Patterson v National Capital District Commission [2001] PGNC 71; N2145 (5 October 2001)

N2145

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS No. 630 of 2001

JACK LIVINAI PATTERSON

-Plaintiff-

V

NATIONAL CAPITAL DISTRICT COMMISSION

- Defendant-

WAIGANI: KANDAKASI, J.
2001:

PRACTICE & PROCEDURE – Failure to disclose reasonable cause of action – Essential element of contract not pleaded and non-existent – Non-compliance of public tender and Ministerial Approval of contract with public body – Failure to put costs in taxable form – Action dismissal – Public Finance (Management) Act 1995 ss. 48(4), 59 and 61 – Lawyers Act 1986 ss. 62(1) and (2) and (63)(2) – Professional conduct Rules ss.3 and 13 – National Court Rules O.12, r.40(1) & O. 22 r. 49.

CONTRACT – Essential elements of consideration or price with certainty – Absence of – No consensus and idem – No contract – Non-compliance of relevant and applying statute – Contract illegal, null and void – Public Finance (Management) Act 1995 ss. 48(4), 59 and 61.

LAWYERS COSTS – Lawyer and client not agreeing on costs – Contract – Lawyers bill of costs must be in taxable form – Lawyer must advise client of right of taxation – Failure to put Costs in taxable form and advise client of right of taxation amounts to failure to give rise to a cause of action for recovery of costs – Lawyers Act 1986, ss. 62(1) and (2) and 63(3) – Professional conduct Rules, ss. 3 and 13.

Facts

Mr. Patterson sued for unpaid legal costs totalling over K4.3 million. He claimed being engaged by the National Capital District Commission ("NCDC") to render legal services. Public tender and ministerial approval requirements under the Public Finance (Management) Act were not met. There was no agreement on the consideration or price for the services. Accounts were render to the NCDC but not in taxable form. NCDC was not advised of its rights to have the costs taxed and when asked to put costs in taxable form, Mr. Patterson failed to do that. NCDC is applying by motion to dismiss the claim for failure to disclose a reasonable cause of action.

Held

1. There was no agreement and therefore a lack of consensus idem on the essential element of price or valuable consideration for the provision of legal services to the NCDC by Mr. Patterson.
   
2. The alleged contract was illegal, null and void and therefore unenforceable for non-compliance of the requirements for public tender and ministerial approval under the Public Finance (Management) Act 1995.
   
3. Lawyers are under a duty to advise their clients of the client’s right to a taxation of their costs and give meaningful opportunity to the clients to exercise their right to a taxation of their costs, which includes a provision of a bill of costs in taxable form. The purported bill of costs in this case were not put in taxable and the NCDC was not given a real opportunity to have the purported bills of costs taxed. Therefore, no cause of action accrued to Mr. Patterson.
   
4. By reason of the above no reasonable cause of action is disclosed.
   

PNG Cases Cited:

PNG Forest Products v The State [1992] PNGLR 85.
Ronny Wabia –v- BP Exploration Co. Ltd, Department of Mining & Petroleum and The State, N1697
Sylvanus Gorio v. National Parks Board [1982] PNGLR 364 at pages 368 – 369.
Panga Coffee Factory Pty Ltd v. Coffee Industry Corporation Limited (Unreported but numbered judgement).
Wag v. Mount Hagen Town Authority [1996].
Inakambi Singorom v. John Kalaut [1985] PNGLR 238 at 241.
PLAR No. 1 of 1980 [1980] PNGLR 326.
Norah Mairi v. Alkan Tololo & Ors [1976] PNGLR 125 at 136.
Ombudsman Commission Investigations of the Public Prosecutor [1978] PNGLR 345 at page 389.
Peter Ipu Peipul v. Sheehan J., Ori Karapo and Ivoa Geita (Leadership Tribunal) & Ors (Unreported and unnumbered judgement) at page 11.
The State v. Keboki Business Group Incorporated & Morobe Provinsel Gavman [1985] PNGLR 369.
Visvanathan Subendranathan v. The State (Unnumbered Judgement).
Marsh -v- Hay [1981] PNGLR 392.
Paul Paraka Lawyers v. NCDC.
Philip Mamando v. Lumusa Local Level Government Council (13/9/98) N1752

Other Cases Cited:
Hubbuck & Sons Ltd –v- Wilkinson Heywood & Clark Ltd [1898] UKLawRpKQB 176; [1899] 1 QB 86 at pp. 90-91; [1895-9] All ER Rep 244 at page 247.
Dyson –v- Attorney General [191
1] I KB 410 at pages 414 & 419.
Nagle –v- Feilden [1966] I All ER 689 at 697 [1966] 2QB 633, at page 651.
Allen –v- Gulf Oil Refining Ltd [1980] UKHL 9; [1981] 1 All ER 353 at page 355; [1981] AC 1000 at – 1111.
Attorney General of the Duchy of Lancaster –v- London and North Western Railway Co. [1892] UKLawRpCh 134; [1892] 3 Ch 274, at 277.
Thomas v. Thomas [1842] EngR 260; (1842) 2 Q.B. 851 at 859.
Scammel & Nephew Ltd v. Ouston [1941] AC 25.
Credit Suisse v. Allerdale BC [1996] All ER 129.
Hunter Brothers v. Brisbane City Council [1984] 1 QdR 328.
Wade v. Gold Coast City Council (1971) 26 LGRA 349.
Streamline Travel Service Pty Ltd v. Sydney City Council (1981) 46 LGRA 168.

Counsel:
S. Ketan for the Plaintiff
J. Naipet for the Defendant

5th October 2001

KANDAKASI J: I have two motions before me for determination. The first is the defendant’s ("the NCDC"), seeking a dismissal of the proceedings pursuant to Order 12 r.40 (1) of the National Court Rules ("the Rules") for not disclosing a reasonable cause of action or is otherwise frivolous, vexatious and or an abuse of process. The motion is the plaintiff’s ("Mr. Patterson"), seeking a strike out of the NCDC’s defence and for summary judgement to be entered for Mr. Patterson in the sum of K4, 354, 502.00 for legal services allegedly rendered to the defendant.

