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Coecen Ltd v National Fisheries Authority of Papua New Guinea [2002] PNGLR 6 (28 February 2002)

[NATIONAL COURT OF JUSTICE]

COECON LIMITED (receiver/manager appointed)

v

THE NATIONAL FISHERIES AUTHORITY OF PAPUA NEW GUINEA; AND
INDEPENDENT STATE OF PAPUA NEW GUINEA
Waigani: Kandakasi J

4, 28 February 2002

PRACTICE & PROCEDURE – Assessment of damages after entry of judgement on liability by Consent – Principles governing assessment of damages – No issue on liability is to be taken – Where there is already a judgement in an action for damages for breach of contract the only issue at assessment of damages is the damages that flow from the breach – Plaintiff has burden to establish its damages on the balance of probabilities – Damages not pleaded in the statement of claim still in issue and may or may not be awarded – If a defendant takes no issue on matters not pleaded awards may be made subject to appropriate evidence.

PRACTICE & PROCEDURE – Claim by a defendant that a plaintiff has failed to mitigate its damages – Burden on the defendant to establish such failure

PRACTICE & PROCEDURE – Application for disqualification of judge – Application based on speculation – No notice of intended application given to the Court and the other side – Application for a judge to disqualify is a serious matter and must be supported by proper evidence and the relevant law on it – Good practice that the Court and the other party (ies) be notified of intended application before making the application – Application dismissed.

PRACTICE & PROCEDURE – Adjournments – Applications for adjournment of trial on day of trial – No prior notice of intention to make the application given to the Court and the other side – No evidence of steps taken to prepare for trial presented – No satisfactory explanation for failure to prepare and failure to comply with directions of the Court regarding preparation for trial – Application refused.

COURTS & JUDGES – Application for disqualification of a judge – Application based on no real evidence but only on speculation – No prior notice of application given to the court and opposing side – It is a serious matter to ask a court or a judge to disqualify.

DAMAGES – Assessment of damages after entry of judgement by consent – Plaintiff's evidence on damages not rebutted and destroyed by any evidence or cross-examination – Submissions going into liability need not be considered – If claim established on balance of probabilities amounts claimed must be awarded.

CONTRACT – Breach of construction contract – Implied term plant and equipment would be stood down on failure to pay progress claims – variation of terms of contract by express terms and conduct of parties – Liability resolved by consent judgement with damages to assessed – Issues of liability not open for contest on assessment of damages – Issues of remoteness of damages and mitigation of damages considered.

Facts

The plaintiff and the defendants entered into a written contract for the construction of a fisheries project for the first defendant. The contract was part performed by the plaintiff and it rendered progress claims in accordance with the contract to the defendants for payment. In breach of the contract, the defendants were not able to meet the progress claims. The parties, therefore, agreed to a variation of the contract, both expressedly and by conduct, to allow for the plaintiff to stand down plant and equipment at an agreed rate pending payment of the progress claims. The defendants delayed payment and the stand down continued up to a period of 7 months, by which time the plaintiff's cash flow was seriously affected. The plaintiff, therefore, terminated the contract. Shortly thereafter, the plaintiff's secured creditor appointed a receiver/manager. An advertisement of that resulted in a termination of another construction contract the plaintiff had secured with the State.

By Writ of Summons, with a detailed statement of claim with full particulars, the plaintiff sued the defendants for breach of contract. The second defendant conceded liability by formally endorsing an order by consent for judgement with damages to be assessed only against the second defendant, with the claim against the first defendant being discontinued. The defendant sought to call evidence and take issue on liability over the plaintiff's claim notwithstanding the consent judgement on liability. It also argued that the claims for stand down were remote and that the plaintiff failed to mitigate the loss.

Before the hearing for the assessment of damages could proceed, the defendant made two applications. The first was for the judge to be disqualified without any evidence or suggestion of bias or likelihood of the same against the judge. The second was for an adjournment of the proceedings without providing any evidence of steps taken for the hearing or without any evidence of any difficulty it could not overcome before the trial. No notice of its intention to make these applications were given to the Court or the plaintiff and the plaintiff was fully prepared with overseas counsel to proceed with the hearing. The applications were dismissed and the matter proceeded to a hearing and conclusion.

At the hearing, the plaintiff produced evidence of each item of its damages and amended parts of its claim without any objection from the defendant. The defendant called no evidence in rebuttal and failed to destroy the plaintiff's case by cross-examination.

Held

Application to disqualify:

1. An application for a judge to disqualify is a serious matter and it must be made with the support of appropriate and convincing evidence and the relevant law on point and not on mere speculation.

2. The law on this kind of application is as set out in the Gobe Hongu Ltd v National Executive Council & Ors N1964 by Mr. Justice Sevua.

3. In fairness, notice of such application must be given to the Court and the other side before making the application to avoid incurrence of expenses unnecessarily.
Application to adjourn

1. Notice of an intention to adjourn must be given in advance of its making to the Court and the other party (ies).

2. Evidence of steps taken to prepare for trial must be provided before any adjournment could be granted.

3. If no case is made out for a grant of an adjournment,no order for adjournment should be made.

Assessment of damages,

(a) General Principles

1. Where liability has been resolved by a consent judgement, a defendant is not at any liberty to take issue on any aspect of liability or a plaintiff's entitlement to a particular item of damage pleaded.

2. This follows on from the fact that liability has already been determined and also because of the fact that consent judgments cannot be set aside easily except on appeal or on, issue of fresh proceedings based on fraud or mistake.

3. A defendant is not however precluded from taking issue on any matter that is not pleaded in the statement of claim.

4. Where a defendant takes no issue on a matter not pleaded in the statement of claim the Court may allow such a claim if evidence supports it.

5. In the case of a breach of contract, judgement on liability confirms breach of contract and leaves for assessment the damages that necessarily follow from such a breach.

6. For the purposes of assessing the plaintiff's damages in cases where liability has been resolved either in default or by consent, the plaintiff is under an obligation to establish his damages on the balance of probabilities.

7. If a plaintiff is able to establish his damages on the required standard of prove, it must be awarded.

(b) Present Case

1. In the present case, the defendant was not at any liberty to take issue on liability after having consented to judgement with damages to be assessed.

2. The plaintiff produced evidence in support of each of the items specified in the statement of claim and later amended at the trial without any objection from the defendant.

3. An award of K18,740,108.60 was made on the basis of the evidence called and unrebutted by any evidence in rebuttal or any level of cross-examination.

Papua New Guinean cases cited

Andale More & Manis Andale v Henry Tokam & The State (1997) unreported N1645.
Dia Kopo v Employment Authority of Enga Provincial Government and Enga Provincial and Local Level Government [1999] PNGLR 462.
Gobe Hongu Limited v National Executive Council & Ors [2000] PNGLR 372.
Keith Reid v Murray Hallam and Allcad Pty Limited N1337.
Kenneth Bromley v Finance Pacific Ltd (2001) unreported N2097.
Kevin Patai v Niugini Lumber Merchants Pty Ltd & Ors N1602.
Komaip Trading v George Waugulo and The State [1995]PNGLR 165.
Melina Limited Trading as CN Merchantile v Fred Martens (2001) unreported N2183.
Obed Lalip for himself and on behalf of Marae Kulap and Anor v Fred Sikiot and The State (1996) unreported N1457.
Paul Torato & Anor v Sir Tei Abel & Ors [1987] PNGLR 403.
Peter Lipsey v The Independent State of Papua New Guinea [1993] PNGLR 405.
PNG National Stevedores Pty Ltd and Bank South Pacific Ltd v The Honourable Andrew Baing & Ors; PNG Harbours Board v PNG National Stevedores Pty Ltd (1998) unreported N1705.
The Honourable Andrew Baing & Anor v PNG National Stevedores & Ors (2000) unreported SC627.
The State v Hodson [1987] PNGLR 241.

