Home | Databases | WorldLII | Search | Feedback National Court of Papua New Guinea

Tomala v National Housing Estate Ltd [2021] PGNC 177; N9016 (29 July 2021)

N9016

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 943 OF 2018

BETWEEN:
KEMASANG TOMALA
Plaintiff

AND:
NATIONAL HOUSING ESTATE LIMITED
Defendant

Lae: Dowa J
2020: 23^rd September, 26^th October & 11^th November
2021: 29^th July

CONTRACT – Contract for hire of Motor vehicle- Lack of authority by officer executing contract - Contact void and unenforceable - The need to comply with the constitution of company and contracting method and practice – Effect of – Illegal, void ab initio contract – Unenforceable contract – Quantum meruit claim can be considered for actual performance - No hard and fast rule in determining quantum meruit based on innocence-each case to be determined on its own merits to do justice- considerations for appropriate and reasonable damages.
Cases Cited:

Waghi Security Services Pty Ltd vs. John Tembon & Western Highlands Provincial Government [1994] PNGLR 138, N1287

Keboki Business Group vs. The State [1984] PNGLR 281
Fly River Provincial Government vs. Pioneer Health Services Limited (2003) SC705

The State vs. Barclay Bros (PNG) Ltd (2004) N2507,

Delphi Corporate Investigations Ltd vs. Bernard Kipit (2003) N2480
Leontine Ofoi vs. Kris Bongare (2007) N3248
Teine vs. University of Goroka (2019) SC1881
Steven Turik vs. Mathew Gubag (2013) N5132
National Broadcasting Corporation vs. Taison [2019] PGNC 266, N8083

Counsel:

K. Aisi, for the Plaintiff
A. Neimani, for the Defendant

RULING

29^th July, 2021

1. DOWA J: This is a decision on issues of both liability and damages. The Plaintiff claims against the Defendant a sum of K482,900.00 being for outstanding invoices for hire of his vehicle at the Defendant’s request.

FACTS

2. The Plaintiff and Defendant entered a vehicle hire agreement on 23^rd July 2015 for the hire of the Plaintiff’s vehicle described as Toyota Land Cruiser, 5 Door, Reg No. BEQ 897.

3. The vehicle was hired at a daily rate of K1,000.00. The Plaintiff’s vehicle was in the possession of the Defendant from 22 July 2015 to 30^th September 2016. The Plaintiff rendered monthly invoices to the Defendant, and by 30^th September 2016, the total outstanding sum was K482,900.00. The Defendant did not pay the invoices. The Plaintiff instituted these proceedings to recover the outstanding debt.

4. The Defendant denies that it is liable to the Plaintiff, pleading that the former Chief Executive Officer, Mr. Kevin Aihipum did not have authority to enter hire car agreement for and on behalf of the Defendant, and that the Plaintiff’s vehicle was not hired for the work purposes of the Defendant.

ISSUES

5. The issues for consideration are:

1. Whether or not a Kevin Aihipum had authority to enter hire car agreement for and on behalf of the Defendant.
2. Whether or not the Plaintiff’s vehicle was hired for work purposes of the Defendant.

100. Whether or not the Defendant should pay the invoices of the Plaintiff.

4. Whether or not the Plaintiff is entitled to 10% GST as charged.
5. Whether the Plaintiff is entitled to damages in quantum meruit.

EVIDENCE

6. The Plaintiff gave evidence himself, supported by Kevin Aihipum, and relied on the following:

(a) Affidavit of Kemasang Tomala – Exhibit P1.
(b) Taxpayer Registration Certificate (TIN) – Exhibit P2.
(c) Affidavit of Kevin Aihipum – Exhibit P3.
(d) Company Extract of National Housing Estate Ltd – Exhibit P4.
(e) Defendant’s list of Creditors – Exhibit P5.

7. The Defendant’s evidence came from Madeline Paulisbo and tendered the following Affidavits:

(a) Affidavit of Madeline Paulisbo filed 12/6/2019 - Exhibit D1.
(b) Affidavit of Madeline Paulisbo filed and sworn 04/04/20 – Exhibit D2.
(c) Affidavit of Madeline Paulisbo filed 9/7/2020 – Exhibit D3.

