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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS No. 1112 OF 2017
BETWEEN
H.TSUSE AND SONS LIMITED
Plaintiff
AND:
PNG POWER LIMITED
Defendant
Lae: Numapo J
2019: 11th April
CIVIL PRACTICE AND PROCEDURE – Leave to amend Pleadings – O. 8 r. 50 NCR – Party is entitled to amend its Statement of Claim or Statement of Defence at any stage of the proceedings - Leave must be first be obtained – Court shall grant leave on application - Considerations on granting leave to amend pleadings to be assessed on merits – If fraud is alleged, the Applicant must particularize the acts of fraud and plead specific matters relating to fraud – O. 8 rr. 14 and 30 – Court is satisfied that the pleadings are clear and precise on matters specifically relating to fraud - O. 8 rr. 14 and 30 – Application for leave to amend granted.
Cases Cited:
Papua New Guinea Cases
New Guinea Company Ltd v Thomason [1975] PGNC 18; [1975] PNGLR 454
George v Motor Vehicles Insurance (PNG) Trust [1993] PGNC 62; PNGLR 477
Papua Club Inc. v Nusaum Holdings Ltd [2002] PGNC 50; N2273 [2002] PNGLR 42
Michael Kewa v Elias Mai Kombo [2004] PGNC 83; N2688
Pais v Kodi [2004] PNGNC 84 (Unreported)
Eki Investments Ltd v Era Dorina Ltd [2006] PGNC 145; N3176
Overseas Cases
Cropper v Smith [1884] UKLawRpCh 91; (1884) 26 Ch D 700
Wallingford v Mutual Society (1880) 5 App Cas 685 at 697.
Webster v Power [1868] EngR 9; (1868) LR 2 PC 69
Counsel:
Mr D Poka, for the Plaintiff (Judgment Creditor)
Ms A Samol, for the Defendant (Judgment Debtor)
DECISION
23rd June, 2020
1. NUMAPO J: This is an application by the Defendant for leave to amend its defence pursuant to Order 8 Rule 50 of the National Court Rules (NCR). The Defendant also filed a Cross-Claim and intends to pursue the matter in the event leave is granted.
2. The Plaintiff and the Defendant entered into a ‘verbal agreement’ on or around January 2011 for the Plaintiff to erect spike fences around the perimeters of the Switch Yard and Ramu 1 Power Stations at Yonki at the total cost of K789, 573.00. The agreement requires the Plaintiff to undertake the fencing work at its own costs and upon completion of the work, Plaintiff is to submit the invoice to the Defendant for payment.
3. The Plaintiff submitted an invoice for the sum of K789, 573.00 in March 2011 after the fencing work was completed. Defendant paid the Plaintiff a sum of K405, 000.00 with the balance of K384, 573.00 still to be paid.
4. Defendant alleged that the ‘verbal agreement’ between the Plaintiff and the officers representing the Defendant for the Plaintiff to carry out the fencing work first and later submit its invoice for payment without a proper contract of engagement is improper and does not comply with the procurement procedures and financial guidelines of the Defendant – PNG Power Limited. Furthermore, for a huge amount of money like K789, 573.99 there must a written contract approved by the Board after it has been vetted by the Defendant’s own internal tenders and bidding process.
5. Defendant further alleged that the Plaintiff conspired and colluded with the Officers representing the Defendant in reaching a verbal agreement which is improper and unlawful and in breach of the Defendant’s established procurement guidelines resulting in fraudulent payment. Defendant intends to file a cross-claim if leave to amend is granted.
6. Whether leave should be granted to the Defendant to amend its Defence.
7. The applicable law is O. 8 r. 50 (1) & (2) of the NCR reads:
(1) “The Court may, at any stage of any proceedings, on application by any party or of its motion, order, on terms that any document in the proceedings be amended, or that any party have leave to amend any document in the proceedings, in either case in such manner as the Court thinks fit.”
(2) “All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, or of correcting any defect or error in any proceedings, or of avoiding multiplicity of proceedings.”
8. Order 8 r 50 essentially allows for amendment at any stage of the proceedings upon an application by a party to the proceedings or by the Court on its own motion. Generally speaking, a party is entitled to amend its Statement of Claim or Statement of Defence at any time but that the leave of court must be first be obtained to amend any document in the proceedings. Granting of leave to amend is at the discretion of the Court.
