N10812

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO.59 OF 2021

BETWEEN:
LUKE RAMI
Plaintiff

AND:
SAKING ANDREW
Defendant

Lae:  David, J
2023:  10th November

CONTRACT – claim for breach of agreement – essential elements of valid and legally binding contract – agreement not enforceable at law if too uncertain or incomplete – court can resolve uncertainty by reference to other acceptable evidence or subsequent conduct of parties.  

Cases Cited:

Papua New Guinean Cases
Shaw v Commonwealth of Australia [1963] PNGLR 119
Woodward v Woodward [1987] PNGLR 92
Patterson v National Capital District Commission (2001) N2145
Supreme Court Reference No 4 of 1980 [1982] PNGLR 65
Reference by the East Sepik Provincial Executive (2011) SC1154
Galem Falide v Registrar of Titles and The State (2012) N4775
Hargy Oil Palm Ltd v Ewasse Landowners Association Incorporated (2013) N5441
Board of Management, Holy Spirit Primary School v Moses Sariki (2013) N5446

Overseas Cases
Scammel & Nephew Ltd v Ouston (1941) AC 25
Whitlock v Brew (1968) 118 CLR 445

Treatise Cited:
JD Heydon, Cross on Evidence, Butterworths, Fifth Edition, 1996
Stephen Graw, An introduction to the law of contract, Lawbook Co. 2012, Seventh Edition

Counsel:
Simon S. Sengi, for the Plaintiff
Kenneth Aisi, for the Defendant

JUDGMENT

10th November 2023

1.	DAVID, J:   INTRODUCTION: This action, commenced by writ of summons endorsed with a statement of claim filed on 24 February 2021, is about the alleged breach of an agreement entered into between the plaintiff, Luke Rami and the defendant, Saking Andrew to establish and operate a trade store business (the business) at the Umi Market along the Okuk Highway, Markham District, Morobe Province.  It is alleged that in May 2016, the defendant contacted the plaintiff, who at the time was residing at Kimbe, West New Britain Province, by phone and requested to borrow from him some money to assist him start up the business.  The plaintiff agreed and gave the sum of K15,000.00 to the plaintiff.   The plaintiff avers that the terms of the oral agreement between the parties were:

1.	The plaintiff would provide the capital to start the business and the defendant would manage the business as an employee of the plaintiff.
2.	The defendant would provide the building he had secured at the Umi market from the Umi Co-operative Society, the operators of the market.
3.	The defendant would manage the business for a fortnightly/monthly wage at a rate of between K300.00 to K400.00 per fortnight.
4.	A bank account would be opened for the business and both parties would be signatories.
5.	The plaintiff would have the overall control over the operations and finances of the business.
   
2.	The plaintiff also asserts that he gave an undertaking to the defendant that if he properly managed the business and it became profitable, he would transfer forty percent of the shareholding in the business to him.
 
3.	The plaintiff claims against the defendant general damages for loss of earnings in the sum of K717,600.00, general damages for suffering, special damages, interest pursuant to statute and costs. 

4.	 The defendant denies liability.

EVIDENCE

5.	The plaintiff relies on and reads his own affidavit sworn on 20 September 2021 and filed on 4 October 2021 (Exhibit A).

6.	The defendant relies on and reads the following affidavits:

1.	Affidavit of Saking Andrew sworn on 16 February 2022 and filed on 17 February 2022 (Exhibit 1);
2.	Affidavit of James Kiaring sworn on 31 March 2022 and filed on 4 April 2022 (Exhibit 2); and
3.	Affidavit of Lucy James sworn on 11 April 2022 and filed on 12 April 2022 (Exhibit 3).

7.	All affidavits were tendered without objection.

8.	No cross-examination was conducted. 

SUMMARY OF PLAINTIFF’S EVIDENCE

9.	The defendant is his nephew. They are both from Mayamzariang village in the Markham District of Morobe Province.

10.	In May 2016, while he was resident at Kimbe in the West New Britain Province, the defendant verbally requested him to build a trade store, buy the stock and let him operate and manage the business on his behalf.  The defendant agreed to provide the building for the business which he secured through the Umi Co-operative Society.  He was at first a little hesitant to enter into such an arrange due to three past experiences involving similar trade store business arrangement which had all failed and caused him huge loss, but after much discussion and eventual persuasion, he agreed.

