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Porebada Holdings Ltd v Baru [2012] PGNC 2; N4516 (9 February 2012)

N4516


PAPUA NEW GUINEA
IN THE NATIONAL COURT OF JUSTICE


WS 05 OF 2011


BETWEEN:


POREBADA HOLDINGS LTD
First Plaintiff


AND:


ARUA DAIRI, TARA JOHN GAU, KOITA HENAO, NOHOKAU IGO, LOHIA ASAIAH (SNR), HITOLO EDDIE LOHIA, MORRIS TARA MOREA, MOREA SIONI RAKA and AREBO TAUMAKA in their capacity as TRUSTEES of POREBADA HOLDINGS LTD
Second Plaintiffs


AND:


EDDIE HITOLO LOHIA, ARUA DAIRI, PETER GOATA and MOMORU ODA, in their capacity as DIRECTORS of POREBADA HOLDINGS LTD
Third Plaintiffs


AND:


IGO BARU, ISAIAH ODA, IGO REI, MEA BUSINA, BUSINA LOHIA, MEA KOANI, RAKATANI PETER, HEGORA NONO and MOMORU HITOLO
First Defendants


AND:


ALEX TONGAYU in his capacity as the REGISTRAR OF COMPANIES
Second Defendant


AND:


MAYBANK (PNG) LTD
Third Defendant


Waigani: Davani, J
2011: 19th August,
2012: 9th February


MEDIATION – Procedures to comply with – factors to be considered before referral to mediation – Rules relating to the accreditation, regulations and conduct of Mediators ('Mediation Rules'), R.4; R.5.


PRACTISE AND PROCEDURE – Litigation – a party's right to choose – proper exercise of discretion, R.5(3)(a) to (i) of Mediation Rules.


Facts


All plaintiffs and first and second defendants were affected by a previous National Court blanket order ordering that all LNG related matters be referred to mediation. The first and second defendants did not want to go to mediation.


Based on a finding by a single Judge of the Supreme Court that the blanket National Court order did not apply to all parties and the fact that a party would have to apply to the Court for orders to have the matter mediated, this Court directed that an application seeking leave to mediate must be filed by the plaintiff who was desirous of mediation rather than litigation.


The application was filed and moved and was opposed by the first and second defendants.


Issues


  1. Can the Court order a mediation?
  2. What are the principles to be considered?

Reasoning


In relation to both issues, the Court found and held that it must carefully consider all the considerations in R.5(3)(a) to (i) of the Mediation Rules. That if there are legal issues to be determined, then the matter must be litigated.


Orders


  1. The Motion filed by Warner Shand Lawyers on 6th June, 2011, is dismissed;
  2. The Interim Ex parte Restraining Orders of 14th January, 2011, are extended and made returnable on 9th February, 2012 at 9:30am, for all parties to make submissions on whether the Interim Orders will continue or not;
  3. Between 10th February, 2012 to 9th March,, 2012, all parties will file and serve Interlocutories and to file and serve Responses to these Interlocutories;
  4. All parties to return to Court on Monday, 12th March, 2012 at 9:30am, for the Court to issue further directions on pre-trial preparation;
  5. That either party is at liberty to apply to extend these directions but must do so on 7 days notice to all parties and which application must be filed and served before Monday, 12th March, 2012;
  6. That Warner Shand Lawyers have leave to abandon the orders sought in the Notice of Motion filed on 6th June, 2011, seeking leave to amend the plaintiffs' Writ of Summons and Statement of Claim and to re-file and re-serve a Motion seeking the same or similar orders;
  7. That Henaos Lawyers have leave to abandon the orders sought in its Notice of Motion filed on 12th April, 2012 in relation to the dismissal of these proceedings and to re-file and re-serve Motion seeking the same or similar orders;
  8. The second and third plaintiffs will pay the first and third defendants' costs of this application, to be taxed if not agreed;
  9. Time is abridged to time of settlement to take place forthwith.

