N5526

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 480 OF 2012

BETWEEN:

EAST NEW BRITAIN COCOA COPRA &CO-OPERATIVE SOCIETY LIMITED
Plaintiff/First Cross Defendant

AND:

MOSES ELIAS TRADING
First Defendant

AND:

MOSES ELIAS (trading as) MOSES TRADING
Cross Claimant/Second Defendant

AND:

EAST NEW BRITAIN COCOA &COPRA CO-OPERATIVE SOCIETY LIMITED
First Cross Claimant/Third Defendant

AND:

EAST NEW BRITAIN DEVELOPMENT CORPORATIVE
LIMITED
Second Cross Claimant/Fourth Defendant

Kokopo: Oli AJ
2013: November 26th,
2014: March 5th.

CIVIL JURISDICTION - PRACTICE & PROCEDURE - Application by Plaintiff to declare increase monthly rental without Plaintiff consent is unlawful and therefore unenforceable – Considered unilateral decision by Defendants to increase monthly rental without Plaintiffs' consent is undemocratic – Plaintiff has a choice to terminate occupancy – Considered Plaintiff conduct to continue to occupy rental property despite disagree with increase in monthly rental – Plaintiff unwillingly pay increase rental – Amount to agreeing to the monthly rental increase until Plaintiff physically vacate the rental premises - By parties conduct rental lease agreement reduce to monthly rental lease agreement – Parties are at liberty to terminate rental lease agreement at the end of each month or alternative to renew – Each month is a new separate rental lease agreement between Plaintiff and Defendants.

CIVIL JURISDICTION - PRACTICE & PROCEDURE - Application by Plaintiff to declare increase monthly rental without Plaintiff consent is unlawful and therefore unenforceable – Considered Plaintiff conduct in view of Defendant cross-claim for unpaid rental is valid to the time Plaintiff physically vacate the premises – Defendants conduct to impound Plaintiff Cocoa & Copra Weighing Bridge and Communication Tower on the rental premises without a proper Court Order is unlawful – Defendant has lawful means to recoup the outstanding rental arrears through due Court process - But choose self help means without a proper court order is unlawful -- Cost in favor of the Plaintiff, if not agreed be taxed.

Cases Cited: 

Nil

Counsels:

 J Nalawaku, for the Plaintiff
O Kivu, No Appearance

EX PARTE DECISION

5th March, 2014

1.	OLI, AJ: The Plaintiff files an Originating Summons on 10th August 2012 and seeking to obtain the following Orders as:

(1)	An Order in the nature of a declaration that the Defendant's monthly lease rental increase of K5,000.00 from the initial K2,500.00 for the lease by the Plaintiff of the Defendant's Palatirip Depot Warehouse at Malaguna No.1 Rabaul, was with notice but without acceptance by the Plaintiff thereby in breach of the landlord and tenant agreement hence unenforceable.

(2)	An Order that the Defendant forthwith release to the Plaintiff the Cocoa &Copra Weighing Bridge and Communication Tower mounted on Moses Elias Trading premises at Palatirip Depot, Malaguna No. 1 Rabaul, East New Britain Province held by the Defendant as security for alleged rental arrears owing.

(3)	Pending the determination of the substantive orders sought herein, an interim restraining order against the Defendant, its agents, servants and tenants operating from or out of Moses Elias Trading premises described as Palatirip Depot, Malaguna No. 1 Rabaul, East New Britain Province from interfering, dismantling, taking possession or removing the entire or parts of the weighing bridge and the telecommunication tower on the said premises.

(4)	Costs and incidental of the proceeding.

2.	The matter was set down for hearing on 26th November 2013 at 9.30am and Defendants' Counsel on record was advised to appear but failed to turn up or the Defendants themselves did not turn up in person. The Plaintiff seeks leave of the Court to proceed hearing of the matter ex parte and for the Court to grant the application. The Plaintiff's Counsel addressed the Court by referring to his extract of submission on file supported by the affidavits of Mr. David Carroll filed on 10th August 2012 and Ms. Delilah Kolias filed on 16th November 2012 respectively. However, the Defendants in their defence filed affidavit by second Defendant on 13th September 2012 in support of their defence and counterclaim filed on 6th September 2012 and another affidavit by Mr. James Milate filed on 4th October 2012 in support of the defence counter cross claim.

