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FHG Investments Ltd v Dion [2016] PGNC 33; N6208 (24 February 2016)

N6208

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS. No. 100 OF 2014

BETWEEN:

FHG INVESTMENTS LIMITED
First Plaintiff

AND:

VINCENT YANGWARI, DIRECTOR FHG INVESTMENTS LIMITED
Second Plaintiff

AND:

HON. LEO DION, MP DEPUTY PRIME MINISTER OF PNG
First Defendant

AND:

DR. KEN NGANGNAN – ACTING SECRETARY DEPARTMENT OF FINANCE
Second Defendant

AND:

HON. JAMES MARAPE, MR MINISTER FOR FINANCE
Third Defendant

AND:

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Defendant

Waigani: Ipang J
2015: 15th June
2016: 24th February

NATIONAL COURT - Plaintiffs application to have Defendants Defense filed to be struck on the basis that the Defence was filed out of time and without leave of court – order 9 Rule 15(1) (b), Order 7 Rule 6(2) National Court Rules & section 9(a) (i) Claims By and Against the State Act, 1996.

NATIONAL COURT PRACTICE & PROCEDURE – Application seeking Default Judgement against the Defendants for alleged breach of Hire Car Rental Agreement entered in to on the 2nd August, 2011 during Political Impasse – Legitimacy of such agreement entered in to during Political Impasse.

HIRE CAR RENTAL AGRREMENT – First Defendant enter in to the said agreement in his official capacity as Deputy Prime Minister For and On behalf of O'Neill Namah Government – Agreement entered in to on the 2 August, 2011 during Political Impasse – Legitimacy of such agreement entered in to during Political Impasse.

Cited Cases:
Bruce Tsang v. Credit Corporation (PNG) Limited [1983] PNGLR 112
Commissioner for Internal Revenue v. Bougainville Copper Limited (2009) N3988
Fly River Provincial Government v. Pioneer Health Services SCA No. 73 of 2000 (SC 705)
Independent State of Papua New Guinea v. Barclay Bros (PNG) (2004) N2507
Jack Patterson v. NCDC (2001) N2145
Keboki Business Group v. The State of Morobe Provincial Government [1985] PNGLR 30, SC 307
Kunton v. Junias [2006] PGSC 34; SC929 (28.09.06)
Severinus Ampaoi v. James Tauriko & 1 or [2012] PG SC 3; SC 1166 (1March, 2012)
Urban – Giru v. Luke Muta & ors [2005] PGNC 83; N2877 (12 August, 2005)

Counsel:
Joseph. K. Abraham, for Plaintiff
No Appearance of Defendants

Decision

24th February, 2016

1. IPANG, J: Plaintiffs by their amended Notice of Motion filed on the 20th March, 2015 seek to have the Defence filed on the 29th May, 2014 by First, Second, Third and Fourth Defendants be struck out for reason that the said Defence was filed out of time. In seeking this order, the Plaintiff rely on Order 9 Rule 15(1) (b), Order 7, Rule 6(a) (i) of the National Court Rules (NCR) and Section 9(a) (i) of the Claims By And Against The State Act 1996.
   
2. As a possible consequence to the above order sought (if any) the Plaintiffs also seek for the entry of the Default judgement against the Defendants for the Defendants' failure to file their Notice of Intention to Defend (NOID) and Defence within the required 90 days period. Plaintiffs invoke order 12 Rule 25(a) (b) and 32 of the National Court Rules (NCR) to seek such order. Further and in the alternative, Plaintiffs seek entry of summary Judgement against the Defendants for damages as claimed in the statement of claim and damages to be assessed pursuant to Order 12 Rule 38 of the National Court Rules (NCR). And finally, the 8% interest pursuant to Judicial Proceedings (Interest on Debts and Damages) Act Chapter 52 and the cost of this application.
   
3. In support of the motion, the Plaintiffs rely on the Affidavit of Christopher Niken sworn on the 20th November, 2014 and filed on the 1st December, 2014, the Affidavit of Vincent Yangwari sworn on the 12th November, 2014 and filed on the 25th November, 2014, the Affidavit of Abel Tol sworn and filed on 13th May, 2015, the Affidavit of Service by Abel Tol sworn and filed on the 18th May, 2015 and the Plaintiffs' submission on Default Judgement filed on the 13th May, 2015.
   

