Angoman v Independent Public Business Corporation of Papua New Guinea [2011] PGNC 89; N4363 (24 May 2011)

N4363

PAPUA NEW GUINEA
IN THE NATIONAL COURT OF JUSTICE

W.S.NO. 287 OF 2008

BETWEEN:

FRED ANGOMAN
First Plaintiff

AND:

PAPACO NO. 1 LIMITED
Second Plaintiff

AND:

INDEPENDENT PUBLIC BUSINESS CORPORATION OF PAPUA NEW GUINEA
First Defendant

AND:

GLEN BLAKE as the Managing Director of the
INDEPENDENT PUBLIC BUSINESS CORPORATION OF PAPUA NEW GUINEA
Second Defendant

Waigani: Kariko, J
2011: 23 February & 24 May

CONTRACT – Contract of sale of land - Breach of contract – Specific Performance – Doctrine of laches – Unreasonable delay by plaintiff in pursuing its claim – Prejudice to the defendant - Whether specific performance the appropriate remedy

Facts:

The Plaintiffs filed this suit against the Defendants alleging breach of contract of sale of land and sought specific performance of the contract or damages in the alternative. After executing the contract, obtaining ministerial approval for the transfer of the land, and paying the appropriate stamp duty, the sale was never settled due to issues concerning the outstanding water rates for the property. After 4 years the Plaintiffs commenced these proceedings. In the meantime the Defendants sought to sell the land by public tender.

Held:

1. A defence that has not been pleaded cannot be argued; Uma More v UPNG [1985] PNGLR 41 and Papua New Guinea Banking Corporation v Jeff Tole (2002) SC694 applied.
   
2. Specific performance is a discretionary remedy founded on equitable principles and its grant will depend on many factors including the bona fide conduct of the parties.
   
3. Specific performance will not be ordered as a matter of course where a breach of contract is proven.
   
4. Specific performance may not be ordered where there has been unreasonable delay on the part of the plaintiff in prosecuting his claim and the delay has unfairly prejudiced the defendant; Mehmet v. Benson [1965] HCA 18; (1965) 113 CLR 295 and Lamshed v. Lamshed (1963) 109 CLR 140 followed.
   
5. Specific performance refused, damages ordered as the appropriate remedy.
   

Cases cited:
Papua New Guinea cases

Papua New Guinea cases:
Uma More v. UPNG [1985] PNGLR 41
Papua New Guinea Banking Corporation v. Jeff Tole (2002) SC694
Yooken Paklin v. The State (2001) N2212
Yange Lagan and Others v. The State (1995) N1369
Albert Baine v. The State (1995) N1335
Jonathan Mangope Paraia v. The State (1995) N1343

Overseas cases:

Mehmet v. Benson [1965] HCA 18; (1965) 113 CLR 295
Lamshed v. Lamshed (1963) 109 CLR 140

Textbook:

Chitty on Contracts, 28th Edition, Volume 1 General Principles

Counsels:

Mr K Iduhu, for the Plaintiffs
Mr D Gavara-Nanu, for the Defendants

24 May, 2011

1. KARIKO, J: The Plaintiffs filed this suit against the Defendants alleging breach of contract of sale of land, and have sought specific performance of the contract or damages in the alternative.
   

Facts

2. The relevant facts of this case, from the Agreed Statement of Facts and from evidence not disputed in court are as follows:
   
   • (a) In early 1999, while employed by the then Investment Corporation of Papua New Guinea ("ICPNG"), the first plaintiff was offered the sale of land situated in Korobosea N.C.D. and described as Allotment 4 Section 85 Boroko ("the Property") for a purchase price of K37,000.
     
   • (b) The First Plaintiff accepted the offer and through the Second Plaintiff, a company owned by him as the sole shareholder, a contract for sale was entered into with the ICPNG ("the Contract") which was executed on 24 August 1999.
     
   • (c) Although the Contract provided for a 10% deposit, K13,300 was paid ("the Deposit").
     
   • (d) Statutory approval under section 128 of the Lands Act was obtained on 28 January 2000.
     
   • (e) The appropriate stamp duty was paid and the Contract and transfer instrument duly stamped.
     
