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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS NO. 26 OF 2004
POLEM ENTERPRISE LTD
Plaintiff
AND:
ATTORNEY GENERAL OF PAPUA NEW GUINEA,
MR FRANCIS DAMEN
First Defendant
AND:
SOLICITOR GENERAL OF PAPUA NEW GUINEA,
MR JOHN KUMURA
Second Defendant
AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant
AND:
EAST SEPIK PROVINCIAL GOVERNMENT
Fourth Defendant
WAIGANI : GABI, J
2005: 11th, 12th, 13th, 14th and 15 April
: 30th May
: 6th, 27th and 30th June
2006: 2nd February
PRACTICE AND PROCEDURE – s.13 of Attorney-General’s Act – Solicitor-General entered into a deed of settlement without authority – Deed of Settlement is null, void and unenforceable – Equitable remedy of estoppel by conduct is not available as deed is illegal.
Cases Cited:
Scott v Brown Doering McNab and Co. [1892] UKLawRpKQB 170; [1892] 2 QB 724
Central London Property Trust v High Tree House Ltd [1946] EWHC KB 1; [1947] K.B. 130
Howell v Falmouth Boat Construction Co. [1951] 2 All ER 278
St John Shipping Corp. v Joseph Rank Ltd [1957] 1 QB 267 at 316
PNG v Keboki Business Group Inc. [1985] PNGLR 369
Putput Logging Ltd v Philip Ambalis [1992] PNGLR 159
Brink Incorporated & Anor v Brink and Ors N1567
Reservation Pursuant to Section 15 of the Supreme Court Act, SCR No. 1 of 1999 SC672
Peter Aigilo v Sir Mekere Morauta and Ors 2001 N2102
Fly River Provincial Government v Pioneer Health Services Ltd (2001) SC705
Paul Kumba v Motor Vehicle (PNG) Trust (2001) N2132
Simon Mali & Ors v The State (2002) SC690
The State v Manorburn Earth Moving Limited and Anor (2003) SC716
Text:
Halsbury’s Laws of England, 4th Edn, Vol.9, paragraphs 630, 666 and 667
Counsel:
B. Narokobi and later C Narokobi with V. Narokobi, for the plaintiff
D Stevens, for the 1st, 2nd and 3rd defendants
J Gawi, for the 4th defendant
2 February 2006
DECISION
INTRODUCTION:
GABI, J: The plaintiff seeks to enforce a Deed of Settlement dated 15th August, 2002. This Deed of Settlement relates to a Writ of Summons, WS No. 452 of 2001, which was settled by Mr Zacchary Gelu, the then Solicitor-General. Since August, 2002, three (3) part payments totalling K457,823.31 have been made to the plaintiff by the third defendant.
The trial proceeded by way of affidavit evidence and oral testimonies. The following affidavits were filed and relied on: (i) the affidavit justifying damages of K6,171,086.03 of John Jimberi sworn on 14th June, 2002; (ii) the affidavit of John Jimberi sworn on 26th January, 2004; (iii) the affidavit of Zacchary Gelu sworn on 26th January, 2004; (iv) the affidavit of Thomas B Mane sworn on 26th January, 2004; (v) the affidavit of John Kumura sworn on 22nd May, 2004; (vi) the affidavit in response of John Jimberi sworn on 29th July, 2004; and (vii) the affidavit in response of John Jimberi sworn on 29th July, 2004.
Messrs Zacchary Gelu and John Jimberi gave evidence for the plaintiff while Messrs Francis Damem and John Kumura, the first and second defendants respectively, gave evidence for and on behalf of the defendants. In addition, the parties by consent admitted into evidence the following documents: (i) a copy of Writ of Summons No. 452 of 2001; (ii) a copy of notice of appearance filed by the Solicitor General for the defendants in WS No. 452 of 2001; (iii) purported Deed of Settlement and Release dated 15th August, 2002; and (iv) National Executive Council Decision Nos. 07/2002 and 150/2003.
BACKGROUND:
It is convenient to set out the background to this action in chronological order. Sometime in 1994, the East Sepik Provincial Government issued a liquor licence to the plaintiff to operate a liquor wholesale outlet in Wewak. The license was for a six (6) year term and was renewable each year at a cost of K10,000.00. Apart from the annual license fee, the plaintiff was paying tax in the form of provincial sales tax to the fourth defendant.
