N6159

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 301 OF 2010

BETWEEN

VITUS KAIS, PETER SIARUP, TOM BAMATU, WOLEF BAMATU, MANUEL AMBAT, JULIUS BAMATU, JOHN SAPURI, SIM SIPIEL, MEPI VITUS, ERLBERTH SIARUP, TARIUS SIARUP, JUAKIM BUNAM, JAUL SAGUI AND JOHN DAP
First Plaintiffs

MASUBA LAND GROUP INCORPORATED
Second Plaintiff

V

SALI TAGAU
First Defendant

SELON LIMITED
Second Defendant

TROPIC TIMBERS LIMITED
Third Defendant

PEPI KIMAS, SECRETARY, DEPARTMENT OF LANDS & PHYSICAL PLANNING
Fourth Defendant

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fifth Defendant

Madang: Cannings J
2014: 3 December And 2015: 21 April
2016: 15 January

LAND – Government land – State Leases – Indefeasibility of title – Alleged fraud in granting of State Leases – Meaning of fraud – Whether a case of constructive fraud.

LIMITATION PERIODS – Whether an action commenced more than 10 years after date of alleged fraud is time-barred – Frauds and Limitations Act, Sections 16, 18. 

REMEDIES – Appropriate relief where State Lease found to have been granted in a case of fraud – Whether order for forfeiture of Lease should be made. 

Facts

The plaintiffs claimed that the second defendant, with the assistance of the first defendant, fraudulently became registered proprietor of a State Lease over agricultural land. The plaintiffs claimed that they were the traditional owners of the land, that it was the National Government's intention to transfer the land to them as the traditional owners, that the first and second defendants falsely represented to the National Government that the second defendant was a company representing the interests of the traditional owners and that the State Lease was granted on that false premise. The plaintiffs sought orders that the second defendant's title be forfeited and transferred to them. The first and second defendants argued as a preliminary issue that the proceedings should be summarily dismissed for being time-barred under the Frauds and Limitations Act. As to the merits of the claim, they denied all allegations of fraud and argued that the second defendant had been lawfully granted the State Lease by a tender process and that it was under no obligation, by any trust, express or implied, or any other arrangement, to deal with the land for the benefit of the plaintiffs. The third defendant is a company that lent money to the second defendant so that the second defendant could acquire the Lease. No specific relief is sought against it, but it filed a cross-claim, mainly against the first and second defendants, which has not been pursued, and tends to support the plaintiffs. 

Held:

(1)	The proceedings were not time-barred by Section 16(1) of the Frauds and Limitations Act as: (a) this was not an action founded on simple contract or tort or any other form of action covered by Section 16(1); and (b) the proceedings are properly regarded, for the purposes of Section 18 of that Act, as a claim for an injunction and other forms of equitable relief, in which case Section 16 does not apply. 

(2)	The granting of the State Lease to the second defendant was a case of fraud as it had been represented to the State, prior to granting the State Lease, that the second defendant was a company representing the interests of the plaintiffs, when, in fact, it was not. A declaration was made in those terms. 

(3)	A further declaration was made that the granting of that Lease and the subsequent granting of interests in the land covered by the Lease, including State Leases granted or transferred as a result of the subdivision of that land, are liable, subject to a further hearing or agreement between the parties, to be set aside, forfeited or transferred or subject to such other orders of the Court, as are necessary to do justice in the circumstances of this case.

(4)	The question of what further declarations and orders should be made will be addressed at a further hearing. 

