N3802

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 171 OF 2009
(NO. 1)

BETWEEN:

BARBARA GAWI KISEKOL
Plaintiff

AND:

BERNARD KISEKOL
First Defendant

AND:

DICKSON KISOMBO, AND SERAH KISOMBO trading as CONVENIENT REAL ESTATE
Second Defendant

AND:

BANK OF SOUTH PACIFIC LIMITED
Third Defendant

Waigani: Davani .J
2009: 24th June
8th, 10th, 16th July
3rd September

MATRIMONIAL PROPERTY – Plaintiff seeks orders to be declared as having a constructive trust in a property – property is the matrimonial home – restraining orders by the plaintiff restraining first defendant from evicting her, from matrimonial home, amongst other orders - restraining orders to continue until completion of substantive hearing.

MATRIMONIAL PROPERTY – Sold by first defendant to second defendant with vacant possession – plaintiff still in possession and occupation – no written contracts of sale – requisitions were not exchanged – second defendant obtained a loan as purchase price – second defendant paid purchase price to first defendant – did not properly investigate existing tenancies prior to purchase – second and third defendants very unprofessional – second and third defendants took risks – no reason to set aside restraining orders against first defendant.

MATRIMONIAL PROPERTY – Third defendant bank is mortgagee in first sale of matrimonial property – third defendant bank is mortgagee in second sale of matrimonial property – investigations not conducted by bank into existing tenancies on property – property in occupation when sold the second time – bank unprofessional in its dealings – no reason to set aside restraining orders against first defendant.

Facts

The plaintiff and the first defendant are married but as at the date of the proceedings on 2nd April, 2009, were living separately and apart. A house was purchased, located at Section 17, Allotment 3, Guitana Avenue, Matirogo, National Capital District. The first defendant sold the house with vacant possession to the second defendant whilst the plaintiff was still in occupation. The plaintiff refuses to vacate the property because she claims she holds constructive trust in the property and wants her 50% share of the proceeds of the sale of the house, before she vacates.

The second defendant took out a loan from the third defendant to purchase the property. However, Contracts for Sale were not executed. The third defendant bank did not conduct proper investigations into the state of the tenancy to the property before approving the loan. Neither did the second defendant.

Additionally, the first defendant had earlier sold the property to another party, not named in the proceedings. He received the sale proceeds but did not ensure that good title was passed to that party. That party sued and took out judgment against the first defendant for repayment of the purchase price, interest and costs.

The plaintiff took out interim restraining orders, restraining the first defendant and others from evicting and/or harassing her until completion of the substantive proceedings. The second defendant applied to set aside the interim orders.

Issues

Should the restraining orders be set aside?

Reasons

1. The plaintiff put evidence before the Court demonstrating her interest in the property and why she wants to be declared a constructive trustee, to then receive her 50% share. The defendants have not put any evidence before the Court.

2. The first, second and third defendants were found to have conducted the sale in a very unprofessional manner in that there were no formal written contracts of sale nor were requisitions exchanged and other proper investigations conducted to ascertain the state of existing tenancies before funds were released by the bank to the second defendant.

3. The first defendant had also earlier, sold the property to a party but where occupation or possession did not take place because the plaintiff was in occupation. Notwithstanding that there is an existing judgment for payment against the first defendant, taken out against him by that party, that the first and second defendants pursued the sale and the third defendant committed funds.

Held

These are not good enough reasons for the restraining orders to be set aside. Application to set aside is refused. Other directions are also issued and for the matter to proceed to substantive hearing.

Counsel:

M Kokiva, for the plaintiff/applicant
N. Tenige, for the first defendant/applicant
M. Nasil, for the second defendant/applicant
A. Daniels, for the third defendant

DECISION
(NO. 1)

3rd September, 2009

1. DAVANI .J: Before the Court is an Originating Summons filed by the plaintiffs lawyer, Martha & Associates, on 2nd April, 2009. Then, only Bernard Kisekol was named as the defendant.

2. Soon thereafter, it became apparent that the other named defendants ought to have been joined in the proceedings, which was subsequently done. 

The plaintiffs claim

3. The plaintiff seeks declaratory orders that she hold property located at Section 17 Allotment 3, Guitana Avenue, Matirogo, National Capital District (the ‘property’) in constructive trust, as co-owner of the property and that she is entitled to her 50 percent share in the property. She also seeks further orders that the defendant sell the property at the best possible price and to pay her 50 percent share of the proceeds of the sale.

