N5678

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 652 OF 2012

JOHN KITCHEPAK
Plaintiff

V

RAYMOND IMANAUI
First Defendant

TOYOTA TSUSHO (PNG) LIMITED TRADING AS ELA MOTORS
Second Defendant

Madang: Cannings J
2014: 14 March, 13 June, 18 July

CONTRACTS – breach of contract – whether contract entered into – identification of time that contract came into existence – terms of contract – whether breach of contract committed

The plaintiff rang the first defendant, a salesman for the second defendant, and negotiated the purchase of a boat and motor. The next day the first defendant faxed a quote to the plaintiff, to the value of K21,900.00, inclusive of freight costs of K1,500.00. Later that day the plaintiff deposited K21,900.00 into the second defendant's bank account. After waiting several months for delivery the plaintiff became impatient. Eight months and one week after depositing the funds he commenced proceedings against the defendants, claiming damages for breach of contract. He claimed that the first defendant undertook to deliver the boat and motor within two weeks after receipt of the funds. The second defendant delivered the boat and motor to the plaintiff nine months and 25 days after the date of receipt of the funds. The plaintiff argued that he has a cause of action in breach of contract. The defendants claimed that the quote provided to the plaintiff was a conditional offer only, in that it was provided subject to the availability of stock and that the indication that delivery would be effected within two weeks was subject to the availability of shipping services and that the boat and motor were delivered as soon as circumstances permitted. Three issues arose: (1) was there a contract and if yes, when did it come into existence? (2) what were the terms of the contract? and (3) was there a breach of contract?

Held:

(1)	The written quote was an offer – not merely a conditional offer – which was accepted by the plaintiff through his act of depositing funds into the second defendant's bank account. There was agreement, an intention to create legal relations and consideration. Therefore a contract for the sale of goods came into existence when the funds were deposited into the second defendant's bank account. The contract was between the plaintiff and the second defendant.

(2)	The contract included a term that the boat and motor would be delivered to the plaintiff within two weeks after the date the contract came into existence. There was no term that the boat and motor would be supplied subject to availability of stock or shipping services.

(3)	The plaintiff established a cause of action in breach of contract as the boat and motor were not delivered within two weeks.

Cases cited

The following cases are cited in the judgment:

Cresseri v Halla Resources Corporation [1985] PNGLR 294
John Manau v Telikom (PNG) Ltd (2008) N3268
Mond v Okoro [1992] PNGLR 501
MVIT v Etape [1994] PNGLR 596
MVIT v Pupune [1993] PNGLR 370
MVIT v Waige [1995] PNGLR 202
PNGBC v Tole (2002) SC694
Pundari v Niolam (2011) SC1123
Raim v Korua (2010) SC1062
Shell PNG Ltd v Speko Investment Ltd (2004) SC767
Steven Naki v AGC (Pacific) Ltd (2005) N2782
The State v Keboki Business Group Inc [1985] PNGLR 369

STATEMENT OF CLAIM

This was a trial on liability for breach of contract.

Counsel

B B Wak, for the plaintiff
W Stephen, for the defendants

18th July, 2014 

1. CANNINGS J: The plaintiff, John Kitchepak, lives on Ahus Island, Manus Province. He is seeking damages against the defendants, Raymond Imanaui (a salesman with Ela Motors, Madang) and Toyota Tsusho (PNG) Ltd, for breach of contract arising from their failure to deliver to him a boat and motor he purchased from them, within the time agreed.

2. The plaintiff says that he entered into a contract with the defendants on 21 October 2011 to supply him, through the Ela Motors Madang branch, a 23-foot dinghy and a 40-hp Yamaha motor, within two weeks, for the total price, inclusive of freight charges, of K21,900.00. On that day he deposited that amount in Ela Motors' Madang bank account. After waiting several months for delivery the plaintiff became impatient. On 28 June 2012 he commenced these proceedings against the defendants by writ of summons. On 21 July 2012 the boat and motor were delivered to him. The plaintiff claims that the late delivery of the goods amounts to a breach of contract and has caused him considerable loss as he had planned to use the boat and motor for the purposes of his business, ferrying passengers and freight between Ahus and Lorengau, the capital of Manus Province.