Cases cited

The following cases are cited in the judgment:

Elizabeth Kanari v Augustine Wiakar (2009) N3589
Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215
Helifix Group of Companies Ltd v PNG Land Board (2012) SC1150
Hi-Lift Company Pty Ltd v Miri Setae [2000] PNGLR 80
Kapiura Trading Ltd v Bullen (2012) N4903
Koitachi Ltd v Walter Schnaubelt (2007) SC870
Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120
Lae Rental Homes Ltd v Viviso Seravo (2003) N2483
Mamun Investment Ltd v Nixon Koi (2015) SC1409
Mark Lakani v Gabe Ikupu (2015) N6067 
Mosoro v Kingswell Ltd (2011) N4450
Mudge v Secretary for Lands [1985] PNGLR 387
NCDIC v Crusoe Pty Ltd [1993] PNGLR 139
Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109
Ramu Nickel Ltd v Temu (2007) N3252
Steamships Trading Company Ltd v Garamut Enterprises Ltd (2000) N1959
Tau Gumu v PNGBC (2002) N2251
West New Britain Provincial Government v Kimas (2009) N3834
Yakananda Business Group Inc v Minister for Lands (2001) N2159 

STATEMENT OF CLAIM

This was a trial in which the plaintiffs challenged the granting of a State Lease over Government land on the ground of fraud. 

Counsel

B B Wak, for the Plaintiffs
B W Meten, for the First & Second Defendants
L A Kari, for the Third Defendant

15th January, 2016 

1. CANNINGS J: This case is about an area of Government land of 416.9 hectares in Madang District known as Mililat Plantation. The land was made the subject of a 99-year State Lease in the year 2000, when it was described as Portion 237, Milinch of Kranket, Fourmil Madang. The State Lease was granted to the second defendant, Selon Ltd. The land was later subdivided and described as Portions 1056, 1057, 1058, 1059, 1060 and 1061. State Leases were granted over all those portions to Selon Ltd, which has since transferred its interests in one or more of those portions to persons who are not parties to these proceedings.

2. The first plaintiffs, Vitus Kais and 13 others, say that they, and clans they represent, are the traditional owners of Mililat Plantation. They are challenging Selon Ltd's title. They claim that Selon Ltd, abetted by its managing director, the first defendant, Sali Tagau, fraudulently became registered proprietor of the State Lease over Portion 237 in 2000. The plaintiffs claim that it was the National Government's intention to transfer the land to them as the traditional owners, that the first and second defendants falsely and dishonestly represented to the National Government that the second defendant was a company representing the interests of the traditional owners and that the State Lease was granted on that false premise. The plaintiffs seek orders that the second defendant's title be forfeited and transferred to them. 

3. The first and second defendants argue as a preliminary issue that the proceedings should be summarily dismissed for being time-barred under the Frauds and Limitations Act, as the alleged fraud was committed in 1999 but these proceedings were not commenced until 2010. As to the merits of the claim, they deny all allegations of fraud. They say that Selon Ltd was lawfully granted the State Lease by a tender process and that it is under no obligation, by any trust, express or implied, or any other arrangement, to deal with the land for the benefit of the plaintiffs. 

4. The third defendant, Tropic Timbers Ltd, is a company that lent money to the second defendant so that it could acquire the Lease. No specific relief is sought against the third defendant, but it filed a cross-claim, mainly against the first and second defendants, and tends to support the plaintiffs. It is not clear whether the third defendant wishes to pursue its cross-claim, and the merits of the cross-claim are not addressed in this judgment. The fourth and fifth defendants, the Secretary for Lands and Physical Planning and the State, have not participated in the proceedings.

5. The case is essentially a dispute over title to Government Land between the plaintiffs and the first and second defendants. 

ISSUES

6. The following issues arise:

1 Are the proceedings time-barred?

2 Did Selon Ltd obtain the land by fraud?

3 What declarations or orders should the Court make?

1	ARE THE PROCEEDINGS TIME-BARRED?

7. Mr Meten, for the first and second defendants, submitted that the proceedings are time-barred by Section 16(1) (limitation of actions in contract, tort, etc) of the Frauds and Limitations Act, which states:

Subject to Sections 17 and 18, an action—

(a) that is founded on simple contract or on tort; or

(b) to enforce a recognisance; or

(c) to enforce an award, where the submission is not by an instrument under seal; or

(d) to recover any sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture,

shall not be brought after the expiration of six years commencing on the date on which the cause of action accrued.

