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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO.442 OF 2011
BETWEEN:
PNG PORTS CORPORATION LTD
Plaintiff
AND:
CHARLES INNI trading as INNI TRADING
Defendant
Waigani & Mt. Hagen: David, J
2011: 13 December
2012: 2 April
LANDLORD AND TENANT – claim for recovery of demised premises and mesne profit – demised premises used to operate tucker shop/fast food shop - lease agreement executed by parties for a term of 5 years - defendant failed to pay rent since commencement of lease – plaintiff entitled to vacant possession, outstanding rentals, mesne profit, interest and costs.
Case cited:
Seafreight Pty Ltd v Bishop Shipping Services Pty Ltd [1976] PNGLR 22
Treatise cited:
McGregor on Damages, Sweet & Maxwell Limited, 14th Edition, (1980)
Counsel:
Ms. Hane Tabe Kila, for the plaintiff
JUDGMENT
2 April, 2012
1. DAVID, J: INTRODUCTION: On 13 May 2011, the plaintiff, PNG Ports Corporation Ltd instituted these proceedings against the defendant by writ of summons endorsed with a statement of claim.
PLAINTIFF'S ALLEGATIONS
2. The plaintiff makes the following allegations. It is a company duly incorporated under the Companies Act, 1997. The defendant is a male adult, the owner and operator of a trade store and trades under his own name. The plaintiff is the registered proprietor of all that piece or parcel of land described as Allotment 21 Section 16 Kimbe in the West New Britain Province (the property).
3. On 22 January 2007, it entered into a lease agreement with the defendant for the defendant to occupy part of the property (the demised premises) for a term of 5 years commencing on 2 February 2007 and expiring on 1 February 2012 for the purpose of operating a tucker shop/fast food shop and other related purposes at an annual rental of K1,320.00 payable in monthly instalments of K110.00 on the first week of each month (the lease agreement). It was also a term of the lease agreement that during the continuance of the lease agreement, the defendant was not to sublet or part with possession of the demised premises or any part or parts of the demised premises to any other person without the expressed authorisation of the plaintiff.
4. The defendant has failed to pay rent to the plaintiff since the commencement of the lease agreement contrary to Clause 9 (a) of the lease agreement. He owed the plaintiff the sum of K4,070.00 being outstanding rental for three years and for the month of January 2011.
5. By its letter to the defendant dated 7 January 2011, the plaintiff requested the defendant to vacate the demised premises within three months of the date of the letter. Upon receipt of the letter, the defendant sought financial assistance from the administration of the West New Britain Provincial Government to assist him pay the outstanding rentals.
6. In response to the defendant's request, the administration of the West New Britain Provincial Government forwarded to the plaintiff a bank cheque for K3,960.00, but it refused to accept the payment for the following reasons:
7. By its letter to the defendant dated 21 January 2011, it maintained that it had terminated the lease agreement on the basis that the defendant had breached essential terms of the lease agreement, returned the cheque and requested him to vacate the demised premises within 14 days.
ORDERS SOUGHT
8. The plaintiff claims the following principal orders:
DEFENCE
9. It seems from the Court file that without filing a notice of intention to defend, on 23 May 2011, the defendant proceeded to file his defence through Linge & Associates Lawyers. The plaintiff has not taken issue with the apparent procedural defect and has allowed the defendant to take part in these proceedings including the filing of his defence contrary to Order 7 Rule 2 of the National Court Rules. On the other hand, this issue might have been raised before and dealt with by the Court in favour of the defendant, but the Court records do not show it or that a notice of intention to defend was filed within the prescribed period, but for some reason it has not been recorded as having been filed and is missing from the Court file. I will give the defendant the benefit of the doubt.
10. The defendant admits that he executed the lease agreement, but denies liability or owing the plaintiff the sum of K4,070.00 on the basis that:
11. For these reasons, the defendant avers that all reliefs that the plaintiff claims should be refused and that he be allowed to remain on the demised premises up until the expiry of the lease agreement on 1 February 2012 as per the lease agreement as well as be given three months to bring up-to-date the rental payments.
