Embda Ltd v Tropical Habitat Ltd [2001] PGNC 145; N2067 (7 May 2001)

N2067

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1117 OF 1999

Between:

EMBDA LIMITED Trading as
TRIBAL PLUMBERS

(Plaintiff)

And:

TROPICAL HABITAT LIMITED

(Defendant)

WAIGANI: GAVARA- NANU, J
2001: 2nd, 3rd March & 7th May

DAMAGES – Liquidated claims – Debts owed for services rendered - Particular business ‘usage’ adopted by the parties in doing business – Usage binding on the parties – Proof of usage.

CONTRACT – Implied warranty – Breach of implied warranty – Damages open on facts and evidence pleaded and adduced - National Court Rules – O 8 r8 applicable.

INTERESTS – Discretion of the Court – Judicial Proceedings (Interest on Debts and Damages Act, (Ch. No.52) S.1. - Not mandatory.

COSTS – Discretion of the Court – Unreasonable conduct – Defence a sham – Abuse of process - Award of costs on Solicitor and Client basis appropriate.

Cases cited:
New Britain Entertainments –v- Webb, No. 89 of 1956
Brownett –v- Newton [1941] HCA 14; (1941) 64 CLR 439
The State –v- Konis Haha [1981] PNGLR 205
Dennis Wallbank & Jeanette Minifie –v- The State [1994] PNGLR 78
Lomax –v- Dankel [1982] 2 S.A.S.R 68
Collen –v- Wright (1857) 8 E1 & B1 647; [1857] EngR 25; 120 E.R 241
Gulf Provincial Government –v- Baimuru Trading Pty Ltd – N1794
Don Pomb Pullie Polye –v- Jimson Sauk Papaki – SC637

Counsel:
C. Okuk for the Plaintiff
J. Sirigoi for the Defendant

JUDGEMENT

GAVARA-NANU, J.: The Plaintiff is a small company, involved in plumbing business. It is claiming K11,833.59 in liquidated damages against the Defendant for services it says it rendered to the Defendant, which is a construction company, from 14th March 1997 to 7th September, 1998.

The Defendant has admitted through its lawyer in Court, owing K7,833.48 of the amount claimed by the Plaintiff, but denies that it owes the balance, which is K4,000.11. The Defendant says, it is not liable to pay the balance because, the amount is for the plumbing jobs the Plaintiff did for a Dr Lam and not for the Defendant. Dr Lam has refused to pay the amount, because he did not authorise the jobs. The Plaintiff has contended that the Defendant is liable to pay the balance of its claim because, it was engaged by the Defendant through its Managing Director, Mr Greg Neville, to do the jobs for Dr Lam.

The undisputed facts.

The evidence given by the Plaintiff through Mr Fred Sibona who is the Plaintiff’s Maintenance Service Manager shows that there was a standard business practice adopted by the Plaintiff and the Defendant, whereby if and when the Defendant needed the Plaintiff’s services, the Defendant would simply phone the Plaintiff’s office and place it’s job orders with the descriptions of the locations of the jobs to be done, and the Plaintiff, upon such instructions would go to the locations and do the jobs, and upon completion of the jobs, the Plaintiff would invoice the Defendant, who would pay the invoices. The Plaintiff would engage the Defendant’s services in the same way, if and when it needed the Defendant’s services. The Plaintiff says, the Defendant through Mr Neville, engaged its services for Dr Lam’s plumbing jobs, in accordance with that practice. The parties referred to the practice as the ‘understanding’ between them when doing business with each other.

The Plaintiff produced sixteen invoice numbers in evidence for the various amounts it claims against the Defendant which make up the total amount of its claim. The balance of K4,000.11, which the Defendant disputes is made up of the amounts from two of those sixteen invoices, which are numbered 00004252, and 00004392 which were raised on 7th September 1998 for the respective amounts of K464.05 and K3,546.06.

The issue therefore is whether the Defendant is liable to pay this K4,000.11 to the Plaintiff.

The Plaintiff’s case

The essence of the Plaintiffs case is that the business practice or the line of conduct generally adopted by the parties when dealing with each other in business was a ‘usage’ and thus was contractual in nature, which was binding on them, and hence, they were responsible for paying for each others services as contracting each other in such dealings, so the Defendant was and is liable to pay for the Plaintiffs services to Dr Lam.

