Central Province Forest Industries Pty Ltd (Provincial Liquidator Appointed) v Rainbow Holdings Pty Ltd [1981] PGNC 39; N321 (23 October 1981)

Unreported National Court Decisions

N321

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

W.S. 713 OF 1980
BETWEEN: CENTRAL PROVINCE FOREST INDUSTRIES PTY. LIMITED (PROVISIONAL LIQUIDATOR APPOINTED)
PLAINTIFF
AND: RAINBOW HOLDINGS PTY. LIMITED
DEFENDANT

Waigani

Kapi J
14-15 September 1981
23 October 1981

CONTRACT - damages for breach of contract of sale - Goods Act - 1951.

The meaning of “available market” considered.

Consideration of appropriate interest on damages.

Statutes Referred To

Goods Act 1951

Law Reform (Miscellaneous Provisions) Act 1962

Cases Referred To

Thompson (W.L.) Ld. v. Robinson (Gunmakers) Ld. (1955) Ch. 177

Cameron v. Campbell & Worthington Ltd. [1931] SAStRp 1; (1930) S.A.S.R. 402

Dominion Motors, Limited v. Grieves [1936] NZGazLawRp 112; (1936) N.Z.L.R. 766

Eclipse Motors Pty. Ltd. v. Nixon [1939] VicLawRp 62; (1940) V.L.R. 49

Aspinall v. The Government of Papua New Guinea (Unreported) judgment No. N215 of 18 April 1980

KAPI J: This was an action brought by the Provisional Liquidator of Central Province Forest Industries Pty. Limited as vendor for damages for breach of contract, against the defendant Rainbow Holding. Limited as purchaser.

Proceedings for the winding ding up of the Central Province Forest Industries Pty. Limited were commenced in early 1980. A Provisional Liquidator was appointed by the court to take possession of all the company’s assets and to take steps that may be necessary to protect them.

One of the assets of the company was a number of logs which were situated on the beach at Margarida, Amazon Bay in the Central Province. The logs consisted of 6,000 cubic metres of rosewood and 1,000 cubic metres of taun.

When the Provisional Liquidator took charge of these logs steps were taken by him to sell them. Amongst the offers that were received, Mr Davis, the managing director of Rainbow Holdings Pty. Limited made an offer for the purchase of these logs. The offer was made in writing in a letter dated 7th February, 1980, addressed to the Provisional Liquidator. (Exhibit “B”.) The offer was for K450,000 for the logs.

In the same letter the managing director of Rainbow Holdings Pty. Limited advised the liquidator that Mr Gordon Smith of Russell Hay’s office would negotiate the sale on behalf of the company. On the same day Mr Gordon Smith of Russell Hay’s got in touch with the liquidator’s office and advised that he acted for the defendant. He confirmed his instructions to act for the defendant in a letter dated 18th February, 1980. (Exhibit “D”.)

There were negotiations between the liquidator and the defendant’s solicitor regarding the offer. The defendant’s offer was accepted and the liquidator, by letter dated 19th March, 1980, (Exhibit “G”) required the defendant to either proceed with his offer within 24 hours or, alternatively, the liquidator would withdraw acceptance cf the offer. By letter dated 20th March, 1980, (Exhibit “H”) the defendant, through his solicitor, made another offer of K270,000 on the basis that the condition of the logs was deteriorating. The liquidator, having accepted the offer by the defendant, prepared a contract in writing by way of a letter dated 21st March, 1980 (Exhibit “I”). This contract was signed by the solicitor for the defendant on behalf of the defendant on 26th March, 1980. Mr Joe Davis, the managing director of the defendant company, who gave evidence, did not deny the signing of this contract.

I find that by a contract dated 26th March, 1980, it was agreed that the defendant purchase the 6,000 cubic metres of rosewood and 1,000 cubic metres of taun, for a price of K270,000.