3. The defendants deny liability. They say that there is no breach of contract as the quote provided to the plaintiff was a conditional offer only, subject to the availability of stock. As to the alleged promise that delivery would be effected within two weeks, that was a general indication only, subject to the availability of shipping services. They say that the boat and motor were delivered as soon as circumstances permitted.

ISSUES

4. A trial has been conducted on the issue of liability. Three issues arise:

1	was there a contract between the plaintiff and the defendants? and if yes, when did it come into existence?

2	what were the terms of the contract? and

3	was there a breach of contract?

1	WAS THERE A CONTRACT? WHEN DID IT COME INTO EXISTENCE?

5. Mr Stephen for the defendants submitted that the quote that was faxed by the first defendant (from Madang) to the plaintiff (in Lorengau) on 21 October 2011 was not an offer as such. It was only a conditional offer, as it was made subject to availability of stock.

6. I reject this argument for three reasons. First, I uphold the submission of Mr Wak for the plaintiff that the defendants are precluded from raising it as it is not in the defendants' defence. The plaintiff commenced proceedings by writ of summons, on which was endorsed a statement of claim. Liability is to be determined in accordance with the law of pleadings: the parties are confined to bringing evidence and asserting arguments that are raised in a statement of claim (in the case of the plaintiff) or a defence (in the case of the defendants). Sakora AJ, as he then was, made this clear in Mond v Okoro [1992] PNGLR 501:

The purpose of pleadings in civil actions is to ensure that the scope of the dispute between the parties is defined with some precision. Every party is thereby made aware of the case to be made by his opponent, and his preparation for the trial can be directed to the actual controversy. They are intended to inform each party of the case he will have to meet at the trial, and to inform the court of the issues for adjudication. And pleadings require the parties to plead facts in support of a claim or defence. Facts must be specifically alleged so that the opposite party is not surprised. Certain rules of pleadings such as notices and time limits come into play also to ensure parties do not attempt "trial by ambush".

7. This principle has been reinforced by numerous decisions of the Supreme Court, including Cresseri v Halla Resources Corporation [1985] PNGLR 294, MVIT v Pupune [1993] PNGLR 370, MVIT v Etape [1994] PNGLR 596, MVIT v Waige [1995] PNGLR 202, PNGBC v Tole (2002) SC694, Raim v Korua (2010) SC1062 and Pundari v Niolam (2011) SC1123.

8. Secondly, there is nothing expressed in the quote that says it is subject to availability of stock, and I reject Mr Stephen's submission that this is something that can be implied.

9. Thirdly, I accept the plaintiff's evidence that in his telephone conversation with Mr Imanaui on 20 October 2011, Mr Imanaui told him that the boat and motor would be delivered to him in Manus within two weeks after Ela Motors received the full amount of the purchase price. Both the plaintiff and Mr Imanaui gave oral evidence and were cross-examined about their conversation. The plaintiff was adamant that Mr Imanaui told him the goods would be delivered within two weeks and Mr Imanaui, under cross-examination, did not deny telling the plaintiff that. I find as a fact that Mr Imanaui told the plaintiff without equivocation that the goods would be delivered within two weeks. This strengthens the categorisation of the quote that was faxed to the plaintiff on 21 October 2011 as a full and effective offer, capable of acceptance.

10. The plaintiff accepted the offer on the same day that it was made, 21 October 2011, by depositing K21,900.00 in the account of Ela Motors at Bank South Pacific Madang. By accepting the offer and providing consideration (in the form of K21,900.00) all elements of formation of a contract were completed (The State v Keboki Business Group Inc [1985] PNGLR 369, Shell PNG Ltd v Speko Investment Ltd (2004) SC767, Steven Naki v AGC (Pacific) Ltd (2005) N2782, John Manau v Telikom (PNG) Ltd (2008) N3268). That is:

•	an agreement (brought about by a full and effective offer by a seller, which was accepted by a purchaser) existed for the sale and supply of a boat and motor of a specific description for a specific amount, inclusive of freight charges;

•	there was a common intention to create legal relations;

•	the agreement was supported by consideration.

11. I conclude that there was a contract formed between the plaintiff and the second defendant. The first defendant was an employee of the second defendant. No contract was formed with him. The contract came into existence on 21 October 2011.

