Mineral Resources Development Co Ltd v Kakaraya [2023] PGNC 311; N10461 (23 August 2023)

N10461

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1741 OF 2004 (CC2)

BETWEEN
MINERAL RESOURCES DEVELOPMENT COMPANY LTD
Plaintiff/Cross-Defendant

AND
DAN SALMON KAKARAYA
Defendant/Cross-Claimant

Waigani: Shepherd J
2018: 8^th November
2023: 23^rd August

PRACTICE & PROCEDURE – Cross-Claims – cross-claim alleging breach of employment contract by cross-defendant – cross-defence struck out and summary judgment entered for cross-claimant with damages to be assessed - National Court may grant summary judgment on cross-claim of its own initiative for failure by party to comply with order or directions of the Court – National Court Rules, Order 10 Rule 9A(15) – National Court may set aside summary judgment on cross-claim for cause – National Court Rules, Order 8 Rule 49 – principles relating to assessment of damages on cross-claim after judgment on liability entered discussed – summary judgment on a cross-claim resolves all questions of liability on matters pleaded if summary judgment is not set aside on prompt application to National Court by cross-defendant or on appeal to Supreme Court.

PRACTICE AND PROCEDURE - whether Claims By and Against the State Act (CBAS Act) applies to Mineral Resources Development Company Limited (MRDC) – whether MRDC is an entity or instrumentality of the State for purposes of CBAS Act – whether notice of cross-claim against MRDC must be served on the State under Section 5 of CBAS Act – purpose of CBAS Act discussed – CBAS Act applies primarily to suits or claims brought against the State and not to suits or claims made by the State or its entities as plaintiff against other parties - CBAS Act does not apply to a cross-claim after litigation commenced by MRDC as plaintiff – a defence such as a time bar or Section 5 CBAS Act notice issue must in any event be pleaded by a cross-defendant - failure to plead such a defence disentitles a cross-defendant to raise the issue at trial on assessment of damages.

DAMAGES – breach of employment contract – claim for general damages for entitlements withheld by cross-defendant - cross-defendant misrepresented that monies it withheld after suspension of cross-claimant pending resolution of certain matters were placed in an escrow account, later referred to as a suspense account, and then placed on IBD – monies withheld by cross-defendant from cross-claimant were not placed in an escrow account or a suspense account or invested in an IBD at all – discussion of difference between escrow account and suspense account – cross-defendant failed to rebut accountancy expert evidence of quantification of estimated net salary and entitlements withheld by cross-defendant – cross-claimant awarded general damages of K3,232,077 for loss of net salary and other contractual entitlements.

DAMAGES – claim by experienced lawyer for loss of reputation and mental distress – quantum of low awards under this head of damages in earlier cases considered – reputational damage and mental distress suffered by cross-claimant assessed by Court by reference to awards in defamation actions where claimants were senior members of legal profession – cross-claimant awarded additional general damages of K150,000 for loss of reputation and mental distress.

DAMAGES – claim for expectation damages – a claim for loss of future salary and entitlements on expectation of renewal of contract of employment wrongfully terminated early is only actionable if the contract expressly allows for the employee to exercise an option for renewal – claim for expectation damages disallowed because cross-defendant as employer had sole option under the contract for its renewal or extension.

DAMAGES – claims for loss of corporate board sitting allowances and loss of capital gains on future sale of prospective property purchases disallowed for failure to adduce satisfactory evidence to establish quantum of such losses.

DAMAGES – claim for aggravated damages not pleaded but pursued at trial - aggravated damages is a separate head of damages from general damages and must be pleaded - failure to plead particulars and relief to include separate claim for aggravated damages disentitles a claimant from an award of aggravated damages – claim for aggravated damages not allowed.

Cases Cited:

Papua New Guinean Cases
Baine v The State (1995) N1335
Central Bank of Papua New Guinea v Tugiau [2009] PGSC 50; SC1013
Cheong Supermarket Pty Ltd v Muro [1987] PNGLR 24
Coecon Ltd (Receiver-Manager Appointed) v National Fisheries Authority of Papua New Guinea (2002) N2182
Commissioner General of Internal Revenue v Leach (1998) N1779
Coyle v Henao [2000] PNGLR 17
Harding v Teperoi Timbers Pty Ltd [1988-89] PNGLR 128 ; N672
Himsa v Sikani (2002) N2307
Honda Canada Inc v Keays [2008] SCR 362
Kakaraya v Ombudsman Commission of Papua New Guinea (2003) N2478
Kaurigova v Perone (2008) SC964
Kiap & National Capital District Commission v Kasper & The State (2023) SC2435
Kuluah v University of Papua New Guinea [1993] PNGLR 494
Lambu v Dugube (2006) N3082
MAPS Tuna Ltd v Manus Provincial Government (2007) SC857
Mataio v August (2014) SC1361
Minatou v Kumo (1998) N1768
Mineral Resources Development Corporation Ltd v Sisimolu (2010) SC1090
More v University of Papua New Guinea [1985] PNGLR 401
Na-Al v Debege (2000) N1958
Nambawan Super Ltd v Petra Management Ltd (2017) N6748
Nuia v Independent State of Papua New Guinea (2000) N1986
Opi v Telikom PNG Limited (2020) N8290
Paklin v Waugulo (2001) N2212
PNG Aviation Services Pty Ltd v Somare (2000) SC658
PNG Aviation Services Pty Ltd v Karri (2009) SC1002
PNG Ports Corporation Ltd v Canopus No. 71 Ltd (2010) N4288
Papua New Guinea Banking Corporation v Tole [1985] PNGLR 401
Roth v Waironak (2011) N4452
Salika v Pacific Star Ltd (2014) N5699
State v Josiah (2005) SC792
State v Downer Construction (PNG) Ltd (2009) SC979
Wanis v Sikiot (1995) N1350
Yaluma v The State (2010) N4088

Overseas Cases:
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54 (1991) 174 ALR 64

Legislation:
Claims By And Against the State Act 1996: Sections 1, 2, 5
Judicial Proceedings (Interest on Debts and Damages) Act 2015: Sections 4, 6
Mineral Resources Development Company Limited (Privatization) Act 1996
Mineral Resources Development Company Limited Authorisation Act 2020
National Court Rules: Order 4 Rules 7 & 49(8); Order 8 Rule 5(1); Order 10 Rule 9A(15); Order 8 Rules 44 & 49; Order 12 Rules 6(2), 25, 35; Table 1 of Schedule 2
Oil and Gas Act 1998: Section 176

Texts
Black’s Law Dictionary (2009) 9^th Ed.
Websters New Encyclopedia Dictionary (2002)

Counsel
Mr Michael Goodwin and Mr Daniel Bidar, for the Cross-Claimant
Mr McRonald Nale and Mr Simon Dewe, for the Cross-Defendant

DECISION

23^rd August 2023

1. SHEPHERD J: This is a decision on assessment of damages sought by the cross-claimant following entry of summary judgment in his favour. Reasons are also given in this decision for the Court’s refusal of the cross-defendant’s application for dismissal of these proceedings.

BACKGROUND

2. The cross-claimant (Mr Kakaraya) is a lawyer by profession. In view of the breadth of his professional experience, he was appointed as the managing director and chief executive officer of the cross-defendant (MRDC) on 2 August 2001 for a term of 4 years under a written contract of employment, replacing the MRDC’s former managing director Mr Andrew Madiu.
3. On 14 October 2002 the board of MRDC suspended Mr Kakaraya’s employment as managing director on full pay.
4. By letter dated 17 February 2003 MRDC’s acting managing director Mr J. Francis Kaupa notified Mr Kakaraya that all payments under his contract were suspended as from 7 February 2003 and would be paid into an escrow account until such time as certain issues relating to his employment and management of the company were resolved. Mr Kakaraya received his last pay from MRDC on 7 February 2003.
5. Two years later, on 7 February 2005 the board of MRDC gave Mr Kakaraya notice of termination of his contract. In the ordinary course of events, Mr Kakaraya’s contract of employment would not otherwise have expired until August 2005.
6. By writ of summons instituting this proceeding and filed on 17 December 2004, MRDC sued Mr Kakaraya and claimed, inter alia, the following relief in its statement of claim:

(a) a declaration that the contract which it had entered into with Mr Kakaraya was void from the start;

(b) a declaration that Mr Kakaraya was only entitled to be paid accrued entitlements under the contract up to the date of his suspension by the MRDC on or about 12 October 2002;

(c) a declaration that MRDC was entitled to “offset any or all funds held in an escrow account for and on behalf of the Defendant towards the settlement of any judgment given in favour of the Plaintiff in these proceedings”;

(d) special damages of approximately K616,000 comprising a range of monies, including an alleged overpayment of Mr Kakaraya’s base salary of K164,000 by a further K168,038, income tax of K89,302 alleged to have been “improperly paid” by MRDC on behalf of Mr Kakaraya, motor vehicle allowances of K38,085 and housing allowances of K382,641.

7. MRCD’s writ of summons also sought general damages, exemplary damages, interest on damages at 8% per annum pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act and costs.
8. An amended statement of claim was filed by MRDC on 1 April 2005 which augmented its original statement of claim by pleading particulars of an alleged unilateral mistake it had made as to the fundamental terms of the contract. Except for that additional pleading and the removal of its claim for general damages, MRDC’s amended statement of claim remained much the same as its original statement of claim.
9. An amended defence and cross-claim was filed for Mr Kakaraya on 13 May 2005.^[1] Mr Kakaraya denied all adverse allegations that had been pleaded against him in MRDC’s amended statement of claim. Mr Kakaraya’s cross-claim pleaded, among others, that:

(a) he was employed by MRDC on terms not less favourable than those which were applicable to outgoing managing director Mr Madiu Andrew;

(b) he had performed his duties under his contract;

(c) on or about 14 October 2002 he was suspended on full pay by MRDC’s board;

(d) he received full remuneration under his contract for one month until November 2002, which is when he was notified by MRDC that his remuneration would be held in escrow;^[2]

(e) on or about 28 January 2005 the board of MRDC resolved to terminate his contract, notice of which termination was given to him on 7 February 2005;

(f) he is entitled to all remuneration that was withheld from him by MRDC as well as substantial damages for breach of his contract by MRDC.

10. On 27 June 2005 MRDC filed its reply and cross-defence to Mr Kakaraya’s amended statement of claim and cross-claim.^[3] MRDC’s cross-defence pleaded that Mr Kakaraya’s contract of employment was void because MRDC had been induced to enter into the contract by mistake, because of alleged misrepresentation by Mr Kakaraya and because the contract was ultra vires the authority of Board of the MRDC to have approved it.
11. On 14 April 2008 the MRDC’s substantive claim against Mr Kakaraya was dismissed by Kapi CJ for failure to disclose a reasonable cause of action.^[4] MRDC was ordered to pay Mr Kakaraya’s costs on a solicitor/client basis. Mr Kakaraya’s cross-claim was not affected by Kapi CJ’s order of 14 April 2008.
12. On 21 May 2008 MRDC filed a notice of appeal in the Supreme Court against the dismissal order of Kapi CJ: SCA of 26 of 2008 – Mineral Resources Development Company Limited -v- Dan Salmon Kakaraya.
13. The Supreme Court heard MRDC’s appeal in SCA No. 26 of 2008 on 3 September 2010 and reserved its ruling, which was delivered four years 3 months later on 5 December 2014. The Supreme Court upheld MRDC’s appeal and restored MRDC’s proceeding in WS No. 1741 of 2004 to the National Court list for allocation of a date for trial.
14. This proceeding WS No. 1741 of 2004 was eventually relisted in the National Court. After a series of interlocutory orders were made, MRDC’s substantive claim against Mr Kakaraya came back before the Court on 7 October 2016 after failure by MRDC’s lawyers to have complied with repeated requests made by Mr Kakaraya’s lawyers for production of discoverable documents and for failure by MRDC to have taken active steps to progress its claim against Mr Kakaraya to trial.
15. On 7 October 2016 an order was made by Kandakasi J (as he then was) whereby MRDC’s substantive claim against Mr Kakaraya was dismissed for want of prosecution and for failure by MRDC to have complied with discovery procedures after receipt of notices from both Mr Kakaraya’s lawyers and the Civil Registry.^[5] This left Mr Kakaraya’s cross-claim still on foot.
16. The order of 7 October 2016 required the parties to endeavour to negotiate a settlement of Mr Kakaraya’s cross-claim, but failing settlement the parties were to settle a draft consent order for the cross-claim to proceed to mediation.
17. On 24 November 2016 Kandakasi J ordered MRDC to provide Mr Kakaraya with outstanding discoverable documents by 20 December 2016.^[6]
18. MRDC failed to comply with the order of 24 November 2016, despite an extension of time to 27 January 2017 for it to do so having been ordered by Kandakasi J on 20 December 2016.^[7] His Honour’s order of 20 December 2016 stated to the effect that non-compliance by MRDC would result in entry of judgment of Mr Kakaraya’s cross-claim on the return of the case on 27 January 2017.
19. On 27 January 2017 MRDC’s cross-defence to Mr Kakaraya’s cross-claim was summarily struck out by Kandakasi J and judgment entered for Mr Kakaraya on his cross-claim with damages to be assessed.^[8] The summary judgment of 27 January 2017 occurred because of MRDC’s failure to have complied with the Court’s orders of 24 November 2016 and 20 December 2016.
20. The parties attended mediation of Mr Kakaraya’s cross-claim on 27 April 2017, 25 May 2017, 11 August 2017 and again on 25 September 2017, but the mediation was not successful.
21. By order dated 26 September 2017^[9] Kandakasi J directed the parties to settle a statement of relevant facts and issues by 20 October 2017 and adjourned the cross-claim proceeding to return on 25 October 2017.
22. After a further series of procedural orders had been made, on 16 May 2018 Kandakasi J issued a directional order that Mr Kakaraya’s cross-claim was to be fixed for trial on assessment of damages by Shepherd J.^[10]
23. Directional orders were made by me on 24 August 2018^[11] and 12 September 2018^[12] which resulted in Mr Kakaraya’s cross-claim being set down for trial on assessment of damages on 8 November 2018.
24. The trial on assessment of Mr Kakaraya’s damages on his cross-claim proceeded on 8 November 2018, following which the Court reserved its decision to a date to be notified to the parties.

EVIDENCE

25. The evidence for Mr Kakaraya as cross-claimant at trial on assessment of damages consisted of two affidavits:

(1) affidavit of Mr Kakaraya filed on 26 February 2018;^[13] and

(2) affidavit of James Sinton Spence, chartered accountant, filed on 26 February 2018.^[14]

26. In answer, the MRDC relied at trial on four affidavits:

(1) affidavit of Richard Aupae, company secretary of MRDC, filed on 26 March 2018;^[15] and

(2) affidavit of Veronica Scott, payroll and finance officer of MRDC at the time of Mr Kakaraya’s suspension in October 2022, filed on 26 March 2018.^[16]

(3) affidavit of Richard Aupae filed on 2 November 2018.^[17]

(4) affidavit of Simon Dewe, lawyer with Jema Lawyers, filed on 7 November 2018.^[18]

PRELIMINARY ISSUE – MRDC’s MOTION FOR DISMISSAL OF THE CROSS-CLAIM PROCEEDINGS

27. At commencement of trial on assessment of damages on 8 November 2018, counsel for MRDC Mr McRonald Nale indicated he wished to move a motion late-filed by Jema Lawyers on 2 November 2018^[19], only a week before trial on assessment of damages. The motion sought to set aside the order made by Kandakasi J on 27 January 2017 which had dismissed MRDC’s cross-defence to Mr Kakaraya’s cross-claim and had entered judgment on the cross-claim in favour of Mr Kakaraya. MRDC’s motion also sought to have Mr Kakaraya’s cross-claim proceedings dismissed in their entirety as an alleged abuse of process.
28. I allowed counsel for MRDC, Mr McRonald Nale, to proceed with the motion and then heard submissions in reply from leading counsel for Mr Kakaraya, Mr Michael Goodwin.
29. After hearing submissions from both counsel on MRDC’s motion, I made the following ex tempore ruling, recorded at page 16 of the transcript of the subject proceedings:

HIS HONOUR: I am making a short ruling today in relation to the motion presently before the Court filed by the cross-defendant on 2 November 2018.

