Hornibrook NGI Pty Ltd v Lihir Management Company Pty Ltd [1998] PGLawRp 742; [1998] PNGLR 52 (18 June 1998)

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LIHIR MANAGEMENT COMPANY PTY LTD AND
WESTS PROCESS ENGINEERING PTY LTD
(ADMINISTRATOR APPOINTED)

The lex loci contractus in this case is Papua New Guinea, as the transaction or contract between the plaintiff and second defendant has its closest and most real connexion with Papua New Guinea, and accordingly, the law of Papua New Guinea shall govern the contract.

Curtain Bros (Qld) Pty Ltd & Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285.
Hornibrook Construction Pty Ltd v Kawas Express Corporation Pty Ltd [1986] PNGLR 301.

John Lavington Bonython v Commonwealth of Australia [1951] AC 201.
Tomkinson & Anor v First Pennsylvania Banking & Trust Co. (In re United Railways of Havana & Regla Warehouses Ltd) [1961] AC 1007.

E Anderson, for plaintiff.
P Payne, for first defendant.
J Sirigoi, for second defendant.

SEVUA J. This is an application for summary judgment against the second defendant pursuant to Order 12 Rule 38 of the National Court Rules (the Rules). As this application was against the second defendant only, counsel for the first defendant was excused and the claim against the first defendant adjourned generally.

In support of its application, the plaintiff relies on the affidavits of Mal Lewis sworn on 16th February 1998 and Graham Chaffey sworn on 14th May 1998.

The plaintiff’s claim against the defendants in the sum of K297,899.01 arose from a contract. The plaintiff is in the business of supplying and manufacturing of steel for construction and engineering works amongst its other businesses. The first defendant manages the construction and operation of the Lihir Gold Mine at Lihir Island in New Ireland Province. In April 1997, the plaintiff agreed to manufacture and supply to the second defendant for the ultimate use of the first defendant at Lihir, certain goods which the second defendant agreed to pay for. This agreement followed some quotations supplied by the plaintiff to the second defendant, which were discussed with the first defendant, and in which, both defendants selected the plaintiff to manufacture and supply the goods.

The first order, which for the purpose of these proceedings, will be identified as Contract 5199/C26, (which is the actual order number from the second defendant), requested the manufacture and supply of a dump hopper, cyclone support structure, dump hopper support structure and additional cost to whip blast and prime dump the hopper for a consideration of K42, 609.00.

The second order, Contract 5199/C37 was for the fabrication, supply and delivery of a 200 tonne lime bin with supporting steelwork in accordance with the drawings and specifications referred to therein. The consideration for this order was K 148,483.00.

During the manufacture or fabrication of these goods, amendments were made to both orders and these amendments inflated the original costs, however all the amendments, six in the first order and four in the second order, were agreed to by both the plaintiff and the second defendant.

This contract was in accordance with the Australian Standard General Conditions of Contract AS 2124-1992 (AS 2124-1992).

In accordance with the terms of the contract, the plaintiff performed the works required of it. By 13th June 1997, the plaintiff had delivered most of the goods and materials required under the contract. However, it still retained on its premises, dump hopper dust cover hood door and support works under the first order and access ladders and platforms under the second order. On 16th June 1997, the plaintiff was informed that the second defendant had had an Administrator appointed over it in Australia. The plaintiff later received a report from the Administrator, Ronald Bentley Brown of Bentleys Chartered Accountants, undated, but titled, "Report to the Creditors of West’s Process Engineering Pty Ltd (Administrator Appointed) ACN 002 498 142".

Invoice No.	Date of Invoice	Due Date	Amount (K)
708294	29th May, 1997	29th June, 1997	67, 047.85
708314	18th June, 1997	19th July, 1997	158,538.72
708315	18th June, 1997	19th July, 1997	63,300.71
708317	18th June, 1997	19th July, 1997	9,011.73

In May and June 1997, the plaintiff remitted four invoices to the second defendant for payment; however, neither the second defendant nor the first defendant had paid any monies in those invoices. Particulars of these invoices are as follows:

The second defendant has filed a defence to the plaintiffs writ. In its defence filed 12th May 1998; the second defendant denies some parts of the statement of claim, but made some admissions. In relation to the amount claimed by the plaintiff, I think the relevant parts of the statement of claim are paragraphs 17, 25 and 28, which sets out the particulars of invoices and amounts in the two orders constituting the contract between the parties.

