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Nowra No 8 Pty Ltd v Swokin, Minister for Lands, and The State [1993] PNGLR 498 (2 June 1989)

PNG Law Reports 1993

[1993] PNGLR 498 - Nowra No 8 Pty Ltd v Kala Swokin, Minister for Lands, and The State 

[1993] PNGLR 498

U7

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

NOWRA NO. 8 PTY LTD

V

KALA SWOKIN, MINISTER FOR LANDS, AND

THE INDEPENDENT STATE OF PAPUA NEW GUINEA

Waigani

Los J

13 April 1989

2 June 1989

REAL PROPERTY - Forfeiture of government lease - Relief.

CONSTITUTIONAL LAW - Forfeiture - When harsh and oppressive - Constitution s 41.

WORDS & PHRASES - "Harsh and oppressive" - Constitution s 41.

Facts

The appellant appealed against the forfeiture of his state lease for his non-payment of rent. Upon publication of the "notice" to show cause, but before actual forfeiture, he paid the outstanding rent. It was also established that he had contracted to effect major improvements on the land, and work had commenced.

Held

1.       The first step to forfeit a government lease is by notice in the National Gazette setting out the breach and requesting the lessee to show cause.

2.       The payment of the outstanding rent after the notice to show cause, even though it took place after "all the necessary actions had been taken", but before actual forfeiture by gazettal of the notice of forfeiture, put an end to the forfeiture.

3.       The court may grant relief against forfeiture under s 41 of the Constitution if the act of forfeiture, in the circumstances, is harsh and oppressive.

Cases Cited

Raz v Matane [1986] PNGLR 38.

Tarere v ANZ Bank [1988] PNGLR 201.

Counsel

R O'Regan QC for the appellant.

Z Gelu for the respondents.

2 June 1989

LOS J:  This appeal comes before the National Court pursuant to s 112(1)b of the Land Act Ch 185 against the forfeiture of the state lease volume 99 folio 207. The area of the land in the lease is towards the waterfront in downtown Port Moresby, being section 21 allotments 2 and 3. The lease was granted to the appellant in May 1986. The appellant proposed to build a multi-story building for office and car park purposes.

The lease was forfeited for two purported reasons. The first reason was for non-compliance with an improvement condition. The second was allegedly for failure to pay a lease rent. I dealt with the first reason when it was raised as a preliminary point. I now deal with the second reason.

The Minister for Lands (the Minister) has power under the Land Act to forfeit a lease by a notice in the National Gazette for various reasons stated in s 46(1), including failure to pay rent on the lease:

"46.    Forfeiture of lease

(1)      Subject to this section, the Minister may, by notice in the National Gazette, forfeit a State lease:

(a)      If rent on the lease remains due and unpaid for a period of six months, or if fees or the amount payable in respect of improvements are not or is not paid in accordance with this Act; or

(b)      subject to Subsection (2), if:

(i)       a covenant or condition of the lease; or

(ii)      a provision of this Act relating to the lease; or

(iii)     a requirement of a notice under s 53 relating to the lease, is not complied with; or

(c)      if the granting of the lease has been obtained, in the opinion of the Minister, wholly or partly as a result of statements that were, to the knowledge of the lessee, false or misleading."

Before forfeiting a lease, the Minister is required by s 46(2) to give notice to the lessee to show cause:

"(2)     Before forfeiting a State lease under Subsection (1), the Minister:

(a)      shall serve notice on the lessee calling on him to show cause, within a period specified in the notice, why the lease should not be forfeited on the ground specified in the notice, and

(b)      may, whether or not cause has been shown in accordance with a notice under Paragraph (a), serve on the lessee a notice requiring him, within a period specified in the notice, to comply with the covenants or conditions of the lease or the provisions of this Act."

Under s 46(3), however, the Minister is obliged not to forfeit a lease unless the lessee fails to show cause required in s 46(2):

"(3)     The Minister shall not forfeit a lease under this section unless:

(a)      the lessee has failed to comply with a notice under Subsection (2) (a) or (b); or

(b)      the lessee has failed to show good cause why the lease should not be forfeited."

By a notice dated 7 July 1988 and signed by a delegate of the Minister, the appellant, Nowra No.8 Pty Ltd., was required to show cause why the lease, subject of the dispute, should not be forfeited on the grounds that the appellant had failed to pay rent for a period of more than six months.

The appellant says it had shown cause. Firstly, it had paid the rent by cheque before the notice, but apparently the cheque had gone astray. Secondly, after the notice to show cause and within three weeks, it had ensured that the payment was made by cancelling the original cheque and issuing a new cheque. The Minister, in his affidavit, does not comment directly on the claim of payment before the notice to show cause. He does not deny the payment before the notice to show cause and does not deny that payment was made by a replacement cheque after the notice to show cause, but he says it came to his attention "after all the necessary forfeiture actions had been taken".

DID THE APPELLANT SHOW GOOD CAUSE?

It would seem to me from paragraph 13 of the Minister's affidavit that the merit or demerit of any cause for non-payment was not an issue when the ground work was in progress to forfeit the lease. The only basis upon which the ground work had been proceeding was that no cause at all had been shown by the appellant. But before any gazettal notice was published, the Minister was told that the appellant had shown cause within the time required by the notice. The Minister indicated he would terminate the process leading to forfeiture. I consider that, by indicating that he would terminate the process leading to forfeiture, he had accepted that the appellant had complied with the notice as well as that it had shown a good cause. Section 46 says "subject to this section" the minister may forfeit a state lease. Subsection (3) imposes a negative obligation, "shall not", upon the Minister. Once he was satisfied that the appellant had not failed to comply with the notice issued by his delegate and that the appellant had not failed to show good cause, the Minister had no other obligation than that of not to forfeit the lease. I consider the Minister no longer had power to proceed to forfeit the lease.

