3A Composites PNG Ltd v National Agricultural Research Institute [2022] PGNC 546; N10045 (18 November 2022)

N10045

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 535 OF 2021

BETWEEN:
3A COMPOSITES PNG LIMITED
Plaintiff/Cross Defendant

AND:
NATIONAL AGRICULTURAL RESEARCH INSTITUTE
First Defendant/Cross Claimant

AND:
MJ BALSA LIMITED
Second Defendant/Cross Claimant

AND:
COCONUTS PRODUCTS LIMITED
Third Defendant/Cross Claimant

Kokopo: Dingake J
2022: 18^th November

CONTRACT – plaintiff claims breach of contract by first defendant - Plaintiff claims First Defendant breached the Agreement by denying it access to balsa plantation and preventing it from harvesting the balsa pursuant to the Agreement – counter claim by first defendant also claiming that Plaintiff is in breach by trespassing into its land, when it planted balsa beyond the 50 hectares set out in the Agreement the parties signed; not exercising proper husbandry over the balsa trees and not maintaining the roads - whether the First Defendant is in breach of the Agreement as claimed in their pleadings – plaintiff is partially in breach of the agreement –

TRESPASS – first defendant makes counter-claim by stating that the plaintiff breached agreement by planting balsa trees beyond the 50 hectares provided in the agreement – plaintiff has trespassed into the land of the first defendant by planting balsa trees beyond the 50-hectare mark – first defendant entitled to compensatory damages – parties to bear their own costs

Cases Cited:
Papua New Guinean Cases

Nivani Ltd v China Jihangsu International (PNG) Ltd (2007) N3147
Shell Papua New Guinea Ltd v Speko Investments Ltd (2004) SC767

Overseas Cases

DC Thompson and Co v Deakin (1952 Ch. 646).
Emerald Construction Co Ltd v Lowthian (1996)1 WLR 691
McGrath v Sturesteps; Sturesteps v HIH Oversea Holdings Ltd (in liq) [2011] NSWCA 315; (2011) 81 NSWLR 690
Masters v Cameron (1954) HCA 72
Quinn v Lenthem (1901) AC 495
Shipping Corpn v Laughton ( 1983) AC 570

Counsel:

Ms. Samantha Kiene, for the Plaintiff

Mr. Nobert Kubak, for the First Defendant

Mr. Paul Yange, for the Second Defendant

Ms. Grethel Kogora, for the Second Defendant

18^th November, 2022

1. DINGAKE J: INTRODUCTION: In this matter Plaintiff sues the First Defendant for breach of contract and the Second Defendant for inducing such breach.
   
2. The facts underpinning this litigation are largely common cause and the factual disputes turn on a narrow compass.
3. The Plaintiff and the Defendants are all juristic persons. The main protagonists in the dispute are the Plaintiff and the First Defendant. The First Defendant is a National Agricultural Research Institute created by Section 2 of the National Agricultural Research Institute Act, 1996.
   

Background

4. The background in this matter bears stating briefly: On the 4^th of August 2016, the Plaintiff and First Defendant entered into a Balsa Production Agreement in terms of which the Plaintiff would plant balsa trees in the First Defendant’s land, being Portion 3897, Milinch of Kokopo, Fourmil of Rabaul, East New Britain Province.
5. In this suit the Plaintiff claims that the First Defendant breached the Agreement by denying it access to the plantation and preventing it from harvesting the balsa pursuant to the Agreement and by harvesting the balsa without its consent. The First Defendant also counterclaims that the Plaintiff is in breach by trespassing into its land, when it planted balsa beyond the 50 hectares set out in the Agreement the parties signed; not exercising proper husbandry over the balsa trees and not maintaining the roads.
6. The Third Defendant was granted leave to join the proceedings to protect its own interest in the matter.
7. On the 2^nd of September 2021 an interim injunction was issued to stop the First and Second Defendants from harvesting the balsa. By consent, on the 6^th of June 2022, that injunction was partially uplifted to allow the Plaintiff and the First Defendant to harvest up to 50 hectares of the balsa planted. All the parties were restrained from harvesting the remaining 14.2 hectares of balsa pending the determination of the substantive hearing.
8. With respect to the Second Defendant the particulars of the alleged breach are that the Second Defendant with knowledge of the Agreement between the Plaintiff and the First Defendant and with intent to prevent the performance of the Agreement wrongfully prevented the First Defendant from performing its obligations under the Agreement.
9. The Plaintiff alleges that in July 2021 the Second Defendant induced the First Defendant to restrain the Plaintiff’s access to the Plantation and that the Second Defendant harvested 39m³ of balsa trees and purchased the harvested balsa timbers from the First Defendant at a higher market price.
10. The main protagonists in this matter do not dispute the existence of the Agreement. There is also no dispute that the Plaintiff planted 64.22 hectares, which exceeded the 50 hectares mark captured by the Agreement by 14.22 hectares.
11. The Plaintiff alleges that by conduct the parties, post the conclusion of the written contract, agreed that it could plant the extra 14.22 hectares referred to above. The First Defendant denies that there was any such agreement.
12. The Second Defendant denies that it induced the First Defendant to breach the contract at all.
13. The Third Defendant avers that it entered into an agreement to harvest the excess of 50 hectares which at the time was 14.595 hectares of balsa trees on the land.

