PacLII Home | Databases | WorldLII | Search | Feedback

National Court of Papua New Guinea
You are here:  PacLII >> Databases >> National Court of Papua New Guinea >> 2021 >> [2021] PGNC 657

Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help

Ronnie Choi Constructions Ltd v Tela [2021] PGNC 657; N9971 (19 November 2021)

N9971

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]


WS NO. 1324 OF 2008


RONNIE CHOI CONSTRUCTIONS LIMITED
Plaintiff


ROBERT TELA, PROVINCIAL WORKS MANAGER, ENGA PROVINCE
First Defendant


AND:
DAVID WEREH, REGIONAL WORKS MANAGER, HIGHLANDS & SOUTHERN REGIONS
Second Defendant


AND:
JOEL LUMA, SECRETARY DEPARTMENT OF WORKS
Third Defendant


AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Defendant


Waigani: Kandakasi DCJ
2020: 11th June
2021: 19th November


CONTRACT LAW – contracting with the State – contract for road works – nature of – performance based within specified period –only 21% of works completed - contractor paid more than value of completed works – whether contract period varied and extended by conduct of the parties? – contract requiring all communication to be in writing – substantial sums of public funds involved - Public Finance (Management) Act (PFMA) applies and its provisions must be complied with – variation of public contracts to be by a valid agreement in writing – alleged variation not meeting PFMA and contract requirements – effect of – no variation – no damages payable.


DAMAGES – assessment of after entry of default judgment – applicable principles – plaintiff under duty to plead and adduce evidence supporting each head of damages claimed – nature of contract – performance based public works – contract having specific provisions on each item of damages claimed – plaintiff acting in breach or outside the terms of the contract – plaintiff failing to raise issues in accordance with the relevant provisions of the contract – effect of – damages sought was not an issue - court’s jurisdiction ousted and plaintiff precluded from going to Court - works and invoices continuing after expiry of contract period and without responding to show cause notice - no written extension or variation of the contract period in accordance with the terms of the contract – only 21% of total physical works completed - plaintiff paid over and above value of completed works – plaintiff breached all relevant terms of the contract – plaintiff lack necessary financial and other capacities to undertake, complete and deliver the project – most of damages claimed lack foundation in the pleadings and evidence - except for only one item of damages no damages assessed and awarded.


INTERESTS – interests claim basis on contract - two different kinds – late payment of certified invoices and delayed payments – relevant rate – plaintiff’s obligation to plead and produce evidence of the actual rate of interest applicable - plaintiffs pleading for delayed payments – evidence and submissions for late payment –issue not taken up in accordance with contractual terms – interests claimed depended on claim for unpaid invoices not made out – claim for interest fall with that – interest at 2% pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act allowed item of damages assessed.


PRACTICE & PROCEDURE – PLEADINGS – claims against the State or a public authority - plaintiff obliged to plead with particulars the basis of claim – plaintiff to plead in anticipation of possible default judgment - plead with sufficient particulars of meeting all condition precedent and other statutory and contractual provisions that might operate as bar or impediment against the claim – a failure to so plead – entry of default judgment – effect of – conclusive only against matters pleaded - matters not pleaded but ought to have been open for consideration.


Facts


Ronnie Constructions Limited (Ronnie) contracted with the State through the Department of Works (DoW) for certain public road works. The contract was for a period of 10 months commencing August 2010 and ending 30th June 2011, with a value of K8, 322, 649.83. Ronnie got the contract on terms it bided for including a representation that it had the necessary technical and financial capacity to deliver on the project. Amongst others, the contract provided for, mobilisation costs at K500.00; demobilisation at K150,000.00; invoices would be rendered monthly at the end of each month worked; a Superintendent appointed under the contract would make all decisions under the contract which included the authority to check and certify the invoices; the certified invoices would be due for payment within 28 days with any late payments attracting interest at the prevailing commercial bank lending rate; all issues on any deductions or any decision of the Superintended would be resolved by adjudication and failing that by arbitration initiated by Ronnie within 14 days. After execution of the Contract the DoW paid the agreed K500.00 to Ronnie for mobilisation costs but Ronnie claimed K500,000.00 instead and insisted upon that amount being paid before it could take possession of the project site and commence the works. Around this time, Ronnie was experiencing cashflow problems and asked for an advance payment of 15% of the total Contract value. The defendants repeatedly required Ronnie to take possession of the project site and commence the works. Eventually on claims that the first and second defendants agreed to reimburse its costs Ronnie mobilised at its own costs allegedly at K300,000.00 and took possession of the project site in early August 2010. Upon getting to the project site Ronnie commenced the works in August and continued in September 2010. Instead of rendering its first invoice at the end of each of those months it did so on 11th October 2010, followed by second invoice on 30th November 2010 covering the months of October, November and December 2010 and advance claims for the months of January and February 2011. The third invoice was rendered on 10th February 2011. The fourth invoice was rendered on 27th May 2011 covering the months of March, April, and May 2011. The Contract expiry date arrived on 30th June 2011. By then Ronnie had not rendered any invoice for that month. The defendants took steps to have the contract terminated including, serving Ronnie with notice to show cause as to why the Contract should not be terminated to which Ronnie did not respond and instead continued to work and rendered its fifth invoice on 06th September 2011 for the month of August 2011. On 07th December 2011, it rendered its sixth and last invoice covering the months of November and December 2011 and January and February 2012. The State withheld processing and paying on the fifth invoice pending Ronnie’s response to the show cause notice and the possibility of formally terminating the Contract, but later had it paid. On each occasion the Superintendent checked and substantially reduced most of the invoices and the State paid the thus certified invoices. Ronnie took no issue against each of the deductions and late payments pursuant to the relevant provisions of the Contract. The defendants refused to pay the sixth invoice claiming it was not for works done but of advances contrary to the terms of the Contract. The defendants also claimed that Ronnie was paid over and above the value of works done. Ronnie admitted completing only 21% of the total physical works required. The total value of the completed works was K1, 727, 683.21 but Ronnie was paid K2,326,308.76 which was K596,625.55 more. Ronnie stopped carrying out any further works due to cashflow problems and attributed that to the defendants’ failure to pay its invoices on time and unlawful deductions. The defendants engaged another contractor to complete the remaining 79% of the total works.


Held:

  1. The decisions in William Mel v. Coleman Pakalia and Others (2005) SC790, Coecon Ltd v. National Fisheries Authority of Papua New Guinea [2002] PNGLR 506, Papua New Guinea Banking Corporation v. Jeff Tole (2002) SC694 and many others, settled the relevant principles governing assessment of damages after entry of default judgment in terms of:
  2. To benefit from the principle that an entry of default judgment is conclusive on the issue of liability for the matters properly pleaded with sufficient particulars, a plaintiff in a claim based on a contract against the State or a public authority, must plead with sufficient particulars a meeting of all condition precedents such as notice under s. 5 of the Claims By and Against the State and the relevant and applicable provisions of the Public Finance (Management) Act 1995 (PFMA), any other relevant and applicable legislation and any relevant and applicable terms of the relevant contract. Failing any such pleading, the entry of default judgment is no bar to the parties and the Court considering the application of such provisions as against the claim: Adopted and applied.
  3. Except only for allowing and assessing damages at K150,000.00 for demobilisation costs based on the expressed agreed terms of the Contract, the rest of Ronnie’s claims were disallowed with no damages assessed and awarded because:

(1) Ronnie did not establish a case of the parties varying the contract in writing as required by the provisions of the contract and as a public works contract in accordance with the relevant and applicable provisions of the PFMA to:

(a) increase the agreed mobilisation costs from K500.00 to K500,000;

(b) increase the agreed demobilisation costs from K150,000.00 to K300,000.00; and

(c) extend the Contract’s period from its agreed date of expiry;

(2) Ronnie rendered its invoices contrary to the relevant terms of the Contract which required monthly invoices and not for multiple months for works done and or advances;

(3) the Contract Superintendent who was authorised by the contract to make all decisions checked and substantially reduced most of the invoices, certified them and the defendants paid the certified amounts although late, which Ronnie accepted unconditionally;


(4) the contract provided for an easier and quicker process for the resolution of disputes by adjudication and or arbitration which process, Ronnie failed to use;


(5) in the absence of any pleading, evidence and or submissions establishing a case to the contrary, the dispute resolution provisions in the Contract ousted the Court’s jurisdiction, precluded it from assuming jurisdiction assessing Ronnie’s damages: Bluewater International Ltd v. Roy Mumu (2019) SC1798 adopted and applied;


(6) Ronnie completed only 21% of the total required works valued at K1,727,683.21 but was paid over and above that in a sum of K2,326,308.76, representing an over payment by K596,625.55.


(7) allowing any further payments to Ronnie by way of damages as claimed or at all would increase the agreed value of the Contract without corresponding amount of works and would thus amount to unjust enrichment by Ronnie;


(8) the claim for interest was contrary to the relevant contractual provisions and in any case was dependent on the claim for unpaid invoices succeeding but since that part of the claim was not allowed, the interests claim fell away with it;


(9) under the Contract, Ronnie had the obligation to insure against the risk of depreciation of its machineries, plant, and equipment and in any case, it did not make a case in its pleadings or the evidence it adduced that the defendants were liable for this part of the claim;


(10) despite its representation through its tender and other communication with the defendants that it had both the financial and other capacity to deliver on the contract within the agreed contractual period, Ronnie lacked such capacity and instead relied on its invoices being paid;


(11) Ronnie authored its own alleged losses and damages by its own conduct in terms of:


(a) basing its cashflow on the assumption that it would be receiving a cash loan with a credit line that would be paid in time, both of which did not materialise in the absence of any evidence and explanation to the contrary by Ronnie;

(b) failing to promptly take possession of the project site and commence the agreed works;

(c) failing to render monthly invoices at the end of each month worked and instead render multiple months invoices for works done and advances;

(d) failing to register and have its claim of unlawful deductions of its invoices and appropriately claim interests for late payments in accordance with the relevant provisions of the Contract;

(e) continuing to work unilaterally and incur costs without: (i) securing an extension of the Contract’s agreed expiry date in accordance with the relevant terms of the Contract; (ii) responding to a show cause notice served on it by the defendants and with full knowledge that the defendants were considering a termination of the Contract;

(f) in the absence of any evidence to the contrary adduced by Ronnie, its failure to have in place sufficient and adequate insurance cover to cover for late payments of invoices and depreciation of machinery, plant and equipment as required by the Contract and as a reasonable and prudent business; and

(g) failing to promptly demobilise and take meaningful steps to mitigate its loss or damages;


(12) the claims for balance of contract and general damages were a duplication of the other claims and in any case not made out in Ronnie’s pleadings, the evidence it adduced and, in its submissions, as to their legal and factual foundation for those claims.


  1. Costs for one eighth (1/8) of the claim was allowed in view of Ronnie succeeding only in one out of eight main heads of damages it claimed.
  2. Interest at 2% pursuant to the Judicial Proceedings (Interest of Debts and Damages) Act 2015 from date of issue of the writ to the date of judgment was allowed the damages assessed and allowed.

Cases Cited:
Papua New Guinean Cases


William Mel v. Coleman Pakalia and Others (2005) SC790
Coecon Ltd v. National Fisheries Authority of Papua New Guinea [2002] PNGLR 506
Papua New Guinea Banking Corporation v. Jeff Tole (2002) SC694
Peter Wararu Waranaka v. Gabriel Dusava (2009) SC980
Public Curator of PNG v. Konze Kara (2014) SC1420
MVIT v. Tabanto [1995] PNGLR 214
MVIT v. Pupune [1993] PNGLR 370
Kolaip Palapi & Ors v. Sergeant Poko & Ors (2001) N2274
Tetley v. The Administration (1971) No 647
Thomas Tulin v. Toyota Tsusho (PNG) Ltd (2018) N7685
Motor Vehicles Insurance Ltd v. Kiangua (2015) SC1476
Bluewater International Ltd v. Roy Mumu (2019) SC1798
J A Construction v. Ipisa Wanega (2010) SC1069
Brian Josiah v. Steven Raphael (2018) SC1665
Paul Tohian v. Tau Liu (1998) SC566
Sakaire Ambo v. MVIT (2002) SC681
Fly River Provincial Government v. Pioneer Health Services Ltd (2003) SC705
Alex Bernard v. Nixon Duban (2016) N6299
Peter Bire v. Dr Philip Kereme (2016) N6328
Electoral Commission of PNG v. Kaku (2020) SC1950
Anis Kore v. The State (2011) SC1136
National Broadcasting Corporation v. Sam Taison & Freeway Motors Limited (2019) N8083
Hargy Oil Palm Ltd v. Ewase Landowners Association (2013) N5441
Panga Coffee Factory Pty Ltd v. Coffee Industry Corporation Limited (1999) SC619
NCDC v. Yama Security Services Pty Ltd (2003) SC707
Jack Patterson v. National Capital District Commission (2001) N2145
The Central Bank of PNG v Gabriel Tugiau (2009) SC1013
Bluewater International Ltd v. Roy Mumu (2019) SC1798
Rimbunan Hijau (PNG) Ltd v. Ina Enei (2017) SC1605
Motor Vehicle Insurance (PNG) Trust v. James Pupune [1993] PNGLR 370
Abel Kopen v. The State [1998-89] PNGLR 659
PNG Aviation Services Pty Ltd v. Geob Karri (2009) SC1002
Ibi Enei v. Rimbunan Hijau (PNG)Limited (2011) N4402
The Central Bank of PNG v. Gabriel Tugiau (2009) SC1013
Rodao Holdings Ltd v. Sogeram Development Corporation Ltd (2007) N5485
Binnen Construction Ltd v. Malai (2014) N5775
Hodson v. The State [1985] PNGLR 303
Peter Aigilo v. The Independent State of Papua New Guinea (2001) N2102


Overseas Cases


Hadlely v. Baxendale (1854) 9 Exch 341


Counsel:


Mr. J. Lome, for the Plaintiff
Mr. W. Mapiso, for the Defendants


19th November, 2021


1. KANDAKASI DCJ: The plaintiff Ronnie Choi Constructions Limited (Ronnie) came to Court on an alleged breach of a construction contract (Contract) for road works between itself and the State. An entry of default judgment against the defendants resolved the issue of liability. That left the issue of damages to be assessed. A trial on assessment of Ronnie’s damages proceeded only on affidavits, a statement of agreed and disputed facts and issues for trial and submissions.