4. Also before the Court are several Motions. These are the plaintiffs Motion filed on 2nd April, 2005 seeking orders that the first defendant be restrained from selling or attempting to sell the property until the substantive proceedings are heard. It also seeks further orders that the first defendant be restrained from evicting or harassing or intimidating the plaintiff and her children whilst they are still resident on the property until the substantive determination of the matter. The other orders the plaintiff seeks is for a date for the hearing of the Originating Summons.

5. The other Motion is that filed by Nasil & Associates on 2nd July, 2009, for and on behalf of the second defendant, seeking to set aside ex parte Court Orders taken out by the plaintiff on 24th June, 2009. 

6. Notice of Motion filed by Tenige & Co. Lawyers, on 19th June, 2009, seeks to set aside ex parte orders taken out by the plaintiff on 17th April, 2009.

Background facts

7. The plaintiff and the first defendant were married on 3rd September, 1995 according to the rites of the United Pentecostal Church. Customary bride price was also exchanged.

8. The parties separated in or about April 2006 when the first defendant left the property also to be described as the matrimonial home in these proceedings. 

9. The application now before the Court by the plaintiff is to be declared as holding a constructive trust in the property because the first defendant, who is the registered proprietor of the property, intends to sell or has sold the property to the second defendant who took out a loan to purchase the property. 

10. The Bank of South Pacific who are the named third defendant, are the mortgagee having given a loan to the second defendant to purchase the property.

11. The plaintiff claims she has constructive trust in the property because she has contributed a lot to the purchase and the development of that property, even though the first defendant holds sole title to the property. I set out these details further below.

12. The second defendant’s only wish to take possession of the property because they claim to have paid the full purchase price to the first defendant and are now in the process of repaying the loan. 

13. Also brought to the Court’s attention was the existence of proceedings WS 813 of 2008 between one Edwin Acosta as the plaintiff, the first defendant, named as the first defendant and the second defendant named as the second defendant. On those proceedings is Court Order of 5th November, 2008 where the National Court ordered specific performance of a written agreement dated 27th December, 2006 between Edwin Acosta as purchaser and the first and second defendants as vendors. 

14. The allegations in the Statement of Claim filed in those proceedings are that the plaintiff paid to the first and second defendants, the sum of K23,000.00 and K12,000.00 respectively, a total sum of K35,000.00, as deposit for the purchase price of the property and that this was done pursuant to the said written agreement made between the plaintiff Edwin Acosta and the first defendant where the first defendant agreed to sell to Edwin Acosta, the property, the subject of these proceedings.

15. The plaintiff in WS 813 of 2008 pleaded in the Statement of Claim that he also took out a loan on 15th January, 2007 to pay the deposit for the property and that he is still repaying the loan, although he is not residing on the property.

16. The default judgment order in WS 813 of 2008, apart from ordering specific performance of the agreement, also ordered that the first and second defendants are liable for general damages, to be assessed.

This application

17. To fully comprehend and understand the events in relation to the multiple sale of the property, I set out below a chronology of events;

(i) a transfer to Bernard Kisekol was registered on the Title Deed to the property, produced on 7th July, 2000 and entered on 26th July, 2000;

(ii) a mortgage to Papua New Guinea Banking Corporation entered on the Title Deed was produced on 7th July, 2000 and entered on 26th July, 2000;

(iii) According to proceedings WS 813 of 2008, by Contract for Sale dated 27th December, 2006, the first defendant agreed to sell the property to Edwin Acosta and Elena Acosta. According to the entries on the copy Title Deed before me, the latest entry is the Mortgage to the Papua New Guinea Banking Corporation referred to in (ii) above. There is no entry in the folio to the Title Deed, of the alleged transfer to Edwin Acosta;

(iv) Or about January and February 2009, the first defendant entered into negotiations with the second defendants to sell the property to the second defendants;

(v) On 6th March, 2009, the first and second defendants signed the Contract for Sale and Transfer Instrument relating to the property. The second defendants took out a loan from the third defendant to purchase that property. The loan repayment was agreed at K6,500.00 per month to be effective on 9th June, 2009 (referred to in Dickson Kisombo’s affidavit sworn on 30th June, 2009);

(vi) On 17th April, 2009, the plaintiff in these proceedings, obtained an order restraining the first defendant from selling the property until the substantive matter is heard and determined. The further orders were that the first defendant be restrained from evicting, harassing, threatening or intimidating the plaintiff and her children from the property until the hearing of the substantive matter. The orders were also that the Court give a date for the hearing of the Originating Summons;

(vii) On 5th November, 2008, Edwin Acosta and Elena Acosta obtained default judgment for specific performance of the Contract and for general damages to be assessed, judgment against the first and second defendants.

