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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS. NO. 83 OF 2001
NATIONAL PROVIDENT FUND BOARD OF TRUSTEES
AND:
JAMES MALADINA
First Defendant
KUMAGAI GUMI CO. LTD
AND:
KEN YAPANE & ASSOCIATES LTD
AND:
KEN YAPANE
AND:
KUNTILA NO 35 LTD
AND:
JANET KARL, DICK KARL & ANGO WANGATAU
Sixth Defendant
KENNETH NORMAN BARKER
AND:
PORT MORESBY FIRST NATIONAL REAL ESTATE LTD
AND:
BETHGOLD PTY LTD
AND:
MAURICE JOHN SULLIVAN
AND:
BARBRA PERKS
AND:
ULYA REAL ESTATE LIMITED
AND:
HERMAN LEAHY
Thirteenth Defendant
DAVID LIGHFOOT, JOHN BEATTIE, KELLY NARU & BERNAD AVERY PRACTISING WITH JIMMY MALADINA AS ‘CARTER NEWELL LAWYERS
AND:
BLUEHAVEN NO 42 LTD
AND:
RAM BUSINESS CONSULTANTS LTD
WAIGANI: KANDAKASI, J.
2003: 11th September & 05th December
PRACTICE & PROCEDURE – Pleadings – Purpose and object of – To enable parties to fully disclose their claims to avoid unnecessary delays, trial by ambush and attrition and to enable an out of court settlement or payment into court if need be - A mere denial of a claim without more when more is reasonably required and or where verification of a defence is required amounts to general denial – Effect of – Amounts to evasion or avoidance and an affront to the purpose and object of pleadings attracting an application of the provisions of O.8, r. 27 – Such pleadings liable to be struck out - Order 8 rr. 24 and 27.
PRACTICE & PROCEDURE – Application for summary judgement – Claim for certain sum of money paid fraud over and above contract entitlements due to fraud – Claim falling within exceptions to the application of summary judgement procedure – Exceptions necessary in cases where a defendant is entitled to a jury trial – Recent developments in England omitted claims based on fraud from the list of exceptions – List of exceptions generally considered inappropriate to PNG circumstances as there is no jury trial and there is always the need to promptly resolve disputes – Claims based on fraud specifically inappropriate since England as removed it from the list of exceptions - Order 12, rr.37 and 38.
PRACTICE & PROCEDURE – Further and better particulars – A party is required to plead with full particulars – Where there is a failure, it is incumbent upon the other party to request they be provided – Failure to do so means the failing party is content with the pleadings – A belated claim for lack of particulars in response to an application for judgement based on the pleadings should not be sustained to avoid unnecessary delays and costs – Order 8, r. 36.
Facts:
In a detailed statement of claim based on fraud arising out of a contractual relationship, the Plaintiff sought to recover a sum of K5.805 million with punitive damages, costs on indemnity basis and interest at commercial bank rates. The plaintiff paid the amount claimed to the Second Defendant ("Kumagai") which was over and above the contract price due to a conspiracy and fraud committed against it by Kumagai in association with the other named defendants. The plaintiff’s pleadings detailed the relevant terms of the contract, how the payment of the K5.805 million was secured, how the proceeds were dealt with and who ultimately received them. Without verifying its defence, Kumagai generally denied the claim and without providing any reasons for its denials. Application was therefore made by the Plaintiff for a dismissal of Kumagai’s defence and for judgement, costs and interests under O.8, r.27 and O.12, r. 25(c) and 38.
Held:
Papua New Guinean Cases Cited:
SCA No. 24 of 1988; Application by Gabriel Dusava (Unreported judgement delivered 27/10/98) SC 581.
Motor Vehicles Insurance (PNG) Trust v. John Etape [1994] PNGLR 596.
Motor Vehicles Insurance (PNG) Trust v. James Pupune [1993] PNGLR 370.
Papua New Guinea Banking Corporation (PNGBC) v. Jeff Tole (Unreported judgement delivered on 27/09/02) SC694.
Pius Sankin & Ors v. Papua New Guinea Electricity Commission (Unreported judgement delivered on 19/07/02) N2257.
Public Officers Superannuation Fund Board v Sailas Imanakuan (Unreported judgement delivered on 09/11/01) SC677.
Hornibrook Constructions Pty Ltd v. Kawas Express Corporation Pty Ltd [1986] PNGLR 301.
Motor Vehicles Insurance (PNG) Trust v. Nand Waige & 2 Ors [1995] PNGLR 202.
Geoffrey McLaughlin v. Air Niugini Pty Limited and National Airline Commission (Unreported judgement delivered 10/11/00) N2000.
Hornibrook NGI Pty Ltd v. Lihir Management Company Pty Ltd and Wests Process Engineering Pty Ltd (Administrator Appointed)(Unreported
judgement delivered on 18/06/98) N1735.
Michael Newal Wilson v. Harold Rosser Howard [1994] PNGLR 418.
Akipa & Others v. Lowa & Others [1990] PNGLR 502.
Tau Gumu v. Papua New Guinea Banking Corporation Limited (Unreported judgement delivered 26/04/02) N2251.
Dempsey v. Pacific Pty Ltd [1985] PNGLR 93.
Bruce Tsang –v- Credit Corporation (PNG) Ltd [1993] PNGLR 112.
Curtain Bros (Qld) Pty Ltd v. Kinhill Kramer Pty Ltd & the State [1993] PNGLR 285.
Kappo No. 5 Pty Limited & Ors v. James Chi King Wong & Anor (Unreported judgement delivered on 23/05/97)SC520.
Pastor Saki & Anor v. Kadir Contractors Ltd (Unreported judgement delivered 25/02/99) SC599.
Counsel:
Mr. E Anderson and Mrs. T. Nonggorr for the Plaintiff/Applicant
Mr. Webb QC and R. Bradshaw for the Second Defendant/Respondent.
05th December 2003
KANDAKASI, J: This is an application for judgement in alternatives under O.8, rr. 25(c) and 27 and or O.12, r. 38 of the National Court Rules 1988 (the Rules), in the sum of K5, 805, 000.00 plus interest or alternatively judgement be entered for the Plaintiff ("NPF") with damages to be assessed. It also seeks an order for costs and interest at 8%.
The Arguments of the Parties
NPF claims that the Second Defendant/Respondent (Kumagai) has merely denied specific allegations against it in terms of conducts leading to and culminating in an illegal or corrupt contract, without any verification as is required by O. 8 r. 24 of the Rules. Also it claims that Kumagai was reasonably required to plead with verification and the relevant and appropriate particulars in answer to each of the claims against it so as to enable the parties and the Court to ascertain the matters in issue between the parties. But, it submits Kumagai has failed to do that. That failure it submits amounts to a breach of the requirements under O. 8 rr. 27 and 28 and the purpose and spirit of proper pleadings.
In the alternative, NPF claims that apart from the mere denials in the unverified defence, Kumagai has not pleaded specifically to any of the matters pleaded against it. Then it goes on to argue that, in any case, NPF has now provided evidence through responsible persons’ affidavits demonstrating that Kumugai has no defence, whether pleaded or not on the merits. As such, it argues that it has demonstrated a case for summary judgement within the meaning of O.12 r. 38 of Rules.
Kumgai submits in response to the first part that the claim against it is not a liquidated demand to require verification. Instead, it submits the claim is based on a civil conspiracy and fraud, to which it has adequately responded in accordance with the requirements of the Rules and purpose of pleadings. Hence it submits, there is no default within the meaning of O. 8 r.24 to enable NPF to make its application under O.12, r.25 (c). With regard to the application based on O.8 rr.27 and 28, it argues that it has not pleaded the general issue but has pleaded a general denial which is permitted by O.8, r.21. In relation to the application for summary judgement, it repeats its foregoing submissions and points to O.12, r. 37, which prohibits applications for summary judgment, where a claim is based on an allegation of fraud and in any case, it says it disputes the facts relied upon by NPF. On these bases it argues for a dismissal of NPF’s application. It also argues for a dismissal of the application based on the long established policy in this jurisdiction that the plaintiff is required to prove every element of its case strictly but NPF is proceeding on an embarrassing pleading and that the pleadings have been on foot for over two years.
