N5499

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1463 OF 2008

JACOB WAMA
Plaintiff

V

SIMEON MANIHIA
First Defendant

WILLING PACIFIC (PNG) LTD
Second Defendant

Madang: Cannings J
2013: 26 September, 15, 22 November,
2014: 14 February

CONTRACT – whether oral agreement for transfer of interest in land enforceable – evidence of agreement.

REAL PROPERTY – indefeasibility of registered title – allegation of fraud – meaning of "fraud" – Land Registration Act, Section 33(1)(a).

The plaintiff sued the second defendant for breach of contract, claiming that the defendants breached an oral agreement with him regarding a State Lease over a piece of government land. The plaintiff claimed that he provided his own money to purchase the land, but before acquiring title to it he entered into an oral agreement with the first defendant (who owned and controlled the second defendant) that title would be transferred from the vendors to the second defendant, which would then transfer title to the plaintiff when he requested it. He claimed that six years after the transfer of title to the second defendant, he requested that the title be transferred to him, but the defendants refused his request, giving rise to a breach of contract. He claimed various relief including an order that the title be transferred to him and an account of profits and damages. The defendants denied liability on the ground that the terms of their agreement with the plaintiff, which resulted in the land being transferred to the second defendant, were nothing like what he claimed. Rather, their agreement was that the land would be transferred to the second defendant in satisfaction of a debt due to the second defendant.

Held:

(1)	As the cause of action pleaded by the plaintiff was breach of contract, he bore the onus of establishing on the balance of probabilities the existence of a contract between himself and the defendants and the terms of the contract.

(2)	There was no evidence of any written or oral agreement. There was no written record, memorandum or notes of any agreement. Nor was there sufficient evidence to verify the central claim that the land was transferred to the second defendant on condition that it would be transferred to the plaintiff when he requested it.

(3)	The plaintiff failed to establish a cause of action and failed to establish fraud, so the question of remedies did not arise. The proceedings were wholly dismissed, with costs.

Cases cited

The following cases are cited in the judgment:

Emas Estate Development Pty Limited v John Mea and The State [1993] PNGLR 215
John Manau v Telikom (PNG) Ltd (2008) N3268
NCDC v Yama Security Services Pty Ltd (2003) SC707
Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109
Steven Naki v AGC (Pacific) Ltd (2005) N2782
The State v Keboki Business Group Incorporated and Morobe Provinsel Gavman [1985] PNGLR 369
Veltro Ltd v Steven Liu Huang (2006) N4608

STATEMENT OF CLAIM

This was an action in breach of contract.

Counsel

B W Meten, for the plaintiff
S Javati, for the defendants

14th February, 2014 

1. CANNINGS J: At the centre of this case is a block of residential land in Laurabada Avenue, Boroko, National Capital District. It is Allotment 112, Section 42. It is covered by a State Lease, the registered proprietor of which is the second defendant, Willing Pacific (PNG) Ltd. That company is owned and controlled by the first defendant, Simeon Manihia, and title to the land was transferred to it in 2000.

2. The plaintiff, Jacob Wama, says the land is really his. He has commenced proceedings against the defendants, seeking an order that title to the land (the State Lease) be transferred to him and an account of profits and damages. The plaintiff claims that the defendants were obliged by an agreement he entered into with them in 1999, to transfer title in the land to him, when he requested them to do so in 2006. But they refused to transfer the title, thus breaching the contract. He pleads an action in breach of contract. He argues that the second defendant's title must be transferred to him as this is a case of fraud.

3. The defendants deny liability. They concede that they entered into an agreement with the plaintiff in 1999, regarding the land, which resulted in the land being transferred to the second defendant. However they say that the terms of the agreement are nothing like what the plaintiff claims. They say that the agreement was that the land would be transferred to the second defendant in satisfaction of a debt due to the second defendant.

4. The following issues arise:

1	What were the terms of the 1999 agreement?

2	Has the plaintiff proven that the defendants breached the agreement?

3	Was it an enforceable agreement?

4	Has a cause of action in breach of contract been established?

5	Is this a case of fraud?

6	What declarations or orders should the Court make?

1	WHAT WERE THE TERMS OF THE 1999 AGREEMENT?

The plaintiff's version of the agreement 

5. The plaintiff says that in 1999 he was the member for Madang Open in the National Parliament. He was under investigation by the Ombudsman Commission regarding his use of funds obtained from the National Gaming Control Board. He found out about the investigation while he was in the process of purchasing, with his private funds, the land in Laurabada Avenue. He had agreed with the owner of the land, Sir Hugo Berghuser, to purchase it for a price of K230,000.00, through First National Real Estate, in a deal arranged by its then manager, Mr Peter O'Neill. He paid the purchase price to First National Real Estate and everything was in place for the transfer of the State Lease over the land to him. Then the news broke that the Ombudsman Commission had referred him to the Public Prosecutor for prosecution before a Leadership Tribunal.

