N8633
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1192 OF 2016 

BETWEEN
BLUEWATER INTERNATIONAL LIMITED 
Plaintiff

AND
ROY MUMU, SECRETARY DEPARTMENT OF TRANSPORT
First Defendant 

AND
INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Defendant

Waigani:  Shepherd J
2020: 16th, 28th October

PRACTICE & PROCEDURE - supervisory role of National Court where parties have contractually agreed on dispute resolution process – parties agreed to resolve disputes by negotiation but failing settlement by negotiation then arbitration - where parties have agreed to settle plaintiff’s principal claim the Court may deal with residual claims for interest and costs without compelling the parties to submit to arbitration.

PRACTICE & PROCEDURE – application for summary judgment when parties have agreed to settle plaintiff’s principal claim – proper jurisdiction for summary judgment when National Court is exercising supervisory role of dispute resolution process is Order 12 Rule 1 National Court Rules – National Court’s exercise of power to grant summary judgment is discretionary.  

Cases Cited:

Ambogo Sawmill Pty Ltd [1987] PNGLR 117
Ampaoi v Bougainville Copper Ltd (2012) SC1166
Augerea v Bank of South Pacific Ltd  [2007] SC869
Bluewater International Ltd v Roy Mumu, Secretary Department of Transport
  & The State (2019) SC1798
Boochani v The State (2017) SC1566
Chief Collector of Taxes v T.A. Field Pty Ltd [1975] PNGLR 144
Curtain Brothers (Qld) Pty Ltd v The State [1993] PNGLR 295
Duma v Meier (2007) SC898
Eru v Interoil (PNG) Ltd (2016) N6352
Evaluation Consult (New Zealand) Ltd v The State (2016) N6219,
Finance Corporation Ltd v Dalmine Enterprises Ltd (2015) N6080
Finance Corporation Ltd v Trans Ganuka Ltd (2015) N5978
Re Koitaki Plantations Ltd (2017) N6670
Kumul Builders Pty Ltd v Post & Telecommunication Corporation [1991] PNGLR 299
Makeng  v Timbers (PNG) Ltd (2008) N3317
Medaing v Ramu Nico Management (MCC) Ltd (2011) SC1156
Opi v Telikom PNG Limited (2020) N8290
Powi v Southern Highlands Provincial Government (2006) SC844
Smith v Ruma Construction Ltd (2000) N1982

Textbooks:
Gary Born, International Commercial Arbitration (2nd ed.) 2014, Kluwer, The Netherlands

Counsel:

Mr S. Malaga, for the Plaintiff
Mr E’ava Geita, for the Defendants
Mr David Dotaona, for the Attorney-General

DECISION 
28th October, 2020

1.	SHEPHERD J:   This is a decision on an application by the plaintiff seeking summary judgment against the State. 

2.	By writ of summons filed on 22 September 2016 the plaintiff (Bluewater) claimed liquidated damages of K1,530,000 against the Secretary of the Dept of Transport and the State for breach of contract. Bluewater later agreed to settle its principal claim for K1,450,000, which the State agreed to pay.  

3.	There are residual issues of interest on Bluewater’s principal claim and the company’s costs of this proceeding which are still outstanding and which the parties are required, at the direction of the Supreme Court, to resolve under their contract by a dispute resolution process involving direct negotiation or, failing settlement by negotiation, by arbitration.   

4.	I delivered short reasons for this ruling on 28 October 2020, at which time I indicated that I would deliver full reasons, which I now do.

Background 

5.	On 31 May 2013 Bluewater entered into a consultancy contract (the Contract) with the State for the company to prepare a feasibility study at an agreed cost of K7 million.   The feasibility study related to a proposed wharf to be constructed at Dogreto Bay near Wewak, East Sepik Province (the Project).  The total cost of the Wewak Wharf was estimated to be K37 million, inclusive of the K7 million cost of the feasibility study.

6.	The Project was initiated back in 2011 by the former member for the Wewak Open Electorate, the Hon. Dr Moses Manwau and later supported by his political successor in 2012, the Hon. Jimmy Simatab.  The Contract was prepared by the Central Supply and Tenders Board (now the National Procurement Commission) in consultation with the Department of Finance.  The affixing to the Contract of the seal of the Central Supply and Tenders Board  (CSTB) “for and on behalf of the Independent State of Papua New Guinea” was dated 31 May 2013 and witnessed by Mr Philip Eludeme, Chairman of the CSTB and Mr Veari C. Hitolo.  The contract was similarly executed under seal by Bluewater by its managing director Mr Josiah Donigi and his co-director Mr Benedict Irah.  

7.	The Department of Transport was not a party to the Contract.

8.	Clause 3.1.2 of the Contract, when read in conjunction with the Specific Conditions of Contract (SCC) in clause 4, stipulated to the effect that although the Chairman of the CSTB was the person to whom all correspondence regarding termination of and disputes concerning the Contract should be delivered, the agency of the State which was “responsible for the day-to-day implementation of the Contract and for making payments due to the Consultant” was the Department of Transport. 

9.	The SCC set out in clause 4 of the Contract required that all notices under the Contract intended for the Department of Transport as the implementing agency be addressed and submitted to Mr Roy Mumu, Secretary of the Department of Transport, with copies to the Chairman of the CTSB. 

10.	However Mr Mumu in his capacity as Secretary of the Department of Transport did not become aware of the existence of the Contract until after it had been executed on 31 May 2013 and had already come into force. 
 
11.	No actual funding was ever transferred by the Department of Finance to the Department of Transport in respect of the services to be provided by Bluewater under the Contract, notwithstanding that on 7 December 2011 the Secretary for the Department of Finance had, well prior to execution of the Contract on 31 May 2013, previously issued Authority to Pre-Commit Expenditure serial no. 211884 under the Public Finances (Management) Act 1995 evidencing Department of Finance approval to commit government funds to the extent of K7 million for “Wewak District Impact Projects” under the vote for Transport Sector-Wewak Wharfs. 

12.	In compliance with its contractual obligations for the Project, Bluewater’s personnel commenced work on the feasibility study and undertook desktop study work.  On 7 December 2015 Bluewater issued an invoice for its first progress payment to the Department of Transport for services the company had rendered under the Contract up to that point.  The invoice claimed for concept design and launching, a desktop study report, mobilisation and administration costs. A further itemisation of these services claim was attached to the invoice. 

13.	Bluewater’s invoice was delivered to the Hon. Jimmy Simatab, then Member of Parliament for the Wewak Open Electorate at his office, at the Wewak District Development Authority on 8 December 2020.   The Hon. Member then immediately forwarded Bluewater’s invoice to Department of Transport Headquarters in Port Moresby for payment. Thereafter Bluewater’s Mr Donigi followed-up with both the Department of Transport and the Department of Finance in Port Moresby between January 2016 to July 2016 seeking payment of Bluewater’s invoice under the Contract.

14.	When Mr Donigi’s efforts to obtain payment of Bluewater’s invoice proved unsuccessful, Bluewater instituted this proceeding WS No. 1192 of 2016 by the filing of its writ of summons with endorsed statement of claim on 22 September 2016.  
15.	What then transpired between the parties between commencement of this litigation in September 2016 down to the present time in terms of the parties’ settlement negotiations and the complications which have arisen in this proceeding to prevent the State’s payment of its agreed liability to settle Bluewater’s principal claim in the sum of K1,450,000 is summarised below. 
   
Litigation history and the parties’ settlement negotiations 

16.	Following the filing of Bluewater’s writ of summons on 22 September 2016, a sealed copy of the writ was duly served on Mr Roy Mumu at Department of Transport Headquarters on 26 September 2016.  A sealed copy of the writ was also served the same day on the personal secretary/executive officer of the Solicitor-General in accordance with the service requirements allowed for in s.7 of the Claims By And Against The State Act 1996 (as amended) (CBAAS Act). 

17.	Although the State Solicitor’s Office filed a notice of intention to defend this proceeding on 13 October 2015, the formal defence of the Department of Transport and the State was not filed until 15 February 2017, by which date the time limited by s.9 of the CBAAS Act for the filing of the defence had already expired and no application had been made by the Solicitor-General’s Office for extension of time to file the defence. 

18.	This litigation was then suspended when Bluewater appealed a decision of this Court which on 11 April 2017 had dismissed Bluewater’s application for default judgment, alternatively summary judgment, based on the State’s failure to have filed its defence within time.   Bluewater’s appeal to the Supreme Court, instituted by SCA No. 66 of 2017, was in turn dismissed on 1 May 2019 for the reasons given by the Supreme Court in its judgment SC1798. 
 
19.	A principal reason given by the Supreme Court for its dismissal of Bluewater’s appeal centred on the parties’ contractual obligation under clause 3.11 of the Contract to use their best efforts to amicably settle any dispute arising in connection with the Contract  by negotiation at first instance, and if a negotiated settlement were to fail then the parties were required to submit their dispute to arbitration under the Arbitration Act 1951.    The Supreme Court ruled that clause 3.11 of the Contract ousted the National Court’s normal jurisdiction to determine the dispute which had arisen regarding the State’s payment of Bluewater’s invoice dated 7 December 2015.  This was the overriding reason why the Supreme Court on 1 May 2019 dismissed the appeal in SCA No. 66 of 2017 and remitted the case back to the National Court.  
20.	It was a term of the Supreme Court’s order made on 1 May 2019 that on remittal of the substantive matter back to the National Court, the case was to be stayed pending “exhaustion of the process provided for under Clause 3.11 “Disputes and Arbitration” contained in the Contract between the parties.” 
  
21.	The Supreme Court directed in term 4 of its order of 1 May 2019 that the case be assigned to the National Court’s ADR Track in Civil Court 2 (CC2) to manage the dispute resolution process in Clause 3.11 of the Contract. 

22.	 By emailed letter dated 14 May 2019 the Deputy Registrar of the National Court notified counsel for Bluewater, copied to the Solicitor-General, that WS No. 1192 of 2016 was listed for mention in CC2 on 31 May 2019.