In response, NPF submits that the essential part of its claim against Kumagai is liquidated and in any case, very specific, which require verification and an appropriate response rather than a mere denial. It submits, Kumagai has not done that and so the application is correctly before this Court on account of Kumagai’s failure. With regard to the application for summary judgement, it submits that its claim is not based on fraud or conspiracy but an illegal contract. Nevertheless, if it was then the requirements of O.12, r.37 should be dispensed under O.1 r.7 of the Court Rules. Further or in the alternative, it argues that this Court should find the provisions of O.12 r.37 are inappropriate to the circumstances of the country following the Supreme Court approach in SCA No. 24 of 1988; Application by Gabriel Dusava.[1]
The Relevant Issues
Obviously, a number of issues are presented in these arguments, which the Court needs to consider and determine. Of the issues presented the main ones are these:
The first issue and question 2(a) require a close examination of the pleadings, particularly the Statement of Claim in so far as it covers Kumagai and Kumagai’s response to it in terms of its Defence as well as the law on pleadings. The remaining question follows on from a consideration of the earlier questions. This is particularly in relation to the relevant pleadings of the parties, the law on pleadings and the law and practice on applications for summary judgement. It also requires a consideration of the facts deposed to in support and any against the application for summary judgement in the present case.
I consider it appropriate therefore, that I should first deal with the facts in order to appreciate the background and circumstances giving rise to the proceedings and the application before me.
Facts
The relevant facts are set out in a number of affidavits filed mainly for NPF. The main Affidavit for NPF is that of Erastus Kamburi sworn on 16th and filed on the 17th of July 2003 and his further one sworn and filed on 10th September 2003. There is also an affidavit by Mr. Roger Michael Dalton sworn on the 28th of July 2003. There is no affidavit in rebuttal from Kumagai despite an order of the Court made on the 11th of August, requiring the parties to file and serve their respective Affidavits by the 1st of September 2003. The only exception to that is one by Mr. Bradshaw sworn on the 5th of August 2003. This only relates to the question of verification of Kumagai’s defence, but otherwise NPF’s evidence stands without rebuttal.
From these affidavits, it is clear that NPF decided to construct a multistory building under the label "NPF Tower" in early 1995. This was to be erected at Allotments 9, 10 and 11 of Section 5, Granville, Douglas Street, Port Moresby. The cost of the building was to be funded by a K50 million loan from the then Papua New Guinea Banking Corporation (PNGBC). As NPF did not have any experience or expertise in building such a building, it appointed Pacific Architects Consortium Limited (PAC) as the project manager under a written agreement dated the 5th of April 1995. Tenders were then called for and Kumagai was accepted as the successful bidder, which was formalized in a written contract between NPF and Kumagai on the 3rd of June 1997.
The contract between NPF and Kumagai is annexed to Mr. Kamburi’s affidavit and is marked "EK2". In so far as is relevant, the contract sum or price is stated in item B(7) of the contract as K45,447,388.00. This price was not to be varied either upwards or downwards on account of fluctuations in the value of the Kina or for an acceleration of the contract. The following situations were provided as the only basis on which there could be a variation to the price:
(a) work done to adjoining properties;
(b) a bankrupt subcontractor;
(c) testing instructed by the architect;
(d) architect instructed separate contract;
(e) executed work after insurance claim;
(f) work on further instruction from architect;
(g) changes in levies, charges or fees;
(h) costs arising from site conditions; and
(i) delay costs.
During the foundation laying phase of the project, it was discovered that substratum soil was found to be softer than initially thought. This required the digging up of more soil to allow for more concrete slab to firm up the foundation, resulting in a delay of 84 working days. NPF therefore, requested Kumagai to provide details as to whether Kumagai could accelerate the works to finish on time. On 16th February 1998, Kumagai indicated its preparedness to accelerate but at a cost of K1.4 million. At the same time, it indicated the adverse impact a devaluation of the Kina had on the project. On 27th February 1998, NPF agreed to accelerate at the suggested cost but requested a detailed plan for the accelerated works but made no mention in relation to the devaluation claim.
On 26th March 1998, Kumugai formally notified NPF that it would forward its claim for additional payments on account of extra costs forced upon it by the devaluation of the Kina. This claim was rejected by NPF on 3rd April 1998, setting out the provisions in the contract as well as the tender documents, which specifically excludes such a claim. Notwithstanding that, Kumagai sent on 30th April 1998, a claim totaling K319,796.70 to 31st March 1998. On 10th July 1998, NPF responded negatively to the claim, maintaining its earlier position. On 1st August 1998, Kumagai indicated to NPF that there was a dispute pursuant to s.13 of the contract and provided an analysis of its actual and anticipated additional increased costs.
On 10th August 1998, the parties met and agreed to Kumagai putting together its analysis on the loss on account of the devaluation of the Kina. That analysis was provided to the NPF by Kumagai on 27th August 1998, totalling K1,938,211.41 in actual costs and K4,918,176.74 in future claims. This was repeated by Kumagai on 24th November 1998, but this time, it suggested each of the parties to bear 50% of the total cost, which translated to about K3.3 million. If accepted, that would have increased the total project cost to K51,545,646.00.
All of the communications to and from each other was through PAC, the project manager. Through this channel between, 10th December 1998 and January 1999, the parties entered into settlement negotiations. This saw a number of counter offers being communicated to and from the parties via PAC. The final counter offer was from Kumagai to NPF for a total project costs sum of K51.3 million on 25th January 1999. NPF did not respond to that counter offer. At about this time, Mr. Jimmy (alias James) Maladina was appointed Managing Director of the NPF.
On 17th February 1999, the then Managing Director of the NPF Mr. Henry Fabila informed PAC that an agreement was reached between, NPF and Kumagai for the acceleration of the project to complete by March 1999. At the same time, he enclosed a draft letter for PAC to engross and settle in PAC’s letterhead and have it sent off to Kumagai. On 23rd February 1999, PAC requested Mr. Henry Fabila to inform it of the details of the agreement so PAC could do its job. Mr. Fabila or nobody else in NPF provided the requested details, but sometime later Kumagai informed PAC that the matter was settled at a total cost of K54,050,646.00. Of these, K2.505 million was for acceleration costs and K3.3 million was for devaluation costs.
PAC was amazed with the settlement figures as it was beyond what Kumagai had been offering to settle at. There was a difference of K2, 750,646.00 from the last of Kumagai’s counter offer of K51.3 million. No information was given as to how the figures were arrived at. PAC’s request for such information was met with directions to transcribe into its own letterhead already drafted letters asking Kumagai to provide the costs for acceleration, which did not require any additional works, except to complete the existing project. PAC acted on the instructions or directions it received from NPF.
The settlement did not represent a settlement of all claims including adjusted costs. The NPF was still left to face such additional claims. PAC was determined to secure a settlement for all of these claims using its industry skills and knowledge but was by passed by the chairman of the board of NPF and Mr. Herman Leahy. Then proceeding on the basis of the settlement, Kumagai made claim for the acceleration and devaluation costs. PAC refused to certify as the project manager for payment as the claim in its professional view was inflated and no work was in fact completed to warrant the payment.
On 29th February 1999, Mr. Leahy directed PAC out of further negotiations. Thereafter on 18th March 1999, Kumagai requested NPF to pay the first part of the extra costs, referring to a Progress Certificate No.22 but that certificate did not include the acceleration costs on account of that not being certified by the project manager. Notwithstanding that, Kumagai was paid K3 million by a PNGBC bank cheque on 6th of April 1999, on Mr. Henry Fabila’s request dated 31st March 1999, in the form of a draw down from the loan facility. A further amount of K3, 445,842.00 was paid again on Mr. Fabila’s request, using the same mode and from the same account, on 19th May 1999. Subsequently, a sum of K2.475 million was paid out from the same account to Kumagai in much the same way, but this time specified as being for "dispute settlement". Then the next day, a sum of K3, 445,842.00 was paid to Kumagai. All of these claims and payments were not supported by any certified progress claims, which is normally required in the building and construction industry.
A tracking of all payments for the project by NPF toward the project at the relevant times revealed that Kumagai paid a sum of K2, 650,000.00 to Ken Yapane & Associates for a sub-contract. As far as the project manager was concerned, this sub-contract was not performed in any way and so therefore there was no work completed under the sub-contract. It also revealed that the first four cheques of the progress certificates were addressed to Ken Yapane & Associates. Later, this firm refused to allow further payment cheques to go through its accounts and so they were altered to go through Carter Newell. In this way, progress claims 5 and 6 went through Carter Newell’s trust account. Also an examination of Kumagai’s accounts revealed that a sum of K150,000.00 was paid out by Kumagai to Jimmy Maladina in commission.
With these facts in mind, I now turn to the issues presented in the order in which I have set them out.
The nature and basis of NPF’s claim
As noted already, the nature and basis of NPF’s claim can be ascertained from the statement of claim. The statement of claim in relevant parts reads:
"1. The plaintiff is a body corporate established pursuant to the National Provident Fund Act and may sue and be sued in its own corporate name and style.