REPLY
12. On 30 May 2011, the plaintiff filed its reply joining issue with the defendant's defence.
DIRECTIONS BY THE COURT
13. According to the Court file endorsement with respect to Court proceedings of 15 July 2011 at which both parties were represented by counsel, Kassman, J issued certain directions in order to progress the matter to trial. That included a direction for the parties to file and serve affidavits on each other. The matter was then adjourned to 9 August 2011. According to the court file endorsement with respect to Court proceedings of 9 August 2011, there was no attendance of parties when the matter was brought before the Court that day and the matter was adjourned to the Registry.
14. On 15 November 2011, the matter was brought before Murray, J when Her Honour issued further directions. From the file endorsement with respect to Court proceedings of 15 November 2011, it appears that only the plaintiff was represented that day. A formal minute of these directions was filed on 29 November 2011 and it seems from the name of the document, "Consented Court Directions" that the directions were issued by consent of the parties. These, inter alia, are:
According to the Consented Court Directions, a trial date was not fixed.
15. However, according to the endorsement in the Court file with respect to Court proceedings of 15 November 2011, the Court adjourned the matter to 6 December 2011 for status conference and also fixed 13 December 2011 at 11:30 am as the date and time for a two hour trial.
STATEMENT OF AGREED AND DISPUTED FACTS AND ISSUES FOR DETERMINATION
16. On 28 October 2011, a Statement of Agreed and Disputed Facts and Issues for Determination (the Statement of Facts and Issues) duly endorsed by the parties was filed. I will return to this matter later on in the judgment.
NOTICE TO SET DOWN FOR TRIAL
17. On 3 November 2011, a Notice to Set Down for Trial duly endorsed by the parties was filed.
STATUS CONFERENCE
18. None of the parties was represented at the status conference which I conducted on 6 December 2011. The Court however confirmed that the trial of the matter would proceed as scheduled on 13 December 2011.
PLEADINGS BOOK
19. A Pleadings Book duly certified by the parties as to its correctness was filed on 5 December 2011. The defendant's counsel, Gerard Linge signed the book on 23 November 2011 while the plaintiff's counsel signed on 28 November 2011. The Pleadings Book contains the pleadings, the affidavits the parties were to rely on at the trial, the Statement of Facts and Issues and the Consented Court Directions.
TRIAL
20. At the trial, only Ms. Kila of counsel for the plaintiff appeared on behalf of her client. The defendant was not represented either by counsel or in person. Ms. Kila indicated before the trial got under way that she notified the defendant's counsel, Mr. Linge two weeks before the trial that the matter was fixed for hearing on 13 December 2011, but Mr. Linge contacted her the day before the trial and told her that he was unable to appear at the trial as he was appearing before the National Court in Kimbe on the same date in another matter and that he would confirm his position in writing to the Registrar. By a letter from Mr. Linge to the Deputy Registrar, National Court, Waigani dated 12 December 2011 a copy of which was received by my Associate on 13 December 2011 after the trial had concluded, counsel conceded being informed by counsel for the plaintiff regarding the matter being listed for trial on 13 December 2011 at 11:30 am, but said that the defendant was not issued with a notice of trial by the Registrar in accordance with Rule 12 of the National Court Listings Rules 2005. He confirmed his unavailability at the trial and requested leave to adjourn the trial under Rule 13 of the National Court Listings Rules 2005.
21. I allowed the plaintiff to proceed ex parte nevertheless given steps taken to progress the matter to trial according to Court file endorsements, the Notice to Set Down for Trial, the Consented Court Directions generally had the involvement of all parties and that the agreed and disputed facts and contested issues were settled by the filing of the Statement of Facts and Issues.
22. I note from Rule 13 (1) of the National Court Listings Rules 2005 that a 'trial once fixed shall not be adjourned except by leave of the Court upon sufficient cause being shown'. I consider that while there might have been sufficient cause to warrant the adjournment of the trial, the adjournment was sought in the eleventh hour and no objection was raised earlier by the defence as to the trial proceeding on 13 December 2011 as scheduled for want of compliance with Rule 12 of the National Court Listings Rules 2005 or Order 10 Rule 9 of the National Court Rules as to the issuance of a notice of trial by the Registrar. Moreover, since counsel for the defence is resident in Kimbe, he should have briefed counsel in a law firm in Port Moresby to appear in Court for him to seek the adjournment. Seeking leave to adjourn the trial by letter to the Deputy Registrar was an inappropriate way of making the application for adjournment because the Deputy Registrar or the Registrar for that matter do not have any power to grant leave to adjourn a trial except by the Court under Rule 12 of the National Court Listings Rules 2005.