Mr. Patterson relies on section 63 (2) of the Lawyers Act 1986 ("the Lawyers Act"), argues that NCDC failed to ask for a taxation of his bills of costs and a period of more than one month passed before the issue of the proceedings. Therefore, it precluded from taking issue on the bill. The NCDC contents however, that the bills of costs were not presented in taxable form having regard to the provisions of s.62 (2) of the Lawyers Act so as to allow for a taxation of Mr. Patterson’s costs. By reason of that, NCDC agues that Mr. Patterson is not entitled to bring this proceedings without first having facilitated and obtained a certificate of taxation. Hence NCDC argues that, the issue of these proceedings amount to an abuse of process if not a failure to disclose a reasonable cause of action and or are frivolous or vexatious and as such they should be dismissed with costs.

I consider it more appropriate that I should deal with the NCDC’s application first because a determination of that application will determine whether Mr. Patterson’s application should be dealt with at all.

The issues presented by NCDC’s application are these:

1. Do the pleadings disclose a reasonable cause of action against the defendant?
   
2. Are the proceedings frivolous and vexatious?
   
3. Do the proceedings amount to an abuse of the court’s process by reason of Mr. Patterson’s costs not being put in taxable form and not being subjected to taxation under section 62 (2) and (63(2) of the Lawyers Act 1986?
   

The first and second issues can be dealt with together because the same kind of principles or considerations applies to them. I will therefore deal with them in that way.

The relevant evidence is set out in the affidavits of Judy Naipet and Joseph Aisa (Jnr) for NCDC both sworn on the 17th of May 2001. Mr. Patterson’s own affidavit of the 7th of June 2001, is the only evidence of him.

From these affidavit evidence the facts are not in issue. Mr. Patterson claims he was engaged, as a lawyer by NCDC to help recover certain outstanding Sales and Services Tax owed by a number of companies and business entities. The engagement was by letter dated 25th February 1999. The letter of engagement reads in relevant parts as follows:

"RE: COLLECTION OF OUTSTANDING SALES AND SERVICES TAX FOR THE NATIONAL CAPITAL DISTRICT – (NCDC)

I refer to the above and advise that the Management of NCDC has decided to instruct your firm to collect outstanding Sales and Services Tax owed by Companies and Business entities in the National Capital District Commission. ...

Please liaise with our Revenue Section to provide the list of all Defaulting Companies and the amount owing to enable you to commence legal proceedings immediately.

Yours faithfully

(signed )

DAVID B. IPASSI

Director – Legal Services"

By letter dated 3rd March 1999, Mr. Patterson accepted the instructions and informed NCDC of the steps it had taken to carry out the instructions. Under cover of a letter dated 21st April 1999, the plaintiff appears to have issued interim bills totalling K202, 880.00 mainly for conducting 64 company searches at a rate of K3, 170.00 per search. The total amount claimed was changed drastically to K456, 480.00 by letter dated 22nd June 1999. The reason for that is stated in these terms in the opening and last lines of the second paragraph to that letter:

"So far we have done individual searches for Sixty-four (144) companies. ... Our costs as you may appreciate are done on a per company basis thus we charge K3, 170 multiply by 144 equals K456, 480.00"

There is no reference in that letter to the first letter of the 21st of April 1999, and the substantial variation in the total amount of costs claimed. Apart from a number of invoices, there is no explanation for the amounts claimed beyond K456, 480.00 before finally claiming a debt of K4, 351, 635.00, appearing in annexure "M" to Mr. Patterson’s affidavit, which is a letter dated 3rd February 2000. That letter came about after NCDC terminated Mr. Patterson’s services by letter dated 26th October 1999.

The NCDC took issue on the alleged debts for a number of reasons. The first was that Mr. Patterson undertook work that was not authorised. Instead of liasing with it’s defendant’s revenue section for a list of the tax defaulters, Mr. Paterson’s firm merely obtained a list of the registered taxpayers. Secondly, the amount charged for each company search was excessive given that the job did not require a lawyer but a clerk who could have charge far less than the amount charged. Finally, the NCDC did not benefit from Mr. Patterson’s services as it failed to produce any results in the recovery of debts from the defaulters.

Mr. Patterson insisted that, the costs were properly incurred and demanded a payment. By a letter dated 3rd January 2000, the NCDC required Mr. Paterson to get his costs taxed. For that purpose, it asked Mr. Patterson to put his costs in taxable form. Mr. Patterson did not put his costs in taxable form as requested. Instead it seems the matter somehow went to the then Minister for Provincial and Local Level Government Affairs, Honourable Andrew Kumbakor who directed that K2 million kina be paid and the balance be negotiated. At the same time, he indicated that the officer involved in engaging the services of Mr. Patterson should be investigated and raised doubt as to the due compliance of the relevant and correct procedures. It seems the then Ministers directions appear not have been followed and that resulted in a issue of these proceedings on the 2nd of June 2000.

There is no evidence of the parties agreeing to the appropriate rate and the amount of costs or the price for the engagement of Mr. Patterson’s services. Similarly there is no evidence of the requirements for public institutions such as the NCDC to comply with the provisions of Public Finance (Management) Act 1995. This is especially in relation to the need to call for public tender for the provision of goods and services to such institutions where the amount of money involved exceeds the prescribed limits. Mr. Patterson admits that there was no public tender for the job.

After the issue of the proceedings, the NCDC requested Mr. Patterson to withdraw the proceedings on the basis that he had no cause of action, as his Bill of Costs was not taxed in accordance with section 62 of the Lawyers Act. It was submitted that, a compliance with that provision was a pre-requisite to a cause of action accruing to a lawyer suing for his fees. Since Mr. Patterson had not complied with that provision, he had thereby deprived him itself of a cause of action. The NCDC then threatened to apply for a dismissal of the proceedings if Mr. Patterson did not discontinue the proceedings. Mr. Patterson rejected that and refused to withdraw the proceedings maintaining a contrary view.

