Tasion v National Broadcasting Corporation [2021] PGSC 91; SC2164 (8 November 2021)

SC2164

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 199 OF 2019

BETWEEN:
SAM TASION
First Appellant

AND
T.G HOLDINGS LIMITED TRADING AS FREEWAY MOTORS
Second Appellant

V

NATIONAL BROADCASTING CORPORATION
Respondent

Waigani: Batari J, Manuhu J, Anis J
2021: 26^th July & 8^th November

SUBSTANTIVE APPEAL – Appeal against Court’s findings on liability – preliminary consideration on how the trial was conducted - Court’s inherent jurisdiction and as the final Appeal Court – s. 155(1), (2) & (4) of the Constitution, and s. 6 of the Supreme Court Act Chapter No. 37 – transcript of proceeding shows evidence not formally tendered and accepted by the Court – no evidence of agreement reached on how evidence was to be accepted and considered by the trial Court – trial proceeded on settled agreed statement of facts and issues and submissions of the parties – appeal books contain affidavit evidence not tendered in the Court below – considerations – fatal error observed – want of administering conduct of trial – no allowance made for parties to formally tender their affidavit evidence or call witnesses – appropriate orders – s. 16 of the Supreme Court Act Chapter No. 37

Cases Cited:

Philip Kereme v Peter O’Neil (2019) SC 1781
Acquila Samson v. NEC (2019) SC1880
Madang Timbers Ltd v. Valentine Kambori (2009) SC992
Papua Club Inc. v. Nusaum Holdings Ltd (2005) SC812
Las Peles Shipping v. John Telele (2019) N7676

Counsel:

J. Holingu, for the Appellants
C. Kup-Ogut, for the Respondent

8^th November, 2021

1. BY THE COURT: This is a substantive appeal hearing. The appellants are appealing against a decision of the National Court on liability made on 29 October 2019. The proceeding before the National Court is described as WS No. 765 of 2012. The appellants are defendants and the respondent plaintiff in the said proceeding. The matter in the Court below is pending hearing on other aspects of liability and quantum.

BACKGROUND

2. The respondent is the beneficiary, according to its pleadings in the Court below, to an agreement that was entered on 25 July 2008 between the appellants and the Independent State of Papua New Guinea (State) through its Central Supply Tenders Board (CSTB). The agreement is described as Sale and purchase Agreement (the Agreement). According to the Agreement, the appellants were to supply brand new vehicles to the respondent for a sum of K3, 126,845. A further K1, 500,000 was requested by the appellants after the Agreement, and so in total, the contract value was for K4, 626,845. The respondent wrote out 6 cheques totaling K4, 626,845 to the appellants. The vehicles to be supplied were 23 Toyota Hilux 4-wheel drive 5^th Element vehicles, 1 x Toyota 10-seater Trooper, 2x 15-seater Toyota Hiace buses and 1x Panel Bus (vehicles).

3. The respondent was aggrieved that not all the vehicles were delivered by the appellants according to the specifications set out in the terms and conditions of the Agreement. It commenced proceeding in the National Court, that is, WS765 of 2012 against the appellants. It alleges, amongst others, breach of contract, fraud and misrepresentation and fraudulent conversion. The matter was trialed on 3 November 2016. On 29 October 2019, the trial Court handed down its decision. It ordered judgment in favour of the respondent for a sum of K3, 095,295, interest at the rate of 8% per annum from the date of filing of the writ of summons and statement of claim to the date of full settlement of the judgment, and costs. And at paragraph 40, the last paragraph of the judgment, the Court stated:

48. Judgment in the above terms is not the end of the matter. Instead, it is only part of what the NBC is claiming in its statement of claim. The statement of facts and issues do not say anything about what becomes of the remaining parts of the claim. The parties are therefore, required to address the Court on what becomes of the remaining parts of NBC’s claim. For that purpose, the parties are required to return to the Court on 05^th December 2019 at 9:30am.