The law

I find the decision in the pre-independence case of New Britain Entertainments –v- Webb, No. 89 of 1956, which is referred to in ‘Pacific Contract Law‘ by Roebuck, Arwastava and Nonggor, at page 322, helpful in deciding this issue. In that case, Kelly J, was deciding the appeal, by the appellant against the decision of the Stipendiary Magistrate in Rabaul, where the learned Magistrate awarded £72.00 to the respondent for six weeks’ holiday pay against the appellant. The respondent claimed against the appellant for work done by the respondent for the appellant at the appellant’s request. The respondent contended that business houses in Rabaul paid six weeks holiday pay to the employees for every two years of work, therefore, in accordance with that ‘practice’, because she worked for two years, she was entitled to the six weeks’ holiday pay of £72.00 from the appellant. The evidence on this claim before his Worship was only by way of oral evidence from the respondent. The Magistrate referred to the practice as ‘custom’ by the business houses in Rabaul. His Honour in allowing the appeal said:-

"On that evidence, the Stipendiary Magistrate found that it is the ‘custom’ of the business houses in Rabaul to pay six weeks’ holiday pay at the completion of two years’ work. No doubt, the Stipendiary Magistrate meant to use the word ‘usage’. Custom is defined in Halsbury’s Laws of England 3rd Ed. Vol.11 p.158 paras 294 and 295. Usage is defined ibid. p. 182 para 338.

The method of proof of usage is laid down in Halsbury’s Laws of England 3rd Ed. Vol. 11. Pp.199 and 200, paras 367 to 369 and more particularly at p.200 – "A usage is not proved merely by bringing the person interested in establishing its existence to give oral evidence of its existence unsupported by any other evidence".

Apart from that evidence of the respondent, there was no evidence before the Stipendiary Magistrate on which he could have found any agreement between the appellant and the respondent as to any fixed terms of holidays on which the respondent was entitled to be paid any holiday pay ...." (my underlining).

The ‘Words and Phrases Legally Defined 3rd Ed’ at page 371 defines ‘usage’ in this way:-

"Usage may be broadly defined as a particular course of dealing or line of conduct general adopted by persons engaged in a particular department of business life, or more fully as a particular course of dealing or line of conduct which has acquired such notoriety, that where persons enter into contractual relationships in matters respecting the particular branch of business life where the usage is alleged to exist, those persons must be taken to have intended to follow that course of dealing or line of conduct, unless they have expressly or impliedly stipulated to the contrary, that is to say that a rule of conduct amounts to a usage if so generally known in the particular department of business life in which the case occurs that, unless expressly or impliedly excluded, it must be considered as forming part of the contract. (my underlining).

The Oxford Concise Dictionary 4th Ed., defines ‘usage’ as:–

"Habitual or customary practice, esp. as creating a right, obligation or standard".

Applying the principles in East New Britain Entertainments –v- Webb, (supra), the party asserting a particular business ‘usage’ has the onus to prove its existence. Oral evidence alone from the party asserting the existence of usage would not be sufficient. Evidence other than the oral evidence by the party asserting usage must be produced to prove the existence of usage. This is because of the contractual nature of the usage, which would bind the parties in any business dealings. In New Britain Entertainments –v- Webb (supra) Kelly J. held that oral evidence alone from the respondent was not enough to establish the existence of the ‘usage’ which could bind the appellant to pay the amount claimed by the respondent. His Honour said, in the absence of other evidence to support the respondent’s oral evidence, the existence of the usage, was not proved.

I find the principles in New Britain Entertainments –v- Webb (supra), sound and relevant, for the case before me, I therefore respectfully adopt them, see also, The State –v- Konis Haha [1981] PNGLR 205 at page 211.

Application of the law to the facts of this case

(a) The ‘business practice’ or ‘understanding’ adopted by the parties in doing business with each other was contractual and constituted ‘usage’ which was binding.

