Rainbow Holdings Pty Ltd v Central Province Forest Industries Pty Ltd (Provisional Liquidator Appointed) [1983] PNGLR 34

• Jurisdiction: Papua New Guinea
• Judge: Pratt J, Bredmeyer J, McDermott J
• Judgment Date: 02 March 1983
• Court: Supreme Court
• Citation: [1983] PNGLR 34
• Year: 1983
• Judgement Number: SC241

Full Title: Rainbow Holdings Pty Ltd v Central Province Forest Industries Pty Ltd (Provisional Liquidator Appointed) [1983] PNGLR 34

Supreme Court: Pratt J, Bredmeyer J, McDermott J

Judgment Delivered: 2 March 1983

SC241

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

RAINBOW HOLDINGS PTY LTD

V

CENTRAL PROVINCE FOREST INDUSTRIES

(PROVISIONAL LIQUIDATOR APPOINTED)

Waigani

Pratt Bredmeyer McDermott JJ

25 November 1982

2 March 1983

PRINCIPAL AND AGENT — Authority of agent — Implied or ostensible authority — Test for — Contract negotiated and signed by solicitor — Whether binding.

CONTRACT — Enforceability — Public policy — Sale of goods — Title to goods acquired in breach of statutory regulations — Scope and purpose of statutory purpose — Forestry Act (Ch. No. 216) — Forestry Regulations, regs. 16, 17, 18.

Negotiations for the sale and purchase of timber logs in the possession of the vendor and stockpiled on a beach were entered into between the appellant as purchasers and the respondent as vendor. The actual negotiations and correspondence in relation thereto took place between the solicitors to whom the vendor was referred by the purchaser on behalf of their "client", for the purchaser, (the solicitor actually signing the contract), and the liquidator of the vendor. At the time of acquiring the "timber logs" the vendor did not hold a native timber authority which was required under the provisions of the Forestry Regulations made pursuant to the Forestry Act (Ch. No. 216). The penalty for purchasing from a traditional or customary owner in breach of the regulation is a fine not exceeding K100.

On appeal against an award of damages for breach of contract by the purchaser.

Held

(1) Whether there was a binding contract depended upon whether it was reasonable to believe that the solicitor had authority to sign the contract.

Mitsui and Co. Ltd v. Mapro Industrial Ltd. and Goukeket and Co. N.V., [1974] 1 Lloyd's Rep. 386 adopted and applied.

(2) In the absence of actual authority, apparent or ostensible authority may be found to exist, where it is shown: (a) that a representation has been made that the agent has authority to enter into a contract of that kind on behalf of the principal; (b) that the representation was made by a person or persons who had actual authority to manage the business of the principal either generally or in respect of those matters to which the contract related; and (c) that the contractor was induced by the representation to enter into the contract.

Freeman and Lockyer v. Buckhurst Park Properties (Mangal) Ltd [1964] 1 All E.R. 630 at 644 adopted and applied.

(3) In the circumstances there was a binding contract.

(4) Insofar as the subject of the contract was goods acquired in a manner which was prohibited by the Forestry Regulations (the contract itself not being subject to any such prohibition) the court could have regard to public policy in determining its enforceability.

(5) The question for determination was whether, having regard to the scope and purpose of the statutory provisions, the legislative purpose would be fulfilled without the court regarding the contract as void and unenforceable.

Yango Pastoral Co. Pty Ltd v. First Chicago Australia Ltd (1978) 21 A.L.R. 585; 139 C.L.R. 410, adopted and applied.

(6) In the circumstances (including by Bredmeyer J, the possession of the timber logs), the vendor would have had title sufficient to complete the contract, which was therefore enforceable.

Cases Cited

Archbold's (Freightage) Ltd v. S. Spanglett Ltd [1961] 1 Q.B. 374.

Freeman and Lockyer v. Buckhurst Park Properties (Mangal) Ltd [1964] 2 Q.B. 480; 1 All E.R. 630.

Mitsui and Co. Ltd v. Marpro Industrial Ltd and Goukeket and Co. N.V. [1974] 1 Lloyd's Rep. 386.

Vita Food Products Inc. v. Unus Shipping Co. Ltd [1939] A.C. 277; 1 All E.R. 523.