11.	He and the defendant agreed that:

1.	Umi market would be the location where the business would be conducted;
2.	he would provide the capital to start the business;
3.	the defendant would manage the business at a fortnightly/monthly wage which would be around K400.00 to K500.00 initially; 
4.	a bank account would be opened for the business and they would both be signatories to the account; and
5.	he would assume overall control over the operation and finances of the business. 

12.	In addition, as the plaintiff was his nephew, he gave an undertaking to him that if he managed the business properly and successfully and it became profitable, he would transfer forty percent of the shareholding in the business to him. 

13.	He then obtained a loan of K20,000.00 from the Bank of South Pacific Limited, Kimbe Branch as capital to start the business which was deposited into his account number 1000063132:  annexure A to plaintiff’s affidavit.  The transaction is described as “Purchase Household Goods.” in the plaintiff’s Savings Account Enquiry, Prior Statement. On 14 October 2016, he transferred K15,000.00 into the defendant’s account number 7004949009 conducted with the Bank South Pacific Limited: annexures B, (plaintiff’s Savings Account Enquiry Prior Statement) and C (deposit butt) to plaintiff’s affidavit.  

14.	He instructed the defendant to go to Lae and use the money to purchase a generator and stock to start the business and the defendant did.

15.	To date, the defendant has banked all earnings of the business into his own personal bank account without his permission.  He has and continues to spend and benefit from the earnings of the business for his own purposes.

16.	During Christmas of 2016, he came to Lae and attempted on several occasions to have both of them open a joint account for the purposes of the business, but the defendant refused to cooperate and implement what they had agreed. 

17.	 In December 2017, he did an audit of the business and noticed serious problems in the handling and use of business finances.  As a result, he directed the defendant to deposit K5,000.00 each week every Monday and that he would keep a record of business finances.   It worked for some time.

18.	From mid-2018 onwards, the defendant started to shut him out from the operations of the business.  He now has no control or say in making any decision regarding the operation and management of the business and its finances.

19.	He continues to service the loan obtained from Bank of South Pacific Limited.

20.	He has suffered loss of capital in the sum of K15,000.00 injected into the business and continues to lose income from the business.

21.	He has suffered anxiety and stress since 2016 which is attributed to the defendant’s conduct of the business. 

SUMMARY OF DEFENDANT’S EVIDENCE
Saking Andrew

22.	The plaintiff is his father’s cousin and therefore his uncle.

23.	In 2015, he saw a business opportunity at Umi market area along Okuk Highway, Umi Atzera LLG, Markham District, Morobe Province so he wanted to start a trade store business.  He called the plaintiff by phone and requested him for some money to assist him start the trade store business.  He did not specify the amount he required.  At the material time, the plaintiff was employed at the Simberi Gold Mine in New Ireland Province, but was resident at Kimbe, West New Britain Province. 

24.	A day later, the plaintiff called him and informed him that he had decided to meet his request and would give him the sum of K15,000.00 which he should repay with interest without specifying the rate at which interest would be calculated or alternatively by a specified amount.   The plaintiff deposited K15,000.00 into his bank account operated at Bank of South Pacific Limited.

25.	No arrangement or agreement was reached between them for the plaintiff to be a partner with him in the business.  The plaintiff was never at any stage a partner of his in the business.  The plaintiff does not have any right to interfere with the business.

26.	There was no agreement to share any profit made by the business.

27.	After one year of operation, he repaid the plaintiff the amount borrowed by the payment of the sum of K25,000.00.  He paid a further K25,000.00 to the plaintiff upon his request later.  

