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National Capital District Water & Sewerage Ltd (trading as Eda Ranu) v Yambaran Pausa Saka Ben Ltd [2023] PGSC 17; SC2365 (23 March 2023)

SC2365

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]


SCA NO. 34 OF 2020 (IECMS)


BETWEEN
NATIONAL CAPITAL DISTRICT WATER & SEWERAGE LIMITED
trading as EDA RANU
Appellant


AND
YAMBARAN PAUSA SAKA BEN LIMITED
Respondent


________________________________________________


SCA NO. 38 OF 2020 (IECMS)


BETWEEN
YAMBARAN PAUSA SAKA BEN LIMITED
Appellant


AND
NATIONAL CAPITAL DISTRICT WATER & SEWERAGE LIMITED
trading as EDA RANU
Respondent


Waigani: Makail J, Shepherd J, Tusais J
2022: 13th December
2023: 23rd March


SUPREME COURT – APPEAL – failure to raise issues in Court below precludes a party from raising those issues on appeal unless leave to do so has been granted.


SUPREME COURT – PRACTICE & PROCEDURE – discussion of meaning of “mixed fact and law” for purposes of Supreme Court Act, s.4(2)(b) – improper to plead “mixed law and fact” or “mixed law and facts” in notice of appeal.


CONTRACT – specific provision for variation in a contract excludes variation by implied conduct – any variation to a contract must be in very clear terms – where there is no contractual provision prescribing how variation is to be made, only then can conduct of parties be relevant to issue as to whether variation has occurred – parole evidence not admissible if provisions of contract are clear – issue of implied conduct only relevant if there is lack of contractual provision and genuine uncertainty as to how aspects of contract such as variation are to be observed.


Cases Cited:


Curtain Bros (PNG) Ltd v University of Papua New Guinea (2005) SC788
Fly River Provincial Government v Pioneer Health Services Ltd (2003) SC705
Kandapaki v Enga Provincial Government (2011) SC1139
Kumbu v Mann (2012) N4784
Mainland Holdings Ltd v RD Tuna Cannery [2000] PNGLR 213
National Broadcasting Corporation v Taison (2019) N8083
Nivani Ltd v China Jiangsu International (PNG) Ltd (2007) N3147
Papua Club Inc v Nusaum Holdings Ltd (2005) SC812
Papua New Guinea Banking Corporation v Tole (2002) SC694
PNG Ports Corporation Ltd v Canopus No. 71 Ltd (2010) N4288
Takori v Yagari (2008) SC905
Vanimo Forest Products Ltd v Ossima Resources Ltd (2013) SC1275


Legislation


National Court Rules: Order 22 Rules 8, 11
Supreme Court Act Chapter 37: s.4(2)(b)
Supreme Court Rules 2012: Order 7 Rule 9(c)


Counsel


Mr L Manua, for the Appellant /Cross-Respondent
Mr R Tamarua, for the Respondent/Cross-Appellant


DECISION


23rd March, 2023


  1. BY THE COURT: The appellant in SCA No. 34 of 2020, National Capital District Water & Sewerage Ltd (Eda Ranu), appeals against the decision of the National Court whereby judgment was entered in favour of the respondent, Yambaran Pausa Saka Ben Ltd (Yambaran), with damages to be assessed.
  2. The appellant in SCA No. 38 of 2020, Yambaran, cross-appeals against the same decision of the National Court, but on different grounds than those pleaded by Eda Ranu in SCA No. 34 of 2020.
  3. These two appeals were heard together as although the grounds of appeal are different in each case, the two appeals arise out of the same facts and the parties are the same.