WS NO. 762 OF 2000:
On 4th July, 2000, the plaintiff instituted proceedings, WS No. 762 of 2000, against the third and fourth defendants challenging the legality of the provincial sales tax. In this proceedings, the plaintiff was represented by Mr Francis Damem when he was in private practice. It claimed K403,186.59 being the amount illegally collected from liquor sales by the plaintiff. On 25th October, 2000, a default judgement was obtained against the defendants for the sum of K403,186.59 together with interest and costs. This money was paid in full and final discharge of the Writ of Summons by the defendants.
WS NO. 452 OF 2001:
Between March, 1996 and December, 1999, the fourth defendant suspended the plaintiff’s licence for periods ranging from one (1) month to six (6) months. On 10th April, 2001, the plaintiff commenced proceedings, WS No. 452 of 2001, for business or economic loss as a result of the suspensions and failure to renew the licence. It claimed K2,251,124.28, interest at eight (8) percent per annum, exemplary damages and costs. Although the third defendant was named as a party to the proceedings, no cause of action was pleaded against it. The claim was entirely against the fourth defendant. Secondly, the action was not commenced by a lawyer.
On 18th May, 2001, the Provincial Administrator, Nelson Hungrabos, filed a notice of intention to defend on behalf of the fourth defendant. On 29th May, 2001, John Kawi, the Acting Solicitor-General filed a notice of intention to defend on behalf of the defendants. On 7th June, 2001, the fourth defendant filed its defence. On 11th April, 2002, a notice to set down for trial was filed. This notice was endorsed by Murray and Associates for the plaintiff and John Kawi, the Solicitor-General, for the defendants.
On 27th May, 2002, Jerewai Lawyers filed a notice of appearance for and on behalf of the fourth defendant. On 29th May, 2002, a copy of the notice of appearance was served on the plaintiff by way of a letter from Jerewai Lawyers.
On 13th June, 2002, John Kumura wrote a hand written note stating that liability was not an issue and that quantum was the only issue to address. On 14th June, 2002, John Jimberi filed his affidavit justifying damages of K6,171,086.03. On 15th July, 2002, Zacchary Gelu was appointed the Solicitor-General replacing Mr Kumura. On 15th August, 2002, Mr Gelu settled the claim for K3.5 million. The Deed of Settlement is between the plaintiff and the third defendant. The fourth defendant is not a party to the deed.
On 22nd August, 2002, the National Executive Council directed in Decision No. 07/2002 at its Special Meeting No. 05/2002 in item 10 that there be no more out of Court Settlements, by any state body including the Attorney-General and Solicitor-General without the approval of the National Executive Council. On 25th July, 2003, the National Executive Council in Decision No. 150/2003 at its Special Meeting No. 33/2003 rescinded clause 10 of the NEC Decision No. 07/2002 and "approved that all out of Court Settlement including consent Court orders are to be reviewed and cleared by the Attorney-General". It further directed the Solicitor-General in consultation with the Attorney-General to settle any further claims for amounts only up to K1 million.
OS NO. 26 OF 2004
The plaintiff commenced the current proceedings, OS NO. 26 of 2004, on 27th January, 2004 to enforce the Deed of Settlement dated 15th August, 2002. Since the settlement, the defendants have paid a total of K457,823.31 as follows:
(i) 25th October, 2002 - K100,000.00
(ii) 4th December, 2002 - K 50,000.00
(iii) 7th February, 2003 - K307,823.31
There have been no further payments despite numerous demands to do so. On 3rd February, 2004, the fourth defendant filed its notice of intention to defend and a cross-claim against the plaintiff/cross-defendant seeking reimbursement of K457,823.31. Mr John Alman, the Provincial Legal Officer, filed a notice of appearance for and on behalf of the fourth defendant. On 11th February, 2004, the Acting Solicitor-General, Mr Francis Kuvi, filed a notice of intention to defend on behalf of the first, second and third defendants. On 5th March, 2004, the fourth defendant filed its defence and the amended cross-claim.
On 13th May, 2004, Stevens Lawyers filed a notice of change of lawyers. On 20th May, 2004, Stevens Lawyers filed an amended notice of change of lawyers. They act for the first, second and third defendants. At the same time, the first, second and third defendants filed an application on notice seeking an order for the matter to proceed by way of pleadings pursuant to O.4, rule 35 of the National Court Rules. On 21st May, 2004, the Court ordered that proceedings continue on pleadings and the plaintiff is to file and serve a statement of claim on all the defendants. On 26th May, 2004, the plaintiff filed a statement of claim. On 8th June, 2004, the defendants filed their notice of intend to defend. In addition, the fourth defendant filed its defence and cross-claim. At the same time, Mr John Alman entered an appearance for the fourth defendant. On 9th June, 2004, the first, second and third defendants filed their defence and cross-claim and requested further and better particulars.
