N9025

PAPUA NEW GUINEA
[IN THE NATION COURT OF JUSTICE]

WS 1721 OF 2019

BETWEEN
JOHN SOTO trading as JS DISTRIBUTOR & BOTTLE BUYER (6-234725)
Plaintiff/Cross Defendant

AND
SOUTH PACIFIC BREWERY LIMITED
Defendant/Cross Claimant

Waigani:  Thompson J
2021:  6th August, 12th August

CONTRACTS – termination – breaches – need for pleading and evidence to prove loss

Counsel:

Mr A. Benny, for the Plaintiff
Mr L. Wangi, for the Defendant

12th August, 2021

1.	THOMPSON J:	On 17 December 2019, the plaintiff filed these proceedings, essentially seeking damages for breaches of Agreements which it had entered into with the defendant.   On 12 March 2020, the defendant filed a defence denying liability, and a Cross-Claim for the return of its property or the value thereof, subsequent to a breach of the Agreements by the plaintiff.   The legal status of the plaintiff as a company or business name, was not shown by the evidence, but was not raised by the parties.

2.	The evidence showed that on 12 December 2008, “Soto Trading, a company incorporated under the laws of Papua New Guinea” signed a Distribution Agreement with the defendant.  Clause 14.1 of this Agreement provided:

This Agreement commences on the date of execution… and remains in force unless terminated by either party giving the other party at least 30 days notice in writing, or unless terminated pursuant to the other terms of this Agreement. 

3.	The Agreement went on to provide in Clause 14.2, other ways in which the Agreement could also be terminated, including for breaches of the Agreement.

4.	Clause 15.1 (b) provided that on termination, the plaintiff would return to the defendant, all material belonging to the defendant.

5.	The evidence showed that by an Empty Bottle Collection Agreement dated 20 September 2010 and signed on 28 January 2011, “JS Distributor and Bottle Buyer a company incorporated in Papua New Guinea” entered into an agreement with the defendant.  Clause 12 of this Agreement said that it was for one year, and that after expiry, it would be automatically extended for consecutive years, unless the defendant gave one month’s notice to the plaintiff of its intention not to renew.  Clause 13 of the Agreement provided:

Notwithstanding Clause 12, (the defendant) may terminate this Agreement at any time by giving the (plaintiff) not less than one months’ written notice, after which period this 

Agreement shall be determined.  Neither party will be entitled to any damages whatsoever if this Agreement is terminated under to this Clause…  

6.	There was no evidence of when that Agreement came to an end, but the evidence showed that “JS Bottle Distributor and Bottle Buyer” entered into another Empty Bottle Collection Agreement with the defendant dated 1 June 2018, although signed on 23 May 2018.

Clause 12 of this Agreement provided:

Notwithstanding Clause 12, (the defendant) may terminate this Agreement at any time by giving the (plaintiff) not less than one months’ written notice, after which period this Agreement shall be determined.  Neither party will be entitled to any damages whatsoever if this Agreement is terminated under to this Clause…  

7.	It was therefore the case that, pursuant to the 2008 Distribution Agreement, and the 2010 and 2018 Collection Agreements, each Agreement could be terminated at any time by the defendant giving one months’ written notice to the plaintiff.  No reasons for termination were required to be given, and on termination, material belonging to the defendant was to be returned to the defendant.  

8.	The defendant gave evidence in support of its cross-claim, that it had supplied materials including a container shop, plastic crates and wood pallets with a value of K24,500.00 to the plaintiff.  On 18 July 2019 the defendant wrote a letter of demand to the plaintiff, requiring the return of the plastic crates, wood pallets, freezers and other items, by 19 July 2019.

9.	Despite the request, the assets were not returned to the defendant.  On 19 July 2019, the defendant gave notice to the plaintiff of termination of both the Agreements.  The termination letter stated that monies owing to the plaintiff would be paid upon the return of the defendants’ assets.

10.	In his Reply and Defence to cross-claim, the plaintiff denied an obligation to return the materials, on the basis that they had been supplied to him by the defendant pursuant to the Agreements, and because those Agreements had been unlawfully terminated, the defendant was not entitled to seek the return of the materials.

11.	In paras 9 and 10 of the Statement of Claim, the plaintiff says that the Agreements were terminated without the defendant giving formal reasons, without giving him the opportunity to respond to the allegations, and without giving sufficient notice.  He alleges that the termination of the Agreements was unlawful for various reasons, including that the defendant failed to inform the plaintiff about allegations made against him, and that the termination was not in accordance with any of the termination clauses.

