Jay LW Contractors Ltd v Covec (PNG) Ltd [2024] PGSC 105; SC2635 (2 October 2024)

SC2635

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 127 OF 2022

BETWEEN:
JAY LW CONTRACTORS LIMITED
Appellant

AND:
COVEC (PNG) LIMITED
Respondent

Waigani: Salika CJ, Mogish J & Carey J
2024: 27^th May and 2^nd October

CONTRACT – Contractual Entitlement – Complementary Agreement – Contractual Entitlements – Breach of Contract.

DAMAGES – Assessment of Damages – Damages for Breach of Contract – Remoteness of Damages – Cross–claim Liquidated Damages – General Damages – Exemplary Damages – Special Damages.

INTERESTS – Awarding Interests – Commercial Interest - Penalty Interest.

COSTS – Excess Costs – Appeal from indemnity costs order – costs on a full indemnity basis.

Facts:

The Appellant and the Respondent agreed to a sub-contract for the upgrade of a portion of the road. The Appellant commenced work but due to delay in completing the work, entered into a complimentary agreement which varied the sub-contract with the Respondent reducing the work to be completed by the Appellant. The Respondent then completed the remainder of the work. The Appellant appealed from part of the judgment in relation to the damages claimed.

Held:

1. The appeal is upheld in part.
   
2. The judgment and orders in term 3 of the Court Orders of 3^rd May 2022 are quashed.
   
3. The proceeding is remitted to the National Court for re–hearing on the matter of Cross-claim – Liquidated Damages and Excess Costs.
   
4. Each party shall pay its own costs of and incidental to this appeal.
   

Cases Cited:

The following cases are cited in the judgment.

Papua New Guinean Cases
Christopher M Smith v Ruma Constructions Ltd [2002] SC695
Curlewis v Yuapa [2013] SC1274
Mogai Ltd v Tolopa [2021] N9360
PNG Aviation Service Pty Limited v Somare [2002] SC685
Sir Arnold Amet v Peter Charles Yama [2010] SC1064

Overseas Cases:
Addis v Gramophone Co Ltd [1909] AC 488.
Hadley v Baxendale [1854] 9 Exch 34.

Legislation:
Supreme Court Act.

Counsel:
Mr R. Lains, for the Appellant
Mr RJ. Webb SC with Counsel assisting Mr G. Pogla, for the Respondent

JUDGMENT

2^nd October 2024

1. BY THE COURT: This is an appeal against part of the judgment of the National Court of 3^rd May 2022 WS No. 1339 of 2017 in relation to damages which are in dispute.
   

BACKGROUND

2. Jay LW Contractors Limited (the Appellant) and Covec (PNG Limited (the Respondent) agreed to a sub-contract and complementary agreement for road construction work to be done by the Appellant.
   
3. The sub–contract related to road construction which was to be done by the Appellant on 13 kilometres of the Laiagam to Porgera section of the Okuk Highway.
   
4. The scope and value of the work was initially K26,860,035.72 which was later reduced to K14,999,670.00 for 7.25 kilometres of road.
   
5. The balance of K7,362,468.28 is the amount that the Appellant claims from the Respondent.
   

APPEAL GROUNDS

1. The trial judge refused to award contractual entitlement under the Complementary Agreement;
   
2. Erroneous application of the Principle of Remoteness of Damages or Proximation Cause;
   
3. Refused to award General Damages for Breach of Contract under the heading – Injury to Company’s Reptation or Good Will due to the Appellant being placed under liquidation;
   
4. Refused to award General Damages for Breach of Contract under the heading – Exemplary and Aggregate Damages;
   
5. Refused to award General Damages for Breach of Contract under the heading – Loss of Business/Profits – (Expectation);
   
6. Refused to award General Damages for Breach of Contract under the heading – Loss of Business/Profits/Expectation on the 5.74 km of works taken back by the Respondent;
   
7. Refused to award General Damages for Breach of Contract under the heading – Penalty Interest paid to FIFIL & Westpac Bank;
   
8. Refused to award Special Damages for Breach of Contract under the heading – Liquidation-related expenses;
   
9. Refused to award Interest on Commercial Rate;
   
10. Refused to award Costs on Solicitor and Client basis or full indemnity;
    
11. Respondent awarded Cross-claim – Liquidated Damages and Excess Costs.
    

DETERMINATION

6. The Appellant abandons several grounds of the appeal under the Appeal Grounds. They include: 2 and 4.
   
7. In reviewing the submissions of the Appellant and upon examination of the files, we find no evidence that the trial judge erred in law to assume powers of the Supreme Court.
   
8. The matter was that of one proceeding in two parts and therefore not functus officio.
   
9. In Christopher M Smith v Ruma Constructions Ltd [2002] SC695, the trial judge had no authority to review the decision as this power was for that of the Supreme Court per the Supreme Court Act.
   
