N7043

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS No.503 of 2014

BETWEEN: 
GEORGE KILA
Plaintiff

AND:
SHICHUN ZHU & YUE JING SUN as joint tenants
First Defendant

AND:
LUCAS BAZO as Bank Officer of the National Development Bank
Second Defendant

AND:
NATIONAL DEVELOPMENT BANK
Third Defendant

AND:
BENJAMIN SAMSON, Acting Registrar of Titles
Fourth Defendant

Waigani:   David, J
2017:   21 March & 6 April

LIMITATIONS OF ACTIONS – sale of property by mortgagee – allegations of fraud and breach of contract - claim for declarations and interim injunctions – equitable relief - whether action founded on simple contract or an action upon a speciality - Frauds and Limitations Act, Sections 16 & 18.

PNG cases cited:

John Hiwi v Rendle Rimua (2015) SC1460  
Mamun Investment Ltd v Nixon Koi (2015) SC1409
Oil Search Limited v Mineral Resources Development Corporation Limited (2010) SC1022
Simon Puraituk v The State (2007) N3204

Overseas cases cited:

Gibbs v Guild (1881) 8 QBD 296
R v Williams [1942] 2 All ER 95

Treatises cited:

Halsbury’s Laws of England, Fourth Edition, Reissue, Volume 28
Osborn’s Concise Law Dictionary, 9th Edition, Sweet & Maxwell, London

Counsel:

Timil L. Tape, for the Plaintiff
Steven Ranewa, for the Third Defendant

RULING

6th April, 2017

1.	DAVID, J:	INTRODUCTION: This is a ruling on an application moved by the third defendant pursuant to a notice of motion filed on 20 June 2016 essentially seeking orders to dismiss the entire proceedings for; abuse of process under Order 8 Rule 27(1) and Order 12 Rule 40(1)(c) of the National Court Rules; and for being time-barred under Section 16(1)(a) of the Frauds and Limitations Act 1988.

2.	On 21 March 2017 after hearing the application, I gave an ex tempore ruling with regard to the relief sought for abuse of process.  The third defendant had argued that there was no need for the plaintiff to institute these proceedings against the third defendant on the basis that similar issues raised in these proceedings have already been raised by his business partner Jim Tapako in proceedings commenced by WS No.652 of 2007 against the third defendant in relation to the property.  I accepted the plaintiff’s submission that the proceedings were not an abuse of process and refused to grant the relief.  

EVIDENCE

3.	In support of its motion, the third defendant relies on the Affidavit of Suzanne Unumba sworn on 17 June 2016 and filed on 20 June 2016. 

4.	The plaintiff contests the application. He relies on the affidavits of: 

(a)	George Kila sworn and filed on 21 May 2014 (the first affidavit);
(b)	George Kila sworn and filed on 22 May 2014 (the second affidavit);
(c)	George Kila sworn on 10 June 2014 and filed on 11 June 2014 (the third affidavit);
(d)	Joseph Ng sworn on 16 June 2016 and filed on 17 June 2016.

PLAINTIFF’S ALLEGATIONS AND CLAIM

5.	 By a writ of summons endorsed with a statement of claim filed by the plaintiff on 21 May 2014 against the defendants which was amended by the amended writ of summons endorsed with a statement of claim and filed on 11 June 2014, the plaintiff makes the following allegations. He and one Jim Tapako are legally the registered proprietors as joint tenants of all that piece or parcel of land described as Allotment 4 Section 144 Badili, Matirogo in the National Capital District (the property).   On or about 12 December 2000, they mortgaged the property to the third defendant, the National Development Bank formerly known as the Rural Development Bank as security for a loan.   The property was leased out to one Joseph Ng, a foreigner of Chinese origin at a monthly rental of K3,500.00 for a period of 5 years.  The plaintiff fell into arrears and the third defendant served him with demand notices. 

