N4869

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1370 OF 2007

MICHAEL SASAKA
Plaintiff

V

THOMAS DAL MINI
First Defendant

AND

PACIFIC INDUSTIRES LIMITED
Second Defendant

Goroka: Ipang AJ
2012: 16 & 30 October

DAMAGES – Estimating loss of profit requires replaying history – what actually happened – Reconstructing pre, during and post –interruption history – Getting business records – Balance sheets, income statements, Cash flow statements– Cost histories and breakdowns- Identifying period of disruption – Closed, open (disruption or its effect are on-going) or, infinite (Company went out of business) – what would have happened, absent the disruption – Replaying the history. 
 
DAMAGES – Trial on Assessment of Damages – Plaintiff's 25 Seater Coaster Bus collided with Defendants' truck – suffered Damage – Liability is not an issue as default judgement has been entered – Plaintiff still bears the obligation to prove his loss.

DAMAGES – Claim for additional repair costs not justified – insufficient evidence – barred by the Deed of Release. 

DAMAGES – Assessment of loss of Business Income – strict approach on need to comply with tax laws, and require appropriate business records to show whether any profit over and above running costs was earned – if profit was earned – whether requirements to pay taxes were complied (Graham Mappa Case, Komaip Trading, Kopen & Kerekal Farming compared with liberal approaches in William Patitts & Tusia Komasa)

Cases cited

Graham Mappa -v- PNG Electrical Commission [1995] PNGLR 165
Komaip Trading -v- George Waugulo & The State [1995] PNGLR 165
Kopen -v- State [1988 – 89] PNGLR 659
Kerekal Farming -v- Queensland [1995] PNGLR 401
William Patitts for and on Behalf of Sasaova Business Group -v- Independent State of Papua New Guinea N3088 (26 September, 2006).
Tusia Komasa -v- Edger Jossy & Or Ws. No. 948 of 2006 (12 October, 2012) Unreported.
Coecon Ltd (Receiver – Manager appointed) -v- National Fisheries Authority of Papua New Guinea [2002] PGNC 144; N2182 (28 February, 2002).
Kinsim Business Group Inc. V Joseph Hompwafi & Ors v The State [1997] N1634 (18.09.97)
John Tuink Salamon & Ors v The State [1994] N1272
Marcus Mong v John Selou (2002) N2208

Text Book
McGregor on Damages (Sweet & Maxwell, 13 Edn. 1972, London).

Counsel

Mr. B Koningi, for the Plaintiff
Mr. P. Ousi, for the Defendants

JUDGEMENT

30 October, 2012

1.	IPANG AJ: This is the trial on assessment of damages for the Plaintiff's 25 Seater Mitsubishi Bus Registration No. P256P arising out of an accident on or about 26th of May, 2006. Plaintiff filed his Writ of Summons on the 29th November, 2007. The writ was served on the First Defendant on the 19th August, 2008 and on the Second Defendant on the 20th August, 2008. The Plaintiff claims damages for the repair of 25 seater PMV Bus, damages for loss of profits from his PMV Business, interest pursuant to statute and costs. On the 18th of March, 2011 default judgement was entered against the Defendants. Liability therefore has been determined and so it is not an issue before this court.

2.	Even if default judgment has been entered against the Defendants, the Plaintiff still bears the obligation to prove his loss. In McGregor on Damages (Sweet & Maxwell, 13 Edn. 1972, London) the learned Author made this position clear.

"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 persons' 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)

3.	Then again in Coecon Ltd (Reciever – Manager Appointed) v National Fisheries Authority of Papua New Guinea [2002] PGNC 144; N2182 (28 February, 2002) in the context of assessment of damages, the court held;

"For the purposes of assessing the plaintiff's damages in cases where liability has been resolved either in default or by consent, the plaintiff is under the obligation to establish his damages on the balance of probabilities. If a plaintiff is able to establish his damages on the required standard of prove, it must be awarded."

4.	In Kinsim Business Group Inc. v Joseph Hompwafi & Ors v The State N1634 (18.09.97) Bidar, AJ (as he then was) has this to say:

"...it is incumbent upon the plaintiff to produce business records, such as profit and loss accounts, sales records, bank statements, groups' tax returns etc....to prove business operations and viability of the business. Failure to do so does not assist plaintiff's cause, particularly the validity of the claim against the defendant.

