N3240 

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS No. 454 of 2007

BETWEEN

NEW IRELAND DEVELOPMENT 
CORPORATION LTD
Plaintiff

AND

ARROW TRADING LTD
Defendant

Kokopo: Lay J.

2007: 21 September
23 November

CIVIL - equitable lease ─ whether signatories for the lessor had ostensible authority to sign ─ effect of lease being unstamped ─ lease for five years unregistered ─ whether unenforceable by non registration ─ whether lease void by reason of lessee’s breach of Investment Promotion Act s25, s41 & s41A ─ Investment Promotion Act Section 41A, considerations for applying.

Facts

The General Manager and a Director of the Plaintiff applied the common seal and signed a lease to the Defendant for five years, of premises owned by the plaintiff, in breach of the internal management rules of the Plaintiff. At the time of signing the Defendant, a foreign enterprise, did not have the requisite Investment Promotion Authority Certificate to carry on the business authorised by the lease and in fact carried on by the Defendant, in breach of Section 25 of the Investment Promotion Act being an offence under section 41. It subsequently obtained the requisite certification. The lease is unstamped, unapproved by the Minister for Lands under the Lands Act and unregistered under the Land Registration Act.

Held

1.	The lease is not void by reason of the breach of the internal management rules of the Plaintiff because the General manager and Director had ostensible authority to negotiate & execute the lease and their action bind the plaintiff;

2.	The lease is not void for public policy by reason of the breach of Investment Promotion Act Section 25 and Section 41 because Section 41A provides a specific remedy for the Plaintiff and it would be inappropriate to apply common law when Parliament had enacted an appropriate remedy. The Plaintiff did not seek the relief provided by Section 41A in its summons and cannot have relief it did not plead;

3.	Matters relevant in deciding which way to exercise the discretion vested by Section 41A are:

a)	whether an order to declare the agreement void would advance the policy under the Act?

b)	the delay, if any, in making the application and whether that delay occurred before or after the breach of the Act came to the attention of the applicant and the conduct of the parties during any delay;

c)	the respective position of the parties at the time of the application and their conduct;

d)	the effect of making the order compared with not making the order.

4.	The unstamped lease cannot be produced in evidence. It can be relied upon in equity by other evidence of its terms and execution;

5.	The non registration of a lease contrary to the provisions of the Land Registration Act Section 49 is not a bar to enforcement of the lease in equity and does not affect its existence in equity.

Cases Cited

PNG Cases 
AGC (Pacific) Ltd v Woo International Pty Ltd [1992] PNGLR 100
 Jay Mingo Pty Ltd v Steamships Trading Co. Ltd [1995] PNGLR 129
Rainbow Holdings Pty Ltd v Central Province Forest Industries [1983] PNGLR 134
Ume More v University of Papua and New Guinea [1985] PNGLR 401
Odata Ltd v Ambusa Copra Oil Mill Ltd (2001) N2106 (Kandakasi J.).
Spirit Haus Ltd v Robert Marshall (2004) N2630 (Kandakasi J.)
Timothy Lim Kok Chuan v Simon Goh Say Beng (2004) N2753
Wamena Trading Ltd v Civil Aviation Authority (2006)N3058
Tian Chen Ltd v The Tower Ltd (2002) N2313
Papua New Guinea Harbours Board v Hargy Oil Palms (1995) N1384
Wal Wine v Bill Giglmai [1990] PNGLR 462

Overseas cases cited
Rama Corporation Ltd v Proved Tin and General Investments Ltd [1953] 2 QB 147
Taylor v Smith (1926) 38 CLR 48
Hamilton Panel Works v Thomas [1963] NZLR 771
Sinclair v Hudson (1995) 9 BPR 16,269
Marsh v Joseph [1897] 1 Ch 213
Brockway v Pando (2000) 22 WAR 405
Lithgoe v Vernon (1860) 5 H&N 180
Gunn v Roberts (1874) LR 9 CP 331
Pegela Pty Ltd & Ors v National Mutual Life Association of Australia Ltd [2006] VSC 507
Moore v Dimond (1929) 43 CLR 105

References
Companies Act 1997
Investment Promotion Act
Land Act
Land Registration Act

