Augwi Ltd v Xun Xin Xin [2014] PGSC 83; SC1616 (17 October 2014)

SC1616

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA No 100 of 2012

BETWEEN:
AUGWI LTD
Appellant

AND:
XUN XIN XIN
Respondent

Waigani: Injia, CJ, David & Gabi JJ
2014: 25^th February,
16^th, 17^th October

REAL PROPERTY - Action for specific performance of contract of sale of land - Mistake as to price of the land under sale - Appeal from award of damages in preference over specific performance

Facts:

The parties in this appeal entered into a contract of sale over a vacant piece of land situated in Port Moresby that was owned by the respondent. The purchase price for the land was agreed at K45,000. The contract was given statutory approval under the Land Act. The respondent refused to complete the contract citing amongst other reasons that there was a mistake as to the value of the land because its real value was K100,000. The appellant brought an action claiming specific performance and damages as alternative remedies. The trial judge found that the contract was valid and enforceable but declined to grant specific performance and ordered damages to be assessed. The appellant appeals against the part of the judgment that relates to the choice of remedy.

Held:

(1) The existence of a valid and enforceable contract for the sale of land is a precondition to the grant of specific performance.
(2) Specific performance is an equitable remedy that is available to compel an unwilling vendor to perform the contract by completing the sale of land.
(3) Specific performance is available as a matter of course in a contract of sale of land except where, inter alia, the purchaser is guilty of laches in bringing the action for specific performance or the property the subject of the contract no longer exists.
(4) The price of land is a fundamental term of the contract that is required to be specified in a written contract and no extrinsic evidence is allowed to contradict or alter the contracted price.
(5) Order for specific performance should have been ordered in the circumstances of this case.

Cases Cited:
PNG Cases cited:

McCoster & King v Kusher [1967-68] PNGLR 182
Daba Hisjunes Pty Ltd v Turner ond Davey Electrical Pty Ltd [1974]PNGLR 164
Kiddie v Pavey (2004) N2513
PNGBC v Barra Amevo and Bari Investments trading as Kainantu Pharmacy, Lennie Aparima and Orito Aparima [1998] PNGLR 240
Fred Angoram v Independent Public Business Corporation of Papua New Guinea (2011) N4363
Phillip Taudevin v Charles Theseira and Theresa Theresa [1995] PNGLR 56
Wal Wine v Bill Giglmai [1990] PNGLR 462
Arnold Ningiga v Peter Lare Koavea [1988-89] PNGLR 312
Jacobs v Kwaindu [1991] PNGLR 366
Pamela Ipu Pangu v lan Ellery (2007) N3227
Kwila Insurance Corporation v Kwangtun Pty Ltd [1992] PNGLR 200
Mondo Merchants Pty Ltd v Melpa Properties and Konag No.47 Ltd (1999) N1863
Koang No 47 Ltd v Mondo Merchants Ltd [2001] 5C675
Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285

Overseas cases cited:

Dougan v Ley [1946] HCA 3; (1946) 71 CLR 142
Turner v Bladin and others [1910] CLR 463
Mehemet v Benson [1965] HCA 18; (1965) 113 CLR 295
Lamshed v Lamshed (1963) 109 CLR 140
Price v Starnge [1946]1 Ch 337

Statutes referred to:
Land Act (Ch..)
Statute of Frauds and Limitations 1988

Texts and treatises referred to:

Halsbury's Laws of England (4^th ed), Vo116, par 1306.

Counsel:

L Manua, for the Appellant
K Frank, for the Respondent

16^th October, 2014

1. INJIA CJ & DAVID J: This is an appeal from a decision of the National Court given in an action for specific performance of a contract for the sale of land (the contract).

2. By way of background facts, the parties in this appeal entered into a contract of sale over a vacant piece of land situated in Port Moresby that was owned by the respondent. The purchase price for the land was agreed at K45,OOO. The contract was given statutory approval under the Land Act. The respondent refused to complete the contract citing amongst other reasons that there was a mistake as to the value of the land because its real value was K100,OOO. The appellant brought an action claiming specific performance and damages as alternative remedies. The trial judge found that the contract was valid and enforceable but declined to grant specific performance and ordered damages to be assessed. The appellant appeals against the part of the judgment that relates to the choice of remedy.
   