23.	On 31 May 2019 Mr Sanol Malaga appeared for Bluewater before me in CC2 of the National Court.  Solicitor-General Mr Tauvasa Tanuvasa appeared in person for both defendants, that is to say for the Secretary for the Department of Transport and for the State. As the presiding judge, I informed counsel that I was aware of the decision of the Supreme Court which had been delivered in SCA No. 66 of 2017 on 1 May 2020.  As no settlement of the case had been negotiated at that stage, the case was adjourned for 3 weeks to 31 June 2019 to enable the parties’ counsel time to confer with each other and for a set of mutually agreed draft directions to be handed up which addressed the appointment and remuneration of an arbitrator or arbitrators as well as the logistical issues attendant on any arbitration, assuming arbitration had to be the way forward in the absence of any settlement arrived at in the interim.     

24.	On 21 June 2019 counsel for the respective parties indicated to the Court that instead of arbitration, negotiations for settlement of Bluewater’s claim were under way and that an adjournment to facilitate those settlement negotiations was requested.  An adjournment was accordingly granted for that purpose to 4 July 2019.

25.	On 4 July 2019 counsel for the respective parties requested a further adjournment to continue settlement negotiations.  I therefore allowed an adjournment to 19 July 2019 to enable the parties to agree on a timetable to settle Bluewater’s claim by direct negotiation or mediation.  However it was also stipulated in that order that if no agreement on a timetable for negotiations and or mediation could be reached in the intervening period, then the parties’ counsel were to hand up a set of mutually agreed draft directions on 19 July 2019 for the Court to consider, which directions were to specifically deal with the appointment of the arbitral tribunal and the logistics for the arbitration to take place. 
26.	On 19 July 2019 counsel for the State Mr E’ava Geita requested a further adjournment because an impasse which had previously existed between the Department of Transport and the Department of Finance as to which of those two Departments of the State should fund settlement of Bluewater’s claim had not been resolved.  Mr Geita indicated that more inter-departmental discussion was needed before settlement negotiations with Bluewater could resume.  An adjournment was accordingly granted to 2 August 2019.

27.	On 2 August 2019 Mr Geita informed the Court that legal officers for the Department of Transport and the Department of Finance continued to be at loggerheads as to which of those two Departments was responsible for settlement and payment of Bluewater’s claim.  An order was therefore made on 2 August 2019 which adjourned the case to 16 August 2019 on condition that the legal officer for the Department of Finance, Ms Carolyn Jaruga, and the legal officer for the Department of Transport, Mr Charles Siniu, were to attend at Court and explain their respective Departments’ positions as to why agreement could not be reached as to which Department should be responsible for undertaking negotiations with Bluewater to settle and fund payment of its claim. 

28.	On 16 August 2019 Ms Jaruga and Mr Siniu both appeared before the Court.  On the Court being advised that negotiations could now be progressed to settle Bluewater’s claim, a further adjournment at the State’s request was granted to 13 September 2019.

29.	The next development in this proceeding was the filing by the Solicitor-General’s Office on 6 September 2019 of the affidavit of Dr Ken Ngangan, Secretary for the Department of Finance sworn on 5 September 2019.  Dr Ngangan deposes in his affidavit that in 2007 the National Executive Council (NEC) allocated funds for different projects under the Department of Transport and Department of Works.  One of those projects was the Wewak Wharf Project.  An overall sum of K37 million was allocated for that particular project and parked under “Transport Sector Development Trust Account”.  This is evidenced by term 4(k)(vii) of the trust instrument dated 13 January 2009, a copy of which is annexed to Dr Ngangan’s affidavit and marked “A”. 
 
30.	Clause 4 of the trust instrument referred to by Dr Ngangan in his affidavit states that the signatories for the bank account for the main Wewak Wharf Project were the Secretary for the Department of Transport and the Secretary of the Department of Finance or his delegate.  However Dr Ngangan deposes that the trust instrument for the trust account for that project was subsequently revoked on 15 September 2015 because clause 6 of the trust instrument indicated that the trust was to expire on 31 December 2010.  Upon belated revocation of the trust instrument almost 5 years later on 15 September 2015, all moneys in the trust account for the main project, which included monies which should have been available to fund the feasibility study to be carried out by Bluewater, were refunded into the Government’s consolidated revenue account. Dr Ngangan says that therefore the Department of Finance no longer had funds to settle Bluewater’s invoice of 7 December 2015 and that the Department of Finance was not the responsible State agency to pay Bluewater under its Contract with the State because the Department of Transport was the implementing agency appointed to manage the Contract and to pay Bluewater.  Despite this averral of lack of funds held by the Department of Finance for the Project, Dr Ngangan nevertheless concludes his affidavit with this assurance in [12]:
12.	However, should the Department of Transport reach a negotiation with the Plaintiff in respect of the Plaintiff’s invoice and lack funds to pay, I can assist by requesting the Department of Treasury to release funds by way of warrant to assist the Department of Transport.
[emphasis added]

31.	On the next return of this case to Court on 13 September 2019, Mr Malaga and Mr Geita informed the Court that negotiations for settlement of Bluewater’s principal claim for its unpaid invoice had been successful.  Counsel handed up a draft order which they said could be made by consent and which disposed of Bluewater’s principal claim in this proceeding by payment by the State to Bluewater of the sum of K1,450,000, leaving only the issues of interest on that sum and Bluewater’s costs of the litigation to be the subject of further negotiations and/or arbitration.  Mr Ken Ngangan’s affidavit filed on 6 September 2019 had by this juncture already indicated that funds for settlement of Bluewater’s claim could be provided by warrant issued by the Department of Treasury rather than from the now non-existent pre-committed sources said to have been formerly under the control of the Department of Finance and the Department of Transport.  

32.	As the draft order by Consent produced to the Court on 13 September 2019 did not bear the endorsed signatures of any authorised representative of Bluewater or of the Solicitor-General, I directed that the case be adjourned yet again, this time to 2 October 2019, to enable the draft consent order reflecting the parties’ terms of settlement to be endorsed with properly authorised signatures of the Solicitor-General and a representative of Bluewater. 

33.	On the next return date of 2 October 2019, the draft order by consent had still not been endorsed with the signature of the Solicitor-General and an office-bearer of Bluewater.  An adjournment was granted to 11 October 2019, then adjourned again on that date for the same reason to 18 October 2019.

34.	On 18 October 2019 Mr Malaga confirmed that the draft consent order had been endorsed and signed by Mr Ben Irah in his capacity as a director and authorised representative of Bluewater.  However Mr Geita informed the Court that because of absences on the part of the Solicitor-General, he was having difficulty in obtaining the Solicitor-General’s signature on the draft consent order, even though the terms of that draft had been agreed by all parties.  The case was adjourned to 25 October 2019 on condition that if the Solicitor-General had not signed the draft consent order by that date, Bluewater could apply for an order that the Solicitor-General appear before the Court in person to explain why he had been unable to endorse the draft consent order.  

35.	On 25 October 2019 Mr Geita indicated to the Court he was confident that although the Solicitor-General had still not signed the draft consent order, the Solicitor-General would soon be able to sign it.  In reliance on Mr Geita’s assurance, the case was adjourned to 4 November 2019.

36.	On 4 November 2019 Mr Geita finally produced to the Court, with the approval of Mr Malaga, the draft consent Order  bearing the signatures of the Solicitor-General and Mr Ben Irah for Bluewater as evidence of the parties’ consent to judgment being entered against the State in the sum of K1,450,000 in settlement of Bluewater’s principal claim, leaving only two residual issues to be resolved, namely the interest payable by the State on the principal sum and Bluewater’s legal costs.  An order was accordingly made by consent on 4 November 2019 as per the wording of the draft Consent Order, with only minor editorial revisions which did not affect content. 

37.	The full text of the formal order which was made by consent of the parties on 4 November 2019 and which reflected the terms of the negotiated settlement agreement which the parties had arrived at by 13 September 2019 is as follows:

THE COURT ORDERS by consent of all parties that:

1.	The State shall pay to the Plaintiff the sum of K1,450,000 in full and final settlement of the Plaintiff’s claim for its outstanding invoice dated 7 December 2015.
2.	The Secretary for the Department of Finance shall facilitate the payment of the sum of K1,450,000.
3.	The Plaintiff’s claim for interest on the outstanding invoice dated 7 December 2015 under the Consultancy Agreement between the Plaintiff and the Second Defendant dated 31 May 2013 shall be the subject of further negotiation and/or arbitration.
4.	The Plaintiff’s claim for the costs of this proceeding shall be the subject of further negotiations and/or arbitration.
5.	This proceeding is adjourned to Friday 6 December 2019 at 1:30 pm for the parties’ counsel to report to the Court on the status of the parties’ negotiations regarding the issue of interest and costs.
6.	The time for entry of this Order is abridged to the time of signing by the Court which shall take place forthwith. 

38.	Further adjournments of the case were granted on 6 December 2019, 13 December 2019 and 20 December 2019 because of delays on the part of the State.  The reason for these adjournments, applied for each time by Mr Geita on behalf of the State, was because neither the Department of Finance nor the Department of Transport could agree as to which of those two Departments should be responsible for issuing instructions to the Solicitor-General to negotiate the remaining two issues of Bluewater’s claims for interest and costs and, more importantly, which Department should actually fund the payment of the judgment amount of K1,450,000.  There was however no internal dispute between the two Departments that the State was still liable to pay Bluewater’s principal claim of K1,450,000 which had already been agreed as per term 1 of the order made by consent on 4 November 2019 (the Consent Judgment).  The main problem was that each Department had refused to pay the judgment amount to Bluewater because each Department denied that it had funds to do so, even though term 2 of the Consent Judgment expressly stated that the Secretary for the Department of Finance, that is to say Dr Ken Ngangan, was to facilitate payment of the amount of K1,450,000 to Bluewater “in full and final settlement of the Plaintiff’s claim for its outstanding invoice dated 7 December 2015”.  

39.	On 20 December 2019 an order was made adjourning the case to 14 February 2020, this time with a direction that Ms Jaruga and Mr Siniu were to consult with each other and with Mr Geita no later than 31 January 2020 “with the view to resolving the remaining issues of the Plaintiff’s claim for interest and costs in this proceeding.”, it having already been agreed by the State that it would somehow settle Bluewater’s invoice for K1,450,000 as per term 1 of the Consent Judgment. 

