N8560

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1795 OF 2015 (COMM)

BETWEEN:
ASKOPINA LIMITED
Plaintiff

AND:
NATIONAL CAPITAL DISTRICT
COMMISSION
Defendant

Waigani: Hartshorn J,
2019: 2nd December

CONTRACT – breach of agreement – Trial – plaintiff claims for loss and expenses incurred as a result of breach of contract by defendant – whether contract was entered into by the parties in breach of the Public Finance Management Act – whether defendant liable to pay plaintiff for services rendered -  plaintiff not entitled to damages under the principles of quantum meruit – contract is void and unenforceable for non-compliance with PFMA – claim dismissed - ss. 59 and 61 Public Finance Management Act,

Cases Cited:
Fly River Provincial Government v. Pioneer Health Services Ltd (2003) SC705 The State v. Brian Josiah (2005) SC792
National Capital District Commission v. Jim Reima (2009) SC993
Global Constructions Ltd v. NCDC (2011) N4275
Yamanka Multi Services Ltd v. NCDC (2016) N6556

Counsel:

Mr. S. Goa, for the Plaintiff
Mr. M. Boas, for the Defendant

2nd December, 2019

1. HARTSHORN J: The plaintiff (Askopina) and the defendant, National Capital District Commission (NCDC) entered into a written agreement on 25th July 2014 for Askopina to provide the services of amongst others, vending and distribution to NCDC and the general public in the National Capital District (NCD) (Agreement). NCDC would support Askopina and give Askopina the right and authority to coordinate and operate the collection, processing, distribution and sale of betelnut within NCD. NCDC would also obtain all approvals and the authorisation necessary to enter into and perform its obligations under the Agreement per clauses 4.3(a) and 14 of the Agreement.

2. The Agreement was for a term of 10 years. Askopina pleads that the Agreement was deemed to be terminated after 15th July 2015 after Askopina had given written notice to NCDC of NCDC's breaches of the terms of the Agreement and after NCDC had failed to remedy those breaches.

3. Askopina sues NCDC and seeks amongst others K4,350,000.00 from NCDC for its incurred expenses and losses.

Submissions

4. Askopina contends that the parties did not comply with the requirements of the Public Finance (Management) Act 1995 (PFMA) when they entered into the Agreement because NCDC acted in bad faith and misrepresented to Askopina that there was no requirement to comply with the PFMA.

5. Askopina further contends that even if the court finds that the Agreement is void due to non-compliance with the PFMA, the court should be slow to dismiss the claim. The court should find in favour of Askopina on the basis that Askopina rendered services to NCDC at NCDC's request and hence Askopina has a right of restitution, it is submitted. It is entitled to be compensated for the expenses incurred and losses suffered for complying with its obligations under the Agreement as held by the Supreme Court in Fly River Provincial Government v. Pioneer Health Services Ltd (2003) SC705.

6. Askopina contends that it has performed its obligations under the Agreement. As a result of this, Askopina incurred expenses and suffered losses. NCDC has not paid and/or compensated Askopina for the expenses incurred and losses suffered. Therefore it is contended, Askopina is entitled on a quantum meruit basis to be compensated.

7. NCDC contends that Askopina's claim should be dismissed for non-compliance with ss. 59 and 61 PFMA and as such the Agreement is null and void and unenforceable. It is contended that Askopina misrepresented to NCDC that it had the financial capacity to perform its duties and responsibilities and as such induced NCDC to enter into the Agreement with Askopina.

8. Furthermore, it is contended that Askopina failed to carry out its duties and obligations under clause 4.2 of the Agreement and so is not entitled to claim for breach of contract as the agreement is void. As to Askopina's claim for a quantum meruit, NCDC contends that the claim is not pleaded in the statement of claim and the circumstances do not warrant such a claim as no services were provided by Askopina to NCDC. The actions of Askopina have frustrated the agreement it is contended.

Consideration

9. Askopina contends that there is no dispute that the parties did not comply with the requirements of ss. 59 and 61 PFMA, but that the court should be slow to dismiss the claim on this basis. 

10. Askopina relies on the Fly River case (supra). That case held that amongst others:

"2.	The requirements under ss.59 and 61 of the PF(M)A are mandatory and where a contract is entered into in breach of those requirements, it is illegal and is therefore null, void and unenforceable.

3.	The requirements under the PF(M)A are to enable transparency in all public contracts and to safeguard against corruption and enable securing of fair contracts with public institutions and or bodies for the best services at a competitive or best price.

4.	A person dealing with the State or any of its arm or instrumentality or a public institution to which the Act applies, is bound to comply with the requirements of the Act and every person dealing with such institutions or bodies are deemed to be aware of these requirements.

5.	A failure to ensure compliance of the requirements of the Act operates to the detriment of the party contracting with the State or a public authority to which the Act applies.

6.	Where an illegal contract is part performed an action for recovery or restitution is available if not already paid for in equity to avoid unjust enrichment condition on the innocence of the contracting parties.

