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K L Engineering & Constructions (PNG) Ltd v Damansara Forest Products [2002] PNGLR 30 (28 June 2002)

[NATIONAL COURT OF JUSTICE]

K L ENGINEERING & CONSTrUCTIONS (PNG) LIMITED

v

DAMANSARA FOREST PRODUCTS (PNG) LIMITED;
DAMANSARA REALTY BERHAD; and

DAMANSARA PAI LIMITED
WAIGANI: GAVARA-NANU J

14, 16, 25 May 2001; 28 June 2002

CONTRACT – Breach of contract – Damages claimed for breach of contract must flow from the terms of the contract – Such damages must be pleaded.

DAMAGES – Assessment of damages – Duty to prove damages following entry of summary judgement – Entry of summary judgement is no exoneration from the duty to prove damages upon proven facts.

EVIDENCE – Expert witness – Evidence by an expert witness is a matter for the Court's discretion – Court may reject or adopt such evidence depending on its relevance and admissibility.

INTEREST – Interest is a matter for the Court's discretion – Interest at a commercial rate is fair and appropriate where the monetary loss suffered is of great commercial value and where such loss is totally occasioned by the other party.

Facts

The plaintiff, KL Engineering & Construction (PNG) Limited sought damages against the defendants for breach of logging and stevedoring contracts. The defendants filed their defence but their defence was struck out on an application by the plaintiffs pursuant to Order 12 Rule 38 of the National Court Rules. The Court ordered that the assessment of damages should be referred to the Papua New Guinea Commercial Dispute Centre Inc. for mediation. The parties failed to reach agreement and the matter came before the court for assessment of damages.

Held

1. The amount of damages must flow from the terms of the contract under which the plaintiff is making its claim and the plaintiff has the onus of proving its claim on the balance of probabilities: Keith Reid v Murray Hallam & Allcad N1337; Davies Peter Koringo v National Broadcasting Corporation (Unreported Supreme Court Decision, 3rd April 1998) followed.

2. The evidence of expert witnesses based on hearsay must be corroborated by independent admissible evidence: Albert Bain v The State (1995) unreported N1335 cited.

3. The Court is at liberty to apply figures which in its opinion were reasonable to arrive as the amount to be awarded in damages to the plaintiff: Kopung Brothers Business Group v Sakawar Kasieng & The State N1631; Albert Bain v The State (supra); Anton John Pinzger v Bougainville Copper Limited [1983] PNGLR 436 applied.

4. Ethical conduct: It is highly improper for Counsel to get documents to the Court without the knowledge of the other side and clearly contrary to the Professional Conduct Rules and is unethical.

5. The rate of interest provided for in Order 12 Rule 6 of the National Court Rules is only to regulate the process and does not fetter the discretion of the Court. The principle and purpose behind awarding interest is to compensate the wronged party because the wrongdoer has wrongfully withheld the money from the wronged party: Alotau Enterprises Pty Ltd v Allen Enterprises Pty Ltd and Zurich Pacific Insurance Corporation (1999) unreported N1969; Embada Limited Trading as Tribal Plumbers Tropical Habitat Limited N2067; John Cybula v Nings Agencies Pty Ltd [1981] PNGLR 129 noted. Aspinall v Government of PNG (No.2) [1980] PNGLR 50; Anton Johan Pinzger v Bougainville Copper Limited (supra); Bennett v Jones & Another [1977 2 NSWLR 355 followed.

Papua New Guinea cases cited

Albert Bain v The State (1995) unreported N1335.

Alotau Enterprises Pty Ltd v Allen Enterprises Pty Ltd and Zurich Pacific Insurance Corporation (1999) unreported N1969.

Anton John Pinzger v Bougainville Copper Limited [1983] PNGLR 436.

Aspinall v Government of PNG (No. 2) [1980] PNGLR 50.

Davies Peter Koringo v National Broadcasting Corporation (1998) unreported Supreme Court Decision, 3rd April, 1998.

Embada Limited Trading as Tribal Plumbers v Tropical Habitat Limited (2001) unreported N2067.

John Cybula v Nings Agencies Pty Ltd [1981] PNGLR 129.

Keith Reid v Murray Hallam & Allcad Ltd (1995) unreported N1337.

Kopung Brothers Business Group v Sakawar Kasieng & The State [1997] PNGLR 331.

Other cases cited

Australian Consolidated Press v Duscoll [1988] Aust. Torts Reports 80-175.

Bennett v Jones & Another [1977] 2 NSWLR 355.

Counsel

P Mills, for the plaintiff.
I Shepherds, for the second defendant.
K Frank, for the Liquidator of the first defendant.

28 June 2002

Gavara-Nanu J. The plaintiff is claiming damages against the defendants for breaches of logging and stevedoring contracts.

The writs were issued on 23 April 1999. The second and third defendants have been joined as the nominees and/or agents of the first defendant which is the principal party to the contracts.

