Kombra v Independent State of Papua New Guinea [2021] PGSC 52; SC2127 (1 July 2021)

SC2127

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 25 OF 2020

DR UKE KOMBRA, SECRETARY, DEPARTMENT OF EDUCATION
First Appellant

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Appellant

V

FINANCE CORPORATION LIMITED
Respondent

Waigani: Salika CJ, Cannings J, Manuhu J
2021: 27^th May, 1^st July

CONTRACT – whether contract existed between government department (on behalf of the State) and finance company, requiring department to make deductions from salaries of officers to service loan agreements with finance company – whether breach of contract occurred when departmental head stopped salary deductions.

NATURAL JUSTICE – final order of National Court finding the State liable for breach of contract and ordering damages against it – whether trial judge gave proper opportunity to parties to be heard on quantum of damages – whether separate trial on assessment was necessary.

CLAIMS AGAINST THE STATE – restriction on entry of judgment against State for liquidated sums – Claims By and Against the State Act 1996.

This was an appeal by the State and a departmental head against an order of the National Court awarding the respondent, a finance company, damages for breach of contract. The total judgment sum was K18,439,164.41 damages + K570,859.05 pre-judgment interest = K19,010,023.46. The primary Judge held that under longstanding arrangements between the department and the respondent, officers of the department entered into loan agreements with the respondent, subject to the condition that they signed an irrevocable authority for the department to make fortnightly deductions from their salary that would be remitted to the respondent to repay the loans, and that in return for doing that work the department would be paid 5% of each deduction. It was held that apart from the contracts (loan agreements) between the officers and the respondent, there was a contract between the State (second appellant) and the respondent under which those arrangements were in place, which contract was breached when the departmental head (first appellant) issued a circular instruction to the department’s payroll section that stopped those arrangements, and that the appellants were liable in damages for the loss of profits incurred by the respondent. The appellants appealed against the trial Judge’s finding on liability (but not against the assessment of damages), on three main grounds: (1) error of law in finding that there was a contract between the State and the respondent and finding that it had been breached; (2) breach of the principles of natural justice by not giving the appellants a proper opportunity to be heard on the assessment of damages; and (3) entering judgment against the State contrary to s 12(3) of the Claims By and Against the State Act, without a separate trial on assessment of damages.

Held:

(1) It was conceded by the appellants in the National Court that there was a contract between the State and the respondent, so it could not be argued in the appeal (except with the leave of the Court, granted after application, supported by good reasons, which was not the case here) that there was not a contract. The trial judge did not err in finding that a contract existed and that it had been breached.

(2) It was determined early by the trial Judge, in consultation with the parties, that it was a trial on both liability and assessment of damages. Whether there are separate trials on liability and assessment is a matter for the trial Judge. The appellants had multiple opportunities to object to the course of action embarked on by the trial Judge. No objection was taken. There was no denial of natural justice.

(3) Section 12(3) of the Claims By and Against the State Act, which restricts the entry of judgment against the State in cases of default judgment by requiring that (unless the claim relates to a debt only) judgment shall be entered for damages to be assessed, had no relevance to this case as the State was not in default, there was no application for default judgment and entry of judgment followed a trial. There was no necessity for a separate trial on damages.

(4) Appeal dismissed, with costs.

Cases Cited

Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853
Curtain Brothers (PNG) Ltd v University of Papua New Guinea (2005) SC788
Finance Corporation Ltd v Kombra & The State (2020) N8285
Finance Corporation Ltd v The State (2014) N5682
Sharp v Andrew (2016) SC1797
The Papua Club Inc v Nusaum Holdings Ltd (2005) SC812
Van Der Kreek v Van Der Kreek [1979] PNGLR 185

APPEAL

This was an appeal against an order of the National Court finding the appellants liable for breach of contract and awarding damages against them.
Counsel

M Wangatau, for the Appellants
A Edo, for the Respondent

1^st July, 2021

1. BY THE COURT: This is an appeal by the State and the head of the Department of Education against an order of the National Court awarding the respondent, Finance Corporation Ltd, damages for breach of contract. The total judgment sum was K18,439,164.41 damages + K570,859.05 pre-judgment interest = K19,010,023.46.

2. The trial Judge, Justice Anis, held that under longstanding arrangements between the department and the respondent, officers of the department entered into loan agreements with the respondent, subject to the condition that they sign an irrevocable authority for the department to make fortnightly deductions from their salary that would be remitted to the respondent to repay the loans, and that in return for doing that work the department would be paid 5% of each deduction.