   • (f) Completion of the sale did not occur. While the First Plaintiff made numerous communications for settlement of the sale there was very slow reaction and response from the ICPNG who offered two reasons for the delay in settlement. Firstly the ICPNG informed the First Plaintiff that the owner's copy of the title deed had gone missing but the excuse changed to issues concerning the arrears in the water rates for the Property. After months of waiting for a settlement statement from ICPNG as the vendor, the Plaintiffs prepared its own statement and sent it to the ICPNG by letter dated 29 May 2002 but received no response.
     
   • (g) While waiting for completion, the assets of the ICPNG including the Property became vested in the Privatisation Commission established under the Privatisation Act 1999.
     
   • (h) By letter dated 9 July 2001, the ICPNG purportedly gave notice to the Plaintiffs to settle the balance of the purchase price or the sale would be withdrawn ("the Notice"). The Plaintiffs did not respond to this letter and neither the ICPNG nor the IPBC have ever advised the Plaintiffs that the sale was withdrawn.
     
   • (i) In 2002 after the Privatisation Act was repealed and the Independent Public Business Corporation Act 2002 ("IPBC Act") enacted, the assets of the Privatization Commission including the Property became vested in the Independent Public Business Corporation ("IPBC"), the Second Defendant.
     
   • (j) Pursuant to the IPBC Act and in particular sections 31(3) and 50(1) and (4) the relevant Minister published a notice the National Gazette No. G33 on 6 April 2004 vesting the assets and liabilities of the ICPNG in the IPBC.
     
   • (k) The First Plaintiff then turned to the IPBC and resumed his follow-ups on the completion of the sale of the Property and wrote to the First Defendant on 24 May 2006 in this regard.
     
   • (l) The IPBC advised by letter written by the First Defendant on 15 June 2007 that the Property had been placed on public tender and sold to a third party.
     
   • (m) But that proposed sale appears to have fallen through and the registered title to the Property remains with the ICPNG.
     
   • (n) The Second Defendant, the IPBC has to date refused to complete the sale of the Property to the Second Plaintiff.
     
3. Based on these facts, the Plaintiffs filed this action on 21 March 2008 and have claimed a breach of the Contract, seeking an order for specific performance or in the alternative, damages including the refund of the deposit of K13,300. They say IPBC is liable because the assets and liabilities of the ICPNG vested in the IPBC under the IPBC Act.
   

Defence

4. In its amended Defence, the Defendants asserted that:
   
   • (a) The IPBC was not privy to the contract;
     
   • (b) section 50 of the IPBC Act does not vest the assets and liabilities of the ICPNG in the IPBC; and
     
   • (c) the Plaintiffs did not suffer any damages and are not entitled to the relief sought.
     

In court, the Defendants did not argue the first two grounds of its defence.

Issues

5. The parties agreed that the issues for determination are:
   
   • (a) Whether or not the First Defendant is estopped from denying liability by virtue of the vesting of the assets and liabilities of ICPNG in it and or its conduct in dealing with the Property.
     
   • (b) Whether or not a cause of action is founded against any of the Defendants.
     
   • (c) Whether the Plaintiffs are entitled to seek specific performance of the Contract of Sale and/or damages against the Defendants.
     

Was the contract terminated?

6. In final submissions, the Defendants again did not argue the first two issues and merely submitted that the court should refuse the relief claimed.
   
7. I am satisfied that the notice in the National Gazette No. G33 on 6 April 2004 vested all interests and obligations arising from the Contract in the IPBC as trustee of ICPNG.
   
8. Mr Gavara-Nanu of counsel for the Defendants properly stopped short of claiming that the failure to settle after the Notice amounted to the Contract being terminated. I understood his submissions to be saying that because the Plaintiffs:
   
   • (a) did not settle when given notice by ICPNG in 2001; and
     
   • (b) then in 2005 did not object to the Property being placed on public tender,
     

there was no valid contract for specific performance to be claimed, and no damages were shown to have been suffered and none could be ordered except the reimbursement of the deposit monies. I had some difficulty in following the submissions but I gathered the Defendants were suggesting that the contract was terminated, and even if it was not, the Plaintiff did not suffer any damages except for the deposit paid.

9. I reject the assertion that the Contract was terminated after the Plaintiffs failed to pay the balance of the purchase price. The Plaintiffs were at all times seeking settlement of the sale but could not do so for the failure of ICPNG initially and then the IPBC to finalise the settlement statement. But more critically, the Defendants did not plead termination or withdrawal of contract in their Defence. They therefore cannot argue such a defence. The law is clear that you cannot raise a claim, defence or relief that has not been properly pleaded; Uma More v UPNG [1985] PNGLR 41; Papua New Guinea Banking Corporation v Jeff Tole (2002) SC694.
   

