National Capital District Commission v Reima [2009] PGSC 15; SC993 (25 September 2009)

SC993

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA 79 OF 2008

BETWEEN:

NATIONAL CAPITAL DISTRICT COMMISSION
Appellant

AND:

JIM REIMA,
on behalf of himself and 120 YOUTH GROUPS OF MORESBY NORTH EAST
First Respondent

AND:

BALUS SOKELE and ROBANE PISIMI
Second Respondent

Waigani: Davani, Manuhu, David .JJ
2009: 30th April
25th September

STATUTORY AUTHORITY – NCDC is a corporation – NCDC is a statutory authority – NCDC is an entity of the State – a claimant must give s.5 Notice under the Claims By and Against the State Act 1996 - s.4 of NCDC Act 1990.

CONTRACTS – Youth and Community Groups and other prospective contractors – must comply with proper processes – must make the necessary enquiries before engaging in work – contracts exceeding K100,000.00 – must comply with tender process – ss.59 and 61 of Public Finances (Management) Act 1995.

Facts

1. The respondents are the owners of vehicles and representatives of a Youth group. They were engaged by a manager with the NCDC to perform cleaning activities in Port Moresby. This engagement was by letters of engagement, signed by the appellant’s Manager, and agreeing to engage the first respondent, of which there were 120 groups, at K1,200.00, each group, per fortnight and the second respondent, for the hire of their trucks, at K2,200.00 each per fortnight, a total of K4,400.00 per fortnight. After 4 months, the work bill was at K1,728,000.00 for the first respondent youth groups and K334,400.00 for the second respondent’s two trucks. Upon the respondent demanding payment, the appellant refused to pay claiming that the respondents had not complied with ss.59 and 61 of the Public Finances (Management) Act 1995 (‘PFMA’) and had also not given notice under s.5 of the Claims By and Against the State Act (‘CBASA’).

2. The appellant applied to the National Court by motion seeking, amongst other orders, dismissal of the whole proceedings, because the respondents had not given s.5 Notice and had not obtained the necessary approvals under ss.59 and 61 of the PFMA. The Trial Judge dismissed the appellant’s motion and held, basically, that s.5 Notice need not be given because, amongst others, the NCDC is a corporation and can sue and be sued. He also held that it was not necessary for the respondents to obtain approvals under ss.59 and 61 of the PFMA.

3. The Appellants appealed.

Held

The NCDC is an entity of the State. It is a public body and a statutory body. That any person, company, individual or community group looking to secure a contract with the NCDC, must firstly ensure that the total amount to be eventually paid out under the Contract will not exceed K100,000.00. If it does, then the persons concerned must make the necessary enquiries with the NCDC as to the processes to be complied with, more particularly tender processes, before embarking on work. If they commence work without making the necessary enquiries and complying with processes, then they do so at their own peril and detriment.

Cases Cited
Papua New Guinea Cases

Paul Tohian v. Tau Liu, SC566;
The Independent State of Papua New Guinea v. Barclay Brothers (PNG) Ltd (2001) N2090
Olympic Stationery Ltd v. The Independent State of Papua New Guinea (2001) N2194
Okam Sakarius & six (6) others v. Chris Tep, Project Manager and Cocoa, Coconut Extension Agency, (2003) N2355
Delphi Corporate Investigations Limited and Bernard Kipit, City Administrator and National Capital District Commission, dated (2003) N2480
Mathew Totori v. Bob Nenta (2003) N2373.
Yawasoro Poultry Farm v. The PNG Defence Force and the State (2004) N2736
Otto Napi v. National Capital District Commission (2004) N2797
Daniel Hewali v. PNG Police Force and the State, N2233
Albert Purane v. Asi Tipurupeke Land Group Incorporated and Mineral Resources Development Company Ltd and Secretary for Department of Petroleum & Energy, (2005) N2806
Eliakim Laki & Ors v. Guau K Zurenuoc & 2 Others (2005) N2818
John Kuman trading as Gulba Contractors v. NCDC, WS 1395 of 2002 dated 23rd June, 2005
Lawrence B.W. Titimur v. The Executive, Jackson Sarea, John Vailala, Rex Lai & Wilson Thompson for themselves and on behalf of the National Capital District Commission Workers Union & the National Capital District Commission, WS 1695 of 2002 dated 25th October, 2007

Counsel

J. Haiara, for the appellant
W. Bigi, for the first and second respondents

25th September, 2009

DECISION

1. BY THE COURT – This is an appeal from a decision of the National Court of 8th July, 2008 where the Trial Judge refused to dismiss proceedings where the respondents had not complied with ss.59 and 61 of the Public Finance (Management) Act (‘PFMA’) and s.5 of the Claims By and Against the State Act (‘CBASA’).