23. The trial of this matter proceeded by way of affidavit evidence.
24. At the conclusion of the plaintiff's submissions, I directed that the defendant was at liberty to file written submissions either personally or through his lawyer by 19 December 2011 failing which I would proceed to deliver judgment. The plaintiff has not filed any written submissions to date.
EVIDENCE
25. The plaintiff relied on three affidavits identified in the Consented Court Directions. They are that of:
26 The affidavits of Tass Allayialis, Fego Kiniafa, and Joseph Aisa were tendered and appropriately admitted into evidence.
27. I summarise the plaintiff's evidence below.
Tass Allayialis
28. He is the Managing Director of R & A Marine Services Ltd. In January 2008, he approached the defendant and asked him to use a part of the demised premises as a ship yard. The defendant agreed and his company consequently entered into a lease agreement with the defendant to lease the relevant part of the demised premises at an annual rental of K8,160.00 or K680.00 per month. Mr. Ronny Achurch, a director of the company signed the agreement on behalf of the company. A copy of that agreement is in evidence and is marked as annexure "A" to his affidavit. At the time, he had no prior knowledge about the relationship between the plaintiff and the defendant.
29. He learnt about the relationship that the defendant had with the plaintiff in or about late 2010 when the defendant approached his company for an advance to settle his rental arrears with the plaintiff. The company in a letter to the defendant dated 27 October 2010 agreed to pay only half of what he owed the plaintiff. A copy of that letter is in evidence and is marked as annexure "B" to his affidavit. The company then decided not to continue to do business with the defendant and ceased all financial payments altogether thereafter. It commenced negotiations with the plaintiff instead.
30. On 17 March 2011, he received a hand-written letter from the defendant claiming further rental payment. A copy of that letter is in evidence and is marked as annexure "C" to his affidavit. Consequent to ceasing making further rental payments, the defendant denied the company access to the ship yard. The company then wrote to the plaintiff through its Business Manager, Kimbe Port and Manager, Legal Services on 20 and 28 April 2011 respectively seeking its intervention. Copies of those letters are in evidence and are marked as annexures "D" and "E" respectively to his affidavit. The plaintiff responded by writing to the defendant's lawyer on 2 May 2011 to advise his client to immediately lift the unauthorized blockade and give access to the company. A copy of that letter is in evidence and is marked as annexure "F" to his affidavit.
Fego Kiniafa
31. He is employed by the plaintiff as its Deputy Chief Commercial Officer. He is responsible for managing the plaintiff's commercial leases and he keeps in his custody records of all matters involving commercial leases.
32. The plaintiff is the registered proprietor of the property, more particularly described in State Lease Volume 6 Folio 117. The land area of the property is 12.86 hectares. A copy of the State Lease is in evidence and is marked as annexure "A" to his affidavit.
33. On 22 January 2007, the plaintiff and the defendant entered into the lease agreement to lease the demised premises. A copy of the lease agreement is in evidence and is marked as annexure "B" to his affidavit.
34. The defendant has not paid any rent since signing the lease agreement, a period of more than 3 years. The plaintiff informed the defendant of the outstanding rent in a letter to him dated 7 January 2011. A copy of that letter is in evidence and is marked as annexure "C" to his affidavit.
35. After receiving that letter, the defendant sought the assistance of the West New Britain Provincial Government and the latter on 13 January 2011 under cover of its letter addressed to the plaintiff bearing that date provided a bank cheque for K3,960.00 to settle the arrears. A copy of that letter is in evidence and is marked as annexure "D" to his affidavit.
36. A report received from the Acting Station Commander in Kimbe dated 12 January 2011 revealed that the demised premises were used as a point for smuggling of marijuana and homebrew by people from Bali and Vitu in the West New Britain Province. The defendant condoned these activities and they in turn were interrupting the normal business operations at the Kimbe Port. A copy of that report is in evidence and is marked as annexure "E" to his affidavit. These activities may possibly be averted if the defendant vacated the demised premises.