Failure to disclose reasonable cause of action
and or a frivolous and vexatious claim

Order 12 r.40 of the Rules provides the foundation for a stay or dismissal in part or in whole of any proceedings before the court. That provision reads:

Order 12 rule 40. Frivolity, etc

"(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings-

(a) no reasonable cause of action is disclosed;

(b) the proceedings are frivolous or vexatious; or

(c) the proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

(2) The Court may receive evidence on the hearing of an application for an Order under Sub-rule (1)".

There are numerous cases on this rule. Justice Sheehan discussed the extent to which this rule can or can not be used in PNG Forest Products v The State [1992] PNGLR 85. From the head note to the judgement his Honour said:

"1. A party has a right to have his case heard, as guaranteed by the Constitution and the laws of this country. Such a right cannot be lightly set aside. Hence the National Court Rules are designed to enhance those rights and to ensure the prompt and fair disposal of matters coming before the Court. For the same reason and in the interest of justice, the rule include prohibitions against abuse of the court process.

2. Quite apart from the powers given to the court by the National Court Rules Order 12 Rule 40 to strike out or stay any proceedings which -
   

(a) do not disclose a reasonable case of action; or

(b) are frivolous or vexatious; or

(c) are an abuse of the court process,

the court also has an inherent jurisdiction to protect itself from abuse of its process. If the Court is satisfied that the conditions of Order 12 Rule 40 are or have been established, it may strike out that offending action. Hence, it can in appropriate cases prevent a party from presenting its case in court or from defending one brought against it. But the refusal to try a party’s claim or the striking out of its defence is not lightly done, and there has been a long history of case law determining what is a "reasonable" cause of action or defence and what is "frivolous or vexatious". See Republic of Peru v Peruvian Guano Company [1887] UKLawRpCh 186; (1887) 36 Ch D 489 per Chitty J, Hubbuck and Sons Ltd v Wilkinson, Heywood & Clerk Ltd [1898] UKLawRpKQB 176; (1899) 1 QB 86 per Lord Lindly MR;

3. An action should only be struck out in cases where "the cause of action is obviously and almost incontestably bad".
   
4. There is a distinction between seeking to have an action decided on a preliminary point of law and moving to have it struck out for want of reasonable cause of action. See Hubbuck and Sons Ltd v Wilkinson Heywood and Clerk Ltd [1898] UKLawRpKQB 176; (1899) 1 QB 86 per Lord Lindly MR; Lonrho plc v Fayed (1991) 3 All ER 303 per Lord Bridge".
   

(emphasis added)

Lindley, MR; in Hubbuck & Sons Ltd –v- Wilkinson Heywood & Clark Ltd [1898] UKLawRpKQB 176; [1899] 1 QB 86 at pp. 90-91; [1895-9] All ER Rep 244 at 247 (case cited in the PNG Forest Products case (supra) in relation to power to dismiss an action on an application to dismiss a cause of action or defence for failure to disclose a cause of action said:

"it is only appropriate to cases which are plain and obvious so that the master or Judge can say at once that the statement of claim as it stands, is insufficient, even if proved, to entitle the plaintiff to what he asks."

Fletcher Moulton LJ expressed the same principle in Dyson –v- Attorney General [1911] I KB 410 at 414, 419, in these terms:

"To my mind, it is evident that our judicial system should never permit a plaintiff to be ‘driven from the judgment seat’ in this way without any Court having considered his right to be heard, except in cases where the cause of action was obviously and almost incontestably bad."

For similar statements of the law on this issue, see Nagle –v- Feilden [1966] I All ER 689 at 697 [1966] 2QB 633, per Salmon LJ at page 651 and Lord Wilberforce in Allen –v- Gulf Oil Refining Ltd [1980] UKHL 9; [1981] 1 All ER 353 at page 355; [1981] AC 1000 at 1010 – 1111. For more local authorities on the subject see Ronny Wabia –v- BP Exploration Co. Ltd, Department of Mining & Petroleum and The State, N1697, per Sevua J.

From this long line of cases authorities it is abundantly clear that, the power to stay or dismiss an action for failure to disclose a cause of action must be exercised only in the clearest of cases. In other words, the powers vested in the court by O.12 r. 40 should only be exercised where it is clear that cause of action known to law is disclosed or is one that "is obviously and almost incontestably bad".

The object of the rule as was made clear by, Lindley LJ, in Attorney General of the Duchy of Lancaster –v- London and North Western Railway Co. [1892] UKLawRpCh 134; [1892] 3 Ch 274, at 277, in the context of the then English Rules, Order 25 Rule 4 of the 1883 English Rules of the Supreme Court (similar to ours) "is to stop cases which ought not to be launched - cases which are obviously frivolous or vexatious or obviously unsustainable." In other words as Lopes LJ said in the same case at 277, "the object of the rule was to get rid of frivolous actions."

In the present case, it is clear that Mr. Patterson is claiming a breach of service contract he had with the NCDC. He claims that he provided legal services to the NCDC and rendered accounts or invoices for his costs, which remained due and unpaid. He has thus is sued these proceedings to recover his legal costs. There is however, no pleading as to the parties agreement on the consideration or the price or the costs for his provisions of legal services to the NCDC. Whilst the claim for breach of contract is a claim known to law and may be sustained, if it can be established by appropriate evidence, there is no law that recognises a contract that lacks any or all of the essential elements of a legally binding contract.

One of the essential elements that must be present in a contract in order to render a contract legally binding is valuable consideration. A basic feature of consideration is that "something valuable in the eyes of the law" must be given in promise by one of the parties to the other, in order to make the contract enforceable: see Thomas v. Thomas [1842] EngR 260; (1842) 2 Q.B. 851 at 859. The definition of the concept of consideration turns on the requirement that "something of value" must be given by one of the parties to the other. It can be either a "benefit" or "detriment" which is in essence the same thing looked at from different positions. For example, in the case of an agreement for the sale and purchase of a motor vehicle the consideration is the vehicle for the purchaser while the consideration for the vendor is the price at which the vehicle is sold. To the vendor he suffers a detriment in letting the vehicle go in exchange for the agreed price, which is a benefit. In the same transaction the giving of the agreed amount of money for the purchase of the vehicle is a detriment to the purchaser whilst the taking delivery of the vehicle is a benefit to him or her.

