Unreported National Court Decisions
N1337
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
WS NO 23 OF 1994
BETWEEN:
KEITH REID - Plaintiff
And:
MURRAY HALLAM - First Defendant
And:
ALLCAD PTY LIMITED - Second Defendant
Waigani
Kapi DCJ
11-12 April 1995
6 July 1995
NATIONAL COURT RULES - O 8 r 21 is applicable where pleading is filed by the other party.
ASSESSMENT OF DAMAGES - Breach of Contract of Employment.
Counsel:
R Thompson for the Plaintiff
V Mirupasi for the Defendant
6 July 1995
KAPI DCJ:  The plaintiff sued the defendants for damages for breach of contract of employment.  Default judgment was entered against the defendants on 22 March 1994 for not filing a defence.
The matter came on before me for assessment of damages.
Counsel for the plaintiff has submitted that all allegations of fact in the statement of claim stand admitted by the defendants because they did not traverse any of the facts by their failure to file a defence.  Counsel relied on O 8 r 21 of the National Court Rules for this proposition.  It is in the following terms:
“O 8 r 21. Admissions and traverse
(1)      Subject to Sub-rule (3), an allegation of fact made by a party in his pleading shall stand admitted by any opposite party required to plead to that pleading unless it is traversed by that opposite party in his pleading or a joinder of issue under Rule 22 operates as a denial of it.
(2)      A traverse may be either by a denial or by a statement of  non-admission, and either expressly or by necessary implication, and either generally or as to any particular allegation.
(3)      Where a pleading makes an allegation of the suffering of damage, or an allegation of an amount of damages, a pleading to that pleading by an opposite party shall be taken to traverse the allegation, unless the allegation is specifically admitted.”
As far as I am aware this rule has not been considered and applied in the manner submitted by counsel for the plaintiff.  This rule is similar in terms to Supreme Court Rules of New South Wales (15/20).  Ritchie’s Supreme Court Procedure (NSW) has the following note on this rule (Vol. 1 p. 2364):
“Furthermore, the deemed admission arising under subrule (1) only applies if a pleading is in fact filed by the other party.  Consequently a defendant's failure to file and serve a defence does not give rise to a deemed admission of all of the matters alleged in the statement of claim: My Distributors Pty Ltd v Omaq Pty Ltd (1992) 36 FCR 578.”
It is clear from this case that O 8 r 21 is not applicable where default judgment is entered where there is clearly no pleading by the opposing party in terms of filing a defence.  Therefore, I cannot accept the submission of counsel for the plaintiff.
What then is the effect of a default judgment?  A writ of summons should disclose a cause of action in law.  That is to say it should allege matters of fact which gives rise to a cause of action in law.  In this case the statement of claim alleges a valid contract of employment, breach of that contract and claims damages based on the terms of the contract.
Where default judgment is entered in an unliquidated demand (as in this case) the facts which gives rise to the question of liability are settled.  The effect of default of judgment in this case is that there was a valid contract of employment and that there was a breach of that contract.  All the facts and legal issues relating to liability are no longer in issue.
Assessment of damages involves consideration of the terms of the contract and assessing the damages that flow from the breach of the terms of the contract.
The plaintiff claims the following:
(a)      Contract of employment for period of two years.
(b)      Annual salary of K35,000.00.
(c)      Accommodation allowance of K450.00 per week.
(d)      Annual gratuity payment of 25% of salary.
(e)      Annual school fees for one child.
(f)      Annual leave fares for the family to Australia.
(g)      Motor vehicle allowance of K80.00 per week.
(h)      Four weeks recreation leave.
(i)       One month notice or salary in lieu of notice.
(j)      Loss consisting of extra interest charges on the FIFL Lease.
(k)      Liable to account for moneys had and received.