Parties Claims and Issues for determination


2. Ronnie makes several claims per its statement of claim. At the hearing and in submissions however, it decided to abandon two heads of its alleged damages. Below is a table extracted from Ronnie’s learned Counsel’s submissions which confirms the claims maintained and those abandoned:



NATURE OF THE DAMAGES CLAIMED
AMOUNT CLAIMED
1
Unpaid outstanding claim for the invoices rendered
K3, 185, 635.67
2
Unpaid Mobilization fee
K500, 000.00
3
Secret payments of the bitumen & associated transport costs
Abandoned
4
Interest for the late payments on payments already made
Abandoned
5
Interests on unpaid payments already invoiced
K7, 664, 573.68
6
Demobilization fee
K300, 000.00.
7
Loss of income, business, or profit
K10, 800 000.00
8
Claim for depreciation
K4, 500 000.00
9
Claim for remaining contract value for breach of contract
K2, 995, 760. 90
10
General damages for losses and sufferings
K2million
11
Interest
@2%
11
Costs

GRAND TOTAL CLAIMABLE K31, 945, 970.25

3. The defendants argue for no awards under each of the heads of damages. The main basis for that submission is their claim that, Ronnie has been paid over and above what was due to it under the Contract, and it is owed nothing. Hence, the question for the Court to determine is whether, Ronnie is entitled to each of the heads of damages it is claiming.


Principles on assessment of damages after entry of default judgment


4. Before proceeding to consider each of the plaintiff’s claims and the defendants’ response thereto, I first remind myself of the principles that must guide this Court in arriving at a decision on the matters in dispute between the parties. Both learned Counsels ably assisted the Court with the relevant case authorities and the principles of law enunciated by those cases. The decision of the Supreme Court in William Mel v. Coleman Pakalia and Others (2005) SC790, is most relevant and is on point. That decision endorsed what I stated in my decision in the National Court in Coecon Ltd v. National Fisheries Authority of Papua New Guinea [2002] PNGLR 506, which was earlier approved by the Supreme Court in Papua New Guinea Banking Corporation v. Jeff Tole (2002) SC694.


5. From this line of authorities, the relevant principles on assessment of damages are these:


(1) A trial judge’s role is to make a cursory inquiry to be satisfied that the facts and the cause of action are pleaded with sufficient clarity.

(2) If the facts and cause of action are reasonably clear, liability should be regarded as proven, i.e., the default judgment resolves all questions of liability in respect of the matters pleaded in the statement of claim.

(3) Only if the facts or the cause of action pleaded do not make sense or would render assessment of damages a futile exercise should the judge inquire further and revisit the issue of liability.

(4) The plaintiff has the burden of producing admissible and credible evidence of the alleged damages.

(5) Any matter that has not been pleaded but is introduced at the trial is a matter on which the defendant can take issue on liability.

(6) Consistent with the principle of “he who alleges must prove it”, a plaintiff always has the burden of proving his or her claim: See Peter Wararu Waranaka v. Gabriel Dusava (2009) SC980, and Public Curator of PNG v. Konze Kara (2014) SC1420;

(7) Pleading the damages is one aspect of the process, but producing credible admissible evidence supporting a plaintiff’s claim is that which determines an award or no award of damages;

(8) In some instances, corroboration of a claim is usually required from an independent source. The need to prove with corroboration applies even in cases where the defendant fails to present any evidence disputing the claim or the assessment of damages hearing takes place ex parte a defendant;

(9) If the evidence and pleadings are confusing, contradictory, and inherently suspicious, the plaintiff will not discharge the onus of proving his losses on the balance of probabilities. It is conceivable that such a plaintiff will not be awarded any damages;

(10) Evidence adduced in support of a claim must support the facts pleaded but no evidence can be allowed in support of facts that are not pleaded: See MVIT v. Tabanto [1995] PNGLR 214 and MVIT v. Pupune [1993] PNGLR 370;

(11) The Court must be alert to vague claims, unsupported by corroborating evidence, as they might be false claims and must only uphold genuine claims: See Kolaip Palapi & Ors v. Sergeant Poko & Ors (2001) N2274; and

(12) The aim of assessing damages is to put the innocent party in the same position as far as money can do as if the guilty party had not caused the harm or damage complained of and is that which forms the basis for an assessment of damages. See Hadlely v. Baxendale (1854) 9 Exch 341 and Tetley v. The Administration (1971) No 647; Thomas Tulin v. Toyota Tsusho (PNG) Ltd (2018) N7685 and others.

6. Additionally, to gain from the principle that an entry of default judgment is conclusive on the matters properly pleaded, a plaintiff especially in a claim against the State or a public authority based on an alleged breach of contract must plead with particulars a meeting of condition precedents, such as the requirement for notice under s. 5 of the Claims By and Against the State Act 1996, (CBASA) meeting the relevant and applicable provisions of Public Finance (Management) Act 1995 (PFMA) as amended and or the relevant and applicable provisions of the contract upon which a plaintiff is suing. In this respect, I note the Supreme Court was divided in the case of Motor Vehicles Insurance Ltd v. Kiangua (2015) SC1476 (MVIL v. Kiangua) when the appellant raised the issue of statutory time bar under s.31 of the Wrongs (Miscellaneous Provisions) Act after the entry of default judgment. The majority of Kassman and Logan JJ decided the entry of default judgment precluded the appellant from raising the issue. They reasoned that, the appellants should have raised the issue in its defence in the court below and participate at the hearing, both of which the appellant failed to do. Neither of their honour’s had regard to the decision in William Mel v. Coleman Pakalia or that line of authorities in our jurisdiction. His honour Logan J had regard to decisions from Australia while Kassman J had regard to other PNG decisions. The dissenting view of her honour Davani J., had regard to decision in William Mel v. Coleman Pakalia, especially amongst others the requirement for a trial judge “to make a cursory inquiry so as to be satisfied that the facts and the cause of action are pleaded with sufficient clarity [and only] if the facts and the cause of action are reasonably clear, liability should be regarded as proven i.e. default judgment resolves all questions of liability in respect of the matters pleaded in the Statement of Claim”. Subsequent decisions of the Supreme Court in Bluewater International Ltd v. Roy Mumu (2019) SC1798 (Bluewater International) and J A Construction v. Ipisa Wanega (2010) SC1069 (J A Construction) effectively allowed a failure to meet the condition precedent of notice under s. 5 of the CBASA to be raised after entry of judgment and even on the Courts own motion. In my humble view, these decisions effectively endorsed the dissenting view in MVIL v. Kiangua.


7. The decisions in Bluewater International (supra) and J A Construction and the dissenting view MVIL v. Kiangua are in my respectful view, sensible and correct at law. It is trite law that, s. 5 of the CBASA precludes a party from coming to the Court unless notice to do so has been first given in accordance with that provision: See Brian Josiah v. Steven Raphael (2018) SC1665 and Paul Tohian v. Tau Liu (1998) SC566 for examples of cases on point. Similarly, s. 31 of the Wrongs Act and s. 16 of the Frauds and Limitations Act preclude matters from getting to the courts outside the authorised periods: See Sakaire Ambo v. MVIT (2002) SC681 and Anis Kore v. The State (2011) SC1136 for examples of case on point. In the case of contracts with the State or a public authority, a failure to comply with the important provisions of the PFMA would render a contract illegal and therefore unenforceable: See Fly River Provincial Government v. Pioneer Health Services Ltd (2003) SC705. The effect of this in my view is this, that which is expressly precluded by Parliament through its law-making power cannot be undermined or allowed to be eroded away by judge made rules such as the principle that a default judgement precludes a defendant from raising such important statutory based issues that goes into a plaintiff’s right to be in court and a court’s jurisdiction to deal with the matter. A court’s duty always is to apply the law has given by Parliament unless otherwise declare unconstitutional and thus invalid. For unless the requirements of the relevant and applicable legislation are met, the courts would be proceeding unlawfully and could be allowing a plaintiff to succeed in a matter it is precluded from coming to the Court at the first place. Hence, unless a plaintiff has pleaded in the terms suggested, an entry of default judgment can be no bar to a court assessing damages to have regard to and come to a decision the relevant law and the relevant facts dictate in each case.


8. This is no new requirement or law. It is already settled law that, parties in any litigation are required to disclose all factors that are relevant and have a bearing in a case fully, fairly, and frankly. This duty specifically includes a duty to so disclose even the factors that are against a party. The principle is better expressed in the context of applications for interim injunctive reliefs. An example of a case on point is my decision in Alex Bernard v. Nixon Duban (2016) N6299. There, I stated the law at [101] in these terms:


“It is a well-accepted principle of law that all information that may affect the grant or not of an interim injunction and its continuity must be disclosed. I referred to that principle in ...Golobadana No 35 Ltd v. Bank of South Pacific Ltd,... where I said the duty to disclose all relevant and necessary information that might affect the grant of an interlocutory injunction, “is a requirement that must be met in equity given that the grant or not of an interlocutory injunction is an exercise of the Court’s power or discretion in equity.” Usually, this requirement is directed at a party seeking an interim injunction ex parte. In my view however this rule equally applies to all parties who are either arguing for a grant or not of an interim injunction and or its continuity or not, to disclose all information within their knowledge and more so those within their possession and or control.”


9. Another context in which the principle is also better expressed is in the case of the duty a counsel appearing in a case before a Court has. It is trite law that, all counsel appearing in any matter before a court owe a duty to disclose any case or statutory law that operates against his or her client’s case and make a case as to why such a law or factor should not apply against his or her client’s case. The decisions in Peter Bire v. Dr Philip Kereme (2016) N6328 and Electoral Commission of PNG v. Kaku (2020) SC1950 are examples of cases on point.


The Background, Facts, Consideration and Determination of Issues


10. I now turn to a consideration of the case before me. To enable a better understanding and determination of the issues presented, I will consider each of the issues presented in this case chronologically. The relevant facts come from the various affidavits the parties have filed and the Agreed Statement. It is clear, Ronnie is a duly registered company. Its primary business is construction works and projects in the country. Since incorporation in 2002, it successfully delivered on a few small construction contracts with the State through the Department of Works (DoW).


11. On 20th February 2010, Ronnie bided to undertake pavement and resealing works on a section of the Enga portion of the Okuk Highway. That followed a public call for tender. Ronnie succeeded in its bid and was awarded the Contract. During pre-contract negotiations, Ronnie indicated amongst others that, it had the necessary financial capacity of more than K200,000.00 in cash, K1.5 million to come from a Korean financier and K2.45 million in outstanding payments for a few small works contract it completed, bringing the total to about K4.15 million to undertake the works and complete them within the agreed period. Annexure “RC I” to the affidavit of Ronnie Choi sworn on 18th and filed on 20th August 2014, document number 56 on the Court file confirms that position. On 22nd July 2010, Ronnie accepted the contract to undertake the said works. The works comprised of about 12.1 kilometers of road at an agreed price of K8, 322, 649.83 to be completed in 10 months commencing August 2010 and expiring 30 June 2011. This was Ronnie’s first ever major construction contract.


Mobilisation Claim


12. After the signing of the contract, Ronnie was to mobilise its plant and equipment, other machinery, material, and manpower that were then located in Mt. Hagen to the project site to commence the works. Ronnie claimed it was entitled to K500,000.00 in mobilisation costs in accordance with standard terms of contracts like the Contract in this case. The defendants denied that claim and maintained the parties agreed upon a sum of K500.00 and paid that amount.


13. Going by the principles of “he who alleges must prove it”, Ronnie who claims it is entitled to K500,000.00 in mobilisation costs, had the burden to prove its claim. Has Ronnie discharged that burden on the balance of probabilities? Couple of factors are relevant and important for the purposes of answering that question.


  1. Firstly, the Contract has specific provisions on the question of mobilisation costs. The Contract documents which are headed “CONFIRMED CONTRACT DOCUMENT” with several sections. It has a section headed “Section X Prices Bill of Quantities”. Within that section is a section headed “PRICED BILL OF QANTITIES” and within that section, “Group 2 – Establishment” at items 2.1 and 2.9 has the figures, K500.00 for mobilization and K150,000.00 for demobilization. That was the agreement of the parties on the question of mobilisation and demobilisation.
  2. Outside the clear terms of the Contract, Ronnie submits, the entry in its proposal in the sum of K500.00 for mobilisation was a typographical error. Ronnie has not provided any explanation with appropriate evidence as to how that was the case. Also, there is no evidence from Ronnie as to when it discovered the error and communicated the same to the defendants and ask for appropriate amendments or a variation of the Contract within the terms of the Contract for raising such issues or differences between the contracting parties. Further, Ronnie has not provided any evidence that the parties clearly reached an agreement within the terms of the main Contract to increase the mobilisation costs to K500,000.00 and that the Contract was accordingly varied. Notwithstanding that, Ronnie insisted on a payment of K500,000.00 toward mobilisation and refused to mobilise and take possession of the project site promptly. That was despite repeated calls by the first and second defendants for Ronnie to do so. Eventually, the first and second defendants called for a meeting in the first week of August 2010. Ronnie claims, that meeting resolved the issue of mobilisation for it to mobilise at its own costs on conditions of the State reimbursing it. There are no evidence or details as to whether the parties exchanged or executed any documentation that records and confirms a variation to the Contract in those terms.
  3. As I pointed out in National Broadcasting Corporation v. Sam Taison & Freeway Motors Limited (2019) N8083 (Freeway Motors):

“A variation of an existing contract is a contract in itself. This means the legal requirements for a legally binding and enforceable contract must exist in order for there to be a valid variation. It is settled law that, contracting parties may by their clear and unequivocal agreement, vary their contracts. Usually, the original of a contract would make provision for its variation. Where there are such provisions, its terms dictate how variations could be validly arrived at. In such a case, a valid contract variation can be brought about in accordance with the way or manner prescribed in the contract. Any departure from that which is prescribed could not amount to a valid variation of the contract unless the parties otherwise mutually agree in very clear terms. But in cases where such provisions are lacking, the parties must enter into a clearly binding agreement for the variation. In some instances, the variation of the contract may come by the conduct of the parties.”


  1. In the present case, neither Ronnie nor the defendants assisted with any submission on the question of whether their Contract has any provision on its variation. The Court’s examination of the Contract reveals Clauses 6.1 and 39.1 Section IV – General Conditions of Contract (unless otherwise indicated references to “Clause” means a Clause in this part of the Contract).
  2. These provisions read:

“6.1 Communications between parties that are referred to in the Conditions shall be effective only when in writing. A notice to be effective only when it is delivered.”


“39.1 All Variations shall be included in an updated Programs produced by the Contractor.”

(Underlining mine)


  1. A combined reading of these provisions makes it very clear that, all communication between the parties must be in writing to be effective. Agreements between contracting parties are usually preceded by exchange of communication between them. By Clause 6.1, all communication about any variation of the terms of the Contract are required to be in writing. Then in the case of any variation to the Bill of Quantities which includes the mobilisation costs, that must be incorporated in an updated “Programs produced by the Contractor.” Clause 27.1 – 27.3 give us some idea about “Programs” in the following terms:

“27.1 Within the time stated in the contract data, the Contractor shall submit to the Superintendent for approval a Program showing the general methods, arrangements, order, and timing of all the activities in the works.


