National Housing Corporation v Audela Ltd [2020] PGNC 201; N8436 (29 July 2020)

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DAMAGES – undertaking as to damages - assessment of damages based on applicable principles – damages claimed must be directly connected to the injunction – party affected by injunction under duty to establish its damages by evidence – no clarity in damages claimed as to when, where and how they were incurred – no award of damages

Supported by an undertaking as to damages, the Plaintiff obtained an interim injunction pending a determination of the proceeding. Thereafter, the Court issued directions to progress the matter to trial, which the Plaintiff failed to comply with and also failed to prosecute its claim with due diligence. That resulted in a dismissal of the proceeding, a lifting of the interim injunction and an order for an assessment of the First Defendant’s damages based on the undertaking as to damages. The First Defendant claimed K32,191,442.00 in damages which were not demonstrated by any evidence to have been forced upon it by the interim injunction. At the hearing on damages, the Plaintiff took issue on the validity of the undertaking arguing that it was not binding on it because the person who signed the undertaking was not an authorised officer and was not under its corporate seal.

(e) If the Court decides in favour of enforcing the undertaking, it should proceed to assess the entitled party’s damages.

(f) Damages are usually assessed in accordance with the established principles governing assessment of damages applicable to breach of contracts.

(g) Save in special cases, an undertaking as to damages is the price which the person asking for an interlocutory injunction has to pay for its grant.

(h) The undertaking though described as an undertaking as to damages does not found any cause of action. It does, however, enable the party enjoined to apply to the court for compensation if it is subsequently established that the interlocutory injunction should not have been granted.

(i) In a case where it is determined that the injunction should not have been granted the undertaking is likely to be enforced, though the Court retains discretion not to do so.

Lee & Song Timber (Png) Co LTD v. Nathanael Burua (2005) N2836.
Bougainville Copper Ltd v. Chief Collector of Taxes (2007) SC853.
PNG Deep Sea Fishing Ltd v. Luke Critten (2010) SC1126.
MAS International Ltd v David Sode (2008) SC944.
Telikom PNG Limited v. ICCC (2007) N3143.
Rimbunan Hijau (PNG) Ltd v. Ina Enei (2019) SC1859.
PNG Bible Church Inc v. Carol Mandi (2018) SC1724.
Brian Laki v. The State (2005) SC783.
Motor Vehicle Insurance (PNG) Trust v James Pupune [1993] PNGLR 370 at 380 and Abel Kopen v. The State [1998-89] PNGLR 659.
White Corner Investments Ltd v. Regina Waim Harro (2006) N3089.
Wei Xiang Cheng v. Agmark Limited (2008) N3338.
Pastor James Molu v. Dokta Pena (2009) N3817.
Bui Minig v. Joycelyn Minig (2013) N5327.
Morobe Provincial Government v. Tropical Charters Limited (2011) N4240.
Norman Daniel v. Air Niugini Ltd (2019) N7820.
Marsh v. Hay [1981] PNGLR 392.
Jack Livinai Patterson trading as Patterson Lawyers v. NCDC (2001) N2145.
Dr Florian Gubon v Pacific Mobile Communications Ltd (2006) N3104.
The Central Bank of PNG v. Gabriel Tugiau (2009) SC1013.
SareaSoi v. Daniel Korimbao (2018) N7081.

Mr. L. Tilto, for the First Defendant
No appearance for the Second to the Fifth Defendants

1. KANDAKASI DCJ: Following dismissal of the National Housing Corporation’s (NHC) claim on account of non-compliance of Court orders and want of prosecution, the Court ordered the First Defendant, Audlea Limited’s (Audlea) damages be assessed. That proceeded on the basis of an undertaking as to damages given by the NHC in support of an interim injunctive order it secured against Audlea, pending a final determination of the proceeding.

2. Audlea, claims it suffered a total of K32,191,442.00 as a result of the injunction and is seeking to recover that amount. The claim comprises of:

1	Administration Costs (actual)	151, 921.00
2	Demolition costs (actual)	350,070.00
3	Loss of business, loss of reputation, hardship, etc	517,300.00
4	Loss of wages (lost opportunity)	885,640.00
5	Loss of revenue (lost opportunity)	29,887,148.00
6	Legal fees incurred (actual)	509,368.00

3. In arguing against this claim, the NHC is making two points. Firstly, it claims the undertaking as to damages is not binding on it because it was not signed under its seal and the person who signed the undertaking was not an authorised officer. It goes on to argue that, these defects should have been raised by Audlea and have the interim orders lifted earlier but it failed to do so by reason of which, it is precluded from claiming the damages. Secondly, it submits Audela has not established by any evidence that it suffered these alleged damages during the currency or as a direct result of the restraining orders. The relevant period of the injunction was 14 months from 20^th November 2008 to 05^th March 2010. NHC further argues that, the alleged damages are speculative and are for a period of 9 years which is beyond the currency of the injunction.

