Fletcher Morobe Construction Pty Ltd v Minister for Lands [1988] PGLawRp 37; [1988-89] PNGLR 25 (22 December 1988)

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[1988-89] PNGLR 25 - Fletcher Morobe Construction Pty Ltd v Minister for Lands�

REAL PROPERTY - State Land Leases - Compensation for improvements - Lease granted under repealed legislation - Expiration under new legislation - Preservation of accrued rights - Right to compensation potential only - Compensation under new legislation - Whether special lease - Special purposes lease - Land Ordinance 1911, ss 40, 54 - Land Act (Ch No 185) (formerly Land Ordinance 1962), ss 41(1)(2)(3), 55(2)(10).

STATUTES - Repeal - Savings clauses - Preservation of �rights� under State leases - Whether accrued or potential rights preserved - Right to compensation on termination of lease - Land Ordinance 1911, s 54 - Land Act (Ch No 185) (formerly Land Ordinance 1962), ss 4(1)(2)(3), 55(2).

Under the Land Ordinance 1911, s 54, the lessee of a State Land Lease was entitled on expiration of the lease to compensation for the value of improvements from the incoming tenant where there was one. The Land Ordinance 1911 was repealed and replaced by the Land Ordinance 1962 (now Land Act (Ch No 185)), under s 55(2) of which the lessee of an expired lease for which a renewal was refused, was entitled to compensation for the value of improvements from the State.

Section 4 of the Land Ordinance 1962 provided and preserved any �right, title, interest, power, duty, obligation or liability created by, acquired under or at any time existing under or by virtue of or in respect of� any lease granted under the Land Ordinance 1911.

N1>(1)�� In respect of a lease granted in 1959 which expired in 1980, and renewal of which was refused, compensation was to be determined under s 55 of the Land Ordinance 1962.

Fletcher Morobe Construction Pty Ltd v Minister for Lands [1988] PNGLR 53, reversed.

N1>(2)�� The �rights� referred to in the savings provisions of s 4 of the Land Ordinance 1962 were acquired rights: they did not extend to the rights under s 54 of the Land Ordinance 1911, which were potential rights only, contingent or conditional upon the expiration of the lease for the right to compensation to accrue or to be realised.

N1>(3)�� A �special� lease issued under s 40 of the Land Ordinance 1911 �for the purpose of industry� was not the type of lease described as �special purposes lease� under s 70 of the Land Ordinance 1962, for which no compensation for improvements was payable.

This was an appeal from the decision by Cory J in Fletcher Morobe Construction Pty Ltd v Minister for Lands [1988] PNGLR 53.

AMET J: The appellant was the lessee of a �Special� State Lease granted under s 40 of the Land Ordinance 1911 on 3 September 1959 for a period of 20 years, for the purpose of industry. The lease expired on 25 July 1980. During the term of the lease, the Land Ordinance 1911 was repealed and replaced by the Land Ordinance 1962. When the lease expired, the appellant applied for a further lease but the application was refused. During the term of the lease, the appellant had erected improvements upon the land. After the appellant�s application for renewal of the lease had been refused, a new lease was issued to another lessee.

The appellant had sought declarations pursuant to the revised Land Act (Ch No 185), s 48(3), that, as outgoing lessee who had been refused a renewal of the lease, he was entitled to be compensated by the Minister representing the State for the value of the improvements to the land. The trial judge held that the appellant was entitled to claim compensation from the incoming lessee under s 54 of the Land Ordinance 1911 and not from the Minister under s 55(2) of the Land Ordinance 1962 which is the corresponding provision of the revised Land Act, s 48(3): see Fletcher Morobe Construction Pty Ltd v Minister for Lands [1988] PNGLR 53.

�If a lease is forfeited there shall be no compensation for improvements. If a lease expires by effluxion of time the value of the improvements shall be paid by the incoming to the outgoing tenant; and if there is no incoming tenant the Lieutenant-Governor may if he thinks fit order that a sum not exceeding the value of the improvements shall be paid to the outgoing tenant.

