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P.K. Investments Ltd v Mobil Oil New Guinea Ltd [2015] PGSC 50; SC1456 (3 September 2015)

SC1456

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 132 OF 2010

BETWEEN

P. K. INVESTMENTS LIMITED
Appellant

AND

MOBIL OIL NEW GUINEA LIMITED
Respondent

Waigani: Batari, David & Makail, JJ
2011: 28th February
2015: 03rd September

CONTRACT LAW – Dealership agreement – Agreement to operate a fuel service station – Alleged breach of – Occurrence of supervening event – Demonstration by landowners or occupants of land – Dispute over party to dealership agreement – Delay in performance of agreement – Frustration of – Effect of – Termination of.

EVIDENCE – Onus of proof – Proof of – Sufficiency of evidence – Supervening event – Demonstration by landowners or occupants of land – Dispute over party to dealership agreement – Whether supervening event significantly altered the nature and obligation of parties – Frustration of dealership agreement – Termination of agreement by supervening event – Liability not established on balance of probabilities – Appeal dismissed.
Cases cited:

Papua New Guinea cases

Robert Kalasim & The State v. Aina Mond & Ors (2006) SC 828
Curtain Bros (PNG) Ltd v. UPNG (2005) SC788
The State v. Sam Akoita & Others (2009) SC1016

Overseas cases

Browne v. Dunn [1893] 6 R 67 (HL)

Legislations:

Supreme Court Act
Supreme Court Rules
Evidence Act

Texts & Materials:

Cheshire and Fifoot's Law of Contract (9th ed, 2008) Law Book Co, London

Counsel:

Miss. G. Salika, for Appellant
Mr. T. Anis, for Respondent

03rd September, 2015

JUDGMENT

1. BY THE COURT: This is an appeal against the decision of the National Court on liability and assessment of damages. On 03rd September 2010 the National Court dismissed the appellant's action against the respondent for breach of contract. The appellant seeks an order to quash the decision of that decision and a further order for judgment to be entered in its favour in the sum of K6,020,271.00 as general and special damages.

Background Facts

2. The appellant alleged around September 2000, it entered into a contract called a dealership agreement with the respondent to operate a fuel service station and a shop on a land described as Section 95, Allotment 2 in Madang town. The land is a State lease and registered in the Registrar of Title's records as Volume 65, Folio 81. The respondent is the registered proprietor of the State lease.

3. Under the agreement, the respondent was to lease the land to the appellant and the appellant was to operate a fuel service station and a shop. In consideration for this, the appellant was to pay rent of K4,950.00 per month to the respondent. It was a month to month lease and was to commence on 01st October 2000. However, a week prior to the appellant commencing work, the landowners or occupants of the land put up a demonstration on site. They did not cause any physical damage to property or harassed employees of the appellant, but set up a road block with uprooted trees and shrubs and locked the fuel pumps of the bowers and remained on the site from 28th September 2000 until 20th October 2000.

4. They opposed the engagement of the appellant because the proprietors of the appellant were from a different ethnical background. As a result, neither party was able to perform the agreement. The respondent did not give possession of the site to the appellant and the appellant was not able to operate the fuel service station and shop, and pay the respondent rent for that month. On 20th October, 2000, the respondent sent a letter to the appellant withdrawing its offer. It claimed due to the landowners' demonstration and protest against the appellant's engagement, it had been impossible to perform the agreement. It claimed the agreement had been frustrated by the landowners' demonstration and protest at the site.

5. The appellant took the opposite view. It alleged it had not been aware or advised of the respondent's withdrawal of the offer and that it had a valid agreement with the respondent. The respondent unlawfully breached it when it failed to give possession of the site to it to conduct its business. Alternatively, it alleged the agreement was not frustrated because when it became aware of the dispute by the occupants of the land and raised it with the respondent, the respondent assured it that it was a slight hiccup and would resolve it.

6. On that representation, it incurred substantial costs for mobilizing its resources. They were costs for recruiting employees and securing accommodation for them, loan of K100,000.00 from BSP Bank, purchasing a motor vehicle for its operations and loss of profit. It claimed loss of K6,020,271.00. It further alleged a third party named Stanley Pil who had interest in operating the fuel service station had mobilized the landowners to demonstrate and protest against its engagement by the respondent. That resulted in the respondent's prematurely terminating the agreement, and 3 months later, Stanley Pil was awarded a contract to operate the fuel service station.