Cases Cited:


Rendel Rimua & 2 ors v. Simon Ekanda & 31 others (2011) SC 1094


Counsel:


M. Wilson, for First, Second and Third Plaintiffs/Applicants
W. Bigi, for the First Defendants
No appearance, for the Second Defendants
M. Ai, for the Third Defendant


DECISION


9th February, 2012


  1. DAVANI, J: Returnable before me is an Interim Ex parte Court Order of 17th January, 2011, duly extended together with Notice of Motion filed by Warner Shand Lawyers for and on behalf of the first, second and third plaintiffs/applicants ('applicants'), on 6th June, 2011. Also before me is Notice of Motion filed by Henaos Lawyers on 12th April, 2011, for and on behalf of the first defendants.

Background


  1. The Interim Restraining Orders of 14th January, 2011 were taken out ex parte by the applicants' lawyers, with only Mr Wilson of Warner Shand Lawyers in attendance.
  2. These orders were further extended on several occasions, eventually being made returnable before me on 19th August, 2011, where the two (2) Motions referred to above were also moved and argued by their respective lawyers.
  3. The Interim Ex parte Orders of 17th January, 2011 reads as follows:

"The Court orders that:


  1. Pursuant to Order 14 Rules 9 and 10(1) of the National Court Rules, the third defendant is restrained from allowing any transactions with the first plaintiffs' Maybank account(s), namely the business cheque account no. 600257-6 conducted at Maybank (PNG) Ltd, Port Moresby Branch, until return of these proceedings on 17th January, 2011.
  2. The first defendants are restrained from acting as Directors of the first plaintiff until the substantive proceedings are determined or further order.
  3. Time of entry of these orders is abridged to the date of settlement by the Registry which shall take place forthwith."
  4. The Notice of Motion filed by Henaos Lawyers is a Motion seeking that this matter be litigated rather than proceed to mediation. It also seeks that the Interim Restraining Orders be set aside or alternatively varied, allowing the signatories to the cheque account referred to in the Interim Restraining Orders, to conduct transactions on that account.
  5. The Motion seeks further orders that upon the granting of leave to proceed to judicial determination, that this Court issue directions setting out the time frame within which this matter will proceed, eventually to its final determination.

My orders of 22nd July, 2011


  1. By my orders of 22nd July, 2011, I directed and ordered the dismissal of par. no. 1 of the Motion by Henaos Lawyers of 12th April, 2011, which sought orders that this matter proceed to litigation and eventual determination. I made those orders because contrary to representations made by Mr Wilson that a previous Court had ordered that the matter proceed to mediation, that a single Judge of the Supreme Court had found that this was not an order specifically referring this and other LNG related matters to mediation because certain provisions of the Mediation Rules had not been complied with and also because the then Trial Judge's orders of 21st December, 2010, 2nd and 8th March, 2011 were effectively blanket orders. (See Rendel Rimua & 2 ors v. Simon Ekanda & 31 others (2001) SC 1094 ('Rendel Rimua decision').
  2. I then directed that the application seeking leave for the matter to proceed to mediation must be filed in Court and be listed for hearing on 5th August, 2011.
  3. Therefore, I must make it specifically clear that the orders I issued on 22nd July, 2011 for the dismissal of par. no. 1 of Henaos Lawyers' Motion filed on 12th April, 2011 which sought orders that the matter proceed to judicial determination, is not one done on the merits, but one done after hearing submissions from all parties of the existence of the blanket orders referred to above and the fact that there was a need for a proper application to be filed seeking leave for this matter to be mediated rather than litigated, hence, the Motion filed by Warner Shand Lawyers on 29th July, 2011.

Motion filed by Warner Shand Lawyers on 29th July, 2011


  1. I set out in full the terms of the Motion. It reads;

"1. Requirements of service be dispensed with pursuant to Order 1 Rule 7 of the National Court Rules.