In this case, the existence of the business practice between the parties, as discussed earlier was asserted by the Plaintiff through its Maintenance Service Manager, Mr Fred Sibona through oral evidence. There was no other evidence from the Plaintiff on the existence of that practice, apart from Mr Sibona’s oral evidence. Therefore applying the principles in New Britain Entertainments –v- Webb (supra), I would dismiss the Plaintiff’s claim on this ground in respect of the two invoices, if Mr Sibona’s oral evidence stood alone. However, Mr Neville who gave evidence for the Defendant, agreed that the practice or understanding between the parties as claimed by the Plaintiff did exist, and the parties had conducted business with each other in accordance with that practice as under contracts on regular basis. Mr Neville’s evidence therefore supports Mr Sibona’s oral evidence on the existence of the business practice between the parties. I therefore find that there was usage as asserted by Mr Sibona, which the parties used to do business with each other. I also find that the engagement of the Plaintiff by Mr Neville to do plumbing jobs for Dr Lam was done in accordance with that usage and the Defendant is therefore liable to pay K4,000.11, to the plaintiff for those jobs.

Mr Neville also told the Court that the Defendant has not been paid for the services it rendered to Dr Lam. He said, had Dr Lam paid for the Defendant’s services, the Defendant would have settled the Plaintiff’s two invoices. This in my view amounts to admission of liability by the Defendant in respect of the two invoices.

(b) Breach of implied warranty

I also find that, even if there had been no such business usage between the parties, the defendant would still be liable to pay the Plaintiff for its services to Dr Lam, because when Mr Neville engaged the Plaintiff to do the plumbing jobs for Dr Lam, Mr Neville held himself out as the agent for Dr Lam, albeit without authority from Dr Lam. There was therefore an implied warranty by Mr Neville that the Plaintiff would be paid by Dr Lam for its services. However, Mr Neville having acted without Dr Lam’s authority, the Defendant who is bound by the actions of Mr Neville, is liable to pay the Plaintiff’s claims in respect of the jobs it did for Dr Lam. The Defendant’s refusal to pay the Plaintiff’s claims is therefore in breach of that implied warranty. See Brownett & Ors –v- Newton [1941] HCA 14; [1941] 64 CLR 439. In that case, the appellants who were Directors of a company purportedly entered into an agreement with the respondent on behalf of the company for the respondent to supply a quantity of cement bags over a period of time. The total price of all the cement bags was £1,973.85. After paying part of that amount, it was discovered that the company did not file statutory declarations with the Registrar General as required and S.77 (1)(c) of the Companies Act. The company therefore lacked the capacity to do business including entering into a contract with the Respondent. That resulted in the company going into voluntary liquidation. The Respondent sued the company Directors (appellants) for the balance of the money owing to him in New South Wales Supreme Court. The Supreme Court found in favour, of the appellants but on appeal to the Full Court, the decision by the Supreme Court was overturned. The appellants then appealed to the High Court. The High Court had to consider the issue of whether there was an implied warranty by the appellants as agents of the company that they had authority to make contracts on behalf of the company with the respondent. McTiernan J, at page 448 said:-

"The obligation arising in such a case is well expressed by saying that a person, professing to contract as agent for another, impliedly, if not expressly, undertakes to or promises the person who enters into such contract, upon the faith of the professed agent being duly authorized, that the authority which he professes to have does in point of fact exist. The fact of entering into the transaction with the professed agent, as such, is good consideration for the promise".

Then at page 450, his Honour said:-

"If there were no other circumstances to be taken into consideration by the jury except the evidence of the course of dealing and the part which the jury could reasonably infer that the appellants took in it, the jury could properly have found that the appellants or some of them represented to the respondent that they were authorized by the company to make those contracts. The liability of the person who proposes to act as agent but whose authority is defective arises under an implied contract". See also Lomax –v- Dankel [1982] 2 S.A.S.R 68 at pages 74-75 and 77, Collen –v- Wright (1857) 8 E1 & B1 647; [1857] EngR 25; 120 ER 241.

The Plaintiff can in my view claim damages against the Defendant for breach of implied warranty upon the facts pleaded and the evidence before me. The Supreme Court emphasised this in Richard Dennis Wallbank and Jeanette Minifie –v The State [1994] PNGLR 78 at page 89 said:-

"The National Court Rules do not require a plaintiff to characterise his cause of action within a legal framework, although he has, in fact, done that when calling the estate's claim as one for "loss of expectation of life". The National Court Rules O 8 r 7 merely ask that the plaintiff plead the facts on which he seeks to rely. If established on the evidence at the hearing, the Court may find an award for damages according to any principles of law which have developed, whether by common law, statutory effect or development in Papua New Guinea on a case-by-case basis. There is no need "to put a label on his cause of action".

