|
|
Home
| Databases
| WorldLII
| Search
| Feedback
National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO. 1192 OF 2016
BETWEEN
BLUEWATER INTERNATIONAL LIMITED
Plaintiff
AND
ROY MUMU, SECRETARY DEPARTMENT OF TRANSPORT
First Defendant
AND
INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Defendant
Waigani: Shepherd J
2020: 16th, 28th October
PRACTICE & PROCEDURE - supervisory role of National Court where parties have contractually agreed on dispute resolution process – parties agreed to resolve disputes by negotiation but failing settlement by negotiation then arbitration - where parties have agreed to settle plaintiff’s principal claim the Court may deal with residual claims for interest and costs without compelling the parties to submit to arbitration.
PRACTICE & PROCEDURE – application for summary judgment when parties have agreed to settle plaintiff’s principal claim – proper jurisdiction for summary judgment when National Court is exercising supervisory role of dispute resolution process is Order 12 Rule 1 National Court Rules – National Court’s exercise of power to grant summary judgment is discretionary.
Cases Cited:
Ambogo Sawmill Pty Ltd [1987] PNGLR 117
Ampaoi v Bougainville Copper Ltd (2012) SC1166
Augerea v Bank of South Pacific Ltd [2007] SC869
Bluewater International Ltd v Roy Mumu, Secretary Department of Transport
& The State (2019) SC1798
Boochani v The State (2017) SC1566
Chief Collector of Taxes v T.A. Field Pty Ltd [1975] PNGLR 144
Curtain Brothers (Qld) Pty Ltd v The State [1993] PNGLR 295
Duma v Meier (2007) SC898
Eru v Interoil (PNG) Ltd (2016) N6352
Evaluation Consult (New Zealand) Ltd v The State (2016) N6219,
Finance Corporation Ltd v Dalmine Enterprises Ltd (2015) N6080
Finance Corporation Ltd v Trans Ganuka Ltd (2015) N5978
Re Koitaki Plantations Ltd (2017) N6670
Kumul Builders Pty Ltd v Post & Telecommunication Corporation [1991] PNGLR 299
Makeng v Timbers (PNG) Ltd (2008) N3317
Medaing v Ramu Nico Management (MCC) Ltd (2011) SC1156
Opi v Telikom PNG Limited (2020) N8290
Powi v Southern Highlands Provincial Government (2006) SC844
Smith v Ruma Construction Ltd (2000) N1982
Textbooks:
Gary Born, International Commercial Arbitration (2nd ed.) 2014, Kluwer, The Netherlands
Counsel:
Mr S. Malaga, for the Plaintiff
Mr E’ava Geita, for the Defendants
Mr David Dotaona, for the Attorney-General
DECISION
28th October, 2020
Background
Litigation history and the parties’ settlement negotiations
[emphasis added]
THE COURT ORDERS by consent of all parties that:
...
[underlining added]
...
59. Bluewater’s motion for summary judgment came on for hearing on 16 October 2020. Mr Malaga appeared for Bluewater. Mr Geita appeared for the Department of Transport and the State. Mr Dotaona again appeared for the Hon. Davis Steven as Attorney-General and Minister for Justice. Mr Malaga informed the Court that he had not been contacted by anyone from the office of the Secretary for the Department of Justice and Attorney-General or anyone from the Solicitor-General’s Office to discuss and agree on a proposed deed of settlement. Mr Geita and Mr Dotaona were unable to provide any further update to the Court beyond the content of the Attorney-General’s affidavit of 14 October 2020. The Attorney-General’s submission to the NEC was clearly still in limbo. The Solicitor-General’s Office filed no affidavit material in answer to Bluewater’s affidavit in support of its motion for summary judgment. The Court proceeded to hear Bluewater’s motion for summary judgment on 16 October 2020 and then reserved its ruling, which is the subject of this decision.
Bluewater’s motion for summary judgment
Issues
Consideration
Issue 1 – Is Bluewater entitled to summary judgment for its principal claim of K1,450,000?
38. Summary judgement
(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 judgment for the plaintiff on that claim or part, as the nature of the case requires.
See Chief Collector of Taxes v T.A. Field Pty Ltd [1975] PNGLR 144; Dep International Private Ltd v Ambogo Sawmill Pty Ltd [1987] PNGLR 117; Kumul Builders Pty Ltd v Post and Telecommunication Corporation [1991] PNGLR 299; Curtain Brothers (Qld) Pty Ltd v The State [1993] PNGLR 295.
(1) The applicant must verify by affidavit evidence the cause of action.
(2) The applicant must swear to a belief on his part that the respondent (defendant) has no defence to the cause of action (or the pleadings.
If the Court has been satisfied in respect of (1) and (2), then the onus is on the respondent to:
(3) show an arguable defence or that there is a real question to be tried.
(1) The appeal is dismissed.
(2) Costs to the Respondents to be taxed, if not agreed.
(3) The substantive matter be remitted back to the National Court ...
(4) the National Court proceedings be stayed pending an exhaustion of the process provided for under Clause 3.11 “Disputes and Arbitration” contained in the Contract between the parties.
(5) The matter be assigned to the ADR Track in CC2 to manage the process referred to in term (4) of these orders.
[underlining added]
3.11. DISPUTES AND ARBITRATION
3.11.1 Amicable Settlement
The Parties agree that the avoidance or early resolution of disputes is crucial for a smooth execution of the Contract and the success of the assignment. The Parties shall use their best efforts to settle amicably all disputes arising out of or in connection with this Contract or its interpretation.
3.11.2 Dispute Resolution
Any dispute, claim or difference out of breach or termination of the Agreement shall be agreed between the Agency and the Consultant or failing agreement shall be referred to arbitration in accordance with clause 3.11.3.