28.	He has registered a business name called Jubillie Trading that bears registration number 6-294519.  It was registered under the Business Names Act with the Office of the Registrar of Companies on 29 March 2021 (Certificate of Registration, annexure A1, defendant’s affidavit).  The date of commencement of carrying on business in the country under the business name is 30 March 2021 (annexure A2, defendant’s affidavit). The owner of the business name called Jubillie Trading shown on the Business Name Extract issued on 30 March 2021 is Saking Elaizah whose principal place of business and residential address is shown as Umi Market, along Okuk Highway, Markham District, Lae, Morobe Province, Papua New Guinea (annexure A2, defendant’s affidavit). 

29.	A Taxpayer Registration Certificate number 038055910 showing Taxpayer Identification Number 500907317 was issued by the Internal Revenue Commission, Lae Tax Office to Saking Philimon Elizah, Sole Trader on 23 August 2017 (annexure A3, defendant’s affidavit).

James Kiaring

30.	He is from Gainarun village, Umi Atzera LLG, Markham District, Morobe Province.

31.	The plaintiff is the defendant’s uncle.  The plaintiff and the defendant’s father Elizah Philemon are first cousins.  

32.	 Sometime during the year in 2015, he recalls he was with the defendant and his wife and children at the defendant’s house at Gainarun.  The defendant called the plaintiff by phone and requested him for money to help him start a trade store business. The phone was on speaker so he heard the plaintiff telling the defendant that he would revert to him the next day on whether or not to give him the assistance sought.

33.	The next day, he and the defendant were at the house when the plaintiff called the defendant. The plaintiff informed him that he would assist him with the sum of K15,000.00 and that amount would be transferred to the defendant’s account, the details of which were given to the plaintiff by the defendant right away.   The defendant never asked the plaintiff for a specific amount to be given to him.

34.	The defendant sought financial assistance from the plaintiff due to their family relationship and the defendant verbally promised to repay the money to the plaintiff with interest.  The defendant does not owe the plaintiff any money as he has already repaid the plaintiff the amount borrowed from him by the payment to him of a total sum of K50,000.00.

35.	The parties never discussed or agreed to the sharing of any percentage of the profit of the business or that the plaintiff and the defendant would be engaged in a partnership. 

Lucy James

36.	She is from Gainarun village, Umi Atzera LLG, Markham District, Morobe Province.

37.	She has been working as a store keeper at the defendant’s business since its inception.

38.	The plaintiff gave the sum of K15,000.00 to the defendant to start the business.  The defendant repaid the plaintiff the amount borrowed when he paid him K50,000.00 which is K35,000.00 more than the amount borrowed.

39.	There was never an agreement between the parties for the plaintiff to be a partner with the defendant in the business.  The plaintiff has never been a partner with the defendant in the business.

40.	The plaintiff started his own trade store business in 2020 at Umi at the same location, but has been unsuccessful and has run it down.

UNDISPUTED FACTS

41.	From the pleadings, admissible evidence and the parties’ submissions, the following facts appear not to be disputed:

1.	At all material times, the plaintiff and the defendant were adults or that no issue has been taken on this fact.
2.	The plaintiff and the defendant are relatives, the plaintiff being the defendant’s uncle because the plaintiff is the defendant’s father’s cousin.
3.	The plaintiff and the defendant are both from Mayamzariang village in the Markham District of Morobe Province.
4.	In May 2016, the defendant verbally requested financial assistance from the plaintiff to start a trade store business.
5.	On 13 October 2016, the plaintiff obtained a personal loan of K20,489.42 from the Bank of South Pacific Limited, Kimbe Branch for a term of three years starting from the date of advance or the money being made available to the payable repayable by fortnightly payments of K418.99. 
6.	On 13 October 2016, the Bank of South Pacific Limited credited the plaintiff’s account number 1000063132 with the sum of K20,000.00 with the transaction described as “Purchase Household Goods” in the plaintiff’s Savings Account Enquiry, Prior Statement. 
7.	On 14 October 2016, the plaintiff gave the defendant the sum of K15,000.00 by depositing the amount in the defendant’s account number 7004949009 operated with the Bank of South Pacific Limited.
8.	The trade store business is conducted at the Umi market along the Okuk Highway, Umi Atzera LLG, Markham District.
9.	In mid-April 2018, the plaintiff requested K25,000.00 from the defendant to purchase a used truck for the business.  The defendant gave the plaintiff the money, but he applied the funds to his own or other use. 
10.	The alleged agreement between the parties is not in writing, but made orally.

