Kanturk Ltd v Kawage [2024] PGNC 261; N10928 (26 July 2024)

N10928

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1416 OF 2015

BETWEEN:
KANTURK LIMITED
Plaintiff

V

JOE KAWAGE
First Defendant

AND

PIAWA TOKO LIMITED
Second Defendant

Waigani: Anis J
2023: 8^th May
2024: 26^th July

CLAIM IN CONTRACT – claim for enforcement premised on contract for sale of land between the seller and the first intended buyer – contract signed between the seller and first intended buyer – seller sells the same land to a second buyer – second buyer a bona-fide purchaser – second buyer purchases and registers land under its name as the registered proprietor before proceeding was commenced by the first intended buyer against the seller and the second buyer – matter appealed to the Supreme Court – appeal upheld and matter referred to the National Court for re-hearing premised on evidence that had been filed and also premised on the findings of the Supreme Court – consideration – seller now deceased – who should be held liable and what type of damages should be awarded, allowance for them and to who? - ruling

Cases Cited:
Joe Kawage and Paiwa Toko Limited v. Kanturk Limited (2020) SC1990
Irafawe v Riwong (1996) N1915
Toap v The State [2004] 1 PNGLR 191
Papua New Guinea Banking Corporation Ltd v. Jeff Tole (2002) SC694
Kalinoe v. Paul Paraka (2014) SC1366
National Capital District v. Central Provincial Government (2015) SC1429
Tubo Trucking Limited v. Tony Kila and 1 Or (2024) N10861

Counsel:
Mr. S. Gor, for the Plaintiff
Mr. J. Kama, for the Second Defendant
Nil appearance by the First Defendant

JUDGMENT

26^th July 2024

1. ANIS J: This was a re-hearing on enforcement of a contract for sale of land (Contract of Sale). Final submissions were presented on 8 May 2023 before I reserved my ruling.

2. Parties have been notified so I will rule on it now.

BACKGROUND

3. The plaintiff’s initial complaint was this. It claimed that on 31 January 2014, it entered into the Contract of Sale with the first defendant, for the first defendant to sell his land to it for K1,300,000. The land is described as State Lease, Volume 49, Folio 35, Allotment 26, Section 70 (the Property). The plaintiff also claimed, (i), that the parties also executed a transfer instrument on 31 January 2014, (ii), that it had lodged and paid the stamp duty tax of K65,000 for the Contract of Sale and other associated costs, (iii), that on 16 October 2014, it obtained the required Ministerial Approval to complete the transaction through settlement, and (iv), however, the first defendant had refused to settle or complete the sale. The plaintiff later learnt that the first defendant had purportedly sold the Property to the second defendant under a second contract of Sale of Land (2^nd Contract of Sale).

4. Aggrieved by this, the plaintiff filed the proceeding on 6 October 2015. The main claim was enforcement of the Contract of Sale under the terms as agreed between the parties, that is, the plaintiff requested the Court to order the parties to settle and complete the sale and to order transfer and registration of its interest as the registered proprietor of the Property. The matter was tried before Hartshorn J. On 9 December 2019, His Honour handed down his final ruling which included the following:

1. Judgment is entered for the plaintiff against the first and second defendants.
   
2. This matter is adjourned to a date to be fixed for the parties submissions on the orders to be made to enable the plaintiff to have specific performance of its contract with the first defendant.
   

5. The defendants appealed against this decision in SCA 8 of 2020; Joe Kawage and Paiwa Toko Limited v. Kanturk Limited. On 27 August 2020, the Supreme Court upheld the appeal in its unreported decision, Joe Kawage and Paiwa Toko Limited v. Kanturk Limited (2020) SC1990 (SCA 8 of 2020). Its final orders read:

(1) The appeal is allowed.

(2) The order of the National Court of 9 December 2019 in WS No 1416 of 2015 is quashed.