3.11.3 Arbitration
Arbitration may be commenced prior to or during the performance of the Services, and proceedings shall be conducted in accordance with the rules of procedure as specified below:
a) A Contract with a Foreign Consultant
...
b) A Contract with a National Consultant
Any dispute, controversy or claim arising out of or relating to this Contract, or breach, termination or invalidity thereto, shall be settled by arbitration in accordance with the provisions of the Arbitration Act of 1951 of Papua New Guinea.
During the period that Arbitration is underway the parties shall continue to perform their respective obligations under the Contract, unless they otherwise agree, and the Agency shall pay the Consultant any monies due to the Consultant.
[underlining added]
70. When giving its reasons for remitting the case back to the National Court, the Supreme Court in SCA No. 66 of 2016 said this at [35]:
... the parties agreed to have their disputes resolved amicably through negotiations and failing that through arbitration ... it is clear that Bluewater issued these proceedings seeking to enforce its contractual rights in breach of the dispute resolution provisions contained in the same contract in clause 3.11.1 to 3.11.3. By these provisions the parties ousted the Courts jurisdiction. They made a deliberate decision not to go to court. Given that, the Court and its processes cannot be availed [of] by either of the parties except only for the enforcement of their dispute resolution provisions and or enforce any agreement or resolution arrived at through the use of their dispute resolution process set out in clause 3.11 of their agreement, be it a mediated agreement or an arbitration award.
[underlining added]
71. In view of this finding by the Supreme Court, which is binding on this Court, I consider that the dispute resolution process
mandated under clause 3.11.2 of the Contract requires the parties to attempt at first instance to agree on a settlement of any dispute
which arises under the Contract. Only when settlement negotiations fail does arbitration become the process of last resort as the
parties’ agreed means to resolve any “dispute, claim or difference” between them. That this is so is reinforced
by clause 3.11.1 which sets out the parties’ overarching obligation, which is that the parties must use their best efforts
to settle any dispute which arises in connection with the Project before the parties can submit their dispute to arbitration.
72. The current status of the case now that it has been remitted back to this Court is that the case has been stayed under term
4 of the order made by the Supreme Court on 1 May 2019. It is clear that the purpose of the stay is for the parties to exhaust the dispute resolution process provided for in clause 3.11
of the Contract. The ADR Track of CC2 has been directed by term 5 of the Supreme Court’s order to manage that dispute resolution process.
73. The substantive matter in this proceeding referred to in term 3 of the Supreme Court’s order is Bluewater’s principal claim that the State and its implementing agency the Department of Transport breached the Contract by failing to pay Bluewater’s invoice dated 7 December 2015 for K1,530,000 when that invoice fell due for payment. This is what was pleaded by Bluewater in the statement of claim endorsed on its writ of summons filed on 22 September 2016.
74. Term 1 of Bluewater’s notice of motion refers to s.12(3) of the CBAAS Act, which provides:
12(3) Where in a claim against the State the State is in default within the meaning of the National Court Rules, then notwithstanding that a plaintiff’s claim is for a liquidated demand, judgement shall not be entered against the State for the sum claimed unless the claim relates to a debt only, and in all other cases judgement shall be entered for damages to be assessed and, where appropriate, for costs.
75. As Bluewater’s motion for summary dismissal is not an application for default judgment pursuant to Order 12 Rule 25 NCR or under any of the other rules for default in Division 3 NCR, I consider that s.12(3) of the CBAAS Act has no relevance to Bluewater’s application for entry of summary judgment against the State. In any event, even if s.12(3) of the Act were to apply to some other motion by Bluewater seeking default judgment against the State, such a motion would likely be dismissed unless it fell within the Court’s present limited jurisdiction to supervise and enforce the parties dispute resolution process under clause 3.11 of the Contract, which excludes the usual litigation process.
76. Apart from Order 12 Rule 38, Bluewater also relies on Order 12 Rule 1 NCR and s.155(4) of the Constitution to give this Court jurisdiction to enter summary judgment against the State.
77. Order 12 Rule 1 NCR is a rule of general application. It states:
1. General relief
The Court may, at any stage of any proceedings, on the application of any party, direct the entry of such judgement or make such order as the nature of the case requires, notwithstanding that the applicant does not make a claim for relief extending to that judgment or order in any originating process.
78. Section 155(4) of the Constitution provides:
155(4) Both the Supreme Court and the National Court have an inherent power to make, in such circumstances as seem to them proper, orders in the nature of prerogative writs and such other orders as are necessary to do justice in the circumstances of a particular case.
79. It is settled law that s.155(4) of the Constitution is only to be relied upon to protect the primary rights of parties in the absence of other relevant law: Powi v Southern Highlands Provincial Government (2006) SC844; Louis Medaing v Ramu Nico Management (MCC) Limited (2011) SC1156; Boochani v The State (2017) SC1566.
