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Heroauka No 2 Land Group Inc v Frontier Holdings Ltd [2010] PGNC 83; N4096 (16 July 2010)

N4096

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 367 OF 2008

HEROAUKA NO 2 LAND GROUP INC & OTHERS
Plaintiffs

V

FRONTIER HOLDINGS LTD
First Defendant

BOARD OF DIRECTORS OF FRONTIER HOLDINGS LTD
Second Defendant

HON BELDEN NAMAH MP, MINISTER FOR FORESTS
Third Defendant

PAPUA NEW GUINEA FOREST AUTHORITY
Fourth Defendant

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fifth Defendant

Waigani: Cannings J
2010: 14, 16 July

PRACTICE AND PROCEDURE – motion for default judgment – formal requirements satisfied – whether discretion to enter default judgment should be exercised in favour of plaintiff.

The plaintiffs commenced proceedings against a timber company, its directors, the Minister for Forests, the Forest Authority and the State, seeking damages for equitable fraud. The Minister and the State were in default of the National Court Rules and the plaintiff applied for default judgment against them.

Held:

(1) The formal requirements for entry of default judgment were complied with. It therefore became a matter for discretion.

(2) There were a number of reasons for refusing to exercise the discretion of the court in favour of the plaintiff: no clear cause of action; not clear how the current Minister can be liable for acts allegedly committed by a predecessor; serious allegations of fraud are made; defendants appear to have a defence on the merits; other defendants have not been served with the notice of motion; entry of judgment may prejudice other defendants; default is not extensive; plaintiffs have not prosecuted the case diligently; entry of judgment would be contrary to the national interest; failure to comply with Claims By and Against the State Act, Section 12(3); abuse of process.

(3) The motion was accordingly refused.

Cases cited

The following cases are cited in the judgment:

Agnes Kunton v John Junias and The State (2006) SC929
Bala Kitipa v Vincent Auali, Supply and Tenders Board of Western Highlands Provincial Government and Others (1998) N1773
Beecroft No 51 Ltd trading as Ronnie's Hot Bread v Neville Seeto and Others (2004) N2561
John Kunkene v Michael Rangsu and The State (1999) N1917
Kante Mininga v The State & Others (1996) N1458
Urban Giru v Luke Muta (2005) N2877

Counsel

J K Gawi, for the plaintiffs
W Mapiso, for the 5th defendant

16 July, 2010

1. CANNINGS J: The plaintiffs are customary landowners in the Vailala area of Gulf Province. They have commenced proceedings against a timber company, its directors, the Minister for Forests, the PNG Forest Authority and the State, seeking damages for an equitable fraud committed against them since 1992.

2. The fraud is alleged in the statement of claim to be constituted by the unlawful granting of a timber permit over the plaintiffs' land by the then Minister for Forests to a sham company connected by a chain of fraudulent schemes with the first and second defendants.

3. On 23 June 2010, the plaintiffs filed a motion seeking default judgment against the third defendant, the Minister for Forests, and the fifth defendant, the State. That is the motion on which I am now ruling.

4. In addition to entry of default judgment (which would provide for assessment at a trial of general damages and exemplary damages) the plaintiffs want the court to order that the State pay approximately $US194 million special damages (being losses and damages suffered by the plaintiffs due to the wrongful conduct of the Minister for Forests committed on 24 June 1992 regarding the issue of timber permit No 2-16). That is, they are seeking to obtain a default judgment for:

➢ $US194 million (which is about K588 million); plus

➢ general damages; plus

➢ exemplary damages.

FORMAL REQUIREMENTS

5. To obtain a default judgment, a plaintiff needs, first, to satisfy the formal requirements of the National Court Rules and, if the State is a defendant, the Claims By and Against the State Act. If the formal requirements are satisfied the court has a discretion to exercise: to order or not to order default judgment; and if to order, to order the terms on and extent to which judgment is entered (Agnes Kunton v John Junias and The State (2006) SC929).

