Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285 (9 November 1993)

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[1993] PNGLR 285 - Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State

PRACTICE AND PROCEDURE - Summary judgment - National Court Rules O 12 r 38 - The elements to be satisfied in such an application - The appropriateness of the rule is not relevant - Evidence of defence - Facts/law may be raised - Evidence must be admissible and precise - Responsibility of lawyers for defendant.

CONTRACT - When terms of contract are contained in writing - No evidence to be allowed to add to, subtract from, vary, or qualify the written contract.

The appellants and respondent entered into a written contract for the design and construction of a road. The contract, which was worth US$67,619,500, was cancelled by the respondent. The appellants commenced proceedings seeking damages for breach of contract but discontinued the action and entered into negotiations to settle the matter. The terms of settlement, which provided for the respondent to pay compensation of US$14,000,000, "subject to the consortium providing satisfactory evidence to justify the claim", was contained in a handwritten document and signed by the agents of the parties. The appellants commenced an action by writ against the respondent on the basis of this document. The writ was endorsed with a claim for US$14,000,000. The respondent filed a notice of intention to defend and the appellants filed a motion for summary judgment pursuant to O 12 r 38 of the National Court Rules. The National Court dismissed the application.

The appellant sought leave to appeal against the decision pursuant to s 14(3)(b) of the Supreme Court Act.

4. When terms of contract are contained in writing, it is not permissible to allow any evidence to add to, subtract from, vary, or qualify a written contract.

5. The appeal be allowed and judgment be granted to the appellants in the amount of US$14 million.

Imak International Pty Ltd v Pacific Wholesale Freezers Pty Ltd (1991) unreported N976.

United Timbers (PNG) Pty Ltd v Mussau Timber Development Pty Ltd (1987) unreported N645.

K/S A/S Oil Transport v Saudi Research and Development Corporation Ltd (The "Gudermes") [1984] 1 Lloyd's Report 5.

KAPI DCJ HINCHLIFFE J: On or about 27 May 1992, the appellants and the respondent entered into a written contract for the design and construction of a road from Champion Parade, Port Moresby, via Burns Peak, to Waigani, to be known as the "Poreporena Freeway". The contract was worth US$67,619,500. This contract was cancelled by the respondent on or about 27 August 1992. The appellants took out a writ of summons (WS 734 of 1992) seeking damages for wrongful termination of this contract. This action was discontinued. This cause of action has no relevance to this appeal except that it provides the background to the negotiations that took place to settle the matter.

Subsequent to this, a number of meetings took place between the agents of all the parties with a view to reaching a settlement. At a meeting on 17 November 1992, it is alleged that the parties reached an agreement to settle the matter for US$14 million. It is alleged that the terms of the agreement are contained in a hand-written document as follows:

In the meeting held at DOT office between Mr C. Millar and Mr P. Aisi they agreed to a compensation claim amount of US$14,000,000 subject to the Consortium providing satisfactory evidence to justify their claim.

The Consortium claim will be divided 6/14 to Kinhill Kramer and 8/14 to Curtain Bros as detailed in their August 26th letter.

On 23 March 1993, the appellants filed a motion in the National Court for summary judgment pursuant to O 12 r 38 of the National Court Rules. The National Court dismissed the application.

As this was an interlocutory judgment, the appellants applied for leave to appeal against the decision pursuant to s 14(3)(b) of the Supreme Court Act Ch 37.

Having regard to the reasons for the decision by the trial judge, the grounds relating to the admissibility of certain paragraphs of the respondent's affidavits, and the law relating to the proper application of O 12 r 38 of the National Court Rules, we would grant leave to appeal in this matter.

The grounds of appeal upon which the appellants rely are identical to the grounds for leave to appeal. The notice of appeal raises several grounds of appeal. They fall into the following categories:

2. That the trial judge failed to deal with the objections raised with regard to the admissibility of certain paragraphs of the respondent's affidavits.

3. That the trial judge erred in concluding that there were triable issues for proper resolution at the trial.

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:

(b) there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed, the Court may, by order, direct the entry of such judgment for the plaintiff on that claim or part, as the nature of the case requires.

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.

In Tsang v Credit Corporation (PNG) Ltd [1993] PNGLR 112, the Supreme Court said:

(b) that the plaintiff or some responsible person gives evidence that in his belief there is no defence.

As to the second element, the plaintiff must show in absence of any defence or evidence from the defendant that, in his belief, the defendant has no defence. If a defence is filed or evidence is given by the defendant, as in this case, the plaintiff must show that, upon the facts and/or the law, the defendant has no defence. The plaintiff will not be entitled to summary judgment if there is a serious conflict on questions of fact or law. Whether a case should go to trial on these issues will be determined on the facts of each case. However, the authorities show that the summary jurisdiction should only be invoked in a clear case: see Chief Collector of Taxes v T A Field Pty Ltd [1975] PNGLR 144."

"The cause of action, upon the basis of which the plaintiffs apply for judgment, is undeniably based on contract. The plaintiffs have contended that the contract is wholly in writing entered into between the first and second plaintiffs of the one part and the defendant of the other part, on 17th November 1992."

"The plaintiffs submitted that a valid and binding contract was formed on 17th November, 1992 when the parties (by their duly authorised agents) signed that hand-written document. The plaintiffs further submitted that they have duly performed the contract condition by providing to the defendant 'satisfactory evidence' to justify their claim, between November 1992 and March 1993. These evidentiary affidavits and Statutory Declarations were amply documented before me on this application."

After making reference to the affidavits of the respondent, the trial judge concluded:

"There is evidence of the facts upon which the claim is based, and there is evidence by the plaintiffs."