By that motion the cross-defendant seeks pursuant to Order 12 Rule 35 or Order 12 Rule 1 or Order 12 Rule 40(1)(c) of the National Court Rules and/or the inherent powers of the Court to set aside the judgment entered against the cross-defendant on 27 January 2017. I am satisfied that the judgment so entered was a summary judgment. It was a final judgment on liability. ... The cross-defendant cannot at this late stage seek to ventilate issues which should have been raised before the Court before judgment was given on 27 January 2017. The matter will proceed to assessment of damages today as per the previous directions of the Court.

My full reasons for the decision in relation to this motion will be given at the time of delivery of my reasons for decision in connection with assessment of damages. The motion of the cross-defendant filed on 2 November 2018 is dismissed with costs in favour of the cross-claimant. Those costs are to be taxed, if not agreed.

30. I now set out the reasons for my dismissal of MRDC’s motion belatedly filed on 2 November 2018.
31. MRDC’s motion sought orders for the setting aside of the judgment entered for Mr Kakaraya and dismissal of the cross-claim proceedings because it was contended that the subject order made by Kandakasi J on 27 January 2017 was a default judgment, not a summary judgment, and that in any event the judgment should be set aside and the cross-claim proceedings dismissed as an abuse of process because the cross-claim was allegedly void from the start due to the non-service by Mr Kakaraya of a notice of his cross-claim on the State under s.5 of the Claims By And Against the State Act 1996 (CBAS Act).
32. The transcript of proceedings at pages 9 and 10 shows that during the course of Mr Nale’s submissions, the following exchange took place between the Bench and Mr Nale, who confusingly endeavoured to explain:

MR NALE: Your Honour, it is our submission that the Supreme Court has held that my client is a State entity [and] that to the extent that it is a State entity, notice under section 5 [of the CBAS Act] should have been given, the issues we raise this morning before this Court are issues of competency [and] to the extent that there has been a lack of compliance by the cross-claimant, this proceeding is a nullity. And because it is a nullity, despite the default judgment or summary judgment being entered, it should be dismissed. And we would refer to the case of ---

HIS HONOUR: Just stop there. Why was an appeal not filed or an application made to set aside the default judgment made much earlier?

MR NALE: Yes, there was, your Honour, I am told, there was an appeal filed and the appeal was not successful.

HIS HONOUR: So did that not dispose of the matter? How can you reventilate this now at an assessment of damages?

MR NALE: Your Honour, we say that this was in relation to the lack of compliance where my client’s application to comply – in lack of complying with the orders his claim was dismissed and then the matter ended up in the Supreme Court for - dismissed for want of prosecution. That was the subject of the appeal. It was not about this issue. This issue is raised for the first time your Honour. This is our submission.

HIS HONOUR: The section 5 issue – why was that not raised as part of the [cross-] defence?

MR NALE: Your Honour, I----

HIS HONOUR: And the [cross-] defence was not filed on time, correct? Or was not filed at all?

MR NALE: The [cross-] defence, your Honour, was struck out because of lack of compliance on my client’s previous lawyer’s part. Your Honour, we say that in terms of this issue that we are raising, it is a jurisdictional issue and we submit with respect that that can be raised at any time [in] the proceedings.

HIS HONOUR: That may well be your argument but I think the authorities are well against you. There has been a merger of issues that should been raised in this matter at the hearing which you say resulted in the default judgment, [and] which the cross-claimant asserts resulted in a summary judgment. And if it was a summary judgment then all the issues that should have been ventilated before the court before a summary judgment was given should have been raised at that point, not at this late stage and I want to see an authority for your proposition that at this late stage [the section 5 notice issue can be raised] when the matter is set down for assessment of damages ...

33. After further questioning by the bench, Mr Nale confirmed that MRDC’s cross-defence in these proceedings was struck out by Kandakasi J for lack of compliance with prior directions made by his Honour. However, Mr Nale persisted in his submissions with the argument that Kandakasi J’s order was a default judgment, not a summary judgment, and that the cross-claim was a nullity because no notice of cross-claim under s.5 of the CBAS Act had ever been given to the State by Mr Kakaraya.
34. Counsel for Mr Kakaraya then brought some clarity to the situation. Mr Goodwin directed the Court’s attention to terms 3 and 4 of the earlier order made by Kandakasi J on 24 November 2016, which stated:

“ 3. The Plaintiff shall provide the Defendant with further Discovery as requested in the Defendant’s Notice of Motion filed 22 September 2015 and set out in the Affidavit of Dan Salmon Kakaraya sworn 18 September 2016 and filed 22 September 2016 by 20 December 2016.

4. The matter is adjourned to 20 December 2016 at 9.30 am.”

35. When the case returned before his Honour almost a month later on 20 December 2016, MRDC had still not complied with Mr Kakaraya’s request for discovery, which had in turn been outstanding since September 2016. Nor had MRDC complied with his Honour’s order of 24 November 2016 to provide further discovery. His Honour gave MRDC one last chance to remedy its non-compliance. The order made by his Honour on 20 December 2016 stated:

“ 1. The matter is adjourned to 27 January 2017 at 9.30 am.

2. The Orders of 24 November 2016 are extended to be fully complied with by the Plaintiff/Cross-Defendant by 27 January 2017.

3. Failing compliance by the Plaintiff/Cross-Defendant will result in entry of judgment on the Cross-Claim on 27 January 2017.

4. The Plaintiff/Cross-Defendant shall pay the Defendant/Cross-Claimant’s costs of and incidental to today’s appearance.

5. Time is abridged to the time of settlement which shall take place forthwith.”

36. Mr Goodwin explained in his submissions that on the next return date of 27 January 2017, MRDC had still not remedied its non-compliance with Mr Kakaraya’s request for discovery. Furthermore MRDC had continued to ignore the Court’s orders of 24 November 2016 and 20 December 2016. It was this non-compliance which had resulted in Kandakasi J’s order for summary judgment on 27 January 2017, which was in these terms:

“ THE COURT ORDERS THAT:

1. Plaintiff’s oral application for an adjournment is declined.

2. Plaintiff/Cross-Defendant’s Defence is struck out and judgment entered for the Defendant/Cross-Claimant with damages to be assessed.

3. Costs of today shall be borne by the Plaintiff/Cross-Defendant.

4. The matter returns to Court on 7 February 2017 at 9:30 am for directions hearing for the Cross-Claim or otherwise appropriate directions for parties to talk settlement.

5. Time is abridged to the time of settlement which shall take place forthwith.”

37. Mr Goodwin also explained that the hearing that took place before Kandakasi J on 27 January 2017 was an inter partes hearing. The Court’s record shows that MRDC was represented on that occasion by counsel Mr Frank Kuvi of Elemi Lawyers. Mr Daniel Bidar of O’Briens Lawyers appeared for Mr Kakaraya. Justice Kandakasi refused an oral application by Mr Kuvi for an adjournment and heard both counsel on the issue of whether MRDC’s cross-defence should be struck out. His Honour then ruled that MRDC’s cross-defence should indeed be struck out for non-compliance with prior orders of the Court and this was why judgment was entered against MRDC in favour of Mr Kakaraya, with damages to be assessed.
38. On 6 February 2017 Elemi Lawyers filed a notice of ceasing to act for MRDC,^[20] which his Honour found on the next return of the case on 7 February 2017 was defective for failure by Elemi Lawyers to have filed an accompanying affidavit as required by Order 2 Rule 39(2) of the National Court Rules.
39. Mr Goodwin submitted that the judgment ordered by Kandakasi J on 27 January 2017 was a summary judgment, not a default judgment under Order 12 Rule 35 of the National Court Rules.
40. I observe that there is a very real difference between a summary judgment and a default judgment. The Court has power to summarily determine proceedings which come before it under Order 10 Rule 9A(15) of the National Court Rules, which Rule relevantly provides:

15. SUMMARY DISPOSAL

(1) The Court may summarily determine a matter:

(a) on application by a party; or

(b) on its own initiative; ...

(2) The Court may summarily dispose of a matter in the following situations:

(a) for want of prosecution since filing the proceedings or since the last activity on the file; or

(b) for a failure to appear at any of the listing or directions hearing by a party or his lawyer; ...

(c) for non-compliance of any order or directions previously made or issued by the Court at any of the listing processes.

[underlining added]

41. In contrast, Order 12 Rule 35 of the National Court Rules, which was principally relied on by counsel for MRDC as the source of the Court’s power to set aside the judgment of 27 January 2017, relates to the Court’s power to set aside a default judgment. Rule 35 comes within Division 3 of Order 12 of the National Court Rules, which sets out the procedure for obtaining and setting aside of a default judgment where the proceedings have been commenced by writ of summons. Order 12 Rule 25 of the National Court Rules prescribes the circumstances in which a default judgment can be obtained by a plaintiff against a defendant, which also includes a default judgment against a cross-defendant.^[21] A default judgment can only be granted by the Court in these three situations:

25. Default

A defendant shall be in default for the purposes of this Division—

(a) where the originating process bears a note under Order 4 Rule 9,and the time for him to comply has expired but he has not given the notice; or

(b) where he is required to file a defence and the time limited for him to file his defence has expired but he has not filed his defence; or

(c) where he is required under Order 8 Rule 25 to verify his defence and the time for him to verify his defence in accordance with that Rule has expired but he has not so verified his defence.

42. None of these three circumstances apply to the order which was granted by Kandakasi J on 27 January 2017. His Honour struck out MRDC’s cross-defence because of MRDC’s failure to comply with the Court’s orders and directions of 24 November 2016 and 20 December 2017. I find that any argument that the order made by his Honour on 27 January 2017 was a default judgment is clearly misconceived. That order was not a default judgment made under Division 3 of Order 12 of the National Court Rules. It was a summary judgment granted by the Court pursuant to Order 10 Rule 9A(15) of the Rules because of MRDC’s blatant non-compliance with prior directional orders of the Court. It was and still is a final judgment on MRDC’s liability for its breach of Mr Kakaraya’s contract of employment, subject only to assessment of the quantum of damages to which Mr Kakaraya is entitled for that breach.
43. Mr Nale has argued that one reason why the judgment of 27 January 2017 should be set aside is because Mr Kakaraya should have first filed an application to invoke the jurisdiction of the Court to enter judgment. That proposition is seriously flawed because it ignores that the Court, acting on its own initiative, has power expressly conferred by Order 10 Rule 9A(15)(1)(b) and (2)(c) of the National Court Rules to summarily determine a matter by entry of judgment in circumstances where there has been non-compliance by a party with orders or directions previously made by the Court.^[22] Mr Kakaraya was under no obligation to file a motion seeking the summary judgment already forewarned by Kandakasi J’s order of 20 December 2016 on the return of the proceedings before the Court on 27 January 2017.
44. It was held by the Supreme Court in Mataio v August (2014) SC1361 (Cannings, Gabi & Hartshorn JJ) that where a Court gives consideration on its own motion to dismissing a proceeding, the notice given by the Court must be sufficient. The notice must enable the party at risk of dismissal of proceedings to fully appreciate the possible consequences of what could occur on the return of the case before the Court and to also enable the plaintiff to prepare and make submissions to the Court as to why dismissal should not be ordered. It is a logical corollary to this proposition that where a Court intends to dismiss a defence or cross-defence and enter summary judgment because of non-compliance with orders or directions of the Court, the defendant or cross-defendant must be on similar notice to be able to prepare its case on the return of the matter as to why the Court should not exercise its power of summary determination to strike out a defence or cross-defence and enter summary judgment against the defendant or cross-defendant.
45. In the present case MRDC was already on notice by the Court’s order of 20 December 2016 that if it failed to comply with the extension of the earlier order of 24 November 2017 to provide Mr Kakaraya with outstanding discoverable documents by 27 January 2017, that continued non-compliance would result in entry of judgment against it on Mr Kakaraya’s cross-claim. MRDC was represented by counsel Mr Kuvi at the inter partes hearing which took place before Kandakasi J on 27 January 2017, yet MRDC’s counsel had on that occasion taken no steps to prepare for the hearing and instead made an oral application for adjournment, which was justifiably refused by his Honour.
46. The grounds set out in MRDC’s motion filed on 2 November 2018 for which dismissal of Mr Kakaraya’s cross-claim was sought at the trial on assessment of damages only a week later are threefold. It is said in that motion to the effect that the “default judgment” in Mr Kakaraya’s favour should be set aside and the cross-claim dismissed because:

(a) the Court lacks jurisdiction as Mr Kakaraya did not comply with the mandatory giving of notice of his cross-claim to the State under s.5 of the CBAS Act;

(b) the judgment was irregularly entered as no s.5 notice of Mr Kakaraya’s cross-claim was served on the State; and

(c) the cross-claim proceedings were therefore an abuse of process under Order 12 Rule 40(1)(c) of the National Court Rules.

47. Section 5 of the CBAS Act states:

5. Notice of claims against the State.

(1) No action to enforce any claim against the State lies against the State unless notice in writing of intention to make a claim is given in accordance with this Section by the claimant to—

(a) The Departmental Head of the Department responsible for justice matters; or

(b) the Solicitor-General.

(2) A notice under this Section shall be given—

(a) within a period of six months after the occurrence out of which the claim arose; or

(b) where the claim is for breach of a contract, within a period of six months after the claimant became aware of the alleged breach; or

(c) within such further period as—

(1) The Principal Legal Adviser; or

(2) the court before which the action is instituted,

on sufficient cause being shown, allows.

48. The CBAS Act does not define the term “the State”. It has been left to the Courts to develop its own jurisprudence as to the meaning of that term.
49. Mr Nale argued that the MRDC is an entity of the State, hence a s.5 notice under the CBAS Act is required as a condition precedent for the purpose of prosecuting a claim against the MRDC. As no s.5 notice of Mr Kakaraya’s cross-claim was given to the Solicitor-General or the Attorney-General, it was submitted by Mr Nale that no action can lie against the MRDC in respect of matters pleaded in Mr Kakaraya’s cross-claim. Mr Nale argued that because no s.5 notice of cross-claim was given, the “default judgment’ entered against MRDC was irregularly entered, void and an abuse of process of the Court and should be set aside and the whole of the cross-claim proceedings dismissed.
50. As to Mr Nale’s submission that non-service of a mandatory s.5 notice under the CBAS Act renders a claim void as against the State, I disagree. Section 5(1) of the CBAS Act clearly states that no action to enforce any claim against the State can be made unless a notice in writing is given in accordance with that section. An action can still be commenced, but it cannot be enforced by order of the Court. Section 5 of the CBAS Act is a defence that must be pleaded by the State if no notice of the claim has been given. It is akin to a statutory time bar. If such a defence is not pleaded, it cannot be argued: More v University of Papua New Guinea [1985] PNGLR 401 (Pratt J, Amet J, Los J).
51. In the present case, MRDC failed to plead the s.5 issue in its cross-defence. This is a but one reason why the MRDC’s motion to dismiss Mr Kakaraya’s cross-claim was flawed.
52. It is well settled law that unless there is foundation in the pleadings of a party, no relief for matters not pleaded can be allowed: see Papua New Guinea Banking Corporation v Tole (2002) SC694 (Amet CJ, Sheehan & Kandakasi JJ) and the many cases cited therein. This fundamental principle of procedural law is derived from Order 4 Rule 7 of the National Court Rules which states that an originating process must state specifically the relief claimed. The principle was further explained by Kandakasi J at page 9 of the Supreme Court’s decision in the Tole case, where his Honour said:

“But with the exceptions of fresh matters being introduced without objection at trial, parties are restricted to the case and relief detailed in their pleadings. In any other case, to alter pleadings a party must seek amendment and only if such amendment is granted can there be relief outside that which has been pleaded.”

