N9231
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS No 612 OF 2018 (CC4)

BETWEEN:
LUCAS MOL
Plaintiff

AND:
MARTIN KOMBRI
Defendant

Waigani: Wurr AJ
2021: 13th & 20th September

CONTRACT- breach of contract- memorandum of agreement- loan agreement- terms of contract in writing- admissions by defendant in Defence- liability entered

DAMAGES- breach of contract- loan agreement- liability entered after trial- assessment of damages- damages under loan agreement- interest- costs  
Cases Cited:
Cheong Supermarket Pty Ltd v Pery Muro [1987] PNGLR 24
Rodao Holdings Ltd v Sogeram Development Corporation Ltd (2007) N5485
Solomaya Finance Ltd v Linda Kuri (2017) N7057
Steven Naki v AGC (Pacific) Ltd (2005) N2782
William Mel v Coleman Pakalia (2005) SC790

Counsel:

A. Kuria, for the Plaintiff
No Appearance, for the Defendant

JUDGMENT
20th September, 2021

1.	WURR AJ: This was a trial on liability and damages. The plaintiff claims from the defendant a total of K100, 000.00 being principal amount plus K50, 000.00 additional as his interest. He also claims interest on the judgment amount plus cost of these proceedings. 

2.	Despite being served with a notice of trial advising of date and time on 03 August 2021 via email, the defendant failed to appear so the plaintiff was granted leave to conduct the trial in the absence of the defendant (see Affidavit of Andrew Kuria sworn and filed 13 September 2021).

EVIDENCE

3.	In support of the claim, the plaintiff relied on the affidavit of Lucas Mol filed 26 October 2020 received and marked as Exhibit P1.

FINDINGS OF FACT

4.	There being no evidence from the defendant, and admissions made in the defendant’s Defence filed 27 June 2018, I make the following findings of fact:
•	On 18 December 2012, the defendant registered his business called Kombri and Associates Lawyers.
•	The defendant needed finance to set up office and operate his own business.
•	On 6 March 2013, both the plaintiff and the defendant entered into a written agreement “Memorandum of Agreement” (the Agreement) whereby the defendant agreed to obtain a K100,000.00 loan from the plaintiff to establish his new business.
•	Pursuant to the Agreement, the plaintiff granted the loan to the defendant in instalments in 2013: K40,000.00 on 10 April, K40, 000.00 on 27 June and K20,000.00 on 20 September.
•	According to the Agreement, the defendant was required to repay the loan commencing August 2013 until completion at end of 2015. However, the defendant has not made any repayment. Notices served on him to pay have not been adhered to. 

ISSUE

5.	There are two issues for my consideration:

a.	Whether or not the defendant is liable for breaching the Agreement 
b.	Whether or not the plaintiff is entitled to damages of K150,000.00

 LAW

6.	In Steven Naki v AGC (Pacific) Ltd (2005) N2782, the Court upon making reference to A G Guest, Chitty on Contracts, 27th Edition, Sweet & Maxwell, 1994, pp 89-90 observed that the essential  elements of a contract  are:
1. agreement between the parties;
2. an intention to create legal relations; and
3. support of the agreement with consideration.

7.	In Steven Naki v AGC (Pacific) Ltd (supra) the Court also observed that the elements of a cause of action in breach of contract are:
1.	there was an enforceable contract between the parties;
2.	the defendant breached the contract; and
3.	the breach of contract caused damage to the plaintiff.

8.	Clauses (1-5) of the Memorandum of Agreement states:

1.	“Lucas Mol shall lend K100,000.00 to Martin Kombri.
2.	Martin Kombri shall accept the K100,000.00.
3.	The repayment will start in August, 2013 and payment shall be made to Lucas Mol at the end of every month thereafter.
4.	Martin Kombri agrees to pay an additional amount of K50,000.00 on top of the principal amount which will bring the total amount paid to Lucas Mol to be K150,000.000.
5.	The monthly payment to Lucas Mol into his nominated bank account will be K6,250.00, which means the repayment period will be for twenty –four  (24) months starting August 2013.”(sic)