37. By a letter to the defendant dated 21 January 2011, the plaintiff advised of its refusal to accept the payment made by the Administration of the West New Britain Provincial Government on his behalf on the basis that the cheque was less than the amount representing the arrears of rental and taking into account the matters raised in the report by the Acting Station Commander. A copy of that letter is in evidence and is marked as annexure "F" to his affidavit.
38. Since the plaintiff considered that the defendant was in breach of its obligations under the lease agreement, it requested him to vacate the demised premises within 14 days.
Joseph Aisa
39. He is employed by the plaintiff as its Manager, Legal Services. He is responsible for managing the plaintiff's legal affairs including those related to or involving commercial leases. The defendant breached Clauses 3 (e) and (f) of the lease agreement when it entered into a sub-lease arrangement with the R & A Marine Services for the latter to use part of the demised premises as a shipyard and deriving income in the process without the approval of the plaintiff. The plaintiff therefore has exercised its right to terminate the lease agreement and requires the defendant to vacate the demised premises as well as claiming the other reliefs sought in the statement of claim.
UNDISPUTED FACTS
40. From the pleadings, the Statement of Facts and Issues and all the evidence before me, I consider that the following essential facts are either not disputed or have been established on the balance of probabilities.
41. The plaintiff is the registered proprietor of the property. The demised premises was a vacant portion of land forming part of the property. On 22 January 2007, the plaintiff and the defendant entered into the lease agreement. Under the lease agreement, the defendant leased the demised premises for a term of 5 years commencing on 2 February 2007 and expiring on 1 February 2012 for the purpose of operating a tucker shop/fast food shop and other related purposes at an annual rental of K1,320.00 payable in monthly instalments of K110.00 on the first week of each month. The plaintiff did not give to the defendant any rent due notice or invoice since signing the lease agreement. The defendant has not paid any rent since signing the lease agreement. The plaintiff informed the defendant of the outstanding rent in a letter to him dated 7 January 2011, exercised the option to terminate the lease agreement prior to it expiring and requested the defendant to vacate the demised premises within 3 months. The defendant tried to pay the outstanding rental, but the plaintiff refused to accept the payment. By a letter from the plaintiff to the defendant dated 21 January 2011, the plaintiff said the lease agreement was terminated as of that date and requested the defendant to vacate the demised premises within 14 days from the date of the letter.
DISPUTED FACTS
42. From the pleadings, Statement of Facts and Issues and all the evidence before me, I consider that the disputed facts are these. Apart from the letter of 7 January 2011, the plaintiff had not given any written notice to the defendant regarding non-payment of rentals. The defendant sub-let the demised premises to a third party, R & A Marine Services without the knowledge and authorization of the plaintiff thereby breaching the terms of the lease agreement. Outstanding rental was K4,070.00. As the defendant has remained in possession of the demised premises despite the termination of the lease agreement, the plaintiff is entitled to mesne profit for the period of occupation since the termination.
ISSUES
43. The legal issues that require my consideration and determination are:
1. Whether the defendant breached the terms and conditions of the lease agreement warranting its termination?
2. If the first issue is answered in the affirmative, whether the plaintiff is entitled to remove the defendant and have vacant possession of the demised premises?
3. If the second issue is decided in favour of the plaintiff, whether the plaintiff is entitled to mesne profit?
4. Whether the plaintiff is entitled to any other damages?
5. If the plaintiff is successful, what rate of interest should apply?
THE PLAINTIFF'S SUBMISSIONS
44. I have considered the plaintiff's submissions, both written and oral and they are summarised below.
45. As the duly registered proprietor of the property inclusive of the demised premises, the plaintiff is entitled to enter and repossess the demised property upon the defendant committing a breach of the lease agreement.
46. There is unchallenged and incontrovertible evidence that the defendant has breached an essential term of the lease agreement by not paying monthly rentals promptly for over a period of three years.
47. The affidavit evidence of Tass Allayialis shows that the defendant committed a further breach of the lease agreement by sub-leasing part of the demised premises to a third party, R & A Marine Services Ltd without the plaintiff's approval or consent.