PLAINTIFF’S EVIDENCE

8. The Plaintiff’s evidence is this. He is the registered owner of a motor vehicle, Toyota Land Cruiser, 5 Door, Reg No. BEQ 897. On 22^nd July 2015, he entered a motor vehicle hire agreement with the Defendant. The agreement was in writing. It was agreed that the Defendant would pay K1,000.00 per day for the hire of the vehicle.

9. The Plaintiff delivered the vehicle to the Defendant’s Chief Executive Officer, and Managing Director, Mr. Kevin Aihipum. The vehicle was used by the Defendant from date of the agreement to 30^th September 2016. The Plaintiff says he issued monthly invoices for the Defendant to settle. The Defendant did not settle any of the invoices, and the outstanding amount as of 30^th September 2016 was K482,900.00.

10. On 8^th December 2015, the Defendant paid a cheque for K180,400.00. However, the cheque was dishonoured by the bank.

11. The Plaintiff’s evidence was supported by Kevin Aihipum, the former Chief Executive Officer of the Defendant. Mr. Aihipum says, the Defendant signed an agreement with the Plaintiff to hire his vehicle at a daily rate of K1,000.00. He, as the Chief Executive Officer, of the Defendant signed the contract, and took delivery of the vehicle. The vehicle was used as support vehicle for the purposes of working with the Chinese and Korean visitors who were travelling to PNG to do a joint venture business on the Defendant’s housing projects. Mr. Aihipum during cross-examination said, he had the authority to enter the hire agreement and bind the Defendant. Mr. Aihipum said, the Defendant did not pay the Plaintiff in time due to cash flow problems.

DEFENDANT’S EVIDENCE

12. The Defendant’s evidence came from Madeline Paulisbo, the Acting Chief Executive Officer of the Defendant. Her evidence is this. The Defendant did not enter a vehicle hire agreement with the Plaintiff. She says the hire agreement the Plaintiff relies on is orchestrated by the former Chief Executive Officer, Kevin Aihipum, and not officially sanctioned by the Defendant’s Board of Directors, Senior Officers of the Company, or the Company Secretary. The agreement was signed by Mr. Aihipum only. It was not counter-signed or witnessed by any Senior Officer, or the Company Secretary as is the usual practice. The common seal of the Defendant was not affixed to the Agreement. Further, she says, the Plaintiff’s motor vehicle was not used for the Defendant’s work purposes and the Defendant became aware of the vehicle when it was involved in a road accident in Kerema sometime in 2016. And even at that time the vehicle was driven by a relative of Kevin Aihipum, and not by any officer or employee of the Defendant.

Finally, Ms. Paulisbo said, no periodical invoices were received by the Defendant. The Defendant became aware of the invoices for the first time in May 2019 after the filing of these proceedings.

CONSIDERATION OF THE ISSUES

Contract

1. Whether Kevin Aihipum has authority to enter hire car agreement for and on behalf of the Defendant.

13. Mr. Aisi, counsel for the Plaintiff submits that the Plaintiff has entered a valid contract for the hire of his vehicle at K1,000.00 per day. The vehicle was used by the Defendant for the period from 23^rd July 2015 to 30^th September 2016.

14. Mr. Aisi submits that the contract is binding on the Defendant, as it was signed by Mr. Aihipum, the Chief Executive Officer and Managing Director, who had authority to enter this contract. He did not need to call a board meeting, and the absence of affixation of the company seal was immaterial, as the Constitution of the Defendant was not yet registered with the office of Investment Promotion Authority at the relevant time.

15. Mr. Neimani, counsel for the Defendant submitted that the contract for hire signed by the Plaintiff and Mr. Kevin Aihipum is not valid and binding on the Defendant. Mr. Neimani submitted that Mr. Aihipum did not have the authority to enter a contract without the sanction of the board. For a contract to be valid and binding on the Defendant, it must be signed and counter-signed by board members or a Company Secretary under the Defendant’s Company Seal as required by sections 19 and 31 of the Defendant’s Constitution. In the present case, the contract was not counter-signed by a board member or a Company Secretary. The Company Seal was not affixed as required by Clause 19.1 and 31 of the Defendant’s Constitution.

