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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO 957 OF 2011
STEVEN TURIK
Plaintiff
V
MATHEW GUBAG
Defendant
Madang: Cannings J
2013: 22 February, 4 March, 5 April
CONTRACT – written agreement – alleged breach of contract – circumstances in which a cause of action in quasi-contract may arise – quantum meruit
The plaintiff claimed that he had a written agreement with the defendant under which he would be the sales agent on behalf of the defendant, who wanted to sell a piece of land, and negotiate with potential buyers and upon completion of the sale be paid by the defendant a commission of at least 10% of the sale price. The plaintiff claimed that after considerable time and effort he found a potential buyer and negotiated with him to sell the land for K230,000.00; then while negotiations were ongoing after the plaintiff mentioned to him what was happening the defendant without the plaintiff's knowledge negotiated directly with the buyer and sold him the land for K180,000.00. The plaintiff asked the defendant for 10% of the sale price. The defendant refused to pay so the plaintiff commenced proceedings against the defendant claiming K18,000.00 commission and damages for breach of contract. The defendant denied liability on two grounds, first that there was no contract and secondly if there was a contract he had not breached it, instead it was the plaintiff who breached the contract as he failed to find a buyer.
Held:
(1) There was a written contract under which the plaintiff was to be paid a 10% commission upon successful completion of a sale that he had negotiated.
(2) There was no breach of contract by the defendant as the obligation to pay a 10% commission to the plaintiff only arose upon a sale that had been negotiated completely by the plaintiff, and here the plaintiff had only engaged in preliminary negotiations with the buyer.
(3) However, the plaintiff established a cause of action in quasi-contract in that he performed services pursuant to a contract and his completion of the contract was thwarted by the actions of the defendant and it would be unjust to allow the defendant to benefit from the contract and the services performed without paying just remuneration to the plaintiff.
(4) The appropriate remedy is to award the plaintiff a quantum meruit (the amount that is merited), ie a reasonable amount of money to remunerate him for services actually performed, which was assessed at half the amount (K18,000.00) that would have been earned if the plaintiff had completely negotiated the sale: K9,000.00.
(5) Interest calculated at the rate of 8% per annum on the quantum meruit from the date of service of the writ was awarded to the plaintiff, in the sum of K856.80; in addition the court, having regard to the fact that neither party was legally represented at the trial, fixed costs payable by the defendant at K1,000.00.
(6) The total judgment sum was K9,000.00 (quantum meruit) + K856.80 (interest) + K1,000.00 (costs) = K10,856.80.
Case cited
The following cases are cited in the judgment:
Delphi Corporate Investigations Ltd v Bernard Kipit (2003) N2480
Egga Pua v Otto Benal Magiten (2005) N2892
Leonard Gaua v Joe & Theresia Amir (2010) N3891
Leontine Ofoi v Kris Bongare (2007) N3248
National Housing Commission v Queensland Insurance (PNG) Ltd [1988-89] PNGLR 474
Paradise Farms Ltd v Bank South Pacific Ltd (2010) N3825
Patterson v NCDC (2001) N2145
Sonny Atua v Grace Kemmah (2012) N4687
Steven Naki v AGC (Pacific) Ltd (2005) N2782
The State v Barclay Bros (PNG) Ltd (2004) N2507
Tinange Tamase v MVIT [1992] PNGLR 244
Veltro Ltd v Steven Liu Huang (2006) N4608
STATEMENT OF CLAIM
This was the trial of an action for breach of a contract for services.
Counsel
S Turik, the plaintiff, in person
5th April, 2013
1. CANNINGS J: The question in this case is whether the court should order the defendant Mathew Gubag to pay any money to the plaintiff Steven Turik pursuant to an agreement that the plaintiff claims they entered into in January 2010.
2. The plaintiff claims that under the agreement he was to be sales agent on behalf of the defendant, who wanted to sell a piece of land in Madang town, and negotiate with potential buyers and upon completion of the sale be paid by the defendant a commission of at least 10% of the sale price. The plaintiff claims he found a potential buyer, "Mr B", and negotiated with him to sell the defendant's property for K230,000.00; then while negotiations were ongoing, after the plaintiff mentioned to the defendant what was happening, the defendant without the plaintiff's knowledge negotiated directly with Mr B, and sold him the land for K180,000.00. The plaintiff says that he asked the defendant for 10% of the sale price. The defendant refused to pay anything so the plaintiff commenced proceedings against him claiming K18,000.00 commission and damages for breach of contract.
