Vaihalla Ltd, Construction and Civil Works v Independent State of Papua New Guinea [2011] PGNC 135; N4426 (21 October 2011)

N4426

PAPUA NEW GUINEA
IN THE NATIONAL COURT OF JUSTICE

OS NO 366 OF 2011

BETWEEN

VAIHALLA LTD, CONSTRUCTION AND CIVIL WORKS
Plaintiff

AND

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
First Defendant

AND

SOUTHERN HIGHLANDS PROVINCIAL GOVERNMENT
Second Defendant

Mount Hagen: Makail, J
2011: 14th & 21st October

PRACTICE & PROCEDURE - claims against the state - Notice of intention to make a claim - Notice out of time - Extension of time - Application of - Leave of - Sufficient cause must be shown - Consideration of - Whether reasonable explanation for the failure to give notice within the prescribed time - Whether arguable case shown - Prejudice - Whether sufficient cause shown - Leave refused - Claims By and Against the State Act, 1996 - Section 5(2)(c)(ii).

Facts

The plaintiff sought leave to give notice of its intention to make a claim against the State out of time pursuant to section 5(2)(c)(ii) of the Claims By and Against the State Act, 1996. It alleged it had entered into a construction contract with the defendants in 2006 in the value of K16.8 million for construction of buildings for schools and hospitals in Nipa and Magarima Districts. It alleged the defendants breached the contract when they failed to pay the money. Despite numerous requests and demands for payment between 2006 and 2010, the defendants failed to pay. As it did not give notice within the prescribed time period of six months, it sought extension of time to give the notice.

Held:

1. In an application for leave to make a claim against the State out of time under section 5(2)(c)(ii) of the Claims By and Against the State Act, 1996, an applicant must establish that there is a reasonable explanation for the failure to give notice within the prescribed time, that there is an arguable case and the State will not be prejudiced if leave is granted.

2. On the evidence, the applicant has failed to establish a reasonable explanation for its failure to give notice within the prescribed time, that there is an arguable case and that the defendants will not be prejudiced if leave is granted.

3. The application was accordingly refused and proceeding dismissed with costs.

Cases cited:
Kamapu Minato -v- Philip Kumo & The State (1998) N1768
Rawson Construction Limited & Ors -v- Department of Works & The State (2004) N2604
Paulus Pato -v- Motor Vehicles Trust (2008) N3403
Maname Malipu -v- Motor Vehicles Trust (2009) N3793
Koe Fuanka -v- Motor Vehicle Insurance (PNG) Trust (1998) N1825
The State -v- Barclay Brother (PNG) Limited (2001) N2090
Fly River Provincial Government -v- Pioneer Health Services Limited (2003) SC705

Counsel:
Mr B Takyo, appearing as manager for Plaintiff
Ms J Doa,, for the first Defendant
No appearance for Second Defendant

RULING

21st October, 2011

1. MAKAIL, J: This is a ruling on the plaintiff's application for leave to give notice of claim to the State out of time pursuant to section 5(2)(c)(ii) of the Claims By and Against the State Act, 1996. At the hearing, the plaintiff was represented by its manager Mr Ben Takyo. The State was represented by Ms Jacinta Doa who opposed the application. There was no representation by or on behalf of the second defendant.

2. Section 5(2)(c)(ii) of the Claims By and Against the State Act, 1996 states:

"5. Notice of claims against the State.

(1) No action to enforce any claim against the State lies against the State unless notice in writing of intention to make a claim is given in accordance with this Section by the claimant to –

(a) the Departmental Head of the Department responsible for justice matters; or

(b) the Solicitor-General.

(2) A notice under this Section shall be given –

(a) within a period of six months after the occurrence out of which the claim arose; or

(b) where the claim is for breach of a contract, within a period of six months after the claimant became aware of the alleged breach; or

(c) within such further period as –

(i) the Principal Legal Adviser; or

(ii) the court before which the action is instituted,

on sufficient cause being shown, allows.

(3) ..................." (Empahsis added).

3. There is no issue that the purpose of giving notice to the State is to enable the State to gather evidence to inform itself about the claim: Kamapu Minato -v- Philip Kumo & The State (1998) N1768. The notice must be given within a period of six months after the occurrence of the alleged claim or where the claim is for breach of contract, within six months after the claimant becomes aware of the alleged breach: section 5(2)(a)&(b) above.

4. It is also noted section 5(2)(c)(ii) states, where a claimant is outside the period of six months to give a notice to the State, the notice shall be given within a further period if either the Principal Legal Advisor or the Court before which the action is instituted on sufficient cause being shown, allows. It is further noted the Claims By and Against the State Act, 1996 does not define the expression "sufficient cause".