(1) Whether the undertaking as to damages was defective in that, it was not signed under seal and by an unauthorised officer and is therefore, not binding on the NHC?

(2) If the undertaking was defective, did Audlea have any obligation to point those out and seek a set aside of the injunctive orders and thereby avoid or mitigate its damages?

(3) What is the relevant period for an assessment of Audlea’s damages under the undertaking as to damages?

(4) Has Audlea established by appropriate evidence its damages for the relevant period of the injunctive orders?

5. In order to properly consider and determine each of these issues, it is important that the background facts leading to these issues need to be properly understood. The relevant facts are set out in NHC and Audela’s submissions and various affidavits each of them has filed and are in the Court file, which are as follows:

(a) On 11^th October 2004, Rex Mono, the Managing Director of Audela wrote to Lands Department expressing Audela’s interest in a State Lease property, described as, Volume 30 Folio 7 Allotment 6 Section 43 Curlew Street, Waigani, Port Moresby (the Property).

(b) On the 29^th October 2004, Audela lodged a formal application for consideration by the National Lands Board for a lease(title) over the Property.

(c) Upon Audela’s request, an inspection was carried out on the property by Lands Department and a report dated 22^nd October, 2004 followed.

(d) Audela, also applied for license for occupation of the Property for a period of 12 months from the date of its issuance and paid K360.00 as license fee.

(e) On the 23^rd March, 2005, Audela applied for an exemption of advertisement of the property for public tender. Section 69 of the Lands Act 1996, governs exemptions. Audela’ s letter did not mention or disclose any evidence establishing any of the basis for the grant of such an application.

(f) On the 25^th March, 2005, an exemption from advertisement on the said property was granted to Audela under s. 69 (2) (d) of the Lands Act. Section 69 (2) (d) states: “The Minister may exempt land from advertisement for application or tender ... (d)where the State has agreed to provide land for the establishment or expansion of a business, project, or other undertaking.” No evidence of any such agreement was produced or alluded to in the application for exemption and or the grant of it.

(g) On the 30^th June 2005, a Valuer from Lands Department made a valuation on the property, noting two buildings on the Property but giving a valuation of K42,000.00.

(h) The Lands Department notified Audela by Notice dated 9^th January 2006, that the PNG Land Board Meeting No. 1 of 2006, would be held from the 18^th- 20^th January 2006, and that Audela’s application was listed No. 17 on the Boards List for hearing.

(i) On 10^th February 2006, the National Land Board had a meeting and decided to grant Audela a State Lease over the Property, without making any mention of the improvements on the Property.

(j) On 10^th January 2006, the Chairman of the PNG Land Board wrote to Audela Ltd enclosing the recommendations of the PNG Land Board.

(k) On 03^rd May 2006, the State Lease over the Property was formally granted to Audela Ltd.

(l) At all relevant times, the Property was neither unimproved, nor vacant. It had two blocks of NHC flats housing about 10 families who were public servants serving the then Administrative College, now the Institute of Public Administration (IPA). They were tenants of the NHC.

(m) On February 28^th 2007, Audela took out Orders in the District Court for the eviction of the tenants on the Property.

(n) The tenants filed National Court proceedings, WS No. 394 of 2007 and successfully took out on 20^th April 20007 a stay of the District Court orders.

(o) On 7^th May 2007, Audela challenged the tenants standing and lack of notice under s. 5 of the Claims By and Against the State Act 1996. That led to a discontinuance of the tenants’ proceeding on 21^st May 2007.

(p) On or about October or November 2006, the tenants issued proceedings in the National Court against Audela and the other Defendants under WS 1532 of 2006. Audela applied to have those proceedings dismissed for want of locus standi and for want of s. 5 notice. On 16^th February 2007, the National Court granted that application and dismissed the proceedings.

(q) On 27^th February 2007, the Plaintiffs in WS 1532 of 2006 filed an appeal, SCA 10 of 2007 in the Supreme Court against the dismissal order. However, following a failure to prosecute the appeal with due diligence, the Court dismissed it on 4^th July 2008.

(r) On 11^th August 2006, the tenants filed an OS proceeding in the National Court, OS 565 of 2006, seeking certain declaratory orders against Audela. Upon Audela raising the same issues of lack of standing and s.5 notice, the tenants with leave of the Court discontinued the OS proceeding on 6^th October 2006.

(s) On 15^th November 2008, the NHC took out the current proceeding, WS 1324 of 2008 challenging Audela’s title to the property. Then 2 days later, on 8^th November 2008, NHC, filed a motion with a supporting affidavit and an undertaking as to damages for interim restraining orders against Audela and other defendants.

(t) On 19^th November 2008, the National Court granted ex parte interim restraining orders. The orders amongst others restraint Audela from evicting the tenants and bringing on any development on the Property. The proceeding was then fixed to return before the Court on 01^st December 2008 for inter parte hearing.

