N11502

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WS NO. 603 OF 2015

BETWEEN
NARAYAN GEHLOT
Plaintiff

AND:
PNG POWER LIMITED
Defendant

LAE: DOWA J
8 NOVEMBER, 19 DECEMBER 2022; 30 SEPTEMBER 2025

CONTRACT – Contract for consultancy service- oral contractual arrangement on ad hoc basis-whether there was a binding contract-terms vague and indefinite-arrangement in defiance of Board decision-no valid contract due to uncertainty-contract void ab initio

Whether the contract was illegal for breach of procurement requirements under Public Finances (Management) Act- and Independent Public Business Corporation of PNG Act-Contract illegal and unenforceable

Quantum Meruit-claim can be considered for actual performance. No hard and fast rule in determining quantum meruit based on innocence-each case to be determined on its own merits to do justice -not just to award damages on quantum merit-claim dismissed. 

Cases cited
Yooken Paklin v The State (2001) N2212
Jonathan Mangope Paraia v The State (1995) N1343 
Samot v Yame (2020) N8266
NKW Holdings v Poladin Solutions PNG Ltd (2020) N8339
Keam investments v Toyota Tsusho (PNG) Ltd (2019) N7859
Titus Tumba v Samson (2020) N8721
Woodward v Woodward [1987] PNGLR 92
Fly River Provincial Government vs. Pioneer Health Services Limited (2003) SC705
The State vs. Barclay Bros (PNG) Ltd (2004) N2507
Delphi Corporate Investigations Ltd vs. Bernard Kipit (2003) N2480
Leontine Ofoi vs. Kris Bongare (2007) N3248
Teine vs. University of Goroka (2019) SC1881
Steven Turik vs. Mathew Gubag (2013) N5132 
Ray v Numara (2018) N7380
National Broadcasting Corporation vs. Taison [2019] PGNC 266; N8083
Tomala v National Housing Estate Limited (2020) N9016

Counsel
K. Keindip, for the plaintiff
M Tusais, for the defendant

JUDGMENT

1.	DOWA J: The Plaintiff claims damages against the Defendant for unpaid invoices for services rendered under an oral consultancy agreement for the period between March 2013 and July 2014.

Background Facts 

2.	The Plaintiff is a USA citizen. He holds a doctorate degree (PHD) in electrical engineering. He was engaged by the Defendant to provide consultancy services on power production and consumption in Papua New Guinea. The engagement was partly oral and partly in writing. The Plaintif’s engagement commenced in March 2013. The Plaintiff alleges it was for a term of three years

3.	The Plaintiff alleges that the major terms of the contract were that he would be paid USD 399.00 per hour for actual hours worked or fixed 40 hours per week whichever is more together with transport allowances, accommodation and airfares between PNG and home (USA/India).

4.	 Between March and August 2013, the Plaintiff issued four invoices totaling USD 268,257.92 for the services he provided for the period between March 2013 and August 2013 which were settled in full.

5.	In 2014, the Plaintiff rendered three further invoices for the following:

i)	Remnant of invoice payment etc (May 2013 to 23 August 2013) – US$193,533.
ii)	PPL HQ Air condition report (September to November 2013) – PGK121,000.
iii)	Wages & Transport Allowance (1 December 2013 to 31 July 2014) – US$551,760 and PGK84,700.

6.	The Defendant disputed the invoices and did not pay. Aggrieved, the Plaintiff instituted the current recovery proceedings.

7.	The Defendant filed a defence, pleading that the Plaintiff was not engaged as a consultant, that the services he rendered on ad hoc basis were paid in full, and his further and continuous service was terminated by the Board on 24th July 2013 and thus the Defendant is not liable.

Trial

8.	 The trial was conducted on both issues of liability and damages. It involved oral examination and tender of affidavit evidence.

Evidence-Plaintiff

9.	The Plaintiff gave evidence both orally and by affidavit evidence. In respect of affidavits, the Plaintiff relied on the following:

(a)	Exhibit P1-Affidavit of Narayan Lal Gehlot sworn 29 December 2015 filed 14 March 2016 (Court Doc no. 15)
(b)	Exhibit P2-Affidavit of Narayan Gehlot sworn 26 November 2021 and filed 2 December 2021 (court Doc no. 125)
(c)	Exhibit P3-Affidavit of Alex Oa Sworn 4 November 2020 and filed 9 November 2020 (Court doc no. 87)
(d)	Exhibit P4-Affidavit of Kalip Salo sworn 14 October 2020 and filed 9 November 2020 (Court doc no.85)
(e)	Exhibit P5-Affidavit of John Tangit sworn 21 April 2021 and filed 7 May 2021 (Court doc no. 100)
10.	This is the summary of the Plaintiff’s evidence. The Plaintiff is a US citizen. He holds a doctorate degree in Electrical Engineering. He came to PNG in 2009 as Associate Professor with PNG University of Technology. He was terminated from employment by Unitech in 2011. On 6th March 2013, he was approached by the Chief Executive of PNG Power Ltd, Tony Koiri, to provide consultancy services on technical matters for the Defendant which he agreed subject to conducive terms and conditions. The Plaintiff was asked to provide technical advice on matters listed in paragraph 7 of his Affidavit (Exhibit P1). He was subsequently asked by both CEO Koiri, CEO John Tangit and IPBC Minister Ben Micah to provide consultancy services on various dates and places between 6th March 2013 and 22nd June 2014.