4. The appellants were aggrieved by the decision of the National Court and filed this appeal on 6 December 2019.

APPEAL GROUNDS

5. The GROUNDS OF APPEAL are as follow:

Technicalities

(a) His Honor erred in law and fact and in the exercise of his discretion by failing to find that the Respondent had no standing to bring the National Court suit when;

1. The Respondent was not privy to the Sale and Purchase Agreement described as Contract No. COI – 072/2007 entered into by the Independent State of Papua New Guinea and Freeway Motors Limited on 25 July 2008 (the “Original Contract”), which contract was the subject of the National Court proceeding; and
   
2. The Attorney General had the standing pursuant to section 4 of the Claims By and Against the State Act 1996 (CSB Act), to institute the National Court suit on behalf of the Independent State of Papua New Guinea; and
   
3. The issue of the Respondent’s standing as to privy of contract and to bring the suit in its name and style contrary to section 4 of the CBS Act was raised by the Appellants in their Defence and was open at the Court below.
   

(b) His Honor erred in law and fact and in the exercise of his discretion when he failed to find that the Appellants were wrongly named as parties in the National Court suit when they were not privy to the Original Contract; and were not capable of being sued; and that issue was raised in the Appellants’ Defence and was open at the Court below.

(c) His Honor erred in law and fact and in the exercise of his discretion when he failed to find that the National Court suit was prematurely filed in Court by the Respondent when by virtue of Clause 12 of the Original Contract, any dispute arising out of the Original Contract ought to be settled by arbitration under the Arbitration Act 1951.

Nullity of Original Contract

(d) His Honor erred in law and fact in finding that the Original Contract was null and void as it was facilitated and arrived at by illegality following breach of the requirements of the Public Finance Management Act 1995 (PFM Act), especially sections 59 and 61 when;

1. The issue of compliance of requirements and breach thereof of the PFM Act especially the tender process under section 59 and ministerial approval under section 61 if the PFM Act were not pleaded in the Statement of Claim and were not issues tried at trial; and
   
2. The parties had agreed in the pleadings, evidence and in the Statement of Agreed and Disputed Facts and Legal Issues for Trial, that the requirements of the PFM Act and the procurement process under the PFM Act were complied with before drawing up and execution of the Original Contract; and
   
3. A Certificate of Inexpediency was issued under section 59(2)(b) of the PFM Act waiving the tender process and Ministerial approval was granted under section 61(2)(a) of the PFM Act allowing execution of the Original Contract and ensuring payment of monies to procure property.
   

(e) His Honor erred in law and fact and in the exercise of his discretion in finding that the purchase price of property totaling K3, 126, 845.00 (Purchase Price) under the Original Contract was paid long before compliance of the requirements under the PFM Act and ensuing execution of the Original Contract, when;

1. In fact, there was credible and corroborated evidence tendered by both the Respondent and Appellants affirming that the cheques for the Purchase Price was drawn after the execution of the Original Contract; and
   
2. The facts, pleaded in the Statement of Agreed and Disputed Facts and Legal Issues for Trial affirmed that the Purchase Price was drawn after execution for the Original Contract; and
   
3. There was no direct evidence, source documents of cheque butts or requisition forms, contemporaneous evidence, or independent evidence available to prove the Purchas Price was paid prior to execution of the Original Contract; and
   
4. There was only hearsay and uncorroborated evidence in the form of a bank statement alleging that the Purchase Price was paid prior to the execution of the Original Contract, which evidence was wrongly relied on by the Court and relied on in contravention of the best evidence rule.
   

(f) His Honor erred in law and fact in finding that the Original Contract was null and void as it was facilitated and arrived at by fraud, misrepresentation and deceit on the part of the Appellants, when;

1. There was no credible, corroborated and independent evidence of fraud, deceit and misrepresentation tendered by the Respondent; and
   
2. Such allegations are very serious allegations which require higher standard of proof derived from proper examination of witness and testing of evidence on the rules of evidence, but such was not done given trial was ordered to be by way of submission, thus depriving the Appellants the right to a fair trial; and
   
3. Due diligence and the onus to ensure requirements under the PFM Act are complied with in ensuring the best possible supplier or property is engaged and procuring of a service contract lies with the Respondent and the State, whereas the Appellants were mere business persons making an invitation to treat; and
   
4. The Original Contract was varied by conduct of the parties, following the Appellants breach of the condition to supply the required types of property or motor vehicles within the required term, and the Respondent waiver of the right to repudiate the Original Contract based on the breach and sue for damages thereafter.
   

