Michael v Polomon [2023] PGNC 316; N10478 (22 September 2023)

N10478

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1043 OF 2018

BETWEEN
BENJAMIN MICHAEL MANAGING DIRECTOR FLY TRAVEL AGENT LIMITED
First Plaintiff

AND
FLY TRAVEL AGENT LIMITED
Second Plaintiff

AND
NIHIN POLOMON, MANAGER FINANCE, CONSERVATION & ENVIRONMENT PROTECTION AUTHORITY
First Defendant

AND
GUNTHER JOKU, MANAGING DIRECTOR, CONSERVATION & ENVIRONMENT PROTECTION AUTHORITY
Second Defendant

AND
CONSERVATION & ENVIRONMENT PROTECTION AUTHORITY
Third Defendant

AND
INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Defendant

Waigani: Makail, J

2023: 17^th July & 22^nd September

ASSESSMENT OF DAMAGES – Breach of contract – Hire car service agreement – Non-payment of fees – Entry of default judgment – Award of damages – Damages stipulated in contract – Contract unenforceable – Lack of public tender approval – Lack of ILOPOC and APEC forms – Damages assessed on quantum meruit – Damages awarded based on actual services rendered or work performed – General damages for frustration and hardship – Special damages – Loss of profit – Bank loan arrears – Lost opportunity for children’s school and education – Costs of follow-up for payment – Dismissal of – Damages falling outside of contract – Remoteness of damages – Failure to mitigate damages – Public Finances (Management) Act, 1995 – Sections 39(2)(b) & 47C(2) – Claims By and Against the State Act, 1996 – Section 2A(2)

Cases Cited:

Starreach Corporation Limited v. Secretary for Department of Education & The State (2023) N10312
Seken Kewa t/a Kopiam Hire Cars v. Minister for Community Development & The State (2022) N9421
Seken Kewa t/a Kopiam Hire Cars v. Minister for Community Development & Ors (2019) N7753

Counsel:

Plaintiff In Person
No Appearance, for Defendants

JUDGMENT

22^nd September 2023

1. MAKAIL J: The plaintiffs commenced this action for breach of contract in the form of a hire car service agreement entered on 10^th April 2016. Default judgment was entered against the defendants on 04^th July 2019. On 17^th July 2023 the matter was fixed for hearing on paper for assessment of damages.
   

Introduction

2. The Court directed the plaintiffs to file and serve their written submissions on the defendants by or before 07^th August 2023 and the defendants to file and serve their written submissions in response by or before 21^st August 2023. The plaintiff shall have liberty to file a reply-submission by or before 28^th August 2023.
   
3. The plaintiffs complied with the Court directions and filed and served their written submissions on 04^th August 2023 while the defendants did not. This is the Court’s decision on the assessment of damages.
   

Damages Sought

4. According to the statement of claim endorsed to the writ of summons, the plaintiffs seek the following:
   
   • (a) Outstanding sum of K63,879.00.
   • (b) General damages for frustration and hardship of K100,000.00.
   • (c) Loss of business income of K120,000.00.
   • (d) Bank loan arrears of K30,000.00.
   • (e) Exemplary damages of K100,000.00.
   • (f) Loss of opportunity for children’s education of K100,000.00.
   • (g) Costs of following up payment of K100,000.00.

Total K613,879 (According to [32.8] of the statement of claim the sum referred to is K640,053.33 which is incorrect).

The Parties’ Evidence

5. The plaintiffs rely on the following:
   
   • (a) Affidavit of first plaintiff sworn and filed 30^th January 2019.
   • (b) Affidavit of first plaintiff sworn and filed 08^th May 2019.
   • (c) Affidavit of service of first plaintiff sworn and filed 09^th September 2019.
   • (d) Affidavit of Roda Timbol sworn and filed 02^nd June 2023.
   • (e) Affidavit of Colin Tomo sworn and filed 02^nd June 2023.
   • (f) Affidavit of Mrs Nawaru Lovo sworn and filed 02^nd June 2023.
   • (g) Affidavit of George Rua filed 02^nd June 2023.
   • (h) Affidavit of Kons Michael sworn and filed 02^nd June 2023.
   • (i) Affidavit of Fenstean Michael sworn and filed 02^nd June 2023.
   • (j) Affidavit of first plaintiff sworn and filed 02^nd June 2023.
     