1. That there was a cause of action based on contract. The parties had been negotiating and reached finality on terms set out in writing and signed by parties.

2. There is evidence of the facts upon which the claim is based. That is to say, there is evidence of a binding contract entered into by authorised agents of the parties and there is evidence of the performance of the contract by the appellants.

Therefore, the trial judge was satisfied with the first element of O 12 r 38. There has been no cross-appeal in this regard. This is significant. First, by agreeing to pay compensation, the respondent did not raise any issue about their liability to pay. This was bound up in the agreement. Liability under the writ of summons (WS 734 of 1992), which was discontinued, is not an issue. The trial judge has concluded that there was a binding contract. The respondent has not cross-appealed against this finding.

The trial judge had difficulty with the second element. He made reference to the respondent's affidavits:

"The defendant has filed affidavits through it's servants and lawyers having carriage of this case and the negotiations generally. These affidavits take issue with the precise meaning and interpretation to be ascribed to the words of the hand-written document. The defendant has also taken issue with the plaintiffs as to the 'satisfactoriness' of the evidence to justify the claim."

Where there is evidence given by a defendant in an application for summary judgment, it is the function of the trial judge to determine whether the evidence is admissible in the hearing for summary judgment, and also subsequently at the trial, and whether the evidence raises a serious conflict of fact or law that would require resolution at the trial.

At the hearing of this application before the trial judge, counsel for the appellants objected to various paragraphs of affidavits filed on behalf of the respondent. Counsel also submitted that the affidavits do not raise any conflict of fact and/or law for resolution in a trial.

The trial judge did not deal with the question of admissibility of certain paragraphs of the respondent's affidavits, nor did he deal with the subsequent question of whether there was sufficient evidence at the end of the day to raise any defence for determination at the trial. He simply concluded that there were issues for resolution at the trial.

It is apparent from the judgment that his honour was influenced by his personal views of the appropriateness of O 12 r 38. He said:

"I do not propose to deal with the issues raised. They are clearly issues for proper resolution upon a trial. This brings me to the matter of the application of O 12 r 38, it's appropriateness or otherwise.

The difficulty I have with the next requirement is that of the belief of the plaintiffs that 'the defendant has no defence to the claim.' Simply because the plaintiff or a responsible person gives evidence that in his belief the defendant has no defence does not make it so. It is even more difficult to accept that contention in the face of sworn affidavit to the contrary.

I find this process, invoked at this juncture, quite inappropriate for proper resolution of substantive disputes. Where there are prima facie disputes of substantive nature, it is preferable to simply pursue a course for expedited hearing.

In the circumstances of this application, I repeat my view that simply the issues raised require substantive determination by examination of witnesses' evidence and application of the law. I consider they are most inappropriate for summary determination and judgment in this fashion.

Finally, whatever the origins and traditional basis for the relevance and application of this rule of practice might have been, I consider it is one that requires to be reviewed as to it's relevance and appropriateness in the circumstances of Papua New Guinea. Is it appropriate that full evidence and arguments not be presented and heard and a substantive ruling as to liability and quantum be made in this summary fashion?

This passage clearly questions the appropriateness of the procedure set out in O 12 r 38 of the National Court Rules. The rules are the subject of delegated legislation made pursuant to s 184 of the Constitution. The power of legislation by judges under this provision is quite distinct from judicial power of judges in the performance of their judicial functions. The two must not be confused. With respect, it is not open for judges to question the reasonableness or appropriateness of a statutory provision. In Carltona Ltd v Commissioners of Works [1943] 2 All ER 560 at 564, Lord Green MR, in dealing with a regulation made under an act, said:

"Parliament, which authorises this regulation, commits to the executive the discretion to decide and with that discretion if bona fide exercised no court can interfere. All that the court can do is to see that the power which is claimed to be exercised is one which falls within the four corners of the powers given by the legislature and to see that those powers are exercised in good faith. Apart from that, the courts have no power at all to inquire into the reasonableness, the policy, the sense, or any other aspect of the transaction."

See also Minister for Lands v Frame [1980] PNGLR 433 at 459 and South Pacific Post Pty Ltd v Nwokolo [1984] PNGLR 38 at 53.

If there are inappropriate statutory provisions, these can only be abolished or amended by the same statutory power. The National Court Rules are a form of delegated legislation and can only be amended by judges in their rule making power under s 184 of the Constitution.

An application under O 12 r 38 must be considered on it's merits within the terms of the rule, and the consideration of these issues must not be clouded by any consideration relating to the appropriateness of the rule.

This brings us to consider the proper basis upon which the trial judge should have determined the application.

The grounds of appeal to consider in this connection relate to the failure on the part of the trial judge to determine the admissibility of certain paragraphs of the respondent's affidavits.

Counsel for the appellants made detailed written submissions on the question of admissibility of evidence. These submissions appear on pages 792 to 822 of the Appeal Book. In particular, reference is made to page 796, in which the appellants' lawyers submitted in the following paragraphs:

"13. Much of the contents of the defendant's three affidavits is objectionable, as contravening the rules of evidence, and therefore inadmissible in evidence before this Honourable Court.

14. In particular, the defendant has attempted to introduce into evidence matters which go only, and at the highest, to the apparently private and un-communicated thoughts and beliefs of the defendant's agents, which were not, on the evidence before this Court, the subject of the negotiations which took place between the parties.

15. The defendant also attempted to introduce into evidence communications between various different persons who were agents of the defendant, on matters which were not communicated to the plaintiffs in the negotiations with the plaintiffs."

