THE COURT REPORT

Peter Yama loses over K22m in one day

September 1, 2017, was an expensive day for Madang Governor, Peter Yama, with more than K22 million slipping through his fingers in a single Supreme Court decision.

In March 2016, the National court had awarded the Governor’s company, Yama Security Services Ltd (YSSL) K17,871,510 in damages and interest for breach of a contract between the security company and the National Capital District Commission [NCDC]. The court had also awarded a further K5 million in legal costs .

However, on appeal, the Supreme Court has now revoked the decision of the lower court, imposing instead its own damages assessment of just K1!

To make matters even worse for Mr Yama, the three Supreme Court justices also ordered YSSL must pay the NCDC’s legal costs for both the National and Supreme Court cases; which will run into hundreds of thousands if not millions of kina.

This extraordinary reversal of fortune casts a spotlight on the original National court decision, made by Justice Bernard Sakora, who is currently facing his own Leadership Tribunal, and who the Supreme Court singled out for some unusual criticism.

The facts

In February and March 1998 the NCDC entered into two contracts for YSSL to provide security services, for 48 and 39 months respectively, at various premises owned by the Commission. A year later, in February 1999, the NCDC cancelled the contracts. YSSL sued for damages, claiming it was entitled under Clause 12(d) of the contract, to the balance of the amount it would have been paid under the contracts if they had not been cancelled.

YSSL then proceeded to obtain a default judgement against the NCDC with damages to be assessed. The two parties then purported to settle the matter via a Deed of Release. That Deed was though later held invalid by the Supreme Court, as its terms were never approved as necessary under the Public Finance (Management) Act 1995.

The Deed having been invalidated, a trial was then held to assess the damages to be paid for the breach of the original contracts.

At the trial, before Justice Sakora, YSSL confined itself to presenting evidence to quantify the amount it would have been paid for the balance of the contract term. NCDC provided evidence showing that after the cancellation, YSSL had been offered, taken up and been paid for alternative work, and that its real losses had, therefore, been much lower than the amount claimed.

In making his decision on the quantum of damages, Justice Sakora relied on the Clause 12(d) as dictating the method for computing the damages and based his assessment on the evidence provided by YSSL and ignored or dismissed the submissions from NCDC.

Sakora then added, unusually, compound rather than simple interest to the amount awarded. Importantly, Sakora also made particular reference to the significance of the earlier Deed of Release.

The decision

On the question of damages the Supreme Court held:

  1. The deed of release had already been held invalid by the Supreme Court and the trial judge was incorrect to treat it as not invalid;
  2. Clause 12(d) of the original contracts was invalid as it was a penalty clause rather then just compensation;
  3. As the assessment of damages was made on a false premise [Clause 12(d)] it must be set aside;
  4. There should be no retrial as YSSL had an opportunity at trial to call evidence to prove a valid loss and failed to do so.

The appeal was allowed, the National Court order set aside and it was ordered NCDC pay YSSL nominal damages of K1.

The costs question

At the National court trial, Justice Sakora gave an ex tempore judgement, meaning he gave it orally, immediately at the end of the trial. In that decision he awarded costs to YSSL, to be taxed if not agreed. This means the amount to be paid in costs would be determined by a court official if YSSL and NCDC could not come to an agreement between themselves.

This was the order announced by Sakora in court on 2 March 2016 and it is the order that was entered in the court records in writing on 3 March.

However, at a later date, the judge revised his decision on costs, ordering the NCDC to pay YSSL’s costs in the sum of K5 million. Justice Sakora made this large and significant change apparently of his own volition and without allowing either of the parties any opportunity to be heard.

In its decision the Supreme Court, rather delicately, said this:

“The recitation in the revised reasons for judgement of a radically different order in respect of costs appears to have been an error of recollection by the trial judge running counter to the accepted practice”

The Supreme Court imposed it own rather different costs order, requiring YSSL pay the NCDC’s costs of the appeal and the trial in the National Court in respect of damages.

Thus, although the Supreme Court accepted YSSL was entitled to damages, as it already had a default judgement on liability, not only did it award only K1 in damages, it also ordered YSSL pay the costs of the NCDC, the ‘losing’ party.

Trial judge

Anyone who follows the decisions of the courts and the conduct of appeal proceedings in particular will know that it is extremely rare for one judge to ever cast aspirations on the decisions or conduct of a ‘fellow’ judge. There is a very clear and marked camaraderie and often an appeal decision does not even mention the name of the lower court judge, simply referring to ‘the court’ or ‘the judge’.

It is notable therefore, that in this case the Supreme Court did make some rare and ‘unusually’ critical observations about the decisions made by Justice Sakora in the original trial.

While the Supreme Court expressed its agreement with the trial judge that there had been “too much lawyering” in relation to the whole dispute which had taken almost two decades to resolve through the courts and ‘an apparent absence of adequate attention over the years by various practitioners to principles of law and practice’, the judges said this did not give Sakora ‘a license to apply idiosyncratic notions of fairness to the application of the law to the evidence’.

Such an approach, the Supreme Court suggests, invoking Shakespeare and his play Henry VI, ‘would invoke anarchy and the death of all those who would seek to uphold justice according to the law’.

The Supreme Court also stated Justice Sakora had been ‘very peremptory’ in dealing with the question, on which the appeal turned, of whether Clause 12(d) was ‘penal in character and conducive to unjust enrichment’.

This is not the only time Justice Sakora has faced questions about his conduct and judgement.

In an unrelated and entirely separate matter, in April 2016, Justice Sakora was arrested and charged with corruption. His arrest was in relation to an injunction granted to controversial lawyer, Paul Paraka, suppressing the publication of the findings of the Commission of Inquiry into the Department of Finance. It is a charge Sakora denies.

Also in an unrelated matter, Justice Sakora is currently suspended from duty while a Leadership Tribunal investigates charges relating to delays in giving reserved judgements.

Yama Security Services

Yama Security Services Ltd is a PNG registered company owned by Peter Yama.

Peter Yama owns 95% of the shares in the company and other members of his family the other 5%. The company was first registered in 1984.

YSSL has had something of a checkered history, having twice been placed into liquidation [in 2000 and 2003].

According to the records of the Investment Promotion Authority, the company has not filed an Annual Return since 2002, yet the company has clearly been functioning as evidenced by the court proceeding the subject of this report and other documents lodged with the IPA such as changes of shareholders and directors (lodged in 2014) and registration of a charge (in 2006).

The failure to lodge timely annual returns with the Registrar of Companies is a serious offence for the directors of the company.