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East West (1) Ltd v Sim [2006] PGNC 124; N3103 (19 April 2006)

N3103

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1222 OF 1999

BETWEEN:

EAST WEST (1) LIMITED
Plaintiff

AND:

KEE AN SIM also known as RINGO SIM
First Defendant

AND:

GENERAL ENGINEERING & PARTS DISTRIBUTORS LIMITED
Second Defendant

Lae: Gabi, J
2006: 19 April

PRACTICE AND PROCEDURE – Contract – Breach of contract - Direct and indirect inducement - Inducing breach of contract is a tortious act – Elements of the tort.

Cases Cited

Papua New Guinea Cases
Nil

Overseas Cases
Lumley v Gyle [1853] EngR 15; (1853) 2 E. & B. 216
Mogul Steamship Co. Ltd. v Mcgregor, Gow & Co. [1891] UKLawRpAC 50; [1892] A.C. 25
Allen v Flood [1898] A.C.1
Quinn v Lenthem [1901] AC 495
British Industrial Prastics Ltd v Ferguson [1940] 1 All E R 479
British Motor Trade Association v Salvadori [1949] Ch. 556
DC Thomson & Co. Ltd v Deakin [1952] Ch. 646
Exchange Telephone Co v Gregory [1895] UKLawRpKQB 176; [1896] 1 QB 147
Stratford (J.T.) & Son Ltd. v Lindley [1965) A.C. 269
Torquay Hotel Co. Ltd. v Cousins [1969] 2 Ch. 106
Hadmor Productions Ltd v Hamilton [1983] 1 A.C. 191
Merkur Island Shipping Corpn. V Laughton [1983] 2 A.C. 570
Falconer v A.S.L.E.F. and N.U.R. [1986] I.R.L.R. 331
Barretts and Baird (Wholesale) Ltd. v IPCS [1987] I.R.L.R.3
News Group Newspapers Ltd. v SOGAT [1987] I.C.R. 181
Emerald Construction Co. Ltd. v Lowthian [1996] 1 W.L.R. 691
Merkur Emerald Construction Co. Ltd. v Lowthian [1996] 1 W.L.R. 691

Text:
Bullen & Leake and Jacobs, Precedents of Pleadings, 12th ed, Sweet and Maxwell, 1975, p 500 & 501
Bullen & Leake and Jacobs, Precedents of Pleadings, 15th ed, Sweet and Maxwell, p 819-822

Counsel:
D Poka, for the plaintiff
G Anis, for the defendants

DECISION

19 April, 2006

1. GABI, J: Introduction: The plaintiff is seeking damages for inducing breach of employment contract.

2. The plaintiff and the second defendant are both involved in motor vehicle repair and maintenance industry in Lae. The plaintiff’s action, as pleaded in the Statement of Claim, is for damages for "wrongfully and maliciously" inducing two of its experienced expatriate employees, Kajorn Kongkoen ("James") and Obscheric Suphachinic ("Willie"), to breach their employment contracts with the plaintiff and work for the second defendant by offering them better working conditions. As a result, the plaintiff was "unable to complete orders which it then had in hand for its customers" and suffered loss and damages.

3. The defendants in their defence deny any such inducement and say that James and Willie approached the second defendant for possible employment and after negotiations agreed to certain terms and conditions. As a result of the agreement, James and Willie terminated their contracts with the plaintiff and returned to Thailand. They were then recruited from Thailand and commenced employment with the defendant.

4. The Writ of Summons was filed on 29 October 1999 followed by the Defence, which was filed on 25 November 1999. On 29 July 2003, Kee An Sim also known as "Ringo Sim" was ordered to be added as a defendant in the proceedings. On 10 December 2003, the plaintiff filed an amended Writ of Summons and Statement of Claim, which was served on the defendants on 30 March 2004. In the amended Statement of Claim, paragraph 1 was amended to include paragraphs 1(a) to (e) and additional particulars of loss of sale and profit for the year 1999 and injury to the plaintiff’s trade. The pleadings closed on 25 November 1999. No leave was obtained to make the amendment. As such, I find that the amendment is invalid and will not be relied on.

5. The trial proceeded by way of affidavit evidence and oral testimonies. Joe Auri, Lamjuan Phoolthasee ("John Bangkok"), James, Kevin Mara and David Ninawale gave evidence for the plaintiff. The first defendant gave evidence at the trial for and on behalf of the defendants. In addition, the following affidavits were filed and relied on by the plaintiff: affidavit of John Bangkok dated 19 March 2001; affidavit of David Ninawale dated 19 March 2001; affidavit of Kevin Mara dated 30 May 2001; affidavit of Narayanan Murugesan dated 30 May 2001; affidavit of John Bangkok dated 21 July 2003; affidavit of Joe Arim dated 4 May 2005; and affidavit of John Bangkok dated 4 May 2005. The defendants filed and relied on the affidavit of Ringo Sim dated 14 April 2000.