9. The principles of law developed in this jurisdiction through the various case laws sets out clearly certain criteria and/or guiding principles the Court must take into consideration before granting leave to amend. In New Guinea Company Ltd v Thomason [1975] PGNC 18; [1975] PNGLR 454, Saldanha J (as he then was), held that; “whether leave to amend should be granted or not is a matter of discretion for the Court. Relevant matters for consideration in the exercise of this judicial discretion include:
(a) whether the amendment ought to be made “for purposes of determining the real question in controversy between the parties....or of correcting any defect of error”
(b) whether the amendment can be made without injustice or prejudice to the other party; and
(c) the conduct of the parties.”
10. In George v Motor Vehicles Insurance (PNG) Trust [1993] PGNC 62; PNGLR 477, per Woods J. His Honour held, inter alia, “that the National Court Rules O. 8 r. 50 allows the Court to amend the pleadings at any stage of the trial, but leave to amend should be sought as early as possible after the need arises. Further, the Court will allow pleadings to be amended only if the party is not prejudiced. In exercising its discretion, the Court must act judicially.....”
11. Gavara-Nanu J, in Papua Club Inc. v Nusaum Holdings Ltd [2002] PGNC 50; N2273 [2002] PNGLR 42 stated, amongst others, that: “The Court’s power under this rule, is discretionary and broad, and in exercising that discretion, the Court has a duty to do so judicially and on proper principles, so that justice is done in the case”.
12. Expounding on what was said in New Guinea Company Ltd v Thomason (supra), his Honour succinctly sets out the five considerations on amendment as follows:
(i) whether the amendment will enable the Court to determine the real question in controversy between the parties;
(ii) whether the amendments would correct any defect or error in the proceedings;
(iii) whether the amendments will not cause prejudice or result in injustice to the other party;
(iv) whether the application is not made mala fide or bona fide and;
- (v) whether the other party will be compensated with costs for such amendments.
13. Canning J, in Michael Kewa v Elias Mai Kombo [2004] PGNC 83; N2688 and Pais v Kodi [2004] PNGNC 84 (Unreported) added three more principles to the above list as follows:
(vi) “that the party applying to amend his pleadings is not prevented by its conduct or the manner in which the proceedings have progressed from being permitted to amend its pleadings;
(vii) that the interest of justice warrants the amendment sought; and
(viii) that the proposed amendment will enable an efficient and effective determination of the issues between the parties.”
The above eight considerations have been used as guidelines by the Courts in a number of subsequent cases in deciding whether or not to grant leave to amend.
14. The Defendant is seeking leave of Court to amend its Defence and if leave is granted, Defendant further seeks to file a Cross-Claim. The application for Cross-Claim is also filed along with this application for leave to amend.
15. The Defendant alleged amongst others, that the “verbal agreement” between the Plaintiff and the then Regional Manager, late Awa Aporo and the then Chief Operating Officer (both former employees of the Defendant) resulting in the payment of K405, 000. 00 to the Plaintiff is improper and unlawful and does not comply with the Defendant’s procurement process of awarding contracts. Furthermore, its two former employees in their respective roles and capacities do not have the financial authority to commit the Defendant especially for a huge sum of money such as in this case. Even the approval authority of the Chief Executive Officer/Managing Director of PNG Power Limited is limited to only K500, 000.00 and anything above that goes to the Board for approval. The payment of K405, 000.00 in this present case was made from fraudulent dealings between the Plaintiff and the two employees representing the Defendant.
16. Except for paragraphs 1, 3 and 5, Defendant denies all the allegations contained in the Plaintiff’s Statement of Claim and makes a cross-claim against the Plaintiff.
17. In his Affidavit, Douglas Mageo, the Executive General Manger – Transmission & Distribution of the Defendant - PNG Power Limited, said at paragraph 8 that the Plaintiff is not entitled to any claims in the Statement of Claim and that the alleged verbal agreement is vague and unauthorized as there is no endorsement in writing by the Defendant’s Board or Management authorizing such payment and therefore, the Plaintiff is not entitled to the balance of K339, 573.00 as claimed.
