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Manorburn Earthmoving Ltd v State (No 2) [2008] PGNC 14; N3287 (25 February 2008)

N3287


PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]


OS 698 OF 2006


MANORBURN EARTHMOVING LIMITED


-V-


THE INDEPENDENT STATE
OF PAPUA NEW GUINEA
(No.2)


Waigani: Kandakasi, J.
2007: 20 August
2008: 25 February


PRACTICE & PROCEDURE – Belated claim of a defence – Issue open to be raised in defence of earlier proceedings – Earlier determination not challenged – Defendant precluded from re-agitating issues.


PRACTICE & PROCEDURE – Proceedings commenced by Originating Summons - Defence to - Claiming a defence without filing a defence and leave of the Court or without affidavit disclosing a defence on the merits – Defendant not at any liberty to raise a defence.


CLAIMS BY AND AGAINST THE STATE – Requirement to give notice – Claim on going – Issue not raised earlier in the proceedings – Separate earlier proceedings issued by the State raising the same issue dismissed – Lack of challenge of - State at no liberty to raise the same issues again.


CONTRACT LAW – Contract with the State – Requirements for tender and approval under the Public Finance Management Act 1998 – Appropriate time to raise issues – State required to raise the issues as soon as a claim is made to enforce a contract – State choosing to reach agreement – Effect of – State issuing fresh proceedings seeking to nullify the deed of release – Proceedings dismissed for want of prosecution – No appeal of proper challenge against the dismissal – Effect of – State precluded from raising the issues it should have raised in its proceedings and before reaching entering into the agreement.


JUDGMENTS AND ORDERS – Judgment and orders – Public policy requires finality in litigation – All available issues must be raised when the opportunity is first presented – Failure to do so – Effect of – Party precluded from raising and re-agitating the issues.


Cases Cited:


Papua New Guinea Cases:


The State v. Zacchary Gelu, Solicitor-General and Manoburn Earthmoving Limited (2003) SC716.
Motor Vehicles Insurance (PNG) Trust v. James Pupune [1993] PNGLR 370.
National Capital District Commission v Yama Security Services Pty Limited (2003) SC707.
Richard Dennis Wallbank and Jeanette Minifie v. The Independent State of Papua New Guinea [1994] PNGLR 78.
Motor Vehicles Insurance (PNG) Trust v. Kulubala Salem [1991] PNGLR 305.
The State & 3 Others v Brian Josiah and 80 Others (2005) SC792.
National Capital District Commission v Yama Security Services Limited (2005) SC835.
Fly River Provincial Government v. Pioneer Health Services Limited (24/03/03) SC705. The Independent State of Papua New Guinea v. Barclay Brothers (PNG) Limited, SCA 62 and 63 of 2001 (delivered on 31/12/02).


Overseas Cases Cited:


R. v. Coney [1882] UKLawRpKQB 30; (1882) 8 Q.B.D. 534.


Counsels:


Mr. K. Kua, for the Defendant/Applicant.
Ms. E. Suelep, for Plaintiff/Respondent.


25 February, 2008


1. KANDAKASI J: This case has quite a history. The State decided to settle by way of a Deed of Release dated 31 July 2002 ("the Deed"), Court proceedings issued against it by Manorburn Earth Moving Limited (the Company) claiming, damages for breach of a services contract. Pursuant to the Deed, the State made part payment while the company discontinued its proceedings. Later, the State however, changed its mind and took out Court proceedings seeking a declaration that the Deed is invalid on the basis of fraud and a failure to meet tender and approval requirements under sections 59 and 61 of the Public Finances (Management) Act 1995, failure to meet the notice requirements under the Claims By and Against the State 1996 and the Attorney General’s approval and or signature pursuant to the decision of the Supreme Court in The State v. Zacchary Gelu, Solicitor-General and Manorburn Earthmoving Limited.[1] For reasons only known to the State, it failed to prosecute those proceedings by reason of which, the proceedings got dismissed. Following that, the Company issued these proceedings.


2. These proceedings seek a declaration that the Deed is valid and an order that the State pay the balance of what is due and owing to it under the Deed. Without formally taking any step to protect its interest, the State belatedly at the trial of this matter, raised issues raised in its own earlier proceedings which were dismissed. Effectively, the State seeks a declaration that the Deed is invalid and tried to lead evidence from the bar table by Counsel for the State Mr. Kua. Mr. Kua also objected to Annexure B to an affidavit sworn by Mr. Mirupasi on 27th and filed on 28 September 2007 which was admitted into evidence in these proceedings. The company’s response is that, the State is precluded from raising these issues given the history of the case and the State’s failure to plead the issues it is now taking without any leave of the Court.


