Home | Databases | WorldLII | Search | Feedback National Court of Papua New Guinea

Morobe Provincial Government v Tropical Charters Ltd [2011] PGNC 33; N4240 (9 February 2011)

N4240

PAPUA NEW GUINEA
IN THE NATIONAL COURT OF JUSTICE

OS. No. 141 of 2008

BETWEEN

MOROBE PROVINCIAL GOVERNMENT
Plaintiff

AND

TROPICAL CHARTERS LIMITED
First Defendant

AND

FRANCIS TANGA-CHAIRMAN OF NATIONAL LAND BOARD
Second Defendant

AND

RAGA KAVANAR AS REGISTRAR OF LANDS TITLES
Third Defendant

AND

DR. PUKA TEMU – MINISTER FOR LANDS & PHYSICAL PLANNING
Fourth Defendant

AND

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fifth Defendant

Lae: Gabi, J
2011: 9th February

PRACTICE AND PROCEDURE - first defendant seeking damages from plaintiff pursuant to an undertaking given by plaintiff - distinction drawn between damage caused by grant of injunction and damage which arose from the litigation itself - only damages to which a defendant is entitled are those which he has sustained by reason of the grant of the injunction - burden of proof lie on defendant who asserts that he sustained damage by reason of the order – no evidence that the first defendant actually suffered the damages because of the injunctive order granted to the plaintiff – first defendant's application for damages dismissed

Facts:

The first defendant made an application for damages pursuant to an undertaking given by the Plaintiff to the Court. After a couple of Notice of Motions filed before the Court for various orders, the Plaintiff eventually discontinued the action in May 2010. The first defendant applied to enforce the undertaking as to damages. Mr. Theo Pelgen, the Managing Director of the first defendant, filed an affidavit setting out the damage he claims the first defendant sustained. He lays his claims under eight different items.

Held:

1. An undertaking as to damages is given to the Court and not to the other parties to the proceedings.

2. There is a distinction between damage caused by the grant of injunction and damage which arose from the litigation itself. It is clear from the authorities that the only damages to which a defendant is entitled are those which he has sustained by reason of the grant of the injunction.

3. The first defendant's claim for past loss, future loss, loss due to erosion, and loss due to an increase in construction costs is dismissed as it was in no position to construct the apartments. It had no approvals and no evidence of availability of funds to do so.

4. The first defendant's claim for cost incurred in backfilling, land rentals, medical expenses and survey fees are also dismissed as those losses were not incurred as a consequence of the injunction.

Cases Cited
Papua New Guinea Cases Cited

Wei Xiang Cheng & Anor vs. Agmark Ltd & Anor (2008) N3338
White Corner Investments Ltd vs. Regina Waim Haro (2006) N3089

Overseas Cases Cited

Air Express Limited vs. Ansett Transport Industries (Operations) Proprietary Limited [1981] HCA 75; [1978-1981] 146 C.L.R 249
Baker v Willoughby [1970] A.C467
Bingley v Marshall (1863) L. T. N. S144
Douglas v Bullen (1913) 12 D.L.R 652
Newman Bros. Ltd v Allum, S.O.S Motors Ltd (In Liq.) [No. 2] [1935] N.Z.L.R 17
Smith v Day (1882) 21 Ch.D. 421

Counsel

J Haiara, for the plaintiff
E Manu, for the first defendant

DECISION

9th February, 2011

1. GABI, J: Introduction: Following the discontinuance of the proceeding on 27th May 2010, Tropical Charters Limited, the first defendant, sought damages pursuant to an undertaking given by the Morobe Provincial Government to the Court to "submit to such Order (if any) as the Court may consider to be for the just payment of damages and costs as assessed by the Court or as it may direct, to any person, whether or not a party, affected by the operation of the interlocutory Order made herein or any continuation thereto, with or without variation of the Order."

