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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
WS NO. 430 OF 2023 (IECMS)
BETWEEN:
EMJ ELECTRICAL (PNG) LTD
Plaintiff
AND:
THE NATIONAL PARLIAMENT
First Defendant
AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Defendant
WAIGANI: BRE, AJ
20 DECEMBER 2024; 17 JANUARY 2025
CIVIL PRACTICE AND PROCEDURE – Summary dismissal application – whether claim is frivolous - verbal agreement – public finance – claim beyond financial threshold - services rendered – whether claim for restitution- condition of innocence in causing illegality not met – proceeding dismissed.
Cases cited
Bani Investment Ltd v Parkop [2021] N9050
Fly River Provincial Government v Pioneer Health Services Limited [2003] SC705
Kerry Lerro v Phillip Stagg & Ors [2006] N3050
Kiee Toap v The State and Electoral Commission and Another [2004] N2766
Mount Hagen Urban Local Level Government v Sek No 15 Ltd [2009] SC1007
PNG Forest Products Pty Ltd and Another v The State and Genia [1992] PNGLR 85
Steven Turik v Mathew Gubag [2013] N5132
Takori v Yagari [2007] SC905
Teine v University of Goroka [2019] SC1881
Toap v State [2004] N2766
Counsel
Mr M John for the plaintiff
Mr R Lains for the first defendant
Ms E Wungin for the second defendant
RULING
2. The first defendant raised two preliminary issues going to competency of the proceeding concerning proper naming of the first defendant and the plaintiff not pleading service of prior notice on the State pursuant to Section 5 of the Claims By and Against the State Act 1996 (CBASA).
3. Apart from these two issues, the third more substantive issue concerns the legality of the plaintiff’s engagement by the former clerk of the Parliamentary Services, Mr Vela Konivaro. I will address this issue first as it is a determinant issue.
4. On 12 October 2018, the plaintiff was verbally invited to service and install LED lights within the garden of the grounds of the National Parliament in preparation for the international APEC meeting that was scheduled to be hosted by PNG from 15 November 2018. Three days before the APEC meeting, the plaintiff completed the maintenance and installation of the LED lights.
5. The plaintiff invoiced the Parliamentary Services a total bill of K985, 380.00. This amount has not been paid and remains outstanding. The plaintiff seeks liquidated damages in the sum of K985,380.00 plus loss of business and costs.
6. Counsel for the plaintiff submits that the plaintiff is entitled to be restituted for services rendered on a quantum meruit basis and relies on evidence from two correspondences and the case of Fly River Provincial Government v Pioneer Health Services Limited [2003] SC705.
7. The applicant challenged the legal foundation of the pleadings and clarified that it will proceed with its submissions on the assumption that the claim is for restitution of services rendered to the alleged value of K985,380.00.
8. It is trite law that a properly pleaded claim should concisely plead the legal foundation or basis of the claim and the factual allegations to disclose that it has a reasonable cause of action against a defendant. See Kiee Toap v The State and Electoral Commission and Another [2004] N2766 and Takori v Yagari [2007] SC905. That an action is frivolous where it is bound to fail because the legal foundation of the claim is wanting. See Mount Hagen Urban Local Level Government v Sek No 15 Ltd [2009] SC1007.
9. The main contention concerns the statement of claim filed on 7 September 2023 which pleads that the plaintiff rendered services upon the invitation of the Clerk of Parliament. That it inspected and replaced the lights with LED lights, including solar lights imported from abroad. No written contract is pleaded. The services were rendered based on a verbal invitation by the Clerk of Parliament.
11. The issue for deliberation concerns whether there is a valid legal foundation for the claim or in other words, whether the claim is tenable and there is a reasonable cause of action disclosed by the pleadings given the verbal nature of the agreement.
12. To validly enforce a claim against the State in contract or for the supply of goods or services, there must be authority to pre-commit public expenditure or an Integrated Purchase Order and Claim (ILPOC) or a written contract. See CBASA Section 2A and section 47D of the Public Finance (Management) (Amendment) Act 2016 (PFMA). The language of these provisions refer to written agreements not verbal agreements.
Section 2A CBASA provides: -
"2A. Claim Against the State Not Enforceable in Certain Circumstances.
(1) ...
