N6057
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 281 OF 2011

BETWEEN:

BOB BOBBIES FOR AND ON BEHALF OF HIMSELF & 479 OTHER COCOA FARMERS OF BOGIA DISTRICT, MADANG PROVINCE
Plaintiffs

AND:

ANDREW BENZIMAN, SECRETARY, DEPARTMENT OF AGRICULTURE & LIVESTOCK
First Defendant

AND:

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Defendant

Madang: Cannings J
2014: 2nd December,
2015:10th March, 17th August

LAW OF CONTRACT – whether an oral agreement between the plaintiffs and defendants was in existence – whether the agreement was enforceable – whether defendants breached agreement by failing to pay plaintiffs full amount of restitution package.

The 480 plaintiffs are cocoa farmers. They claimed that they entered into an oral agreement with the Secretary for Agriculture (the first defendant), who acted for and on behalf of the State (the second defendant), to allow the government to conduct a disease eradication program in their district, involving destruction of trees and closure of cocoa fermentaries, subject to them being paid restitution in accordance with an assessment report to be prepared by the Cocoa and Coconut Institute. The plaintiffs claimed that the eradication program went ahead as agreed and an assessment report was prepared as agreed, concluding that their losses were in the total sum of K1,383,353.00, but the defendants paid them only K730,000.00. The plaintiffs commenced proceedings against the defendants, claiming that the defendants were liable to pay them the balance of K653,353.00, the cause of action being breach of contract: breach of the oral agreement made with the first defendant. The defendants conceded that there was an agreement in principle about restitution, but argued that there was no agreement that the amounts of restitution would be fixed by reference to the assessment report, that the agreement was not enforceable and the amount of K730,000.00, which was paid, is best regarded as an ex gratia payment.

Held:

(1)	The oral agreement between the first plaintiff and the first defendant amounted to a valid and enforceable contract, as there was an agreement, an intention to create legal relations and the agreement was supported with consideration.

(2)	It was a term of the agreement that the plaintiffs be paid a restitution package in accordance with the assessment report. The defendants breached the agreement by not complying the amounts recommended in the assessment report.

(3)	The second defendant is liable in breach of contract to the plaintiffs and shall complete the contract by paying the plaintiffs the total amount of K653, 353.00.

Cases cited

The following case is cited in the judgment:

Steven Naki v AGC (Pacific) Ltd (2005) N2782

STATEMENT OF CLAIM

These were proceedings in which the plaintiffs sought specific performance of a contract.

Counsel

B B Wak, for the Plaintiff
S Phannaphen, for the Defendant

17th August, 2015 

1. CANNINGS J: The question in this case is whether the defendants are liable in breach of contract to the 480 plaintiffs, Bob Bobbies and 479 other cocoa farmers of Bogia District, Madang Province.

PLAINTIFFS' CLAIMS

2. The plaintiffs claim that in 2008 they entered into an oral agreement with the Secretary for Agriculture (the first defendant), who acted for and on behalf of the State (the second defendant). The agreement was that the plaintiffs would allow the National Government through the Department of Agriculture and Livestock to conduct a cocoa pod borer disease eradication program in their district, involving compulsory harvesting and destruction of crops, heavy pruning of trees and closure of cocoa fermentaries, subject to the plaintiffs being paid restitution in accordance with a loss assessment report, which would be prepared by the Cocoa and Coconut Institute. The plaintiff's claim that the eradication program went ahead in 2008 as agreed and an assessment report was prepared as agreed, concluding that their losses were in the total sum of K1, 383,353.00. The defendants paid them only K730, 000.00.

3. The plaintiffs commenced these proceedings against the defendants in 2011, claiming the balance of K653, 353.00. The cause of action pleaded is breach of contract, ie breach of the oral agreement made with the first defendant on behalf of the second defendant. The plaintiffs are only seeking payment of the amount of K653, 353.00 and interest on that sum. There is no claim for damages. The remedy sought is best regarded as a decree of specific performance.

DEFENDANTS' POSITION

4. The defendants deny liability. They concede that there was a general agreement as to a restitution package, but say that the amounts of restitution were not to be fixed by reference to the loss assessment report. They say that the agreement, even if it was proven to have existed, is not enforceable and the amount of K730, 000.00, which was paid, was an ex gratia payment and does not amount to admission of liability. They say that the plaintiffs have been paid a generous amount and that the State is not liable to pay them any more.

ISSUES

4. These issues have emerged:

(1)	Was there a legally enforceable contract?

(2)	What were the terms of the contract?

(3)	Was the contract breached?

(4)	What orders should the Court make?

5. WAS THERE A LEGALLY ENFORCEABLE CONTRACT?

5. Yes. The underlying law of Papua New Guinea treats an arrangement between two or more parties as a contract when three essential elements exist: an agreement between the parties, an intention to create legal relations; and support of the agreement with consideration (Steven Naki v AGC (Pacific) Ltd (2005) N2782).

