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Gigira Development Corporation Ltd v Kurumbukari Ltd [2021] PGNC 550; N9376 (6 August 2021)

N9376

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1036 OF 2012

GIGIRA DEVELOPMENT CORPORATION LIMITED
Plaintiff

-V-

KURUMBUKARI LIMITED
Defendant

Waigani: Kariko, J
2021: 2^nd June & 6^th August

CONTRACT – alleged breach of – joint venture agreement – partner permitted to meet financial obligation of other partner and claim as debt - whether breach established – alternative claim for quantum meruit

Cases Cited:

Anio v Baliki (2004) N2719
Curtain Brothers (QLD) Pty Ltd &Kinhill Kramer Pty Ltd v The Independent State of Papua New Guinea [1993] PNGLR 285
Shell PNG v Speko Investments Ltd & Anor (2004) SC676

Counsel:

Mr D Bidar, for the Plaintiff
No appearance for the Defendant

JUDGMENT

6^th August, 2021

1. KARIKO, J: The plaintiff is suing the defendant for breach of a joint venture agreement the parties entered into on 19^thJune 2008 (the Agreement) and it is claiming damages resulting from the alleged breach.
   
2. The defendant did not appear at the trial despite having filed a Defence and having been duly notified of the hearing date.
   

EVIDENCE

3. The plaintiff tendered six affidavits into evidence, all sworn by Paul Kemga, its Finance Manager:
   
   • (1) Affidavit filed 04.11.13 (Exhibit P1)
   • (2) Affidavit filed 05.05.17 (Exhibit P2)
   • (3) Affidavit filed 16.08.17 (Exhibit P3)
   • (4) Affidavit filed 26.10.17 (Exhibit P4)
   • (5) Affidavit filed 01.12.17 (Exhibit P5)
   • (6) Affidavit filed 28.10.20 (Exhibit P6).
     
4. The affidavits disclose the following relevant facts.
   
5. The plaintiff is in the business of providing a number of services (the Services) including:
   
   • security guards and services;
   • hire and recruitment of personnel; and
   • technical, business and management consultancies.
     
6. The defendant company was established to represent the commercial interests of the traditional landowners of the Ramu Nickel and Cobalt Project () located at the Kurumbukari Special Mining Lease, Madang Province (the Project.
   
7. The parties intended to establish a joint venture enterprise (the JV) that would provide the Services to local contractors, subcontractors and suppliers engaged by the Project from time to time. In pursuance of that objective, the parties executed the Agreement which provided for the plaintiff to manage the JV.
   
8. The provisions of the Agreement referred to by the plaintiff as relevant to its claims are:
   
   • Clause 2.02 - each party shall hold a fifty percent (50%) interest in the profits and losses of the JV.
   • Clause 2.04 - each party shall contribute equally to the funds of the JV. If one of the parties is unable to provide funds required by the JV, the other may at its sole discretion provide funds in excess of its share, and the excess funds will be treated as a loan to the JV.
   • Clause 2.06 - each party shall do all things necessary to give effect to the Agreement and to enable the JV to operate in the best interest of both parties.
   • Clause 4.02(i) - each party irrevocably and unconditionally indemnifies and keeps indemnified the other party from and against any liability and loss suffered as a result of any act or omission done by it in connection with the JV, not authorized by the Agreement or any resolution of the Management Committee.
   • Clause 4.02 (ii) - if a party incurs a liability for the purpose of the JV greater than its obligations, the other party shall indemnify and account to the amount incurred so that such liability is shared equally.
   • Clause 6.01 - the plaintiff is appointed the manager of the JV.
   • Clause 6.02 – the manager shall have possession and control of the assets of the JV.
   • Clause 6.05(i) - the manager shall do all things necessary for the efficient conduct of the JV.
     
9. From February 2009 to the end of May 2010, the plaintiff issued the defendant 21 invoices totaling K406,312.03 which it says were the defendant’s share of the costs and expenses for the startup of the JV.
   
10. Details of the invoices from copies produced into evidence are:
    

11. The defendant repaid K23,740.00 in respect of only three (3) invoices:
    

12. The plaintiff claims the balance of K382,572.03 as still owing by the defendant.
    

SUBMISSIONS

13. The plaintiff argues that the Agreement is a binding contract as the essential elements of a valid legal contract exist. Further, the terms agreed to were reduced in writing to comprise the Agreement, and the document should speak for itself to the exclusion of extrinsic evidence. In support of these submissions, the plaintiff cited Shell PNG v Speko Investments Ltd & Anor (2004) SC676.
    
