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Olympic Stationery Pty Ltd v Niugini Steel Corporation Pty Ltd [1991] PGNC 3; N1313 (12 February 1991)

Unreported National Court Decisions

N1313

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

WS 79 OF 1993
OLYMPIC STATIONERY PTY LTD
v
NIUGINI STEEL CORPORATION PTY LTD

Waigani

Salika J
March 1995

JUDGMENT

CONTRACT - Negotiations for sale of land between parties - offer and acceptance - Deposit paid - Contract of Sale executed - Ministerial Approval obtained - Defendant refuses to co-operate to honour contract.

DEFENDANT DENIES CONTRACT - Persons signed on behalf of Defendant ostensible authority to enter into contracts.

Specific performance ordered.

Counsel:

Mr Merrick for the Plaintiff

Mr Briggs for the Defendant

Cases Cited:

AGC (Pacific) Ltd v Woo International Pty Ltd (1992)

McWilliams v McWilliams Wines Pty Ltd [1964] HCA 6; (1964) 114 CLR 656

March 1995

SALIKA J: The suit in tatter was coms commenced by way of a writ of summons by the plaintiff against the defendant.

The main facts not in dispute are:

(1) &##160;plae tiffntiff is this the registered proprietor of land namely Lotsnd 19 (con (consolidated) Section 341 Hohola.

(2) &ـ The defe defendantndant is the regis propr of iness lease ease VolumVolume 84 Folio 198 which was granted on the 28th September 1983 for a tera term of 99 years from 9 July 1981. leaserisestment 2ent 20,21,0,21,0,21,22 and 23 (consolidated) section 341 Hohola. The plaintiffs and the danendants share land bound.

(3) tiagoons iook place betweentween the parties, Ray, Ray Thurecht and Anton Rasiah on behalf e plaintiffs and Kurt Fieldman and Joshua Kuruilla on behalbehalf of the defendants for the sale by the defendants to the plaintiffs of Lot 20 Section 341 Hohola.

(4) ـ&#1n offe offer of K of K15,000 for Lot 20 was accepted by Mr Kurt Fieldman by a letter dated 24 May 1990 with a proviso that payments be made immediately and not when the title changes hands.

(5) &#160eposdt of K15,900 was was paid by cheque by the plaintiff to the defendant between 15 and 20 June 1990.

(6) &ـ A act oe and Purcoase of Lot 20 was drawn up by Steeles Lawyers, the, the plai plaintiffntiffs laws lawyers with the approval of the defendaor exon.

(7) ـ The Con ract was exas executed on the 29te 29th Octh October 1990 and the common Seal of both Niugini Steel Corporation Pty Ltd and Olympic Stationary Pty Ltd were affixed thereto and witnessed by Kurt Fieldman (Director) and “Joshua Kuruvilla (Secretary)” on behalf of the defendants and “Ray Thurecht (Director)” and “Anton Rasiah, (Secretary)” on behalf of the plaintiff.

(8) & Stamp damp duty was paid by the plaintiffs on the documents on 6 November, 1990.

(9) Ministerial Approval was obtained to the dealing inland e 12 ary, 1991.

(10) & Pay;ent ment oent of thof thof the outstanding land lease rental due to the Department of Lands for Lo, 21,nd 23ion 341, Hohola was paid byid by the plaintiff in the sum of K4,425.00 in or about December of 1991 u991 upon ipon instructions of the defendant.

(11) There is spute as to the ithe identity of the signatories on the contract on behalf of both parties.

PLAINTIFF’S CASE

The plaintiff submits that there was a valid agreement for the sale of Lot 20 following an offer and acceptance between itself as the purchaser and the Defendant as the vendor.

The plaintiff further submits that the agreed purchase price of the property was K15,000 and that at the request the defendant the plaintiff had paid a deposit of K14,900.

The plaintiff argues that a contract was drawn up by its lawyers with the approval of Mr Kurt Fieldman a director of the Defendant company and which was signed across the common seal on behalf of the defendant by Mr Fieldman and Mr Joshua Kuruvilla who held himself out to be the Company Secretary of the Defendant Company was a valid contract.

The contract and transfer documents were dated executed on the 29 October 1990 and stamp duty on the transfer and the Contract was paid by the plaintiffs.

Ministerial approval was granted on 12/1/91 but the documents were not returned to the plaintiff’s lawyers until the plaintiff had paid the outstanding land lease rentals in December 1991. It was the responity of thof the defendants to pay the land lease rental and the plaintiff was forced to pay in order to obtain the documents duly approved.

After the plaf had received the approved Transfer documents it was necesnecessary to apply to the Lands Department for sub-division under Section 71 of the Lands Act. The Piff argues that althoalthough it was the vendors ( defendants) responsibility the defendants had indicated it was taking a passive role in the procedure. The Piff therefore took thok the lead role in this and required the defendants cooperations in so far as it had to consent to the application made on its behalf.

