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Supreme Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]
SCREV NO. 32 OF 2021
BETWEEN
NATIONAL HOUSING CORPORATION
Applicant
AND
NIUGINI BUILDING SUPPLIES LIMITED
Respondent
Waigani: Makail, Kariko & Murray JJ
2023: 18th December
2024: 29th July
SUPREME COURT – Application for review – Review of National Court decision – Entry of summary judgment against National Housing Corporation – Requirement to give notice of intention to make a claim to the State – Constitution – Section 155(2)(b) – Claims By & Against The State Act, 1996 – Section 5(1)
JUDICIAL REVIEW – Application to review decision of National Court – review pursuant to s 155(2)(b), Constitution - Entry of summary judgement – Whether proceedings in National Court incompetent – Notice under s 5, Claims By and Against the State Act 1996 – Whether notice required and given – Whether issue can be argued when not pleaded
STATUTORY INTERPRETATION – WORDS & PHRASES – Literal interpretation – Purposive interpretation – Definition of word “State” – Claims By & Against The State Act, 1996 – Section 5(1)
Facts
The National Court entered summary judgement ordering damages for breach of contract against the National Housing Corporation and
its related company National Housing Estate Limited. Among other grounds for judicial review, it was alleged the primary Judge should
have dismissed the proceedings for being incompetent due to lack of statutory notice to make a claim against the State pursuant to
Section 5 of the Claims By and Against the State Act 1996.
Held:
1. (Per Makail J) (Dissenting) The word the “State” in Section 5 of the Claims By and Against The State Act 1996 must be read literally and it is not necessary to receive evidence to determine whether the National Housing Corporation is charged with the duty and/or responsibility of providing public housing in the country and is not profit-driven but relies on government funding.
2. (Per Makail J) (Dissenting) On its proper construction, the word the “State” in Section 5 of the Claims By and Against The State Act 1996 does not include the National Housing Corporation nor does it mean that the National Housing Corporation is “part of the State” or “an entity of the State”.
3. (Per Makail J) (Dissenting) The duty to give notice of intention to make a claim against the State does not apply to the National Housing Corporation and it is not necessary for the respondent to give Section 5 notice to the State.
4. (Per Makail J) The further grounds of review are fresh grounds because they were not advanced in the National Court and leave is necessary. As the applicant did not obtain leave to advance these fresh grounds of review, they are disregarded. These grounds are:
(a) Judgment sum awarded was in excess of the contract value and without assessment of damages.
(b) The award of interest at rate of 8% per annum exceeded the prescribed rate of 25 per annum and in the absence of a date of commencement of interest under Section 4 of the Judicial Proceedings (Interest on Debts and Damages) Act 2015.
(c) Failure to enter default judgment with damages to be assessed because of serious dispute in relation to the sum owing and due
under the contract.
5. (Per Makail J) In relation to the ground that the National Court erred in the exercise of discretion to refuse to grant the application
for an adjournment, the applicant failed to establish an error in the finding that the reasons for the adjournment were unsatisfactory
and that there was no evidence by affidavit that it will be prejudiced in its defence of the claim.
6. (Per Makail J) The ground on the failure by the National Court to rely on a notice of completion when it entered summary judgment against the applicant is dismissed because on a proper construction of Section 18 and Section 19 of the Building Regulation 1994, they do not say that a certificate of completion is a pre-condition to payment of value of the contract. Secondly, there is no evidence by affidavit from the Managing Director or a responsible officer of the applicant contesting the evidence of the respondent that it completed the work it was tasked to do, and the sum sought.
7. (Per Kariko J & Murray J) The National Housing Corporation is a part of the State for purposes of the Claims By and Against the State Act 1996.
8. (Per Kariko J & Murray J) The plaintiff must plead and show that his case is fully compliant with the law, and in the context of claims against the State, has complied with s 5 of the Claims By and Against the State Act 1996.
9. (Per Kariko J & Murray J) If the issue of want of s 5 notice is raised, the Court is obliged to ascertain if the condition-precedent has been properly pleaded and confirmed by evidence, as the issue goes to jurisdiction.
10. (Per Kariko J & Murray J) The requisite s 5 notice was not given, rendering the proceedings incompetent
11. (By majority) Application for judicial review granted.
Cases Cited:
Papua New Guinean Cases
Paul Tohian & The State v. Tau Liu (1998) SC566
PLAR No. 1 of 1980 [1980] PNGLR 326
Reservation Pursuant to Section 15 of the Supreme Court Act (2001) SC672
Mineral Resources Development Authority v. Mathew Sisimolu (2010) SC1090
University of Technology v. Plumtrade Ltd (2012) SC1209
PNG Power Ltd v. Ian Augerea (2013) SC1245
Mt Hagen Urban Local level Government v. National Housing Corporation: WS No 1194 of 2002 (Unreported & Unnumbered Judgment of 20th April 2004 per Mogish J)
Okram Sakarius v. Chris Tep (2003) N2355
Albert Areng v. Gregory Babia (2005) N2895
Wamena Trading v. Civil Aviation Authority (2006) N3058
Konze Kara v. Public Curator of PNG (2010) N4048
Anawe Megaraka Ona v. National Housing Corporation (2009) N3623 Sarakuma Investment Limited v. Peter Merkendi (2004) N2629
Sengus Investment Limited v. National Broadcasting Corporation (2010) N4129
Public Curator v. Konze Kara (2014) SC1420
Michael Keka v. Pius Yafaet & National Housing Corporation (2018) SC1673
Niugini Building Supplies Ltd v. National Housing Estate Ltd (2020) SC1985
Topi Walun v. National Housing Corporation (2021) N8772
Kopyoto Investment Limited v. National Housing Corporation (2022) SC2339
Amet v Yama (2010) SC1064
Application by Ludwig Patrick Shulze; Review Pursuant to Constitution s155(2)(b) (1998) SC572
Bluewater International Ltd v Mumu (2019) SC1798
Daniel Hewali v Papua New Guinea Police Force (2002) N2233
Kauba v Willie (2021) SC2162
Paul Paraka Lawyers v POSFB (2014) SC1363
Takori v Yagari & Ors (2008) SC905
Overseas Cases
Amalgamated Society of Engineers v. Adelaide Steamship Co Ltd (the Engineer’s Case) [1920] HCA 54; (1920) 28 CLR 129
Project Blue Sky Inc v. Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; 153 ALR 490
Grey v. Pearson [1857] EngR 335; (1857) 6 HLC 61; 10 ER 1216
Australian Boot Trade Employees’ Federation v. Whybrow & Co [1910] HCA 53; (1910) 11 CLR 311
Broken Hill South Ltd v. Commissioner of Taxation (NSW) [1937] HCA 4; (1937) 56 CLR 337
Legislation
Constitution
Claims By and Against the State Act 1996
National Court Rules
Other References
DC Pearce & RS Geddes, Statutory Interpretation in Australia, 7th ed, Lexis Nexis Butterworths, Australia, 2011
Counsel:
Mr C Gagma, for Applicant
Mr N Ako, for Respondent
JUDGMENT
29th July 2024
1. MAKAIL J (Dissenting): The respondent commenced proceedings in the National Court to recover a sum of money it alleged was owed to it by the appellant under a contract for supply of building materials.
Brief Facts
2. On 10th June 2014, the respondent’s lawyers wrote to the Managing Director of the appellant and demanded payment in the sum of K5,159,220.93 and threaten legal action against the appellant and National Housing Estate Limited (“NHEL”) if the sum of money was not paid. The relevant parts of the letter dated 10th June 2014 are as follows:
“Our client, entered into a Memorandum of Agreement with NHC and NHEL on 27th November 2011 under which our client was to rectify and complete the failed housing project at Gerehu Stage 3B in the NCD, previously awarded another contract under the State contract but was not completed. NHC and NHEL were to remunerate our client in the sum of K3.6 million for completion of 21 houses. In the course of its duties, our client was required to incur additional costs for civil site works, on site security, obtaining building permits, inspection reports from NCDC and certificates of completion and occupation from NCDC.
Our client completed the all works by on 30th September 2012 and was given the Certificates of Permissive Occupancy in January 2013. Since then, our client has requested settlement of the contract price from NHC and NHEL. Under the Agreement, our client is entitled to K3.6 million plus additional costs incurred for additional works and variations. Alternatively, the Agreement provides that our client has the option of being given twelve of the houses in the housing project in lieu of monetary remuneration. To date, our client has not been renumerated in either money terms or been given 12 houses within the housing project. Accordingly, NHC and NHEL have breach the Agreement by failing to remunerate our clients as agreed.
Our client was given verbal assurance of your good self as late as February 2014 that its final invoice would be settled however this has not eventuated to date.