...
...
The Construction Contract
Particulars:
Letter from the second defendant to Pacific Architects Consortium dated 16 February 1988.
Letter from the second defendant to Pacific Architects Consortium dated 26 March 1998.
Letter from the second defendant to Pacific Architects Consortium dated 30 April 1988.
Letter from the second defendant to Pacific Architects Consortium dated 1 August 1998.
Meeting between the second defendant (Mr Kobayashi), Pacific Architects Consortium (Roger Dalton), and the plaintiff (Mr Herman Leahy, Mr Noel Wright in August 1998 before the 27th of that month.
Letter from the second defendant to Pacific Architects Consortium dated 27 August 1988.
Letter from the second defendant to Pacific Architects Consortium dated 24 November 1998.
Letter from the second defendant to Pacific Architects Consortium dated 4 January 1999.
Letter from the second defendant to Pacific Architects Consortium dated 25 January 1999.
Particulars:
Letter from Pacific Architects Consortium to the second defendant dated 3 April 1998.
Letter from Pacific Architects Consortium to the second defendant dated 10 July 1998.
Letter from Pacific Architects Consortium to the second defendant dated 25 January 1999.
The Corrupt Agreement
Particulars:
Oral agreements between the first defendant and Mr Taniguchi on behalf of the second defendant in January 1999 by phone and February 1999 in person.
Performance of the Corrupt Agreement
Particulars:
Fake contract in the form of AS2354 between the second defendant and Ken Yapane & Associates for work on acceleration of the Contract.
Fake letter from PAC to the second defendant dated 5 January 1999, requesting costs and conditions of a further ‘acceleration’ of the Contract
Fake letter dated 28 January 1999 from the second defendant to PAC.
Fake letter dated 5 February 1999 from PAC to the second defendant.
6 Fake claims in the form of Progress Claims.
Particulars:
Proceeds of First Payment to Ken Yapane
Particulars:
Cheque No. 0233054 dated 2 March 1999 and drawn on 8 March deposited by Janet Karl in the account of Kuntil No. 35 Ltd.
Particulars:
Cheque No. 0149065 in the sum of K399,000 dated 11 March 1999 signed by Janet Karl in favour of the seventh defendant, Mr Barker and deposited in the account of Norman Kenneth Banker & Remedius Barker at the Westpac Bank, Port Moresby.
Particulars:
(a) Cheque No. 754799 in the sum of K300,000 dated 25 March 1999 & debited on 25 March 1999 deposited in the account of Port Moresby First national Real Estate Ltd account number 246204 at the PNGBC Port Moresby Branch.
(b) Cheque No. 762127 in the sum of K99,000 dated 30 March 1999 and debited on 30 March 1999 deposited in the account of Port Moresby First national Real Estate Ltd account number 246204 at the PNGBC Port Moresby Branch.
Particulars:
Cheque No. 266915 in the sum of K300,000 deposited to the account of First National Real Estate Limited under receipt No. 46002 dated 26 March 1999 by Nambawan Finance Ltd.
Particulars:
| Date of Withdrawal | Amount | Person Authorising |
| 25 June 1999 | K56,040.00 | M.J. Sullivan |
| 25 June 1999 | K160,000.00 | M.J. Sullivan |
| 16 July 1999 | K85,949.67 | M.J. Sullivan |
| 25 August 1999 | K664,597.14 | M.J. Sullivan |
| Total | K966,586.81 | |
Particulars:
Cheque No. 266917 for K49,000 on 6 April 1999 in favour of the "Papua New Guinea Banking Corporation (Williams Graham & Carmen) for the purchase of a transfer of AUD$31,972.50 to National Australia Bank, Cairns (beneficiary: Williams Graham & Carmen).
Proceeds from the Second Payment to Ken Yapane
Particulars:
Particulars:
(a) The sum of K70,000 on 22 April 1999 by Finance Corporation Cheque No. 794643 dated 22 April 1999 in favour of ‘Carter Newell Lawyers Trustees for John Lousia".
(b) The sum of K216,156.65 on 30 April 1999 by Finance Corporation Cheque No. 794721 dated 30 April 1999 in favour of ‘Carter Newell Lawyers Trustees for John Lousia" file no 980246.
Particulars:
| No 800053 | 3 May 1999 | K11,000.00 |
| No 766469 | 3 May 1999 | K102,300.00 |
| No 800063 | 18 May 1999 | K20,400.00 |
| No 800073 | 31 May 1999 | K18,633.39 |
| No 800075 | 2 June 1999 | K21,489.57 |
| | 3 June 1999 | K84,833.40 |
| No 800077 | 10 June 1999 | K113.58 |
| No 800080 | 15 June 1999 | K32,839.12 |
Particulars:
(a) The sum of K150,000 on 28 June 1999 by Finance Corporation Cheque No. 794559 dated 28 June 1999 in favour of Port Moresby Real Estate.
(b) The sum of K189,854.27 on 9 July 1999 by Finance Corporation Cheque No. 821685 dated 9 July 1999 in favour of Carter Newell Lawyers Trust Account with reference to file 990393 Kerowa Tikil.
The third payment to Ken Yapane
(a) The sum of K100,000 was transferred to the Port Moresby First National Real Estate Trust Account #2 on 14 May 1999 by cheque No. 266929.
(b) The sum of K100,000 was paid for the benefit of Mecca No 36 Ltd, the sixteenth defendant by cheque No. 266932 on 17 May 1999.
(c) The sum of K100,000 was paid in cash to persons presently unknown on 21 May 1999
Particulars:
| No | Date | Amount |
| No 800086 | 17 June 1999 | 20,450.00 |
| No 8000092 | 24 June 1999 | 5,000.00 |
| No 800094 | 25 June 1999 | 54,500.00 |
| No 766472 | 28 June 1999 | 30,000.00 |
| No 8000096 | 29 June 1999 | 16,254.72 |
| Cheque No | Date | Amount |
| 800121 | 28 July 1999 | 400,000.00 |
| 800123 | 29 July 1999 | 3,786.98 |
| 800131 | 4 August 1999 | 6,323.70 |
| 800132 | 4 August 1999 | 17,000.00 |
| 766487 | 16 August 1999 | 45,000.00 |
| 800157 | 17 August 1999 | 2,500.00 |
| 800177 | 24 August 1999 | 7,007.64 |
| 800195 | 2 September 1999 | 44,576.50 |
| 800202 | 7 September 1999 | 40,638.05 |
| | | 566,832.87 |
| No | Date | Amount |
| 800156 | 12 August 1999 | 95,453.32 |
| 800173 | 24 August 1999 | 140,000.00 |
| 800174 | 24 August 1999 | 250,000.00 |
| | | 485,453.32 |
It is clear from these pleadings that NPF claims that it had a construction contract with Kumagai for a fixed cost of K45, 447,388. The costs were not to be increased by reason of increased costs of material and or fluctuations in the Kina. As the contract was being performed, Kumagai found that the costs to it were greater than anticipated. It therefore requested NPF to compensate it by numerous letters from 16th February 1998 to 25th January 1999. Relying on the terms of the contract, NPF rejected these requests, which were communicated to Kumagai in three letters during the period 3rd April 1998 and 25th January 1999, via the project manager, PAC.
In or about August 1998, Mr. Jimmy Maladina was informed that he was being appointed chairman of the board of NPF. Following that, from about 25th January 1999, Kumagai through Mr. Taniguchi and Mr. Maladina wrongly and maliciously entered into a wholly oral and corrupt agreement. The agreement was for Kumagai to prepare and lodge a fraudulent claim against the plaintiff for a sum of K2.5 million (the ‘false acceleration claim’) and press the NPF on with its increased costs claim of K3.3 million. On Mr. Maladina’s part, he would procure the approval and payment by NPF the false acceleration claim of K2.505 million and the increased costs claim of K3.3 million. Then from the proceeds, Kumagai would pay the false acceleration claim to Mr. Maladina either directly or through a third party or parties in a manner to be instructed by him and retain the benefit of the increased cost claim. They further agreed to and did keep secret the fact of and the terms of the agreement.
The agreement was a conspiracy and combination to unjustly enrich each of them and to injure NPF in its business. In pursuance of that agreement, Kumagai prepared and lodged a fraudulent claim against the plaintiff for ‘acceleration’ of the contract in the sum of K2.505 million. That was in the form of a fake contract, number AS2354 between Kumagai and Ken Yapane & Associates for work on acceleration of the contract which was not in fact performed. A number of fake letters dated 5th January 1999, 28th January 1999, and 4th February 1999 to and from PAC and Kumagai covering the acceleration and 6 fake claims in the form of progress claims were generated.