11.	The Plaintiff deposed he agreed with CEO Tangit to provide consultancy services on the following terms:

a.	Plaintiff would be paid US$399.00 per hour for actual hours worked or fixed at 40 hours per week, whichever is more.
b.	Defendant would at its cost accommodate the Plaintiff during the term of the consultancy.
c.	Defendant would pay the Plaintiff transport allowance of K350.00 per day.
d.	Defendant would reimburse all air travel within PNG and home visit (USA/India).
e.	The Plaintiff’s engagement would be for a term of 3 years 

12.	The Plaintiff’s engagement was temporary pending formal contract. No formal contract was signed but due to urgency of certain matters he was asked to provide the services on ad hoc basis.  He was provided with accommodation with all utilities paid for by the Defendant. During the currency of the engagement the Plaintiff provided professional services and attended to several assigned tasks all listed at paragraph 14 of his affidavit (Exhibit P1). He then issued the following four (4) invoices and got paid in US dollars: 

		Date of Invoice			Amount
	
1.	24/04/2013			USD 67,058.56
2.	13/05/2013			USD 25,852.50
3.	25/07/2013			USD 77,306.36
4.	21/10/2013			USD 98,040.50

Total 					USD 268,257.92

13.	In 2014, the Plaintiff rendered three more invoices in respect of the following claims:

i.	Remnant of invoice payment etc (May 2013 to 23 August 2013) – US$193,533.00.
ii. PPL HQ Air condition report (September to November 2013) – PNGK121,000.00.
iii. Wages & Transport Allowance (1 December 2013 to 31 July 2014) – US$551,760.00 and PGK84,700.00.

14.	The Plaintiff deposed he did not receive payment for the three invoices which remain outstanding, and his contract was eventually terminated on 29th July 2014. 

		Alex Oa

15.	The witnesses Alex Oa, Kalip Salo and John Tangit gave evidence for the Plaintiff. Alex Oa was employed by the Defendant as General Manager-Performance Engineering. He was part of the management team. He deposed the Plaintiff being engaged by the Defendant to provide consultancy services although he is not privy to the financial terms agreed. He deposed that the Plaintiff did provide consultancy services when CEO Tangit engaged him in May 2013 and was provided accommodation by the Defendant.

16.	At this juncture it is important to note that Alex Oa did not give any evidence of the terms of the Plaintiff’s engagement. It is also important to mention that Oa made no mention of the investigation and report done on 13th April 2016 on the Air Condition System Failure at the PNG Power Head Quarters endorsed by him as General Manager -Performance Engineering to show whether the Defendant benefited from work allegedly done by the Plaintiff in the Air Condition system.

		Kalip Salo

17.	The witness, Kalip Salo, was employed by the Defendant as General Manager-Corporate Service at the material time. He deposed that he was aware that the Plaintiff was engaged by CEO Koiri to provide consultancy services in March 2013. As part of the management team, he was involved in meetings with the CEO and the Plaintiff. He is aware that the Plaintiff did attend to providing consultancy services at least on two occasions in March 2014 and June 2014. He deposed that the Plaintiff was provided accommodation by the Defendant and was paid for his services in US dollars for the four invoices rendered. He deposed that the Plaintiff rendered further invoices, but payment was not made for unknown reasons. 

18.	At this juncture it is important to note that the witness Salo was generally giving evidence of matters he was informed about and became aware as part of the management team but offered no direct evidence on the terms of the consultancy services.

	John Tangit

19.	Late John Tangit is the former CEO of the Defendant. He passed away before the trial. His affidavit was allowed into evidence despite objections but subject to weight. The Court is mindful that the deponent was not cross examined, and the Court will give whatever weight due considering all other evidence to do justice in the circumstances.

20.	Tangit deposed Plaintiff was engaged initially by former CEO Koiri.  When he became CEO, he continued to engage the Plaintiff’s services due to urgent needs. During the term of his engagement Plaintiff was required to travel with Minister Ben Micah for meetings throughout the country. The Plaintiff was provided accommodation by the Defendant. The Defendant agreed to pay USD 399.00 per hour for actual hours worked or a fixed rate of 40 hours per week. The term was for three years commencing March 2013. Tangit deposed Plaintiff was paid for the first four Invoices rendered. Plaintiff sent three more invoices. After seeking clarification from the Plaintiff and consulting senior management he approved the payment. Due to disagreement at the Board level, the Plaintiff’s engagement was terminated. 

21.	At this juncture it is significant to note that Tangit did not mention PNG Power Board decision on 24th July 2013 terminating the services of the Plaintiff. This is important because Tangit was Acting CEO and was present at that meeting. Since Tangit’s evidence is not tested in cross-examination, the Court will give no weight to the evidence. 

 John Yanis’ Affidavit

22.	John Yanis did not attend Court. The Plaintiff applied to tender the Affidavit of John Yanis sworn 19th October 2020 and filed 9th November 2020. The Defendant objected to the tender as he was required for cross examination. The deponent was not present for cross examination because he was required for a job interview elsewhere. I reserved my ruling because I did not want to make a hasty decision. After thinking about it, I have decided to uphold the objection. This is because notice for cross examination under section 36 of the Evidence Act was served and the reason offered by the Plaintiff is not good enough. It is not in the interest of justice to admit the affidavit in evidence which is not tested in cross-examination. Thus, the affidavit of John Yanis is not allowed into evidence.

