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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATION COURT OF JUSTICE]
WS NO. 817 OF 2018
BETWEEN
EVANGELICAL LUTHERAN CHURCH OF PAPUA NEW GUINEA
Plaintiff /Cross Defendant
AND
FELIX UNAGE
First Defendant
AND
NFS CONSULTING
Second Defendant / Cross Claimant
Waigani: Thompson J
2021: 21st & 30th July
CIVIL – detinue – claim for delivery up of Title document – whether party in possession of document had entitlement to exercise lien – alleged breach of agreement – plaintiff not party to agreement – whether plaintiff authorized or ratified agreement – whether person signing agreement had actual or ostensible authority – agreement with statutory body in breach of statutory requirements – effect – whether claim for quantum meruit maintainable.
Counsel:
Mr S. Gor, for the Plaintiff/Cross Defendant
First Defendant: In Person
Mr B. Yagi, for the Second Defendant/Cross Claimant
30th July, 2021
3. The plaintiff eventually instructed Fiocco & Nutley Lawyers, and after negotiations were completed, they prepared the documentation for the sale. The Contract of Sale and Transfer were duly executed by the plaintiff and WPL on 9 October 2017. Settlement was fixed for 18 June 2018. However, settlement could not proceed as the plaintiff was unable to locate the Owner’s copy of the State Lease Title (the Title).
4. The defendants plead in para 5 of the defence that that first defendant “came to know” that the land was about to be sold to WPL in June 2018, and in para 12 of the cross-claim, pleads that the second defendant was entitled to 20% of the sale price for “service rendered ... a success contingency basis”. On 8 June 2018 the second defendant wrote to the plaintiff saying that it was aware that the sale was about to settle but that the church did not have the Title. The defendants said that they would release the Title in exchange for payment of their 20% fee, amounting to K180,000.00, for which they attached a purported invoice, which included GST without showing the GST registration number or Certificate of Compliance. They referred to an agreement and gave a copy of a power of attorney.
5. This was the first time that the plaintiff became aware of the defendants’ involvement in the matter. On becoming aware, the plaintiff’s Secretary issued a formal document attaching a copy of the power of attorney, stating that it was not a power of attorney, it was unauthorized, the person who signed it did not have the Council’s authority to sign, the Council did not ratify it, and it was a nullity. It set out and affirmed s 3 of the ELC Act, which provides that Church Property owned by the plaintiff shall only by managed by the Council.
6. Despite this, the defendants refused to deliver the Title, and continued by correspondence to inform the plaintiff that they would retain possession of the Title until the plaintiff paid their 20% fee. The plaintiff therefore issued these proceedings in July 2018, and the defendants filed a cross-claim in October 2018.
7. First, it is necessary to refer to various provisions of the ELC Act.
8. Under the Act, the ELC is a corporation which must have a seal (s 2), and property must be managed by the Council (s 3). The Council comprises various persons including the Bishop as Chairman (s 4), and ten members are a quorum (s 7 (3)). All questions must be decided by a majority vote of the Council members (s 7 (4)). The seal of the corporation must only be affixed in the presence of persons duly authorized by the Council to witness the affixing (s 12 (1), and the document must be signed by at least two persons duly authorized by the Council to sign (s 12 (2)).The powers of the ELC relating to property maybe exercised by the Council (s 21). Other powers include the power to appoint by instrument under seal, any person as the Attorney of the ELC (s 21 (j)). Any contract relating to property, shall be in writing (s 22).
9. Next, I refer to the evidence.
10. On 31 March 2009 the second defendant entered into a Consultancy Agreement (the Agreement) with “The Board of Governing Council Bumayong Lutheran Secondary School”. This Agreement was signed by “The Chairman on behalf of Governing Council Bumayong Lutheran Secondary High School, Morobe Prov”, (“the School Board”), which was Jacob Sawanga, and was signed by the first defendant on behalf of the second defendant. A seal of “New Fraud Solutions” was affixed to the document. There was no stamp affixed for “NFS Consulting”.
11. The Agreement provided, relevantly, that the School Board was “eligible to conduct business under its own name and style”, and it was “desirous to pursue its project submission to dispose or lease property as the Bumayong Water Reservoir to the PNG Water Board”. The second defendant was to “..fast track the lease or sale of this property to the PNG Water Board”. The second defendant would be retained for “twelve months commencing on the date of the signing of this Agreement” and be“..paid 20% ... on the total amount of any payments made in relation to the project submission and settlement payment by PNG Water Board ...”. The second defendant was “excluded from invoicing other cost or bill in pursuit of this task unless the other party agrees...”.
