SC2549
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 147 OF 2023

MINERAL RESOURCES DEVELOPMENT COMPANY LIMITED
Appellant

V

DAN SALMON KAKARAYA
Respondent

Waigani: Cannings J, Dingake J, Berrigan J
2024: 26th March, 4th April 

DAMAGES – assessment of damages for breach of contract of employment – whether award of damages by National Court excessive – whether award of damages included items outside scope of contract.

INTEREST – assessment of interest under Judicial Proceedings (Interest on Debt and Damages) Act 2015 – whether reasonable exercise of discretion by National Court to take into account four-year period between date judgment reserved and date judgment delivered. 

APPEALS – power of Supreme Court to give such judgment as ought to have been given in first instance – Supreme Court Act, s 16(c).

The appellant appealed against the award by the National Court of damages of K3,382,077 for breach of contract of employment and interest of K5,831,257. The appellant argued that the trial judge erred in three respects, by: (1) awarding a manifestly excessive amount of K3,232,077 for unpaid contractual entitlements; (2)  awarding K150,000 for loss of reputation and mental distress; (3) calculating an excessive amount of interest by including a period of more than four years for which judgment was reserved. The respondent argued that all grounds of appeal should be dismissed.

Held: 

(1)	The trial judge did not err in basing assessment of unpaid contractual entitlements on evidence of an expert witness, which was unrebutted. However, the judge did not subject the evidence to sufficient scrutiny as it included items in the sum of K840,302 that were outside the scope of the contract.

(2)	The trial judge did not err by regarding the claim for damages for loss of reputation and mental distress as being within the scope of the pleaded claim for general damages. The amount of K150,000.00 was within the range of awards granted in other cases.

(3)	The trial judge did not err in the method of calculation of interest or by including the lengthy period for which judgment was reserved. However, the reduced amount of general damages resulted in the amount of interest being reduced to K4,178,678.

(4)	Having identified an error in assessment of damages for unpaid contractual entitlements to the extent of K840,302, it was in the interests of justice for the Supreme Court to invoke its power under s 16(c) of the Supreme Court Act to give “such judgment as ought to have been given in the first instance” forthwith. 

(5)	Accordingly the appeal was allowed in part and the respondent was awarded in substitution for the order of the National Court, damages of K2,541,775 plus interest of K4,178,678, being a total judgment sum of K6,720,453. The parties were ordered to bear their own costs. 

Cases Cited

Central Bank v Tugiau (2009) SC1013
Cheong Supermarket Pty Ltd v Muro [1987] PNGLR 24
Coyle v Henao [2000] PNGLR 17
Kae v Mondo (2020) N8681
Lambu v Dugube (2006) N3082
Mineral Resources Development Company Ltd v Kakaraya (2023) N10461
NCDC v Dademo (2013) SC1260
Porgera Joint Venture v Kami [2010] 2 PNGLR 156
Salika v Pacific Star Ltd (2014) N5699

Counsel

B Kumo, for the Appellant
W P Smith, for the Respondent

4th April 2024

1.     BY THE COURT: The appellant, Mineral Resources Development Company Ltd, appeals against the award by the National Court to the respondent, Dan Kakaraya, of damages of K3,382,077 for breach of contract of employment and interest of K5,831,257. The total judgment sum was K9,213,334.

2.     The respondent was employed as managing director of the appellant under a four-year written contract of employment commencing 2 August 2001. He was suspended without pay on 17 February 2003. His employment was terminated on 7 February 2005. 

3.     The appellant commenced proceedings against the respondent in WS 1741 of 2004. The respondent filed a cross-claim in those proceedings, seeking damages for breach of contract. Liability for breach of contract was established under the cross-claim and judgment was entered for the respondent on 27 January 2017. 

4.    A separate trial on assessment of damages was conducted before Justice Shepherd on 8 November 2018. His Honour delivered judgment on 23 August 2023 (Mineral Resources Development Company Ltd v Kakaraya (2023) N10461).

5.     The appellant argues that his Honour erred in three respects, by: 

(1)	awarding an excessive amount of K3,232,077 for unpaid contractual entitlements (grounds of appeal 3.1, 3.2, 3.3 and 3.6); 

(2) 	awarding K150,000 for loss of reputation and mental distress (ground of appeal 3.4); 

(3) 	calculating an excessive amount of interest by including the period of more than four years for which judgment was reserved (ground of appeal 3.5). 