In the present case, the NCDC was to receive the benefit of legal services but there is no pleading as what detriment the parties agreed that the NCDC should suffer in exchange. Similarly, Mr. Patterson was to suffer the detriment of rendering legal services to the NCDC but there is no pleading as to what benefits it was to receive in exchange for that detriment.

It is settled law that, there must be certainty in the consideration of the price of a contract in order for the contract to be enforced. In Scammel & Nephew Ltd v. Ouston [1941] AC 25, the respondent agreed to purchase from the appellants a new motor van but stipulated that "this order is given on the understanding that the balance of purchase price can be had on hire purchase terms over a term of two years." Viscount Simon LC held at page 254 that, the stipulation was so vaguely expressed that it could not, standing by itself, be given definite meaning. It therefore, required further agreement to be reached between the parties before a complete consensus ad idem could be achieved. The other member of the court, Viscount Maugham on his part said at page 255 that:

"in order to constitute a valid contract the parties must so express themselves that their meaning can be determined with reasonable degree of certainty. It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intention; in other words the consensus ad idem would be a matter of mere conjecture."

As that case may reflect, in most cases, where the courts have come to consider the issue of certainty in the terms of a contract, they had to deal with words used by the parties. In the present case, there is neither any pleading nor is there any evidence of anything being said about the price of the alleged contract. That is a failure of an essential element and or requirement for a legally enforceable contract. It follows therefore, that in the absence of any disclosure of an agreement on price or consideration with certainty, it means the parties were not at consensus ad idem. Given that, I find that Mr. Patterson’s statement of claim fails to disclose a cause of action. I am therefore inclined to grant the application to strike out the proceedings on this basis.

Further, Mr. Patterson has not pleaded in his statement of claim that, the contract he claims was entered into, was in due compliance of the requirements under the Public Finance (Management) Act 1995. Mr. Patterson’s counsel admits in submissions that, his client did not secure his alleged contract pursuant to a public tender in accordance with the requirements of the Act.

Sections 48, 59 and 61 of the Act are relevant. They stipulate in relevant parts as follows:

"59. Contracts for works and services.

(1) Subject to Subsection (2), tenders shall be publicly invited and contracts taken by a public body to which this Act applies for all works, supplies and services the estimated cost of which exceeds such sum as is specified in its constituent law or declared by the Minister.

(2) Subsection (1) does not apply to any works, supplies and services –

• (a) that are to be executed, furnished or performed by the State, or an arm, agent or instrumentality of the State approved by the Minister for the purposes of this subsection; or
• (b) in respect of which the public body certifies that the inviting of tenders is impracticable or inexpedient."
  

"61. Approval required for certain contracts.

(1) The provisions of this section apply to and in respect of all public bodies notwithstanding any provision to the contrary in any other law and notwithstanding and without regard to any exceptions, limitations, conditions, additions or modifications contained in any other law.

(2) Subject to Subsection (3), a public body shall not, except with the approval of the Minister, enter into a contract involving the payment or receipt of an amount, or of property to a value, (or both) exceeding –

• (a) K1000,000.00; or
• (b) In the case of a public body declared by the Head of State, acting on advice, by notice in the National Gazette, to be a public body to which this paragraph applies – K500,000.00.
  

"48. Application of this Part.

...

(4) Where any provision in this Part is stated to apply to all public bodies notwithstanding any contrary provision in any other law, then such provision shall apply, notwithstanding any provision to the contrary and notwithstanding and without regard to any exceptions, limitations, conditions, additions or modifications in any other law."

Sections 59 and 61 fall into the part, section 48 (4) speaks of. That part is Part VIII, which commences with section 48 and ends with section 64 under the subheading "Public Bodies". Hence, there can be no room for any argument that the requirements of sections 59 and 61 of the Act apply to all contracts of the type spoken of in that part of the Act, involving a public bodily.

There is no dispute that the NCDC is a public body. There is also no dispute that the amount of money involved (over K4.3 million) far exceeded the limits set out under the Public Finance (Management) Act. It follows therefore that the Act applies to the NCDC. As noted Mr. Patterson admits, there being no call for tenders for the provision of legal services. His firm was instead given the job without going through the tender and without process any approval of the relevant Ministers. That renders the alleged contract illegal for non-compliance of the requirements of sections 48 (4), 59 and 61 of the Public Finance (Management) Act.

It is trite law that, an illegal contract or prohibited contract is null and void and is therefore unenforceable from the beginning: see G.H. Treitel, The Law of Contract, 5th Ed, Stevens & Sons 1979, pages 316 – 386. Bredmeyer J in Sylvanus Gorio v. National Parks Board [1982] PNGLR 364 at pages 368 – 369 correctly stated the law generally in relation to a contract with a public body outside its powers. His Honour said:

"I consider that the English Common Law on the powers of statutory corporations is apposite and applicable to the circumstances of Papua New Guinea; indeed it is most important and highly desirable that bodies established by statute should not exceed the powers given to them by Parliament. The law is conveniently stated in Halsbury’s Law of England (4th ed.) Vol. 9, par. 1333:

‘The powers of a corporations created by statute are limited and circumscribed by the statutes which regulate it, and extend no further than is expressly stated therein, or is necessarily and properly required for carrying into effect the purposes of its incorporation, or may be fairly regard as incidental to, or consequential upon, those things which the legislature has authorised. What the statute does not expressly or impliedly authorise is to be taken to be prohibited.’"

