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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO.267 of 2023 (IECMS – CC1)
BETWEEN:
EDA CIVIL WORKS LIMITED
Plaintiff
AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
First Defendant
AND:
HARRY KORE, as the Secretary for Department of Mineral Policy and Geohazard Management and Chairman of Board of Trustee of Western
Province Non-CMCA Region People’s Dividend Trust Account and the members of the Board of Trustee including the Secretary for
Department of Finance, Secretary for Department of Treasury and Secretary for Department of National Planning and Monitoring
Second Defendant
Waigani: Bre, AJ
2024: 10th April and 27th June
CIVIL PRACTICE AND PROCEDURE – application for summary judgement – O12r38 NCR - claim for unpaid interest – basis of interest claim in contract or mediated agreement - defence filed – calculation of the interest per contract terms or Judicial Proceedings (Interest on Debts and Damages) Act 2015 – serious questions of fact and law arises – essential elements of claim not proved - summary judgement refused.
Cases Cited
Tsang v Credit Corporation [1993] PNGLR 112
Legislation
Judicial Proceedings (Interest on Debts and Damages) Act 2015, ss4 and 6.
Counsel
Mr T Yamaraja, for the Applicant/Plaintiff
Mr L Baida, for the Respondent/Second Defendant
No appearance – for the First Defendant
RULING
27th June 2024
1.BRE, AJ: INTRODUCTION: The plaintiff, Eda Works Limited, was contracted on 7 February 2013, by the defendants to upgrade the Balimo airport in the Middle Fly District of Western Province. There were payment issues which affected the progress of the works and outstanding interest payments which the plaintiff alleges is due to it pursuant to the terms of the contract and is seeking summary judgment for interest of payment of K15,525,709.91.
APPLICATION
2. The plaintiff's application was filed on 01 March 2024 and relies on the National Court Rules ('NCR') Order 12 rule 38(1) [summary judgment], Order 9 rule 30 [Admissions], or alternatively, Order 10 rule 9A(15)(1)(a) and (2)(a), (b) and (c) [non-compliance of court directions] and seeks relief in four parts:-
1) interest of K8,847,448.08 for the unpaid sum of K8,249,697.50 for a period of 28 months from May 2018 to November 2020, from the Western Province Non CMCA Region People's Dividend Trust Account Funds, and
2) interest of K6,678,261.83 for the unpaid sum of K6,500,105.00 for a period of 10 months from November 2021 to August 2022 from the Western Province Non CMCA Region People's Dividend Trust Account Funds, or alternatively;
3) the Second Defendants pay to the plaintiff a sum of K15,525,709.91 being the total of the above two sums from the Western Province Non CMCA Region People's Dividend Trust Account Funds.
4) an order for loss of business to be assessed.
3. The application focused mostly on outstanding interest claims 1 and 2 to which both counsels made submissions on. The plaintiff's
application filed on 12 December 2023 was withdrawn as it is preceded by this application.
PRELIMINARY ISSUES
4. The second defendants raised preliminary issues about the naming of the parties and jurisdictional basis which the plaintiff countered by submitting that the correct parties have been named and the correct jurisdictional basis has been cited. On these preliminary issues, I accept the plaintiffs' submissions. It is the plaintiff's prerogative to sue whomever it considers relevant, unless a party has made a good case to be removed from the proceeding.
The plaintiff has made a valid submission that the parties they are suing are those that they have contracted with. In terms of jurisdictional basis, the defendant's objection centered on the defence being filed as a counter to the plaintiff's application for summary judgement and admissions which I address in my deliberations.
EVIDENCE
3. The plaintiff relies on five affidavits filed at various times by its Managing Director Evele Kala as follows: -
LAW
4. The relevant law relied on for the primary application for summary judgement is Order 12 rule 38 NCR which reads:-
"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 judgement for the plaintiff on that claim or part, as the nature of the case requires."
ISSUE
5. The principle issues for my consideration and exercise of discretion, are whether there is sufficient evidence proving the essential elements of the claim and whether the defendants have a defence on the merits.
Alternatively, the issue of non-compliance of Court Orders during the listing stage of proceeding will be considered, where required.
