Paradise Farms Limited v Bank South Pacifc Limited (2010) N3825

• Jurisdiction: Papua New Guinea
• Judge: Makail, J
• Judgment Date: 08 January 2010
• Court: National Court
• Citation: (2010) N3825
• Docket Number: WS NO 691 OF 2001
• Year: 2010
• Judgement Number: N3825

Full Title: WS NO 691 OF 2001; Paradise Farms Limited v Bank South Pacifc Limited (2010) N3825

National Court: Makail, J

Judgment Delivered: 8 January 2010

N3825

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 691 OF 2001

BETWEEN

PARADISE FARMS LIMITED

Plaintiff

AND

BANK SOUTH PACIFC LIMITED

Defendant

Mount Hagen: Makail, J

2008: 8th September & 27th October &

2009: 9th June & 2010: 8th January

LAW OF CONTRACT - Agreement for sale of land - Early possession - Improvements - Agreement rescinded - Effect of - Authorization or approval to take early possession - Authorization or approval to make improvements - Variation of agreement - Variation in writing and by conduct of parties - Parties bound by variation of agreement.

EQUITY - Principles of equity - Promissory estoppel - Reliance on assumptions - Detrimental - Unjust enrichment - Substantial improvements - Party estopped from denying claim - Constitution - Schedule 2.2.

DAMAGES - Assessment - Recovery of expenses incurred - Value of improvement of property - Operational expenses - Two distinct claims - Whether recoverable - Expenses directly related to improvement recoverable - Whether claims established - Evidence of - Lack of - Insufficiency of - Vague and inconsistencies.

Cases cited:

Papua New Guinean cases

Curtain Brothers (PNG) Limited & Anor -v- The State [1993] PNGLR 285

Maip Pty Limited -v- Ambra Coffee Estates Pty Limited [1995] PNGLR 25

Kwila Insurance Corporation Limited -v- Kwantun Pty Limited [1992] PNGLR 200

Jacobs -v- Kwaindu [1991] PNGLR 366

Ningiga -v- Koavea [1988-89] PNGLR 312

Mondo Merchants Limited -v- Melpa Properties Pty Limited & Koang No 47 Pty Limited: OS No 11 of 1999 (Unnumbered & Unreported Judgment of 10th March 1999)

Koang No 47 Pty Limited -v- Mondo Merchants Limited & Melpa Properties Pty Limited (2001) SC675

Investment Promotion Authority -v- Niugini Scrap Corporation Pty Ltd (2001) N2104

New Ireland Development Corporation Limited -v- Arrow Trading Limited (2007) N3240

Spirit Haus Limited -v- Robert Marshall & Ors (2004) N2630

Soroi Eoe as Director of PNG National Museum & Art Gallery & Ors -v- Steamships Limited & Ors (2005) N3013

Madiu Andrew -v- Mineral Resources Development Company Limited (2007) N2601

Jack Topo -v- Kelly Kaman & The State (2009) N3773

Overseas cases

Brown -v- Smitt (1924) 34 CLR 160

Crabb -v- Arun District Council [1976] Ch 179

Waltons Stores (Interstate) Limited -v- Maher (1988) 164 CLR 387

Livingstone -v- Rawyards Coal (1880) 5 App Case 25

Botham Carter -v- Hyden Park Hotel [1948] 64 TLR 177

Text:

Oxford Advanced Learner’s Dictionary, Oxford University Press, (7th ed 2005)

Counsel:

Mr P. Kunai, for the Plaintiff

Mr K. Peri, for the Defendant

JUDGMENT

8th January, 2010

1. MAKAIL, J: In this action, the plaintiff, a company incorporated under the Companies Act 1997 sues the defendant for expenses in the total sum of K753, 205.00 incurred in taking early possession of a coffee plantation located outside the town of Mt Hagen after an agreement for the sale of the property between the plaintiff and the defendant was rescinded by the defendant. The defendant denies the claim and trial was conducted on both liability and assessment of damages.

2. In its writ of summons filed on 28th May 2001 and subsequently amended on 25th March 2005, the plaintiff alleges that sometimes in 1995, the defendant advertised two portions of land described as portions 53 and 1011 situated between Mt Hagen town and Baisu Corrective Institution. Both portions of land were consolidated and had improvements comprising of fully developed coffee plantation which is commonly known as “Kuga Coffee Plantation”, (“the property”).