27.2 An update of the program shall be by a program showing the actual progress achieved on each activity and the effect of the progress achieved on the timing of the remaining work, including any changes to the sequence of activities.


27.3 The Contractor shall submit to the Superintendent for approval an updated Program at intervals no longer than the period stated in the Contract Data. If the contractor does not submit an updated program within this period, the Superintendent may withhold the amount stated in the Contract Data from the next payment certificate and continue to withhold this amount until the next payment after the date on which the overdue program has been submitted.”

(Underling mine)

  1. Clause 27.0 in the Contract Data then states:

“The Contractor shall submit a revised Program for the works within fourteen (14) days of receipt of the Letter of Acceptance.


The period between program updates is four (4) weeks.”

(Underlining mine)


  1. Reading these provisions together with Clause 6.1 and Clause 39.1, it is obvious that, Clause 6.1 provides for the mode of communication under the Contract. Then Clause 39.1 requires any variation in the Bill of Quantities, which includes mobilisation costs to be incorporated in a revised Program for the works. Under Clause 27.1 and Clause 27.0, the first revised Program for the works should have been submitted by Ronnie to the Superintendent for consideration and approval within 14 days of receipt of the Letter of Acceptance. Since, Ronnie says, it received that letter on 22nd July 2010 the revised Program for the works was due by 05th August 2010.
  2. Ronnie as the plaintiff was under an obligation to first plead the existence of these provisions, how were they to apply and how it used the agreed mode of communication to seek and secure a variation of the Contract to increase the mobilisation costs to K500,000.00. Then at the trial, Ronnie was obliged to adduce appropriate evidence and based on such evidence, submissions on when it provided its first revised Program for the works for approval and was approved by the Superintendent. This it failed to do. Having so failed, Ronnie has not assisted with any submissions as to why and how the Court should ignore the provisions of Clauses 6.1 and 27.1 – 27.3 and allow the parties to override their written agreement outside the process provided for by these provisions. The Contract formed the basis for the parties to have a relationship at the first place. It was the Contract that provided the terms of the relationship. Venturing outside the terms of the Contract unilaterally would amount to a breach of contract unless mutually agreed in accordance with the terms of the Contract. Consistent with Clause 6.1 of the Contract, only a subsequent written agreement incorporated into a revised Program for the works under Clause 27.1 and 39.1 and approved by the Superintendent, could vary, and replace the original agreement on the mobilisation costs at K500.00 and not otherwise.
  3. Secondly, this lack of specific pleading, facts and submissions leads to the next factor, the Contract was with the State. It was for public works and all payments were to come from public funds. This, as of necessity, required formal documentation recording the parties’ agreement to vary the Contract, the terms, and the basis for the variation for transparency and accountability purposes. By reason of that, the relevant provisions of the PFMA as amended applies. Included in the provisions that needed to be complied with are the provisions of s. 42 which requires pre-commitments for a contract to be enforceable, given the provisions of s. 44. Also, the Contract variation had to come through persons who are authorized for that purpose under s. 32 of the same Act. There is neither any evidence, nor is there any suggestion that an approved officer under the Act, approved the alleged variations to the Contract in the present case. In the end, there is nothing to demonstrate that, the variations went through the correct process for approval before it could become a legally binding contract or agreement.
  4. As already noted, an agreement to vary a contract is a contract itself. As such, the essential elements for a legally binding and enforceable contract must exist to enable a finding for a variation of a contract where there is a dispute as is the case here. I remind myself of what I said in Hargy Oil Palm Ltd v. Ewase Landowners Association (2013) N5441. There in the context of a mediated agreement I said:

“All agreements arrived at mediations are legally binding and enforceable, provided the essential elements of a valid contract are present. What then are the essential elements of a valid contract? A quick perusal of the relevant authorities...reaffirms and brings out clearly the following as the essential elements of a legally binding and enforceable contract:

(1) a clear offer and acceptance;

(2) an intention to create a legally binding contract;

(3) passage of valuable consideration each way; and

(4) Each of the parties has the legal capacity to negotiate and enter into a contract.”


  1. I then went on to observe that, even if all these elements exist, contracts can be invalidated or nullified in certain known circumstances and pointed out the circumstances as follows:

“(a) there is a failure to meet statutory requirements in cases where the contracts are regulated by statute;

(b) the agreement is to commit a crime or commit an act that is illegal such as an agreement to carry out a bank robbery;

(c) there has been fraudulent misrepresentation in some material respect at the negotiations which eventually leads to an agreement;

(d) the terms of the contract are unreasonable and unfair; and

(e) there has been use of force and or duress to obtain or secure the contract.”


  1. In the present case, the onus was on Ronnie, who is claiming the Contract was varied to make out a case for that in accordance with the law on varying written contracts with the State or public authorities. This it failed to do in any manner or respect, except only its allegation of meeting with the first and second defendants in August 2010.
  2. Contracts with the State or a public authority for public works with substantial amounts of public funds involved, strictly require a meeting of the requirements of the PFMA. That includes any variation to any such contract. This is necessary because, as the Supreme Court held in the Pioneer Health Services Limited case from its headnotes:

“2. The requirements under ss.59 and 61 of the PF(M)A are mandatory and where a contract is entered into in breach of those requirements, it is illegal and is therefore null, void, and unenforceable.

  1. The requirements under the PF(M)A are to enable transparency in all public contracts and to safeguard against corruption and enable securing of fair contracts with public institutions and or bodies for the best services at a competitive or best price.
  2. A person dealing with the State or any of its arm or instrumentality or a public institution to which the Act applies, is bound to comply with the requirements of the Act and every person dealing with such institutions or bodies are deemed to be aware of these requirements.
  3. A failure to ensure compliance of the requirements of the Act operates to the detriment of the party contracting with the State or a public authority to which the Act applies.
  4. Where an illegal contract is part performed an action for recovery or restitution is available if not already paid for in equity to avoid unjust enrichment condition (sic) on the innocence of the contracting parties.
  5. In the present case, the contract between the Appellant and the Respondent is null and void for non-compliance of the public tender and Minister for Finance’s approval under the PF(M) A.
  6. However, since the contract was part performed and the Appellant received goods and service from the Respondent, in equity the Respondent is entitled to pursue its claim for a recovery of the costs and expenses it has incurred by way of restitution. But this is conditional on showing its innocence in the creation of the illegal contract.”

(Underlining supplied)


  1. The Court elaborated in the main body of its judgment the notion of an innocent contracting party in this way:

“It is trite law that an innocent party to an illegal or void contract would not be left without any remedy....

A bona fide contractor who has provided services of value is not left without a remedy. There is no unfairness in upholding the legislation in such circumstances and allow an innocent party to recover damages on a quantum merit basis to avoid unjust enrichment by the other if the contract has been part performed.

Some authorities describe this principle as the right of restitution. ... Such a right is not to enforce a contract but because justice and equity demands it. A party seeking restitution must be able to establish at the least that it is not responsible for or not an equal participant in the illegality. The converse of that is that restitution is not available to a party, which knowingly or cynically entered into an illegal contract. Thus, where a Court finds willing participation in an illegal contract there will be no recovery.”

(Underling mine)


  1. The Court also emphasised that, all parties contracting with the State, or any State entity are obliged to ensure all the relevant requirements of the PFMA are complied with and a formal contract is executed. A failure to do so renders such a contract null and void and hence unenforceable. It also made the point clear that, private contractors like Ronnie in this case, are under an obligation to ascertain all the relevant and applicable legislation and ensure to meet all the requirements to make their contract legally valid and enforceable. This is required on their part as part of their due diligence. In turn, this is an important requirement, failing which there can be adverse consequences. As the Supreme Court noted in Pioneer Health Services Limited case, the Courts have in several cases, refused to uphold contracts that did not meet the requirements of the PFMA. There are numerous authorities on point but I refer to the decisions of the Supreme Court in Panga Coffee Factory Pty Ltd v. Coffee Industry Corporation Limited (1999) SC619 and NCDC v. Yama Security Services Pty Ltd (2003) SC707, for examples of cases on point. In the first case, the Supreme Court declared a contract the Coffee Industry Corporation Limited had with the Panga Coffee Factory Pty Ltd null and void and unenforceable for not having the necessary authority under its enabling statute to exempt Panga Coffee Factory from statutorily required levies. In the second case, the Court spoke against a deed of release compromising an earlier proceeding without duly complying with the relevant and applicable provisions of the PFMA.
  2. Applying the law to the Freeway Motors case, I found a purported contract for the supply and purchase of Toyota branded motor vehicles for an agreed price, allegedly varied, was null and void and unenforceable and in any event, Freeway Motors breach the contract because:

(1) the due process under the PFMA was not followed for the original contract and its alleged variation, in addition to a lack of a proper and clearly binding contract arrived at to vary the original contract between the parties;


(3) payment of the full contract prince of K3, 126, 845.00, and an additional K1.5 million, purportedly under the alleged variation were paid well before and outside the requirements for public tender process and a signing of the contract;


(4) despite the full advance payments, Freeway Motors took 9 years which was well outside the agreed contract period, to supply a different brand of vehicles without NBC’s consent or approval;


(5) Freeway Motors acted fraudulently or misrepresented and gave warranties that it was a bona fide car dealer which had the necessary capacity and capability to sell and supply the vehicles at the specified locations for the originally agreed price within the agreed period when it had reason to know it did not have the capacity or ability to do so even after the advance payment of the full contract price: and


(6) the vehicles Freeway Motors supplied were not the agreed Toyota branded vehicles, but Chinese made Wingles that proved not value for money and not fit for purpose.


  1. In these circumstances, I found not only did the parties fail to meet the requirements of the relevant provisions of the PFMA but most importantly their respective intention and or purpose. Citing my decision in Jack Patterson v. National Capital District Commission (2001) N2145, I held, the intention and the purpose of the PFMA is to ensure:

(1) a proper management and control of public finances in an open, transparent, and accountable way;


(2) give equal opportunity to all who can supply goods or services required by the State or public entity from time to time to bid and for the State or public authority to get the best qualified and experience to render the service or goods as required at a best possible price; and


(3) the public authorities do not enter into contracts having monetary values that exceeded the limits set without first meeting the requirements for tender and approval of the Minister for Finance.


  1. In present case, the express agreement at Ronnie’s own suggestion per its tender proposal, was for K500.00 in mobilisation costs. There is neither any pleading, nor is there any evidence of a valid variation to the original contract to allow for K500,000.00 in mobilisation costs. Specifically, there is no evidence:

(1) of the due process under the PFMA for the alleged variation were followed;


(2) of an agreement with its clear terms for the alleged variation was arrived at between the parties in accordance with the relevant provisions of the PFMA and the terms of the original Contract;


(3) establishing the allegation by Ronnie of making a mistake in inserting K500.00 instead of K500,000.00 in the relevant part of its tender proposal;


(4) that the first and the second defendants were the duly appointed s. 32 officers under the PFMA and therefore did have the power and necessary authority to agree to a variation of the mobilisation costs from K500.00 to K500,000.00 and have signed a variation agreement in the terms claimed by Ronnie; and


(5) of the parties varying the Contract in writing as required by Clauses 6.1 and 27.1 of the Contract.


  1. Additionally, Ronnie’s claim is at odds with what it says through Mr. Ronnie Choi’s affidavit sworn on 28th November 2019 and filed on 02nd December 2019 at paragraph 6 (a). This evidence puts Ronnie’s alleged actual costs of mobilization at K300,000.00.
  2. In these circumstances and for these reasons, the claim of unpaid or the balance of the mobilisation costs cannot be sustained. Accordingly, I make no award for this part of the claim.

Unpaid outstanding claim for invoices rendered


  1. As noted, Ronnie eventually mobilised at its own costs and took possession of the project site in August 2010. By letter dated 21st September 2010, Ronnie indicated facing financial difficulties and asked for an advance of 15% of the total contract price which translates to K1, 248, 397.47. That letter is annexure DW1 to the affidavit of Mr. David Were. Relevantly, the letter reads:

“We inform we have encountered financial difficulties in our efforts to fully fund equipment mobilization together with other related costs and warn of the likely delay in execution of core activities of the project as scheduled.


We hereby proposed and request for the employer to make an advance payment of 15% of the contract price in this regard which should provide a hedge against this expected delay to successfully implement and complete the project on time.


We have traditionally completed minor works contracts successfully to date with this being the first major contract. We hope to complete this major contract with some initial funding support.


As a guarantee to secure our advance request, we have posted a 12% in reductions in the IPCs to cater and cover for performance security. Furthermore, we offer our existing capital and non-capital assets as security in securing this advance request should we default in the repayments.


We also wish to inform that we do not have any other outstanding repayment credits with other people and sources.”


  1. Between October 2010 and December 2011, Ronnie rendered a total of (6) six Bill of Quantities, invoices or IPCs for payment. Of those, IPCs 1- 5 were checked, reduced substantially in most cases, and certified by the Superintendent and paid leaving the remaining 6th invoice totally unpaid. Ronnie claims the payments were untimely, the reductions were unlawful and not justified. The table below shows the invoices with the relevant amounts invoiced, the amount reduced to and paid and their respective balances:

Invoices Raised, Payments & Outstanding

IPC No.
Amount invoiced
Invoice date
Amount paid
Date paid
Amount unpaid
1
K695, 646.42
11.10.10
K407, 781.41
19.11.10
K287, 865.01
2
K604, 804.07
30.11.10
K316, 153.82
04.12.10
K288, 650.25
3
K251, 581.84
10.02.11
K228, 426.06
11.03.11
K23, 155.78
4
K1, 077,124.71
27.05.11
K372, 802.54
13.07.11
K704, 322.17
5
K409, 006.19
06.09.11
K335, 089.41
01.12.11
K73, 916.78
6
K1,587, 725.71
07.12.11
Still Unpaid

