|
|
Home
| Databases
| WorldLII
| Search
| Feedback
National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO.1198 OF 2015
BETWEEN:
JOSHUA NICK
First Plaintiff
AND:
ANZ CLOTHNG LIMITED
Second Plaintiff
AND:
SAKA BEN WIA
First Defendant
AND:
BENIK HOLDINGS LIMITED
Second Defendant
Waigani: David, J
2020: 7th April
EQUITY – claim for rectification and specific performance – interest in land – contract for sale to be in writing – rectification not appropriate vehicle to address uncertainty - claim dismissed.
Cases Cited
Alotau Enterprises Pty Limited and Allen Enterprises Pty Limited v Zurich Pacific Insurance Pty Limited (1999) N1969
Augwi Ltd v Xun Xin Xin (2014) SC1616
Board of Management, Holy Spirit Primary School v Moses Sariki (2013) N5446
Fred Angoman v IPBC of PNG (2011) N4363
Galem Falide v Registrar of Titles and The State (2012) N4775
Hiwi v Rimua (2015) SC1460
Letina Rau v Albert Kone (2014) N5804
Louis Medaing v Ramu Nico Management (MCC) Ltd (2011) SC1144
Mamun Investment Ltd v Nixon Koi (2015) SC1409
Reference by the East Sepik Provincial Executive (2011) SC1154
Shaw v Commonwealth of Australia [1963] PNGLR 119
Supreme Court Reference No 4 of 1980 [1982] PNGLR 65
Treatises cited:
JD Heydon, Cross on Evidence, Butterworths, Fifth Edition, 1996
G E Dal Pont et al, Equity and Trusts in Australia, Fourth Edition, Lawbook Company, 2007
Peter W Young et al, On Equity, Lawbook Company, 2009
Counsel:
Allan Mana, for the Plaintiffs
P. Ben Lomai, for the Defendants
JUDGMENT
7th April, 2020
5. The plaintiffs’ claim is now premised only on the equitable relief of rectification.
BRIEF BACKGROUND
6. The first plaintiff and first defendant are biological brothers. The first defendant is the elder brother. The first plaintiff and first defendant worked collaboratively over some months to secure the Property, a 99 year Business (Light Industrial) lease commencing on 13 January 2005 and ending on 12 January 2104 through a direct grant from the Independent State of Papua New Guinea processed under the auspices of the Department of Lands & Physical Planning pursuant to Section 92 of the Land Act. On 8 March 2005, the title to the Property was formally issued to the second plaintiff. On 20 June 2005, the title to the Property was transferred to the second defendant purportedly conveyed to it pursuant to a contract of sale of land entered into between the second plaintiff and the second defendant dated 31 May 2005 for a purchase price of K5,000.00.
EVIDENCE
8. The defendants’ evidence consists of the following affidavits.
9. Mr. Wia was not subjected to cross-examination.
PLAINTIFFS’ EVIDENCE
Joshua Nick
10. The first defendant is his biological brother.
11. He is a director and controlling shareholder of the second plaintiff company.
12. The second plaintiff was incorporated on 19 March 2001.
13. At all material times, the second plaintiff had an indefeasible title over the Property which was the subject of a direct grant from the State to the second plaintiff pursuant to Section 92 of the Land Act and the State Lease was dated 3 March 2005.
14. The second defendant was incorporated on 17 May 2005.
15. The second defendant was incorporated for the sole purpose of subsequently acquiring the title to the Property to fulfil the first defendant’s personal interests.
16. In order to induce him to transfer the title to the Property to the second defendant, on or about 3 March 2005, the first defendant made the following representations and statements (the representations) to him:
17. At the material time, he had no personal, financial, commercial or any other motivation to transfer the newly issued title to the Property to any third party.
18. The representations to him were made orally in numerous discussions he had with the first defendant in March 2005.
19. The representations were untrue, in particular:
20. At the time when the representations were made, the first defendant knew them to be untrue or made them recklessly not caring whether they were true or not, motivated by his own personal interests.
