N10149

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 118 OF 2016 (COMM)

BETWEEN:
OTIS ELEVATOR COMPANY (PNG) LIMITED
Plaintiff

V

MELANESIAN TRUSTEE SERVICES LTD
First Defendant

AND
MINERAL RESOURCES DEVELOPMENT COMPANY LIMITED
Second Defendant

Waigani: Anis J
2023:  28th February
2023:  7th March

CONTRACT – Claim in debt recovery – denial premised on various invoices – denial also based on liability issues raised between the first and second defendants premised on indemnity claims –preliminary matter – whether there is a cause of action pleaded against the second defendant - considerations – whether privity of contract exists between the plaintiff and the second defendant – whether claim for indemnity between the first and second defendant properly before the Court – whether there were cross or counter claims filed – want of cross or counter claims filed fatal to the indemnity claims – whether liability a serious issue on claims made against the first defendant

Cases Cited:
PNGBC v Burra Amevo [1998] PNGLR 240
Beno Maoko v. Kevin Ling (2008) N3293
Albert Areng v. Gregory Babia (2005) N2895
Soka Toligai v. Sir Julius Chan and Ors (2012) N4842
Dekenai Constructions Ltd v Tati Keke Resources Ltd (2019) SC1800
Kerry Lerro v Phillip Stagg (2006) N3050
Phillip Takori v Simon Yagari (2008) SC905
Peter Kama v David Wereh (2019) N7926

Counsel:
K Pato, for the Plaintiff
J Sirigoi, for the First Defendant 
A Ayako, for the Second Defendant

DECISION

7th March, 2023
1.	ANIS J:	Trial on liability for the matter commenced on 6 December 2022.  Presentation of submissions followed through on 28 February 2023.  I reserved my ruling thereafter to a date to be advised.
2.	This is my ruling.
BACKGROUND
3.	This is a debt recovery proceeding.  The plaintiff is seeking to recover K291,041.48 plus interest and costs.  The sum represents a total of 47 invoices which the plaintiff claims it had issued to the first defendant for payment for work it had rendered, but which continue to remain outstanding.  The invoices, according to the plaintiff, represent services rendered under Additional Services category of a service contract.  The first defendant had engaged the plaintiff to service and maintain the elevators of a building called Pacific Place Building.  The building is now called MRDC Haus (the Building).  The service contract was signed on 5 December 2003 (service contract).  The plaintiff would maintain the elevators and the first defendant would pay the plaintiff for services rendered.  The building is owned by Pacific Properties Trust (PPT).  At the material time, the first defendant was PPT’s appointed trustee.
4.	The service contract was terminated on 26 May 2014.  There is no issue with termination of the said contract.  However, after that (i.e., termination), the plaintiff issued or brought to the attention of the first defendant the 47 invoices.  The plaintiff demanded the first defendant to settle them in the sum of K291,041.48 (debt).  The debt remained outstanding, according to the plaintiff, thus it filed this proceeding.
5.	What is also relevant to note for this purpose is this.  About 2 weeks after the service agreement was terminated, and on 10 June 2014, PPT terminated the first defendant as its trustee.  PPT then appointed the second defendant as its new trustee.  When the plaintiff learnt of the change, it took steps belatedly to join the second defendant to the proceeding, that is, on 4 April 2022.  Leave was also granted on that day to the parties to amend and file their pleadings.
EVIDNCE
6.	All the evidence were tendered by consent of the parties without the benefit of cross-examination.  The affidavits tendered were each given exhibit numbers.
PRELIMINARY MATTER/ OBSERVATIONS/ COMMON GROUND
7.	At the commencement of hearing on closing submissions, Mr Pato for the plaintiff raised a preliminary matter.  Counsel enquired whether the hearing was for liability only.  I heard submissions from all counsel who were also unable to assist with a confirmed answer.  In the end, all the parties agree that the Court should determine liability first and, subject to its ruling, proceed to hear a separate trial on quantum.  The trial proceeded on that basis.
8.	In regard to the main issue, which is liability, I make the following observations.  First, I note that the plaintiff’s claim is premised solely on the contractual relationship it had with the first defendant, namely, the service contract.  The first defendant does not deny the service contract and its validity.  The said relationship had lasted for over 10 years.  Evidence adduced by the first defendant under Exhibit D1 (affidavit of Jerry Kootz Simon filed on 15 March 2017) shows, amongst others, the first defendant admitting to some of the invoices that had been rendered by the plaintiff.  At this juncture, it would seem like a simple case where liability or judgment may be entered against the first defendant with damages to be assessed.