The plaintiff and the first defendant gave evidence on all the items set out in the statement of claim.  A far as I can see from the evidence and submissions by counsel for the defendants, it is not disputed that a contract of employment provided for a period of employment, a salary, gratuity, accommodation allowance and motor vehicle allowance.  The dispute relates to quantum of damages under these heads and denied completely the existence of any term with regard to school fees for one child, airfares for the family, money in lieu of notice and that all the monies had and received have been accounted for.
PERIOD
There is no dispute that the contract was for a period of two years.
SALARY
There is no dispute that the plaintiff was contracted on K35,000.00 per annum.  The difference between the parties relate to the dispute as to the date on which the plaintiff commenced employment.  According to the plaintiff, he started work on 24 June 1992.  According to the first defendant, the plaintiff was only on orientation from 24 June to 14 July and commenced duties with the company on 15 July 1992.  In this regard, I am inclined to believe the plaintiff.  The plaintiff was already gainfully employed when he was offered a job to join the first defendant.  He would not have left the previous employment for a period when he would be without a salary.  I find that he commenced employment on 24 June 1992.  I accept the calculations by the plaintiff in respect of unpaid salaries, K1,210.65.
GRATUITY
The dispute in respect of this head of claim is also based on the dispute relating to the date on which the plaintiff commenced work.  I have already determined this in favour of the plaintiff.  Therefore, the proper amount owing in this regard is as calculated by the plaintiff, K2,844.60.
ACCOMMODATION ALLOWANCE
There is no dispute as to the amount of allowance per week.  The dispute here again relate to the date the plaintiff commenced work with the defendants.  I have already found that the plaintiff commenced work on 24 June 1992.  The amount that is owing is as calculated by the plaintiff, K8,475.00.
MOTOR VEHICLE ALLOWANCE
The evidence on the amount of allowance in respect of transport is not easy to determine.  The plaintiff gave evidence that the allowance was K80.00 per week.  The first defendant gave evidence that it was K45.00 per week.  The only independent evidence which is relevant to this issue is a record of payment of an amount of K180.00 (see Ex “A”).  This does not indicate for what period this allowance was paid.  If the amount was K80.00 per week, one would expect to find for two weeks that would work out to K160.00.  However, an amount of K180.00 would appear on the face of it to be two payments of K90.00.  Therefore, doing the best I can in the circumstances, this K180.00 most probably represents two payments of K90.00.  I therefore conclude that this would represent two payments of K90.00 than anything else.  For this reason I accept the evidence of the first defendant and find that the terms of contract was K45.00 per week.  I therefore find the amount outstanding is as calculated by the first defendant, K671.71.
SCHOOL FEES
The first defendant denied that this was a ever a term of employment.  There is evidence that the first defendant paid school fees of K1500.00 for a term.  This amount was paid after the plaintiff discussed the matter with the first defendant.  I conclude from this payment that there was provision for school fees in the contract.  The balance to be paid for the contract period is as calculated by the plaintiff, K7,500.00.
AIRFARES
I find that there was provision for airfares for the family under the contract.  I accept the evidence of the Plaintiff that when he commenced employment, the defendants agreed to pay for the airfares for the family to come up to Papua New Guinea.  It can be implied from this that the provision of airfares for recreation leave would have included the family.  The balance to be paid under this head is as calculated by the plaintiff, K800.00.
NOTICE
The parties do not dispute that a month’s notice was required to terminate employment.  The dispute was, whether, one month notice was given or whether money in lieu of notice was promised.  The plaintiff gave evidence to the effect that he was notified to finish employment on 12 March 1993 forthwith.  One month pay has not been paid.
The first defendant gave evidence to the effect that the plaintiff was given one month notice to terminate his employment and this is confirmed by a letter dated 15 March 1993 (Ex D) giving one month notice to terminate employment on 12 April 1993.
I am inclined to accept the first defendant’s evidence on this in view of the letter of termination which supports the version of events given by the first defendant.  The plaintiff was, therefore, given one month notice.
