N5954

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS. NO. 1565 of 2002

BETWEEN:

KOLTA DEVELOPMENT LIMITED
First Plaintiff

AND:

MARGIN PTY LTD
Second Plaintiff

AND:

PATRICK K. KOLTA
Third Plaintiff

AND:

INDEPENDENT STATE OF PAPUA NEW GUINEA
Defendant

Waigani: Kandakasi, J.
2012: 23rd August
2013: 20th September

 CAUSES OF ACTIONS - success of a court action dependent on two fundamentals apart from meeting the requirements for proper pleading, and all other procedural matters – first is the need to have and pursue only a cause of action known to law - second is proving the claim by, relevant, appropriate and admissible evidence – effect of - Court can strike out or dismiss claim for failure to disclose a reasonable cause of action - - National Court Rules provisions like Order 12 Rule 40

EX – GRATIA PAYMENT –an out of favour payment to someone which is not compelled by law - no legal right or obligation is vested in the promise to sue for enforcement of the promise - no legal or factual basis for the Plaintiffs to claim they are entitled to an ex gratia payment - to pursue claim against State will be futile and unnecessary - proceeding is dismissed – costs awarded to State. 

Cases cited:

Igiseng Investments Limited v. Starwest Constructions Limited and Igiseng–Okmanip (PNG) Trust [1993] PNGLR 485.

Counsel:

T. Kirio, for the Plaintiffs.
S. Tiankin, for the Defendant.

20th September, 2013

1. KANDAKASI J: This case presents an interesting question. The question is, can the plaintiffs sue on a recommendation of ex gratia payment following dismissal of their claim against the State?

Background and Facts

2. The background to the question is simply this. On 03rd April 1993, certain members of the PNG Defence Force went to the Plaintiffs' property then of substantial value known as the Germania Club situated along the Waigani Drive, in the nation's capital city, Port Moresby and set fire to it. The fire completely destroyed the property. At the relevant time, the offending soldiers were fully armed with military issue firearms and equipment. The Plaintiffs claimed damages against the State under WS No. 411 of 1993. Their claim then was based on the common law doctrine of vicarious liability for the actions of the soldiers resulting in their losses. The National Court per Salika J., (as he then was) conducted a trial. His Honour found that the soldiers were drunk and were on a frolic and detour of their own whilst off duty.

3. After having dismissed the plaintiffs' claim, His Honour strongly recommended the State to make an ex-gratia payment to the Plaintiffs. Based on that recommendation, the plaintiffs sought payment over K2 million from the State. At different times, to different Attorney Generals and two Ministers for Justice in 1999 and 2001 respectively agreed to settle the claim. However, no actual settlement took place. That caused the Plaintiffs to issue this proceeding. They then filed an application for summary judgment, which they did not pursue. Instead, they pursued further out of Court settlement negotiations through the office of the Solicitor General. That resulted in a deed of release being executed for the sum of K2.5 million in favour of the plaintiffs. That was without prior approval of the National Executive Council (NEC) as the amounts exceeded the relevant departmental heads and their respective Minister's financial delegation limits under the Public Finance (Management) Act. Yet the Department of Finance through its Secretary made a payment of K25,000.00. 

4. Upon receiving no payment of the balance of K2.475 million, the plaintiffs issued this proceeding. They claim that the State with its servants have breached a duty of care owed to them in that, they failed to facilitate the ex gratia payment. They further claim that the failure to meet their claim has resulted in loss of business and income and have suffered medical and psychological problems. They thus make a claim for K3.5 million for ex gratia payment after allowing for devaluation of the Kina plus interests and costs. 

5. The plaintiffs through their learned counsel's submission argue that, their claim is based on two legal foundations. The first is that, the parties executed a deed of Release for a sum of K2.5 million which has not been honored. The second basis is that, by entertaining and entering into the deed of release, the defendant created a legitimate expectation in the plaintiffs that they would be paid the sums set out in the deed of release. 

6. When the matter eventually came before me at case management directions hearing, I enquired as to what was the plaintiffs' cause of action. During the course of directions hearing, the parties informed me of the background to this proceeding as noted above. I therefore suggested and the parties agreed to address by way of a preliminary point the question of whether the Plaintiffs have a valid cause of action particularly when their earlier cause of action was dismissed after a trial. Learned counsel on both sides ably assisted me with their respective submission, for which I am grateful. 

Consideration of relevant and applicable law

7. The success of a court action is dependent on two fundamentals apart from meeting the requirements for proper pleading, and all other procedural matters. The first is the need to have and pursue only a cause of action known to law. The second is proving the claim by, relevant, appropriate and admissible evidence. Of the two, the first is relevant for our purposes and is also most critical because without having a cause of action known to law there can be no prospects and hope of success. Speaking of the subject, in my dissenting decision in the matter of The Independent State of PNG v. Downer Construction (PNG) Ltd (2009) SC979 I said this:

"…the issuance of any court proceeding does not grant any person with a cause of action. Instead, a cause of action forms the foundation for a claim and or a suit or court proceedings. Hence, no person can issue and successfully pursue any suit or proceeding in court unless he has a 'claim' that is well founded in law and the law can have it enforced. Technically this is called having a 'cause of action' which must be disclosed in all proceedings filed in court… Our law reports and numerous decisions of the National and Supreme Courts are loaded with cases that speak about 'cause of action' and dismissal of cases for failure to disclose a 'reasonable cause of action.'

