Keboki Business Group Inc and Morobe Provinseal Gavman, The State v [1985] PNGLR 369 (3 December 1985)

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[1985] PNGLR 369 - The State v Keboki Business Group Inc and Morobe Provinseal Gavman

CONTRACTS - What constitutes - Contract with State - Provision of services - Supply and tender procedures - Common law rules applicable - Separate single contract not required - Authority to contract includes power to authorise signatures - Government Contracts Act (Ch No 34), ss 1, 2 - Minister’s (Delegation) Act (Ch No 35), ss 2, 4 - Public Finances (Control and Audit) Act (Ch No 36), s 82.

CONTRACTS - Contract with State - Delegated power to contract - Extent of power - Power includes power to authorise signatures to relevant documents - Supply and tender procedures - Government Contracts Act (Ch No 34), ss 1, 2 - Minister (Delegation) Act (Ch No 35), ss 2, 4 - Public Finances (Control and Audit) Act (Ch No 36), s 82.

STATE - Liabilities of - In contract - Power to contract delegated to specific office holder - Extent of power - Tender and supply procedures - Power includes power to authorise signature to relevant documents - Government Contracts Act (Ch No 34) ss 1, 2 - Minister (Delegation) Act (Ch No 35), ss 2, 4 - Public Finances (Control and Audit) Act (Ch No 36), s 82.

STATE - Liabilities of - In contract - Contract for provision of services - Tender and supply procedures - Contract need not be in writing - Government Contracts Act (Ch No 34), ss 1, 2 - Minister’s (Delegation) Act, (Ch No 35), ss 2, 4 - Public Finances (Control and Audit) Act (Ch No 36), s 82.

Contracts with the State are regulated by legislation, namely the Government Contracts Act (Ch No 34), the Minister (Delegation) Act (Ch No 35), the Public Finances (Control and Audit) Act, (Ch No 36), and certain regulations and financial institutions made thereunder which include procedures for supply and tender.

Under the legislation and regulations only certain specified persons have power to bind the State or “to enter into and execute any contract or agreement”.

(1) A contract for the provision of services to the State need not be contained in a single document signed on behalf of the State by a designated person; provided the common law requirements as to the existence of a valid contract exist, such a contract may, and usually will, consist of a series of documents specified under the relevant procedures for supply and tender, namely, the document calling for tenders and any specifications, the tender itself and any letter accompanying, and the letter of acceptance.

(2) A person who is delegated the power “to enter into and execute any contract or agreement” on behalf of the State, must exercise the power itself, that is, decide whether or not a contract should be entered into and then convey his decision in the most practical and effective manner; such a delegated power includes the power to sign a letter of acceptance of a tender or authorise its signing by a responsible official.

Discussion by Pratt J of the distinction between delegated powers and authorities.

(3) Accordingly, a valid and enforceable contract for the provision of garbage and sanitary services arose out of a series of documents evidencing a tender and acceptance thereof, notwithstanding the absence of the signature of the person to whom the power to so contract had been delegated.

Keboki Business Group Inc v Independent State of Papua New Guinea and Morobe Provinsel Gavman [1984] PNGLR 281, and reversed.

(4) (Per Pratt J) (Obiter) A contract for the provision of services to the State need not be in writing.

This was an appeal from a decision of Kidu CJ, namely, Keboki Business Group (Inc) v Independent State of Papua New Guinea and Morobe Provinsel Gavman [1984] PNGLR 281, in which his Honour determined that a contract for the provision of garbage and sanitary services was not binding on the State but was subject to the principles of quantum meruit.

PRATT J: On 18 February 1983 the first respondent in this appeal, who is also a cross-appellant and the plaintiff in the original action, submitted to the Morobe Province Supply and Tenders Board a written tender for a sanitary/garbage contract at Wau for a period of twelve months renewable for a further period of one year. The amount of tender was in the vicinity of K90,000, and was outside the K50,000 limit imposed on the Morobe Board (per Government Gazette No 43 of 1977 at 12; annexure “F” to the affidavit of John Vulupindi). Consequently, they referred the matter to the Central Supply and Tenders Board which itself has a limit of K100,000.

The Morobe Board is admitted to be a “National Government Supply and Tenders Board”. It is not an integral department of the Morobe Province, though no doubt its functions are restricted to matters occurring within the boundaries of that province. There is no question that the Central Supply and Tenders Board is also a National Government Supply and Tenders Board.

On 1 July 1983, the plaintiff-company received a letter from Morobe Board signed by its chairman advising them that they had been awarded a contract, that a letter of security in the sum of K2,250 should be lodged, made out in favour of the State (not the Province), and requesting acknowledgement of “this letter of acceptance by having receipt endorsed on the attached copy of this letter signed by a duly authorised officer of your company”. This the company did on the same date. It then commenced to carry out its task and submitted the monthly accounts for July, August and September totalling K27,194.40. By this stage the company became sufficiently concerned to engage a firm of solicitors in order to obtain reimbursement for work performed by it. Despite inquiries with the Morobe Board by telex on a number of occasions, a great silence prevailed. About this time it appears that the second respondent had advised both the appellant and the first respondent that the matter was not one which concerned the Morobe Provincial Government. Almost simultaneously, the first respondent was likewise advised by the National Government that it was of no concern of the National Government either. Caught in this mid-court situation, the company resolutely continued to perform what it believed to be its contractual obligations (no doubt to the relief and good health of the Wau residents), presumably believing that commonsense and fair play would prevail in the long run. After all they had an official document signed by the chairman of the Morobe Board to say that they had been given the contract together with the company’s acknowledgement. As the second respondent put in a token appearance only at the commencement of argument on the appeal, I shall simply refer hereafter to the first respondent only.