Evidence

14. The trial was based on affidavits duly filed by the parties. Mr. Kubak learned Counsel for Plaintiff cross-examined the Plaintiff’s witness Mr. Victor Penias about the planting of balsa more than the 50 hectares captured in the Agreement. Mr. Penias is the Logistics and Harvesting Co-ordinator of the Plaintiff and had at the time he deposed to the affidavit been in the employ of Plaintiff for 10 years. The cross-examination of Mr. Penias did not alter in any material way, his admitted evidence marked, “Exhibit P1”.
15. Essentially, in terms of the evidence of Mr. Penias (Exhibit “P1”), the First Defendant “had taken the decision to unreasonably deny 3A Composites PNG Limited access to the plantation for the purpose of the Agreement, proceeded to harvest and sell the balsa to MJ Balsa Limited”. He did not say who took this decision, nor produce any evidence of the decision and how that alleged decision was implemented and when. He says the First Defendant harvested the balsa belonging to the Plaintiff. He avers further that he objected to the harvesting of balsa by the Second Defendant to Mr. Josito but was told that the balsa being harvested is not the Plaintiff’s balsa.
16. Mr. Penias also said in his affidavit that at a meeting with the First Defendant’s Management held on the 29^th of July 2021, Mr. Hannet of the First Defendant confirmed receiving K5,000.00 for sales of balsa to the Second Defendant.
17. The evidence of Blaise Tatai (Exhibit “P2”) also says that the First Defendant harvested balsa, “within our planted areas”). The affidavit does not say anything about being restricted access to the Plantation.
18. The Affidavit of Blaise Tatai (Exhibit “P3”) is not materially different from Exhibit 2”. The affidavit of Mr. Victor Penias (Exhibit “P4”) reiterates that the 14.22 hectares excess was planted with the knowledge and authority of Mr. Petilani.
19. The evidence of Mr. Eric Gauther Jaques confirms that all the persons who gave evidence for the Plaintiff were authorized to do so. He makes no averments touching on the contentious issues in this case.
20. According to the evidence of Elijah Tobung (Exhibit “P6”) the planting of balsa in the excess of 14.22 hectares was done with the authority of Mr. Ofara Petilani at paragraph 12 of his affidavit he states that:

“I know for a fact that no balsa trees were planted without the knowledge of Mr. Ofara Petilani, Mr. Rex Maima, and Mr. Gabriel who were the persons in charge of NARI Kerevat at the time”.