80. Furthermore, s.155(4) cannot be applied to do anything which is contrary or inconsistent with the provisions of the NCR: Makeng v Timbers (PNG) Ltd (2008) N3317. That case concerned an issue as to the National Court’s jurisdiction to grant interim injunctive relief prior to grant of leave to apply for leave to apply for judicial review. The issue was raised in the context of Order 16 Rule 3(8) NCR which says that where the Court grants leave, the grant operates in certain circumstances as a stay of the judicial review proceeding and the Court can in its discretion grant further interim relief. His Honour Injia DCJ (as he then was) stated at [34];
Does s 155(4) of the Constitution confer a primary power on this Court to grant a stay or other interim relief before leave to apply for judicial review is granted? In my view s 155(4) of the Constitution is not applicable to O 16 r 3(8). That section is not the source of primary jurisdictional power. The Court’s primary power or jurisdiction is given by O 16 r 3 (8) of the National Court Rules. Section 155(4) confers jurisdiction on the Court to issue facilitative orders in aid of enforcement of a primary right conferred by law, whether such right be conferred by statute or subordinate legislation enacted under the enabling statute: SCR No. 2 of 1981 [1982] PNGLR 150 at 154, Uma More v UPNG [1985] PNGLR 401 at 402. The National Court Rules which contains O 16 is a subordinate legislation made by judges under their rule-making power given by s 184 of the Constitution and s.8 and s.9 of the National Court Act (Ch 38) and it falls within the definition of law in s.9 of the Constitution: see s.9 (c) & (e). On a matter of practice and procedure of Court, and more specifically in respect of a procedural provision which confers jurisdiction on the Court, the Rules may confer itself jurisdiction and prescribe the ambit of that jurisdiction and the circumstances in which that jurisdiction may be exercised. In my view, in relation to the Court’s jurisdiction to grant a stay or interim relief in a judicial review proceeding, Order 16 is the source of primary jurisdictional power. Under O 16, a plaintiff has no right to seek judicial relief unless leave is granted. No such primary right to commence proceedings exists until leave is granted and no such right to apply for a stay or for interim relief and the Court’s jurisdiction to grant such relief exists until an application for judicial review seeking substantive relief is filed by the person granted leave. Upon the grant of leave and filing of the application for judicial review, the Court assumes jurisdiction to deal with any interlocutory applications. Only then, the discretionary power under s 155(4) of the Constitution may be invoked by the Court or a party, to tailor remedies in addition to those provided by r 3(8), in aid of the substantive application for judicial review. Even then, s 155 cannot be applied to do anything contrary or inconsistent with the provisions of O 16 r 3 (8).
81. The reasoning in Makeng’s case regarding the procedural jurisdiction and remedies available in the National Court under the NCR has been applied in many subsequent cases: see for instance Eru v Interoil (PNG) Ltd (2016) N6352; Re Koitaki Plantations Ltd (2017) N6670.
82. Applying the reasoning in Makeng’s case, I find that Order 12 Rule 1 NCR is a relevant law which confers jurisdiction on the National Court which can be invoked by
Bluewater to protect its primary right, acknowledged by the Supreme Court, to seek to enforce any settlement of its principal claim
arrived at with the State. In this instance, Bluewater’s principal claim is the “substantive matter” which the
Supreme Court has remitted back to the National Court for the Court to supervise pending an exhaustion of the dispute resolution
process provided for under clause 3.11 of the parties’ Contract.
83. As Bluewater is able to have recourse to Order 12 Rule 1 NCR to confer jurisdiction in the particular circumstances of this
case, I consider that the Rule allows Bluewater the right to apply for the remedy of summary judgment. Moreover, because there is
no absence of other relevant law, there is no need to consider if s.155(4) of the Constitution should be invoked as a final source of jurisdiction for this Court to entertain Bluewater’s motion for summary judgment.
84. However if I am wrong in this regard, which I say am not, then on the authority of the cases I have just referred to, s.155(4) of the Constitution can be availed of by Bluewater to provide this Court’s jurisdiction and remedy to enforce any settlement of its principal claim.
85. I pass now to a consideration as to whether there has in fact been a settlement of Bluewater’s principal claim, demonstrable on the evidence presented, capable of enforcement by this Court by way of summary judgment pursuant to Order 12 Rule 1 NCR.
86. The evidence adduced at the hearing of Bluewater’s motion for summary judgment on 26 October 2020 shows that as a result of negotiations conducted between Bluewater and the Solicitor-General’s Office between June 2019 to early September 2019, it was agreed by 12 September 2019 that the State would settle Bluewater’s principal claim in the sum of K1,450,000, which amount Bluewater had agreed to accept, leaving only the residual issues of interest on that amount and Bluewater’s costs for the case to be the subject of further negotiation, or failing settlement by negotiation then referral of those remaining two issues to arbitration.
87. I am satisfied on the evidence presented at the hearing of Bluewater’s motion for summary judgment that by letter dated 12 September 2019 Mr Mumu as Secretary of the Department of Transport instructed the Solicitor-General to settle Bluewater’s outstanding invoice dated 7 December 2015 for the sum of K1,450,000, which amount Bluewater had by that stage agreed to accept. This admission of liability to settle Bluewater’s principal claim at K1,450,000 is contained in Mr Geita’s various affidavits filed for the defendants on 15 May 2020 and 4 August 2020. These affidavits of Mr Geita also confirm that the reason for non-payment was because of the Department of Finance’s refusal to accept liability to settle and pay Bluewater the sum of K1,450,000 and because the Department of Transport had never received any funds from the Department of Finance to pay monies falling due under the Contract to pay Bluewater.
88. Moreover, the affidavit of Dr Ken Ngangan as Secretary for the Department of Finance filed on 6 September 2019 had earlier confirmed that although neither the Department of Transport nor the Department of Finance had funds then allocated and available to them to settle Bluewater’s invoice, Dr Ngangan could assist with any settlement of Bluewater’s invoice negotiated by the Department of Transport “by requesting the Department of Treasury to release funds by way of warrant to assist the Department of Transport.” Why this offer by Dr Ngangan was never pursued by the Solicitor-General’s Office to enable funds to be released by the Department of Treasury to the Department of Transport, bypassing the Department of Finance, to pay Bluewater’s invoice was never explained on the evidence before the Court at the hearing of the present motion on 16 October 2020. Had that offer by Dr Ngangan been taken up, in my view this case would, or should, have been settled and the payment process commenced back in September 2019 or October 2019 at the latest, instead of being the subject of the Consent Judgment improperly obtained on 4 November 2019 for want of approval by the NEC, and which order had to be set aside by consent on application by the Solicitor-General’s Office heard by this Court on 10 July 2020 so as to enable the Attorney-General to endeavour to obtain approval of the NEC under the Public Finances (Management) Act 1995. The NEC’s approval has still not been forthcoming because of issues as to the form and content of the draft prepared by the Solicitor-General for the formal submission to go from the Attorney-General to the NEC. I find that those issues, which have existed since 12 June 2020, remain unresolved between the Attorney-General, the Secretary for the Department of Justice and Attorney-General and the Solicitor-General. I further find that none of those State inter-departmental issues are attributable to any fault at all on the part of Bluewater.
