Manua v Southern Highlands Provincial Government [2008] PGNC 156; N3505 (24 October 2008)

N3505

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 848 OF 2006

BETWEEN

FIRMAN MANUA
as Managing Director of KOLOPA SECURITY SERVICES LIMITED
First Plaintiff

AND

KOLOPA SECURITY SERVICES LIMITED
Second Plaintiff

AND

SOUTHERN HIGHLANDS PROVINCIAL GOVERNMENT
Defendant

Mendi: Makail, AJ
2008: 21 October
: 24 October

CONTRACT LAW - Contract of service - Provision of security services - Period of 3 years - Contract not renewed at end of 3 years - Breach of - Non payment of fees - Contract of security services distinguished from contract of employment - Damages.

PRACTICE & PROCEDURE - Assessment of damages after entry of judgment on liability - Principles governing assessment of damages - No issue on liability is to be taken - Where there is already a judgment in an action for damages for breach of contract the only issue at assessment of damages is the damages that flow from the breach.

EVIDENCE - Plaintiffs have burden to prove damages on the balance of probabilities - No evidence from defendants to disprove or contradict evidence of plaintiffs - Evidence of non payment of contractual fee - Whether there is evidence of services rendered - Whether Plaintiffs established damages based on invoices rendered - Failure to prove damages - Entire action dismissed.

Cases Cited

Papua New Guinea Cases:
Christopher Appa -v- Peter Wama [1992] PNGLR 395
Yange Lagan -v- The State (1995) N1369
Jonathan Mangope Paraia -v- The State (1995) N1343
Robert Karawa -v- Kevin Byrne & Tourism Promotion Authority (1999) N1805
Ace Guard Dog Security Services Limited -v- Lindsay Lailai & Telikom (PNG) Limited (2003) N2459
Paul Piru -v- Chimbu Holdings Pty Limited: WS No 542 of 2005 (Unnumbered & Unreported Judgment of 04 July 2008)

Overseas Cases:
Bonham Cater -v- Hyden Park Hotel Limited [1948] 64 TLR 177
Ashcroft -v- Curtin [1971] 1 WLR 1731; [1971] 3 AKER 1208

Counsel:
Mr. P Kumo, for the Plaintiffs
No appearance for the Defendant

JUDGMENT

24 October, 2008

1. MAKAIL AJ: This matter comes before the Court as an ex parte trial on assessment of damages. Initially, there were two Defendants. The first is this Defendant and the second is the State. After default judgment was entered against this Defendant on 18 April 2008 after it failed to file its defence, the Court also ordered the State to be removed as a party to the proceeding because it was an unnecessary and inconvenient party. This was on the basis that there was no cause of action against the State as the contract of security services was entered between the Plaintiffs and Southern Highlands Provincial Government, the Defendant in this proceeding. Hence, the claim for damages is only against this Defendant and the Plaintiffs claim a sum of K525,600.00 for breach of this contract.

EVIDENCE

2. The Plaintiffs rely on the Affidavit of the First Plaintiff sworn and filed on 24 September 2008 which was admitted into evidence and marked Exhibit "P1". The First Plaintiff is the Managing Director of the Second Plaintiff. He says that the Plaintiffs entered into a written contract of security services ("contract") with the Defendant on 11th April 2001. The contract is for a period of 3 years commencing on 11 April 2001. Relevant parts of the contract can be found in Annexures "A1","A2", &"A3" of the Affidavit of the First Plaintiff.

3. The Plaintiffs say that they provided security services to the Defendant at the following locations and buildings:

1. Old Provincial Headquarters Buildings;

2. Provincial Accounts Buildings;

3. Old Provincial Assembly Buildings;

4. Provincial Government Printery.

5. Provincial Health Community Services, DIP Buildings and Education Buildings

4. The Plaintiffs produce 3 invoices which they claim were delivered to the Defendant for payments. They are:

1. Invoice dated 11 April 2002 (Annexure "B1") for K175,200.00;

2. Invoice dated 11 April 2003 (Annexure "B2") for K175,200.00;

3. Invoice dated 11 April 2004 (Annexure "B3") for K175,200.00;

Total K525,600.00

5. The contract ended on 11 August 2004, but the Defendant did not pay for the services rendered. They say that the amount due and payable therefore is K525,600.00.

LAW ON ASSESSMENT OF DAMAGES

6. It is the law that notwithstanding the fact that default judgment is entered against a Defendant or Defendants, the Plaintiff or Plaintiffs still bears the burden to prove by appropriate evidence his or their losses or damages. See the cases of Yange Lagan -v- The State (1995) N1369 and Jonathan Mangope Paraia -v- The State (1995) N1343.

