Sea Horse (PNG) Ltd v Harry (trading as Hans Marine Products) [2021] PGNC 23; N8770 (26 February 2021)

N8770

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1746 OF 2019

BETWEEN
SEA HORSE (PNG) LIMITED
Plaintiff

AND
HANS HARRY TRADING as Hans Marine Products
Defendant

Waigani: Thompson J
2021: 19^th February
2021: 26^th February

CONTRACT- breach of agreement – need to identify terms –proof of loss -damages – requirement for pleading to be proven by evidence

Counsel:

Mr S. Wanis, for the Plaintiff

26^th February, 2021

1. THOMPSON J: The Plaintiff issued proceedings against the Defendant, claiming various types of damages for breach of an agreement entered into between the parties on 3 June 2017. It was alleged that, by this agreement, the Plaintiff would provide monies to the Defendant to enable him to purchase sea cucumber/bech-de-mer (bdm) pursuant to his Sea Cucumber Exporting Licence, and deliver that bdm to the Plaintiff, who would pay him K40.00 per kilogram. It was alleged that the Plaintiff paid K500,000.00 to the Defendant, but only K400,000.00’s worth of bdm was provided by the Defendant, who then subsequently seized the entire consignment, together with the Plaintiff’s mobile phone. It was alleged that the Defendant later returned 2.4 tonnes of bdm of low quality, and that the Defendant retained 1.4 tonnes of high quality bdm, which he then sold to a third party at a significant profit. It was not entirely clear from the pleadings, but the Plaintiff appeared to be claiming that its loss comprised K100,000.00 cash provided to purchase bdm which was not purchased, plus K400,000.00 for the bdm taken by the Defendant and sold.

2. The Plaintiff also claimed unspecified damages for loss of business, and general damages, together with interest and costs.

The Agreement

3. The essential elements of a binding contract, are that each party has the intention to be bound by the terms which have been offered and accepted, and that usually, the agreement was supported by consideration. As the court said in Steven Naki v AGC (Pacific) Ltd [2005] PGNC 163, the test is: Did one party make a clear and precise offer, accepted by the other party; would a reasonable person conclude that the parties had reached agreement on the terms; and did the parties give their final consent to terms by which they were content to be bound as a complete statement of their rights and liabilities?

4. Although the Defendant had filed and served a Defence and Cross-Claim, he filed no affidavit evidence, and did not appear at the hearing.

5. The agreement was said to be contained in a Memorandum of Agreement (“MOA”) a copy of which was annexed to the Plaintiff’s director’s affidavit. The MOA had been signed by the Defendant, which was described in the document as a company which would be signing by affixing the Common Seal, which was not done. However, the Defendant had been pleaded to be a registered business name, in which case, no seal could be affixed. The Plaintiff was pleaded to be a duly incorporated company, but it was only signed by one director, without a Common Seal, and the signature was not witnessed.

6. I accept the Plaintiff’s submission that, although the MOA had not been validly signed by the Plaintiff, the terms were accepted by the Defendant, and it evidenced the essential terms of the agreement reached between the parties, orally and by conduct.

7. The Plaintiff pleaded that the Defendant’s conduct was a breach of clause 5.3.4 of the MOA, which was as follows:

“All aspects of achieving quality relationship outcome including mutual AGREEMENT and respect, relationship assessment system, courtesy measures and rules, these and all other important relationship factors and parameters shall be employed and practised between both parties to ensure success of the objective of this MOA is accomplished. Defaulting party shall bear all risks and associated costs.”

8. It was difficult to know what this clause meant, other than that the parties agreed to show respect and courtesy in achieving a successful business arrangement.

9. Clause 6.3 of the MOA provided that the Plaintiff would provide the Defendant with the “required sum needed to purchase sea cucumber from the local market”, the Defendant would bring it to the storage area and dry it while awaiting export, and once a certain volume had been reached, the Defendant would tell the Plaintiff who would then pay him K40.00 per kilogram. It also provided that the Defendant would not be entitled to the export earnings of the bdm other than as specified in the MOA. No other entitlement was specified.