53. In State v Josiah (2005) SC792 (Jalina, Kirriwom & Lenalia JJ) one of the issues raised by the State was that the trial judge had erred when exercising jurisdiction of the National Court to deal with a claim by serving members of the Air Transport Division of the PNG Defence Force and granting a default judgment against the State in circumstances where the National Court proceedings had been commenced without any s.5 notice under the CBAS Act having been given to the State. That issue had not, however, been pleaded in the defence filed for the State and its co-defendants at National Court level. It was argued on appeal that the trial judge on his own initiative should have raised and determined issues concerning the regularity or competency of the proceedings with or without the application of an interested party. One of those matters was the s.5 notice issue which had not been pleaded in the defence filed for the State. The appellants submitted that had the trial judge addressed competency issues, even though not pleaded, he would have found that the proceedings were incompetent from the start and that default judgment should not be granted.
54. The Supreme Court in State v Josiah made short shrift of this submission. In a unanimous decision, their Honours said at page 10:

“We have considered the grounds of appeal as well as the statement of claim in the light of the submissions by both parties, and note that much emphasis has been placed by [counsel for the State] on the alleged error by the trial judge to properly consider and exercise his discretion on the failure by the respondents to give notice of claim pursuant to s.5 of the Claims By and Against the State Act. He referred us to a number of cases in this jurisdiction relating to the discretionary power of the Court.

Whilst we accept the requirement to give notice of intention to make a claim against the State to be mandatory, we do not consider the learned trial judge made any error in that regard for the simple reason that it was for the appellant to have raised the issue through the pleadings. The appellant failed to do so even though it had more than ample opportunity to have done so. The first opportunity was during the ordinary course of pleadings after the writ was served on it through the office of the Solicitor General and secondly, after an extension of time of 7 days was granted to it by Kandakasi J. It cannot now complain that the learned trial judge failed to properly consider the provisions of that Act.”

55. Just as a defendant is entitled to know the case against it through a properly pleaded statement of claim, so too is a plaintiff entitled to know the case for the defendant through a properly pleaded defence and not be taken by surprise or ambush on the eve of trial. It is axiomatic that this principle has equal application to proceedings on a cross-claim. I find that the MRDC through its lawyers at the material time failed to amend its cross-defence to plead the s.5 notice issue prior to summary judgment on Mr Kakaraya’s cross-claim being entered on 27 January 2017. MRDC was estopped from raising that issue at trial on assessment of Mr Kakaraya’s damages.
56. I am fortified in this conclusion by observing that MRDC failed to comply with yet another order made by Kandakasi J, this time an order made by his Honour on 26 September 2017^[23] whereby MRDC was required to respond by 17 October 2017 to a statement of relevant facts and issues (Statement) to be prepared by Mr Kakaraya and forwarded to MRDC by 10 October 2017. The parties were to then meet in conference and settle the Statement by 20 October 2017. Mr Kakaraya’s lawyers complied and duly forwarded the Statement to MRDC’s lawyers. However, when this case returned before the Court on 7 November 2017, MRDC had not responded to Mr Kakaraya’s Statement. His Honour granted MRDC an extension of time on condition that there had to be full compliance by MRDC with the settling of the Statement well before the next return date.^[24]
57. When these proceedings returned before the Court on 13 December 2017, MRDC had still not settled and signed off on the Statement of facts and issues. So on 13 December 2017 Kandakasi J ordered that Mr Kakaraya’s Statement be filed as per the draft that was tendered to his Honour by Mr Kakaraya’s counsel on that occasion. O’Briens Lawyers filed Mr Kakaraya’s Statement the same day. It is dated 13 December 2017. It bears the initials of Kandakasi J.^[25]
58. If MRDC’s lawyers had wanted to raise the s.5 notice issue, they had every opportunity to do so by conferring with Mr Kakaraya’s lawyers after the Court’s order of 27 September 2017 was made and before 13 December 2017, the date on which MRDC had again failed to comply with directions of the Court despite an extension having been granted to it on 7 November 2017. By not responding to the Court’s directions in a timely manner or at all, it is understandable as to why Mr Kakaraya’s Statement made no reference to the s.5 notice issue as that was not a matter which had been pleaded in MRDC’s cross-defence filed on 27 June 2005 nor was it at any time subsequent thereto an issue for determination by the Court which been communicated by MRDC’s lawyers to Mr Kakaraya’s lawyers, that is until the issue finally surfaced in the notice of motion filed by Jema Lawyers a week before the trial on assessment of damages was fixed for hearing.
59. Turning now to the gist of Mr Nale’s primary submission for MRDC’s motion for dismissal, Mr Nale has strenuously argued that MRDC is an entity of the State for the purposes of s.5 of the CBAS Act. Therefore, notice of any claim against MRDC by a prospective plaintiff, including notice of claim by a cross-claimant after commencement of litigation, must be served on either the Solicitor-General or the Attorney-General in accordance with the service provisions set out in s.5(3) of the Act. Mr Nale referred in his extensive submissions to a number of case authorities which he said supported this proposition.
60. Reliance was placed by Mr Nale on conventional authorities such as Minatou v Kumo (1998) N1768, where an application for a default judgment arising for a claim for compensation for damage caused by a police raid was properly refused by the Court because no s. 5 notice had been served on the State prior to commencement of suit.
61. Mr Nale also referred to State v Downer Construction (PNG) Ltd (2009) SC979, where the Supreme Court by a majority of two to one held that arbitration proceedings are not the same as an action for a claim in court proceedings and therefore a s. 5 notice under the CBAS Act is not required prior to commencing arbitration proceedings against the State.
62. I observe that the Supreme Court’s decision in State v Downer Construction (PNG) Ltd has no bearing at all on Mr Kakaraya’s cross-claim, as this present litigation has never involved any issue as to whether the parties had agreed to submit a dispute between them to arbitration.
63. Mr Nale cited the case of Kakaraya v Ombudsman Commission of Papua New Guinea (2003) N2478 in which Kandakasi J held that Mr Kakaraya’s application for judicial review of a decision of the Ombudsman to refer him to the Public Prosecutor for possible prosecution under the Leadership Code was refused. While it is correct that his Honour found that the MRDC is a public institution because the State has a controlling share and at the material time had power to appoint members of its board and its managing director, the decision in that case had nothing to do with the issue of whether MRDC is an entity of the State for the purposes of s.5 of the CBAS Act. In any event, his Honour found that Mr Kakaraya had not exhausted all available remedies before seeking judicial review. And as it transpired, the evidence at assessment of trial shows that after long and protracted litigation entirely separate from these cross-claim proceedings, Mr Kakaraya was exonerated from any wrongdoing prior to his suspension and subsequent dismissal by the board of MRDC.
64. Mr Nale then pointed out that MRDC is a limited liability company incorporated under the Companies Act 1997, the sole shareholder of which at the material time back in 2002 to 2005 was Prime Minister Hon. Michael Somare. It was contended by Mr Nale that MRDC is a company wholly owned by the State through the Prime Minister, originally established to hold and manage the interests of project area landowners and Provincial Governments in mining and petroleum resource activities in the country. Mr Nale referred in his written submissions to s.176 of the Oil and Gas Act 1998, which created a regime whereby the equity and royalty benefits accruing from petroleum projects are held on trust for project landowners by corporate trustees owned by MRDC.
65. It was argued by Mr Nale that the MRDC, despite being a limited liability company, is nevertheless an entity of the State because it is subject to decisions and directions of the National Executive Council. Therefore, it was submitted, MRDC is a governmental body and is in effect deemed to be “the State” for the purposes of s.5 of the CBSA Act.
66. Mr Nale contended that as Mr Kakaraya did not give notice of his cross-claim to the Solicitor-General or the Attorney-General within six months of MRDC’s breaches of his contract of employment, the proceedings based on Mr Kakaraya’s cross-claim are therefore an abuse of process and must be dismissed.
67. Of more relevance to Mr Nale’s argument, albeit in a limited way, was the reference in his submissions to the decision in Mineral Resources Development Corporation Ltd v Sisimolu (2010) SC1090 (Lenalia, Davani, Kariko JJ) where the Supreme Court held that because of the MRDC’s enabling legislation, the Mineral Resources Development Company Limited (Privatization) Act 1996 and its corporate constitution, the MRDC is an entity of the State because of the large role which the State has to play in its everyday functions. The Supreme Court found that the MRDC was answerable to the State in all its operations and that because of these characteristics, the CBAS Act applied to it. This in turn meant that persons and entities suing the MRDC were required to serve a s.5 notice on the State.
68. I am aware that the Mineral Resources Development Company Limited (Privatization) Act 1996 was repealed and replaced by the Mineral Resources Development Company Limited Authorisation Act 2020 (Act No. 9 of 2020) which was certified on 26 June 2020 and came into force on 31 July 2020 on publication of notice in National Gazette No. G488 of 2020. Section 4(e) of the new Act expressly states that the CBAS Act does not apply to a MRDC subsidiary company, although it does not clarify whether the CBAS Act applies to claims made against the MRDC itself. Section 2 of the new Act defines the State as meaning “the Independent State of Papua New Guinea”. The new Act does not extend its statutory definition of the State to include the MRDC.
69. Be that as it may, Mr Nale for MRDC was unable to cite any authority for the proposition that a cross-claim by a defendant such as Mr Kakaraya, after commencement of proceedings instituted by MRDC, requires a s. 5 notice to be given under the CBAS Act.
70. Even if the MRDC were to still be judicially considered to be an entity of the State for the purposes of the CBAS Act, a contention on which I make no finding in the absence of full argument, I can find no authority in Papua New Guinea case law for the proposition that after commencement of suit against a defendant by a company such as the MRDC, notice of a cross-claim by a defendant in its capacity as cross-claimant must be given by the defendant to the State under s.5 of the CBAS Act.
71. The purpose of a s.5 notice was addressed by the Supreme Court in Kaurigova v Perone (2008) SC964 (Gavara-Nanu & Kandakasi JJ) at para. 27:

“ ... we consider that the question needs to be determined in the context of the legislative intent behind s.5 by taking a purposive approach to the Section. The scheme and purpose s.5 in our view is akin to that of s.54(6) of the MVIT Act, thus the purpose of a s.5 notice is to ensure that the notice of intention to make a claim by a claimant against the State gets to the notice of the State through the officers mentioned in Subsection (1) viz. Attorney General (the Secretary for Justice) or the Solicitor General as the case may be within the time stipulated under Subsection (2) so that the State is put on early notice and is made aware of an impending claim against it.”

72. In Hewali v PNG Police Force & The State N2233 Kandakasi J again considered the purpose of a s.5 notice under the CBAS Act, and said:

“ Such notice must give sufficient details about the impending claim so that the State can carry out its investigations and gather its evidence to properly address the claim once lodged against it. Such details should include dates, time, names of people and places, copies of any correspondence or such other information that could enable the State to carry out its own investigations. Only when notice is given with such details or information can one safely that notice of his or her intended claim has been given to the State.

This I consider is very important because the State, being a large institution, it would be hard placed to take any meaningful step to assess a claim as early as possible before it is lodged. This could serve both ways. It gives the State an early opportunity to investigate and assess a possible claim and facilitate early settlement in cases where the State is clearly liable to the claimant. This would minimize costs and interest to both parties. It would also help reduce the number of matters entering the court system for resolution.”

73. However, where an instrumentality created by the State is the plaintiff, that entity already knows the circumstances of the case because it should have already satisfied itself that it has the facts and evidence necessary to pursue a cause of action against a defendant.
74. The CBSA Act primarily relates to commencement of a suit or proceeding in a court where the claim is being made against the State or certain of its entities, not where the State or the entity in question is the plaintiff making a claim against a defendant.
75. Section 1 of the CBSA Act defines a “suit” as including “any action or original proceeding between parties in any court of competent jurisdiction”. Section 2 of the Act then provides:

2. Suits against the State

(1) A person making a claim against the State in contract or in tort may bring a suit against the State, in respect of the claim, in any court in which such a suit may be brought as between other persons.

(2) The provisions of this Act apply to applications for enforcement against the State of a right or freedom under Section 57 (Enforcement of guaranteed rights and freedoms) of the Constitution and for damages for infringement of a right or freedom under Section 58 (Compensation) of the Constitution.

76. Therefore the reference in s.5 of the CBSA Act to an “action to enforce any claim against the State” and to “intention to make a claim” refers only to an originating process, which does not include a cross-claim.
77. If Parliament had intended s.5 of the CBSA Act to apply to a cross-claim against the State, it should have clearly stated so in the Act. The reason it did not, in my view, is because once an originating process is filed by the State, the Court is already seized of the matter. Where the commencing party is an instrumentality of the State, that entity is already aware of the issues relating to its cause or causes of action against a defendant. A notice by a cross-claimant under s.5 of the CBSA Act would serve no purpose as the very function of a s.5 notice is to ensure that “the State is given early warning while the evidence is fresh. It would enable the State to make its own investigation if it wanted to and depending upon whatever evidence it gathers may decide to either settle or dispute an intended claim: Minato v The State” per the Supreme Court at para. 36 in MAPS Tuna Ltd v Manus Provincial Government (2007) SC857 (Hinchliffe, Gavara-Nanu, Lenalia JJ).
78. In the present case MRDC was in total control of Mr Kakaraya’s salary and entitlements. MRDC by its board sued Mr Kakaraya in these proceedings WS No. 1471 of 2004 for certain alleged matters which impugned his conduct as managing director of the company within the first 14 months of his contract of employment. MRDC also sued Mr Kakaraya for matters which related to the formation of the contract itself. At all material times MRDC had direct access to the facts and evidence it relied on for the purpose of this litigation, firstly in pursuit of its claim against Mr Kakaraya, which was struck out by the Court on 7 October 2016 for want of prosecution and for failure by MRDC to have complied with prior directions of the Court; and secondly, in MRDC’s defence of Mr Kakaraya’s cross-claim. MRDC did not need 6-months’ advance notice under s.5 of the CBAS Act of Mr Kakaraya’s intention to make a cross-claim against it in this litigation to enable MRDC to prepare its defence of Mr Kakaraya’s cross-claim. It would be an absurdity if s.5 of the CBAS Act were to be construed in such a manner as to impose a mandatory requirement on a cross-claimant such as Mr Kakaraya to give 6-months prior notice to the State. MRDC’s motion for dismissal of Mr Kakaraya’s cross-claim proceedings was misconceived and could have been refused on this basis alone.
79. There are several further cogent reasons why MRDC’s motion warranted dismissal at commencement of the trial on assessment of damages on 8 November 2018. Those reasons include failure to furnish evidence of any appeal to the Supreme Court against the summary judgment of 27 January 2017, failure by MRDC to have acted promptly in applying to set aside that judgment and failure by MRDC to give any satisfactory explanation for its delay in not raising the s.5 notice issue until only a week before trial of assessment of damages was due to commence.
80. There is no evidence before this Court that MRDC ever appealed Kandakasi J’s summary judgment of 27 January 2017 to the Supreme Court. However, assuming that there was such an appeal, unproven on the evidence, Mr Nale in his submissions said that the appeal was unsuccessful. I consider, however, that when Mr Nale made this statement, he was mistakenly referring to MRDC’s appeal to the Supreme Court in SCA No. 26 of 2008, which was against Kapi CJ’s dismissal of MRDC’s claim in these proceedings on 21 May 2008, not to any appeal against Kandakasi J’s subsequent summary dismissal of MRDC’s claim on 27 January 2017 based on MRDC’s failure to comply with prior directions of the Court.
81. Next, there is no record on the Court’s file that any application was ever made by MRDC to set aside the summary judgment of 27 January 2017 under Order 8 Rule 49 of the National Court Rules, which provides:

46. Where a judgment on a cross-claim is entered in default of notice of intention to defend or defence or in consequence of default in compliance with an order or direction of the Court, the Court may, on terms, set aside or vary the judgement.

