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Kumagai Gumi Co Ltd v National Provident Fund Board of Trustees [2006] PGSC 2; SC837 (22 May 2006)

SC837


PAPUA NEW GUINEA


[IN THE SUPREME COURT OF JUSTICE]


SC APPEAL NO. 145 OF 2003


BETWEEN:


KUMAGAI GUMI CO. LTD
Appellant


AND:


NATIONAL PROVIDENT FUND BOARD OF TRUSTEES
Respondent


Waigani : Injia, DCJ, Salika & Davani, JJ.
2005 : April 27
2006 : May 22


CIVIL – Practice and procedure – Summary judgment – Not available on a claim based on fraud – National Court Rules, O.12 r.37(b).


COURTS – National Court – Jurisdiction – Repeal of delegated legislation - A single judge has no power to repeal a rule of the National Court Rules and develop a new rule of the underlying law to replace it – National Court Rules, O.12 r.37(b) & r.38; Constitution, s.184, Sch. 2.3; National Court Act (Ch. No. 38), s.8.


CIVIL – Practice and procedure – Liquidated demand – A claim for a specified sum including claim for punitive damages for civil fraud is not a liquidated demand – National Court Rules, O.8 r.24, O.12 r.25(c), O.12. r.27.


CIVIL – Practice and procedure – Liquidated demand – Default Judgment on liquidated demand – Sum claimed in the Statement of Claim – Consequential relief – For costs and interest is allowed – A claim for punitive damages is not allowed – National Court rules, O.8 r.27.


Cases cited:
Dempsy v Project Pacific Ltd [1985] PNGLR 93
Government of PNG & Davis v Barker [1977] PNGLR 386
Kappo No. 5 Pty Ltd and Ors v James Chi King Wong & Another (1997) SC520
Stettin Bay Lumber Company Pty Ltd v Arya Ship Management Ltd (1995) SC488
Tau Gunu v PNGBC Ltd (2002) N2251


Counsel:
R. Webb, SC for the Appellant
E. Endersen, for the Respondent


1. BY THE COURT: This is an appeal from the judgment of the National Court given on 5 December 2003 in which the Court granted the Respondent’s application for summary judgment and default judgment.


2. There are fifteen (15) grounds of appeal and they are as follows:


“(a) His Honour erred in law in determining the application before him on the basis that at the hearing on 11 September 2003 he had before him as evidence the affidavits of Erastus Kamburi made 16 July and 10 September 2003 and an affidavit by Roger Michael Dalton made 28 July 2003 when in fact no evidence was adduced by the Respondent before him.


(b) His Honour erred in law by proceeding on the basis that all of the claims for relief in the Respondent’s notice of motion filed 25 June 2003 had been before him at the hearing on 11 September 2003 when in fact the application before him was confined to the issues:

(c) His Honour erred in law in failing to find that the defence filed by the Appellant in the National Court proceedings was not a denial of the general issue.

(d) His Honour erred in law in finding the claim made by the Respondent in the Statement of Claim was a claim made against the Appellant for a liquidated demand within the meaning of Order 8, Rule 24(1) of the National Court Rules and that the Appellant was required by the said rule to verify its defence.

(e) His Honour erred in law in failing to find that the claim made by the Respondent in its Statement of Claim was a claim based on fraud within the meaning of Order 12, Rule 37.

(f) His Honour erred in law in finding that the Appellant was not entitled to plead its defence as it did given the nature of the allegations against it.

(g) His Honour erred in law in finding that the defence of the Appellant did not specifically answer any of the allegations made in the Statement of Claim against it.

(h) His Honour erred in law in finding that the Appellant’s defence:

(j) His Honour erred in law in finding that the defence of the Appellant had a tendency to cause prejudice, embarrassment or delay within the meaning of Order 8, Rule 27 of the National Court Rules.

(k) His Honour erred in law in finding that the Respondent could make application for summary judgment under Order 12, Rule 38 despite Order 12, Rule 37 of the National Court Rules.

(l) His Honour erred in law in making the determination in the proceedings based on the fact that the Appellant had not verified its defence.

(m) His Honour erred in law in making a determination that in the application heard before him that the Respondent had satisfied the requirements for summary judgment set out in Order 12, Rule 38 of the National Court Rule.