K1,587,725.71
Total
K1,660,253.24
K3,185,635.67

  1. The works were not completed by the agreed expiry date of 30th June 2011. Ronnie continued to work until 20th December 2011, when the defendants purportedly terminated the contract. The continuation of works was without any expressed approval of the defendants, or the parties expressed agreement varying the Contract to extended beyond the agreed expiry date.
  2. By letter dated 22nd November 2011, Ronnie by its Managing Director wrote to the third defendant. Ronnie expressed dissatisfaction in what it described as deliberate actions by the second defendant, in sabotaging further progress of the project by intentionally withholding payments. That it claimed was to delay the progress of the project and thereby create possible reasons for the termination of the Contract.
  3. Through a letter dated 20th December 2011, the third defendant wrote to the Chairman and members of the Central Supplies and Tenders Board recommending a termination of the Contract on various grounds. But by letter dated 15th March 2012, the State Solicitor wrote to the third defendant requesting the third defendant to withdraw his letter recommending termination of the Contract. Eventually there was neither an expressed termination nor an expressed extension of the Contract’s agreed expiry date.
  4. Ronnie goes on to claim, because of the delayed payments, unlawful deductions and the non-payment of the mobilisation fee, its cash flow was seriously affected. That prevented it from further continuing with the works on the project and lay off all its workers with all its machines, plant and equipment left at the project site. Further, Ronnie says, despite the purported termination, the defendants did not pay anything toward its demobilisation. It is therefore claiming demobilisation costs.
  5. The evidence shows that, Ronnie rendered IPC No. 1 on 11th October 2010. That was for work done in September 2010 in the total sum of K695, 646.42. The defendants say invoices for work done should have been generated and rendered at the end of each month pursuant to Clause 42.1 of the Contract. Hence, they submit, the first invoice was submitted 11 days late. Nevertheless, the invoice was checked, reduced, and certified for payment at K407,781.41. On 19th November 2010, the certified amount was paid.
  6. On 23rd November 2010, DoW Enga made a cash advance payment of K500,000.00. That was to assist Ronnie to continue and complete the project.
  7. On 30th November 2010, Ronnie rendered its second invoice, IPC No. 2 for a sum of K604,804.07. That covered work done for the months of October and November 2010 and projected advance for December 2010, January, and February 2011. The Contract does not allow for invoices for multiple months but as noted, only for monthly statements by Clause 42.1. Hence, that invoice was not strictly in accordance with the terms of the Contract. Despite that, the Superintendent had it verified and certified for payment in the sum of K316,153.82 which excluded the advance claimed for February 2011. Payment was made on 18th December 2010, which was well within the contractually agreed period of 28 days. Hence, there is no issue as to the timing of the payment.
  8. On 04th February 2011, DoW Enga placed an order and paid for the supply of bitumen from Australia by United Pacific Brothers in the sum of K501,144.93. Later, on 21st September 2011, the DoW Enga paid Mapai Transport a sum of K92,779.00 for a transportation of the bitumen from Lae to the project site in Enga. At that point, the total advanced payments inclusive of the K500,000.00 cash advance made to Ronnie on 23rd November 2010, stood at K1,093, 923.93.
  9. Ronnie takes issue with these payments. It argues that it did not ask for these payments and that the DoW Enga acted unilaterally. It goes onto say there is no provision in the Contract authorising such payments. Further Ronnie says, these advances added more to its advances account to more than K1 million and the provision of the materials affected its invoicing. The defendants agree they are not obliged and or authorisation by the Contract for them to assist as they did. However, they say they had to provide these assistances to help Ronnie with its cashflow problem and more so to ensure the project was completed promptly. There is no issue that Ronnie had a serious cashflow problem from the beginning. Although Ronnie represented to the defendants that it had the capacity, that was based on hopes of K1.5 million being lent to it and K2.45 million in outstanding amounts or credit line[1] would be paid. Ronnie does not offer any explanation as to what became of the funds, their respective sources, and how its cash flow with its capacity to perform and deliver on the contract became adversely affected.
  10. On 10th February 2011, Ronnie submitted its third invoice, IPC No. 3 for a sum of K251,581.84 for works done in that month. After going through the certification process, an amount of K228, 426.06 was certified and paid 27 days late on 05th April 2011. The contractually agreed period for payment expired on or before 08th March 2011. Ronnie registered no issue or dispute for the reductions and the late payment, pursuant to Clause 24.1 of the Contract.
  11. On 27th April 2011, Ronnie issued its 4th invoice, IPC No. 4 for a sum of K1, 077, 124.74. This invoice was for multiple months of March, April, and May 2011. The Superintendent disallowed most of the items claimed as they were not for any works done and certified for payment a sum of K372, 802.54 only. Of that, a sum of K335, 522.29 was paid 19 days late on 13th July 2011, with the balance of K37,280.25 paid on 09th August 2011. Again, Ronnie did not register any claim or dispute on the reductions and the late payment under Clause 24.1.
  12. On 30th June 2011 the Contract’s expiry date arrived. As noted, the defendants did not approve nor did the parties expressly agreed to a variation of the Contract extending its expiry date.
  13. On 11th July 2011, the first defendant did a report to the second defendant which reported that Ronnie lacked both the financial and necessary technical capacity required to satisfactorily undertake the works under the Contract and complete them on time. The report recommended any of three options to be taken. The first recommended a termination of the Contract with work to be completed by way of “under-day labour”. The second recommended, there be an extension of the completion or expiry date and allow Ronnie to complete the works. The third recommended the Contract be terminated and call for a retender.
  14. On 23rd August 2011, Ronnie was served with notice to show cause within 14 days as to why the Contract should not be terminated (show cause notice). Without responding to the show cause notice, Ronnie served its 5th invoice, IPC No.5 on 06th September 2011, covering the month of August 2011 for a sum of K409,006.19. Action on that invoice was delay pending Ronnie’s response to the show cause notice and the possibility of termination of the Contract. In November 2011, the invoice was certified for payment in part and a sum of K301,580.47 was paid on 1st December 2011. For the defendants, that was to get Ronnie to complete its agreed works. The payment was 58 days late from the date of the invoice. Subject to the reasons for the delayed payment, the payment was due on or by 04th October 2011 under the contractual terms. The balance of the invoice was paid on 16th December 2011, which was 74 days late. Ronnie did not register any dispute or issue on the reductions and the late payments in accordance with the provisions of Clause 24.1 of the Contract.
  15. The final invoice, IPC No.6 was submitted on 07th December 2011. That invoice was certified by the Superintendent’s representative in an amount of K1, 401, 015. 57 from a claimed amount of K1, 587,725.71. However, the defendants decided against making any payment claiming, it was not for any work done but in fact a claim for advances and that it was after the Contract had expired without any extension. Ronnie says that invoice covered actual work done in November 2011 and for projected works for the months of December 2011 and January and February 2012, which it claims was consistent with previous invoicing and payment. As for the non-renewal of the Contract, Ronnie claims it was deemed renewed by the conduct of the parties going beyond the agreed expiry date.
  16. A copy of the Superintendents assessment is annexure “C1” to the affidavit of Ronnie Choi sworn and filed in response (the Choi affidavit) to that of Mr. David Wereh’s sworn on 28th and filed on 29th March 2019 (the Wereh affidavit). The following table shows the individual items allowed and the relevant amounts certified for payment:
Item No.
Nature of costs or works
Amounts endorsed
1.1
Allow for all expenses to confirm to group 1 including traffic and dust control

30,000.00
1.2
Approval & Execution of HIV/AIDs awareness program
4,400.00
1.3
Approval & Execution of Contractors safety program
4,600.00
2.2
Maintenance of contractors site establishment
38,500.00
2.4
Maintenance of Engineer’s site facilities
24,000.00
4.1
Construction of table drains & turnouts
10,000.00
4.2
Remove and replace unsuitable material
18,200.00
5.1
Preparing existing pavement
215,453.05
5.2
Supply, place, spread & compact 200mm thick subbase material

448,860.50
5.3
Supply, place, spread, & compact 200mm thick base course material

989,950.80
6.1
Application of prime coat
11,817.68
6.2
1st Coat seal with 19mm
33,483.44
7.2 (c)
Clean and/or rehabilitate existing culverts 900mm diameter CMP
15,750.00
7.3 (a)
Stone pitched headwalls for 600mm dia CMP
8,000.00

Contingencies item
20,000.00
Total
K1,873,015.47

  1. Only three of the items claimed were rejected. These were as follows:
Item No.
Nature of costs or works
Amounts endorsed
1.4
Approval & execution of contractor’s environmental management plan

4,700.00
1.5
Approval & execution of contractor’s quality control plan
20,000.00
2.6
Maintenance of Superintendents vehicle including fuel and lubricants
6,785.00
Total
K31,485.00

  1. Couple of problems attend this invoice. Firstly, the checking and certification is not by the Superintendent but his agent. Secondly, unlike the previous invoices, which saw substantial reductions this invoice allows of K1,401,015.57 out of a total of K1,587,725.71. Thirdly, the figures do not add up. The Superintendent’s agent talks about a total of K1,587,725.71 was claimed by Ronnie under IPC No. 6. He further says, after assessment and allowing for the items not approved, the total certified amount came to K1,401,015.57. But when one adds up the amounts claimed and certified or allowed for works allegedly done and costs incurred, they exceed the original invoiced amounts in IPC No. 6 as well as the amounts certified for payment. Fourthly, the Choi affidavit at paragraph 38 says, IPC No. 6 was for November 2011 and projected advances for works for the months of December 2011 and January and February 2012. The certified items were allegedly for work already done except for items, 1.1 – 1.3 having a total value of K39,000.00 which was for projected advance for the month of December 2011. These problems give rise to the question, what items of work were claimed in advance for the months of December 2011, January, and February 2012, what was their value and what became of that part of the invoice during the certification process?
  2. Annexure DW5 to the Wereh affidavit, which is a copy of Ronnie’s own project manager, John Puri’s report dated 11th December 2011, possibly provides us with an answer to the first of the questions presented above. In the first 4 paragraphs the report states:

“With 5 IPCs certified to date, the financial status of the contract remains as 48% complete which is equivalent of K2, 826, 272.39 of the contract sum being accomplished.


The physical progress of works can be reported as 21% complete with an equivalent amount of K1,727, 638.21 of the contract sum being the value of work completed.


Although physical progress of works has been well below acceptable level, it is still in our interest to complete the project hence we will be putting in extra effort to mobilise additional equipment to ensure the project is successfully completed.”

(Underlining mine)


  1. He then attaches a revised work program to complete the remaining 79% of the physical works under the Contract. The highlighted works include, pavement repairs, sealing works and other outstanding items. The report concludes with a statement that, Ronnie was having cashflow problems and attributes that problem to delays by the defendants in processing and meeting the progress claims especially IPC No. 4. Then most relevantly, the report states:

“In order to maintain a good positive cash flow and to continue with the pavement repair works in December 2011 and January 2012 and carry on with sealing works, we would need additional funds.


Therefore we have included for advance payment under item 5.0 and 6.0 for sealing works in our progress claim No. 6.”


  1. That report does not however, resolve or explain all the discrepancies noted above. To my mind, the discrepancies suggest the claims by Ronnie through its invoice, IPC No. 6 was questionable and so was its certification. As noted, the defendants refused to pay that invoice claiming it was for work not done. The duty was then upon Ronnie to register a dispute under Clause 24 of the Contract and seek an adjudication on it and failing resolution by that process, go for arbitration under Clause 25 of the Contract, but Ronnie did not do that. In the meantime, Ronnie allowed the time frame for those process to lapse.
  2. Overall, for all the invoices, I find there are few more problems with Ronnie’s claims. Firstly, given the claims of unlawful deductions and delayed payments, there is a complete lack of pleading, evidence, and submissions by Ronnie on the remedies, if any, that may be provided for under the Contract to address and resolve these issues. What use if any, did Ronnie make of such provisions in the Contract and what was their outcome? If Ronnie did not make use of those provisions under the Contract, there is no pleading, evidence, or submission as to why Ronnie did not make use of those provisions and how is it now possible for it to come to this Court outside the process provided for under the Contract?
  3. Clause 4.1 of the Contract vests the Superintendent with all powers to “determine all contractual matters” between the parties. Then Clause 24.1, provides for a mechanism for the resolution of any dispute arising out of a decision of the Superintendent. That provision reads:

“If the Contractor believes that a decision taken by the Superintendent was either outside the authority given to the Superintendent by the Contract or that the decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of the notification of the Superintendent’s decision.”


  1. The next provision, Clause 25 provides for the procedure for a resolution of disputes under the Contract. This includes a duty placed on the adjudicator to give his or her decision in writing within 28 days of receipt of the notification of a dispute. The same provision gives a party who is aggrieved by a decision of the adjudicator, the right to refer the Adjudicator’s decision to arbitration under the Arbitration Act 1951.
  2. I consider these are important provisions as they provide for both the process and procedure for a resolution of all issues concerning and arising out of the Contract. By their free agreement, the parties agreed that the Superintendent would determine all contractual matters between the parties. If Ronnie was aggrieved by any decision of the Superintendent, it was to request adjudication under Clause 24.1. If the adjudication outcome was unsatisfactory for Ronnie, it would go for arbitration under Clause 25.
  3. It is trite law that, where parties to a contract agree to a process other than the courts to determine or resolve any dispute arising out of or concerning their contract, that effectively ousts the courts’ jurisdiction. In such a case, the parties will have to use their agreed process for a resolution of their disputes or differences. The Supreme Court made that point clear in a similar public works contract having a similar dispute resolution clause as in the present case. That was in the case of Bluewater International Ltd (supra). There, the parties agreed to submit any dispute under their contract for resolution by a twostep process. The first was direct negotiations and failing resolution there, a referral to arbitration.
  4. Speaking in the context of that case, the Supreme Court noted that parties make such choices for the resolution of their dispute for good reason which the courts must appreciate and uphold. In its own words, the Court said:

“...most international and domestic contracts often contain dispute resolution provisions as part of their contract. Businessmen or women after due consideration of all factors including, the serious backlogs in the Courts and much delayed decisions, often chose to have their disputes or differences resolved by mediation or arbitration. Hence, to them, their preferred process for a resolution of their disputes is what they chose, mediation or arbitration or a combination of the two. Also, often businessmen and women who are new to a country do not know much about the Judges who man the Courts and who will deal with any case that they might take to them. Further subject specialisation is a rarity in the Courts. Hence, they [parties] opt for a process they know and can appoint their arbitrator or mediator who is knowledgeable of the subject matter, and they can dictate the times for the various steps to be taken through to final resolution. They also know and accept that, there will be no appeals or reviews of the outcome which prolongs a final resolution of their disputes. Indeed, we note that a country that actively prompts the use of mediation, arbitration or other forms of dispute resolution and is friendly to these other forms of dispute resolution gains the confidence of the business community. This encourages more foreign investment as is the case for Singapore.”


  1. The Court went on to add:

“What this means in the case of an agreement or contract containing an arbitration clause is this. The parties have expressed an intention to have their dispute resolved by arbitration and not by the formal court process or litigation. A courts duty then is to do all it can to give effect to that intention as was done in the case of Able Constructions Ltd v. W.R. Carpenter (PNG) Ltd (2014) N5636. There, the Court ignored reference to a process (arbitration) that did not exist and allowed for a process (mediation) that existed to give effect to the parties’ intention to have their dispute resolved by a process other than the formal court process. It does not sit well with the parties’ choice and hence their intention for the courts to look for reason not to give effect to their agreements by coming up with the kinds of factors set out in the Cannings decisions [Niugini Civil Petroleum Ltd v. West New Britain Development Corporation Ltd (2005) N2909 and Newsat Ltd v Telikom PNG Ltd (2007) N3448] or any other that ignores, dilutes and departs from the parties’ intention. The only exceptions to these would be cases in which a statutory provision expressly excludes arbitration as was noted by this Court in Chief Collector of Taxes v Bougainville Copper Ltd; Bougainville Copper Ltd v Chief Collector of Taxes (2007) SC853, in the context of income tax or the parties have not in fact entered into a contract.”


