Unreported National Court Decisions
N20
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
(M.P. 41 OF 1969 (N.G.))
IN THE MATTER OF THE INSOLVENCY ACT 1951 OF PAPUA NEW GUINEA
AND
IN THE MATTER OF A PETITION BY STEAMSHIPS TRADING COMPANY LIMITED THAT GLYN WORT BE ADJUDGED INSOLVENT
Waigani
Saldanha J
11-12 December 1975
15 December 1975
SALDANHA J:  Glyn Wort (hereinafter referred to as the debtor) was a building contractor. The Administration of the Territory of Papua New Guinea, as it then was, (hereinafter referred to as the Administration) invited tenders for the construction of a number of buildings at Alotau. Three tenders were submitted, one by the debtor for $47,346.00; another by Stewardson Bros. Pty. Ltd (hereinafter referred to as Stewardsons) for $59,200.00; the third one does not concern us. The debtor’s tender being the lowest was accepted. Stewardsons was the next lowest. By a letter dated 20th March, 1970 the Administration accepted the tender and said inter alia:
“Until a formal contract document is signed, the drawings and specifications on which your tender was based, your tender and this letter of acceptance will form a binding contract. The formal contract document is being prepared and will be forwarded to you shortly for execution.”
The debtor had cleared the site and done some preliminary work, when, on 8th May, 1970, the Supreme Court, as it then was, adjudged him to be insolvent. On the same day the debtor wrote to the Administration stating that as he had been adjudged to be insolvent he could no longer get the necessary overdraft facilities, and, consequently he was unable to continue the work. The relevant part of clause 31 of the contract provides as follows:
“31.    PROCEEDINGS ON DEFAULT ETC, OF CONTRACTOR
(1)      If:
(a)      The Contractor:
(i)       ........
(ii)      ........
(iii)     ........
(iv)     ........
(v)      Intimates that he is unable or unwilling to complete the works; or
(vi)     ........
(b)      ..............
(i)       ........
(ii)      ........
(c)      Then in any of such events the Administration may:
(i)       ........
(ii)      cancel the contract.”
On 24th May, 1970, the Administration wrote to the debtor that they had cancelled the contract under clauses 31 and 33 of the contract. Stewardsons were asked and agreed to do the work for $59,200.00, being the amount of their original tender.
On 8th July, 1970, the trustee of the property of the debtor (hereinafter referred to as the trustee) wrote to the Director of Public Works stating that it was possible that the debtor was indebted to the Public Works Department and suggested that a proof of debt should be sent to his office as soon as possible. On 22nd September, 1970, the Administration filed a proof of debt for $11,380.54. This sum was the difference between Stewardsons’ tender for $59,200.00 and the debtor’s tender for $47,346.00 less the sum of $473.46 which the debtor had deposited with the Administration as security. The trustee rejected this proof of debt. There followed an exchange of letters between the trustee and the Crown Solicitor, the trustee maintaining that he could not accept the proof of debt on the ground that there had been no contract between the debtor and the Administration, presumably because a formal contract document had not been signed by the parties, and the Crown Solicitor maintaining that the parties had in fact entered into a valid contract. Finally the trustee suggested that if the Crown Solicitor was not prepared to accept the trustee’s decision he should refer the matter to the Court. It is in these circumstances that the matter comes before me - not as an appeal but a hearing de novo.
The Administration bases its claim upon the following footing. They say that in stating that he could not continue the work the debtor had repudiated contract entitling the Administration to sue for damages for breach of contract. They say that the measure of damages is the difference between Stewardsons’ tender for $59,200.00 and the debtor’s tender for $47,346.00 less $473.46, the amount of the deposit, that is to say, $11,380.54.