The State says categorically that there never was a binding contract between it and the company. The document signed by the Morobe Board is a worthless piece of paper. The State also contends that it is not subject to the principles of quantum meruit either. The convoluted and tortuous process of reasoning which the State has had to develop in order to reach these conclusions has been painful to watch. The dust of diversion has been greatly increased by the State’s failure to place any of its cards on the table at the pleading stage.

The learned trial judge came to the conclusion that the contract was not binding on the State because it was not “executed” by the designated officer of the State. No mention is made by his Honour as to why the contract had to be in writing and thus require execution, or whether or not the State had entered into an agreement in some form other than in writing. His Honour correctly stated that the Board, be it Central or Morobe, does not have the power to enter into a contract on behalf of the State. I do not understand counsel for the respondent to submit to the contrary.

I do not consider it necessary to examine the various pieces of legislation concerning the limitations on the powers of a public servant to act within his authority. The matter under appeal is not one where an officer of Government has acted outside the scope of his authority. It has been said that the Government had not appropriated funds to cover the subject matter of the contract and that this particular area had been transferred to Provincial Governments. From 1 April 1982 expenditure by the National Government was limited to K12,000 in respect of the Morobe Province. This arrangement arose out of a Premier’s Conference in 1980 and a Department of Finance instruction directed the provincial governments to enter into their own contractual arrangements for sanitary and garbage services. There is no evidence however that a Parliamentary appropriation was lacking. There is only a statement from the secretary for Finance that the National Government, as opposed to the Parliament, had decided on such a course. I have the clear impression that this is not a matter of Parliamentary appropriation but a departmental arrangement under the blessing of the Department of Finance, which is a vastly different matter from a case where the Parliamentary Appropriation Bill has failed to earmark funds to cover contracts entered into by the State (see cl (d) of the secretary for Finance’s affidavit). I certainly would not expect this paragraph to establish evidence of Parliamentary appropriation of funds. In any case this claim of appropriation by the National Government to the Provincial Government misses the whole issue. The question before the Court is not whether the Provincial Government has overstepped its allocation. Indeed it is not a matter of allocation of funds at all. The alleged contract is directly between the National Government and the plaintiff and has nothing to do with those areas which are the subject of specific grants between the two bodies be they for town services or otherwise. It is not to the point to allege that the National Government only allocated to the Provincial Government Kx for town services. The allocation of public funds which concerned the trial judge and this Court is one which would deal with the Chairman’s funding allocation by National Parliament to enter into agreements with citizens in respect of a host of services including town garbage. The amount which the National Government has allocated for payment of these services which may be entered into by the Provincial Government has nothing to do with this case and certainly does not affect a citizen who had entered into a contract with the Provincial Government. The learned trial judge does not deal with the issue of funds appropriation at all. I cannot see how arrangements between the central Government and the Provinces are of concern to a citizen who has entered into a contract with the central Government. These arrangements are made perhaps to give the central Government certain claims against their provincial counterparts, but it is not necessary to enter that domain. What is clear is that interdepartmental arrangements are of no concern to the citizen if he has a binding agreement with the State.

Central to the submissions of Mr Reeve for the State is the claim that any letter of acceptance had to be signed personally (and by none other) either by the chairman or the secretary of the relevant Supply and Tenders Board. “If one analyses a contract for example, in terms of offer and acceptance, then in my submission under the delegation legislation, it would not be competent for a person who has the power himself to have the communication conveyed to the offeror by a person who wasn’t himself a delegate. In other words, it requires him to do the thing personally, to communicate the acceptance personally. That is our submission, we say, when one looks at s 4 of the Minister’s (Delegation) Act, it is that restrictive; it must be performed by the Minister personally or by the delegate, if any, we say, personally, or subdelegate if any, personally.” The submission relies, first, on the Minister’s (Delegation) Act (Ch No 35), s 2, whereby the Minister in 1977 under the unrevised Act delegated the powers which were vested in him by virtue of the Government Contracts Act (Ch No 34), s 2, (previously s 4 of the unrevised 1972 Act). The delegation was, in the case of the Chairman of the Supply and Tenders Board, “to enter into and execute any contract”; and to the Secretary, “to execute any contract ... only in so far as related to execution of letters of acceptance”. These delegations are set out at pp 11 and 16 of Government Gazette No 43 of 9 June 1977. The distinction between the powers of the chairman and the secretary should be noted carefully. No doubt there are occasions in which it is necessary for letters of acceptance to be executed (for example, certain contracts under the Statute of Frauds must be in writing) and in such a case the authority to sign such letters has been given to both the chairman and the secretary. The chairman’s authority is much wider however for he may enter into a contract be it by letter of acceptance or otherwise. Nor does the delegation say that the secretary is the only one who may execute a letter of acceptance. He is authorised to do so by the Minister once the Board has come to a decision, but this does not exclude the chairman. Obviously, if he is authorised to enter into contracts and also to execute those contracts which are, or are required, to be in writing, then he has, as a part of that delegation, a power to execute a letter of acceptance.