The Supreme Court expressed a similar view in Panga Coffee Factory Pty Ltd v. Coffee Industry Corporation Limited (Unreported but numbered judgement delivered on 6 October, 1999) SC619. In that case, the respondent relied upon its own lack of power to enter into a contract to exempt the appellants from paying levies. At page 7 the Supreme Court said:

"We agree with the learned trial judge that the Act gives no power to the Corporation to exempt particular coffee exporters, it only gives the power to exempt in relation to a type or form of coffee. The Corporation is public authority with a power to deal in monies for which it has obligations to the members of the public engaged in the Industry. It can only enter into arrangements and contracts in accordance with its powers under its enabling legislation as referred to above. There was a clear lack of capacity to enter into the arrangement set out in clause 3 (a). See Credit Suisse v. Allerdale BC [1996] All ER 129."

In the case of Credit Suisse v. Allerdale (supra), the English Court of Appeal held that a contract of guarantee entered into by a local authority was void and unenforceable. Hobhouse LJ at page 165 said:

"Where a statutory corporation purports to enter into a contract which it is not empowered by the relevant statute to enter into, the corporation lacks the capacity to make the supposed contract. This lack of capacity means that the document and the agreement it contains does not have effect as a legal contract. It exists in fact but not in law. It is legal nullity. The purported contract which is in truth not a contract does not confer any legal rights on either party. Neither party can sue upon it."

Back in our country, Justice Injia, in Wag v. Mount Hagen Town Authority [1996] PNGLR 385 refused to enforce an employment contract. In that case, the plaintiff was appointed to a contract position not in accordance with the clear established statutory provisions per the Mount Hagen Town Authority Act 1989. His Honour found at pages 393- 394 that, the contract was void for non-compliance of the mandatory statutory provision.

It is apparent from these authorities that, where a contract is entered into contrary to the provisions of a relevant and applying legislation, there is no discretion whether to enforce it or not. It is simply void and unenforceable. Thus, it cannot be the law that the legislation sometimes depends on what is "fair" and it does not matter whether the public authority itself raises the issue of statutory non-compliance or not: see Panga Coffee Factory, (supra) at page 8.

In most cases, legislation expresses public policy considerations. They become the legislative intent behind whatever the legislation is. It is trite law in our jurisdiction that, all legislative provisions must be given their fair, large and liberal meaning so as to give effect to the legislative intent. There is a long list of cases on this. For examples, see Inakambi Singorom v. John Kalaut [1985] PNGLR 238 at 241, per Kidu CJ; PLAR No. 1 of 1980 [1980] PNGLR 326; Norah Mairi v. Alkan Tololo & Ors [1976] PNGLR 125 at 136; SCR No. 1 of 1978: Re Ombudsman Commission Investigations of the Public Prosecutor [1978] PNGLR 345 at page 389, per Pritchard J, Peter Ipu Peipul v. Sheehan J., Ori Karapo and Ivoa Geita (constituting the Leadership Tribunal) & Ors (Unreported and unnumbered judgement of Kandakasi J delivered on the 25th of May 2001) at page 11.

In the present case, going by the suggestion given by the name of the Act itself, there can be no room for any doubt that the intent behind the Act is to control and manage the finances of the State, its arms, instrumentalities and any other public body. A quick perusal of the various provisions of the Act makes it clear that the Act is aimed at proper budgetary appropriations and spending according to budget. It is also to ensure the maintenance of proper records and accounts of public finances both in terms of incomes and expenditures.

Section 58 calls for or requires "public tender" in the areas of provision of works, supplies and services to the State, any of its arms and instrumentalities and any other public body. This is required where the estimate costs exceeds the amounts declared by the Minister for Finance or the public authority concern’s law. There are only two exceptions to this. The first is where the party to provide the service is the State, an agent of the State or an arm or an instrumentality of the State approved by the Minister to provided the service in question. The second is where the public authority concerned certifies that calling for public tender is "impracticable or inexpedient".

Section 61 then emphasises the importance of the need to spend out of public finances according to budget and within set limits. It vests power in the Minister to either approve or not to approve contracts with public authorities which has a monetary value of over K100, 000.00 and in any other case that exceeds K500, 000.00. The only exception there is where the contract is for an investment. Coming within this requirement is the need for a public authority to seek and receive the approval of the Minister for Finance if the value of a proposed contract exceeds the limits set. This is also a very important requirement in the important area of public finance because the absence of such a requirement would bring about total chaos and serious financial difficulties and land public authorities’ in very difficult finance positions and ultimately the nation.

Section 48 (4) strengthens the requirements for tender and approval under sections 59 and 61 respectively. It does so by stating that, these requirements apply notwithstanding any exception or any provision to the contrary in any other law. This re-emphasises the importance of those requirements and the need to met them.

These provisions were enacted, in my view, to ensure transparency in all dealings with public authorities and persons or parties who is or are not the State, an agent of the State, or an arm or instrumentality of the State, approved by the Minister to provide the works, supplies or services. The benefits of these requirements is not only to ensure transparency but is more importantly, intended to ensure that all who are able to provided the kind of works, supplies or services under consideration are given the opportunity to bid for the job. At the same time, it gives the public authority concerned the opportunity to get the best works, supplies and or services as the case may be, at the best possible price subject to its budget. A closed dealing may not necessarily provide for the best possible works, supplies and or services at a price that is reasonably justified any may facilitate fraud or corruption.

The intent therefore, of Parliament in enacting these requirements of the Act, was in my view, to ensure that public authorities do not have any right to enter into contracts having monetary values that exceeded the limits set without first meeting the requirements for tender and approval of the Minister. In other words, Parliament by enacting the provisions of sections 59 and 61 of the Act, it prohibited contracts over K100, 000.00 for some and K500, 000.00 for others with private persons with a public authority unless put through tender and or approved by the Minister for Finance.

As I already said, legislation often translate public policies into law and that is why it is important that Acts of Parliament be interpreted and accorded a meaning that best gives effect to the legislative intent. The public policy behind the provisions of sections 59 and 61 as discussed above is very important. All good governments of whatever form always strife for transparency in all of their dealings to serve the best interest of the people they represent. That is the ideal. However, often times, leaders in responsible position do not always act in the best interest of the people or those they are supposed to serve. In our country today, this is the case more than not which has seen us get into the financial difficulties we are in as a nation today. There has been overspending or cases of spending without proper budgetary appropriation and accounting. Public funds have being committed and or spent without proper authorization and accounting. The enactment of the Public Finance (Management) Act and the provisions under consideration were intended to prevent such conduct. At the same time, they were intended to dictate the way in which public authorities should act when it comes to the securing of works, supplies and or services and more importantly when it comes to spending public finances.

