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Zeal Hire Car (PNG) Ltd v Wara [2023] PGNC 72; N10195 (24 February 2023)

N10195

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1601 OF 2014

BETWEEN:

ZEAL HIRE CAR (PNG) LTD

- Plaintiff-

AND:

JEFFERY WARA

-First Defendant-

AND:

MICHAEL LOHIA

-Second Defendant-

AND:

ROKO KOLOMA

National Statesian

-Third Defendant-

AND:

THE INDEPENDENT STATE OF PAPUA NEW GUINEA

-Fourth Defendant-

Waigani: Tamade AJ

2022: 27^th September

2023: 24^th February

CONTRACT – contract for supply of hire car to State organisation – agreement made bypassed requirements set under Public Finance (Management) Act – Sections 59 and 61 – illegal and unenforceable contract – quantum meruit not pleaded – court exercised discretion to grant damages on quantum meruit – plaintiff negligent in not checking its vehicles

PRACTICE AND PROCEEDURE – assessment of damages after default judgment granted – unjust to let Plaintiff go without damage- reasonable damage granted on quantum meruit basis

Cases Cited:
Maku v Maliwolo [2012] PGSC 5; SC1171
Mel v Pakalia [2005] PGSC 36; SC790
Wapi v Ialy [2014] PGSC 32; SC1370
Fly River Provincial Government v Pioneer Health Services Ltd [2003] PGSC 4; SC705
National Broadcasting Commission v Tasion [2019] PGNC 266; N8083
Baikisa v J & Z Trading Ltd [2016] PGNC 13; N6181
The State v Barclay Bros (PNG) Ltd (2004) N2507
Delphi Corporate Investigations v Bernard Kipit (2003) N2480
Leontine Ofoi v Kris Bongare (2007) N3248
Steven Kurik v Mathew Gubag [2013] PGNC 299; N5132

Legislation:

Public Finances (Management) Act 1995 (as amended)

Counsel:
Mr. Michael Norum, for the Plaintiff’
Mr. Robbie Kebeya, for the Defendants

24^th February, 2023

1. TAMADE, AJ: The Plaintiff claims that it had supplied three vehicles for hire to the National Statistical Office during the period of the National Population and Housing Census in 2010. The Plaintiff claims that the arrangement to hire the said vehicles was done through the Third Defendant Mr. Roko Koloma who was the National Statistician at the time. The Plaintiff and Mr. Koloma and the First Defendant as his officer signed various Motor Vehicle Rental Agreements and three vehicles were given to the Defendants for hire during the census period.
   
2. On 25 February 2013, the Plaintiff requested for the return of his vehicles as the bills were accumulating and remained unpaid, and that the census period had passed. The Plaintiff claims that two of the vehicles were returned except a Toyota Land Cruiser, 10-Seater Trooper, beige in colour with the registration number BCV 408. This vehicle was said to be in an accident on 17 November 2012. The Plaintiff claims it had no knowledge of the accident until later when it was informed by the First Defendant that the vehicle was towed from 8 Mile to a workshop at Hanuabada village. It was also later revealed that the First Defendant had released the vehicle to a person by the name of Kenneth Huafolo who drove the vehicle to drop his relatives at the Bomana Police College when the said accident happened.
   
3. The Plaintiff, therefore, claims for the loss of use and profits from the third motor vehicle which was damaged in the accident as well as other costs for repairs, etc, and the unpaid invoices from the hire of the three vehicles.
   
4. The Plaintiff was granted default judgment on 15 March 2016. There is a written decision by Justice David on file. There was also an application to set aside the default judgment by the State which was heard before Justice Polume-Kiele on 27 September 2016 and a ruling was handed down on 24 August 2018 refusing the application.
   
5. This is therefore a decision on assessment of damages after the entry of default judgment.
   

Has the Plaintiff sufficiently pleaded the cause of action?

6. After the grant of default judgment, the Court in assessing damages has a duty to carefully appraise itself that the Plaintiff has sufficiently pleaded his cause of action and that the evidence supports the claim pleaded. A court can not blindly award judgment, it must do so after being satisfied that the cause of action is one that is identified in law, has been sufficiently pleaded, and that the Plaintiff has proven his or her losses to warrant a grant of damages. In the case of Maku v Maliwolo^[1] the Supreme Court said this:
   

“As a general rule, a default judgment entered by consent or otherwise determines the issue of liability and the only issue for determination by the Court is an assessment of damages. Therefore, it is not open to the Court to revisit or relook at the issue of liability. However, there is an exception in cases where the pleadings do not disclose a cause of action in law. William Mel -v- Coleman Pakalia, The Police & The State (2005) SC790; Titus Wambun -v- The Commissioner of Police & The State (2009) N3787 and Keith Reith -v- Murray Hallam and Allcad Pty Ltd (1995) N1337 referred to.”