48. Alternatively, since it has terminated the lease agreement, the plaintiff wants vacant possession of the demised premises. Should the defendant feel that the termination is unlawful, he is at liberty to institute a separate action for damages.
49. Since the plaintiff terminated the lease agreement on 21 January 2011, the defendant has not vacated the demised premises and is still in occupation. He should pay for the period of occupation from January 2011 to December 2011 and mesne profit should be calculated at the rate charged under the lease agreement, i.e., at K110.00 per month or which translates into K1,320.00 annually.
REASONS FOR DECISION
First and Second issues:
50. I will discuss the first and second issues together.
51. The termination of the lease agreement must be done under the terms and conditions of the lease agreement. A breach of any of those terms and conditions entitles the plaintiff to terminate the lease agreement and repossess the demised premises.
52. On the question of payment of the annual rental, the defendant's covenant to pay rent is contained in the reddendum, i.e., the clause in the lease agreement dealing with the payment of rent. Clause 2 is the relevant clause. It states:
"The Lessee HEREBY COVENANTS AND AGREES with the Lessor to pay the Lessor without demand and without any deduction whatsoever the annual rental specified in Item 7 of the Schedule hereto at the time and in the manner specified in Item 8 of the Schedule hereto but subject to any rent review as may be hereinafter provided."
53. According to Items 7 and 8 of the Schedule to the lease agreement, the annual rental of K1,320.00 was to be paid by the defendant on a monthly basis in the sum of K110.00 on the first week of each month.
54. The requirement for the plaintiff to give notice of rent due or an invoice to the defendant is not expressly provided in the lease agreement. However, it is implied in the reddendum and Clause 9 (a) which obliged the plaintiff to give monthly rent due notices or invoices.
55. Clause 9 (a) of the lease agreement states:
"That if the rent hereby reserved or any part thereof shall be unpaid for the space of fourteen days after the initial thirty days after notification of rent due in accordance with the covenant for payment of rent herein contained (although no formal or legal demand shall have been made therefore) or if the Lessee commits, permits or suffers to occur any breach or default in the due and punctual observance and performance of any of the covenants, obligations and provisions of this Sub-Lease then and in any one or more or either of such events, the Lessor, at any time or times thereafter shall have the right to re-enter into and upon the demised premises or part thereof in the name of the whole and to have again repossess and enjoy the same as of its former estate anything herein contained to the contrary notwithstanding but without prejudice to any action or other remedy which the Lessor has the right or otherwise could have for arrears of rent or breach of covenant or for damages as a result of any such event and thereupon the Lessor shall be freed and discharged from any action, suit, claim, or demand by or obligation to the Lessee under or by virtue of the Sub-Lease."
56. It is not disputed that the plaintiff did not give to the defendant any rent due notice or invoice since signing the lease agreement. However, does that operate adversely against the plaintiff? In his defence, the defendant has contended that by sleeping on its rights under the lease agreement or the failure to take action to enforce its claim or by its conduct it had acquiesced and allowed rent to accrue for three years, the plaintiff could not three years down the track, turn around and demand and invoke immediate remedy without it accepting some responsibility and blame.
57. Clause 7 (a) of the lease agreement operates to nullify the defendant's contention. It states:
"That no waiver by the Lessor of any breach of any covenant, obligation, or provision in this Sub-Lease contained or implied shall operate as a waiver of any other breach of the same or of any other covenant, obligation, or provision in this Sub-Lease contained or implied."
58. On the other hand, the defendant had covenanted to pay rent agreed upon as and when it fell due without demand. Hence, notwithstanding the fact that the plaintiff did not give any rent due notice or invoice, the defendant was well aware of his obligation under the lease agreement to pay rent on a monthly basis for occupying the demised premises. However, he defaulted as per the reddendum. It is not disputed that the defendant had not paid any rent since signing the lease agreement effective as at 2 February 2007. From 2 February 2007 to 21 January 2011, the total period of non-payment of rent was over 3 years and 11 months. An amount of K5,170.00 would therefore have been due and owing by the defendant to the plaintiff and not K4,070.00 as is claimed by the plaintiff. However, since the plaintiff only claims K4,070.00 for the period specified, I will find as a fact that the defendant owed the plaintiff the sum of K4,070.00 for outstanding rental prior to 21 January 2011. I am satisfied that the defendant committed an essential breach of the lease agreement for non-payment of rent for over three years.
