N6702
 
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS No. 731 OF 2014

BOYD CONSTRUCTION 
Plaintiff 

AND:

SISTER ELIZABETH KOAI 
First Defendant

AND:
LEO KUGLAME 
Second Defendant

AND:
ST. JOSEPH RURAL HOSPITAL MINGENDE
Third Defendant

Kundiawa:  Liosi, AJ
2016: 14th November,
2017: 17th March 

PRACTICE & PROCEDURE – Contracts executed between parties – contract executed subject to availability of funding – Subject funding earmarked for another project – contract unenforceable – claim dismissed.

Case Cited:
Nil
Counsel: 
M. Yawip, for the Plaintiff
P. Kuman, for the Defendants
Ruling
17th March, 2017
1.	LIOSI AJ:  This is a claim by the plaintiff for alleged breach of a contract relating to storm water drainage and footpath works at St. Joseph Rural Health Hospital located at Mingende, Simbu.
  
2.	On 22nd August 2016, both counsels agreed to have the trial proceed by way affidavits and to tender affidavits by consent. There was no indication for cross examination of witnesses. The Court directed written submissions to be filed and exchanged before 6th September 2016 for parties to make submissions on 6th September 2016. This wasn’t done and the date for submissions to be filed was extended to 17th October 2016. On 17th October the matter was adjourned further for defendant’s submissions to be served on the plaintiff’s lawyers. This is the ruling. 

Alleged facts of the case
 	
3.	The alleged facts of the case are that a contract of maintenance relating to storm water drainage and foot pathways was awarded to the plaintiff by the St. Joseph Rural Hospital management after a board meeting. The plaintiff signed the contract and started the works until the contract was terminated. 
      
Plaintiff’s evidence
 
4.	The plaintiff relies on the affidavit of Boyd Kaman filed on 12th November 2014, and the Affidavit of Peter Apa filed on 03rd September 2014.

5.	Boyd Kaman’s evidence is that through the Governor’s office he submitted an expression of interest to do maintenance works through Provincial Infrastructure Improvement Funds. Only one submission was accepted the subject of this proceedings. He was called to a meeting with a Mr. Issac Baikuru, Coordinator Health Sector with the first and second defendants to inform them that payment will be made to the hospital then hospital will formally award him the contract. On 8th November 2013, the second defendant called him on the mobile informing him that the hospital board has approved the contract and asked him to go and sign the contract at 2 pm at the conference room. 

6.	The affidavit of Mr. Peter Apa confirms the Hospital Board’s meeting. Attached to his affidavit is the meeting minute. There were two (2) resolutions passed at that meeting.
1.	The management committee of Simbu Church Health Services resolved that Boyd Construction is given the task to carry out the construction work if and when the said funds become available.
2.	The construction will be labour built contract and the funds will be managed by the Church Health Services through it’s existing structure. 
      
Defendant’s Evidence 

7.	The defendants rely on the two Affidavit of Sr. Elizabeth Koai  both documents numbered 12 & 13 and both filed on 22nd December 2014. In document number 12 affidavit at paragraph 4, she says that at her meeting with Boyd Kaman, he said that the Governor knows him well personally. That if he requested for funds for St. Joseph Hospital it will be funded without delay.
 
8.	At paragraph five (5) he further advised that for Kaman and Issac to excess funds from the Governor, they require an urgent hospital board meeting minutes identifying work that is needed at the St. Joseph’s Rural Hospital. They also requested the board to resolve to appoint a qualified person to do scoping of the work and to cost K250, 000.00 so they would present it to the Governor for funding.
 
9.	 At paragraphs six (6) she quotes Mr. Kaman as saying “we need to act fast or the health funds from the Governor’s office will be depleted and we will miss out.” She described him as acting desperately. 

10.	 Mr. Boyd Kaman further advised her that he owns and operates a construction company trading under the name Boyd Construction and also proposed to her that his company will be contracted to do any construction work for the St. Joseph Rural Hospital when K250, 000.00 from the Governor is paid to the hospital.

