Binnen Construction Ltd v Hon Buka Goli Malai

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 21 October 2014
• Citation: (2014) N5775
• Court: National Court
• Year: 2014
• Judgement Number: N5775

Full : WS NO 288 OF 2012; Binnen Construction Limited v Hon Buka Goli Malai, Member for Madang Open, Chairman, Joint District Planning & Budget Priorities Committee and Lawrence Pitor, Madang District Administrator and The Independent State of Papua New Guinea (2014) N5775

National Court: Cannings J

Judgment Delivered: 21 October 2014

N5775

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 288 OF 2012

BINNEN CONSTRUCTION LIMITED

Plaintiff

V

HON BUKA GOLI MALAI, MEMBER FOR MADANG OPEN,

CHAIRMAN, JOINT DISTRICT PLANNING &

BUDGET PRIORITIES COMMITTEE

First Defendant

LAWRENCE PITOR, MADANG DISTRICT ADMINISTRATOR

Second Defendant

THE INDEPENDENT STATE OF PAPUA NEW GUINEA

Third Defendant

CANNINGS J

Madang: 23 October 2013, 10 September 2014

Waigani: 21 October 2014

DEBT AND DAMAGES – assessment – after entry of default judgment – breach of contract – oral contract for provision of road construction work – defendants’ failure to honour invoices.

The plaintiff claimed that it entered into a contract with the first and second defendants (a member of Parliament and a district administrator) to upgrade a road, that it completed the contract and that the defendants, including the third defendant, the State, failed to pay all invoices it rendered. The plaintiff sued for the debt due and for damages for breach of contract. The defendants failed to file a defence and default judgment on liability was entered against them. This was a trial on assessment of debt and damages. The plaintiff sought three categories of relief: (a) debt of K772,536.52 in respect of the balance of unpaid invoices; (b) damages in respect of interest incurred on a loan it obtained to purchase equipment, K649,000.00; (c) general damages for pain and hardship, K10,000.00, a total claim of K1,431,535.52. Only the State defended the matter, arguing that the issue of liability should be revisited due to defects in the pleadings and the State should be found not liable; but in the event that the State remains liable, nothing should be awarded due to lack of evidence to support the claims.

Held:

(1) The effect of the default judgment was that the facts and cause of action pleaded in the statement of claim are presumed to have been proven, and are only revisited if they do not make sense or would make an assessment of damages a futile exercise (William Mel v Coleman Pakalia (2005) SC790). Here, the facts pleaded were clear, as were the causes of action relied on, so the issue of liability was not reconsidered.

(2) The Court awarded: (a) debt of K772,536.52, the full amount of the unpaid invoices, (b) nothing for interest incurred on purchase of equipment, (c) damages of K10,000.00 for pain and hardship, a total amount of debt and damages of K782,536.52.

(3) In addition, interest on the total amount of debt and damages was awarded, calculated at the rate of 8% per annum from the date of service of the writ to the date of judgment (a period of 2.5 years), a sum of K156,507.30, resulting in a total judgment sum of K939,043.82.

Cases cited

The following cases are cited in the judgment:

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

Dennis Marus v Kimbe Urban Local-level Government (2007) N5021

Fly River Provincial Government v Pioneer Health Services Ltd (2003) SC705

Hadley v Baxendale (1854) 9 Exch 341

Jeffery Balakau v Sir Arnold Amet (2013) N5313

Kumagai Gumi Co Ltd v National Provident Fund Board of Trustees (2006) SC837

National Capital District Commission v Yama Security Services Ltd (2005) SC835

Niugini Civil & Petroleum Ltd v West New Britain Development Corporation Ltd (2008) N3292

Panga Coffee Factory Pty Ltd v Coffee Industry Corporation Ltd (1999) SC619

PNG Aviation Services Pty Ltd v Geob Karri (2009) SC1002

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

Tetley v The Administration (1971) No 647

Victoria Laundry v Newman [1949] 2 KB 528

William Mel v Coleman Pakalia (2005) SC790

TRIAL

This was a trial on assessment of debt and damages for breach of contract.