(n) His Honour erred in law in making orders for:

(o) His Honour erred in law in exercising his discretion to order:

3. The background to this appeal is as follows. On 3 June 1997, the Appellant (“Kumagai Gumi”) and the Respondent (“NPF”) entered into a Contract for the Appellant to construct a multistorey building in Port Moresby at a cost of K45 million.


4. Due to increased cost of construction during the construction phase, parties engaged in further negotiations resulting in a settlement reached whereby parties agreed to increase the cost to around K54 million. Pursuant to the settlement agreement, the NPF board approved certain payments to be made to Kumagai Gumi. The project was completed. NPF was unhappy with the additional payment and filed a liquidated claim in WS No. 83 of 2001, against Kumagai Gumi and certain board members of NPF and other consultants and parties involved in negotiating the settlement, payment and distribution of the additional funds. In its Statement of Claim, NPF alleged fraud and conspiracy between Kumagai Gumi and NPF board members.


5. The Appellant filed its Defence generally denying the allegations of fraud and conspiracy. The Appellant did not verify its Defence as required by the Writ. NPF moved for judgment in the alternatives under O.8 r.27 (Embarrassment, etc in pleadings), r.28 (Pleading general issue) and/or under O.12, r.38 (summary judgment). NPF also moved for default judgment under O.8 r.24 and O.12 r.25(c) (Verification of Defence). Both parties filed affidavits in support of their respective positions on the motion.


Threshold issue: Denial of Natural Justice.


6. It is not contested by both parties before us that in the National Court, both parties agreed to make submissions on only two (2) legal issues and these were whether summary judgment was available on a claim based on fraud (O.12 r.37(b)). Whether the Appellant’s Defence should be struck out and judgment entered for hearing. O.8 r.27 (embarrassing pleadings, etc) O.8 r.28 or for pleading the general issue (O.8 r.28). O.8 r.24 and O.12 r.25 (c) (for failing to verify defence). The parties chose not to address the Court on the affidavit evidence relevant to these three (3) legal issues and this was accepted by the Court. If the Respondent failed to obtain a ruling in its favour on the three (3) legal issues, parties were to return to argue the balance of the orders sought in the Motion which would involve arguments on the evidence.


7. It is also not contested between the parties before us that the National Court instead proceeded to consider the evidence in various affidavits on file and made certain findings of fact based on which it proceeded to determine application for judgment under O.12 r.38 and O.8 r.27 and r.28 and granted judgment in favour of the respondent. The Court delivered a written judgment which appears in the Appeal Book (AB) at pages 499 to 527. The Court’s findings of fact and application of principles to the facts appear at AB-pages 502(a) to 505 and 525 to 525(a).


8. We accept submissions by Mr Webb of counsel for the Appellant, that there was a denial of natural justice to both parties, in particular the Appellant, in that they were denied the opportunity to address on the evidence. The right to be heard on the evidence before the Court considers the evidence is a fundamental requisite of the judicial process and the Court’s failure to afford this right to the parties is a fundamental error. We are satisfied that the Court erred in that regard. For this reason alone, we allow those grounds of appeal relating to grant of summary judgment granted under O.12 r.38 and default judgment under O.8 r.27 and 28 and quash those orders.


9. Mr. Webb made a further threshold submission which we consider to be vital and critically important and determinative to all the grounds of appeal. He submitted that the Court’s consideration of all the legal issues were affected by the erroneous findings of fact made earlier. We reproduce Mr. Webb’s submissions which appear at paras. 21 to 27 of his written extract of submissions, as follows:


“Grounds of appeal – denial of natural justice (all grounds)


“21. It appears that when the trial judge turned to consider his judgment in chambers he inadvertently lost sight of the fact that only limited issues had been litigated in the hearing before him. This is clear from his summary of the arguments of the parties early in the judgment at AB 501 and the way he summarises the issues he is to decide at AB 502 lines 7-13.


“22. Having erred in that way, as the first step in his deliberations, His Honour proceeded to consider the affidavits which were on the Court file as though they were evidence. He summarises their effect in the early part of his judgment which appears at AB 502 – 504. Having done so he sets out a significant portion of NPF’s statement of claim (at AB 505 – 510) and then returns to make findings of fact consistent with the allegations in the statement of claim at AB 510, line 26 – 511A, line 2.


“23. In the result, based on the affidavits His Honour proceeded to find the claim for summary judgment was made out. See the judgment at AB 525, line 18 – 525B, line 16.


