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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS No. 1449 of 2018 (COMM)
BETWEEN:
FINANCE CORPORATION LIMITED
Plaintiff
AND:
DR UKE KOMBRA, SECRETARY for the Department of Education
First Defendant
AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Defendant
Waigani: Anis J
2019: 15th August
2020: 28th April
CONTRACT – claim for specific performance based on breach of contract and court order – claim for damages based on breach of contract – contract partly written and partly oral – written irrevocable letters of authorities to deduct pay from government employees – oral agreement/arrangement between the parties – processing of pay deductions by the defendants concerning their employees’ loan agreements with the plaintiff - consideration based on 5% fortnightly deduction per employee which is deducted and received by the defendants as service fees
BREACH OF COURT ORDER – existing court order – mandatory injunctions in place for continuation of existing contractual arrangements between the plaintiff and the defendants’ employees – claim for specific performance
DAMAGES – assessment of damages – considerations
INTEREST - pre-judgment and post judgment interests – sections 4(2) and 6(1) and (2) of Judicial Proceedings (Interest on Debts and Damages) Act 2015 discussed – 2% fixed interest rate per annum applicable to damages awards that are awarded against the State
CONTEMPT OF COURT – claim that the first defendant was duly served or knew of the court order – claim that the first defendant had deliberately disobeyed the court order – elements of contempt of court discussed – clarity of the court order and personal service of the court order considered - standard of proof – beyond reasonable doubt – whether the plaintiff has discharged the required standard of proof
Case Cited:
Pamela Ipi Pangu v. Ian Ellery (2007) N3227
Joshua Kalinoe v. Paul Paraka (2014) SC 1366
Stephen Asivo v Bank of South Pacific Ltd (2009) N3754
Yondu Coffee Producers Ltd v. Fred Punangi (2017) N7128
Ace Guard Dog Security Services Ltd v. Lindsay Lailai (2003) N2459
NCDC v. Robert Dademo (2013) SC1260
Alphonse Willie v. Simon Kaupa (2016) N6553
Thomas Aiwara v. Cocoa Board of PNG (2017) N6788
Francis Pinje v. Jeffery Kera (2018) N7557
Ian Augerea v. Todagia Kelola (2014) N5582
Solomon Tato v. Samson Akuani (2016) SC1511
Gabrial Miai Bizei v. Joseph Gabut (2019) SC1793
Counsel:
Mr A Edo, for the Plaintiff
Ms B Kulumbu, for the Defendants
JUDGMENT
28th April, 2020
1. ANIS J: The trial for this matter proceeded by way of affidavits on 22 August 2019. No witnesses were called to testify or cross-examined at the hearing. The only person called to the witness-stand was the first defendant. He was asked to take his plea in response to the charge, contempt of court, which had been laid against him. He entered a plea of not guilty and the trial proceeded.
2. Affidavit evidence tendered by the parties were consented to. Presentation of submissions followed immediately on the same day after the parties closed their cases. I reserved my ruling thereafter to a date to be advised. Parties have been notified so I will rule on it now.
FACTS
3. The claim is in two folds. The first is for specific performance, breach of contract and court order, and for damages suffered as a result. The second claim is a charge for contempt of court. It is made against the first defendant.
4. The plaintiff is a licensed financial institution under the Banking and Financial Institutions Act 2000. It conducts its business as a lender of finance. As for this case, it has over the years been lending monies to employees of the State including those in the Department of Education. The contractual arrangement is this. The plaintiff provides its loan facilities to the State employees. If an employee wishes to obtain loan from the plaintiff, he or she would be required to firstly fill in the plaintiff’s application form. The application will be considered and either be approved or declined by the plaintiff based on its requirements. An essential part of the loan agreement is this. In addition to the plaintiff’s requirements as contained in its loan application, the employee is required to fill-in and also submit an irrevocable authority. The irrevocable authority consists of the employee’s express permission to the employer, which is the State, to deduct directly from the employee’s salary on a fortnightly basis, an allowable amount that is based on the loan agreement between the employee and the plaintiff, and to have that remitted directly to the plaintiff to offset the employee’s loan account. The next material term of the loan agreement is this. The defendants, in this case, the Department of Education, will be required to endorse the irrevocable authority and then take steps to commence fortnightly deductions on the salary of the employee concerned. For the defendants’ participation, the parties orally agreed as follows. For each fortnightly deduction for the duration of the loan agreement between the plaintiff and the employee, the defendants shall also deduct and receive a service fee of 5%. The said consideration applies to all employees who have loans with the plaintiff and who are employed with the Department of Education.
5. The plaintiff’s complaint arose on 11 October 2018. On that day, the first defendant issued an Internal Circular Instruction No. 6 of 2018 (Circular Instruction). In the Circular Instruction, the first defendant instructed the Department’s payroll section and I quote in part, not to accept, input and effect any new pay deductions from Financial Loan Companies until further notice. The plaintiff says that the Circular Instruction was issued in breach of the terms of the contract that exists between the parties. The plaintiff also claims that the Circular Instruction or that the actions of the first defendant, was in direct breach of an existing Court Order. By that, the plaintiff refers to earlier mandatory injunctive orders that had been issued by this Court. The Court Order is dated 2 April 2014 (Court Order of 2 April), and it was issued in proceeding WS 1363 of 2007. The plaintiff claims that the defendants have breached the Court Order of 2 April by their actions, and amongst others, by the action of the first defendant in issuing the Circular Instruction. The plaintiff claims that it has suffered damages as a result.