In respect of paragraph 17 of the second defendant’s defence, the second defendant said, it does not know and cannot admit that paragraph.

In respect of paragraph 25, the second defendant admits it received invoices from the plaintiff; and otherwise does not admit paragraphs 25 of the statement of claim.

In relation to paragraph 28, the second defendant denies it has defaulted in paying the invoice against the HNGI contracts as alleged; does not know and cannot admit the claim against the first defendant denies that the plaintiff is entitled to judgment as alleged or at all; and denies the plaintiff is entitled to claim as alleged or at all.

In opposing the plaintiff’s application, the second defendant has merely raised the question of jurisdiction and argued that the law of NSW governs this contract.

The basis for this argument is that the documents relative to this contract were posted in Australia therefore the contract was entered into or made in Australia (my emphasis). The second defendant relied on the affidavit of Ronald Brown, the Administrator Appointed.

That affidavit contains matters of law and hearsay materials. There is no reason why Mr Robert Jury, former project engineer of the second defendant, could not give direct evidence by way of an affidavit. No reason has been advanced as to why the second defendant was not able to have him swear an affidavit. As it were, Mr Brown was relying on what Mr Jury had said, and this is hearsay evidence. In any event, Mr Brown’s affidavit was not filed as an affidavit, but annexed to the affidavit of Mr Sirigoi, counsel for the second defendant.

I consider that both affidavits are objectionable. The affidavit of Mr Sirigoi merely refers to the affidavit of Mr Brown therefore contains no evidentiary value. The affidavit of Mr Brown is inadmissible, in my view. It sets out provisions of a law in NSW based on advice received from a law firm in Australia, in paragraphs 3, 5 and 14. This is not evidence. The rest of the affidavit is hearsay as the matters deposed to be from Mr Robert Jury, who could have sworn an affidavit himself. Mr Brown’s affidavit is therefore inadmissible.

Earlier on, I adverted to the fact that the contract was in accordance with AS 2124-1992. Clause 1 deals with the applicable law in the event of arbitration or litigation. The applicable law is required to be stated in the annexure, however, Annexure Part A of AS 2124-1992, does not contain the governing law. And as alluded to, the only basis for the second defendant’s argument is that the documents were posted in Australia.

I am of the view that the second defendant’s argument must fail. There are more factors, which weigh in favour of the plaintiff in finding that the law of Papua New Guinea is applicable to this contract and these are:

The only factor in favour of the second defendant’s argument is that the second defendant is an Australian company and is located in Australia, but conducted business in Papua New Guinea.

Although I find that the parties have not nominated the law applicable to or governing the contract, I consider that the law in Papua New Guinea governs this contract under the circumstances because the contract would seem to have the most real connexion with Papua New Guinea. In my view, the circumstances are of great, if not decisive weight in determining that the proper law of the contract is the law of Papua New Guinea.

Counsel has not referred me to any authority in our jurisdiction, but Mr Anderson referred to two English decisions. The Privy Council decision in John Lavington Bonython v Commonwealth of Australia [1951] AC 201, where Viscount Simmonds delivering the judgment of the court propounded the correct test at p. 219 as follows "... the system of law by reference to which the contract was made or that with which the transaction has its closest and most real connexion." The test was later applied in Tomkinson & Anor v First Pennsylvania Banking & Trust Co and In re United Railways of Havana and Regla Warehouses Ltd [1961] AC 1007.

In the light of the circumstances of the present case I have alluded to, I consider that the test in these English cases is the test to be applied here, and accordingly, I adopt the test and apply it in this case. I find that the lex loci contractus is Papua New Guinea, therefore the transaction or contract between the parties herein has its closest and most real connexion with Papua New Guinea. Accordingly, I dismiss the second defendant’s contention that the contract was made in Australia and the law of NSW governs the contract.