The Minister for Lands woulder approve or refuse the aphe application. If the terms and conns of s of the new lease are acceptable to the plaintiff, the defendant would then be called upon to surrender the State lease for new leases to be granted over each of the subdivided portionshe land.

The defendafendant refused to give instructions to its Mortgage, the ANZ Banking Group to release the State Lease for the purpose of the application to the Minister for Lands for a Sub-division.

The plaintiff argues that by its refusal the defendants is in breach of the contract and is seeking specific performance of the contract.

In the alternative the plaintiff seeks an order for damages for losses suffered as a result of the breach.

The defendants has denied knowledge and existence of the contract of sale. It submits that there w cono contract binding on it because of the way in which the purported execution took place. Ifits that Mr Kurt Fieldmaeldman and Mr Joshua Kuruvilla were not authorised by the Directorst to enter into such a cont contract and furthermore it submits that Mr Fieldman was no longer Director of it and that Mr Kuruvilla was never the Company Secretary. The defendant pleads the statute of Frauds and Limitations Act Sections 2 (1) (a) and S. 4. Ites that those provisionssions deal with situations where the vendor of an interest in land is a company (as in this case) at a nl person there arre are two ways by which a Vendor company can “sign” so as to s to comply with provisions of Section 2 and 4 of the Statute of Frauds and Limitations Act. The fir by duly fixing theg the Company seal on a document and the second is pursuant to s. 38 of the Companies Act Chapter 146.

The Companies Act is silent as to how companies should fix theimon seals to documents but but it is a matter which is dealt with by the Company's articles of association. In this case the dant Comp Company articles of association say that the common seal:

(a) ; must be used bnly byauthoauthority of the Directors or of a Committee of Directors authorised by the Director in than that behalf; and

(b) &ـ mu accoed by the tignature of a Dire Director ctor and sand shall hall be counter signed by the Secretary or a Second Director or by some otersonointed by the Directors for that purpose.

The defendant thus argues that bhat becausecause Mr Fieldman and Mr Kuruvilla were not either Directors or Secretaries or specially appointed persons they could not execute the document on behalf of it. It ts that the company seay seal is not duly affixed to the Contract of Sale.

In relation to the second means of compliance on 38 (i) (b) states:

“(i) Contron s halfeof a co a co a company may be made as follows:

(a) ـ&#1..

(b

(b) &##160;; a contrcontract thct that, if made between private persons,d be w req to be in writing sign signed by the parties to be charged with it may be made on behalf of the the compacompany in writing signed by a person acting under to express or implied authority; and

any contract so made is effectual in law and binds the company and its successors and all other parties to it and may be varied or discharged in the manner in which it is authorised to be made.”

The first point the defendants argues is that it says the contract of sale cannot be construed as a document which is purported to be executed by natural persons on behalf of the defendant company. It says that the executiou clause was drafted for execution by a Director and Secretary of the defendant company signing as witnesses to the affixing of the common seal and not for exec of the document by individuals on behalf of the defendant.dant. It argues that the only function of the Director and Secretary in such execution is to record by signature, the attestation to the sealing of the instrument but it is by the sealing of the iment that the document is executed. The defendant thut thus argues that the Contract of Sale cannot be construed to be an example of the defendant company executing an agreement pursuant to section 38 of the Companies Act.

The second point the defe argues is that Section 2 an 2 and 4 of the frauds and Limitations Act requires lawful authorisation of agents in writing for the supposition of interest in land to be evidenced by writing of an agent and not the principal. the defendant argued that there was no such written, lawful authorisation of Mr Fieldman and Mr Kuruvilla to enter the contract. The defendant argues thaany event the two officers who purported to execute the contract on behalf of the defendantndant were acting without the authority ofdefendant company.

The defendant also argues that in appointing a director or a Secr Secretary, a company is bound by any action taken by the director of Secretary in accordance with express authority conferred by the shareholders or directors of the company. They also submit thaompanympany is bound by any action taken by a Director or Secretary which is incidental to their position. This is called implithorithority. A company can alsbound by d by action taken by a Director or a Secretary where that company holds out that person as having such authority. Thatalled “ostensiblnsible authority”.

The dant argues that it did not not do anything which could be construed as holding out Mr Fieldman or Mr Kuruvilla as having ostensible rity to execute the contracntract of sale. It argues that the dnts wats was not to be executed under authority but by the Company itself under seal.

I have heard evidence from both sides and I must say at the outset that I was not impressed with thdence of Mr Fieldman. #160; Thisecause I am of thof the view that he is the cause of this litigation.

The first issue for the court to determine is whether there was a contract binding on the defendant.

