N11054
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (COMM) NO. 40 OF 2023 (IECMS)

BETWEEN
PNG POWER LIMITED
Plaintiff

AND:
NIUPOWER LIMITED
Defendant

Waigani: Carey J
2024: 23rd & 25th October 

CONTRACT LAW – Interpretation of applicability of Clause in Power Purchase Agreement – Jurisdiction of the National Court – Process for addressing disputes – Equitable relief and relevance 

The Plaintiff asserts that the Power Purchase Agreement entered into between the parties establishes a mechanism by which all disputes are to be addressed. As such the Plaintiff seeks declaratory orders in relation to this mechanism and sought orders from the Court to restrain the Defendant from taking any action to limit specific performance. The Defendant indicates that a demand for payment of a debt is not itself a dispute and sought dismissal of the proceeding. 

Held:

1.	The Plaintiff did not prove that the dispute mechanism per the Power Purchase Agreement had been triggered.

2.	 The Plaintiff sought the Court’s intervention in relation to the Power Purchase Agreement to circumvent its utilising Clause 17 of the Power Purchase Agreement to appropriately address disputes. 

3.	 This proceeding is dismissed and claims for relief by the Plaintiff are refused.

4.	 The Plaintiff shall pay the Defendant’s costs of and incidental to this proceeding, to 
             be taxed if not agreed.

5.	The time for the entry of these Orders is abridged to the time for settlement which shall take place forthwith

Cases Cited:

Papua New Guinean Cases
Bemobile Ltd v Digicel (PNG) Ltd [2013] N5064
Bluewater International Ltd v Mum [2019] PGSC 41; SC1798
Huon Electrical Ltd v RD Tuna Cannery Ltd [2000] N2005
Lasco Development (15) Ltd v Total E &P PNG Ltd [2019] PCNC 200; N7987 
Matthew Piake Kaen v Telikom (PNG) Ltd [2004] SC746
Melanesian Trust Services Ltd v Pacific Equities and Investments Ltd [2010] N8362
Nivani Limited v The State of PNG & 2 Others [2022] PGNC 48; N9424
P.K. Investments Limited v Mobil Oil New Guinea Limited [2015] SC1456
Stettin Bay Lumbar Company Pty Ltd v. Arya Ship Management Ltd [1995] SC488

Overseas Cases
Bates v Post Office Ltd (No. 3) [2019] EWHC 606 (QB)
Browne v Dunn [1893] 6 R 67 (HL)
Northclifffe Constructions v Stein [2000] NSWSC 1216

Legislation:
Constitution
National Court Rules

Counsel: 
Ms. V. Rambua with Ms. E. Wangu, for the Plaintiff
Mr. I. Molloy, with Mr. K. Imako and Ms. G. Jiki, for the Defendant

JUDGMENT

25th October 2024

1.	CAREY J: This is a decision of the Court regarding PNG POWER LIMITED (the Plaintiff) and NIUPOWER LIMITED (the Defendant) in which there is a dispute over the interpretation of the Power Purchase Agreement (the PPA) specifically as to how Clause 17 applies with disputes on debt.
 
2.	The Plaintiff sought a declaration that the PPA entered between the Defendant and itself is binding.

3.	The Plaintiff sought a declaration that the Parties are bound by Clause 17 of the PPA.

4.	The Plaintiff sought the Court’s intervention to direct the Parties pursuant to Clause 17.1 to enter into discussions to resolve any disputes arising from the PPA.

5.	The Plaintiff sought the Court’s intervention to restrain the Defendant from reducing the dispatch of electricity supply to the Port Moresby Grid without first utilizing Clause 17 of the PPA.

6.	 The Plaintiff’s Originating Summons was filed on 4th September 2023.

7.	 The Plaintiff relied on the evidence submitted in the affidavit of Mr. Obed Batia sworn and filed on 1st September 2023 (Court doc. # 3), affidavit of Mr. Nehemiah Naris sworn and filed on 31st May 2024 (Court doc. # 42), affidavit of Mr. Nehemiah Naris sworn on 14th August 2024 and filed on 29 August 2024 (Court doc. # 49), affidavit of Mr. Nehemiah Naris sworn on 4th October 2024 and filed on 8th October 2024 (Court doc. # 54) and affidavit of Mr. Ivan Pekaea  sworn and filed on 21st October 2024 (Court doc # 66). 