6.	Given his precarious financial situation and being in arrears, he authorised Joseph Ng to sublease the property to the first defendants who are of Chinese origin and to arrange with the first defendants to make an advance payment of K380,000.00 to cover for a rental period of 5 years directly to the third defendant for the settlement of the outstanding loan.  On 25 March 2005, the first defendants and Joseph Ng approached the third defendant to waive the tender for the sale of the property as the first defendants were going to settle the outstanding loan.  On 13 April 2005, Joseph Ng entered into a sub-lease agreement (the sub-lease agreement) with the first defendants reflecting terms that; payments made by the first defendants to the third defendant in settlement of the plaintiff’s arrears and the loan generally were to be treated as advance rental payments for the property; the amount payable also covered the optional rental period of 5 years inclusive of the remaining period of 1 year and 6 months; and that upon settlement of the loan by the sureties, the property would revert to the plaintiff.   On 21 May 2005, the third defendant agreed to the proposal by Mr Ng and the first defendants to settle the outstanding loan, waived the tender of the property and allowed the loan repayment to be made and the mortgage was effectively discharged.

7.	Soon after the settlement of the loan and the discharge of the mortgage, the first defendants conspired or colluded with the second defendant, bank officer employed by the third defendant and fraudulently and in breach of the sub-lease agreement effected the sale of the property to the first defendants and subsequently had the fourth defendant erroneously transfer the title to the property to the first defendants, particulars of which are:  
	
Particulars of fraud

(a)	The first defendants and second defendant conspired or colluded with each other and deceitfully treated the loan repayments made by the first defendants on behalf of the plaintiff from the advance payment for the 5 year rent as purchase moneys from the first defendants for the purchase of the property.
(b)	The first defendants and second defendant conspired or colluded with each other to deceitfully divert the moneys paid for the plaintiff’s loan and apply them for the benefit and use of the first defendants to purchase the property.
(c)	The first defendants and second defendant conspired or colluded with each other to deceitfully divert the moneys paid for the loan repayments made by the first defendants on behalf of the plaintiff from the advance payment for the 5 year rent as purchase moneys from the first defendants for the direct purchase of the property.
(d)	The first defendants and second defendant conspired or colluded with each other by providing to the fourth defendant false information and deceitfully obtained title to the property.     
 	
Particulars of breach of the sub-lease agreement

(a)	The first defendants deceitfully colluded with the second defendant to treat or divert the moneys paid for the settlement of the loan as moneys for their purchase of the property.
(b)	The first defendants colluded with the second defendant to treat or divert the advance rental payment for 5 years which was used for the settlement of the loan as purchase money for the property.   

8.	The plaintiff therefore seeks the following principal relief:

(a)	a declaration that the transfer of title from the plaintiff and Jim Tapako of Allotment 4 Section 144 Badili, Matitorgo in the National Capital District was illegal and therefore null and void.
(b)	a declaration that the sale of the property to the first defendant by the second defendant was fraudulently done therefore null and void.
(c)	an order that the fourth defendant restore the plaintiff and his business partner Jim Tapako back to the Register as the legal title holder of the property.
(d)	General damages against the first, second and third defendants.
(e)	an interim injunction restraining the first defendants, their servants or agents from selling, leasing or disposing of the property to other persons or entities pending the determination of the substantive proceedings.  
(f)	an interim injunction restraining the fourth defendant from entertaining any request from any interested party including the first defendants for the further transfer of the property.  

9.	The third defendant filed its defence on 20 August 2014. It denied the allegations of fraud and breach of agreement. 

10.	The plaintiff filed his reply with leave of the Court on 23 February 2016.  

SUMMARY OF PLAINTIFF’S EVIDENCE

George Kila

11.	He is also known as George Kia. He is a businessman.  He, with Jim Tapako, are legally the registered proprietors of the property as joint tenants.  The Instrument of Transfer transferring the property to the first defendants as joint tenants bearing registration number S.38926 was produced for registration at the Office of the Registrar of Titles on 18 May 2005 and entered on 26 May 2005.  The Memorandum of Mortgage bearing registration number S.38927 was also produced for registration at the Office of the Registrar of Titles on 18 May 2005 and entered on 26 May 2005.  Copies of the title showing the appropriate endorsements are annexed; to the first affidavit as Annexure “A”; and to the second affidavit as Annexure “A” as well.  There is erected on the property a high covenant building comprising 2 floors. 

12.	The property was mortgaged to the forerunner of the third defendant as security for a loan.  A copy of the memorandum of mortgage dated 11 September 2000 is annexed to the first affidavit as Annexure “B”. 

