Huang Zhi Wei v Wang Wei Ping [2024] PGNC 282; N10963 (23 August 2024)

N10963

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1337 OF 2019

BETWEEN:
HUANG ZHI WEI
First Plaintiff/First Cross Defendant

AND
MULTICO LIMITED
Second Plaintiff/Second Cross Defendant

V

WANG WEI PING
First Defendant/First Cross Claimant

AND
PING AN INVESTMENT LIMITED
Second Defendant/Second Cross Claimant

AND
WESTPAC BANK PNG LIMITED
Third Defendant

Waigani: Anis J
2023: 19^th June, 6^th July
2024: 23^rd August

CLAIM FOR UNJUST ENRICHMENT – Claim that commercial lease agreement null and void or illegal – claim for unjust enrichment – whether commercial lease agreement valid – alternative claim for breach of contract – preliminary consideration – whether alternative claim pleaded – consequences and findings – whether claim for unjust enrichment abandoned – consideration and ruling - whether cross claim established – whether plaintiffs concede to the outstanding rentals – whether outstanding rentals a non-issue and whether judgment should be entered – consequences and findings – ruling

Cases Cited:

Samson Kisa v. James Talok and Ors (2017) SC1650
Irafawe v Riwong (1996) N1915
Laki v Alaluku (2002) N2001
Toap v The State [2004] 1 PNGLR 191
Yakasa v Piso (2014) SC1330
Serah Muingepe Kani v. Barrick Niugini Limited (2024) SC2557
Pius Koroguen v Christine Wagen (2008) N3422
Jackson Laka v Pius Nui (2013) SC1223
Leonard Gaua v Joe Amir and Ors (2009) N3891
Vuksich & Borich (NZ) Limited v. Pacific Energy Aviation (PNG) Limited (2024) N10714

Counsel:

M Golu, for the Plaintiffs/Cross Defendants
M Wenge and B Tomaka, for the Defendants/Cross Claimants

DECISION

23^rd August 2024

1. ANIS J: The trial for this matter was conducted on 19 June 2023. Parties presented their closing submissions on 6 July 2023 before I reserved my decision to a date to be advised.

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

BACKGROUND

3. The third defendant has been removed from the proceeding. The first plaintiff is a director of the second plaintiff. The first defendant is also a director of the second defendant. In 2014, the second plaintiff and the second defendant decided to enter into a commercial lease agreement (Commercial Lease/Lease). So, on 18 February 2014, they signed the Commercial Lease. The first plaintiff and the first defendant executed the Lease as directors of the 2 companies. The Lessor was the second defendant, and the Tenant was the second plaintiff. The Lease was for a period of 10 years and had a fixed rental rate of K10,000 per month.
4. On 11 July 2019, the defendants terminated the Lease. The plaintiffs refused to vacate the premises, so on 24 July 2020, the defendants filed a summary ejectment proceeding in the District Court described as DC No. 251 of 2000. On 16 October 2020, the District Court granted orders to evict the defendants. So, between 24 and 26 October 2020, the defendants, with the assistance of police, evicted the plaintiffs from the premises.

5. The plaintiffs’ claim is for unjust enrichment premised on the Commercial Lease. The plaintiffs assert that the first defendant, and not second defendant, owned the property which was the subject of the Lease at the material time. They assert that they signed the Lease on the understanding that the property in question was owned by the second defendant. The property is described as Section 115, Allotment 41, Gordons, National Capital District (Property). The ownership status of the Property at the material time is in issue before this Court. The plaintiffs complain that when they found out about this alleged fact, they ceased paying rent on the basis that the Lease was null and void or illegal. They assert that the said alleged fact (i.e., first defendant being the owner of the Property) was not disclosed to them by the defendants until after the signing of the Lease. They claim that they had expanded money on the Property which had significantly increased its market value to K2,550,000. As such, they claim that despite the illegality of the Lease, the defendants were unjustly enriched by the market value of the Property, and as such, they seek to be compensated.

6. The plaintiffs filed this proceeding on 22 October 2019. At the hearing, the plaintiffs decided to abandon most of the claims and relief sought in their Statement of Claim (SoC). They seek 2 main relief, namely, relief 49(b) and 50(a) in the SoC which are as follows:

(b) A further order in the nature of a declaration that the Commercial Lease Agreement executed on 18^th day of February 2014 between Ping An Investment [1-47888] and Multi Co Limited (Second Plaintiff) is null and void.

......

(a) the sum of K2,550,000.00 for fair market assessment and valuation on improvements being buildings for Business (Commercial) and ancillary purposes.

7. In regard to the latter relief, which is the claim for K2,550,000, the plaintiffs submit in closing that they will seek a final reduced sum of K1,000,000 instead of the K2,250,000. They submit that the balance of K1,550,000 should be discounted to off-set against the defendants’ cross-claim for outstanding rentals and other associated costs.

8. The defendants filed a defence and cross-claim to the SoC, on 28 November 2019. They deny the claim and the relief sought in the SoC. In their cross-claim, they assert that the plaintiffs owe them outstanding rents under the Lease, that is, from June 2014 which they claim was the month when the plaintiffs stopped paying the K10,000 rent per month, to December of 2019. They seek the full 10 years’ rents at aggregated rates, or in the alternative, at the normal rate till the date of commencement of this proceeding. At the trial, however, Defendants opted to claim only K710,000, which was the total rent they claimed was due from June 2014 to December 2019, the latter being the year when they filed this proceeding.

EVIDENCE

9. The plaintiffs tendered a total of 2 affidavits. There were marked as Exhibit P1 and Exhibit P2. The defendants did not tender any affidavits. Their attempt to tender an affidavit at the closing submissions hearing was rejected by the Court. I would refer to the transcript of proceeding for my reasonings.

ISSUES

10. The Plaintiffs assert that the main issue for trial is whether the Commercial Lease was invalid and should be declared as null and void or illegal. I will therefore address that first. Subject to my determination on this issue, I may address issues such as whether the terms and conditions of the Lease were breached, and if so, by who, and what damages I should award. I will also consider whether the plaintiffs have made out a case for unjust enrichment.

11. In regard to the defendants’ cross-claim, the main issue, in my view and subject my findings on the above issues, is whether the outstanding rents for the sum of K710,000 is not contested or opposed by the plaintiffs; whether it is not disputed that the plaintiffs did not pay rents for the Lease from June of 2014 to the date when they were evicted from the Property in 2020 or of filing this proceeding in 2019.

CONSIDERATION

12. The plaintiffs claim that the Lease was null and void or illegal, and that this Court should make declarations to that effect.

13. The first question that comes to my mind is this. What is the cause of action? Is relief 49(b) pleaded in the SoC? And also, can this Court declare the Lease null and void or illegal for the reason that the Lessor is not the registered proprietor of the Property?

14. Upon considering the pleadings, I make various observations which are summarize as follows:

• There is no pleadings in the SoC for a cause of action for breach of contract; the alternative argument by the plaintiffs in their written submission, that if the Court finds the Lease valid, that they would sue for breach of contract, is not premised as alternative claim or at all, in the SoC.
  
• The only alternative claim that was pleaded in the SoC was made against Westpac Bank PNG Ltd who was named as the third defendant; however, and as stated above, the plaintiffs have discontinued proceeding against the third defendant.
  
• The cause of action by the plaintiffs is pleaded at para. 33 of the SoC which reads,
  
  33. The Plaintiffs made substantial personal and business losses at the Defendants’ unethical conducts. Hence, the First Defendant has unjustly enriched himself at the Plaintiffs’ expenses whose conduct are oppressive, unfairly discriminatory and unfairly prejudicial.
      

(Bold lettering mine)

• So, the main cause of action by the plaintiffs is for unjust enrichment.
  
• The plaintiffs allege that the Lease was null and void or illegal, and they seek declaration to that effect at para. 49(b) in the SoC. They claim that they only learnt that the first defendant was the owner of the Property after they signed the Lease, and therefore, that, they allege, made the Lease null and void or illegal because it was executed by the second defendant who did not own the Property.
  
• The plaintiffs did not pursue their other reason as pleaded at paras. 9 and 10 of the SoC (i.e., alleged noncompliance by the first defendant to the terms of the State Lease over the Property) which is therefore regarded as abandoned for this purpose.
  
• The pleading that asserts want of ownership of the Property by the first defendant, is contained at para. 11 of the SoC, which reads:
  
  11. Moreover, the First Defendant at the material time did not disclose to the First Plaintiff that the title to the said Property was under his personal name. However, instead, the First Defendant knowingly represented himself as the Managing Director of the Second Defendant and executed a poorly drafted Commercial Lease Agreement in the guise of Second Defendant as registered Proprietor and leased the Property to the Second Defendant (sic)
      
• The above is the only basis or reason why the plaintiffs argue that the Lease should be declared null and void or illegal.
  
• The reasoning appears illogical and misconceived. The reason I give is simple. It is not unusual for a lessor that does not own a property to sub-lease it to a third party. The main standard consideration would be that the lessor, who may be a lessee who is about to sub-lease, obtains the permission of the registered proprietor of the property. So long as the property owner is aware or gives his or her consent, the sub-lessee may further sublease a property or a portion of it to a third party. In the present case, the first defendant was alleged to have owned the Property at that time in 2014. The defendants, however, deny that in their defence and assert that the second defendant was the owner of the Property at the material time.
  
• This brings me to my second observation concerning the reason that is given by the plaintiffs to allege that the Lease was null and void or was illegal. The burden of proof rests with the plaintiffs, that is, if it is relevant at all, to prove that the first defendant was the registered owner of the Property and not the second defendant. I observe from exhibits P1 and P2, that the plaintiffs did not attach a verified copy of the title to the Property. The only evidence adduced were the written words of the first plaintiff. The relevant question then is whether I should accept the written words of the first plaintiff as good evidence, or whether it falls short of sufficient evidence for the burden of proof to shift to the defendants to disprove.
  
• But besides all that, I observe that it is not true or correct for one to make a general claim or assertion that for a lease to be valid, that it must always be counter signed by the registered proprietor of the property that is to be leased or sub-leased. Such general argument is not a rational argument in law. Unless there are express terms in the lease to that effect, a lease, which is a contract, is valid if the parties to it execute it by following the required pre-requisites of a legally binding contract, one of which is a valid consideration. In the present case, the parties had complied with the due process; the plaintiffs were given access to the Property and were permitted to conduct and operate its business there; and the Lease existed for a period of 6 years before it was terminated; and the only reason why it was terminated was because the plaintiffs had refused to pay their rents almost immediately after they occupied the Property.
  
• The plaintiffs’ conduct and argument that is put before this Court demonstrate that they may be disingenuous or mischievous in their claim; they said they knew soon after in June of 2014 that the first defendant was the owner of the Property because that was when they decided to stop paying rent; instead of addressing their complaint then by vacating the Property and terminating the Lease, they chose instead to continue to occupy the Property and to conduct their business there for 6 years without paying rent. Then when they were forcefully removed from the Property in October of 2020, they file this proceeding, and now and belatedly, they raise the argument that the Lease was null and void and illegal in the first place because they claim that the second defendant did not own the Property but yet signed the Lease as the Lessor. I find it very hard to accept the plaintiffs’ line of argument.
  
• Even if I were to follow this bizarre reason given by the plaintiffs, I note that the first defendant did sign the Lease and did expressly state under his name that he was the owner of the Property. So, in that regard, I fail to see where the plaintiffs are going with their said reasoning to seek to declare the Commercial Lease null and void or illegal.
  

15. When I take these into consideration, and in answer to the questions I posed above, I come to this conclusion and finding. The reasoning that the Lease was null and void or illegal because it was not counter-signed by the registered proprietor of the Property does not make legal sense, is irrational and cannot be sustained, and so is dismissed. Even if I may be wrong in that regard, the first defendant whom the plaintiffs accuse as the owner of the Property, did actually sign the Lease. The third reason I give is this. I am not satisfied that the plaintiffs have established their assertions that the first defendant was the owner of the Property and not the second defendant. The plaintiffs failed to adduce credible evidence, such as copy of the Title to the Property, to prove their case. The first plaintiff was not called in as a witness to testify in Court for me to make a clear assessment on whether I should believe this witness or not. The credibility of this witness was not tested in Court. Instead, I am being asked to look at what he has stated in his affidavit and accept them as true and correct. I have done that, and I come to the conclusion that the first plaintiff’s evidence falls short of proving that the first defendant owned the Property and not the second defendant. To adduce as evidence, a copy of the title to the Property, would have been sufficient proof for the burden of proof to shift to the defendants to respond. The fourth reason is this. Even if the Court accepts and makes a finding that the first defendant was the owner of the Property, I fail to see how such a finding would therefore mean that the Lease was null and void or illegal. Such a finding would be inconsequential to the validity of the Lease.

16. I therefore dismiss the plaintiffs’ claim or assertion that the Lease was null and void or illegal. Conversely, I find that the Commercial Lease was valid at the material time between the parties.

17. The plaintiffs, in their oral submission, also say that if the Court finds that the Lease was valid, then they will raise the alternative argument that it was the defendants that breached the terms and conditions of the Lease and therefore they should be held liable for breach of contract and in damages. The plaintiffs covered this line of argument in their written submission that was handed to the Court during closing submissions. However, and as stated above, the said alternative claim was not pleaded in the SoC. The only alternative claim pleaded was that made against Westpac Bank PNG Ltd on a different matter, but the said claim was abandoned. Without proper pleadings, the plaintiffs cannot make this alternative claim. Cases: Samson Kisa v. James Talok and Ors (2017) SC1650, Irafawe v Riwong (1996) N1915, Laki v Alaluku (2002) N2001, Toap v The State [2004] 1 PNGLR 191, Yakasa v Piso (2014) SC1330 and Serah Muingepe Kani v. Barrick Niugini Limited (2024) SC2557. In Samson Kasi, the Supreme Court stated at para. 15, which I adopt herein:

15. The appellant is bound by his pleadings and he cannot go outside of them on appeal viz; he cannot raise issues which he has not pleaded in the Statement of Claim. Furthermore, the failure to plead the relevant matters renders the pleadings defective and such defects cannot be cured by oral submissions during substantive hearing.

18. So, this leads me to this next question. What about their claim for unjust enrichment? When I refer to the Plaintiffs’ submissions, I note that they did not address that in both their written and oral submissions. No proper discussions or submissions were made on the law of unjust enrichment, the elements that are required to succeed in making the claim, and whether the plaintiffs have adduced evidence to meet the requirements. Cases: Pius Koroguen v Christine Wagen (2008) N3422, Jackson Laka v Pius Nui (2013) SC1223, Leonard Gaua v Joe Amir and Ors (2009) N3891 and Vuksich & Borich (NZ) Limited v. Pacific Energy Aviation (PNG) Limited (2024) N10714.

19. I therefore find that the claim for unjust enrichment has been abandoned or that it was not properly addressed by the plaintiffs at the trial for the Court to consider and make a ruling on, and so I dismiss it accordingly.

20. For the stated reasonings and findings I give, the plaintiffs’ claim as a whole shall fail.

CROSS-CLAIM

21. The defendants did not tender any evidence in regard to their cross-claim. However, I note that the plaintiffs did not dispute the fact that they did not pay the rentals shortly after they occupied the Property in 2014. In fact, and in closing and as part of their submissions on what amount of quantum should be awarded to them, they opted for K1,000,000 instead of K2,550,000 which was the sum they sought in the SoC. The plaintiffs submitted that the balance of K1,550,000 should be used to offset against the outstanding rentals that they had not paid during the tenure of the lease of the Property.

22. I also refer to admissions by the plaintiffs in their pleadings, and in particular, at para. 4 of their Reply and Defence to Cross-Claim filed 5 April 2023, where they pleaded:

4. In response to paragraphs 21(h), (i) and (j) of the Cross Claim, the Cross Defendants say:
   

(a) The non-payment of the rental was the subsequent result of the Cross Claimants’ own doing of locking out Cross Defendants’ tenants that disrupts and frustrates the Cross Defendants business activities and flow of income.

(b) Sub-leasing and renting out spaces and collecting rentals were inherent part of the business (commercial) activities allowable by the agreement between the Cross Claimant and Cross Defendant.

(Underlining mine)

23. The plaintiffs’ above defence was in response to para. 21 of the defendants’ cross claim, and for this purpose, at para. 21(h) in particular, the defendants state:

(h) Around June 2014, the Second Cross Defendants stopped paying rental to the Second Cross Claimant but had completed the partial work and started renting and collecting rentals.

24. The other observation I make relates to the evidence. From the plaintiffs’ 2 affidavits filed, which were deposed to by the first plaintiff, they do not deny that they owe the outstanding rents to the defendants. This appears to confirm what they have pleaded which is that they admit to owing the defendants the outstanding rentals for the stated period.

25. When I weigh all these, I find that there is admission by the plaintiffs that they did not pay the rents that were due under the Lease from the period of June 2014 to October 2020. I also find as a matter of fact that there is no issue or contest between the parties that rents were not paid from June 2014 to the date of filing of the proceeding. With these, I find that the plaintiffs are liable for these outstanding rents which is calculable at the rate of K10,000 per month.

26. As for assessment, I note that the defendants, in their closing submissions, are only seeking a final outstanding rental of K710,000 which was the sum calculated from February 2014 to December of 2019. This is contained in their written submission. Thus, I will refrain from considering and making any findings on the other relief sought in the cross claim. Even if I may wish to consider them, I note that the defendants have not filed any evidence to establish these other claims and relief, which means that they would most likely be dismissed if raised.

27. The question I have now is whether I should award the full amount as calculated by the defendants at K710,000 or whether the sum should be less. The calculation of the total rent, in my view, is not difficult to ascertain. From June of 2014 to October of 2020, is a total of 6 years and 4 months. I multiply 6 years by 12 and get 72 months. I add that with the 4 months and get 76 months. I then multiply 76 months by K10,000 and get K760,000. I note that my calculation goes beyond the period that is claimed for in the cross claim. As such, and following the rules of pleadings, I am minded to and will award the lesser sum. June 2014 to December 2019 is a total of 5 years and 6 months. I multiply K10,000 by a total of 66 months and get K660,000.

28. I will make an award of K660,000 for outstanding rentals to be paid by the plaintiffs.

INTEREST

29. The defendants did not seek interest in their cross claim so I will not grant interest on the judgment sum.

SUMMARY

30. In summary, I dismiss the plaintiffs’ claim and uphold the cross claim by the defendants in part.

COST

31. An order for cost is discretionary. I will order cost to follow the event on a party/party basis to be taxed if not agreed.

ORDERS OF THE COURT

32. I make the following orders:

1. The plaintiffs’ claim is dismissed in its entirety.
   
2. Judgment in the sum of K660,000 is entered in favour of the defendants/Cross Claimants against the plaintiffs/Cross Defendants.
   
3. The plaintiffs shall pay the defendants’ cost of the proceeding on a party/party basis to be taxed if not agreed.
   
4. 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

________________________________________________________________
Jaku: Lawyers for the Plaintiffs/Cross Defendants
Luthers: Lawyers for the Defendants/Cross Claimants