The appellants' counsel then itemised in detail the objections to each of the affidavits on pp 797 to 821 of the Appeal Book. There is no indication in the trial judge's decision that he considered these submissions at all. Failure to deal with the issues relating to admissibility of evidence would be a proper ground for quashing the decision of the trial judge.

The question then arises as to whether the matter should be remitted back to the trial judge. We consider that it is not in the best interest of the parties to have to delay the matter and incur further cost in sending this matter back to the trial judge. An appeal to this Court is by way of a rehearing on the evidence given in the court below (see s 6 of the Supreme Court Act). This Court can deal with the issues on the basis of the evidence presented in the court below.

We will first deal with the general matters relating to the affidavits which were relied upon by the respondent. Counsel for the appellants raised detailed objections to certain paragraphs of affidavits filed by the respondent in their written submissions at pp 792 to 822 of the Appeal Book. We have already set out paragraphs 13, 14 and 15 of appellants' submissions, which set out the summary of the grounds upon which appellants' lawyer objected to the relevant paragraphs of the respondent's affidavits.

The written submissions by the respondent appear on pp 823 to 826. These submissions provided no answer to these objections, nor did they make any reference to the objections by the appellants.

At the hearing of the appeal before us, counsel for the appellants made detailed submissions on the same issues. In contrast, counsel for the respondent again made no submissions on these issues. There is no reference to these issues in the respondent's outline of submissions filed in this appeal.

We will first deal with the affidavit of Peter Aisi. The nature of the objections are set out in the written submissions. It is alleged that certain matters are not the subject of admissible evidence. These include:

. personal comments or opinions that it was apparent to someone that someone else was desperate (paragraph 5).

. observations that in someone's opinion a strange thing occurred (paragraph 7).

. assertions that some other organ of the defendant needed to be consulted (paragraph 13).

. attempted evidence of an honest belief of some individual (paragraph 17) or that individual's personal understanding (paragraph 17).

We have considered all these objections, and we would uphold the objections on the basis of the grounds relied upon by counsel for the appellants.

Where parties have embodied the terms of the contract in a document, the general rule is that "verbal evidence is not to be allowed to be given... so as to add or subtract from, or in any manner to vary or qualify the written contract". See Bank of Australia v Palmer [1897] UKLawRpAC 44; [1897] AC 540 at 545; Reliance Marine Insurance v Duder [1912] UKLawRpKQB 90; [1913] 1 KB 265 at 273; Tsang Chuen v Li Po Kwai [1932] UKPC 50; [1932] AC 715 at 727; O'Connor v Hume [1954] 1 WLR 824 at 830.

It is also not permissible to adduce evidence to show that subjective intentions of the parties were not in accord with the written instrument. See Chitty on Contracts 25th Edn para 802. It is settled law that, where a contract is contained in a document, it is to the document that the courts will look for terms of the agreement. See Preston v Luck (1884) 27 Ch 497 at 506 per Cotton LJ; Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60, 77 per Isaac J.

We now consider the affidavit of Mr Gelu. Paragraph 5 of Mr Gelu's affidavit deposes that at no time the parties agreed that the engineers would negotiate settlement out of court. However, Mr Gelu's letter dated 4 November 1992 to the Secretary of Department of Transport states "generally, the meeting was to settle the question of compensation to the contractors by the State, out of court." Paragraph 5 cannot stand in view of this contradiction. Paragraph 6 deals with a proposition in law that relates to the authority of Mr Aisi to approve expenditure of certain amounts of money. The relevant question of fact is whether or not the NEC authorised the agents of the State to negotiate a settlement of this matter. This paragraph does not state this fact. It deals with the effect in law of this authority and is, therefore, inadmissible.

In respect of the affidavit of Mr Wohuinangu, counsel for the appellants raise objection to paragraph 10 in relation to a fax received from the Department of Transport in which Mr Aisi had stated, "We have agreed (in principle) that the compensation should be somewhere between 0 to 14 million as the base figure, that subjected to documentary evidence". This cannot be admitted, on the basis that this is not a document that passed between the appellants and the respondent and seeks to add to the hand-written document which sets out the terms of the agreement. The faxes referred to in paragraph 17 are not admissible for the same reason. In paragraph 15, the deponent refers to material which has no relevance to the "Poreporena Freeway". They are irrelevant and, therefore, inadmissible.

The whole of Mr Damem's affidavit is inadmissible. He simply makes reference to affidavits of Mr Aisi, Mr Gelu, and Mr Wohuinangu and makes submissions. It is of no evidentiary value.

Having dealt with issues relating to admissibility, the question arises whether there is any evidence left in the affidavits which raises any serious conflict of fact and/or law which would require resolution at the trial.

Two issues were raised by the respondent that would require resolution at a trial. These are:

1. the precise meaning and interpretation to be ascribed to the words of the hand-written document.

2. unsatisfactory nature of the evidence to justify the claim for US$14 million.

We now deal with the first matter. In view of the fact that evidence relating to subjective views of Mr Aisi have been struck off, there is no issue about the nature of the hand-written document. Whether or not the meaning of the document is clear has to be determined from the words used in the document itself. The respondent has not raised any issue in relation to the precise meaning of any of the words in the document. Counsel for the respondent has argued that the words "compensation claim amount of US$14,000,000" does not settle the question of liability to pay, as there is no express reference to liability, and, therefore, this is a matter which should be determined at the trial. It is true that there is no reference to the question of liability in the document. However, we cannot accept the proposition that, because this document does not make reference to liability, the parties should go to trial to determine this. First, if there is an agreement with regard to quantum, it can be implied from this that there is liability to pay. In any case, where there is negotiation to settle a matter and agreement is reached as to quantum, parties may settle without ever settling the question of liability. Many cases are settled on this basis without admission of liability. Such agreements must be enforced in law for the simple reason that, if they are not, many people would not be encouraged to settle cases out of court and our judicial system would be swamped with hundreds of cases that would come to court to determine the question of liability. We cannot allow this to happen. There can be no doubt that the words "compensation claim" in the hand-written document relates to the claim by the appellants arising out of the cancellation by the respondent of the written contract entered into to build the "Poreporena Freeway". There can be no triable issue relating to the meaning of the words "compensation claim" in the hand-written document dated the 17 November 1992.