16. I have considered the evidence and submissions of counsel and here is my ruling on the issue.

17. There is no dispute that a contract for hire of the Plaintiff’s vehicle was signed by the Plaintiff, and Mr. Aihipum on behalf of the Defendant. The rate for hire was for K1,000.00 per day. The vehicle was used for the period between 23^rd July 2015 and 30^th September 2016. The Plaintiff is said to have issued monthly invoices, which the Defendant denies, and by 30^th September 2016, the outstanding invoices was K482,900.00. None of the invoices have been settled.

18. In my view, a significant element or term of the contract was missing, and that is the period or term of the hire. It would seem the hire period is for almost 15 months, and the amount is significant. The term for the hire was not fixed.

19. A contract of this magnitude would require proper procurement and execution process. The Defendant is a company owned by National Housing Corporation and the Independent State of Papua New Guinea. Although it operates as an entity under the Companies Act, with a corporate structure, its officers are required to comply with the minimum procurement requirements of the Public Finance Management Act, its Constitution, and the Companies Act.

20. One of these requirements, is the need for affixing its company seal in the presence of any two (2) directors or a company secretary.

21. In the case of the Defendant, Sections 19.1, and 31 of its Constitution provide for the method of Contracting and the Affixation of the Company Seal. Section 19.1 and 31 provides and I quote:

“19.0 METHOD OF CONTRACTING

19.1 A contract or other enforceable obligation may be entered into by the Company as follows:

19.1.1 An obligation which, if entered into by a natural person, would, by law, be required to be a deed, may be entered into on behalf of the company under the name of the Company in writing signed:

1. under the common seal of the Company affixed in the presence any two directors or, if a secretary is appointed, in the presence of one director or secretary or if there is only one director in the presence of that director whose signature must be witnessed; or
   
2. by a director or other person authorised to do so by the Board whose signature must be witnessed; or
   

100. by one or more attorneys appointed by the Company in accordance with section 156 of the Act.
     

19.1.2 An obligation which, if entered into by a natural person, is, by law, required to be in writing, may be entered into on behalf of the Company in writing by a person acting under the Company’s express or implied authority.

19.1.3 An obligation which, if entered into by a natural person is not, by law, required to be in writing, may be entered into on behalf of the company in writing or orally by a person acting under the Company’s express or implied authority.

31.0 THE SEAL

31.1 The directors shall provide for a seal and provide for the safe custody of the seal and the seal shall be used except by the authority of directors and in the presence of one director at the least who shall sign every instrument to which the seal is affixed.”

22. In Waghi Security Services Pty Ltd vs. John Tembon & Western Highlands Provincial Government (1994) PNGLR 138, N1287, Woods J in dismissing the Plaintiff’s claim held that:

“The document has not been executed properly. The seal of the provincial government has not been affixed properly, namely in the presence of two officers of the provincial government who are proper officers and who have signed accordingly. There appears to be one signature of a provincial government official but that is all. It may have been necessary to have a copy of the resolution in the minutes of the cabinet whereby the seal was authorised to be.”

23. Applying the above principles to the present case, it is clear, the contract was improper and void. Although, Mr. Aihipum says, he had authority to enter the contract, and bind the Defendant, it is not supported by the Defendant’s corporate method of contracting. This contract was not executed under company seal in the presence of any two (2) board members or a company secretary. Although, the Defendant’s constitution relied on by the Defendant, was adopted after the date of the contract, I accept Ms. Paulisbo’s evidence that they had earlier constitutions and corporate practice of sealing all company contracts by affixing the common seal. Even Mr. Aihipum has confirmed in cross-examination that they did have a common seal, which he said was only a procedural requirement. However, I do not accept that the affixation of the common seal was a mere procedural requirement. It is an integral part of a corporate practice and method of executing valid contracts and creating binding obligations. Mr. Aihipum said under clause 19 of his contract of employment, he was empowered to enter such contracts and the contract he signed with the Plaintiff is effective and valid for all purposes. However, under clause 19 (1) e, f, and g of his contract of employment, Mr. Aihipum was obliged to comply with the constitution of the Defendant. Clause 19 of Mr. Aihipum’s contract reads as follows:

“19. PERFORMANCE OF DUTIES

19.1 The Executive Chairman shall at all times:

a) Comply with the NHEL’s Board Resolutions and Determination as approved which the Executive Chairman is responsible for; and

b) Skilfully and diligently perform all duties and works considered by the NHEL Board to be within the scope of or incidental to the employment under this Contract or as may reasonably be regarded by the Board as within the capabilities of a person engaged in such employment, and without limiting the generality of the above, shall:

i) Provide clear direction to all the work performance the National Housing Estate Limited supportive of the National Government Policy as determined by the Government or National Executive Council from time to time;

ii) Ensure the NHEL staff are given clear instructions, are provided regular feedback on their performance and are disciplined as necessary in accordance with the terms and conditions of their employer;

3. Do all things necessary to maintain or improve the efficiency of working with NHEL’s budgetary constraints;

iv) Keep abreast of any scientific or technical change that may occur in the Executive Chairman’s area or operation; and

v) Provide professional management of National resources or services coming within the Executive Chairman’s requirements of the NHEL or NEC as ordered from time to time.

100. Comply with all lawful orders and directions given by the NHEL Board or the Minister and without limiting the generality of the above and if instructed so to do shall work overtime:

i) To maintain the operations of NHEL and provide services to the Nation;

2. To maintain the productivity and achieve work targets as directed by the NHEL Board;
3. In all cases of emergency, and at all other times as required by the NHEL Board, Minister or NEC.

4. Undertake the training and instruction of NHEL employees;
5. Comply with all rules, regulations, policies, directions and arrangements of the NHEL from time to time in force for the management and safety of the NHEL’s resources, its property and works, and for the control, good conduct and well-being of the NHEL’s Officers and employees;
6. Comply with the Contract, Constitution, the Resolutions, Determinations and Decisions of the NHEL Board, and all other Laws of Papua New Guinea;
7. Not engage in any activity which may directly or indirectly conflict with the duties described therein, or which may result in public reports injurious to the interest of the NHEL and the State’s interest;
8. Not at any time during the continuation of or after the termination of this contract except by the direction the NHEL Board, divulge either directly or indirectly to any person, information or record concerning the affairs of the NHEL or any business, property or transaction in which the NHEL maybe or may have been concerned or interested;
9. In the event that Executive Chairman commits or alleged to have committed a serious breach of this Clause, then the matter shall be referred to the NHEL Board under Clause 25, Disciplinary Procedure herein.”
   

24. Clearly, Mr. Aihipum breached even the terms of his own employment contract when he signed the contract which had significant financial implications without complying with the Defendant’s constitution. I also note, that Mr. Aihipum’s signature was witnessed by Mrs. Tomala, the Plaintiff’s wife. This supports the contention by the Defendant that the contract was not sanctioned or executed properly by the authorised officers of the Defendant.

25. In my view, the constitution of the Defendant, and for that matter any other company, is an important document. It contains the heart and mind of the Defendant company whose intentions are executed by its authorised officers. It provides rules and guidelines for operation and regulate conduct of its Officers. Any departure from a strict adherence to the expressed provisions of the constitution may be open to abuse and lead to financial loss, for example.

26. If the hire agreement was for a short period, I would accept that Mr Aihipum had administrative power to procure such services. The contract with the Plaintiff was for a significant period, and I do not accept that the Chief Executive Officer had an unfettered discretion. For these reasons, I find the contract signed on 23rd July 2015 was signed without authority and is void and unenforceable.

Whether the Plaintiff’s vehicle was hired for the work purposes of the Defendant.

27. The Plaintiff submits that the vehicle was hired by Mr. Aihipum, the Chief Executive Officer of the Defendant for work purposes. Mr. Aihipum who gave evidence for the Plaintiff maintained that the vehicle was hired as a support vehicle for special projects that the Defendant was embarking at the relevant time. The Defendant on the other hand submitted, the vehicle was not seen or used by any of the Defendant’s officers for work purposes. If it was hired, it was a personal matter between the Plaintiff and Mr. Aihipum.

28. The evidence show, the vehicle was with Mr. Aihipum. Mr. Aihipum was the Chief Executive Officer, and accordingly to his evidence, the vehicle was used as support vehicle. I accept that the vehicle was used for the Defendant’s work purposes by Mr. Aihipum as his support vehicle.

Whether the Defendant should pay for the Plaintiff’s Invoices.

