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Lewin v Westpac Bank PNG Ltd [2020] PGNC 92; N8318 (20 May 2020)

N8318

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (COMM) 65 of 2020

BETWEEN

STEPHEN LEWIN, PETER LOWING & MICHAEL SULLIVAN trading as LEAHY LEWIN LOWING SULLIVAN LAWYERS
Plaintiff

AND:
WESTPAC BANK PNG LIMITED

First Defendant

AND:
BANK OF SOUTH PACIFIC LIMITED

Second Defendant

AND:
KINA BANK LIMITED

Third Defendant

Waigani: Anis J
2020: 14 & 20 May

NOTICE OF MOTION – Removal of a party – Order12 Rule 8(4) and (5) –National Court Rules – removal consented to except on cost – whether cost should be awarded against a party, and if so, whether on a solicitor/client or indemnity basis - discretion

Cases cited:

Nil

Counsel:

Mr B Sinen, for the Plaintiff
Mrs E Noki, for the First Defendant
Mr. D Bidar, for the Third Defendant

RULING

20^th May, 2020

1. ANIS J: The plaintiff applied to remove the third defendant as a party to the proceeding. The plaintiff’s application was consented to except on the issue of cost. I heard submissions on cost on 14 May 2020, and reserved my ruling to a date to be advised.

2. Parties have been notified so I will rule on it now.

BACKGROUND

3. Briefly, the plaintiff filed this proceeding and has obtained ex-parte interim injunctions against the second and third defendants. The interim orders were sought and granted to (i), protect the plaintiff’s trust account which is held with the first defendant and (ii), to stop further transactions of its funds that had been remitted by alleged fraudsters to the alleged fraudsters’ accounts that are or may be kept with the second and third defendants.

MOTION

4. The plaintiff wishes to remove the third defendant from the proceeding, and files its notice of motion. It was filed on 27 April 2020 (application). The application returned on 13 May 2020, and upon the request by the first defendant, it was adjourned to 1:30pm on 14 May 2020 for hearing.

5. The relief sought in the application are, and I quote in part,

1. Pursuant to Order 12 Rule 8(4) and (5) of the National Court Rules, the Court Orders of 5 March 2020 and varied on 6 March 2020, as against the Third Defendant is discharged forthwith.
2. Pursuant to Order 5 Rule 9(a)(b) of the National Court Rules and the inherent jurisdiction of the Honourable Court, that the Third Defendant be removed as a party to this proceeding.
3. The First Defendant shall pay the Plaintiff’s costs and incidental to this application on a solicitor client basis.
4. The First Defendant shall pay the costs of the Third Defendant on an indemnity basis pursuant to its Letter of Indemnity dated 24 February 2020.
   

ISSUE

6. The issue concerns cost. In this case, the plaintiff and the third defendant argue that the cost of the application should be awarded against the first defendant in favour of the plaintiff and the third defendant, on solicitor/client and indemnity basis, respectively. The first defendant denies that and submits that each party should bear for their own costs.

CONSIDERATION

7. Before anything else, I think I should address the issue of cost generally and make a determination on whether the first defendant should be held liable for it. I begin with these general remarks. The application is unorthodox in the sense that it is not made by the third defendant who wants out of the proceeding, but rather, by the plaintiff, it seems, on its behalf. And by making the application, the plaintiff is also asking the Court to direct or order the first defendant to meet its cost for seeking to remove the third defendant whom the plaintiff has named in the proceeding. The plaintiff wants the first defendant to pay its cost on a solicitor/client basis, and further, for the Court to also order the first defendant to pay the cost of the third defendant on an indemnity basis. However, having made these remarks, I must say that there is nothing wrong with the application and the approach taken by the plaintiff.

8. So in my view, the relevant considerations are as follows. Firstly, I note the fact that the first defendant did not contest the main relief sought in the application. It consented to them, except on the issue of cost, that is, from the time it appeared in Court to state its position on 13 May 2020. The second consideration I think is relevant is this. When I consider the relief that is being sought, it appears that the first defendant is joined as a nominal defendant. And the reason why it is joined is because it holds the plaintiff’s trust account which is the subject of the alleged fraudulent transactions as pleaded in the originating summons and as adduced in evidence. At this juncture, I note that there is no claim made against the first defendant. The third consideration is this. The plaintiff is the party that joined or named the third defendant to the proceeding, not the first defendant. And this is where, if I may add, the plaintiff begins its claim on why it says the first defendant should be held liable for its cost on a solicitor/client basis. The plaintiff refers to a letter which had brought to its attention by the third defendant. The letter is from the first defendant to the third defendant. It is dated 24 February 2020 (letter of indemnity) and it is attached as annexure A to the affidavit of Michael Sullivan filed on 27 April 2020.

