N2325

PAPUA NEW GUINEA

[In the National Court of Justice]

WS 909 of 1990

GREGORY PULI MANDA

V

YATALI LIMITED
AND
DARYL HASTE

WAIGANI: SALIKA, J
17 April, 2002

Contract – variation of contract in writing – estopped from relying on old agreement – variation from old contract – new terms changed contract.

Counsel:
Miss J Murray for the Plaintiff.
Mr L Kandi for the Defendants.

The plaintiff’s statement of claim reads:

1.	The plaintiff is an adult citizen lawyer suing the Defendants in his own right.
2.	The First Defendant is a company incorporated under the Companies Act 1997 and is capable of being sued in its corporate name and style cited.
3.	The Second Defendant is the Managing Director of the First Defendant company and is sued in person and in his capacity as the Managing Director of the First Defendant company.
4.	The First Defendant is the former owner of Allotment 9 Section 4, Matirogo being the whole of the land described in State Lease Volume 5 Folio 1046, (herein referred to as "the Property").
5.	The First Defendant through the Second Defendant as its agent or employee entered into a contract for sale (hereinafter referred to as "the Agreement") of the property on 21 December 1999. The entire agreement will be referred to in trial for its full contents and effect.
6.	It was a term of the agreement that the purchase price would be K155,000.00. The schedule to the agreement provided:
Part 4: The Purchase Price – One Hundred and Fifty Thousand Kina (K155,000.00)
Part 5: Apportionment of Purchase Price
Land and Buildings				K130,000.00
	Chattels					K 25,000.00
7.	It was also a special term of the agreement that the First Defendant guaranteed the Plaintiff a rental rate of K3,000 – K3,500.00 for six months whether or not it continued to lease Units 3 and 4 of the property.
The schedule to the agreement Part II: special conditions, reads – 
2.	If this agreement is completed, the Vendor guarantees rent at K3,000.00 to K3,500.00 for 6 months whether or not it continues to lease Unit 3 and Unit 4.
8.	On or about 15 March 2000 the First Defendant acting through the Second defendant or its lawyer, Mr Philip Wariniki of Blake Dawson Waldron Lawyers, required the plaintiff to pay an extra K7,750.00 over the above the purchase price excluding the adjustments thereby breaching the term of the agreement as to the purchase price of K155,000.00
9.	The breach of contract by the Defendants referred to in paragraph 8 above caused the settlement fixed for 17 March 2000 to fail resulting in the Plaintiff incurring extra costs including rental payments until settlement on 10 April 2000.
10.	The First Defendant acting through the Second Defendant continues to require the plaintiff to pay an extra K7,750.00 to it and uses that as an excuse to refuse to observe the terms of the guaranteed lease-back pleaded in paragraph 7 above on account of invoices rendered to date to provision of accommodation, thereby resulting in further breach of the agreement pertaining to the guaranteed lease-back.
11.	The Plaintiff has given ample notice to the Defendants to settle invoices rendered for accommodating employees of the First Defendant company in accordance with the agreement and the Defendants have wrongly refused or continue to refuse to pay whiles the employees of the First Defendant continue to be accommodated by the plaintiff on the property.
12.	By reason of the Defendants’ breaches of the contract the Plaintiff suffered and or continues to suffer damages and losses.
He claims the following reliefs:
(a)	A sum of Twenty One Thousand Kina (21,000.00) as per the contract for six months rental.
(b)	Orders for eviction of the First Defendant’s employees forthwith.
(c)	Damages
(d)	Special damages or losses in bank interest rates.
(e)	Interest pursuant to statute.
(f)	Cost of the proceedings.
The defendants admit paragraphs 1,2,3,4,5,6 and 7 of the statement of claim but deny paragraphs 8,9,10,11 and 12 of the statement of claim.
In reply to the statement of claim the defendants say:
(a)	On 31 March 2000 the first defendant wrote to the plaintiff proposing the variation of the agreement as follows:-
(i)	In consideration of the First Defendants proceeding to settlement, the plaintiff acknowledged that it was indebted to the first defendant in the sum of K7,750.00
(ii)	Rentals for the units occupied by the first defendant to be as follows:
Unit 2 – K750.00 per month plus VAT
Unit 3 – K700.00 per month plus VAT
Unit 4 – K700.00 per month plus VAT
The First Defendant to occupy the 3 Units at a total rent of K2,150.00 plus VAT for a period of 3.5 months, rent to be applied against the indebtedness of the plaintiff in (1) above.
(iii)	At the conclusion of the 3.5 months period the First defendant to occupy the units at the rent referred to in (11) above on a month to month tenancy.
(iv)	On April 2000 the plaintiff endorsed upon the First Defendants letter of 31 March the following:
"10:30 am – 03/04/2000"
I accept the arrangement to speed up settlement. Please advise your lawyers of same.
Thankyou
Signed
Gregory Manda"
(v)	The plaintiff’s above notation of 3 April 2000 was acceptance of the First Defendants offer of 31 March 2000 and constituted a variation of the Agreement.
(vi)	Pursuant to the variation of the 3 April 2000 the first Defendants lawyers prepared a draft settlement statement and forwarded it to the plaintiff on 7 April 2000.
(vii)	On 10 April 2000, the plaintiff proceeded to settle the purchase of the property with the First Defendant in accordance with the agreement and as varied by the variation of 3 April 2000 and the settlement Statement of 7 April 2000.
(viii)	Pursuant again to the variation of 3 April 2000 the first defendant occupied Units 2, 3 and 4 at the property on the terms in 7 (a) (ii) (iii) and (iv) above.
In the alternative the First Defendant says that the plaintiff is estoppel by his conduct in relying upon special condition 2 of the agreement. The particulars of the plaintiffs conduct that gives rise to estoppel are:-
(a)	On 31 March 2000 to the First Defendant proposed a variation to the Agreement in the terms of the variation of 3 April 2000.
(b)	In reliance of the plaintiff having agreed to the variation of 3 April 2000, the first defendant acted to its detriment and proceeded to settle the sale of the property to the plaintiff on 10 April 2000.