  1. Leave be granted to have the proceedings herein mediated and mediator appointed, pursuant to Rule 4(2)(c) of the Mediation and Arbitration Rules.
  2. Pursuant to Rule 5(2)(b) of the Mediation and Arbitration Rules, an order that mediation be for;
  3. Leave be granted to appoint the Honourable Justice Ambeng Kandakasi as Mediator pursuant to Rule 6 of the Mediation and Arbitration Rules.
  4. An order staying these proceedings herein pending the outcome of Mediation.
  5. Time of entry of these orders to the time of settlement by the Registry be abridged.
  6. Any other orders this Honourable Court deems appropriate."
  7. The applicants rely on r.4(2)(c) of the Mediation and Arbitration Rules. They also rely on r.5(2)(b) of the Mediation and Arbitration Rules.
  8. The Motion seeks further orders that Justice Ambeng Kandakasi be appointed as Mediator pursuant to r.6 of the Mediation and Arbitration Rules.
  9. Firstly, the correct description of the Mediation and Arbitration Rules is "Rules relating to the accreditation, regulations and conduct of mediators". I will refer to it in this application as the "Mediation Rules".
  10. I also set out in full the rules relied on by the applicants because the first defendants submit in short that these are incorrect provisions and that for that reason, the Motion should be dismissed as having no jurisdictional basis.
  11. Rule 4(2)(c) of the Mediation Rules reads:

"4. Exhaustion of or Dispensation with Mediation


(1) After the commencement of these Rules but subject to the provision of this Rule, no further step may be taken in any proceedings after:

save only with the leave of the Court.


(2) Subject to Subrules (3) and (4) on the hearing of an application for leave, the Court may make any one or more of the following orders:

(3) In determining whether to order mediation and the appointment of a mediator or to dispense with the requirement for mediation, the Court shall take into account the matters set out in Rule 5(3)."
  1. Rule 5(2)(b) of the Mediation Rules read as follows;

"5. Ordering Mediation


(1) At any time following commencement of proceedings, the parties may agree to participate in a mediation of the issues to which the proceedings relate.

(2) The Court shall on the request of all parties to a proceeding or on the application of any party to a proceeding or on its own motion order mediation for:

(3) At the time of considering whether or not to order mediation, the Court shall have regard to the following factors:

(4) If the Court decides to make an order for mediation, the Court shall ensure to incorporate in its order for mediation the:

(5) Making an order for mediation does not:

(6) The Court may revoke or vary an order for mediation at anytime but before the conclusion of the mediation."
  1. I deal now with par. no. 2 of that Notice of Motion.
  1. Should leave be granted for a mediator to be appointed pursuant to r.4(2)(c) of the Mediation Rules?
  1. Rule 4 refers to the "exhaustion of or dispensation of mediation". That is the title of that rule. Rule 4(2)(c) is very clear, that the orders sought will only be made subject to r.4(1)(a) which reads:

"...subject to the provisions of this rule, no further steps may be taken in any proceedings after;


(a) the filing of the defence.

..."


  1. The words "the proceedings" is defined in r.3, the interpretation provision of the Mediation Rules, as "proceedings out of which mediation or another form of ADR has been ordered."
  2. Rule 5(1) of the Mediation Rules states that; "At any time following commencement of proceedings,...the parties may agree to participate in a mediation of the issues to which the proceedings relate." To me, that raises a dilemma or a contradiction in the Rules, more particularly r.4(1) and r.5(1). These contradictions are;
  3. Notwithstanding the above, I will interpret the Mediation Rules as they appear, effectively, a literal interpretation. I interpret r.4(2) of the Mediation Rules as:
  4. In this case, on 22nd July, 2011, I directed the dismissal of the Motion filed by Henaos Lawyers on 12th April, 2011 because amongst others, I found that there was no proper referral order to mediate made by the Trial Judge - a finding made by the Supreme Court in Rendel Rimua. I then gave leave to the plaintiff to file an application under r.5 of the Mediation Rules for the Court to consider the requirements for a mediation and then to decide whether or not to order a mediation.
  5. In this case, the plaintiff has not done that. The plaintiffs in fact come under an incorrect rule being r.4(2)(c) of the Mediation Rules which is the hearing of an application for leave.
  6. Therefore, I agree with the first defendants' lawyers that:

(ii) The applicant is proceeding under an incorrect rule based on the reasons set out above. It is therefore in breach of my orders of 22nd July, 2011.