“24. In proceeding to summary judgment based on that “evidence” His Honour found that Order 12, Rule 37 did not prevent the application being made (the preliminary point) because (on the “evidence”) there was “no clearly sustainable defence”. See AB 524A, line 1.


“25. Further, His Honour proceeded to find that the NPF’s claim was for a liquidated demand thus requiring verification. See AB 519, line 23, Ab 520, line 8, AB 521A, line 17.


“26. What is more His Honour found that Kumagai Gumi’s failure to verify its defence was a fact which supported his determination that the defence should be struck out on the alternative basis, namely that the defence offended the provisions of order 8, rules 27 and 28. See in particular the judgment at AB 520, line 8ff, AB 521, line 6ff and AB 521A, line 17ff.


  1. Finally, and undoubtedly, his finding that the defence offended the requirements of order 8, rules 27 and 28 was affected by the fact that he erroneously believed he had before him an uncontested body of evidence which supported the allegations made in NPF’s statement of claim. This is evidence from the whole of the structure of the judgment. He considered whether the defence could be struck out (integrally with the question whether the defence ought be verified) after considering the evidence and before turning to the question of summary judgment in the passage from Ab 511A, line 12 – AB 521A, line 24. That whole section of the judgment is expressed in terms which show that His Honour approached the pleading and verification issues impermissibly on the basis of his view of the “evidence” which he believed was before him.”

10. Counsel for the Respondent, Mr. Endersen submits the three (3) legal issues were distinct and separately dealt with by the Court and the Court’s findings of fact did not play any part on the Court’s decisions on each issue. He submits the Court entered judgment on three (3) separate basis which stand independently of each other and even if the Court upholds the appeal against summary judgment, judgment under O.8 r.27 and 28 and/or default judgment under O.8 r.24 should stand.


11. We have considered the structure and contents of the Court’s judgment on all three (3) issues. In our view, the structure of the judgment clearly shows that the determination of all three (3) legal issues was done against the back drop findings of fact made earlier. This is clear from pages 13 of the judgment. In the introduction part, under the heading “Facts”, the Court said at page 13:


“With these facts in mind, I now turn to the issues presented in the order in which I have set them out”. (Our emphasis)


12. In the concluding paragraph of the judgment, after deciding to grant the application for default judgment under O.8, rr.27 and summary judgment O.12, rr.25(c) and r.38, the Court went on to deal with the question of damages where the Court said:


“Given the facts of this case, I do not consider there is a need for this Court to allow for such damages” (Our emphasis)


13. The body of the judgment shows the Court made findings of facts and inferences which were relevant to the three (3) legal issues and determined those legal issues based on those facts. We reproduce parts of the judgment in which the Court considered the evidence, as follows:


1. “...NPF’s evidence stands without rebuttal” (AB.p.502(b).


  1. “On 23rd February 1999, PAC requested Henry Fabila to inform it of the details of the agreement so that PAC could do its job. Mr. Fabila or nobody else in NPF provided the requested details, but sometimes later Kumagai informed PAC that the matter was settled at a total cost of K54,050,646.00.” (AB, p.504).
  2. “PAC was amazed at the settlement figure as it was beyond what Kumagai had been offering to settle. There was a difference of K2,750,646.00 from the last of Kumagai’s counter-offer of K51.3 million. No information was given as to how the figures were arrived at.” (AB, p.504).
  3. “The Settlement did not represent a settlement of all claims including adjusted costs. The NPF was left to face such additional claim. PAC was determined to secure a settlement for all of these claims using its industry skills and knowledge but was passed by the Chairman of NPF...” (AB, p.504).
  4. “Then proceeding on the basis of the settlement, Kumagai made claim for the acceleration and documentation cost. PAC refused to certify as the Project Manager as the claim in its professional view was inflated and no work was in fact completed to warrant such payment” (AB: p.504A).
  5. “Notwithstanding that, Kumagai was paid K3 million”... A further amount of K3,445,842.00 was paid again on ... 19 May 1999 ... Subsequently, a sum of K2.473 million was paid ... The next day, a sum of K3,445,842.00 was paid to Kumagai. All of these claims and payments were not supported by any certified progress claims, which is normally required in the building and construction industry.” (AB. 504(A)).
  6. “A tracking of all payments for the project by NPF toward the project at relevant times revealed that Kumagai paid the sum of K2,650,000.00 to (named company)... Later this firm refused to allow further payments to go through its accounts.... (AB. 504(b)).
  7. In relation to summary judgment, the Court said:

“From this, it is clear to me that the first two requirements of evidence of the essential elements of the claim and that coming from the plaintiff or a responsible person have been met. As for the requirement for a statement in the supporting affidavit, I find that the affidavit of Mr. Kamburi sworn on 10th September 2003 fulfils that requirement in the second paragraph. That paragraph reads:


“After a review of all correspondence, contracts and records in this matter, it is my belief and that of the Plaintiff that the Second Defendant has no Defence whatsoever to this action. In the end result, I am satisfied that the requirements for entry of summary judgment have been made out.”


