PNG Law Reports 1995
[1995] PNGLR 129
N1390
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
JAY MINGO PTY LTD
V
STEAMSHIPS TRADING PTY LTD T/A
STEAMSHIPS PROPERTY DIVISION
Lae
Sevua J
18 August 1995
8 December 1995
REAL PROPERTY - Lease of commercial property - Approval of certain dealing - Dealing of no effect untill ministerial approval obtained - Lease not approved - Possession given and taken - Effect of lack of approval - Whether defendant can rely on s 69 of Land Act Ch 185 - Lease contains clause - “pending three - 3 - year lease agreement stamp.”
LANDLORD AND TENANT - Commercial lease agreement - Approval by Minister not obtained - Effect of lack of approval - Possession given and taken - Estoppel - Specifies performance.
EQUITY - Estoppel by acquiescence - He who comes to equity must consult clean hands.
Facts
The parties through their respective agents agreed to a 3 year lease at a monthly rental of K5,000. The agreement was not sealed with their common seal. Sixteen months after the commencement of the lease the lessor served a notice of termination on the lessee to who successful applied for an interim injunction to prevent his repossession. The former claimed that the lease was void for a number of reasons including, absence of ministerial approval, non compliance with Stamp Duties Act absence of company’s seal.
Held
1.       The agent of the lessor by virtue of the position he held in the company had ostensible authority to sign the agreement on its behalf.
2.       The defendant by allowing the lease to continue and receiving rents therefrom was estopped from asserting that the lease was invalid.
3.       Notwithstanding s 69 of the Land Act (unapproved lease is ineffective) possession and payment of rent by the tenant creates an estoppel.
4.       The duty to comply with the Stamp Duty Act is on the landlord (defendant) at it is unfair and unacceptable for it to rely on breach of its obligation.
Cases Cited
Papua New Guinea cases cited
McCosker and King v Kuster [1967 -68] PNGLR 182.
Ningiga v Koavea [1988-89] PNGLR 312.
Re: Luabar Logging Pty Ltd [1988] PNGLR 124.
Other cases cited
Discount & Finance Ltd v Gehrigs NSW Wines Ltd & Anor.(1940) 40 SR (NSW) 598.
L’estrange v F. Graucob Ltd [1934] 2 KB 394.
Parker v South Eastern Ry Co. 2 CPD 416.
8 December 1995
SEVUA J: The plaintiff in its originating summons filed on 13 July 1995 sought certain declaratory orders, injunction, specific performance and other ancillary orders. 
The facts which are not really in dispute are as follows. The parties executed an agreement entitled “Commercial Lease Agreement” on 11 February, 1994 following certain negotiations. The agreement was for a duration of three years from the first day of occupation at a monthly rental of K5,000 payable in advance. On 16 June, 1995, the plaintiff received a letter from the defendant dated even date, wherein the defendant gave notice to the plaintiff to give up possession of the property. On 4 July, 1995, the defendant forwarded another letter to the plaintiff reiterating that vacant possession was required by 16 July, 1995. The plaintiff, fearing its rights under that agreement was in jeopardy, instituted these proceedings against the defendant on 11 July, 1995. On 12 July 1995, this Court granted an interim injunction against the defendant so that the plaintiff was not evicted until final disposition of the substantive issues.
Let me refer, if only briefly, to the lease itself. The lease was executed on 11 February, 1994 by one Judith Gama and Dixon Mane on behalf of the respective parties without the common seal of each party. It, is drawn on the defendant’s letterhead and entitled “Commercial Lease Agreement.” At the end of the numbered clauses, and before the signatures of the parties at the foot thereof, is this clause: “For record purposes kindly acknowledge the approval to the above terms and conditions by signing the notation at the foot of the agreement and return one copy as formal acceptance to the owners ------------ do hereby formally agree and accept the conditions and terms of this agreement as set out above (‘pending three - 3 - year lease agreement stamp’)” (my emphasis). Sometime after the date of execution the monthly rent increased to K5,150.00. Therefore, from the date of commencement to 16 July, 1995, the defendant had enjoyed a handsome monthly rental for 16 months which exceeded K80,000. Suffice it to say, none of the issues raised by the defendant in the trial were ever raised. 