Variation of Original Contract

(g) His Honor erred in law and fact and in the exercise of his discretion in that he failed to find that the Original Contract was varied by conduct of the parties as opposed to variation in writing, when:

1. By virtue of Clause 20 of the Original Contract, its term is only 12 months and the term had expired on 24 July, 2009, but the parties continued their relationship after the expiration date; and
   
2. The Respondent elected not to terminate the Original Contract per Clause 10; and not to sue for breach of the Original Contract after the Appellants failed to supply the required motor vehicles by 24 July 2009, and therefore waiving the condition or requirement to supply the required motor vehicles within the 12 months period; and
   
3. The Appellants by letter of 19 March 2009 explicitly requested the Respondent for the variation of Original Contract, in order to supply the balance of required motor vehicles in substitution of the brand Wingles or Great Wall of China with 5-year warranty and complimentary supply of 3 additional motor vehicles; and
   
4. The Respondents via its Board Resolution of 02 September 2009 resolved to accept the supply of the required motor vehicles in substituted brand being Wingles or Great Wall of China additional 3 motor vehicles; all on 5-year warranty; and
   
5. The Appellants thereby on 09 September 2009 supplied to the Respondent the motor vehicles brand of Wingles or Great Wall of China; and
   
6. The Respondent accepted supply of the Wingles or Great Wall of China motor vehicles, took possession and used those motor vehicles for 2 years.
   

(h) His Honor erred in law and fact and in the exercise of his discretion in that he failed to find that the Original Contract was varied by combination of conduct and writing and the elements of variation were established, when:

1. There was offer and acceptance of a proposal for variation of the Original Contract between the parties as shown by Appellant’s letter of 19 March 2009 requesting substitution of required brand of motor vehicles and Respondents Board Resolution of 02 September 2009; and
   
2. There was intention to enter into a legally binding contract to vary the Original Conduct, as parties continued their relationship after breach and expiry of the Original Contract; and
   
3. There was passing of valuable consideration between the parties, as the Appellants supplied the substituted brand of required motor vehicles in Wingles or Great Wall of China based on the Purchase Price retained under the Original Contract; and
   
4. Parties had legal capacity to negotiate and vary the Original Contract, as the Respondent acted through is (sic) Board and upon its Board Resolution of 02 September 2009.
   

(i) His Honor erred in law and fact and in the exercise of his discretion in that he failed to find that the Respondent is stopped from relying on the express and strict terms of the Original Contract when;

1. by its conduct the Respondent had elected to allow the Original Contract to continue, even after the breach and expiration; and
   
2. by its conduct, the Respondent varied the Original Contract and accepted the supply of and used the motor vehicle brand of Wingles or Great Wall of China; and
   

(j) His Honor erred in law and fact and in the exercise of his discretion by holding that variation of the Original Contract ought to be in writing per clause 18(k) of the Original Contract, when;

1. clause 18(k) ceased to have effect upon expiry of Original Contract; and
   
2. section 29(c) of the Broad Corporation Act 1973 permits the Respondent to enter into contracts, in modes other than in writing only.
   

Liquidated damages

(k) His Honor erred in law and fact and in the exercise of his discretion in awarding liquidated damages in the sum of K3,095,295.00 as a form of reimbursement of the purchase price under the Original Contract, when;

1. the claim of reimbursement of the Purchase Price under the Original Contract does not constitute liquidated damages easily calculable by simple arithmetic calculation but further investigation has to be made to determine the justifiable amount of damages to be paid; and
   
2. there is dispute as to the total number of vehicles supplied by the Second Appellant and the number outstanding and consequently damages should be assessed; and
   
3. there is dispute to the total monetary value of the number of vehicles supplied by the second appellant and the number outstanding and consequently a valuation is necessary to be done for appropriate damages to be assessed; and
   
4. the claim is for alleged fraud and misrepresentation in the purchase and supply of motor vehicles with some vehicles had been supplied by the second appellant, hence the appropriate remedy would have been for assessment of damages; and
   
5. the claim for Contract value or reimbursement of the Purchase Price under the Original Contract is not a clear debt and is easily calculable as it is subject to a number of factors before the appropriate amount is worked out and these factors include:
   

- exact number of motor vehicles of various brand supplied by the Appellants and used by the Respondent;

