Hasu v Watt [1996] PGDC 4; DC5 (10 July 1996)

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CONTRACT - Sale through third party - “Undisclosed principal” - Set off - Need to give written notice of set off - S. 153 of the District Courts Act, Ch. No. 40.

KARAPO PM: I have to make a decision on the Complaint by Lancer Hasu (Complainant) who says that in April 1992, at Kavieng, the Defendant made an agreement that he exports his marine products for him. The total weights of the marine products given to the Defendant for export was 885.5 kilogram. They worth about K4,000.00. This is the same complaint that was struck out recently but it was for the claim of K945.62.

The Complainant gave evidence that he and the Defendant had agreed that instead of him selling his marine products to a Lester, the Defendant would assist in the exports of his products to the Defendant for exports. The third occasion was on the month of April 1992 when the Complainant took his marine products weighing 885.5 kilograms to the Defendant for export. The Complainant said he believed and trusted the Defendant because of his standing in the Community as a Lawyer.

However, since April 1992 the Defendant failed to pay the Complainant the proceeds of his marine products. The Complainant approached the Defendant about twenty (20) times but there were no response. He brought the matter to Court. He did not call any witnesses.

The Defendant also gave evidence on his own behalf. He agreed he knew the Complainant as his client. He also agreed that he offered to assist the Complainant with the sale of his marine products and promised to look for an exporter.

He did find an exporter in Pacific Atos Pty Ltd, a national company and operates from Kavieng. This Company (ie Pacific Atos Pty Ltd) has a contract with a foreign Company called Yee Ton Importers and Exporters Trading Co, and based in Hongkong. The agreement is that Pacific Atos Pty Ltd sells certain marine products that are harvested in the seas of Papua New Guinea to Yee Ton Importer and Exporters Trading Co. who is the buyer. A copy o the Contract was tendered into Court by the Defendant. I noted that it was witnessed by the Defendant. According to the Defendant the Pacific Atos Pty Ltd had been exporting their products which also includes the Complainant’s. he produced a copy of one of the Bill of Lading as evidence of the products being exported. There were also several documentary evidence which relates to correspondence between Pacific Atos Pty Ltd and the Defendant. The letters were about the products of the Complainant. They include the 885.5 kilogram now in question and worth about K4,000.00.

The Defendant denied liability. He claimed Pacific Atos Pty Ltd was liable because it was exporting the Complainant’s sea products. The Company was licensed to export such products. He claimed he only assisted the Complainant, however he did not disclose to the Complainant that Pacific Atos Pty Ltd was exporting the Complainant’s products. The Company, Pacific Atos Pty Ltd have since been dissolved.

In the cause of giving his evidence, the defendant claimed the Complainant owed him a total sum of more than K4,000.00 for outstanding legal fees. He produced the bill, which was dated the 14/04/96. The balance due and payable was K4,089.10.

N2>(b) Can I consider (his) Defendant’s claim of K4,089.90 for outstanding legal fees on the part of the Complainant?

A contract of agency may create two entirely different relationship. First, there is the relationship between the principal and the agent himself. The relationship is simply a contract like any other contract, and the rights and duties of the parties inter se are regulated by express and implied terms of that contract.

For the present purpose, however I am concerned with the possibility that agency may be created for the purpose of establishing a further relationship between the principal and a third party. If the agent makes a contract with the third party on behalf of his principal, that contract is regarded by law as having been made by the principal himself. Hence he can sue on it and be sue on it. In the normal way the principal will have authorised the agent to make the contract, but the agents power to bind his principal frequently extends beyond his actual authority.

In the absence of notice to the contrary the third party is entitle to assume that the agent has in fact the authority that he appears to have (apparent authority) and the authority that an agent of that class usually has.

English Law also recognises “the undisclosed principle”, that is it recognises the right of a principal to enforce a contract in fact made on his behalf by an agent, even though the agent was not known to be acting for a principal. This is certainly is inconsistent with any strict application of the doctrine of privity of contract, especially, when viewed in the light of the usual objective approach of the Law to questions of intention. The third party who has no knowledge of the principal’s existence may thus find that he has made a contract with a person of whom he has never heard, and with whom he never intended to contract. In a sense, the resulting contract is based on the subjective intention of the agent. Thus the doctrine of the undisclosed principal is hedged about with certain limitations to safeguard the interest of the third party.

The third party can enforce the contract against the agent personally if he chooses, since he is permitted to judge the agents’ intentions in the usual objective way. In the second place, the principal must prove that the agent did infact have authority to make the contract at the time when it was made. And thirdly, the principal will not be able to enforce the contract if it is of a personal nature.

In the case before me there is evidence that the Defendant agreed with the Complainant to export his marine products. The defendant made a verbal agreement that the Complainant export his products through him. The Complainant was performing part of his contract. The Defendant on the other hand did not disclosed the principal company to the Complainant.

There is evidence that the Complainant had been selling his products through the Defendant for export. This include his 885.5 kilograms of bech-de-mer of which he has yet to receive payments for. The Company, Pacific Atos Pty Ltd had since been dissolved.

The doctrine of agency and undisclosed principles were very well explained above and are binding on myself to consider and apply in the case before me. I am convince that the Defendant when making the contract failed to disclose the principal Contractor at the negotiation stage to the Complainant.

I therefore find that although Pacific Atos Pty Ltd has since been dissolved. The Complainant can still sue the Defendant as agent.

On the question of the Defendant’s unpaid Legal fees, I looked at Section 153 of the District Courts Act, c. 40 which reads:

N2>“(1) Without the permission of the Court, the Defendant in the Complaint for a debt recoverable before a Court shall not:

(a) Set off a debt or demand claimed or recoverable by him from the Complainant; or

unless, a reasonable time before the hearing of the Complaint written notice of his intention to set off or to set up that defence, as the case may be, has been given to the Complainant personally or by post or causing it to be delivered at his usual or last known place of abode or business or at his address for service set out in the summons or complaint.

N2>(2) The Defendant shall produce on the hearing a copy of the notice given under Sub-section (1), and, unless it is admitted, shall prove that it was given in accordance with that Sub-section, and indefault of that proof no set off or defence specified in that Sub-section shall be set up except by consent.”

I noted there was no notice filed before this Court or that there is nothing on records to say the Court has given the Defendant the permission to set off his debt recoverable by him from the Complainant. The Defendant as required by Section 153 (2) fail to produce a copy of the notice given to the Complainant.

I consider therefore that it would be unwise for me to entertain his claim at this point in time. I will therefore exclude this counter claim from consideration in line with S. 153 of District Court Act.

On the question of damages, I consider that the plaintiff can recover financial compensation for the loss of his marine products. The total weight of the product as claim is 885.5 kilograms. The Complainant claims the value would be at about 4,000.00 if exported. I took into consideration the list produced to Court by the Defendant. I am not in the position to make a proper consideration, there is no expert witness to justify the list produce to this Court by the Complainant.

I however, consider from my own assessment that the appropriate sum to be awarded is K1,500.00.

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Papua New Guinea District Court

Hasu v Watt [1996] PGDC 4; DC5 (10 July 1996)

Unreported District Court Decisions