I find persuasion and accept Harvey’s comments in his article "The Hughes Aircraft Case and the Private Law of Public Tenders", (1998) 5 Aust Journal of Administrative Law 207, which accurately summarises the purpose of provisions such as section 59 where he states at pages 207 and 212:

"The practice of calling for tenders for the acquisition of valuable goods and services has been a feature of the operations of all Governments within Australia, including most statutory corporations, for many years. The invitation of tenders for the sale of government assets is also common practice. Tendering is the method used by governments in Australia, either because legislation requires it or because it is seen as the best way of to achieve relevant public goals and objectives in relation to the acquisition or disposal of goods and services. ...In a broad sense, the public sector uses the tender process as a means of securing value for money, open competition, impartiality in decision-making and fairness."

In Papua New Guinea these words have even greater relevance in light of the National Goals and Directive Principles contained in the Constitution. In particular the Second Goal provides for "Equality and participation" and declares all citizens should have an equal opportunity to participate in, and benefit from, the development of the country including an equal opportunity to take part in the economic, life of the country. To allow provisions such as section 59 and 61 to be ignored defeats this National Goal.

The Supreme Court in two cases considered the Public Finance (Management) Act. The cases are The State v. Keboki Business Group Incorporated & Morobe Provinsel Gavman [1985] PNGLR 369 and Visvanathan Subendranathan v. The State (Unnumbered Judgement SCA 106 of 1998, 27 October 1999). They were both on appeal from the National Court.

In Keboki’s case, the National Court held that a contract for the provision of garbage and sanitary services, entered into between Keboki Business Group and the State was not binding on the State. The National Court reasoned that the contract was not personally "executed" by the designated officer the then fore runner to the Public Finance (Management) Act. Somebody else in fact signed the contract for and on behalf of the designated officer, the chairman of the National Government Supply and Tenders Board. That followed a successful tender for the provision of garbage collection service at a price of K90, 000.00 for 12 months renewable.

The Supreme upheld the appeal (per Pratt J with whom Cory J agreed) and said at page 373:

"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."

Woods J expressed a similar view in these terms at pages 380-381 of the judgement:

"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."

The Supreme Court in that case, referred to a number of overseas authorities and said that, where a public authority enters into a contract with a private person, the court will strife to uphold the contract as having being made in due compliance of the relevant procedure. That is however, subject to evidence that may be produced to prove to the contrary. The Court also considered the position as analogous to the doctrine of estoppel, which would operate to prevent a public authority to raise a defence of lack of authority. Even then, the Court said, that was subject to there being no act which is ultra vires the authority’s powers and or illegal: per Pratt J at page 376 of the judgement.

In Visvanathan Subendranathan v. The State (supra), the National Court dismissed the appellant’s claim because it found that statutory law prohibited the contract. The statutes in question included the Audit Act and the Public Finance Management Act, particularly section 40 of that Act. That provision made it mandatory for the State to call for public tenders before awarding contract for the supply of goods and services to the State.

In unanimously upholding the appeal and quashing the trial judge’s decision, the Supreme Court at page 13 said:

"We are of the opinion that where a contract has been entered into between an individual or a corporate entity and the Independent State of Papua New Guinea represented by the appropriated delegated officer or institution such as the Head of State in this instance, upon advice of the National Executive Council, the State cannot purport to contend that the agreement was in breach of statutory provisions and thus invalid or illegal. The State is bound by actions, represented by the relevant officers or institutions."

That immediately followed a finding in these terms at the same page:

"The uncontested evidence from Mr. Bai showed that the State through its duly authorised servants or agents had followed the proper procedures allowed by law, the same laws the respondent now relies to invalidate the Agreement."

Mr. Bai was the then Secretary to the Department of Prime Minister and a Mr. Simon Gilal who was his deputy supported him. Mr. Bai was not subjected to any cross-examination and his evidence remained uncontested and destroyed in any way. The cross-examination of Mr. Gilal failed to destroy his evidence especially in the material aspect of the case. The evidence was that, the appellant offered to provide free services to the State but the State through Mr. Bai opted to pay for his services. The contract went through various bodies including the Ombudsman Commission and the National Executive Council (NEC) and was approved. Then finally, upon the advice of the NEC, the Head of State signed the contract. In view of that, the Court said also at page 13:

"When, as in this instance, the highest constitutional institutions endorsed and signed the agreement, binding the State, it can safely be presumed to have been with full legal advice as to the validity and lawfulness of the contract."

Indeed the contract in that case had passed through the office of the Solicitor General obviously for appropriate legal advice and clearance before it got to the NEC. In view of that, the Court said "[t]he State cannot then seek to avoid liability by contending that it invalidly or unlawfully entered into the agreement." Therefore the court said "[t]he State simply has to assume the liability for the possible procedural irregularities on the part of its members. It cannot seek to deny responsibility for the liability incurred. It must deal with possible irregularities on institutional procedures internally and not seek to deny liability under agreements validly entered into."

These cases turned on their own facts on the basis of the evidence produced in court. In both cases, the statutory requirements as to tender, approval and clearance under all relevant and applying legislation were met. Therefore the Supreme Court held as it did in both cases.

There are no local cases specifically dealing with a failure to meet public tender requirements. I therefore turn to Australia and find what Justice Connolly said in Hunter Brothers v. Brisbane City Council [1984] 1 QdR 328 of some assistance. In that case, the council was required by statute to call for tenders where it proposes to enter into service contracts amounting to more than $10,000. Although the council first called for tenders, it only allowed one tenderer, after tenders had closed, to submit a revised rate and then accepted that "revised tender". The Court at page 339 said:

"... there is nothing to indicate that a contract prohibited by Ord. 2 of Part 9 is other than void. On the contrary all the considerations of language and policy tend towards giving the Ordinance its ordinary and natural meaning. Part 9 is designed to ensure regularity and openness in the purchase of goods and services. Its provisions are a matter of public law and there can be no injustice in holding not only the Council but prospective vendors to a strict observance of its requirements."