21. The first defendant made the representations in order to induce him to transfer the title to the Property to the yet to be incorporated second defendant, an entity which he has now discovered is controlled by the first defendant.
22. By means of the representations and acting on the faith of the representations and in the belief that they were true, he transferred the title to the Property to the second defendant on 20 June 2005 after the second defendant was incorporated.
23. In cross-examination, asked if the Property was the subject of a contract for sale of land he signed on 31 May 2005, the witness said he did not sign a contract to sell the Property to the second defendant. When the witness was shown a copy of a contract for the sale of the Property to the second defendant dated 31 May 2005, he maintained that he did not sign any contract or see any contract regarding the sale of the Property before. The common seal affixed to the contract was not the first defendant’s as it was in his custody and another common seal of the second plaintiff was organised and affixed to the contract by the first defendant. The signature appearing on the contract was not his. John Nion whose name appears as witness did not sign the contract. The person named as witness for the second defendant was the third daughter of the first defendant. The first defendant did everything and he had no idea at all about the contract. He said he obtained a copy from the Department of Lands in 2017 following a search conducted there as prior to that, he did not have a copy. He filed proceedings against the defendants thereafter.
24. In cross-examination, the witness said he never received the contract price of K5,000.00 either in cash or bank cheque.
25. In re-examination when asked who had the custody of the title to the Property between 2005 and 2014 when he was charged by police, the witness said he had it. In re-examination when asked if he tried to retrieve the title to the Property from Bank South Pacific Limited after paying off the loan, the witness said that was the time he realised that the title was not in the second plaintiff’s name.
26. Asked further whether the second defendant was mentioned in the Information laid by the police as the owner of the Property, the witness said he was not sure. When it was put to the witness that the charge in the Information was about him stealing the title for the Property contrary to Section 372(1) of the Criminal Code, he said he was charged, but the Property was his so he did not steal from anyone.
27. In cross-examination, he was referred to another Information containing a charge for fraudulently uttering a false document contrary to Section 463(2) of the Criminal Code, he said he was charged.
28. In cross-examination, he was referred to another Information containing a charge for forgery contrary to Section 462(1) of the Criminal Code, the witness said he was charged.
29. When it was put to him in cross-examination that he did not produce any record of conviction, he agreed. When pressed that he was convicted and sentenced for two years and placed on a good behaviour bond, he agreed.
30. Contrary to the representations, upon incorporation, the second defendant carries his interests, but in subservience to the first defendant’s overriding interests.
31. The transfer of title to the Property has effectively diminished his interests in the Property thereby materially affecting his and the second plaintiff’s commercial interests in circumstances where there was otherwise no commercial sense to transfer the title to the Property to the second defendant.
32. The defendants have since 1 April 2015 capitalised on the transfer of the title to the Property to the second defendant by interrupting him and the second plaintiff’s commercial interests on the Property to their detriment.
33. On 15 May 2015, the defendants took illegal possession of the Property and were using it as storage area therefore inhibiting
them from any income generation from the Property.
34. No valuable consideration was given by the defendants in exchange for the transfer of title to the Property in circumstances where
no purchase price was offered or paid. At the material time, the Property was valued at K5 million. The current value of the Property
is K12 million. In cross-examination, he said; he obtained a valuation of the Property; the value of the Property in 2005 was K1.5
million; and the current value was K5 million.
35. He did not execute a written contract of sale of land to transfer the Property to the second defendant contrary to Section 2 of the Frauds and Limitations Act. Hence, no interest in the Property was transferred to the second defendant.
36. The second defendant; was a shelf company with no other assets or material injection by the first defendant; has not traded since its incorporation; does not have an operating bank account; has not filed any company and tax returns since its incorporation; is in the process of being deregistered; and ironically compounding the real risk of the plaintiffs losing the Property.
37. He was easily misled for the following reasons. The familial bond amongst biological relatives is self-evident. He and his brother have cooperatively collaborated on prior initiatives without any problems. Like other cultures, their Engan customs attaches a special bond among brothers. He therefore had absolutely no doubt as to his brother’s bona fides in relation to the Property.