6. It was then that the first defendant, Mr Manihia, who is a close relative, approached him and suggested that it would be prudent to arrange with Sir Hugo for the land to be transferred to Mr Manihia's company, Willing Pacific (PNG) Ltd, as if the land was transferred to the plaintiff the State might take possession of it as part of the Ombudsman Commission referral process. Mr Manihia assured the plaintiff and his wife that the land would be transferred to the plaintiff after the investigations were completed.

7. The plaintiff says that he was initially reluctant to accept Mr Manihia's proposal, but eventually he agreed as he thought that it was good, friendly advice. So he entered into an oral agreement with the defendants under which the land would be transferred to the second defendant on condition that when the plaintiff requested it, the land would be transferred to him.

8. He had some difficulty convincing Sir Hugo that this was a good idea, but eventually he assured him that the transfer to the second defendant was only a temporary measure until his case was over. So the transfer was registered in the name of the second defendant, and that is how it came to be the registered proprietor of the State Lease.

9. The plaintiff refutes the defendants' claim that he agreed in 1999 for the land to be transferred to the second defendant as satisfaction, 'in kind', of a debt owed by the Madang Open electorate to the second defendant. The plaintiff says that the second defendant was never contracted to prepare any scope of works by the Madang Open Joint District Planning and Budget Priorities Committee in the period that he was an MP, from 1997 to 2002.

10. The plaintiff argues that his agreement with the defendants, though not reduced to writing, is an enforceable contract, and that it has been breached by the defendants.

11. The plaintiff says that as result of the Ombudsman Commission investigation he was charged under the Criminal Code with misappropriation. In 2002 he was convicted by the National Court and sentenced to a term of imprisonment. He served four years at Beon Jail, Madang, and when he was released in 2006 he asked the defendants, pursuant to the 1999 agreement, to transfer the land to him. They refused, thereby breaching the contract.

12. He came to realise that Mr Manihia always had a scheme to scare him about the Ombudsman Commission investigation, in order to achieve his evil intentions and trick the plaintiff into transferring the land to the second defendant. He argues that the second defendant acquired title in the land by fraud, which is a justifiable reason under Section 33 of the Land Registration Act for the Court to quash its title and transfer it to the plaintiff.

The defendants' version of the agreement

13. Mr Manihia refutes the plaintiff's version of the 1999 agreement. Mr Manihia concedes that he, on behalf of the second defendant, entered into an oral agreement with the plaintiff regarding transfer of the Laurabada Avenue property: it would be transferred to the second defendant, which had provided services to the Madang Open electorate in the period from June to December 1999 to the value of K230,000.00. The money the plaintiff was using to purchase the land was not his own. It was public (Gaming Board) money. The second defendant was owed an additional sum exceeding K300,000.00 (a debt which was eventually satisfied by the Department of Finance) so the transfer of the land to the second defendant is properly regarded as part-payment of a debt.

Which version is the truth?

14. That is the natural question to ask but actually it is not the best question to ask. The question the Court must now address is whether the plaintiff has proven on the balance of probabilities that his is the correct version and that he entered into an agreement with the defendants in the terms he has pleaded.

15. A contract can be entered into orally or in writing or by a combination of those forms of agreement but whatever form it takes it must be clearly identifiable. If a dispute over interpretation or application of the contract ends up in court or there is a dispute as to the existence of a contract, the party seeking to prove its existence must precisely plead the details of the contract in the originating process. Who are the parties to the contract? When did it come into existence? What form is it in? Where was it entered into? Why was it entered into? (The State v Keboki Business Group Incorporated and Morobe Provinsel Gavman [1985] PNGLR 369, Veltro Ltd v Steven Liu Huang (2006) N4608).

16. Having pleaded its existence, the party relying on the contract must come to court with evidence of its existence. If it is a written contract, it must be adduced in evidence. If it is oral, there must be evidence of the oral communication that gave rise to its existence. In such cases, the who, when, what, where, why questions become extra critical.

17. The plaintiff has pleaded, in a barely adequate way, the existence of a contract. But the evidence as to when, where and how it was entered into is vague. He has attempted to corroborate his own evidence of the terms of the agreement by adducing affidavits by his wife, Annie Wama, and by Sir Hugo Berghuser.

18. Sir Hugo's evidence of his knowledge of the agreement is hearsay and of no probative value. Mrs Wama's evidence is of some value as she gives direct evidence of being present at a meeting between the plaintiff and Mr Manihia when they discussed the transfer of the land. She states that she was not happy with the agreement and that she often heard Mr Manihia say to the plaintiff "Big bro, don't worry, everything will be all OK. I assure you, I will transfer your house back to you as soon as your alleged misappropriation case is over". However, Mrs Wama's evidence is ultimately as vague as that of the plaintiff. She states that after she and the family lived in the Laurabada Avenue property for about a year, Mr Manihia "came to us one morning at about 9.30 am to talk with my husband regarding the change of title to Willing Pacific (PNG) Ltd". The date of this meeting is not stated. She indicates that it was about a year after the family moved in. As to the date that they moved in, this is unclear. Her affidavit does not even state the year that they moved in. Was it in 1999 (when the plaintiff states that he paid the purchase price)? If so, this meeting would have taken place in 2000. But according to the plaintiff's evidence, the agreement with the defendants was entered into in 2000. I view Mrs Wama's evidence with some scepticism. Ultimately it is unconvincing.