11.	Having believed Mr Boyd Kaman and Mr. Isaack Baikuru, she and the second defendant called up an urgent Board meeting and informed the members of the Board about what Mr. Kaman and Isaack Baikuru had said to her. In that meeting the board also believing Mr. Kaman and Isaack identified pathways and line drainage works that was very much a need at and around the hospital premises. The board also resolved to engage Mr. Joseph Kaman a private contractor who is the bigger brother of Mr. Boyd Kaman to do documentation on scoping of the pathways and line drainage work and also to do costs for the same to the tune of K250, 000.00 as proposed by Mr. Boyd Kaman himself. The Board further resolved to engage the plaintiff company owned by Mr Boyd Kaman to construct pathways and line drainage works in and around the hospital as proposed by himself.

12.	After the board meeting they engaged Mr Joseph Kaman who inspected the sites and documented the scope of work on pathways and line drainage and did up the costing to K250, 000.00. That document on scope of work and costing was then given to Mr Boyd Kaman to present to the Governor’s office for funding. Annexed as “A” to her affidavit is the said scope of work document and costing compiled by Joseph Kaman.

13.	After the board’s resolution to engage the plaintiff’s company to undertake work on pathways and line drainage, Mr. Boyd Kaman went to her the next day with a draft contract agreement and forced and induced her and the second defendant to sign. She informed Mr. Boyd Kaman that they would not sign or enter any agreement as yet for the pathway and line drainage works although they have approved his company to undertake the work in their board meeting for the reason that the funds from the Governor’s office have not reached them. She further emphasized and assured him that his company will undertake the said work on pathways and line drainage as and when the Governor release the K250,000.00 for which he said he was negotiating with the office of the Governor. 

14.	However, she says Mr Boyd Kaman insisted that she and the second defendant should sign the contract agreement and that he would present the signed copy of the same with the completed scope of work document and the board’s meeting minutes to the Governor before he could release the funds of K250, 000.00.

15.	She says interestingly a few weeks later the Hon. Governor personally went to Mingende St. Joseph Rural Hospital and presented a cheque to the Hospital to the value of K250, 000.00. She and the second defendant received the said cheque and thanked the Governor for his generosity.
 
16.	After seeing the cheque she and the second defendant were surprised that the cheque was a counter-funding cheque for the new pediatric ward or children’s ward for St. Joseph Rural Hospital as shown on the cheque remittance advice. This is annexure “D” on her affidavit.
 
17.	The first and second defendant then realized that the cheque given to them by the Governor was from a submission she and the St. Joseph Rural Hospital Board previously submitted to the office of the Governor seeking counter-funding for the newly constructed pediatric ward when they were confronted with short falls to complete it. Such funded submission was submitted to the office of the Governor sometime in early May 2013. The submission is annexure “E” on the affidavit.
 
18.	Having learnt of the payment of K250, 000.00 to St. Joseph Rural Hospital by the Governor, Mr. Kaman approached her to undertake the works on pathways and line drainage but she told him that he cannot start work as the K250, 000.00 from the Governor was for the construction of the children’s ward and not for pathways and line drainage work. She further advised him that she and the hospital board cannot divert K250, 000.00 for the pediatric ward to Boyd construction for work on pathways and line drainage. After the cheque was presented by the Governor, the defendants decided to terminate his contract agreement due to his mischievous conducts and actions. However, they decided to keep him to perform the work as and when the hospital has funds available in the future. A letter to that effect was caused to Mr. Boyd Kaman dated 24th June 2014. It is annexure “F”.

19.	She says despite this Mr Boyd Kaman defied and ignored her advice and without her knowledge has gone around recruiting labour from the public telling them to work at the hospital clearing drainage promising them that he will pay them. As a result some twenty (20) youths cleared the main drains at the hospital and confronted her office for payments. Consequently, she made payments which was not in line with the hospital’s budget. He has also misled a lot of people and has solicited monies and credited store goods from several trade store operators and individuals telling them that he has been awarded a K250, 000.00 contract work by St. Joseph Rural Hospital and would be re-paying them with interest when he is paid. Further he has hired private motor vehicles on the same basis. The creditors letters sent to the hospital are annexed “G” to her affidavit.
 
