Ajeri (trading as Ajeri Construction & Maintenance) v Akipe [2024] PGNC 211; N10853 (14 June 2024)

N10853

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 472 OF 2021 (IECMS)

BETWEEN:
HENRY AJERI Trading as AJERI CONSTRUCTION & MAINTENANCE
Plaintiff

AND:
HARI JOHN AKIPE in his capacity as the SECRETARY FOR DEPARTMENT OF DEFENCE
First Defendant

AND:
DEPARTMENT OF DEFENCE
Second Defendant

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

Waigani: Bre, AJ
2024: 10th May & 14th June

ASSESSMENT OF DAMAGES – Principles of assessing damages considered – cursory inquiry – competency of Section 5 CBASA notice – plaintiff to prove loss – discrepancies in evidence – Court cannot do its best – business loss not proved - no award for damages.

Cases Cited
Coady v Motor Vehicles Insurance (PNG) Trust [1987] PNGLR 55
Coecon Ltd (Receiver-Manager Appointed) v National Fisheries Authority of Papua New Guinea (2002) N2182
Essy v Bomal [2021] SC2085
Fly River Limited Government v Pioneer Health Services Limited (2003) SC705.
Mel v Pakalia [2005] SC790
Puara v Andagali (2024) N10761

Legislation
Claims by and Against the State Act 1996, s5.
Public Finance (Management) Act 1995, s47B
Statute of Fraud and Limitations Act 1988, s16

Trial
Trial by Affidavit on assessment of damages following summary judgment where the plaintiffs sought to prove non-payment of invoices rendered and balance of contract.

Counsel
Ms J Topo, for the Plaintiffs
Ms V Balio, for the Defendants

DECISION

14^th June 2024

1.BRE, AJ: The plaintiff was engaged by the first and second defendants to provide chemicals for its water treatment plant at the PNG Defence Force Goldie River Barracks outside Port Moresby and to provide maintenance services. The plaintiff has the benefit of a summary judgment and is seeking damages of K441,792.88 for payment of four outstanding invoices and balance of contract.

2. The plaintiff relies on his Affidavits which were tendered into evidence and accepted:

1. Affidavit of Henry Ajeri filed 5 May 2023 marked "P1".
2. Supplementary Affidavit of Henry Ajeri filed 16 May 2023 marked "P2".
   

The defendants did not adduce any evidence but submitted that the plaintiff has the burden of proving his loss.

3. Liability is taken to have been proved as a result of the summary judgment obtained against the defendants on 11 August 2023. The issue for my determination at the hearing of damages is one of quantum and concerns whether the plaintiff is entitled:

1. to a payment of K154,491.98 for outstanding invoices for services rendered or works performed; and
2. K287, 300.90 being the balance of contract for early termination of a three year contract?

4. Both these issues assume that there is a written contract between the plaintiff and the defendants.

5. At the outset, I must state that I am dissatisfied with the manner of engagement of the plaintiff by the first and second defendants. Business engagements with any State department must observe the public financial procurement and contracting processes detailed in the Public Finances (Management) Act 1995 (PMFA) and recently the National Procurement Act 2018. Business transactions above K100,000.00^[1] must be transacted through an authority to pre-commit (s47B PFMA) and through properly executed contracts. Verbal engagements are permissible for transactions worth less then K500.00. K1000.00 or now K5000.00. See: PFMA Financial Instructions. Departmental heads or public officials engaging businesses contrary to the rules can be surcharged under Section 102 PFMA. The State can rightly direct all such businesses to pursue any loss directly against the public official who engaged them, in their personal capacity, rather than the State. However, in this case we are at an advanced stage of the proceedings, summary judgement has been entered against the defendants on 11 August 2023 when it failed to attend settlement discussions as directed by the Court. Liability is taken to have been proved.

6. The principles in assessing damages are well established by Coecon Ltd (Receiver-Manager Appointed) v National Fisheries Authority of Papua New Guinea (2002) N2182 and Mel v Pakalia [2005] SC790, I apply the following relevant principles in assessing damages: -

1. Summary judgement is taken as proving liability unless there are competency issues or the cause of action is incontestably bad, in which case the Court can cause a cursory inquiry to revisit liability,
2. the plaintiff must prove its loss on a balance of probabilities with corroborated evidence to the civil standard of proof, and
3. The Court can do its best to award damages where the evidence is not sufficient to quantity actual damage or loss.

