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Newdawn Finance v Lakasa [2021] PGNC 37; N8805 (10 March 2021)

N8805

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 985 OF 2015

BETWEEN
NEWDAWN FINANCE
First Plaintiff

AND
BUDO ILAITA
Second Plaintiff

AND
BEN LAKASA
Defendant

Waigani: Thompson J
2021: 5^th, 10^th March

DEFAULT INTERLOCUTORY JUDGMENT – effect – assessment of damages –lost business – mental distress – need to produce admissible and credible evidence.

Counsel:

Mr. C Oresi, for First and Second Plaintiffs
Mr. J Simbala, for the Defendant

10^th March, 2021

1. THOMPSON J: On 16 July 2015, the plaintiffs issued these proceedings, claiming damages for breach of an agreement entered into with the defendant in 2010. On 11 November 2016 default judgment was entered for the plaintiffs in the sum of K10,087.72, together with default interlocutory judgment for the balance of the claim, with damages to be assessed.

2. The duty of the court following the entry of a default judgement, is clear: “The fact that the plaintiff has obtained a default judgement against the defendant does not mean that he is automatically entitled to damages against the defendant. He must first establish that his action is proper and legal and prove his claim, before any damages can be awarded to him”. (William Mel v Coleman Pakalia (2005) PGSC 36).

3. The principles to be followed, which are set out in Coecon Ltd v National Fisheries Authority (2002) N2182, include that the default judgment resolves all questions of liability on matters pleaded in the statement of claim, and where the claim is for a breach of contract, the judgment confirms the breach as alleged, leaving the question of what damages necessarily flow from that breach. The plaintiff has the burden of producing credible and admissible evidence of the damages.

4. The defendant invited the court to revisit the issue of liability because the pleadings were not clear and did not disclose a cause of action by the first plaintiff. Following Mel v Pakalia (supra), it is only where the facts or cause of action pleaded do not make sense or would make an assessment futile, that liability should be revisited. This is not such a case. The pleadings are sufficient to show the facts and the cause of action, and to enable this court to proceed to an assessment.

5. The issue for determination is therefore whether or not the plaintiffs have produced sufficient admissible and credible evidence to establish the alleged damages.

6. I now consider the statement of claim. Paras 4-7 plead that the agreement was that the plaintiffs would lend a total of K7,117.92 to the defendant, who would repay this amount plus interest at the rate of 20%, by fortnightly payments of K474.53 over a period of 18 consecutive fortnights. If the defendant defaulted, “a default interest of 25% would be charged thereon which equates to K118.63 as default interest”.

7. The defendant made only one fortnightly repayment, so interest at 25% was applied to the balance, making a total of K10,083.72. It was this amount for which default judgment has already been entered, as a liquidated sum.

8. In para 11, the first plaintiff pleaded that as a result of the defendant’s breach of the agreement, it suffered a loss of business. The amount of the loss was not pleaded.

9. The plaintiff’s evidence was that on an unspecified date, the second plaintiff had received a superannuation payout of an unspecified amount, but likely to be K9,000.00, paid into her personal bank account. The second plaintiff says she intended to use this money to set up a money-lending business in the name of the first plaintiff. She did not incorporate a company, and there is no evidence that she registered a business name.

10. The defendant submitted that the court could not accept the plaintiff’s claim to have a money-lending business, because neither plaintiff was licensed under the Banks and Financial Institutions Act.

11. However, the plaintiffs were not engaging in banking business, because they were not taking money on deposit and then using it to lend out, and nor were they a corporation licensed as a financial institution. Neither plaintiff was a corporation which was carrying on banking business. Accordingly, the provisions of the Act had no application to them.

12. I note that under s 3 of the Business Names Act, “A person who...carries on business...under a business name, is guilty of an offence, unless... the business name consists of the name of that person...or the business name is registered under this Act.”

13. I also note that under s 6 of that Act, “Notwithstanding this Act,...a failure to comply with a provision of this Act, does not operate to avoid an agreement...”.

14. If the second plaintiff was carrying on business under the name of the first plaintiff, then as it was not her name and was not registered, she would prima facie have been committing an offence. That would be a matter for the authorities, but it would not make the loan agreement in-valid.

15. However, there was in fact no formal business. There was no evidence that the monies had been loaned by or in the name of the first plaintiff. The only evidence was that the monies had been paid from the

second plaintiff’s personal bank account. There was no evidence that the second plaintiff had been carrying on business in the name of the first plaintiff. There was no evidence of the existence of the first plaintiff at all. The default judgment is therefore only effective as being in favor of the second plaintiff.