The defendants filed their defences against both claims, but they were struck out by the Court on 3 December 1999, upon application by the plaintiff made on 29 November 1999, pursuant to Order 12 r 38 of the National Court Rules. The judgement was therefore entered for the plaintiff for assessment of damages.

When striking out the defences, the Court ordered that the assessment of damages be referred to the Papua New Guinea Commercial Dispute Center Inc. for mediation, but in the event that the parties were unable to resolve the issue of damages through mediation, the issue was to be determined by the Court.

The matter came before me on 14 May 2001, after the parties failed to resolve the issue of damages through mediation before the Papua New Guinea Commercial Dispute Center Inc.

At the start of the trial, the second defendant made a preliminary application that it be excluded from the proceedings on the basis that it had no obligation to the plaintiff in respect of the damages arising from the breaches of the two contracts by reason of the doctrine of privity to the contract. I ruled against the application. (See my unnumbered judgement on that application which was given on 22 May 2001). In principle, I ruled that the second defendant was an agent of the first defendant and thus was privy to the contracts and was therefore bound by the terms of the two contracts..

The plaintiff called four witnesses for the trial of the assessment of its damages. The first two were former officers of the plaintiff namely, Mr. Henry Lee, who was a Director, and Mr. Edward Lee Kim, who was the Operations Manager. The other two were expert witnesses, namely, Mr. Simon Fraser, who was the Director of Corporate Finance and Recovery Division in Price Waterhouse Coopers and Mr. Alama Oti, an architect on design and buildings.

The defendants did not call any witnesses they only made submissions on the evidence that was before the Court.

Types of claims under the two contracts

Under the logging contract, the plaintiff claims for the following:

i. Costs of repatriating expatriate employees from the Permit Area and demobilisation of the logging equipment at an estimated cost of K 350,000.00. This claim is for permanent cessation of operations under clause 13A.

ii. Loss of profit for 48 months from 20 May 1998 at 8,000 cubic meters per month at US $7.25 per cubic meter at the total cost of US $2,784,000.00. The claim is made pursuant to clause 18. The formulae used is, 48 months x 8,000 cms x US $7.25, which equals the amount claimed of US $ 2,784,000.00.

iii. Alternatively, K368,475.00 for the cost of the base camp. This claim is made pursuant to clause 12.4. It is based on costs incurred in setting up the base camp or at the cost the base camp was taken over by the defendant, subject to a depreciated value of 10 % per annum after the first year.

iv. Interest and costs.

Under the stevedoring contract, the plaintiff claims for the following:-

i. Costs of repatriating expatriate employees from the Permit Area and demobilisation of the stevedoring equipment at the cost of K232,000.00.

ii. Loss of profit for 2.5 years from 20 May 1998, at 70,000 cubic meters per annum, estimated at US $ 3.50 per cubic meter and at the total cost of US $ 612,500.00. This claim is made pursuant to clause 22. The formula used is 2.5 years x 70,000 cm x US $ 3.50, which equals the amount claimed of US $ 612,500.00.

iii. Alternatively, K291,213.33 for the cost of stevedoring facilities at the base camp. This claim is made pursuant to clause 8.3. The facilities include buildings and other necessary facilities to facilitate the stevedoring operations. Under clause 8.3, the defendants are obliged to compensate the plaintiff for such losses.

iv. Interest and costs.

Factual Background

The parties entered into the logging agreement on 27 January 1997 for the plaintiff to carry out logging operations within the Permit Area, near Aitape, West Sepik Province. The area is described as Appendix 'AA' to the logging contract. The term of the agreement was for five (5) years (Clause 5). The plaintiff carried out logging operations in the area pursuant to the contract until 20 April 1998, when the defendants by a letter dated the same date, notified the plaintiff to cease operations within 30 days from the date of the letter.

The plaintiff accepted the repudiation of the contract by the defendants and ceased logging operations.

In respect of the stevedoring contract, the parties entered into the agreement on 8 October 1996, for the plaintiff to carry out stevedoring operations near Aitape. The term of the agreement was for three (3) years (Clause 5). Pursuant to that agreement, the plaintiff carried out stevedoring operations until 20 April 1998, when the defendant's repudiated the contract by the letter referred to above. The plaintiff accepted the repudiation of the contract by the defendants and ceased stevedoring operations.

General Comments

All the issues relating to liability were decided when the Court found that the defendants had no defences to the plaintiff's claims and entered summary judgement in favour of the plaintiff, for damages to be assessed. My task here is to decide the amount of damages for the plaintiff. Such damages must of course flow from the terms of the two contracts under which the plaintiff is making its claims. The plaintiff has the onus to prove its claims on the balance of probabilities. See Keith Reid v Murray Hallam & Allcad Ltd – N1337. See also Davies Peter Koringo v National Broadcasting Corporation – (Unreported Supreme Court decision, 3rd April, 1998).

