Arrow Trading Ltd v New Ireland Development Corporation Ltd [2018] PGNC 598; N8337 (7 May 2018)

N8337

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 799 of 2015

BETWEEN:
ARROW TRADING
LIMITED
Plaintiff

AND:
NEW IRELAND DEVELOPMENT
CORPORATION LIMITED
Defendant

Waigani: Hartshorn J.,
2018: 7^th May

LEASE - Tenant and landlord - Trial - plaintiff seeks declaratory relief – renewal of lease agreement – whether Arrow Trading gave any written request to renew the lease pursuant to clause 22 of the lease agreement and therefore did it exercise the option as provided – plaintiff did adequately give a written request to NIDC in terms of what clause 22.1 of the lease required – lease renewed – orders to renew lease granted

Counsel:

Mr. S. Ketan, for the Plaintiff
Mr. W. Bigi and Mr. G. Gaudi, for the Defendant

7^th May, 2018

1. HARTSHORN J: The plaintiff seeks declaratory relief to the effect that amongst others, it validly executed its option to renew its lease of a property in Kavieng, New Ireland Province with the defendant.

Background

2. The plaintiff Arrow Trading Ltd, leases a property from the defendant, the New Ireland Development Corporation Ltd (NIDC) in Kavieng Town. Clause 22 of the lease provides an option for Arrow Trading to renew the lease. A written request to renew is to be given by Arrow Trading between not more than six months and not less than three months before the lease expires. NIDC maintains that such a renewal request was not given. Arrow Trading claims that such a request was given by letter dated 20^th July 2015. NIDC concedes that if the requisite written request was given within the requisite three month period, then it would have to grant the renewal of the lease. That did not happen in this instance NIDC contends.

3. Arrow Trading further claims that as there is a dispute between the parties as to whether the requisite written notice was given pursuant to clause 22 of the lease, the dispute should be referred to the expert as provided in clause 18 of the lease or to Arbitration.

Consideration

4. NIDC submits that the “crux of the matter” is whether Arrow Trading gave any written request to renew the lease pursuant to clause 22 of the lease agreement and therefore did it exercise the option as provided. NIDC submits that Arrow Trading’s letter of 20^th July 2015 does not amount to a notice of renewal.

5. NIDC relies on amongst others, the cases of Kolum v. Motor Vehicles Insurance (PNG) Trust Ltd [2000] PNGLR 40; Kawai v. Motor Vehicles Insurance (PNG) Trust Ltd (1996) N1651; Cresta Holdings Ltd v. Karlin (1959) 1 W.L.R. 1055 and Good Year Tyre & Rubber Co (Great Britain) Ltd v. Lancashire Batteries Ltd [1958] 3 All E.R. 7 in support of its position.

6. These cases are concerned with whether “notice” has been given. Clause 22 of the subject lease does not require “notice” to be given. The requirement of clause 22 for renewal of the lease is for Arrow Trading to give NIDC “a written request” within the requisite period. I did not find the cases relied upon by NIDC to be of particular assistance.

7. Clause 22.1 of the lease is poorly drafted. An interpretation according to its wording prima facie, is that NIDC will only renew the lease if a written request is given within time and there are unremedied defaults of which NIDC has given notice to Arrow Trading, and/or Arrow Trading has persistently defaulted under the lease and NIDC has given written notice to Arrow trading of those defaults. Clearly, that is not what was intended and not what the parties intended. In the circumstances of a poorly drafted clause in a lease which is incapable of a rational interpretation prima facie, the court should ascertain the intention of the parties at the relevant time and should be slow to adversely determine substantive rights.

8. Notwithstanding that the lease contains definitions of various terms such as “notice”, there is no definition of “written request”. There is no form of a “written request” or any details of what the content of a written request should be. The only requirement that may be gleaned from the wording of clause 22, to my mind, is that when the “...Lessee give (sic) the Lessor a written request...” the request should contain a reference express or implied, that the lessee wishes to continue the lease.

9. In this instance the letter of 20^th July 2015 sets out a proposed redevelopment and then states:

“The total cost of renovation is K1,059,705.00 which Arrow trading is prepare to meet the cost. Arrow trading is suggesting to the Board of Nidc Ltd if the Board agrees the bring the rental to K14000.00 per month and ten (10) years lease in order for Arrow Trading to recoup its money back within this period. This can be discussed between us and come to common understanding.”

10. By the suggestion of a rental increase in order for Arrow Trading to recoup its money, to my mind, Arrow Trading is conveying the intention of continuing to rent the property. The suggestion would not be relevant if Arrow Trading were not to continue renting. That NIDC took the letter of 20^th July 2015 to mean that Arrow Trading wished to continue renting and therefore wanted a continuation of the lease is evidenced by the fact that in its letter of 23^rd August 2015, which specifically refers to the 20^th July 2015 letter, NIDC, after referring to the proposed redevelopment, states that, “The Board however, had made a decision not to renew...” (my underlining).

11. Given the above, I am satisfied that Arrow Trading did adequately give a written request to NIDC in terms of what clause 22.1 of the lease required and NIDC understood the letter of 20^th July 2015 to be, amongst others, a written request pursuant to clause 22.1 and treated it as such by its response letter of 23^rd August 2015. Consequently, pursuant to clause 22.3(a) of the lease the renewal of the lease commenced on the day after the lease expired.

12. Given this it is not necessary to consider the other submissions of counsel.

Orders

13. It is ordered that:

a) The relief sought in paragraphs 1, 2, 3, 4, 5, 6 and 10 only of the originating summons is granted;

b) Time is abridged.
_____________________________________________________________
Ketan Lawyers: Lawyers for the Plaintiff
Henaos Lawyers: Lawyers for the Defendant