N8717
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS (COMM) NO. 911 OF 2019

BETWEEN:
VEADI HOLDINGS LIMITED
Plaintiff

V

CJ VENTURES LIMITED
First Defendant

AND
MUNI GROUP LIMITED
Second Defendant

AND
KONEKARU HOLDINGS LIMITED
Third Defendant

Waigani: Anis J
2020: 19th November
2021: 28th January

NOTICE OF MOTION – seeking removal as a party or alternatively for leave to file defence out of time – Order 5 Rule 9(a), Order 1 Rule 15, and Order 7 Rule 6(2) of the National Court Rules – consideration – whether the pleadings have at all or sufficiently pleaded a cause of action that is recognizable under law against the 3rd defendant – exercise of discretion

Cases Cited:

Clinton Capital Partners Pty Ltd v. Kumul Petroleum Holdings Limited (2020) N8668
Soka Toligai v. Sir Julius Chan (2012) N4842
Ben Maoko v. Kevin Ling (2008) N3293

Counsel:

Mr B Ovia, for the Plaintiff
Ms P Andrew, for the Third Defendant
Nil appearances for the other parties

RULING

28th January, 2021

1.	ANIS J:  The 3rd defendant applied to remove itself as a party to the proceeding, or alternatively, for leave to file its defence out of time.  I heard the application on 19 November 2020 and reserved my ruling to a date to be advised.

2.	Parties have been notified so I will rule on it now.

BACKGROUND

3.	The claim is in contract.  The plaintiff alleges that it entered into a valid contract with the 1st and 2nd defendants, to supply various processed quarry materials at fixed prices and that based on the said contract, services had been performed and invoices issued, but that to date, the defendants owes it a sum of K1,313,537.25.  The contract, as pleaded, was entered on or about 2 September 2013 (the extraction agreement) between the plaintiff and the 1st defendant.  The 1st defendant subsequently changed its name to the 2nd defendant which is why the 2nd defendant is also named herein.  The 3rd defendant is sued on the basis, (i) that the 1st and 2nd defendants were its agents at the material time and or (ii) that it had benefited from the transaction or arrangement.  As such, it is alleged that it should be held liable under the common law principle of quantum meruit.

4.	The 3rd defendant did not file a defence.  

MOTION

5.	Instead, and in its present application, the 3rd defendant seeks to remove itself from the proceeding.  It claims that it is not a party to the extraction agreement that is pleaded in the writ of summons and statement of claim (the writ).  In the alternative, it seeks leave to file its defence out of time.  

6.	The notice of motion was filed on 27 October 2020 (NoM).  The rules relied upon are Order 5 Rule 9(a), Order 1 Rule 15, and Order 7 Rule 6(2) of the National Court Rules.  They are not contested herein so for this reason I will proceed to deal with the substantive issues that are raised in the NoM.

ISSUES

7.	The main issues are, (i), whether a cause of action exists between the plaintiff and the 3rd defendant as pleaded, (ii), if so, whether leave should be granted to the 3rd defendant to file its defence out of time.

MOA

8.	To answer the first issue, regard, in my view, must be had to a memorandum of agreement (MOA).  The MOA is not pleaded but the parties acknowledge in their evidence and submissions that it exists and that it was entered on or about 30 November 2009.  A copy of the MOA is attached to the affidavit of Gerard Kassman which was filed on 27 October 2020 on behalf of the 3rd defendant.  It is also annexed to the supplementary affidavit of Nicky Maraga which was filed on 30 July 2020.  The existence of the MOA is not an issue.  From this MOA, a material issue arises where, as for the plaintiff, it claims that based on the MOA, the 1st and 2nd defendants were merely acting as agents or consultants of the 3rd defendant when they negotiated and signed the extraction agreement.  As such, the plaintiff claims that the 3rd defendant cannot distance itself from the actions of the 2 defendants; it submits that the 3rd defendant had benefitted from the transaction and therefore it should be held liable under the doctrine of quantum meruit.  The 3rd defendant contests this claim or the material term of the MOA.  The contested term is under Part C of the MOA.  It reads, Agrees to engage CJ Venture Ltd as its management consultant at a fee approved by the Company.  The term Company in the MOA appears to refer to the 3rd defendant.  The 3rd defendant submits amongst others that Clause C is ambiguous.  It also submits that the clause could be interpreted to mean that the 4 sets of parties in the MOA may engage the 1st defendant as their management consultant at a fee to be approved by the 3rd defendant.  And finally, it submits that it is not privy to the said MOA.

9.	I make the following observations.  The 3rd defendant is not a party to the MOA or the extraction agreement.  I note that the MOA is not pleaded in the writ of summons and statement of claim (writ).  In my view, it should or ought to have been pleaded in the writ if the plaintiff is to rely on it to allege its application upon the 3rd defendant.  Since the parties are at common ground that the MOA is relevant, the way forward may be for the plaintiff to be granted leave to amend its writ to include allegations concerning the MOA.  This preliminary consideration at first appeared in my view as a just or fair option to make or grant instead of the relief sought in the NoM.  But having said that, evidence of the MOA and submissions, have been presented before me without objections, and I have had the benefit of considering them.  And my view is this.  The MOA was signed between 9 individual persons who appear to be landowners of a clan called the Vanemata Clan, which is situated in the Papa Village in the Central Province.  The 10th person to the MOA was the Hiri Local Level Government.  The MOA does not identify or describe with clarity the traditional land that was proposed by the parties therein for commercial activities.  It merely describes at Clause B at page 1 of the MOA, and I read in part, The parties wish to establish a business entity to protect their land and around Papa Village Central Province.  It appears that their traditional land is situated in the surrounding land to the LNG Plant site, and I say this by making reference to Mr Maraga’s affidavit of 30 July 2020. 