  1. Having found that the applicant should not have proceeded under r.4(2)(c) of the Mediation Rules, can or should this Court proceed to consider the requirements in r.5 of the Mediation Rules which are requirements to be considered when the Court is deciding whether or not to appoint a mediator?
  1. My view is that I should do so because that is the whole reason why parties are before me. They want to know if this matter can go to mediation or that it should be litigated. It is in fact in the defendants' interests that I consider these requirements notwithstanding the fact that the application before the Court now has no merits for lack of a jurisdictional basis, amongst others. I will consider these requirements to then put an end to this long running dispute, more particularly in relation to whether the matter should go to mediation or be litigated.
  2. The Rendel Rimua decision has established the criteria for when a matter should proceed to mediation. This was done relying on the relevant provisions in the National Court Act and the Mediation Rules.
  3. I refer to the Chief Justice's findings in Rendel Rimua, at pgs. 3 and 4 where he said;

"...First, the scheme of s.7B of the Act is that a mediation order is the sole foundation upon which mediation is conducted by a Mediator. A mediation order is based on three basic conditions having been met, as follows:


(a) The subject matter of the proceedings is appropriate for mediation: s.7B(1)(a), (2) of the Act; Rule 5(1), (2) & (3) of Mediation Rules.

(b) A mediator is available to mediate in the matter and is so appointed: s.7B(3) of the Act; Rules 6 & 7 of Mediation Rules.

(c) Mediation is conducted and conducted by the Mediator and reported back to the Court within the time fixed by the Court: S.7B(4) of the Act; Rule 9 of Mediation Rules."
  1. What should a Judge do when faced with an application for an order under S.5 of the Mediation Rules?
  1. The Chief Justice said this at pg.6 of Rendel Rimua:

"...In addition to determinations as to the requirements of s.7B of the Act, a decision is required to be made in respect of every proceeding in respect of every consideration set out in Rule 5(3). The considerations enumerated in Rule 5(3) are designed for the Court to ensure that only cases that are feasible and have prospect for a mediated settlement are allowed to proceed to mediation and a mediator is appointed to conduct the mediation within a fixed period. Such an order (Mediation Order) can only be made on a case by case basis." (pg.6) (my emphasis)


  1. And in the event the parties do not agree for the matter to go to mediation or the Court does not issue a mediation order, then the matter can be listed for trial. Parties can also apply to the Court under rr.5 and 6 of the Mediation Rules to revoke the mediation order or to revoke the appointment of a mediator. The parties also have the right to terminate the mediation after commencement of mediation. And if the mediation is successful and a settlement reached, then there is no reason for anybody to disagree with the mediation process and its outcome because although its processes have been exhausted. In fact, the Chief Justice also addressed these considerations in the Rendel Rimua decision. This is found at pg.6 of his reasons where he said:

"If the terms of the mediation order cannot be settled by agreement of the parties or otherwise by the Court and a mediation order is not issued in every case, the matter should be listed for trial. If a mediation order is reached in every case and the matter proceeds to mediation, there is provision in rules 5 and 6 of the Mediation Rules for a party to apply to the Court to revoke the mediation order or to revoke the appointment of a mediator. In rule 59, a party has the right to terminate the mediation after commencement of the mediation, in which case the Mediator reports that event to the Court and the matter proceeds to trial. If a mediation is successful in that a mediated settlement is reached, the issue of primary rights of the parties being adversely affected does not arise. Under any one of those scenarios, the primary rights of the parties are not affected and their right to litigate the matter in Court is also not affected.