Trial Judge's Findings

7. The trial judge identified the following as issues for trial and made the following findings:

7.1. Whether the offer was withdrawn by the respondent before it was accepted by the appellant. Her Honour held that there was a contract because the respondent's offer was accepted by the appellant even though the appellant was aware of the existing dispute by the landowners.

7.2. If there was an agreement, whether it was frustrated. Her Honour held that the contract was frustrated because parties could not perform it due to the existing dispute by landowners. Her reason was that the dispute significantly changed the nature of the outstanding contractual rights and/or obligations from what they could reasonably have contemplated at the time of its execution. For this reason, it would be unjust to hold them bound to its terms in the new circumstances.

7.3. As to whether the agreement was terminated by the respondent after a month of its execution, her Honour held that it was a month to month agreement and was terminated after a month when the parties were unable to perform it due to the dispute by landowners.

7.4. Given these findings, it was not necessary for her Honour to consider the remaining issue as to what the appellant's damages were.

Grounds of Appeal

8. The appellant raised nine (9) grounds of appeal. For convenience of parties, we set out in full the grounds hereunder:

"(a) The Learned Judge erred in mixed fact and law in finding that the contract was frustrated by a certain event when there was evidence before the Court that:-

(i) The event that allegedly frustrated the contract was brought about solely by the actions and conduct of Mobil Oil and two (2) other parties who were not privy to the contract;

(ii) The supervening event that allegedly frustrated the contract was the alleged "purported landowners" prejudice over the ethnicity of the owner of P. K. Investments despite the fact that the land on which the service station is situated belongs to the State and Mobil Oil has a valid current lease over that land;

(iii) Immediately after the events that allegedly frustrated the contract between P. K. Investments and Mobil Oil, the contract was awarded to a third party who had influenced the event that allegedly frustrated the Contract between P. K. Investments and Mobil Oil.

(b) The Learned Judge erred in law in finding that the contract was frustrated by a certain event when there was no evidence before the Court establishing that this event significantly altered the nature of the remaining obligations of the parties, under the contract.

(c) The Learned Judge erred in law in finding that the contract was frustrated by relying on facts pleaded in the Affidavit of Mr Namon Mawason, sworn and filed on 1 June 2009 when the deponent did not present himself to be cross examined by P. K. Investments' lawyers despite the fact that the hearing and trial was to be conducted by way of affidavit evidence only and subject to service of a Notice to Cross Examine filed pursuant to Section 36 of the Evidence Act on Mobil Oil's Lawyers.

(d) The Learned Judge erred in mixed fact and law in finding that the contract was frustrated because the purported landowners were 'occupants' of the land on which the service station was situated 'demonstrated by their continuous presence there', when she should have found that the purported landowners were never occupants.

(e) The Learned Judge erred in mixed fact and law in finding that the period between 28 September 2000 and 20 October 2000 was 'a waiting period rather than a period where PKI could have commenced the work it was intended to do under the dealership arrangement' when there was evidence before the Court that the Contract came into effect on 1 October 2000.

(f) The Learned Judge erred in law in finding that the contract was terminated, in the absence of evidence before the Court that Mobil Oil had formally terminated the contract pursuant to the provisions of the Contract.

(g) The Learned Judge erred in mixed fact and law in finding that consideration for the measure of damages was irrelevant because the contract had been frustrated.

(h) The Learned Judge erred in mixed fact and law in dismissing P. K. Investment's claim against Mobil Oil and consequently failed to find and order Judgment in favour of P. K. Investments against Mobil Oil.

(i) The Learned Judge erred in mixed fact and law in failing to make a finding and order judgment in favour of P. K. Investments against Mobil Oil and consequently failed to find that Mobil Oil was liable to pay P. K. Investments the sum of K5,870,217.00 for losses and costs incurred as a result of the breach of contract plus general damages in the sum of K150,000.00 (for aggravated damages and damages for distress, frustration and general disappointment)."