12.	The plaintiff says that after the termination of the Agreements, he was informally told of the reasons for the termination.

13.	The plaintiff pleaded that as a result of the unlawful termination, he had sustained various losses.  

14.	The first loss was for 321 cartons of beer and 109 bottles of spirits with a value of K58,157.00, which had been seized by the police.  The plaintiff produced no evidence to support the pleading.  There was no evidence that he had that quantity of liquor in stock at that time, or that it had been seized by the Police.  

15.	The defendant’s evidence was that a consignment of 1,320 cartons of beer with a value of K151,109.64 which was to be delivered to another customer, had been unlawfully taken by the drivers and then purchased by the plaintiff for a much lower price than was prescribed in the Distribution Agreement.  The defendant reported the matter to the police, who obtained a search warrant and searched the plaintiffs’ sales outlets on 11 July 2019.  The police seized about 160 cartons from the plaintiffs’ premises, some of which were given to the defendant to be held pending criminal charges, and the plaintiff was charged with Receiving Stolen Property.  On 10 October 2019 one charge was dismissed after no evidence was offered, and on 22 January 2020 the other charge was struck out for want of prosecution.  The Court ordered that 264 cartons of beer be returned to the plaintiff.

16.	There was no clear evidence of the amount of beer which had been in the plaintiffs’ premises or the amount seized by police, or the amount held by the police or the defendant.  However, on 11 February 2020 the plaintiff, the defendant and a police officer, signed a document which referred to the court order for the return of 264 cartons, stated that defendant only held 105 cartons and 9 cans, which were handed over to the plaintiff and witnessed by the Police, and which further stated that in 2019 all of the plaintiffs’ beer was released back to him by the police.  The statement acknowledged that the defendant was “honoring the court order by releasing the beer”.

17.	Any claim for the loss of liquor seized by the Police could only be made against the Police, not against the defendant.  After the seizure, 105 cartons of beer were held by the defendant, but the evidence showed that they were returned to the plaintiff in February 2020.  There was no evidence that the defendant had been holding any of the other alcohol, and the only evidence was that all the plaintiff’s beer had already been returned to him.  This claim was not made out.

18.	The plaintiff next claimed the loss of future income “for many years to come” from the sale of the defendants’ products.  No particulars were provided, and no evidence was produced.  This claim was not made out.  

19.	The plaintiff claimed for the loss of income from his stores, due to their closure.  No particulars were provided of how the defendant was liable for the closure, or of the loss alleged to have been sustained, and no evidence was provided.  This claim was not made out.

20.	The plaintiff claimed that he had not received a carton rebate from the defendant, since the commencement of the Distribution Agreement, and that a list of these cartons would be “provided during trial as evidence”.  No further particulars were given, and no evidence was provided.  This claim was not made out.

21.	The plaintiff claimed the loss of future income “for many years to come” due to the termination of the Collection Agreement.  No particulars were given, and no evidence was provided.  This claim was not made out.

22.	The plaintiff claimed that he had not received payment from the defendant for fourteen invoices from 17 June – 9 July 2019, totaling K46,660.96, and that “copies of the invoices will be provided as evidence during trial”.  This was denied by the defendant in its defence.   No invoices or other evidence were provided.  This claim was not made out.

23.	The plaintiff claimed for the depreciation in the value of his machinery and vehicles due to disuse.  No particulars were given of how the defendant was liable for this, and no evidence was provided.  This claim was not made out.

24.	The plaintiff claimed that because the defendant had put a notice in the newspaper discouraging customers from selling to him, he had suffered losses.   No particulars were given, and no evidence was provided.  This claim was not made out.

25.	The plaintiff claimed that in 2016 he had obtained a loan from PNG Micro Finance Ltd for the purchase of three trucks to be used in his business, and that as a result of the termination, he was unable to repay the loan, and some of his vehicles were seized by the finance company.  No particulars were given, and no evidence was provided.  This claim was not made out.

26.	The plaintiff claimed that he had been building two guest houses, but stopped after termination of the Agreements.  No particulars were given, and no evidence was provided.  This claim was not made out.

27.	The plaintiff claimed that his standard of living, and of his four wives and twenty children, had deteriorated.  No particulars were given, and no evidence was provided.  This claim was not made out.

28.	The plaintiff additionally sought orders for specific performance of the two Agreements, general damages, and exemplary damages.