2. The appeal is brought with leave of the Court granted on 19th September, 2008.

Background

3. The Trial Judge had before him two (2) Motions filed by the appellant and the respondents. The respondents’ Motion sought orders for summary judgment. The appellant’s Motion sought orders that the respondents’ Motion be struck out for being defective and incompetent and further orders that the entire proceedings be dismissed;

(i) for lack of notice under s.5 of the CBASA;

(ii) for lack of proper consent and authority by the respondents;

(iii) or alternatively, that the whole proceedings be struck out for non-compliance with ss.59 and 61 of the PFMA.

4. His Honour the Trial Judge refused the appellant’s motion and held that;

(i) The appellant is not an entity of the State so s.5 Notice under the CBASA need not be given;

(ii) That the National Capital District Commission (‘NCDC’) is a body that can sue and be sued in its own name and style and is a corporation with perpetual succession;

(iii) That the NCDC is not an entity of the State because the NCDC Act does not state specifically that persons wishing to sue the NCDC must first give notice under s.5 of the CBASA;

(iv) That the requirements of ss.59 and 61 of the PFMA need not be complied with because the contracts or agreements entered into between the NCDC and the respondents were not the kind that required tender approval.

Grounds of appeal

5. There are two (2) main grounds of appeal which are summarised as;

(i) The National Court erred in law when it held that it was not necessary to give notice under s.5 of the CBASA, contrary to well-established authorities;

(ii) The National Court erred when it failed to dismiss the respondents’ claim for the reason that the respondents’ Contract was awarded to them in breach of ss.59 and 61 of the PFMA.

Issues for determination

6. Basically, the issues for determination in this appeal are;

(i) Does s.5 of the CBASA apply to the NCDC and should persons intending to sue the NCDC, firstly give notice to the State under s.5 of the CBASA;

(ii) Whether a youth group or community groups or other like companies or individuals, must comply with tender processes under ss.59 and 61 of the PFMA, when seeking or applying to be awarded contracts by the NCDC?

Analysis of submissions

7. We refer firstly to the Trial Judge’s reasons as related to the issues before us.

Issue No. (i) – Whether the NCDC is an entity of the State?

8. The Trial Judge relied on s.4 of the National Capital District Commission Act 1990 (‘NCDC Act’) and held that the NCDC is a corporation with perpetual succession. Section 4 of the NCDC Act states that the Commission can sue and be sued in its own name and style. It reads;

"4. NATIONAL CAPITAL DISTRICT COMMISSION.

(1) The National Capital District Commission is hereby established.

(2) The Commission –

(a) is a corporation; and

(b) has perpetual succession; and

(c) shall have a seal; and

(d) may –

(i) acquire, hold and dispose of land, interest in land and property; and

(ii) sue and be sued in its corporate name; and

(iii) enter into contracts; and

(iv) subject to the prior written approval of the Minister, conduct business enterprises."

9. His Honour said this in relation to the giving of notice under s.5 of the CBASA and s.4 of the NCDC Act.

"It authorises the Commission to enter into contracts or any kind magnitude with anyone or body. It is not required to go to the Attorney General or the Solicitor General to seek approval to enter into any such contractual arrangements. When it finds itself being sued for alleged breach of contract, it tells that party to go to the Attorney General or the Solicitor General first. To me, this is absurd. An organisation empowered by its own enabling legislation able to easily engage with others contractually but is difficult to get at, to me is not fair. Why can’t a person sue the NCDC direct because its own law says it can be sued in its own name and style? Why couldn’t the NCDC Act be amended to say that any person wishing to sue NCDC, must first give notice under s.5 of the Claims By and Against the State Act." (par. No.11 of Trial Judge’s published reasons)

10. In our view, the NCDC Act was established to govern the National Capital District as required by s.4 of the Constitution. The preamble to the NCDC Act takes cognizance of the fact that the NCDC is in the same tier of government as a provincial government because it is taken into account as a provincial electorate in accordance with s.125 of the Constitution (Electorates). This is provided for in s.4(5) of the Constitution which reads;

"4. National Capital District

...

(5) In calculating the number of provincial electorates in accordance with s.125 (electorates), the National Capital District shall be taken into account as if it were a province."

11. The NCDC is an entity established to govern as part of a 3 tier structure of a constitutional government. Amongst others, according to s.51 of the NCDC Act, its purposes are public purposes, it has power to legislate as provided in Part VII of the NCDC Act (s.16(1)) and its finances are derived from its own taxation laws and regulations and from grants from the National Government (s.24 of NCDC Act). The NCDC also has the power to legislate to impose taxation (s.42 of NCDC Act) and which laws can only come into operation after the Minister has given his written consent (s.43 of NCDC Act). The terms and conditions of the staff are subject to the Salaries Conditions and Monitoring Act 1988. (S.20 of NCDC Act). The Governor or in his absence, the Deputy Governor is politically responsible to the NCDC and the National Parliament for governing NCD and is constitutionally responsible to the Minister (s.6D of NCDC Act). The members of the NCDC are subject to the Leadership Code (s.7 of NCDC Act). The accounts and records of the NCDC are subject to inspection and auditing by the Auditor-General (s.34 of NCDC Act).

12. However, the Trial Judge’s views are that because the NCDC is a corporation, that by virtue of s.4 of the NCDC Act, it can sue and be sued in its own name and style and is not answerable to the State. His Honour said further that the NCDC Act does not contain a provision that directs that s.5 Notice must be given, therefore s.5 Notice need not be given. Is that the correct interpretation of the law? Davani .J discussed this issue in Lawrence B.W. Titimur v. The Executive, Jackson Sarea, John Vailala, Rex Lai & Wilson Thompson for themselves and on behalf of the National Capital District Commission Workers Union & the National Capital District Commission, WS 1695 of 2002 dated 25th October, 2007. In that case, Her Honour reviewed cases decided by other National Courts where the Courts have found that despite the fact that several entities were incorporated, that they were still entities of the State. These cases are;

(i) Okam Sakarius & six (6) others v. Chris Tep, Project Manager and Cocoa, Coconut Extension Agency 28th March, 2003) N2355.

The Cocoa Coconut Extension Agency is an entity established by the National Executive Council and registered under the Companies Act as a company limited to guarantee, and registered under the Business Names Act.

The plaintiff issued a Writ of Levy of Property against the Agency to enforce a judgement taken out against it.

But the Agency successfully argued that it was a State agency and as such, was protected by s.13(1) of the CBASA.

The learned Judge found that the Agency was politically and financially controlled by the State and as such, its assets should be regarded as the assets of the State and its people. The Court ordered this notwithstanding the plaintiffs submissions that the Agency is a corporation incorporated under the Companies Act and as such, is liable to be sued and be dealt with like a normal company under the Companies Act.

The plaintiffs further submissions were that the Agency should not hide under the corporate veil considering that upon issue of Certificate of Incorporation, the Agency became a body corporate or a corporation and as such, is responsible for its own actions.

The Court also found that while the Agency was a company in its own right, that it relies on the National Government for its annual financial grants and it gets its funding and direction from the National Government.

All the above formed the basis of the learned Judge’s decision that the Agency was a government entity and that s.5 Notice must issue.

(ii) Otto Napi v. National Capital District Commission (15th September, 2004) N2797.

In this case, the plaintiff sought payment of a judgment debt. Acting Justice David (then), found that although the National Capital District Commission Act 2001 provided that the NCDC could sue and be sued and enter into contracts, etc, that various provisions in the Act demonstrated that the NCDC is a provincial government and that enforcement proceedings could not apply to it.

(iii) Albert Purane v. Asi Tipurupeke Land Group Incorporated and Mineral Resources Development Company Ltd and Secretary for Department of Petroleum & Energy (7th April, 2005) N2806.

In that case, the plaintiff sought to file enforcement proceedings against the MRDC for payment of a judgment debt owing to it by the Land Group defendant. The MRDC was named as first Garnishee.

