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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO. 530 OF 2013
BETWEEN
CHRIS RIMBA Trading as PAWA CLEANING SERVICES
Plaintiff
AND
JOHN SINI PORTI as the Secretary for Defence
First Defendant
AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Defendant
Waigani: Makail, J
2021: 18th November
2022: 4th February
CONTRACT – Liability – Contract for services – Provision of repair and maintenance of building works – Non-payment of services – Breach of – Enforceability of – Defence of non-compliance with statutory procurement procedure – Public Finances (Management) Act – 1995 – Sections 47B-D – Claims By and Against the State Act, 1996 – Section 2A
UNJUST ENRICHMENT – Contract awarded in breach of statutory procurement procedure – Effect of – Contract unenforceable – Innocent party entitled to damages for unjust enrichment
Cases Cited:
Fly River Provincial Government v. Pioneer Health Services Limited (2003) SC705
Glennel G Mari trading as Wani Connection v. Timothy Numara & The State (2019) N8089
Jhelson Ray trading as Bara Construction v. Timothy Numara & The State (2018) N7380
Seken Kewa v. Minister for Community Development & The State (2019) N7753
Counsel:
Mr. R. Awalua, for Plaintiff
Ms. G. Nindil-Awesa with Ms. R. Mesa, for Defendants
JUDGMENT
4th February 2022
1. MAKAIL, J: By an amended writ of summons filed 8th April 2016, the plaintiff sued the defendants for breach of contract of services. The defendants filed an amended defence on 15th August 2016 and denied that they had entered into a contract with the plaintiff. In the alternative, the contract was illegal, null
and void on the ground that it was entered into in breach of Sections 47B-D of the Public Finances (Management) Act, 1995 and Section 2A of the Claims By and Against the State Act, 1996.
2. At the trial, parties elected to rely on affidavits that have been filed with no cross-examination of witnesses. Parties were then directed to file written submissions and decision to follow suit. The parties have filed submissions.
Parties’ Evidence
3. The plaintiff relied on his affidavit sworn on 20th March 2019 and filed 21st March 2019.
4. The defendants did not file any responding affidavits to support their defence that there is no contract between the parties, but in their amended defence filed by the Solicitor General on 15th August 2016, they alleged that the contract is unenforceable because it did not comply with Sections 47 B, C and D of the Public Finances (Management) Act, 1995 and Section 2A of the Claims By and Against the State Act, 1996.
5. They also alleged that the plaintiff did not give notice of claim to the State under Section 5 of the Claims By and Against the State Act, 1996 and the notice that was given was rejected by the Solicitor General and constituted no notice.
Summary of Plaintiff’s Evidence
6. The plaintiff’s affidavit may be summarised as follows: Mr Chris Rimba is the proprietor of Pawi Cleaning Services having registered it on 3rd January 2005 to engage in small contractual works and other spin-off business activities.
7. Sometime in April 2008 the Department of Defence through the Office of the Secretary for Defence requested companies and business entities to submit applications for Pre-Qualified Contractors for small repair and maintenance works with the PNG Defence Force establishments in Port Moresby.
8. The plaintiff submitted an application. On 5th March 2010, the Deputy Secretary of the Department of Defence wrote to the plaintiff advising that its application had been accepted subject to availability of work.
9. When work became available in April 2010, the first defendant requested pre-qualified contractors to submit their applications to maintain and repair several buildings at Murray Barracks.
10. The plaintiff submitted its application to maintain and repair a building described as Type Two JMO 250, located at the Married Quarters at Murray Barracks (referred herein as the “building”).
11. It provided quotation for the maintenance of the building and was accepted to carry out maintenance work on the building.
12. The plaintiff and other contractors were provided a document titled “SCOPE OF WORK” containing the terms and conditions of the engagement and formed the Agreement.