3. The defendant failed to attend the trial but filed a defence to the statement of claim, denying liability on two grounds, first that there was no contract and secondly if there was a contract he had not breached it, instead it was the plaintiff who breached the contract as he failed to find a buyer. Four issues arise:
1 WHAT ARE THE FACTS?
4. The court has only heard evidence that supports the plaintiff's version of events but it is credible evidence and I rely on it to make the following findings of fact. On 27 January 2010 the plaintiff and the defendant signed a one-page document, which stated:
LETTER OF AGREEMENT
I Mr MATHEW GUBAG of C/: Madang Provincial Government, PO Box 2108, Madang, Madang Province, do give my consent to Mr STEVEN TURIK of PO Box 624, Madang, Madang Province to act as my Sales Agent to negotiate on my behalf to sell to potential buyers my registered State Lease at Section 59, Lot 8 with a total size of 0.0966 hectares and located at Bemlon St, Newtown, Madang.
I hereby agree, and give these three undertakings to Mr Steven Turik if he successfully negotiate and sell my land.
or
and
I Mr Steven Turik do agree to act as Sales Agent for Mr Mathew Gubag and accept the three undertakings given above.
We hereby agree and sign, dated Wednesday the 27th day of January 2010.
....... [Signed .............. ....... [Signed ..............
MR MATHEW GUBAG MR STEVEN TURIK
Lease Holder Sales Agent
5. Within a few days after signing the agreement the plaintiff approached a Madang resident, "Mr B", and told him that he was the sales agent for the defendant and that the Bemlon Street property was for sale for a price of K230,000.00. Mr B told the plaintiff that he was interested but that he would have to sort things out with his bank before he took the matter further. Mr B (who swore an affidavit concerning these events, which was admitted into evidence) did not disclose the information about his interest in the property to anyone including the defendant. One month later – I estimate in early March 2011 – Mr B had a visit from the defendant who offered to sell him the property for K180,000.00. Mr B accepted the offer and later made full payment to the defendant.
6. There is no direct evidence of how the defendant became aware that Mr B was a potential buyer but as Mr B has given evidence that it was not him I draw the inference and find as a fact that it was the plaintiff who gave that information to the defendant, which the defendant then used to approach Mr B and negotiate directly with him, thereby leaving the plaintiff out of the arrangements.
7. After finding out about the sale of the property to Mr B for K180,000.00 the plaintiff approached the defendant and asked for K18,000.00, being 10% of the sale price, as his commission pursuant to their agreement. The defendant refused to pay anything.
2 WAS THERE A CONTRACT?
8. This is a question of law. As pointed out in Steven Naki v AGC (Pacific) Ltd (2005) N2782 an arrangement between two or more parties is regarded as a contract, giving rise to legally enforceable rights and obligations, when three essential elements exist:
9. Each of those elements applied here. The letter of agreement is an authentic document, which demonstrates that there was a clear meeting of minds and certainty as to what the rights and obligations of each party were. The fact that the agreement was put in writing and signed by both parties manifested an intention to create legal relations. The terms of the agreement show that a bargain was struck between the parties: the agreement was supported with consideration (Patterson v NCDC (2001) N2145). The defendant's obligations, expressed as the undertakings numbered 1, 2 and 3, were more than mere promises (National Housing Commission v Queensland Insurance (PNG) Ltd [1988-89] PNGLR 474, Tinange Tamase v MVIT [1992] PNGLR 244. An exchange of promises took place under which the plaintiff undertook and promised to be the defendant's sale agent and the defendant in return promised to pay him a 10% commission if he successfully negotiated the sale of the land. There is no suggestion that either party lacked capacity to enter into a binding contract or was mistaken as to the subject matter or that any other circumstances existed that would warrant the court finding the agreement unenforceable. The letter of agreement dated 27 January 2010 was a legally enforceable contract.
3 HAS LIABILITY BEEN ESTABLISHED?
10. Put another way this question can be posed as: has the plaintiff established a cause of action that would entitle him to or make him eligible for a remedy such as damages? The main cause of action pleaded in the statement of claim is breach of contract, however the statement of claim is drafted in sufficiently broad terms to discern from it an alternative cause of action in 'quasi-contract'. The two causes of action are quite distinct, so they must be dealt with separately.
11. To prove a breach of contract the plaintiff must prove that a contract existed and that a term of the contract was breached by the defendant and that the breach caused damage to the plaintiff (Veltro Ltd v Steven Liu Huang (2006) N4608). The plaintiff has proven the existence of a contract but what term of it was breached? The plaintiff clearly feels that he was wronged by the defendant. The way that the plaintiff sees it, the defendant went behind his back by negotiating directly with the buyer who the plaintiff had identified and negotiated with. There was no express term of the contract to prevent the defendant doing that. Arguably there was an implied term to that effect but given the fact that the parties reduced their agreement to writing the presumption arises that it set out exhaustively the terms of the agreement and the court has no evidence to rebut that presumption.
12. The plaintiff has not established that the defendant's conduct was a breach of contract. I also find that the defendant did not breach the contract by refusing to pay the plaintiff 10% of the sale price as entitlement to that commission only arose upon a sale that had been negotiated completely by the plaintiff. The plaintiff had only engaged in preliminary negotiations with the buyer. He set up the deal but he did not close it. Liability for breach of contract has not been established.