I can find nothing in the Government Contracts Act, s 4, which either explicitly or by necessary implication required a personal signature from the chairman. Nor has any authority been cited for what I consider a totally unrealistic suggestion. The chairman and members of the Central Board were asked by the Morobe Board to consider the tender because it was beyond the financial limits placed on the latter. As both are boards of the National Government, both are essentially part and parcel of the same organisation but the one has a superior status and authority to the other. The Morobe Board is merely a conduit-pipe calling for tenders and in the appropriate case channelling the tenders to the Central Board for consideration, and vice versa.

Much of the present confusion in this case and in the appeal stems from a complete misuse of the principle of law underlying the maximum “delegatus non potest delegare”.[vi]¹ The State had convinced the learned trial judge that the failure by the chairman to sign personally the letter of acceptance to the company, and his actions through an official of the Board, and also through the chairman of the Morobe Board, was a breach of this rule. It is said that if I direct my secretary to sign a letter on my behalf during my absence, I am delegating a part of my powers. I believe the answer to that statement is patently obvious. All I am doing is authorising her to sign on my behalf. I am delegating nothing. It may be even a matter of simple agency, but it is not necessary to enter that somewhat “equivocal area” as Professor de Smith calls it in relation to public law at p 101. If I wish to give evidence to the world that such person has a right to sign for me and if I delegate to that person a right to enter into contracts on my behalf and do all necessary things for my benefit then I would go a further stage and utilise a power of attorney — a full instrument of delegation.

The Minister has delegated his power to enter into contracts to the chairman: see Minister’s (Delegation) Act, s 2 and s 4, of the Regulations. It is therefore his sole prerogative to decide whether or not to exercise such power and in the absence of some statutory exception, he cannot delegate that power to everyone else. Such a prohibition is a far cry however from directing someone to sign a letter on his behalf. “The degree of control (a priori or a posteriori) maintained by the delegating authority over acts of the delegate or subdelegate may be a material factor in determining the validity of the delegation. In general the control preserved ... must be close enough for the decision to be identifiable as that of the delegating authority”: de Smith, at p 304. Cognisance of this very practical approach is given in the State’s own directions: Supply and Tenders Board Procedures (s 8) in Sch 2, par 14, which reads in full:

“A Notification of Acceptance of tender signed by or on behalf of the Chairman of the Board will be sent by post or delivered to the successful tenderor who shall acknowledge receipt. No tender shall be deemed to have been accepted until acknowledgement of such Notification has been effected. Such Notification of Acceptance shall at all times and for all purposes be conclusive proof of the acceptance of tender.” [Emphasis is mine.]

Essentially, what is at the centre of the principle of non-delegation is the necessity for the person appointed to exercise the power itself — here to decide whether or not a contract should be entered into after giving due consideration to the recommendation of the Board, and then to convey his decision by whatever means is most practical and most effective. “Express authority to subdelegate powers is to be construed as impliedly excluding authority to subdelegate the performance of duties involving the exercise of deliberate judgment (my emphasis), unless the performance of the duty is inextricably interwoven with the exercise of the power”: de Smith, at p 305(f). It is clear that the normal way of doing this would be through the secretary for he has been specifically delegated the Minister’s powers of signing a letter of acceptance. It is no part of the chairman’s power to place his signature personally on a letter. That is merely ancillary to the exercised of the power. The discretion to enter into the contract has been exercise and the decision made. It remains only for the mechanics to be set in motion for the purpose of advising the offeror of the acceptance. This and a number of kindred aspects are mentioned by Professor de Smith in his fourth edition, earlier referred to with his usual copious reference to authorities. I quote from p 307:

“Special considerations arise where a statutory power vested in a Minister or a department of State is exercised by a departmental official. The official is the alter ego of the Minister or the department, and since he is subject to the fullest control by his superior he is not usually spoken of as a delegate. (A different analysis must, of course, be adopted where powers are explicitly conferred upon or delegated to an official by a law-making instrument.) The courts have recognised that ‘the duties imposed on Ministers and the powers given to Ministers are normally exercised under the authority of the Ministers by responsible officials of the department. Public business could not be carried on if that were not the case’. In general, therefore, a Minister is not obliged to bring his own mind to bear upon a matter entrusted to him by statute but may act through a duly authorised officer of his department. The officer’s authority need not be conferred upon him by the Minister personally; it may be conveyed generally and informally by the officer’s hierarchical superiors in accordance with departmental practice.”

Let us turn to the events in this matter in their chronological order, after the Morobe Board had referred the tender, as it was required, to the Central Board, and the normal bureaucratic submissions had been made. On 20 April 1983, the superintendent of Purchasing and Contract wrote to the chairman of the Central Government Supply and Tenders Board attaching a memo from the Provincial Board and recommending that “the contract be awarded to Keboki Business Group at the approximate total value of K90,000 per annum”. This recommendation was approved by the Board (the chairman and the two members) on 13 May 1983. On 20 May under a letter heading “National Government — Supply and Tenders Board”, a Mr Andrew Temu for the chairman of the Central Government Supply and Tenders Board wrote to the chairman of the Provincial Board indicating that the approval of the Central Board was given and that “a contract be entered into ... value K90,000. Would you please arrange to have a letter of acceptance issued accordingly to the company”. In consequence, the chairman of the Provincial Board wrote to the company on 1 June 1983 advising that its tender was successful and suggesting it comply with certain requirements. This the company did, including a return of the acceptance duly signed.