20.	 Due to the actions and conduct of Mr Boyd Kaman as stated in the preceding paragraph St. Joseph Hospital has paid out unbudgeted expenses to several individuals which he (Boyd) has engaged without her approval and knowledge. They now have learned that he is a hazard to St. Joseph Rural Hospital and that the hospital board will decide at the next meeting whether to retain his company to undertake pathways and line drainage work or to terminate his company from performing the said work when the funds are available. 
       
Document 13 affidavit 
21.	In response to Mr. Peter Apa’s affidavit at paragraph five (5), she says the meeting was convened on advice of Mr Boyd Kaman who lied and misled her and the chairman Leo Kuglame into believing him that he would need the meeting minutes to present to the Governor of Simbu as a requirement to seek funding.

22.	 Paragraph 7 of Peter Apa’s affidavit is not true as they have not engaged another contractor as they do not have funds for the work on line drainage and pathways scope of works. 

       Plaintiff’s submission  
23.	The plaintiff’s claim of K250, 000.00 is for the construction of new walkways, roof over intensive care unit to medical ward, 2 culvert 900 mm, 3 line drain staff houses to TB ward, drain line to paediatric ward to boarder hospital, elementary school and council. 
24.	The plaintiff submits it’s a clear case. There was a duly signed contract executed without any duress. Such evidence is corroborated by Peter Apa. The contract was signed and sealed after the board meeting.
 
25.	Consequently, the plaintiff started work on 9th November, 2013. The cheque was given by the Governor on 3rd December 2013. The contract was terminated after the cheque was received. The defendants say the plaintiff forced them to sign the contract on the basis of his knowledge that the Governor was to present that K250, 000.00 cheque. The plaintiff argues it is immaterial that they were induced to enter into a contract as the contract was between the defendants and the plaintiff and has nothing to do with the Governor’s office.
26.	There was offer and acceptance. Consequently, the plaintiff performed the contract and incurred expenses and hence the defendant is liable to pay damages.  

Defendant’s submission  
27.	This is a claim by the plaintiff for alleged breach of a contract relating to drainage and footpath works against the defendants. 
   Reply to defence 
The plaintiff filed a reply to the defence on 16 July 2014, essentially maintaining the pleadings in the writ of summons and effectively joined issues on all aspects of the defendants defence. 
      The trial 
28.	Trial was held on 22nd August 2016 in Kundiawa. By consent, the plaintiff tendered two (2) affidavits. They are Exhibit “P1” the affidavit of Boyd Kaman sworn and filed on 12thNovember 2014 and Exhibit “P2” which is the affidavit of Peter Apa sworn and filed on 3rd September 2014. There was no cross – examination by either party.
 
29.	The defendants tendered two affidavits. They are Exhibit “D1” the affidavits of Sister Elizabeth Koai sworn and filed 22ndDecember 2014 (court document12) and Exhibit “D2” sworn and filed 22nd December 2014 (court document 13). The Court then directed parties to file written submissions on or by 6th September 2016 and for matter to return that day for verbal submissions. 
Onus – Burden of proof 
30.	It is trite law that the civil burden of proof on the “balance of probabilities” lies with the plaintiff. He who asserts must prove. This burden of proof is both legal and evidentiary and the plaintiff must proof liability as well as damages against the defendants. Even if the plaintiff succeeds in liability alone, damages as claimed must also be proven before the court can grant such reliefs as sought. Damages will not be granted automatically. 
       Liability 
31.	The plaintiffs must prove on the balance of probabilities the following; 
(a)	There was a valid, legal and binding contract between the parties;
(b)	This contract was breached; and 
(c)	 As a result of the breach, there was damages suffered 

