N404(L)

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

W.S. 677 OF 1982

BETWEEN:

TONOLEI DEVELOPMENT CORPORATION LIMITED
PLAINTIFF

AND:

LUCAS WAKA, MINISTER FOR FORESTS
DEFENDANT

Waigani: Pratt J
2-3 December 1982; 4 February 1983

PRATT J: The plaintiff claims for a declaration that the revocation of a timber permit issued by the Minister of Forests is null and void, or in the alternative that there was a binding contract between the plaintiff and the Minister which would lead ultimately to the issue of a formal timber permit in due course.

Both the plaintiff and defendant called evidence at the trial including Mr. Joseph Aoae, the immediate past Minister for Forests, Mr. Lucas Waka, the present Minister for Forests, and Mr. Andrew Yauieb, the permanent head of the Department of Forests. I find the following facts: The plaintiff is an incorporated company. By its memorandum and articles of association it must have at least two or a maximum of 11 directors. There were three initial subscribers at K1 each per share, namely, David Kughuka, Francis Kikira and Raphael Duaki. Under Article 79, these three persons were the first directors of the company. There are now eight directors. The object set forth in the memorandum are sufficiently broad to encompass the purpose of working and logging timber either directly or through sub-contractors.

Mr. Dennis Mamatau is the Managing Director of the company and is one of the directors who was directly involved in several meetings with Mr. Joseph Aoae, who was a Minister in the previous government until the early hours of the afternoon of Monday, the 2nd of August 1982.

A number of meetings were held involving the shareholders and the directors or the directors only. The actual meeting to apply for a permit was held in January 1982. Present at that meeting were the directors Mamatau, Kughuka, Mino, Menassa and Duaki. It was resolved at this meeting that Mr. Mamatau first come to Moresby in order to make direct approach to the Forestry Department. Many of the shareholders in the company are apparently landowners in the area over which the timber purchases and the prospective timber permit applied.

As was further discussed at the January meeting, Mr. Bolger of Buin Earth Moving Pty. Ltd., Mr. Patrick Leslie, Mr. Mamatau, Mr. Kughuka, and Mr. Mino had various meetings or telephone conversations with the Forestry Department. There were two visits to Port Moresby of special significance, that on the 28th of May and another on the 12th of July. As a result of these meetings the terms and conditions of the document given the title "interim permit" were hammered out. At the first meeting in May, directors Mamatau and Kughuka and possibly also Mr. Bolger were present. They also attended the second meeting in the minister’s office together with two other directors. It seems later on that day that three directors, namely Mino, Mamatau and Kughuka, directed Mr. Bolger to attend to the formal paper work associated with the application for a permit. On their return to Bougainville a general meeting was held, to use the term somewhat loosely, with a number of shareholders on Block 5 and developments were discussed.

No minutes or written records of any of meeting was kept. My task has therefore been made that much more difficult. I cannot stress too strongly to those who adopt the role of advisor to locally owned companies the tremendous importance of keeping proper written records - at the very least records of resolutions passed by directors at their various meetings. The absence of such written material may well have proved fatal to the plaintiff’s case in this present dispute. Fortunately for it other avenues of proof have come to its aid thereby allowing the essential elements of the dispute to be decided upon.

On the 26th of July 1982, the so-called interim permit was issued by the Minister in the following terms:

"I acknowledge receipt of your application for a timber permit over the above mentioned area and wish to advise that your application has been approved pending your acceptance of the conditions outlined hereunder:..."

This document was received at Kieta on Friday, the 30th of July. The formal acceptance was typed on page four of the photostat copy of the interim permit at the dictation of Mr. Bolger, and signed by Mr. Mamatau as Chairman of the Board "on behalf on (sic)" the company. This formal acceptance typed on the photostat (which was later itself photostated), together with a letter of the same date, namely, the 30th of July signed by Mr. Kughuka as Deputy Chairman of the company were placed in an envelope and left in a safe by Mr. Bolger from where he retrieved it on Sunday and then travelled to Port Moresby. Neither the document being the original acceptance on the photostat of the letter of the Minister dated the 26th of July, nor the original letter signed by the Deputy Chairman Kughuka have been produced. The later photostats of both documents however have been admitted and marked as Exhibits "C" and "B" respectively.

