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International Education Agency of Papua New Guinea Ltd v Kulunga [2010] PGNC 154; N3991 (9 April 2010)

N3991

PAPUA NEW GUINEA
IN THE NATIONAL COURT OF JUSTICE

OS NO 60 OF 2010

BETWEEN

INTERNATIONAL EDUCATION AGENCY OF PAPUA NEW GUINEA LIMITED t/a MOUNT HAGEN INTERNATIONAL SCHOOL
Plaintiff

AND

FRANCIS KULUNGA
Defendant

Mount Hagen: Makail, J
2010: 01st & 9th April

INJUNCTIONS - Interlocutory injunctions - Grant of - Extension of - Principles of.

REAL PROPERTY - State lease - Title - Indefeasibility - Fraud - Actual and constructive - Effect of - Land Registration Act, Ch 191 - Section 33.

PRACTICE & PROCEDURE - Parties - Wrong party - Joinder of parties - Amendment of originating summons - Additional reliefs - National Court Rules - Order 5, rule 8(1)(b) & Order 9, rule 50(1).

Cases cited:

Rosemary John -v- James Nomenda & Ors: WS No 1818 of 2005 & OS No 446 of 2005 (Consolidated) (Unnumbered & Unreported Judgment of 18th January 2010)
Mudge -v- Secretary for Lands [1985] PNGLR 387

Emas Estate Development Pty Ltd -v- John Mea & Ors [1993] [PNGLR 215
Steamships Trading Company Limited -v- Garamut Enterprises Limited & Ors (2000) N1959

The Papua Club Inc -v- Nusaum Holdings Limited (No. 2) (2004) N2603
Hi Lift Co Pty Ltd -v- Miri Setae & Ors [2000] PNGLR 80; (2000) N2004
Ramu Nickel Limited & Ors -v- Honourable Dr Puka Temu & Ors (2007) N3252
Elizabeth Kanari -v- Augustine Wiakar & Registrar of Titles (2009) N3589
Koitachi Farms Limited -v- Walter Schnaubelt (2007) SC870

Paul Tohian & The State -v- Tau Liu (1997) SC566
Kamapu Minato -v- Philip Kumo & The State (1998) N1768
John Bokin & Ors -v- The State & Ors (2001) N2111

Counsel:

Ms V Palts, for Plaintiff
Mr T Dalid, for Defendant

INTERLOCUTORY RULING

09th April, 2010

1. MAKAIL, J: There are two applications before me for decision. They are:

1. The plaintiff's application by amended notice of motion filed on 4th March 2010 for joinder of parties and leave to amend the originating summons to seek additional reliefs pursuant to Order 5, rule 8(1)(b) and Order 9, rule 50(1) of the National Court Rules respectively; and

2. The defendant's application by notice of motion filed on 09th March 2010 to dismiss the proceeding for not disclosing a reasonable cause of action, frivolous and vexatious and an abuse of process pursuant to Order 12, rule 40(1)(a)-(c) of the National Court Rules or alternatively to set aside an ex-parte interim injunction of 22nd February 2010 pursuant to Order 12, rule 8 of the National Court Rules.

2. This two applications arose from a dispute between the plaintiff and the defendant over a land described as allotment 5, section 29, registered as a State lease in Volume 15, Folio 157. The grant of title was made to the defendant by the State through a delegate of the Minister for Lands and Physical Planning on 30th October 2009. The land is located adjacent to where the plaintiff's international school is currently located in the town of Mt Hagen. The plaintiff claimed that it applied to the Minister for Lands and Physical Planning for the grant of title to the land. The defendant also claimed that JK Wills Limited, a company in which he is the managing director is the registered proprietor and had every right to enter and deal with the land. As a result of the dispute, the plaintiff obtained an ex-parte interim injunction on 22nd February 2010 to restrain the defendant from entering and dealing with the land until the dispute is determined by the Court.

3. In the originating summons filed on 19th February 2010, the plaintiff sought a single relief in a form of a declaratory order that the defendant is not the legal title holder of the land. In the proposed amended originating summons, marked as annexure "CL" to the affidavit in support of Clement Luis sworn and filed on 01st March 2010, it is noted that the plaintiff had sought five additional reliefs in the following:

1. A declaration that the plaintiff had acquired an equitable interest to the land;

2. A declaration that the conduct of the Registrar of Titles in issuing title for the land in the name of the defendant is unlawful;

3. A declaration that the conduct of the Minister for Lands and Physical Planning in approving the grant of title to the land to the defendant is unlawful;

4. A declaration that the conduct of the Minister for Department of Lands and Physical Planning and the State in preparing and issuing the State lease for the land to the defendant is unlawful; and

5. A declaration that the title issue to the defendant in respect of the land be declared null and void and stands cancelled.

