Powi v Niugini Building Supplies Ltd [2016] PGSC 22; SC1501 (29 April 2016)

SC1501
PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 173 OF 2013

WILLIAM POWI as Southern Highlands Provincial Administrator

First Appellant

SOUTHERN HIGHLANDS PROVINCIAL GOVERNMENT
Second Appellant

V

NIUGINI BUILDING SUPPLIES LIMITED
Respondent

Waigani: Manuhu J, Kariko J &Toliken J

2015: 17^th December

2016: 29^th April

PRACTICE AND PROCEDURE – application to dismiss proceedings – cause of action – breach of contract – whether action statute-barred–date when cause of action accrued– validity of notice of intention to make a claim against the Provincial Government – time limitation to give notice– service of notice

Cases cited:
John Hiwi v RendleRimua&Ors (2015) SC1460
Kerry Lero trading as Hulu Hara Investments Ltd v Philip Stagg (2006) N3950
Paul Tohian v Tau Liu (1998) SC566
Philip Takori v Simon Yagari (2008) SC905
PNG Forest Products Pty Ltd &InchapeBerhad v The State and Jack Genia [1992] PNGLR 85
SC Review No. 55 of 2013: Simbu Provincial Government v Thomas Sil t/a Perum Youth Stationary (Unreported Judgement dated 23^rd February 2015)

Overseas cases:
Dyson v Attorney-General [1910] UKLawRpKQB 203; [1911] 1 KB 410

Legislation:
Claims By and Against the Simbu Provincial Government Act 2001
Claims By and Against the Southern Highlands Provincial Government Act2000
Claims By and Against the State Act1996
Frauds & Limitations Act 1988
National Court Rules
Public Finances (Management) Act 1995

Counsel:
MrA Maribu, for the appellants
Mr M Andrew, for the respondent

JUDGEMENT

29^th April, 2016

1. BY THE COURT: The Provincial Administrator (the Administrator) and the Provincial Government of the Southern Highlands Province (the Provincial Government) appeal against the decision of the National Court at Waigani given on 11^th October, 2013 in proceedings WS No. 720 of 2013 - Niugini Building Supplies Limited v William Powi as Southern Highlands Provincial Administrator & Southern Highlands Provincial Government - whereby the primary Judge refused an application by the appellants (then the defendants) to dismiss those proceedings filed by the respondent (then the plaintiff) Niugini Building Supplies Limited (NBS).

The National Court proceedings

2. In the Statement of Claim filed in the National Court proceedings, NBS alleged breach of contract by the Administrator and the Provincial Government, and sought damages for loss suffered as a result of the breach.

3. NBS claimed that when the Provincial Government called for tenders in February 2006 for the construction of the Yawari Administration Complex in Nipa, Southern Highlands Province, NBS submitted a bid of K9, 769,694 that was accepted.

4. NBS further claimed that it then verbally agreed with the Provincial Government (through the Administrator) that:

• Construction of the Complex would take 12 months;
• The bid was valid for 60 days after which adjustments could be made for unforeseen costs;
• The Provincial Government would pay a 10% deposit to NBS to cover the costs of mobilizing workers, machinery and equipment from its base in Mt Hagen to Nipa; and
• The balance of the contract price would be paid upon signing the formal contract upon the mobilization.(the Agreement)
  

5. NBS pleaded that it received a deposit of K1,000,000 from the Provincial Government on 27 February 2006 and mobilized from Mt Hagen to Nipa by 3^rdApril 2006.After the mobilization however, the Provincial Government failed to have the formal contract executed and it did not make any further payments to NBS as agreed. After three months of waiting, NBS demobilized back to Mt Hagen.

6. NBS further pleaded that between 2006 and 2011, it unsuccessfully tried to re-negotiate the contract with the Provincial Government because the tender price was only valid for 60 days. It then gave notices of its intention to make a claim against the Provincial Government and the State respectively before filing the suit in the National Court.

7. The Administrator and the Provincial Government filed their Defence denying the claim for breach of contract, stating that the Provincial Government never entered into any valid agreement or contract for NBS to construct the Yawari Administration Complex.

8. The appellants filed a motion to dismiss the proceedings:

(1) for being statute-barred;
(2) for want of proper service of NBS’ notices of intention to make claims on the State and the Provincial Government respectively; and
(3) for not disclosing a reasonable cause of action.

9. On 11^th October 2013, the primary Judge ruled on the application, dismissing it, and this appeal is against that decision.

Grounds of appeal

10. There are six grounds of appeal that summarized allege the primary Judge erred in deciding that:

(1) the claim for breach of contract was not statute-barred pursuant to section 16 of the Frauds & Limitations Act1988 (the Frauds Act)- Ground (a) of the Notice of Appeal;
(2) the notice of intention to make a claim against the Provincial Government was given within the stipulated six months period pursuant to section 4 of the Claims By and Against the Southern Highlands Provincial Government Act 2000 (the SHP Claims Act)- Ground (b)of the Notice of Appeal;
(3) the said notice was properly served pursuant to section 4 of the SHP Claims Act- Ground (c) of the Notice of Appeal; and
(4) the proceedings disclosed a reasonable cause of action - Grounds (d)-(f) of the Notice of Appeal.

11. We consider this appeal raises four issues that are convenient to determine in the following order:

(1) Did the Statement of Claim disclose a reasonable cause of action?
(2) If so, when did the cause of action arise?
(3) Was the action statute-barred?
(4) Did NBS give a valid notice of its intention to make a claim against the Provincial Government?

Reasonable cause of action

12. The appellants contended that the Statement of Claim did not disclose a reasonable cause of action on the basis that it did not plead:

(1) adequate particulars of the alleged contract; and
(2) whether the mandatory requirements of sections 59 and 61(2) of the Public Finances(Management) Act 1995were complied with, that is, whether the proper tender process was followed and if the Minister gave the requisite approval given the value of the alleged contract.

13. The appellants also urged this Court to hold that the respondent’s failure to produce copies of the tender documents as directed by the primary Judge should have convinced her Honour to find there was no reasonable cause of action, and she should have then in the exercise of her discretion dismissed the proceedings pursuant to Order 12 Rule 40 of the National Court Rules.

14. While we accept that the Statement of Claim was not precisely pleaded, we consider it adequately disclosed a cause of action, being one of breach of contract. The discretionary power to summarily dismiss claims alleged to be frivolous or vexatious or to not to disclose a reasonable cause of action must be exercised sparingly and only if the pleadings are “obviously and almost incontestably bad”; Kerry Lero trading as Hulu Hara Investments Ltd v Philip Stagg (2006) N3950 and Philip Takori v Simon Yagari (2008) SC905. The primary Judge relied on this same legal principle (citing the cases of PNG Forest Products Pty Ltd &Inchape Berhad v The State and Jack Genia [1992] PNGLR 85 and Dyson v. Attorney-General [1910] UKLawRpKQB 203; [1911] 1 KB 410. We agree with her Honour that the pleadings were not “obviously and almost incontestably bad”.

15. In our view, the inadequacies in the pleadings in the Statement of Claim could have been cured by a direction for further and better particulars or an order for amendment of the Statement of Claim to include the further relevant particulars. The failure to produce the tender documents and the question of whether the proper tender process was followed, are matters to address during the trial.

16. Although it is regrettable that the primary Judge referred to the claim as “an arguable case”, we nevertheless find no error in her Honour’s determination that the proceedings disclosed a reasonable cause of action. We dismiss Grounds (d), (e) and (f) of the appeal.

Time limitation

17. As noted earlier, NBS claimed in its pleadings that the Agreement was made in February 2006. It was a verbal agreement whereby the Provincial Government accepted NBS as the successful bidder to construct the Yawari Administration Complex on terms, including that upon mobilization, the formal contract was to be executed and thereafter the balance of the contract price was to be paid by installments.

18. As it did in the National Court, the Provincial Government submitted that based on the facts alleged by NBS, the action it filed was statute-barred pursuant to section 16 of the Frauds Act because the alleged cause of action would have accrued in 2006 when the Provincial Government failed to execute a formal contract and commence payments by installments of the balance of the contract price in accordance with the Agreement.

19. NBS argued however that the cause of action accrued in November 2011 when re-negotiations of the contract terminated.

20. The primary Judge referred to evidence tendered of a letter dated 8^th March 2013 by NBS’ lawyers to the Provincial Government’s lawyers, and accepted the assertion in that letter that the cause of action arose in November2011 when negotiations between NBS and the Provincial Government failed. Her Honour accepted the submission that NBS was entitled to re-negotiate the contract after the lapse of 60 day. She reasoned that as the respondent’s tender was only valid for 60 days, the cause of action accrued on 29^th November 2011 when the negotiations terminated.

21. It is settled law that a cause of action in breach of contract accrues on the date of the breach, not on the date of the contract; John Hiwi v Rendle Rimua &Ors (2015) SC1460. In its Statement of Claim, NBS pleaded that the appellants breached the Agreement when they failed to execute a formal contract and commence payments of the balance of the contract price. Those obligations were terms of the contract that were to have come into effect upon the completion of the mobilization exercise, and that occurred on 3^rd April 2006.That date then has to be the relevant date for the purposes of section 16(1)(a)of the Frauds Act which provides that an action founded on simple contract must be commenced within six years from the date on which the “cause of action accrued”. When NBS filed proceedings on 16^th July 2012, the action was statute-barred as it should have been filed by3^rd April 2012 which would have been the expiry date of the six years time-limit.

22. We uphold Ground (a) of the appeal and on that basis alone we would allow the appeal. While it may not be necessary then to address the remaining grounds of appeal, we will do so for the sake of completeness.