Compensation for improvements under this Section shall be arrived at in manner to be provided by regulation.�

It is convenient to refer to the Land Ordinance 1962, s 55(2), and not the revised Land Act, s 48(3). It provides that:

�Subject to this Section, where, on the expiration of the term of an Administration lease of land on which there are improvements, the lessee applies for and is not granted a further lease of that land or is granted a further lease of part only or which includes part only of that land, the Administrator shall, within six months after the expiration, pay to the outgoing lessee the value of those improvements on the land, or the part of the land not included in the further lease, as the case may be.�

When the Land Ordinance 1962 repealed the Land Ordinance 1911, it provided in s 4 the following saving provisions in relation to rights created by or acquired under the Land Ordinance 1911:

N2>�(1)�� Subject to the succeeding provisions of this Section, the repeal of an Ordinance by the last preceding Section does not affect a grant, granted application, lease, licence or permit made, granted or preserved by or under that Ordinance and in force immediately before the commencement of this Ordinance, or any estate, right, title, interest, power, duty, obligation or liability created by, acquired under, or at any time existing under, or by virtue or in respect of, any such grant, granted application, lease, licence or permit or any such Ordinance, and all such grants, granted applications, leases, licences, permits, estates, rights, titles, interests, powers, duties, obligations and liabilities shall continue to be of the same force and effect as if that Ordinance had not been repealed.

N2>(2)�� Except where the contrary intention appears, and subject to Subsection (2a) of this Section, the provisions of this Ordinance apply to a grant, granted application, lease, licence, permit, estate, right, title, interest, power, duty, obligation or liability referred to in the last preceding Subsection.

N2>(2a)�� Part V (other than Sections 53, 54 and 54(a)) of this Ordinance does not apply to a grant, granted application, lease, licence, permit, estate, right, title, interest, power, duty, obligation or liability referred to in Subsection (1) of this Section.�

The issue before the learned trial judge was whether the appellant�s claim for compensation fell to be determined under s 54 of the Land Ordinance 1911, by virtue of the saving provisions in s 4 of the Land Ordinance 1962 or s 55(2) of the Land Ordinance 1962. The trial judge held that (at 55):

�... the Land Ordinance 1911 had created in the plaintiff the statutory right to claim compensation for the value of the improvements on the expiration of the lease. This right was preserved by s 4(1) of the Land Ordinance 1962 and by s 4(2a), a claim for compensation under s 55(2) of the Land Ordinance 1962 was excluded. It would seem that the plaintiff is entitled to claim compensation from the incoming lessee under s 54 of the Land Ordinance 1911.�

This conclusion is arrived at on the premise that the right referred to in s 4(1) of the Land Ordinance 1962 is the �right� being conferred by s 54 of the Land Ordinance 1911.

The appellant has submitted that the trial judge erred in his interpretation of the �right� (assuming it to be properly so called) conferred by s 54 of the Land Ordinance 1911. It was argued that s 54 only conferred a �potential right� and not a right referred to in the saving provisions of s 4(1) of the Land Ordinance 1962. The right referred to in s 4(1) was one created by, acquired under or existing under the Land Ordinance 1911, and the s 54 right was not such a right. It was only potential.

I agree. In my view s 54 created potential rights only, contingent or conditional upon future events taking place for the rights to accrue or be realised. For instance, the first proviso is that if a lease is forfeited, then no compensation shall be paid for any improvement. Secondly, the condition for the payment of compensation for improvements is upon the expiration of the lease by effluxion of time. Both of these were events in the future. In my view, the right to compensation is created, acquired or comes into existence when the lease expires, and not before. It is only enforceable upon and after the expiry of the lease. Prior to that, it is only a potential or contingent right. It had not yet been acquired.

