N7633
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1184 OF 2013

MOTORIST DISCOUNT CENTRE LIMITED
Plaintiff

V

JR COMPANY LIMITED
Defendant

AND

JR COMPANY LIMITED
Cross-claimant

V

MOTORIST DISCOUNT CENTRE LIMITED
Cross-defendant

Madang: Cannings J
2018: 4 September, 9 November,
2019:  10 January

LAND – State Leases – expiry of State Lease – whether registered proprietor has legal or equitable interests in land beyond date of expiry – effect of back-dating commencement of State Lease.    

LANDLORD AND TENANT – written lease – whether landlord can claim rent against tenant in respect of periods that landlord had no legal interest in property the subject of lease.  

PRACTICE AND PROCEDURE – cross-claim by defendant – burden of proof – whether cross-claim disclosed cause of action – whether cross-claimant could prove facts on which cross-claim based.   

In September 2006 the plaintiff leased a property to the defendant pursuant to a written lease under which the defendant was to pay monthly rentals. The arrangement was amicable for five and a half years. The defendant conducted its business on the property and paid monthly rentals to the plaintiff in accordance with the lease. In April 2012 the defendant stopped paying rent when it discovered that the plaintiff’s State Lease over the property had expired. The defendant continued to occupy the property without paying rent until vacating it in September 2013. In June 2013 the plaintiff was granted a new 99-year State Lease over the property, backdated to commence in February 2007. The plaintiff then commenced proceedings against the defendant, claiming unpaid rent of K112,145.00 in respect of the period from April 2012 to September 2013. The defendant filed a cross-claim against the plaintiff, claiming the return of K136,640.00 in rent which it alleged had been unlawfully collected from it during the period the plaintiff held no interest in the property. 

Held:

(1)	The plaintiff’s claim failed as it held no interest in the property after expiry of the State Lease in April 2004, including when it entered into the lease with the defendant in September 2006, until it was granted the new State Lease in June 2013. The lease that the plaintiff was attempting to enforce against the defendant was void and unenforceable as it was based on the false representation that the plaintiff was the registered proprietor of the State Lease or that on some other proper legal basis it was able to lease the property to the defendant. 

(2)	The defendant’s cross-claim failed as it was inadequately pleaded. There was conceivably a claim for the tort of deceit but its elements were not pleaded and there was a failure to disclose any reasonable cause of action. If it were presumed that the cause of action was deceit, the claim was unsupported by the evidence and also failed for that reason. 

(3)	Both the statement of claim and the cross-claim were dismissed and the parties were ordered to bear their own costs. 

Cases cited

The following cases are cited in the judgment:

Pacific Foam Pty Ltd v Zurich Pacific Insurance Pty Ltd (1998) N1745
Papua Club Inc v Nusaum Holdings Ltd (2005) SC812
Wong v Wong (2018) N7227

STATEMENT OF CLAIM & CROSS-CLAIM

This was a trial in which the plaintiff sought unpaid rentals and damages in respect of a property lease and the defendant cross-claimed for rentals paid under a misrepresentation. 

Counsel

A J Dalton, for the Plaintiff & Cross-Defendant
D F Wa’au, for the Defendant & Cross-Claimant

10th January, 2019 

1.      CANNINGS J: A trial has been conducted in which two competing claims have been made. The plaintiff, Motorist Discount Centre Ltd, is by a statement of claim seeking unpaid rentals and damages against the defendant, JR Company Ltd, in respect of a property, Section 10, Allotment 38, Modilon Road, Madang that it leased to the defendant. The defendant is by a cross-claim seeking a refund of rentals it alleges were unlawfully collected from it by the plaintiff due to the plaintiff falsely representing that it was the owner of the property.  
  
BACKGROUND  

2.     On 24 July 2002 the plaintiff became registered proprietor of a 50-year State Lease over the property, originally granted by the colonial administration on 5 April 1954. The State Lease expired on 4 April 2004 and there was no extension of it. 

