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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO 938 OF 1999
OTTO BENAL MAGITEN
Plaintiff
V
WILLIAM MOSES
First Defendant
ANTON ANAWON
Second Defendant
ELIZABETH TOVEA
Third Defendant
RURAL DEVELOPMENT BANK LIMITED
Fourth Defendant
Kimbe: Cannings J
2005: 15 July, 22 August, 6 October;
2006: 20 October
LAND – agricultural lease – title to land – dispute as to title – role of bank – illegal occupation of land – fraudulent transfer of title – alleged facilitation of illegal occupation and fraud by bank – liability of bank – banker-customer relationship.
LIMITATION PERIODS – identification of cause of action – identification of date cause of action accrues – whether cause of action in negligence accrues when tortious act committed or when damage is done.
The plaintiff was granted an agricultural lease over a block of land and a bank lent him money to develop it. He moved on to the block, developed it, started repaying the loan, then left the block temporarily in the hands of a caretaker, the first defendant, and stopped repaying the bank loan. The bank tendered the block in the absence of the plaintiff and, without his knowledge or consent, allocated it to the first defendant, who took over the loan. The bank held no registered mortgage over the block. Title to the block was later transferred to the first defendant, without the plaintiff's knowledge or consent. The plaintiff claimed that the first defendant illegally occupied the block, all dealings regarding the block were done without his authority and the transfer was executed fraudulently. He brought proceedings against the caretaker, the caretaker's brother, an officer of the Department of Lands and Physical Planning and the bank, claiming that they facilitated unlawful occupation of the block and collaborated in fraudulently transferring title to it. He sought a declaration that the transfer was null and void and claimed damages. The plaintiff secured default judgment against the caretaker and his brother and did not pursue the claim against the departmental officer. This was a trial conducted to determine whether the bank was liable for damages.
Held:
(1) The statement of claim was poorly pleaded, making it difficult to ascertain the cause of action relied on by the plaintiff. However, the plaintiff appeared to have a legitimate grievance against the bank and it was in the interests of justice to regard the cause of action as the tort of negligence.
(2) The bank owed a duty of care to the plaintiff by virtue of the banker-customer relationship and breached that duty by negligently purporting to exercise the powers of a mortgagee, when it held no mortgage over the land. Other elements of the tort of negligence were established and therefore a cause of action in negligence was established against the bank.
(3) The action was not time barred as a cause of action in negligence accrues when the damage is done, not when the negligent act of the wrongdoer is committed. This was a case of recurring damage over a long period.
(4) The plaintiff succeeded in establishing liability against the bank. The claim will proceed to trial for an assessment of damages.
Cases cited
The following case is cited in the judgment:
Kembo Tirima and Others v Angau Memorial Hospital Board and The State (2005) N2779
STATEMENT OF CLAIM
These were proceedings in which the former registered proprietor of a block of land sought to establish liability for damages against a bank.
Counsel
K S Latu, for the plaintiff
H Nii, for the fourth defendant
20th October, 2006
1. CANNINGS J: This is a case about alleged illegal occupation and fraudulent transfer of land, an oil palm block in West New Britain. The plaintiff was granted an agricultural lease over the block more than 25 years ago. He obtained a loan from the Rural Development Bank to develop it. Then the block was occupied by someone else and eventually the lease was transferred to that person. The plaintiff claimed that the occupation and/or transfer were unlawful and fraudulent, due to the actions of four parties:
2. He seeks:
3. He obtained default judgment against the first and second defendants. He is not pursuing the claim against the third defendant. This is a trial to determine whether the fourth defendant, the bank, is liable.