6.     The respondent argues that all grounds of appeal should be dismissed.

PRELIMINARY ISSUE

7.    Counsel for the respondent, Mr Smith, argued as a preliminary point regarding ground of appeal 3.6 that it contains questions of fact only and required leave of the court before being included in the notice of appeal. We disagree. It contains questions of mixed fact and law and such questions do not, per s 14(1)(b) of the  Supreme Court Act, require leave of the Court. We are satisfied that all grounds of appeal in the notice of appeal, which we have reduced to three, are properly before us.

(1)	ALLEGED ERROR BY TRIAL JUDGE BY AWARDING EXCESSIVE AMOUNT OF K3,232,077 FOR UNPAID CONTRACTUAL ENTITLEMENTS 

8.     The trial judge relied on an affidavit of James Sinton Spence, chartered accountant, who deposed that the respondent had given him instructions to do an assessment of the financial and economic losses he suffered as a result of suspension and termination of his employment. Mr Spence assessed that the losses suffered by the respondent for his “initial contract” (the contract that commenced on 2 August 2001) were K3,232,077. His Honour noted that the components of that sum were set out in a spreadsheet in Mr Spence’s report, which can be summarised as shown in the following table.

No	Item	Amount (K)	
1	Salary	632,469.00	
2	NPF	319,450.00	
3	Gratuity	442,515.00	
            4	Housing	-112,241.00	
5	Motor vehicle	449,990.00	
6	Telephone	48,000.00	
7	Utilities	116,000.00	
8	Domestic	12,800.00	
9	Business entertainment	19,200.00	
10	Security	120,000.00	
11	School fees	480,000.00	
12	Annual Leave	112,905.00	
13	Medical	77,137.00	
14	Settling out allowance	6,000.00	
15	Leave fares	30,000.00	
16	Repatriation	5,000.00	
17	Freight	16,228.00	
18	Dry cleaners	2,528.00	
19	Utilities maintenance	34,598.00	
20	Food and beverage	17,861.00	
21	Stationery	4,170.00	
22	Accommodation	20,157.00	
23	Travel	69,310.00	
24	Club membership	20,000.00	
25	Legal	228,000.00	
26	Accountancy	50,000.00	
     27	Computer consumables	10,000.00	
	Total	3,232,077.00	

9.     His Honour held that Mr Spence was properly regarded as an expert witness who was not cross-examined on his affidavit, and concluded:

As there was no evidence before the Court to rebut Mr Spence’s assessment that the amount owing but unpaid by MRDC to Mr Kakaraya at the end-date of 2 August 2005 of Mr Kakaraya’s contract was K3,232,077 had the contract not been terminated early, I find that this amount has, on the civil standard of proof on balance of probabilities, been proven to be the estimated financial loss sustained by Mr Kakaraya for this head of damage.  Item 1 of Mr Kakaraya’s claim is accordingly allowed and assessed in the sum of K3,232,077.  

10.     Ms Kumo, for the respondent, submitted that his Honour erred by:

•	placing unwarranted weight on the Spence report, which was not corroborated by documentary evidence; 
•	stating that the appellant did not rebut the evidence in the Spence report as there was a report by another accountant, Victoria Scott, which contradicted the figures in the Spence report;
•	not stating the period for which the unpaid contractual entitlements were calculated;
•	awarding damages for the whole term of the contract, contrary to the term of the contract which provided only a 12-month period for money in lieu of notice upon termination of the contract;
•	not taking into account the amounts paid by the appellant to the respondent pursuant to the contract of employment; and
•	including various items that the respondent was not entitled to under the contract of employment. 

11.     We reject all but the last of those submissions. His Honour was entitled to rely on the Spence report as Mr Spence adequately explained in his affidavit the materials that he relied on to make his calculations. The appellant did not take the opportunity at the trial to cross-examine him on his affidavit and report. 

12.    Mr Spence’s affidavit was properly regarded by the trial judge as unrebutted as the affidavit of Victorria Scott, a former payroll and accounts officer of the appellant, only stated actual salary, allowances and gratuity paid to the respondent for a particular period of his contract; it did not contain any projections for salary, allowances and gratuity that would have been paid to him if he had not been suspended without pay and had his contract terminated. 

13.    Mr Spence’s total amount of K3,232,077 was clearly referable to the period from the date of suspension without pay (17 February 2003) to the date of the end of the contract period (2 August 2005). 