If the Minister had any other reasons that might lead to forfeiture of the lease, he was required to start all over again by complying with ss 46(2) and (3). In doing so, the lessee would have been given a chance to show cause. The Minister failed in this respect.

The appellant's next argument is that if the reason for the Minister proceeding to forfeit the lease was because of the late payment, his decision to do so was drastic in view of the minor nature of the infringement. It is argued so in comparison to, and in proportion to, the effect and the consequence of the forfeiture upon the lessee, the Investment Corporation and its shareholders, and the contracting work that had been undertaken on the land.

On the material before me, the only legal reason for the Minister to proceed to forfeit the lease was the late payment. Under subs. (5) of s 46 of the Land Act, "No acceptance of rent by the State waives a right to forfeit a lease". But forfeiture of the lease is not the only penalty prescribed in the Act. Pursuant to s 47, the Minister may impose a fine.

"47.    Fine instead of forfeiture

(1)      If a term, covenant or condition of a State lease is not complied with, the Minister may, in his discretion, instead of taking action under Section 46, serve notice on the lessee calling on him to shown cause, within a period specified in the notice, why a fine should not be imposed under this section.

(2)      If the lessee fails, within the period specified in the notice under Subsection (1), to show good cause why the fine should not be imposed, the Minister may, by written notice served on the lessee, impose a fine not exceeding K50.00 per month for each month for which the non-compliance has continued or continues.

(3)      If a fine imposed under this section is not paid within the time limited for the purpose in the notice under Subsection (2), the Minister may, by notice in the National Gazette, forfeit the lease without regard to any formalities or requirements of this Act preliminary to the forfeiture of a State lease, or otherwise."

Whether the Minister's delegate had considered the option in s 47 and decided against it, and for what reasons, I cannot tell. The evidence by the appellant and the Investment Corporation on the consequence of the forfeiture, however, make the decision to forfeit the lease unreasonable. The lessee is a wholly owned subsidiary of the Investment Corporation. Thousands of nationals are shareholders of the Investment Corporation. Contracting to effect major improvements on the land and work had commenced. The loss estimated and stated in the affidavit of the managing director of the Investment Corporation, should the forfeiture order stand, is about K10,000.00.

Mr Gelu, appearing for the respondents, did not contest that evidence. Indeed, he could not. The only thing he did, and could do, was to point out that all these events occurred after the notice to show cause, and the Minister for Lands was not aware of that. That could be so. But, certainly, he became aware of these developments and events before the gazettal notice of forfeiture. The notice was gazetted on 10 November 1988. The decision to forfeit and its ground work did not conclude forfeiture. The lease was forfeited when notice to forfeit was in the National Gazette. A month before, and certainly on 12 October, the Minister was aware of all the events and developments that had occurred in relation to the lease. Under this heading, it cannot be argued that the circumstances which I have outlined deprived the Minister of any power to forfeit the lease. But he also had a discretion to impose a different penalty short of forfeiture. Given the valuable information on what drastic consequences might occur if he proceeded to forfeit the lease, the only reasonable decision he would have come to was not to forfeit the lease. By continuing with the forfeiture, he was unreasonable. His decision to proceed to forfeiture was harsh and oppressive because it was disproportionate in the circumstances. Under s 41 of the Constitution, an act which is done under a valid law but is not warranted in a particular circumstance, or is harsh and oppressive, is an unlawful act:

"41.    Proscribed acts

(1)      Notwithstanding anything to the contrary in any other provision of any law, any act that is done under a valid law but in the particular case:

(a)      is harsh or oppressive; or

(b)      is not warranted by, or is disproportionate to, the requirements of the particular circumstances or of the particular case; or

(c)      is otherwise not, in the particular circumstances, reasonably justifiable in a democratic society having a proper regard for the rights and dignity of mankind, is an unlawful act."

Section 41 has been considered in many cases by the Supreme Court and the National Court. In Raz v Matane [1986] PNGLR 38, the act of exercising an executive discretion, such as that under the Migration Act to revoke an entry permit, must be real: "matters which ought to be considered must be considered; conversely irrelevant collateral matters must be disregarded. When the discretion is exercised within the ambit of considering what is relevant, the court cannot intervene, except where the conclusion is one that no reasonable body could have come to."

I am cautious here as I pay heed to a cautious statement of Hinchliffe J in Tarere v ANZ Bank [1988] PNGLR 201 that planning of commercial and other activities would be impossible where acts done under valid laws are frequently declared unlawful under s 41 of the Constitution. The facts in that case speak for themselves. In the case before me, it is obvious that the Minister would have been aware that forfeiture would have had a far drastic consequence on the lessee Investment Corporation and its shareholders, than the State. The rent found to be outstanding was K10,950. What is K10,950 compared to the loss that may be caused as a direct result of forfeiture. In the face of all these, I consider the Minister had wrongly exercised his discretion in proceeding to forfeit the lease. I, therefore, uphold the appeal and declare that the forfeiture of State lease volume 99 folio 207, published in the National Gazette G 73 dated 10 November 1988, is void and of no effect.

I award the costs to the appellant. The counsel for the first and second respondents argued that it was not necessary to engage an overseas counsel and, therefore, the Court should refuse certification. I consider it was necessary; it took a skilled counsel to make the case sound so easy. Accordingly, I certify for overseas counsel's fees.

Lawyer for the appellant: R O'Regan, QC.

Lawyer for the respondents: State Solicitor.