Dau v P I Electrics Pty Ltd [1998] PGDC 20; DC43 (27 November 1998)

Unreported District Court Decisions

[1998] PNGDC 21 - PETER DAU V P I ELECTRICS PTY LTD

[1998] PNGDC 21

PAPUA NEW GUINEA

[DISTRICT COURT OF JUSTICE]

NO 207 OF 1998

PETER DAU (Complainant)

v

P.I. ELECTRICS PTY LTD and PAUL IYAPENG (Defendants)

Kimbe

G Manuhu SPM

5 November 1998

6 November 1998

27 November 1998

CONTRACT - oral contract - dispute on ownership of balance of account - partnership - consideration - quasi contract.

Cases referred to

Paul Bafino v Auno Tibiro [1992] PNGLR 168

Representation:

Counsel/Representative:

Complainant: In person

Defendants: P. Iyapeng, for himself and first defendant

27 November 1998

G MANUHU SPM:

N1>[1]      This is a matter between the complainant and the first defendant (hereinafter referred to as the company). The second defendant (hereinafter referred to as Iyapeng) is joined in his capacity as the company's managing director. After an unnecessarily protracted trial only two claims have emerged from this matter. One is really a claim for K770 being moneys advanced to the company. The second claim is for ownership rights of the parties to moneys generated when they were still in sound business terms. This claim involves a sum of K6,187.31. There is also a counter claim for K500 being moneys advanced to the complainant.

N1>[2]      In relation to the cash advance of K770 the company says that it got K450 only. The complainant was unable to substantiate (by producing receipts, for instance) the quantum of cash advanced to the company. Accordingly, I can only find for the complainant in the sum of K450. The counter claim is not denied so I find accordingly. The final assessments would be finalized after I deal with the balance of the claims.

N1>[3]      The remaining claim involves the said K6,187.31. Let me emphasize at the outset that, realizing that they would have a lot to tell, all parties were strictly required to plead their respective cases and were forewarned that only those evidence consistent with the pleadings would be accepted. Any fresh claim or counterclaim raised in evidence would not be considered. In the process, to avoid arguments over insignificant differences in mathematical calculations, most of the monetary figures herein were agreed to by the parties.

N1>[4]      The facts relevant to the issue are not really in dispute despite the parties', i.e., the complainant and Iyapeng, apparent personal dislike for each other which at times, in the course of the trial, unnecessarily made it difficult for them to appreciate relevant issues and facts. The complainant is a qualified valuer. Defendant Iyapeng is a qualified electrician and owns the company. The company was operating in Madang until 1995 when it decided to move its operations to Kimbe. Through Iyapeng's wife, who is a relative to the complainant, the latter got closer to Iyapeng and, thereby, the company. Consequently, the complainant advanced cash at various times to Mrs. Iyapeng who held a senior position in the company to, amongst other things, assist the company commence operations in Kimbe.

N1>[5]      Then, one time, the complainant was asked by a client, a Cape Holman, to do some valuation work. This was when the complainant saw Iyapeng about including the complainant's valuation service as part of the company operations. The best evidence on this meeting came from Iyapeng himself. He explained in his evidence thus:

"Then Cape Holman wanted the complainant to do some valuation operations. They wanted professional work. So complainant and Joel Aka came and asked that we form valuation services. Joel Aka and the complainant came to my office and we discussed about the valuation services. That's when we agreed on a new letterhead. That's when we agreed on a new stationery to accommodate the extension of the company operations to include valuation services."

N1>[6]      Consistent with the agreement a new letterhead came into existence in this form:

"P.I. ELECTRICS PTY. LTD.

REAL ESTATE & PROPERTY VALUATIONS

Urban Valuation - Residential, Commercial & Industrial

Rural Properties Valuations."

