N6166

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 499 OF 2010

BETWEEN:

PANAMASEIER RESOURCES PACIFIC COMPANY LIMITED
First Plaintiff

AND:

PAUL HITAMOORE, Managing Director
Second Plaintiff

AND:

RICHARD SIKANI, Commissioner for Correctional Services of Papua New Guinea
First Defendant

AND:

PNG SUPPLY AND TENDERS BOARD
Second Defendant

AND:

INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

Waigani: Hartshorn J.
2014: 9th December
2015: 10th November

 Trial

Cases cited: 

James Geama, Koim Kopun v. OTML Shares In Success Ltd (2011) N4269

Counsel:

Ms. G. B. Kubak, for the Plaintiffs 
Ms. I. Mugugia , for the Defendants 

10th November, 2015

1. HARTSHORN J: The first plaintiff, Panamaseier Resources Pacific Company Ltd (PRPC) entered into a contract on 13th February 2008 to supply rations to five prisons (Contract). The Contract was with the State through the PNG Correctional Services (PNGCS) and was for a period of one year with two options to extend to a total of three years. The Contract was not extended.

2. PRPC claims that the defendants breached the Contract, were negligent and were unfair in their business dealings with PRPC and as a consequence the plaintiffs' have suffered loss and damages.

3. The parties agreed 11 issues for trial in a "Statement of Agreed & Disputed Facts and Issues" that was filed on 4th September 2014. I now consider those issues.

Whether the plaintiffs entered into a contractual agreement to supply Mukrumanda Jail (Enga Province), Ningerum Jail (Western Province), Buka Jail (Autonomous Region of Bougainville), and Buiebi Jail (Southern Highlands Province) on a monthly basis dependent on the number of inmates.

4. From a perusal of the Contract that is in evidence, PRPC entered into a contract with the State through the PNGCS. The second plaintiff Paul Hitamoore was not a party to the Contract. Clause 2.1 provides amongst others that, the Supplier (PRPC) will make available, and supply, various rations as requested to "…Bui-yebi, Ningerum, Mukrumanda, Barawagi, Buka Correctional Institutions within five working days of receiving a formal order….." There is no provision in the Contract that rations were to be provided on a monthly basis dependent on the number of inmates. As to the reference to "on a monthly basis" in Annex A to the Contract, clause 1.2 of the Contract addresses the question of the priority of the documents that comprise the agreement between the parties where there is a conflict or any ambiguity. PNGCS's Terms and Conditions of Contract CSTB 1759 (3) is the prior document (clause 1.1 (k) and (l)).

Whether the condition of the arrangement was that PRPC was to deliver rations before payments are done.

5.1 The plaintiffs' submit that it was a condition of the arrangement that Integrated Local Purchased Orders (ILPOC's) would be issued to PRPC first before the delivery of rations took place and that this fact is not disputed.

5.2 The defendants' submit that clause 7 of the Contract is clear on this issue. It is:

"Payment shall be made by the PNGCS to the Supplier within 30 working days, subject to: proof of delivery; the submission of a correctly rendered tax invoice; and the payment basis stated in the Public Finance Management Act."

5.3 Further, the evidence of John Pakua, the Director Finance of PNGCS at the material time, in paragraph 4 of his affidavit, confirms this.

5.4 Given the words "proof of delivery", it is clear from a perusal of clause 7 of the Contract that the subject rations were to be delivered before payment was made. As to a relevant fact not being disputed, I note that in paragraph 2 of the disputed facts contained in the Statement of Agreed & Disputed Facts and Issues, it is stated amongst others that "… the Plaintiff was to deliver rations before payments are done." Further, in the Amended Defence it is pleaded in paragraph 4 (c) that amongst others, that the PRPC was to deliver rations before payments are done. Given this, I am satisfied that "the condition of the arrangement" was that PRPC was to deliver rations before payments were done.

Whether the Buka Jail and the Ningerum Jail were delivered rations three weeks into the first month of the Contract.

