Tapu Construction Ltd v JT (Ramu) Construction Ltd [2012] PGNC 106; N4811 (5 October 2012)

N4811

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1255 OF 2010

TAPU CONSTRUCTION LIMITED
Plaintiff

V

JT (PNG) RAMU CONSTRUCTION LIMITED
Defendant

Madang: Cannings J
2012: 7 September, 5 October

CONTRACT – contract for hire of equipment and vehicles – assessment of debt due under contract – assessment of damages for breach of contract

The plaintiff entered into a written contract with the defendant for hire by the defendant of the plaintiff's equipment at a total fixed monthly rate of K51,500.00. The plaintiff provided the equipment for six months before the defendant rescinded the contract without notice, after having paid the plaintiff K11,000.00. The plaintiff sued the defendant, claiming monies (debts) due under the contract and damages for breach of contract. The defendant failed to defend the claim and default judgment was entered against it subject to an assessment of damages (and debt). This is the trial on assessment of debt and damages. The plaintiff claimed six categories of losses: (1) outstanding monies for services rendered, K318,600.00; (2) reimbursement for cartage and shipment costs, K46,949.00; (3) compensation for foregoing of previous contracts, unspecified; (4) damages for breach of contract, K134,429.00; (5) labour costs, K32,000.00; and (6) interest, K85,116.48, less a 10% reduction of K61,709.45 on account of wages and repairs, being a net claim of K555,385.00 plus the unspecified claim for foregoing previous contracts.

Held:

(1) Only the claim for outstanding monies for services rendered was properly founded in fact and law. There was sufficient evidence that the equipment had been deployed for six months, giving rise to a debt of K51,500.00 x 6 months = K309,000.00, less the sum of K11,000.00 paid. The plaintiff was awarded K298,000.00.

(2) Other claims with the exception of damages for breach of contract were misconceived. Nothing was awarded for cartage costs, compensation re previous contracts, labour costs or interest (as interest must be assessed separately).

(3) As the contract was of indefinite duration damages for breach of contract are restricted to the amount of income that would have been earned in the notice period, which was only two days: K51,500.00 per month/30.41 days x 2 days = K3,387.04.

(4) The court awarded a total amount of debt and damages of K301,387.04; plus interest (separately assessed) of K57,384.09, being a total judgment sum of K358,771.13.

Cases cited

The following cases are cited in the judgment:

Madang Shipping & Stevedoring Agencies Ltd v Pete C Celso (2011) N4294
Niugini Civil & Petroleum Ltd v West New Britain Development Corporation Ltd (2008) N3292
PNG Aviation Services Pty Ltd v Geob Karri (2009) SC1002

TRIAL

This is a trial on assessment of debt and damages after entry of default judgment.

Counsel

B Lakakit, for the plaintiff
T M Ilaisa, for the defendant

5 October, 2012

1. CANNINGS J: The plaintiff, Tapu Construction Ltd, in November 2009 entered into a written contract with the defendant, JT (PNG) Ramu Construction Ltd, for hire by the defendant of the plaintiff's equipment (an excavator and three trucks) at a total fixed monthly rate of K51,500.00. The plaintiff provided the equipment, which was deployed by the defendant in the Basamuk area of Madang Province in connection with construction work on the Ramu Nickel Project, for six months before the defendant rescinded the contract without notice, after having paid the plaintiff K11,000.00. The contract provided that either party could rescind the contract on two days notice. The plaintiff sued the defendant, claiming monies (debts) due under the contract and damages for breach of contract. The defendant failed to defend the claim and default judgment was entered against it subject to an assessment of damages (and debt). This is the trial on assessment of debt and damages. The plaintiff claimed six categories of losses: (1) outstanding monies for services rendered, K318,600.00; (2) reimbursement for cartage and shipment costs, K46,949.00; (3) compensation for foregoing of previous contracts, unspecified; (4) damages for breach of contract, K134,429.00; (5) labour costs, K32,000.00; and (6) interest, K85,116.48; a gross claim of K617,094.48 (sic), less a 10% reduction of K61,709.45 on account of wages and repairs, being a net total claim of K555,385.00 plus the unspecified claim for foregoing previous contracts.