Other cases cited

Hadley v Baxendale [1854] Ex. 341; 156 E.R. 145.

Keeble v Guardian Trust and Executors Co of New Zealand Ltd [1976] 2 NZLR 338.

Marsden v Marsden [1972] 2 All ER 1162.

Neale v Gordon Lennox [1902] AC 46.

Counsel

J Griffin QC and Mr Varitimos, for the plaintiff.
J Gawi and Ms. J. Murray, for the defendant.

28 February 2002

Kandakasi J. This matter came before me for an assessment of damages on 4 February 2002. That followed an entry of a consent judgement with damages to be assessed on 30 July 2001. The second defendant ("the State") formally consented to the judgment against it, with damages to be assessed. It also agreed to discontinuance of the action against the first defendant. A notice of discontinuance of the proceedings against that defendant was thus filed on 21 December 2001. So, the matter was proceeding only against the State.

Despite the consent judgement, the lawyers for the State, Henaos Lawyers represented by Mr. Chris Coady first and later Mr. John Gawi, tried to turn the assessment of damages into a trial on both liability and quantum. Proceeding on that basis, they resisted every attempt by the plaintiff to get to an assessment of its damages promptly due to it being placed under receivership by its secured creditor, the Papua New Guinea Banking Corporation ("PNGBC"). This obviously contributed to a delay in a prompt assessment of the plaintiff's claim. As this gives rise to the correct practice and procedure to be adopted on the assessment of damages following the entry of judgement by consent, I consider it important that the history of this case up to the hearing should be stated. This is so that there can be a better appreciation of the relevant legal principles I intend to discus here.

HISTORY OF THE CASE

(a) Generally

On 22 November 2000, the plaintiff filed its writ of summons with its statement of claim and particulars and had it served on the named defendants on the same date. The defendants filed their notice of intention to defend on 4 December 2000, through Warner Shand Lawyers. They also filed a notice of motion seeking an order for security for costs against the plaintiff. The plaintiff filed a cross-motion for summary judgement and interim restraining orders. On 5 December 2000, the plaintiff filed an affidavit by Timothy Peter Neville followed by another one from its receiver appointed, Mr. David Wardley on 8 December 2000. Both of these motions were resolved by consent orders on 11 December 2000, when the motions returned. The consent orders, amongst others, required the defendants to file and serve their defences by or before 22 February 2001, with the plaintiff having until 8 March 2001 to file and serve its reply. By 15 March 2001, the pleadings would be deemed closed, with each of the parties completing discoveries by or before 30 March 2001. They also agreed to complete any other interlocutory procedures by or before 14 April 2001, with either of the parties having liberty to apply for any variations up until that date. The matter should then be listed for hearing at the earliest date convenient to the Court.

In compliance with one of the terms of the consent orders of 11 December 2000, the defendants filed their defence on 22 February 2001. The plaintiff replied to that on 3 April 2001. At the same time, it filed a notice of discovery requiring the defendants to give discovery. The next day, the plaintiff voluntarily filed and served a list of its documents. At the same time, it served a notice of discovery on the defendants.

On 24 April 2001, Kassman Lawyers gave notice of changing the second defendant's lawyers. By that time the defendants had still not complied with the notice to give discovery. So, on 1 May 2001, the plaintiff filed a motion seeking to strike out the defendants' defence and for judgement to be entered against the defendants. On 6 June 2001, the first defendant, through Warner Shand, Lawyers, filed a verified list of documents. The second defendant followed suit on 15 June 2001 with the indulgence of the plaintiff despite the consent orders of 11 December 2000, which inter alia, required all such steps to be completed by or before 14 April 2001. Then, on 30 July 2001, judgement by consent was entered against the State with damages to be assessed. From this day forward, the proceedings were only against the State, which accepted responsibility for the conducts and/ or actions of the first defendant.

Since then, the plaintiff sought to get a date at the earliest possible but the State's lawyers were not able to facilitate that. According to the notations on the Court file, the plaintiff appeared before the Registrar on 4 October 2001, but the State's lawyers did not appear. So the matter was stood over to the next call-over to be conducted on 11 October 2001. At that time, both parties appeared and 16 November 2001 at 9:30 a.m. was allocated for a hearing of the matter. However, that trial date appears to have been vacated with the consent of the parties. There is however, no file notation to confirm that. An affidavit sworn by Jacinta Joana Murray of the State's Lawyers on 4 December 2001 states at paragraph 3 that, at a call-over conducted on 18 October 2001, the trial date was vacated by the Registrar and had the matter tentatively fixed for return at the next call-over.

The next call-over was conducted on 8 November 2001. On that date, Mr. Coady appeared for the State and informed the registrar that it was a complicated matter in which the State will extensively cross-examine the plaintiff's witnesses. He stated and will itself call a number of witnesses. That will take more than a day's trial and asked for a 3 days fixture. On that representation, 11, 12 and 13 March 2002 was fixed for a hearing of this matter. Mr. Frank, of the plaintiff's lawyers firm, who does not have the carriage of this matter on behalf of the plaintiff, attended that call-over. As noted, there is no file notation of all these and it seems the call-over was conducted at which the 3 days trial was allocated without an appreciation, so it seems, that liability was already resolved by consent judgement. Also, the plaintiff had long filed its affidavits on 5 and 8 December 2001, which were not extensive.

On 26 November 2001, I handed down a decision in the matter of Timothy Peter & Anor v Privatization Commission (O.S. 548 of 2001), refusing to lift a consent interim injunction against the PNGBC from proceeding with its liquidation of the plaintiff in these proceedings. I arrived at that decision after being informed of liability in this matter being already resolved by consent and an assessment of the damages was what was being waited for. At the time of handing down my decision, Mr. Kawi, the Solicitor General, was present and I asked if he saw any difficulty in expediting the assessment of damages in this case. He said he saw no difficulties with that. On that representation, I indicated to the parties that I would find a suitable date and would confirm that date with the parties.

By a letter dated 27 November 2001, the plaintiff's lawyers, wrote to my associate, with a copy to the State's lawyers, confirming the above and requested that the trial dates set for 11, 12, and 13 March 2002 be brought forward. My associate replied to that letter, with a copy also to the State's lawyers advising that this matter was being listed for hearing on 7 December 2001. It seems the State's lawyers replied to my associate's letter by a letter dated 28 November 2001, since a copy of that letter is annexed to Ms. Murray's affidavit. I do not recall seeing or receiving such a letter until the affidavit in question was brought into the court file on 7 December 2001, when the parties appeared before me.

On 7 December 2001, Ms. Murray appeared for the State, while Mr. Sheppard appeared for the plaintiff. Ms. Murray clearly stated that her only instructions was for her to ask for an adjournment and was in no position to assist, as she was not sufficiently and fully briefed. She said Mr. Coady of her firm had carriage of the matter and he was not available. I indicated to the parties that as far as I could see this was a straightforward assessment of damages and did not see the need for a three days trial. I therefore, issued a number of directive orders to allow for an expedited hearing without unnecessary delays and listed the matter for hearing before me on 24 December 2001. I did that in view of the fact that an interim injunction was in place pending the outcome of the assessment of damages in this case and that the PNGBC was progressing toward privatization and a possible sell-out may be affected by the injunction. The directive orders I issued were as follows:

"1. The Defendants are hereby directed to provide to the plaintiff and to this Court details of the points or issues they take on the assessment of damages to the plaintiffs lawyers.

2. Those points or issues shall be restricted to the assessment of damages only.

3. If witnesses are required to be cross-examined, then the names of these witnesses should be stated together with the part of the evidence, which is sought to be examined.