Mr Daniels counsel for the plaintiff contented that there is a valid and enforceable lease and the defendant is estopped from raising the issue of Dixon Manes’ lack of authority in binding the defendant. Mr Daniels therefore submitted, his client was entitled to the remedies sought.
Mr Poka for the defendant has raised certain points of law which can be deciphered as follows: Firstly, the agreement was a condition precedent to a purchase by the plaintiff. Secondly, the agreement was merely a “letter” subject to a formal lease and subsequent ministerial approval, therefore invalid and of no effect. Thirdly, Dixon Mane had no authority to execute the agreement on behalf of the defendant, therefore the agreement is not binding on the defendant. Fourthly, s 3 of the Statutes of Fraud and Limitations Act invalidates the agreement. And, finally, s 19 of the Stamp Duties Act was not complied with. As Mr Poka puts it, the defendant relied on McCosker & King v Kuster [1967-68] PNGLR 182 and Re: Luabar Logging Pty Ltd [1988] PNGLR 124. However, in my view, these authorities do not support the defendant and it seems to me that in placing reliance on these cases, the defendant had dug its own grave.
Let me analyse the defendant’s arguments by commencing with its third submission i.e. that Dixon Mane had no authority to execute the agreement on behalf of the defendant. In his affidavit sworn on 21 July, 1995, the defendant’s National Property Manager in Port Moresby, Mr Gordon Walsh said in paragraph two “On 11 February 1994 a letter setting out various terms regarding a lease agreement was signed on behalf of the applicant. The person who signed for the respondent is Dickson Mane who is an employee of the respondent but not a person who can sign for the respondent. The only person who can sign a lease agreement on behalf of the respondent is its managing director, who at present is Mr David Copland.” Be that as it may, neither Mr Walsh nor Mr Copland had raised this issue at all during the 16 months the defendant was enjoying the financial benefits from the plaintiff by virtue of the monthly rent. Mr Walsh especially knew of this arrangement because he deposed to in paragraph three of his affidavit that “during the period prior to 11 February 1994 and from 9 March 1994 discussions took place between Judith Gama and myself.” He certainly was aware of the existence of this lease, for in his letter of 24 August, 1994 to the plaintiff, he referred to arrears in rent. If Dickson Mane had no authority to execute the lease on behalf of the defendant, why didn’t Mr Walsh or Mr Copland terminate or rescind the agreement?
The defendant in its dealing with the plaintiff prior to executing the lease, had been represented by both Messrs Mane and Walsh. In my view, Dickson Mane, as branch manager of the defendant, had implied authority, (if not expressed), to deal with this matter in the manner he did. He was the branch manager so he must have possessed some kind of authority to deal with the defendant’s properties in Lae. I consider he had authority to execute the lease on behalf of the defendant. This Court will not assume that Dickson Mane had no authority or acted without authority or he misrepresented any fact or fraudulently entered into the contractual arrangements on behalf of the defendant. As I alluded to earlier, the defendant had enjoyed 16 months of financial benefits. It knew that this lease was in existence. Indeed, by his own admission in his affidavit referred to earlier, Mr Walsh adverted to that fact. The defendant could have rescinded the agreement soon after 11 February, 1994. It didn’t, and now says the lease is of no effect.
In my view, the defendant cannot back paddle now. There is no basis for the assumption that Mr Mane’s action amounted to fraud or misrepresentation. I consider that at the material time, Mr Mane had authority to sign on behalf of the defendant, after all, he was the defendant’s branch manager therefore in a position to execute the agreement on behalf of the defendant. I would accept Mr Daniel’s submission that Dickson Mane had ostensible authority to sign on behalf of the defendant. In L’estrange v F. Graucob Ltd [1934] 2 KB 394 at 403, Scruthon, LJ said, “when a document containing contractual terms is signed, then in the absence of fraud or, I will add, misrepresentation, the party signing it is bound and it is wholly immaterial whether he has read the document or not.” That case applied the law laid down by Mellish LJ in Parker v South Eastern Ry Co. 2 CPD 416 at 421: “In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents.” I adopt these statements of law here.