29. The Plaintiff submits that the Defendant is liable to pay for the entire invoices totalling K482,900.00. The Plaintiff has rendered monthly invoices, but the Defendant has not paid them. The Plaintiff submits that although the Defendant made a payment of K180,400.00 in December 2015, the cheque was dishonoured. The Defendant has therefore acknowledged and accepted its indebtedness to the Plaintiff by its actions. The Plaintiff has also submitted that, the Defendant’s Creditors list produced on 30^th April 2017 shows the Plaintiff as one of the creditors who is owed at least K82,200.00.

30. The Defendant’s counsel maintains its denial. The Defendant submits the Defendant was not served with invoices until after the proceedings were filed and they are not aware of these invoices totalling K482,900.00 and therefore is not liable to pay.

31. The Defendant’s Creditors list issued on 30^th April 2017, (Exhibit P5) does not show the Defendant owing the Plaintiff the sum of K482,900.00. It has a figure of only K82,200.00. This list was cleared and approved for payment by Mr. Kevin Aihipum, on 30^th April 2017. The last of the Plaintiff’s invoices was issued on 30^th September 2016, and by this time the total debt outstanding was K482,900.00. Surprisingly, this figure was not shown on the Creditors list by 30^th April 2017, especially when Mr. Kevin Aihipum was or should have been aware of the debt.

32. My conclusion from the analysis of the evidence is that although the invoices were issued, most of them were not brought to the attention of the management. It seems the invoices were served on Mr. Aihipum who failed to bring them to the attention of the Defendant.

33. Although the Defendant attempted to pay the first lot of invoices in December 2015, the cheque issued for K180,400.00 was dishonoured. In the light of my finding, the Defendant is not to liable to pay for the entire invoices issued.

QUANTUM MERUIT

34. Whilst, the contract did not meet with the contracting practices and statutory requirements of the Defendant, there is overwhelming evidence that the Plaintiff’s vehicle was hired by Mr. Aihipum on behalf of the Defendant. The vehicle was kept and used by Mr. Aihipum and the Defendant for their work purposes, for the period between 23^rd July 2015 to 30^th September 2016. The Plaintiff’s vehicle sustained damage in a road accident in 2016, whilst in the Defendant’s possession. The Defendant and its employees have become aware of this. This is evident from the issue of the initial cheque for the sum of K180,400.00 dated 8^th December 2015. There is also evidence of the Plaintiff’s name being on the Defendant’s Creditors List issued on 30^th April 2017.

35. It is clear the Defendant has benefited from the use of the Plaintiff’s vehicle. The Defendant has acknowledged its indebtedness to the Plaintiff. In the circumstances, should the Plaintiff’s claim be dismissed without a remedy.

36. On 16^th July 2021, I have invited counsel involved in these proceedings to address the Court on this issue. I have directed counsel to file submissions by 22^nd July 2021, on this issue, whether the Court should make an award on quantum meruit in the event it rules that the Plaintiff’s hire contract was invalid and unenforceable.

37. Mr Aisi, counsel for the Plaintiff submits that the Plaintiff is entitled to the full claim of K 482,900.00. Mr. Ranewa, counsel for the Defendant submits that the Plaintiff is not entitled to any payment on quantum meruit for the following reasons:

1. The Plaintiff is not innocent. He knew of the lack of authority by Mr. Aihipum to bind the defendant. He was involved with top level management of the defendant in housing projects in Lae and made overseas trips together and knew well the corporate structure of the Defendant,
   

b. Secondly, the Plaintiff did not plead quantum meruit in the statement of

claim and therefore is precluded from making a claim now.

38. In my view, the Plaintiff should not be left without a remedy. Although not pleaded, the matter has been raised in open court and the defendant has been given an opportunity to address the court. I am prepared to consider the Plaintiff’s claim on a quantum meruit basis.

39. Quantum meruit is a common law cause of action. It has been applied in cases such as Keboki Business Group v The State (1984) PNGLR281, Fly River Provincial Government v Pioneer Health Services Limited (2003), SC705, 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, Teine v University of Goroka (2019) and Steven Turik v Mathew Gubag (2013) N5132:

40. In Turik v Gubag, Cannings J set out the following elements of quantum meruit:

1. ‘A’ has done something of benefit for ‘B’.
   
2. the thing done by ‘A’ relates to an arrangement of some sort with ‘B’ (the arrangement might be but is not necessarily a contract and might be an illegal contract).
   
3. it would be unjust to allow ‘B’ to retain the benefit without some remuneration or reward for ‘A’.
   