4. In delivering who to examine on what, the defendants shall be guided by the rule in Browne v Dunn. There should be no suggestion of new set of facts unless the Defendant is going to call evidence itself to establish those facts.

5. These directions should be complied with by or prior to 21 December 2001."

I then went on circuit to Wewak and Vanimo and anticipated returning to Waigani to hear this matter on 24 December 2001. That was pending approval of my leave to commence from the end of the circuit. Approval of my leave eventually came and by 12 December 2001, it became apparent that I would not proceed with the hearing on 24 December 2001. I, therefore, had the plaintiff's lawyers informed, through one of their secretaries, that the hearing would not proceed on 24 December 2001. She was therefore asked to notify the lawyer in her firm who had the carriage of the matter and the defendants' lawyers. At the same time, they were informed that I would be happy to deal with the matter any time in the week beginning 14 January 2002.

Despite my above advice, I was informed in Vanimo by the lawyers doing the circuit with me there, on 23 December 2001, that I was required back in Waigani to hear this matter. There was also a suggestion that an aircraft may have been hired specifically for me. I, was obviously not happy with that news. I therefore, instructed my associate to write a letter to the plaintiff's lawyers on 24 December 2001, with a copy to the State's lawyers, asking, amongst other things, what had become of my earlier advice of the trial not proceeding and whether there was, in fact, an aircraft hired for me. At the same time, I instructed my associate to conduct the necessary inquiries to ascertain if, indeed, what we were informed of was correct. My associate carried out the necessary inquiries and informed me that none of what was said to us could be established or verified. So I continued with the circuit to Vanimo.

On the same day (24/12/01), the plaintiff's lawyers replied to my associate's letter, with a copy to the State's lawyers, saying their secretary who received my advise appeared to have failed to pass on my message to the lawyer having carriage of the matter. They also expressed surprise and denied being a party to what was put to me on 23 December 2001. They then indicated their preparedness for trial anytime in the week beginning 14 January 2002. I accepted their explanation and that was the end of the issues raised in my associate's letter to the plaintiff's lawyers of 24 December 2001.

The State's lawyers indicated they would not be able to deal with the matter anytime in the week beginning 14 January 2002. Their reason consistently was that this was a complicated matter and that they required time to organize their client's witnesses. Given the urgency of the matter, I directed my associate and he did inform the parties that I would hear the matter on 4 February 2002. That was by letter dated 21 January 2002. On the same day, Henaos responded and repeated their earlier lines for resisting an early trial of this matter, that the matter was complicated and that it would take about 3 to 5 days trial with southern counsel appearing. On the other hand, the plaintiff confirmed its readiness. In the circumstances, I called for and conducted a pre-trial conference on 29 January 2002, to ascertain if, indeed, this matter required a more than half a day or a days trial and indicated that I would start hearing the case on 1 February 2002 and continue on Sunday through to Monday 4 February 2002, if need be.

(b) Pre-trial Conference

At the pre-trial conference, it became apparent that the State was wishing to call three witnesses in addition to a cross-examination of the plaintiff's witnesses. Substantially, these were going to go back to the issues of liability which were already resolved by the consent orders of 30 July 2001, where the State consented to judgement with damages to be assessed. The State proceeded on the basis of a comment I made in passing, in the motions' court, last year. My comment was that where judgement in default of a defence is entered against a defendant, some overseas authority seem to suggest that the issue of liability is still open at an assessment of damages hearing. If one were to do so in PNG, there must be proper research and presentation.

Obviously, counsel for the State failed to note that, in this case, judgement on liability was resolved with the consent of his client. Besides, counsel was not able to place before me the authorities on which he was proceeding to prepare his client's case. It also became apparent that the State had not fully complied with my directive orders of 7 December 2001. In the circumstances, I directed that I would not allow and hear any evidence and/or arguments on liability as long as the consent order remained on foot. I might add that the consent order was not at that stage and had anytime, as far as I am aware as of this day, been the subject of any proper challenge.

(c) Principles on Assessment of Damages

This gives rise to the issue of whether the issue of liability is still open for the State to take after having consented to judgement with damages to be assessed. In other words, the question is whether the State is entitled to go behind the consent judgement and take issue on liability at a hearing for assessment of damages after having agreed to judgement on liability to be signed against it. It also gives rise to the issue of what issues are open for consideration by a court conducting an assessment of damages hearing.

I first deal with the issue of whether the issue of liability is still open after the consent judgement resolving that issue. It is settled law that consent judgements cannot be easily set aside. Extreme care and caution must be exercised when a court is asked to set aside a consent order. The reason for this is simple. As Bredmeyer J said in Paul Torato & Anor v Sir Tei Abel & Ors [1987] PNGLR 403 at p. 413:

"... there are strong public policy reasons why consent orders should not be easily set aside. The parties and the public should be able to act on a court order especially after the appeal period has expired."

The principles governing the setting aside of orders or judgements by consent are as were noted by Bredmeyer J in the above case at page 413 in these terms:

"A judgment by consent can be set aside in limited circumstances. Volume 2 of the Supreme Court Practice (1979) at pars 2010, and 2010A states:

'A consent order can be set aside in an action commenced for the purpose on any ground that would invalidate an agreement ... If consent has been given by a mistake, it may be withdrawn at any time before the judgement is passed and entered ... But where a final judgement has been passed and entered the Court cannot set it aside unless a fresh action is brought for that purpose although it has been entered by mistake (Ainsworth v Wilding [1896] UKLawRpCh 42; [1896] 1 Ch 673 and Wilding v Sanderson [1897] UKLawRpCh 120; [1897] 2 Ch 534.)'"

His Honour, in that case, had an application for a setting aside of a consent order on the basis that one of the parties' lawyers was not instructed to consent to the orders. His Honour had regard to the overseas leading authorities on point such as Marsden v Marsden [1972] 2 All ER 1162, and a much earlier authority Neale v Gordon Lennox [1902] AC 46. He also traced the application of those principles in subsequent case elsewhere as in the New Zealand case of Keeble v Guardian Trust and Executors Co of New Zealand Ltd [1976] 2 NZLR 338. On the basis of those authorities, His Honour was not convinced that the consent order should be set aside.

These principles have been adopted and applied by other judges in Papua New Guinea. Justice Sheehan had regard to those principles and dismissed an application for a setting aside of a consent order again on the basis that one of the lawyers did not have the necessary instructions to consent to the judgement. That was in the case of Peter Lipsey v The Independent State of Papua New Guinea [1993] PNGLR 405. His Honour dismissed the application in that case. In so doing, he reconfirmed that once final judgement has been entered, the only recourse to a party aggrieved by a consent order or a judgement is to either appeal or to issue fresh proceedings on the basis of fraud or such orders or judgement being obtained by mistake.

For other local authorities on these, see PNG National Stevedores Pty Ltd and Bank South Pacific Ltd v The Honourable Andrew Baing & Ors; PNG Harbours Board v PNG National Stevedores Pty Ltd (1998) N1705. That case went on appeal and is in the numbered judgements as The Honourable Andrew Baing & Anor v PNG National Stevedores & Ors (2000) SC627. The appeal was upheld on the basis that the consent order was conditional and once the condition occurred, further orders of the court were required. In so doing, however, the Supreme Court did not reject the principles governing the setting aside of consent orders.

What this means, in the present case, is that in the absence of an appeal or a fresh proceeding seeking a setting aside of the consent judgement on liability against the State, the State is not at any liberty to go behind the consent judgement on any aspect of liability.

This then leads me to the next issue of what issues are open for consideration and determination in an assessment of damages hearing. The Deputy Chief Justice succinctly, in my view, stated the correct legal consequence where a default judgement has been entered against a defendant in default of a defence in Keith Reid v Murray Hallam and Allcad Pty Limited (1995) N1337, in these terms:

"What then is the effect of a default judgment? A writ of summons should disclose a cause of action in law. That is to say it should allege matters of fact which gives rise to a cause of action in law. In this case the statement of claim alleges a valid contract of employment, breach of that contract and claims damages based on the terms of the contract.