We enclose the following documents for your ease of reference:
Payments is settled on completion of contract and issuance of practical completion certificates with invoice/statement within 30 days however, this process of settlement has been breached by NHC. Our client was given verbal assurances that payment would be made, and we reiterate that the last assurance was given on February 2014.
NHC has now issued an eviction notice to our client to vacate the property described as Allotment 56 Section 529, Gerehu Stage 3B, NCD however, NHC and NHEL have neither settled the monies owed to our client under the MOA.”
3. Following this letter, on 13th June 2014 the respondent commenced proceedings WS No 623 of 2014 against the appellant, NHEL and the State. On 03rd September 2014 the National Court ordered the removal of the State as a party (third defendant) from the proceedings. The remaining defendants were the appellant and NHEL.
4. On 22nd October 2014 the National Court entered summary judgment for the respondent in the sum of K4,879,263.21 with 8% interest until final settlement and costs on solicitor/client basis on the grounds that the appellant failed to file a defence, and failure to attend hearing and furthermore, failed to comply with earlier Court directions to settle the matter.
Issues
5. One of the main issues in this review is whether the respondent gave notice of intention to make a claim to the State under Section 5 of the Claims By and Against The State Act 1996 (“CB&AS Act”) (“Section 5 Notice”) prior to commencement of the proceedings against the applicant.
Requirement to Give Notice to the State
6. As noted at [3] supra, there is no question that the respondent was required to give Section 5 notice to the State because the State was one of the defendants. Subsequently, the State was removed as a party by an order of the National Court on 03rd September 2014.
7. In my view, the letter dated 10th June 2014 which is set out at [2] supra and relied upon by the respondent as constituting the Section 5 notice is clearly not one. First, it is not addressed to either the Attorney-General or the Solicitor General and secondly, it is not expressed as a notice of intention to make a claim against the State for the outstanding sum of money as required by Section 5(1) of the CB&AS Act. For these reasons, the letter does not constitute a Section 5 notice and the proceedings should have been dismissed there and then for failure to comply with Section 5 of the CB&AS Act.
8. However, the proceedings progressed until the State was removed as a party and subsequently, summary judgment was entered in favour of the respondent. It is abundantly clear from these background facts that the question of whether the respondent was required to give a Section 5 notice to the State was raised at the hearing to counter the respondent’s application for summary judgment. This was well past the time the State was no longer a party to the proceedings. This then gives rise to the question of whether it was necessary for the respondent to give Section 5 notice where the NHC is a sole defendant.
9. Section 5 of the CB&AS Act states:
“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.” (Underlining added).
10. According to Section 5(1) (supra), it is a requirement to give Section 5 notice to the State. Where no Section 5 notice is given prior to commencement of proceedings, it renders the proceedings incompetent. In Paul Tohian & The State v. Tau Liu (1998) SC566 the Supreme Court examined the requirement to give notice under Section 5 of the CB&AS Act and Section 54 of the Motor Vehicles (Third Party Insurance) Act Ch 295 and held that:
“It is clear to us that the notice of intention to make a claim is a condition precedent to issuing a writ of summons in all circumstances.”
11. It is significant to note two matters arising from that case. First, the State was a party to the appeal, and it took up the issue of lack of Section 5 notice in the Supreme Court. Secondly, the Supreme Court was not asked to define the term the “State” in Section 5(1). This was because it was not an issue between the parties.
12. The present case is the first time the word the “State” in Section 5(1) is being considered. This will require a construction of the word the ‘State’ in Section 5(1). As to statutory interpretation, the first port of call is the controversial provision or word used in the text of the statute. The Court must read it and give a meaning to it.
13. There are different ways of interpretating a statute. The two common ones are: literal interpretation and purposive interpretation. They are commonly referred to as ‘literal approach’ and ‘purposive approach’ to statutory interpretation.
Literal Interpretation
14. What is a literal approach to statutory interpretation?
15. In the textbook by DC Pearce & RS Geddes, Statutory Interpretation in Australia, 7th ed, Lexis Nexis Butterworths, Australia, 2011 at 27 and [2.3], the learned authors referred to the judgment of Higgins J in Amalgamated Society of Engineers v. Adelaide Steamship Co Ltd (the Engineer’s Case) [1920] HCA 54; (1920) 28 CLR 129 at 161-162 to define it in this way:
“The fundamental rule of interpretation, to which all others are subordinate, is that a statute is to be expounded according to the intent of the Parliament that made it; and that intention has to be found in the statute as a whole. The question is, what does the language mean; and when we find what the language means, in its ordinary and natural sense, it is our duty to obey that meaning, even if we think the result to be inconvenient or impolitic or improbable.”
16. According to Pearce and Geddes at the same page and [2.3] of the textbook, “............this uncompromising form [of interpretation excluded] the possibility of any other approach to interpretation, however unsatisfactory the result”. Furthermore, in a case where a literal interpretation is adopted “The natural and ordinary meaning of what is actually said in the Act must be the starting point as Cooke J said in Reid v. Reid [1979] 1NZLR 572 at 594.”
17. The reason is that it is not always the case that there is one meaning to a word if the natural and ordinary meaning is given. This was pointed out by Pearce and Geddes at p 27 and [2.3] when referring to the Australian High Court case of Project Blue Sky Inc v. Australian Broadcasting Authority (1998) 194 CLR 355 at 384; [1998] HCA 28; 153 ALR 490 at 511 where McHugh, Gummow, Kirby and Hayne JJ said:
“.........the duty of a court is to give the words of a statutory provision the meaning that the legislative is taken to have intended to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.”
18. Equally important is, when applying a literal or grammatical meaning to a statutory provision, it must not result in absurdity and cause injustice to a litigant. In the same textbook Pearce and Geddes referred to this principle of statutory interpretation as the ‘Golden Rule’ at p 27 and [2.4] by Lord Wendsleydale in Grey v. Pearson [1857] EngR 335; (1857) 6 HLC 61 at 106; [1857] EngR 335; 10 ER 1216 at 1234 where a limitation was placed on the literal approach as follows:
“I have been long and deeply impressed with the wisdom of the rule, now, I believe, universally adopted, at least in the Courts of Law in Westminister Hall, that in construing wills and indeed statutes, and all written instruments, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instruments, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no further.”
19. The learned authors continued at p 27 and [2.4]:
“This qualification of the literal approach is usually called the golden rule. The rule contemplates the modification of the literal meaning of the words used to overcome an error or defect perceived in the text.”
20. An additional important principle of statutory interpretation is that it is not the duty of the Court to re-write the statutory provision to modify the “literal meaning of the words used to overcome an error or defect perceived in the text.” Pearce and Geddes emphasized this point at the same page of the textbook when referring to Lord Wensleydale’s statement which was quoted with approval by Higgins J in Australian Boot Trade Employees’ Federation v. Whybrow & Co [1910] HCA 53; (1910) 11 CLR 311 at 341-2. The same rule was referred to by Dixon J in Broken Hill South Ltd v. Commissioner of Taxation (NSW) [1937] HCA 4; (1937) 56 CLR 337 at 371. They said:
“It would seem that the ‘absurdity’ related to by Lord Wensleydale was an absurdity appearing on the face of the Act from the words that had been used. His Lordship did not contemplate that the court would review the policy underlying the Act and modify the language of the Act if it considered the result to be ‘absurd’. Put shortly, the golden rule contemplated that a mistake had been made in the wording of the Act”
(Underlining added)
Purposive approach
21. A purposive approach is commonly used to correct a ‘mischief’ in the statutory provision. According to Pearce and Geddes at p 29 and [2.5] of the same textbook:
“This approach had its origins in the so-call ‘mischief rule’, which was set out in Heydon’s Case [1584] EngR 9; (1584) 3 Co Rep 7a at 7b 76 ER 637 at 638:
In this case all the judges met.
And it was resolved by them, that for the sure and true interpretation of all statutes in general, (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered:-
1st What was the common law before the making of the Act.
2nd What was the mischief and defect for which the common law
did not provide.
3rd What remedy the Parliament hath resolved and appointed to cure the disease of the Commonwealth.
And,
4th The true reason of the remedy; and then the remedy, and to suppress subtle interventions and evasions for continuance of the mischief, and pro private commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publicio.
The purposive approach was applied by determining the purpose of the Act, or the particular provision in question (or the ‘mischief’) with which it was intended to deal), and by adopting an interpretation of the words that was consistent with that purpose.”
22. The learned authors continued at p 30 of the same textbook:
“...........it was generally accepted that at common law the purposive approach applied only when an attempt to apply the literal approach produced an ambiguity ...........Spigelman CJ observed, in Repatriation Commns v. Vietnam Veterans’ Assoc of Australia NSW Branch Inc [2000] NSWCA 65; (2000) 48 NSWLR 548 at 577-8; [2000] NSWCA 65; 171 ALR 523 at 550:
The use of the word ‘ambiguity’ in the context of statutory interpretation is not restricted to lexical or verbal ambiguity and syntactic or grammatical ambiguity. It extends to circumstances in which the intention of the legislature is for whatever reason, doubtful.”