A lot of documents have been tendered in evidence by the plaintiff in support of its claims. However, the authors of most of these documents have not been called to give evidence to verify the documents and their contents. The documents have been accepted by the Court because no objections were raised by the defendants. But as to what weight, if any, the Court can or should give to these documents is still a matter for the Court's discretion. Most, if not, all of these documents were tendered through Mr. Henry Lee and Mr. Edward Lee Kim. The reports prepared by the two expert witnesses will also be treated the same. The only difference between the reports by the two expert witnesses and the other documents is that the reports were prepared by the two expert witnesses who gave evidence; however, the reports were prepared on the basis of the information given to them by the plaintiff. Therefore, again, as to what weight the Court can or should give to them is a matter for the Court's discretion.

Claims under the Logging Contract

The first claim under the logging contract is for the costs of the repatriation of the expatriate employees and for the demobilisation of the logging equipment. The amount claimed is K 350,000.00. This claim is based on clause 13A of the logging contract.

The claim therefore is determined in two parts.

The first part is in respect of the costs for the repatriation of the expatriate employees from the Permit Area and the second part is in respect of the costs of the demobilisation of the logging equipment.

As to the first part of the claim, the evidence given by Mr. Edward Lee Kim shows that there were thirty expatriate staff made up of six mechanics, four supervisors, two chefs, one camp manager, one assistant manager, one spare parts keeper, one trade store manager, ten bull dozer operators, two chain saw mechanics and two chain saw operators. Mr. Kim himself is not among these thirty expatriate staff.

Under cross examination by Mr. Ian Shepherd, Mr. Kim said he did not have a work permit from the Department of Labour but said that, he would do so later. According to Mr. Kim, all the expatriate employees were either from Malaysia or Philippines and were earning an average salary of K 5,000.00 per month. The plaintiff was not able to produce the records of the salaries of the thirty expatriate employees because they were missing.

Mr. Kim did not know whether these employees had work permits from the Department of Labour.

Clauses 19.3 and 20 of the logging agreement are relevant in deciding this issue. Clause 19.3 provides that the plaintiff had to maintain correct and sufficient accounting systems, financial accounts and records and clause 20 provides that the plaintiff was to employ citizens of the State in all its activities, including all ancillary and related activities except where employment of non citizens was approved by the Department of Labour and Employment and the employment preferences were that, the villagers in the Permit Area were to be given first priority, then the people from the Province, then other Papua New Guineans and lastly, the foreigners. Both clauses are in mandatory terms by virtue of the word 'shall'; therefore, it was incumbent on the plaintiff to comply strictly with these requirements. These are all relevant considerations for this part of the claim.

The contract made the approval by the Department of Labour for the employment of non-citizens as a condition precedent to their employment. There is no evidence from the plaintiff that the thirty non citizen employees were approved by the Department of Labour.

The second leg of the claim is for the costs of the demobilisation of the logging equipment from the Permit Area. The plaintiff has not produced any direct and independent evidence on the types of equipment which were demobilised. I must, therefore, turn to some sources in order to best determine this issue. To do that, I propose to use the list of assets or equipment provided in Appendixes B (1) to B (3) to the logging contract as the guide. This to me is the best source of information on the types of equipment which have been demobilised (in the absence of any direct independent evidence of such equipment).

In the Statement of Claim, the plaintiff claims estimated cost of K350,000.00. This amount, of course, is much less than the amount of K540,000.00 the plaintiff has submitted as its total repatriation costs for the thirty expatriate employees.

For the cost of demobilisation of equipment alone, the plaintiff has put the figure at K61,500.00, see Exhibit 8. This document was tendered through Mr. Lee, but he did not prepare this document, so he was not able to explain how this figure was reached. The figure is therefore by no means conclusive but I propose to use it as a guide together with Appendixes B(1) to B(3) to the logging contract in determining the cost of the demobilisation of the logging equipment.

I will reverse the order and first determine the second part of the claim, which is in respect of the cost of the demobilisation of the logging equipment, by using the list of equipment in the Appendixes B (1) to B (3) to the logging contract and the amount of K 61,500.00 given in Exhibit 8, because, then it is easier to determine the first part of the claim regarding the cost of the repatriation of the thirty expatriate employees.

For the second part of the claim, it can be seen from the list of the equipment provided in Appendixes B (1) to B (3) to the logging contract that some of the equipment are very heavy machinery. I consider the amount of K61,500.00 given by the plaintiff in Exhibit 8 to be reasonable and appropriate for the demobilisation of such equipment and therefore adopt it. The plaintiff is therefore entitled to K61,500.00 as its costs for the demobilisation of the logging equipment.

The balance from the principle amount of K350,000.00 after deducting K61,500.00 for the cost of demobilisation of logging equipment is K288,500.00. Is this amount reasonable for the first part of the claim, namely, for the cost of the repatriation of the thirty expatriate employees?