8. Mr Meten submitted that the alleged fraud on which the plaintiffs rely occurred on 9 December 1999, which was the date on which their cause of action accrued. They had until 9 December 2005 to commence the proceedings. But these proceedings were not commenced until 23 March 2010, which exceeded the statutory time limit by more than four years.

9. I reject that submission for two reasons. First, this is not an action founded on simple contract or tort or any other form of action covered by Section 16(1) of the Frauds and Limitations Act. Though in some cases (eg Mark Lakani v Gabe Ikupu (2015) N6067) a challenge to a defendant's title to Government land has been regarded as an action founded on the tort of fraud, and therefore subject to the six-year limitation period, the present case should not be categorised in that way. 

10. The plaintiffs' amended statement of claim filed on 4 April 2012 does not plead the tort of fraud; and nor did it have to. Though it was not expressly pleaded as a case of constructive fraud for the purposes of Section 33(1) of the Land Registration Act, I consider that that is how the statement of claim is properly regarded. There are many cases now applying the principle established by the Supreme Court in Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215 that a registered proprietor's State Lease can be annulled in a case of constructive fraud and that proof of actual fraud is not necessary. None of those cases say that constructive fraud is necessarily the equivalent of the tort of fraud. 

11. The second reason the action is not time-barred is that it falls within Section 18 (claims for specific performance, etc) of the Frauds and Limitations Act, which states:

Section 16 does not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief.

12. Section 18 requires the Court to assess the nature of the primary relief sought by the plaintiffs. If it is equitable relief, the proceedings are not subject to the time limitation in Section 16. The primary remedies sought by the plaintiffs are declarations that the second defendant obtained the State Lease over Portion 237 (and other leases to the subdivided land) by fraud and orders as to the disposition of the second defendant's interests in the land. The declarations are not sought on the basis of breach of contract or the tort of fraud or other common law principles, but on equitable principles. They are therefore equitable remedies (Mamun Investment Ltd v Nixon Koi (2015) SC1409). Likewise with the orders. They are sought on the basis of equitable principles. They are properly regarded as mandatory injunctions. They are also, in this case, equitable remedies. 

13. There is a third reason I was inclined to reject the argument that the case is time-barred, but which, ultimately, I do not rely on. The evidence shows that the plaintiffs only became aware of the alleged fraud in 2008 when Selon Ltd commenced summary ejectment proceedings against them in the District Court. Mr Wak for the plaintiffs put forward the enticing argument that the cause of action did not accrue until 2008, when the plaintiffs became aware of the fraud that had occurred. He based the argument on the decision of Kandakasi J in Tau Gumu v PNGBC (2002) N2251. His Honour's reasoning, based squarely on principles of justice and equity, made perfect sense to me and left to my own devices I would have followed it. 

14. However the recent decision of the Supreme Court (Sakora J, Hartshorn J and Poole J) in Mamun Investment Ltd v Nixon Koi (2015) SC1409 overruled Guru. The Court took the view that the Gumu approach relied too heavily on amendments to the relevant British legislation that are not reflected in the PNG legislation. I am bound to follow the reasoning of the Supreme Court. Therefore I do not follow Gumu nor do I rely on it as a reason for rejecting Mr Meten's submission that the proceedings are time-barred. 

The answer to the question of whether the proceedings are time-barred is no. 

2	DID SELON LTD OBTAIN THE LAND BY FRAUD?

15. The plaintiffs acknowledge that Selon Ltd became registered proprietor of the State Lease over Portion 237 in September 2000 and became the registered proprietor of all six State Leases when Portion 237 was subdivided in December 2001. They also acknowledge that under Papua New Guinea's Torrens Title system of land registration the general principle is that once a lease of land from the State to a person is registered, an indefeasible title is conferred on the registered proprietor, subject only to the exceptions in Section 33(1) (protection of registered proprietor) of the Land Registration Act. They rely on Section 33(1)(a), which states:

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

16. In support of their argument that this was a case of fraud, the plaintiffs rely on three documents; two of which, they say, a number of them signed on the insistence of the first defendant, Sali Tagau, in the 10-month period prior to registration of the State Lease.