There is evidence of negotiations taking place between the plaintiff and Mr Kurt Fieldman and Mr Kuruvilla purportedly on behalf of the defendant. Correspondences wert on thon the company letterheads of each of the parties. Mr Fin held himself out tout to be a Director and Mr Kuruvilla himself out to be the Company Secretary of the defendant Company. Thendant arguesrgues that that it did not give authority to Mrdman and Mr Kuruvilla to acto act on its behalf. I do not accept thamissionssion. I am of the view Mr Fieldmieldman and Muvilla were both acting on g on behalf of the defendant company. They wer men at the localiocality and surely one would expect to masome authority toty to act on behalf of the defendant compacompany. er to exhibit D, a l; a letter d by Mr Fiel Fieldman e 20/6/90. That letteletter was in reply to a letter from the plaintiffs Managing Director Ray Thurecht. The letter reads

&;We thank you foru for your letter dated 15/6/90 with attacattached deposit cheque, and we wish to advise that we approve the deal be doneer your suggestion.”

That in my view is evidence enough for the plaintiff comp company to accept and believe that the defendant company had authorised Mr Fieldman to correspond on its behalf and agreed to the deal.

Earlier, on the 30/4/90 Mr Kuruvilla had written to the plaintiff and his letter says:

“We have consulted our Board of directors regarding your offer...”

Again this is evidence that the Board of Directors of the defendant company were aware of the deal and that Mr Kuruvilla was authorised to act on its behalf. Insame letter Mr Kuruvillavilla said:

“We require all the monies in full and the legal formalities will be your responsibility.”

Again, anyone reading that letter was eed to reasonably assume thae that Mr Kuruvilla was acting on instructions from the Board of Directors. From all the correspondende and negotiations a contract of sale was drawn up by the Plaintiffs lawyers. An up front payof K14,900 ,900 was paid byPlaintiff as requested and accepted by the defendants through Mr Fie.dman. Afte After the contract le sale was drawn up i signed by the parties. The defendant argt had nhad nhad no knowledge of the contract and that Mr Fieldman and Mr Kuruvilla wer authd to execute the the document. I amhe view that that foll following on from the negotiations and the correspondence received from the defendant company the plaintiff was entitled to assume that both Mr Fieldman and Mr Kuruvilla were the mouth piece for the defendant company in Papua New Guinea and that each was authorised to sign the contract of sale. were no suspicious circumircumstances in my view which would have placed the plaintiff on inquiry that the dealings by the Director and Secretary were anythingr than regular. The fact that Mrecht had bhad been toen told that the contract had been sent to Sydney is not in my view a circumstance which would have placed Mr Thurecht on inquiry. This iause right from the the start of negotiations Mr Fieldman and Mr Kuruvilla held themselves out to be a director and secretary respectively of the defendant company. Mr Fieldman who was ector said Mr Kuruvilla miga might have held himself out to be the company secretary of the defendant. Mr Fieldman a Director idly allowed Mr Kuruvilla to hold himself out to be the company secretary. Indeed&#160 “Exhibi8221; a letteletter fr Kuruvilla, to the plaintiff Mr Kuruvilla holds himself out as the company Secretary. #160; One would expepies ofes of such corrdencee on the company files and that a prudent Companympany Dire Director such as Mr Fieldman would have seen the correspondence andped Muvilla from holdinolding himself out as the company seny secretary. Mr Fieldman did not and so Mr Kuruvilla in my view wastled (rightly or wrongly) to assume he was the company secretary which in turn entitled thed the plaintiff to assume that Mr Kuruvill the company secretary of the defendant company. In m In my vie circumstancstances in this case were such that there was ostensible authority given by the defendant company to both Mr Fieldman and Mr Kuruvilla to act for the defendant Company.

I reo the case of AGC (Pacific)ific) Ltd v Woo International Pty Ltd (1992) for support where Sakora J said:

“Where a person dealing with a company acts in good faith with no other notice or reasonable grounds of suspicion of irregularity or impropriety, he is not affected by any actual irregularity or impropriety in a matter of internal regulations. That is a third partying wing with a company is not bound to ensure that the internal regulations derived, inter alia from the articles of associatiove in fact been complied with as regards the exercise and delegation of authority in the cohe company. A third party need not gthfurther; he need not ensure that the rules of internal management sometimes referred to as rules of ‘indoor management&# have been observed.”

In my view the fact that Mr Fieldman and Mr Kuruvilla hela held themselves out as a Director and a Company Secretary was a matter of internal management of the company and should have been attended to by the Directors. A as the plaintiff is conc concerned he is a third party interested in buying land from them. Itot the plaintiffs busitousito sort out the management deficiency of the defendant company.

