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Geru Holdings Ltd v Kruse [2023] PGSC 141; SC2492 (3 November 2023)

SC2492

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 142 OF 2021

BETWEEN:
GERU HOLDINGS LIMITED
Appellant

AND:
JAMES KRUSE
First Respondent

DELOITTE TOUCHE TOHMATSU
Second Respondent

ROBIN FLEMING as the Chief Executive Officer of Bank of South Pacific Financial Group Ltd
Third Respondent

BANK OF SOUTH PACIFIC FINANICAL GROUP LTD
Fourth Respondent

MOROBE PROPERTIES LTD
Fifth Respondent

Waigani: Collier J, Geita & Dowa JJ
2023: 31^st October, 3^rd November

PRACTICE AND PROCEDURE – appeal of judgment of National Court – whether proceedings in the National Court were vexatious pursuant to Order 12 rule 40(1) of National Court Rules – whether causes of action time barred pursuant to section 16(1) of Frauds and Limitations Act 1988 – multiplicity of proceedings – whether defence required to be filed before application to dismiss proceedings entertained by National Court - whether primary Judge erred in awarding costs against both lawyers and party

The primary decision concerned an interlocutory application to dismiss the substantive proceeding in WS No. 221 of 2021 pursuant to O 12 r 40(1) of the National Court Rules. The substantive proceeding largely concerned the fourth respondent’s enforcement of a Deed of Guarantee and Indemnity executed by the appellant, and the subsequent sale of a property (originally owned by the appellant) to the fifth respondent. The primary Judge dismissed the substantive proceeding on the basis that the causes of action the subject of the substantive proceeding were time barred, and that the appellant was a vexatious litigant in commencing a multiplicity of proceedings on the same substratum of facts over the course of eleven years.

The appellant appealed, pressing 7 grounds of appeal, on the basis that the primary Judge erred in finding that the appellant’s claims were time barred, and that the primary Judge’s findings were contrary to the rules of natural justice and the evidence before the Court.

Held:

The Court found that the primary Judge did not err in her findings. The conclusion of the primary Judge that the causes of action of the appellant were either wholly or in part time-barred was open to her Honour. In any event, the primary Judge properly applied relevant principles in determining that the substantive proceedings were instituted vexatiously for the purposes of Order 12 rule 40(1) of the National Court Rules. It was unnecessary for the fourth respondent to exhaust its remedies against the debtor prior to seeking to enforce the Deed of Guarantee and Indemnity. The moving party in respect of the application for dismissal of the substantive proceedings at first instance was a defendant and therefore a party to the proceedings, entitled to seek summary dismissal of the substantive proceedings as vexatious. That the defendants at first instance had not filed defences did not prevent the primary Judge dismissing the substantive proceedings as vexatious. The primary Judge did not err in her findings as to costs. The appeal was dismissed with costs.

Cases Cited:

Gadiki v Logae [2021] SC2102
Geru Holdings Ltd v Kruse [2017] N6663
Geru Holding Ltd v Kruse [2017] N7650
Geru Holdings Ltd v Kruse [2019] N7867
Geru Holdings Ltd v Kruse [2020] SC2050
Geru Holdings Ltd v Kruse [2022] SC2318
Hiwi v Rimua [2015] SC1460
Hui v Bank of South Pacific [2019] N8838
Iangalio v National Development Bank Ltd [2016] SC1499
Logona v Piokole [2015] SC1618
National Capital Ltd v Port Moresby Stock Exchange [2010] SC1053
Nodepa Plantation v Balat (2020) SC1927
Popuna v Owa [2017] SC1564
Takori v Yagari [2007] SC905
Wilson v Kuburam [2016] SC1489

Legislation:

Constitution of the Independent State of Papua New Guinea
Frauds and Limitations Act 1988
National Court Listing Rules 2005
National Court Rules 1983

Counsel

Mr C Gagma, for the Appellants
Mr I Shepherd, for the First, Second, Third and Fourth Respondent

REASONS FOR JUDGMENT

3^rd November 2023

1. BY THE COURT: Before the Court is an appeal against the whole Judgment of the National Court of Justice delivered on 27 September 2021 in proceeding WS No. 221 of 2021; Geru Holding Ltd v Kruse [2021] PGNC 338 (primary decision).
   

2. The primary decision concerned an interlocutory application filed on 24 May 2021 by the fifth defendant in the National Court proceedings, Morobe Properties Limited, pursuant to O 12 r 1 and O 12 r 40(1)(b) and (c) of the National Court Rules 1983 (National Court Rules), r 15 (1)(a) of the National Court Listing Rules 2005, and s 155 (4) of the Constitution seeking the following order:

... the entire proceeding be dismissed for being frivolous, vexatious and abuse of the process of the Court on the grounds of “multiplicity of proceedings”, “res judicata” and “issue estoppel”.

3. At the same time the primary Judge heard an interlocutory application filed by the other respondents on 28 May 2021 in support of the interlocutory application of Morobe Properties Limited for dismissal of the entire proceedings pursuant to O 12 r 40(1)(a), (b) or (c) of the National Court Rules and/or the inherent jurisdiction of the Court.

