Independent Public Business Corporation (Plaintiff/First Cross Defendant) and Motor Vehicles Insurance Limited (First Defendant/First Cross Claimant/Second Cross Defendant) and Nominees Niugini Limited (Second Defendant/Second Cross Claimant) and National Superannuation Fund Limited (Third Defendant) (2012) N4843

• Jurisdiction: Papua New Guinea
• Judge: Hartshorn J
• Judgment Date: 18 June 2012
• Citation: (2012) N4843
• Docket Number: WS 1252 of 2010
• Court: National Court
• Year: 2012
• Judgement Number: N4843

Full Title: WS 1252 of 2010; Independent Public Business Corporation (Plaintiff/First Cross Defendant) and Motor Vehicles Insurance Limited (First Defendant/First Cross Claimant/Second Cross Defendant) and Nominees Niugini Limited (Second Defendant/Second Cross Claimant) and National Superannuation Fund Limited (Third Defendant) (2012) N4843

National Court: Hartshorn, J

Judgment Delivered: 18 June 2012

N4843

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS 1252 OF 2010

BETWEEN:

INDEPENDENT PUBLIC BUSINESS CORPORATION

Plaintiff/First Cross Defendant

AND:

MOTOR VEHICLES INSURANCE LIMITED

First Defendant/First Cross Claimant/Second Cross Defendant

AND:

NOMINEES NIUGINI LIMITED

Second Defendant/Second Cross Claimant

AND:

NATIONAL SUPERANNUATION FUND LIMITED

Third Defendant

Waigani: Hartshorn, J.

2012: 10th April,

: 18th June

Dismissal Application pursuant to Order 12 Rule 40 National Court Rules

Facts:

This proceeding concerns a loan referred to as an Equity Monetisation Contract (EMC), made by the second defendant Nominees Niugini Ltd (NNL) to the first defendant Motor Vehicles Insurance Ltd (MVIL) in July 2009. The EMC was secured by a mortgage over shares owned by MVIL in Bank of South Pacific Ltd (BSP). The plaintiff Independent Public Business Corporation (IPBC), the majority shareholder of MVIL, claims amongst others, that the EMC and mortgage are void for want of compliance by MVIL, a Majority State Owned Enterprise, with s. 46B Independent Public Business Corporation of Papua New Guinea Act 2002 (IPBC Act) and s. 110 Companies Act 1997, that NNL has been unjustly enriched and that the BSP shares are the subject of a constructive trust for the benefit of MVIL.

Held:

1. There is an arguable case to be determined at trial that IPBC has the necessary standing to seek the relief that it does. The proceeding is not an abuse of process, as alleged by NNL.

2. A reasonable cause of action is disclosed in the pleading concerning whether non compliance with a statutory requirement renders a contract void.

Cases Cited:

Papua New Guinea Cases

Fly River Provincial Government v. Pioneer Health Services Ltd (2003) SC705

Kerry Lerro v. Stagg & Ors (2006) N3050

Takori v.Yagari & Ors (2008) SC905

Mt Hagen Urban Local Level Government v. Sek No. 15 (2009) SC1007

Siu v. Wasime Land Group Incorporated (2011) SC1107

Associated Plumbing Installation Ltd v. Air Niugini Ltd (2011) SC1127

Overseas Cases:

Foss v. Harbottle (1843) 2 Hare 46

Credit Suisse v. Allerdale BC [1996] All ER 129

Counsel:

Mr. E.G. Andersen, for the Plaintiff/First Cross Defendant

Mr. J. A. Griffin QC, for the First Defendant/First Cross Claimant/Second Cross Defendant

Mr. R. J. Webb SC and Mr. G. Geroro, for the Second Defendant /Second Cross Claimant

18th June, 2012

1. HARTSHORN, J: This proceeding concerns a loan referred to as an Equity Monetisation Contract (EMC), made by the second defendant Nominees Niugini Ltd (NNL) to the first defendant Motor Vehicles Insurance Ltd (MVIL) in July 2009. The EMC was secured by a mortgage over shares owned by MVIL in Bank of South Pacific Ltd (BSP). The plaintiff Independent Public Business Corporation (IPBC), the majority shareholder of MVIL, claims amongst others, that the EMC and mortgage are void for want of compliance by MVIL, a Majority State Owned Enterprise, with s. 46B Independent Public Business Corporation of Papua New Guinea Act 2002 (IPBC Act) and s. 110 Companies Act 1997, that NNL has been unjustly enriched and that the BSP shares are the subject of a constructive trust for the benefit of MVIL.

