N3680

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 915 OF 2005

LAWRENCE WIN
Plaintiff

V

GENERAL AUTO CENTRE LIMITED
First Defendant

RINGO SIM
Second Defendant

Kimbe: Cannings J
2009: 20 March, 23 April, 25 June

JUDGMENT

CONTRACTS – sale of goods – whether a notice printed on invoice/receipt that goods are non-refundable forms one of the conditions of the contract – Goods Act – Section 14: condition as to correspondence with description – Section 15: condition as to fitness for purpose and merchantable quality – Fairness of Transactions Act, Section 5 – whether cause of action in breach of contract established.

DAMAGES – for breach of contract – need to provide financial records re loss of business.

A customer purchased an auto part – a starter motor – which did not fit his vehicle. He returned the part to the supplier and requested a refund of the purchase price of K1,735.37, which was refused. The supplier relied on a notice on the invoice which stated "All electrical goods sold are not returnable. Goods sold are not returnable after 14 days. Returns must be in a new condition and in the original packing". The customer claimed that the refund notice did not apply and was not one of the conditions of the contract of sale and that implied conditions that the starter motor correspond with the description given to it and that it was fit for the purpose for which it was required had been breached. Further, that the contract should be reviewed under the Fairness of Transactions Act. He sued the supplier, claiming damages of K197,584.46.

Held:

(1) The refund notice on the invoice did not form part of the contract as it was not expressly included as a condition of the contract and was not brought to the customer’s attention until after formation of the contract. It was simply a display of the supplier’s refund policy.

(2) The first defendant breached two conditions of the contract of sale implied under the Goods Act: the condition as to correspondence with description under Section 14(1) and the condition as to fitness for purpose under Section 15(2)(a).

(3) The Fairness of Transactions Act did not apply as the court was not satisfied that the contract was not genuinely mutual or manifestly unfair to the plaintiff.

(4) The plaintiff succeeded in establishing liability by proving a cause of action in breach of contract.

(5) Damages were assessed at K6,357.46 and the plaintiff was awarded interest of K2,034.39, making the total judgment sum K8,391.85.

Cases cited:

The following cases are cited in the judgment:

Albert Baine v The State (1995) N1335
Cheong Supermarket Pty Ltd v Pery Muro [1987] PNGLR 24
Jonathan Mangope Paraia v The State (1995) N1343
Kopung Brothers Business Group v Sakawar Kasieng [1997] PNGLR 331
L’Estrange v Gaucob [1934] 2 KB 394
Livingston v Raywards Coal Co [1880] 5 App Cases 25
Misac Pokonoming v Jeffery Simiri, WS No 1596 of 2005, 26.10.07
Niugini Civil & Petroleum Ltd v West New Britain Development Corporation Ltd (2008) N3292
Obed Lalip and Others v Fred Sikiot and The State (1996) N1457
Peter Wanis v Fred Sikiot and The State (1995) N1350
Rabaul Stevedores Ltd v Benedict and Nancy Seeto [1984] PNGLR 248
Rabtrad Nuigini Pty Ltd v Abco Pty Ltd [1990] PNGLR 155
Thornton v Shoe Lane Parking [1971] 2 WLR 585
Yooken Paklin v The State (2001) N2212

STATEMENT OF CLAIM

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

Counsel:

G Linge, for the plaintiff
L Tunian, for the defendant

25 June, 2009

1. CANNINGS J: The plaintiff, Lawrence Win, runs a PMV business in Kimbe. He purchased a new starter motor for his truck at the General Auto Centre, the first defendant, in Lae. He brought the starter motor back to Kimbe and tried to fit it to his truck but it was the wrong part. He sent it back to Lae and asked for a refund of the purchase price of K1,735.37 which was refused. The defendants pointed out that a starter motor is an electrical part and relied on a notice on the sales invoice which stated:

All electrical goods sold are not returnable. Goods sold are not returnable after 14 days. Returns must be in a new condition and in the original packing.