Furthermore, I am of the opinion that the defendant is estopped from denying the validity of the lease on the basis that certain principles of estoppel apply in the present case. The general categories into which fall all the principles of estoppel were summarized by Jordan CJ in Discount & Finance Ltd v Gehrigs NSW Wines Ltd & Anor. (1940) 40 SR (NSW) 598 at 602-3: “There are various types of estoppel. There is estoppel by deed, which, in any action on a deed, prevents a party to it from disputing any distinct allegation of fact which he has made in it: Norton On Deeds, 2nd ed. 211-15. There is common law estoppel, which, if a person does an act, effecting someone else, which he is entitled to do only if a certain state of things exists, prevents him from asserting, as against the other, that when he did it, that state of things did not exist: Franklin v Manufacturers Mutual Insurance Ltd (1935) 36 SR (NSW) 76 at 80-2. There is estoppel by representation which prevents a person who, by a representation of fact, has led another to alter his position, from denying that the fact is as represented: ibid. There is estoppel by judgment, which prevents every party to the litigation in which the judgment was given from questioning in anyway, in any subsequent litigation between himself and another party to the litigation, anything decided by the judgment. Ex parte Amalgamated Engineering Union; Re Jackson (1937) 38 SR (NSW) 13 at 17, New Baunswick Railway Co. v British and French Trust Corp Ltd [1939] AC 1. In all these cases, estoppel is a rule of evidence which, in the given circumstances, prevents a person from denying or asserting, as the case may be, the existence of some fact, irrespectively of whether it really exists. There is also equitable estoppel by acquiescence, which prevents a person, who has knowingly permitted another to act, through mistake, to his own detriment and to the advantage of the former, from profiting by the other’s mistake. Ramsden v Dyson LR 1 HL 129 at 168; NSW Trotting Club Ltd v Glebe Municipal Counsel (1937) 37 SR (NSW) 288 at 308.”
I consider that the present case touches on estoppel by deed, therefore, it becomes necessary in my view, to consider whether there is to be found in the agreement a statement of fact by the defendant that Dickson Mane did not have ostensible authority to execute the lease, or that, only the defendant’s managing director can sign the lease as asserted by Mr Walsh. In my view, if the defendant is to be bound by estoppel by deed, it must establish firstly, that in the agreement, there exists a precise and unambiguous statement of fact in dispute and secondly, such a statement was made by it. It is not sufficient to point to the lease and the fact that Dickson Mane signed it on behalf of the defendant and infer from such fact that he had no authority to bind the defendant. If the defendant says that the execution of the lease by Dickson Mane was a mistake since he had no authority then I consider that equitable estoppel by acquiescence would apply as well. In my view, the defendant by its own conduct, in allowing such an “invalid lease”, as it now claims, to continue by reason of Dickson Mane’s lack of authority, had consented tacitly to such “invalidity” and it is therefore estopped from claiming or asserting that the lease is invalid or of no effect. This in my view, is tantament to equitable estoppel by acquiescence.
For these reasons, I consider that, at the time Dickson Mane executed the lease, he had ostensible authority and by his signature, bound the defendant to the lease.
The defendant’s first argument can be disposed of easily. There is reference to an option to purchase by the plaintiff. Both Mr Walsh and Ms Gama alluded to this in their respective affidavits. The defendant say the lease was entered into on the basis that the plaintiff had agreed to purchase the property, ie, the defendant says, it was a precondition of granting the lease that the plaintiff enters into a contract to purchase the property. 