An old English Court of Appeal case of Hamilton-Gell v White [1922] 2 KB 422 was relied upon for the proposition that the �rights� conferred by s 54 were abstract, prospective or potential rights. The facts are outlined by Los J. They are akin to the facts of this appeal. The tenant was entitled to compensation upon early termination of the tenancy, under the Agriculture Holdings Act 1908 (UK). Before the tenant could comply with the second of two conditions, the 1908 Act was repealed. The issue went before the Court of Appeal, as to whether or not, notwithstanding the inability on the part of the tenant to comply with the second condition, he could nevertheless claim compensation by virtue of s 38 of the Interpretation Act �1889(UK), which provided that where an Act is repealed:

�the repeal shall not affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed.�

�It is obvious that that provision was not intended to preserve the abstract rights conferred by the repealed Act, such for instance as the right of compensation for disturbance conferred upon tenants generally under the Act of 1908, for if it were the repealing Act would be altogether inoperative. It only applies to the specific rights given to an individual upon the happening of one or other of the events specified in the statute. Here the necessary event has happened, because the landlord has, in view of a sale of the property, given the tenant notice to quit. Under those circumstances the tenant has �acquired a right�, which would �accrue� when he has quitted his holding, to receive compensation.�

The appellant�s claim, in my view, therefore fell to be considered under s 55(2) of the Land Ordinance 1962. The scheme of the Land Ordinance 1962 under s 55(10) precluded recovery of compensation for improvements on special purpose or mission leases. Section 55(10) provided that:

�The lessee of a special purpose lease or mission lease may remove, on or before the expiration of the lease, such of the improvements on the land the subject of the lease as are severable, doing as little damage as may reasonably be to the land the subject of the lease, but otherwise is not entitled to payment under this Section in respect of the improvements.�

A �Special Purpose Lease� is defined in s 6 as an �Administration lease granted under Subsection (1) of Section 70� of the 1962 Act. The lease in issue in this case is not a s 70(1) lease but a 1911 Ordinance, s 40 lease. Section 55(10) therefore does not apply to it. It remains to be considered as an �Administration lease� under s 55(2). �Administration lease� is defined under s 6 as a lease from the Administration granted under or continued in force by the Land Ordinance 1962.

LOS J: Until 25 July 1980, the appellant was registered as the lessee of the State Lease (Vol 17, Folio 4176) over Allotment 3, Section 36, Boroko. The lease expired on 25 July 1980. The appellant applied for a further lease of the land but was told on 23 July 1981 that the lease was not renewed in its favour. During the term of the lease, the appellant had built on the land three flats, a carport and a storage shed to the value of K72,400.

The appellant took out a writ of summons seeking a declaration by the National Court that, as the outgoing lessee who had been refused a further lease, it was entitled to receive payment for the value of the improvements on the land. The appellant relied on s 55(2) of the Land Ordinance 1962 (now Land Act (Ch No 185)). I call it the 1962 Ordinance for convenience.

�Subject to this Section, where, on the expiration of the term of an Administration lease of land on which there are improvements, the lessee applies for and is not granted a further lease of that land or is granted a further lease of part only or which includes part only of that land, the Administrator shall, within six months after the expiration, pay to the outgoing lessee the value of those improvements on the land, or on the part of the land not included in the further lease, as the case may be.�

The presiding judge refused such a declaration. His Honour held a view that the plaintiff�s right to claim for compensation did not exist under the 1962 Ordinance but under the Land Ordinance 1911 (the 1911 Ordinance). Under s 54 of the 1911 Ordinance, a claim for compensation could only be made against an incoming lessee (where there is an incoming lessee) and not the respondent.

Compensation for improvements under this Section shall be arrived at in manner to be provided by regulation.�

Since the issue of the lease to the appellant, the 1911 Ordinance had been repealed by the 1962 Ordinance. The respondent says the appellant cannot rely on the 1962 Ordinance because his rights arising under the 1911 Ordinance have been saved by s 4(1) of the 1962 Ordinance. This is the construction that his Honour had put on the saving section.