It has been argued both in the court below and in this Court, that as the chairman had not personally signed the letter of 20 May 1983, and as no evidence was tendered to show that the chairman personally agreed to enter into the contract or had authorised Mr Temu to sign on his behalf, there was no contract. The argument really reduces itself to a claim that although there is unequivocal evidence that the chairman indicated his approval of entry into the contract as the chairman and member of the Board, this endorsement on the Board minute is insufficient because the Board itself does not have the power to enter into a contract. Such power is reserved to the chairman alone and it is claimed he must go through the charade of sitting down separately from the Board and determining that he will exercise his delegated power to enter into a contract. In my view, such a contention is not only incredulous but strikes at the very root of sane reasonable administration and business conduct. In the absence of any proof to the contrary, there can be no doubt that in giving his approval the chairman contemporaneously exercised his delegated power to accept the offer put to him through the Board by the plaintiff. In the absence of any proof that Mr Temu acted without the instructions of his superior in conveying the chairman’s decision to the plaintiff company through the Provincial Board, I believe the ordinary principle of omnia praesumuntur ... applies, quite apart from the National Government’s own publication to all and sundry under Sch 2, cl 14 of “General Conditions of Tender and Contract” that notification of acceptance “by or on behalf of the Chairman ... shall at all times and for all purposes be conclusive proof of the acceptance of tender”. In the most formal way therefore, the Government itself has decreed that persons may sign on behalf of the chairman in relation to the acceptance of tenders.

Obviously this is far from the first occasion where a party has endeavoured to avoid legal responsibility by alleging lack of proof despite most compelling inferences deducible from the face of things (though it may be the first time that a Government has tried to do so), otherwise it would have not been necessary for the law to develop the presumption of regularity. I do not propose to examine the numerous cases listed under this basic area of law in Halsbury’s Laws of England (4th ed), Vol 17, par 118. Suffice it merely to quote from the learned authors in par 111 that “presumptions of fact are inferences logically drawn from one fact as to the existence of other facts”. At par 118 the learned authors go on to say “the fact that a person acted in an official capacity raises a rebuttable presumption of due appointment”. That in my view means that Mr Temu is not only an officer under the direct control of the chairman but he has acted with due authority when he signed the letter on behalf of the chairman.

Finally, as Mr Molloy has pointed out, the courts will strive to uphold an agreement especially if one of the parties involved is a public body. In Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] AC 520 at 536, the following statement of the law is made:

“Their Lordships consider that in modern times the courts are readier to find an obligation which can be enforced, even though apparent certainty may be lacking as regards some term such as the price, provided that some means or standard by which the term can be fixed can be found. ... Further, if the contract is one made with a public body, with a duty to act and decide according to a recognisable principle, the court may be willing to find an obligation which requires that body to reach a decision in accordance with that principle, as to a matter left to its decision in the contract itself, and so find an enforceable contract where one might not be found as between private parties.”

The analogy to this decision of course is simply where the courts act on the assumption that a public body will reach a decision in accordance with principle, likewise a public body will act according to the proper course of procedures; and where a letter is sent out by such a body purporting to be signed on behalf of the chairman, the inference will be that that is indeed the case unless there is evidence to the contrary. At no stage did the defence either on the pleadings or in the evidence allege any specific facts to the contrary.

To some extent the proposition involves a reliance on an analogy to the doctrine of estoppel. As Denning J said in Robertson v Minister of Pensions [1949] 1 KB 227 at 232, “if a government department in its dealing with a subject takes upon itself to assume authority upon a matter with which he is concerned, he is entitled to rely on it having the authority which it assumes”, subject of course to there being no act which is ultra vires or illegal. This important proviso was emphasised by the Lords in Howell v Falmouth Boat Construction Co [1951] 2 All ER 278. The strictures by the Lords on the above general statement were well in the mind of Cumming-Bruce J when he referred to it in Re L(AC) (An Infant) [1971] 3 All ER 743 at 752. His Honour adopted a further statement of Lord Denning: “a public authority cannot be stopped from doing its ... duty, but I do think it can be estopped from relying on technicalities.” It is not so much a matter of technicality in the present case but rather an outright effort by the State to block the inferences which the ordinary person would logically draw from a particular set of facts.

Some considerable time has been spent in dealing with the form of contract in this case. It was contended by the respondent plaintiff on the pleadings that the contract was written and before this Court that even if it were not written there is an oral contract. It is further contended that nothing can be found in the relevant statutes which prevents the Government from entering into such contracts orally.

The learned trial judge did not base his decision on writing or lack thereof. His Honour ruled that as the chairman of the Board had not signed the letter to the plaintiff and as the Board itself had no power to enter into a contract there was, in his view, simply no contract be it in writing or oral. By inference I believe his Honour refused to accept the signature of the chairman on the document approving entry into a contract between the Government and the plaintiff as an indicator that the chairman himself as such was expressing an intention to commence legal relationships by accepting the offer made by the company. As I have said, I cannot accept this view. With great respect it seems to me to resort to excessive legalism and to disregard the failure by the defendant in the pleadings to query the authority of the chairman, and to ignore the principle of regularity so essential to a proper administration of Government. As I have formed the view therefore that there is no warrant for deciding the letter by Mr Temu was signed without authority it follows that there was a written acceptance of the plaintiff’s offer by way of tender, and this written acceptance resulted in a further acceptance of more precise conditions by the plaintiff all of which were forwarded to it and acknowledged on 1 June 1983. The fact that Mr Temu’s letter was directed to the Provincial Board is of no consequence. The latter Board was not acting even as an agent of the National Board but as its junior partner. In my view if one puts together the approval of the chairman dated 13 May, the letter of Mr Temu dated 20 May 1983, the letter of Mr Deklam for the Provincial Board of 31 May and the acceptance of the more precise terms forwarded to them with their letter by the plaintiff on 1 June, there emerges a written contract in the classic form. Not one document of course, but nevertheless a series of documents which cover the precise and ascertainable terms and conditions between the parties.