On 22nd June, 2004, the plaintiff filed its notice of intention to defend the cross-claim. On 24th June, 2004, the plaintiff filed its defence to the cross-claim and its reply to the defence and cross-claim of the first, second and third defendants. On 9th July, 2004, the plaintiff filed its notice of discovery, notice to answer interrogatories and notice to admit facts on the first, second and third defendants. On 29th July, 2004, the plaintiff filed its reply to notice to plead facts. On 27th August, 2004, the first, second and third defendants filed their notice for discovery. On 13th September, 2004, the plaintiff filed its list of documents. On 29th September, 2004, the first, second and third defendants filed their list of documents, reply to the plaintiff’s notice to admit facts and the answers to the plaintiff’s interrogatories.
On 30th September, 2004, John K Gawi Lawyers filed a notice of change of lawyers replacing John Alman as lawyers for the fourth defendant and the fourth defendant filed its answers to the plaintiff’s interrogatories and its list of documents.
On 18th March, 2005, the Listing judge, Mr Justice Kandakasi ordered that this matter proceed to trial on the disputed facts as per the Agreed and Disputed Facts filed by Melanesian Lawyers on 14th February, 2005. Secondly, that upon determination of the disputed facts, the trial judge shall consider the need for reference of the agreed issues as per the proposed facts filed by Melanesian Lawyers on 14th February, 2005 and refer the issues for determination by the Supreme Court. Melanesian lawyers filed a list of proposed facts, a list of agreed and disputed facts and a list of proposed questions.
I have carefully considered the evidence, the issues and the authorities, in particular, the Supreme Court decisions in Simon Mali and Ors v The State (2002) SC690 (Simon Mali case) and The State v Manorburn Earthmoving Limited and Anor (2003) SC716 (Manorburn case) on the question of the authority of the Solicitor-General to settle claims out of Court. I am of the view that the observation of the Supreme Court in Simon Mali case that the Solicitor-General had authority to settle claims is obiter dictum only as the question before the Court was whether or not a consent order may be set aside. I, therefore, decline to refer the issues for determination by the Supreme Court.
ORAL TESTIMONIES
I now turn to the oral evidence of the witnesses in this matter.
ZACCHARY GELU
Mr Zacchary Gelu was appointed Solicitor-General on 15th July, 2002 and was replaced on 6th March, 2003. He said that, on perusal of the file, he noticed two things. First, that John Kawi, the Acting Solicitor-General, filed a notice of intention to defend. However, no defence was filed by the third defendant. Secondly, that Mr John Kumura had done a written note dated 13th June, 2002, stating that liability is not an issue and the only issue is quantum. He said that he took that to mean that the State has admitted liability.
He said that Francis Damem, the then Attorney-General, acted for the plaintiff in WS No. 762 of 2000, so Mr Damem verbally instructed him to deal with the matter because he was in a conflict of interest situation. On the basis of that verbal instruction, he continued to negotiate with the plaintiff. During the negotiations, he consulted Mr Kumura, who was the action officer in the matter.
He said he settled the claim for K3.5 million on the basis of the assessment by the accounting firm, Tengdui and Associates and that no defence was filed in the matter. He said he consulted Mr Damem on the amount of K6.1 million. According to Mr Gelu, Mr Damem was of the view that the amount was too high and suggested to Mr Gelu to renegotiate the amount. He did so and settled for K3.5 million. He said he subsequently briefed Mr Damem, who agreed with the amount. He gave two reasons for settlement. First, he was authorised by Mr Damem to settle the claim. Secondly, he had the authority at that point in time as the Solicitor-General to settle claims as a result of the decision in Peter Aigilo v Sir Mekere Morauta and Ors (2001) N2102 (Aigilo case).
According to Mr Gelu, the Deed binds the fourth defendant because a Provincial Government is part and parcel of the State and the Solicitor-General was acting for both defendants. He said he became aware of Jerewai Lawyers acting for the fourth defendant after the execution of the Deed.