DISPUTED FACTS 

42.	From the pleadings, admissible evidence and the parties’ submissions, the following facts appear to be disputed:

1.	The plaintiff and the defendant entered into an oral agreement whereby:

(a)	They would conduct the trade store business as partners;
(b)	The plaintiff would provide the capital to start the business;
(c)	The defendant would manage the business at a fortnightly/monthly wage which would be around K300.00 to K400.00 initially; 
(d)	A bank account would be opened for the business and they would both be signatories to the account; and
(e)	The plaintiff would assume overall control over the operation and finances of the business.

2.	The loan obtained by the plaintiff from the Bank of South Pacific Limited was the start-up capital for the trade store business.

3.	The plaintiff gave an undertaking to the defendant that if he managed the business properly and successfully and it became profitable, he would transfer forty percent of the shareholding in the business to him.

4.	 The defendant does not owe the plaintiff any money as he has already repaid the plaintiff the amount borrowed from him by the payment to him of a total sum of K50,000.00.

ISSUES

43.	The main issues that require my determination are:

1.	Whether there was an agreement between the parties to conduct a trade store business together as partners on terms agreed?
2.	If so, whether the defendant has breached the agreement? 

SUBMISSIONS
Plaintiff

44.	The plaintiff through his lawyer, Mr Sengi submitted that the law applicable to the circumstances of the present case are the common law principles of contract.

45.	He argued that there was a valid contract between the plaintiff and the defendant for the following reasons:

1.	The plaintiff borrowed money from his bank to get the business started upon being satisfied with terms of the agreement proposed; it was a personal sacrifice to borrow and repay it.
2.	The terms of the agreement included:

(a)	The defendant managing the business as an employee on wages to be paid;
(b)	The plaintiff having the overall control of the business.

3.	The plaintiff took a big risk or gamble when he gave away K15,000.00 to a person.
4.	The plaintiff could not have borrowed such an amount of money and give it away without any terms attached.
5.	The plaintiff’s interest was commercial in nature, his giving of the money to the defendant to start the trade store business was an investment he wanted to benefit from including recouping the money lent and earning a dividend.
6.	The plaintiff did not borrow money from the bank to give away such an amount of money to the defendant without being sure of a return on the risks he would take and the burden of repaying the loan with interest he would shoulder.
7.	Without the sum of K15,000.00 the plaintiff gave to the defendant, the business would never have started.

46.	The defendant has acted in breach of the parties’ agreement when:

1.	He registered the business under a business name without the plaintiff’s approval;
2.	He barred the plaintiff from having access to business records and accounts;
3.	He did not allow the plaintiff to be a signatory to bank accounts of the business; and
4.	He claimed total control and ownership of the business to himself.   

47.	The suggestion by the defendant that he has already repaid the plaintiff the sum of K15,000.00 that the defendant gave to him by a payment to the plaintiff of K50,000.00 is not supported by any convincing evidence and must be rejected. 

48.	The evidence by James Kiaring and Lucy James should be disregarded as it is hearsay and inadmissible.  

Defendant

49.	The defendant through Mr. Aisi of counsel submitted that the claim should be dismissed as:

1.	The action ought to have been commenced and prosecuted against the defendant in the business name he had registered to conduct the business under Order 5 Rule 34 of the National Court Rules.
2.	There was convincing and overwhelming evidence from the defendant’s three witnesses that the defendant borrowed money from the plaintiff purely on the basis that he was the defendant’s uncle;
3.	There was no agreement on conducting the trade store business as partners;
4.	There was no agreement on the sharing of business profits;
5.	The only agreement between the parties was that the defendant repay the amount borrowed of K15,0000.00 with some interest, with no rate specified;
6.	The defendant has fully settled the amount borrowed from the plaintiff by the payment of K50,000.00 to the plaintiff which is K35,000.00 more than the amount borrowed and covers the interest component of the amount borrowed.
7.	Otherwise, the claim is vague and ambiguous and therefore insufficient to hold the defendant liable for the alleged breach of agreement. 