The Defendant’s Evidence

23.	The Defendant relies on the following affidavits:

(a)	Exhibit D1	Affidavit of Luke Ambu sworn and filed 20 August 2021 
(b)	Exhibit D2	Affidavit of Luke Ambu sworn and filed 20 May 2021 
a.	 Exhibit D3	Affidavit of Gorethy Nongkas sworn and filed 20 August 2021
(c)	 Exhibit D4 	Affidavit of Gorthy Nongkas sworn and filed 20 May 2021 

Luke Ambu

24.	Luke Ambu is currently a Lecturer at UPNG. He was at all material times employed by the Defendant as Human Resources General Manager. He deposed that the Plaintiff’s engagement did not follow due process. Normally employment contracts, including consultancy services, go through his office before reaching CEO or the Board for approval.  Where consultants are engaged, they must sign contracts setting out the duty statements and terms of the contract. Once the services under the contract are performed and invoices are rendered to his department, the technical division’s Chief Operations Officer will check and verify before payments are made. 

25.	He deposed this procedure was not followed in the case of the Plaintiff. The Plaintiff was engaged by former CEO Tony Koiri. Ambu was asked by Koiri to give some short-term consultancy work on ad hoc temporary basis after he was dismissed from employment with Unitech. Plaintiff was engaged on that basis. No written contract was signed. There was a draft consultancy agreement for a short period of twelve weeks which was to end by August 2013. However, that agreement was not signed. Despite that the Plaintiff continued providing services on ad hoc basis. Since the Plaintiff had no accommodation, the Defendant provided accommodation. For the temporary consultancy services, the Plaintiff rendered invoices which were paid in full. The Plaintiff was not engaged after August 2013, especially because the PNG Power Ltd Board has specifically directed that the Plaintiff’s engagement be ceased as of 24th July 2013. Ambu was present at the Board meeting. Ambu deposed that by August 2013, the Plaintiff was back in United States. He then advised the Board HR Subcommittee in their December 2013 meeting that the Plaintiff’s engagement has ceased and the Plaintiff has since left PNG. 

26.	Ambu deposed that the Defendant did not engage the Plaintiff for any work in 2014. If the Plaintiff provided services to the Minister, Ben Micah, then that is a matter that the Defendant is not responsible.

27.	Ambu deposed he is aware of the Plaintiff exhibiting similar behavior and tendency in initiating unmeritorious proceedings against IBS University for unlawful termination in proceedings OS 884 of 2018 between Gehlot v Ambu & Mick Nades of IBSU.

	Gorethy Nongkas

28.	Gorethy Nongkas is the Manager, Property and Finance Service, for the Defendant. She deposes that at the material time she was the Senior Property Development Officer and is aware of the Plaintiff’s claim for work done for the Air Conditioning system at the PNG Power Head Office. A report was produced and given to her and after reviewing the report it was found to be substandard. There was no proper diagnosis, and the problem was eventually rectified by their own team. The management decided not to pay for the invoice for reasons that the Plaintiff was not legally or properly engaged and secondly for poor workmanship.

29.	As for the accommodation, Nongkas deposed that it was the CEO who allowed the Plaintiff to be accommodated at the Defendant’s premises while the Plaintiff was in the country. When management became aware they evicted the Plaintiff.

Burden of Proof 	 

30.	The burden of proving the claim rests on the Plaintiff and he must discharge the burden on the balance of probabilities. It is not sufficient to make assertions in a statement of claim and hope to be awarded damages claimed. Refer: Yooken Paklin v The State (2001) N2212,  Jonathan Mangope Paraia v The State (1995) N1343, and Samot v Yame (2020) N8266.

Submissions of Parties-Plaintiff

31.	The Plaintiff submitted the following:
	
a.	He was orally engaged by the Defendant to provide consultancy services for three years on agreed terms. 

b.	Based on the agreement, he provided consultancy services for the period March 2013 to July 2014 and rendered invoices for settlement.

c.	He received US$ 268,257.92 for the four invoices rendered for the service period March 2013 to August 2013.

d.	He is yet to receive payment for three invoices issued in respect of the following: 

i.	US$ 193,533.00-Remnant of payment (May to August 2013).
ii.	PNGK 120,000.00-PPL HQ Air Condition Report.
iii.	 US$ 551,760.00 & PNGK 84,700.00 - Wages & Transport Allowance for 1st December 2013 to 31st July 2014

e.	The claim is for services rendered based on oral contract. If contract is found to be invalid, Plaintiff is entitled to judgment for a sum equivalent to the professional service rendered for the period of consultancy on a quantum meruit basis.