40.	On 14 February 2020 Mr Geita informed the Court that Ms Jaruga was adamant that the Department of Finance would not accept any liability to meet judgments against the State entered in this proceeding in favour of Bluewater, notwithstanding the terms of the Consent Judgment made on 4 November 2019.  An order was therefore made on 14 February 2020 directing Ms Jaruga to appear in person before the Court on 10 March 2020 to explain the legal basis on which she contended that the Department of Finance would not be liable to facilitate payment of monies adjudged to be payable by the State in this proceeding, including payment of the already agreed amount of K1,450,000 for Bluewater’s invoice.

41.	On 4 March 2020 Bluewater filed a motion for contempt proceedings against the Solicitor-General for his refusal to counter-sign the certificate of judgment for K1,450,000 which had been signed by the Registrar on 19 November 2019 pursuant to s.13(2) of the CBAAS Act following the sealing of the Consent Judgment on 4 November 2019.  This resulted in an adjournment of that motion on 10 March 2020 and the balance of the proceeding generally to 17 March 2020.  Ms Jaruga did not appear in Court on 10 March 2020 as she was apparently unavailable to do so.

42.	On 11 March 2020 Bluewater filed a further motion, this time seeking an order that the words “full and final” in term 1 of the Consent Judgment made on 4 November 2019 be deleted because Bluewater had been informed that this was the impediment to the Solicitor-General counter-signing the certificate of judgment for K1,450,00 already signed by the Registrar as those words tended to ambiguously exclude any further payment for interest on the principal amount and Bluewater’s legal costs, despite terms 3 and 4 of the Consent Judgment stating Bluewater’s claims for interest and its costs were to be the subject of further negotiations and/or arbitration. 

43.	When this case returned on 17 March 2020, Mr Geita informed the Court for the first time that quite apart from the issue raised in Bluewater’s motion filed on 11 March 2020, a more important issue was that, due to what Mr Geita euphemistically termed an “oversight” within the Office of the Solicitor-General, it had been realised that the Solicitor-General did not have statutory authority to consent to the draft order on which he had erroneously endorsed with his signature on behalf of the State and which draft had been formalised into the Consent Judgment made on 4 November 2019.  Mr Geita said that the reason the Solicitor-General did not have the requisite authority to consent was because the amount involved, Bluewater’s principal claim agreed by the parties for payment at K1,450,000, exceeded the Solicitor-General’s discretionary threshold under the Public Finances (Management) Act 1995 to settle claims against the State.  Mr Geita said that the Solicitor-General’s threshold to approve claims against the State was capped at K1 million and that in this instance the settlement required the approval of the National Executive Council (NEC) on referral of a submission from the Attorney-General.  Mr Geita further informed the Court to the effect that a draft submission for the Attorney-General to deliver to the NEC seeking the NEC’s requisite approval had already been prepared by the Solicitor-General’s Office and was awaiting processing by the Attorney-General’s Office. The case was therefore adjourned, under protest by Mr Malaga, to 21 May 2020 to enable Mr Geita to report to the Court on the outcome of the Attorney-General’s submission to the NEC seeking the NEC’s approval of payment of K1,450,000 to Bluewater – and that if the remaining issues of interest and Bluewater’s legal costs had not been resolved by that date, then Mr Geita was to inform the Court if there was any genuine prospect that those remaining two issues could be resolved by the parties or if those issues would need to be the subject of Court-supervised arbitration. 

44.	On 15 May 2020 the Solicitor-General’s Office filed a notice of motion for the State returnable before the Court on 21 May 2020 seeking an order to set aside the Consent Judgment of 4 November 2019 (mistakenly stated in that notice of motion as having been dated 11 November 2019) pursuant to s.155(4) of the Constitution for want of approval by the NEC under the Public Finances (Management) Act 1995 because it was a claim that exceeded K1 million. Mr Geita deposed in his affidavit in support of the State’s motion filed on 15 May 2020 that the Solicitor-General had been instructed to settle Bluewater’s invoice for K1,450,000 by letter dated 12 September 2019 from the Secretary of the Department of Transport as agent and manager of the Contract.  Mr Geita further reconfirmed in his affidavit that the Solicitor-General had endorsed his consent on the draft consent order of 4 November 2019 due to “oversight” and that the Solicitor-General’s Office was now intending “to satisfy proper process by seeking the Attorney General and NEC’s instructions on this matter”.

45.	On 21 May 2020 the State’s motion filed on 15 May 2020, which had been short-served, was adjourned to 18 June 2020 for hearing and for Mr Geita to report to the Court on what progress had been made with the Attorney-General’s submission to the NEC for its approval for the State to consent to judgment in favour of the plaintiff for K1,450,000.  Both counsel were also directed by the Court on 21 May 2020 to file affidavit material before the hearing on 21 June 2020 regarding the costs which had been incurred by Bluewater following the referral of this case back to the National Court by the Supreme Court on 1 May 2019, Bluewater’s legal costs having been largely caused because of recurring delays on the part of agencies of the State. 

46.	On 18 June 2020 Mr Malaga appeared for the plaintiff.  There was no appearance by any counsel for the defendants. The case was further adjourned to 10 July 2020 for hearing as a special fixture of the State’s motion to set aside the Consent Judgment of 4 November 2019.  The State was ordered to pay plaintiff’s costs for that day on a solicitor and own client basis due to the non-appearance of any counsel for the defendants.
47.	On 10 July 2020 the State’s motion filed on 15 May 2020 was granted and an order was made by consent setting aside the Consent Judgment of 4 November 2019.  Mr Geita was ordered to file and serve by 31 July 2020 an affidavit attaching a copy of the still outstanding submission to go from the Attorney-General to the NEC for approval of the proposed settlement of the plaintiff’s claim for K1,450,000, the submission to be subject to any remaining issues as to interest “being dealt with by arbitration, further negotiation or order of the Court.”  Mr Malaga was ordered to forthwith serve on Mr Geita a copy of Mr Malaga’s affidavit on taxable costs which at that point had not been filed. The case was adjourned to 7 August 2020 for hearing on the issue of costs which had been incurred by Bluewater subsequent to the Supreme Court’s decision delivered on 1 May 2019 and for Mr Geita to report on progress made with the Attorney-General’s submission to the NEC.

48.	On 21 July 2020 an affidavit sworn by Bluewater’s managing director Mr Donigi was filed in this proceeding. Mr Donigi’s affidavit attached a copy of Malaga Lawyers 5-page memorandum of fees and disbursements dated 17 July 2020 for a total of K338,544 covering the period 1 May 2019 to 17 July 2020. 

49.	The next return date for this case, 7 August 2020, had to be deferred to 15 September 2020 because of a partial shut-down of the Court due to a resurgence of the Covid-19 pandemic. The parties’ respective counsel were notified of this by email dated 3 August 2020 sent by my associate.

50.	On 6 August 2020 the Solicitor-General’s Office filed two affidavits by Mr Geita, each affidavit having been sworn by Mr Geita on 4 August 2020. 
 
51.	Mr Geita deposes in his first affidavit sworn on 4 August 2020 that after a period of ill-health on his part during June 2020, he had a meeting with Attorney-General the Hon. Davis Steven on 2 July 2020, at which time the Attorney-General advised Mr Geita that the draft NEC submission prepared by the Solicitor-General’s Office required improvement and changes to the format.  Mr Geita states in this affidavit at [5]:

5.	I was instructed that ‘NEC Submission’ will be put before the National Executive Council once the ‘Legal and Policy Branch’ of the Justice & Attorney General’s Department make necessary improvements and quality checks to the submission as they normally do for all NEC policy submissions.

52.	Mr Geita deposes in his second affidavit sworn on 4 August 2020 at [16], [17] and [20] that:
16.	Despite filing of application on 15 May 2020 (Doc No. 54) to set aside the consent orders of November 4, 2019, the Solicitor General made recommendations to Attorney General and NEC to settle this claim going by the merits of the matter and based on the instructions of the Transport Secretary.  
17.	I have not been able to file an affidavit by 31 July 2020 attaching a copy of submission to NEC as directed by Court on 10 July 2020 as the Attorney General’s Office could not provide a copy of a submission to NEC.
…
20.	Since the referral of this matter to arbitration, the Solicitor General’s office has made genuine efforts to ensure both Departments reach a consensus to settle the Plaintiff’s principle [sic] claim, hence the instructions from Transport Secretary to settle Plaintiff’s claim of K1,450,000.  The signing of the Consent orders was made in good faith but for want of approval by NEC for claims over K1 million.
[underlining added]
 
53.	On 7 September 2020 a notice of motion returnable on 15 September 2020 was filed by Malaga Lawyers for Bluewater, with affidavit in support sworn by Mr Donigi on 7 September 2020, seeking orders, among others, that the State pay the costs of this proceeding from 31 May 2019 to 15 September 2020 on a solicitor and own client basis because of the continuing delays caused by the State, the latest delays having occurred because the Attorney-General was not satisfied with the content and format of the submission to go to the NEC which had been prepared for the Attorney-General’s signature by the Solicitor-General’s Office. 

54.	The case resumed for interlocutory hearing on 15 September 2020, at which time Bluewater’s motion filed on 7 September 2020 seeking an order for costs was heard and reserved.  Mr Geita informed the Court on that occasion that there was ongoing delay with delivery of the submission from the Attorney General to the NEC.  The Attorney-General was therefore ordered on 15 September 2020 to cause an affidavit to be filed by 29 September 2020 explaining the present status of the draft of his submission to go to the NEC recommending settlement of the plaintiff’s principal claim for K1,450,000, it having been said by Mr Geita that the draft submission had been delivered by the Solicitor-General’s Office to the Attorney-General’s Office back on 12 June 2020, although I observe that this seemed at odds with Mr Geita’s earlier advice to the Court on 17 March 2020 that a draft submission to the NEC had at that stage already been prepared by the Solicitor-General’s Office and was awaiting processing by the Attorney-General’s Office.  Mr Geita was therefore ordered on 15 September 2020 to personally serve a copy of the order made that day on the executive officer/personal assistant of the Attorney-General by 22 September 2020.  The case was adjourned to 2 October 2020 for the Court to consider the Attorney-General’s affidavit which was directed by term 2 of the order made on 15 September 2020 to be filed by 29 September 2020.