38. It was from this foundation that he approached his brother to help him secure the Property. They worked collaboratively over some months to secure the Property.
39. Another reason why he sought his brother’s invaluable help was his level of sophistication and connectedness, compared to his. He was educated up to Grade 10 level. He was generally abreast with the usual things that engender survival of his relatively low-level business interests. He however had his limitations and there are some things that he can find confronting and prohibitive. The legal requirements and documentation relevant to land acquisition, from initial application, to sub-division application, to dealing with the National Land Board, putting aside the required documentation, was one such challenge for him. He had put all his faith and trust in his brother to do the honourable thing. The initial securing of the Property was therefore an exhilarating experience, testament to his brother’s acumen, he had thought.
40. So when his brother approached him to again, purportedly secure the Property from the risk of the second defendant’s deregistration, he again, had absolutely no distrust in him, given their earlier success. He took his brother’s word in his representations. The papers he signed were purely on his brother’s word. He did not properly absorb the nature of the documentation and would, in hindsight, not have appreciated their legal effect in any event, without further assistance.
41. As to why it took ten years to assert his rights? Even after the transfer of the title to the Property on 20 June 2005, he had not fully appreciated that this had actually happened. He continued to rent the Property out and retain all the income from lease payments. He also consistently paid the annual lease rent at the Department of Lands the whole time. He also took out insurance cover over the Property for the corresponding period.
42. In or about March 2009, a loan of K250,000.00 was obtained from Bank South Pacific and he was asked by his brother to get the loan in his name. He then understood that the Property was mortgaged as collateral. His brother hand-delivered the Owner’s Copy of the title to the Property to Bank South Pacific Limited to secure the loan. The loan was really his brother’s idea as he needed urgent cash and he, as his brother, was the only one he could turn to, in order to secure the cash. After he drew down the loan, he gave all the money to his brother. The first defendant however let him keep K70,000.00 supposedly in exchange for a property at East Boroko. His brother is now trying to retrieve the house he gave him under that arrangement.
43. Throughout a period of eight years from 2005 to 2013, his relationship with his brother remained harmonious as his brother minded his own business interests principally at Club 22 while he himself went about his own business as well.
44. Things came to a head after June 2013 after he fully repaid the Bank South Pacific loan and wanted to retrieve what he thought was his title. A compounding problem was that the title’s file kept by the Registrar of Titles was missing. He, believing that the title was rightfully his, he did what he thought was necessary to regain the title. This involved signing papers at Bank South Pacific Limited to release the Owner’s Copy of the title to him, which he realised was in the second defendant’s name. Due to the missing files saga at the Department of Lands, he went through the process, with the help of knowledgeable people within the Department of Lands, to eventually get a title in the second plaintiff’s name.
45. He understands that the Registrar of Titles has since activated a process under Section 161 of the Land Registration Act to resile the title in the second plaintiff’s name and return the title to the second defendant’s name.
46. He understands that this turn of events angered his brother into doing what he did next. He demanded exorbitant rent from his then tenant of the Property on 1 April 2015, the very first time he has shown an interest in the Property. He then followed through with an illegal eviction exercise on 15 May 2015 when he, with the assistance of Gordon’s police, forcefully evicted his tenant. This exercise was without a court order and in breach of the usual police eviction protocol, which required Assistant Police Commissioner to sign off before the Metropolitan Superintendent tasked units to effect an ejection.
47. He has had these troubles since then because his tenant is threatening him for loss of business. The rent he collects from leasing out the Property supplements his other business interests, including repaying loans he has for his other business operations. He will suffer irreparable loss if he does not arrest the situation in good time.
48. He has been charged with fraud-related charges attendant to what he did in retrieving the original Owner’s Copy of the title from Bank South Pacific Limited and procuring a replacement title in the second plaintiff’s name from the Department of Lands. In reality, all documentation surrounding those issues have been administratively rectified by the Registrar of Titles under the Section 161 process. He however believes that the criminal charges are based on a secondary issue, being the legal character of the Property after 20 June 2005.
