Rau v Kone [2014] PGNC 347; N5804 (24 October 2014)

N5804

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 216 OF 2012

LETINA RAU
Plaintiff

V

ALBERT KONE
First Defendant

DOMINIC AGLUA
Second Defendant

Waigani: Cannings J
2014: 14, 24 October

CONTRACTS – alleged breach of agreement for sale of land – part-performance – dispute as to terms of contract – whether defendant breached agreement for sale of land to plaintiff

REMEDIES – specific performance – laches: delay in seeking relief – whether appropriate remedy for breach of contract is damages

The plaintiff claimed that she in 1995 entered into an agreement with the first defendant for sale of his property (a residential block of land, including a house) to her for K15, 000.00, that she paid a down-payment of K7, 000.00 in accordance with the agreement but that the first defendant failed, upon securing title to the property in 2003, to transfer title to her, thereby committing a breach of contract. In 2012 she brought an action in breach of contract, claiming the equitable remedy of specific performance of the contract and in the alternative, damages.

Held:

(1) An enforceable contract existed between the plaintiff and the first defendant for the sale of the property for K15,000.00.

(2) The terms of the contract included that the plaintiff would pay a down-payment of K7,000.00, that the first defendant would transfer title to the plaintiff within a reasonable time after obtaining title, and that the plaintiff would then pay the first defendant K200.00 per month until such time as a further K8,000.00 was paid.

(3) The first defendant obtained title in 2003 and breached the contract by not transferring title to the plaintiff within a reasonable time.

(4) Specific performance of the contract was not, however, granted due to the lapse of nine years between the first defendant obtaining title and the plaintiff seeking to enforce her rights under the contract. Further, the breach of contract occurred due to understandable confusion on the part of the first defendant as to his contractual obligations and the plaintiff had occupied the property rent-free for 19 years.

(5) The plaintiff was awarded damages of K7,000.00 (being the amount paid to the first defendant in 1995) and interest of K10,920.00, a total judgment sum of K17,920.00; and it was further ordered that the plaintiff has the right to continue occupying the property until the date that is two months after full payment of the judgment sum, and that by that date she must vacate the property leaving it in good order and condition.

TRIAL

This was a trial for breach of contract.

Cases cited

The following case is cited in the judgment.

Fred Angoman v Independent Public Business Corporation (2011) N4363

Counsel

D Kamen, for the plaintiff
A Donigi, for the first defendant

24th October, 2014

1. CANNINGS J: The plaintiff Letina Rau seeks specific performance of a contract for the sale of land she entered into in 1995 with the first defendant John Kone. The land is a residential block, Section 306, Allotment 3, Tarumana Avenue, Gerehu, National Capital District. Mrs Rau claims that the agreed sale price was K15,000.00. She says that she paid a down-payment of K7,000.00 to Mr Kone in 1995 and under the terms of the contract he was to transfer title to her within a reasonable time after securing title and then she was to complete the contract by paying him a further K8,000.00 in monthly instalments of K200.00. She claims that Mr Kone, having obtained title to the property in 2003, failed to transfer title to her, thereby committing a breach of contract, and that in 2011 title was transferred to the second defendant, Dominic Aglua. In 2012 she commenced these proceedings, claiming the equitable remedy of specific performance of the contract and in the alternative, damages.

2. Mr Kone does not dispute that he entered into a contract of sale with Mrs Rau in 1995. At that time the National Housing Corporation was the registered proprietor but Mr Kone had been informed that title would be transferred to him under the Corporation's home ownership scheme. He does not dispute that the agreed sale price was K15,000.00 and that under the contract Mrs Rau would pay him a down-payment of K7,000.00. He does not dispute receiving that sum in 1995. He does not dispute that in 2003 he obtained title and that he has taken no steps to transfer title to Mrs Rau. He does not dispute that in 2011 title was transferred to Mr Aglua but he says that that occurred without his knowledge and that the transfer has since been annulled. What he disputes is the timing of the payment of the balance of K8,000.00. He says that the agreement was that that sum would be paid to him before he was obliged to transfer title to Mrs Rau. He says that she has never paid that money to him, so he has not committed any breach of contract.