6. The plaintiffs have adduced sufficient evidence to prove on the balance of probabilities that in 2008 the first defendant, Mr Andrew Benziman, who was then the Secretary for Agriculture, went to Bogia and met with the plaintiffs and inspected their blocks, and advised them of the urgent need to conduct a cocoa pod borer disease eradication program. He told them that they would be paid under a restitution package, in accordance with a loss assessment report to be prepared by the Cocoa and Coconut Institute. The plaintiffs agreed with his proposals. The agreement was not reduced to writing. It should have been, but it was not. It was an oral or handshake agreement.

7. In addition to the existence of an agreement, there was an intention to create legal relations, and consideration. The requisite intention is evident from the seriousness and urgency of the subject of the agreement and the status of the first defendant, a senior public official who was reasonably seen to be in a position where he could enter into agreements of this nature on behalf of the State.

8. Consideration has been provided in that the plaintiffs allowed severe and urgent steps to be taken which would deprive them of an income source for an extended period and allowed their fermentaries to be shut down in exchange for the promise of restitution. I find that a legally enforceable contract was entered into. The contract was between the plaintiffs and the State.

WHAT WERE THE TERMS OF THE CONTRACT?

9. The plaintiffs have adduced sufficient evidence to prove that the terms of the contract included that they would be paid restitution in terms of a loss assessment report that would be prepared by the Cocoa and Coconut Institute, provided that the amounts recommended for payment were not obviously unreasonable or outlandish.

WAS THE CONTRACT BREACHED?

10. Yes, the contract was breached as the State did not pay the plaintiffs the amounts recommended in the assessment report, which were not unreasonable or outlandish, and offered no reason for the under-payment. It paid them only 52.8% (K730,000.00) of the total amount recommended (K1,383,353.00).

11. The loss assessment report is in evidence as an annexure to the affidavit of its author, Paul Tumun. Mr Tumun at the relevant time was a senior officer of the Cocoa and Coconut Institute holding the positions of Scientific Liaison Officer and Program Manager for Madang Province and Regional Manager for the Momase Region and Executive Manager, Industry Affairs Division. He explains that cocoa pod borer disease was first discovered near Kerevat, East New Britain Province, in 2006. In early 2008 it was detected in Wards 2, 3 and 4 of the Yawar Local-level Government area in Bogia District. He was appointed by the Minister for Agriculture as co-ordinator of the response operations regarding the outbreak of the disease at Bogia. This involved mapping the boundary of the affected area and designating a one-kilometre buffer zone around the boundary. Starting from the outer edge of the buffer zone, the operations moved inwards. All cocoa trees were sprayed with insecticide, pods were harvested and buried and trees were heavily pruned; the modus operandi being to cut off the food source of the insect so it would starve to death. The trees took one to two years to recover and produce pods again. During that time the cocoa farmers were deprived of their cocoa income. Before the operations commenced, a survey was conducted and a database established. This revealed that nine villages comprising 447 cocoa farmers occupying an area of 310.56 hectares and 194,693 cocoa trees were affected. Further, 17 registered cocoa fermentaries closed and the licences to operate them were suspended for one year. 

12. As part of his official functions Mr Tumun prepared a 30-page "Loss of Income Assessment Report" dated 26 February 2009, which was forwarded to the then Minister for Agriculture and Livestock, Hon John Hickey MP. He calculated losses for each individual farmer in terms of cocoa yield per tree per year and the number of trees, as well as losses caused by the one-year suspension of operation of the 17 fermentaries. He reported that the success of the operation was due to the tremendous support of the Bogia farmers who had made genuine sacrifices. He noted that a feature of the Bogia operation, which distinguished it from the Kerevat operation is that in Bogia the farmers received nothing from the Government before the program started whereas in Kerevat the farmers were compensated before the program commenced. Mr Tumun assessed losses in three categories:

Losses due to loss of cocoa yield K801,360.00
Losses from heavy pruning K194,693.00
Losses due to fermentary suspensions K387,300.00

Total K1,383,353.00

WHAT ORDERS SHOULD THE COURT MAKE?

13. The plaintiffs are not seeking damages. The statement of claim pleads only that the defendants be ordered to pay the shortfall of K653,353.00 in the agreed total amount of restitution. The principal relief being sought is specific performance of the contract. I will make an order to that effect. The order will be in general terms at this stage. The parties should be able to agree on a more detailed order, which might set out how much is due to each of the 480 plaintiffs, and by when they are to be paid. All the data required for drafting such a detailed order is in Mr Tumun's loss assessment report. Whether they can agree or not, there will be a further hearing shortly, following which I will make an order that will fully resolve the proceedings.

ORDER

(1)	The second defendant is liable in breach of contract to the plaintiffs and it is decreed that it shall perform the contract by paying the plaintiffs the total amount of K653,353.00.

(2)	The defendants shall pay that amount and any other amount determined by the Court, including interest and costs, in accordance with such terms as will be set in a further and final order of the Court.

(3)	There will be a hearing at Madang on 7 September 2015 at 1.30 pm, or at such other time set by the Court, at which hearing: (a) the parties will present the Court with a draft consent order for consideration; or (b) the Court will receive any further evidence, if necessary, and hear submissions for the purpose of determining the final order of the Court.

Judgment accordingly.
___________________________________________________________
Kunai & Co Lawyers: Lawyers for the Plaintiffs 
Solicitor-General: Lawyer for the Defendants