Counsel for the defendants further submitted that the plaintiff is not entitled to one month salary because he was not at work.  In respect of work the plaintiff gave evidence that he was working on his own boat for that month.  He was not performing work in connection with the defendant’s business.  The net result is that the plaintiff is not entitled to a months salary as well as other allowances for the month in question.
MONIES HAD AND RECEIVED
This claim is based on insurance money paid to the defendants for repairs to the plaintiff’s boat, Starbuck II.  The amount in question is K25,000.00.  This money related to the repair of the masts on the boat.  An initial quote was obtained from the Australian suppliers for two masts.  However, it was decided to put in only one mast.  This mast was ordered and fitted.
The question is whether the defendants has fully accounted for the K25,000.00 for the work done on the boat.  The amount of K25,000.00 was initially calculated on an earlier quote based on having two masts fitted.  However, when this was revised to fit only one mast, the price was renegotiated.  The proof of the use of the money for this purpose would have been a simple matter.  I am sure the Australian suppliers would have provided an invoice and the defendants would have made payments on this invoice.  The first defendant gave evidence.  He did not give direct evidence of the cost of supplying the mast.  What he has relied upon is a credit note (Ex E) which was prepared in 1994 after the proceedings in this matter had been instituted.  His evidence is that this credit shows an amount of K3,000.00.  It is submitted that it can be inferred from this that the balance of the money was used to pay for the mast as well as hire of a crane in connection with mounting of the mast to the boat.
Counsel for the plaintiff is prepared to accept that K16,000.00 was used for the mast and that K1500.00 was used for the hire of the crane.
I accept that K3,000.00 is to be refunded to the plaintiff on the basis of the evidence.  I also accept that an amount of K1,500 was used for the hire of the crane.
As to the cost of the mast, Ex E was prepared after the litigation in this matter commenced and I am not prepare to give it due weight.  There is no reason why the invoice and the payment receipt for this amount could not be presented to the court.  Such documents should settle this issue.
I also cannot accept the concession by the plaintiff that the cost of the mast is K16,000.00.  There is no evidence on which to base this.
I would direct that the defendants properly account for balance of K25,000.00 by provision of the invoice and receipt of the payment for the mast.  This matter may be settled upon the plaintiff being satisfied of the cost of the mast.  If this is not settled then the matter should be relisted for the purposes of the defendants supplying the copy of invoice and payment of the invoice for the cost of the mast.
FIFL LEASE INTEREST
The plaintiff claims that the lease payments were based on the salary and the accommodation allowance provided in the contract.  He submitted that this was the only source of income upon which the lease arrangements were entered into.  He further submitted that these were not paid or not paid regularly resulting in non-payment of the lease.  Therefore, counsel submitted that penalty interests for the non-payment of the lease is a damage which flows directly from the failure to pay salary and accommodation allowance under the contract of employment.
Counsel for the defendants submitted that the interest in question was for period 1 December 1992 to 17 March 1993.  That for the most part of this period he was still employed and was paid his salary as well as accommodation allowance and he should have been in a position to keep up with the payments.
The evidence shows that the plaintiff was paid his salary for the relevant period an amount of K641.94 paid on 24 December 1992 and another amount of K641.94 also paid on 24 December 1992.  There is no record of any other payment of salary until 7 May 1993.
As to the accommodation allowance the record shows he was paid an amount of K500.00 for 9 December to 15 December 1992.  No further payments were made until 15 February 1993.
The evidence shows that the defendants did not regularly pay the salary and the accommodation allowance.  This was the reason for non-payment of the lease payments.  In the circumstances of this case, the interest penalties were a direct result of the failure to pay salary as well as accommodation allowance by the defendants.  I award the amount as calculated by the plaintiff, K791.98.
I assess the damages at K22,293.94 plus interest at the rate of 8% pa from 12 April 1993 to the date of judgement.  The defendants to pay the plaintiff cost of hearing.
Lawyers for the Plaintiff:  Young and Williams
Lawyers for the Defendants:  Nii & Mirupasi