3. The parties agree that the transfer of title to Mr Aglua has been annulled and that Mr Kone is still the registered proprietor and that it is unnecessary for Mr Aglua to be further involved in the case. There are two issues:

• Has Mr Kone breached the contract by not transferring title to Mrs Rau?
  
• What orders should the Court make?
  

HAS MR KONE BREACHED THE CONTRACT BY NOT TRANSFERRING TITLE TO MRS RAU?

4. I find that Mr Kone did breach the contract by not transferring title to Mrs Rau as it was not a term of the contract that he was obliged to transfer title after receiving the sum of K8,000.00. It was the other way around: he was obliged to transfer title within a reasonable time after obtaining title, and then Mrs Rau was obliged to pay him the sum of K8,000.00. I base this interpretation of the terms of the contract on two documents.

5. The first document is headed "DECLARATION" and it appears to be the principal, but not the only, document setting out the terms of the contract. It states:

DECLARATION

I, ALBERT KONE, THE PURCHASER OF THE PROPERTY LOCATED ON SECTION 306, ALLOTMENT 03 AT GEREHU, SIGNED THE LEGAL DOCUMENTS IN WHICH I HAVE NOT YET RECEIVED SAME FROM THE NATIONAL HOUSING CORPORATION, AND NOW DECIDED TO SELL IT TO LETINA RAU, C/- PO BOX 3062, BOROKO.

THE FIRST CASH DEPOSIT OF K7,000.00 WAS RECEIVED AT 12.00 PM ON FRIDAY 21ST APRIL 1995, AND THE BALANCE WILL BE SETTLED AT A LATER DATE.

ONCE, THE TITLE IS RECEIVED FROM THE NATIONAL HOUSING CORPORATION, I WILL ARRANGE TO TRANSFER IT TO LETINA AT THE TIME THE SETTLEMENT IS MADE.

SIGNED: ____[signed]___

ALBERT KONE

DATE: 21/04/95

PAYMENT MADE BY ___[signed]__ 24/04/95

LETINA RAU

DATE: 24/04/95

WITNESS: _____[signed]___

PETER NUPI

DATE: 24/04/95

6. The second document is a statutory declaration of Mr Kone made at Boroko District Court on 24 April 1995, which states:

I, ALBERT KONE, DO SOLEMNLY AND SINCERELY DECLARE THAT THIS PROPERTY AND LAND IN SECTION 306, ALLOTMENT 3 TO NEW OWNER BY THE NAME OF MRS LETINA RAU, TO AN AGREEMENT WE HAVE COME TO AN UNDERSTANDING TO DO PART PAYMENT OF K7,000.00 AND TO WITNESS BY CARETAKER MR PETER NUPI, EX MEMBER OF POLICE FORCE.

I, ALBERT KONE, TO MOVE OUT OF THE LAND AND PROPERTY AT THE END OF SECOND WEEK OF MAY.

THIS AGREEMENT IS WITNESSED BY BOROKO DISTRICT COURT THAT MONTHLY PAYMENTS WILL BE PAID AT THE AMOUNT OF K200.00 TO COMPLETE THE TOTAL OF K15,000.00.

The monthly payments to begin at a time agreed to by the two parties after the land title is transferred to Mrs Letina Rau Komen by me (Albert Kone).

THE PURCHASER [... signed ..] WITNESS FOR PURCHASER [... signed ..]

THE TENANT [... signed ..]

THE WITNESS [... signed ..]

7. The italicised words in the statutory declaration are written by hand, whereas the other words are typed. Mr Donigi, for Mr Kone, submitted that the handwritten words had been added after the making of the statutory declaration and that this is evidence of forgery of the document. This was a very serious allegation, which I reject as no defence was filed by Mr Kone and it was an allegation made without notice to the other side, and besides that, having examined the document, I am not convinced that the allegation has substance.