The plaintiff has also claimed a number of different amounts for this part of the claim. For instance, in its written submission, it claimed K600,000.00, but this figure is made up of K540,000.00 for the thirty expatriate employees and K40,000.00 for the forty national staff and K20,000.00 for forty nationals, non repatriated. But these and other amounts, such as the amount of K503,730.45 in Exhibit 9 for the cost of the repatriation of the expatriate employees are outside the amount pleaded in the Statement of Claim. I will therefore reject them.

The plaintiff can only claim the amount pleaded in the Statement of Claim, which is K350,000.00, which includes the costs of the demobilisation of equipment.

The plaintiff has, through its lawyer, conceded that the cost of demobilisation cannot be verified, but using Appendixes B1 to B3 to the logging contract and Exhibit 8 as guide, I have awarded K61,500.00 for the cost of the demobilisation of the logging equipment, leaving the balance at K288,500.00 from the K350,000.00 claimed.

Taking into account all the factors discussed above, I consider K288,500.00 to be reasonable for the costs of the repatriation of the thirty expatriate employees. The plaintiff is therefore entitled to K288,500.00 as its costs for the repatriation of the thirty expatriate employees.

The plaintiff is therefore entitled to K350,000.00 as claimed. It may be possible that some, if not all, of the thirty expatriate employees did not have work permits from the Department of Labour and Employment; in which case, they have been employed illegally by the plaintiff. But, in this regard, I note three things, first is that the defendants never raised this issue with the plaintiff when the contract was current. The defendants are therefore deemed to have acquiesced any such illegal conduct by the plaintiff. Secondly, the defendants have not pleaded the issue, in their defences. This of course is of no consequence because the defences have been struck out. Thirdly, the defendants carry the onus to prove any such illegality as the party asserting it, that I understand is the law, but they did not discharge that onus at all at the trial. I must therefore regard the thirty expatriate employees as having been legally employed.

The second claim under the logging contract is for the loss of profit for 48 months from 20th May, 1998, at 8,000 cubic meters per month at US $7.25 per cubic meter. The total amount claimed is US $2,784,000.00. This claim is based on clause 18. The clause relates to 'minimum production' and under sub-clause 18.1, the plaintiff undertook to fell and extract from the Permit Area, a minimum quantity of 8,000 cubic meters of merchantable timber logs per month. Under sub-clauses 18.2 and 18.3, the plaintiff had to compensate the defendants for any short falls below the required quantity of timber logs at the rate of US $2.00 per cubic meter of short fall and sub-clause 18.4 provides that the plaintiff was not obliged to pay such compensation if the short fall was as the result of the insufficient timber in the Permit Area or due to other circumstances beyond the control of the plaintiff.

It is clear that this clause was incorporated for the benefit and the protection of the defendants, not for the plaintiff. Therefore, had the plaintiff defaulted or repudiated the contract, the defendants; would have a claim under this clause but the default here is by the defendants; therefore, they cannot claim under it. The defendants have lost any right to claim under this clause. The plaintiff also cannot claim under this clause because it is there for the benefit of the defendants. This claim is therefore dismissed.

As its third claim under the logging contract, the plaintiff claims the amount of K 368,475.00 for the cost of the base camp. This is the same amount given in Exhibit 6, which is the 'Computation for the logging project'. This claim is made pursuant clause 12.4 of the logging agreement. The clause provides that, the plaintiff was responsible for either acquiring or constructing the base camp at its own costs or, where appropriate, to take over the existing base camp at a mutually agreed price and, in the event that the logging operations ceased prior to the expiry of the term of the agreement, and that such termination was due solely to the fault of defendants, the defendants were to compensate the plaintiff for the cost of the base camp either at the cost of setting it up or the price at which it was taken over, but subject to 10 % depreciated value per annum effective after the first year.

Again, it is not clear as to how this amount is claimed as there is no direct and independent evidence to support the claim. In the circumstances, I will use Appendixes B (4) and B (5) to the logging contract as a guide in determining this issue. The Appendixes give descriptions of the base camp buildings and other installations, which are clearly of substantiate value. Based on this, I find that the claim of K368,475.00 is justified. I will therefore allow this amount subject to 10 % yearly depreciation value from after the first year. Thus for depreciation, it has to be calculated after 27 January 1998, because the contract was executed on 27 January 1997. I will therefore allow deprecation at 10 % per annum for the period from 28 January 1998 to 20 April 1998, the date of the breach. I have calculated the amount of depreciation for this period at K8,564.06.

The plaintiff is therefore entitled to claim K368,475.00 less K8,564.06, which is K359,910.94.

