Eureka Industry Ltd v Iopare [2024] PGNC 120; N10772 (3 May 2024)

N10772

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 448 OF 2021

BETWEEN
EUREKA INDUSTRY LIMITED
Plaintiff

AND
MOSES IOPARE – CHIEF EXECUTIVE OFFICER (CEO), IJIVITARI DISTRICT DEVELOPMENT AUTHORITY
First Defendant

AND
HONOURABLE RICHARD MASERE, MP MEMBER FOR IJIVITARI DISTRICT in his capacity as CHAIRMAN OF THE BOARD OF IJIVITARI DISTRICT DEVELOPMENT AUTHORITY
Second Defendant

AND
IJIVITARI DISTRICT DEVELOPMENT AUTHORITY
Third Defendant

Popondetta: Makail, J
2024: 02^nd & 3^rd May

ASSESSMENT OF DAMAGES – Breach of contract – Contract of services – Construction of road – Non-payment for services rendered – Recovery of outstanding sum – Debt – Additional damages sought – Exemplary damages – General damages for frustration and hardship

INTEREST – Award of interest – Applicable rate of interest – Rate of interest of 2% per annum applicable to ‘State’ as opposed to ‘District Development Authority’ – Judicial Proceedings (Interest on Debts and Damages) Act, 2015 – Sections 4(1)&(2) & 6(1)&(2) – District Development Authority Act, 2014 – Section 4

Cases Cited:
Abel Tomba v. The State (1997) SC518

Counsel:
Mr T Sua, for Plaintiff
No appearance, for Defendants

JUDGMENT

3^rd May 2024

1. MAKAIL, J: This is an action for breach of contract of services in the form of a road construction contract. Services in the form of construction of a 10 kilometre-road at Seva in Ijivitari District was rendered but the defendants failed to pay the full sum agreed in the contract. The total contract sum was K488,695.14. A sum of K75,000.00 was paid to the plaintiff and a balance of K413,695.14 is due and owing. Default judgment was entered against the defendants on 3^rd November 2022, and this is the trial on assessment of damages.

2. It is an ex parte trial because since the commencement of proceedings, and except for filing a notice of appearance and conditional notice of intention to defend by Veronica Palts Lawyers, the defendants did not file a defence and attend directions hearing and call over to defend the assessment of damages.

3. The plaintiff sought the following relief:

(a) K413,695.14 as balance or outstanding sum under the contract.
(b) K200,000.00 as exemplary damages.
(c) K200,000.00 as general damages.

Plaintiff’s Evidence

4. The plaintiff tendered two affidavits which were given exhibit numbers:

(a) Affidavit of Hasan Anwar sworn and filed 8^th July 2022 (Exhibit “P1”), and

(b) Affidavit of Tony Lim sworn on 14^th December 2023 and filed 20^th December 2023 (Exhibit “P2”).

Findings of Fact

5. Based on these affidavits, it is the findings of the Court that the plaintiff was awarded a contract for construction of road at Seva in Ijivitari District by the Oro Provincial Supply and Tenders Board. On 7^th December 2017 parties signed a written contract in the sum of K488,695.14.

6. The plaintiff rendered the services, and on 4^th June 2018 a certificate of completion was issued by the Senior Projects Manager of the Department of Works Oro, to verify that the construction of the road was completed. The plaintiff was then paid a sum of K75,000.00 on 31^st October 2018. However, for unknown reasons and despite repeated requests to the defendants to pay, the plaintiff was not paid the balance of K413,695.14. This sum is due and outstanding.

7. Further, the Court finds that on 28^th November 2017 the plaintiff signed a contract of sale of property with We One PNG Limited for the sale of its property described as Allotment 03 Section 08 Popondetta town in the sum of K500,000.00. However, while the plaintiff referred to expenses of operational costs (plant equipment), parts and services, labour, landowner claims for gravel and sand, hire of machinery and local security guards along the road project site, the Court is not satisfied that the proceeds of sale in the sum of K500,000.00 was utilised to meet these expenses for the construction of the road. Secondly, there is no evidence in the form of receipt of payment and bank statements to verify that this sum of money was paid to the plaintiff and in turn, utilised to pay for these expenses.