Facts

2. This proceeding concerns a piece of prime land along Butibum Road near Lae Yacht Club in the City of Lae. The property is described as Allotment 53 Section 27 Lae, Morobe Province. On 24th August 2006, the property was advertised as light industrial area in National Gazette No. G162. On 28th August 2006, Mr. Theo Pelgen applied for the land on behalf of the first defendant. On 10th November 2006, the names of the four applicants, including the first defendant, for the land were published in National Gazette No. G205. On 13th November 2006, the Department of Lands and Physical Planning acknowledge receipt of the application and advised that it would be considered when the National Land Board convened its hearing from 4th to 8th December 2006. On 27th November 2006, Lawrence Billy sent by facsimile to Theo Pelgen a copy of National Gazette No. G205. On 5th April 2007, the first defendant was published as the first choice in the bid over the property in the National Gazette No. G56. By a letter dated 12th April 2007, the Department of Lands and Physical Planning advised the first defendant that it was the successful applicant for the land and was advised to sign the terms and conditions of the notice and return it with a fee of K5, 779.86. On 13th April 2007, the first defendant accepted the terms and conditions of the notice of lease for the land and returned it with the required fee of K5, 779.86. On 17th May 2007, the first defendant applied to the Morobe Provinsel Fisikel Plening Bod for permission to erect a picket fence around the perimeter of the land. On 10th July 2007, the title deed was issued to the first defendant. By an undated letter, a Colin Loko advised that the land was an open space and must be rezoned before the application was considered. On 5th October 2007, the first defendant submitted the necessary documents. On 12th October 2007, the Morobe Provinsel Fisikel Plening Bod advised the first defendant that its application to rezone was rejected.

3. On 25th March 2008, the plaintiff commenced this action claiming that the land was a public park area and the rezoning to light industrial was illegal and consequently the grant of the title to the first defendant is void. The plaintiff also sought a declaratory order that it is the registered proprietor of the land in question and a permanent injunction against the first defendant from doing anything on the land.

4. In February 2010, by a motion of notice, the plaintiff applied to amend the originating summons. It sought a number of declaratory orders and wanted to delete the order that it is the registered proprietor of the land described as Volume 14, Folio 61, Allotment 53, Section 27, Lae. In March 2010, the application for amendment was dismissed with costs. In May 2010, the plaintiff discontinued the action and the first defendant applied to enforce the undertaking as to damages. Mr. Theo Pelgen, the Managing Director of the first defendant, filed an affidavit setting out the damage he claims the first defendant sustained.

The Law

5. In White Corner Investments Ltd v Regina Waim Haro (2006) N3089, after consideration of the authorities on the matter, I said:

"An undertaking as to damages is given to the Court, not to the other party to the proceedings. As such there is no contract between the parties and no right is conferred on a party to the proceedings to sue. However, it enables the other party to apply for compensation for loss suffered as a result of the injunction."

6. In Air Express Limited v Ansett Transport Industries (Operations) Proprietary Limited [1981] HCA 75; [1978-1981] 146 C.L.R 249, Steven J said at pages 318 to 320:

"Perhaps the first point to be observed is that undertakings such as this are given to the Court and not to the party enjoined. Brett L.J made this point when, in Smith v. Day (1882) 21 Ch.D. 421, at p.428 he said: 'Now in the present case there is no undertaking with the opposite party, but with the Court. There is no contract on which the opposite party could sue.' A claimant under an undertaking cannot complain of any breach of contract nor of any breach of duty, tortious or otherwise, owed to him, nor, of course, of any breach of the undertaking. What occurs when such an undertaking is extracted from a plaintiff is that the Court, as a condition of its grant of interim or interlocutory injunctive relief, has ensured that, should it turn out that that relief should never have been granted, it will have the power, so far as monetary compensation allows, to make good the harm which the grant has done to the defendant...Damages awarded under such an undertaking are, therefore, of a rather different nature from those awarded at common law. Their special character appears from the fact that their source lies in the plaintiff's own voluntary undertaking, given as the price of obtaining an injunction. It may also be seen in the words of the common form of the undertaking, they must not only be sustained by reason of the grant of the injunction but the court must form the opinion that the plaintiff 'ought to pay' them...It is quite a different thing to seek to apply common law rules of causation to a claim made under such undertakings; there is no such analogy as Lord Reid in Baker v Willoughby [1969] UKHL 8; [1970] A.C 467 found to exist in the case of workers' compensation. The reason for this is plain enough. In both contract and tort it is enough that the breach of contract or of duty is one direct cause of whatever damage a plaintiff has suffered – McGregor on Damages, 13 ed. (1972), pp. 69, 118. The breach is a wrongful act on the defendant's part and the common law visits him with liability for the consequences to the plaintiff, subject always to rules as to remoteness. But a plaintiff who sues for an injunction and obtains interlocutory relief, giving an undertaking to the court as the price of that relief, commits no wrongful act, no breach of contract or of duty when, at the trial, he fails to obtain any perpetual injunction. If, as a result of the grant of interlocutory relief, the defendant has been harmed there will, however, have been injustice and, an undertaking having been given, the court will thereby have been armed with jurisdiction, otherwise lacking, to right that injustice and compensate the defendant for the harm done to him."