23. Additional principles identified by the Pearce and Geddes at p 30 of the same textbook are:
“When the purposive approach was applied, the purpose was usually deduced by looking at the statute as a whole. The history of the statute also sometimes assisted. In Pambula District Hospital v. Herriman (1988) 14 NSWLR 387 at 410 Samuels JA commented that ‘it has always been open to the court to have regard to the historical setting of a statute and by that means to ascertain what the object of the legislature was. See also Kirby P at 394. Sources such as reports of parliamentary debates and of commissions and international agreements could also be of assistance........”
(Underlining added)
Definition of the word the “State” in Section 5(1)
24. The various statements of principles on literal approach and purposive approach to interpretation outlined above are by no means new in this jurisdiction but are restated to assist define the word the “State” in Section 5(1) (supra). The passage by Wilson J in PLAR No. 1 of 1980 [1980] PNGLR 326 cited hereunder is one example of the Court’s recognition of the principles of statutory interpretation:
“.........there is no place in a developing country where the courts, as well as the Law Reform Commission, are given special responsibilities in the process of development, for the narrow interpretation of status without adequate regard to the social purpose of particular legislation. Development is difficult to achieve if courts adopt too conservative an approach to the interpretation of statutes. There has been a tendency in our National Judicial System, less evidence in some recent decisions of the courts but still perceptible, to over-emphasize the literal meaning of a provision at the expense of the meaning to be derived from other possible contexts; the latter including the application of the “mischief” rule, the recognition of the general legislative purpose, as well as the obligations laid down under the Constitution such as, for example, the obligation upon the courts in interpretating the law to give ‘paramount consideration to the dispensation of justice’.”
Is the National Housing Corporation (NHC) the “State”?
25. It is a question of which approach should be adopted to define the word the “State” in Section 5(1) (supra). In the present case, when the word the “State” is construed literally, it is abundantly clear and unambiguous that in its ordinary and natural meaning it means the “State”. On the other hand, there is no other entity referred to in Section 5(1) or there is no other provision in the CB&AS Act which defines the NHC as the “State”, or “part of the State” or an “entity of the State”. In short, the NHC is not mentioned in Section 5(1). A literal construction of the word the “State” should resolve the question of Section 5 notice in favour of the respondent, that is the requirement to give Section 5 notice to the “State” where the NHC is a sole defendant, or the “State” is not a defendant in the proceedings does not apply. This should effectively conclude this review in favour of the respondent.
26. However, the National Court gave no consideration to the question of whether Section 5 applied to the NHC. This was despite Ms Doiwa of counsel for the respondent’s brief submissions on this question at the hearing as follows:
“......Lastly, your Honour, in relation to s 5 notice, though it is not necessary because NHC is a corporation of its own, capable of being sued in that capacity and NHEL is a corporate entity, it is actually National Housing Estate Limited so it is registered with IPA and capable of being sued in its corporate capacity, your Honour, my client nonetheless did give section 5 notice on 10 June 2014.....”.
(Underlining added)
27. The question was delicately put by counsel for the respondent. It rightfully deserved but received no submissions from the opposing counsel. Notably, each counsel focussed on the question of whether Section 5 notice had been given to the State prior to the commencement of proceedings. On the evidence of the letter from the respondent to the NHC dated 10th June 2014 referred to at [2] (supra), the National Court was satisfied that Section 5 notice was given. However, in my view the question of whether Section 5 applied to the NHC is a threshold issue and it is open to the National Court and this Court to determine it.
28. The National Court’s finding is consistent with the judgment of the Supreme Court in PNG Power Ltd v. Ian Augerea (2013) SC1245. This was an appeal against a decision of the National Court to order PNG Power Limited to continue to supply electricity to the Madang National Court when it sits under Section 225 of the Constitution. There were two major issues for determination by the Supreme Court. These were:
29. In its consideration of the second issue, at [50] of the judgment, the Supreme Court referred to the phrase “Governmental Bodies” used in Section 225 of the Constitution and at [51] to [75] correctly, in my view, identified the divergence of judicial opinions in relation to the definition of the word ‘State’ in either Section 5 or Section 13 of the CB&AS Act. It referred to the cases of Mt Hagen Urban Local level Government v. National Housing Corporation: WS No 1194 of 2002 (Unreported & Unnumbered Judgment of 20th April 2004 per Mogish J) where the National Court held that the NHC is part of the State. Similarly, in Okram Sakarius v. Chris Tep (2003) N2355 the National Court held that as the Cocoa and Copra Extension Agency was funded by the National Government, it was part of the State under Section 13 of the CB&AS Act.
30. Also, the Supreme Court noted that in Albert Areng v. Gregory Babia (2005) N2895, Naomi Vicki John (supra) and Wamena Trading v. Civil Aviation Authority (2006) N3058, the National Court held a contrary view. After referring to these National Court decisions, the Supreme Court gave its reasons
for forming the view that PNG Power Limited is part of the State. Finally, at [62] and [63] of the judgment, the Supreme Court identified
two additional tests or criteria relevant to determine whether entities other than a form of government are a State “for the purpose of the requirements under s. 5 and the protection provided to the State under s. 13 of the CBASA.....”.
31. The first is the nature or kind of services and/or responsibilities of the entity. Where the entity is charged with the duty and/or
responsibility of providing an important and critical service, it is part of the State. Secondly, if the entity is not profit-driven,
it is part of the State. At [64] of the judgment, the Supreme Court noted that in the case of the NHC, the same tests applied.
As the NHC is charged with the duty and/or responsibility of providing public housing in the country and is not profit-driven but
relies on government funding, it is part of the State. Based on these additional tests or criteria, in essence the Supreme Court
overruled the decision of National Court in Naomi Vicky John’s case (supra).
32. At [65] of the judgment, the Supreme Court noted that based on the same tests, the Public Curator of Papua New Guinea is an entity of the State because it is charged with the duty and/or responsibility of providing services in relation to administration of intestate deceased estates and secondly, is not a profit-driven entity because it does not charge and collect fees at rates like those charged by other professional entities in the private sector. On the other hand, it relies on government funding for its operations and sustainability. For these reasons, the Supreme Court distinguished that case from the case of Konze Kara v. Public Curator of PNG (2010) N4048.
33. At [66] and [67] of the judgment, in applying the same tests or criteria, the Supreme Court observed that other entities such as Civil Aviation Authority of Papua New Guinea, the NHC, Cocoa and Coconut Extension Agency, East Sepik Provincial Liquor Licensing Board and National Broadcasting Corporation are part of the State: see Wamena Trading v. Civil Aviation Authority (supra), Anawe Megaraka Ona v. National Housing Corporation (2009) N3623, Sarakuma Investment Limited v. Peter Merkendi (2004) N2629, Sengus Investment Limited v. National Broadcasting Corporation (2010) N4129.
34. At [79] of the judgment, the Supreme Court concluded by holding that PNG Power Limited is an entity of the State. However, the Supreme Court’s decision to hold that the NHC is “part of the State” or “an entity of the State”, is obiter dictum. This is because it was not one of the issues the Supreme Court was asked to express a view. On the other hand, the ratio decidendi in that case was the finding that PNG Power Limited was an entity of the State for the purpose of Section 225 of the Constitution and was under a constitutional duty to provide supply of electricity to the National Court. For these reasons, it is open to this Court to express its own view on the question of whether the NHC is “part of the State” or “an entity of the State” for the purpose of Section 5 of the CB&AS Act.
Judgment of Supreme Court in Reservation Pursuant to Section 15 of the Supreme Court Act (2001) SC672
35. According to the judgment of the Supreme Court the word “State” in Section 13 of the CB&AS Act includes a Provincial Government. This is because a Provincial Government is a “governmental body” as defined in Schedule 1.2(1) of the Constitution. Its reason for forming this view is that:
“The principal sources of Provincial Government funds are provided by the National Government through the various forms of financial grants and assistance specified under Ss. 91 and 95A of the Organic Law................... These financial grants are guaranteed annually through the national budget and administered and distributed by the National Government to the Provincial and Local-Level Governments in accordance with the Public Finance (Management) Act.”
36. However, that case is distinguishable on its facts because it was decided on Section 13 of the CB&AS Act where the question was whether on its proper construction, the word the “State” in Section 13 included a Provincial Government. It is abundantly clear the Supreme Court interpretated the word the “State” to include a Provincial Government to bring it within the prohibition that the State enjoys under Section 13.