BACKGROUND
3.	The brief background to this matter is that the Plaintiff filed an urgent motion on 10th August 2012 supported by an affidavit of Mr. David Carroll, Manager of Copra & Cocoa Cooperative Society Limited seeking interim restraining order against the Defendants for the preservation of the Plaintiff's property on the Defendant's rental premises until the determination of the substantive matter on foot by the Court. On 17th August 2012 the Court granted the motion and issued interim restraining orders as sought against the Defendants.

4.	On 14th September 2012 the Defendants filed a motion to join the East New Britain Development Corporation Limited as Second Cross Claim Defendant whilst the Plaintiff becomes the First Cross Claim Defendant in the same proceedings. 

ISSUE:
5.	The issue in this case is whether the unilateral decision made by the Defendants to increase monthly rental at will to K5, 500.00 without the consent of the Plaintiff is binding on the Plaintiff. 

PLAINTIFFS' CASE
6.	The brief historical background in respect to contractual relationship between Plaintiffs and the Defendants began sometimes in 2009, where the Plaintiffs' representatives and the Defendant had a meeting and entered into some verbal agreement to lease the Defendants' premises at Palatirip Depot, Malaguna No. 1, Rabaul. The Parties unfortunately, had no formal written agreement entered into but on mutual understanding that the Plaintiff would lease the premises at a rate of K1,500.00 monthly rental commencing from and including March 2009. The Plaintiff claims that the mutual understanding was that the rental lease period was for a period of three (3) years thus terminating at the end of March 2011. Throughout the term of the verbal lease agreement, the parties carried out their basic legal obligations and commitment and Plaintiff during the rental period has honor its monthly rental commitments without fail or defaulted in any monthly rental payments at all. The Plaintiff, however, upon paying the initial bond fee and monthly rental payments bought the necessary business equipment needed to carry out their business operations and installed these heavy equipments on the rental premises. The Plaintiffs' business operations started and commenced business soon after. 

7.	When the term of the three (3) years lease agreement ended in March 2011, the Defendant notified the Plaintiff that it would increase its initial rental to K2, 500.00 per calendar month. The Plaintiff claim that the parties did not sign any formal lease agreement, though there is evidence on Court file that Defendants did prepare some draft Rental Lease Agreement made for parties to sign but the Defendants said that they made attempt to have the Plaintiff sign but to no avail. 

8.	The Plaintiff having to learn of the new rental increases was in stiff opposition to anymore new rental increases on monthly rental Lease Agreement as K1,500.00, was already reasonable amount as the rental premises has not gone through any major renovation at all to justify any further increase in monthly rental. The Defendants, however, unilaterally impose the new monthly rental increases to K2, 500.00 and made it known to the Plaintiff that this was new monthly rental fees and made it appear as if it was accepted by Plaintiff to continue to operate business on those terms and on mutual trust and understanding as between the parties for the balance of the year 2011. 

9.	However, at the end of 2011, the Defendants notified the Plaintiff again that it has decided to raise the monthly rental fees again from K2, 500.00 to K5,500.00 per calendar month and issued an invoice to this amount to the Plaintiff on 18th January 2012. The Plaintiff did not agree to the new increase on monthly rental lease agreement and had a real issue with it because it was over and above the current market rates in Kokopo and Rabaul business Real Estate environment. But the Plaintiff, despite its strong objection to the new rental increases, instead raised a cheque of K2, 500.00 to appease the Defendants. 

10.	The Defendants upon receipt of the cheque with the amount of K2,500,00 were very bitter about it and unhappy and refused to accept the payment stating that there was a new increase in monthly rental fees in place and Plaintiff should honor the new increase monthly rental lease agreement than the old monthly rental fees. In the preceding months that followed thereafter, the Defendant continued to issue invoices to the Plaintiff with K5,500.00, as the new increase monthly rental fees. 