Amended Statement of Claim

1. The First Plaintiff is a corporate entity registered under the Investment Promotion Authority Act 1992 and is capable of suing and being sued in its' own name and is suing in that capacity
   
2. The Second Plaintiff is the Managing Director of the First Plaintiff Company and is capable of suing and being sued in his own name and is suing in that capacity.
   
3. The First Defendant is the Deputy Prime Minister of Papua New Guinea and being sued in that capacity
   
4. The Second Defendant is the Acting Secretary for the Department of Finance and is being sued in that capacity as cited.
   
5. The Third Defendant is the Minister for Finance and is responsible for all powers and affairs exercised by the Second Defendant and are being sued in that capacity as cited as well
   
6. The Fourth Defendant is the Principal of the First, Second, and Third Defendants and is being sued pursuant to Section 2 of the Claims of By And Against the State Act 1996( CBAATSA)
   
7. Prior to instituting this court proceedings on or about the 05th July, 2013, the Plaintiffs through their lawyers, served a letter containing a Notice pursuant to Section 5 of the Claims By And Against the State Act on the Solicitor General and an acknowledgment from the Solicitor General was received on 22nd August, 2013 as sufficient notice to make a claim against the State. Hence other issues raised in the notice the Plaintiff concedes as materials for trial.
   
8. The First Plaintiff was at all material times a nationally owned company involved in business of hiring and leasing of cars. It is based in Port Moresby, National Capital District.
   
9. The Second Plaintiff was at all material times the Managing Director of the First Plaintiff a nationally owned company involved in the business of hiring and leasing cars. It is based in Port Moresby, National Capital District.
   
10. On the 2nd day of August, 2011, Plaintiffs entered into a written contractual agreement with the First Defendant ("the parties") on behalf of the O'Neill/Namah Government to hire the Plaintiffs fleet of vehicles and was used in the Political Impasse Operations.
    
11. Under the vehicle hire agreement. The Plaintiffs leased to the First Defendant a total of eleven (11) vehicles ranging from Toyota Land Cruisers to Toyota Hilux 5th Elements and BT50 Mazda Double Cab utilities.
    
12. The rate of hire of the fleet of vehicles is subject to the type of vehicles on flat rate per day as set out on the schedule hereunder
    

13. Under the agreement, the Plaintiffs issued to the First Defendant monthly invoices for paying of hire as and when due for payments by the Defendants and that the agreement was well sustained.
    
14. The Defendants made two (2) lots of payments to the Plaintiffs, first on 05th November, 2013 being K300, 000.00, BPNG Cheque No. 016256 and on the 10th January, 2013 the second payment of K600, 000.00, BPNG Cheque No. 018210 totalling of K900, 000.00 in part settlement of the accumulated hire rates.
    
15. The Plaintiffs continued to issue several invoices for progressive payments to the Second Defendant for the vehicle hire services being rendered to the tone of K4.2 million which had become due and owing for the period and on 12th March, 2013, the Second Defendant having vetted the Plaintiffs' balance of claim of K4.2 million paid to the Plaintiff part payment of K2 million BPNG Cheque No. 020894 with the balance of K2.2 million to follow suit.
    
16. On the same date of 12th March, 2013 the Plaintiffs presented K2 million BPNG Cheque 020894 to its Banker at the BSP Bank Port Moresby Branch but the Defendants had "stopped" the K2 million cheque payment. The Cheque of K2 million could not be accepted by the bank and it was returned back to the Plaintiff.
    
17. The vehicle hire agreement between the parties was envisaged for the duration of the political impasse commencing the date of the inception of the contract until the formation of the new government in 2012, thus the Defendants having stopped the Plaintiffs progressive cheque payment of K2 million failed to deal with the Plaintiffs claim and as such the Defendants breached the Car Hire Agreement between the Plaintiffs and the Defendants
    

Particulars of Breach

Clause 7 of the Hire Car Agreement was breached and as a result the monthly invoices for each vehicle accumulated to the said amount as claimed below.

Exhibit 1. Summary of FHG Fleet used in the Political impasse period

18. As a consequences of the stop payment of the Plaintiffs' K2 million cheque and the balance of K2.2 million for service rendered under the contract, the contract was frustrated and the Plaintiffs' business experienced serious management impediments and economic losses.
    

Particulars of Economic Loss

1. Loss of Business in the claim of K4.2 million
   
2. Winding down of the Plaintiffs' business
   
3. Physical damages caused to the company's assets (vehicles) due and owing to the Plaintiffs as a direct result of the Defendants failure in settling the Vehicle Hire Bills
   
19. Further while waiting for the payment, the Plaintiffs had to cease the hire car rental business and completely closed down its business.
    