8. Given that importance we have in the National Court Rules provisions like Order 12 Rule 40, which empowers the Court to strike out or dismiss a claim for amongst others a failure to disclose a reasonable cause of action. However, this should not be confused with a person's right to come to the court for redress of any harm or damage done to him or her. 

9. In Kerry Lero trading as Hulu Hara Investments Ltd v Philip Stagg & Ors (2006) N3050, speaking of the need to disclose a reasonable cause of action and the courts power to dismiss a claim for failure in that regard, I noted after reviewing the relevant cases on point that:

"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 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 providing 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 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 which 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".

10. After the above summation of the relevant principles, I added:

"…the pleadings must be so bad and or vague and is not a case of lack of particulars or a lack of better pleading which cannot be cured by a request and or orders for further and better particulars and or amendment respectively under O.8, rr.36, 50 or 51 of the Rules. Lack of particulars or lack of better pleadings is distinctly separate from a failure to disclose a reasonable cause of action or an action that is frivolous, vexatious or harassment. As such, clear and separate consequences follow. There is provision under the rules for requesting and or orders for further and better particulars or better pleadings as opposed to a right in a defendant or an opposing party to apply for a dismissal straightaway. A party must be careful not to ask for and the court must stop to ensure that it is not being asked to dismiss a claim because of lack of particulars or lack of proper pleading which can be cured by appropriate amendments to the pleadings. Regard must also be had to the fact that the Rules are not an end in themselves but a means to an end and by reason of which a struck compliance of the Rules can be dispensed in the interest of doing justice in accordance with O.1, r.7 of the Rules in appropriate cases"

11. The Supreme Court in its decisions in Philip Takori & Ors v. Simon Yagari & Ors (2008) SC905; Rage Augerea & Ors v. The Bank South Pacific Ltd (2007) SC869; Mount Hagen Urban Local Level Government v Sek No. 15 Ltd (2009) SC1007 and Michael Kuman v. Digicel (PNG) Ltd (2013) SC1232 approved this summation and statement of the law and applied them. 

12. In this case, although not clearly presented as such, the Plaintiffs' argument is that, their cause of action is based on the decision by His Honour, Salika J who recommended ex gratia payment to the Plaintiffs. Based on that recommendation, the Plaintiffs made a claim in damages for well over K2 million. The recommendation came after His Honour had dismissed as against the State an earlier cause of action based on vicarious liability because His Honour found the claim could not be sustained because the State's employees acted on a frolic and detour of their own.

13. The law on the principle of vicarious liability and in particular the aspect on an employee going out on a frolic and detour of his or her own and causing harm or damage is clear. Earlier on it seemed that, the courts were prepared to over look the long established common law principle that, an employer can only be liable for the actions of his employees if it can be shown by appropriate evidence that, the employee was acting within the scope of his employment, advancing the employer's cause, business or interest and not out on a frolic and detour of his own. The decision of Injia J., (as he then was) in Dalin More v The State and Chief Inspector Jim Onopia, Sergeant Joe Luage, Constable Dala Mentai and Constable Miamel Dage (1998) N1736l, in my view correctly stated and applied the long established principle at common as adopted by statute into our country. There His Honour dismissed a claim against the State for damages on account of two police men who raped a woman after tying up her boyfriend. In arriving at his decision His Honour reasoned amongst others:

"Rape is a criminal offence under s. 347 of the Criminal Code... Under the ordinary criminal law, the individual policemen concerned would become liable to criminal prosecution. Their policemen title and their police uniforms is no shield against criminal prosecution for criminal offences committed in the course of performing their duties. However, the legal entity of the State, their employer, or principal, cannot be held liable for the criminal offence of rape: Caind v. Doyle (1946) 72 CLR 09. The State may however be held vicariously liable in damages for civil wrongs such as torts committed by its employees or agents, such as policemen, committed in the course of performing their duties provided the wrongful action was committed whilst performing or purporting to perform such functions "as they would have been if the functions had been conferred or imposed solely by virtue of instructions lawfully given by the Government"… If a policeman departs from his lawful instructions and goes on a frolic of his own and commits a crime, then the State cannot be held liable for the crime for the reason that it would never form part of the State's lawful instructions to the policeman concerned to commit a crime in the course of performing their duties. The individual policemen concerned, if identified, would become criminally liable for the crime. If they are not identified, then that is the end of the matter insofar as criminal liability is concerned."(Underlining supplied)

 14. Before arriving at his decision His Honour correctly noted the provisions of Wrong (Miscellaneous Provisions) Act (Chapter. No. 295), s. 1(1), (2) and (4) which enshrines the common law principle on vicarious liability as noted.