2	WHAT WERE THE TERMS OF THE CONTRACT?

12. The terms of the contract included the following: that the second defendant would deliver to the plaintiff, in Manus Province, the boat and motor described in the quote faxed to the plaintiff (a 23-foot boat and a 40-hp Yamaha motor, model Nos E40GMHL-R, W23SA).

13. Was it a term of the contract that delivery would be effected within a certain period? Yes, I find that it formed part of the offer conveyed to the plaintiff that delivery would be effected within two weeks after receipt of the full purchase price. Though the promise to deliver within two weeks was not stated in the quote that was faxed on 21 October 2011, it was stated in sufficiently clear terms in the conversation between the plaintiff and the first defendant that took place the day before. It was incorporated into the offer that was accepted by the plaintiff. That promise is properly regarded as a term of the contract.

14. I reject the defendants' argument that their only obligation was to supply the goods within a reasonable time, which could only be determined after taking account of availability of shipping services. That might have been a reasonable interpretation of the terms of the contract if the subject of delivery time had not been broached in the conversation between the plaintiff and the first defendant on 20 October 2011. However, the subject was specifically addressed and Mr Imanaui promised a delivery time of two weeks. It was therefore a term of the contract that the boat and motor would be delivered to the plaintiff, in Manus, by 4 November 2011.

3	WAS THERE A BREACH OF CONTRACT?

15. Mr Stephen submitted that the defendants made every effort to deliver the goods in a timely manner. There were other customers who had ordered similar goods, who had to be supplied before the boat and motor ordered by the plaintiff were dispatched to him; and then, when the boat and motor ordered by the plaintiff were actually available, the defendants experienced difficulties in organising sea transport to Manus. There is some evidence to support that explanation for the delay in delivering the goods to the plaintiff. However, it goes to show that the defendants were acting, at best, imprudently, and perhaps deceitfully, by promising to the plaintiff that the goods would be delivered to him within two weeks.

16. Ultimately the argument that the defendants were doing the best they could in difficult circumstances is irrelevant to the question of whether there was a breach of contract. As the boat and motor were not delivered by 4 November 2011, a breach was committed on 5 November 2011.

CONCLUSION

17. A contract between the plaintiff and the second defendant was entered into on 21 October 2011. Included amongst its terms was the second defendant's obligation to deliver the boat and motor to the plaintiff by 4 November 2011. The second defendant breached the contract by not delivering the goods until 21 July 2012: eight months and 17 days late. The plaintiff has established a cause of action in breach of contract, and the second defendant is liable in damages.

18. As this trial was confined to the issue of liability, no assessment of damages will be made. This raises the question of how damages should be assessed. There are at least three options available to the court: (1) order a trial on assessment of damages or (2) let the parties resolve the matter or (3) order mediation.

19. Under the ADR Rules the National Court is empowered by Rule 5(2), of its own motion, to order mediation for a resolution of any part of any proceedings provided that at the time of considering whether to order mediation it has regard to the factors prescribed by Rule 5(3). I have had regard to those matters. I consider that: (a) mediation will not result in prejudice to the rights of either party; (b) it is reasonably within the ability and power of both parties to comply with a mediation order; (c) mediation will not entail substantial work for either party; (d) the nature of the relief sought lends itself to mediation; (e) a mediation at Madang can be set up very soon and this should be convenient to both parties; (f) neither party has expressed opposition to the prospect of mediation; (g) mediation has not yet been attempted and it should be attempted at least once before consideration is given to setting down a trial; (h) neither party loses the right to have the assessment of damages tried in court; and (i) it is in the interests of justice to attempt mediation as a method of resolving disputes such as this. I conclude that option (3) is the most appropriate as it is the option that has the greatest prospect of finally and quickly determining the dispute. I will therefore make an order for mediation. Costs of this trial will follow the event.

ORDER

(1)	The second defendant is liable in breach of contract to the plaintiff.

(2)	The question of assessment of damages shall under Rule 5(2) of the ADR Rules, on the court's own motion, be referred for mediation pursuant to a separate mediation order under Rule 5(4) of the ADR Rules.

(3)	The second defendant shall pay the plaintiff's costs of the proceedings on a party-party basis which shall if not agreed be taxed.

Judgment accordingly.
___________________________________________________________

Kunai & Co Lawyers: Lawyers for the Plaintiff
W Igo: Lawyer for the Defendants