Madang Cocoa Growers Export Co Limited v National Development Bank Limited (2012) N4682

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 18 May 2012
• Court: National Court
• Citation: (2012) N4682
• Docket Number: WS NO 1165 of 2009
• Year: 2012
• Judgement Number: N4682

Full Title: WS NO 1165 of 2009; Madang Cocoa Growers Export Co Limited v National Development Bank Limited (2012) N4682

National Court: Cannings J

Judgment Delivered: 18 May 2012

N4682

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1165 OF 2009

MADANG COCOA GROWERS EXPORT CO LIMITED

Plaintiff

V

NATIONAL DEVELOPMENT BANK LIMITED

Defendant

Madang: Cannings J

2011: 18 November, 9 December;

2012: 18 May

DAMAGES – breach of contract – loan agreement – breach by defendant bank – plaintiff/borrower’s claim for economic loss – need for plaintiff to corroborate claims – plaintiff awarded damages, plus interest and costs.

The plaintiff entered into a loan agreement with the defendant bank under which the bank advanced it K300,000.00. The loan was secured by amongst other things a fixed and floating charge over two of the plaintiff’s motor vehicles. The plaintiff failed to meet its monthly repayment obligations and the bank took possession of the vehicles, sold them, credited the proceeds of sale to the plaintiff’s loan account and terminated the loan agreement. The plaintiff succeeded at a trial on liability in establishing a cause of action in breach of contract against the bank on the grounds that, at the relevant time, the plaintiff was not in material default, the bank acted contrary to its duty of fairness in the conduct of the loan account and failed to give effect to the plaintiff’s equity of redemption. This was a trial on assessment of damages. The plaintiff argued that the two vehicles were profit-earning assets as they were regularly hired out to customers and that it lost substantial profits as a result of the loss of its assets. It claimed damages of K3,151,100.00.

Held:

(1) The plaintiff failed to adduce sufficient evidence to support most of the claims.

(2) The court awarded a total amount of damages of K46,666.66 plus interest of K13,663.80, being a total judgment sum of K60,330.46.

Cases cited

The following cases are cited in the judgment:

Albert Areng v Gregory Babia (2008) N3469

Albert Baine v The State (1995) N1335

ANZ Banking (PNG) Ltd v Kila Wari (1990) N801

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

Continental Trading Limited v Dewe Patsy (2004) N2503

Eliab Buka v Henry Uramete (2009) N3905

Graham Mappa v ELCOM (1992) N1093

Hadley v Baxendale (1854) 9 Exch 341

Jonathan Mangope Paraia v The State (1995) N1343

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

Livingston v Raywards Coal Co [1880] 5 App Cases 25

Madang Cocoa Growers Export Co Ltd v National Development Bank Ltd (2011) N4291

Madang Development Corporation Ltd v Rabtrad Madang Ltd (2006) N3091

Misac Pokonoming v Jeffery Simiri WS 1596/2005, 26.10.07

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

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

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

Putput Logging Pty Ltd v Philip Ambalis [1992] PNGLR 159

Rodao Holdings Ltd v Sogeram Development Corporation Ltd WS No 521 of 2001, 23.02.07

Spirit Haus Ltd v Robert Marshall (2000) N2630

Steven Naki v AGC (Pacific) Ltd WS No 1256 of 1999, 20.10.06

Tetley v The Administration (1971) No 647

Victoria Laundry v Newman [1949] 2 KB 528

Wahgi Security Service Pty Ltd v John Tenlon [1994] PNGLR 138

Wamena Trading v Civil Aviation Authority (2006) N3058

Westpac Bank (PNG) Ltd v Henderson [1990] PNGLR 112

Westpac Bank (PNG) Ltd v Miai Suve Larelake (2008) N3247

Yooken Paklin v The State (2001) N2212

TRIAL

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

Counsel

S Asivo, for the plaintiff, with leave of the Court

K Imako, for the defendant

18 May, 2012

1. CANNINGS J: This was a trial on assessment of damages for breach of contract. The plaintiff, Madang Cocoa Growers Export Co Ltd, succeeded at an earlier trial in establishing liability against the defendant, National Development Bank Ltd.