37. In PNG Power Limited v. Ian Augerea (supra), the Supreme Court adopted the definition of the word the “State” in Section 13 in the Supreme Court Reservation case (supra) and applied it in Section 5. Consequently, the Supreme Court read more into the word the “State” in Section 5 of the CB&AS Act to bring other entities such as PNG Power Limited and NHC under the Section 5 and the protection the State enjoys under Section 5. In each case, the Supreme Court expressed the view that a Provincial Government and PNG Power Limited provide essential government services and rely on National Government funding to provide these essential government services. However, these reasons overlook the literal interpretation of the word the “State” where no absurdity or mischief is sought to correct. In the Supreme Court Reservation case (supra), the Supreme Court adopted the definition of the word “Governmental body” in Schedule 1.2(1) of the Constitution to define the word ‘Provincial Government’ to mean part of the State or arm of the State. With respect, in so doing the Supreme Court, in each case, did not explain why it adopted the purposive interpretation to correct the mischief. Consequently, the Supreme Court has re-written the law in Section 5 and Section 13 by giving a broad definition to the word the “State” to include entities such as the NHC, PNG Power Ltd and others.
38. It is not the duty of the Court to re-write the law, “even if we think the result to be inconvenient or impolitic or improbable.” Amalgamated Society of Engineers v. Adelaide Steamship Co Ltd (supra) at 161 – 162 per Higgins J. For it is the duty of the Court to interpret the law. In this respect, there is no ambiguity in the word the “State” in Section 5 and Section 13 of the CB&AS Act. If the legislature had intended that the word the “State” includes other entities, instrumentalities, agencies or bodies or other forms of Governments, it would have said so. Section 5 and Section 13 could have included other entities, instrumentalities, agencies or bodies or other forms of Governments such as PNG Power Limited, the NHC, Liquor Licencing Board and Provincial Government and Local-level Government.
39. Moreover, the definition provision in Section 1 of the CB&AS Act could have included other entities, instrumentalities, agencies or bodies or other forms of Governments. Better still, the enabling legislation (eg, National Housing Corporation Act) of each entity, instrumentality, agency or body or other forms of Governments could have included those entities, instrumentalities, agencies or bodies or other forms of Governments “as part of the State” or made provision in Section 5 and Section 13 of the CB&AS Act that they also applied to other entities, instrumentalities, agencies or bodies or other forms of Governments. In my view, these are various options open to the legislature to take up if it had intended that the ‘State’ is more than what it is.
40. Significantly, the word the “State” is not only a generic term but is constitutionally defined in Section 247 of the National Constitution of Papua New Guinea (“Constitution”) as having the legal capacity to sue and be sued in these terms:
“LEGAL CAPACITY OF THE INDEPENDENT STATE OF PAPUA NEW GUINEA
(1) Papua New Guinea has power to acquire, hold and dispose of property of any kind, and to make contracts, in accordance with an Act of Parliament.
(2) Papua New Guinea may sue and be sued, in accordance with an Act of Parliament.”
(Underlining added)
41. In my respectful view, this is the difference between those decided cases and the present case. In those cases, the Supreme Court did not refer to the “State” as having a legal capacity to sue and be sued on its own. In this case the Act of Parliament referred to in Section 247(2) of the Constitution is the CB&AS Act. Section 5 of the CB&AS Act reinforces the doctrine of separate legal entity of the State by putting in place a process of prior notice to the State by a claimant before commencement of proceedings against the State. It is for the fundamental reason explained at [11] of the judgment by the Supreme Court in Keka v. Yafaet (supra) that “.....the sovereign could do no wrong”. However, based on the doctrine of vicarious liability, the State may be sued for acts and/or omissions of its servants and agents at common law and/or pursuant to statute, in PNG, the Wrongs (Miscellaneous Provisions) Act, Ch 297.
42. On the other hand, it is sufficient to highlight that Section 6 of the Organic Law on Provincial Governments and Local-level Governments (“OLPG&LLG”) provides for the legal capacity of the Provincial Government in the following terms:
“6. Legal capacity
A Provincial Government or a Local-level Government –
(a) may acquire, hold and dispose of property of any kind; and
(b) may sue or be sued,
and a provincial law or a local-level law may make provision for and in respect of the manner and form in which each respective government may do so.”
(Underlining added)
43. In Maps Tuna Limited v. Manus Provincial Government (2007) SC857 the Supreme Court pointed out the distinction between the ‘State’ and a Provincial Government in the context of service of a notice on a Provincial Government at [39] and [40] of the judgment in these words:
“39. Provincial Governments are established by PART VI (Sections 187A to 187J of the Constitution) and Section 10 of the Organic Law on Provincial Governments and Local-level Governments. Because such governments are State entities they have the capacity to acquire, hold and dispose of any property and they have the capacity to sue and be sued independently according to s. 6 of the Organic Law on Provincial Governments and Local-level Governments which provides for the legal capacity of the Provincial Governments and Local-level Governments.
The State also has its legal capacity to sue and it can be sued and acquire, hold or dispose of property. That capacity originates from s. 247 of the Constitution........”
44. Despite the “State” and a Provincial Government being separate entities, in the Supreme Court Reservation case, the Supreme Court held that a provincial government is a “governmental body” pursuant to Schedule 1.2(1) of the Constitution for the purpose of Section 13 of the CB&AS Act. Section 13 states that:
“13. NO EXECUTION AGAINST THE STATE
(1) In any suit, execution or attachment, or process in the nature of execution or attachment, may not be issued against the property or revenue of the State.
(2) Where a judgment is given against the State, the registrar, clerk or other proper officer of the court by which the judgment is given shall issue a certificate in Form 1 to the party in whose favour the judgment is given.”
(Underlining added)
45. The Supreme Court Reservation case (supra) has been adopted in many subsequent cases some of which are mentioned hereunder in order of the date of judgment starting from the earliest being Mineral Resources Development Authority v. Mathew Sisimolu (2010) SC1090, University of Technology v. Plumtrade Ltd (2012) SC1209, PNG Power Ltd v. Ian Augerea (supra), Public Curator v. Konze Kara (2014) SC1420, Michael Keka v. Pius Yafaet & National Housing Corporation (2018) SC1673, Niugini Building Supplies Ltd v. National Housing Estate Ltd (2020) SC1985, Topi Walun v. National Housing Corporation (2021) N8772 and Kopyoto Investment Limited v. National Housing Corporation (2022) SC2339.
46. In Mineral Resources Development Authority v. Mathew Sisimolu (2010) SC1090 the Supreme Court held that the Mineral Resources Development Authority (“MRDC”) is an entity of the State because its enabling legislation and Constitution demonstrated that it is answerable to the State in all its functions. Consequently, it is necessary to comply with the requirements of the CB&AS Act before a claim is made against it. However, that the Supreme Court did not identify the mischief it was correcting when it read the word the “State” to include the MRDC and held that Section 5 of the CB&AS Act applied to MRDC.
47. In University of Technology v. Plumtrade Ltd (2012) SC1209, at [47] of the judgment, the Supreme identified two critical factors which were relevant to determine whether an entity constituted the ‘State’ for the purpose of Section 5 of the CB&AS Act. These were the level of autonomy and nature of the functions of the relevant governmental entity. Furthermore, the Supreme Court adopted the criteria set out in Supreme Court Reservation case (supra), amongst others, “that the entity is principally funded by the State, with budgetary constraints referrable to political approval” and observed at [50] that:
“However while the University may be a governmental body and while it exhibits some characteristics of an entity which is part of “the State” – for example, it is funded from consolidated revenue (Section 35 Unitech Act), its staff are subject to the Salaries and Conditions Monitoring Act 1988, it is subject to the Public Finances (Management) Act with a few exceptions, and its Statutes require Parliamentary approval – there are many factors indicating that the University functions on a daily basis as an independent body free from government direction or control of any kind.”
48. The Supreme Court concluded at [52] that:
“The University is not part of the State for the purposes of Section 5 of the Claims Act.”
49. Similarly, it is noted that the Supreme Court did not identify the mischief it was correcting when defining the word, the “State” in Section 5 of the CB&AS Act.
50. In Public Curator v. Konze Kara (2014) SC1420 at [35] to [36] of the judgment, after examining the tests identified by the Supreme Court in PNG Power Limited v. Ian Augerea (supra) at [40] of the judgment, the Supreme Court endorsed:
“the further test propounded by the Supreme Court in PNG Power Limited and the reasons behind the formulation of the test. Applying that test, we find that the Public Curator of Papua New Guinea which is a statutory corporation with perpetual succession pursuant to Section 2(2)(a) & (b) of the Public Curator Act and consequently capable of suing and being sued in his corporate name and style is deemed the “State” within the meaning of the CBASA more specifically for the purpose of Section 2”.