Even if I am wrong in deciding that a written contract exists, I certainly agree with the respondent’s submissions that there is no legislative requirement for such a contract to be in writing. The Government Contracts Act, s 1, says:

may enter into and execute any contract or agreement which in his opinion is necessary or desirable in the interests of Papua New Guinea.”

The contract is one for services rendered within a period of twelve months (renewable). There is nothing contained in the section which makes it necessary for the Government to enter into such contract in writing nor in the circumstances such as the present is there any similar requirement in the underlying law: see, for example, Coogee Esplanade Surf Motel Pty Ltd v Commonwealth [1944] ArgusLawRp 72; (1976) 50 ALR 363 at 376 and 383, and Aronson & Whitmore, Public Torts and Contracts, at p 218. Nor does the person empowered to enter the contract have to sign anything. So long as he communicates his acceptance to the offeror that is sufficient: Powell v Lee (1908) 99 LT 284, Robophone Facilities v Blank [1966] 1 WLR 1428, Bloxham’s case [1864] EngR 364; (1864) 33 Beav 529; 55 ER 474, Levita’s case [1867] UKLawRpCh 90; (1867) 3 Ch App 36, Chitty on Contracts (25th ed, 1983), Vol 1 par 64 and Cheshire and Fifoot, Law of Contract (10th ed, 1981), at p 41. In this matter there was clear communication by the chairman to the respondent through his junior officers.

I believe that the errors which the learned trial judge fell into can be much attributed to the poor state of the pleadings in this action. As Mr Reeve for the appellant correctly points out, no mention is made of an oral contract in the statement of claim. To cover all possibilities an oral contract should have been pleaded in the alternate, particularly in such a case as this where certain documents might ultimately be construed as affording some evidence at least of intent which had been communicated orally through instructions to junior officers. I do not believe, however, that the omission to plead an oral contract is fatal to the action. After all the oral agreement comes about only if and when the court finds that the documentary material does not quite amount to a written agreement. In either case the gravamen of the learned trial judge’s decision was that no authority existed to enter into any agreement be it oral or otherwise because he wrongly inferred that such agreement had been entered into by the Board and not the chairman.

As I have ruled a valid contract was in existence it follows that it is not necessary to decide whether or not the learned trial judge is correct in finding for the plaintiff on the basis of quantum meruit. I would dismiss the appeal and uphold the respondent’s cross-appeal subject to what I now have to say on the question of damages.

The amended statement of claim is for K101,231.96 together with interest at the rate of 8 per cent. Unfortunately, his Honour did not deal with the quantum of damage. I am not sure how this came about but apparently there were some shortcuts used by the parties in the hope of having their dispute resolved quickly. The appellant claims that in the event of the respondent succeeding on the cross-appeal the matter should be returned to the trial judge for assessment of damages. I will not have a bar of this submission. The plaintiff had placed before the Court a breakup of its claims extending from July 1983 to August 1984 (claims 1 to 12 and apparently exhibit “A” in the trial). However, as the contract was for a period of one year only the plaintiffs sensibly dropped the last two claims on their statement of claim and do not therefore claim for the July and August 1984 amounts. There is no evidence on the record in any form to suggest that the Government contested the bona fides of the claims, although it disputes the reasonableness of the amounts in its defence. There is a suggestion that this area was not gone into when it was thought somehow or other that the learned trial judge might deal with the matter piecemeal. I cannot follow this suggestion. The parties were before the court on all issues and for all purposes. The defence did not in fact dispute the amounts tendered. Had his Honour found for the plaintiff on the basis of a valid contract he would have been bound to bring in a verdict for the amounts claimed with one proviso. The acceptance of the offer was for “K90,000 approximately”. The chairman had power to enter into a contract for the maximum sum of K100,000. It might be suggested that a difference of K10,000 amounts to a very large “approximation”. Once again, however, the trial court was the place to canvass these matters and not leave them in the air in the hope that the Supreme Court would give the defence a second bite at the cherry by sending the case back for assessment. The facts are that the plaintiff proved the sum of K101,231.96 set out in its statement of claim. A contract for this amount cannot be entered into by the chairman. The maximum sum which can be claimed is K100,000. That is the judgment figure which should have been handed down by the learned trial judge on the evidence he had before him. I would therefore order judgment for this amount plus interest at the rate of 8 per cent from the date of serving the writ of summons.

The question of costs is slightly complicated by the fact that the second respondent was joined in the appeal and was not notified until just before the day of hearing the appeal that the State no longer intended to proceed against them. Hence the appearance by counsel before us as a matter of courtesy and to request leave to withdraw. I would award costs not only in favour of the first respondent but to the second respondent also up to and including appearance before the Honourable the Chief Justice on 15 August 1985 when a consent order withdrawing the appeal against the second respondent was granted and the second respondent’s costs on the appeal were to be paid by the appellant in the sum of K805. I would also grant costs to the second respondent on the trial to be paid by the appellant.