14.     His Honour did not err in awarding damages for the whole of the contract period, consistently with the approach sanctioned by the Supreme Court in Porgera Joint Venture v Kami [2010] 2 PNGLR 156 as notice to the respondent of termination of the contract was given to him in February 2005, only six months before the end date of the four-year contract period. 

15.    There was no need to subtract from the sum of K3,232,077, amounts actually paid to the respondent, as the calculation was based on the period from the date of suspension without pay (17 February 2003) to the end of the contract period (2 August 2005).

16.     The part of the appellant’s submission we uphold concerns his Honour’s acceptance of the inclusion in Mr Spence’s calculation of some items that do not represent contractual entitlements. We find with respect that the learned trial judge did not subject the Spence report to sufficient scrutiny in that regard. It included a number of items that are in our opinion clearly outside the scope of the contract. Such items should have been struck out of the calculation. These total K840,302. The following table shows the items that should have been struck out of the calculation, resulting in a lesser figure.

No	Item	Amount	
1.		Salary	632,469.00	
2.		NPF	319,450.00	
3.		Gratuity	442,515.00	
4.		Housing	-112,241.00	
5.		Motor vehicle	449,990.00	
6.		Telephone	48,000.00	
7.		Utilities	116,000.00	
8.		Domestic	12,800.00	
9.		Business entertainment	19,200.00	
10.		Security	120,000.00	
11.		School fees	480,000.00	
12.		Annual Leave	112,905.00	
13.		Medical	77,137.00	
14.		Settling out allowance	6,000.00	
15.		Leave fares	30,000.00	
16.		Repatriation	5,000.00	
17.		Freight	16,228.00	
18.		Dry cleaners	2,528.00	
19.		Utilities maintenance	34,598.00	
20.		Food and beverage	17,861.00	
21.		Stationery	4,170.00	
22.		Accommodation	20,157.00	
23.		Travel	69,310.00	
24.		Club membership	20,000.00	
25.		Legal	228,000.00	
26.		Accountancy	50,000.00	
27.		Computer consumables	10,000.00	
	Total	2,391,775.00	

17.    In summary we partially uphold grounds of appeal 3.1, 3.2, 3.3 and 3.6. We find an error of law in the award of damages for loss of contractual entitlements to the extent of K840,302. 

(2)	AWARDING K150,000 FOR LOSS OF REPUTATION AND MENTAL DISTRESS

18.     The respondent claimed K1.5 million for loss of reputation and mental distress. The trial judge held that it was a proper claim that fell in line with the principles established in Central Bank v Tugiau (2009) SC1013 and that it comes under the head of general damages. His Honour considered that the appellant was put on notice through the pre-trial statement of agreed and disputed facts and issues that the respondent would be pressing this claim, yet argued only that nothing should be awarded. 

19.    His Honour considered cases in which lawyers had been awarded damages for reputational damage such as Coyle v Henao [2000] PNGLR 17 in which the Supreme Court sanctioned an award of K50,0000 in a defamation action and Lambu v Dugube (2006) N3082 in which a lawyer was awarded K100,000. His Honour was also guided by the award of K250,000 general damages plus K50,000 aggravated damages to a judge who brought a successful defamation suit against a newspaper publisher in Salika v Pacific Star Ltd (2014) N5699.

20.     Ms Kumo submitted that his Honour erred in law as the respondent did not plead reputational damage and the statement of agreed facts and issues is not a pleading, so he should have been awarded nothing. 

21.     We agree that the statement is not a pleading (Kae v Mondo (2020) N8681). However we uphold the approach of the trial judge that the claim for reputational damages fell within the scope of general damages and that any concern that the appellant was not given notice of the claim was resolved by its inclusion in the statement of agreed and disputed facts and issues. 

22.     We find that the amount awarded by his Honour was in accordance with precedent. No error of law has been established. We dismiss ground of appeal 3.4. 

(3)	AWARDING AN EXCESSIVE AMOUNT OF INTEREST OF K5,831,257

23.     The trial judge awarded interest to the respondent under s 4(1) of the Judicial Proceedings (Interest on Debt and Damages) Act 2015, which relevantly provides:

… in proceedings in a court for the recovery of a debt or damages, the court may order a rate as it thinks proper to be applied to the sum for which judgment is given … on the whole or part of the debt or damages for the whole or part of the period between the date on which the cause of action arose and the date of the judgment.