82. I observe that both parties’ counsel overlooked this important provision in the National Court Rules, although in the result nothing turns on this as MRDC did not cite Order 8 Rule 46 in its late-filed motion as a source of the Court’s jurisdiction to grant the orders it was seeking for the dismissal of Mr Kakaraya’s cross-claim proceedings.
83. Order 4 Rule 49(8) of the National Court Rules mandatorily requires a motion to contain a concise reference to the Court’s jurisdiction to grant the orders sought, otherwise the motion may be struck out by the Court for being incompetent and for lack of form. It was held in Yaluma v The State (2010) N4088 by Sawong J that where such a motion seeks substantive relief such as dismissal (as was the case here) but fails to cite the correct source of the Court’s jurisdiction, the motion is defective and should itself be dismissed under Order 4 Rule 49(8) of the Rules as an abuse of process.
84. I surmise that the reason why Mr Kuvi, then with Elemi Lawyers who were acting for MRDC, took no steps to apply to the Court to set aside Kandakasi J’s order of 27 January 2017 was because Mr Kuvi considered that there were no viable grounds for such an application to be made, given that he was counsel who appeared for MRDC at the inter partes hearing which had resulted in Kandakasi J’s summary judgment in favour of Mr Kakaraya’s cross-claim on 27 January 2017. It was not as if that summary judgment had been made ex parte. There is evidence before the Court that Elemi Lawyers were under pressure by MRDC to withdraw from representing the company in these proceedings shortly after the summary judgment was granted.
85. Turning now to the delay in MRDC raising the s.5 notice issue, I find that MRDC had ample time prior the trial on assessment of Mr Kakaraya’s damages to have raised the s.5 notice issue. I have already observed that the s.5 notice issue was a matter that could have been pleaded in MRDC’s cross-defence filed on 27 July 2005. The same issue could thereafter at any time have been raised by MRDC’s lawyers up until Kandakasi J’s order of 13 December 2017 was made directing Mr Kakaraya to file his Statement in the form it then was, without any input from MRDC because of the company’s own default in complying with his Honour’s orders of 26 September 2017 and 7 November 2017.
86. It is abundantly clear that back in 2005 MRDC’s lawyers were not alive to the possibility of raising the s.5 notice issue, irrespective of whether that issue had any validity. But after MRDC’s cross-defence was filed on 27 July 2005, MRDC had every opportunity to raise the s.5 notice issue by the straightforward expedient of applying to the Court for leave pursuant to Order 8 Rule 5(1) of the National Court Rules to file an amended cross-defence. Alternatively, MRDC had full opportunity to raise the s.5 issue after Kandakasi J directed MRDC on 26 September 2017 to settle its input into Mr Kakaraya’s Statement by 10 October 2017. Again MRDC failed to do so.
87. Instead, the various lawyers acting for MRDC left it more than 13 years after the filing of MRDC’s cross-defence to suddenly raise the s.5 notice issue by the filing of a motion seeking to dismiss Mr Kakaraya’s cross-claim only a week before trial on assessment of Mr Kakaraya’s damages. No satisfactory reason for that delay was advanced by Mr Nale other than that the issue had occurred to his colleague Mr Simon Dewe at Jema Lawyers in mid-October 2018 when they were preparing for trial on assessment of damages, after the departure of their prior colleague Mr Noel Ako from that law firm in mid-July 2018.
88. Mr Dewe deposes in his affidavit sworn by him and filed in these proceedings on 7 November 2018, the day before the trial on assessment of damages on 8 November 2018, to the effect that he was the lawyer assisting Mr Ako when acting for the MRDC in the defence of Mr Kakaraya’s cross-claim, even before Mr Ako left Jema Lawyers in mid-July 2018. Jema Lawyers had been acting for MRDC in these proceedings as from date of filing of their notice of change of lawyers for MRDC on 17 July 2017.^[26] Mr Dewe’s affidavit gives no credible or satisfactory explanation at all as to the reason for the delay in MRDC raising the s.5 notice issue prior to the eve of trial for assessment of Mr Kakaraya’s damages.
89. When I put the question to Mr Nale at the commencement of the assessment of damages hearing on 8 November 2018 as to why the s.5 notice issue was not raised for MRDC at the inter partes hearing before Kandakasi J on 27 January 2017, Mr Nale had no satisfactory answer, except to say that another lawyer had appeared for MRDC on that occasion (Mr Kuvi of Elemi Lawyers) and that MRDC was entitled to raise competency issues at any time right up to time of trial.
90. I reject the competency argument raised by Mr Nale. These cross-claim proceedings relate to a civil suit in private contract law for damages. They are not specialised proceedings such as election petition proceedings where statutory provision has been made in Rule 12 of the Election Petition Rules 2012 to allow for objections to competency. Ordinary principles of pleading apply to Mr Kakaraya’s cross-claim. In view of the decision of the Supreme Court in Papua New Guinea Banking Corporation v Tole (supra) and its many preceding and subsequent authorities, MRDC is estopped by its own failure to initially plead the s.5 issue or to raise that issue by amendment of its cross-defence in a timely way, alternatively to have raised that issue by way of its inclusion in Mr Kakaraya’s Statement filed on 13 December 2017. MRDC had no justification for belatedly challenging at the trial on assessment of damages the competency of the cross-claim or the jurisdiction of this Court to deal with assessment of the damages to be awarded to Mr Kakaraya pursuant to the summary judgment on liability granted on 27 January 2017.
91. For all of the reasons I have given, I find that MRDC’s motion filed on 2 November 2018 was misconceived, flawed, in itself an abuse of process and should never have been filed at all. The motion fully warranted its dismissal, as was ordered by the Court at commencement of the trial on assessment of Mr Kakaraya’s damages on 8 November 2018.

ASSESSMENT OF DAMAGES

Issues and applicable law

92. Mr Kakaraya’s cause of action as pleaded in his cross-claim is for breach of contract. MRDC’s position at commencement of the trial on assessment of damages seemed to be that if its belated motion to dismiss the cross-claim were to be refused, which it was, then MRDC was resigned to not disputing its liability in respect of the cross-claim any further and would only be challenging the quantum of damages sought by Mr Kakaraya.
93. I make this observation at the outset because the written submissions for MRDC in answer to Mr Kakaraya’s claim on assessment of damages which were filed by Jema Lawyers for the MRDC on 23 October 2018^[27] categorically state this at para. 1:

“ [The] Cross Claim is for damages for breach of a Contract of Employment. This is not disputed and generally covered by the Statement of Facts and Legal Issues.”

The remainder of the written submissions for MRDC comprising 11 pages address the question of quantum of damages to be awarded by the Court. Those written submissions as well as Mr Nale’s oral submissions at trial on quantum made no attempt to further challenge MRDC’s liability to actually pay damages to Mr Kakaraya under the summary judgment of 27 January 2017.

94. The principles that govern assessment of damages after judgment has been entered on liability are well established and were summarised by Kandakasi J in Coecon Ltd (Receiver-Manager Appointed) v National Fisheries Authority of Papua New Guinea (2002) N2182 as follows:

“ 1. The judgement resolves all questions of liability in respect of the matters pleaded in the statement of claim.

2. Any matter that has not been pleaded but is introduced at the trial is a matter on which the defendant can take an issue on liability.

3. In the case of a claim for damages for breach of contract as in this case, such a judgement confirms there being a breach as alleged and leaves only the question of what damages necessarily flow from the breach.

4. The plaintiff in such a case has the burden to produce admissible and credible evidence of his alleged damages and if the Court is satisfied on the balance of probabilities that the damages have been incurred, awards can be made for the proven damages.

5. A plaintiff in such a case is only entitled to lead evidence and recover such damages as may be pleaded and asked for in his statement of claim.”

95. I now apply these principles to the assessment of the quantum of damages to which Mr Kakaraya is entitled as liability for MRDC’s breach of Mr Kakaraya’s contract was resolved by the Court’s judgment of 27 February 2017.
96. As it is acknowledged in the introduction to the submissions on quantum filed by counsel for MRDC that Mr Kakaraya’s cross-claim for damages is generally as set out in Mr Kakaraya’s Statement of facts and legal issues filed on 13 December 2017, I turn now to consider the content of that document. The Statement shows that the relief claimed by Mr Kakaraya is for damages which come under the following heads:

(1) claim for balance of unpaid entitlements for 4-year term of the contract supposedly held in escrow: K7,378.94 plus interest.

(2) claim for loss of future entitlements on expectation of renewal of the contract for a further term of 4 years: K7,036,158 plus interest.

(3) claim for loss of sitting allowances from corporate boards: K546,000.

(4 ) claim for loss of capital appreciation on lost property transactions: K10million.

(5) claim for loss of reputation and mental distress: K1.5million plus interest.

(6) claim for aggravated damages for breach of contract: at discretion of the Court.

(7) claim for legal costs.

97. These seven heads of claim comprise the issues which are now addressed by the Court in this decision.

Issue 1: Claim for entitlements under Contract intended by MRDC to have been held in escrow

98. This is a direct money claim for the balance of salary and entitlements which MRDC owes to Mr Kakaraya arising from MRDC’s liability for breach of Mr Kakaraya’s contract and MRDC’s failure to have placed those monies in an escrow account.
99. Item 9 of Mr Kakaraya’s contract stated that the commencement date for his employment with MRDC was 2 August 2001. Item 10 of the contract stated that the termination date was to be 4 years from the date specified in Item 9. The contract was therefore prima facie for a term of 4 years from 2 August 2001 and was due to end on 2 August 2005: see para. 8 of the affidavit of MRDC’s Mr Aupe filed on 26 March 2018.^[28]
100. It is agreed by MRDC that Mr Kakaraya was suspended on full pay and entitlements on 3 October 2022.
101. By letter dated 17 February 2003 MRDC’s then acting managing director Mr Kaupa notified Mr Kakaraya to the effect that all salary and entitlements payable under his contract would be indefinitely suspended and would instead be deposited into an escrow account. Reproduced hereunder is the relevant text of Mr Kaupa’s letter dated 17 February 2003 to Mr Kakaraya:

“ I advise that the Board of Directors has resolved that all payments from the Company to you under your Contract of Employment be suspended indefinitely as of 07^th February 2003. The Board also resolved that all such payments be held in escrow.

The funds deposited into that account will be held in escrow until such time as issues relating to your employment with and management of the company are resolved.”

[underlining added]

102. Websters New Encyclopedia Dictionary (2002) at p. 621 gives this description of an escrow account:

“ 1. A deed, a bond, money or a piece of property held in trust by a third party to be turn over to the grantee only upon fulfillment of a condition.

2. a fund on deposit designed to serve as an escrow

– in escrow: in trust or as an escrow (had $1000 in escrow to pay taxes)”

103. Black’s Law Dictionary (2009) 9^th Ed.at p. 20 defines an escrow account as being:

“ A bank account, generally held in the name of the depositor and an escrow agent, that is returnable to the depositor or paid to a third person on the fulfillment of specified conditions. ”

104. In accounting terms, an escrow account is an account where money or an asset such as company shares or bonds are held in trust by a third party on behalf of two other parties involved in a transaction. If the transaction is completed, the money or asset is released to the party for whom it was intended. If the transaction is not completed, the money or asset is returned to the depositor. An escrow account is managed by an escrow agent. The agent as trustee releases the money or asset only upon the fulfillment of predetermined contractual obligations or upon receiving appropriate instructions. In the case of money, the funds are usually paid into a bank account operated by the escrow agent.
105. An everyday example of an escrow account is where a purchaser has entered into a contract to purchase a real estate property from a vendor. The purchaser pays a deposit to the sales agent who then places the deposit monies into a trust account operated by the sales agent with a bank. If the sale is completed, the deposit monies are released by the sales agent to the vendor. If the sale does not proceed because some condition has not been fulfilled, such as where the parties have entered into a contract which is conditional on the purchaser obtaining mortgage finance but the purchaser’s loan application is unsuccessful, the sales agent will then normally be required to release the deposit monies back to the purchaser unless the contract provides otherwise.
106. An escrow account is not the same as a suspense account. Whereas an escrow account is held by a trusted agent independent of the persons or entities for whom the escrow account is established, a suspense account is created in the internal accounting system of a company or individual.
107. Black’s Law Dictionary (loc cit) at page 21 explains a suspense account in these terms:

“Suspense account: an account for the temporary entry of charges or credit or especially of doubtful accounts receivable pending determination of their ultimate disposition.”

108. A suspense account is a general ledger account which is used to record payments that need more information or where funds are recorded as being temporarily parked for a short period, before the end of the financial year. A suspense account is a bookkeeping technique that enables funds to be recorded until particular issues are resolved. A suspense account kept in a general ledger in an accounting system typically contain entries where there are uncertainties or discrepancies that need to be answered, such as where a customer pays an account to a company’s bank account but fails to inform the company of the invoice to which the payment relates.
109. Reverting to the present case, I observe that MRDC failed at trial to produce any evidence that MRDC’s board had, prior to Mr Kaupa’s letter of 17 February 2003, passed any resolution that payment of Mr Kakaraya’s salary and entitlements under his contract as from 7 February 2003 onwards were to be held in an escrow account. The evidence shows that the statement which was made by Mr Kaupa on behalf of MRDC in his letter dated 17 February 2003 that MRDC’s board had resolved that Mr Kakaraya’s salary and entitlements would be held in an escrow account was either patently untrue or that MRDC wilfully withheld from the discovery of documents process any resolution of the board made prior to 17 February 2003 which had directed that all payments withheld from Mr Kakaraya under his contract were to be paid into an escrow account.
110. The evidence as to what MRDC’s board had actually resolved prior to 17 February 2003 regarding Mr Kakaraya’s suspension is reflected in the minutes of the board’s meeting held on 14 October 2002 which are annexure E2 to Mr Aupe’s affidavit. The minutes of that board meeting contain the following resolutions:

“ RESOLVED:

1. THAT the Managing Director, Mr Dan Kakaraya, steps aside or is hereby suspended as the Managing Director and Chief Executive Officer of the Company on full remuneration pending completion of investigations of the books, accounts and financial records of the Company under Public Finances (Management) Act 1996.

2. THAT the Managing Director Mr Kakaraya is directed not to enter the Registered Office of the Company at Level one, First Heritage Centre, Waigani, NCD during the period of the financial inspections, as recited in paragraph 1 above.

3. THAT considering the current orders of the National Court and financial implications of the Company, Mr Francis Kaupa is not appointed to act as the Managing Director and Chief Executive Officer of the Company.

4. THAT Mr Joseph Gabut be appointed to act as the Managing Director of the Company pending conclusion of the financial inspections on the books, accounts, and financial records of the Company and the consideration and determination of the reports and recommendations of the financial inspectors.

5. THAT the Managing Director Mr Kakaraya is also directed to withdraw from performing all functions, duties and responsibilities relating to or associated with the Office of the Managing Director, including:

(a) attending all meetings of the subsidiary companies of the MRDC Group of Companies; and

(b) attending all meetings related to Mining and Petroleum Projects that the Company by itself, or through its subsidiaries is involved with. ”

111. The minutes of the meeting of the MRDC’s board held on 14 October 2002 make no mention of an escrow account to be established for the purpose of holding all monies payable to Mr Kakaraya under his contract following his suspension pending the financial investigations initiated by the board at the request of Prime Minister Hon. Michael Somare as sole shareholder of MRDC on behalf of the State. No other board minutes produced in evidence for MRDC for any period prior to 7 February 2003 allude to the escrow account so clearly referred to in Mr Kaupa’s letter of that date.
112. Yet MRDC, at para. 6 in its claim for relief in its amended statement of claim filed on 1 April 2005, categorically stated that MRDC was seeking a declaration by the Court that the company was entitled to “offset any or all funds held in an escrow account for and on behalf of the Defendant towards the settlement of any judgment given in favour of the Plaintiff in these proceedings”, thereby misleading Mr Kakaraya into a reasonably held belief that an escrow account purportedly existed into which MRDC was paying all salary and other entitlements withheld from him by MRDC.
113. I find that Mr Kaupa’s letter of 17 February 2003 was also an express representation made to Mr Kakaraya on behalf of MRDC that all monies owing under his contract as from 7 February 2003 would be paid by MRDC into an escrow account for an indefinite period pending the outcome of the investigations referred to in the minutes of MRDC’s board meeting held on 14 October 2002. Mr Kakaraya was fully entitled to rely on that representation. Suspension of Mr Kakaraya from duties as from 14 October 2002 and then from receipt of his salary and entitlements as from 7 February 2003 was a very serious matter. By reason of the MRDC’s board’s decision to suspend Mr Kakaraya from duties, he was effectively without income and blocked from receiving any of his salary and monetary entitlements under his contract as from 7 February 2003 onwards, pending resolution of the alleged matters which had prompted his suspension.
114. Subsequent to Mr Kaupa’s letter of 17 February 2003, MRDC took no steps at all to set up any escrow account for holding Mr Kakaraya’s withheld salary and entitlements, despite the false impression given by MRDC’s amended defence that such an escrow account already existed.
115. It was not until 22 months later that Prime Minister Hon. Michael Somare, as sole shareholder of MRDC, then directed the board of MRDC to “remove” Mr Kakaraya as managing director and chief executive officer of the company. The minute of the Prime Minister’s shareholder’s resolution dated 19 October 2004 is annexure F to Mr Aupe’s affidavit. The Prime Minister’s resolution states:

“ The Board is hereby directed to meet and determine:

(1) Dan Kakaraya’s removal, which shall take effect on the date the Board meets to make that determination; and

(2) his entitlements under the suspense account. ”

116. In furtherance of the shareholder’s resolution of the Prime Minister made on 19 October 2004, a meeting of MRDC’s board was convened on 28 January 2005, at which time the board passed a resolution formally terminating the services of Mr Kakaraya under his contract and appointing Mr Kaupa as his successor. A copy of the minute of the board’s meeting of 28 January 2005, a meeting held some 8 months before Mr Kakaraya’s contract was in the ordinary course of events due to expire on 2 October 2005, is annexure “G” to Mr Aupe’s affidavit. The resolution made by the MRDC’s board on that occasion states:

“ RESOLVED:

1. THAT Dan Kakaraya is hereby terminated as the Managing Director of MRDC.

2. THAT Mr Kakaraya’s entitlements be retained until all legal issues are resolved.

3. THAT documents relation to the removal of Dan Kakaraya must be properly drafted.”

117. Following the MRDC’s board meeting held on 28 January 2005, the acting chairman of MRDC Mr Simon Tosali wrote to Mr Kakaraya on MRDC letterhead on 7 February 2005. A copy of Mr Tosali’s letter is annexure “E” to Mr Kakaraya’s affidavit. The content of that letter is reproduced below:

“ Dear Sir,

RE: NOTICE OF TERMINATION

Please be advised of the following:

1. On 19^th October 2004 the Shareholders [sic] of Mineral Resource Development Company Limited met and resolved to terminate your appointment as a Director of this Company.