WOODS J: This is an appeal against a decision of the National Court whereby the trial judge found there was no valid contract between the Keboki Business Group Incorporated (the plaintiff) and the Independent State of Papua New Guinea (the defendant) but he did find for the plaintiff on a quantum meruit.

There are appeals by both the plaintiff and the defendant, however, by consent the matters were dealt with on an appeal by the Independent State of Papua New Guinea and a cross-appeal by the Keboki Business Group. The Morobe Provinsel Gavman was a party before the National Court and was joined as a respondent in both appeals. However one appeal was discontinued as against the Morobe Provinsel Gavman and with respect to the other appeal, counsel was given leave to withdraw from the hearing before us.

The State argued two grounds of appeal: that the trial judge erred in finding liability on a quantum meruit count thereby permitting public moneys to be committed and also erred in finding that the State had obtained a benefit.

The Keboki Business Group appealed on the basis that the trial judge erred in not finding that a proper contract existed. Their grounds of appeal particularise the various requirements involved in a contract with the Government.

The background of the case is that in 1983 tenders were called by the Government of Papua New Guinea through the Government Supply and Tender Committee at Lae for the supply of sanitary and garbage services to the town of Wau. Keboki Zorogo Business Group submitted a tender together with an appropriate deposit.

The Government Supply and Tender Committee at Lae referred the tenders received to the chairman of the Central Government Supply and Tenders Board and also submitted their own reports on the tenders received.

In due course the Board approved that the contract for sanitary and garbage services at Wau be awarded to Keboki Business Group at an approximate total value of K90,000 per annum: See letter of 20 April 1983 in Appeal Book at 111.

On 31 May 1983 a letter of acceptance was written to Keboki Business Group advising them of the Government acceptance of their tender. This letter was duly acknowledged by the business group. This letter of acceptance pointed out that the contract was for twelve months at an approximate total value of K90,000.

Contracts with the Government are regulated by legislation. Relevant legislation is the Government Contracts Act (Ch No 34), the Minister’s (Delegation) Act (Ch No 35), the Public Finance (Control and Audit) Act (Ch No 36) and certain regulations and financial instructions made thereunder. The overall result in a situation like the supply of services to the Government is that there is often not necessarily one document called a “contract” which is executed by both parties but rather there is a series of documents namely:

1. The document calling for the tender and any specifications referred to with that document.

The main import of the legislation and regulations and directions seems to be that only certain specified persons have power to bind the State or as the Government Contracts Act states “... to enter into and execute any contract or agreement”.

The regulations and directions set out how the Government calls for and awards contracts and in the type of case here, for the supply of services to the Government, we look at what appears to be a manual issued by or under the authority of the Minister for Finance. In this manual we find a section called “Supply and Tenders Board Procedures”. These procedures set out how tenders are to be invited, how they are to be considered and examined by the Board, and how the Board accepts a tender and how notification of that acceptance is to be made to the successful tenderer. Finally then, as seen in condition 15 of the part of the manual called “General Condition of Tender and of Contract” we find the following:

shall together constitute the contract between the tenderer and the Government for the supply of the Stores, Works or Services.

In this case before us we have all the above documents, yet the State is denying the existence of a contract. The basis of the State’s submission is that the contract was not executed by the specific person authorised in accordance with delegations, namely, in this instance, Mr R Guise. However, in this instance, we do not have one document in the form one usually associates with a contract or agreement but, as set out above, we have a series of documents which constitute the contract and nowhere is it specified where in this series of documents Mr Guise has to execute.

Presumably if we had no evidence of his participation anywhere else in the proceeding his signature on the notification of acceptance may be sufficient. However, we do have evidence of his participation in the offer and acceptance by his endorsement with his Board of their approval on the document of 20 April 1983. So how can it be said that he has not entered into a contract on behalf of the State.

We have the elements of a contract. We have an offer and acceptance and a consideration. It is not as if under the common law or any specific legislation such a contract must be in writing. Of course because the details of the contract are complicated there is in fact some documentation and further, documentation is required for government procedures. But there is no specific requirement for a separate single document signed by both parties. Instead we have a series of documents which make up the contract or agreement. And the letter of acceptance was in the terms of condition 14 of the General Conditions of Tenders and of Contract “signed on behalf of the Chairman of the Board”. These General Conditions do not insist on the correct person’s signature appearing at every “step” of the contract. The specific person within the Government who has the delegation for the amount involved has considered the offer and approved the acceptance of the offer so he must be held to have accepted for the State.

I am reluctant to let a party with the advantage of complicated procedures take advantage of a minor emphasis of interpretation to avoid an obligation where the other party to the agreement has done everything correctly and been led to believe there was an agreement.

I am therefore satisfied that Mr R Guise has taken a sufficient role in the process of the offer and acceptance for the sanitary and garbage contract to be said to have “entered into and executed any contract or agreement” in the terms of the Government Contracts Act. And as I have already said, Mr R Guise was specifically empowered with the appropriate delegation to bind the State for such an agreement.

Any submission or suggestions that there was no power to bind the State where there was no specific appropriation or because the appropriation was directed through the Provincial Government and not the Central Government are irrelevant here. First, the case of Churchward v The Queen [1865] EngR 744; (1865) LR 1 QB 173 is not relevant and can be distinguished as the contract in that case was specifically expressed to be subject to moneys being appropriated by Parliament. Secondly, the “Government of Papua New Guinea” as referred to in the 1983 notice calling for tenders, whether it is the National Government or the Provincial Government, is the State. The Government Contracts Act and Public Finances (Control and Audit) Act set out the procedures to be used when contracting with the State. The State has various arms and it is not our concern how the State handles its money within its various arms, that is a matter of internal administration.

