N3905

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1066 OF 2007

BETWEEN:

ELIAB BUKA
Plaintiff

AND:

HENRY URAMETE
Defendant

Kokopo: Hartshorn J.
2009: 13th May, 
:15th September 

DAMAGES – plaintiff claimed damages for conversion of vehicle, loss of business and enjoyment –defendant not paying purchase price and committing a fundamental breach of agreement – breach treated as rescission of agreement - statement of claim properly discloses a reasonable cause of action - default judgment entered – calculation of damages for conversion

Facts:

The defendant was in possession of the plaintiff’s vehicle for 17 months after agreeing to buy it. The vehicle was repossessed for non payment of the purchase price. The plaintiff commenced this proceeding for conversion of the vehicle and sought damages for loss of business and enjoyment. Default judgment was ordered with damages to be assessed.

Held:

1. Statement of claim properly discloses a cause of action in conversion.

2. The defendant had committed a fundamental breach of the agreement.

3. The Plaintiff, by demanding its return and retaking possession of the vehicle had treated the fundamental breach as a rescission of the agreement.

4. The Plaintiff is entitled to an amount for loss of profits, being the hiring charges less an allowance for running costs.

5. Judgment in the sum of K39,270. 00 with interest at 8 % per annum is awarded.

Cases cited:

William Mel v. Coleman Pakalia & Ors (2005) SC790 
RH Trading Limited v. Damansara Forest Products (PNG) Ltd & Ors (1999) N1904 

Counsel:

Mr. W. Kivu, for the Plaintiff 

15th September 2009

1. HARTSHORN J. Mr. Eliab Buka agreed to sell to Mr. Henry Uramete his Mazda B2500 vehicle for K 35,000. Mr. Uramete had possession of the vehicle for about 17 months until it was repossessed by Mr. Buka. Mr. Uramete had registered the vehicle into his name, but did not pay the purchase price.

2. Mr. Buka commenced this proceeding seeking damages for the conversion of the vehicle and for loss of business and enjoyment.

3. Default judgment was ordered on 6th June 2008 with damages to be assessed.

Assessment of damages – law

4. The Supreme Court in William Mel v. Coleman Pakalia & Ors (2005) SC790 stated:

"The principles that apply to a trial on assessment of damages following entry of default judgment were summarised by Kandakasi J. in Coecon Ltd (Receiver/Manager Appointed) v National Fisheries Authority (2002), National Court, N2182.

His Honour stated:

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

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

2. Any matter that has not been pleaded that 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 judgment 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.

The Supreme Court adopted and applied those principles in Papua New Guinea Banking Corporation v Jeff Tole (2002) SC694, Amet CJ, Sheehan J, Kandakasi J.

Kandakasi J. applied those principles recently in the National Court in Desmond Huaimbukie v James Baugen (2004) N2589. We believe His Honour succinctly and correctly stated the law. We elaborate on the first principle by saying that once default judgment is entered, the facts as pleaded and their legal consequences in terms of establishing the cause of action as pleaded must be regarded as proven. (See Keith Reid v Murray Hallam and Allcad Pty Ltd (1995) N1337, National Court, Kapi DCJ and Andale More and Manis Andale v Henry Tokam and The State (1997) N1645, National Court, Injia J.)….....................

Turning back to the issue raised above as to the role of the trial judge after entry of default judgment, we consider the following to be the correct approach:

the trial judge should make a cursory inquiry so as to be satisfied that the facts and the cause of action are pleaded with sufficient clarity;
if it is reasonably clear what the facts and cause of action are, liability should be regarded as proven;
only if the facts or the cause of action pleaded do not make sense or would make an assessment of damages a futile exercise should the judge inquire further and revisit the issue of liability."

The claim

5. From a perusal of the statement of claim, it is accepted as proved that amongst others, Mr. Buka owned the vehicle and entered into an agreement with Mr. Uramete to sell the vehicle for K 35,000, that Mr. Uramete took possession but did not pay the agreed purchase price, that Mr. Buka demanded the return of the vehicle but that Mr. Uramete refused to return the vehicle, that Mr. Uramete changed the registration of the vehicle and kept the vehicle until 13th July 2006 and that by his actions Mr. Uramete had converted the vehicle to his own use.

6. I am satisfied that the statement of claim properly discloses a cause of action in conversion.

7. By not paying the purchase price Mr. Uramete had committed a fundamental breach of the agreement. Mr. Buka by demanding its return and retaking possession of the vehicle has treated the fundamental breach as a rescission of the contract instead of not retaking possession and affirming the agreement and then suing Mr. Uramete for the purchase price. Mr. Buka no longer has an obligation to give possession of the vehicle to Mr. Uramete. As a consequence his remedy is not to recover the purchase price but to seek damages for conversion for Mr. Uramete’s use of the vehicle to the exclusion of Mr. Buka’s right to the vehicle.

8. As to calculating damages for conversion, counsel for Mr. Buka cited the decision of Woods J: RH Trading Limited v. Damansara Forest Products (PNG) Ltd & Ors (1999) N1904 in which His Honour stated that:

"The normal rule in assessing the damages for the conversion of a profit making machine or asset is that an owner is entitled to compensation for the period of the loss at the full market rate of hire that the owner might otherwise have received; see Strand Electric Co v. Brisford [1952] 3 All ER 796."

9. His Honour further stated that:

"The law is that damages for conversion are damages at large, thus they do not depend on proof of what the plaintiff had actually planned to do with the profit earning asset but rather with the fact (that) the defendant has illegally deprived the plaintiff of its assets and should not be allowed to gain from that."

10. Mr. Buka has produced a projection based on hiring charges of K 216 per day x 6 days x 80 weeks to 13th July 2006; a total of K 103,680 and claims this as loss of business. What he is entitled to though is an amount for loss of profits, being the hiring charges less an allowance for running costs.

11. On the sums contained in the projection supplied by Mr. Buka, this calculates to K2,040 per month. For the total period that Mr. Uramete had possession of the vehicle this calculates to K 39,270. Accordingly, I award that sum.

12. Mr. Buka has also claimed K 5,000 for the loss of enjoyment of use of the vehicle. Given the amount that I have awarded for conversion on the basis of the vehicle's projected use for 6 days a week, any further award to my mind, is a duplication. I am not satisfied that it has been properly proved that Mr. Buka is entitled to damages for loss of enjoyment or for any other damages other than those that I have awarded.

Orders

13. I order judgment for the Plaintiff against the Defendant in the sum of K39,270 together with interest at 8% per annum from the date of the issue of the writ of summons until payment of the judgment sum and interest thereon.

14. The Defendant is to pay the Plaintiff's costs of and incidental to the proceeding.

______________________________________________
Kivu & Associates Lawyers: Lawyers for the Plaintiff