6. As there was no appearance and participation of the defendants, no affidavits were tendered.
   

Damages for breach of contract

7. It is trite principle of contract law that where there is a breach of contract, the injured party is entitled to damages stipulated in the contract. In this case the plaintiffs and a Mr Jude Tukuliya on behalf of the defendants signed a hire car service agreement on 10^th April 2016. A copy of the contract is attached and marked annexure “A” to the affidavit of the first plaintiff sworn and filed 30^th January 2019. According to the contract:
   
   • Clause 1 stipulates that the plaintiffs will lend a Toyota Land Cruiser 5 Door Blue in colour bearing registration no: BEU 232 to the defendants to use.
   • Clause 2 stipulated a rate of K850.00 per day to be paid by the defendants.
   • Clause 3 stipulated an invoice to be rendered to the defendants at end of each month.
   • Clause 4 stipulated that a total sum of K25,500.00 for 30 days or K26,350.00 for 31 days is due and payable per month.
   • Clause 6 stipulates that if payment is delayed by a month, it would constitute a breach.
     

8. The plaintiffs assert that the second plaintiff is a registered business entity and operates as a travel agent specialising in providing hire cars and transport logistics. The first plaintiff is the managing director of the second plaintiff.

9. Pursuant to clause 1 of the contract, it lent a motor vehicle in the description of the one stipulated in clause 1 of the contract to the defendants to use and in consideration, rendered an invoice in the total sum of K247,250.00 dated 06^th February 2017.

10. The plaintiffs accept as a fact that in consideration for the services rendered, the defendants made part payment of K93,371.67 by cheque dated 11^th April 2017 and a further part payment of K90,000.00 by cheque dated 11^th December 2017 to the plaintiffs.

11. The total sum paid is K183,371.67. The balance is K63,628.33. According to the plaintiffs, this is the sum they seek from the Court to award.

12. However, the plaintiffs have not been forthright about this claim. There is a question mark over the enforceability of the contract because where the State is a party to the contract, the contract must meet the requirements of Section 39(2)(b) and Section 47C(2) of the Public Finances (Management) Act, 1995 and Section 2A(2) of the Claims By and Against the State Act, 1996 in relation to public tender approval and having an Integrated Local Purchase Order (ILPOC) form and Authority to Pre-commit Funds (APEC) form. There is no evidence tendered by the plaintiffs to established that they have met these statutory requirements. Consequently, and contrary to the plaintiffs’ strong submissions that there is a valid and enforceable contract between the parties, the contract is void and unenforceable. The view was reinforced in the recent judgment by the Court in Starreach Corporation Limited v. Secretary for Department of Education & The State (2023) N10312.

13. Nonetheless, a default judgment has been entered and it is open to the plaintiffs to seek damages for the actual services they have rendered, or work performed under the principles of quantum meruit and unjust enrichment. The Courts have long recognised that a genuine service-provider to the State must not be left without a remedy but be given something in return for actual services rendered or work performed to the State, even though the contract is void.

14. In Seken Kewa t/a Kopiam Hire Cars v. Minister for Community Development & The State (2022) N9421, the plaintiff sued the defendants for breach of contract for provision of hire car services. Services were rendered, invoices were rendered but were not settled. Judgment on liability was entered with damages to be assessed on the principle of unjust enrichment after a trial: Seken Kewa t/a Kopiam Hire Cars v. Minister for Community Development & Ors (2019) N7753. Damages were awarded based on the actual services rendered from the sum stated in the invoices.

15. While the plaintiffs produced bank account statements of the second plaintiff to support their claims for general damages for frustration and hardship, special damages for loss of business income, bank loan arrears and others, the bank account statements tell a different story. The bank account statements dated 01^st April 2019 (for period 01 January 2016 to 11^th April 2019) which are attached and marked annexure “B” to the first plaintiff’s affidavit sworn and filed 08^th May 2019 reveal that the second plaintiff’s bank account was credited a sum of K60,000.00 on 19^th November 2018 from the (Dept of Environment and Conservation) or the defendants.

