Dennis Marus v Kimbe Urban Local-Level Government (2007) N5021

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 06 July 2007
• Citation: (2007) N5021
• Docket Number: WS NO 682 OF 2005
• Court: National Court
• Year: 2007
• Judgement Number: N5021

Full Title: WS NO 682 OF 2005; Dennis Marus v Kimbe Urban Local-Level Government (2007) N5021

National Court: Cannings J

Judgment Delivered: 6 July 2007

N5021

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 682 OF 2005

DENNIS MARUS

Plaintiff

V

KIMBE URBAN LOCAL-LEVEL GOVERNMENT

Defendant

Kimbe: Cannings J

2006: 8, 21 September,

2007: 6 July

CONTRACTS – breach of contract – whether contract in existence, capable of enforcement – whether contract lawfully entered into on behalf of a local-level government body – consequences of illegality – whether a party to an illegal contract can sustain a claim in equity for work actually done.

The plaintiff entered into a memorandum of agreement, which he says is a contract, with the Kimbe LLG (the council). The agreement was that the council would pay him for provision of his services. They did not pay him anything for the work he did so he sued for breach of contract. The council says it is not obliged to pay as there was no contract with the plaintiff; but if there were a contract it was entered into unlawfully by the town mayor, so it is illegal and unenforceable.

Held:

(1) The contract was not void for uncertainty.

(2) The Mayor was not authorised to sign the contract and it was therefore illegal and unenforceable. Further it purported to outsource the administrative functions of the council to a single person, which was unlawful as it offended against the principle of representative democracy on which Papua New Guinea’s three-tier system of government is based.

(3) The council did not breach the contract as the plaintiff did not do the things that the contract required him to do.

(4) Despite the illegal aspects of the contract, the court, in the exercise of its discretion, granted restitution to the plaintiff of 5% of the contract sum, on a quantum meruit basis.

Cases cited

The following cases are cited in the judgment:

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

John Vulupindi v John Gideon CIA No 4 of 2006, 22.06.06

Veltro Ltd and Others v Steven Liu Huang and Others OS No 478 of 2006, 12.09.06, unreported

STATEMENT OF CLAIM

This was an application for enforcement of a contract.

Counsel

T Waisi, for the plaintiff

G Linge, for the defendant

6th July, 2007

1. CANNINGS J: The plaintiff, Dennis Marus, is claiming that Kimbe Urban Local-level Government (“the council”) owes him K60,000.00 for a strategic plan he prepared for them. He says that in April 2004 he entered into an agreement with the council to prepare the plan. He kept to his side of the bargain. He prepared the plan within the six-month deadline. He waited for payment for almost a year before taking the matter to court. He is suing the council for breach of contract. If the council succeeds in showing some illegality in the contract, he says he still has a claim in equity.

2. The council says it owes Mr Marus nothing. There never was a contract. The memorandum of agreement is too vague. It does not specify who the parties are. Besides that the town mayor, who signed the document, had no authority to do so. The proposal to enter into an agreement with Mr Marus was not approved by the council or its finance committee. This makes the contract – if there was one – illegal and unenforceable. The subject matter of the agreement also makes it illegal as it purported to divest management of the council to Mr Marus. If all of those arguments fail, the council says it is still not guilty of any breach of contract as Mr Marus has not done what he was required to do by the contract. If anyone has breached the contract, it is Mr Marus, not the council. Surprisingly the council did not argue that the contract was entered into without a public tender contrary to the Public Finances (Management) Act 1995, and was therefore unenforceable. So I am not going to address that issue. There are five questions to resolve:

1 Was the agreement void for uncertainty?

2 Was the Mayor authorised to sign the agreement? If not, is it enforceable?

3 Was the subject matter of the contract lawful?

4 Did the council breach the contract?

5 If there is no breach of contract or the agreement is illegal or unenforceable, does the plaintiff have a claim in equity?

3. Mr Waisi, appearing for Mr Marus, submitted that all those questions should be answered yes. Mr Linge, for the council, submitted that they should all be answered no.

