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Mondo Merchants Pty Ltd v Melpa Properties Pty Ltd [1999] PGNC 112; N1863 (10 March 1999)

N1863

PAPUA NEW GUINEA
[In the National Court of Justice]

OS 11 of 1999

BETWEEN:

MONDO MERCHANTS PTY LIMITED
Plaintiff

AND:

MELPA PROPERTIES PTY LIMITED
First Defendant

AND:

KOANG NO. 47 PTY LIMITED
Second Defendant

Mt Hagen: Hinchliffe, J
1999: 2 February (Mt Hagen)
10 March (Wabag)

Contract of Sale of Land – Breach of Contract – Specific Performance.

P.K. Kunai for the plaintiff
P. Dowa for the first defendant
C.Nidue for the second defendant

10 March 1999

Hinchliffe: In the Amended Originating Summons filed on the 3 October, 1997 the plaintiff seeks the following relief:

1. "A declaration that the Contract of Sale of Land dated 29 April, 1997 entered into between the plaintiff as the proceedings. Hence any reference to the "defendant" in the said Amended Originating Summons is referring to the first defendant."
   

The plaintiff claims relief in the nature of an order for specific performance and damages against the first defendant for breach of contract for the sale and purchase of property in Mt Hagen entered into between the plaintiff as purchaser and the first defendant as vendor.

The plaintiff claims that before the completion of the said contract the first defendant unilaterally opted to terminate the sale and purchase contract and resell the same property to a third party who is the second defendant to the proceeding s and consequently the plaintiff has brought the proceedings against the first defendant.

On the 8 August, 1997 the Court ordered the restraining order as a sought in No.4 of the said Amended Originating Summons.

As far as the first defendant is concerned its position is fairly clear and it is precisely set out in Mr Dowa's written submissions dated on the 10 February, 1999.

He says, inter alia:

"Issues

The first and foremost issue is whether a contract has been negotiated and agreed into. There is no doubt a contract has been entered into. Under clause 5.3 of the contract, the contract was effected on the date when the deposit monies, stamp duties and ministerial fees were paid and when the contracts were executed by the parties. The terms of the contract are therefore binding on the parties.

The second issue is whether the first defendant is entitled to terminate the contract pending ministerial approval.

The contract for sale itself provides for the instances where a party can terminate a contract. Under clause 13 of the agreement, the only time when the vendor could terminate the contract is when the purchaser defaults in the observance or performance of any obligation imposed by the agreement. In the present case the purchaser was willing and performed his obligations and therefore no grounds exist for the termination of the contract for sale except for reasons given by the first defendant.

Section 69 of the Land Act

Clause 18.1 of the contract for sale provided that the agreement is entered subject to statutory approval pursuant to section 69 of the Land Act and will be of no effect until that approval is obtained. In the present case no ministerial approval has been granted and therefore the transfer is incomplete. The contract is not approved and therefore the plaintiff had no legal right in the property."

Therefore it seems that the first defendant is relying on Section 69 argument to show the Court that what it did in relation to the contract of sale was quiet valid. There was also evidence presented by the first defendant that in fact the plaintiff agreed to withdraw from the contract of sale if the first defendant met certain conditions. The plaintiff denied it. I found the first defendant's explanation and account of events in relation to the alleged withdrawal as most unconvincing. Witnesses evidence conflicted and even one witness conflicted with his own written and verbal evidence. I far preferred the plaintiff's evidence on the point and after all it is rather unlikely that the plaintiff would withdraw from the contract of sale and then turn around and issue proceedings for specific performance and damages in relation to the contract of sale.

With regard to the "Section 69 argument, I am unable to agree with Mr Dowa. I am of the view that the vendor cannot use Section 69 of the Land Act (Ch.185) to bail out of a contract of sale just because the Minister has not yet given his or her approval. Mr Dowa says that ministerial has not been granted therefore the transfer is incomplete. He says the contract is not approved and therefore the plaintiff has no legal right in the property.

Mr Dowa should have referred to other parts of No.18 of the Contract of Sale. Certainly the agreement is entered into subject to Statutory approval, but I am satisfied that the agreement cannot be tampered with by the vendor unless Statutory approval is refused. The purchaser is well and truly protected by the Contract of Sale and the agreement must stand unless the Minister disapproves. No one can alter the agreement must stand unless the Minister disapproves. No one can alter the agreement unilaterally until the decision of the Minister.

N18.3 reads,

"Refusal of Approval

If the Statutory approval is refused this Agreement shall be deemed to be rescinded and the provisions of Clause 17 shall apply".