8.	The Defendant relied on the affidavits of Mr. Michael Uiairi sworn and filed on 10th November 2024 (Court doc. # 19), sworn and filed on 23rd November 2023 (Court doc. # 24), sworn and filed on 21st March 2024 (Court doc. # 31), sworn and filed on 17th July 2024 (Court doc. # 47), and sworn and filed on 15th October (Court doc. # 56).

BACKGROUND

9.	The Plaintiff and the Defendant are parties to a PPA dated 26th April 2019 for 15 years. 

10.	The PPA provides that the Defendant is to sell electricity to the Plaintiff.

11.	The PPA contains provisions in respect of dealing with default, termination and disputes among other subject areas.

12.	The PPA also indicates that the Defendant is required to provide to the Plaintiff a monthly statement reflecting the amount payable and the payment timeline which is within 20 days of receipt of the statement per Clause 9.3.1 of this PPA.

13.	There is an outstanding amount owed by the Plaintiff to the Defendant. 

14.	In June 2023, the Defendant informed the Plaintiff that due to the large amount of debt owed by the Plaintiff it would reduce the amount of electricity supply to the Plaintiff. 

15.	Following this communication, there was a meeting between the Plaintiff and the Defendant at which time it was agreed that the Plaintiff would pay the Defendant K3 million per week. 

16.	The Plaintiff states it is making the K3 million weekly payment to the Defendant at all material times.

17.	The Defendant indicates that the Plaintiff has not adhered to this agreement of making the payment of K3 million weekly. 

18.	This proceeding, which was commenced by the Plaintiff per paragraph 2, with a supporting affidavit of Mr. Nehemiah Naris sworn on 4th October 2024 and filed on 8th October 2024 (Court doc. # 54) at paragraph 9 of this affidavit states:

“PPL brought this proceeding in the hopes to prevent NPL from giving effect to its threat to reduce the dispatch of electricity from its gas power plan (sic) at Papa-Lealea to the Port Moresby grid pursuant to its Notice of 17 July 202 released to the public.” 

ISSUES
(a)	Whether there are genuine disputes raised by the Plaintiff in connection with or arising from the PPA?
(b)	Whether the parties are bound to utilize Clause 17 of the PPA when there are genuine disputes raised regarding whether the outstanding debt to the Defendant is due or owing under the PPA?
(c)	Whether the Court has jurisdiction to order parties to utilize Clause 17 of the PPA?

DETERMINATION

19.	The Plaintiff tendered into evidence the affidavit of Mr. Obed Batia (Court doc. # 3), who was its former Chief Executive Officer. However, he was not available for cross examination and no reasonable explanation was provided to the Court as to his unavailability. 
 
20.	It has been treated with caution in terms of the approach taken by this Court in relation to reliance on its contents as evidence. 

21.	Acting Chief Technical Officer of the Plaintiff, Ivan Pekaea under cross examination by Defence Counsel Mr. Molloy indicated that he processed invoices that were to be paid but did not record payments and therefore could not confirm the amount owed by the Plaintiff to the Defendant. 

22.	Mr. Pekaea further indicated that no dispute notice was ever issued by the Plaintiff, he never raised any issue with the invoiced amount and the Plaintiff was not paying the K3 million a week and he was unable to confirm the total arrears owed to the Defendant. 

23.	The Acting Chief Executive Officer of the Plaintiff, Mr. Nehemiah Naris indicated under cross examination that the debt owed to the Defendant was over K200 million. 

24.	Mr. Naris further stated that there was a dispute over the exact amount owed but indicated the approximate amount in arrears was around K20 million.  

25.	In addition, Mr. Narris indicated that there was an obligation to give notice immediately of any dispute and the requirement to pay any undisputed amount was clear.

26.	The Plaintiff’s reliance on Court doc. # 3 was challenged insofar as the Defence Counsel indicated that he wanted to cross examine the deponent but was unable to do so as the Plaintiff’s Counsel was unable to locate the witness. 

27.	In P.K. Investments Limited v Mobil Oil New Guinea Limited [2015] SC1456 at para. 23 it states:

“Where the affidavit evidence of a witness is untested by cross-examination, the Court must treat it with caution and weight it up with the other evidence before relying on it.” 