Where default judgement is entered in an unliquidated demand (as in this case) the facts which gives rise to the question of liability are settled. The effect of default of judgement in this case is that there was a valid contract of employment and that there was a breach of that contract. All the facts and legal issues relating to liability are no longer in issue.

Assessment of damages involves consideration of the terms of the contract and assessing the damages that flow from the breach of the terms of the contract."

That was in a case of a breach of an employment contract and the plaintiff sued for damages. Following the defendants' default in filing their defence, judgement in default was entered against them and the matter went before the Deputy Chief Justice for an assessment of damages.

A survey of the authorities on assessment of damages after entry of judgement on liability, mainly in default of a defendant's defence, clearly show the following:

1. The judgement resolves all questions of liability in respect of the matters pleaded in the statement of claim.

2. Any matter that has not been pleaded but is introduced at the trial is a matter on which the defendant can take an issue on liability.

3. In the case of a claim for damages for breach of contract as in this case, such a judgement confirms there being a breach as alleged and leaves only the question of what damages necessarily flow from the breach.

4. The plaintiff in such a case has the burden to produce admissible and credible evidence of his alleged damages and if the Court is satisfied on the balance of probabilities that the damages have been incurred, awards can be made for the proven damages.

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

Examples of these authorities include the case cited above, and Andale More & Manis Andale v Henry Tokam & The State (1997) N1645; The State v Hodson [1987] PNGLR 241; Kevin Patai v Niugini Lumber Merchants Pty Ltd & Ors N1602; Komaip Trading v George Waugulo and The State [1995]PNGLR 165 and Obed Lalip for himself and on behalf of Marae Kulap and Anor v Fred Sikiot and The State (1996) N1457, to mention a few of them.

In the present case, I allowed myself to be guided by these principles and authorities when dealing with the matter on 7 December 2001, 29 January 2002 and 4 February 2002. On these bases, I issued and/or made the orders I made on those dates, particularly as to the issues for trial.

Now, returning to the history of the case, on Mr. Coady's indication that he was seeing his client's witnesses after the pre-trial conference, I confirmed 4 February 2002, at 1:30 pm for an assessment of damages hearing. At the same time, I directed that the State arrange for its witnesses, if any, to attend court on that date to give their evidence. That was on learning also from Mr. Coady that he was seeing his client's witnesses after the pre-conference on the same date.

On the 4 February 2002, when the matter was called for hearing, Mr. J. Griffin QC and Varitimos appeared for the plaintiff while Mr. J. Gawi and Ms. J. Murray appeared for the State. There was no explanation offered for the change in counsel for the State.

(d) Application for Disqualification

Before the hearing could get under way, Mr. Gawi indicated that he had an application to make. The application was for me to disqualify on the basis that there were appearances of interference in the course of justice. Mr. Gawi pointed to my associate's letter to Maladinas lawyers of 24 December 2001. He narrowed his submissions down to the suggestion of a supposed direction from the Chief Justice for me to return to Port Moresby to deal with this matter on 24 December 2001, as well as the suggestion of a hired aircraft. Apart from that, Mr. Gawi was not able to produce any evidence of either a direction from the Chief Justice nor a hired aircraft. Mr. Gawi conceded that neither he nor his clients were suggesting that I would be partial or that I would be biased toward the plaintiff.

The State gave no notice of its intended application to either the Court or the plaintiff. It therefore took both the Court and the plaintiff by complete surprise. The letter Mr. Gawi was relying upon was with him from 24 December 2001 and there was no mention of it at any time before 4 February 2002, and not even at the pre-trial conference on 4 February 2002. For these reasons, the plaintiff opposed the application.

The plaintiff submitted that I should refuse the application because it was most improper and was highly speculative without the support of any evidence. They also submitted that the application did not refer to any, or meet any of the principles or bases on which such an application can be upheld or a judge should disqualify. In any case, the application was being made suddenly after too much cost have already been incurred by the plaintiff in terms of securing the appearance of overseas counsel and its witnesses. It was also being made whilst conceding that no questions were being raised regarding the need for me to be neutral and the need to be impartial and arrive at a decision fairly. In those circumstances, it would be most unfair to grant the application and have the hearing vacated. I accepted those submissions and I refused the application.

Of course, at the time of refusing the application, I had regard to the principles or the basis on which a judge should disqualify or uphold such an application. These were set out recently by my brother Justice Sevua in Gobe Hongu Limited v National Executive Council & Ors N1964 (16th July 1999). From the head notes, His Honour, in my view, correctly set out the following principles:

"1. Judges should not too readily accede to applications for disqualification, whereby parties may effectively influence the choice of a Judge in their case. Re. JRL; Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342 at 352; [1986] HCA 39; 66 ALR 239;

2. Judges should resist from being driven from their Courts by the conduct or assertion of parties, Raybos Australia Pty Ltd v Tectran Corp. Pty Ltd (No.4) (1986) 6 NSWLR 674 (at 689);

3. A Judge may disqualify himself in circumstances where a fair minded, lay observer, with knowledge of the material facts might entertain a reasonable apprehension that the Judge might not bring an impartial and unprejudiced mind to the resolution of the question in issue, Livesey v NSW Bar Association [1983] HCA 17; (1983) 151 CLR 288;

4. A Judge should disqualify himself by reasons of apprehension of bias, under one or more of the following principles, where it is demonstrated that, firstly, he has an interest in the case before him, which interest may be direct, indirect, pecuniary or otherwise. Secondly, by his conduct including statements, whether such conduct is in the course of, or inside the proceedings. Thirdly, where the Judge, through association or relationship, either by himself, his spouse or children, has a direct pecuniary interest in the case. And finally, disqualification by extraneous information, where the Judge had presided over an earlier case or he has had some knowledge of prejudicial and admissible facts. Webb v R [1994] HCA 30; [1994] 181 CLR 41;

5. It is of fundamental importance in the administration of justice that litigants and the general public have full confidence in the integrity, including the impartiality of those entrusted with the administration of justice, so that the impartiality and the Constitutional independence of the judiciary is not interfered with;

6. The test of an 'objective observer' established by the Supreme Court in PNG Pipes Ltd & Anor v Mujo Sefa & Ors, should also include a 'fair minded, lay observer' as considered in Livesay v NSW Bar Association (supra)."

Neither the case cited, nor any other authority was referred to or cited in support of Mr. Gawi's submission. It is a very serious matter when a party applies for a judge to disqualify. This is so simply because by in the act of making the application, the party making the application is in fact questioning the impartiality of the judge to whom the application is made. Making such an application without proper basis is not only unacceptable but may give rise to questions over the integrity of the counsel who is making such an application. Counsel should always bear in mind that whilst they may be pursuing the interest of their client, they have a duty to the court to only come with applications or make submissions only with good factual and legal basis in so far as is relevant. Bearing this in mind, I can only hope that the counsel concerned will refrain from making a similar or other applications either before me or any court for that matter in future, unless he has first ensured that he has the necessary facts and the law to support him.

