Lorma Constructions Ltd v Neng [2025] PGNC 432; N11573 (5 November 2025)

N11573

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WS NO 781 OF 2018

BETWEEN
LORMA CONSTRUCTIONS LTD
Plaintiff

AND
JOSEPH NENG, The Provincial Administrator
First Defendant

AND
WESTERN HIGHLANDS PROVINCIAL GOVERNMENT
Second Defendant

AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

WAIGANI: MAKAIL J
3, 5 NOVEMBER 2025

LIABILITY – Breach of contract – Contract for services – Upgrading and resealing of road – Performance of contract – Services rendered – Unpaid costs

DAMAGES – Assessment of damages – Proof of – Award of damages – Sum due and owing under invoices – Calculation of sum due and owing

INTERESTS – Contractual interests – Interests charged at 12.7% per annum – Statutory interest – Duplication of interests – Judicial Proceedings (Interests on Debts and Damages) Act

Cases cited
Nil

Counsel:
Mr J Talipan, for plaintiff
No appearance, for first & second defendants
Mr B Lesity, for third defendant

JUDGMENT

1. MAKAIL J: This is a trial on liability and assessment of damages arising from an alleged breach of contract of services for the upgrading and resealing of roads in the Western Highlands Province.

2. The first and second defendants filed a defence. Amongst others, they rely on the defence that the plaintiff failed to give prior notice of claim to the second defendant under the Claims By and Against The Western Highlands Provincial and Local-level Governments Act 1999.

3. The third defendant did not file a defence.

Parties’ Evidence

4. The plaintiff tendered the following:

(a) affidavit of Danny Korakali sworn and filed on 30^th September 2019 – exhibit “P1”.

(b) affidavit of Kenneth Korakali sworn on 5^th May 2025 and filed on 6^th May 2025 – exhibit “P2” and

(c) further affidavit of Kenneth Korakali sworn and filed on 9^th May 2025 – exhibit “P3”.

5. The first and second defendants did not attend the trial. However, counsel for the third defendant appeared for the third defendant but tendered no evidence.

Uncontested Facts

6. Based on the above affidavits, the uncontested facts are as follows:

• the plaintiff is a company specified in road construction and upgrades.
  
• it was awarded a contract is described as Project WHPSTBBRNB 014-2013 after a successful open tender bid.
  
• it entered into a contract with the second defendant on 27^th January 2014 to undertake the following:
  
  • upgrade and reseal of Kerebug-Hagen Polytechnic Road, and
  • upgrade and reseal of Kerebug-Kala Road.
    
• the terms of the contract were:
  
  • the contract value was K4,184,592.34, inclusive of GST.
    
  • the plaintiff would carry out the works in the roads and submit, to the second defendant, invoices on monthly basis, for payment.
    
  • all invoices were to be paid, by the second defendant within 28 days of the submission.
    
  • failure to pay, by the second defendant, within 28 days would result in interests accruing at the prevailing commercial rate.
    
  • The Superintendent for the works would be Peter Dorflinger.
    
• pursuant to clause 43 of the contract, interest at the prevailing commercial bank rate, accrues every 28 days from the date the final invoice fell due for payment.
  
• in accordance with the terms of the contract, the plaintiff commenced work in the roads on 24^th February 2014 and issued progressive invoices, to the second defendant, on a monthly basis, for payment.
  
• the second defendant paid the progressive invoices in the total sum of K2,826,790.73.
  
• the works on the roads were completed on 27^th January 2016.
  
• a Certificate of Completion was issued on 23^rd February 2016
  
• it was followed by a letter from the Superintendent to the first and second defendants on 10^th March 2016.
  
• final progressive invoice in the sum of K1,736,600.72 was submitted to the second defendant, on or about 9^th June 2017.
  
• on 21^st June 2017 the final progressive invoice was certified by the Superintendent in the sum of K1,702,455.36.
  
• on 11^th November 2017 or thereabout, the second defendant made a part payment in the sum of K200,000.00 to the plaintiff.
  
• following the filing of the writ of summons in these proceedings on 31^st August 2018 a further payment in the sum of K300,000.00 was made to the plaintiff.
  
• two further payments were made on 23^rd March 2020 and 3^rd September 2021 respectively in the sum of K200,000.00 each.
  

Liability

7. Pursuant to clause 3 of the contract the plaintiff as the contractor agreed to perform the contract and clause 4 required the second defendant as the employer to pay the plaintiff for the work done. Additionally, pursuant to clause 55.1 of the contract, the Superintendent is required to issue a certificate of completion when the works have been completed.