2. On 28^th January 2005 the Directors of this Company met and resolved that:

(1) Your Contract of Employment entered into with this Company in or about August 2001, based on legal advice, is null and void from its inception and as a result:

(a) you are only entitled to be paid on the basis of the void Contract for what you have actually earned up to on or about 12 October 2002, being the date of commencement of your suspension; and

(b) you are not entitled to be paid any entitlements by the Company calculated under the void Contract after the date of the suspension.

(2) Alternatively, should a Court of law hold your Contract of Employment is valid, it is summarily terminated pursuant to Clause 5 of the Contract effective as of 28 January 2005, on the basis of the grounds specified in Clause 5(a) and (b). Should this scenario materialise then the Company reserves the right to calculate your entitlements and to off set it against such amounts as you may owe the Company which is presently calculated at K678,066.88 , and the difference if any will be paid to you.

I take this opportunity on behalf of the Board and the Company to thank you for your previous involvement with this Company and we collectively wish you all the very best in your future endeavours.

Yours sincerely,

Mineral Resources Development Company Limited

[signature]

Simon Tosali

Acting Chairman ”

118. MRDC’s evidence shows that some four years later, after Mr Kakaraya had been exonerated from all allegations of wrongdoing when he was managing director of MRDC, protracted negotiations for settlement of Mr Kakaraya’s cross-claim had resulted in a resolution by the board of MRDC to the effect that an offer of K3million be made to Mr Kakaraya to settle his claim for K3million. A copy of the minute of the board meeting at which that resolution was made on 5 April 2009 is annexure “H” to Mr Aupe’s affidavit.
119. Mr Kakaraya did not accept the MRDC’s settlement offer of K3million but conveyed a higher counter-offer, which was not accepted by MRDC’s board.
120. A further 5 years passed, and while this litigation was still in progress, the MRDC’s board held a meeting on 28 March 2014 at which it passed a resolution which confusingly referred to an escrow account, not a suspense account, which had purportedly been set up for holding the balance of Mr Kakaraya’s salary and entitlements which were still owing, The Board’s resolution of 28 March 2014, a copy of which is annexure “I” to the affidavit of Mr Aupe, stated:

“ RESOLUTION

The Board resolved to:

(a) Write to Dan Kakaraya advising him that the offer to settle out of Court is withdrawn;

(b) The K3M currently held in an escrow account be transferred to an IBD account until the matter is resolved.

Moved: Director Baru
Seconded: Director Rimua ”

121. Despite the MRDC’s board resolution of 28 March 2014, the evidence clearly shows that at no point in time did the MRDC ever establish an escrow account, or even a suspense account by general ledger in its internal accounting system into which it transferred or made allowance for any monies which the board members knew MRDC would be required to pay to Mr Kakaraya should this Court proceeding in WS 1471 of 2004 be resolved in Mr Kakaraya’s favour.
122. I refer in this regard to the evidence of MRDC’ former payroll and accounts officer Ms Victoria Scott who, at para. 6 of her affidavit filed on 26 March 2016 deposes:

“... There was no escrow account created nor was there any escrow deed prepared or an escrow agent appointed. Any reference [in my annexed calculations] to escrow account was only made as a description that the funds set aside were related to the Cross-Claimant’s legal case.”

123. Attached to Ms Scott’s affidavit and marked “A” are two pages of calculations she has made. Page 2 of those calculations contain details of actual salary paid by MRDC to Mr Kakaraya for the payroll period 1 January 2002 to 26 July 2002 (K106,298.55 net) and various security, housing, gratuity and vehicle allowances actually paid by MRDC to or for the benefit of Mr Kakaraya for the period 6 December 2001 to 2 July 2002. Those calculations contain no projections for gross and net salary and entitlements or allowances which would have been payable under Mr Kakaraya’s contract beyond 2 July 2002 through to when termination of the contract would in the ordinary course of events have expired on 2 August 2005, were it not for the MRDC board’s early termination of the contract which took effect on 28 January 2005.
124. Page one of Ms Scott’s calculations forming part of Annexure “A” of her affidavit is of more relevance. Page one is a spreadsheet headed “Dan Kakaraya Escrow Account as at 30 October 2004”. The data in this spreadsheet is not projected to the end date of Mr Kakaraya’s contract on 2 August 2005. The data on this spreadsheet only covers the period from commencement of Mr Kakaraya’s contract on 2 August 2001 up to an arbitrary cut-off date of 30 October 2004. It is this set of calculations headed “Dan Kakaraya Escrow Account as at 30 October 2004” which is very carefully referred to by Ms Scott in her affidavit as being “a description” of what is in effect the notional result of what should have been reflected in an escrow account had such an account been established by MRDC outside of its accounting system to show what Mr Kakaraya was owed for the period from 7 February 2003 to the end date of Ms Scott’s calculation on 30 October 2004, and which escrow account had, as I have found, not been created at all.
125. Page one of Ms Scott’s calculations does give some useful information. It states that the last payment of salary to Mr Kakaraya was made on 7 February 2003. The first column of this page one then gives sub-heading descriptions for salary and each entitlement or allowance payable under Mr Kakaraya’s contract. The second column states to the effect that salary due after 7 February 2003 projected through to 31 December 2003 would have been K301,693.35 gross, with a further pro rata salary amount of K316,059.70 gross due for payment to Mr Kakaraya for the period 1 January 2004 through to 30 October 2004 (on the assumption that the contract were to have been allowed to continue). The second column of the calculation then sets out the amounts that would be due under the contract for entitlements under each of the sub-headings of gratuity, motor vehicle, security and domestic allowances for the period 7 February 2003 to 30 October 2004, giving a total, when added to the abovementioned two amounts, of gross salary of K1,136,512.01. The third column of the calculation sets out tax payable on gross salary and all entitlements (except for domestic allowance, which is presumably exempt from tax) giving a total of K508,166.64 for tax deductible from gross salary. The fourth column of the calculation sets out the net amounts of after-tax salary and entitlements totalling K640,864.37 that would be payable to Mr Kakaraya for the period from 7 February 2003 to 30 October 2004. Ms Scott has then allowed for further deduction from that net amount of K640,864.37 of an advance payment of a housing allowance of K116,918.12 which had apparently already been paid by MRDC to Mr Kakaraya for the period October 2004 to August 2005 and a further amount of K132,654.18 for “staff and travel advances” received by Mr Kakaraya, giving a net balance of K391,292.07 which would purportedly have been payable to him had the contract continued to the end date of Ms Scott’s calculation, which was 30 October 2004 (rather than date of termination of Mr Kakaraya’s contract on 2 August 2005).
126. It will be recalled at this juncture that according to the MRDC’s board resolution of 28 March 2018, an amount of K3million was to be paid by MRDC from a (non-existent) escrow account into an IBD account as a fund to compensate Mr Kakaraya for the unpaid balance of his salary and entitlements should this proceeding be resolved in his favour. I repeat that there is incontrovertible evidence that MRDC never established that escrow account. There is also evidence that the MRDC failed to transfer an amount of K3million into an IBD for the benefit of Mr Kakaraya should this case be resolved in his favour.
127. Mr Aupae on behalf of MRDC deposes at paras. 15 to 17 of his first affidavit as follows:

“ 15. There was no escrow account established for the purpose of keeping the salary and other entitlements which were provided under the Cross-Claimant’s Contract of Employment; If an account was established to hold the Cross-Claimant’s entitlements then it would have been established entirely at the discretion of the Board of Directors.

16. The Cross-Defendant’s shareholders resolution dated 19^th October 2004 [Removal of Dan Kakaraya] only provides for “his entitlements under the suspense account”. Dut to the Cross-Claimant obtaining restraining orders from the Court preventing the implementation of the Shareholders’ [sic] resolution of 19^th October 2004 the Cross-Defendant’s Board resolution (No. 2) passed during the meeting held on 28^th January 2005 stated that the Cross-Claimant’s entitlements be retained until all legal issues are resolved”.

17. The Cross-Defendant, through its Board, has over [the] years disclosed the case and made a contingent liability provision for this case in its annual budgets and financial accounts since 2005 as part of standard company operating requirements. There was no legal or contractual requirement for contingent liabilities to be placed into escrow accounts.”

128. I agree with Mr Aupe when he deposes that there was no contractual requirement for MRDC to create an escrow account, or indeed to pay monies into an IBD account, to cater for a compensation fund for Mr Kakaraya should his breach of contract claim against MRDC be successful. But I find that it was ingenuous and misleading for Mr Aupe to endeavour to persuade the Court that MRDC was not obliged to honour its representations made to Mr Kakaraya that the MRDC was establishing an escrow account, later erroneously referred to as a suspense account, then later referred to again in board minutes as an escrow account as if it had already been created and from which an amount of K3million would be paid into an IBD account.
129. Furthermore, no evidence was adduced by MRDC at trial of assessment of damages of any of MRDC’s annual budgets and financial accounts since 2005 to date of trial which Mr Aupe has alleged would show that MRDC has made repeated annual provision for a contingent liability to compensate Mr Kakaraya should his cross-claim be successful. There is no corroborative accounting or other evidence at all to support Mr Aupe’s contentions in this regard.
130. In short, I find that MRDC’s own evidence proves that it misrepresented to Mr Kakaraya that the balance of his suspended salary and entitlements from 7 February 2003 to the end of his contract on 2 August 2005 would be held in an escrow account. This misrepresentation was then compounded the MRDC’s board’s resolution of 28 March 2014 that a reputed amount of K3million held in a (non-existent) escrow account would be transferred into an equally non-existent IBD account “until the matter is resolved”.
131. In view of this analysis of the evidence, and given that there can be no issue as to MRDC’s liability to compensate Mr Kakaraya by way of damages for the balance of his unpaid salary and entitlements under his contract because of the judgment on liability of 27 February 2017, what then is the proper amount of damages that should be awarded to Mr Kakaraya for the period from his last payday on 7 February 2003 to the termination date of his contract on 2 August 2005?
132. It is at this juncture that the evidence of chartered accountant Mr Sinton Spence contained in his affidavit filed on 26 February 2018 becomes relevant.
133. Prior to the trial for assessment of damages, on 26 September 2018 MRDC filed a notice pursuant to s.35(2) of the Evidence Act^[29] that it objected, among other things, to the use of Mr Spence’s affidavit on the ground that it was alleged that paragraphs 4 and 5 contain unqualified opinion evidence and/or unreliable evidence due to Mr Spence’s misconception of principles of law governing judgments entered by default and should be struck out.
134. Counsel for Mr Kakaraya countered by formal notice of reply filed on 31 October 2018^[30] and submitted that the whole of Mr Spence’s affidavit is relevant to the issues for assessment of damages by the Court. It was submitted that Mr Spence is a fully qualified and experienced accountant and he is therefore entitled to give his expert opinion of the quantum of Mr Kakaraya’s financial losses.
135. Counsel for MRDC Mr Nale objected to the use of Mr Spence’s affidavit at the trial on assessment of damages. Mr Nale also raised objections to various matters deposed to by Mr Kakaraya in his affidavit. I accordingly ruled that I would allow into evidence the two affidavits sought to be tendered in evidence for Mr Kakaraya, including Mr Spence’s affidavit, as well as the two main affidavits sought to be tendered in evidence for MRDC, that is to say Mr Aupe’s affidavit and Ms Scott’s affidavit, on condition that if I found there to be any substance to the objections raised, then I would deal with those objections in the Court’s reserved decision.
136. As to MRDC’s objection to the admissibility of Mr Spence’s affidavit, I concur entirely with the submission made by Mr Goodwin, counsel for Mr Kakaraya. Mr Spence’s affidavit constitutes the evidence of an expert witness, given in support of the case for Mr Kakaraya. Annexed and marked “A” to Mr Spence’s affidavit is a resumé of his extensive accountancy qualifications and professional experience acquired over a period of more than 40 years. He is a fully qualified accountant and auditor. He has been an Associate Member of The Institute of Chartered Accountants of England and Wales since 1980. He is an Associate Member of Certified Practising Accountants of Papua New Guinea. Mr Spence’s credentials as an expert witness in accounting and audit matters are impeccable. Mr Spence’s report dated 14 November 2017 in respect of Mr Kakaraya’s estimated financial losses is based on documentation and data furnished to Mr Spence’s office by Mr Kakaraya, who obviously requested him to do a series of projections of estimated financial losses which would be applicable if the Court were to find that Mr Kakaraya was entitled to hold a reasonable expectation that his contract of employment would have been renewed for a second term of 4 years were it not for the matters that had prompted MRDC’s decision to suspend and then terminate Mr Kakaraya’s contract early. MRDC’s objection to Mr Spence’s affidavit is misconceived and I accordingly overrule that objection. The whole of Mr Spence’s affidavit is validly admitted into evidence. It is now a question of how the Court deals with the matters concerning Mr Kakaraya’s financial losses which are deposed to by Mr Spence in his affidavit and its annexed report.
137. Mr Spence deposes in his affidavit filed on 26 February 2018 that his office accepted instructions from Mr Kakaraya in May 2008 to prepare an assessment of the financial and economic losses which Mr Kakaraya sustained as a result of MRDC’s suspension of him from duties and MRDC’s subsequent early termination of his contract.
138. Mr Spence outlines at para. 4 of his affidavit the methodology his office adopted when carrying out the projections of Mr Kakaraya’s financial losses:

“ We performed the following procedure in our finding:

4.1 Analysing Dan Kakaraya’s Cross-Claim;

4.2 Calculation of Gross Salary;

4.3 Comparing and assessing data from Nasfund;

4.5 Analysing CIP Indices; and

4.5 Comparing and assessing data obtained from published reports of the Bank of Papua New Guinea.”

139. Mr Spence states in the introduction to his report to the effect that its purpose is to quantify amounts unpaid under Mr Kakaraya’s contract of employment with MRDC, including the interest on those amounts, resulting from the termination for Mr Kakaraya’s contract.
140. The overall summary of the assessment carried out by the office of Mr Spence in respect of Mr Kakaraya’s estimated financial losses is set out on page 3 of Mr Spence’s report. The summary of those estimated losses has been calculated to 14 November 2017, the date of Mr Spence’s report. The summary of that report, set out below, includes a projection of losses that Mr Kakaraya was claiming had his contract been renewed by MRDC for a further term of 4 years from 2 August 2005 through to August 2009. The interest components of the summary are based on fluctuating Bank of Papua New Guinea and Nasfund interest rates which are set out in Appendix 2 to Mr Sinton’s report.