On Mr. Maladina’s part, he procured the approval and payment by NPF of the false acceleration claim in the sum of K2.505 million and the increased costs claim in the sum of K3.3 million. This was achieved by changing the proposed date of a meeting of the NPF board so that it was held on 8 February 1999 being a date when experienced members of the board would not be present. He also advocated the board on 8th February 1999 and on that day, the board approved the settlement of all claims by Kumagai against NPF in an amount of up to K54.0 million, without disclosing the corrupt agreement between him and Kumagai. This amount exceeded the proper amounts payable under the contract by a sum sufficient to allow for payment of the false acceleration claim and increased costs claims. Further in pursuance of the corrupt agreement, Mr. Maladina entered into an oral agreement with Ken Yapane & Associates for it to make fraudulent claims on NPF for work not done and that it would receive the fraudulent payments. Ken Yapane and Associates would then deal with the proceeds of the false acceleration claim received by it in such manner as Mr. Maladina directed. It was part of the corrupt agreement that Ken Yapane & Associates would keep a portion of the proceeds for its services in the scheme.
After having received the payments, Kumagai retained the increased costs claim component and paid out the false acceleration claim to Mr. Maladina in accordance with the corrupt agreement a total of K2.705 million. This was paid through Ken Yapane & Associates in four lots on Mr. Maladina’s instructions and on Ken Yapane & Associates instructions to Carter Newell Lawyers Trust Account and others as set out in paragraphs 37 to 87, which I need not restate.
It is NPF’s claim that all the defendants conspired together with an intention to defraud it in terms of the corrupt agreement and the roles each played as set out in the pleadings. Further, NPF claims that it was indebted to the PNGBC for funding the Tower and was required to borrow the sum of K5,805,000 from the Papua New Guinea Banking Corporation (PNGBC) at commercial borrowing rates in order to pay the increased costs claim and the false acceleration claim. NPF further claims that Kumagai was aware of this fact.
In the circumstances, NPF is claiming judgment in the sum of K5.805 million, interest at the rates charged to it by PNGBC, indemnity costs and punitive damages. The first part of the claim is the amount NPF has lost to Kumagai on the basis of what NPF calls a corrupt agreement. This, in my view, could be viewed as a fraud against the NPF as a result of a conspiracy to do so on the part of Kumagai and Mr. Jimmy Maladina and the other persons named in the pleadings. That is a specific and certain amount as opposed to a general damages claim requiring the Court to assess the plaintiff’s damages. The rest of the claims are relieves that fall within the discretion of the Court and are all consequential and or dependent on the first claim and not separate from it.
Given NPF’s claim, the question then is how was Kumagai required to plead? Was it required to plead with verification or not? Has it pleaded the general issue, or in a manner that is inconsistent with the purpose and or object of pleadings, or do they amount to an abuse of the process of pleadings? These questions are the subject of the first part of the second main issue. It is thus appropriate to give consideration to that issue now so I turn to it.
Pleading the General Issue
(i) Generally
The law on pleadings generally is settled in our jurisdiction. A clearest statement of the law is by the Supreme Court in Motor Vehicles Insurance (PNG) Trust v. John Etape,[2] in these terms:[3]
"‘besides requiring that certain matters be pleaded specifically, the rules also contain a number of provisions which require a party to furnish in or with his pleadings, particulars of his claim or defence or other matter pleaded. The function of particulars is ‘to let (a party) know what case he will have to meet and to enable him to know what evidence he ought to be prepared with’. The object is ‘to ensure as far as is practicable, that proceedings between parties would result in a determination of the rights of the parties according to law and to limit if not eradicate the number of cases in which technologies can cause the proceedings to miscarry. Generally speaking justice will be more readily and speedily attained if each party is fully aware of the precise nature of the allegations made by the other’.[4]
Particulars are in fact an extension of the pleadings — they control the generality of the pleadings. In Pilato -v- Metropolitan Water Sewerage and Drainange Board,[5] McClemens J said at 365 – ‘Pleadings define the issues in general terms. Particulars control the generality of the pleadings and restrict the evidence to be led by the parties at the trial and give the other party such information as may enable him to know what case he will be met with at the trial and prevent surprise. Evidence enables the tribunal within the ambit of the general definition of the issues, affected by the pleadings and limited by the particulars, to decide where the truth lies’."
(Emphasis supplied)
This was a restatement of what the Supreme Court already stated in Motor Vehicles Insurance (PNG) Trust v. James Pupune.[6] Subsequent judgments of the both the Supreme and National Courts have applied these principles. Recent examples of these are Papua New Guinea Banking Corporation (PNGBC) v. Jeff Tole[7] and Pius Sankin & Ors v. Papua New Guinea Electricity Commission.[8]
What is apparent from this is that, pleadings play an important part in all matters going before the Court. For as the Supreme Court in Motor Vehicles Insurance (PNG) Trust v. James Pupune,[9] said in summary, pleadings and particulars have the object or functions of doing the following:
"1. they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it;
Then as I said in Pius Sankin & Ors v. Papua New Guinea Electricity Commission:[10]
"This in turn follows on from the fact that, our system of justice is not one of surprises but one of fair play. Reasonable opportunity must therefore be given to each other by the parties to an action so as to assist them to ascertain fully the nature of the other’s case so that, if need be, a defendant can make a payment into Court or facilitate an out of Court settlement."[11]
(Emphasis supplied)
If anything needs to be stressed from these authorities, it is the requirement that a party must fully disclose in his pleadings its case. This is to enable the opposing party to know the full extent of the claim or his opponent’s position and make a decision whether to settle the claim or defend or prosecute the claim, as the case might be. For our system of justice is one which allows fair play and not one of ambush, attrition, evasion and unnecessary prolonged pleadings or interrogatories resulting in unnecessary and avoidable costs to the parties and taking up some of the scarcely available judicial time. Indeed, the Supreme Court has warned against a stringent application of the rules for the sake of it at the expense of doing justice on the merits at a lesser cost. This is the effect of its ruling against a strict compliance of the rules just for the sake of mere compliance regardless of the costs to the parties and the delays in getting to a judgement on the merits. Recent examples of this being done are in the cases of Public Officers Superannuation Fund Board v Sailas Imanakuan,[12] and Papua New Guinea Banking Corporation v. Jeff Tole.[13] These judgements also make it clear that, the Rules are there to enable the parties to fairly and fully present their case for a determination of their rights and interests as are given to them by the substantive law and not for them to gain purely on the Rules.
Given the purpose and object of pleadings, the Rules do provide as to what the parties can and cannot do in the furtherance of their respective pleadings. This includes for example the prohibition against pleading the general issue and requiring a defendant responding to a liquidated claim to verify its defence. It also makes provisions for interrogatories such as requests for further and better particulars, notice to admit particular facts and others. These are there to enable the parties to fully fulfil their duties to plead their claims or defence with sufficient detail and or particulars to achieve the purpose and or object of pleadings with particulars. All of these processes would not be necessary if the parties fully disclosed all there is to a claim or a defence thereto from when they are first required to plead. The emphasis should therefore be on the purpose and object of pleadings rather than what follows where there is a failure such as the need to request further and better particulars.
The issue before this Court concerns the purpose and object of pleadings, the prohibition against pleading the general issue, the need for a defendant to verify its defence in the case of a liquidated claim, and whether a case has been made out for an entry of summary judgement. I will deal with the first three parts first and later get to the last issue.
(ii) Pleading the General Issue
A discussion on the issue of pleading the general issue must start with O. 8 r. 28 within the context of the purpose and object of pleadings as noted. In Hornibrook Constructions Pty Ltd v. Kawas Express Corporation Pty Ltd,[14] Kapi DCJ (as he then was) said the purpose of O.8 r. 28 is to prohibit a defendant from making a general denial without specifically denying the facts or the basis on which the plaintiff’s cause of action is based. This is consistent with and in furtherance of the purpose of pleadings, which is to set out clearly the issues, not only to inform the other party of the nature of the case he has to meet, but the Court as well.
The Supreme Court accepted this statement as correct and applied it to the case before it in Motor Vehicles Insurance (PNG) Trust v. Nand Waige & 2 Ors.[15] That was in a case of personal injuries in which the appellant, a nominal defendant under the Motor Vehicles (Third Party) Insurance Act,[16] answered each and every claim against it with a "the Defendant does not know and cannot admit" and pleaded contributory negligence in the alternative. The Court held that, pleading in that manner did not offend against the prohibition in O.8 r. 28. In so doing, the Supreme Court distinguished Hornibrook Constructions Pty Ltd v. Kawas Express Corporation Pty Ltd,[17] in that, that case concerned a contract and the defendant only pleaded "the defendant does not admit the allegations contained in paragraphs 3 to 10 of the Statement of Claim."
