CMSS (PNG) Ltd v State [2014] PGNC 111; N5717 (7 August 2014)

N5717

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1404 of 2013 (Comm)

BETWEEN:

CMSS (PNG) LIMITED
Plaintiff

AND:

THE INDEPENDENT STATE
OF PAPUA NEW GUINEA
First Defendant

AND:

NATIONAL CAPITAL DISTRICT
COMMISSION
Second Defendant

Waigani: Hartshorn, J
2014: 14th April,
: 7th August

Section 5 Claims By and Against the State Act

Cases cited:

Paul Tohian v. Tau Liu (1998) SC566
Peter Komba v. National Capital District Commission (2007) Unreported, WS 451/07, Waigani, delivered 26/7/07
Global Constructions Ltd v. National Capital District Commission (2011) N4275
Paul Eddie v. Bill Kirokim (2012) N4932

Counsel:

Mr. A. Jerewai, for the Plaintiff
Mr. P. Bednall and Mrs. G. Awesa, for the First Defendant
Ms. L. David, for the Second Defendant

7th August, 2014

1. HARTSHORN J: This is an application by the first defendant, the State, to dismiss the proceeding as it is an abuse of process as amongst others, the plaintiff, CMSS (PNG) Ltd has failed to comply with s. 5 Claims By and Against the State Act (Claims Act). The application is opposed by CMSS. The second defendant, National Capital District Commission (NCDC) did not take a position on the application. Counsel for CMSS did not take objection to the form or content of the notice of motion seeking the relief sought.

Background

2. CMSS, NCDC and the State entered into a project agreement dated 22nd March 2007 (project agreement). Pursuant to the project agreement, CMSS was to construct a five-star hotel, including a casino in Boroko, National Capital District. Clause 2.3 of the project agreement provides:

"The State shall give the casino, bar and restaurant license before the construction of the five-star hotel facility...."

3. Construction of the hotel commenced in or about 2007 but has not been completed. The State concedes that the casino licence is yet to be granted to CMSS.

4. In or about 2013, the NCDC Building Board formed the view that the building had been defectively constructed and was a danger to the public. The Building Board subsequently issued a public notice advising of its intention to demolish the building subject to the consideration of objections from interested parties (demolition notice).

5. By letter dated 29th November 2013, CMSS purported to give a s. 5 notice pursuant to the Claims Act (CMSS s. 5 notice). CMSS then commenced proceedings by way of Writ of Summons and Statement of Claim on 6th December 2013.

Section 5 notice

6. The State contends that s. 5 Claims Act was not complied with as:

a) the CMSS s.5 notice was not given within six months of CMSS becoming aware of the alleged breach of contract, being the failure to issue a casino licence.

b) the CMSS s.5 notice failed to contain sufficient particulars of the claim and is invalid.

7. CMSS contends that:

a) the date of the breach of contract is when the notice to demolish the subject building was given by the NCDC Building Board. The CMSS s.5 notice was given within six months of that date and so is valid.

b) if the alleged breach is the failure to grant a casino licence, that breach is continuing as the casino licence has not been issued.

c) the CMSS s.5 notice is sufficiently particularised and in any event the Solicitor General had informed that the CMSS s.5 notice is sufficient notice.

8. I consider the issue of whether the CMSS s.5 notice has been given within time, first.

Whether s. 5 notice given in time

9. The State contends that CMSS has failed to serve the CMSS s.5 notice within six months from the occurrence out of which the claim for a breach of clause 2.3 of the project agreement arose or from when CMSS became aware of the breach, contrary to s. 5 (2) (a) and (b) Claims Act. Further, as no further period of time has been extended to CMSS, no cause of action exists against the State.

10. CMSS contends that the date of the breach of the project agreement is the date when the demolition notice was issued. This is because, if I understand correctly, there have been discussions between the new majority shareholder of CMSS and the Department of Trade and Commerce, part of the State, to progress the project. The project was proceeding pursuant to a memorandum of understanding that had been entered into, until the demolition notice was issued.

11. As to this contention, in the Statement of Claim of CMSS, it is pleaded at paragraph 11 that amongst others, the casino license was not issued under clause 2.3 of the project agreement, and at paragraph 16, that:

"By reason of failure in specific performance by the Defendants as pleaded in the preceding paragraph 11 hereof, i. e. the condition precedent to issue the Plaintiff the casino license, the Plaintiff suffered loss and damages."

12. Further, part of the relief claimed is a declaration that the State is in breach of clause 2.3 of the project agreement. It is clear then, that notwithstanding the discussions and the memorandum of agreement to which counsel referred, which occurred before the Statement of Claim was filed, one of the causes of action of CMSS in its Statement of Claim is in relation to the alleged breach of clause 2.3 of the project agreement. The claim of CMSS in its Statement of Claim is not confined to its cause of action concerning the demolition notice.

13. Counsel for CMSS further contended that if, for the purposes of the Claims Act, the breach of contract is when clause 2.3 was breached, and not the issue of the demolition notice, the CMSS s.5 notice was given in time as the breach is continuing - the casino licence still has not been issued.

14. Counsel for CMSS also contended that the Acting Solicitor General in her letter dated 20th January 2014, had informed the lawyers for CMSS that the CMSS s.5 notice had been perused and its contents noted and that:

"I accept your notice as sufficient notice pursuant to s.5 of the Claims By & Against the State Act 1996."

15. If I understand correctly, it is contended that the State is estopped by the content of this letter from denying that CMSS had given the requisite notice under s. 5 Claims Act.
16. Section 5 (2) Claims Act is:

"(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."