I reject the amount suggested by plaintiff's expert witness, Mr. Alama Oti, because Mr. Oti's figure is based on hearsay evidence. According to him, he did not visit the camp to see the base camp to compile his figures, which means, if I accepted his figures, any amount of damages awarded will not be based on the actual figures. I therefore cannot use Mr. Oti's figures.

The total amount the plaintiff is entitled to claim under the logging contract therefore is K709,910.94. (K350,000.00 + K359,910.94)

Claims of damages under the Stevedoring Contract

Under the stevedoring contract, the plaintiff's first claim is for K232,000.00 for the costs of the repatriation of the expatriate employees and the demobilisation of the stevedoring equipment.

In Exhibit 8, the figure given for repatriation costs is K187,120.22. But that is for both expatriate and national employees. This is confirmed by Exhibit 10, which gives the cost of repatriating expatriate employees at only K163,768.73 and the cost of repatriating the national workers at K23,351.50. The total amount being K 187,120.23, (Exhibit 10). But there is no provision for the repatriation of the national employees under the contract, so the plaintiff cannot claim for it.

As noted, these figures are speculative, but I cannot dismiss the claim completely because the plaintiff did have expatriate employees working on the stevedoring project who naturally had to be repatriated to their ports of origin, and that is the reason why the contract provides for the repatriation costs. The plaintiff is therefore entitled to claim some costs.

Again, in the absence of any direct evidence to assist me in determining this issue, I propose to use the amount awarded to the plaintiff under the logging contract for the thirty expatriate employees as the best guide in determining this issue. The amount awarded for the cost of repatriating thirty expatriate employees under the logging contract is K288,500.00, this works out at K9,616.67 per employee. I will apply this figure for the expatriate employees at the stevedoring project. There were 9 expatriate workers and, at K9,616.67 each, it would cost K86,550.03 to repatriate all the expatriate employees. I will award this amount to the plaintiff as the cost of repatriating the nine expatriate employees. As to the demobilisation of the stevedoring equipment, I will adopt the figure given in Exhibit 8, which is K45,000.00. There is no other source from which I can be further assisted in determining this issue. Unlike the logging contract, the stevedoring contract does not indicate the kinds of equipment that would have been demobilised. I have therefore opted to adopt K45,000.00 as the appropriate figure for the demobilisation of the stevedoring equipment (the figure proposed by the plaintiff in Exhibit 8). Therefore the total amount, the plaintiff is entitled to claim is K131,550.03. (K86,550.03 + K45,000.00)

The second claim under the stevedoring contract is for US $612,500.00 for the loss of profit for 2 ½ years from 20 May 1998, at 70,000 cm per annum at K3.50 per cubic meter; the claim is made pursuant to clauses 22.1 and 22.3 of the stevedoring contract. The amount is calculated at 70,000 cms x 2.5 years x US $3.50.

Under clause 22.1 of the stevedoring contract, the defendants undertook and guaranteed the plaintiff that, as of the commencement date and during the currency of the agreement, the plaintiff would handle a quantity of no less than 70,000 cm of timber (guaranteed quantity) per working year. Clause 21.2 provides that the 'working year' is to be determined on the basis of twelve months from 'the commencement date'. Under clause 1.2 (c), 'the commencement date' is 1 August 1996. The term of the agreement was three (3) years from 'the commencement date'. This means that the term of the agreement would have expired on 1 August 1999.

The plaintiff's claim arose from the defendant's breach of the contract by the letter dated 20 April 1998, which repudiated the contract because of the defendant's claim that they could not secure the Timber Authority License, but, as it is established clearly by the affidavit of Mr. Henry Lee, sworn on 10 November 1999, the defendants had the Timber Authority Lease at all material times.

The defendants have argued that clause 22.3 cannot be enforced since it is a penalty clause and the amount of US $3.50 per cubic meter given in the clause for every cubic meter of short fall is incapable of accurate assessment of loss by reference to work done, man power, time and so on.

But clause 22.3, in my opinion, cannot be read in isolation from clauses 22.1 and 22.2. It has to be read together with these clauses. In my opinion, the short fall referred to in clause 22.3 relates to any short fall from the guaranteed 70,000 cms per year, and the short fall would also relate to the quantity of timber the plaintiff would have handled had the contract not been terminated by the defendants.

The plaintiff is therefore in my opinion entitled to claim under Clause 22, in accordance with the particulars stipulated in clauses 22.1, 22.2 and 22.3.

The agreement was for three years from 1 August 1996, and thus would have been terminable on 1 August 1999. The plaintiff's claim is for the period from 20 May 1998. The remaining period of the agreement was therefore from 20 May 1998 to 1 August 1999. This is a period of 1 year, 2 months, 1 week and 3 days.

