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Caloundra Pty Ltd v Sona Aviation Services Pty Ltd [1998] PGNC 38; N1715 (28 May 1998)

Unreported National Court Decisions

N1715

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

OS 16 OF 1998
CALOUNDRA PTY LTD - PLAINTIFF
V
SONA AVIATION SERVICES PTY LTD - FIRST DEFENDANT
THE MINISTER FOR TRANSPORT - SECOND DEFENDANT
THE STATE - THIRD DEFENDANT

Waigani

Woods J
14 May 1998
28 May 1998

LEASES UNDER AERODROME (BUSINESS CONCESSIONS) ACT - grant of lease – representations made – unilaterally canceling lease - terms of lease not all contained in lease document – procedure for allocation of business concessions – declaratory orders over hangar allotment.

Counsel

S O’Brien & D Kakarya for the Plaintiff

M Age for the First Defendant

C Makail for the 2nd and 3rd Defendants

28 May 1998

WOODS J: The Plaintiff is seeking certain declarations over the occupation and tenancy of a property Section 143 Allotment 14 Jackson’s Airport which comprises a Hangar referred to as Hangar 157.

The Plaintiff states that in 1993 following appropriate discussions and offers a Lease was granted to it for the property Section 143 Allotment 14. This lease was to commence on 1^st January 1994 for a period of 10 years. In support of this there is a copy of a Lease No 067 attached to the Affidavits Mack Lee and Samuel Geno. This Lease was signed on behalf of the Plaintiff but the copies presented in court had not been signed by the Minister for the State. The Lease is stated to be for the whole of Section 143 Allotment 14 and was for 10 years from 1 Jan 1994 and with a yearly rental of K11,176.35. Various officers of the Department of Civil Aviation at different times from 1994 to 1996 seemed to endorse the fact that the plaintiff had a valid lease and were in lawful occupancy of the subject allotment under that lease.

However there is then correspondence and reports from these same Departmental Officers which suggest that at sometime in 1995 in the words of a Mr Samuel Geno the Director-General of the Office of Civil Aviation all the previous agreements and arrangements were superseded, and a new valuation having been obtained for the leasing of properties at the Airport there were new applications called and for example because the Plaintiff did not agree to the new terms, the State refused to complete the agreement made with the Plaintiff in 1993. Apparently in the new arrangements the Plaintiff were only going to be offered half of the site at Allotment 14, they were to share it with another company. And whereas the original offer was for the lease of the whole allotment at a yearly rental of K11,176.35, the new arrangement was for a yearly fee of K17,396.10 for half. There was some confusion over who was to be the other lessee of the allotment and between 1995 and 1997 two separate leases were executed by the State, one with a United Air Services, and then one with the First Defendant Sona Aviation Services. It is noted that each of those lease documents appears to cover the whole of allotment 14, there is no clause anywhere in the lease documents suggesting any sharing of the premises. It is submitted that one must read letters and memorandums with the lease documents to understand the exact nature of what is being leased. So it is clear that whatever arrangements and agreements are being made the terms are not solely contained in the formal lease documents themselves.

It is submitted on behalf of the plaintiff that the discussions and offer made in 1993 was a firm offer and was concluded when the Civil Aviation officials pressed the plaintiff to formalise the agreement by signing and returning the lease, note the letter of 25 October 1993 from DCA to the Plaintiff, “It is vital....that lease documents handed to your company be signed and returned to this department for execution by the end of this month”. There is no dispute that the lease documents referred to are those referred to as Lease 067 annexed to the affidavits of of Mr Mack and Mr Geno. And there seems to be no dispute that this lease document was returned to DCA at the time, as officers of DCA refer to the lease at various times. Mr Simitap refers to it as Lease 67 issued to the plaintiff in June 1993 and he saw it later in April 1994 noting in a letter of 20 April 1994 that the department would not approve some arrangement for someone else to use the facility with the plaintiff and stating “that you declare your intention over the facility vis-a-vis the current leasing arrangement in place between the Minister for Civil Aviation and Caloundra Pty Ltd. Your lease no 067 signed recently refers”. This clearly suggests that the lease 067 has by then been signed by the Minister and the plaintiff is the legal lessee to the property. Yet Mr Simitap then later seems to suggest something else such as that the same property was being legally leased to other parties. He does not explain the contradictions. Rather he is assuming that it was open to he and the Department to unilaterally cancel these previous agreements. As late as March 1996 a Mr Lagaia for the Director General is stating in a letter dated 21/3/96 to the plaintiff, “Air Manubada being the main lease holder and legal tenant of the facility at Jackson’s Airport should be the one to take the matter up and not the other way around”. This was in connection with certain apparent arrangements between the plaintiff and the first defendant for the first defendant to do engineering work for the plaintiff in the plaintiff’s hangar. The Department seeming to view that as a sublease. And in April 1996 Mr Karri for the Director is agreeing in a letter dated 29 April 1996 that the Plaintiff is the main leaseholder.