89. I observe that none of the content of Mr Donigi’s latest affidavit or the earlier affidavits on which Mr Donigi relies for Bluewater’s motion for summary judgment has been challenged by the Department of Transport or the State. The State has filed no responding affidavit material at all in answer to Bluewater’s motion for summary judgment. The undisputed evidence of Bluewater is to be found in Mr Donigi’s affidavits filed on 29 March 2017, 10 September 2020 and 28 September 2020, the affidavit of the Hon. Jimmy Simatab filed on 6 April 2017, and the affidavit of Mr Malaga filed on 18 July 2020. Bluewater also relies on the affidavit of Dr Ken Ngangan filed by the Solicitor-General’s Office more than a year ago on 6 September 2019.
90. Mr Geita, when asked by the Court at the hearing of Bluewater’s motion for summary judgment on 16 October 2020 as to why summary judgment for K1,450,000 should not be entered against the State given the clear concession by the State that this amount was owed by the State under its Contract with Bluewater and should be paid notwithstanding that NEC approval had still not been obtained, had only one submission to make. Me Geita submitted to the effect that the Supreme Court had directed that the issues between the parties be resolved by arbitration if they could not be settled. With respect, that is not an accurate summation of what the Supreme Court said. I iterate that term 4 of the Supreme Court’s order in SCA 66 of 2017 made on 1 May 2019 states:
4. The National Court proceedings be stayed pending an exhaustion of the process provided for under Clause 3.11 “Disputes and Arbitration” contained in the Contract between the parties.
91. I repeat that clause 3.11 of the Contract provides:
3.11.2 Dispute Resolution
Any dispute, claim or difference out of breach or termination of the Agreement shall be agreed between the Agency and the Consultant or failing agreement shall be referred to arbitration in accordance with clause 3.11.3
92. It is not in contention that in the present case the parties had already agreed by early September 2019 that Bluewater’s invoice should be settled and paid by the State in the sum of K1,450,000, leaving only the quantum of interest on that amount and Bluewater’s legal costs to be paid by the State as the sole remaining issues between the parties to be determined. What then transpired as a result of the Consent Judgment of 4 November 2019 improperly consented to by the Solicitor-General having to be set aside and for a submission for approval by the NEC of payment by the State of the sum of K1,450,000 in settlement of Bluewater’s invoice to be obtained should, in my opinion, not have occurred. The main component of the dispute, the payment by the State of K1,450,00 in settlement of Bluewater’s invoice, had already been agreed between the parties by 12 September 2019, as evidenced by the terms of the draft consent order handed up to the bench by Mr Geita and Mr Malaga on 13 September 2019 which awaited authorising signatures but which was then confirmed by the terms of the draft consent order, personally signed by the Solicitor-General for both defendants and by Mr Irah for Bluewater, which was formalised in writing by the Consent Judgment of 4 November 2019, despite that order having been endorsed by the Solicitor-General due to an “oversight” of approval requirements under the Public Finances (Management) Act 1995.
93. I therefore find that the affidavit material presented by Bluewater in support of its motion for summary judgment has overwhelmingly established undisputed evidence of the parties’ mutual agreement to settle Bluewater’s principal claim for the sum of K1,450,000, which agreement was reflected in writing by the Consent Judgment of 4 November 2019, despite the subsequent setting aside of that Judgment. Bluewater is entitled to summary judgment in that amount for its principal claim because this Court has jurisdiction, in its supervisory role of the parties’ agreed dispute resolution process under clause 3.11 of the Contract, to enforce any settlement agreement reached by the parties.
94. Although not applicable, I observe that if the parties’ Contract had been silent as to any mechanism for resolution of disputes arising in connection with the Project and a similar fact scenario to that which has now been presented to this Court had arisen but not involving the Court’s supervisory role assigned to it by the Supreme Court, I consider that this Court would in that event have been entitled in its discretion to have granted any application made by Bluewater pursuant to Order 12 Rule 38(1) NCR for summary judgment against the State. This is because: firstly, the sufficiency of evidence as to the terms of agreement to settle which the parties had already arrived at by early September 2019; secondly, because Bluewater’s Mr Donigi has complied with the requirement in Order 12 Rule 38(1)(b) in that he has deposed to the effect that he believes the defendants has no defence to Bluewater’s claims; and thirdly, because the State has not demonstrated that it has any arguable defence to Bluewater’s principal claim on its invoice for K1,450,000, nor has the State shown that there is any real question to be tried. As to the third point, this is the onus referred to in Smith v Ruma Construction Ltd and in Finance Corporation Ltd v Delmine Enterprises Ltd. The admissions contained in the defence filed on behalf of the defendants and the State’s non-rebuttal of any of Bluewater’s evidence in support of Bluewater’s motion for summary dismissal constitute the State’s failure to have discharged that onus. The tests for the principles propounded in those case authorities I have referred to in [64] to [66] of this decision for applications for summary judgment made under Order 12 Rule 38 NCR have all been met.
95. For the reasons I have outlined in [67] to [93] of this decision, summary judgment will be entered against the State for Bluewater’s principal claim of K1,450,000 in the exercise of this Court’s supervisory role of the parties’ dispute resolution process pursuant to this Court’s discretionary power to do so under Order 12 Rule 1 NCR.
96. As I have found that Bluewater is entitled to summary judgment against the State for its principal claim through this Court’s exercise of its discretion under Order 12 Rule 1 NCR, what then is still left in dispute which could not be agreed by the parties and should be submitted to the last-resort arbitration process referred to in clauses 3.11.2 and 3.11.3(b) of the Contract if arbitration were required? This brings into focus the two remaining residual issues of statutory interest and Bluewater’s legal costs, issues which are the subject of terms 2 and 3 of Bluewater’s motion for summary judgment.