7. As Lord Goddard CJ said in Bonham Carter -v- Hyden Park Hotel Ltd [1948] 64 TLR 177 at 178:

"Plaintiffs must understand that, if they bring actions for damages, it is for them to prove their damage; it is not enough to write down particulars and, so to speak, throw them at the head of the Court, saying: ‘This is what I have lost, I ask you to give me these damages.’ They have to prove it."

8. For a more recent example where the above principles were applied, see Ashcroft -v- Curtin [1971] 1 WLR 1731; [1971] 3 AKER 1208. In McGregor on Damages, (Sweet & Maxwell, 13th Edn, 1972, London), the learned author puts the same principles in another way:

"The plaintiff has the burden of proving both the fact and the amount of damages before he can recover substantial damages. This follows from the general rule that the burden of proving a fact is upon him who alleges it and not upon him who denies it, so that where a given allegation forms an essential part of a person’s case, the proof of such allegation falls on him. Even if the defendant fails to deny the allegations of damage or suffers default, the plaintiff must still prove his loss". (p. 935).

9. In other words, where default judgment is entered in an un liquidated demand (as in this case) the facts which gives rise to the question of liability are settled. The effect of default of judgment in this case is that there is a valid contract of service and that there was a breach of that contract. All the facts and legal issues relating to liability are no longer in issue. Assessment of damages involves consideration of the terms of the contract and assessing the damages that flow from the breach of the terms of the contract. Thus, applying the above stated principles to the present case, the question I ask is, notwithstanding the fact that default judgment has been entered against the Defendant and that it has offered no evidence in response to the Plaintiffs’ evidence, have the Plaintiffs proven their losses or damages?

REASONS FOR DECISION

10. As I said earlier and will emphasis here, the Plaintiffs rely on the Affidavit of the First Plaintiff sworn and filed on 24 September 2008 which was admitted into evidence and marked Exhibit "P1". The Plaintiffs’ counsel did not call the First Plaintiff to give oral evidence or adduce any other documentary evidence to support the claim of K525,600.00 apart from the 3 invoices totalling that amount annexed to Exhibit "P1". I am emphasizing the issue of evidence of the Plaintiffs because it will become relevant later on when I assess the Plaintiffs’ losses or damages. As for the Defendant, because it was not represented, it offered no evidence to refute or deny the Plaintiffs’ evidence supporting the assessment of damages. But does this mean that the Court can go ahead and award the amount claimed without any further proof by the Plaintiffs that the amount of K525,600.00 is the loss suffered as a result of the breach of contract?

11. I do not think so! For the law requires the Plaintiffs to prove their losses or damages against the Defendant. And so, in this case, how will the Court know that the Plaintiffs lost K525,600.00? Whilst I accept that there is evidence of a contract to show that the Plaintiffs were contracted to provide security services to the Defendant at the locations and buildings in the town of Mendi and that there is also evidence of 3 invoices rendered to the Defendant to pay K525,600.00, I am not satisfied that the Plaintiffs did actually provide security services to the Defendant.

12. I say this because, there is no evidence before me to show that the Plaintiffs actually provided security services to the Defendant. For example, the Plaintiffs did not call any evidence from the supervisors of the security guards to confirm that the Plaintiffs did provide the services by placing security guards at these locations and buildings. Also, the First Plaintiff did not say in his evidence that the Plaintiffs did provide security services to the Defendant. Further still, he did not say in his Affidavit how many guards were actually on guard per shift at any given time and at which locations and buildings in Mendi town. Thus, the Court is left in the dark so to speak as to the details of the actual work or services performed. The relevant evidence of which the Court does not have is as follows:

1. Wage books;

2. Guard Shift records;

3. Group tax records;

4. NasFund records; and

5. Company Certificate of Incorporation.

13. I raise these matters because they are crucial evidence to support the quantum. In this respect, I note under clause 7 of the contract, it does not state that the contract is worth K175,200.00 per annum or K525,600.00 for 3 years. Further, I do not find in any other clauses in the contract the figures of K175,200.00 per annum or K525,600.00 for 3 years. The only clause which gives a figure or amount is clause 7 of the contract. But it provides for a rate of K2.00 an hour per guardsman.

If that is the rate, then it is a mathematical formula by which parties use to calculate the total fees due to the Plaintiffs based on the actual number of guardsmen who actually worked. Thus, the first question to ask is, how many guardsmen did the Plaintiffs provide? The answer is found in clause 5(2) of contract. According to that clause, there shall be a "total of 10 men as required from time to time, especially 10 men in the night and 5 men guards in the day".