16. Similarly, as for the two part-payments, the same bank account statement reveals that the second plaintiff’s bank account was credited a sum of K93,371.67 on 20^th April 2017 and K90,000.00 on 13^th December 2017 from the (Dept of Environment and Conservation) or the defendants. This is consistent with the type of transactions the plaintiffs and the defendants have adopted and reinforces the presupposition that K60,000.00 credited to the second plaintiff’s bank account on 19^th November 2018 was settlement for the outstanding balance of K63,628.33.

17. In summary, unless there is evidence from the plaintiffs that this sum of money was for services other than the one, they rendered (which is none), the Court is not satisfied that the plaintiffs have discharged the onus of proof on the balance of probabilities that the sum of K63,628.33 is due and owing to them. On the contrary, the payment of K60,000.00 will reduce the outstanding sum from K63,628.33 to K3,628.33 and this is the sum due and payable for actual services rendered under the contract. The Court awards K3,628.33.

Additional Damages

18. The plaintiffs seek additional damages outside the terms of the contract. These are:

(a) General damages for frustration and hardship of K100,000.00.
(b) Loss of business income of K120,000.00.
(c) Bank loan arrears of K30,000.00.
(d) Exemplary damages of K100,000.00.
(e) Loss of opportunity for children’s education of K100,000.00.
(f) Costs of following up payment of K100,000.00.

19. From the affidavits relied upon by the plaintiffs, it is abundantly clear that the core of the plaintiffs’ case is that, because of the non-payment of the outstanding sum of K63,628.33, the plaintiffs were unable to meet their financial obligations and seek these additional damages on four grounds:

• The motor vehicle broke-down and was written-off and they had no money to have it repaired.
  
• As the motor vehicle was not operating, it was not bringing income for the second plaintiff.
  
• As a result, they did not have income to pay for children’s school fees, meet medical expenses for the first plaintiff’s father who passed away in 2015 including funeral and repatriation of the deceased to his home village in Nipa/Kutubu (Note the father passed away before the contract was entered on 10^th April 2016) and complete payment of his school-fees to graduate from the University of Papua New Guinea after undertaking a Masters programme.
  
• Finally, they had to borrow money from money lenders and financial institutions like Moni Plus Finance Company, friends, and work colleagues some of whom have filed affidavits supporting the claims like Rota Timbol and George Rua.
  

20. The first point that goes against the plaintiffs is that as observed above, the plaintiffs’ damages are restricted to the outstanding sum due under the contract for the services they rendered to the defendants. That is all they are entitled to under the principles of quantum meruit and unjust enrichment. They are not entitled to any additional and the additional damages they seek will be dismissed.

21. Even if each claim for damages is considered on its merits, it is doubtful and questionable. This is because while the plaintiffs make strong submissions based on the four grounds outlined above, the bank accounts statements of the first plaintiff and the second plaintiff respectively tell a very different story. First, according to paragraph 5 of the first plaintiff’s own affidavit filed 02^nd June 2023 he is employed by the PNG Science & Technology Council Secretariat as a permanent and full-time officer and earning a salary on a fortnightly basis. Annexure “J” to his affidavit filed 08^th May 2019 reveals that he receives a net salary of K863.33.

22. The net salary is supplemented substantially by the income from the hire car service and transport logistics business of the second plaintiff of which the first plaintiff is the managing director. The bank account statements of the second plaintiff reveal several substantial payments to the second plaintiff by the defendants including the payments under consideration in the subject litigation. Interestingly, prior to the two part-payments of K93,371.67 on 20^th April 2017 and K90,000.00 on 13^th December 2017 respectively, the second plaintiff’s bank account was credited a sum of K83,775.67 from Department of Environment on 16^th December 2016 and there is no explanation for this payment. What is more intriguing is a day before that, on 15^th December 2016 the second plaintiff’s bank account was credited a sum of K12,120.00 from PNG Science & Technology Secretariate. Again, the plaintiffs have not given any explanation for this payment from the first plaintiff’s employer.

