Kimbe International Primary School v Narpal [1987] PGLawRp 551; [1987] PNGLR 442 (2 September 1987)

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GAMING AND WAGERING - Contract of chance - Sale of raffle tickets with permit - Method of draw not disclosed - Implied term that first prize going to first drawn - Breach of contract where first prize going to third ticket drawn - Gaming Act (Ch No 270).

CONTRACT - Implied terms - General principles - Where contract silent on obviously essential matter - Fair term to be applied - Standard of reasonable person - Time for implication when contract made - Contract of chance silent as to method of draw - Implied term that first prize to first drawn ticket.

N1>(1)�� A term may be implied into a contract if the express terms of the agreement are silent as to an obviously essential matter, if it is a fair term which a reasonable person would think must be implied so as to make the contract work.

B P Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 52 ALJR 20 and Shirlaw v Southern Foundries Ltd [1939] 2 KB 206, considered.

N1>(2)�� Accordingly, where a permit was issued under the Gaming Act (Ch No 270) for the conduct of a raffle, in the absence of any express term in the contract of �chance� arising from and at the time of the purchase of a raffle ticket, there should be implied a term that the first ticket drawn should receive first prize.

N1>(3)�� In the circumstances where, following an announcement prior to drawing, the third ticket drawn in a raffle was given first prize, there was a breach of the implied term of the contract.

This was an appeal from a decision of the District Court awarding damages for breach of contract.

KING AJ.: This is an appeal by the Board of Directors of the Kimbe International School (the School) from a judgment of the District Court at Kimbe given on 4 December 1985 by which the school was ordered to pay K8,500 to Kasphy Narpal (Mr Narpal).

The dispute between the parties arose out of a lottery or raffle held by the School on 23 or 24 August 1985. The precise date is not important. A permit to hold the raffle was granted by the Department of West New Britain in May 1985 under the Gaming Act (Ch No 270). The permit was tendered as an exhibit in the District Court proceedings.

It was common ground that Mr Narpal bought five tickets for K10 each and that when he paid the money and received the tickets nothing was said about the way the prizes would be allocated or drawn. The printed tickets bore no information about the way the prizes would be allocated. The permit did not require the draw to be conducted in any particular way. However, it required the results to be published in the local newspaper �as soon as possible after drawing�.

It was also not disputed that when the raffle was drawn one of Mr Narpal�s tickets was the first one drawn. That ticket was tendered as an exhibit. He was not present at the time of the draw but witnesses who gave evidence on his behalf were present, as were many other people. Among them were Mr Herman Talingapua (the official who issued the permit), Mr Albert Frappa, Mr Haans and Mr Mark Seabrook, all of whom gave evidence for the School. The witnesses called for the School said that the School had appointed a committee to organise and conduct the raffle to raise funds, that the committee discussed things over the telephone without formal meetings, and that the way the draw was conducted was decided by �the people� � presumably committee members � present at the raffle. All the School�s witnesses said that shortly before the draw a public announcement was made that the first ticket drawn would be given third prize, the second ticket drawn second prize, and the third ticket drawn first prize. First prize was a motor vehicle worth K8,500. Mr Talingapua also gave evidence that he had attended several other raffles in the district at which the same system of allocating prizes was followed.

When Mr Narpal learned what had happened he was dissatisfied that he did not receive first prize. He brought the proceedings before the District Court in which, as I have said, he succeeded.

On the appeal counsel for both parties concentrated their arguments on essentially the same matters. Both approached the case as one of contract, which is obviously correct. The transaction whereby Mr Narpal paid for the tickets which gave him the chance of winning a prize or prizes was a contract �of chance� or a wager of K10 against the prizes to be won if the tickets were drawn out. Under the general law such a contract would be unenforceable but in this case it was made enforceable by the issue of the permit under the Gaming Act (Ch No 270).

Counsel for the School submitted that the contract was void for uncertainty because at the time the ticket was bought the way in which the raffle would be drawn was not disclosed or settled. Counsel for Mr Narpal submitted that in those circumstances there was an implied term in the contract that the first ticket drawn should receive first prize. Obviously the District Court, in principle, favoured the latter approach.

Before going on to mention the other arguments which were not as vital as this argument, I should state the law as I understand it in relation to implied terms in contracts and relate it to this case.

A term can be implied into a contract by statute. Here the only relevant statute is the Gaming Act (Ch No 270) and whilst it defines �lottery� for the purposes of the Act as I shall later mention, it implies no term or terms into this contract. A term may be implied in a commercial or business contract to make it conform with the usual custom of the trade or business when the parties have not expressly agreed otherwise. But this was not a business contract and that branch of the law cannot apply.

The remaining way in which a term may be implied if the express terms of the agreement are silent as to an obviously essential matter is if it is a fair term which a reasonable person would think must be implied so as to make the contract work. In deciding whether the term is to be implied, the court looks at the alleged term and asks: would a reasonable person, if called upon to consider whether this term should be implied, say �of course it should�: see B P Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 52 ALJR 20 and the cases mentioned (at 26-27) especially Shirlaw v Southern Foundries Ltd [1939] 2 KB 206.

The School�s major argument was that the contract was too vague as to the method of the draw, but alternatively that the term to be implied was that the method of the draw would be decided later. The term Mr Narpal says should be implied need not be mentioned again.