10.	But these, in my view, are irrelevant to the point that I will make, which is this.  All the parties to this proceeding are companies that were or are established under the Companies Act, 1997 (the Companies Act).  They are of course legal persons with rights as regarded by s. 16 of the Companies Act.  The section reads in part, A company is a legal entity in its own right separate from its shareholders and continues in existence until it is removed from the register.  None of these companies were parties to the MOA.  For this reason alone, inclusion of the MOA into the pleadings or the writ would be unnecessary or irrelevant to the material issues.  And again, for this reason alone, the argument by the plaintiff which is based on the MOA, that the 1st or the 2nd defendant had acted as agents of the 3rd defendant when they signed the extraction agreement, appears to be unfounded.  The MOA may have been an understanding that had been reached between the landowners and the Hiri Local Level Government.  But it is not binding upon the parties herein because they did not counter sign it, and they were also not parties to it.  No privity of contract, in my view, exists between any of the parties in this proceeding and the MOA.  See cases: Clinton Capital Partners Pty Ltd v. Kumul Petroleum Holdings Limited (2020) N8668, Soka Toligai v. Sir Julius Chan (2012) N4842 and Ben Maoko v. Kevin Ling (2008) N3293.

11.	I therefore find the MOA irrelevant to the issues at hand.  As such, any arguments by the plaintiff against the 3rd defendant in reliance of the MOA shall fail.  

EXTRACTION AGREEMENT

12.	So with that finding, we are left with the extraction agreement.  A copy of the agreement is attached as annexure A to Mr Maraga’s affidavit which was filed on 17 March 2020 on behalf of the plaintiff.  The agreement was clearly entered into between the plaintiff and the 1st defendant.  It is not disputed that the 1st defendant subsequently changed its name to the 2nd defendant.  It is for that reason and as pleaded, that the 2nd defendant was named as a party herein.

13.	I have considered the arguments of the parties.  The main difficulty I have is this.  The 3rd defendant is not privy to the extraction agreement.  The agreement is express and was entered into between the parties to it, which were the plaintiff and the 1st defendant which is now the 2nd defendant.  These facts are not disputed.  There is therefore, in my view, no basis for the plaintiff to allege a claim against the 3rd defendant based on the principle of quantum meruit.  The reason being that there is a written contract between the parties to it with terms that appear express, and the parties to it may be bound by it depending on the outcome of a trial proper which is still pending.  However, no relationship existed at the material time between the plaintiff and the 3rd defendant where it may be assumed that based on the said relationship or understanding, that services had been provided for which a reasonable sum may be estimated and awarded under the principle of quantum meruit.  Perhaps the best way to explain this is that the claim may be described as a debt recovery matter.  Services were alleged to have been rendered in that X number of gravels as pleaded had been extracted by the 1st and 2nd defendants on site that belonged to the plaintiff pursuant to the extraction agreement.  Invoices were said to have been issued by the plaintiff to the 1st defendant as pleaded, and payments have not been forthcoming from the 1st or the 2nd defendant.  

14.	Perhaps the only way, based on the pleading, where the 3rd defendant may be held liable is, and in my view was correctly argued by the 3rd defendant, which is that the plaintiff ought to establish, in its pleading, an exception to the doctrine of privity of contract against the 3rd defendant.  In Clinton Capital Partners Pty Ltd v. Kumul Petroleum Holdings Limited (supra), I set out these exceptions as follows, and I quote at paragraph 15.

15. I note that the exceptions to the principle include (i), collateral contract and the sale of defective goods, (ii), where an agent is involved, (iii), trusts, (iv), restrictive agreements, (v), negligence, (vi), assignment, and (vii), where it involves insurance companies – third-party insurance.

15.	The closest of the exceptions the plaintiff may argue are agency and assignment.  The problem I am faced with, as stated above in my judgment, is that the plaintiff has not correctly pleaded these exceptions in the writ.  But despite that, I note that the issue of agency was nevertheless argued before me.  And I note that I have already addressed that above herein and have made findings, that is, under the sub-heading MOA.

FINDINGS

16.	With the above considerations and findings, I will say this.  I do not find that the plaintiff has pleaded a valid cause of action against the 3rd defendant that is recognized in law.  With that and consequently, I find that the 3rd defendant ought not to have been joined as a defendant in the first place; that its inclusion as a party in the writ was improper or unnecessary to the substantive cause of action, that is, within the meaning of Order 5 Rule 9(a) of the National Court Rules.  As such, I am inclined to grant the first relief that is sought in the NoM.  

17.	I will make orders for the removal of the 3rd defendant to the proceeding.

COST

18.	An order for cost in this instance is discretionary.  I see no valid reason why I should not award to follow the event.  As such, cost will follow the event on a party/party basis to be taxed if not agreed.

ORDERS OF THE COURT

19.	I make the following orders:

1.	The 3rd defendant Konekaru Holdings Limited is removed as a party to this proceeding.

2.	The plaintiff shall pay the cost of the proceeding of the 3rd defendant on a party/party basis which may be taxed if not agreed.

3.	Time for entry of these orders is abridged to the date and time of settlement by the Registrar which shall take place forthwith.

The Court orders accordingly. 
_______________________________________________________________
Buri Ovi & Associates: Lawyers for the Plaintiff
Leahy Lewin Lowing Sullivan: Lawyers for the Third Defendant