Brookes v Brookes [2014] PGNC 172; N5751 (25 September 2014)

N5751

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

W.S.NO. 785 F 2009

BETWEEN:

RODERICK GLEN BROOKES
Plaintiff

AND:

MAGDALEN BROOKES
First Defendant

BERABERANA CONSTRUCTION LIMITED
Second Defendant

Kokopo: Lenalia; J.
2012: 12th December
2014: 25th September

LAW OF CONTRACT – Contract of Employment – Master and servant –
Written contract of employment – Contract of service – Self termination of contract after the plaintiff engaged in extra marital affairs – No specification as to when employment contract should end.

CONTRACT – Written contract of employment – Construction of
documented contract of service – Contract of employment in a family business – Contract provided for free accommodation, 4 weeks annual holidays, free holidays fares to Brisbane.

CONTRACT – Construction of – Fair and liberal approach as to give
effect to the agreement of the parties – Court can allow extrinsic evidence to construe invalidating clauses or terms implied by law or practice – The family business provided a safe-haven or city of refuge for the plaintiff to conduct business of the Second Defendant.

Cases cited

Papua New Guinea Cases

Allan Arthur Morris v PNG Associated Industries Ltd (1980) N260
Jimmy Malai v PNG Teachers Association [1992] PNGLR 568
Curtain Bros (QLD) Pty Ltd v. The State [1993] PNGLR 285
Bruno Baiwan v University of Papua New Guinea [1995] PNGLR 18
Fly River Provincial Government v Pioneer Health Services Limited (24.3.03) SC705

Overseas cases cited:

Bank of Australia v. Palmer [1897] UKLawRpAC 44; [1897] AC 540
Reliance Marine Insurance v. Duder [1912] UKLawRpKQB 90; [1913] 1 KB 265
Tsang Chuen v. Li Po Kwai [1932] UKPC 50; [1932] AC 715
O'Connor v. Hume [1954] 1 W.L.R 824
Jacobs v Batavia & General Plantations Trust Ltd [1924] 1 Ch.287
Gillespie Bros. & Co v Cheney Eggar & Co [1896] UKLawRpKQB 55; [1896] 2 Q.B. 59

Materials referred to:

Companies Act 1997
Chitty on Contracts 24th Edition at 700 – 701

Counsel

Mr. D. Lidgett, for the Plaintiff
Ms. E. Saulep, for the First and Second Defendants

25th September, 2014

1. LENALIA, J: The plaintiff in this case commenced proceedings by filing of an original Writ of Summons on 9th July 2009. In the Writ, the plaintiff claimed an amount of K1, 063,630.55 for entitlements and loans he advanced toward establishment of the Second Defendant. He also claimed damages for suffering and anxiety and for cost incurred.

2. No activity occurred on the original claim and an Amended Writ was filed on 9th February 2011. In the Amended process, the plaintiff reduced his claim for special damages and entitlements to K847, 132.72. The second leg of his claim, is for the amount of K153, 953.55 for the loan owed to him by the Second Defendant. The third leg of this claim, the plaintiff claims for damages and sufferings and for interests pursuant to statute.

3. The letter by Mirupasi Lawyers blaming this Court for inactivity since 12th December 2011 is totally inaccurate. Ms. Saulep appeared for their clients, the defendants a number of times. Paraka Lawyers then appeared for the plaintiff. On the above date, the court directed that, the plaintiff was to file and serve on the defendant's lawyer's written submission within 2 weeks.

4. The same period of time was given to the defendants that after being served with such document, the defendants were to reply and serve the plaintiff theirs. The matter was ordered returnable by early February 2012. Nothing eventuated in February 2012. Further delays by lawyers is reflected on the file endorsement as follows:

➢ 4th March 2013 – Matter adjourned to 25th March. Mr. Potoura to advise Ms. Saulep of the hearing date. (Nothing happened).
➢ 31st May 2013 – Counsels directed to file written submissions within 7 days. (Since nothing occurred, court redirected counsel to file written submission – Nothing eventuated).
➢ 7th June 2013, Mr. Ligett appeared for plaintiff. Matter adjourned to 14th that month. (Was not called on that date).
➢ 5.8.2013 – Matter adjourned to 9.8.2013. Nothing happened.)
➢ 9.8.2013 – No written submissions had been filed – Adjourned to 16th that month.
➢ 16.8.2013 – the matter came before A.J. Oli – Matter adjourned to 20th Sept. Plaintiff's lawyers were redirected to file written submission.
➢ 20.9.2013 – matter came before A.J. Oli – Defendant's counsel was directed to file written submission, (may be in reply to that of the plaintiff's). Adjourned to 28.10.2013 for the matter to be listed before this court. (It appears nothing eventuated on that set date).
➢ 28.10.2013 – matter adjourned to be listed before this court.
➢ 4.12.2013 – another direction given to lawyers to file written submissions. Was adjourned to 19.12.2013. The matter was left there.
➢ 19.120.2013 – matter further adjourned for the court to confirm my position on the case. (It was left there until).
➢ 4.7.2014 – matter came before A.J. Oli was adjourned with same aim as above but returnable on 18.7.2014.

• ➢ 18.7.2014 – matter again adjourned for same reason as above.
  

5. This file was only brought to me in chambers by the third week of August this year.

Plaintiff's Case

6. The Plaintiff is a builder and architect. He came to Papua New Guinea in early 1980s and worked in Bougainville, then the North Solomons Province. Then on the plaintiff got married to the First Defendant on 6th June 1989. As a married couple, they incorporated the Second Defendant Company on 7th September 1995. The plaintiff and first defendant were both directors and where shareholders together with others to the defendant company.

7. In the course of the company's operation, the plaintiff was engaged as the Construction Manager pursuant to a Contract of Employment. He signed a contract of employment for a yearly income of K80, 000.00. His work permit was valid during the currency of his work permit with the second defendant until March 2010 and later further reviewed. The plaintiff and first defendant have now been separated since 2008.

8. The first letter of the offer of employment to the plaintiff was written and dated 10th March, 1994. In that letter the first defendant as the director of the second defendant offered the position of Building Manager to the plaintiff. In that first offer, the plaintiff did not sign. Then on 19th February 1999, the plaintiff signed another offer of contract as a Construction Manager. The first defendant signed as the director and the plaintiff signed on 18th February, 1999. In the course of their business, the plaintiff signed a third contract of employment as a Construction Manager. The parties signed on 26th February 2004.

9. The Second Defendant, BERABERANA Construction Limited ceased its operations on 29th July 2009. The evidence in support of this claim and the Cross-Claim show that, prior to the Second Defendant winding up, the plaintiff had incorporated his own company CLICON Limited. The defendants alleged in their evidence that, before the plaintiff and the First Defendant were separated and prior to the Second Defendant ceasing to operate, the Plaintiff transferred funds from the Second Defendant's account to his new company without authority from other directors.

10. The issue on the Plaintiff's claim is, whether, the plaintiff is entitled to claim for unpaid entitlements on his position as the Construction Manager of the Second Defendant. The plaintiff claims in the amended Writ of Summons for special damages and for unpaid entitlements which is put at K847,132.72, the total amount of loan owed by the Second Defendant at the value of K153,953.55 and damages for suffering.

11. The evidence on the trial of this claim established that, when the Plaintiff and First Defendant (the couple) started having marital problems which resulted in their marriage being dissolved in Australia about the end of December 2011. The evidence also shows that, the Second Defendant ceased operation since 30th June 2010.

Defendants' Case and Cross-Claim

12. On this claim, the two Defendants filed a Defence and Cross-Claim claiming for proceeds of sales of various assets valued at K457,630.00, outstanding rental payments for the sum of K168,000.00, and reimbursement of K896, 808.93 for the monies withdrawn from the Second Defendant's Accounts. The following is the ruling on the claim by the plaintiff for unpaid entitlements and damages. There is also a Cross-Claim by the First and Second Defendants. I deal with the plaintiff's claim first.

13. Evidence by the First Defendant establishes that, she was married to the Plaintiff but their marriage was separated or dissolved in 2008. She was asked about the contract of employment signed by the plaintiff to work as the Construction Manager of the Second Defendant. She answered that, when the company commenced its operation, they live together as a married couple and since it was a family company, the plaintiff never got any payments but he used company facilities and as well, the plaintiff never requested for anything.

