N8782

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 756 OF 2003

BETWEEN:
DAVID S. NELSON
Plaintiff

AND:
PATRICK PRUAITCH, MP
Minister for Forests
First Defendant

AND:
NATIONAL FOREST BOARD OF
PNG FOREST AUTHORITY
Second Defendant

AND:
NATIONAL EXECUTIVE COUNCIL
Third Defendant

AND:
THE INDEPENDENT STATE OF
PAPUA NEW GUINEA
Fourth Defendant

Waigani: Hartshorn J.
2019: 20th February

DAMAGES - Assessment of damages – whether plaintiff is entitled to damages for breach of contract - plaintiff is entitled to and shall be paid four calendar months’ salary and emoluments together with interest on that amount at the rate of 2% per annum from the date of filing of the statement of claim being 22nd June 2010, pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act 2015 - defendants shall pay plaintiff’s costs.
Cases Cited

Wilson Thompson v. National Capital District Commission (2004) N2686
Central Bank of PNG v. Gabriel Tugiau (2009) SC1013 
Porgera Joint Venture v. Kami (2010) SC1060
Robert Kapo v. Ayleen Bare (2010) SC1162

Counsel:

Mr. B.S. Lai, for the Plaintiff
Mr. D. Mel, for the Defendants

20th February, 2019

1. HARTSHORN J. This is a decision on an assessment of damages.

Background

2. The plaintiff was employed by the State as the Managing Director of the National Forest Service. This was under a contract of employment dated 6th December 2001 for a term of four years, effective from 23rd May 2002 to 24th May 2006. The plaintiff’s employment was terminated on 27th November 2003. The plaintiff successfully challenged the termination by judicial review. The termination was quashed but his reinstatement application was refused. All of the plaintiff’s entitlements under the contract of employment until its expiry on 24th May 2006 were ordered to be paid. Following an appeal to the Supreme Court that only concerned the entitlements that the National Court had ordered, the Supreme Court ordered in substitution, that judgment is entered for damages to be assessed. The Supreme Court further ordered amongst others, that if the parties did not reach agreement the plaintiff should file a statement of claim for the purpose of assessment of damages and the proceedings should proceed by way of pleadings. This is what occurred.

Submissions

3. The plaintiff submits that he is entitled to damages in the sum of K4,008,479.80, together with interest at 8% per annum and costs. If however, this court follows the Supreme Court ruling in Central Bank of PNG v. Gabriel Tugiau (2009) SC1013, then the plaintiff submits that he is entitled to three months’ salary for the notice period and other emoluments, an ex gratia termination benefit pursuant to clause 12.3 of his employment contract, and a further three months’ salary to encompass the disciplinary proceedings process.

4. The defendants’ submit that the plaintiff is not entitled to any damages for breach of contract as:

a)	the plaintiff’s damages have not been pleaded with sufficient particularity;

b)	there was no breach of contract per se;

c)	the employment contract did not provide for damages to consist of payment of the balance of the contract. If it did, that would amount to an unenforceable penalty.

Law

5. The plaintiff relies upon the following cases:

a)	Central Bank of PNG v. Gabriel Tugiau (2009) SC1013 at [7]:

“7.  ………. It is necessary to first remind ourselves of principles governing an assessment of damages as recently stated by this Court in its decision in the matter of Motor Vehicles Insurance Limited v. Maki Kol,1 in the following terms:

“Generally speaking, a desire to compensate one’s loss and suffering is at the very core of the whole body of law governing the assessment of damages, be it for a breach of contract situation or personal injuries. Usually, the law looks at awarding damages in monetary terms not more or not less than what has actually been suffered or lost.  Lord Blackburn in Livingstone v. Rawyards Coal Co … formulated the classical and often quoted principle in the following terms:

‘where any injury is to be compensated by damages, in settling the sum of money to be given for … damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation.’

In time, this principle has become known as the principle of restitution in integrum.””;

b)	Porgera Joint Venture v. Kami (2010) SC1060 in which it was held, by majority as follows:

“Held:   (by majority decision)

1.	Damages for breach of fixed term contract should be assessed on the basis of salary and other entitlements which the employee is entitled to receive had the contract been lawfully terminated.

2.	 In a case where it is an express or implied term of the contract that termination of the employment contract for cause would be effected upon compliance with disciplinary procedures, the measure of damages is assessed on a reasonable period within which the disciplinary proceedings would be commenced and concluded.  The likely outcome of the disciplinary proceeding is immaterial or is an irrelevant consideration in assessing damages. 