Was the contract breached?

10. The evidence is very clear that the Contract was substantially complied with and all that remained was for the vendor to provide the settlement statement to progress to settlement.
    
11. The obligations of the parties to complete the sale include:
    
    • (a) the purchaser to pay the balance of the purchase price – clause 1(c) of the Contract
      
    • (b) the vendor to pay and bear all Government rates up to and including completion – clause 1(f) of the Contract.
      
12. While the parties could exchange cheques for the payments due from each of them, the common practice is for the purchaser to pay the balance of the purchase price adjusted by the payments due from the vendor. On the evidence, it appears that it is this practice that was contemplated by the parties. But I believe that the ICPNG (and for that matter the IPBC) decided not to proceed to settlement because the outstanding water rates was a significant amount (over K40,000), which meant that the vendor would incur a minimum loss of about K6,300 from the sale. The vendor (ICPNG) most probably realised this earlier on in preparing for settlement and so did its successor IPBC when vested with the property.
    
13. It is obviously in the best interest of the Defendants to avoid completion of the sale because it simply does not make any economic sense, which is totally understandable. This is yet another mystifying case where the Board and management of government statutory corporation resolved to dispose of a valuable State-owned asset without any due diligence or proper accountability. While I appreciate that the property was sold under the then ICPNG home-ownership scheme for its employees, and it is common knowledge that such schemes offer houses and properties at reduced and subsidized prices, it is abundantly clear that the purchase price in this case was ridiculously low. Land in Korobosea has never been cheap, even in 1999. The bottom line for this transaction would be a financial loss for the vendor and practically a "give-away" for the purchaser. But there is no evidence nor was it pleaded that there are legal grounds such as fraud to challenge the validity of the contract. The parties agreed to the terms of the sale and these are contained in a legally binding contract.
    
14. On the evidence, I find the Defendants breached the Contract.
    

Is specific performance an appropriate order?

15. The decree of specific performance is a discretionary remedy founded on equitable principles and its grant will depend on many factors including the bona fide conduct of the parties.
    
16. Prima facie, the contract having been substantially complied with it would seem that specific performance may be the appropriate relief. However specific performance is a discretionary remedy and even where a breach of contract is proved, specific performance will not be ordered as a matter of course. One situation is where the plaintiff is guilty of laches, that is specific performance may not be ordered where there has been unreasonable delay on the part of the plaintiff in pursuing the action and the delay unfairly prejudices the defendant. Paragraph 29-140 of Chitty on Contracts, 28th Edition, Volume 1 General Principles, says this of the principle of laches:
    

"... the essence of the doctrine of laches is that if the claimant has not been reasonably diligent in seeking relief, and in consequence the position of the defendant has been prejudiced or it would now be unjust or unreasonable to grant the relief, the claimant will be debarred from pursuing his remedy on the ground of laches."

17. A plaintiff seeking specific performance should prosecute his claim with diligence and should at all times be ready, willing and able to complete the contract; Mehmet v. Benson [1965] HCA 18; (1965) 113 CLR 295. Specific performance may not be ordered in cases concerning the sale of land where the delay in making a claim leaves the vendor in a situation where there is uncertainty and even assumes the purchaser is no longer interested in the property and decides to sell the land to a third party, which is what happened in this case; see also Lamshed v. Lamshed (1963) 109 CLR 140.
    
18. On 9 July 2001 the Plaintiffs were threatened with withdrawal of the sale unless they paid the balance of the purchase price. The Plaintiffs did not respond to the threat until 29 May 2002 when a letter was written to then ICPNG lawyer suggesting settlement on 4 June 2002. After that there was again no activity and the Plaintiffs did not pursue the matter further with the ICPNG or the IPBC until 24 May 2006, a period of nearly 4 years. Even when the IPBC finally responded on 15 June 2007, the Plaintiffs did not take any action until 18 October when it again wrote to the Defendants insisting on settlement and eventually filed this proceeding on 21 March 2008. No doubt the Defendants were entitled to believe that the Plaintiffs were no longer keen on the sale at least during the period 29 May 2002 to 15 May 2006.It is no wonder then that the IPBC took steps to sell the property via public tender. The Plaintiffs did not react to the newspaper notice of 10 January 2005 advertising the Property for public tender. Even when the IPBC gave advice of the purported sale to a third party through the public tender, the Plaintiffs waited another 10 months before filing this suit.
    