Counsel
J. Isacc, For The Plaintiff
K. Latu, For The Defendant

23 November, 2007 

1.	LAY J.: Two officers of the Plaintiff applied the common seal of the Plaintiff to, and signed, a lease, which the Defendant also signed as lessee, in respect of supermarket premises owned by the Plaintiff in Kavieng town, New Ireland Province. The lease is for a term of five years commencing 1 December 2005. From December 2005 until the end of May 2007, the defendant had undisturbed and unhindered possession of the property. The Plaintiff invoiced the Defendant on a monthly basis for the rent set out in the lease agreement and down to the end of August 2007 the Defendant had paid a total rent of K221,076 and the rent was current. The invoices went out over the name of the managing director, although not signed by him. On 14 June, 2007, the plaintiff' purported to terminate the lease and gave the Defendant fourteen (14) days to move out. The plaintiff commenced these proceedings on the 16 August 2007 for declarations set out below, and for an interim injunction. The injunction was refused.

2.	The plaintiff seeks declarations that:

a)	the lease is void, illegal and unenforceable against either party :
b)	the officers who signing the lease on behalf of the plaintiff acted ultra vires their powers and without ostensible authority;
c)	The Defendant is operating a supermarket and grocery store in the premises in breach of Sections 25(2) and 41A of the Investment Promotion Act 1992 which renders the said lease agreement void and unenforceable;

3.	There are three issues for trial which I deal with in the following order:

i)	whether the persons who signed the lease purportedly on behalf of the plaintiff bound the plaintiff?;
ii)	whether the plaintiff could declare the lease void and terminated by reason of the Defendant trading outside the terms of its foreign enterprise certificate, or whether the court should do so?;
iii)	whether the validity of the lease is affected by the fact that it is unstamped or unregistered?.

Whether the persons who signed the lease purportedly on behalf of the plaintiff bound the plaintiff?

4.	The leasing of the premises came about between the parties when the Defendant made a verbal inquiry to the then General Manager of the Plaintiff, Richie Gash, and Mr Gash responded with a written offer. Mr Gash arranged for a lease to be prepared and on a date unknown, the plaintiff's witnesses say in 2004, although I find it more likely towards the end of 2005, the lease was executed by Mr Gash placing his signature over the words "Company Secretary" and Mr Pedi Anis over the words "Director". Mr Rui Lin signed on behalf of the Defendant.

5.	Mr Pedi Anis was in fact a director of the Plaintiff and was also chairman of a Board subcommittee known as the Properties Committee. Mr Gash was the General Manager of the Plaintiff. There is no evidence either way as to whether or not Mr Gash held the office of Secretary at the time the lease was signed. There is evidence that he “is not a Company Secretary of NIDC Ltd nor a Public Officer” at 30 July 2007 (affidavit of Mr Mazewin par 16). There is no evidence of what the Constitution of the Plaintiff provides, if anything, with respect to affixing the seal of the company.

6.	I find from the Plaintiff's evidence that the role of the Board subcommittee which Mr Anis chaired was to advise the board. Internally, to the company the only person or body with authority to authorise the leasing of the premises was the Board of Directors. Mr Anis and Mr Gash exceeded their actual authority according to the internal management rules of the Plaintiff, in purporting to commit the Plaintiff to a lease and executing a lease document. However that is a long way from saying that their acts did not bind the Plaintiff.

7.	The Companies Act 1997 makes the following provision in respect of the contracting powers of a company:

155.	Method of contracting.

(1)	A contract or other enforceable obligation may be entered into by a company as follows—

(a)	an obligation which, if entered into by a natural person, would, by law, be required to be by deed, may be entered into on behalf of the company in writing signed under the common seal of the company; or
(b)	an obligation which, if entered into by a natural person, is, by law, required to be in writing, may be entered into on behalf of the company in writing by a person acting under the company's express or implied authority; or
(c)	....

(2)	... 

(a)	... and
(b)	... 

8.	Sakora J. recorded the following summary of the law relating to in-house management rules and ostensible authority in respect of the acts of a company in the case of AGC (Pacific) Ltd v Woo International Pty Ltd [1992] PNGLR 100:

" 	It has been accepted in this jurisdiction that, where a person dealing with a company acts in good faith and with no notice of reasonable grounds for suspicion of irregularity or impropriety, he is not affected by any actual irregularity or impropriety in a matter of internal regulation: Sangara (Holdings) Ltd v Hamac Holdings Ltd (In Liquidation) [1973] PNGLR 504. This proposition is sometimes referred to as the rule in Turquand's case: Royal British Bank v Turquand (1856) 6E and B 327; (1856) 119 ER 886. The substance of this rule is that a third-party dealing with the company is not bound to ensure that the internal regulations (derived from, inter alia, the articles of association) have in fact been complied with as regards the exercise and delegation of authority in the company.