(e) Application for Adjournment

Next, immediately upon the refusal of his application, Mr. Gawi rose and made a second application. This time it was an application for an adjournment of the hearing. That application was made on the basis that the State was not ready to proceed with the hearing. Though not specifically mentioned, it appeared apparent from his submissions that, Mr. Gawi or his firm had anticipated instructions to appeal against my directions on 29 January 2002, after the pre-trail conference. Those directions amongst others directed that the hearing shall take place on 4 February 2002, at 1:30 p.m. and that no evidence and cross-examination on liability would be permitted. Mr. Gawi informed the court that he sought instructions from his client to appeal against those directions but was instructed not to appeal. He was therefore in a prejudiced position as he was prevented from calling witnesses and or evidence. This was so because he had only been preparing for a contest on liability, especially on the plaintiff's claim for stand down. It seemed he concentrated only on liability and not damages despite the consent judgement on liability and the principles governing an assessment of damages hearing as set out above. No explanation was offered as to how that was the case. An explanation was required, given the State's consent to judgement on liability at the first place and, according to Mr. Coady on 29 January 2002, he was seeing the State witnesses that day and by reason of which he was directed to organize for his witnesses to appear in court on the 4th of February 2002, to give evidence for the State.

Again as with his first application, Mr.Gawi did not place the Court with any evidence of any step being taken to arrange for any witnesses or overseas counsel for the hearing set for 4 February 2002. Despite my inquiry, Mr. Gawi was not able to show me any correspondence between his firm and any overseas counsel and between his firm and any witnesses for the hearing set for 4 February or for any of the earlier dates or the dates in March that were allocated by the Registrar. Simply put, it was very clear to me, in the absence of any evidence to the contrary, the State had failed to get its case ready for hearing on any of the possible dates for trial. It was therefore, prepared to seize upon any opportunity even without the support of any evidence to force a delay in a prompt hearing and disposal of the matter. The State seemed prepared to delay the matter despite being aware of the fact that an injunction was on foot which necessitated a prompt disposal of this matter after liability was resolved by consent on the 30th of July 2001. It was also despite earlier consent orders of the court that this matter should be ready for hearing by the 14th of April 2001, when parties agreed that all other interlocutories must be completed.

As with the first application that failed, the plaintiff was not notified of the State's intention to apply for an adjournment. The plaintiff was therefore, prepared to proceed with the hearing on 4 February 2002. Hence, it was taken by complete surprise and that a vacation of the hearing would be highly prejudicial to the plaintiff because of the sale of PNGBC being progressed which required a prompt action on the liquidation of the plaintiff, and counsel and witness expenses.

I had regard to all of these factors as well as what I said in my judgement in Melina Limited (Trading as CN Merchantile) v Fred Martens (WS. 998 of 1999) unreported and not yet numbered judgement delivered 24/08/01. In that case, I said inter alia in effect that, where a party fails to take any steps to proceed to trial without any good reason, no adjournment should be granted. I then refused the application for an adjournment and ordered the trial to proceed in this matter.

(f) Further Application for Adjournment

The plaintiff proceeded to call his key and main witness, Mr. Timothy Peter Neville, who is its managing director. Almost at the completion of his evidence in chief, and when certain documents were sought to be admitted into evidence and the State's position was sought, Mr. Gawi, asked for a 15 minute adjournment so that he could seek instructions, as to whether to continue to act for the State, as his instructions were only for him to make the two applications he earlier made. It should be noted that, Mr. Gawi did not make that position clear at the outset. So it seemed to me, he had expected to succeed on either of his two failed applications without the support of any evidence and law on point. Despite that, this application was granted with a reluctant agreement of the plaintiff.

When the Court reconvened, Mr. Gawi informed the Court that he was instructed to conduct the hearing on behalf of the State. Accordingly, the hearing continued and was completed on the same date. I then reserved a decision on the assessment of damages with parties to be notified as soon as judgement is ready, possibly in March or if possible toward the end of this month. That was after having heard oral submissions from both parties. Both parties decided not to go into any written submissions after I had given them the option of either a written submission by the next day or oral submissions the same day.

I now go into the substantive matter. In so doing, I allow myself to be guided by the principles governing the assessment of damages. I also note and allow myself to be guided by the fact that liability in this cases was resolved in favour of the plaintiff with the consent of the State and the relevant principles and or the authorities on the effect of such a judgement or order. I have already set out all of these principles above and I need not repeat them here.

THE SUBSTANTIVE MATTER

(a) The plaintiff's claim

By Writ of Summons with a statement of claim endorsed thereto, the plaintiff claimed a breach of a construction contract between itself and the State for a construction project in the Putput area of the New Ireland Province. Based on its Writ of Summons and statement of claim the plaintiff claims:

1. A sum of K12,066,906.83 in stand down claims under the contract;

2. A sum of K374,355.08 in contract termination entitlements;

3. A sum of K1,680,386.90 (excluding VAT) for the loss of a Vanimo Contract;

4. A sum of K65,000.00 for Receiver's expenses, forced upon the plaintiff by the States failure to promptly pay under the Contract;

5. Damages for breach of contract; Interest pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act; and

6. Costs, as well further and other relief as this Honourable Court deems just.

On the 30th of July 2001, the State formerly consented to judgement against it with damages to be assessed. Despite that consent, the State through Henaos Lawyers, took issue on the plaintiff's entitlement to each of these claims but more so the claim for stand down. I had that issue resolved by my orders or directions of 29 January 2002. As I said before, in arriving at that decision I allowed myself to be guided by the principles and authorities governing an assessment of damages hearing after judgement on liability. I also had regard to the principles on the effect of a consent judgement on liability. Going by the submissions of Mr. Gawi, I noted that the State has decided not to appeal against, my directive orders of 29 January 2002.

At the hearing, the claims for contract entitlement as well as receivership expenses were amended and increased without any objection from the State. These were confirmed and up dated by a schedule of the plaintiff's damages which was admitted into evidence without any objection from the State as exhibit "B." The schedule reads:

"SCHEDULE OF DAMAGES

(A) STAND DOWN

Stand Down Costs (for period of Stand Down i.e. 23/10/99 to 23/07/00) –

Amount (K)

(B) CONTRACT TERMINATION ENTITLEMENT

(C) DEMOBILISATION

(D) VANIMO Contract (Paragraph 25 of Statement of Claim)

(E) RECEIVER'S EXPENSES

(b) Arguments of the Parties

The main issue Mr. Gawi takes is in relation to the plaintiff's "stand down" claims and costs of the Receiver/Manager. As I will demonstrate in due course, counsel took only a half-hearted issue on the Vanimo Contract loss. Mr. Gawi conceded to the plaintiff's claim for contract termination entitlements. I therefore allow the amounts claimed under this head of the plaintiff's damages. This leaves me to assess the plaintiff's other claims.

The State's arguments in respect of the remaining claims are this. For the Vanimo Contract loss claim, Mr.Gawi submitted that I should only allow the profit component of that claim. He was not able to demonstrate what was the profit component and how that was or could be arrived at. I asked him to assist the Court in those areas and he said he was unable to provide me with any assistance.

In respect of the claim for receivership expenses, Mr Gawi argued that those costs were not forced on the State by any conduct of the State. His argument was that the claim was remotely connected to the actions of the State. As such, that part of the claim should not be allowed.

With regard to the "stand down" claim, Mr. Gawi argued that, when the State was not able to meet the plaintiff's progress claims and subsequent stand down claims, it should have terminated the contract so as to minimize or mitigate its damages. He also argued that there was no provision for stand down in the contract and as such the plaintiff was not entitled to the stand down claims.

Mr. Gawi made no specific submission on the plaintiff's claim for demobilization. Overall, however, Mr. Gawi submitted that his client concedes to judgement in the sum of K2.5 million but was not able to demonstrate how that figure was arrived at and or on what basis the whole or any part of the plaintiff's claim should not be allowed. He was not even able to assist with submissions as to how or why I should reject the plaintiffs' evidence on its entitlement to all of its claims, including the claims the State was not contesting. Similarly, he did not assist me with any authority as to why or how I could go behind the consent judgement on liability on each of these claims. He only referred to the well-known contract case of Hadley v Baxendale [1854] Ex.341; 156 E.R. 145 on the remoteness of damages in a breach of contract situation.

