Koang No 47 Limited v Monodo Merchants Limited and Melpa Properties Limited (2001) SC675

• Jurisdiction: Papua New Guinea
• Judge: Kandakasi J:
• Judgment Date: 09 November 2001
• Court: Supreme Court
• Citation: (2001) SC675
• Docket Number: SCA No 32 of 1999
• Year: 2001
• Judgement Number: SC675

Full Title: SCA No 32 of 1999; Koang No 47 Limited v Monodo Merchants Limited and Melpa Properties Limited (2001) SC675

Supreme Court: Amet CJ, Injia J, Kandakasi J

Judgment Delivered: 9 November 2001

SC675

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCA No. 32 of 1999

BETWEEN:

KOANG NO. 47 LIMITED

-Appellant-

AND:

MONODO MERCHANTS LIMITED

- First Respondent-

AND:

MELPA PROPERTIES LIMITED

- Second Respondent-

WAIGANI: AMET,CJ., INJIA, KANDAKASI, JJ.

2001: 19th and 23rd February

2001: 9th November

LAW OF CONTRACT — Two separate contracts for sale of same land — Earlier contract not validly terminated — Purchaser in second contract unsecured and not formalised but in continuos occupation and effecting substantial improvements with the acquiescence of the landlord/vendor — Purchaser in second contract caused landlord/vendor to purport to terminate first contract and enter into the second contract — Purchaser in first contract sued for and obtained order for specific performance — Unsecured tenant has no right to interfere with a landlords right to sell land unless curtailed by agreement

LAWYERS — Professional conduct — Failure of lawyer to turn up in Court on time — Keeping client and court waiting — Unsatisfactory explanation for failure — breach of professional conduct rules — Actions amounting to contempt of court — No penalty imposed but warned.

Facts

This is an appeal against a decision of the National Court which ordered specific performance of a contract for sale of land between the First and Second Respondent as purchaser and vendor respectively. The Appellant was an unsecured tenant in occupation of the subject land, which sought to restrain the Second Respondent from enforcing the contract. It did so after successful causing the Second Respondent to terminate its contract with the First Respondent and enter into a second contract with it.

Held

1. The Appellant as an unsecured tenant was not entitled to interfere with the landlord's right to sell the land and therefore did not have any right to restrain the Respondents from performing their respective contractual obligations.

2. The Appellant's interest was not secured and therefore its interest was not superior to the right of the First Respondent to purchase the property free of any encumbrances.

3. The equitable principle of first in time could not assist the Appellant because of its own conduct in failing to secure its interest and causing the Second Respondent to terminate its contract with the First Respondent which meant that it was not going to equity with clean hands.

4. The doctrine of privity of contract precluded the Appellant from taking any steps to prevent the Second Respondent from discharging its contractual obligations to the First Respondent.

5. The concept of equality under section 55 of the Constitution does not arise because the case involved private parties to a legitimate contract who were not charged with the duty to ensure fair distribution of land and in any case, the sale was by tender where the Appellant had the opportunity and did bid for a purchase of the property but for a lower price than that of the First Respondent.

6. The Appellant may have a cause of action against the Second Respondent subject to an examination of its or its shareholders own conduct but that has nothing to do with an enforcement of the contract between the Respondents.

Papua New Guinea Cases Cited

Ready Mixed Concrete Pty Ltd v. The Independent Sate of Papua New Guinea [1981] PNGLR 396

Jivetuo v. The Independent State of Papua New Guinea [1984] PNGLR 174

Bai v. Morobe Provincial Government [1992] PNGLR 150

Mudge v. Secretary for Lands & 2 Others [1985] PNGLR 390

Papua New Guinea Banking Corporation v. Brra Amevo & Bari & Others (26th May 1998) N1726

Other Cases Cited

Meye v. Electric Transmission Ltd. [1942] Ch. 290,

Wheeler v. Mercer [1957] A.C. 416

Coggan v. Warwicker (1852) 3 Car. & K. 40: 175 E. R. 454

Commonwealth Life (Amalgamated) Assurance Ltd. v. Anderson (1945) 46 S.R. (N.S.W.) 47

