N1051

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

JACOBS

V

KWAINDU

Waigani
Los J

20 September 1991
18 October 1991

VENDOR AND PURCHASER - Contract for sale of land - Evidence of - Note or memorandum in writing - Letter from vendor/landlord supporting application for finance - Letter sufficient - Specific performance granted - Fraud and Limitations Act 1988, s 4.

The Fraud and Limitations Act 1988, s 4, provides:

"No action shall be brought upon a contract for the sale or other disposition of land or an interest in land unless the contract, or some note or memorandum of the contract, upon which the action is brought is in writing signed:

(a) by the person against whom the action is brought; or ..."

In proceedings for specific performance of a contract for the sale of land the purchaser alleged an oral contract between himself as tenant and the vendor as landlord evidenced by a letter provided by the vendor to a bank for the purposes of the purchaser obtaining finance, which provided in part as follows:

"In those circumstances, I have decided to sell the property only for K32,000 and [illegible] for K3,000 taking the total purchase price to K35,000. I consider this figure as reasonable as after allowing for say K15,000 discount if I was to sell it to someone outside for K50,000."

Held

(Granting specific performance) The letter from the purchaser to the bank was a sufficient note or memorandum for the purposes of s 4 of the Fraud and Limitations Act 1988.

Cases Cited

Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647.
Clifton v Palumbo [1944] 2 All ER 497.
Ningiga v Koavea [1988-89] PNGLR 312.

Statement of Claim

These were proceedings in which the plaintiff sought specific performance of a contract for the sale of a house property.

Counsel

R Habuka, for plaintiff.
J Yagi, for defendant.
Cur adv vult

18 October 1991

LOS J: The plaintiff has brought an action against the defendant seeking an order for specific performance of a sale agreement over a house located at section 271, allotment 41, Erehu. In the alternative he seeks an order for damages for breach of contract by the defendant.

The plaintiff and his family moved into the house about July 1984 when he was in the employment of a company known as Theodist. The property was then owned by someone other than the defendant. In 1985, the defendant became the owner of the house through a mortgagee sale. The plaintiff continued to live in the house and his company was paying a rental of K500 per month to the defendant. The plaintiff ceased employment with Theodist in 1988 and he became personally responsible for payment of rents at the same rate.

Early this year, the defendant told the plaintiff to move out of this house. In a letter of 2 March the defendant wrote to the plaintiff and said: "I would like you to vacate the house completely by or before the 15th April 1991." Hence the dispute began. The plaintiff says an oral agreement was entered into between himself and the defendant in 1988 wherein the defendant had agreed to sell the house to him. The defendant says there was no agreement at all in 1988 but, if there was one, it had expired; that only in 1989 after a constant pleading by the plaintiff he had reluctantly agreed to sell the property to him.

Was there any oral agreement in 1988? No written material by way of an agreement or any written communication has been produced before the Court to confirm the alleged agreement. Therefore it is the plaintiffs word against the defendant’s word. I have therefore to determine whether there was an agreement by inferences from other evidence, facts and conducts of the parties established by the evidence.

Before going into the evidence the defendant attacks the plaintiffs demeanour and says he has been evasive and has not answered the questions put to him. On the other hand it is said that the defendant has spoken with confidence and maturity and therefore he should be trusted. It is my respectful view that the plaintiff was not evasive as such; he was pre-emptive and verbose in many of the answers. The defendant acted and spoke with maturity because he had to act with caution, foresight and shrewdness.

It is clear to me that no agreement in a technical sense had been concluded in 1988. It is my view however that a loose kind of agreement in a layman’s language had been reached either by acquiescence or by a non-negative reply given by the defendant just like the verbal agreement between them allowing the plaintiff to remain in the house and to continue to pay the same rate of rent to the defendant. There was no fuss on this; the defendant had benefitted from this informal arrangement. What remained to be agreed upon was the price. The plaintiff might have been slow to get the money but the bank did not refuse his application for a loan. There is no evidence that the defendant wanted an immediate sale. How could he contend on the one hand that there was no oral agreement on anything when on the other hand he insists there was a verbal agreement for an immediate sale. Further, how could he on the one hand say his letter of 19 March 1989 contained an offer for the plaintiff to consider and, on the other hand, say the house was for immediate sale.