17. The first is a statement under Selon Ltd letterhead dated 9 December 1999 in the following terms:

We the undersigned hold an interest in Selon Limited and hereby agree that Mililat land, on payment of the overdue amount be transferred into the name of Selon Limited.

PANUFON CLAN (Kananam village)
1.	Nickolas Tagau Lua
2.	Sali Tagau
3.	Joseph Balim Tagau
4.	Philip Matei Tagau

TIMISO GROUP (Malmal village)
1.	Andrew Nak
2.	Nigus Gigilon Gogi
3.	Maksil Mot
4.	Matei Kaug
5.	Francis Mot

MATANAN CLAN (Kananam village)
1.	Paul Basan Masai
2.	Martin Kikai
3.	George Malot

ABO CLAN (Mabonob and Dapu village)
1.	Philip Lahek

GAMARMATU CLAN
1.	Bernard Nalul
2.	Joseph Maub
3.	Augustine Wingiak

18. The second document is a statutory declaration made on 22 March 2000 in the following terms:

We the following principal Clan Leaders do solemnly and sincerely declare that Selon Limited is the true landowner company put in place of Mililat Development Corporation to act on behalf of its people to safeguard the interest of its members and the people of Kananam/Malmal/Riwo and Mabonob villages.

We the undersigned represent the following villages.

1.	Joe Balim, principal clan leader – Panufon clan (Kananam village)
2.	Paul Basan Masai, principal clan leader – Matanan clan (Kananam village)
3.	Maksil Mot, principal clan leader – Sousia clan (Malmal village)
4.	Andrew Nak, principal clan leader – Tilu clan (Malmal village)
5.	Gileng Sabub, principal clan leader – Asonanen clan (Riwo village)
6.	Philip Like, principal clan leader – Abo clan (Dapu/Mabonob village)

19. The third document the plaintiffs rely on is a letter dated 9 December 1999 written by Sali Tagau in his capacity as Chairman of Selon Ltd, under Selon Ltd letterhead, addressed to "Dept of Lands – Northern Region, PO Box 5665 Boroko National Capital District", on the subject of "Mililat Land", in the following terms:

Please be informed that Selon Limited is a registered company under the names of all clans namely Panufon Clan, Timiso Group, Matanan Clan, Abo Clan and Gamarmatu Clan.

In other words, Selon Limited represents these five clans in terms of business affairs.

Enclosed is a list of signed representatives for each clan who agree to have the land title transferred into the name of Selon Limited once the payment of overdue amount is done.

20. The plaintiffs argue that these documents gave the impression, intentionally so, that Selon Ltd was a landowner company set up to represent the interests of the traditional owners of the Mililat Plantation land, which was a false impression. It was a false representation as the company was never established for that purpose. Even though a number of the plaintiffs believed for a long time that that was the case, Selon Ltd has never been operated for that purpose. 

21. I uphold that argument. There is ample evidence before the Court from the Company Register to show that the shareholdings and directorships of Selon Ltd are not consistent with it being a customary landowner company. It is reasonably to be inferred from the evidence that Selon Ltd was granted the State Lease over Portion 237 because it was regarded by the relevant authorities (the fourth and fifth defendants) as the genuine corporate representative of the traditional owners of the land. I find that the Lease was granted on that false premise. 

22. The first and second defendants have adduced no direct evidence to rebut the plaintiffs' evidence. Mr Tagau has testified that Selon Ltd was granted the Lease following a tender process, but provides no details and no evidence of that process. 

23. I am satisfied in these circumstances that the plaintiffs have proven a case of "fraud", according to the meaning of that term formulated by the Supreme Court (Amet J and Salika J, Brown J dissenting) in Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215. That is, the circumstances of the grant of the State Lease to Selon Ltd were so unsatisfactory and irregular that it was tantamount to fraud, warranting the setting aside of registration of title. 