59. As it turned out, because of the arrears in rental which had been unpaid for over three years and in the light of Clause 9 (a) giving it the right to re-enter and take possession of the demised premises in that situation, the plaintiff exercised its option to determine the lease under Item 6 of the Schedule to the lease agreement. Part of Item 6 which specifies the term of the lease agreement states:
"Each party has the option to terminate this Agreement upon giving three (3) months notice in writing"
The option is expressly made exercisable by either party. Generally, a proviso conferring the option allows a party or parties to determine a lease at a stated time or times or on the happening of an event before the expiry of the lease and it must be strictly observed. Apart from the requirement to give three months notice in writing, there is no specified condition precedent to the exercise of the option by either party in the present case. The plaintiff's letter to the defendant dated 7 January 2011 giving notice to the defendant to vacate the property within three months from the date of the letter was therefore in order.
60. The defendant tried to settle the arrears in rental after he received the plaintiff's letter to him dated 7 January 2011. The plaintiff was entitled to either accept or reject the payment and it chose the latter.
61. As to whether the defendant was guilty of sub-leasing part of the demised premises to a third party, R & A Marine Services Ltd without the plaintiff's authorisation, the defendant's defence is that it was done with the full knowledge of the plaintiff and the plaintiff did nothing to stop R & A Marine Services Ltd from occupying that part of the demised premises. Clause 3 (e) of the lease agreement prohibits the defendant from sub-leasing the demised premises or part of it during the continuance of the lease agreement to any other person without the prior written approval of the plaintiff. Clause 3(e) states:
"That except with the prior written approval of the Lessor (which approval shall not be unreasonably withheld), the Lessee shall not at any time during the continuance of this Sub-Lease assign, transfer, sublet, or part with the possession of the demised premises or any part or parts thereof nor by any act or deed procure the same or any part or parts thereof to be assigned, transferred or sublet to or put in possession of any other person."
62. There is no evidence before me to suggest that the defendant got the prior written approval of the plaintiff prior to sub-leasing part of the demised premises to R & A Marine Services Ltd in January 2008 as a ship yard at an annual rent of K8,160.00 or K680.00 per month. A copy of the agreement is in evidence and is annexed to the affidavit of Tass Allayialis as annexure "A". Further evidence of the sub-lease is contained in letters from; R & A Marine Services Ltd to the defendant dated 27 October 2010; the defendant to R & A Marine Services Ltd dated 17 March 2011; R & A Marine Services Ltd to the plaintiff dated 20 April 2011; and R & A Marine Services Ltd to the plaintiff dated 8 April 2011. Copies of those correspondence are annexed to the affidavit of Tass Allayialis as annexures "B", "C", "D" and "E" respectively. By annexure "B", R & A Marine Services Ltd confirmed that the annual rent for 2009 was paid in full in 2009 and that the annual rent for 2010 would be off-set against an advance of K5,700.00 received from R & A Marine Services Ltd. Annexure "C", "D" and "E", demonstrate that the defendant requested payment for rent from R & A Marine Services Ltd.
63. Tass Allayialis' evidence is that at the time he entered into the sub-lease with the defendant, he had no prior knowledge about the relationship between the plaintiff and the defendant. He only learnt about the relationship that the defendant had with the plaintiff in or about late 2010 when the defendant approached his company for an advance to settle his rental arrears with the plaintiff.
64. I find as facts that the sub-lease between the plaintiff and the defendant was not authorised by the plaintiff and the defendant was receiving income from R & A Marine Services Ltd from the unauthorised sub-lease.
65. Arrears of rental aside, the plaintiff also relied on a letter it received from the Acting Police Station Commander at Kimbe reporting on illegal activities such as the smuggling and consumption of illicit drugs namely, marijuana and home brewed alcohol contributing to law and order problems at the wharf area involving persons residing with the defendant to review its earlier notice and bring forward its demand for vacant possession within 14 days from the date of its letter to the defendant dated 21 January 2011. Copies of those letters are in evidence and are annexed to the affidavit of Tass Allayialis as annexures "E" and "F".