49. The fundamental and underlying issue is the question of who is the indefeasible title holder, given all the circumstances now presented. In all his dealings, his simple man’s understanding is that the property is his. Documentary evidence of ownership is secondary and is subject to proof of the underlying ownership issue and how the second defendant got to be the titleholder.
50. He has been disparaged elsewhere in the evidence that he is of violent disposition. He has taken liberty to obtain a character reference from his local pastor from Reformation Ministries & Churches Network (RMCN PNG Inc.) expressing a contrary view of him. A copy of the character reference is annexure A to Exhibit A.
51. Annexure B to Exhibit A is a true copy of a bundle of documents filed in proceedings entitled OS 104 of 2014 and WS 628 of 2015 involving the same parties which is relevant to the determination of the issues in these proceedings.
52. If the defendants had the best interests of the second defendant at heart, they would be utilising the Property for income generation to every stakeholder’s mutual benefit. What they have done is vindictive and an indication of bad faith in circumstances where they have shut off his means to an income by using the Property as their storage yard while the first defendant continues to pursue his business at Club 22.
Felix Rayabrum
53. He holds the rank of Chief Sergeant with the Royal Papua New Guinea Constabulary.
54. His work involves document examination and this includes identification of handwriting and detection of erasures, etc. He has been engaged in this line of work since March 1981. He has testified in Court before on matters involving his line of work.
55. He was shown Exhibit A and asked to identify the signature appearing after the last paragraph namely paragraph 43 and next to the jurat and the signatures appearing in the bundle of documents annexed to Exhibit A and he said those were not the documents he had previously examined and so would not be in a position to comment on them in Court.
DEFENDANTS’ EVIDENCE
56. The first defendant is the Managing Director and Chairman of the second defendant.
57. The second defendant is a company duly incorporated under the Companies Act 1997. A copy of its Annual Return filed dated 28 October 2015 is annexure A1 to Exhibit 2. A copy of a company extract issued as at 28 October 2015 is annexure A2 to Exhibit 2. The company extract shows that; the second defendant was incorporated on 17 May 2005; the second defendant’s directors are Joshua Anscar Nick and the first plaintiff; the second defendant has 1,000 issued shares out of which, the first defendant has 950 shares and Louis Londati Wia, Young Wia, Aveame Kitalin Carol Wia, Mary Wia for Solomon Wia and Christopher Wia all hold 10 shares each. The second defendant lodged with the Investment Promotion Authority a Form 13, Notice of Change of Shareholder (Share Transfer) dated 12 October 2015. Annexure B to Exhibit 2 is a copy of Form 13. A copy of the minutes of a meeting of the second defendant conducted on 3 October 2015 at Allotment 46 Section 46 Boroko, National Capital District annexed to Form 13 shows that 10 shares each were transferred by the first defendant to Louis Londati Wia, Young Wia, Aveame Kitalin Carol Wia, Mary Wia for Solomon Wia and Christopher Wia and the first plaintiff transferred his 460 shares to the first defendant.
58. Annexure C to Exhibit 2 is a copy of a Stamp Assessment issued by the Internal Revenue Commission for K110.00 in relation to lodgement number 25479 for the transfer of the Property for a consideration of K5,000.00.
59. Copies of the title to the Property showing the second defendant as the registered proprietor as at 20 June 2005 are annexure D to Exhibit 2, annexure SBW01 to Exhibit 4 and annexure SBW1 to Exhibit 5. He has in his possession the legitimate original Owner’s Copy of the title to the Property.
60. A company called Bige Petroleum Ltd was in possession of the Property under a lease agreement fraudulently entered into between the plaintiff’s and that company that commenced on or about 1 August 2011 until his intervention on 15 May 2015 under police supervision when the company was locked out due to it blatantly refusing to pay to it rent for the period of occupation totalling about K889,649.20. Annexure SBW04 to Exhibit 4 and annexure SBW 4 to Exhibit 5 are true copies of the lease agreement dated 10 July 2014 entered into between the second defendant as lessor and Bige Petroleum Ltd as lessee for a term of one year commencing on 1 August 2014 and expiring on 31 July 2015 at a rent of K40,000.00 per month plus 10% GST less the unused portion of 200 sqm @ K22.40 p/sqm.