12. There is no evidence of what happened in the twelve months following the signing of this Agreement.
13. On 2 September 2010, the then Bishop Geigere Wenge (“the former Bishop”) signed a document called a Power Of Attorney
(POA). This document said that the former bishop “... on behalf of the Evangelical Lutheran Church of Papua New Guinea ELCPNG” appointed “the chairman and board of management of Bumayong Lutheran Secondary School ... to act as our agent and to deal with the application
for sub-lease of portion 36...of the State Lease Volume 68 Folio 59”. It went on to say that he appointed “... The Board Chairman or his ex-officio member to be my executor and who shall appoint an attorney on behalf of the ELCPNG... to enter
into all negotiations for sale of the property..”. The POA shows on its face that it was signed by the former Bishop and by Jacob Sawanga as witness.
14. There was no evidence of how the POA referring to portion 36 Vol 68 Folio 59, related to the Title for portion 543 Vol 19 Folio 128. The defendants did not produce the original POA, or give an explanation of why they sought to rely on a photocopy. The only photocopy they produced was too faint to see if the plaintiff’s seal was affixed. However, it shows that the bishop’s signature was very small, did not appear to say the words “Geigere Wenge”, and did not say the words “Head Bishop Reverend”. The signature was not witnessed by at least two persons duly authorized by the plaintiff’s Council, and was in fact only witnessed by one person. There was no evidence that either the former Bishop or the witness were authorized by the Council to affix the seal, sign the document or witness the signing and affixing. The author of the document, the former Bishop, did not identify the document and was not called to give evidence.
15. Jacob Sawanga gave evidence that, at the time he signed the Agreement and witnessed the POA, he believed that the School Board had authority to deal with the land, but he now realizes that the land and all the plaintiff’s property can only be dealt with by the plaintiff’s Council. He also now realizes that he had no authority to sign the Agreement. He confirmed that neither he nor the School Board informed the Council or its Secretary of the POA, or of anything with respect to the land.
16. About two years later, in 2011, the first defendant who was then apparently employed by Muroa and Associates Lawyers, asked WPL to pay occupation fees for the use of the plaintiff’s land, and in July 2011 WPL paid K450,000.00 to Muroa and Associates Lawyers Trust Account, which was then disbursed by payment of K50,000.00 to Muroa and Associates Lawyers, K149,988.00 to the second defendant, and K250,012.00 to the School Board. The defendants plead that a further payment of K140,000.00 was ‘later paid to the plaintiff’s agent’, by which they mean the School Board or themselves. The evidence showed, and it was not disputed, that neither the defendants nor the School Board informed the plaintiff of WPL’s agreement to pay, or of the payments, and that the plaintiff was completely unaware of this.
17. After the monies were paid to the defendants in 2011, there is no evidence of what occurred, of any relevance.
18. The position is therefore that it is not in dispute that the plaintiff is the registered proprietor of the land and entitled to the Owner’s copy of the Title, but it is being held by the defendants claiming to exercise a lien over it, for monies owing under the Agreement.
Findings
19. Neither the plaintiff nor the first defendant were parties to the Agreement, which was not signed under the ELC seal which had been affixed and witnessed by at least two persons duly authorized by a majority decision of the Council to affix the seal, sign and witness the documents.
20. The defendants specifically pleaded and gave evidence that the plaintiff was not a party to the Agreement, and that therefore they had no obligation to, and did not, inform or report on the matter to the plaintiff, or pass on the monies received by them from WPL for the occupation of the plaintiff’s land. They deliberately kept these matters secret from the plaintiff.
21. It is correct that the plaintiff is not a party to the Agreement. Despite this, the defendants have cross-claimed against the plaintiff for payment allegedly due under the Agreement. The legal basis for this is not clearly articulated, but there are references to the School Board and the former Bishop being agents of the plaintiff. This is contrary to the express statement in the Agreement that the School Board was ‘eligible to conduct business under its own name and style..’ and there is no statement of acting as agent for the plaintiff. The only basis for the allegation of agency, is that if the School Board and former Bishop were not actual agents, their positions of School Board and former Bishop, were sufficient to establish their ostensible authority to bind the plaintiff.
22. Neither the School Board nor the former Bishop were actually authorized to act as agents, and there was no reasonable basis on which the defendants could have been unaware of this.
23. Where a person dealing with a company acts in good faith and with no notice or reasonable grounds for suspicion of irregularity or impropriety, he may not be bound to ensure that the internal regulations of the company have been complied with in relation to the delegation of authority, and may rely on the ostensible authority of the person signing. (AGC (Pacific) Ltd v Woo International Pty Ltd (1992) PNGLR 100.
