Papua New Guinea Law Reports - 1992
[1992] PNGLR 495
N1120
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
T R ARAWA NO 8 PTY LTD
V
BERNARD CHARLES AMNOL
Waigani
Brown J
19 October 1992
CONTRACT - Contract for sale of land providing for vacant possession - Contract merges in transfer on completion - Subsequent letter by purchaser to occupier offering payment on his vacation of the land - Terms to be imputed to vendor - Absence of evidence to show vendor aware of and acquiesced in agreement - No evidence of knowledge in vendor of subsequent letter.
TRUSTS - Alleged breach of implied trust - Lawyer for vendor holding settlement moneys from sale - Purchaser not seeking account - Question of solicitor/client relationship raised in counsel's address - Responsibility of trustee to stranger.
Facts
The plaintiff claimed the sum of K21,600 from the defendant, who was the lawyer of the vendor in a sale transaction. This sum represented part of the purchase price held by the defendant upon trust for the vendor. Subsequent to the transfer of the property, the purchaser wrote to the plaintiff, who occupied the premises, stating that it had become the owner and suggesting terms under which the plaintiff should vacate the premises. The letter asserted that the defendant held in trust K21,600 for release to the plaintiff on vacation of the premises. The plaintiff sought to enforce the purported trust.
Held
1.       A contract of sale made between the vendor and purchaser of real estate merges in the transfer.
2.       Consequently, where the defendant has not been shown to be the lawyer for the purchaser, no liability exists in contract or tort where he, as lawyer for the vendor, deals with moneys of the vendor contrary to a supposed agreement between the purchaser and an occupier of premises who remains, to the knowledge of the purchaser, on the premises after completion.
Counsel
V Stylianou for the plaintiff
J Wa, for the defendant
19 October 1992
BROWN J: The plaintiff by writ of summons claims the sum of K21,600 from the defendant. He claimed that the defendant held such sum on his account and failed to pay upon a direction given in accordance with a written agreement between the plaintiff and a third party, Austraphane. The plaintiff claimed that, as a result of the agreement, the defendant held such money in trust for the him in accordance with its terms. 
The defendant is a lawyer practising by firm name "Bernard Amnol & Company". He has been sued in his own right for the plaintiff argued that, whilst acting for Boudev Resources Development Pty Ltd ('Boudev') in a conveyancing matter involving a sale of a property situated at Boroko to Austraphane Sales (PNG) Pty Ltd, the lawyer failed to account in breach of an implied trust.
The facts are relatively straightforward. On 8 July 1991, a contract for sale was entered into by the vendor and purchaser above named for the sale of the property for K380,000. The contract provided for vacant possession on completion. Completion of the contract took place on 14 August 1991 at the Bank of South Pacific, Port Moresby Branch. At settlement the purchase price, after allowances, was paid as follows:
Bank of South Pacific	K291,844.68	
Boudev	K16,785.27	
Boudev	K13,155.32	
Bernard Amnol & Company	K21,400.00	
T R Arawa No 8 Pty Ltd, trading as Capable Construction, was in occupation of the subject property under licence of Boudev. Various attempts were made to have the licencee vacate the premises before completion, to no avail. Boudev, through its lawyer, Bernard Amnol & Company, wrote offering various sums to Capable Construction if it vacated within certain periods of time. In the event, Capable Construction, which was represented by Warner Shand lawyers, remained in possession of the premises at the time of completion to the knowledge of the purchaser. The purchaser, Austraphane Sales (PNG) Pty Ltd, was never joined in these proceedings.
A letter was written to Capable Construction by Austraphane on 16 August 1991, 2 days after completion of the sale, stating that it had become the owner of the property and suggesting terms under which Capable Construction would vacate the premises. I reproduce the letter later on.
The letter also asserted that the amount of K21,600 "is held in trust by Trustees, Bernard Amnol & Co. for release to you on vacation of the premises etc". There is no evidence showing that either Bernard Amnol was a party to this trust, that he was aware of the proposal in the letter, or that he acquiesced in its terms. The letter is not evidence of the truth of the material in it affecting Bernard Amnol.
REASONS
Now Ms Stylianou says that the defendant lawyer acted both for Boudev and for the purchaser Austraphane. There is no direct evidence, but findings need be made on that point, for the "trust" which the plaintiff says should be implied can only rest on the solicitor/client relationship. It cannot arise out of contract, for the reasons I give.
From the facts of the letter of 16 August, written to the manager, Capable Construction (the plaintiff) by Austraphane, there can be no contract implied between Austraphane and Boudev (the vendor) on terms binding Boudev to the points in the letter. Boudev was not a signatory to the letter, and there is no evidence that the company intended to be bound by its terms. There is evidence to the contrary, for Boudev's lawyer, Bernard Amnol, wrote on various occasions on its client's behalf particularising the agreement Boudev sought to reach with Capable Construction over the latter's vacation of the property. On 14 August 1991, Bernard Amnol wrote to the plaintiff's lawyers (Warner Shand) giving Capable Constructions 48 hours to vacate or risk forfeiting K21,500 which Boudev offered on vacation.