15. I restated the principle in the matter of Andrew Daiva and Ome Ome Forests Ltd v. Lawrance Pukali & Anor; Ome Ome Forests Ltd v. Ray Cheong & Ors (08/10/02) N2289, in these terms:

"The company can only be liable for the acts of its employees if they act in the course of their employment pursuing their employers (the company's) interest. If they are out on a frolic and detour of their own they could become personally liable."

16. In my subsequent decision in Jimm Trading Limited v. John Maddison (2006) N3174, I elaborated on these principles as follows:

"This means where an employee or an officer of a company is in the course of his employment pursing his employer or principal's business or interest and incurs a liability, that liability becomes that of the company or the principal. The correct party should therefore, be the company or the principal and not the employee or the officer. If however, the employee or the officer goes out on a frolic and detour of his own and incurs any liability, that employee becomes personally liable and is therefore the correct party to be named and not the company." 

17. As I noted in my decision in Desmond Huaimbukie & Ors v. James Baugen & Ors (2004) N2589, I discussed in some detail this principle in my earlier decision in Peter Aigilo v. The Independent State of Papua New Guinea & Ors (unreported judgment) N2102, in the context of whether the Defendants acted "in the best interest of Papua New Guinea." There I noted that: 

"There are numerous cases on this doctrine in Papua New Guinea, which need not be considered in any detail save only to refer to them. Examples of this line of cases include Pike Dambe v. Augustine Peri and The State [1993] PNGLR 4, Bogil Guma v. The State & Ors N262 and Dalin More v. The State & Ors N1736. These cases discuss the doctrine at some length including its reception in Papua New Guinea. Under this doctrine an employer or a principle can be found vicariously liable in some instances while in others an employer or a principal cannot be held liable.

It is an accepted principle that, an employer cannot be made liable for the acts of his servant, if the servant acted outside the scope of his employment. In other words, if an employee goes on a frolic and detour of his own and causes damages to a third party, the employer will not be liable for the acts of the employee. This principle has also been already applied in a number of cases in our jurisdiction: see for example Kolta Development Pty Ltd & Great Happiness Seafood Pty Ltd v. PNG defence Force and The State N1470 and Dalin More v. The State & Ors (supra)."

18. Then on the particular issue before me in that case, of whether the defendants acted "in the best interest of Papua New Guinea" I said this:

"In the context of the concept of 'in the best interest of Papua New Guinea' it follows therefore that, where a servant, an agent or an arm or instrumentality of the State conducts in a way that is not for the benefit or in the interest of the State, it would amount to an act outside his scope of employment and would be out on a frolic and detour of his own. The State would not be liable in such a situation and a plaintiff may only have a cause of action against the person responsible for the damage, loss or injury."

19. I went on to note that:

"Many other judgments in the country such as the more recent ones as in Tony Wemin & Ors v. The Independent State of Papua New Guinea (21/06/01) N2134; John Yama v. The Independent State of Papua New Guinea (17/05/02) N2198 and Kolaip Palapi v Independent State of Papua New Guinea (05/06/01) N2274, make this clear but only in the context of exemplary damages. These cases carry on from the judgments of the Supreme Court in The Independent State of Papua New Guinea v. David Wari Kofowei& Ors [1987] PNGLR 5 and the subsequent judgment of the Supreme Court in Abel Tomba v. The Independent State of Papua New Guinea (07/04/97) SC518. 

20. Turning then to the Supreme Court decisions I noted that those decisions:

"made it clear that, the liability of the State in an unlawful police raid, arrest and or any breach of a person's Constitutional right is dependent on two considerations. The first is whether the wrong doer was an employee or servant of the State at the time of the conduct of action in question. Secondly, if the first question is answered in the affirmative, then the next consideration is whether the circumstances render the State vicariously liable. They did not displace the common law requirements for a plaintiff to show against an employer that his offending employee was in the course of his or her employment pursing the employer's interest.

21. At the same time, I noted that:

"With respect, other judgments against the State, particularly for police raid and other instances appear to merely gloss over the second basis on which the State can be vicariously liable to arrive at judgments for general damages against the State. These judgments have however, correctly, in my view, carefully considered the question of why should the State be liable for the unlawful actions of an employee who conducts in a manner that is not within the course of his employment and hence not furthering the interest of the employer. This has been done in the context of exemplary damages only.

A good example of this is the judgment of Justice Los with the agreement of Salika, J. in Abel Tomba v. The Independent State of Papua New Guinea (supra). There, His Honour said at pp 19-20 and 22-23:

'It is my view that section 18 envisages that certain acts that go beyond mere breach of any of the provisions of the Search Act the State as the employer cannot be liable beyond liability for general damages. For example a policeman stops a person and searches him knowing very well there exists no reasonable ground that the person may have in possession of stolen goods. He does it with other motives. Application of section 4(4) of the Act may give a good example. Under sub-s-(4) where a male police officer has to conduct a search upon a female, it is mandatory that an adult female be present. But if a policeman because of time constraint or because no female adult is nearby conducts the search upon the female, he has committed a technical breach. The State has to be vicariously liable for general damages as well as for any punitive damages that may be awarded. On the other hand a policeman sees a female during a search that she needs to be searched but he wants to search her alone deliberately and orders her to take all the clothes of, and he fondles her a bit. This in my view is beyond mere non-compliance with sub-s. 4. The State cannot be vicariously liable for any punitive damages for such an act. Further example may be shown for breach of section 12. This section makes it mandatory to register all properties seized by a policeman. After a raid a group of policemen may come back with a number of goods and just as they are just about to register them, a senior officer orders them to conduct another raid immediately. They do so and return with more goods and reach the police station at midnight. They are so tired that they go to sleep. In the morning they return to register the goods but all the goods get mixed up with the goods seized in the subsequent raid. Some get lost. The State must be vicariously liable for the loss of the goods as well as for exemplary damages. However, if the same group of policemen returned to the station and did not register the goods deliberately so that the owners could not get them back, it is my view that the State could only be liable for failing to register thereby causing the properties to be lost. For the purpose of exemplary damages the State cannot be liable. The rationale is that exemplary damage is penal in nature. The State through legislative process has given strict standards and procedures and rules for the policemen to operate under. If they deliberately falter, they have to answer for their fault individually.
…
There are also policy considerations that the courts must bear in mind when they are exercising their discretionary powers pertaining to award of exemplary damages. As exemplary damage is intended to punish and hence serves as moral retribution and deterrence for oppressive and arbitrary acts, should the four million people suffer for the acts of a handful of policemen? In an abstract way it may be a lesson for the leadership of the Police Force so that they can take a hard look at training and instilling discipline in the membership of the Force. But the State cannot go on spending money on paying damages and exemplary damages which are unplanned expenditures. The State has more important obligation which concerns the welfare and interest of the majority of the people — that is a planned expenditure to achieve "equalisation of services in all parts of the country" (National Goal Number 2 paragraph 4 of the constitution). A multiplicity of demands upon the State to pay exemplary damages arising from unruly behaviour of a few policemen may force the State to make unconstitutional reduction of the budget appropriated by the National Parliament for different areas and functions of the government in the country as were discovered in Special Reference 1 of 1990 (1990) PNGLR 532 and in Re: Criminal Circuits In Eastern Highlands (1990) PNGLR 82.'"

22. Further I went on to note that subsequently Jalina, J. in In the Application by Kunzi Waso [1996] PNGLR 218, had a re-look at the basis for holding the State vicariously liable for the unlawful acts and omissions of police officers generally. In so doing, His Honour correctly stated:

"In the past the Courts have been ordering the State to bear the financial burden on the principle of vicarious liability. This has resulted in the ordinary tax-payer footing the bills. It has resulted in moneys that could have been used on development projects such as health and education being used to pay damages. I am therefore going to differ from my brethren. I am of the opinion that when a member of the disciplined forces, be he a soldier, policeman or warder goes beyond the bounds of the law and ends up breaching someone's Constitutional rights, then he should be made to personally bear the consequences of his actions. The reason for this is simple. The State does not say to the officers on duty "you go and beat up that person badly, you go and burn houses and kill pigs and chickens and rape women". Not at all. Officers are not only told but expected to go and carry out their duties within the bounds of the law. What happens in the field of operation and how far one should go in carrying it out is in the hands of the individual. I believe that by awarding damages against officers individually will result in not only the amount paid by the State in damages being reduced but may also reduce the frequency of unruly behaviour by policemen and warders and others…"

23. I found persuasion in these observations and added on my part that:

"… the Supreme Court judgments in The Independent State of Papua New Guinea v. David Wari Kofowei& Ors (supra) and Abel Tomba v. The Independent State of Papua New Guinea (supra) did not say that, vicariously liability automatically follows against the State as soon as the wrong doer is found as an employee of the State. That is only one-half of the consideration. The Court must also consider whether the circumstances giving rise to the action against the State are such that they give rise to vicarious liability."

24. Allowing myself to be guided by the above statement of the law on the vicarious liability of the State, I am of the view that, Salika J., correctly came to the decision in the plaintiffs' original claim for damages. The drunken soldiers were off duty and were not deployed on a mission that was sanctioned by the defence force hierarchy and hence the State. Clearly, they went on a frolic and detour of their own pursuing their own wishes and interests. It should follow therefore that, the Plaintiffs did not have a valid cause of action from the very beginning of their court action to pursue against the State. When the court decided to dismiss their claim that should have been the end of their claim save only for their right of appeal. The common law doctrine of res judicata came into operation thereafter, meaning they could not make any claims against the State over the same subject matter except only for their right of appeal and any consequence following there from.

25. Having dismissed, the Plaintiffs' cause of action, Salika J., went on to recommend that the State make an ex gratia payment to the Plaintiffs for a cause that was already dismissed. This therefore calls for a consideration of the kinds of circumstances in which ex gratia payments can be made. It is appropriate that we start the consideration with a definition of the term "ex gratia" and whether that can give rise to a cause of action.