It was contended, on behalf of the defendant, that the plaintiff had no interest or title to the logs at the time the contract was entered into, and therefore the contract cannot be binding. With respect, this submission was made without any proper foundation. The effect of the contract was that the title in the logs would pass to the defendant upon payment of the price, that is, the title would pass at a future date. The plaintiff also undertook that at that time he would establish interest in the logs for the purposes of this contract. An examination of the provisions of the Goods Act 1951 shows that such a contract is allowed for. See ss. 6(4) and 17(a) of the Goods Act 1951. As far as this case is concerned, there is no dispute that these logs form part of the assets of the plaintiff company. As far as the sale of these logs was concerned, it is not disputed by the plaintiff that it has to have a Native Timber Authority pursuant to the provisions of the Forestry Act (Amalgamated) 1973 (as amended) and Forestry Regulation (Amalgamated) 1973. The reference in the contract to establishment of the title was with reference to the granting of the Native Timber Authority which would allow the plaintiff to sell the logs to the defendant. In this regard, Misi Henao gave evidence. He is the Provincial Forest Officer with the Central Provincial Government. This witness became involved in the sale of these logs as between the plaintiff and the defendant. By the time he became involved in the negotiations, the local people had been demanding quick payment of the royalties. Because of this demand, he made an application to the Director of Forests for an approval of a Native Timber Authority to be granted to the plaintiff in order to effect the sale. The Director, in a letter dated 6th March, 1980 (Exhibit “R”) gave approval to Mr Henao to grant the Native Timber Authority to the plaintiff. As far as Mr Henao was concerned the approval for the Native Timber Authority had been given and that it was a matter for formal issue of the instrument when the parties were ready to proceed with the contract. This, however, was not issued because the defendant did not complete the contract. In his evidence he stated that had the defendant gone ahead and completed the contract he would have issued the instrument. It is clear from this evidence that the Native Timber Authority was not a difficulty in this contract.

I therefore cannot accept the contention by counsel for the defendant that this contract was not a valid contract under the provisions of the Goods Act 1951.

I now turn to the question of whether or not there was a breach of the contract. S.32 of the Goods Act 1951 sets out the duties of a buyer and a seller. By a letter dated 14th April, 1980 the liquidator advised the solicitor for the defendant that the defendant had not taken any steps to complete the contract. The liquidator, by the same letter, advised the solicitor to indicate the defendant’s intention in the matter. The solicitor for the defendant, by a letter dated 14th April, 1980 (Exhibit “K”) advised the liquidator that the defendant would make progress within the next seven to ten days. The liquidator, in a letter dated 16th April, 1980, indicated that he would delay any action for a further ten days. By letter dated 1st May, 1980, (Exhibit “M”) the solicitor for the defendant then advised the liquidator that the defendant would complete the contract by late May. On 5th May, 1980 Mr Kelly of the liquidator’s office advised Mr Gordon Smith, the solicitor for the defendant, that enough time had passed since the contract was entered into and that the liquidator demanded a deposit to be paid which would be non-refundable and that the liquidator would give notice to complete within a reasonable time to complete the contract, to which Mr Gordon Smith agreed. After this no further steps were taken by the defendant or his solicitor to complete the contract or to pay the deposit. Consequently the plaintiff gave notice to the defendant to complete the contract on 9th May, 1980 (Exhibit “M”). There is no contest that this notice was received by the solicitor for the defendant. In this notice the defendant was required to complete the contract at 10.00 a.m. on 30th May, and appointed the offices of Price Waterhouse & Co., A.N.G. House, the place for settlement. This notice made it quite clear that the time was the essence of the agreement. The defendant failed to complete the contract at the appointed time. Consequently the plaintiff terminated the contract by notice dated 2nd June, 1980 (Exhibit “O”). The defendant did not contest any of those matters, either through cross-examination or by evidence on rebuttal.

I find that there was a breach of the contract.

I now turn to the question of damages. The plaintiff’s claim for damages is under s.54 of the Goods Act 1951. It is in the following terms:

“54(1) Where the buyer wrongfully neglects or refuses to accept and pay for the goods the seller may maintain an action against him for damages for non-acceptance.

(2) The measure of damases i ethe estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s breach of contract.

(3);ټ&##160;e the an available markemarket fort for the the goodsgoods in q in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted or if no time was fixed for acceptance then at the time of the refusal to accept.”

Counsel for the plaintiff submitted that assessment of damages in this case should fall under s.54(2) and not under s.54(3) as in his submission there was no “available market”. Counsel for the plaintiff referred to a number of cases which define the meaning of what is an “available market”. The definition which I prefer is found in Thompson (W.L.) Ld. v. Robinson (Gunmakers) Ltd.N321.html#_edn618" title="">[dcxviii]¹ from the judgment of Upjohn, J:

“Had the matter been res integra I think that I should have found that an ‘available market’ merely that the situation in the particular trade in the particular area was such that the particarticular goods could freely be sold, and that there was a demand sufficient to absorb readily all the goods that were thrust on it, so that if a purchaser defaulted, the goods in question could readily be disposed of.”