9. I have considered the said letter and the arguments. I will say this. A fundamental purpose of the letter of indemnity, as I observe therein, was to request the third defendant to put a hold on the alleged fraudsters’ accounts that are being held by the third defendant. In consideration, the first defendant promises to indemnify the third defendant on the terms as set out in the letter. I will later discuss the considerations. But for this purpose, the plaintiff’s complaint is this. It says that the first defendant should have informed it of the letter of indemnity early on or about 24 February 2020. It says had that been done, it would not have named the third defendant in the proceeding. It says it had taken steps to include the third defendant before it learnt of or became aware of the letter of indemnity. Therefore, it submits that the first defendant should pay its cost of the application on a solicitor/client basis.

10. In my view, I find the argument difficult to accept to justify why I should punish the first defendant with an order for cost at all or in the manner as submitted to by the plaintiff, that is, on a solicitor/client basis. For a start, I accept the first defendant’s submission that there is no cause of action against it. I say this based on what is pleaded in the originating summons and the evidence as adduced. The second reason is this. What returns is a consented application. In the normal course, unless cost is agreed to, the plaintiff would be the person whom the third defendant may claim cost against, that is, if the claim is that the third defendant was wrongly named or joined. However, in this case and as the evidence shows, the third defendant is a party that is affected by the alleged fraud because of the fact that it holds the accounts of the third parties or the alleged fraudsters. Again, and as I have remarked in Court to all the counsel, this may be a case where none of the parties to the proceeding is at fault and should be held liable for cost, that is, for the naming of the third defendant.

11. Let me come back to the letter of indemnity. I note that the letter constitutes a request that had been made by the first defendant to the third defendant that had proposed considerations that were offered but which were subject to the third defendant agreeing to perform the first defendant’s request. The letter itself, in my view, was not an absolute guarantee or conclusive evidence for the third defendant to accept and act upon, to the extent that had the letter been drawn to the plaintiff’s attention back then, that it would have been absolutely crucial to its (i.e., the plaintiff’s) decision on whether to join the third defendant. The other reason why I reject this argument is this. The letter, I gather, is part of the internal arrangements that banks have in situations like this. It was not written to the plaintiff and I do not think that the plaintiff is privy to it, and I also do not think that the first defendant was obligated to provide a copy to or inform the plaintiff about the letter of guarantee or of its existence.

12. I refer to the considerations in the letter of guarantee. I note that the claim that is made against the third defendant in this proceeding has been achieved or settled. That is why the plaintiff has brought the application to remove the third defendant. It is their position, based on arguments from the plaintiff and the third defendant, that they do not wish to seek cost against themselves but rather against the first defendant. If I am not minded to award cost against the third defendant herein then the third defendant, in my view, would suffer no loss. If it has suffered any loss in this matter, then that would, in my view, be a matter for it to take up with the plaintiff based on the letter of guarantee. I say this also in light of the fact that the parties have not come prepared to fully argue the issue of cost to be awarded based on the letter of guarantee. I note that the none of the counsel were able to assist in providing a copy of the rule that is referred to in the letter of guarantee, that is, Record of Arrangements Between Banks in Papua New Guinea (Revised 16^th January 2017).

SUMMARY

13. For these reasons, I do not find that the first defendant should be held liable to pay the cost of the application, that is, whether it be for the plaintiff or the third defendant. I will instead order each party to bear their own cost of the application.

THE ORDERS OF THE COURT

14. I make the following orders:

1. Pursuant to Order 12 Rule 8(4) and (5) of the National Court Rules, the Court Orders of 5 March 2020 and varied on 6 March 2020, as against the Third Defendant is discharged forthwith.
   
2. Pursuant to Order 5 Rule 9(a)(b) of the National Court Rules and the inherent jurisdiction of the Honourable Court, that the Third Defendant is removed as a party to this proceeding.
   
3. Parties shall bear their own costs of the application.
   
4. Time for entry of these orders is abridged to the date of settlement by the Registrar which shall take place forthwith.
   

The Court orders accordingly.

_______________________________________________________________
Leahy Lewin Lowing Sullivan Lawyers: Lawyers Plaintiff
Bradshaw Lawyers: Lawyers for the First Defendant
Bank of South Pacific Ltd: Lawyers for the Second Defendant
O’Brien Lawyers: Lawyers for the Third Defendant