7. There are therefore exceptions to the Court revisiting the issue of liability and one such instance is where the pleadings do not sufficiently disclose a cause of action in law. The Supreme Court also decided in Wapi v Ialy^[2] that where the Court is of the view that the claim is vexatious and or frivolous or is an abuse of process etc, the Court has the discretion to refuse to make any award of damage rather than dismissing the claim. A claimant therefore can be awarded nothing in such instances.
   
8. In Mel v Pakalia^[3], the Supreme Court said this:
   

“The plaintiff has the onus of proving his loss on the balance of probabilities. It is not sufficient to make assertions in a statement of claim and then expect the court to award what is claimed. The burden of proving a fact is upon the party alleging it, not the party who denies it. If an allegation forms an essential part of a person’s case, that person has the onus of proving the allegation. (Yooken Paklin v The State (2001) N2212, National Court, Jalina J.)

• Corroboration of a claim is usually required and the corroboration must come from an independent source. (Albert Baine v The State (1995) N1335, National Court, Woods J; Kopung Brothers Business Group v Sakawar Kasieng [1997] PNGLR 331, National Court, Lenalia J.)

• The principles of proof and corroboration apply even when the defendant fails to present any evidence disputing the claim. (Peter Wanis v Fred Sikiot and The State (1995) N1350, National Court, Woods J.)

• The same principles apply after default judgment is entered and the trial is on assessment of damages – even when the trial is conducted ex parte. A person who obtains a default judgment is not entitled as of right to receive any damages. Injury or damage suffered must still be proved by credible evidence. (Yange Lagan and Others v The State (1995) N1369, National Court, Injia J.)

• If the evidence and pleadings are confusing, contradictory and inherently suspicious, the plaintiff will not discharge the onus of proving his losses on the balance of probabilities. It is conceivable that such a plaintiff will be awarded nothing. (Obed Lalip and Others v Fred Sikiot and The State (1996) N1457, National Court, Injia J.)

• Where default judgment is granted, for damages to be assessed on a given set of facts as pleaded in a statement of claim, the evidence must support the facts pleaded. No evidence will be allowed in support of facts that are not pleaded. (MVIT v Tabanto [1995] PNGLR 214, Supreme Court, Kapi DCJ, Hinchliffe J, Sevua J; Waima v MVIT [1993] PNGLR 370, Supreme Court, Kapi DCJ, Jalina J, Doherty J; Tabie Mathias Koim and 28 Others v The State and Others [1998] PNGLR 247, National Court, Injia J.)

• The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages. Where precise evidence is available the court expects to have it. However, where it is not, the Court must do the best it can. (Jonathan Mangope Paraia v The State (1995) N1343, National Court, Injia J.)”

9. I am of the view that the Plaintiff has pleaded in its Statement of claim that it has an agreement signed by the officers of the National Statistical Office and therefore the Plaintiff is relying on the legality and or the validity of such an agreement to pursue this claim. Mr Kebeya has submitted the case of Fly River Provincial Government v Pioneer Health Services Ltd^[4] which the Supreme Court held that:
   

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.

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.

10. Section 59 of the Public Finances (Management) Act is in the following terms:
    

59. CONTRACTS FOR WORKS AND SERVICES.

(1) Subject to Subsection (2), tenders shall be publicly invited and contracts taken by a public body to which this Act applies for all works, supplies and services the estimated cost of which exceeds such sum as is specified in its constituent law or declared by the Minister.

(2) Subsection (1) does not apply to any works, supplies and services–

(a) that are to be executed, furnished or performed by the State, or an arm, agent or instrumentality of the State approved by the Minister for the purposes of this subsection; or
(b) in respect of which the public body certifies that the inviting of tenders is impracticable or inexpedient.

11. Section 61 of the Act is in the following terms:
    

1. 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).

