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Bilas v Guan [2020] PGNC 228; N8463 (25 August 2020)

N8463

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1424 OF 2017

BETWEEN:
SIMON BILAS
Plaintiff

AND:
MIRANDA GUAN
First Defendant

AND:
MILAN CHUN TIAN LTD
Second Defendant

Madang: Narokobi J
2020: 14^th, 19^th, 25^th August

DAMAGES – assessment of damages – special damages for breach of notice period – application of the common law to determine general damages – subject to considerations provided in the Underlying Law Act 2000 - general damages – stress and anxiety – considerations to determine appropriate amount in general damages.

The plaintiff had a lease agreement with the defendants. The court determined liability by finding that two clauses of the lease agreement had been breached – notice period and illegal connection of electricity. It returns to court for assessment of damages after conclusion of trial.

Held:

(1) Notice under lease agreement was for one (1) month, and since the lease agreement was for a rental of K2,000 per month, the plaintiff was entitled to this amount for breach of the notice period.

(2) After considering the requirements of section 4(3) of the Underlying Law Act 2000, it is declared for purposes of Sections 4(5) and 4(4)(b) of the Underlying Law Act 2000 that the common law as developed in the English case of Hadley v Baxendale (1854) 9 Exch 341 is part of the underlying law of Papua New Guinea as it is appropriate to the circumstances of Papua New Guinea having met the requirements of sections 4(3)(b)of the Underlying Law Act, for the reason it is applicable and appropriate to the circumstance of the country. It will enable Papua New Guineans to fully participate in modern commercial transactions, by ensuring that all parties who enter into a contract will have their rights and interests protected through common law rules that have a sustained history of resolving disputes in contractual breaches fairly.

(3) The plaintiff has shown to the satisfaction of the court through the pleadings and the evidence that he suffered embarrassment, shame and humiliation for the illegal electricity connection to his property, and so he should be entitled to general damages.

(4) In determining general damages for breach of contract, the two tests to apply to determine appropriate damages are:

• whether the damages are such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself; or
• whether the damages are such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it (Hadley v Baxendale (1854) 9 Exch 341considered as appropriate and applied).
  

(5) In the circumstances of this case, it is reasonable to suppose to have been in the contemplation of both parties, that is the second limb of the rule in Hadley v Baxendale, that the plaintiff would have suffered embarrassment, shame and humiliation in the eyes of the public for the breach of the lease agreement by the defendants connecting power illegally.

(6) General damages was assessed at KK7,000.00.

(7) The total amount of damages awarded was K2000.00 + K7,000.00 = K9,000.00. In addition, interest of K2,016.00 is payable, making the total judgment of K11,016.00.

Cases Cited
Papua New Guinea Cases

PNGBC v Jeff Tole (2000) SC 694
Rodao Holdings Ltd v Sogeram Development Corporation Ltd (2007) N5485

Overseas cases cited:

Hadley v Baxendale (1854) 9 Exch 341.

Legislation cited:

Judicial Proceedings (Interests on Debts and Damages) Act 2015
Underlying Law Act 2000

TRIAL

This is a trial on assessment of damages.

Counsel

Mr.B Tabai, for the Plaintiff
Mr. B Wak, for the Defendants

JUDGMENT

25^th August, 2020

1. This is an action for breach of a tenancy agreement entered into by the parties on 20^th November 2014. The plaintiff leased his property to the defendant for a monthly rental of K2,000 per month. On 9 August 2019 the court found the defendants liable, having breached clause 6 regarding notice period and clause 3 in relation to illegal connection of electricity. The matter now returns for assessment of damages.
   

A ISSUES

2. The issue I have to determine in this case is how much damages I should award for breach of the lease agreement in clause 6 for not giving sufficient notice and clause 3 for making illegal electricity connection.
   

B BACKGROUND, PLEADINGS AND EVIDENCE

3. The plaintiff claims the following categories of damages:
   
   • Breach of the notice period – K2,000.00; and
   • General damages for shame and embarrassment for K10,000.
     
4. The defendant does not dispute that the plaintiff is entitled to K2,000 for breach of the notice period, but says the plaintiff has not pleaded or proven general damages for breach of contract. The defendant submits that following the Supreme Court’s decision in PNGBC v Jeff Tole (2000) SC 694, the plaintiff should not be entitled to anything as it has not pleaded nor provided evidence to support the claim.
   
5. I accept that I should award K2,000 for breach of the notice period in clause 3 of the lease agreement. What is at issue is how much I should award for general damages for breach of the lease agreement.
   
6. I also accept that the defendants have raised a relevant issue on the need for adequate pleading and have had recourse to the statement of claim. In the statement of claim, the plaintiff pleads the illegal connection. This is confirmed by the finding of this court, that clauses 3 and 6 of the lease agreement has been breached. I also find that the pleadings refer to financial hardships, mental stress and anxiety for the breach of the contract. So I am satisfied that the pleadings have met the requisite standards.
   
7. What does the evidence say with regards to general damages? The plaintiff says at paragraph 3:
   

“Their sudden departure without giving notice had caused me a lot of hardships and inconveniences in that: (1)I was not able to pay my second born son’s school fees at Hagen Technical School for the year 2017. Thus he did not enrol at the said school to do his 2^nd year; and (2) I could not quickly find another person to move in and lease/rent the property immediately after the defendants left.”

8. At paragraph 4 states the following is stated by the plaintiff:
   

“The discovery of illegal connection of electricity had also caused me a lot of embarrassment, humiliation and shame. Since the day I took over from my father, late Sir Angmai Bilas and began operating the property. I have never participated or got involved in this kind of activity.”