7. There is a distinction drawn between damage caused by the grant of injunction and damage which arose from the litigation itself. It is clear from the authorities that the only damages to which a defendant is entitled are those which he has sustained by reason of the grant of the injunction and the burden of proof lie on the defendant who asserts that he sustained damage by reason of the order (see Bingley v Marshall (1863) L.T.N.S 144; Douglas v Bullen (1913) 12 D.L.R 652; Newman Bros. Ltd v Allum, S.O.S Motors Ltd (In liq.) [No.2] [1935] N.Z.L.R 17; Air Express Limited v Ansett Transport Industries (Operations) Proprietary Limited (supra)).

Loss

8. The injunction was granted on 25th March 2008 and the entire proceeding was initially dismissed on 20th July 2009. However, on 2nd November 2009, the Court set aside the Order of 20th July 2009 and reinstated the proceeding. On 27th May 2010, the proceeding was finally discontinued.

9. In his affidavit dated 11th June 2010, Mr. Theo Pelgen deposed that the first defendant had plans to build 42 apartments, 27 x 3 bedrooms units and 15 x 2 bedrooms units, on the land but could not do so due to the injunction. Secondly, the erosion on the shoreline of the property was left unattended because of the grant of the injunction. Finally, he said that he and his wife suffered mental anguish, stress and related discomfort as a result of the injunction. He claims the following items of loss: (1) Past loss of rental income in the sum of K10,105, 200.00; (2) Future loss of rental income in the sum of K16,842,000.00; (3) Loss of potential income due to erosion in the sum of K6,240,000.00; (4) The increase in construction costs of K1,096,170.00; (5) Costs of backfilling due to erosion in the sum of K18,183,051.10; (6) Land rentals of K22,950.00; (7) Survey fees of K1,760.00; and (8) Medical expenses of K1,205. The total claim is K55, 042,336.10.

Past loss of K10, 105,200.00, Future loss of K16, 842,000.00, Loss due to erosion of K6, 240,000.00 and Increase in construction costs of K1, 096,170.00

10. I intend to deal with items 1, 2, 3 and 4 together because they relate to losses arising from the proposed 42 apartments.

11. Mr. Pelgen said that in early January 2008, after consultation with NOKA BUILDERS, a proposed development plan for 42 apartments was devised. He said under the plan, the first defendant was to construct 27 x 3 bedrooms units, 15 x 2 bedrooms units and a 3 bedroom Manager's Accommodation/Office. The units were to be rented at: (i) 3 bedrooms units at K8, 500.00 per calendar month; and (ii) 2 bedroom units at K8, 000.00 per calendar month. This would give a monthly rent of three (3) bedrooms at K229, 500.00 and K120, 000.00 for two (2) bedroom apartments; a total gross rental of K349, 500 per month and K4, 194,000.00 annually. He said after expenses the total net sum of K3, 368,400 x 3 years would give a total sum of K10, 105,200.00. He said a similar forecast on rentals on the same rate for the next five (5) years for future losses would be K16, 842,000.00 net. He said out of the 42 apartments, 18 units comprising of 5x3 bedrooms and 13 x 2 bedrooms, will not be built until the back fill was done. Using the same rates of K8, 500.00 and K8, 000.00 respectively, Mr. Pelgen said that the total loss per annum would be K1, 248,000.00 and allowing five (5) years future loss the total loss would have been K6, 240,000.00.