  1. At the conclusion of the judgment, in relation to costs, the Court said:

“I consider the order for costs and interests sufficient penalty. As such, I am disinclined to making any order in favour of plaintiff in respect of its claim for punitive damages. Whether or not, such a claim should be entertained and how much should be the quantum, is a matter within the discretion of the Court. Given the facts of the case, I do not consider there is a need for this Court to allow for such damages. For if the plaintiff is of the view that the defendants should be penalized than it should assist the police to bring criminal proceedings against each or any one of the defendants, which if successful, will arrive at the same result of punishing the defendants. Further, I am of the view that such a claim should only be entertained where there is no other process that could be brought against a defendant, which could result in a penalty.” (our emphasis) [sic] (AB page 526 – 526a).


14. From the above, we are satisfied that the Court’s consideration of all the legal issues in their entirety was tainted by its finding of fact made earlier. Many of those findings of fact were adverse to the Appellant and they were made without giving the Appellant the opportunity to be heard on the evidence. Whilst we accept that the affidavit evidence is relevant to judgments under O.8 r.27 and 28 and O.12 r.38 and not O.12 r.25(c), it is difficult to separate the trial judge’s findings and conclusion on the facts which affected his exercise of discretion on all these four (4) different but closely related procedural provisions on which judgment on the claim was entered. The only reasonable conclusion we draw from the structure of the judgment and the manner in which the trial judge dealt with these procedural provisions and the pleadings before it is that the whole of the trial judge’s exercise of discretion under the four (4) different rules on the claim were tainted by the findings of fact.


15. We now turn to submissions on specific issues.


Summary Judgment.


16. The Court considered the evidence and referred to its earlier findings of fact. Under O.12 r.38, summary judgment is granted on “evidence of the facts” given by the Plaintiff or some responsible person. We have already concluded that the Court erred in considering the evidence and making findings of fact. We are satisfied that the Court erred in taking into account the evidence in deciding to grant summary judgment under r.38.


17. There is an important procedural point raised on the proper construction of O.12 r.37 (b) and we deal with this issue separately. Order 12 Rule 37 and Rule 38 provides:


“37. Application of Division 4. (13/1)


This Division applies to all proceedings except proceedings which include–


(a) a claim by the plaintiff for libel, slander, malicious prosecution, false imprisonment, seduction or breach of promise of marriage; or

(b) a claim based on an allegation of fraud.

(c) a claim for damages arising in respect of the death of any person or in respect of personal injuries to any person.


”38. Summary judgment (13/12)


(1) Where, on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff—

(2) Without limiting Sub-rule (1), the Court may under that Sub-rule direct the entry of judgment for the plaintiff for damages to be assessed.

(3) In this rule, “damages” includes the value of goods.”

18. There is no contest between the parties that in the present case, NPF’s claim was based on fraud. There is also no contest that Rule 37(b) bars the Court from granting summary judgment on a claim based on fraud. It appears from the Court’s judgment that it was fully aware of this. The Court was also aware of the decision of the Supreme Court in Kappo No. 5 Pty Ltd and Ors v James Chi King Wong & Another (1997) SC520 which it cited in its judgment, in which the Supreme Court held that summary procedure is not applicable on a claim based on fraud. This decision was binding on the National Court. However, the Court found a way around it by ruling that r.37(b) was outdated and therefore inappropriate and inapplicable to the circumstances of this country under Sch. 2.3 of the Constitution. The Court’s reasons are set out at AB pages 524 – 524a, as follows:


“Finally, and more specifically for a claim based on fraud, England from which the exception list initially came from, has now changed its position. She has removed fraud from the list of exceptions. This is apparent from the wording of the present equivalent of O.8, r.37, in these terms in so far as they are relevant:


“...this rule applies to every action begun by writ in the Queen’s Bench Division (including Admiralty Court) or the Chancery Division other than-


(a) an action which includes a claim by the plaintiff for libel, slander, false prosecution, false imprisonment or seduction,
(b) [revoked.]
(c) an admiralty action in rem.”