Mr. Griffin, who appears for the trustee, concedes that there is a valid contract between the debtor and the Administration. He contends that the Administration would be entitled to file a proof of debt only if it had a right to sue for damages but concedes, that, if the Administration is at all entitled to file a proof of debt the correct amount is $11,380.54. However, he denies that the Administration is entitled to sue for damages. He cites the following passage from The Law of Contract by Cheshire and Fifoot, third Australian edition at page 712:
“CONTRACT NOT AUTOMATICALLY DISCHARGED BY BREACH. - It must be observed that a breach automatically terminates a contract only where its effect is to render the contract impossible of further performance. In other cases, where the breach is sufficiently serious, the party not in breach is given an option either to insist upon performance or to accept the breach as a repudiation of the contract. If he adopts the latter course he can sue for damages forthwith, whether the time for performance is due or not, but if he refuses to regard the contract as discharged he presents the guilty party with an opportunity to reconsider his attitude. Dealing with the case where a party has refused to proceed further with performance, Lord Simon has described the position of the other party as follows:
‘He may, notwithstanding the so-called repudiation, insist on holding his co-contractor to the bargain and continue to tender due performance on his part. In that event, the co-contractor has the opportunity of withdrawing from his false position, and, even if he does not, may escape ultimate liability because of some supervening event not due to his own fault which excuses or puts an end to further performance. ... Alternatively, the other party may rescind the contract, or (as it is sometimes expressed) ‘accept the repudiation’, by so acting as to make plain that, in view of the wrongful action of the party who has repudiated, he claims to treat the contract as at an end, in which case he can sue at once for damages.’ ”
Mr. Griffin’s argument then runs as follows. It is open to contracting parties to make their own terms. They can exclude common law remedies and liabilities and create their own. In the instant case the parties have redefined remedies and liabilities to suit their own particular needs, and, in so doing have not saved the common law remedy of suing for damages for breach of contract. In the event of a breach of contract the parties must look to clauses 31, 32 and 33 for a remedy. Clause 31 provides for cancellation of the contract by the Administration on default by the contractor. Clause 33 provides, for instance, that in the event of cancellation the Administration can forfeit plant, implements and materials belonging to the contractor and lying on the site. There are other remedies. But there is no provision in any of these three clauses for the remedy of suing for damages for breach of contract. The concept of “cancellation” mentioned in the contract is not the same as the concept of “acceptance of repudiation” expressed by Lord Simon in the passage cited above.
I can see no reason why the word “cancel” as used in clause 31 should not be read as meaning “rescind”. The Concise Oxford Dictionary defines rescind as “abrogate, annul, revoke, cancel”. If the word “cancel” means “rescind” then the right to sue for damages automatically follows.
It is true that upon the contractor committing a default in the circumstances mentioned in clause 31, clauses 31, 32 and 33 give the Administration certain powers and remedies which would not be available to it under the common law, like the power under clause 33(3) to forfeit “all the plant and implements in the Contractor’s possession, and all the materials provided by him upon the ground upon which the works are being carried on or adjacent thereto”. But in my view the remedies provided by these three clauses are not in derogation of or in lieu of common law rights but additional to them.
Not only had the Administration written to the debtor saying it was cancelling the contract but it had made plain to the debtor by its action in handing over the job to Stewardsons that it had “accepted the repudiation”. It could then, if it so wished, have sued for damages, but nothing would have been gained in doing this as the debtor had been adjudged to be insolvent. If the Administration has the right to sue it has the right to file its proof of debt.
I am of the opinion also that clause 34 in addition to providing some other remedies saves the common law right to sue for damages. It reads as follows:
“All losses, costs, charges and expenses which the Administration shall have incurred or sustained by reason of any act, default or omission of the Contractor in the performance of the Contract, together with any sum or sums payable to the Administration as liquidated damages under these Conditions or the Special Conditions (if any) may be deducted from any moneys that may be then or may thereafter become due to the Contractor or may have been deposited by him as security, and if the moneys then due or thereafter becoming due to the Contractor or deposited by him as security be less than the amount so deductable, the amount of the deficiency shall be a debt due by the Contractor to the Administration and may be recovered in any Court of competent jurisdiction. A certificate signed by the Director of Public Works stating the amount of any such losses, costs, charges, expenses and damages shall be conclusive evidence of the matter stated”.
I can see no reason why the debtor’s statement that he is unable to continue with the work cannot be construed as an “act, default or omission of the contractor in the performance of the contract”.
Even if I am wrong in my interpretation of clauses 31, 32, 33 and 34, as there is nothing anywhere in the contract either limiting or excluding, expressly or by implication, the common law right to sue for damages, I am of the opinion that the Administration retains this right. In The Law of Contract referred to above the following passage appears at page 708:
“Breach, no matter what form it may take, always entitles the innocent party to maintain an action for damages ...”
For reasons stated above I am of the view that the trustee is not justified in rejecting the proof of debt.
Solicitor for the Applicant: L.W. Roberts-Smith, Public Prosecutor.
Counsel for the Applicant: J.E. Byrne.
Solicitor for the Trustee: White, Reitano & Young
Counsel for the Trustee: J.A. Griffin. L.K. Young.