Mr Walsh, in his affidavit (paragraphs 4 and 5) has referred to the lease being conditional upon a contract of sale as adverted to before. Despite his discussions with the plaintiff prior to and subsequent to 11 February, 1994; it is evident that there is to be found no clause in the lease relating to this aspect. Annexure “B” to his affidavit is a letter from the plaintiff which suggests that he was in Lae the week preceding 9 March, 1994 and had offered the plaintiff an option to purchase. However, this was after the lease had been executed. It seems that the option to purchase, which I find, was discussed by the parties, is a collateral issue, however, I find nothing in the lease which stipulates that the granting of this lease was subject to or conditional upon the purchase of the property by the plaintiff. If it indeed were, the defendant had failed to incorporate this option in the lease so as to form part of the agreement. In my view, the defendant cannot rely on this argument because it was not part of the terms and conditions of the lease.
I consider that this aspect can be distinguished from the same issue raised in Ningiga v Koavea [1988-89] PNGLR 312. In that case, the lease contained a provision for an option to purchase which was infact clause 11. The plaintiff therein availed himself to that option consequently, the Court granted him specific performance. In the present case, I can find nothing in the lease as in Ningiga v Koavea (supra) therefore the defendant’s argument must fail.
There are two reasons I would dismiss this contention as mischievous. Firstly, despite the fact the Mr Walsh deposed to in his affidavit that he had held discussions with the plaintiff prior to and after 11 February, 1994, he had virtually done nothing to incorporate this option into the lease. He failed to instruct or direct, Dickson Mane to include the option to purchase as a condition of the lease as he now contends. I can find no provision in the lease which adverts to the option to purchase and I consider that this was not a condition precedent to the granting of the lease. Secondly, the defendant had done nothing to materialise this “precondition.” If indeed, the lease was granted as a precondition for purchase then, it failed in drawing up a contract of sale. Did the defendant expect the plaintiff to prepare the contract of sale? I cannot accept the defendant’s argument and reasoning on this issue and accordingly, I find that the granting of the lease by the defendant to the plaintiff was not conditional upon purchase by the plaintiff.
I have adverted earlier to the authorities which the defendant sought to rely on in this case. At this juncture let me discuss those authorities. In Re: Luabar Logging Pty Ltd (supra) the court held, “withstanding the provisions of s.69 of the Land Act, where the parties had acted on an unapproved lease and the tenant had gone into possession with the knowledge and approval of the landlord, the tenant was estopped from saying that the lease was of no force and effect.” I emphasise what His Honour Bredmeyer, J said at 126: “Despite the fact that this lease was not approved and the parties expressly stated in clause 9 that until such approval was obtained the lease was to be of no force and effect, neither side acted on that clause. The tenant went into possession and paid the rent and, on the landlord’s part, she allowed the tenant into possession and collected the rent. I consider that it is just that the tenant is now estopped from saying that the lease is of no force and effect.”
At the end of clause 12 of the lease in the present case, just above the signatures of the parties, is this clause, “pending three - 3 - year lease agreement stamp.” Although this clause does not expressly refer to ministerial approval, I consider it meant that this lease was required to be stamped. I reach this conclusion simply on the basis that only the minister or his delegate can stamp an approved lease once it is approved in pursuance of s.69 of the Land Act. In my view therefore, what that clause implies is that, this lease was for a period of three years and was required to be approved and stamped. I consider that to be the intention of the parties.
I consider that the situation here is the same as what Bredmeyer, J had referred to at 126 which I have cited above. The plaintiff herein took possession and paid the rent. The defendant permitted the plaintiff possession and collected the rent and might I add, whilst the defendant was collecting a handsome rent, it did nothing to question the validity or otherwise of the lease. As I have reached the conclusion that this lease was subject to ministerial approval, I consider on the basis of the authority cited, that the defendant is estopped from saying that the lease is of no force and effect. I have already alluded to the principles of estoppel which I consider applicable in the present case.