4. I heard both applications on 1st April 2010. In relation to the defendant's application, the defendant relied on three grounds to dismiss the proceeding. First, the defendant is not the correct or proper party to be sued in this proceeding because he is not the registered proprietor of the State lease. The registered proprietor is a company known as JK Wills Limited and according to section 17 of the Companies Act, 1997, JK Wills Limited has the capacity to sue and be sued in its own name and style. The plaintiff therefore, had wrongly sued the defendant. Secondly, JK Wills Limited as the registered proprietor of the State lease had an indefeasible title pursuant to section 33 of the Land Registration Act, Ch 191. Hence, its interest in the land is superior to that of the defendant and the Court should not disturb it. Thirdly, the plaintiff had failed to give notice of claim to the State under section 5 of the Claims By and Against the State Act, 1996. In the alternative, the ex-parte interim injunction should be set aside because first, the plaintiff had not shown that there are serious issues to be tried in this proceeding, secondly that the balance of convenience favoured the continuation of the interim injunction and finally, that damages is an adequate remedy.

5. The plaintiff conceded that JK Wills Limited is the registered proprietor of the State lease but strongly argued that at the time of instituting the proceeding, it had been unable to ascertain the title holder of the State lease because the title deed and other relevant documents pertaining to the grant of title to JK Wills Limited held by the Department of Lands and Physical Planning in Port Moresby had not been readily available. It also strongly argued that the proceeding should not be dismissed simply because it had sued the wrong party, rather JK Wills Limited should be added as a defendant to the proceeding in order to correct the defect so that the dispute between the parties could be properly and effectively resolved. Further, the proceeding should not be dismissed because it had raised fraud in relation to the grant of title to the defendant. It argued that there had been either actual or constructive fraud in the grant of title in this case.

6. I deal first with the defendant's application to dismiss the proceeding on the ground of incorrect party. I accept the defendant's submission that the proceeding should be dismissed because the plaintiff had sued or named a wrong party to the proceeding. It is clear that the dispute between the parties is over the land in which JK Wills Limited is the registered proprietor. I refer to annexure "R" to the affidavit in response of Francis Kulunga sworn on 01st March 2010 and filed on 2nd March 2010 for a copy of the title deed. JK Wills Limited is a company incorporated under the provisions of the Companies Act, 1997 and has the capacity to sue and be sued. Section 17(1)(a) of the Companies Act, 1997 gives JK Wills Limited the capacity to carry on or under take any business or activity, do any act, or enter into any transaction. It is pursuant to these powers that JK Wills Limited applied and obtained title to the land in the State lease. In my view therefore, it is the party that should have been sued or named as the defendant in this proceeding and not the defendant. To that extent, the proceeding is defective and ought to be dismissed. But there is the plaintiff's application for leave to join JK Wills Limited to the proceeding which I must consider too. I shall return to deal with it in a moment.

7. The second ground of the defendant's application to dismiss the proceeding is that, the proceeding do not disclose a reasonable cause of action. The defendant argued that JK Wills Limited held an indefeasible title to the land as it is the registered proprietor of the State lease. The plaintiff had neither pleaded fraud nor sufficiently demonstrated fraud in the proceeding. The plaintiff argued to the contrary. The doctrine of indefeasibility of title derived its origins from the Torrens title system of registration of alienation of government land where a person or entity holds title to the land free of any encumbrances. Section 33 of our Land Registration Act, Ch 191 which the defendant relied upon to assert JK Wills Limited's title in this case, reinforces the doctrine of indefeasibility of title. However, according to section 33(1), a title may be overturned if there is fraud.