The defendants deny they are indebted to the plaintiff as alleged or at all. It appears from the pleadings and from the evidence that not much is in dispute in so far as the facts are concerned. It seems to me that the only, substantive matter for argument is the purported variation of the agreement by the plaintiff on the 3April 2000. The defendants insists that they wrote to the plaintiff on 31 March 2000 proposing a variation to the agreement to which the plaintiff agreed. This they contend amounted to a variation of the original contract. As a consequence they argue that the plaintiff is estoppel from relying on the initial agreement by his conduct of accepting the variation of the 3 April 2000.

The plaintiff contends that while it is true he had written the endorsement "I accept the arrangement to speed up settlement" please advise your lawyers of same", he only signed after he saw that the defendants were not going to settle. He said he saw this as an opportunity to expedite settlement. He said he had no intention of varying the contract. He said that by signing on the letter as he did he got what he was entitled to and that was the property and the 6 months lease back agreement.

The primary issue for determination is who was to meet the K7,750.00 shortfall in the purchase price of the property.

As indicated this is a claim for orders that the defendants pay K21,000.00 to the plaintiff for alleged outstanding rental due to him under a special condition clause in a contract of sale dated 21 December 1999. The defendants were former owners of a property described as Allotment 9 Section 4 Matirogo. On 2 December 1999 the second defendant on behalf of the fist defendant entered into a contract of sales for the purchase of the property described above. The purchase price was agreed to be K155,000.00. A real estate agent discovered the plaintiff and got him interested in the property. There was a K150,000.00 mortgage to be discharged on the property. The plaintiff offered K155,000.00 as the purchase price. The defendants alleged that when the plaintiff offered K155,000.00 he would cover all other costs and expenses incurred in the transaction. The defendants alleged that three attempts were made to settle the transactions but were unsuccessful on the basis that there was a shortfall of K7,750.00 on the purchase price.