41. In the case Fly River Provincial Government vs. Pioneer Health Services Limited (2003) SC705, the Supreme Court said, in appropriate cases, the Court can make alternative awards based on quantum meruit. A summary of the Supreme Court decision from the head notes states in the following:

“2. The requirements under ss.59 and 61 of the PF(M)A are mandatory and where a contract is entered into in breach of those requirements, it is illegal and is therefore null, void and unenforceable.

3. The requirements under the PF(M)A are to enable transparency in all public contracts and to safeguard against corruption and enable securing of fair contracts with public institutions and or bodies for the best services at a competitive or best price.
   
4. A person dealing with the State or any of its arm or instrumentality or a public institution to which the Act applies, is bound to comply with the requirements of the Act and every person dealing with such institutions or bodies are deemed to be aware of these requirements.
   
5. A failure to ensure compliance of the requirements of the Act operates to the detriment of the party contracting with the State or a public authority to which the Act applies.
   
6. Where an illegal contract is part performed an action for recovery or restitution is available if not already paid for in equity to avoid unjust enrichment condition on the innocence of the contracting parties.
   
7. In the present case, the contract between the Appellant and the Respondent is null and void for non-compliance of the public tender and Minister for Finance’s approval under the PF(M) A.
   
8. However, since the contract was part performed and the Appellant received goods and service from the Respondent, in equity the Respondent is entitled to pursue its claim for a recovery of the costs and expenses it has incurred by way of restitution. But this is conditional on showing its innocence in the creation of the illegal contract.
   
9. In the construction of words used in a contract, the court is duty bound to adopt a fair and liberal approach with a view to upholding the agreement of the parties, if the intention of the parties can be ascertained. For the courts are there to uphold the agreement of parties and not to destroy it. In so doing, the court can supply any reasonable term missing from the contract or strike out meaningless words or clause in a contract. A part performance of a contract speaks in favour of a contract existing more than not. In the present case, there are sufficient details as to the price of a contract and or how it is to be ascertained. Therefore, there can be no uncertainty on such a term.”
   

42. His Honour Kandakasi DCJ, in restating this principle in a recent case, National Broadcasting Corporation v Taison (2019) PGNC 266, N8083 said this at paragraph 46 of his judgment:

“The law on point as represented by the decision of the Supreme Court in Fly River Provincial Government vs. Pioneer Health Services Limited (2003) SC705 is clear. A contract as in the present case, that has been arrived at in breach or without duly meeting the requirements of the PFMA is null and void ab initio and is thus unenforceable. Where such a contract has been performed in part, a claim based on the principle of quantum meruit may be possible, provided the private party contracting with the State or any of its entities is innocent of the breaches of the Act.

43. In Teine v University of Goroka (2019) SC1881, the Supreme Court clarified that the Supreme Court in Fly River Provincial Government did not lay down a hard-and -fast rule that all persons dealing with public institutions will be deemed to have knowledge of illegalities for lack of statutory compliances. At paragraph 9 of the judgment the Court said:

“ 9. We do not consider that the Supreme Court in Fly River v Pioneer laid down a hard-and-fast rule that all persons dealing with public institutions will be deemed to be aware of the public tender requirements of the Public Finances (Management) Act, so that in each and every instance of an illegal contract, the parties to the contract will be deemed to have knowledge of its illegality. The better view is that any dicta to that effect is confined to the facts of that particular case. It remains important that the evidence in each case be assessed on its merits. Though it might be appropriate to presume knowledge of illegalities, such a presumption can on a proper assessment of the evidence be rebutted. We consider that the trial judge erred by regarding dicta of the Supreme Court in the Fly River Provincial Government case about the parties being deemed to have knowledge of an illegality as a hard-and-fast rule and applying it against the appellants without adequate assessment of the evidence, leading to them being labelled without justification as ‘not innocent’.”

44. The combined effect of the above Supreme Court decisions is that each case has to be dealt with on its own merit. In the present case, there is evidence that Plaintiff signed a motor vehicle hire contract with the Defendant. He delivered his vehicle to the Defendant to use as per the terms of the contract in good faith. The Defendant used the Plaintiff’s vehicle for fourteen months and benefited from its use. Except that the contract is found to be void for lack of authority, and except for the Plaintiff not being paid, the parties have otherwise acted on the terms of the contract. Whilst the Defendant says the Plaintiff is not innocent, there is not enough evidence to conclude that the Plaintiff had knowledge of Mr Aihipum’s lack of authority to contract and bind the Defendant. I am of the view that the Plaintiff should be compensated, if not grave injustice will be done to the Plaintiff. I will therefore consider making an award on quantum meruit.