BACKGROUND


  1. On 29 July 2013 Eda Ranu executed a contract for the provision of backhoe hire services by Yambaran. The agreement was for a term of three years effective from 28 July 2013, with Yambaran to provide its backhoe services to Eda Ranu at a rate of K400 per hour per backhoe.
  2. During the currency of the contract, by letter dated 29 April 2014 Eda Ranu notified Yambaran to the effect that there was to be a reduction in the rate of hire of Yambaran’s backhoe services such that Eda Ranu would only pay K300 per hour for those services, excluding idle time, and that the number of backhoes to be provided under the agreement at any one time was to be reduced from three backhoes to one backhoe per month. Eda Ranu’s letter further notified Yambaran that the company could withdraw its backhoe equipment from Eda Ranu should Yambaran not agree with Eda Ranu’s new conditions for hire of backhoes.
  3. Yambaran did not promptly respond to Eda Ranu’s letter of 29 April 2014 to advise whether it objected to the reductions insisted on by Eda Radu but Yambaran appeared to tacitly accept those reductions for the next six months by continuing to provide backhoe services for one backhoe only per month but invoicing Eda Ranu at the lower rate of K300 per hour, for which continuing services the company was paid by Eda Ranu at the lower rate.
  4. By letter dated 24 October 2014 Yambaran replied to Eda Ranu’s letter of 29 April 2014 and acknowledged the reduction of the backhoe hire rate from K400 to K300 per hour and the reduction in the number of backhoes.
  5. Eda Ranu responded by letter dated 29 October 2014 and informed Yambaran that it would engage the company’s services for provision of two backhoes which would be hired at the rate of K300 per hour.
  6. Almost a year later, by letter dated 24 September 2015 Eda Ranu again wrote to Yambaran, this time advising that it would only engage the hire of one backhoe “as and when the need arises”. The letter also stated that Eda Ranu was varying the rate it would pay for backhoe hire from K300 per hour to a fixed amount of K850 per day. The letter of 24 September 2015 concluded: “Should we not hear from you within 7 days of receipt of this letter we will assume that your company does not wish to conduct further business with EDA RANU and will treat this letter as sufficient notice under clause 6.1(b) of the Agreement to terminate the Agreement.”
  7. Yambaran did not respond in writing to Eda Ranu’s letter of 24 September 2015 but continued to provide backhoe services to Eda Ranu, this time at the new rate of K850 per day. Eda Ranu paid Yambaran’s invoices at the new daily rate until the contract came to an end on its due expiry date of 29 July 2016.
  8. On 1 September 2016 Yambaran filed suit against Eda Ranu in the National Court in WS No. 1089 of 2016 alleging breaches by Eda Ranu of its contract for Yambaran to provide backhoe hire services and claiming damages.
  9. Yambaran’s substantive claim in WS No. 1089 of 2016 was heard by the National Court on 18 February 2019 and decision reserved.
  10. The trial judge delivered the National Court’s decision in WS No. 1089 of 2016 on 30 April 2020. The trial judge dismissed that component of Yambaran’s claim which was based on the reduction of the number of backhoe hire services but allowed Yambaran’s claim for damages on the initial agreed rate of K400 per hour, the actual quantum of those damages to be assessed at further trial.
  11. Aggrieved by the National Court’s decision to award Yambaran damages for breach of contract based on Eda Ranu’s unilateral conduct in reducing the initial agreed rate of K400 per hour to K300 per hour, Eda Ranu filed appeal SCA No. 34 of 2020 on 5 June 2020.
  12. Yambaran, wishing to challenge the National Court’s decision to endorse Eda Ranu’s contractual entitlement to vary the number of backhoes to be provided by Yambaran from three backhoes to one backhoe, filed cross-appeal SCA No. 38 of 2020 on 5 June 2020, coincidentally on the same day as Eda Ranu’s appeal was filed in SCA No. 34 of 2020.

SCA No. 34 of 2020 (IECMS)


Grounds of appeal in SCA No. 34 of 2020


  1. Eda Ranu has pleaded five grounds of appeal in SCA No. 34 of 2020. The grounds can be stated as follows:
  2. Eda Ranu seeks orders that this appeal in SCA No. 34 of 2020 be allowed, that the case be referred back to the National Court for re-hearing on the issue of liability and that Yambaran should pay Eda Ranu’s costs of this appeal and of the National Court proceedings in WS No. 1089 of 2016.

Ground 1 in Appeal SCA No. 34 of 2020


  1. Ground 1 is the primary issue in this appeal. It centres on whether the trial judge erred in law when he found that clause 5 of the Contract did not authorise Eda Ranu to vary the rate for the hire of Yambaran’s backhoe services from K400 per hour to K300 per hour, and to then subsequently further that rate to a rate of K850 per day.
  2. The trial judge’s reasons for deciding that Eda Ranu’s unilateral variation of the hire rates for Yambaran’s backhoe services was in breach of the Contract were twofold. Those reasons are set out in paragraph 12 of the trial judge’s decision:

“ 12. In this instance, from the evidence, I am satisfied that:

  1. The parties did not agree in writing in the contract or at all to vary the rates;
  2. if there is no provision in the contract that provides for a variation of the rate, it cannot implied from the conduct of the parties that there was an agreement between them to vary the rate. ”
  1. To appreciate the trial judge’s reasons for decision, it is necessary to have regard to provisions contained in the Contract.
  2. Recital 2 of the Contract defines the services to be provided by Yambaran to Eda Ranu in these terms:

2. The Service Provider is a company incorporated in Papua New Guinea and provides Backhoe equipment services, machinery and operator on a hire basis (the “Services”). The Service Provider has agreed to provide the Services, particularly provision of 3 backhoes with operators to Eda Ranu.


  1. Clauses 4, 5 and 6 of the Contract deal firstly, with the rate to be paid by Eda Ranu for Yambaran’s provision of its Services; secondly, variations which can be made to the Contract; and thirdly, the circumstances under which termination of Yambaran’s Services can occur. The text of those clauses is set out in full below:
    1. Eda Ranu’s Obligations
      • 4.1 Eda Ranu shall pay for the Services at a rate of K400 per hour per backhoe to the Service Provider.
      • 4.2 The rate is fixed and inclusive of other expenses incurred by the Service Provider in relation to the Services to be provided, including GST.
      • 4.3 Eda Ranu shall provide the specific instructions and directions to the Service Provider in relation to the Services to be provided and at required locations and times.
    2. Variations

The Parties may at any time during the term of this Agreement, agree in writing to extend or reduce or otherwise vary or modify the Services under this Agreement.