Similar results were arrived at in similar situations in Wade v. Gold Coast City Council (1971) 26 LGRA 349 and Streamline Travel Service Pty Ltd v. Sydney City Council (1981) 46 LGRA 168 (Supreme Court of New South Wales (per Kearney J).

In this case, not a single step was taken to comply with the requirements of the Public Finance (Management) Act or any other Act. Mr. Patterson being a lawyer had the duty to ensure that the requirements of the Act were first met. There is no indication or evidence of what, if any, he did to ensure compliance of those requirements. Apart form failing to secure an agreement on the essential element of price or his consideration for the services he was going to provided, he also failed to allow for a due compliance of the important requirements of the Public Finance (Management) Act. This denied other lawyers from being given an equal opportunity to bid for the job. It also denied the NCDC of the right to competitive legal service at a reasonable price.

I am of the view that, all lawyers have a duty to their clients and to themselves to ensured that they comply with requirements of all applying and relevant law, be it statute, the Professional Conduct Rules or principles enunciated in judgements of the National Supreme Courts. Indeed the very first thing a lawyer does upon being admitted is take an oath to uphold the Constitution and the laws of Papua New Guinea. This is then reinforced or strengthened by section 3 of the Professional Conduct Rules which states:

"3. Duty of every lawyer.

It is the duty of a lawyer-

(a) not to engage in conduct (whether in pursuit of his profession or otherwise) which—

(i) is illegal; or

(ii) is dishonest; or

(iii) is unprofessional; or

(iv) is prejudicial to the administration of justice; or

(v) may otherwise bring the legal profession into disrepute; and

(b) to observe the ethics and etiquette of the legal profession; and

(c) to be competent in all his professional activities; ..."

To the extent that Mr. Patterson failed to ensure that the requirements of the Public Finance (Management) Act were complied with, he engaged himself in conduct that was illegal. It also amounted to dishonesty when he failed draw to the attention to the NCDC the need to comply with the requirements of that Act. Further his own evidence shows that he render an account of over K200, 000.00 for conducting only 64 company searches at a rate over K3, 000.00 and later had the amount changed to almost half a million Kina and finally up to over K4.3 million. This in my view was not only dishonest but was possibly a deliberate fraud against the NCDC in the absence of any evidence, submission or suggestion to the contrary. A company search could easily be carried out by a law clerk or secretary at not more than say K50.00 each at the most. Hence at the most, Mr. Patterson could have reasonably charged K3, 200.00 for all of the searches. If the NCDC did not take issue it could have paid the huge extra charges for nothing. As a result Mr. Patterson could have unjustly enriched himself at the expenses of the people of the National Capital District.

No sensible court in these circumstances could allow such a claim to succeed. By reason of the requirements of the Public Finance (Management) Act, not being met in breach of section 3 of the Professional Conduct Rules in so far as Mr. Patterson is concerned, the alleged contract was illegal, null and void and unenforceable. Clearly therefore, he has no reasonable cause of action either on the pleadings or in any of the evidence now before me. I am also be inclined to dismiss Mr. Paterson’s claim on this basis too. There is a further reason to dismiss Mr. Patterson’s claim. That is in the context of the third issue.

Costs not taxed and in taxable form

The NCDC argues that Mr. Patterson is not entitled to bring these proceedings because he has not put his costs in taxable form and has not had them taxed. It relies on section 62(1) and (2) of the Lawyers Act 1986 ("the Lawyers Act") as amended, and the judgement in Marsh -v- Hay [1981] PNGLR 392.

Mr. Patterson argues that his bill of costs does contain the required particulars. He also argues that the NCDC has failed to request taxation under s. 63 (2) of the Lawyers Act within the prescribed period. He therefore argues that NCDC is now precluded from now questioning his bill of costs. He then referred the Court to an unreported judgement of His Honour, Justice Los delivered on the 2nd of December 1999, in WS No. 1017 of 1999 – Paul Paraka trading as Paul Paraka Lawyers v. NCDC. In that case the NCDC’s concern was the total amount of the bill of costs, and His Honour said this:

"The Affidavit evidence shows that the claim is for professional bills due and the Defence filed especially paragraph 3 which admits engaging the services of the plaintiff. The only Complaint is the excessiveness of the claim. The defendant should have applied for taxation, the avenue was open to it. I therefore grant the Order sought".

I distinguish that case from the present for the simple reasons that in addition to a concern that the amount claimed by Mr. Patterson is excessive, there are the other issues in the present case. Those issues are the need to comply with the Public Finance (Management) Act, the question marks on the engagement of Mr. Patterson, and the purported bill of costs not put in taxable form. Given these, I do not consider that judgement of any assistance. In any case, I note that I am not bound by that decision for matters already covered and those that I will set out to below.

Section 62 (1) and (2) stipulate as follows:

"62. Action to recover costs.

(1) A lawyer shall not bring proceedings to recover costs due to him until the end of a period of one month after a bill of the costs has been delivered in accordance with this Act.

(2) A bill shall contain the particulars required by the Rules of Court."

These provisions clearly provide that a lawyer shall not bring proceedings to recover costs due to him until the end of a period of one month after a bill of costs has been delivered in accordance with this Act. A bill of Costs must contain the particulars required by the Rules of Court. Section 1 of the Lawyers Act defines the "Rules of Court" to mean the Rules of the National Court. It follows therefore, that a lawyer’s bill of costs should contain particulars required by the National Court Rules.

Order 22 of the National Court Rules 1988 deals with Costs. These rules provide as to how a bill of costs should be prepared and taxed. Rule 49 of that Order provides that a bill of costs must contain particulars of the work done, by the lawyer whose bill it is, his servant or agents together with disbursements and the amount of costs claimed for each item. Sub-rule 2 of this rule provides that, each item of costs or disbursements must be set out separately in separate columns with provisions for tax offs and allows.