4. On 27 September 2021, the primary Judge made the following orders:

1. The Plaintiff is declared a vexatious litigant.
2. These proceedings are dismissed in its entirety against all Defendants.
3. The Plaintiff and Gagma Legal Services shall equally meet all the costs of the Defendants on a solicitor client basis.
4. All costs of these proceedings shall be met prior to the institution of any new proceeding over the same subject matter.

5. By notice of appeal filed 1 November 2021, the appellant appealed the Primary Decision on 12 grounds, with multiple sub-grounds.

6. On 17 November 2021, the first to fourth respondents filed a notice of objection of competency in respect of the notice of appeal.

7. On 25 November 2022, judgment was delivered in respect of the notice of objection of competency finding that 7 of the 12 grounds were competent and, on that basis, the objection to competency was refused: Geru Holdings Ltd v Kruse [2022] SC2318.

BACKGROUND FACTS

8. The appellant was the guarantor of loans given by the fourth respondent, Bank of South Pacific (BSP) to a debtor company, Piunde Limited. The appellant and Piunde Limited were related corporations. Under a Deed of Guarantee and Indemnity executed on 2 June 2008 by directors of the appellant and BSP, three leasehold properties of the appellant were mortgaged to BSP.

9. Piunde Limited defaulted on the loans in or about 2009. It subsequently entered liquidation.

10. It appears that some time in 2014 BSP commenced steps to repossess and sell the relevant properties. It further appears that BSP and the fifth respondent (Morobe Properties Limited) executed a contract of sale over one of the mortgaged properties (Allotment 10 Section 3 State Lease Volume 29 Folio 161) for K3.1 million. This sale appears to have been finalised on 30 October 2017. All three properties were also advertised for sale through public tender.

11. The appellant commenced substantive proceedings against the respondents the subject of the present appeal in the National Court of Justice in WS No. 221 of 2021 claiming, in summary:

• Breach of the Deed of Guarantee and Indemnity;
• Illegal sale and deprivation of properties;
• Unjust enrichment; and
• Fraud/deceit.

12. The primary Judge found that the appellant had earlier commenced other proceedings in relation to its liability under the Deed of Guarantee and Indemnity, namely:

• OS No. 305 of 2009 - Geru Holdings Limited v Bank South Pacific and Ors - these proceedings sought a right over the property known as Section 3 Lot 10 in Kundiawa. The proceedings were subsequently withdrawn.
• OS No. 797 of 2015 - Geru Holdings Limited v James Kruse - these proceedings sought similar remedy to the OS No. 305 of 2009 matter over the same subject matter. These proceedings were subsequently discontinued.
• WS No. 428 of 2017 - Geru Holdings v James Kruse and Ors - the appellant sought to assert its right over the same subject property by challenging the respondents, a similar attempt to past proceedings however this time through a Writ of Summons.
• SCA No. 105 of 2017 - Geru Holdings Limited v James Kruse and Ors - this was an appeal on WS No. 428 of 2017 from an interlocutory order from the National Court refusing to grant interim injunctions to the appellant over the subject property. The respondents however were successful in having the appeal dismissed.
• Following the dismissal of SCA No. 105 of 2017, the appellant discontinued WS No. 428 of 2017.

DECISION OF THE PRIMARY JUDGE

13. The primary Judge identified the key issues before the National Court as:

1. Has the Plaintiff abused the process of the court by filing numerous proceedings over the same subject matter? Are these proceedings res judicata and the Plaintiff is therefore estopped from filing these proceedings?

2. Is the Plaintiff’s claim time barred?
3. Is the Plaintiff a vexatious litigant?

14. In relation to the first issue the primary Judge at [16] noted the submissions of Morobe Properties Limited that the Court had exercised its rights in past proceedings on the same subject matter and therefore the matter was functus officio. Her Honour considered that the subject matter complained of by the appellant had not been decided at the National Court level, or by the Supreme Court on merits, and that accordingly the principles of res judicata and functus officio did not apply. However at [18] of her reasons, the primary Judge observed that the appellant had attempted to file proceedings and discontinue them, only to file fresh ones and discontinue again, over the course of eleven years from 2009. Her Honour concluded that the decision of the Supreme Court in SCA No. 105 of 2017- Geru Holdings v Homeland Joint Venture Limited and Ors pointed to a multiplicity of proceedings and a time bar, particularly to the extent that the Supreme Court found that the appellant’s case was statute barred and “the appellants did not have a very strong case and or all their claims appeared to be statute-barred and/or a rehash of relief refused in previous proceedings.”

15. In relation to the second issue, the primary Judge referred to the six year time bar mandated by s 16(1) of the Frauds and Limitations Act 1988 and continued:

22. The origin of the Plaintiff’s claim upon which he asserts all other rights (beginning with the legal challenge to the bank, the appointment of the First Defendant herein etc and also the challenge against the Fifth Defendant who has purchased the subject property) , the initial alleged right complained of as a guarantor of the company Piunde Limited which cascaded into other causes of actions is time barred as correctly pointed out by the Supreme Court in SCA 105 of 2017.

16. Her Honour further relied on the principles discussed in Philip Takori v Simon Yagari (2008) SC905 and Kerry Lerro v Philip Stagg (2006) N3050. Her Honour continued:

26. The Plaintiff seems to run his litigation based on the same causes of action but perhaps refined after eliciting from every proceeding filed some new fact that did not exist before to keep coming back to the Courts.
27. In so doing, the Defendants have been prejudiced having had to defend every proceeding both in the National and Supreme Court only to have those proceedings dismissed and or the Plaintiff discontinuing same only to come back again to the same Courts.