THE FACTS
4. The story of this oil palm block – portion 1254, "Wilelo", Milinch of Ulawan, Fourmil Talasea, an area of 6.54 hectares, located at Barema near Bialla, West New Britain – is long and complex. But most facts necessary for determination of liability of the bank, the fourth defendant, are not in dispute. The story begins on 23 October 1980 when the plaintiff, Otto Benal Magiten, an East Sepik man, was granted a 99-year State Lease over the block, under the Land Act, on condition that it be used for oil palm. He obtained a loan from the Rural Development Bank to develop it. He cleared the land, planted it with oil palm seedlings and lived with his family on the block. In January 1982 there was a problem back home so he decided to take himself and his family to Wewak. He appointed the first defendant, William Moses, his brother-in-law, as caretaker of the block. He notified the Bialla branch of the bank and OPIC at Barema of the arrangements, then went to Wewak in April 1982. After being in Wewak for a year the plaintiff received a letter of demand from the fourth defendant, requiring him to pay K3,095.38 regarding his loan, within 21 days. He replied that he had arranged for the loan to be repaid, the block was part of a national development project and the bank was in breach of its agreement with him by demanding payment on such short notice. The plaintiff and his family returned to Bialla on 13 April 1984, only to find that due to his failure to service the loan the bank had put his block to tender and allocated it to the first defendant. He was not given prior notice of those things. The fourth defendant told him it had exercised its powers as mortgagee. That was not correct as, in fact, the fourth defendant had no mortgage over the block. Having nowhere to stay in Bialla, the plaintiff took his family to Kimbe, then back to Wewak. According to his evidence, given both by affidavit and orally, he assumed the bank had followed normal procedures and he had lost the block to his brother-in-law, the first defendant. He was not to find out until some years later that the fourth defendant had no mortgage on the block.
5. He stayed in Wewak until 1990 when he was, to his surprise, called into the Wewak branch of the bank and asked to sign a document to surrender the lease to the bank, who was acting on behalf of the first defendant. The plaintiff refused to sign. Then he set about getting the 'owner's copy' of the lease from the Department of Lands and Physical Planning. Evidently, he did not have it before this. He obtained the 'owner's copy' on 9 August 1991. By then he was living in Madang. The lease showed no transfer to the first defendant so he sought assistance from the Madang branch of the bank, who contacted the Bialla branch on his behalf to try and sort out the matter. 6. Bialla did not respond, however. He tried without success to get the Department of Lands and Physical Planning to intervene. In August 1998 he tried a different tack. He enlisted the support of the District Administrator at Kimbe who served a notice-to-quit on the first defendant. That did not work, as the first defendant refused to leave the block, maintaining that he was the rightful tenant appointed by the fourth defendant. The plaintiff then commenced proceedings against the first defendant in the Bialla District Court under the Summary Ejectment Act. On 16 June 1999 an eviction order was made. The plaintiff has given uncontested evidence that the bank's Bialla branch assistant manager was the first defendant's key witness in those proceedings. The District Court order gave the first defendant two weeks to leave. However, he did not leave and it seems he is still living on and working the block. There was a dramatic turn of events shortly afterwards when, on 12 August 1999, the lease was transferred to the first defendant. The plaintiff says he did not authorise the transfer and had no prior knowledge of it. It was a false or fraudulent transfer effected by the actions of the first, second and third defendants, and facilitated by officers of the bank's Bialla branch, the plaintiff claims. At paragraph 34 of an affidavit sworn and filed on 1 October 2003, the plaintiff states that the bank's Bialla branch assistant manager advised the first and second defendants on the transfer. That evidence was not effectively challenged either by evidence in rebuttal from the fourth defendant or by cross-examination of the plaintiff when he gave oral testimony. I conclude that the matter deposed to in paragraph 34 is a fact; and it is an important fact that implicates the fourth defendant in the actions of the first and second defendants in arranging the transfer of the lease to the first defendant. The plaintiff filed the present proceedings, WS No 938 of 1999, in the National Court at Kimbe on 31 August 1999.
7. Since then the first defendant has appealed to the National Court against the ejectment order of the Bialla District Court. His appeal was dismissed for want of prosecution in December 2000; and an appeal to the Supreme Court against that decision was also dismissed, in August 2001. On 23 November 2001 Lenalia J, sitting in the National Court at Kimbe, entered default judgment in the present proceedings against the first and second defendants and ordered that the matter be set down for trial on assessment of damages. That has not happened yet. Instead the present trial has been conducted to determine whether the bank, the fourth defendant, has any liability.
THE ISSUES
8. There are two main legal issues to determine. First, has the plaintiff established a cause of action against the fourth defendant? This is the critical issue and will be determined first, in isolation of a time-barred (statute of limitations) defence that the defendant raised at the trial. Secondly, is the action time-barred? The defendant argues that the plaintiff waited more than six years after his cause of action arose, so the proceedings are time-barred under the Frauds and Limitations Act 1988.