Issues

9. It is clear from the grounds (supra) that the appellant does not appeal against the trial judge's finding that there is a contract between the parties. The appeal is purely against the finding that it was frustrated and could not be performed. The appellant says the respondent breached the contract because it did not terminate it in accordance with its terms. There was no supervening event that made it impossible for the parties to perform it and even if there was, it was the respondent who caused it. The main issue is whether there was a supervening event which significantly changed the parties' position and made it impossible for them to perform the contract. If the Court finds that the contract was not frustrated but unlawfully breached and upholds the appeal, the Court must consider whether or not to assess and award damages.

Preliminary Objection

10. Counsel for the respondent drew our attention to the grounds of appeal and submitted that they refer to "the contract was frustrated by a certain event". The objection is that the grounds of appeal are vague, false and misleading because the learned trial judge did not hold that "the contract was frustrated by a certain event". She held that "........the Contract was frustrated because neither party could perform it as a result of the prevailing circumstances".

11. To base an appeal on the premise that "the contract was frustrated by a certain event" is vague, false and misleading. Where the grounds of appeal are vague, false and misleading, the Court may at any stage of the proceeding, determine whether the appeal is competent. Counsel referred us to Chief Inspector Robert Kalasim & The State -v- Aina Mond & Ors (2007) SC828 for the proposition that competency of an appeal may be raised at any state of the appeal and submitted that notwithstanding its failure to give notice to the appellant, the respondent is not precluded from raising it. Counsel invited us to consider the objection and find that the appeal is incompetent and dismiss it.

12. We accept the proposition advanced by the respondent. Regardless of whether a notice is given, issues of competency may be raised at any stage of the appeal because they challenge the exercise of jurisdiction of the Supreme Court to determine an appeal.

13. For this reason, we will consider the objection. We have perused the grounds of appeal that refer to "the contract was frustrated by a certain event" and are not satisfied they are vague, false and misleading. In our view, they are quite clear and unambiguous as to what the appellant wishes to convey to the respondent. The "certain event" that frustrated the contract was the landowners or occupants' demonstration at the site for almost 4 weeks. That was the "certain event" that the trial judge found frustrated the dealership agreement. For this reason, we decline to dismiss the appeal for being incompetent.

Trial Judge's Assessment of Evidence

14. We deal first with ground 3(c) (supra) which raises the issue of the trial judge's assessment of evidence and admission of the affidavit of Namon Mawason without Mr. Mawason being cross-examined. The appellant submitted that the finding that the contract was frustrated by the dispute by landowners was wrong because there was no evidence to establish it. This ground requires us to review how the trial judge assessed the evidence of the parties before arriving at the conclusion she did.

15. The trial was by affidavits. The affidavits were tendered by consent. For those affidavits where notices were given to the deponents to appear for cross-examination, the deponents appeared and were cross-examined. There is no dispute that the following affidavits were tendered by consent:

1. Affidavit of Thomas Kainge sworn on 15th November 2000 and filed on 16th November 2000 - Exhibit 1;

2. Affidavit of Brian Lewis sworn on 22nd October 2007 and filed on 04th June 2008 - Exhibit 2;

3. Affidavit of Lawrence Beya sworn on 28th April 2008 and filed on 04th June 2008 - Exhibit 3;

4. Affidavit of Thomas Katik sworn on 28th April 2008 and filed on 04th June 2008 - Exhibit 4;

5. Affidavit of Steven Katik sworn on 28th April 2008 and filed on 04th June 2008 - Exhibit 5;

6. Affidavit of Abraham Gande sworn on 21st May 2008 and filed on 04th June 2008 - Exhibit 6;

7. Affidavit of Larry Laufa sworn on 14th May 2008 and filed on 04th June 2008 - Exhibit 7;

8. Affidavit of Wareyo Yano sworn on 19th May 2008 and filed on 04th June 2008 - Exhibit 8;

9. Affidavit of Lawrence Beya sworn on 24th June 2008 and filed on 04th July 2008 - Exhibit 9;

10. Affidavit of Thomas Kainge sworn on 19th September 2008 and filed on 03rd October 2008 - Exhibit 10;

11. Affidavit of Bonnie Mona Kainge sworn on 19th September 2008 and filed on 03rd October 2008 - Exhibit 11;

12. Affidavit of Carl Aroga sworn on 11th November 2008 and filed on 27th November 2008 - Exhibit 12;

13. Affidavit of Thomas Kainge sworn on 29th January 2009 and filed on 04th February 2009 - Exhibit13;

14. Affidavit of Larry Laufa sworn on 30th June 2009 and filed on 30th June 2009 - Exhibit 14; and

15. Affidavit of Thomas Kainge sworn on 30th June 2009 and filed on 30th June 2009 - Exhibit 15.

16. Out of all these witnesses, three of them namely Brian Lewis, Thomas Kainge and Larry Laufa were cross-examined in relation to factual matters deposed in their affidavits. Namon Mawason was a witness for the respondent and was required for cross-examination but he did not turn up at trial. Counsel for the respondent applied for an adjournment to enable him to attend but it was refused. However, the trial judge admitted his affidavit sworn and filed on 01st June 2009 and marked it as exhibit "A". This is the controversial affidavit.

17. Counsel for the appellant submitted that the trial judge wrongly exercised her discretion by accepting and relying on the affidavit of Mr. Mawason (exhibit "A") because first, he was not called and cross-examined in relation to matters deposed in his affidavit. As a result his evidence was not tested in cross-examination and she should not have relied on it.

18. Secondly, his evidence did not refute or deny the evidence of the appellant's witnesses in relation to the demonstration by the landowners at the material time, the influence Stanley Pil had over the landowners to dispute the appellant's engagement in the dealership agreement and the respondent's knowledge of Stanley Pil's interest in the fuel service station. She relied on Browne -v-Dunn [1893] 6 R 67 (HL) to support her submission that there was no evidence from the respondent to refute or deny all these evidence.

19. Consequently, the evidence that the landowners staged a demonstration or protest against the appellant and this made it impossible for the parties to perform the contract was uncontroverted. The end result was the contract was frustrated and the learned trial judge fell into error when she reached a contrary decision.

20. Counsel for the respondent relied on Section 36(1)(b) of the Evidence Act, Ch 35 and submitted this provision permits the Court to grant leave to a party to rely on an affidavit at hearing. It states: "Subject to this section, in any legal proceedings before a tribunal to which this Division applies desires to cross-examine a person who has made an affidavit used or intended to be used in the proceedings -........ if the party or person served with the notice does not produce the deponent at the hearing, he is not entitled to use or to reply on the affidavit as evidence without leave of the tribunal;...."

21. The appellant gave notice to the respondent to cross-examine Mr. Mawason. However, he was not available on the date of trial. As a result, counsel for the respondent applied for an adjournment which was vigorously opposed by the appellant's counsel. That application was refused but his affidavit was tendered as evidence for the respondent's case.

22. The admission of the affidavit was an exercise of discretion by the trial judge under Section 36(1)(b) (supra). Where an appeal is against a trial judge's exercise of discretion, the onus is on the appellant to show that the exercise of discretion is clearly wrong or an identifiable error has occurred in the exercise of discretion. Alternatively, the judgment or order may be set aside where there is no identifiable error, but it is "unreasonable or plainly unjust" such that an error can be inferred: Curtain Bros (PNG) Ltd v. UPNG (2005) SC788 and The State v. Sam Akoita & Others (2009) SC1016.

23. Where the affidavit evidence of a witness is untested by cross-examination, the Court must treat it with caution and weight it up with the other evidence before relying on it. It depends on how much weight is given to it. The trial judge accepted the evidence of Brian Lewis because she found no inconsistencies and contradiction in his evidence. However, she rejected the evidence of Larry Laufa because he was not a credible witness. One of the reasons for rejecting his evidence was that, he was the former Retail Territory Manager of the respondent and instead of giving evidence for the respondent, gave evidence for the appellant. For this reason, the trial judge found that his evidence was tainted and unreliable. As for Thomas Kainge, the trial judge rejected his evidence because there were inconsistencies and contradiction in his evidence.

24. After the trial judge rejected the evidence of Larry Laufa and Thomas Kainge, she then considered the evidence of Lawrence Beya, Thomas Katik, Steven Katik, Abraham Gande, Wareyo Yano and Bonnie Mona Kainge. These witnesses gave evidence for the appellant in relation to the demonstration by landowners and Stanley Pil's interest in the fuel service station business.