(u) Neither of the parties explain what happened on the set return date until the Court made the orders dismissing the proceeding on 5^th March 2010 for want of prosecution and for failure to comply with Court orders and ordered an assessment of Audela’s damages based on the NHC’s undertaking as to damages.

(v) A looking up of the Court file and endorsements thereupon, is clear that Audela filed a number of motions seeking a dismissal of the proceedings but failed to have them prosecuted, and those were dismissed for want of prosecution themselves.

(w) Following the dismissal of the proceeding, the Court listed the matter for a hearing for an assessment of Audela’s damages.

(a) Kaluwin Potuan Sworn on 19^th May 2016 and filed on 20^th May 2016^[1]. The deponent is a registered Valuer who carried out a valuation of Audela’s properties and assets and provided a report dated 26^th January 2016. The report is annexure “A” the affidavit;

(b) Iris Rainol sworn on 19^th May 2016 and filed on 20^th May 2016.^[2] She has a degree in Lands Studies from Unitech, Lae. She assisted Mr. Potuan with the valuation of Audela’s properties and assets;

(c) Asing Bogomos sworn on 20^th May 2016 and filed on 20^th May 2016.^[3] The depondent is a registered Certified Practicing Accountant (CPA). This person has done all the Financial Reports, Company Returns and Tax Returns for Audlea for the period 2005 to 2015.Annexure “B” of affidavit contains the Financial Statements for the period 2006 to 2010 and the company returns for the same period.Annexure “C” contains the Financial Statements for the period 2011 to 2015 and the Company Returns for the same period.Annexure “D” contains a Summary of Claims by Audela for alleged the losses for the period 2006 to 2015; and

(d) Rex Monosworn on 12^th July 2016 and filed on the same day^[4]. He is the sole shareholder director of Audlea. His affidavit gives an account of the events for the period 2005 to 2015. He also gives an account of work put into seeing Audela start from scratch to a nationally owned company, worth several millions. As Audlea’s counsel submits, this is a critical affidavit as it will soon become apparent.

7. I consider it important that, we should first state the relevant principles on assessment of damages based on an undertaking as to damages for proper guidance. The principles are clear as they appear from a number of decisions in our jurisdiction such as the one in Lee & Song Timber (Png) Co LTD v. Nathanael Burua (2005) N2836, per Injia DCJ (as he then was). In summary the principles in so far as they are relevant for the present case are:

(a) If a plaintiff ultimately fails in the substantive merits of his case, a defendant is entitled to an enquiry as to damages sustained by reason of interlocutory injunctions, unless there are special circumstances.

(b) An assessment of damages should proceed on an Undertaking as to Damages following a discharge of an interim injunctive order after a decision is made to have the Undertaking enforced.

(c) A discharge of an interim injunctive order can occur upon discontinuance or dismissal of the substantive proceedings. In many cases, injunctions will remain until the trial and in such cases, the propriety of its original grant and the question of an enforcement of an undertaking will not be considered before the conclusion of the trial.

(d) An undertaking is made to the Court and not to the other partyor those enjoined and is for the Court to decide whether the Undertaking should be enforced. That is a question that is separate from the question of whether or not the interim injunctive order should be discharged.

(e) If the Court decides in favour of enforcing an undertaking, it should proceed to assessing damages.

(f) Damages are usually assessed in accordance with the established principles governing assessment of damages applicable to breach of contracts.

(g) Save in special cases, an undertaking as to damages is the pricewhich the person asking for an interlocutory injunction has to pay for its grant. The court cannot compel an applicant to give an undertaking but it can refuse to grant an injunction unless he does.

(i) In a case where it is determined that the injunction should not have been granted, the undertaking is likely to be enforced, though the Court retains discretion not to do so.

8. With these principles in mind I now turn to a consideration of each of the issues presented for determination.

Issue (1) - Whether the undertaking as to damages was defective in that it was not signed under seal and by an unauthorised officer and is therefore not binding on the NHC?

10. The law governing undertaking as to damages in support of an application and grant of interim injunctive orders is clear. Commencing with the decision of the Supreme Court in Bougainville Copper Ltd v. Chief Collector of Taxes (2007) SC853, per Kapi DCJ (as he then was), Sevua and Kandakasi JJ (as we then were), the law clearly is that, no interim injunction can be granted without a proper undertaking as to damages given by an applicant. Recent decisions of the Supreme Court such as the one in PNG Deep Sea Fishing Ltd v. Luke Critten (2010) SC1126, per Kandakasi J (as I then was), Hartshorn and Sawong JJ and MAS International Ltd v. David Sode (2008) SC944, per Gavara–Nanu, Manuhu and David JJ continue to emphasise these requirements.

11. In Telikom PNG Limited v. ICCC (2007) N3143, I noted the relevant law as held by the Supreme Court in the Bougainville Copper Limited. I then went on to note that:

“Unfortunately, there is no authority that I am aware of that deals with the question of the form of an undertaking and who must execute it. Except only to argue their respective positions, neither of the parties assisted the Court with any authority on point ...[and I] maintained the view ... that, if a company is giving an undertaking as to damages, in order for that to be binding on the company, that undertaking must be given under seal of the company”.

