Kapipi v Andu [2015] PGNC 241; N6125 (8 October 2015)

N6125

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 88 of 2012

BETWEEN:

AGNES KAPIPI
Plaintiff

AND:

ANDREW ANDU
Defendant

Waigani: Hartshorn J
2014: 10th November
2015: 8th October

Assessment of damages

Cases cited:

Frank Onga v. The General Manager Engineering Management Pty Ltd (2003) N2321
Obed Lalip v. Fred Sikiot and The State (1996) N1457
Pama Anio v. Aho Baliki (2004) N2719
PNG Nambawan Trophy Ltd v. Tuban Investments Ltd (2009) N5349
William Mel v. Coleman Pakalia & Ors (2005) SC790

Counsel:

Ms. A. Waviha, for the Plaintiff

8th October, 2015

1. HARTSHORN J: This is an assessment of damages following the entry of default judgment.

Background

2. The plaintiff seeks reimbursement of funds that she paid as guarantor to Finance Corporation Ltd (Fincorp) on behalf of the defendant. After the plaintiff had paid Fincorp the sum of K34, 557.12 in settlement of the amount owing by the defendant to Fincorp, the defendant undertook to repay to the plaintiff the amount that she had paid to Fincorp, by instalment, together with default interest. The defendant did not honour his undertaking and the plaintiff commenced this proceeding in February 2012 seeking judgment against the defendant. Default judgement was entered against the defendant with general and special damages to be assessed, on 6th November 2012.

Assessment of damages – law

3. The Supreme Court in William Mel v. Coleman Pakalia & Ors (2005) SC790 stated:

"The principles that apply to a trial on assessment of damages following entry of default judgment were summarised by Kandakasi J. in Coecon Ltd (Receiver/Manager Appointed) v National Fisheries Authority (2002), National Court, N2182.

His Honour stated:

A survey of the authorities on assessment of damages after entry of judgment on liability mainly in default of a defendant's defence, clearly show the following:

1. The judgment resolves all questions of liability in respect of the matters pleaded in the statement of claim.

2. Any matter that has not been pleaded that is introduced at the trial is a matter on which the defendant can take an issue on liability.

3. In the case of a claim for damages for breach of contract as in this case, such a judgment confirms there being a breach as alleged and leaves only the question of what damages necessarily flow from the breach.

4. The plaintiff in such a case has the burden to produce admissible and credible evidence of his alleged damages and if the Court is satisfied on the balance of probabilities that the damages have been incurred, awards can be made for the proven damages.

5. A plaintiff in such a case is only entitled to lead evidence and recover such damages as may be pleaded and asked for in his statement of claim.

The Supreme Court adopted and applied those principles in Papua New Guinea Banking Corporation v Jeff Tole (2002) SC694, Amet CJ, Sheehan J, Kandakasi J.

Kandakasi J. applied those principles recently in the National Court in Desmond Huaimbukie v James Baugen (2004) N2589. We believe His Honour succinctly and correctly stated the law. We elaborate on the first principle by saying that once default judgment is entered, the facts as pleaded and their legal consequences in terms of establishing the cause of action as pleaded must be regarded as proven. (See Keith Reid v Murray Hallam and Allcad Pty Ltd (1995) N1337, National Court, Kapi DCJ and Andale More and Manis Andale v Henry Tokam and The State (1997) N1645, National Court, Injia J.)........................

Turning back to the issue raised above as to the role of the trial judge after entry of default judgment, we consider the following to be the correct approach:

the trial 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."

4. Reference is also made to the following passage from the judgment of Kandakasi J. in Frank Onga v. The General Manager Engineering Management Pty Ltd (2003) N2321:

"As noted in Coecon Limited (Receiver/Manager Appointed) vs. The National Fisheries Authority of Papua New Guinea and The Independent State of Papua New Guinea (supra), a plaintiff can discharge his burden of prove (sic) by calling credible evidence. If he is able to do that in relation to what he alleges then, there is no reason why there should (not) be a finding in his favour unless, the defendant is able to rebut it by other credible evidence. Apparent in this is the fact that, once a plaintiff establishes his case on the balance of probabilities, the burden then shifts to the defendant to rebut it. If the plaintiff (sic) (defendant) fails to discharge that burden, it is open to the Court to act on the evidence of the plaintiff."

The claim

5. From a perusal of the statement of claim it is accepted as proved that:

a) the defendant applied for a personal loan of K 20,000.00 from Fincorp, the defendant used the plaintiff as guarantor, the amount that the plaintiff was required to pay Fincorp was K 34,000.00 and the plaintiff as guarantor paid K34,557.12 to Fincorp.

b) the defendant in a statutory declaration dated 8th March 2008 gave an undertaking to repay the sum of K34,557.12 to the plaintiff by paying a monthly instalment of K1,500.00 beginning on 30th June 2008 and ending on 30th June 2010 and upon default the defendant agreed to pay 30% accumulative interest on the outstanding balance.

c) the defendant has defaulted in making payment.

The undertaking to repay the plaintiff

6. It is pleaded in paragraph 8 of the statement of claim that:

" ..... the Defendant... made an undertaking to the Plaintiff to repay the sum of K34,557.12 by paying her on (sic) instalment a sum of K1,500.00 per month beginning of (sic) 30th June 2008 and ending on 30th June 2010 and upon default the Defendant agreed to pay 30% accumulative interest on the outstanding balance. However, the Defendant has defaulted in completing the repayments as per his promise and (from 30th June 2008 to 30th June 2012), the outstanding amount has accumulated to K456, 153.72.