SECOND DEFENDANT’S INTEREST
9.	However, the first and second defendants raised other matter(s) to make their arguments against liability which I believe I must deal with first, that is, to avoid confusions or if not give clarity to the main issue.  They refer to and rely on 2 documents, and I must say that the documents have been pleaded as well as adduced in the evidence.  The first document is called Deed of Retirement and Appointment (Deed), whilst the second document is called Deed of Assignment and Assumption (Assignment Deed).  The Deed was signed on 10 June 2014 by the 2 defendants with a third party, who was a retiring manager of PPT called Pacific Equities and Investment Limited.  The Assignment Deed, on the other hand, was signed on 23 August 2016 between the first and second defendants.  The 2 documents (2 deeds) are adduced in the evidence of the second defendant, namely, Exhibit DD1 (affidavit of Barry Aki filed on 5 October 2022).  
10.	In summary, the defendants, premised on the 2 deeds, are seeking indemnity against each other, in regard to the plaintiff’s claim for payment of its invoices under the service contract.
11.	In considering, I make the following observations.  I observe that the plaintiff is not privy to the 2 deeds.  I also observe that this was also the main part of the submissions of the second defendant; that there was no privity of contract between the second defendant and the plaintiff in regard to the pleaded action.  The second defendant also submits that the pleading is ambiguous, and that no cause of action is pleaded against it.  I note that the plaintiff and the first defendant did not make out clear arguments against these contentions by the second defendant.
12.	I would uphold the submission of the second defendant but not strictly based on its stated reasons.  Let me elaborate.  First, it is not disputed that no privity of contract existed between the 2 parties in regard to the service agreement.  The only parties to the service contract were the plaintiff and the first defendant.  So, where does that leave the plaintiff’s interest with the second defendant?  I uphold the second defendant’s defence that no privity of contract exists or existed between itself and the plaintiff in regard to the service contract or the 2 deeds.  See cases:  PNGBC v Burra Amevo [1998] PNGLR 240, Beno Maoko v. Kevin Ling (2008) N3293, Albert Areng v. Gregory Babia (2005) N2895, Soka Toligai v. Sir Julius Chan and Ors (2012) N4842 and Dekenai Constructions Ltd v Tati Keke Resources Ltd (2019) SC1800.  
13.	Secondly, when I consider the amended statement of claim, I must say that I cannot see anything there that would constitute a valid cause of action by the plaintiff against the second defendant.  See cases:  Kerry Lerro v Phillip Stagg (2006) N3050, Phillip Takori v Simon Yagari (2008) SC905 and Peter Kama v David Wereh (2019) N7926.  I find the amended statement of claim to be poorly pleaded in terms of making a case against the second defendant.  Paragraphs 13 and 14 therein refer to the 2 deeds.  However, it is clear that the plaintiff is not privy to the 2 deeds.  It has no contractual relationship or interest there.  References to them and of what the clauses say, in my view, are of no consequences to the plaintiff’s claim against the first defendant.  It is therefore pointless, in my view, to look further into the 2 deeds and consider their terms and conditions.
14.	Thirdly, I also find the defendants’ purported claims for indemnity against each other, as matters that are not properly before the Court for consideration.  They are raised without proper pleadings.  There are no cross or counter claims filed by the first defendant against the second defendant or vise-versa.  The defendants in this proceeding have filed separate defences that only respond to the plaintiff’s cause of action.  As such, any inferences, or suggestions in their defences that one should be liable and the other should be indemnified, which were clearly demonstrated in their submissions, have no foundations in the pleadings.  I dismiss them as unfounded.
15.	And in conclusion, I therefore dismiss the plaintiff’s claim against the second defendant.
ISSUE
16.	Having removed the second defendant from the proceeding, the main issue therefore is whether the plaintiff has established liability, or whether liability is really in issue.
SERVICE CONTRACT
17.	The plaintiff’s relationship with the first defendant is, as stated above, obvious, and not disputed.
18.	A true copy of the service contract is attached as annexure A to Exhibit P1 (affidavit of Andrew Tiernan filed on 19 February 2016).