Facts:

6. James and Willie are Thai nationals and were recruited by John Bangkok to work for the plaintiff. James was initially employed by Green Mountain Ltd. and when the company ceased operations, he was employed to work for the plaintiff. Willie was employed directly from Thailand. Work permits and visas for both men were organized by John Bangkok. Both men are skilled and experienced tradesmen in their respective fields of trade.

7. It is alleged that both men worked for the plaintiff until March 1999, when they took their recreational leave. They were given tickets by the plaintiff on or about 29 March 1999 to travel to Thailand via Singapore on 3 April 1999 and to return to Papua New Guinea on 1 May 1999. They were to arrive in Lae on 2 May 1999 after overnighting in Port Moresby. The work permits of the two men show the following:

Kajorn, K

Obchoei, S

8. The entry permit for James was valid until 31 August 1999 while Willie’s entry permit was to expire on 3 December 1999.

9. On 2 May 1999, James and Willie arrived in Lae and commenced to work for the second defendant. As a result, John Bangkok lodged a complaint with David Ninawale, the Provincial Labour Officer of the Department of Employment and Youth in Lae. On or about 12 May 1999, David Ninawale conducted an investigation. James and Willie were summoned to produce their passports and the following were noted:

Kajorn Kongkaew

Obchoei Suphachai

10. It is alleged that the first defendant was responsible for tempering with the employment records of the plaintiff held at the Headquarters of the Department of Employment and Youth in Port Moresby. As a result of the investigations and representations to the Department by Daniel Ninawale, the work permits of James and Willie were revoked and both were then repatriated to Thailand.

Submissions:

11. Counsel for the plaintiff submitted that his client’s action lies in tort and the essential ingredients to prove the tort of inducing a breach of contract are:

(i) that the wrongdoer knew or acquired knowledge of the contract in question and its essential terms;
(ii) that he so acted or interfered whether by persuasion, inducement or procurement or other means as to show that he intended to cause a breach of the contract or prevent its performance by one party to the detriment of the other;
(iii) that the breach of contract was directly attributable to such act or interference; and
(iv) that damage was occasioned or was likely to be occasioned to such other party (see Lumley v Gyle [1853] EngR 15; (1853) 2 E & B 216; Mogul Steamships Co. Ltd v Mcgregor Gow [1891] UKLawRpAC 50; [1892] AC 25 and Bullen & Leake and Jacobs, Precedents of Pleadings, 12th ed, Sweet and Maxwell, 1975, at pages 500 and 501). He argued that the essential ingredients have been proven. As such, the defendants are liable for inducing breach of contract.

12. Counsel for the defendants submitted that there was no inducement of breach of contract by the defendants. If there ever was a contract between the plaintiff and James and Willie, the defendant had no knowledge of or was not aware of the exact terms of the contract which had been broken. Counsel referred me to the case of British Industrial Prastics Ltd v Ferguson [1940] 1 All E R 479. He submitted that there was no negotiation between the first defendant and James and Willie. If there was any negotiation between the parties, it was conducted by Mr Ng Soon Tech, the General Manager of the second defendant. There is no dispute that James and Willie left their employment with the plaintiff and worked for the second defendant. If there was any breach of the contract, it was done by James and Willie and the plaintiff’s cause of action is against them and not the defendants. He argued that there was no malicious interference by the defendants and the plaintiff had not shown that it suffered loss. He further submitted that the nature of business conducted by the plaintiff and the second defendant are different and that the defendants would only be liable if they intentionally prevented or hindered the performance of the contract or committed some wrongful acts which prevented or hindered the performance of the contract. He argued that there was no such conduct in this case.

The Law:

13. Inducing a breach of contract is an actionable wrong in tort. In Quinn v Lenthem [1901] AC 495, Lord Macnaghten said at page 510:

It "is a cause of action... to interfere with contractual relations recognized by law if there be no sufficient justification for the interference".

14. There must be interference with the contractual relations between the contracting parties. I agree with Counsel for the plaintiff that the essential elements of the tort are that:

(i) the wrongdoer knew of the contract in question and its essential, though not necessarily its precise, terms;
(ii) he so acted or "interfered" whether by persuasion, inducement or procurement or other means as to show that he intended to cause a breach of the contract or prevent its performance by one party to the detriment of the other;
(iii) there was a breach of the contract attributable to such act or interference; and