2. The plaintiff claimed that when he bought the part, the sales representative, Ringo Sim, the second defendant, assured him that it would fit his vehicle and that if it did not fit he could return it and get a refund. He maintains that the failure to refund the purchase price amounts to a breach of the contract of sale which has caused him considerable losses. He has sued the defendants, claiming damages of K197,584.46.

THE ISSUES

1. Did the refund notice form part of the contract?

2. Was there any breach of contract by the defendants?

3. Does the Fairness of Transactions Act apply in favour of the plaintiff?

4. Has the plaintiff succeeded in establishing liability?

5. If liability is established what damages is the plaintiff entitled to?

1. DID THE REFUND NOTICE FORM PART OF THE CONTRACT?

3. Mr Linge, for the plaintiff, submitted that the refund notice did not apply for two reasons. First, it was not proven that a starter motor is an electrical part. Secondly, the notice was waived by Mr Sim when he sold the part to the plaintiff.

4. I reject the first submission as there was evidence before the court in the form of an affidavit by Mr Sim that a starter motor is an electrical item. That evidence was not rebutted by the plaintiff. In any event, it is a self-evident fact that a starter motor, also called a self starter or starter, is an electrical motor that initiates rotational motion in an internal combustion engine before it can power itself. It is an integral part of the electrical system of any modern motor vehicle.

5. As to the second submission the plaintiff gave sworn evidence at the trial that Mr Sim convinced him that the starter motor would fit his Hino truck. If it didn’t fit, according to the plaintiffs evidence, Mr Sim assured him that if he returned it within 14 days – which he did – he would get his money back.

6. I have difficulty accepting all of the plaintiffs evidence as the allegation that Mr Sim waived the notice was not set out in either the statement of claim or the plaintiffs affidavit. It was an important question of fact, which has only been asserted during the course of the trial. The plaintiff carried the onus of proving this fact on the balance of probabilities. The onus has not been discharged. I find that the notice was not waived by Mr Sim.

7. However, there is a threshold issue concerning the refund notice that must be considered: was it one of the conditions of the contract of sale?

8. Ms Tunian, for the defendants, submitted that it was an important condition of the contract that had the effect of making it an absolute, as distinct from a conditional, contract.

9. I do not accept that proposition. The notice was akin to an exemption clause – exempting the supplier from liability for something for which they might otherwise be liable. At common law, such clauses are interpreted strictly. Only if they are expressly included in a signed written contract or the purchaser is given adequate notice before the contract is formed are exclusion clauses regarded as part of the conditions of a contract (L’Estrange v Gaucob [1934] 2 KB 394; Thornton v Shoe Lane Parking [1971] 2 WLR 585; Rabaul Stevedores Ltd v Benedict and Nancy Seeto [1984] PNGLR 248; Rabtrad Nuigini Pty Ltd v Abco Pty Ltd [1990] PNGLR 155).

10. Here there was no signed written contract incorporating the refund notice. The notice was on the sales invoice which doubled as a receipt. That document was generated by the contract that was formed when the plaintiff paid for the starter motor. The refund notice was not brought to the plaintiffs attention until after formation of the contract. I therefore find that it was not one of the conditions of the contract. It was simply a display of the first defendant’s refund policy, which remained at all times subject to the conditions of the contract.

2. WAS THERE ANY BREACH OF CONTRACT BY THE DEFENDANTS?

11. Mr Linge submits that there were two implied conditions of the contract that were breached:

- the condition that the starter motor corresponded with the description given to it;

- the condition that the starter motor was fit for its required purpose and of merchantable quality.

Implied condition in sale by description

12. The first condition can arise under Section 14(1) of the Goods Act, which states:

Subject to Subsection (2) where there is a contract for the sale of goods by description, there is an implied condition that the goods correspond with the description.

13. To prove that this condition formed part of the contract of sale the plaintiff had to prove that he specifically asked for a starter motor for his particular model of Hino truck or that it was sold bearing that particular description, and that the starter motor supplied to him did not correspond with that description.