13.	 On 1 December 2001, he entered into a rental agreement with one Joseph Ng of Chinese origin of NWM Trading Ltd for a period of 5 years at a monthly rental of K3,500.00 commencing on 15 November 2001 (the Rental Agreement). A copy of the Rental Agreement dated 1 December 2001 is annexed to the first affidavit as Annexure “C”.

14.	He experienced financial hardships between years 2002 and 2005 and was not able to service the loan and this resulted in the bank issuing demand notices to him.   Upon receipt of the notices of demand, he discussed his dire situation with Mr Ng and it was resolved that Mr Ng sub-lease the property to the first defendants who are both of Chinese origin.  

15.	Since the tender process had already begun for the sale of the property by the bank exercising its power under the mortgage, Mr Ng and the first defendants, as joint business partners, approached the third defendant at its Boroko Branch and requested the bank to waive the tender and accept repayment of the outstanding loan of K380,000.00 by the first defendants on his behalf to be facilitated by the Westpac Bank. A copy of a letter written under the letterhead of NWM Trading Limited addressed to the Senior Branch Manager of the third defendant’s Boroko Branch dated 25 March 2005 reflecting the request is annexed to the first affidavit as Annexure “E”.
 
16.	On 13 April 2005, Mr Ng entered into a Joint Business Agreement (the Joint Business Agreement) with the first defendants whereby it was principally agreed that Mr Ng would sublease the property to the first defendants and that the first defendants would in turn make an advance payment equivalent of the total rent for 5 years which was the amount of loan due and outstanding at the time.    A copy of the Joint Business Agreement dated 13 April 2005 is annexed to the first affidavit as Annexure “D”.  

17.	The first defendants then organised a loan with Westpac Bank in the sum of K380,000.00 and fully settled his outstanding loan with the third defendant and effectively discharging his obligations under the mortgage and for the property to revert to him unencumbered.  The third defendant allowed the repayment of the loan by the first defendants and waived the tender.  A copy of a notice or letter put out or given to the public by the third defendant with respect to the tender of the property dated 21 May 2005 and addressed “TO WHOM IT MAY CONCERN” is annexed to the first affidavit as Annexure “F”.  

18.	After a passage of 5 years since his loan was settled, he began forwarding rental invoices to the first defendants, but they ignored them or refused to pay them.  Their conduct prompted him to conduct a title search at the Department of Lands & Physical Planning which revealed that his title was deceitfully transferred to the first defendants.  He made this discovery in June 2010.  Copies the title showing the appropriate endorsements are annexed to the first affidavit as Annexure “A” and “G” and to the second affidavit as annexure “A”.  Copies of a letter under the letterhead of Kia Trading Limited addressed to the first defendants dated 26 January 2012 and an invoice addressed to the first defendants dated 26 January 2012 are annexed to the first affidavit as Annexure “H”.  

19.	He made enquiries with the third defendant at Waigani which revealed that the first defendants returned to the bank soon after settling his loan and colluded with the second defendant and got him to treat or divert the moneys they paid for the settlement of his loan as purchase moneys for the property and deceitfully effected the sale of the property purportedly exercising the bank’s power of sale under the mortgage.    Annexed to the first affidavit as annexures “I1” and “I2”are copies of statutory declarations both declared by the second defendant on 28 April 2005 and used in the facilitation of the transfer of the property to the first defendants.  

20.	Having discovered the fraudulent sale of the property by the third defendant to the first defendants facilitated by the second defendant, he approached the fourth defendant and presented him with relevant information about the fraudulent sale including the Instrument of Transfer by Mortgagee Exercising Power of Sale dated 12 April 2005.   A copy of the relevant Instrument of Transfer is annexed to the first affidavit as Annexure “J”. 

21.	On 6 January 2012, he wrote to the first defendants under the letterhead of Kia Trading Limited, which he copied to Mr Ng, expressing his dissatisfaction about the conduct of the first defendants in engaging in the fraudulent sale and purchase of the property contrary to what was originally agreed to in good faith.    A copy of the relevant letter is annexed to the first affidavit as Annexure “K”.   Mr Ng responded to his letter by his letter to him of 13 January 2012 indicating that the transfer of the title to the first defendants was fraudulently done. A copy of the relevant letter is annexed to the first affidavit as part of Annexure “L”.  Also annexed to the first affidavit forming part of Annexure “L” is a copy of a letter under the letterhead of NWM Trading Limited addressed to the Secretary of the Department of Lands & Physical Planning dated 2 July 2012 and signed by Joseph Ng and witnessed by a David Philip informing the Department of the fraudulent manner in which the property was transferred to the first defendants to the detriment of the plaintiff.