55.	Attorney-General the Hon. Davis Steven complied with the directions of the Court made on 15 September 2020.  In his affidavit filed on 28 September 2020, the Hon. Davis Steven deposes at [6]:

6. 	I could not sign the draft NEC submission presented to me by the Solicitor General on or about 12 June 2020 as it was in the wrong format thereby omitting relevant information for NEC.  This is particularly important given that NEC endorsement is sought to facilitate settlement of the claim now before the Court. 
…
10.	I have now directed the Secretary DJAG to assist Solicitor General’s office to prepare the NEC submission for my approval by or before 2 October 2020.  Annexed hereto and marked “C” is a copy of my memo to th[at] effect.							[underlining added]

56.	The other development which occurred on 28 September 2020 was that Malaga Lawyers that same day filed the present notice of motion for Bluewater, with affidavit in support from Mr Donigi, seeking orders for summary judgment against the State for K1,450,000, statutory interest and certain orders as to costs.  The notice of motion for summary judgment was set down to coincide with the next return date for this case of 2 October 2020.

57.	On 2 October 2020 Mr Malaga appeared before the Court for Bluewater.  Mr Geita appeared for the Department of Transport and the State.  Mr David Dotaona of counsel appeared for the Attorney-General and Minister for Justice, the Hon. Davis Steven.  Because of short service, Bluewater’s motion for summary judgment was fixed for hearing as a special fixture on 16 October 2020.  As the Attorney-General was still waiting on the Solicitor-General’s Office to furnish him with a revised draft submission to go to the NEC for settlement of Bluewater’s principal claim of K1, 450,000, the  Attorney-General was ordered to file a further affidavit by 14 October 2020 updating the Court on the status of his submission to the NEC referred to in his affidavit filed on 28 September 2020.

58.	A further affidavit by the Attorney-General was sworn by him and filed by Dotaona Lawyers on 14 October 2020. The Hon. Davis Steven deposes in his affidavit at [7] and [8] that the submission is still not ready to go from him to the NEC: 

7. 	I have again enquired with the Secretary for the Department of Justice and Attorney-General and the Solicitor General and am yet to receive from them the draft NEC submission.”
8.	To progress the matter, I have now instructed my lawyers to meet with the Plaintiff’s lawyer, and agree on a proposed deed of settlement before the matter returns to Court.

59.	Bluewater’s motion for summary judgment came on for hearing on 16 October 2020.  Mr Malaga appeared for Bluewater.  Mr Geita appeared for the Department of Transport and the State. Mr Dotaona again appeared for the Hon. Davis Steven as Attorney-General and Minister for Justice.  Mr Malaga informed the Court that he had not been contacted by anyone from the office of the Secretary for the Department of Justice and Attorney-General or anyone from the Solicitor-General’s Office to discuss and agree on a proposed deed of settlement.  Mr Geita and Mr Dotaona were unable to provide any further update to the Court beyond the content of the Attorney-General’s affidavit of 14 October 2020.  The Attorney-General’s submission to the NEC was clearly still in limbo. The Solicitor-General’s Office filed no affidavit material in answer to Bluewater’s affidavit in support of its motion for summary judgment.  The Court proceeded to hear Bluewater’s motion for summary judgment on 16 October 2020 and then reserved its ruling, which is the subject of this decision.     

Bluewater’s motion for summary judgment

60.		Bluewater’s notice of motion filed on 28 September 2020 seeks the following orders:

1.	that pursuant to Order 12 Rules 1 and  38 of the National Court Rules (NCR), and because of s.12(3) of the CBAAS Act and s.155(4) of the Constitution, summary judgment be entered for Bluewater in the sum of K1,450,000.
2.	that pursuant to Order 12 Rule 1 NCR, the State pay statutory interest from 22 September 2016 to date of payment of the sum of K1,450,000. 
3.	that pursuant to Order 12 Rule 1 and Oder 22 Rules 35 and 65(1)(b) NCR, the Solicitor-General personally pay Bluewater’s costs of the motion on a solicitor/client basis.
4.	that pursuant to Order 12 Rule 1 and Order 11 Rule 2 NCR, the Solicitor-General be summoned to personally appear before the Court and give evidence as to why he has not proactively taken steps to finalise this proceeding.
5.	such other orders as the Court deems fit.

Issues

61.	The issues now squarely before the Court raised by Bluewater’s latest motion are these:

1.	Can the Court exercise its discretion under the National Court Rules (NCR) and/or s.155(4) of the Constitution to enter summary judgment against the State in view of the protracted history of this case subsequent to its referral back to the National Court by the Supreme Court on 1 May 2019 and the concession by the State that Bluewater is owed an amount of K1,450,000 in settlement of its principal claim against the Department of Transport and the State?
2.	If summary judgment is to be entered against the State, what is the quantum of statutory interest on the principal claim of K1,450,000 to be paid by the State?
3.	If summary judgement is to be entered against the State, what order as to costs should be made in favour of Bluewater?

Consideration
Issue 1 – Is Bluewater entitled to summary judgment for its principal claim of K1,450,000?

62.	Term 1 of Bluewater’s motion filed on 25 September 2020 seeks an order that summary judgment be entered for Bluewater in the sum of K1,450,000.  Bluewater cites Order 12 Rule 1 NCR, Order 12 Rule 38 NCR, s.12(3) of the CBAAS Act and s.155(4) of the Constitution as jurisdiction for this Court to grant summary judgment for the amount claimed. 

63.	I deal first with whether Order 12 Rule 38 NCR has any application to this case.  Order 12 Rule 38(1) NCR states: 

38.	Summary judgement
(1)	Where, on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff – 
(a)	there is evidence of the facts on which the claim or part is based; and
(b)	there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed,
the Court may, by order, direct the entry of such judgment for the plaintiff on that claim or part, as the nature of the case requires.

64.	In the ordinary course of litigation, Order 12 Rule 38 NCR can be availed of by a plaintiff if the Court can be satisfied that the requisite evidentiary material exists and that the well-known principles which have been developed in connection with summary judgments apply to the circumstances of the case. The predominant principles are these:

1. 	The discretion conferred on the Court to enter summary judgment under Order 12 Rule 38 NCR should only be exercised in a clear case and with considerable care.
2.	Summary judgment should be granted only where there is no serious triable issue of fact or law.  
3.	If there is no dispute as to fact and there are clear admissions of the claim or part of the claim, then judgment can be entered for the plaintiff.

See Chief Collector of Taxes v T.A. Field Pty Ltd [1975] PNGLR 144; Dep International Private Ltd v Ambogo Sawmill Pty Ltd [1987] PNGLR 117; Kumul Builders Pty Ltd v Post and Telecommunication Corporation [1991] PNGLR 299; Curtain Brothers (Qld) Pty Ltd v The State [1993] PNGLR 295. 

65.	In Smith v Ruma Construction Ltd (2000) N1982, Sakora J observed that for summary judgment to be entered under Order 12 Rule 38(1) NCR:

(1)	The applicant must verify by affidavit evidence the cause of action.
(2)	The applicant must swear to a belief on his part that the respondent (defendant) has no defence to the cause of action (or the pleadings.
If the Court has been satisfied in respect of (1) and (2), then the onus is on the respondent to:
(3)	show an arguable defence or that there is a real question to be tried.

66.	These principles have been reaffirmed in many cases:  see for instance Augerea v Bank of South Pacific Limited [2007] 1 PNGLR; Ampaoi v Bougainville Copper Limited (2012) SC1166; Finance Corporation Ltd v Trans Ganuka Ltd (2015) N5978; Finance Corporation Ltd v Dalmine Enterprises Ltd (2015) N6080. 
67.	However the circumstances presented by the current proceeding in WS No. 1193 of 2016 are unusual.  This is not an ordinary case of litigation where the parties can, in the absence of any agreement to settle, exercise their constitutional right to due process and require this Court to determine their dispute by trial on the evidence should any mediation ordered under the ADR Rules not be successful.  In this particular case the Supreme Court ruled in SCA No. 66 of 2017 that the parties contractually agreed that any dispute between them in connection with the Project was to be settled by the dispute resolution process set out in clause 3.11 of the Contract, which requires negotiation at first instance, but if negotiation should fail then by arbitration, thereby excluding the jurisdiction of this Court to allow a dispute between the parties to be litigated and to proceed to trial on all issues in the normal manner. 

68.	The relevant text of the order made by the Supreme Court in SCA No. 66 of 2017 on 1 May 2019 is set out below:

(1)	The appeal is dismissed.
(2)	Costs to the Respondents to be taxed, if not agreed.	
(3)	The substantive matter be remitted back to the National Court …
(4)	the National Court proceedings be stayed pending an exhaustion of the process provided for under Clause 3.11 “Disputes and Arbitration” contained in the Contract between the parties.
(5)	The matter be assigned to the ADR Track in CC2 to manage the process referred to in term (4) of these orders.
								[underlining added]

69.	The parties’ agreed dispute resolution process is set out in clause 3.11 of the Contract: 

3.11.	DISPUTES AND ARBITRATION
3.11.1	Amicable Settlement
The Parties agree that the avoidance or early resolution of disputes is crucial for a smooth execution of the Contract and the success of the assignment.  The Parties shall use their best efforts to settle amicably all disputes arising out of or in connection with this Contract or its interpretation.
3.11.2	Dispute Resolution
Any dispute, claim or difference out of breach or termination of the Agreement shall be agreed between the Agency and the Consultant or failing agreement shall be referred to arbitration in accordance with clause 3.11.3.
3.11.3	Arbitration
Arbitration may be commenced prior to or during the performance of the Services, and proceedings shall be conducted in accordance with the rules of procedure as specified below:
	a) 	A Contract with a Foreign Consultant
	…
	b)	A Contract with a National Consultant
	Any dispute, controversy or claim arising out of or relating to this Contract, or breach, termination or invalidity thereto, shall be settled by arbitration in accordance with the provisions of the Arbitration Act of 1951 of Papua New Guinea.
During the period that Arbitration is underway the parties shall continue to perform their respective obligations under the Contract, unless they otherwise agree, and the Agency shall pay the Consultant any monies due to the Consultant. 
[underlining added]

70.       When giving its reasons for remitting the case back to the National Court, the Supreme Court in SCA No. 66 of 2016 said this at [35]:

… the parties agreed to have their disputes resolved amicably through negotiations and failing that through arbitration … it is clear that Bluewater issued these proceedings seeking to enforce its contractual rights in breach of the dispute resolution provisions contained in the same contract in clause 3.11.1 to 3.11.3.  By these provisions the parties ousted the Courts jurisdiction.  They made a deliberate decision not to go to court.  Given that, the Court and its processes cannot be availed [of] by either of the parties except only for the enforcement of their dispute resolution provisions and or enforce any agreement or resolution arrived at through the use of their dispute resolution process set out in clause 3.11 of their agreement, be it a mediated agreement or an arbitration award. 	
[underlining added]

71.     In view of this finding by the Supreme Court, which is binding on this Court, I consider that the dispute resolution process mandated under clause 3.11.2 of the Contract requires the parties to attempt at first instance to agree on a settlement of any dispute which arises under the Contract.  Only when settlement negotiations fail does arbitration become the process of last resort as the parties’ agreed means to resolve any “dispute, claim or difference” between them.  That this is so is reinforced by clause 3.11.1 which sets out the parties’ overarching obligation, which is that the parties must use their best efforts to settle any dispute which arises in connection with the Project before the parties can submit their dispute to arbitration. 
72.    The current status of the case now that it has been remitted back to this Court is that  the case has been stayed under term 4 of the order made by the Supreme Court on 1 May 2019.  It is clear that the purpose of the stay is for the parties to exhaust the dispute resolution process provided for in clause 3.11 of the Contract.  The ADR Track of CC2 has been directed by term 5 of the Supreme Court’s order to manage that dispute resolution process.