We now consider the second matter. That is that the appellant failed to justify the claim for US$14 million therefore, the matter should go to trial to determine this. There are two matters involved in this issue. The first is the requirement of the appellant to actually provide information that would form the basis for the calculation of the amount. The second matter is that this information would justify the US$14 million.

There is ample evidence to show that the appellants provided the information required, which formed the basis of the calculation of the amount of claim. This evidence is contained in the statutory declarations by Mr Millar and Mr Kraemer, both authorised agents of the appellants. This clearly sets out the details and the basis of the calculations supporting the claim for US$14 million.

Counsel for respondent says the respondent is not satisfied because the appellants have not provided the documents which formed the basis of the calculations. It is true they requested these documents. The appellants' lawyers offered these documents for inspection in their office. We do not see anything wrong with this. In fact, the respondent's agents failed to attend a meeting for the purposes of inspecting the documents. Apart from this complaint, they offer no other alternative to the calculations made by the appellants. Mr Aisi, in paragraph 22 of his affidavit, did state that he was not satisfied with the documentary evidence. He has not stated in what respect he is not satisfied. For instance, he has not indicated which head of claim he is not satisfied with and the basis for disputing the amount. The appellants have broken up their claim under five separate heads. Ackner LJ, in K/S A/S Oil Transport v Saudi Research and Development Corporation Ltd (The "Gudermes") [1984] 1 Lloyd's Reports 5 at p 7, said:

"It is well settled that a defendant, seeking to resist summary judgment, should state clearly and concisely what his defence is and what facts are relied upon as supporting it."

It is the responsibility of the respondent's lawyers to state clearly and precisely what the defence is and what facts are relied upon. The respondent has failed to raise any defence as to the justification of the claim of US$14 million.

Counsel for the respondent further submitted that even if there was a contract, it is prohibited by s 46 of the Public Finances (Management) Act 1986 (No 35 of 1986) in that the amount agreed to in the contract is subject to approval by the National Executive Council. This submission raises two matters.

The first matter is the application of s 46 of the Act. It is in the following terms:

(1) Where there is no provision in any law as to the person or authority empowered to execute a contract or agreement on behalf of the State, that contract or agreement may be executed by:

(2) Where a contract or agreement was executed by a Minister or the Minister or by the Head of State, acting on advice, any variation thereto may be executed by the Minister or by the Head of State, acting on advice."

This section appears in Part VII of the Act, which deals with state tenders and contracts. Sections 39 to 45 under this part deal with the purchase and disposal of property and stores and supply of works and services for and on behalf of the State. These provisions have no application to the present case.

Section 46 is widely worded, and the agreement to settle the claim in this case would come within the words "... to execute a contract or agreement on behalf of the State ...."

The application of this section is, however, limited by the opening words: "Where there is no provision in any law as to the person or authority empowered to execute a contract or agreement on behalf of the State ...". The remaining part of s 46(1) is made subject to the words quoted above. This means that, where there is any provision in any other law dealing with the power of any person or authority to execute a contract or agreement on behalf of the State, the remaining part of s 46(1) simply becomes an option, and the State may choose to enter an agreement in this manner. There is no evidence to suggest that the State intended to enter into this agreement in accordance with the latter part of s 46(1) of the Act.

Any law under this provision means constitutional law, statutory law, or the underlying law. Counsel did not direct our attention to any constitutional or statutory laws on the subject. We have not been able to find any such law. The only law which is applicable to the subject is underlying law. The relevant law is the law of agency in common law, which is applicable under Sch 2.2 of the Constitution. The general rule is that, in a contract, the State is bound by a servant or agent acting within his or her authority. There can be no doubt that Mr Aisi and the Acting Solicitor General are agents of the State. There is no evidence from the respondent to dispute this, nor is there any evidence to show that the National Executive Council did not authorise either Mr Aisi or the Solicitor General to negotiate a settlement of this matter to the extent of the amount agreed to. Lawyers for the respondent did not lead any evidence at all in this regard. The respondent has not raised any evidence which may displace the ordinary rules of agency.

For the reason given above, we would allow the appeal, quash the decision of the trial judge, and enter judgment for the appellants in the amount of US$14 million. The appellants' cost of this appeal shall be paid by the respondent.

JALINA J: On or about 27 May 1992, the appellants and the respondent entered into a written contract ("the initial contract") for the design and construction of a road from Champion Parade, Port Moresby, via Burns Peak, to Waigani, to be known as the "Poreporena Freeway". The contract was worth US$67,619,500. This contract was cancelled by the respondent on or about 28 August 1992.

On or about 30 September 1992, the appellant caused to be issued in the National Court at Waigani a writ of summons (WS 734 of 1992) seeking damages for wrongful termination of the initial contract, interest, and costs. Alternative to paragraphs 1 to 12 inclusive of the Statement of Claim the appellants made alternative claims under paragraphs 13 and 14 of the Statement of Claim for various works, materials, and expenses they incurred under the initial contract. They were as follows:

(a) done various works and provided various materials in relation to the Agreement; and

14. The plaintiffs therefore are entitled to recover the value of the work done and materials provided on the basis inter alia it was an implied term of the Agreement that the defendant would pay the plaintiff for such work and materials."