3. At the hearing, the respondent contested the appeal on grounds pertaining to the validity of the contract on two grounds. First, the respondent argued that the contract was invalid and unenforceable because the contract was entered into in breach of s 128 and s 129 of the Land Act which prohibit the sale of unimproved State lease land. Secondly, the term of the contract had lapsed by the time statutory approval was granted.
   
4. The appellant argued the respondent did not challenge the trial judge's finding that the contract was valid and enforceable and it is not open to the respondent to raise those matters in this appeal.
   
5. The finding by the trial judge that the contract was valid and enforceable did not favour respondent. The respondent chose not to contest that finding by an appeal or cross appeal. At the hearing of this appeal, the respondent's counsel raised extensive arguments concerning the legality or validity of the contract and that the term of the contract in any event had lapsed. The two matters raised by the appellant are founded on statutory defences. Those defences were not pleaded in the Defence and Cross Claim as a statutory defence as required by the rules of court: see National Court Rules, Order 8 Rule 14. At the trial the respondent led evidence on these matters and argued that the trial judge should allow the respondent to raise those matters. The respondent submitted that those matters have been substantiated by the evidence and the action should be dismissed for those reasons. The judge did not address these material and arguments in his decision. The respondent did not challenge the lack of such finding and the trial judge's finding that the contract was valid and enforceable by way of an appeal or cross appeal.
   
6. Counsel for the respondent argued that notwithstanding an appeal or cross appeal of its own, the respondent should be permitted to raise the statutory defence in the appeal because they raise important points of law that this Court should consider in the interest of justice. However we are not referred to any case authority or provision in the rules of court that support this argument.
   
7. In our view, it is not open for the respondent to raise the point in this appeal. The principles that support this position are well established in this jurisdiction. With the exception of matters concerning the jurisdiction of the Court which may be raised at any stage of the hearing, a party aggrieved by a decision of the Court in the case should properly invoke this Court's jurisdiction to challenge the decision or part of the decision that the party is aggrieved by the decision or part thereof, by filing its own appeal.
   
8. The choice of an appropriate remedy amongst the remedies claimed in an originating process is in the Court's discretion. The appellant claimed damages as an alternative remedy in the statement of claim endorsed on the writ and it was open to the trial judge to consider damages as an alternative remedy. In Papua New Guinea, specific performance and damages in a contract for sale of land are available as alternate remedies but not both: Mondo Merchants Pty Ltd v Melpa Properties and Koang No.47 Ltd (1999) N1863. The question is whether the exercise of discretion was erroneous in the circumstances.
   
9. In choosing damages over specific performance, the trial judge assessed and considered the evidence given at the trial, both oral and affidavit evidence. He found, inter alia, that there was a mistake as to the value of the land at the time the contract was concluded which rendered it inequitable and inappropriate for the contract to be performed by way of specific performance. He found that there was undisputed evidence that the land was valued at over Kl00,000. For this reason, he refused to award specific performance and instead, entered judgment for damages to be assessed. The trial judge summed up his findings in the following words:
   

"There is overwhelming evidence that the defendant signed the contract for sale on her own free will and that she agreed to sell the property for K45,000. What then is the remedy for the plaintiff Whilst I find that the defendant had agreed to sell the property for K45,000 there is undisputed evidence that the property was worth at least Kl00,000 at the time the contract was signed. The lowest possible price the property could be sold at that time according to the defendant's affidavit is K55,000. Clearly therefore, the mount of K45,000 was much lower than the commercial value of the property even at that time.

"It would in the circumstances be unfair for me to order specific performance. I consider the plaintiff's remedy lies in damages. I would therefore adjourn the case to Friday 17^th August 2012 for parties to make submissions for assessment of damages."

10. There are five grounds set out in the notice of appeal. When those grounds are read together, their essence is that the trial judge erred in not awarding specific performance which was the principal relief claimed and that specific performance would have enforced the contractual obligation to complete the settlement. The trial judge erred in finding that the property's value was high as Kl00,000 when that fact was not pleaded and no evidence should have been allowed to be adduced in support of it. In the alternative, the trial judge erred in placing too much weight on the increased value of the land and erred in concluding that damages were an appropriate remedy instead of specific performance. The appellant identified five main issues arising from these grounds and argued them before us.
    
11. At the trial the parties made extensive submissions on the issues before the Court and referred to several cases on point, particularly with regard to the availability of the equitable remedy of specific performance in contracts for sale of land. The trial judge made no reference to any of those cases in his judgment. It is not clear from his judgment the principles of law that guided the exercise of his discretion.
    