  1. Termination of Services
  2. The term “rate” is not defined in the Contract. However, we consider that the meaning of this term as used in clause 4.1 and 4.2 is clear. The rate at which Eda Ranu was to pay for the hire of Yambaran’s backhoe equipment services, machinery and operators was agreed at the outset at an inclusive fixed rate of K400 per hour per backhoe. The rate of K400 per hour included not only 10% GST under the Goods and Services Tax Act 2003 but also any other expenses incurred by Yambaran in its provision of its backhoe services.
  3. Clause 5 of the Contract is the operative provision which would allow Eda Ranu and Yambaran to mutually agree in writing to vary or modify any aspect of the Contract, including the provision by Yambaran of its backhoe hire services, as defined in Recital 2.
  4. Against this, Eda Ranu submits that a legally valid and enforceable variation of the rates it would pay under the Contract occurred because Yambaran by its own conduct in rendering invoices at the varied rates impliedly agreed to those variations and that this was sufficient evidence of the parties’ mutual agreement that variation as to rates had occurred and was binding on both parties, hence, it was argued, the trial judge erred in law in finding that the variations as to rate which were imposed by Eda Ranu were invalid.
  5. Eda Ranu, in support of this ground, referred to the case of Vanimo Forest Products Ltd v Ossima Resources Ltd (2013) SC1275 (Salika DCJ as he then was, Cannings J, Logan J) where the Supreme Court held that renewal of a contract can be inferred from the conduct of the parties. However, that case was not concerned with variation of a contract by implied conduct but with renewal of a contract by implied conduct, as is obvious from the following pronouncement at paragraph 19 of the Court’s decision:

“ ... if the existence of an initial contract can be inferred by the conduct of the parties, that it has been renewed in accordance with a provision anticipating that the parties may extend its term can likewise be inferred from the conduct of the parties. Repudiation of a contract can also be inferred from the conduct of the parties: Mercidita Malihan v Divine Word University (2010) N4112, National Development Bank Ltd v Maxtone Graham (2012) N4739. There was, therefore no error in principle in her Honour acting on the basis that it was lawfully possible for renewal to be inferred from the conduct of the parties. There did not have to be a formal instrument of renewal signed by the parties. ”


  1. We further observe that the Vanimo Forest Products Ltd case was concerned with a situation where the parties’ original contract, having contained a clause that said that the contract was to be renewed annually, was silent as to how renewal was to be effected.
  2. We find that Vanimo Forest Products Ltd case and other case authorities cited to the same effect are of little or no assistance to Eda Ranu in circumstances where a contract, such as that which was entered into by Eda Ranu and Yambaran, unambiguously provides that any variation is to be evidenced by agreement in writing.
  3. A leading case on contract law in this jurisdiction relating to variation of contracts is National Broadcasting Corporation v Taison (2019) N8083 (Kandakasi DCJ). There the second defendant claimed that its contract to supply certain vehicles to the plaintiff was varied by implied conduct, including that the plaintiff had failed to object or take issue with vehicles delivered by the second defendant which were different from those required to be delivered under the contract. His Honour stated at paragraph 14:

“ A variation of an existing contract is a contract in itself. This means the legal requirements for a legally binding and enforceable contract must exist in order for there to be a valid variation. It is settled law that contracting parties may by their clear and unequivocal agreement vary their contracts. Usually the original of a contract would make provision for its variation. Where there are such provisions, its terms dictate how variations could validly be arrived at. In such a case, a valid contract variation can be brought about in accordance with the way or manner prescribed in the contract. Any departure from that which is prescribed could not amount to a valid variation of the contract, unless the parties otherwise mutually agree in very clear terms. But in cases where such provisions are lacking, the parties must enter into a clearly binding agreement for the variation. In some instances, the variation of the contract may come by the conduct of the parties.”

[underlining added]

  1. See also the earlier case of Nivani Ltd v China Jiangsu International (PNG) Ltd (2007) N3147 where it was held by Lay J that where a contract makes no provision for variation, a variation will occur if there is a contract of variation binding on the parties, in which event a contract of variation may be able to be formed by the conduct of the parties.
  2. Express conditions in a contract which clearly articulate how aspects of the contract are to be performed or apply to circumstances relevant to the contract cannot later be ousted by the implied conduct of one or more of the parties if express contractual conditions are not complied with. We consider that the issue of implied conduct of parties is only relevant to situations where there is lack of contractual provision and genuine uncertainty as to how aspects of the contract are to be performed.
  3. We accordingly adopt and apply the principles explained in the National Broadcasting Corporation and Nivani Ltd cases to the situation presented in this appeal.
  4. It is clear on the evidence that at no time did Yambaran ever agree in writing to the variation sought by Eda Ranu to reduce the rate from K400 to K300 per hour per backhoe, nor did Yambaran ever agree in writing to the later variation of K850 per day per backhoe proposed by Eda Ranu.
  5. We consider that in the absence of both Eda Ranu and Yambaran having agreed in writing to any proposed variation of the provision of Yambaran’s services, which of necessity would include any variation of the rate specified in clause 4.1, then the fixed rate of K400 per hour per backhoe would remain for the remainder of the duration of the Contract until its termination under any of the conditions stipulated in clause 6.
  6. When taken in its contractual context, the meaning of clauses 4.1 and 5 is clear. For any variation of the rate prescribed by clause 4.1 to become binding, both parties had to enter into a variation contract which, given the wording of clause 5, had to be in writing. Implied conduct could not, giving the clarity of meaning of clause 5, override the contractual necessity for any mutual agreement to variations in the rate prescribed by clause 4.1 of the parties’ contract to be in writing.
  7. For these reasons we dismiss Ground 1 of the appeal.