73.     The substantive matter in this proceeding referred to in term 3 of the Supreme Court’s order is Bluewater’s principal claim that the State and its implementing agency the Department of Transport breached the Contract by failing to pay Bluewater’s invoice dated 7 December 2015 for K1,530,000 when that invoice fell due for payment.  This is what was pleaded by Bluewater in the statement of claim endorsed on its writ of summons filed on 22 September 2016.  

74.    Term 1 of Bluewater’s notice of motion refers to s.12(3) of the CBAAS Act, which provides:

12(3)	Where in a claim against the State the State is in default within the meaning of the National Court Rules, then notwithstanding that a plaintiff’s claim is for a liquidated demand, judgement shall not be entered against the State for the sum claimed unless the claim relates to a debt only, and in all other cases judgement shall be entered for damages to be assessed and, where appropriate, for costs.

75.    As Bluewater’s motion for summary dismissal is not an application for default judgment pursuant to Order 12 Rule 25 NCR or under any of the other rules for default in Division 3 NCR, I consider that s.12(3) of the CBAAS Act has no relevance to Bluewater’s application for entry of summary judgment against the State.  In any event, even if s.12(3) of the Act were to apply to some other motion by Bluewater seeking default judgment against the State, such a motion would likely be dismissed unless it fell within the Court’s present limited jurisdiction to supervise and enforce the parties dispute resolution process under clause 3.11 of the Contract, which excludes the usual litigation process.   

76.     Apart from Order 12 Rule 38, Bluewater also relies on Order 12 Rule 1 NCR and s.155(4) of the Constitution to give this Court jurisdiction to enter summary judgment against the State.   

77.        Order 12 Rule 1 NCR is a rule of general application.  It states:
1.	General relief
The Court may, at any stage of any proceedings, on the application of any party, direct the entry of such judgement or make such order as the nature of the case requires, notwithstanding that the applicant does not make a claim for relief extending to that judgment or order in any originating process.
	
78.     Section 155(4) of the Constitution provides:

155(4)	Both the Supreme Court and the National Court have an inherent power to make, in such circumstances as seem to them proper, orders in the nature of prerogative writs and such other orders as are necessary to do justice in the circumstances of a particular case. 
 
79.      It is settled law that s.155(4) of the Constitution is only to be relied upon to protect the primary rights of parties in the absence of other relevant law: Powi v Southern Highlands Provincial Government (2006) SC844; Louis Medaing v Ramu Nico Management (MCC) Limited (2011) SC1156; Boochani v The State (2017) SC1566.

80.      Furthermore, s.155(4) cannot be applied to do anything which is contrary or inconsistent with the provisions of the NCR: Makeng v Timbers (PNG) Ltd (2008) N3317.  That case concerned an issue as to the National Court’s jurisdiction to grant interim injunctive relief prior to grant of leave to apply for leave to apply for judicial review.  The issue was raised in the context of Order 16 Rule 3(8) NCR which says that where the Court grants leave, the grant operates in certain circumstances as a stay of the judicial review proceeding and the Court can in its discretion grant further interim relief.  His Honour Injia DCJ (as he then was) stated at [34]; 

Does s 155(4) of the Constitution confer a primary power on this Court to grant a stay or other interim relief before leave to apply for judicial review is granted? In my view s 155(4) of the Constitution is not applicable to O 16 r 3(8). That section is not the source of primary jurisdictional power. The Court’s primary power or jurisdiction is given by O 16 r 3 (8) of the National Court Rules. Section 155(4) confers jurisdiction on the Court to issue facilitative orders in aid of enforcement of a primary right conferred by law, whether such right be conferred by statute or subordinate legislation enacted under the enabling statute: SCR No. 2 of 1981 [1982] PNGLR 150 at 154, Uma More v UPNG [1985] PNGLR 401 at 402. The National Court Rules which contains O 16 is a subordinate legislation made by judges under their rule-making power given by s 184 of the Constitution and s.8 and s.9 of the National Court Act (Ch 38) and it falls within the definition of law in s.9 of the Constitution: see s.9 (c) & (e). On a matter of practice and procedure of Court, and more specifically in respect of a procedural provision which confers jurisdiction on the Court, the Rules may confer itself jurisdiction and prescribe the ambit of that jurisdiction and the circumstances in which that jurisdiction may be exercised. In my view, in relation to the Court’s jurisdiction to grant a stay or interim relief in a judicial review proceeding, Order 16 is the source of primary jurisdictional power. Under O 16, a plaintiff has no right to seek judicial relief unless leave is granted. No such primary right to commence proceedings exists until leave is granted and no such right to apply for a stay or for interim relief and the Court’s jurisdiction to grant such relief exists until an application for judicial review seeking substantive relief is filed by the person granted leave. Upon the grant of leave and filing of the application for judicial review, the Court assumes jurisdiction to deal with any interlocutory applications. Only then, the discretionary power under s 155(4) of the Constitution may be invoked by the Court or a party, to tailor remedies in addition to those provided by r 3(8), in aid of the substantive application for judicial review. Even then, s 155 cannot be applied to do anything contrary or inconsistent with the provisions of O 16 r 3 (8).

81.     The reasoning in Makeng’s case regarding the procedural jurisdiction and remedies available in the National Court under the NCR has been applied in many subsequent cases: see for instance Eru v Interoil (PNG) Ltd (2016) N6352; Re Koitaki Plantations Ltd (2017) N6670. 

82.      Applying the reasoning in Makeng’s case, I find that Order 12 Rule 1 NCR is a relevant law which confers jurisdiction on the National Court which can be invoked by Bluewater to protect its primary right, acknowledged by the Supreme Court, to seek to enforce any settlement of its principal claim arrived at with the State.  In this instance, Bluewater’s principal claim is the “substantive matter” which the Supreme Court has remitted back to the National Court for the Court to supervise pending an exhaustion of the dispute resolution process provided for under clause 3.11 of the parties’ Contract.
83.      As Bluewater is able to have recourse to Order 12 Rule 1 NCR to confer jurisdiction in the particular circumstances of this case, I consider that the Rule allows Bluewater the right to apply for the remedy of summary judgment.  Moreover, because there is no absence of other relevant law, there is no need to consider if s.155(4) of the Constitution should be invoked as a final source of  jurisdiction for this Court to entertain Bluewater’s motion for summary judgment. 

84.     However if I am wrong in this regard, which I say am not, then on the authority of the cases I have just referred to, s.155(4) of the Constitution can be availed of by Bluewater to provide this Court’s jurisdiction and remedy to enforce any settlement of its principal claim.

85.    I pass now to a consideration as to whether there has in fact been a settlement of Bluewater’s principal claim, demonstrable on the evidence presented, capable of enforcement by this Court by way of summary judgment pursuant to Order 12 Rule 1 NCR. 

86.      The evidence adduced at the hearing of Bluewater’s motion for summary judgment on 26 October 2020 shows that as a result of negotiations conducted between Bluewater and the Solicitor-General’s Office between June 2019 to early September 2019, it was agreed by 12 September 2019 that the State would settle Bluewater’s principal claim in the sum of K1,450,000, which amount Bluewater had agreed to accept, leaving only the residual issues of interest on that amount and Bluewater’s costs for the case to be the subject of further negotiation, or failing settlement by negotiation then referral of those remaining two issues to arbitration.  

87.      I am satisfied on the evidence presented at the hearing of Bluewater’s motion for summary judgment that by letter dated 12 September 2019 Mr Mumu as Secretary of the Department of Transport instructed the Solicitor-General to settle Bluewater’s outstanding invoice dated 7 December 2015 for the sum of K1,450,000, which amount Bluewater had by that stage agreed to accept.  This admission of liability to settle Bluewater’s principal claim at K1,450,000 is contained in Mr Geita’s various affidavits filed for the defendants on 15 May 2020 and 4 August 2020.   These affidavits of Mr Geita also confirm that the reason for non-payment was because of the Department of Finance’s refusal to accept liability to settle and pay Bluewater the sum of K1,450,000 and because the Department of Transport had never received any funds from the Department of Finance to pay monies falling due under the Contract to pay Bluewater.

