N4618

Papua New Guinea
[IN THE NATIONAL COURT OF JUSTICE]

OS 48 of 1997

BETWEEN:

PNG INTERNATIONAL HOTELS LTD
First Plaintiff

AND:

DORADO PTY LTD
Second Plaintiff

AND:

ASSOCIATED INVESTMENTS LTD
Third Plaintiff

AND:

REGISTRAR OF TITLES
First Defendant

AND:

CHAIRMAN OF PNG LAND BOARD
Second Defendant

AND:

SECRETARY FOR LANDS DEPARTMENT
Third Defendant

AND:

MINISTER FOR LANDS
Fourth Defendant

AND:

INDEPENDENT STATE OF PAPUA NEW GUINEA
Fifth Defendant

Waigani: Gavara-Nanu J.

2011: 12 August
2012: 16 March

PRACTICE AND PROCEDURES - State Lease – Improvement covenants- Lessee not complying with improvement covenant – Forfeiture of the Lease by the Minister – Land Act 1996, s.122 - Lessee failing to appeal the forfeiture of the Lease – Land Act 1996, s.142 (2) (b) - Ministers power to forfeit a Lease for non compliance with improvement covenant.

PRACTICE AND PROCEDURES – State Lease – Forfeiture of Lease – Lessee having no existing rights and interests in the land after Lease is forfeited – A State Lease granted after the forfeiture of the original Lease is a completely a new Lease. 

Cases cited

Jubilee Hambru N3193
MVIT v. Pupume [1993] PNGLR 370

Counsels

N. Kubak, for the plaintiffs
E.Geita, for the defendants

16 March, 2012

1.	GAVARA-NANU J:	The first plaintiff seeks review of certain decisions made by the defendants regarding the land described as Section 7 Lot 44 Granville, NCD.

2.	In its Notice of Motion filed pursuant to Order 16 r 5 of the National Court Rules ('NCR"), the plaintiffs seeks the following relief:-

1.	Pursuant to Order 12 r 8 (4) and (5) of the NCR and s. 155 (4) of the Constitution the defendants be restrained from issuing or advertising or accepting Tenders for or any new lease of the subject land namely Allotment 44 Section 7, Granville, NCD until further orders of the Court.

2.	Pursuant to s. 155 (4) of the Constitution, an order that the defendants issue the lease title documents to the plaintiffs.

3.	Pursuant to Order 12 r 8 (4) and (5) of the NCR and s. 155 (4) of the Constitution an order restraining the Registrar of Titles from registering and accepting for registration or otherwise dealing in whatever manner the property namely, Allotment 44 Section 7, Granville, NCD, until further orders of the Court.

4.	An order that the Notice of Forfeiture issued on the subject land is null and void and of no legal effect. 

5.	Damages.

6.	Interest

3.	It is noted that damages are being claimed pursuant to an Order made by the Court on 16 November, 2010, the Order was to amend the Statement in Support pursuant to Order 8 r 50 (1) and (2) of the NCR. The Order was made in respect of a similar relief sought in a Notice of Motion filed by the plaintiff on 10 November, 2010. Leave to amend the Statement in Support was granted and amendments were made in accordance with the amendments which were already contained in the Statement in Support filed on 16 November, 2010.

4.	In the amended Statement in Support, the plaintiff also seeks interest and costs. The plaintiff in paragraphs 3 (1) and (2) of the amended Statement in Support gives reasons for seeking damages. It is noted that in paragraph 3 (1) of the amended Statement in Support, the plaintiff claims that because the defendant failed to issue a replacement Business Lease over the property in its favour after its original Lease was lost in the Department of Lands, it (the plaintiff) could not make  improvements on the land. The plaintiff claims that despite its continued requests for a replacement Lease, the defendants failed to issue a replacement Business Lease to it. The plaintiff also claims that the defendants failed to respond to its letters which it says resulted in it not making financial arrangements to make improvements to the land.

5.	The plaintiff also claims that no notice to show cause was served  on him when in August, 1991, a forfeiture notice to forfeit its Business Lease was served on him by the State for not developing the land as required in the improvement covenant of the Lease.