17. In relation to the third issue the primary Judge observed:

31. A litigant can be declared a vexatious litigant after having filed numerous proceedings and having failed on all these proceedings to establish his claims. In the case of Smugglers Inn Resort Hotel Ltd v PNGBC (2006) N3062, the Court stated that it has an inherent jurisdiction in the protection of its process from abuse. The Court therefore can:
    1. Make orders to prevent the making of anticipated, unwarranted and vexatious applications in an action which is pending in court, unless the applicant first obtains leave of court,
    2. Prevent the commencement of anticipated and unwarranted and vexatious proceedings, unless the litigant the subject of the order first obtains leave by showing that the case is arguable,
    100. A vexatious litigant order would not normally be made until after the litigant has made a number of applications in a single proceeding all of which have been dismissed because they are totally devoid of merit
    4. An extended vexatious litigant order would ordinarily be made only after;
       1. The litigant has commenced proceedings that has little or no basis in law but has the effect of subjecting the defendants to inconvenience, harassment and expense out of all proportion to any gain likely to accrue to the claimant
       2. The litigant has sued the same party repeatedly in reliance on essentially the same cause of action, perhaps with minor variations,
       3. The litigant relies on essentially the same cause of action, perhaps with minor variations, after it has been ruled upon in actions against successive parties who, if they were to be sued at all, should be joined in the same action
       4. The litigant automatically challenges every decision on appeal and refuses to take any notice or give any effect to orders of the Court.
32. I am of the view that the Plaintiff is a vexatious litigant having commenced proceedings through its same lawyer over the course of 11 years in different modes and only to discontinue in order to resurrect same again in another fresh proceeding, subjecting the Defendant’s to inconvenience, harassment and expense out of all proportion to any gain likely to accrue to the claimant.
33. The Fifth Defendant has made submissions that it has acquired the property the subject of this proceeding and has been deprived of this property as a result of the Plaintiff continuing to file and run litigation over the same subject matter and continuing to remain in possession of same.
34. I find that, the Plaintiff’s conduct has been malicious in this matter and greatly prejudicial to all Defendants who have had to incur costs over the years defending suits brought on by the Plaintiff.
35. The Fifth Defendant has made submissions that because the Plaintiff has been represented by the same lawyer since 2009 when he filed the first proceeding, that Gagma Legal Services should be personally liable for all of the Defendant’s costs.
36. Lawyers have a higher duty to advise and inform their client’s well as to causes of actions identifiable in law and the consequences of being unsuccessful in court and or discontinuing matters, the payment of costs to parties unnecessarily dragged into Court to defend matters.
37. I am of the view that these proceedings add on to the multiplicity of proceedings over the years pursued by the Plaintiff over the same subject matter and the fact that the matters complained of as affecting the Plaintiff’s rights are time barred. I will dismiss the proceedings.

GROUNDS OF APPEAL

18. The appellant filed a notice of appeal against the primary Judge’s decision on 1 November 2021. Following determination of a notice of objection to the competency of its appeal filed by the first, second, third and fourth respondents, the appellant only pressed 7 of its 12 grounds of appeal.

