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Dalas Property Management Ltd v Amrak Construction & Consulting (PNG) Ltd [2022] PGNC 327; N9842 (29 August 2022)

N9842

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS No. 645 OF 2019

DALAS PROPERTY MANAGEMENT LIMITED
Plaintiff

AND
AMRAK CONSTRUCTION & CONSULTING (PNG) LIMITED
Defendant

Waigani: Linge A J
2022: 16^th & 29^th August

CONTRACT – plaintiff claims for reimbursement of advance payments made to defendant – plaintiff and defendant contracted for defendant to build a swimming pool for the plaintiff – defendant failed to complete project as stated under the contract – defendant says delay in materials arriving in PNG from Australia has caused delay in completing project on time as agreed – plaintiff also claims damages for breach of contract by defendant and costs– common law doctrine of frustration of contract where an intervening act causes delay or non- performance of a contractual obligation - whether the delay in the arrival of materials from Australia to complete the swimming pool is an intervening event – delay of materials from Australia is not an intervening act – defendant has breached the agreement – liability in breach of contract by defendant established

Cases Cited:

Papua New Guinean Cases

Mand v. Lypita [2021] PGNC 106; N8857
Lyn v. Yaku [2017] PGSC 6, SC1574
PK Investment Ltd v Mobil Oil New Guinea Ltd [2015] PGSC 50; SC1456
Pacross Limited v Rouna Development Limited (2009) N3648
Suan v. Dumba [2013] PGNC 211; N5428

Overseas Cases

Hirji Mulji v Cheong S.S Co Ltd [1926] AC 497
Counsel:

Mr. Joe Sunungu, for the Plaintiff
Mr. Andrew Kuria, for the Defendant

DECISION

29^th August, 2022

1. LINGE A J: Trial of the cause of action for breach of contract for failing to complete the contract and submission by parties took place on the 16 August 2022. Trial was contested and this is my decision.

Facts

2. Dalas Property Management Limited executed a construction contract with Amrak Consulting & Construction Limited on the 25 July 2018.The scope of work was to design and construct a 5 m x 4.5 swimming pool including exterior work and BBQ within property Portion 3256C Tunakohu, Taurama Valley.
   
3. The contract valued was K220, 000.00 and was for a duration of three (3) months. The plaintiff made various advance payments totalling K178, 600.00 to the defendant/contractor.
   
4. The defendant claims that only 30% of the work was completed and despite given time to complete failed and the plaintiff terminated the contract claims for reimbursement of K120, 707.55 from the advance payments paid to the defendant
   
5. The plaintiff also claims for costs and for damages as a result of the breach of the Contract.
   

Submissions

For the plaintiff

6. Mr. Sunungu of Counsel for the plaintiff submits that the work on swimming pool which commenced in August 2019 was only 30% completed when the three (3) months contract period lapsed. Counsel submits that this was in breach of Article 2 of the agreement
   
7. He submits that the unreasonable delay by the defendant led to the breach of the agreement resulting in the termination of the contract by the plaintiff.
   
8. Counsel contends and submits that the plaintiff is entitled to the reimbursement of K120, 707.55 from its advance payments of K178, 600.00 to the defendant. He refers to Mand v. Lypita [2021] PGNC 106; N8857 and Lyn v. Yaku [2017] PGSC 6, SC1574) to support the claim for reimbursement.
   
9. The plaintiff refutes the defendant’s assertion that the delay was wholly caused by the delay in transporting the materials from Australia. Counsel submits that there is no evidence provided by the defendant that it had purchased those building materials from Australia. There are no payment receipts or deposits slips. (See Suan v. Dumba (2013) PGNC211; N5428).
   

For the defendant

10. Mr. Kuria of Counsel for the defendant contends that main pool structure was completed and submits that only the installation of the pool pumps, the shading and the pool lighting depend on the availability of the materials, such as pumps, lights and materials for shading were yet to be incorporated.
    
11. Counsel submits that these items have been bought already from Australia but were not transported into the country in time, by the agent, Niugini Link Pty Ltd, which is beyond the control of the Defendant.
    
12. Further Counsel submits that the other cause for the delay was the prolonged discussions and disagreement on various details pertaining to installation and colour of tiles, fence, electrical, pavement and pool size.
    
13. Mr. Kuria submits that the defendant had not deliberately delayed the contract but rather the above events frustrated the performance of the contract rendering the defendant unable to fully perform its obligation and to complete the Pool job. On that basis he submits that the defendant is obliged to fulfil contractual obligations that fell due before the frustrating event but is excused from performance after the event of frustration.
    
14. On the advance payment, Counsel contends that the total amount was expended on supplies and materials both locally and from Australia, on labour costs of the construction as well as other related costs.
    
15. He submits that the plaintiff had modified the plan for the pool incurring additional costs which extra costs are being sought from the defendant.
    