Various legal issues arose in that case, one of which was whether the MRDC was an entity of the State and whether the funds it held could be garnished. It was pointed out to the Court that the MRDC was incorporated under the Companies Act 1997, that its directors were representatives from the State and its affairs were managed under the direction and supervision of its board. However, the Court also found;

(a) that the funds were managed and controlled by the State under a Trust;

(b) that the MRDC’s board consists of representatives from the State;

(c) that the majority shareholding is held by the State;

(d) that the powers of the shareholder may be performed or undertaken by the Minister for Treasury and Finance.

These peculiarities or characteristics were stated in the MRDC’s constitution which of course provided the basis for the Court’s ruling that there cannot be any execution or enforcement upon the property or revenue of the MRDC because it is an instrumentality or entity of the State.

(iv) The Independent State of Papua New Guinea v. Barclay Brothers (PNG) Ltd (6th June, 2001) N2090

In that case, the trial judge held that a company incorporated under the Companies Act 1997 was a governmental instrumentality. The company, Southern Highlands Gulf Highway Ltd was specifically incorporated to undertake or oversee the construction of the Gulf to Southern Highlands Highway. Kapi CJ (as he then was) was guided by the definition of a ‘public body’ in s.2 of the PFMA which reads.

"public body" means –

(i) a body authority instrumentality (corporate or unincorporated) established by or under an act or a constitutional law; and

(ii) a body authority or instrumentality incorporated under the Companies Act, chapter 146 where and to the extent that –

(iii) the Memorandum and Articles of Association of that body, authority or instrumentality provide; or

(iv) an act other than this act provides,

that this act shall apply to that body, authority or instrumentality, other than -

(v) the Auditor-General or the Office of the Auditor-General; or

(vi) the Privatisation Commission established by the Privatisation Act 1999;

(vii) a body authority or instrumentality incorporated under the Companies Act (chapter 146) other than one to which par.(b) relates;

......

The Trial Judge found that s.2(a)(b)(ii) states that a body is a ‘public body’ if it is incorporated and its governing act provides that the PFMA applies to it.

13. In this case, the NCDC is incorporated and the Act governing its existence, the NCDC Act at s.23, provides that the PFMA applies to the NCDC. It reads;

"23. APPLICATION OF PART VIII OF PUBLIC FINANCES (MANAGEMENT) ACT 1995

Part VIII of the Public Finances (Management) Act 1995 applies to and in relation to the Commission, subject to such modifications as are contained in this part as are permitted by Part VIII of the Public Finances (Management) Act 1995."

14. This coupled with the other characteristics, set out above, demonstrates that the NCDC is a public body and is an entity of the State. The characteristics of the NCDC which in itself is a statutory body, are characteristics that have developed over time in the area of Administrative Law. We discuss these characteristics below. But the trial judge raises some interesting issues in relation to his findings that the NCDC is not an entity of the State. Firstly, he emphasises the fact that the NCDC can sue and be sued in its own name and style and that it is a corporation with perpetual succession. He raises the point that the NCDC is not required to go to the Attorney General or the Solicitor General for approval to enter into any contractual arrangements. That, when it finds itself being sued for breach of contract, that it need not advise the other parties to firstly seek the Attorney General or the Solicitor General’s authorisation albeit s.5 Notice. He asked why a person cannot sue the NCDC direct because its own law says it can be sued in its own name and style.

15. His Honour the Trial Judge held and defined what a corporation is. He said that because the NCDC Act authorises the NCDC to be sued in its own corporate name, that is sufficient authority to sue the NCDC direct rather than firstly issue a s.5 Notice.

16. As we are all aware, the CBASA was enacted to protect the State from the many fraudulent claims being made against it by individuals, groups and corporations. The s.5 Notice is to allow the Solicitor General, through its lawyers, to conduct the necessary investigations and enquiries, to determine whether the claim is genuine or not. Or if the claim is genuine, whether the necessary processes in place as provided by legislation or otherwise, have been adhered to.

17. The NCDC, and other provincial governments, run their own affairs as provided for under legislation. Therefore, the NCDC as with other provincial governments must protect itself from those who wish to profit from its inability to maintain surveillance on the activities of its employees.