6. The second part of the plaintiff’s claim is the contempt of court charge. The alleged contemnor is Dr. Uke Kombra, the first defendant. As stated above, Dr Kombra has pleaded “not guilty”. The plaintiff’s charge is based on the Court Order of 2 April in proceeding WS 1363 of 2007. The plaintiff alleges that Dr Kombra, having known of the Court Order of 2 April, breached it, that is, when he issued the Circular Instruction on 11 October 2018. As such, the plaintiff submits that he should be found guilty of contempt of court and be punished.
COMMON GROUND
7. The parties do not take issue with the contract or the contractual arrangements that exist between themselves and the State employees. When I use the phrase “State employees”, I of course and for this case, specifically refer to employees within the Department of Education who have existing loans with the plaintiff. And when I use the phrase “contractual arrangements,” I make reference to the processes or practices that have been put in place in terms of loan applications, the loan application requirements, and also the 3 notable conditions for loan approvals as highlighted above under the sub-heading “FACTS”, between the plaintiff, the defendants and the State employees.
ISSUES
8. Let me address the issues in regard to the first part of the claim. The first issue relates to the Circular Instruction, that is, whether the Circular Instruction breached the Court Order of 2 April. The next issue is whether the defendants also breached the terms of the contract it has with the plaintiff in regard to the contractual arrangements. And the third issue, subject to the 2 issues, is whether the plaintiff has suffered as a result, and if so, the type relief that may be awarded. If damages is awarded then what would be the appropriate quantified sum?
9. In relation to the second claim, if I find the alleged contemnor “guilty”, then the matter will be further listed for hearing on the type of punishment that I should impose on him. After receiving submissions from the parties, I may choose to impose a fine, a prison term, or both upon in the contemnor. On the other hand, if I find the alleged contemnor, “not guilty,” then he will be acquitted forthwith.
MATERIAL TERMS - CONTRACT
10. As stated above and generally, the material terms of the contract and the contractual arrangements between the parties are not in dispute. I will address separately whether the terms of the contract were breached as alleged, under the sub-heading “BREACH OF CONTRACT”.
COURT ORDER OF 2 APRIL 2014
11. I refer to the Court Order of 2 April. Briefly, in proceeding WS 1363 of 2007, the plaintiff, Kina Finance Limited and PNG Home Finance Company Limited sued the State under similar circumstances. The Secretary for Finance had issued a financial instruction to its Department to cease loan deductions from its employees who had existing loan commitments with the plaintiffs. As a result, the financial companies including the plaintiff, commenced proceedings against the State.
12. His Honour Justice Hartshorn made final orders on 2 April 2014. The main terms were as follows:
(1) The defendant, whether by its officers, servants or agents shall give specific performance of each of the agreements that are contained in the plaintiffs’ respective ‘Irrevocable Salary/Wages Deduction’ forms and ‘Irrevocable Salary Deduction Authority’ forms and ‘Employer Acknowledgment’ or any other similar loan deduction authorities, which relate to those loans between the plaintiffs and individual public servants, whereby the defendant (the State) by its officer the Secretary of the Department of Finance (or any other responsible person or entity) shall ensure:
(a) that all existing computer codes in the Government’s Payroll System (GPS) (or any other subsequent system or operation including the GoPNG Payroll System) operated by the Department of Finance in respect of Payment Variation Advices (PVA’s) (or any other subsequent system or advice) for public servants currently having consumer loans from the plaintiffs shall be maintained in and not removed from the GPS (or any other subsequent system or operation);
(b) that the Department of Finance (or any other responsible person or entity) and the GPS (or any other subsequent system or operation) shall continue to accept and give effect to any new PVA’s (or any other subsequent system or advice) from public servants who obtain consumer loans from the plaintiffs and to permit the GPA supervisors to continue to sign Employer Acknowledgments in the plaintiffs’ consumer loan application forms regarding deduction of loan repayment instalments and remittance of same to the plaintiffs.
(2) The defendant, whether by its officers, servants or agents shall give specific performance of each of the agreements that are contained in the plaintiffs’ respective ‘Irrevocable Salary/Wages Deduction’ forms and ‘Irrevocable Salary/Wages Deduction Authority’ forms and ‘Employers Acknowledgment’ or any other similar loan deduction authorities, which relate to those loans between the plaintiffs and individual public servants, whereby the defendant, including by its officer the Secretary of the Department of Finance, is permanently restrained from implementing, acting upon or giving effect to Items 7 & 8 of Financial Instruction No. 03/2007 issued by the Secretary of the Department of Finance on 19 July 2007 insofar as the instruction relates to the plaintiffs.
......
WAS THERE A BREACH OF THE COURT ORDER?