12. At the hearing before us, the appellant improvised its submissions made in the Court below by relying on several more cases on the choice of remedy between specific performance and damages.
    
13. We consider the main issue to be decided is one of mixed fact and law and one that challenges the trial judge's exercise of discretion in choosing damages over specific performance. It is clear to us that the exercise of discretion was based on his finding that the value of the property exceeded the contract price.
    
14. The appellant argued the trial judge erred in making this finding because it was not open to him to question the contract price which parties had agreed to in the contract and which contract the Court had already found it to be valid and enforceable. In any event, it is submitted, there was no credible evidence to support that finding. The only witness who gave evidence was Mr Hindom who made mention of the KlOO,OOO and which was not supported by a land valuation report. The appellant argued that both parties were under no disability, they were represented by lawyers in the sale transaction and that the amount was agreed to without any ambiguity. The contract was performed in part by paying the standard 10% purchase price deposit payment and the contract was submitted for statutory approval under the Land Act which was grated. When time came to complete the sale, the respondent reneged on the contract saying the land was valued more than the contracted price. There was no mistake by the parties as to the contract price when the contract was entered into and the Court. The appellant established these facts by the pleadings and evidence. In the circumstances, the Court should have awarded specific performance. Counsel referred us to a number of cases from overseas which support the proposition that specific performance of a contract for sale of land is the most appropriate remedy.
    
15. Counsel for the respondent submits there was evidence to support the finding that the land was valued more than the contracted price. A mistake as to value of the property agreed to be sold is a valid reason to refuse specific performance. To support this submission the appellant relied on several Australian and English high court decisions.
    
16. Counsel for the respondent also argued that the conduct of the appellant in pursuing the contract to ministerial approval was unfair such that equitable remedy of specific performance should not be granted. He cited a number of cases to support this submission. Counsel for the appellant submits those matters were not considered by the trial judge and it is not open to be raised on appeal. We accept the appellant's submission that this point was not amongst the matters under consideration by the trial judge in refusing specific performance and it is not open for that matter to be raised before us.
    
17. We accept submissions of counsel for the appellant that as a general rule, a finding by the Court that a valid and enforceable contract for the sale of land is, at law, a precondition to the grant of the equitable remedy of specific performance: McCoster & King v Kusher [1967- 68] PNGLR 182, Daba Hisjunes Pty Ltd v Turner and Davey Electrical Pty Ltd [1974]164, Kiddie v Pavey (2004) N2513, PNGBC v Barra Amevo and Bari Investments trading as Kanantu Pharmacy, Lennie Aparima and Orito Aparima [1998] PNGLR 240. Specific performance, of a contract of sale of land, as an equitable remedy, must follow as a matter of course except where the circumstances of the case falls under any of the recognized exceptions to this rule. Exceptions to the rules include a case where the plaintiff is guilty of laches in bringing an action for specific performance: Fred Angoram v Independent Public Business Corporation of Papua New Guinea (2011) N4363, Mehemet v Benson [1965] HCA 18; (1965) 113 CLR 295, Lamshed v Lamshed (1963) 109 CLR 140; or the subject matter of the contract no longer exists: Price v Strange [1978]1 Ch 337. As much as specific performance in a contract for sale of land is a right of the vendor against a defaulting purchaser, it is a right of the purchaser against a defaulting vendor: Dougan v Ley [1946] HCA 3; (1946) 71 CLR 142, Turner v Bladin and others [1910] CLR 463. A valid contract for sale of land, enforceable by specific performance, exists irrespective of grant of statutory approval of the contract under the Land Act: McCoster & King v Kusher [1967-68] PNGLR 182, Daba Hisjunes Pty Ltd v Turner and Davey Electrical Pty Ltd [1974]164; Phillip Taudevin v Charles Theseira and Theresa Theresa [1995] PNGLR 56, Wal Wine v Bill Giglmai [1990] PNGLR 462; Arnold Ningiga v Peter Lore Koavea [1988-89] PNGLR 312, Jacobs v Kwaindu [1991] PNGLR 366.
    
18. A mistake as to the value of the land is not amongst those recognized exceptions. A contract for the sale of land is a special contract that the law requires in writing: Statute of Frauds and Limitations 1988 ss 2 & 4; Pamela Ipu Pangu v Ion Ellery (2007) N3227. The price of land is so fundamental a term of such contract that it is almost impossible to an impossibility to comprehend that parties can be mistaken as to the price of the land the subject of the sale; and for this reason, extrinsic evidence is not allowed to alter the selling price of land: Curtain Brothers (Queensland) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285.
    