6.1 The plaintiffs' submit that delivery of goods to the Buka and Ningerum Jails were delayed but this was beyond the plaintiffs' control.

6.2 The defendants' submit that the evidence is that the Buka and Ningerum Jails were supplied three weeks into the first month of the Contract.

6.3 Given the plaintiffs' submission on this issue and the evidence of John Pakua, I am satisfied that the delivery of the subject rations to the Buka and Ningerum Jails was delayed up to three weeks into the first month of the Contract.

Whether there were any discussions between the plaintiffs and the defendants

7. From the submissions, it is agreed that Mr. Pakua on behalf of PNGCS had discussions with a representative of PRPC. It is not necessary to consider further submissions given the wording of this issue.

Whether the termination of the subject contract was based on reports and correspondence from respective Jail Commanders

8.1 The plaintiffs' submit that the evidence is that complaints came from only one of the five jails and that is not sufficient to terminate the Contract. Further, reports containing complaints were not brought to the attention of the plaintiffs.

8.2 The defendants' submit that the termination of the Contract was based on reports, correspondence and verbal reports from the Commanders of the jails. Mr. Pakua deposes to this in his affidavit and confirms that correspondence was collected and a submission compiled and presented before the Central Supply and Tenders Board for the termination of the Contract.

8.3 From a perusal of the Contract, it is apparent that although the evidence given and submissions made on behalf of the parties refers to the Contract being terminated, what did occur was that the Contract was not extended and came to an end, as distinct from being terminated. In the evidence of Mr. Pakua, there are three letters in which complaints are made or inferred in regard to the Contract. I am satisfied from the evidence that the decision not to extend the Contract was based on reports and correspondence from at least three Jail commanders. As to the subject reports not being brought to the attention of the first plaintiff, I note there is no reporting requirement contained in the Contract.

Whether the first defendant had the authority and was at liberty to make it known to the plaintiffs his intentions not to renew the Contract, and whether the first defendant consulted the second defendant.

9.1 The plaintiffs' submit that the doctrine of privity of contract arises as although PNGCS was the beneficiary of the Contract, it was not a party to it. Further, there is no evidence that the decision to terminate the Contract was made in consultation with the second defendant.

9.2 The defendants' submit that the first defendant is the head of the PNGCS. He has the responsibility for the superintendence and efficient organisation and management of the Service and also has the responsibility for the proper performance by the Service of its functions. The Contract was between the State through the PNGCS and the first plaintiff and the first defendant as the head of the PNGCS has the authority to make the decision not to renew the Contract. Further, there was consultation. Mr. Pakua confirms in paragraph 19 of his affidavit that a number of meetings were held with the Central Supply and Tenders Boards procurement advisor Mr. Blackburn and the procurement officer Veari Hitolo.

9.3 From a perusal of the Contract, the first party is described as "The Independent State of Papua New Guinea ("The State") Through the PNG Correctional Services ("The Purchaser")". Further, in clause 1.1 (k) of the Contract, the agreement reached between the parties is defined. It provides that the agreement is contained in four documents. Those documents specifically referred to PNGCS. Also in clause 1.1 (l) of the Contract it is provided that the four documents referred to in clause 1.1 (k) constitute the entire agreement between PRPC and PNGCS. In these circumstances, I am not satisfied that the doctrine of privity of contract applies. As to consultation, I am satisfied with the evidence of Mr. Pakua in this regard.

Whether the defendants were negligent in their business dealings with the plaintiffs and whether the defendants were unfair in their business dealings

10.1 In regard to these two questions the plaintiffs' submit that the defendants' breached a duty of care that they owed to PRPC when they failed to disclose information that may have had an effect upon the Contract. This information was that Mukrumanda Jail did not have any inmates and had been closed before the execution of the Contract. This lack of disclosure also raises questions as to the fairness of the transaction, submit the plaintiffs'.