13. The first question I have is this. Did the first defendant breach the Court Order of 2 April when he issued the Circular Instruction? I refer to the Circular Instruction. It is attached as annexure D to Exhibit P1. It reads, and I quote in part,
SUBJECT: CEASE OF ALL NEW SALARY DEDUCTION FOR NEW LOANS
Due to some very high incidences of teachers’ salary deductions in pay periods 20 and 21 the last paydays, all Salary Officers are instructed not to accept, input and effect any new pay deductions from Financial Loan Companies until all individual cases are investigated and corrected through an audit by the Payroll.
The instruction takes immediate effect.
......
(Underlining is mine)
14. I refer to the submissions that address this matter. I must say at the outset that I find misconceptions and contradictions, in the arguments of the defendants. The defendants argue that the first defendant’s instruction only applied to or concerned new pending loan applications which had been made by the State employees which had not yet been approved as binding loan agreements. However, I note that the argument runs contrary to the heading and content of the Circular Instruction itself. The instruction uses words namely, “new salary deduction” and “new pay deductions”. To me, I understand the Circular Instruction to mean as follows, that is, those new loan applications that have been approved but whose deductions shall cease, be put on hold or shall not commence until further notice. That is my reading of the Circular Instruction. Had the Circular Instruction states for example that processing of loan applications on the part of the Department shall cease or stop pending investigations etc, then I may perhaps follow the defendants’ line of argument. But that is not, in my view, what the Circular Instruction says. The defendants’ argument therefore fails.
15. In addition, let me also say this. Term 1(b) of the Court Order of 2 April appears express in that it directs the GPA supervisors of the State which would include the defendants herein, and I quote in part, to continue to sign Employer Acknowledgments in the plaintiffs’ consumer loan application forms regarding deduction of loan repayment instalments and remittance of same to the plaintiffs. In other words, it means that once the plaintiff approves a loan application of an employee of the State, term 1(b) makes it mandatory for the State to accept and process salary deductions. So on that note, I reject the defendants’ submission that a loan application of an employee is not binding until after it is sanctioned or approved by the State. In view of term 1(b) of the Court Order of 2 April, the fact that the defendants (pursuant to the Circular Instruction) had kept or had held back loan applications of those employees whose loans have been approved by the plaintiff, amount to breach of the Court Order of 2 April. I find that to be the case as well.
16. I therefore find that the Circular Instruction was issued in direct breach of the Court Order 2 April.
17. The plaintiff also claims that the Court Order had been breached prior to issuance of the Circular Instruction. I refer in particular to paragraphs 11 and 12 to Exhibit P1. Mr Craig Miller gives evidence showing various instances where certain officer’s within the Department of Education had removed the pay variation authorities from the plaintiff’s existing customers and replacing them with pay variation authorities of another finance institution. This claim and evidence of the plaintiff is not challenged by the defendants in terms of furnishing evidence to the contrary. But regardless of that, I also see no reason to doubt the evidence of Mr Miller. I find Mr Miller’s evidence to this claim, credible. I therefore find that the defendants have also breached of the Court Order by their actions or inactions prior to the issuance of the Circular Instruction by the first defendant.
BREACH OF CONTRACT
18. The plaintiff also claims that the defendants breached the terms of the contract. The contract between the plaintiff and the defendants of course relates to the promise or permission that is given to the defendants to deduct and retain 5% as a service fee of every fortnightly deductions that they make on each of their employees’ salaries, that is, those employees that have approved or existing loans with the plaintiff.
19. Let me refer to a sample of the plaintiff’s form called Payment Variation Advice (PVA). It is attached as annexure B to Exhibit P1. The form consists of 3 main parts. The top part is where the employee is required to state his employment details. The middle part is the area where the employee is required to also fill-in. There, the employee is required to give an irrevocable authority to the defendants or the State, to deduct from his or her salary on a fortnightly basis, a specified sum, and to pay that directly to the plaintiff. The third part is at the bottom of the form. This is where the defendants or the State is required to fill-in. There, the State is required to confirm the receipt date of the PVA. The State is also required to fill-in the date when the deductions will commence, and it has to be checked and approved by the responsible officer.
20. It is obvious, in my view, when I consider the third section of the PVA that the defendants’ role is to simply process an already approved loan. Let me explain. Where it says, and I quote, “Approved by,” it relates to registering receipt of the PVA and stating the date when the loan repayment shall commence. In other words, once the plaintiff approves a government employee’s loan, it is a ‘done deal’ or it constitutes a binding agreement between the plaintiff and the employee. The State’s part is simply to (i) register receipt of the PVA and (ii) set the date for the deductions to commence. These include forwarding the PVA to its finance section to make the necessary variation to the employee’s salary in order to account for the sum that is required to be deducted fortnightly and paid directly into the account of the plaintiff. Upon completing the said process or simultaneously, the State shall also, as agreed with the plaintiff, be entitled to deduct and receive the 5% deduction, that is, per fortnight and until the employee’s loan is fully settled. It is therefore wrong, as I have stated above in my judgment, for the defendants to argue that they also have a responsibility to process each loan agreement. The argument, if I may add, also defies the law on privity of contract. The State has no business, in my view, in regard to the loan agreements which are personal agreements between the plaintiff and the individual employees concerned. And the contract between the plaintiff and the defendants, which is the subject of this proceeding, is also obviously a separate agreement. It seems that in the defendants’ interferences, they, apart from lacking privity of contracts in these personal loan agreements, have also breached the terms of their contract with the plaintiff, that is, by issuing the Circular Instruction, and in so doing, abstaining from their obligation under the contract to process payments of new and existing loan deductions.
