Philip Howard Taudevin v Charles Theseira and Theresa Theseira; Charles Theseira and Theresa Theseira v Philip Howard Taudevin

• Jurisdiction: Papua New Guinea
• Judge: Sheehan J
• Judgment Date: 24 April 1995
• Citation: [1995] PNGLR 56
• Court: National Court
• Year: 1995
• Judgement Number: N1379

National Court: Sheehan J

Judgment Delivered: 24 April 1995

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

PHILIP HOWARD TAUDEVIN

V

CHARLES THESEIRA AND THERESA THESEIRA

CHARLES THESEIRA AND THERESA THESEIRA

(CROSS PLAINTIFFS)

V

PHILIP HOWARD TAUDEVIN

(CROSS DEFENDANT)

Waigani

Sheehan J

21 April 1995

24 April 1995

CONTRACT — Sale of land — Claim for specific performance — Defence of termination for fundamental breach — Definition of fundamental breach.

REAL PROPERTY — Enforceable agreement passes property — Covenant against sub-letting — Licence does not amount to breach of such covenant.

WORDS AND PHRASES — "Structural alterations" or additions to property — Meaning of.

EVIDENCE — Manufacture of evidence — Pleading by counsel.

Facts:

The plaintiff and defendant entered into a contract of purchase and sale of registered property. The parties carried out the contract in a substantial way, a deposit of 10% was paid by the plaintiff, and he took possession of the vacant portion. However, because the transaction was couched as a lease/purchase agreement and the plaintiff permitted a third party use of the premises in purported violation of a clause against subletting, the vendor purported to forfeit the interest and claimed the deposit as damages.

Held:

1. The transaction was a sale of real property, and the vendor had no ground to resile from carrying it out.

2. From the moment of the execution of the agreement pending ministerial approval, the property passed to the plaintiff, though completion by giving full possession and final payment of the purchase price was postponed.

3. Not every breach of a contract gives a right of discharge from liability. Only a breach of a term fundamental to the contract will entitle an innocent party to treat the contract as terminated.

4. A licence to occupy on a temporary basis is not subletting or parting with possession and is not breach of such a term.

Counsel

J Shepherd for plaintiff.

J Aisa for defendant.

24 April 1995

SHEEHAN J: The plaintiff seeks orders that the defendants specifically perform a contract of sale of land entered into by the parties on 6 April 1994.

It is the plaintiff's case that the parties agreed that the defendants, as vendor, would sell and the plaintiff purchase "all that the leasehold estate of the Vendor in ... the State Lease of Portion 1620, Milinch, Granville, Four Mile, of Moresby NCD registered in State Business Lease, Vol. 102 Fol 171 ... together with all improvements erected thereon" for a purchase price of K142,000. Settlement was provided for 18 February 1995, or within 14 days of ministerial approval under s 69 of the Land Act, or on such a date as the parties otherwise agree. A deposit of 10% — K14,200 — was paid by the plaintiff and released to the defendants on the security of an interest-free second mortgage of the property executed by defendants.

The plaintiff says that the property was sold with vacant possession but, pending settlement, an occupation fee of K1,500 per month was agreed. In fact, that vacant possession was subject to the proviso that the plaintiff allow a tenant of the defendants (Port Moresby Timbers Pty Ltd) to see out its lease to expiry date, namely, 1 December 1994.

The plaintiff contends that, in pursuance of the contract, the executed contract documents and transfer of title were duly stamped and returned for presentation by the defendants to the Minister of Lands for s 69 approval. The second mortgage securing the deposit to the plaintiff was also duly executed by the defendants.

The plaintiff says the defendants have breached their contract, in that on 27 September 1994 they determined to unilaterally terminate the contract and have claimed to forfeit the deposit of K14,200.

In reply, the defendants acknowledge that they "agreed to accept the offer of the sale to the plaintiff for K142,000", but assert that the agreement executed by them was a "lease/purchase" agreement. It was a condition of that lease, they say, that the plaintiff not sublease. Accordingly, when the plaintiff, in breach of that agreement, entered into a sub-lease with another party, that breach brought about the defendants' decision to terminate the contract as they claim they were entitled to by virtue of the provisions of cl 10 of the agreement.