20. Persistently the Plaintiffs had written numerous correspondences and personally followed up in person with the First, Second & Third Defendants for its payments but to no avail, and at one point in time, the Second Defendant insisted to the Plaintiff to produce a court order pay-see-pay in order for the Defendants to facilitate and or make payment to the Plaintiffs but the failure by the Second Defendant doing so continue to cause the Plaintiffs to suffer loss of income.
    
21. The Plaintiffs have suffered and experienced frustration and inconveniences of delay and or rather the refusal by the First, Second, Third and Fourth Defendants in paying to the Plaintiffs the overdue bills for its hire car services being rendered.
    

The Plaintiffs Claim

(a) Liquidated damages in the amount of K4.2 million for hire car services rendered and invoices for payments issued under the contract.

(b) Damages for Breach of contract and loss of profits.

(c) General damages for frustration, inconveniences and financial hardship.

(d) Interest at 8% pursuant to Judicial Proceedings (Interest on Debt & Damages) Act.

(e) Costs

(f) Such further and other orders as the Court deems fit

4. The Plaintiffs' substantive claim is for breach of Hire Car Rental Agreement entered in to between the parties on the 2nd of August, 2011. The Plaintiff claim the First Defendant Belden Namah entered in this agreement in his capacity as the Deputy Prime Minister in the O'Neill/Namah Government during the political impasse period from 2011 to 2012.
   
5. The said Hire Car Rental Agreement between the parties was for the duration period of the political impasse commencing on the 2nd August, 2011 until the formation of the new government in 2012. Refer to paragraph 23 at page 5 of the Plaintiffs' dated 13th May, 2015.
   
6. It was apparent that the First Defendant through Department of Finance paid two (2) lots of payments to the Plaintiffs. On the 5th November, 2012 as sum of K300, 000.00 was paid to the Plaintiffs and on the 10th January, 2013 a sum of K600, 000. 00 was again paid to the Plaintiffs. A total of K900, 000.00 was paid. Refer to paragraph 8 of Vincent Yangwwari's Affidavit.
   
7. From the payment of K900, 000.00, the Plaintiffs outstanding debt of K4.2 million still remaining unpaid. On the 12th March, 2013, Department of Finance paid part payment of K2.2 million through BPNG Cheque No. 020894. When the Plaintiffs presented the said Cheque to BSP Bank Port Moresby, the cheque got bounced back because of the reason as claimed by the Plaintiffs the Department of Finance had put a "Stop payment" to the cheque.
   
8. Plaintiffs despite numerous follow ups with Defendants and especially with the Department of Finance commenced or instituted this legal proceeding to claim damages for breach of the said agreement. Refer to the statement of claim.
   

Amended Notice of Motion of 20th March, 2015

9. In the Amendment Notice of Motion filed on the 20th of March, 2015 the Plaintiffs moved for the following orders;
   
   • (i) The Defence filed by the First, Second, Third and Fourth Defendants on the 29th of May, 2014 be struck out for filing out of time pursuant to Order 9 Rule15(1) (b) and Order 7 Rule 6 (2) of the National Court Rules (NCR) and Section 9(a) (i) of the Claims By And Against the State Act, 1996.
     
   • (ii) Default judgement be entered against the First, Second, Third and Fourth Defendants pursuant to Order 12 Rule 25(a) & (b) and 32 of the National Court Rules, where the Defendants were required to file their Notice of Intention to Defend and Defence and the time has expired and the Defendants have not filed their Notice of Intention to Defend and Defence out of the required time under the Rules and the Claims By and Against the State Act 1996.
     
   • (iii) Alternatively, summary judgement is entered against the Defendants for damages claimed in the statement of claim pursuant to Order 12 Rule 38 of the National Court Rules with damages to be assessed.
     
   • (iv) Interest at 8% pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act, chapter 52,
     
   • (v) Cost of this application.
     
10. The Plaintiff relied on the affidavit of Abel Tol dated 13th May, 2015 in support of the Amended Notice of Motion. Tol deposed that he had conducted a File search on the 10th of March, 2015 and noted that the last document by the Defendants were both their Notice of Intention to Defend and Defence filed on the 29th May, 2014 was one day late as the 90 days period expired on the 28th of May, 2014. Plaintiff said Defendants did not seek leave of the court to file their Notice of Intention to defend and defence out of time.
    
