1) of the Supreme Court Act" (paragraph 32(3)(iv)).


55. The Bank submits that, these and the other allegations in the amended statement of claim against Peter Mills are untrue and have no basis. Accordingly, they submit that they are vexatious and designed to cause prejudice, particularly when Mr. Mills has not been joined as a defendant by JTL to the proceedings and not been served with the allegations. The prejudice to the Bank and the first and second defendants they submit is that, by inference, JTL claims that, they were aware of Mr. Mills’ alleged unlawful conducts and condoned his actions and conspired with him to defraud JTL. The Bank and the first and second defendants further submit that JTL should have but as not sought to retract its allegations against Mr. Mills, who is not a party to the proceedings.


56. As with the other parts of its amended statement of claim, JTL has not pleaded any particulars to disclose the foundation or basis for the allegations against Mr. Mills. The allegations are serious and are levelled against a person who was counsel for one of the parties in a history of long drawn out litigation. It would require the Bank to get in contact with Mr. Mills and get his response to the not particularized allegations. Given that Mr. Mills is no longer in the country, the allegations obviously have the effect of delaying the Bank and the other defendant’s defence. If they are not able to contact Mr. Mills, it would certainly result in prejudice to the defendants as they would be in no position to respond to JTL’s allegations against Mr. Mills and the inference that could be drawn against the Bank and the other defendants.


57. The history of the litigation as between JTL and the Bank as outlined and discussed above appear to support the position taken by the Bank that it was entitled to take the steps it took against JTL and both this and the Supreme Courts were correct in approving those steps despite JTL’s opposition. Mr. Mills was merely providing the Bank with legal services for a fee and as an officer of the Court assisted the Court. There is no evidence of Mr. Mills having a vested interest in the issues fought between the parties or an interest other than to represent the Bank within the bounds of the law. If there were any merit in the claims against Mr. Mills and the inferences that could be drawn against the Bank, it was necessary for JTL to specifically plead and produce the necessary evidence to rebut the Bank’s claim but it did not do that.


58. Mr. Mills has appeared before me on a number of occupations. He impressed upon me has a diligent lawyer able and prepared to raise all issues that a relevant and favourable to his client as well as those operating against his client and respectfully putting forward his client’s case. In the absence of proper foundation laid in the pleadings and or evidence, it is clear to me that JTL introduced this part of the allegations with a view to causing prejudice, embarrassment and scandal against Mr. Mills, the Bank and the other defendants. The Court does have a duty to safeguard against a scandalous and vexatious use of its process against another person. I find in this case that JTL has used these proceedings to do what it is prohibited or not allowed to do by the Rules of the Court and the case law built around them. Accordingly, I find this is an appropriate case for me to strike out the allegations as against Mr. Mills and the inferences the pleadings in question raised against the Bank and the other defendants and I do so without hesitation.


59. Further, the Bank and its two officers, namely, the first and second defendants argue that the naming of the first and second defendants as parties to the proceedings are also scandalous, vexatious and an abuse of the Court’s process. It is argued that, Richard Busby and John Maddison were merely performing their duties as employees of the third defendant and did not act negligently as alleged in paragraph 33. In those circumstances, they could not be personally liable and the pleadings do not warrant their inclusion as defendants.


60. It has become a mere matter of course for lawyers who draw up pleadings on behalf of plaintiffs these days to name all sorts of parties as defendants without first ensuring that their clients do have a course of action against them. As I said in Andrew Daiva and Ome Ome Forests Ltd v. Lawrance Pukali & Anor; Ome Ome Forests Ltd v. Ray Cheong & Ors.[8] in the context of the liability of a company:


"The company can only be liable for the acts of its employees if they act in the course of their employment pursuing their employers (the company’s) interest. If they are out on a frolic and detour of their own they could become personally liable."


61. This means where an employee or an officer of a company is in the course of his employment pursing his employer or principle’s business or interest and incurs a liability, that liability becomes that of the company or the principle. The correct party should therefore, be the company or the principle and not the employee or the officer. If however, the employee or the officer goes out on a frolic and detour of his own and incurs any liability, that employee becomes personally liable and is therefore the correct party to be named and not the company.


62. What I have just said applies in a case where the company (employer) knows or has reason to know what its officers and or employees should and are doing from time to time in furtherance of the employer’s business interest. However, in the case of very large employers like the State, it may be next to impossible for the employer to know each of its employees or officers as well as their activities on a day to day basis. In such a case, it may be appropriate to name the relevant officer or employee for whose actions or inactions the employer is being sued, so that the employer can have the opportunity to know both for whose actions it is being sued and an opportunity given to the person responsible to give his response to the allegations against him and his employer. This is necessary because an employer can only be liable if the employee is found liable in damages to a plaintiff. As the kinds of employment setting is very diverse, it is impossible for me to lay down a rigid rule but can only suggest as I have so that each case can be made out as to the naming of the correct parties or defendant’s. Nevertheless, I would be quick to suggest that a plaintiff should exercise care and restrain before naming an employee or an officer of an employer as a defendant to any claim against a company if all that the employee or officer did was pursued his or her employers business in the course of his or her duties, unless they did something to attract personal liability.