“When the seal of a company is affixed, it signifies that the document is for or by the company with its due and proper authority. It immediately gives the impression that the document is for and by the company for all its intents and purposes. Thus, subject only to prove of fraud or serious misrepresentation, the affixing of the seal binds the company. Otherwise, there is always the potential for the argument that the company did not give the undertaking but an individual who did not necessarily have the authority to bind the company at the relevant time. So, unless the company’s seal is affixed to an undertaking as to damages, there would be room for that argument. Affixing the company’s seal would put any such argument to rest.”

13. Going on further, I reasoned that, giving an undertaking under seal is necessary for one main reason. The reason is:

“The Court hearing an application for injunction has to proceed with the comfort that in the event of any damages occasioned by any injunctive order it may order, will be made good by the party applying for the injunction and that it will not result in any further unnecessary litigation or arguments as to the authority and validity of the undertaking as to damages and just what the undertaking covers.”

14. In giving that reason, I noted that the validity of undertakings has been questioned. Requiring and ensuring that an undertaking by a corporate entity be under seal by the relevant and correct officer eliminates litigation questioning the validity of undertakings by a corporate entity.

15. Speaking specifically on the wording in an undertaking as to damages, I noted, there was no prescribed form or wording. In that vacuum, I opined that, whatever wordings are used, “the fact of giving an undertaking as to damages for the injunction applied must be made clear.” I then suggested wordings that might help convey that intention clearly.

“The Plaintiff hereby undertakes to pay damages to the Defendants for any damages that may accrue to the Defendants as a result of the Court granting restraining Orders in favor of the Plaintiff herein.

17. Two things are clearly missing. The first is the common seal of the NHC. It does not appear anywhere in the undertaking. Secondly, the position of the person giving that undertaking on behalf the NHC is not disclosed. These are obviously critical or serious defects on the face of the undertaking. They are both critical on the question of binding the NHC and serve the purpose of the requirement for undertakings in support of its then successful application for the interim injunction. The undertaking was prepared, filed and relied upon by the NHC. It had a duty to ensure, such defects did not attend the undertaking. It was under a duty and an obligation to ensure these defects did not exist before relying on the undertaking, argue for the interim injunctive orders and secure them. The NHC failed to discharge that duty and benefited from its own failure. Having so benefitted, the NHC is now seeking to avoid liability and gain again from his defective conduct. This is similar to a party seeking to gain from one’s own illegal conduct, which is not permissible: See Rimbunan Hijau (PNG) Ltd v. Ina Enei (2019) SC1859, per Salika CJ, Kandakasi DCJ and Toliken J at para 20; PNG Bible Church Inc v. Carol Mandi (2018) SC1724, per Kandakasi J (as I then was), Toliken and Bona JJ at para 25; PNG Deep Sea Fishing Ltd v. Luke Critten (supra) and Brian Laki v. The State (2005) SC783, per Jalina (as he then was), Kirriwom and Kandakasi J (as I then was). I am thus of the view that, the NHC is bound by its undertaking notwithstanding its self-authored defects. This takes us to question two.

Issue (2) - If the undertaking was defective, did Audela have any obligation to point those out and seek a set aside of the injunctive orders and thereby avoid or mitigate its damages?

18. The defects on the face of the Undertaking and the terms of the interim orders that were granted on19^th November 2008 are relevant for the purposes of assessing Audela’s damages. This is particularly relevant on the question of the one who is entitled to claim damages’ duty to mitigate his or her loss or damages. It is settled law that all plaintiffs have a duty to mitigate their losses. A failure to do so may result in a reduction of the damages that could be recoverable: See Motor Vehicle Insurance (PNG) Trust v James Pupune [1993] PNGLR 370 at 380 and Abel Kopen v. The State [1998-89] PNGLR 659 at 660.

19. In this case, the interim orders were obtained ex parte. Under O.12, r.8 of the National Court Rules, Audela was entitled to apply for a set aside of those orders. The apparent defects in the face of the undertaking could have easily resulted in a lifting of the injunctive orders. The interim injunctive orders were made returnable on 01^st December 2008. If those orders were a problem to Audela, it could have taken all steps necessary to have those orders set aside at the earliest possible opportunity. There is a large body of cases including the decision in Bougainville Copper Ltd v. Chief Collector of Taxes (supra) in which interim orders have been set aside for a failure to give an undertaking as to damage. There is no evidence or any submission highlighting the steps Audela took or the reasons for it not taking any step promptly to have the interim orders set aside. Hence, in the absence of any evidence to the contrary, I find Audela failed in its duty to mitigate its damages. What should be the consequence of this on the assessment of Audela’s damages? This is the subject of the third question, to which I now turn to.

Issue (3) - What is the relevant period for an assessment of Audela’s damages under the undertaking as to damages?