- current market value or estimate of value of those various motor vehicles;

- mark-up profit added to the various motor vehicles;

- deduction for use of the Wingels or Great Wall of China for over 2 years following variation of the Original Contract;

- Unjust enrichment on the part of the Respondent for using the Wingles for 2 years whilst at the same time claiming for the refund of the Purchase Price in totally;

REHEARING

6. This is a rehearing of the substantive matter. We have this power under s.6 of the Supreme Court Act Chapter No. 37 (SC Act) which states:

6. Appeal to be by way of rehearing.

(1) An appeal to the Supreme Court shall be by way of rehearing on the evidence given in the court the decision of which is appealed against, subject to the right of the Supreme Court—

(a) to allow fresh evidence to be adduced where it is satisfied that the justice of the case warrants it; and

(b) to draw inferences of fact.

(2) For the purposes of hearing and determining an appeal, the Supreme Court has all the powers, authority and jurisdiction of a Judge exercising the jurisdiction of the National Court.

7. We also note that this Court is the final Court of appeal, and its hierarchy in the National Judicial System and its powers, are prescribed under s. 155(1), (2) & (4) of the Constitution, which states:

(1) The National Judicial System consists of—

(a) the Supreme Court; and

(b) the National Court; and

(c) such other courts as are established under Section 172 (establishment of other courts).

(2) The Supreme Court—

(a) is the final court of appeal; and

(b) has an inherent power to review all judicial acts of the National Court; and

(c) has such other jurisdiction and powers as are conferred on it by this Constitution or any other law.

......

(4) Both the Supreme Court and the National Court have an inherent power to make, in such circumstances as seem to them proper, orders in the nature of prerogative writs and such other orders as are necessary to do justice in the circumstances of a particular case

CONDUCT OF THE HEARING

8. We refer to the concluding paragraphs of the National Court judgment, namely, 47 and 48 the subject of this appeal. His Honour stated therein that his findings in his judgment were limited to reimbursements of funds for the sum of K3, 095,295 by the appellants to the respondent and ordered the balance of the claim to remain to be determined at a later date. What this means to us is that liability on some parts of the claims by the respondent are or may be still pending determination together with assessment of damages.

9 This then enabled or led us to inquire, at the start of our consideration, the events and how the trial Judge had commenced or conducted the hearing based on what had been agreed or disagreed as issues for determination.

10. We drew our attention to the transcript of the proceeding of 3 November 2016 (the transcript) and in particular noted the conduct of the proceeding on that day. What stood out immediately to us was this. The trial on 3 November 2016 was conducted in a rather peculiar manner. The parties informed the trial Judge that they would proceed with submissions that had been filed based on the Agreed Statement and Issues (the Statement). The trial Judge, upon receiving the advice, proceeded with and heard submissions from the parties.

11. We refer to the transcript of the hearing which is located at page 371 of the Appeal Books (ABs). Pages 373 and 374 read in part:

MR KUP-OGUT: Your Honour, we are here to make oral submission based on a settled statement of facts and legal issues.

HIS HONOUR: This is the submission on the legal point”

MR KUP-OGUT: Yes, your Honour.

HIS HONOUR: Yes. All right, let us just get it clear. The matter is being called up for hearing on submissions only with all facts and the issues for hearing resolved by way of that statement of agreed and disputed facts. Is that right, gentlemen?

MR KUP-OGUT: It is only statement of agreed facts.

HIS HONOUR: Yes.

......

HIS HONOUR: Yes, all right, and you both have filed your respective submissions?

MR KUP-OGUT: Yes

HIS HONOUR: And you are going to be brief take the court through that, okay. Yes, Mr Kup-Ogut, you might take the lead.

......

12. The trial, as revealed in the transcript, proceeded with submissions from both counsel without admission of any evidence. We observe that no agreement had been reached between the parties as to which evidence they would each be relying on or tender by consent. The trial Judge, we observe and with respect, also did not address evidence at the commencement of the hearing. Affidavit evidence were not marked or recorded as court exhibits.