51. Interestingly, the Supreme Court did not identify the mischief it sought to correct when it expanded the meaning of the word the “State” in Section 5 of the CB&AS Act to include the Public Curator. On the other hand, it is abundantly clear that the Supreme Court adopted the view expressed by the Supreme Court in PNG Power Limited v. Ian Augerea (supra) and held that the Public Curator is “deemed the State”. However, the Supreme Court did not refer to the Public Curator as a having the legal capacity to sue and be sued in its own name and style under Section 2 of the Public Curator Act. This is the distinction between the “State” and the Public Curator. For this reason, it is not necessary to deem that the Public Curator is the State or define the word the “State” in Section 5 to include the Public Curator and that it is necessary to give Section 5 notice to the State where the Public Curator is a sole defendant in the proceedings.
52. The case of Michael Keka v. Pius Yafaet & National Housing Corporation (2018) SC1673 was an appeal from a decision of the National Court to dismiss the proceedings on its own motion for lack of Section 5 notice under the CB&AS Act. One of the grounds of appeal brought up the question of whether it is necessary to give Section 5 notice to the State where the NHC is a sole defendant. At [34] of the judgment, the Supreme Court noted that:
“At present, there is no definitive Supreme Court authority on this issue. The authorities in the National Court diverge. With multiple decisions coming to both conclusions: See Mt Hagen Urban LLG v. NHC, WS 1194/2022, Kilebo Sigo Mamae & Ors v. NHC. 0S844/2015, Paul Pawaiya & Ors v. NHC, OS 429/2006, Philip Num v. NHC, OS 115/20023; contra. Naomi Vicky John v. NHC (2005) N2770, Albert Areng v Babia & NHC (2005) N2895.”
53. At [40] and [45] of the judgment, the Supreme Court referred to the PNG Power Limited v. Ian Augerea (supra) and noted the tests/criteria adopted by the Supreme Court to determine whether an entity is part of the “State”. However, at [46] of the judgment the Supreme Court did not commit itself to making a finding on this question because of lack of evidence. Consequently, it remains to be determined that the test/criteria no. 5 applied, that is whether the NHC is engaged “in what can be described as commercial activity” as opposed to provision of public housing services.
54. This is what the Supreme Court said that at [47] of the judgment:
“This is not an appropriate vehicle (case) for making a definitive statement on the question whether the NHC is an arm of the State in Papua New Guinea.”
55. It reasoned that it “will have a broad and significant impact on litigation in this area”. On the other hand, the Michael Keka v. Pius Yafaet case (supra) highlights that the Supreme Court judgment in PNG Power Limited v. Ian Augerea case (supra) is not the authority for the proposition that the NHC is “part of the State” or “an entity of the State” and the word the “State” in Section 5 of the CB&AS Act should be read to include the NHC, but each case must be decided on its own facts and appropriate evidence.
56. That case also highlights the divergence of judicial opinion on the question of the definition of the word the “State” in Section 5 of the CB&AS Act. Significantly, settling the definition of the word the “State” in Section 5 continues to be a problematic issue for the legal practitioners, parties and litigants and many cases/proceedings have been dismissed because of the broad and liberal definition given to the word the “State” in Section 5.
57. For instance, in Niugini Building Supplies Ltd v. National Housing Estate Ltd (2020) SC1985, the Supreme Court adopted the tests in PNG Power Limited v. Ian Augerea (supra) and Mineral resources Development Corporation Ltd v. Mathew Sisimolu (supra) and held that the National Court erred in holding that the NHEL (respondent) is “the State” within the meaning of the CB&AS Act.
58. One of the reasons is that the NHEL “is not an entity established pursuant to a specific statute but under the Companies Act by reason of which the governing and appliable Act is the Companies Act.” The other is “there is no statutory provision obligating it to provide quality, reliable and affordable housing to the people of Papua New Guinea in addition to what the NHC is already obligated to do instead of operating as a profit orientated business.”
59. Next is the National Court decision in Topi Walun v. National Housing Corporation (2021) N8772. In that case the plaintiffs applied for a garnishee order absolute after the defendant failed to satisfy a judgment debt in their favour. The defendant relied on Section 13 of the CB&AS Act in its defence and submitted that the defendant is protected from proceedings for execution or attachment or processes in the nature of execution or attachment under Section 13. At [18] of the judgment, the National Court accepted that “The defendant clearly is included in the definition of the “State” in the Claims By and Against the State Act.” It refused to grant the application for garnishee order absolute.
60. In Kopyoto Investment Limited v. National Housing Corporation (2022) SC2339 the appellant appealed part of the judgment of the National Court which awarded interest at a reduced rate than the agreed rate of 70% based on a loan agreement between the parties. At the hearing of the appeal, the Court on its own motion invited parties to address the question of whether Section 5 of the CB&AS Act and Section 25 of the National Housing Corporation Act applied.
61. At [6] of the judgment the Supreme Court referred to PNG Power Limited v. Ian Augerea (supra), Public Curator of PNG v. Kara (supra) and Walun v. National Housing Corporation (supra) and noted that it was uncontroversial that it is necessary for the appellant to comply with Section 5 of the CB&AS Act because the respondent is considered part of the State for the purposes of the CB&AS Act.
62. Finally, in Victor Joseph v. Rui Rami & National Housing Corporation (2021) SC2138 the appellant commenced proceedings to have the State Lease title of the first respondent set aside on the grounds of fraud. The National Court dismissed the proceedings for lack of Section 5 notice. In its decision, the Supreme Court adopted the view expressed in Keka v. Yafaet (supra) at [18] of the judgment and did not commit itself to deciding the question of whether the NHC is for the purposes of Section 5 of the CB&AS Act, ‘the State’. The Supreme Court commented:
“Mr Joseph also submitted that the NHC was not, for the purposes of s5 of the CBAS Act, “the State”. As Keka v. Yafaet reveals, that is a vexed question in respect of which there is, as yet, no settled answer. It is not necessary to answer that question in order to resolve this appeal. Rather, it is sufficient to assume, without deciding, that the NHC is “the State”.”
63. At [19] to [26] of the judgment, the Supreme Court further observed that, since it was the NHC who filed the notice of motion to seek dismissal of the proceedings for lack of Section 5 notice, it did not produce evidence to establish that the appellant failed to give Section 5 notice to the Solicitor General or the Attorney-General prior to commencement of the proceedings. The Supreme Court upheld the appeal on the grounds of lack of evidence to establish that the appellant failed to give Section 5 notice and remitted the matter to the National Court for rehearing.
64. Based on the above cases, two major key points are apparent. First the Supreme Court judgment in PNG Power Limited v. Ian Augerea (supra) is not authority for the proposition that the NHC is “part of the State” or “an entity of the State” or that the word the “State” in Section 5 of the CB&AS Act should be read to include the NHC. Secondly, it is open to the National Court and the Supreme Court to decide whether Section 5 applies to NHC. The question must be decided based on the construction of the word the “State” in Section 5 of the CB&AS Act and appropriate evidence.
65. In the present case, the word the “State” in Section 5 (supra) must be read literally and it is not necessary to receive evidence to determine whether the NHC is charged with the duty and/or responsibility of providing public housing in the country and is not profit-driven but relies on government funding to define it as “part of the State” or “an entity of the State”. On its proper construction, the word the “State” in Section 5 (supra) does not include the NHC nor does it mean the NHC is “part of the State” or “an entity of the State”. It follows that the requirement to give notice of intention to make a claim against the State under Section 5 (supra) does not apply to the NHC and it is not necessary for the respondent to give Section 5 notice to the State. For the foregoing reasons, the applicant’s ground of review that there is no evidence that the respondent gave Section 5 notice to the State is misconceived and without merit. It is, accordingly, dismissed.
Further Grounds of Review
66. Picking up from [4] (supra), according to the documentation including the transcripts of the proceedings in the Review Book, it is noted that on 5th August 2014 the National Court directed parties to settle the matter, failing which they will identify the legal issue necessary for judicial consideration and, also hand up draft mediation order for the matter to be referred to mediation. The matter was adjourned to 3rd September 2014 at 9:30 am. After a month, on 3rd September 2014 parties returned to Court and the National Court ordered, amongst other things,
67. On 24th September 2014 the respondent filed a notice of motion for summary judgment in the sum of K4,879,263.21 or alternatively, default judgment in the same sum against the applicant and NHEL for their failure to file a defence, on the morning of 22nd October 2014 Mr Gagma appeared for the applicant and Ms Doiwa appeared for the respondent. Mr Gagma made an application for an adjournment of the hearing of the notice of motion because he was belatedly instructed by the applicant and, that counsel needed time to obtain Court documents from the applicant and that the matter should be referred to mediation. The matter was stood down to 2:00 pm that day.