25. Lawrence Beya, Thomas Katik and Steven Katik gave evidence that they were members of Yabob clan and were the original traditional owners of the land. Stanley Pil gave money and hosted a dinner for them which influenced them to support him in his bid to be awarded the dealership agreement. As a result, along with other members of their clan, they put up a demonstration at the site. This prevented the appellant from entering the site and conducting its business. After the demonstration stopped, they regretted their actions and apologized to the proprietors of the appellant. After the close of the appellant's case, for the respondent's case, the only witness was Mr. Mawason. He was the one who did not attend trial and cross-examined. Nonetheless, his affidavit was tendered in support of the respondent's case.

26. After weighing up their evidence, the trial judge accepted the evidence of Mr. Mawason because his evidence was consistent with the evidence of Lawrence Beya, Thomas Katik, Steven Katik, Abraham Gande, Wareyo Yano and Bonnie Mona Kainge whose evidence was that there was demonstration by landowners on the site and Stanley Pil had an interest in the fuel service station business. These witnesses gave evidence for the appellant and their evidence and Mr. Mawason's evidence confirmed that there was a demonstration by landowners on the site.

27. The appellant's case in response was that a Mr. Stanley Pil conspired with the landowners to hold the demonstration on site to prevent it from conducting its business. Larry Laufa was alleged to have been, if not, the key player in the alleged conspiracy theory. Mr. Laufa switched sides and gave evidence for the appellant but the appellant failed to adduce evidence from him regarding the issue. Indeed, it seemed well orchestrated because Mr. Laufa conveniently left out these facts in his affidavit whilst the appellant's other witnesses made these allegations against Mr. Laufa. The respondent on the other hand questioned Mr. Laufa about the allegation during cross-examination and his response was "I can't recall".

28. We are satisfied that the respondent did put its case to the appellant's witness Mr. Laufa in compliance with the rule in Browne v. Dunn (supra). Its case was consistent with the appellant's case that there was a landowners' demonstration on the site. It follows that the appellant's contention that appellant's evidence was not contradicted under this rule is misconceived.

29. The demonstration by landowners and the allegation that it was planned by Mr. Pil were at centre of the dispute. While Mr. Mawason's affidavit was tendered without him being cross-examined, we find no identifiable error in the trial judge's decision to admit and rely on it because the evidence was consistent with and corroborated the evidence of other witnesses namely Lawrence Beya, Thomas Katik, Steven Katik, Abraham Gande, Wareyo Yano and Bonnie Mona Kainge. Their evidence was that there was a demonstration by landowners on the site and Stanley Pil had interest in the fuel service station business.

30. We are also not satisfied that when all the circumstances of the case is considered, the admission of the affidavit evidence of Mr. Mawason without Mr. Mawason being cross-examined and its reliance leading to the conclusion reached by her Honour could be considered "unreasonable or plainly unjust" such that an error can be inferred. We dismiss ground 3(c).

Proof of Supervening Event

31. Alternatively, in grounds 3(a)(i)&(iii) and 3(b), the appellant submitted that if there were supervening events at the time, the supervening events did not significantly alter the nature of the remaining obligations of the parties under the contract which would thereby frustrate the performance of the contract by the parties. It was submitted that the real reason behind the dispute by landowners was to prevent its engagement as the operator of the fuel service station. The agreement could have been carried out and was in fact carried out, albeit by a third party, namely Mr. Pil's company.

32. Secondly, under grounds 3(a)(ii) and 3(d), the main contention of the appellant is, first, there is no dispute that land on which the fuel service station is located is State land. It is a State lease and the respondent is the registered proprietor. That means, the respondent had every right in law to deal with the land in any manner or form consistent with the terms of the lease. If it decides to lease the land to a third party, that is its prerogative and it did so by agreeing to lease it to the appellant for a fee.

33. However, the appellant's submission is misconceived. The issue as to whether or not the "occupants" of the land were landowners is not one of the issues for our consideration. In our view, ownership of the land was not an issue before the National Court. It is also not an issue in this appeal. In any case, it is not disputed the "occupants" were landowners and were involved in the demonstration and protest against the appellant.