10. The MOA was silent on the types of quality bdm which was to be purchased and brought to the storage area for export. It was also silent on any differences in price to be paid according to the quality of the bdm. No evidence was given by the Plaintiff on either of these matters.

11. The statement of claim makes some conflicting statements, including in para 11 which pleads that K400, 000.00 was paid by the Plaintiff to the Defendant to purchase 5 tonnes of bdm, while para 25 says that the Plaintiff paid the total of K328,260.00 to the Defendant. These figures were also not consistent with the Plaintiff’s affidavit in which it was said that K500,000.00 had been paid for the purchase of 5 tonnes of bdm.

12. The Plaintiff’s director said that K500,000.00 cash was paid by the company to the Defendant between 4 May and August 2017. He produced copies of a deposit slip and some voucher documents which broadly showed (such as a payment to “Hans Harry wife”, unsigned) that K328,269.00 had been paid to the Defendant, although the documents did not show who had made the payments. K43,300.00 of this was paid before 3 June 2017, when the MOA was signed by the Defendant. He said that a further K171,731.00 in cash was also paid by the company to the Defendant, for which there were no vouchers or receipts or other records.

13. The Defendant had denied receiving these payments, and pleaded that it had only received K160,000.00.

14. The Plaintiff gave no explanation for how it knew that a further K171,731.00 was paid in cash to the Defendant. It is a very specific figure, and yet no bank records or other documents were produced to show from where that figure had been obtained, other than by rounding it up to make K500,000.00.

15. The onus is on the Plaintiff to support its pleading by evidence, on the balance of probabilities, particularly where the payments were denied by the Defendant. Where such large sums of money are involved, it would be reasonable to expect the Plaintiff to be able to produce accounts, financial statements, receipts and bank records as evidence. However, the only documents produced were some vouchers and one bank deposit slip, none of which even showed the Plaintiff’s name.

16. I can accept the Plaintiff’s director’s evidence as sufficient to show that it was the company which made the payments referred to in the vouchers and deposit slip. However, in the absence of supporting evidence, I cannot be satisfied that the other payments have been established.

17. I accept that the Plaintiff’s evidence is just sufficient to show on the balance of probabilities that it paid K328,269.00 to the Defendant.

18. The Plaintiff said that the amount of K500,000.00 was sufficient to purchase 5 tonnes of bdm, and as only 4 tonnes were provided, the Defendant had failed to purchase one tonne of bdm, resulting in a loss to the Plaintiff of K100,000.00. The Defendant had denied this, and although his Defence is partly incomprehensible, it appeared that he was asserting that he initially supplied almost 4 tonnes.

19. The Plaintiff said that after the 4 tonnes had been received, the Defendant then seized it all, but after subsequent meetings, returned 2.4 tons. The Plaintiff said that this second delivery comprised only low and medium value bdm, whereas the original 4 tonnes had comprised high-value bdm.

20. In his affidavit, the Plaintiff’s director identified three types of bdm – high, medium and low-value bdm. He also said that the 2.4 tonnes which were returned by the Defendant, was a mixture of medium and low-value bdm.

21. The Plaintiff’s driver said that he had weighed the returned consignment, which was 2.4 tonnes, and it was low and medium value bdm.

22. The Plaintiff did not give evidence that it had requested only high-value bdm, or that the original consignment of 4 tonnes was high-value bdm. It was submitted that it should be inferred from the evidence that either it was an implied term of the agreement that the bdm be only of high quality, or that the Plaintiff had made known to the Defendant that it only required high-value bdm. The Plaintiff submitted that these implications were supported by the fact that the Defendant did not assert in his defence that he was entitled to supply low-value bdm, and on the contrary he pleaded that all the sea cucumber which was delivered to the Plaintiff, was of high-value. It was also submitted that when the original consignment was assessed, the Plaintiff made no complaint that any of it was low-value.