6.	The plaintiff claims that it has spent funds in excess of K1, 500,000.00.

7.	The amendments in the Statement in Support i.e paragraph 3 (1) and (2) form the grounds for the plaintiff's claim for damages. 

8.	This case has a long history. The plaintiff was granted a Business Lease over the subject land on 06 August, 1987, to build a hotel under the improvement covenant of the Lease. Under that covenant the plaintiff was required to erect improvements for business purposes to a minimum value of K5m within one year from the date of the grant of the Lease. The evidence before the Court shows that the property was mortgaged to the ANZ Bank on 30 December, 1987, the mortgage was entered at the Titles Office on 9 March, 1988, with Entry No. 62949. 

9.	On 7 April, 1995, the plaintiff's Lease was forfeited by the Minister for Lands and Physical Planning for non compliance with the improvement covenant of the Lease. The forfeiture was gazetted in Gazettal Notice G40, dated 20 April, 1995. 

9.	It is noted that the land was mortgaged to the ANZ Bank for a loan for the plaintiff to fund developments on the Land in compliance with the improvement covenant of the Lease.

10.	According to the plaintiff's affidavit sworn on 26 November, 2010, in paragraph 11, the plaintiff says it paid K446,513.64 to the ANZ Bank to settle its loan and for the mortgage to be discharged. In the same paragraph, the plaintiff claims that when its copy of the Lease was lodged at the Titles Office for the mortgage to be discharged, the Titles Office lost the Lease.

11.	According to paragraph 12 of the same affidavit, the plaintiff was exempted by the State from paying lease rentals over the land for two years from 1988, then for further five years. Those exemptions expired in 1995, and on 20 April, 1995, the Lease was forfeited due to the failure by the plaintiff to comply with improvement covenant.

12.	The plaintiff in its affidavit says that between 1988 and 1996 numerous correspondences were sent to the Department of Lands for the return of its Lease but those correspondences went unanswered. 

13.	The plaintiff decided to challenge the forfeiture of its Lease by way of a writ in proceedings WS 906 of 1996, however, the proceedings were struck out on 11 December, 1996 by the Court, and as a result the current proceedings were commenced on 12 February, 1997.

14.	On 16 September, 2006, a Business Lease was issued to the plaintiff over the subject land. The plaintiff's mortgage was discharged on 15 May, 2007. It is to be noted that on 28 May, 1997, a Business Lease was issued to another company i.e Beecroft No. 20 Pty Ltd over the same property. The company was granted Lease after the property was put on tender and after it had put in a bid for the land.

15.	It is to be noted that between 6 August, 1987 to 7 April, 1995, no improvement was done to the land by the plaintiff although it had a clear title to the land in that period. 

16.	When plaintiff's Lease was forfeited in 1995, the plaintiff failed to appeal the forfeiture as required under s. 142 (2) (b) of the Land Act 1996. Thus from 7 April, 1995 to 16 September, 2006, which is when a Business Lease was granted to the plaintiff, the plaintiff had no interests in the land. It also had no rights and obligations over the land. The Business Lease that was issued to the plaintiff on 16 September, 2006 over the land was a new Business Lease because the plaintiff's old Business Lease was forfeited for a cause i.e breach of the improvement covenant of the Lease.

17.	It is noted that when a Business Lease was granted to Beecroft No. 20 Pty Ltd, in 1997, the company (Beecroft) had a clear title to the land because the plaintiff did not have title to the land. That Lease (Beecroft's Lease) remained current until 2007, when it was cancelled. This means from 16 September, 2006, when the plaintiff was granted a Business Lease to 2007, when Beecrfot's Lease was cancelled, the plaintiff did not have a clear title to the land because Beecroft No.20 Pty Ltd also had title to the same land. It was only after Beecroft's title was cancelled that the plaintiff had clear title to the land. It is however clear that from 2008 or from when Beecrfot's lease was cancelled to the date of trial which 12 August, 2011, the plaintiff had clear title, and the plaintiff has conceded that in that period it made no improvements to the land, except the erection of the perimeter fence.

