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Nivani Ltd v Kimbe Nivani Properties Ltd [2020] PGSC 143; SC2066 (27 May 2020)

SC2066

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA 53 OF 2019

BETWEEN:
NIVANI LIMITED
First Appellant

AND:
DAVID JOHN STEIN
Second Appellant

AND:
KIMBE NIVANI PROPERTIES
LIMITED
Respondent

Waigani: Hartshorn J,
2019: 17^th September,
2020: 27^th May

SUPREME COURT – practice and procedure - Application for leave to appeal and an application for stay

Cases Cited:
Gary McHardy v. Prosec Security [2000] PNGLR 279
Oberia v. Charlie (2005) SC801
Ombudsman Commission v. Gabriel Yer (2009) SC1041
William Duma v. James Puk (2019) SC1754

Counsel:

Mr. T. Griffiths, for the Appellants
Mr. I. R. Molloy and Ms. E. Goina, for the Respondent
27^th May 2020

1. HARTSHORN J: This is a decision on contested applications for leave to appeal an interlocutory decision of the National Court and for a stay. The decision of the National Court made orders for discovery and production pursuant to Order 9 Rules 7 and 10 National Court Rules against the two appellants in National Court proceeding WS 858 of 2017 (Discovery Orders).
   

Background

2. A proceeding has been commenced in the National Court in the name and on behalf of the plaintiff Kimbe Nivani Properties Ltd, the herein respondent (KNPL). This was pursuant to leave that I granted to a shareholder on 3rd August 2017 pursuant to s. 143(1) Companies Act 1997. It is claimed that amongst others, the second appellant, Mr. David Stein herein, breached his fiduciary duty to KNPL because while he was a director of KNPL, he set up his own rival company under the same name, transferred the assets of KNPL to his own company, caused the migration of the customers and goodwill of KNPL to his company and ostensibly continued to trade under the auspices and name of KNPL, thereby depriving KNPL of its assets, customers, goodwill and future business.
3. KNPL claims amongst others; a declaration that the first appellant (Nivani) holds its property and assets as a constructive trustee for the benefit of KNPL; that Nivani's property and assets be transferred to KNPL; compensation in equity for breaches of fiduciary duty or breach of trust; an account of profits; damages and injunctive relief.
4. KNPL sought orders for further discovery after the appellants' had given a verified list of documents in answer to a notice for discovery. The Discovery Orders were made after a contested hearing.

Leave to appeal

5. The requirement to seek leave is a procedure that ensures that the Supreme Court is not clogged with appeals from every interlocutory ruling of a judge made before the final judgment.
   
6. In Oberia v. Charlie (2005) SC801, Lay J., after a comprehensive review of the authorities, listed the following tests that are to be applied to the facts of each application for leave to appeal:
   

a) Is there an arguable or prime facie case or has it been demonstrated that the trial judge was wrong?

b) Does the appellant have other recourse in the court below?

c) Was the ruling within the discretion of the court? Has it been shown that its exercise was manifestly unreasonable, exercised on a wrong principle or a mistake of fact?

d) Does the decision have any bearing on the final determination of the issues between the parties? Will it affect the primary rights of the parties or prevent the determination of the issues?

e) Will substantial injustice be caused by allowing the decision to stand?

f) Has cause been shown that the trial process should be interrupted by an appeal?

Consideration

7. The appellants submit that it is clearly arguable that the Discovery Orders are incorrect as amongst others, they are too broad and there is no consideration in them to issues that arise from the pleadings. Further, the Discovery Orders are incorrect in directing the appellants to file an affidavit and provide discovery of documents in excess of prescribed retention periods for documents in the Companies Act and the Income Tax Act.
   
8. First, in regard to the Discovery Orders being too broad and there not being a consideration to issues that arise from the proceedings, the Discovery Orders require the appellants to give discovery of certain documents from 1995 to 2015. In the pleadings, KNPL alleges and the appellants deny that in or about February and March 2001 the appellants changed the name of KNPL without shareholder consent and "migrated" KNPL's assets to Nivani Ltd. The appellants submit that an order for particular discovery pursuant to Order 9 Rule 7 National Court Rules should have been confined to the alleged transfer of assets in 2001. KNPL submits that the issues in dispute go beyond the initial breaches when the respondent's assets were taken and that the claim includes compensation based on the profits earned since that occurrence. That occurrence is pleaded as being in 2001and not in 1995. Consequently, I find merit in the submission of the appellants on this point.
   
9. Secondly, although the wording in [1a] Discovery Orders, to some extent, follows the wording of Order 9 Rule 7(a) National Court Rules, the meaning of [1a] differs materially. The wording of Order 9 Rule 7(a) refers to "that" document or "that" class. The reference to "that" is to "some document or class of documents relating to any matter in question in the proceedings". There is no such qualification in [1a] Discovery Orders. Consequently, there is merit in the appellant's submission that the Discovery Orders require them to give discovery of all documentation referred to in the Schedule to the Discovery Orders regardless of whether a document or class of documents relates to any matter in question in the proceedings.
   