22.	By his letter addressed to the Minister for Lands & Physical Planning, Hon Benny Allan MP dated 17 June 2013, he requested the Minister’s intervention in restoring his name in the Register as the registered proprietor due to the fraudulent manner in which the first defendants had obtained title to the property.   A copy of the relevant letter is annexed to the first affidavit as Annexure “M”.  The Office of the Minister for Lands & Physical Planning then wrote to the first defendants on 6 November 2013 requesting an explanation as to how they got title to the property.  A copy of the relevant letter is annexed to the first affidavit as Annexure “N”.   The Office of the Minister for Lands & Physical Planning through the First Secretary, Luke Kegoyatayoyu wrote to him on 22 April 2014 informing him that he had been directed by the Minister to advise the Secretary and the Registrar of Titles to recall the title and he was advised to follow up with them.    A copy of the relevant letter is annexed to the first affidavit as Annexure “O”.   

Joseph Ng

23.	He is a businessman of Chinese origin.  He has been a resident of Papua New Guinea since 1986.  He is the principal owner of NWM Trading Limited.  He was operating out of the property after entering into a lease agreement with the plaintiff in 2001.

24.	In December 2001, he, on behalf of NWM Trading Limited, entered into a Business Lease Agreement with the plaintiff of Kia Trading Limited to lease the property at a monthly rental of K3,500.00 for a period of 5 years commencing on 15 November 2001 with an option to renew upon expiry of the term in 2006.  A copy of the lease agreement is annexed to his affidavit as annexure “A”.
 
25.	Sometime after the execution of the lease agreement, he accommodated the first defendants, Shichun Zhu (Charlie) being a good friend and Yue Jing Sun being Shichun Zhu’s de facto wife at the property.  The first defendants were living with him whilst operating a coffee shop at a space leased from Brian Bell & Co. Limited at Boroko which was later taken back by the lessor.   Immediately after the coffee shop was taken back, he allowed the first defendants to take charge and manage the affairs of the business he was operating at the property. He and Mr Zhu agreed in principal to share the benefits/profits of the business at 50% each.  He collected rentals and paid them to the plaintiff. 

26.	Sometime in 2005, the plaintiff approached him and told him about the loan arrears he had with the forerunner of the third defendant for which he had been served demand notices. He asked if rentals could be paid in advance in order for him to settle the loan arrears in full.  Soon after his discussion with the plaintiff, he spoke to the first defendants about the plaintiff’s request for an advance payment of rental equivalent to rental for 5 years and they acceded to the request.      

27.	On 13April 2005, he entered into an agreement with the first defendants under which the first defendants were required to secure a loan of K380,000.00 from Westpac Bank to fully settle the plaintiff’s loan arrears with the third defendant.  A copy of the agreement is annexed to his affidavit as annexure “B”.

28.	Having realised that the third defendant had already placed the property on tender after sending demand notices to the plaintiff, he and Shichun (Charlie) Zhu, one of the first defendants asked the third defendant through a letter dated 25 March 2005 to waive the tender process and accept the loan repayment which would be made on behalf of the plaintiff.    A copy of the letter is annexed to his affidavit as annexure “C”.  Upon receipt of a positive indication from the third defendant, the first defendants obtained a loan from Westpac Bank for the sum of K380,000.00 and fully settled the plaintiff’s outstanding loan with the third defendant.   The third defendant agreed to waive the tender process and accepted the sum of K380,000.00 as settlement of the plaintiff’s loan.   A copy of the letter or notice given by the third defendant to the public dated 21 May 2005 confirming revocation or waiver of the tender process and settlement of the plaintiff’s loan including arrears is annexed to his affidavit as annexure “D”.

29.	Contrary to what had been agreed to, the first defendants returned to the third defendant, liaised or otherwise conspired with the second defendant to change the whole transaction resulting in the plaintiff losing the property to the first defendants.   

