Nambawan Trophy Ltd v Telikom (PNG) Ltd [2017] PGNC 419; N7683 (17 January 2017)

N7683

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1161 of 2011

BETWEEN:
NAMBAWAN TROPHY LIMITED

Plaintiff

AND:
TELIKOM (PNG) LIMITED
Defendant

Waigani: Hartshorn J
2016: 19^th February
2017: 17^th January

Trial

Cases Cited:
Papua New Guinea Cases

Papua New Guinea Banking Corporation v. Jeff Tole (2002) SC694
Jacob Simbuaken v. Neville Egari (2009) N3824
Sogeram Development Corporation Ltd v. Robin Som (2014) N5874

Overseas Cases

British Home Assurance Corporation Ltd v. Paterson [1902] UKLawRpCh 121; [1902] 2 Ch. 404
Norman v. Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9
Scarf v. Jardine (1882) 7 AC 345
Tito v. Waddell [1977] Ch 106

Counsel:

Mr. M. Goodwin and Mr. B. Nutley, for the Plaintiff
Mr. N. Asimba, for the Defendant

17^th January, 2017

1. HARTSHORN J: Nambawan Trophy Limited (NTL) sues Telikom (PNG) Limited (Telikom) for breach of contract and/or negligence and claims damages. This concerns a Distributorship Agreement that was entered into between the parties on 19^th August 2008 (Distributorship Agreement).

2. NTL claims that Telikom breached the Distributorship Agreement and repudiated it, which NTL accepted, with NTL terminating the Distributorship Agreement effective from 10^th October 2010. Telikom denies NTL’s allegations and says that following the execution of the Distributorship Agreement, it underwent a corporate restructure of its business. Telikom’s mobile business was sold and the Distributorship Agreement was transferred to Black Dolphin Ltd on 13^th November 2008.

3. Telikom pleads that all of its contractual obligations and liabilities were assigned to Black Dolphin Ltd. This included Telikom’s mobile business licence which had authorised Telikom to carry on its mobile business.

4. Alternatively, Telikom pleads that the Distributorship Agreement is unenforceable as no statutory approvals and/or licences were given and/or obtained by NTL or Telikom as required by clauses 8(l) and 8(n) of the Distributorship Agreement.

5. Telikom also denies that there was any misrepresentation on its part.

6. In essence NTL claims that when Telikom purportedly assigned the Distributorship Agreement to Black Dolphin Ltd it failed to obtain NTL’s consent and failed to novate or assign the Distributorship Agreement correctly in any event.

Whether the Distributorship Agreement is enforceable

7. I consider the enforceability of the Distributorship Agreement first.

8. Telikom submits that it is not enforceable as various licences and approvals required by law and the Distributorship Agreement were not obtained.

9. NTL submits that this purported defence of Telikom cannot be relied upon by Telikom and the evidence presented in support of it, is inadmissible as Telikom has failed to plead this defence in its amended defence. Specifically NTL submits that Telikom should not be allowed to raise matters which are not pleaded. Therefore, paragraphs 10 to 15 of the affidavit of Mr. David Kulu are inadmissible. A notice of objection was filed by NTL to the use of Mr. Kulu’s affidavit and objection was taken to the admissibility of paragraphs 10 to 15, and 17 and 18 of his affidavit. This court reserved its decision on the question of the admissibility of these paragraphs.

10. Telikom submits as to the adequacy of its pleadings in its amended defence that by pleading lack of approvals and specifying clauses 8(l) and 8(n) of the Distributorship Agreement, that a sufficient foundation in its pleadings has been set for it to call evidence in regard to all approvals that it alleges should have been, but were not obtained.

11. In its amended defence at paragraph 11, Telikom pleads:

“Alternatively, the DA is unenforceable as no statutory approvals and/or licences were given and/or obtained by either parties as required by Clauses 8(l) and 8(n) of the DA.”

12. Order 8 Rule 14 National Court Rules is as follows:

“14. Matters for specific pleading. (15/13)

In a defence or subsequent pleading the party pleading shall plead specifically any matter, for example, performance, release, any statute of limitation, fraud, or any fact showing illegality—

(a) which he alleges makes any claim, defence or other case of the opposite party not maintainable; or

(b) which, if not pleaded specifically, may take the opposite party by surprise; or

(c) which raises matters of fact not arising out of the preceding pleadings.”

13. In Papua New Guinea Banking Corporation v. Jeff Tole (2002) SC694 Kandakasi J stated:

“The law on pleadings in our jurisdiction is well settled..... unless there is foundation in the pleadings of a party, no evidence.... of matters not pleaded can be allowed.”

14. In Jacob Simbuaken v. Neville Egari (2009) N3824, Davani J, after setting out Order 8 Rule 14 National Court Rules, stated that the reason that certain matters should be pleaded is to avoid surprises and to ensure that all issues that need to be raised are raised long before the matter progresses to trial. Further, each party must plead all the material facts on which he means to rely at the trial otherwise he is not entitled to give any evidence of them at the trial. As I stated in Sogeram Development Corporation Ltd v. Robin Som (2014) N5874, I respectfully agree with the above statements.