Damages 
32.	It follows that if the plaintiffs prove there was a valid and binding contract and that there was a breach then it must prove, by credible evidence, that it suffered damages as a direct result of the breach. 
•	Issues arising 
33.	The defendants submit that the following legal and factual issues arise for consideration by this Court; 
(a)	 Whether there was a valid contract, entered into and was binding on the parties; 
(b)	 If so, whether there was a breach of this contract and; 
(c)	 whether damages did arise and if so what are those damages.  
(d)	 If damages did arise, has it been proven and can it be recovered at all. 
       Defence 
34.	The defendants denies the entire claim by the plaintiff on both liability and damages and says; 
       (a) The plaintiff was told not to perform any work as there was no funding. 
       (b) The plaintiff, through its manager, Boyd Kaman misinformed and misled the first and second defendants into signing the purported contract but there was no specific amount of K250,000.00 as alleged by the plaintiff. 
       (c) The defendants are not aware of the plaintiff spending K12, 000 as pleaded in the writ of summons because no work was ever done by the plaintiff. 
35.	The plaintiff filed a reply to the defence essentially maintaining the pleadings and joined issues on defendant’s defence. The plaintiff relies on the affidavit of Boyd Kaman and Peter Appa. 
      Threshold issue 
36.	The threshold issue is whether there was a contract between the parties. Issues 2, 3, & 4 are dependent on the finding in the affirmative of issue one (1). If the Court finds there is no contract. That is the end of the matter. 
       Failure to prove contract  
37.	The defendants have denied the existence of any contract on the basis that the entire arrangement was subject to availability of funding. 
38.	The evidence by the plaintiff itself exhibit “P2”of Peter Apa sworn and filed on 3rd  September 2014 annexes a copy of the meeting minutes of the Church Health Service Simbu Province Board on 8th November 2013. Agenda one (1) resolution one (1) that was passed states; 
       “1. Management Committee of Simbu Church Health Services resolved that Boyd Construction is given the task to carry out the work if and when the said fund  becomes available.”  
        Resolution 2 reads as follows; 
        “2. That this construct (sic) will be labour built contract and funds will be managed by the Church Health Services through existing structures.” 
39.	The defendant submits this clearly meant the said contract was subject to funding and even when funds became available it was to be managed and paid by the defendants subject to work done upon satisfactory completion of the job. The letter of 24th June 2014 is critical and explains the entire issue clearly. The defendants submits the entire claim must fail on issue one (1) alone. The plaintiff has not proven on the balance of probability that there is a valid contract and the claim must be dismissed. 
        Ruling  
40.	In the absence of cross examination of either parties witnesses. The Court proceeded on as is where is basis to determine this case. Consequently the Court had to look at the affidavits of each witnesses. 
41.	Having done that, I am inclined to believe the evidence of Sister Elizabeth Koai who in my view appears to explain everything. I believe her to be a credible and truthful witness. In my view, her explanation of the events leading up to the actual signing of the contract is significant very truthful and convincing. Annexure “P 2” of Mr. Peter Apa’s evidence is a copy of the meeting minutes of the Church Health Services, Simbu Provinces board on 8th November 2013. Resolution number one (1) of agenda number (1) clearly states; “
       “1. Management Committee of Simbu Church Health Services resolved that Boyd Construction is given the task to carry out the work if and when the said fund becomes available.”  
           Resolution 2 reads as follows; 
       “2. That this construct (sic) will be labour built contract and funds will be managed by the Church Health Services through existing structures.” 
42.	It is clear that the plaintiff was to undertake the contract if and when the funding was available. The funding that was received was clearly for another project which was the Paediatric Ward for which submission was done in 2013. That explanation is documented in the plaintiff’s own evidence contained in the affidavit of Peter Apa. 
43.	In the circumstances, I dismiss the entire claim and the proceedings. I order costs of the proceedings to be paid by the plaintiff to be taxed if not agreed. 

Ruling accordingly,
________________________________________________________________
Public Solicitor	: Lawyer for the Plaintiff
Kuman Lawyers	: Lawyer for the Defendants