The Issue


  1. Clearly, there are two main but inter related issues for this Court to consider and determine. The first is, whether the State is at any liberty to challenge the validity of the Deed? The second is, whether there is any impediment to a grant of the orders the Company is seeking? A determination of the first issue will form the foundation for a determination of the second issue. For a proper determination of these issues, it will be necessary to consider and determine:

Evidence and Facts


  1. In order to give proper context to the issues presented and to have proper understanding and arrive at a considered decision, it is necessary to consider the relevant facts from the evidence before the Court. The relevant evidence is from the affidavit of Mr. Vincent Mirupasi sworn on 27 September 2007 and filed on 28 September 2007. That is the only evidence before the Court. The affidavit was filed and served with notice of an intention to use it long before the trial. The State did not give notice of any objection to the use of that affidavit as required by s. 35 (2) of the Evidence Act.[3] Consequentially, the State was in no position then and now to object to an admission into evidence of that affidavit. Despite that, the State objected to Annexure B of Mr. Mirupasi’s affidavit. Annexure B is a copy of the Deed signed by both parties on 31 July 2002. The basis for the objection was that, Mr. Mirupasi was not the author of the document and also not a party to the document.
  2. I am disinclined to upholding the State’s objection for two reasons. First, s. 35 (2) of the Evidence Act precludes the State from taking the objection because it failed to give notice as required by that provision following the service of the affidavit and notice of the company’s desire to use the affidavit at the trial. Secondly, Annexure B has Mr. Mirupasi’s signature on it and as a witness to its execution. In his affidavit, Mr. Mirupasi states that, he is the principle of the firm of Mirupasi Lawyers and that he is conversant and familiar with the background and the matters giving rise to these proceedings. Also he says, he is familiar with all of the documentation and the issues relating to this matter. I contrast this case, with a person who knows nothing about a document and seeks to have it tendered into evidence.
  3. Proceeding then on the basis of the affidavit of Mr. Mirupasi, I find that the Company is involved in a road construction and maintenance business based in Popondetta. The Company issued proceedings under WS. No. 285 of 2000 on 16 March 2000, claiming damages for unpaid invoices, for road works, loss of business, breach of contract, interests and costs against the State. The State failed to file and serve its defence to the claim. That resulted in an entry of default judgment with damages to be assessed on 21 August 2000.
  4. The State appears to have accepted the default judgment confirmed by its decision to enter into out of court settlement negotiations with the Company on the Company’s damages rather than take steps to have the default judgment set aside and or appealed against. The negotiations resulted in an agreement between the parties on 31 July 2002. In that agreement, the State agreed to pay K8.6 million and the parties executed the Deed, a copy of which is Annexure B to Mr. Mirupasi’s affidavit.
  5. Proceeding on the basis of the Deed, the Company filed on 9 August 2002, a Notice of Discontinuance signed by both parties. In return and again in accordance with the terms of the Deed, the State made a part payment of K4 million, out of which the Company placed K1 million with the Central Bank in Treasury Bills.
  6. Subsequently, the State instructed Posman Kua Aisi who filed proceedings under WS. No. 1343 of 2002 challenging the validity of the Deed. In view of those proceedings, and by consent of the parties, the Court ordered the K1 million in Treasury Bills to remain and be paid to the party which eventually becomes entitled to those funds on the conclusion of the proceedings under WS No. 1343 of 2002.
  7. Thereafter, the parties went to and from the Supreme and National Courts on a number of issues over a period of time. A considerable period of time then passed with the State doing nothing about its claim under WS No. 1343 of 2002. This caused the Company to successfully apply for a dismissal of the proceedings for want of prosecution, which was granted on 7 April 2006. Sometime later, a directive was issued by the Ombudsman Commission to the Central Bank not to release the K1 million.
  8. On 17 July 2006, the Company issued proceedings seeking declaratory and directive orders against the Central Bank for a release of its K1 million together with interest accrued on it. The Company also sought orders against the Ombudsman Commission to lift its directive. However, a subsequent decision by the Ombudsman Commission to lift its directive on 1 September 2006 made the last relief sought unnecessary. Following that, the Court on 4 September 2006, entered orders for the monies held at the Central Bank, together with interests, to be paid to the Company.
  9. Mr. Mirupasi says in his affidavit that, in the absence of a Court order declaring the Deed to be invalid, for all intents and purposes, there is a valid Deed on foot which has been part performed. He says further that, there is no further challenge to this Deed and neither is there any directive issued by the Ombudsman Commission on foot. The only impediment he says as against a full satisfaction of the balance of what the State agreed to pay is that the Secretary for Finance is continuing to ask for clearance from the Attorney General, who is either refusing or failing to perform her functions to advise the Secretary for Finance on the validity or otherwise of the Deed.

First Issue: Whether the State is at Liberty to Challenge the Validity of the Deed of Release