Brief Relevant Background Facts

5.	On or about 19th of June, 2006 at around 11.00am the plaintiff's bus which was driven by Philemon Michael was heading along the Highlands Highway into Goroka Town. The First Defendant was driving an Isuzu Space Cab Registration No. LAN 421 owned by the Second Defendant. The Isuzu collided with the plaintiff's bus at Ketarobo Bridge on the Highlands Highway approximately 3 kilometres out cast of the Goroka Town.

6.	As a result of the collision, the plaintiff's truck suffered extensive damage which the repair costs were quoted in the sum of K20, 223.50. The plaintiff's bus has since been disabled and the plaintiff as the evidence has shown has not repaired the bus even after receipt of K20, 223.50 as the repair cost.

7.	The Plaintiff had initially purchased his bus in 1999 with loan finance from Nambawan Finance Company. He purchased his bus from Wamp Nga Motors in Mt. Hagen for a price of K69, 500.00. He had repaid his loan prior to the accident. This is so, because on the 4th of March, 2002 Nambawan Finance Limited wrote to the Plaintiff confirming settlement of the loan.

Damages for repair costs

8.	It is not disputed that the Plaintiff did make some attempts to seek compensation for repairs and for loss of his business income. The Plaintiff said on 27th November, 2007 he instituted the legal proceeding when Defendants refused to deal with his claims for repairs and loss of business. On the 24th April, 2008, the Defendants paid K20, 223.50. This will be 5 months after the action was filed and 1 year, 10 months after the accident took place. Mr. Koningi of Counsel for the Plaintiff submitted that the Plaintiff is not pursuing his claim for repairs however, he said because it was 1 year, 10 months after the repayment for repairs was made and cost for repairs could have risen up.

9.	The submission by the Plaintiff's Counsel is bold and there is no evidence to justify that the actual costs for repairs in 2006 for the sum of K20, 223. 50 have risen after 1 year, 10 months. This aspect of the Plaintiff's submission is without justification as the Plaintiff did not even repair his bus when K20, 233. 50 was paid to him on the 27th of April, 2008.

10.	Should the Plaintiff for the same damage caused by the collision took his bus to the workshop on the 27th of April, 2008, that is 1 year 10 months after the accident and if he was told and given another quote for repairs which indicated the repair costs had escalated and exceeds the previous repair costs, this would amount to a reasonable justification. As it is, the bold argument without any evidence is not very convincing. I am therefore reluctant to accept the Plaintiff's argument.

Damages for loss of profits from PMV Business

11.	In paragraph 12 of his Statement of Claim, the Plaintiff claimed he made income from his PMV bus on average of K500.00 per day. The Plaintiff claimed he was operating 6 days a week until his bus was involved in the accident on the 19th of June, 2006. This would mean the plaintiff was earning an average of K3, 000.00 in operating the PMV bus for six (6) weeks.

12.	In his Affidavit sworn and filed on the 28th of June, 2012, the Plaintiff deposed in paragraph 5 that prior to the accident he was making about K500.00 gross per day. He would deduct about K200.00 per day for fuel, meals and betel-nut allowance for the driver and himself. He said he would take home a net sum of K300.00 per day for six days in a week.

13.	The Plaintiff says he has a Pass Book Account which shows his own irregular deposits and withdrawals of various sums of money. He said it will not assist in the assessment of his business losses in relation to his PMV business. Plaintiff has annexed his receipts of evidence of his monthly loan repayments. Plaintiff asks this court to view his 36 monthly loan repayment of K1, 523.52 as showing at least a minimum monthly income of K1, 523.52. He therefore asks this court to assess his loss of business income as he claimed in the writ of summons at the rate of K1, 523.52 per month.

Need to mitigate loss
14.	Mr. P. Ousi of counsel for the Defendants submitted that since the Plaintiff said he kept substantial amount of money in the house, he (plaintiff) should have used some of this money to repair the bus, thus mitigate the loss. In Kopen -v- State [1988-89] PNGLR 659 Woods, J referred to Halsbury's Law of England (4th ed.) vol.34, par 89 in the context of loss of a profit – earning chattel is that, 'where a chattel used by a plaintiff in the course of his business is damaged or destroyed, a plaintiff is entitled to loss of profits during a reasonable period to effect repair'.