In Turquand's case, the company's articles empowered the directors to borrow such sums as were authorised by an ordinary resolution of a general meeting. The directors issued a bond to Turquand, from whom they borrowed money. The bond was under the company's seal, but no resolution was passed by the company authorising it. The company was held bound by the act of the directors.

It should be remembered that a third party has no means of knowing whether an ordinary resolution has been passed by the company. He can read the memoranda and study the vires, and inspect the register of charges, or discover whether a special or extraordinary resolution has been passed. He can read the articles of association and obtain particulars of the directors. But he cannot know, unless he has been told, whether an ordinary resolution such as was required in the Turquand case has been passed by a general meeting. The loan there was clearly within the powers of the company. The company therefore, had the necessary capacity. And it was also clear that the directors had the necessary authority. A third-party need go no further: he need not make sure that the rules of internal management - sometimes referred to as the rules of "indoor management" - have been observed.

If the principal places secret restrictions on the apparent authority of his agent, they do not affect the third-party: the third-party need not take steps to ensure that there are no such restrictions, for this would make the carrying on of business a practical impossibility.

It is the directors and managers who represent the directing mind and will of the company and control what they do. The state of mind of these managers is the state of mind of the company and is treated by law as such: HL Bolton (Engineering) Co Ltd. v T. J. Graham and Sons Limited [1956] 3 All ER 624. 

And in relation to contractual obligations arising out of the acts or actions of the employees or officers of the company, the liability arises out of the operations of the doctrine of ostensible (or apparent) authority. The learned editors of the CCH Reporter has stated (2, 220) that:

'The authority of a person to bind his company depends on what would usually be done by a person in his position. Thus, any person having dealing with an officer or other servant of the company should be confident that the type of transaction is one which would normally fall within the ordinary scope of the authority of such officer' "
9.	The constitution of a company determines the authority which can be conferred on an officer or agent, the "indoor management" rule can operate only within the limits prescribed by the company's constitution. In Mahony v. East Holyford Mining Co. (1875) LR 7 H.L. 869, at pp 893-894, Lord Hatherley held it to be settled. The principle is however of no assistance here because no evidence of the Company's Constitution, whether it be specially adopted or Schedule 2 to the Companies Act, has been put before the court.

10.	Apart from the affixing of the seal to the lease agreement, the facts of this case are somewhat similar to the case of Jay Mingo Pty Ltd v Steamships Trading Co. Ltd [1995] PNGLR 129 (Sevua J.). In that case a representative of the plaintiff and the branch manager of the defendant signed an informal three year lease agreement of premises owned by the defendant. The defendant enjoyed 16 months rent while the plaintiff was in possession of the premises. The defendant then purported to terminate the lease. At trial, the defendant argued lack of authority to execute the lease on the part of the branch manager. Sevua J. held that as the defendant's senior officers clearly had knowledge of the lease arrangement and could have repudiated the lease at an earlier date, the defendant could not on the one hand enjoy the income from the lease then repudiate it and the acts of its branch manager at its convenience.

11.	As in Jay Mingo Pty Ltd it appears that the Plaintiff in this case wants to approbate and reprobate at its convenience. In Wal Wine v Bill Giglmai [1990] PNGLR 462 Brunton J. referred to the general and old legal principle that you cannot approbate and reprobate, explaining "one cannot take advantage of the beneficial parts of a deed or a lease or tenancy agreement, and reject the rest..." I consider that principle applies equally to parts of a term, that is the length of time an agreement is to be in force, as it does to other parts of the terms or conditions of the agreement. The Plaintiffs substantial delay in bringing the application (if it is such) and its conduct in invoicing for the rent under the lease during the period of the delay are to my mind some of the reasons why I should exercise the discretion against the Plaintiff.

12.	Whether this is justified by the doctrine of estoppel or ratification, I do not consider really matters. Ratification of an agent’s unauthorised acts may render a principal liable where there have been clear acts of adoption, approval or acquiescence by a principal who has full knowledge of the relevant facts: Taylor v Smith (1926) 38 CLR 48 at 59 per Higgins J, at 60 per Rich J; Hamilton Panel Works v Thomas [1963] NZLR 771 at 774 per Woodhouse J; Marsh v Joseph [1897] 1 Ch 213 at 246-247; Brockway v Pando (2000) 22 WAR 405 at 433. The burden is on the plaintiffs to show on the balance of probabilities that the principal had knowledge of all of the relevant facts: Gunn v Roberts (1874) LR 9 CP 331 at 335 per Brett J; Marsh v Joseph at 246-7 per Russell LCJ; Brockway v Pando ibid.

