Investment Corporation of Papua New Guinea v Clean Away Ltd [2005] PGDC 122; DC367 (11 November 2005)

DC367

PAPUA NEW GUINEA
[IN THE DISTRICT COURT OF JUSTICE]

CASE NO 497OF 2005

BETWEEN

Investment Corporation of Papua New Guinea
Complainant

V

Clean Away Limited
First Defendant

Yoronu Paia & Others
Second Defendant

Port Moresby: Gauli, Apm
2005: July 01st, 14th; August 18th, 31st
September 14th, 30th; October 24th
November 04th, 11th

Counsel
For The Complainant: Mr Billy Pidu of Stevens Lawyers
For The Defendants: Mr L. Kari of PNG Legal Services Lawyers

DECISION OF THE COURT

GAULI, APM: The complainant brings this action pursuant of section 6 of the Summary Ejectment Act chapter 202 to evict the Defendants from the property described as section 146 Allotment 29, Tokarara (Hohola), National Capital District. The complainant is seeking orders to evict the defendant for the reasons that:

1. The defendant has breached the lease agreement

2. The period for the lease had expired

3. The property had been sold to Mr. Patrick Kiap.

The section 6 of the Summary Ejectment Act states and I quote:

"6 Recovery of premises held without right, etc

(1) Where a person without right, title or license is in possession of premises the owner may make a complaint to a magistrate of a District Court to recover possessions of the premises, and the magistrate may issue a summons in the prescribed form to the person in illegal occupation.

(2) Where a person summoned under subsection (1) –

(a) does not appear before the District Court at the time named in the summons; or

(b) appears and does not show reasonable cause why possession of the premises should not be given, the court may or proof of the matter of the complaint, issue a warrant directed to a member of the Police Force requiring him on or before a day specified in the warrant –

(c) to enter may, by force and with assistants if necessary, into the premises; and

(d) to give possession of the premises to the complainant."

By this provision, the complainant must establish that the defendant is in possession of the premises illegally or without right, title or license

Brief Facts

The undisputed facts are these. On the 1st of November 1999 the complainant and the defendant entered into a Lease Agreement for the property described as Section 146 Allotment 29 Hohola (Tokarara), National Capital District. The term of the lease is for five (5) years on a monthly rent of K400.00 which is payable in advance on the first day of each month. The expiry date of the Lease was the 31st October 2004.The complainant was issued the State Lease on 11th August 1977 for the said property.

On the 10th January 2005 the subject property was put up for sale by public tender on the daily newspapers. Number of interested bidders tendered their bids including the defendant whose bid was K80 000.00. The successful bidder for the tender was Mr. Patrick Kiap whose bid was K120 000.00. And Mr. P. Kiap already made a 10% deposit with a sum K12 000.00 by bank cheque on 8th March 2005, cheque number 406511. He also paid K4 800.00 to the Revenue Commission for the stamp duty on the 06th June 2005 on a bank cheque number 439722.

The defendant is still in possession of the premises even after the expiry of the lease and the property been sold to another person.

The facts in dispute are as follows. That the defendant was not given the right of first refusal as per the CLAUSE 10 (a) and (b) of the Lease Agreement. That is that the defendant was not given the first opportunity to purchase the property by reasons that his lease was still current and that he has carried out repairs and maintenance on the property that costs about K28 000.00 which costs were to be deducted from the rentals or from the proceeds of the sale of that property. And that the defendant was in breach of the Lease Agreement by failing to pay rentals on the due dates.

The Issues:

The followings are the issues this court is to consider.

1. Whether the defendant was in breach of the Lease Agreement

2. Whether the property was put up for sale by public tender during the currency of the Lease Agreement

3. Whether the defendant has expanded its own funds on the renovation of the property.

4. Whether the defendants’ expenses on the renovations have extended the period of the Lease Agreement.

5. If the defendant had incurred the costs on renovations, is he entitled to reimbursement?

6. Whether the defendant has the right of first refusal

The Evidence

The complainant relied on the affidavits evidence of Mr. Kiyali Kalik. He was examined on oath. The council for the complainant decided to disregard the affidavits of the other witness.

The defendant also decided to rely on the affidavit of the witness Mr. Grey Pisimi’ and disregard the other witnesses’ affidavit. When the Court began to hear the defense case on 31st August 2005, the council for the Complainant consented to accept the affidavits of the witnesses, Mr. Greg Pisimi and June Atopare and he decided not to cross-examine these witnesses. Their affidavits were tendered by consent. Both councils then tendered their written submission to the Court.