In Shaw –v- Shaw [1954] 2 QB 429 at 441, Denning L J said:

"It is said that an implied warranty is not alleged in the pleadings, but all the material facts are alleged, and in these days, so long as those facts are alleged, that is sufficient for the court to proceed to judgment without putting any particular legal label upon the cause of action."

The problem, which the appellants face here, of course, is that the estate's claim for "lost years" is an after-thought. It was never argued before the trial judge, and he was never asked to make an award of damages on that head. As Mr Glenn says, there has been no decision of the Supreme Court on the question of the estate's right to recover damages for the lost years. There can be no re-opening, as it were, of the plaintiff's case in this Court with a claim for a fresh head of damage, which had not been alluded to in the trial". (my underlining).

The Plaintiff in this case however, having claimed only liquidated damages, would only be entitled to the amount it has claimed.

For these reasons, I find that the Defendant is liable to pay the total amount claimed by the Plaintiff, which is K11,833.59.

The cross-claim

The Defendant has filed a cross-claim against the Plaintiff for the sum of K3,576.00 for its services to the Plaintiff. The Defendant has also itemised its claims, in a form of a single Invoice No.0104, which is a letter it sent to the Plaintiff dated 11th August 1998. In the Invoice, there are 8 itemised claims. The Plaintiff disputes Items 2 and 4. Item 2 is for the ‘hire of a truck to pick up and deliver pipes’. This claim is for K750.00 and item 4 is for two rosewood desktops, which the Defendant delivered to the Plaintiff a couple years ago. This claim is for K220.00. For Item 2, the Plaintiff, says, the Defendant was asked many times to provide the rates it used to calculate the amount, so that if it was satisfied with the rates used, it could pay, but the Defendant never provided the rates to the Plaintiff. For Item 4, the Plaintiff says, the desks were defective and the Defendant was told to fix them but the Defendant never fixed them. The Plaintiff has never paid for them, but it has been using them, since their delivery.

Mr. Neville agreed that, it is a normal practice for his company to state the rate used when calculating such invoices. Regarding item 2 of his company’s claim, Mr Neville says he had no idea how his office girls calculated it. In other words the Defendant’s office girls knew what rate they used to calculate the amount but have failed to inform the Plaintiffs when the Plaintiff requested it. In those circumstances, it is my view, that it would not be fair for this Court to order the Plaintiff to pay the amount. I therefore direct that the Defendant provide the rate it used to calculate the amount for Item 2, to the Plaintiff, so that the Plaintiff can pay it, if it is satisfied with the rate. As to Item 4, although the desks were defective, the Plaintiff has been using them, furthermore, it has not paid for them. The Defendant has admitted that it received complaints from the Plaintiff about the defects, but failed to rectify them. I find that both parties are at fault. I will therefore reduce the Defendant’s claim for item 4, by half, the Plaintiff will therefore pay K110.00 for this claim. The Plaintiff admits liability in respect of the other 6 items. Therefore, the total amount the Plaintiff has to pay to the Defendant is K2,716.00.

Defendant’s claim for interest and costs on the cross-claim

There is evidence from the Plaintiff that, it asked the Defendant to settle its debts to the Plaintiff so that out of that settlement, the amount owed to the Defendant by Plaintiff could be deducted and the Defendant would only pay the balance to the Plaintiff. The Defendant refused those requests. Indeed, the Defendant denied all the Plaintiff’s claims in its Defence, ironically though, at the trial, the Defendant through its Managing Director expressed willingness to settle the claims amicably and even admitted that it is owing all the amounts claimed by the Plaintiff, except for the two invoices the Plaintiff raised for its services to Dr Lam, although not denying liability.

Interest and costs are discretionary matters, which the court may award. As to Court’s discretion in awarding interests on claims, see Judicial Proceedings (Interest on Debts and Damages Act. Ch. No. 52), S.1. The Section reads:

Being an Act to make provision for interest on certain judgements.

1. Interest on certain debts and damages.

Subject to Section 2, in proceedings in a court for the recovery of a debt or damages the court may order that there be included in the sum for which judgement is given interest, at such rate as it thinks proper, on the whole or part of the debt or damages for the whole or part of the period between the date on which the cause of action arose and the date of the judgement (my emphasis).