68. At 3:14 pm, Mr Phillip appeared for the applicant, Mr Gagma appeared for the NHEL and Ms Doiwa appeared for the respondent. Both Mr Phillip and Mr Gagma sought a further adjournment because they were not prepared to respond to the motion. They asserted that the applicant and NHEL did not provide copies of the originating process (writ of summons) and other Court documents to them, respectively. After hearing from counsel for the respondent, the primary judge ruled, refusing the application for adjournment. The primary judge heard submissions on the notice of motion and delivered an extempore ruling, granting the application for summary judgment against the applicant and NHEL in the sum of K4,879,263.21 with 8% interest and solicitor/client costs.
69. Turning to the further grounds of review, these are:
(a) Non-compliance of Section 2A of the CB&AS Act and Section 47B of the Public Finances (Management) Act 1995.
This ground was withdrawn at the hearing.
(b) Judgment sum awarded was in excess of the contract value and without assessment of damages.
(c) The awarded of interest at rate of 8% per annum exceeded the prescribed rate of 2% per annum and in the absence of a date of commencement of interest under Section 4 of the Judicial Proceedings (Interests on Debts and Damages) Act 2015.
(d) Lack of service of writ of summons on the applicant and NHEL
This ground was withdrawn at the hearing.
(e) Failure to enter default judgment with damages to be assessed because of serious dispute in relation to the sum owing and due under the contract.
(f) Refusal to grant an adjournment of the hearing of the application for summary judgment or alternatively, default judgment. Consequently, the applicant was denied natural justice under Section 59 of the Constitution.
(g) Lack of certificate of completion under Sections 18 and 19 of the Building Regulations Act.
70. Except for the last two grounds (refusal to grant an adjournment of the application for summary judgment or alternatively, default judgment and lack of certificate of completion), it is not disputed that the rest are fresh grounds of review because they were not advanced in the National Court. Additionally, except for the grounds that were withdrawn, the question is whether the applicant can advance the remaining grounds in the review. Counsel for both parties did not address this question in their respective submissions, but these further grounds of review turn on the question of whether or not the applicant has correctly engaged the jurisdiction of the Court and may be answered in one of two ways:
(a) As this is an application for review under Section 155(2)(b) of the Constitution, and leave has been granted to review the decision of the National Court, it must be taken that leave was granted to the applicant to advance these grounds at the substantive review.
(b) The opposite view is that the grant of leave to review is distinct from an application for leave to advance a fresh ground of review because the tests for each application are different.
71. I prefer the latter view because the tests for an application for leave to review are different from an application for leave to advance a fresh ground of review. For example, in the latter, it is necessary for an applicant to provide an adequate explanation for not advancing the fresh ground in the National Court. In the case of an application for leave to review, it is necessary for an applicant to provide an adequate explanation for allowing the time to appeal to expire. For these reasons, I find that the applicant has not obtained leave to advance these fresh grounds of review and they are disregarded. These grounds are:
(a) Judgment sum awarded was in excess of the contract value and without assessment of damages.
(b) The award of interest at rate of 8% per annum exceeded the prescribed rate of 2% per annum and in the absence of a date of commencement of interest under Section 4 of the Judicial Proceedings (Interests on Debts and Damages) Act 2015.
(c) Failure to enter default judgment with damages to be assessed because of serious dispute in relation to the sum owing and due under the contract.
Refusal of Application for Adjournment
72. The remaining ground which, in my view, is correctly before the Court to consider is the applicant’s contention that the primary judge erred in his judgment to refuse its application for adjournment. According to [40] of the applicant’s written submissions, they “were instructed a day before the hearing of the application for summary judgment” and needed more time to “sort out the issues of service of the Statement of Claim and the Application for default judgment or summary judgment and legal representation in the matter and would have filed appropriate documents to assist the Court so that the matter could be settled through medication or by way of quantum submissions and damages assessment”. Refer to [37] of applicant’s written submissions.
73. The primary judge stood down the respondent’s notice of motion to 2:00 pm for hearing to allow the respondent’s counsel to assist the applicant’s counsel with any missing Court documents by 12:00 noon. According to the applicant’s counsel, in refusing the applicant’s application for adjournment, the primary judge erred in judgment by denying the applicant natural justice under Section 59 of the Constitution and the judgment was unreasonable in the circumstances.
74. One of the factors to consider in an application for an adjournment is the reason for the adjournment supported by appropriate affidavit evidence. The reason will be based on the circumstances of each case. In this case the primary judge considered the reasons for adjournment and in its extempore ruling, held that the reasons were unsatisfactory. Except for the withdrawal of the ground in relation to lack of service of the writ of summons on the applicant, I agree with the primary judge’s finding because according to paragraphs 2 and 3 of the affidavit of service of Joe Kila sworn and filed on 16th June 2014 the applicant was served with a copy of the writ of summons and other Court documents on 16th June 2014 and had ample opportunity between that date and the hearing date to prepare.
75. In addition, there were several directions hearing and attendances including the one on 3rd September 2014 where the National Court put the applicant on notice that unless it appears on the next return date with an affidavit explaining its lack of communication with the respondent and non-compliance with the order of 5th August 2014, judgment in the sum sought by the respondent will be awarded against it.
76. In my view, the applicant was the procrastinating party. It was directed by the National Court to settle the matter based on the work done by the respondent and it did not. It was put on notice that judgment will be entered against it if it did not provide an affidavit to explain why it did not communicate with the respondent and failed to comply with the earlier Court directions to settle the matter. Then, on the hearing date of application for summary judgment on 22nd October 2014 it appeared through counsel and did neither of those matters the National Court had directed it to do. It then conceded through its counsel that it had been served the writ of summons and other Court documents, but its counsel was not given copies of the documents to prepare for the hearing. In all the circumstances, there is no merit in the applicant’s assertion that it was denied natural justice when the National Court refused its application for an adjournment.
77. The next factor which an applicant for an adjournment must establish is the prejudice it will suffer if an adjournment is not granted. According to the applicant’s counsel’s submissions the prejudice is that the Court entered summary judgment for a fixed sum of money when the applicant has filed affidavits which contested the sum sought and awarded by the National Court. For example, the sum awarded by the National Court exceeded the value of the contract and there was no variation to the contract to include the excess sum.
78. An application for summary judgment is a serious matter because it is not granted too readily but in the clearest of cases. If the applicant is contesting it, it must produce evidence by affidavit to demonstrate that there is serious factual dispute in relation to the question of liability and the sum sought in the application for summary judgment. In this case the ground on prejudice is based on mere assertions by counsel and the result is unsatisfactory. The applicant did not produce any evidence by affidavit from its Managing Director or a responsible officer to contest the sum awarded by the National Court. Consequently, I uphold the respondent’s submission at [86] of its written submissions that “........the Applicant[s] did not file any affidavit to show that they seriously disputed the debt.” Furthermore, “........there was no affidavit material filed and presented before the National Court Judge to show that the Applicant[s] seriously disputed the debt.” It follows that the applicant’s counsel’s submission on prejudice is unsupported by evidence.
79. In an application for review under Section 155(2)(b) of the Constitution, the applicant must establish that there are cogent and convincing reasons and exceptional circumstances, or some substantial injustice being manifested against the National Court exercise of discretion to enter summary judgment in favour of the respondent. Based on these two factors, the applicant has failed to establish that there are cogent and convincing reasons and exceptional circumstances, or some substantial injustice being manifested when the National Court exercised its discretion to enter summary judgment in favour of the respondent.
80. This ground is dismissed.
Lack of certificate of completion under Sections 18 and 19 of the Building Regulation, 1994
81. According to counsel, a notice of completion is a legal requirement under Section 18 and Section 19 of the Building Regulations 1994. It is also proof that the work has been completed. The applicant’s counsel submitted that the respondent did not produce a notice of completion to support its application for summary judgment.
82. This reinforces the applicant’s assertion in defence to the claim that the respondent did not complete the work it was tasked to undertake. Despite the lack of notice of completion, the National Court erroneously relied on a certificate of permissive occupancy to enter summary judgment.
83. There are two major problems with the applicant’s submissions. First, it is a misconstruction of Section 18 and Section 19 of the Building Regulation. Relevantly, Section 18 states:
“18. NOTICE OF COMPLETION
(1) A person, who erects a building or makes any alteration or addition to a building shall, within a reasonable time after the completion of the election of the building or of the alteration or addition, give notice in writing to the Board.
Penalty: A fine not exceeding K200.00.
Default: K10.00.
(2) The Board may require a person to whom Subsection (1) applies to provide certificate that the building has been erected, altered or added to in accordance with the plans and specifications for the work approved by the Board pursuant to Section 12, and such certification shall be prepared and signed by the Architect, Engineer or Builder as required by the Board in each case.