The defendants alleged that on the 24 March 2000 the plaintiff wrote to the second defendant asking for his assistance to write to his financiers to obtain additional finance to meet the shortfall. The second defendant did write to the plaintiff’s bank requesting additional finance but that was refused.

The defendants allege that on 30 March 2000 the plaintiff went to the Defendant’s office pleading with the second defendant to assist with the shortfall. On 31 March 2000 the second defendant wrote to the plaintiff proposing a variation of the special condition clause to the agreement of 21 December 1999. On 3 April 2000 the plaintiff went to the second defendants office and there the defendants alleged that the plaintiff accepted the variation by writing on the original letter and signing it in the following terms:

"10:30 am - 03/04/2000
I accept the arrangement to speed up settlement. 
Please advise your lawyers of same.
Thank you
Signed
Gregory Manda"

The defendants allege that as consequence of this variation the settlement proceeded on 10 April 2000 and the plaintiff effectively became the owner of the property.

To get a better picture of what happened before settlement I reproduce the relevant correspondences. I start off with the letter of 16 March 2000 from the plaintiff to the Defendants then lawyers. The letter reads:

16 March, 2000
Blake Dawson Waldron Lawyers
PO Box 850
PORT MORESBY NCD

Attention: Philip Wariniki Esq

Dear Sir,

PURCHASE FROM YATALA LIMITED
ALLOTMENT 9 SECTION 4, 2 MILE HILL
I refer to your facsimile of 15 March and my letter of 16 March instant to Janet Pauwia of PNGBC Waigani, and confirm as follows:
(a)	The purchase price is K155.00.00. I have paid 10% deposit of K15,500.00 into the trust fund OF THE Real Estate Agent (Puritau Real Estate – Newman Kuri_. I am required to pay K139,500 more at settlement. PNGBC is financing K131,750 and the balance of K7,750.00 will be met by myself. The adjustments in the settlement statement total up to K1,140.02. Altogether I have to pay K8890.02 excluding the 10% deposit (see (b) below in this regard.
(b)	I have paid an amount of K8000.00 to my financier PNGBC to organize the settlement cheques from their end for convenience. See copy of receipts enclosed. I have another K1,000.00 sitting in my transaction account with the PNGBC Waigani branch, which I have also verbally authorize the bank to debit to total up to K8,890.02.
(c)	The money mentioned in (b) above (K8,890.02) will go towards meeting the Department of Lands, National Capital District Commission, Eda Ranu rates and the Vendor’s legal fees (K4,906.22), including the adjustments totaling K1,140.02.
(d)	The only amendment that needs to be done is the amount payable to the Bank of South Pacific. PNGBC will draw a cheque for K131,750 in favour of Bank south Pacific Limited together with the four (4) cheques to the following people. 
1.	Department of Lands				K 1,375.00
2.	National Capital District Commission	K1,158.13
3.	Eda Ranu					K 780.73
4.	Blake Dawson Waldron			K1,592.36
5.	Bank South Pacific Ltd		 K131,750.00	
(e)	The balance owed, if any, to Bank South Pacific must come from the Vendor. So the settlement statement needs to be amended to reflect this.
In summary, the purchase is as follows:

1.	Purchaser equity - 		K15,500.00. (10% deposited with Real Estate Agent) 15% equity contribution by-	K 7,750.00 (5% deposited with PNGBC)
	Purchaser -			K 1,140.02 (total adjustment deposited with PNGBC)

	TOTAL			K 24,390.02

2.	Bank finance -			K131,750.00 (PNGBC financing 85% of purchase)

GRAND TOTAL		K156,140.02

Real Estate Agent’s fees, Vendor’s legal fees and the land and water rates have been met by myself as purchaser for which the vendor should make allowances. Any outstanding owed to Bank of South Pacific will be borne by the vendor. Please bear in mind that the Real Estate Agent involved was the gent of the vendor and the agent’s fees must be met by the vendor. A sum from the 10% deposit would have settled the agent’s fee.