18. When moving for the injunctive orders, Ms Kokiva for the plaintiff made submissions on the substantive Summons before me which was basically to declare that the plaintiff had a constructive trust in the property. Ms Kokiva did so relying on affidavits sworn by the plaintiff on 7th July, 2009. In that affidavit, the plaintiff set out the following;

OS No. 171 of 2009 – Barbara Gawi Kisekol –v- Bernard Kisekol
Purchase Price – K110,000.00 – K120,000.00

Plaintiffs contributions towards interest in property at Section 17, Allotment 3, Guitana Drive, Matirogo, NCD

	Details
	Value/Estimated Value	
(1)	K350/fortnight from 2003 to 2006 (varying amount per fortnight – K350 – 390 – paid cash to defendant.
	K 27,300.00	
(2)	Defendant used K8,000 out of K15,000 given by plaintiff and returned K7,000.
	K 8,000.00	
(3)	K5,000 cash which was supposed to be in the account. Defendant used it to buy a car in early 2004 which is in his possession.

	K 5,000.00	
(4)	Maintenance of the property from 1999 to date, including repairs, water and sewerage bills, electricity, cleaning, making & maintaining garden estimated at K5,000 per year for 10 years.
	K 50,000.00	
(5)	Maintenance of the family to current at estimated K500/fortnight = K13,000 for four years.
	K 52,000.00	
(6)	Plaintiff left job at SP Brewery to take care of baby Elijah upon request by defendant and agreement by both parties. She was paid K450/fortnight. She resumed work at Hideaway Hotel in 2002. Sacrifice of earnings of K11,700 per year from 2000 to 2001.
	K 23,400.00	
(7)	Saving the defendant from selling the property in December 2006 for a price of K350,000. From K650,000, a difference of K300,000.
	K300,000.00	
(8)	Airline tickets for Barbara Kisekol & children: Elaine & Elijah for annual leave airfares 2005 to 2008 (from Pom-Manus-Pom) claimed & obtained by the defendant but not passed onto them. Estimated at K750 per person – one way for 4 years.

(The plaintiff said to the defendant: "I don’t care what you use the money for as long as I keep the house.")
	K 18,000.00	
	Estimated Total:	K483,700.00"	

19. The first defendant has not filed any affidavits in response to these claims. The plaintiff also asserts in that affidavit, as illustrated above, her contributions in monetary terms to the improvements done to the property and that they must be recognized and that she be given her share in monitory terms in the event of a sale.

20. In my view, this demonstrates that the first defendant does not dispute the plaintiffs contributions made towards the purchase and later development of the property.

21. However, what I see to be the issue at hand is the first defendant’s alleged sale to the plaintiff in WS 813 of 2008 and to the second defendant in these proceedings. In a normal conveyancing, the purchaser must be sure of what he is purchasing. This includes the bank as well. The purchaser must firstly ascertain that the property is in fact vacant. This is done by the exchange of Requisitions on Title where the usual standard questions are asked by a purchaser as to what the status of the property is. Or the purchaser can conduct an inspection of the property. This was not done in this case. If the second defendant is a real estate company as is stated in the title of the court document, then it should be fully aware of the risks it takes in a business of this nature. The obvious question I ask myself is why the second defendant committed itself to a loan when the property was not vacant? Also, all the defendants are unable to put before me a Contract for Sale to show what the conditions of the sale/purchase were. Was the property sold with vacant possession? Or was the property sold subject to tenancy? Those are standard conveyancing practices which I take judicial notice of. Any conveyancing lawyer or a real estate agent or even a bank who is committing itself to a mortgage would want to find out first before Mortgages are signed and monies exchanged. In this case, in my view, neither the bank nor the second defendant did that.

22. What is most disturbing is that the first defendant has "sold" the property on two occasions. On both occasions, the third defendant was the Mortgagee. Both of these sales fell through. The evidence is also that the second defendants were involved. There is no evidence before me that shows that the third defendant bank is concerned about this, which I find most unusual.

23. As far as the plaintiff is concerned, she has on the face of it, made a contribution to the property. Her claim that the property should not be sold unless she is consulted and her views obtained, is justified under the circumstances.