1 OUTSTANDING MONIES FOR SERVICES RENDERED

2. This is a claim for debt as distinct from damages. It is important to maintain that distinction (Niugini Civil & Petroleum Ltd v West New Britain Development Corporation Ltd (2008) N3292). The plaintiff has adduced a copy of the written contract in evidence. It is poorly drafted but it is sufficiently clear that the defendant agreed to hire equipment comprising one excavator and three trucks from the plaintiff for a fixed rate of K51,500.00 per month. The equipment was on site at Basamuk by mid-November 2009. The contract, which was of open-ended duration, was terminated by the defendant without notice by a letter dated 15 May 2010. I find that the contract was in operation for a period of six months. During that time there is evidence that the defendant paid the plaintiff only K11,000.00. The amount due to the plaintiff is a debt of K51,500.00 x 6 months = K309,000.00, less the sum of K11,000.00 paid. The plaintiff is awarded K298,000.00.

2 REIMBURSEMENT OF CARTAGE AND SHIPMENT COSTS

3. The plaintiff adduced evidence that it spent K46,949.00 on cartage and shipment to transport its equipment from its base in Enga to Basamuk. The contract did not make the defendant liable for these costs, so there is no liability in debt. They are costs incurred by the plaintiff, which the plaintiff must bear in the course of fulfilling its contractual obligations. They are not costs incurred as a consequence of the defendant's breach of contract. Nothing is awarded.

3 COMPENSATION FOR FOREGOING PREVIOUS CONTRACTS

4. The plaintiff claims an unspecified amount of damages. It says that by entering into the contract with the defendant it forewent other hire contracts with the Enga Provincial Government. This claim might be classed as claim for 'opportunity cost'. Whatever description is put on it, it is misconceived. The plaintiff made a business decision to enter into the contract with the defendant. It naturally, with limited equipment, lost the opportunity to enter into other contracts. The lost opportunity is not a consequence of the defendant's breach of contract. Nothing is awarded.

4 DAMAGES FOR BREACH OF CONTRACT

5. When assessing damages in contract the court seeks to put the injured party in the position it would have been in but for the breach of contract. The object is to put the plaintiff in the same position as if the contract was performed or, at least, not breached (PNG Aviation Services Pty Ltd v Geob Karri (2009) SC1002). As the contract was of indefinite duration damages for breach of contract are restricted to the amount of income that would have been earned in the notice period (Madang Shipping & Stevedoring Agencies Ltd v Pete C Celso (2011) N4294). The notice period was only two days. Thus the plaintiff is awarded K51,500.00 per month/30.41 days (being the average length of a month) x 2 days = K3,387.04.

5 LABOUR COSTS

6. The plaintiff claims K32,000.00 for wages and other payments due to its employees arising from the breach of contract. These costs are an ordinary incident of doing business and did not arise as a consequence of the breach of contract. Nothing is awarded.

6 INTEREST

7. The plaintiff claims K85,116.48 for interest, which is a meaningless figure as interest must be separately assessed after the court has arrived at an award of debt and damages. Nothing is awarded at this point. The question of interest is addressed later.

SUMMARY OF DEBTS AND DAMAGES ASSESSED

8. Only the claim for outstanding monies for services rendered was properly founded in fact and law. Other claims with the exception of damages for breach of contract were misconceived. The following amounts have been awarded:

(1) outstanding monies for services rendered: K298,000.00

(2) reimbursement for cartage and shipment costs: 0

(3) compensation for foregoing previous contracts: 0

(4) damages for breach of contract: K3,387.04

(5) labour costs: 0

(6) interest: 0

being a total amount of K301,387.04.

INTEREST

9. Interest will be awarded at the rate of 8 per cent per annum on the total amount of damages under Section 1(1) of the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52. Interest is calculated from the date on which the cause of action accrued, which is deemed to be 19 May 2010, to the date of this judgment, a period of 2.38 years, by applying the following formula:

• D x I x N = A
  

Where:

• D is the amount of debt and damages assessed;
• I is the rate of interest per annum;
• N is the appropriate period in numbers of years;
• A is the amount of interest.
  

Thus K301,387.04 x 0.08 x 2.38 = K57,384.09.

COSTS

10. The general rule is that costs follow the event, ie the successful party has its costs paid for by the losing party on a party-to-party basis. The question of costs is a discretionary matter. There are no special circumstances in this case that warrant departure from the general rule. The plaintiff is the successful party and it shall get its costs.

ORDER

11. The court orders that:

(1) the defendant shall pay to the plaintiff a total amount of debt and damages of K301,387.04 plus interest of K57,384.09, being a total judgment sum of K358,771.13; and

(2) the defendants pay costs of the proceedings to the plaintiff on a party-party basis, to be taxed if not agreed.

Judgment accordingly.
_____________________________

Lakakit & Associates Lawyers: Lawyers for the plaintiff
Thomas More Ilaisa Lawyers & Attorneys: Lawyers for the defendant