15.	In deliberating on Kopen -v- State (supra) Woods, J found that the Plaintiff was supposed to mitigate his damages and in this case this would include taking appropriate steps to get the repairs done efficiently and without any unreasonable delay. Defendant instead left everything to his finance company which, it would appear, was grossly careless, even negligent, in looking after the interest of his client. The Court held that 3 weeks was reasonable period to effect repairs for the calculating of loss of profits.

16.	In the instant case, the Plaintiff did nothing to mitigate his loss. On the 19th June, 2006 the accident occurred and on the 24th April, 2008 the Defendants paid for the repairs. It was 1 year, 10 months when the defendants paid for the repair costs. Thus, the Plaintiff did not take appropriate steps or measures to get the repairs done efficiently and within reasonable period. I found given the circumstances of this instant case, the period of 1 year 10 months was an inordinate delay and unreasonable.

Requirements to prove loss of profits

17.	The next line of Mr. Ousi's argument is that this court should not give due weight to the Plaintiff's argument that the Plaintiff's monthly loan repayment of K1, 523.52 should be taken as minimum monthly income. Mr. Ousi submitted that the Plaintiff at that time had a loan to repay and had monthly target to meet. He said it's natural that once loan has been repaid, the plaintiff will tend to relax. So the amount of K1, 523.52 would not be a reflection of the income after the loan has been repaid.

18.	It is without doubt that estimating loss of profits requires replaying this history. What actually happened and this will involve reconstructing what happened during pre, during and post- interruption history. This would also involve getting business records, balance sheets, income statements, cash flow statements, cost histories and breakdown coupled with identifying the period of disruption – closed, open (disruption or its effect are ongoing ) or infinite (company went out of business). This would also involve asking the question, what would have happened in the absence of disruption?

19.	There is a big gap after the loan was repaid. After the loan was repaid there was no track record of how much the PMV Bus was making per month. When I attempt to reconstruct the history, it is not consistent and there is a large vacuum in terms of calculating monthly income. 

20.	In John Tuink Salmon & Ors v The State [1994] N1272 the plaintiff Salmon claimed for loss of houses and trade store, loss of personal possessions, trade store goods, and damage to vehicle. In the loss aspect of trade store goods in which claim was for K12, 785.00 stock of cigarettes, His Honour Woods, J gave this evaluation:

"...that seems to be a large item for a trade store and suggests more than just a mere convenience village trade store. Whilst the Court may be lenient with strict evidentiary matters with village claims, once you are claiming for what are major economic activity enterprises the Court is entitled to insist on proper evidence in the nature of ledgers and account books and even taxation returns to comply with the modern laws."

21.	Defendant counsel referred to the case of Graham Mappa -v- PNG Electricity Commission [1995] PNGLR 170. In Graham Mappa (Supra) Woods, J Stated:

"...if you wish to establish matters like loss of profits from the operation of a modern business, then it is necessary to comply with modern law, for example, producing such records as are required by law. If you wish to have the advantages of a modern world of business, then you must comply with modern matters like tax laws. This would require appropriate business records to show whether any profit over and above running costs was earned, there are the requirements to pay taxes".

22.	The Supreme Court in Mappa (supra) summarised that if there are no bank records, or balance sheets or other kinds of evidence then it is not sufficient to establish damages in law in the context of loss of profits or business income. In Mappa (supra) Woods, J in re-assessing damages after the matter was remitted by the Supreme Court to the National Court only awarded K1, 451. 44 being K1, 033. 19 in damages and K418.25 as interest. The claim for loss of profit was not awarded, as the plaintiff did not prove any such loss.

23.	In Marus Mong v John Selou (2002) N2208 Jalina, J took the hard line approach as enunciated in Graham Mappa (supra) and awarded no loss of earnings as there was no evidence. That there was no bank statement, passbooks or other documentary evidence produced to show the rate of his earnings per week or per month.

24.	In Kinsim Business Group Inc. v Joseph Hompwafi, John Kalaut and The State N1634 (18th September, 1997) Bidar AJ applied the strict approach in Graham Mappa (supra) and disallowed the claim for loss of profit for unsold beer stock. The brief facts in Kinsim Business Group Inc case (supra), was that on the 01st October, 1996, Police raided the Plaintiff's liquor outlet at Parom village, Wewak and confiscated a total number of 364 cartons of beer. This incident happened whilst the manager and proprietor Mr. Simi was in Madang on business trip.