SUMMARY OF THIRD DEFENDANT’S EVIDENCE 

Suzanne Unumba

30.	She is the Principal Legal Officer and Company Secretary of the third defendant.

31.	The plaintiff through Kia Trading Limited applied to the third defendant by a letter dated 29 March 2000 for a fully drawn loan of K249,952.00 as its director. A copy of the letter is annexed to her affidavit as annexure “A”.  By its letter to the plaintiff dated 17 August 2000, the third defendant informed the plaintiff that it had the approved the loan, but before it could release the funds to Kia Trading Limited’s bank account, the plaintiff was required to meet some pre-documentation conditions.  A copy of the letter is annexed to affidavit and marked as Annexure “B”.  The plaintiff met the pre-conditions and an Application for Finance was signed on 30 August 2000. A copy of the Application for Finance is annexed to the affidavit and marked as Annexure “C”.  The funds were then credited to the plaintiff’s company’s bank account and the property was mortgaged to the third defendant as a “Third Party Mortgage”.  Copies of a duly executed Equitable Mortgage dated 30 October 2000 and a duly executed Real Property Mortgage dated 11 September 2000 are annexed to the affidavit and marked with the letters “D1” and “D2” respectively.

32.	The directors of Kia Trading Limited are; Lydia Kia, Stephen Pulipilya and the plaintiff.  Stephen Pulipilya is the company secretary.   The shareholders of the company are; Lydia Kia, 1 share; Jeffrey Kia, 1 share; Janet Kia, 1 share; Elma Kia, 1 share; June Kia, 1 share; and the plaintiff, 1 share.  The registered Office is situated at Room 12, Butibam Progress Association Building, Coronation Drive, Lae, Morobe Province, 411, Papua New Guinea.  The address for service is Allotment 2 Section 98 Lae, Morobe Province, 411, Papua New Guinea. The postal address is Pronto Chartered Accountants, PO Box 236, Boroko, National Capital District, 111, Papua New Guinea. Except for Lydia Kia and the plaintiff who reside at Allotment 2 Section 98, 7th Street, Lae, all the other shareholders reside at Allotment 15 Section 5, 8th Street, Lae.  The postal address for all the shareholders is PO Box 1009 Lae, Morobe Province, 411, Papua New Guinea.  Stephen Pulipilya resides at Allotment 13 Section 114, Badili, National Capital District and his postal address is PO Box 3427 Boroko, National Capital District.  A copy of Company Extract of Kia Trading Limited from which this information is extracted is annexed to the affidavit and marked as Annexure “M”.  

33.	Around year 2001, the plaintiff fell into arrears.  The third defendant reminded the plaintiff about the arrears totalling K18,800.00 by its letter to the plaintiff dated 13 September 2001, but no response was forthcoming. A copy of the letter is annexed to the affidavit and marked as Annexure “E1”.   Since the arrears were increasing, by a letter to the plaintiff dated 26 June 2002, the third defendant again demanded payment of the arrears.  A copy of the letter is annexed to the affidavit and marked as Annexure “E2”.   

34.	In 2004, a Creditors Statutory Demand for Payment of Debt of the outstanding loan totalling K372,769.94 was forwarded to the plaintiff and other directors of Kia Trading Limited. There was no response to the Statutory Demand. A copy of the Statutory Demand is annexed to the affidavit and marked as annexure ”F”.

35.	By letters to the plaintiff, Mrs Lydia Kia and Mr Steven Pulipilya all dated 26 January 2005, the third defendant demanded immediate payment of the principal amount and interest owing to it by Kia Trading Limited in the sum of K372,769.94.  Annexed to the affidavit and marked with the letter “G” are copies of those letters.    

36.	The plaintiff did not do anything or take any active step to repay the loan or arrears so the third defendant decided to tender the property.  A notice of intention to exercise its powers under securities given to it to sell the property dated 8 February 2005 was given to the directors of Kia Trading Limited giving them 3 days from the date of the letter to settle the loan.  Annexed to the affidavit and marked with the letter “H” is a true copy of that letter.    The tender of the property was advertised on 11 February 2005 in The National newspaper.  Annexed to the affidavit and marked with the letter “I” is a copy of that advertisement.    