88.     Moreover, the affidavit of Dr Ken Ngangan as Secretary for the Department of Finance filed on 6 September 2019 had earlier confirmed that although neither the Department of Transport nor the Department of Finance had funds then allocated and available to them to settle Bluewater’s invoice, Dr Ngangan could assist with any settlement of Bluewater’s invoice negotiated by the Department of Transport “by requesting the Department of Treasury to release funds by way of warrant to assist the Department of Transport.”   Why this offer by Dr Ngangan was never pursued by the Solicitor-General’s Office to enable funds to be released by the Department of Treasury to the Department of Transport, bypassing the Department of Finance, to pay Bluewater’s invoice was never explained on the evidence before the Court at the hearing of the present motion on 16 October 2020.  Had that offer by Dr Ngangan been taken up, in my view this case would, or should, have been settled and the payment process commenced back in September 2019 or October 2019 at the latest, instead of being the subject of the Consent Judgment improperly obtained on 4 November 2019 for want of approval by the NEC, and which order had to be set aside by consent on application by the Solicitor-General’s Office heard by this Court on 10 July 2020 so as to enable the Attorney-General to endeavour to obtain approval of the NEC under the Public Finances (Management) Act 1995.  The NEC’s approval has still not been forthcoming because of issues as to the form and content of the draft prepared by the Solicitor-General for the formal submission to go from the Attorney-General to the NEC.  I find that those issues, which have existed since 12 June 2020, remain unresolved between the Attorney-General, the Secretary for the Department of Justice and Attorney-General and the Solicitor-General. I further find that none of those State inter-departmental issues are attributable to any fault at all on the part of Bluewater.

89.    I observe that none of the content of Mr Donigi’s latest affidavit or the earlier affidavits on which Mr Donigi relies for Bluewater’s motion for summary judgment has been challenged by the Department of Transport or the State.  The State has filed no responding affidavit material at all in answer to Bluewater’s motion for summary judgment. The undisputed evidence of Bluewater is to be found in Mr Donigi’s affidavits filed on 29 March 2017, 10 September 2020 and 28 September 2020, the affidavit of the Hon. Jimmy Simatab filed on 6 April 2017, and the affidavit of Mr Malaga filed on 18 July 2020.  Bluewater also relies on the affidavit of Dr Ken Ngangan filed by the Solicitor-General’s Office more than a year ago on 6 September 2019.

90.     Mr Geita, when asked by the Court at the hearing of Bluewater’s motion for summary judgment on 16 October 2020 as to why summary judgment for K1,450,000 should not be entered against the State given the clear concession by the State that this amount was owed by the State under its Contract with Bluewater and should be paid notwithstanding that NEC approval had still not been obtained, had only one submission to make.  Me Geita submitted to the effect that the Supreme Court had directed that the issues between the parties be resolved by arbitration if they could not be settled. With respect, that is not an accurate summation of what the Supreme Court said.  I iterate that term 4 of the Supreme Court’s order in SCA 66 of 2017 made on 1 May 2019 states:

4.	The National Court proceedings be stayed pending an exhaustion of the process provided for under Clause 3.11 “Disputes and Arbitration” contained in the Contract between the parties.

91.     I repeat that clause 3.11 of the Contract provides:

3.11.2	Dispute Resolution

Any dispute, claim or difference out of breach or termination of the Agreement shall be agreed between the Agency and the Consultant or failing agreement shall be referred to arbitration in accordance with clause 3.11.3

92.     It is not in contention that in the present case the parties had already agreed by early September 2019 that Bluewater’s invoice should be settled and paid by the State in the sum of K1,450,000, leaving only the quantum of interest on that amount and Bluewater’s legal costs to be paid by the State as the sole remaining issues between the parties to be determined.  What then transpired as a result of the Consent Judgment of 4 November 2019 improperly consented to by the Solicitor-General having to be set aside and for a submission for approval by the NEC of payment by the State of the sum of K1,450,000 in settlement of Bluewater’s invoice to be obtained should, in my opinion, not have occurred. The main component of the dispute, the payment by the State of K1,450,00 in settlement of Bluewater’s invoice, had already been agreed between the parties by 12 September 2019, as evidenced by the terms of the draft consent order handed up to the bench by Mr Geita and Mr Malaga on 13 September 2019 which awaited authorising signatures but which was then confirmed by the terms of the draft consent order, personally signed by the Solicitor-General for both defendants and by Mr Irah for Bluewater, which was formalised in writing by the Consent Judgment of 4 November 2019, despite that order having been endorsed by the Solicitor-General due to an “oversight” of approval requirements under the Public Finances (Management) Act 1995.

93.      I therefore find that the affidavit material presented by Bluewater in support of its motion for summary judgment has overwhelmingly established undisputed evidence of the parties’ mutual agreement to settle Bluewater’s principal claim for the sum of K1,450,000, which agreement was reflected in writing by the Consent Judgment of 4 November 2019, despite the subsequent setting aside of that Judgment.  Bluewater is entitled to summary judgment in that amount for its principal claim because this Court has jurisdiction, in its supervisory role of the parties’ agreed dispute resolution process under clause 3.11 of the Contract, to enforce any settlement agreement reached by the parties.

94.      Although not applicable, I observe that if the parties’ Contract had been silent as to any mechanism for resolution of disputes arising in connection with the Project and a similar fact scenario to that which has now been presented to this Court had arisen but not involving the Court’s supervisory role assigned to it by the Supreme Court, I consider that this Court would in that event have been entitled in its discretion to have granted any application made by Bluewater pursuant to Order 12 Rule 38(1) NCR for summary judgment against the State.  This is because: firstly, the sufficiency of evidence as to the terms of agreement to settle which the parties had already arrived at by early September 2019; secondly, because Bluewater’s Mr Donigi has complied with the requirement in Order 12 Rule 38(1)(b) in that he has deposed to the effect that he believes the defendants has no defence to Bluewater’s claims; and thirdly, because the State has not demonstrated that it has any arguable defence to Bluewater’s principal claim on its invoice for K1,450,000, nor has the State shown that there is any real question to be tried. As to the third point, this is the onus referred to in Smith v Ruma Construction Ltd and in Finance Corporation Ltd v Delmine Enterprises Ltd.  The admissions contained in the defence filed on behalf of the defendants and the State’s non-rebuttal of any of Bluewater’s evidence in support of Bluewater’s motion for summary dismissal constitute the State’s failure to have discharged that onus.  The tests for the principles propounded in those case authorities I have referred to in [64] to [66] of this decision for applications for summary judgment made under Order 12 Rule 38 NCR have all been met.

95.     For the reasons I have outlined in [67] to [93] of this decision, summary judgment will be entered against the State for Bluewater’s principal claim of K1,450,000 in the exercise of this Court’s supervisory role of the parties’ dispute resolution process pursuant to this Court’s discretionary power to do so under Order 12 Rule 1 NCR. 
  
96.      As I have found that Bluewater is entitled to summary judgment against the State for its principal claim through this Court’s exercise of its discretion under Order 12 Rule 1 NCR, what then is still left in dispute which could not be agreed by the parties and should be submitted to the last-resort arbitration process referred to in clauses 3.11.2 and 3.11.3(b) of the Contract if arbitration were required?  This brings into focus the two remaining residual issues of statutory interest and Bluewater’s legal costs, issues which are the subject of terms 2 and 3 of Bluewater’s motion for summary judgment. 

97.     I consider that these two residual matters are consequential issues because they are dependent upon and flow from the parties’ own agreement to settle Bluewater’s principal claim for K1,450,000 and are therefore incidental to the “substantive matter” which this Court has been directed by the Supreme Court to supervise.

Issue 2:  Interest on the principal amount of K1,450,000

98.     Term 2 of Bluewater’s motion for summary judgment seeks statutory interest on the principal amount of K1,450,000 calculated from 22 September 2016 to date of payment of that principal amount by the State.  Term 5 of the motion seeks in the alternative such further orders as the Court deems fit.  

99.     Bluewater’s contractual entitlement to interest on overdue invoices payable by the Department of Transport as the designated implementing agency of the State is governed by clause 3.9 of the Contract.  That sub-clause provides:  

3.9 	TERMS OF PAYMENT
…
Payment shall be made within 28 days of receipt of the invoice and the relevant documents and within 56 days in the case of the final payment.
…
If the Agency has delayed payments beyond fifteen (15) days after the due date stated above, interest shall be paid to the Consultant for each day of delay at the rate stated in the SCC.

100.      Item 3.8 in the SCC which were incorporated into the Contract stipulates that interest on late payments shall be payable “at the rate of 8% per day for each day of delay in payment”.  The reference to “8% per day” in item 3.8 is clearly a mutual mistake made by the parties because I have no doubt that both of them intended at the time they entered into the Contract that the interest rate applicable for late payment of invoices would be 8% per annum, not 8% per day.

101.      However whatever the actual rate of interest for late payment of invoices was agreed in the Contract is irrelevant in view of the enactment of the Judicial Proceedings (Interest on Debts and Damages) Act 2015.  Section 2 provides that the Act applies to all Court orders made against the State after 1 January 2014.  

102.      Section 4(2) of the Act stipulates that for all proceedings arising out of a breach of an express or implied contract taken against the State, the rate of interest shall not exceed 2% per annum.  This is reinforced by s.4(3) and s.4(4) of the Act, the applicable text of which is reproduced below:

4(3)	The maximum rate of interest in Subsection (2) applies notwithstanding that the proceedings against the State arose out of a breach of express or implied contract or mercantile usage and the relevant interest rate in the contract or mercantile usage is higher than 2%.	
4(4)	A judgment entered contrary to Subsections (2) and (3) is a nullity and is liable to be set aside …

103.     Section 6(2) of the Act prescribes that where judgment is given or an order is made by a Court against the State for payment of money, post-judgment interest shall not exceed 2% yearly on such of the money as is from time to time unpaid as from when the judgment or order takes effect.

104.     Bluewater’s notice of motion seeks statutory interest, that is to say interest at 2% per annum, from 22 September 2016 on the principal judgment sum of K1,450,000 to date of the State’s payment of same.  The date of 22 September 2016 proposed by Bluewater for commencement of any award of interest is the date on which Bluewater filed its writ of summons in this proceeding.  I nevertheless exercise the Court’s discretion and find that the proper commencement date for interest to accrue on the principal amount of the summary judgment is what the Contract allows in this regard.  