By virtue of s 4(2), the provisions of the 1962 Ordinance do apply to the rights saved in s 4(1). But the application is subject to two requirements: first, some provisions cannot apply to the rights saved by s 4(1) where that intention appears; and secondly, some provisions do not apply because of s 4(2a). Section 4(2a) specifically excludes all the provisions of Pt V except for ss 53, 54, and 54(a).

By this construction the appellant cannot rely on s 55(2) of the 1962 Ordinance because s 4(2a) excludes the application of s 55 in relation to any of the rights saved by s 4(1).

The appellant argues, however, that the rights saved by s 4(1) of the 1962 Ordinance are accrued rights, not potential rights. The need to claim compensation did not arise when the 1911 Ordinance was still in force. The need arose when the lease expired. And the lease expired after the 1911 Ordinance had been repealed by the 1962 Ordinance. Hence the right to claim compensation became accrued under the 1962 Ordinance. In support of that argument, the appellant relies on Abbott v The Minister for Lands [1895] UKLawRpAC 18; [1895] AC 425, and Hamilton-Gell v White [1922] 2 KB 422 at 431.

In Abbott�s case, a saving provision of the Crown Land Act 1884 (UK) came before the House of Lords for scrutiny. Section 2(b) of that Act reads:

N2>�(b)�� All rights accrued and obligations incurred or imposed under or by virtue of any of the said repealed enactments shall subject to any express provisions of this Act in relation thereto remain unaffected by such repeal.�

Abbott made conditional purchase of certain land under the Crown Lands Alienation Act 1861 (UK). This Act was repealed by the Crown Land Act 1884 (UK). It was contended for Abbott that, in the right of the first conditional purchase which he made under the provisions of the Act of 1861, he might still make additional conditional purchases by virtue of the saving provision. To this, the Lord Chancellor, delivering the judgment of their Lordships, said (at 431):

�It has been very common in the case of repealing statutes to save all rights accrued. If it were held that the effect of this was to leave it open to any one who could have taken advantage of any of the repealed enactments still to take advantage of them, the result would be very far-reaching.

It may be, as Windeyer J observes, that the power to take advantage of an enactment may without impropriety be termed a �right�. But the question is whether it is a �right accrued� within the meaning of the enactment which has to be construed.

Their Lordships think not, and they are confirmed in this opinion by the fact that the words relied on are found in conjunction with the words �obligations incurred or imposed�. They think that the mere right (assuming it to be properly so called) existing in the members of the community or any class of them to take advantage of an enactment, without any act done by an individual towards availing himself of that right, cannot properly be deemed a �right accrued� within the meaning of the enactment.

Even if the appellant could establish that the language of s 2(b) was sufficient to reserve to him the right for which he contends, he would have to overcome further difficulties. That enactment only renders �rights accrued� unaffected by the repeal �subject to any express provisions of this Act in relation thereto�.�

In Hamilton-Gell v White [1922] KB 422, the landlord of an agricultural holding gave his tenant a notice to quit. Under the Agricultural Holdings Act 1908 (UK), the tenant was entitled to compensation in view of an early termination of the tenancy. But compensation was payable on certain conditions. The first condition was that a tenant must, within two months of receiving a notice to quit, give the landlord a notice to claim compensation. Secondly, he must make the claim for compensation within three months after quitting the holding. The tenant complied with the first condition. But before he could comply with the second condition, the 1908 Act was repealed. He did, however, make his claim within three months. The question arose as to whether the tenant, having given notice of intention to claim compensation in time under a previous Act but not having claimed compensation under the same Act (as it was repealed), could claim any compensation. The question eventually came before the Court of Appeal. It was held that the tenant was entitled to claim compensation under s 38 of the Interpretation Act 1889 (UK), which is similar to our Interpretation Act (Ch No 2). Atkin LJ said (at 431) that:

�As far as the claim under the Act of 1908 is concerned that depends on the proper construction of s 38 of the Interpretation Act 1889, which provides that where an Act is repealed �the repeal shall not affect any right, privilege, obligation or liability acquired, accrued, or incurred under any enactment so repealed�. It is obvious that that provision was not intended to preserve the abstract rights conferred by the repealed Act, such for instance as the right of compensation for disturbance conferred upon tenants generally under the Act of 1908, for if it were the repealing Act would be altogether inoperative. It only applies to the specific rights given to an individual upon the happening of one or other of the events specified in the statute. Here the necessary event has happened, because the landlord has, in view of a sale of the property, given the tenant notice to quit. Under those circumstances the tenant has �acquired a right�, which would �accrue� when he has quitted his holding, to receive compensation.�

Having read those cases, I think the appellant�s contention is correct. If the saving clause in the 1962 Ordinance refers to potential rights, there would be no need for the 1962 Ordinance itself.

The next question is whether the appellant, as a holder of a special lease issued under s 40 of the 1911 Ordinance, is entitled to claim any compensation for the improvements on the land. Under s 55(10) of the 1962 Ordinance, a lessee of a special purpose lease is not entitled to payment in respect of any improvements effected on the land. The lessee may remove such parts of the improvements as he can on the land:

N2>�(10)�� The lessee of a special purposes lease or mission lease may remove, on or before the expiration of the lease, such of the improvements on the land the subject of the lease as are severable, doing as little damage as may reasonably be to the land the subject of the lease, but otherwise is not entitled to payment under this Section in respect of the improvements.�

It may be argued that the special lease issued to the appellant under s 40 of the 1911 Ordinance is not in the same category of special leases described in s 55(10) of the 1962 Ordinance. The lease granted to the appellant was �for the purpose of Industry�. Apart from cl (e) in the terms and conditions of the lease indicating �buildings for Industrial purposes�, there is no more information as to what kind of industry has been carried out on the land. Section 40 and s 40a list the purposes for which a special lease may be granted:

N2>�40.�� Special leases may be granted by the Lieutenant-Governor of any Government building not required for Government purposes or of any lands the property of the Crown for any term not exceeding twenty-five years from the date thereof at such rent with or without royalty and upon such terms and conditions as may be prescribed by regulation under this Ordinance or as may be otherwise directed by the Governor in Council for any of the following purposes that is to say:

(1)�� For obtaining and removing therefrom guano phosphates animal vegetable or mineral manures or any substance used as a manure or a constituent thereof or any other valuable substance except metals metalliferous ores coal shale or mineral oils;

(10)�� For sites for smelting works or any works approved by the Lieutenant-Governor in Council;

(11)�� For any purposes for which licences may be granted under this Ordinance;

The area of a special lease under this section shall be of such reasonable extent as in the opinion of the Lieutenant-Governor will enable the particular object or industry for which the lease is required to be carried on successfully.

N2>40a.�� A Special Lease may be granted of any land the property of the Crown for use as a private cemetery. The area term and conditions of any such lease shall be as the Lieutenant-Governor may determine.�

The restriction on compensation under s 55(10) of the 1962 Ordinance relates to a �special purposes lease� and �special purposes lease� is defined in s 6(1) as �an Administration lease granted under Subsection (1) of section 70�:

N2>�(1)�� Subject to the next succeeding subsection, where the Administrator considers that the grant of a lease under any other Division of this part would not be appropriate or would not be possible, he may grant a special purposes lease of Administration Land.� (My emphasis.)

All other leases are dealt with in the first six Divisions of Part V � Leases. Division 4 deals with Business and Residence Lease. Division 6 deals with Administration Buildings. It is apparent to me that the �special purposes lease� referred to in s 55(10) does not relate to any of those leases. I consider therefore that a special lease issued to the appellant under s 40 of the 1911 Ordinance is not the type of lease described as �special purposes lease� in s 70 of the 1962 Ordinance. Section 55(10) therefore does not apply to the appellant.

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Papua New Guinea Law Reports

Fletcher Morobe Construction Pty Ltd v Minister for Lands [1988] PGLawRp 37; [1988-89] PNGLR 25 (22 December 1988)

Papua New Guinea Law Reports - 1988-89