Mr. Bolger then says he took the envelope on Monday, the 2nd of August to a room in the Department of Forests headquarters occupied by the secretaries, that is a steno-secretary and the personal secretary, of the Minister and left it there on the table of the personal secretary with both documents still inside. I have no reason to find as a matter of fact that Mr. Bolger didn’t do what he testified to. Although he saw persons in some other offices in the complex leading into the Minister’s office, he did not see any persons in the secretary’s office.

The Minister for Forests at the time the letter was deposited on his secretary’s table had already instigated on the immediate previous Friday, the clearing out of his files and papers from the office complex. This procedure was still not complete by the Monday. The staff were instructed to sort out the Minister’s own files and correspondence from departmental material and take away the former to an agreed place of safe deposit. Not surprisingly there were some inevitable mixing up. The Minister attended at his office early Monday morning and then proceeded on to meetings at Parliament House. At 1.00 o’clock that afternoon Mr. Somare was elected Prime Minister thus terminating Mr. Aoae’s occupation of the Ministry. Subsequently on the 6th day of August, Mr. Lucas Waka was appointed Minister. That the drama unfolding on Monday, the 2nd of August was unknown to Mr. Bolger I find difficult to believe, but no point has been taken on the matter and I concede that there are people who for a multitude of reasons do not take a great deal of interest in political affairs.

The Secretary of the Department of Forests, Mr. Andrew Yauieb, had been aware of negotiations between the Minister and the directors of the plaintiff company. For some time before and after the 2nd of August however he was travelling inside and outside the country on departmental business. However he did not approve of Mr. Aoae’s issuance of the "interim permit", in common with a number of other officers within the department. Accordingly he gave telephonic advice to the new Minister as a result of which the offer forwarded by Mr. Aoae dated the 26th of July was withdrawn in the name of the Minister by telex. This telex was followed up by a written revocation of the offer.

The whereabouts of the original documents remain a mystery. Mr. Aoae has been unable to locate his own Tonolei file after "diligent search" and although he had had in his possession the original of Mr. Kughuka’s covering letter (Exhibit "B"), enclosing the acceptance endorsed on the last page of the offer he has not been able to locate it. He has never seen the original acceptance that is the photostat of the offer upon which the original acceptance was typed at page four and then signed by Mr. Mamatau. What has been tendered in court is a photostat of the copy document bearing a photostat of the acceptance and of Mr. Mamatau’s signature (Exhibit "C"). Both Exhibit "B" and Exhibit "C" were produced by a departmental witness, who obtained them from the Department of Justice. The present Minister had not seen a copy of Exhibit "B" or Exhibit "C" until he came to court. What is perhaps more mystifying is that neither had the Minister’s permanent head of department.

As a fact I must therefore find that at no stage had either the previous Minister or the present Minister read the acceptance typed onto the offer of 26th July (Exhibit "C"), prior to the Minister’s telexed withdrawal (Exhibit "D") and follow up letter (Exhibit "E") both despatched on the 11th of August 1982. The present Minister had also not seen the covering letter (Exhibit "B") before that date but I cannot say whether the previous Minister read the letter before or after the 11th August. The plaintiff had notice of the withdrawal and revocation several days after that date.

Because Mr. Aoae had possession of the original of Exhibit "B" for a time it is obvious that original documents of which Exhibits "B" and "C" are copies must have been delivered to his office at the same time but became separated at some stage on or after the morning of the 2nd August. As I said earlier I accept Mr. Bolger’s evidence that the acceptance signed by Mr. Mamatau and the letter signed by Mr. Kughuka were placed on the secretary’s table at about 10.00 a.m. on 2nd August 1982.

It remains now to decide what legal principles have application to the facts. Counsel for the Minister has specifically refrained from accepting my invitation to discuss whether or not there was sufficient consideration to form the basis of a binding agreement in the present circumstances, or whether any of the documentary material could amount to a deed. I note that the same approach was taken before His Honour Mr. Justice Bredmeyer in The Queen v. Director of Forests ex parte Leytrac Pty. Ltd. handed down on 3 June 1982, and that His Honour found a binding contract in existence (although the wording between the documents before His Honour and those before me contain substantial differences). Counsel for both parties have argued the case on the basic ground of absence or presence of acceptance and communication thereof. During the hearing I expressed a passing view that the evidence might support the issuance of an actual permit, but on reflection and particularly in the light of the terms of s.10 of the Forestry Act Ch. No.216 and Regulation 6 of the Forestry Regulations, I do not consider that such a proposition is tenable.