  1. With these facts in mind, I now turn firstly to the issue of the State failing to register its response to these proceedings and the consequence following that. This issue affects the State’s argument centred around the provisions of s. 5 of the Claims By and Against the State Act 1996; s.59 and s.61 of the Public Finances (Management) Act 1995 and the decision of the Supreme Court in The State v. Zacchary Gelu, Solicitor-General and Manorburn Earthmoving Limited.[4] This, as of necessity requires an examination of what the State did or did not do in relation to those aspects. It also requires a consideration of the background leading to the execution of the Deed. I will therefore, start with a consideration of the latter aspect first.
  2. Appreciating that, the Company commenced its proceedings by Originating Summons, I note that, strictly speaking, pleadings are not common place in proceedings commenced by such mode of proceedings unless, required by direction of the Court under O 4 r 31. It is trite law that, except for any expressed exception in the rules, Originating Summons as a mode of commencing proceedings before the Court is available only in simple or straight forward matters and are not for matters in which there are serious contentions either on the facts or the law, which require proper pleading with discoveries and interrogatories to help crystallize the issues for determination. Given that, there is no requirement for a plaintiff to plead as in proceedings commenced by Writs of Summons. It would follow then that, a defendant to such proceedings is under no obligation to file pleadings stating his or her defence, unless the defendant is desirous of seeking a countering relief.
  3. Order 4 r34, obligates a defendant to give notice of any "cross-claim for any relief" it may wish to claim against the plaintiff. What could amount to "any relief" within the meaning of the rule may vary. I note that the rule does not limit the list. In the absence of any clear suggestion to the contrary, I am of the view that, this could mean any relief other than what the plaintiff may be seeking, which could include an order or relief which is the direct opposite of what the plaintiff may be seeking.
  4. The notice spoken of in O 4 r 34 cannot be given as of right. Instead, it must be with leave of the Court and at the earliest opportunity possible. I am of the view that the draftsman made no mistake in including this provision. The reason for this is self evident. Seeking any relief away from the ones sought by a plaintiff has the potential of complicating either the facts or the legal issues involved and hence the requirement for leave of the Court before proceeding with a cross-claim. It is thus, necessary for the Court to consider the nature of the relief to be sought, the basis for that and the complexity of the issues it presents, the level of time and attention required of the Court and the parties to properly consider the issues raised and for the Court to come to a determination. Then in due consideration of these factors, the Court has to decide whether the proceedings should continue as they are or should they be converted to proceed by way of pleadings. This is a necessary and critical requirement, if the Court is to properly consider the issues presented and come to a well considered decision. A clear and proper understanding of the issues presented and their factual or legal foundation is critical to arriving at such a decision. If a defendant was at liberty as in the case of proceedings commenced by writ of summons, it would bring into what is otherwise intended to be a simple and expeditious process, much complication confusion and delay in and arriving at of decisions and render the difference between the two main modes of commencing proceedings, Writ of Summons and Originating Summons meaningless.
  5. Given the importance of the requirements of the rule under consideration, the requirement for a defendant to apply for leave of the Court to cross-claim is important. The sooner a defendant makes such an application, the sooner it enables both the plaintiff and the Court to be aware of the defendant’s response to the claim and the kind of issues the proceedings are likely to raise. It would also enable the parties and the Court to work out the level of time and effort required for preparation, hearing and conclusion of the matter. No doubt, this is in keeping with one of the most cardinal principles in our system of justice. That principle is, in fairness, all the parties to any proceedings before the Court must take all steps necessary expeditiously to avoid any trial by ambush by laying all of their cards on the table so to speak, in terms of outlining their position earlier on in the proceedings. That in turn enables the parties and the Court to avoid the outlaying of substantial time and costs which could have been avoided or minimized. A failure to do so attracts adverse consequences against a party in default in terms of precluding such a party from raising issues or taking a point that party should have been taken earlier.
  6. In this case, the State is arguing for a dismissal of the Company’s claim and effectively a declaration that the Deed is invalid and therefore unenforceable on the basis of lack of s. 5 of the Claims by and Against the State Act notice, lack of meeting the requirements under s.59 and s.61 of the Public Finances (Management) Act and the Attorney General not executing the Deed. It appears obvious to me that, the State is asking for a relief other than the one the Company is seeking. Going by the provisions of O 4 r 34 as I have just discussed above, I am of the view that, the State is in no position to ask for the kind of relief it is belatedly seeking, without first seeking and securing the leave of the Court.
  7. Apart from not seeking leave of the Court in terms of O 4 r 34, there is the additional problem of the State failing to notify the Company earlier on in the proceedings that it was taking these issues. Although not specifically applying to proceedings commenced by Originating Summons, we have provisions in the rules of the Court that require a defendant or a party entering into subsequent pleading to specifically plead any matter say for instance, statutory limitations, fraud or any fact showing illegality that would render the other party’s claims unsustainable. Here, I am speaking in terms of Order 8 r 14. That provision reads:

"14. Matters for specific pleading. (15/13)


In a defence or subsequent pleading the party pleading shall plead specifically any matter, for example, performance, release, any statute of limitation, fraud, or any fact showing illegality—


(a) which he alleges makes any claim, defence or other case of the opposite party not maintainable; or


(b) which, if not pleaded specifically, may take the opposite party by surprise; or


(c) which raises matters of fact not arising out of the preceding pleadings."


  1. As could easily be seen from this provision, the intent of this provision is to ensure two things. The first is to ensure that a party entitled to a statutory or other defence that would render his opponent’s claim unsustainable to plead it. Secondly, it is intended to ensure that the other party is notified of the existence of such a defence earlier. The reason for this is simply to avoid surprises and to ensure all of the issues that need to be raised are raised long before a matter gets progressed to trial. An early notification of one’s response to a claim enables the other party to reconsider his claim and if need be, withdraw his claim or otherwise, narrow down the issues for trial.
  2. Whilst I appreciate that strictly speaking, this applies to proceedings commenced by Writs of Summons, the principles this rule stands for are of universal application and is very basic to administration and doing of justice. The requirement is to ensure fair play for all the parties in a matter before the Court. Under our system of justice, there can be no trial by ambush or by surprises. Raising new issues in response to proceedings commenced by originating summons has the potential of complicating the proceedings, hence the requirements of O 4 r 34 and the need for the Court to consider the appropriateness of continuing as an Originating Summons process or have them converted and continue by way of pleadings. Accordingly, I am of the view that, a party responding to proceedings commenced by Originating Summons must indicate his or her position earlier on in the proceedings, especially if what he or she is wishing to raise will prevent the Court from granting the relief the plaintiff is seeking or form the foundation for the grant of a relief opposite to what the plaintiff may be seeking. A failure to do so should result in the same consequence that follows a party who fails to plead. The consequence is usually preclusion from raising the issue at the trial and succeeding on it.[5]
  3. In the case now before me, a successful raising of any of the issues the State is raising without first securing the leave of the Court to do so, has the potential of rendering the Company’s proceedings unsustainable and entitle the State to a relief opposite to the ones the Company is seeking. In fairness therefore, the State should have put the Company on notice before the matter was progressed to trial. The State did not do that even up to the point of status conference and a number of mentions before me. For no apparent and good reason, the State raised these issues at the trial, after I decided against its application for a vacation of the trial for the reasons I published in the decision I delivered on 28 August 2007.
  4. As already noted, this case concerns a Deed compromising an earlier Court action. The Supreme Court had such a case before it in the case of National Capital District Commission v. Yama Security Services Pty Limited.[6] What Injia DCJ said there is relevant for our purpose. There, His Honour said:

"Generally speaking, in cases where parties have reached a genuine settlement in a pending proceeding, courts should give due recognition and respect to such settlement. The court should not interfere with the compromise except in unusual or exceptional circumstances. Such exceptional circumstances are many and vary from case to case and it is not practical for me to provide an exhaustive list. I can give a few examples. These include the very situation such as in the present case, where a party disputes the validity or enforceability of the compromise on substantive grounds such as fraud, misrepresentation, illegality, or mistake as to the nature and extent of authority of representatives of a public authority. The court would usually rely on the parties to plead the compromise and the defences. In some cases, the court on its own initiative may detect fundamental flaws in the compromise in respect of any of these aspects. In these kind of cases, it is only proper for the court to require the parties to adopt the appropriate procedure to enable the plaintiff to plead the relevant circumstances and relief sought under the compromise and for the defendant to plead the appropriate defence. The case then advances to a full trial on the merits in which the parties call all available evidence. The court should then be able to determine the merits of the issues raised in the trial."


  1. With most of these, I agree but I beg to differ and say that the basis on which the Court can interfere with the agreement of parties resulting a resolution of pending Court proceedings is the same as the basis on which a contract can be interfered with, such as fraud and or misrepresentation which are well settled in our jurisdiction. However, the Courts should never lose sight of the emphasis these days both within our jurisdiction and the world over. The emphasis is on the parties to a dispute, resolving their disputes through alternative dispute resolutions (ADR) processes and the Courts actively encouraging the parties to have their disputes resolved through out of Court settlement negotiations. Hence, the Court should be very slow to interfering with the free agreement of the parties and has to proceed very cautiously and only in the clearest of cases.
  2. I also add that a party which wishes to opt out of a deed or agreement must make that known without unnecessary delay. Where Court proceedings have been issued by one of the parties seeking an enforcement of the agreement, the other party if is opposing the enforcement of the agreement, that party must make that clear earlier on in the proceedings. That party must do so with a clear statement of the grounds for his or her opposition. This is necessary so that, the Court can consider the issues raised and issue appropriate directions or orders to enable a proper trial when all the issues are crystallized. Where a party by its own conduct fails to raise the issues well before a matter is listed for trial and before the actual trial, or has had the opportunity to raise the issues it seeks to raise as against such agreements but has not, such a party should be precluded from readily raising such issues at the trial because of the need to protect the free agreement of the parties and to enable and encourage other litigants to have confidence in their own resolution of their conflicts without fear of their agreements being readily undone by the Courts.
  3. The decision of the Supreme Court in the NCDC case, also noted per Injia DCJ that the correct mode to challenge a deed compromising Court proceedings is by Writ of Summons so that proper pleadings can be entered into before there can be a trial and determination of a validity of such a deed. In this case, the plaintiff is saying, there is no impediment to enforcing the Deed. It is the State which is belatedly claiming that the Deed is not valid for the reasons it advances. It follows therefore that, the issues the State is raising requires pleadings to get to the relief it is claiming. This cannot happen as of right but only with leave of the Court under O 4 r 34, which leave, the State has not sought. In all of the circumstances, I find that the State by its own conduct precluded itself from raising any of these issues. Accordingly, I am of the view that, the State is at no liberty to raise these issues now.
  4. There is in my view, a further reason that and precludes the State from raising the issues it tried to raise before me at the trial. In its own proceedings under WS No. 1343 of 2002, the State sought to have the Deed declared null and void on the very basis and or the issues it is now raising before me. Those proceedings were dismissed on account of the State’s own unexplained failure to prosecute those proceedings. The State did nothing about that decision. For all that we know and in the absence of any clear explanation formally before the Court from the State to the contrary, I find that the State has accepted the correctness of the dismissal of the proceedings and consequently an end of the basis and the issues that were raised in those proceedings. That left no impediment for the State to pay the balance of what was due to the Company on the Deed, but the State did not. Hence, the State did not completely discharge its obligations under the Deed. Consequential on that, the Company issued these proceedings to compel the State to do what it agreed to do under the Deed. As noted, the State did not raise any issue against these proceedings until very belatedly at the trial.
  5. There is a well accepted principle the world over that there must be finality in litigation, for they cannot go on forever. The decision of the Supreme Court in Richard Dennis Wallbank and Jeanette Minifie v. The Independent State of Papua New Guinea [1994] PNGLR 78, in the context of re-opening a case on the basis of what has become known as the "slip rule" after stating a number of examples made that clear when it said:

"... However, it must be emphasized that the jurisdiction is not to be exercised for the purpose of re-agitating arguments already considered by the Court, nor is to be exercised simply because the party seeking a rehearing has failed to present the argument in all its aspects or as well as it might have been put. What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and a misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing. The purpose of the jurisdiction is not to provide, a backdoor method by which unsuccessful litigants can seek to re-argue their cases."