105.      The date of Bluewater’s invoice was 7 December 2015.  A copy of the invoice was attached to a letter dated 8 December 2015, which I infer was either hand-delivered or scanned and sent by email from the Hon. Jimmy Simatab or his office to Mr Mumu, the Secretary of the Department of Transport. The Hon. Mr Simatab deposes in his affidavit filed on 6 April 2017 that he received Bluewater’s invoice on 8 December 2015 and that it was forwarded by him under cover of his letter dated 8 December 2015 to Mr Mumu.  A copy of that letter is annexure “JS4” to the affidavit of the Hon. Mr Simatab.  I infer that the letter, or a copy of it, with a copy of Bluewater’s invoice, was either hand-delivered to Mr Mumu at the Department of Transport in Port Moresby or was scanned and emailed to Mr Mumu.  The copy of the letter which is annexure “JS4” to the Hon. Mr Simatab’s affidavit has handwritten notes on it dated 9 December 2015 and 10 December 2015, presumably made by officers within the Department of Transport, so the original or emailed copy of that letter must have been received by Mr Mumu or his office on or about 8 December 2015.   In any event there is no dispute on the evidence before the Court that Bluewater’s invoice dated 7 December 2015 was received by Mr Mumu on 8 December 2015 under cover of the Hon. Mr Simatab’s letter to Mr Mumu dated 8 December 2015.

106.      By operation of clause 3.9 of the Contract, the Department of Transport was required to pay Bluewater’s invoice within 28 days from date of that Department’s receipt of it on 8 December 2015.  Bluewater’s invoice should therefore have been paid by the Department of Transport as the State’s designated agency no later than 5 January 2016.  The Department then had a further grace period of 15 days within which to pay, but if it did not do so then clause 3.9 of the Contract stipulated that interest would accrue for each day of delay. In practical terms, this meant that if the invoice was not paid within a further 15 days from 5 January 2016, that is to say by 21 January 2016, then interest on the invoiced amount would accrue for each day of delay.  Clause 3.9 of the Contract did not clarify whether interest would commence as from the expiration of the 28-day period for payment of the invoice or from the expiration of the further 15-day grace period for payment.  I have therefore applied the interpretation of clause 3.9 which is most favourable to the State in this regard, which is 21 January 2015 as being the date on which statutory interest of 2% interest on the principal judgment amount of K1,450,000 should commence to accrue.  This is also the date of accrual of Bluewater’s cause of action against both defendants for breach of contract. 
 
107.      I am aware of the fact that in its prayer for relief in the writ of summons filed on 22 September 2016, Bluewater originally claimed judgment in the sum of K1,530,000, being the full amount of Bluewater’s invoice dated 7 December 2015.  However by early September 2019 Bluewater had already agreed to accept K1,450,000 in settlement of its principal claim against the Department of Transport and the State, as was subsequently evidenced by Consent Judgment of 4 November 2019 - which was later set aside by consent on 15 May 2020 as having been obtained because the amount involved exceeded the Solicitor-General’s authority to approve and which amount instead required approval from the Attorney-General and the NEC.   Interest will therefore be awarded at the statutory rate of 2% per annum on the agreed principal amount of K1,450,000 as from 21 January 2016 to the date of this decision, 28 October 2020, a period of 1742 days excluding the end date.  Interest on K1,450,000 at 2% per annum is K29,000.  Daily interest on K1,450,000 at 2% per annum is K29,000/365 days = K79.452055 per day.
108.      Interest is calculated by applying the formula I x N = A, where I is the rate of interest per day, N is the appropriate number of days and A is the amount of interest: K79.452055 per day x 1742 days = K138,405.48.  

Issue 3:  Bluewater’s legal costs of this proceeding

109.      Term 3 of Bluewater’s motion for summary judgment seeks an order that the Solicitor-General personally pay Bluewater’s costs of the application on a solicitor and own client basis. 
 
110.     However the Court needs to consider not only what order for costs should be made in respect of Bluewater’s motion for summary judgment but also what order as to costs should be made for the whole of this proceeding, given that summary judgment will be determinative of this litigation. 

111.     Order 4 Rule 7(3) NCR provides that subject to Order 4 Rule 10 NCR, costs need not be specifically claimed in any originating process.  Order 4 Rule 10 NCR only relates to prescribed amounts for costs if proceedings are stayed pending payment by a defendant of a liquidated demand within the time limited for giving notice of intention to defend, an early settlement option which was not availed of by the State in the present case.

112.      I observe that although it was not required to do so, Bluewater expressly sought an order for its costs in its prayer for relief in the statement of claim endorsed on Bluewater’s writ of summons filed on 22 September 2016.  

113.     It is important to also note that Bluewater’s prior motion filed on 10 September 2020 seeking orders, among others, that the State pay the costs of this proceeding from 31 May 2019 to the date of hearing of that motion on 15 September 2020, was subsumed and overtaken by Bluewater’s present motion filed on 28 September 2020 seeking summary judgment.  

114.      Order 22 Rules 1 to 65 NCR comprise an extensive set of provisions which deal with the powers and discretions of the National Court to award and supervise the assessment of costs in litigation as well as the assessment of professional fees and disbursements charged by a lawyer to a client.

115.      Order 22 r. 11 NCR provides:

11.	If the Court makes any order as to costs, the Court shall, subject to this Order, order that the costs follow the event, except where it appears to the court that some other order should be made to the whole or any part of the costs.

116.      In practice, an order that costs follow the event means that the costs are to be taxed on a party/party basis: Order 22 Rule 24(1) NCR.  

117.     However, Order 22 Rule 11 NCR gives the National Court a discretion to make other forms of costs orders.  This is where the practice has grown for parties in litigation to seek costs orders on a solicitor/client basis, alternatively on the more extensive indemnity basis.  

118.      The costs order termed “costs on a solicitor/client basis” is also known as “costs on a solicitor and own client basis”.
     
119.     In Opi v Telikom PNG Limited (2020) N8290, I addressed the distinction between indemnity costs and costs on a solicitor/client basis.  After reviewing case authorities, I said in that decision at [231-232] in relation to the difference between indemnity costs and costs awarded on a solicitor/client basis: 

231.	(1)	The purpose of a costs award on an indemnity basis, although compensatory is primarily punitive. As was stated by the Supreme Court in the Rex Paki case, an award of costs on an indemnity basis can be made where the conduct of a lawyer or a party to the proceedings is so improper, unreasonable or blameworthy that punishment is warranted.
…
(3)	Because a costs award on an indemnity basis is more generous that a costs award on a solicitor/client basis, its scope extends beyond that to which a receiving party is entitled had a solicitor/client costs been ordered. It is intended as a full indemnity for all costs and expenses incurred preparatory to and during the proceedings, not just the legal fees and associated disbursements charged by that party’s lawyer(s). So for example a receiving party, if an individual, is entitled to claim for loss of income or the value of time wasted when attending to matters relating to the proceedings.  Similarly, a corporation or business can claim for the value of time spent by its officers and employees when attending to the proceedings. 

(4)	An award of costs on a solicitor/client basis is intended to compensate the receiving party for legal fees and disbursements charged by that party’s lawyer in having to unnecessarily defend proceedings which were an abuse of process, where there was no defence on the merits, where the other party failed to explore and exhaust all prospects of having the matter settled without the need for court action or delay, where there has been defiance by the other party in complying with court orders and or where the receiving party has generally had to incur unnecessary expense through unmeritorious litigation. 

232.    The above principles are not intended to be exhaustive. But I consider that they sufficiently illustrate the distinction between costs ordered on a solicitor/client basis as opposed to costs ordered on an indemnity basis.   It must always be borne in mind that these two different categories of costs orders are at the discretion of the Court, just as party/party costs are discretionary. It is axiomatic that each costs order made by a Court must be tailored to the circumstances of the case before it. 

120.      Applying these principles to the present case, I have determined that Bluewater is entitled to its costs on a solicitor/client basis. 
 
121.      The internecine dispute between the Department of Finance and the Department of Transport as to which of those two Departments should settle and pay Bluewater’s principal claim on its invoice for the Project caused much delay after this case was remitted by the Supreme Court back to the National Court on 1 May 2019.  The Solicitor-General then caused separate avoidable delay by consenting to the order made on 4 November 2019 for judgment to pay Bluewater’s principal claim of K1,450,000, only to have that order set aside by consent on 10 July 2020 for want of the Solicitor-General’s statutory authority to have given approval for that judgment amount. This was followed by the further delay caused by the Attorney-General’s rejection of the draft submission prepared by the Solicitor-General’s Office to go from the Attorney-General to the NEC, which submission has still not been finalised.  All of these delays have resulted in unnecessary legal costs incurred by Bluewater in seeking to have by court order what should have been resolved by settlement back in September 2019 when agreement had already been reached between the parties by that stage that the State was liable to pay Bluewater’s principal claim for K1,450,000.  

122.      I find that an award of costs to Bluewater on a solicitor and own client basis for the whole of this case is warranted because after the Supreme Court’s referral of the case back to the National Court, Bluewater successfully negotiated a settlement of its principal claim with the State.  The settlement was arrived at by the parties in compliance with their respective obligations to use their best efforts to so under clause 3.11.1 of the Contract without having to submit to arbitration except as a last resort. Once Bluewater’s principal claim was settled, there was no utility in referring the remaining issues of interest and costs to arbitration, particularly when Bluewater came to accept that its claim for interest on its principal claim was restricted to the statutory rate of 2% per annum.  The considerable cost of arbitration has been avoided by Bluewater’s application for summary judgment, which with all due respect has now resolved all remaining issues. 
  
123.      I also consider that Bluewater is entitled to be reimbursed for its legal costs on a solicitor and own client basis for the entirety of this case at National Court level because of the prolongation of the case to this stage due to factors attributable to conduct within agencies of the State, for which Bluewater was not the cause.  Had the offer made by Secretary of Finance Dr Ken Ngangan in his affidavit of 5 September 2019 for him to request the Department of Treasury to release funds by way of warrant to assist the Department of Transport to negotiate and pay Bluewater’s principal claim been pursued by those responsible within the State to settle that claim, more than 12 months of wasted Court time and parties’ time could have been avoided.   

124.      Having said this, it follows that I do not consider that the Solicitor-General should be personally liable to pay Bluewater’s costs on a solicitor and own client basis or that he should be summoned personally appear before the Court to give evidence as to why pro-active steps have not been taken to finalise this proceeding, as is sought by Bluewater in  terms 3 and 4 of its motion for summary judgment.  The Solicitor-General was partly at fault for legal costs unnecessarily incurred by Bluewater, but he was not the sole cause. Numerous other officers of the State within the Solicitor-General’s Office, the Department of Finance and the Department of Transport contributed to the many delays in bringing this case to conclusion.  I decline to grant the relief sought in terms 3 and 4 of Bluewater’s motion for summary judgment.  Bluewater’s costs on a solicitor and own client basis will be paid by the State and not by any individual officer.

