Kopyoto Investment Ltd (trading as Lodge 10) v National Housing Corporation [2022] PGSC 138; SC2339 (14 October 2022)

SC2339

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA 75 OF 2021

BETWEEN:
KOPYOTO INVESTMENT
LIMITED
trading as LODGE 10
Appellant

AND:
NATIONAL HOUSING
CORPORATION
Respondent

Waigani: Hartshorn J, Berrigan J, Dowa J
2022: 28^th April, 12^th August, 14^th October

SUPREME COURT – Appeal – grounds of appeal - primary judge fell into error in failing to uphold the agreement between the parties in regard to interest and default interest; in not giving any reasons; in not awarding special damages and in not awarding costs of the proceeding to the appellant - Court of its own volition required the parties to make submissions on whether s. 5 Claims By and Against The State Act (Claims Act) and s. 25 National Housing Corporation Act (NHC Act) were applicable in the circumstances of the case and if so whether those provisions had been complied with – s.5 Notice is condition precedent to making any claims against the state – appellant failed to issue s5 Notice to defendants under the Claims Act - National Court proceeding was incompetent and an abuse of process - appeal also incompetent– appeal dismissed

Cases Cited:
Paul Tohian v. Tau Liu (1998) SC566
Kokopo Building & Maintenance Ltd v. Department of Police (2005) SC786
Paul Eddie v. Bill Kirokim (2012) N4932
PNG Power v. Augerea (2013) SC1245
Public Curator of PNG v. Kara (2014) SC1420
CMSS PNG Ltd v. State (2014) N5717
State v. Nimbituo (2020) SC1974
Nikint Investment Ltd v. Thomas Niganu (2020) SC1919
Walun v. National Housing Corporation (2021) N8772

Counsel:

Mr. R. Lains, for the Appellant
Mr. A. Luke, for the Respondent

14^th October, 2022

1. BY THE COURT: This is a decision on an appeal of part of a National Court judgment (judgment appealed). That part consists of an award of interest at a reduced rate to that claimed by the appellant and an order that each party bear their own costs.
Background

2. The appellant/plaintiff entered into a written agreement with the respondent/defendant to amongst others, lend to the defendant K250,000. The respondent was to repay the sum of K250,000 together with 70% interest of K175,000 three weeks later, on 29^th July 2016. The respondent repaid the sum of K250,000 but did not pay any interest.

3. The appellant commenced proceedings in the National Court on 19^th December 2019 and sought amongst others, 70% contractual interest, default interest and special damages. After a trial the primary judge ordered to the appellant judgment on liability, a sum of K37,500 being 15% interest and 2% per annum interest on K37,500. An order sought for 8% interest per week in the total sum of K2,450,000.00 was refused. It was further ordered that each party pay its own costs.

Grounds of appeal

4. In essence the appellant’s grounds of appeal are that the primary judge fell into error in failing to uphold the agreement between the parties in regard to interest and default interest; in not giving any reasons; in not awarding special damages and in not awarding costs of the proceeding to the appellant.

Consideration

5. At the first hearing of the appeal, pursuant to its inherent jurisdiction, the Court of its own volition required the parties to make submissions on whether s. 5 Claims By and Against The State Act (Claims Act) and s. 25 National Housing Corporation Act (NHC Act) were applicable in the circumstances of the case and if so whether those provisions had been complied with. The appellant took no issue with the Court of its own volition raising the issue of s. 5 Claims Act and cited Bluewater International Ltd v. Mumu (2019) SC1798 in this regard. We refer to State v. Nimbituo (2020) SC1974, as an example of this Court of its own volition, raising the s. 5 Claims Act issue.

Section 5 Claims Act

6. That compliance with s. 5 Claims Act is required is not controversial. The respondent is considered part of the State for the purposes of the Claims Act: PNG Power v. Augerea (2013) SC1245; Public Curator of PNG v. Kara (2014) SC1420; Walun v. National Housing Corporation (2021) N8772 at [18].