		Balance Due (K)	Interest (K)	Total (K)
A	Entitlements from initial Contract	3,232,077	4,146,864	7,378,941
B	Entitlements from Contract renewal	3,186,393	3,849,765	7,036,158
	Total Entitlements	6,418,470	7,996,629	14,415,099

141. Columns 1 and 2 in the spreadsheet which is page 5 of Mr Spence’s report give a comprehensive outline of all of Mr Kakaraya’s salary and entitlements said to have been payable by MRDC under the original 4-year term of Mr Kakaraya’s contract. Column 3 of that spreadsheet sets out in itemized form Mr Spence’s assessment of the notional balance of salary and entitlements totalling K3,232,077 (but excluding interest) which were due but unpaid by MRDC as at 2 August 2005, the date Mr Kakaraya’s subject contract would in the ordinary course of events have expired had it not been for the early termination of Mr Kakaraya’s employment. An abbreviated version of column 3 is set out below.

Salary and Entitlements
Balance Due Under Contract
1. Salary 632,469
2 NPF (NasFund) 319,450
3. Gratuity 442,515
4. Housing (112,241)
5. Motor Vehicle 449,990
6. Telephone 48,000
7. Utilities 116,000
8. Domestic 12,800
9. Business Entertainment19,200
10. Security 120,000
11. School fees 480,000
12. Annual leave 112,905
13. Medical 77,137
14. Settling in Advance -
15. Settling out Allowance 6,000
16. Leave Fares 30,000
17. Repatriation 5,000
18. Freight 16,228
19. Various Other:
Motor Vehicle -
Dry cleaners 2,528
Utilities -
Maintenance 34,598
Food and beverage 17,861
Stationery 4,170
Accommodation 20,157
Travel 69,130
Club membership 20,000
Legal 228,000
Accountancy 50,000
Computer consumables 10,000
_______
Total: 3,232,077

142. I observe that no rebuttal affidavit material was filed by MRDC in answer to the degree of detail and projections contained in Mr Spence’s report on Mr Kakaraya’s estimated financial losses. I agree with what Mr Kakaraya says in para. 62 of his affidavit:

“ 62. To date the Plaintiff/Cross-Defendant has not made any real attempt to review or verify the Sinton Spence Report on the Assessment of my Damages and have continued to ignore it until the trial on the assessment of damages.”

143. The affidavit of Ms Scott filed for MRDC on 26 March 2016 refers to her own calculations of Mr Kakaraya’s estimated financial losses for the period from commencement of Mr Kakaraya’s contract on 2 August 2001 up to an arbitrary cut-off date of 30 October 2004 and, as it preceded the filing of Mr Spence’s affidavit filed on 26 February 2018, it did not take into account many of the entitlements set out in column 3 of Mr Spence’s report. If MRDC had genuine cause to challenge the estimated financial losses sustained by Mr Kakaraya and set out in column 3 of the spreadsheet on page 5 of Mr Spence’s report, MRDC had more than 8 months before trial on assessment of damages on 8 November 2018 to do so. No such rebuttal affidavit material was filed for MRDC. Instead, a notice of objection to the use of Mr Spence’s affidavit and report was filed for MRDC on 26 September 2018, just six weeks before trial, being an objection which I have ruled was misconceived.
144. As there was no evidence before the Court to rebut Mr Spence’s assessment that the amount owing but unpaid by MRDC to Mr Kakaraya at the end-date of 2 August 2005 of Kakaraya’s contract was K3,232,077 had the contract not been terminated early, I find that this amount has, on the civil standard of proof on balance of probabilities, been proven to be the estimated financial loss sustained by Mr Kakaraya for this head of damage. Item 1 of Mr Kakaraya’s claim is accordingly allowed and assessed in the sum of K3,232,077.

Issue 2: Claim for expectation damages – claim for loss of future entitlements on expectation of renewal of Contact for further term of 4 years - K7,036,158 plus interest

145. Mr Kakaraya is claiming for salary and entitlements for a further 4 years beyond the 4-year term of his contract, including interest, based on what he says was his legitimate expectation when he entered into the contract in August 2001 that it would be renewed or extended on completion of his 4-year term in August 2005 for at least a further term of 4 years.
146. This head of damages claimed for Mr Kakaraya, known as expectation damages, is predicated on the assumption that the law of contract in Papua New Guinea recognizes that there are circumstances where an innocent party who has an expectation of renewal of a contract may claim for financial loss sustained when the other party wrongfully breaches the original contract and thereby causes the innocent party to sustain not only financial loss or benefits under the original contract but also financial loss or benefits arising from the non-renewal of the original contract.
147. Mr Kakaraya relies on clause 4(b) of his contract of employment as having created, from his perspective, a legitimate expectation that the contract would be renewed at termination by MRDC in the ordinary course of events for a further term of 4-years. Clause 4 of the contract states:

“4. Duration

(a) This Agreement shall commence on the date specified in Item 9 of the Schedule and shall continue for the period specified in Item 10 of the Schedule unless and until the Employee’s employment is terminated as provided in this Agreement.

(b) Upon the expiration of the term of this Agreement the Company may at its option elect to extend the term of the Agreement.”

148. As previously observed, Items 9 and 10 of the Schedule stipulated that the commencement date of the contract was 2 August 2001 and that the duration of the contract was for a term of 4 years.
149. It is submitted for Mr Kakaraya that if the contract had been allowed to have gone full term without its wrongful early termination by MRDC, then Mr Kakaraya had a reasonably-held expectation that the contract would have been renewed for a further 4 years from 2 August 2005 to 2 August 2009. Therefore, Mr Kakaraya is claiming the further sum of K3,186,393, plus interest, for the additional 4-year period of notional renewal of the contract, as calculated and set out in column 1 of the spreadsheet which is contained on page 7 of Mr Spence’s report.
150. It is submitted for Mr Kakaraya that his evidence establishes that it was the usual practice of MRDC to give an employee an extension of a contract of employment where there had been proper performance of that employee’s contractual duties. It was argued by Mr Goodwin that as Mr Kakaraya was successful in obtaining judgment on liability against MRDC on 27 February 2017, this was tantamount to a finding that MRDC’s suspension and then early termination of Mr Kakaraya’s employment was unlawful. Mr Goodwin’s written submissions states at paras. 30 and 31:

“30. ... It is reasonably forseeable for the Cross-Claimant to have expected that he would have had his term extended and a further period of 4 years as provided for in the contract of employment, and is reasonable in the circumstances and not a remote prospect.

31. The evidence of the Cross-Claimant is that his reputation and career were completely destroyed by the unlawful actions of the Cross-Defendant, such that he has never been able to gain employment at the level and remuneration of his former employment with MRDC. He has had to scour out a basic living and rely on family savings to survive, even up to recent times when he has secured some employment as a lawyer with Warner Shand, which is based on a contribution to the firm and has yet to bear fruit.”

151. In answer, MRDC by its counsel Mr Nale submitted that the words of clause 4(b) of the contract speak for themselves. Clause 4(b) did not create any legal obligation on the part of MRDC to renew the contract. It simply gave MRDC an option, an unfettered discretion, as to whether the contract should be renewed for a further term. MRDC was at liberty, no matter what expectation Mr Kakaraya may have had, to allow the contract to simply lapse as soon as the initial term of 4 years had expired. This was, Mr Nale submitted, MRDC’s contractual right.
152. It was also submitted by Mr Nale that even if the board of MRDC had made a wholly unreasonable decision to terminate Mr Kakaraya’s services early, as asserted by Mr Kakaraya, that decision was still within the bounds of the board’s authority to make. It was contended that the MRDC’s decision did not in itself create any additional cause of action or foundation for a claim based on MRDCS’ refusal to in effect honour Mr Kakaraya’s expectation that the contract would be renewed.
153. Given Mr Kakaraya’s evidence on point, which is to be found at paras. 37 to 44 of his affidavit, I appreciate the reasons why it is advanced for Mr Kakaraya that he considers he should be compensated for financial losses based on his reasonably-held expectation that the contract would be renewed by MRDC under clause 4(b). However, the case authorities are very much against such a proposition.
154. The case which was relied on for Mr Kakaraya in support of his claim for expectation damages for MRDC’s breach of the contract flowing for a further 4 years is the oft-cited Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54 (1991) 174 ALR 64 where the Australian Federal High Court considered the measure of the damages, including expectation damages, which can be claimed as arising from a breach of contract. Mason CJ and Dawson J said this at paras. 23 and 24 of the judgment:

“ 23. The general rule at common law, as stated by Parke B. in Robinson v. Harman [1848] EngR 135; (1848) 1 Ex 850, at p 855 [1848] EngR 135; (154 ER 363, at p 365), is:

"that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed".

This statement of principle has been accepted and applied in Australia: see Wenham v. Ella [1972] HCA 43; (1972) 127 CLR 454, per Gibbs J. at p 471.

24. The award of damages for breach of contract protects a plaintiff's expectation of receiving the defendant's performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as "expectation damages". The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation.”

155. The principles of contract law applicable to assessment of damages as propounded in Commonwealth v Amann Aviation Pty Ltd have been accepted and adopted as good law in Papua New Guinea. In PNG Aviation Services Pty Ltd v Karri (2009) SC1002 the Supreme Court (Cannings J, Gabi J and Ellis J) said this at para. 14:

“When assessing damages in contract, the court seeks to put the injured party in the position that party would have been in but for the breach of the contract. In other words, the object is to put the plaintiff in the same position as if the contract was performed. That statement of general principle for the assessment of damages for breach of contract is usually based on the decision in Robinson v Harman [1848] EngR 135; (1848) Exch 850 at 855; [1848] EngR 135; 154 ER 363 at 365, approved by the High Court of Australia in Commonwealth v Amann Aviation Pty Ltd ...”.

156. Mr Goodwin eloquently states at para 9 of his written submissions, in connection with Commonwealth v Amann Aviation Pty Ltd:

“ The High Court recognises that all damages flowing from a breach of contract (as pleaded in this case) may be claimed by a party not in breach. Each particular or sub-head of damages for breach of contract is a manifestation of the damages that can be claimed from the breach, and they are not discrete or alternate measures of damages. This includes expectation damages, loss of profits, reliance damages, damages for wasted expenditure, and any other particular damage flowing from a breach of contract.”

157. I agree with counsel for Mr Kakaraya in this regard. However, the Australian High Court in Commonwealth v Amann Aviation Pty Ltd, when considering the principles of contract law which specifically apply to the measure of expectation damages, was referring to the expectation of a party to a contract that the other party would perform its obligations under the contract itself. In that case, Mason CJ and Dawson J went on to observe that the corollary to the general principles outlined in the Australian High Court’s decision is that a plaintiff is not entitled by an award of damages for breach of contract to be placed in a superior position to that in which he or she would have been had the contract been performed.
158. In the present instance, clause 4(b) of the contract placed no affirmative enforceable obligation on MRDC to extend or renew the contract. There was no contractual “promise” or agreement by MRDC to extend or grant renewal of Mr Kakaraya’s contract on termination that would bring clause 4(b) within the ambit of the principles of expectation damages enunciated in Commonwealth v Amann Aviation Pty Ltd. Clause 4(b) is merely declaratory that MRDC could, if it so wished, unilaterally elect to extend the term of the contract when it expired, by such further term as the MRDC might decide. Any such extension would be at the MRDC’s discretion. The extension might only be for a short duration, a matter of several weeks or months, or it could be an extension for a much longer period of time, perhaps for a further term of 4 years or beyond. Clause 4(b) of the contract was an option available to MRDC, but not to Mr Kakaraya.
159. The exercise by MRDC of its option to extend the 4-year term of Mr Kakaraya’s employment always remained the prerogative of MRDC under clause 4(b) of the contract. That option has never been susceptible to enforcement by Mr Kakaraya. Without right of enforcement, no expectation damages can be awarded. Mr Kakaraya’s claim for expectation damages must be declined.
160. However, I wish to add some further observations in connection with the principles of contract law applicable to expectation damages.
161. There has in the past been a practice that has developed in the area of employment by the public service and public authorities following expiry of a written contact that is not renewed for the former employee to remain on the payroll but become “unattached” or get placed in a pool of former employees waiting for further arrangements for their employment to be made. This practice, which has allowed former employees to hold an expectation that their expired contracts will be renewed, is well-described by Kandakasi J in Himsa v Sikani (2002) N2307. However, there is no basis in law that such an expectation can be enforced or is actionable. Once a person in the public service or a public authority obtains employment under a written contract, it is to the terms of the contract that the parties and the courts must turn. If the contract provides for the employee to have a right of renewal or extension, the court will uphold that right subject to any conditions that attach to that contractual right. If the contract does not confer on the employee the right for its renewal or extension, the court will decline to grant relief by way of expectation damages.
162. In Kuluah v University of Papua New Guinea [1993] PNGLR 494 the plaintiff had been employed under a written contract with the University. When the contract expired the University refused to renew it. Aggrieved by that decision, the plaintiff applied to the Court for judicial review. The application was refused by Sheehan J who held at p.497:

“In the first place, it is acknowledged that the plaintiff’s contract of employment was a private contract. As such, the action or the decisions of the parties to it are outside the scope of judicial review. Judicial review is concerned only with the protection of rights under public law, not the private rights and duties of parties that arise under contract or tort. Judicial review is certainly not available to those involving disputes regarding private contracts of employment: Sulaiman v PNG University of Technology [1987] PNGLR 267.”

163. In the recent case of Kiap & National Capital District Commission v Kasper & The State (2023) SC2435 (Kandakasi DCJ, Polume-Kiele J and Dowa J) the Supreme Court held that upon the expiry of the appellant’s contract of employment with the NCDC, the contractual relationship between the parties ended, with no right of continuous employment vested in Mr Kasper as an unattached employee or as an employee waiting in a pool of former employees to be re-employed. The Supreme Court held that the public service practice of “unattached officers” or “being in the pool” is unlawful, unfair and unenforceable. While this case related to a judicial review application of a decision of a statutory authority not to renew a contract of employment rather than a claim for damages for breach of contract, as is the case here, the decision in Kiap v National Capital District Commission is illustrative of the Court’s refusal, with good reason, to acknowledge that a former employee has any enforceable right of expectation that a contract will be renewed or extended unless the contract itself has express provision which confers on the employee the right to entertain that expectation.
164. There is one further aspect of Mr Kakaraya’s claim for expectation damages which requires comment. Counsel for Mr Kakaraya endeavoured at paras. 24 and 25 of his written submission to persuade the Court that in the alternative to expectation damages being assessed for a notional renewal period of 4 years from expiry of Mr Kakaraya’s contract on 2 August 2005, expectation damages based on Mr Kakaraya’s salary and entitlements under the contract should instead be calculated for period of 11 years from 2 August 2005 through to September 2016, which is when Mr Kakaraya obtained employment with Warner Shand Lawyers. The reasoning for this proposition is that the severity of the damage to Mr Kakaraya’s professional reputation caused by the aftermath of the MRDC’s decision to terminate his employment and the Ombudsman Commission’s subsequent enquiry into his dismissal was such that he was unable to obtain any meaningful employment during that 11-year period.
165. I am compelled to reject this alternative submission made for Mr Kakaraya for the same reasons as I have given in connection with the refusal of the Court to allow any claim for expectation damages for the renewal or extension of the 4-year term of Mr Kakaraya’s original contract of employment. I consider that counsel for Mr Kakaraya knew that the alternative submission that expectation damages should be awarded for 11 years, not 4 years, was unlikely to ever succeed because no case authority was cited to justify that proposition and no evidence was adduced which could have assisted the Court to calculate expectation damages for such a prolonged duration, even if the Court had agreed to the proposition, which it does not.

Issue 3: Claim for loss of sitting allowances: K546,000

166. Item 6 of Mr Kakaraya’s Statement refers to his claim for loss of sitting allowances as a member of various boards of directors, which his counsel submits comes to a total of K546,000 and occurred as a forseeable consequence of MRDC’s wrongful termination of Mr Kakaraya’s employment.
167. The evidence in support of Mr Kakaraya’s claim for loss of sitting allowances is brief. It is contained in para. 70 of his affidavit. Mr Kakaraya deposes:

“ 70. I am also claiming from the Plaintiff/Cross-Defendant for damages for the following:

70.1 Loss of sitting allowance on the Board of BSP Bank. I was one of the founding Directors of the Board of BSP Bank. Due to the court proceeding by the Plaintiff/Defendant against me, the Governor of Central Bank refused to appoint me to the Board, and I was removed from the Board. As a result, I lost my expected sitting allowance of the duration of tenue of employment with the Plaintiff/Cross-Defendant.