26. A quick survey of legal dictionaries appear to be of the same view that, the term "ex gratia" means an act out of favour especially of someone making some form of a payment to another, which is not compelled by law. In other words, the term means an act of grace extended by one person to another without the one making the payment having or accepting or admitting a legal liability or obligation to do so. This definition was accepted and applied in the case of Tolom Abai & 765 Ors vs. The State (1995) N1402, which decision both learned counsel referred to in their respective submissions. There, Sheehan J., (as he then was) speaking of the definition of the term said:
 
"An ex-gratia payment literally means a payment made as a matter of grace or favor. A payment made without any acknowledgement of liability." 

27. Having so defined the term, His Honour went on to apply the definition in the case before him in these terms:

 "The ex gratia payments in this case therefore, can be described as voluntary grants to be made to eligible retrenched ex-servicemen without any legal obligation admitted on the part of the State. In declaring such ex-gratia payments, therefore, the State did not grant rights enforceable in the same way that the statutory termination entitlements can be pursued. 
…
They remain promises of grace or favor of the discretion of the party making the grant. Unless those to whom the grant has been promised have through reliance on the grants changed their legal position." 

28. It should thus be obvious that, unless there is clear evidence of a person to whom an ex gratia payment is promised changes his or her legal position and does so in reliance upon the promise, no legal right or obligation is vested in the promise to sue for enforcement of the promise.

29. Learned counsel for the Plaintiffs drew the Court's attention to the National Court decision in Tamati Inara v. Soge Mariori (2006) N3014 and submitted that, that decision settled the law on ex gratia payments. With respect, I do not agree. Instead, I accept the States submission because it is correct that the Tamati Inara case concerned the question of whether the plaintiffs and the defendants were entitle to an equal of 50% each of a large sum of money the State decided to pay by way of an ex gratia payment for the States acquisition and use of their land where the Sogeri National High School now stands. It did not concern the question of whether the plaintiffs were entitled to receive ex gratia payments and or enforce a promise to make an ex gratia payment, which is the issue here. Hence, I find that the decision in the Tamati Inara case is of no assistance to the case at hand. The decision in the Tolom Abai & 765 Ors is in so far as the definition of the term ex gratia is concerned is relevant and helpful as already noted above. 

30. From a quick survey of cases on ex gratia payment and going by the definition of the term ex gratia as set out above, it is clear to me that, ex gratia payments are made voluntarily out of the one making the payments own grace and or volition. Put another way, no one can be forced or ordered to make an ex gratia payment. The only exception is where a person has already made a decision to make an ex gratia payment and the promisee has upon reliance on that promise changed his or her legal position. Such payments are often extended to long serving employees upon their termination in appreciation of their dedicated and faithful service. Even in such cases however, ex gratia payments are not automatic as the decision in Paschal W Feria v. Ben Lange (2009) N3574 demonstrates.

31. In that case, as the National Court noted Mr Feria was claiming an ex gratia payment of K49, 438.29. But through counsel, he was aware that there is no provision for this sort of payment in the Public Service General Orders. Nevertheless Mr Feria persisted with his claim because he claimed having served the State with loyalty and dedication for 40 years and felt that it is only fair that he be given an ex gratia payment. The Court per, Cannings J held:

"This is not a proper claim. This case is a determination of Mr Feria's lawful entitlements. The court is in no position to award ex gratia amounts. There is provision for such payments under the Public Finances (Management) Act, which should only be made on a case-by-case basis following the careful and considered exercise of discretion by the Minister."

32. As the above decision suggests, whether or not an ex gratia payment should be made is at the discretion of the person who is to or expected to make the payment. In the case ex gratia payments by the State is all regulated by statute. This is necessary because it concerns public funds and the discretion to make ex gratia payments must be arrived at on proper and due consideration.

33. For the purpose of this proceedings and the issue before me, both counsel in their respective submissions referred the Court to the provisions of s. 107 of the Public Finances (Management) Act 1995 as amended. The provision in relevant parts read: 

"107. Ex gratia payments.

(1) Where, in the opinion of—

(a) the Minister; or

(b) the Departmental Head of the Department responsible for financial management,

it is expedient to do so, he may make an ex gratia payment of public moneys to any person in an amount not exceeding the prescribed amount.

(2) Where, in the opinion of the Minister it is expedient to do so, he may, with the approval of the National Executive Council, make an ex gratia payment of the public moneys to any person in an amount exceeding the prescribed amount.

(3) Where, in the opinion of—

(a) the Minister; or

(b) the Departmental Head of the Department responsible for financial management,

it is expedient that a payment of public moneys to a person, being a payment in an amount not exceeding the prescribed amount, be treated as an ex gratia payment,

(c) the Minister; or

(d) the Departmental Head of the Department responsible for financial management,

as the case may be, may approve the payment and the payment so approved shall be deemed to be an ex gratia payment under Subsection (1).

(4) Where the National Executive Council resolves that it is expedient that a payment of public moneys to a person, being a payment in an amount exceeding the prescribed amount, be treated as an ex gratia payment, the National Executive Council may approve that payment and the payment so approved shall be deemed to be an ex gratia payment made under Subsection (2).