Particulars

Loan Amount Paid by the Plaintiff = 34,557.12 ie the outstanding balance.

Default Charges 30% accumulative interest charge on outstanding balance.

= 30% x K34, 557.12 = K10, 367.13 per month for 44 months (June 2008 to December 2011) = K456.153.72"

7. A copy of the statutory declaration in which the undertaking is contained, is in evidence. It does state that amongst others, "upon default, 30% accumulative interest on the outstanding balance will be charged."

8. It does not state that the outstanding balance is K34, 557.12 and it does not state that 30% will be charged after every non-payment of K1, 500.00.

9. Upon my reading of the statutory declaration, 30% accumulative interest will only be charged on the outstanding balance if there is a default. As it has been agreed that payment is to be made by instalment, an outstanding balance arises when an instalment is not paid. So if the first instalment is not paid, the sum of K1, 500.00 is owing and is the outstanding balance at that time. There is no provision for any other interest to be charged. So if the agreed instalments had all been paid on time, the defendant in total would have paid 25 payments of K1, 500.00 = K37, 500.00 and no interest would have been charged.

10. The effect of the calculation in the pleading and particulars in paragraph 8 of the statement of claim is that the defendant pays interest at an effective rate of about 156% per annum, not 30% per annum. This is an exorbitantly high interest rate, especially when no interest would be charged if the instalments were made on time.

11. After giving consideration to the above, I am of the view that the factual scenario as pleaded and particularised in paragraph 8 of the statement of claim does not make sense: William Mel (supra). I also refer in this regard to the case of Obed Lalip v. Fred Sikiot and The State (1996) N1457, a decision of Injia J. (as he then was) where he said:

"If the evidence and pleadings are confusing, contradictory and inherently suspicious, the plaintiff will not discharge the onus of proving his losses on the balance of probabilities. It is conceivable that such a plaintiff will be awarded nothing."

This passage was cited with approval by the Supreme Court in William Mel (supra).

12. I am mindful of the following passage from Chitty on Contracts, volume 1, General Principles, 28th ed. at page 271, to which I referred in PNG Nambawan Trophy Ltd v. Tuban Investments Ltd (2009) N5349 as to the calculation of damages for breach of contract:

"Damages for a breach of contract committed by a defendant are compensation to the claimant for the damage, loss or injury he has suffered through that breach. He is, as far as money can do it, to be placed in the same position as if the contract had been performed. This implies a "net loss" approach in which the gains made by the claimant as a result of the breach (e.g. savings made because he is relieved from performing his side of a contract which has been terminated for breach; savings in taxation; benefits obtained from partial performance; or the salvage value of something left in his hands) must be set off against his losses arising from the breach (after he has taken reasonable steps to minimise those losses)."

13. With this passage in mind, I will award interest on the basis of it being 30% per annum and on the total of instalments not paid at the end of each period of 12 months as follows:

30/6/08 – 30/5/09, 12 instalments outstanding = 18,000 x 30% = 5,400 = 23,400.

30/6/09 – 30/5/10, 12 instalments outstanding = 18,000 + 23,400 = 41,400 x 30% = 12,420 = 53,820.

30/6/10 – 30/5/11, 1 instalment outstanding = 1,500 + 53,820 = 55,320 x 30% = 16,596 = 71, 916.

30/6/11 – 30/5//12, 71,916 x 30% = 21,574.80 = 93,490.80.

30/6/12 – 6/11/12, 93,490.80 x 30% for 129 days = 9,912.50 = 103,403.38.

14. Interest will then be calculated at 8% per annum on the sum of K103, 403.38 from the date of judgment until payment, as claimed in the statement of claim.

Special damages

15. The plaintiff also claims special damages. These consist of the cost of airline tickets, car hire, accommodation, transport and stationery incurred in travelling from Australia to Port Moresby in attempts to have the defendant pay what he owed to the plaintiff and by the plaintiff in attempting to pursue her case against the defendant. The amounts claimed total K544, 923.32.

16. Special damages are limited in the same way as general damages. It must be reasonably foreseeable to the defendant that the special damages claimed would be likely to follow the breach. Further, the special damages sought should have been incurred as a direct result of the breach - in this instance, the failure to pay the instalments on time. The special damages sought are merely costs that the plaintiff has decided to incur. They do not fall within the scope of special damages and consequently are refused.

17. The plaintiff also seeks "Personal Damages" of K900, 000.00. The plaintiff seeks these damages for pain, hardship and suffering. This claim has not been specifically sought in the statement of claim and so the plaintiff is not entitled to it. Further, I refer to the case of Pama Anio v. Aho Baliki (2004) N2719, in which Kandakasi J. expressed the view that for claims for damages for distress and frustration, there should be proof of damage or the negative mental or physical impact on the claimant, by appropriate medical or other evidence. I respectfully agree with His Honour's comments. In this instance there is no medical evidence or to my mind, other sufficient evidence.

18. Consequently, the plaintiff is entitled to the sum of K103, 403.38 as referred to, together with interest at 8% from the date of judgment, and costs.

Orders

19. The Orders of the Court are:

a) Judgement is ordered for the plaintiff against the defendant in the sum of K103,403.38 together with interest in the sum of 8% per annum from 6th November 2012 on that amount or any amount remaining, until payment of that amount and interest in full;

b) the defendant shall pay the plaintiff's costs of and incidental to this proceeding on a party to party basis to be taxed if not agreed;

c) time is abridged.

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Waviha Lawyers: Lawyers for the Plaintiff