34. We accept the submissions of counsel for the respondent that this ground has no merit and should be dismissed. First, if the Court were to accept the appellant's submissions and uphold the appeal, it will have no significant effect on the finding of the learned trial judge that the dealership agreement was frustrated. We accept the persons who demonstrated or protested the engagement of the appellant were landowners or "occupants" of the land was irrelevant. This is because there is no dispute that the respondent was the registered proprietor of the State lease on which the fuel service station was located and it was the actions of these persons who frustrated the contract.

35. Secondly, the use of the word "occupant" by the trial judge should not be interpreted in the literal sense. This may be clarified by looking at part of her judgment where she used the word. In using the word, it implied that the landowners or occupants had some form of control over the land where the fuel service station was located. The control was "demonstrated by their continuous presence there." She was also pointing out that the people "were occupants of the land where the service station stood and they demonstrated before the contract was signed on 28th September 2000 and continued on for a total of 4 weeks."

36. Thirdly and finally, it is apparent to us from the evidence of the appellant's witnesses and of course Mr. Mawason that the basis of the demonstration by the landowners or occupants of the land was not over the ownership of the land but their disapproval or strong opposition to the proprietors of the appellant to be awarded the dealership agreement because they were from a different ethnical background.

37. For example, at paragraphs 12-20 of his affidavit, Mr. Mawason deposed that the respondent's selection criteria for selection of dealers were based on financial capacity and operation experience of the applicants. Ethnical background of applicants had never been one of the criteria for selection of dealers. Therefore, it was wrong to suggest that the respondent was influenced to withdraw its offer to the appellant because the proprietors of the appellant were from a different ethnical background from the landowners or occupants of the land.

38. Mr. Mawason's evidence on this aspect is consistent with and reaffirms the evidence of Lawrence Beya, Thomas Katik and Steven Katik who gave evidence of their opposition to the appellant's engagement by the respondent because of its proprietors' different ethnical background.

39. Quite contrary to the appellant's contention, we are satisfied that the protest or demonstration by landowners significantly altered the contractual obligations of the parties because the protest or demonstration lasted for four weeks and the parties could not perform the contract. We reject the appellant's submission that because Mr. Pil's company was subsequently engaged by the respondent, it showed that the contract could have been performed is immaterial because Mr. Pil's company is not privy to the contract.

40. For these reasons, we dismiss grounds 3(a)(i),(ii)&(iii), 3(b) and 3(d).

Period of Contract

41. The trial judge found that there was a contract called a dealership agreement between the parties. In grounds 3(e) and 3(f), the appellant challenged the trial judge's finding that the period between 28th September 2000 and 20th October 2000 was "a waiting period rather than a period where PKI could have commenced the work it was intended to do under the dealership arrangement." It was contended this finding was wrong because the dealership agreement came into effect on 01st October 2000 and based on that, the appellant was to have commenced work on that date.

42. There are two problems with this submission. First, we have found the agreement was frustrated by the actions of the landowners or occupants of the land. The agreement was to have commenced on 01st October 2000 but could not be performed because of the demonstration and protest by the landowners or occupants of the land. As the lease ran on a month to month basis and the demonstration and protest by landowners or occupants of the land went on until 20th October 2000, it was impossible for the respondent to give possession of the site to the appellant on 01st October 2000 or any time thereafter.

43. The undisputed evidence from Brian Lewis was, the proprietors and employees of the appellant did nothing during the demonstration period, like moving onto the site and removing the road block to demonstrate that it was able to go ahead with the agreement despite the demonstration by the landowners or occupants of the land. Instead, they kept well away from the fuel service station and observed or monitored the situation.

44. In our view, it is contradictory for the appellant to strongly argue or attempt to create an impression that it had complied with the terms of the contract and that it was the respondent's fault that the lease arrangement had failed when it did nothing from 28th September 2000 to 20th October 2000. It was almost the first month of the lease and none of the parties were able to perform the agreement.

45. The second is, there is nothing in the agreement which defines a "waiting period" and at the same time describes the demonstration by the landowners or occupants that went on for 4 weeks. The only appropriate description the learned trial judge could give to describe the situation at that time was what she said; it was a "waiting period".