15. Order 8 Rule 14 National Court Rules requires that in a defence the defendant shall plead any matter which he alleges makes any claim not maintainable, or if not pleaded would take the plaintiff by surprise. If he does not so plead all material facts on which he intends to rely at trial, a defendant is not entitled to give any evidence of those facts at the trial.

16. As to the submission that the pleading by Telikom of lack of approvals as required by Clauses 8(l) and 8(n) is a sufficient foundation in its pleading for it to call evidence in regard to all approvals that it alleges should have been but were not obtained, Clauses 8(l) and 8(n) of the Distributorship Agreement are as follows:

“The Distributor shall (apart from other obligations specified under this agreement):

.......

(l) Ensure that it obtains at its own expense the appropriate Radio Dealers License and any other registrations and approvals required by law in the Territory in order to sell the Products, under Papua New Guinea law.

........

(n) Observe the provisions of the Independent Consumer and Competition Act 2000 and any other relevant legislation dealing with consumer protection and related subjects as they apply to the activities of the Distributor under this Agreement.”

17. From a plain reading of these clauses, I am satisfied that they are restricted to licences that are required to sell products in Papua New Guinea, and consumer protection obligations at law, and are not concerned with other statutory approvals such as under the Independent Public Business Corporation of Papua New Guinea Act (IPBC Act).

18. As Telikom has not pleaded in its amended defence any breach of the IPBC Act, it cannot rely on any breach of the IPBC Act as a defence to NTL’s claim and any evidence concerning alleged breaches of the IPBC Act is inadmissible. Consequently, the submission of Telikom that the Distributorship Agreement is unenforceable because of a failure to obtain approvals under the IPBC Act is rejected as there is not sufficient pleading and admissible evidence in that regard.

19. Telikom also submits that the Distributorship Agreement is unenforceable because of a failure to obtain approval under the Independent Consumer and Competition Act (ICCC Act). As referred to, Clause 8(l) makes reference to the ICCC Act. Specific reference is made in submissions by Telikom to s. 70 and s. 50 ICCC Act.

20. A perusal of s. 70 ICCC Act reveals that a person may apply for authorization. It is not a mandatory requirement. A perusal of s. 50 ICCC Act reveals that it is not a section under which an approval or licence can be given or obtained.

21. Consequently the submission of Telikom that the Distributorship Agreement is unenforceable as statutory approval and/or licences required by sections 70 and 50 ICCC Act were not obtained fails as s. 50 does not provide for an approval or licence to be given and s. 70 does not make it mandatory that an approval under that section is required.

Clause 17, Distributorship Agreement

22. Notwithstanding that it is pleaded in its amended defence, counsel for Telikom in oral submissions informed the court that Telikom was no longer relying upon or raising a defence based on clause 17 of the Distributorship Agreement and in written submissions Telikom submits that it does not take issue on the application and the effect of clause 17 of the Distributorship Agreement. Consequently I shall not consider this defence.

Effect of the transfer of the Distributorship Agreement by Telikom to Black Dolphin Ltd

23. Telikom pleads that as at November 2008, it has absolutely and unconditionally assigned all its benefits and obligations, including the Distributorship Agreement under its licence to Black Dolphin Ltd and “a notice pertaining to the same was given as well.”

24. Telikom submits that it has properly transferred all of its obligations under the Distributorship Agreement to Black Dolphin Ltd and to Bemobile pursuant to the provisions of a Business Transfer Agreement as at 13^th November 2008.

25. Telikom then goes on to submit that as to the evidence of NTL that Telikom attempted to properly assign and or novate the Distributorship Agreement to Bemobile but Bemobile refused to participate in the transfer process, Telikom should not be held responsible for Bemobile’s actions. Further, in its conclusion to its written submissions, Telikom submits that all obligations under the Distributorship Agreement were properly transferred to Bemobile save that Bemobile failed to complete the transfer process and Telikom should not be held responsible for this.

26. As to the purported transfer, NTL submits that the evidence shows that Telikom failed to affect the transfer of the Distributorship Agreement at all.

27. In any event submits NTL, Telikom cannot avoid its obligations under the Distributorship Agreement on the basis that it assigned its benefits and obligations under the business transfer agreement with Bemobile Ltd, formerly Black Dolphin Ltd. This is contrary to the principles of assignment and novation under contract law, it is submitted.

28. NTL refers to the following cases:

a) In Norman v. Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9 at 26, Windeyer J states:

“Assignment means the immediate transfer of an existing proprietary right, vested or contingent, from the assignor to the assignee.”

b) In Scarf v. Jardine (1882) 7 AC 345, the term novation was defined by Lord Selborne LC at 351:

“...... “ novation,” which as I understand it means this - the term being derived from the Civil law - that there being a contract in existence, some new contract is substituted for it, either between the same parties (for that might be) or between different parties; the consideration mutually being the discharge of the old contract.”