3. His Honour held that apart from the contracts (loan agreements) between the officers and the respondent, there was a contract between the State (second appellant) and the respondent under which those arrangements were in place. His Honour further held that the contract was breached when the departmental head (first appellant) on 11 October 2018 issued a circular instruction to the department’s payroll section that stopped those arrangements, and that the appellants were liable in damages for the consequential loss of profits incurred by the respondent, which he assessed, based on evidence presented by the respondent, in the sum of approximately K18.4 million (Finance Corporation Ltd v Kombra & The State (2020) N8285).

4. The appellants appealed against the trial Judge’s finding on liability (but not against the assessment of damages), on three main grounds, which were numbered 3.1, 3.3 and 3.4, ground 3.2 having been abandoned, in the supplementary notice of appeal:

(1) error of law in finding that there was a contract between the State and the respondent and finding that it had been breached;

(2) breach of the principles of natural justice by not giving the appellants a proper opportunity to be heard on the issue of assessment of damages; and

(3) entering judgment against the State contrary to s 12(3) of the Claims By and Against the State Act.

GROUND 1: FINDING OF EXISTENCE OF CONTRACT AND FINDING OF BREACH OF CONTRACT

5. The appellants argue that the trial Judge erred in finding that there was a contract between the State and the respondent and compounded the error by finding that the purported contract had been breached.

6. The first leg of the argument fails as the appellants conceded the existence of the contract at the trial. They cannot turn around at the appeal and argue that the Judge was wrong in upholding a proposition that they conceded at the trial. They are flouting the general principle of litigation that an appellant cannot argue a question of law or fact that was not raised or was conceded at the trial.

7. There is a divergence of opinion on whether it is even possible to raise issues in the Supreme Court that were not raised in the National Court. Some cases suggest that it is not possible (eg Curtain Brothers (PNG) Ltd v University of Papua New Guinea (2005) SC788, Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853). Some cases say that it is possible subject to leave being sought, accompanied by good reasons, and granted (eg Van Der Kreek v Van Der Kreek [1979] PNGLR 185, The Papua Club Inc v Nusaum Holdings Ltd (2005) SC812). Here, no good reasons were provided for asking the Court to hear argument on a point of law that was conceded and was non-contentious at the trial. The appellants did not seek leave to argue the point, and leave was not granted. It is a non-issue. There was a contract between the State and the respondent.

8. As to the second leg of the argument – that the trial judge erred by finding a breach of contract – the appellant asserts that his Honour confused the issue of whether there was a breach of contract, with another issue that arose in the trial, as to whether the first appellant, in issuing the circular instruction of 11 October 2018, was in contempt of an order of the National Court in previous proceedings, WS 1363 of 2007. Hartshorn J made that order on 2 April 2014 in similar circumstances as those prevailing in the present case. His Honour granted a decree of specific performance of what in effect was the same contract between the State and the respondent, which was the subject of the present case (Finance Corporation Ltd v The State (2014) N5682).

9. We reject this argument as the learned trial Judge carefully and conveniently separated the various issues which, though related, required discrete determination. One issue was whether the first appellant was guilty of contempt of court for breaching the order of 2 April 2014. Another issue was whether the appellants had breached the contract between the State and the respondent.

10. His Honour dealt with the issues systematically, finding as to the first issue that, though the order of 2 April 2014 had been breached, the first appellant was not a party to the proceedings in which that order was granted and there was no clear evidence that he had been served with that order. Therefore he was not guilty of contempt of court. The issue of whether the appellants had breached the contract between the State and the respondent, which we reiterate was determined separately from the contempt issue, was determined in favour of the respondent.

11. There was no contradiction or confusion in his Honour’s findings on those issues. There was no error of law in his Honour’s finding of breach of contract. Evidence as to the first appellant’s circular instruction of 11 October 2018 was conclusive. It was determined in WS 1363 of 2007 that in very similar circumstances, such an instruction would amount to a breach of contract. The trial Judge’s findings on the breach of contract issue in the present case were consistent with those in WS 1363 of 2007. There was no error of law. Ground 1 of the appeal is entirely dismissed.