37.	The first defendants won the tender and the third defendant made an offer to them to purchase the property.  A contract for sale of land and an instrument of transfer both dated 12 April 2015 were executed to effect the sale of the property by the third defendant exercising its power of sale under registered mortgage number S.25169 to the first defendants at a purchase price of K380,000.00.   Copies of the contract for sale of land and instrument of transfer are annexed to the affidavit and marked as annexures ”J” and “K” respectively.

38.	Following completion of the conveyance, the third defendant on 23 August 2005 informed the plaintiff that; the property was sold for K370,860.37 against the outstanding loan balance of K394,627.13; there was no excess after settlement; and that Kia Trading Limited still owed the bank K18,558.13 and requested that it settle the outstanding amount.   

UNCONTESTED FACTS

39.	From the evidence before me, I consider that the principal facts that are not contested are.

(a)	The plaintiff and one Jim Tapako were initially the registered proprietors of the property as joint tenants.
(b)	On 1 December 2001, he entered into the Rental Agreement with one Joseph Ng of Chinese origin of NWM Trading Ltd for a period of 5 years at a monthly rental of K3,500.00 commencing on 15 November 2001.
(c)	Joseph Ng then sublet the property to the first defendants who are of Chinese origin.
(d)	Kia Trading Limited applied for a loan of K249,952.00 from the Rural Development Bank, the forerunner of the third defendant by letter of 29 March 2000 and the application was granted.
(e)	The directors of Kia Trading Limited are Lydia Kia, Stephen Pulipilya and the plaintiff.
(f)	The company Secretary of Kia Trading Limited is Stephen Pulipilya.
(g)	The shareholders of Kia Trading Limited are; Lydia Kia, 1 share; Jeffrey Kia, 1 share; Janet Kia, 1 share; Elma Kia, 1 share; June Kia, 1 share; and the plaintiff, 1 share.
(h)	The Registered Office for Kia Trading Limited is situated at Room 12, Butibam Progress Association Building, Coronation Drive, Lae, Morobe Province, 411, Papua New Guinea.
(i)	The Address for Service for Kia Trading Limited is Allotment 2 Section 98 Lae, Morobe Province, 411, Papua New Guinea. The postal address of the company is Pronto Chartered Accountants, PO Box 236, Boroko, National Capital District, 111, Papua New Guinea.    
(j)	Except for Lydia Kia and the plaintiff who reside at Allotment 2 Section 98, 7th Street, Lae, all the other shareholders reside at Allotment 15 Section 5, 8th Street, Lae.  The postal address for all the shareholders is PO Box 1009 Lae, Morobe Province, 411, Papua New Guinea.
(k)	Stephen Pulipilya resides at Allotment 13 Section 114, Badili, National Capital District and his postal address is PO Box 3427 Boroko, National Capital District.  
(l)	As security for the loan, the property was offered as security for the loan and a third party mortgage was executed in favour of the third defendant and registered with registration number S.25169.
(m)	Kia Trading Limited also executed an Equitable Mortgage in favour of the third defendant on 30 October 2000.
(n)	The plaintiff defaulted in meeting loan obligations and together with other directors of Kia Trading Limited was issued with notices of demand by the third defendant to settle the loan including arrears.
(o)	The property was sold by the third defendant to the first defendants for K380,000.00 pursuant to a Contract of Sale of Land dated 12 April 2005 and an Instrument of Transfer dated 12 April 2005.
(p)	The first defendants currently are the registered proprietors of the property as joint tenants.
(q)	The Instrument of Transfer transferring the property to the first defendants bearing registration number S.38926 was produced for registration at the Office of the Registrar of Titles on 18 May 2005 and entered on 26 May 2005.
(r)	The Memorandum of Mortgage bearing registration number S.38927 was also produced for registration at the Office of the Registrar of Titles on 18 May 2005 and entered on 26 May 2005.  