8. There are two views held by the Court in relation to proving fraud to overturn a title of a registered proprietor under section 33 of the Land Registration Act, Ch 191. There is one view that a party alleging fraud must prove actual fraud. There is the other view that there need not be actual fraud. A proof of irregularities in the process of registration of title is sufficient. This is the constructive fraud. In Rosemary John -v- James Nomenda & Ors: WS No 1818 of 2005 & OS No 446 of 2005 (Consolidated) (Unnumbered & Unreported Judgment of 18th January 2010), I observed these two views after I considered past cases of Mudge -v- Secretary for Lands [1985] PNGLR 38; Emas Estate Development Pty Ltd -v- John Mea & Ors [1993] [PNGLR 215; Steamships Trading Company Limited -v- Garamut Enterprises Limited & Ors (2000) N1959; The Papua Club Inc -v- Nusaum Holdings Limited (No. 2) (2004) N2603; Hi Lift Co Pty Ltd -v- Miri Setae & Ors [2000] PNGLR 80; (2000) N2004; Ramu Nickel Limited & Ors -v- Honourable Dr Puka Temu & Ors (2007) N3252; Elizabeth Kanari -v- Augustine Wiakar & Registrar of Titles (2009) N3589; Koitachi Farms Limited -v- Walter Schnaubelt (2007) SC870. I said at p 10 of the judgment:

"The law in relation to establishing fraud affecting a registered title under section 33 of the Land Registration Act, Ch 191 seems pretty much settled in this jurisdiction although I note there appears to be two differing views on this issue. First, there is the Supreme Court decision in Mudge -v- Secretary for Lands [1985] PNGLR 387 which stands for the proposition that registration of title is final on all issues and that, only the exceptions provided under the Land Registration Act ch 191 can be invoked to overturn a registered title. One of these exceptions is fraud.

Then, there is Emas Estate Development Pty Limited -v- John Mea & Ors [1993] PNGLR 215 where the Supreme Court took a contrary view of the consequences of breaches of statutory procedures. In that case, the Supreme Court, while acknowledging the principles of indefeasibility of title nonetheless did (by a majority) consider irregularities tantamount to fraud as sufficient to over turn a registered title. The view expressed by the Supreme Court in Emas Estate's case (supra) was followed by Sheehan, J in the Steamships Trading Company Limited -v- Garamut Enterprises Limited & Ors (2000) N1959 and also Sevua, J in Hi Lift Co Pty Limited -v- Miri Setae & Ors [2000] PNGLR 08; (2000) N2004. In Steamships Trading's case (supra) after considering these two different views in relation to registration of title under the provisions of the Land Registration Act ch 191, Sheehan, J followed the decision in Emas Estate's case (supra)."

9. In the present case, first, there is evidence before me that the plaintiff had not been aware that the defendant had been granted title to the land until towards the end of 2009. Mr Alban Tabanea stated at paragraphs 2-8 of his affidavit of search sworn and filed on 18th February 2010 that between 2nd February 2010 and 5th February 2010 and 8th February 2010 and 9th February 2010, he attended at the Registrar of Titles office at the Department of Lands and Physical Planning located at the 03rd level of Aopi building at Waigani and searched for the file containing the documents pertaining to the land and found none. Prior to the unavailability of the file, the plaintiff had applied for the grant of title to the Department of Lands and Physical Planning after occupying and using the land for sporting activities under a certificate of occupancy from the Department of Works: see paragraphs 4 and 5 of the affidavit in support of Clement Luis sworn on 16th February 2010 and filed on 18th February 2010.

10. As the plaintiff was located on the land adjacent to allotments 4 and 5, section 29, and needed more space, it had proposed to the Department of Lands and Physical Planning to consolidate them and if the Department of Lands and Physical Planning had accepted the proposal, it would have surrendered the title to its land to enable the consolidation to take place. The proposal was aimed at increasing its space to cater for the increasing student population and as part of its expansion programme. It had been waiting for the Department of Lands and Physical Planning to respond to its request when it discovered that the defendant had also applied for a grant of title to the same land.

11. There is on the other hand, evidence from the defendant in his affidavit in response sworn on 01st March 2010 and filed on 02nd March 2010 from paragraphs 1-28 that the documents pertaining to the land had been available and accessible if the plaintiff had attended at the Provincial Lands office in Mt Hagen. If the plaintiff had, it would have discovered that JK Wills Limited had applied for closed tender of the land, had the land rezoned from Public Institution to Commercial purpose, paid all required fees for the acquisition and registration of title in its name and was granted title to the land on 30th October 2009. It is therefore clear that, there is an issue in relation to the plaintiff's knowledge of the defendant's interest in the land, more so, JK Wills Limited's interest as the registered proprietor. What may be inferred from the plaintiff's lack of knowledge of JK Wills Limited's title to the land is that, JK Wills Limited may have secretly acquired the title to the land, hence committed fraud.