I look forward to your amended settlement.

Yours faithfully,
(Signed)
GREGORY MANDA

A settlement statement was prepared for settlement for the 17 March 2000. It was in the following terms:

"Settlement Statement"

Vendor:		YATALA LIMITED
Purchaser:		GREGORY PULI MANDA
Properties:		ALLOTMENT 9 SECTION 4, MATIROGO
Completion Date:	17 MARCH 2000
Venue:			BLAKE DAWSON WALDRON
Time:			1.30 PM

Purchase Price	K155,000.00	
Less Deposit Paid	(K15,500.00)	
Total Payable	K139.500.00	
Adjustments		
Plus
Land Rent @ K1,375.00 per annum
Purchaser allows 289/366 days	

1,085,72	
Plus
Land Rate @ K60 per annum
Purchaser allows 289/366 days
(Arrears: K1,158.13)	

47.38	
Plus 
Water Rate @ K22.50 per quarter
Purchaser allows 28/91 days
(Arrears: K780.73)	

(6.92)	
Amount Payable	K140,640.02	
Bank Cheques Required at Settlement		
1. Department of Lands	1,375.00	
2. National Capital District Commission	1,158.13	
3. Eda Ranu	780.73	
4. Blake Dawson Waldron	1,592.36	
5. Bank of South Pacific	K139.500.00	

On 24 March 2000 the plaintiff wrote to the defendants in the following terms:-

24 March 2000

Yatala Limited
PO Box 3332
BOROKO – NCD.

Dear Sir
Yatala Limited sale to Gregory Manda
Allotment 9 Section 4 Matigoro, NCD

I refer to my conference yesterday (23/3/00) at 9.00 am with your lawyer, Mr Philip Wariniki, and to our subsequent conference at your office and confirm your kind assurance that you would write to my bank (PNGBC) to support my intended application for an additional loan of K7750.00 t0 meet the short fall on your behalf in the amount payable to Bank south Pacific to discharge the mortgage.
Please make it clear to my bank that the amount of K7,750.00 would be repaid together with the rentals under the lease-back arrangement in place.
In an case it will save both parties a lot of time and money if you can meet the short fall of K7750.00 in the settlement statement and we settle sooner.
I thank you in advance and look forward to your prompt action in this regard.

Yours faithfully
Post PNG Limited

Gregory Manda

The Defendants wrote to the plaintiff’s financiers as requested by the plaintiff on 24 March 2000. The letter reads:

March 24, 2000

The Lending Manager
PO Box 169,
WAIGANI – NCD.
Attention: Ms Janet Pauwia,

Dear Madam,

Re:	 SECTION: 4, ALLOTMENT 9, MATIGORO
	SALES TO GREGORY PULI MANDA

At a specific request from the purchaser we have written to you regarding the sale price of the above property.
The purchase price is K150,000.00 clear. After adjustments and agents fees the purchaser is K7,750.00 short, allowing our non ability to settle.
On behalf of ourselves and BSP (Our Financiers) we are not prepared to settle until this shortfall is resolved, and as such request you refinance your client allowing us the opportunity to clear up this matter.
Unfortunately for yourselves we have another purchaser of who has given us a written offer of K160,000.00 and does not require finance. We have advised the other purchaser that we will given them an answer late next week.
In the interim we await your response.

Yours faithfully
YATALA LIMITED

(signed)
DARYL L HASTE
MANAGING DIRECTOR

On the 31 March 2000 the defendants wrote to the plaintiff in the following terms:

March 31, 2000

The Purchaser
C/- Post PNG Ltd
Section 15 Lot 5
2nd Floor – Haus Post
PO Box 2
BOROKO – NCD.