Paragraph (b) in the original read “fraud.” Now that has been revoked. Hence, it is now possible to apply for summary judgment as long as the safety guidelines as noted in the annotation to the rule are met. It would thus, in my view, be quite silly for us in PNG to continue to adopt and allow a legal position to function when it has already been discarded. There is no overriding reason for this rule to continue to have meaning and application in PNG, particularly when considered in the context of reasons why the exception list was created in England and adopted throughout the Commonwealth world. All of the cases on summary judgment in PNG to date, proceed on the basis of the fact that, O.8, r.37 exists. They have not as already mentioned, considered it in any way, the reason for having this rule.


In the circumstances, the only conclusion reasonably open in my view is that, the provisions of O.8, r.37 are inappropriate to the circumstances of PNG, if not so, for all of the kinds of actions listed, it is at least the case for an action based on “fraud”. The rules in relation to pleading fraud with particulars and the need to prove it remain intact. It also means the requirements that must be met before summary judgment can be entered, continue to apply. Included in this, is the need to specifically prove the fraud claimed by evidence rather than a mere reference to the pleadings.”


19. In respect to the development of a rule of the underlying law, Mr. Webb submits the National Court Rules including Rule 37(b) is a subsidiary legislation of Papua New Guinea made under s.154 of the Constitution and the National Court Act (Ch. No. 38). They are a law of Papua New Guinea and not part of the underlying law and a Court must apply them.


20. Mr. Endersen in his written submissions sought to strengthen the Court’s approach under Schedule 2.3 of the Constitution by relying on the Court’s inherent power under O.1 r.7 of the National Court Rules and s.155(4) and s.166 of the Constitution. None of these provisions however were relied upon by the trial judge. In our view, is not open to the Respondent to raise those new matters in this appeal.


21. Mr. Endersen submitted that Sch. 2.3(1) of the Constitution empowers the Court to develop an appropriate rule where there “is no rule of law that is applicable and appropriate to the circumstances of this country” in a particular case. In the present case, he submitted “rule” includes the National Court Rules, in particular O.12 r.37(b). He submitted the Court was correct in finding that r.37(b) was inappropriate and inapplicable to the circumstances of this country and therefore having disbanded that rule, there was no “rule” and therefore, it was open for the Court to develop a new rule of the underlying law to fill in the gap, that is, summary judgment is available on a claim based on fraud.


22. We consider Mr. Endersen’s submission to be misconceived. His misconception stems from the Court’s misconception of Schedule 2.3 and the Court’s rule-making powers under s.184 of the Constitution and s.8 of the National Court Act. Chapter No. 38). We accept Mr. Webb’s submission. Schedule 2.3 of the Constitution applies to a situation where there is no written law or the underlying law (customary law and common law and equity) on a subject and there is a gap in the law which is required to be filled. In our view, there was no gap to be filled by development of a rule of the underlying law under Sch. 2.3 of the Constitution because there was already a written law on the subject in the form of the National Court Rules made pursuant to s.184 of the Constitution and s.8 of the National Court Act.


23. We are of the view that the Court erred in unilaterally disbanding r.37(b) of the National Court Rules on the face of clear and binding Supreme Court authority on this rule. We are of the view that whilst a judge of the National Court has power to waive or dispense with compliance with the rules of the National Court rules, (O.1 r.7), the judge has no power to amend, repeal, disband, or declare inappropriate and inapplicable a rule of the National Court Rules because it is delegated legislations made by the judges collectively, pursuant to their rule-making power under s.8 of the National Court Act (Ch. No. 38) and s.184 of the Constitution.


Default Judgment: Failure to Verify Defence: O.8 r.24, r.25(c); O.12 r.27.


24. The trial judge found that NPF’s claim for K5.805 million was a liquidated demand and Kumagai was required to verify its defence. It failed to do so hence judgment in the liquidated amount was entered. The trial judge treated NPF’s claim for costs, interest and punitive damages as “merely consequential” on the main claim and therefore, they did not come within the qualification in O.8 r.24 that there is “no other claim.”


