Pala v Cascades Apartments Ltd [2011] PGNC 260; N4436 (7 November 2011)

N4436

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 460 OF 2010

BETWEEN:

HON. ANO PALA, MP, MINISTER FOR JUSTICE & ATTORNEY GENERAL IN HIS CAPACITY AS ATTORNEY GENERAL FOR HIMSELF AND ON BEHALF OF THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Plaintiff

AND:

CASCADE APARTMENTS LIMITED
Defendant

Waigani: Thompson, AJ
Hearing: 4 November
2011: 7 November

JUDGMENTS AND ORDERS – application for entry of default judgment – defendant applying for extension of time to file defence – plaintiffs claim based on unenforceable lease agreement – grounds of – lease agreement entered between plaintiff and defendant contrary to Public Finance Management Act and Land Registration Act – statutory mandatory requirements not met - lease agreement is unenforceable and void ab initio – s 47 Public Finance Management Act, s 17 Land Registration Act

Cases Cited
Fly River Provincial Government v. Pioneer Health Services (2003) SC 705

Counsel
Mr. K. Iduhu, for the Plaintiff
Mr. P. Mawa, for the First & Second Defendants

DECISION

7 November, 2011

1. THOMPSON AJ: The Plaintiff is applying to enter default judgment, and the Defendant is applying for an extension of time which to file a Defence. The Plaintiff's claim is for a declaration that a Lease Agreement entered into between the parties is unenforceable, and a further claim for the alleged over-payment of rentals made pursuant to that Lease.
2. There is no dispute that the Defendant is in default of filing a Defence.
3. The basis of the Plaintiff's claim that the Lease is unenforceable, is that there are numerous irregularities in the execution of the document. The main objections are that the document failed to comply with the provisions of the Public Finances (Management) Act, and the Land Registration Act. The Defendant says that these breaches are minor and do not affect the validity of the document.

NON-COMPLIANCE WITH PUBLIC FINANCES (MANAGEMENT) ACT

4. The Lease was for proposed expenditure exceeding the statutory minimum, but it did not comply with Section 47 of the Public Finances (Management) Act. Section 47C and Section 47D say that such agreements are null and void and are not enforceable against the State. In its draft Defence, the Defendant has not refuted these pleadings, and has not produced any evidence in the supporting Affidavits which might refute these pleadings.
5. The Supreme Court in Fly River Provincial Government v. Pioneer Health Services (2003) SC 705 determined that the requirements of the Public Finances (Management) Act are mandatory, and where a contract is entered into in breach of those requirements, it is illegal, and is therefore null and void and unenforceable.

6. The Court also determined that a person dealing with the State or any of its arms or instrumentalities, is bound to comply with the requirements of the Public Finances (Management) Act and every person dealing with such institutions is deemed to be aware of those requirements.

7. Where an illegal contract is part-performed, an action for restitution is available, if not already paid for.

8. The Plaintiff has alleged that the lease document does not comply with the mandatory requirements of the Public Finances (Management) Act, and the Defendant has not produced any evidence to refute that. Non-compliance is not a minor matter which does not affect the validity of the lease document. Non- compliance renders the document illegal, and therefore null, void and unenforceable.

NON-COMPLIANCE WITH LAND REGISTRATION ACT

9. Section 17 of the Land Registration Act provides that no instrument is effective to create an interest, until the instrument is registered in accordance with the Act.

10. Section 49 of the Act provides that a Lease of more than three years must be executed in the prescribed form, and must be registered.

11. This Lease may not have been executed in the prescribed form, as it was not dated, was only partly witnessed, and was not duty-stamped. In any event, it was not registered. It is therefore clearly ineffective to create a lease-hold interest, and is not valid.

12. The matters raised in the draft Defence and in the Defendant's Affidavit do not provide any basis for refuting these clear and unambiguous statutory requirements. Regardless of whether or not the Defendant can identify the person who signed the Lease for the State, it would not be relevant to show compliance with these statutory requirements. The Defendant has not shown any prima facie compliance with the requirements. The clear effect of non-compliance is that the Lease document is not valid and is unenforceable against the Plaintiff.
13. The Defendant has also failed to comply with the other conditions.

14. He has not given any satisfactory explanation for his failure to file a Defence in time, or for the delay in bringing this application for an extension of time. The Writ was served in May 2010. After a technical amendment, the Amended Writ was served in August 2010. It is now November 2011, almost one year and a half later.

15. In the Affidavit, the Defendant says that he has been busy and overseas. That is obviously not a satisfactory explanation at all.

16. He says that there were some settlement discussions between the parties. However, the fact that there may have been settlement discussions does not relieve a Defendant of his obligation to file a Defence and comply with all other requirements.

17. As the Defendant has not satisfied any of the requirements of his application for an extension of time in which to file a Defence, I make the following orders:

(a) The Defendant's application for an extension of time in which to file a Defence, is refused.

(b) A Declaration is granted that the undated Lease Agreement between the Defendant and the Department of Labour and Employment over property at Lot 8 Section 8 Granville, Volume 9, Folio 2016, is null and void and unenforceable against the Plaintiff.

(c) The Plaintiff's claim for unlawful payments and unjust enrichment is to be set for hearing.

(d) The Plaintiff by its servants or agents or howsoever is permitted to enter levels three and five of ANG Haus, and retrieve and remove the Plaintiff's goods, chattels and other property within fourteen days, with liberty to apply.

(e) The Plaintiff is to file and serve any further Affidavits on which it may wish to rely in relation to the claim for unlawful payments and unjust enrichment, by 21 November 2011.

(f) The Defendant is to file and serve any further Affidavits on which it may wish to rely, by 5 December 2011.

(g) The Plaintiff is to serve a draft index to the pleading book by 12 December 2011.

(h) The Defendant is to respond by 19 December 2011.

(i) The Plaintiff is to file and serve the Pleading Books by 31 January 2012.

(j) The matter will return to Court on 1 February 2012 for allocation of a hearing date.

(k) The Defendant is to pay the Plaintiff's costs.

_____________________________________________________

Mr. K. Iduhu: Lawyer for the Plaintiff
Mawa Lawyers: Lawyers for the Defendants