Re JCA Lumber Co (PNG) Ltd

• Jurisdiction: Papua New Guinea
• Judge: Hartshorn J
• Judgment Date: 29 June 2015
• Citation: (2015) N6040
• Court: National Court
• Year: 2015
• Judgement Number: N6040

Full : MP 27 OF 2012; In the matter of the Companies Act 1997 and In the matter of JCA Lumber Co. (PNG) Limited (Company Number 1-29029) (2015) N6040

National Court: Hartshorn J

Judgment Delivered: 29 June 2015

N6040

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

MP 27 OF 2012

IN THE MATTER OF THE

COMPANIES ACT 1997

AND:

IN THE MATTER OF JCA

LUMBER CO. (PNG) LIMITED

(COMPANY NUMBER 1-29029)

Waigani: Hartshorn J.

2014: 9th September

2015: 29th June

Application for Security for Costs

Cases cited:

Papua New Guinea Cases

Yartlett v. New Guinea Motors Ltd [1984] PNGLR 155

Osprey Industries Ltd v. Hallam [1992] PNGLR 537

Odata Ltd v. Ambusa Copra Oil Mill Ltd (2001) N2106

Albright Ltd v. Mekeo Hinterland Holdings Ltd (2013) N5774

Albright v. Mekeo Hinterland Holdings Ltd (2014) SC1400

Overseas Cases

Evans v. Bartlam [1937] AC 473; 2 All ER 646

Gardner v. Jay (1885) 29 Ch 50

P M Sulcs and Assocs P/L v. Daihatsu Aust P/L [No 2] [2000] NSWSC 826

Sir Lindsay Parkinson & Co Ltd v. Triplan Ltd [1973] 2 All ER 273

Counsel:

Mr. J. Books, for the Applicants

Mr. E. G. Andersen and Ms. D. Gavara Nanu, for Messrs Chieng Puong Chin and Tan Lian Kee

29th June, 2015

1. HARTSHORN J: This is a decision on an application for security for costs.

2. Messrs Chieng Puong Chin and Tan Lian Kee, who are two of the respondents in this proceeding (respondents), seek that Messrs Jesus Vincente Magsaysay and Caesar Reyes Guidote (applicants) pay about K40,000 each as security for costs. The applicants oppose the application. There was no appearance on behalf of the other respondents.

3. The application is made pursuant to Order 14 Rule 25 (1) (a) National Court Rules.

Background

4. This matter involves a dispute over the shareholding in JCA Lumber Co. (PNG) Ltd (JCA). The applicants seek amongst others, the rectification of the share register of JCA under the Companies Act 1997.

This application

5. The respondents submit that the applicants should pay security for costs as amongst others:

a) the applicants are ordinarily resident overseas and do not have assets in Papua New Guinea apart from their claim to shares in JCA;

b) the applicants substantive claim is not likely to succeed;

c) the respondents have not contributed to any impecuniosity of the applicants;

d) the amount sought for security for costs is reasonable and will not have the effect of nullifying the proceeding;

e) there is no substantive cross claim in the proceeding;

f) any delay in bringing the application has not caused the applicants to incur further costs in preparing for trial.

6. The applicants submit that amongst others, although the respondents have a prima facie entitlement to an order for security for costs , this court should exercise its discretion and refuse the application as:

a) the application has not been made promptly;

b) the respondents did not seek security for costs when the other respondents successfully did so against the applicants almost 2 years ago;

c) the applicants have been attempting and continue to attempt to resolve or mediate the matter, the respondents have also filed a motion for the matter to be mediated, and the parties have agreed to mediate;

d) there are good prospects that the applicants will succeed in the substantive proceeding;

e) the applicants have already paid money into court as security for costs by virtue of the other respondents successful application almost 2 years ago. If the proposed mediation is unsuccessful those costs may be able to be applied to secure the costs of the respondents;

f) this application is being used oppressively as the respondents are seeking to consolidate this proceeding with complicated fraud proceedings between JCA shareholders but which do not concern the applicants, yet the respondents seek security for costs against the applicants;

g) the evidence of the costs claimed are inflated because of the complications that will result from the consolidation of the fraud related proceedings that do not involve the applicants;

h) if the application for the amount sought is successful, this may have the effect of nullifying the proceeding;

i) the respondents do not come to court with clean hands;

j) the respondents are also resident outside of Papua New Guinea;

k) it is not in the interests of justice to award security for costs in this instance.

