Udia v Wanjik [2000] PGDC 7; DC72 (1 May 2000)

Unreported District Court Decisions

[2000] PNGDC 5 - OPOA FO'O UDIA V PAUL WANJIK

[2000] PNGDC 5

PAPUA NEW GUINEA

[DISTRICT COURT OF JUSTICE]

CASE NO: DCC. 530/2000

BETWEEN

OPAO FO’O UDIA

COMPLAINANT

AND

PAUL WANJIK

DEFENDANT

Port Moresby

Geita M

21 March 2000

5 April 2000

14 April 2000

1 May 2000

LANDLORD AND TENANT – Recovery of possession- Summary ejectment proceedings – Available only where clear title in landlord.

PRINCIPLE AND AGENT – liabilities of agent – for money received and accounted to landlord – No agreement entered – Landlord liable to account balance of monies held – balance monies towards rental payments.

Cases Cited

Pole v Leask (1863) 33 L.J. Ch. 155.

Barrington v Lee {1971] 3 All E.R. at pp 1237-1238.

Regione v Palms Tavern Pty Ltd 1988-89 PNGLR 150

Counsel

G Garo for the Complainant

C Makail for the Defendant

JUDGEMENT

1 May 2000

GEITA M:  This is a proceedings in which the complainant sought to recover possession of property known as Section 107, Allotment 10, Gordons under Section 6 of the Summary Ejectment Act Ch No. 202. The brief statement of the facts is as follows. The complainant in May 1997 gave management rights or so he claims of the above mentioned property to Boi Boi Real Estate to lease on his behalf at K250 per week to any prospective tenant. Around 27 July 1997 the real estate agent entered into a purchase agreement with Mr. Wanjik. A lady salesperson with the real estate agent accompanied the defendant to inspect the property of which he indicated his willingness to purchase the property at a sale price of K50, 000. Upon request by the agent the defendant paid cash deposit of K5000 representing 20% of the purchase price.

Mr. Wanjik and his family moved into the property the next day on 28 July 1997. The real estate agent again demanded an additional 40% of which the defendant paid K18, 000. At that point in time no contract of sale documents were signed or entered into. The defendant however was told that Henao Lawyers were preparing them.

Around December 1999 the complainant fronted up at the house to deliver a letter from his lawyers to the defendant. According to the defendant that was the first time after almost two years for him to meet the complainant, since taking up possession.

The complainant has now come back to evict the defendant for non-payment of rent after giving notice to give up possession. The defendant has refused to give up possession, saying that he has been misled into outlaying K23, 000 for the property the agent promised would be sold to him. From the K23, 000 paid to the agent; K5000 was returned to the defendant upon court directions and the balance K18000 was paid to the complaint in July 1997. According to the complainant the money was received as advance rental payment.

In the case before me I have what can be termed as an oral agreement between the agent and the defendant, where the agent has deliberately not brought his principal into contact with the defendant. The defendant paid some money as initial deposit to the agent to secure a tenancy to the house. This payment was made before any firm lease agreement had been entered into.

Normal business practice would be that a tenancy agreement would be entered into before occupation and moneys would be paid over in accordance with the terms of that tenancy agreement. However, here it is apparent that to secure the tenancy defendant paid over the equivalent of a 20% deposit of the purchase price, to secure the promise and as an indication of their good intent.

In this case the agent and the complainant disappeared from the scene since 1997 after receiving the K23, 000 from the defendant. The agent returned to refund the K5000 and the complainant returned to the scene, hence this complaint to evict the defendant for being in unlawful possession of his property. It is significant to note here that at the relevant time the complainant was not registered as having any interest under s.17 of the Land Registration Act 1981. Consequently it had no legal interest (s.26). The complainant’s ownership of the property was in dispute as far back as May 1997 when he gave management rights of the property to Boi Boi Real Estate for the leasing of the property at K250 per week. Since no documentary evidence was forthcoming I take the arrangement to be entered into verbally.

Despite the no-existence of a “written management agreement” and or  “the lease arrangement” between the complainant and the agent, the complainant saw fit to receive and accept the K18000 from the real estate agent. To have received the K18000 without ascertaining what it was for is considered highly irregular. Having to come back a few years down the line and rely on your recollection that you received the money as advance rental and not part payment of the property is also questionable. In the absence of a written arrangement, a prudent man would take time to find out exactly what the money was for and note down when it was received. As it is the court has been told that such an amount was received but I have not been told the exact date when it was received.