(5) Until an amount is prescribed by the Regulation, the prescribed amount is—

(a) in the case of the Minister—K50,000.00; and

(b) in the case of the Departmental Head of the Department responsible for financial management—K25,000.00.

(6) This section shall not be taken to be an appropriation of public moneys."(Underlining mine)

34. As will be apparent from this provision, there is provision for payment of ex gratia payments. However, whether such a payment should be made is dependent on a decision by the three separate authorities on behalf of the State. The first the Departmental Head for the department responsible for public finances up to a sum not exceeding K25,000.00. The second is Minister responsible for public finances up to a sum not exceeding K50,000.00. The third and final is the National Executive Council (NEC). Each of these authorities must come to the decision that, "it is expedient" to make the payment. 

35. Where there is claim for damages or as the case might be against the State, the provisions of s. 7 (j) of the Attorney-General Act 1989 as amended is relevant and clear. This provision in relevant parts reads:

"7. Duties, functions and responsibilities of the Attorney-General.

The duties, functions and responsibilities of the Attorney-General are—

 (j) to recommend to the Minister responsible for finance matters the payment by the State of an ex gratia sum of money in cases where the State is not under a legal liability but where it appears nevertheless that the State should compensate a person as an act of grace."(Underlining mine)

36. What this means in my view is this. Where a person has a claim or cause of action to pursue against the State, the Attorney General can make a recommendation to the Minister responsible for public finances to make an ex gratia payment, even though the State may not be legally liable. That recommendation must however be arrived at only if the Attorney General is of the view that the claimant deserves to be compensated by the State as an act of grace. Such a recommendation does not become automatically binding and must be acted upon by the Minister responsible for public finances. Instead, the Minister is bound by the provisions of s. 107 of the Public Finances (Management) Act 1995 as amended. If the amounts to be so paid exceed the Ministers limit, approval of the NEC would necessarily be required and must be obtained before any payment can be required.

37. It follows therefore that, if the above described process is followed and a decision to make an ex gratia payment is arrived at, the payee or payees would have a legitimate expectation to receive such payment. The question then is, if the payment is in fact not made and the State therefore fails to deliver on the expectation, can the payee seek to enforce the decision to make an ex gratia payment. The question was answered by Sheehan J in the Tolom Abai & 765 Ors case. There His Honour said given that an ex gratia is act in grace or favour without any legal liability there can be no right vested in the payee to seek enforcement if there is no payment unless the payee has altered his legal position to his detriment relying upon the decision to make an ex gratia payment.

38. I made a quick survey from Premdas v. The Independent State of Papua New Guinea [1979] PNGLR 329 at the earliest to the decision in Namba Tumu v Chief Executive - PNG Cocoa Coconut Institute Ltd (2011) N4449 at the latest where there is a reference to the term ex gratia. I could not find a single case of a successful action to enforce a decision to make an ex gratia payment as against the maker of such payment. Of the cases that might be relevant I note that the decision in Sao Gabi & State v. Kasup Nate & Ors (2006) N4020 makes reference to a deed for ex gratia payment. However, the Court found that the basis for the deed was for payment of amounts of money outside legal limits and was therefore fundamentally flawed. Consequently, the Court declared the Deed null and void. Then as noted in Mr Feria's case, his claim for payment of ex gratia amount without any decision to make such payment in accordance with legislation was found unenforceable.

39. On the other hand, the decisions in the Tolom Abai & 765 Ors case and the one in the Tamati Inara case show that once the State in each case made a decision to make ex gratia payments, the State stayed committed to that decision. Only the questions of who was entitled to receive such payments and how much. Those questions were respectively considered by the Court and answered them in the respective cases. 

40. In what appears to be an obiter dictum, His Honour Canning J in the Tamati Inara case said these about ex gratia payments and the Court's jurisdiction: 

"The compensation payment agreed by the National Government to be paid for the land was properly regarded as an ex-gratia payment. It is unusual for a court to be asked to review the terms of an ex-gratia payment or to determine who the correct beneficiaries of the payment are. Unusual, but not improper. I am satisfied that the court does have jurisdiction. However, I do not consider that it should be the function of the National Court in proceedings of this nature to undertake anything other than a cursory inquiry into the merits of an ex-gratia payment, so as to be satisfied that the payment is neither manifestly excessive nor unconscionably inadequate and that the beneficiaries of the payment appear to have a legitimate expectation to receipt of the payment. 

In particular, where the National Government has agreed to make an ex-gratia payment and a deed of release has been signed by the intended beneficiaries, the National Court should not undertake anything other than a cursory inquiry, so as to be satisfied that judgments formed by officials, presumably technical experts, in a government department – in this case the Department of Lands and Physical Planning – are not so outlandish as to be unreasonable."