Law

7. Order 14 Rule 25 National Court Rules is as follows:

“25. Cases for security. (53/2)

(1)Where in any proceedings, it appears to the Court on the application of a defendant—

(a)that a plaintiff is ordinarily resident outside Papua New Guinea; or

(b)that a plaintiff is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that that plaintiff will be unable to pay the costs of the defendant if ordered to do so; or

(c)subject to Sub-rule (2), that the address of a plaintiff is not stated or is mis-stated in his originating process; or

(d)that a plaintiff has changed his address after the commencement of the proceedings with a view to avoiding the consequences of the proceedings,

the Court may order that plaintiff to give such security as the Court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the security is given.

(2)The Court shall not order a plaintiff to give security by reason only of Sub-rule (1)(c) if it appears to the Court that the failure to state his address or the mis-statement of his address was made without intention to deceive.”

8. There is a discretion given to the court as to whether to give security if the criteria in either (a) – (d) are met. There are numerous cases on a security for costs application in this jurisdiction and the court’s discretion in considering such an application. As an example I refer to Yartlett v. New Guinea Motors Ltd [1984] PNGLR 155. In an application under Order 14 Rule 25 (1) (a), McDermott J followed Sir Lindsay Parkinson & Co Ltd v. Triplan Ltd [1973] 2 All ER 273 at 285, and held that:

“An order for security for costs is within the discretion of the court and all the circumstances of the case must be considered. In determining whether an order for security of costs should be made the following matters, inter alia, may be taken into account:

a) whether the claim is bona fide;

b) whether there is a reasonably good prospect of success;

c) whether there is an admission on the pleadings or elsewhere that money is due;

d) whether money has been paid into account;

e) whether the application for security is being used oppressively;

f) whether want of means has been brought about by any conduct of the parties.”

9. As to the discretion conferred by Order 14 Rule 25 (1), I refer to the following statement that I reproduced in Albright Ltd v. Mekeo Hinterland Holdings Ltd (2013) N5774 at para 21. It is a statement by Bowen LJ in Gardner v. Jay (1885) 29 Ch 50, at p59:

“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?”

10. This statement was also quoted by Lord Wright in the House of Lord’s decision of Evans v. Bartlam [1937] AC 473; 2 All ER 646, and recently in Albright v. Mekeo Hinterland Holdings Ltd (2014) SC1400 at para 29.

11. As there is no indication in Order 14 Rule 25 (1) of the grounds upon which the discretion is to be exercised once the criteria in either (a) – (d) are met, I am of the view that the discretion is unfettered and should be exercised with regard to all of the circumstances of the case.

12. In this instance it is not disputed that the applicants are ordinarily resident outside of Papua New Guinea and so the requirement of Order 14 Rule 25 (1) (a) has been met.

13. The respondents’ first submission is that the applicants’ substantive claim is not likely to succeed although it is conceded that the intent behind the proceeding is bona fide. The applicants though submit that they have a good chance of succeeding. In this regard, I have not heard from the parties witnesses and am not in a position to form a view on the merits. As to how this aspect should be considered, I note the following passage of Kirby J (as he then was) in P M Sulcs and Assocs P/L v. Daihatsu Aust P/L [No 2] [2000] NSWSC 826 as to the approach of Beazley J in K P Cable Investments Pty Ltd v. Meltglow Pty Ltd & Ors [1995] FCA 76, in a case concerning an application for security for costs in which Her Honour:

“……identified as a relevant matter, the strength and bona fides of the plaintiff’s case. Her Honour adopted the observations of French J in Bryan E Fencott & Associates Pty Ltd v. Eratta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497 at 514 when she said this: (at 197)

“As a...