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Maoko v Ling [2008] PGNC 19; N3293 (26 March 2008)

N3293

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 661 OF 2007

BENO MAOKO
Plaintiff

V
KEVIN LING
First Defendant

HUGO SAWMILLING LIMITED
Second Defendant

Kimbe: Cannings J
2007: 23 November
2008: 26 March

PRACTICE AND PROCEDURE – motion to dismiss proceedings for disclosing no reasonable cause of action – National Court Rules, Order 12, Rule 40.

CONTRACT – privity of contract – whether a contract can be enforced by a person who was not a party to the contract.

The plaintiff commenced proceedings against the defendants, claiming damages for breach of contract. The defendants responded by moving a motion that the proceedings be dismissed for disclosing no reasonable cause of action, in that the plaintiff was not a party to the contract which he seeks to enforce and is precluded from enforcing it by the doctrine of privity of contract.

Held:

(1) Where a person wishes to enforce a contract by claiming damages for breach of contract, they must plead that they were a party to the contract or bring themselves within one of the exceptions to the doctrine of privity of contract.

(2) Here, the plaintiff was not a party to the contract and did not plead any of the exceptions to the doctrine of privity.

(3) The statement of claim discloses no reasonable cause of action and should, as a matter of discretion, be dismissed.

Cases cited:

Albert Areng v Gregory Babia & National Housing Corporation (2005) N2895
Christian Life Centre v Associated Mission Churches of PNG & Others (2002) N2261
Kiee Toap v The State and Electoral Commission and Another (2004) N2731
PNG Forest Products Pty Ltd and Another v The State and Genia [1992] PNGLR 85
PNGBC v Barra Amevo and Bari Investments t/a Kainantu Pharmacy, Lennie Aparima and Orito Aparima (1998) N1726

NOTICE OF MOTION
This was a motion for summary dismissal of a breach of contract action.

Counsel
No appearance for the plaintiff
R Asa, for the defendants

26 March, 2008

1. CANNINGS J: This is a ruling on a motion brought by the defendants, Kevin Ling and Hugo Sawmilling Ltd, to have breach of contract proceedings commenced against them summarily dismissed.

BREACH OF CONTRACT PROCEEDINGS

2 The proceedings were initiated by the plaintiff, Beno Maoko, who claims that, in 2001, he, through the business which he runs and is employed by – Noau Stevedoring – entered into a contract with the second defendant. It was a contract under which Noau Stevedoring provided stevedoring services to Hugo Sawmilling, a logging contractor operating in the Bakada and Ulamona areas of West New Britain Province. The first defendant, Kevin Ling, is the general manager of Hugo Sawmilling and signed the contract on behalf of the company.

3 Mr Maoko claims that Hugo Sawmilling breached the contract by terminating it without notice in February 2006, and that this has caused him loss of employment and income. He seeks damages for breach of contract.

THE DEFENDANTS’ POSITION

4 The defendants say that Mr Maoko was not a party to the October 2001 contract, which was executed by a written memorandum of agreement expressed to be between Noau Stevedoring Ltd and Hugo Sawmilling Ltd. He was one of two people who signed as a director of Noau Stevedoring, but that does not make him a party to the contract. The defendants argue that he is precluded by the doctrine of privity of contract from enforcing the contract.

5 They have moved a motion that the proceedings be dismissed for disclosing no reasonable cause of action, under Order 12, Rule 40 of the National Court Rules, which states:

(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings—

(a) no reasonable cause of action is disclosed; or

(b) the proceedings are frivolous or vexatious; or

(c) the proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

(2) The Court may receive evidence on the hearing of an application for an order under Sub-rule (1).

PRIVITY OF CONTRACT

6 The doctrine of privity of contract is a common law principle that has been adopted as part of the underlying law of Papua New Guinea. Sevua J explained it in PNGBC v Barra Amevo and Bari Investments t/a Kainantu Pharmacy, Lennie Aparima and Orito Aparima (1998) N1726:

The doctrine of privity of contract is that, as a general rule, a contract cannot confer rights or impose obligations arising under it on any person except the parties to it. The scope of the doctrine means only that a person cannot acquire rights, or be subjected to liabilities, arising under a contract to which he is not a party.

7 In Christian Life Centre v Associated Mission Churches of PNG & Others (2002) N2261 Lenalia J stated:

In the law of contract, a contract creates rights and obligations only between the parties to it. A contract does not confer rights on a stranger nor does it impose any obligations on the same. It is a fundamental principle of common law, that no person can sue or be sued on a contract unless he or she is a party to it: Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] UKHL 1; [1915] AC 847. The doctrine of privity means a contract cannot as a general rule confer rights or impose obligations arising under it on any person except the parties to it.