Cursory Inquiry

7. I can make a cursory inquiry to ascertain the competency of proceedings and the cause of action. The State implores me to exercise that authority to dismiss the proceedings on grounds of competency as the plaintiff has served late, the notice under Section 5 of the Claims by and Against the State Act 1996 (''CBASA') outside the six-month time limitation. I have considered the submission but discount it as it is too late to make the submission when the State has slept on its rights to do so. Further the intent of Section 5 CBASA is to provide a scheme of advance notice to enable the State to file its defence. In my view, this legislative intent was achieved when the State filed its Defence on 21 September 2022. See Essy v Bomal [2021] SC2085. I find there is no prejudice to the State in defending itself, however, I find that there is prejudice to the plaintiff who has been diligently pursuing his claim. On that basis, I disregard the State's submission on competency.

Proof of loss

A) Outstanding invoices of K154,491.98, for works done or services rendered.

8. I accept the State’s submissions that the plaintiff bears the evidential burden of proving that he rendered services or performed works to the department of Defence Goldie River Barracks worth K154,491.98 that was not paid and remains outstanding to date.

9. The plaintiff's evidence is that he had an oral contract renewed yearly with the first and second defendants to provide chemicals for water treatment and to maintain the water treatment plant which he had been rendering services for since 2014. He deposes in his affidavit marked 'P1' that, that verbal contract ended in 2015. He deposes that while the Area Manager Mr Wohevia made recommendations for the continuation of his services to the management, he was verbally informed by Mr Wohevia to continue providing his services which he did from October 2015 to February 2016, when he signed a written agreement with the first defendant. The plaintiff deposes that the written agreement was signed on 8 February 2016 and was verbally terminated on 3 July 2017. Annexure 'D' of 'P1' contains four invoices which he claims are outstanding, excluding one invoice on grounds of time bar. He claims that he is entitled to payment of K154,491.98 I summarise the invoices below:-

Date of Invoice	Invoice No.	Invoiced Month	Amount
23/11/2015	003/2015	November 2015	K41,866.63
23/01/2015	004/2015	February 2015	K32,957.46[2]
19/01/2016	001/2016	January 2015	K45,590.12
7/05/2016	008/2016	Oct, Nov, Dec 2016	K67,035.23

10. Aside from reservations I have about the manner of engagement of the plaintiff by the first and second defendant. I find several discrepancies with these claims which I set out below:-

1. The outstanding invoices are advanced bills billed before services were rendered. The detail of each invoice shows a billing date earlier to the month the services are supposed to be rendered and billed for.
2. Invoices 003/2015 and 001/2016 totaling K87,456.75 ( K41,866.63 + K45,590.12) are for the period November 2015 and January 2015 during the currency of the verbal agreement. Invoice 003/2015 is billed in the same month that the services or works were allegedly performed.
3. These were billed five months before services were rendered for these months.
4. Invoice 001/2016 dated 10/01/2016 is for January 2015, a period before the service date and appears to be in order, except that is time barred. The Plaintiff filed his proceeding on 14 October 2021, six years after January 2015. The sixth year lapsed on January 2021 and this claim is time barred under section 16 of the Statute of Fraud and Limitations Act 1988.
5. No terms of the verbal agreement covering the period 2015 to January 2016, in the form of letters or payment schedules have been brought into evidence to corroborate the terms of engagement and that it will be by way of advance billing.
6. There is no written evidence as to the terms of payment and the services to be rendered of the verbal agreement. The plaintiff does not indicate how much the verbal engagement is valued at.
7. The plaintiff mentions that Mr Wohevia verbally authorised him to perform the services, yet he has not provided Mr Wohevia’s affidavit to corroborate his engagement and its terms.
8. Invoice 008/2016 dated 7 May 2016 covers the periods October, November and December 2016, invoicing a total bill of K67,035.23 for the three months, the subject of the written agreement.
9. If I accept the terms of the short form CSTB template as containing the written agreement between the plaintiff and first and second defendants, it states that the agreement is for three years effective as at the date signed until 2018. The plaintiff's signature indicates a handwritten date of 08 February 2016. If I take that as the effective date, the last date would be 08 February 2018, which is two years, however the plaintiff's evidence is that the agreement is for three years.
10. The contract value indicated in the written agreement is K399,926.02 indicating quarterly payments of K99,981.50 or K33,327.16/month. I find that this term is inconsistent with the intent of the parties to have a three-year contract. A simple addition of the quarterly payments will indicate that the contract value will be achieved in one year. This would be contrary to the intent of the agreement, if I am to accept the plaintiff’s evidence that the agreement is for three years. A feasible term is K11,109.05 per month or K133,308.64 per year which adds up to K399,926.02 for three years.
11. The invoice for the periods October, November and December 2016, of K67,035.23 will mean a monthly bill of K 22,345.07. This amount is greater than a monthly bill of K11,109.05 and close to the three-year monthly bill of K33,327.16. Either way, I find there are discrepancies in the terms of the written agreement and in the actual invoicing by the plaintiff, with no explanation offered for the discrepancies.
12. The plaintiff must corroborate his invoice of K67,035.23 with evidence of services rendered or works performed.
    

