N7428
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1265 OF 2017

BETWEEN:
ARPI LIMITED
Plaintiff

AND:
JOHN TALELE
Chief Executive Officer Kokopo District Development Authority
First Defendant

AND:
KOKOPO DISTRICT DEVELOPMENT AUTHORITY
Second Defendant

AND:
EAST NEW BRITAIN PROVINCIAL GOVERNMENT
Third Defendant

Kokopo: Anis J
2018:  1, 20 & 24 August 

CONTRACT – agreement to settle debt and liabilities - whether there was any breach of the terms of the 3 main contracts – whether the parties have entered into a new agreement - whether the subsequent agreement is binding - whether the defendants are liable under the new agreement
  
Cases cited:

Iambakey Okuk and the Independent State of Papua New Guinea v. Gerald Sidney Falllscheer [1980] PNGLR 274
Tender Wak v. John Wia (2008) N3356

Counsel:

Mr T. C. Waisi, for the Plaintiff
Mr B. Killian, for the Defendants

JUDGMENT ON LIABILITY

24th August, 2018

1.	ANIS J:	This was a trial on liability.  The plaintiff alleged various contracts it said it had or has entered into with the defendants.  It seeks the following relief in its amended statement of claim:

23.	Pursuant to the Court’s inherent jurisdiction, a Declaration that the Second Defendant’s letter of 25th February, 2015 is lawful and its terms binding on the parties and therefore enforceable.
24.	Pursuant to the Court’s inherent jurisdiction, Judgment in the sum of K1,200,000.00 as pleaded in Paragraph 21 or alternatively, after assessment, the sum of moneys as pleaded under Paragraph 13 of the Amended Statement of Claim.
25.	General damages and losses arising from the delay in making the payments.
26.	Punitive damages in the sum of K500,000.00 or such amount in the discretion of the court, to be paid by the Defendants for delay in making the payment causing harm and injury to the Plaintiff's business.
27.	Interest at 8 percent pursuant to Judicial Proceedings (Interest on Debts & Damages) Act Chapter 52.
28.	Costs of the proceedings to be paid by the Third Defendant.
29.	Such further or other relief as to this Honourable Court may seem just.

BACKGROUND

2.	On 13 December 2013, 6 May 2014 and 25 May 2014, the plaintiff signed 3 contracts (refer to annexures B, C and D of Exhibit P1) with the defendants for the procurement of electrical items.  The items were required for the defendants’ rural electrification projects in Kokopo in East New Britain.  The 3 contracts were for the same purpose, namely, procurement of electrical items.  They were valued at K2,550,342.51.  Compliances with the requirements under the Public (Finance Management) Act 1995 had been met, according to the parties, before the 3 contracts were signed.  The parties had reached common ground on this, so it was not a contentious issue at the trial.  In June of 2014, the plaintiff delivered to the defendants the electrical items as per the terms of the 3 contracts.  This was also not disputed.

3.	The defendants have paid the contracts sum in full to the plaintiff.  Payments had been made in instalments.  The final instalment was for a sum of K400,342.51 and it was paid on 17 June 2016.  Let me set out the schedule of these payments herein which is extracted under the sub-heading, “Agreed Facts”, from the parties’ filed Statement of Agreed and Disputed Facts and Legal Issues.

Date	Cheque Number	Cheque Amount (K)
	
22nd January, 2014	3076	900,000.00	
22nd May, 2014	3434	700,000.00	
14th October, 2014	3820	350,000.00	
24th January, 2015		200,000.00	
17th June, 2016		400,342.51	
	Total:	2,550,342.51	

4.	The plaintiff has acknowledged receipt of the final instalment payment.  For the first part of the claim, the plaintiff does not dispute the fact that full payments for the 3 contracts have been received.  However, its complaint is this.  It says that since the payments had been slow and that it had taken the defendants about 3 years to settle, the plaintiff claims that it has suffered damages.  Regarding the delay period, the plaintiff submits that there was delay for 3 years.  The defendants on the other hand submit that the delay was for 1 and a half years.  Regardless of that, and say during the said delayed period, correspondences had exchanged between the parties, that is, after concerns and demands were raised by the plaintiff regarding its money under the 3 contracts.  Amongst these were 3 letters which were also described as letters of guarantees which the plaintiff claims constituted a separate agreement between the parties.  Of the three (3), the main letter was the one written by the defendants’ lawyers Mr Killian which is dated 25 February 2015.  Refer to Annexure “O” to Exhibit P1.  The plaintiff claims that, based on the said agreement in the letter, the defendants have agreed to pay K1,600,342.51 to cover the plaintiff’s additional costs.  The plaintiff also pleads these and claims, amongst other things, that it is entitled to K1,200,000 which is the balance of K1,600,342.51.

ISSUES

5.	The issues are as follows:

(i)	Whether there is an existing cause of action for breach of contract in relation to the 3 contracts;
(ii)	Regardless of the above, whether the parties have another binding agreement.