(2) A claim for the ... supply of goods or services to the State shall not be enforceable, through the courts or otherwise, unless 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 ... goods or services, the subject of the claim, to the full amount of the claim."
(Emphasis added)
Section 47D PFMA reads:-
“47D. CLAIM AGAINST STATE NOT ENFORCEABLE IN CERTAIN CIRCUMSTANCES.
(1) A contract purportedly entered into for and on behalf of the State without full compliance of this Act is null and void and shall not be enforced in any court.
(2) Any property, goods or services supplied under a contract referred to in Subsection (1), may not be sued upon and no claim is enforceable in respect of them, in any court”.
13. Similarly, to sustain a lawful action against the Parliamentary Services, it must be demonstrated that the claim comes within
the legal and financial authority of the Clerk. The legal authority for the plaintiff's engagement to perform the services has not
been pleaded. Section 21(5) of the Parliamentary Service Act 1997 (PSA) limits the Clerk’s financial authority to commit public funds to K300,000.00. Any intended purchases above K300,000.00
must be decided and approved by the internal supply and tenders board of the Parliamentary Services. The Clerk is vested with statutory
powers in Section 21 PSA to ensure this happens.
Section 21(5) PSA states:
"(5) Subject to subsection (2), tenders shall be publicly invited and contracts let for the purchase or disposal of property or stores or the supply of works and services, whose estimated cost exceed the prescribed amount of K300,000.00."
Section 21(3) PSA refers to the Parliamentary Services internal supply and tenders board and requires the Clerk to "make rules for the Service’s Supply and Tenders Board not inconsistent with the Public Finances (Management) Act 1995".
14. Counsel for the plaintiff submits that it is for the Clerk to comply with Section 21 PSA and not the plaintiff. This submission ignores the clear language of statute and practical commercial sense. The plaintiff and other suppliers have a financial interest to ensure they comply with the procurement requirements so they can get paid. The PSA is public legislation that is available for public access. Any prudent businessperson intending to do business with the State or its agencies ought to have some basic knowledge of the State's procurement processes. To ignore such knowledge is to incur a financial risk for the business.
15. It is obvious that the Clerk has no legal authority to financially commit the defendants to the verbal agreement of K985,380.00. It is the internal supply and tenders board that is lawfully mandated to authorise services above the Clerk's financial threshold. This claim is clearly in excess of the Clerk's financial threshold by K505,380.00.
16. For the liquidated claim to be tenable, the plaintiff ought to have pleaded how its claim has legal merit despite the express authority of the internal supply and tenders board and the apparent illegal nature of the verbal agreement.
17. The plaintiff instead, at paragraphs 16 and 20 of the statement of claim, alleges admission of liability by officers of the Parliamentary Services in communication for payment for the services rendered. However, these are factual allegations. The pleading is not adequate and must disclose the legal basis of the claim going to liability. A claim in restitution for services rendered may be supported by equity and case law, however the legal elements of restitution or quantum meruit must be pleaded to disclose the legal basis of the claim.
18. In Steven Turik v Mathew Gubag [2013] N5132 the Court commented that the elements of a cause of action in quantum meruit or restitution are:
19. With due respect, I would add a fourth element of party A or the plaintiff pleading the condition of innocence in not causing the illegality of the arrangement for which it is seeking restitution.
20. In the leading case on restitution or quantum meruit of Fly River Provincial Government v Pioneer Health Services Limited [2003] SC705 the Supreme Court held that a supplier of goods or services rendered from a voidable or illegal contract was entitled to be restituted on a quantum meruit basis despite the illegal or voidable nature of the contract or arrangement. In Teine v University of Goroka [2019] SC188 the Supreme Court clarified that Fly River Provincial Government v Pioneer Health Services Limited did not create an automatic right to restitution for unjust enrichment but subjected it to the condition of innocence by the plaintiff on the cause of the illegality or non-existence of an arrangement or contract.
21. In Bani Investment Ltd v Parkop [2021] N9050 His Honour Shepherd J clarified the concept of innocence as:
"Where a party has a mistaken but genuine belief that a contract exists and has supplied goods or rendered services to another party under that misapprehension, a remedy by way of unjust enrichment is available to that party, provided that the first party is innocent of the cause of the non-existence of the contract."