CONSIDERATION AND DETERMINATION

50.	Order 5 Rule 34 of the National Court Rules provides that proceedings may be commenced against a person who carries on business under a business name and that business name is not, on the date on which proceedings are commenced, registered.   The business name “Jubillie Trading” was registered on 29 March 2021.  That was after these proceedings were commenced on 24 February 2021.  There is no convincing or credible evidence that the defendant was carrying on business under the business name “Jubillie Trading” which was not, on the date on which the proceedings were commenced, registered.   The action taken by the plaintiff against the defendant is in order.  The defendant’s argument is misconceived and therefore rejected.  

51.	In civil proceedings, the general rule is that he who asserts must prove it  (Shaw v Commonwealth of Australia [1963] PNGLR 119, Supreme Court Reference No 4 of 1980 [1982] PNGLR 65, Reference by the East Sepik Provincial Executive (2011) SC1154, Galem Falide v Registrar of Titles and The State (2012) N4775, Board of Management, Holy Spirit Primary School v Moses Sariki (2013) N5446) and the standard of proof is on the balance of probabilities. Hence, the burden may shift to the party who asserts and who must then prove it:  JD Heydon, Cross on Evidence, Butterworths, Fifth Edition, 1996, paragraphs 7200-7230.

52.	The essential elements of a valid and legally binding contract were stated in Patterson v National Capital District Commission (2001) N2145 and Hargy Oil Palm Ltd v Ewasse Landowners Association Incorporated (2013) N5441 and these are:
	
1.	A clear offer and acceptance;
	2.	An intention to create a legally binding contract;
	3.	Passage of valuable consideration each way; and
4.	Each of the parties has the legal capacity to negotiate and enter into a contract. 

53.	An agreement will not be enforceable at law if it is either too uncertain or incomplete:  Patterson v National Capital District Commission (2001) N2145, Woodward v Woodward (1987) PNGLR 92, Stephen Graw, An introduction to the law of contract, Lawbook Co. 2012, Seventh Edition, 4.190-4.200.  In Stephen Graw, An introduction to the law of contract, Lawbook Co. 2012, Seventh Edition at 4.190, the learned author said:

“Certainty means that the parties must set out their respective obligations – or at least those that they regard as “essential” (see Thorby v Goldberg (1964) 112 CLR 597) – clearly and precisely so the courts can determine exactly what they agreed (and, therefore, what should be enforced).  Completeness means simply that the agreement must contain all of its essential elements – or must specify an agreed means of ascertaining those essential elements – because the courts will not “write the parties’ agreement” for them.”

54.	In Woodward v Woodward (1987) PNGLR 92, the Supreme Court stated:

“Whilst this Court would not disagree with the general rule that if the terms of an agreement are so vague or indefinite that it cannot be ascertained with reasonable certainty what is the intention of the parties there is no contract enforceable at law, if the court can resolve this uncertainty by reference to other acceptable evidence or the subsequent conduct of the parties, it should attempt to find that parties have acted upon and intend an agreement to have legal effect.”

55.	In Scammel & Nephew Ltd v Ouston (1941) AC 25 which is cited in Patterson v National Capital District Commission (2001) N2145, Viscount Simon LC at 254 observed:

“[I]n order to constitute a valid contract the parties must so express themselves that their meaning can be determined with reasonable degree of certainty.  It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intention: in other words the consensus ad idem would be a matter of mere conjecture.” 

56.	In Whitlock v Brew (1968) 118 CLR 445, the dispute was about the sale of a plot of land by Whitlock to Brew.  Clause 5 of their agreement provided that on taking possession, Brew would lease part of the land to Shell “upon such reasonable terms as commonly govern such a lease.”  Brew paid the deposit, but later changed his mind and refused to go through with the contract.  He sued for the return of his deposit on the ground that the agreement was too uncertain and therefore unenforceable.   He said there were no such “common terms” governing leases, the terms of which differed greatly in all aspects.  The court found that the contract was void for uncertainty and Brew could recover his deposit.  The court said the law will not make an agreement for the parties out of terms that are indefinite. That is, there will be no contract unless the exact obligation undertaken can be determined objectively and with a reasonable degree of certainty.

