Madang Cocoa Growers Export Co Ltd v Lange [2016] PGNC 8; N6161 (15 January 2016)

N6161

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1138 OF 2013

MADANG COCOA GROWERS EXPORT CO LIMITED
Plaintiff

V

BERNARD ALVIN LANGE, PROVINCIAL ADMINISTRATOR, MADANG
First Defendant

MADANG PROVINCIAL GOVERNMENT
Second Defendant

Madang: Cannings J
2015: 22 April, 2, 17, 22 June,
2016: 15 January

DAMAGES – assessment, after entry of default judgment – breach of contract – tort of conversion.

The plaintiff entered into a contract with the second defendant to lease the second defendant's warehouse, for use as a cocoa holding facility for its dried cocoa beans export business. The second defendant breached the contract by not allowing the plaintiff exclusive occupancy of the warehouse, and also committed the tort of conversion by allowing the plaintiff's goods and chattels inside the warehouse to be damaged, lost or stolen. The plaintiff sued for damages for breach of contract and conversion. The second defendant defaulted in compliance with the National Court Rules and default judgment on liability was entered against it. This was a trial on assessment of damages. The plaintiff sought five categories of damages: (a) loss of business, K4,439,960.00; (b) loss of profit, K5,170,210.00; (c) special damages, K551,556.00; (d) general damages, K500,000.00, (e) exemplary damages, K50,000.00, a total claim of K10,711,726.00, plus interest and costs.

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) loss of business, K100,000.00; (b) loss of profit, 0; (c) special damages, K51,556.00; (d) general damages, K50,000.00, (e) exemplary damages, 0, a total of K201,556.00.

(3) In addition, interest on the total amount of damages was awarded, calculated at the rate of 8% per annum from the date of service of the amended statement of claim to the date of judgment (a period of 1.7 years), a sum of K27,411.62, resulting in a total judgment sum of K228,967.62.

Cases cited

The following cases are cited in the judgment:

Desmond Guasilu v Enga Provincial Government (2012) N4774
Latham v Henry [1997] PNGLR 435
Madang Cocoa Growers Export Co Limited v Noilai Gunar and Gee Gunar and Madang Provincial Government (2013) N5324
Madang Cocoa Growers Export Co Ltd v Noilai Gunar (2013) N4956
Madang Cocoa Growers Export Co Ltd v Noilai Gunar, Gee Gunar & Madang Provincial Government (2012) N4703
Mark Ekepa v William Gaupe (2004) N2694
Misac Pokonoming v Jeffery Simiri (2007) N4978
Peter Kuriti v The State [1994] PNGLR 262
Rodao Holdings Ltd v Sogeram Development Corporation Ltd (2007) N5485
Steven Naki v AGC (Pacific) Ltd (2006) N5015
William Mel v Coleman Pakalia (2005) SC790

TRIAL

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

Counsel

S Asivo, with leave of the Court, for the Plaintiff
G Haumu, for the Defendants

15th January, 2016

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

2. The plaintiff, Madang Cocoa Growers Export Company Limited, entered into a contract with the second defendant, Madang Provincial Government, to lease the second defendant's warehouse, at Newtown, Madang, for use as a cocoa holding facility for its dried cocoa beans export business. The second defendant breached the contract by not allowing the plaintiff exclusive occupancy of the warehouse, and also committed the tort of conversion by allowing the plaintiff's goods and chattels inside the warehouse to be damaged, lost or stolen.

3. The plaintiff sued the first defendant, the then Provincial Administrator, Mr Bernard Lange, and the second defendant, for damages for breach of contract and conversion. The plaintiff filed an amended statement of claim on 29 April 2014. The second defendant defaulted in compliance with the National Court Rules and default judgment on liability was on 4 September 2014 entered against it.

4. This was a trial on assessment of damages. The plaintiff seeks five categories of damages: (a) loss of business, K4,439,960.00; (b) loss of profit, K5,170,210.00; (c) special damages, K551,556.00; (d) general damages, K500,000.00, (e) exemplary damages, K50,000.00, a total claim of K10,711,726.00, plus interest and costs.

PRELIMINARY POINT

5. Mr Haumu, for the defendants, made a preliminary submission that nothing should be awarded as the whole proceedings are res judicata (the dispute has already been decided). He referred to the decisions of this Court in Madang Cocoa Growers Export Co Ltd v Noilai Gunar, Gee Gunar & Madang Provincial Government (2012) N4703 and Madang Cocoa Growers Export Co Limited v Noilai Gunar and Gee Gunar and Madang Provincial Government (2013) N5324, which arose out of the same facts that are the basis of the present proceedings.

6. In those earlier decisions, which arose out of separate proceedings, OS No 297 of 2011, the Court declared that the plaintiff was the lawful occupant of the warehouse pursuant to the lease with the second defendant and that the second defendant without consulting the plaintiff allocated the warehouse to third parties (Gee Gunar and Noilai Gunar) who unlawfully entered the warehouse, removed the plaintiff's property and set up business there. The Court awarded the plaintiff K100,000.00 compensation.

7. Mr Haumu's submission is a fair one but I reject it as, despite the earlier proceedings and these proceedings arising out of the same facts, there is no complete commonality in the cause of action at the centre of the earlier case (which was treated as 'tantamount to conversion') and the causes of action at the centre of the present case (breach of contract and conversion). As the commonality of causes of action is one of the prerequisites to an action being labelled res judicata, and it is not entirely present here, the present proceedings are not res judicata and therefore not an abuse of process (Mark Ekepa v William Gaupe (2004) N2694). It would not be appropriate to award the plaintiff nothing.

DEFAULT JUDGMENT

8. 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 are clear, as are the causes of action relied on. So the question of liability will not be revisited.