21. I find that the defendants have breached the terms of the contract.
RELIEF
22. I refer to the writ of summons and statement of claim. The plaintiff seeks the following relief, and I quote in part:
(1) Specific performance of each of the said agreements between the plaintiff and the defendants that are contained in the plaintiff’s respective ‘Irrevocable Salary/Wages Deduction’ forms and ‘Irrevocable Salary Deduction Authority’ forms and ‘Employer Acknowledgment’ or any other similar loan deduction and authorities.
(2) Specific Performance of the plaintiff’s current Payment Variation Advices.
(3) Specific Performance of the plaintiff’s new Payment Variation Advices.
(4) Damages for breach of contract in lieu of or in addition to specific performance to current loans and future loans.
(5) Pre-judgment and post-judgment interest on damages at a commercial rate pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No. 52.
(6) Further or other relief as the court considers appropriate.
(7) Costs of and incidental to this proceeding.
23. I note that the defendants have not made any submissions on quantum. Nevertheless, I also note that the plaintiff of course has the burden to show that it is entitled to the relief it seeks, and if I am minded to grant the relief, its submissions on quantum. I note the plaintiff’s submissions and evidence on these matters.
24. Let me address them. The first question I ask is this. Is the plaintiff entitled to seek specific performance? Specific performance of course is an equitable remedy. Its granting or refusal is discretionary depending on the circumstances of the case. The relief is available in a contractual relationship or scenario. One party may seek the relief where after having performed its part of the contract or where the party’s performance of the contract is subject to the other party’s performance and the other party is not willing to perform its part or wishes to abstain itself of its obligation(s) under the contract. The relief is sought only by the parties to the contract.
25. In support, I refer to and adopt what Justice Manuhu has said in Pamela Ipi Pangu v. Ian Ellery (2007) N3227. At paragraph 4 of his judgment, His Honour said, and I quote:
It is trite law that specific performance is a remedy designed to compel a defendant to perform or carry out the obligation expressly or impliedly imposed upon him by the contract between him and the other contracting party. Specific performance is, however, available only when damages, which purpose is to restore the injured party to the position he was in immediately before the breach, is not adequate.
26. The plaintiff, in my view, is obviously entitled to seek the relief specific performance. I also find that the plaintiff has established its entitlement to the relief. Let me explain. The facts of the case, and in particular, the contractual relationship that exists between the plaintiff and the defendants, and the defendants’ actions or inactions, have put the plaintiff in a situation where it had to return back to the Court to seek various relief including the relief specific performance. The circumstances of the present case is also worth noting. There is already an order for specific performance granted by this Court in the form of mandatory injunctions earlier on 2 April 2014, that is, in proceeding WS 1363 of 2007. When I say that, I of course refer to the Court Order of 2 April which continues to remain in force. This therefore brings me to the next question. Should this Court issue new sets of orders for specific performance? I would answer that in the affirmative. There are many reasons but the main ones are as follows. Except for the plaintiff and the State, the parties are all not the same. The Department of Education is specifically mentioned here whereas it is not a named party in proceeding WS 1363 of 2007, and the facts that gave rise to the present proceeding were as a result of actions taken by the first defendant on the State employees who were and are employed with the Department of Education. The order for specific performance sought herein applies to or is specifically directed at the department, which is the Department of Education. And finally, I note that the Court Order of 2 April is broad, that is, it is directed at the State and its agencies.
27. The next question I have is this. Can I grant both specific performance and award damages? My answer to that is, “yes, I can.” The Supreme Court in Joshua Kalinoe v. Paul Paraka (2014) SC 1366, stated at paragraph 51 of its judgment, and I quote in part, Any breach of any contractual obligation or duty by the State would entitle the other contracting party to sue for either specific performance and or reinstatement of the relationship or damages or both and as the law may permit. See also: Stephen Asivo v Bank of South Pacific Ltd (2009) N3754. In this instance, I note that both relief are pleaded in the statement of claim. And I will also add this. It is not uncommon and contract law as adopted under the common law, does permit, as an option, for one to sue for damages for breach of contract whilst the contract is being performed (i.e., without terminating or putting an end to it).