8 There are, however, a number of exceptions to the doctrine of privity which allow third parties to acquire rights or obligations under a contract. Sawong J explained this in Albert Areng v Gregory Babia & National Housing Corporation (2005) N2895. In that case the plaintiff was the son of the purchasers of a property who had entered into a contract of sale with the National Housing Corporation. There was a long delay in transferring the title to the property and the plaintiff sued the NHC and the manager of its Madang office, claiming damages for breach of contract. The defendants attempted to have the proceedings summarily dismissed on the ground that the plaintiff was not a party to the contract. However, their motion for dismissal was refused as the court accepted that the plaintiff was authorised by his parents to bring the case to court. The defendants’ reliance on the doctrine of privity was regarded by Sawong J as a belated attempt on their part to distance themselves from the performance of their contractual obligations. This was unacceptable and inequitable and his Honour concluded that the doctrine of privity did not apply.

9 The various exceptions to the doctrine of privity are discussed at length in the following texts: J G Starke QC, N C Seddon, M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, © Butterworths 1988, Chapter 15, pp 477-515; K E Lindgren, J W Carter, D J Harland, Contract Law in Australia, © Butterworths 1986, Chapter 9 pp 292-316; G H Treitel An Outline of the Law of Contract, © Butterworths 1984, Chapter 13, pp 199-216.

10 If a person wishes to enforce a contract by claiming damages for breach of contract, they must plead that they were a party to the contract or bring themselves within one of the well recognised exceptions to the doctrine of privity of contract. Here, the plaintiff was not a party to the contract and did not plead any of the exceptions to the doctrine of privity; and I cannot see that any of the exceptions apply.

SHOULD THE PROCEEDINGS BE DISMISSED?

11 The test to apply when dealing with motions to dismiss proceedings on the ground of failure to disclose a reasonable cause of action is to ask:

• is it plain and obvious that the facts in the statement of claim, even if proved, will not entitle the plaintiff to what he is asking for?
  

12 If the answer is yes, it is appropriate to strike out the proceedings on the ground that no reasonable cause of action is disclosed.

13 The procedure should be confined to cases where the cause of action is obviously and almost incontestably bad. The plaintiff should not be driven from the judgment seat unless the case is unarguable. (PNG Forest Products Pty Ltd and Another v The State and Genia [1992] PNGLR 85, National Court, Sheehan J; Kiee Toap v The State and Electoral Commission and Another (2004) N2731, National Court, Cannings J).

14 Applying that test to this case, I consider that the facts pleaded in the statement of claim, even if proven, will not entitle the plaintiff to what he is asking for. He was not a party to the contract. The facts show that the case does not fall within any of the exceptions to the doctrine of privity of contract. The case looks to be unarguable.

15 I therefore have to decide whether the proceedings should be dismissed. In exercising the discretion available under Order 12, Rule 40(1)(a), I take into account that this is the second attempt by the plaintiff to enforce the October 2001 contract. The first attempt was in WS No 1008 of 2006, an action brought in the name of Noau Stevedores Ltd against the same defendants as in the present case. I dismissed those proceedings, on 15 December 2006, for being an abuse of process as the defendants proved that Noau Stevedores had never been registered as a company under the Companies Act. In my closing remarks I suggested to Mr Maoko that there might be some scope for a new action to be commenced in his own name, perhaps a quantum meruit claim for work that has actually been done. He appears to have only half followed that suggestion. He has brought proceedings in his own name but he is still trying to enforce a contract entered into by a non-existent entity; and this is another reason that this case, as it has been framed, is a hopeless one.

16 I have also briefly considered the merits of the breach of contract argument that Mr Maoko is trying to raise. I have looked at the contract he is relying on and note that it is an open-ended contract, which obliquely deals with the issue of termination in these terms:

This Agreement may be reviewed from time to time by notice by either party.

17 That is a rather vague clause and the plaintiff would be very hard pressed, if this case were to go to trial, convincing a court that the second defendant breached it when it terminated the contract, in such a way as to entitle him to damages.

18 In all the circumstances I consider that the fairest and most appropriate order for the court to make is an order for dismissal.

ORDER

19 I will order that the proceedings WS No 661 of 2007 are dismissed, generally, pursuant to Order 12, Rule 40(1)(a) of the National Court Rules.
Ordered accordingly.
____________________________

No representation for the Plaintiff
Warner Shand: Lawyers for the Defendants