14. Magdalene's evidence gives some highlight of something interesting about the plaintiff's claim. In her evidence, she said, when she returned from Australia in 2006 or 2007, she wrote cheques to be drawn from the Second Defendant's accounts, the cheques bounced. She inquired with the bank and she was informed that, she was no longer a signatory to the company account.

15. Asked about how and where the plaintiff got the money from to get his company registered. The plaintiff made various withdrawals from the Second Defendant's account in the name of his company, Clicon Limited. Two withdrawals were done in 2008 for a total sum of K365, 000.00. Her evidence further reveals that, the plaintiff was the only signatory to the Second Defendant's account and though she tried to enter the Second Defendant's premises in Section 74, Allotments 20 and 21 at Takubar, she was restrained from entering the premises.

16. Magdalene's evidence also establishes that, the total amount debited from the Second Defendant's account according to her calculations stood at K896, 808.91 and she said there could have been more. Apart from that, she said the plaintiff had also sold and disposed of the Second Defendant's assets including the sale of a portion of Section 74 and other assets.

Counsels' Submissions

17. I thank counsels for their helpful submissions. Both counsels filed written submissions. Paul Paraka Lawyers then acted for the Plaintiff submit that the from evidence by the plaintiff contained in his affidavit dated 18th August 2011 and the supplementary one of 18th October 2011, it is clear that the Plaintiff was employed as the Construction Manager of the Second Defendant. They argue that such contract was valid from the date the company was incorporated until it ceased its operation. They submit, the plaintiff has proven his case on the balance of probabilities and his action was in the best interest of the company and the court should order damages as claimed.

18. Ms. Saulep of counsel appearing for the Defendant submitted in reply that, the reason why the Defendants had filed a Cross-Claim is because the Plaintiff had not come to court with "clean hands". Her submission covers what the two defendants claim in their cross-claim and said, the claim made by the plaintiff against the Second Defendant must be looked at in context of the company being a family business when it was incorporated.

19. The second leg of their submission attacks the manner in which the plaintiff dealt with the Second Defendant's assets including unauthorized withdrawals made from the second defendant's account in favour of the plaintiff and his company, Clicon Limited. Counsel submitted that, the court should consider the fact that what the First Defendant did as a director of the second defendant's account, was that she was concerned about the operation of their family company.

Application of Law

20. On these claims, a number of legal issues are involved. First, it is not disputed that the plaintiff was employed as the Construction Manager of the Second Defendant. It is not disputed that the Second Defendant was incorporated on 7th September 1995 pursuant to the Companies Act 1997. After the company was registered, it was a family run company. Both the plaintiff and first defendant were directors of the second defendant company. It is agreed that due to their marital problems, they dissolved their marriage in September 2008. The Second Defendant ceased operation on 30th June 2010.

21. In order for the parties to succeed on their claims, they ought to prove their cases on the balance of probabilities. I differentiate the plaintiff's claim from one where there has been a wrongful termination by an employer as was in cases like Jimmy Malai v PNG Teachers Association [1992] PNGLR 568, or that of Bruno Baiwan v University of Papua New Guinea [1995] PNGLR 18.

22. The plaintiff's counsel cited the case of Allan Arthur Morris v PNG Associated Industries Ltd (1980) N260 where the company dismissed its Managing Director. The defendant denied the claim and cross-claimed for loan monies amounting to K45, 000.00. The court held that, the defendant company conducted its business invalidly as it did not comply with the company's Articles of Association and was in breach of the Companies Act.

23. On the instant claim, the court must look at the intentions of the parties at the time the Contract of Employment was signed. The evidence of both the plaintiff and first defendant show that, since inception of the second defendant company on 7th September 1995, the plaintiff's evidence so as that of the first defendant show that, the plaintiff had never received any remuneration except for a salary of K250.00 per fortnight which only commenced in 2008 until 2009.

24. In the case before me the issue is whether or not the plaintiff is entitled to what he claims on his Amended Writ of Summons. This issue can be resolved by reference to the relevant provisions of the contract which I will refer to shortly. Generally the law is that, where there is a written contract, it should be allowed to speak for itself to the exclusion of any extrinsic evidence: Curtain Bros (QLD) Pty Ltd v. The State [1993] PNGLR 285. The following cases were referred to in the above case, Bank of Australia v. Palmer [1897] UKLawRpAC 44; [1897] AC 540; Reliance Marine Insurance v. Duder [1912] UKLawRpKQB 90; [1913] 1 KB 265; Tsang Chuen v. Li Po Kwai [1932] UKPC 50; [1932] AC 715 at 727; O'Connor v. Hume [1954] 1 W.L.R 824.