28. The next query I have following the above is this, whether the circumstances of the present case warrants both relief to be sought together in this manner. The first significant factor in my view is that the contract was not repudiated or rescinded by the parties. The plaintiff in the present case has treated the actions or inactions of the defendants as minor breaches to the terms of the contract with the intention not to end but rather to continue on with it. The contractual relationship between the plaintiff and the defendants is binding and enforceable. In fact, the Circular Instruction, which had directed ceasing of processing and deductions, of employees’ loans with the plaintiff, was only meant as a temporary measure pending internal investigations that were to have been conducted by the defendants. And the investigations appeared to only relate to actions or inactions of officers within the Department of Education. I say this based on the defendants’ own evidence, that is, Exhibits D1, D2 and D3. Evidence also shows that the Circular Instruction was later lifted on or about 2 May 2019. Evidence of that are those contained in Exhibits P7, P8 and D1. I also note that this Court has also granted interim orders on 11 December 2018 and 12 April 2019, that is, in regard to the plaintiff’s notice of motion that had been filed on 12 December 2018. The orders granted by this Court include orders that restrains the first defendant from effecting his Circular Instruction, secondly, interim mandatory injunction for the defendants to continue to maintain and not remove the existing loan repayments that the Department’s employees have with the plaintiff, and thirdly, interim mandatory orders for the defendants to continue to process new PVAs or new loan agreements that have been entered into between the plaintiff and the Department’s employees. The present status quo is that the parties, as of 2 May 2019, are or ought to abide by their contractual duties and obligations and also as per the Court Order of 2 April.
29. For these reasons, I find that the plaintiff is entitled to seek both specific performance and damages for breach of contract. At this juncture, I will grant the plaintiff’s relief for specific performance. I am satisfied that the plaintiff has established the basis for seeking the relief.
QUANTUM
30. In regard to the relief breach of contract, I ask myself this. Did the plaintiff suffer damages as a result of the breach, and if so, what would be the appropriate sum to award? Again, I note that the defendants have not made any submissions in regard to quantum or damages for breach of contract. The plaintiff on the other hand has provided submissions, evidence and its figure of what it claims its damages is or should be. It says that damages should be assessed at K19, 725,505.
31. Firstly, I find that the plaintiff did suffer damages as a result of breach of contract by the defendants. The plaintiff provides finance or loan facilities to State employees employed with the Department of Education. Because of breach of (i) the Court Order of 2 April and (ii) the contract that exists between the plaintiff and the defendants, the plaintiff’s individual loan agreements it has with the State employees were affected, and I must say, in a significant way. The plaintiff has provided evidence of that, and I refer to Exhibit P10. Mr Miller, for the plaintiff, attaches evidence of the plaintiff’s annual sale figures from the periods, 11 October 2016 to 2 May 2019. To me, these are sufficient enough for me to rule that the plaintiff did suffer damages.
32. A clarity I wish to address is this. I note that the plaintiff claim’s for breach of the Court Order of 2 April is limited to the relief specific performance which the plaintiff has sought and which I have granted above. The plaintiff is not seeking damages for breach of the Court Order of 2 April separately like it is seeking damages for breach of contract. I will therefore proceed to assess damages on that basis, that is, I will assess damages for breach of contract. I also note that this is also consistent with the plaintiff’s pleading in its writ of summons and statement of claim.
33. At the outset, I find the plaintiff’s method for assessing damages suffered to be reasonable. I refer to Exhibit P10. The plaintiff’s total loan sales from 11 October 2016 to 2 May 2017, was K22, 522,164. And its total loan sales from 11 October 2017 to 2 May 2018 was K26, 390,069.12. It submits that based on the said figures, its loan sales had increased by 17.1%. But it submits that from the period 11 October 2018 and 2 May 2019, its total loan sales was K11, 117,713. It submits that based on the 17.1% projection, it had expected to make about K30, 902,770 from the period 11 October 2018 and 2 May 2019. However, it submits that that had not been the case. I note that the figure K30, 902,770 is projected based on the 17.1 % increase on the figure K26, 390,069.12, which is an estimated increase by K4, 512,701.82. I note that such projected increase or estimates for assessing damages, is not new to this jurisdiction. See cases, Yondu Coffee Producers Ltd v. Fred Punangi (2017) N7128 and Ace Guard Dog Security Services Ltd v. Lindsay Lailai (2003) N2459.
34. Whilst I agree with the plaintiff’s estimated annual loan sales increase of 17.1%, let me say this. The figure K30, 902,770 is only a projected estimate compared to the actual total loan sales for 2019, which is K11, 117,713. Like all businesses, loan sales or gross profits for a year is not determined based on previous years’ figures but of course on the open market and what is actually sold or earned in the current year. For example and in the present case, the number of State employees who had applied for loans with the plaintiff in 2019, could have increased or decreased. It may not have decreased solely because of the actions of the defendants or the actions of the first defendant in issuing the Circular Instruction. To be fair, discounts or accounts should be had to considerations like this. I will hereby apply a discount in this case. I will reduce the 17.1% projection of the loan sales to 12%. When I add the 12% increase to the actual loan sales for 2018, which is K26, 390, 069.12, it would see a projected increase in the total loan sales in 2019 by K3, 166,808.29. When I add that together with K26, 390,069.12, the projected increase in the plaintiff’s loan sales for 2019 would stand at K29, 556,877.41. The plaintiff’s actual generated loan sales for 2019 is K11, 117, 713. If we minus that from K29, 556,877.41, the plaintiff’s estimated projected loan sales loss for the period 11 October 2018 to 2 May 2019 would be K18, 439,164.41.
35. I will award damages for breach of contract in the sum of K18, 439,164.41.
INTEREST
36. The plaintiff seeks interest pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No. 52 (old Act). I note that the old Act has been repealed by Judicial Proceedings (Interest on Debts and Damages) Act 2015 (new Act). The new Act came into existence on 28 May 2015.