19. The grounds of appeal pressed by the appellant were as follows:

(2) Her Honour erred in law or mixed fact and law when she ruled/held that the Plaintiff was a vexatious litigant and thereafter dismissed the proceedings in its entirety with costs to be paid on solicitor client basis along with orders for costs be paid prior to any new proceedings on basis of Section 16 (1) of the Frauds and Limitations Act 1988 when:
(a) The Court proceeded to consider/accept/rely on and thus gave irrelevant weight to the fifth Respondents' evidence and the fifth Respondent's submissions without considering or determining the evidence put forward by the Appellant which on the whole, was equally relevant and sufficient enough to refute/rebut the Respondents' claim that the Appellant's claim was indeed time barred; and
(b) The cause of action accrued from the time of disclosure of the illegal transactions executed to transfer the property described as Allotment 10 Section 3 (State Lease Volume 29 Folio 161) in 2018 where the actual transactions appears to occur in 2017;
(c) For reasons set out in (a) above, the Appellant was not afforded the avenue/opportunity to be heard for purposes of ensuring a fair/reasonable hearing contrary to the principles of Natural Justice envisaged by Section 59 of the Constitution.
(3) Her Honour erred in law or mixed fact and law when she wholly heard, considered and deliberated on the fifth defendant's application for dismissal of the entire proceedings pursuant to Order 12 rule 40 of the National Court Rules, when:
(a) there was no cause of action or claim against the fifth defendant, only to the extent that there were two consequential relieves sought in the statement of claim in relation to the property described as Allotment 10 Section 3 (State Lease Volume 29 Folio 161) which was purportedly sold to the fifth defendant by the first, second, third and fourth defendants;
(b) there was no defense on merit filed and no affidavits of evidences in rebuttal to the claim that have formed the basis to rely on in the application to dismiss.
(4) Her Honour erred in law or mixed fact and law, when Her Honour proceeded to consider/ accept/rely on and thus gave irrelevant weight to the fifth respondents' evidence and submissions without considering or determining the causes of actions pleaded in the Statement of claim and supported by affidavit evidence put to the court by the Appellant.
(a) Consequently, facts of the case as stated at paragraphs 2 and 3 at page 3 of the judgment in relation to a loan default by Piunde Limited in 2009 that resulted in the exercise of rights by the Bank of Sought Pacific Ltd to sell the property owned by the Plaintiff, a guarantor of the loan to the fifth defendant are misconceived and erroneous facts of the case.
(b) Whilst relied on the misleading submissions by the fifth defendant without pleadings ...defence, Her Honour deviate from the actual cause of action and replaced with cause of action and facts which were not before the court by way of pleadings and evidence.
(c) For that reasons, the Appellant was not afforded the avenue/opportunity to be heard for purposes of ensuring a fair/reasonable hearing contrary to the principles of Natural Justice envisaged by Section 59 of the Constitution.
(5) Her Honour erred in law or mixed fact and law when she ruled/held that the Plaintiff was a vexatious litigant and thereafter dismissed the proceedings in its entirety with costs to be paid on solicitor client basis along with orders for costs be paid prior to any new proceedings when:
(a) Despite evidence presented by both the appellant and respondents showing that the proceedings OS 797 of 2015, Geru Holdings Ltd v. Kruse & Deloitte Touche Tohmatsu, WS 428 of 2017 -Geru Holdings & Ors v. BSP & Ors, OS. 675 of 2017 - Geru Holdings & Ors v. BSP & Ors and OS 189 of 2018 – Geru Holdings & Ors v. BSP & Ors were all discontinued, the Court instead proceeded to consider/ accept/rely on and thus gave irrelevant weight to the respondents' evidence and submissions on the issue of "multiplicity of proceedings" without giving sufficient/adequate or due consideration of the Appellant's evidence and pleadings which remained undistorted and had substance on the merits;
(b) Those proceedings named were never judicially determined the same issues to a finality by a competent jurisdiction; and there was or were no other similar or related court proceedings pending before the District, National and Supreme Courts running parallel that may constitute a multiplicity of proceedings;
(c) Similarly and despite evidence being presented by the Respondents showing that the other related cases alongside those referenced in (a) above were before the National Court and had cause of actions that were distinct in nature as regards the issue of "estopple" and "funtious officio", the Court instead proceeded to consider/accept/ rely on and thus gave irrelevant weight to the Respondents' evidence and submissions without given sufficient/adequate or due consideration of the Appellant's evidence and submissions which remained undistorted and had substance on the merits.
(d) For reasons set out in (a), (b) and (c) above, the Appellant was not afforded the avenue/opportunity to be heard for purposes of ensuring a fair/reasonable hearing contrary to the principles of Natural Justice envisaged by Section 59 of the Constitution.
(8) Her Honour erred in law or fact and law when Her Honour made a finding that the plaintiff was a vexatious litigant and subsequently declared the plaintiff a vexatious litigant when:
(a) there was no evidence before the court disclosing the same or similar court proceedings with same cause of action which were adjudicated as final, putting to rest all the rights of the parties;
(b) the Notice of Motion filed by the 1^st, 2^nd, 3^rd and 4^th defendants were unsupported by affidavit evidence and they abandon the Motion;
(c) only the 5th defendant through its lawyers moved that motion filed by the 1^st, 2^nd, 3^rd and 4^th defendants over the bar table after the appellant here replied to the submissions by the defendants;
(d) in fact the appellant's lawyers objected to and Her Honour uphold that objection;
(10) Her Honour erred in law or fact and law when Her Honour erroneously exercised her discretionary powers to make orders for costs on a solicitor/ client basis to be equally met by the Appellant and Gagma Legal Services when there was no relieves sought in that nature sought in the Motions and that there was no evidence of forewarning notices given to the Plaintiff and Gagma Legal Services contrary to Order 4 Rule 40 (1(c)(d)(2) and Order 4. Rule 49 (8) of the National Court Rules
(11) Her Honour erred in law or fact and law when Her Honour erroneously exercised her discretionary powers to make orders in relation to payment of costs before commencing any other proceedings when there was no relieve sought in that nature in the Motions which would have invoke those discretionary powers which intended to preclude the appellant rights of seeking justice.

SUBMISSIONS

20. Written submissions were filed in the appeal by the appellant, and jointly by the first, second, third and fourth respondents.

21. No submissions were filed by the fifth respondent in relation to the appeal, and there was no appearance for the fifth respondent at the hearing.

