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Cameron Constructions Ltd v Shorncliff (PNG) Ltd [2019] PGNC 243; N8073 (21 October 2019)

N8073

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS (COMM) NO. 1131 of 2011

BETWEEN:
CAMERON CONSTRUCTIONS LIMITED
Plaintiff

AND:
SHORNCLIFF (PNG) LIMITED
First Defendant

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Defendant

Waigani: Anis J
2019: 17 and 21 October

NOTICE OF MOTION –Order 5 Rule 9(a) – National Court Rules – party to proceeding – improper or unnecessary joinder – doctrine, privity of contract discussed - Court’s power

Cases Cited:

Beno Maoko v. Kevin (2008) N3293
Christian Life Centre v Associated Mission Churches of PNG &Ors (2002) N2261

Counsel:

Mr N Kopunye, for the Plaintiff/Respondent
Mr Vere, for the First Defendant
Mr M Pepi, for the Second Defendant/Applicant

RULING

21^st October, 2019

1. ANIS J: This is an application seeking orders to remove the second defendant as a party to the proceeding. The application was made on 17 October 2019. I reserved my ruling to today at 1:30pm.

2. This is my ruling.

MOTION

3. The second defendant’s notice of motion was filed on 17 September 2019. The main relief sought therein states, and I quote in part, The second Defendant be removed as a party under Order 5 Rule and Sub Rules (9)(a) of the National Court Rules for being unnecessarily named in this proceeding for not being a party to a Sub-Contract entered between the Plaintiff and the First Defendant.

4. The first defendant supports the application.

SOURCE

5. Order 5 Rule 9(a) of the National Court Rules states, and I quote, Where a party — (a) has been improperly or unnecessarily joined; or......the Court, on application by any party or of its own motion, may, on terms, order that he cease to be a party and make orders for the further conduct of the proceedings.

6. There was no contest by the parties regarding the source of the application. Regardless, I find reliance by the second defendant on Order 5 Rule 9(a) in its application to be correct.

BACKGROUND

7. The claim relates to monies that were allegedly due under a sub-contract. The sub-contract was entered into between the plaintiff and the first defendant on or about 11 July 2006 (sub-contract). The main contract was in relation to road-works. It is described as Contract No. CSTB-0612 of 2006 (main contract). It was entered into between the first and second defendants for rehabilitation road-works along the Okuk National Highway in Chuave in the Chimbu Province. The plaintiff claims, amongst others, that it had not been made aware of the fact that the first defendant was required to but had not obtained the consent of the second defendant, before the first defendant sub-contracted the road work to it. The plaintiff says that it had entered into the sub-contract in good faith. It says that it had performed the road work as required under the sub-contract. It says the final payments that had been due under the sub-contract had not been settled by the first and second defendants, that is, despite various demands it had made to them. It filed this proceeding to recover these monies. The total sum claimed for in its writ of summons and statement of claim, is K541, 049.70 plus interest and cost.

8. The first defendant, amongst others, denies in its defence the claim that it had not obtained the consent from the second defendant before signing the sub-contract with the plaintiff. It also argues, amongst others, that it has already paid in full the monies that it had owed to the plaintiff under the sub-contract, and that it does not owe the plaintiff anything.

9. The second defendant pleads, amongst others that, pursuant to the main contract, the first defendant shall seek its consent, before the first defendant could sub-contract any work under the main contact, to a third party. The second defendant submits however that in the present case, the first defendant had failed to obtain its consent before it sub-contracted with the plaintiff. It therefore denies knowledge and liability in relation to the sub-contract. It also pleads that it was not privy to the sub-contract and in support relies on the doctrine, privity of contract.

ISSUES

10. The main issue is this, whether, based on the sub-contract or otherwise, a legal relationship exists between the plaintiff and the second defendant, or whether the second defendant was unnecessarily joined in as a party to the proceeding.