The complainant appears quick to disassociate himself from the purchase agreement saying that he did not have title to the property as it was still being processed. However he appears to be too slow in disassociating himself from the lease arrangement and receiving the K18000, knowing full well that he had no interest in the property at the material time. Simply put he had no title to the property but was ready to accept the K18000.

The question now is how far can an agent commit his principal. In the case of Pole v Leask (1863) 33 L.J Ch. 155, the House of Lords unanimously laid down that if a person deals with another as agent and seeks to charge a third person as principal, the onus is on him to show that the agency exists that the agency has authority he assumes to exercise, or that the principal is estopped from disputing it.

In this case the defendant  paid some money to the real estate agent to secure the tenancy to the house. The payment was made before any firm lease arrangement had been entered into.

In the words of Lord Denning M.R. in the case of Barrington v Lee [1971] 3 All E.R 1231 at pp 1237-1238:

“To my mind, the claim to the return of the deposit lies in contract and nothing else. When the purchaser pays a deposit to an estate agent, in the course of negotiations before any contract is concluded, there is clearly an implied promise by someone to repay it if the negotiations break down. But who is that someone? Who makes the promise to repay it? The estate agent or the vendor? If the estate agent receives the deposit ‘as stakeholder’, then it is the estate agent who makes the promise to repay, and he alone can be sued for it.

If the estate agent receives the deposit ‘as agent for the vendor’ (having actual authority on that behalf) then it is the vendor who make the promise to repay. The agent must hand it to the vendor on demand; and the vendor alone is liable to return it. If the estate agent receives the deposit, without saying in what capacity he receives it, it is his duty to hold it pending the outcome of the negotiations. He must not hand it over to the vendor. When the negotiations break down, he must return it to the purchaser. The purchaser can sue the estate agent for money had and received which is based on an imputed promise to repay.”

In this case the agent handed the money over to the vendor. Hence it would be correct to say that the purchaser can sue the vendor/complainant for money had and received which is based on an imputed promise to repay. The inference is irresistible that the complainant received the money as vendor hence if the contract was not concluded, the defendant’s money would have to be returned to him. There was no agreement whether the money was for rent or part payment of the house and so it had to be refunded.

I regard the K5000 paid by the defendant to Boi Boi Real Estate as akin to the deposit referred to by Lord Denning. Those monies have rightly been returned to the defendant by way of a court order to that effect. What is not returned is the K18, 000?

One observation made by the court is that in a letter dated 15 December 1999 sent to the defendant by the complainant’s previous lawyers, an offer was made to treat the K18000 as part payment. The complainant’s lawyers then requested for the balance of K32, 000 and have the dispute resolved. The defendant it seems did not reply to that letter or has not taken up the offer.  However in his affidavit sworn on 12 April 2000 the defendant deposed that he has waited all these time to pay the balance and own the property by getting the title transferred to him.  There appears to be some falsehood in that affidavit. I am not in a position to ascertain the truth or otherwise of the above assertions.

The real issue here as I see it is what will become of the K18000 accounted to the complainant. There is irresistible inference that nobody in his right mind would spend that much money towards advance rental instalment as is claimed by the complainant. A prudent man would rather use that kind of money to buy a reasonable size property. Therefore I am not convinced by the complainant’s version that that K18000 was for advance rentals.

At the hearing the court was advised that the complainant has been granted a lease under the Land Act Ch. No. 185, and that it had been registered as a lessee of this property under Land Registration Act 1981. He is now in a position to take ejectment proceedings under the Summary Ejectment Act Ch. No. 202.

Another observation is that the complainant has neatly apportioned the K18000 as rental payment over a period of 18 months with K1000 per month. And yet the complainant was unable to show to this court any documentation to this effect. For instance payment details, receipts etc. I am more inclined to believe that the sourcing of those details were within the power of the complainant however they were not produced. Boi Boi Real Estate is Port Moresby based and not too difficult to contact to make available those payment details. It may well be that from the time the house was given to the agent to manage, the complainant was not entitled to possession and hence was not entitled to any benefits accruing from that deal. Hence the more reason for him to keep distance until he has been granted the lease on 14 October 1999.

The complainant’s affidavit sworn on 12 April 2000 deposed that Patterson Lawyers, in a letter to the defendant dated 14 December 1999 claimed that their client was authorised by National Housing Commission to rent the property. However they have failed to produce that “ authorisation” to court for reasons only known to themselves. In the absence of that letter of authorisation we can now easily infer that up to 15 December 1999 or earlier than that the complainant had not ostensible authority to lease the house to third parties. Any and all monies derived from those transactions rightly belong to the National Housing Commission. And rightly so National Housing Commission embarked on recovery proceedings to collect all monies, which were due to them at the material time.