3.	 The trial judge erred in assessing damages for the balance of the contract period in that employee was only entitled to damages in salary and other entitlements for the notice period and within such reasonable period required to commence and complete the disciplinary process relating to termination for cause adopted by the parties under the contract. A reasonable period in the circumstances of this case was two (2). The employee already having been paid money in lieu of four week notice, he was not entitled to receive additional damages. Consequently, the appeal was allowed with costs.”

6. The defendants rely upon the following cases:

a)	PNGBC v. Jeff Tole (2002) SC694:

“It is clear law that, where a plaintiff’s claim is special in nature, such as a claim for loss of salaries or wages, they must be specifically pleaded with particulars.  Unless that is done, no evidence of matters not pleaded can be allowed and relief granted. That is apparent from the judgements in the James Pupune and John Etape cases. These cases adopted and applied principles enunciated in those terms in authorities such as Ilkiw v. Samuel [1963] 2 All ER 879, per Diplock L J at pp. 980-891 and Pilato v. Metropolitan Water Sewerage and Drainage Board (1959) 76 WN (NSW) 364, per McClemens J at 365.  This follows in turn from the fact that, our system of justice is not one of surprises but one of fair play.  Reasonable opportunity must be given to each other by the parties to an action to ascertain fully the nature of the other’s case so that, if need be, a defendant can make a payment into Court.”  

b)	Coecon Limited (Receiver/Manager Appointed) v. National Fisheries Authority (2002) N2182:

“A survey of the authorities on assessment of damages after entry of judgement on liability mainly in default of a defendant’s defence, clearly show the following:
1.	The judgement resolves all questions of liability in respect of the matters pleaded in the statement of claim.
2.	Any matter that has not been pleaded but is introduced at the trial is a matter on which the defendant can take an issue on liability.
3.	In the case of a claim for damages for breach of contract as in this case, such a judgement confirms there being a breach as alleged and leaves only the question of what damages necessarily flow from the breach.
4.	The plaintiff in such a case has the burden to produce admissible and credible evidence of his alleged damages and if the Court is satisfied on the balance of probabilities that the damages have been incurred, awards can be made for the proven damages.

5.	A plaintiff in such a case is only entitled to lead evidence and recover such damages as may be pleaded and asked for in his statement of claim.”

c)	Wilson Thompson v. National Capital District Commission (2004) N2686:	

“Further, the Plaintiff is asking for damages for the whole of the balance of his contract. I accept the NCDC’s submission that, the fundamental principle for award of damages is to compensate a Plaintiff for his actual loss.  This is technically expressed in the principle of restitutio in intergrum , subject to a requirement for a plaintiff to mitigate his loss and that the damages he is claiming are not remote.

	In a case where a contract of employment provides for a payout of the balance of one’s contract such as those seen in PNG with public authorities in the event of an early termination, the law is also clear.  The Supreme Court in Post Puma Ltd v. Yama Security Services Ltd (unnumbered judgment 26/07/01) SCA No. 80 of 2000, held that such contracts amount to penalties.  As such, the courts will not uphold it because it goes against the basis on which contracts exist, namely the freedom of the parties. 

	I had regard to that judgment and followed it in Teio Raka Ila vs. Wilson Kamit & Anor (supra) and held that a provision providing for a payout of the balance of the plaintiff’s contract was null and void and therefore unenforceable.  The Supreme Court in PNGBC v. Jeff Tole (supra) re-echoed that position.   All of these proceed on the basis that the only true measure of damages is the amount of wages actually lost.  They also take into account the fact that a plaintiff is under an obligation to mitigate his loss and further that there is always the possibility of a plaintiff finding an alternative employment.”

d)	Taru v. New Ireland Shipping Ltd (2008) N3501:

“The principles thus adopted and applying in our jurisdiction are these:

(a)	One’s measure of damages “should as nearly as possible... that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation”;lvii5

(b)	However the measure of one’s damages should not include any damages or loss that is remote;lviii6

(c)	Damages may be awarded for the prospective as well as the actual loss incurred by a breach of contract.  Although damages are in many cases difficult to ascertain, an attempt must nevertheless be made to assess them;lix7

(d)	There may be cases in which the contract may provide for a sum payable as damages in a case of a breach of one or more of its terms but such an agreement may not be upheld unless it can be demonstrated as a reasonable and genuine pre-estimated of one’s loss or damages;lx8