In cross examination, he said the Solicitor-General continued to act for the fourth defendant because no notice of change of lawyers was filed. He admitted that he did not secure an independent assessment of the claim before settlement nor did he consult relevant officers of the liquor licensing division of the fourth defendant. He agreed that he had no instructions from the fourth defendant to settle the case.
JOHN JIMBERI
He said he had discussions with Mr Kumura, who advised that liability was not an issue and the only question was quantum. He had about three (3) to four (4) months of negotiation with Mr Kumura and when Mr Gelu was appointed, they continued negotiations with him. He said they were asked by the Solicitor-General’s Office to get an accountant to assess the loss. As a result, they obtained the services of Tengdui and Associate to prepare the report which assessed the loss at K6.1 million.
He said he never met with Mr Damem. However, he was informed by Mr Gelu that Mr Damem was aware of the settlement. He said that there was no written offer from the third defendant or the Solicitor-General’s Office to settle for K3.5 million. He was aware that Jerewai Lawyers were acting for the fourth defendant but did not negotiate with them because he was assured by Mr Gelu that he had the powers or authority to represent the third and fourth defendants. As a result, he continued to negotiate with Mr Gelu and eventually settled the claim for K3.5 million. He said that he was informed by Mr Gelu that Mr Damem had knocked back the figure of K6.1 million and that they should settle at K3.5 million. It was on that basis that he accepted the figure of K3.5 million and signed the Deed.
JOHN KUMURA
He said that the note on liability was a file note. However, he could not verify it as the file was missing. He agreed that the note was in his hand writing. He recalled meeting with Thomas Mane on a number of occasions. He said he knew Thomas Mane as both were at LTI together. However, he made no offers to Thomas Mane or John Jimberi to settle.
He said the file was removed from him when Mr Gelu assumed office as Solicitor-General. He said the settlement was made by Mr Gelu and that he was never consulted. He said he was never a party to any negotiations for settlement. He said that the procedure for settlement is that the Solicitor-General would recommend settlement. If Attorney-General approves the recommendation, the Solicitor-General would then enter into negotiations. According to Mr Kumura, he did not go through the process of briefing the Solicitor-General on liability and quantum. As a result, he was not in a position to make formal representation to the plaintiff. He said that he was not aware or cannot recall if the Attorney-General approved settlement before Mr Gelu settled the claim.
FRANCIS DAMEM
Mr Damem was the Attorney-General from January, 2001 to January, 2005. He said that he had not seen the Deed of Settlement dated 15th August, 2002 before the trial and that he was never consulted by Mr Gelu. He said the settlement was done in secret and he became aware of it in about September or October 2002 from the Department of Finance.
In examination in chief, Mr Damem was asked about the Deed and this is what he said:
"Q. Mr Damem, it is in evidence by Mr Gelu that he had consulted you before the execution of this Deed. What do you say?
He said that during the time Mr Gene was the Attorney-General, a practice direction was issued to the then Solicitor-General to refer all claims in excess of K50,000.00 to him for decision. During his term as Attorney-General, Mr Damem said that he gave instructions to the then Acting Solicitor-General and then to Mr Gelu to consult him on major settlements. According to Mr Damem, a major settlement would be "anything from K500,00.00 upwards".
He said that in 2002, the National Executive Council gave directions to him and the Solicitor-General not to settle claims in excess of K1 million. Where there is a need for settlement, the communication between parties is in writing and the deed of settlement is prepared by the action officer. He said he was concerned with the settlement in this case because of non-compliance with standing procedures in that the action officer was not aware of the settlement and the file was removed from his office.
Again, in examination in chief, in respect of Mr Gelu’s assertion that he was given authority by Mr Damem to settle the claim, Mr Damem gave the following evidence:
"Q. Mr Damem, if I may, Mr Gelu said in his evidence that by reason of your involvement in WS 762 of 2000, you had felt uncomfortable in dealing with the Polem matter and that you had given him the authority to deal with the plaintiff in respect to these negotiations for out of Court settlement in 452 of 2000.
He said he was concerned about settlements in the Solicitor-General’s Office because there was a culture of settling claims without merits or instructions. He denied giving authority to Mr Gelu to settle the claim. He also denied the assertion by Mr Gelu that it was Mr Damem who knocked back K6.1 million and suggested K3.5 million for settlement of the claim. During his term as Attorney-General, Mr Damem said that he never delegated his powers to the Solicitor-General or Deputy solicitor-Generals to settle claims.