19. In every case where parties enter into contractual arrangements over dealing in land, contracting parties consciously and tactfully and painstakingly, over time, negotiate over the selling price and after much aforethought reach ad idem on the selling price, which they then commit the agreement to writing in the contract. With the marked value of land
    always fluctuating over time owing to constant changes recurring in the economy and real estate market, the price of land cannot be fixed with absolute certainty at anyone time. Therefore when a market price of land is agreed upon and committed to writing in a contract for sale of land by the parties with their eyes wide open, there is no room for and there can be no mistake by the contracting parties as to the value and price of the land. A
    vendor should not renege on the contract by disputing the contract price and refuse to complete the sale because he or she has since entering into the contract changed his or her mind on the selling price for a better offer.
    
20. It is normal that a vendor and a purchaser of land are free to sell and buy at will and a Court doing equity cannot convert an unwilling vendor or purchaser to be a willing vendor or purchaser respectively and compel them to enter into a contract. But when a willing vendor and purchaser have freely entered into a valid and binding contract, a Court doing equity can compel, by an order of specific performance, an unwilling vendor to do what a willing
    vendor would do, and that is to complete the sale: Kwila Insurance Corporation v Kwangtun Pty Ltd [1992] PNGLR 200; Koang No 47 Ltd v Mondo Merchants Ltd [2001] 5C675. Equity looks "upon that as done which ought to be done or which is greed to be done ... (to) those who had a right to pray that the thing be should be done": Halsbury's Laws of England (4^th edn), Vol 16, par 1306. Equity will come to the aid of the purchaser to compel an
    unwilling vendor to perform the contract by taking all necessary steps to complete the sale.
    
21. Counsel for the appellant referred us the English Court of Appeal decision in Price v Strange [1978]1 Ch 337 in which Buckley J sets out a useful list of questions to be asked when the Court is considering deciding between specific performance and damages. We do not consider it necessary to apply those in the case before us because, apart from considering the mistaken value and price of the land agreed between the parties, there was no other reason given for the exercise of discretion in terms of the choice of remedy made by the trial judge.
    
22. In the case before us, the evidence of the lone witness in Mr Hindom had no basis in the pleadings, and even when the respondent was allowed to give the evidence, which should not have been the case, the evidence was at best scanty and flimsy. The evidence was also not supported by a land valuation report. In the circumstances it was unsafe for the trial judge to find and conclude that the value of the land was more than the contracted price. In any event, parties were bound to the terms of the contract that fixed the selling price and extrinsic evidence that was allowed to be given to change the contracted price should not have been allowed.
    
23. The circumstances under which the contract was concluded was ripe for the award of specific performance. The contract was validly entered into, it was duly submitted for statutory approval and obtained, the appellant was willing to complete the purchase yet the respondent for reasons to do with the selling price changed his mind and reneged on the contract and refused to complete the sale for want of a higher price, and as a result the appellant wasted no time in bringing an action for specific performance. The contract did not fall under any of the recognized exceptions to the general rule that specific performance of a contract for sale of land must follow as a matter of course. We are satisfied that justice was miscarried in denying the appellant his right to enforce the contract by specific performance.
    
24. For these reasons, we allow the appeal and grant an order for specific performance in terms of the relief sought by the appellant in the notice of appeal.
    
25. GABI J: Not available having passed away before judgment was delivered. Parties agreed for the remaining judges to deliver judgment: see 3 of the Supreme Court Act.
    

ORDERS:

26. The Court orders that:
    
    • (1) The appeal is allowed.
      

(2) The decision of the National Court dated 6^th August 2012 is quashed and substituted with the orders as follows:

(a) The Appellant is granted the relief of specific performance of the contract of sale and purchase dated 19^th September 2005 entered into between the appellant and the respondent, regarding the property or land described as Allotment 9, Section 50, Granville, being the whole of the land described in State Lease Volume 72 Folio 77, and approved by the Minister for Lands.

(b) The Respondent shall complete or settle the said sale transaction forthwith.

(c) The Respondent shall pay the Appellant's costs of the appeal.

____________________________________________________________
Rageau, Manua & Kikira: Lawyers for the Appellant
Young & Williams: Lawyers for the Respondent