14. I am satisfied on the evidence that the plaintiff asked for a starter motor for his particular model of Hino. There was an implied condition that the starter motor would correspond with that description.

15. That condition was breached as the starter motor did not fit the truck. It was the wrong part.

Implied condition as to fitness for purpose and merchantable quality

16. The second condition can be implied by Section 15 of the Goods Act, which states:

(1) Subject to this Part and any other law there is no implied warranty or condition as to the quality or fitness for a particular purpose of goods supplied under a contract of sale.

(2) Notwithstanding Subsection (1) but subject to Subsections (3) and (4)—

(a) where—

(i) the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller's skill or judgement; and

(ii) the goods are of a description that it is in the course of the seller's business to supply (whether or not he is the manufacturer),

there is an implied condition that the goods are reasonably fit for that purpose; and

(b) where goods are bought by description from a seller who deals in goods of that description (whether or not he is the manufacturer), there is an implied condition that the goods are of merchantable quality; and

(c) an implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade; and

(d) an express warranty or condition does not negative a warranty or condition implied by this Part unless the express warranty or condition is inconsistent with the implied warranty or condition.

(3) In the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for a particular purpose.

(4) If the buyer has examined the goods, there is no implied condition as regards defects that the examination ought to have revealed.

17. Under Section 15 there are in fact two conditions that can be implied – provided that the preconditions to their operation are satisfied:

- that the goods are reasonably fit for the purpose for which they were required (Section 15(2)(a)); and

- that the goods are of merchantable quality, ie that they meet a basic level of quality and performance (Section 15(2)(b)).

Section 15(2)(a)

18. To prove that the condition in Section 15(2)(a) was to be implied the plaintiff had to prove two elements:

- he expressly or by implication made known to the seller the particular purpose for which the starter motor was required, ie that it was required for his particular model of Hino truck; and

- that the starter motor was of a description that it is in the course of the seller’s business to supply.

19. Both of the elements have been proven. I infer from the evidence that the plaintiff walked into the shop and asked for a starter motor for his particular model of truck. A starter motor is the sort of item that an auto parts supplier ordinarily sells. The condition that the starter motor would be reasonably fit for the plaintiffs model of truck was therefore part of the contract.

20. That condition was breached as the starter motor did not fit the plaintiffs truck. It was the wrong part.

Section 15(2)(b)

21. The pre-conditions to its operation are satisfied. Therefore the condition that the starter motor be of merchantable quality was part of the contract.

22. There was no however, no breach of this condition as the starter motor was of merchantable quality. It just happened to be the wrong part.

Conclusion as to implied conditions

23. The implied condition as to correspondence with description under Section 14(1) of the Goods Act and the implied condition as to fitness for purpose under Section 15(2)(a) of the Goods Act were breached.

3. DOES THE FAIRNESS OF TRANSACTIONS ACT APPLY IN FAVOUR OF THE PLAINTIFF?

24. Mr Linge submitted that irrespective of the outcome of the issues concerning the refund notice and the implied conditions of the contract the court should exercise its power to review the contract under the Fairness of Transactions Act 1993.

25. Section 5 is the key provision. It states:

(1) A transaction to which this Act applies may be reviewed by a court on the application of any party, if the Court is satisfied that the transaction was not genuinely mutual or was manifestly unfair to a party.

(2) Without limiting the generality of Subsection (1), unless the Court is satisfied that the transaction was entered into on an equal footing in all material respects, a transaction shall be deemed not to be genuinely mutual or manifestly unfair if a party to the transaction complaining unfairness shows—

(a) that he did not understand the transaction and no genuine effort was made to explain its terms to him prior to entering into the transaction; or

(b) that the other party was in such a predominant position (whether economically, socially, personally or otherwise), that an ordinary person with the background of the complainant was not likely to exercise a true freedom of choice in relation to the transaction; or

(c) that the other party had or should have had at the time of entering into the transaction or immediately thereafter information affecting the fairness of the transaction which was not disclosed to the complainant; or

(d) that he was mistaken in or had miscalculated the likely consequences of the mistake or miscalculation to such an extent adverse to his interests that he could not reasonably be held responsible for such consequences.