21. The First Defendant’s evidence is captured in the affidavits of Fidelis Edward Hela (Exhibit “FD1”), affidavit of Serei Jotiso (Exhibit “FD2) and the affidavits of Godfrey Hannet (Exhibit “FD3” and Exhibit “FD4” & Exhibit “FD5”.
22. The affidavit of Mr. Hela is argumentative in some respects, which is impermissible. However, I discern from it that the harvesting that the First Defendant undertook was done with the consent of the Plaintiff and further that the First Defendant never agreed that the Plaintiff could plant beyond the 50 hectares captured in the Agreement.
23. Mr. Serei Jotiso says in his affidavit that the First Defendant harvested trees that were covered by the Agreement and those that were not covered by the Agreement. He says that the harvesting of the trees covered by the Agreement were done with the consent of the Plaintiff.
24. Mr. Godfrey Hannet in his affidavit (Exhibit “FD3”) says that the Plaintiff breached the Agreement in that it did not maintain the roads as required by Clause 4 of the Agreement and failed to manage the crops in violation of Clause 3 of the Agreement.
25. The affidavit in support of the case of the Second Defendant was sworn by Bagari Lehe, a Senior Project Officer of the Second Defendant. This affidavit was admitted as evidence and marked “Exhibit “BL1”.
26. Mr. Lehe says that in July 2021, the Frist Defendant through its employees delivered to the Second Defendant a total of 39 cubic meters of balsa, which were cut by the First Defendant’s contractors or workers and the Second Defendant bought same. The Deponent also says that before or after the said purchase, the Second Defendant did not know about the existence of an Agreement between the Plaintiff and the First Defendant. Mr. Lehe does not identify the land this balsa was harvested from.
27. The affidavit in support of the Third Defendant case is deposed to by Nisala Sanjeeva Jayawardena, (Exhibit “CPL1”) who says that the Third Defendant entered into an Agreement with the First Defendant to harvest balsa trees on 14.595 hectares belonging to the First Defendant.

The Issue

28. The issue that falls for determination is whether the First Defendant and the Plaintiff are in breach of the Agreement of the 4^th of August 2016, as claimed in their pleadings (Statement of Claim & the Crossclaim) respectively, and therefore entitled to the relief they both claim.
29. I have already indicated that the existence of the Agreement of the 4^th of August 2016, is not in dispute. Its terms are ascertainable from its provisions.
30. It is trite law that the terms of a written contract are pronounced by the written instrument itself. A court is precluded from re-writing the contract on behalf of the parties under the guise of interpretation. (McGrath v Sturesteps; Sturesteps v HIH Oversea Holdings Ltd (in liq) [2011] NSWCA 315; (2011) 81 NSWLR 690). What the parties wrote if clear, matters and is enforceable. This is important for the certainty of commercial contracts such as the present one. Parties to a commercial contract should be able to organize their affairs in the knowledge of the sanctity of the contract that is couched in clear terms.
31. It is also settled law that parties to a written contract may vary such a contract if they so wish. However, where a contract makes no provision for variation, there must be a contract of variation to bind the parties. (Nivani Ltd v China Jihangsu International (PNG) Ltd (2007) N3147).
32. Speaking for myself, in a litigation concerning a written agreement the main piece of evidence is the agreement itself – what the parties have written and signed – it is the most persuasive proof to a court properly directing itself.
33. In this case the area the Plaintiff was to plant the balsa crops was explicitly stated as approximately 50 hectares. It is also common cause that 64.22 hectares was planted by the Plaintiff – far more than the approximately 50 hectares that was agreed.
34. The terms of the agreement that are relevant to this dispute are as follows:
    
    1. The agreed area to plant the balsa would be “approximately 50 hectares of the Plantation.”
       
    2. The First Defendant would allow the Plaintiff free and uninterrupted access to the plantation for the purposes of the agreement.
       