N1>[7]      Following this, and to cut a long story short, valuation service was rendered to Cape Holman by the complainant for K10,266.80. Out of this amount the complainant got for himself a total of K4,099.49. The leftover balance of K6,187.31 was collected by the company and dealt with thus. The company had obtained on credit the new letterheads at a cost of K612.85 which was settled accordingly. A further sum of K920.49 is said to have been paid to Kimbe Enterprise in respect of debts allegedly incurred by the complainant. The complainant disputes this so in view of the company's inability to prove the claim I will ignore it.

N1>[8]      Up to this point everything was all right until the parties got themselves involved in a separate legal proceeding on opposing sides. That case involved a large sum of money. That could be the reason for the parties' continued dislike for each other.

N1>[9]      However, personal differences aside, this court must consider this case purely on legal merits. The complainant's case is basically that there was a partnership and as such he is entitled to the balance of account which was generated by him. The company's position is that there was no partnership, the complainant was only "attached". Consequently, it is argued, the company is entitled to the leftover balance.

N1>[10]    The irony of the parties arguments will be explained later. What is clear though is that the court must consider the issue of ownership of the balance of the valuation money which is currently in the possession of the company. This will depend entirely on the nature of the relationship between the parties from the legal viewpoint at the relevant time and, what that relationship say about the money in question. That is not an easy thing to do because there was never any written agreement. Everything was done orally.

N1>[0]      Fortunately, the first reported case I came across in the course of my research into this judgment which dealt with the same issue involved facts and circumstances compatible with this case. As such, I feel indebted to his Honour Woods J. In Paul Bafino v Auno Tibiro [1992] PNGLR 168 the plaintiff operated a trade store and, due to financial difficulties, approached the defendant, who paid off the outstanding debts and helped with restocking the store. A passbook account was opened in their joint names with themselves as co-signatories. The defendant kept the passbook in which various deposits were made from the business. The parties disagreed over the ownership of the balance in the account. The Court was requested to determine the rights of the parties in the joint account. At p 169 Woods J deliberated thus:

"In the absence of any clear written agreement it must be seen as a partnership with equal sharing of the benefits of the business. There is no suggestion of anything here other than a modern commercial arrangement for a modern commercial situation. The fact that the parties may not be conversant with the strict form of business partnership contracts does not mean that the court cannot find the parties bound by modern partnership obligations. The court is entitled to, and must, find some agreement and in doing so look at the objective situation - namely the ownership of the store, the coming in of the defendant to help in the running of the store, the existence of the joint account. Those objective facts point to a partnership on equal terms." (my emphasis)

N1>[11]    It is clear from his Honour's judgment that, in the absence of a written agreement, the test for the determination of the nature of the relationship of the parties is an objective one. In this matter, therefore, this court must objectively analyze all the circumstances of the case, including the fact that there was nothing in writing, to determine whether (or not) there was a partnership contract.

N1>[12]    By comparison, the cited case is similar to this case in that, first, both arrangements were made in a modern commercial situation. Secondly, both cases deal with agreements entered into only orally. Thirdly, both of them relate to a dispute over the balance of account.

N1>[13]    However, there are also some notable distinguishable features of the cases. First, in the cited case, the parties were dealing with only one type of business - that of operating a tradestore and both appear to have the same operational skill and knowledge. In this case, the complainant is the only one who had the qualifications and skills of a valuer. The defendants were only involved in electrical business and, without the complainant or a valuer, for that matter, they were not capable of operating a valuation service.

N1>[14]    Secondly, in the cited case, the operation of the tradestore went on for sometimes during which the profits were held jointly in the form of a joint bank account. In this matter, the operation of the valuation service had just begun when disagreements crept in. There is no evidence on how the company operated its accounts.