Henderson v. Squire (1869) L.R. 4 Ex. 1709

Henderson v. Van Cooten [1922] W.N. (Eng.) 340

Lapin v. Abigail (1930) 44 C.L.R. 166

J & H. Just (Holdings) Pty. Ltd. v. The Bank of New South Wales (1971) 125 C.L.R. 546

Butler v. Faircloth (1917) 23 C.L.R. 78

Courtenay v. Austin (1961) 78 W.N. (N.S.W.) 1082

Counsels

P. Mawa, for the Appellant

P. Kunai, for the First Respondent

P. Dowa, for the Second Respondent

9th of November 2001

AMET, CJ: I have read the draft judgement of my brother judges Injia and Kandakasi and I agree with them on both their reasoning and outcome of the appeal. I have nothing further to add.

INJIA, J: I agree with Justice Kandakasi that this appeal should be dismissed for reasons given by his Honour.

But I wish to add a few comments. First, I also agree with Kandakasi J. that the standard of ethical conduct of a good number of counsel appearing before this Court and the National Court has somewhat declined over the years. Such conduct as coming late to the Court or not attending Court at all without informing the Court, has become frequent. Whilst such conduct may constitute breach of professional ethical rules, they may as well constitute Contempt of Court and the Courts will not hesitate to cite lawyers for contempt: see Andrew Kwimberi v. The SC 545 (1998).

Secondly, in relation to the appeal itself, it is trite law that as the registered State leaseholder of a registered land, the registered leaseholder's title is superior to the interest of any other person having or claiming to have any other form of secured or unsecured legal or equitable interest over the same land. A valid Contract for Sale of the land, per se, is a legal agreement, which is enforceable. Any interest in the land created by the legal contract is simply equitable and the equitable relief of specific performance is available to an aggrieved purchaser (or vendor) to the extent that an unwilling vendor may be required to honour its obligation under the contract, to do all that is necessary to complete the sale.

In the present case, there was a second Contract of Sale ("the Second Contract") of the same land executed between Melpa and Koang, whilst there was already in existence a Contract of Sale ("the first Contract") entered into between Melpa and Mondo in relation to the same land. It is trite law that a second contract for the sale of the same land cannot be validly entered into between the same vendor and a second purchaser when there is already in existence a valid first Contract of Sale between the vendor and the first purchaser.

In the National Court, Melpa sought to establish that it validly terminated the first Contract in order to make way for the second Contract to be validly entered into. Koang did not file any cross-claim against Melpa and/or Mondo seeking to invalidate the first Contract and seeking specific performance of its own second Contract. Instead, Koang joined Melpa in defending Mondo's action. The trial judge found the first Contract was not validly terminated, that the first contract was still valid and therefore, the second Contract was invalid. The Court then ordered specific performance of the first Contract by Melpa.

In this appeal, there is no issue taken of the approach taken by the trial judge in determining the legal status of the two Contracts. Instead Koang proceeds on the basis that the two Contracts of Sale were both validly entered into and the trial judge erred in selecting the first contract and giving effect to it. Koang then advances arguments as to which of the two equal but competing equities, created by the two valid Contracts should take priority over the other. Accepting the general rule that the equity created first in time ranks in priority, Konag seeks to explore exceptions to this general rule in an effort to bring Koang's case within the recognised category of exceptions. In that regard, Koang relies on the some improvements carried out on the land without objection or with the acquiescence of Melpa.

In my view, such of Koang's position in this appeal is based on the fallacious assumption that the second Contract was validly entered into. I am not persuaded by Koang that the first Contract was validly terminated by Melpa thereby paving the way for the second Contract to be validly entered into. If Koang had erected substantial improvements with the acquiescence of Melpa and thereby acquired an equitable interest in the land which I presume is unsecured, then the deprivation of such interest is compensatory in damages only as against Melpa and this would be subject of separate action instituted by Koang. Mondo is not a party to any such dealings between Melpa and Koang and the completion of its Contract should not be hindered in any way by any complications created by the pre-contract relationship between Melpa and Koang. Melpa being the registered titleholder of the subject State leasehold land is entitled to dispose of its indefeasible title by sale to Mondo notwithstanding Koang's unsecured equitable interest over the land.

For these...