  1. Apply the law to the case then before it, the Court held:

“In the present case, the relevant provisions of the parties’ contract or agreement ... are very clear. First, the parties agreed to have their disputes resolved amicably through negotiations and failing that through arbitration. There is no evidence of Bluewater taking any meaningful steps to have the issues raised in this proceeding resolved by the parties’ own direct negotiations. Also, there is no evidence of Bluewater taking all steps necessary to have the issues resolved by arbitration. In the absence of such evidence, it is clear that Bluewater issued these proceeding 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 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 ...”


... In these circumstances, we find Bluewater was at no liberty and therefore not entitled to issue the National Court proceedings which gave rise to this appeal. It was instead, barred by its own deliberate choice and agreement per the provisions referred to above from going to Court. Given that, we find the Court had good reason, although it did not constitute part of the learned trial Judge’s reasons, not to grant Bluewater’s application for default judgment as the proceedings were flawed from the beginning.”


  1. In the present case, Ronnie is the party taking issue with the Superintendent’s decision to reduce its invoices not once but for almost all the invoices and settle only the certified claims. It is doing so outside the relevant provisions of the Contract. As already noted, Ronnie claims the reductions were unlawful and the payments were made late. Clause 43 of the Contract allows for certification and payment within 28 days. Hence, payment for the first invoice date 11th October 2010, was for example due by 08th or 09th November 2010, but payment was made on 30th November 2010. That was done about 22 days late. Pursuant to clause 43.1 interest at the prevailing commercial rate became payable for the late payment.
  2. If the deductions and delayed payments was an issue for Ronnie, those had to be raised on each occasion of the deductions and late payment and have those resolved in accordance with Clause 24 and or 25 of the Contract. The adjudicator and failing that, the arbitrator would have been better placed with the relevant and necessary technical knowledge and expertise to help determine or resolve the issues promptly. If they were observed and the disputes were submitted for resolution within the time frames provided for under the Contract, the cashflow and consequential problems Ronnie is claiming would have been avoided. Also, the parties would have had the opportunity to go through the invoices again and have that checked against the works done when the relevant evidence of the works were intact and freshly available. Instead, Ronnie has come to this Court on 14th September 2012, well passed the date when the first of the payments was made in November 2010 and the last of the payments made on 01st December 2011 and in any event well outside the 14 days for the notification of a dispute and 28 days for any initiation of arbitration proceedings if not satisfied with the adjudicator’s decision.
  3. Secondly, most of Ronnie’s claims per its invoices were rendered outside what was agreed to in Clause 42.1 of the Contract. That provision stipulates: “The Contractor shall submit to the Superintendent monthly statements of the estimated value of work executed less the cumulative amount certified previously.” The defendants submit therefore that, invoices for work done should have been generated and submitted at the end of each month. Each of the invoices were not for each month for the months Ronnie claims it worked, September 2010 to December 2011. Instead, the invoices were either rendered late or for multiple months as was the case for Invoices IPC No. 2 and IPC No. 4. IPC No. 2 was for the months of October and November 2010 and for a projected advance for December 2010, January, and February 2011. IPC No. 4 was for March, April, and May 2011. If Ronnie operated in accordance with the terms of the Contract, it would have rendered individual invoices for each of the months from September 2010 to November 2011 at the end of each of those months. Ronnie has not pointed to any provision in the Contract that allows for it to invoice in the way it did. Also, Ronnie has not drawn the Court’s attention to any provision in the Contract which allows for it to request cash advances or grants from the State.
  4. Thirdly, pursuant to Clause 42 of the Contract, it was a condition precedent for all interim progress claims to be assessed and certified by the Superintendent before any obligation to pay arises. Ronnie has not pleaded with any particulars and, failed to adduce evidence clearly showing the Superintendent certified for payment all the amounts claimed per each of the invoices it rendered without any deduction. Instead, the undisputed evidence is that each of the invoices were checked, reduced substantially, certified, and paid, though late.
  5. Fourthly, Ronnie has pleaded effectively that the Superintendent should have accepted the invoices as settled by the Contract engineer and Ronnie’s engineer and thus suggests the Superintendent had no power. That is despite the clear terms of Clause 4.1 of the Contract. Ronnie has neither pleaded with any particulars nor has it adduced any evidence clearly demonstrating its basis for claiming the deductions were unlawful as against actual work done which are also not pleaded. In any case, Ronnie was to raise the issues under clause 24 of the Contract. This it did not for reasons not pleaded and only itself knows. That raises and leaves many questions unanswered. Such questions include:

(1) What did Ronnie do to have the issues raised and resolved within the terms of the Contract?

(2) If Ronnie did raise the issues, what became of them?

(3) If Ronnie did not raise the issues, what prevented it from raising the issues?

(4) Given the provisions of Clauses 24 and 25 of the Contract, how is Ronnie entitled to issue and maintain this proceeding outside those provisions?


  1. In the absence of any proper pleading with particulars and evidence called to establish its claims of unlawful deductions, this claim cannot be sustained.
  2. Fifthly, Ronnie’s failure to register its dispute on each occasion of the reductions in accordance with the provisions of the Contract within the required time, meant in my view, there was no dispute: See The Central Bank of PNG v Gabriel Tugiau (2009) SC1013 at [19]. This, in my view was confirmed effectively by Ronnie’s acceptance of each of the payments of the reduced amounts. By virtue of the parties’ agreement per Clause 24 and 25 of the Contract, the parties did not preserve the right to come to this Court with any dispute or issue arising out of or concerning the Contract. In any case, this Court is not in any better position to back track outside the agreed time frames to consider an issue that was not an issue at the relevant time but raised well outside the agreed time frames and process and procedure under Clause 24 and if required, Clause 25.
  3. Sixthly, I note the value of work done is not disputed. The evidence on this is clear. Annexure DW5 to the Wereh affidavit, which is a copy of Ronnie’s Project Manager’s report, which I referred to earlier, confirms the actual value of work at K1,727, 683.21. As noted, that represented 21% of the actual works completed. However, Ronnie was paid a total of K2,326,308.76 as of 09th August 2011, according to the Were affidavit at paragraph 47. That means, Ronnie was paid an extra K598,625.55. This puts beyond any dispute that Ronnie completed K1, 727,683.21 worth of works before 11th December 2011. The 5 invoices that were reduced, certified, and paid covers the actual works performed and completed as at the time of the relevant invoices. In the absence of any pleading, evidence, or submission to the contrary, this probably explains Ronnie’s failure to register a dispute pursuant to Clause 24 and if need be, under Clause 25 of the Contract on the reductions and late payments. Making any allowance by way of any damages for the alleged unpaid invoices as claimed or at all, will only unfairly increase the extra payments made to Ronnie without any corresponding amount of actual works justifying it.
  4. Finally, the contract expired on the agreed date, 30th June 2011. However, as earlier noted, Ronnie claims the Contract was extended by the parties’ conduct. There are couple of problems with that claim. Firstly, the discussion centred on Clauses 6.1 and 39.1 of General Conditions of Contract at paragraphs 14 to 33 above except for those centred on clause 27.1 – 27.3, applies here with the appropriate modification.
  5. Secondly, specifically on the alleged extension of the expiry date, Clause 28.1 and 28.2 of the Contract, provides for a possible, if not, the only circumstance in which the expiry date could be extended. These provisions read:

“28.1 The Superintendent shall extend the Period of Completion if a Compensation event occurs or a variation is issued which makes it impossible for Completion to be achieved within the Period of Completion without the Contractor taking steps to accelerate the remaining work, which would cost the Contractor to incur additional costs.


28.2 The Superintendent shall decide whether and by how much to extend the Period of Completion within 21 days of the Contractor asking the Superintendent for a decision upon the effect of a Compensation Event or Variation and submitting full supporting information. If the Contractor as failed to give early warning of a delay or as failed to cooperate in dealing with a delay, the delay by this failure shall not be considered in assessing the new Period of Completion.”


(Underlining mine)


  1. Again, none of the parties assisted with any submissions on the existence and application of any of these provisions. It is clear to me that, when the end of the Period of Completion was approaching, Ronnie as the Contractor was obliged under the contract to seek in writing an extension of that Period. The Period of Completion according to Clause 1.0 in Section V – Contract Data, of the Contract, is 10 months from the Start Date. Going by the same provision, the Start Date “shall be no later than twenty-eight (28) days after the receipt of the Letter of Acceptance.” Since Ronnie accepted the Contract on 22nd July 2010, the Start Date fell on or about 19th August 2010. Given that, the end date fell on 19th June 2011.
  2. Ronnie does not assist with any submissions as to when, if it did, apply for an extension of the Period of Completion and which of the listed Compensation Events under Clause 44.1 of the Contract it cited and relied upon. Also, Ronnie did not assist this Court with any submissions on when it provided its first revised Program for the works for approval and such approval was granted by the Superintendent. Further, Ronnie did not assist with any submissions as to when it submitted the required 4 weekly updates and were approved. Then most importantly, Ronnie did not assist with any pleading, evidence and or submissions as to when was the last update of Program for the works submitted, when was that approved, and what was or were the relevant time frames for completion of the Program for the works. This is vital because, the thus updated Program for the works would have shown what activities or works have been achieved, what works, or activities remain to be achieved and their impact on the sequence of activities including the Period of Completion. Further, Ronnie failed to point to any evidence of the Superintendent approving its application of contract variation or extension of the Period of Completion by approving in writing a revised Program for the works submitted in accordance with the terms of the Contract that went past the Period of Completion up to the date of the last of the activities undertaken in December 2011. If Ronnie did ask for and such extension or approval was granted, that would have arguably extended or varied the Period of Completion in writing as required and hence an extension of the expiry date.
  3. Applying the law as discussed already I note this was a contract that involved substantial public funds running into millions of Kina. That necessarily dictated a following of all the due process under the PFMA as well as the relevant provisions of the Contract between the parties. That in turn, necessarily meant that, those who had the necessary power and authority to bind the State had to be involved in the negotiations, the eventual settlement of the terms and the final signing off on the alleged variation or extension of the Contract. There is no evidence of these happening.
  4. The uncontested evidence before the Court clearly shows Ronnie unilaterally decided to and continued to work after the contract had expired and rendered invoices, IPC No.5 and 6 without at any time seeking and securing an expressed agreement to so continue in accordance with the terms of the Contract. The defendants did not make any clear decision to confirm that the contract had expired, and that Ronnie should cease all works or expressly approved in writing the works to continue. Whilst the defendants were considering the options recommended by the first defendant based on his report dated 11th July 2011, Ronnie continued with the works and rendered the 2 invoices. Invoice, IPC No. 5 was not processed because, Ronnie had not yet responded to the show cause notice served on it, the contract had expired on 30th June 2011 without any formal renewal and the defendants were considering the option of terminating the contract. Subsequently, the claim was verified and a sum of K335, 089.41 was approved for payment. Of that, K301, 580. 47 was paid on 01st December 2011 and the balance got paid on 16th December 2011. A refusal to pay against invoice, IPC 6 caused Ronnie to cease any further works and his men and machines got stood down. The defendants engaged another contractor to complete the substantially incomplete works.
  5. In the Freeway Motors case, I expressed the view that:

“Given that NBC is part of the State, the parties had to go through the public tender process provided for under the PFMA, which they did for the original contract. Any variation to the original contract had to be in due compliance of the said Act. There is no evidence of the parties meeting the requirements under the Act in question.”


  1. This I held was necessary to meet the requirements of the PFMA as elaborated and emphasised by the Supreme Court in the Pioneer Health Services case, where the Court held:

“1. The requirements under ss.59 and 61 [now add ss.42 and 44] of the PF(M)A are mandatory and where a contract is entered into in breach of those requirements, it is illegal and is therefore null, void, and unenforceable.


  1. The requirements under the PF(M)A are to enable transparency in all public contracts and to safeguard against corruption and enable securing of fair contracts with public institutions and or bodies for the best services at a competitive or best price.
  2. A person dealing with the State or any of its arm or instrumentality or a public institution to which the Act applies, is bound to comply with the requirements of the Act and every person dealing with such institutions or bodies are deemed to be aware of these requirements.
  3. A failure to ensure compliance of the requirements of the Act operates to the detriment of the party contracting with the State or a public authority to which the Act applies.”
  4. In this case, several factors dictated the parties to specifically and expressly address the issue of any extension of the Contract expiry date and the terms on which that was to happen. These factors amongst others included Ronnie’s failures to:

(1) promptly mobilise and commence the works it agreed to undertake under the Contract without any delay especially when its, plant and equipment and other machinery were in Mt. Hagen and instead insist on a payment first of a sum of K500,000.00 contrary to the terms of the Contract;


(2) deliver the agreed works on a major national highway upon the arrival of the agreed Contract expiry date except only for 21% of the works despite being paid more than the value of the works completed;


(3) show cause when required;


(4) raise in accordance with Clause 24 of the Contract the issue of its alleged unlawful deductions and late payments of its invoices which it alleges had an impact on its cash flow and its ability to complete the Program of Works on time;


(4) seek an extension of the Period of Completion in accordance with the provisions of Clause 27 and 28 of the Contract; and


(5) generally, operate in accordance with the various and relevant provisions of the Contract, amongst others, in a timely undertaking of the works required and the rendering of its monthly invoices at the end of each month worked.


  1. Additionally, about 79% of the works or about K6,606,378.37 worth of works out of the initial contract value of K8,322,649.83 remained to be completed. This was, therefore, not an appropriate case for variation or extension of the expiry date by the conduct of the parties. The parties had to go through the PFMA process and the relevant terms of the Contract to have it renewed expressly and in writing. The parties failed to take the appropriate steps and have the Contract’s expiry date appropriately and expressly extended in any manner or form. It was incumbent upon Ronnie to make the necessary requests for extension and refrain in the meantime, from undertaking any further works until the extension was secured. Instead, Ronnie decided unilaterally to continue with the works beyond the agreed period and tried to secure an extension outside the requirements of the PFMA and the case law built around that Act, as well as the relevant terms of the Contract. That in my view, was illegal and was in breach of the PFMA and the terms of the Contract. Effectively, that was a fraud against the PFMA and the State and the people of the country. Given that illegality, Ronnie is not entitled to claim and be paid for the works done after the expiry of the Contract and after service of the show cause notice. Fortunately, for Ronnie it was paid under its invoice, IPC No. 5.
  2. Following on from the above, Ronnie was obliged to mitigate its losses, but it did not. The fact that the Contract had expired without any expressed extension or renewal, it was served with a show cause notice which it failed to respond to, its invoice, IPC No. 4 remaining unpaid as of the date of the expiry of the Contract and its serious cashflow problem, gave Ronnie more than enough reason to refrain for conducting any further works and incur costs after the Contract had expired. Instead, it proceeded unilaterally, and by its conduct, illegal caused the State to pay it K335, 089.41 out of the public purse against IPC No. 5
  3. In these circumstances, I find the parties could not and did not extend the Contract’s expiry date by their conduct. Ronnie’s working beyond the Contract expiry date without any expressed renewal or approval was unilateral and unlawful.
  4. Having regard to all the problems highlighted above, I find Ronnie was paid over and above the value of the physical works estimated at only 21% of the total physical works required under the Contract had been completed. It is therefore not entitled to be paid more. Any allowance for any additional payments would amount to unjust enrichment. Further, even if any of the invoices in full or in part remains unpaid, Ronnie was obliged to take the appropriate steps under the Contract to raise the issue of reductions and late payments in a timely manner within the terms of the Contract. That, Ronnie failed to do, and it is now not open to it to come to this Court and raise them outside the process and time frames agreed to and provided for under the Contract. For these reasons, I find Ronnie has failed to establish its entitlement to the damages it is claiming. Accordingly, I decline to make any award for this part of the claim.