There is substantial correspondence indicating that the plaintiff had a fully executed lease and it is noted that rent had been paid and the keys were given to the plaintiff for the Hangar.

So how is the Department now saying that the plaintiff did not have a lease and was not the legal tenant. The Director General is saying that the department had the power to unilaterally cancel all the old arrangements and having done so and having obtained a valuation it had called for tenders for business concessions and the Aerodrome Business Concessions Tenders Committee had allocated one half of the Hangar no 157 to the Plaintiff at the new rental of K17,396.10. Although the Department then executed two different leases for the whole of the allotment with two other companies namely United Air Services, and the First Defendant.

I can find nothing in the Aerodrome (Business Concessions) Act which gives such draconian powers to unilaterally cancel contractual arrangements. If the Department was prepared to negotiate and give leases at old rentals that was their prerogative. Of course the leases have provisions for regular rental review.

It is submitted by the defendants that there was never any final agreement between the plaintiff and the Department, that there was still disagreement over the rental and half share of the facility. However the only disagreement evident on the documents is the fact that the plaintiff had executed a lease for the whole at the K11,000 figure in 1993 and the Director General and his staff seemed to admit that the lease had been finalised, but then once the old arrangement had been cancelled by the Director-General the plaintiff was being told of a new rental and a new lease were required. The plaintiff disputes the unilateral abrogation of the original agreement. Even though the Department officers seem to indicate that the execution of the Lease 067 had been finalised the Department has refused to deliver a duly executed lease by the Minister, stating instead that the Minister had not completed the lease once the plaintiff appeared to reject the new terms and conditions.

With this mutiplicity of leases each worded to be over the whole of the same property and the confusion within the Departments over where the terms and conditions of these leases are to be found, that they must be read with other documents to conclude that they are only over half of the property, and then with the various statements that the plaintiff was recognised as the legal tenant or lessee of the property, it is very easy to feel that the Department was not really sure of what it was doing and that perhaps various officers were confusing themselves and each other under some misapprehension that the Department was within its rights and powers to chop and change its policies and leasing arrangements whenever it felt like it. Whilst the legislation would appear to read that the Minister has an overriding power and prerogative to enter leases for business concessions this does not mean that it is a power that can be exercised completely arbitrarily. The power is one that must be exercised reasonably and according to appropriate procedures. In this case it is exercised by whatever procedure is in place for the department to screen the appropriate applicants for business concessions and to require appropriate conditions for the good of the operation of the Airport generally and all parties. And here the Department offered a lease to the plaintiff in 1993 which the plaintiff accepted by executing the lease. There was no further negotiating to be done at that stage. And the plaintiff was led, by what officers of the Department advised, to believe that the Minister had also executed the lease.

I find that the Department and thereby the Minister had granted a lease to the plaintiff in the terms of the document called Lease No 067 before this court. Therefore any other leases that the Minister purported to grant are invalid as there was no power to grant further leases over the same property while the original lease was granted and current.

I declare that the Plaintiff is the lawful and legal tenant of the whole of the property section 143 allotment 14 Jackson’s Airport including Hangar 157 under the terms and conditions set out in the Lease document No 067 and that the plaintiff be permitted to continue to conduct its daily business operations on the premises.

I further Order that the Minister deliver to the Plaintiff a duly executed copy of the lease 067 for the subject property and otherwise perform the terms and conditions of the lease.