N6160
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 207 OF 2012

BETWEEN:

WAGUVISA RESOURCE OWNERS GENERAL CO-OPERATIVE SOCIETY LTD
Plaintiff

V

JOHN KAMBUAL, MANAGING DIRECTOR
First Defendant

MADANG AGRO LTD
Second Defendant

Madang: Cannings J:
2014: 8 December And 2015: 22 April
2016:15 January

DEBT AND DAMAGES – Assessment – After entry of default judgment – Breach of contract – Contract for supply of cocoa beans for export. 

The plaintiff entered into a contract with the second defendant to supply dried cocoa beans for export. The second defendant, which had an export licence, would sell the dried beans to its overseas customers and, after deducting a commission for its services, pay the plaintiff. The plaintiff supplied the beans to the second defendant, which were exported and the second defendant received the proceeds of the sale, but failed to pass on the proceeds to the plaintiff, thereby breaching the contract. The plaintiff sued for the debt due and for damages for breach of contract. The defendants failed to file a defence and default judgment on liability was entered against them. This was a trial on assessment of debt and damages. The plaintiff sought four categories of relief: (a) debt of K253,110.00 in respect of the proceeds of sale; (b) general damages for breach of contract, K80,000.00; (c) general damages for loss of business, K1,500,000.00; and (d) operational costs of K164,320.00, a total claim of K1,997,430.00. 

Held:

(1)	The effect of the default judgment was that the facts and cause of action pleaded in the amended statement of claim are presumed to have been proven, and are only revisited if they do not make sense or would make an assessment of damages a futile exercise. Here, the facts pleaded were clear, as were the causes of action relied on, so the issue of liability was not reconsidered.

(2)	The Court awarded: (a) debt of K180,000.00; (b) K50,000.00 general damages; (c) zero for loss of business; (d) zero for operational costs, a total of K230,000.00.

(3)	In addition, interest on the total amount of debt and damages was awarded, calculated at the rate of 8% per annum from the date of service of the writ to the date of judgment (a period of 3.5 years), a sum of K64,400.00, resulting in a total judgment sum of K294,400.00.

 Cases cited

The following cases are cited in the judgment:

Coecon Ltd (Receiver/Manager Appointed) v National Fisheries Authority (2002) N2182
Hadley v Baxendale (1854) 9 Exch 341
Jeffery Balakau v Sir Arnold Amet (2013) N5313
Kumagai Gumi Co Ltd v National Provident Fund Board of Trustees (2006) SC837
Niugini Civil & Petroleum Ltd v West New Britain Development Corporation Ltd (2008) N3292
PNG Aviation Services Pty Ltd v Geob Karri (2009) SC1002
Rodao Holdings Ltd v Sogeram Development Corporation Ltd (2007) N5485
Tetley v The Administration (1971) No 647
Victoria Laundry v Newman [1949] 2 KB 528
William Mel v Coleman Pakalia (2005) SC790

TRIAL

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

Counsel

W Akuani, for the Plaintiff
B W Meten, for the Defendants

15th January, 2016 

1. CANNINGS J: This is an assessment of debt and damages for breach of contract, following entry of default judgment.

2. The plaintiff, Waguvisa Resource Owners General Co-operative Society Limited, entered into a contract with the second defendant, Madang Agro Ltd, to supply bags of dried cocoa beans for export. The contract provided that the second defendant, which had an export licence, would sell the dried beans to its overseas customers and, after deducting a commission for its services, pay the plaintiff. 

3. The plaintiff supplied 627 bags to the second defendant, 480 of which were exported to Singapore. The second defendant received the proceeds of the sale in November 2011, but failed, despite many requests, to pass on the amount due under the contract to the plaintiff within a reasonable time, thereby breaching the contract. 

4. The plaintiff sued the second defendant and its managing director for debt and for damages for breach of contract. The defendants failed to file a defence and default judgment on liability was entered against them. This was a trial on assessment of debt and damages. 

5. The plaintiff seeks four categories of relief: (a) debt of K253,110.00 in respect of the proceeds of sale; (b) general damages for breach of contract, K80,000.00; (c) general damages for loss of business, K1,500,000.00; and (d) operational costs of K164,320.00, a total claim of K1,997,430.00. 

6. The effect of the default judgment is that the facts and cause of action pleaded in the statement of claim are presumed to have been proven, and are only revisited if they do not make sense or would make an assessment of damages a futile exercise (William Mel v Coleman Pakalia (2005) SC790). Here, the facts pleaded were clear, as were the causes of action relied on, so the issue of liability has not been reconsidered.

