N6362
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

CIA NO. 19 OF 2014

BETWEEN

LAVONGAI EQUITIES LIMITED 
Appellant
	 	
AND
HON. BENNY ALLAN, MP, The Minister for Lands and Physical Planning 
 First Respondent

AND
ROMILY KILA-PAT, The Departmental Head and Secretary of Department of Lands and Physical Planning 
 Second Respondent

AND
 THE INDEPENDENT STATE OF PAPUA NEW GUINEA 
 Third Respondent

Waigani: Makail, J
	2016: 20th & 22nd July 	

CIVIL APPEAL – Forfeiture of State Lease – Grounds of – Compliance with improvement covenant – Proof of – Notice to show cause – Good cause must be shown – Land Act, 1996 – Section 122

CIVIL APPEAL – Appeal on forfeiture of State Lease – Appeal hearing – Hearing de novo – Land Act, 1996 – Section 142

No cases cited:

Counsel:
Ms. G. Salika, for Appellant 
Ms. I. Mugugia, for Respondents 

JUDGMENT 
22nd July, 2016

1.	MAKAIL, J:  The Appellant appeals against two forfeiture notices issued in respect of a property, State Lease Portion 2049 dated 5th February and 11th June 2013 respectively, pursuant to section 142 of the Land Act, 1996.  Section 142 states that “[a]n interested person may appeal to the National Court on the forfeiture of a lease.”

2.	The appeal has proceeded as a hearing de novo, as parties had not only adduced evidence that was before the First Respondent but also relied on new or fresh evidence in the form of affidavits to either support or oppose the appeal.  The evidence are contained in the Appeal Book.

3.	The affidavits which were tendered afresh were, amongst others, by a Mr. Arthur Ugup, a Graduate Valuer in the employ of LJ Hooker Real Estate Agents and Auctioneers who deposed to having inspected the property and assessed it at K197,650.00 comprising of 1 X 2 bedroom house and extended area of K80,190.00, panel deck fence of K27,760.00 and drainage of K89,200.00; and the Second Respondent who deposed to the contrary, pointing out that the original decision to grant the lease to the Appellant was for residential purposes.

4.	That the Appellant was to build a residential village comprising of low to medium covenant houses inclusive of provision of necessary easements for electricity, water, drainage and sewerage and that had not occurred.

5.	The Second Respondent’s evidence is backed-up by the Application or Tender Form submitted by a company called Hoi Hoi No. 28 Pty Ltd for a grant of the Lease, Notice issued by the then Minister for Lands and Physical Planning Hon. Kala Swokin dated 20th November 1989 pursuant to section 57 of the old Land Act, Notice of Land Board Meeting dated 24th November 1989 and Minutes of Meeting and Recommendation by the Land Board dated 2nd January 1990.  These documents support the Respondents’ contention that the lease was issued for a specific purpose and that was to build a residential village.

6.	The Residential Lease was originally granted to Hoi Hoi No. 28 Pty Ltd on 18th April 1991 for a term of 99 years.  Hoi Hoi changed its name to Bulufaia Pty Ltd. Bulufaia with several other companies amalgamated with the Appellant in 2006.

7.	The Respondents alleged that the Appellant failed to comply with the improvement covenant of the lease, alleging that it failed to put up improvements to the value of K100, 000.00 within five years of the lease as stipulated in the lease.  It was for this reason that a notice to show cause dated 11th June 2012 was issued and served on the Appellant pursuant to section 122 of the Land Act.

8.	The Appellant denied that it failed to comply with this covenant alleging that it had put up improvements on the property in excess of K100, 000.00.  Its response in a letter to the Second Respondent dated 21st June 2012 bear witness to this.  The Respondents denied receiving this letter even though there is evidence that it was personally delivered to the office of the Second Respondent on 25th June 2012, a week after the notice to show cause was issued.

9.	Its response is further supported by a letter purportedly written by Andrew Dovaro an officer in the Department of Lands and Physical Planning who stated in the letter that he had carried out a site inspection of the property and confirmed a detached building located in it.

10.	After that, nothing further was heard from the Respondents until 28th February 2014 when it discovered from a publication in the National Gazette dated 14th February 2013 that the State Lease had been forfeited.  The forfeiture notice not only stated that it had failed to comply with the improvement covenant but also failed to pay rentals for more than six months and comply with the notice under section 122 (2) of the Land Act. 

11.	In any case, the Appellant contended that the evidence of Mr. Ugup the Graduate Valuer puts it beyond argument that the improved value of the property is in excess of K100,000.00 and there is no justification to forfeit the Lease.

12.	It is worthy to set out the reason for the notice to show cause dated 11th June 2012.  It states:

“(a)	You have neglected or failed to comply with improvement covenants and or conditions as stipulated in the land lease agreement....”.

