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Dads Investment Corporation Ltd v U Sky Ltd [2020] PGNC 429; N8698 (21 December 2020)

N8698

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]


OS NO.3 OF 2020 (CC4)


BETWEEN:
DADS INVESTMENT CORPORATION LIMITED
Plaintiff


AND:
U SKY LIMITED
Defendant


Waigani: David, J
2020: 7th & 21st December


REAL PROPERTY – tenancy at will – tenant at will has no right or interest over and above rights and or interest of landlord - tenant in possession – substantial amount of rent outstanding for months - continued occupation of property – vacant possession ordered.


Cases Cited:
Papua New Guinea Cases


png Ready Mixed Concrete Pty Ltd v The Independent Sate of Papua New Guinea [1981] PNGLR 396
Mudge v Secretary for Lands & Ors (1985) PNGLR 387
Koang No 47 Ltd v Monodo Merchants Ltd (2001) SC675
Kiso v Otoa (2013) SC1222
Paga Hill Development Company (PNG) Ltd v Kisu (2014) N5683


Overseas Cases cited:


Executor Trustee & Agency Co. of South Australia Ltd v Federal Commissioner of Taxation (1932) CLR 26
Gillet v Burke (1997) 1 VR 81


Treatises Cited:


Amankwah, Mugambwa and Muroa, Land Law in Papua New Guinea, 2001, LBC Information Services, 2001
Peter Butt, Land Law, Sixth Edition, Lawbook Co.


Counsel:


Belinda Sinen, for the Plaintiff
Moses Paiya, for the Defendant


JUDGMENT


21st December, 2020


  1. DAVID, J: INTRODUCTION: This is a decision on a contested trial in which the plaintiff, Dads Investment Corporation Limited has sought an order for vacant possession of property and other consequential relief against the defendant, U Sky Limited.

2. The plaintiff applies by originating summons filed on 7 January 2020 for two main relief against the defendant, its servants, agents, relatives or whosoever and these are:


  1. An order for vacant possession of the property described as Allotment 17 Section 33, Granville, National Capital District contained in State Lease Volume 27 Folio 23 (the Property);
  2. An order empowering members and officers of the Royal Papua New Guinea Constabulary to assist in the eviction of the defendant, its servants, agents, relatives or whosoever from the Property and to give effect to the orders of the Court.

3. The plaintiff’s originating summons is supported by an affidavit of David Wong sworn and filed on 12 February 2020 (Exhibit A), a further affidavit of David Wong sworn and filed on 6 October 2020 (Exhibit B) and a supplementary affidavit of David Wong sworn and filed on 7 April 2020 (Exhibit C).


4. The defendant relies on the affidavit of Ilangkumaran Sivagnanam sworn and filed on 19 March 2020 (Exhibit 1).


AGREED FACTS


5. The agreed facts are these:


1. The plaintiff is the registered proprietor of the Property.

  1. In or about November 2015, the plaintiff offered to lease the Property to the defendant.
  2. On or about 1 December 2015, prior to the execution of a written lease agreement between the parties, the defendant took possession of the Property.
  3. The defendant has no rental arrears for year 2016.
  4. On 2 May 2017, the plaintiff sent a lease agreement to the defendant for execution and return to the plaintiff.
  5. The defendant did not execute the lease agreement or return the lease agreement, duly executed, to the plaintiff.
  6. Between 2 May 2017 and 8 September 2017, the defendant paid a total sum of K22,000.00 for rent for the period between December 2016 and August 2017.
  7. As at 31 December 2017, the defendant owed the plaintiff the sum of K17,600.00 for rent accumulated between September 2017 and December 2017.
  8. As at 31 December 2018, the defendant owed the plaintiff the sum of K70,400.00 for rent accumulated between September 2017 and 31 December 2017.
  9. The defendant has not paid any rent for the occupation of the Property from January 2020 to October 2020.
  10. As at 6 October 2020, the defendant owes the plaintiff a total sum of K147,800.00 for outstanding rentals for the Property.
  11. On 20 December 2019, Ilangkumaran Sivagnanam and Anita Isabel Ani filed National Court proceedings, WS No.1777 of 2019 against David Wong claiming K59,148.17 as reimbursement of the amounts spent on the purported renovation of the Property.
  12. The defendant has refused to give up possession of the Property despite repeated requests to do so from the plaintiff.