(Emphasis added)
22. In my view, the condition of innocence must be pleaded to sustain a cause of action in restitution for quantum meruit. Not pleading it results in a crucial defect in the pleadings going to the root of the legal claim in restitution.
23. Despite this however, the evidence of the first defendant (doc 15 and 16) alleges the plaintiff was not innocent in securing the verbal agreement. The plaintiff's pleading at paragraphs 4 to 12 indicates the plaintiff performed the services despite the verbal nature of its engagement. This demonstrates that any claim to restitution is compromised and has little chance of success. It goes to the proceeding being frivolous for not disclosing a reasonable cause of action.
24. In Kiee Toap v The State his Honour Cannings J commented:
"If it is plain and obvious that the statement of claim, even if proved, will not entitle the plaintiff to what he is asking for, it is appropriate to strike out the proceedings on the ground that no reasonable cause of action is disclosed. But the procedure should be confined to cases where the cause of action is obviously and almost incontestably bad. The plaintiff should not be driven from the judgment seat unless the case is unarguable."
25. See also PNG Forest Products Pty Ltd and Another v The State and Genia [1992] PNGLR 85.
In Mount Hagen Urban Local Level Government v Sek No 15 Ltd the Supreme Court considered the principles discussed in Kerry Lerro v Phillip Stagg & Ors and Takori v Yagari and affirmed that:
"[A] frivolous claim is one that is characterized as a claim that is plainly and obviously untenable, that cannot possibly succeed and bound to fail if it proceeds to trial."
26. It is plain and obvious that the claim is bound to fail and is obviously untenable. The former Clerk ought to be personally liable for the plaintiff's financial loss for not complying with the PSA and PFMA which he was mandated by statute to uphold. Public officials are liable to be surcharged for breaching procurement rules pursuant to section 102 PFMA.
27. Still supposing the claim is based on contract law, the legal form of action would be wanting because in contract law, an invitation
to perform a service is not an agreement until the terms of the engagement are agreed upon and accepted by both parties. The terms
pleaded in paragraphs 4 to 13 of the statement of claim are of a simple or verbal agreement. They are not adequate to support the
legal basis for the valuable consideration of the engagement, the undertakings of the Clerk nor other mandatory terms of the services
that would constitute a valid contract.
28. I have considered other factors, such as the length of time of the proceeding, two years, and the date of filing of the summary
dismissal application, 2 August 2024. There was ample time for the plaintiff to consider the issues raised by the applicant on the
merits of the pleading including the naming of the first defendant and pleading of section 5 CBASA notice to the State, but it did not. This goes to the conduct of proceedings by the plaintiff and is viewed unfavorably against the
plaintiff.
29. In any case, the claim cannot proceed further against the defendants in its current form. The first defendant is not the proper party, it is one of the three arms of government and exercises the legislative power of the people. See sections 99 and100 Constitution. The proper party is the Clerk of the Parliamentary Services. Further, the action cannot be enforced against the State due to the voidable agreement and the lack of proper pleading for vicarious liability of the former Clerk's alleged actions or omissions. The pleadings at paragraphs 2 and 3 do not sufficiently plead vicarious liability. These defects can be cured by amendment, however, the defect in the legal form of the claim do not warrant amendment.
30. I have exercised caution in my considerations so as not to drive the plaintiff from the judgment seat. The defects in the pleadings do not go to factual allegations where it can be cured by amendment or an order for further and better particulars but rather, of a fundamental nature affecting the legal basis of the claim. See Kerry Lerro v Phillip Stagg & Ors.
31. For the foregoing reasons, it is my ruling that the legal basis of the claim whether it be in restitution or contract, is untenable. The proceeding is frivolous and discloses no reasonable cause of action and must be summarily dismissed pursuant to Order 12 rule 40(1) (a), (b) and (c) of the National Court Rules.
32. On costs, I exercise my discretion not to make any order for costs, given the circumstances of the plaintiff.
ORDER
33. The formal orders of the Court are:
Orders accordingly,.
________________________________________________________________
Lawyers for the plaintiffs: Solomon Wanis Lawyers
Lawyers for the first defendant: Hardy and Stocks Lawyers
Lawyer for the second defendants: Office of the Solicitor General
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