PLAINTIFF'S SUBMISSIONS
9. Mr Latu, for the plaintiff, focussed on the first issue. The fourth defendant is to be blamed for practically everything that has happened, he submitted. It misrepresented that it had a mortgage over the block. It exercised powers – tendering the block and allocating it to the first defendant – which it did not have. Its actions were tantamount to foreclosing on a mortgage. But there was no mortgage. It lacked power to do what it did by virtue of Section 74 of the Land Registration Act. The inference to be drawn from the facts is that the fourth defendant vigorously pursued the registration of the first defendant's title. The first and second defendants could not pursue registration on their own. They needed the assistance of the bank, which through its Bialla branch must have collaborated with them. The bank must bear liability for the fraud, which culminated in transfer of the lease to the first defendant. Mr Latu made no substantive submissions regarding the time-barred issue other than to suggest that it was not pleaded in the defence filed by the fourth defendant on 28 July 2000. Therefore the fourth defendant should not be allowed to rely on it.
DEFENDANT'S SUBMISSIONS
10. On the first issue, Mr Nii conceded that the fourth defendant erred by purporting to exercise the powers of a registered mortgagee, which it did not have, but argued that the most it could have been guilty of was attempting to transfer the property to the first defendant – and that cannot amount to fraud. He submitted that the evidence fell short of showing any active involvement by the fourth defendant in transfer of the lease. If the transfer were fraudulent, the fourth defendant had nothing to do with it. Liability for any fraud must be confined to the other defendants. As for the time-barred issue, Mr Nii argued that the plaintiff was the master of his own downfall. He sat on his rights for too long. A prudent person, told in 1984 his block had been put on tender and allocated to someone else, would have mounted a legal challenge then – not wait 15 years. The plaintiff obtained the 'owner's copy' of the lease in August 1991. It clarified that he was still the registered proprietor of the block. But again he sat on his rights, doing nothing until 1999 when he commenced eviction proceedings in the Bialla District Court. According to the statement of claim the cause of action against the bank is for assisting the first defendant's continuous illegal occupation of the property since 1984, best described as the tort of trespass. That cause of action accrued in 1984 and therefore Section 16(1)(a) of the Frauds and Limitations Act applied: an action founded on tort shall not be brought more than six years after the date on which the cause of action accrued. The present proceedings should have been filed by 1990, Mr Nii submitted. The plaintiff did not file his writ until 1999. He was nine years late. In the alternative, if the cause of action is said to have accrued in 1991, when the plaintiff received his 'owner's copy' of the lease, he should have filed the writ by 1997. He was still two years late. The date 16 June 1994 had been deliberately earmarked in the statement of claim as the date from which the plaintiff is claiming lost oil palm earnings so as to avoid the six-year limitation period. It was a date of no significance and should be disregarded, he submitted. Mr Nii conceded that the time-barred issue was not pleaded in the fourth defendant's defence but argued that that did not prevent reliance on it.
HAS THE PLAINTIFF ESTABLISHED A CAUSE OF ACTION AGAINST THE FOURTH DEFENDANT?
11. This is not a straightforward issue as the statement of claim does not make it clear what the cause of action is, or whether more than one is relied on. The facts pleaded appear to give rise to three possible causes of action against the fourth defendant. First, trespass on the block by the first defendant, to which the fourth defendant was a party by facilitating the tender and re-allocation to and continuing unlawful occupation of the block by the first defendant (at least until 12 August 1999, when title was transferred to the first defendant). Secondly, fraud, constituted by the unauthorised transfer of the lease to the first defendant on 12 August in 1999, to which the fourth defendant was a party, according to the evidence of the plaintiff. Thirdly, negligence by the fourth defendant, constituted by its tendering of the block and re-allocation to the first defendant in about 1984, which it did on the false assumption that it held a mortgage over the block, and its continued support of the interests of the first defendant culminating in facilitation of the unauthorised transfer to the first defendant in 1999.
Trespass
12. The statement of claim gives an inkling that the tort of trespass might be the cause of action relied on, in paragraph 10, which states:
The fourth defendant had at all material times assisted and facilitated the first defendant's continuous illegal occupation of portion 1254 Wilelo despite not having a registered mortgage over the said portion.
13. However, the tort of trespass is an action available to someone who is in lawful possession of the land at the time of its 'invasion' by the wrongdoer. As Professor Fleming puts it, in his classic text:
The action of trespass vindicates only violation of actual possession, and is not concerned with protecting the interests of persons out of possession at the time of the intrusion.
(J G Fleming, The Law of Torts, 5th edition, LBC Information Services, © 1977, Chapter 3, Intentional Invasion of Land, page 41.)