20. The answer to the second question lays the foundation for an answer to the third question. If Audela applied for a set aside of the restraining orders on the set return date, that application would have been granted. The relevant case law on point including the decision in Bougainville Copper Ltd v. Chief Collector of Taxes (supra) and those that followed it, dictates such an outcome. Since there is no evidence of Audela exercising that right and discharging the duty that was upon it, its damages, if any, can only be allowed for from the date when the orders were issued, namely, 19^th November 2008 to the date of its lifting, which was 01^st December 2008 being the first return date. That accounts for a period of 13 days only.

21. If, however the duty to mitigate its damages where not to apply, the relevant period to allow for the purposes of calculating Audela’s damages can only be from the date of the issuance of the injunctive orders until their set aside or lifting on 05^th March 2010. That accounts for a period of 1 year and 106 days. Audela has neither made any submission nor has it provided any evidence as to why its failure to mitigate should not be taken into account or for that matter, the need to consider the issue of mitigation when assessing damages. In the circumstances, I am of the view that, the relevant and applicable period for the purposes of assessing damages in this case is 13 days from 19^th November 2008 when the interim orders were issued to 01^st December 2008 when the orders were set to first return to the Court.

21. The next question to turn to then is what exactly are Audela’s damages. That is the subject of issue four, which is the last and final question before this Court, to which I now turn to.

Issue (4) - Has Audela established by appropriate evidence its damages for the relevant period of the injunctive orders?

22. In order to succeed in a claim for damages based on an undertaking as to damages, the party claiming such damages has an obligation to establish damages suffered as a direct result of the injunction. It is not an open license for such a party to bring a claim similar to those at common because, it is not a common law cause of action but, an undertaking given to the Court. A person claiming damages under an undertaking as to damages, could be awarded damages if that person establishes by appropriate evidence, damages actually forced upon it solely by the injunction and not those forced on by the litigation:White Corner Investments Ltd v. Regina WaimHarro (2006) N3089; Wei Xiang Cheng v. Agmark Limited (2008) N3338; Pastor James Molu v. Dokta Pena (2009) N3817; Bui Minig v. Joycelyn Minig (2013) N5327; Morobe Provincial Government v. Tropical Charters Limited (2011) N4240 and Norman Daniel v. Air Niugini Ltd (2019) N7820.

23. As noted earlier, Audela filed a number of affidavits in support of its claim for damages. The first of the affidavits is one from a Kaluwin Potuan, sworn on 19^th May 2016 and filed on 20^th May 2016. The deponent is a registered Valuer who carried out a valuation of Audela’s properties and assets and provided a report dated 26^th January 2016. The report is annexure “A” to the affidavit. The valuation is based on a valuation of the Property the subject of this proceeding, on 28^th January 2016. That was 6 years after the lifting of the injunctive orders. Neither the affidavit, nor the valuation says anything about the value of the property as at or during the period 19^th November 2008 to 5^th March 2010, being the period of the currency of the injunction. Also, the affidavit fails to answer any of the following questions:

(a) What means if any did Audela have during that period 19^th November 2008 to 5^th March 2010 to immediately commence its development of the Property?

(b) What steps did it take and what resources including finance did Audela gather within and before the period of the injunction to bring about the improvements captured in the affidavit and valuation report and was impeded by the injunction?

(d) What kinds of costs and what exactly were the costs Audela was forced to incur in say, machinery, plant, equipment and man power stand-downs as a result of the injunctive orders and within the relevant period?

24. The affidavit of Ms. Bogomos who was the accountant who did the various tax returns and financial statements does not assist with any answers to any of these questions. Instead, it adds more questions than answers. Her affidavit does give evidence on Audela’s Financial position for the years 2005 – 2015. She gives a summary of the statements in annexure “A” to her affidavit. The Statements for the period 2006 – 2013 (2014 to 2015 omitted due to limited space) show the following:

YEARS	2006	2007	2008	2009	2010	2011	2012	2013
Income Rental	6, 381	34, 860	82, 011	146, 456	132, 153	274, 358	288, 839	354, 752
General Expenses	(465)	(17, 828)	(73, 578)	(535, 043)	(579, 177)	(575, 036)	(717, 830)	(697, 987)
Gross Profit	5, 916	17,032	8, 433	(388, 587)	(447, 024)	(300, 678)	(428, 991)	(343, 235)
Tax @ 30%	1, 775	5, 110	2, 530	(116, 576)	(134, 107)	(90, 203)	(128, 697)	(102, 971)
Net Profit	4, 141	11, 922	5, 903	(272, 011)	(312, 917)	(210, 475)	(300, 294)	(240, 265)

25. Going by this table alone, it clearly shows Audela was not generating much income in the years, 2006 – 2008. That position substantially improved in the years 2009 and 2010. But the expenditure far exceeded the income. That was the position until 2013 and also 2014 to 2015. There is no explanation as to how Audela was able to jump from K6,381.00 total in income in 2006 to K146,456.00 and the corresponding expenditure in 2009. The same can be said of the subsequent years after 2010. At paragraphs 14 to 15 of her affidavit, Ms. Bogomos states:

“14. From the above table it can be seen that losses were made due to several factors. These include issues like other unforeseen costs such as Architectural drawing plans, court battles, legal bills, other expenses etc for the period 2009 – 2013. For example: -

2009: the loss was K272, 011.00, 2010: the loss was K312, 917.00, 2011: the loss was K210, 475.00, 2012: the loss was K300, 294.00 and 2013: the loss was K240, 265.00. Therefore the total loss for the period 2009 – 2013 was K1, 335, 962.00.

