N3768

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS. 1287 OF 2007

ISAAC MINICUS
Plaintiff

V.

TELIKOM PNG LIMITED
Defendant

Lae: Manuhu J
2008: 17 September
2009: 28 September

REAL PROPERTY – Telephone Exchange Property – Defendant occupied property when property was owned by Post PNG Limited – Property was sold to Plaintiff – Plaintiff demanded rental payment – Defendant disputed amount.

TORT – Plaintiff had intention to be coffee dealer – Property was intended to be used as storage – Duty of care – Breach – Liability – Forseeability – Elements of tort not clearly pleaded – Defendant had no knowledge of Plaintiffs business plans. 

No cases cited.

Counsel:

N. T. Kubak, for the Plaintiff
W. Mapiso, for the Defendant

28 September, 2009

1. MANUHU, J.: Consent judgment in respect of liability was made and entered on 29th May 2008. The matter comes to me for assessment of damages. 

2. Isaac Minicus is claiming rentals and loss of business in relation to a property in Lae that houses the Telikom’s Telephone Exchange and all the necessary equipment. The equipment has been there since the days when Telikom and Post PNG were just one entity. The property is described as Section 148 Allotment 1, East Taraka, Morobe Province. Upon corporate separation, this property was allocated to Post PNG. It was eventually sold to Mr. Minicus for K90,000 by Post PNG Limited on 11 July 2006.

3. Mr. Minicus upon acquisition prepared and forwarded a commercial lease agreement to Telikom for execution. The proposed lease was for one year and was renewable. The proposed rent was fixed at K37, 500 per month. Telikom disputed the proposed rent and refused to execute the lease. That is the matter before me. The issue, therefore, is how much should the rental be? 

4. There are a number of methods of arriving at an appropriate rent for a property. Mr. Minicus claims that K37,500 is based on the profit being generated by Telikom from the Telephone Exchange. It is a fair statement to say that Telikom is making millions from the Telephone Exchange. With such revenue, Telikom should be able to pay K37,500 per month to keep the Telephone Exchange on the property. 

5. The trouble with this method of rental assessment is that there is no evidence on how much profit Telikom is making from the Telephone Exchange. Examination of witnesses produced by Telikom did not assist in ascertaining the nature of revenue being generated by Telikom from the Telephone Exchange. Consequently, the rent proposed by Mr. Minicus is based on assumed facts and, as such, the Court is unable to draw reasonable deductions and inferences to make a positive assessment of what the rent should be. 

6. In any event, while the property belongs to Mr. Minicus, the Telephone Exchange does not belong to him – it belongs to Telikom. If the Telephone Exchange was removed the property becomes just another property at suburban East Taraka that was purchased for K90,000 and Mr. Minicus. Without the Telephone Exchange, Mr. Minicus would not be leasing the property for K37,500 per month. When seen in this way, Mr. Minicus appears to be seeking enrichment, quite unjustly, from the Telephone Exchange, which does not belong to him. 

7. The other method of ascertaining rent is from the market value of the property. The property was sold for K90,000. Such a price must have been for land and other improvements, other than the Telephone Exchange itself. There is usually a nexus between rent and property market value. By judicial notice, rent is charged between 5 and 15 per cent of the property value. Therefore, at best, Mr. Minicus could only be charging K13,500 per annum or K1,125 per month, discounting GST. He would be luckier to collect K18,000 (20 per cent) per annum. This estimation is not substantially far from the only expert valuation assessment on rent. 

8. Engelbert Turia, a registered valuer with Telikom has presented a valuation report after inspection of the property on 13th February 2006. He estimated a monthly rental of K1,800 per month as more appropriate. K1,800 per month equates to K18,000 per annum which is 24 per cent of K90,000. On the other hand, K37,500 per month is equivalent to 500 per cent of K90,000. Quite frankly, you will never find a property with a value of K90,000 charging K37,500 per month in rent in this country. 

9. While some allowance must be made for a landlord to decide how much the rent should be, his prerogative must be within the scope of commercial reason. A rent of K37,500 per month means that either Post PNG made a bad commercial decision to sell the property when the property could have been leased to Telikom for K37,500; or Mr. Minicus claim is glaringly unjust. In my opinion, it is the latter and I so find. 

10. In all the circumstances, on the balance of probabilities, Mr. Minicus has failed to justify his rental claim at K37,500 per month. The parties, I am aware, are maintaining a certain interim rental agreement that was sanctioned by the Court. To avoid further disagreements, it is recommended that the interim arrangement should be retained and a formal lease agreement should be executed accordingly. 

11. Mr. Minicus also claims for loss of business. He planned to be a coffee dealer. The property in question was bought for that purpose as he needed substantial space for storage. He had been engaged in talks with foreign persons and companies to execute his business aspirations and plans.

12. This alternative claim is obviously based on tort. The law of tort imposes a duty of care on a person towards others appropriately described as his neighbours. A breach of that duty renders a person charged with such duty liable for any consequential injury or loss. 

13. Liability is, however, subject to the principle of foreseeability. A person charged with a duty is not liable for a resulting injury that is not foreseeable. A person is not held responsible for his actions unless if he was aware that his action was fraught with risk of some harm to somebody. These common law principles have already been adopted and are now part of the underlying law.

14. In this case, the statement of claim does not clearly plead the nature of duty bestowed upon Telikom; the nature of the breach and foreseeability of harm to support the claimed loss in the sum of K225,160 per month. The pleading is general and mixed up with the claim for rental payments. 

15. And, perhaps for that reason, there is no clear evidence that Telikom had knowledge of Mr. Minicus’s intention or plan to be a coffee dealer. Telikom was only aware of the dispute in relation to the lease – not the other business plan. Mr. Minicus was actively in dispute with Telikom over rental payments. 

16. In the circumstances, on the balance of probabilities, Telikom could not have foreseen the alleged loss of business. 

17. In any event, Mr. Minicus cannot claim rental and loss of business for the same property at the same time. He could not be leasing to Telikom and be using the property for storage of coffee at the same time. The claims are in the alternative. He cannot have both. To accede to the claim would clearly be double dipping, and is, therefore, unjust and wrongful. 

18. On this basis, the claim for loss of business cannot be sustained.

19. In the final analysis, Mr. Minicus has failed to prove to the satisfaction of the Court his claim for rental payments and loss of business. The entire proceeding is accordingly dismissed with cost.

______________________________

Nobert Kubak & Co Lawyers: Lawyer for the Plaintiff
Telikom In-House Lawyers: Lawyer for the Defendant