11. The principle of restitution and quantum meruit require that the Court exercise its jurisdiction in equity to award damages for loss suffered as a result of services rendered or works performed to right a wrong of unjust enrichment to the recipient of the services rendered or works performed. See Puara v Andagali (2024) N10761, Fly River Limited Government v Pioneer Health Services Limited (2003) SC705.

Here, I find that the of the four plaintiff’s outstanding invoices totaling K154, 491.98 one is time barred (invoice 001/2016), while two (invoices 003/2015 and 008/2016) are advanced invoices issued for services or works that have not yet been rendered. The invoice dates precede the period billed for. The principle of restitution and quantum meruit is not applicable to warrant an award of outstanding payment when invoices pre-date the period for works or services. There appears to be no unjust enrichment that the Court must right with an award for the unpaid invoices.

B)Balance of the contract for K287,300.90 for early termination of a 2016 three-year agreement?

12. For the claim for the balance of contract, the plaintiff bears the evidential burden of proving his loss. The balance of contract claim to me is a loss of business claim and must be supported by evidence of the business loss suffered as a result of the early termination.

13. I adopt an explanation of the terms, ‘loss of earning capacity’ and ‘economic loss’ in a personal injury case to illustrate what the plaintiff must prove to discharge his burden of proof of loss of earnings and business loss from the early termination of the contract affecting his business earning capacity.

14. The Supreme Court in Coady v Motor Vehicles Insurance (PNG) Trust [1987] PNGLR 55 adopted the common law principles at p57 where Kapi DCJ explained ‘loss of actual earnings’ and ‘loss of earning capacity’ as:-

"The first deals with the actual losses which can be calculated mathematically. Whereas, the second category deals with the risk that the plaintiff has lost the earning capacity to obtain an equivalent or a better job in the future."

15. The plaintiff did not provide evidence of business loss experienced by the early termination of the agreement on his business income. There is no written provision in the agreement setting out parties' rights in the event of an early termination as is common in standard formal contracts. The plaintiff’s claim for business loss will depend on evidence.

16. The plaintiff takes issue with the manner of the termination of the contract as well; however, the written terms of the contract does state the CO (which I infer to mean the Commanding Officer) can terminate the contract for poor performance but does not prescribe the manner of termination which leaves it open for the defendants to terminate it verbally and without formal notice. There are no contractual grounds for the plaintiffs' claim for early termination.

17. The plaintiff relies on internal communication by the officers of the first and second defendants to corroborate his evidence about his engagement and unpaid invoices. However, I do not place much weight to the internal communication because apart from it being secondary evidence, the communications themselves are raising issues and recommending to the Secretary of Defence for the payments and the re-engagement of the plaintiff but produce no evidence of the Secretary's decision. Only the Secretary as departmental head can bind the second and third defendants regarding the plaintiff’s claim. As it is, there is no evidence from the Secretary about the plaintiff's claim.

18. In terms of other corroborating evidence, the plaintiff appears to be a sole trader, incorporated as a business name and he pleads in his Writ of Summons that he is also registered for tax with the Internal Revenue Commission. I expect the plaintiff to produce copies of his annual company returns or annual or monthly tax returns for any of the relevant periods in the financial years 2015 to 2018 to substantiate both claims about his income and expenses.