Grounds 2, 3, 4 and 5 in Appeal SCA No. 34 of 2020


  1. Yambaran objects to Grounds 2, 3, 4 and 5 of Eda Ranu’s notice of appeal because it is contended that each of these four grounds raise fresh issues which:
  2. Yambaran submits that the four grounds of appeal to which it objects all go to issues for which it was given no opportunity to be heard at trial and that the trial judge was himself denied any opportunity to consider these new issues and make findings. Yambaran points out that the trial judge only made findings and decided on the issues which were before him, being those issues which had been agreed in the parties’ Statement.
  3. The law as to whether an appellant on an appeal is entitled to raise an issue or argument that was not raised at trial in the court below is well settled. It was definitively held in Fly River Provincial Government v Pioneer Health Services Ltd (2003) SC705 (Amet CJ, Sawong J, Kandakasi J as he then was) that a party is not entitled to raise any new or fresh issue or argument on appeal. This principle has been applied in many appeal cases: see for example Curtain Bros (PNG) Ltd v University of Papua New Guinea (2005) SC788 (Injia DCJ as he then was, Jalina J, Sevua J); Takori v Yagari (2008) SC905; Kandapaki v Enga Provincial Government (2011) SC1139 (Cannings J, Gabi J, Yagi J). The only exception to this general rule is where leave to raise a fresh issue on appeal has been granted by the Supreme Court: Papua Club Inc v Nusaum Holdings Ltd (2005) SC812 (Los J, Davani J, Cannings J).
  4. Analysis of Grounds 2, 3, 4 and 5 of Eda Ranu’s notice of appeal shows that these grounds plead that the trial judge is said to have erred by failing to consider issues such as whether Eda Ranu’s letter to Yambaran dated 29 April 2014 constituted notice to terminate the Contract and whether there was any collateral agreement or new agreement to vary the Contract.
  5. We note that Yambaran’s amended statement of claim in WS No. 1089 of 2016 filed on 8 December 2016[2] is limited to allegations relating to the issues of: (1) Eda Ranu’s purported two variations of the rate of K400 per hour for the hire of each backhoe and operator prescribed by clause 4.1 of the Contract, and (2) Eda Ranu’s reduction of the number of backhoes from three to one. Yambaran’s amended statement of claim did not plead any issue relating to whether Eda Ranu wrongfully terminated the Contract or whether there was any collateral agreement or new agreement to vary the Contract.
  6. The issues which Eda Ranu agreed with Yambaran were to be considered at trial are set out at page 5 of their Statement filed in WS No 1089 of 2016 on 12 June 2018:

“ C. Legal Issues

1. Whether or not the variations made to the terms of the contract are valid:

(a) reduce[d] the number of backhoes under the Agreement from three (3) to one (1) at the reduced hire rate of K300/hour on 24 April 2014.

(b) reduced the number of backhoes under the Agreement from three (3) to one (1) at an amended rate of K850/day on 24 September 2015.

  1. Whether or not the Defendant breached its obligations under Clause 4 of the Agreement by not paying outstanding invoices from October 2015 to December 2015?
  2. Whether or not the Defendant breached its obligations under Clause 4 of the Agreement by not paying outstanding payments between the months of January 2016 to July 2016 for Backhoe BDX 446? ”
  3. The trial judge in his decision made specific mention of the parties’ agreed issues which were before the National Court for determination. His Honour said this at paragraph 3 of his decision:

“ 3. The parties agreed three issues for trial in a statement of agreed and disputed facts and legal issues. I now consider those issues.”


  1. The parties’ Statement did not introduce any issue for determination by the trial judge based on purported early termination of the Contract by Eda Ranu or whether there was any collateral agreement or new agreement to vary the Contract which could be deduced from implied conduct of Yambaran.
  2. When the Supreme Court was confronted with a similar situation in Curtain Bros (PNG) Ltd v University of Papua New Guinea (supra), the Court said at pp 10 and 11:

“ It is our opinion based on the authorities and cases cited here, that the appellants should not be given the opportunity to present their arguments on these issues in this Court when they had the opportunity to do so in the Court below but failed to do so. The National Court Rules exist to regulate the procedures of that Court and parties or litigants have the right to utilize such procedures to protect their rights and interests. If they fail without good reasons to exercise their rights to utilize the procedures and avenues available to them in the National Court, they cannot come to the Supreme Court and take a ‘second bite of the cherry’ as it were. It would be unfair to the opposing party and also unfair to the trial judge to criticize the Judge over something that was never put before him.”


  1. We therefore agree with Yambaran that the issues raised in Grounds 2, 3, 4 and 5 of Eda Ranu’s notice of appeal are novel or fresh issues and that they cannot now be raised at substantive appeal, no leave to proceed with those new issues having been granted by the Supreme Court. No utility would be served by considering those four grounds further.
  2. We accordingly dismiss Grounds 2, 3, 4 and 5 of Eda Ranu’s appeal.
  3. It follows that as all grounds of Eda Ranu’s appeal have failed, the appeal must be dismissed.

SCA No. 38 of 2020 (IECMS)


Grounds of Cross-Appeal in SCA No. 38 of 2020


  1. Yambaran relies on five grounds of appeal in SCA No. 38 of 2020. The grounds as pleaded in Yambaran’s notice of appeal are prolix, confusing and poorly drafted. We will not attempt to summarise those grounds, but set them below in full without editorial revision. We will then comment on these grounds.

