N671

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

IN THE MATTER OF LUABAR LOGGING PTY LTD AND 
IN THE MATTER OF THE COMPANIES ACT (CH NO 145)

Waigani
Bredmeyer J

17 June 1988
8 July 1988

REAL PROPERTY - Approval of certain dealings - Dealing of "no effect" till Ministerial approval obtained - Lease not approved - Possession given and taken - Whether rent recoverable - Land Act (Ch No 185), s 69.

LANDLORD AND TENANT - Agreement for lease - Approval of Minister required - Lease of "no effect" until approved - Effect of lack of approval - Possession given and taken — Whether rent recoverable - Land Act (Ch No 185), s 69.

The Land Act (Ch No 185), s 69, provides that certain dealings in land (including relevantly leases) shall not be made without the approval of the Minister. Section 69(2) provides that until the approval is given - a lease "is of no effect" and s 69(3) provides in effect that the section is not breached if the document creating the relevant interest in land is expressed to "be subject to the approval of the Minister".

Held:

That notwithstanding the provisions of s 69 of the Land Act, where the parties had acted on an unapproved lease and the tenant had gone into possession with the knowledge and approval of the landlord, the tenant was estopped from saying that the lease was of no force and effect and the landlord could sue for and recover the rent owing.

McCosker and King v Kuster [1967-68] P&NGLR 182, followed.

Cases Cited

The following cases are cited in the judgment:

Gaudron v Mackay (1936) 60 WN (NSW) 11.
McCosker and King v Kuster [1967-68] P&NGLR 182.
Marks v Jolly (1938) 38 SR (NSW) 351; 55 WN 125.

Petition

This was a creditor's petition for the winding up of a company, on the ground of inability to pay its debts (s 240(1)(e) of the Companies Act (Ch No 145)), the debt relied upon being rent unpaid.

Counsel:

P Dowa, for the petitioning creditor.
S Konecny, for the company.
Cur adv vult

8 July 1988

BREDMEYER J.: This is a creditor's petition for the winding up of a company on the ground of inability to pay its debts — which is a ground for winding up under s 240(1)(e) of the Companies Act (Ch No 145). The notice under that section, dated 2 November 1987, does not recite a written lease. It says that the company owes K5,400 for rent due on premises at allotment 2, section 73, Rabaul from 1 December 1986 to 31 August 1987.

Neither the petition nor an affidavit by the petitioning creditor refers to a written lease. In the petitioning creditors affidavit she claims "agreed rent" for the stated period at K600 per month. Clearly that is nine months at K600 per month = K5,400.

Mr Rod Patterson, who is a lawyer and a director of the defendant company, says that the rent is claimed under a lease dated 2 January 1986 which is stamped but not approved under s 69 of the Land Act (Ch No 185). Under that lease the rent is K600 per month for the first year (commencing from 1.2.86) and K650 per month for the second year. Thus the arrears of rent for the period 1.12.86 to 31.8.87 would be two months at K600 per month and seven months at K650 per month = K5,750. I consider that the rent is not in fact claimed under the lease.

In case I am upset on that finding, I now turn to the company's argument ably put by Mr Konecny. He says that the lease is void and thus a debt created under it cannot be recovered because of s 69 of the Land Act (Ch No 185) and because the parties by their express words in cl 9 declared that the lease should have no force or effect until it was approved.

I quote s 69 of the Land Act:

"69. approval of certain dealings

(1) Notwithstanding anything in any law, but subject to this section, a person shall not, without the approval of the Minister—

(a) transfer land; or

(b) give a mortgage or encumbrance of or over land; or

(c) grant a lease, easement, right, power or privilege of, over, in or in connexion with land.

(2) Until the approval referred to in Subsection (1) has been given, a transfer, mortgage, encumbrance, lease, easement, right, power or privilege in or in connexion with land is of no effect.

(3) Nothing in Subsection (2) makes of no effect a transaction referred to in Subsection (1) if the contract or agreement—

(a) is expressed to be subject to the approval of the Minister; or

(b) provides that, until that approval is given, the contract or agreement has no force or effect.