22. In summary, the appellant submitted as follows:

• The cause of action could not have arisen in 2014 as found by the primary Judge, as the appellant did not become aware of the transactions until around 2017 or 2018 when there was disclosure of the concealed illegal transactions executed to transfer the property.
• A Deed of Mortgage, Deed of Guarantee and Deed of Appointment of Agent to Sale are specialty contracts which attract a time limitation of 12 years under s 16 of the Frauds and Limitations Act 1988.
• The appellant’s proceeding was within time on the basis the cause of action commenced in 2017 and was an action upon a specialty which has a time limitation of 12 years.
• The first to fourth respondents’ submissions and the primary Judge’s enquiries as to statutory defence for time limitations in the primary hearing were not pleaded in a defence or in the notice of motion, and were not in any affidavit evidence. The appellant therefore was not prepared to argue on the issue, and was “ambushed” and not afforded the avenue for fair/reasonable hearing in accordance with the principles of natural justice.
• There was no actual cause of action against the fifth respondent. Rather, the fifth respondent was merely an interested party involved in the transaction.
• The primary Judge relied on misleading submissions made by the fifth respondent that were not supported by pleadings in the defence and accordingly deviated from the actual cause of action.
• The primary Judge gave irrelevant weight to the respondents’ evidence and submissions, and failed to adequately consider the appellant’s evidence in relation to the issue of multiplicity of proceedings. The primary Judge failed to consider that the background facts in most of the previously filed and discontinued cases were different to the current proceedings. The current facts were only similar to one previous proceeding commenced, however that proceeding was never tried and determined, and the cause of actions were different.
• The respondents did not file a defence, any evidence, or plead as to the determination of the appellant as a vexatious litigant. The primary Judge made a determination that the appellant was a vexatious litigant only on the basis of oral submissions.
• The primary Judge erroneously exercised discretionary powers to make orders for costs on a solicitor/client basis in circumstances where costs were not specifically sought by the respondents, and no prior notice was given to the appellant.

23. In summary, the first, second, third and fourth respondents submitted as follows:

• The primary Judge made no error with respect to the interpretation of the limitation period in concluding that the appellant’s cause of action arose in 2014 rather than 2017.
• The fifth respondent was a party to the proceedings, was directly affected by the orders being sought, and was therefore able to bring an application for dismissal.
• There is no requirement in such circumstances for an applicant for dismissal to file a defence before moving to seek dismissal of the proceedings.
• The primary Judge correctly summarised the background to the case.
• The assertion that the primary Judge did not take into account the previous proceedings is incorrect.
• The primary Judge’s reasons for awarding costs are explained in paras 34, 35 and 36 of the primary judgment.

CONSIDERATION

24. In our view the grounds of appeal pressed by the appellant can be grouped as follows:

• In summary, grounds 2, 5 and 8 allege error by the primary Judge in finding that the appellant was a vexatious litigant when such finding was contrary to the rules of natural justice, the operation of s 16(1) of the Frauds and Limitations Act 1988, and the evidence before the Court;
• In summary, grounds 3 and 4 allege error by the primary Judge in making the orders sought by Morobe Properties Limited when no defence was filed and the orders deviated from the relief sought at first instance against Morobe Properties Limited; and
• In summary, grounds 10 and 11 allege error by the primary Judge in the exercise of discretionary powers to make orders concerning costs.

25. It is appropriate to consider these grounds in turn.

Grounds 2, 5 and 8

“Vexatious litigant”

26. As the Supreme Court explained in Wilson v Kuburam [2016] SC1489:

33. It is an established principle of law that the Court has a duty to protect its processes from being abused. Where there is such abuse, the Court has the inherent power to deal with it. The Court can exercise this power even without an application being made by a party. This is necessary for the fair and proper administration of justice by the Court. In Anderson Agiru v. The Electoral Commission (supra), the Supreme Court in reiterating this principle said:

"The basic principles that are to be applied when the court is considering whether or not there has been an abuse of its processes have been succinctly put before us by Mr. Cannings in his submissions. Those principles in essence are that, the court's inherent power is its authority to do all things that are necessary for the proper administration of justice. Such inherent power consists of all powers reasonably required to enable the court to perform efficiently its judicial functions and to protect its dignity and integrity. Essential to these inherent powers is the court's duty to protect itself by ensuring that vexatious litigants do not abuse the court's process by instituting frivolous or vexatious suits. It behoves litigants therefore to carefully choose their causes of action before they commence proceedings in this Court purporting to enforce their rights. The court should summarily dismiss proceedings it considers frivolous, vexatious or is an abuse of process. (see, generally, Ronney Wabia v BP Exploration Operating Co. Ltd & Ors, Unreported National Court Judgment N1697 dated 28 March 1998).

27. (see also Popuna v Owa [2017] SC1564 at [10], Gadiki v Logae [2021] SC2102 at [33])

28. In the event however that a litigant is declared “vexatious” such that it is prevented from commencing further proceedings without first obtaining leave of the Court, it would be necessary for the order to so specify. An example of such order was Thompson J’s ruling in Hui v Bank of South Pacific [2019] N8838 where her Honour relevantly ordered:

The First and Second Plaintiffs are declared vexatious litigants in relation to the Defendant and are thereby prevented from commencing any further proceedings against the Defendant unless the Plaintiffs first obtain leave of the Court

29. In the present case, the order of the primary Judge that the appellant was a “vexatious litigant”, without further qualification, can only be interpreted as relating to the proceedings before her Honour, within the meaning of O 12 r 40(1) of the National Court Rules. At the hearing the lawyer for the first to fourth respondents accepted that this was the case.

30. Ultimately, however, even if the cause of action of the appellant arose in 2017, as it insists, this did not prevent the proceedings instituted by the appellant being declared vexatious by her Honour, nor does this warrant a finding that her Honour was wrong to dismiss the substantive proceedings as vexatious.