12. There is no pleading in the Plaintiff’s Statement of Claim that the said contract had gone through the process under the Public Finance (Management) Act to support the proposition that the contract is a legal contract. There is also no evidence to support this proposition by the Plaintiff. The evidence is that the contract was just signed by the Officers of the National Statistical Office. The evidence also shows that the invoices for each of the three vehicles hired exceeded the amount of K450 000 plus. Together, the total claim is in excess of over K1 million. Why should the State pay an amount in excess of K1 million for an illegal contract that did not go through the process under the Public Finance (Management) Act? To honour such an agreement is to validate the negligence of those in management of public office who are supposed to comply with the law in terms of how contracts or work is awarded and services received. If vehicles were needed for census by the National Statistical Office, does the National Statistical Office have a capped budget within their Department for such expenses? Why should the expense of hire cars be thrown to the big purse of the State to pay for when it is clearly in excess of K1 million? The exorbitant claims against the State we see every day in and out of the Court use the State as a milking cow when claims do not comply with the requirements of the law and or are stacked up to milk the State.
    
13. I find that the pleadings in the Plaintiff’s Statement of Claim suspicious as it does not plead the legality of the contract as it is contracting with a State agency or department. On reviewing the evidence, I find that the Plaintiff’s alleged contract for the provision of hire cars is contrary to the provisions of the Public Finance (Management) Act and therefore the contract is clearly illegal and void of any effect.
    
14. Given that the illegal contract was acted upon by the Plaintiff and the officers of the National Statistical Office, it is not clear when actually did the work for the census happened and when it concluded as the invoices seems to be for a period starting from 11 November 2011 to 28 February 2013, a period of more than a year.
    
15. I therefore find that as in the case of National Broadcasting Commission v Tasion^[5], the Plaintiff failed to do its due diligence before contracting with the State. Once it handed over its vehicles, it blindly left it in the care of the Officers of the National Statistical Office and did nothing to check on its vehicles only to send invoice after invoice which got lost and new invoices had to be raised again.
    
16. I refuse to consider the claim for negligence for the damage done to one of the vehicles as again, this claim is based on an illegal contract and also that the evidence does not sustain the allegations. The claim is not for vicarious liability and the State therefore should not be bound to pay for the negligence of its officers if they were out using the vehicle for their personal gain and not in the course of their employment. The Plaintiff has therefore not proven the elements of negligence as set out in the case of Baikisa v J & Z Trading Ltd^[6].
    
17. The Plaintiff has also not pleaded the claim of quantum meruit in the event the contract is not upheld by the Court.^[7] The conduct of both the Plaintiff and the National Statistical Office in my view was ignorant and deliberate to circumvent and or blatantly ignore the due lawful process using the Public Finance (Management) Act. In the exercise of the Court’s discretion, on the basis that the Plaintiff has provided some service to the National Statistical Office for the hire of his vehicles, the Court will consider some compensation as quantum meruit. In the case of Steven Kurik v Mathew Gubag^[8], Justice Cannings has set out the elements of a quasi-contract or circumstances that proved that warrants the Court treating the parties as if they had a contract. It would therefore be unjust to let the party providing the service go without some sort of remuneration.
    
18. The Plaintiff’s entire claim is K1 387 980 plus loss of income and other costs. The court will award an amount of K150 000 for the use of each hire car vehicle for use at the time of the national census in 2010. It is my considered view that the hire vehicles may also be used for personal gain by the officers of the National Statistical Office beyond the period of the census. The resources of the State should not be misused by its own officers, servants and agents.
    
19. The Court orders that:
    
    1. The Plaintiff is granted judgment as quantum meruit in the sum of K150 000.00.
    2. Interest at 2 percent is granted on this judgment sum pursuant to the Judicial Proceedings (Interest on Debts and Damages) 2015.
    3. Costs is awarded to the Plaintiff to be taxed if not agreed.
       

Orders accordingly.

Michael Norum Lawyers : Lawyers for the Plaintiff
Office of the Solicitor General : Lawyers for the Defendants

^[1] [2012] PGSC 5; SC1171 (2 March 2012)
^[2] [2014] PGSC 32; SC1370 (4 July 2014)
^[3] [2005] PGSC 36; SC790 (1 July 2005)

[4] [2003] PGSC 4; SC705 (24 March 2003)
[5] [2019] PGNC 266; N8083 (28 October 2019)

^[6] [2016] PGNC 13; N6181 (12 February 2016)
^[7] Quantum meruit as a cause of action- see The State v Barclay Bros (PNG) Ltd (2004) N2507, Delphi Corporate Investigations v Bernard Kipit (2003) N2480, and Leontine Ofoi v Kris Bongare (2007) N3248

[8] [2013] PGNC 299; N5132 (5 April 2013)