41. With the greatest respect, I do not agree. This Court has an inherent power under s. 155 (3) – (5) of the Constitution to review all decisions of public authorities. That includes the decision of the National Government or the National Executive government. A decision to make ex gratia payments concerns public funds. The absence of a proper check and balance gives way to abuse of government power which is more rampant in PNG these days than not. The framers of our Constitution had wisdom in empowering to court with the necessary powers under the Constitution to review all decision of the public bodies, except in the clear cases in which there is clear exclusion as in the cases of non justifiable questions under s. 87 (2) and 95 (6) of the Constitution for example. The Court thus has the necessary jurisdiction and power to ensure that the decision to make an ex gratia payment:

1.	was arrived at in accordance with the relevant and applicable legislation and is therefore legal; and 

2.	payment is in settlement of a current, existing and valid course of action; or 

3.	for matters in which ex gratia payments would normally be made as in the case for example of a long serving employee who is leaving the public service, government occupation of private land not proceeded with a formal compulsory acquisition; and

4.	the amounts to be paid are reasonable and appropriate having regard to the prevailing market values of what it is; and 

5.	the State gains or acquires an advantage.

42. Commenting on each of these factors, first I note that the decision of the Supreme Court in Fly River Provincial Government v. Pioneer Health Services (2003) SC705 and those that have subsequently followed it, make it clear that all contracts involving the payment out of public funds must meet amongst others the Public Finances (Management) Act 1995 as amended. A failure to do so renders the contract null and void as was done specifically in the context of a deed for payment of an ex gratia payment in the Sao Gabi & State v. Kasup Nate & Ors case. The second and third factors are given rise to by the only exception to enforcing ex gratia payment, which requires an alternation of one's existing and current legal position (not one already exhausted and or extinguished) by relying upon a decision to make an ex gratia payment. Not only that, it also follows on from the fact that the State represents the collective interest of the people of the country who expect their government to make payments of this nature where there is proper basis for the making of such payments. In this regard decisions to make ex gratia payment to ex service men and long serving public servants as may be highlighted by the decision in Tolom Abai & 765 Ors case, lends support for this factor. The absence of these factors opens the floodgate to corruption and abuse of power resulting in the wastage of public funds, something already occurring at a much more alarming rate. The fourth and fifth factors further strengthen the need for government or public officers to ensure that, a decision to make an ex gratia payment and its amount are within limits and have foundation in the law and is offered in return for some valuable gain or consideration passing to the State, such as having received years of dedicated service from a retiring long serving employee to the continue use and enjoyment of land on which there is public infrastructure, minimize costs and interests or settle for a lesser and certain amount rather than face the risk of an high award by a Court. These factors are inherent, in my view in the word "expedient" as employed by the provisions of s. 107 of the Public Finance (Management Act) 1995. 

43. The term "expedient" has a number of meanings. These are "measure", "means", "method", "device", "maneuver", "convenient", "practical" and "useful". In the particular context of proper management and application of public finances, it means to my mind that, decision to make an ex gratia payment must be measured and is a good maneuvering on the part of the State and is a best method, means or device employed by the State because it is practical, convenient or is useful for the State. However, these words are used it is obvious to me, that there must be a meaningful assessment of the claim that which calls for an ex gratia payment and the decision to make the payment must be deliberately arrived at.
 
Application of the relevant law to the present case

44. Allowing myself to be guided by the foregoing principles and discussions, I now proceed to consider the case at hand. There is neither any evidence, nor any pleading or submission that, the process as per the provisions of s. 7 (j) of the Attorney-General Act 1989 and s. 107 of the Public Finance (Management Act) 1995 as amended as I described in paragraph 36 above has been followed. In other words, there is nothing before the Court either in the pleadings, any evidence or the submissions of the Plaintiff pointing the Attorney General or the Minister for Justice making a recommendation to the Minister for Finance in accordance with the provisions of s. 7 (j) of the Attorney-General Act 1989. Similarly, there is nothing that points to the Minister for Finance coming to a decision in accordance with the provisions of s. 107 of the Public Finance (Management Act) 1995 and such a decision being placed before the NEC, which the NEC approved. Hence, I am not satisfied that a decision to make an ex gratia payment was arrived at in accordance with the provisions in question by the NEC given the large sums of public funds involved. Indeed the plaintiffs concede that the NEC has not in fact made a decision in so far for ex gratia payment for them. I accept that, two Ministers for Justice and a Secretary of the Department of Finance and a Solicitor General arrived at a decision to make a payment of K2.5 million and submissions were put to the NEC with repeated follow ups for the NEC's approval. There is all there to it. The NEC did not make a decision in favour of an ex gratia payment. 

45. I also note, that there was a part payment of K25,000.00 by the then Secretary for the Department of Finance. That however, was at its very best, a clear abuse of his powers under s. 107 (5) (b) of the Public Finance (Management Act) 1995. Section 107 in so far as it authorizes the Secretary for Finance, he can make a decision to make an ex gratia payment up to an amount not exceeding K25,000.00. There is no provision authorizing a breaking up of the total ex gratia payment to be made, into financial authority levels of the Minister and the Secretary for Finance and the NEC. Instead there has to be one decision for one total amount of ex gratia payment. The then Secretary knew that the claim was for over K2 million, which was beyond his and that of his then Minister. That being the case, approval was necessary and had to be sought and obtained from the NEC before any payment of the whole or a part of it could be made. That did not occur here. Further, the decision on the amount had to be preceded with a determination or decision that, it was expedient (in terms noted in paragraph 43 above) to make such payment. There is neither any evidence nor any pleading or submission that such a decision was made. Hence, the part payment amounted to an abuse of power and an unlawful payment made out of public funds. That being the case, nothing could turn in favour of the Plaintiffs by virtue of the part payment.