13.	In respect of estoppel, I adopt comments made by Redlich J. in the case of Pegela Pty Ltd & Ors v National Mutual Life Association of Australia Ltd [2006] VSC 507:

“[564]Equity will come to the relief of a party who acts to their detriment on the basis of an assumption where the other party has played such a part in the adoption of the assumption that it would be unjust if that party were able to ignore it: Grundt v Great Boulder Goldmines Pty Ltd (1937) 59 CLR 641; Thompson v Palmer (1933) 49 CLR 507 at 547 per Dixon J; Waltons Stores(1988) 164 CLR 387. In the seminal judgment of Dixon J in Thompson v Palmer: (1933) 49 CLR 507 at 547 the object of estoppel in pais was described as the prevention of an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption were adhered to, would operate to the others’ detriment. Dixon J referred to various circumstances in which a party may be required to abide by the assumption. It may have formed the "conventional" basis upon which the parties entered into contractual relations, or because, knowing the mistake the other laboured under, that party refrained from correcting the other when it was their duty to do so or because a party’s imprudence, when care was required, was a cause of the other party adopting the assumption or because a representation was made upon which the other party founded the assumption: ibid at 547 [565] Estoppel by convention is founded upon the conduct of relations between the parties on the basis of agreed or assumed facts: Con-stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244 per Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ. The agreement need not be overt, as the conduct of the parties may reveal that they must have agreed or assumed the facts upon which the conduct is based. The agreement may be inferred where a party remains silent if that silence was understood to be an acceptance of the state of affairs: Con-Stan Industries; Santos & ors v Delhi Petroleum Pty Ltd [2002] SASC 272 

 It is now accepted that estoppels may concern assumptions of fact or law Foran v Wight (1989) 168 CLR 385 at 435 per Deane J; Caboche v Ramsay (1994) 119 ALR 215 at 238 per Gummow J; Santos v Delhi Petroleum supra at [489]; Riseda Nominees Pty Ltd v St Vincent’s Hospital [1998] 2 VR 70 at 77per Callaway JA with whom Brooking and Kenny JA agreed; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 399."

14.	I take judicial notice of the fact that Kavieng is a very small town. The shop premises owned by the plaintiff is a significant building in the town. The fact that the previous tenant was not operating a supermarket in the building, the fact that significant works were being done in the building, the fact that a new tenant was operating in the building and the fact that the plaintiff was receiving substantial income from a new tenant, are matters which I consider that the directors of the plaintiff could not have failed to notice over a period exceeding 12 months. These facts established by the defendant's evidence discharge its onus of establishing the knowledge of the plaintiff. In my view the plaintiff ratified the actions of its officers by its silence, by its acquiescence and by its invoicing and receipt of the rents.

15.	Further, by appointing Mr Gash as General Manager in my view the plaintiff clothed him with the authority to negotiate and execute a lease document. And because of the facts recited in the previous paragraph, I find that the plaintiff had knowledge that the defendant was relying on the representations made by Mr Gash and director Pedi Anis in executing the lease, in acting to its detriment by spending substantial sums on repairs and maintenance to the building and establishing a substantial business. It would be unjust now to allow the plaintiff to repudiate those representations.

16.	Section 155 (4) of the Companies Act 1997 does not spell out how the seal of the company is to be affixed to documents or whose signatures are to be affixed with the seal. There is no evidence of what the company Constitution, if any, provides. It seems to me that a company director has ostensible authority to sign with the fixing of the seal. Further a General Manager, ostensibly has general powers of management. Within broad limits a managing director or a general manager can be ostensibly expected to be carrying out the will of the Board of Directors. There would need to be some particular aspect of the transaction, such as being the sale of a substantial part of the assets of the company, to take it outside the ostensible powers of a general manager. See Rama Corporation Ltd v Proved Tin and General Investments Ltd [1953] 2 QB 147 for an example of such a case. I find that the General Manager Richie Gash had ostensible authority to negotiate terms of a lease of property with the Defendant.