24. That is not the position in this case, and that principle has no application to a statutory body. No question of ostensible authority can arise in relation to a contract with a statutory body. A contract which does not comply with the statutory requirements, or is inconsistent with those statutory requirements, is void and unenforceable (Jack Patterson v NCDC (2001) N2145, Panga Coffee Factory Pty Ltd and ors v Coffee Industry Corporation Ltd (1999) SC 619, Fly River Provincial Government v Pioneer Health Services Ltd (2003) SC705). As the plaintiff is a body created by statute, any contract with it, must comply with the requirements of the ELC Act. A contract which does not comply, is void and unenforceable.
25. If the School Board purported to sign the Agreement as agent for the plaintiff, it did not comply with the statutory requirements under the ELC Act for, inter alia, the document to be signed and witnessed by attorneys appointed by instrument under seal or persons duly authorized to affix the seal, sign and witness a document. If the former Bishop purported to sign the POA as attorney or agent of the plaintiff, it did not comply with the statutory requirements under the ELC Act for, inter alia, him to have been appointed attorney by instrument under seal, and to be signed and witnessed by at least two persons duly authorized to affix the seal, sign and witness it.
26. Neither the Agreement nor the POA complied with the statutory requirements of the ELC Act, and their intention was wholly inconsistent with those requirements. Neither the School Board nor the former Bishop were actual agents or attorneys of the plaintiff, and had no actual authority to bind the plaintiff. Their actions in signing the documents were ultra vires their powers as School Board or former Bishop. Their conduct in signing, could not validate documents which they never had the capacity to sign, and could not give rise to ostensible authority in breach of the statutory requirements for authority.
27. As the Agreement and POA were signed in breach of the statutory requirements of the ELC Act, they are void and unenforceable against the plaintiff.
28. Even if the question of ostensible authority could arise, it would be unsupported by the facts.
29. The first defendant was an educated professional person who had a long association with the plaintiff and its affairs, and he was the owner of the second defendant business. He attached great significance to the fact that he had been an active member of the plaintiff his entire life, and he was familiar with and involved in Church affairs. He is also a lawyer who was in the business of ascertaining and applying the law, for reward.
30. It is an offence under S 60 of the Lawyers Act for a non-lawyer to draw or prepare a conveyance or deed or instrument relating to real property, or to prepare dutiable instruments creating or regulating rights between parties. This is to ensure that such serious documents are validly prepared. The first defendant requested, and he and his business were paid, very large sums of money for (on his evidence) arranging for the Title, lease and sale of the land. It was uncontested that he knew that the plaintiff was the registered proprietor of the land. He could therefore only ever lawfully accept instructions from the plaintiff, or its duly authorized agent. The defendants took no steps whatsoever to ensure that either the School Board or the former Bishop were duly authorized agents
31. Every person is presumed to know the law, which of course includes lawyers. As a lawyer dealing with the plaintiff’s land, the first defendant knew or ought to have known that the requirements for dealing with the plaintiff’s land, were prescribed by statute. He therefore knew or ought to have known that only the plaintiff’s Council by majority vote could make decisions binding the plaintiff, including decisions to appoint attorneys or agents, and for the affixing and witnessing of the seal. He and his business deliberately breached these statutory requirements by dealing and signing documents with the School Board and former Bishop, and by keeping these dealings and documents secret from the plaintiff.
32. The fact that the defendants went to some lengths to have documents signed by anyone other than the plaintiff, shows a lack of good faith. The defendants’ deliberate decision not to inform the plaintiff of the Agreement or POA, showed that they did not act in good faith. Their deliberate decision not to inform the plaintiff of payment of K590,000.00 made by WPL for the occupation of the land, shows a lack of good faith. Their deliberate decision to keep the payment of K590,000.00 and disburse it without informing the plaintiff, shows a lack of good faith. The whole of the defendants’ conduct relating to the Agreement, POA and receipt and disbursement of monies, shows at the least that the defendants had reasonable grounds for suspicion of irregularity in the dealings, but knowingly participated in them. The first defendant and therefore his business, knew or ought to have known that both the Agreement and POA were irregular and that neither the School Board nor the former Bishop had authority to bind the plaintiff by signing those documents.
33. The School Board had no authority to sell the Church property or to agree to pay monies received from WPL for the plaintiff, to the second defendant or anyone else. The former Bishop had no authority to approve any such agreement. The monies payable for the occupation of the land, and which will become payable for the purchase of the land, are payable to the owner, who is the plaintiff.
34. The first and second defendants received monies totalling K590,000.00 and disbursed them in 2011, without lawful authority. Notwithstanding this, the plaintiff has decided not to pursue its claim for damages for that sum. The plaintiff seeks only the return and delivery up of the Title, or alternatively damages.
35. The first defendant is not a party to the Agreement. He has been named as a defendant because he says he is holding the Title which he obtained through the Agreement with the second defendant.