46. Relying on the decision in Joseph Lemuel Raz v. Paulus Matane & Ors [1986] 38 (wrongly reference by the Plaintiffs' counsel as John Lamuel Raz v. Paulius Matane & Others (1989) PNGLR 38), the Plaintiffs argue that they were given a legitimate expectation that they would be paid the amounts indicated by the then Ministers for Justice, the Secretary of the Department of Finance and the Solicitor General. They are therefore entitled to seek a payment of that amount. There are at least five problems with this submission. 

47. The first problem is this. Raz's case concerned the question whether the principles of natural justice, especially ones the right to be heard before any decision adverse to him or is arrived at necessarily created a legitimate expectation in Mr. Raz on the decision to have him deported. That was in the context of a judicial review. It did not involve the payment of a large sum of money as in this case.

48. Secondly, relevant authorities some of which I have already cited in this judgment, say that having a legitimate expectation alone is not sufficient for the purposes of seeking an enforcement of a decision to make an ex gratia payment. A critical requirement is for the person to whom ex gratia payment was promised must have altered his or her legal position by relying upon the promise. In this case, the Plaintiffs legal position was already determined against them by the decision of his Honour Salika J. That ended any right or expectation they might have had for any payment from the State as at the time of the pronouncement of the decision. The only right they had was to appeal within the prescribed time limit of 40 days. There is no mention of what the Plaintiffs did about that right. In any event I note according to the pleadings that, the first decision in favour of ex gratia payment was arrived at 18th February 1997, by the then Secretary of the Department of Justice Mr. Sao Gabi who initially recommended to the Minister for Finance to make an ex gratia payment of K2.5 million. That decision came well after the appeal period had expired following Salika J.'s decision which was arrived at in August 1996.

49. Thirdly, in order for a situation of legitimate expectation to arise, the decision to make the ex gratia must be arrived at legal. That means all legal requirements for arriving at an ex gratia payment must be fully complied both procedurally, the basis for the decision and the relevant and correct authority making the decision. In this case, as we have already noted, there is no evidence or suggestion that the decision to make the ex gratia payments were arrived at in accordance with the combined provisions of s. 7 (j) of the Attorney-General Act 1989 and s. 107 of the Public Finance (Management Act) 1995 and more importantly, the NEC did not make the decision to make such payments. 

50. Fourthly, I have not been placed with any material demonstrating a gain for the State and therefore the people of PNG for a pay out of such a substantial sum of money especially, when the plaintiffs' legal right to any compensation was heard and dismissed by a court of competent jurisdiction. The plaintiffs have rendered on years of dedicated services to the State as do long serving public servants. There was nothing of the plaintiffs the State was using for public purposes. I also note there is evidence or any suggestion that, there was in existence a good relationship with mutual gains going both ways existed between the State and the Plaintiff that was special and beyond that which every citizen, residence and business have in the country. Further plaintiffs did not have a substantive and existing claim that had the risk of exposing the State to substantial costs, damages and other harm in the particular circumstances of this case. If at all, the Plaintiff still had the right to make and pursue claims as against the drunken and out of duty soldiers. I also observe that, the Plaintiffs where in a business in the nation's capital. They would have therefore insured against such risks. Did they take out any insurance? If they did and got paid out, their claim for ex gratia payment would effectively have been a claim for double gain, which cannot be allowed. 

51. Finally, the Court after having dismissed the Plaintiffs claim, initiated the idea of an ex gratia payment. Decisions to make ex gratia payments is a right the person who decides to make an ex gratia payment has. After all the nature of ex gratia payments is such that, the payer out of his or her own free choice and or volition and out of grace or favour decides to make such payments. Given that, the payer needs no compulsion or even a suggestion from any other person or authority, unless their views and inputs are sought on the question whether any ex gratia payment should be made or they are specifically empowered by legislation to make such inputs or suggestions. Here with the greatest respect, Salika J (as he then was), had the power to hear and determine the claim that was before him according to law applying legal principles considering wrongs and remedies according to law. Once he came to the decision to dismiss the claim, the whole claim as a matter of law came to an end, subject only to the plaintiffs right of appeal.

Decision

52. Taking into account all of the foregoing, I find that, there is no legal or factual basis for the Plaintiffs, to claim they are entitled to an ex gratia payment. Consequently, I am of the view that they cannot maintain and pursue this claim against the State as to do so will be futile and will be an unnecessary waste of time and money for the parties and the Court. In the circumstances, I am minded to order a dismissal of the proceedings and order costs in favour of the State. 

________________________________________________________
Sam Bonner Lawyers: Lawyers for the Plaintiffs 
Solicitor General: Lawyers for the defendants