He said the procedure for settlement was for the action officer to brief the Solicitor-General on liability and quantum. The Solicitor-General then makes a decision on the brief by the action officer. The Solicitor-General would do a brief to the Attorney-General, who would then give instructions as to whether or not to settle.
SUBMISSIONS
Counsel for the plaintiff submitted that the Deed of Settlement dated 15th August, 2002 is a valid contract and that section 61 of the Public Finances (Management) Act does not apply to a deed of settlement or an out of Court settlement and referred me to Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285. Even, if section 61 were to apply, he submitted that it was never raised at the time of signing of the contract. As a result, the defendants are estopped from raising the illegality argument now. Alternatively, he argued that as three (3) payments have been made and the plaintiff has withdrawn his claim against the defendants, the defendants are estopped, under the doctrine of promissory estopped, from going back on their promise (see Central London Property Trust v High Tree House Ltd [1946] EWHC KB 1; [1947] K.B. 130).
He further submitted that at the time the Deed of Settlement was entered into, the Solicitor-General had the authority to make out of Court settlements by virtue of the decisions in Aigilo case and Simon Mali case. Even, if he did not have the authority, he was instructed by the Attorney-General to settle the claim for K3.5 million and that the deed is binding on the fourth defendant because of the ruling by the Supreme Court in Reservation Pursuant to Section 15 of the Supreme Court Act, SCR No. 1 of 1999 SC672 that a Provincial Government is part of the State for purposes of the Claims By and Against the State Act.
Counsel for the first, second and third defendants submitted that Mr Gelu had no authority in law to agree and execute a Deed of Settlement on behalf of the third and fourth defendants in WS No. 452 of 2001. He argued that there is no evidence of delegation of powers from the Attorney-General to the Solicitor-General and no instructions to Mr Zacchary Gelu to settle the claim. Under section 13 of the Attorney-General’s Act, the Solicitor-General has no authority to do anything including settlement of cases without instructions from the Attorney-General.
He argued that the National Court decision in Aigilo case which tried to interpret section 13 to mean that the Solicitor-General and not the Attorney-General had powers to settle claims has been clearly overruled by the Supreme Court in Manorburn case which is binding on this Court. Even, if the decision in Aigilo case had not been overruled, it would still not be binding on this Court. Accordingly, he submitted that Mr Gelu had no authority to settle the case for the State. His actions cannot bind the State or its agencies. The Deed of Settlement dated 15th August, 2002 is therefore void ab initio and cannot be enforced.
With respect to the assertion by Mr Gelu that he had the powers to bind the fourth defendant because a Provincial Government is part of the State, Mr Stevens submitted that the decision of the Supreme Court in SCR No. 1 of 1999 SC672 (supra) clearly establish that enforcement proceedings cannot be taken against the assets of the State including a Provincial Government under the Claims By and Against the State Act. He argued that that does not mean that the Solicitor-General can act for all the Provincial Governments and make decisions to bind them. Accordingly, he submitted that Mr Gelu could not bind the fourth defendant who gave no instructions to settle the claim.
He submitted that pursuant to sections 47 and 61 of the Public Finances (Management) Act, the Attorney-General and the Solicitor-General are prevented from entering into a contract that involves the payment of public monies without the approval of the Minister. He further submitted that the deed is uncertain, unfair and void for illegality in that it was entered into without authority. As such, the Deed is not binding and unenforceable. (see Halsbury’s laws of England, 4th Edn, Vol.9, paragraphs 630, 666 and 667; Scott v Brown Doering McNab and Co. [1892] UKLawRpKQB 170; [1892] 2 QB 724; Brink Incorporated & Anor v Brink and Ors N1567; and Putput Logging Ltd v Philip Ambalis [1992] PNGLR 159).
Counsel for the fourth defendant submitted that section 13 of the Attorney-General Act was the subject of the Supreme Court decision in Manorburn case. In that case, the Court held that Solicitor-General does not have the authority to enter into a Deed of Settlement to bind the State and where the Solicitor-General is served any process he must seek instructions from the Attorney-General to act in the matter. Clearly, Mr Gelu did not have the authority to enter into negotiations with the plaintiff for an out of Court settlement so that when he purported to execute the Deed, he did so without authority. In addition, he argued that Mr Gelu had no instructions to act for the fourth defendant.