14. Thus, what this clause says is that the Second Plaintiff is required to provide 15 guardsmen in total. There shall be 10 guardsmen on night shifts and 5 guardsmen on day shifts. In my view, it is a stipulation of the contract. The Plaintiffs must fulfil this stipulation in order to be remunerated. Thus, the second question is, how do I know if the Second Plaintiff fulfilled this stipulation? In other words, is there evidence before the Court to show that there were 10 guardsmen working in the nights and 5 working in the days during the whole year or for the entire contractual period?

15. To answer this question, this requires the Plaintiffs to produce evidence of Guard Shift records to show that 10 guardsmen did work during the nights and 5 guardsmen did work during the days. I find that there is no evidence placed before me to show that this number of guardsmen did actually work during the night shifts and also during the day shifts. Thus, how do I know that these guardsmen did actually work during the night and day shifts between 2001 and 2004? This is a question which I find the Plaintiffs have not satisfactorily answered.

16. Secondly, there is no evidence of wage books and (pay slips if any) to show that the Second Plaintiff did employ these number of guardsmen during the period of 2001 and 2004. And so, again there is absolutely no evidence placed before me to prove that the Plaintiffs did actually employ this "x" number of guardsmen to work during the night shifts and also during the day shifts for the period of the contract.

17. Finally, there is no evidence of company tax records, NasFund records and Company Certificate of Incorporation. How will the Court know that the Second Plaintiff was and is a company providing security services during that period of time and even up to the present time? The only way to know this is to get the Plaintiffs to produce company tax records, NasFund records and most importantly the Certificate of Incorporation of the Second Plaintiff to verify that the Second Plaintiff is an entity duly registered to operate as a company and more so engaged in the business of providing security services. The company tax records will also show to the Court that the Second Plaintiff did operate during that period of time as it would have lodged its tax returns to the Tax Office under the Income Tax Act 1959.

18. Furthermore, the NasFund records would show that the Second Plaintiff did employ this "x" number of guardsmen as it is a legal requirement for an employer to make contributions to the NasFund if the employer employs persons in the establishment. See sections 1, 31- 36 of the National Provident Fund Act 1980.

19. Whilst the Plaintiffs have produced a copy of the contract before the Court, I consider that producing the contract is one thing and proving the losses or damages arising from the contract is another thing. That is why the law still requires the Plaintiffs to prove their losses or damages. In this case, I am not satisfied on the balance of probabilities that they have done so. In my view, producing the 3 invoices is like saying and if I may respectfully borrow from the words of Lord Goddard CJ in Bonham Carter -v- Hyden Park Hotel Ltd [1948] 64 TLR 177 at 178: "This is what I have lost, I ask you to give me these damages".

20. In a company operation such as this, the Court would expect and is entitled to expect to have such company records to verify its losses or damages. In my view, it is not sufficient to produce 3 invoices and expect the Court to rely on them as evidence of the loss or damages of the Plaintiffs. In any case, I do not accept them because they are inadequate. For the benefit of the parties and others to appreciate what I am saying, I quote the relevant parts of one of the invoices dated 11th April 2001 which I should also mention here is in identical terms as the other 2 below:

"INVOICE/STATEMENT 34

11 April 2001

To: The Provincial Administration

Southern Highlands Provincial Government

From: Kolopa Security Services

PO Box 724, Mendi, SHP

Being in payment for providing Security Services

To the Provincial Government Buildings.

1. Provincial Government Building.
   
2. Health Office.
   
3. SHP Assembly Hall.
   
4. Media Office and Commerce Office.
   
5. Works Engineering Office.
   
6. Education Office.
   
7. Administrators House.
   
8. The Deputy Administrators Houses.
   

Rate K2.00 per guard x 12 hours x 365 days

10 days guards x 12 hours x 365 days

10 night guards x 12 hours x 365 nights

K87,600.00

x 2

K175,200.00"

21. In my view, a party’s failure to provide appropriate evidence to support its claim may result in the dismissal of the entire action. I think this was the very reason for the Court to dismiss the action commenced by Ace Guard Dogs Security Services and Yama Security Services Limited against Telikom (PNG) Limited in the case Ace Guard Dog Security Services Limited & Anor -v- Lindsay Lailai & Telikom (PNG) Limited (2003) N2459 where they failed to give discovery to the Defendants of these documents I referred to above.