25. The principles stated in the above cases say that a written contract must be allowed to speak for itself or construed strictly according to the terms of the written contract. To this court it makes a lot of sense because the terms of a written contract do bind the parties and they are expected to perform according to what they have intended so that the words must be construed according to the intention of the parties.

26. A classical statement on the construction of the terms of a contract can be found in Chitty on Contracts 24th edition at pages 700-701, in the following terms:

"The object of all construction of the terms of a written agreement is to discover there from the intention of the parties to the agreement...the cardinal presumption is that the parties have intended what they have in fact said, so that their words must be construed as they stand. That is to say, the meaning of the document or of a particular part of it is to be sought in the document itself: 'One must consider the meaning of the words used, not what one may guess to be the intention of the parties.'"

27. Contents of a contract depend primarily on the words used by the parties. Where the contract is in writing, there is a general rule that, the court will not look beyond what is contained in the writing to determine what its express terms are: Jacobs v Batavia & General Plantations Trust Ltd [1924] 1 Ch.287.

28. The above rule is subject to many exceptions such on evidence to prove some invalidating causes as in Campbell Discount Co v Gall [1961] 1 Q.B.431, or on terms implied by law or custom: Gillespie Bros. & Co v Cheney Eggar & Co [1896] UKLawRpKQB 55; [1896] 2 Q.B. 59, or by operation of the contract: Pym v Campbell (1856) 6 E. & B.370, or for evidence in aid for construing a document: Bank of New Zealand v Simpson [1900] A.C.182. (For more cases on extrinsic evidence see - G.H. Treitel 'The Law of Contract' Fifth Edition 134 to 142). (See also Fly River Provincial Government v Pioneer Health Services Limited (24.3.03) SC705 footnote 9 and page 35 to 36 of the judgment).

29. Looking at the Statement of Agreed and Disputed Facts, the plaintiff and the two defendants agree that the second defendant was incorporated on 7th September 1995. The plaintiff and the first defendant were both directors of the second defendant. The first defendant held forty (40%), their son Clae Brookes held fifty (50%) share and the plaintiff's father in-law had ten (10%). It is not clear from the evidence of both the plaintiff and first defendant why the plaintiff did not have any share in the company.

30. The plaintiff was the Construction Manager of the company under a Contract of Employment signed under a work permit that would permit the plaintiff work in Papua New Guinea until 2010. The plaintiff and the first defendant dissolved their marriage since 18th November 2008. On disputed facts, the fact that the plaintiff did not receive his remuneration must be looked at from the point of view that the plaintiff is a foreigner and in order for him to work in Papua New Guinea, he must have a valid work permit and his place of work and addresses must be provided otherwise, the plaintiff would not have been permitted to be in PNG.

31. There is no other evidence to show if the plaintiff was engaged in any other form of employment with another company. Certainly he would have had a work permit prior to February 1994 when the second defendant began its operation. His employment with the second defendant as a Construction Manager operated as a "city of refuge" to safeguard his stay in this country.

32. There may be some legal issues about why the plaintiff did not apply for a new work permit when he was separated from the first defendant? In my view, in order for the plaintiff to work in PNG, he set up his own company Clicon Limited in which company the plaintiff holds ninety-eight percent (98%) to protect or safeguard him against legal consequences.

33. It is rather surprising why the plaintiff did not claim for such entitlements as he now claims for when the second defendant commenced operation in 1994. Neither the plaintiff nor the defendant gave any logical reasons why the plaintiff could have worked for so long without being remunerated except for the reasons that they regarded the second defendant as a family company and in fact it was.

34. The plaintiff and the first defendant have now claimed certain sums of monies made against each other on each of their claims. The company, New Beraberana Hardware Limited was incorporated in June 16th, 2004 and was deregistered on 30th November 2006. By 19th May 2009, the plaintiff's company, Clicon Limited commenced its operations. Noting here that by 15th September, the second defendant had ceased its operations.