Interest claims


  1. I now turn to a consideration of issue of interests. Originally, Ronnie claimed interest under two categories. One for interest for late payments for invoices which were already paid and the other for interests for invoices rendered but not yet paid. At the trial, Ronnie abandoned the first category of interests claimed and pursued only the claim under the second category. As will become clearer soon, I find with respect, Ronnie got its claim for interests mixed up.
  2. Ronnie’s learned counsel submits, pursuant to Clause 43.1 of the Contract, for all the delayed payments, interest must be calculated on “commercial borrowing rate” at the material time. Relying on a few decisions of the Supreme and National Courts which includes my decision in Kunai v. PNG Forest Authority (2018) N7570, counsel submits, in the absence of any specific agreement of the parties as to the relevant commercial borrowing rate, the rate should be 13.38%. Then despite abandoning the claim for interest for late payment, learned counsel makes the following further submissions:

“As per the Agreement clause 43.1, invoices have to be paid within 28 days. However, interest at commercial rate is attracted for late payments outside of the 28 days. The total amount unpaid from the invoices rendered stands at K3, 185, 635.67. These were payments unlawfully deducted by the Defendants. For purposes of calculating interests, this is the total principle amount.


From the principle amount, two of the unpaid invoices issued in 2010 remains outstanding totaling up to K576, 515.26. This becomes the principle amount. The year of maturity should be 2011. Hence, table 1 sets out the calculation on the prevailing commercial interests’ rate at 13.38% with penalty at 0.937%.”


  1. Proceeding on that basis, counsel calculates interest for the years 2011 to 2020 and arrives at a total of K2,197,449.96 for unpaid invoices, IPC No. 1 and 2. He then arrives at a further K8,632,759.12 for unpaid invoices, IPC No. 3 – 6. This brings the total claim for interests alone to K10,830, 209.08. Counsel then submits to avoid multiplicity of claims, K10,830,209.08 be awarded to cover outstanding payments for IPC 1 - 6 with interests.
  2. There are several problems attending this part of Ronnie’s claim, some apparent on the face of the submissions. Firstly, The Contract provides for the prevailing commercial borrowing rate without specifying what that rate is. It was incumbent upon Ronnie to plead and produce evidence on the prevailing commercial lending rate at the relevant time. That was not hard to do. All that Ronnie and counsel needed to do was to obtain the relevant prevailing interest rates from the commercial banks and have those adduced into evidence. This, Ronnie failed to do. It is not for the Court to make a case for a party, especially in cases where a party is easily placed to seek, secure, and produce the evidence, required to establish its case. Relying on passed decided cases such as my decision in Kunai v. PNG Forest Authority (supra) and the Supreme Court decision in Rimbunan Hijau (PNG) Ltd v. Ina Enei (2017) SC1605, are for cases in which a plaintiff is not in any position to access and produce the relevant evidence. Here, the evidence required is not hard to seek, secure them from the commercial banks and produce those in Court. Without explaining why, it was not able to adduce the kind of evidence in question, the submission calls for an acceptance of a rate that was used in earlier judgments, which is not necessarily the rate the parties may have agreed to and or is the prevailing commercial banks’ lending rate now or at the relevant time of the late or delayed payments.
  3. Secondly, the due date for a payment of each of the certified invoices were not the same. They had different dates and periods. Except for only one or two of the invoices, most of the invoices were not rendered at the end of each month as required by Clause 42.1 of the Contract. Ronnie rendered invoices covering multiple months works and or advances. That contributed to some of the delays in a prompt and timely payment of the invoices. Ronnie’s submission does not make any allowance for these differentiating factors and its own contributions.
  4. Thirdly, the Contract had a duration of 10 months commencing August 2010 to 30th June 2011. How is it then possible to claim interest beyond the agreed contract expiry date or up to the date when Ronnie stopped conducting any more works which was just before the end of 2011? Further, the total value of the Contract as agreed to by the parties was K8, 322, 649.83. How is it then fair and reasonable to allow for interest beyond the agreed contractual value with Ronnie completing only 21% of the total physical works required? Ronnie has not offered any convincing answer or explanation as to its legal and factual basis to claim interest for such extended periods and in such substantial amounts of money which must come out of the public purse, if it is to succeed in its claim.
  5. Fourthly, two provisions in the Contract between the parties provide for interest. These are Clause 43.1 and Clause 43.2. These provisions state:

Clause 43.1

“Payments shall be adjusted for deductions for retention. The Employer shall pay the Contractor the amounts certified by the Superintendent within 28 days of the date of each certificate. If the Employer makes a late payment, the Contractor shall be paid interest on the late payment in the next payment. Interest shall be calculated from the date by which the payment should have been made up to the date when the late payment is made at the prevailing rate of interest for commercial borrowing.”


Clause 43.2

“If an amount certified is increased in a later certificate or as a result of an award by the Adjudicator or an Arbitrator, the Contractor shall be paid interest upon the delayed payment as set out in this clause. Interest shall be calculated from the date upon which the increased amount would have been certified in the absence of dispute.”

(Underlining mine)


  1. By these provisions, the parties provided for two kinds of interests, one for late payment under Clause 43.1 and the other for delayed payments under Clause 43.2. They are two completely distinct kinds of interests. The first kind is for any late payment of invoices certified by the Superintendent. Once, an invoice is certified by the Superintendent, it becomes payable within 28 days. Any payment outside that period becomes late payment and attracts interest “at the prevailing rate of interest for commercial borrowing” or the prevailing commercial bank lending interest rate. The rate can be determined by reference to the prevailing commercial bank interest rate, which is a matter of fact and must be proven by appropriate evidence in the absence of any agreement of the parties. Interest thus payable is to be calculated and included in the next payment.
  2. The second kind of interest is for delayed payments. This applies in cases where a certified amount is “increased in a later certificate or as a result of an award by the Adjudicator or an Arbitrator.” The rate of interest would be at the same as the one under Clause 43.1. Such interests would run from “the date upon which the increased amount would have been certified in the absence of dispute.”
  3. Both parties failed to assist the Court with any submissions as to how these provisions were to be applied. Clause 43.1 is clear, and no art of interpretation is required. As for Clause 43.2, I find it is a bit tricky especially in relation the phrase “If an amount certified is increased in a later certificate”. What does this mean? How would a previously certified invoice or claim be “increased in a later certificate”? In my view, one way that could happen within the context of the clause itself, is this. An item included in a previous invoice is reduce and is part of a certification by the Superintendent. The contractor then takes issue with the reduction and the parties agree to restore the reduced amounts in full or in part without going through the adjudication or arbitration processes. Another would be interest for any late payment which by virtue of Clause 43.1 must be paid in the next payment. That can happen with say the contractor including the interest for late payment in its next invoice which the Superintendent may allow if it is in order, for payment on the next payment. If the Superintendent allows the interests claimed, that would effectively result in the “amount certified is increased in a later certificate”. In other words, the previous certified invoice gets increased by the amount of interest certified by the Superintendent.
  4. Ronnie’s pleading for the relief for interest is at paragraph 24 of the Amended Statement of Claim. The pleading reads:

“Pursuant to clause 43.1 of the General Provisions of Contract, Section IV of the Contract, the Plaintiff is entitled to interest at the prevailing interest rate for Commercial Borrowing for any delayed payments after expiry of the expected payment date. The expected date of payment is (42) days which includes (14) days under clause 42 given to the Superintendent to certify monthly invoices and (28) days under clause 43. 1 for payment of the certified amount.”


  1. As already noted, Clause 43.1 provides for interest for late payments while Clause 43.2 provides for interest for delayed payments. Again, as noted, these are two distinct kinds of interest payable under two different situations. Ronnie’s pleadings cite Clause 43.1 and talks about delayed payment. The evidence adduced by Ronnie does not establish a case of delayed payments within the meaning of Clause 43.2 but if any, it is for late payments which would come under Clause 43.1. In any case, I note the claim for interest for late payments was abandoned. Also, Ronnie has failed to establish the claim it has pleaded. Consistent with the relevant law on point, without leave being sought and appropriate amendments granted, this Court cannot act on the evidence presented outside the pleadings: See PNGBC v. Jeff Tole (supra). Further, since there was more than one invoice rendered and payments made at various times, the interest claimed had to be first pleaded corresponding the relevant invoices and their respective period of late or delayed payment with the evidence called establishing the case thus pleaded. This Ronnie failed to do.
  2. The entry of default judgment was for the kind of interest pleaded and not that which was introduced by the evidence. The defendants are therefore entitled to, and they are taking issue on their liability as this was a matter that was not pleaded. Again, based on trite law on point, I find the claim for interest for delayed payment as pleaded has no foundation in the Contract or the evidence adduced. This alone would form the basis to reject Ronnie’s remaining part of its interests claim.
  3. Fifthly, interest for delayed payment is applicable upon an establishment as a fact that “an amount certified is increased in a later certificate or as a result of an award by the Adjudicator or an Arbitrator” within the meaning of Clause 43.2 of the Contract. The points I made above and those regarding the ousting of this Court’s jurisdiction by the provisions of Clause 4.1, 24 and 25 of the Contract are relevant and equally apply here. Now that the parties’ relationship has soured and they have come to this Court, the possibility of getting to “an amount certified is increased in a later certificate” is nil. The other alternative of “or as a result of an award by the Adjudicator or an Arbitrator” can only be reached at adjudication or arbitration as provide for in the Contract. Ronnie did not utilise the process it agreed to and is provided for in the Contract. This Court is neither the adjudicator nor the arbitrator the parties provided for in their Contract. Hence, a combination of Clauses 4.1, 24, 43.1 and 43.2 of the Contract, precludes this Court from allowing the remaining part of the interests as claimed.
  4. Sixthly and more substantially, of the total 6 invoices rendered, invoices, IPC NO. 1 - 5 were reduced, the reduced amounts were certified and paid albeit belatedly for most of them. If there was any issue with that, that should have been resolved in accordance with the provisions of Clauses 4.1, 24, 43.1 and 43.2 of the Contract. The only unpaid invoice is IPC No. 6. For reasons given at paragraphs 51 to 85 above, this Court decided against making any allowance for that invoice. The question of interest be it categorised as late payment or delayed payment is dependent on a finding that, there is a valid invoice that remains unpaid and must therefore be paid. Given the decision on the relevant invoice not being valid and properly outstanding for payment, the claim for interest for that invoice falls away.
  5. Seventhly, after having abandoned its claim for interest for late payments of the certified invoices, Ronnie was obliged to bring its remaining part of the interests claim within the terms of the Contract. The relevant provisions as noted are Clause 43.1 and 43.2 of the Contract. Having abandoned the claim for interest for late payment which falls under Clause 43.1, Ronnie was left with the provisions of Clause 43.2. For reasons given above at paragraphs 94 to 100 under the fourth problem, the claim for interests for unpaid amounts do not fall under Clause 43.2. Indeed, Ronnie’s submissions does not even try to make a case under this provision of the Contract.
  6. Finally, a close examination of Ronnie’s remaining parts of the interest claims is for unpaid invoices. In respect of that, Ronnie appears to have taken out the differences in all invoices reduced, certified, and paid and its original invoiced amounts and then place the difference into the unpaid category along with IPC No. 6. For reasons already given under the heading “Unpaid outstanding claims for invoices rendered” at paragraphs 35 to 87 I declined to allow any damages for unpaid and outstanding claims for invoices rendered. The claim for interest stands or falls with the that part of the claim. Since, this Court decided to disallow that part of the claim, the claim for interests has no foundation.
  7. For all the foregoing reasons, I decline to allow for the whole or any part of the interest claims.

Loss of income, business, and profits


  1. I now turn to a consideration of the next head of damages claimed by Ronnie, namely loss of income, business, and profits. Under this head of damages, Ronnie is seeking judgment in the sum of K10 million based on a claim that, if all went well with the Contract and the State paid on a timely basis, it would have made an estimated K1.2 million for 9 years from 2011 to 2019.
  2. In support of its claim, Ronnie claims, prior to the Contract the subject of this proceeding, it had a healthy cash flow as shown below:
Financial Year
Revenue/Income generated (K)
2005
2, 154, 812
2006
2, 597,182
2007
2, 624, 899
2008
1, 213, 402
2009
2, 045, 273
2010
1, 856, 966