The opening words of Exhibit "C" have already been set out. On page 4 of this document the Chairman of Directors signed as follows:

"I, Dennis Mamatau Kanepo, on behalf on (sic) Tonolei Development Corporation Limited have read and understood the above terms and accept them as the principal operating terms and conditions of Timber Permit No. 17-8."

This document was placed in an envelope addressed to Mr. Joseph Aoae together with the following letter signed by the Deputy Chairman of the company:

"Mr. Joseph Aoae
Minister of Forests
P.O. Box 5055
BOROKO

Dear Minister,

RE: ACCEPTANCE TIMBER PERMIT 17-8

We have today received our copy of the above mentioned Timber Permit. I would like to thank you personally on behalf of all the landowners and my fellow directors for your great support in enabling us to unlock our land.

We are very keen to start our logging company to get development on our land.
We thank you once again and we now enclose our acceptance of the terms and conditions set out in the Timber Permit.

Yours faithfully,..."

By Article 114 of the plaintiff’s Memorandum and Articles of Association: "all other contracts and instruments entered into by the company in the ordinary course of business shall be signed by any 2 directors or by such other person or persons as the directors shall from time to time appoint."

Further, in Article 98 it is laid down: "Until otherwise determined after the first meeting of directors, two directors with one of such directors being the Chairman of directors or the Managing Director, shall be a quorum."

In reading Article 114 it is useful to bear in mind the provisions of s.38 of the Companies Act Ch. No. 146 where at sub-s.1(b) we find as follows:

"A contract that, if made between private persons, would be by law required to be in writing and signed by the parties to be charged with it may be made on behalf of the company in writing signed by a person acting under its express or implied authority; and..."

Sub-s. 2 goes on to say:

"A document or proceeding requiring authentication by a company may be signed by an authorised officer of the company and need not be under its common seal".

By the ordinary law of contract of course any person duly authorised may make a binding contract (see Cheshire and Fifoot’s Australian Law of Contract, 3rd ed., p. 489). There is no direct evidence that any particular person was specifically appointed to sign "on behalf of" or for the company. There is ample evidence that the Chairman was acting at all times with the approval of at least the majority of the directors and there is no evidence either explicit or implicit that any of the directors disagreed with the terms and conditions set out by the Minister. Had such a disagreement existed I would certainly have expected evidence to have been adduced on the point. It would not be hard to find if it were there. It must be remembered that in some instances the Chairman of Directors has been equated with the vastly more powerful office of Managing Director (see e.g. Gowers Company Law 2nd ed., p. 147). Although there was no specific resolution nominating the Chairman to sign for the company he was involved in all of the discussions, he attended several times upon the Minister or the Forestry officers in Port Moresby and at the all important meeting to discuss the developments which was held by the directors and shareholders on Block 7 after the return of the directors from the July meeting with the Minister. In addition the letter of acceptance and the acceptance endorsed on page 4 were drawn up by Mr. Bolger on the express instructions of the three directors Mino, Kughuka and Mamatau. It seems obvious to me that these three directors at least clearly agreed that one of their members should sign the acceptance. It is even more obvious that when Mr. Kughuka wrote his letter of 30th July 1982 he knew of and approved Mr. Mamatau’s signature on the offer. In his letter, Mr. Kughuka says: "we enclose our acceptance". It seems to me therefore that in placing his signature on the acceptance, Mr. Mamatau was certainly authorised to do so for and on behalf of the company.

Even if I were wrong in holding that there was a compliance with the final part of Article 114 I am still of the view that the acceptance was signed by two directors. It is highly desirable that when two signatures are required, they appear together on the one document. That is not to say however that the court may not refer to several documents which must be read together. The wording used by Mr. Kughuka in Exhibit "B" expresses the clear consensus with the action taken by Mr. Mamatau in placing his signature to an acceptance of the terms and conditions set forth by the Minister on the 26th July. (Unfortunately the area dealt with by the learned authors in the 3rd ed. of Cheshire and Fifoot is not covered in the most recent 10th ed.). By reading the acceptance endorsed on the Minister’s offer together with the letter signed by the Deputy Chairman together I have no difficulty in finding that the acceptance is in fact signed by two directors.