35. In this case, the court finds that the plaintiff worked under cover of the second defendant and the court finds that there were illegal activities carried out by both the plaintiff and the first defendant. Such activities as the major shareholder (Clae Brookes) of the second defendant giving instructions to the plaintiff to ensure that the Second Defendant's debts were paid in full. There is no evidence to the exercise of powers by ordinary resolution, or any unanimous agreement by shareholders of the second defendant pursuant to ss.86 and 87 or s.89 of the Companies Act.

36. In fact pursuant to s.79 of the Act, a shareholder is not liable for the liability of a company lawfully registered. I have perused the documents and found nothing about the company's constitution. Pursuant to s.79 of the Act, the liability of a shareholder is limited to those liabilities expressly provided for under the Companies Act or the company's constitution.

37. There is evidence by both the plaintiff and the first defendant that, the plaintiff was removed as a director of the company in 2006 as soon as the first defendant found out about extra marital relationship with another woman. The plaintiff was however reinstated and continued working as a director of the second defendant.

38. Another aspect of the evidence on this case is that, after the parties started having problems, the plaintiff wrote several letters to the first defendant to convene extraordinary general meetings. See Annexures "L" "O" "P" and other correspondences). The plaintiff wrote in his capacity as either the Managing Director or Construction Manager. In such correspondences, there is no reference made to the "Board of Directors". It would seem to the court that at the time the plaintiff was doing what he did, it may have been a one man deciding on company business.

39. In the plaintiff's oral evidence in court, he was asked in cross-examination if he ever asked the defendants for remunerations since he commenced working with the second defendant. He said he did not ask for it because he regarded the second defendant as a family business. Further asked as to why he did not make a claim earlier against the second defendant.

40. He said the first defendant and himself have lived a happy life and there was no need for him to make any claims. The plaintiff also revealed that during his employment with the second defendant, the company provided for his daily expenses and he was a signatory to the second defendant's account.

41. On the loans the plaintiff is supposed to have provided for establishment of the second defendant, he pleaded two amounts on the Amended Writ of Summons. The first loan for an amount K107, 388.45 was obtained in 1994. Another loan was obtained in 2006 for a sum of K46, 565.10. The plaintiff contradicted himself in cross-examination where the defendants' lawyer asked him about what he said in oral evidence that the loans were K80, 000.00 and K60, 000.00. He said, whatever he said in the Statement of Claim was correct.

42. On the Cross-Claim, there is evidence by the first defendant that, when she was in Australia in 2007, the plaintiff independently removed her from being a signatory to the Second Defendant's account. At the time the proceeding was instituted, the first defendant was no longer a signatory to the second defendant's account.

43. There is evidence that the plaintiff sold the second defendant's assets such as a portion of the property at Takubar referred to as Section 74, Allotments 20 and 21. He also sold two company vehicles. There is evidence that, the plaintiff now operates from the second defendant's company premises. These assets cost large sums of money and not only that, but the plaintiff and his company conduct business from the second defendant's premises.

44. In fact the court notes from the plaintiff's supplementary affidavit dated 18th October 2011Annexures "H" & "K" that the plaintiff obtained restraining orders from the District Court dated 14th July 2009 and 4th August 2009 not only restraining the first defendant and her associates from harassing, threatening, intimidation of any sort but she was also restrained and barred from entering the second defendant's offices and the whole premises.

Can the plaintiff claim for his unpaid entitlements?

45. The case before me is one involving two claims. One in the Amended Writ of Summons filed by the plaintiff and the other a Cross-Claim filed or made by the defendants.

46. The issue now is can the plaintiff claim for his unpaid entitlements which he claims for since 1994? As the court earlier alluded to on this judgment, according to the evidence both oral and written, there was no intention on the part of all parties for the plaintiff to be remunerated since the second defendant commenced business in 1994.

47. There is a cardinal rule of law which, I must adopt and apply to the circumstances of this case. The rule and practice in contract law says that the purpose of construction of the terms of a written contract is to discover from it the intentions of the parties to an agreement. So in law, the presumption is that the parties have intended what they have in fact said, so that their words must be construed and they must stand as intended: Curtain Bros (QLD) Pty Ltd v. The State (supra). The court must consider the meaning of the words used when the contract was formed and not what one may guess to be the intention of the parties.