14. It is also submitted that the claimed debt arises from a breach of the Agreement by the defendant, and in particular, the defendant’s obligation under Clause 2.04. The defendant was obliged to meet the startup costs of the JV but as it did not have the funds, the plaintiff paid the costs. Pursuant to the Agreement, that amount became a debt owed to the plaintiff by the defendant.
    

CONSIDERATION

15. While I am satisfied that the Agreement (copy of which is Annexure PK1 of Exhibit P1) is a duly signed legally binding contract, I view the central issue on trial to be whether the Agreement was breached as alleged by the plaintiff.
    
16. The main provision of the Agreement relied upon by the plaintiff is Clause 2.04, which reads:
    

“Each Party shall contribute equally to the funds of the Joint Venture SAVE in the event one Party is unable to provide funds required by the Joint venture then the other Party may at its sole discretion provide funds in excess of the other Party and any such excess funds will be treated as a loan to the Joint Venture.” (my emphasis)

17. Summarized, Clause 2.04 provides:
    
    • The parties shall contribute equally to the funds of the JV; and
    • If one party cannot meet its share, the other may fund that share; and
    • That extra funding is treated as a loan to the JV.
      
18. In this case, the plaintiff says that the invoiced amount of K406,312.03 was for startup costs of the JV.
    
19. However, the plaintiff did not produce any evidence has to show if there was a budget or financial plan that showed details of the financial requirements to establish the JV and commence operations. Such a plan would no doubt have required the endorsement of the parties, or the defendant ought to have at least been informed of the required funding.
    
20. Further, the evidence does not show or provide particulars of how the invoiced expenses related to the startup of the operations of the JV:
    
    • Why were the vehicles/trucks hired, and what was the nature of the cartage?
    • What were the security costs for?
    • What was the purpose of the new vehicle?
    • What did the telephone charges relate to?
    • What are the details of the office rental?
      
21. It is also noted that the plaintiff did not produce evidence to confirm that the startup costs were put to the defendant who then advised that it could not pay its 50% share.
    
22. The law is that generally where parties have reduced their agreement into writing, the document should be allowed to speak for itself. No extrinsic evidence can be allowed to add to, subtract from or contradict the language of the written document; Shell PNG v Speko Investments Ltd & Anor (supra), Curtain Brothers (QLD) Pty Ltd &Kinhill Kramer Pty Ltd v The Independent State of Papua New Guinea [1993] PNGLR 285, and Anio v Baliki (2004) N2719. An exception to the general rule is that the extrinsic evidence may be used to resolve any ambiguity and to decide what the parties had in their minds when they negotiate the agreement; Bank of New Zealand v Simpson [1900] UKLawRpAC 6; (1900) AC 182. The plain, ordinary or natural meaning is usually accorded to a word used by the parties to express a term, unless the context warrants otherwise.
    
23. Under Clause 2.04, each party is to contribute equally to the funding needs of the JV, so if the invoiced amount was in fact for the startup costs of the JV, the defendant would have been obliged to meet half of those costs. Also, according to Clause 2.04, where one party pays the share of funds due from the other party, the extra payment by the first party “will be treated as a loan to the Joint Venture”. There is no ambiguity in reading this phrase. Applying the plain and ordinary meaning of the words contained in the phrase, what Clause 2.04 states is that the extra payment by the first party is a loan to the JV. In other words, the JV owes the extra payment as a loan to it by that party. It is a debt that is owed by the JV. To my mind, the fact that the defendant paid some of the invoices is of no consequence.
    
24. The debt claimed by the plaintiff, if properly grounded on Clause 2.04, should be made against the JV and not the defendant. The claim for breach of contract must accordingly be refused.
    
25. In any event, I find that the JV has never existed as a legal entity. Clause 2.01 of the Agreement states that “The Parties agree to form and engage in an incorporated joint venture companies (sic) ...for the purpose of carrying on the business contemplated in this Agreement” (my emphasis). There is no evidence that the parties executed this provision. In my view, the JV could not legally operate pursuant to the Agreement without the JV being first incorporated as a company.
    
26. As to the alternative claim by the plaintiff for damages based on quantum meruit, I refer to the lack of relevant evidence I earlier highlighted in [20] – [22]. I am not satisfied the invoices relate to work done for purposes of the JV, which I have determined never legally came into existence. I find therefore that the alternative claim has not been properly made out.
    
27. The upshot of the foregoing is that I dismiss the entire proceeding. Although costs normally follow the event, I make no order as to costs as the defendant did not appear at the trial.
    

ORDER

(1) This proceeding is dismissed.
(2) Time for the entry of these orders shall be abridged to the date of settlement by the Registrar, which shall take place forthwith.

________________________________________________________________
Goodwin Bidar Nutley Lawyers: Lawyers for the Plaintiff
GP Lawyers: Lawyers for the Defendant