    100. At all times the balsa shall remain the property of the Plaintiff.
         
    4. That the Plaintiff shall have lien over the balsa crops.
       
    5. The Plaintiff and First Defendant shall share the proceeds thereof equally.
       
    6. The Plaintiff shall exercise good husbandry over the crops.
       
    7. The Plaintiff shall also maintain the roads.
       
35. On the evidence the Plaintiff and the Defendant concede that the First Defendant did harvest the Plaintiff’s balsa trees within the 50 hectares and beyond – including in the excess area of 14.22 hectares.
36. The Plaintiff’s evidence is that it had authority of the officers or agents of the First Defendant to plant in the excess area of 14.22 hectares. The Defendant denies this.
37. The First Defendant says where it harvested the balsa trees from within 50 hectares, it was done with the consent of the Plaintiff. The Plaintiff denies this.
38. It is trite law that the claimants (the Plaintiff and the First Defendant as the cross-claimant bears the burden to prove their allegations on a balance of probabilities.
39. In this case, I am satisfied, on a balance of probabilities, that the First Defendant harvested from the 50 hectares of balsa trees planted by the Plaintiff. This much is clear from the evidence tendered by the Plaintiff in support of its case (Exhibit “P1” – “P6”). It is also confirmed by the First Defendant.
40. In my mind the First Defendant harvesting of the balsa crops in the Plantation is not authorized by the Agreement and it is inconsistent with the terms of the Agreement that vest ownership of the balsa crops on the Plaintiff. In my respectful view the harvesting of balsa crops amounts to breach of the Agreement.
41. Although the First Defendant asserts that the harvesting it did within the 50 hectares of the plantation was with the consent of the Plaintiff it does not say who exactly from the Plaintiff or representing the Plaintiff gave the consent; nor whether the consent was verbal or in writing.
42. I therefore find that the First Defendant’s defense that the Plaintiff gave its consent to the harvesting within the 50 hectares area it’s a mere assertion not supported by evidence.
43. In the result, I find on a balance of probabilities that the harvesting of the Plaintiff’s crops within the 50 hectares, was done without the Plaintiff’s authority and amounted to breach of the Agreement as alleged by the Plaintiff.
44. It is also common course that the Plaintiff harvested the balsa trees and sold them to the Second Defendant for K5,000.00 and that the proceeds of the said sale have not been shared with the Plaintiff.
45. The Agreement is clear that the balsa planted by the Plaintiff belonged to the Plaintiff. The First Defendant had not right, derived from the Agreement, to do so.
46. With respect to the Plaintiff’s allegations that it was denied access to the plantation, the evidence placed before the court in support of the allegation is too weak and inadequate to prove that the First Defendant denied it free access to the plantation. No adequate particulars relating to the days, and the persons allegedly involved in denying such access was given or the nature of the denial. I therefore find that the Plaintiff failed to prove that the First Defendant breached the agreement in that it prevented or hindered it free and uninterrupted access to the plantation.
47. I turn now to consider the evidence of the Plaintiff that it had authority of the First Defendant to plant balsa trees beyond the 50 hectares agreed in the Agreement and that at all material times when the planting beyond the 50 hectares took place the First Defendant knew and or acquiesced in the planting.
48. It is trite law that an agreement may be based on the conduct of the parties. Such conduct must be specifically pleaded and proven. In determining whether the parties hereto entered into a contract orally or by conduct much depends on the circumstances of each case viewed objectively. (Masters v Cameron (1954) HCA 72). It has also been held that in determining the issue, the intention of the parties to enter into an enforceable agreement is important. (Shell Papua New Guinea Ltd v Speko Investments Ltd (2004) SC767.
49. In my mind in a case where the terms are alleged to be based on conduct or what the parties orally said to each other the evidence of a party as to what he understood to have been agreed is necessary to prove those terms.
50. In this case, I find that the evidence of the Plaintiff that the First Defendant by conduct through the authority of some of its officers, more particularly Mr. Petilani, concluded an agreement with the Plaintiff in terms of which the Plaintiff was permitted to plant balsa beyond the 50 hectares by an extra 14.22 hectares has not been sufficiently proven to the required standard of a balance of probabilities.
51. It is clear from the evidence of the Plaintiff that Mr. Petilani was a critical person whose conduct is said to have constituted the basis for the Plaintiff to assert that there was an agreement by conduct to plant balsa beyond the 50 hectares stipulated in the Agreement.
52. It seems to me that the evidence of Mr. Petilani was important for the case of the Plaintiff, yet he filed no affidavit in support of the conduct and knowledge attributed to him. This is besides the point that, even if it was so proven that he conducted himself, together with his other colleagues or officers of the First Defendant, in a manner that led the Plaintiff to believe that they were authorized to plant beyond 50 hectares captured in the Agreement, there is still the issue of whether he and his other colleagues had the actual or ostensible authority from the First Defendant to do so, having regard to the fact that the First Defendant is a juristic person and the terms of the written Agreement the parties signed. On the evidence before me I have found no evidence of such authority whether actual or ostensible.