26. The argument is that the plaintiff is illiterate in the English language and as the refund notice was written in English the plaintiff was in a weak position vis-à-vis the defendants. Therefore the contract was not genuinely mutual and was manifestly unfair to the plaintiff.

27. I am not impressed by this argument. The plaintiff is a businessman. The way that he gave his oral evidence suggests that he is an intelligent person capable of understanding written English. The way that he has pursued this case and asserted his rights reinforce that impression. I cannot conclude that the contract he entered into with the first defendant was not genuinely mutual or that it was not manifestly unfair to him. There is no good reason to review the contract under the Fairness of Transactions Act.

4. HAS THE PLAINTIFF SUCCEEDED IN ESTABLISHING LIABILITY?

28. My findings on the issues of law so far are that:

- the refund notice did not form part of the contract and therefore did not protect the defendants;

- the plaintiff has proven two breaches of contract, under Sections 14(1) and 15(2)(a) of the Goods Act;

- the Fairness of Transactions Act did not apply.

29. In the normal course of events it would be a logical next step to conclude that the plaintiff has succeeded in establishing liability. However, I have hesitated before drawing that conclusion as the two breaches of contract are not expressly referred to in the statement of claim. Is it necessary for a statement of claim to provide that amount of detail?

30. Certainly it is desirable but in the circumstances of this case I do not think it was necessary as the defendants have not been unduly prejudiced by the generality of the statement of claim. It discloses by necessary implication a cause of action as to breach of contract. I conclude that the plaintiff has succeeded in establishing that cause of action and the defendants are liable in damages to the plaintiff.

5. WHAT DAMAGES IS THE PLAINTIFF ENTITLED TO?

General principles

31. In determining this claim some basic rules about assessment of damages must be applied, in particular:

- 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 they would have been in if the wrongdoer had not committed the wrongful act (the breach of contract). (Livingston v Raywards Coal Co [1880] 5 App Cases 25.)

- The plaintiff has the onus of proving his loss on the balance of probabilities. It is not sufficient to make assertions in a statement of claim and then 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. If an allegation forms an essential part of a person’s case, that person has the onus of proving the allegation. (Yooken Paklin v The State (2001) N2212, National Court, Jalina J.)

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

- 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, National Court, Woods J.)

- If the evidence and pleadings are confusing, contradictory and inherently suspicious the plaintiff will not discharge the onus of proving his losses on the balance of probabilities. It is conceivable that such a plaintiff will be awarded nothing. (Obed Lalip and Others v Fred Sikiot and The State (1996) N1457, National Court, Injia J.)

- The fact that damages cannot be assessed with certainty does not 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. (Jonathan Mangope Paraia v The State (1995) N1343, National Court, Injia J; Misac Pokonoming v Jeffery Simiri, WS No 1596 of 2005, 26.10.07, Cannings J; Niugini Civil & Petroleum Ltd v West New Britain Development Corporation Ltd (2008) N3292, Cannings J.)

The claim

32. Under the statement of claim the plaintiff is claiming damages in the following categories:

(a) cost of refund, K1,735.37; and
(b) cost of return of starter motor, K66.46;
(c) general damages for lost opportunity and business, K184,675.00;
(d) additional cost of starter motor, K4,555.63;
(e) cost of a loan with Credit Corporation, K6,552.00; being
(f) a total damages claim of K197,584.46.

(a) Actual cost of refund

33. I see no difficulty with this claim. The plaintiff paid K1,735.37 for the starter motor and he returned it and the money has not been refunded to him. He is entitled to a refund, notwithstanding the refund notice (which I have concluded did not form part of the contract).

I award K1,735.37.

(b) Cost of return of starter motor

34. There is sufficient proof that this was the cost of freighting the starter motor back to Lae.

I award K66.46.