Having determined that issue, I revert to the question of whether the second defendant has a defence. I have already alluded to the plaintiff’s claim in paragraphs 17, 25 and 28 of its statement of claim. I have also adverted to the second defendant’s defence and the manner in which it had pleaded its defence to those paragraphs. The second defendant did not know and could not admit paragraph 17 of the plaintiff’s statement of claim, but offered no satisfactory explanation as to why or how it denied the plaintiff’s claim that the steel products required and requested by it had been fabricated and delivered to Lihir Gold Mine, except for a few goods that were withheld subject to satisfactory arrangement of payment of invoices.

There is more than ample evidence that the plaintiff had manufactured and supplied steelworks to Lihir Gold Mine at the request and orders of the second defendant. How then could the second defendant deny liability?

Furthermore, the second defendant admits receipt of the plaintiff’s invoices in paragraph 25 of the statement of claim, but does not admit paragraph 25. Similarly, the second defendant had done the same in paragraph 28, where it says it denies default in payment and denies that the plaintiff is entitled to judgment and interest. The second defendant had just not given the plaintiff and the court the precise nature of its defence.

In my view, the second defendant’s defence is prohibited by Order 8 Rule 38. Most of the second defendant’s defence amounts to nothing more than general denial and non-admission of facts. It has made general denials and non-admissions without specifically denying the facts or the basis upon which the plaintiff’s cause of action is based, and so informing the plaintiff and the Court of the precise nature of its defence. This is unacceptable and such defence cannot stand. See Hornibrook Construction Pty Ltd v Kawas Express Corporation Pty Ltd [1986] PNGLR 301.

There is ample evidence in the affidavits of Mal Lewis and Graham Chaffey that the second defendant has not substantially disputed. The agreement to fabricate and supply steelworks to the second defendant and the second defendant’s orders, 5199/C26 and 5199/C37 are ably supported by credible evidence. Delivery of these goods to Lihir in accordance with the contract has not been denied. These and a number of other facts have led me to conclude that the second defendant has no defence. The plaintiff’s evidence leads me to this conclusion.

The law in relation to summary judgment has been settled by the Supreme Court in Bruce Tsang v Credit Corporation (PNG) Ltd [1993] PNGLR 112 and followed in Curtain Bros (Qld) Pty Ltd & Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285.

In both decisions of the Supreme Court, the Court said at 117 and 288 respectively:

(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." See also, Kumul Builders Pty Ltd v Post and Telecommunication Corporation [1991] PNGLR 299.

I am satisfied that the plaintiff has fulfilled the requirements of rule 38(1) and accordingly, he is entitled to the relief sought.

I am satisfied that the second defendant has no defence at all, and I have arrived at this conclusion following a careful consideration of the facts of the case. I am of the view that the plaintiff’s evidence show that the second defendant’s defence has no merits. In my view, there is no serious conflict on questions of fact or law, which require this case to proceed to trial. The second defendant’s evidence shows no defence at all. Therefore, I conclude that the plaintiff is entitled to summary judgment.

As to the question of interest, the rate of 18% per annum is stipulated in clause 42.9 of the AS 2124-1992. I consider therefore that the plaintiff is entitled to that interest rate. Since that clause stipulates that interest shall be compounded at six monthly intervals, I will allow that.

Judgment will therefore be entered for the plaintiff and I order the following:-

(a) as to the sum of K67,047.85, interest to commence from 29th June 1997, compounding every six months thereafter.

(b) as to the sum of K230,851.16, interest to commence on 19th July 1997, compounding every six months thereafter.

Lawyers for plaintiff: Gadens.
Lawyers for 1st defendant: Blake Dawson Waldron.
Lawyers for 2nd defendant: Thirlwall Aisi & Koiri.

Papua New Guinea Law Reports

Hornibrook NGI Pty Ltd v Lihir Management Company Pty Ltd [1998] PGLawRp 742; [1998] PNGLR 52 (18 June 1998)