9.	In the case of Rodao Holdings Ltd v Sogeram Development Corporation Ltd (2007) N5485, His Honour Justice Cannings after referring to decisions of the Supreme Court and National Court namely Papua New Guinea Banking Corporation v Jeff Tole (2002) SC 694, William Mel v Coleman Pakalia and Others (2005) SC 790 and Coecon Ltd (Receiver/ Manager Appointed) v National Fisheries Authority (2002) N2182,  laid out key principles in relation to the role of the trial judge when assessing damages:
“ 14. ….. The trial judge's role is:
•	to make a cursory inquiry so as to be satisfied that the facts and the cause of action are pleaded with sufficient clarity; and
•	if the facts and cause of action are reasonably clear, liability should be regarded as proven, ie the default judgment resolves all questions of liability in respect of the matters pleaded in the statement of claim;
•	only if the facts or the cause of action pleaded do not make sense or would make an assessment of damages a futile exercise should the judge inquire further and revisit the issue of liability;
•	the plaintiff has the burden of producing admissible and credible evidence of the alleged damages;
•	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.
General principles for assessment of damages

15. Other general principles to apply when the court is assessing damages can be summarised as follows:
•	The plaintiff has the onus of proving his loss on the balance of probabilities. It is not sufficient to make assertions in a statement of claim and then expect the court to award what is claimed. The burden of proving a fact is upon the party alleging it, not the party who denies it. If an allegation forms an essential part of a person's case, that person has the onus of proving the allegation. (Yooken Paklin v The State (2001) N2212, National Court, Jalina J.)
•	Corroboration of a claim is usually required and the corroboration must come from an independent source. (Albert Baine v The State (1995) N1335, National Court, Woods J; Kopung Brothers Business Group v Sakawar Kasieng [1997] PNGLR 331, National Court, Lenalia AJ.)
•	The principles of proof and corroboration apply even when the defendant fails to present any evidence disputing the claim. (Peter Wanis v Fred Sikiot and The State (1995) N1350, National Court, Woods J.)
•	The same principles apply after default judgment is entered and the trial is on assessment of damages – even when the trial is conducted ex parte. A person who obtains a default judgment is not entitled as of right to receive any damages. Injury or damage suffered must still be proved by credible evidence. (Yange Lagan and Others v The State (1995) N1369, National Court, Injia J.)
•	If the evidence and pleadings are confusing, contradictory and inherently suspicious, the plaintiff will not discharge the onus of proving his losses on the balance of probabilities. It is conceivable that such a plaintiff will be awarded nothing. (Obed Lalip and Others v Fred Sikiot and The State (1996) N1457, National Court, Injia J.)
•	Where default judgment is granted, for damages to be assessed on a given set of facts as pleaded in a statement of claim, the evidence must support the facts pleaded. No evidence will be allowed in support of facts that are not pleaded. (MVIT v Tabanto [1995] PNGLR 214, Supreme Court, Kapi DCJ, Hinchliffe J, Sevua J; Waima v MVIT [1992] PNGLR 254, National Court, Woods J; MVIT v Pupune [1993] PNGLR 370, Supreme Court, Kapi DCJ, Jalina J, Doherty J; Tabie Mathias Koim and 28 Others v The State and Others [1998] PNGLR 247, National Court, Injia J.)
•	The court must be alert to vague claims, unsupported by corroborating evidence, as they might be false claims. The court must only uphold genuine claims. (Kolaip Palapi and Others v Sergeant Poko and Others (2001) N2274, National Court, Jalina J.)
Special principles regarding damages for breach of contract
16. When assessing damages for breach of contract special principles apply. These come from the leading common law case on damages for breach of contract, Hadley v Baxendale (1854) 9 Exch 341, the principles of which were explained in the other leading common law case Victoria Laundry v Newman [1949] 2 KB 528. Hadley v Baxendale has been considered in PNG in, for example, Tetley v The Administration (1971) No 647, pre-Independence Supreme Court, Frost SPJ and in the Coecon case. I consider that the principle of Hadley v Baxendale and the Victoria Laundry cases are appropriate to the circumstances of PNG, and therefore can be safely applied as part of the underlying law. The special principles are:
•	The general principle that the purpose of an award of damages is to put the innocent party in the same position, as far as money can do, as if the guilty party had not committed a wrongful act, is qualified substantially when assessing damages for breach of contract.
•	The qualification is that the innocent party only gets the amount of his actual losses that were reasonably foreseeable at the time the contract was formed.
•	What is taken to have been reasonably foreseeable at the time the contract was formed depends on two things: (a) the sort of knowledge that any reasonable person would be expected to have; and (b) knowledge of special circumstances outside the ordinary course of things.”