Mr. Mullumby for the State has placed some emphasis on the words "on behalf of" used in the acceptance endorsed on the offer, and although I have gained some assistance from his authority Newborne v. Sensolid (Great Britain Ltd.), I cannot agree that the use of this harmless formula makes Mr. Kughuka a mere agent for the company. In one sense all directors are agents for the company (see 7 Halsbury (4 ed.) para. 717), for a company cannot act without agents. But a director is more than an agent - he contributes to the mind as well as to the locomotion of the company as a corporate body. The term "on behalf of" in the present context really means "for and on behalf of". To construe the term in a manner which would restrict the intention of the other two directors to giving approval to an act by the Chairman of the Board on a basis equal to some junior official acting as a mere agent and nothing else would fly in the face of common sense and business practice.

In my view therefore the acceptance was properly signed. The defence however contends strongly that such acceptance was never communicated. I have already set out my findings of fact on this issue. Mr. Mullumby has drawn my attention to the special rules which have been developed by the Courts to give contractual effect to acceptance by post (see e.g. Cheshire & Fifoot’s Australian Law of Contract, 10th ed. p. 45 ff.). The principle highlighted by the authorities is one of commercial necessity and good sense. Mr. Mullumby draw some comfort from the vivid examples on acceptance or lack thereof set out by Lord Justice Denning at p. 332-3 of Entores Ld. v. Miles Far East Corporation, together with the basic principles so clearly set down in Carlill v. Carbolic Smoke Ball Co. He has also laid considerable emphasis on Holwell Securities Ltd. v. Hughes, where acceptance by post was utilized by one party but was held not to apply when not received by the other because of the precise wording used in the particular agreement which in the circumstances allowed the court to call in aid certain provisions of the Law of Property Act 1925. As Lawton L. J. points out in his discussion on the second and more "roundabout path" for deciding against the party who posted the acceptance, the course adopted by both parties is the ultimate deciding factor and not some general principle of the law of contract regarding the use of the postal services. The authority itself is a helpful one in that it clarifies basic principle but it must be applied carefully to any given set of facts.

What more can a citizen do if he wishes to communicate with a Minister but leave the communication with the Minister’s private secretary, immediately outside the Minister’s own office. This would have been the penultimate resting place for the documents even if they had come through the mail. There is no evidence before me as to the practice followed by the private secretary concerning the opening of envelopes addressed to the Minister but I have already inferred that someone other than the Minister opened this envelope and extracted the contents. However I certainly cannot assume that it was the steno-secretary or the private secretary who opened the envelope. There were apparently a number of people (five) on the Minister’s personal staff. I agree with Mr. Coady that a plaintiff should not be penalised because the Minister does not read his mail on the day it arrives. The point is somewhat different here however for the Minister has never read the acceptance as endorsed on Exhibit "C" at all, and I cannot be certain whether he read the letter Exhibit "B" before or after the 11th August. The closest the Minister can go is "about a week after" the 2nd August, which could be the ninth or may be the eleventh itself. What Mr. Coady is really asking me to do is to draw an analogy between the postal case decisions which lay down that once the acceptance is posted communication thereof is presumed to have occurred when the acceptance would be delivered to the addressee in the ordinary course of post, and the present set of circumstances when the courier is not the postal authorities but an agent of the plaintiff company. I think some guidance can be given from remarks made by Lord Herschell in Henthorn v. Fraser:

"I should prefer to state the rule thus: Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted."

The common law of England is of course part of our underlying law and must be applied so far as it is applicable to the circumstances of the country. One circumstance which I must take into account which would not have troubled Lord Herschell is that we have no postmen to deliver letters in Papua New Guinea. The mail stops at the post office until it is collected by the addressee or someone on his behalf. In short, assuming the postal cases do apply to this country then the plaintiff would be in a worse position because a responsible agent of the plaintiff has delivered the acceptance to the Minister’s doorstep whereas in the ordinary course of post some very junior departmental officer could be the person uplifting the mail on behalf of a Minister or a Government Department. According to the "ordinary usage of mankind" one would be forgiven for thinking that delivery of a written acceptance onto the table, if not even into the actual hands, of the Minister’s personal secretary would be adequate delivery to the Minister himself. I would have thought that such delivery was both reasonable and as perfect as the law would require in the far from perfect business world. That there are potential problems which follow from such a ruling I do not doubt but they seem to me less harrowing to the mind than the shortcomings which troubled the court under the ordinary postal system as set out in The Household Fire and Carriage Accident Insurance Company (Limited) v. Grant.