8. Finally, Mr Lim asserted that the plaintiff borrowed money from him as a director to meet these expenses. However, the Court is not satisfied that the plaintiff borrowed money from him to pay for these expenses because there is no evidence in the form of bank statements and receipts of payment to verify his assertion.
Outstanding Sum

9. The plaintiff submitted that pursuant to the contract, the defendants paid a sum of K75,000.00 out of the agreed sum of K488,695.14 and a sum of K413,695.14 is outstanding and owing. This sum is a debt by the defendants. Based on the above findings, the Court upholds the plaintiff’s submissions and award the sum of K413,695.14 as the value of the outstanding sum for breach of contract.

Exemplary Damages

10. The plaintiff submitted that the Court should find the first and second defendants liable for exemplary damages because despite repeated requests to them to pay the outstanding sum, they have failed or neglected to pay the outstanding sum. Their lack of action and/or failure to settle the outstanding sum over a period of six years calls for and award exemplary damages in the sum of K200,000.00 to be paid by the third defendant to punish them and to deter other such cases in future from occurring.

11. At paragraph 20B of the statement of claim, the plaintiff sought exemplary damages against the first and second defendants only. It sought no exemplary damages against the third defendant. This distinction is crucial in relation to which defendant should be ordered to pay exemplary damages. This is because such damages may be awarded against the servants and/or agents of the employer where the conduct is wilful, or the employer can be independently liable for exemplary damages if it is proven that it approved or sanctioned the wilful conduct of its servants and/or agents: Abel Tomba v. The State (1997) SC518.

12. In the instance case the first defendant is the Chief Executive Officer of the third defendant and is responsible for the administrative and management decisions of the third defendant including decisions on allocation of funds for projects in the district. As for the second defendant, he is the Member for Ijivitari Open electorate and by virtue of Section 12(1)(a) of the District Development Authority Act, 2014, (“DDA Act”), held the position of Chairman of the Board of the Ijivitari District Development Authority, such Board is responsible for approval of delivery of goods and services to the district, which will include approval of funds for infrastructure projects.

13. Given the nature of the first and second defendants’ responsibilities, where they failed in the discharge of their responsibilities such as failing to ensure that payment is made to the plaintiff for the outstanding sum under the contract, the third defendant will be liable for their actions and/or omissions under the principles of vicarious liability. For these reasons, the Court is satisfied that the conduct of the first and second defendants was wilful, and the defendants will be liable to pay exemplary damages to the plaintiff.

14. The award of exemplary damages is a mark of the Court’s disapproval of such conduct and a warning to the defendants and others not to repeat such conduct in future. After all, based on the Court’s finding that the plaintiff had completed the road construction project, such provision of essential services by the plaintiff has given the people of the district, road accessibility to Popondetta town and beyond and should never be taken for granted by the defendants.

15. As to an appropriate sum to award, while it is noted that the defendants had done nothing about settling the outstanding sum for more than six years, the proposed sum of K200,000.00 will be considered excessive. Instead, a reasonable sum to award is K50,000.00. This sum is awarded as exemplary damages to be paid by the defendants.

General Damages

16. The plaintiff submitted that the Court should award general damages for frustration and hardship in the sum of K200,000.00 because of the prolonged delay in payment of the outstanding sum. This has forced the plaintiff to seek alternative funds from sale of its property and loan from its director Mr Lim to pay for expenses to complete the road construction. As found in the Court’s findings of fact, there is no evidence to verify that the proceeds of sale in the sum of K500,000.00 was utilised to meet expenses of the road construction. Secondly, there is no evidence in the form of bank statements and receipts of payment to verify Mr Lim’s assertion that the plaintiff borrowed money from him to pay for the expenses incurred by the plaintiff in the road construction project.
17. In the absence of such evidence to verify payment of expenses of the plaintiff, the Court finds that the plaintiff’s submissions for an award of general damages in the sum of K200,000.00 is unsupported by evidence. However, given that there is evidence of a certificate of completion to verify its assertion that it has completed the road construction project, there will be some award of damages to the plaintiff. It follows that a sum of K50,000.00 is awarded to compensate the plaintiff for frustration and hardship it has suffered because of non-payment of the outstanding sum. A sum of K50,000.00 is awarded as general damages for frustration and hardship.