“ (1) His Honour erred in law when His Honour gave strict interpretation on the definition of the term “services” as expressed under the recital of the Contract by holding that the reference to the number of backhoes as 3 backhoes on the last sentence of the Clause 2 of the recital does not form part of the definition of the term “services” and, as such that Contract does not provide for specific number of backhoes to be engaged hence, no variation was required in the number of backhoes which, therefore allowed:

(a) His Honour to misconstrue Clause 5 of the Contract to hold that variation under Clause 5 does not provide for variation of the number of backhoes (from 3 to 1) of backhoes to be used and as such there was no variation for the number (From 3 to 1) of backhoes provided for by the Contract;

(b) His Honour to misconstrue Clause 5 of the Contract and hold that no variation on the number of backhoes was permitted by the Contract.

(c) His Honour to misconstrue and wrongly rely on Clause 4.3 to justify the Respondent’s action in permanently standing down two of its backhoes off the Contract from operation without lawful variation under Clause 5, when in essence Clause 4.3 provides for the Respondent’s obligation in terms giving specific instructions and directions on the Appellant only in respect of day-to-day operation of the backhoes under the Contract and, does not extend to authorise the Respondent to permanently reduce (from 3 to 1) the number of backhoes forming part of the service agreed in the Contract, which His Honour failed to see as reduction on the services (number of backhoes from 3 to 1) that would have been done as variation of services under Clause of 5; and

(d) His Honour to make error in law and mixed facts when he failed to distinguish that variation on the number of backhoes (from 3 to 1) was variation on the service and that would have been done under Clause 5 which His Honour failed to find, and not Clause 4.3 which provides only in relation to the manner in which the 3 backhoes would be engaged within the Contract by the Respondent on a day-to-day operation.


3.2 His Honour erred in law and in mixed facts when interpreting the term “service” whereas His Honour failed to read the Contract as whole to appreciate the meaning of the term “service” that included that the intention of the parties at the time of signing the agreement was manifested in the recital of the Contract especially provisions of 3 backhoes as being service agreed upon by parties which, His Honour would have appreciated if he had not failed to give considerable weight to evidence tendered by the Appellants to appreciate the position of the parties and the understanding reached from the early negotiation stage leading up to the signing of the Contract; and


3.3 His Honour erred in law and mixed fact when he misconstrued and/or misinterpreted Clause 4.3 of the Contract whereas Clause 4.3 of the Contract provided for the Respondent’s obligation in relation to provision of specific instructions and direction to the Appellant in relation to day-to-day operation and that any permanent reduction on the number of backhoes from 3 to 1 meant reduction in service which falls within the ambit of Clause 5 of the Contract and, as such His Honour failed to find that variation by the Respondent on the number of backhoes from 3 to 1 was not done in accordance with Clause 5 of the Contract.


3.4 His Honour erred in law and mixed fact when he gave inconsiderable weight to the evidence tendered by the Appellant and therefore failed to find that the Respondent failed to properly communicate in writing to the respondent on the variation on the number of backhoes from 3 to 1 per Clause 5 of the Contract.


3.5 His Honour erred in law when His Honour ordered that the Respondent shall pay one-half of the Appellant’s cost of and incidental to this proceeding in the National Court, when His Honour did not give any reasons as such order on cost, thereby denying the Appellant right to be heard and hence, right to natural justice as afforded under the Constitution. ”


  1. We observe that Grounds 1 to 4 of Yambaran’s notice of appeal are a hodgepodge of barely comprehensible contentions that the trial judge misconstrued clauses 4.3 and 5 of the Contract and that the trial judge placed undue weight on Eda Ranu’s evidence when the trial judge found that Eda Ranu was contractually entitled to issue specific instructions to Yambaran regarding the number of backhoes Eda Ranu required Yambaran to provide from time to time and that no variation of the Contract was required to achieve a valid reduction in the number of those backhoes.
  2. As to Ground 5 of Yambaran’s notice of appeal, this challenges the trial judge’s broad judicial discretion in the matter of awarding costs. We address Ground 5 later in this decision.
  3. At the hearing of this appeal, counsel for Yambaran chose not to make separate submissions on each of Yambaran’s five grounds of appeal. Instead counsel’s written submissions endeavoured to persuade this Court that the issues which fall for determination on Yambaran’s appeal in SCA No. 38 of 2020 are these:
  4. A preliminary response which we feel compelled to make in connection with supposed issues (1) and (3) is that an appellant has no right of appeal from a judgment of the National Court on questions of “law and mixed fact” or “law and mixed facts” as variously pleaded in Grounds 1(d), 2, 3 and 4 of the notice of appeal. It is the reverse. Section 4 of the Supreme Court Act Chapter 37 states:

4. Right of appeal from National Court

(1) An appeal in accordance with this Act lies to the Supreme Court from a judgment of the National Court.

(2) An appeal lies in any civil or criminal proceedings, to the Supreme Court from a Judge of the National Court sitting on appeal—

(a) on a question of law; or

(b) on a question of mixed fact and law; or

(c) with leave of the Supreme Court, on a question of fact.