(4) Where the approval of the Minister is required to be given under this section, the transferee, mortgagor, encumbrancer, grantee or donee who seeks that approval must, within 28 days of the execution of an instrument to which the requirement relates, cause—

(a) the instrument to be presented to the Department for endorsement with a certificate in the prescribed form to the effect that the approval has been given; and

(b) a duplicate or certified copy of that instrument to be filed in the Department.

(5) A person referred to in Subsection (4) who refuses or fails to comply with Subsection (4) is guilty of an offence.

Penalty: A fine not exceeding K40.00.

Default penalty: A fine not exceeding K10.00.

(6) A duplicate or certified copy prepared solely for the purposes of Subsection (4)(b) is not liable to stamp duty."

A little history is in order here. The forerunner to this section in New Guinea was s 3 of the Transfer of Land Control Ordinance 1951 which is quoted in McCosker and King v Kuster which is a 1954 case but is published in [1967-68] P&NGLR 182. Note that it uses the word "and" between (a) and (b) of subs 4. To paraphrase, the section is deemed not to be contravened if the transaction (a) is expressed to be subject to the approval of the Administrator, and (b), provides that, unless and until that approval is given, the contract or agreement shall have no force or effect.

The section continued in that form in the first amalgamated Land Ordinance for the two territories, in s 75 of the Land Ordinance 1962. By an amendment No 5 of 1966 the section was repealed and replaced by a new version, the most important change being that the word "or" was substituted for "and" in the two legs of what became subs (3). That section is now s 69 of the Land Act (Ch No 185) with the Minister substituted for the Administrator.

That change from "and" to "or" is an important one and one which is, I believe, overlooked by many conveyancers. Section 69 is not breached if the document creating an interest in land is expressed to "be subject to the approval of the Minister". There is no need to go on and also declare that the document is of no force and effect until that approval is given.

Despite the fact that this lease was not approved and the parties expressly stated in cl 9 that until such approval was obtained the lease was to be of no force and effect, neither side acted on that clause. The tenant went into possession and paid the rent and, on the landlord's part, she allowed the tenant into possession and collected the rent. I consider that it is just that the tenant is now estopped from saying that the lease is of no force and effect. Although cl 9 is clearly worded and there is a strong logical argument for saying that the lease is void because unapproved and by the express agreement of the parties, McCosker and King v Kuster, already cited, is to the contrary. The document there contained a clause in the same form as cl 9. Yet despite that, Ollerenshaw AJ, citing much Australian authority, said that the parties were not without legal obligations to each other (at 189) and granted specific performance to the transferee. That decision has been widely followed, as far as I know, in Papua New Guinea. I know of no reported case to the contrary.

Mr Konecny cited to me two Australian cases. Gaudron v Mackay (1936) 60 (NSW) WN 11, which is indeed to the contrary but is in my view, overwhelmed by the authorities cited in McCosker. The second case he cited, Marks v Jolly (1938) 38 SR (NSW) 351, I consider supports my view. In that case the defendant granted a lease to the plaintiff without the consent of the Water Conservation and Irrigation Commission as required by a section of an Act, which provided that any dealing should not be valid for any purpose whatsover unless the consent of the Commission had been obtained. The plaintiff went into possession, paid the rent for the first three months, of 200 pounds, and no consent was obtained. After the expiration of three months, he was evicted and he sued for the recovery of the rent paid. He failed in the District Court and his appeal to the Full Court of the Supreme Court was dismissed. I rationalise the decision this way. The parties intended a tenancy, they agreed on a rent, the tenant went into possession, he enjoyed the benefit of the tenancy and he paid the rent: therefore he could not later recover the rent. The same would apply in this case. If, for example, Luabar Logging sued for recover of rent after having enjoyed possession, it would fail. A party cannot be allowed to blow hot and cold, to have the benefit of a contract and then escape the obligation which is the consideration for the benefit. It is like eating one's cake and then having it too.

In this case I propose to follow McCosker's case. I have read the affidavits carefully. I accept the petitioner's affidavit evidence that Luabar Logging had the lease, did not terminate it or quit it in any way, that it put Mr Alex Subramanium in as tenant, and that he was not put there by the petitioning creditor or her agent.

I make the winding up order and I award costs to the petitioning creditor against the company.

Winding up order made

_________________

Lawyer for the petitioning creditor: Kirkes.
Lawyer for the company: Day and Associates.