17. Counsel for the State contended that clause 2.3 of the project agreement provides that the State was to issue the casino licence before the construction of the hotel facility and that CMSS has pleaded that this was a condition precedent to the obligation to construct the hotel. Construction of the hotel commenced in or about 2007 and CMSS would have been aware from that date that it had not been granted the casino licence by the State.

18. Counsel for the State further contended that the time for the purposes of s. 5 Claims Act started running from this time. Alternatively, at the very latest, by the time of the decision of the National Executive Council no. 113/2012 on 15th May 2012, pleaded in the Statement of Claim, CMSS knew that it had not been issued a casino licence. CMSS's s.5 notice was not served until 29th November 2013. On any analysis of the facts, contends the State, the CMSS s. 5 notice was served out of time.

19. As to the argument of CMSS that as the breach of clause 2.3 is continuing and so the CMSS s.5 notice was given in time, as I said in Peter Komba v. National Capital District Commission (2007) Unreported, WS 451/07, Waigani, delivered 26/7/07, as to a contention that a continued outstanding payment constituted a continuing cause of action and so a s. 5 notice could be given at any time:

"This contention is not correct. The cause of action or the "occurrence out of which the claim arose" is when the event first happened. The question to be posed is, when did the money begin to be owed or when was it that the breach occurred?"

20. I also refer to the case of Global Constructions Ltd v. National Capital District Commission (2011) N4275, in which I stated the following concerning s. 5 (2) (a) and (b) Claims Act:

"9. Pursuant to s. 5 (2) (a) Claims Act, the occurrence out of which the claim arose, to my mind, is the alleged non-payment by NCDC of the amounts in respect of which progress certificates had been issued when those amounts were due to be paid: Caspar Kondi v. Provincial Administrator, Department of Western Highlands Province (2004) N2755, Peter Komba v. National Capital District Commission (2007) Unreported, WS 451/07 Waigani, delivered 26/7/07, Hartshorn J. In the statement of claim the particulars are to the effect that the progress certificates were issued on 12th May 2008. Then in paragraph 8 of the statement of claim it is pleaded that it was a further term of the contract that payment of monies due under a progress certificate would be paid by NCDC to Global within 14 days after the issue of a progress certificate.........

10. Consequently, payment of the amounts in respect of which progress certificates had been issued, should have been made and expected by 26th May 2008. When payment was not made by that date pursuant to the contract as pleaded, the occurrence out of which the claim arose - the non-payment by the due date, had occurred.

11. If reliance is placed upon s. 5 (2) (b) Claims Act, Global would have become aware of the alleged breach of contract, as pleaded, when the subject payments were not made by 26 May 2008."

21. Given the above, I am satisfied that the CMSS s.5 notice was not given within a period of six months after the occurrence out of which the alleged breach of clause 2.3 project agreement arose or within a period of six months after CMSS became aware of the alleged breach.

22. As to the contention that the State is estopped because of the content of the letter from the Acting Solicitor General, counsel for the State contended that the response of the Acting Solicitor General was in relation to the claim disclosed in the CMSS s. 5 notice which only related to the demolition notice cause of action. The claim that was subsequently made in the Statement of Claim took the Office of the Solicitor General by surprise as it consisted of two causes of action, one of which, the clause 2.3 cause of action, had not been referred to in the CMSS s. 5 notice. Further, the question of whether the claimant has complied with the Claims Act, is ultimately for the court to decide and not the Solicitor General.

23. In this regard I refer to the case of Paul Eddie v. Bill Kirokim (2012) N4932, in which the contention was made that the State had recognised a plaintiff's claim and therefore notice under s. 5 Claims Act was not necessary. At para 8, I stated that:

"8. The requirement to give a notice under s. 5 Claims Act is mandatory. No one on behalf of the State can waive these requirements directly or by implication. The Principle Legal Adviser is only able to allow a further time within which a notice shall be given, on sufficient cause being shown. In this regard, there is no evidence that the plaintiffs applied for an extension of time or that any further time has been allowed for them to file a s. 5 Claims Act notice."

24. Similarly, it is for the court to decide whether the requirements of s. 5 Claims Act have been complied with and this includes whether a purported s. 5 notice is compliant and whether it has been given in time.

25. As s. 5 (1) Claims Act provides that:

"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........," (my underlining),

All of the causes of action in the Statement of Claim are affected by the CMSS s. 5 notice not being given within the requisite time. In this regard I refer to the Supreme Court case of Paul Tohian v. Tau Liu (1998) SC566 which held that the requirement to comply with s. 5 Claims Act is a condition precedent that must be complied with before a proceeding is issued. If a proceeding is issued without the necessary notice being given, a defendant is entitled to question the competency of a proceeding on that ground, as it is affected by the bringing of an incompetent proceeding in which it is named as a defendant and is obliged to defend: Eddie v. Kirokim (supra).

26. Consequently, I am satisfied that as the CMSS s. 5 notice was not given in time, s. 5 Claims Act has not been complied with. Consequently, this proceeding is an abuse of process and pursuant to Order 12 Rule 40 National Court Rules it should be dismissed. Given this finding, it is not necessary to consider the other submissions of counsel.

Orders

27. The formal Orders of the Court are:

a) This proceeding is dismissed,

b) The plaintiff shall pay the costs of the first defendant of and incidental to this proceeding,

c) Time is abridged.
_____________________________________________________________
Jerewai Lawyers: Lawyers for the Plaintiff
Office of the Solicitor General: Lawyers for the First Respondent
Pacific Legal Group: Lawyers for the Second Defendant