Defendant’s submissions

32. The Defendant submitted that the Plaintiff is not entitled to the claim for the following reasons: 

a. The Plaintiff was not engaged as a consultant under a formal 			contract, oral or written, on terms that he has pleaded.

b. The Plaintiff was engaged to provide consultancy services on an ad hoc basis subject to a formal written agreement which did not eventuate.

c. Plaintiff’s engagement as consultant was not approved by the Defendant’s Board of Directors.  The Board directed management to cease Plaintiff’s consultancy services in May 2013. The Board eventually terminated the consultancy services on 24th July 2013.

d. Even if there was an oral contract, it is illegal for failure to obtain mandatory approval from the Minister for Finance

e. The Plaintiff was paid in full for the ad hoc consultancy services he provided to PPL from March 2013 to August 2013. 

f.	The Defendant is not liable for any services provided by the Plaintiff after 24 July 2013 and is therefore not liable to pay for the 3 invoices issued in 2014. 

g.	The Defendant is not liable to pay even in quantum meruit.

Issues 

33. The issues for consideration based on pleadings and submissions are: 
	
a.   Whether there was a legal and binding consultancy contract between   the parties on the terms pleaded by the Plaintiff.

b. Whether the Plaintiff’s engagement under the alleged oral consultancy agreement was unlawful and illegal.

c. Whether the Plaintiff is entitled to claim for Remnant Invoice Payments in the sum of USD 193,533.00

d. Whether the Plaintiff is entitled to claim for investigation and report on Defendant’s HQ Air Condition in the sum of PNGK 121,000.00 

e. Whether the Plaintiff is entitled to claim wages and vehicle allowance for period 1st December 2013 to 31st July 2014 in the sum of USD 551,760.00 & PNGK 84,700.00 respectfully.

f. Whether the Plaintiff is entitled to payment for the three invoices on quantum meruit basis.

	
a. Whether there is a legal and binding Consultancy contract between the parties on the terms pleaded by the Plaintiff.

34.	The Plaintiff’s claim is for breach of consultancy service agreement. The law on contract is settled in this jurisdiction. Refer to NKW Holdings v Poladin Solutions PNG Ltd, (2020) 8339, Keam investments v Toyota Tsusho (PNG) Ltd (2019) N7859, Titus Tumba v Samson (2020) N8721.

35.	For a contract to be valid and enforceable, the following elements be present:

a)	Clear Offer
b)	Unconditional Acceptance of terms
c)	Intention to create legal relations by parties having capacity to contract.
d)	Passing of consideration

36.	What were the terms of the agreement. The Plaintiff pleaded the following:	
	
a.	Plaintiff would provide consultancy services on power generation and consumption.
b.	Plaintiff would be paid US$399.00 per hour for actual hours worked or fixed at 40 hours per week, whichever is more.
c.	Defendant would at its costs accommodate the Plaintiff during the term of the consultancy.
d.	Defendant would pay the Plaintiff transport allowance of K350.00 daily.
e.	Defendant would reimburse all air travel within PNG and home visit (USA/India).
f.	Plaintiff’s engagement would continue for a term of 3 years.  

37.	The above terms of engagement were oral and not written. There is no clear documentary evidence on the terms agreed. Generally, the Court will be hesitant to enforce a contract where the terms are vague or uncertain. However, where the Court can resolve the uncertainty through other acceptable evidence or conduct of parties then it should find that the parties have acted upon and intended to have an agreement and to have legal effect, be it in writing or oral. 

38.	In the case Woodward v Woodward (1987) PNGLR 92 the Supreme Court stated the principle of law in the following terms: 

“Whilst this Court would not disagree with the general rule that if the terms of an agreement are so vague or indefinite that it cannot be ascertained with reasonable certainty what is the intention of the parties there is no contract enforceable at law, if the court can resolve this uncertainty by reference to other acceptable evidence or the subsequent conduct of the parties it should attempt to find that parties have acted upon and intend an agreement to have legal effect.”

 39.	In the present case, I note there are discrepancies in the evidence. In paragraph 9 of his Affidavit (Exhibit P1), the Plaintiff deposed the above terms of engagement were agreed between him and CEO John Tangit on 4th and 13th March 2013. This is inconsistent with other evidence which shows John Tangit was not the CEO in March 2013. Tony Koiri was the CEO who engaged him on ad hoc basis. In paragraphs 4 & 5 of John Tangit’s Affidavit (Exhibit P5), Tangit deposed that Koiri engaged the Plaintiff, and he continued the engagement, with the intention of formalizing same. Although Tangit deposed the engagement was in terms pleaded by the Plaintiff, the Court will not place much weight on the evidence as the deponent couldn’t be cross examined and the evidence was not tested. Apart from that, Tangit made no mention of the Defendant’s Board meeting of 24th July 2013, which terminated the engagement of the Plaintiff. Tangit’s evidence lacks credibility.

40.	There are other discrepancies. The first invoice issued for period between 4th March 2013, and 12th April 2013 shows the Plaintiff charging the Defendant in Australian Dollars. In that invoice it also stated that for future engagements, Plaintiff has agreed to charge Aus$ 1650 per day for 90 days.  In respect to invoice for service rendered between 13th April 2013 and 30th April 2013, the hourly rate claimed was US$ 360, a reduction from US$ 399 per hour. In his latest letter dated 12th June 2014 to Tangit, Plaintiff stated his earlier agreement was in Aus$ but when US$ was cheaper it was changed to US$ 399/hour. The motor vehicle charge pleaded was for K350/day but was invoiced at K300.00/day, a variation of the amount by K50.00.