Counsel

D F Wa’au, for the plaintiff

S Phannaphen, for the third defendant

21st October, 2014

1. CANNINGS J: This is an assessment of debt and damages for breach of contract, following entry of default judgment. The plaintiff, Binnen Construction Limited, claims that in December 2007 it was engaged by the first and second defendants to upgrade the Four Mile-Bawan Road, Madang Province. At that time the first defendant, Buka Goli Malai, was the Member for Madang Open and Chairman of the Madang Joint District Planning and Budget Priorities Committee, and the second defendant, Lawrence Pitor, was the Madang District Administrator. The plaintiff claims that it completed the contract and that the first and second defendants failed to pay all invoices it rendered. The plaintiff sued those defendants, as well as the third defendant, the State, for the debt due and for damages for breach of contract. The defendants failed to file a defence and default judgment on liability was on 23 November 2012 entered against them.

2. The plaintiff seeks three categories of relief:

(a) debt of K772,536.52 in respect of the balance of unpaid invoices;

(b) damages in respect of interest incurred on a loan it obtained from Credit Corporation Ltd to purchase equipment, K649,000.00;

(c) damages for pain and hardship, K10,000.00, a total claim of K1,431,535.52.

3. Only the State defended the assessment, arguing that the issue of liability should be revisited due to defects in the pleadings and the State should be found not liable; but in the event that the State remains liable, nothing should be awarded due to lack of evidence to support the claims.

4. The first issue is whether to revisit the issue of liability. If that issue is decided against the State, the court will assess the amount of debt and damages due to the plaintiff.

SHOULD LIABILITY BE REVISITED?

5. The effect of the default judgment is that the facts and cause of action pleaded in the statement of claim are presumed to have been proven, and are only revisited if they do not make sense or would make an assessment of damages a futile exercise (William Mel v Coleman Pakalia (2005) SC790).

6. Mr Phannaphen, for the State, submitted that the Court should revisit the issue of liability and find that the State is not liable, for these reasons:

· the cause of action was not pleaded with sufficient clarity: the pleading is so vague the defendants have been left guessing whether the cause of action is unpaid debt or breach of contract;

· it is not clear whether the purported contract at the centre of the case was an oral contract or in writing;

· it is not clear what the terms of the contract were, and in particular what the value of the contract was;

· the statement of claim does not plead any facts that would enable the court to conclude that the contract, if it exists, was lawfully entered into, in that: no mention is made of compliance with the public tender requirements of the Public Finances (Management) Act and the value of the purported contract (which the statement of claim pleaded was approximately K1 million) was beyond the legal capacity of the first and second defendants to award, the result being that the contract is void and unenforceable (Panga Coffee Factory Pty Ltd v Coffee Industry Corporation Ltd (1999) SC619, Fly River Provincial Government v Pioneer Health Services Ltd (2003) SC705, National Capital District Commission v Yama Security Services Ltd (2005) SC835).

7. I reject those submissions. The statement of claim, though not precisely pleaded, adequately discloses causes of action in debt and breach of contract. I agree that it is not expressly pleaded whether the contract was in writing and what its terms were. However, it is reasonably to be inferred that the pleading is that:

· there was an oral contract entered into by the first and second defendants,

· its terms included that the plaintiff would upgrade and rehabilitate the road,

· the first and second defendants would be invoiced a reasonable sum for doing so, and

· they would honour the invoices within a reasonable time after being rendered.

8. I agree that it is questionable whether the procedures followed by the parties in entering the contract complied with the Public Finances (Management) Act and whether the first and second defendants had legal capacity to enter the contract and bind the State. Those would certainly seem to have been arguable defences. But no defence has been filed and the State ought not be permitted to raise these arguments now. The default judgment will not be set aside. I will now assess the amount of debt and damages.

ASSESSMENT OF DEBT AND DAMAGES

(a) Unpaid debt

9. This is a claim for debt as distinct from damages. It is important to maintain that distinction (Kumagai Gumi Co Ltd v National Provident Fund Board of Trustees (2006) SC837, Niugini Civil & Petroleum Ltd v West New...