24.     His Honour noted that that provision confers a four-fold discretion on the Court: (1) whether to grant interest at all; (2) to fix the rate; (3) to grant interest on the whole or part of the damages for which judgment is given; and (4) to fix the period for which interest will run. 

25.    His Honour exercised the discretion by deciding: (1) to award interest; (2) to fix the rate at 8% per annum; (3) to grant interest on the whole of the amount of damages for which judgment was given; and (4) to fix the start-date of the period for which interest would run as 17 February 2003 (when the respondent was suspended without pay) and the end-date of that period as the date of judgment (23 August 2023). 

26.     His Honour applied the following formula for calculating interest:

D x IR x (N/365) = I

Where D is the amount of damages, IR is the interest rate, N is the number of days expressed as a percentage of years and I is the amount of interest.

Thus: K3,382,077 x 0.08 x 7502/365 = K5,831,257.

27.      The appellant takes issue with the period of 20.55 years that interest was allowed to run. It is argued that the trial judge should not have included the period of lengthy delay in delivery of judgment, from 8 November 2018 to 23 August 2023. This is said to be contrary to the principles established by the Supreme Court in NCDC v Dademo (2013) SC1260.

28.      We reject the submission. The Supreme Court in NCDC v Dademo did not say that in every case of lengthy delay in delivery of judgment, the court must disregard the period of delay in calculating interest. Each case will turn on its facts. The present case is peculiar in that the litigation has been proceeding for more than 20 years including the period of more than four years for which judgment was reserved. In the context of such prolonged litigation we are not persuaded that the trial judge erred in the exercise of discretion by including that period in the calculation of interest.

29.      We endorse the trial judge’s methodology for determining interest, including the notion of the four-fold discretion as set out by Bredmeyer J in Cheong Supermarket Pty Ltd v Muro [1987] PNGLR 24.

30.       However, because we have reduced the amount of general damages that ought to have been awarded to the appellant to the sum of K2,391,775, he will be awarded a lesser amount of interest.

31.      We apply the same formula used by the trial judge:

D x IR x (N/365) = I

Where D is the amount of damages, IR is the interest rate, N is the number of days expressed as a percentage of years and I is the amount of interest. The amount of damages is K2,391,775 + K150,000 = K2,541,775.

Thus: K2,541,775 x 0.08 x 7502/365 = K4,178,678.

32.      We therefore partially uphold ground of appeal 3.5, though not on the ground contended for by the appellant. We reduce the amount of interest that ought to have been awarded, to the extent of K1,652,579 (K5,831,257 – K4,178,678 = K1,652,579).

WHAT ORDERS SHOULD THE SUPREME COURT MAKE?

33.     We have partially upheld most grounds of appeal. We have identified an error in the award of general damages to the extent of K840,302 and a consequential error in the award of interest to the extent of K1,652,579. 

34.     It is in the interests of justice, given the lengthy period over which the litigation has run, for the Supreme Court to invoke its power under s 16(c) of the Supreme Court Act to give “such judgment as ought to have been given in the first instance” forthwith, without remitting the matter to the National Court for a fresh assessment of damages. 

35.     Damages are assessed as:

General damages re unpaid contractual entitlements K2,391,775 + 
Damages re reputation K150,000 
Total damages = K2,541,775.

Interest is assessed at K4,178,678

36.       As the appeal has partially succeeded, it is appropriate that the parties bear their own costs of the Supreme Court proceedings. However the National Court’s order as to costs (that the appellant pay the respondent’s costs on a solicitor-client basis) will be preserved. 

ORDER
 
(1)	The appeal is allowed in part in that it is determined that the amount of damages and interest awarded by the National Court was excessive. 

(2)	Orders (1) and (2) of the National Court in WS 1741 of 2004 of 23 August 2023 are set aside and in substitution thereof, pursuant to s 16(c) of the Supreme Court Act, judgment is entered for the respondent in the sum of K6,720,453 comprising: 

assessed damages 	: K2,541,775
pre-judgment interest: K4,178,678.

(3)	Order (3) of the National Court in WS 1741 of 2004 of 23 August    2023 is not set aside and shall be given effect on its terms.

(4)	Subject to any specific costs orders in these Supreme Court proceedings, the parties will bear their own costs of these Supreme Court proceedings. 
_______________________________________________________________
Jema Lawyers: Lawyers for the Appellant 
O’Briens Lawyers: Lawyers for the Respondent