13. The Agreement can be briefly stated:
(a) The Contractor shall provide all materials, labour and all necessary equipment to successfully carry-out and complete works specified,
(b) The Contractor shall execute all works in accordance with the specification as required,
(c) The work is to commence on 17th August 2010,
(d) The work is to be completed on 9th September 2010,
(e) The contractor shall be paid upon completion of the repair and maintenance and upon a Works Completion Report being provided, and
(f) The amount accepted for the repair and maintenance work is K55,000.00.
14. The plaintiff completed repair and maintenance work on the building on time. Following that, an inspection was done and a Works Completion Report was prepared by the Department of Defence Engineering Division on 20th November 2010. The report confirmed that work was satisfactorily completed.
15. Based on the work and recommendation in the Work Completion Report, the plaintiff tendered an invoice in the sum of K55,000.00 for payment.
16. The Department of Defence through its Engineering Division prepared a Requisition for Expenditure Form for payment, but no payment was made. Despite numerous requests in writing and in person, no payment was made. The plaintiff was advised that the claim was on the pending list awaiting payment.
17. On 15th March 2015 the plaintiff’s lawyers gave notice in writing of the plaintiff’s intention to make a claim against the State.
Issues
18. The questions which arise are:
(a) Whether the plaintiff gave notice of claim to the State under Section 5 of the Claims By and Against the State Act, 1996,
(b) whether there is a contract between the parties, and
(c) if yes, whether the contract is enforceable.
Notice of Claim - Section 5
19. There is no evidence from the defendants that the plaintiff’s letter of notice dated 15th March 2015 was rejected by the Solicitor General and reasons for that. Even the defendants did not address the issue of lack of notice in their written submissions and so, it will be the finding of the Court that the plaintiff did comply with the requirement of giving notice of claim under Section 5 of the Claims By and Against the State Act, 1996 when its lawyers gave notice in their letter dated 15th March 2015. This defence is therefore, dismissed.
Existence of Contract
20. The plaintiff submitted that based on the “Scope of Work” document which provided the terms of the engagement, the acceptance by the defendant of its application as a Pre-Qualified Contractor and its submission of a quotation of K55,000.00 as value of the services, parties have in no uncertain terms agreed to be bound by an agreement in a form of a contract for provision of services for repair and maintenance work in consideration of K55,000.00.
21. It further submitted that it performed the contract and completed it, but the defendants breached it when they failed to pay the consideration of K55,000.00. They should be held liable for breach of contract.
22. The defendants do not seriously contest the existence of a contract as alleged by the plaintiff.
23. In the circumstances, it is the finding of the Court that the parties have entered into a contract for provision of repair and maintenance services in the value of K55,000.00.
Enforceability of Contract
24. As noted, the defendants alleged that the contract did not comply with the statutory procurement procedure under Sections 47 B, C, and D of the Public Finances (Management) Act, 1995 and Section 2 A of the Claims By and Against the State Act, 1996. As these provisions are pertinent to the issues, it is necessary to set them out in full below:
25. Section 47B states:
“47B. AUTHORITY TO PRE-COMMIT EXPENDITURE.
(1) The Departmental Head of the Department responsible for financial management may issue to a Departmental Head an Authority to Pre-commit Expenditure in relation to the purchase of property or stores or to the supply of goods or services where the Departmental Head of the Department responsible for financial management is satisfied that –
(a) in the case of proposed expenditure exceeding K100,000.00 –
(i) in the provisions of this Part have been complied with in relation to the purchase or supply; and
(ii) funds will be available to meet the proposed schedule of payments for the purchases or supply; and
(b) in the case of proposed expenditure not exceeding K100,000.00, the circumstances of the proposed expenditure are such that it is appropriate to authorize the Department, to the Departmental Head of which the Authority to Pre-Commit Expenditure was granted, to enter into a contract for the purchase of property or stores or for the supply of goods or services notwithstanding that the full amount of funds to meet the payment required under the contract is not immediately available, but it is within the appropriation for the year to which the Authority to Pre-commit Expenditure relates for the item to which it relates.