12. The State Lease was a Light Industrial Lease for the construction of Marina. The construction of 42 apartments was not only contrary to the purpose of the lease but it was only an idea, a concept or a dream. The implementation of the idea or concept depended on obtaining approvals from the Morobe Fisikel Plening Bod and the Building Board and securing finance. There is no evidence before me to show that the residential development plan had been approved by the Morobe Fisikel Plening Bod or that a detailed concept plan for development was prepared and approved by the Building Board. In addition, there is no evidence that the first defendant had funds to construct the buildings or had engaged a contractor to do so. I am satisfied on the evidence that the first defendant could not have commenced building on 28th March 2008.

13. In Wei Xiang Cheng & Anor v Agmark Ltd & Anor (2008) N3338, Gavara-Nanu, J awarded damages to the first defendant. In that case, the plaintiffs obtained a number of interim ex parte injunctive orders on 25th November 2005. The relevant ones were: (i) the first and second defendants and their servants or agents be restrained from harassing or intimidating and removing the plaintiffs and their properties or otherwise from the property known as Portion 249C Kimbe, West New Britain Province until further notice; and (ii) the first and second defendants and their servants and agents be restrained from going within 10 meters of the property known as Portion 249C Kimbe, West New Britain Province until further order. When the injunctive orders were obtained on 25th November 2005, the first defendant was already leasing the land and using it to do business. The injunctive orders prevented and deprived the first defendant from using the land to do business. It could not use the land to store its hardware, building supplies and containers nor could it build a warehouse to store its agricultural goods and equipment. The Court held that the first defendant suffered loss and the loss was sustained by the reason of the grant of the injunctive order.

14. In this case, the first defendant was in no position to construct the apartments. It had no approvals and no evidence of availability of funds to do so. As such, it suffered no loss and I dismiss items 1, 2, 3 and 4 of the claim.

Costs of backfilling – K18, 183,051.10

15. The evidence is clear. The erosion has been occurring on the land since 2006. The restraining orders were obtained on 28th March 2008. I am satisfied that the loss or damage is not sustained by reason of the grant of the injunction. I dismiss the claim.

Land rentals of K22, 950.00

16. By law a lease holder is required to pay land lease rentals, which is an obligation arising independently of the injunctive order. It is not incurred as a consequence of the injunction. I dismiss the claim.

Medical expenses of K1, 205.00

17. Mr. Pelgen said he and his wife suffered from sleeping disorder and anxiety as a result of the case. Dr. Laki Iss reported that in his opinion Mr. and Mrs. Pelgen suffer from "psychosomatic disorder as a result of stressful court battle."

18. Annexure M to the affidavit of Mr. Pelgen (Exhibit D1) is a document which sets out the dates and the amounts of payments made. This is not an official receipt from Dr. Laki Iss. It is not known what the alleged illnesses were and the type of treatment administered to Mr. and Mrs. Pelgen. Counsel for the plaintiff objected to the tender of the document. I allow the objection and the document is not admitted into evidence. Secondly, Mr. and Mrs. Pelgen are not parties to the proceeding and any costs incurred by them are not recoverable against the plaintiff. The medical expenses are not loss incurred by the first defendant. The claim is dismissed.

Survey fees of K1, 760.00

19. It is not known who the Surveyor was and the purpose of the survey report. The survey report or plan was not produced in evidence. The first defendant has failed to show how the restraining order has caused it to incur survey costs. This claim is also dismissed.

20. For all the reasons given in the judgment, I dismiss the first defendant's application for damages with costs.

_______________________________
Steel Lawyers: Lawyer for the Plaintiff
Manu & Associates: Lawyer for the First Defendent