18. According to Mr Mageo, the Audit Report shows that there is no Certificate of Completion for the spike fencing project to indicate that the project was completed but yet the payment of K405, 000.00 was made to the Plaintiff. This amounts to fraud.
19. Defendant sought leave to be granted pursuant to O. 8 r. 50 (1) to amend its Defence and to file a new Amended Statement of Defence and Cross- Claim for determination in a trial.
20. In response, the Plaintiff argued that the Defendant failed to plead specific matters relating to fraud. Order 8 Rules 14 and 30 of the NCR makes it mandatory on the part of person alleging fraud to particularize the acts of fraud or plead matters specifically relating to fraud. The Defendant in this case failed to do so and therefore, should be refused leave. Plaintiff further argued that the Defendant’s failure to plead specific issues of fraud amounts to general issue which is not allowed under Order 8 Rule 28 and offends against the rules of pleadings. For this reason, the amendment sought (i.e. fraud) given that it has not being particularized, will result in injustice and prejudice to the Plaintiff.
21. Plaintiff further submitted that failure by the Defendant to plead specific matters relating to fraud might raise matters of fact not arising out of the preceding pleadings and obviously will take the Plaintiff by surprise in the course of the proceedings: O. 8 r. 14 (b) and (c) of the NCR.
22. Plaintiff submitted that the application by the Defendant to amend its Defence should be refused.
23. Rules of Court typically afford judges a broad discretion, upon terms, to permit amendments to pleadings at any stage of the proceedings. Order 8 Rule 50 of the NCR is no exception. It generally states that the Court may at any stage of the proceedings, on application by any party or of its own motion, order that any document in the proceedings be amended, or that the party have leave to amend any document in the proceedings in either case in such manner as the Court sees fit. All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, or of correcting any defect or error in any proceedings including avoiding multiplicity of proceedings. The discretion of the court to grant leave to amend evolved out of the recognition of the traditional role of the judges to do justice according to law.
24. The authoritative statement to grant leave to amend in the exercise of such discretion is found in the opinion of Bowen LJ in Cropper v Smith [1884] UKLawRpCh 91; (1884) 26 Ch D 700 at 710 -711 as follows:
“Now I think that it is well established principle that the object of Courts is to decide the rights of parties, and not to punish them for mistakes they make in the conduct of their cases....I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party....as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter of right on his part to have t corrected, if it can be done without injustice, as anything else in the case is a matter of right.”
25. Kandakasi J (as he then was) adopted the view taken in Cropper (supra) in Eki Investments Ltd v Era Dorina Ltd [2006] PGNC 145; N3176 and held that; “O. 8 r. 5 (1) of the NCR provides for amendment to pleadings. The provision gives the Court wide discretion to allow for amendments at any stage of the proceedings....”
26. One of the reasons for amendment is to bring to the fore the real questions to be determined and it should be readily granted so long as such an amendment will not cause any prejudice or injustice to the other party as was held in New Guinea Company Ltd v Thomason (supra).
27. Generally, a party to a proceedings is entitled to amend his statement of claim or defence, whatever the case may be, at any time, on an application seeking leave of court to do so. The court in the exercise of its discretion under O. 8 r. 50 shall, in the appropriate circumstances, grant leave to amend. Putting it simply, leave to amend should be readily given when an application is made if the Court is of the view that the amendment would do justice to the case.
28. However, where fraud is alleged, the party alleging fraud must particularize the acts of fraud and plead matters specifically relating to fraud as required by O. 8 rr. 14 and 30. General allegations are insufficient to amount to an averment of fraud: Wallingford v Mutual Society (1880) 5 App Cas 685 at 697. The Court will not give relief on an issue involving fraud where fraud has not been specifically pleaded: Webster v Power [1868] EngR 9; (1868) LR 2 PC 69.
29. I now turn to the statements and affidavits filed by the Defence to ascertain if the Defendant had particularized the acts of fraud alleged and plead matters specifically relating to fraud to comply with the requirements of O. 8 rr. 14 and 30.