Yango Pastoral Co. Pty Ltd v. First Chicago Australia Ltd (1978) 139 C.L.R. 410; 21 A.L.R. 585.

Appeal

This was an appeal against an award of damages for breach of contract.

Counsel

B. C. Nordgren, for the appellant.

B. D. White and J G. Fuller, for the respondent.

Cur. adv. vult.

2 March 1983

PRATT J: I agree with the judgments of Bredmeyer and McDermott JJ and would dismiss the appeal with costs. I would also certify for overseas counsel.

BREDMEYER J: I agree entirely with the judgment of McDermott J, but wish to add the following:

I consider that the respondent had a "good" or at least an adequate title at the agreed completion date to pass on to the purchaser appellant. That title was based on possession — the vendor was in possession of the logs stockpiled on the beach and was in a position to give possession of them to the purchaser. It is true that as at the date of completion, the original customary owners had not been paid but they were to be paid K36,450 royalty out of the purchase price in satisfaction of their rights and upon that payment, were unlikely to take any action to frustrate the sale and delivery of the logs to the appellant. It is true too that in obtaining the logs prior to making the contract of sale with the appellant, the respondent and/or others had breached the Forestry Regulations. The logs had been obtained without the issue of N.T.A.s or any other statutory authority for obtaining logs from customary owners. But that breach did not in my view affect the respondent's title to the logs. The Director of Forest was not about to seize the logs for breach of the Regulations. On the contrary, he fully endorsed and supported the sale and was prepared to order his inspectors to issue the N.T.A.s retrospectively. I consider that had the appellant paid the purchase moneys on the day of completion, it would have gained good title to the logs.

Counsel for the appellant argued that we should declare the contract of sale void because of the breach of reg. 18 — the non-issue of N.T.A.s. The first thing to note is that, reg, 18 was breached by the respondent or some other person before the contract in question was made. This contract is thus a subsequent contract of logs illegally obtained. The second thing to note is that, the regulation does not expressly declare void any contract of sale of logs obtained in breach of the regulations; neither does it prohibit any such contract. So the effect of a breach of the regulation on a subsequent contract falls to be decided by the Common Law.

I consider there are two competing principles involved in the Common Law. One is that the courts have a vested interest in enforcing contracts entered into by competent parties without fraud, duress, misrepresentation and the like. To quote Lord Wright in a passage cited by McDermott J, from Vita Food Products Inc. v. Unus Shipping Co. Ltd [1939] A.C. 277, the courts should as a matter of public policy "refuse to nullify a bargain save on serious and sufficient grounds." On the other hand, if there has been a serious illegality, the courts have a vested interest in seeing that the law is enforced and that people do not profit from their illegal conduct.

I consider that the correct way to apply these principles to the contract in issue — as Devlin L.J, said in Archbold's (Freightage) Ltd v. S. Spanglett Ltd [1961] 1 Q.B. 374 at 390, is to examine the language used in the statute and the scope and purpose of the statute. Does it further the objects of the legislation to enforce this contract or to declare it void? On that test clearly, this contract must be enforced. The aim of the Forestry Regulations, regs. 16 to 18 is to prevent customary owners being exploited. The regulations provide that the customary owners can only sell logs to non-natives on terms and conditions which the Government considers fair. These logs were initially cut in breach of those regulations and without payment to the native owners. The contract between the respondent and the appellant for the sale of those logs contains a condition that the customary owners be paid K36,450, a price which, according to the documentary exhibits, the customary owners were willing to accept and which theDirector of Forests considered fair. To enforce this contract ensures that the customary owners will be paid a fair price and thus achieves the main objective of the regulations as well as upholding a bargain made between two persons. Not to enforce it, would mean that the native owners are less likely to be paid for the logs — the logs being a wasting asset on the beach — and would frustrate the objectives of the regulations.

I too, would dismiss the appeal with costs and would certify for overseas counsel.

MCDERMOTT J: The appellant disputes liability to pay a judgment debt of K242,000 payable to the respondent as damages for breach of contract.

The second ground of appeal will be dealt with first. It was submitted that there was no binding contract between the parties as it was signed on behalf of the appellant by a person without actual, implied or ostensible authority and was not ratified by the appellant.

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