5. However, case authorities establish that in an application for leave to make a claim against the State out of time under section 5(2)(c)(ii) of the Claims By and Against the State Act, 1996, an applicant must establish that there is a reasonable explanation for the failure to give notice within the prescribed period, that there is an arguable case and the State will not be prejudiced if leave is granted. Rawson Construction Limited & Ors -v- Department of Works & The State (2004) N2604, Paulus Pato -v- Motor Vehicles Trust (2008) N3403, and Maname Malipu -v- Motor Vehicles Trust (2009) N3793. The cases of Paulus Pato (supra) and Maname Malipu (supra) applied the above considerations in the context of section 54(6) of the Motor Vehicles (Third Party Insurance) Act, Ch 295, which provision is similar to that of section 5 of the Claims By and Against the State Act, 1996.

6. The onus of proof is on the applicant to make out a case. This means, the applicant must establish by appropriate evidence that there is reasonable explanation for the failure to give notice within the prescribed time, that there is an arguable case and the State will not be prejudiced if leave is granted. I adopt and apply these principles in this case to determine whether the plaintiff has shown sufficient cause for the Court to grant leave to give notice to the defendants out of time.

7. Mr Takyo relied on an affidavit in support of Roger Brinsdon, the Managing Director of the plaintiff who deposed that the plaintiff is a company registered under the Companies Act in Papua New Guinea and has a parent company overseas that operate in the building and construction business since 1984. But it is noted he did not state which country or countries the plaintiff's parent company is operating and did not produce a copy of a certificate of incorporation of the plaintiff to verify that the plaintiff is a registered company in Papua New Guinea.

8. In June 2006, he was in Mt Hagen and received confirmation of a successful tender for the construction project. This news was relayed to him by the second defendant during the term of the former Governor, Honourable Hami Yawari and former Provincial Administrator, Brian Pebo. The news was, the plaintiff was awarded a contract to construct buildings for schools and hospitals in Nipa and Magarima Districts in the Southern Highlands Province. He produced an undated letter from the Interim Provincial Treasurer Mr Ronald Kalu to the plaintiff to verify his assertion.

9. It is however noted he did not produce a copy of a written contract to verify his assertion or stated that the plaintiff had commenced and completed the work in accordance with the contract. He further stated when the present administration (presumably under the Governorship of Honourable Anderson Agiru) took over, it denied responsibility and all communication between the parties ceased.

10. He further deposed that the second defendant made an offer of a quarter of K16.8 million as settlement of the claim and produced a letter from the then Provincial Administrator Mr Pebo dated 26th May 2006 to verify his assertion on the settlement offer. It is noted according to the letter, Mr Pebo asked Mr Brinsdon to give him some money for himself, Mr Yawari and the project officer Mr Tapala. Mr Brinsdon relied on this letter and waited patiently for the second defendant to pay but it did not. Since 2006, he had been making numerous requests and demands for payment in writing and verbally to the second defendant but all these requests and demands had been fruitless as they had been ignored by the second defendant.

11. He produced a letter from the Executive officer of Mr Agiru named Mr Nelson Matialu dated 03rd August 2010, where Mr Matialu had advised the plaintiff that the second defendant had received two payment vouchers from the plaintiff for out of court settlement for K1.4 million and K15.474 million for the LNG project landowner resettlement projects and for him (Mr Brinsdon) to meet with Mr Agiru at the Governor's office in Port Moresby between 20th and 24th August 2010 to arrange the payment through BSP Boroko branch.

12. Apart from the letter from Mr Matialu, there is no further evidence confirming if Mr Brinsdon had met with Mr Agiru and received the payment of K16.8 million. There is also no evidence that from that time, the plaintiff wrote to the State giving notice of its intention to make a claim against the State. However, it is noted Mr Brinsdon did not state when and to whom did he write or speak to regarding the payment nor has he produced copies of the letters to verify his assertion. Since it is almost 6 years from the time the plaintiff was awarded the contract, it seeks leave to give notice to the State out of time.

In submissions, Mr Takyo submitted the plaintiff signed a contract with the second defendant after it was informed that it had been awarded the contract to construct buildings for schools and hospitals in Nipa and Magarima Districts. On enquiry by the Court as to whether there was a written contract and if it was produced in evidence, he said there was a contract signed by the parties and it was with Mr Brinsdon in Port Moresby. Presently, Mr Brinsdon is sick and is in Australia seeking medical treatment. In reply to Ms Doa's submissions, he submitted work had actually been done by the plaintiff and that all the relevant documents including the contract are with Mr Brinsdon in Port Moresby.