24. This wide view of "fraud" – it includes irregularities that are tantamount to fraud and constructive fraud – has been applied in many National Court cases. For example: Steamships Trading Company Ltd v Garamut Enterprises Ltd (2000) N1959, Hi-Lift Company Pty Ltd v Miri Setae [2000] PNGLR 80, Yakananda Business Group Inc v Minister for Lands (2001) N2159, Lae Rental Homes Ltd v Viviso Seravo (2003) N2483, Ramu Nickel Ltd v Temu (2007) N3252, Elizabeth Kanari v Augustine Wiakar (2009) N3589, West New Britain Provincial Government v Kimas (2009) N3834, Mosoro v Kingswell Ltd (2011) N4450, Kapiura Trading Ltd v Bullen (2012) N4903, Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109. 

25. In Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120 the Supreme Court confirmed that the wide view of fraud emanating from Emas Estates is the relevant test to apply. I have applied it here and conclude that this was a case of fraud.

26. If, however, a narrower view of "fraud", such as that taken by the Supreme Court (Gavara-Nanu J, Mogish J and Hartshorn J) in Koitachi Ltd v Walter Schnaubelt (2007) SC870, were regarded as the relevant test – ie that it is not sufficient to prove constructive fraud, it is necessary to prove actual fraud on the part of the registered proprietor – I would reach the same conclusion. 

27. It has been proven on the balance of probabilities that deliberately false representations were made by the first and second defendants that led to Selon Ltd being granted the State Lease. This was a case of actual fraud committed by the registered proprietor. 

28. Whichever view of fraud is taken, I conclude that Selon Ltd obtained the land by fraud. This was a case of fraud for the purposes of Section 33(1)(a) of the Land Registration Act. 

3	WHAT DECLARATIONS OR ORDERS SHOULD THE COURT MAKE?

29. I will make a declaration to the effect that Selon Ltd was granted the State Lease over Portion 237 in a case of fraud. The question of what orders should flow from that is rather complex due to Portion 237 being subsequently subdivided into six smaller portions, one or more of which has apparently been transferred to persons who are not parties to these proceedings. So I will order that there be a further hearing to determine the final orders and declarations that will dispose of the proceedings. 

30. I encourage the parties, particularly the plaintiffs and the first and second defendants, to discuss the remaining areas of dispute and attempt to reach agreement. I have considered referring the matter to mediation, but it has been tried in the past and was not fruitful. It is better to continue with a trial. There also remains the issue of the third defendant's cross-claim. This must be finalised soon. 

ORDER

31. The Court declares and orders that:

(1)	The proceedings are not time-barred by Section 16(1) of the Frauds and Limitations Act. 

(2)	The granting, on or about 27 September 2000, of a 99-year State Lease over Portion 237, Milinch of Kranket, Fourmil Madang, commonly known as Mililat Plantation, subsequently subdivided and described as Portions 1056, 1057, 1058, 1059, 1060 and 1061, to the second defendant, was, for the purposes of Section 33(1)(a) of the Land Registration Act, a case of fraud. 

(3)	The granting of that Lease and the subsequent granting of interests in the land covered by the Lease, including State Leases granted or transferred as a result of the subdivision of that land, are liable, subject to a further hearing or agreement between the parties, to be set aside, forfeited or transferred or subject to such other orders of the Court as are necessary to do justice in the circumstances of this case.

(4)	The question of what further declarations and orders should be made shall, subject to any agreement between the parties, be addressed at a further hearing, and for that purpose there shall be a directions hearing on 22 January 2016 at 9.00 am.

(5)	The third defendant shall appear at the directions hearing and clarify its position regarding its cross-claim, failing which the cross-claim is liable to be dismissed for want of prosecution on the Court's own motion. 

(6)	The question of costs is deferred for submissions at a later hearing.

Judgment accordingly.
______________________________________________________________
Kunai & Co Lawyers: Lawyers for the Plaintiffs 
Meten Lawyers: Lawyers for the First & Second Defendant
PNG Legal Services Lawyers: Lawyers for the Third Defendant