61. The plaintiffs have never operated from the Property prior to 15 May 2015 so they lost nothing when Bige Petroleum Ltd was locked out.
62. Prior to the removal of illegal occupants on 15 May 2015, the second defendant operated a bottle shop in front of the Property. Annexure SBW07 to Exhibit 4 and annexure SBW7 to Exhibit 5 are true copies of a Storekeeper’s Licence dated 9 March 2010 issued by the National Capital District Commission to the second defendant to sell, supply and dispose of liquor from the Property. He also had on the Property two containers loaded with items worth more than K350,000.00 which were removed by the plaintiffs and squatters. Annexure SBW6 to Exhibit 5 is a list of items contained in those containers.
63. While away in his village in Enga Province attending to his mother’s funeral ceremonies, one John Bige and the first plaintiff capitalized on the circumstances and made arrangements with some rogue policemen and broke into the Property on 19 May 2015, removed everything there and caused extensive damage to the Property.
64. They have been operating from the Property since the former tenant was forcefully moved out on 19 May 2015.
65. A National Court order was obtained by the first plaintiff on 6 October 2015 and entered on 7 October 2015. It was a mandatory injunction compelling the defendants to let the plaintiffs to re-enter, take possession of the Property and carry on their business the way they did before the interruption of 15 April 2015, but subject to the proviso that all rentals were to be paid into the National Court Registrar’s Trust Account. True copies of the order are annexure B to Exhibit 1, annexure SBW02 to Exhibit 4 and annexure SBW2 to Exhibit 5. Its authenticity was queried so police were alerted to it and asked to investigate. A true copy of a letter to the Commander of National Capital District Operations, Boroko Police Station from the first defendant dated 7 October 2015 is annexure A to Exhibit 1. Police conducted an investigation and wrote to the Registrar of the Supreme and National Courts.
66. Rentals have not been paid into the National Court Registrar’s Trust Account as ordered by the Court on 6 October 2015. That was confirmed by the Registrar in his letter to Lomai & Lomai Attorneys dated 31 May 2018. Annexure SBW03 of Exhibit 4 and annexure SBW3 to Exhibit 5 are true copies of that letter.
67. Lawyers for the defendants having become fully aware of the characters behind the ex parte order immediately filed an application to set aside the order on 9 October 2015. Annexures C and D to Exhibit 1 are true copies of the notice of motion and affidavit in support sworn by the first defendant respectively.
68. On Saturday, 10 October 2015 at around 12:45 pm, the first plaintiff and a team of heavily intoxicated and armed policemen wearing police issue protective vests and dressed in torn police uniforms broke into the Property and ordered him out of the Property at gun point as if he were a dangerous wild beast. He told the heavily intoxicated policemen that they had no right to evict him as the court order they were executing did not order his eviction and he should be given time to move out as millions of Kina worth of machinery and equipment were there. Despite his plea, the policemen were so heavily drunk/intoxicated that they refused to listen to him, pushed him into his car and ordered him out of the Property at gun point.
69. The Property is occupied by the first plaintiff and squatters hired by the plaintiffs who conduct illegal activities such as prostitution, drug distribution, black marketing of liquor, betel nut sales, etc. Annexure SBW05 of Exhibit 4 and annexure SBW5A to Exhibit 5 are photographs showing squatters’ illegal activities. Annexure SBW06 of Exhibit 4 and annexure SBW5A are photographs showing illegal sheds/structures erected on the Property. None of his staff and relatives have been allowed inside the Property to oversee the security of their machinery and equipment there.
70. Their business operations were brought to a complete stop since 12:45 pm on Saturday, 10 October 2015 and it means loss of thousands of Kina per day.