97. I consider that these two residual matters are consequential issues because they are dependent upon and flow from the parties’ own agreement to settle Bluewater’s principal claim for K1,450,000 and are therefore incidental to the “substantive matter” which this Court has been directed by the Supreme Court to supervise.
Issue 2: Interest on the principal amount of K1,450,000
98. Term 2 of Bluewater’s motion for summary judgment seeks statutory interest on the principal amount of K1,450,000 calculated from 22 September 2016 to date of payment of that principal amount by the State. Term 5 of the motion seeks in the alternative such further orders as the Court deems fit.
99. Bluewater’s contractual entitlement to interest on overdue invoices payable by the Department of Transport as the designated implementing agency of the State is governed by clause 3.9 of the Contract. That sub-clause provides:
3.9 TERMS OF PAYMENT
...
Payment shall be made within 28 days of receipt of the invoice and the relevant documents and within 56 days in the case of the final payment.
...
If the Agency has delayed payments beyond fifteen (15) days after the due date stated above, interest shall be paid to the Consultant for each day of delay at the rate stated in the SCC.
100. Item 3.8 in the SCC which were incorporated into the Contract stipulates that interest on late payments shall be payable “at the rate of 8% per day for each day of delay in payment”. The reference to “8% per day” in item 3.8 is clearly a mutual mistake made by the parties because I have no doubt that both of them intended at the time they entered into the Contract that the interest rate applicable for late payment of invoices would be 8% per annum, not 8% per day.
101. However whatever the actual rate of interest for late payment of invoices was agreed in the Contract is irrelevant in view of the enactment of the Judicial Proceedings (Interest on Debts and Damages) Act 2015. Section 2 provides that the Act applies to all Court orders made against the State after 1 January 2014.
102. Section 4(2) of the Act stipulates that for all proceedings arising out of a breach of an express or implied contract taken against the State, the rate of interest shall not exceed 2% per annum. This is reinforced by s.4(3) and s.4(4) of the Act, the applicable text of which is reproduced below:
4(3) The maximum rate of interest in Subsection (2) applies notwithstanding that the proceedings against the State arose out of a breach of express or implied contract or mercantile usage and the relevant interest rate in the contract or mercantile usage is higher than 2%.
4(4) A judgment entered contrary to Subsections (2) and (3) is a nullity and is liable to be set aside ...
103. Section 6(2) of the Act prescribes that where judgment is given or an order is made by a Court against the State for payment of money, post-judgment interest shall not exceed 2% yearly on such of the money as is from time to time unpaid as from when the judgment or order takes effect.
104. Bluewater’s notice of motion seeks statutory interest, that is to say interest at 2% per annum, from 22 September 2016 on the principal judgment sum of K1,450,000 to date of the State’s payment of same. The date of 22 September 2016 proposed by Bluewater for commencement of any award of interest is the date on which Bluewater filed its writ of summons in this proceeding. I nevertheless exercise the Court’s discretion and find that the proper commencement date for interest to accrue on the principal amount of the summary judgment is what the Contract allows in this regard.
105. The date of Bluewater’s invoice was 7 December 2015. A copy of the invoice was attached to a letter dated 8 December 2015, which I infer was either hand-delivered or scanned and sent by email from the Hon. Jimmy Simatab or his office to Mr Mumu, the Secretary of the Department of Transport. The Hon. Mr Simatab deposes in his affidavit filed on 6 April 2017 that he received Bluewater’s invoice on 8 December 2015 and that it was forwarded by him under cover of his letter dated 8 December 2015 to Mr Mumu. A copy of that letter is annexure “JS4” to the affidavit of the Hon. Mr Simatab. I infer that the letter, or a copy of it, with a copy of Bluewater’s invoice, was either hand-delivered to Mr Mumu at the Department of Transport in Port Moresby or was scanned and emailed to Mr Mumu. The copy of the letter which is annexure “JS4” to the Hon. Mr Simatab’s affidavit has handwritten notes on it dated 9 December 2015 and 10 December 2015, presumably made by officers within the Department of Transport, so the original or emailed copy of that letter must have been received by Mr Mumu or his office on or about 8 December 2015. In any event there is no dispute on the evidence before the Court that Bluewater’s invoice dated 7 December 2015 was received by Mr Mumu on 8 December 2015 under cover of the Hon. Mr Simatab’s letter to Mr Mumu dated 8 December 2015.
106. By operation of clause 3.9 of the Contract, the Department of Transport was required to pay Bluewater’s invoice within 28 days from date of that Department’s receipt of it on 8 December 2015. Bluewater’s invoice should therefore have been paid by the Department of Transport as the State’s designated agency no later than 5 January 2016. The Department then had a further grace period of 15 days within which to pay, but if it did not do so then clause 3.9 of the Contract stipulated that interest would accrue for each day of delay. In practical terms, this meant that if the invoice was not paid within a further 15 days from 5 January 2016, that is to say by 21 January 2016, then interest on the invoiced amount would accrue for each day of delay. Clause 3.9 of the Contract did not clarify whether interest would commence as from the expiration of the 28-day period for payment of the invoice or from the expiration of the further 15-day grace period for payment. I have therefore applied the interpretation of clause 3.9 which is most favourable to the State in this regard, which is 21 January 2015 as being the date on which statutory interest of 2% interest on the principal judgment amount of K1,450,000 should commence to accrue. This is also the date of accrual of Bluewater’s cause of action against both defendants for breach of contract.
107. I am aware of the fact that in its prayer for relief in the writ of summons filed on 22 September 2016, Bluewater originally
claimed judgment in the sum of K1,530,000, being the full amount of Bluewater’s invoice dated 7 December 2015. However by
early September 2019 Bluewater had already agreed to accept K1,450,000 in settlement of its principal claim against the Department
of Transport and the State, as was subsequently evidenced by Consent Judgment of 4 November 2019 - which was later set aside by consent
on 15 May 2020 as having been obtained because the amount involved exceeded the Solicitor-General’s authority to approve and
which amount instead required approval from the Attorney-General and the NEC. Interest will therefore be awarded at the statutory
rate of 2% per annum on the agreed principal amount of K1,450,000 as from 21 January 2016 to the date of this decision, 28 October
2020, a period of 1742 days excluding the end date. Interest on K1,450,000 at 2% per annum is K29,000. Daily interest on K1,450,000
at 2% per annum is K29,000/365 days = K79.452055 per day.
