Kiap (trading as El Roi Hire Cars) v Wari [2024] PGNC 233; N10902 (27 June 2024)

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AND:
DR. PAUL WARI as the Chief Executive Officer of Gulf Provincial Health Authority
First Defendant

LIABILITY – vehicle used in emergency - vehicle damaged in an accident on return trip – vehicle replaced 10 months later - claim for loss of business and out of pocket expenses – proof of carrying on a business lacking – quantum meruit does not apply- out of pocket expenses not particularised - liability not established.

Facts
The plaintiff's vehicle was used for emergency medical transportation by the Kerema General Hospital to transport a seriously wounded patient to Port Moresby. On its return to Kerema, the vehicle had an accident and was damaged beyond repair. The plaintiff's vehicle was replaced 10 months later. The plaintiff claims the defendants are liable for loss of business at K1000.00/day and out of pocket expenses incurred for the 10-month period he was without the vehicle.

Cases Cited
Bani Investment Ltd v Parkop [2021] N9050
Fly River Provincial Government v Pioneer Health Services Ltd (2003) SC705
Likui Trading Ltd v Selna [2011] N4530
Teine v University of Goroka [2019] SC1881
The State v Barclay Bros (PNG) Ltd [2004] N2507
University of Papua New Guinea v Duwaino [2011] SC1119

Legislation
Business Names Act 2014, s9.
Goods and services Tax Act 2003 ss 8, 10 and 48.
Income Tax Act 1959(as amended), s11.

STATEMENT OF CLAIM
Trial by Affidavit on liability where the plaintiffs sought to prove loss of business and out of pocket expenses.

1.BRE, AJ: INTRODUCTION: The plaintiff, Peter Kiap, is claiming loss of business and out of pocket expenses for a period of ten (10) months when he was without his vehicle to service his hire car business as a result of his vehicle been damaged beyond repair after the Kerema General Hospital used his vehicle for an emergency medical transportation.
The defendants deny liability asserting instead that the plaintiff has been fully restituted.

PLAINTIFF'S CLAIM

2. The plaintiff amended his Writ of Summons and Statement of Claim twice. In his further amended Statement of Claim the plaintiff claims his vehicle, a Toyota land cruiser 10-seater registration number BER 123 was hired by a senior doctor at the Kerema General Hospital on 16 December 2016 at a rate of K1000.00/day for an emergency transportation of a seriously wounded patient to the Port Moresby General. That on the return trip the next day, the vehicle had an accident that damaged the vehicle beyond repair and his vehicle was written-off. As a result, he seeks loss of business at K266,050,00, out of pocket expenses, plus costs and interest.

3. The defendants pleaded that the plaintiff is not entitled to loss of business and referred to a deed of release dated 15 October 2017 signed by the plaintiff and the Kerema General Hospital when the plaintiff's vehicle was replaced with a new Toyota land cruiser 10-seater vehicle. That it was legally defective in that there was no board resolution and clause 3.3.3 of the deed is inconsistent with Section 9(c),(d) and (e) of the Provincial Health Authorities Act 1996 and section 2A(2) of the Claims By and Against the State Act 1996.

4. The plaintiff relies on following Affidavits which were tendered into evidence:-

5. The following evidence was objected to by the defendants and not accepted into evidence: -

Defendants' evidence

6. The defendants rely on the following Affidavits which were tendered into evidence:-

7. The following agreed facts are taken from the Statement of Agreed and Disputed Facts and Legal Issues signed by both parties' counsel and filed on 18 October 2023:-

8. Counsel for the plaintiff submits that while the plaintiff's vehicle has been replaced, the plaintiff is entitled to be restituted for loss of business and out of pocket expenses during the 10-month period when he was without his vehicle.
Counsel relied on Fly River Provincial Government v Pioneer Health Services Ltd (2003) SC705 to submit that despite any illegality of the hire arrangement or the deed of release between the parties, the plaintiff must be restituted for loss of business and out of pocket expenses incurred in pursuing his claim.

9. Counsel for the defendants submits that the defendants are not liable for any loss of business or out of pocket expenses sustained by the plaintiff because the hire arrangement and the deed of release are legally defective. Further, the plaintiff has been adequately compensated for the loss of its vehicle with the replacement of a brand-new vehicle of similar type being a Toyota
Landcruiser 10-seater on 25 October 2016.

CONSIDERATION ON LIABILITY

10. In determining liability, I have perused the evidence relied on by both parties and consider the following affidavits pertinent to deciding the issue of liability.

a) Affidavit of Mike Pepi sworn on 20 September 2019 and filed
on 20 September 2019 (Doc #15)
b) Affidavit of Moses Uvapi sworn on 20 September 2019 and filed on 20 September 2019 (Doc # 16)
c) Affidavit of Norape Sakanu filed 4 February 2020 (Doc # 17)
d) Further Affidavit of Dr Paul Wari sworn on 2 June 2021 and filed on 3 June 2021. (Doc # 31)
e) Affidavit of Peter Kiap filed 2 March 2022. (Doc #49)
f) Affidavit of Peter Kiap filed 2 May 2022. (Doc #65)
g) Affidavit of Peter Kiap filed 29 September 2022. (Doc#73)

11. The following timeline is considered relevant to appreciating the background and I set that out below:-

Time	Event
August 2016	Plaintiff purchased Toyota Land cruiser BER 123
16 December 2016	Dr John Raomae Senior Doctor at Kerema General Hospital used the plaintiff's vehicle Toyota Land cruiser BER 123 at K1000/day to transport a seriously wounded patient to Port Moresby General Hospital.
17 December 2016	On its return to Kerema, the plaintiff's vehicle Toyota Land cruiser BER 123 got involved in an accident and was damaged beyond repair.
24 May 2017	Plaintiff filed this Writ of Summons.
25 October 2017	A deed of release was signed by the plaintiff and the Kerema General Hospital reflecting a replacement vehicle of a brand-new Toyota Land cruiser 10 seater handed to the plaintiff.
17 June 2021	Defence filed
23 June 2021	Writ of Summons and Statement of Claim Amended filed
2 August 2021	Reply filed
28 September 2021	Further Amended Writ of Summons and Statement of Claim filed

12. The crucial issue for determination concerns whether the plaintiff has discharged his burden of proof in proving the defendant's liability for his loss of business and out of pocket expenses and in proving that he was operating a business before the vehicle damage which resulted in him losing business.
The plaintiff has not distinguished in his pleading the nature of his loss of business in whether he is claiming loss of business profits or loss of business opportunities or both. Though, he has pleaded business loss of K1000.00 per day for 313 days at K313,000.00 less 15% contingencies resulting in a total claim for K266,050.00 This implies it is a loss of profits claim and assumes the daily rate alleged to be that agreed with Dr John Raomae of Kerema General Hospital as the going daily rate he was charging at that time.

13. On the issue of the defendant's liability, the matters which I consider crucial for my consideration are: -

14. The uncontested evidence is that on 16 December 2016 due to a medical emergency of a severely wounded patient Dr John Raomae made a medical decision to hire the plaintiff's vehicle to transport the patient to Port Moresby General Hospital as the hospital's ambulance was not available. I find that on the 16 December 2016, there existed a verbal agreement for the use of the plaintiff's vehicle. The defendants did not produce the evidence of Dr John Raomae to confirm the arrangements and the daily hire charge of K1000.00 as deposed by the plaintiff.

15. On that basis, I accept the plaintiff's evidence that there was an agreement for the hire of the vehicle for K1000.00 per day.
As to its duration, I have also covered the issue below, my view is that the intention of the parties is that it was a short hire of not more than 48 hours purposely for the emergency transportation and return of the vehicle from 16 December to 17 December 2016

16. The defendants deny liability on grounds of legality, regarding the terms of the deed of release as it pertains to binding them to clauses which provide a right to the plaintiff to sue for loss of business and other costs as a result of the vehicle damage. I accept the defendants submission but qualify my acceptance to the extent of the factual matters concerning the statements of fact on purchase of a brand-new equivalent Toyota Landcruiser 10-seater to replace the damaged Toyota Landcruiser vehicle of the plaintiff.

The plaintiff's evidence is that he purchased his vehicle some three months prior in August 2016, so the vehicle was fairly new at the time it was used and damaged beyond repair.

17. The uncontested evidence is that the plaintiff's damaged Toyota Land Cruiser 10-seater BER 123 which was written off as a result of the accident was replaced by the Kerema General Hospital some 10 months after the accident.
The defendants evidence ( Doc 15 and 16) is that in addition to the replacement vehicle the plaintiff was compensated with K5000.00.

This payment is not mentioned in the plaintiff's evidence, but I accept the defendants corroborated evidence (Doc 15 and 16). To me that sufficiently restores the plaintiff to his original position as it concerns owning a Toyota Landcruiser 10-seater and given the new state of the plaintiff's vehicle, similar treatment was applied by the Kerema Hospital when the vehicle was replaced with a brand-new vehicle and K5000.00. This would have adequately compensated him.

18. The plaintiff's primary claim is for loss of business for the period after the accident to the time before he was handed the replacement vehicle. The relevant period is from 17 December 2016 to 25 October 2017.
I find that the plaintiff makes an assumption that he has a hire agreement with the defendants for this period at the rate of K1000.00 per day. However, there is no written hire agreement nor any immediate follow-up documentation in the first instance.

As a business, the prudent thing for the plaintiff to do to minimise any risks to his business was to immediately follow up the verbal or oral hire arrangement with written documentation. It could be as simple as a letter confirming the use of the hire and its terms as mentioned by Dr John Raomae or signing of a hire agreement when the license details of the driver are taken, before the keys are handed to the driver. Further, the plaintiff has not given evidence to indicate what the vehicle was doing in Kerema at that time, was it out on hire or is Kerema his usual place of business?

19. In Fly River Provincial Government v Pioneer Health Services Ltd [2003] SC705 the Supreme Court held that a party to a contract that is null and void because it has not complied with the Public Finances (Management) Act 1996 can rely on the remedy of restitution to seek relief for costs incurred or work performed.

20. In Bani Investment Ltd v Parkop [2021] N9050 His honour Sheppard J carefully examined the PNG and foreign caselaw and summarised the principles of restitution at [106] as follows:-

“1) A contract which is void for illegality is void ab initio and is unenforceable as to its terms and conditions.

2) However, where such a contract has been performed in part, a remedy for goods supplied or services rendered by a party under the void contract is available to that party based on the principle of quantum merit, provided that party is innocent of the cause of the illegality of the contract.

3)Where a party has a mistaken but genuine belief that a contract exists and has supplied goods or rendered services to another party under that misapprehension, a remedy by way of unjust enrichment is available to that party, provided that the first party is innocent of the cause of non-existence of the contract.

4) Innocence or otherwise of the cause of the illegality or non-existence of a contract is in each case is a matter for evidence on the civil standard of proof.”

21. With respect, the caselaw on restitution refers to written contracts which became void as a result of non-compliance with the public finance laws and to restitute on quantum meruit and in my view do not support the plaintiff. The evidence is that there is no hire agreement in writing between the parties. I have drawn an inference based on the evidence that the agreement is an oral agreement for hire for a short period of less than 48hours for the specific period of emergency transportation. The K5000.00 payment may be an ex-gratia payment but without any written agreement it adequately compensates the plaintiff for any alleged out-of-pocket expenses. Restitution based on quantum meruit requires that services were performed or works done for which payment remains outstanding.
The plaintiff bears the onus of proving loss of business income and out of pocket expenses.

22. In terms of the plaintiff discharging his burden of proof regarding his business and out of pocket expenses, I consider that in order to establish a case for assessment of damages, the plaintiff must prove that he was running a hire car business around the time before and after the damage of his vehicle which has resulted in him sustaining loss of income from the business activity of vehicle hire.

The plaintiff must prove his loss of business with clarity. See Likui Trading Ltd v Selna [2011] N4530, and University of Papua New Guinea v Duwaino [2011] SC1119

23. For this, I consider relevant evidence would be documentary evidence of past hires in the form of hire agreements, paid invoices, or earnings as captured by bank statements, or financial records, vehicle hire bookings, etc,.
The principle of restitution applies to compensating a plaintiff who has rendered services or performed works for quantum meruit despite the legality of the arrangement. That is established in the cases of Fly River Provincial Government v Pioneer Health Services Ltd [2003] SC705, Teine v University of Goroka [2019] SC1881 and The State v Barclay Bros (PNG) Ltd [2004] N2507.
In Fly River Provincial Government v Pioneer Health Services Limited the Supreme Court stated in the headnote:-

"Where an illegal contract is part performed an action for recovery or restitution is available if not already paid for in equity to avoid unjust enrichment condition on the innocence of the contracting parties.”

24. Here, the relevant period of 10 months from 17 December 2016 to 25 October 2017 marks the period when the plaintiff was without his vehicle. Could it be implied that services were rendered to the defendants for hire of the vehicle during this time?

The evidence is that the vehicle was initially used for an emergency lifesaving operation on the call of a senior doctor of the Kerema General Hospital. The vehicle was returning the next day to Kerema.
I infer the intention was to return the vehicle, implying a very limited use of the vehicle for not more than 48 hours.

It is difficult to ascertain the parties intention at the time of use of the vehicle on the 16 of December 2016 except to take a cue from the overt circumstances of the case as presented by the evidence.

The defendants have also not produced evidence to clarify what internal procedures the hospital management or senior doctors have in financially committing the hospital to organise emergency medical transportation to Port Moresby, which I assume, would be a common occurrence and should have been catered for in the internal procedures of the Kerema General Hospital.

25. However, what is clear to me is that the use of the plaintiff's vehicle to transport a patient of the Kerema General Hospital translates to a hire of the plaintiff's vehicle purposely for the emergency transportation or medical evaluation, for a short period of between 24 hours to 48 hours to transport the patient to Port Moresby General Hospital and return to Kerema town.

The plaintiff should have taken steps to mitigate his loss. As a business, it is prudent for the plaintiff to immediately after the hire, issue in writing a confirmation of the verbal hire arrangement, failing which the plaintiff incurred a business risk with his decision to permit the use of the vehicle without immediate follow up documentation.

26. I infer from the defendants evidence that there was no intention to create legal relations from the defendants with the plaintiff for an ongoing use or hire of the vehicle to such an extent that it would cover the 10-month period.

The plaintiff also does not explain in his evidence whether his vehicle was used in previous hires before its use by the defendants and at what daily rate nor what the vehicle was doing in Kerema when it was used. In Mappa v Papua New Guinea Electricity Commission [1995] N1366, the Court held after its earlier decision on a daily rate was overturned by the Supreme Court that there was no evidence in the form of business record or tax returns to prove the daily rate so no finding of loss of profits in business loss was made. I adopt what the Court said as follows:-

"... if you wish to establish matters like loss of profits from the operation of a modern business then it is necessary to comply with the modern law such as produce such records as are required by the law."

27. I consider that the plaintiff is a sole trader registered by virtue of the business name registration. The vehicle registration certificate indicates that the vehicle was registered for business purposes, not private purposes. To me formal documents reflect an intention to carry on a business of a hire car using the vehicle, it however does not prove the actual carry-on of a business. That evidence will be captured in the plaintiffs business records.

As a business, the plaintiff must comply with IPA and taxation laws. IPA laws require business names to be renewed annually. See section 9 Business Names Act 2014. While the Income Tax Act 1959(as amended) and the Goods and services Tax Act 2003 require all income to be reported and subjected to a tax assessment. See section 11 Income Tax Act, and Sections 8, 10 and 48 GST Act.

28. I would expect copies of Individual Income Tax returns or monthly GST returns for the financial years 2016 and 2017 to be produced in evidence to prove that the plaintiff was carrying on a hire car business. The monthly income and expense and loss to the business income would be reflected in these tax records if the plaintiff did comply with his tax obligations.

Alternatively, a record of a cashbook or copies of invoices or payment receipts should suffice. On this point, the plaintiff did annex to his affidavit (Doc 65) a copy of a remittance advice (payment receipt) dated 28 July 2016 from the Department of Justice and Attorney General of K1600.00 for the hire of vehicle. However, the plaintiff's evidence falls short as he does not provide details to explain whether the vehicle hired was the Toyota landcruiser BER 123, what the daily rate was and how long the vehicle was hired for.

29. Further, if vehicle BER 123 was insured, evidence of insurance would assist the plaintiff in proving business loss.

30. Additionally, quantum meruit applies to past services rendered or works done. There was no hire in the 10 months the vehicle was damaged. Quantum meruit does not apply to a loss of profits or business opportunity claim, which I find is the basis of the plaintiff’s claim.

31. Overall, the purpose of an award of damages is to put the injured party in the same position as (s)he would have been in but for the loss suffered. See University of Papua New Guinea v Duwaino [2011] SC1119. The plaintiff was restored to his original position when he was given a new Toyota land cruiser plus K5000.00 in compensation. In the absence of any written agreement, evidence about carrying on a business activity and in light of the public finance laws requiring authorised financial delegates to bind the State with any financial commitments, it is my judgement that the plaintiff has not discharged his burden of proof on a balance of probabilities that he was carrying on a business and sustained financial loss of K1000.00/day or K266,050.00 for 313 days (about 10 and a half months) as claimed. The plaintiff is not liable for any loss of business.

32. It appears the plaintiff’s claim is for loss of profits, however, he has not adduced sufficient evidence to prove carrying on a business and loss of business profits.

33. As to out-of-pocket expenses, this claim must be specifically pleaded.
Order 8 rule 34 NCR:-

"34. Out of pocket expenses. Where, in proceedings on a common law claim, a party pleading claims damages which include moneys which he has paid or is liable to pay, he shall give particulars of those moneys."

34. The pleadings do not particularise the out-of-pocket expenses. I accept the defendant's evidence that K5000.00 was paid in addition to the replaced vehicle. I consider that sufficient to cover any costs. Given my decision denying liability for the defendants, the out-of-pocket expenses are consequential and follows that the plaintiff has been restituted. The defendants are not liable for any out of pocket expenses.

35. Overall, the plaintiff has not discharged his evidentiary burden to the required civil standard; to prove he was carrying on a hire car business earning K1000/day which was adversely affected, by proving loss of earnings reflected in business records.

36. I accept the defendant's evidence that they have adequately compensated or restituted the plaintiff and had no intention to enter legal relations with the plaintiff such that it would create an ongoing relation to which he has suffered a business loss. The principle of quantum meruit does not apply to assist the plaintiff as there is no hire covering the 10 month period. It is therefore my judgement that the defendants are not liable for loss of business of K1000.00 per day for 313 days at K313,000.00 less 15% contingencies resulting in a total claim for K266,050.00.

________________________________________________________________
Sanol Malaga: Lawyers for Plaintiff
Nelson Lawyers: Lawyers for Defendants

National Court of Papua New Guinea

Kiap (trading as El Roi Hire Cars) v Wari [2024] PGNC 233; N10902 (27 June 2024)