(iv) damage was occasioned, or was likely to be occasioned to the other party to the contract. (See DC Thomson & Co. Ltd v Deakin [1952] Ch. 646 approved by the House of Lords in Merkur Island Shipping Corpn v Laughton [1983] A.C. 570; See also Lumley v Gye [1853] EngR 15; (1853) 2 E. & B. 216; Mogul Steamship Co. Ltd. V Mcgregor, Gow & Co. [1891] UKLawRpAC 50; [1892] A.C. 25; Stratford (J.T.) & Son Ltd. V Lindley [1965) A.C. 269; Emerald Construction Co. Ltd. v Lowthian [1996] 1 W.L.R. 691; Torquay Hotel Co. Ltd. v Cousins [1969] 2 Ch. 106; Falconer v A.S.L.E.F. and N.U.R. [1986] I.R.L.R. 331; News Group Newspapers Ltd. v SOGAT [1987] I.C.R. 181; and Barretts and Baird (Wholesale) Ltd. v IPCS [1987] I.R.L.R.3).

15. The tort may be committed by direct or indirect inducement. Indirect inducement is where the wrongdoer acts indirectly, other than on parties to the contract, so as to procure a breach of the contract. For example, the removal by the wrongdoer of the essential tools required for the performance of the contract. Direct inducement is where the wrongdoer, whether acting by himself or his agent, communicates pressure to the mind or person of one of the parties to the contract. In such a situation, it is essential to show that there was pressure, persuasion or procuration (See Bullen & Leake and Jacobs, Precedents of Pleadings, 15th ed, Sweet and Maxwell, pages 819 – 820).

16. I now turn to the consideration of the evidence to ascertain if the elements necessary to constitute a cause of action in law are present in this case.

Knowledge of contract

17. There are two (2) requirements: that the wrongdoer must act with the knowledge of the contract and with the intention to interfere with its performance (per Lord Diplock in Merkur Island Shipping Corpn. v Laughton [1983] 2 A.C. 570 at 608.

18. It is imperative that we establish whether there was an existing contract of employment between the plaintiff and James and Willie.

19. The plaintiff pleaded that James and Willie were on monthly contracts (Statement of Claim, paragraph 2). The defendant’s defence is that there was no contract between the plaintiff and James and Willie as both had terminated their contracts and returned to Thailand. The defendants then recruited them from Thailand (Defence, paragraphs 2,8,9,10 & 11).

20. There is no dispute that James and Willie were employed by the plaintiff before 2 May 1999. However, there is no evidence before me as to when James and Willie were employed by the plaintiff. There is no evidence that James and Willie resigned from the plaintiff to work for the second defendant commencing in May 1999 nor is there evidence that their contracts with the plaintiff were terminated. The entry permits of James and Willie show that they had work permits entitling them to work for the plaintiff (see affidavits of John Bangkok dated 19 March 2001, paragraph 2 and annexure "A" and affidavit of David Ninawale dated 19 March 2001, paragraph 4(b) and annexure "A"). Co-incidentally, both men also had work permits to work for the second defendant. As a result, an investigation was conducted by the Department of Industrial Relations. On 31 August 1999, the Secretary of the Department advised the second defendant that James and Willie were "properly employed by East West P/L" and had "breached conditions of their work permits by improperly obtaining alternative employment" with them and directed that their work permits be revoked and that they be repatriated to their country of origin (see affidavit of David Ninawale dated 19 March 2001, paragraphs 4(d), 5, 6, 8 and annexure "B").

21. I am satisfied on the evidence before me that James and Willie were employed by the plaintiff and were on contract of employment. Counsel for the defendants submitted that the defendants had no knowledge of the contract itself and also of the exact terms of the contract that were broken. (British Industrial Plastics Ltd v Ferguson (supra)).

22. The authorities clearly indicate that the wrongdoer must have knowledge of the existence of the contract. However, it is not necessary that the wrongdoer should have detailed or precise knowledge of the terms of the contract. It is sufficient to show knowledge of the existence of the contract and some of its likely or essential terms.

23. The evidence on the question of knowledge of contract conflict. In his affidavit, Ringo Sim deposed that in or about February or March 1999, James and Willie approached Ng Soon Ech, the General Manager of the second defendant inquiring about possible employment. After much negotiations, James and Willie agreed to be employed on certain terms and conditions (see affidavit of Ringo Sim dated 14 April 2000, paragraphs 3 & 4).

24. In examination in chief, Ringo Sim gave the following evidence:

"Q. Are you aware of any negotiations between Ng Soon Ech and James and Willie?

1. I am not aware of any negotiations."
   

25. He said he had no knowledge of James and Willie working for the plaintiff. In cross-examination, the first defendant admitted that he knew some Thai men working for the plaintiff in 1999 but did not know who they were. He denied speaking to them, asking them to work for the defendants or discussing terms and conditions of employment with them. He said that it was Ng Soon Ech who was involved in negotiations and engagement of James and Willie. He said that he only became aware of the two (2) men when he was asked by Ng Soon Ech to sign documents for work permits and visas for James and Willie.