DISPUTED FACTS


6. The disputed facts are these:


1. The plaintiff offered the Property for lease at a rental of K4,400.00.
2. The parties agreed to the following terms:


(a) The defendant pay the sum of K3,600.00 per month as rent to the plaintiff.

(b) The defendant completely renovate the Property at its own expense before moving into the Property.

(c) The plaintiff instal an automated gate at the Property.

(d) The plaintiff provide a 24 hour security guard at its own expense at the Property.

(e) The plaintiff provide a gardener at its own expense at the Property.

  1. In or around September 2015, the defendant agreed to the condition set by the plaintiff and refurnished the Property to a habitable condition at its own expense.
  2. The defendant paid for its own security guard to man the Property.
  3. The defendant paid for its own gardener for the Property.
  4. The plaintiff has told the defendant to maintain the Property every time the defendant requests for routine maintenance work.
  5. The total amount spent for renovation works is K59,148.17.

ISSUE


7. The main issue is whether or not the Court should order the defendant to give up vacant possession of the Property to the plaintiff.


PARTIES’ SUBMISSIONS
Plaintiff


8. Ms. Sinen of counsel for the plaintiff contends that the plaintiff is entitled to the relief sought because:


  1. It is the registered proprietor of the Property and has an indefeasible title to the Property by virtue of Section 33(1) of the Land Registration Act.
  2. The defendant and its servants or agents have no better title to the Property than it or by way of any lease, licence or any other right whatsoever to remain on the Property.
  3. As registered proprietor of the Property, it has the right to deal with the Property in any way it sees fit.
  4. The plaintiff has been occupying the Property since 1 December 2015 and has not made any rental payment since September 2017.
  5. As at October 2020, the defendant owes it the sum of K147,800.00.
  6. Despite the plaintiff’s numerous requests for the payment of rent, the defendant has failed, neglected or otherwise refused to pay any rent including for the whole of year 2020.
  7. Despite the plaintiff’s reasonable requests for the defendant to give up possession of the Property, the defendant remains in possession of the Property.

Defendant


9. Mr. Paiya of counsel for the defendant argues that the relief sought by the plaintiff should be refused because:


  1. While the defendant does not dispute the fact that the plaintiff has title to the Property, prior to the defendant taking possession of the Property, it was not occupied and there were illegal squatters squatting on the Property and that resulted in the defendant carrying out substantial renovations to the Property to make it habitable and it has continued to maintain the Property to its current state at its own expense.
  2. Substantial amount of money has been spent on renovation, maintenance and upkeep of the Property.
  3. Contrary to the plaintiff’s assertion, the parties verbally agreed that the amount of the rent payable was K3,600.00 per month on terms.
  4. The principles of natural justice under Section 59 of the Constitution should be observed.
  5. The defendant should be given sufficient time to vacate until it finds alternative accommodation.

CONSIDERATION


10. Registration of leases under the Land Registration Act vests an indefeasible title in the registered proprietor subject to the exceptions enumerated in Section 33 of the Land Registration Act including fraud: Mudge v Secretary for Lands & Ors (1985) PNGLR 387, Kiso v Otoa (2013) SC 1222, Paga Hill Development Company (PNG) Ltd v Kisu (2014) N5683. The plaintiff is the registered proprietor of the Property. It is not disputed that on or about 1 December 2015, prior to the execution of a written lease agreement between the parties, the defendant took possession of the Property. It is also not disputed that on 2 May 2017, the plaintiff sent a lease agreement to the defendant for its execution and return to the plaintiff, but the defendant did not execute the lease agreement or return the lease agreement, duly executed, to the plaintiff.


11. As a general rule, a lease must be in writing. In addition, a lease for a term exceeding three years must be registered in accordance with the Land Registration Act: see Sections 49(1) and 17(1), Land Registration Act. A lease for a term of three years or less may be created without registration, but may be registered if it is in the approved form: see Section 49(2), Land Registration Act.


12. Section 2(1)(a)(i) of the Frauds and Limitation Act states that no interest in land can be created or disposed of except by writing signed by the person creating or disposing of the interest or by that person’s agent lawfully authorised in writing for that purpose.