70.2 Loss of sitting allowance on the Board of Trustees of Petroleum Resources of Kutubu Ltd, Petroleum Globe Ltd [sic] and Petroleum Resources Moran Ltd for the duration of my term as Managing Director and CEO of MRDC. I was also one of the members of the Board of Trustee[s] of each of the above companies and was entitled to receive sitting allowances in excess of K1million annually. The sitting allowances are calculated in accordance with the investment guidelines and Trust Deed of each company.

70.3 The particulars of the calculations for my lost sitting allowances are as follows:

Loss of Sitting Allowance	3 year term remaining on Contract	4 year term on extension of contract
- MRDC (AUD500 per day for 4 x 12 months for 3 and 7 yrs respectively)	180,000	420,000
- BSP (K500 x 4 x 12 for 3 and 7 yrs respectively)	72,000	168,000 ”

168. Mr Goodwin, at page 6 of his written submissions, says to the effect that the sitting allowances which Mr Kakaraya received:

(a) from MRDC ranged from K180,000 to K420,000 – which have been averaged out to K390,000; and

(b) from Bank of South Pacific Limited (BSP) ranged from K72,000 to K168,000 – which have been averaged out to K156,000.

169. I disallow all of these sitting allowances for the following reasons:

(1) There is no evidence to substantiate in respect of sitting allowances paid to Mr Kakaraya by MRDC or by any of the subsidiary companies of MRDC:

(a) the respective dates on which Mr Kakaraya was appointed to the boards of trustees of Petroleum Resources of Kutubu Ltd, Petroleum Globe Ltd^[31] and Petroleum Resources Moran Ltd and who made those appointments;

(b) that a sitting allowance of AUD500 per day was payable to Mr Kakaraya each time he attended meetings of the boards of trustees of Petroleum Resources of Kutubu Ltd, Petroleum Globe Ltd and Petroleum Resources Moran Ltd;

(c) the dates on which Mr Kakaraya actually attended meetings of the boards of Trustees of Petroleum Resources of Kutubu Ltd, Petroleum Globe Ltd and Petroleum Resources Moran Ltd prior to MRDC’s early termination of his employment effective as of 28 January 2005, those meetings presumably having also occurred prior to MRDC’s suspension of Mr Kakaraya’s employment on 3 October 2002;

(d) the dates of receipt by Mr Kakaraya of sitting allowances actually paid to him by Petroleum Resources of Kutubu Ltd, Petroleum Globe Ltd and Petroleum Resources Moran Ltd and/or MRDC or by some other entity, and the amount of each such receipt.

(2) There is no evidence to substantiate in respect of sitting allowances paid to Mr Kakaraya by BSP:

(a) the date on which Mr Kakaraya was appointed to the board of the Bank of South Pacific Ltd (BSP) and who made that appointment;

(b) that a sitting allowance of K500 was payable to Mr Kakaraya by BSP for attending each meeting of the board;

(c) the dates on which Mr Kakaraya actually attended meetings of the board of BSP prior to MRDC’s early termination of his employment effective as of 28 January 2005, those meetings presumably having occurred prior to MRDC’s suspension of Mr Kakaraya’s employment on 3 October 2002;

(d) the dates of receipt by Mr Kakaraya of sitting allowances actually paid to him by BSP, and the amount of each such receipt;

(e) the date and manner in which Mr Kakaraya received notification that the Governor of the Central Bank of Papua New Guinea had refused to appoint Mr Kakaraya to the board of BSP and had removed him from that board.

(3) No particulars in respect of any claim for loss of sitting allowances were pleaded in Mr Kakaraya’s cross-claim, nor did they form part of the calculations contained in the Accountant’s Report annexed to Mr Spence’s affidavit.

170. I find that because of the absence of corroborative evidence to substantiate this claim for loss of sitting allowances, Mr Kakaraya has not discharged his burden of proof to adduce credible proof of his losses in this regard: Coecon Limited (Receiver/Manager Appointed) v National Fisheries Authority (supra). Assertion of loss is not sufficient. There must be cogent proof of loss sufficient to satisfy the Court on the balance of probabilities that the loss has been incurred. Evidence with supporting calculations sufficient to support this head of damage has not been furnished to the Court. The claim for loss of sitting allowances is not proven and is declined.

Issue 4: Claim for loss of capital appreciation on lost property transactions: K10million

171. Mr Kakaraya’s claim for this loss is set out at item 7 of the Statement. Mr Kakaraya seeks an award of damages for loss of capital appreciation on several properties he intended to purchase but which acquisitions could not proceed after institutional lenders withdrew loan finance due to the reputational damage which he suffered after he was suspended and his employment later wrongfully terminated by MRDC.
172. The primary evidence in support of Mr Kakaraya’s claim under this head of damages is contained at paras. 49 to 54 of his affidavit, which I set out in full below:

“ 49. I lost a substantial property in downtown Port Moresby in the Central Business District, described as the KIK Building at Section 45, Allotment 9, Granville, NCD.

Annexed hereto and marked “I” is a true copy of the letter dated 27 December 2002, from the ANZ Bank to KIK’s Real Estate Agent to my real estate agent.

Annexed hereto and marked “J” is a true copy of the letter dated 27 December 2002, from the ANZ Bank to KIK’s Real Estate Agent confirming that I had sufficient funds for deposit of the purchase price of the property at Section 45, Allotment 9, Granville, NCD.

50. On or about 2002, I had to sell my Toyota VX Land cruiser to Boroko Motors for K180,000 for the purposes of arriving at ten (10) per cent deposit for the said property and deposited with the real estate agent.

51. I lost this property as a direct consequent of the deprivation of my capacity to service the loan as my entitlement and salaries were withheld by the Plaintiff/Cross-Defendant in an escrow account.

52. On or about 2002, I was offered to purchase a prestigious residential property at Touaguba Hill described as Section 64 Allotments 12-15 Konenamo Crescent, Touaguba Hill, NCD. However, I could not purchase it as I was denied access to my finances, my entitlements were withheld as well.

Annexed hereto and marked “J” is a true coy of the letter dated 7 April 2017 from Jasmore Holdings Limited, the owners of the property located at Section 64, Allotments 12-15, Konenamo Crescent, Touaguba Hill, NCD, informing me of the withdrawal of their offer at the end of 2002.

53. In 2002, I also lost a commercial property at Boroko, Tabari Place which was offered to me at K1.8 million when the loan facility offered to me by the Kina Finance Group at that time withdrew the facility due to the adverse publicity surrounding my suspension as Managing Director of MRDC. That property is currently valued at K18 million and I have requested for the current owner’s valuation.

54. I verily believe that if the Plaintiff/Cross-Defendant’s agents and servants did not deprive me of my funds and maliciously persecuted me, I would have acquired these properties and mitigated my losses caused by the Plaintiff/Cross-Defendant.”

173. These contentions by Mr Kakaraya as to his financial losses were not substantiated by any further evidentiary material. I have difficulty understanding how the Court could possibly calculate the loss of capital gain on the three properties which Mr Kakaraya deposes he lost as a result of MRDC’s breach of his contract of employment.
174. It is obvious from Mr Kakaraya’s affidavit that he intended to adduce a considerable body of evidence dealing with this issue of loss of capital gain at trial on assessment of damages. I say this because Mr Kakaraya states at para.46 of his affidavit:

“46. I have also engaged three valuers to conduct valuations on three properties I lost as a result of my suspension and termination. The valuers I engaged recently informed me that they had a conflict of interest as they were also doing some work for MRDC and could not work on my valuations. I had to look for another valuer which I have yet to find. I have been unable to engage any valuer but have kindly asked for valuations from the current owners which I will provide as soon as I can obtain same.”

175. No valuation reports as to the market value of the three properties in question as at the date of MRDC’s breach of Mr Kakaraya’s contract between 2002 and 2005 and again proximate to the date of trial in 2018 were tended in evidence at trial. The Court is left with no evidence from which it could possibly determine the quantum of Mr Kakaraya’s assertions of loss of capital gain on the three properties, assuming that the Court were minded to allow such a claim in the first place, which it is not because of the paucity of corroborative evidence and because of foreseeability issues in connection with remoteness of such damage that were not comprehensively argued for Mr Kakaraya at trial.
176. It need hardly be repeated that a claimant such as Mr Kakaraya has the onus of proving his losses on the balance of probabilities. It is not sufficient to make assertions in a statement of claim or cross-claim and expect the Court to award what is claimed. The burden of proving a fact is upon the party alleging it: Paklin v Waugulo (2001) N2212 (Jalina J). Corroboration of what is asserted must come from an independent source: Baine v The State (1995) N1335 (Woods J). The principles of proof and corroboration apply even when a defendant such as the MRDC fails to present any evidence disputing a claim: Wanis v Sikiot (1995) N1350 (Woods J).
177. Mr Goodwin endeavoured in his submissions for Mr Kakaraya to persuade the Court that because of the lapse of time of 16 years between when Mr Kakaraya’s salary and entitlements were withheld by MRDC and the date of trial, it was difficult for Mr Kakaraya to accurately quantify his estimated loss of capital gain on the three properties and that therefore the Court should just go ahead and make some allowance for those losses. I disagree with that submission. Valuation reports are crucial to claims made for loss of capital gain. The Court needs to know the difference in the market value of a real estate property at time of loss of investment opportunity and the accretion in the market value of that property at time of trial if there is to be any prospect of the Court being able to calculate loss of capital gain. Mr Kakaraya was clearly aware of this at the time he deposed to the matters in his affidavit sworn and filed on 26 February 2018. He then had 9 months before trial on assessment of damages on 8 November 2018 to obtain and produce in evidence the valuation reports necessary to support his claims for loss of capital gain, a claim which I observe had inexplicably escalated from K10 million in item 7 of the Statement filed on 13 December 2017 to K37 million by the time written submissions on assessment of his damages were filed for him by his lawyers on 19 October 2018.
178. As the evidence for Mr Kakaraya on his claim for losses of capital gain on investment properties he wished to purchase during and after 2002 falls far below that which would be required to satisfy the Court on balance of probabilities, assuming that the Court were in principle prepared to accept such a claim in the circumstances of this case, which it is not for reasons explained, the claim under this head of damages must fail.

Issue 5: Claim for loss of reputation and mental distress: K5million plus interest

179. A claim for loss of reputation and mental distress arising from breach of contract is possible in this jurisdiction and comes under the head of general damages. Any doubt as to this was laid to rest in Central Bank of Papua New Guinea v Tugiau (2009) SC1013 (Kirriwom, Kandakasi & Batari JJ) where the Supreme Court said this at p.16:

“ Traditionally, the law did not and does not compensate for any disappointment and hurt feelings which ordinarily follow any termination of employment. The law has now developed to a point where the Courts have been awarding damages for such things as stress, anxiety and defamation of character or loss of reputation. This can only happen in cases where a plaintiff first properly pleads the loss or damage with the relevant particulars and then establishes it by appropriate evidence at the trial. The evidence must establish actual damages being suffered, for example serious negative impact on one’s health or not being able to secure alternative employment because of any unlawful and baseless attacks and injury to one’s reputation or character.”

[underlining added]

180. The principal relief pleaded by Mr Kakaraya’s in his cross-claim was “damages for breach of contract”. He expanded on this in his Statement, where at item 8 he claimed for loss of reputation and mental distress. MRDC was therefore on notice as from when the Statement was filed on 13 December 2017 that it would be required to meet a claim in general damages that included a claim for Mr Kakaraya’s loss of reputation and mental distress.
181. Mr Goodwin has summarised Mr Kakaraya’s claim for this head of damages in this way:
     

“ The loss suffered by the Cross-Claimant was due to the suspension and termination of his employment, with serious unproven allegations of impropriety. The Cross-Claimant as subjected to subsequent public investigative and legal action taken by the Cross-Defendant. The evidence of this is extensively set out in various paragraphs of the Affidavit of Dan Kakaraya. In all of the circumstances there was a serious possibility or real danger that the Cross-Defendant’s actions would result in loss of reputation and mental distress to the Cross-Claimant (which did occur as evidenced in paragraphs 55 to 58 of the Affidavit of Dan Kakaraya). This was clearly in the contemplation of the Cross-Defendant, or at least if it had considered the question, the Cross-Defendant would have concluded that loss of reputation and mental distress would have occurred, and that this flowed from the breach of contract.”

182. There are numerous PNG cases where general damages have been awarded primarily for mental distress in cases involving breach of contract. Earlier cases include Harding v Teperoi Timbers Pty Ltd (1988) N672 (K1,000); Na-Al v Debege (2000) N1958 (K15,000); Nuia v Independent State of Papua New Guinea (2000) N1986 (K5,000); and Roth v Waironak (2011) N4452 (K5,000).
183. However, these earlier breach of contract cases give little guidance as to quantum of awards of general damages where there has been serious damage caused to the professional and personal reputation of a plaintiff such as Mr Kakaraya. I therefore consider it appropriate that the Court should, when assessing the quantum to which Mr Kakaraya is entitled for the damage to his reputation, have recourse to awards of general damages to senior members of the legal profession in defamation actions.
184. The Supreme Court in Coyle v Henao [2000] PNGLR 17 (Los, Jalina, Kirriwom JJ) at p.32 expounded on the basic principles that underpin the tort of defamation:

“ The law does not say that the person defamed must prove injuries before he can be compensated. Damages awarded in defamation serve three purposes, which overlap considerably in reality and ensure that “the amount of a verdict is the product of a mixture of inextricable considerations”, Uren v John Fairfax & Sons Pty Ltd (1966) 117 C.L.R.118 per Windeyer J. The three purposes are:

(i) consolation for the personal distress and hurt caused to the [respondent] by the publication;

(ii) reparation for the harm done to the appellant’s personal and (if relevant) business reputation; and

(iii) vindication of the appellant’s reputation:

Carson v John Fairfax & Co at p.60 per Mason CJ, Deane, Dawson and Gaudron JJ.”

185. The appeal in Coyle’s case was against an award of K50,000 made by Woods J in the National Court in favour of the respondent, a well-known lawyer and former president of the PNG Law Society. The respondent was found by Woods J to have been defamed by members of another law firm in a letter which they wrote to the Attorney-General alleging professional misconduct on the part of the respondent. The Supreme Court declined to accept the submission for the appellants that the award of general damages made by the trial judge was excessively high and instead held, at p.33:

“The amount awarded is not so greatly outside the discretionary range “such as to evoke and exclamation of astonishment”. This appeal must therefore fail as the appellants have failed to show or demonstrate that the trial judge had erred by acting on a wrong principle of law or through misapprehension of facts. In the circumstances we dismiss the appeal and confirm the award of K50,000.