CONSIDERATIONS
6. To my mind, the determination of the application is largely a matter of evidence. The plaintiff seeks liquidated judgment for alleged outstanding interest from two unpaid principal amounts arising from a contract with the defendants.
8. The plaintiff seeks summary judgment for interest at the BPNG[1] commercial interest rate as agreed to in the contract, on delayed or outstanding payments to be paid from the Western Province Non CMCA Region People's Dividend Trust Account Funds as follows:-
1) interest of K8,847,448.08 for the unpaid sum of K8,249,697.50 for a period of 28 months from May 2018 to November 2020, and
2) interest of K6,678,261.83 for the unpaid sum of K6,500,105.00 for a period of 10 months from November 2021 to August 2022.
9. The plaintiff must prove the following to succeed: -
10. In Tsang v Credit Corporation [1993] PNGLR 112 at 117 the Supreme Court clarified the application of Order 12 rule 38 NCR as:-
"There are two elements involved in this rule:
(a) evidence of the facts proving essential elements of the claim; and
(b) that the plaintiff or some responsible person gives evidence that in his belief there is no defence.
...
As to the second element ... If a defence is filed or evidence is given by the defendant, ... the plaintiff must show that, upon the facts and/or the law, the defendant has no defence. The plaintiff will not be entitled to summary judgment if there is a serious conflict on questions of fact or law. Whether a case should go to trial on these issues will be determined on the facts of each case. However, the authorities show that
the summary jurisdiction should only be invoked in a clear case; Chief Collector of Taxes v T A Field Pty Ltd [1975] PNGLR 144."
(Emphasis added)
11. Here, the plaintiff's Managing Director Evele Kala filed an affidavit on 01 March 2024 (doc 23) deposing to the defendants refusing to enter into settlement discussions despite directions from the Court and relied on proceedings from other suppliers where judgements were ordered to depose that summary judgement be entered. However, the defendants filed their defence on 24 November 2023 defending the terms of the Hilton Agreement and denying the plaintiff's claim.
12. In my view, the law as expounded in Tsang v Credit Corporation implies that the belief of the plaintiff or its responsible person does not apply when a defence is filed as the level of proof changes from a 'belief’ to one where the plaintiff must now rely on evidence and law to persuade the Court that the defendants do not have a defence. That where there is a serious conflict of the evidence and the law, the plaintiff will not be entitled to summary judgement as summary judgement must only be invoked in a clear case of no defence.
13. Applying this rationale to the six evidentiary matters I have set out above for the plaintiff to prove, I accept that items 1
and 3 are easily proved. There is evidence of a public tender CSTB[2] awarded multi-million kina contract to the plaintiff for the upgrade of the Balimo airport signed on 07 February 2013.
There is evidence also of the Court mediated Hilton Heads of Agreement of 22 September 2020 between the parties which was converted
into a Court Order on 02 November 2020. This arose from a related proceeding OS 40 of 2020 between the plaintiff, other contractors and the defendants and for the plaintiff, concerned the same CSTB contract with the defendants,
the subject of this proceeding.
14. The plaintiff's claim, according to its Amended Statement of Claim filed on 10 November 2023, that it is entitled to loss of business and outstanding interest pursuant to its contract with the State particularly clauses 60.10 and 43.1 and 43.2 of the General Conditions of Contract ('GCC') and the Court mediated Hilton Agreement of 22 September 2020 for certain periods when payments to it were stopped.
15. After perusing the evidence of the plaintiff and the submissions of Counsel it is clear to me that the essential elements of the plaintiff's claim for outstanding interest is in establishing the principal amounts that are due and owing to it under the contract or the Hilton Agreement to prove its claim for outstanding interest.
16. The plaintiff's claim is that the Hilton Agreement clause 1.4 allows it to pursue other claims for loss of business and interest. I have not sighted the Hilton Agreement in any of the affidavits of the plaintiff but note from an extract in the affidavit of Evele Kala filed 12 December 2023 (Doc 19-'E3') that these right refers to a schedule 2 and the money paid into the National Court Trust account. I infer this term is referring to K13,695,157.21 which according to the plaintiff's submission (para 44(iii), was paid into the National Court Trust account which comprises K10,265,252.34 in interest on delayed payment and K3,429,904.87 in loss of business.