As to the nature of the interest held by the defendant since taking up possession, that interest at law is akin to a tenancy at will. The complainant has referred this court to the case of Regione v Palms Tavern Pty Ltd 1988-89 PNGLR 150. In that case the court held that where lease is duly determined, the bringing of proceedings constitute re-entry. In the case before me there is no lease therefore no clauses of re-entry upon breach is contained. Also since there is no lease one cannot possibly say at what point in time will it be determined.

In the absence of any evidence to show that National Housing Commission had authorised the complainant to rent the property, this court will disregard this assertion. As such from 27 July 1997 to 13 October 1999 the complainant had no title over the property and was therefore not entitled to collect any rent at all from prospective tenants. Any and all rent derived from the rent of the property must rightly go to National Housing Commission.

Furthermore the complainant’s claim of subjecting the property to rent with the real estate agent must also be disregarded. The agent’s letter in response to National Housing Commission enquiry dated 14 February 1998 makes no reference of the complainant’s wish to rent. All references are directed towards the complainant with powers to sell to the defendant and receipt of K5000 as 10% for the sale price of K50, 000. I am more inclined to believe the defendant’s version that the house was offered to him for sale by the real estate agent on behalf of the complainant.

Next is the question of the refund of K5000 deposit fee to the defendant after almost 13 months in waiting. (27-7-97 to 21-10-98). The complainant maintains that the refund confirms that the purchase arrangement is now terminated and not in existence. That assertion seems to be the most logical one under the circumstances. The offer made by the complainant comes to an end and all obligations associated with it are likewise terminated as a result of lapse of time.

As to the remaining K18, 000 there is no doubt that the complainant must account for it. In the case before me the agent dealt with the deposit and accounted to his principal for it, despite the contract yet to be fully confirmed. I find this to be a case where the complainant is liable for the money given to him by the defendant.

Next is the question of rent. Who is liable to pay rent and at what rate and who is entitled to collect such rent?  As I mentioned above if any rent is due it must be paid to National Housing Commission up to the time a lease was registered on behalf of the complainant (21-10-99). This transaction is an estate contract hence there is evidence before me of an offer made to the defendant. This offer was made about 14 months after the K5000 was refunded to the defendant as a result of a successful court order. I might add here that the offer was made despite the termination of the purchase agreement. Needless to say no acceptance was recorded by the complainant, despite the defendant’s assertions that numerous attempts were made to contact the complainant to sort out some outstanding matters. I am not convinced that the defendant was totally left in the dark until contacted by the complainant to serve him his letter and court summons. I say this because the real estate agent’s letter dated 4 February 1998 bears carbon copies to the complainant and defendant. I am convinced that both parties were aware of what was going on all these years.

Despite the defendant’s claim of willingness to make final settlement there is no evidence to support his claim. No attempt was made to at least pay in some money or file an acceptance to the complainant’s offer.

The end result is that the complainant’s claim of putting up the property for rental and the defendant’s claim of a purchase arrangement have not been made out. Both claims must therefore fail. The defendant’s relief is the return of the balance of any monies owing to him after his rental obligations are met and the complainant’s relief is possession of his property from the defendant.  The complainant has computed the rent to be at K250 per week. I am not certain if that was the same amount he paid to the National Housing Commission. In the absence of any evidence to that effect   I am more inclined to settle on a standard rate of rentals for three bedroom houses within the same locality. Standard government rates range between K75-K125 per fortnight or K150-K250 per month. Based on these figures I consider K250 per month to be a more realistic rental and will apply it in this case. Rental computation is as follows: - From 27 July 1997 to 1 May 2000, a total of 45 months at K250 = K11, 250.00. Balance remaining is K6750.00

In view of the issue of the lease to the complainant, the defendant has taken exception to the complainant’s application for and subsequent grant of a lease. In accordance with Section 21 (4) (f) District Courts Act as amended, this court has no jurisdiction to resolve this issue. I will make no further orders save to say here that the production of a lease document is prima facie good for all purposes unless a better title is produced. The complainant’s title to the land is bona fide good and is indefeasible unless fraud is pleaded.

I make orders in the following terms:

N1>(1)      The complainant repays the defendant the sum of K6750.00 as unused rental monies.

N1>(2)      The defendant to give up vacant possession to the complainant as soon as the said K6750.00 is refunded.

N1>(3)      Terms 1 and 2 to be concluded within one month as from today. Failing that no further rent will be paid and collected by both parties until full satisfaction of these orders.

N1>(4)      Both parties to pay its own costs.