16. The second plaintiff’s evidence was that she had K9,000.00 as starting capital for her business, although there were no banking or other records. She submits that after she loaned out K7,117.91, she should have received back K8,541.50 after eighteen consecutive fortnights ie. within nine months. She submits that as the full amount was not received, she was deprived of regular fortnightly income, and was unable to lend out money to other persons. She submits that her business therefore came to a halt, or rather, never really got started. As a result, she claims damages for her future loss of business.

17. The plaintiffs did not provide any evidence that the first plaintiff business had existed, and therefore had provided no evidence that the business came to a halt, or that it would have continued if not for the defendant’s default. This submission therefore amounts to a claim by the second plaintiff for loss of business. Such a claim was not pleaded. No evidence can be given of matters not pleaded (MVIT v Salio Tabanto (1995) PNGLR 214, PNGBC v Jeff Tole (2002) PGSC 8).

18. The second plaintiff submitted that simply because she was unable to produce any evidence enabling her future loss of business to be ascertained with any degree of certainty, this did not relieve the defendant of an obligation to pay damages. Having regard to cases such as Tusia Komaisa v Edgar Jossy and FNM Engineering Ltd (2012) N4863, she submitted that the court should award a reasonable amount as nominal compensation for loss of business, and she proposed K10,000.00.

19. The minimum requirement in any action is for the plaintiff to give admissible evidence in support of her claim (Yange Lagan v the State and ors (1995) PGNC 32.) In the oft-quoted passage from Bonham Carter v Hyde Park Hotel Ltd (1948) 4 TLR 177, the court said:

“Plaintiffs must understand that if they bring actions for damages, it is for them to prove their damages; it is not enough to write down particulars and, so to speak, throw them at the head of the court, saying: ‘this is what I have lost, I ask you to give me these damages’. They have to prove it.”
This has been adopted and applied by the courts in PNG, in numerous cases.

20. No application was made to amend para 11 or any other part of the statement of clam, to plead that the second plaintiff had suffered a loss of business. But even if para 11 could be impliedly taken to refer to the second plaintiff, she has not produced any admissible or credible evidence of a future loss. This is not a case where such evidence has been produced but is insufficient to accurately determine her loss, as in the Tusia Komaisa case. This is a case where no evidence has been produced at all.

21. The second plaintiff’s evidence was that she had loaned K7117.92 to the defendant, which was about 80% of her available capital. This left only about K1,900.00 available to further lend out. There was no evidence that this was sufficient to generate a future income.

22. The evidence only established that the second plaintiff had made a loan. It did not establish on the balance of probabilities that the second plaintiff had a realistic likelihood of carrying on a money-lending business, or that such a business would be profit-making. In fact, the evidence was that her only loan had failed to make any profit.

23. In relation to that failed loan, the loss suffered by the second plaintiff has been recognized by the judgment for the amount of the loan plus penalty interest. Any other loss is purely speculative.

24. I am not satisfied that the plaintiffs have produced any admissible or credible evidence of further economic loss flowing from the breach of the loan agreement, on which an award of damages could be based.

25. Next, in para 12, the second plaintiff pleaded that she had suffered mental distress, anguish and hardship as a result of the failure to repay the
loan, including “seeking accommodation with relatives”, and that “constant worry” contributed to her decline in health. No further particulars were provided.

26. As determined by the Supreme Court in Central Bank of Papua New Guinea v Tugiau (2009) PGSC 50, such a claim must be established by proper evidence. The plaintiff needs to provide medical evidence clearly establishing the nature and extent of any mental condition, and that it was caused by the defendant’s breach of contract or other tortious conduct. The only medical evidence produced here was that she had a thyroid condition, which was clearly unrelated to any mental stress, and could not be said to have been caused by the defendant’s conduct. There was no psychological or other evidence to show that the second plaintiff suffered any more serious worry or frustration than any money-lender would experience whenever a customer fails to repay a debt.

27. There was no evidence of the accommodation in which the second plaintiff lived, either before or after the loan default.

28. The second plaintiff has not produced any admissible or credible evidence to establish any injury or loss on which an award of general damages could be based.

29. I therefore find that the plaintiffs have not discharged the burden of proving a loss of business or psychological distress flowing from the breach of the loan agreement, and no damages can be assessed.

30. The final orders of the court, taking into account the orders of 2 December 2016, are:

a) Judgment for the second plaintiff against the defendant in the sum of K10,083.72, is affirmed.

b) No damages are awarded to the plaintiffs.

(c) Each party is to pay its own costs.
___________________________________________________________
Public Solicitor: Lawyers for the First and Second Plaintiffs
Taito Lawyers: Lawyers for the Defendant