Mambo, trading as Mambo Maintenance v Board of Management of Modilon General Hospital [2013] PGNC 3; N4952 (30 January 2013)

N4952

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1369 OF 2007

JOE MAMBO TRADING AS MAMBO MAINTENANCE
Plaintiff

V

BOARD OF MANAGEMENT OF MODILON GENERAL HOSPITAL
Defendant

Madang: Cannings J
2012: 5 October, 23 November,
2013: 30 January

DAMAGES – breach of contract – whether damages for lost income assessed by reference to notice period in termination clause or to unexpired period of contract – whether damages can be awarded for pain and suffering

The plaintiff entered into a three-year written contract of service with the defendant, a public hospital, under which the plaintiff removed rubbish from the hospital and was paid a fixed sum for each load of rubbish removed. The contract provided that either party could terminate the contract by giving two weeks notice in writing. The defendant after six months terminated the contract without notice. The plaintiff commenced proceedings against the defendant, claiming damages for breach of contract. Liability was established due to the defendant's failure to comply with pre-trial directions of the court. A trial was held to assess damages. Two categories of damages were claimed: loss of income for the unexpired period of the contract (K108,000.00) and general damages for pain and suffering (K20,000.00).

Held:

(1) As a term of the contract allowed for termination without cause, damages for lost income are restricted to the income that would have been earned in the notice period of two weeks, which was calculated as K900.00 per week x 2 weeks = K1,800.00 minus K300.00 in respect of operating expenses = K1,500.00.

(2) As the plaintiff was a sole trader and the income generated by the contract was significant it was reasonable to award damages for pain, suffering and stress caused by the abrupt, unlawful termination of the contract: K1,500.00 damages was awarded.

(3) The court awarded total damages of K3,000.00 and in addition interest of K1,380.00 was awarded, being a total judgment sum of K4,380.00.

Cases cited

The following cases are cited in the judgment:

Bromley v Pacific Finance Ltd (2001) N2097
Graham Mappa v ELCOM (1992) N1093
Madang Shipping & Stevedoring Agencies Ltd v Pete C Celso (2011) N4294
PNG Aviation Services Pty Ltd v Geob Karri (2009) SC1002
Porgera Joint Venture Manager Placer (PNG) Ltd v Robin Kami (2010) SC1060
Rodao Holdings Ltd v Sogeram Development Corporation Ltd WS No 521 of 2001, 23.02.07
Rooney v National Forest Authority [1990] PNGLR 914
William Mel v Coleman Pakalia (2005) SC790

TRIAL

This was a trial on assessment of damages for breach of contract.

Counsel

B W Meten, for the plaintiff
S Phannaphen, for the defendant

30 January, 2013

1. CANNINGS J: This is an assessment of damages for breach of contract. Liability was established summarily in favour of the plaintiff, Joe Mambo, due to the failure of the defendant, the board of management of Modilon General Hospital, to comply with pre-trial directions of the court.

2. The plaintiff and the defendant entered into a three-year written contract on 1 November 2006 under which the plaintiff was to remove rubbish from the hospital in 44-gallon drums and dispose of it at Mero Dump outside Madang town. The contract provided that he would be paid K150.00 for each "load" and that he would remove rubbish each Monday, Wednesday and Friday. For the first six months the contract was performed by both parties: the plaintiff removed and disposed of hospital waste and was paid according to the number of loads. However on 1 May 2007 the hospital terminated the contract without notice by verbal communication to the plaintiff and its conduct in doing so gave rise to a breach of contract as there was a termination clause in the contract which stated:

This Agreement may be terminated by either party on the provision that 2 weeks notice is given in writing.

3. The plaintiff is claiming two categories of damages. First he says that he should be paid for "loss of income" calculated by reference to the unexpired period of the contract. He says he was earning K3,600.00 per month and as the unexpired period was 30 months he claims K3,600.00 x 30 = K108,000.00. Secondly he claims K20,000.00 for pain and suffering. The total damages sought is K128,000.00.

4. Mr Phannaphen for the defendant submits that the plaintiff should be awarded nothing as the question of liability should be revisited by the court, and if this is done it will be realised that the statement of claim is defective as no proper cause of action has been pleaded. If that argument is rejected the plaintiff should still be awarded nothing as he has not provided evidence of the lost income or pain or suffering incurred.

SHOULD THE QUESTION OF LIABILITY BE REVISITED?

5. Liability was established in this case via the summary determination procedure in Rule 15 of the Listings Rules, which is akin to entry of default judgment, and it is possible in an appropriate case to revisit the question of liability. The Supreme Court in William Mel v Coleman Pakalia (2005) SC790 explained the role of the trial judge assessing damages after entry of default judgment in the following terms:

• the judge should make a cursory inquiry so as to be satisfied that the facts and the cause of action are pleaded with sufficient clarity;
  
• if it is reasonably clear what the facts and cause of action are, liability should be regarded as proven;
  
• only if the facts or the cause of action pleaded do not make sense or would make an assessment of damages a futile exercise should the judge inquire further and revisit the issue of liability.
  