If the mediation is successful in that a mediated settlement is reached, there is no cause for any willing participants in the mediation to harbour any sense of grievance about the mediation process and its outcome." (pg.6) (my emphasis)


  1. Rule 5(3)(a) to (i) of the Mediation Rules set out in full above, are factors a Court shall have regard to and consider before a mediation order is made. These peculiarities or characteristics are the hall marks of a matter to be mediated and must be given thorough consideration before an order is made. A Judge upon consideration of these factors, must properly exercise his or her discretion, and has a duty to the parties and other stakeholders, to show that it has properly performed its role, which has eventually resulted in the matter either proceeding to mediation or not.
  2. I discuss these considerations below.

Rule 5(3)(a) – Whether the mediation will result in prejudice to the rights of any of the parties


  1. The first defendants submit that they will be prejudiced if the matter is mediated because the matters to be mediated are all legal issues, matters to be properly determined by a Court, rather than a mediation. Without discussing the merits of these claims at law, it only requires that I state the principles or grounds of law that the defendants rely on in claiming that there is a valid, good Defence to be properly litigated rather than mediated.
  2. The applicants submit that the removal of the first defendants as the first plaintiffs' directors and the appointment of the third plaintiffs as directors of the first plaintiffs are matters falling exclusively within the powers of shareholders, such powers provided for in ss.131, 133 and 134 of the Companies Act. Additionally, the Court also has power to appoint directors pursuant to s.132 of the Companies Act.
  3. In my view, these are not issues to be deliberated and agreed to in a mediation. Rather, they are issues for litigation.
  4. The applicants submit further that the second plaintiffs' exercise of powers provided in Trust Deeds to remove and appoint directors is an illegal action which illegal action is that the plaintiffs allege that the Trust Deeds were created without the knowledge of the shareholders, amongst others and was not stamped under the Stamp Duties Act.
  5. I find this to be a meritorious legal ground which can only be properly determined by a Court of law rather than mediation.
  6. The first defendants submit also that this action should have been commenced as a derivative action under s.143(1) of the Companies Act. The first defendants submit that this is a mandatory requirement.
  7. I find this to be a meritorious issue, one to be litigated rather than mediated.

Rule 5(3)(b) - Whether it is reasonably within the ability and the power of a party to comply with an order for mediation having regard to matters such as any urgency in the proceedings, costs, multiplicity of parties or lack of resources?


  1. The defendants submit that the mediators are charging fees set at AUS$20,000.00 per day. They submit that they do not have the financial ability to pay for mediators as well as lawyers.
  2. No doubt, the sum of AUS$20,000.00 per day set by the mediators is not only exorbitant but one that ordinary villagers definitely cannot afford. I make this finding without having to call evidence.
  3. Additionally, logistically, it is next to nigh impossible for neibouring villages to be told that mediation is the alternative to resolving all issues, when not all the villagers/clans share the same view as presently demonstrated.

Rule 5(3)(c) - Whether the mediation will require substantial work which could be better directed to preparation for trial?


  1. I have heard that there are 32 clans in Porebada Village. If they are to be prepared for the mediation exercise, this will require a lengthy amount of time and substantial work will be required. Additionally, since the filing of these proceedings on 19th January, 2011, a year has passed without any steps being taken.
  2. In my view, this matter is best resolved by a schedule set by the Court in relation to the manner in which and the time frame within which this matter will be litigated.

Rule 5(3)(d) - The nature of the relief sought and the suitability of a mediation result.


  1. The Statement of Claim seeks Declaratory Orders, one of which is to declare that the third plaintiffs were lawfully appointed as directors of Porebada Holdings Ltd, the first plaintiffs.
  2. The first defendants say otherwise.
  3. Legal issues have been raised, which I briefly mentioned above, which obviously cannot be settled by mediation. It must be settled by a properly conducted trial/hearing.

Rule 5(3)(e) - The timing of the mediation including reference to the status of the pleadings, discovery and the alternatives of when trial is likely and the length and costs of trial.