The letter of 19 March 1989 speaks for itself and speaks loudly. The nature of this letter indicates that this was not the first occasion on which discussions between the parties has occurred. The first occasion perhaps relates to a written communication but not the subject matter of the letter. I say that for a number of reasons. The letter refers to a telephone conversation of the 18th and the letter also refers to the history of acquiring the property. Further the letter refers to the consideration and factors that the defendant had taken into account in favour of the plaintiff despite a lucrative offer elsewhere. In my view this confirms the plaintiffs evidence that on more than one occasion the defendant had agreed to sell the property to the plaintiff and his family by saying "haus bilong yupela".

The defendant says the letter was written in order to assist the plaintiff to get a loan from the bank. This statement is nonsensical and ironical. If he was not going to sell the house why would he have supported the plaintiff in writing at all; what would have been the loan for. Secondly even if he was playing smart because of his experience in banking before, he was clearly holding himself out in such a way that the plaintiff acted in good faith. If he was too scared to tell the plaintiff the truth that he did not want to sell the house, he was a coward. He expected the bank to make a decision for him by refusing a loan so that the deal would be off. However, the manifestation of his acts told the plaintiff otherwise and in my respectful view the plaintiff was entitled to act on the outward manifestation of the defendant’s acts and not cowardly concealed thoughts however shrewd they might have been.

Counsel for the defendant submitted that the letter was an offer and that the plaintiff did not communicate his acceptance. Along the views I have already expressed, the letter confirmed the final purchase price agreed upon. When writing the letter, the defendant knew that the plaintiff had accepted that the purchase price was K35,000 and he wrote the letter to support the plaintiffs application for a bank loan of that sum.

The defendant next raises the defence under s 4 of the Statutes of Frauds and of Limitations Act (Ch No 330). The plaintiff responds accordingly and says that s 4 only applies to leases, licences and easements and not to contracts of sale. The Statutes of Frauds and of Limitations Act has been repealed by the Fraud and Limitations Act 1988 and this new Act came into force on 7 September 1988. The requirement of writing under the 1988 Act is in Pt II — Transactions that must be, or be evidenced, in writing. Section 4 of this Act says:

"No action shall be brought upon a contract for the sale or other disposition of land or an interest in land unless the contract, or some note or memorandum of the contract, upon which the action is brought is in writing signed:

(a) by the person against whom the action is brought; or

(b) by an agent of that person lawfully authorised in writing for the purpose."

I think the proper section to rely upon is s 4 of this Act and I construe the phrase "some note" as applying to the letter of 19 March 1989 written and signed by the defendant and sent to the plaintiff. The fourth paragraph of the letter reads:

"In those circumstances, I have decided to sell the property only for K32,000 and [illegible] for K3,000 taking the total purchase price to K35,000. I consider this figure as reasonable as after allowing for say K15,000 discount if I was to sell it to someone outside for K50,000."

Mr Yagi refers to the basic elements of the law of contract and says that these had not been satisfied and thus there could not have been any contract between the parties. He says there must be an offer and acceptance before there can be a meeting of the minds by the two parties. In this respect he correctly stated the law that in most cases the courts look at the nature and the circumstances of the parties to ascertain whether there was a firm offer or acceptance and hence signify the intentions of the parties to be bound. He refers to Clifton v Palumbo [1944] 2 All E R 497 for support. In this English case, the negotiations started without assistance of any lawyer as in the case before me. In this English case, the subject of the contract was a very large estate spread over a very large area and comprising properties of various types which were subject to various sorts of lease, the whole being subject also to a jointure. There were mortgages outstanding in large sums. Given this and the nature of the letter from the plaintiff, it is not surprising that the court held that no contract was concluded at that stage. In that case (at 499) the plaintiff wrote:

"I ... am prepared to offer you ... my ... Estate for £600,000 ... I also agree that a reasonable and sufficient time shall be granted to you for the examination and consideration of all the data and details necessary for the preparation of the Schedule of Completion."