18. The NCDC is, in a sense, the executive arm of government for the National Capital District. According to Douglas and Jone’s Administrative Law 5th Edition (2006);

"Traditionally, executive government was composed of the Crown as its head, minister of the Crown, cabinet and its alter ego, the executive council (both of which are constituted by ministers), and government departments with a minister as political head. This picture is now varied by addition of a second strand to the executive, statutory bodies and statutory offices. In brief, these are bodies or offices created by statute which tend to be outside the traditional strand of executive government..." (par. No. 13, pg.2)

(our emphasis)

19. The text then discusses or points out what these bodies are, then discusses what a statutory authority is. We mention statutory authority because the NCDC is a statutory authority. Douglas & Jones (supra) defines a statutory authority as;

"21. Statutory Authorities

A statutory body is simply a body established by statute. This statute is variously referred to as the body’s enabling Act, parent Act or charter... Statutory bodies are what their parent Act or statute makes them, but since there are a number of fairly common features, it is possible to make some general comments about them... Frequently, the enabling Act will give a statutory body corporate personality and authorise it to own property, enter contracts, and to sue and be sued in its corporate name. As well, the statute will establish the governing board or other form of management, endow the body with power and possibly lay down procedures. Not infrequently there is a statement of a body’s function and objects. Other not uncommon provisions are for offices and employees, revenue, finance and accounting, criminal offences to protect the body and authorisation for delegated legislations. Sometimes, there is a provision for special review of the body’s decisions.... All of these points to one fairly obvious and simple piece of advice. Where a statutory body is involved, it is necessary to go through its enabling Act to ascertain its powers, procedures and the like. In many cases, the enabling Act is the sole source of these, although it is always possible that other Acts also deal with some of these matters." (par.21; pg.4)

(our emphasis)

20. Douglas and Jones (supra) states further at pg.5;

"While statutory corporations are distinct legal entities, the government can still exercise some control over them. One of the most potent forms of control is a provision in the enabling Act giving the Minister a right to give directions to the body or to veto its actions. Sometimes, the government may be able to appoint some or even all of their governing body. If the corporation can make delegated legislation this normally requires the approval of the executive or parliament. Financial control can be exercised by the amount of money which the government allocates to a corporation and by the audit of its books and the accounts. Publicity can be given to the activities of statutory corporations by a requirement that they prepare an annual report which is tabled in Parliament."

(our emphasis)

21. These statutory authorities of which the NCDC is one, by or through its enabling legislation, demonstrates that there is government control over these bodies. We can safely conclude that these statutory bodies exhibit some control by government, through legislation. Therefore, the NCDC is not separate and distinct because of those characteristics.

22. Having found that the NCDC is a public body and an entity of the State, it follows therefore that s.5 Notice under the CBASA should have issued prior to the filing of court proceedings because as was held in Paul Tohian v. Tau Liu SC 566;

"It is clear to us that the Notice of Intention to make a claim is a condition precedent to issuing a Writ of Summons in all the circumstances". (see Yawasoro Poultry Farm v. The PNG Defence Force and the State [2004] N2736; Daniel Hewali v. PNG Police Force and the State N2233; Eliakim Laki & Ors v. Guau K Zurenuoc & 2 Others (2005) N2818); Olympic Stationery Ltd v. The Independent State of Papua New Guinea (2001) N2194); Mathew Totori v. Bob Nenta (2003) N2373).

23. Having already found that the NCDC is an entity of the State, we can uphold the appeal on that basis alone. However, compliance by the NCDC with tender processes under the PFMA, is an important issue that we will deliberate on and will do so under the second issue.

Issue no. (ii) – Whether a youth group or community groups as in this case, or other like companies or individuals, must comply with tender processes under ss.59 and 61 of the PFMA when being awarded contracts by the NCDC.

24. First, ss.59 and 61 of the PFMA read as follows;

"59. Contracts for works and services

(1) Subject to subsection (2), tenders shall be publicly invited and contracts taken by a public body to which this Act applies for all works, supplies and services, the estimated cost of which exceeds such a sum as is specified in its constituent law or declared by the Minister.

(2) Subsection (1) does not apply to works, supplies and services –

(a) that are to be executed, furnished or performed by the State, or an arm, agent or instrumentality of the State approved by the Minister for the purpose of this subsection; or

(b) in respect of which the public body certifies that the inviting of tenders is impracticable or inexpedient."

"61. Approval required for certain contracts

(1) The provisions of this section apply to and in respect of all public bodies notwithstanding provision to the contrary in any other law and notwithstanding and without regard to any exceptions, limitations, conditions, additions or modifications contained in any other law.