28.	I have considered the evidence in its total context and I reject the argument by the Plaintiff that the Plaintiff raised any dispute through the appropriate dispute resolution mechanism under the PPA which would have precluded the Plaintiff from meeting its obligation under the PPA except to the reference to the disputed components of the IPP costs which were not compliant with Clause 9.5.2 in the PPA and referenced in the affidavit of Mr. Obed Batia (Court doc. # 3) in this proceeding.
 
29.	There was no dispute notice ever issued by the Plaintiff to the Defendant.

30.	It is deduced that the Plaintiff has sought to use these proceedings to circumvent the PPA and frustrate the Defendant from exercising its rights under the PPA in order to avoid payment of debt owed to the Defendant by the Plaintiff. 

31.	The Equitable maxim that he who seeks equity must come with clean hands applies in this case as the Plaintiff is seeking declaratory orders when there is no basis in equity or law for same given the circumstances, they find themselves in. 

32.	The Plaintiff through the order being sought to compel the Defendant not to reduce the dispatch of electricity without using Clause 17 of the PPA has not demonstrated by the evidence submitted to this court that it has paid the undisputed amount of the invoices owed to the Defendant.

33.	As equitable remedies are discretionary, I reject the argument that an order should be made to compel the Defendant to perform under the PPA while the Plaintiff does not correspondingly perform under the PPA.

34.	I have further considered whether there is an implied duty of good faith in the PPA given the relational nature of this commercial contract.

35.	In the English case Bates v Post Office Ltd (No. 3) [2019] EWHC 606 (QB), a non-exhaustive list for what is considered a relational contract was identified. This is persuasive and I have assessed its application in this proceeding. 

36.	The PPA has the appearance of a relational contract and referencing Bates which indicates that contracting parties intend that their respective roles be performed with integrity and fidelity to their bargain indicate some elements of an implied duty of good faith. 

37.	In Matthew Piake Kaen v Telikom (PNG) Ltd [2004] SC746, the implied term of the contract was confirmed in that contract as an implied duty of good faith for the employee to perform his function in good faith. 

38.	The Plaintiff and the Defendant through this relational contract should comply with the PPA and if they operate under an implied duty of good faith should not require the services of this court except as to interpretation of the PPA or for examination of the legal consequences as determined from such interpretation as indicated in Huon Electrical Ltd v RD Tuna Cannery Ltd [2000] N2005.

39.	The Plaintiff contends that there are genuine disputes for which the parties are bound to use Clause 17 of PPA in relation to whether the outstanding debt is due to the Defendant per the PPA.
 
40.	The Plaintiff further indicated that this court has jurisdiction pursuant to Order 12 Rule 1 of the National Court Rules and Section 155(4) of the Constitution to make the declaratory orders sought. 

41.	However, invoking the jurisdiction of the Court in this particular matter was not applicable or of practical effect.

42.	It is a fact that there is a substantial debt owed to the Defendant by the Plaintiff under the PPA. 

43.	The Acting CEO Mr. Nehemiah Naris confirmed this under cross-examination however, he was unable to specify how much was owed and what constitutes the dispute that can override the precondition step required to invoke Clause 17 of the PPA. 

44.	The affidavits by the Defendant’s witness, Mr. Michael Uiari, were never challenged by the Plaintiff.

45.	The failure to pay a debt because a party is unwilling or unable to pay does not constitute a bona fide dispute.

46.	Litigation for the purpose of frustrating a party to an agreement is arguably an abuse of the Court process. 

47.	A dispute regarding an amount owed is in monetary terms but this has never been quantified by the Plaintiff. 

48.	There is no dispute between the Plaintiff and Defendant as to the whether the PPA is binding. 

49.	As such, there is no legal reasoning behind this Court providing a declaration for which parties have confirmed.

50.	In relation to whether the parties to the PPA are bound by Clause 17, it has been confirmed through submissions and evidence that they accept this to be so.

51.	In Melanesian Trust Services Ltd v Pacific Equities and Investments Ltd [2010] N8362, at paragraph 14, it states:
“14. As to seeking a declaration in respect of an issue that is hypothetical, in the Supreme Court case of Stettin Bay Lumbar Company Pty Ltd v. Arya Ship Management Ltd (1995) SC488, it was stated that one of the prerequisites for declaratory orders is that: “The issue must not be merely academic interest, hypothetical or one whose resolution would be of no practical effect.”