The amount of short fall for the period therefore is:-

1. 1 year = 70,000 cms of short fall
2 months = 70,000 cms -:- 12 months x 2 = 11,666.666 cms of short fall
1 week = 70,000 cms -:- 12 -:- 4 = 1,458.3333 cms of short fall
3 days = 70,000 cms -:- 12 -:- 4 -:- 7 x 3 = 624.99996 cms of short fall
The total short fall is 83,749.998 cms x US $3.50 = US $ 293,124.99

The plaintiff is therefore entitled to claim US $ 293,124.99 from the defendants. The appropriate conversion rate in Kina at that time according to Exhibit 18 is 0.5913. So, for US $293,124.99, the plaintiff is entitled to claim

K 495,729.73, (US $ 293,124.99 -:- 0.5913). The defendants will therefore pay K 495,729.73 to the plaintiff under this claim.

The plaintiff's last claim under the stevedoring contract is for the cost of the base camp at K 291,213.83. The claim is made pursuant to clause 8.3 of the contract. This clause provides that the plaintiff was to construct the base camp and other necessary buildings and facilities at its own cost. The amount claimed appears in Exhibit 8. The amount is subject to a flat rate of 14 % depreciation per year from 1 August 1996.

No other evidence was produced by the plaintiff to substantiate the amount claimed. One source of material for this claim is from Mr. Alama Oti's evidence, but I have rejected his evidence. The Court is therefore again left to speculate on the cost of the base camp.

The only source of material on which the claim is based is Exhibit 8. This document has the heading 'Claim computation for stevedoring project'. The amount of K291,213.83 is given in this Exhibit for 'Infrastructure Expenditure'. The document has no date and the source or the author of the document is unknown. It is also unsigned. It nevertheless is in evidence as it was not objected to by the defendants. I therefore propose to use it as a guide. One thing to note about the amount claimed is that it is before the value of depreciation.

Exhibit 8 stands alone as the only source of information for this claim. This is different to the claim for the cost of the base camp under the logging contract because the logging contract included and showed the assets for the base camp. Therefore, with no other independent evidence to support it, the amount claimed is highly speculative.

I will calculate the depreciation up to 20 April 1998, which is the date of the breach. Therefore, depreciation for 12 months from 1 August 1996 to 31 July 1997 is K40,769.94. The depreciation amount for the period from 1 August 1997 to 20 April 1998, is K25,296.00. The total amount for depreciation is K66,065.94.

So the amount remaining after deducting the total depreciation amount, which is K66,065.94, from K291,213.83 is K225,147.89

As noted, the plaintiff has not produced any evidence in support of the K291,213.83 claimed; the figure is speculative. I will therefore reduce K225,147.89 by a third, which leaves the balance at K150,098.59. I will award this amount to the plaintiff. The defendants will therefore pay K150,098.59 to the plaintiff for the costs of the stevedoring base camp.

Summary of claims under both contracts

Under the logging contract, the defendants will pay the following amounts to the plaintiff:

1. K350,000.00 for the repatriation costs of the expatriate employees and the demobilisation of the logging employment.

2. K359.910.94 for the cost of the logging base camp.

The total amount to be paid by the defendants to the plaintiff under the logging agreement is K709,910.94.

Under the stevedoring contract, the defendants will pay the following amounts to the plaintiff:

1. K131,550.03 for the repatriation of the expatriate employees and the demobilisation of the stevedoring equipment.

2. K495,729.73 for loss of profit from 20 May 1998 to 1 August 1999.

3. K150,098.59 for the cost of stevedoring base camp.

The total amount to be paid by the defendants to the plaintiff under the stevedoring contract is K777,378.35.

The total amount to be paid to the plaintiff by the defendants is K1,487,289.20. (K709,910.94 + K777,378.35).

The plaintiff has, through its counsel, in its submissions, claimed an amount in excess of K12m, but that amount is based on unsubstantiated figures which were taken from the documents which have not been verified, which the Court, therefore, in its discretion, had to either reject totally or to use as guides or adopt.

The plaintiff's claim of K12m, was in my opinion, highly inflated by facts and figures which were unsubstantiated. With such speculative and unsubstantiated figures, there is no way the plaintiff could prove its claim of such magnitude. The plaintiff not only had the onus to prove the amount it claimed but the facts upon which the claim was based. It has not discharged that onus.

Further more, the plaintiff has totally departed from the matters it pleaded to arrive at such an exorbitant amount.

I have rejected the report prepared by Mr. Alama Oti, an expert witness, because his assessment of the costs of the base camp was based on hearsay evidence, he did not personally visit the base camp to obtain first hand information to compile his assessment report. As to the reports submitted by Mr Fraser, again, these reports were based on figures or information given to him by the plaintiff, and that information was mostly, if not all, based also on the figures in the documents which have not been substantiated and verified. The reports were therefore based on assumptions. The evidence by these two witnesses were the basis of this claim.

There cannot be a judgement for the plaintiff based on unproved facts. The plaintiff still had to prove the damages it claims. It is by no means exonerated from that duty by the fact that a summary judgement was given in its favour.