Interest

18. At paragraph 20D of the statement of claim, the plaintiff sought pre-judgment and post-judgment interest to be paid on the judgment sum at the rate of 2% per annum pursuant to Sections 4 and 6 of the Judicial Proceedings (Interest on Debts and Damages) Act, 2015.

19. However, after a serious reconsideration of its submissions at the hearing the plaintiff changed its position and submitted that interest be awarded at the rate of 8% per annum because the State is not one of the defendants to the proceedings. Notably, the State was a fourth defendant to the proceedings but was removed by an order of the Court at the directions hearing.

20. Given this, the question which arises for consideration is the applicable rate of interest to award. Is it 2% per annum or 8% per annum? Interestingly, when the Parliament passed the DDA Act in 2014 to establish a District Development Authority under Section 4(1) as being a body corporate capable of suing or being sued in its corporate name, a year later when it passed the Judicial Proceedings (Interest on Debts and Damages) Act, 2015, it did not include a District Development Authority in Sections 4(2) and 6(2) of the Judicial Proceedings (Interest on Debts and Damages) Act, 2015 for the rate of interest of 2% to also apply to a District Development Authority.

21. Given this, it is not necessary for the Court to read into Sections 4(2) and 6(2) of the Judicial Proceedings (Interest on Debts and Damages) Act, 2015 to include a District Development Authority. It will be a matter for Parliament to decide but at present, given the way Sections 4(2) and 6(2) of the Judicial Proceedings (Interest on Debts and Damages) Act, 2015 has been drafted, the Court is conferred discretion to award interest at a rate of up to 8% per annum on a judgment sum where the defendant is other than the ‘State’. The applicable rate of interest where the State is a defendant is up to 2% per annum. As the State is not a defendant in this case, the applicable rate in the case of a ‘District Development Authority’ is up to 8%.

22 It follows that the plaintiff is awarded interest at a rate of 8% per annum for pre-judgment interest and post-judgment interest pursuant to Sections 4(1) and 6(1) of the Judicial Proceedings (Interest on Debts and Damages) Act, 2015. Pre-judgment interest shall run from date of issue of writ of summons to date of judgment on assessment of damages and post-judgment interest shall run from date of assessment of damages until final settlement of the judgment sum.

Conclusion

23. Adding K413,695.14 to K50,000.00 and K50,000.00 gives a total judgment sum of K513,695.14. Judgment is, therefore, entered in favour of the plaintiff in the total sum of K513,695.14 with interest for pre-judgment and post-judgment at rate of 8%. Finally, the defendants shall pay the plaintiff’s costs of the proceedings, to be taxed, if not agreed.

Order

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

1. Judgment is entered in favour of the plaintiff in the total sum of K513,695.14 to be paid by the defendants.
   
2. Interest at rate of 8% is awarded on the total judgment sum of K513,695.14 for pre-judgment interest from the date of issue of writ of summons to date of judgment on assessment of damages pursuant to Section 4(1) of the Judicial Proceedings (Interest on Debts and Damages) Act, 2015.
   
3. Interest at rate of 8% is awarded on the total judgment sum of K513,695.14 for post-judgment interest from the date of judgment on assessment of damages until final settlement pursuant to Section 6(1) of the Judicial Proceedings (Interest on Debts and Damages) Act, 2015.
   
4. The defendants shall pay the plaintiff’s costs of the proceedings, to be taxed, if not agreed.

5. Time shall be abridged.

Sua & Sons Lawyers: Lawyers for Plaintiff