23. But what is more telling and against the plaintiffs is that these two lots of payments totalled K95,895.67 and five days later, on 21^st December 2016 a massive K80,000.00 cash withdrawal was made. The purpose of the cash withdrawal has not been explained by the plaintiffs. Worst still, the first plaintiff through the second plaintiff was receiving money (K12,120.00) from his employer PNG Science & Technology Council Secretariat. What was that payment for? It could be a genuine payment, but there is no statement by the plaintiffs to verify it. Yet the plaintiffs have portrayed to the Court that they are and were financially crippled because the defendants failed to pay the outstanding sum of K63,628.33.

24. It is the same story with the payment of K60,000.00 on 14^th November 2018. Five days after on 19^th November 2018 another massive cash withdrawal of K40,000.00 was made and there is no explanation for that. Yet again, the plaintiffs have portrayed to the Court that they are and were financially crippled because the defendants failed to pay the outstanding sum of K63,628.33.

25. Moreover, the bank account statement is littered with these glaring irregularities and shows a trend that the plaintiffs particularly, the first plaintiff is a big spender, yet he holds himself out to be impecunious. The scrutiny of the transactions is for years 2016 to 2018. Some examples are, the second plaintiff’s bank account was credited a sum of K12,000.00 on 26^th May 2017 from PNG Science & Technology Council Secretariate. Again, what was this payment for? The plaintiffs do not provide an explanation but what is disturbing is, four days later, on 30^th March 2017 a cash withdrawal of K12,000.00 was made. Then two weeks later, on 05^th April 2017 the second plaintiff’s bank account was further credited another K7,000.00 from PNG Science & Technology Council Secretariate. It is not known what this payment was for, but two days later, a cash withdrawal of K7,000.00 was made. These two unexplained lots of payments from the first plaintiff’s employer in the space of two weeks and withdrawals made within two days shows a trend where “money goes in and comes out” from the bank account without any proper record of their purpose.

26. Fast forward to years 2021 and 2022, the bank account statements of the second plaintiff annexed and marked “D” and “E” to the affidavit of the first plaintiff filed 02^nd June 2023 reveals further and substantial sums of money received by the second plaintiff. One of them was a sum of K399,200.00 from the Department of Treasury dated 30^th March 2021. Again, the plaintiffs did not provide an explanation for this payment but the point to make is the second plaintiff received a substantial sum of money from the Department of Treasury for its ‘hire cars and transport logistics’ business.

27. It will be noted that two days after, on 01^st April 2021, it is recorded that K15,000.00 was made for purchase of vehicle parts. It is unclear from the first plaintiff’s affidavit filed 02^nd June 2023 if the payment is for the motor vehicle which is the subject of the litigation.

28. Further, it is recorded that on 16^th April 2021, a sum of K100,000.00 was paid to an Abel Tol. At [15] of his affidavit filed 02^nd June 2023 the first plaintiff explained that this sum of money was paid to Abel Tol for “his accumulated legal advice (sic) and services ............since 2016 in this court proceeding”. However, the credibility of this assertion is doubted because as is required by law, a legal practitioner acting for a client must produce a fee note or a bill of costs. In this case, there is none to verify if Abel Tol provided legal advice and services to the plaintiffs and is disregarded. Nonetheless, it is not correct to assert that the plaintiffs did not have funds to support this litigation.

29. In another instance, on 17^th January 2022 the second plaintiff’s bank account was credited a sum of K150,000.00 from the Department of Treasury and again, the plaintiffs did not provide an explanation for that. It will be noted, again, a massive cash withdrawal of K25,000.00 was made on the same day and another massive cash withdrawal of K20,000.00 was made the next day 18^th January 2022. The plaintiffs do not explain the purpose of withdrawing such substantial sums of money in hard cash particularly within 24 hours of the account being credited K150,000.00. This is alarming and yet the plaintiffs want the Court to believe that they are impecunious.

30. Meanwhile, a close perusal of the second plaintiff’s bank account statements does not reveal any payments related to the daily operations of the hire car service and transport logistics business in terms of payment of staff salaries and wages, office rentals, fuel costs, income tax, etc... Yet, again, the plaintiffs assert that their hire care and transport logistics business collapsed because the defendants failed to pay the outstanding sum.