41.	Although the Plaintiff claims the consultancy agreement was for three years, the first invoice and the proposed draft agreement show the Plaintiff would be engaged for 90 days at the rate of Aus$1,650.00 per day. 

42.	The Plaintiff was provided with accommodation. Yet the invoices show a charge of K330.00 per day for accommodation.

43.	The legal advice provided by the in-house lawyer, Vincent Henry, shows the engagement was subject to a written contract to be approved by the Defendant’s Board of Directors in the next Board meeting. The Board met on 24th July 2013 and terminated the ad hoc arrangement.

44.	The Plaintiff was engaged by the CEO Koiri in March 2013 on ad hoc basis. His engagement was however rejected by the Board Chairman in May 2013. This was communicated to senior management through various email exchanges between Finkewe Zurenuoc, Director and Chairperson of HR Sub Committee. The Board eventually terminated the arrangement in its Board meeting of 24th July 2013.

45.	In my view, the terms of engagement are fraught with uncertainty. There was no consensus ad idem. The oral engagement was therefore void ab initio. 

46.	The fact that payment was made for the services rendered between March 2013 and August 2013 should not be construed as conduct validating what was otherwise a vague and indefinite contract unenforceable in law. It is clear the Defendant’s management was making the payments under invalid contract and in defiance of the Board decision. 

b.	Whether the Plaintiff’s engagement under the alleged oral consultancy agreement was unlawful and illegal.

47.	As explained by Luke Ambu in his Affidavit (Exhibit D1), the Defendant has internal HR engagement process. It begins with the engagement discussions, agreement of the terms and concluding with a written contract. The contract would then be executed by the consultant and the CEO after approval is given by the Board. In the present case this process was not followed.  

48.	According to the Plaintiff it was contracted for a term of three years at the hourly rate of US$ 399.00 for actual hours worked or fixed rate of 40 hours per week whichever is more. At a conservative level of 40 weeks per year, for three years it would amount to US$ 1,915,200. This would be around PGK 4,000,000 at the prevailing exchange rate.

49. 	A contract of this magnitude would require proper procurement and execution process.  The Defendant is a company owned by the Independent State of Papua New Guinea through the Independent Public Business Corporation of PNG then, (and now Kumul Consolidated Holdings Ltd).  It is a State-owned enterprise. Although it operates as an entity under the Companies Act with a corporate structure, its officers were and are still required to comply with the minimum procurement requirements of the Public Finances (Management) Act, the Companies Act and Independent Public Business Corporation of Papua New Guinea Act 2002.

50.	Under section 61 of the Public Finances (Management) Act and section 46B of the Independent Public Business Corporation of Papua New Guinea Act 2002, State Owned Enterprise would require approval from the Minister for Finance, upon a recommendation from the Managing Director of the Independent Public Business Corporation (as it was then) to enter a contract involving payment exceeding one million kina.

51. 	Section 61 of the Public Finances (Management) Act reads:

61.	APPROVAL REQUIRED FOR CERTAIN CONTRACTS.
(1) 	The provisions of this section apply to and in respect of all public bodies notwithstanding any provision to the contrary in any other law and notwithstanding and without regard to any exceptions, limitations, conditions, additions or modifications contained in any other law.
(2) 	Subject to Subsection (3), a public body shall not, except with the approval of the Minister, enter into a contract involving the payment or receipt of an amount, or of property to a value, (or both) exceeding–
(a) 	K100,000.00; or
(b) 	in the case of a public body declared by the Head of State, acting on advice, by notice in the National Gazette, to be a public body to which this paragraph applies–K500,000.00.
(3) 	The provisions of Subsection (2) do not apply to a contract relating to investment by a public body (including a subsidiary corporation) the subject of a declaration under Section 57(3).”

52.	Section 46B (1) of the Independent Public Business Corporation of Papua New Guinea Act 2002 reads:

	“46B	Approval required for certain Contracts

(1) 	Subject to this Section, a Majority State Owned Enterprise shall not, except with the approval of the Minister referred to in Section 61 of the Public Finances Management Act 1995 upon recommendation of the Managing Director, enter into any contract involving payment or receipt of an amount, or property toa value,(or both) exceeding K 1,000,000.00, or such other amount(not exceeding K 10,000,000.00) as may be approved by the Corporation from time to time in respect of that specific Majority State owned Enterprise.”

53.	Turning to the present case, Plaintiff’s aggregate value of the contract exceeded PGK4,000,000.00. This would require compliance with the approval requirements of the two Acts. No such approval was sought nor received by the Defendant management. 

54.	It is not disputed that PNG Power Board of Directors did not approve of the Plaintiff’s engagement. The Board Chairman made it clear in May 2013 that the Plaintiff’s engagement be terminated. This was clearly communicated to the management by Finkewe Zurenuoc, Director and Chairperson of HR Sub Committee. On 24th July 2013, the Board made a formal resolution terminating the consultancy services. The Board directed the management to implement the decision. CEO Tangit was present at the Board meeting. CEO Tangit, who gave evidence for the Plaintiff in this proceeding, did not mention anything about the Board’s termination decision. He did not explain why the Plaintiff was allowed to continue after the termination decision. It is clear the continuous engagement was a clear defiance of the Board's decision. 