The appellants made a "further alternative" claim, which was alternative to the alternative claim referred to in paragraphs 13 and 14 above. The "further alternative" claim is set out in paragraphs 15, 16, and 17, as follows:

"15. Further and in the alternative to paragraphs 9, 10, 11, 12, 13 and 14 the plaintiffs plead that the defendant has benefited from the matters pleaded in paragraphs 7 and 8.

16. In all the circumstances it would be unfair, inconsiderate, unjust or inequitable for the defendant to have so benefited without properly compensating the plaintiffs.

It would, therefore, appear that, to cover themselves against the risk of their claim for damages for breach of the initial contract being dismissed in its entirety, the appellants made alternative claims for damages for costs and expenses which they may have incurred up to the time of termination. This writ was never formally served on the respondent. I will return to this aspect later in this judgment.

Subsequent to the termination by the respondent by notice in accordance with Article 21.5 of the initial contract, a number of meetings took place between the agents of all the parties with a view to reaching a settlement. At a meeting on 17 November 1992, it is alleged that the parties reached an agreement to settle the matter for US$14 million. It is alleged that the terms of the agreement are contained in a hand-written documents, as follows:

In the meeting held at DOT office between Mr C. Millar and Mr P. Aisi they agreed to a compensation claim amount of US$14,000,00 subject to the Consortium providing satisfactory evidence to justify their claim.

The Consortium claim will be divided 6/14 to Kinhill Kramer and 8/14 to Curtain Bros as detailed in their August 26th letter.

The appellants commenced an action against the respondent on the basis of the hand-written document referred to above. The writ was issued on 18 March 1993 and endorsed with a claim for US$14 million. The writ was, therefore, issued for an alleged breach by the respondent of the terms of the hand-written document of 17 November 1992, which the appellants say formed a valid and binding contract between them and the respondent.

The respondent filed its notice of intention to defend on 23 March 1993. On the same day a motion for summary judgment was filed. This was prior to the expiration of 14 days allowed by 0 8 r 4(1)(a) of the National Court Rules for the respondent to file its defence. However, as correctly pointed out by the trial judge, the appellants motion for summary judgment was permitted by 0 8 r 4(2) of the National Court Rules.

The appellants' motion for summary judgment was made pursuant to 0 12 r 38 which reads:

(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.

The two elements of the above rules were clearly set out in Tsang v Credit Corporation (PNG) Ltd [1993] PNGLR 112, the Supreme Court said:

(b) that the plaintiff or some responsible person gives evidence that in his belief there is no defence."

As to the second element, the plaintiff must show in absence of any defence or evidence from the defendant that, in his belief, the defendant has no defence. If a defence is filed or evidence is given by the defendant, as in this case, the plaintiff must show that, upon facts and/or the law, the defendant has no defence. The plaintiff will not be entitled to summary judgment, if there is a serious conflict on questions of fact or law. Whether a case should go to trial on these issues will be determined on the facts of each case. However, the authorities show that the summary jurisdiction should only be invoked in a clear case; see Chief Collector of Taxes v T A Field Pty Ltd [1975] PNGLR 144.

In dealing with the present case, the trial judge considered the submissions by both the appellants and the respondent on the basis of the materials/evidence before him and decided to dismiss the motion. He was of the view that there were issues of fact and law raised which could appropriately be resolved at the trial.

The decision by the trial judge was in the nature of an interlocutory judgment. Appeals to the Supreme Court against an interlocutory judgment are prohibited by s 14(3)(b) of the Supreme Court Act Ch 37 unless the leave of the Supreme Court is first obtained. That section reads:

(ii) in cases of granting or refusing an injunction or appointing a receiver; or

(iii) in such other cases prescribed by the Rules of Court as are in the nature of final decisions."

The appellants' grounds of application for leave to appeal and the notice of appeal were identical. These grounds may be categorised as follows:

1. That the trial judge failed to deal with the defences raised by the respondent.

2. That the trial judge failed to deal with the objections raised by the appellants with regard to admissibility of certain paragraphs of the respondent's affidavits.

3. That the trial judge erred in concluding that there were triable issues for proper resolution at the trial.

As has been indicated above, the application for leave is made as the appellants propose to appeal against an interlocutory judgment of court whereby the trial judge dismissed the appellants' motion for summary judgment.

As Mr Millar deposes to the fact (see p 35 of Appeal Book) that a copy of the writ which contained, among other things, an alternative claim for costs and expenses incurred by the appellants under the initial contract was delivered to the respondent's representatives and discussed by the parties during the negotiations towards settlement which eventually led to the appellants instituting proceedings the subject of this appeal, it is necessary to consider whether or not the initial contract was effective prior to or at the time of termination. I consider this to be vital to the whole case, as the whole argument between the parties relates to payment of compensation for costs and expenses allegedly incurred by the appellants under the initial contract. The alleged contract the subject of the appeal was not related to compensation for costs and expenses under a separate contract. It was clearly related to such costs and expenses under the initial contract. The contract the subject of the appeal cannot, therefore, be considered in isolation from the initial contract.

Article 16 of the initial contract (p 64 of Appeal Book) makes the contract conditional on certain requirements being met in order for the contract to become effective. Article 16 reads:

(c) The issue and delivery by the State of all planning and related approvals required for the Works with the provision that such approvals shall be interpreted as having been granted by the signing of this Agreement."