Attention: Mr Gregory Puli Manda

Dear sir,

RE: 	PROPOSED PURCHASE SECTION 4, ALLOTMENT 9
	5 FLATS YATALA LTD

I refer our previous correspondence and recent meeting regarding the purchase price and your shortfall in setting and advise as follows:
1.	We confirm receipt of K10,500.00 being your deposit currently held by our solicitors.
2.	We acknowledge your Finance amount of K131,750.00
3.	We confirm your shortfall as K7,750.00 in an endeavour to settle, we confirm that we are prepared to accept K142,250.00 in exchange for the property under the following conditions:
(a)	You accept the following rentals, currently occupied by Yatala.
Unit 2 (Center unit upstairs)		K750.00 month
Unit 3 (Lover left unit)		K750.00 month
Unit 3 (Lover right unit)		K700.00 month
(b)	The total payable by Yatala monthly be K2,150.00 plus VAT, net K3,500 as previously discussed.
(c)	You accept Yatala occupies the 3 units for a period of 3&1/2 months in lieu of the K7,750.00 being the shortfall in the settlement figure.
(d)	You accept Yatala rents back the 3 flats at K2,150.00 plus VAT on a month to month basis.

We confirm that the K7,750.00 represents a shortfall in clearing one of our loans with out Financiers and as such Yatala will still pay rent.

The rental payment will be paid by us directly to our Bankers until such time as the loan is cleared.

In the interim we await your acceptance.

Yours faithfully

YATALA LIMITED

Daryl L Haste
Managing Director

It was the terms of this letter that the plaintiff on the 3 April, 2000 wrote:

	"10:30 am - 03/04/2000
I accept the arrangement to speed up settlement. 
Please advise your lawyers of same.
Thank you
Signed
Gregory Manda"

After the plaintiff had agreed to the defendants proposals settlement took place on 10 April 2000.

On 17 April 2000 NIKSAT HOLDINGS, presumably a company owned by the plaintiff invoiced the Defendants for an amount of K3,500.00 for rental charges from 17 March to 17 April 2000. It is noted that the plaintiff did not own the property until 10 April 2000. The defendants wrote to NIKSAT HOLDINGS and pointed out to them that according to their letter of 31 March 20000 the plaintiff and his agreement to the terms of the letter on the 3 April 2000 they would have credit of K8,967.34 and a such any rental payment from them would fall due in August of 2000.

Since then there has been disagreements between the plaintiff and the defendants firstly relating to the agreement by the plaintiff dated the 3 April 2000 and the rental payments.

It is not disputed that the purchase price of the property was K15,000.00. It is also not in disputed that the plaintiff paid a 10% deposit of K15,500.00. Upon payment of the deposit the balance of the purchase price was K139,500.00. The plaintiffs obtained a loan of K131,750 which went toward the reduction of the purchase price of the property. This reduced the balance of the purchase price of K7,750.00.

The plaintiff said he would pay the balance. The plaintiff in his affidavit of November, 2001 paragraph 25 said he made an equity deposit of K8,000.00 in cash with PNGBC at its Waigani Branch in preparation for settlement. A PNGBC Cheque dated 10 April 2000 in the amount of K135,652.81 was drawn out in favour of Bank South. If I understand the plaintiffs intention for depositing the K8,000 with PNGBC correctly the K8000.00 was to cover his K7,750.00 contribution to the purchase price. So he thought the PNGBC would write out one cheque for both itself and him. 

On settlement PNGBC had 5 cheques. They were for:-

1.	Bank South Pacific for K135,652.81
2.	Blake Dawson Waldron for K1,592.36
3.	Department of Lands – K1,375.00
4.	National Capital District Commission – K1,158.13
5.	Eda Ranu – K780.73

On the settlement the PNGBC paid K140,559.03 worth of cheques. What is not clear is that the K131,750 the original amount to be paid by PNGBC INCREASED TO k135,655.81. The amount of K135,655.00 in my view would go to the purchase price of the property. This means that you add K135,655.81 and K15,500.00 you would come up with a total of K151,152.81 for the purchase of the Units. There would still be a shortfall of K3,847.19 of the purchase price plus adjustment in the settlement statement of K1,140.02. altogether there would be a shortfall of K4,987.21.