See also Cameron v. Campbell & Worthinqton Ltd.N321.html#_edn619" title="">[dcxix]²; Dominion Motors Limited v. GrievesN321.html#_edn620" title="">[dcxx]³; Eclipse Motors Pty. Ltd. v. NixonN321.html#_edn621" title="">[dcxxi]⁴.

Mr Kelly, who gave evidence on behalf of the plaintiff, stated that there was no such “available market” for timber in Papua New Guinea. His evidence was not challenged and the defendant called no evidence to dispute it. I agree that s.54(3) is not applicable in this case.

It follows that the damages fall for determination under s.54(2) of the Goods Act 1951.

Upon breach of the contract by the defendant and termination of the contract by the plaintiff the plaintiff took all necessary steps to find an alternative buyer for the logs. The liquidator got in touch with all the firms who made offers before. The liquidator negotiated the sale of the logs with about six to seven firms or persons in order to get a contract. He was unable to get a contract signed due to the deteriorating condition of the logs. After having exhausted these negotiations he advertised the same logs on 2nd October, 1980 in the Post-Courier. As a result of this advertisement, Northern District Sawmilling and Timber Company Pty. Limited offered to buy the logs. The contract to buy these logs was executed on 12th December, 1980. By the time the sale was effected the condition of the logs had further deteriorated. Mr Patrick Tay, a registered timber grader whose evidence was not contested, upon examination of the logs in August, 1980 found that both the rosewood and taun had borers, splits and shakes. In his opinion only 40% was millable and a recovery of 30% or less for timber. He expressed the opinion that by December the logs would have deteriorated further. This was the deteriorating state of these logs when they were sold to the Northern District Sawmilling and Timber Company Pty. Limited. The contract entered into was for the logs and other equipment. The total price offered for all the logs and equipment was K100,000. It was verbally agreed between the liquidator and the Northern District Sawmilling and Timber Company Pty. Limited that K50,000 was for the logs. None of this evidence was contested. There was no evidence to suggest that this was not a reasonable deal. There was also no evidence to suggest that the plaintiff could have obtained a better price for the deteriorating logs. The nature of damages in the circumstances would then be the difference between the contract price and the price at which the plaintiff sold the logs. This is the loss which directly and naturally resulted from the breach of contract.

Contract price	K270,000
Price at which logs sold	K50,000
Loss	K220,000

Counsel for the plaintiff has submitted that I should award interest on the amount for damages.

The power to award interest on damages arises from s.42 of the Law Reform (Miscellaneous Provisions) Act 1962. It is a discretionary matter and must be exercised according to law. See Aspinall v. The Government of Papua New GuineaN321.html#_edn622" title="">[dcxxii]⁵.

The amount of damages suffered by the plaintiff was due to him at the time of the breach of contract. In accordance with Aspinall’s case (supra) interest on damages would commence to run from the commencement of the action, to the date of judgment. This is a period of one year, three months. The loss in this case is the value of money fixed at the time of breach of contract. There is no inflation built into its calculation. The plaintiff is entitled to receive interest on his money for having to receive it much later than he should have.

The rate of interest would be the current rate at the time of judgment, due to inflation. The current rate now would be about 10%. Counsel for the plaintiff was quite content with 8% for the period of one year, three months.

Loss	K220,000
8% for 1 year 3 months	K22,000
Total	K242,000

There will be judgment for the plaintiff for K242,000.00.

Solicitor for the plaintiff: Gadens

Counsel: M.W.D. White and P.A. Dempsey

Solicitor for the defendant: P.S. Sam

Counsel: P.S. Sam

<18">N321.html#_ednref618" title="">[dcxviii] ^{(1955) Ch. 177 at p.187}

me="_edn619">N321.html#_ednref619" title="">[dcxix]^{(1930) S.A.S.R. 40R. 402}

N321.html#_ednref620" title="">[dcxx]^{[1936] NZGazLawRp 112; (1936) N.Z.L.R. 766}

N321.html#_ednref621" title="">[dcxxi]^{[1939] VicLawRp 62; (1940) V.L.R. 49}

N321.html#_ednref622" title="">[dcxxii]^{(Unreported) judgment No. N215 of 18 April 1980}