There is no evidence that conditions (a) and (b) above have been satisfied. There is no evidence as to whether the appellants or the respondent had the obligation to ensure that those conditions were satisfied. Since the appellants are claiming compensation for costs and expenses incurred under this contract, the onus is on them to show that the contract was effective and that they had a valid claim.

If any or all of the above conditions have not been satisfied, then the contract is not effective and, as such, it is not binding on the parties; and in the absence of any provision in the contract entitling the respondent to be reimbursed the costs and expenses it incurred prior to the contract being effective, it would not be entitled to be compensated for such costs and expenses. This, of course, can only be determined at trial, as it was not argued in this Court. Although this matter was not argued, I consider this to be not only relevant but vital to the whole case, particularly in view of the appellants' decision to use the writ issued in respect of the alleged breach of the initial contract when the parties were negotiating settlement. It seems nonsensical that the appellants issued the writ involving a contract for over US$67 million but decided not to serve it and then went ahead and used it to negotiate compensation for only US$20 million. It raises a question as to why they were not prepared to proceed with the suit and receive the US$67 million (plus) from the respondent for having done virtually nothing for the respondent under the initial contract. It would have been a "free gift" on a "golden plate", as it were.

I now return to the grounds of the appellants' application for leave. As I have indicated above, the main reason for the trial judge's decision to dismiss the motion for summary judgment was that there were issues which could be appropriately resolved at trial. Consequently, I will deal with this ground first and then return to the other two grounds later in the judgment.

There are a number of authorities for the proposition that the Court should only enter summary judgment in a very clear case. In other words it should not enter summary judgment if the evidence/material before it shows that there are conflicts of law or fact. In such a case it is appropriate to resolve the conflict after the consideration of the evidence at trial.

In Chief Collector of Taxes v TA Field Pty Ltd [1975] PNGLR 144 Raine J said at p 146:

"The plaintiff has applied by way of notice of motion for an order under O XVIII r 1, namely, that he should be given leave to enter final and summary judgment in the action. In my opinion the summary jurisdiction conferred by the rule should only be invoked in a clear case. Great care should be taken not to shut out a defendant unless it is quite clear upon the facts and/or the law that he has no defence. Summary proceedings in ejectment in New South Wales under the old Rules in that State were only made use of by the Judges of the Court in very clear cases. See Burnstein v Lynn (1955) 73 W.N. (NSW) 111 and Pearch v Gyucha (1953) 73 W.N. (NSW) 122 at 124, where Street CJ said:

'Jurisdiction under this Order does not entitle the court to deprive the parties of their right to proceed to a hearing before a jury if there is a serious conflict on questions of fact - and that, of course, involves not only the surrounding facts themselves, but inferences of fact to be drawn from the evidence. If there is no such serious question between the parties, then I think that this Court should exercise the power which it has to determine the matter summarily and prevent continuous litigation over a claim which has little or no substance.' "

In Tsang v Credit Corporation (PNG) Ltd [1993] PNGLR 112, the Supreme Court said when discussing the second element in O 12 r 38 of the National Court Rules:

"As to the second element, the plaintiff must show in absence of any defence or evidence from the defendant, that, in his belief, the defendant has no defence. If a defence is filed or evidence is given by the defendant, as in this case, the plaintiff must show that upon the facts and/or the law, the defendant has no defence. The plaintiff will not be entitled to summary judgment if there is a serious conflict on questions of fact or law. Whether a case should go to trial on these issues will be determined on the facts of each case. However, the authorities show that the summary jurisdiction should only be invoked in a clear case."

In United Timbers (PNG) Pty Ltd v Mussau Timber Development Pty Ltd, unreported National Court judgment N645 of 2 December 1987, King AJ said:

"The power to enter summary judgment is one to be exercised sparingly and with great care and only when it is clear that there is no triable issue between the parties."

This case was applied by me in Imak International Pty Ltd v Pacific Wholesale Freezers Pty Ltd, unreported National Court judgment N976 of 26 March 1991.

As has been indicated above in relation to the conditions under Article 16 of the initial contract, it is doubtful as to whether the contract was effective prior to or at the time of termination, as there is no evidence that it was so effective. This raises a conflict of both fact and law which should be appropriately determined/resolved at trial.

Article 16 (c) required the respondent to issue and deliver "all planning and related approvals required for the Works".

Article 10.1 (f) required the respondent "To ensure that for the purpose of this Agreement that EFIC is a prescribed international assistance agency within the meaning of the Loans and Assistance International Agencies Act Ch 132." Section 11 of the act provides for the Head of State to prescribe by regulation organisations and agencies to be an international finance agency or an international assistance agency. Section 11 reads:

"The Head of State, acting on advice, may make regulations, not inconsistent with this Act, prescribing all matters that are necessary or convenient to be prescribed for carrying out or giving effect to this Act, and in particular for declaring organizations and agencies to be international assistance agencies or international finance agencies within the meaning of this Act."

There is no evidence that EFIC has been prescribed by the Head of State as an "international assistance agency" through a regulation. This is a requirement of law which would, again, be appropriate for determination at trial. The question of whether or not the state should be estopped from relying on it is another matter which could also be argued at trial.

As has also been indicated above, Article 16 (a) and (b) required approval by EFIC of both the export proceeds insurance for the project and the contract undertaken by the contractors which, of course, are the appellants. The inference I draw from this is that payment would be required to be made by the state in foreign currency. The Central Banking (Foreign Exchange and Gold) Regulation, which is made under the Central Banking Act Ch 138, requires approval of the Central Bank before any payments can be made in foreign currency. Sections 6 and 7 of the regulation provide:

(1) Subject to subsection (3), a person other than the Central Bank who, except with the authority of the Central Bank:

(2) Subject to subsection (3), a person other than the Central Bank, who, except with the authority of the Bank, is a party to a transaction having the effect of a transaction prohibited by subsection (1) is guilty of an offence.