The Court agreed with the then Deputy Chief Justice and now Chief Justice with His Honour’s judgement in the Hornibrook case,[18] and said the defendant’s pleading was too general. In its own words the Court said:
"The defence was therefore far too general when in an attempt to isolate the matters at issue it should have referred to each clause in the Statement of Claim and pleaded the defendant's situation in respect of each of the allegations starting of course with what the defendant had to say about the particular contract, thus do they recognise that there was some document called a contract or how do they dispute its very existence. However the broad ‘not admitting the allegations’ was clearly too general when the court would need to know what was the defendant’s position regarding the very existence of the contract, it did not state the facts upon which the conclusion is reached."
(Emphasis supplied)
Many other cases followed the decision in the Hornibrook case.[19] In Geoffrey McLaughlin v. Air Niugini Pty Limited and National Airline Commission,[20] Sevua J, found a mere denial of a claim for unlawful termination of an employment contract as pleading the general issue. His Honour said:
"In making general denials, the defendants have neither pleaded facts nor offer what they assert to be their or the plaintiff's correct position. They have simply denied the plaintiff's allegations. I therefore consider that these mere denials do not amount to a defence at all. Order 8 Rule 28 prohibits general denials."
His Honour arrived at a similar decision in Hornibrook NGI Pty Ltd v. Lihir Management Company Pty Ltd and Wests Process Engineering Pty Ltd (Administrator Appointed.[21] It concerned a manufacture and supply contract to which the defendant was a party and despite that, it did not make any specific reference to any provisions of the contract in its defence.
The Supreme Court had a further occasion to consider the issue and followed in effect the ruling in the Motor Vehicles (PNG) Insurance Trust v. Nand Waige & 2 Ors.[22] That was in the case of Michael Newal Wilson v. Harold Rosser Howard.[23] In that case, the case was again based on a contract. The terms of the contract were specifically referred to and pleaded by the plaintiff. However, the defendant (appellant) without more merely denied the claim, including a denial of the existence of the contract. The Court found this to be an abuse of the process of the Court and confirmed a judgment against the appellant.
But all of these cases did not have any regard to the subsequent judgement of the then Deputy Chief Justice (now Chief Justice) in Akipa & Others v. Lowa & Others,[24] where His Honour did not follow his ruling in Hornibrook case.[25] His Honour held that O.8 r. 28 does not prohibit a mere denial of facts alleged in a statement of claim, either generally or specifically because such a defence is permitted by O. 8 r 21 (2). This decision was cited and followed but with a different result in Tau Gumu v. Papua New Guinea Banking Corporation Limited,[26] by Justice Gavara-Nanu. In that case, although His Honour found that O.8 r.21 (2) permitted a general denial, the defendant did not do that in good faith. The Court found that the defendant was aware of the relevant facts, and could have specifically responded to the facts pleaded by the plaintiff, but it chose not do that. His Honour found the position the defendant adopted was an abuse of the Court’s process when it merely denied the claim against it in a case where specific responses to the matters pleaded were reasonably expected and or required.
It is clear to me from these authorities that, a defendant is prohibited from pleading the general issue. But it is permitted to plead in terms of generally denying a claim by reason of O.8 r. 21 (2). However, that must be done in good faith. Hence, where a defendant has knowledge of the facts giving rise to the claim against it, or is a party to the facts or matters pleaded, it is obliged to specifically plead to the matters pleaded against it with particulars or reasons why it is denying the claim. In this regard, where a plaintiff claims a breach of a contract, it is not good enough for the defendant to generally deny the claim. Instead, the defendant must do so with reasons for taking such a position, given that it is allegedly a party to the contract, by reason of which, it is reasonably expected to do so in accordance with the purpose and object of pleadings. A failure to do so amounts to an abuse of the Court’s process which is prohibited on the basis of which, such a pleading could be struck out and judgement entered for the plaintiff in accordance with O.8 r. 27.
(iii) Verification of Defence
Moving onto to the need to verifying a defence to a liquidated demand, I note that the relevant provision in the Rules is O.8 r. 24. That provision reads:
24. Defence: Verification. (15/23)
(1) Where a plaintiff, by his statement of claim, makes a claim against a defendant for a liquidated demand, but no other claim, and the statement of claim bears a note requiring the defendant to verify his defence, the defendant shall verify his defence, that is to say, he shall, within the time limited for filing his defence, file an affidavit verifying his defence to the claim in accordance with this Rule.
(Emphasis supplied)
The operative words in this rule are the words that I have highlighted but more importantly the phrase, " a liquidated demand, but no other claim." There are a number of cases on the question of what is "a liquidated demand"? The leading case, is the judgement of the Supreme Court in Dempsey v. Pacific Pty Ltd.[27] According to that case, and the many others on point, "a claim is a liquidated demand" for the purposes of signing default judgement "when it is ascertainable or is capable of being ascertained by a simple calculation as when there is no element of assessment on judgement."
The Supreme Court traced the history of the phrase from well known admitted demands to a majority of cases in which the defendant knew perfectly well what the claim was. In such a case, the writ operated to compel immediate payment from a necessitous or backward debtor of a known or admitted debt. This progressed to covering claims for money due upon a legal liability or upon a simple contract, where the demand is for a sum certain or is capable of being readily reduced to certainty. The Supreme Court also highlighted the object of requiring this special endorsement or verification, which is to:
"... allow a procedure whereby a plaintiff who has a clear debt type of action with clearly ascertainable claim can overcome the natural reluctance of the courts to allow claims in the absence of the defendant and can get a speedy justice in the face of a delay or difficult defendant. It has a prompt and summary effect in favour of a plaintiff."
Proceeding on the basis of these principles, the Supreme Court in Michael Newal Wilson v. Harold Rosser Howard,[28] found that the National Court was right in striking out a defence and signing judgement for the plaintiff, pursuant to an application made under O.8 rr.27 and 28. In that case, the appellant failed to verify his defence to a liquidated claim and nothing else by the respondent for breach of a sale and purchase agreement.
Bearing all of these principles in mind, I will now give consideration to the case before me. I will do so by first setting out and considering Kumagai’s pleadings. Then address each of the specific issues raised, in terms of pleading the general issue and the need to verify the defence in the context of Kumagai’s defence and the overall purpose or object of pleadings.
Present Case
Kumagai’s responses to the allegations against it in the material parts are as follows:
"3. It denies the allegations in paragraph 3 and says that it is a company incorporated in Japan but registered in Papua New Guinea pursuant to the Companies Act 1997 and that it may sue and be sued in its corporate name and style of "Kumagai Gumi Co. Limited".
...
From these pleading, it is clear that, Kumagai admits the construction contract with NPF for the fixed price of K45,447,388. But it does not admit that there is no provision in the contract for an increase in the price for increased costs and or fluctuations in the Kina.
Kumagai also admits to finding that the costs were more than what it had anticipated. These were caused by a significant devaluation in the Kina and also as a result of variations, it does not specify which were apparent during the performance of the contract. Therefore it admits to seeking compensation from NPF for the increased costs but denies that NPF refused to make additional payments and claims that NPF offered to pay K5, 352,612. It claims the offer was made by letter dated 25th January 1999 via PAC. Kumagai otherwise denies the allegations in paragraph 25 of the Statement of Claim. This effectively means, in my view, that as far as it is concerned, the letters set out in paragraph 24 of the statement of claim were never written, exchanged and therefore do not exist.
As for the claim that Mr. Maladina was advised that he was being appointed chairman of the NPF board of directors and the entering into the corrupt agreement, Kumagai merely pleads, "it does not admit" those allegations. Pleadings in these terms are adopted for the allegations by NPF in paragraphs 87 of the statement claim as to retaining benefit of increased costs, 88 as to keeping the agreement secret and 89 as to NPF borrowing from PNGBC. A similar pleading is adopted in regard to the performance of the corrupt agreement, procuring the necessary approval and payment of the sums over K5 million and the way and manner in which the proceeds were dealt with (paragraphs 30 to 42). The same kind of pleading is carried through in relation to the dealing with of the first of the proceeds of the payments and goes on to say, it is not required to plead in relation to the pleadings under paragraph 43 of the statement of claim. That is repeated for the pleadings in paragraph 54, 69, 77, 80. These paragraphs concern the way in which the proceeds of the second and third payment to Ken Yapane & Associates were dealt with.