3.     In September 2006 the plaintiff and the defendant entered into a written “rental agreement” under which the plaintiff leased the property to the defendant and the defendant paid monthly rentals. The arrangement was amicable for five and a half years. The defendant conducted its business on the property and paid the rent in accordance with the lease. 

4.     In April 2012 the defendant stopped paying rent when it discovered that the plaintiff’s State Lease over the property had expired in April 2004 and not been renewed. The defendant continued to occupy the property without paying rent until vacating it in September 2013. 

5.     In the meantime in June 2013 the plaintiff was granted a new 99-year State Lease over the property, backdated to commence on 22 February 2007. 

6.     In October 2013 the plaintiff commenced the present proceedings, WS No 1184 of 2013, against the defendant, claiming unpaid rent of K112,145.00 in respect of the 17-month period from April 2012 (when the defendant stopped paying the rent) to September 2013 (when the defendant vacated the property), and damages. 

7.     In February 2014 the defendant filed a cross-claim against the plaintiff, claiming the return of K136,640.00 in rent which it alleged had been unlawfully collected from it during the period that the plaintiff held no interest in the property, and damages. 

8.     The following issues arise:

1.	Does the plaintiff succeed on the statement of claim? 

2.	Does the defendant succeed on the cross-claim? 

3.	What order should the Court make?

1	DOES THE PLAINTIFF SUCCEED ON THE STATEMENT OF CLAIM?

9.     No. The plaintiff’s claim fails as it held no interest in the property after expiry of the first State Lease in April 2004, including when it entered into the lease with the defendant in September 2006, until it was granted the new State Lease in June 2013. Expiry of the first State Lease extinguished all interests of the plaintiff in the property (Papua Club Inc v Nusaum Holdings Ltd (2005) SC812, Wong v Wong (2018) N7227). This means that the lease the plaintiff is attempting to enforce against the defendant is void and unenforceable as it was based on the false representation that the plaintiff was the registered proprietor of the State Lease or that on some other proper legal basis it was able to lease the property to the defendant (Pacific Foam Pty Ltd v Zurich Pacific Insurance Pty Ltd (1998) N1745). 
  
10.     The backdating of the date of commencement of the new State Lease to 22 February 2007 is of no consequence. The rental agreement between the plaintiff and the defendant was entered into in September 2006. That was when the misrepresentation occurred. Its effect is not nullified by backdating the new State Lease to February 2007.  

2	DOES THE DEFENDANT SUCCEED ON THE CROSS-CLAIM?  

11.     No. The cross-claim fails as it is inadequately pleaded. There is conceivably a claim for the tort of deceit but its elements have not been pleaded. No reasonable cause of action is disclosed. If it were presumed that the cause of action is deceit, there is insufficient evidence that the plaintiff/cross-defendant acted with fraudulent intent in falsely representing that it was the registered proprietor of the property. On both accounts – inadequate pleading and inadequate evidence – the cross-claim has not been proven. 

3	WHAT ORDER SHOULD THE COURT MAKE?

12.     Both the plaintiff’s statement of claim and the defendant’s cross-claim will be dismissed. I think that is a just outcome as both parties have entered into a business arrangement centred on a piece of Government land without checking that the party leasing the land to the other was in a proper legal position to do so. Each party is to blame for what happened. Each has had a victory of sorts so they will bear their own costs. 

ORDER

1.	All relief sought in the statement of claim is refused and the statement of claim is dismissed. 

2.	All relief sought in the cross-claim is refused and the cross-claim is dismissed. 

3.	Subject to any specific costs order made in the course of the proceedings the parties shall bear their own costs of the proceedings. 

4.	Time for entry of this order is abridged and the file is closed. 

Judgment accordingly.
__________________________________________________________
Warner Shand Lawyers: Lawyers for the Plaintiff & Cross-Defendant
Ninerah Lawyers: Lawyers for the Defendant & Cross-Claimant