(3) The Central Bank may give authority to an authorized dealer to do any thing or be a party to any transaction referred to in subsection (1) or (2) and those subsections do not apply to a thing done or transaction entered into in accordance with the authority.

(4) A person permitted to buy, borrow, sell, lend or exchange foreign currency under this section who enters into a transaction that provides for the conversion of Papua New Guinea currency into foreign currency, or vice versa, at a rate of exchange other than any rate of exchange fixed or authorised by the Central Bank and in force for the time being is guilty of an offence.

(5) Where any foreign currency is made available to a person by the Central Bank or by an authorised dealer:

(b) subject to conditions, he must not use the foreign currency otherwise than for that purpose, or fail or refuse to comply with the conditions, as the case may be.

(1) subject to subsection (2), a person other than the Central Bank who, except with the authority of the Bank or an authorised dealer, takes or sends, or attempts to take or send, out of Papua New Guinea:

(b) any foreign currency other than foreign currency obtained in accordance with an authority granted under s 6, is guilty of an offence.

(2) Subsection (1) does not apply to a money order issued at a post office in Papua New Guinea and payable outside Papua New Guinea.

(3) Where the authority of the Central Bank or of an authorized dealer is given to any person for the taking or sending out of Papua New Guinea of any Papua New Guinea currency for a specified purpose or subject to conditions, he must not use the currency otherwise than for that purpose, or fail or refuse to comply with the conditions, as the case may be."

As there is no evidence to indicate that approval of the Central Bank has been obtained, which was one of the related approvals required to enable finance to be made available so as to enable the works under the contract to proceed, this is also a question of both law and fact that could be appropriately resolved at trial, since any payment without the approval of the Bank of PNG would be illegal.

Article 15 of the initial contract made the contract subject to the laws of Papua New Guinea, which included the laws I have referred to above. Notwithstanding the fact that neither of the parties have made submissions on this, I am of the opinion that, since those requirements are not administrative requirements but are requirements of law, justice of the case, in the circumstances, places upon the court a duty to ensure that such laws which are applicable to certain aspects of the matter have, in fact, been complied with. As they are statutory requirements, the court should bring such requirements to the attention of the parties and not leave them out just because the parties have not made any submissions relating to such laws.

There are other triable issues which have been raised by the respondent in the outline of its submissions which I, with respect, adopt. For convenience and ease of reference for anyone who may wish to ascertain what the respondents have argued before this court, I quote most of them hereunder:

"1. One triable issue is 'the precise meaning and interpretation to be ascribed to the words of the handwritten document': p 834. For example, the appellants contend that the document (at p 209) deals with both liability and quantum of their claim. The respondent asserts that if the document has any legal effect, it is limited to quantum only: 'the compensation claim amount'. Another issue is whether, according to the true construction of the document, the appellants need only produce evidence which is objectively 'satisfactory'. The opposing argument is the test is subjective; the evidence must satisfy the respondent: Lindgren Carter & Harland, Contract Law in Australia, para. 275.

2. These matters of interpretation and construction cannot be decided on an application for summary judgment. No contracts are 'made in vacuum: there is always a setting in which they have to be placed Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989 at 995 and 997: Bacchus Marsh Concentrated Milk Co Ltd v Joseph Nathan & Co Ltd, [1919] HCA 18; (1919) 26 CLR 410, 427. 'Notwithstanding the parole evidence rule, the court, when construing a contract must place itself in the same factual matrix as that in which the parties were': Reardon Smith Line Ltd (supra) p 997; Lindgren Carter & Harland, Contract Law in Australia, para. 708.

3. Another triable issue identified by his Honour is whether the appellants have produced 'satisfactory evidence to justify their claim'. Even if 'satisfactory' is to be given an objective meaning, there remains an unresolved dispute which the court cannot decide on a conflict of affidavits in a summary fashion. See the affidavits of Mr Curtin (page 27, para. 5), Mr Kramer (page 31, para. 5) and Mr Aisi (page 587, para 22). The documents relied upon by the appellants and their calculations are, at least arguable, deficient: pp. 289 - 300. For example, there is no discounting for early payment of future profit: Lindgren Carter & Harland, para 216. There is no credit for their remunerative work the appellants are free to undertake: Greig & Davis, The Law of Contract p 1391 .

4. There are other obviously triable issues of law or mixed fact and law. An intention to create legal relations is an essential element to a contract. Many disparate factors may negative contractual intention: Treitel, The Law of Contract, 7th edition, p 130. The issue is determined as an inference of fact based upon the express or implied intention of the parties looked at in the circumstances of the case. Relevant factors are the circumstances leading to the signing of the handwritten document, the vagueness of its language, the importance of the agreement, the amount of money involved, the usual practice (if any) of the parties, the fact that one party is the State, the position of Mr Aisi, and relevant statutory restrictions. In the light of all the facts it would be open to the court to determine there was no intention to create legal relations.

5. A legal entity such as the State must act through agents. Mr Aisi had no actual authority to bind the State to a $US14m contract. His alleged authority derived entirely from the letter of 4th November, 1992 from the Acting State Solicitor Mr Gelu (page 600). That document does not on its true construction give Mr Aisi power to bind the State to the alleged contract. Paragraph 7 of the appellants' Statement of Claim (page 7) more accurately describes Mr Aisi's authority.