55.	The Defendant is a State-owned company. Its shareholder is ultimately the State. The shareholder is represented by the Board of Directors who supervise and direct the affairs of the company. The company is managed by a management team who receives directions and supervision from the Board under Section 109 of the Companies Act 1997.  Section 110 (1) of the Companies Act provides that a company shall not enter a major transaction unless the transaction is approved by special resolution.

56.	In the present case, the engagement of the Plaintiff by the CEO Koiri and CEO Tangit was a major transaction. It requires the approval of the Board for which approval was not given. The engagement of the Plaintiff was therefore void and illegal. 
 
57.	The law on illegal contracts is settled.  Where a contract is entered with the State or an entity of the State for the supply of goods or services without complying with the mandatory requirements of the Public Finances (Management)) Act  is illegal and unenforceable: Refer: Fly River Provincial Government v Pioneer Health Services Limited (2003), SC705, The State v Barclay Bros (PNG) Ltd (2004) N2507, Delphi  Corporate Investigations Ltd v Bernard Kipit (2003) N2480 and Leontine Ofoi v Kris Bongare (2007) N3248, Ray v Numara (2018) N7380.

58. In Fly River Provincial Government v Pioneer Health Services Limited (2003) SC705, the Supreme Court stated the law at paragraphs 2 -5 of the headnotes of the judgment: 

“2.	The requirements under ss.59 and 61 of the PF(M)A are mandatory 	and where a contract is entered into in breach of those requirements, it is illegal and is therefore null, void and unenforceable.

3.	The requirements under the PF(M)A are to enable transparency in all public contracts and to safeguard against corruption and enable securing of fair contracts with public institutions and or bodies for the best services at a competitive or best price.

4.	A person dealing with the State or any of its arm or instrumentality or a public institution to which the Act applies, is bound to comply with the requirements of the Act and every person dealing with such institutions or bodies are deemed to be aware of these requirements.

5.	A failure to ensure compliance of the requirements of the Act operates to the detriment of the party contracting with the State or a public authority to which the Act applies.”

59. The Plaintiff’ was engaged as consultant without complying with the mandatory requirements of the Public Finances (Management) Act and ministerial approval under the Independent Public Business Corporation of Papua New Guinea Act 2002. It was not open and transparent. The terms were vague and indefinite. The Plaintiff continued under an ad hoc arrangement which was terminated and rejected by the Board. Further, there is no evidence of whether the officers who continued to engage the Plaintiff had authority to pre-commit financial obligations on behalf of the Defendant, especially after the Board’s termination decision.

60. For the foregoing reasons, I find the ad hoc consultancy service arrangement made with the Plaintiff by the Defendant’s CEO Koiri and continued by CEO Tangit illegal and unenforceable.

c. Whether the Plaintiff is entitled to claim for Remnant Invoice Payments in the sum of USD 193,533.00

61.	The Plaintiff claims US $193,533.00 for Remnant invoice. This comprises of monies he allegedly lost due to Kina depreciations, incorrect calculations, interest, airfares, phone charges and luggage surcharges. The remnant invoice was sent on 12th June 2014. 

62.	This claim is made after payments were made and received for services rendered between March 2013 and August 2013. In my view, the Plaintiff is not entitled to this claim. Following are my reasons:
	
a.	As I have found, there is no valid contract. The terms for claims for kina depreciation, interest, phone charges, etc were not agreed to, forming part of any contract at all. Even CEO Tangit was not sure when he directed the management to verify and get some understanding to settle. (Exhibit P1, Annexure F, Invoice C).

b.	As I have also found, the consultancy agreement is illegal and is unenforceable. Plaintiff is not entitled to any remnant claim arising out of the invalid contract.

c.	The Plaintiff did not produce all the invoices for which he received the four payments to verify his claim on the remnant invoice. 

d.	Although the Plaintiff pleaded, he received US$268,257.92 for consultancy services up to August 2013, there is evidence that he received an amount of US$136,493.00 on 22nd May 2014. This brings the total payment received by the Plaintiff to US$ 404,750.92. The Plaintiff’s total invoice is US$ 409,881.09. The Plaintiff’s claim for Remnant invoice for US$ 193,533.00 is not justified and would amount to unjust enrichment.
e.	There is no specific and particularized pleading in the statement of claim supported by credible evidence for the remnant claim.

63.	In the end, the Plaintiff is not entitled to the Remnant claim of US$193,533.00.

d.	Whether the Plaintiff is entitled to claim for investigation and report on Defendant’s HQ Air Condition in the sum of PNGK 121,000.00 

64.	The Plaintiff claims K 121,000.00 for investigation and reporting to the Defendant on its Air Conditioning problem at the PNG Power Headquarters in or around November 2013. I have considered the pleadings, evidence and submissions of parties and conclude that the Plaintiff is not entitled to the claim. My reasons for decision are:

a.	As I have found, there is no valid contract. The investigation and reporting on the condition of the Aircon was not part of the earlier arrangement. If it is claimed under the terms of the general engagement, this would be an unauthorized job. The Plaintiff’s engagement was rejected by the Board on 24th July 2013.

b.	As I have also found, the consultancy agreement is illegal and is unenforceable. This extends to and includes all services provided during the period of illegal engagement. 

c.	There is no specific and particularized pleading in the statement of claim for the air-condition claim.

d.	No evidence was presented to show the details of his engagement.

65.	The claim for the work on the air condition is rejected.

e.	Whether the Plaintiff is entitled to claim wages and vehicle allowance for period 1st December 2013 to 31st July 2014 in the sum of USD 551,760.00 & PNGK 84,700.00 respectfully.

66.	The Plaintiff claims US$551,760.00 for wages for the period 1st December 2013 to 31st July 2014 and K84,700.00 for vehicle allowance. The claims are based on the oral consultancy agreement made on or about March 2013. I have considered the pleadings, evidence and submissions of the parties and have reached the conclusion that the Plaintiff is not entitled to these claims. My reasons for decision are:

a.	As I have determined, there is no valid and binding agreement between the Plaintiff and the Defendant. The initial ad hoc consultancy agreement allegedly entered between the parties in March 2013 is void for uncertainty on the terms. 

b.	The initial consultancy agreement is also found to be illegal for non-compliance of sections 61 of the Public Finances (Management) Act and Section 46B of the Independent Public Business Corporation of Papua New Guinea Act 2002.

c.	The PNG Power Board of Directors have expressly rejected the engagement of the Plaintiff as Consultant in its Board meeting of 24th July 2013. The evidence shows the Plaintiff returned to USA in or around August 2013. The Plaintiff states in his invoice that the claim is based on the arrangement he made with CEO Koiri in March 2013. It is ludicrous that the Plaintiff could continue to provide services and render invoices based on terms that were expressly rejected by the Defendant’s Board.

d.	The initial agreement of March 2013 ended in August 2013. The Plaintiff’s claim is for the period 1st December 2013 to 31st July 2014. The amount claimed is more than PNGK 1,500,000.00 at the prevailing foreign exchange rate and would require compliance with procurement requirements of Public Finances (Management) Act. It would also require Ministerial approval under the IPBCPNG Act. Furthermore, it would require the PNG Power Board approval under the Companies Act. None of these statutory requirements were met or complied with. 

e.	The Plaintiff’s work for the period 1st December 2013 to 31st July 2014 is not clear except for a few meetings and trips with the Minister for IBPCPNG during the period. The Plaintiff’s witnesses, Alex Oa, Kalip Salo and John Tangit did not give any clear evidence of Plaintiff’s engagement for the period. 

f.	There is no evidence of a proper invoice or invoices presented for a substantial claim of US$551,760.00 which is about PNGK1,672,000.00 at the prevailing exchange rate of US$.33. The only evidence presented is a one sentence invoice with a two-paged explanation letter dated 9th July 2014 (Exhibit P1, Annexure “F”) by the Plaintiff to CEO Tangit for work allegedly undertaken for seven months. There is no evidence of senior management verifying the claim. There is no evidence of the Board approving the claim. It defies logic and common sense for the Plaintiff to make such a substantial claim in just a two paged letter. The claim lacks credibility.

g.	The Plaintiff did not provide regular or monthly invoices. Why wait until July 2014 when he was evicted from the Defendant’s premises. 

h.	There is no specific and particularized pleading in the statement of claim for the wages and vehicle allowances. 

67.	For the reasons given, I find the Plaintiff is not entitled to claim for the wages and vehicle allowances for the period 1st December 2013 to 31st July 2014.

f.	Whether the Plaintiff is entitled to payment for the three invoices on quantum meruit basis.

68.	The Plaintiff submitted that the Plaintiff is entitled to payment in quantum meruit because the Plaintiff provided services at the request of the Defendant. 
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69.	The Defendant submitted that the Plaintiff is not entitled to damages in quantum meruit because it would amount to unjust enrichment to the Plaintiff for services not requested and benefited by the defendant.

70.	Quantum meruit is a common law cause of action. It is a remedy in equity that allows for a party to recover from the other party the value of services provided, or benefits received by the other party, in the absence of a formal contract. It extends in some instances to illegal contracts where a contracting party might be innocent or ignorant of any institutional or statutory procurement requirements.

71.	 Quantum meruit has been discussed and applied in cases such as Keboki Business Group v The State (1984) PNGLR281, Fly River Provincial Government v Pioneer Health Services Limited (2003), SC705, The State v Barclay Bros (PNG) Ltd (2004) N2507, Delphi Corporate Investigations Ltd v Bernard Kipit (2003) N2480, Leontine Ofoi v Kris Bongare (2007) N3248, Teine v University of Goroka (2019)  Steven Turik v Mathew Gubag (2013) N5132 and Tomala v National Housing Estate Limited (2020) N9016 and many other cases.

72.	The main elements of quantum meruit are best illustrated by Cannings J in the case Turik v Gubag (supra) and later adopted by the Supreme Court in Teine v University of Goroka (supra): 
	
1.	‘A’ has done something of benefit for ‘B’.

2.	the thing done by ‘A’ relates to an arrangement of some sort with ‘B’ (the arrangement might be but is not necessarily a contract and might be an illegal contract).

3.	it would be unjust to allow ‘B’ to retain the benefit without some remuneration or reward for ‘A’.

73.	In the case Fly River Provincial Government v Pioneer Health Services Limited (2003) SC705, the Supreme Court said, in appropriate cases, the Court can make alternative awards based on quantum meruit provided that the person making the claim is innocent of illegality in the arrangement: Paragraphs 6 and 8 of the headnotes reads:
 
6.	Where an illegal contract is part performed an action for recovery or restitution is available if not already paid for in equity to avoid unjust enrichment condition on the innocence of the contracting parties.
….
8.	However, since the contract was part performed and the Appellant received goods and service from the Respondent, in equity the Respondent is entitled to pursue its claim for a recovery of the costs and expenses it has incurred by way of restitution. But this is conditional on showing its innocence in the creation of the illegal contract.”

74.    His Honour Kandakasi DCJ, in restating this principle in a recent case, National Broadcasting Corporation v Taison (2019) PGNC 266, N8083 said this at paragraph 46 of his judgment: 

	“The law on point as represented by the decision of the Supreme Court 	in Fly River Provincial Government v Pioneer Health Services Limited (2003) SC705 is clear. A contract as in the present case, that has been arrived at in breach or without duly meeting the requirements of the PFMA is null and void ab initio and is thus unenforceable. Where such a contract has been performed in part, a claim based on the principle 	of quantum meruit may be possible, provided the private party contracting with the State or any of its entities is innocent of the breaches of the Act.”

75.	In Teine v University of Goroka (2019) SC1881, the Supreme Court clarified that the Supreme Court in Fly River Provincial Government did not lay down a hard-and-fast rule that all persons dealing with public institutions will be deemed to have knowledge of illegalities for lack of statutory compliances. 
 
76.	In Tomala v National Housing Estate (supra), this Court said there are no hard and fast rules in applying the doctrine of quantum meruit. The Court has a discretion to deal with each case on its own merits and factual circumstances to arrive at a conclusion that is just and equitable. 

Remnant Invoice Payments in the sum of USD 193,533.00

77.	I have considered the submissions of parties and refuse the Plaintiff’s claim for the Remnant Invoice payments for the following reasons:

a.	For the same reasons stated in paragraph 62 of the judgment. 
b.	The Plaintiff was paid in full. 
c.	The Plaintiff benefited from an arrangement which fell short of a contract.
d.	The arrangement was illegal from the beginning, and the illegality continued especially after the Board Chairman and the Board rejected the engagement. 
e.	The Plaintiff is highly educated, and knowledgeable and he was aware that his engagement fell short of a valid contract as early as April 2013 yet chose to continue in this ad hoc arrangement.
f.	To order remnant payment would amount to unjust enrichment to the Plaintiff because he had already benefited from the initial payments he received under the invalid contract.

Investigation and report on Defendant’s HQ Air Condition- PNGK 121,000.00 

78.	I have considered the submissions of the parties and reject the claim for the following reasons:

a.	For the same reasons in paragraph 64 of the judgment.
b.	The Plaintiff’s ad hoc arrangements were terminated by the Defendant’s Board of Directors in July 2013 and any service undertaken after August 2013 was unauthorized.
c.	Plaintiff has not provided evidence of how he was engaged in the investigative work on the air conditioning system
d.	The evidence presented by the Defendant shows it did not benefit from the service provided.

Wages and vehicle allowance for period 1st December 2013 to 31st July 2014 in the sum of USD 551,760.00 & PNGK 84,700.00 respectfully.

79.	I have considered the submissions of the parties in respect of this claim and reject the claim for the following reasons:

a.	I reject the claim for the same reasons given in paragraph 66 of the judgment.
b.	The claim for US$ 551,760.00 in wages for consultancy services is substantial but there is no evidence of the work actually undertaken. 
c.	There is no evidence of engagement by the Defendant after the initial arrangement was terminated in July 2013.
d.	There is no evidence that the Defendant benefited from the Plaintiff’s engagement.
e.	The Plaintiff is not innocent. He was aware his continuous engagement was rejected by the PNG Power Board of Directors starting May 2013 with eventual termination on 24th July 2013.

80.	I reiterate that the Defendant is a State-owned entity. It is run and controlled by a Board of Directors. The management is subject to the direction and supervision of the Board. The management cannot manage the company in isolation and in defiance of the lawful directions of the Board. Management is answerable to the Board just as much as the Board is answerable to the Shareholder. 
  
81.	The Plaintiff was aware of the position taken by the Board as early as May 2013 and the decision of the Board in July 2013. He is not innocent nor faultless to benefit from an unenforceable contract based on quantum meruit. 

Conclusion

82.	In the end, the Plaintiff has the burden of proof. He has not discharged the burden on the balance of probabilities. The Plaintiff’s claim shall therefore be dismissed based on all the reasons given in the judgment.

Costs

83.	Generally, costs follow the event, that is, the successful party is entitled to costs. The Defendant has succeeded in defending the proceedings. The Defendant shall be entitled to costs.

Orders

84.     The Court orders that:

a.	The Plaintiff’s entire proceeding is dismissed.

b.	The Plaintiff shall pay the Defendant’s cost of the proceedings, to be taxed, if not agreed.

c.	Time be abridged

_____________________________________________________________
Lawyers for the plaintiff:  Gamoga & Co. Lawyers
Lawyers for the defendant: Dentons PNG Lawyers