GROUND 2: BREACH OF PRINCIPLES OF NATURAL JUSTICE

12. The appellants argue that the trial Judge breached the principles of natural justice by not giving them a proper opportunity to be heard on the issue of assessment of damages. This argument is unsupported by the evidence. The trial Judge made it sufficiently clear at the start of the trial that it would be a trial on both liability and quantum. The respondent, which was the plaintiff in the National Court, tendered evidence on both issues, without objection. The appellants had the opportunity to tender evidence on both issues, but did not utilise it.

13. When the respondent’s counsel made final submissions on the breach of contract issue, he addressed the Court both on liability and quantum. No objection was taken by the appellants’ counsel. No request was made for the Judge to make a prior determination of liability before proceeding, if necessary, to hear submissions on quantum.

14. We agree with the appellants that if the trial Judge had indicated that the trial was on liability only but then proceeded to award damages without giving the appellants the opportunity to be heard on damages, a denial of natural justice would probably have occurred (something similar occurred in Sharp v Andrew (2016) SC1797). However, that scenario is far removed from what happened here.

15. It was determined by the trial Judge at the commencement of the trial, that it was a trial on both liability and assessment of damages. Whether there are separate trials on liability and assessment is a matter for the trial Judge. The appellants had multiple opportunities to object to the course of action obviously being taken by the respondent, which was countenanced by the trial judge. There was no denial of natural justice. Ground 2 is dismissed.

GROUND 3: BREACH OF CLAIMS BY AND AGAINST THE STATE ACT

16. There are two parts of this ground of appeal, stated in the supplementary notice of appeal as follows:

3.4.1 His Honour failed to consider that s 12(3) of the Claims By and Against the State Act provides that no judgment shall be entered against the State for a liquidated sum unless the claim relates to a debt only.

3.4.2 His Honour failed to consider that that the relief sought by the respondent in the writ of summons and the statement of claim do not fall in the category of a debt and ought to have been assessed in a separate trial hearing on assessment of damages.

17. The appellants argue that the trial Judge erred by entering judgment against the State contrary to s 12(3) of the Claims By and Against the State Act and without a separate trial on assessment of damages.

18. Section 12(3) is in the following terms:

Where in a claim against the State the State is in default within the meaning of the National Court Rules, then notwithstanding that a plaintiff's claim for relief is for a liquidated demand, judgment shall not be entered against the State for the sum claimed unless the claim relates to a debt only, and in all other cases judgment shall be entered for damages to be assessed and, where appropriate, for costs.

19. Section 12(3) restricts the entry of judgment against the State in cases of default judgment by requiring that (unless the claim relates to a debt only) judgment shall be entered for damages to be assessed. It has no relevance to this case as the State was not in default and there was no application for default judgment. The claim for relief was not for a liquidated demand. Entry of judgment followed a trial in which the opportunity was available to all parties to present evidence and make submissions. The appellants’ argument is misconceived and without merit.

20. The second argument, that there should have been a separate trial on assessment of damages, is a rehash of the issue raised in the second ground of appeal regarding the purported requirement for a separate trial on assessment of damages. There was no such requirement. A trial on assessment of damages was conducted fairly and in accordance with the Rules of Court. Nothing in the relief sought by the appellants or the nature of the judgment entered against the appellants required that there be a separate trial on assessment of damages. This was a matter for the discretion of the trial Judge. His Honour exercised that discretion fairly and unremarkably by conducting a trial on both liability and quantum. There was no error of law. Ground 3 of the appeal is entirely dismissed.

CONCLUSION

21. All grounds of appeal fail and the appeal must be dismissed, with costs. It is perplexing, in view of the substantial amount of public money involved, that there was no appeal against the assessment of damages. The appellants ran an appeal against a finding on liability only, raising grounds of appeal that have been found to be frivolous and misconceived. With respect, the State’s interests were poorly protected in the National Court and the lack of diligence has continued throughout the Supreme Court proceedings.

ORDER

(1) The appeal is dismissed.

(2) The order of the National Court in WS 1449 of 2018 of 28 April 2020 is affirmed.

(3) Any order of this Court staying the order of the National Court in WS 1449 of 2018 of 28 April 2020 is dissolved.

(4) The appellants shall pay the respondent’s costs of the appeal on a party-party basis, which shall, if not agreed, be taxed.

_______________________________________________________________
Ace Lawyers: Lawyers for the Appellants
Ashurst Lawyers: Lawyers for the Respondent