26. James gave sworn evidence. In examination in chief, he said that in or about March 1999, the first defendant rang him and asked him and Willie to work for the first defendant in China town. He said there were a number of telephone calls between him, Willie and the first defendant. The first defendant offered him better or higher salary, commission and house. He told Kevin Mara that the first defendant had offered him better or higher salary, commission and house and that they would work for the first defendant when they return from leave. He said that they worked for the first defendant after they returned from leave. In cross-examination, he said that he never spoke to Ng Soon Ech. All the telephone conversations he had about working for the second defendant were with the first defendant.

27. The evidence of James is corroborated by Kevin Mara (see Kevin Mara’s affidavit dated 19 March 2001, paragraphs 5, 6, 7, 8 and 9 and his second affidavit dated 30 May 2001, paragraph 2, 3, 4 and 5).

28. I have carefully assessed the evidence of the first defendant and James and prefer the evidence of James. The first defendant was evasive and pleaded ignorance. He minimized his involvement and maximized the involvement of Ng Soon Ech in the negotiations and the recruitment of the two (2) men. I find that it was the first defendant who caused, induced or lured James and Willie to break their contracts with the plaintiff and work for the second defendant. Even if I were wrong and that it was Ng Soon Ech, who was involved in the negotiations and recruitment of the two men, I am of the view that he was acting on behalf of and acting as an agent for the defendants. Ng Soon Ech was General Manager of the second defendant. The first defendant is the only shareholder and director of the second defendant (see affidavit of John Bangkok dated 21 July 2003, paragraph 4 and annexure "A").

29. I am also satisfied that the first defendant would have known the essential terms of the contracts of employment as he was involved in negotiations and discussions which resulted in him offering better and higher wages, commission and house to the two (2) men.

Intention to cause breach

30. There must be an intention to interfere with the performance of the contract and the conduct or act must be deliberate and directed against the plaintiff.

31. I am satisfied that the conduct of the defendants were intentional, deliberate and calculated to cause the employees to breach their contracts with the plaintiff. The plaintiff and the second defendant are involved in the motor vehicle repair and maintenance industry. The evidence suggests that the plaintiff was running a reasonably successful business. In addition, the defendants with the assistance of officers of the Department of Industrial Relations obtained work permits for James and Willie to work for the defendants when the work permits for the said James and Willie were still current. The records in the Department were altered so that the number of expatriate employees the plaintiff could employ was reduced from four (4) to two (2) without the knowledge and authority of the plaintiff (see affidavit of John Bangkok dated 19 March 2001, paragraph 2(O) and annexure "E"). I believe that the defendants were part of this deliberate illegal act.

Breach of Contract

32. James and Willie worked for the second defendant after they returned from leave on 2 May 1999. They had breached their employment contracts with the plaintiff. This was caused directly by the first defendant or by Ng Soon Ech, an employee of the second defendant. A breach of an existing contract is a fundamental requirement for the tort of inducement. (Allen v Flood [1897] UKLawRpAC 56; [1898] A.C 1; Hadmor Productions Ltd v Hamilton [1983] 1 A.C. 191).

Damages

33. The claimant must prove that he has suffered loss as a result of the breach (see Exchange Telephone Co v Gregory [1895] UKLawRpKQB 176; [1896] 1 Q.B 147; British Motor Trade Association v Salvadori [1949] ch. 556).

34. John Bangkok’s evidence clearly shows that he lost clients after James and Willie left the plaintiff. Some of the customers he lost were Telikom PNG Ltd, Unitech, Elcom, Police Department and ANGAU Hospital. According to Mr Bangkok, those customers were not happy with the services offered by the plaintiff during the absence of James and Willie and took their motor vehicles and went to other workshops. James and Willie were specialists in their respective fields and none of the local employees in the workshop had those skills (see affidavit of John Bangkok dated 19 March 2001, paragraph 5). In addition, the accounting firm of Kiddie and Associates prepared a financial statement for the year 1999. According to the assessment, the expected loss of profit in 1999 was K35,364.00 (see affidavit of Narayanan Murugesan dated 30 May 2001, paragraphs 3 and 4 and affidavit of Joe Auri dated 4 May 2005, paragraphs 4 and 5).

35. I am satisfied that the plaintiff has discharged the burden of proof. I, therefore, find the defendant liable for inducing breach of contract. I make the following orders:

1. The defendants are liable.
2. Damages to be assessed.
3. Interest at 8 percent per annum shall apply on the total amount of damages payable to the plaintiff from the date of issue of the Writ, being 29 October 1999.
4. Costs to the plaintiff, to be taxed if not agreed.
   

____________________________________

Pryke & Jansen Lawyers: Lawyers for the Plaintiffs
Gamoga & Co Lawyers: Lawyers for the Defendants