36. In the defence and cross-claim, the first defendant pleads that he was instructed by the former Bishop to withhold the Title until the sale of the land to WPL, and that the second defendant’s fee of 20% of the sale price would be paid on settlement. The defendants plead that the plaintiff’s refusal to pay the 20% fee is “in breach of the Agreement”. It is to be inferred that this gave rise to a lien by the defendants, over the Title.
37. No evidence was produced to support the pleading of this instruction, from the former Bishop or otherwise. In any event, the former Bishop had no power to give such an instruction to the defendants. Despite being informed by the plaintiff and by its lawyers that the plaintiff did not authorize any such arrangement, the first defendant continued to retain the Title, and continued to say that unless the plaintiff agreed to pay 20% of the sale price to the defendants, he would not release the Title.
38. A lien is a common law right to retain property which is rightfully in a person’s possession, until his claim is satisfied. It is an essential element of a lien, that the property has come into the claimant’s possession with the express or implied authority of the owner (Sae Sadelmi v Morgan Equipment Pty Ltd (1990) PNGLR 187). The Title was not rightfully in the defendants’ possession, and it did not come into their possession with either the express or implied authority of the plaintiff, who was unaware of it being in their possession until June 2018.
39. The only basis on which the defendants claim 20% of the sale price from the plaintiff, is by reliance on the Agreement. I have already found that the plaintiff was not a party to that agreement, and that neither the School Board nor the former Bishop had authority, either actual or ostensible, to enter into it, or to authorize any dealings with the plaintiff’s property. Any claim for payment under that Agreement, could only be made against the parties to the Agreement, namely, the School Board or the former Bishop. The defendants have no legal basis under that Agreement, to an entitlement to payment of 20% from the plaintiff.
40. As the defendants have no entitlement to payment from the plaintiff under that Agreement, or on any other basis, they have no right which is capable of being enforced by a lien over the plaintiff’s Title. The defendants’ claim to a lien, is not made out.
41. I find that neither the School Board nor the former Bishop had any actual or ostensible authority to bind the plaintiff, and that the defendants knew or ought to have known this. The Agreement, including the obligation to pay a 20% fee, is void and unenforceable against the plaintiff.
42. The defendants have made an alternative claim for payment of K180,000.00 by the plaintiff on a quantum meruit basis, for work performed. This is in addition to the K250,000.00 or K390,000.00 they have already received, and makes a total fee of K430,000.00 or K570,000.00 for work done in relation to land which is being sold for K900,000.00.
43. First, the plaintiff was not a party to the unenforceable Agreement, and has not incurred any liability to pay for work performed under that Agreement, on any basis.
44. Secondly, the defendants produced no evidence of the work which was done, apart from a few letters in 2011 arranging for WPL to pay the occupation monies to them. The first defendant said that he had ‘stacks of documents’ in his office, but felt that it was unnecessary to produce them. In the absence of evidence showing the nature and extent of work performed, there is no basis on which a court could assess a fair value for that work.
45. Thirdly, and in any event, even if the defendants had produced evidence of work performed, it is implausible that it could have shown that a fair value would have been more than the approximately K250,000.00 or K390,000.00 already received by them and the former employer Muroa lawyers, so that no further amount would be payable
46. The defendants’ cross-claim for payment on a quantum meruit basis, is not made out.
47. The plaintiff has not proceeded with its claim to damages for the monies had and received by the defendants since payment in 2011. The plaintiff has established that it is the registered proprietor of the land, and is entitled to the Title. The defendants have failed to establish any entitlement either to be paid monies by the plaintiff, or to exercise a lien over the plaintiff’s Title.
48. By willfully refusing to deliver up the Title to enable settlement of the sale to WPL in June 2018, the defendants caused the plaintiff to suffer further delay, inconvenience, legal costs, and the loss of use of the sale proceeds for over three years. The seriousness of this conduct warrants censure, but as the claim for damages has not been pursued, this may only be reflected in the issue of costs.
49. I therefore make the following orders:
(1) The first and second defendants are to deliver up the State Lease Volume 19 Folio128 being for Portion 543 Milinch Erap, Fourmil Markham, Morobe Province, to the custody of the plaintiff’s lawyers forthwith, and at the latest by 9.00am on Monday 2 August 2021.
(2) The defendants’ cross-claim, is dismissed.
(3) In default of compliance with Order 1, the plaintiff is at liberty to return to court and proceed with para 2 of the relief sought in the statement of claim, for an award of damages to be made and assessed against the defendants.
(4) The first and second defendants, jointly and severally, are to pay the plaintiff’s costs on a solicitor / client basis,
to be agreed or taxed.
__________________________________________________________________
Fiocco & Nutley: Lawyers for the Plaintiff
Konjib and Associates: Lawyers for the Defendants
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URL: http://www.paclii.org/pg/cases/PGNC/2021/210.html