8. Based on the undisputed facts above and that the Superintendent has issued a certificate of completion and that the first defendant as the Provincial Administrator has failed to ensure that the second defendant’s debt is settled. Accordingly, the first and second defendants have failed to pay the balance of the sum under the contract, the plaintiff has established that the first and second defendants have failed to honour their obligation under the contract and have breached the contract.

Defence of Lack of Notice to Make a Claim to Second Defendant

9. Although the plaintiff made submissions to address the first and second defendants’ defence on lack of notice of claim under the Claims By and Against The Western Highlands Provincial and Local-level Governments Act, 1999 the first and second defendants did not attend trial and did not take up this defence in submissions. Additionally, while the third defendant attended trial, it did not take up this defence. Accordingly, it is not necessary to consider it.

10. For the foregoing reasons, the plaintiff has established liability and there shall be a judgment on liability against the first and second defendants. As for the third defendant, there is no evidence to prove that the third defendant is a party to the contract and that it breached the contract. Accordingly, liability has not been proved against the third defendant and the proceedings against it is dismissed with costs.

Assessment of Damages

11. According to clause 43.1 of the contract, if the second defendant as the employer makes late payment of invoices, the plaintiff as the contractor shall be paid interest on the late 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 bank.

12. By a letter dated 12^th December 2013, the Engineering firm Infrastructure Development Company Limited was engaged by the second defendant as the Superintendent in the project and conferred powers under clause 4.1 of the contract to decide contractual matters between the parties. Clause 4.1 states:

“Superintendents Decision

Except where otherwise specifically stated, the Superintendent will decide contractual matters between the Employer and the Contractor in the role representing the Employer.”

13. Pursuant to clause 4.1 of the contract and by a letter dated 21^st June 2017 the supervising Engineering from Infrastructure Development Company Ltd fixed the unpaid invoices at K1,702.455.36 subject to annual interest of 12.7 pursuant to clause 43.1 of the contract. Copy of the letter from Infrastructure Development Company Ltd dated 21^st June 2017 is in evidence and an important piece of evidence of what the plaintiff claims to be outstanding and due to it because there is no evidence of the actual invoices submitted to the second defendant to verify the outstanding balance of the costs.

14. Notwithstanding the absence of the invoices, the plaintiff’s explanation given above is accepted and there will be a finding in the sum of K1,702,455.36 being as due and owing less the following payments which the plaintiff accepts were made by the first and second defendants:

• 31^st August 2018 – K300,000.00
• 23^rd March 2020 – K200,000.00
• 3^rd September 2021 – K200,000.00
  

Contractual Interests

15. The final sum due and owing includes interest accrued under clause 43.1 of the contract. The purpose of awarding interests is to compensate the injured party from being kept out of the money. In terms of evidence, the calculation of the final sum due and owing less the various sums paid including interests is set out in annexure “B” to exhibit “P2”. Notably, the last set of interests was calculated and added to the principal sum from 3^rd September 2021 to 31^st May 2025. The final sum is K2,739,711.62.

16. This calculation is accepted as being done in accordance with clause 43.1 of the contract and there shall be a judgment in the total sum of K2,739,711.62 for the plaintiff.

Statutory Interests

17. The plaintiff further seeks statutory interest under the Judicial Proceedings (Interests on Debts and Damages) Act, 2015. If the purpose of awarding interests is to compensate the injured party from being kept out of the money, then the award of interest under statute must not be seen as a duplication of interest if the injured party has been awarded interest under the contract.

18. It is so that in this case, given that the plaintiff has been awarded interest under contract up to 31^st May 2025, there shall be a judgment for interest at the rate of 8% per annum on the total judgment sum of K2,739,711.62 under the Judicial Proceedings (Interests on Debts and Damages) Act, 2015 from 1 June 2025 to the date of final settlement.

Order

19. The orders are:

1. Judgment on liability is entered against the first and second defendants.
   

2. The proceedings against the third defendant are dismissed.

3. Judgment is entered against the first and second defendants in the total sum of K2,739,711.62.
   
4. Judgment is entered for interest at the rate of 8% per annum on the total judgment sum of K2,739,711.62 under the Judicial Proceedings (Interests on Debts and Damages) Act, 2015 from 1 June 2025 to the date of final settlement.
   
5. The first and second defendants shall pay the plaintiff’s costs of and incidental to the proceedings, to be taxed, if not agreed.
   
6. The plaintiff shall pay the third defendant’s costs of and incidental to the proceedings, to be taxed, if not agreed.

________________________________________________________________
Lawyers for plaintiff: Kortal Lawyers
Lawyers for first & second defendants: Tamutai Lawyers
Lawyers for third defendant: Solicitor-General