6. Here I am satisfied that the formal requirements for entry of default judgment have been complied with (Urban Giru v Luke Muta (2005) N2877). In particular the Minister has failed to file a defence and the State has been late in filing its defence.

HOW SHOULD THE DISCRETION OF THE COURT BE EXERCISED?

7. I exercise the discretion of the court by declining to order the entry of default judgment against either the third defendant or the fifth defendant for the following reasons:

1. There is no clear cause of action disclosed in the further amended statement of claim against the Minister or the State. The allegations of equitable fraud appear to be primarily pleaded against the first and second defendants.
   
2. The statement of claim does not make it clear how the incumbent Minister for Forests, Hon Belden Namah MP, can be deemed liable for allegedly unlawful or fraudulent acts committed by the person who held office as Minister for Forests in 1992 – those being the acts pleaded in the statement of claim to give rise to the cause of action in equitable fraud.
   
3. The statement of claim raises serious allegations of fraud and deceit, in which case the interests of justice require those allegations to be proved by evidence in a trial before judgment is given on the merits (Bala Kitipa v Vincent Auali, Supply and Tenders Board of Western Highlands Provincial Government and Others (1998) N1773).
   
4. The defendants appear to have what might be a good defence in that the claim may be time-barred under the Frauds and Limitations Act, given that the cause of action is said to have accrued 18 years ago (John Kunkene v Michael Rangsu and The State (1999) N1917).
   
5. Other defendants have not been served with this notice of motion. As long as a person remains a party to proceedings, he or she must be served with all court documents. This is the case even if the plaintiff seeks – as in the present case – a judgment or order only against some other party (Agnes Kunton v John Junias and The State (2006) SC929).
   
6. Entry of judgment might prejudice the rights of co-defendants. Default judgment has already been entered against the fourth defendant and there is a motion on foot to set it aside. In multiple-defendant cases such as this one it is not good practice and procedure to deal with motions for default judgment on a piecemeal basis (Kante Mininga v The State & Others (1996) N1458, Beecroft No 51 Ltd trading as Ronnie's Hot Bread v Neville Seeto and Others (2004) N2561).
   
7. In regard to the State, the period of default is about two months which although a serious default is nonetheless not extensive when viewed in the context of the period that has elapsed since the date on which the cause of action apparently accrued, June 1992 (Kunkene).
   
8. The plaintiffs have not prosecuted this case diligently (Tiaga Bomson v Kerry Hart (2003) N2428).
   
9. The interests of justice would not be served by the entry of default judgment (Urban Giru v Luke Muta (2005) N2887). The Court must take into account the national interest when dealing with motions for default judgment against the State. Ordering judgment today would expose the State and the People of Papua New Guinea to the risk of being required to pay well over half a billion kina to landowners. By any objective standards this is a huge amount of public money. The entitlement of any person or persons to that amount of public money can only be properly determined at a trial.
   
10. The motion, to the extent that it seeks an order for a liquidated demand (a precise sum of money), has been filed contrary to Section 12(3) of the Claims By and Against the State Act, which states:
    

Where in a claim against the State the State is in default within the meaning of the National Court Rules, then notwithstanding that a plaintiff's claim for relief is for a liquidated demand, judgment shall not be entered against the State for the sum claimed unless the claim relates to a debt only, and in all other cases judgment shall be entered for damages to be assessed and, where appropriate, for costs.

11. The motion is therefore an abuse of process.
    

COSTS

8. The State has successfully defended this motion but has been guilty of a default of the Rules, so it is not proper that it be awarded costs. The parties will bear their own costs.

ORDER

(1) All relief sought in the notice of motion filed by the plaintiffs on 23 June 2010 is refused.

(2) The parties shall bear their own costs.

(3) Time for entry of this order is abridged to the date of settlement by the Registrar, which shall take place forthwith.

Ruling accordingly.

__________________________________
John K Gawi: Lawyers for the Plaintiff
Solicitor-General: Lawyer for the Fifth Defendant