According to the plaintiff's evidence, the plaintiff exercised this right under clause 1.4 of the Hilton Agreement when the amount was paid to it by consent in WS 1141 of 2015.
17. The second defendants submission is that the plaintiff's claim is incompetent and should be dismissed as the claim was resolved by mediation as contained in the terms of the Hilton Agreement. That the claim for payment out of the Non-CMCA account is contrary to the agreed terms of the Hilton Agreement where the payments were paid either direct to the plaintiff or to the National Court Trust Account to pursue any loss of business or interest claims.
18. The evidence of the plaintiff is that it has a valid binding contract with the State which it won through public tender. That the terms of the contract were breached when payments to it were stopped sometime in 2014 resulting in it stopping work on the upgrade of the Balimo airport from January 2015. That the project lay idle from 2015 to 2021, a period of six years.
Payments stopped because third parties had obtained restraining orders to stay the payments from the Non-CMCA trust account. Payments were then made in 2021 after the Hilton mediation agreement, enabling the plaintiff to re-commence the project. However, the last payment of K6,500,105.00 from the K13,695,157.21 payment was delayed when a Supreme Court appeal SCA 145 of 2020 was filed against OS 40 of 2020 from which the Hilton Agreement is derived.
The plaintiff's case is that because of this delay, it has lost business and is claiming interest arising during the period of the stay order in SCA 145 of 2020 (claim 2) and for a period when interest continued to accrue from the initial contract payment(claim 1).
The plaintiff relies on clause 60.10 , 43.1 and 43.2 GCC to support its claim.
Clause 60.10 GCC reads:-
Clause 60.1 on 'time of payment' of the Contract reads:-
"The amount due to the Contractor under any Interim Payment Certificate issued by the Engineer pursuant to this Clause, or to any other terms of the Contract, shall, subject to Clause 47, be paid by the Employer to the Contractor within 28 days after such Interim Payment Certificate has been delivered to the Employer, or, in the case of the Final Payment Certificate has been referred to in Sub-Clause 80.8, within 56 days, after such Final Payment Certificate has been delivered to the Employer. In the event of the failure of the Employer to make payment within the times stated, the Employer shall pay to the Contractor interest at the rate stated in the Appendix to Tender upon all sums unpaid from the date by which the same should have been paid. The Provisions of this Sub-Clause are without prejudice to the Contractor’s entitlement under Clause 69 or otherwise."
(Emphasis added)
Clause 60.10 requires interest to be paid on an amount due that is the subject of an Interim Payment Certificate.
Claim 1: K8,847,448.08 for May 2018 – November 2020
19. From what I can gather from the plaintiff's evidence, claim 1 is based off the original contract amount of K8,249,697.50. The
evidence shows that this amount is included in the payment of K21,249,895.98.
Further, interest of K10,265,252.34 was included in the amount of K13,695,157.21 in the Hilton Agreement. Once the principal amount
owed of K8,249,697.50 is paid, the interest should not be accruing.
20. However, the plaintiff submits the interest amount of K8, 847,448.08 is for a different period which is from May 2018 –
Nov 2020.
Still, I deduce that most of this period (May 2018 to November 2020) is within the period that the mediation should have covered.
The Hilton Agreement was concluded and signed on 22 September 2020. The plaintiff has not clarified how it is entitled to this interest
amount, besides clause 1.4 of the Hilton Agreement.
21. Further, the plaintiff claims this amount should be paid from the non-CMCA account and not the National Court trust account. I infer that payment from the National Court Trust account has been paid out already hence the claim for payment out of the non-CMCA account.
22. However, the account is not a crucial aspect for me, to me the crucial aspect of this claim is that it does not seem to have a legal basis under clause 60.10 or a variation or other term of the contract nor the Hilton Agreement.
If the plaintiff is to succeed, it must point to a term in the contract, preferably the variation terms of the contract that saves and continues the initial contract amount of K8,249,697.50 after it has been varied and paid.
Claim 2: K6,678,261.83 for November 2021 –August 2022
23. On the second claim for interest, the period claimed is past the Hilton Agreement date of 22 September 2020 and obviously would be outside the period considered during negotiations. The second interest claim is for the period November 2021 to August 2022. The plaintiff claims this is the period when a stay order arising from SCA 145 of 2020 was in place.