19.	Copies of the various invoices purportedly rendered by the plaintiff are adduced in evidence under Exhibit P1.  The first defendant has provided its response to the invoices.  As stated, it has admitted to a few of the 47 invoices.  However, I note that a majority of them have been disputed by the first defendant.  Its rebuttal evidence is Exhibit D1.  Its denial includes invoices which it claims had dates that surpasses the termination date of the service contract.  Its denial also includes claims that no services were requested or authorized.  These, in my view, are matters or issues that will be reserved for determination at the trial on assessment of damages.
20.	However, clarity, in my view, may be required now on the extent of the contractual period particularly after its termination and what was expressly agreed to between the parties, concerning services that may occur after 26 May 2014.  The termination letter is dated 26 May 2014.  It was written by the first defendant to the plaintiff.  A copy of the letter is adduced in evidence, that is, annexure C to Exhibit P1.  The relevant part, for this purpose, reads:
The Agreement will be terminated on the expiry of ninety (90) days from the date of this notice.  
In the meantime, we require you Company to continue providing your services as per the Service and Report Specification Schedule and Emergency Responses stated in the Agreement.
21.	When I interpret that, what it simply means is that a further 3 months period (estimate) was permitted by the first defendant, that is, for the plaintiff to continue to service the lifts in the building as per the terms of the service contract.  Three months from 26 May 2014 means that the final day for the extended period of the service contract was 26 August 2014.
FINDINGS ON LIABILITY 
22.	My findings on liability are as follows.  First, the service contract was binding upon the parties to it, which were the plaintiff and the first defendant.  The plaintiff’s various outstanding invoices may all have been rendered as claimed.  However, some or most of the invoices are disputed by the first defendant.  
23.	The cut off mark for issuance of the invoices by the plaintiff, based on what was agreed to between the parties, should be the 90th day from 26 May 2014.  I will estimate that to be 3 months extension, and if we compute time from the 26th of May 2014, a month after that will be 26th June 2014, following by 26th July 2014, and the 3rd month will end after 26th August 2014. 
24.	When I refer to the amended statement of claim, the earliest invoice is dated 15 February 2012.  So, for purposes of computing time, I find the first defendant liable to pay a sum which will be assessed separately.  However, the first defendant’s liability shall be limited from the period commencing 15 February 2012 to 26 August 2014.  Invoices that are issued outside this timeline are invalid as they would have been issued outside the term and extended term of the service contract after its termination.  Invoices that are issued within the said period will be subject to further assessment at a later date.
SUMMARY
25.	In summary, I firstly dismiss the plaintiff’s claim against the second defendant.
26.	Secondly, I find the first defendant liable for services rendered under the service contract for the period commencing 15 February 2012 to 26 August 2014.  Having made a general finding of liability against the first defendant, the matter will be set down for assessment of damages.  
27.	A separate trial will be heard unless the parties decide to settle out of Court.
COST
28.	An award of cost in this type of claims is discretionary.  In regard to the claim against the second defendant, I will order the plaintiff to pay the second defendant’s cost of the proceeding, that is, on a party/party basis to be taxed if not agreed.
29.	In regard to the claim against the first defendant, I will order the first defendant to pay the plaintiff’s costs of the proceeding on liability, that is, on a party/party basis to be taxed if not agreed.

ORDERS OF THE COURT:
30.	I make the following orders:
1.	The plaintiff’s claim against the second defendant is dismissed in its entirety.
2.	The plaintiff shall pay the second defendant’s cost of the proceeding on a party/party basis which may be taxed if not agreed.
3.	Judgment on liability is entered against the first defendant with damages to be assessed which shall be limited to the invoices that are issued for the period commencing 15 February 2012 to 26 August 2014.
4.	The first defendant shall pay the plaintiff’s cost of this proceeding on liability on a party/party basis which may be taxed if not agreed.
5.	This matter is now adjourned to 9:30am on Thursday 9 March 2023 for Directions/Status Conference.
6.	Time for entry of these orders is abridged to the date and time of settlement by the Registrar of the National Court which shall take place forthwith.

The Court orders accordingly
________________________________________________________________
Posman Kua Lawyers:	Lawyers for the Plaintiff
Albatross Lawyers:	Lawyers for the First Defendant
Legal Services Unit:	Lawyers for the Second Defendant