In response to the plaintiff’s contention that even if the Solicitor-General did not have actual authority to execute the Deed, he did have ostensible authority to negotiate and execute the said Deed, Mr Gawi submitted that the plaintiff is misconceived in its contention that despite the "express lack of statutory authority", the Solicitor-General could nevertheless, have ostensible authority under the Common Law contrary to the express provisions of a statutory enactment. He argued that "instructions" under section 13(2) of the Attorney-General’s Act could be "written" or "oral" and could mean "express", "implied", "inferred", "deemed" or "assumed" instructions. He submitted that the evidence of Messrs Gelu and Jimberi conflict with that of Mr Damem and urged the Court to prefer Mr Damem’s testimony. He further submitted that the plaintiff’s claim of estoppel against the State should be dismissed on the basis that State lawyers had compromised their role to protect the interest of the State and the plaintiff being a privy to the modus operandi in reaching settlement and signing the Deed cannot claim that he was an innocent third party without notice of the line of authority and the necessary legal capacity by the lawyers to represent the interest of the State.
Finally, he submitted that the proceedings, WS No. 452 of 2001 is a nullity on the basis that the proceedings were not commenced by a Solicitor contrary to O.4 r5 of the National Court Rules.
ISSUES:
The issues raised are the application of s.61 of the Public Finances (Management) Act, authority of Solicitor-General to settle a claim and to represent a Provincial Government, uncertainty as to the terms of the deed, commencement of WS No. 452 of 2001 by a person other than a Solicitor and estoppel. I believe the questions for deliberation are authority of the Solicitor-General to settle the claim and estoppel. Therefore, the issues for consideration are:
AUTHORITY TO SETTLE:
The Office of the Solicitor-General is created under the Attorney-General’s Act (s.10). The Attorney-General appoints the Solicitor-General (s.11), whose powers and functions are expressly provided for under s.13 of the Act. Section 13 provides:
"Section 13. Functions of the Solicitor-General
(1) The primary function of the Solicitor-General is to appear as an advocate for the State in matters coming before the Courts in Paua New Guinea.
(2) In the exercise of his function under Sub-section (1), the Solicitor-General shall accept instructions from the Attorney-General." (Emphasis added).
This provision was considered by the National Court in Aigilo case. The Court held that the Solicitor-General had the powers to settle claims against the State. His Honour Kandakasi, J concluded thus:
"In the end, I find the AG has no power of direction or control over the exercise of the Solicitor-General’s powers under the AG’s Act. I also find that the Solicitor-General has the primary responsibility over the conduct of all litigation in all claims by and against the State. As such, he has the first say both for a brief out or the instructing of another lawyer under s.7(i) and a recommendation or request for payment under s.7(j). Unless the Solicitor-General has had his input on these powers, there could be no valid exercise of power. Consequently, any action taken by the AG without an input from the Solicitor-General would be illegal and therefore null and void."
In Simon Mali case, the Supreme Court made a similar ruling to that in Aigilo case. The Supreme Court said:
"We accept the respondent State’s submission that the Attorney-General has no power (or responsibility) over the superintendence, control and direction over all the matters of litigation brought against the State. This power is vested in the Solicitor-General pursuant to s.13 Attorney-General’s Act, 1989.....
The decision whether or not a certain litigation should be settled out of Court is a professional decision of an advocate involved in that litigation. It certainly is not a decision intended to be made by someone in the exercise of an executive or political power or function. The point is emphasized when the position of an Attorney-General who is both a parliamentarian and a member of the executive government is appreciated. Such an Attorney-General would not have, has not the legislative and professional, capacity to make such a decision.
In this case, the Office of the Solicitor-General had the carriage of the State’s defence to the claim. The Attorney-General had no power to settle the claim as he did."
Recently, the Supreme Court in Manorburn case, has overruled the Aigilo case and decided not to follow Simon Mali case. The Supreme Court said:
"We have considered the decision in Peter Aigilo v Sir Mekere Morauta & Others (Aigilo Case) (Unreported Judgement of the National Court dated 15th June 2001, N2102 in the light of the provisions, we have examined of (sic) AG Act 1989 and CBAS Act 1996, we conclude that Aigilo Case was wrongly decided and therefore should not be followed. Counsel for the Appellant urged the trial Judge to depart from his previous decision on the basis of the clear provisions of AG Act and CBAS Act but rejected these submissions and followed his own decision in Aigilo Case. In so doing, he fell into error."