Further, the contract provides that upon termination for breach, the defendants were entitled to damages. Therefore, the defendants forfeited the deposit as part of the claim for damages sustained from the plaintiff's failure to honour this contract.

The trial of this matter was preceded by interlocutory applications for injunctive relief, brought about by the defendants' decision to terminate the contract in late September of last year. Those applications were declined. Sufficient to say, court orders were made to hold the status quo pending trial. Likewise, questions of damages and costs were reserved for trial.

The trial itself involved a lengthy examination of the plaintiff and Mr Theseira, one of the defendants, as well as the events, from time of negotiation of the contract through to the purported termination. That evidence sought to solve the essential question of whether the defendants were justified by virtue of the terms of contract they had executed to terminate that contract with the plaintiff.

The contract between the parties provides in cl 10 that upon execution of the contract the purchaser (the plaintiff) shall be entitled to "the benefit of possession of the property pending completion". Until that completion, the same clause provides that the purchaser shall abide by terms that prohibit subletting, structural alterations, or additions and require the property be kept in good repair. An "occupation fee" of K1,500 per month till settlement is also provided for.

That clause is stipulated to be "subject to the provisions of Clause 20", which provides:

"20 Possession

The property is sold with vacant possession the benefit of which shall be given to the Purchaser forthwith provided however the Purchaser hereby acknowledges that approximately one half of the property is currently leased by the Vendor to Port Moresby Timbers Pty Limited (and which portion is identified and marked in orange on the diagram annexed hereto) and that not withstanding the provisions of Clause 10 hereof a purchaser shall not be entitled to take possession of that portion of the Property so occupied by Port Moresby Timbers Limited until such time as the Vendor's existing lease arrangements with Port Moresby Timbers Pty Limited in connection with such portion of the Property shall terminate [October] November 1994 Provided Further However that the vendor hereby covenants with the Purchaser that vacant possession of that portion of the Property currently leased by the vendor to Port Moresby Timbers Pty Limited shall be available for the benefit of the Purchaser no later than 1, [November] December 199. "

On the evidence before the Court, there is complete agreement that the contract was executed by the parties on 6 April 1994 and that both parties acted with the full legal advice of their respective solicitors. It can also be said that the particular provisions regarding occupancy pending settlement were also plainly examined by the parties and agreed to. This is shown by the fact that the parties amended and initialled cl 20 to provide that possession would be granted no later than 1 December 1994. Briefly, that clause provides for the defendants' tenant, Port Moresby Timbers, to see out its term of lease and that, upon that term expiring (or no later than 1 November 1994), the defendants undertook that full possession would be given to the plaintiff.

The parties proceeded to carry out that contract of sale in a substantial way. The deposit was paid. The plaintiff did take possession of that part of the property shown in the contract. The temporary separation of the Port Moresby Timbers part of the property and the erecting of a temporary fence was carried out in an amicable fashion.

The events that led to the defendants terminating the contract began in May of 1994. This was occasioned by the misfortunes of Mr Alex Hamei, who had operated a nearby motor vehicle repairs business, Chebu Workshop. His business premises had been vandalised and burnt out. He was unable to find alternate premises till the plaintiff, Mr Taudevin, offered him temporary haven on the portion of the property occupied by him.

The defendants say that no consent was given to Chebu Workshop entering the premises, but it is quite clear from the evidence offered by Mr Theseira himself that he was approached by the plaintiff's then manager, Lester Symon, and made aware that Mr Taudevin "had decided to put Mr Hamei in on a temporary basis". Significantly, Mr Theseira acknowledged that he made no objections at that time. He said in his evidence in Court that though he was not too happy, "I didn't say anything. I didn't say yes. I didn't say no. I said it's up to you." That is plainly not a refusal or an objection.

The defendants did write to the plaintiff on 26 May expressing concern about the plaintiff's arrangement with Chebu Workshop. That...