11.	The Plaintiff Counsel submit that the Plaintiff, though did not agree with the new increase in monthly rental fees of K5,500.00, unwillingly paid the increased monthly rental fees in order to maintain and preserve its operations and to protect its expensive heavy equipment it had installed on the rental premises and thereby made two separate payments to honor the Defendants demand. The first payment was made sometimes in February 2012, and when this payment of K5,500.00 was made the Plaintiff unequivocally told the Defendants that the payment was made specifically to sustain the Plaintiffs' operations and not to be seen as an acceptance by Plaintiff of the new increase in monthly lease rental of K5,500.00. 

12.	The Plaintiff made a second payment of K11, 000.00 in April 2012 and did express the same sentiments and reasons for making such payments and tried to initiate discussions with the Defendant with the view to review the increase on monthly lease rental fees. The Plaintiff claims that their request was denied and no opportunity was made available to discuss the new increase on monthly rental fees, which created a situation where the Plaintiff was made to disagree with the new monthly increased rental fees by the Defendants. 

13.	The Defendants, however, continued to issue invoices to the amount of K5,500.00, and the Plaintiff by this time was not receiving any positive reception from the Defendants to review the increase of the new monthly rental fees and refused to pay these invoices thereafter. The Plaintiff's business relationship with the Defendants was not getting any better but was getting very sour during the ensuing months and was anticipating to vacating the rental premises at any time from thereon to a new location in Rabaul or in Kokopo. 

14.	The Defendant heard of the Plaintiff's quiet plan to leave the rental premises and at the end of July 2012, locked the Plaintiff out of the premises without any prior notice to the Plaintiff. The Defendants purposely intended to lock the Plaintiff out from the rental premises in order to make the Plaintiff pay up the three months outstanding rental owing to the Defendants from May to and including July 2012. The action by the Defendants resulted in no positive response from the Plaintiff and the Defendants continued to keep the rental premises locked against the Plaintiff.

15.	The parties by this time, by their own conduct has confirmed in no uncertain terms that they were in fact operating purely on mutual understanding and exercising real gentleman good will, however, in the absence of any written lease agreement being signed and witnessed, the parties in fact were operating on oral rental lease agreement on month by month lease rental agreement basis. That is, both parties were at liberty to terminate monthly rental lease agreement at the end of each month or renew if they want to. 

16.	However, what appears to be a one sided affair, all hell was let loose when the Plaintiff defaulted and failed to pay monthly rental fees for May and June but was still in occupation of the rental premises till end of July, when the Defendant resorted to self-help quick fix avenue and exercised his heavy handed option to terminate the monthly rental lease agreement by locking the Plaintiff out from the premises gate. This event actually repudiates and terminates the verbal monthly rental lease agreement at the end of July 2012 between the Plaintiff and Defendants. The Defendants' unilateral decision to increase monthly rental increases on two separate occasions during the currency of the verbal monthly rental lease agreement from March 2011 to and including July 2012 had legal binding on the Plaintiff, though the Plaintiff did not agree with the new monthly rental increases in principle. 

17.	There is undisputed evidence on the part of the Plaintiff, and that is, by its own conduct has demonstrated that Plaintiff has unwillingly accepted responsibility to make payment on the new increased monthly rental fees and still was in physical occupation of the rental premises to and including July 2012 when the Defendant physically locked the gate to restrict the Plaintiff's re-entry to the premises. That event in itself has effectively terminated the verbal monthly rental lease agreement between the Plaintiff and the Defendants thereafter.