13. At that point in time of the hearing, as quoted above from the transcript, the correct process we observe should have been for the trial Court to formally accept the evidence of the parties, whether by consent or otherwise. We have also perused the written submissions of the parties which were presented before the trial Court in the ABs. We observe therein no references made on what evidence the parties had intended to tender to the court. We have also perused the written decision of the Court delivered on 29 October 2019 and note nothing therein that addresses evidence and how they may have been tendered or accepted by the Court. It is also clear to us reading the decision that His Honour’s findings were based on facts or evidence that had to come from what had been filed by the parties, but which had not been formally tendered. We also observe that the Statement, which was said to contain the agreed facts, in fact contained contentious facts which the parties had agreed on. For example, at paragraph 1(t) of the Statement, the parties acknowledged the appellants’ defence (which was based on the original and variation contracts) where they had claimed that they had fulfilled their obligation except for the supply of 10 vehicles which they said remained outstanding. These therefore meant that the trial Court would have required evidence from both sides if the issues were to be properly considered.

14. We also observe the Court’s findings on fraud which was a serious allegation that was pleaded in the statement of claim. At paragraph 41 of the decision, His Honour said, and we quote in part:

In these circumstances, I find the original Contract was facilitated and arrived at by fraud, misrepresentation, dishonesty and illegal for breach of the requirements, the intends and the whole purpose of the PFMA by Freeway Motors through its managing director and sole shareholder Mr. Taison (sic) with the help of the then chairman of the CSTB. These actions constitution (sic) a serious and clear corrupt deal at its worst that falls nothing short of a fraud on the statute...

15. Such findings would require evidence of proof. Nothing in the Statement, in our view, would at all be sufficient for the trial Judge to refer to and make a finding on the issue of fraud. We would also say the same in regard to the other findings of the trial Judge that he made in his decision.

16. We finally observe that a total of 10 affidavits were included in the ABs. So, we ask ourselves this. “How were they tendered and accepted by the trial Court as evidence in the first place for them to be accepted, compiled and filed herein into the ABs?” We cannot find any explanation anywhere that would assist us answer this question.

17. In Philip Kereme v Peter O’Neil (2019) SC 1781, the then Chief Justice Sir Salamo Injia made this general observation re evidence, at paragraph 61:

61. In conducting a trial on the facts under O 3 r 3 of the Supreme Court Rules 2012 in an application under Section 18 (1) of the Constitution, ordinary rules of practice and procedure relating to pleading of a cause action in a civil claim and reception of evidence in Court apply. The pleadings of the cause in the application and statements in response from the interveners must plead the cause of action in clear, concise and sufficient terms. Those pleadings must spell out the issue(s) for trial - The pleadings must drive the evidence. Evidence must be formally admitted into evidence in accordance with ordinary and established rules and principles for reception of evidence in a trial. The Evidence must be material and relevant to the issues in the substantive application. The findings of fact must be supported by the evidence. I have followed these principles in conducting the trial in the case at hand. (Underlining ours)

18. In Las Peles Shipping v. John Telele (2019) N7676, the National Court, when setting aside a judgment that was heard ex parte on assessment of damages, said in part at paragraph 12:

... In my view, I find that to be irregular. A trial that is conducted ex-parte, is still a trial. The absence of a party or the defendants in this case, does not guarantee or mean that judgment shall therefore be entered without the proper tendering of evidence or without the proper considerations in terms of assessing damages. This was not meant to be a summary judgment hearing but rather a trial for assessment of damages. See the case Yange Langan v. The State (1995) N1369. In my view, what should have happened was this. The plaintiff should have formally opened its case, tendered its evidence where they should have been formally accepted by the Court. And the plaintiff should have closed its case after that. Only then, in my view, can the Court proceed to consider the evidence and reach a decision on damages. ...

19. In our view, a civil trial must be conducted in observance of its formal process. The process requires an opening address by each counsel, proceeded with adducing of evidence whether it be orally or by affidavits, that is, subject to the rights of the parties to cross-examine witnesses in observance of the requirements under the Evidence Act Chapter No. 48, then the closing arguments or submissions. The transcript of proceeding in the present matter shows that the process was not observed by the Court below. To us, this error is fatal thus affects the final decision of the trial Judge making it susceptible to be overturned upon an appeal. The proper term for this is mistrial.

20. There is nothing before us that assists us see how the parties and also the trial Court with respect, were able to rely on or consider any evidence in the matter in the Court below.