N1>[15]    Thirdly, and most importantly, in the cited case, both parties contributed except that their contributions were difficult to ascertain. Here, the contributions of the parties are ascertainable. Everything started with the initial mutual agreement to have the valuation service come under the umbrella of the company. Following this a new letterhead became necessary. The complainant made K10,266.80 from his service rendered to Cape Holman. The company claims that it assisted in providing transport to the complainant at the relevant time but this claim did not form part of its pleadings. Accordingly, I am rejecting the company's evidence on claims not mentioned in its pleadings. All these means that there were no financial contributions at all from the company.

N1>[16]    In contract law, there is no contract if there is no consideration. Consideration is some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. In this matter, the only consideration given by the company was the sharing of the letterhead with the complainant. Other than that, according to the evidence, all the company's resources were intact. Indeed, it was made very clear by Iyapeng that the company never wanted to share its other profits with the complainant.

N1>[17]    In all the circumstances, I am satisfied that the initial arrangement was for the formation of a partnership but the parties did not succeed in creating a partnership contract. The initial intention is apparent from the agreement reached at the meeting culminating in the alterations to the letterhead. Subsequently, a sum of K10,266.80 was generated by the complainant and collected by the company. However, apart from the changes to the letterhead, the company did not come good with its part of the agreement. It did not give consideration to appropriately support the partnership contract. The company made a promise but performance of that promise is absent.

N1>[18]    Consequently, whilst Woods J was able to conclude that there was a partnership contract in the cited case, I am unable to arrive at the same conclusion here. Consequently, the partnership principle of equal sharing of benefits as stipulated under the Partnership Act (Ch148), and applied by his Honour is not applicable here.

N1>[19]    I am, however, satisfied that there was a partnership quasi contract but, even then, the principles of equal sharing does not apply. I say there is a partnership quasi contract on the basis of the understanding reached at the meeting which resolved in favour of the formation of a partnership culminating in the alterations to the company's letterhead to incorporate the valuation service. I cannot ignore this.

N1>[20]    This means that it is necessary to look at the common law to appreciate the appropriate remedy or remedies under quasi contracts such as the one before us. It is said that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi contract or restitution. To be precise, where the plaintiff pays money to the defendant under an ineffective contract, such as the defendant's failure to give consideration, he is entitled to recover that money in quasi contract: Halsbury's Laws of England, 4th ed, Vol 9, paras 630, 666 and 667.

N1>[21]    In this case, therefore, I am satisfied that, in justice and equity, all the valuation moneys received by the company belongs to the complainant. To find that the said K6,187.31 or half of K10,266.80 belongs to the company would clearly tantamount to unjust enrichment. This case is about money. The company did not suffer any financial loss or forbearance to warrant a claim of ownership to the balance of the account.

N1>[22]    Ironically, the parties were all the time backing the wrong horses. The complainant would be disappointed if I had found in favour of a partnership as claimed by himself. That would have meant that the company owns half of the valuation money. Likewise, the company would be better off arguing in favour of a partnership. Instead, it was arguing that the complainant was only "attached" and made it plainly clear that it did not want to form a partnership.

N1>[23]    It does not really matter, however. The parties should understand now that the central issue of the case was ownership of the balance of account which destiny depends entirely on the outcome of the legal examination of their relationship as established by the evidence. This course presents a suitable method for resolving this case and should be utilised by the court despite the parties' misconception.

N1>[24]    Furthermore, partnership is a legal terminology specifically defined by the said statute. Likewise, the rights of the parties in a partnership agreement, in the absence of expressed agreement, are defined therein. Consequently, the complainant's failure to prove his claim about the existence of a partnership is of little consequence. The court is not permitted to visit the Act and apply the principle of equal sharing of benefits if, as I have found, there was no partnership contract.

N1>[25]    In the final analysis, the mathematics of all the above findings stand as follows:

Valuation money - K6,187.31

Advance money - K   450.00

Total - K6,637.31

Less letterhead - K   612.85

Less counter claim - K   500.00

Total - K5,524.46

N1>[26]    I find for the complainant in the sum of K5,524.46 plus interests and costs to be paid forthwith.

N1>[27]    Orders accordingly.