CONTESTED FACTS

40.	From the evidence, I consider that the principal contested facts are:

(a)	The first defendants agreed to settle the plaintiff’s outstanding loan from advance payment of rentals of the property under the sub-lease agreement with Joseph Ng. 
(b)	The plaintiff’s outstanding loan including arrears was settled by the first defendants on his behalf and all obligations and responsibilities under the mortgage were discharged.
(c)	Consequently the third defendant waived the tender and it put out a notice or gave a letter to the public dated 21 May 2005 to that effect. 
(d)	The first defendants and the second defendant conspired and colluded with each other whereby the moneys paid by the first defendants for the settlement of the plaintiff’s loan were applied as purchase money for the first defendants to purchase the property from the third defendant purportedly exercising its power of sale under the registered mortgage.
(e)	The plaintiff discovered the fraudulent transaction in June 2010.    
(f)	The third defendant after exhausting all avenues for Kia Trading Limited, through the plaintiff, to settle the outstanding loan, sold the property to the first defendants exercising its power of sale under the registered mortgage after it was tendered publicly in the daily papers on 11 February 2005.
(g)	The first defendants did not breach any agreement including the agreement they had with Joseph Ng of NWM Trading Ltd of 13 April 2005.  
(h)	Following the completion of the conveyance, the third defendant on 23 August 2005 informed the plaintiff by letter forwarded to PO Box 1009, Lae that; the property was sold for K370,860.37 against the outstanding loan balance of K394,627.13; there was no excess after settlement; and that Kia Trading Limited still owed the bank K18,558.13 and requested that it settle the outstanding amount.   

ISSUE

41.	The main issue is whether the proceedings are time-barred?

THIRD DEFENDANT’S SUBMISSIONS  
42.	The third defendant contends that the proceedings should be dismissed on the basis that they were time-barred under Section 16(1)(a) of the Frauds and Limitations Act, in that the plaintiffs’ cause of action essentially and in reality was “founded on simple contract” and not as demonstrated in the pleadings and the plaintiff did not commence the proceedings until more than six years (about 9 years) after the cause of action accrued.

PLAINTIFF’S SUBMISSIONS

43.	The plaintiff argues that the motion be dismissed on the basis that the plaintiff’s proceedings seek equitable relief namely the principal cause of action is based on fraud so Section 16 of the Frauds and Limitations Act does not apply pursuant to Section 18 of the Frauds and Limitations Act.

44.	Alternatively, the proceedings were “an action upon a specialty”, the registered mortgage and the agreement entered into between the first defendants and Joseph Ng of NWM Trading Ltd on 13 April 2005 falling within that category, in which case there was a 12-year limitation period under Section 16(3) of the Frauds and Limitations Act and the proceedings had been commenced within that period on 25 May 2005 when the title to the property was fraudulently transferred by the third defendant through the fraudulent and deceitful conduct of the second defendant to the first defendants.  

REASONS FOR RULING

45.	 It is instructive that I set out Sections 16 and 18 of the Frauds and Limitations Act. 

46.	Section 16 states:

16.	Limitation of actions in contract, tort, etc.

(1)	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.
(2)	An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.
(3)	Subject to Subsection (4), an action upon a specialty shall not be brought after the expiration of twelve years commencing on the date when the cause of action accrued.
(4)	Nothing contained in Subsection (3) shall be construed as affecting any action for which a period of limitation is specified by any other Act, and that subsection shall be read and construed accordingly.
(5)	An action shall not be brought upon any judgment after the expiration of twelve years commencing on the date when the judgement became enforceable.
(6)	No arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years commencing on the date when the interest became due.
(7)	Subject to Subsection (8), an action to recover any penalty or forfeiture, or sum by way of penalty or forfeiture, recoverable by virtue of any enactment shall not be brought after the expiration of two years commencing on the date when the cause of action accrued.
(8)	For the purpose of Subsection (7) the word "penalty" does not include a fine to which any person is liable on conviction of a criminal offence.

47.	 Section 18 states:

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

48.	In Oil Search Limited v Mineral Resources Development Corporation Limited (2010) SC1022, the Supreme Court (Injia CJ, Cannings J &Makail J) at paragraphs 22 to 25 of the decision made some useful observations as to when an application to dismiss proceedings for being time-barred should be made.  It held that except in the clearest of cases, such applications are best left for thorough determination at trial.  The court also held at paragraph 23 that:

“If a claim is clearly time-barred and provided the statutory defence is pleaded in the defence, a motion for dismissal is warranted and it would be quite appropriate for the National Court to hear and determine it. Where, however, the case for dismissal is not clear-cut, the decision-making process of first, identifying the cause of action, secondly, identifying the date on which the cause of action arose and then, deciding the question of whether the cause of action is founded on a simple contract or is an action upon a speciality, can only efficaciously be carried out at a trial.”