15. The losses accumulated over the years as well and the volume of sales decreased because we have been informed that Audela Limited later incorporated as Audela Properties Limited was taken to Court from 2005 to 2010 by the National Housing Corporation and people who were living in shacks and run down shelters claimed that they were the tenants of these shacks that were owned by National Housing Corporation.”

26. From paragraph 15 of the affidavit, it is clear that, most of information for the deponent is based on what the deponent was told by Audela’s managing director, Mr Rex Mono. This evidence is therefore, inadmissible because it is hearsay evidence. At the same time, at paragraph 13 of her affidavit, she speaks of bank statements and company records without attaching any copies of the same to her affidavit. Also, there is no allocation of the actual costs or alleged losses to the various expenditure items mentioned and in particular what expenditure or loss is directly attributable to the interim injunction. The summary of claims, annexure “D” to Ms. Bogomos’ affidavit tries to do that, but it is again too general, adds on items that could not strictly be speaking loss or damages forced on by the injunction during the relevant period and adds on items like legal fees, architectural drawings, independent calculation of claims and related costs and other unspecified costs. All of the claims are for a period of 5 years. More confusion rather than clarity is added to Audela’s claim when in the third paragraph of the first page of the Executive Summary, states:

“During the mobilisation and constructions phase 1 in 2015, tenants of NHC, supporters and wantoks (relatives) disrupted the work progress and took the company and its directors to Court, a battled that lasted for 5 years. Audela suffered huge loss in legal fees, business and economical loss, including personal suffering, stress and hardship to the company directors, workers and contractors on the project.”

27. The Executive Summary goes on to list the following as the main heads of Audela’s damages and costs:

28. Thereafter in the subsequent pages, the summary gives a breakdown of each of the items listed above. Under administration costs, it speaks, of correspondence and follow up with lawyers, NHC and other administration costs. It also talks about, affidavits, visitations to courts and related costs, legal fees, loss of business, reputation and hardship and loss opportunities in wages and revenue. Under demolition costs, it talks about, clearing and cutting trees, plant and equipment hire for demolition and upgrading, material for security fencing, direct labour for demolition work, compensation and related costs and direct labour costs for clean-up. For loss of business, it talks about building materials, damage to director and company’s reputation and personal stress and hardship with interest at 8% added on. Under loss of wages income, it talks about the wages of a number of professionals, namely project manager, carpenters, bricklayers, plumbers, drivers, project supervisors, electrical contractors, paint contractors, welding contractors, and tiles laying contractors. For loss of revenue, it talks about loss of rental income for 2-bedroom units x 92 @ K3, 466.67 per month for 7 years and 1-bedroom units x 4 @ K2,600 per month for 10 years. Interest at 8% has also been added on. Finally, under legal fees, it talks about legal fees from 2005 – 2012. Again, interest at 8% has been added.

29. As can be seen, there are repeat claims for a few of the items. One such item is the legal costs. First the total amount of costs claim is over K500,000.00. It is not clear how that figure has been arrived at. Is it for all of the proceedings Audela had to deal with or is it only for this proceeding? Where is the evidence of such costs being incurred and paid? Were those costs put in taxable form in accordance with the Lawyers Act 1986 and the National Court Rules? Were they reasonably incurred and paid for by Audela? Didn’t the Court in each case make costs orders? If not so ordered, how is Audela entitled to claim this as part of its damages. But if costs were separately ordered in each case, how is Audela entitled to claim those costs in this proceeding and more so under the or otherwise connect to the undertaking as to damages? In the absence of any helpful submissions of counsel for Audela, I note and accept that, all legal costs are usually included in an order for costs and a recoverable in accordance with the law on point. That includes the need to put the costs in taxable form and subjected to the taxing process unless agreed to by the party obliged to pay: See Marsh v. Hay [1981] PNGLR 392; Jack Livinai Patterson trading as Patterson Lawyers v. NCDC (2001) N2145; and Dr Florian Gubon v Pacific Mobile Communications Ltd (2006) N3104. Given that, they cannot be included as damages under an assessment of damages.