14. The plaintiff has not been in actual possession of the block since 1982, so one of the elements of the tort of trespass is absent and he cannot rely on it as a cause of action.
Fraud
15. If the plaintiff were to rely on fraud as a discrete cause of action, he would need to have pleaded either the tort of deceit – and show that he acted to his detriment on the fraudulent (intentional, dishonest) misrepresentations of others – or an action under Section 150 (damages for deprivation of land) of the Land Registration Act – which can apply when a person is deprived of an estate or interest in land in consequence of fraud. Neither action can succeed against the fourth defendant, however. The tort of deceit is inapplicable as the element of acting on the misrepresentation of another person is absent. Section 150 is also inapplicable as it only gives rise to an action against the person who derived benefit by the fraud, not against someone in the position of the fourth defendant.
Negligence
16. That leaves the tort of negligence as the only cause of action on which the plaintiff could conceivably pin liability against the fourth defendant. Its elements are:
See generally J G Fleming, The Law of Torts, 5th edition, LBC Information Services, © 1977, Chapter 6, Negligence: Introduction, pages 104-105 and Kembo Tirima and Others v Angau Memorial Hospital Board and The State (2005) N2779. Negligence is an all-embracing cause of action, the categories of which are open-ended. It can cover actions for both personal injuries and economic loss.
17. Before considering whether each of the elements has been established by the plaintiff, I need to be satisfied that the statement of claim adequately pleads negligence. I am satisfied, but only just. The efficient disposition of a case such as this – based on a novel, convoluted and long drawn out saga over a block of land, which has wound its way already through the District Court, the National Court and the Supreme Court – depends on the parties filing clear and precise pleadings. The statement of claim should clearly set out the facts and the cause of action relied on. That is not the case here. It is, with respect, poorly pleaded. That is why I have hesitated before going further. However, I do not think I would be dispensing justice if I were to stop the case in its tracks now by concluding, at the trial that the statement of claim was defective. It is not hard to see why the plaintiff has a genuine grievance against the fourth defendant. The plaintiff has obtained default judgment already against two other defendants, based on the same facts, and no attempt has been made to set it aside. Furthermore the fourth defendant has not sought to strike out the proceedings against it on the ground that the pleadings fail to disclose a reasonable cause of action, that being a course of action available under Order 12, Rule 40 (frivolity etc) of the National Court Rules. So, are the elements of negligence made out?
18. First, the fourth defendant owed a duty of care to the plaintiff. Quite apart from the contractual relationship that existed between them, the bank, the fourth defendant, as a lender and a governmental body, owed a duty of care towards small block-holders participating in a development scheme. Its duty was to act reasonably and carefully.
19. Secondly, the fourth defendant breached that duty when it acted without lawful authority in tendering the block and allocating it to the first defendant in around 1983-1984. It would appear that the fourth defendant deliberately assumed the powers of a registered mortgagee, when it had no mortgage. The facts suggest that the plaintiff's loan was in arrears. But, as the loan was not secured by a mortgage, it was incumbent on the fourth defendant to recover the outstanding loan from the plaintiff by conventional means, eg by filing debt recovery proceedings in the District Court. It was not entitled to take the law into its own hands, by allocating the block to someone else. It was doubly unreasonable – and negligent – to allocate the block to the first defendant – the person who the plaintiff had appointed as caretaker – without notice to the plaintiff. The fourth defendant continued to act unreasonably and negligently by its continued, tacit support of the unlawful occupation of the block by the first defendant over many years. This was manifested by the its attempt in 1990, when the plaintiff was in Wewak, to have the land transferred to the first defendant; the failure of the Bialla branch to cooperate with the Madang branch, in 1991, in sorting out the matter, after the plaintiff got the 'owner's copy' of the lease; the assistance given by the Bialla branch to the first defendant in the District Court proceedings in 1999; and culminating in the bank's facilitation of the transfer of the lease to the first defendant, executed on 12 August 1999. I have based those findings on the evidence adduced by the plaintiff, which has not been effectively contradicted by the fourth defendant. It did not introduce evidence to rebut the key facts on which the plaintiff's claims against it were based. Nor did Mr Nii succeed in cross-examination of the plaintiff in damaging his credibility as a witness or the credibility of the evidence he gave.
20. Thirdly, the fourth defendant's continuing negligent conduct has resulted in damage to the plaintiff. He has been deprived of his right to occupy the block and the capacity to earn a living from it.