(c) General damages

35. There is no evidence in support of this claim. As Ms Tunian pointed out, no evidence has been provided as to the registration number of the vehicle or the fact that it is used as a PMV. The plaintiff has not provided a copy of any PMV licence or any evidence to support his assertion that he uses his truck on the Bialla-Kimbe route (which was part of his oral evidence). No financial records of any description have been provided.

36. I award nothing for this category of damage.

(d) Additional costs of starter motor

37. The plaintiff claims K4,555.63, which he says is the cost of a starter motor he was forced by the defendants’ breach of contract to purchase from Ela Motors Kimbe. There is ample evidence in support of this claim. I am satisfied that this was a cost occasioned by the defendants’ breach of contract.

I award K4,555.63.

(e) Credit Corporation loan

38. The plaintiff claims that because of the delay in getting his truck back on the road he fell into arrears on a loan with Credit Corporation which he had obtained to purchase the truck. This claim is poorly particularised. The evidence is unconvincing and the sort of damage claimed is too remote.

39. I award nothing for this category of damage.

(f) Summary

Actual cost of refund = K1,735.37
Cost of return of starter motor = K66.46
General damages = 0
Additional cost of starter motor = K4,555.63
Credit Corporation loan = 0

Total amount of damages awarded = K6,357.46.

COSTS

31. The general rule is that costs follow the event, ie the successful party has its costs paid for by the losing party on a party-to-party basis. The question of costs is a discretionary matter. There are no special circumstances in this case that warrant departure from the general rule.

INTEREST

32. Interest was not expressly claimed in the statement of claim but the prayer for relief in the final paragraph of the statement of claim seeks "any further orders as the court deems appropriate". I regard that as sufficient to include a claim for interest. Further, the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52, which is the law that allows the court to award interest, does not stipulate that interest must be expressly sought by a plaintiff. The relevant provision is Section 1, which states:

Subject to Section 2, in proceedings in a court for the recovery of a debt or damages the court may order that there be included in the sum for which judgment is given interest, at such rate as it thinks proper, on the whole or part of the debt or damages for the whole or part of the period between the date on which the cause of action arose and the date of the judgment.

33. As Bredmeyer J pointed out in Cheong Supermarket Pty Ltd v Pery Muro [1987] PNGLR 24, this section confers a four-fold discretion on the Judge: (1) whether to grant interest at all; (2) to fix the rate; (3) to grant interest on the whole or part of the debt or damages for which judgment has been given; and (4) to fix the period for which interest will run.

34. I exercise that discretion in the following way:

1. A plaintiff should in the normal course of events receive interest. There is nothing that takes this case out of the ordinary in that regard. The Court will order that interest be included in the sum for which judgment is given.

2. The rate of interest commonly used is 8%. In view of current economic conditions in the country I think 8% is the proper rate of interest.

3. Interest should be payable on the whole of the sum of damages for which judgment is given.

4. I will fix the commencement date for the appropriate period as the date on which the writ of summons and statement of claim was filed, 22 June 2005. The end of the period is the date of judgment, 26 June 2009. The appropriate period is 4.0 years.

35. I calculate the amount of interest by applying the following formula:

- D x I x N = A

Where:

- D is the amount of damages assessed;

- I is the rate of interest per annum;

- N is the appropriate period in numbers of years;

- A is the amount of interest.

Thus:

- K6,357.46 x 0.08 x 4.0 = K2,034.39.

JUDGMENT

36. The judgment will be in the following terms:

(1) damages payable by the defendants to the plaintiff of K6,357.46;

(2) interest payable by the defendants to the plaintiff of K2,034.39;

(3) being a total judgment lump sum of K8,391.85;

(4) costs of the proceedings shall be paid by the defendants to the plaintiff on a party-party basis, to be taxed if not agreed.

Judgment accordingly.

_____________________________

Linge & Associates: Lawyers for the plaintiff
Warner Shand: Lawyers for the defendant