10. However, the case mentioned in paragraph 9 does not apply to the argument proffered by the Appellant, as counsel for the Appellant conceded in oral submission that the proceeding was in two parts.
    
11. The Respondent’s argument that there is no contradiction in the judgment on liability and the judgment on damages further supports the position of what was read in the appeal book.
    
12. Hence, the trial judge did not assume powers of the Supreme Court, and the ground of appeal is rejected.
    
13. The Appellant argued that the trial judge in refusing to award General Damages for Breach of Contract, under the heading – Injury to Company’s Reputation or Good Will due to the appellant being placed under liquidation, acted incorrectly and the case law was not authorities that were applicable.
    
14. The trial judge considered PNG Aviation Service Pty Limited v Somare [2002] SC685 and Mogai Ltd v Tolopa [2021] N9360.
    
15. The Respondent submits that the trial judge appropriately applied Addis v Gramophone Co Ltd [1909] AC 488 which contends that damages are not recoverable in a contract for loss of reputation.
    
16. The application of the principle of remoteness as outlined in Hadley v Baxendale [1854] 9 Exch 341 supports the Respondent’s argument that the trial judge correctly held the view that the cause of action was for breach of contract and as such we reject the Appellant’s submission on this ground of appeal.
    
17. The Appellant argued that the trial judge erred in refusing to award General Damages for Breach of Contract – Loss of Business Profits/Expectation.
    
18. We find that the submission by the Appellant fails as there is no identifiable

error that can be attributed to the trial judge that would sustain this ground of appeal.

19. For Ground 6, the Appellant argues that the trial judge erred in refusing to award General Damages for Breach of Contract under the heading – Loss of Business/Profits/Expectation on the 5.74 km of works taken back by the Respondent.
    
20. The argument proffered in relation to Ground 6 is not sustainable and indicates a business decision for which the Appellant attempts to connect to the Respondent.
    
21. This argument fails to persuade the Court that it has merit as there is no legal basis for which we can apply legal reasoning to deduce a decision that has any rationale in placing the onus of responsibility on the Respondent.
    
22. For Ground 7, the Appellant argues the trial judge erred in refusing to award General Damages for Breach of Contract under the heading – Penalty Interest paid to FIFIL & Westpac Bank
    
23. We accept the Respondent’s counter argument that the trial judge correctly applied the

principle of remoteness in the application of penalty interest and that the penalty interest is a business risk and within the control of the Appellant in this instance.

24. The Appellant argues that the trial judge erred in refusing to award Special Damages arising from the Appellant being placed into liquidation.
    
25. The principle of remoteness was applied by the trial judge.
    
26. The argument by the Appellant fails to persuade this Court of its merit and therefore, fails.
    
27. The exercise of discretion by the trial judge in refusing to award interest at a commercial rate is a position that a trial judge may take in the absence of evidence by the Appellant.
    
28. To convince the Appellate Court that the trial judge erred in exercising his discretion, the Appellant has to demonstrate that such is the case: Curlewis v Yuapa [2013] SC1274.
    
29. The trial judge considered the submission of the Appellant and made a determination to apply the interest rate under the Judicial Proceedings (Interest on Debts and Damages) Act 2015.
    
30. We reject the argument by the Appellant that the trial judge erred in law and fact in refusing to award interest at a commercial rate.
    
31. The argument by the Appellant on the refusal to award costs on solicitor and client basis or full indemnity is one of the exercises of discretion of the trial judge.
    
32. The determination by the trial judge in this regard does not suggest any identifiable error in fact and law and we reject this ground of appeal.
    
33. The Appellant avers that the trial judge provided no reasons for awarding the cross-claim to the Respondent.
    
34. The Respondent contends that the trial judge accepted its pleading and the evidence to support the claims.
    
35. This court accepts the argument by the Respondent that the decision would have been arrived at based on the submissions.
    
36. However, the reasons for the decision must be made known.
    
37. In Sir Arnold Amet v Peter Charles Yama [2010] SC1064, it states:
    

“2. A pronouncement by the Court falling short of giving reasons will inevitably lead to the conclusion that the Court or decision maker has no good reasons for the decision made;”

38. The trial judge erred in law by failing to provide reasons for the cross-claim award.
    

CONCLUSION

39. The Appellant did not prove that any of the other grounds of appeal should succeed except that in relation to the cross-claim.
    

ORDERS OF THE COURT

1. The appeal is upheld in part.
   
2. The judgment and orders in term 3 of the Court Orders of 3^rd May 2022 are quashed.
   
3. The proceeding is remitted to the National Court for re–hearing on the matter of cross-claim – Liquidated Damages and Excess Costs.
   
4. Each party shall pay its own costs of and incidental to this appeal.
   

Ordered accordingly.

________________________________________________________________
Hardy & Stocks Lawyers: Lawyers for the Appellant
Leahy Lewin Lowing Sullivan Lawyers: Lawyers for the Respondent