(e)	In some cases, damages may be recovered for inconvenience and mental distress resulting from the breach of contract;lxi9  and

(f)	Finally, the law requires a plaintiff to take all reasonable steps to mitigate his loss failing which part of his damages may be reduced.lxii10”

e)	Potane v. National Development Bank Ltd (No. 2) (2013) N5099

“9.	The law is that the plaintiff must prove the alleged damages. It is not sufficient to make general allegation in a statement of claim and expect the Court to award damages. The damages must be pleaded and proven by evidence in court. In Bonham Carter  v. Hayden Park Hotel Ltd (1948) 64 TLR 177 at 178, Lord Goddard said:     

“The plaintiff must understand that if they bring action for damages, it is for them to prove their damages. It is not enough for them to write down particulars and so to speak, throw them at the head of the Court, saying ...... ‘This is what I have lost, I ask you to give me these damages, they have to prove it.’” ” 

f)	MVIL v. Kauna Kiangua (2015) SC1476

“52.	Pleadings and particulars play a very important role in a parties case, be it a plaintiff or a defendant.  The effect of not properly pleading can be disastrous to a party.  Courts in this country, including the Supreme Court, have re-emphasized the importance of good pleadings over the years but which unfortunately, has come to naught.  The leading Supreme Court case of PNGBC v. Jeff Tole (2002) SC 694 is one such case.  I reproduce below what the Supreme Court said in PNGBC v. Jeff Tole (supra):

“The law on pleadings in our Jurisdiction is well settled. The principles governing pleadings can easily be summarized in these terms; unless there is foundation in the pleadings of a party, no evidence and damages or relief or matter not pleaded can be allowed.  This is the effect of matters not pleaded can be allowed.  This is the effect of the judgments of this Court in MVIT v. John Etape [1994] PNGLR 596 and MVIT v. Pupune [1993] PNGLR 370; see also MVIT v. Salio Tabanto [1995] PNGLR 214 at 221.  These judgments reaffirmed what was always the position at common law and consistently applied in large numbers of cases in our country.  The list of such cases is long but reference need only be made to cases like that of Repa Waima v. MVIT [1992] PNGLR 254 and Colins v. MVIT [1990] PNGLR 580 at 582 for examples only.””

Consideration

7. The defendants submit that there was no breach of contract and so the plaintiff is not entitled to damages for breach of contract. It is the case that the primary judge in the National Court only considered argument on the grounds of ultra vires and bias in a judicial review context. He then quashed the decision of the National Executive Council which terminated the plaintiff’s contract of employment. There was no specific finding that the contract of employment was breached. The appeal to the Supreme Court only concerned the entitlements of the plaintiff ordered by the primary judge. Damages are to be assessed therefore on the basis of the primary judge finding that the National Executive Council was ultra vires and biased when it terminated the contract of employment. To my mind, this constitutes the National Executive Council breaching the contract of employment as the contract was not terminated correctly. Consequently, damages are to be assessed for a breach of the employment contract.

8. As to the defendants’ submission that the pleadings in the statement of claim are not founded on the terms of the employment contract, the statement of claim pleads the employment contract and in essence pleads that the plaintiff is entitled to damages for the contract’s unexpired term.

9. As foreshadowed by the plaintiff in his alternative submission, the law concerning damages for breach of a fixed term contract is that stated in Porgera JV v. Kami (supra) and Robert Kapo v. Ayleen Bare (2010) SC1162. Consequently, the plaintiff is entitled pursuant to clause 17.2 of his contract of employment to three calendar months’ notice and salary and other emoluments calculated for that three months. 

10. As to the claim for three months in regard to the disciplinary proceeding process, to my mind, that is excessive having regard to clause 27 of the contract. In my view one month is appropriate and sufficient.

11. In regard to the claim for an ex gratia payment under clause 12.3, following a reading of this clause, I am satisfied that it clearly constitutes a penalty as referred to in Thompson v. NCDC (supra). Consequently, the claim under this clause is refused.

12. Given the above, the plaintiff is entitled to and shall be paid four calendar months’ salary and emoluments together with interest on that amount at the rate of 2% per annum from the date of filing of the statement of claim being 22nd June 2010, pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act 2015. Further, the defendants shall pay the plaintiff’s costs of and incidental to this proceeding that have not already been ordered, and time is abridged.
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B.S Lai Lawyers:  Lawyers for the Plaintiff                                                     
Mel & Hennry Lawyers: Lawyers for the Defendants