Finally, Mr. Gawi took no issue on the various items of interests claimed under the various heads of damages. It follows, therefore, that if I allow the principle amount claimed under each of the items claimed, I will have no choice but to also allow the interest components, in the absence of any evidence and or argument to the contrary.

The plaintiff's counsel Mr. Griffin QC, on the other hand submits that the consent judgement on liability resolved in its favour all issues of liability or the question of whether or not the plaintiff is entitled to each of the items of damages it claims. The question of remoteness of damages goes to liability and is not open for consideration because of the judgement on liability. It is submitted in the alternative that, even if that was still an issue, none of the items of damages claimed are remote. Instead they are damages directly related to and resulting closely from the State's breach of the contract, which the State has conceded to by consenting to judgement on liability. In relation to the issue of the plaintiff failing to terminate the contract earlier to mitigate its damages, Mr. Griffin argues first, that, the onus was on the State as the defendant in these proceedings to establish that by appropriate evidence, but failed to do that. Secondly, Mr. Griffin argues that it is not a case of failing to mitigate losses but it is a case of continuing breach on the part of the State and anticipatory breach on the part of the Plaintiff if it terminated the contract earlier. This is so he submits, because of the State whilst admitting to not having the funds to meet its obligations to the plaintiff under the contract, it instructed the plaintiff to continue to stand down plant and equipment to recommence construction as soon as funds were secured and the plaintiff was paid. This gave no choice to the plaintiff but to do as instructed to avoid itself breaching the contract and opening itself to liability for breach of contract.

Going by the submissions of the State, I find that there is no dispute that the plaintiff incurred the damages claimed for stand down and Receiver/Manager's expenses. Also going by the consent judgement on liability there can be no issue that the plaintiff is entitled to those items of damages. The only issues raised by the State in respect of these claims is that they are too remote and that the plaintiff failed to mitigate its damages.

(c) Issues for Determination

The issues for me to resolve then are as follows:

1. Whether the stand down and Receiver/Manager's expenses are remotely connected to the State's breach of the contract between the parties.

2. Whether the plaintiff failed to mitigate its loss or whether the State was in continuing breach and therefore placed the plaintiff in a position of anticipatory breach if it terminated the contract earlier.

These issues can be resolved by reference to the relevant facts and the law on point. I therefore go into the evidence and the relevant facts based on the evidence.

(d) The Evidence and the Relevant Facts

The plaintiff's evidence is in the form of an affidavit by Mr. Timothy Peter Neville, sworn to on 29 December 2000. He is the plaintiff's managing director. He is supported by an affidavit sworn to by Mr. David Wardley on 8 December 2000. Both of these affidavits were filed and served on the State soon after their filing. So the State had these affidavits with them since then. Hence it has had plenty of time to prepare and bring its evidence in rebuttal, if any, but it did not.

Both of the plaintiff's affidavits were admitted into evidence for the plaintiff. That was done without any objection from the defendants. Both witnesses were called for cross-examination. Before that, they confirmed the terms of their affidavit.

Mr. Neville orally verified and confirmed under oath the matters pleaded and or set out in the plaintiff's statement of claim as facts. His affidavit also confirms the matters set out in the plaintiff's statement of claim and substantiates the damages. He also gave evidence varying the plaintiff's claim, particularly, the interest components necessitated by the passage of time since the filing of its writ and the costs to the plaintiff by its receivership.

Omitting parts dealing with or touching on liability, which I note, is included because the affidavit pre-dated the entry of judgement by consent is in these terms. By a written contract dated 25 June 1999 ("the Contract"), between the plaintiff as contractor, and the State as employer through its servants or agents, the State contracted with the plaintiff for the plaintiff to construct a National Fisheries Surveillance project at Putput in Kavieng, New Ireland Province. The terms and conditions of the contract are set out in the contract itself and are not in any serious dispute.

In accordance with terms of the contract, the plaintiff undertook work and rendered services for and on behalf of the State including the mobilization of plant, equipment and labour to perform the contract. It also included site establishment, stripping of topsoil and stockpiling for reuse, earthworks cut to fill, import material and spread, and stand down of plant and equipment when the State failed to meet progress claims rendered for work already done.

The latter is accepted as a normal practice in the construction industry and became necessary from time to time after the execution of the contract. In any case, the parties agreed to vary the terms of the contract by permitting the plaintiff to:

(a) suspend work in connection with the execution of the Contract, and

(b) to allow the plaintiff to retain its plant, equipment and staff on site during the period of the suspension of work.

They also agreed that the plaintiff was entitled to charge a daily "stand down" rate during the period of the suspension of work. During the course and execution of the contract, the plaintiff charged the State, stand down claims calculated on the basis of 60% of plant costs, plus costs of K14,785.00 per day. This was necessary to allow for the plaintiff to be on stand by to complete the contract as soon as the State was able to secure funds to meet the progress claims and to ensure that there were no delays in the completion of the project.

There were three stand-downs. The first occurred on 11 August 1999, and resumed on 13 August 1999, as a result of adverse landowner activity ("the first stand down"). The second one occurred on 19 October 1999 and resumed on 22 October 2000, as a result of awaiting instructions on density testing for the paving operation ("the second stand down"). The third stand down occurred on 27 October 1999 until the date the contract was terminated, on or about 25 July 2000, ("the third stand down").

The first and second stand-down charges were accepted and paid. But the third stand down claim was not paid. The plaintiff completed daily stand down records upon which the third stand down claim is based. Full particulars are set out in the statement of claim. Through Mr. Neville, three volumes of documents constituting the charges are in evidence. These include the daily record sheets and about 46 statements or invoices based on those records. They were admitted into evidence without any objection from the State. It is therefore, uncontested evidence before me. These confirm a total amount of K9,778,323.50, before adding value added tax and interests. Interest and Value added tax components have now taken the total claim to K16,121,854.26. The witness says the State took no issue on any of these claims or the record but failed to make any payments. The non-payment by the State seriously affected the plaintiff's cash flow problem. It meant that the plaintiff was not able to meet its loan and other equipment lease commitments with the PNGBC. The plaintiff therefore, terminated the contract on 18 July 2000.

About two months later, on 18 October 2000, PNGBC, the plaintiff's secured creditor, appointed Mr. David Wardley as the plaintiff's Receiver/Manager under its security arrangements with the plaintiff. This meant additional costs to the plaintiff which was at the time of the issue of the writ was approximately K65,000.00. These costs have since increased to K438,723.75.

By letter dated 18 November 2000, the State notified the plaintiff that it was terminating its contract with the plaintiff for the paving, preparation and sealing of a 22.5 kilometers of the Coastal Highway in Vanimo, Sandaun Province ("the Vanimo Contract"). The State cited the appointment of the Receiver/Manager as the reason for that decision. A copy of that letter is in evidence as annexure "TN9" to Mr. Neville's affidavit.

Mr Neville says that contract was worth a total of K1, 680,386.95 to the plaintiff on income. He says the termination of that contract meant a loss of that amount of possible income to the plaintiff.

Mr. Gawi's cross-examination of this witness revolved around the plaintiff's stand down claim. Mr. Gawi repeatedly tried to get the witness to say that the plaintiff was only entitled to receive about K3.5 million under the contract and that the stand down claims had no foundation in the contract. He was therefore, trying to get the witness to admit or say at the least that, the stand down costs were incurred by the plaintiff independent of the State's failure to meet the plaintiff's progress claims. In other words, Mr. Gawi was trying to get the witness to admit that the plaintiff failed to mitigate its losses.

