WS. No 765 of 2012; National Broadcasting Corporation v Sam Taison and T.G. Holding Limited trading as Freeway Motors (2019) N8083

• Jurisdiction: Papua New Guinea
• Judge: Kandakasi, DCJ
• Judgment Date: 28 October 2019
• Court: National Court
• Citation: (2019) N8083
• Year: 2019
• Judgement Number: N8083

Full Title: WS. No 765 of 2012; National Broadcasting Corporation v Sam Taison and T.G. Holding Limited trading as Freeway Motors (2019) N8083

National Court: Kandakasi, DCJ

Judgment Delivered: 28 October 2019

N8083

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS. NO.765 of 2012

BETWEEN

NATIONAL BROADCASTING CORPORATION

Plaintiff

AND

SAM TAISON

First Defendant

AND

T.G. HOLDING LIMITED trading as FREEWAY MOTORS

Second Defendant

Waigani: Kandakasi, DCJ

2016: 02nd November

2019: 28th October

CONTRACT – Contract for supply of goods State or a public authority – Payment for goods requested before meeting public tender and contracting requirements – Whether written contract varied by conduct – Lack of essential elements of a binding contract – Effect of – Unilateral action of only one of the parties - No evidence of the requirements of the Public Finances (Management) Act 1995 met – Effect of – Illegal, void ab initio contract – Unenforceable contract – Quantum meruit claim – Need to establish innocence for breach of statutory requirements – Failure – Claim in quantum meruit not available -Evidence of some of the goods contracted for supplied – Need to allow for their value - Amount paid under illegal contract fully recoverable less the value of goods supplied to avoid unjust enrichment.

Cases Cited:

Paul Busby v. Air Niugini Pty Ltd (2001) N2155

Nivani Ltd v. China Jiangsu International (PNG) Ltd (2007) N3147

Hargy Oil Palm Ltd v. Ewase Landowners Association (2013) N5441

Fly River Provincial Government v. Pioneer Health Services Ltd (2003) SC705

Panga Coffee Factory Pty Ltd v. Coffee Industry Corporation Limited (1999) SC619.

Jack Livinai Patterson v. National Capital District Commission (2001) N2145

The State v. Barclay Bros (PNG) Ltd (2002) N2090

Legislation cited:

Public Finances (Management) Act 1995

Counsel:

P. Kup-Okut, for the Plaintiff

M. Kipa, for the Defendants

28th October, 2019

1. KANDAKASI DCJ: The National Broadcasting Corporation (NBC), is seeking to recover a sum of K4, 626, 845.00 it paid to T.G. Holding Limited trading as Freeway Motors (Freeway Motors). That was for the supply initially of 27 Toyota branded motor vehicles and later 3 more such vehicles added bring the total vehicles to 30 (the 27 Vehicles) pursuant to a written Sale and Purchase Agreement (Contract) as varied. These monies were paid long before a meeting of the requirements of the Public Finances (Management) Act 1995 (PFMA) and signing of a formal contract. Of the amounts paid, K3, 126, 845 was the original contract price. The balance of K1.5 million was caused to be paid at the request of Freeway Motors with the approval of the then chairman of the Central Supply and Tenders Board (CSTB). That was allegedly for demurrage and storage costs.

Parties Arguments

2. The NBC claims Freeway Motors failed to supply the 27 Vehicles in accordance with the terms of the contract despite having received the payment of K4, 626, 845.00 except for 4 Toyota branded vehicles out of the total 30 Vehicles. The NBC also claims that, Freeway Motors received the payments through fraud and misrepresentation. It reasons that Freeway Motors knew it was not going to supply the 30 Vehicles within the agreed period or at all at the agreed locations and it indeed failed to deliver the balance of 26 Vehicles. As for the additional K1.5 million payment, NBC says Freeway Motors did not incur the alleged expenses of demurrage and storage.

3. In response, Freeway Motors claims the parties varied the contract by conduct of the parties in two respects. Firstly, the parties agreed to allow for the K1.5 million additional payment for demurrage and storage. The second was for Freeway Motors to supply the balance of the Vehicles in the form of Great Wall of China, Wingles (Wingles). The conduct was in NBC failing to object or take issue with the Wingles being supplied. The NBC disputes the variation claims.