6. The handwritten document is so vague as to be arguably uncertain and unenforceable. The requirement that the appellants produce 'satisfactory evidence' is not related to any external yard-stick. The courts will not always adopt a reasonable standard. What is meant by the word 'claim'? Furthermore, the alleged contract is subject to a specified event or condition being satisfied. That raises the question whether the parties could be said to be bound (and whether either may unilaterally withdraw) unless and until that event occurs or condition is fulfilled. 'The intention of the parties must be ascertained from their agreement and this will be no easy task, as shown from the differing opinions which have been expressed in a number of cases as to the position when a sale has been stated to be subject to survey, running trials and the like': Lindgren Carter & Harland, Contract Law in Australia, para. 275 (and the cases there).

7. The alleged contract is at least arguably invalid and unenforceable for non-compliance with the Public Finances (Management) Act 1986 particularly s 46. No promise or representation by a public servant can bind the State where it is made in breach of Statute: Hogg, The Liability of the Crown, 2nd edition, pp 168-169. Similarly, the general law of agency whereby the act of an agent will bind the principal if the act is the agent's apparent or ostensible authority cannot override a statutory prohibition: Hogg, pp. 173-4.

8. Arguably the alleged contract was not intended to be binding until a formal document, approved by the State Solicitor, had been executed. It is quite common for parties to negotiate an agreement but not intend to be bound until a formal contract, approved by their lawyers, is executed. Factors to look at are the vagueness of the language, the importance of the agreement, the parties, the amount involved, and the action of the parties' representatives. See Mr Gelu's affidavit, pages 597-598; Lindgren Carter & Harland, Contract Law in Australia, para. 273.

9. The alleged contract contained a term requiring the State to be satisfied with the appellants' evidence. It is not unusual to give one contracting party a wide discretion such as this, only limited by an obligation to exercise that discretion honestly: Meehan v Jones [1982] HCA 52; (1982) 56 ALJR 813, 820. Mr Aisi says he is not satisfied with the appellants' evidence. Whether the test is objective or subjective, whether it imports a question of reasonableness, and whether Mr Aisi has acted reasonably and honestly are triable issues."

From the above, it is clear that there are numerous triable issues which this court, with respect, cannot ignore and enter summary judgment in favour of the appellants.

Grounds 1 and 2 of the application for leave relate to the failure of the trial judge to deal with the defences raised as well as his failure to deal with objections regarding the admissibility of certain paragraphs of the respondent's affidavits. These grounds, basically, involve the exercise of the trial judge's discretion, which he was clearly given by the words "the Court may" in O 12 r 38 of the National Court Rules. As can be seen from the wording of O 12 r 38(1), the discretion given to the court by the words "the Court may" applies to both elements of this rule. With respect, I cannot see where the trial judge has failed but has, in fact, considered the matters referred to in the above two grounds and decided not to deal with them in the exercise of his discretion. Whilst his Honour's discretion appears to have been influenced by the numerous triable issues referred to above and some of which are referred to in his judgment, he, nevertheless, exercised his discretion. By his decision not to deal with the matters raised in the above two grounds, His Honour appears to have decided that for him to have done so would have involved his entering into the merits of the case. In Jacobs v Booth's Distillery Co (1901) 85 LT 262, a case which involved O xiv of the English Supreme Court Rules, which is the equivalent of our 0 12 r 38, Lord James of Hereford said:

"The view which I think ought to be taken of Order xiv is that the tribunal to which the application is made should simply determine, 'is there a issue to go before a jury or a court?' It is not for that tribunal to enter into the merits of the case at all. It ought to make the order only when it can say to the person who opposes the order, 'You have no defence.' You could not by general demurrer, if it were a point of law, raise a defence here. We think it is impossible for you to go before any tribunal to determine the question of fact."

The rule is intended only to apply to cases where there is no reasonable doubt that the plaintiff is entitled to judgment, and where, therefore, it is not expedient to allow a defendant to defend for mere purposes of delay. This case was also applied by me in Imak International v Pacific Wholesale Freezers.

In Straits Contracting (PNG) Pty Ltd v Branfill Investments Ltd [1988] PNGLR 239, the Supreme Court comprising Bredmeyer, Los and Hinchliffe JJ unanimously held that the Supreme Court should hesitate to overturn a trial judge on a discretionary interlocutory ruling. I, with respect, endorse this view. I would venture to add a word of caution in this regard. The Supreme Court should be careful in dealing with appeals against interlocutory judgments of the National Court which are not in the nature of a final decision. To do so may result in every decision of the National Court being appealed against thus resulting in the unnecessary clogging of the Supreme Court List, and the process of the Supreme Court being abused.

In the present case, the trial judge's decision to dismiss the appellants' motion for summary judgment was interlocutory in nature. The decision was not final. The appellants have not shown that the trial judge's decision has prejudiced their case in any way. If their claim is genuine and that they have a greater chance of success, then there is no reason why they should not go to trial and prove their claim. The reason that costs would be saved by summary judgment should not be a reason not to remit the case for trial, since any costs that may be incurred by them would undoubtedly be paid by the losing party, which in this case would be the respondent. For the reasons I have given above, I am of the opinion that the appellants' application for leave to appeal be refused and that the matter be remitted to the National Court for trial.

As I have decided to refuse leave to appeal, it is not necessary for me to consider the appeal.

The respondent's costs of this appeal be paid by the appellants. I would certify that this case was appropriate for engagement of overseas counsel.

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Papua New Guinea Law Reports

Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285 (9 November 1993)

PNG Law Reports 1993