25.	Mr. Simi was subsequently arrested and charged with one count of illegal sale of liquor contrary to East Sepik Provincial Liquor Licensing Act. On the 7th December, 1995 the Wewak District acquitted him of the charges of the 364 cartons of beer, 283 cartons were returned and 81 cartons of beer were not accounted. Due to the Provincial Liquor ban in the Province, 283 cartons of beer were sold at lower price at K15.00 per carton, causing loss of profit. The court found Mr. Simi unable to produce business records, bank statements or group tax etc...Mr. Simi said he left them back in Wewak.

Strict approach verses liberal approach: Need to develop a safety valve to filtrate requirements for assessing damages for loss of profits or business income:

(i)	Strict Approach

26.	We have seen courts in Graham Mappa case (supra), Komaip Trading case (supra), Abel Kopen case (supra), Kerekal Farming case, Marcus Mong case, John Tuink Salmon case (supra), Kinsim Business Group case (supra) took the hard line or strict approach to assess damages for loss of profits or business income. The strict approach cannot be expressed in more detail then to adopt the words of Woods, J in Graham Mappa v PNG Electricity Commission (supra) where the following were expressed:

"....if you wish to establish matter like loss of profits from the operation of a modern business, the it is necessary to comply with modern law, for example, producing such records as a required by the law. If you wish to have the advantages of a modern world of business, then you must comply with modern matters like tax laws. This would require appropriate business records to show whether any profit over and above business running costs was earned. And then, if a profit was earned, there are the requirements to pay taxes."

27.	The Court in the Mappa case (supra) went further to say:

"The Courts have referring to these requirements in recent years, especially in the operation of shop or trade store businesses. And the Supreme Court, by its ruling, is implying that the same must apply to the operation of a PMV or such like public transport business."

28.	In Kinsim Business Group case (supra) Bidar AJ (as he then was) taking the 'hardline or strict approach' made this ruling:

"In this case, the plaintiff has failed to produce books of accounts, bank statements, and declaration of profits or any Tax Returns. In the absence of such evidence, the Plaintiff claim for loss of profit from unsold stock is not substantiated."

29.	Then, again in Marcus Mong case (supra) Woods, J took the same approach and made the following finding:

"In the case before, I find no evidence of loss. No bank statements or passbooks or other documentary evidence has been produced to show the rate of his earning per week or per month from which it can be ascertained he was earning that kind of money per week or per month."

30.	In Kerekal Farming v Queensland [1995] PNGLR 401 at p. 405 the Court said:

"The plaintiff is also claiming loss of profit whilst the vehicle was out of service because of the accident and because of the delay in the defendant meeting the claim. However, the plaintiff has not presented any financial statements to show the income received from the operation of the truck. It has merely been stated that the company had contract haulage with Placer and was earning an average of K22, 000.00 per month. Then this is a bank deposit book. However, there is no evidence of the details of any contract or of the breakdown of the details of that income, namely, what were the running costs...etc. so how can this court find an amount for loss of profits, when there are no detailed figures to support such?"

31.	In Graham Mappa case [1995] (supra) Woods, J reached the following conclusion:

"....Therefore, as no proper business records and no tax returns have been produced to the Court to show any profit from the operation of the vehicle, this court cannot find that there has been any such loss. The mere assertions and the depositing of sums of money in a bank is not sufficient evidence."

32.	The above cases specifically adopted and applied the 'hardline or strict approach'. Even at some instances Courts have acknowledged the struggle and efforts put by people in starting and operating business ventures. However, in terms of claiming for loss of profits, they must still disclose them according to law. In Komaip Trading v George Waugulo & The State [1995] PNGLR 165 the court said:

"...whilst this Court must sympathise with the plight of a hard working man who had built up such a viable business, and has had to face such wilful and criminal destruction by officers of the state, to claim profits you must have disclosed them according to the law."

(ii)	Liberal Approach

33.	Despite the strict approach as discussed, it seems there have been some attempts by courts to deviate from this approach and take a more liberal approach. To such an extent that the liberal approach taken has seen to be creating bad precedents. In the case of William Patitts For and On Behalf of Sasaova Business Group v Independent State of Papua New Guinea N3088 (26 September, 2006) which Mr. B. Koningi of counsel for the Defendant had referred me to is one such case in which the court has deviated from applying the strict approach.