As for the pleading that "it is not required to plead", I note that, that is repeated in respect of the pleadings in paragraphs, 44 to 53, 55 to 68, 70 to 76, 78, 79 and 81 to 85. If these allegations in these paragraphs were taken in isolation, it might well be considered as having nothing to do with Kumagai. But the way in which the pleadings are set out, it follows on from the pleadings concerning the corrupt agreement, its performance and procuring and receiving payment. Also, the allegations in these particular paragraphs deal with the way in which the proceeds were dealt with.
This type of pleading, in my view, is not the same to say that, "it does not know and cannot admit," a type of pleading which is perfectly correct for entities such as the Motor Vehicles Insurance Trust. For defendants like them do not have any personal knowledge and involved in the matters giving rise to an action.[29]
In the present case, NPF’s pleadings are specific. Amongst others, it pleads the total contract price, any variation thereto and the exclusion of situations not warranting a variation. At the same time, it pleads certain actions taken by Kumagai in association with other specified people to secure a total contract price beyond what was agreed. Further, it pleads that the project manager appointed under the contract was by passed in critical negotiations that led to an illegal agreement to pay, Kumagai over and above what was due to it under the terms of the original contract. As far as the pleadings in the statement of claim are concerned, these matters are and or were within the knowledge of Kumugai. They connect Kumagai in terms of making the claim and persisting on it, receiving the payments and making payments out of those and its other funds out of its account to the persons whom NPF says are the persons who conspired with Kumagai to defraud the NPF.
These require, in my view, specific responses from Kumagai with the reasons for saying, "it can not admit" or "it is not required to plead." When viewed in that context, the particular kind of pleadings it has adopted carries the message that, it knows the matters or facts pleaded. Then based on that knowledge, it is not prepared to admit that it made the relevant claims and received the payments from NPF. Also it is not prepared to admit that upon receiving the payments, it retained the benefit of the increased cost claim and paid out the other component, being for acceleration to Mr. Maladina and the other persons that are named in the statement of claim. Similarly, it is saying, it did not keep the terms of the agreement secret and that it was not aware that NPF borrowed from PNGBC to fund the over K5 million additional claim. The reasons for these are not known, as they are not stated in the defence so they are reasons only known to Kumagai. Then based on this knowledge, it denies there was a corrupt agreement, a conspiracy and combination of an intention to defraud and unjustly enrich it and thereby injure NPF’s business.
As I already said, NPF’s claim is specifically for an amount over K5 million being the amount paid to Kumagai over and above what it was entitled to under the construction contract. NPF has pleaded specifically the way and manner in which that payment was secured and then how the proceeds of the payment were dealt with. This, in my view, is certain and therefore a liquidated amount. It has to be contrasted with claim in which damages are generally claimed for, example personal injuries or loss of business occasioned by a breach of contract, where the Court has to assess the plaintiff’s damages.
The other claims of NPF are for interest costs and punitive damages. These claims, as already noted, are merely consequential on the main claim. They can not stand on their own. I am, therefore, of the view that these additional claims do not come within the qualification in O.8 r.24 that there is "no other claim".
Based on this view, I find that Kumagai was under an obligation to verify its defence in relation to the specific claim against it. It did not do that and maintained the view that NPF’s claim was not liquidated within the meaning of O.8 r.24. That view could be correct only if the provisions of O.8 r.24 have not been authoritatively extended to cover all cases in which it was certain as to the amounts the plaintiff was claiming as was seen in discussion of the law in the foregoing. Indeed, the defence of some of the other defendants’ such as that of the fifteenth and eighth defendant in this case have been verified, thereby confirming the need to do so.
Kumagai, also raised the argument that, if NPF was convinced that O.8 r.24 did apply to the defence it filed and served on NPF, it should have promptly made its application to strike out the defence but it did not do that. I take this submission is in the context of the rule in question saying that the reason to require a verification of a defence is to ensure prompt relieve for a plaintiff. Whilst I agree with the intent of the rule, I do not agree that it was also intended to prescribe a time limit within which a plaintiff should apply for a strike out of a defence that has not been verified in cases where that should have been done. There could be a number of reasons preventing a plaintiff from applying for a judgement under O.8, r.25(c), for example, the parties might undertake settlement negotiations, or there could be such other factors preventing an application to be made promptly. So it would not be advisable to prescribe a time limit. I am of the view that this is why no time limits were prescribed. Besides, there is always power in the Court to dispense with a strict compliance of the Rules in the interest of doing justice on the merits of the case and not purely on the Rules.
Further, pleadings remain an open issue until judgement. So if at any stage of the proceedings it is found that a pleading offends the true spirit and purpose of pleadings, the Court should not be restrained from making appropriate orders. This is to enable the Court to do justice in a case in terms of minimizing and or avoiding further costs to the parties and wastage of the Court’s limited time.
In addition to these considerations, in this case, there is an explanation for the timing of NPF’s application. It is tied down to the NPF Commission of Inquiry and various follow-on steps the NPF and the parties named in these proceedings had to take. This meant that no meaningful steps could be taken without first attending to those matters.
The end result, in my is that, Kumagai was required to plead its defence specifically to the matters alleged against it with verification rather than merely say, "it does not admit" and or "it is not required to plead". In its defence, Kumagai admits the existence of the contract but it is not able to admit that it was a term of the contract that the contract price was not to be varied for increased costs or devaluation in the Kina. Likewise, it is not able to admit a variation of the contract price for increased costs and devaluation of the Kina to over K5 million, although it admits to NPF making an offer to pay an additional K5,352,612 and does not offer anything more as to what became of this offer.
Kumugai had reason to know and was in a position to say how it was able to secure and through whom it was able to vary the contract for the substantial increase in the price, but says nothing in relation to aspects. Likewise, it would know what it did in relation to every stage of the negotiations and how it secured the additional price. If it is correct in maintaining that this was legally arrived at, then it was incumbent upon it to provide the basis to support such a conclusion, but has not.
This places the present case in the same footing at least factually in the cases I have discussed above except for Motor Vehicles (PNG) Insurance Trust v. Nand Waige & 2 Ors.[30] The situation in that case was understandable. The defendant appellant was not a party in any way to the facts giving rise to the claim, a motor vehicle accident. It was named as a defendant by operation of the law, being the Motor Vechicles (Third Party) Insurance Act.[31] It was therefore in no position to respond in any other way then to simply say it "does not know and cannot admit."
A person who is a party to a contract and or a party to the facts giving rise to a claim cannot, in my view, say the same. If such a party were allowed to do that, it would amount to an abuse of process, as was found in Tau Gumu v. Papua New Guinea Banking Corporation Limited.[32] It would also run contrary to the purpose and object of pleading in our system of justice which requires fairness to be accorded to all the parties by both the Courts and each of the parties in the conduct of their respective claims. The interest of justice could not be served and justice would be unnecessarily delayed if the rules were applied in isolation of the main purpose and object of pleadings as earlier noted.
Kumagai was in a contractual relationship with the NPF. The allegations concerned the conduct of its relevant officers through whom it can act at any one time. It was therefore in a better position to appreciate what was pleaded against it and appropriately respond with reasons for denying the allegations. Instead of doing that, I find that Kumagai merely denied the allegations without more when more with particulars were reasonably required. For example, it has not pleaded that the officer negotiating for the illegal contract purportedly on its behalf was acting without its knowledge and authority. Similarly, it has not pleaded that it did not benefit in any way from the increased price. Likewise, it has not pleaded that the increase was within the terms of the original contract and not as was pleaded by NPF and or that the relevant terms were varied in accordance with the terms of contract and provide particulars or the basis for mounting any such pleading. Finally, if Kumagai was genuine in its defence, then what was the harm in having its defence verified, as did some of the other defendants? In the absence of anything to the contrary, it could mean that Kumagai was not prepared to go on oath and have its defence verified.
Hence, I am of the view that, if this did not amount to a case of pleading the general issue, it was a case of Kumagai simply refusing to answer specific allegations against it and merely pleading a general denial. Even then, I find that Kumagai did not act in good faith, evidence by its failure to say any thing specifically in relation to what was specifically alleged against it. It did not fully disclose the basis for its defence. It merely chose to put the plaintiff to the task of establishing its case against it. This is a typical example of a party trying to go for the strict application of the rules in disregard of the purpose and object of pleadings. It also ignores the need to achieve justice with minimum delay and less costs and of course, without unnecessarily taking up more of the Court’s scarcely available time. What Kumagai has done, in my view, is not within the purpose and objective of the pleadings as strengthen and elaborated by the Supreme Court in Public Officers Superannuation Fund Board v Sailas Imanakuan,[33] and Papua New Guinea Banking Corporation v. Jeff Tole.[34] Kumugai’s defence as far as I could see, is one which avoids providing a specific answer to any of the specific allegations made against it.