I will consider their evidence as I discuss the issues as follows:

Issue 1. Whether the Defendant was in breach of the Lease Agreement.

The evidence for the Complainant as deposed by the witness, Mr. Kulyali Kalit in his affidavit that since taking possession of the property the Defendant failed to pay the monthly rents of K4,000.00. As a result a Notice of termination was issued to the Defendant in the year 2001. The Clauses 2 and 7(a) of the Lease Agreement required the Defendant Tenant to pay the rent on due date. Defendant’s failure to pay the rental on due dates was in breach of these terms of the Lease.

The Defendant however, gave evidence through the witness, Mr. Pisimi that the ANZ bank cheque was raised for a sum of K2, 000.00 covering the payments for the months of November 1999 to March 2000. Then another ANZ bank cheque valued K2, 400.00 was made out for the months of April to September 2000. I am satisfied that the first cheque payment of K2, 000.00 was made. The second alleged payment of K2, 400.00 refers to a "Draft Application." The Defendant did not produce the copy of the actual cheque raised except the Draft Application. I could not be convinced that the second payment was raised. There were no further payment records or even shown by the Defendant thereafter.

The evidence of June Atopare, the former Managing Director of the Defendant Company, confirmed the evidence of witness Greg Pisimi without producing copies of any cheque payments. This witness claimed that the Complainant was refusing to accept the bank cheque payments for unknown reasons. By a letter dated 23rd November 2000, Mr. Yoronu Paia, the Director of the Defendant Company to the Complainant admitted that the Defendant had outstanding arrears due while carrying out renovations on the property. That letter is annexed to June Atopare’s affidavit. Again a letter by June Atopare to the Complainant dated 28th November 2000 enclosed a bank cheque payment of K1, 2000.00 for the months of September, October and November 2000. This clearly shows that this payment was not in compliance with the Clauses 2 and 7 of the Lease Agreement. The payment was not made in advance at all.

From the evidence as presented by the parties, I find that the Defendant has breached the Lease Agreement in that it was not making advance payments. Under the Lease, the payments were to be made on the first day of each month which the Defendant has breached.

Issue 2: Whether the property was put up for sale by Public Tender during the currency of the Lease Agreement.

The evidence for the Complainant is that the five year lease expired on 30th October 2004. The tender notice was published in the National Newspaper on the 10th January 2005 just over two months after the Lease expired.

The Defendant did not dispute that the property was put up for sale after the expiry of the Lease. The Defendant’s only argument is that the Defendant had carried out maintenance and repairs to the premises to a value of about K28, 000.00. The Defendant therefore claims that they have the right to remain on the premises till the total of the renovation work done on the premises is fully utilized. They claim that if a sum of K28, 000.00 divided into the annual rental of K4, 800.00, they would remain on the property until August 2005.

The Defendant’s right to possession of the subject property is based on the terms of the Lease Agreement itself. The parties to the Lease must be guided by the Lease itself unless both parties have agreed to amend or vary certain parts of the Lease. The view of the Defendant to extend the period of the Lease in satisfaction to their expenses on the renovation was not in the terms of the Lease.

The Clause 9 of the Lease provides for the "Option to Review Lease." If the tenant desired to renew the lease for the further term from the expiration of the term of the Lese, the Tenant is to give not less than one month’s notice to the Landlord in writing so long as the Tenant has dully and punctually paid the rent. There is no evidence that the Defendant had given such notice to the Complainant.

The Clause 8(b)(ii) of the Lease required the landlord to carryout reasonable repairs to the Tenant’s ordinary use and occupation of the premises. And the Clause 10(b) of the Lease provided that where the landlord is not able to carry out general maintenance of the premises the Tenant may use its own funds to carry out repairs and the costs of the maintenance shall be reimbursed. And that all monies owing to the Tenant shall be deducted from the agreed purchase price. The Clause 10 of the Lease applies only when the Lease is still current.

I find that when the five year Lease term expired on the 30th October 2004, and the option to review the lease under Clause 9 was not done for an extension of the Lease beyond the agreed expiration of the Lease. I am satisfied that when the Complainant put up the property for sale by tender on the 10th January 2005, the Lease Agreement has already expired.

Issue 3: Whether the Defendant has expanded its own funds on the renovation of the property.

The Defendant provided evidence that they expanded their own fund and carried out renovations on the premises at a cost of almost K28, 000.00. The witness June Atopare stated that the cost of the renovations came to K25, 659.93 while witness, Mr. Greg Pisimi said it was K27, 384.44. He provided the list of materials and tools purchased as shown in EXHIBIT "E". However, there are no receipts of the purchase of these items been attached, nor is there evidence that the Defendant had engaged a contractor who carried out the renovations to verify the exact cost of the renovation done on the property.