30. Further, this being a case in which Audela claims it was prevented from implementing its wish to develop a commercial residential property, it was necessary to outline the various stages involved in implementing of that wish and the stage at which the injunction stopped it. Based on my limited exposer to building contract cases, I am aware that there are at least 8 stages in a commercial accommodation construction project in addition to having already secured the land required for such a project. Firstly, a professional architect would be instructed to produce a detailed architectural drawing, covering earth works, plumbing, electrical and the buildings proposed to be constructed. This would take some time from concept to actual drawings, drafts and final drawings. Secondly, once the first stage is completed, a quantity surveyor will then be engaged to assist in a determination of the kinds of material required for the project and the costs involved. The quantity surveyor would help produce a schedule of quantities which comprises of estimates of the material and labour required for the project with their respective costs from start to completion of the project. Thirdly, the complete drawing and the quantity of surveyors constituting the building project plan will then need to be lodged with the relevant physical and planning board for consideration and approval. The board might approve the plans as submitted or reject it in full or ask for modification or as the case might be. If there is a rejection, either wholly or partially, the plans and the drawings would be revisited and resubmitted until fully approved. This would take some time from a few weeks to few months and even more than a year in some cases in PNG. An approval of the plans would trigger the fourth stage, namely having the appropriate level of funding to commence and complete the project within the anticipated time frame. Unless finance is readily available, this would require seeking and securing a bank or other sources of funding. Again, this would take some time with initial appointment and meeting with the possible source of funding to final approval of the funding facilities for the project. Once, funding is secured and is available, a property developer would then be ready to commence the fifth stage which is a commencement of the construction of the project. If the project owner is already physically in possession of the land on which the project is to be built, construction would commence right away. If not, the project owner would have to take the necessary steps to secure vacant possession as was required in this case. That would be the sixth stage. At the same time, the seventh stage would come into operation. The project owner would by this time, also call for tender and or enter into construction and the various other related contracts. Such contracts would include, contracts for either purchase or hire of plant and equipment required for the project, demolition and clearing (where there are existing structures as in this case), earth works, plumbing, electrical, the building construction, welding, painting, tiling and other contractors as required. Once the building construction is completed, the eighth and final stage would come into operation. This would involve inspections by the relevant authorities for water, sanitation and electricity, approval and issue of the appropriate certificates for connections to the main lines and ultimately a certificate for occupation of the building would be granted.

31. Each of the contractors would come in and commence and complete their parts at the relevant and required stages to minimise costs. This means for example, the demolition and clearing contractors would come in first. After they are finished, it would be the earth works contractors. Once they are finished, it would be the main builders consisting of carpenters, bricklayers, plumbers, electricians, painters and tile layers as required. Only the project manager and its supervisors would start from the beginning of the construction managing and overseeing each stage of the construction and works until the issuance of the certificate to occupy as required by ss. 19 and 20 of the Building Regulations 1994. For these approvals and certificates to be given, appropriate notices of completion would have to be first given: See for example, s. 18 of the Building Regulations.

32. In this case, there is no clear evidence as to when each or any of these stages were initiated and finally reached or impeded by the injunction. Similarly, there is no evidence establishing at what stage Audela was at in the implementing of its commercial residential property development project with that stage’s relevant costs and the injunctive orders stopped it from continuing with its construction. Further, there is a complete lack of Audela’s primary evidence supporting each of the alleged items of loss and damages deposed to in Ms. Bogomos’ affidavit.

33. This leaves us to consider, Rex Mono, the managing director of Audela’s affidavit evidence. His affidavit evidence only deposes to facts as noted in paragraph 5 (a) to (w) above. He neither deposes, nor does he annex any documentary evidence, in the form of receipts, invoices, bank statements or such other documents evidencing the incurring of and paying for the various items of costs and the damages claimed per the various costs and damages mentioned in Ms. Bogomos and Mr. Potuan’s affidavits.

(1) establish the total costs of its then proposed property development project;

(2) establish the kinds of funding and other resource it had and was in a position to enter the Property and have it developed, especially when its financial position was less impressive during the relevant period;

(3) state with the appropriate evidence when its drawings, building and all the related development plans were completed, lodged with the Physical Planning Board under the Physical Planning Act 1989 and when they were approved;

(4) state with evidence when Audela was in a position to commence construction and implement its approved development plan with evidence of the financial means readily available but for the injunctive orders;

(5) state with evidence when the demolition and earthworks were to commence and conclude with the details and evidence of the plan and contractors and the kinds of money paid;

(6) state with evidence when actual construction of the buildings was to commence, with an indication of the various necessary stages from laying of foundations, the building structures going up, roofing and internal and external walling, tiling, painting the buildings and final completion with the keys turned over from the builders and indicate how the injunction prevented each of these stages from being implemented successfully;

(7) identify the damages and costs if any that were specifically suffered from the date of the grant of injunction, 19^th November 2008 and its eventual dismissal on 5^th March 2010;

(8) state with evidence that from the identified list of items of damage or costs included necessarily expected items such as:

(a) standing down of manpower, machinery, plant and equipment contracted for demolition, scrubbing and clearing of the land and other earth works with the names of the contractors or providers and their respective costs;