I have found there was a valid contract between the Keboki Business Group and the State. The documents comprising the “contract” refer to it being for an approximate total value of K90,000.00 for the one year. Keboki has submitted accounts for services supplied for the twelve months of the contract totaling K101,231.96. There is no evidence that these services were not supplied and in actual fact the evidence is that the accounts were certified by Government officials. The State did not dispute these amounts. However, as the officer contracting on behalf of the State only had authority to contract up to K100,000 and Keboki should have known that, this Court can only allow claims under the contract within that authority. I am satisfied that K100,000 is not an unreasonable figure under the contract reference of an approximate total value of K90,000.00. I therefore dismiss the appeal of the State and I uphold the cross-appeal of the Keboki Business Group and I find for Keboki Business Group in the sum of K100,000 plus interest at the rate of 8 per cent from the date of service of the writ of summons.

CORY J: In this matter I have had the benefit of reading the draft judgment of Pratt J and I agree with his conclusions and the reasons given for them.

I would add the following observations. In this case the main issue between the two appellants is whether there is a contract. The appellant, the State, contents that there was no contract between the State and Keboki Business Group Incorporated. The cross-appellant, Keboki Business Group Incorporated submits there was a contract and that as set out in the amended statement of claim, it comprised:

(a) general conditions of tender and of contract and the specifications for contract described as tender No MPT 2/83.

(b) tender for that contract submitted by the plaintiff and letter accompanying the tender dated 16 February 1983.

The Act dealing with contracts is the Government Contracts Act (Ch No 34) and provides as follows:

(b) where the consideration does not exceed K300,000.00 — a Minister, may enter into and execute any contract or agreement which in his opinion is necessary or desirable in the interests of Papua New Guinea. (Replaced by No 33 of 1981.)

(i) the manner or form in which contracts or agreements shall or may be entered into; or

(b) derogate any power to enter into a contract or agreement conferred, directly or indirectly, by any other law.”

As this was a contract for K90,000 a Minister was empowered to enter into and execute any contract. By the Minister’s (Delegation) Act (Ch No 35), s 2(1), a Minister is empowered to delegate by instrument all or any of his powers or functions.

“... Where a Regulation empowers a Minister to delegate the power or function no person other than the Minister in person or a delegate (if any) or a sub-delegate (if any) under the power of delegation may exercise or perform the power or function on behalf of the Minister.”

Section 4 of the Minister (Delegation) Regulation, a regulation made under the above Act, reads:

“That a Minister may, by writing under his hand, delegate to any person all or any of his powers and functions under any Act or subordinate enactment to enter into and execute any contract or agreement . . . ”

Coupled with the power to enter into contracts is the constraint on public servants imposed under the Public Finances (Control and Audit) Act (Ch No 36) and s 82 of that Act confers a regulation-making power and permits the regulations to authorise financial instructions. The Public Finances (Control and Audit) Act in Pt IV deals specifically with the supply to the State of stores, works and services. Section 17(1) of this Act deals with the establishment of a Tenders Board and requires the Minister to determine the limits of authority and jurisdiction of the Board. The Tenders (Procedure) Rules under the Public Finances (Control and Audit) Act set out the procedure to be adopted by a Tenders Board when dealing with tenders.

Coming now to the facts of this case. By gazette notification a Central Government Supply and Tenders Board and a Morobe Province Supply and Tenders Board were established with authority to invite tenders for the “... supply of works and services for the State” to the value of K100,000 in the case of the former and K50,000 in the case of the latter. Both boards were National Government Boards.

The Morobe Province Supply and Tenders Board (National) issued an invitation to tender (exhibit 1). The plaintiff submitted a tender (exhibit 2).

The chairman of the Morobe Supply and Tenders Board forwarded the three tenders to the Central Government Supply and Tenders Board as the total tender price was found to be in excess of K50,000. From this point it became a Central Government Supply and Tenders Board matter and the Central Board took over the negotiations from the Morobe Supply and Tenders Board, but used it to make further inquiries and to submit further information.

Now by gazette notification dated 9 June 1977 (at p 131 of transcript), the Minister had:

“Delegated all my powers and functions under s 4 of the Government Contracts Act 1972 to the Chairman of the Central Government Supply and Tenders Board to enter into and execute any contract, contracts, agreement or agreements as a result of a tender approved by the Board and where the total consideration in relation to that tender does not exceed K100,000. ...” [Emphasis added.]

On 20 April 1983 (at p 111 of transcript) a recommendation that the plaintiff’s tender be accepted was submitted to the chairman of the Central Government Supply and Tenders Board and was endorsed “approved”.

On 20 May 1983 (transcript at p 116) a letter was sent to the Chairman of the Morobe Supply and Tenders Board stating:

“Please arrange to have a letter of acceptance issued accordingly to the (plaintiff) company.

On 31 May 1983 the chairman of the Morobe Supply and Tenders Board wrote a letter of acceptance to the plaintiff and forwarded a copy of this letter to the secretary, Central Government Supply and Tenders Board with a footnote, “[F]or your information in regard to your 54 STB/Morobe 2165 dated 20th May, 1983” which was their letter dated 20 May 1983 referred to above, requesting that a letter of acceptance be sent.