  1. Section 4(2)(b) of the Supreme Court Act refers to “mixed fact and law”. The lawyer who drafted the notice of appeal for Yambaran appears not to have properly understood the term “mixed fact and law”. An appeal involving (1) a question of law, or (2) a question of mixed fact and law, does not require leave. If a question relates to an error of fact alone, then leave to appeal is required under s.4(2)(c).
  2. An error of law can occur when a trial judge has, for example, misconstrued a law. An error of mixed fact and law can occur when a trial judge has misapplied application of a law to the facts. In other words, there is an appeal as of right where it is contended that a trial judge has erred on a matter of law only or where the trial judge is said to have erred in application of a matter of law to the facts of the case.
  3. In the present appeal, the trial judge applied law (his legal interpretation of contract terms) to the facts and made findings which are the subject of this appeal. This constitutes a matter of mixed fact and law, and should have been pleaded as such in Yambaran’s notice of appeal. The repeated pleading in the notice of appeal that the trial judge had erred on matters of “law and mixed fact” and “law and mixed facts” is plainly wrong. The notice of appeal, when referring to such matters should have pleaded that the trial judge had erred on matters of “mixed fact and law” and then, in compliance with Order 7 Rule 9(c) of the Supreme Court Rules 2012, stated briefly but specifically the grounds relied upon in support of the contention that there had been errors of mixed fact and law.
  4. This is not mere pedantry. There is a very real difference between the situation where it is contended for an appellant that a trial judge has erred when giving reasons for decision where that error has occurred through facts to which there has been misapplication of law (mixed fact and law) as opposed to where a trial judge is said to have erred by misapplication of law to mixed facts (mixed law and fact). Whereas the former situation relates to errors which may have occurred when a trial judge has misapplied law to certain facts, the latter situation implies a scenario where a trial judge has wrongly applied matters of law to a muddled or confused mixture of facts.
  5. Be that as it may, we disagree with counsel for Yambaran that the issues raised in Yambaran’s grounds of appeal in SCA No. 38 of 2020 are as stated in his written submission. We consider that apart from Ground 5, Grounds 1 to 4, which were pleaded in such a confusing manner in the notice of appeal as to be an embarrassment, can be distilled into but one ground of appeal and one issue which would warrant consideration by this Court for the purposes of this appeal, namely:

Whether the trial judge erred in law or mixed fact and law when holding that Eda Ranu was entitled pursuant to clause 4.3 of the Contract by specific instruction and directions to Yambaran to reduce the number of backhoes to be provided to Eda Ranu by Yambaran from time to time without the necessity of the parties entering into a variation of the Contract by mutual agreement in writing under clause 5 of the Contract?


  1. When summarising this sole ground and issue in this manner, we note that it generally accords with Eda Ranu’s own understanding of the sole issue which is required to be determined by this Court. This is what is somewhat clumsily expressed in section D on page 3 of the written extract of submission filed in this appeal by counsel for Eda Ranu:

“The issue in this appeal is whether the learned trial judge erred in fact and law when holding that the recital of the provision of 3 backhoes, was not included in interpreting the term “Services” under Clause 2 of the Agreement, as such the trial judge erred in his decision when holding that the Respondent could vary the number of backhoes from 3 to 1.”


Grounds 1 to 4 in Appeal SCA No. 38 of 2020 as summarised by this Court


  1. The primary ground in this appeal, as distilled as best we can from Grounds 1 to 4 pleaded in Yambaran’s notice of appeal, is a ground based on whether the trial judge erred in law or mixed fact and law. We now set out the relevant portions of the trial judge’s findings and reasons for decision in connection with the backhoe issue:

“ 5. The contract provides in clause 2 of the recitals, “.... provides Backhoe equipment services, machinery and operator on a hire basis (the “Services”)”. Clause 4.1 provides that Eda Ranu shall pay for the services of K400.00 per hour per backhoe (rate). Clause 5 provides that:


“The parties may at any time during the term of the Agreement, agree in writing to extend or reduce or otherwise vary or modify the Services under the Agreement”

6. Clause 5 only provides for a variation of Services. It does not provide for a variation of the rate. Even if ‘Services” could be construed to include the ‘rate’, a variation is to be agreed in writing by the parties. There is no evidence that [Yambaran] agreed in writing to the variations in rate.


7. Clause 5 also does not provide for a variation in the number of backhoes of [Yambaran] which Eda Ranu is obliged to engage. Inthis instance however, the contract does not provide that Eda Ranu shall engage a specific number of backhoes. The reference to the number of backhoes is contained in the last sentence of clause 2 of the recitals. That sentence is not part of what is defined as ‘Services’.

8. Clause 4.3 of the contract provides that Eda Ranu shall provide the specific instructions and directions to [Yambaran] in relation to the Services to be provided and at required locations and times. To my mind, this wording permitted Eda Ranu to provide specific instructions as to the number of backhoes it required to be used in relation to the Services from time to time. It was not therefore necessary that there be a variation agreed to by the parties in regard to the number of backhoes to be used.


9. I am not satisfied therefore that Eda Ranu made the variations as to rate pursuant to any provisions of the contract. As to the reduction in backhoes, Eda Ranu was entitled to reduce the number pursuant to clause 4.3 of the contract and no variation agreed by the parties was necessary pursuant to the terms of the contract.

...

13. Consequently in answer to the first agreed issue, the variations referred to as to rate were not valid and the variation in the number of backhoes was permitted under the contract.

14. Given the finding on the first agreed issue, I am satisfied that [Yambaran] is entitled to have judgment on liability entered in its favour but only as to the variation in the rate charged by Eda Ranu for the backhoes as pleaded As to damages which [Yambaran] seeks, it is appropriate in the circumstances that any such damages should be assessed. Given this it is not necessary to consider the other submissions of counsel.