(Emphasis supplied)


29. The State was in charge of its proceedings under WS No. 1343 of 2002. It chose not to pursue those proceedings and lost interest in those proceedings and failed to prosecute them with due diligence. That resulted in a dismissal of the proceedings on the application of the Company. The State had the option of appealing against that decision or take such other steps that may have been open to it without further delay but it did not. Now in the light of proceedings issue by the Company seeking orders to effectively enforce the Deed, the State is trying to re-agitate the issues that were concluded with the dismissal of the proceedings under WS No. 1343 of 2002 and the State took no further issue. Neither the Court nor the Company did anything to contribute to the dismissal of those proceedings and the State’s failure to take remedial action. In the circumstances, I am of the view that, the State is at no liberty to re-agitate the issues it chose to let die with the dismissal of the proceedings under WS No. 1343 of 2002.


  1. If I was wrong in arriving at the above views and findings (which I say am not), I am not persuaded on the merits of the issues the State is raising. I have arrived at that view for three reasons. First, I note that the State neither sought nor did it call any evidence either in the form of affidavits or oral testimonies. Hence, there is no factual foundation for any of the issues raised before me at the trial and more specifically during submissions. Consequently, I find the State has failed to establish by appropriate evidence that, the Company failed to give notice of its intention to make its claim against the State under s. 5 of the Claims by and Against the State Act. Similarly, I find that the State has failed to establish by appropriate evidence that, the Company failed to comply with the requirements of the Public Finances (Management) Act. The same goes for the State’s claim regarding the lack of signature or approval from the Attorney General.
  2. Secondly, even if the kind of evidence the State should have produced were before me, I am of the view that the State is at no liberty to raise them initially for the reasons I have earlier given and secondly for the reason I am shortly to provide. The Company did not issue these proceedings out of the blues or without a history. In terms of formal Court proceedings, it all started with the Company issuing its proceedings under WS. No. 285 of 2000 on 16 March 2000. Going by the fact that the State decided to have those proceedings resolving by entering into the Deed, I find that the State took no issue in relation to s. 5 of the Claims by and Against the State Act or the requirements under the Public Finances (Management) Act. If it is genuinely raising these issues, the issues were always there prior to and at the time of executing the Deed and so it should have declined to enter into the agreement but it did not.
  3. There can be no argument for a fresh notice to be given in respect of the Company’s claim based on Deed, even though the Deed is a separate agreement. The main reason for this is because, this is not a new claim but it does relate to the original claim in respect of which the issue of notice of intention to make a claim did not arise. Also the State can not deny notice and say at the same time that it knows what the claim is for and raise the other issues it is trying to raise, because obviously, the State is effectively confirming its knowledge of this claim. The State should not be taking the notice issue because, it part paid on the Deed and then issued its own proceedings seeking to have the Deed declared null and void which got dismissed, following which the Company repeatedly asked the State to pay the balance due and owing under the Deed but it refused to do so which caused the Company to come to Court with the full knowledge of the State for the kind of relief the Company is seeking. The State was kept informed of what was happening to the proceedings up to the date of trial.
  4. On the basis of the Deed, the State benefited in that, it caused the Company to discontinue the proceedings. It also benefited in terms of saving the costs of going to trial and any interest that may have been forced on due to a possible prolonged Court battle, which is all too common before the National Court these days under the proceedings that were discontinued. Having benefited in that way, Mr. Kua for the State admits that, if the State succeeds in its arguments before me and the proceedings gets dismissed with a declaration that the Deed is null and void and hence unenforceable, the Company will be left with no recourse, let alone a reactivation of its proceedings that were discontinued on the basis of the Deed. Obviously, Mr. Kua is happy to let the State gain at the expense of the Company.
  5. The position Mr. Kua is taking ignores the very foundation of justice in our country and in any working and living democracy in the world. Justice is a two edge sword and has to be applied with the same standard and measure regardless of who is before the Courts which administer justice under our Constitution. The Courts are under a duty to ensure not only that justice is done but must be seen to be done in the eyes of all parties before it and other on lookers or observers. What Mr. Kua is effectively arguing for and if the Court upholds those arguments, it will give license to the State to come through one of its servants or agents and deliberately fail to raise issues it should raise in its defence of any proceedings against it, get a plaintiff to withdraw his or her proceedings under a deed of release or an agreement with a promise for the State to pay the plaintiff. Then once the plaintiff has withdrawn his proceedings, the State could simply walk away with no consequence against it, from its obligation under its deed of release or agreement on the basis of an issue it should have raised in its defence of the proceedings or during the negotiation leading to the deed or agreement compromising the Court proceedings but it did not due to no fault of the plaintiff or the Court.
  6. Can the Court uphold such an out come through the kind of arguments the State is raising? Is it just and fair? Would justice be done and seen to be done? The answer to all of these questions is in the negative. What Mr. Kua is arguing for is for the Court do justice only through the eyes of the State without having any regard to the State’s own conduct which has a trail of failures and conduct unbecoming of the State despite it being the protector of the rights of its citizens and residences, both corporate and private individuals alike in a democracy such as ours. Anyone in the position of the Company or a reasonable and fair minded bystander fully viewing the conduct of the parties and in particular that of the State in this case, would quite rightly view the position the State is taking as most unfair and if the Court upholds the submissions of the State, it would amount to a one sided affair with justice not seen to be done fairly and fully taking into account the conduct of all parties.
  7. Case law in our country and jurisdictions similar to ours is loaded with a party not being allowed to gain from his or her own failures. For example in Motor Vehicles Insurance (PNG) Trust v. Kulubala Salem,[7] the National Court restated the well accepted principle at common law that a lawyer is deemed to have his client’s instructions when communicating with other parties or making representations in Court. As such a party can not later hark back at his lawyer’s lack of instructions and succeed on it. On the other hand, there is nothing, or if there is, the State has not drawn to my attention any authority that demonstrates a party not in fault being caused to suffer consequences not of his or her own making. Considering all of these, I am not prepared to allow what the State is arguing for in the interest of doing justice fairly to all parties whether the State is a party or not.
  8. Additionally and in regard to the s. 5 of the Claims By and Against the State Act issue, I note that, the Supreme and National Courts have on many occasions declined belated applications seeking to dismiss proceedings against the State for lack of compliance of the requirements of that provision. The main reasoning behind these decisions has been the principles codified in O 8 r 14 as I have discussed above particularly where the State as a defendant fails to raise the non compliance of the requirements for notice earlier on in proceedings against it. The Supreme Court confirmed this position in its decision in The State & 3 Others v Brian Josiah and 80 Others,[8] in the context of an argument that the National Court failed to take into account the provisions in question. There the Court said:

"Whilst we accept the requirement to give notice of intention to make a claim against the State to be mandatory, we do not consider that the learned trial judge made any error in that regard for the simple reason that it was for the appellant to have raised the issue through the pleadings. The Appellant failed to do so even though it had had more than ample opportunity to have done so. The first opportunity was during the ordinary course of pleadings after the writ was served on it through the office of the Solicitor General and secondly, after an extension of time of 7 days was granted to it by Kandakasi J. It cannot now complain that the learned trial judge failed to properly consider the provisions of that Act."


  1. What this effectively means is that, the State by its own conduct estopped itself from raising the issues again after choosing to enter into the Deed without raising the issue. Procedurally speaking, the same position applies against the State’s other arguments based on s. 59 and s.61 of the Public Finances (Management) Act 1995 and the decision of the Supreme Court in The State v Zacchary Gelu, Solicitor-General and Manoburn Earthmoving Limited.[9] On the merits however, it is necessary to note what exactly the provisions in question say. This leads me to my third reason to find that the State’s arguments can not be sustained.
  2. Sections 59 and 61 of the Public Finances (Management) Act 1995 read as follows:

"59. Contracts for works and services.


(1) Subject to Subsection (2), tenders shall be publicly invited and contracts taken by a public body to which this Act applies for all works, supplies and services the estimated cost of which exceeds such sum as is specified in its constituent law or declared by the Minister.


(2) Subsection (1) does not apply to any works, supplies and services—


(a) that are to be executed, furnished or performed by the State, or an arm, agent or instrumentality of the State approved by the Minister for the purposes of this subsection; or


(b) in respect of which the public body certifies that the inviting of tenders is impracticable or inexpedient."

...

"61. Approval required for certain contracts.


(1) The provisions of this section apply to and in respect of all public bodies notwithstanding any provision to the contrary in any other law and notwithstanding and without regard to any exceptions, limitations, conditions, additions or modifications contained in any other law.


(2) Subject to Subsection (3), a public body shall not, except with the approval of the Minister, enter into a contract involving the payment or receipt of an amount, or of property to a value, (or both) exceeding—


(a) K100,000.00; or

(b) in the case of a public body declared by the Head of State, acting on advice, by notice in the National Gazette, to be a public body to which this paragraph applies—K500,000.00.


(3) The provisions of Subsection (2) do not apply to a contract relating to investment by a public body (including a subsidiary corporation) the subject of a declaration under Section 57(3)."