(3) Failure to provide certification under this section shall be sufficient reason for refusing a Certificate of Completion under
Section 19.”
84. Equally relevant is Section 19 which states:
“19. CERTIFCIATE OF COMPLETION
The Board, upon receipt of the notice specified in Section 18, may grant or refuse a certificate in Form 3 that the building has been completed in accordance with this Regulation.”
85. On a proper construction of Section 18 and Section 19 (supra), they do not say that a certificate of completion is a pre-condition to payment of value of the contract. This is the first problem.
86. The second problem is if the applicant is disputing the work undertaken by the respondent and that the respondent is not entitled to the sum awarded, the onus is on the applicant to bring evidence to show that the respondent did not complete the work. As a matter of evidence, there is no evidence by affidavit from the Managing Director or a responsible officer of the applicant showing that the respondent did not complete the work it was tasked to do. In the absence of evidence contesting the work done and sum sought, it is open to the National Court to rely on the evidence of the respondent to enter summary judgment against it. In this respect, the evidence before the National Court is in the form of an affidavit by the Managing Director of the applicant John Bori filed on 13th June 2014 which shows work done and completed for the housing project at Gerehu Stage 3B in the National Capital District in September 2012. However, the final payment for the work was not forthcoming from the applicant and NHEL since 28th May 2013.
87. There is no merit in this ground, and it is dismissed.
Conclusion
88. The applicant failed to establish that there are cogent and convincing reasons and exceptional circumstances, or some substantial injustice being manifested against the National Court exercise of discretion to enter summary judgment in favour of the respondent. It follows that the application for review is dismissed, the decision and orders of the National Court of 22nd October 2014 is affirmed and the applicant shall pay the costs of the review, to be taxed, if not agreed.
Order
89. The final terms of the order of the Court are:-
90. KARIKO J & MURRAY J: This is an application by the National Housing Corporation (the NHC) pursuant to s 155(2)(b) of the Constitution for judicial review of the decision of the National Court at Waigani given on 22 October 2014 in proceedings entitled WS No. 623 of 2014: Niugini Building Supplies Limited v National Housing Corporation & National Housing Estate Limited, whereby summary judgment was ordered against the NHC and its subsidiary company National Housing Estate Limited (the Decision).
BACKGROUND
91. The applicant is established under the National Housing Corporation Act 1990 whose main functions include providing adequate and suitable housing for letting and sale to eligible persons.
92. The National Housing Estates Limited (NHEL) is related to the NHC in that it is a government-owned incorporated company engaged in commercial housing activities.
93. The respondent, Niugini Building Supplies Limited (NBS), is a private building contractor.
94. After the first contractor employed to construct housing for NHEL at Gerehu Stage 3B, National Capital District failed to complete them, NBS was engaged to build the unfinished 21 houses (the Project), and the NHC and NHEL entered into a Memorandum of Agreement with NBS for that purpose (the MOA).
95. The MOA stipulated that the NHC would pay NBS K3.6 million or in lieu have titles to 12 of the houses transferred to it, upon due completion of the Project.
96. Despite this, NHC failed to honour either of the agreed remuneration modes after the Project was completed, and this prompted NBS to file proceedings WS No. 623 of 2014 on 13 June 2014 alleging breach of contract against both the NHC and NHEL.
97. The State was initially named as a defendant but later removed as a party upon application by NBS.
98. On 22 October 2014, the respondent’s notice of motion for summary judgement (and in the alternative, default judgement) came before the primary Judge.
99. Counsel for the applicant sought an adjournment on grounds that his clients had not been properly served the originating process and he needed more time to properly prepare their case. However, the primary Judge declined the request and proceeded to hear the motion resulting in the Decision.
100. Both the NHC and NHEL applied to this Court for review of the Decision, but NHEL was later removed as an applicant after the company was placed into liquidation.
JURISDICTION
101. The jurisdiction for review pursuant to s 155(2)(b) of the Constitution was explained by the Court (Kapi DCJ, Sheehan J, Injia J) in Application by Ludwig Patrick Shulze; Review Pursuant to Constitution s155(2)(b) (1998) SC 572 in these terms:
The nature of a review is different from the right of appeal that may be invoked under the provisions of the Supreme Court Act. The
grounds upon which the right of appeal may be exercised are much wider in that a person may appeal on virtually any ground including
appeal against findings of fact only. On the other hand, the grounds upon which a judicial review may be brought are limited by the
criteria set out in Avia Aihi v The State (No 2)... [and] conveniently set out in PNG v Colbert [1988] PNGLR 138 where the Court concluded that the discretionary power of the Court should be exercised only where:
(a) it is in the interest of justice;
(b) there are cogent and convincing reasons and exceptional circumstances, when some substantial injustice is manifest or the case is of special gravity; and
(c) there are clear legal grounds meriting a review of the decision.
102. We adopt and apply these principles.
GROUNDS FOR REVIEW
103. In seeking the review, the applicant raised several grounds which we summarize. It pleaded that the learned primary Judge erred in law and fact:
(1) in not dismissing the proceedings for failure to give notice under s 5 of the Claims By And Against the State Act 1996 (the Claims Act),
(2) in entering summary judgement:
- (a) despite there being no evidence of authorization of expenditure pursuant to s 2A of the Claims Act an s 47B of the Public Finance (Management) Act 1995
- (b) for an amount not claimed nor properly assessed and inconsistent with the terms of the MOA.
- (c) when the originating process and other court documents were not properly served,
- (d) when there were serious facts in dispute,
- (e) without allowing for proper submissions from the applicant,
- (f) by relying on certificates of occupancy rather than certificates of completion,
(3) in ordering interest on the judgement debt at 8%,
(4) in refusing to grant the applicant an adjournment to prepare case,
(5) in refusing to accept affidavits in support of the defence.
104. Of these grounds, we believe the critical issue to first address is whether the primary Judge erred in not finding that the proceedings before him were incompetent for want of a notice under s 5 of the Claims Act. We take this approach because the question goes to jurisdiction and if we decide in favour of the ground, that would be determinative of the application before us.
SECTION 5
105. Section 5 of the Claims Act states:
(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.
(Our underlining)
106. Claims relevant under the Act include claims in contract; s 2(1). The notice must be served on either the Head of the Department responsible for justice matters (currently the Secretary for Justice) or the Solicitor-General; s 5(1). Where the claim is for breach of contract, the notice must be given within 6 months of the claimant becoming aware of the breach; s.5(2)(b). Further, sufficient details of the claim must be included in the notice: Daniel Hewali v Papua New Guinea Police Force (2002) N2233.
CONSIDERATION
107. After being denied an application to tender affidavit evidence and a request for adjournment, counsel for the NHC, Mr Gagma, mentioned the issue of s 5 notice. The transcript notes the following exchange between counsel and the primary Judge (with emphasis added):
MR GAGMA: I think - we say there is no section 5 notice given to the second defendant in terms of this.
HIS HONOUR: Is there a defence on file?
MR GAGMA: No, your Honour.
HIS HONOUR: No. So how is that being raise?
MR GAGMA: It is a preliminary issue that we ----
HIS HONOUR: Have you read the Supreme Court decision in Philip Takori? Can you raise an issue belatedly without putting it on the defence? What do the provisions of order 8 rule 58 and so forth talk about? Rules of pleading? If you are raising a statutory defence, what must you do - raise it from the bar table in response to an application like this or should you specifically plead? What is the correct approach procedurally, Mr Gagma?
MR GAGMA: We concede with your Honour’s observations, so we leave it to your Honour’s discretion to make a decision on this application.
HIS HONOUR: So, you are unable to address the court on any of the points of law?
MR GAGMA: No, your Honour....
HIS HONOUR: All right. Ms Doiwa?
MS DOIWA: .... Lastly, your Honour, in relation to s 5 notice, though it is not necessary because NHC is a corporation of its own, capable of being sued in that capacity and NHEL is a corporate entity, it is actually National Housing Estate Limited so it is registered with IPA and capable of being sued in its corporate capacity, your Honour, my client nonetheless did give section 5 notice on 10 June 2014 ----
HIS HONOUR: I am sorry, they gave notice, 10 June?
MS DOIWA: 2014 to the State and that is actually stated at paragraph 31 of the writ of summons, your Honour.
HIS HONOUR: All right, so, you have covered all angles, so you say?
MS DOIWA: Yes, your Honour.
108. No doubt, Mr Gagma raised the lack of a s 5 notice to seek dismissal of the proceedings. His submissions were immediately paused by the primary Judge who put to him that the “defence” could not be argued without having pleaded it according to the Supreme Court decision in “Philip Takori” and “order 8 rule 58 and so forth”. Ms Doiwa for NBS did not refer to the non-pleading but instead submitted that a s 5 notice was not necessary as the NHC is a corporation but notwithstanding, her client gave notice to the State on 10 June 2014 as pleaded in [31] of the writ of summons.