DEFENDANTS' CASE AND CROSS CLAIM

18.	The Matter had to precede Ex parte and Defendants' were not heard except through their respective affidavits file in Court. It became very evident from the history of the case that from the end of March 2011 and thereon, the Defendants unilaterally increased the monthly rental increases on two separate occasions and did effectively terminate the verbal agreement on monthly rental lease agreement between Plaintiff and Defendants at the end of July 2012. This is confirmed by their cross-claim against the Plaintiff, who pleaded and claimed that the plaintiffs' outstanding rental payment for the last three months of May, June and including July 2012 before Plaintiff was physically locked out for outstanding unpaid rental arrears in the sum of K16,500.00. The Plaintiff from thereon was physically restricted access by Defendants' into the rental premises as its usual business operation location at Palatirip Depot at Malaguna No, 1 Rabaul till to this date. The cross-claim by Defendants is evidence by the fact that Plaintiff actually stopped operating usual business from Defendants' rental premises once Defendants' locked the gate on Plaintiff to restrict re-entry into the rental premises again after July 2012. This event has also terminated Plaintiff obligation under the so called gentleman monthly rental lease agreement between Plaintiff and Defendants as dictated by their own conduct whilst maintaining their mutual interest and respect for each other in their own business little ways respectively.

LAW

19.	According to Oxford Dictionary of Law, the word "contract" is defined as a legally binding agreement, but a number of other legal requirements must be satisfied for an agreement to be legally binding. They are:

(i)	There must be a consideration(unless the contract is by deed)

(ii)	The parties must have an intention to create legal relations. This requirement usually operates to prevent a purely domestic or socially agreement from constituting a contract.

(iii)	The parties must have capacity to contract.

(iv)	The agreement must comply with any formal requirements. In general, no particular formality is required for the creation of a valid contract. It may be oral, written, partly oral and partly written, or even implied from contract. Certain transactions are, however, valid only if effected by deed (e.g. transfers of shares British ships) or in writing (e.g. promissory notes, contract for the sale of interests in land, and guarantees that can at law only be enforced if evidenced in writing).

(v)	The agreement must be legal.

(vi)	The agreement must be not be rendered void either by some common-law or statutory rule inherent defect, such as operative mistake (void contract). Certain contracts, though valid, may be liable to be set aside by one of the parties on such grounds as misrepresentation or the exercise of undue influence (voidable contract).

20.	The Parties in this case appears to have explored and applied one of the legal options of the law of contract, and that is Oral Agreement as opposed to written agreement as mostly used as the much preferred option. The case on foot, however, is demonstrative of a typical oral agreement between Parties where Plaintiff agrees in principle to rent the premises owned by the Defendants commencing from and including March 2009 for K1,500.00 per calendar month for the duration of three years to and including end March 2011. The Defendants at the end of March 2011, increase yet another monthly lease rental to K2,500.00 per month. The Plaintiff was not willing to accept the new increase in monthly rental, but instead was prepared to keep up with the new rental fees to maintain its normal business operation as usual. 

21.	 The Defendants made the second rental increase again without Plaintiffs approval toward the end of 2011, and this was not well received by the Plaintiff and so the Plaintiff felt obliged to look for an alternative outlet to move its operations. The Plaintiff by this time had made rental payment up to April 2012 but defaulted for the months of May and June in protest against the new increase in monthly rental. The news of Plaintiffs' intention to move out of the rental premises was heard by the Defendants and Defendants naturally reacted to this move and without serving any formal notice to the Plaintiff to demand outstanding rental payments, restricted physical access by locking the gate to the rental premises at Palatirip Depot, Malaguna No. 1 Rabaul, the usual business operational rental premises for the Plaintiff. 

22.	The Defendants invoked this option to lure the Plaintiff to make quick payment to the outstanding rental arrears before access to the rental premises. The Plaintiff by this time was not moved by the Defendants' action to make full rental payments in haste and firmly stood his ground and did not agree at all to make any final rental payments, unlike in the past. The Defendants maintained their position and continued to lock the Plaintiffs' rental premises that effectively repudiated and terminated the monthly rental lease agreement between the parties to come to an end. But the Defendants held onto the Cocoa and Coconut weighing machine and communication tower as security for the nonpayment of the rental. Hence, this case before this court for plaintiff seeking the courts' intervention for the return of its asset held by the Defendants unlawfully and Defendants cross claim to seek Court to issue a recovery order for payment of the outstanding three months rental arrears due and payable by the Plaintiff.

