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Kurumbukari Ltd v Enfi (PNG) Ltd [2015] PGNC 92; N5951 (21 April 2015)

N5951

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1596 OF 2005

KURUMBUKARI LTD
Plaintiff

V

ENFI (PNG) LTD
Defendant

Madang: Cannings J
2014: 8 December,
2015: 16 February, 21 April

DAMAGES – breach of contract – construction and transport contract – liability established at trial – defendant's refusal to pay reasonable price of contract variation.

The plaintiff succeeded at an earlier trial in establishing liability in breach of contract against the defendant for its refusal to pay anything other than the fixed price of the contract despite the contract being substantially varied with its consent. At this trial on assessment of damages the plaintiff claimed total damages of K1,646,173.27 comprising: (1) the extra amounts it was invoiced by other contractors due to extra equipment and services it engaged due to the contract variation, K1,431,455.02; and (2) 15% profit margin, K214,718.25.

Held:

(1) The plaintiff's claim was sound in principle and generally supported by the evidence, however the extra amounts claimed were discounted by 20% due to (a) the plaintiff's failure to prove that all the invoices adduced in evidence related to the contract variation and (b) the defendant's evidence that substantial expenditure was wasted by the plaintiff. The amount discounted was K1,431,455.02 x 0.20 = K286,291.00. Thus the amount awarded was K1,145,164.02.

(2) The claim for a 15% profit margin was vague and unsubstantiated and nothing was awarded. The total award of damages was thus K1,145,164.02.

(3) In addition interest was awarded, calculated from the date deemed to be a reasonable date after the judgment on liability by which the defendant ought to have settled the claim, 21 April 2013, to the date of the judgment on damages, at the rate of 8% per annum. The amount of interest was K183,226.24.

(4) The total judgment sum was K1,328,390.26. The plaintiff was awarded costs.

Cases cited

The following case is cited in the judgment:

Kurumbukari Ltd v Enfi (PNG) Ltd (2012) N4704

ASSESSMENT OF DAMAGES

This was a trial on assessment of damages for breach of contract following a trial on liability.

Counsel

G Pipike, for the Plaintiff
B B Wak, for the Defendant

21st April, 2015

1. CANNINGS J: This has been a trial on assessment of damages. The plaintiff, Kurumbukari Ltd, succeeded at an earlier trial in establishing liability in breach of contract against the defendant, Enfi (PNG) Ltd.

BACKGROUND

2. The parties entered into a written contract in December 2008 under which the defendant engaged the plaintiff to strengthen bridges and construct road diversions to enable it to transport heavy machinery from Lae, Morobe Province, along the Bruce Jephcott Highway to the site of the Ramu Nickel-Cobalt mine at Kurumbukari, Madang Province. There are on the highway between Waterais Junction and Usino Junction many river crossings. Normal traffic traverses them by permanent bridges, but most of the bridges are single-lane and not strong enough to bear loads created by movement across them of machinery of the size and weight to be transported to the mine. The plaintiff was engaged to temporarily modify some of the bridges, for example by removal and replacement of fender posts, and to construct detours around other bridges and construct ford crossings. The contract was for a fixed price of K1,509,154.02 plus GST.

3. The scope of works of the contract was materially changed when it became apparent to both parties during performance of the contract in 2009 that the original scope of works would not enable all the heavy machinery to be transported safely to the mine site. Additional works, involving deployment of a mobile bridge, imported from China by the defendant and provided to the plaintiff, were carried out with the defendant's knowledge and consent. There were implied instructions to carry out those works. It was necessarily implied that a term of the varied contract would be that the defendant pay a reasonable price for the additional works performed, calculated in accordance with the pricing formulae incorporated in the original contract.

4. The defendant's refusal to pay anything to the plaintiff in addition to the original contract price was found to be a breach of contract for which the defendant was liable in damages. The Court entered judgment in favour of the plaintiff on 25 June 2012 (Kurumbukari Ltd v Enfi (PNG) Ltd (2012) N4704). The question of assessment of damages was referred to mediation but the mediation failed and the matter has returned to Court for trial.

5. The plaintiff claims two categories of damages:

(1) additional expenditure necessitated by the contract variation, K1,431,455.02;

(2) a 15% profit margin, claimed to be K214,718.26.

The total claim is K1,646,173.27 plus interest and costs.

(1) ADDITIONAL EXPENDITURE

6. Mr Wak for the defendant submitted that nothing should be awarded as there is no evidence to support the proposition that the plaintiff suffered any damage as a result of the wrongful actions of the defendant. I reject this submission as it fails to meet the fundamental finding of the Court in the earlier judgment: the defendant breached the contract, as varied, by refusing to pay anything over the original contract price. The plaintiff is entitled to damages in the sense that it is entitled to an award that will represent the reasonable price of the extra works and services it performed.

7. The plaintiff is saying that it incurred additional expenditure of K1,431,455.02 and needs to be compensated with that amount (plus the profit margin) as part of a determination of the reasonable price due under the varied contract. I agree with the submission of Mr Pipike for the plaintiff that this is, in principle, a valid claim. However, I am going to discount it by 20% for two reasons. First, though the plaintiff has adduced evidence of invoices issued which support calculation of the figure claimed, there is insufficient evidence that each and every invoice is to the full extent of the invoice directly related to the extra works and services necessitated by the contract variation. Secondly, I have taken into account the evidence of the defendant's Logistics Manager, Tian Tao, that there were instances of wasted expenditure and down-time of heavy equipment hired by the plaintiff, which should be excluded from calculation of the reasonable price.

8. The amount discounted is K1,431,455.02 x 0.20 = K286,291.00. Thus the amount awarded is K1,145,164.02.

(2) PROFIT MARGIN

9. I consider that the claim for a 15% profit margin is vague and unsubstantiated and I uphold Mr Wak's submission that nothing should be awarded.

SUMMARY

10. Additional expenditure : K1,145,164.02; +
Profit margin claim : 0

Total = K1,145,164.02.

INTEREST

11. Interest will be awarded at the rate of 8 per cent per annum on the total amount of damages under Section 1(1) of the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52. Interest will be calculated from the date deemed to be a reasonable date after the judgment on liability by which the defendant ought to have settled the claim, 21 April 2013, to the date of this judgment, a period of 2 years, by applying the formula D x I x N = A, where: D is the amount of damages assessed, I is the rate of interest per annum, N is the appropriate period in numbers of years and A is the amount of interest. Thus: K1,145,164.02 x 0.08 x 2.0 = K183,226.24.

COSTS

12. The general rule is that costs follow the event, ie the successful party has its costs paid for by the losing party on a party-to-party basis. The question of costs is a discretionary matter. There are no special circumstances in this case that warrant departure from the general rule. As the claim of the plaintiff has been substantially successful it will be awarded costs.

ORDER

(1) The defendant shall pay to the plaintiff damages of K1,145,164.02 plus interest of K183,226.24, being a total judgment sum of K1,328,390.26.

(2) The defendant shall pay the plaintiff's costs of and incidental to the trial on assessment of damages, on a party-party basis which shall, if not agreed, be taxed.

Judgment accordingly.
___________________________________________________________

GP Lawyers: Lawyers for the Plaintiff
Kunai & Co Lawyers: Lawyers for the Defendant