This line of question failed to get the witness to provide the answer or answers Mr. Gawi wanted. Instead the witness maintained that circumstances not contributed to by the plaintiff in anyway caused variations to the contract, necessitating the three different stand-downs. They were forced on the plaintiff by the State's failure to meet its obligation in terms of preparatory and facilitative work for the project and most of all failed to meet the plaintiff's progress claims. The plaintiff was given no choice but to remain on site, in a state of preparedness to recommence work as soon as funds were secured and paid to the plaintiff. This was considered more economical as there would be not much time and money wasted in mobilizing, demobilizing and re-demobilizing, of plant, equipment and labour as soon as funds become available to the State to meet the plaintiff's claims. The State instructed the plaintiff to continue with the stand down as it hoped to secure funds to meet the progress claims and complete the contract. The main idea was to avoid the wastage of any further time once funds were secured and the plaintiff got paid. Several meetings between the plaintiff and the State's representatives continued to agree to this position continuing until the Plaintiff finally decided to terminate the contract after a passage of about 7 months without any payment in sight. The witness also said, as the Plaintiff and the State had a good working relationship, the plaintiff was unable to terminate the contract any earlier in the light of the State indicating its commitment to seeing the contract completed to its final stages. The plaintiff's decision to terminate the contract was forced upon it by the State's delay in meeting the plaintiff's claims which meant cash flow problems for the plaintiff which had to meet its on going commitments.

When asked about the difference in the contract price and the amounts claimed by the plaintiff, the witness spoke clearly of the contract price being subject to unforeseen circumstances such, as landowner claims and the State not being able to secure the funds promptly. The need to stand down was the only best option available to the parties considering all the other options open to the State. These represented a reduced rate of about 60% of the normal charges. This according to the witness was considered reasonable for the State, as it was not being charged its normal daily rate. At the same time, it did allow the plaintiff to charge some fees to the State as a form of compensation for keeping it out of business during the stand down period.

The witness was not cross-examined on the other aspects of his witness evidence and consequently, the other aspects of the plaintiff's claim.

The second witness for the plaintiff was Mr. Wardley, a partner in the accounting firm of KPMG Chartered Accountants. He has practised as an audit and insolvency specialist in Papua New Guinea for in excess of twenty (20) years. He is a fellow of the Institute of Chartered Accountants in England and Wales, Australia and Papua New Guinea and is a registered company auditor and a registered liquidator. He is the receiver/manager of the plaintiff. He was appointed to that position by the PNGBC on 18 October 2000.

At the time of his affidavit, he deposed to being in the process of determining assets and liabilities of the plaintiff. He was able to say that the plaintiff was owed a substantial amounts of money for work it had done in Putput, New Ireland, for the Department of Works and National Fisheries Authority under a Contract dated 25 June 1999. He then referred to the details of work done, claims made, claims due and receipt of monies as set out with particularity in the Writ of Summons and commented that, there has been a substantial delay between the date of monies due and monies received. He noted that the plaintiff's claim at that time was over K12,000,000.00 inclusive of value added tax, for stand down alone. That was more than, K7,053, 449.96 the plaintiff owed to PNGBC for arrears it owed to its leasing entity, Nambawan Finance.

Mr. Wardley deposed that it was apparent that if the plaintiff's claim for work done and stand down had been paid when due, all arrears of two fully drawn down loans from PNGBC would have been fully settled. Hence, the lease arrears would not have existed. Instead, the plaintiff would have ended up with an overdraft of K2,701,196.04 and would have had funds in hand of K5,867,895.05. The significant arrears and the interest charges accruing on the arrears was a key factor in his appointment. That would have been avoided, had the State paid the sums due and owing to the plaintiff for work done and the stand down claims.

Mr. Wardley, then produced and had admitted into evidence the original of a letter dated 4 February 2002, from KPMG to Maladina's as exhibit "H" without any objection from the State. That letter in fact is a letter fully setting out the Receiver's fees up to the date of the letter. The total amount is put at K438,723.73.

Cross-examination of this witness concentrated only on the plaintiff's financial statements. Those statements showed loans by the plaintiff to its associated companies totaling about K3.0 million in 1999 and the figure then increasing to about K5.0 or so million in 2000. He then raised the point that, if the plaintiff was in a cash flow problem as claimed, necessitating the appointment of a receiver, no such advances or loans could have been made. The witness pointed out that these loans were not advanced in the relevant financial years. It seemed they were advanced sometime back or prior to the date of the statements which were continuously being carried over to the following years financial statements.

Mr. Gawi, tried to get this witness to agree that, the failure of the State to meet the plaintiff's claim did not necessarily lead to his appointment. The witness however, maintained that it was the failure of the State to make the payments due to the plaintiff that seriously contributed to the plaintiff's cash flow problem. This caused the PNGBC to appoint him as receiver/manager over the plaintiff.

At the end of Mr. Wardley's evidence, the plaintiff closed its case. Mr. Gawi, then informed the court that his client was not producing any evidence. He was instead ready with his client's submissions. He indicated that he would make his submission orally first and later file written submissions. On the other hand, Mr. Griffin QC, said he was ready to make submission orally and would prefer that both parties make their submissions orally. I allowed Mr. Gawi to choose either to file written submissions the next day or make oral submissions at the end of evidence. He opted for the latter. I therefore, proceeded to hear submissions of the parties the same day of the trial.

I have already set out the parties' submission. I will therefore not repeat them here. Instead, I will go straight into the issues for determination. But before I do, let me address the evidence presented and whether or not I accept them. Mr. Gawi made no submissions on this issue. I therefore take it that there is no issue on the acceptance of the plaintiff's evidence. I find in any event that, the plaintiff's witnesses were truthful in their evidence. They gave me no impression of not telling the truth or that they were making up things. Cross examination of these witnesses failed to cast any doubt on their credibility as well as their reliability.

From the evidence produced for the plaintiff, I find that the plaintiff and the State entered into a construction contract 25 June of 1999. The plaintiff duly mobilized its plant, equipment and labour to carry out the contract. When it got to the site ready, to commence the agreed construction, some initial work that were to be done by the State were not in fact done. This required a variation of the contract, as some more time and money was required for the additional work. Subsequently, a landowner issue arose and that necessitated suspension of work for the State to have that resolved. It also meant a stand down of the plant and equipment. There were two "stand downs" caused by these events. After these issues were resolved by the State, the plaintiff proceeded with the construction of the project and rendered a number of invoices in the agreed manner for work already done. The State delayed in a prompt payment of the claims. The delays continued up to a level where the plaintiff could not bear it anymore. It therefore "stood down" its plant and equipment with due notice of the same to the State. This is a normal and established practice in the construction industry.

The State accepted the delays and the "stand downs" and instructed the plaintiff to continue to "stand down" its plant and equipment whilst it was looking for funds to meet the progress claims and the balance of the amounts due under the contract. The plaintiff provided the State with daily records of "stand down" for plant and equipment. On the basis of those records the plaintiff rendered invoices on an agreed rate of 60% of the normal daily rate for the plant and equipment and on costs of K14,785.00 per day. These rates were agreed to, to take into account the fact that when the plant, equipment and manpower were assigned to the project, and they could not operate, they could not be used elsewhere and generate an income for the plaintiff. There was however, some savings in areas such as fuel costs. However, the on costs continued to be sustained by the plaintiff even when the plant and equipment were not operative.

The State took no issue on any of the records or the invoices rendered on the basis of the records. Its only problem was that, it was not able to meet the invoices due to its inability to secure the required funds to pay them and see to a completion of the contract. This continued up to a period of 7 months, after which the plaintiff decided to terminate the contract because its cash flow was seriously affected by the non-payment of the sums due and owing from the State. The plaintiff could have earlier terminated the contract. But because of the likelihood of the State securing the funds and meeting its obligations to the plaintiff anytime based on the good relationships they have had in the past, it did not do so until it could not bear it any longer.