29.	In Covec (PNG Ltd) v Peter Kama & ors (2020) PGSC 9, the Supreme Court referred to a long line of case authorities including PNGBC v Jeff Tole (2002) SC 694, to affirm the general principle that evidence cannot be called or relief granted for claims that have no foundation in the pleadings. 

30.	In Yange Lagan & ors v The State (1995) PGNC 32, the court affirmed:

Plaintiffs must prove their damages in accordance with established principles as to onus and standard of proof … As Lord  Goddard CJ said in Bonham-Carter v Hyde Park Hotel Ltd (1948) 64 TLR 177: “Plaintiffs must understand that, if they bring actions for damages, it is for them to prove their damage; it is not enough 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”.

31.	The court went on to cite from McGregor on Damages, 13 ed 1972:

… the burden of proving a fact is upon him whom who alleges it and not upon him who denies it ...

32.	The only evidence produced by the plaintiff, was in relation to the merits of the criminal charges against him, which was not a cause of action against the defendant.  His pleadings did not particularize most of the losses claimed.  He produced no evidence supporting the claims for breaches of the Agreements by the defendant, or of losses sustained by him as a result of those alleged breaches.

33.	The termination Clauses of the Agreements are plain and unambiguous.  The 2008 Agreement could be terminated for various reasons.  However, all three Agreements had essentially the same termination Clause, which entitled the defendant to terminate by giving thirty days/one month’s notice.  No reasons are required to be given for that termination.  As no reasons need to be given, there is nothing for the plaintiff to respond to, or on which to be given an opportunity to be heard.  The termination is to be effected by one month’s written notice.  This meant that the termination would take effect thirty days / one month from the date of the notice. As the notice was given on 19 July 2019, the termination took effect from 19 August 2019.

34.	The plaintiff did not give evidence of what happened between 19 July and 19 August 2019.  The seizure of his stock by police and his arrest and charge by the police had already occurred on 11 July 2019, before the termination letter of 19 July.

35.	It is apparent from his pleadings that the plaintiff’s loss of business resulted from the earlier seizure of his stock and closure of his stores by the police on 11 July 2019.  They were not caused by the defendants’ termination of the Agreements on 19 July.  I am unable to identify from the plaintiffs’ pleadings or affidavit / evidence, what if any loss could be said to have been suffered between 19 July and 19 August 2019 as a result of the notice of termination.

36.	Further, in relation to the Collection Agreements, Clause 13 of the 2010 Agreement and Clause 12 of the 2018 Agreement, both provided that upon termination by one month’s written notice, “Neither party will be entitled to any damages whatsoever if this agreement is terminated under to this clause except damages resulting from any antecedent breach”. If the Agreements were terminated by the defendant giving one month’s notice, the plaintiff was not entitled to any damages as a result of that termination.  He was entitled to claim damages for any breach of the Agreements which had occurred prior to their termination.  Equally, the defendant was entitled to claim damages for any breach prior to the termination.

37.	The notice of intention to terminate given on 19 July 2019, was in compliance with each of the termination clauses of the Agreements. There was no breach of those Agreements.

38.	The wording of the termination clauses in the Agreements is clear and unambiguous, and leaves no room for implying any other meaning, even if such an implication had been pleaded or submitted, which it had not.  No reasons were required to be given for the termination, which would be validly effected by giving thirty days written notice.

39.	The evidentiary position is therefore that the defendant validly gave notice of intention to terminate both Agreements on 19 July 2019, this termination took effect on 19 August 2019, and neither party was entitled to any damages arising from that termination.  

40.	The termination was not unlawful.   The plaintiff did not establish any antecedent breaches of the Agreements.  As the termination was lawful, there was no entitlement to damages.  In any event, the plaintiff’s evidence did not establish any loss which was sustained in that thirty day/ one month’s period as a result of the termination.

41.	The defendant’s evidence was sufficient to establish on the balance of probabilities that it had given materials to the plaintiff, which upon the lawful termination of the Agreements, it was entitled to have returned, but that the defendant had failed to return them. 

42.	I therefore make the following orders:	

	(a)	The plaintiff’s claim is dismissed.
	(b)	 Judgment is entered for the defendant against the plaintiff on the cross-	claim, whereby the plaintiff is to return the items particularized in para 6 of the cross-claim, or pay the sum of K24,500.00 to the defendant.
(c)	The plaintiff is to pay the defendants’ costs on a party/party basis, to be agreed or taxed.
_________________________________________________________________
Niuage Lawyers: Lawyers for the Plaintiff 
Leahy Lewin Lowing Sullivan Lawyers: Lawyers for Defendant