10. I am satisfied that the appellants have an arguable case that the primary judge fell into error for the above reasons. Having so found, the next consideration is whether, as the appellants have an arguable case that the primary judge fell into error, the appellants should be granted leave to appeal.
    
11. The appellants submit that the Discovery Orders, being as broad as they are, in essence require discovery and production of all documentation of both appellants since 1995 without reference to any matter in issue in the proceeding. All of the documentation is in Kokopo. The costs of the exercise of discovery, production in Port Moresby and inspection will be prohibitive for all parties it is submitted. Further, the appellants submit that the Discovery Orders affect the primary rights of the parties and may prevent a proper determination of issues by preventing proper discovery of relevant documents and in disrupting the business of Nivani.
    
12. I concur with the submissions of the appellants and grant the appellants leave to appeal. Given this it is not necessary to consider the other submissions of counsel concerning the application for leave.
    
13. The next consideration is whether a stay should be granted. The appellants make application for a stay pursuant to s. 155(4) Constitution and sections 5 and 19 Supreme Court Act. I consider the application under s. 19 Supreme Court Act first.
    
14. In regard to an application for stay, s. 19 Supreme Court Act provides that unless otherwise ordered by the Supreme Court or any Judge, an appeal, or an application for leave to appeal, to the Supreme Court does not operate as a stay of proceedings.
    
15. In Gary McHardy v. Prosec Security [2000] PNGLR 279, the Supreme Court found that it had unlimited jurisdiction to do justice and should exercise its discretionary power depending on the factors and circumstances of a particular case. Factors to consider when deciding whether to grant a stay include:

a) Whether leave to appeal is required and whether it has been obtained;

b) Whether there has been a delay in making the application;

c) Possible hardship, inconvenience or prejudice to either party;

d) The nature of the judgment sought to be stayed;

e) The financial ability of the applicant;

f) A preliminary assessment about whether the applicant has an arguable case on the proposed appeal;

g) Whether on the face of the record of the judgment there may be indicated apparent error of law or procedure;

h) The overall interests of justice;

i) The balance of convenience;

j) Whether damages would be a sufficient remedy.

16. I make reference to the following passage of Injia CJ (as he then was) in Ombudsman Commission v. Gabriel Yer (2009) SC1041. His Honour was considering a stay application under s. 19 Supreme Court Act:
    

“The grant or refusal of stay is discretionary. The principles on grant of stay are set out in McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279 (McHardy case)..... In McHardy the Court said the starting point is the basic premise that the judgment creditor is entitled to enjoy the fruit of the judgment. There are ten (10) other considerations which are enumerated in that case which may be considered. The Court said the list is not exhaustive. In my view, it is not intended that the discretion should be exercised on all or selected consideration(s). The circumstances of a particular case may warrant greater or less or even no weight at all to be given to a particular consideration(s). It is open to the Supreme Court to expound on those considerations or introduce new considerations as necessitated by the circumstances of the case before it. In a case where a number of considerations are relevant, the Court must take into account the totality of those considerations in order to dispense substantive justice in the circumstances of the case before it. The onus is on the applicant to persuade the Court to exercise its discretion in his or her favour.”

17. I also make reference to William Duma v. James Puk (2019) SC1754 in which at [13] the Court said:
    

“13. As referred to, in determining whether a stay should be granted this Court must consider what is necessary to do justice in the circumstances of a particular case. There is no fetter on this Court’s discretion apart from this consideration. We are reminded in this regard of the oft cited statement of Bowen LJ in Gardner v. Jay (1885) 29 Ch 50, at 59:

“When a tribunal is invested by Act of Parliament or by Rules with a discretion, without any indication in the Act or Rules of the grounds upon which the discretion is to be exercised, it is a mistake to lay down any rules with a view of indicating the particular grooves in which the discretion should run, for if the Act or the Rules did not fetter the discretion of the Judge why should the Court do so?””

Consideration

18. In this instance, leave to appeal is required and has been granted. There is an arguable case on appeal. If a stay is not granted the appellants' will be required to comply with the Discovery Orders and will be deprived of the benefit of their appeal if it is successful. I am not satisfied that any prejudice will be caused to the respondent if a stay is granted. Prejudice would be caused to the appellants if the stay is not granted. Consequently, I am satisfied that it is in the interests of justice that the stay sought should be granted.
    

Orders

19. The Court orders that:
    

a) The appellants/applicants are granted leave to appeal the judgment (or decision) and Orders made by the Honourable Justice Thompson on 15th March 2019 in National Court proceeding WS No. 858 of 2017;

b) The grounds set out in the Application for Leave to Appeal shall be treated as the Notice of Appeal against the decision of the Honourable Justice Thompson on 15th March 2019;

c) Both the National Court order of 15th March 2019 and the National Court proceeding referenced WS No. 858 of 2017 (COMM) - Kimbe Nivani Properties Ltd v. Nivani Ltd and David John Stein, in which the orders of 15th March 2019 were made are stayed pending the determination of the substantive appeal;

d) The costs of and incidental to the Application for Leave to Appeal and the Application for a Stay shall be costs in the Appeal.

_______________________________________________________________
Ashurst: Lawyers for the Appellants
Fiocco & Nutley: Lawyers for the Respondent