Rodao Holdings Ltd v Sogeram Development Corporation Ltd (2007) N5485

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 23 February 2007
• Citation: (2007) N5485
• Docket Number: WS NO 521 OF 2001
• Court: National Court
• Year: 2007
• Judgement Number: N5485

Full Title: WS NO 521 OF 2001; Rodao Holdings Ltd v Sogeram Development Corporation Ltd (2007) N5485

National Court: Cannings J

Judgment Delivered: 23 February 2007

N5485

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 521 OF 2001

RODAO HOLDINGS LTD

Plaintiff

V

SOGERAM DEVELOPMENT CORPORATION LTD

Defendant

Madang: Cannings J

2005: 18 November,

2006: 18 January, 20 November,

2007: 23 February

DAMAGES – breach of contract – management agreement – breach by party which had contracted other party to manage its affairs – assessment of damages following entry of default judgment – conflict between terms of default judgment and statement of claim – assessment of remuneration due to plaintiff – general damages.

The plaintiff, a management company, and the defendant, a landowner company and owner of forest resources, entered into a three-year management agreement under which the plaintiff was to manage the defendant’s affairs, particularly regarding a timber and marketing agreement it had with another company. Under the management agreement, the defendant was to pay the plaintiff a flat fortnightly sum plus 5% of the gross amount of monies the plaintiff recovered on the defendant’s behalf. A few months after commencement of the management agreement, the defendant repudiated it. The plaintiff sued the defendant claiming amongst other remedies a percentage of monies recovered and general damages for breach of contract. The defendant failed to defend the matter and default judgment was entered against it for (a) “remuneration for the remainder of the contractual period” and (b) “general damages”, both of which were to be assessed. This was a trial on assessment of those amounts. The plaintiff submitted the assessed sums should be (a) K4.78 million and (b) K50,000.00. The defendant submitted the plaintiff be awarded nothing; or in the alternative judgment be entered for nominal sums only.

Held:

(1) The default judgment resolved all questions of liability in respect of the matters pleaded in the statement of claim.

(2) An assessment of remuneration for the balance of the contract period required the court to examine the terms of the contract and the statement of claim; and as a result of that process the plaintiff was awarded K2,000.00.

(3) General damages for distress, frustration and inconvenience were assessed at K50,000.00.

(4) The plaintiff was awarded interest of K28,704.00, being a total judgment sum of K80,704.00.

(5) As both sides had a victory of sorts they will bear their own costs.

Cases cited

The following cases are cited in the judgment:

Albert Baine v The State (1995) N1335

Anglia Television v Reed [1972] 1 QB 60

Cheong Supermarket Pty Ltd v Pery Muro [1987] PNGLR 24

Coecon Ltd (Receiver/Manager Appointed) v National Fisheries Authority (2002) N2182

Hadley v Baxendale (1854) 9 Exch 341

Kolaip Palapi and Others v Sergeant Poko and Others (2001) N2274

Kopung Brothers Business Group v Sakawar Kasieng [1997] PNGLR 331

MVIT v Pupune [1993] PNGLR 370

MVIT v Tabanto [1995] PNGLR 214

Obed Lalip and Others v Fred Sikiot and The State (1996) N1457

Papua New Guinea Banking Corporation v Jeff Tole (2002) SC694

Peter Wanis v Fred Sikiot and The State (1995) N1350

Tabie Mathias Koim and 28 Others v The State and Others [1998] PNGLR 247

Tetley v The Administration (1971) No 647

Victoria Laundry v Newman [1949] 2 KB 528

Waima v MVIT [1992] PNGLR 254

William Mel v Coleman Pakalia and Others (2005) SC790

Yange Lagan and Others v The State (1995) N1369

Yooken Paklin v The State (2001) N2212

ASSESSMENT OF SUM AND DAMAGES

This was a trial on assessment of an amount due under a repudiated contract and general damages following entry of default judgment.

Counsel

B Meten, for the plaintiff

Y Wadau, for the defendant

23rd February, 2007

1. CANNINGS J: This is a case about assessment of amounts of remuneration and damages for breach of contract following the entry of default judgment in favour of the plaintiff. The plaintiff says it should get judgment for almost K5 million, whereas the defendant submits that the plaintiff should be awarded nothing. The plaintiff is Rodao Holdings Ltd, a management company based in Madang owned and controlled by David Monks. The defendant is Sogeram Development Corporation Ltd, a landowner company that is the timber resource owner of the Sogeram Timber Project, Madang Province.