23. In the absence of any rebutting evidence, I accept that it was an implied term of the agreement that the Plaintiff had requested high-value bdm.

24. The Plaintiff said that the Defendant retained 1.4 tonnes of high and medium-value bdm. If the Defendant had taken 4 tonnes, returned 2.4 tonnes, and retained 1.4 tonnes, the Plaintiff does not say what happened to the difference of 0.2 tonnes.

25. I accept that the Plaintiff’s evidence is sufficient to establish on the balance of probabilities that the original consignment was 4 tonnes of high-value bdm, which was seized by the Defendant, and that 2.4 tonnes of low and medium value bdm was subsequently delivered by him.

26. The Plaintiff has therefore shown that it gave K328, 269.00 to the Defendant for the purpose of purchasing high-value bdm but the Defendant only provided 2.4 tonnes of low and medium value bdm.

27. It may be concluded that this amounted to a breach of clause 5.3.4 of the MOA for the respectful and courteous measures for ensuring success of the business. I prefer to proceed on the basis that it was a breach of the particular agreement reached between the parties arising out of the payment of K328,269.00 for the purchase of high-value bdm.

Loss and Damages Claims

28. This raises the next issue, of the loss suffered by the Plaintiff as a result of the breach.

29. In para 18 of his affidavit, the Plaintiff’s director says that he “heard” from “local oral sources” that the Defendant had sold the 1.4 tonnes of high-value bdm for K400, 000.00. This was clearly hearsay, and no weight could be attached to it.

30. The Plaintiff gave no evidence of the value of the low and medium value bdm. The Plaintiff gave no evidence of the sale price it received for the 2.4 tonnes of low and medium value bdm which it had received in the second consignment.

31. In the statement of claim, the Plaintiff pleaded that it had invested K800,000.00 in the business (para 25a), paid K328,260.00 to the Defendant (para 25 b), the Defendant delivered bdm worth K400,000.00 but seized it back and sold it (para 25 c), and that the Defendant had kept K100,000.00 for his own use (para 25 d). The Defendant then claimed “specific liquidated damages in the sum of K500, 000.00” together with loss of business and general damages.

32. I am unable to properly reconcile the figures in the statement of claim and in the Plaintiff’s affidavit evidence.

33. It was submitted that the overall effect of the Plaintiff’s affidavit evidence was that one tonne of high-value bdm cost K100,000.00 to purchase. (It is not clear how this relates to the purchase price to be paid by the Plaintiff to the Defendant under clause 6.3 of the MOA, of K40,000.00 per tonne). If this was accepted, then if the Plaintiff had given K500,000.00 to the Defendant, it was entitled to receive 5 tonnes of high-value bdm.

34. However, I am not satisfied that the Plaintiff gave K500,000.00 to the Defendant. It has only shown that it gave K328,260.00. Applying the same price formula, the Plaintiff was entitled to receive 3.28 tonnes of high-value bdm. It eventually only received 2.4 tonnes of low and medium value bdm. The Plaintiff gave no evidence of the value of these 2.4 tonnes. The Plaintiff’s loss would appear to be the 1.6 tonnes of high-value bdm which was taken and not returned, plus the difference in price between the high-value of the 2.6 tonnes taken and the low and medium value of the 2.4 tonnes returned.

35. As the Plaintiff gave no evidence of the price of the low or medium value bdm, I am unable to accurately assess the loss sustained by being provided with low and medium value instead of high-value.

36. As the Plaintiff did not show that it had paid K500,000.00 to the Plaintiff to purchase 5 tonnes, I am unable to find that delivery of 4 tonnes was a breach of the agreement, or that K100,000,00 was missing.