NO ISSUE WITH THE 3 CONTRACTS

6.	At the presentation of submissions hearing, this is what the plaintiff had to say.  It does not take issue with the 3 contracts, their terms and conditions, and the payments that had been made and received which totalled K2,550,342.51.  Its argument relates to what it claims were consequential losses which were said to have been suffered because of the late or delayed payments by the defendants on the 3 contracts.

7.	I had difficulty understanding the plaintiff’s argument and had put counsel to task to explain, during the presentation of submissions hearing.  I am still not convinced that there is any merit to the argument.  Let me explain.  Without alleging breaches of the terms and conditions of the 3 contracts, I am unable to see a cause of action here.  If there is however one that would have given rise to the damages as pleaded, then it has not, in my view, been pleaded or sufficiently explained by the plaintiff.  Pleadings on this part of the plaintiff’s claim, in my view, is vague or unascertainable.  A pleading shall form the basis of a claim or a defence.  It is therefore imperative that its rules are observed by parties to court proceedings.  The case law on point is settled.  For this purpose, let me state two (2) cases.  Justice Miles in the case Iambakey Okuk and the Independent State of Papua New Guinea v. Gerald Sidney Falllscheer [1980] PNGLR 274, stated and I read:

I must make some reference to Mr. Young's initial submission that for the purpose of the demurrer the plaintiff has not identified the cause of action upon which he relies. As one who shares for better or worse a background in the strict common law system of pleading I found that submission attractive. The plaintiff's claim is clearly not an action in contract, nor is it founded on one of the common law forms of action; nor is it a claim in equity; therefore, so the argument goes, the cause of action must be found in the statute itself. Yet the statute which is couched in terms of the Minister's powers makes no reference to a right to be heard, not even to a duty from which a right may be inferred.

8.	Justice Makail in Tender Wak v. John Wia (2008) N3356, stated at paragraph 60 and I quote:

60.  I am of the view that the Plaintiffs’ pleadings in the Statement of Claim do not clearly set out the particulars of the cause of action, be it fraud or breach of contract.   They are also confusing and there is no order in the pleadings.  In my view, the common law actions of breach of contract and fraud should be pleaded with clarity and with particularity and also in an orderly fashion.  As I said in my own Judgment in the National Superannuation Fund Board Limited -v- Mount Hagen Urban Local Level Government: WS No 1312 of 2007 (Unnumbered and Unreported Judgment of 4 March 2008) on page 12 that: “...... generally the pleadings set the foundation or the basis of the claim, the issues to be decided and the kind of evidence to be led at the interlocutory hearing to support the application for interlocutory Orders or at the trial to support the final reliefs.”

9.	I find that the plaintiff has not established a cause of action in law under the 3 contracts that would have entitled it to claim damages or consequential losses as alleged.

LETTER OF 25 FEBRUARY 2015

10.	The plaintiff also makes this argument.  It repeats the delay period argument which it said had caused it to incur additional costs.  It says that it had brought these to the attention of the defendants.  As a result, it says that the parties have entered into another agreement whereby the defendants have agreed to pay K1,600,342.51 to cover its additional costs.

11.	It is important to set out the pleadings for this claim.  Let me start with the amended statement of claim.  The relevant part is paragraph 15.  It reads:

15.  That on 25th February, 2015, the Third Defendant through its Provincial Legal Officer namely Benedick Killian caused a letter ‘admitting’ that the Third Defendant shall pay K1,600,342.51 to the Plaintiff as an “all up” settlement sum for the Plaintiff’s claim. Despite the guarantee letter no such payment was made. Similar assurances were made by the incumbent Acting Provincial Administrator and former Governor within the relevant period to no realization.

12.	In the defendants’ amended defence, they respond at paragraph 15.  It reads:

15(a)  The Defendants agree that the previous Provincial Legal Officer after instructions from the Kokopo DDA, had advised that the balance owing was K400,342.51 be accepted by the Kokopo DDA for payments to the Plaintiff.

(b)  Although in principle, the DDA Board did convene pursuant to the legal officer’s advice and approval payment of a total sum of K1,600,342.51 to the Plaintiff, continued funding constraints from the National Government had affected the final settlement, even of that sum.
…..
(Underlining is mine)

13.	I have considered the above and the pleadings.  In my view, there appears to be a clear admission by the defendants in their defence on the subject matter.  I cannot see a valid defence pleaded in the amended defence which says that the defendants deny this subsequent agreement to pay the plaintiff K1,600,342.51.  I note that a sum of K400,532.51 has since been paid so there was already part-payment made under the said agreement.  The K400,532.51 I note is actually the final instalment payment for the 3 contracts. This sum was, as it seems, included into this subsequent agreement by the parties.  Let me refer to the defendants’ letter of 25 February 2015.  The letter reads in part as follows:

Final Conclusion

Having considered the above and the fact that ARPI Ltd has diligently supplied the materials as per the contracts, we would advise and urge that in the interest of fairness and amicably settling the matter, the District Administrator pay to ARPI Ltd forthwith as follows:

a)	Balance of Contracts -	K400,342.51
b)	Costs and interest incurred by ARPI -	K1,200,000.00
Total Due to Arpi LTD	K1,600,342.51

To avoid a lengthy and costly court battle, it is our due diligence advise to the Kokopo District Administrator that they facilitate the payment of K1,600,342.51 to ARPI Ltd upon receipt of this advice.

