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Kwa v Naces Ltd (1-73581) [2022] PGNC 386; N9866 (31 August 2022)

N9866

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 262 OF 2021

BETWEEN:

DR ERIC KWA PhD- ATTORNEY GENERAL AND SECRETARY FOR JUSTICE

- Plaintiff/First Cross Defendant-

AND:

THE INDEPENDENT STATE OF PAPUA NEW GUINEA

Second Plaintiff/ Second Cross Defendant

AND:

NACES LIMITED (1-73581)

-First Defendant/First Cross Claimant-

AND:

FELIX KANGE

-Second Defendant/ Second Cross Claimant-

Waigani: Tamade AJ

2022: 30^th & 31^st August

LIMITATIONS OF ACTIONS – Claims By and Against the State Act 1996, Section 5 – cross-claim – whether Section 5 Notice is a precondition when making a cross-claim.

CONTRACT – specific performance – incomplete project by Defendants – breach of contract by Plaintiff.

PRACTICE AND PROCEDURE – application to dismiss proceedings for being statute bared, frivolous, vexatious, and abuse of process – application for default judgment for failure to file defence to cross-claim – application for failure to give Section 5 Notice before filing cross-claim – entire proceedings and cross-claim dismissed.

Cases Cited:

Oil Search Ltd v Mineral Resources Development Corporation Ltd [2010] PGSC 12; SC1022
Bluewater International Ltd v Mumu [2019] PGSC 41

Legislation:

Claims By and Against the State Act

Counsel:

Mr. Isaac David, for the Plaintiffs/ Cross Defendants
Mr. Derrick Dusava, for the Defendants/Cross Claimants

31^st August, 2022

1. TAMADE AJ: This is a ruling on the Defendants/ Cross Claimants Notice of Motion filed on 5 June 2022 seeking a dismissal of these proceedings for being statute barred and for being frivolous, vexatious, and an abuse of the process of Court and to enter default judgment against the Cross Claimants for failure to file a Defence to the Cross-Claim. This is also a ruling on the Plaintiff/Cross Defendants Notice of Motion filed on 22 June 2022 seeking that the Defendants’ Cross-Claim be dismissed for failing to give section 5 notice pursuant to the Claims By and Against the State Act.

2. This is a claim by the State against the Defendants for specific performance of a contract entered into with the Defendants for the construction of a New Transit Medical Store for Kiunga in Western Province. The Plaintiff’s evidence shows that the contract was entered into on 14 June 2013. In the Amended Statement of Claim filed by the Plaintiffs/Cross Defendants, the Plaintiffs/Cross Defendants alleges that the Defendants/Cross Claimants took possession of the work site and commenced work in July of 2012. Mr. David of the Plaintiffs/Cross Defendants conceded that the pleadings in paragraph 11 of the Amended Statement of Claim is in error as it should be in July of 2013 as the agreement was entered into in 2013. Mr. David submits that elsewhere in the pleadings and in the Affidavit of one Peter ToAlbert filed on 30 August 2022, the Plaintiffs/Cross Defendants state that the agreement was entered into in 2013. The Defendants/Cross Claimants were to complete the work within 6 months however the work was left incomplete when the Defendants/Cross Claimants abandoned the project or the site in June 2015 after receiving a total payment of K1 029 847.50. The Plaintiffs/Cross Defendants, therefore, seek that the Defendants/Cross Claimants pay damages for breach of contract and or alternatively, that the subject contract be specifically performed by the Defendants/Cross Claimants.

3. The Defendants/Cross Claimants on the other hand in their Cross-Claim claiming for a breach of the subject agreement by the Plaintiffs/Cross Defendants for failure to pay them a sum of K274 237.23 being the balance of the contract fee agreed upon by the parties for the contract price and the Defendants/Cross Claimants also seek specific performance for the Plaintiffs/Cross Defendants to pay them the balance of the contract in which they say is owing.

Statutory Time Bar

4. The Defendants/Cross Claimants application, therefore, seek that these proceedings be dismissed as the claim is statute-barred pursuant to section 16 of the Frauds and Limitations Act. In the case of Oil Search Ltd v Mineral Resources Development Corporation Ltd^[1] the Supreme Court held that:

A proper determination of whether an action involving an alleged breach of contractual obligations is time-barred entails a finding on three matters:

(a) identification of the cause of action;

(b) identification of the date on which the cause of action accrued;

(c) categorization of the cause of action according to whether it is "founded on a simple contract" or "an action upon a specialty".

5. The Defendants/Cross Claimants submit that the Plaintiff’s cause of action as pleaded in the Amended Statement of Claim in paragraph 11 is that the Defendant/Cross Claimant took possession of the site in July of 2012 and that the work was to be completed 6 months from the date of possession. The cause of action would therefore start after 6 months from July 2012 and or around January of 2013 and therefore 6 years from thereon would lapse on or about January of 2019, however these proceedings were filed in 2021 and therefore these proceedings are time-barred.

6. The Plaintiffs/Cross Defendants however conceded that paragraph 11 of the Amended Statement of Claim is in error as it should read in 2013 as the agreement was entered into in 2013. The Plaintiffs/Cross Defendants rely on the Affidavit of Mr. Peter ToAlbert who is the appointed Contract Manager for the subject contract and submit that the contract was extended by agreement of parties until June of 2015 when the Defendants/Cross Claimants abandoned the project site and never completed the project.