LAW

11. The doctrine, privity of contract is applicable in this jurisdiction. There are already established case law on this, and I can only point to one or two here. For example, Justice Cannings in the case of Beno Maoko v. Kevin Ling and 1Or (2008) N3293, stated and I quote in part:

6 The doctrine of privity of contract is a common law principle that has been adopted as part of the underlying law of Papua New Guinea. Sevua J explained it in PNGBC v Barra Amevo and Bari Investments t/a Kainantu Pharmacy, Lennie Aparima and Orito Aparima (1998) N1726:

The doctrine of privity of contract is that, as a general rule, a contract cannot confer rights or impose obligations arising under it on any person except the parties to it. The scope of the doctrine means only that a person cannot acquire rights, or be subjected to liabilities, arising under a contract to which he is not a party.

12. Justice Lenalia, in the case Christian Life Centre v Associated Mission Churches of PNG & Ors (2002) N2261 also stated, and I quote:

In the law of contract, a contract creates rights and obligations only between the parties to it. A contract does not confer rights on a stranger nor does it impose any obligations on the same. It is a fundamental principle of common law, that no person can sue or be sued on a contract unless he or she is a party to it: Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] UKHL 1; [1915] AC 847. The doctrine of privity means a contract cannot as a general rule confer rights or impose obligations arising under it on any person except the parties to it.

SECOND DEFENDANT’S INTEREST IN THE PROCEEDING

13. I had asked counsel to refer to provisions in the main contract or the sub-contract which either expressly states or infers anything that would bind the plaintiff and the second defendant. The second defendant submitted that there was none. The first defendant supported the submissions of the second defendant. The first defendant submitted that the sub-contract had been entered into between itself and the plaintiff, and that the second defendant had not been a party to it.

14. The plaintiff, however, was unable to point to a provision in either one of the agreements that would show a binding contractual relationship in existence between itself and the second defendant. In fact, the plaintiff’s counsel I thought was upfront about the issue. Counsel explained the actual reason why the second defendant was joined in as a party. Counsel submitted that the second defendant was joined as a matter of convenience, that is, after the plaintiff’s final invoice had been refused by both the first and second defendants. Counsel drew the Court’s attention to the affidavit of Peter Cameron filed on 2 November 2011. I have considered the said affidavit which I think supported counsel’s submissions on point.

15. With these, my finding is this. I cannot see any document or evidence that shows or demonstrates the likelihood of a binding contractual relationship between the plaintiff and the second defendant. The plaintiff’s contractual relationship appears clearly to be with the first defendant, that is, pursuant to the sub-contract. The plaintiff’s own evidence proves these. I note that counsel for the first defendant has also confirmed the different relationships, that is, of the plaintiff, the first defendant and the second defendant.

SUMMARY

16. I therefore find that the second defendant was unnecessarily joined as a party. I will grant the application.

COST

17. Cost is discretionary. I will award cost to follow the event. I note that both the plaintiff and the first defendant have agreed in their submissions on cost. They submit that in the event that the application is granted, that cost should be divided equally between them. I see no reason why I should disagree with the plaintiff’s and the first defendant’s submissions on point. I will make an order for cost in the manner as suggested to by both counsel.

18. I will award cost equally against the plaintiff and the first defendant, that is, on a party/party basis which may be taxed if not agreed.

ORDERS OF THE COURT

19. I make the following orders:

(1)The second defendant’s notice of motion filed 17 September 2019 is granted.

(2)The second defendant is removed as a party to the proceeding.

(3)The second defendant’s cost of the notice of motion including its overall costs of the proceeding, is awarded equally against the plaintiff and the first defendant, on party/party basis to be taxed if not agreed.

(4)Time for entry of these orders is abridged to the time of settlement by the Registrar of the National Court which shall take place forthwith.
________________________________________________________________
Kopunye Lawyers: Lawyers for the Plaintiff

Gamoga & Co. Lawyers: Lawyers for the First Defendant
Solicitor General: Lawyers for the Second Defendant