  1. With the mediators' fees set at AUS$20,000.00 per day and the uncertainty of how long the mediation will take, means that the costs of the mediation will obviously rise and may drag out. Only time will tell. However, this can be remedied by parties going to trial relying on a schedule/time-line set by this Court and the manner in which litigation should proceed, of course to be guided by the Court at Directions hearings.
  2. I say this noting that all defendants have already filed their respective Defences, raising arguable issues.

Rule 5(3)(f) - The attitude of the parties to mediation though not significant.


  1. The evidence is that the first defendants do not want to go to mediation, for the reasons stated above.

Rule 5(3)(g) - Whether mediation was earlier attempted and whether any good purpose will be served by an order for further mediation?


  1. As held by the Chief Justice in Rendel Rimua, the order made by the Trial Judge for the matter to go to mediation is a blanket order, the Trial Judge not having complied with requirements under the Mediation Rules and the National Court Act. Therefore, no purpose will be served by an order for mediation because since the blanket order was issued by the Trial Judge, no steps have been taken by the parties to mediate.

Rule 5(3)(h) - The appropriateness of deferring any final decision on an application for orders for mediation.


  1. There is an application on file by the applicants seeking leave to amend their Statement of Claim. There is also an application by the first defendants seeking to dismiss the proceedings. The defendants have also filed their Defences. In my view, there is no need to defer the decision to mediate because a decision must be made, in the interest of all parties.

Rule 5(3)(i) - What the interest of justice in the particular circumstances of the case require.


  1. Again, I reiterate that it is in the interests of justice that all parties are properly heard on the legal issues posed above.

Conclusion


  1. I find that based on the above reasoning, this matter is not one for mediation but one that must be properly litigated. Therefore, I will refuse the application by Warner Shand Lawyers with further orders that all the plaintiffs pay the first and third defendants' costs of this application, to be taxed if not agreed.
  2. I order this noting that the third defendant Maybank (PNG) Ltd has always appeared in Court, including this hearing. Its appearance is only in relation to the interim restraining orders. However, because it has been forced to come to Court, it is only proper that all the plaintiffs pay its costs of the application.
  3. As for the future conduct of the proceedings, I will address firstly the return of the interim injunctive orders which I have not addressed in this application because both counsel did not make submissions on this. This, the Court will hear on Monday, 9th February, 2012 at 9:30am.
  4. As for the two (2) pending applications being the application to amend by the second plaintiffs and the first defendants' application to dismiss, I will direct the withdrawal of those respective Motions with other orders that counsel file fresh Motions if they wish to proceed with the applications seeking the same or similar reliefs.
  5. Set out below is the time-line or time-frame on the applications to be moved:

(i) Thursday, 9th February, 2012 at 9:30am – Return of interim restraining orders of 14th January, 2011, for argument/submission by all parties on whether interim orders should remain until the substantive hearing of the Statement of Claim;


(ii) Between 10th February, 2012 to 9th March, 2012 – All parties to file and serve interlocutories and for responses to those interlocutories, all to be done within that period of time;

(iii) Monday, 12th March, 2012 at 9:30am – All parties to return to Court for further directions to issue on pre-trial preparation which will include the filing of affidavits to be relied on at trial, if any; the filing of a Pleadings Book and the giving of relevant Notices under the Evidence Act. Also, at that time, if parties wish to apply for leave to extend these directions, that they have liberty to move such an application but must do so on 7 days notice to the affected parties named in these proceedings, which will include the filing and service of this application.

Costs


  1. As costs follow the event, I order that the second and third plaintiffs/applicants pay the first and third defendants' costs of this application, to be taxed if not agreed.

Formal orders


  1. These are the formal orders of the Court:

___________________________


Warner Shand Lawyers: Lawyer for the First, Second and Third Plaintiffs/Applicants
Henaos lawyers: Lawyer for the first defendants
In-House Lawyers for the Registrar of Companies: Lawyer for the second defendants
Posman Kua Aisi Lawyers: Lawyers for the Third Defendant

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