New Ireland Development Corporation Ltd v Arrow Trading Ltd (2007) N3240

• Jurisdiction: Papua New Guinea
• Judge: Lay J
• Judgment Date: 23 November 2007
• Citation: (2007) N3240
• Docket Number: OS No. 454 of 2007
• Court: National Court
• Year: 2007
• Judgement Number: N3240

Full Title: OS No. 454 of 2007; New Ireland Development Corporation Ltd v Arrow Trading Ltd (2007) N3240

National Court: Lay J

Judgment Delivered: 23 November 2007

N3240

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS No. 454 of 2007

BETWEEN

NEW IRELAND DEVELOPMENT CORPORATION LTD

Plaintiff

AND

ARROW TRADING LTD

Defendant

Kokopo: Lay J.

2007: 21 September

23 November

CIVIL - equitable lease - whether signatories for the lessor had ostensible authority to sign - effect of lease being unstamped - lease for five years unregistered - whether unenforceable by non registration - whether lease void by reason of lessee’s breach of Investment Promotion Act s25, s41 & s41A - Investment Promotion Act Section 41A, considerations for applying.

Facts

The General Manager and a Director of the Plaintiff applied the common seal and signed a lease to the Defendant for five years, of premises owned by the plaintiff, in breach of the internal management rules of the Plaintiff. At the time of signing the Defendant, a foreign enterprise, did not have the requisite Investment Promotion Authority Certificate to carry on the business authorised by the lease and in fact carried on by the Defendant, in breach of Section 25 of the Investment Promotion Act being an offence under section 41. It subsequently obtained the requisite certification. The lease is unstamped, unapproved by the Minister for Lands under the Lands Act and unregistered under the Land Registration Act.

Held

1 The lease is not void by reason of the breach of the internal management rules of the Plaintiff because the General manager and Director had ostensible authority to negotiate & execute the lease and their action bind the plaintiff;

2 The lease is not void for public policy by reason of the breach of Investment Promotion Act Section 25 and Section 41 because Section 41A provides a specific remedy for the Plaintiff and it would be inappropriate to apply common law when Parliament had enacted an appropriate remedy. The Plaintiff did not seek the relief provided by Section 41A in its summons and cannot have relief it did not plead;

3 Matters relevant in deciding which way to exercise the discretion vested by Section 41A are:

a whether an order to declare the agreement void would advance the policy under the Act?;

b the delay, if any, in making the application and whether that delay occurred before or after the breach of the Act came to the attention of the applicant and the conduct of the parties during any delay;

c the respective position of the parties at the time of the application and their conduct;

d the effect of making the order compared with not making the order.

4 The unstamped lease cannot be produced in evidence. It can be relied upon in equity by other evidence of its terms and execution;

5 The non registration of a lease contrary to the provisions of the Land Registration Act Section 49 is not a bar to enforcement of the lease in equity and does not affect its existence in equity.

Cases Cited

PNG Cases

AGC (Pacific) Ltd v Woo International Pty Ltd [1992] PNGLR 100

Jay Mingo Pty Ltd v Steamships Trading Co. Ltd [1995] PNGLR 129

Rainbow Holdings Pty Ltd v Central Province Forest Industries [1983] PNGLR 134

Ume More v University of Papua and New Guinea [1985] PNGLR 401

Odata Ltd v Ambusa Copra Oil Mill Ltd (2001) N2106 (Kandakasi J.).

Spirit Haus Ltd v Robert Marshall (2004) N2630 (Kandakasi J.)

Timothy Lim Kok Chuan v Simon Goh Say Beng (2004) N2753

Wamena Trading Ltd v Civil Aviation Authority (2006)N3058

Tian Chen Ltd v The Tower Ltd (2002) N2313

Papua New Guinea Harbours Board v Hargy Oil Palms (1995) N1384

Wal Wine v Bill Giglmai [1990] PNGLR 462

Overseas cases cited

Rama Corporation Ltd v Proved Tin and General Investments Ltd [1953] 2 QB 147

Taylor v Smith (1926) 38 CLR 48

Hamilton Panel Works v Thomas [1963] NZLR 771

Sinclair v Hudson (1995) 9 BPR 16,269

Marsh v Joseph [1897] 1 Ch 213

Brockway v Pando (2000) 22 WAR 405

Lithgoe v Vernon (1860) 5 H&N 180

Gunn v Roberts (1874) LR 9 CP 331

Pegela Pty Ltd & Ors v National Mutual Life Association of Australia Ltd [2006] VSC 507