Have the parties exhausted their agreed dispute resolution process?

125.      There is only one further matter which I consider needs to be addressed. Can it be said that the parties have exhausted the parties’ dispute resolution process under clause 3.11 of the Contract, as required by term 4 of the Supreme Court’s order of 1 May 2019?  This can be answered by addressing what utility would be served if this Court, in the exercise of its supervisory role, were to compel the parties to submit to arbitration the two residual issues of interest and Bluewater’s legal costs. 

126.      Clause 3.11.2 of the Contract is clear in its terms and its intent.  Any ‘dispute, claim or difference out of breach or termination of the Agreement” can only be referred to arbitration if settlement of that dispute, claim or difference cannot be agreed.  Arbitration is the process of last resort. Here the dispute arose from the defendants’ breach of their obligation to pay when due Bluewater’s invoice dated 7 December 2015.  That is the “substantive matter” which was initially in dispute but which was resolved by the parties’ agreement to settle reached by early September 2019.  

127.      The hallmark of the arbitration process is that it is a private procedure which is separate from the court system but which determines in a judicial manner the legal rights and obligations of the parties, with binding effect, which is enforceable at law. It is described by leading international arbitrator Gary Born in his authoritative textbook International Commercial Arbitration (2nd ed. Kluwer, The Netherlands, 2014) at [217] as being a process by which parties consensually submit a dispute to a non-governmental decision-maker, selected by or for the parties, to render a binding decision resolving a dispute in accordance with neutral, adjudicatory procedures affording the parties an opportunity to be heard. 

128.      Once made, an arbitral award can be enforced by court order but cannot normally be appealed or be reviewed by the courts of any country.  

129.      Papua New Guinea’s Arbitration Act Chapter No. 46 was enacted in 1951. The Act is outdated by contemporary international arbitration standards. It is pending legislative repeal and reform.  The Act is nevertheless still in force at this juncture and its salient provisions regarding setting aside and enforcement of arbitral awards by the National Court are ss. 11(2) and 12(1): 

11.	Power to set aside award
	…
	(2)	Where an arbitrator or umpire has misconducted himself, or an arbitration or award has been improperly procured, the Court may set the award aside.
12.	Enforcing award
	(1)	By leave of the Court, an award on a submission may be enforced in the same manner as a judgement of order to the same effect.

130.      Section 1 of the Act defines a submission as “a written agreement to submit present or future differences to arbitration, whether or not an arbitrator is named in the submission”.

131.      Section 3 of the Act provides that unless a contract intention is expressed in a parties’ submission, a submission is deemed to include provisions which are set out in the Schedule to the Act. 

132.      Schedule 1.8 of the Act states:

Sch. 1.8.	The award to be made by the arbitrators or umpire is final and binding on the parties and the persons claiming under them respectively.

133.     If the Court were to compel the parties in this instance to submit to arbitration on the issue as to what interest is payable by the State on the agreed principal claim of K1,450,000, the arbitrator would be bound to apply the provisions of s.4(2) and s.4(3) of the Judicial Proceedings (Interest on Debts and Damages) Act 2015 and award interest at the statutory rate of 2% per annum. This is because Bluewater’s principal claim arises out of the breach contract by the Department of Transport as the agency of the State responsible for the implementation of the Contract on funding, which funding was withdrawn by the Department of Finance. 

134.      Bluewater is entitled under the Contract to interest payable by the Department of Transport and the State on the long overdue payment of the amount of K1,450,000 which Bluewater has since September 2019 agreed to accept in settlement of its invoice dated 7 December 205.  The parties’ bargain regarding the imposition of interest on late payment of invoices was clearly expressed in the Contract.   The rate of interest of “8% per day” for late payment of invoices stipulated in item 3.8 of the SCC incorporated into the Contract has, however, been legislatively superseded by operation of s.4(2) of the Act, which deems that rate of interest to be 2% per annum.  

135.      The position would be different if the Contract had not contained any provision for interest to be payable by the Department of Transport or the State on overdue invoices rendered by Bluewater.  If the Contract had been silent on the issue of interest, no interest on overdue invoices could lawfully be awarded by an arbitrator.  In Evaluation Consult (New Zealand) Ltd v The State (2016) N6219, Kandakasi J (as he then was) held that as the Arbitration Act is silent as to the power of an arbitrator to award interest, that power can only come from the parties’ own contractual arrangements or from future legislative reform. But in the present instance, the parties have clearly agreed in the Contract that interest is payable on overdue invoices. 

136.      As I have found that the State’s breach of the Contract commenced on 21 January 2016 (at the latest) and is still continuing, any further delay in determining the quantum of interest which has accrued and is still accruing will not alter the statutory rate of interest of 2% per annum to be applied by an arbitrator to the principal amount owed of K1,450,000 but will only increase the quantum due to the passage of time.  Every day that passes without payment by the State to Bluewater of the principal amount and statutory interest of 2% per annum accrued and accruing brings financial prejudice to Bluewater.  

137.      As to the issue of Bluewater’s claim for costs, if the parties were to be compelled by this Court in its supervisory jurisdiction to submit this remaining issue to arbitration, the arbitrator would, given the history of the case which I have already outlined at length, be unlikely to arrive at any award of costs for the arbitration in favour of Bluewater other than costs on a solicitor and own client basis. This is because Schedule 1.9 of the Act expressly provides:

Sch. 1.9	The costs of the reference and award are in the discretion of the arbitrators or umpire, who may direct to and by whom, and in what manner, the costs or any part of the costs are to be paid, and may tax or settle the amount costs of to be paid or any part of the costs, and may award costs to be paid as between solicitor and client.
								[underlining added]

138.      A further factor which militates against compelling the parties to submit the residual issues of statutory interest and Bluewater’s costs to arbitration in pursuance of the Court’s supervisory role of the parties’ dispute resolution process is the cost of arbitration itself.  Bluewater and the State would each need to equally fund the arbitration process, at least prior to commencement of the arbitration pending the arbitrator’s delivery of the arbitral award on residual issues, unless the State otherwise agreed or was ordered by this Court to pay the whole of the estimated arbitration costs in advance.  This would be an additional but, in my view, totally unnecessary financial burden which the State would ultimately have to bear on delivery of any arbitral award dealing solely with the residual issues.  

139.      As I find no utility in ordering the parties to resort to arbitration on the remaining issues of interest or Bluewater’s costs, the result of any arbitral award on those remaining issues to be unlikely to be different from the present findings of this Court on those residual issues, and as arbitration would only unnecessarily prorogue the inevitable and add yet further cost to what should now yield to common sense, I consider that the parties have effectively exhausted their dispute resolution process.  To allow or to direct the parties to arbitrate their remaining minor differences would be to defeat the overall interests of justice in bringing finality to this case and would, to my mind, in itself be an abuse of process. The simple fact is that the NEC’s approval of the settlement arrangements which the parties had already arrived at by 12 September 2019 is not required if those settlement arrangements are not to be formalised by a deed of settlement or consent judgment requiring NEC approval but by summary judgment.

Conclusion

140.     I have considered the circumstances of this case as presented on Bluewater’s evidence in support of its motion for summary judgment and the law applicable to that motion.  My assessment of the evidence includes:

(1)	confirmation that Bluewater’s cause of action is properly founded on breach of the Contract by the Department of Transport and the State;
(2)	the pre-litigation history of this case, in particular the Department of Finance’s withdrawal of funding for the Department of Transport’s which prevented payment of Bluewater’s invoice dated 7 December 2015;
(3)	the events which occurred subsequent to the referral of this case by the Supreme Court back to this Court on 1 May 2019 down to the present time;
(4)	acknowledgment of the content of Dr Ken Ngangan’s affidavit filed on 6 September 2019 and Dr Ngangan’s assurance to the Court that he could request the Department of Treasury to release funds by way of warrant to fund the Department of Transport’s payment of Bluewater’s subject invoice, thereby bypassing the need for funds to come from the Department of Finance;
(5)	the fact that a settlement of Bluewater’s principal claim had been negotiated and agreed by the parties by 12 September 2019 in furtherance of their obligations under the dispute resolution mechanism in clause 3.11 in the Contract, as directed by the Supreme Court;
(6)	noting the absence of any rebuttal by the State to Bluewater’s affidavit evidence in support of Bluewater’s application for summary judgment;
(7)	my finding that there is no utility in compelling the parties to submit the residual issues of interest and Bluewater’s costs to arbitration.

141.      Based on that evidence, applicable law and my findings, I uphold Bluewater’s motion for summary judgment, which will be entered for Bluewater against the State in the sum of K1,450,000 with interest thereon at the statutory rate of 2% from 21 January 2016 to date of this judgment 28 October 2020 amounting to K138,405.48, a total judgment amount of K1,588,405.48, the State to pay Bluewater’s costs of this proceeding on a solicitor and own client basis, such costs to be taxed if not agreed.   Post-judgment interest will accrue at the statutory rate of 2% pursuant to s.6(2) of the Judicial Proceedings (Interest on Debts and Damages) Act 2015 on such of the total judgment amount of K1,588,405.48 as is from time to time unpaid by the State.  

Order

142.      The Order of this Court is: 

(1)	Summary judgment is entered for the Plaintiff against the Second Defendant in the sum of K1.588,405.48 comprising:
a)	K1,450,000 damages for breach of contract;
b)	K138,405.48 interest on damages at the statutory rate of 2% per annum from date of breach of contract on 21 January 2016 to date of judgment.
(2)	Post-judgment interest shall accrue at the statutory rate of 2% per annum on such of the judgment sum as is from time to time unpaid.
(3)	The Second Defendant shall pay the Plaintiff’s costs of this proceeding on a solicitor and own client basis, such costs to be taxed if not agreed.
(4) 	The time for entry of this Order is abridged to the time of signing by the Court which shall take place forthwith.

Judgment accordingly.
_______________________________________________________________
Malaga Lawyers: Lawyers for the Plaintiff
Solicitor-General:  Lawyers for the Defendants	
Dotaona Lawyers: Lawyers for the Attorney-General