  1. It is clear to me that s. 59 applies to all works, goods and services contracts, the considerations of which, exceeds the amounts prescribed in their enabling legislation or as may be declared by the Minister for Finance. It is also clear to me that, s. 61 apply to all other contracts not covered by s. 59. This is understandable. Section 61 could not be possibly requiring a contract for works, goods and services already covered under s. 59 and screened through the public tender process to be also covered under s. 61. The Supreme Court decision in National Capital District Commission v Yama Security Services Pty Limited,[10] and its later decision in National Capital District Commission v. Yama Security Services Limited,[11] took a similar view though not expressly. This is evident from its decision that a deed of release compromising court proceedings is a separate contract caught by s. 61.
  2. The Supreme Court in the above cases had regard to its decision in Fly River Provincial Government v. Pioneer Health Services Limited[12] and The Independent State of Papua New Guinea v. Barclay Brothers (PNG) Limited.[13] I was a member of the Court in both cases. As far as I can recall and as far as I can gather from the judgments, I note in the first case that there was no argument as to the relevance and application of these provisions to a contract for the provision of health services in the Western Province. The main argument centred on the effect of a non compliance of the requirements of these provisions in view of the parties taking no issue on these provisions’ application to the contract in that case. The Court held that a non compliance of these provisions rendered the contract in that case null and void and therefore unenforceable.
  3. In relation to the second case, there was an argument as to its application but dependant on the identity and capacity of the party contracting with the Barclay Brothers (PNG) Limited. Barclay Brothers (PNG) Limited argued that, it contract with a non State entity. Therefore, its argument was that, the provisions of s. 59 and s.61 did not apply to its contract by reason of which, it did not see to a compliance of the requirements of the provisions in question. The State however, argued that, even though the party that actually contracted with Barclay Brothers (PNG) Limited was incorporated under the Companies Act, it was nevertheless an entity of the State because that entity’s funding and its control was with the State by reason of which, the provisions in question applied. Initially, the National Court accepted that argument and the Supreme Court on appeal endorsed it. Then having found that, the provisions were applicable, the Court proceeded without much of an argument on the kinds of contract covered by the provisions in question and declared that the contract in that case was null and void and therefore unenforceable.
  4. In both cases, the issues built around s.59 and s.61 arose at the time when the respective private contracting parties sought to enforce their respective contracts against the state, following alleged breaches by the State of their respective contracts. The situation is not the same in the present case.
  5. In the present case, the Company initially issued proceedings suing for damages for breach of its contract with the State. The State had the opportunity in its defence of those proceedings to raise the lack of compliance of the requirements for notice under s. 5 of the Claims By and Against the State Act and the requirements for public tender and Minister for Finances’ approval under s.59 and s. 61 respectively. It chose not to do that. Instead, the State decided to have the matter settled out of Court and executed the Deed. Then on the basis of the Deed, the parties took various steps including a discontinuance of the Company’s then proceedings and the State making part payment of the agreed damages. Later however, the State changed its position and issued proceeds questioning the validity of the Deed, based on some of the very grounds that were available to it at the time of negotiation and conclusion of the Deed. The failure to raise those grounds and instead enter into the agreement to settle the claim by way of the Deed clearly demonstrated in my view, the fact that the State was not taking those points up and instead it was happy to enter into settlement negotiations and have the matter settled through the Deed.
  6. The only new issue it could raise and did raise was the lack of signature or approval of the Deed by the Attorney General and its claim of fraud leading to the Deed. The State did not pursue its proceedings and instead allowed them to be dismissed for want of prosecution, an outcome it did not challenge in any manner or form. Then only when the Company sought to enforce the Deed, the State belatedly and at the trial raised the same issues it failed to raise at the time of entering into settlement negotiations and later in the proceedings it issued but dismissed on account of its own failure to pursue them. I have already expressed the view that, by its own conduct the State shut itself out from further litigating on the very issues that were put to an end with the entering into of the Deed and the dismissal of its proceedings under WS No. 1343 of 2002, by reason of which the State is at no liberty to re-agitate the same issues.
  7. The factors just stated distinguish this case from the Yama Group of Companies (supra) cases. Nevertheless, the present case is similar to the Yama Group of Companies (supra) cases. These cases, gave the Supreme Court and before that, the National Court the opportunity to consider the question of whether a contract that is already subjected to the public tender requirements under s. 59 are further obliged to meet the requirements for a second and additional consideration and approval under s. 61? These cases also gave the Courts the opportunity to consider another related and an important question. That is the question of whether the State is entitled to question the validity of a Deed of release on the basis of the process leading to the Deed not meeting the requirements of s.59 and s.61 and if I may also add, s. 5 of the Claims by and Against the State Act, which defences were open to the State to take at the time of compromising earlier Court proceedings under a Deed of release but it chose not to? Closely related to that, is the other question in the public interest of ensuring finality in litigation, whether the State can re-agitate an issue it should have raised and have resolved in its earlier proceedings before entering into settlement negotiations and compromising the earlier proceedings? These are important questions that require a careful consideration and determination by the Courts.
  8. With the greatest respect, I note that the Supreme Court in both of the decisions in the Yama Group of Companies (supra) cases did not specifically raise and deal with the questions, I have just stated above. The failure of the Supreme Court to raise those issues and address them unfortunately, in my view, with respect, caused the Supreme Court not to properly consider those issues. The National Court decision in the second of the two of the Yama Group of Companies (supra) cases, did specifically address the first issue I raised in the foregoing. There the National Court per Sevua J., took the view that s.59 and s.61 should be read as one. His Honour proceeding on that basis held that, the time to raise the non compliance of these provisions is when a private contractor such as the Yama Group of Companies in that case, issues proceedings seeking to enforce a contract for goods, services or works and not after a Deed compromising such proceedings have been arrived at.
  9. The Supreme Court was of the view that the learned trial judge in that case misconceived the law and in particular the decision of the Supreme Court in Pioneer Health Services Limited case and the Barclay Brothers (PNG) Limited case. But with respect as I have noted, the Supreme Court in neither of those cases specifically or impliedly had the issue before it. Consequently, the Court in those cases, did not in fact consider the issue at hand and arrive at a decision that clearly states that, the provisions of s. 61 still applies even if the contract has already been subjected to the public tender requirements under s. 59 despite nothing in these provisions specifically making such an intention clear. With respect, I find that the Supreme Court in both of the Yama Group of Companies (supra) cases, merely proceeded on the assumption that the decisions in the Pioneer Health Services Limited and Barclay Brothers (PNG) Limited cases already decided the issue when in fact they did not. That prevented the Supreme Court from considering the issues I have raised on their merits. If it did, I am of the view that the Court could have arrived at the view as my brother Sevua J., had and I have that, there is no need for a contract already subjected to the public tender requirements under s. 59 to be subjected to the further and additional requirements under s. 61 which clearly applies to other contracts that have not been subjected to the requirements under s. 59.
  10. Whilst I agree with the Supreme Court’s view in both of the Yama Group of Companies (supra) cases that, a deed compromising a court action is a separate contract on its own, one must not ignore its genesis. Nothing exists in isolation or comes into existence out of the blues or out of no where. Justice cannot be served on a piece meal basis but on the overall and general scheme of what is in issue, so that an issue is resolved once and for all rather than going to and fro on parts of an whole issue. The whole issue would be that which gives rise to a deed compromising Court proceedings in the initial proceedings and the basis on which the proceedings have been issued at the first place, particularly when all parties to the earlier proceedings have been legally represented by lawyers.
  11. Until the decision in the Yama Group of Companies (supra) cases, the Courts have always been slow to set aside, the free compromise of Court actions through negotiated outcomes, except on very limited and well recognized exceptions. The exceptions are in the main, fraud and misrepresentation leading to the compromise. Arguments against the validity of such compromises on the basis of lack of authority of one of the parties have found no favour with the Courts based on longer and deeper roots in the common law as represented by judgments in our jurisdiction such as the one in Motor Vehicles Insurance (PNG) Trust v. Kulubala Salem.[14] That case is authority for the proposition that, a lawyer has ostensible if not expressed authority to bind his or her client. This principle has given confidence to the parties to any litigation or any negotiation to freely and fairly enter into negotiations and settle a large number of cases. Indeed as I already noted, most of the courts the world over are actively encouraging the parties to settle through their own negotiations their disputes through what has now become well entrenched and known as alternative dispute resolutions (ADR), which the Supreme Court acknowledged in its decisions in the two Yama Group of Companies cases. Despite that, the Supreme Court arrived at a decision that sends our jurisdiction miles backwards in our claims and endeavours of leading in the South Pacific jurisdictions, other than Australia and New Zealand in the development and implementation of ADR. Not only that, these decisions, has the potential to put an end to free and fearless negotiations with the State for out of court settlement of matters being brought before the Courts, which has the potential of inundating the Courts with matters that could otherwise be freely and easily negotiated and resolved out of Court through the State’s legal representatives.
  12. In the case of negotiating with the State, it has always been the Solicitor General until the decision of the Supreme Court in the The State v Zacchary Gelu, Solicitor-General and Manorburn Earthmoving Limited in 2003. That decision did not have any regard to the comparative analysis I gave in relation to the role of an attorney general in jurisdictions similar to ours. It also did not have regard to the possible conflict of interest our attorney general would have in terms of the politics of the day dictating how litigation is conducted. The decision has effectively allowed for the Courts to subject their jurisdictions whether to endorse or not, consent orders involving State cases to the attorney general’s signature rather than going by the often readily accepted ostensible authority of a lawyer representing a litigant or a party as enunciated in Motor Vehicles Insurance (PNG) Trust v. Kulubala Salem,[15] especially where the State is legally represented and is involved in the negotiations leading to an agreement to settle out of Court. The decision of the Supreme Court has unfortunately, to date in many cases and without fail, delayed prompt resolution of disputes involving the State even in straight forward and or insignificant claims, thereby inundating the courts with many applications for contempt and applications aimed at causing the attorney to give his consent.
  13. Until the decision in the Zacchary Gelu, Solicitor-General and Manorburn Earthmoving Limited case, it has always been the case that the Solicitor General represents the State in all cases before the Courts and did have the ostensible authority, if not the specific instructions to bind the State. The parties executed the Deed in this case on 31 July 2002 and the decision of the Supreme Court came a year later on 15 August 2003. The decision of the Supreme Court has no retrospective application. It operates from the date the decision is pronounced. Only Parliament can pass legislation to have retrospective application in some cases. There is no similar authority in a Court to make its decision apply with retrospective effect. In the circumstances, I am of the view that, the State is not at any liberty to hark back at its own lack of capacity to depart from its obligations under the Deed after having indicated no lack of authority and long before the decision of the Supreme.