46. This case reminds us of the risks that come with investing in any commercial business enterprise whether big or small, e.g, operating a large scale resource project such as a mining or oil and gas resource project or running a trade-store. Investors who invest in Papua New Guinea take risks associated with investment in this country. One of these risks is landowner disputes. They are a common occurrence in recent times in light of the high number of business activities taking place in the country. They can disrupt or undermine business investment and may lead to temporary or permanent closure of the business.

47. The present case is an example of landowners disrupting a business operation through no fault of the appellant and respondent. We say through no fault of the parties because we are satisfied that there is uncontroverted evidence pointing to landowners or occupants as the party responsible for the disruption of the business operations of the appellant well before the date which the agreement was to come into effect.

48. Although there is evidence that Stanley Pil influenced the landowners or occupants of the land to mobilise and demonstrate against the appellant, we are not satisfied that it was sufficient to disturb the finding by the trial judge that the contract was frustrated by landowners' protest or demonstration.

49. In our view, the trial judge's finding was consistent with the doctrine of frustration of contract. This doctrine is a common law principle of contract, which we have adopted as part of the Underlying Law under Schedule 2.3 of the Constitution. It states that an event can result in the termination of the contract by operation of law: see Cheshire and Fifoot's Law of Contract (9th ed, 2008), Law Book Co, London. It is not dependent on the fault of either party but must be an event that significantly alters the nature and obligations of the parties. It is not necessary that it must be a foreseeable event because to accept this proposition would mean foreseeable events do not give rise to frustration of the contract.

50. The trial judge correctly referred to the doctrine of frustration of contract. We respectfully cite parts of her judgment hereunder:

"The Common Law is that the frustrating event discharges the Contract immediately. The occurrence of the frustrating events brings the Contract to an end forthwith without more and automatically (see Hirji Mulji v. Cheong S.S Co Ltd [1926] AC 497 at pg.505). Again, where the further performance of a Contract has become impossible, then in the absence of special provisions in the Contract, both parties are excused from further performance of the Contract and as regards further liability, i.e liability not then actually accrued and enforceable - the Contract is at an end (see RE Continental C. & G. Rubber Co. Pty Ltd (1919) 27 C.L.R at pg. 201 per Knox CJ and Barton .J).

The Contract is terminated as to the future only. Unlike one vitiated by mistake, it is not void ab initio. It starts life as a valid contract, but come to an abrupt and automatic end the moment the common adventure is frustrated. As Lord Wright held in Fibrosa Spolka Akcyina v. Fairbairn Lawson Combe Barbour Ltd [1942] UKHL 4; [1942] 2 All E.R 122 at pg.140;

'Each party must fulfill his contractual obligations so far as they have fallen due before the frustrating event, but he is excused from performing those that fall due later."

51. In the present case, the event was the landowners or occupants' dispute, protests and demands that the respondent must not engage the appellant to operate the fuel service station. The trial judge concluded that, "the occurrence of the frustrating event brings the Contract to an end forthwith without more and automatically."

52. The finding by the learned trial judge was based on the fact that the appellant had not entered the site and operated the fuel service station and the shop on the first date of the dealership agreement which was 01st October 2000 and worst still, for the first month bearing in mind the period of the dealership agreement was a month to month basis.

53. In our view, the appellant cannot have it both ways. It cannot, on the one hand claim that the contract was effective when the appellant did not perform the dealership agreement (because it was prevented by landowners or occupants) and on the other hand, say that the respondent breach the dealership agreement because it (respondent) failed to perform it during the same duration. We dismiss grounds 3(e) and 3(f).

Conclusion

54. For these reasons, we are not satisfied that the trial judge fell into error when she found against the appellant on the question of liability. It follows it is not necessary to consider the grounds on assessment of damages under paragraphs 3(g) to 3(i).

55. The appeal must be dismissed with costs to the respondent.

Order

56. The orders are:

1. The appeal is dismissed.

2. The appellant shall pay the costs of the appeal, to be taxed, if not agreed.

___________________________________________________________
Young & Williams Lawyers: Lawyers for the Appellant
Blake Dawson Lawyers: Lawyers for the Respondent