10.	In the case of Solomaya Finance Ltd v Kuri (2017) N7057, Justice David when assessing damages after default judgment was entered against the defendant for breach of a loan agreement, considered and applied the above principles in the case of Rodao Holdings Ltd v Sogeram Development Corporation Ltd.

WHETHER OR NOT THE DEFENDANT IS LIABLE FOR BREACHING THE MEMORANDUM OF AGREEMENT

11.	On 18 December 2012, the defendant registered his business Kombri & Associate Lawyers. The defendant was in need of finance to establish his new office and carry on his newly established business. The plaintiff was willing to assist the defendant with finance.

12.	On 6 March 2013, both the plaintiff and the defendant entered into an Agreement. The terms were clear and both parties understood and agreed to the terms of the contract. They were:

1.	“Lucas Mol shall lend K100,000.00 to Martin Kombri.
2.	Martin Kombri shall accept the K100,000.00.
3.	The repayment will start in August, 2013 and payment shall be made to Lucas Mol at the end of every month thereafter.
4.	Martin Kombri agrees to pay an additional amount of K50,000.00 on top of the principal amount which will bring the total amount paid to Lucas Mol will be K150,000.000.
5.	The monthly payment to Lucas Mol into his nominated bank account will be K6,250.00, which means the repayment period will be for twenty –four  (24) months starting August 2013.”
13.	Pursuant to the Agreement, the plaintiff paid the loan to the defendant in instalments in 2013: K40,000.00 on 10 April, K40, 000.00 on 27 June and K20,000.00 on 20 September. (Deposit Slips are annexed as C, D and E in Exhibit P1)

14.	These monies were all deposited into an account nominated by the defendant, details are:

Account Name		: Nangen Investment Ltd
Account Number	: 1009393073
Bank 			: BSP

15.	Nangen Investment Ltd is owned by the defendant as he is the sole shareholder and company director of that company as per the company extract in evidence (Annexure F of Exhibit P1). 

16.	I therefore find that consideration was made, that is K100, 000.00 was paid to the defendant through his company.

17.	The defendant failed to commence repayment in August 2013 as agreed in Term 3 of the Agreement. Follow up letters were written to the defendant to repay however to no avail. Terms 4 and 5 were also breached by the defendant.  (See Annexure G of Exhibit P1)

18.	As at the date of filing of the writ of summons and statement of claim until present, the plaintiff submitted that the defendant has not made any repayments. 

19.	Upon perusal of the defendant’s Defence, I note there are admissions in his pleadings. 

20.	The elements of a contract are; that there was an agreement between the parties (offer and acceptance); there was a mutual intention to create legal relations between parties, each with legal capacity; and passage of valuable consideration. I find that all elements were established, and a valid binding contract was in existence. 

21.	I further find that the contract was breached by the defendant because he did not uphold terms 3, 4 and 5 of the Memorandum of Agreement signed on 06 March 2013. 

22.	I accordingly find that he is liable for breaching the contract. 

WHETHER OR NOT THE PLAINTIFF IS ENTITLED TO K150, 000.00 IN DAMAGES 

23.	The plaintiff claims K150, 000.00 in damages in his statement of claim, and has substantiated his claim by producing the written contract between him and the defendant as well as deposit slips proving that K100, 000. 00 was deposited into a company account that belonged to the defendant. 

24.	The defendant agreed to repay K100, 000.00 as principal amount and K50, 000.00 as additional amount over a period of time commencing August 2013 and ending 2015.  However he breached that agreement and I have found him liable.  