The Complainant did not challenge this issue to any dept. The Complainant only argued that allegation of renovation is a matter that can be dealt with by the parties by other means. I am not convinced by the Complainant’s argument at all.

When the Defendant had earlier expressed in 1999 of their interest to either rent or purchase the subject property, the Complainant stated that the property had not been maintained and it requires a lot of maintenance so they were intending to dispose it in a near future. At about that time the property was valued about K35 000.00 to K40 000.00. However, by January 2005 the value sky rocketed to K120 000.00. And the defendant claimed that the value had increased because the defendants have carried out maintenance that has improved its value.

Although the defendant did not provide strong evidence to support that they have actually spent close to K28 000.00 on maintenance of the property, I am satisfied that whatever amount the defendant has expanded had tremendously increased the outlook of the property and its value. And I find that the defendant had expanded its own funds on renovations of the property though the amount actually expanded may have been less than what they claim to be.

Issue 4: Whether the defendant’s expenses on the renovations have the period of the Lease Agreement.

I have already touched on this Issue when discussed the Issue 2 above. That is that the parties to the Lease Agreement are guided by that agreement, unless of course both parties have agreed to amend or vary certain parts of that agreement. One of the parties cannot on his own choice do what he pleases to do. That would be seen that part to be acting in breach. And the other party could sue for damages.

The CLAUSE 9 of the Lease gives the Tenant/Defendant the option to review the Lease. That option can be acceptable to the landlord so long as the Tenant has been keeping up with his monthly rental payment. The defendant gave no notice either in writing or otherwise to exercise his right given under Clause 9 of the Lease.

The CLAUSE 8 (b)(ii) of the Lease required the landlord to carry out reasonable repairs. If the landlord could not perform repairs on the property the CLAUSE 10 (b) allowed the Tenant to expand his own funds and do renovations to the property. The property was in desperate need of repairs at the time the defendant took possession of the property. The complainant then drew up the scope of work for the repairs to be done but the complainant failed to expand their funds on it. And so the defendant took up himself and carried out the maintenance.

However there was never any agreement made by the parties either on the Lease itself, nor was there supplementary Lease to amend or vary the original Lease that extended at the period of the Lease beyond the original period of the Lease. The defendant has failed to satisfy this court that his expenses on the renovation had extended the period of the Lease. And I could not be satisfied that the Lease period was extended beyond 30th October 2004.

ISSUE 5: If the defendant has incurred costs on renovation, is he entitled to reimbursement

From the evidence as presented before this court and the findings I have so far made in discussions on Issue 3 above, this court is satisfied on the balance of probabilities that the defendant had incurred the cost in maintenance. However the exact amount expanded could not be ascertained without the receipts of the purchases of the material listed in the EXHIBIT ‘E’’. Once the exact amount is verified, the total amount expanded could be deducted from the total unpaid rentals and the balance could be refunded to the defendants, as this is provided by the CLAUSE 10 (b) of the Lease.

The EXIHIBIT ‘E’ shows the defendants total expenses on the purchase of the materials used for carrying out the repair work, to a total sum K27 384.44. From this total cost a sum of K16 441.62 was for the purchase of a good number of tools and charges for 10% VAT, 30% interest and labour hours. Only a sum of K10 942.82 was for the cost of materials, including timber, nails screws, paints, tiles, locks and so forth. In view of these expanses I would have my reservations whether the defendant should be entitled to some reimbursement, however that should be considered before the appropriate forum since the complainants rental arrears and defendants claim of expenses far exist the jurisdiction of the District Court.

ISSUE 6: Whether the Defendant has the right of first refusal.

The CLAUSE 10 (a) of the Lease Agreement stated that in the event the landlord intends to sell the property, the landlord shall first make the offer for sale to the Tenant. And that offer for sale shall remain for a period of three months from the date the offer is communicated. The offer can only be made to the public after the expiration of the three months if the Tenant or the lessee does not accept the offer to purchase the property.

If the lessee accepts the offer then the landlord is to submit to the Tenant the agreement containing the terms and conditions. And if the tenant fails to accept the agreement nor pay the required deposit to the landlord within the three months then the offer is deemed to have been refused.