31. Principles relevant for the Court to consider in determining whether proceedings are vexatious for the purposes of O 12 r 40(1) of the National Court Rules are well established. They were explained, for example, in Takori v Yagari [2007] SC905:

1. Our judicial system should never permit a plaintiff or a defendant to be ''driven from the judgment seat'' in a summary way, ''without a Court having considered his right to be heard.'' A party has a right to have his case heard, as guaranteed by the Constitution and the laws of the land. The Rules are designed to enhance those rights and to ensure the prompt and fair disposal of matters coming before the Court. That right cannot be lightly set aside.
2. 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.
3. The object of these rules are therefore ''to stop cases which ought not to be launched — cases which are obviously frivolous or vexatious or obviously unsustainable.'' In other words ''the object of the rule was to get rid of frivolous actions.''
4. A claim may be frivolous if it can be characterized as so obviously untenable that, it cannot possibly succeed or that, the claim or defence is bound to fail, if it proceeds to trial.
5. 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.
6. With regard to the issue of disclosing a reasonable cause of action or defence, the Court must be clear that, there are two parts to the phrase ''cause of action''. First, it entails a right given by law, such as an entitlement to reasonable damages for breach of human rights under s. 58 of the Constitution, commonly referred to as, the ''form of action''. Secondly, it entails the pleadings disclosing all the necessary facts which give rise to the form of action.
7. The phrase ''cause of action'' could thus be defined in terms of a legal right or form of action known to law with:

''every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court. It does not comprise of every piece of evidence which is necessary to prove each fact, but every fact is necessary to be proved.''

8. A statement of claim or a defence (as the case may be) must therefore, clearly plead the form of action by pleading the necessary legal elements or ingredients of the action and the relevant and necessary facts (not the evidence) giving rise to the form of action. It follows therefore that, where a statement of claim or a defence is so ambiguous or lacking in particularity that it does not facilitate orderly and rational pleadings, which would enable the real issues to be identified, and instead leaves it to guess work, it should be struck out.
9. These rules provide a summary judgment procedure or remedy which is available to a plaintiff or a defendant, and one which vests and calls for an exercise of a discretion by the Court.
10. The discretion must be exercised sparingly and only in a case where the statement of claim or the defence (as the case might be) is ''obviously and almost incontestably bad.'' In other words this discretion can be exercised only in cases that ''are plain and obvious so that the master or Judge can say at once that the statement of claim [or defence] as it stands, is insufficient, even if proved, to entitle the plaintiff [or defendant] to what he asks'' for.

32. Her Honour properly relied on these principles at para 25 of her reasons.

33. However a key finding of her Honour was that the substantive proceeding instituted by the appellant was vexatious, because it were the latest in a long line of cases brought by the appellant, seeking a variation of the same relief, or at least part of a cascading series of claims. The Supreme Court has held that a multiplicity of proceedings in which similar causes of action and claims for relief are prosecuted from the same factual circumstances and involving the same parties can amount to abuse of process of the Court and stand liable to be dismissed for that reason: Logona v Piokole [2015] SC1618 at [11]. Notwithstanding the submissions of the lawyer for the appellant that the present case was “different” from previous claims in the National Court brought, pressed, and then discontinued by the appellant, we can find no fault in the conclusion of the primary Judge that the proceedings in WS No. 221 of 2021 were a further iteration of the same litigation where the appellant has sought to resist the enforcement by BSP of the guarantee given by the appellant for the loans of Piunde Limited. Her Honour’s findings in this respect were consistent with earlier decisions of the National Court concerning the lack of good faith on the part of the appellant in the conduct of its litigation (see for example Geru Holdings Ltd v Kruse [2017] N6663), and findings of abuse of process of the Court by the appellant in its conduct of related litigation (see for example Geru Holdings Ltd v Kruse [2017] N7650 and Geru Holdings Ltd v Kruse [2019] N7867).

34. We are not persuaded that the primary Judge erred in finding that the proceedings instituted by the appellant in WS No. 221 of 2021 were vexatious for the purposes of O 12 r 40(1) of the National Court Rules.

Time bar issue

35. Much was made by the appellant of alleged error by the primary Judge in finding that the appellant’s causes of action accrued in 2014. Plainly there was some overlap in the arguments put to the National Court concerning whether the proceedings instituted by the appellant were time-barred, and whether they were vexatious for the purposes of O 12 r 40(1) of the National Court Rules. However they are clearly separate questions, to the extent that even if the proceedings were not barred by s 16(1) of the Frauds and Limitations Act 1988 such a finding would not prevent the primary Judge considering whether the proceedings were vexatious. Indeed, her Honour recognised this, as was apparent from her identification of these as separate issues for decision.

36. Her Honour found that the appellant’s causes of action referable to the sale of the relevant property to Morobe Properties Limited arose in 2014 (when the agent for sale was appointed and the sale contract was allegedly entered) rather than 2017 (when the appellant learned of the sale of the relevant property to Morobe Properties Limited). The appellant claimed that the primary Judge failed to have regard to evidence before the Court (in particular absence of evidence from the respondents), and the rules of natural justice, in concluding that the causes of action against Morobe Properties Limited had arisen in 2014.