109. As to the law put to Mr Gagma by the primary Judge, we assume his Honour was referring to Takori v Yagari & Ors (2008) SC905 a case which deals with adequacy of pleadings, and we note that Order 8 Rule 58 of the National Court Rules concerns service of amended pleadings. That aside, we noticed that the primary Judge did not specifically make a finding or rule
on the issue after it was discussed, nor did his Honour mention it in the Decision. In our view, his Honour was obliged to discuss,
even if briefly, the evidence and law and give a ruling. While we acknowledge that failure to give reasons for a decision is fatal;
such that it may be set aside or quashed on appeal (Paul Paraka Lawyers v POSFB (2014) SC1363), it appears to us that the primary Judge considered the issue resolved when Ms Doiwa advised that a s 5 notice was in fact served
on the State.
110. Is the NHC a part of the State for purposes of the Claims Act?
111. As noted earlier, despite Ms Doiwa’s brief submission, the primary Judge did not discuss this question. We think that in
all probability, this was not an issue given he had already expressed a view in the Supreme Court answering the question in the affirmative.
We will further discuss this point later in our discussions.
112. Two Supreme Court cases have effectively revisited the question of what entities are to be included in the definition of "State"
in the Claims Act.
113. In PNG Power Ltd v Augerea (2013) SC1245 delivered on 7 August 2013, the Court (Kandakasi J, Manuhu J & Kawi J) discussed contrasting views expressed in the National Court and concluded that the NHC is part of the State. The Court noted that there are governmental bodies or entities other than the three tiers of government, which are charged with providing services traditionally the responsibility of the State including public housing. Many of the entities have since been corporatized or privatized but several of them only charge nominal fees as opposed to the prevailing commercial rates, and one of them is the NHC. The Court stated at [63]:
... an important and determinative test in our view to determine whether an entity is part of the State or not is the nature or kind of service and or duties and responsibilities the entity under consideration has or owes to a particular part of the country or the whole country. If the kind of service or duties and responsibilities the entity has, falls into one of the traditional critical functions and or duties and responsibilities of the State, and that entity is not operating as a private enterprise purely for profit, with all of the features of a private enterprise present, such an entity should easily qualify to be part of the State.
(Emphasis added)
114. The Court went on to note at [64] that because the NHC is the governmental body responsible for public housing established by statute; it only charges nominal rental fees to its tenants; it depends heavily on the national government for most of its funding; the government also appoints the board members, and the managing director and officers (who if they were in the Public Service before their appointment are deemed to continue in the Public Service), these factors qualified the NHC as a government entity which is part of the State.
115. The obiter views were endorsed soon after by the Supreme Court (David J, Yagi J & Murray J) in Public Curator of Papua New Guinea v Kara (2014) SC1420, and it has since been accepted that the NHC is considered part of the State for purposes of the Claims Act; see Kopyoto Investment Ltd (trading as Lodge 10) v National Housing Corporation (2022) SC2339 (Hartshorn J, Berrigan J & Dowa J) and Walun v National Housing Corporation (2021) N8772 (David J).
116. Interestingly, the Supreme Court (Collier J, Neill J & Liosi J) in Michael Keka v Pius Yafaet (2018) SC1673 was not prepared to consider PNG Power determinative of the issue of whether the NHC is the State for purposes of the Claims Act. The reason being that the Court was not satisfied on the evidence before it if the NHC is a profit-making governmental body or if it serves a public purpose and left the issue for full argument in an appropriate case. This has not been such a case, as counsel submissions were minimal without reference to relevant case authorities, and we heard no argument that the statement in PNG Power is wrong.
117. It is noteworthy that the primary Judge was a member of the Court in PNG Power which handed down its unanimous decision on 27 August 2013, 14 months before he heard the present case. More recently, his Honour was also a member of the Supreme Court which heard a related case to the present, Niugini Building Supplies Ltd v National Housing Estate Ltd (2020) SC1985, in which the Court affirmed the obiter in PNG Power regarding the status of the NHC under the Claims Act. In the circumstances, we consider it proper to infer that his Honour’s position on 22 October 2014 had not changed since deciding PNG Power.
118. From the foregoing, it is our considered view that when his Honour was informed by Ms Doiwa that a s 5 notice had in fact been served on the State, he deemed the issue settled; that a s 5 notice was required to be given and that was complied with. His Honour then proceeded to decide the merits of the application for summary judgement.
119. Was notice given as required by the Claims Act?
120. The Court in Bluewater International Ltd (2019) SC1798 (Kandakasi DCJ, Pitpit J, Dingake J), in deciding an appeal against the entry of default judgement, remarked:
... plaintiffs applying for such judgment have an obligation to demonstrate to the satisfaction of the Court that they themselves have complied with all the relevant and applicable technical requirements as they apply to them. Such requirements include meeting condition precedents such as, the notice requirements under s. 5 of the CBASA in the case of a claim against the State...
121. Obviously, the observations equally apply to applications for summary judgment.
122. In the recent case of Kauba v Willie (2021) SC2162, an appeal arose from the trial Judge’s refusal to entertain a request to revisit liability after the entry of default judgment on the basis that no s 5 notice was given. In that case the State failed to file a Defence, and the issue was only raised when an application was made to revisit liability. The Court (Batari J, Yagi J & Bona J) in deciding for the appellant observed at [50]:
... the onus is on a plaintiff or claimant to plead his or her case according to law. Going by the strength of the judicial pronouncements on s. 5 notice requirement and the requirement of the NCR, Order 5 Rule 12, it is incumbent on the plaintiff to plead and show that the case is fully compliant with the law and in the context of claims against the State, is s. 5 compliant.
123. It is settled law that the question on the competency of proceedings is a challenge as to jurisdiction and may be raised at any time by a party or the court on its own motion: Amet v Yama (2010) SC1064.
124. Given these pronouncements, we consider that when the primary Judge was alerted of the s 5 issue by the applicant, his Honour was obliged to satisfy himself if NBS had complied with the requirements of the Claims Act. Therefore, upon being referred to [31] of the writ of summons (that the notice was served on 10 June 2014), his Honour was obliged to verify the assertion from evidence presented.
125. Two affidavits were filed by the managing director of NBS, John Buri. The evidence includes a copy of a letter dated 10 June 2014, but it is a letter of demand to the NHC (copied to NHEL) in which NBS threatened legal action for not being remunerated pursuant to the MOA. This document cannot in any way be construed as a s 5 Notice. Foremost, it is addressed to the Managing Director of the NHC and copied to the Managing Director of NHEL. They are not persons named in s 5(1) to whom notice may be given under the Claims Act.
126. Consequently, and with respect, we find the primary Judge erred in deeming that a s 5 notice was properly given.
127. The Courts have repeatedly stressed since Paul Tohian v Tau Liu (1998) SC566 that the requirement to comply with s 5 of the Claims Act is a condition precedent to be complied with before proceedings are filed, and failure to comply renders the proceedings incompetent.
128. As in fact no s 5 notice was given, the proceedings in the National Court were incompetent and ought to have been dismissed. The primary Judge thereby erred in not deciding accordingly.
129. In the result, we uphold the first ground of review, and do not consider it necessary to address the parties’ other submissions as our finding disposes of the application for review.
130. The decision of the primary Judge should be set aside, and judgment given that ought to have been given in the court below.
ORDERS
131. We hereby order that:
(1) The application for review is granted.
(2) The decision of the National Court given on 22 October 2014 in proceedings WS No. 623 of 2014 is quashed and set aside.
(3) The proceedings WS No. 623 of 2014 is hereby dismissed for being incompetent.
(4) The respondent shall pay the applicant’s costs of and incidental to proceedings in the National Court and this review, to be taxed if not agreed.
(5) Time for entry of these Orders is abridged to the date of settlement by the Registrar, which shall take place forthwith.
FINAL ORDER OF THE COURT (BY MAJORITY):
132. We hereby order that:
(1) The application for review is granted.
(2) The decision of the National Court given on 22 October 2014 in proceedings WS No. 623 of 2014 is quashed and set aside.
(3) The proceedings WS No. 623 of 2014 is hereby dismissed for being incompetent.
(4) The respondent shall pay the applicant’s costs of and incidental to proceedings in the National Court and this review, to be taxed if not agreed.
(5) Time for entry of these Orders is abridged to the date of settlement by the Registrar, which shall take place forthwith.
________________________________________________________________
Gagma Legal Services Lawyers: Lawyers for Applicant
O’Briens Lawyers: Lawyers for Respondent
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