71. The Acting Police Commissioner intervened and directed the Metropolitan Superintendent and Acting Assistant Police Commissioner, National Capital District and Central Province to immediately restore the status quo and assist him and his business operations to return to normal operations before 4:06 pm on 13 October 2015. Annexure E to Exhibit 1 is a copy of a minute from J. Andrews, A/Deputy Commissioner of Police, Chief of Operations to A/ACP National Capital District and Central Province dated 13 October 2015.
72. On 2 September 2017, he went to the Department of Lands and obtained a copy of the contract of sale dated 31 May 2005 entered into between the second defendant as the vendor and the second defendant as the purchaser for the sale of the Property at a purchase price of K5,000.00 from officers of that Department who said that the file for the Property that had gone missing before was eventually found. Annexure A to Exhibit 3 is a stamped copy of the contract of sale and a statutory declaration to accompany documents lodged for approval by the Minister and/or registration declared by the first defendant dated I June 2005. Annexure B to Exhibit 3 is a copy of the transcript of National Court proceedings of 9 August 2016 and 7 September 2016.
73. The plaintiffs recently shifted the boundary fence of the Property to illegally claim the drainage reserve to the detriment of the second defendant as indefeasible title holder and a letter from the National Capital District Commission Physical Planning Division/Board was issued concerning the matter. Annexure 8 to Exhibit 5 are two photographs showing the boundary fence erected right up to the drainage reserve.
LEGAL ISSUES
74. The main legal issues for my decision for now are:
75. The consideration of other issues arising out of other relief sought, consequential or otherwise, will be dependent on the outcomes of the main issues.
RECTIFICATION
Plaintiffs’ submissions
76. I have considered the plaintiffs’ submissions contained in their written submissions and ventilated at the trial during the presentation of oral submissions by Mr. Mana of counsel.
77. Mr Mana contends that rectification extends to conveyance of land. As an equitable relief, the action was not caught by time limitation imposed by Section 16 of the Frauds and Limitations Act by virtue of the exemption provided under Section 18 of that Act it was argued.
78. Mr. Mana submits that by failing to specifically plead to paragraph 16 of the amended statement of claim in their defence, the defendants essentially have admitted the plaintiffs’ assertion that:
[A]ny contract for sale of the said land has been breached as a result of the first defendant’s fraudulent misrepresentations, rendering such contract, and the subsequent transfer, null and void.
79. It is argued that rectification applies where either party to a contract establishes that such a contract does not record the real intention of the parties, that party is entitled to an order for rectification so that the agreement correctly expresses the true agreement between the parties.
80. Mr. Mana argued that the representations by the first defendant to the first plaintiff in or about March 2005 resulted in the agreement to transfer the title to the Property to an alternate entity. Mr. Mana states that according to the plaintiff’s evidence, the alleged agreement was twofold; firstly, to transfer the interests of the first plaintiff out of the second plaintiff entity into an alternate entity, to be solely controlled by the first plaintiff; and secondly, as a practical matter, the interest in land required a contract of sale and transfer instrument to transfer the title away from the second plaintiff to the alternate entity
81. Mr. Mana states that the first defendant however reneged in two material respects. First, the first defendant incorporated the second defendant which installed him as the overriding controller of the company and effective title holder/owner of the Property. Second, given that first scenario, any corresponding contract for sale and/or transfer instrument would be a mere sham. It was also contended that in any event, the alleged contract for sale of land is a fraud as the first plaintiff never signed it and no consideration was paid by the second defendant to the second plaintiff.
82. Mr. Mana contends that for rectification to be sustained in the case of unilateral (as distinct from mutual or common) mistake, the following factors must be present:
83. It was argued that the power of rectification be exercised and specific performance of the agreement so rectified be ordered as evidence before the Court which is unchallenged demonstrate that:
Defendants’ submissions
84. I have also considered the defendants’ submissions contained in their written submissions and ventilated at the trial during the presentation of oral submissions by Mr. Lomai of counsel.