Very importantly, No.18.44 reads;

"Parties Right to Rescind"

If the Statutory approval has not been obtained within eight months from the date of exchange of contracts, either party may by notice in writing to the other rescind this Agreement, whereupon the provisions of clause 17 shall apply"

It would therefore seem to me that if the first defendant had wished to rescind the contract of sale then it would have had to wait eight (8) months from the date of exchange of contracts and only if the Minister had not yet given his approval. I am of the view that Nos. 18.1, 18.3 and 18.4 of the Contract must be read together.

I also agree with Justice Los where at p370 in the matter of Jacob v Kwaidu (1991) PNGLR 366 he said, "The requirement for ministerial approval under Section 69 of the Land Act (Chapter 185) has been used to argue that until such an approval is given the contract if there is one is of no effect. I can only repeat what I said in Niugiga v. Koavea (1988-1989) PNGLR 312, that a party cannot use an argument of Section 69 of thee Land Act o cover his lost interest or deliberate refusal in performing his part of the contract."

I am therefore satisfied that the first defendant's arguments regarding the said Section 69 fail.

With regard to the second defendant I am reclined to agree with the written submissions of the plaintiff's lawyer. They go inter alia, as follows;

1. "That there is no written lease in existence between the first defendant and the second defendant setting out the terms of it's tenancy upon which any action can be founded. It had done nothing to legalise its tenancy status on the property with the first defendant as the landlord even though it says that its servants and agents have been occupying the property for many years and have made substantial improvements to the property.
   
2. There is no evidence of any rent being paid to the first defendant nor the allegation of carrying out substantial improvements on the property was made pursuant to any term in a lease agreement.
   
3. If what Mr. D.G. McGuinn says in his affidavit is correct they why did the first defendant not consult the second defendant whether they wish to purchase the property first before it could be sold in the open market.
   
4. The Frauds and Limitations Act makes it mandatory that all dealings in land must be evidenced in writing and this has not been the case with respect to the second defendant's lease of the property from the first defendant.
   
5. The absence of nay written lease agreement means that the National Government is denied of the revenue on stamp duty for leases as required by the stamp duties Act.
   

Therefore whilst the parties to the lease agreement may do anything as they please regarding the lease the court is not obliged to hear either of the parties pleas regarding the lease simply because they have not complied with the laws of the country.

There is clearly no obligation on the part of the first defendant to pull out of the sale for the sake of the second defendant as it did in this case.

Neither the First Defendant nor the second defendant can rely on the lease agreement to invalidate or terminate a legally binding sale."

The second defendant had every opportunity to compete for the purchase of the property but it failed to do so and in fact only showed some interest when it was far too late. It is quiet clear to me that there was a valid agreement between the plaintiff and the first defendant and it was only the first defendant who faltered when it clearly "felt sorry" for the second defendant when the second defendant approached it, when it was too late. The second defendant has no legal basis to its claim and it must fail in its endeavours. It would seem that when the plaintiff takes control it will give the second defendant to have the property. that is its right. There is no written lease with terms and conditions that runs with the said sale. I am quiet satisfied that the second defendant does not have any equitable remedy.

To my mind the plaintiff is entitled to specific performance of the said contract of sale and I say that because the first defendant has failed to show grounds or cause under the contract to terminate it. There has been a fundamental breach. Clearly in this type of contract involving land and business damages would not be appropriate in lie of specific performance.

The plaintiff in this action seeks orders for specific performance and damages as separate heads of damages and not in the alternative.

The plaintiff has referred to two English cases which say that this course can be taken even though there is no precedent for it in Papua New Guinea. In Papua New Guinea the remedies are sought in the alternative, i.e. specific performance or damages but not both.

I need to research that area further and I do not propose to give a decision today but I shall do so later.

I therefore order that there be judgment for the plaintiff and I make the following declarations and orders;

1. I declare that the Contract for Sale of Land dated 29 April, 1997 entered into between the plaintiff as the "purchaser" and the first defendant as the "vendor" for purchase and the sale of the property described ass Section 90 Allotment 2 being Volume 7 Folio 244 Town of Mt Hagen Western Highlands Province is a valid and legal contract.
   
2. I declare that the first defendant has failed to cite any ground or cause under the contract to terminate the said contract and therefore the first defendant's subsequent refusal to perform the contract constitutes a fundamental breach of the contract.
   
3. Order directing that the first defendant is to perform the contract as per the terms of the said contract dated 29 April, 1997.
   
4. Order that the restraining order of the 8 August, 1997 and entered on the 11 August, 1997 is now dissolved.
   
5. Order that the first defendant is to pay the plaintiffs costs. If not agreed then they are to be taxed.
   

Orders accordingly.

Lawyers for the plaintiff, Kunai & Co
Lawyers for first defendant, P. Dowa Lawyers
Lawyers for second defendant, Tamutai Lawyers.