30. Douglas Mageo, the Executive General Manager – Transmission and Distribution of PNG Power Limited in his affidavit filed on the 5th April 2019, set out the particulars of the fraudulent payments in paragraphs 11 – 16 in his affidavit in the following terms:
(i) The Defendant has never sighted the invoice of K789, 573.00 (total amount claimed) but a fraudulent payment of K405, 000.00 was made to the Plaintiff on or around 16 August 2012 without a Certificate of Completion.
(ii) The Defendant was not aware of any Financial and Business Paper seeking endorsement from the Defendant’s Board as required for a substantial amount of K789, 573.00 to be expended of this fencing project.
(iii) Due to misrepresentation by the Plaintiff, the then Regional Manager of PNG Power Ltd late Mr Awa Aporo and the then Chief Operating Officer authorized the payment of K405, 000.00 as a result of which the Defendant has now made a business loss and say that the Plaintiff is not entitled to the balance of the K789, 573.00 in its initial claim against the Defendant.
(iv) Both the Regional Manager and the Chief Operating Officer do not have the financial authority and/or capacity to award contracts on behalf of the Defendant for such amount of money.
(v) The Defendant carried out an Internal Audit Investigation and said that the Plaintiff and the then Chief Executive Officer or Chief Operating Officer together with the late Awa Aporo as the Highlands Region Manager for Yonki Power Station manipulated, colluded and effected payment to the Plaintiff unlawfully.
(vi) The Plaintiff knowing that fraud was involved in facilitating his payment knowingly accepted the payment to the detriment of the Defendant.
(vii) The Defendant in its Audit Report following its investigation discovered that the total cost of the fencing project amounts to K209, 369.49 based on the unit cost obtained from Barlow Industries, hence the actual construction and labour cost for the spike fencing in 2011 would have been within the vicinity of K72, 223.39.
31. I considered the affidavit by Mr Douglas Mageo as containing sufficient particulars of fraud relating to the payment made to the Plaintiff. I am therefore, satisfied upon the balance of probabilities that the Defendant has sufficiently particularized the acts of fraud committed with specific dates and the amount of money involved including the various reports on the alleged acts or omissions of the Plaintiff and the Officers representing the Defendant at the time who colluded with the Plaintiff to defraud the Defendant. I am also satisfied that the pleadings are clear and precise on matters specifically relating to fraud, pursuant to O. 8 rr. 14 and 30 of the NCR.
32. Having found so, I now return to the guiding principles to determine whether or not leave to amend should be granted to the Defendant. The guidelines I consider relevant for the purpose of this application are set out below. My response to each of the guidelines is shown in italic.
(a) Whether the amendment will enable the Court to determine the real question in controversy between the parties – The amendment no doubt, will bring to fore the real questions to be determined by the Court to do justice to the case.
(b) Whether the amendments will not cause any prejudice or result in injustice to the other party – There is no evidence to suggest that the amendments will disadvantaged the other party and cause any prejudice or result in injustice. Plaintiff/Respondent has not shown by way of evidence that he would be disadvantaged if the leave to amend is granted.
(c) Whether the application is not made mala fide or bona fide – Claim was made in good faith, in the interest of justice and with no ulterior motives.
(d) Whether the other party will be compensated with costs for such amendments – The Court will require the Defendant/Applicant to provide the usual undertaking as to damage and pay the costs of the proceedings if the ruling goes against the Defendant.
(e) That the interest of justice warrants the amendment sought – It is in the interest of justice that leave to amend is granted to enable the Court to properly deal with the issues in a holistic manner rather than on a piecemeal basis so that the right result is arrived at and a win-win for both Parties.
(f) That the proposed amendment will enable an efficient and effective determination of the issues between the parties – When the issues are properly identified the Court will determine the issues effectively and efficiently according to law.
33. I make the following Orders:
(i) Application for leave to amend is granted pursuant to O. 8 r. 50 of the NCR.
(ii) Defendant to file an Amended Statement of Defence within Fourteen (14) days from the date of this Order.
(iii) Matter is generally adjourned to the Registry for a date to be fixed for hearing.
(iv) Costs be in the cause.
Orders Accordingly
________________________________________________________________
Niugini Lawyers: Lawyers for the Plaintiff
PNG Power Limited (In House Lawyers): Lawyers for the Defendant
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