19. In 2001, the outstanding water rates were estimated to be around K40,000. This amount would have significantly increased over the last 10 years. This would also apply to other outgoings the Defendants as the vendor would need to pay. If specific performance of the Contract is ordered, the result would be a much greater loss for the First Defendant than the K6,300 the vendor would have suffered back in 2001.
    
20. Due to the unreasonable delay and lack of diligence on the part of the Plaintiffs and the unfair prejudice to the Defendants, I will not order specific performance.
    

Damages

21. In my view, damages is the appropriate relief for the Plaintiffs who did claim damages as the alternate relief, as follows:
    
    • (a) Refund of the Deposit of K13,300;
      
    • (b) Loss of enjoyment of the Property and the Deposit; and
      
    • (c) Stress and anxiety.
      
22. The Defendants did not contest the claim for refund of the Deposit and I will order the refund to be paid to the Second Plaintiff as the purchaser under the Contract, but the Defendants argued that the Plaintiffs had not proved any other damages.
    
23. In considering the claim for damages, I apply the following principles:
    
    • The plaintiff has the onus of proving his loss on the balance of probabilities. It is not sufficient to make assertions in a statement of claim and then expect the court to award what is claimed. The burden of proving a fact is upon the party alleging it, not the party who denies it. If an allegation forms an essential part of a person's case, that person has the onus of proving the allegation; Yooken Paklin v. The State (2001) N2212.
      
    • On a claim for damages, the plaintiff has the onus of proving his losses on the balance of probabilities and is obliged to prove the claim upon credible evidence; Yange Lagan and Others v. The State (1995) N1369.
      
    • Corroboration of a claim is usually required and the corroboration must come from an independent source; Albert Baine v. The State (1995) N1335.
      
    • The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages. The court will do the best it can in assessing damages where precise evidence is not available; Jonathan Mangope Paraia v. The State (1995) N1343.
      
    • The plaintiff is only entitled to damages which are properly pleaded in the statement of claim; Papua New Guinea Banking Corporation v. Jeff Tole (supra).
      
24. Damages in equity is discretionary and the court may take into account conduct of the plaintiff that disentitled the plaintiff to specific performance. The plaintiffs in this case argued that the market value of the Property has increased over the intervening years. I have no doubt this is so, but as they are guilty of delay, they should not profit out of the delay. I am therefore not inclined to award damages amounting to the difference between the contract price and the present market value of the Property. In any case, there is simply no evidence of the current market value of the Property nor is there evidence upon which the court may properly conclude a reasonable estimate of the current market value.
    
25. The loss of enjoyment of the Deposit is covered by the interest payable which I discuss shortly.
    
26. There is no doubt that the Plaintiffs suffered some stress and anxiety in chasing up the sale more particularly in the beginning with the ICPNG but later with the IPBC. There is no evidence to support this heading of damages but I am prepared to award a nominal sum of K5,000 in favour of the First Plaintiff.
    

Interest

27. I order that interest at the usual rate of 8% per annum to apply to the damages awarded. The interest applies from the date which the cause of action accrued to the date of judgment. The date the cause of action accrued is the day on which settlement should have taken place and that is 14 days from statutory approval of the Contract which was 11 February 2000. The appropriate period for calculation of interest is11 years 3 months or 11.3 years.
    
28. Interest in respect of the refund is calculated as follows: K13,300.00 x 0.08 x 11.3 = K12,023.20.
    
29. Interest in respect of the damages for stress and anxiety is: K5,000.00 x 0.08 x 11.3 = K4,520.00.
    

Costs

30. As the court has found a breach of the Contract by the First Defendant who holds ICPNG's liabilities in trust, costs are awarded against the First Defendant.
    

Orders

31. The formal orders of this court are:
    
    1. The Plaintiffs' claim for specific performance is dismissed.
       
    2. The First Defendant shall refund the Second Plaintiff the deposit of K13,300.00 plus interest of K12,023.20.
       
    3. The First Defendant shall pay the First Plaintiff general damages of K5,000.00 plus interest of K4,520.00.
       
    4. Costs of the Plaintiffs of and incidental to this proceeding are awarded against the First Defendant, to be taxed if not agreed.
       

___________________________________________________

Fairfax Lawyers: Lawyer for the Plaintiffs
O'Briens Lawyers: Lawyer for the Defendants