Beno Maoko v Kevin Ling and Hugo Sawmilling Limited (2008) N3293

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 26 March 2008
• Court: National Court
• Citation: (2008) N3293
• Docket Number: WS NO 661 OF 2007
• Year: 2008
• Judgement Number: N3293

Full Title: WS NO 661 OF 2007; Beno Maoko v Kevin Ling and Hugo Sawmilling Limited (2008) N3293

National Court: Cannings J

Judgment Delivered: 26 March 2008

N3293

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 661 OF 2007

BENO MAOKO

Plaintiff

V

KEVIN LING

First Defendant

HUGO SAWMILLING LIMITED

Second Defendant

Kimbe: Cannings J

2007: 23 November

2008: 26 March

PRACTICE AND PROCEDURE – motion to dismiss proceedings for disclosing no reasonable cause of action – National Court Rules, Order 12, Rule 40.

CONTRACT – privity of contract – whether a contract can be enforced by a person who was not a party to the contract.

The plaintiff commenced proceedings against the defendants, claiming damages for breach of contract. The defendants responded by moving a motion that the proceedings be dismissed for disclosing no reasonable cause of action, in that the plaintiff was not a party to the contract which he seeks to enforce and is precluded from enforcing it by the doctrine of privity of contract.

Held:

(1) Where a person wishes to enforce a contract by claiming damages for breach of contract, they must plead that they were a party to the contract or bring themselves within one of the exceptions to the doctrine of privity of contract.

(2) Here, the plaintiff was not a party to the contract and did not plead any of the exceptions to the doctrine of privity.

(3) The statement of claim discloses no reasonable cause of action and should, as a matter of discretion, be dismissed.

Cases cited:

Albert Areng v Gregory Babia & National Housing Corporation (2005) N2895

Christian Life Centre v Associated Mission Churches of PNG & Others (2002) N2261

Kiee Toap v The State and Electoral Commission and Another (2004) N2731

PNG Forest Products Pty Ltd and Another v The State and Genia [1992] PNGLR 85

PNGBC v Barra Amevo and Bari Investments t/a Kainantu Pharmacy, Lennie Aparima and Orito Aparima (1998) N1726

NOTICE OF MOTION

This was a motion for summary dismissal of a breach of contract action.

Counsel

No appearance for the plaintiff

R Asa, for the defendants

26 March, 2008

1. CANNINGS J: This is a ruling on a motion brought by the defendants, Kevin Ling and Hugo Sawmilling Ltd, to have breach of contract proceedings commenced against them summarily dismissed.

BREACH OF CONTRACT PROCEEDINGS

2 The proceedings were initiated by the plaintiff, Beno Maoko, who claims that, in 2001, he, through the business which he runs and is employed by – Noau Stevedoring – entered into a contract with the second defendant. It was a contract under which Noau Stevedoring provided stevedoring services to Hugo Sawmilling, a logging contractor operating in the Bakada and Ulamona areas of West New Britain Province. The first defendant, Kevin Ling, is the general manager of Hugo Sawmilling and signed the contract on behalf of the company.

3 Mr Maoko claims that Hugo Sawmilling breached the contract by terminating it without notice in February 2006, and that this has caused him loss of employment and income. He seeks damages for breach of contract.

THE DEFENDANTS’ POSITION

4 The defendants say that Mr Maoko was not a party to the October 2001 contract, which was executed by a written memorandum of agreement expressed to be between Noau Stevedoring Ltd and Hugo Sawmilling Ltd. He was one of two people who signed as a director of Noau Stevedoring, but that does not make him a party to the contract. The defendants argue that he is precluded by the doctrine of privity of contract from enforcing the contract.

5 They have moved a motion that the proceedings be dismissed for disclosing no reasonable cause of action, under Order 12, Rule 40 of the National Court Rules, which states:

(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings—

(a) no reasonable cause of action is disclosed; or

(b) the proceedings are frivolous or vexatious; or

(c) the proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

(2) The Court may receive evidence on the hearing of an application for an order under Sub-rule (1).

PRIVITY OF CONTRACT

6 The doctrine of privity of contract is a common law principle that has been adopted as part of the underlying law of Papua New Guinea. Sevua J explained it in PNGBC v Barra Amevo and Bari Investments t/a Kainantu Pharmacy, Lennie Aparima and Orito Aparima (1998) N1726:

The doctrine of privity of contract is that, as a general rule, a contract cannot confer rights or impose obligations arising under it on any person except the parties to it. The scope of the doctrine means only that a person cannot acquire rights, or be subjected to liabilities, arising under a contract to which he is not a party.

7 In Christian Life Centre v Associated Mission Churches of PNG & Others (2002) N2261 Lenalia J stated:

In the law of contract, a contract creates rights and obligations only between the parties to it. A contract does not confer rights on a stranger nor does it impose any obligations on the same. It is a fundamental principle of common law, that no person can sue or be sued on a contract unless he or she is a party to it: Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847. The doctrine of privity means a contract cannot as a general rule confer rights or impose obligations arising under it on any person except the parties to it.

8 There are, however, a number of exceptions to the doctrine of privity which allow third parties to acquire rights or obligations under a contract. Sawong J explained this in Albert Areng v Gregory Babia & National Housing Corporation (2005) N2895. In that case the plaintiff was the son of the purchasers of a property who had entered into a contract of sale with the National Housing Corporation. There was a long delay in transferring the title to the property and the plaintiff sued the NHC and the manager of its Madang office, claiming damages for breach of contract. The defendants attempted to have the proceedings summarily dismissed on the ground that the plaintiff was not a party to the contract. However, their motion for dismissal was refused as the court accepted that the plaintiff was authorised by his parents to bring the case to court. The defendants’ reliance on the doctrine of privity was regarded by Sawong J as a belated attempt on their part to distance themselves from the performance of their contractual obligations. This was unacceptable and inequitable and his Honour concluded that the doctrine of privity did not apply.

9 The various exceptions to the doctrine of privity are discussed at length in the following texts: J G Starke QC, N C Seddon, M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, © Butterworths 1988, Chapter 15, pp 477-515; K E Lindgren, J W Carter, D J Harland, Contract Law in Australia, © Butterworths 1986, Chapter 9 pp 292-316; G H Treitel An Outline of the Law of Contract, © Butterworths 1984, Chapter 13, pp 199-216.

10 If a person wishes to enforce a contract by claiming damages for breach of contract, they must plead that they were a party to the contract or bring themselves within one of the well recognised exceptions to the doctrine of privity of contract. Here, the plaintiff was not a party to the contract and did not plead any of the exceptions to the doctrine of privity; and I cannot see that any of the exceptions apply.

SHOULD THE PROCEEDINGS BE DISMISSED?

11 The test to apply when dealing with motions to dismiss proceedings on the ground of failure to disclose a reasonable cause of action is to ask:

· is it plain and obvious that the facts in the statement of claim, even if proved, will not entitle the...