  1. Ronnie also claims, it has successfully completed several small works contracts with the State through the DoW. The Contract in this proceeding was its first major one. It goes on to claim the State’s unlawful deduction and the delayed payment of its claims or invoices under the Contract, caused it to go into financial difficulties and eventually go dormant and defunct. Therefore, it claims, it is entitled to the amounts it is claiming as it is the amount it would have made. Several affidavits from Ronnie’s employees and itself have been filed to support its claims.
  2. I am having difficulty understanding and finding for this part of Ronnie’s claim because of five factors. Firstly, Ronnie has not pleaded with sufficient particulars this part of its claim. At paragraph 26 of its amended statement of claim, it pleads generally and says, “particulars to be provided at the trial”. As the Supreme Court said in PNGBC v. Jeff Tole (supra), that is no pleading at all. The particulars must be pleaded and included in a plaintiff’s statement of claim. This is necessary to meet the object or purpose of pleadings and to allow for a conclusiveness of a default judgment to flow through for an assessment of damages. Here, Ronnie has failed to properly plead with all the relevant particulars.
  3. Secondly, after having failed to plead properly, Ronnie has also failed to produce any evidence that directly connects its alleged losses only to the actions of the defendants in the alleged unlawful deductions and late payments. Evidence, for example of the businesses, Ronnie planned had already commenced based on the projected income to be derived from the Contract in this case but collapsed or failed because of the unlawful deductions and delayed payments, which would have assisted. There is no such evidence. Also, Ronnie’s submissions do not allude to any business that was directly affected by the defendants alleged illegal deductions and delayed payments.
  4. Thirdly, the claim is for loss of income, business, and profits for 9 years from 2011 to 2019. However, the Contract was for a period of 10 months only commencing August 2010 and expiring on 30th June 2011. In the absence of any valid extension of the Contract period up to 2019, Ronnie could only be looking at income, business and profit it could have generated within the 10 months period from the proceeds of the contract. The agreed value of the Contract was K8, 322,649.83. That is the amount the parties contracted for. Clearly, that is the ultimate amount of income Ronnie was entitled to look at and expect to make out of the Contract in the absence of any pleading and evidence to the contrary, if all went well with all parties meeting their obligations in a timely manner. A critical trigger for that had to be the steps Ronnie had to take in a timely and satisfactorily manner. The evidence suggests Ronnie failing to discharge its contractual obligations in that way. Again, in the absence of any pleading and evidence to the contrary, the profits and other gains Ronnie would have made from the Contract was dependant on the contracted amount being generated and nothing beyond. Also, any income, or profits would have to allow adequately for expenses or expenditure out laid to generate the income. Neither is there any evidence called by Ronnie nor does its pleadings assist with any information in that respect. The claim for K10 million in addition to the amounts already paid to Ronnie is certainly outside what was agreed to and could not reasonably be expected to be made from the contract if all went well. If, however, Ronnie was a smart business and would have made income up to the amounts it is claiming by say investing well from its income from the Contract in this case with healthy returns, it had the obligation to first plead with particulars how it was able to make such income from its prior investments, his projected investments out of the Contract in this case and establish such a claim by evidence on point. This it failed to do.
  5. Fourthly, my discussions, observations, findings, and the decisions under the respective headings on the issues of mobilisation, deductions or reduction of invoices and late payments under their respective headings are relevant. They equally apply here with appropriate modification.
  6. Finally, based on the earlier discussions, findings, and decisions, and other factors that will soon be explained the following are important and critical factors:

(1) the parties had a written contract governing their relationship with their respective duties and responsibilities;


(2) the terms of the contract clearly provided for mobilisation costs at K500.00. That amount was proposed by Ronnie, accepted by the State, and paid when required. Despite the expressed agreement and without a valid variation of the Contract to increase the figures to K500,000, Ronnie demanded a payment of K500,000.00 first before taking possession of the project site;


(3) the defendants repeatedly asked Ronnie to take possession of the site and commence the works after the execution of the Contract which Ronnie ignored, choosing instead to insist upon a payment of its claim of K500,000.00 in mobilisation costs;


(4) during contract negotiations, Ronnie represented has having the necessary financial and other capacities and capabilities therefore to successfully undertake the works and deliver within the agreed period. That representation was in the main, based on an assumption that Ronnie would successfully borrow, K1.5 million and would be receiving outstanding payments on a credit line in the sum of K2.45 million in time to improve its cash flow. It is a well-known fact in PNG that the State is best known for delays, sometimes very lengthy and going into years on contracts and even judgments of the Supreme and National Courts. Ronnie has not pleaded and did not produce any evidence that clearly explains what became of the money it was going to borrow and its line of credit. Not surprisingly, the assumption proved wrong in the absence of any evidence to the contrary. That in my view, adversely affected Ronnie’s cashflow, independent of the alleged unlawful deductions, delayed payments, and any breach of the Contract by the defendants;


(5) the contract at Clause 42.1 provided for invoices for work done or progress claims to be rendered at the end of each month worked for each of the 10 months duration of the contract. Contrary to that, Ronnie rendered delayed invoices and, in most instances, rendered invoices for multiple months which were not authorised by the Contract;


(6) Ronnie’s failure to render monthly invoices at the end of each month and invoicing for multiple months, contributed to the delay in the processing and payment of the invoices;


(7) contrary to Ronnie’s indication that it had the necessary financial and other relevant capacity to undertake the works and deliver them within the agreed period, it in fact relied upon payment of its invoices to continue with the works;


(8) factors (4) - (6) adversely affected Ronnie’s cashflow and hence its ability to discharge its duties and obligations under the Contract within the agreed period of 10 months;


(9) Ronnie failed to promptly register disputes pursuant to Clause 24 of the Contract over the deductions to each of its progress claims through invoices, IPC No. 1 – 5 and a delayed payment of the certified invoices or claims in accordance with the relevant terms of the Contract and claim interest pursuant to Clause 43.1 of the Contract;


(10) Ronnie’s own project manager, Mr. John Puri’s report confirmed only 21% of the physical works or K1,727, 638.21 worth of works out of the total contracted value of K8, 322,649.83 were completed as of 11th December 2011. However, Ronnie was paid a total of K2,326,308.76 as of 09th August 2011;


(11) the Contract at Clause 13.1 speaks of and obligates Ronnie to take out appropriate insurance cover. Ronnie did not plead, adduce evidence and make submissions on whether it explored and or in fact took out the required insurance to cover for delays in payments given the well-known fact that the State often delays contract, judgment or other payments for goods and services;


(13) Ronnie failed to mitigate its loss:

(a) by taking the position it took under (2) above;

(b) by failing to take the steps it failed to take under (3), (5), (9) and (11) above;

(c) when the defendants failed to promptly pay the invoices it rendered, it had the option of refraining from undertaking any further works, with its serious cashflow problem. That it failed to do; and

(d) given his lack of financial and other capabilities to undertake and deliver the project on time, it had the option of subcontracting the works to another contractor having the necessary means to help deliver on the project. There is no evidence of Ronnie giving such an option any consideration and taking the appropriate steps.


  1. It is settled law that all plaintiffs have a duty to mitigate their losses. A failure to do so may result in a reduction of the damages that could be recoverable: See Motor Vehicle Insurance (PNG) Trust v. James Pupune [1993] PNGLR 370 at 380 and Abel Kopen v. The State [1998-89] PNGLR 659 at 660.
  2. In the light of the factors outlined above, I find Ronnie’s alleged losses were of its own making notwithstanding the defendant’s late payments. Repeating for the purpose of this part of the Ronnie’s claim, Ronnie’s losses or damages started with it signing a contract of substantial value that was beyond its capacity and capability to deliver within the terms of the Contract. Having signed the Contract, it failed to promptly mobilise and take possession of the project site and commence the works. Instead, it insisted upon a payment of K500,000, in mobilisation costs that was neither in the Contract nor validly varied and incorporated into the Contract. Since, Ronnie had to mobilise from nearby Mt. Hagen, I cannot understand why Ronnie took the position it took. When it eventually relocated at its own costs, the costs according to its own evidence, came to K300,000.00. Even then, no detail is given as to the individual items that added up to that amount.
  3. Then as noted already, upon getting to the project site and commencing the works in August and continuing in September 2010, Ronnie failed to render its monthly invoices at the end of August for August 2010 and end of September 2010 for September 2010 as required by Clause 42.1 of the Contract. Instead, it rendered an invoice for only September late on 11th October 2010. The next invoice, IPC No. 2, was rendered on 30th November 2010 covering the months of October, November and December 2010 and advance claims for the months of January and February. The third invoice, IPC No. 3 was rendered on 10th February 2011 follow disallowance under the second invoice. That was in order as it confirmed with the terms of the Contract. Invoice, IPC No. 4 was rendered on 27th May 2011 covering the months of March, April, and May 2011, instead of at the end of each month. No invoice was rendered for the months of June, and July 2011. Ronnie rendered its next invoice, IPC No. 5 on 06th September 2011 for the month of August 2011. It did not render any invoice for the month of October 2011. The next invoice Ronnie rendered was IPC No. 6 on 07th December 2011, covering the months of November and December 2011 and January and February 2012. This pattern of invoicing tells of the relevant Program for the works not progressing consistently each month up to the expiry of the Contract and beyond. I take the view that this explains why only 21% of the physical works was completed as of 11th December 2011 as reported by Ronnie’s own project manager, Mr. John Puri.
  4. John Puri attributes this poor completion of the works to delays by the State in settling invoice, IPC No. 4. In my view, given the number of months covered in that invoice, the defendants had to take time to verify the claim against actual physical works done for those months. Eventually, that invoice was substantially reduced from K1,077,124.74 to K372, 802.54 and certified for payment. On 13th July 2011 part payment in the sum of K335, 522.29 was made and the remaining balance were paid on 19th August 2011. Ronnie did not take any issue with that reduction pursuant to Clause 24 of the Contract. Also, if indeed Ronnie did have the necessary and required capacity, it could have continued to perform the Contract despite the late payments with the assurance it would be eventually paid later with interest per Clause 43.1 and 43.2 of the Contract. But since, it did not have the necessary capacity, it relied entirely on the payment of the invoices which were slow in coming.
  5. Again, ss earlier noted, all the invoices were subjected to verification, and reduced substantially and certified for payment at substantially reduced amounts for some of them. The substantial reduction of several of the invoices which did not attract an immediately dispute from Ronnie certainly tells its own story. Either the invoices were indeed substantially inflated, and therefore, Ronnie was in no position to successfully take issue and succeed or that the reductions were of no concern to Ronnie and as such it took no issue. The certified invoices were paid but with some delay. Again, as already noted, Ronnie was entitled but it failed to register any dispute under Clause 24 on the reduction for each of the invoices or the late payments and claim interest for each of the late payments pursuant to Clause 43.1 and 43.2. If it did, given the timeframes stipulated for adjudication under Clause 24 and failing resolution, arbitration under Clause 25, these issues could have been promptly addressed and resolved, whilst the relevant evidence of works carried out were fresh and intact. That had the possibility assisting Ronnie with its cashflow problem each month but for its failure to render monthly invoices.
  6. In the end however, the total of the amounts paid to Ronnie, exceed the total value of the works done. Also, if Ronnie disputed the reductions and claimed the interest for the late payments within the terms of the Contract, that also came with the possibility of being paid more, conditional on it successfully making out a case, something Ronnie failed to do in this Court.
  7. I remind myself again, it is trite law that the object of assessing damages is to put an injured party in the same position that party would have been but for the actions of the other party constituting a breach of contract: See PNG Aviation Services Pty Ltd v. Geob Karri (2009) SC1002 at [14]. This necessarily, imposes a duty in the Court as a matter of law and in equity to ensure that there is no unjust enrichment or gain by one party against the other. This is necessary to do justice: See Ibi Enei v. Rimbunan Hijau (PNG)Limited (2011) N4402 at [67] and Rimbunan Hijau (PNG) Limited v. Ina Enei (2017) SC1605.
  8. In the present case, I accept the defendants’ submissions that Ronnie was paid over and above the actual value of the little 21% of the physical works performed. If not withstanding that, Ronnie did suffer the kind of losses it claims and that is directly connected to the alleged unlawful deductions and late payments of its invoices, it did not produce any credible evidence establishing that. To ask for more and allow for more without the relevant and necessary evidence and a corresponding amount of work completed, we would be allowing for unjust enrichment by Ronnie who has not substantially delivered on its side of the bargain. Its failure has resulted in the State incurring further costs in engaging a different contractor Kaipal Investment Limited to complete the incomplete 79% of the physical works, well outside the original budget and project timeframe.
  9. I also considered Ronnie’s claims of the first and second defendants sabotaging it from performing the Contract by deliberately delaying and withholding the payments on its invoices. Ronnie came up with that allegation in its letter dated 22nd November 2011[2], claiming inter alia that, the said defendants were siding with two Engan Politicians, Hon. John Pundari, who allegedly owned the company, Kaipal Investment Limited that eventually completed the works and Hon. Sam Abal. No company extracts showing Hon. Pundari as a shareholder or director of Kaipal Investment Limited or any evidence connect either of these politicians to the company or and other evidence disclosing the relationship between the said defendants and Hon. Pundari was adduced and put into evidence for Ronnie. Without any such evidence, the allegations remain allegations only. Further, the effect of the various problems identified above speak against Ronnie’s claims and point strongly to Ronnie creating its own problems.
  10. Having regard to all the above, I am not persuaded on the balance of probabilities that Ronnie suffered the losses as alleged. But, if it did, they are not solely and directly or at all attributable to the actions, inactions or failures alleged against the defendants. Accordingly, I decline to make any award of damages under this head of damages.

Demobilisation costs


  1. I now turn to the next head of damages, demobilisation. For this head of damages, Ronnie refers to my decision in the Coecon (supra) case, where I allowed K50,000.00 in demobilisation costs. It then points to its machineries, plant and equipment being stood down or grounded at the project site for over 10 years incurring K130,000.00 in rental arrears. Ronnie also points to Clause 60.2 of the Contract which it argues, provides for demobilisation. Finally, it submits, given the lapse of time, it stands to suffer huge prejudice if it is to demobilise and argues for an award of K300, 000.00.
  2. There are five problems with this part of Ronnie’s claim. Firstly, the starting point once again is the question of, is there a relevant term in the Contract that covers this issue. Clause 60.2 referred to by Ronnie allows for “reasonable costs of removal of equipment, repatriation of the Contractor’s personnel employed solely on the Works and the Contractors costs of protecting and securing the Works less advance payments received up to the date of the certificate.” But as Ronnie also acknowledges, this provision applies upon termination of the Contract for the Employer’s convenience or “because of a fundamental breach of Contract by the Employer”. Ronnie has not established and is not arguing, such a situation has arisen. Additionally, there is no evidence disclosing any termination under this provision. Hence, I find Clause 60.2 of the Contract does not apply.
  3. Secondly, a relevant provision might be Section IV, Clause 37.1 and 37.2 of the Contract which covers the Bill of Costs for the Contract. At paragraphs 14 and 15 in this judgment, I briefly discussed the confirmed contract document and “Section X - Prices Bill of Quantities”. As already noted, within that section is a section headed “PRICED BILL OF QANTITIES”. Then within that part, there is a part headed “Group 2 – Establishment” at items 2.1 and 2.9 having the figures K500.00 for mobilization and K150,000.00 for demobilization respectively. This, I already found was the agreement of the parties on the question of mobilisation and demobilisation.
  4. Thirdly, I repeat the discussions and findings under the claim for mobilisation inclusive of the question of any variation of that part of the contract. In short, as a matter of fact and contract law, Ronnie offered and the State accepted K500.00 in mobilisation costs and K150,000.00 for demobilisation costs. Ronnie claimed but failed to produce any evidence of the parties increasing those figures to K500,000.00 in mobilisation. Similarly, for the costs for demobilisation, Ronnie has not claimed, and it has not produced any evidence of the parties agreeing to vary the contract by increasing the initially agreed amount of K150,000.00 to K300,000 or to allow Ronnie to have its machinery, plant and equipment stood down at the project site for the lengthy period of 10 years or at all. I also adopt and apply the discussions on the question of Ronnie’s obligation to mitigate its losses or damages.
  5. Fourthly and specifically for this head of damages, Ronnie proposed, and it was agreed that demobilisation costs would be at K150,000.00. Also, upon expiry of the contract Ronnie did not request and the State did not expressly agree in accordance with the relevant terms of the Contract for its extension. As earlier found, during the currency of the Contract, both sides failed to act in a timely manner. Ronnie failed to render its progress claims or invoices in a timely manner and in accordance with the Contract, while the defendants failed to have the invoices promptly verified, certified, and paid within the agreed timeframe. Further, Ronnie produced no evidence and there are no submissions that, it made a claim for demobilisation at the agreed contractual amount of K150,000.00 or at all.
  6. Finally, given these factors amongst others, if Ronnie was a prudent and reasonable contractor, it should have taken the appropriate steps and demobilised promptly and seek to have them engaged in other construction contracts or hired to minimise its alleged losses and damages. The absence of any expressed agreement to extend the Contract beyond its agreed expiry date, Ronnie failing to respond to the show cause notice served on it and the fact that the defendants were taking steps to have the Contract formally terminated, the duty to take appropriate steps to mitigate its losses and or damages became a serious imperative for Ronnie. There is neither any evidence, nor is there any submission from Ronnie as to what steps it took to mitigate its losses and damages. I repeat the earlier statement and discussion of the law on a plaintiff’s duty to mitigate its losses and or damages. What is apparent in this case is that Ronnie did not make any attempt at all to demobilise. In these circumstances, I find Ronnie is only entitled to the agreed K150,000.00 in demobilisation costs and no more.
  7. This takes us to the next head of damages, which is depreciation of machines and equipment that are still on site.