31. The bank account statements tell a very different story of the plaintiffs, and it makes the plaintiffs’ plea for damages to be awarded for lost opportunity for the first plaintiff’s children’s school and education almost comical. Add to that, there is no evidence of payment of school fees for the first plaintiff’s children prior to the date of contract to verify the assertion that the children were attending school and income from the hire car services was utilised to pay their school fees until the breach occurred. As to the first plaintiff’s claim for non-payment of school fees for the University’s Masters programme, it is a personal debt or liability and too remote from the breach of contract to award damages. Quite frankly, the first plaintiff should pay his school fees out of the income he receives from his employment with the PNG Science and Technology Council Secretariate.

32. To add to what is turning out to be an untenable case for the plaintiffs, they strongly maintained that they could not afford medical fees for the first plaintiff’s father when he was ill and when he passed on, they could not afford the costs of funeral and repatriation of his body to his home village in Nipa/Kutubu. However, according to the medical certificate of death annexed to the affidavit of the first plaintiff filed 02^nd June 2023, his father died on 26^th July 2015. What is telling and against the plaintiffs’ story is that the claim for damages is too remote to the breach of contract because the contract was entered on 10^th April 2016, some nine months after the first plaintiff’s father’s death. By law of remoteness of damages, logic and commonsense, it is an untenable proposition to contend otherwise.

33. If [8] of the first plaintiff’s affidavit filed 08^th May 2019 that the motor vehicle broke down in late 2016 is accepted, the massive cash withdrawals of funds from the second plaintiff’s bank account between 2016 and 2022 without any record of their purpose raises a strong inference of suspicion and doubt in relation to the genuineness of the subject litigation. Conversely, these massive cash withdrawals were more than sufficient to utilise to have the motor vehicle repaired without delay to mitigate the plaintiffs’ damages. The failure to mitigate will be held against the plaintiffs.

34. Finally, again, based on the massive cash withdrawals of funds from the second plaintiff’s bank account, and conversely, the massive spending by the first plaintiff as the managing director of the second plaintiff, it is sufficient to find that there is no merit in the claims for damages for bank loan arrears, outstanding personal loans from money lenders, personal friends and work colleagues including costs of following-up the outstanding sum with the defendants. In any case, as the Court has found, except for K3,628.33, the defendants had settled the debt and there is no utility for the plaintiffs to pursue the claim in the subject litigation. The damages as outlined at [4(b)-(g)] (supra) and sought are dismissed.

Conclusion

35. In conclusion, given the Court’s findings and observations above, this case smacks of fraud and deceit and it is recommended that the relevant State authorities including the Solicitor General, Department of Finance and Police launch an investigation in the plaintiffs’ financial affairs including those from the first plaintiff’s employer PNG Science and Technology Council Secretariate. It will be interesting to find out if Stella Tukulya who was credited K4,500.00 from the second plaintiff’s bank account on 07^th April 2021 is anywhere related to Jude Tukuliya the person who signed the hire car service agreement (contract) on behalf of the defendants on 10^th April 2016 and what was the payment of K4,500.00 to Stella Tukulya for?

36. For the present purpose, there shall be a judgment in favour of the plaintiffs in the sum of K3,628.33. Judgment sought for general damages for frustration and hardship, special damages for loss of business income, bank loan arrears, exemplary damages, loss of opportunity for children’s education, and costs of following up payment is dismissed. As to interest, given the glaring irregularities and failure by the plaintiffs to prove their damages, this is a rare case where the discretion conferred on the Court under Section 4 of the Judicial Proceedings (Interest on Debts and Damages) Act, 2015 will not be exercised in favour of the plaintiffs. It is refused.

37. Similarly, as to costs, it is discretionary and given the above reasons, the discretion to award costs will not be exercised in favour of the plaintiffs and each party shall bear its own costs of the proceedings.

Order

38. The final terms of the order of the Court are:

1. Judgment is entered in favour of the plaintiffs in the sum of K3,628.33.

2. Judgment sought for general damages for frustration and hardship, special damages for loss of business income, bank loan arrears, exemplary damages, loss of opportunity for children’s education, and costs of following up payment is dismissed
   
3. Interest sought under Section 4 of the Judicial Proceedings (Interest on Debts and Damages) Act, 2015 is refused.

4. Each party shall bear its own costs of the proceedings.

5. Time for entry of these orders shall be abridged by the Registrar to the date of settlement, which shall take place, forthwith.

________________________________________________________________
Solicitor General: Lawyers for Defendants