1 WAS THE AGREEMENT VOID FOR UNCERTAINTY?

4. The agreement is three pages in length and consists of a preamble and five clauses. The parties to the agreement are stated at the beginning to be:

· Kimbe Urban Local-level Government – the “Engager”; and

· Denis Holiua Marus of Island Consultant Services Ltd – the “Engagee”.

5. Mr Linge argued that the agreement was void for uncertainty and therefore not a contract as the party that executed it was not Mr Marus but another entity called “Island Consultant Services Ltd”. A company seal in that name was affixed to the agreement, next to where Mr Marus signed as “principal director”. Mr Linge also submitted that Mr Marus’s statement of claim (the court document by which this case was commenced) added to the uncertainty by pleading that the party to the contract was Mr Marus, not Island Consultant Services. Mr Linge referred to my decision in Veltro Ltd and Others v Steven Liu Huang and Others OS No 478 of 2006, 12.09.06, to argue that Mr Marus had failed to plead the details of the contract with sufficient particularity to establish a cause of action.

6. I reject those submissions. An initial reading of the agreement gives rise to an element of ambiguity about who the “engagee” is – whether it is Mr Marus of Island Consultant Services Ltd. However, a closer reading reveals that the “engagee” and the party to the contract is clearly Mr Marus in his individual capacity. If the council were to sue the engagee for breach of contract it would have to make Mr Marus the defendant. The statement of claim correctly stated that Mr Marus was the plaintiff. The contract is not void for uncertainty.

2 WAS THE MAYOR AUTHORISED TO SIGN THE AGREEMENT? IF NOT, DOES THIS MAKE IT UNENFORCEABLE?

7. Mr Waisi submitted that the question of Mr Marus’s engagement went before the council’s finance executive committee on 6 April 2004, which resolved to seek legal advice. A week later the mayor and the town manager consulted the acting provincial administrator, Willie Edo, who advised them to engage Mr Marus for a six-month period. The Mayor was therefore authorised to sign the agreement, Mr Waisi submitted.

8. I reject that submission as it is contrary to the evidence. The minutes of the committee meeting referred to by Mr Waisi show that the question of Mr Marus’s engagement was discussed by the finance executive committee. But a decision was deferred pending advice from the District Administrator and the LLG Adviser. That was done so that “the Assembly can make a decision on this proposal”. It is not clear what “Assembly” was being referred to. Was it the assembly of the council or the provincial assembly? For present purposes, it does not matter except to observe that the finance executive committee did not approve the contract with Mr Marus and did not decide to seek advice from the Provincial Administrator. The committee decided to seek advice from the District Administrator and the LLG Adviser. In any event, there is no reliable evidence before the court that Acting Provincial Administrator, Mr Edo, advised the Mayor or the council to engage Mr Marus. I conclude that the Mayor was not advised or authorised to sign the agreement by the finance executive committee, the full council, the district administrator, the provincial administrator, the provincial assembly, the provincial governor or any other person or authority.

9. To lawfully sign the agreement the mayor had to be authorised to do so by the finance executive committee or the full council. The laws that prescribe the powers, functions, duties and responsibilities of local-level governments do not delegate to or permit the head of a local-level government to enter into contracts on behalf of the local-level government without authority. Those laws are the Organic Law on Provincial Governments and Local-level Governments and the Local-level Governments Administration Act. A local-level government has legal capacity under Section 6 of the Organic Law. It can sue and be sued. The Kimbe town council was capable of entering into a contract with Mr Marus. But it does not follow that the Mayor could unilaterally decide to sign a contract on behalf of the local-level government. The institutional structure of local-level governments ordained by the Organic Law is that, like provincial governments, they have a legislative arm and an executive arm. Section 36(1) of the Organic Law says that the executive arm consists of all the members of the legislative arm. Section 36(2) says that an Act of the Parliament shall make provision for the powers and procedures of the executive arm of a local-level government. Section 17 of the Local-level...