11. Defendants have part – performed their obligations under the Vehicle Hire Agreement with the Plaintiff with payment of K900, 000. 00. Thereafter, claimed K4.2 million for liquidated loss of profit, general damages, interest at 8% and costs.
    
12. It is evident that the Defendants Defence was filed out of time and of course without the Leave of Court as per the requirement of Order 9 Rule 15 (1) (b), Order 7 Rule 6(2) of the National Court Rule (NCR) and section 9 (a) (i) of the Claims By And Against The State Act, 1996. There is a clear default on the part of the Defendants. However, the entry of the default judgement is not a matter of right. There are certain preconditions that have to be satisfied but even when all are satisfied, the decision whether to enter default judgement is a matter for the discretion of the primary Judge.
    
13. In the case of Agenes Kunton & ors v. John Junia & ors [2006] PGSC 34; SC 929 (28.09.06) the Supreme Court (Los, J and Cannings, J) observed that the motion for default judgement before the Primary Judge was in order and properly served and other formal requirements for entry of default judgement were satisfied but expressed concern about the implications of making the State liable without a trial. The primary Judge Kandakasi, J observed:
    

"There is a proof of compliance of section 5 [of the Claims By and Against the State Act] requirements. So that forms the basis for ground of default judgement. However, this not the end of the matter. Non-compliance of the Rules does not mean that judgement should automatically follow. There is discretion in the Court whether to not grant such application even if it is satisfied that the Rules or the application is perfect on the consideration of the relevant rules. I note this is one of the first cases I have come to deal with, if not the court, arising out of a prison escape. Prisoner is shot. Allegations of negligence or deliberate shooting. If it is to be resolved by default it might bring about a number of implications. Matter of public policy comes in to consideration as well"

14. In relation to Ground 2 of the Appeal in that His Honour took in to account irrelevant considerations, the Supreme Court stated:
    

"We consider that the primary Judge reasonably took in to account that this was a novel case, perhaps the first of its kind, and public policy made it desirable that the issue of liability be argued in a trial. It is relevant consideration for a Judge to consider the entry of judgement might set a precedent and what kind of precedent it would set" (emphasis mine)

15. In relation to public policy consideration in this present case is whether the Public Finance (Management) Act 1995 is applicable in Hire Car Rental Agreement entered in to between the parties on the 02nd of August, 2011 between the First Defendant in his official capacity as Deputy Prime Minister for and on behalf of O'Neill – Namah Government. In the present case it was obvious the provisions or requirements of Public Finance (Management) Act, 1995 (PF (M)A were not complied with. Mr. Joseph. K Abraham of counsel argued that the Vehicle Hire Agreement in the present case does not fall under the ambit of section 59 and 61 of the PF(M) A 1995 because the contract was a "contract for service" rendered out on a daily basis at fixed rates below K1000.00. Mr Abraham further submitted that the contract does not contain time frame or specific amount and that the contract can be terminated when First Defendant no longer required services and Plaintiffs invoices and settled.
    
16. It is now settled law that, the requirements of the PF(M)A are mandatory and must be met before there can be a valid contract for supply of goods and services to the State or any of its instrumentalities. This was the view held in Jack Livinai Patterson v. National Capital District Commission (2001) N2145 and also in The Independent State of Papua New Guinea v. Barclay Bros (PNG) (2004) N2507 and in Fly River Provincial Government v Pioneer Health Services. SCA No. 73 of 2000 (SC 705)
    
17. The Supreme Court in Fly River Provincial Government (supra) proposed that when an illegal contract has been part performed, the innocent party is entitled to damages on the basis of quantum merit. The principle in Keboki Business Group v. The State & Morobe Provincial Government [1985] PNGLR 30, SC 307 was discussed and the Supreme Court held that what mattered was that a decision has been made to award the contract to the appellant who relied on it and proceeded to perform the contract even though the Chairman of The Central Supply and Tenders Board did not sign and forward the appellant the relevant acceptance letter. In the Keboki Business Group Inc. Case, plaintiff claimed he did not receive a formal letter of acceptance.
    
18. In the present case, the plaintiffs did not go through the Public Tender Procedure in accordance with the PF (M) Act, therefore whether plaintiffs do have a valid contract is a vital matter for substantive trial to determine.
    
19. I will dismiss the Plaintiffs motion of 20 March, 2015.
    

________________________________________________________________
Kumbari Lawyers: Lawyers for the Plaintiffs
Nil Appearances, for the Defendants