National Capital District Commission v Yama Security Services Pty Limited (2003) SC707

• Jurisdiction: Papua New Guinea
• Court: Supreme Court
• Date: 06 June 2003
• Citation: [2003] PNGLR 1
• Docket Number: SCA No 24 of 2002
• Year: 2003

Full Title: SCA No 24 of 2002; National Capital District Commission v Yama Security Services Pty Limited (2003) SC707

Supreme Court: Injia J, Davani J, Mogish J

Judgment Delivered: 6 June 2003

1 Practice and Procedure—National Court—Civil—Judgment on liability for damages to be assessed—Compromise reached by parties on damages pending trial on assessment of damages by court—Deed of Release—Application for summary judgment seeking enforcement of Deed of Release—Compromise disputed by one party on grounds of fraud, illegality and excess of authority—Inappropriateness of summary procedure under O12 r38—Necessity to institute fresh proceedings or amend pleadings to plead Deed of Release—Duty of the Court to facilitate process for pleadings and full trial to determine merits of issues—National Court Rules, O12 r38.

2 Contract—Contract involving public authority—Compromise of pending action—Deed of Release—Subsequently disputed by public authority on grounds of fraud, illegality and excess of authority by former officers of the public authority—Duty of Court to facilitate proper determination of issues—Inappropriateness of summary procedure to determine validity of Deed of Release—Public Finances (Management) Act 1995 s61—National Capital District Commission Act 1990—Claims By and Against The State Act 1996, s5

3 Lailai v Ace Guard Dog Security Services Ltd [2003] PNGLR 225, The Independent State of Papua New Guinea v Barclay Brothers (PNG) Ltd (1992) (Unreported and Unnumbered Supreme Court judgment delivered on 31 December 2002), Patterson v NCDC (2001) N2145, Yama Security Services Limited v Warupi and MVIT (2000) WS 225 of 1999 (Unreported and unnumbered National Court judgment of Sevua J dated 25 August 2000), John Momis v Attorney–General [2000] PNGLR 109, Bruce Tsang v Credit Corporation (PNG) Ltd [1993] PNGLR 112, Hornibrook NGI Pty Ltd v Lihir Management Co Pty Ltd [1998] PNGLR 52, Kumul Builders Pty Ltd v PTC [1991] PNGLR 299, Ume More v The University of Papua New Guinea [1985] PNGLR 401, Caltex (Overseas) Ltd v Douglas Charles Dent [1978] PNGLR 411, Green v Rozen [1955] 2 All ER 797, Smythe v Smythe (1887) 18 QBD 544, Re Gardet Freres Steamships Co (1879) 12 Ch D 882, Eden v Nail (1878) 7 Ch D 781 and Pryer v Gribble (1875) LR 10 Ch App 534 referred to

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Injia J:

The Appellant challenges the decision of the National Court at Waigani made on 27 March 2002, in which the learned judge entered judgment in favour of the Respondent in the sum of K8.5 million. The grounds of appeal are set out in the judgment of Davani J, which I adopt.

The background circumstances of the Respondent/Plaintiff's claim and the procedure employed by the Respondent in seeking and obtaining this judgment in brief are these. The Appellant is a statutory body established under the National Capital District Commission Act 1990 and is charged with the duty to manage the affairs of the National Capital District. On 5 February 1998, the Respondent entered into a contract with the Appellant to provide security services. The contract was to run for a period of four years, and was to expire on 5 February 2002. On 27 March 1998, the parties entered into a "Supplementary" contract for additional security services in the same period. On 9 February 1999, some 13 months into the performance of the contract, the Appellant "suspended" the contract. On 29 October 1999, the Respondent commenced proceedings in the National Court in WS No 1221 of 1999, seeking damages for the unperformed period of the contract. The Respondent claimed total damages of K7,513,835.84, particulars of which were endorsed on the Writ. In these proceedings, the respondent also joined the National Executive Council and the State as nominal defendants, under provision of s2 of the Claims By and Against the State Act 1996 and s68(3) of the Organic Law on Provincial Governments and Local–level Governments. This is because the respondent was under suspension at the time the proceedings were instituted and the management of the affairs of the Commission was vested in the National Government. On 1 December 2000 the Respondent obtained judgment on liability, for damages to be assessed later. This judgment on liability was not in issue in the National Court and also not in issue in this appeal.

Pending assessment of damages by the court, the parties entered into negotiations on quantum of damages. The Respondent claims that these negotiations resulted in a resolution passed by the Respondent's board on 25 November 2001, which authorised its Chairman and Governor of the National Capital District, one Philip Taku (who was the elected member for Moresby North East in the National Parliament) and the Chairman of the Commission's Finance Executive and Tender Committee, to negotiate a settlement of the claim. The Respondent claims an agreement was reached to settle the damages for K8.5 million and a Deed of Release ("the Deed") was drawn up and signed, sealed and delivered on 28 November 2001. Under the Deed, upon the receipt of K8.5 million from the Appellant, the Respondent undertook to file a Notice of Discontinuance of Proceedings in the National Court. The Deed was signed by Mr Philip Taku on behalf of the Respondent. Subsequently, changes in the administration of the Respondent occurred as a result of changes to legislation affecting the Respondent, which resulted in the administration headed by Governor Philip Taku replaced by the administration headed by a non–elected person, one Bernard Kipit. This new administration refused to honour the contract, for various reasons, which prompted the Respondent to commence proceedings in WS 1221 of 1999.

In these proceedings, by Notice of Motion, filed on 7 March 2002, the respondent sought to enforce the Deed and applied for orders that the "Defendant be ordered to pay the Plaintiff the sum contained in the duly executed Deed of Settlement dated 28 November 2001" or alternatively, "Judgment be entered to the agreed amount as reflected in the Deed of Release."

When the Motion was heard on 18 March 2002, the appellant vigorously contested the application. It is not clear under which provision of the National Court Rules the motion was initially moved but it is clear from the transcript of proceedings that the respondent's counsel moved an application for summary judgment under O12 r38 and the trial judge proceeded on this basis.

Both parties relied on affidavits filed which asserted their respective positions. None of the deponents of the affidavits were called by either party and their evidence was not tested in cross–examination. Both counsel made submissions on the affidavit evidence.

The Respondent argued that the Deed was properly entered into, that administrative procedures were properly followed in securing a full board resolution authorising the settlement, that the terms of the Deed were consistent with the terms of the resolution, that the Deed was conclusive evidence of the terms of the settlement and binding on the parties and that the Deed should be enforced.

The Appellant countered by arguing that summary judgment should not be granted because the respondent failed to meet the requirements of O12 r38 of the National Court Rules (to provide evidence of facts proving the claim and there was evidence from a responsible person for the Respondent that the appellant had no defence to the claim). It was contended that because the plaintiff had not pleaded the Deed in the statement of claim, judgment on the Deed was not available.

The Appellant also contended that the Deed was not validly entered into because there was evidence to show that no such resolution was passed by the Board and that the resolution was a fraud. In the alternative, even if the resolution was passed and the Deed entered into pursuant to the resolution, the Deed exceeded the terms of its authority under the resolution in that the...