21. We find as a matter of fact that none of the affidavits in the ABs were formally tendered before the Court below. As such, these evidence cannot be regarded as properly before us as the Appellate Court, to consider or use to decide on the merits of the appeal or the substantive matter.

22. We are therefore inclined to uphold the appeal for this reason alone. This is not one of the grounds of appeal raised by the appellants although we note that it is reflected in some of the particulars of the appeal grounds. However, as this is the substantive hearing of the appeal, we have powers as we have set out above herein, namely, s. 6 and 16 of the SC Act, and s. 155(1), (2) & (4) of the Constitution. This means that we may consider all issues whether they be preliminary or substantive that arise in this appeal or in the Court below, and we are not restricted or limited to considering only the grounds of appeal and the relief that are pleaded and sought by the appellants. See cases: Acquila Samson v. NEC (2019) SC1880, Madang Timbers Ltd v. Valentine Kambori (2009) SC992, Papua Club Inc. v. Nusaum Holdings Ltd (2005) SC812.

APPROPRIATE RELIEF

23. It comes down to this next issue, which is the type of orders or relief we should make given our findings.

24. Section 16 of the SC Act reads:

16. Decision, etc., on appeal.

On the hearing of an appeal, the Supreme Court shall inquire into the matter and may—

(a) adjourn the hearing from time to time; or

(b) affirm, reverse or modify the judgement; or

(c) give such judgement as ought to have been given in the first instance; or

(d) remit the case in whole or in part for further hearing; or

(e) order a new trial.

25. We have considered the options herein. In our view, the option that best suits this matter would be to set aside or dismiss the National Court decision of 29 October 2019 and order a re-trial. We find this option appropriate under the circumstances. We note in particular that since no evidence were ever admitted, to proceed in any other manner by us now would be like to proceed ‘blind-folded’ so to speak. Had the evidence been identified by the Court below, that could have assisted us with our considerations and options. This is however not the case, and so the safest and just option under the circumstances, in our view, would be to refer the matter back to the National Court for a re-trial.

26. The matter should also be referred back for Directions Hearing for the parties to settle any pending issues. We intend to make this particular order given submissions made by counsel in this appeal hearing. Counsel for the appellants in particular refers to ground (c) of appeal and also in his submission, that the Agreement has a mandatory clause for arbitration, and counsel submits that the option was not exhausted as it should have before proceeding was commenced in the National Court. This indicates to us that the Agreement should be looked at on this issue. The Agreement has not been tendered so it is not formally before us to consider together with any affidavit evidence that have been compiled that are in the ABs that may relate to the issue. It is perhaps something for us to note and issue appropriate orders so that it is addressed with the appropriate evidence in the Court below.

SUMMARY

27. In summary, we uphold the appeal based on the reason we give. The decision of the trial Judge made on 29 October 2019 will be set aside and quashed. We will order the matter to return before another judge to deal with. We will also order that at the first directions hearing, the Court shall consider whether the agreement contains a mandatory clause for disputes between the parties to be resolved by arbitration, whether the said provision had been exhausted, and if not, whether the matter should be referred to for arbitration.

COST

28. The appeal is upheld not based on the grounds of appeal but based on a preliminary issue or upon the Court’s own findings. And we note that both parties had contributed to the fundamental error, that is, when they informed the trial Judge that they would be making submissions based on the Statement. None of the counsel, as officers of the Court, alerted the trial Judge of the trial process and of how they each would tender their evidence in Court before they presented their written submissions.

29. As such, we will order each party to bear their own costs of the appeal.

ORDERS OF THE COURT

30. We make the following orders:

1. We uphold the appeal and quash the decision of the National Court of 29 October 2019 made in proceeding WS 765 of 2012.
   
2. The matter is referred back to the National Court to be heard before another judge.
   
3. At the first directions hearing of the matter, the parties shall make submissions to assist the Court ascertain whether there is a mandatory clause in the Sale and Purchase Agreement for arbitration, if so, whether the process had been exhausted, and if not, whether the matter should be referred to arbitration as per the agreement.
   
4. Parties shall bear their own costs of the appeal.

________________________________________________________________
Holingu Lawyers: Lawyers for the First & Second Appellants
Kup & Co. Lawyers: Lawyers for the Respondent