9. At paragraph 5 he says:
   

“I was so ashamed because people including PNG Power employees, might start taking me as a person who does illegal connections and have been using free power at my area.”

10. In reply the defendants have not led evidence to rebut this aspect, and it seems this is why it has run its case on a legal defence on the adequacy of pleadings.
    

C THE LAW AND APPLICATION OF THE LAW TO THE ISSUES

11. So I turn to the issue of the amount for general damages after awarding K2,000 for breach of the notice period. For this issue, I have had recourse to the case of Rodao Holdings Ltd v Sogeram Development Corporation Ltd (2007) N5485 which adopted the famous English case of Hadley v Baxendale (1854) 9 Exch 341 as appropriate to the circumstances of Papua New Guinea.
    
12. I agree that it is an appropriate common law to adopt in our country after considering the Underlying Law Act 2000. I note that in this case the lease agreement is a modern commercial arrangement and I assume that it is between a citizen and a non-citizen. I have not been assisted with any custom that may be applied in this case. After considering the requirements of section 4(3) of the Underlying Law Act, I am of the view that this particular common law is appropriate to the circumstances of Papua New Guinea, as it will enable Papua New Guineans to participate in modern commercial transactions, by ensuring that all parties who enter into a contract will have their rights and interests protected through common law rules that have a sustained history of resolving disputes fairly. I therefore declare that for purposes of section 4(5) of the Underlying Law Act, that the common law as developed in the case of Hadley v Baxendale is part of the underlying law of Papua New Guinea for the reason enumerated in section 4(3)(b). I am required to provide the reason for application of common law under s 4(4)(b) of the Underlying Law Act which I have provided above.
    
13. Hadley v Baxendale sets out how the court ought to approach assessment of damages for breach of contracts. The statement of the law is taken from Baron Alderson:
    

“Now we think the proper rule is such as the present is this: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made where communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For such loss would neither have flowed naturally from the breach of this contract in the great multitude of such cases occurring under ordinary circumstances, nor were the special circumstances, which, perhaps, would have made it a reasonable and natural consequence of such breach of contract, communicated to or known by the defendants. The Judge ought, therefore, to have told the jury, that, upon the facts then before them, they ought not to take the loss of profits into consideration at all in estimating the damages. There must therefore be a new trial in this case.” (Emphasis added)

14. The above statement has been analysed in many subsequent cases and they say that Hadley v Baxendale has two limbs when determining the question of damages for breach of contract(see for example Victoria Laundry v Newman [1949] 2 KB 528, which was also cited in Rodao):
    
    • the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself; or
    • damages such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.
      
15. In my view, it is reasonable to suppose that the plaintiff’s stress and anxiety from the embarrassment, shame and humiliation would be the natural consequences of the breach of the lease agreement, through an illegal activity conducted on the plaintiff’s premises. Since the plaintiff was the proprietor of the property, he most likely would have been prosecuted by PNG Power Ltd for stealing electricity if after the defendants had vacated the property, the illegal connection was detected. The lease agreement was clear that there should not be any alteration to the property. Even if it was not in the lease agreement, what the defendants did was illegal, and it would most likelyresult in loss of reputation in the eyes of the public by the plaintiff given his father was a senior statesman. This was a fact well known to the first defendant, as she had contributed to the plaintiff’s father’s funeral expenses. I am therefore applying the second limb of the test in Hadley v Baxendale ie that the damages suffered by the plaintiff would have been in the contemplation of both parties at the time they made the contract.
    
16. How do I quantify this? The plaintiff claims K10,000 and the defendants submits that the plaintiff should get nothing. If the claim was for loss of business, there would have been something more concrete to base assessment on such as past rental earnings. In light of this predicament, I have taken the liberty to consider the evidence led during trial on the issue of liability (before Cannings J) and I have discovered that there was a notice for payment issued by PNG Power Ltd to the defendants in relation to the illegal connection for the amount of K6,873.26. Since what the defendants did was illegal, and the charge of K6,873.26 was a natural consequence of the breach, it is reasonable to foresee that this is what would have occurred if there was an illegal connection. In my view the appropriate amount for this head of damage should at least be K6,873.26, as a symbol to restore lose of reputation, that is the amount that PNG Power Ltd charged for the illegal connection. I round this figure off and therefore award general damages for K7,000.00.
    

D INTERESTS

17. The plaintiff claims interest and I see nothing militating against the awarding of interests, so I also award interests on both heads of damages as per the Judicial Proceedings (Interests on Debts and Damages) Act 2015 at the rate of 8% from the date of filing of the writ to the date of judgment. Ie 22 December 2017 to 25 August 2020, that is 2.8 years, so K9,000x0.08x2.8 = K2,016.
    

E COSTS

18. On the issue of costs, the general rule is that costs should follow the event. I also see nothing preventing me from awarding of costs in favour of the plaintiff, but noting from counsel and the first defendant’s evidence, their past good relationship, I award costs in the fixed sum of K5,000.00.
    

F ORDERS

19. The orders I therefore make are as follows:
    
    1. The defendants pay the plaintiff a judgment sum of K11,016.00; and
    2. The defendants pay the plaintiff costs in the fixed sum of K5,000; and
    3. Time is abridged; and
    4. File is closed.
       

Judgement and orders accordingly

Tabai Lawyers: Lawyers for the Plaintiff

Bradley Wak Lawyers: Lawyers for the Defendants