The pleadings adopted by Kumagai, in my view, are clearly evasive, and have a tendency of embarrassing and or delaying the process. Accordingly, it is caught by the prohibition under O.8 r. 27, as these pleadings have the tendency of causing prejudice, embarrassment and of course, delay in a prompt disposition of the dispute between the parties. It also amounts to an abuse of the Court’s process, as Kumagai did not plead its defence in accordance with the purpose and object of pleadings which are to specifically and truthfully answer NPF’s claim.
The law on this kind of pleading and the consequences of failing to appropriately plead has been stated in numerous cases before, some of which, I have outlined above. In short, the authorities state that where a party adopts the kind of pleading Kumagai adopted in this case, it stands the risk of being struck out and judgement being entered for the opposing party. I am not placed with any convincing reason as to why this consequence should not follow here.
In summary, I find that Kumagai’s defence is evasive and it avoids answering the specific allegations against it, when it was reasonably expected and required to do so. It has also failed to verify its defence when again it was required to do, as did the fifteenth and eight defendants. Hence, I find that it has not met the requirements under O8.r.24 and has offended the prohibition under O.8 r. 27. In so doing, it has not pleaded in accordance with the purpose and object of pleadings which is to enable the parties and the Court to arrive at a determination of the real issues between the parties and avoid a case of trial and success by means such as evasion, avoidance, ambush, surprise, delay and attrition. For these reasons, I am of the view that Kumagai’s defence should be struck out pursuant to O.8. r. 27 and O.12, r.25(c) and judgement in the sum of K5, 805, 000.00 with costs and interest entered for NPF.
Summary Judgment
There is a further reason why I could make such an order. That is in the context of the application in the alternative under O.12, r.38. This rule provides:
"38. Summary Judgment. (13/2)
(1) Where, on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff—
(a) there is evidence of the facts on which the claim or part is based; and
(b) there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed,
the Court may, by order, direct the entry of such judgement for the plaintiff on that claim or part, as the nature of the case requires.
(2) Without limiting Sub-rule (1), the Court may under that Sub-rule direct the entry of judgement for the plaintiff for damages to be assessed.
(3) In this rule, ‘damages’ includes the value of goods."
The leading authority on summary judgments in Papua New Guinea, is Bruce Tsang v. Credit Corporation (PNG) Ltd.[35] In that case, the Supreme Court held that two elements must be met before there could be an order of judgement under O. 12, r. 38. These are:
(a) there must be evidence of the facts proving the essential elements of the claim; and
(b) that the Plaintiff or some responsible person gives evidence saying in his belief there is no defence to the claim.
If one considers these requirements closely, there are in fact three requirements. The first is that, there must be evidence of the facts proving the essential elements of the claim. The second is that, the evidence must come from the plaintiff or a responsible person. Then the third and final is that the person providing the evidence must express a belief that, the defendant does not have a defence to the claim.
The majority in the subsequent case of Curtain Bros (Qld) Pty Ltd v. Kinhill Kramer Pty Ltd & the State,[36] cited the above case with approval. It was also cited and applied with approval by the Supreme Court in Kappo No. 5 Pty Limited & Ors v. James Chi King Wong & Anor.,[37] the Supreme Court adopted that approach. In that case, summary judgement was entered for the Respondent under O.12, r. 38. The Respondent’s claim was however, based on fraud and so the appellant successfully appealed against that decision. The Supreme Court in upholding the appeal observed at p.6 that O.8, r. 37:
"... clearly states that where there is a claim based on fraud, summary procedure is not applicable. It is clearly intended that such allegations must be dealt with at the substantive trial. We find that the trial judge, made no reference to this Rule in his judgement. If his attention was drawn to the Rule, he may not have entered judgement against the second appellants. We find that the trial judge erred in this regard."
It would appear clearly therefore that, where a claim is based on fraud, the summary judgment procedure under O.8, r. 38 is not available. This means, in my view that, where a claim is based on a claim other than fraud or in a case where there can be judgement without finding fraud, the procedure under O.8, r. 38 is available.
In this case, NPF is arguing that the provisions of O.8, r.37 are inappropriate to the circumstances of country. Therefore it is asking this Court to waive the application of O.12 r. 37 following the line of reasoning in the five man Supreme Court bench in Enforcement Pursuant to Constitution s57; Application by Gabriel Dusava.[38] That case concerned the interpretation of a constitutional and statutory provision. The judgment discussed the desirability of not applying a law that was inappropriate to the circumstances of the country. It then said:
"... as Professor Goldring asserts, and I respectfully adopt here, the provisions of schedule 2.3(1)(a), in particular would appear to give ample scope for judicial creativity whether law is an adopted enactment so the courts could find that the Rule contained in it was inappropriate to the circumstances of the country and formulate a law that was."
The argument for NPF goes on to stress that, the summary judgment mechanism is there to prevent the resources of the Court and the parties from being wasted in bringing a matter to trial when it is clear that there is no defence to the action. This is with recognition of the exceptions noted in O.8, r.37 for which a trial by jury was considered necessary. The argument continues that, there is no right to a trial by jury in our country. A judge determines questions of both fact and law. To allow this adopted enactment to remain, creates that absurdity and certainly is against the mischief that the summary judgment provisions seek to address, that is the wastage of resources and Court’s time without good basis.
Kumagai argues in opposition to NPF’s that, the provisions of O.8, r.37 are very clear. It also submits that, both the Supreme and this Court have consistently recognised that position and that summary judgement can only be signed in the clearest of cases. This requires much care on the part of the Court before deciding to sign judgement. It refers to judgements like that of Pastor Saki & Anor v. Kadir Contractors Ltd,[39] and others to support its position. It effectively argues that the provisions in question are still relevant and appropriate to the circumstances in PNG, notwithstanding the fact that there is no jury trial.
This controversy, in my view, can be resolved by reference to the purpose and object of pleadings which were already noted. Regard must also be had to the purpose of the procedure on summary judgment, which is to enable speedy judgment, in cases where there is no viable defence to a claim, which principle, I note is not in issue. At the same time, consideration must be given to the reasons why the provisions of O.8, r. 37 were enacted in the first place and whether that purpose is relevant in the PNG circumstances. Here, in my view, is the reason for the controversy and the basis on which it must be decided.
The summary judgment provisions have their origin back to the English practice rules. These rules have now undergone rigorous review and reform culminating in the work headed by Lord Woolf. Most of these changes are set out in the Rules of the Supreme Court 1965 as amended. A full text of that can be found in the relevant White Book on The Supreme Court Practice 1999, Volume 1. In the relevant commentary under the equivalent of our O.8, r.37,[40] it clearly states that the exceptions to the process applying were only in respect of cases in which a defendant is entitled to a jury trial. Further, it clearly sets out that the list of exception has been revisited with the result that "fraud" as been removed. This removal means:
"O.14 now applies to an action based on an allegation of fraud, but it does not mean any diminution in the common law rule that fraud must be distinctly alleged and distinctly proved ...; nor is there any diminution in the obligation of a party to plead the necessary particulars of the fraud and the fraudulent intention on which the party relies. ... Since the charge of fraud must be distinctly proved it would be inappropriate for the supporting affidavit simply to depose that the particulars of the claim appear by the statement of claim in the action."
I am of the view that, the provisions of O.8, r. 37 are inappropriate to the circumstances of PNG for two reasons generally and a third reason in the case of a claim based on fraud. Firstly, our system of justice was adopted by a deliberate act in terms of the Constitution, which did away with the jury trial system. Yet, after having made that decision, the Rules merely adopted the rules as they applied in England as at the time of their adoption. In so doing, the draftsman obviously overlooked the fact that the PNG Constitution had done away with jury trials. The duty of a jury was instead placed in Judges and magistrates who are both judges of the facts as well as the law. The Constitutional Planning Committee, in its deliberate act determined that judges and magistrates who are trained and experienced in the law can be better judges of both the facts and the law, given the particular circumstances of PNG.
The second reason follows on from the first. That has to do with the object or purpose of the summary judgement mechanism. If the aim is to get to a judgment in a claim that does not have a clearly sustainable defence, and subject to meeting the conditions that must be met, it makes no sense to single out the kind of cases listed in O.12, r. 37. The only reason for the exceptions is the fact that these kinds of actions traditionally required jury trials. Given that there are no jury trials in PNG, there is no reason to retain this list of exceptions. A judge, who is trained and experienced in the law, is no doubt, in my view, able to determine both the factual as well as the legal basis for an application for summary judgement, in accordance with the wishes and the intention of the founding fathers of the Constitution.