85. Mr. Lomai contends that the plaintiffs’ claim for rectification and specific performance should be dismissed as:
Reasons for decision
86. In civil proceedings, the general rule is that he who asserts must prove it (Shaw v Commonwealth of Australia [1963] PNGLR 119, Supreme Court Reference No 4 of 1980 [1982] PNGLR 65, Reference by the East Sepik Provincial Executive (2011) SC1154, Galem Falide v Registrar of Titles and The State (2012) N4775, Board of Management, Holy Spirit Primary School v Moses Sariki (2013) N5446) and the standard of proof is on the balance of probabilities. Hence, the burden may shift to the party who asserts and who must then prove it: JD Heydon, Cross on Evidence, Butterworths, Fifth Edition, 1996, paragraphs 7200-7230.
87. Rectification is an equitable remedy so the time limitation imposed by Section 16(1) of the Frauds and Limitations Act does not operate as a bar to commencing an action under Section 18 of the Frauds and Limitations Act.
88. Only where the relief sought by a plaintiff is confined to purely equitable relief such as specific performance of a contract or an injunction or other equitable relief can an action fall within Section 18 of the Frauds and Limitations Act: Mamun Investment Ltd v Nixon Koi (2015) SC1409 and Hiwi v Rimua (2015) SC1460.
89. Equitable remedies are discretionary and so in deciding whether to grant such relief, the Court is bound to take into consideration defensive equities or factors which militate against the Court exercising its discretion to grant equitable relief such as the doctrine of laches, ie, undue delay in commencing proceedings: Louis Medaing v Ramu Nico Management (MCC) Ltd (2011) SC1144, Fred Angoman v IPBC of PNG (2011) N4363, Augwi Ltd v Xun Xin Xin (2014) SC1616, Letina Rau v Albert Kone (2014) N5804 and Hiwi v Rimua (2015) SC1460.
90. Mr. Mana has correctly summarised the equitable remedy of rectification. It applies where either party to a contract establishes that such a contract does not record the real intention of the parties, that party is entitled to an order for rectification so that the agreement correctly expresses the true agreement between the parties: Alotau Enterprises Pty Limited and Allen Enterprises Pty Limited v Zurich Pacific Insurance Pty Limited (1999) N1969.
91. I have consulted other written sources to better understand the remedy.
92. The nature of rectification is expressed in the treatise authored by G E Dal Pont et al, Equity and Trusts in Australia, Fourth Edition, Lawbook Company, 2007 at pp.965-966 para 37.60 in the following terms:
Rectification aims to make an instrument conform to the true agreement of the parties where the writing fails to express that agreement accurately. That the remedy is activated by equity’s jurisdiction to ensure that a written document is not used as an instrument of fraud, or misconduct “equivalent to fraud”, explains why parties cannot, by the terms of their contract, exclude a court’s power to effect rectification. An order for rectification does not make a new contract for the parties or rescind the existing contract – it creates no new rights – but simply rectifies the erroneous expression of a written agreement. Such an order has retrospective force, that is, “it is to be read as if it had been originally drawn in its rectified form”. The court’s power is not limited to contractual documents, but extends to deeds created pursuant to an agreement, powers of attorney and trust instruments.
93. It is instructive that I refer to another passage in G E Dal Pont et al, Equity and Trusts in Australia, Fourth Edition, Lawbook Company, 2007 found at p.966 para 37.65 where the learned authors state:
The focus on mistake dictates that rectification is not the appropriate vehicle to address uncertainty. The latter is appropriately addressed by way of construction and possibly by reference to extrinsic evidence of the parties’ intentions. It follows that, consistent with equitable principle, rectification will not be decreed where the court is able to ascertain the meaning of the clause(s) in dispute through a process of construction. The courts have, in any case, historically assumed jurisdiction to supply words, omitted or corrected, in an instrument, where this is “clearly necessary in order to avoid absurdity or inconsistency” in order to “give effect to what must be accepted as a clearly manifested intention, albeit one literally at odds with the words used”. A plaintiff may, in any case, plead construction and rectification as alternatives.