The evidence by the two expert witnesses are subject to the Court's discretion and I have considered the evidence by Mr. Fraser and I am convinced that his projections are far too remote from the amount of damages which would flow from the two contracts. I have therefore placed little weight, if any, on them.

In Albert Bain v The State (1995) unreported N1335, Woods J. said:

"The Court must demand more corroboration of such a value and cannot go merely on the talk of the plaintiff. By analogy if a car is damaged in an accident a court requires an appropriate valuation from a reputable car dealer, if a house in town is destroyed it is usually assessed by an insurance assessor. Whilst I am not expecting an insurance assessor to assess village raid destruction, the Court must have some independent evidence to support estimates of values, such as a coronial inquiry, evidence from people in authority like District Officers who knew the area and who were called to visit the sight immediately after an accident" (my emphasis).

In this case, the figures given in the documents tendered in Court, need to be corroborated by independent admissible evidence. In the absence of such evidence, there were serious gaps in the plaintiff's case.

In the circumstances of this case, the Court had to do the best it could by adopting an educated approach in applying figures which in its opinion were reasonable to arrive at the amount awarded in damages to the plaintiff. This approach has been adopted in other cases, for instance in cases involving claims made for the destruction caused by police raids, see Kopung Brothers Business Group v Sakawar Kasieng & The State [1997] PNGLR 331 and Albert Bain v The State (supra), see also Anton John Pinzger v Bougainville Copper Limited (supra).

There is one thing, I must comment on. The Court was left to speculate on the costs of the demobilisation of the logging equipment from the Permit Area because Appendix 'AA' to the logging contract, which was the map of the Permit Area in which the logging operations were supposedly carried out, was never produced to Court when the logging contract was tendered as evidence. The logging contract was tendered without this Appendix 'AA' attached to it.

In the course of writing the judgement, it was discovered that most pages in the logging and stevedoring contracts were not readable because, there were heavy ink blottings over various clauses in the two contracts. This prompted me to request for better and clear copies of the two contracts from the plaintiff's lawyers. That was made known to the defendants. They had no objections to it. When forwarding the clear copies of the contracts, the plaintiff's lawyers also forwarded a map which I took to be the Appendix 'AA' to the logging contract which the lawyers said was forwarded for purposes of "completeness", obviously because it was not tendered during the trial as part of the logging contract. I have not considered that map when writing this judgement because as I said, it was not tendered in court and the other parties have not had the benefit of seeing it. Indeed, Mr. Shepherd of counsel for the defendants, made reference to that omission by the plaintiff in his submission. It was highly improper for the plaintiff's counsel to try and get the documents to the Court without the knowledge of the other side. Such conduct is clearly contrary to the Lawyers Professional Conduct Rules and it is unethical. The lawyers must not resort to such conduct.

Interest

The plaintiff claims interest on the principal amount awarded for damages. It claims a commercial rate of 15.29% which was the average rate for the period from 12 December 1996 to 11 May 2001. Alternatively, it claims 13.5 %, which is the rate adopted by this Court in the case of Alotau Enterprises Pty Ltd v Allen Enterprises Pty Ltd and Zurich Pacific Insurance Corporation unreported (1999) N1969.

I have said in the case of Embda Limited Trading as Tribal Plumbers v Tropical Habitat Limited (2001) N2067 that interest is a discretionary matter for the Courts.

Section 1 of the Judicial Proceedings (Interest on Debts and Damages) Act, 1962, makes that clear by virtue of the word 'may' in the provision. But when considering whether to order interest, the Courts must do so judicially and be guided by proper principles in the light of the circumstances of the case; see John Cybula v Nings Agencies Pty Ltd [1981] PNGLR 129 at p.122.

The rate normally applied by the courts is 8 %, which is the rate provided under Order 12 r 6 of the National Court Rules, but that Rule is only to regulate the process; it does not fetter the discretion of the Court.

The principle and the purpose behind awarding interest is to compensate the wronged party because the wrongdoer has wrongfully withheld the money from the wronged party, see Aspinall v Government of PNG (No. 2) [1980] PNGLR 50, see also Anton Johan Pinzger v Bougainville Copper Limited [1983] PNGLR 436. At p. 445. The Court must strive to ensure that justice would be done to the aggrieved party, in determining the issue of interest; see Australian Consolidated Press v Duscoll [1988] Aust. Torts Reports 80-175 at p. 64,646.