(3) WS No 1416 of 2015 is remitted to the National Court for further conduct of those proceedings, subject to the requirement that the parties be invited to make fresh submissions (based on the evidence before the National Court, and the proper determination of the National Court that there was a breach of the contract between the first appellant and the respondent committed by the first appellant) as to what orders should be made by the National Court in the light of the judgment of the Supreme Court, including whether the respondent should be awarded damages.

(4) The parties shall bear their own costs of the appeal.

6. So, on 8 May 2023, the parties proceeded to present their submissions premised on the already tendered evidence that had been allowed by Hartshorn J. The evidence were identified by counsel for the plaintiff and the second defendant at the hearing.

7. The first defendant is deceased. He passed on before the hearing. Due notices were however given by the plaintiff to the office of the Public Trustee. Having satisfied myself that the first defendant had been duly served, the trial proceeded, and closing submissions were presented and received by this Court from the parties.

SCA 8 of 2020

8. As a start, let me put into perspective the findings and determinations of the Supreme Court in SCA 8 of 2020 (or what has already been decided), to what may be heard and decided by this Court. And the best way to address these, in my view, is to consider the competing preliminary issues raised by the parties.

9. The first issue is whether the second defendant has been exonerated of any liability premised on the Supreme Court’s decision in SCA 8 of 2020. To answer that, I first consider the Amended Writ of Summons and Statement of Claim (ASoC) filed 14 March 2017. I observe that the second defendant is joined and sued premised on the plaintiff’s argument against the legal principle, Bona Fide Purchaser. The plaintiff asserts at para. 33 of the ASoC that “At all material times the Second Defendant knew or ought to have known that the First Defendant contracted with the Plaintiff to sell the Property to the Plaintiff.” And premised on this claim, the plaintiff asserts the second defendant was not a bona fide purchaser, and the plaintiff seeks damages against the second defendant for breach of contract and bad faith.

10. The Supreme Court in SCA 8 of 2020 has made a determination on this issue. The Court considered the evidence filed by the parties that were before the primary judge and found no or insufficient evidence that supported the primary judge’s finding that the second defendant was not a bona fide purchaser. The Supreme Court, in its ruling, noted that the burden of proof on the matter was bestowed upon the plaintiff. However, the Court found that the plaintiff’s adduced evidence were insufficient to discharge the said burden. The Supreme Court’s decision on point is contained at paras. 21 to 23 in SCA 8 of 2020.

11. Therefore, and to summarise, I will remark that there is no basis for the plaintiff to continue to pursue or maintain its claim against the second defendant; that its said claim had been considered and determined by the Supreme Court in SCA 8 of 2020.

12. The next preliminary issue raised is whether the Contract of Sale, its validity and existence, has already been decided by the Supreme Court and the primary judge. The plaintiff argues in the affirmative and submits that the issues have been decided in its favour. It also made submissions that in the event this Court interprets otherwise, that the Contract of Sale is valid, binding and that it was never terminated. Detailed submissions on this are captured in its written submissions to this Court. The Public Trustee, however, did not appear at the hearing to provide a response on behalf of the first defendant.

13. In my view, these issues have been decided by the primary judge which were later affirmed by the Supreme Court. I refer to paras. 6, 7 and 8 where the Court said:

“6. We find that there was no credible evidence or argument that Kanturk breached the first contract by not providing a copy of the contract to Kawage.

7. That issue was not included in Kawage’s defence. The trial judge focused in the defences pleaded by Kawage that there was difficulty in giving vacant possession to Kanturk and difficulty in changing the status of the State Lease from residential to commercial use.
8. His Honour properly found that the defence were not supported by the evidence, that the first contract was valid and enforceable, that it had not been breached by Kanturk and that it had not been lawfully terminated by Kawage. We dismiss ground 1. “
   

[Underlining mine]

14. The Supreme Court also made the same finding at para. 10 of its decision.

15. Term 3 of the primary judge’s decision reads, Judgment is entered for the plaintiff against the first and second defendants. Given that the second defendant has been cleared by the effect of the decision of the Supreme Court, it means that judgment can only be entered against the first defendant. The Supreme Court did not find that the primary judge erred in his decision:

(i) regarding the validity and enforceability of the Contract of Sale, and

(ii) on his conclusion or finding that the Contract of Sale was not lawfully terminated.