(2) Subject to subsection 93, a public body shall not, except with the approval of the Minister, enter into a contract involving the payment or receipt of an amount, or of property to a value, (or both) exceeding –

(a) K100,000.00; or

(b) In the case of a public body declared by the Head of State, acting on advice, by notice in the National Gazette, to be a public body to which this paragraph applies – K500,000.00.

(3) The provisions of Subsection (2) do not apply to a contract relating to investment by a public body (including a subsidiary corporation), the subject of a declaration under Section 57(3).

(4) ..."

25. Mr Haiara for the appellant submits that the trial judge did not consider submissions put to the Court by the appellant’s counsel on ss.59 and 61 of the PFMA. We note on perusal of the trial judge’s published reasons that he does not discuss these provisions nor did he consider submissions on those provisions, put before him by both counsel. In support of this, appellant’s counsel referred to pg.95 tabs 10, 20 and 30 of the Appeal Book and, pg. 101, tab 20 to pg. 102, tab 30 of the Appeal Book which are his submissions on the law and facts seeking dismissal of the proceedings relying on ss. 59 and 61 of the PFMA.

26. On that basis alone, we find the trial judge erred. However, we will go one step further by considering and stating the law in relation to ss.59 and 61 of the PFMA and taking into account the evidence on the manner in which the appellant allegedly awarded the contract or contracts to the respondents.

27. The evidence in the Court below is that the first respondent commenced on a clean-up programme on 23rd February, 2002 pursuant to verbal agreement between one Paul Keikei, the appellant’s Youth Manager at that time together with the first respondent Jim Reima. The affidavit of one Tom Gesa sworn on 21st August, 2006, formerly the Deputy City Administrator, Community and Social Services Division with the appellant, deposes that in 2002, the appellant undertook a major exercise and engaged youths, individuals and trucks in various parts of the city. He deposes that he verbally authorised the first respondent, Jim Reima on or about 23rd February, 2002 to provide cleaning services. He said this was formalised in writing on or about 7th April, 2002 and that the approved rates for each individual youth group was K1,200.00 per fortnight. He said these youth groups were engaged for about 4 to 6 months and upon completion of work, they were to be discharged after payment.

28. He deposes further that the respondents also engaged trucks owned by the second respondent on the cleaning programme. He recalled that the approved hire rate for each truck was K2,200.00 per fortnight and that they were engaged on or about 7th April, 2002.

29. However, the letter of engagement does not state the period of engagement. But it is noted in the evidence that work was from the period 23rd February, 2002 to 3rd October, 2003. In the case of Robame Pisimi, a second respondent, the hire of his vehicle was at the rate of K2,200.00 per fortnight over that period of time.

30. For the second named second respondent, Balus Sokele, his engagement was also for the hire of his truck, to commence on 7th April, 2002 at the rate of K2,200.00 per fortnight as confirmed in the engagement letter signed by Tom Gesa, at that time, Deputy City Manager, Community and Social Services and Manager - NCDC Education.

31. The first respondent, Jim Reima, deposes in his affidavit sworn on 23rd August, 2006 that Tom Gesa had verbally agreed to engage his youth groups and Robame Pisimi’s truck to commence work on 23rd February, 2002. He deposes that each group of which there were 120, were to be paid at K1,200.00 each per fortnight and payment for use of a truck was set at K2,200.00 each per fortnight. That he worked together with the youth groups for nearly 4 months but the appellant did not pay them anything.

32. The respondents’ lawyers submit that because of the amounts agreed to be paid, i.e K1,200.00 per individual youth groups and K2,200.00 per fortnight for a truck, that there was no need for the contract to be publicly tendered as required under s.59 of the PFMA because the monies involved were far less than the amount specified under s.61 of the PFMA. They submit that because the arrangements were on a fortnightly basis, that the trial judge was correct when he said at pg.27 that;

"This matter did not have to go through a tender process."

33. But what if the costs or monies to be paid accumulated over time and eventually reached the K100,000.00 mark set by the PFMA as had occurred in this case? The appellant’s lawyers submit that when totalled, that the City Administrator had approved a contract worth K1,728,000.00, i.e K1,200.00 per youth group per fortnight x 120 youth groups for 4 to 6 months.

34. The payment of K2,200.00 each fortnight for 2 trucks, ie. K2,200.00 x 2 trucks = K4,400.00 x 2 fortnights in a month = K8,800.00 from 23/02/02 to 3/10/03, a period of approximately 38 fortnights, is approximately K334,400.00.