8. The italicised words are sufficient evidence to clarify that the obligation to pay the balance of K8,000.00 would only arise after the transfer of title to Mrs Rau, and that Mr Kone was obliged to transfer title to Mrs Rau within a reasonable time after obtaining it. He did not do that, therefore he breached the contract.

WHAT ORDERS SHOULD THE COURT MAKE?

9. Mrs Rau wants the court to grant a decree of specific performance of the contract, ie a court order directing Mr Kone to perform the 1995 contract by immediately transferring title to her, in which case she would be obliged to commence paying him the balance of the purchase price of K8,000.00.

10. Specific performance of a contract is an equitable remedy, ie the court has discretion as to whether to grant it. I exercise that discretion, having taken into account the relevant considerations highlighted by Kariko J in Fred Angoman v Independent Public Business Corporation (2011) N4363, by declining to grant of specific performance, for the following reasons:

• there was a lapse of nine years between Mr Kone obtaining title, in 2003, and Mrs Rau seeking to enforce her rights under the contract by commencing court proceedings, in 2012, and in such a situation the doctrine of laches applies;
  
• during that nine-year period Mr Kone is entitled to have formed the view that Mrs Rau was no longer interested in purchasing the property;
  
• it is reasonably to be expected that the value of the property has increased substantially during the period since 1995, particularly since 2003, and therefore Mr Kone will be substantially prejudiced if he is forced to dispose of his interest in the property for the amount agreed to in 1995;
  
• though Mr Kone committed a breach of contract, I am satisfied that this did not occur due to any bad faith on his part; it was more a product of understandable confusion as to his contractual obligations arising from the fact that the contract was of an informal nature and was not drafted in clear and unambiguous language;
  
• Mrs Rau has occupied and had the use of the property rent-free for 19 years; and
  
• though Mrs Rau has improved the property and evidently spent a considerable amount of money in doing so, this has been done subject to the risk that any person takes when they develop and put money into land that they do not own.
  

11. The appropriate remedy is an order for damages These are equitable damages and are to be awarded at the discretion of the court. Mrs Rau will be awarded a refund of the K7,000.00 she paid in 1995. But nothing more. She has had the rent-free use of the property for 19 years. She has invested money in the property but took a big risk in doing so. She has suffered stress and anxiety but there is little doubt that Mr Kone has similarly suffered. Though I found that Mr Kone committed a breach of contract, I do not label him, in equitable terms, as a wrongdoer. Nor is Mrs Rau a wrongdoer. I consider that both are equally to blame for landing themselves in this unfortunate predicament due to their entry into such a loosely worded and vague agreement in 1995.

12. Interest is awarded at the rate of 8 per cent per annum on the total amount of damages under Section 1(1) of the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52. Interest is calculated in respect of the period from the date of payment of the down-payment (April 1995) to the date of this judgment (October 2014), a period of 19.5 years, by applying the formula D x I x N = A, where D is the total amount of damages awarded, I is the rate of interest per annum, N is the appropriate period in years and A is the amount of interest. Thus K7,000.00 x 0.08 x 19.5 = K10,920.00.

The total judgment sum is damages of K7,000.00 + interest of K10,920.00 = K17,920.00.

13. I will order that Mrs Rau has the right to continue occupying the property until the date that is two months after Mr Kone makes full payment of the judgment sum, and that by that date she must vacate the property leaving it in good order and condition. Neither party has clearly won the case, so they will bear their own costs.

ORDER

(1) The first defendant shall pay to the plaintiff K7,000.00 damages plus K10,920.00 interest, being a judgment sum of K17,920.00.

(2) The plaintiff has the right to continue occupying the property, Section 306, Allotment 3, Tarumana Avenue, Gerehu, National Capital District, until the date that is two months after full payment of the judgment sum, and by that date she and her family members and associates must vacate the property leaving it in good order and condition.

(3) All other relief sought in the amended statement of claim is refused.

(4) The parties shall bear their own costs.

_________________________________________________________
Kamen Lawyers: Lawyers for the Plaintiff
Public Solicitor: Lawyer for the first Defendant