ASSESSMENT OF DEBT AND DAMAGES

(a)	Unpaid debt

7. This is a claim for debt as distinct from damages. It is important to maintain that distinction (Kumagai Gumi Co Ltd v National Provident Fund Board of Trustees (2006) SC837, Niugini Civil & Petroleum Ltd v West New Britain Development Corporation Ltd (2008) N3292, Jeffery Balakau v Sir Arnold Amet (2013) N5313).

8. The plaintiff argues that it is owed K253,110.00. However, the amount pleaded in the amended statement of claim is K189,953.27. I regard that as the maximum that can be awarded. It has been proven that that is the amount that was received by the second defendant. From that sum is to be deducted the 5% commission the second defendant was entitled to under the contract. I will round out the amount assessed to K180,000,00. 

(b)	General damages for breach of contract 

9. The plaintiff claims general damages for pain and suffering, frustration and inconvenience of K80,000.00. It sounds unusual for a corporation to claim damages for its 'pain and suffering' but this is a valid claim. Whenever a corporation is the victim of a breach of contract it inevitably costs time and corporate energy coping with the consequences of the breach, so the plaintiff is entitled to be compensated in damages (Rodao Holdings Ltd v Sogeram Development Corporation Ltd (2007) N5485). I award K50,000.00. 

(c)	General damages: loss of business 

10. The plaintiff claims general damages for loss of business of K1.5 million. The argument seems to be that the plaintiff went out of business because of the breach of contract. The period of the contract was 18 months. So if the plaintiff had not gone out of business and the second defendant had performed the contract, the plaintiff would have earned K1.5 million. 

11. This is a vague claim, unsupported by the evidence. At this juncture, in view of the deficiencies in the evidence, it is appropriate to call upon some pertinent principles for assessment of damages for breach of contract:

•	The general principle that the purpose of an award of damages is to put the innocent party in the same position, as far as money can do, as if the guilty party had not committed a wrongful act, is qualified substantially: the innocent party only gets the amount of his actual losses that were reasonably foreseeable at the time the contract was formed.

•	What is taken to have been reasonably foreseeable at the time the contract was formed depends on two things: (a) the sort of knowledge that any reasonable person would be expected to have; and (b) knowledge of special circumstances outside the ordinary course of things.

12. Those specific principles emerge from the leading British cases on damages for breach of contract, Hadley v Baxendale (1854) 9 Exch 341 and Victoria Laundry v Newman [1949] 2 KB 528, which have been applied in PNG in, for example, Tetley v The Administration (1971) No 647, Coecon Ltd (Receiver/Manager Appointed) v National Fisheries Authority (2002) N2182 and PNG Aviation Services Pty Ltd v Geob Karri (2009) SC1002.

13. The defendants are not presumed to have the knowledge that their failure to pay the plaintiff would mean that the plaintiff's business would collapse. I find that the type of loss the plaintiffs is claiming was not reasonably foreseeable. It is too remote. Nothing is awarded.

(d)	Operational costs

14. The plaintiff claims operational costs of K164,320.00. This is another vague claim, too remote in nature to warrant an award of damages. I award nothing. 

Summary of assessment

15. The following amounts are awarded: (a) debt of K180,000.00 in respect of the proceeds of sale; (b) K50,000.00 general damages; (c) zero for loss of business; (d) zero for operational costs, a total of K230,000.00.

INTEREST

16. 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 will be calculated in respect of the period from the date of service of the writ to the date of this judgment, a period of 3.5 years, by applying the formula D x I x N = A, where: D is the total amount of debt and damages awarded, I is the rate of interest per annum, N is the appropriate period in numbers of years and A is the amount of interest. Thus K230,000.00 x 0.08 x 3.5 = K64,400.00.

COSTS

17. 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. I apply that rule of thumb here. The successful party will be awarded its costs.

ORDER

(1)	The defendants shall pay to the plaintiff a total amount of debt and damages of K230,000.00 plus interest of K64,400.00, being a total judgment sum of K294,400.00. 

(2)	The defendants shall pay the plaintiff's costs of the proceedings on a party-party basis which shall, if not agreed, be taxed.

 Judgment accordingly.

_________________________________________
William Akuani Lawyers: Lawyers for the Plaintiff
Meten Lawyers: Lawyers for the Defendants: