McCosker v Kuster [1954] PGSC 3 (5 May 1954)

IN THE SUPREME COURT OF THE
TERRITORY OF PAPUA AND NEW GUINEA
CIVIL JURISDICTION.

AT PORT MORESBY

W.S. 21 (N.G.) of 1953.

CORAM: OLLERENSHAW. A.J.

STANLEY McCOSKER and
HENRY WALFORD KING
Plaintiffs

- and -

GUSTAV THOMAS KUSTER
Defendant

WEDNESDAY the FIFTH DAY OF MAY, 1954, at 10.30 a.m.

JUDGMENT.

This action was heard by me at Rabaul on the 6th, 7th, 8th, 9th, 12th and 13th days of April and I reserved judgment to be delivered at Port Moresby.

It is, primarily, an action for the specific performance of an agreement made between the parties on the 12th February, 1952. The plaintiffs claim that they are entitled to an assignment of the interest of the defendant in "Maron Plantation," held by him under a contract for sale dated the 4^th August, 1950 and made between Burns Philp Trust Company Limited, the Administrator of the Estate of Joseph Thomas McEvoy, as vendor, and the defendant, as purchaser.

The plaintiffs claim that this agreement of the 12th February, 1952, was entered into for the purpose of dissolving and providing for the winding up of a partnership between the parties in respect of the ownership and working of the said plantation, and also of other plantation lands known as "Tulu", "Ponam" and "Nuwak", which, were also subject to the said agreement between the Trust Company and the defendant.

Alternatively, the plaintiffs claim that if a partnership did not exist in relation to these properties, they were at least co-owners defendant of his equitable interest, therein, and that the agreement of the 12th February, 1952, was made for the purpose of dividing or partitioning the properties between the parties so that the plaintiffs and the defendant respectively would take specific properties in lieu of their undivided interest in all the properties.

If the agreement in question cannot be carried into effect the plaintiffs' claim a winding up of the partnership alleged.

The defendant, in his pleadings, denied the existence of the partnership and, in effect, denied that the plaintiffs were entitled, at the time of the execution of the agreement of 12th February, 1952, to any interest in the properties, and alleged that this agreement - and this was the substantial issue between the parties at the hearing - was obtained by the plaintiff McCosker by duress fraud and misrepresentation as to its nature. In his counterclaim, the defendant sought a declaration that the agreement was void for the reasons alleged, the rescission thereof, and consequential relief.

In the course of his evidence, the defendant, while denying that there had even been an express agreement for partnership, did say that the plaintiffs had a responsibility for plantation debts equal to their one-fifth share in the properties, and were, to a like extent, liable for losses and entitled to profits.

In his addresses and conduct of the case, the defendant's Counsel, while contesting the partnership issue, took the stand that, at the date of the agreement in question, the plaintiffs were co-owners with the defendant in the terms of Exhibit "2". In his final address he invited me to find that Exhibit "2" governed the relationship of the parties and asked for an order for accounts in the terms of that document.

To my mind, there would be no material difference between partnership and co-ownership as a basis for the agreement of the 12th February, 1952. There is no doubt, and both parties took this attitude, that the relationship between the plaintiffs and the defendant, as lenders or mortgagees and borrower or mortgagor respectively under Exhibit "1" had been determined before the defendant left Rabaul in December, 1950, to take possession of the properties under the contract with the Trust Company.

Neither party adhered strictly to the pleadings, neither party objected and, in all the circumstances, I did not think that I should order amendments, unsought and without objection. The issues which the parties desired to be tried emerged clearly enough during the hearing.

The plaintiff McCosker gave evidence as did also the defendant and his wife, and I had ample opportunity of observing them as witnesses.

I have also been assisted by the exhibits, which include some correspondence between the parties, and by the conduct of the parties. I do not propose to review all the evidence. I accept the plaintiff McCosker as a truthful witness, although his memory was not always clear.

The earlier relations between the parties were evidenced by the loan agreement, Exhibit "l", and, subsequently, by Exhibit "2', whereunder the plaintiffs took a one-fifth interest in the properties, subject to the terms expressed in that document. The parties then, as I find, became partners pending the formation of a limited company to take over the properties - a company in which the plaintiffs were to hold an equal number of shares with the defendant. The plaintiffs contributed moneys to this partnership over and above those contributed by the defendant, which were intended to be treated as advances - otherwise it was a partnership on what has been called in the evidence a "fifty-fifty" basis.

The evidence does not permit me to find at what date this partnership was entered into - it was before the defendant left Rabaul on the 14th December, 1950. I do find, however, that the partnership was intended by the parties to be in substitution for their previous relationship and to commence as from the date of the contract between the defendant and the Trust Company.

This partnership was carried on, with the defendant as Manager, until the 12th Februarys 1952, when the parties entered into the agreement in question, two counterparts whereof comprise Exhibit "4".

This agreement, I find, was entered into for the purpose of dissolving the partnership, winding up its affairs and adjusting the rights of the parties. Its most important provisions, as far as this action is concerned, are that the defendant relinquished what claims he had on "Maron Plantation" and it became the property of the plaintiffs while the plaintiffs relinquished all their claims to the other properties, "Tulu", "Ponam" and "Nuwak", which became the unencumbered property of the defendant.

The defendant said that he himself did not read Exhibit "4" although he agrees that the plaintiff McCosker read it to him with, as I understood the defendant, the implication that McCosker read it falsely.

I have no hesitation in finding that there was no duress on the part of McCosker and that this agreement was prepared as the result of and in the presence of the defendant's wife, and executed in her presence, the defendant knowing and understanding what he was signing.

Three counterparts of the agreement were written out by McCosker in the defendant's home, in his and his wife's presence. It was there read over and executed and one of the counterparts, Exhibit "5", was retained by the defendant.

McCosker and the defendant took the other two counterparts to the District Office at Lorengau, where they hoped to have their execution witnessed by the District Commissioner. He was absent; however, they again executed these two counterparts and had their execution witnessed by the Administration officer at that Station. McCosker retained one of these and lodged the other with Edgell & Whiteley Limited, the Agent at Lorengau of the Copra Production Board.

I reject the defendant's claim that his execution of the agreement was obtained by duress on the part of the plaintiff, whose evidence as to the incidents between himself and the defendant on the 1lth and 12th February, I accept. I also reject the defendant's claim that his execution was obtained by McCosker by fraud and by his misrepresenting that the agreement was merely a document whereunder the plaintiffs were entitled to go into possession of "Moron" for the purpose of recouping the moneys they had put into the properties.

It was suggested by Counsel for the defendant, in the course of his address, that the provisions made in Exhibit "4" were unfair to the defendant. Upon the evidence I think it was quite fair and even welcome to the defendant, who had never been in a position fully to finance the purchase of the properties nor develop them. The hopes of the parties that the instalments of purchase money payable to the Trust Company would be met out of proceeds from the plantations were not fulfilled - to some extent because of the defendant's management, although this was, I think, made more difficult by the distance separating "Moron" from the Manus properties.

There is no dispute between the parties as to the meaning of the document; see Kell -v- Harris, [1915] NSWStRp 52; (15 S.R. (N.S.W.) 473).

After its execution, the defendant retained the sole possession of the Manus properties, "Tulu", "Ponam" and "Nuwak", and the plaintiffs had the sole possession of "Maron".

The plaintiffs have fulfilled all their obligations under Exhibit "4" with one exception. They paid the next three instalments of purchase money due to the Trust Company in respect of all the properties, as they were bound to do, but when they tendered the last instalment to this Company, they discovered that the defendant had got in before them and paid it. In these circumstances the Trust Company refused to accept the final payment tendered by the plaintiffs. This payment by the defendant was subsequent to the issue of the writ in this action.

As against this amount paid by the defendant for the final instalment and interest, namely £1,027/2/7, the defendant has not paid to the plaintiff the sums of £284/19/1 and £328/17/9 provided for in the second last paragraph of Exhibit "4".

The plaintiffs have also claimed damages, putting their claim this way: they say that, although, for some time they did receive the proceeds of copra from "Maron", the Copra Marketing Board later declined to pay further proceeds to them because the defendant refused to "confirm" the agreement, Exhibit "4"; (see Exhibit "6"), and so they say that they were then "economically" unable to carry on "Moron" and were obliged to take their labour off and allow another person a licence to work it for a lesser reward to themselves. They claimed damages accordingly, in addition to specific performance. However, I do not think that any damages the plaintiffs suffered in this connection flowed, in any legal sense, from any action of the defendant but from their own election to enjoy their possession of "Maron" in the way they did. They could have sued the Board, which is still holding moneys, the proceeds of copra from "Moron", in suspense.

There is the difficulty of the Transfer of Land' Control Ordinance No. 70 of 1951. Although not pleaded to Exhibit "4", it was submitted by Counsel for the defendant that the agreement was void and of no effect by reason of the provisions of this Ordinance.

Sub-Section (1) of Section 3 of this Ordinance provides that "a person shall not, without the approval in writing of the Administration, .......... enter into any contract or agreement for the transfer of any land ............".

By virtue of Section 6 of the Ordinances Interpretation Ordinance, 1949-1953, "land" includes "messuages, tenements and hereditaments corporeal and incorporeal, of any tenure or description, and whatever may be the estate or interest therein".

Sub-Sections (2) and (3) of Section 3 of the Transfer of Land Control Ordinance provide as follows:

"(2) Except as provided in the next succeeding sub-section, any transfer, contract, agreement, mortgage, lease, easement, right, power or privilege, made entered into or granted in contravention of this section is void and of no effect.

"(3) This section does not apply to any transfer, contract, agreement, mortgage, lease, easement, right, power or privilege, made entered into or granted in contravention of this section where the Administrator in writing declares that he is satisfied that the contravention was due to inadvertence and subsequently gives his consent to the transaction in question."

This Ordinance follows the pattern of similar legislation, embodying the Administration policy of keeping control over the acquisition of land in the Territory of New Guinea, since 1924. It is strangely constructed from the point of view of anyone endeavouring to determine the position as between the parties to a transaction entered into without the Administrator's approval, even where this is due to inadvertence. Assuming that the agreement in question in this action falls within the prohibition of the Ordinance, I have no doubt that it was due to inadvertence that it was entered into without the approval of the Administrator. It is, however, for the Administrator to be satisfied that this was so, and there is also the additional need of his consent.

If the plaintiffs' application for the Administrator's declaration and consent to Exhibit "4" had been pressed, it may well be that they would have been forthcoming; see the letter of the 8th June, 1953 from the Secretary for Lands to the plaintiffs' solicitor, Exhibit "12".

Sub Section (2) - the Sub-Section rendering transactions entered into in contravention of the Section, that is without the written approval of the Administrator, void and of no effect - expressly excepts transactions declared by the Administrator to have been entered into without his approval due to inadvertence and subsequently consented to by him.

Having regard to the policy of the Ordinance and its wording, particularly the opening words of-Sub-Section (2) of Section 1, I am inclined to think that, pending an application for the Administrator's declaration and his decision to grant or refuse consent, the parties to a transaction are not without obligations towards each other. I am also inclined to think that any agreement entered into with respect to the acquisition of an interest in land in the Territory of New Guinea would be subject to an implied condition that it was subject to the approval of the Administrator and that if such approval were refused, it would go off. Furthermore, I think that the parties would be bound not to do anything to prevent approval and, in some circumstances, to do what was reasonably necessary towards obtaining approval. A somewhat similar position exists in relation to Crown Lands in New South Wales; see Egan -v- Ross [1928] NSWStRp 101; (29 S.R. (N.S.W.) 382).

In any event, in my view, the defendant, as a dissolving partner, was bound to do what was necessary to give effect to the agreement between himself and his partners, and I find, on the evidence, that it was expressly contemplated and agreed between the parties at the time of the execution of Exhibit "4", that there would be a further document constituting a formal assignment of the defendant's interest in "Maron" to the plaintiffs. Doubtless such an assignment would have included, in accord with the usual practice of solicitors in the Territory, a clause in pursuance of Sub-Section (4) of Section 3 of the Transfer of Land Control Ordinance. The assignment submitted by the plaintiffs' solicitor to the defendant included a clause expressed in pursuance of such Sub-Section.

I should mention that the assignment so submitted was an assignment to "Moron Plantation Limited", a Company contemplated by the parties but not incorporated until after the execution of Exhibit "4". I do not think that the plaintiffs are entitled to an assignment to the Company, they do not claim it and the defendant's objection to executing this document was not that it was an assignment to the Company.

I do not think that the need for the Administrator's consent prevents this Court making and framing an appropriate order, and I propose to follow the practice that exists in at least two States of Australia where the need for the consent of a third party has not prevented Courts from directing specific performance of an agreement and framing an appropriate order: (see, for instance, in New South Wales: Macaulay -v- Greater Paramount Theatres Ltd. (22 S.R. 66); Robertson -v- Admans [1922] ArgusLawRp 98; (31 C.L.R. 250) and Public Trustee of New South Wales -v- Gavel [1927] HCA 43; (40 C.L.R. 169); and in Victoria: Australia Can_ Co. Pty. Ltd. -v –Lavin & Co. Pty. Ltd. [1947] VicLawRp 15; (1947 V.L.R. 332); Dillon -v- Nash [1950] VicLawRp 34; (1950 V.L.R. 293) and Doyle -v- Heenan [1945] VicLawRp 45; (1946 V.L.R. 77)), a case of some interest upon the question of the application of the Transfer of Land Control Ordinance.

This practice has always received the approval of the High Court of Australia; see the decisions of the High Court, cited above, and also of more recent date: Dugan -v- Lev [1946] HCA 3; (71 C.L.R. 142) and Turner -v- Bladin [1951] HCA 13; (82 C.L.R. 463): and see generally Norton -v- Angus [1926] HCA 35; (38 C.L.R. 523).

I do not consider that the principle applied in Smith -v- Wirth (1945 Q.W.N. 8) is applicable in this action.

This Court has a full equitable jurisdiction and I know of nothing in its practice and procedure that would prevent me following the practice as illustrated in the cases which I have cited.

Both parties appeared to desire that, if the agreement were ineffective, either because I upheld any of the defences or because the Administrator refused his approval, the position and accounts between them should be finalised in this action. However, I do not think that I can, at present, give a final judgment and order as to the position and accounts if the Administrator should refuse his approval, and I consider that the proper thing to do is to reserve further consideration.

I should say something about the title. This is still vested in the Custodian of Expropriated Property. As is cited in Exhibit "7", John Thomas McEvoy purchased on terms from the Custodian, and, as is shown by the evidence and admissions in this action, the whole of the purchase moneys have been paid to the Custodian as also the purchase moneys due to Burns Philp Trust Company Limited. It is not shown whether the Custodian's title still rests on the old German Groundbook or whether it had been brought under the Land Registration Ordinance before the Japanese occupation. However, in either event, as is recited in Exhibit "7", the records of that title have been lost, and it may well be some considerable time before they are restored under the New Guinea Land Titles Restoration Ordinance 1951-1953. In the meantime, I consider that the plaintiffs are entitled to an assignment of the defendant's interest in "Maron Plantation", held by him under Exhibit "7".

I make the following declarations:

(1) That on the 12th February, 1952, a partnership existed between the plaintiffs and the defendant in the business of planters carried on by them upon "Maron", "Tulu", "Ponam" and "Nuwak" Plantations (described in Exhibit "7"), and that the plaintiffs were entitled to share equally with the defendant in the capital and profits of the business, and were liable to contribute equally with the defendant towards the losses of the said partnership, and that the assets of the partnership included the defendant's interest in the said plantations under the contract of sale, Exhibit "7", made on the,4th day of August, 1950, between Burns Philp Trust Company Limited as vendor and the defendant as purchaser.

(2) That the agreement made between the plaintiffs and the defendant on the 12th February, 1952, was made for the purpose of dissolving the said partnership, winding up its affairs and settling the accounts and adjusting the rights of the partners between themselves.

(3) That the said agreement of the 12th February, 1952 was not obtained by the plaintiffs by duress, fraud or misrepresentation.

(4) That the said agreement of the 12th February, 1452, so far as it has not already been performed, ought to be specifically performed and carried into effect except so far as its performance has been waived by the defendant.

(5) That the plaintiffs are entitled to have from the defendant an assignment from the defendant to the plaintiff, expressed to be subject to the approval of the Administrator and providing that unless and until that approval is given the assignment shall have no effect, of all the defendant's right title and interest in "Maron Plantation", also known as "Hermit Group" and comprising a group of thirteen islands situated to the north west of the main Admiralty Islands, under the said contract of sale made on the 4th August, 1950, between Burns Philp Trust Company Limited and the defendant.

(6) That subject to the Administrator granting his approval of the assignment provided for in this judgment, the plaintiffs are entitled to all the profits, including the proceeds from the sale of copra, from "Maron Plantation" since the 12th February, 1952.

And I make the following orders:

(1) That in the event of the plaintiffs and the defendant failing to agree upon the terms of an assignment pursuant to the above declarations within one month after a draft assignment is submitted by the plaintiffs to the defendant or his solicitor, such assignment is to be in a form to be settled by a Judge of this Court.

(2) That the defendant, within one month after the assignment, in a form agreed to or settled as above, is submitted to the defendant or his solicitor, execute and deliver the same to the plaintiffs upon the payment to the defendant by the plaintiffs of the sum of £413/5/9.

(3) That the defendant do all acts and execute all documents reasonably required by the plaintiffs for the purpose of an application to obtain the approval of the Administrator to the said assignment.

(4) That upon the Administrator granting his approval of the said assignment and upon the restoration and registration of the title to "Maron Plantation"; also known as the "Hermit Group", and described above, 'the defendant do all acts and execute all documents reasonably required by the plaintiffs to transfer the title thereto to the plaintiffs.

(5) That further consideration and further costs be reserved in the event of the Administrator refusing to grant in the event of the Administrator refusing to grant his approval of the said assignment.

(6) That the counterclaim be dismissed.

(7) That the defendant pay the plaintiffs' cost of the action and counterclaim, including any costs incurred in the settlement of the said assignment by a Judge of this court.

(8) That liberty be granted to either party to apply upon reasonable notice to the other party generally as to any matter arising in the carrying out of this judgment and particularly in the event of the Administrator refusing his approval of the said assignment.

(9) That the Exhibits remain in Court until further order or until the parties file a consent signed by them or their solicitors to such Exhibits respectively being handed out to the party respectively entitled thereto.

Order and adjudge accordingly.

Rupert Ollerenshaw.

A. J.