35. With these figures in mind, Mr Tom Gesa should not have engaged the services of the first and second respondents without firstly being sure himself that the works will not exceed the amount stated in s.61 of the PFMA, i.e K100,000.00. Although, there is no evidence before us, we are sure that the processes for the awarding of contracts is in place and should have been followed.

36. We wish to emphasise that officers employed by statutory authorities do not have any right, title or licence to give out contracts without the contract first going through the tender process where required. We in Papua New Guinea, should now be accountable, not just to our employers but also to the government and to the people of this country. There has been a lot of abuse and manipulating of established processes and criteria, purely for monetary gain. These safeguards in legislation are there for a purpose, in this case ss.59 and 61 of the PFMA. All works must comply with proper process. The willy-nilly giving out of contracts by individuals must now stop. It is not just the appellant but other statutory authorities, and provincial governments as well. For too long, these entities have, through their employed servants and agents, handed out works or jobs to persons on a ‘whom you know’ basis, which has resulted in millions of unbudgeted kinas being paid out without compliance with proper process. We have emphasised that proper process must be followed and the Court must be vigilant in ensuring that these processes are complied with.

37. The same applies to individuals seeking contracts. They should not liaise with middle men but must make the necessary enquiries first and on being sure of the process, to then formally lodge their applications. If they decide to use the ‘whom you know process’, firstly that should never happen and secondly, they do so at their own peril. If found out, they may stand to loose out, as has occurred in this case.

38. It may be that work was performed by the respondents but if processes are not followed, they cannot and should not be paid. They may have a claim against the individuals who allegedly gave them the work. But the appellant should not pay. Davani .J dealt with such a situation in John Kuman trading as Gulba Contractors v. NCDC WS 1395 of 2002 dated 23.6.05. In that case, Her Honour relied on Delphi Corporate Investigations Limited and Bernard Kipit, City Administrator and National Capital District Commission N2480 dated 17.10.03, where Gavara-Nanu .J held that contracts and agreements were made in breach of ss.59 and 61 of the PFMA. His Honour said this;

"The defendant is a public body and as such is accountable to the public. Section 23 of the NCDC Act, makes it clear that Part VII of the PFMA applies to and in relation to the Commission, subject to such modifications as are contained in Part V of the NCDC Act. This means that the tender requirements under s.59 of the PFMA must apply to all works given out or awarded by the Commission, except for those works exempted under s.59(2) of that Act."

39. As Davani .J said in John Kuman (supra);

"The defendant is a public body. The funds it controls are public funds so if it has to pay up for work done, it will only do so if those works were properly approved."

40. The Court found in John Kuman (supra) that NCDC’s employee, a Mr Nick Kuman, then Deputy Chief Administrator for Commercial and Social Services, had "handed out" a contract to the plaintiff, by letters of engagement without obtaining the proper approvals, a scenario similar to this. The amount the plaintiff was to have been paid was K204,000.00, which was the accumulation of 34 invoices of K6,000.00. Her Honour dismissed the plaintiffs claim holding that the plaintiff did not tender for these works.

41. We find the same has occurred in this case. Tom Gesa, the appellant’s employee, secured the respondents’ services ‘on the streets’ without firstly complying with tender process, considering the amounts to be eventually paid would exceed K100,000.00, a fact known to Tom Gesa and the respondents.

Conclusion

42. We find that s.5 of the CBASA applies to the NCDC. Persons intending to sue the NCDC must first give notice to the State under s.5 of the CBASA. We also find that a youth group or community groups or other like companies or individuals, must ensure to comply with tender processes under ss.59 and 61 of the PFMA, when seeking or applying to be awarded contracts by the NCDC, if the amount to be paid out eventually, will exceed K100,000.00. We find that the Trial Judge should have dismissed the proceeding for these reasons. Accordingly, we are satisfied that the trial judge fell into error. We will uphold the appeal.

Formal orders

43. The formal orders are these;

(1) The appeal is upheld; and

(2) The judgment and orders of the National Court of 8th July, 2008 are quashed; and

(3) The National Court proceedings are also dismissed; and

(4) The respondents shall pay the appellant’s costs of this appeal and the National Court proceedings.

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Steeles Lawyers: Lawyers for the appellant
Henaos Lawyers: Lawyers for the first and second respondents