Please note also that Bank South Pacific, upon the verbal assurance of the then Kokopo District Administrator Mr Ekonia Walom had facilitated an overdraft facility of K1 million to the contractor Arpi Ltd and thus therefore the bank acting upon that assurance advanced such huge sum to secure the supply of electrical materials from the Australian-based electrical supply company Expro Ltd.

Because the contractor had delivered in accordance with the contract and the service enjoyed we sincerely urge that full payment is done forthwith.

Sincerely

______________
Benedick Killian
Provincial Legal Officer
…..
…..
cc:	Managing Director
	ARPI td

14.	Two (2) additional evidence that supports the parties’ position regarding the subsequent agreement, which I do not wish to get into in detail (primarily given my findings on the admission by the defendants in the pleading on the subject matter) but mention briefly are, (i) Letter dated 4 May 2016 by the former Governor Hon. Ereman ToBaining Jr to the plaintiff, Annexure T to Exhibit P1, and (ii) letter dated 29 June 2016 by the first defendant to the plaintiff, Annexure V to Exhibit P1.  

15.	I am positioned to rule on the second issue.  But before I do so, let me look at the defendants’ evidence on the subject.  I have considered their evidence.  I must say that their only response to the issue is contained at paragraph 6(b) of Exhibit D1, namely, the affidavit of the first defendant which was filed on 11 May 2018.  It reads:

(b)  Therefore by June 2016 we owe the Plaintiff nothing not even the claim of K1,200,000.00.  The allege amount of K1,200,000.00 was an offer made to our District Development Authority by the Provincial Legal Officer which to date has never been accepted by our Board and therefore does not and cannot be claimed by the Plaintiff as of right or debt.
…..

16.	In my view, there are several things wrong with this evidence.  Let me explain.  The defendants have, by their pleadings, admitted to the subsequent agreement between the parties.  This is expressly pleaded in their amended defence and I have addressed it above in my judgment.  It did not appear to be an issue.  In Court, I note that the defendants’ counsel has also indicated that to be the case.  Counsel’s submission on point was that the defendants were unable to honour the said agreement because of funding constraints which they (i.e., the defendants) have had and were continuing to do so, with the National Government.  The second reason is this.  Contrary to the said evidence of the first defendant, the defendants’ own defence at paragraph 15(b) expressly states and reads in part, Although in principle, the DDA Board did convene pursuant to the legal officer’s advice and approval payment of a total sum of K1,600,342.51 to the Plaintiff…... So, the first defendant’s evidence also directly contravenes paragraph 15(b) of the defendants’ amended defence.  Thirdly and when I look at all the evidence, they show the following.  The parties have an agreement in place on or about 25 February 2015, for the payment of K1,600,342.51 by the defendants to the plaintiff.  The said payment was agreed upon by the parties to settle, (i), the plaintiff’s final outstanding payment of K400,342.51 and, (ii), the losses that the plaintiff had suffered due to delayed payments, in regard the earlier 3 contracts.  Payments for the said agreement was approved by the defendants.  The delay in settlement was because of funding constraints that had been experienced by the defendants.

SUMMARY

17.	In regard to the first issue, Whether there is an existing cause of action for breach of contract in relation to the 3 contracts, my answer is, “no”.  In regard to the second issue, Regardless of the above, whether the parties have another binding agreement, my answer is, “yes they have, primarily based on the defendants’ letter of 25 February 2015”.

18.	I will grant the first declaratory relief sought in the plaintiff’s amended statement of claim.  I will also make consequential orders including orders to progress the matter to trial for assessment of damages.

COST

19.	I reserve my decision on cost until after I reach a final decision on damages.

AND THE COURT ORDERS

1.	A Declaration that the Second Defendant’s letter of 25th February 2015 is lawful and its terms binding on the parties and therefore enforceable.
2.	Liability has been established based on the subsequent agreement reached between the parties.
3.	The 3 earlier contracts between the parties were completed and I find no breaches on any of their terms and conditions.
4.	 I also find that there was no valid cause of action pleaded by the plaintiff in regard to its purported claim over the 3 contracts, and I dismiss that part of the claim.
5.	The matter shall be set down for trial or for status conference for allocation of a trial date, for assessment of damages.
6.	Cost is reserved to the trial on assessment of damages.
7.	Time for entry of these orders is abridged to the date of settlement by the Registrar of the National Court which shall take place forthwith.

The Court orders accordingly.

________________________________________________________________
Waisi Lawyers: Lawyers for the Plaintiff
In-House Lawyer: Lawyers for the Defendants