108. Interest is calculated by applying the formula I x N = A, where I is the rate of interest per day, N is the appropriate
number of days and A is the amount of interest: K79.452055 per day x 1742 days = K138,405.48.
Issue 3: Bluewater’s legal costs of this proceeding
109. Term 3 of Bluewater’s motion for summary judgment seeks an order that the Solicitor-General personally pay Bluewater’s costs of the application on a solicitor and own client basis.
110. However the Court needs to consider not only what order for costs should be made in respect of Bluewater’s motion for summary judgment but also what order as to costs should be made for the whole of this proceeding, given that summary judgment will be determinative of this litigation.
111. Order 4 Rule 7(3) NCR provides that subject to Order 4 Rule 10 NCR, costs need not be specifically claimed in any originating process. Order 4 Rule 10 NCR only relates to prescribed amounts for costs if proceedings are stayed pending payment by a defendant of a liquidated demand within the time limited for giving notice of intention to defend, an early settlement option which was not availed of by the State in the present case.
112. I observe that although it was not required to do so, Bluewater expressly sought an order for its costs in its prayer for relief in the statement of claim endorsed on Bluewater’s writ of summons filed on 22 September 2016.
113. It is important to also note that Bluewater’s prior motion filed on 10 September 2020 seeking orders, among others, that the State pay the costs of this proceeding from 31 May 2019 to the date of hearing of that motion on 15 September 2020, was subsumed and overtaken by Bluewater’s present motion filed on 28 September 2020 seeking summary judgment.
114. Order 22 Rules 1 to 65 NCR comprise an extensive set of provisions which deal with the powers and discretions of the National Court to award and supervise the assessment of costs in litigation as well as the assessment of professional fees and disbursements charged by a lawyer to a client.
115. Order 22 r. 11 NCR provides:
11. If the Court makes any order as to costs, the Court shall, subject to this Order, order that the costs follow the event, except where it appears to the court that some other order should be made to the whole or any part of the costs.
116. In practice, an order that costs follow the event means that the costs are to be taxed on a party/party basis: Order 22 Rule 24(1) NCR.
117. However, Order 22 Rule 11 NCR gives the National Court a discretion to make other forms of costs orders. This is where the practice has grown for parties in litigation to seek costs orders on a solicitor/client basis, alternatively on the more extensive indemnity basis.
118. The costs order termed “costs on a solicitor/client basis” is also known as “costs on a solicitor and own client basis”.
119. In Opi v Telikom PNG Limited (2020) N8290, I addressed the distinction between indemnity costs and costs on a solicitor/client basis. After reviewing case authorities, I said in that decision at [231-232] in relation to the difference between indemnity costs and costs awarded on a solicitor/client basis:
...
(3) Because a costs award on an indemnity basis is more generous that a costs award on a solicitor/client basis, its scope extends beyond that to which a receiving party is entitled had a solicitor/client costs been ordered. It is intended as a full indemnity for all costs and expenses incurred preparatory to and during the proceedings, not just the legal fees and associated disbursements charged by that party’s lawyer(s). So for example a receiving party, if an individual, is entitled to claim for loss of income or the value of time wasted when attending to matters relating to the proceedings. Similarly, a corporation or business can claim for the value of time spent by its officers and employees when attending to the proceedings.
(4) An award of costs on a solicitor/client basis is intended to compensate the receiving party for legal fees and disbursements charged by that party’s lawyer in having to unnecessarily defend proceedings which were an abuse of process, where there was no defence on the merits, where the other party failed to explore and exhaust all prospects of having the matter settled without the need for court action or delay, where there has been defiance by the other party in complying with court orders and or where the receiving party has generally had to incur unnecessary expense through unmeritorious litigation.
232. The above principles are not intended to be exhaustive. But I consider that they sufficiently illustrate the distinction between costs ordered on a solicitor/client basis as opposed to costs ordered on an indemnity basis. It must always be borne in mind that these two different categories of costs orders are at the discretion of the Court, just as party/party costs are discretionary. It is axiomatic that each costs order made by a Court must be tailored to the circumstances of the case before it.
120. Applying these principles to the present case, I have determined that Bluewater is entitled to its costs on a solicitor/client basis.
121. The internecine dispute between the Department of Finance and the Department of Transport as to which of those two Departments should settle and pay Bluewater’s principal claim on its invoice for the Project caused much delay after this case was remitted by the Supreme Court back to the National Court on 1 May 2019. The Solicitor-General then caused separate avoidable delay by consenting to the order made on 4 November 2019 for judgment to pay Bluewater’s principal claim of K1,450,000, only to have that order set aside by consent on 10 July 2020 for want of the Solicitor-General’s statutory authority to have given approval for that judgment amount. This was followed by the further delay caused by the Attorney-General’s rejection of the draft submission prepared by the Solicitor-General’s Office to go from the Attorney-General to the NEC, which submission has still not been finalised. All of these delays have resulted in unnecessary legal costs incurred by Bluewater in seeking to have by court order what should have been resolved by settlement back in September 2019 when agreement had already been reached between the parties by that stage that the State was liable to pay Bluewater’s principal claim for K1,450,000.