18.	It is also noted that when a new Business Lease was issued infavour of the plaintiff in 2006, the period in which the plaintiff was to make improvements on the land was relaxed and extended from 2008 to 2013, and the minimum value of improvements to be made to the land under the improvement covenant remains at K5m.

19.	Returning to the relief sought in the substantive Notice of Motion, I find that in regard to paragraphs 1, 2 and 3 of the Motion where (i); the plaintiff seeks respective orders that the defendants be restrained from issuing or advertising or accepting tenders for any new lease over the subject land; (ii) the defendants issue the lease over the subject land to the plaintiff and (iii) that the Registrar of Titles be restrained from registering or accepting for registration or otherwise dealing in whatever manner to the subject land; events have overtaken those reliefs, thus they are now rendered nugatory. The pivotal event being a new Business Lease that was issued to the plaintiff over the subject land in 2006, that Lease is current. These issues therefore do not arise anymore.

20.	In the result the relief sought in paragraphs 1, 2 and 3 of the Notice of Motion serve no purpose and they are dismissed.

21.	In regard to the relief sought in paragraph 4 of the Notice of Motion, which is an order that the Notice of forfeiture issued on the subject land is null and void and is of no legal effect, this relief is dismissed on three grounds; first the relief lacks particulars especially in regard to the Notice of forfeiture, secondly the relief should have been sought by way of a declaration under Order 16 r 1 (2) of the NCR, thirdly and more importantly, assuming that the Notice of forfeiture referred to in this paragraph relates to the notice of forfeiture of the plaintiff's Business Lease which was issued by the Minister in 1995, I find that it was issued for a cause, namely that the plaintiff having failed to make improvements on the land as required under the improvement covenant of the Lease, the Minister had power under s. 122 of the Land Act to forfeit the Lease. The plaintiff had also by its own actions abandoned its right to challenge the forfeiture by failing to appeal against the forfeiture as required under s. 142 of the Land Act. Thus, I find that the forfeiture of the plaintiff's Business Lease in 1995, was properly done and I find no error in the actions taken by the Minister in forfeiting the Lease.

22.	The end result is that this relief is also dismissed.

23.	The claim for interest and costs are consequential upon damages being awarded to the plaintiff. The question therefore is – Is the plaintiff entitled to damages?

24.	As I alluded to earlier, the claim for damages arises from the plaintiff's claim in his amended Statement in Support filed under Order 16 r 3 of the NCR. The grounds for the claim for damages as I alluded to earlier are pleaded in paragraph 3 (1) and (2) of the Statement. In this paragraph the plaintiff claims that because of the failure by the defendants to issue a replacement Business Lease to it after its original Business Lease was lost in the Department of Lands, it was not able to build the hotel it was expected to build under the improve covenant of the Lease. The plaintiff also told the Court that it was waiting for its Lease to be returned to him by the Department of Lands and for its mortgage to be discharged before it could make improvements to the land, I find this explanation lacking good faith and is unreasonable. The fact that plaintiff's Lease was with the Department of Lands and that it was not returned to it or that no replacement Lease was granted to it did not relieve the plaintiff from complying with the requirements of the improvement covenant. I also see no reason why the plaintiff could not discuss the matter with its bank in those circumstances so that it could go ahead and make improvements to the land as required by the improvement covenant of its Lease. This seems to be another excuse by the plaintiff for failing to comply with the improvement covenant of its Lease.

25.	To my mind, the fact that the subject land was mortgaged to the bank soon after the plaintiff was granted the Business Lease over the land also suggests strongly that the plaintiff had no funds to develop the land. This in turn suggests that the plaintiff's initial application for Business Lease was not genuine. 

26.	The plaintiff also claims in paragraph 3 (2) of the above Statement that the Notice of forfeiture was wrongly issued to him, the relevant parts of the amended Statement appear at paragraphs 38 and 39 of the Review Book.