In this case, the damages suffered by the plaintiff were totally occasioned by the defendants by claiming that they did not have the Timber Authority License when they did. The defendants used that claim as the reason for terminating the contracts. This denial was proved wrong as shown by Mr. Lee's affidavit which was sworn on 10 November 1999. The plaintiff has suffered monetary loss, while the defendants have benefited from the plaintiff's loss. The dealings between the plaintiff and the defendants under the two contracts were commercial, one to do with logging and the other with stevedoring. The plaintiff obviously invested a lot, in terms of finance, man power and equipment, as these were large operations. It was therefore a big commercial loss for the plaintiff. The interest I award must therefore fairly compensate the plaintiff for such loss. In the circumstances of the case, interest at a commercial rate is my opinion justified. I am therefore prepared to award interest at a commercial rate, but in so doing, I must be guided by proper principles and considerations. I would normally award 8 %, which is the rate commonly applied by the Courts. But I think, this case justifies a higher rate than 8 %. In considering interest, I find assistance in the observations made by Moffit P. in Bennett v Jones & Another [1977] 2 NSWLR 355 at page 369, helpful:

"The discretion must be exercised judicially and for reason stated. Where a wrong doer has failed to pay money which he should have paid, justice, in principle, requires that he should pay interest over the period for which he has held the money. But other considerations may enter into it. In a commercial setting, it would be proper to take account of the manner in which and the time at which persons acting honestly and reasonably would pay....

To provide by statute a power, unrestricted in terms, to make an award in the nature of interest, and to make the subject of the power a verdict for any debt or a verdict for any damages, so that it is left to the Court, acting judicially, to do that which is fair between the parties, must admit of different considerations according to the subject matter of the verdict.Thus to award interest in a commercial situation, whether in respect of damages in relation to industrial property or in respect of a debt, it is proper to have regard to commercial practices, and that which is fair in a commercial situation." (my emphasis).

Then at page 370, his Honour said:

"I see no reason why the simple fact that a defendant does not have to pay money when his liability arises, and has the benefit of non payment for a period, should not provide a basis to make a discretionary order for payment of interest for the whole period. One has the money, and the other not. If it is not a commercial setting the gain and the loss may not be measured by a commercial rate of interest." (my emphasis).

In the circumstances of this case, I consider interest at 12.5 % per annum as the appropriate and a fair rate to award, which I now do. This rate, in my opinion, is also fair because of the substantial decrease in the value of the Kina in the period for which the interest is awarded.

The interest will be calculated from the date of the writ, which is 23 April 1999, to the date of the judgement, which is today, the 28 June 2002.

Section 1 of the Judicial Proceedings (Interest on Debts and Damages) Act, 1962, provides for the interest to be for the period between the date on which the cause of action arose and the date of the judgement, but that is subject to Court's discretion. The practice adopted by the Courts is that the interest is to be calculated from the date of the writ. There is a very good reason for this practice; that is, the interest must run from the date the complaint or demand is made by the plaintiff through a writ. This approach, in my opinion, is sensible and convenient when determining interest. In Anton Johan Pinzger v Bougainville Copper Limited (supra), Bredmeyer J, made this point, when his Honour at page 444 said:

"How can it be said that the defendant has wrongfully withheld the plaintiff's money, when the Plaintiff has not made a demand for it?"

Amount of interest

The period from 23 April, 1999 to 28 June, 2002 is 3 years 2 months 2 days

- Interest for 3 years is 12.5 % x K 1,487,289.20 x 3 years

= K 185,911.15 x 3 = K 557,733.45.

- Interest for 2 months is 12.% x K 1,487,289.20 -:- 12 months x 2 months

= K 185,911.15 -:- 12 = K 15,492.595 x 2 = K 30,985.19

- Interest for 2 days is 12 % x K 1,487,289.20 -:-12 months -:- 4 weeks -:- 7 days x 2 = K 1,106.61

The total interest is K 589,825.25 (K 557.733.45 + K 30,985.19 + K 1,106.61).

The defendants will therefore pay the total amount of K2,077,114.40 including interests. (K1,487,289.20 + K 589,825.25) to the plaintiff.

Cross Claim

The defendants have cross-claimed for the amount of K1,783,047.30 for the prices of goods sold and delivered and or monies advanced to the plaintiff. The plaintiff has conceded this amount. The plaintiff will therefore pay K1,783,047.30 to the defendants.

Interest and costs claimed by the Cross claimants/defendants

As I said earlier in the judgement, interest is a matter for the Court's discretion. The monies claimed by the cross-claimants are monies which the plaintiff would have paid over the duration of the two contracts. The claim is due only because of the arbitrary termination of the two contracts by the defendants. The plaintiff was forced by the defendants to come to this Court to seek redress. In those circumstances, there is no proper basis for me to award interest on the defendants cross-claim. I therefore refuse to award interest on the cross-claim, see Embda Trading as Tribal Plumbers v Tropical Habitat Limited (supra) at p.10. For the same reasons, I refuse to order costs against the plaintiff on the cross-claim.

The defendants will pay the plaintiff's costs.

Lawyer for the plaintiff: Blake Dawson & Waldron.
Lawyer for the defendants: Pacific Legal Group.
Lawyer for the Liquidator of the first defendant: Maladinas Lawyers.