63. In this case, JTL pleads in paragraph 33 of its amended statement of claim that the first and second defendants were negligent in allowing the other defendants to occupy and detain the goods and assets at the mortgaged property. If there was any such negligence it could have been that of the Bank as the first and second defendants’ only acted in pursuance and in furtherance of the Bank’s interest. That interest was to enforce the Bank’s securities following JTL’s defaults in the repayment of its various loans. Nothing is pleaded in the amended statement of claim. Also, there is no disclosure neither in the pleadings nor in any evidence before me that the first and second defendant had something personally against JTL and that they were out to get JTL. In these circumstances, I am of the view that the naming of the first and second defendants is scandalous and vexations, they do have the effect of embarrassing and making the defence of the Bank and the other defendants unnecessarily expensive given the multiplicity of defendants.


64. Similarly, I find that the naming of the other defendants is also scandalous and vexatious. No particulars of any of the allegations against these defendants are pleaded. For example no particulars in terms of time, date and place and the people involved in coming up with the conspiracy and other allegations against them. There are also no pleadings and or evidence of any conspiracy or collusion between these defendants and the Bank in respect of the steps the Bank took against JTL under the various registered securities for its loans or advances to JTL. The fourth to the sixth defendants are the shareholders, officers and or employees of the seventh and the eight defendants. Nothing is pleaded that discloses a case of the fourth to the sixth defendants having incurred personal liability in order for them to be also named as defendants. Clearly therefore, the pleadings defy the separate legal personality principle in terms of the relationship between the fourth to the sixth defendants and the seventh and eight defendants either has servants, agents and or the shareholders. It is also abundantly clear that, the seventh and eight defendants became the successful purchaser of the property, goods and assets the Bank sold under its various registered mortgages and charges and nothing more. In the circumstances, I find that the fourth to eight defendants were unnecessarily and scandalously named as defendants. This does have the potential of embarrassing these defendants. In the circumstances, I find that, JTL abused the Court process in naming these defendants. I would therefore order a dismissal of the proceedings as against these defendants as well.


66. The end result of all of the foregoing is clear. The proceedings against all of the defendants disclose no reasonable cause of action and or an action that is sustainable. Further, the proceedings amount to an abuse of the process of the Court particularly when there was an earlier long drawn out history of litigation as between the Bank and JTL which resolved in favour of the Bank, without JTL seriously pursuing its right of appeal. They also amount to an abuse of the process of the Court because JTL has failed to provide any reasonable explanation either in the pleadings or by any evidence that these proceedings and the issues they raised are clearly different and that they could not have been raised in the earlier proceedings to avoid the application of the doctrine of res judicata. Furthermore, JTL has named the Bank and the other defendants and have made allegations against the Bank’s former lawyer in a manner that is vexatious, scandalous and embarrassing to the Bank and the other defendants. The Court in the exercise of its discretion in JTL’s favour once already granted JTL leave to file and serve an amended statement of claim with particulars of each of the claims against the defendants and show how the issue of res judicata does not arise. That opportunity has not been properly made use of and no case has been made out for a further exercise of discretion in favour of JTL. The Court does have the power under O 12 r 1 and r 40 to put a stop to proceedings that amount to an abuse of the Court’s process or are vexatious, scandalous and have the potential to embarrass the parties to the proceedings. In the circumstances, consider it appropriate to order a dismissal of the proceedings with costs against JTL to be agreed if not taxed.


_______________________________


Blake Dawson Waldron Lawyers: Lawyers for the first to third Defendants/Applicants.
Gadens Lawyers: Lawyers for the fourth to seventh Defendants/Applicants.
Parkop lawyers: Lawyers for the Plaintiff/Respondents.

[1] (20/04/06) N3050.
[2] [1993] PNGLR 370 at 373 -374.
[3] See Lup Iohoi v. MVIT [1993] PNGLR 360 and Kerry Lerro v. Philip Stagg as Chairman of Central Tenders Board & Ors Opt cit note 1.

[4] (26/11/01) N2184.
[5] See Timothy Peter Neville and Peter John Dalton Neville v Privatisation Committee [Privatization Commission] (04/11/04) N2724, at page 3 for a confirmation of that outcome.

[6] (11/10/04) N2686.
[7] See Wyatt Gallagher Bassett Limited v. Benny Diau (16/08/02) N2277; National Airline Commission v. Lysenko [1990] PNGLR 226.
[8] (08/10/02) N2289 at pp 27-28.

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