16. Consequently, what this means, in view of my determinations of the 2 preliminary issues, or to be precise, in view of what the Supreme Court has held, is this; that what remains alive for determination by this Court is assessment of damages against the first defendant.
DAMAGES

17. For clarity, the plaintiff’s claim for specific performance has been ruled out by the Supreme Court. The Court’s findings on this point is captured at paras. 17, 18, 19 and 20 where the Court stated:

“17. There is more merit in (c). The fact is there was a transfer of the State Lease over Section 70, Allotment 26 from Kawage to Piawa Toko registered on 27 August 2014. On that date Piawa Toko became registered proprietor and enjoyed protection of the principle of indefeasibility of title subject only to the exceptions in s 33 of the Land Registration Act (Mudge v Secretary for Lands [1985] PNGLR 387). Significantly, it became registered proprietor before the filing of the writ on 6 October 2015, and well before the trial on 9 May 2018.

18. We find that this fact – that Piawa Toko was the registered proprietor of the property – was in evidence in the National Court, but it was not brought to the trial judge’s attention by any of the parties. It was a critical fact, which favoured the appellants, but it was left buried in the annexures to the affidavit of Mr Kawage, filed 7 November 2016, and admitted into evidence at the trial as exhibit 1. It was not highlighted by any of the counsel in submissions.
    
19. It is difficult to overestimate the significance of the fact that Piawa Toko was the registered proprietor. It has indefeasible title, in the relevant sense. This made it unjust and inequitable for its title to be put in jeopardy by an order for specific performance of the first contract. Moreover the fact that it was the registered proprietor made it virtually impossible for the order for specific performance of the first contract to be given practical effect.
    
20. An order for specific performance should only be made when it is just and equitable to do so, (Koang No 47 Pty Ltd v Mondo Merchants Pty Ltd (2001) SC627). Here it was unjust and inequitable to order specific performance of the first contract. We consider with respect that the learned trial judge erred in law in granting specific performance but we quality that finding by emphasising that His Honour was led into error by a lack of diligence on the part of all counsel who appeared at the trial in not bringing a critical fact to the Court’s attention. We uphold ground 4(c).”
    

18. The remaining relief for assessment by this Court are relief (iv), (v), (vi) and (vii) in the ASoC, which are as follows:

“(iv) The sum of K102,000,000 as a debt for money advanced by the Plaintiff to the First Defendant under the Contract for Sale;

(v) The sum of K65,000 (as stamp duty paid) and K50 (as fees for ministerial approval paid) by the Plaintiff in compliance with the Contract of Sale ;

(vi) Damages as assessed by the Court against the First Defendant for breach of Contract for Sale and acting in bad-faith;

(vii) Damages as assessed by the Court against the Second Defendant.”

19. Let me address the first relief, that is, for reimbursement of K102,000. The plaintiff sets out the break-up at para. 9 of the ASoC as follows:

“i. K5,000.00 on 31 January 2014;

2. K15,000.00 on 17 February 2014;
3. K5,000.00 on 27 May 2014;
4. K10,000.00 on 13 June 2014; and
5. K62,000.00 on 23 June 2014.”
   

20. I note that the correct sum under relief (iv) is K97,000 and not K102,000 as pleaded therein. The first defendant has admitted to receiving these monies at para. 23 of his affidavit filed 21 June 2016, and he also deposes that he would reimburse the monies. The said affidavit was filed earlier when the matter was tried before Hartshorn J thus is properly before this Court for consideration. In addition, or regardless of this evidence, the plaintiff has adduced evidence to prove that the payments were made on the respective dates to the first defendant. I refer to the affidavit of Joseph Holloway filed 16 October 2015. Again, this evidence was tendered at the initial primary hearing before Hartshorn J which is properly before me for consideration. At para. 13, Mr Holloway attaches as annexures E1 to E5, receipts of payment of these monies by the plaintiff to the first defendant.