13.	The lease stipulated the improvement as being buildings for residence to a minimum of K100,000.00 within five years of the commencement of the lease and to maintain these or similar improvements to the same value for the same purposes in good repair during the term of the lease.

14.	Despite the Respondents’ claim that they did not receive the Appellant’s letter of response dated 21st June 2012, I am satisfied that they did.  I am satisfied it was received by the Personal Assistant of the Secretary one Eono Pepena on 25th June 2012 as noted from the hand written notes on the subject letter.

15.	Where a notice to show cause is served on a lessee, section 122 (3) (b) of the Land Act implies that the lessee must show good cause why the lease must not be forfeited.  The onus is on the lessee to show good cause why the lease must not be forfeited.  The information that the lessee supplies or provides in the response to the notice to show cause must be sufficient to enable the Minister for Lands and Physical Planning or his delegate to form a view that good cause has been shown that the lease must not be forfeited.

16.	In this instance, the letter does not give sufficient details or any particulars of the improvements that were put up on the property by the Appellant.  As the lease was granted for the mentioned stated purpose and that the notice to show cause was quite specific as to non-compliance of its covenant, it would have been expected from the Appellant to give more information than what was given in that letter of response.

17.	Rather than showing good cause as to why the lease should not be forfeited, the letter referred to a letter from the Department of Lands and Physical Planning which the Appellant alleged confirmed that it had complied with the improvement covenant and attached a copy of the subject letter.  It further stated that the Department of Lands and Physical Planning Lease Manager one Andrew Dovaro admitted that there would have been an oversight on “our Officers (sic) part in their initial inspection of the property”.  That, there is a detached residence on site.

18.	In my view, the information contained in the letter does not establish good cause as to why the lease should not be forfeited.  It is my further view, that the Appellant’s reliance on the letter by Mr. Dovaro is no substitute nor does it relieve the Appellant from the duty imposed by section 122 (3) (b) of the Land Act to show good cause as to why the lease should not be forfeited. 

19.	As the hearing had proceeded on the basis that it was a hearing de novo, further evidence from the Appellant came from Mr. Ugup whose evidence was that the improvement value was in excess of K100,000.00.  According to him, the sum of K197,650.00 is the market value of the improvement and arrived at on the basis of “As is” basis. 

20.	A further affidavit of one Ronald Dizon the Business Development Manager of the Appellant annexed three photographs.  The first photograph depicted what happened to be a residential house and fence within and at the corner of the property.  The second depicted a storm water drainage and the last depicted a extended vacant space.  

21.	The evidence from the Second Respondent went further asserting that what has been put up by the Appellant does and did not comply with the improvement covenant as it was supposed to build a residential village and to date it has not.

22.	No submission was made in opposition to the Second Respondent’s assertion.  The Appellant focussed on the improvement already put up on the property which it asserted was in excess of K100, 000.00.   There is no evidence as to when the improvements were made on the property but the lease states that improvements must be made within five years after the commencement of the lease. 

23.	There is no evidence that further improvements have been made following the building of the existing residential house, fence and drainage.  While it is acknowledged that improvements have been made, no further improvements have been made when the notice to show cause was issued in June 2012.  In my view, given that the minimum improvement value, being K100, 000.00 makes a point that the lessee being the Appellant was required to put up further improvements on the property.   

24.	This proposition is consistent with the condition of the lease that the Appellant is “to maintain these or similar improvements to the same value for the same purposes in good repair during the term of the lease.”

25.	It would be also consistent with the original decision to grant the lease to the Appellant and further supports the Second Respondent’s assertion that the Appellant was to build a residential village inclusive of all the necessary easements.  The evidence presented so far by the Appellant falls short of establishing this.  Given this I am not satisfied that the Appellant has shown good cause why its lease should not be forfeited.  It follows that it has failed to establish that the forfeiture was erroneous.

26.	The notice of forfeiture was not served on the Appellant.  The Appellant found out through a publication in the National Gazette.  In my view, the failure to serve the notice of forfeiture is mandatory but not fatal to the forfeiture in this instance because the Appellant was given prior notice of the State’s intention to forfeit the lease by way of the notice to show cause and it had responded.  It was afforded an opportunity to be heard and it had prior to the forfeiture.  No adverse inference can be drawn from this failure.

27.	The notice also stated further grounds for the forfeiture but in my view, the centre of dispute between the parties was in relation to whether or not the improvement covenant had been complied with.  It is, therefore, not necessary to address them. 

28.	The appeal must fail.  It is dismissed.  Costs shall follow the event.

_____________________________________________________

Young & Williams Lawyers: Lawyers for the Appellant
Solicitor-General:	Lawyers for the Respondents