Having reached that conclusion I consider that the plaintiff’s second argument must also fail. One would be forgiven for accepting that the lease was merely a “letter” because it is contained in the defendant’s letter head. However, aside from the fact that the lease is copied onto the defendant’s letterhead, it is clearly and undoubtedly entitled, “Commercial Lease Agreement,” then it sets out the terms and condition. I presume this is a proforma lease copied from a tenancy agreement but suffice it to say, it was signed by both parties and in my view, their signatures manifested their intention to create a legally binding contractual relationship which is enforceable in a court of law. The defendant has acted on this lease by allowing the plaintiff possession. The defendant has enjoyed the financial benefits from this transaction for 16 months. Why should it turn around now and say, that the document was only a “letter?”. I find this argument quite unacceptable and very absurd. Given the scenario, the defendant’s argument is misconceived. I therefore find that, contrary to Mr Poka’s contention, the document he referred to as a “letter,” is a lease.
Mr Poka’s last two submissions relating to certain provisions of statutes can also be disposed of easily as well. His argument that s 3 of the Statutes of Fraud & Limitations Act Ch 330, invalidates the lease does not assist his client in anyway. That provision deals with leases exceeding three years and I cannot see how that can be invoked to assist his client.
Finally, I agree that s 19(1) of the Stamp Duties Act, Ch 117, requires that document shall not be used in any proceedings other than criminal proceedings, if it is not duly stamped, however, in my view, Mr Poka has overlooked subsections (2) and (3) which to my mind are quite important and they overcome the problem caused by non-compliance with ss (1). This section deals with unstamped instruments produced in evidence.
I consider that Mr Poka’s argument on this point is also misconceived for two reasons. First and foremost is that, his client, the defendant, was the lessor or landlord. Having agreed to lease its property to the plaintiff, the defendant was obliged to properly draw up a lease and have it stamped and approved. It had failed to do this and it is quite unfair and unacceptable for it to rely on this argument because it had miserably failed in its obligation. In my view, the plaintiff as the tenant or lessee would do anything in its power to assist the defendant/landlord in ensuring that the lease is properly and professionally prepared, executed, approved and stamped. It is quite absurd to tell the plaintiff in this trial that this statutory requirement has not been complied with.
Secondly, I consider that the non-stamping of the lease can be rectified by the utilization of ss.(3), that is, the lease can be received into evidence on payment of the sum of K50.00 and the appropriate level of stamp duty and I intend to give effect to that provision.
For the foregoing reasons, I consider that the plaintiff is entitled to the remedies it seeks from this Court on the basis that it has fulfilled its own legal and equitable obligations arising out of this agreement or lease. Apart from the non-payment of stamp duty which I find was due to the default of the defendant, I cannot say the plaintiff has come to this Court with unclean hands. “He who comes into Equity must come with clean hands” I consider that the conduct of the plaintiff in this transaction has not been improper that it’s seeking relief in equity should be refused. This Court will accordingly grant the relief(s) sought.
I therefore grant the following declarations and orders.
1.       I declare that the lease over Section 88 Allotment 4, Lae executed between the parties on 11 February, 1994 is enforceable against either party.
2.       I declare that the said lease is for a determinate period of three years coming from 11 February, 1994 and terminating on 11 February, 1997.
3.       I declare that the defendant’s notice dated 16 June 1995 is in breach of clause 1 of the lease.
4.       The defendant, its servants or agents are restrained from evicting the plaintiff until 11 February, 1 997.
5.       I order that the plaintiff pay the sum of K50.00 pursuant to s 19 (3)(a) of Stamp Duties Act, Ch 117.
6.       I order that the defendant fulfil its obligation by obtaining statutory approval.
7.       I order that the plaintiff pays stamp duty pursuant to s 19(3)(b) of Stamp Duties Act, Ch 117.
8.       I order that the defendant pays the costs of these proceedings to be taxed if not agreed upon.
9.       The order is abridged to the date of settlement which shall take place forthwith.
Lawyer for the plaintiff: Langtry Lawyers.
Counsel: S. Daniels
Lawyer for the defendant: Milner & Associates.
Counsel: D. Poka.