21. Fourthly, the types of 'injuries' suffered by the plaintiff – loss of enjoyment of the block, the inconvenience associated with trying to untangle the mess together with economic loss – are not too remote. They are the types of injuries or damage that are a reasonably foreseeable consequence of a bank's negligent conduct towards a customer.
22. Finally, the plaintiff was not himself negligent and did not voluntarily assume the risks involved in borrowing money from a bank. I have considered Mr Nii's argument that the plaintiff was the master of his own downfall. Perhaps with the benefit of hindsight he should have done more to resist in 1984 after being told that the block was allocated to the first defendant. However, it was not unexpected for a layperson in the position of the plaintiff to accept what he was told and to presume, as it seems everyone else did, that the bank had foreclosed on the (non-existent) mortgage. The plaintiff's failure to assert his rights, in the sense of taking court action, cannot be regarded as unreasonable. He is not guilty of any contributory negligence.
23. I conclude that the plaintiff has proven on the balance of probabilities all the facts and elements necessary to sustain a cause of action in negligence against the bank.
IS THE ACTION TIME-BARRED?
24. This defence is based on Section 16(1)(a) of the Frauds and Limitations Act 1988, which states:
An action ... that is founded on simple contract or on tort ... shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued.
25. This was a statute of limitations defence and the defendant was alleging that it made the plaintiff's claim not maintainable. It should have been specifically pleaded in the defendant's defence, per force of Order 8, Rule 21 (matters for specific pleading) of the National Court Rules. However, as I have been flexible in dealing with the statement of claim and as Mr Latu did not vigorously oppose consideration of the defence, I will determine it. The key question to ask is: when did the plaintiff's cause of action accrue? This is determined not by asking when the defendant first did something wrong but, rather: when was the damage done? As Professor Fleming explains:
... damage is the gist of tortious negligence. Hence the cause of action is not complete, and therefore does not 'accrue', until damage has actually occurred. It is then, and not when the negligent act or omission was committed, that the period of limitation begins to run against the claimant.
(J G Fleming, The Law of Torts, 5th edition, LBC Information Services, © 1977, Chapter 8, Duty of Care, page 177.)
26. Mr Nii submitted that the cause of action accrued as long ago as 1984, when the plaintiff went to Bialla and found the bank had tendered and allocated the block to the first defendant. Or, at least in 1991, when the plaintiff obtained the 'owner's copy' of the lease. I reject both propositions as they do not focus on the occurrence of the damage. The better view is that the negligent acts of the fourth defendant continued over a long period – at least 15 years, from 1984 to 1999 – and can rightly be regarded as a course of negligent conduct. The damage – loss of enjoyment of the block, the inconvenience associated with trying to untangle the mess together with economic loss – continued to recur during that period. There was no single event that signalled the end of the occurrence of the damage. It cannot be said that all the damage had been done before 9 September 1993, which is the date six years before the date of filing of the writ. Therefore, the plaintiff's action, which seeks loss of earnings back-dated to 16 June 1994, and damages, is not time-barred. Furthermore, if the cause of action were to be regarded as accruing at the time of the negligent act, that could properly be regarded as 12 August 1999 – when the lease was transferred to the first defendant – and the writ was filed within a month afterwards. Either way, I am satisfied that the plaintiff's action is not defeated by Section 16(1)(a) of the Frauds and Limitations Act. It is not time-barred.
CONCLUSION
27. The plaintiff has succeeded in establishing a cause of action against the fourth defendant. The action is not time-barred. The claim will proceed to trial for an assessment of damages.
COSTS
28. The general rule is that a party that wins a civil case will have its costs paid for by the other side. I see nothing to warrant departure from that rule of thumb. I will exercise my discretion as to costs in favour of the plaintiff.
JUDGMENT
29. The judgment of the court is:
(1) the plaintiff has established a cause of action in negligence against the fourth defendant;
(2) the fourth defendant is liable to compensate the plaintiff for loss of earnings from oil palm crops planted on portion 1254 from 16 June 1994 to the date of judgment, and damages, as claimed in the statement of claim;
(3) the proceedings shall proceed to a trial for assessment of those losses and damages;
(4) costs of these proceedings are awarded to the plaintiff, to be taxed if not agreed.
_______________________________________________
Latu Lawyers: Lawyers for the Plaintiff
Harvey Nii Lawyers: Lawyers for the Fourth Defendant
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URL: http://www.paclii.org/pg/cases/PGNC/2006/204.html