4. Being convinced that this case could easily be resolved by mediation, the Court referred the parties to mediation. Mediation did take place. Unfortunately, the parties failed to settle the matter due to Freeway Motors maintaining its position except only in respect of 10 vehicles it agreed to supply. That, it did but in the form of Wingles to various provincial locations without first informing the NBC management and not strictly in accordance with the written contract.

5. The parties through a formal statement endorsed by the Court agreed upon the relevant facts and issues for resolution. From that statement comes the foregoing summation of facts and other facts as I will refer to in the course of the judgment. For now, based on the statement, the parties agreed that the following are the issues for this Court to determine:

(1) Whether … there was an initial variation of the contract between the State and the Defendants providing for the payment of K1.5 million for demurrage and storage costs?

(2) Whether … there was a further variation of the contract by conduct of the Plaintiff in NBC accepting the delivery of the 13 Wingles without making any objections?

(3) Whether … the 2009 Board decision was a variation or amendment anticipated by Clause 18(k) of the Sale and Purchase Agreement?

(4) Whether the vehicles were imported and stored in any yard by the Defendants?

(5) Whether the Sale and Purchase Agreement is void by fraud and misrepresentation?

(6) Whether … the collection of K3, 126, 845.00 in 2007 prior to the award of the contract to Freeway Motors in 2008 amounts to fraudulent conduct?

(7) Whether … the Plaintiff is entitled to recover its K4, 626, 845.00 with damages and costs for fraud?

(8) Whether the sum of K4, 626,845.00 was money had and collected by the Defendants for the use of the Plaintiff?

(9) Whether the Sale and Purchase Agreement was breached when the Defendant collected K3, 126, 845 and a further Kl.5million but failed to deliver the promised vehicles?

(10) If so, whether the Plaintiff can recover the K4, 626,845.00 with costs and damages for breach of contract, misrepresentation and fraud?

6. Of these issues, issues 1, 2, 3 and 9 are determinative of all of the other issues. A determination of the other issues is dependent or consequential on a determination of the first three and the eighth issues. Accordingly, I will deal with these four issues first.

Variation or Breach of Contract - Issues (1) - (3) and (9)

7. The first three questions can be reframed in this way:

Whether the parties by their conduct varied the initial terms of the Contract to allow for:

(a) Freeway Motors to claim and for the NBC and the State to pay Freeway Motors the further sum of K1.5 million for demurrage and storage costs;

(b) Freeway Motors to supply the balance of 23 Vehicles (initially) in the form of Wingles in place of Toyota branded vehicles;

(c) Freeway Motors to supply an additional 3 vehicles to bring the total vehicles to 30 from the original 27 Toyota branded vehicles and hence the balance yet to be delivered is 26 vehicles?

8. Proper answers to these issues are dependent on an understanding clearly of what were the original terms of the Contract. It is also dependant on a clear understanding of the means or the process the parties used, to have the Contract varied, if indeed they had it varied by their mutual agreement. This requires a consideration of the relevant facts which are set out in the statement of agreed facts and issues and the relevant and applicable law.

9. From the agreed facts there is no dispute that the original terms of the Contract in relevant parts were as follows:

(1) The NBC required 27 Toyota branded motor vehicles comprising of 23 four-wheel 5th Element Hiluxs, one 10-seater Land Cruiser Trooper, two 15-Seater Hiace buses and one panel van;

(2) Freeway Motors bided to supply the required vehicles at a price of K3,126,845.00.

(3) The vehicles were to be supplied within 12 months of the date of the execution of the Contract; and

(4) The places at which the vehicles were to be supplied were the NBC’s head office at 5 Mile, National Capital District and its 19 provincial locations.

10. Prior to a delivery of any of the Vehicles, Freeway Motors through its managing director, Mr. Sam Tasion, went to the then chairman of the CSTB, Mr. Brian Kummins and got him to approve its claim of K1.5 Million in demurrage and storage charges. The chairman of the CSTB granted the approval. Thereafter, Freeway Motors demanded and the NBC paid that additional amount.

11. Then contrary to the Contract, Freeway Motors delivered only four vehicles, one 10-Seater Landcruiser Trooper, two 15-Seater Hiace buses and a panel van. That left an outstanding 23 fully kitted four-wheel drive, 5th Element Toyota Hiluxs from the initial Contract yet to be delivered to the locations specified in the Contract within the agreed period of 12 months. That was despite having received the payments more than a...