19. To corroborate services rendered or works performed, evidence of works done or services performed should be provided by documentary evidence such as employee wages paid, payment receipts of the materials used or supplied in executing the services or works, monthly GST returns of monthly sales and expenditure reporting, evidence of taxes paid, confirmation on worksheets of services rendered or works performed to the client, business accounts and ledgers or profit and loss statement or balance sheets. None of these vital financial records that a business must maintain under company and tax laws have been produced into evidence to corroborate the plaintiff's claim of running a business and suffering business losses for early termination of contract.

20. I have had recourse to the plaintiff's business account bank statement annexure ‘A’ to his affidavit marked "P2" and set out below the payments into his bank account from the second defendant from 2015 to 2018:-

2015

Date of deposit	Amount (K)
2/04/2015	99, 829.51
1/07/2015	89,366.32
28/07/2015	51,120.95
5/10/2015	19,065.00
8/10/2015	110,247.64
18/12/2015	117,506.55
Total	487,135.97

2016

Date of deposit	Amount (K)
25/04/2016	117,739.64
12/12/2016	71,210.08
Total	188,949.72

2017

There were no Department of Defence payments into the plaintiff's bank account in 2017.

2018

Date of deposit	Amount (K)
17/04/2018	15,950.00
Total	15,950.00

21. The plaintiff has not explained the nature of these payments. If these payments are for the services rendered by the plaintiff to the first and second defendants, then there are no written terms to justify the nearly half a million payments in 2015. The 2016 payments exceed the annual payment of K133,308.64 and should have satisfied the outstanding invoices claimed for the 2015 and 2016 periods for K154,491.98. The payments in 2015 alone have exceeded the financial delegation of the first defendant and serves as a marked concern about breach of public finance laws by the first and second defendants which the State should investigate.

22. The plaintiff’s bank statement further reveals that there still is no corroborating evidence to prove the total yearly value of the plaintiff's engagement in 2015 and January 2016. The plaintiff claims that Lieutenant Colonel Esso’s letter of 18 October 2016 confirms part payment by the handwritten note of the word ‘paid’ against April and June 2016 invoices of K14, 410.00 and K15, 950.00 but these payments do not corroborate with his 2016 bank statement. If it was in one of the 2016 payments, the plaintiff has not explained it in his evidence, therefore, his evidence of part payment is not accepted. On the contrary, there are several payments to betting businesses from the plaintiff's business account that contradict any claims for business loss. A business account should be maintained for business purposes separated by a personal account for the business owner so there is a clear demarcation between business and personal expenses. Evidence produced before a Court of law for business loss must prove the case for the business to the required civil standard. Where there is evidence of personal expenses throughout the bank statement, it lessens the plaintiff's evidence about the business nature of the claim. All these discrepancies ultimately cast doubt over the credibility of the plaintiff's business loss.

Court to do its best

23. The last principle in assessing damages is for the Court to do its best to award damages where evidence is lacking, and damages or loss is proved. Here, the plaintiff has not provided sufficient corroborating evidence to prove his business loss in services rendered or works performed nor in loss of business because of the early termination. In my view, this principle is more suited to personal injuries actions or claims in tort where damages are proved but it is difficult to quantify the loss. A business loss claim such as in this case can be easily corroborated with supporting financial and other business records. As such, this principle is not relevant to this case.

CONCLUSION

24. The plaintiff has not discharged his evidentiary burden to prove his business loss for unpaid invoices for services rendered or works performed and loss in early termination of contract. The plaintiff's claim for outstanding invoices and balance of contract are disallowed. The plaintiff is not entitled to any damages.

ORDER

25. The judgment of the Court is:

1) The plaintiff failed to prove his business loss on a balance of probabilities.

2) No award of damages is made for the plaintiff.

3) Costs of the proceedings are awarded to the defendants to be paid by the plaintiff, to be taxed, if not agreed.

4) Time for entry of the orders is abridged to the date of settlement by the Registrar of the National Court which shall take place, forthwith.
Judgement accordingly,.

Boma Lawyers: Lawyers for the Plaintiff
Acting Solicitor General by his employed Lawyer: Lawyer for the Defendants

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^[1] The law as it applied at the relevant time of the agreements.
^[2] Claim discontinued as plaintiff pleads it is time barred.