3. The plaintiff tendered for the property for K165,000.00 at K82,500.00 for each portion of land and was the successful bidder. Upon acceptance of the plaintiff’s offer and prior to execution of the agreement for sale of land (the “agreement”) by the parties, the plaintiff paid the required 10% deposit price of K16,000.00 but the defendant refused to accept that amount and demanded payment of the total purchase price of K165,000.00 before execution of the agreement.

4. On 17th March 1998, the plaintiff paid the total purchase price of K165,000.00. Before it executed the agreement with the defendant, it took early possession of the property and proceeded to carry out improvements on it. It alleges that the total value of improvements it put up was K753,205.00. The agreement and transfer instruments were not executed until 9th August 1999. At the time of the execution of the agreement, there were two un-discharged mortgages registered in favour of the defendant and one John Esana Leahy.

5. While the defendant was able to discharge its own mortgage, it was not able to obtain a discharge on the second mortgage and consequently, the sale could not be completed. Parties then rescinded the agreement and the defendant refunded the total purchase price of K165,000.00 to the plaintiff. The defendant however, did not refund the expenses incurred by the plaintiff for improving the property. The plaintiff alleges that this is in breach of the agreement and seeks refund of its expenses from the defendant.

6. In its defence filed on 31st July 2001 and subsequently amended on 29th November 2005, the defendant admits that it entered into an agreement with the plaintiff for the sale of the property and that at the time of executing the agreement with the plaintiff, there were two un-discharged mortgages. Further, it admits that the agreement was rescinded as it was unable to discharge the second mortgage. However, it denies any liability because first, clause 9 of the agreement prohibited the plaintiff from commencing any action for damages in law in the event that the agreement is rescinded. It alleges that the action for recovery of the expenses incurred in putting up improvements on the property is indeed an action for damages which is prohibited by clause 9 of the agreement.

7. Secondly, even if the plaintiff did incur expenses for putting up improvements on the property, it incurred these expenses without the knowledge and approval of the defendant, hence the defendant should not be liable for these expenses. Thirdly, as a matter of law, the expenses if incurred by the plaintiff were incurred by the plaintiff who had no registered title or interest in the property, hence there is no legal or equitable obligation on the defendant to repay the plaintiff for incurring these expenses. Finally, it alleges that the plaintiff is a foreign company within the meaning of section 3 of the Investment Promotion Act 1992 (the “IP Act”) and since it was not certified to carry on business in Papua New Guinea, the agreement it entered into with the defendant to purchase the property is void pursuant to section 41A of the IP Act. Hence, it is unenforceable against the defendant.

8. The plaintiff relies upon the following affidavits:

1. Affidavit of Thomas Serowa sworn on 25th August 2005 and filed on 26th August 2005 (Exhibit “P1”);

2. Affidavit of Luke Yaluma sworn on 7th December 2007 and filed on 13th December 2007 (Exhibit “P2”); and

3. Affidavit of Noah Kana sworn on 6th August 2002 and filed on 8th August 2002 (Exhibit “P3”).

9. All the deponents of these affidavits were cross examined by counsel for the defendant in relation to the contents of their affidavits. As far as the evidence of the defendant is concerned, the following affidavits were tendered into evidence by consent and none of the deponents of these affidavits were cross examined by counsel for the plaintiff in relation to their contents:

1. Affidavit of Ivan Pomaleu sworn and filed on 15th August 2008 (Exhibit “D1”); and

2. Affidavit of Unaba Daera sworn on 09th September 2005 and filed on 23rd September 2005 (Exhibit “D2”).

10. From these affidavits, the undisputed facts are these: the plaintiff and the defendant entered into an agreement for sale of the property in the sum of K165,000.00 following the plaintiff’s successful application by public tender. On 17th March 1998, the plaintiff paid the total purchase price of K165,000.00, however, the actual execution of the agreement did not take place until 29th August 1999. At the time they executed the agreement, there were two un-discharged mortgages registered on the title, the first one in favour of the defendant and the second, in favour of one John Esana Leahy. One of the terms of the agreement was for the plaintiff to take early possession of the property. Prior to March 1998, the plaintiff took early possession of the property, and carried out improvements on it. However, the sale could not be completed as the defendant was not able to obtain a discharge on the second mortgage. The agreement was later rescinded and the defendant refunded the total purchase price of K165,000.00 to the plaintiff.

11. The disputed facts are first, the defendant denies allowing or authorizing the plaintiff to take early possession of the property as it did not give its consent or authority to the plaintiff to take early possession. Secondly, the defendant denies that the plaintiff...