17.	In Northside Development Ltd v Registrar General (1990) 170 CLR 146 Gaudron J. made the following comments which I find helpful:

" [16] It needs to be borne in mind that ordinarily the delivery of an instrument bearing a company's seal is the culmination of a transaction which will have been preceded by negotiations and dealings conducted by the company's directors or agents. Clearly enough, if those directors or agents, in their negotiations and dealings on behalf of the company, fail to advert to an outstanding requirement that a condition precedent be satisfied before the transaction is brought to completion, they thereby encourage an assumption that, when the company's seal is affixed to the instrument in question, the company is thereby bound. And, because they are acting on behalf of the company, the company has also encouraged that assumption".

18.	All the judges in that case go on to explain, as I have mentioned in paragraph [17], that if and circumstances surrounding the transaction ought to place the other party on notice to make inquiry, then the assumption cannot bind the company. The frequently quoted example being a transaction in which the company received no benefit. Those circumstances do not apply in this case. I therefore consider that it is not relevant that there was no resolution of the Board of Directors authorising the fixing of the company seal. And I find that both Mr Gash and the director Pedi Anis had ostensible authority to affix the common seal of the Plaintiff to the lease.

Whether the plaintiff could declare the lease void and terminated by reason of the Defendant trading outside the terms of its foreign enterprise certificate, or whether the court should do so?

19. It is not disputed that:

a)	when the lease agreement was signed by the parties the Defendant did not have a Certificate Permitting a Foreign Enterprise to Carry on Business in an Activity from the Investment Promotion Authority, which permitted restaurant operations or wholesale or retail of general merchandise and consumer goods;

b)	the business which the lease permits the Defendant to carry on and which it does actually carry on is a wholesaling and retailing of general merchandise and consumer goods and restaurant operations, in the sense of fast food;

c)	The Defendant has rectified the situation and has had the appropriate certificate from Investment Promotion Authority since 1 August 2007.

20. The Plaintiff argues that Section 25 of the Investment Promotion Authority Act requires a foreign enterprise to obtain a certificate before trading. Section 41 of the Investment Promotion Act makes it an offence for a foreigner to carry on business in PNG without first obtaining the required IPA approval. As I understand the Plaintiff’s submissions it argues that the breach by the Defendant of the IPA Act makes the lease illegal and void or voidable (paragraph D6 of the written submissions).

21. The relief claimed in the Originating Summonses is as follows:

" A declaration that the Defendant is illegally operating as a "business activity" a supermarket and/or grocery store contrary to its certificate issued by the Investment Promotion Authority, authorising it to operate the "business Activity" of Wholesale of Heavy Equipment Including Parts and accessories and Associated Services thereby contravening Section 25 (2) and 41A of the Investment promotion Act 1992 which in effect renders the said lease agreement void and unenforceable".

22. Section 25 of the IPA Act does provide that a foreign enterprise must have a certificate to carry on business in an activity. Section 41 provides for a number of offences, amongst those being carrying on business without a certificate, and failing to comply with the terms of a certificate. There is a maximum, fine of K100,000 and a default penalty of K10,000 per day.

23. Section 41A, of the IPA Act provides the following:

41A.	Contract, etc., to be unlawful and void in certain circumstances.
Where a contract, agreement or understanding is entered into between a foreign enterprise and another enterprise and—

(a)	that foreign enterprise had not been issued a certificate at the time at which the contract, agreement or understanding was entered into; or
(b)	the subject matter of the contract relates to business activities outside of the nature of the activities for which the foreign enterprise is certified to carry on business,

the court may, on the application of that other enterprise or of the Authority, declare the contract unlawful and void.

24. In considering whether by reason of provisions of an act of the Parliament an agreement or contract is void for illegality, the court can approach the question by asking:

d)	is the contract specifically prohibited;
e)	is the contract impliedly prohibited;
f)	if neither, on grounds of public policy should the court refuse to enforce it;
g)	can the legislative purpose be fulfilled without the court regarding the contract as void and unenforceable? See Rainbow Holdings Pty Ltd v Central Province Forest Industries [1983] PNGLR 134 Pratt, Bredmeyer and McDermott JJ per McDermott J.

25. Such an inquiry is facilitated by the manner in which the IPA Act has been drafted, particularly with the amendment inserted by Section 41A. The contract is neither specifically or impliedly prohibited by the provisions of the Act. The Parliament has made specific provision for application to be made to the court to have an agreement declared unlawful and void. In those circumstances it would not seem right to me for the court to be applying common law concepts of public policy, because the legislature has already covered that ground and provided an appropriate remedy.