25.	In assessing quantum, I have considered the legal principles summarized in the Supreme Court case of William Mel v Coleman Pakalia (2005) SC790 and the National Court decision of Cannings, J in Steven Naki v AGC (Pacific) Ltd (2006) N5015, the most relevant that apply in this case are:
•	The plaintiff has the onus of proving his loss on the balance of probabilities. It is not sufficient to make assertions in a statement of claim and then expect the court to award what is claimed. The burden of proving a fact is upon the party alleging it, not the party who denies it. If an allegation forms an essential part of a person’s case, that person has the onus of proving the allegation. (Yooken Paklin v The State (2001) N2212, National Court, Jalina J.)
•	Corroboration of a claim is usually required and the corroboration must come from an independent source. (Albert Baine v The State (1995) N1335, National Court, Woods J; Kopung Brothers Business Group v Sakawar Kasieng [1997] PNGLR 331, National Court, Lenalia J.)
•	The principles of proof and corroboration apply even when the defendant fails to present any evidence disputing the claim. (Peter Wanis v Fred Sikiot and The State (1995) N1350, National Court, Woods J.)
•	The same principles apply after default judgment is entered and the trial is on assessment of damages – even when the trial is conducted ex parte. A person who obtains a default judgment is not entitled as of right to receive any damages. Injury or damage suffered must still be proved by credible evidence. (Yange Lagan and Others v The State (1995) N1369, National Court, Injia J.)
•	If the evidence and pleadings are confusing, contradictory and inherently suspicious, the plaintiff will not discharge the onus of proving his losses on the balance of probabilities. It is conceivable that such a plaintiff will be awarded nothing. (Obed Lalip and Others v Fred Sikiot and The State (1996) N1457, National Court, Injia
26.	I am satisfied that the plaintiff has discharged the onus of proving his loss on the balance of probabilities. His claim is corroborated by the written contract and deposit slips. 

27.	I have also considered the special principles that apply when regarding damages for breach of contract as held by Justice Cannings in the case of Rodao Holdings Ltd v Sogeram Development Corporation Ltd (supra):

•	The general principle that the purpose of an award of damages is to put the innocent party in the same position, as far as money can do, as if the guilty party had not committed a wrongful act, is qualified substantially when assessing damages for breach of contract.
•	The qualification is that the innocent party only gets the amount of his actual losses that were reasonably foreseeable at the time the contract was formed.
•	What is taken to have been reasonably foreseeable at the time the contract was formed depends on two things: (a) the sort of knowledge that any reasonable person would be expected to have; and (b) knowledge of special circumstances outside the ordinary course of things.”

28.	In the case of Solomaya Finance Ltd v Kuri (2017) N7057, Justice David considered and applied these principles. I will take the same approach and apply these principles in this case as I agree with Justice David that it reflects the correct principles of law to be applied in assessing damages after the entry of default judgments or generally, in a claim for breach of contract. 

29.	I therefore assess damages as per the loan agreement pleaded in the statement of claim, and award K150, 00.00 in damages to the plaintiff. This award puts the plaintiff in the same position he would have been if the contract was fulfilled. K150 ,000.00 is the amount that was reasonably foreseeable at the time the contract was entered into between the parties.  
 
  INTEREST

30.	The plaintiff seeks interest at a rate of 12% annually pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act, from filing of the writ of summons which is 29 May 2018, to the date of judgement.
 
31.	The awarding of interest under the Judicial Proceedings (Interest on Debts and Damages) Act is discretionary: Cheong Supermarket Pty Ltd v Pery Muro (1987) PNGLR 24.

32.	In the exercise of my discretion, I will award interest at the rate of 8% annually on the total amount awarded of K150, 000.00 from the date of filing of the writ of summons on 29 May 2018 to the date of judgment, 20 September 2021, which is a total of 3 years, 3 months and 22 days. 

33.	I assess and award interest at K39, 682. 19. 

  COSTS

34.	Costs will follow the event, that is the defendant shall pay the plaintiff’s costs on a party-party basis, which shall, if not agreed, be taxed.

JUDGMENT

35.	The formal orders of the Court are:

1.	Liability is established against the defendant. 
2.	 The defendant shall pay to the plaintiff damages in the sum of K150,000.00 as per the Memorandum of Agreement dated 06 March 2013, plus interest of K39, 682.19 being a total sum of K189, 682.19.
3.	Defendant shall pay the plaintiff’s costs on a party-party basis, which shall, if not agreed, be taxed.
4.	Time is abridged.

       Judgment and orders accordingly.
__________________________________________________________________
Kuria Lawyers: Lawyer for the Plaintiff
Lawyer for the Defendant, No Appearance