How much should the Court award?

45. The next issue is how much should the Court award. What is the reasonable amount in the circumstances? What factors should the Court consider in awarding an appropriate sum. In my view, the following considerations should be applied in determining the appropriate amount.

(a) Rate

46. The hire rate of K1, 000.00 per day is not unreasonable. Although, if the Defendant applied due diligence by seeking quotation from three (3) hire car firms, it is possible, the figures would have been reduced, I am not prepared to reduce the rate. The Defendant’s suggestion of K500.00 per day is far too low.

(b) Hire Period

47. The Contract did not have a hire period. It was opened handed, for an indefinite period. This is bad business practice on the part of both parties, especially for the Defendant. The total period invoiced is for 439 days, that is about 15 months. In my view, that is an unreasonable period for procuring the services of a motor vehicle hire. In my view, a reasonable period would be between 5 and 6 months.

(c) Legitimate Expectation

48. The Defendant has created a legitimate expectation. It issued a cheque for K180,400.00 on 8^th December 2015, under a ANZ Bank Cheque # 001914, which was subsequently dishonoured due to insufficient funds. The Plaintiff’s name is listed on the Defendant’s Creditors list as a creditor at item no. 32 for K82, 200.00. In the circumstances, the Court can consider a sum between K82,200.00 and K180,400.00 or thereabouts.

(d) Fairness

49. The Defendant’s Creditors list issued on 30^th April 2017, show it owed the service providers the sum of K5,669,676.91. Of this figure, more than K2,196,504.00 is for hire car alone and is owed to 15 hire car firms. This accounts for almost 40%. This shows the Defendant’s habit of hiring vehicles without restraint. It is not clear whether all the hire car firms have been paid. Assuming that all are paid, it would be unfair to the Plaintiff, if he was not paid anything for the hire of his vehicle.

MITIGATION OF LOSS

50. The Defendant submits that the Plaintiff has an obligation to mitigate his loss. The Plaintiff should have repossessed his vehicle as early as December 2015 when the cheque of K180,400.00 was dishonoured. I agree with the Defendants submission. The Plaintiff should have repossessed his vehicle when his invoices were not settled for a long while. In my view the reasonable period should be six months.

APPROPRIATE FIGURE

51. In my view, the most appropriate figure to fairly compensate the Plaintiff, and to do justice in the circumstances in terms of money, is to award a figure between K180,400.00 and an equivalent hire figure for the six months period. A six-month period has about 183 days. Multiplying by the daily rate of K1,000.00 per day it amounts to K 183.000.00. I am inclined to make an award of K183,000.00.

GST

52. Although the Plaintiff has registered with Internal Revenue Commission, as taxpayer, he has not produced any evidence that he has been paying any tax. This evidence would be in a form of Tax Statement issued by the Internal Revenue Commission. In the absence of the statement, the Plaintiff is not entitled to the GST component of the claim.

INTEREST

53. The Plaintiff is entitled interest at 8% on the principal sum of K183,000.00 from date of Writ of Summons (14^th August 2018) to date of Judgment (29^th July 2021), that is a period of 1079 days. By way of calculation, 8% interest on K 183,000.00 is K 14,640.00 per annum which accrues at K40.11 per day. For the total period it amounts to K 43,278.69.

COSTS

54. The Plaintiff has been successful in pursuing this claim. The Plaintiff is entitled to cost.

ORDERS

55. The Court orders that:

(1) Judgment be entered by the Plaintiff in the sum of K 226,278.69 inclusive of interest.

(2) Post Judgment interest shall accrue at the rate of 8% per annum after 30 days of this order until settlement.

(3) The Defendant shall pay the cost of the proceedings, to be taxed if not agreed.

(4) Time of entry of these Orders is abridged to take place forthwith upon the Court signing the Orders.

______________________________________________________________
Kelly Naru Lawyers: Lawyer for the Plaintiff
Kawat Lawyers: Lawyer for the Defendant