21. I am therefore minded to make an order for the first defendant to reimburse the plaintiff in the sum K97,000.

22. The plaintiff also seeks reimbursement of K65,000 as stamp duty fee that it had to pay to the Internal Revenue Commission in relation to the Contract of Sale. This claim is pleaded at para. 13 of the ASoC. The first defendant did not give any evidence to rebut this claim. The plaintiff gave evidence of this through the affidavit of Armon Kumunke filed 14 December 2017.

23. I am minded to allow the re-imbursement of K65,000 plus associated fees which will add to K65,060. The total award made is K65,060 as reimbursement sum to be ordered in favour of the plaintiff. I, however, reject the claim for K100 as payment fee for a caveat over the Property. The claim and sum are not pleaded in the ASoC. See cases: Irafawe v Riwong (1996) N1915, Toap v The State [2004] 1 PNGLR 191, Papua New Guinea Banking Corporation Ltd v. Jeff Tole (2002) SC694, Kalinoe v. Paul Paraka (2014) SC1366, National Capital District v. Central Provincial Government (2015) SC1429, and Tubo Trucking Limited v. Tony Kila and 1 Or (2024) N10861.

24. In regard to relief (vi), general damages for breach of contract, the plaintiff requests that this Court should order a separate assessment hearing for that. However, I note that there is no pleading in the ASoC for breach of contract against the first defendant. Without the said pleading, the plaintiff, in my view, cannot or is not entitled, to claim relief (vi). I therefore dismiss relief (vi) as a relief that the plaintiff is entitled to seek against the first defendant. In the event that the relief is already deemed to be before this Court for consideration, for the same reason, I decline to make any award in that regard.

25. The plaintiff also seeks assessment of damages against the second defendant under relief (vii) at para. 35 of the ASoC. For clarity, premised on my rulings herein and the decision of the Supreme Court in SCA 8 of 2020, this relief and any other relief that are sought against the second defendant are dismissed.

SUMMARY

26. In summary, I will make the awards as per my findings in favour of the plaintiff against the first defendant.

COST

27. The plaintiff seeks in the ASoC that cost of the proceeding should be awarded on an indemnity basis against the defendants. I am minded to make an order for cost using the said cost scale but only against the first defendant. However, in relation to the plaintiff’s action against the second defendant, which is dismissed, I will order each party to bear their own costs.

ORDERS OF THE COURT

28. I make the following orders:

1. The claim against the second defendant is dismissed with each party to bear their own cost.
   
2. The claim for enforcement of contract by the plaintiff against the first defendant was affirmed by the Supreme Court in SCA 8 of 2020; Joe Kawage and Paiwa Toko Limited v. Kanturk Limited, however, the Supreme Court also ruled that the equitable relief specific performance could not be sought because the second defendant had already acquired title over the concerned land (State Lease, Volume 49, Folio 35, Allotment 26, Section 70) as its registered proprietor and is protected under the principle, indefeasibility of title.
   
3. The Supreme Court also found that the plaintiff did not adduce sufficient evidence before the primary judge that could have established that the second defendant was not a bona fide purchaser, and as such, ruled that His Honour erred in that regard.
   
4. The sums K97,000 and K65,060 are awarded to the plaintiff against the first defendant.
   
5. The first defendant shall pay the plaintiff’s cost of the proceeding on an indemnity basis which to be taxed if not agreed.
   
6. Time for entry of these orders is abridged to the date and time of settlement by the Registrar of the National Court which shall take place forthwith.
   

The Court orders accordingly

________________________________________________________________
Fiocco & Nutley Lawyers: Lawyers for the Plaintiff
Jerry Kama Lawyers : Lawyers for the Second Defendant