13. By Section 3(1) of the Frauds and Limitation Act, a lease created by parol (orally) has at law the force and effect of a tenancy at will, notwithstanding any consideration having been given for the interest. However, under Section 3(2) of the Frauds and Limitation Act, a lease for a term not exceeding three years may be created by parol (orally) provided the lease takes effect in possession and is for the best rent that can reasonably be obtained without taking a fine: Amankwah, Mugambwa and Muroa, Land Law in Papua New Guinea, 2001, LBC Information Services, 2001, 123. A “fine” is an initial lump sum payment made in return for the grant or renewal of a lease: Executor Trustee & Agency Co. of South Australia Ltd v Federal Commissioner of Taxation (1932) CLR 26 at 41-42 per Dixon, J; Gillet v Burke (1997) 1 VR 81 at 91-97, Amankwah, Mugambwa and Muroa, Land Law in Papua New Guinea, 2001, LBC Information Services, 2001, 123.


14. Tenants at will have no right or interest over and above the rights and or interest of the landlord: png Ready Mixed Concrete Pty Ltd v The Independent Sate of Papua New Guinea [1981] PNGLR 396, Koang No 47 Ltd v Monodo Merchants Ltd (2001) SC675.


15. In Koang No 47 Ltd v Monodo Merchants Ltd (2001) SC675, Kandakasi, J, whose judgment was agreed to and endorsed by other members of the Supreme Court made the following observations about what a tenancy at will is:


“The law on landlord and tenant knows only a few well-defined tenancies. The closest the present case can be placed under is a tenancy at will. The learned authors of the book, Law of Real Property (4th ed., 1975) at p. 638, define a tenancy at will in terms of, "whenever a person occupies land as tenant (and not merely as servant or agent), with the consent of the owner, on the terms that either party may determine the tenancy at any time." Such tenancies are usually created by implication rather than by any expressed agreement. There are recognised instances in which this kind of tenancies can be created. They are commonly created in cases where a tenant "holds over" after a lease has expired and the tenant continues to occupy without paying any rent with the consent of the landlord: see for an example, Meye v. Electric Transmission Ltd. [1942] Ch. 290, at 292. Another more common case for the creation of this kind of tenancies is where a purchaser is allowed to take possession before a settlement of the contract for the sale of the subject land: see Wheeler v. Mercer [1956] UKHL 5; [1957] A.C. 416, at 425. Such tenancies are quite often created in cases where a landlord and a prospective tenant undertake negotiations to finalise and formalise a tenancy agreement and in the meantime the tenant is permitted to take possession: see for an example of this Coggan v. Warwicker [1852] EngR 514; (1852) 3 Car. & K. 40: 175 E. R. 454, at 455.

The most important feature about tenancies at will is that, such tenancies are determinable at the will of either party upon demand and without the need for any prior notice: see Commonwealth Life (Amalgamated) Assurance Ltd. v. Anderson [1945] NSWStRp 31; (1945) 46 S.R. (N.S.W.) 47, at 49. This makes all other types of recognised tenancies distinct from tenancies at will. All other tenancies are governed by lease agreements, if any and the period of payment or the way in which rents are calculated and paid. There is an implied, if not expressly provided for, term of very long history that, at the end of the agreed tenancy period the possession of the land will revert to the landlord. This not only requires the tenant to give up possession but also to ensure that, possession is restored to the landlord. A failure to do so entitles a landlord to sue for damages and recover rents he could have received and the costs of any repairs: see Henderson v. Squire (1869) L.R. 4 Ex.170; and Henderson v. Van Cooten [1922] W. N. (Eng.) 340.” (underlining mine)


16. Clearly, on the evidence available, the agreement between the parties is not in writing so it is a tenancy at will. The tenancy at will commenced on or about 1 December 2015 when the defendant took possession of the Property and is on a month to month basis at the will of the plaintiff. What were the terms of the tenancy?


17. The parties are in disagreement as to the rent payable. The plaintiff’s evidence is that it offered the Property for lease at a rental of K4,400.00 per month. On the other hand, the defendant states that the agreed rent was K3,600.00 per month.


18. At paragraph 6 of the affidavit of Ilangkumaran Sivagnanam, the witness states that in or about December 2015 after completing renovations to the Property and moving in, the plaintiff gave the witness a rental bill of K4,400.00 which was much higher than the amount agreed. At paragraph 7 of the same affidavit, the witness states that in order to avoid unnecessary conflict with the plaintiff, he has continued to pay the monthly invoiced amount of K4,400.00. The witness has not produced any evidence to show that upon receiving the initial rental bill of K4,400.00 in or about December 2015 or subsequent monthly rental bills for K4,400.00 received from the plaintiff thereafter, the issue as to the correct monthly rent agreed to was raised with the plaintiff. The draft residential lease agreement in evidence which was not objected to by the defendant at the trial shows that the rent proposed was K58,080.00 plus GST per annum, ie, K4,840.00 plus GST per month. The rent proposed there was higher than that claimed by the defendant and that which is actually charged. The plaintiff’s conduct speaks otherwise. I find as a fact on the evidence available that the plaintiff offered the Property for lease at a monthly rental of K4,400.00 which is inclusive of 10% GST.