Finally, and more specifically for a claimed based on fraud, England from which the exception list initially came from, has now changed its position. She has removed fraud from the list of exceptions. This is apparent from the wording of the present equivalent of O.8, r.37,[41] in these terms in so far as they are relevant:
"... this rule applies to every action begun by writ in the Queen’s Bench Division (including Admiralty Court) or the Chancery Division other than-
(a) an action which includes a claim by the plaintiff for libel, slander, false prosecution, false imprisonment or seduction,
(b) [revoked.]
(c) an admiralty action in rem."
Paragraph (b) in the original read "fraud." Now that has been revoked. Hence, it is now possible to apply for summary judgment as long as the safety guidelines as noted in the annotation to the rule are met. It would thus, in my view, be quite silly of us in PNG to continue to adopt and allow a legal position to function when it has already been discarded. There is no overriding reason for this rule to continue to have meaning and application in PNG, particularly when considered in the context of the reasons why the exception list was created in England and adopted throughout the Commonwealth world. All of the cases on summary judgment in PNG todate, proceed on the basis of the fact that, O.8, r. 37 exists. They have not as already mentioned, considered it in any way, the reasons for having this rule.
In the circumstances, the only conclusion reasonably open in my view is that, the provisions of O.8, r.37 are inappropriate to the circumstances of PNG, if not so, for all of the kinds of actions listed, it is at least the case for an action based on "fraud". The rules in relation to pleading fraud with particulars and the need to prove it remain intact. It also means the requirements that must be met before summary judgement can be entered, continue to apply. Included in this, is the need to specifically prove the fraud claimed by evidence rather than a mere reference to the pleadings.
Present Case
So the question in the present case is, has NPF meet the requirements that must be met in its application for summary judgement? As already noted, there are number of affidavits filed for NPF. Of them, the main ones are that of Erastus Kamburi, sworn on 16th and filed on the 17th of July 2003 and the other one sworn and filed on 10th of September 2003. He is the corporate secretary of the NPF. He has excess to and keeps the records of the NPF. He deposes to facts supporting NPF’s claim. The other is the affidavit of Mr. Roger Michael Dalton sworn on the 28th of July 2003. This witness is the architect employed by PAC at the project site. He was the medium between the NPF and Kumagai in relation to the performance of the construction contract. He supervised the construction work and handled all of the progress and other claims by Kumagai.
No doubt, these witnesses are responsible and are qualified to depose to the facts in their respective affidavits. No objection was taken as to their qualification to depose to their respective affidavits. I have already set out in the earlier part of this judgement the facts emanating from their affidavits and I need not recite them. There is no evidence in rebuttal from or for Kumagai. So the evidence remains essentially uncontested. Nothing has been put before me as to why I should not accept NPF’s evidence through these witnesses, so I have accepted their evidence. Then based on the evidence before me, I find that NPF has established the essential elements of its claim against Kumagai.
From this, it is clear to me that the first two requirements of evidence of the essential elements of the claim and that coming from the plaintiff or a responsible person have been met. As for the requirement for a statement in the supporting affidavit, I find that the affidavit of Mr. Kamburi sworn on 10th September 2003 fulfils that requirement in the second paragraph. That paragraph reads:
"After a review of all correspondence, contracts and records in this matter, it is my belief and that of the Plaintiff that the second Defendant has no Defence whatsoever to this action."
Against these, Kumagai argues that NPF’s claims lack particulars. As such, it argues that NPF’s claim is not precisely clear as to the basis. I find there are two difficulties with this argument on the basis of which I am not prepared to accept.
The first is this, if indeed Kumagai was genuinely concerned with the lack of particulars that would have been the first thing it could have raised with NPF well before the filing of its defence. Indeed the rules in O.8, r. 13 (3), provide a defendant with a right to file and serve a notice to plead facts within the time it is required to file and serve its defence. So Kumagai could have filed and served a notice to plead facts. Then failing a compliance of such a notice, it could have gone to the Court under O.8, r. 36 for orders compelling compliance. It did not utilize these provisions. Instead, it proceeded to file and serve its defence. In so doing, in my view, it demonstrated its contentment rather than its opposite. Despite that, now in the light of an application to strike the defence it has filed, it raises the issue of lack of particulars. This can not and should not be allowed, because the time to do so has already come and gone and parties proceeded on the basis that NPF’s pleadings were in order.
The second reason is that, I find that NPF’s pleading as noted does provide the relevant particulars. Its claim as against Kumagai is clear. Indeed that is why the parties have progressed the pleadings to the level they have.
In the end result, I am satisfied that the requirements for entry of summary judgement have been made out. This is strengthened by the views I have already expressed in relation to Kumagai’s defence, which can be summarized in terms of the defence not disclosing a defence that is worthy of going to trial. For example, it does not raise a defence of say duress or part performance, or any other ground to say as to what the reason is and why they participated in the agreement and received the monies into their bank account and why they refused to repay them to the NPF. This is particularly so when there is no dispute as to the receipt of the monies sought to be recovered.
For these reasons, I am minded to grant the plaintiff’s application for judgement under O.8, rr. 27 and O.12, rr.25(c) and 38. Accordingly, I order a strike out of the Second Defendant’s Defence and order judgment for the plaintiff against it in the sum of K5, 805, 000.00 plus interest at 8% pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act and costs.
I consider the order for costs and interests sufficient penalty. As such, I am disinclined to making any order in favour of plaintiff in respect of its claim for punitive damages. Whether or not, such a claim should be entertained and how much should be the quantum, is a matter within the discretion of the Court. Given the facts of the case, I do not consider there is a need for this Court to allow for such damages. For if the plaintiff is of the view that the defendants should be penalized than it should assist the police to bring criminal proceedings against each or any one of the defendants, which if successful, will arrive at the same result of punishing the defendants. Further, I am of the view that such a claim should only be entertained where there is no other process that could be brought against a defendant, which could result in a penalty.
In any case, I note that in the notice of motion leading to this judgement, NPF is not seeking judgement for punitive damages and
interest in terms other that the usual 8%.
_________________________________________________________________________
Lawyers for the Plaintiff: Gadens Lawyers
Lawyers for the Second Defendants: Blake Dawson Waldron Lawyers
[1] (Unreported judgement delivered 27/10/98) SC 581.
[2] [1994] PNGLR 596.
[3] Quoting as a correct statement of the principles by O'Leary AJ who was dealing with the New South Wales Supreme Court Rules (which
correspond with the rules of the National Court) said in Principles of Practice and Procedure (Butterworths 1976) at 10.307.
[4] Quoting from Philliponi -v- Leithead (1958) 76 W.N.(NSW) 150.
[5] (1959) 76 W.N. (NSW) 364.
[6] [1993] PNGLR 370 at pp. 373 –374.
[7] (Unreported judgement delivered on 27/09/02) SC694.
[8] (Unreported judgement delivered on 19/07/02) N2257.
[9] Supra note 6 at p.374.
[10] Supra note 8.
[11] Repeated in Papua New Guinea Banking Corporation v. Jeff Tole (supra note 7).
[12] (Unreported judgement delivered on 09/11/01) SC677.
[13] Supra note 7.
[14] [1986] PNGLR 301.
[15] [1995] PNGLR 202.
[16] Chp. 295.
[17] Supra note 14.
[18] Ibid.
[19] Supra note 14.
[20] (Unreported judgement delivered 10/11/00) N2000.
[21] (Unreported judgement delivered on 18/06/98) N1735.
[22] Supra note 15.
[23] [1994] PNGLR 418.
[24] [1990] PNGLR 502.
[25] Supra note 14.
[26] (Unreported judgement delivered on 26/04/02) N2251.
[27] [1985] PNGLR 93.
[28] Supra note 20.
[29] See Motor Vehicles (PNG) Insurance Trust v. Nand Waige & 2 Ors (supra note 15) which confirms in effect this position.
[30] Supra note 15.
[31] Chp. 295.
[32] Supra note 23.
[33] Supra note 12.
[34] Supra note 7.
[35] [1993] PNGLR 112.
[36] [1993] PNGLR 285
[37] (Unreported judgement delivered on 23/05/97)SC520.
[38] Supra note 1.
[39] (Unreported judgement delivered 25/02/99) SC599.
[40] Order 14 Rule 1.
[41] Supra note 40.
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