13. In opposing the application, Ms Doa submitted first, the plaintiff has not provided a reasonable explanation for failing to give notice within the prescribed time and secondly, the proposed claim by the plaintiff for alleged breach of contract lacked particulars, in that there was no evidence of a written contract being produced to support the plaintiff's claim for breach of contract against the defendants and also to enable the defendants to further investigate the claim. Thirdly, the lack of proper documentation including the contract has prejudiced the defendants in that, the available information is insufficient to enable the defendants to investigate the claim and prepare their defence of the claim if leave is granted.

1. Has the plaintiff provided a reasonable explanation for the failure to give notice within the prescribed time?

14. The alleged contract was entered into in June 2006 but the exact date is not known as there is no evidence of that from Mr Brinsdon. According to the undated letter of the Interim Provincial Treasurer Mr Kalu, Mr Brinsdon was advised that "[p]rovision are in place for the cheque payment totalling K16.8 million to be paid to Vaihalla Ltd and an invitation shall be made for you to come to Port Moresby in the near future to sign a contract and accept payment."

15. From that time onwards until the letter of Mr Matialu of 03rd August 2010 advising Mr Brinsdon to meet Mr Agiru in Port Moresby between 20th and 24th August 2010, there is no evidence that Mr Brinsdon had been negotiating with the defendants for the settlement of the claim. I am also not satisfied on the evidence of Mr Brinsdon that since 2006, he had written and verbally communicating with the defendants to settle the claim because he did not say when and whom did he write or spoke to regarding the payment, nor has he produced copies of all the letters to verify his assertion.

16. Then from the date of Mr Matialu's letter of 03rd August 2010 to date of filing of this application (01st July 2011), there is no evidence that Mr Brinsdon travelled to Port Moresby and signed the contract and received payment of K16.8 million. Further, there is no evidence that Mr Brinsdon had continued negotiations with the defendants. I conclude the plaintiff did nothing or very little to settle this claim out of Court. On the evidence before the Court, I am not satisfied the plaintiff has provided a reasonable explanation for its failure to give notice within the prescribed time period.

2. Has the plaintiff demonstrated that it has an arguable case?

17. In order to establish an arguable case, I consider an applicant must produce sufficient particulars of the claim to enable the State to properly investigate it: Rawson Construction Limited (supra). Where there are internal discrepancies in the documents giving rise to doubts about the genuineness of the claim, an application for extension of time may be refused. Koe Fuanka -v- Motor Vehicle Insurance (PNG) Trust (1998) N1825.

18. In the present case, as noted from Mr Takyo's submissions, the plaintiff has a claim for breach of contract against the defendants but there is no evidence of a written contract signed between the plaintiff and the defendants before the Court. There is also no evidence that the contract was actually performed. In other words, despite Mr Takyo's submissions from the bar table that the plaintiff signed a written contract and performed the contract, there is no evidence establishing that the plaintiff had a contract with the defendants and commenced and completed the construction of the buildings for the schools and hospitals in Nipa and Magarima Districts.

19. I consider evidence of a written contract is essential to support the plaintiff's claim based on a cause of action for breach of contract against the defendants because since the defendants are public bodies, it is not unusual to expect that a written contract must be in place before the construction project commences, especially where the amount awarded by the defendants for the construction project is substantial. Secondly, evidence of a signed written contract would strongly support the plaintiff's claim that it had complied with the requirements of section 40 of the Public Finances (Management) Act, 1995.

20. In any case, the evidence supporting the plaintiff's claim of compliance with the requirements of section 40 of the Public Finances (Management) Act, 1995 is insufficient because I am not satisfied with Mr Brinsdon's evidence that the plaintiff was awarded the contract following a successful tender. Further, I am not satisfied that Mr Kalu's undated letter informing the plaintiff of its successful application for the construction project is sufficient to support the plaintiff's claim that it had complied with the tender requirements under section 40 of the Public Finances (Management) Act, 1995.

21. In my view, Mr Kalu's letter is questionable because it is undated. Usually letters coming from governmental bodies like in this case the Southern Highlands Provincial Government are dated. Further, the announcement of the successful tender must come from the Chairman of the Supply and Tenders Board and the acceptance of the notice must be published in the National Gazette: see section 45 of the Public Finances (Management) Act, 1995. No such evidence has been put before the Court. Thus, the foundation of the contractual basis for the claim of K16.8 million is questionable: Rawson Constructions Limited (supra), The State -v- Barclay Brother (PNG) Limited (2001) N2090 and Fly River Provincial Government -v- Pioneer Health Services Limited (2003) SC705.