37. Her Honour put the issue of the date of accrual of the causes of action to the parties during the course of the hearing. We note the following exchange:

HER HONOUR: Do you say that your client’s cause of action happened 3 January 2014? You have pleaded in the statement of claim, is that when your client’s cause of action happened?
MR GAGMA : Yes, I will come to that...
...
HER HONOUR: Mr Gagma, I have gone through your submissions. I get that your cause of action – again, I come back to this point – be that as it may that your client was not aware of the changing of hands of this property to the fifth defendant which happened in 2017, your client’s right or if any right, your client’s grievances started in 2014. The cascading situation – that right that your client is complaining of – was impacted January 2014, right?
MR GAGMA: Your Honour, the transaction may have happened in 2014 but they were disclosed in 2015 when it was – the property was advertised for sale.
HER HONOUR: This is my question. When did your client’s cause of action arise? It was not in 2017. It was not in 2017 when the property was exchanged or transferred to the fifth defendant. Your client’s grievances arose in 2014, right, the actions of BSP in appointing the first defendant?
MR GAGMA: Your Honour, appointment of – the appointment of the agent to sell this property was never been disclosed to our client.
HER HONOUR: Yes, regardless of the fact that it was disclosed, if the law says the cause of action happens at a particular point in time, regardless of whether your client was aware or not aware, if we are to pin the cause of action in this matter, what timing is that. Is that January 2014?
MR GAGMA: Concealment of documents is a fraud which we also pleaded in our writ of summons to show that those documents transactions were supposed to be disclosed to our client back then because he is the guarantor.
...
MR GAGMA: The cause of action commenced in 2017 when the defendants purportedly exchanged this title to the fifth defendant and the disclosure that happened earlier was not known to our client. So, the cause of action in relation to the transfer of that property, we take issue, is in 2017....
...
MR GAGMA: Your Honour, we also take issue with those documents that were executed by parties before – in 2014 which were disclosed later in court proceedings. We take issue with the deed of appointment of urgency for sale, the contract of sale of land and the transfer of mortgage exercising power of sale. Those documents are all defective. We have evidence to show to this court that those documents were forged and also...

38. The appellant submitted that the primary Judge was “persistently determined” that the causes of action arose in 2014, notwithstanding that the appellant maintained that it was not aware of relevant transactions – in particular, the appointment of the agent of sale, the contract of sale of land, and the transfer by mortgagor exercising power of sale – until 2017.

39. Notwithstanding the persistence of the appellant’s arguments concerning when it became aware of certain events, as a matter of law the date that the appellant became aware of the relevant transactions is not determinative of the actual date of the accrual of its causes of action. As the Supreme Court observed in Nodepa Plantation v Balat (2020) SC1927:

29. In Mamun Investment Ltd v Nixon Koi (2015) SC 1409, the Supreme Court approved of the view propounded in English cases mentioned there that a cause of action accrues and time begins to run irrespective of the plaintiff’s lack of knowledge. It disapproved of the decision in Tau Gumu v Papua New Guinea Banking Corporation (2001) N2288 where the National Court observed that in an action based on fraud, the period of limitation does not begin to run until the aggrieved party has discovered the fraud. We subscribe to those views. In Mamun Investment Ltd v Nixon Koi (2015) SC 1409, the Supreme Court said that the cause of action accrued at the latest from the date of registration of the transfer of title.

(emphasis added)

40. The appellant argued strongly in this appeal that there was no direct evidence that the appointment of the agent of sale or the contract of sale of land to Morobe Properties Limited were actually executed in 2014, and further alleged fraud on the part of the respondents in respect of this issue. The lawyer for the appellant claimed forgery, and directed the Court’s attention to a forensic report relating to the execution of relevant documents. During the hearing the Court asked the lawyer for the first to fourth respondents to identify evidence evincing the date of execution of either or both the contract of sale of land or the appointment of the agent of sale. The lawyer for the first to fourth respondent was unable to direct the Court to any sworn evidence to that effect.

41. It may well be that the contract of sale of the relevant property to Morobe Properties Limited and the appointment of the agent for sale were both actually signed in 2017 as the appellant submitted. The material before the Court in respect of this issue was unclear. However even if those documents were not signed in 2014, we consider that the primary Judge did not err to the extent that the proceedings in WS No. 221 of 2021 were at least in part time barred because of the appellant’s reliance on events which took place prior to 2014, in particular the execution of the Deed of Guarantee and Indemnity on 2 June 2008 and steps taken by BSP in respect of the Deed of Guarantee and Indemnity after default in 2009 by Piunde Limited on its BSP loans.

42. In passing we note that decisions of the National and Supreme Courts concerning the litigation between the parties reveal that the appellant was aware by, at the latest, 2015 of the steps already taken by BSP to sell one or more of the properties (as was demonstrated by the relief sought by the plaintiff in OS No. 797 of 2015, the subject of judgment of the National Court in Geru Holdings Ltd v Kruse [2017] N6663). See also Geru Holdings Ltd v Kruse [2017] N7650, and the comment of David J in his judgment of 10 April 2019 in OS No 657 of 2017 Geru Holdings Ltd v Kruse [2019] N7867 that:

17. In the substantive proceedings commenced by the originating summons, the plaintiff seeks, inter alia, a declaration that the Deed of Appointment of Agent for Sale purportedly signed by Robin Fleming under power of attorney on behalf of the Bank South Pacific on 3 January 2014 and signed by James Kruse on 17 November 2015 (the Deed of Appointment of Agent for Sale) is illegal therefore null and void.
    

43. Irrespective whether the actual contract of sale was signed on 3 January 2014, we do not consider that the primary Judge’s finding that the appellant’s causes of action accrued in 2014 were inconsistent with the evidence before the Court, or were not open to her Honour.