(2) An Authority to Pre-Commit Expenditure under Subsection (1) shall specify –
(a) the purchase of property or stores of the supply of goods or services to which it relates; and
(b) the maximum amount to which the Authority extends.
(3) Subject to Subsection (4), an Authority to Pre-commit Expenditure under Subsection (1) authorizes the execution, in accordance with and subject to compliance with the procedures specified in this Part, of a contract for the purchase of property or stores or for the supply of goods and services specified in the Authority to the extent of an amount not exceeding the maximum amount specified in the Authority.
(4) A contract under Section 47 shall not be entered into unless –
(a) an Authority to Pre-commit Expenditure under Subsection (1) relating to the contract has been issued; and
(b) all other requirements of this Part relating to the contract have been complied with”.
26. Section 47C states:
“47C. CERTAIN CONTRACTS NULL AND VOID.
(1) In this section –
“Authority to Pre-commit Expenditure” means an Authority to Pre-commit Expenditure issued under Section 47B;
“Integrated Local Purchase Order and Claim (ILPOC)” means Financial Form 4A – Integrated Local Purchase Order and Claim issued in accordance with the Financial Instructions.
(2) A contract for the purchase of property or stores or for the supply of goods or services entered into, or purported to have been entered into, by or on behalf of the State, in respect of which purchase of supply no Authority to Pre-commit Expenditure has been issued or no Integrated Local Purchase Order and Claim has been issued, is null and void.
(3) The provisions of this section apply in respect of contracts entered into, or purported to have been entered into, or purported to have been entered into, by or on behalf of the State, on or after 1 March 2003”.
27. Section 47D states:
“47D. CLAIM AGAINST STATE NOT ENFORCEABLE IN CERTAIN CIRCUMSTANCES.
(1) In this section –
“Authority to Pre-commit Expenditure” means an Authority to Pre-commit Expenditure issued under Section 47B;
“Integrated Local Purchase Order or Claim (ILPOC)” means Finance Form 4A – Integrated Local Purchase Order or Claim issued in accordance with the Financial Instructions.
(2) A claim for the price arising from the sale of property or stores or for the supply of goods or services to the State shall not be enforceable, through the courts or otherwise, unless the seller of the property or stores or the supplier of the goods or services produces –
(a) an Integrated Local Purchase Order or Claim (ILPOC); or
(b) an Authority to Pre-commit Expenditure,
relating to the property or stores or goods or services, the subject of the claim, to the full amount of the claim.
(3) The provisions of this section apply where the property or stores were purported sold to the State or the goods or services were
purportedly supplied to the State on or after 1 March 2003”.
28. The related provision is Section 2A of the Claims By and Against the State Act, 1996 which states:
“2A. Claim against the State not enforceable in certain circumstances.
(1) In this section—
"Authority to Pre-commit Expenditure" an Authority to Pre-commit Expenditure issued under Section 47B of the Public Finances (Management) Act 1995;
"Integrated Local Purchase Order and Claim (ILPOC)" means Finance Form 4A—Integrated Local Purchase Order and Claim issued in accordance with the Finance Instructions under the Public Finances (Management) Act 1995.
(2) A claim for the price arising from the sale of property or stores or for the supply of goods or services to the State shall not be enforceable, through the courts or otherwise, unless the seller of the property or stores or the supplier of the goods or services produces—
(a) a properly authorized Integrated Local Purchase Order and Claim (ILPOC); or
(b) an Authority to Pre-commit Expenditure,
relating to the property or stores or goods or services, the subject of the claim, to the full amount of the claim.
29. In summary and in the context of this case, Section 47B(1)(a) provides for an Authority to Pre-commit Expenditure Claim (APCE) and the Departmental Head of the Department of Finance may issue to a Departmental Head an APCE where the proposed expenditure exceeds K100,000.00 for provision of services.