9. Mr Asivo, who appeared with the leave of the court for the plaintiff, submitted that negligence is one of three causes of action in respect of which default judgment has been entered. I reject that submission and determine that there are only two causes of action on which damages will be assessed: breach of contract and conversion

10. Mr Asivo made another preliminary submission that requires comment. He submitted that the first defendant had conceded that the second defendant was liable in damages in excess of K8 million to the plaintiff and agreed to pay that amount, and also to pay the plaintiff's costs in the sum of K300,000.00. I entirely disregard that concession and any agreement that might have been made, as the first defendant was in no position to settle this claim. Evidence of such arrangements is irrelevant to the assessment of damages which will now be made on the merits of the case.

ASSESSMENT OF DAMAGES

(a) Loss of business, K4,439,960.00

11. The plaintiff claims that as a result of the breach of contract, it lost business of the value claimed, due to it being unable to supply dried cocoa beans. Its argument is that it could not supply the beans to the export market without a warehouse.

12. If a plaintiff claims damages for profits lost as a result of a breach of contract, the plaintiff bears the onus of proving on the balance of probabilities how those profits would have been earned (Steven Naki v AGC (Pacific) Ltd (2006) N5015). If a plaintiff claims that contracts had been entered into with other parties on the strength of the contract that has been breached, there should be clear evidence of the existence of such contracts, irrespective of whether they are in writing.

13. Here, the plaintiff argues that it entered into two types of export contracts, which it was unable to perform due to the breach of contract and the conversion of its assets: (1) contracts with Kumpulan Antarasuri Sdn Bhd and another company, of Malaysia, to the value of K2,087,960.00; and (2) a contract with Vigahs Traders Pte Ltd, of Singapore, to the value of K2,352,000.00.

14. As to (1) I am not satisfied that any contracts were entered into and I award nothing. As to (2), I find that there was a contract in place, however it is very doubtful on the available evidence that the plaintiff would have been able to perform it. Furthermore, I see no attempt being made by the plaintiff to mitigate its losses by finding an alternative warehouse.

15. However, it is not appropriate to award the plaintiff nothing. The plaintiff has secured a judgment in its favour and deserves an award of damages. Though the evidence is deficient, it does not follow, necessarily, that the plaintiff will be awarded nothing. The court will do the best it can on the evidence that is available (Misac Pokonoming v Jeffery Simiri (2007) N4978, Desmond Guasilu v Enga Provincial Government (2012) N4774). I award K100,000.00.

(b) Loss of profit, K5,170,210.00

16. The plaintiff claims this as a separate category of damages to the business losses claim in (a) above. However, I consider that this is a case of double dipping. The two claims are so similar that a zero award is warranted. I award nothing.

(c) Special damages, K551,556.00

17. This claim has two components: (1) K500,000.00 in 'grant assistance' as part of a 'pre-financing arrangement' with the plaintiff's buyers and (2) K51,556.00 for specific expenditure incurred in securing the export contract with Vigahs Traders Pte Ltd of Singapore.

18. I find no merit in the first component as the grant assistance was not a term of any contract put before the Court in evidence. I find merit in the second component, the claim for which is supported by the evidence. I award K51,556.00.

(d) General damages, K500,000.00

19. This claim has two components: (1) K50,000.00 on account of the plaintiff's frustration and inconvenience (2) K450,000.00 for pain and suffering caused to the plaintiff's staff.

20. As to (1), 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.

21. As to (2), this is not a proper claim as the second defendant has not been found to be liable in damages to the plaintiff's staff. I award nothing. The total award of general damages is K50,000.00.

(e) Exemplary damages, K50,000.00

22. The purpose of an award of exemplary damages is to punish the defendant and vindicate the distinction between a wilful and an innocent act (Latham v Henry [1997] PNGLR 435). The purpose is not to unjustly enrich a plaintiff, but to symbolise public indignation of the defendant's conduct (Peter Kuriti v The State [1994] PNGLR 262).

23. I acknowledge that there is an arguable case for an award of exemplary damages because of the protracted litigation that has occurred following the breach of contract. The first defendant and others were actually convicted of contempt of court and subject to punishment as a result of their disobedience of orders of the court in the previous proceedings, OS No 297 of 2011 (Madang Cocoa Growers Export Co Ltd v Noilai Gunar (2013) N4956). However, the second defendant was not convicted. As this judgment is an assessment of damages against the second defendant I conclude that an award of exemplary damages against it would not be proper. I award nothing.

Summary of assessment

24. The following amounts are awarded: (a) loss of business, K100,000.00; (b) loss of profit, 0; (c) special damages, K51,556.00; (d) general damages, K50,000.00, (e) exemplary damages, 0, a total of K201,556.00.

INTEREST

25. 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 amended statement of claim to the date of this judgment, a period of 1.7 years, by applying the formula D x I x N = A, where: D is the total amount of 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 K201,556.00 x 0.08 x 1.7 = K27,411.62.

COSTS

26. 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 the defendants have succeeded in convincing the court that only 1.88% (K201,556.00 out of the claim of K10,711,726.00) of its claim had merit; 98.12% of the claim was without merit. The parties will in these circumstances bear their own costs of the trial on assessment of damages. Other costs orders made in the course of the proceedings, including the order against the defendants in relation to entry of default judgment, remain in force.

ORDER

(1) The second defendant shall pay to the plaintiff a total amount of damages of K201,556.00 plus interest of K27,411.62, being a total judgment sum of K228,967.62.

(2) The first defendant is not liable in any respect and the proceedings against him are dismissed.

(3) The parties shall bear their own costs of the trial on assessment of damages.

(4) Other costs orders remain in force.

(5) The file is closed.

Judgment accordingly.

_________________________________________________________________
G Haumu, Provincial Legal Officer: Lawyer for the Defendants