2. The contract breached by the bank was a loan agreement entered into with the plaintiff in March 2007 under which the bank advanced K300,000.00, repayable in monthly instalments over a period of five years. The loan was secured by amongst other things a fixed and floating charge over two of the plaintiff’s motor vehicles. The plaintiff failed on several occasions to meet its monthly repayments and the bank, in September 2008, took possession of the vehicles, sold them, credited the proceeds of sale to the plaintiff’s loan account and terminated the loan agreement. The plaintiff succeeded at a trial on liability in establishing a cause of action against the bank, on the grounds that the plaintiff was not at the relevant time in material default, the bank acted contrary to its duty of fairness in the conduct of the loan account and failed to give effect to the plaintiff’s equity of redemption (Madang Cocoa Growers Export Co Ltd v National Development Bank Ltd (2011) N4291).

3. The plaintiff claims nine categories of damages, totalling K3,151,100.00. It is argued that the two vehicles were profit-earning assets that were regularly hired out to customers and that the plaintiff lost substantial profits as a result of the loss of its assets. That argument underpins the bulk of the amount of damages claimed, while there are other claims for things like loss of opportunity to obtain government grants and distress and anxiety caused to the plaintiff’s executive director, Mr Asivo. The bank argues that the plaintiff should be awarded nothing as it has failed to prove its losses.

PRINCIPLES FOR ASSESSMENT OF DAMAGES

General

4. The following general principles have been taken into account when assessing the various categories of damages:

· In a civil action, the purpose of an award of damages is to put the innocent party in the same position, as far as possible, as it would have been in if the wrongdoer had not committed the wrongful act (Livingston v Raywards Coal Co [1880] 5 App Cases 25).

· The plaintiff has the onus of proving its loss on the balance of probabilities. It is not sufficient to make assertions in a statement of claim and simply expect the court to award what is claimed. The burden of proving a fact is upon the party alleging it, not the party who denies it (Yooken Paklin v The State (2001) N2212).

· Corroboration of a claim is usually required and the corroboration must come from an independent source (Albert Baine v The State (1995) N1335, Kopung Brothers Business Group v Sakawar Kasieng [1997] PNGLR 331).

· The principles of proof and corroboration apply even when the defendant fails to present any evidence disputing the claim (Peter Wanis v Fred Sikiot and The State (1995) N1350).

· The fact that damages cannot be assessed with certainty does not necessarily relieve the wrongdoer of the necessity of paying damages. Where precise evidence is available the court expects to have it. However, where it is not, the Court must do the best it can (Graham Mappa v ELCOM (1992) N1093, Jonathan Mangope Paraia v The State (1995) N1343).

Specific

5. Specific principles that apply to assessment of damages for breach of contract are:

· The general principle that the purpose of an award of damages is to put the innocent party in the same position, as far as money can do, as if the guilty party had not committed a wrongful act, is qualified substantially: the innocent party only gets the amount of his actual losses that were reasonably foreseeable at the time the contract was formed.

· What is taken to have been reasonably foreseeable at the time the contract was formed depends on two things: (a) the sort of knowledge that any reasonable person would be expected to have; and (b) knowledge of special circumstances outside the ordinary course of things.

6. Those specific principles emerge from the leading British cases on damages for breach of contract, Hadley v Baxendale (1854) 9 Exch 341 and Victoria Laundry v Newman [1949] 2 KB 528, which have been applied in PNG in, for example, Tetley v The Administration (1971) No 647, Coecon Ltd (Receiver/Manager Appointed) v National Fisheries Authority (2002) N2182 and PNG Aviation Services Pty Ltd v Geob Karri (2009) SC1002.

1 EXISTING HIRE AGREEMENT WITH MOUNTAIN ENGINEERING LTD: K206,100.00

7. The plaintiff says that on the date that the bank repossessed its vehicles, 12 September 2008, it had a written hire agreement for one of the vehicles, a Toyota Landcruiser single-cab utility, registration No WAB 176 with Mountain Engineering Ltd of Madang. The plaintiff had to terminate the hire agreement, which was worth K206,100.00.

8. The bank argues that the plaintiff has not proven the existence of the hire agreement and not proven that it was receiving income from the hire of either of its vehicles. Though a copy of a hire agreement has been annexed to an affidavit...