57.	The plaintiff asserts that there was a valid oral agreement between the parties so the onus is on him to prove that all the essential elements of a contract are present in the present case.

58.	In deciding whether there was an agreement between the parties to conduct a trade store business together as partners at Umi Market, I find that the evidence by James Kiaring and Lucy James is hearsay and will be disregarded.  If there were an agreement, the relevant evidence to consider would be that adduced by the plaintiff and the defendant themselves.

59.	The question as to whether each of the parties had legal capacity to negotiate and enter into a contract is not in issue.  That is considered in favour of the plaintiff.

60.	Turning now to the other essential elements of a contract, does the evidence establish on the balance of probabilities that there was; a clear offer and acceptance; an intention to create a legally binding contract; and passage of valuable consideration each way?

61.	The plaintiff’s evidence in essence is that he gave K15,000.00 to the defendant as capital to start the trade store business in a partnership with the defendant, his interest was commercial in nature therefore the presumption that the parties intended to create legal relations and make a contract applied.

62.	The defendant’s evidence in essence is that this was a pure family arrangement with no intention to create legal relations and make a contract.  He requested money from his uncle without specifying the amount to start his trade store business.  His uncle gave him K15,000.00 which he was required to repay with some interest with no rate specified.  There was no agreement for the parties to operate the business together as partners including sharing of profits.  
 
63.	In commercial agreements or agreements that are commercial in nature, the presumption that the parties intended to create legal relations and make a contract may be rebutted in which case the intention of the parties is to be objectively ascertained. The money that the plaintiff borrowed from the Bank of South Pacific Limited was for the purchase of household goods (plaintiff’s Savings Account Enquiry Prior Statement, annexure B, plaintiff’s affidavit). There is no other strong and convincing evidence from the plaintiff stating otherwise.  He gave K15,000.00 to the defendant and retained K5,000.00.   I am persuaded by the defendant that the alleged agreement was purely a family arrangement.

64.	On the evidence before the Court, I am not satisfied that the plaintiff has proven on the balance of probabilities that there was; a clear offer and acceptance; an intention to create a legally binding contract; and passage of valuable consideration each way.

65.	Even if there were an agreement, in my respectful view, it is ineffective because it was not expressed with sufficient certainty. Its vagueness supports the presumption of a lack of intention to create legal relations. 

66.	The defendant admits in his defence and supported by his evidence that he paid K25,000.00 to the plaintiff in mid-April 2018 which was to repay the K15,000.00 he borrowed from the plaintiff.  The defendant also states in his evidence that he paid a further K25,000.00 to the plaintiff later on his request, but that is not supported by the pleadings.

67.	I have found no other acceptable evidence or the subsequent conduct of the parties to demonstrate that the parties have acted upon and intend an agreement to have legal effect.

68.	In the result, I find that there was no agreement between the parties to conduct a trade store business together as partners at Umi Market, Umi Atzera LLG, Markham District, Morobe Province. 

69.	Given this, it is not necessary to address the remaining issue and the parties’ submissions on that.

COSTS

70.	Costs is a discretionary matter.  In the present case, costs shall follow the event, ie, the plaintiff shall pay the defendant’s costs of and incidental to the proceedings, which shall, if not agreed, be taxed. 

ORDERS

71.	The formal orders of the Court are:

1.	These proceedings are dismissed in their entirety.
2.	Costs shall follow the event, ie, the plaintiff shall pay the defendant’s costs of and incidental to the proceedings, which shall, if not agreed, be taxed.
3.	Time is abridged. 
___________________________________________________________________
Simon Sengi & Associates: Lawyers for the Plaintiff	
Kelly Naru Lawyers: Lawyers for the Defendant