44. Much was also made by the appellant of its claim that it was entitled to a twelve year period in which to bring these proceedings, reliant on s 16(3) of the Frauds and Limitations Act 1988 which provides:

(3) Subject to Subsection (4), an action upon a specialty shall not be brought after the expiration of 12 years commencing on the date when the cause of action accrued.

45. To the extent that the appellant sought relief in respect of a contract to which it was not a party (namely the contract of sale of the relevant property to Morobe Properties Limited), or the instrument of appointment of the agent for sale of the relevant property, we consider s 16(3) of the Frauds and Limitation Act 1988 irrelevant. In any event, this issue is irrelevant to the question whether the proceedings were vexatious for the purposes of O 12 R 40 (1) of the National Court Rules.

Exhaustion of remedies against Piunde Limited

46. We note the submissions of the lawyer for the appellant raised at the hearing that the appellant had a cause of action against BSP for proceeding against the appellant prior to BSP’s exhaustion of its remedies against Piunde Limited. However, as observed by the Full Court in Iangalio v National Development Bank Ltd [2016] SC1499 at [15], the law is clear that a creditor is not obliged to exhaust all remedies against a debtor before seeking to enforce a guarantee of that debt. The submissions of the appellant to the contrary have no merit.

47. Grounds of appeal 2, 5 and 8 are not substantiated.

Grounds 3 and 4

48. Morobe Properties Limited was named as the fifth defendant in the National Court proceedings, and the fifth respondent to this appeal. Had the appellant been successful against it at first instance, binding orders would have been made against Morobe Properties Limited by the primary Judge. To that extent, Morobe Properties Limited was a party to the proceedings, and entitled to seek dismissal of the substantive proceedings before the primary Judge.

49. The fact that Morobe Properties Limited, or indeed the other respondents, did not file Defences to the appellant’s claim in the National Court in no way prevented them from seeking summary dismissal of the proceedings, and did not preclude the primary Judge from finding that the substantive proceedings were vexatiously instituted. As the Supreme Court observed in Hiwi v Rimua [2015] SC1460:

27. It is argued, through grounds of appeal 7, 8 and 9, that her Honour erred in law by allowing the third defendant (the third respondent, the State) to move its motion for dismissal of the proceedings on the ground that the proceedings were time-barred, even though it had filed no defence, and though the appellant had filed a motion for default judgment which was set to be heard on the same day that her Honour heard the motion for dismissal.
28. We reject this argument for three reasons. First, there is no rule of practice and procedure that prohibits a defendant who has not filed a defence, from moving the Court to dismiss proceedings on the ground that they are time-barred (Waim No 85 Limited v The State (2015) SC1405). The third defendant filed a notice of intention to defend and that was sufficient.
29. Secondly, when a Judge is deciding the order of hearing of competing or alternative motions that have been set down for hearing at the same time, the question of the order in which the motions are heard is a matter of discretion for the Judge. It is a common, proper and sensible practice to hear and determine a motion for dismissal first, because if the motion is upheld (as occurred here) other motions become otiose.
30. Thirdly, though the Supreme Court in Oil Search Limited v Mineral Resources Development Corporation Ltd (2010) SC1022 cautioned against the practice of hearing motions for dismissal of proceedings on the ground that they were time-barred, as distinct from requiring that the issues be pleaded in a defence and argued at trial, the caution was qualified by the proviso that hearing such motions can be justified in clear-cut cases. We consider that this was a clear-cut case and that her Honour exercised the discretion of the Court as to the order of hearing the motions carefully and properly and committed no error. We dismiss grounds of appeal 7, 8 and 9.

(emphasis added)

50. In our view the case before her Honour was a “clear-cut case” for the Court to hear an application for summary dismissal.

51. Grounds of appeal 3 and 4 are not substantiated.

Grounds 10 and 11

52. Grounds 10 and 11 allege error in the costs orders made by the primary Judge.

53. As the Supreme Court noted in National Capital Ltd v Port Moresby Stock Exchange [2010] SC1053, costs are generally a discretionary matter for the National Court.

54. Order 22 r 65 (1) of the National Court Rules empowers the Court to order that a solicitor for a party be personally liable for costs incurred improperly or without reasonable cause, after providing the solicitor with a reasonable opportunity to be heard.

55. As the transcript of the hearing before the primary Judge demonstrates, her Honour had a detailed exchange with the lawyers for the appellant and Morobe Properties Limited in respect of the issue of costs, including the issue of the lawyers personally bearing costs of the proceedings.

56. In her judgment, the primary Judge gave reasons for her decision to order costs against the lawyer for the appellant as well as costs against the appellant.

57. Grounds of appeal 10 and 11 are not substantiated.

CONCLUSION

58. The proper order is that the appeal be dismissed. As only the first, second, third and fourth respondents participated in this appeal, they are entitled to have their costs of and incidental to the appeal paid by the appellant, such costs to be taxed if not otherwise agreed.

59. The Court orders that:

1. The appeal be dismissed.
2. The appellant pay the costs of the first, second, third and fourth respondents of and incidental to this appeal, such costs to be taxed if not otherwise agreed.
   

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Gagma Legal Services: Lawyers for the Appellants
Ashurst PNG: Lawyers for the Respondents