There is one further reason however which convinces me that the acceptance has been communicated in the present case. The main principle running through the "postal cases" highlights the fact that offer and its acceptance are consummated in a manner either explicitly or implicitly designated by the parties during their negotiations. In the instant case it is true to say that most of such negotiations occurred face to face and were it not for one deciding factor, the logical outcome would be a personal presentation of the acceptance to the Minister. This method would certainly be one in the contemplation of the parties, but it is not the only one. During the evidence of Mr. Aoae the following exchange occurred in the cross-examination:

"Q. That letter there in front of you, was that at your request to be posted, or was that to be picked up or was that conveyed by some courier system or what, can you recall?
A. I beg your pardon?

Q. That letter of the 26th of July in front of you, do you know how it was conveyed to the company?
A. That was typed, signed and left in my office to be collected.

Q. By whom?
A. By the lawyers of the company."

It is obvious from this exchange that the Minister did not anticipate offer and acceptance through the post or that he would personally tender such offer other than through agents of the plaintiff. The evidence of Mr. Bolger discloses that one of the private courier services operating in the country was used between Moresby and Kieta. As the document was to be collected by an agent of the plaintiff it appears an obvious inference to me that the Minister would expect the same system in return and I cannot imagine he or any other Minister suggesting that personal service was required on him. I may be unskilled in the way of bureaucratic management and procedure but I hope I am not naive. In delivering the acceptance in the manner he did, Mr. Bolger, as an agent for the plaintiff in this regard, did everything which could properly be expected in the circumstances. I therefore find that in law there was a proper communication of the acceptance and thus a proper and binding contract.

The new Minister has purported to revoke the offer made by his predecessor on the 26th July. It is only necessary to state the proposition to arrive at the answer, in the light of my decision. The offer could not be revoked on the 11th of August because it had already been accepted. Mr. Mullumby has contended that from 1.00 p.m. on the 2nd of August until the 6th of August by virtue of s.147 of the Constitution there was no Minister for Forests. Although it is not necessary for me to decide for the purpose of this judgment I would specifically reject such submission. As the Crown cannot die under the common law of England the very essence of our Constitution ensures that there will be no hiatus between a defeated government and its successor. The various portfolios are distributed by the new Prime Minister in accordance with a number of dictates. Until such distribution they all of them dwell in the breast of the Prime Minister. It is not s.147 which is pertinent to the situation arising on the 2nd of August but rather s.144 (2) of the Constitution, conjoined with s.141 (b).

In the circumstances of the present case however even if there have been some hiatus between the time the acceptance was placed on the table and the appointment of the new Minister, the communication in my view was still complete. By 10.00 a.m. there was sufficient communication to the previous Minister and there would still have been sufficient communication even if the acceptance had been placed on the table after the new Prime Minister was sworn in. The gap of several days between the time the old Ministry departed and the new was sworn in does not affect the issue. The argument is between a company and the Ministry. There is no agreement between the plaintiff and a member of Parliament as such. The latter’s powers stem from his position and in that position he enters into a contract and grants permits on behalf of the State - in short the plaintiff and the State are the real parties involved but for obvious reasons it is desirable for the State to act through its elected members designated by the Prime Minister.

As I have already indicated I am not prepared to find that a timber permit was issued by the Minister in this particular case but I do declare that on the morning of 2nd August 1982 a binding agreement for the grant of a timber permit came into existence between the plaintiff and the Minister on behalf of the Independent State of Papua New Guinea over the area of land described in, and in accordance with, the terms and conditions laid down in the Minister’s letter of the 26th July 1982.

I therefore find for the plaintiff with costs.

Solicitor for the Plaintiff: Kirkes
Counsel: C.J. Coady
Solicitor for the Defendant: O. Emos, Acting State Solicitor
Counsel: A.J. Mullumby