APPLICATION OF FACTS TO THE LAW

23.	The Plaintiff under the initial three year Lease Agreement with the Defendants from March 2009 to and including March 2011 honor its monthly rental obligations and commitments at K1,500.00 per calendar month as per the Oral Lease Agreement from March 2009 to and including March 2011. I am able to say that this was an Oral Lease Agreement for three years because there were no signed documents to that effect as between the two parties but both parties keep and respect their part of the obligations and commitment as per the Oral Agreement per se. That is Plaintiff pay it's agreed monthly rental lease agreement the Defendants in return make the rental premises available to the Plaintiff. 

24.	The obvious problem with this type of agreement is that it lacks the predetermine dispute resolution clause, in the event of default by either one of the parties. Hence, the Oral Lease Agreement had its first share of uneven ride as between the parties when the Defendant unilaterally increased the monthly rental lease agreement from K1, 500.00 to K2, 500.00 after March 2011. 

25.	The Plaintiff Counsel submit that though his client was advised by the Defendants of this monthly increase in rental fees, the Plaintiff did not agree and was not prepared to enter into any written rental monthly lease agreement at all. However, the Plaintiff by its own conduct appear to maintain its position on the principle refered to as "AGREE TO DISAGREE BUT DISAGREE TO AGREE" hence; Plaintiff did not give any serious thought to enter into any formal written lease agreement on the increase in monthly rental fees. But merely accepted it and made payment unwillingly just to keep its business operation going on as usual. The new development emerges again on the rental track that; had if the first rental increase from K1,500.00 to K2,500.00 was not bad enough, the worst was yet to come in that the Defendants proposes yet another monthly rental fees increases by 100% from K2,500.00 to K5,500.00 per calendar month toward the end of the year 2011, to be effective in early 2012. 

26.	The Plaintiff yet again claim that the 100% increase in rental fees was not accepted by the Plaintiff but was made to accept it unwillingly whilst looking out for alternative place to move in. This was yet another aggressive business initiative by the Defendants to increase the monthly rental fees unilaterally and impose it on the Plaintiff with no due consideration at all. The Plaintiff's Counsel informed the Court that the Plaintiff did not accept the new hefty monthly rental increase by the Defendants, but the Plaintiff, who has calm business oriented nature, though did not accept it, unwilling made payments initially as confirmed by its conduct, though agree to disagree but on the other hand was very mindful to maintain its business operation and to secure its heavy equipment and so did disagree to agree with the new monthly increase rental fees at K5,500,00 per calendar month.

27.	The history of the case demonstrates that Plaintiffs' conduct is very casual in respect to monthly rental lease agreement, however, Defendants all along have demonstrated that they were very serious with their monthly rental lease agreement on a month by month basis. The parties initial agreement to have three years lease agreement period eventually reduced to month by month lease rental agreement as from April 2011 and thereafter. Hence, any monthly rental arrears outstanding thereafter are binding on the Plaintiff so long as the Plaintiff continues to stay on the rental property.

28.	The Plaintiff began to show signs of repudiating and terminated the monthly rental lease agreement by not paying the new increase monthly rental fees as due and payable during the month of May, June and July 2012. However, Plaintiff made initial payments with the new increase in monthly rental fees, was not on the basis that the Plaintiff has accepted the new increase on monthly rental lease agreement. The Plaintiff maintains that new increases monthly rental fees to K5,500.00 were never accepted by Plaintiff at all. But Plaintiff, however, by its own conduct, is not consistent with its intentions to repudiate the monthly rental lease agreement because it has continued to occupy the rental lease premises till the end of July 2012. 

29.	When Plaintiff defaulted in its monthly rental payments for three months the Defendants were at their toes and tried to enforce payment through physical self help quick fix means rather than through legal recovery due process through Court of law. It is indeed undeniable fact that the history of the case reveals that the parties conduct toward the last three months on monthly rental fees was so devastating that parties extinguished their good will and mutual respect on monthly lease rental agreement, the parties in their own dispute resolution attempts resorted to two separate enforcement mechanisms thereby terminated effectively the existing monthly rental agreement between the Plaintiff and the Defendants on and including July 2012.

