Payment for claim questioned
The case for the Crown – was the $1.75million to Apex Agencies (Toa) to settle all claims including historic claims?

• ‘Guarantee’ was subject to subsequent negotiations
• ‘Crown cannot wave a blank cheque’
• ‘Cabinet not within their powers to dispense with any Act’
Did Cabinet and the Finance Minister exceed their powers and was it the Crown or the Government who contracted? Frame later said ‘it is not within the powers of Cabinet to ignore any Act’ and the ‘Crown cannot wave a blank cheque’
Those are some of the weighty issues raised by Dr Alex Frame to Justice Weston in the High Court on Thursday morning. And was Justice Weston asked where that proposition left the Court?
Dr Frame (a constitutional law expert) said it was a ‘question of approach’ saying that the MFEM Act 1995-96 was a ‘tightening of the rules’ enacted to control expenditure by officials.
It was also an ‘implied condition precedent’ in all government contracts that all expenditure was required to relate to appropriate appropriation in Parliament and the court was to ‘distinguish validity’ from ‘enforceability’ but conceded there was a ‘reasonably wide latitude’ to that rule.
The payment of $1.75 million to Apex Agencies (Toa) was for ‘all claims including historic claims’. Agreement was reached in mediation negotiations in December 2009 and the ‘substantive’ payment was to settle the cancellation of the contract to purchase the fuel facilities. Any further claims are ‘ultra vires and void’.
After mediation, the agreement was to negotiate a ‘new template for fuel pricing’ with agreement to be reached ‘as soon as practicable’ where the parties ‘shall enter into a new full pricing template and subject to various provisos. It was part of a price fixing process, re inputs, costs of freight, formulae and was a ‘mechanical process’ (in other words it was a provisional deal and not a done deal)
The question of liability under s 24(3) Crown Proceedings Act was also explored with Justice Weston wanting to explore the ‘consequences’ for the parties if Frame’s argument is right?
Frame said the Apex (Toa) profits are not known each year and according to the template, if Apex (Toa) were to lose $1million that year, then the Crown was liable to pay .the loss in addition to the 1.2million ‘guarantee’.
Justice Weston asked ‘Is that a problem and commented that there had been plenty of such cases ‘without the Crown tumbling’ or the ‘Court crumbling’.
The Cabinet minute purporting to approve the mediation settlement by the former DPM, Sir Terepai Maoate and special consultant Kit Toogood with Solicitor General and Financial Secretary as observers. Justice Weston noted that ‘on the face of it’ the minute gave full approval to the Financial Secretary who was present throughout.
Frame replied: ‘it is not within the powers of Cabinet to ignore any Act’ and the ‘Crown cannot wave a blank cheque’ and was adamant that the contract for the disputed ‘guarantee’ was ‘collateral’ to the main contract and thus ‘severable’ and could be ‘struck down and still retain ‘sufficient coherence to survive the excision’.

Apex Agencies (Toa) say the contract is binding
• If Toa at fault, Crown is equally at fault’
• Is the defendant the Crown or the Government?
In his closing submission, counsel for Apex Agencies (Toa) Paul Dale argued strongly Dale said Crown had admitted ‘breach’ of contract
He said there is ‘no prohibition on the Crown’ to enter into contracts (without prior Parliament appropriation) and their contention that ‘all kinds of terrible things would happen’ was nonsense.
Dale said that leading up to the proposed January trial (to sue for breach), he had worked with Mike Ruffin on draft pleadings re the Triad case and there had been some ‘interesting exchanges’ and joked that the Crown was committing ‘constitutional heresy’ to try and escape liability under the contract.
The ‘guarantee’ was part of the ‘price fixing mechanism’ as to the purchase order and maximum charged for the fuel at X amount of dollars with income dependent on volume.
He said the Crown Proceedings Act distinguished between the ‘Crown’ and ‘Government’ and both Crown and Government are subject to statutory definition> He noted that the ‘Crown has no lesser powers than that of Her subjects’ and the Crown could enter into binding contracts without (Parliamentary) appropriation. Thus the $1.2m ‘guarantee’ did not need prior appropriation similar to becing able to purchase ‘paper clips’ without appropriation.
When discussing an overseas case of Fry, where it could be argued that the Crown could benefit from its down default (in a contract), Justice Weston commented that ‘if Toa is at fault’ it could be argued that the Crown may be equally ‘at fault’.
He then argued that Apex (Toa) had dealt with the ‘Government’ and not the ‘Crown’ but was hard pressed when Justice Weston commented that throughout the case, Dale had argued that the case was against the ‘Crown’.
Unfazed, Dale asked that it did not matter about the meaning of a ‘guarantee’ when it comes to an agreement with Government as it was then an assurance to the contracting parties.
Prior to the offer of mediation from Government, Apex (Toa) had already indicated they intended to sue for breach of contract and seeking damages of $10.2 million and but then the Crown had approached his clients and drawn them into mediation with assurances and representations that they had every authority to do so and then seek to withdraw from the contract.
The Cabinet minute in evidence showed approval for the negotiating team of the dormer DPM, Sir Terepai Maoate, legal consultant Kit Toogood QC and Paul Davison QC and Senior Counsel at Crown Law, Solicitor General Tingika Elikana and the (former) Finance Secretary to settle the matter with Apex (Toa).
Such an experienced team of senior counsel and senior high Government officials would have been well aware of the consequences of their own actions and the Crown had entered into a ‘binding contract’ in the mediation proceedings of December 2009.
The writer notes that contract cases are decided on balance of probabilities and the outcome could go either way in the case with a strong case argued for Apex (Toa) but equally so for the Crown. Justice Weston has reserved his decision and will be ready in May 2010.

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