22. In that case, on 20 May 1999 Yama and Ace entered into contracts to provide security services to Telikom. On 31 August 1999, Telikom terminated the contracts by alleging that they were fraudulently and illegally obtained. Yama and Ace sued Telikom claiming damages for breach of contract, particularly for services rendered and for payment for the 33 months remaining on the two contracts. Yama and Ace claimed K6,114,598.62 and K4,526,280.00 respectively. On 5 December 2000, they each obtained default judgment on liability, with quantum to be assessed. In dismissing the entire action, this is what His Honour Sakora J, said in respect of the importance and relevance of these documents to establish quantum:

"I find that the other arguments offered on behalf of the plaintiffs in their objection to the application before me now are irrelevant. In particular, Mr Poro submits that the defendant cannot raise here the issue of quantum, as this had not been pleaded in the Defence. This line of argument conveniently ignores the fact that, whilst it was incumbent upon the plaintiffs to prove to the required standard (civil) due performance of the alleged contract for services, no discovery had been made of documents relevant to the issue of damages and quantum. Thus, the discoverable documents would necessarily include the following:

· Wages books;

· Written Employment Contracts as required under s 20 of the Employment Act;

· Written records of Oral employment contracts as required under s 15 (1) of the Employment Act;

· Guard shifts records;

· Group tax records; and

· NasFund records.

I agree with the defendant that these documents would form the basis upon which both liability and quantum would be considered and determined. Part of the plaintiffs’ claim is for the balance of both contracts, asserted as being 33 months pursuant to the contracts. To this end, the Court would have to be assisted to assess loss of profits on proof of actual reasonable loss sustained (rather than mere assertion). The plaintiffs would have to demonstrate to the Court’s satisfaction the financial position of the two plaintiff companies and their respective expected (projected?) incomes. Thus, documents collectively described as the business records of the companies would have to be made discovery of by the plaintiffs. I further agree, therefore, that the plaintiffs have failed to provide documents (or lists of) that are critical to the issues in dispute between the parties. In this respect, they have been guilty of defaulting in their obligation(s) under the NCR". (Emphasis is mine).

23. It follows that, where a party or parties fail to produce evidence of these documents, they stand the risk of having the claim for damages dismissed. In the present case, it is clear to me that the Plaintiffs have failed to produce this evidence to support their claim. In my view, this omission is fatal to their claim for damages for breach of contract. For these reasons, this claim must be dismissed.

24. There is another reason for me to dismiss the action. The reason is this, claims based on contract for services are different from contract of employment cases. In the present case, it is a case of breach of contract for services. Unlike contract of employment cases where it is usually the case where an amount or monetary sum is agreed or fixed and expressly set out in the contract, contract for services would not have any. If there is, it would be a monetary rate which is fixed or agreed upon by the parties. The rate would form the basis for calculating the remuneration or fees due under the contract. This present case typifies this category of contract.

25. Let me illustrate the point further. In my judgment of Paul Piru -v- Chimbu Holdings Pty Limited: WS No 542 of 2005 (Unnumbered & Unreported Judgment of 4h July 2008), I awarded a total sum of K73,100.00 to the Plaintiff in damages for breach of contract of employment. In that case, the Plaintiff was employed by the Defendant as its Managing Director and signed a contract for 3 years. After serving more than 1 year of the contract, the Plaintiff resigned. Following his resignation, the Defendant failed to pay his resignation entitlements and also unpaid entitlements under the contract. Under the contract, amongst other heads of entitlements, the Plaintiff was entitled under clause 4 of the contract to a salary of K65,000.00 per annum, clause 8 to accommodation allowance of K10,800.00 per annum and clause 9 for transportation costs of K27,375.00 per annum.

26. As the parties agreed or fixed the amounts or monetary sum under each head of damages, I had no difficulty in finding that the Defendant was liable for the unpaid entitlements under the contract like K13,400.00 for accommodation allowance and K33,000.00 for transportation. Then, there are cases of breach of contract of employment where the employer pays the employee during the period of contract and subsequently terminates the employee from employment. In this category of cases, the law is that the employer shall pay damages based on the period of notice under the contract. The cases falling under this category are Christopher Appa -v- Peter Wama [1992] PNGLR 395 and Robert Karawa -v- Kevin Byrne & Tourism Promotion Authority (1999) N1805 to name a few.

27. Thus, I find this case different from breach of contract of employment cases and so damages that would flow from the breach in those cases is assessed differently from this case. Here, the Plaintiffs must prove their losses or damages based on the agreed rate in the contract.

28. In the end, I am not satisfied that the Plaintiffs have proven their losses or damages on the balance of probabilities and I dismiss the entire action. I make no orders for costs.

________________________________________

Public Solicitor: Lawyers for the Plaintiffs
Jerry Kiwai Lawyers: Lawyers for the Defendant