12. The plaintiff's allegation of fraud against the defendant and JK Wills Limited becomes clearer when the entire circumstances surrounding the acquisition and registration of title is considered. In this respect, it is noted that there is no dispute that the land had been rezoned from a Public Institution to Commercial purpose. There is also no dispute that the defendant had applied and had been granted exemption from public advertisement the tender of the land by the then Minister for Lands and Physical Planning, Honourable Robert Kopaol on 12th January 2003: see copy of the exemption by the Minister for Lands and Physical Planning dated 12th January 2003 marked as annexure "GI" to the affidavit in response of Francis Kulunga sworn on 01st March 2010 and filed on 02nd March 2010.

13. It is further noted that the Minister had granted the exemption because, first, the defendant had put up improvements and had resided on the land. But there is evidence from the plaintiff that the defendant had not put up improvement and resided on the land prior to and at the time of the grant of exemption by the Minister. There is evidence from the plaintiff that it had used the land for sporting activities where it built a basket ball court for its students to play basket ball and had been using the land since 2003. Secondly, it is noted that the defendant had claimed that JK Wills Limited was the sole owner of the land even though there was the plaintiff's interest in the same land when he applied for exemption from public advertisement to the then Minister for Lands and Physical Planning Honourable Robert Kopaol.

14. When I consider all these matters, I am satisfied that it is arguable that there is constructive fraud in the grant of title to JK Wills Limited. This may be seen from the process by which the defendant followed to obtain the title which had been briefly highlighted above. The plaintiff is therefore entitled to ask the Court to inquire into whether or not there was fraud in the grant of title to JK Wills Limited. Hence, to dismiss the proceeding on the ground that the plaintiff had sued a wrong party would prejudice the plaintiff's interest in the land and more so, will deny the plaintiff the opportunity to test its claim of fraud against the defendant in Court. This is where I believe the joinder of JK Wills Limited would benefit both parties and more so, the plaintiff in terms of proving its claim of fraud in the grant of title to JK Wills Limited. This is where I also find the application of the plaintiff to join JK Wills Limited, including the Secretary for the Department of Lands and Physical Planning, the Registrar of Titles and the State necessary and proper in the circumstances of the case. They must be joined as defendants to the proceeding so that all issues and more importantly, the allegation of fraud can be effectively resolved by the Court. For these reasons, I would not dismiss the proceeding but grant leave to the plaintiff to join these parties to the proceeding.

15. I turn to the third ground of the application by the defendant to dismiss the proceeding. It is based on lack of notice of claim to the State under section 5 of the Claims By and Against the State Act, 1996 before commencing the proceeding. The defendant submitted that the proceeding should be dismissed because the plaintiff had not given notice of claim to the State pursuant to section 5 of the Claims By and Against the State Act, 1996. He argued that the notice of claim is mandatory and pre-condition to the issuing of proceedings against the State and made reference to the most often cited case of Paul Tohian & The State -v- Tau Liu (1997) SC566 which had been followed by the National Court many subsequent cases including that of Kamapu Minato -v- Philip Kumo & The State (1998) N1768 and John Bokin & Ors -v- The State & Ors (2001) N2111.

16. With respect, I reject this submission because this case can be distinguished on the facts. Unlike those cases referred to above, in the present case, the plaintiff has not sued the State but is seeking to sue it by seeking leave of the Court to add it to the proceeding as one of the defendants. In my view, the issue of non compliance with section 5 of the Claims By and Against the State Act, 1996 does not arise until and unless the State is added as a defendant to the proceeding. In other words, the defendant cannot raise objection to the competency of the proceeding based on section 5 of the Claims By and Against the State Act, 1996 at this stage because the State is not a party to the proceeding. For this reason, the proceeding against the defendant is competent.

17. However, as I have granted leave to the plaintiff to add the State as a defendant to the proceeding, and the issue of non compliance with section 5 of the Claims By and Against the State Act,1996 has been raised, it is necessary therefore to determine that issue. In respect of this ground, I would still reject the defendant's submission because it is clear to me that the plaintiff had given notice of claim to the State prior to the application for joinder. This can be seen from the evidence of Samuel Soten at paragraph 2 of his affidavit of service sworn and filed on 12th March 2010. He said that on 11th March 2010 at about 10:44 am, he served a letter constituting the notice of claim on the personal secretary to the Acting Solicitor General at the office of the Solicitor General located on the 07th floor of Sir Buri Kidu Haus. A copy of the letter is marked as "B" to his affidavit.