186. In Lambu v Dugube (2006) N3082 (Kandakasi J) the plaintiff, a qualified lawyer and respected member of his local and wider PNG community, was seriously defamed by a police officer who, acting on a defamatory letter written by someone else, widely circulated and published the contents of that letter to many people attending meetings held at Surinki in the Laiagam District of Enga Province. The plaintiff was falsely accused of having purchased and supplied a firearm and a carton of ammunition to purposely kill persons involved in a tribal fight with the tribe of the plaintiff’s wife. The Court found that the defamatory statements, apart from being untrue, gravely endangered the life of the plaintiff. The plaintiff was awarded general damages of K100,000 for injury to his professional reputation and social standing.
187. In the case of Salika v Pacific Star Ltd (2014) N5699 (Davani J) the National Court awarded the plaintiff, a highly respected senior member of Papua New Guinea’s judiciary and now our Chief Justice, general damages of K250,000 and aggravated damages of K50,000, a total of K300,000, for a most egregious defamation published in The National newspaper in an article which contained untrue imputations, among others, that his Honour was presiding in a case where one of the litigants was alleged to be a personal friend. The newspaper’s reporter had failed to cross-check with the Court staff the purported but incorrect facts which had prompted the offending newspaper article. The reporter had merely relied on a statement given to her by another litigant in that case. Had the reporter checked the story with Court staff before publication in the newspaper, she would have quickly ascertained that those parts of the article she had written which related to his Honour were untrue. The editor of the newspaper compounded the injury to his Honour’s reputation by declining to print an apology when requested to do so.
188. In the present case Mr Kakaraya claimed, at item 8 of his Statement, an amount of K1.5 million as general damages for mental distress and injury to his reputation. At trial on assessment of damages Mr Goodwin’s submitted that an award of K5 million was a more appropriate amount of compensation to be awarded by the Court by way of general damages, firstly for the harm done by MRDC to Mr Kakaraya’s professional and personal reputation, and secondly for the mental distress and hurt which Mr Kakaraya had deposed in his evidence he sustained as a result of the many years of litigation, ultimately pointless investigations and stigma he was subjected to after suspension of his employment in October 2002 and after wrongful termination of his contract by MRDC in February 2005 through until October 2016, which is when Mr Kakaraya was finally able to obtain gainful employment with Warner Shand Lawyers.
189. I find that Mr Goodwin’s submissions on the quantum of general damages to be awarded by the Court to Mr Kakaraya for injury to his reputation and mental distress were overly optimistic, as were Mr Kakaraya’s own estimate in that regard. No award of general damages in Papua New Guinea for claims for reputational damage founded on breach of contract or in defamation have ever exceeded K250,000 to date.
190. Mr Nale for MRDC in his submissions did not address the question of quantum of general damages which should be awarded to Mr Kakaraya for his claim for loss of reputation and mental distress. Instead Mr Nale said at page 9 of his written submissions that while Mr Kakaraya’s biographical evidence before and after his termination may be relevant, Mr Kakaraya had not satisfied the need to plead this aspect of his case. I repeat my prior observation that MRDC was on notice as from when Mr Kakaraya’s Statement was filed on 13 December 2017, in accordance with order made by Kandakasi J earlier that day, that Mr Kakaraya was seeking substantial general damages for injury to his reputation and for mental distress. That claim was then evidenced by the matters deposed to by Mr Kakaraya in his affidavit filed on 26 February 2018. MRDC therefore had ample opportunity prior to trial on assessment of damages to rebut Mr Kakaraya’s evidence as to the nature and extent of the injury he suffered to his professional and personal reputation and the mental anguish he was subjected to as a result of the wrongful termination of his employment by MRDC. No such evidence in rebuttal was adduced by MRDC at trial.
191. In the result, having had regard to the range of awards for reputational damage in the defamation cases I have referred to, and acknowledging that in addition to the reputational damage inflicted on Mr Kakaraya by MRDC’s actions, Mr Kakaraya also endured much mental anguish over a period of in excess of 12 years, I have determined that an appropriate award of general damages under this heading would be the sum of K150,000. General damages in that amount are therefore assessed for Mr Kakaraya’s claim for injury to his professional and personal reputation and for mental distress.

Issue 6: Claim for aggravated damages for breach of contract: K7,036,158.

192. Mr Kakaraya has claimed at item 10 of his Statement that he should be awarded aggravated damages arising from MRDC’s breach of his contract. He has acknowledged in item 10 that these are at the discretion of the Court. Mr Nale for MRDC has countered that as aggravated damages were not specifically pleaded in the relief claimed in the cross-claim, a claim under this head of damages cannot be allowed by the Court.
193. Mr Goodwin went to great lengths in his written submissions in his endeavour to persuade the Court that even though aggravated damages were not specifically pleaded in Mr Kakaraya’s cross-claim, the trend in England and Canada has been to allow aggravated damages as a form of general damages, even if not expressly pleaded. Mr Goodwin cited the case of Honda Canada Inc v Keays [2008] SCR 362, said to be a leading case of the Supreme Court of Canada that has had significant impact in Canadian employment law and is said by Mr Goodwin to have drawn support for it in other Commonwealth countries by reforming the manner in which damages for breach of employment contract are to be awarded in cases of wrongful dismissal or unlawful termination. Mr Goodwin relies on the following passage, among others, taken from the judgment of Bastarache J at para. 59 of the decision in the Honda Canada Inc case:

“ To be perfectly clear, I will conclude this analysis of our jurisprudence by saying that there is no reason to retain the distinction between “true aggravated damages” resulting from a separate cause of action and moral damages resulting from conduct in the matter of termination. Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle. .... Examples of conduct in dismissal resulting in compensable damages are attacking the employee’s reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance.”

194. With respect, I can find nothing in the Honda Canada Inc case which supports the proposition advanced by Mr Goodwin, which seems to be that it is not necessary to plead aggravated damages by way of relief in our jurisdiction because aggravated damages are compensatory in nature and, unlike exemplary damages, are not punitive. The argument seems to be that aggravated damages should be considered to be a form of general damages.
195. Mr Goodwin has also referred to the case of Commissioner General of Internal Revenue v Leach (1998) N1779 where Sevua J awarded both general damages and exemplary damages for stress, anxiety and mental distress caused by the conduct of the IRC in destroying the business and profession of the defendant and his ability to earn income. However, Mr Goodwin states in his written submissions at para. 68 that his Honour in that case seems to have grouped together exemplary damages, aggravated damages and compensatory damages for loss of reputation and mental distress but that the nature of the award was more compensatory in nature and therefore falls more within the principles of aggravated damages. Again, with respect, I do not see how this assists the absence of an express plea for relief by way of aggravated damages in Mr Kakaraya’s cross-claim.
196. The nature of aggravated damages was well explained by the Supreme Court in PNG Aviation Services Pty Ltd v Somare (2000) SC658 (Salika, Sakora, Sevua, JJ). Justice Salika (as he then was) said this at p.9:

“ Aggravated damages differ from other types of damages and exemplary damages. They are not designed to punish a defendant or to act as a deterrent. They are compensatory in nature. There are the normal or ordinary compensatory damages but there are those which are aggravated: see Rooks v Barnard [1964] UKHL 1; (1964) AC 1129. Lord Devlin in that case said an injury done to the plaintiff may be exacerbated by the conduct of the defendant, thereby attracting higher compensatory damages. Where the conduct of the defendant has been “high handed, malicious, insulting or oppressive” the award may be at the highest of the range “that could fairly be regarded as compensation.” ... Furthermore, aggravated damages are awarded where the defendant’s conduct has lacked bona fides or is somehow improper or unjustifiable.”

197. In similar vein, Justice Sevua said this at p. 14 of the PNG Aviation Services case:

“Aggravated damage is distinct from general damages, just as it is form special damages and exemplary damages. It is my view that aggravated damages should have been awarded to the appellant on the basis of the evidence that the appellant’s reputation had been injured, the effect of which was “devastating” as the learned trial Judge had found.”

198. The upshot of this is that I am not satisfied that a claim for aggravated damages need not be pleaded separate from a claim for general damages, special damages or exemplary damages in a claim based on breach of contract. These are all heads of damages recognised in Papua New Guinea law. They are discrete heads of damages and should be pleaded as such in a claimant’s prayer for relief.
199. In any event, I have already found that, to the extent that MRDC’s conduct in connection with its breach of Mr Kakaraya’s contract resulted in loss of Mr Kakaraya’s professional reputation and mental distress, he is to be compensated for that by an award of general damages of K150,000. If aggravated damages in excess of general damages were to have been sought by Mr Kakaraya, a claim specific to aggravated damages should have been pleaded in the cross-claim. It was not. The claim for aggravated damages must accordingly be refused.

Issue 7: Claim for costs on a solicitor/client or indemnity basis

200. At trial, Mr Goodwin sought an order that Mr Kakaraya’s costs of this litigation be paid by MRDC on an indemnity or solicitor/client basis.
201. Although costs need not be specifically claimed, it is prudent practice to claim costs in an originating process or cross-claim, particularly where costs will be sought on a solicitor/client or indemnity basis as this then puts the defendant on notice right from the start as to the nature of the costs order which will be sought by a plaintiff or cross-claimant if the claim is successful.
202. The general rule is that costs follow the event, which means that the successful party is awarded a contribution towards its legal costs paid for by the losing party on a party/party basis on the scale set out in Table 1 of Schedule 2 of the National Court Rules. However, an award of costs is always within the discretion of the Court. As the scale of party/party costs has not been revised since the National Court Rules came into operation in 1983 it is, in my view, way out of step with fees presently charged by lawyers to their clients. The Court may therefore, depending on the circumstances of the case, award costs to a successful litigant on a solicitor/client basis (also known as costs on a lawyer/client basis) or on an indemnity basis. An award of solicitor/client costs is compensatory. An award of costs on an indemnity basis is punitive. As to the distinction between solicitor/client costs and indemnity costs, see Opi v Telikom PNG Limited (2020) N8290 (Shepherd J).
203. There are many circumstances when an award of solicitor/client costs is warranted, such as where there is no defence on the merits, where the other party failed to explore and exhaust all prospects of having the matter settled without court action or delay, where there has been defiance by the other party in complying with court orders or where the successful party has generally had to incur unnecessary expenses through unmeritorious litigation: PNG Ports Corporation Ltd v Canopus No. 71 Ltd (2010) N4288 (Kandakasi J); Opi v Telikom PNG Limited (supra).
204. In the present case Mr Kakaraya was compelled to litigate his cross-claim after being sued, ultimately unsuccessfully, by MRDC for monies allegedly owed by Mr Kakaraya to MRDC. Judgment on liability for Mr Kakaraya’s cross-claim was entered against MRDC on 17 February 2018 because of repeated failure by MRDC to comply with prior directions of the Court. I therefore consider that the most appropriate costs order to be made in the present circumstances is that MRDC is to pay Mr Kakaraya’s costs on a solicitor/client basis, that is to say his legal fees and all disbursements properly and necessarily charged by his lawyers of and incidental to the whole of these proceedings from their inception, not just the cross-claim. These costs incurred by Mr Kakaraya are to be paid by MRDC subject to prior interim orders as to costs. Although MRDC’s conduct was highhanded and unwarranted and caused great distress to Mr Kakaraya, MRDC was initially acting on the instructions of its sole shareholder, the prime minister of the day. I do not consider that MRDC’s conduct was therefore so outrageous or intentionally malicious as to warrant an award of indemnity costs being made against it.

INTEREST ON GENERAL DAMAGES

205. The question of whether interest is payable on damages is a matter of discretion for the Court under Section 4 of the Judicial Proceedings (Interest on Debts and Damages) Act 2015. This section confers a four-fold discretion on the Court: (1) whether to grant interest at all; (2) to fix the rate; (3) to grant interest on the whole or part of the damages for which judgment is given; and (4) to fix the period for which interest will run: see Cheong Supermarket Pty Ltd v Muro [1987] PNGLR 24 (Bredmeyer J); Nambawan Super Ltd v Petra Management Ltd (2017) N6748 (Cannings J).
206. The conventional rate of interest, unless the Court otherwise orders, is 8% yearly: Order 12 Rule 6(2) of the National Court Rules.
207. In his claim for relief, Mr Kakaraya seeks interest on the funds which should have been held for him in escrow by MRDC at the 90-day treasury bill rate from the date the payments to which he was entitled under his contract became due. However, no evidence was produced at trial to indicate what the applicable treasury bill rates of the Central Bank of Papua New Guinea have been since 2002. Instead, counsel for Mr Kakaraya submitted at trial that the conventional interest rate of 8% per annum on damages assessed by the Court was being sought. Counsel for MRDC agreed both orally and in written submissions that the appropriate rate of interest to be applied by the Court is the usual rate of 8% per annum.
208. I agree with the parties that an interest rate of 8% per annum on damages is a fair and proper rate of interest to be applied to the damages awarded to Mr Kakaraya in the circumstances of this case, notwithstanding the many fluctuations in commercial banking interest rates which have occurred since 2002. As to when interest at 8% per annum should commence, I have exercised the Court’s discretion to determine that interest on the damages awarded by this Court is to run from 7 February 2003 to the date of this decision. The evidence has established that the date 7 February 2003 was when all payments from MRDC to Mr Kakaraya under his contract were suspended and withheld, as proven by the letter dated 17 February 2003 from MRDC’s Mr Kaupa to Mr Kakaraya which is annexure “D” to Mr Kakaraya’s affidavit and the spreadsheet forming page 1 of annexure “A” to the affidavit of Victoria Scott.
209. Interest on total damages of K3,382,077 is K5,831,257 calculated to the nearest whole number. It is computed by applying the formula: D x IR x (N/365) = I, where: D is the principal amount of total damages, IR is the applicable percentage rate of interest per annum, N is the number of days expressed as a percentage of years and I is the amount of interest:

K3,382,077 x 8% x (7502/365 days) = K5,831,256.71 rounded off to K5,831,257.

210. The award of interest amounting to K5,831,257 should come as no surprise to MRDC. Senior representatives of MRDC repeatedly informed Mr Kakaraya early on after MRDC filed its writ in these proceedings on 17 December 2004 that monies withheld from him by MRDC would be placed in an escrow account. Mr Kakaraya was then advised by MRDC that those monies would be placed in an IBD, which of course would have been earning commercial interest. These representations have been proven to be untrue. Furthermore, Mr Aupe, the company secretary of MRDC, said in paragraph 17 of his affidavit filed on 26 March 2018 that the board of MRDC has ever since 2005 made contingent liability provision in MRDC’s annual budgets and financial accounts over the years in respect of the damages to be awarded by this Court to Mr Kakaraya.
211. Judgment for Mr Kakaraya on the Court’s assessment of damages will therefore be entered for a total of K9,213,334 comprising:

Total of assessed general damages: K 3,382,077

Total of pre-judgment interest: K 5,831,257

Total of Judgment: K 9,213,334

212. Post-judgment interest will, pursuant to the discretion of the Court allowed by s.6(1) of the Judicial Proceedings (Interest on Debts and Damages) Act 2015 and Order 12 Rule 6(1) of the National Court Rules, be payable by MRDC at the rate of 8% per annum on such of the judgment amount of general damages assessed at K3,382,077 as remains from time to time unpaid.

JUDGMENT

213. The terms of the formal judgment of this Court on assessment of Mr Kakaraya’s damages in this suit are:

(1) Judgment is entered for the Defendant/Cross-Claimant in the sum of K 9,213,334 comprising:

(a) assessed damages: K 3,382,077

(b) pre-judgment interest at 8% per annum

on assessed damages: K 5,831,257

Total of Judgment: K 9,213,334

(2) Post-judgment interest shall accrue at the rate of 8% per annum on so much of the above assessed damages of K3,382,077 as remains from time to time unpaid.

(3) Subject to earlier interim orders as to costs, the Defendant/Cross-Claimant’s costs of and incidental to the whole of these proceedings as from date of filing of the writ shall be paid by the Plaintiff/Cross-Defendant on a solicitor/client basis, such costs to be taxed if not agreed.

(4) The time for entry of this judgment is abridged to the time of signing by the Court which shall take place forthwith.

Judgment accordingly
________________________________________________________________
O’Briens Lawyers: Lawyers for the Defendant/Cross-Claimant
Jema Lawyers: Lawyers for the Plaintiff/Cross-Defendant

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^[1] Court document number 14.
^[2] MRDC’s evidence at trial on assessment of damages establishes that the actual date of suspension of all payments under Mr Kakaraya’s contract was 7 February 2003.
^[3] Court document number 19.
^[4] Court document number 32.
^[5] Court document number 54.
^[6] Court document number 58.
^[7] Court document number 61.
^[8] Court document number 65.
^[9] Court document number 83.
^[10] Court document number 98.
^[11] Court document number 101.
^[12] Court document number 104.
^[13] Court document number 91.
^[14] Court document number 90.
^[15] Court document number 93.
^[16] Court document number 94.
^[17] Court document number 119.
^[18] Court document number 125A.
^[19] Court document number 118.
^[20] Court document no. 67.

^[21] See Order 8 Rule 44 of the National Court Rules, which provides that proceedings on a cross-claim shall follow as nearly as may be the course of proceedings on a writ of summons.
^[22] Order 10 Rule 9A of the National Court Rules was inserted by the National Court Listing Rules 2005.
^[23] Court document number 83.
^[24] Court Order dated 7 November 2017.
^[25] Court document number 87.
^[26] Court document number 82.
^[27] Court document number 115.
^[28] Court document number 93.
^[29] Court document number 110.
^[30] Court document number 117.

^[31] The reference to “Petroleum Globe Ltd” in para. 70.2 of Mr Kakaraya’s affidavit was presumably intended to be a reference to a company known in the public domain as “Petroleum Resources Gobe Ltd”.