Second Issue: Is there Any Impediment to a Grant of the Relieves the Plaintiff is Seeking?


  1. I now turn to the next issue of, is there any impediment to a grant of the relief the Company is seeking? Having regard to the views I have just expressed above, I find that there is no impediment to a grant of the relieves the Company seeks from this Court. Accordingly, I order as follows:
  2. An order in the form of a declaration that the Deed of Release entered into on 31 July 2002 between the parties is valid for all purposes.
  3. Judgment be entered in the sum of K4.6 million being the unpaid balance due and owing on the said Deed of Release in favour of the Plaintiff.
  4. The Defendant shall pay interest at 8 percent on the unpaid balance to the date of the judgment.
  5. The Defendant shall pay the Plaintiff’s costs, which costs shall be agreed within 14 days from today, if not taxed.

________________________________


Posman Kua and Aisi Lawyers: Lawyers for Defendant
Mirupasi Lawyers: Lawyers for the Plaintiff Solicitor

[1] (2003) SC716.
[2] Supra note 1.
[3] Chapter 48 as consolidated.
[4] Supra note 1.
[5] See Motor Vehicles Insurance (PNG) Trust v. James Pupune [1993] PNGLR 370 for an example of an authority on point.
[6] (2003) SC707 (per Injia,Davani and Mogish JJ)
[7] [1991] PNGLR 305.
[8] (2005) SC792.
[9] (2003) SC716.
[10] Supra note .
[11] (2005) SC835, (per Jalina, Sawong and Lay JJ.).
[12] (24/03/03) SC705.
[13] SCA 62 and 63 of 2001 (delivered on 31/12/02)
[14] Supra note 4.
[15] Supra note 4.

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