The amount to the first issue as to who is responsible for paying the K7,750.00 is that the plaintiff has the responsibility to pay the K7,750.00. The plaintiff also had the responsibility of paying Department of Lands, the National Capital District Commission, Eda Ranu and the vendors Legal fees including the adjustments which do not form part of the purchase price. The K131,750.00 together with his K8,000.00 were never going to fully meet the purchase price with the Land Rental, NCDC Land rates, water rates and lawyers fees.

In my view the plaintiff may have got himself confused with the letter he wrote to the Defendants on the 16 March 2000. The purchase price of the property must be kept separate from the other necessary costs so that one does not get mixed up. I believe this is how and where the confusion came in. Having said that I find that the plaintiff was to pay the K7,750.00 but it appears that the total shortfall may have been K4987.28.

Having now made that finding the next issue for determination is whether the plaintiff is entitled to claim the rent for which he brings this action. The plaintiffs action I believe is founded on Part II of the Special condition of the contract of Sale. It reads:-

"If this agreement is completed, the vendor guarantees rent at K3,000 to K3,500 for 6 months whether or not it continues to lease Unit 3 and Unit 4.

As it turned out the defendants continued to live in the units. Under the original agreement they would have paid rentals for a period of 6 months whether or not they lived there. This was all in the plaintiff’s favour. However when the plaintiff was not able to come up with the K7,750 shortfall in the purchase price he by his own conduct agreed to the terms of the defendants letter dated 31 March 2000. In his evidence the plaintiff said he only agreed to the terms of the letter to speed up settlement. The plaintiff is a lawyer. He must have known the consequences of what he wrote. He must have known that there was a contract in place. He must also have known that his agreement on the 3rd April 2000 was going to change or vary the original arrangements. From the evidence it is clear that both parties wanted the sale to be completed between themselves. The defendant at the stage could have sold the property to another buyer with ready cash however he gave every opportunity and first preference to the plaintiff.

The issue then is was the agreement by the plaintiff on the 3rd April 2000 a variation of the original contract, or was it a waiver of the original contract. It appears to me that the new proposal agreed to by the plaintiff was effectively a variation of Part II of the original contract. In my view it was a substantial variation. Effectively the new agreement dated 3rd April abandoned the old agreement in so far as Part II of the old agreement was concerned. Part II of the initial agreement gave either party the right to terminate the agreement if finance was not available. Either party was therefore at liberty to terminate the agreement at that stage because there was a shortfall of K7,750.00 of the purchase price. The letter of the 31 March 2000 from the defendants to the plaintiff varied the original position that instead of terminating the contract they were prepared to settle without the K7,750.00 on certain conditions. Those conditions were agreed to by the plaintiff on 3 April 2000. The old clause under Part II 1(b) of the agreement was abandoned and substituted by the new arrangements contained in the letter of the 31 March 2000 agreed to by the plaintiff on 3 April 2000. The plaintiff cannot now go back and rely on the old arrangement. He is estopped in my view from relying on the old agreement. He had in writing altered the original agreement in my view.

It appears that the K7,750.00 was financed by the defendants bankers and the defendants were thereby obliged to repay the loan. They were therefore going to recover that by condition (c) of their letter of 31 March 2000. This in my view makes sense.

In the circumstances I am not satisfied that the plaintiff has established a case on the balance of probabilities. The plaintiff’s claim is therefore dismissed with costs.
_____________________________________________________________________
Lawyer for the Plaintiff:	Pato Lawyers
Lawyer for the Defendants:	Henao Lawyers