10.2 The defendants' submit that the contractual obligations of PNGCS under the Contract were as follows:

(i) Clause 2.1: The PNGCS as purchaser had the contractual obligation to issue a formal order for the first plaintiff to supply rations. The formal order had to come from the PNGCS Headquarters;

(ii) Clause 7.1: Under Clause 7.1 of the Contract, payment shall be made by the PNGCS to the supplier within 30 working days subject to proof of delivery, the submission of a correctly rendered tax invoice and the payment basis stated in the Public Finance Management Act.

10.3 The defendants' submit that the PNGCS complied with its contractual obligations under the Contract. There is evidence to show that the PNGCS Headquarters did issue monthly ration orders. Mr. Pakua confirmed in paragraph 4 of his affidavit that with regard to payment, it was a condition of the arrangement that PRPC had to deliver the rations and provide proof of the delivery with a tax invoice before payment was made.

10.4 As to the plaintiffs' contention that due to the unfairness of the transaction and negligence by the first defendant in not disclosing information regarding Mukrumanda Jail, the plaintiffs suffered financial and business loss; the plaintiffs' evidence shows that the first plaintiff supplied rations to the Mukrumanda Jail in April and May 2008 without a formal order from PNGCS Headquarters, thereby not complying with clause 2.1 of the Contract. Consequently any loss caused was not as a result of action or inaction of the defendants.

10.5 Further, the defendants' submit that the plaintiffs have not proved the elements of negligence. In addition, the evidence of Mr. Pakua is to the effect that the plaintiffs' breached the Contract. 

10.6 The defendants' also submit that they were not unfair in their business dealings with the plaintiffs.

10.7 Notwithstanding the submission of the plaintiffs', it is not pleaded in the Amended Statement of Claim that the defendants' owed any duty of care to the plaintiffs. In addition, the Contract does not provide that the first plaintiff is guaranteed that it shall supply a minimum quantity of rations to all or any of the five prisons. As previously referred to clause 2.1 is clear. PRPC will make available, and supply, "various rations as requested ….. within 5 working days of receiving a formal order….". Clause 1.2 provides that the Terms and Conditions of Contract CSTB 1759 (3) have priority in the event of conflict or ambiguity. Given this, I am not satisfied that the defendants or any of them had an obligation to, or can be considered to be negligent in not informing, the first defendant as alleged. Further, from a perusal of the Amended Statement of Claim, the plaintiffs have not properly pleaded and proved the elements of negligence.

10.8 As to the defendants being unfair in their business dealings with the first plaintiff, in their submission, the plaintiffs' refer to and presumably rely upon the Fairness of Transaction Act 1993. In this regard I make reference to my decision of James Geama, Koim Kopun v. OTML Shares In Success Ltd (2011) N4269 at para 3b. As in James Geama (supra), as far as I am aware, no application has been made under the Fairness of Transactions Act 1993 and such an application is a prerequisite: s.5 (1), this court has not attempted to arrive at an amicable settlement: s. 7 (1), the second prerequisite, and this court has not formed an opinion that an attempt at a mediated settlement has failed: s. 8 (1). As the plaintiffs' have not followed the provisions of the Fairness of Transactions Act 1993, this court has no jurisdiction to deal with a matter under that Act.

10.9 Given the above, I am not satisfied that the plaintiffs have proved to the requisite standard that the defendants or any of them were negligent or unfair in their business dealings with the first plaintiff. I am also not satisfied after a perusal of the Contract, and a consideration of the pleadings, evidence and submissions that the plaintiffs have proved any of their claims made in the Amended Statement of Claim. The proceeding should be dismissed.

Orders

11. The Orders of the Court are:

a) This proceeding is dismissed;

b) The plaintiffs' shall pay the defendants' costs of and incidental to the proceeding;

c) Time is abridged.

_____________________________________________________________
Kubak & Kubak Lawyers: Lawyers for the Plaintiffs 
Office of the Solicitor General: Lawyers for the Defendants