Applying the above principles, I ask myself: would a reasonable person say that the parties were leaving the draw to be worked out later or say that the first ticket drawn was to be the winner? I do not think the first possibility can be regarded as reasonable because it involves delay and uncertainty and of course it is common for persons who have bought raffle or lottery tickets not even to be present at the draw. Many people only learn of their good or bad luck by looking in the newspaper and that was recognised in the permit which required the result to be published as soon as possible in the local paper. However, if a reasonable person considered whether the term Mr Narpal says is to be implied into the contract should be so implied I think that person would say �of course� or �of course, unless some other method was made clear to the ticket buyer�.

Either one of those two answers means in my opinion that the decision arrived at by the District Court was correct because obviously the raffle had to be drawn in some way and no special way was made clear when Mr Narpal bought his tickets.

What I have said above determines this appeal but a number of subsidiary matters were argued which I should deal with shortly.

Both counsel argued that the witnesses of the other side as to the announcement prior to the draw should not be accepted. Counsel for the School pointed out that the witnesses who said they did not hear it may have not been listening, or been distracted, or arrived after the announcement. Counsel for Mr Narpal said that the witnesses called by the School all had a bias towards the view that everything was done properly. For example, Mr Talingapua issued the permit and would be embarrassed if anything went wrong, and Mr Seabrook was actually involved in the decision as to how the draw would be made and Mr Haans made the announcement. Since the question on which the case depends is whether the relevant term was to be implied into the contract when it was made, ie when the ticket was bought, it does not matter which view is taken of the evidence of these witnesses. It is enough that the third ticket was given first prize which constitutes evidence of the breach of the implied term. However, the learned magistrate in the District Court, who saw and heard the witnesses, was impressed with those called by Mr Narpal and although there is substance in the criticisms made by both counsel of the evidence in those circumstances I would be slow to depart from his impression.

Next, to the extent that it seemed the learned magistrate may not have regarded the raffle as drawn as a real lottery, both counsel dealt with that point by reference to the definition of �lottery� in the Gaming Act (Ch No 270) which is as follows:

��lottery� means a scheme of the nature commonly known as a lottery, art union, raffle, sweep or consultation.�

However, counsel approached the matter on the basis that the appropriate definition of �lottery� was:

I do not think it matters which terminology is used although I agree with counsel that the latter is a better guide.

Counsel for Mr Narpal said that the lottery in this case was not a scheme involving accepted ideas of chance because the third ticket got the first prize but had slightly better prospects of being drawn out because the first two were gone ie if there were 1,000 tickets the odds against the first were 1,000:1 but against the third only 998:1. Counsel for the School said that even so, the lottery was still a scheme depending on chance, and also said that he accepted that the Gaming Act (Ch No 270) was of little assistance in a civil dispute like the present because it was concerned with criminal sanctions against illegal gambling. I accept the submissions made by counsel for the School on this point but again, it is irrelevant once the term has been implied into the contract and the only basis upon which counsel for Mr Narpal put his argument was in support of the implication of the term. He suggested in effect that a reasonable person would only define a lottery as a draw by chance in which first prize went to the first ticket.

Counsel for the School argued that the evidence of Mr Talingapua that he had seen other raffles drawn as this one was drawn established that the method was not unusual. However, that is irrelevant to the question of what the terms of the contract were when made. If the School had made the method of drawing known at the time of purchase, that would have been the end of the matter. In any case, because of Mr Talingapua�s special position as the official issuing lottery permits I would not regard his experience as representing the test of the state of mind of a reasonable member of the public. He must, in my view, be looked upon as more in the nature of an expert witness and the question of implied terms is not one for experts.

The substance of his evidence was not put to Mrs Narpal in cross-examination but nothing depends on that. Since Mr Narpal had brought the proceedings he was hardly likely to agree that he thought the way the draw was conducted was a usual or not uncommon one. His personal opinion is also irrelevant in any case.

Counsel for Mr Narpal said the decision about how to draw the raffle was not a valid one because it was made just before the raffle and not by the full raffle committee of the School in a formal meeting. Once more, this is irrelevant once the relevant term is implied into the contract when made. However, I think the very conduct of this case shows that there is no substance in the argument. Even assuming Mr Seabrook and Mr Haans did not have authority to do as they did, by appearing to defend the claim the School by itself and on behalf of its raffle committee has endorsed and ratified the way the raffle was conducted. They have asserted vigorously, if unsuccessfully, that the decision taken about the draw should be upheld.

Finally, the remaining grounds in the notice of appeal were abandoned by counsel for the School and it was not argued that the raffle committee was not the agent of the School.

I feel I should say two things before parting with this case. First, I express my indebtedness for the thorough and helpful way it was argued by both counsel. Secondly, it may seem harsh that the School, which conducted the raffle to raise much needed funds, is obliged to pay the value of first prize to Mr Narpal as well as, presumably, having actually given the motor vehicle that was first prize to the holder of the third ticket to keep faith with the way the raffle was conducted. The school suffers a financial setback whereas Mr Narpal, who was obviously prepared to lose his K50 � which the School in open court offered to refund to him if he withdrew his claim � makes a financial gain by way of damages for breach of the implied term of the contract. However, that is the penalty the School must pay for not having made clear the method of the draw when selling the tickets and I can only hope that this case prompts all persons holding lotteries and raffles to publish on the tickets or in some other clear way how the draw will be held. Alternatively the Government may feel it wise to give consideration to making such a course of action a term of the grant of permits under the Gaming Act (Ch No 270).

The appeal is dismissed and the decision of the District Court affirmed. The School is to pay the costs of the appeal.

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[xi] [Editor�s Note: An appeal to the Supreme Court has been withdrawn.]

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Papua New Guinea Law Reports

Kimbe International Primary School v Narpal [1987] PGLawRp 551; [1987] PNGLR 442 (2 September 1987)

Papua New Guinea Law Reports - 1987