Moore v Dimond (1929) 43 CLR 105

References

Companies Act 1997

Investment Promotion Act

Land Act

Land Registration Act

Counsel

J. Isacc, For The Plaintiff

K. Latu, For The Defendant

23 November, 2007

1 LAY J.: Two officers of the Plaintiff applied the common seal of the Plaintiff to, and signed, a lease, which the Defendant also signed as lessee, in respect of supermarket premises owned by the Plaintiff in Kavieng town, New Ireland Province. The lease is for a term of five years commencing 1 December 2005. From December 2005 until the end of May 2007, the defendant had undisturbed and unhindered possession of the property. The Plaintiff invoiced the Defendant on a monthly basis for the rent set out in the lease agreement and down to the end of August 2007 the Defendant had paid a total rent of K221,076 and the rent was current. The invoices went out over the name of the managing director, although not signed by him. On 14 June, 2007, the plaintiff' purported to terminate the lease and gave the Defendant fourteen (14) days to move out. The plaintiff commenced these proceedings on the 16 August 2007 for declarations set out below, and for an interim injunction. The injunction was refused.

2 The plaintiff seeks declarations that:

a the lease is void, illegal and unenforceable against either party :

b the officers who signing the lease on behalf of the plaintiff acted ultra vires their powers and without ostensible authority;

c The Defendant is operating a supermarket and grocery store in the premises in breach of Sections 25(2) and 41A of the Investment Promotion Act 1992 which renders the said lease agreement void and unenforceable;

3 There are three issues for trial which I deal with in the following order:

a whether the persons who signed the lease purportedly on behalf of the plaintiff bound the plaintiff?;

b whether the plaintiff could declare the lease void and terminated by reason of the Defendant trading outside the terms of its foreign enterprise certificate, or whether the court should do so?;

c whether the validity of the lease is affected by the fact that it is unstamped or unregistered?.

Whether the persons who signed the lease purportedly on behalf of the plaintiff bound the plaintiff?

4 The leasing of the premises came about between the parties when the Defendant made a verbal inquiry to the then General Manager of the Plaintiff, Richie Gash, and Mr Gash responded with a written offer. Mr Gash arranged for a lease to be prepared and on a date unknown, the plaintiff's witnesses say in 2004, although I find it more likely towards the end of 2005, the lease was executed by Mr Gash placing his signature over the words "Company Secretary" and Mr Pedi Anis over the words "Director". Mr Rui Lin signed on behalf of the Defendant.

5 Mr Pedi Anis was in fact a director of the Plaintiff and was also chairman of a Board subcommittee known as the Properties Committee. Mr Gash was the General Manager of the Plaintiff. There is no evidence either way as to whether or not Mr Gash held the office of Secretary at the time the lease was signed. There is evidence that he “is not a Company Secretary of NIDC Ltd nor a Public Officer” at 30 July 2007 (affidavit of Mr Mazewin par 16). There is no evidence of what the Constitution of the Plaintiff provides, if anything, with respect to affixing the seal of the company.

6 I find from the Plaintiff's evidence that the role of the Board subcommittee which Mr Anis chaired was to advise the board. Internally, to the company the only person or body with authority to authorise the leasing of the premises was the Board of Directors. Mr Anis and Mr Gash exceeded their actual authority according to the internal management rules of the Plaintiff, in purporting to commit the Plaintiff to a lease and executing a lease document. However that is a long way from saying that their acts did not bind the Plaintiff.

7 The Companies Act 1997 makes the following provision in respect of the contracting powers of a company:

155. Method of contracting.

(1) A contract or other enforceable obligation may be entered into by a company as follows—

(a) an obligation which, if entered into by a natural person, would, by law, be required to be by deed, may be entered into on behalf of the company in writing signed under the common seal of the company; or

(b) an obligation which, if entered into by a natural person, is, by law, required to be in writing, may be entered into on behalf of the company in writing by a person acting under the company's express or implied authority; or

(c) ....

(2) ...

(a) ... and

(b) ...

8 Sakora J. recorded the following summary of the law relating to in-house management rules and ostensible authority in respect of the...