The Supreme Court decided not to follow Simon Mali case on the basis that the relevant provisions of the Attorney-General’s Act and the Claims By and Against the State Act were not considered. The observation of the Court in Simon Mali case is obiter dictum only in that the issue in that case was whether a consent order may be set aside. The Supreme Court held that a consent order may be set aside for fraud, mistake or procedural irregularity.
In this case, the claim was settled by Mr Gelu, the Solicitor-General. The evidence is conflicting. Mr Gelu said that he consulted Messrs Damem and Kumura and Mr Damem suggested to him to settle for K3.5 million as K6.1 million proposed by the plaintiff was too high. Mr John Jimberi said that he was informed by Mr Gelu that Mr Damem had knocked back the figure of K6.1 million and they should settle at K3.5 million. It was on that basis that he accepted the offer and signed the Deed of Settlement.
Messrs Damem and Kumura denied being consulted about the settlement. Mr Kumura said that after Mr Gelu’s appointment on 15th July, 2002, the file was removed from his office and he had nothing to do with the case. Mr Damem said that he was never consulted nor did he authorise Mr Gelu to settle the matter. He became aware of the Deed after the settlement in September or October, 2002 and placed a stop payment. Mr Damem’s description of the settlement procedure is consistent with that of Mr Kumura. Mr Kumura said the process was not observed in this case.
There is no evidence of delegation of Attorney-General’s powers to the Solicitor-General. The letter dated 9th January, 2002, from Mr Damem to the Secretary for Finance, which was admitted into evidence is not an instrument of delegation. It was a letter informing the Secretary of the National Court decision in Aigilo case.
I have carefully considered the entire evidence and prefer the testimonies of Messrs Damem and Kumura for the following reasons: First, the Aigilo case was decided in 2001 before the appointment of Mr Gelu as Solicitor-General on 15th July, 2002. As such, he would have been aware of the ruling in that case. Mr Gelu was adamant in his evidence that he had authority pursuant to the Aigilo case and used his authority to settle the case.
In examination in chief, Mr Gelu was asked to state the legal basis for his authority. Hereunder is his evidence:
"Q: At that time when you made the settlement, what led you to believe that you had the power, the authority to make settlement?
A: Your Honour, firstly is the pronouncement by the Court, the National Court, which pronounced that the Solicitor-General has the authority in relation to claims coming before him against the State. The Solicitor-General has that power to decide whether the matter should be defended or prosecuted or settlement can be done out of Court based on the material evidence before the Solicitor-General.
Q: And that is Peter Aigilo against the State case?
A: That is the authority I relied on, Your Honour."
Second, in his evidence, Mr Damem said that he was concerned about the "settlement culture" in the Office of the Solicitor-General. He said that when Mr Gelu was appointed, he went on a "settlement spree" and settled claims without merits or instructions. According to Mr Damem, Mr Gelu settled the case of Soiat Williams v The State despite the instructions from the Secretary for the Department of Personnel Management to defend the case. Mr Gelu never denied that assertion. Third, there was an admission by Mr Jimberi that he was assured by Mr Gelu that he had the powers to negotiate and settle the case on behalf of the third and fourth defendants. Fourth, the consultation process or the settlement procedure in the Office of the Solicitor-General was not followed on the basis that Mr Gelu believed at the time that he had the powers to settle. Fifth, Mr Gelu settled the Manorburn case without consulting the Attorney-General and despite the fact that the case was briefed to a private lawyer. Finally, Mr Damem stopped payment after he became aware of the settlement. Had he authorised settlement, I doubt that he would have stopped payment.
Section 13 (2) of the Attorney-General Act is in mandatory terms and non-compliance will render an action null and void. I am satisfied that Mr Gelu relied on the Aigilo case to settle the claim. The decision in Manorburn case was made in 2003, well after the settlement. Does Manorburn case apply retrospectively? In my opinion, the answer is clearly: YES. The law then and now is that the Solicitor-General "shall" seek instructions from the Attorney-General. I am, therefore, of the view that the Deed of Settlement dated 15th August, 2002, is null and void ab initio.
ESTOPPEL
The plaintiff argued that the defendants are estopped from going back on the promise. In other words, the defendants by their conduct are estopped from objecting to the enforcement of the deed. The evidence before the Court is that three (3) part payments have been made and that Mr Gelu made representation to Mr Jimberi that he had the authority to negotiate and settle the claim. A party may rely on a representation by a government officer subject of course to there being no act which is ultra vires or illegal. In Howell v Falmouth Boat Construction Co. [1951] 2 All ER 278, Lord Simonds said at page 280:
"The illegality of an act is the same whether or not the actor has been misled by an assumption of authority on the part of a government officer however high or low in the hierarchy..... The question is whether the character of an act done in face of a statutory prohibition is affected by the fact that it has been induced by a misleading assumption of authority. In my opinion, the answer is clearly: No."