At the time of the termination of the contract, the plaintiff's "stand down" claims stood at a total of K9,778,323.50 before adding value added tax and interests on to it. When value added tax was added, the total due and owing increased to K12,066,906.83. This figure has now further increased to K16,121,854.26 up to the date of the trial. That consists of K974,654.75 in value-added tax and K5,400,652.01 in interest calculate at 24% and not the prevailing commercial bank interest rates of 24.55%. The contract provides for interest on all outstanding charges and or claims at the prevailing commercial bank interest rate. This is set out in the plaintiff's schedule of damages, which was admitted into evidence with the consent of the State.

(i) First Issue – Remoteness of Damages

I reject the State's submission on this issue for two reasons. First, the issue of remoteness in my view goes into the issue of liability. The consent judgement on liability resolved that issue. On the basis of the principles governing the assessment of damages after judgement on liability and the effect of judgement by consent I earlier set out, this is not in my view an issue that is open for consideration. The second reason is that, these damages were incurred as a direct consequence of the State's admitted breach of the contract. It was a term of the contract by virtue of the agreed variation to the contract and if that is not enough by necessary implication a term of the contract that these would be incurred on account of any breach on the part of the State, particularly by failing to promptly pay.

(ii) Second Issue – Mitigation of Damages

The relevant evidence on this is that, the plaintiff had commenced discharging its obligations under the contract. It therefore, part performed the contract and in accordance with the terms of the contract, it rendered progress claims. The State was not able to meet those claims due to lack of funds. That resulted in a stand down of plant and equipment again in accordance with the contract. Given its inability to promptly meet the progress claims, the State agreed to the stand down at the rate of 60% of the normal charges for plant and equipment and K14,785.00 per day for on costs. The delay in payment continued and so did the stand down. There were a number of meetings on these issues between the parties. Those meetings resulted in an agreement for the situation to continue on the State's undertaking to secure the funds and complete the contract. In view of that, and the parties' relationship, the plaintiff could not terminate the contract until its cash flow was affected.

These facts are not in dispute or have not been rebutted in any way by the State. It is settled law that a defendant who claims a lack of any mitigation of damages has the burden to establish that. My brother Mr. Justice Hinchcliff set out that principle in these terms in Dia Kopo v Employment Authority of Enga Provincial Government and Enga Provincial and Local Level Government (1999) N1865:

"... it is trite law that the onus is upon the defendant to point to a particular course of action which, had the plaintiff followed it, would have reduced the amount of harm suffered by the plaintiff. The onus is on the defendant to prove that such a course was reasonable in the circumstances (Roper v Johnson (1873) L.R. 8CP 167; Criss v Alexander (No. 2.) (1928) S.R. (N.S.W.) 587 at 595-596 per Street C.J.; Metal Fabrications (Vic) Pty Ltd. v Kelcey [1986] VicRp 52; [1986] V.R. 507."

In the course of the State's counsel's submissions, I drew his attention to my judgement in Kenneth Bromley v Finance Pacific Ltd (2001) N2097, where I decided to deduct one third of the plaintiff's damages for his failure to mitigate. That was in a contract of employment setting and the plaintiff did not seek any alternative employment.

Mr. Gawi made no specific submissions based on that case. Instead, he went on to argue that the contract ought to have been completed by September 1999, but the plaintiff waited for 7 months and then later billed the State for waiting.

Mr. Gawi's argument failed to acknowledge the fact that, the State had agreed to the stand down and did instruct the plaintiff to continue with the stand down. It also failed to acknowledge the fact that, without the State being able to meet the plaintiff's progress claims and the charges for the stand down, the contract could not be completed. It obviously overlooked the obvious, which was that, the failure on the part of the State to pay promptly the claims and or charges due as and when they were due under the contract, resulted in the "stand downs." That meant that the contract could not be completed in September 1999 or soon thereafter.

The State's arguments also failed to acknowledge the fact that the State did not produce evidence to establish what the plaintiff could have done to mitigate its loss or damages. In any event, I find on the evidence now before me that the plaintiff was given no choice but to continue with its "stand down" until its cash flow was affected. As a result, the State was in continuous breach of its obligation to pay under the contract as varied. This placed the plaintiff in a state of anticipatory breach if it terminated the contract notwithstanding the State's instructions and its past relationship with the State.

I also find on the evidence that by reason of the State's inability to pay in its admitted breach of the contract, resulted in the appointment of the receiver/manager. Similarly I find that the State's admitted breach of the contract resulted in the plaintiff's loss of the Vanimo contract and the anticipated income from that contract.

For these reasons, I reject the State's claim of the plaintiff failing to mitigate his losses or damages. Instead, I find that the State was in continuous breach of its obligation to pay and or meet claims for payment under the contract for progress claims and subsequently the "stand down" claims.

(e) Award of Damages

This now leaves me to assess and award the damages that are supported by the evidence for the contested items of damages claimed by the plaintiff. First is the claim under "stand down." I find this claim has been established in its entirety. I do so, having regard to my foregoing findings and or decision. I therefore, make award of K16,121,854.26. That is inclusive of interests and value-added tax up to the date of the trial. In so doing, I also note that the claim was increased from the original claim of K12,066,906.83. This was without any objection from the State and is set out in the schedule of the plaintiffs damages, which was admitted into evidence as exhibit "B".

For the same reasons, I also accept and award the plaintiff's Receiver's expenses in the sum of K438,723.73.

In relation to the remaining claims for damages for demobilization and loss of Vanimo contract, there is again, no serious issue. They are in the schedule of the plaintiff's damages, Exhibit "B." Neither of the plaintiff's witnesses was cross-examined on these aspects. No suggestion was put to the witness, for example, that these losses or damages were not suffered or that they were unreasonably incurred. The plaintiff's evidence is that these items of damages were incurred as a result of the State's failure to meet the plaintiff's claims as and when they fell due leading to the appointment of its Receiver/Manager.

In submissions, however, Mr. Gawi asked me to allow only the profit component of the claim for loss of the Vanimo Contract. He was not able to specify how much that should be and how he was able to arrive at that. On my asking for assistance in those terms, he conceded having no basis for his submissions and did not insist on his submissions. He made no submissions in respect of the plaintiff's demobilization. In these circumstances, I award the respective damages of K75,652.42 and K1,680,383.95 as has been established on the required standard of proof, that is on the balance of probabilities.

In making these, awards I reject Mr.Gawi's submission that I should make a cumulative award of not more than K2.5 million. The reason for this is similar to the above. He was not able to assist me by showing on the evidence before me, how such a submission should be accepted and more importantly how such an award could be arrived at. He did not demonstrate how or why I should reject essentially uncontested evidence of these damages being incurred because of the State's failure to meet its obligations under the contract, and in respect of which the State has expressly and formerly accepted liability by endorsing the consent judgement on liability.

In summary therefore, I find that the plaintiff did reasonably incur the damages it claims to have incurred on account of the State failing to promptly meet the plaintiff's claims under the contract. They were not too remote and in any case, they were reasonably and necessarily incurred with full knowledge and agreement of the State at a rate of 60% of the normal rate for plant and equipment and on costs of K14,785.00 per day. This is why the State consented to judgement with damages to be assessed.

On the assessment of damages, the State failed to produce any evidence or reason for me to disallow all or any part of the plaintiff's claims. In summary therefore, I make the following awards of the damages:

(A) STAND DOWN

Stand Down Costs (for period of Stand Down i.e. 23/10/99 to 23/07/00) –

Amount (K)

(B) CONTRACT TERMINATION ENTITLEMENT

(C) DEMOBILISATION

(D) VANIMO Contract (Paragraph 25 of Statement of Claim)

(E) RECEIVER'S EXPENSES

Ultimately, I order judgement for the plaintiff in the sum of K18,740,108.60. Costs are reserved for further argument and determination.

Lawyers for the plaintiff: Maladinas Lawyers.
Lawyers for the defendant: Henaos Lawyers.