13. To prove a cause of action in quasi-contract a plaintiff need not prove breach of a contract or even the existence of a contract. All that needs to be proven is a set of circumstances that warrants the court treating the parties as if they had a contract, hence the use of the word "quasi" (seeming to be something, but not really so). Recognition of quasi-contract as a cause of action is a relatively recent development (occurring in the first half of the 20th century) in the common law of England, which Papua New Guinea adopted as part of the underlying law at Independence. It was a recognition by the courts that more conventional causes of action like breach of contract had their limits and could lead to clear injustice. The rationale for its development is explained in Halsbury's Laws of England, Fourth Edition, Butterworths 1974 Chapter 9, Para 630:
Any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution.
14. Quasi-contract has not received detailed attention by the PNG courts but its adoption as a legitimate and identifiable cause of action has been given tacit approval in The State v Barclay Bros (PNG) Ltd (2004) N2507, Delphi Corporate Investigations Ltd v Bernard Kipit (2003) N2480 and Leontine Ofoi v Kris Bongare (2007) N3248. The equitable action of unjust enrichment, to which quasi-contract is related in view of the emphasis on the law protecting innocent parties against unjust benefits being retained by others, has been more often applied in PNG in cases such as Paradise Farms Ltd v Bank South Pacific Ltd (2010) N3825, Leonard Gaua v Joe & Theresia Amir (2010) N3891 and Sonny Atua v Grace Kemmah (2012) N4687. After examining what has been said in those cases and in light of the historical development of this area of the law I suggest that the elements of a cause of action in quasi-contract can be described as:
15. I find that the plaintiff has proven those elements. He went out into the market and identified a potential buyer and then (rather naively it must be said) told the defendant what he had done. This was of benefit to the defendant as he ended up directly negotiating with that person, Mr B, and sold him the property. The plaintiff acted in accordance with an arrangement (the contract) he had with the defendant. It would be unjust to allow the defendant to retain the benefit of the arrangement without payment of some remuneration or reward to the plaintiff. The plaintiff has therefore established a cause of action in quasi-contract. He has established liability against the defendant. The next question is: what remedy, if any, should the court grant to the plaintiff?
4 WHAT ORDERS SHOULD THE COURT MAKE?
16. Proof of a cause of action is one thing; proof of entitlement to a remedy is another. When a plaintiff establishes liability for certain causes of action (such as breach of contract or the tort of negligence) an automatic entitlement to certain remedies (most commonly damages) arises. For other causes of action (and quasi-contract is included in this category) there is no entitlement to a remedy, only eligibility for a remedy. Granting a remedy and deciding on what form it should take is a matter of discretion.
17. The most common form of remedy for liability in quasi-contract is a quantum meruit (the amount that has been earned or the amount merited), whereby the court decides on what a reasonable amount of remuneration would be for the benefit that the plaintiff has provided.
18. In the present case there is no reason in principle that the plaintiff should not be awarded the whole of the remuneration he seeks: K18,000.00. But I think that to award him that amount would be to over-remunerate him, as the fact remains that he did not close the deal with Mr B. He may well have spent a lot of his time and expense searching for other buyers – which is what he claims in his submissions – but really there is no evidence of that, and I don't think that it is something that ought to be too easily presumed. An assessment of what is reasonable must take account of all the circumstances of the case including the fact that the plaintiff was imprudent by signing what was a loosely worded written agreement that did not prevent the defendant using information that the plaintiff gave him from entering into direct negotiations with potential buyers. To some extent the plaintiff has been the cause of his own downfall by telling the defendant about his negotiations with Mr B. All things considered I assess the appropriate and reasonable amount of remuneration as being one half of the amount (K18,000.00) that the plaintiff would have been entitled to if he had closed the deal with Mr B: K9,000.00. The plaintiff is not entitled to any damages on top of that. All claims for damages are refused.
19. I exercise the discretion available to the court under Section 1(1) of the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52 to award interest at the rate of 8 per cent per annum on the total amount of the quantum meruit calculated from the date of service of the writ, 26 January 2012, to the date of this judgment, a period of 1.19 years, by applying the following formula:
Where:
Thus K9,000.00 x 0.08 x 1.19 = K856.80.
20. Costs will follow the event, ie the successful party, the plaintiff, will be awarded his costs. As neither party has been legally represented at the trial the best thing to do is award a fixed and moderate amount of costs, which will avoid the need for a taxation of costs, and should allow the dispute to be resolved quickly (Egga Pua v Otto Benal Magiten (2005) N2892).
ORDER
(1) The defendant is liable to pay to the plaintiff a quantum meruit in the sum of K9,000.00 plus interest of K856.80 plus costs of K1,000.00, being a total judgment sum of K10,856.80, payable within 30 days after the date of entry of judgment.
(2) Time for entry of this order is abridged to the time of settlement by the Registrar, which shall take place forthwith.
Ordered accordingly.
____________________________
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