53. In the result, I hold that there is no sufficient evidence to hold that the Plaintiff and the First Defendant by conduct and or orally entered into an agreement in terms of which the Plaintiff was authorized to plant balsa beyond the 50 hectares agreed in the Agreement; neither is there sufficient evidence to hold that the First Defendant acquiesced in the conduct of the Plaintiff to plant the extra 14.22 hectares.
54. The net effect of the above findings and or conclusions is that the Plaintiff did not have authority to plant beyond the 50 hectares specifically agreed in the Agreement and that the First Defendant pleaded case that the Plaintiff trespassed into its land when it planted balsa trees in the excess 14 hectares area has been proven on balance of probabilities.
55. With respect to the Plaintiff’s pleaded case against the Second Defendant that it induced breach of the Agreement, it is my conclusion that based on the evidence that claim has not been proven.
56. It is trite law that inducing a breach of contract is an actionable wrong. (Quinn v Lenthem (1901) AC 495). The law requires that the alleged wrongdoer must have known of the contract generally and have taken steps, whether by persuasion or inducement or other means to manifest an intention to cause a breach of the contract or prevent its performance by one party to the detriment of the other.
57. The breach of contract must be attributable to such interference and that damage was occasioned or was likely to be occasioned to the other party to the contract. (Shipping Corpn v Laughton ( 1983) AC 570; Emerald Construction Co Ltd v Lowthian (1996)1 WLR 691; DC Thompson and Co v Deakin (1952 Ch. 646).
58. The evidence deposed to by the Second Defendant is clear that the Second Defendant did not know of the Agreement between the Plaintiff and the First Defendant, the subject matter of the litigation.
59. The Second Defendant’s evidence as summarized earlier was not challenged at the trial. It follows in my view that it ought to be accepted as truthful as I hereby do.
60. It is clear from the above that the Plaintiff and the First Defendant have both partially succeeded in their respective claims. Before concluding this matter, it is important to indicate that the First Defendant’s prayer that it be declared the owner of the balsa planted beyond the 50 hectares agreed cannot be sustained because it was not sufficiently pleaded and proven.
61. On costs, it is trite law that costs are the discretion of the Court and normally follow the event. In this case the Plaintiff and the First Defendant have agreed with respect to their suits that each party bear its own costs. As for the Plaintiff’s suit against the Second Defendant there is no reason why costs should not follow the event.
62. In the result it is ordered that:
    1. The Plaintiff’s suit and consequent relief sought against the Second Defendant fails with costs. Such costs are to be paid on a party to party scale as agreed or taxed.
    2. A declaration that the balsa trees planted within the property known as Portion 3987 contained and identified in Balsa Production Agreement dated 4 August 2016 are the sole property of the Plaintiff pursuant to Clause 13 of the Balsa Production Agreement dated 4 August 2016.
    3. An order that the First Defendant and its employees, servants and agents be permanently restrained from trespassing and harvesting balsa wood duly planted in property known as Portion 3897 contained and identified in Balsa Production Agreement dated 4 August 2016.
    4. Specific Performance of the Balsa Production Agreement between the Plaintiff and the Defendant dated 4 August 2016 for the purpose of the Plaintiff to harvest the balsa trees planted on the commercial plantation on the First Defendant’s land described as Portion 3897, Milinch of Kokopo (Plantation).
    5. An account of all monies, profits or benefits received by the First Defendant from the sale and purchase of the balsa trees.
    6. Payment of the amount found to be due to the Plaintiff on taking the account.
    7. It is declared that in knowingly planting Balsa trees upon the First Defendant/Cross-Claimant’s land in excess of the agreed land volume of approximately 50 hectares, the Plaintiff/Cross-Defendant committed an act of trespass and is liable in compensatory damages.
    8. An order for damages for trespass, which damages is to be assessed with specific reference to the prevailing market price for merchantable balsa logs and be paid by the Plaintiff/Cross-Defendant.
    9. General damages for breach of contract.
    10. The quantum of damages for trespass awarded to the First Defendant are referred to trial on a date to be communicated to the Parties by the Registrar or by Court.
    11. The Plaintiff and First Defendant shall each pay their own costs for their claims against each other.
    12. No costs are awarded in favour of the Third Defendant, which shall bear its own costs.

_______________________________________________________________

Cornerstone Legal Services: Lawyers for the Plaintiff

Kubak & Kubak Solicitor & Barrister: Lawyers for the First Defendant

Islands Legal Services: Lawyers for the Second Defendant

Namani & Associates: Lawyers for the Third Defendant