18. Although this case is slightly different in that, the plaintiff had issued the proceeding prior to suing or naming the State as a defendant in the proceeding, I am of the view that the requirement to give notice of claim to the State is applicable because the plaintiff had sought to join the State as a defendant. As observed above, notice of claim under section 5 of the Claims By and Against the State Act, 1996 is a pre-condition to proceedings against the State, and that also applies to proceedings which have been commenced and the State is being sought to be joined. Whether or not the State is joined as a defendant is immaterial. What is relevant is that, a party seeking to join the State to a proceeding that had been commenced must give notice of claim to the State before the hearing of the application for enjoinder.

19. In the present case, the plaintiff gave notice of claim to the State on 11th March 2010 but filed its application to join the State a week earlier (4th March 2010). The application was heard on 1st April 2010. In my view, the plaintiff has complied with the requirement of giving notice of claim to the State under section 5 of the Claims By and Against the State Act, 1996. The application to join the State is properly before the Court and the Court is entitled to consider it. Therefore, the defendant's application to dismiss the proceeding for lack of notice of claim to the State under section 5 of the Claims By and Against the State Act, 1996 is misconceived and ought to be dismissed.

20. I conclude that the proceeding do disclose a reasonable cause of action, is not frivolous and vexatious and is not an abuse of process. The plaintiff must therefore be allowed to proceed to trial to have the issue of fraud in relation to the registration of title to the land resolved. In the end, I uphold the application by the plaintiff and order that JK Wills Limited, Secretary for Lands & Physical Planning, Registrar of Titles, and the State be added as second, third, fourth and fifth defendants respectively to the proceeding. In so doing, I refuse the application by the defendant to dismiss the proceeding for not disclosing a reasonable cause of action, frivolous and vexatious and an abuse of process. I also grant leave to the plaintiff to amend its originating summons in accordance with the draft originating summons marked as annexure "CL" to the affidavit in support of Clement Luis sworn and filed on 1st March 2010 within 14 days from the date of this decision. The proposed additional reilefs are proper and relevant to the issues raised in the proceeding.

21. This then leaves the defendant's alternative application to set aside the ex-parte interim injunction of 22nd February 2010. The law in relation to such applications is settle in this jurisdiction and I need not restate in detail the principles suffice to say that an applicant seeking to set aside ex-parte interim injunctions must show the converse of the principles applicable in application for grant of interim injunctions. The applicant must show that first, there are no serious issues to be tried, secondly, the balance of convenience do not favour the continuation of the interim injunction and finally, damages is an adequate remedy.

22. In relation to the first consideration, I am satisfied that there are serious issues raised in this proceeding. The fundamental issue is whether or not there was fraud in the grant of title to the land to JK Wills Limited. The plaintiff's allegations of breaches of procedures in relation to the acquisition and registration of title are matters that only a trial would resolve. Secondly, whilst there is evidence of the defendant and JK Wills Limited putting up improvements on the land, there is the other competing interest of the plaintiff in relation to the education of the students that must also be weighed out. In weighing these two competing interests, I am inclined towards the interest of the plaintiff because it will be the children who will suffer most here as they had been using the land for sporting activities as part of the school learning programme for a long time until the dispute reached its pinnacle. This is not to say that the interest of the defendant and JK Wills Limited is less significant. They too have a valid claim but I am not satisfied that their business interest will be greatly prejudiced during the period of the interim injunction. They had not put up substantial improvements on the land and had only started work.

23. It is indeed the defendant's evidence at paragraphs 35-40 of his affidavit in response sworn on 1st March 2010 and filed on 2nd March 2010 that as recent as January 2010, they started construction work on the land by building a shed to house the contractor's machineries and equipment for the construction of a building and pouring of gravel. It is noted K20,000.00 had been expended by the defendant so far but in my view, he would have benefited in the long run in the event that the proceeding is dismissed and work resumed without any further inconvenience. Finally, I do not believe that damages would be an adequate remedy for the plaintiff if the interim injunction is set aside. In my view, education of our children is more valuable than money and cannot be substituted with damages.

24. In the end, the defendant's application to set aside the ex-parte interim injunction of 22nd February 2010 is refused. The ex-parte interim injunction is extended until the determination of the substantive proceeding.

Ruling accordingly.

_________________________________________
Nonggorr William Lawyers: Lawyers for the Plaintiff
Jerry Kiwai Lawyers: Lawyers for the Defendant