Section 1 of the Judicial Proceedings (Interest on Debts and Damages Act. Ch. No.52), is only an enabling provision by virtue of the word ‘may’ to give the Courts power to exercise their discretion in deciding whether a party should be awarded interests on its claim or not. It is not mandatory.

Mr Fred Sibona told the Court that the Plaintiff had to follow up the Defendant’s Invoice many times because, the Defendant did not send it. The Invoice was only faxed to the Plaintiff upon the Plaintiff’s own requests. In such circumstances, it is in my view, unjust for the Plaintiff to pay any more than the amount it has to pay to the Defendant under its cross-claim, which is K2,716.00. I therefore refuse to award interest on the amount awarded to the Defendant. I also make no orders as to costs, for the Defendant’s cross claim, for the same reasons.

Total Amount for the Plaintiff

I have found that the Defendant is liable to pay K11,833.59 to the Plaintiff. I find that these proceedings were instituted by the Plaintiff, because of the Defendant’s constant refusal to pay the Plaintiff’s Invoices. In my view, all of Plaintiff’s claims should have been paid by the Defendant, because the Defendant has admitted liability for all the claims by the Plaintiff during the trial. In these circumstances, I think it is proper and just that I exercise my discretion in favour of the Plaintiff on the issues of interest and costs. I award 8% interest on K11,833.59 from the date of the writ, which is 6th October 1999 to the date of judgement, which is 7th May 2001. This works out as follows:-

1. Principal Amount - K11,833.59

2. Interest at 8% p.a.

On K11,833.59

:- From 06/10/99 – 07/05/01

(577 days)

1. For period from 06/10/99 – 06/10/00

(1 year – (365 days)

Interest is – 8% x K11,833.59

= K946.69

2. For period from 07/10/00 – 07/05/01

(212 days)

Interest at daily rate – K946.69 ÷ 365 days

= K2.59

212 days x K2.59 = K549.08

Total Interest – K946.69 + K549.08

= K1,495.77

The total amount the Defendant has to pay to the Plaintiff including interest is K13,329.36. I accordingly enter judgement for the Plaintiff in the sum of K13,329.36.

Plaintiff’s Costs

As to the Plaintiff’s costs, I find that the Defendant has failed to advance any good reasons for not settling all the Plaintiffs claims. The two invoices the Defendant refused to pay for the plumbing work the Plaintiff did in Dr Lam’s property were also at the request and authorisation of Mr Neville. The refusal by the Defendant to pay those invoices just because Dr Lam did not pay its invoices, is not a good and valid reason. The Defendant denied all of Plaintiff’s claims in its Defence, but in my view the Defence was specious, because the Defendant in the course of the trial admitted liability to all of Plaintiff’s claims. In my view, the Defendant knew all along that it had no defence and was liable to pay all of Plaintiff’s claims but it refused to pay them. The Defendant had no defence in law and I think it knew it. The Defence was therefore not filed in good faith and was an abuse of process, see Gulf Provincial Government –v- Baimuru Trading Pty Ltd N1794 and Don Pomb Pullie Polye –v- Jimson Sauk Papapki SC637. I consider the Defendant’s conduct in this regard unreasonable. The Defendant must therefore get all the blame for this action by the Plaintiff. The Plaintiff through, Mr Sibona told the Court, that it did all it could to try and have these claims resolved out of court, but without success because the Defendant did not co-operate, as the result, it decided to instruct its lawyers to institute these proceedings. The Plaintiff was therefore forced by the Defendant to seek redress in this court. This action was in my view totally occasioned by the unreasonable conduct of the Defendant by refusing to pay the Plaintiff’s claim, then subsequently filing a Defence, which was a sham. The Defence was really an abuse of process. The Plaintiff is a small company and unpaid claims such as this no doubt did and do have adverse effects on its business. In these circumstances, I consider that the proper Order on costs, is costs to the Plaintiff on Solicitor and Client basis.

Accordingly, costs to the Plaintiff on Solicitor and Client basis.
_____________________________________________________________________
Lawyer for the Plaintiff: Pacific Legal Group
Lawyer for the Defendant: Fiocco, Posman & Kua Lawyers