Depreciation of machines and equipment


  1. Under this head of damages, Ronnie is asking for an award of K4.6 million. Affidavit evidence filed by Ronnie, including the Supplementary Affidavit of Ronnie Choi filed 19th December 2019, Court document number 127, shows certain of its light and heavy machineries and equipment are still at the project site now obviously deteriorating away. These includes various excavators, side lifters, front hand loaders, water trucks, Hino trucks and land cruisers motor vehicles. I accept Ronnie’s submission that, these machines and equipment costs millions of Kina. A depreciation value report covering the period 2011 to 2019 puts the value at K2, 760, 047.00, while a write off value of these assets is put at K1, 312, 837.00.
  2. I find a few problems with this part of the claim. Firstly, the pleadings do not provide any proper foundation for this part of the claim. At paragraph 26 (c) of its amended statement of claim, Ronnie claims depreciation and states “particulars to be provided at trial”. The law on pleading is clear. As already noted and as the Supreme Court said in BPNG v. Gabriel Tugiau (supra) case, “foundation must be laid in the pleadings to properly ground any prayer for relief. Without any such pleadings there can be no award.” Earlier, as already noted, the Supreme Court in PNGBC v. Jeff Tole (supra) made it clear that a pleading in terms like those employed by Ronnie, is no pleading at all for a proper assessment of damages.
  3. Secondly, neither has Ronnie pleaded nor has it covered in its submissions the relevant provisions, if any in the Contract that might cover this head of damages. The defendants refer to Clauses 12 and 13 of the General Conditions of the Contract which relate to risks and insurance. According to Clause 12, loss, or damage to property, which includes plant, materials and equipment are the Contractor (Ronnie’s) risks. Depreciation of plant, machinery and equipment comes under such risks. Under Clause 13, Ronnie is required to take out appropriate insurance cover. Ronnie has not assisted the Court with any pleading, evidence and submissions on the existence and the use or application of these provisions.
  4. Thirdly, I repeat the points I made in the context of the need for Ronnie as a reasonable and prudent contractor to mitigate its losses or damages. This would certainly include taking out sufficient insurance cover to cover such risks as the substantial amount of depreciation claimed here even if, the Contract did not obligate Ronnie to do so under the provisions referred to above. In my view, that is what a reasonable and prudent contractor would have done, given the usual slowness with which the State meets its contractual and other financial obligations. The question then is, did Ronnie take out any insurance cover? If it did, what level of cover did it take out? Is the risk of depreciation covered in the insurance cover? If Ronnie did in fact take out such cover, did it make any claim under the relevant cover? If yes, what became of it? If it was successful, how is Ronnie entitled to claim the same loss or damage and seek to be compensated when usually an insurer would be the correct party to bring an action in subrogation? Is this an action in subrogation? Ronnie has not provided any answers to all or any of these questions.
  5. Finally, I note the machinery, plant and equipment were allowed to go to waste by Ronnie for periods beyond the contractually agreed period. As noted already, there was no extension of the Contract expiry date in accordance with the terms of the Contract. Also, Ronnie has not made any claim, nor has it produced any evidence of an unequivocal instruction by all or any of the defendants for it to keep the machinery, plant, and equipment at the project site beyond the initially agreed Contract period had expired with no agreed written extension. Instead, Ronnie was served with a notice to show cause, which it did not respond to, and it knew steps were being taken to have the Contract formally terminated. What then was Ronnie’s legal or sensible reason to keep its machinery, plant, and equipment at the project site beyond the Period of Completion or the end of the Contract period and in any case for more than 10 years? If demobilising was difficult, what about the option of selling or renting or leasing out the machinery, plant, and equipment from where they were located? The only reason that has been offered by Ronnie for its failure to deliver on the Contract within the agreed Period of Completion is its cashflow problem and it is blaming the defendants for their failure to pay promptly. I addressed that argument in the context of the earlier heads of damages and had it determined against Ronnie.
  6. For these reasons, I find Ronnie has not made out a case as a matter of Contact, fact, and law for an award of damages for depreciation in the amounts claimed or at all.
  7. This takes us to the next remaining head of damages claimed namely, damages for breach of contract.

Damages for breach of contract.


  1. In its submissions, Ronnie tries to make its case for this part of its claim by allowing for:

(1) K8, 322, 649.83, the Contract value;

(2) K4, 825, 888.94, the total invoiced for alleged works done;

(3) K1, 640, 253.27, the part payments of invoiced amounts;

(4) K3, 185, 635.67, the balances owing on the invoiced amounts; and

(5) K501, 000.00 for purchase of bitumen.


  1. After making these allowances, Ronnie claims a balance of K2,995,760.90 is left. This it submits constitutes the damages for the deliberate breach of contract by the defendants.
  2. All the items from (2) to (5) against item (1) were already considered under the claim for unpaid outstanding claims for the invoices rendered as well as the claims for loss of income, business, and profits. To that extend, this part of the claim is a duplication. In any case, the considerations, and determinations under those heads of damages equally apply here. If, however, this is a separate head of damages and Ronnie is entitled to it, it first had to plead both the legal and factual foundation for the claim, clearly with sufficient particulars and show how this part of the claim is different from those already dealt with. After having so pleaded, Ronnie had the duty to produce appropriate evidence establishing this part of its claim. A careful consideration of Ronnie’s pleadings and the evidence it adduced shows a case of Ronnie having failed in both respects.
  3. As note earlier, the purpose of warding damages by a court of law is to put the injured party in the same position prior to the breach and loss and damages: See PNG Aviation Services Pty Ltd v. Geob Karri (supra). To do that, regard must always be had to the kind of contract under consideration. In the present case, the Contract being a contract for works with invoices to be rendered at the end of each month for works completed for the relevant month, Ronnie was under an obligation to establish by appropriate evidence that it delivered all the agreed works at the agreed monthly rate or stages and is entitled to the full value of the Contract. The evidence, as earlier found demonstrates Ronnie had completed only 21% of the physical works it agreed to undertake within the agreed 10 months under the Contract. Hence, it clearly failed to deliver on the remaining substantial balance of 79% of the total physical works required. Despite that, as earlier found, Ronnie was paid over and above what was properly due to it.
  4. For these reasons, I find Ronnie has failed to establish his claim both as a matter of law and fact. Accordingly, I declined to make any award for this part of the claim.
  5. This leaves us with two remaining heads of damages to deal with. The first of the two is a claim for K2 million in general damages.

General damages


  1. Ronnie through learned counsel submits, award of general damages to a corporate company is not new. He goes on to submit, Courts in our jurisdiction have been awarding general damages to cover costs, time and corporate energy caused by a breach. The decisions in Rodao Holdings Ltd v. Sogeram Development Corporation Ltd (2007) N5485 and Binnen Construction Ltd v. Malai (2014) N5775 are cited in support of that proposition, without any specifics.
  2. The cases, cited for Ronnie are distinguishable from the present case. The first case concerned a management contract. The plaintiff rendered services under a 3-year management agreement. Midway into the faithful performance of the contract, the defendant suspended the agreement. Then a month later the defendant repudiated the agreement, for reasons unknown to the plaintiff. Liability was resolved by default judgment. The Court allowed a claim of K50,000.00 in damages. That was to compensate the plaintiff for distress, inconvenience and frustration caused to it by the defendant’s breach of contract. The judgment does not make it clear if evidence adduced by the plaintiff, establish the suffering of any distress, inconvenience and or frustration. No authority, local or overseas was cited to support the decision to make that award.
  3. The second case concerned a breach of a construction contract. There, citing the first case, Cannings J awarded K10,000. That was to cover for costs, the company’s time, and corporate energy coping with the consequences of the breach inevitably forced upon the plaintiff by a breach of contract. No other authority, local or overseas was cited in support of that award. Also, the judgment does not make it clear if indeed, there was evidence of the kinds of consequence the Court spoke of being occasioned in the case before it.
  4. It is trite law that damages for distress, inconvenience, disappointment, or frustration forced upon a party by the other’s breach of contract is a recognised head of damages in our jurisdiction since the Supreme Court decision in Hodson v. The State [1985] PNGLR 303. However, it is also well settled law that, such damages can only be awarded if the plaintiff adduces evidence of having suffered such damages or losses. In Peter Aigilo v. The Independent State of Papua New Guinea (2001) N2102, I had the occasion to consider this head of damages and awarded K20,000.00 in damages. That was in a clear case of the plaintiff, who was the then Police Commissioner, being terminated in a much more humiliating way without any proper and sufficient notice, warning and providing reasons for termination. The plaintiff was not accorded due honour and respect as an outgoing Police Commissioner in keeping with established custom and tradition in the Police Force. He was not given any notice of the first defendant’s intention to terminate him. He learned of his termination when he turned up for work at the relevant time and found that he was replaced by a new Commissioner of Police and a guard of honour was being mounted to welcome the new Commissioner, without first notifying and farewelling him. This happened within a space of 6 days only after he was congratulated for a job well done by the then Prime Minister and other Ministers. The plaintiff was no doubt shocked. But for his strong health, he could have had a heart attack there and then. Available medical evidence diagnosed the plaintiff as suffering a medical condition described as “acute severed nephorotic syndrome” contributed to by the loss of job, loss of status, loss of money and the way in which he was terminated.
  5. Also based on his contract, the plaintiff got into a loan and other financial commitments. The bank called up the loan and his children’s school fees were seriously affected. He tried to make ends meet by seeking alternative employment with little or no luck. Although he secured some temporary employment, they did not last and did not replace the sudden loss he was made to face. This greatly impacted against his health and rendered him bed ridden. He was rendered as good as useless because of the way in which the defendants treated him.
  6. Applying the law to the present case, clearly the present case is not a case of contract of employment as was the case in Peter Aigilo’s case or Rodao Holdings Ltd’s case. Instead, the present case was a contract for works, with clear terms as to how the works would to be performed, delivered, and paid for. In other words, this was a performance-based contract. It had a specific timeframe within which the works had to be delivered. Repeating myself, when its expiry date arrived, the parties failed to have it renewed or extended in accordance with the relevant provisions of the Contract. Both parties breached the Contract which was set in motion by Ronnie when it failed to promptly mobilise, take possession of the project site, and commence the works. Then throughout the currency of the contract, Ronnie continued to breach the contract in failing to render monthly invoices. Instead, it submitted invoices outside contractual time requirements. Also, it rendered invoices in most instances for multiple months for substantial amounts without any foundation in the Contract for it to render invoices in that way. The defendants did not take any issue with that and eventually got around to certify and paying the certified amounts. Furthermore, Ronnie was served with a show cause notice which it ignored and failed to respond to. Still further, as noted, Ronnie only completed 21% of the physical works require leaving 79% yet to be completed. Despite that, Ronnie was paid more than the value of works rendered and being substantially assisted with cash and material. The only breach on the part of the defendants were delays in certification and timely payments of invoices. However, for that breach, the contract made provision for a remedy which Ronnie fail to utilise promptly and within the timeframes stipulated by the Contract.
  7. The head of damages under consideration is an equitable remedy. Equity demands that he who comes to equity, or the court must come with clean hands. Whether or not to award the kind of damages under consideration is a matter that lies within the discretion of the court, which must be exercised, having due regard amongst others to the conduct of the parties. In this case, both parties have breached certain provisions of the Contract but more so by Ronnie. On all accounts, per all the foregoing, Ronnie has come to this Court with its hands dirtier than that of the defendants. Considering all these, I am persuaded not to allow for any damages for the head of damages under consideration.

In summary


  1. In summary, this Court has decided against assessing any damages for Ronnie in respect of all its heads of damages except for only one. The one exception is the claim for demobilisation which was allowed in the contractually agreed amount of K150,000.00. At the same time, the Court found Ronnie was paid an extra sum of K598,625.55, which was over and above the value of work completed. Neither party assisted the Court with any submissions as to what should become of the excess payment. Accordingly, I decline to make any order in respect of the same. Ultimately, I assess, the plaintiff’s damages at K150,000.00 for demobilisation.

Costs and interests


  1. The only remaining issues the Court must now turn to consider and determine are the issue of interest and costs. These are consequential reliefs that are dependent upon a grant of all or some of the substantive reliefs. I will allow for interest at 2% on the K150,000.00, pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act from the date of the issue of the writ until judgment. As for costs, Ronnie (the plaintiff) as succeed in only one out of eight (1/8) of the heads of damages claimed. It will therefore have one 8th of the total costs in these proceeding, to be agreed, if not, taxed.

Formal Orders


  1. The formal orders of the Court then are as follows:
    1. Except for the claim for demobilisation costs, all other heads of damages claimed by the plaintiff are disallowed with no damages assessed for each of them.
    2. Damages for demobilisation is assessed and allowed for the Plaintiff in the sum of K150,000.00.
    3. The defendants shall pay interest at 2% from the date of the issue of the writ until judgment on the K150,000.00 award, pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act.
    4. The defendants shall pay the plaintiff one eighth (1/8) of the total costs to be agreed, if not, taxed.

__________________________________________________________________
Jeffersons Lawyers: Lawyers for the Plaintiff
Guardian Legal Services: Lawyers for the Defendants

[1] (see letter dated 02/05/2010 in Contract Document, Section III, Pos-Bid/Precontract Amendment and Correspondents).
[2] Annexure “P” to affidavit of Ronnie Choi sworn 15/07/2013 and filed on 16/07/2021, Court document number 45.

PacLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.paclii.org/pg/cases/PGNC/2021/657.html