On 17 September 1991, Bernard Amnol wrote Warner Shand confirming that the offer was withdrawn, for Capable Constructions had failed to vacate within the time allowed. Completion of the sale took place on 14 August, when the terms of the contract merged in the fact of the transfer. In other words, the purchaser could no longer complain after then about vacant possession, for he had accepted title to the property and the contract was concluded by transfer. In these circumstances there can be no separate contract implied affecting Boudev on the strength of the letter of 16 August, two days after the event. The contract for sale has merged in the transfer. The purchaser can no longer sue on the clause relating to vacant possession. Consequently no liability attaches to the lawyer for Boudev for dealing with the K21,400, contrary to a supposed direction by Austraphane, for there was no agreement between the purchaser and vendor giving rise to a supposed direction. That direction was pleaded in the statement of claim as having been given contemporaneously with the receipt by Bernard Amnol of the K21,400 sum on 20 August 1991. No facts were pleaded in the statement of claim as to the nature of the direction. No evidence was led from Austraphane. But it became clear on the hearing that the plaintiff relied on an acknowledgement by Austraphane which I have set out later.
I am not satisfied that there was any agreement by Boudev to be bound by any understanding reached between Austraphane and Capable Construction about vacating premises.
As lawyer for the vendor, the defendant owed no duty to Austraphane. The exchange of correspondence with the lawyers for the plaintiff (Capable Constructions) clearly shows that the defendant was aware of its duties as the lawyer for the vendor to act in its client's best interests. Consequently the defendant owed no duty to the plaintiff (Capable Construction) arising out of contractual arrangements between the vendor and purchaser, for there were none shown to exist after the 14 August nor the lawyer/client relationship existing between Boudev and the defendant. Let me go back to the plaintiff's assertions in his statement of claim. Those are in the following terms:
"3.      On the 20th day of August 1991, the defendant received the sum of K21,500.00 from Austraphane Sales (PNG) Pty Ltd ("Austraphane") with directions to pay the money to the plaintiff upon vacation of certain premises occupied by the plaintiff in accordance with a written agreement between the plaintiff and Austraphane ("the Agreement").
4.       In the premises, the defendant held the money in Trust for the plaintiff to release to him in accordance with the Agreement referred to in paragraph 3 hereof".
Although the plaintiff has not pleaded the facts at the hearing, Ms Stylianou conceded that the agreement was that letter of 16 August.
The phraseology implies at least 2 meanings. The first is that, on the facts, a trust duty arose whereby the lawyer held the money on account of Austraphane. The second is that the money was paid into the lawyer's trust account pursuant to the terms of the agreement contained in the letter of 16 August, written by Austraphane to Capable Constructions. Omitting formal parts, that letter said:
"As you are aware Austraphane Sales (PNG) Pty Ltd has acquired the property of Section 32, Lot 26 of the 14th August 1991.
This letter is to confirm our conversation of 15th August 1991 in regards to the vacating of the premises occupied by your Company.
Points discussed:
1)       Capable Construction to vacate the premises by midnight 31st August 1991 leaving building and surround in good order.
2)       Capable Construction to pay K660 rent to Fairstar Investments Pty Ltd for one half of the normal monthly rent for August.
3)       The amount of K21,600 payable for improvements carried out by yourselves is held in Trust by Trustees, Bernard Amnol & Co., for release to you on vacation of the premises in good order and condition and upon payment of rental agreed to in (2) above.
Yours faithfully
AUSTRAPHANE SALES (PNG) PTY LTD
DRAGAN DJORDJEVIC
Production Manager"
I deal with the second implication. The last paragraph of the letter speaks of money "held in trust by Trustees, Bernard Amnol & Co., for release to you" (Capable Construction).
The defendant, Bernard Amnol, was not a party to this letter, and there is absolutely no evidence that he knew of its terms or intended to be bound. Now, the first implication does recall Ms Stylianou's assertion that the defendant was acting for Austraphane. In those circumstances, the lawyer may hold moneys on account of a certain party. The plaintiff argues that the money then was held to the account of Austraphane and was to be paid by its lawyers at Austraphane's direction.
The plaintiff's assertion is that the direction was contained in a written verification in the following terms:
"This is to verify that Capable Constructions vacated the premises as per agreement on the 31 August 1991".
It was signed by the production manager of Austraphane. It was not addressed to anybody. In his affidavit, Lance Judd, the plaintiff's managing director said para 9:
"On or about 31 August 1991, I vacated the premises in accordance with the Agreement. Annexed hereto and marked with the letter "D" is an acknowledgement from Austraphane. I thereupon became immediately entitled to receive the money from the defendant".
It is clear that the acknowledgement or verification was given on behalf of the plaintiff. There is no evidence that it was directed to the defendant lawyer, nor that Austraphane intended that it be an authority to release funds held by those lawyers on Austraphane's account. The writing says nothing about releasing moneys of Austraphane. In fact, the money in the trust account was part of the settlement moneys due to Boudev on completion of the sale. That is quite clear from reading the affidavit of the lawyer for the plaintiff, sworn on 9 November 1991. He annexes a settlement statement showing how the balance of purchase moneys owing are made up. I am satisfied that the money in the trust account was that purchase money paid on settlement on 14 August. No explanation has been offered for the late receipt of that settlement cheque, but on the facts of this case, once I find that those moneys are settlement moneys, then they may be dealt with as such, subject to any existing trusts or enforceable claims at the time of settlement on 14 August. The letter came into existence after completion of the sale, when rights in the contract to vacant possession merged in the transfer.
I am satisfied no enforceable claims under contract exist affecting the defendant for the reasons I have previously given. I am further satisfied, in the absence of any clear evidence that the defendant was acting for the purchaser, Austraphane, on the purchase, that no duty arises in favour of the plaintiff, arising out of a lawyer/client relationship.
The plaintiff's claim, accordingly, fails.
The moneys paid into Court shall be paid out to Bernard Charles Amnol to be dealt with in accordance with the terms of his retainer by Boudev. There shall be a verdict for the defendant on the claim and costs follow the event.
Lawyer for the plaintiff: Warner Shand
Lawyer for the defendant: Bernard Amnol & Company