It is trite law that an illegal contract is null and void and therefore unenforceable from the beginning. The authorities clearly show that the doctrine of estoppel by conduct is unavailable where the action is ultra vires or illegal. (see also: PNG v Keboki Business Group Inc. [1985] PNGLR 369, Pratt, J at p.376).
In Paul Kumba v Motor Vehicle (PNG) Trust (2001) N2132, Justice Davani held that the equitable remedy of estoppel by conduct was not available to the plaintiff, who failed to give the mandatory notice under s.54 (6) of the Motor Vehicle (Third Party Insurance) Act. In that case, the plaintiff’s lawyer gave notice some ten (10) months after the accident. Subsequently, the Insurance Commissioner granted the plaintiff extension of time to make a claim. However, no notice was given within the time allowed. As a result, the defendant amended its defence to plead the statutory defence of s.54 (6) of the Act. The defendant then applied to the Court to dismiss the proceedings for failure by the plaintiff to give the mandatory notice under s.54 (6) of the Act. The defendant had not admitted liability or agreed that notice under s.54 (6) of the Act had been given. The plaintiff’s lawyer argued that the defendant had not objected to the lack of notice by allowing the proceedings to proceed that far. As such, it was estopped from making the application. Davani, J said at page 12:
"I agree with the defendants’ lawyer that ....’the principles of equitable estoppel if applied to the facts of this case will be inconsistent with s.54 (6) of the Act. There is no gap in the law.’
This is confirmed in Halsburys 4th Edition volume 16 at paragraph 962 which states;
‘The doctrine of estoppel may not be invoked to render valid a transaction which the legislature has, on grounds of general public policy, enacted is to be invalid, or to give the Court a jurisdiction which is denied to it by statute, or to oust the Courts statutory jurisdiction under an enactment which precludes the parties from contracting out of its provisions.’
This being the principle, it follows then that the principle of Equitable Estoppel is not applicable in this instance as s.54 (6) is a mandatory provision a claimant must comply with. The doctrine of Equitable Estoppel cannot be invoked when statute expressly forbids it."
Again, in Fly River Provincial Government v Pioneer Health Services Ltd (2001) SC705, the Supreme Court dealt with the consequences that flow from an illegal contract. The Court said:
"[I]t is trite law that an illegal contract cannot be enforced. Clearly, a guilty party to an illegal contract cannot enforce it (Cowan v Mibourn (1867) [1848] EngR 492; L.R. 2 Ex 230). A person would be a guilty party to a contract for the purposes of not enforcing an illegal contract, where it fails to take steps it should have taken to protect its interest. This consequence follows even as against an innocent party. There is therefore, no such a thing as estoppel by conduct as against the need to put an end to an illegal contract. The judgement in Barclay Bros (supra) case, after having regard to a number of authorities made that clear in this way at page 16:
‘But as for pleading illegality, it clearly is the law that the State or any party can repudiate a contract on grounds of its own illegality. This is simply because Courts must always ensure there is no impediment to the cessation of unlawful action and restoration of legality.’......
[I]t is also settled law that, where the requirements of a statute is considered not merely "directory" but "obligatory", a non-compliance of its requirements renders the contract null and void and is therefore unenforceable. This is often the accepted effect even though this effect is not specified in the legislation itself: see Liverpool Borough Bank v Turner (1860) 2 D.F. & J 502. The law has been able to arrive at that effect by principally having regard to the object of the legislation in question. If upholding a contract would not offend against the object of the relevant and applying legislation, the contract may be upheld. If however, the opposite is likely to result then, the contract cannot be upheld: see St John Shipping Corp. v Joseph Rank Ltd [1957] 1Q B 267 at 316." (Emphasis added).
The plaintiff is not entitled to claim the balance of the sum in the Deed of Settlement that is null, void and unenforceable. I, therefore, make the following orders:
________________________________________________________________
Lawyers for the plaintiffs : Narokobi Lawyers
Lawyers for the 1st, 2nd & 3rd defendants : Stevens Lawyers
Lawyers for the 4th defendant : John K Gawi Lawyers
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