49.	I would adopt these observations and apply them here.

50.	Was the statutory defence pleaded in the defence?  Yes. It is pleaded at paragraph 15 of the defence. The third defendant stated that the plaintiff’s cause of action arose on 27 April 2005 upon settlement and transfer of title and 9 years and 44 days had transpired before the filing of the proceedings on 11 June 2014.  These proceedings were commenced by a writ of summons on 21 May 2014 and the writ was amended by the filing of an amended writ of summons on 11 June 2014.

51.	A proper consideration as to whether an action is time-barred depends on a finding on three matters and these are: 

(a)	identification of the cause of action;
(b)	identification of the date on which the cause of action accrued;
(c)	categorisation of the cause of action according to whether it is “founded on a simple contract” or “an action upon a speciality”.

52.	In the present case, the plaintiff seeks a number of declarations and interim injunctions and general damages.  The relief sought arise from the alleged fraudulent transaction. Declarations are equitable relief and the limitation period under Section 16 does not apply:  Simon Puraituk v The State (2007) N3204; Mamun Investment Ltd v Nixon Koi (2015) SC1409.  Injunctions are also equitable relief and the limitation period under Section 16 also does not apply: John Hiwi v Rendle Rimua (2015) SC1460; Mamun Investment Ltd v Nixon Koi (2015) SC1409.   

53.	In my view, the order sought for the restoration of the plaintiff and Jim Tapako to the title is consequential in nature.

54.	The claim for damages can be viewed as consequential in nature in relation to the alleged fraudulent transaction.   However, the plaintiff would have to be a party to claim damages against the first defendants for breach of contract.   Clearly he is not.

55.	It is now not necessary to discuss the question whether the action is upon a specialty or not.  My short observations are these.   

56.	In Osborn’s Concise Law Dictionary, 9th Edition, Sweet & Maxwell, London the word “specialty” is referred to as “a somewhat archaic term used to refer to a contract made by deed”. 

57.	In Halsbury’s Laws of England, Fourth Edition, Reissue, Volume 28 at paragraph 882, the learned authors set out some examples of specialties and these are; a bond, a contract under seal, a deed, a covenant, a statute and a foreign contract under seal.  
  
58.	Calling a document a deed does not make it a speciality:  R v Williams [1942] 2 All ER 95.  In John Hiwi v Rendle Rimua, the Supreme Court observed that any contract in the form of a deed is a specialty.

59.	I am of the view and it is probable that the registered mortgage can be viewed as a specialty in which case the time in which an action must be brought pursuant to Section 16(3) of the Frauds and Limitations Act is 12 years.

60.	In the present case, the cause of action would have accrued upon completion of the conveyance of the property between the third defendant and the first defendants and the registration of the transfer at the Office of the Registrar of Titles, which was produced on 18 May 2005 and entered on 26 May 2016, given the right of redemption is no longer available to the plaintiff.  The general rule in contract is that the cause of action accrues, not when the damage is suffered, but when the breach occurs, ie, on the date of the breach:  John Hiwi v Rendle Rimua; Gibbs v Guild (1881) 8 QBD 296.

61.	The plaintiff would have known about the alleged fraudulent sale of the property in August 2005 or soon thereafter if the third defendant’s evidence is accepted that it notified the plaintiff by letter on 23 August 2005 addressed to his postal address, being PO Box 1009 Lae:  see annexure “L” of the affidavit of Suzanne Unumba.   It will not make any difference even if the plaintiff’s evidence is accepted that he discovered the fraudulent transaction in June 2010.   The proceedings will not be time-barred.  

ORDER

62.	The orders of the Court will be:

1	the application to dismiss the proceedings on the basis that they are time-barred is refused. 
2	the third defendant shall bear the plaintiff’s costs of the application moved pursuant to the third defendant’s notice of motion filed on 20 June 2016, to be taxed, if not agreed.

Ruling accordingly.
 
_____________________________________________________________
Kandawalyn: Lawyers for the Plaintiff
Kawat Lawyers: Lawyers for the Third Defendant