The evidence for the complainant is that in the year 2001 the complainant issued the defendant the termination notice when the defendant was in breach of the rental payments. The defendant however expressed their interest to purchase the property so the eviction proceedings did not proceed. On 27th April 2004 the complainant’s lawyer, upon instruction wrote to the defendant to provide them the detail amount the defendant wish to offer so that a contract or sale could be prepared. However the defendant never made the offer of the amount of money they intend to purchase the property. And eventually the period of the fiver year lease lapsed on 30th October 2004. Then on the 10th January 2005 a public tender was made for the sale of the property.

The defendant’s evidence is that they were never given any advise by the complainant of the offer to purchase until the tender was advertised as per the evidence of June Atopare. The witness Greg Pisimi gave evidence that while they were organizing the funds to purchase the property, the complainant had a new management who was refusing to accept bank cheque payments and returned the cheques.

The evidence of June Atopare contradicted the evidence of Greg Pisimi. I find that the defendant did receive the letter from the complainant requiring the defendant to offer their price while the defendant was organizing their finance, they failed to offer their price and the three months period had expired. And by the provision of the clause 10 (a) of the lease the offer was deemed to have been refuse by the defendant. As a result the complainant proceeded to public tender for sale well after the five years of the lease period had expired.

Further more there is no evidence to prove that the lease was extended before the expiration of the original period of the lease. Under these circumstances I find that CLAUSE10 does not apply and the defendant could not rely on it after the five year lease had expired. The defendant therefore does not have the right of first refusal under clause 10 (a) of the lease.

Having considered the whole of the evidence as presented before this court, I find on the balance of the probabilities that on the expiration of the five year lease period on the 30th October 2004, the possession of the property by the tenant/defendant thereafter was without right, title or license pursuant to section 6 of the Summary Ejectment Act.

I also consider section 3 of the Summary Ejectment Act. This provision is very relevant to the present case. That provision state as follows-

"3 Proceedings for possession on determination of lease

(1) Where –

a. The term or interest of a lease of premises held by him has ended or has been dully determined, and

b. The lease, or......a person by whom the whole or part of the premises is then actually occupied, neglects or refuses to quit or deliver up possession of the premises or of the part of the premises, as the case may be; the lessor of the premises may make a complaint to a magistrate of a District Court against the person for the recovery of the premises, and the magistrate may issue the summons in the prescribed form to that person.

(2) Where the person to whom the summons is directed under subsection (1) –

a ...........

b appears and does not satisfy the court that here is

reasonable cause why he should not give possession of the premises or of the part of the premises of which he is then in possession, and still neglects or refuses to deliver up possession of the premises ....... of which he is then in possession, then on proof of the matter of the complainant the court may order him to deliver up possession of the premises....... to the complainant wither immediately or on or before a day named in the order."

Although the present proceeding were brought under section 6 and not under section 3 of the Summary Ejectment Act, I consider that the provision of section 3 of the Act are applicable since in both these provisions the proceedings they all speak of one common denominator, that is for eviction.

It was held in the case of REGIONE –V- PALMS TARVERNS PTY LTD 1988-89] PNGLR 150, of which facts are similar to the present case, His Honour Justice Bredmeyer held that:

"Where a lease contains a clause allowing the landlord to re-enter for breach of a covenant and where the breach is complete, because the bringing of proceedings for possession is equivalent to actual entry, it amounts to due determination of the lease and brings those proceedings within the jurisdiction of the District Court under S. 3 (1) (a) of the Summary Ejectment Act."

The complainant has proven his case that the defendant’s lease had expired and that he is till in possession of the premises. I considered the reasons alluded by the defendant of the continuous possession of the premises to be unreasonable as his continuous possession where not in accordance within the terms of the lease.

Accordingly this court makes the following orders:

1. That the defendant or his agents, associates or whosoever to vacate the premises namely section 146 Allotment, 29 Hohola (Tokarara) National Capital District within 14 days of this order and to deliver up the keys and the premises to the complainant.

2. That the defendant or his agents or associates or whosoever otherwise are restrained from causing any damages or interference to the said property.

3. That the defendant, his agents or associates or whosoever are restrained from interfering with access to the Complainant Corporation or its agents or representative.

4. That there can be costs for the complainant.

5. That a warrant of eviction be issued against the defendant or their agents or associated or whosoever otherwise on failure to vacate after the expiry of 14 days.

I make no other for the rental arrears and or the re-imbursement of the defendant’s expenses incurred on renovations of the premises. These claims are to be brought before the appropriate forum since the amounts involved are outside the jurisdiction of the District Court.

Mr. Billy Pidu for the complainant
Mr. L. Kari for the defendants