24. Again, clause 60.10 allows interest to be paid when an amount is due. According to the plaintiff's evidence the interest amount of K6,678,261.83 arises from the amount of K6,500,105.00. That the amount of K6,500,105.00 is derived from the Hilton Agreement for K13,695,157.21 which comprises K10,265,252.34 in interest on delayed payment and K3,429,904.87 in loss of business.
It is not clear what component of K6,500,105.00 makes up interest and what component makes up loss of business. However, to me the crucial aspect to prove is that K6,500,105.00 arises from a principal amount that was due and outstanding as is intended under clause 60.10. The interest component of K6,500,105.00 should have been derived from the principle amount paid of K21,249,895.98. The loss of business component would not attract interest and the terms of clause 60.10GCC.
25. Overall, the evidence adduced shows that the plaintiff is claiming for periods that were not covered in the Hilton Agreement. This is a point of contention for the defendants. Therefore, a construction of clause 60.10, 43.1 and 43.2 of the contract and the Hilton Agreement is required. Clause 60.10 refers to ‘the amount due’ under the interim payment certificate. This comes back to proving the essential elements of the claim to succeed in a summary judgement application. The plaintiff has not produced into evidence the interim payment certificates for:-
1) the amount due of K8, 249, 697.50 which gave rise to the interest claimed of K8, 847, 448.08, and
2) the amount due of K6, 500, 105.00 which gave rise to the interest claimed of K6, 678, 261.83. For this claim it seems a further
distinction between interest and loss of business should be made.
26. Additionally, counsel for both parties must properly address the application of Section 4(1), (2) and (3) on prejudgment interest and Section 6 (1) and (2) on post judgement interest of the Judicial Proceedings (Interest On Debts And Damages) Act 2015, which overrides any interest clause between parties which is inconsistent with the maximum interest rate of 2% set for debt and damages claims against the State.
The related proceedings mentioned in this matter were settled out of Court or mediated and I do not think the issue of the 2 percent
interest rate in the Judicial Proceedings (Interest on Debts and Damages) Act 2015 was considered.
Section 4(3) reads:-
(2) Where the proceedings referred to in Subsection (1), including proceedings arising out of a breach of express or implied contract or mercantile usage, are taken against the State, the rate of any interest under that subsection shall not exceed 2% yearly.
(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%.
Section 6(3) Reads:-
(1) Subject to Subsections (2) and (3), where judgment is given or an order is made for the payment of money, interest shall, unless the court otherwise orders, be payable at the prescribed rate from the date when the judgment or order takes effect on such of the money as is, from time to time, unpaid.
(2) Where the judgment referred to in Subsection (1) is taken against the State, the rate of any interest under that subsection shall not exceed 2% yearly.
(Emphasis mine)
27. In my view, the clear words of the statute override the contractual agreement between the parties on the applicable interest rate and affects the calculation and amounts of interest claimed by the plaintiff. The interpretation and application of the Judicial Proceedings (Interest on Debts and Damages) Act 2015 raises a serious legal issue which prevents the granting of the plaintiff's application.
RULING
28. It is my considered view and ruling, the plaintiff is seeking two new interest amounts and has not adduced sufficient evidence to prove on a balance of probabilities that:-
1) there is sufficient evidence proving the essential elements of its claims,
2) it is entitled to summary judgement of interest for K8,847,448.08 for a period of 28 months from May 2018 to November 2020, and
3) interest of K6,678,261.83 for a period of 10 months from November 2021 to August 2022.
29. I find that there are serious questions of fact and law concerning: -
30. As such, it is not necessary to address the other issue for want of prosecution. The direction for settlement is a matter for the parties to pursue. The defendants have filed their defence, the onus is on the plaintiff to proceed expeditiously to trial.
ORDER
31. The formal orders of the Court are:-
Orders accordingly,
________________________________________________________________
Supasonixs & Alu Lawyers: Lawyers for the Plaintiffs
Nelson Lawyers: Lawyers for the Second Defendants
[1] Bank of Papua New Guinea or also known as Central Bank of Papua New Guinea.
[2] Central Supplies and Tenders Board now known as the National Procurement Commission.
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