48. Contents of a contract depend on the words used by the parties. Where a contract is in writing, there is a general rule that, the court will not look beyond what is contained in the writing to determine what its expressed terms are, unless there is extrinsic evidence to show otherwise. (See G.H. Treitel on "The Law of Contract" Fifth Edition at 134 and see also Fly River Provincial Government v Pioneer Health Services Limited (2003) SC705).

49. According to one of the conditions offered to the plaintiff on the letter dated 10th March 1994, and other consecutive contracts of employment, was that the plaintiff and his family were entitled to free accommodation, 4 weeks annual holidays after 12 months continuous service, free holiday fares and free airfares from PNG to Brisbane and back.

50. There was a second letter of 19th February 1999, the plaintiff was offered the position of Construction Manger. The plaintiff signed both documents. (See Ann. "A1" and "A2" on the plaintiff's supplementary affidavit dated 18th October 2011.)

51. On the issue of whether the plaintiff had any authority to deal with or access the second defendant's account and sell its assets, the court finds that there is no evidence from the plaintiff to substantiate his illegal dealings with the second defendant's assets or even to do withdrawals from the second defendant's account. For instance the court finds in the Ex. "G" of the first defendant's affidavit of 20th November 2011 that there was an amount of K280,000 withdrawn from the second defendant's account to the beneficiary named as "CLICON LIMTED, the plaintiff's company.

52. The court also finds from the defendants' evidence that another deal involving K300, 000.00 a large sum of money was also for the sale of a portion of Section 74 to Tropicana Limited. (See letter "M"). That was a letter from Tropicana Limited Accountant Mr. Bellre Gutierrez addressed to the Director of Clicon Limited and made attention to the plaintiff. There was another transaction as shown in letter "K" where an amount of K85, 000.00 was withdrawn from the second defendant's account again in favour of the plaintiff's company.

53. According to the First Defendant Cross-Claimant's evidence, she did not have the benefit of access to the second defendant's records to find out the exact amounts of money misappropriated by the plaintiff. The court finds that, the plaintiff has not proven his case on the balance of probabilities.

54. On the Defendants' Cross-Claim, there is evidence of gross mismanagement of the second defendant's assets and funds. It can be said from the evidence by the first defendant that the plaintiff unjustly enriched himself by using the second defendants' funds and assets.

55. There is evidence that, there was mediation conducted by Mr. John Reeves of Warner Shand Lawyers. Although the plaintiff said in his evidence that there was an agreement reached between him and the first defendant to wind up the second defendant, I find there are no records of any consensus agreement reached by the plaintiff and the first defendant for the plaintiff to own the second defendant. If that was so, why now claim against the second defendant?

56. It is now a usual practice for any Accredited Mediators to enter something agreed to or upon records in black and white for the parties' references. I find on the plaintiff's claim that the contracts of employment offered to him were a safe haven for the plaintiff creating his continuous work permit allowing him to continue his stay in the country.

57. I find that, the work permits granted to the plaintiff was like a "city of refuge" or safe haven for him to conduct his business until he set up his own company Clicon Limited. The court finds that, the plaintiff used BERABERANA CONSTRUCTION LIMTED to conduct business for his own company CLICON LTD under the pretext of the Second Defendant's name.

58. I also find that, the plaintiff commenced sales of the second defendant's assets and misappropriated large sums of monies from the second defendant's account and in fact, he ran Beraberana Limited down into bankruptcy. In my view it would be unjust to unjustly enrich the plaintiff and award anything in favour of the plaintiff's claim. I dismiss his claim in its entirety and order costs on the Amended Writ against the plaintiff to be taxed if not agreed.

59. On the Cross-Claim, the Court grants judgment in favour of the First and Second Defendants in the following terms:

1. The plaintiff shall pay to the two defendants all proceeds of sales of various assets in the value of K475, 630.00.
2. He shall pay for the outstanding rental payments for using the second defendant's premises to date.
3. He shall reimburse all monies withdrawn from the Second Defendant's accounts which is assessed at K896, 808. 93.
4. Damages for the First Defendant Cross-Claimant at K40, 000.00 and,
5. The costs of these proceedings shall be paid by the plaintiff to be also taxed if the parties do not agree.

_______________________________________________________________
Warner Shand Lawyers: Lawyer for the Plaintiff
Mirupasi Lawyers: Lawyer for the Defendants