Consideration

16. A breach of contract occurs when a party fails to uphold one of their contractual obligations or did not do what they promised to do in the agreement. In G.H Treitel, Law of Contract, “a breach of contract is committed when a party without lawful excuse fails or refuse to perform, performs defectively or incapacitates himself from performing the contract”
17. Where a contract is reduced to writing and there is stipulation as to performance, breach, and termination such clauses are applicable in relevant situations and may be invoked.
    
18. Work on the pool commenced on the 16 August 2018. It is not in dispute that the defendant received K178,600.00 in three (3) instalment payments on the 10 August 2018, 14 September 2018 and 29 September 2018.
    
19. At the end of the contract period of three (3) months which fell on the 10 November 2018 the defendant had not delivered on the contract as the construction of the pool remained incomplete.
    
20. The issue for my consideration is “whether, the delay in the completion of the swimming pool amounts to the breach of contract.
    
21. Article 2 clearly states that the three (3) months runs from date of the first advance payment which is 10 August 2018, therefore completion date would be 10 November 2018.
    

23. The evidence is clear, and it is not in dispute that the pool was not completed in accordance with the terms of the contract. Also, it is not disputed by the defendant that there was clear delay.

24. The defendant justifies the delay in the completion of the swimming pool as being due to the delay in the arrival of specific materials which were ordered from Australia. It maintained that it cannot undertake any work until these materials arrive.

25. On the 14 March 2019 the plaintiff exercised its right under the contract and gave notice of termination to the defendant pursuant to Article 10.2 of the Contract. The Contract was terminated after seven (7) days on the 25 March 2019.

Frustration

26. The defendant claims that the contract was frustrated by the delay in arrival of materials sourced from Australia. Defendant claims that the delay is beyond its control. He relies on PK Investment Ltd v Mobil Oil New Guinea Ltd [2015] PGSC50; SC 1456 and Pacross Limited v Rouna Development Limited (2009) N3648.

27. The common law doctrine of frustration of contract which is adopted as part of the Underlying Law under Schedule 2.3 of the Constitution, stipulates that an event that renders performance of contract impossible or radically different from originally contemplated by the parties is deemed to frustrate the contract. That is, the frustrating event or intervening event discharges the contract or makes the contract impossible to perform (see Hirji Mulji v Cheong S.S Co Ltd [1926] AC 497 at.p.505).

28. The defendant would have been aware of requirement of plaintiff for the type of pool. He wanted it to be of an Australian standard. The contract specification and drawings include all materials needed to complete the pool are the responsibility of the defendant. Specifically, Item1 under Supply & Construction, it sates “the contractor shall provide all materials and consumables to construct and install 100% completion and to client’s satisfaction.”

29. The delay of the materials from Australia as claimed by defendant is not an intervening event. This is a normal risk involved in a building contract. In my view a reliable contractor would have factored this into his contract especially in a short completion timeline of three (3) months.

30. The defendant has not adduced evidence of any natural disaster, act of God or pandemic that had caused the delay in shipping or airlifting of materials from Australia.

31. The defendant claims that payment was made to Niugini Link Pty Ltd for the specialized items from Australia but were not delivered by the time of filing this cause of action. The Customer Copy of what appears to be a quotation dated 30 August 2018 is unreliable as it shows no value of the items.

32. I distinguish both cases cited by the defendant. The delay was in the control of the defendant. In PK Investment Ltd v Mobil Oil New Guinea Ltd (Supra) the frustrating event was the landowners dispute, protests and demands for the defendants not to operate the fuel station. The plaintiff in that case was not able to even commence and perform the contract.

33. In Pacross Limited v Rouna Development Limited (Supra) the frustrating event was the injunction granted to the defendant upon application by the plaintiff to cease operation. The Court held that the operation of defendant company was frustrated upon the granting of the injunction that discharged the contract.

34. In this case the delay of specialized materials from Australia is not an event of frustration. The defendant cannot rely on it. The defendant failure to complete the construction of the swimming pool as aforesaid is a breach of Article 2 of the Contract.

35. In my view, the contract was properly terminated on the 25 March 2019 14 March 2019. The plaintiff exercised its right under the contract upon giving notice pursuant to Article 10.2 of the Contract14 March 2019.

36. The next issue to consider is the claim for reimbursement by the plaintiff for K120,000.00 from the advance/progress payment of K178,600.00 out of the total contract value of K220,000.00 plus damages and costs.

37. I will not deliberate on this at this juncture but will give liberty to parties to appear before me for an assessment of damages.

Order

38. The order of the Court:
    
1. The defendant is liable to the plaintiff for breach of contract.
2. The matter returns on the 5 September 2022 at 1.30 pm for submission on assessment of damages.
3. Defendant pay costs of this proceeding.
4. Time is abridged to time of settlement of order by the Registrar.
   

Ordered Accordingly
_______________________________________________________________
Eagle Lawyers: Lawyers for the Plaintiff
Kuria Lawyers: Lawyers for the Defendant