94. The types of instruments that may be rectified are not confined to contracts. The remedy is available in respect of conveyances, leases, powers of appointment, settlements, bonds, bills of exchange, bought and sold notes, disentailing deeds, mortgages, policies of insurance: G E Dal Pont et al, Equity and Trusts in Australia, Fourth Edition, Lawbook Company, 2007 p.966 para 37.60, Peter W Young et al, On Equity, Lawbook Company, 2009 p. 743 para 11.260, Alotau Enterprises Pty Limited and Allen Enterprises Pty Limited v Zurich Pacific Insurance Pty Limited (1999) N1969. There is no jurisdiction in equity to rectify a will: G E Dal Pont et al, Equity and Trusts in Australia, Fourth Edition, Lawbook Company, 2007 p.967 para 37.75, Peter W Young et al, On Equity, Lawbook Company, 2009 p. 745 para 11.280.
95. These commentaries are persuasive in this jurisdiction, and I would adopt and apply them here to the circumstances of the present case.
96. The test for rectification is an objective one, however if the evidence reveals that each party had a common subjective interest, the Court may order rectification: Alotau Enterprises Pty Limited and Allen Enterprises Pty Limited v Zurich Pacific Insurance Pty Limited (1999) N1969.
97. In the present case the plaintiffs seek rectification of an agreement that resulted in the transfer of the second plaintiff’s proprietary interest in the Property to the second defendant. The plaintiffs do not plead in the amended statement of claim which particular contract of sale they seek to be rectified. This is evident at paragraphs 16 and 17 of the amended statement of claim where it is pleaded as follows:
In the premises, any contract for sale of the said land has been breached as a result of the first defendant’s fraudulent misrepresentations, rendering such contract, and the subsequent transfer, null and void.
In the alternative to the pleadings in paragraphs 5 to 15 above, any purported contract for sale of the said land and the subsequent transfer, is void for lack of valuable consideration given by the defendants in exchange for the transfer of the land, in circumstances where no purchase price was offered and in fact paid for the land, which was at the material time valued at K5,000,000.00.
98. In the prayer for relief pleaded in the alternative at relief (5)(a), again there is no specific reference to a particular contract for sale to be rectified.
99. The plaintiffs through the evidence of the first plaintiff vigorously dispute the existence of the contract for sale dated 31 May 2005 or that it was ever executed by them. An interest in land can only be disposed of in writing according to Section 2 of the Frauds and Limitations Act. So which particular contract for sale that is in writing and that resulted in the transfer of the Property on 20 June 2005 needs to be rectified? It is uncertain. As indicated above, rectification is not the appropriate vehicle to address uncertainty. It follows that in the circumstances of the present case particularly in the absence of a contract for sale that is in writing and specified in the amended statement of claim for purposes of construction of its terms and its existence proven, rectification for common mistake or unilateral mistake to my mind is just not possible. The onus is on the plaintiffs to prove their assertion on the balance of probabilities and they have failed.
100. For these reasons and in the exercise of my discretion, I will refuse to grant to the plaintiffs the equitable relief of rectification.
OTHER ISSUES
101. The outcome of the first main issue is in favour of the defendants therefore I will not address the second issue in any detail. It suffices to say that an order for specific performance is refused.
CONCLUSION
102. The plaintiff has failed to prove its claim founded on the equitable relief of rectification and specific performance on the balance of probabilities and therefore it is dismissed.
COSTS
103. Costs will follow the event, i.e., the defendants are awarded costs of the entire proceedings not specifically awarded during the course of the proceedings. This means that the plaintiffs shall pay the defendants’ costs not specifically awarded during the course of the proceedings on a party-party basis, which shall, if not agreed, be taxed.
ORDER
104. The formal orders of the Court are:
Judgment and orders accordingly.
___________________________________________________________
Corrs Chambers Westgarth: Lawyers for the Plaintiffs
Lomai & Lomai Attorneys: Lawyers for the Defendants
PacLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.paclii.org/pg/cases/PGNC/2020/99.html