It is apparent that because of the informal nature of the discussions in 1988 between the two parties before me there is no direct evidence of offer and acceptance in the strict sense. The property is not huge; just one house. The plaintiff lived in it for a long time. The only thing remained to be settled was the price and that was settled before the defendant committing himself in writing to the plaintiff. The letter was not an offer despite its language; the defendant admitted that it was evidence for the bank to rely on to help the plaintiff buy the house from him, the defendant.

Counsel also refers to the simplistic nature of the alleged agreement and says that on the authority there could not have been any proper agreement entered into. He argues that if there was an agreement at all there should have been some details of that agreement, for instance, an agreement on the price of the house. And in this respect he refers to an observation by Griffith CJ in the case of Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 666:

"There are a great number of details incident to a contract of that sort, and it might be anticipated that the parties would come to some understanding about them before a formal agreement was entered into. They were matters of detail as to which there would probably be little or no difficulty, but still they were matters to be settled, and not left at large to be determined from time to time as occasion might arise. I mention this point because it is very relevant to the inquiry whether the matters referred to in the correspondence were regarded by the parties as the only matters to be dealt with in the contract."

I think the background of the acquisition of the property shows why the agreement looked like a simple matter. The plaintiff had been in that house before it was purchased by the defendant and that defendant obtained a very good rate of rental from the former employer of the plaintiff and that when he resigned from the employing company the plaintiff continued to pay the defendant at the same rate. The defendant appreciated this and, in his letter of 19 March 1989, he said: "I have taken into account yourself having rented the house for eight months now and Theodist Pty Ltd for three years." The demeanour of both parties indicated the loose and friendly relationship. The point is that both the defendant and the plaintiff had known each other for sometime and the defendant also had known the family of the plaintiff and everything they said and did seemed to have been on the friendly basis and they understood each other. There was no need for some elaborate negotiations. All it needed for a final determination was the price tag to be put on the house.

Lastly, the requirement for ministerial approval under s 69 of the Land Act (Ch No 185) has been used to argue that until such an approval is given the contract if there is one is of no effect. I can only repeat what I said in Ningiga v Koavea [1988-89] PNGLR 312 that a party cannot use an argument on s 69 of the Land Act to cover his lost interest or deliberate refusal in performing his part of a contract.

I come to the conclusion therefore that there was a process of negotiations beginning in 1988 and there was some verbal acceptance by the defendant, but that it was only necessary to put that in writing in 1989 because the bank had to sight a permission or authority by the owner of the house that he was prepared to sell his house and to sell it at the price of K35,000. I hold therefore that there was an agreement between the plaintiff and the defendant where the defendant agreed to sell the house to the plaintiff. When the defendant changed his mind and told the plaintiff to move out of the house he was in breach of the agreement.

The question now becomes what should be the proper remedy for the breach of the agreement. The plaintiff submits that the Court should not award damages to the plaintiff; the defendant should be ordered to specifically perform the contract on his side. The defendant’s financial position is not known, he may or he may not be able to pay for damages. But it is not a question of how much money one can pay when it comes to a house that one has occupied for many years. Over the years the plaintiff has become attached to the house and the surroundings. He has done improvements, renovations and many other things under the influence and favourable attitude of the defendant that the house would be sold to him. I therefore order that the defendant abide by the terms of the agreement between the two parties and take all the steps necessary to sell the house to the plaintiff.

As to the cross-claim by the defendant, the plaintiff has admitted that he is owing a large sum of money to the defendant for the rents unpaid for some time. As to his own defence on the cross-claim he said he had done some improvements on the house and some renovations in order to run his business. It is apparent to me he had done this largely to benefit his company and that, secondly, he did not seek approval from the defendant to carry out those major renovations. Therefore he cannot claim for reimbursements. His defence to the cross-claim therefore fails. I order that the plaintiff immediately pay the arrears of rentals in the sum of K5,060 as per the cross-claim plus the rentals for the period from 1 June 1991 to the date of this judgment. That until the sale is completed, the plaintiff shall make immediate payment for the rentals as they become due, unless other arrangements are made and agreed to by the plaintiff and the defendant.

Specific performance ordered

______________

Lawyers for the plaintiff: Richter Habuka.
Lawyers for the defendant: Kirriwon & Company.