29. Further, NTL submits that there is a settled common law principle that a party cannot avoid its obligation under a contract by merely transferring it to a third party or another partner. This principle was referred to by Farwell J in the English case of British Home Assurance Corporation Ltd v. Paterson [1902] UKLawRpCh 121; [1902] 2 Ch. 404. His Honour stated at p 409:

“I take the law as stated in Lindley on Partnership, 6^th ed. P246: “In order that one liability may be extinguished by being replaced by another by agreement, it is essential that the person in whom the correlative right resides should be a party to the agreement, or should, at all events, shew by some act of his own that he exceeds to the substitution. If A., being indebted to B., transfers his liability to C., and B., does not assent to the transfer, his rights are wholly unaffected: he will neither acquire any right against C., nor lose his former right against A.”

30. It is submitted that pursuant to this principle Telikom cannot avoid its obligations under the Distributorship Agreement by transferring it to Bemobile Ltd without the consent of NTL. Any transfer of Telikom’s rights and obligations under the Distributorship Agreement to Bemobile Ltd should have been by consent of all parties. This principle was referred to in Tito v. Waddell [1977] Ch 106. At pages 285 to 289 Megarry VC said:

“Halsbury’s Laws of England, 4^th ed. Vol 9 (1974) p403 sufficiently supports the proposition that consent to a novation may be inferred from conduct, though it also shows that there must be an intent to act a novation.”

and further on:

“Novation is the substitution of a new contract for an old by the agreement of all parties to the old and the new;.....”

31. NTL claims that it was not notified of any intention by Telikom to transfer its rights and obligations under the Distributorship Agreement to Bemobile Ltd. NTL became aware of the transfer through the media and upon its enquiries after the supply of Telikom’s products under the Distributorship Agreement were stopped. There was neither consent nor intention on the part of NTL to any transfer of Telikom’s obligations under the Distributorship Agreement.

32. In fact, it is submitted, that Telikom admits that it had a duty to ensure that NTL’s rights under the Distributorship Agreement were properly assigned or novated in the sale to Black Dolphin Ltd, and that it failed or neglected to do so in the transfer. In its letter to Bemobile Ltd, formerly Black Dolphin Ltd, dated 4^th August 2009, in evidence, Telikom states that it is obliged to novate, and thereafter Bemobile accept, all rights and obligations under the contracts listed in schedule three of the Business Transfer Agreement, which includes the Distributorship Agreement.

33. Telikom further admits that NTL’s Distributorship Agreement has not been novated yet, as Telikom failed to include it in schedule 3 of the Business Transfer Agreement. Telikom then attempts to enter into a separate agreement with Bemobile Ltd to cure the defect.

34. It is submitted that this constitutes an express admission that Telikom failed to protect the rights of NTL under the Distributorship Agreement by attempting to have the Distributorship Agreement transferred or novated to Bemobile Ltd under the Business Transferred Agreement without NTL’s consent. This is a clear breach of the Distributorship Agreement it is submitted. This breach constituted a repudiation of the Distributorship Agreement which was accepted by NTL, and the Distributorship Agreement was terminated by NTL as a consequence.

35. Telikom’s claim in its amended defence that it has absolutely and unconditionally assigned all of its benefits and obligations in the Distributorship Agreement under its licence to Black Dolphin Ltd is simply incorrect it is submitted. Telikom clearly admits it failed to affect the transfer, and in so doing denied NTL the benefit of the Distributorship Agreement, directly in breach of the Distributorship Agreement. This mistake by Telikom denied NTL the benefit of the Distributorship Agreement resulting in loss and damage in being unable to perform and gain the benefits of the Distributorship Agreement.

36. NTL submits that its right to claim for damages against Telikom for breach of contract was never extinguished by the Business Transfer Agreement between Telikom and Bemobile Ltd, formerly Black Dolphin Ltd. Telikom is liable to NTL for the breach and repudiation of the Distributorship Agreement and for its misrepresentations to NTL inducing it to enter into the Distributorship Agreement.

37. From a consideration of the evidence, and the submissions of NTL and Telikom, I am satisfied that NTL has properly established that Telikom breached the Distributorship Agreement as pleaded in NTL’s statement of claim, that its right to claim for damages against Telikom was not extinguished by the Business Transfer Agreement between Telikom and Bemobile Ltd, formerly Black Dolphin Ltd, and that Telikom is liable to NTL for the breach and repudiation of the Distributorship Agreement. Given this it is not necessary to consider the other submissions of counsel.

Orders

38. The Court orders that:

a) Judgment is entered for the plaintiff against the defendant with damages to be assessed;

b) The plaintiff’s costs of and incidental to this proceeding shall be paid by the defendant to be taxed if not otherwise agreed;

c) Time is abridged.

____________________________________________________________
O’Briens Lawyers: Lawyers for the Plaintiff
Western Pacific Lawyers: Lawyers for the Defendant