2. In January 2000 the plaintiff and the defendant negotiated a management agreement. The defendant engaged the plaintiff to manage its affairs, particularly regarding its logging and marketing agreement with Madang Timbers Ltd. The parties did not execute a formal document or contract. Instead the agreement was brought into force by a letter headed “management agreement” from the defendant’s chairman, Isaac Cap Selong, to the plaintiff’s director, dated 24 January 2000. The letter, signed by Mr Selong and counter-signed by Mr Monks on 15 and 16 February 2000 respectively, stated:

I refer to recent discussions in regard to the financial management of our Corporation. We have held a special Board of Directors meeting to consider this matter and am pleased to offer to your Company the management rights to assist in the financial recovery of our Corporation.

Your brief will be as follows:-

a) To oversee all financial aspects of the Corporation’s affairs dating back to the start of our operations.

b) To review and update, as required, the re-imbursements received by way of premiums, royalties, export payments, etc payable from Madang Timbers.

c) To renegotiate the existing payments structure due to the termination of the exporting of round logs from the 11th of November 1997.

d) To peruse and execute the economical and development program which has to date not been carried out by our contractor, Madang Timbers Ltd.

e) Provide recommendations of financial and operational controls to the Board of Directors.

f) To liaise with Madang Timbers to ensure that all aspects of the LMA and the TP have been adhered to.

g) To assist with recommendations in the renegotiations of a new LMA and TP.

h) To report to the Board of Directors on any findings relating to the management of the Corporation.

Your initial period of appointment shall be for a 3-year period and shall be subsequently renewed at that anniversary for a further term of 1 year and so-forth.

Your starting date shall be the date of your signed acceptance of these conditions.

Your remuneration shall be K2,000.00 per fortnight after tax, reviewed at 3 monthly intervals and is also subject to CPI increases, plus 5% of gross amount of any monies recovered and any other additional revenue with the exception of our current payment of premiums.

You shall have full access to our office facilities, of business purposes only, which shall include telephone, fax, computer, stationary, etc, a fully maintained vehicle for use during working hours only, as and when required by your Company.

Please acknowledge receipt of this letter and your acceptance of the terms and conditions as set out above by signing and returning the enclosed copy to this office.

Yours faithfully

[Signed]

Isaac Cap Selong

Chairman – Board of Directors

Sogeram Development Corporation Limited

[no company seal affixed]

I, David Monks, a Director of Rodao Holdings Limited hereby acknowledge receipt and accept the terms and conditions of the management agreement as set out above.

[signed]

David Monks

Director

Rodao Holdings Limited

[company seal affixed]

3. The plaintiff rendered services under the management agreement until 10 March 2000, when the defendant suspended the agreement. Then on 13 April 2000 the defendant repudiated the agreement, for reasons unknown to the plaintiff.

4. One year later, on 26 April 2001, the plaintiff commenced the current proceedings against the defendant, claiming remuneration and other monies due under the agreement and damages, for breach of contract. The amounts claimed in the statement of claim were:

(a) K7,920.00 being remuneration still owing for work already done (payable at the rate of K2,000.00 per fortnight);

(b) K5,000.00 being 5% of the performance bond of K100,000.00 the plaintiff had already recovered on behalf of the defendant from its contractor;

(c) K179,480.00 being remuneration for the remainder of the period of the three-year management agreement;

(d) “the defendant register with the National Court any recovered monies owing by the defendant from its contractor and the defendant’s directors with 5% of any monies recovered to be paid to the plaintiff” [sic];

(e) special damages;

(f) general damages;

(g) interest under the Judicial Proceedings (Interest on Debts and Damages) Act;

(h) costs of these proceedings; and

(i) such further or other orders as the court deems fit.

5. The defendant failed to defend the matter and on 20 June 2001 Sawong J ordered default judgment against the defendant. The wording of the order, entered on 21 June 2001 – particularly order No 4 – is important. It states:

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