34.	In Patitts case (supra) the plaintiffs claimed special damages for loss of business income from the confistication and commandeering by the PNG Defence Force members of the plaintiffs PMV Dyna Truck during the period of crisis in Bougainville. Counsel for the plaintiffs submitted for the K120, 000.00 the amount pleaded in the statement of claim for the court to award on the basis that though there were no proper business records available to substantiate the claim, the court should take into account that the events happened during the Bougainville Crisis when life was particularly difficult for most Bougainvilleans including the Plaintiff and his business group. Counsel for the Defendants argued that there is nothing credible on which the court can rely onto make assessment.

35.	The Presiding Judge, Cannings, J considered;

"I agree to some extent, with both counsels. I agree with Mr. Tamusio that the effects of the crisis cannot be ignored by the court. I agree with Mr. Potorua that it can set a poor precedent if the courts act on the basis of guesswork and supposition. Having weighed both submissions and taking into account what I said before about how things happened in the Bougainville Crisis, I will make a compromise award of half the amount claimed, which for the sake of mathematical convenience I round out to K60, 000.00.

36.	His Honour Cannings, J took judicial notice of what happened during the period of crisis on Bougainville and though found that the Plaintiffs claim were poorly and vaguely pleaded with no proper business records, awarded the Plaintiffs half or 50% of the business loss together with interests and costs.

37.	In Tusia Komasa v Edger Jossy and F&M Engineering Limited WS. No. 948 of 2006 (12 October, 2012) unreported, Ipang AJ, followed the same approach in William Patitts case (supra). His Honour Ipang, AJ was not presented with any properly audited set of accounts nor any copies of Income Tax Returns showing the profit the Plaintiff made from the operation of his Sawmill Business. The Court said it was left with two (2) options, to conclude that plaintiff earned no profit or to draw some rationale that the Sawmill Machine had it been in operation, would continue to generate profit each week.

38.	The Court in Tusia Komasa (supra) took the latter approach because of the justification by the Plaintiff in which the Plaintiff deposed in his affidavit at para 32 that all his business records and documents as well as personal and business properties were burnt together with his house during a tribal fight. Secondly, the Plaintiff provided evidence from his customers whom he supplied timber materials to justify existence of his business operation. The Court then awarded 75% for special damages for loss of business income.

39.	In the wake of the recent attempts as of 2006 by courts to deviate from the strict approach to a more liberal approach to the requirement for assessment for loss of business income or loss of profit, there need to be developed a guideline to be strictly followed otherwise bad precedents will be set. This guideline will act as a safety valve.

40.	Courts must now be put on notice that plaintiffs who come to court and if they are claiming apart from other damages, the damages for loss of business income or loss of profits they must comply with strict approach as highlighted, discussed and elaborated earlier in this case. If Plaintiffs just come to court and say my business records have been destroyed or got burnt down during a tribal fight, is not good enough. The Courts should not provide a 'leeway' for this sort of Plaintiffs to find easy way out.

41.	In this modern world, and with the kind of modern world business activities, there are both manual and e-copies of business records and transactions kept with suppliers of goods and services like the banks, the Internal Revenue Commission (IRC) etc. Plaintiffs who are claiming for loss of profits or business income must turn to their suppliers etc. and obtained copies of those relevant records or receipts. It does not help for them to just come to court through affidavit evidence or oral evidence and tell the court that all my records were destroyed. One of the attributes of modern day business is the need to keep proper records and it does entail keeping business records in a safe place.

42.	In this instant case, the Plaintiff's claim for loss of business income or loss of profit was not substantiated with proper business records, profit and loss account. See Graham Mappa case (supra). Even the claim cannot fall under the exceptions shown in William Patitts case (supra) and Tusia Komasa case (supra). I therefore dismiss the Plaintiff's claim for damages for loss of business income. I have also refused the Defendants request for additional cost for repairs based on lack of evidence and Deed of Release signed. The interest cannot stand alone without the principle claim. The Plaintiff is to meet the Defendants cost of this proceeding, to be agreed if not to be taxed.

Koningi Lawyers: Lawyer for the Plaintiff
Warner Shand Lawyers: Lawyer for the Defendants