122. I find that an award of costs to Bluewater on a solicitor and own client basis for the whole of this case is warranted because after the Supreme Court’s referral of the case back to the National Court, Bluewater successfully negotiated a settlement of its principal claim with the State. The settlement was arrived at by the parties in compliance with their respective obligations to use their best efforts to so under clause 3.11.1 of the Contract without having to submit to arbitration except as a last resort. Once Bluewater’s principal claim was settled, there was no utility in referring the remaining issues of interest and costs to arbitration, particularly when Bluewater came to accept that its claim for interest on its principal claim was restricted to the statutory rate of 2% per annum. The considerable cost of arbitration has been avoided by Bluewater’s application for summary judgment, which with all due respect has now resolved all remaining issues.
123. I also consider that Bluewater is entitled to be reimbursed for its legal costs on a solicitor and own client basis for the entirety of this case at National Court level because of the prolongation of the case to this stage due to factors attributable to conduct within agencies of the State, for which Bluewater was not the cause. Had the offer made by Secretary of Finance Dr Ken Ngangan in his affidavit of 5 September 2019 for him to request the Department of Treasury to release funds by way of warrant to assist the Department of Transport to negotiate and pay Bluewater’s principal claim been pursued by those responsible within the State to settle that claim, more than 12 months of wasted Court time and parties’ time could have been avoided.
124. Having said this, it follows that I do not consider that the Solicitor-General should be personally liable to pay Bluewater’s costs on a solicitor and own client basis or that he should be summoned personally appear before the Court to give evidence as to why pro-active steps have not been taken to finalise this proceeding, as is sought by Bluewater in terms 3 and 4 of its motion for summary judgment. The Solicitor-General was partly at fault for legal costs unnecessarily incurred by Bluewater, but he was not the sole cause. Numerous other officers of the State within the Solicitor-General’s Office, the Department of Finance and the Department of Transport contributed to the many delays in bringing this case to conclusion. I decline to grant the relief sought in terms 3 and 4 of Bluewater’s motion for summary judgment. Bluewater’s costs on a solicitor and own client basis will be paid by the State and not by any individual officer.
Have the parties exhausted their agreed dispute resolution process?
125. There is only one further matter which I consider needs to be addressed. Can it be said that the parties have exhausted the parties’ dispute resolution process under clause 3.11 of the Contract, as required by term 4 of the Supreme Court’s order of 1 May 2019? This can be answered by addressing what utility would be served if this Court, in the exercise of its supervisory role, were to compel the parties to submit to arbitration the two residual issues of interest and Bluewater’s legal costs.
126. Clause 3.11.2 of the Contract is clear in its terms and its intent. Any ‘dispute, claim or difference out of breach or termination of the Agreement” can only be referred to arbitration if settlement of that dispute, claim or difference cannot be agreed. Arbitration is the process of last resort. Here the dispute arose from the defendants’ breach of their obligation to pay when due Bluewater’s invoice dated 7 December 2015. That is the “substantive matter” which was initially in dispute but which was resolved by the parties’ agreement to settle reached by early September 2019.
127. The hallmark of the arbitration process is that it is a private procedure which is separate from the court system but which determines in a judicial manner the legal rights and obligations of the parties, with binding effect, which is enforceable at law. It is described by leading international arbitrator Gary Born in his authoritative textbook International Commercial Arbitration (2nd ed. Kluwer, The Netherlands, 2014) at [217] as being a process by which parties consensually submit a dispute to a non-governmental decision-maker, selected by or for the parties, to render a binding decision resolving a dispute in accordance with neutral, adjudicatory procedures affording the parties an opportunity to be heard.
128. Once made, an arbitral award can be enforced by court order but cannot normally be appealed or be reviewed by the courts of any country.
129. Papua New Guinea’s Arbitration Act Chapter No. 46 was enacted in 1951. The Act is outdated by contemporary international arbitration standards. It is pending legislative repeal and reform. The Act is nevertheless still in force at this juncture and its salient provisions regarding setting aside and enforcement of arbitral awards by the National Court are ss. 11(2) and 12(1):
11. Power to set aside award
...
(2) Where an arbitrator or umpire has misconducted himself, or an arbitration or award has been improperly procured, the Court may set the award aside.
(1) By leave of the Court, an award on a submission may be enforced in the same manner as a judgement of order to the same effect.
130. Section 1 of the Act defines a submission as “a written agreement to submit present or future differences to arbitration, whether or not an arbitrator is named in the submission”.
131. Section 3 of the Act provides that unless a contract intention is expressed in a parties’ submission, a submission is deemed to include provisions which are set out in the Schedule to the Act.
132. Schedule 1.8 of the Act states:
Sch. 1.8. The award to be made by the arbitrators or umpire is final and binding on the parties and the persons claiming under them respectively.
133. If the Court were to compel the parties in this instance to submit to arbitration on the issue as to what interest is payable by the State on the agreed principal claim of K1,450,000, the arbitrator would be bound to apply the provisions of s.4(2) and s.4(3) of the Judicial Proceedings (Interest on Debts and Damages) Act 2015 and award interest at the statutory rate of 2% per annum. This is because Bluewater’s principal claim arises out of the breach contract by the Department of Transport as the agency of the State responsible for the implementation of the Contract on funding, which funding was withdrawn by the Department of Finance.
134. Bluewater is entitled under the Contract to interest payable by the Department of Transport and the State on the long overdue payment of the amount of K1,450,000 which Bluewater has since September 2019 agreed to accept in settlement of its invoice dated 7 December 205. The parties’ bargain regarding the imposition of interest on late payment of invoices was clearly expressed in the Contract. The rate of interest of “8% per day” for late payment of invoices stipulated in item 3.8 of the SCC incorporated into the Contract has, however, been legislatively superseded by operation of s.4(2) of the Act, which deems that rate of interest to be 2% per annum.
135. The position would be different if the Contract had not contained any provision for interest to be payable by the Department of Transport or the State on overdue invoices rendered by Bluewater. If the Contract had been silent on the issue of interest, no interest on overdue invoices could lawfully be awarded by an arbitrator. In Evaluation Consult (New Zealand) Ltd v The State (2016) N6219, Kandakasi J (as he then was) held that as the Arbitration Act is silent as to the power of an arbitrator to award interest, that power can only come from the parties’ own contractual arrangements or from future legislative reform. But in the present instance, the parties have clearly agreed in the Contract that interest is payable on overdue invoices.