7.	In the present case, the contract between the Appellant and the Respondent is null and void for non-compliance of the public tender and Minister for Finance’s approval under the PF(M) A.

8.	However, since the contract was part performed and the Appellant received goods and service from the Respondent, in equity the Respondent is entitled to pursue its claim for a recovery of the costs and expenses it has incurred by way of restitution. But this is conditional on showing its innocence in the creation of the illegal contract."

11. On the authority of the Fly River case (supra), as the requirements under ss. 59 and 61 PFMA are mandatory and in this instance there is no dispute that the parties did not comply with those requirements, the Agreement is illegal and is therefore null, void and unenforceable. Further, the Agreement is, "null and void for non-compliance of the public tender and Minister for Finance's approval under the PF(M)A."
12. In regard to the claim that NCDC acted in bad faith and misrepresented to Askopina that there was no need to comply with the provisions of the PFMA, these issues are not pleaded in the statement of claim. They are raised however, in the legal issues for determination to which the parties have agreed.

13. Again, in the Fly River case (supra), it was held amongst others that:
"4.	A person dealing with the State or any of its arm or instrumentality or a public institution to which the Act applies, is bound to comply with the requirements of the Act and every person dealing with such institutions or bodies are deemed to be aware of these requirements.

5.	A failure to ensure compliance of the requirements of the Act operates to the detriment of the party contracting with the State or a public authority to which the Act applies"
14. To my mind, as it has been held by the Supreme Court that, "every person dealing with such institutions or bodies are deemed to be aware of these requirements.", the claims based on bad faith and misrepresentation will fail as Askopina is deemed to have been aware of the subject requirements.
15. In regard to the claim to be compensated on a quantum meruit, I note that in the Fly River case (supra), such a claim is conditional on the party contracting with the State showing its innocence in the creation of an illegal contract. This appears to conflict with being, "deemed to be aware of these requirements."
16. I note further that in the Supreme Court case of National Capital District Commission v. Jim Reima (2009) SC993, it was held that NCDC is an entity of the State, for the purposes of the Claims By and Against the State Act (Claims Act): see also Global Constructions Ltd v. NCDC (2011) N4275 and Yamanka Multi Services Ltd v. NCDC (2016) N6556.

17. Section 2A Claims Act is as follows:

"2A.	Claim against the State not enforceable in certain circumstances.
(1)	In this section—
"Authority to Pre-commit Expenditure" an Authority to Pre-commit Expenditure issued under Section 47B of the Public Finances (Management) Act 1995;
"Integrated Local Purchase Order and Claim (ILPOC)" means Finance Form 4A—Integrated Local Purchase Order and Claim issued in accordance with the Finance Instructions under the Public Finances (Management) Act 1995.
(2)	A claim for the price arising from the sale of property or stores or for the supply of goods or services to the State shall not be enforceable, through the courts or otherwise, unless the seller of the property or stores or the supplier of the goods or services produces—
(a)	a properly authorized Integrated Local Purchase Order and Claim (ILPOC); 	or
	(b)	an Authority to Pre-commit Expenditure,
relating to the property or stores or goods or services, the subject of the claim, to the full amount of the claim.
(3)	The provisions of this section apply to an alleged sale of property or stores or to an alleged supply of goods or services after 1 March 2003."

18. This section applies amongst others, in regard to the supply of services to the State after 1st March 2003. That is after the Fly River case (supra). Section 2A(2) is specific. "A claim for the price arising from .....the supply of services to the State shall not be enforceable, through the courts or otherwise .... "

19. I acknowledge that this Claims Act argument has not been pleaded or argued by NCDC. I refer however, to the Supreme Court decision inThe State v. Brian Josiah (2005) SC792. In that case the Supreme Court said the following concerning the non-pleading of a “limitation” defence:
“We therefore cannot accept Mr. Dataona’s submission’s that it is a statutory defence which should have been raised in the pleading.  If a claim is not sustainable at law……. 	what difference would pleading of statute of frauds and limitations make?  Can failure to plead cure a clear defect in law? Certainly not”
20.This decision is binding on this court. In this instance, there is a statutory provision which provides, in my view, that a claim in this proceeding shall not be enforceable. To use the words in Brian Josiah (supra), can a failure to plead allow a statute to be disregarded? To my mind therefore, I am bound to consider that statutory provision on the authority of Brian Josiah (supra).
21. Here, there is no evidence of the Authority or ILPOC referred to in s. 2A(1)Claims Act and no pleading in the statement of claim that either were issued for the Agreement. Consequently, the claims of Askopina are not enforceable. Given the above, it is not necessary to consider the other submissions of counsel.

Orders

22.     It is ordered that:

a)	This proceeding is dismissed;

b)	The plaintiff shall pay the costs of the defendant of and incidental to this proceeding;

c)	Time is abridged.
__________________________________________________________________Fiocco & Nutley Lawyers: Lawyers for the Plaintiff
Kuman Lawyers: Lawyers for the Defendant