19. As to repairs done to the Property, it is said that where a lease imposes the obligation to repair on the landlord and he is in breach, a tenant who expends money on repairs that the landlord should have carried out may recoup the expenditure from future rental or may have rights to an equitable set off: Peter Butt, Land Law, Sixth Edition, Lawbook Co., 2010 at 15.105. It is a disputed fact that the defendant completely renovated the Property at its own expense before moving into the Property. It is an undisputed fact that on 20 December 2019, Ilangkumaran Sivagnanam and Anita Isabel Ani filed National Court proceedings, WS No.1777 of 2019 against David Wong claiming K59,148.17 (the proceedings in WS No.1777 of 2019) as reimbursement of the amounts spent on the purported renovation of the Property. A copy of the relevant writ of summons filed on 20 December 2019 is in evidence. It is my view that in the circumstances, it will be improper for me to make any findings on this matter at this juncture since it is a live issue for determination in the proceedings in WS No.1777 of 2019.


20. However, it is said that it is generally unwise for a tenant to withhold rent in an effort to force the landlord to perform his or her obligations under the lease. This is because, such an act may entitle the landlord to enter and forfeit the lease for non-payment of rent as the tenant’s obligation to pay rent is generally independent of the landlord’s obligations under the lease: Peter Butt, Land Law, Sixth Edition, Lawbook Co., 2010 at 15.94. The defendant is continuing to occupy the Property without paying rent despite numerous demands by the plaintiff for the defendant to settle all outstanding rent and vacate the Property which he refuses to do so and rent continues to accumulate. Consequently, I am satisfied to the requisite standard that the plaintiff is entitled to the relief that it seeks against the defendant for non-payment of rent. The defendant should give vacant possession of the Property to the plaintiff.


21. As to the issues raised by the defendant concerning the installation of an automated gate at the Property, provision of a security guard on a 24 hour basis at the Property, and the provision of a gardener at the Property which is disputed by the plaintiff, for the same reasons alluded to above, it is unwise for a tenant to withhold rent in an effort to force the landlord to perform his or her obligations under the lease. This potentially are live issues which can be raised or ventilated at the trial for determination in the proceedings in WS No.1777 of 2019 hence, improper for me to make further observations or findings of fact other than what I have just stated.


22. The defendant has argued that the principles of natural justice should be observed. I do not see any relevance in the application of the principles of natural justice to the circumstances of this case. It is misconceived and therefore the argument is rejected and dismissed.


CONCLUSION


23. The plaintiff seeks orders for vacant possession of the Property leased to the defendant which I have found to be on a tenancy at will which commenced on or about 1 December 2015 and on a month to month basis at a rent of K4,400.00 per month. It is abundantly clear on the evidence available and from the undisputed facts that the defendant owes the plaintiff a substantial amount of rent which has accumulated over many months and which amount as at 6 October 2020 was K147,800.00. The plaintiff is entitled to the relief that it seeks against the defendant for non-payment of rent.


ORDERS


24. The Court orders that:


  1. The defendant, its servants, agents, relatives or whosoever shall give vacant possession of the land known as Allotment 17 Section 33, Granville, National Capital District being the whole of the land contained in State Lease Volume 27 Folio 23 to the plaintiff within one month from today, ie, by 21 January 2020.
  2. Members and officers of the Royal Papua New Guinea Constabulary assist in the eviction of the defendant, its servants, agents, relatives or whosoever from the land known as Allotment 17 Section 33, Granville, National Capital District being the whole of the land contained in State Lease Volume 27 Folio 23 and to give effect to the orders of the Court.
  3. In the exercise of the Court’s discretion, having not been satisfied that an award of costs on a full indemnity basis is justified, the defendant shall pay the plaintiff’s costs of and incidental to these proceedings on a party and party basis which, if not agreed, shall be taxed.

Judgment and orders accordingly.
________________________________________________________________
Pacific Legal Group: Lawyers for the Plaintiff

Paiya Lawyers: Lawyers for the Defendant

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