136. As I have found that the State’s breach of the Contract commenced on 21 January 2016 (at the latest) and is still continuing, any further delay in determining the quantum of interest which has accrued and is still accruing will not alter the statutory rate of interest of 2% per annum to be applied by an arbitrator to the principal amount owed of K1,450,000 but will only increase the quantum due to the passage of time. Every day that passes without payment by the State to Bluewater of the principal amount and statutory interest of 2% per annum accrued and accruing brings financial prejudice to Bluewater.
137. As to the issue of Bluewater’s claim for costs, if the parties were to be compelled by this Court in its supervisory jurisdiction to submit this remaining issue to arbitration, the arbitrator would, given the history of the case which I have already outlined at length, be unlikely to arrive at any award of costs for the arbitration in favour of Bluewater other than costs on a solicitor and own client basis. This is because Schedule 1.9 of the Act expressly provides:
Sch. 1.9 The costs of the reference and award are in the discretion of the arbitrators or umpire, who may direct to and by whom, and in what manner, the costs or any part of the costs are to be paid, and may tax or settle the amount costs of to be paid or any part of the costs, and may award costs to be paid as between solicitor and client.
[underlining added]
138. A further factor which militates against compelling the parties to submit the residual issues of statutory interest and Bluewater’s costs to arbitration in pursuance of the Court’s supervisory role of the parties’ dispute resolution process is the cost of arbitration itself. Bluewater and the State would each need to equally fund the arbitration process, at least prior to commencement of the arbitration pending the arbitrator’s delivery of the arbitral award on residual issues, unless the State otherwise agreed or was ordered by this Court to pay the whole of the estimated arbitration costs in advance. This would be an additional but, in my view, totally unnecessary financial burden which the State would ultimately have to bear on delivery of any arbitral award dealing solely with the residual issues.
139. As I find no utility in ordering the parties to resort to arbitration on the remaining issues of interest or Bluewater’s costs, the result of any arbitral award on those remaining issues to be unlikely to be different from the present findings of this Court on those residual issues, and as arbitration would only unnecessarily prorogue the inevitable and add yet further cost to what should now yield to common sense, I consider that the parties have effectively exhausted their dispute resolution process. To allow or to direct the parties to arbitrate their remaining minor differences would be to defeat the overall interests of justice in bringing finality to this case and would, to my mind, in itself be an abuse of process. The simple fact is that the NEC’s approval of the settlement arrangements which the parties had already arrived at by 12 September 2019 is not required if those settlement arrangements are not to be formalised by a deed of settlement or consent judgment requiring NEC approval but by summary judgment.
Conclusion
140. I have considered the circumstances of this case as presented on Bluewater’s evidence in support of its motion for summary judgment and the law applicable to that motion. My assessment of the evidence includes:
(1) confirmation that Bluewater’s cause of action is properly founded on breach of the Contract by the Department of Transport and the State;
(2) the pre-litigation history of this case, in particular the Department of Finance’s withdrawal of funding for the Department of Transport’s which prevented payment of Bluewater’s invoice dated 7 December 2015;
(3) the events which occurred subsequent to the referral of this case by the Supreme Court back to this Court on 1 May 2019 down to the present time;
(4) acknowledgment of the content of Dr Ken Ngangan’s affidavit filed on 6 September 2019 and Dr Ngangan’s assurance to the Court that he could request the Department of Treasury to release funds by way of warrant to fund the Department of Transport’s payment of Bluewater’s subject invoice, thereby bypassing the need for funds to come from the Department of Finance;
(5) the fact that a settlement of Bluewater’s principal claim had been negotiated and agreed by the parties by 12 September 2019 in furtherance of their obligations under the dispute resolution mechanism in clause 3.11 in the Contract, as directed by the Supreme Court;
(6) noting the absence of any rebuttal by the State to Bluewater’s affidavit evidence in support of Bluewater’s application for summary judgment;
(7) my finding that there is no utility in compelling the parties to submit the residual issues of interest and Bluewater’s costs to arbitration.
141. Based on that evidence, applicable law and my findings, I uphold Bluewater’s motion for summary judgment, which will be entered for Bluewater against the State in the sum of K1,450,000 with interest thereon at the statutory rate of 2% from 21 January 2016 to date of this judgment 28 October 2020 amounting to K138,405.48, a total judgment amount of K1,588,405.48, the State to pay Bluewater’s costs of this proceeding on a solicitor and own client basis, such costs to be taxed if not agreed. Post-judgment interest will accrue at the statutory rate of 2% pursuant to s.6(2) of the Judicial Proceedings (Interest on Debts and Damages) Act 2015 on such of the total judgment amount of K1,588,405.48 as is from time to time unpaid by the State.
Order
142. The Order of this Court is:
(1) Summary judgment is entered for the Plaintiff against the Second Defendant in the sum of K1.588,405.48 comprising:
(2) Post-judgment interest shall accrue at the statutory rate of 2% per annum on such of the judgment sum as is from time to time unpaid.
(3) The Second Defendant shall pay the Plaintiff’s costs of this proceeding on a solicitor and own client basis, such costs to be taxed if not agreed.
(4) The time for entry of this Order is abridged to the time of signing by the Court which shall take place forthwith.
Judgment accordingly.
_______________________________________________________________
Malaga Lawyers: Lawyers for the Plaintiff
Solicitor-General: Lawyers for the Defendants
Dotaona Lawyers: Lawyers for the Attorney-General
[1] Bluewater International Ltd v Roy Mumu, Secretary Department of Transport and the State (2019) SC1798
[2] Rex Paki v MVIL (2010) SC 1015
PacLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.paclii.org/pg/cases/PGNC/2020/392.html