37. I am able to find that the Defendant took 4 tonnes of high-value bdm from the Plaintiff and only returned 2.4 tonnes of low and medium value bdm. Applying the formula of K100,000.00 per tonne of high-value bdm, would mean that the Plaintiff only asked for either 3.28 tonnes of high-value bdm, or 4 tonnes of mixed-value bdm. On these figures, K328,269 was not sufficient to purchase 5 tonnes of high-value bdm. There was no evidence of how many tonnes of medium or low-value bdm could be purchased for this amount.

38. Para 18 of the Plaintiff’s affidavit referred to the 1.4 tonnes of high-value bdm being worth K400,000.00. This was inconsistent with the formula that one tonne of high-value bdm cost K100,000.00, and inconsistent with the price in the MOA of K40,000.00 per tonne. The Plaintiff’s lawyer submitted that this was because the final overseas export price was 3 or 4 times the local purchase price. This was not in evidence, and had to be disregarded. The entire contents of para 18 of the affidavit were, in any event, hearsay.

39. It would only be reasonable to accept an inference that K100,000.00 was missing, if the Plaintiff could show that the bdm cost K100,000.00 per tonne, and that it paid K500,000.00 for it. The Plaintiff showed neither. It only showed that it paid K328,269.00.

40. I conclude that:

1. the Plaintiff has shown that it paid K328, 269.00 to the Defendant for the purchase of high-value bdm.
2. it is a reasonable inference that this was sufficient to purchase 4 tonnes of high-value bdm, because that was the quantity delivered originally by the Defendant. On this basis, it cost about K80,000.00 per tonne for the high-value bdm, which was inconsistent with the purchase price of K40,000.00 per tonne in the MOA.

100. the Defendant took the 4 tonnes of high-value bdm away, and then delivered 2.4 tonnes of medium and low-value bdm, of which the purchase price is unknown.

4. the Plaintiff was deprived of 1.6 tonnes of high-value bdm of an uncertain price, and deprived of the difference in price between the 2.4 tonnes of high-value bdm taken and the 2.4 tonnes of medium and low-value bdm subsequently received.

41. While it is obvious that the price of medium and low-value bdm would be lower than the price of the high-value bdm, there was no evidence to enable this court to determine the actual amount of that price difference.

42. The Plaintiff gave no evidence of the actual local purchase price per tonne of high, medium or low value bdm. The Plaintiff gave no evidence of the final overseas export price such as might have been relevant to a claim for loss of profit. The Plaintiff gave no evidence of any loss of business, either past or future. The Plaintiff gave no particulars or evidence of any matter which might support a claim for general damages.

43. The Plaintiff has shown that it has suffered some loss as a result of the Defendant’s conduct. However, it has not produced sufficient evidence to accurately determine the monetary value of that loss. Doing the best that I can on the evidence available, it would not be unreasonable to conclude that the combined cost of 1.6 tonnes of high-value bdm (which was taken and not returned), and the difference in the cost of 2.4 tonnes of high-value bdm and the medium/low-value bdm (which was returned), would be about K100,000.00.

44. The Plaintiff gave evidence that the Defendant took the director’s mobile phone valued at K4000.00. The Defendant did not clearly deny taking the phone, and the Plaintiff’s evidence was that it was taken. That is sufficient to establish on the balance of probabilities that the Defendant took the Plaintiff’s mobile phone worth K4,000.00, thereby causing that loss to the Plaintiff.

45. I therefore assess the value of the losses sustained by the Plaintiff, in the total sum of K104,000.00.

46. For these reasons, the following orders are made:

(a) Judgment is entered for the Plaintiff against the Defendant in the sum of K104,000.00.

(b) The Defendant is to pay interest at the rate of 8% per annum on the judgment sum, from the date of judgment.

(c) The Defendant is to pay the Plaintiff’s cost on a party/party basis, to be agreed or taxed.

__________________________________________________________________
Wanis Lawyers: Lawyers for the Plaintiff