7. I accept the submissions and the evidence by the Plaintiffs/Cross Defendants that the subject agreement was extended and that the cause of action would commence on or about June of 2015 when the Defendants/Cross Claimants left the construction site. These proceedings were filed on 2 June 2015 therefore these proceedings are within the 6-year time period. I refuse the claim for dismissal on being statute barred and find that this is not a vexatious or frivolous claim.

Plaintiff’s failure to file a Defence to the Cross-Claim and the issue of section 5 notice pursuant to the Claims By and Against the State Act on the Cross-Claim

8. The Defendants/Cross Claimants also seek that default judgment be entered on the cross-claim as the Plaintiffs/Cross Defendants have failed to file a Defence to the cross-claim. There is a clear default on the Plaintiffs/Cross Defendants’ failure to file a Defence to the cross-claim however there are other considerations the Court should take into account in the exercise of its judicial discretion in a default judgment application.^[2]

9. One of the considerations in my view in the exercise of the Court’s discretion looking at the terms of the contract entered into between the parties as also decided in the Bluewater International Ltd v Mumu^[3] case is on the subject contract and the provisions of that contract. At clause 4.14 of the subject contract, it refers to adjudication and arbitration wherein both parties have agreed that in the event there are disputes in the project, those disputes will be adjudicated upon and subsequently, if adjudication fails then the matter shall proceed to arbitration. All parties have stated that neither has taken any step to adjudicate on the matter and or refer the matter to arbitration as per their agreement in the express provisions in the contract. In line with what the Supreme Court considered in the Bluewater International Ltd v Mumu, there could be a flaw in these proceedings as parties have agreed to be bound by their own agreement to have the matter adjudicated upon and subsequently their disputes shall be resolved through arbitration, and it is on that basis that the application for default judgment on the cross-claim is refused.

10. In regard to the Plaintiffs/Cross Defendants’ contention that the Defendants/Cross Claimants have failed to issue a section 5 notice pursuant to the Claims By and Against the State Act, Mr Dusava submits that the cross claim is triggered and or initiated by the substantive claim and that it does not exist on its own and therefore there is no requirement to give section 5 notice on the cross-claim. Mr. David on the other hand submits that the cross-claim falls within the meaning of a claim as against the State pursuant to section 5 of the Claims By and Against the State Act.

11. Are the Defendants/Cross Claimants required to give a section 5 notice pursuant to the Claims By and Against the State Act in regard to the cross-claim?

12. Section 5 of the Claims By and Against the State is in the following terms:

5. NOTICE OF CLAIMS AGAINST THE STATE.

(1) No action to enforce any claim against the State lies against the State unless notice in writing of intention to make a claim is given in accordance with this section by the claimant to–

(a) the Departmental Head of the Department responsible for justice matters; or
(b) the Solicitor-General.

(2) A notice under this section shall be given–

(a) within a period of six months after the occurrence out of which the claim arose; or
(b) where the claim is for breach of a contract, within a period of six months after the claimant became aware of the alleged breach; or
(c) within such further period as–

(i) the Principal Legal Adviser; or
(ii) the court before which the action is instituted,

on sufficient cause being shown, allows.

(3) A notice under Subsection (1) shall be given by–

(a) personal service on an officer referred to in Subsection (1); or
(b) leaving the document at the office of the officer with the person apparently occupying the position of personal secretary to that officer between the hours of 7.45 a.m. and 12 noon, or 1.00 p.m. and 4.06 p.m., or such other hours as may from time to time be declared by or under the Public Services (Management) Act 1995 to be the normal public service hours of duty, on any day which is not a Saturday, Sunday or a public holiday declared by or under the Public Holidays Act 1953.

13. I am of the view that the cross-claim is a claim as against the State therefore section 5 of the Claims By and Against the State Act does apply to the cross-claim. It can be said to have been triggered and or is in response to the substantive claim nevertheless, it is still a claim as against the State. It’s cause of action should be from the time the Plaintiff alleges that the Plaintiffs breached the agreement by the non-payment of the sum of K274 472.23 as and when it should have been paid. The Court is not assisted by any case law on the matter by either counsel.

14. Going back to the terms of the subject contract as between the parties, I find that clause 4.14 of the subject agreement wherein both parties agree to be bound by their own agreement that where a dispute arises in regard to the project, the parties would resort to the matter be adjudicated and where adjudication fails, the parties will refer the matter to arbitration. Nowhere in the agreement did the parties agree that they will run to Court to resolve their issues. These proceedings appear to be flawed on this basis and therefore in the exercise of the Court’s discretion pursuant to Order 12 Rule 1 and Section 155(4) of the Constitution, the substantive claim, as well as the cross-claim, shall be dismissed forthwith.

15. The Court, therefore, makes the following orders:

1. These proceedings and the cross-claim are dismissed in their entirety.
2. Each party shall bear its own costs.
   

Orders accordingly.
________________________________________________________________
Akia & Associates Lawyers: Plaintiffs/Cross Defendants Lawyers
B.S Lai Lawyers: Defendants/Cross Claimants Lawyers

^[1] [2010] PGSC 12; SC1022 (30 April 2010)

^[2] Bluewater International Ltd v Mumu (2019) PGSC41- the Supreme Court held that the National Court had the discretion to bring up the issue of section 5 notice against the State pursuant to the Claims by and Against the State Act even though it was not raised by parties as in the exercise of judicial discretion in a default judgement application.

^[3] Supra N2