(b) list of materials bought with each of their costs, with a discloser of the hardware or supplies from where each of the material were bought or procured from and if any of them got damaged with the relevant value for each damaged item; and

(c) engagement of security with the firm or individual providers names and other specific expenditure or costs necessitated by the injunctive order;

(9) state with evidence when was the construction of the buildings originally expected to commence, completed and trading was to commence but for the injunctive orders preventing that from happening with a demonstrate of how that was the case;

(10) state with evidence when exactly after the lifting of the injunction did the construction of the building commence and was completed;

(11) state with evidence, why it failed to apply for an immediate lifting of the interim injunction on 1^st December 2008 or soon thereafter, when the orders were obtained ex parte and on a defective undertaking as to damages; and

(12) state with evidence and demonstrate why it is entitled to claim damages prior to 19^th November 2008 (date when injunctive orders were granted) and beyond 05^th March 2010 when the injunctive orders were lifted.

34. Additionally, given that the Property was not a completely vacant land but had improvements on it that was under the NHC’s management and was accommodating a number of public servants who were staff of the IPA, a number of other factors had to be addressed with clear answers in Audela’s evidence but it also failed to address them. These are captured in the following questions which remain unanswered:

(1) when was the IPA informed of Audela’s intention to acquire the property and if not why not?

(2) when was the NHC informed of Audela’s intention to acquire the Property and if not why not?

(3) In view of the exemption under s. 69 (2) (d) of the Lands Act 1996 and in the absence of evidence of Audela specifically seeking and making a case for an exception under that provision:

(a) when and how did Audela seek an agreement with the State for the State to provide land for its intended accommodation business?

(b) when did the State agree to provide land for the establishment of Audela’s proposed housing business?

(d) in view of no public tender, did the Lands Department consult with the NHC and IPA before granting the licenses, exemption and the eventual grant of title to Audela?

35. The unanswered questions and or issues highlighted under the immediately preceding paragraph gives rise to the suggestion that, if the NHC duly complied with the orders of the Court and duly prosecuted its claim, it could have succeeded on the substantive merits of the case. For clearly, there is no demonstration by any of the evidence adduced by Audela that, its acquisition of the Property was proper and in due compliance of the relevant provisions of the Land Act 1996. The dismissal and the lifting of the injunctive orders came through a determination not on the merits of the case which pleads possible breaches of the Land Act. The dismissal order came on the basis of want of prosecution and for a failure to comply with the Court’s earlier orders. Associated with that point is the fact that, there were people in occupation, who were not allowing Audela to take over the property. Those people took a number of repeated Court actions. Audela, was well aware of the fact that the Property was not vacant and, in all probabilities, should have contemplated and expected such strong resistance. Audela, voluntarily assumed the risk of such resistance and much delay in it taking possession of the Property and a carrying out of its intended developments. No mention is made of this known risk and what strategy and plans Audela had that effectively addressed that risk and when it expected to take vacant possession and was disrupted by the injunctive orders.

36. Furthermore, included in Audela’s claim is its claim for an alleged damage to its own and that of its managing director’s reputation and hardship. That signals a claim for damages for defamation, which is common law based. That is a separate cause of action. The law requires a claim based on defamation to be properly pleaded with particulars. Failing such pleadings, a claim in defamation fails: See The Central Bank of PNG v. Gabriel Tugiau (2009) SC1013 and SareaSoi v. Daniel Korimbao (2018) N7081. Given that, Audela had a duty to demonstrate how it is entitled to include this item in its claim for damages. Also, it had the duty to clearly point out in its evidence and its submissions exactly, what reputation the company and its managing director had prior to the injunctive orders and how that was injured by the interim injunction. They also had the duty to clearly establish by appropriate evidence what exactly were the injuries and hence the damages they suffered. They failed in those duties as well.

37. In the end, I find that Audela failed to establish with appropriate evidence that the damages it is claiming were forced upon it by the injunctive orders which was for the period commencing 19^th November 2008 and ending 05^th March 2010, if not earlier on 01^st December 2008. Audela, has come to this Court with essentially a baseless claim covering a period of 5 years which is inclusive of periods prior to the grant and after the dismissal of the injunctive orders. Clearly, Audela has exaggerated its claim beyond what could have been, the damages (if at all) that could have been caused directly by the injunction. In the end, I find Audela has failed to establish any of its alleged damages against the NHC. Consequently, Audela has failed to establish its damages by reason of which I decline to award any damages to it under the undertaking as to damages given by the NHC on 18^th November 2008. The First Defendant (Audela) will pay the Plaintiff’s costs to be taxed, if not agreed.

__________________________________________________________________
In House Lawyer: Lawyers for the Plaintiff
Kari Bune Lawyers: Lawyers for the Defendants

^[1]Court document No. 54.
^[2] Court document No. 53.
^[3]Court document No. 55.
^[4]Court document No.60.

National Court of Papua New Guinea

National Housing Corporation v Audela Ltd [2020] PGNC 201; N8436 (29 July 2020)