66. The defendant's contention in his defence is that the reasons supporting the grounds for termination contained in annexure "F" of the affidavit of Tass Allayialis lacked substance and amounted to a breach of natural justice. Furthermore, it was averred in the defence that the allegation about illegal activities conducted by the defendant's relatives at the demised premises was perpetrated by foreign interests at the waterfront and the police did not actually conduct any raid or make any arrest with respect to the allegation. I reject the defendant's contention.
67. The report from the police was not the only basis for the plaintiff's action of 21 January 2011. Breaches for arrears in rental and the unauthorised sub-lease were the other factors. Even if the police report had no valid basis as is alleged by the defendant, it is of no consequence in my view.
68. I agree with the plaintiff's contention that the notice of 7 January 2011 was superseded by the plaintiff's letter to the defendant dated 21 January 2011. The exercise of the option to terminate the lease agreement by three month's notice was therefore negated. I am satisfied that the plaintiff's action of 21 January 2011 to terminate the lease agreement on 21 January and giving 14 days to the defendant to vacate the demised premises was sanctioned by Clause 9 (a) of the lease agreement. Clause 9 (a) applies to breaches for non-payment of rent and other breaches of the lease agreement as well in my view. It is clear that re-entry is based on a breach of a covenant.
69. The plaintiff was entitled to exercise its right of entry to recover the demised premises. The termination of the lease agreement was warranted. It is therefore entitled to vacant possession of the demised premises.
70. If however the defendant considers that the lease agreement was terminated unlawfully, then I agree with the plaintiff's submission that his remedy may lie in a separate claim for damages.
Third issue:
71. As to whether the plaintiff is entitled to mesne profit, I make the following observations. McGregor on Damages, Sweet & Maxwell Limited, 14th Edition, (1980), Chapter 32, deals with torts affecting land.
72. At paragraph 1135 the learned author describes what the action for mesne profit is about. He states, inter alia,:
"Where the defendant wrongfully deprives the plaintiff of his land, the plaintiff will generally wish to recover not the value of the land but the land itself. The principal action is therefore an action for the recovery of the land, historically better known as the action of ejectment. Damages will thus generally be limited to loss arising from the period of wrongful occupation by the defendant. Such damages are recoverable in the action for mesne profits, in origin an action of trespass..."
73. At paragraph 1136, the learned author states what the normal measure of damages is in an action for mesne profit. He states, inter alia,:
"The normal measure of damages is the market value of the property occupied or used for the period of wrongful occupation or user. There is little authority, but this measure is consonant with general principles and with the name of the action for wrongful occupation as one for mesne profits. If the rental value varies due to market fluctuations during the period of wrongful occupation, these fluctuations should be taken into account. If the defendant makes improvements on the land, the rental value should be assessed upon the unimproved..."
74. Since the termination of the lease agreement on 21 January 2011, the defendant continued to be in occupation of the demised premises without any legal basis. The plaintiff was wrongfully dispossessed of the demised premises therefore has a right of action against the defendant for mesne profits: see for instance, Seafreight Pty Ltd v Bishop Shipping Services Pty Ltd [1976] PNGLR 22. The right to mesne profit accrues from the date of determination of the lease agreement and in the present case it will be calculated from 21 January 2011 to the date vacant possession is given to the plaintiff. Assessment of mesne profits will be calculated at the rate of K110.00 per month as from 21 January 2011 until date of vacant possession.
Fourth issue:
75. The plaintiff has not pursued any other damages. I will therefore not make any award for this claim.
Fifth issue:
76. As to what interest rate should apply, I will award interest at the rate of 8% per annum to the plaintiff on the amount of the outstanding rental and mesne profits in accordance with section 1 (1) of the Judicial Proceedings (Interest on Debts and Damages) Act, Chapter No 52. In fairness and in the exercise of my discretion, interest will be calculated from 21 January 2011 to the date of this judgment.
Judgment:
77. I direct the entry of judgment in favour of the plaintiff.
Formal orders:
78. The formal orders of the Court will be that:
Judgment accordingly.
____________________________________________________
Joseph Aisa, In-house Lawyer: Lawyer for the Plaintiff
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