CONCLUSION

30.	The Court having heard the Plaintiff Counsel's submission and considering the affidavit material before me, I am satisfied and able to make the following conclusions:

1.	The Defendants by their own conduct have unlawfully impounded the Plaintiffs' business operational equipments namely Cocoa & Copra Weighing Bridge and Communication Tower mounted on Moses Elias Trading premises at Palatirip Depot, Malaguna No. 1 Rabaul, East New Britain Province without a proper Court order and is illegal. Whilst Defendants claim that they held the Plaintiffs' asset as security for alleged rental arrears owing to the Defendants, without a proper court order it was unlawful. The Defendants had lawful avenues available for redress but choose not to pursue those lawful avenues at its disposal thus depriving the Plaintiff of its potential business opportunities since then, in terms of loss of business and other generic damages to this date. This is evident by the fact that the said business equipments are still being held at the Defendants' rental premises at Palatirip Depot, Malaguna No. 1 Rabaul, East New Britain Province. The loss of business opportunity by the Plaintiff in this case is an issue the Plaintiff will have to seek further legal advice from in-house legal team to explore in a separate action for damages, if need be as this remedy was not sought in this action, except specific orders for the return of the business equipments namely Cocoa & Copra Weighing Bridge and Communication Tower, which this Court is tasked to order in this action now.

2.	The Defendants' cross claim against the Plaintiff for outstanding rental arrears for three months of May, June and July 2011 are due and payable in the sum of K16, 500.00 is granted. Whilst the monthly rental increase on the latter two increase by the Defendants were not actually formally endorsed by the Plaintiff, the Plaintiff's own conduct confirms it's acceptance of new monthly rental increases by the Defendants' by paying the new increase monthly rental fees and who continued to be in occupation of the rental premises until July 2012. The Plaintiff's attitude towards increase in monthly rental toward the end of 2011 show that it had now realized that it was becoming victim of its own making and felt that it should not take it anymore and decided in anticipation to plan to walk out of the rental premises to settle in a new location elsewhere in Rabaul or Kokopo. The Defendant feelers pick up the vibes of Plaintiffs' anticipated move and drop the bomb cell by locking the Plaintiff out from the rental premises at the end of July 2012. Since, then to this date the Plaintiff has been deprived of the use of its business equipment in particular Cocoa & Copra Weighing Bridge and Communication Tower and other generic business equipment at the Defendants' rental premises. The Defendants' aggressive action has placed the Plaintiff in a very difficult position to carry on with its normal business operation and thereby has indirectly suffered substantial business loss and damages and other generic damages, as well. The Court is mindful of its inherent power to fill this obvious gap in favor of the Plaintiff in loss of business damages; however, the Court is also mindful and aware of its legal procedural perimeters too. Whilst these options were open to Plaintiff to plead this remedy as damages in loss of business in its original pleadings but choose not to plead them in its Originating Summons for reasons best known to the Plaintiff himself alone. Hence, the Court cannot make a finding on the Plaintiffs' entitlement on damages on loss of business in this case to be assessed, unless it was pleaded and included in the Originating Summons due process. 

3.	The Court hereby grants the remedies sought by the Plaintiff and in the same vein also grant the cross claim by Cross Claimant/Defendants against the Plaintiff/Cross Defendant, as well. The Court orders accordingly.

ORDER
31.	The Court accordingly makes the following orders that:

1.	The defendants' has unlawfully impound the Plaintiffs' business operational equipments namely Cocoa & Copra Weighing Bridge and Communication Tower mounted on Moses Elias Trading premises at Palatirip Depot, Malaguna No. 1 Rabaul, East New Britain Province held by the Defendant as security for alleged rental arrears owing must be released within seven (7) days from the date of this order. 

2.	The defendants' cross claim against the Plaintiff for outstanding rental arrears for three months from May, June and July 2011 due and payable in the sum of K16,500.00 is granted and payable within (30) days from today's date.

3.	The cost in favour of the Plaintiff if not agreed be taxed.

______________________________________________________________
Namani & Associate Lawyers: Lawyer for the Plaintiff 
Kivu & Associate Lawyers: Lawyer for the Defendant