37. No submissions were made by the parties to address interest in detail and in regard to its application, whether it be under the old Act or the new Act.
38. The question I now have is this. Is the plaintiff entitled to interest? The obvious answer to that, in my view, is this, “yes, the plaintiff is indeed entitled to an award of interest.” I say ‘yes’ because interest is sought in the statement of claim. The second question I have is this. Despite that, should the plaintiff be denied interest because it is seeking interest under the old Act which has since been repealed? The answer to that, in my view, is, “no, the plaintiff should not be denied interest for that reason.” Again, and in my view, the bottom line is that the plaintiff has pleaded interest as a relief which is consequential to the main relief. See case: NCDC v. Robert Dademo (2013) SC1260. The plaintiff is entitled to interest because I have ruled in its favour in regard to one of the main relief, namely, damages for breach of contract. The correct citation to seek interest is under the new Act and not under the old Act as the plaintiff has erroneously cited. There is a further reason to the second question, which is this. Section 2 of the new Act states, and I quote in part, This Act applies to all Court Orders made against the State on or after 1 January 2014. My final decision on interest, as it will be made after 1 January 2014, is subject to the new Act. And it is settled that the new Act sets a fixed interest rate on all awards or judgments that are made against the State, which is 2% per annum. The said rate is inscribed under sections 4(2) and 6(2) of the new Act. See cases: Yondu Coffee Producers Ltd v. Fred Punangi (supra), Alphonse Willie v. Simon Kaupa (2016) N6553, Thomas Aiwara v. Cocoa Board of PNG (2017) N6788 and Francis Pinje v. Jeffery Kera (2018) N7557.
39. I will therefore assess interest on pre-judgment and post judgment damages.
40. In regard to pre-judgment interest, it shall be calculated pursuant to section 4(1) of the new Act, that is, from the date the cause of action arose to the date of decision. In this case, the cause of action arose from the date when the Circular Instruction was issued, which was on 11 October 2018. This judgment is delivered on 28 April 2020. When I compute the duration, it will give a total of 565 days. The damages awarded is K18, 439,164.41. Two (2) percent of K18, 439,164.41 is equals to K368, 783.29, that is, interest per annum. To get the accrued interest per date, I divide K368, 783.29 by 365 days (the number of days in a year), which equals to an accrued interest rate of K1, 010.37 per day. To get the pre-judgment accrued interest rate, I multiply K1, 010.37 by 565 days, which equals to K570, 859.05. The plaintiff shall be entitled to an accrued pre-judgment interest sum of K570, 859.05.
41. In regard to post-judgment interest, pursuant to section 6 of the new Act, I will calculate as follows. I add the damages award of K18, 439,164.41 with the pre-judgment interest sum of K570, 859.05 which is equals to K19, 010,023.46 (judgment sum). I then calculate 2% of the judgment sum, that is, 2% of K19, 010,023.46, which gives me a sum of K380, 200.47, which is the interest on the judgment sum per year. To get post judgment interest per day, I divide K380, 200.47 by 365 days. The post judgment interest per day is K1, 041.65.
CONTEMPT OF COURT CHARGE
42. I turn now to the second claim. The plaintiff files contempt charges against the first defendant, the alleged contemnor. I refer to the statement of charge which was filed on 14 November 2018. It reads, and I quote in part,
STATEMENT OF CHARGE
AGAINST DR UKE KOMBRA
TO: DR UKE KOMBRA, Secretary for the Department of Education
You are charged with contempt of court in that:
“(1) the defendant whether by its officers, servants or agents shall give specific performance of each of the agreements that are contained in the plaintiffs’ respective ‘Irrevocable Salary/Wages Deduction’ forms and ‘Irrevocable Salary Deduction Authority’ forms and ‘Employer Acknowledgment’ or any other similar loan deduction authorities, which relate to those loans between the plaintiffs and individual public servants, whereby the State by its officer the Secretary of the Department of Finance (or any other responsible person or entity) shall ensure:
(a) That all existing computer codes in the Government’s Payroll System (GPS) (or any other subsequent system or operation including the GoPNG Payroll System) operated by the Department of Finance in respect of Payment Variation Advices (PVA’s) (or any other subsequent system or advice) for public servants currently having consumer loans from the plaintiffs shall be maintained in and not removed from the GPS (or any other subsequent system or operation);
(b) that the Department of Finance (or any other responsible person or entity) and the GPS (or any other subsequent system or operation) shall continue to accept and give effect to any new PVA’s (or any other subsequent system or advice) from public servants who obtain consumer loans from the plaintiffs and to permit the GPS supervisors to continue to sign Employer Acknowledgments in the plaintiffs’ consumer loan application forms regarding deduction of loan repayment installments and remittance of same to the plaintiffs.
(2) The defendant, whether by its officers, servants or agents shall give specific performance of each of the agreements that are contained in the plaintiffs’ respective ‘Irrevocable Salary/Wages Deduction’ forms and ‘Irrevocable Salary Deduction Authority’ forms and ‘Irrevocable Salary Deduction Authority’ forms and ‘Employer Acknowledgment’ or any other similar loan deduction authorities, which relate to those loans between the plaintiffs and individual public servants, whereby the defendant, including by its officer the Secretary of the Department of Finance, is permanently restrained from implementing, acting upon or giving effect to Items 7 & 8 of Financial Instruction No. 3/2007 issued by the Secretary of the Department of Finance on 19 July 2007 insofar as the instruction relates to the plaintiffs.”