2. NNL now applies to dismiss the proceeding against it pursuant to Order 12 Rule 40 National Court Rules or alternatively that certain paragraphs and the relief claimed against it in the further amended statement of claim, be struck out pursuant to Order 8 Rule 27 National Court Rules as:

a) no reasonable cause of action is disclosed as the proceeding does not disclose any basis upon which IPBC could be entitled to the relief claimed,

b) the proceeding is an abuse of process as the plaintiff does not have the necessary standing to bring the proceeding and seek the relief that it does,

c) IPBC has had an extended opportunity to attempt to cure its pleading by amendment since NNL’s notice of motion was filed and served, but has failed to do so.

3. IPBC opposes NNL’s application and submits amongst others that for NNL to succeed, IPBC’s pleadings must be obviously and incontestably bad and they are not. At best, submits IPBC, there may be legal argument as to the consequences of breaches of s. 46B IPBC Act, s.61 Public Finance Management Act, s. 110 Companies Act and the standing of IPBC.

Law

4. Counsel for NNL and IPBC relied upon the same authorities in respect of the principles which apply to applications under Order 12 Rule 40 and Order 8 Rule 27 National Court Rules: Kerry Lerro v. Stagg & Ors (2006) N3050, Takori v.Yagari & Ors (2008) SC905 and Mt Hagen Urban Local Level Government v. Sek No. 15 (2009) SC1007. Counsel for NNL also relied upon the Supreme Court case of Siu v. Wasime Land Group Incorporated (2011) SC1107 in which the Court at [36] – [37] confirmed that proceedings which do not disclose a reasonable cause of action are necessarily also frivolous, vexatious and an abuse of the process of the Court. The Court in Mount Hagen v. Sek (supra) in paragraphs 27 to 30 conveniently set out the requirements of Order 12 Rule 40 (1) (a), (b) and (c) as follows:

“27. The terms “vexatious”, “frivolous”, “abuse of the process of the Court” and “reasonable cause of action” under O.12 r.40 of the National Court Rules have been judicially considered, defined and expounded in a number of decisions in both the National and Supreme Courts. These cases include Ronny Wabia v. BP Exploration Co. Limited & 2 Others [1998] PNGLR 8 (N1697); PNG Forest Products Pty Ltd and Another v. The State and Genia [1992] PNGLR 85; Gabriel Apio Irafawe v. Yauwe Riyong (1996) N1915; Eliakim Laki and 167 Others v. Maurice Alulaku and Others (2002) N2001; Kiee Toap v. The Independent State of Papua New Guinea & Another (2004) N2766; Kerry Lerro trading as Hulu Hara Investments Limited v. Philip Stagg, Valentine Kambori & The State (2006) N3050; Philip Takori & Others v. Simon Yagari & 2 Others (2008) SC 905. These cases say the same thing.

28. The law with regard to an application for dismissal of proceedings based on O.12 r.40 is settled in our jurisdiction. We note that the principles are succinctly set out in Kerry Lerro’s case (supra) and which has more recently been approved and applied by the Supreme Court in Philip Takori’s case (supra).

29. The phrase ‘disclosing a reasonable cause of action’ consists of two parts; cause of action and form of action. A cause of action is defined as a legal right or form of action known to law whereby a plaintiff in a statement of claim must plead all necessary facts and legal elements or ingredients to establish or prove his claim. The principles stated by these cases can be summarized as follows:

(i) A plaintiff or claimant should not be driven from the judgment seat in a summary manner and that the Court should be cautious and slow in exercising its discretionary power.

(ii) The Court has an inherent jurisdiction to protect and safeguard its processes from abuse.

(iii) The purpose of O.12 r.40, is to give the Court power to terminate actions or claims which are plainly frivolous or vexatious or untenable.

(iv) A frivolous claim is one that is characterized as a claim that is plainly and obviously untenable, that cannot possibly succeed and (is) bound to fail if it proceeds to trial.

(v) A vexatious claim is one that is said to be a sham and cannot succeed where it seeks to merely harass the opposing party and put that party to unnecessary trouble and expense in defending or proving the claim.

30. In an application under O.12 r.40 of the NCR, the Court may dismiss a proceeding or action where it is satisfied that the pleading in the statement of claim is seriously wanting where a necessary fact or legal element has not been pleaded.”

Standing of IPBC

5. NNL submits that as IPBC is not a party to the EMC or the mortgage it has no standing to seek the relief that it does. The relief sought, if available at all can only be sought by MVIL. Further, by seeking the relief as a shareholder of MVIL, IPBC is in breach of the rule in the celebrated case of Foss v. Harbottle (1843) 2 Hare 46, which is that in order to...