26. In the circumstances of this case and Section 41A of the IPA Act the question to ask is, has either of the two parties authorised to make application to the court to have the agreement declared unlawful and void, by virtue of Section 41A, made such an application in these proceedings? The answer to that question is "no". A party to legal proceedings cannot obtain relief which it has not sought in its pleadings: Ume More v University of Papua and New Guinea [1985] PNGLR 401 per Pratt J. 

27. The Plaintiff has not sought in its Originating Summons or the Notice of Motion an order pursuant to Section 41A of the IPA Act. It has sought a declaration which makes reference to the Section. I therefore conclude that I ought not to make any declaration that the lease is illegal and void by virtue of the circumstances set out at [20].

28. However, because of the unclear manner of pleading which is set out at [22] it may be that the Plaintiff's intention was to seek a declaration pursuant to Section 41A. I therefore set out my views on that basis.

29. Counsel did not refer me to any reported cases, dealing with Section 41A. The only case I have been able to find which I have found quite helpful is Odata Ltd v Ambusa Copra Oil Mill Ltd (2001) N2106 (Kandakasi J.). The Section was also referred to in Spirit Haus Ltd v Robert Marshall (2004) N2630 (Kandakasi J.) and Timothy Lim Kok Chuan v Simon Goh Say Beng (2004) N2753 (Gavara-Nanu J.) but in the context of those cases it was not necessary to discuss the interpretation or apply the section. In the Odata Ltd case it was argued that a breach of section 25 attracted the court's jurisdiction under Section 41A. His Honour found:

h)	just because certification requirements have not been met it does not automatically follow that the contract is unlawful and void;
i)	applications under Section 41A have to be considered on their own merits with fairness and equity in mind, having regard to the conduct of the parties;
j)	it is settled law that all discretions vested in a court have to be exercised on proper principles and after taking into account all of the relevant factors and facts including the principles of equity.

30. Matters which I consider I should take into account in deciding which way to exercise the discretion vested in me are:

k)	whether an order to declare the agreement void would advance the policy under the Act?;
l)	the delay, if any, in making the application and whether that delay occurred before or after the breach of the Act came to the attention of the applicant and the conduct of the parties during any delay;
m)	the respective position of the parties at the time of the application and their conduct;
n)	the effect of making the order compared with not making the order.

31. To decide whether an order to declare the agreement void would advance the policy under the Act I must identify the policy. Clearly Sections 41 and 41A are designed to support compliance with the requirements of Section 25 ie the requirement to have relevant certification before entering into an agreement in relation to carrying on an activity. When the Plaintiff drew to the attention of the Defendant that it did not have the requisite certification, the Defendant made application and was granted that certification. Although late, and although obtained after execution of the agreement, the Defendant does now comply with the Act. It does not seem to me that I would advance the purposes of the Act to now declare void the very lease agreement for which certification was sought and has been granted.

32. The Plaintiff's delay in making the application is not insignificant in business terms. The Defendant enjoyed quiet occupation, and the Plaintiff the rent, for a period of 18 months before the Plaintiff gave notice that it considered that there was anything wrong. During that period the Plaintiff collected the rent, indeed it invoiced the Defendant for the rent on a monthly basis.

33. The respective positions of the parties at the time of the Plaintiff making the application are firstly that the Defendant had been in the premises for some 21 months paying the rent on the due date. It has spent in excess of K100,000 on maintenance and alterations to the premises. The Defendant now runs a very substantial business from the premises and puts the value of its assets and stock in the premises at K3 million. It employs four foreign workers holding appropriate work permits and 40 Papua New Guineans. On the other hand, it seems that the real reason that the Plaintiff has, more than 18 months after the Defendant has been in possession under the lease, become very concerned about the legal position, was revealed in counsel's oral submissions. If the Plaintiff can get the Defendant out, as the Plaintiff is the business arm of the Provincial Government, it intends to allow a local company to take over the premises. In the meantime the Plaintiff enjoys the rent. It does not seem to me that the respective positions of the parties favours making an order in favour of the Plaintiff to declare the lease void.

34. If an order is made declaring the lease void, the very substantial business run by the Defendant will be brought to an end, probably with significant costs to the Defendant and the loss of employment to the employee's and the loss of investment which was made upon the representation of the employees of the Plaintiff. The Plaintiff will be able to implement its change of policy to favour a local business. If the order is not made the Plaintiff will have to defer its plans until 2010 and the Defendant's business will not close down. It seems to be a choice between real losses by the Defendant and real suffering by potentially ex employees of the Defendant against the theoretically more palatable position of having the supermarket operated by a local company.