(the 2014 Court order)
43. As stated above in my judgment, the first defendant has been arraigned and has entered a plea of “not guilty”. His main defence is that he was not served with or was aware of the Court Order of 2 April. In any event, he submits that his action did not breach the Court Order of 2 April. He submits that the Circular Instruction, which he had issued, was only a temporary instruction. He also submits that his instruction had only covered (or had been in relation to) those fresh loan applications that had not yet been approved by the plaintiff.
ELEMENTS
44. The contempt charge relates to alleged disobedience of a court order, in this case, the Court Order of 2 April. Justice Cannings, in Ian Augerea v. Todagia Kelola (2014) N5582, summarized the elements of this type of contempt (i.e., for disobeying a court order). They are, and I quote:
1 the order was clear and unambiguous;
2 the order was properly served on the defendants; and
3 the defendants deliberately failed to comply with it.
45. The Supreme Court approved these 3 elements in Solomon Tato v. Samson Akuani (2016) SC1511. In regard to the second element, the Supreme Court added and I quote, the order was properly served or the contemnor was aware of the order. The additional inclusion means that if the alleged contemnor was not served but was aware of the Court Order then that should be sufficient to establish the second element of the contempt charge. So at paragraph 52, the Supreme Court sets the elements of contempt of court for disobeying a court order as follows:
· the order was clear;
· the order was properly served or the contemnor was aware of the order; and
· there was a deliberate failure to comply with the court order
46. Going back, Justice Cannings also addressed the nature of a contempt of court charge and the required burden of proof. At paragraph 7 of His Honour’s judgment, he said and I quote:
7. Contempt of court is a criminal matter and the plaintiff must prove the existence of the three elements beyond reasonable doubt. If all elements are proven against either defendant, that defendant will be guilty and I will hear the parties on the question of punishment (Ross Bishop and Others v Bishop Bros Engineering Pty Ltd and Others [1988-89] PNGLR 533; The State v Foxy Kia Tala, Re Detective Constable Corney Winjan [1995] PNGLR 303; Peter Luga v Richard Sikani and The State (2002) N2286; Ome Ome Forests Ltd v Ray Cheong (2002) N2289; Richard Sikani v The State and Peter Luga (2003) SC807; Newsat Ltd v Telikom PNG Ltd, ICCC and The State (2007) N3447, Martin Kenehe v Michael Pearson (2009) N3763).
47. I adopt the above therein as my own. With that, I ask myself this. Is the Court Order of 2 April clear and unambiguous? I note that unlike the plaintiff who made submissions, the defendants do not take issue with this element. They agree that the Order is clear. But is that really the case? As a court of justice, I must be satisfied regardless of the parties’ positions or submissions on this particular element; its resolution or determination must be one that is based on facts and law. I also remind myself that this matter is criminal in nature, and like all criminal matters, the plaintiff would have the burden of proof to establish each of the elements of the offence or charge, beyond reasonable doubt to the satisfaction of the Court.
48. I have set out the terms of the Court Order of 2 April above in my judgment. The first obvious or notable circumstance of the case is this. The Court Order of 2 April was not obtained in the present proceeding. It was rather obtained in a separate Court proceeding, that is, WS 1363 of 2007, on 2 April 2014, about 6 years ago. The plaintiffs in that proceeding were Finance Corporation Ltd which is the plaintiff herein, Kina Finance Company Limited and PNG Home Finance Company Ltd. The defendant was the Independent State of Papua New Guinea, which also happens to be the second defendant herein.
49. The Court Order of 2 April is clear, in my view, that is, in so far as it relates to the parties in proceeding WS 1363 of 2007. I, however, have doubts in my mind whether the Court Order can also be said to be clear or unambiguous, if it is used in the present proceeding against the first defendant, who was not a party to the earlier proceeding. Let me consider the second element, that is, whether the Court Order of 2 April was actually personally served on the first defendant. I refer to the plaintiff’s submission. On this point, its submissions on personal service of the Court Order of 2 April refers to service of the contempt application documents, which were effected, according to the plaintiff, on 12 April 2019. To me, I find this submission on personal service misconceived. Personal service under the second element refers to personal service of a court order. In this case, it should mean personal service of the Court Order of 2 April upon the first Defendant after the said order was granted. Again, the difficulty here, in my view, is due to the fact that the Court Order had been obtained in an earlier separate proceeding, namely, WS 1363 of 2007. Secondly, I note that the first defendant is not a direct party in that proceeding. But that said, it seems clear that the Court Order of 2 April would apply to persons such as the first defendant. So firstly, I ask myself this. Was the Court Order of 2 April served on the defendant in proceeding WS 1363 of 2008? The plaintiff tendered a total of 11 exhibits. There is no evidence therein that states that the Court Order of 2 April had been served on the defendant in proceeding WS 1363 of 2008 and also how service had been effected. The Court Order consists of mandatory injunctions or orders for specific performances by the State and its agents and in particular the Finance Department. The Court Order of 2 April were also penal in nature. As such, the plaintiff must provide evidence of proof that the Court Order had been personal service upon the defendant or its agents in proceeding WS 1363 of 2008. There is, however, no evidence adduced in that regard. The next question I have is this. What about personal service or knowledge of the Court Order of 2 April, upon or by the first defendant before he issued the Circular Instruction? The first defendant is being criminally charged and faces possible fine or jail time. The Supreme Court in Gabrial Miai Bizei v. Joseph Gabut (2019) SC1793, I thought summarized well the requirement of personal service, when it stated at paragraph 15 of its judgment, and I quote:
15. Further as it happens, the point is not free from authority in Geoffrey Vaki v Mathew Damaru [2016] SC 1557, it was held that a penal order requiring the performance of an act did not give rise to a contempt in the absence of personal service of that order upon the alleged contemnor. That view as so expressed is entirely consistent with the express provision in relation to service in the National Court Rules. That being so, notwithstanding the making of the order in June 2013, there was no illegality that attended the first respondents the Special Land Commissioners, making their decision in August 2013. It was for the appellant to prove by evidence before the National Court that the June 2013 order was ever served on the first respondents. They did not do so. For these reasons, the appeal necessarily must fail.