41. In relation to the mortgage between the bank and the second defendants, if the third defendant bank has paid out the loan monies to the second defendants, then the second defendants must ensure to return those monies to the bank. If the second defendants have paid these monies to the first defendant, then the first defendant must return the monies to the bank. If the first or second defendants have received the monies and they cannot repay the bank and are also not living on the property, then notwithstanding, the bank has a claim against them.

42. As for the substantive matter on the declaration of a constructive trust, generally, depending on the facts of a case, it is sometimes held, where the claimant has expended money or incurred a detriment, with the knowledge and consent of the legal owner, in respect of the relevant property, that if the arrangement under which it was done is thwarted by outside circumstances, with the result that the legal owner would, without the intervention of equity, reap an underserved and unintended windfall, equity will intervene to get some relief, depending on the particular facts (see Morris (1982) 1 NSWLR 61; Malsbury (1979) 1 NSWLR 226 and the unreported decisions of Young .J in Plumb v. Breen 13.12.90; Knox v. Knox 16.12.94; and Leichardt – Lillyfield Sailors Soldiers and Airmans Club Ltd v. Kelly 23.08.95; Denise Maria Wright and Graham Lindsay Wright and Mavis Joan Adams [1997] Fam CA (14.03.97) Moss .J).

43. For the purpose of the applications now before the Court, I will not make the orders sought by the first defendant nor will I make the orders sought by the second defendant. I will however, reaffirm the continuation of the Court Order of 17th April, 2009 and will direct that parties appear before me at a status conference of all civil trial matters to be conducted on 7th September, 2009 at 9:30 am where I will then list this matter for proper hearing, on the contribution of assets or monies by the plaintiff and the defendants, to the development of the property.

44. The hearing or trial will only be in relation to the issue of the constructive trust where I will require that the first defendant file affidavits in response to the affidavit filed by the plaintiff, parts of which I have set out above.

45. As for the purported contracts that were entered into by the parties over the property, it is for the second defendant in these proceedings and the plaintiff in WS 813 of 2008 to take the next step, but bearing in mind that the plaintiffs claim is now before the Court. I would however suggest that the second defendants await the outcome of this proceeding, then take the next step. But in the interim, they should immediately repay the third defendant whatever monies it has paid to them. If the second defendants have paid those monies to the first defendant, then I direct that the first defendant repay those monies to the bank or if they are held in an account, that these funds be frozen until the completion of this matter.

46. The first defendant attempted to sell the property without first consulting the plaintiff. This has now resulted in this application being filed. Furthermore, by their actions, the second defendants have recklessly committed themselves into entering into this sale with the plaintiff and taking out a mortgage over the property. The plaintiffs rights must be fully determined first before the sale of the property can proceed.

47. Under these circumstances, the repayments by the second defendant to the third defendant, should also cease until after the substantive    hearing.

Formal orders

48. These are the orders I make;

(1) Subject to the orders herein, the matter shall proceed to hearing on the evidence, on the issue of the constructive trust;

(2) The plaintiffs lawyer together with the first defendant’s lawyer will attend a status conference to be conducted before Davani .J on 7th September, 2009 at 9:30 am;

(3) In the interim, the first defendant shall file and serve affidavit in response to the plaintiffs affidavit sworn on 7th July, 2009 and filed on 8th July, 2009;

(4) That in the event the third defendant has paid monies to the second defendants in relation to the purported sale of the property, that the second defendants should immediately return those funds;

(5) Alternatively, that in the event the second or third defendants have already paid those funds to the first defendant, and that he has these funds in his physical possession, that the first defendant should immediately return those funds, failing which the second and third defendants may have a claim against him;

(6) However, where the funds are held in the first defendant’s bank account with the third defendant, that these funds shall be frozen pending the completion of the substantive hearing and that the third defendant shall not exercise its powers of default under the Mortgage, as against the second defendants, until after the substantive matter herein is heard and determined and further orders made;

(7) That for the substantive hearing, the third defendant’s loans officer with carriage of the first defendant’s file, shall depose to an affidavit on the bank’s powers of default under the Mortgage, and shall attach a copy of the said Mortgage between it and the second defendants, together with a copy of a latest valuation report over the property.

(8) Time be abridged to the date of settlement by the Registrar which shall take place forthwith.

____________________________________

Martha & Associates: Lawyer for the Plaintiff
Tenige & Associates: Lawyer for the First Defendant
Nasil & Associates: Lawyer for the Second Defendant
Bank of South Pacific in-House Lawyer: Lawyer for the Third Defendant