30. In a case where the proposed expenditure does not exceed K100,000.00 Section 47B(1)(b) provides that the Departmental Head of the Department of Finance may issues an APCE and authorise the Departmental Head of the Department to enter into the contract for supply of services.
31. By Section 47C a contract for services is null and void if no APEC has been issued or an Integrated Local Purchase Order and Claim (ILPOC) has been issued.
32. Section 47D provides that no claim for provision of services to the State is enforceable through the Courts or otherwise unless the supplier of the services produces an APCE and ILPOC for the full amount of the claim.
33. Finally, Section 47D is replicated in Section 2A of the Claims By and Against the State Act, 1996 to reinforce the notion that a claim for provision of services without an APCE and ILPOC is not enforceable in Court or otherwise.
34. In this case, it is the finding of the Court that the value of the contract did not exceed K100,000.00. However, under Section 47B(1)(a) it is still necessary for the Departmental Head of the Department of Finance to issue an APCE and authorise the Departmental Head of the Department of Defence to enter into the contract which would include an ILPOC under Section 47C.
35. It is clear from the evidence of the plaintiff that there are no APCE and ILPOC issued by the Departmental Head of the Department of Finance to the Departmental Head of Department of Defence.
36. In the absence of an APCE and ILPOC and by virtue of Sections 47B, 47C and 47D and Section 2A above, the contract is null and void and unenforceable.
37. This view is reinforced by the National Court decision in Jhelson Ray trading as Bara Construction v. Timothy Numara & The State (2018) N7380 and followed in Glennel G Mari trading as Wani Connection v. Timothy Numara & The State (2019) N8089.
Unjust Enrichment
38. However, it is the finding the Court that the plaintiff performed the contract and, the defendants benefited from the contract, and it would be unfair and unjust for the defendants to enrich themselves if they do not pay for the services.
39. In Seken Kewa v. Minister for Community Development & The State (2019) N7753 the National Court applied the Supreme Court decision in Fly River Provincial Government v. Pioneer Health Services Limited (2003) SC705 and held that, on the principle of unjust enrichment, it would be unjust to allow the defaulting party not to pay for the services rendered by the aggrieved party if it can be established that:
(a) the defaulting party has been enriched by the receipt of a benefit,
(b) the defaulting party has been enriched at the aggrieved party’s expense, and
(c) it would be unjust to allow the defaulting party to retain the benefit.
40. There is no evidence that the plaintiff was not an innocent party as it knew of the statutory procurement procedure in Sections 47B-D and Section 2A above and avoided them. On the other hand, it is the further finding of the Court that the defendants invited the plaintiff to apply for the work, the plaintiff did, the defendants accepted its application and determined it as a Pre-Qualified Contractor subject to availability of work, and when work was available, they prepared the contract, delivered it to the plaintiff with an invitation for it to commence work and it did.
41. Moreover, the plaintiff performed the contract and was advised that it would be paid but was never paid. Above all, the defendants benefited from the provision of services by the plaintiff.
42. In the circumstances, the plaintiff is entitled to be paid for the unpaid claim under the principle of unjust enrichment. Judgment on liability is entered against the defendants with damages to be assessed on the principle of unjust enrichment.
Damages
43. Since parties did not address the issue of damages, it is within the Court’s discretion pursuant to Order 12, rule 1 of the National Court Rules and Section 155(4) of the Constitution to order parties to agree on the sum to be awarded for the unpaid claim within one month of the order and return with a consent order for the Court’s endorsement. In the event that, parties are unable to agree, parties shall file and serve affidavits to assist the Court assess the sum to be awarded before the return date. The matter will be adjourned to Friday 4th March 2022 at 9:30 am for further hearing.
Costs
44. There will be an order for costs of the proceeding in favour of the plaintiff, to be taxed, if not agreed.
Order
45. The orders of the Court are:
6. Time shall be abridged.
________________________________________________________________
Awalua & Associates Lawyers: Lawyers for Plaintiff
Solicitor General: Lawyers for Defendants
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