The defendant has reas relied on an extract that it produced t court showing the affairs of the company as at the 28 June June 1985. There is no further evidofce of the state of affairs of the company between 1985 and 1992. I could not accept that the position of the defendant company was the same between 1985992. To my mind that extract is of no evidentiary valy value to the Court.

The plaintiff in my view had acted on good fall along. The owners ners of the company in Sydney were aware of the deal. If Mr Fieldman and Mr Kulavilla acted without authority then that in my view is a matter the defendant company has to sort out, because right from the beginning of negotiations the plaf was entitled to assume that both men had the authority toty to act for the defendant.

I find there is a valid contract and that the defendant is bound by it.

The next issue is was the contract breached by the defendant. The plaintiff allegat the the defendant refused to co-operate with the plaintiffs lawyers in submitting an application for a sub-division of the ln accordance with the obligations under clause 19 (b) of the contract. Clause 19 (b) reads:eads:

“This Agreement is subject to and conditional upon the vendor obtaining a separate state lease for the property upon terms and conditions acceptable to the purchaser and in the event that the vendor within six (6) weeks from the date hereof fails to obtain the said state lease or obtains the state lease upon terms and conditions not acceptable to the purchaser, the purchaser may rescind this Agreement in which event the provisions of clause 19 shall...apply.”

The defendant argues that although the contract may appear to impose obligations on the defendant to obtain a separate state lease for allotment 20, the plaintiff in fact assumed that obligation of the defendant and failed to obtain the separate lease within 6 weeks. The defe argues further ther that since the condition remains unsatisfied the contract is not enforceable. Evidence does support the contention that the plaintiffmed the obligation to obtain the separate state lease.&#160 Eve is legal foal formalitmalities to obtain the lease was tohe plaintiffs responsibility. The plaintis forceforced iced into that position by the defendant. The poire is that tfendad ndad not co-operate rate with with the plaintiff when its cooperation was required to achieve the intention of the parties. Evidence is the dant was awas a passive party to the transaction.&#160 It was ped to go through tugh the deal so long as it did not play tading role.

The plaintiff is seeking an order that the defendant take all steps that that are “reasonable or necessary&# to obtain a separate statestate lease of Lot 20. This means italled upon toon to take the steps set out in s. 71 (1) to (6) of the Lands Act. All the other shad been coen completed except to surrender the lease for the purpose of granting new leaser each of the subdivided poed portions of land. The defendant has re to suto surrender the lease in that it has refused to sign the application made on its behalf for a sub division of the land under s. 71 of the Lands Act. It cessary that the defen efen sign the application to acto achieve their intention. To my mind thusal by the dthe defendant to sign the application for the se of achieving their goal is a hindrance to their cause.&#se. The dant in my view must oust on its part, take all steps necesso achieve their intentions.ions. I rto the case of McWilliailliams v McWilliams Wines Pty Ltd [1964] HCA 6; (1964) 114 CLR 656 at 661 where turt said:

“We 0;We think it proper at this stage to direct the appellant to do all such things as may be necessary on his part to support an application for the consent of the Commission to a transfer of the subject land to the respondent company or as it may direct.”

This case in my view lends support to the proposition that it is necessary for the defendant to do everything reasonably necessary to transfer Lot 20 to the Plaintiff. The defendant must ma sign sign the appropriate application and it should not delay or refuse to co-operate. That isthe plaintiff is asis asking the defendant out to do - signapplication - which the plaintiff has prepared on behalf oflf of the defendant.

The defendant has submitted that if it were to the appropriate applicatiocation it would mean that it would have to surrender the whole lease relating to the whole of the land including Allotments 21, 22 and 23 which he says was unforeseen and which it did not wish to do and in the circumstances has decided for that reason not to take the step to sign the application.

What the defendant has failed to realise is that in order to obtain a separate state lease for Lot 20 the defendants has to go through the stages stipulated under section 71 of the Lands Act. I do not consider the requ requirement to surrender the lease is unforseen. The rement has been there here all the time in the Land Act.

Taking into account all the circumstances of the case I am satisfied on the balance of probabilitiat the defendant breached the contract in that it has not pnot performed its obligations under the contract.

I accordingly make the following orders:

a) & T60;defe dantnis to speedspeedily do all things that are necessary to obtain a separate State Lease of Allotment 20 Section 341 Hohola being part of the land comprised in State lease volume 8io 19ether the improvementsments ther thereon; eon; and

b) ; Do all shingt that are nece necessary to complete the sale of the said piece or parcel of land namely Allotment 20 section 341 Hohola being part of the land comprised in state lease vo84 Fo98.c) #1660 &#160 Cost Costs of these pringsdings is awarded to the plaintiff.

Lawyer for Plaintiff:&#16rner Shand

Lawyer for Defendant: Blake Dawson Waldron