Section 4 notice – time limitation to give notice

23. Section 4(1) of the SHP Claims Act provides, amongst others, that a person making a claim against the Provincial Government for breach of contract must give notice of his intention to make the claim before commencing any court action in respect of the claim.

24. A notice regarding a claim for a breach of contract shall be given within six months of the claimant becoming aware of the alleged breach; section 4(2)(b). The time within which to give notice may be extended by the Provincial Administrator or the Court; section 4(2) (c). As noted earlier, the alleged breach of contract occurred in April 2006 when NBS mobilized to Tari. It was then that the Provincial Government failed to sign a formal contract and make further payments in accordance with the Agreement.NBS should have therefore given its section 4 notice by 3^rd October 2006 but instead the notice was served on 6^th February 2012, some 5 years 4 months late.

25. The Supreme Court in the leading case of Paul Tohian v Tau Liu (1998) SC566 held that the requirement to comply with section 5 of the Claims By and Against the State Act 1996 (giving notice of intention to make a claim against the State) is a condition precedent that must be complied with before court proceedings are issued the State. Otherwise, the proceedings are rendered incompetent. Recently, the Supreme Court in SC Review No. 55 of 2013: Simbu Provincial Government v Thomas Sil t/a Perum Youth Stationary (Unreported Judgment dated 23^rd February 2015) dealt with a similar issue but regarding the failure to comply with section 4 of the Claims By and Against the Simbu Provincial Government Act 2001(a provision akin to section 4 of the SHP Claims Act). The Court decided that proceedings initiated without first giving a valid notice to the Simbu Provincial Government under section 4 of the Claims By and Against the Simbu Provincial GovernmentAct2001is incompetent. Likewise, we are of the opinion that any court action filed against the Southern Highlands Provincial Government without a valid section 4 notice under the Claims By and Against the Southern Highlands Provincial Government Act 2000 is also incompetent.

26. Having incorrectly determined that the cause of action accrued on 29^th November 2011, the primary Judge naturally erred in finding the section 4 notice was given within the prescribed six month time-limit. We uphold Ground (b) of the appeal.

Section 4 notice – requirements for service

27. A section 4 notice must be served on the Administrator personally or on “the person apparently occupying the position of personal secretary” to the Administrator; sections 4(1) and (3) (a) & (b). We think the words “apparently occupying” should be given their ordinary meanings and accordingly it is our view that the provisions simply state that the notice must be served on the Administrator or the person who is or appears to be the personal assistant to the Administrator.

28. It makes sense that the legislation provides for the Administrator to be the first person to be formally made aware of any legal claim against the Provincial Government. That allows him as the bureaucratic head of the provincial administration to issue appropriate directions for the claim to be investigated and also obtain necessary instructions and advice on defending the claim. If the Administrator is absent or unavailable, section 4 allows his personal secretary to accept service of the notice. Again, this is logical because the personal secretary is usually the most immediate staff working for the Administrator, and one would expect that as part of her normal duties, the personal secretary would later pass on the notice to the Administrator just as she would with any correspondence, communication and official document received in the Administrator’s absence. The personal secretary may be the actual position-holder or a person who appears to hold that position.

29. In the present matter, the section 4 notice was received by Barclay Tenza, the Legal Clerk of the Provincial Government. He deposed in his affidavit that since 2003 he had been accepting service of legal process on behalf of the Administrator as if he was the personal secretary. James Oip who served the notice deposed in his affidavit that he gave the notice to Barclay Tenza who identified himself as the Legal Clerk and at the time, the Administrator and his personal secretary were not in office, that is, not available. James Opi’s evidence does not support the conclusion by the Primary Judge that Barclay Tenza was “apparently occupying the position of personal secretary”. James Oip served the document on Barclay Tenza knowing he was the Legal Clerk but effected service nevertheless because the Administrator and his personal secretary were not available.

30. Contrary to her Honour’s conclusion, we find no evidence that confirms there was no staff in the Administrator’s office who was designated the personal secretary to the Administrator.

31. We are satisfied her Honour erred in ruling that the section 4 notice was properly served. Ground (c) of the appeal has been properly made out.

Conclusion

32. In the end, we allow the appeal for reasons that the primary Judge erred in deciding:

(1) that the proceedings were not statute-barred pursuant to section 16 of the Frauds & Limitations Act 1988;and
(2) that the respondent complied with section 4 of the Claims By and Against the Southern Highlands Provincial Government Act 2000.

Order

33. This Court orders that:

(1) The appeal is upheld.
(2) The decision of the National Court given on 11^th October, 2013 in proceedings WS No. 720 of 2013 is set aside, and instead those proceedings are dismissed.
(3) The respondent shall pay the appellants’ costs of this appeal and the National Court proceedings, to be taxed if not agreed.

Liria Lawyers: Lawyer for the appellants
Fairfax Legal: Lawyer for the respondents