6. I have made a cursory inquiry and I am satisfied that the facts and the cause of action are pleaded in the statement of claim with sufficient clarity and that it is reasonably clear what the facts and cause of action are: the parties entered into a fixed term contract for service that allowed either party to terminate on giving two weeks notice in writing. The defendant terminated the contract without notice and without putting the notice in writing. That was a breach of contract and the plaintiff is entitled to damages flowing from the breach. The question of liability will not be revisited.

FIRST CATEGORY OF DAMAGES SOUGHT: LOST INCOME

7. I reject the argument that the plaintiff should be paid out for the unexpired period of the contract. That would only be a proper basis of assessment if the contract expressly stated that that is what should happen or if the contract made no provision at all for termination (Rooney v National Forest Authority [1990] PNGLR 914, Bromley v Pacific Finance Ltd (2001) N2097). Neither of those scenarios applies here.

8. If a fixed-term contract for service has a term of the contract allowing for termination on notice before the end of the period of the contract but that term is breached, the appropriate measure of damages in respect of lost income is the income that would have been earned by the innocent party during the notice period (Porgera Joint Venture Manager Placer (PNG) Ltd v Robin Kami (2010) SC1060, Madang Shipping & Stevedoring Agencies Ltd v Pete C Celso (2011) N4294). The notice period in the present case was two weeks so the plaintiff is entitled to two weeks worth of lost income. He has given evidence that he was removing two loads of rubbish for three days each week and receiving K150.00 for each load and that explains how he has arrived at the monthly figure claimed: K150.00 per load x 2 loads x 3 days each week x 4 weeks each month = K3,600.00. If that figure is accepted at face value his lost income for two weeks would be K1,800.00.

9. Mr Phannaphen maintains that that would still be too much as the plaintiff did not provide business records or income tax returns to support his claim (Graham Mappa v ELCOM (1992) N1093). The plaintiff's explanation for this is that he lost all his receipts and records when his ex-wife set fire to his office. I accept that explanation as there is no contrary evidence and the monthly income figure being asserted appears to be consistent with the terms of the contract. However, as it is a gross revenue figure it needs to be discounted to take account of operating expenses. This is necessarily a rather arbitrary approach given the lack of evidence but I will allow a deduction of K600.00 per month or K300.00 per fortnight, which means that lost income in respect of the notice period is assessed as K1,500.00.

SECOND CATEGORY OF DAMAGES SOUGHT: PAIN AND SUFFERING

10. I agree in principle with Mr Meten's submission that something should be awarded to compensate the plaintiff for the distress, inconvenience and frustration caused to him by the defendant's breach of contract. The plaintiff appears to be a sole trader and it is reasonably to be expected that it came as a shock and was a serious disruption to his business when he lost the hospital contract. The Supreme Court stated in PNG Aviation Services Pty Ltd v Geob Karri (2009) SC1002:

When assessing damages in contract, the court seeks to put the injured party in the position that party would have been in but for the breach of contract. In other words, the object is to put the plaintiff in the same position as if the contract was performed.

11. If this contract had been performed and terminated in accordance with the contract the plaintiff would have been given two weeks notice of termination (which was not given, so he will be compensated for that) and he would not have suffered the distress, inconvenience and frustration that he endured, so he needs to be compensated for that as it is a separate and discrete 'injury' (Rodao Holdings Ltd v Sogeram Development Corporation Ltd WS No 521 of 2001, 23.02.07). But how much compensation is he entitled to? There is very little to go on. There is no evidence to prove that he suffered high blood pressure or other health problems or that his marriage was affected or to show the nature and extent of his pain and suffering. Only a modest, nominal figure is justified. I will award the same sum as for lost income: K1,500.00.

SUMMARY OF DAMAGES ASSESSED

1. Lost income: K1,500.00; plus
2. Pain and suffering: K1,500.00
   

being a total amount of K3,000.00.

INTEREST

12. 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, 1 May 2007, to the date of this judgment, a period of 5.75 years, by applying the following formula:

• D x I x N = A
  

Where:

• D is the amount of 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 K3,000.00 x 0.08 x 5.75 = K1,380.00.

COSTS

13. 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. In this case there is no clear winner. The plaintiff has on the one hand succeeded in obtaining an award of damages but on the other hand has succeeded in convincing the court that only 2.34% (K3,000.00 out of K128,000.00) of his claim had merit; 97.66% of the claim was without merit. The defendant has succeeded in showing that the bulk of the claim was misconceived. In these circumstances it is appropriate that the parties bear their own costs.

ORDER

14. The Court orders that:

(1) the defendant pay to the plaintiff damages of K3,000.00 plus interest of K1,380.00, being a total judgment sum of K4,380.00; and

(2) the parties shall bear their own costs.

Judgment accordingly.

____________________________________

Meten Lawyers: Lawyers for the Plaintiff
Solicitor-General: Lawyer for the Defendant