19. I agree that the alternative version of the agreement contended for by the defendants is not entirely convincing. It certainly seems an irregular arrangement to pay a debt for provision of services to a rather amorphous legal entity such as an electorate "in kind". But when it is considered that the plaintiff was convicted by the National Court in 2002 of dishonest misappropriation of public funds it becomes easier to accept the defendants' version of the agreement.

20. I have also taken into account evidence provided by the defendants that clearly suggests that the second defendant had, in fact, been engaged to provide scoping of various works and projects in the Madang Open electorate in 1999. There is an affidavit provided by Senior State Prosecutor Mr Camillus Sambua who prosecuted the case against the plaintiff in the National Court. Mr Sambua deposes that Mr Manihia gave evidence for the State that the second defendant had provided services to the electorate in 1999 to a value in excess of K600,000.00. Part of this debt (to the value of K230,000.00) was satisfied "in the form of a house located in Boroko". Mr Sambua deposed that the plaintiff in his evidence at the trial actually confirmed Mr Manihia's evidence as to the circumstances in which title to the Laurabada Avenue property was transferred to the second defendant.

21. I conclude that the plaintiff has not proven that his agreement with the defendants was in the terms that he claims. It is more likely that the version of the 1999 agreement presented by the defendants is the correct version.

2	HAS THE PLAINTIFF PROVEN THAT THE DEFENDANTS BREACHED THE AGREEMENT?

22. No. The plaintiff has not proven that it was a term of the 1999 agreement with the defendants that they were required, upon his request, to transfer title in the Laurabada Avenue property to him. The fact that he made such a request in 2006 and that it was refused has no legal consequences. He has failed to prove any breach of contract.

3	WAS IT AN ENFORCEABLE AGREEMENT?

23. If it had been found that the terms of the agreement between the plaintiff and the defendants were as contended for by the plaintiff, he would have been hard pressed to prove that the parties to the agreement intended to create legal relations, giving rise to an enforceable contract. A shared intention to create such relations is an essential element of an enforceable contract (NCDC v Yama Security Services Pty Ltd (2003) SC707, Steven Naki v AGC (Pacific) Ltd (2005) N2782, John Manau v Telikom (PNG) Ltd (2008) N3268).

24. If the plaintiff had succeeded in proving that the defendants agreed to transfer the property to him at his request, I would have been inclined to find that it was in the nature of a gentlemen's agreement, lacking an intention to create legal relations. It would have been unenforceable.

4	HAS A CAUSE OF ACTION IN BREACH OF CONTRACT BEEN ESTABLISHED?

25. No. The plaintiff has not proven that he had the agreement he claims to have had with the defendants. He has not proven any breach of contract. 

5	IS THIS A CASE OF FRAUD?

26. It is correct that the second defendant's title could be disturbed if the plaintiff could prove to the satisfaction of the Court that this was a case of fraud for the purposes of Section 33(1)(a) of the Land Registration Act, which states:

The registered proprietor of an estate or interest holds it absolutely free from all encumbrances except ... in the case of fraud. 

27. I have expressed the view in a number of cases that it not necessary for a plaintiff to prove actual fraud (eg Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109). I have applied the wide view of fraud favoured by the majority decision of the Supreme Court in Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215. Thus, if the circumstances of a grant, forfeiture or transfer of title are so unsatisfactory, irregular or unlawful, it is tantamount to fraud, warranting the setting aside of registration of title.

28. Here the plaintiff has failed to prove that there was an enforceable agreement to have the land transferred to him. He has fallen well short of proving actual fraud. He has failed to prove that the circumstances of the transfer to the second defendant were unsatisfactory, irregular or unlawful. Therefore he has failed to prove constructive fraud. This is not a case of fraud and the plaintiff has failed to make out a case for setting aside the second defendant's title.

6	WHAT DECLARATIONS OR ORDERS SHOULD THE COURT MAKE?

29. The plaintiff has failed to prove that the 1999 agreement between him and the defendants required the defendants, on his request, to transfer title in the Laurabada Avenue property to him. Without that proof his entire case has failed. All claims for relief must be refused. Costs will follow the event.

ORDER

(1)	The proceedings are wholly dismissed and all claims for relief are refused.

(2)	The plaintiff shall pay the costs of the proceedings to the defendants on a party-party basis, which shall, if not agreed, be taxed.

________________________________________________

Meten Lawyers: Lawyers for the plaintiff
Javati Lawyers: Lawyers for the defendants