In Marsh v. Hay [1981] PNGLR 392, Pratt J, speaking of section 29 of the Legal Practitioners Ordinance 1954, the then fore runner to the current Lawyers Act, said a client is entitled to demand, receive and have taxed a proper bill of costs in taxable form before being sued for non-payment. He held that a statement of costs in a narrative form is not a bill of costs in taxable form.

In Philip Mamando v. Lumusa Local Level Government Council (13/9/98) N1752, Mr. Mamando a lawyer sued for his unpaid legal costs. His purported bill of costs was not in a taxable form in accordance with the rules of the court. He did not apply for and obtain a certificate of taxation. The Lumusa Local Level government Council made no request for a taxation of the lawyer’s costs in accordance with s. 62 of the Lawyers Act. The Court found the lawyers purported bill of costs merely a memorandum of fees comprising a list of activities with a general figure of K200, 000.00 not to be in conformity with the requirements of section 62(2) of the Lawyers Act. As to what should be in a bill of costs His Honour said:

"For the purposes of the Lawyers Act and the Rules of the National Court the memorandum should contain the relevant particulars of the work done and how the costs accrue for the items similar to a Bill as rendered for taxation. The principles are quite clear that the form of a bill of costs is substantially the same whether for taxation between party and party or between solicitor and own client."

In analysing the bill of costs before him, His Honour said:

"An analysis of this bill of fees shows that there were attendances on a total of 63 days whether it was conferences or court days or merely writing a letter, however from the round figure assessed at the end this calculates at over K3,000 per day regardless for whether it was for attendance at court or merely writing a letter.

I find that the whole memorandum of fees presented here as the basis of the claim is grossly excessive and does not comply with the Lawyers Act and the Rules of Court."

In noting that, the defendant was a public bodily the court, in the early part of its judgement, made the following comments:

"However I find that as the Defendant is a people’s representative body supported by public monies there is a duty on the court to require appropriate evidence of the work performed analogous to a Bill as rendered for taxation and the court would expect to see the appropriate agreement for services as the obligation is clearly to be paid for from public funds. In the circumstances I would expect that there has been some agreement for services as noted in the Lawyers Act Section 66:

...

I would also expect to see an appropriate resolution from the Council to support the agreement to provide legal services. Whilst there is provision in subsection (3) for a client to apply before a judge on motion that the agreement is unfair or unreasonable, the defendant has made no application here. In fact the defendant has failed to appear and defend the matter when it came to court. The court had previously refused an application by the plaintiff for a default judgement. However I feel that there is a duty on lawyers and the Court to consider carefully the level of remuneration for legal services rendered especially when the services rendered are not necessarily covered by standard scale costs. In this case there appears to have been no agreement for remuneration nor has the plaintiff been able to refer to Minutes of Proceedings of the Defendant Council whereby the Council agreed by resolution to brief the plaintiff with an estimate of the amount required for the work."

The claim was ultimately dismissed with costs against the lawyer.

The case before me is similar to the Philip Mamando v. Lumusa Local Level Government Council (supra) case. The NCDC is a public bodily representing the people of the National Capital District. It is funded from public funds. Mr. Patterson’s bills were to be paid out of public funds. Therefore it is a statutory authority and is not a natural person. Unless otherwise specifically provided, one individual person could not bind the NCDC. Appropriate resolutions in addition to the requirements of the Public Finance (Management) Act have to be passed for the procurement of goods and services involving substantial amounts of money. That process of course has to be transparent and fair to all. There is neither any evidence nor is there any indication that a resolution in favour of Mr. Patterson’s legal services was passed, covering amongst others, the way, manner and the amount at which Mr. Patterson was to be remunerated and that was reasonable and fair.

I also find that the purported bills of costs are mere memorandums listing some activities supposedly undertaken by Mr. Patterson and his servant or agents. It is certainly not in a taxable form ready to be taxed, failing any agreement or acceptance. He was requested to put his costs in taxable but he refused or failed to do that. There is no evidence of Mr. Patterson drawing to the NCDC’s attention their right to ask for a taxation of his bill of costs if it did not accept them. In saying that I note that, there is no requirement under the Lawyers Act for a lawyer to do that. Nevertheless, a lawyer is in my view, duty bound to inform his client of the clients right to a taxation of his costs. Section 13 of Professional Conduct Rules obliges lawyers to keep their clients fully informed of their "rights and the possible courses of conduct regarding issues of substantial importance and shall keep his client appraised of all significant developments".

Costs are an important aspect of a lawyer and client relationship. A client is therefore entitle to know from time to time how his costs are running on a regular basis, to avoid sudden suspension or termination of such a relationship, because of a build up in costs that might not be paid. This in my view, as of necessity requires the need to advice the client in fairness of a client’s right to ask for a taxation of the lawyer’s costs. In order for that right to be meaningful exercised by a client, it would also be necessary for a lawyer to put his costs in taxable form, hence the requirement in s. 62 (2) and the cases on it. Clearly, it would make no sense, and it would certainly be most unfair for a lawyer to raise s. 62 (1) and 63 (2) of the Lawyers Act, against a fore client, as in this case, without first notify a client of his right to ask for a taxation of his costs and put them in a taxable form.

In these circumstances, I find that the requirement of 62 (2) of the Lawyers Act have not been met. It means therefore that Mr. Patterson is not entitled to bring the proceedings under the first subsection of that section. That in turn means he has no cause of action without first putting his costs in taxable form and without allowing the NCDC to meaningful exercise his right to a taxation of the cost claimed against it. This alone is sufficient to order a dismissal of the claim against the NCDC, if not in addition to the reasons earlier given.

What is the upshot of all this? I find that Mr. Patterson has no cause of action against the NCDC. I therefore grant to the NCDC’s application to dismiss and order a dismissal of the proceedings with costs against Mr. Patterson.
________________________________________________________________________
Lawyer for the Plaintiff : Ketan Lawyers
Lawyer for the Defendant : Posman Kua Aisi Lawyers