50. I note that the plaintiff herein has only provided evidence of service of the Contempt documents upon the defendants. There is no evidence before me of personal service of the Court Order of 2 April, that is, whether it be upon the defendant in proceeding WS 1363 of 2008 or the first defendant in this proceeding before the issuance of his Circular Instruction. I also note that the first defendant has given evidence where he has denied knowledge of the Court Order of 2 April before issuing his Circular Instruction. Evidence of that is contained in exhibits D1 and D3. Let me make this final remark. I note that there is no pleading in the statement of charge in regard to personal service of the Court Order of 2 April upon the first defendant, that is, before the first defendant issued the Circular Instruction.
51. Given my findings and doubts I have in relation to the 2 elements of the charge, contempt of court, against the first defendant, I must say this. I am not satisfied that the plaintiff has established the 2 elements. Without 1 of the 3 elements being proven to my satisfaction beyond reasonable about, it should be sufficient for me to dismiss the charge contempt of court and acquit the alleged contemnor. In this case, I am not satisfied that the plaintiff has proven the 2 elements, namely, clarity of the Court Order of 2 April, and personal service or knowledge of the Court Order of 2 April. I will dismiss the contempt charge against the first defendant. I will also order cost to follow the event. The defendants shall be entitled to their costs incurred in relation to the contempt charge.
SUMMARY
52. In summary, I find that the plaintiff has established its first claim. I will make orders as per my findings and based on the relief as sought in the writ of summons and statement of claim. I dismiss the plaintiff’s second claim for contempt of court against the first defendant. The first defendant is found “not guilty” and shall be acquitted forthwith.
COST
53. I will order cost to follow the events.
54. The plaintiff shall be entitled to its cost in relation to the first part of its claim, and the defendants, as I have already ruled above in my judgment, shall be entitled to their costs in relation to the charge contempt of court against the fist defendant. Both costs shall be assessed on a party/party basis to be taxed if not agreed.
ORDERS OF THE COURT
55. I make the following orders:
(1) Specific performance is ordered against the defendants on each of the agreements entered into between the plaintiff and the defendants that are contained in the plaintiff’s respective ‘Irrevocable Salary/Wages Deduction’ forms and ‘Irrevocable Salary Deduction Authority’ forms and ‘Employer Acknowledgment’ or any other similar loan deduction and authorities.
(2) Specific Performance is ordered against the defendants on the plaintiff’s current Payment Variation Advices.
(3) Specific Performance is ordered against the defendants on the plaintiff’s new Payment Variation Advices.
(4) Damages for breach of contract is awarded to the plaintiff in the sum of K18, 439,164.41.
(5) Judgment for accrued pre-judgment interest is awarded to the plaintiff in the sum of K570, 859.05.
(6) The defendants are liable to the plaintiff in the total sum of K19, 010,023.46 (judgment sum) upon being served with this order.
(7) If the defendants fail to settle the judgment sum, interest shall accrue daily in the sum of K1, 041.65 from the date of service of the certificate of judgment of the judgment sum upon the Defendants, till the date of full payment of the judgment sum, that is, pursuant to section 6(5)(a) of the Judicial Proceedings (Interest on Debts on Damages) Act 2015.
(8) The plaintiff’s contempt of court charge laid against the first defendant is dismissed; the first defendant is found “not guilty” and is acquitted or discharged forthwith.
(9) Costs of and incidental to this proceeding is awarded to the plaintiff, less the defendants’ costs in relation to the contempt of court charge that had been brought against the first defendant and which has been dismissed, and cost shall be assessed on a party/party basis which may be taxed if not agreed.
(10) Time for entry of these orders is abridged to the date of settlement by the Registrar which shall take place forthwith.
The Court orders accordingly.
________________________________________________________________
Ashurst Lawyers: Lawyers for the Plaintiff
Solicitor General: Lawyers for the Defendants
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