22. Thirdly, there is no evidence of work been performed by the plaintiff and in my view, the absence of such evidence is also fatal to the plaintiff's claim as it raises questions about the genuineness of the claim of K16.8 million. Questions will be and should be asked as to why the plaintiff should be paid K16.8 million for doing nothing. Fourthly, questions should also be asked about the capacity of the plaintiff to bring the proposed claim for breach of contract against the defendants because as earlier noted, there is no evidence of a certificate of incorporation of the plaintiff before the Court to verify Mr Brinsdon's assertion that the plaintiff is a duly registered company in Papua New Guinea and is engaged in the building and construction business.

23. Finally, the proposed claim for alleged breach of contract is suspicious because there are discrepancies in evidence of the plaintiff. The discrepancies are found in the letter from Mr Pebo to Mr Brinsdon dated 26th May 2006. It is noted it is not typed written but hand written and I set out the contents in full below:

"RE: BUILDING AND CONSTRUCTION – MAGARIMA AND TARI (SHP)

In reference to our discussion regarding the above subject, I Mr Brian Pepo would accept K500,000 for the K7.2 m for Magarima and K1 m for the K9.6 m Tari project and that package will cover the Governor and the Projects Officer.

I have instructed the Treasurer to process 2x cheques totalling K16.8 m to Valhala Ltd. If you agree to my request, so a letter accepting this deal and give it to Mr Tapala our Projects Officer as soon as you can so that the cheques can be deposited into your account early. Do not worry about media speculations - everything is in control. Arrange a ticket for Mr Tapala Hagen-Pom return so that he can bring your acceptance letter and the Bank Cheque back to you. I missed you last week ar Sandy Rest Hotel.

Thank you and I hope will agree to our deal.

Yours sincerely

Signed

MR BRIAN PEPO

Provincial Administrator (SHP)."

24. As noted above, the letter is not typed written but hand written. It is common knowledge all official letters from the defendants are typed. This one is not, and to my mind, it raises doubt as to whether or not the plaintiff was a successful applicant for the construction project. If it was indeed written by Mr Pebo, then it puts Mr Pebo, Mr Yawari and Mr Tapala under the spot light of corruption because it strongly suggest these persons had asked Mr Brinsdon to give them some money out of the K16.8 million in exchange for the construction project. Mr Pebo asked for K500,000.00 and asked for K1 million on behalf of Mr Yawari and Mr Tapala.

25. If the letter is not written by Mr Pebo, then it also raises doubt in relation to the genuineness of the letter. It would suggest the letter was written by someone and used as a basis to establish that Mr Pebo had on behalf of the second defendant agreed to settle the claim and that would in turn support the plaintiff's claim that the second defendant had entered into a contract with it for the construction project. The last matter is, if Mr Brinsdon said that the contract was entered into in June 2006, how is it that the purported letter by Mr Pebo was written on 26th May 2006, a couple of days before the contract in 2006. It does not make sense.

26. Given the insufficiency of or lack of evidence and the discrepancies in the evidence in support of the claim for breach of contract, I am not satisfied the plaintiff has established an arguable case.

3. Has the plaintiff shown that no prejudice has been or will be suffered by the defendants if leave is granted?

27. As noted above, there is insufficient and lack of evidence supporting the plaintiff's claim for breach of contract against the defendants. In my view, the insufficiency of or lack of evidence would make it difficult for the defendants to investigate the claim, especially when the alleged contract was entered into in 2006, some 5 years ago. First, the defendants' witnesses may have died or retired from work and may not be easily accessible for instructions to verify the plaintiff's claim. Secondly, the evidence of the nature of the contract is conflicting. On the one hand, if leave is granted, based on Mr Brinsdon's evidence, the defendants will have to investigate the claim on the basis that the claim is for breach of contract for construction of buildings for schools and hospitals in Nipa and Magarima Districts.

28. On the other hand, based on the letter of Mr Matialu of 03rd August 2010, the defendants will have to investigate and prepare their defence against the claim for "landowner settlement projects" for the LNG Project landowners' resettlement project. So is the plaintiff's claim based on the former or the latter, or both? It has not clarified this and in my view, the claim is conflicting and confusing and granting of leave would seriously prejudice the defendants in the defence of the claim.

29. Taking into account all the above considerations and the evidence, I am not satisfied sufficient cause has been shown for the Court to grant an extension of time. I refuse the application and dismiss the proceeding with costs.

Ruling accordingly.
____________________________________
Acting Solicitor-General: Lawyers for First Defendant