Now the appellant submits there is no contract between the plaintiff and the State because while the appellant concedes that “the tender offer could be accepted — ie the contract entered into — by the Chairman of the Central Government Board” he contends that the communication of the acceptance to the plaintiff respondent must be done by him personally.

With respect it is sufficient if the respondent establishes that the chairman entered into the contract by accepting the tender offer and then directing that this acceptance be communicated to the offeror, as in this case, by directing his subordinates to forward a letter of acceptance.

The authorities go further and suggest that it is sufficient if the offeror became aware of the acceptance although no notice of acceptance was forwarded by the offeree. Chitty on Contracts (25th ed, 1983), vol 1, par 64: “The general rule is that an acceptance must be communicated to the offeror ... so long as the offeror knows of the acceptance, there can be a contract even though the acceptance was not brought to his notice by the offeree.”

In Bloxham’s case [1864] EngR 364; (1864) 33 Beav 529; 55 ER 474, B applied verbally for shares in a company and paid a deposit to the secretary on his undertaking to return it if he did not get the shares in a few days. Shares were allotted and an entry to that effect made in the register of allotment, but no letter or notice of allotment or certificate was sent to B. B did nothing further for three months when the company was ordered to be wound up. It was held that B was a shareholder although no notice of allotment was given to him. In Levita’s case [1867] UKLawRpCh 90; (1867) 3 Ch App 36, L applied for shares in a company, a trustee for M. No letter of allotment was sent to L but his name was put on the share register and advertised as a director. In the judgment of Sir John Rolt LJ (at 38): “In this, as in other cases, there must be evidence of a contract; there must be evidence of the application [for shares] being acceded to ... [I]t is clear the company acceded .... He must be taken upon all the facts, to have been aware of this....” In Robophone Facilities Ltd v Blank [1966] 1 WLR 1428, a decision of the Court of Appeal, the plaintiffs were distributors of telephone machines. A salesman for the plaintiff filled in a rental agreement which the defendant signed. No one signed for the plaintiff at that time. A term of the agreement provided that it should become binding on the plaintiffs only by acceptance thereof by signature on their behalf. Some time later the defendant wrote revoking his offer to rent the equipment. On the hearing the document was found to be signed by both parties. On appeal, Harman J said (at 1438):

“There was no express evidence that the plaintiff’s acceptance was communicated to the defendant before he purported to cancel on 16 June. It did, however appear that the plaintiffs representative about 9 June called on the defendant and produced further documents necessary for him to sign to obtain the post office approval. It seems clear that this request could only have been made and complied with upon the footing that the plaintiff’s had accepted the defendants as hirer and this I think made the contract complete.”

These cases illustrate the distinction between acceptance and communication of acceptance.

In looking at all of the facts in the present case, it is clear that the chairman of the Central Government Supply and Tenders Board entered into a contract on behalf of the State by accepting the tender offer and that this acceptance was communicated to the cross-appellant, the offeror. There is the chairman’s, Ralph Guise, signed approval of 13 May 1983 endorsed on the recommendation of the Board dated 20 April. There is the letter of 20 May 1983 signed by Andrew Temu for the chairman of Central Government Supply and Tenders Board requesting that a letter of acceptance issue. There is no evidence that the chairman did not authorise him to sign that letter on his behalf. The signing on behalf of the chairman is in accordance with the State’s own Supply and Tenders Board Procedures, Sch 2, par 14, which reads:

“A notification of acceptance of tender signed by or on behalf of the Chairman ... shall at all times be conclusive proof of the acceptance of the tender.”

Finally, there is the letter of acceptance of 31 May from the chairman of the Morobe Supply and Tenders Board to the offeror, accepting the tender and forwarding a copy to the secretary of the Central Government Supply and Tenders Board referring them to their earlier letter of 20 May 1983. The Central Government Supply and Tenders Board never at any time between May and September 1983 raised any objection that it had not authorised the issue of the letter of acceptance. When the plaintiff sent ten telexes from 2 September until 4 November 1983 to the chairman of the Central Government Supply and Tenders Board “appealing to the Board to advise us why payment is refused” they received no reply.

In all the circumstances I find that there was a binding contract between the appellant and the first respondent. As I find that there was a contract binding on the appellant and the State, it is not necessary to consider the question of estoppel and quantum meruit.

In relation to the quantum of damages, interest and costs I agree with the calculations made by Pratt J and would enter judgment for that amount.

2. Judgment be entered for the first respondent against the appellant in the sum of K100,000 plus interest at the rate of 8 per cent from the date of serving the writ of summons.

3. An order that the appellant pay the first respondent’s costs of the trial and costs of the appeal.

4. An order that the appellant pay the second respondent’s costs of the trial and costs of appeal up to and including appearance before the Honourable Chief Justice on 15 August 1985, the latter of which costs agreed at K805.

5. The cross-appellant pay the costs of the second respondent from 15 August 1985 to the date of withdrawal of first respondent’s cross appeal against the second respondent (that is, 26 August 1985).

[vi] “It is a well-known principle of law that when a power has been confided to a person in circumstances indicating that trust is being placed in his individual judgment he must exercise that power personally unless he has been expressly empowered to delegate it to another”: de Smith, Judicial Review of Administrative Action (4th ed, 1980), p 298. [My emphasis.]

Papua New Guinea Law Reports

Keboki Business Group Inc and Morobe Provinseal Gavman, The State v [1985] PNGLR 369 (3 December 1985)

Papua New Guinea Law Reports - 1985