Orders

15. a) Judgment is entered for the plaintiff with damages to be assessed.

b) The defendant shall pay one half of the plaintiff’s costs of and incidental to this proceeding.

c) Time is abridged. ”

[underlining added]


  1. The thrust of the submission for Yambaran in support of its Grounds 1 to 4 seems to be that the Contract did not within the main body of the document expressly define the term “Services” as including the continuous supply of three backhoes for the duration of the Contract. However, that term was given meaning for the purposes of the main body of the Contract when Recital 2 stated that:

“ The Service Provider is a company incorporated in Papua New Guinea and provides Backhoe equipment services, machinery and operator[s] on a hire basis (the “Services”). The Service Provider has agreed to provide the Services, particularly provision of 3 backhoes with operators to Eda Ranu. ”


  1. It was submitted for Yambaran that it was within the power of the trial judge and of this Court on appeal to give an interpretation to the term “Services” where it appears in Recital 2 that would reflect an alleged intention of the parties, which was that the term “Services” for the purposes of Recital 2 and clause 5 of the Contract included the continuous provision by Yambaran of three backhoes and operators for the full duration of the Contract. This alternative interpretation, urged by counsel for Yambaran, would, if accepted by this Court, mean that any reduction or alteration in the number of backhoes and operators to be supplied by Yambaran to Eda Ranu under the Contract would constitute a variation to the Contract requiring the parties to mutually agree in writing to that variation under clause 5. As there was no evidence at trial that Yambaran had ever agreed in writing to accept a reduction of backhoes from three to one, it was argued that Eda Ranu had thereby breached the Contract when it gave notice to Yambaran by letter dated 29 April 2014 that, apart from the reduction of the rental rate from K400 to K300, Eda Ranu was also reducing the number of backhoes from three to one.
  2. In support of this alternative interpretation sought by Yambaran, which would require expansion of the term “Services” in Recital 2 to include Yambaran’s continuous provision of three backhoes to Eda Ranu until termination of the Contract, counsel for Yambaran cited a number of cases, starting with Mainland Holdings Ltd v RD Tuna Cannery [2000] PNGLR 213 where it was held by Sakora J, quoting from the headnote:

“ It is not the function of the Court to write up new contracts for the parties, as it were. The Court’s function is only to interpret the contract, according to law, to determine what was it that the parties intended and entered into, and with what legal consequences if any.”


  1. Counsel for Yambaran then referred, among others, to the case of Papua New Guinea Banking Corporation v Tole (2002) SC694 (Amet CJ, Sheehan J, Kandakasi J, as he then was) where the Supreme Court said this at page 23:

“ Under contract law, where parties have set down the whole of their agreement in writing, evidence seeking to add or subtract from or vary or qualify the written contract cannot be given and or accepted. This is what is called the parole evidence rule. For authorities on this, see Curtain Bros (QLD) Pty Ltd v The State [1993] PNGLR 285, Goss v Nugent [1883] 5 B&Ad.54; Gillespie Bros & Co. v Cheny, Eggar & Co [1896] 2QB 59; Edwards v O’Connor [1991] 2 NZLR 542. It is a rule that does have exceptions to it. It is open to parties to assert that a written contract or document does or does not contain the whole of an agreement and at trial adduce evidence to support the contention. But that will require appropriate pleadings and not supplied as in this case.”


  1. We pause at this juncture to observe that in the present case, Yambaran’s amended statement of claim filed in WS No. 1089 of 2016 on 8 December 2016[3] failed to plead any issue to the effect that the parties’ Contract did not contain the whole of the parties’ agreement, nor did the amended statement of claim plead pre-contract negotiations and facts which would, if proven, tend to support the proposition that it was intended by the parties that Eda Ranu required Yambaran to supply three backhoes for the whole of the duration of the Contract. Those issues were never pleaded and they were not included in the three issues which the parties had agreed by their Statement were to be determined by the trial judge. Furthermore, our perusal of the transcript of the proceedings[4] before the trial judge shows that no submissions were made for Yambaran at trial in connection with the parole evidence issue now belatedly raised in a convoluted manner in Ground 2 of Yambaran’s notice of appeal. The trial judge cannot be expected to have ruled on issues that were never put to him.
  2. We further observe while on this point that clause 11 of the Contract expressly states:

11. Entire agreement

This Agreement contains the entire agreement between the parties with respect to its subject matter and supersedes all prior agreements and understandings between the parties in connection with it.


  1. Based on Yambaran’s argument that the trial judge should have given a broader interpretation to the term “Services” as including the continuous provision by Yambaran of three backhoes during the currency of the Contract, it was submitted by counsel for Yambaran that because the trial judge did not do so, this was an error of “law and mixed fact”. We disagree. This was not an issue which the parties had, by their Statement, agreed should be determined by the trial judge. We repeat what we have already explained earlier in this decision in connection with Grounds 2 to 5 in SCA No. 34 of 2020: an appellant is not entitled on appeal to raise any new or fresh issue or argument on appeal unless leave to do so has been granted by the Supreme Court. No such leave has been granted to Yambaran in this appeal SCA No. 38 of 2020.
  2. In these circumstances we consider that the conclusion reached by the trial judge that Eda Ranu was entitled under clause 4.3 of the Contract to reduce the number of backhoes it required without the necessity for a variation in that regard to be acknowledged by the parties in writing under clause 5 of the Contract was a conclusion that was open to be made by the trial judge both in law and in mixed fact and law. The trial judge did not err in law, nor did he err in “mixed law and fact” as was argued by counsel for Yambaran.
  3. For the reasons given, we dismiss Grounds 1, 2, 3 and 4 of Yambaran’s appeal.