35. In all the circumstances which I have considered I would not make an order pursuant to Section 41A to declare the lease void.

Whether the validity of the lease is affected by the fact that it is unstamped or unregistered.

36. It has not been submitted by the Plaintiff, and I do not understand it to contend, that the fact that the lease document is not stamped means that it must be treated as if it did not exist. In its submissions the Plaintiff has simply mention that the lease is unstamped and it has referred to my decision in Wamena Trading Ltd v Civil Aviation Authority (2006)N 3058 for the proposition that an unstamped document, which by law is required to be stamped, cannot be admitted into evidence unless the stamp duty is paid. It has also referred to Tian Chen Ltd v The Tower Ltd (2002) N2313 Kandakasi J. for the proposition that a party may in equity rely on an unstamped lease agreement. With respect to his Honour I agree with that proposition. The distinction being between reliance on an unstamped document and production of an unstamped document in evidence. If sufficient collateral evidence is given of the existence of an unstamped document and its terms, in equity a party can rely on that evidence, although the document itself cannot be produced.

37. I therefore hold consistent with my Wamena Trading Ltd ruling that the lease instrument cannot be produced in these proceedings because it is not stamped. However, sufficient evidence has been given by the witnesses for the parties, particularly in relation to the execution of the document, who signed it and how, for the parties to be able to rely on that evidence and for the relevant issues to be determined by the court. 

38. The evidence is that the lease executed between the parties is for a period of five years. The Land Registration Act Section 49 (1) Provides:

" 49.	Creation of lease.

(1)	Where a proprietor intends to lease land for a life or lives or for a term of years exceeding three years he shall execute a lease in the approved form, and the lease shall be registered."

39. The argument that non-registration of a lease pursuant to Section 49 renders the lease unenforceable was rejected in the case of Papua New Guinea Harbours Board v Hargy Oil Palm (1995) N1384 Sawong J. That was a case in which the defendant sought to set up the defence of non-registration of a lease to prevent an application for judgment. His Honour rejected the defence as meritorious. In this case there is an agreement for lease in equity. In the case of Wal Wine v Bill Giglmai [1990] PNGLR 462 Brunton J. held that the court should enforce equitable leases to the extent that they do not conflict with the public law contained in the Land Act, a proposition with which I respectfully agree for the reasons set out by his Honour.

40. In the ordinary course of conveyancing it is the lessor who submits the documents to the Stamp Duties Office and after stamping to the Department of Lands for ministerial approval and subsequently to the Registrar of Land Titles for registration with the title document, which is under the control of the lessor. Therefore, if I was to hold that the lease could not be enforced by reason of the lack of registration, the court would be lending its aid to a breach of the Land Registration Act by the Plaintiff as lessor, by providing it with an excuse not to submit the document for stamping, ministerial approval and registration. By upholding the enforceability of the lease the court is promoting the purposes of the public law contained in the Land Act, and the Land Registration Act, as it is only the titleholder, the Plaintiff, in possession of the title who can lodge it with the stamped and approved lease for registration.

41. Therefore following Papua and New Guinea Harbours Board v Hargy Oil Palm and applying Wal Wine v Bill Giglmai I find that the enforceability of the lease agreement in this case between the parties is not affected by its non-registration pursuant to Section 49 of the Land Registration Act.

42. The Plaintiff referred to the case of Moore v Dimond (1929) 43 CLR 105. I find that case unhelpful because it is concerned only with the term implied at law when a lease expires and the tenant holds over, stays in possession and pays rent with the consent of the landlord. The case holds that, provided the evidence is not to the contrary, the term implied by law is a lease of 12 months. That is not the present case.

43. Therefore for the foregoing reasons the Plaintiff was not entitled to give notice to quit or terminate the lease. Counsel for the Plaintiff conceded during argument that the notice of termination was invalid, at that time because it only gave 14 days. However the notice was also invalid, for all the other reasons I have now given. For those reasons I dismiss the Plaintiff's originating summons and order that the plaintiff pay the Defendant's costs of and incidental to the proceedings.

_____________________________

Warner Shand: Lawyers for the Plaintiff
Latu Lawyers: Lawyers for the Defendant