27.	The Statement in Support was amended pursuant to an Order given by the Court on 16 November, 2010. The application to amend the Statement was made pursuant to a Notice of Motion filed on 10 November, 2010. In that Motion, the plaintiff sought to amend the Statement pursuant to Order 8 r 50 (1) and (2) of the NCR. 	I find these amendments to be an abuse of process because they were made pursuant to wrong Rules of the Court, in other words the Notice of Motion is incompetent, as it contravened Rule 8 of Motions (Amendment) Rules, 2005. Such amendments could only be made pursuant to Order 16 r 7 of the NCR, but this Rule was not invoked nor was it pleaded by the plaintiff in its Motion to amend the Statement as required by Rule 8 of Motions (Amendment) Rules, 2005. Had the amendments been made pursuant to Order 16 r 7, the mandatory requirements in Order 8 Division 2 of the NCR, would have been pleaded and complied with as required by Order 16 r 7 of the NCR. These omissions are fatal to the plaintiff as they are fundamental to the plaintiff's claims for damages.

28. 	As a result of the failure by the plaintiff to comply with the requirements in Order 16 r 7 and Order 8 Division 2 of NCR, the amendments to the Statement in Support are also generally and vaguely pleaded. As a result the claims for damages are not properly and sufficiently pleaded. Pleadings as a general rule must be precise and clear so that the defendants are aware of the claims made against them: Jubilee Hambru N3193 and MVIL v Pupune [1993] PNGLR 370. This reason alone is sufficient for me to dismiss the claims for damages. However, there are other reasons why I would dismiss the claims. Firstly the plaintiff does not specify in its amended Statement in Support the period for which it is claiming damages. As I said the plaintiff cannot claim damages for the period from 1987 to 1995, because he himself defaulted in that period by failing to comply with improvement covenant of its Business Lease.

29. 	It is not in dispute that a new Business Lease was issued to the plaintiff in 2006. That Lease cannot be viewed as a replacement Business Lease for the plaintiff. It was a completely new Business Lease because the plaintiff's original Business Lease was forfeited for a cause in 1995. The forfeiture of the Lease was properly and validly made by the Minister.

30.	When the plaintiff's Lease was forfeited in 1995, the plaintiff did not appeal the forfeiture. The land was therefore free and open for tender. Thus when Beecroft No.20 Pty Ltd was granted a Business Lease over the land in 1997, the plaintiff had no interest in the land thus it cannot claim damages for the period from 1995, when its original Business Lease was forfeited to 16 September, 2006, when a new Business Lease was issued to it.

31.	When plaintiff's Business Lease was forfeited in 1995, all of plaintiff's rights and interests in the land were extinguished.

32.	The plaintiff acquired rights and interests over the land again when a new Business Lease was issued to it in 2006.

33.	The plaintiff cannot claim damages for the period after it was granted a new Business Lease on 16 September, 2006, for the reason that it has not pleaded damages in the amended Statement in Support for the period: MVIT v Pupune (supra). This period includes the period in which the plaintiff had a competing interest on the land with Beecroft No.20 Pty Ltd when both companies had Business Leases over the same land. But even if the plaintiff had claimed and pleaded damages for this period, such a claim cannot possibly succeed because the plaintiff continued to breach the improvement covenant of its Lease after it had clear title to the land after Beecroft No. 20 Pty Ltd's Lease was cancelled in 2007 up to the date of trial which is 12 August, 2011. I see no reason whatsoever why the plaintiff failed to make improvements to the land so as to comply with the improvement covenant of its Lease after it had clear title to the land following cancellation of Beecroft No. 20 Pty Ltd's Lease. To my mind, this again goes to prove that the plaintiff's claims for damages not only lack good faith but they have no basis in law.

34.	For all these reasons, the plaintiffs' claim for damages is also dismissed.

35.	The plaintiff will pay the defendants' costs and incidentals to these proceedings.

________________________________________________

Nobert Kubak Lawyers: Lawyers for the Plaintiff
Solicitor-General: Lawyers for the Defendants