7. The appellant pleaded in the statement of claim that it had given notice pursuant to s. 5 Claims Act by a letter dated 26^th July 2018 and that the State had acknowledged the notice and replied by letter dated 1^st August 2018.

8. The Supreme Court has consistently maintained that the requirement to comply with the Claims Act is a condition precedent that must be complied with before a proceeding is issued: Paul Tohian v. Tau Liu (1998) SC566; Kokopo Building & Maintenance Ltd v. Department of Police (2005) SC786 and Nikint Investment Ltd v. Thomas Niganu (2020) SC1919.

9. Section 5(2) Claims Act provides that:

“(2) A notice under this Section shall be given—

(a) within a period of six months after the occurrence out of which the claim arose; or

(b) where the claim is for breach of a contract, within a period of six months after the claimant became aware of the alleged breach; or

(c) within such further period as—

(i) the Principal Legal Adviser; or

(ii) the court before which the action is instituted,

on sufficient cause being shown, allows.”

10. In this instance the date of the occurrence out of which the claim arose was 30^th July 2016. This is the date following the day on which 70% interest of K175,000 was to be paid pursuant to the written agreement pleaded as being entered into on 5^th July 2016 between the parties. To the extent that the appellant’s claim is for breach of a contract, from the evidence given on behalf of the appellant, we are satisfied that the appellant became aware of the alleged breach on or about 30^th July 2016.

11. Notice under s.5 Claims Act should have been given by 30^th May 2017. It is pleaded that notice was given by letter dated 26^th July 2018. There is no evidence to the effect that a further period of time to give notice under s. 5 Claims Act was requested of the Principal Legal Adviser or of the court, or that a further period of time to give such notice was given.

12. As to any purported extension of time to give the s. 5 notice or of a purported acceptance of the s. 5 notice, we reproduce [8] of Paul Eddie v. Bill Kirokim (2012) N4932:

“8. The requirement to give a notice under s. 5 Claims Act is mandatory. No one on behalf of the State can waive these requirements directly or by implication. The Principal Legal Adviser is only able to allow a further time within which a notice shall be given, on sufficient cause being shown. In this regard, there is no evidence that the plaintiffs applied for an extension of time or that any further time has been allowed for them to file a s. 5 Claims Act notice.”

See also CMSS PNG Ltd v. State (2014) N5717 at [26]
13. In the absence of evidence that a further period of time within which a s. 5 notice shall be given was allowed under s. 5(2)(c) Claims Act, the s. 5 notice pleaded as being given by the appellant was not given within six months after the occurrence out of which the claim arose. Consequently s. 5 Claims Act was not complied with by the appellant, the National Court proceeding was incompetent and an abuse of process and so this appeal is incompetent and should be dismissed.

14. Given this it is not necessary to consider the other submissions of counsel.

15. We mention that although we have found that the National Court proceeding was incompetent, as the respondent did not appeal the judgment of the primary judge, that judgment remains unchallenged apart from the appeal of the appellant. Further, the issue of compliance with s. 25 NHC Act was addressed by the primary judge, but the respondent did not appeal his findings on this issue.

16. We further mention that the facts of this case concerning the borrowing of funds on behalf of a State entity are of grave concern and are alarming. The evidence is that the Managing Director of a State entity had purportedly committed that State entity to borrow money outside of requisite statutory requirements and procedures at an interest rate of 70% for three weeks. That is an exorbitant and usurious interest rate of 1,213.3% per annum. We will order that the appropriate authorities be notified of the facts of this case.

Orders

17. The Court orders that:

a) This appeal is dismissed.

b) The appellant shall pay the costs of the respondent of and incidental to this appeal.

c) The Registrar of the Supreme Court is directed to forward a copy of this judgment to the Commissioner of Police and the Ombudsman Commission for their consideration as to what action may be warranted arising from the circumstances of this case.
__________________________________________________________________
Hardy & Stocks Lawyers: Lawyers for the Appellant
National Housing Commission Legal Division: Lawyers for the Respondent