25. Mr Webb submits NPF’s claim based on the alleged “Corrupt Agreement” was not a liquidated demand, rather it was for damages in tort for civil conspiracy or fraud. NPF would have to plead fraud with sufficient particulars and strictly prove the “Corrupt Agreement” entered into and payments made to parties as alleged.


26. Mr Webb further submits NPF’s claim for “punitive damages” comes within the qualification in O.8 r.24 that there is “no other claim” and for that reason, Kumagai Gumi was not required to verify its defence.


27. Mr Endersen submits the trial judge correctly found that NPF’s claim was for a liquidated demand. The claim for costs, interest and punitive damages were not part of the main claim based on the conduct of the parties. A claim for punitive damages not being compensatory, Kumagai Gumi was not barred from verifying its defence.


28. Order 8 Rule 24(1) states:


“Where a plaintiff, by his statement of claim, makes a claim against a defendant for a liquidated demand, but no other claim, and the statement of claim bears a note requiring the defendant to verify his defence, the defendant shall verify his defence, that is to say, he shall, within the time limited for filing his defence, file an affidavit verifying his defence to the claim in accordance with this Rule.” (Our emphasis)


29. Order 12 Rule 25(c) allows the Court to enter judgment where the defendant fails to verify its defence under O.8 r.24. Order 12 Rule 27 provides the terms of a judgment on a liquidated demand as follows:


“Liquidated demand.


(1) Where the plaintiff’s claim for relief against a defendant in default is for a liquidated demand only, the plaintiff may enter judgment against that defendant for a sum not exceeding the sum claimed in the statement of claim on that demand and for costs.

(2) Where a claim for a liquidated demand includes interest at an unspecified rate, interest accruing after the date of filing the statement of claim to the date of entry of judgment shall, for the purposes of judgment under this Division be reckoned at the rate of 8% yearly.” (Our emphasis)

30. The leading case on what is a liquidated demand is Dempsy v Project Pacific Ltd [1985] PNGLR 93, a case cited by the trial judge in the instant case. The principles are settled in that case. A claim is a liquidated claim when “it is ascertained or is capable of being ascertained by a simple calculation when there is no element of amount on judgment.” A liquidated demand is in the nature of a debt, ie. A specific sum of money due and payable under or by virtue of a contract. Woods, J described the object of a liquidated claim as follows:


“The object of having the special endorsement or what we call the liquidated demand is to allow a procedure whereby a plaintiff who has a clear debt type action with a clearly ascertainable claim can overcome the natural reluctance of Courts to allow claims in the absence of the defendant and can get a speedy justice in the face of a delaying or difficult defendant. It has a prompt and summary effect in favour of the plaintiff.” (Our emphasis)


31. The gist of a liquidated claim is two-fold:- (1) The claim is a “clearly debt type action”; and (2) The claim or demand in damages is for a specific amount in Kina or dollars which is clearly ascertainable by simple mathematical calculation. By the mere fact that the plaintiff in its Statement of Claim sets out a calculation in figures and claims a specific amount and requires the defendant to verify its defence does not convert an ordinary action for damages into a liquidated claim. Woods, J made this point amply clear at p.102, where His Honour said:


“This means that the Court should look closely to see whether a claim really does come within the class of liquidated claims and ensure that what should really be treated as unliquidated claims do not get treated as liquidated ones. It is all too easy just because the plaintiff comes to his own assessment of his claim and puts in a sum certain to then treat it as a liquidated claim...”


32. In the present case, we are of the view that the trial judge erred on principle when he concluded that default judgment under O.12 r.25(c) was available to the plaintiff, for three (3) reasons. First, the claim based on the alleged “Corrupt Agreement” is not a claim which is clearly of a “debt type action.” The alleged corrupt or fraudulent agreement requires strict proof in terms of the actions of the key players giving rise to the claim and the amount allegedly paid to those players. The damages pleaded in the Statement of Claim required strict proof.


33. Secondly, NPF’s claim was not a liquidated claim because it included a claim for “punitive damages” which comes within the terms of the qualification “but no other claims” in O.8 r.24(1). A claim for any category of damages is an integral part of a claim for damages in tort or contract. In an action for damages which includes a claim for punitive damages, the claim for “punitive damages” is an additional claim within the meaning of “and no other claim” in O.8 r.24(1). The Defendant is not required to verify its Defence to such claim. Default judgment under O.12 r.25(c) is not available in respect of a claim which includes “punitive damages”.