Ground 5 of Appeal SCA No. 38 of 2020


  1. Ground 5 of Yambaran’s appeal challenges the trial’s judge’s order that Yambaran was to pay one-half of Eda Ranu’s costs in WS No. 1089 of 2016. However, contrary to Order 7 rule 9(d) of the Supreme Court Rules, Yambaran’s notice of appeal does not plead what order it seeks in lieu of the trial judge’s order as to costs.
  2. We also observe that Yambaran made no submission at all to this Court on Ground 5 of its appeal.
  3. A party has no entitlement to costs in the National Court except under an order of the Court: National Court Rules, Order 22 rule 8. A judge has a wide discretion whether to make an order for costs and as to the terms of a costs order. The discretion must be exercised judicially, not arbitrarily. Costs usually ‘follow the event’, which means that the successful party is awarded their legal costs of and incidental to the proceedings, but this is always subject to the discretion of the judge: National Court Rules, Order 22 rule 11. And see PNG Ports Corporation Ltd v Canopus No. 71 Ltd (2010) N4288 (Kandakasi J, as he then was); Kumbu v Mann (2012) N4784 (Cannings J).
  4. In the present case, Yambaran’s claim against Eda Ranu in WS No. 1089 of 2016 was partially successful and partially disallowed. Yambaran succeeded in obtaining judgment in the National Court on liability for Eda Ranu’s wrongful imposition of variations in the originally agreed rate for Yambaran’s provision of backhoe hire service under the Contract. However, Yambaran failed in its claim that Eda Ranu had no contractual right to reduce the number of backhoes, the trial judge having found that Eda Ranu was entitled under the Contract to unilaterally reduce the number of backhoes it required Yambaran to provide. The trial judge therefore exercised his discretion to order Eda Ranu to only pay one-half of Yambaran’s costs, not the whole of those costs. Given the trial judge’s findings, we consider that the costs order the trial judge made was consistent with the trial judge’s substantive decision and was in all the circumstances a fair and proper costs order to be made.
  5. It is pleaded in Ground 5 of the notice of appeal that the trial judge, when making the subject costs order, did not give any reasons for the costs order, thereby denying Yambaran the right to be heard and denying the company natural justice. We consider this contention to be absurd. It is always open to a party at the close of submissions to address any court on the issue of costs. If Yambaran by its counsel was at all concerned that some order other than that costs were to follow the event should be made by the trial judge in WS No. 1089 of 2015, counsel had every opportunity at the close of Yambaran’s case to put that submission to the trial judge. The transcript shows that counsel did not do so.
  6. In the result, we find that the trial judge did not err when making the costs order that was made. The costs order made by the trial judge was exercised within the bounds of his discretion and it was just and fair. In making that costs order, there was no denial of Yambaran’s right to be heard or denial of natural justice.
  7. Ground 5 of the appeal in SCA No. 38 of 2020 is dismissed.
  8. As all grounds in SCA No. 38 of 2020 have failed, it follows that the entire appeal must be dismissed.

COSTS OF THE TWO APPEALS


  1. At National Court level the issue of costs was left to the trial judge to decide without submissions on costs being made either by counsel for Yambaran or by counsel for Eda Ranu. The same has occurred in this appeal. The issue of costs for each of the two appeals heard by this Court has been left to the Court to determine. As both appeals are to be dismissed, Eda Ranu’s appeal in SCA No. 34 of 2020 in effect cancelling out Yambaran’s cross-appeal in SCA No. 38 of 2020, we will exercise this Court’s discretion by ordering that the parties in each appeal are to bear their own costs of and incidental to each appeal.

ORDER IN RESPECT OF APPEAL SCA No. 34 of 2020:


  1. The terms of the Order for this appeal are as follows:

(1) The appeal is dismissed.

(2) Subject to term (3) hereof, the decision of the National Court in WS No. 1089 of 2016 delivered on 30 April 2020 is affirmed and the whole of the proceeding remitted back to the National Court for assessment of damages based on the findings of the trial judge.

(3) The Appellant shall pay one-half of the Respondent’s costs in National Court proceeding WS No. 1089 up to and including 3 April 2020 on a party/party basis, such costs to be taxed if not agreed.

(4) Each party shall bear their own costs of and incidental to this appeal.


ORDER IN RESPECT OF CROSS-APPEAL SCA No. 38 of 2020:


  1. The terms of the Order for this cross- appeal are as follows:

(1) The appeal is dismissed.

(2) Subject to term (3) hereof, the decision of the National Court in WS No. 1089 of 2016 delivered on 30 April 2020 is affirmed and the whole of the proceeding remitted back to the National Court for assessment of damages based on the findings of the trial judge.

(3) The Respondent shall pay one-half of the Appellant’s costs in National Court proceeding WS No. 1089 up to and including 30 April 2020 on a party/party basis, such costs to be taxed if not agreed.

(4) Each party shall bear their own costs of and incidental to this appeal.

Judgment accordingly

Rageau Manua & Kikira: Lawyers for the Appellant/Cross-Respondent
Lomai & Lomai Attorneys: Lawyers for the Respondent/Cross-Appellant

[1] Tab 10 in the Appeal Book for SCA No. 38 of 2020 (IECMS).
[2] Tab 9 in the Appeal Book for SCA No. 34 of 2020 (IECMS).
[3] Tab 5 of Appeal Book in SCA No. 38 of 2020.
[4] Tab 18 of Appeal Book for SCA No. 38 of 2020.

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