52.	Hence, it is not necessary to make a declaration of something that is obvious and has no practical effect. 

53.	There is no evidence that the Plaintiff gave a dispute notice which would invoke a particular action under the PPA

54.	As in Bemobile Ltd v Digicel (PNG) Ltd [2013] N5064, where the contract between the parties in that case required a dispute notice, the Plaintiff in this proceeding by Clause 9.5 of the PPA was required to immediately notify the Defendant of the amount in dispute and provide reasons. 

55.	The Plaintiff did not comply with the requirement of Clause 9.5 of the PPA.

56.	Therefore, on the one hand for the Plaintiff to seek to use one clause of the PPA to restrain the Defendant from acting in accordance with what was agreed while on the other hand to ignore another clause that has applicability to itself as a requirement under the PPA is to pursue a course of action that creates an injustice for which the courts ought not to be used to facilitate. 

57.	In the overseas case of Northcliffe Constructions v Stein [2000], it proffers that a dispute needs to have a bona fide issue and not just a fabrication. 

58.	The Plaintiff did not cross examine the Defendant’s witness and the Browne v Dunn [1893] 6 R 67 (HL) rule applies.

59.	Kitawal v State [2007] SC927 indicates that the evidence not challenged should be taken to have been accepted.

60.	I am therefore persuaded and accept the evidence of Michael Uiari as contained in the Court documents listed in paragraph 4.

61.	 The distinction between Nivani Limited v The State of PNG & 2 Others [2022] PGNC 48; N9424 and this case is the unjust enrichment application would be relevant against the Plaintiff for failing to pay for the services performed by the Defendant who performed their obligation per the PPA. 

62.	Further, in the case of Nivani the Defendant denied “any form of dispute” whereas in this case, the Defendant asserts there is a dispute regardless of having not filed a dispute notice per the requirement under the PPA.

63.	In Lasco Development (15) Ltd v Total E &P PNG Ltd [2019] PCNC 200; N798, the Court stayed the proceedings pending the outcome of arbitral proceedings in line with the Agreement between the parties. 

64.	The distinction between Lasco and this proceeding is there is no dispute notice filed by the Plaintiff and therefore the Plaintiff cannot benefit by not following the requirement under the PPA to invoke the jurisdiction of this court to stay proceedings. 

65.	I accept the submission by the Defendant that the demand for payment of a debt is not a dispute neither is the exercise of threatened exercise of a power under the PPA. There must be a genuine dispute over the debt or the exercise or threatened exercise of a power under the PPA which has a precondition step that the Plaintiff is required to take to invoke Clause 17 of the PPA.

66.	The Plaintiff has not provided evidence to this court that it has taken all reasonable steps to pay all monies owed to the Defendant. 

67.	In Bluewater International Ltd v Mum [2019] PGSC 41; SC1798, it states:

“30. What this means in the case of an agreement or contract containing an arbitration clause is this. The parties have expressed an intention to have their dispute resolved by arbitration and not by the formal court process or litigation. A Courts duty is to do all it can to give effect to that intention…”

68.	Applying Bluewater, in this case, suggests that the Plaintiff ought to comply with the PPA dispute resolution process and follow this route instead of seeking this court’s intervention to seemingly cloud the issue when the intention of the parties is clear and the only function that this court has is to interpret the contract according to law. 

ORDERS
1.	The Plaintiff did not prove that the dispute mechanism per the Power Purchase Agreement had been triggered.

2.	 The Plaintiff sought the Court’s intervention in relation to the Power Purchase Agreement to circumvent its utilising Clause 17 of the Power Purchase Agreement to appropriately address disputes. 

3.	 This proceeding is dismissed and claims for relief by the Plaintiff are refused.

4.	 The Plaintiff shall pay the Defendant’s costs of and incidental to this proceeding, to 
             be taxed if not agreed.

5.	The time for the entry of these Orders is abridged to the time for settlement which shall take place forthwith

Ordered accordingly.

Leahy Lewin Lowing Sullivan Lawyers: Lawyers for the Plaintiff
Allens Lawyers: Lawyers for the Defendant