34. Thirdly, Order 12 Rule 27 by implication, prescribes the types of relief which may be included in a default judgment entered under O.12 r.25 (c) as consequential relief and these are orders for costs and interest. Pursuant to Order 12 rule 27, the Court can only grant default judgment under O.12 r.25(c) for the “specific sum claimed in the Statement of claim with costs” and interest at a specific rate. The Court cannot grant judgment for unliquidated damages such as in punitive damages.


Judgment: Embarrassing, pleadings,: etc O.8 r.27.


35. The trial judge found that Kumagai’s failure to plead particulars in its Defence was evasive and avoided answering the specific allegations and that it had a tendency to delay the process and amounted to an abuse of process. In failing to do so Kumagai did not act in good faith.


36. Mr Webb submits the principles required a claim based on fraud to plead precise allegations with sufficient particulars and strict proof of fraud. NPF precisely did that and all that Kumagai was required to do was to deny or traverse those facts by non-admission and nothing more. There was also no evidence that Kumagai did not act in good faith.


37. Mr Endersen submits it is impossible to ascertain from Kumagai’s Defence the issue for trial. The trial judge was correct in reaching the conclusion he did.


38. We accept Mr Webb’s submission. Kumagai had sufficiently traversed the allegations by denial or non-admission. Order 8 r.29 requires the plaintiff to plead particulars of fraud. There is no requirement for the Defendant to plead particulars of a traverse. A mere “denial or Statement of non-admission, and either expressly or by necessary implications and either generally or as to any particular allegation” (O.8 r.21(2)) will suffice to answer allegations of fraud. We are of the view that the trial judge erred in principle when he concluded that Kumagai’s defence lacked particularity and that it did not act in good faith.


Judgment: Pleading General Issue: O.8 r.28.


39. The trial judge found that Kumagai’s pleading in its Defence saying it “does not admit” or “denies” or “it is not required to plead” without providing reasons amounted to pleading the general issue and offended O.12 r.28. Kumagai was permitted to plead in terms generally denying a claim by reasons of O.8 r.21(2) but that must be done in good faith: Tau Gunu v PNGBC Ltd (2002) N2251. Kumagai’s failure to answer specific allegations in its Defence was evidence that Kumagai did not act in good faith.


40. Mr Webb submits Kumagai was entitled to traverse the allegations of fraud in the manner it did as permitted by O.8 r.21(2). There was no “evidence” before the Court that it lacked good faith.


41. Mr Webb submits a party is entitled to plead a defence by way of defence and non-admission, thereby putting the plaintiff to the proof. This is permitted by O.8 r.21(2).


42. Mr Endersen submits Kumagai’s bare denial of the allegations made against it without sufficient particulars offended O.12 r.27. When Kumagai Gumi was a party to the contract, it was reasonably expected that it denial or non-admission would be backed up with particulars. The trial judge carefully addressed this issue by covering the relevant cases on point and exercised its discretion. This Court should not readily disturb the trial judge’s exercise of discretion unless it is shown by the Appellant that the trial judge acted on wrong principle or erred in consideration of relevant facts: Stettin Bay Lumber Company Pty Ltd v Arya Ship Management Ltd SC488 (1995), Government of PNG & Davis v Barker [1977] PNGLR 386 at 397.


43. We have studied the Defence filed by Kumagai Gumi and note that it denied the allegations of fraud and conspiracy made against it. In our view, Kumagai Gumi’s denial amounted to non-admission under O.8 r.21. The trial judge did allude to O.8 r.21(2) but His Honour erred when he said “that must be done in good faith.” As to whether a non-admission is done in good faith is a question of fact and it cannot be ascertain purely by reference to the adequacy or otherwise of the pleadings. There was no evidence before the Court to make this finding.


Result of Appeal


44. For these reasons, we uphold all the grounds of appeal.


The orders of this Court therefore are:


  1. The appeal is allowed;
  2. The decision of the National Court made on 5 December 2003 is quashed;
  3. The balance of the Respondent’s Notice of Motion filed in the National Court shall be heard by a different National Court judge.
  4. The Respondent shall pay the Appellant’s costs of the appeal.
  5. We certify Southern Counsel.

____________________________________________________________________
Blake Dawson Waldron lawyers: Lawyers for the Appellant
Gadens Lawyers : Lawyers for the Respondent

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