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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO 1092 OF 2012
BETWEEN:
THE DIVINE WORD UNIVERSITY
Plaintiff
AND:
TERENCE KUARU, HON BEN SEMRI MP, ADRIAN UNDAE,
BOB SIMON, MARY ZALE, TERRY DANIEL, JANSEN TOPOSONA, JOEL PETAU, ROBERT SAMBALE, STEVEN VARUVU,
KARI TOTONA & ELMA AMINI
First, Second, Third, Fourth, Fifth, Sixth,
Seventh, Eighth, Ninth, Tenth, Eleventh & Twelfth Defendants
AND:
TERENCE KUARU, HON BEN SEMRI MP, ADRIAN UNDAE,
BOB SIMON, MARY ZALE, TERRY DANIEL, JANSEN TOPOSONA, JOEL PETAU, ROBERT SAMBALE, STEVEN VARUVU,
KARI TOTONA & ELMA AMINI
First, Second, Third, Fourth, Fifth, Sixth,
Seventh, Eighth, Ninth, Tenth, Eleventh & Twelfth Cross-claimants
AND:
THE DIVINE WORD UNIVERSITY,
SECRETARY FOR LANDS & PHYSICAL PLANNING,
MANAGING DIRECTOR, NATIONAL HOUSING CORPORATION,
SECRETARY FOR HEALTH &
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
First, Second, Third, Fourth & Fifth Cross-defendants
Madang: Cannings J
2017: 6 September, 26 October
2018: 10 April
LAND – State Leases – indefeasibility of title – alleged fraud in granting of State Leases – meaning of fraud – actual fraud and constructive fraud – whether circumstances of grant of State Lease so unsatisfactory, irregular or unlawful, as to be tantamount to fraud, warranting setting aside of registration of title.
The plaintiff became registered proprietor of State Leases over 12 residential properties in 2008. It commenced proceedings by writ against the occupiers of the properties, the defendants, who had over a number of years resisted the plaintiff’s requests to vacate the properties. The plaintiff sought an order for vacant possession. The defendants’ defence was that the plaintiff obtained title to the properties by fraud, in dubious circumstances. They argued that the State Leases were granted to the plaintiff contrary to a decision of the National Executive Council requiring that they be given the first opportunity to purchase the properties and contrary to the principles of natural justice and contrary to the defendants’ equitable interests in the properties arising from their long-term occupation of them and contrary to the Land Act as the subject land was in fact customary land and the State Leases were granted without first being advertised. The defendants filed a cross-claim against the plaintiff and four other cross-defendants, relying (again) on fraud as the ground on which they sought declarations that the State Leases were null and void and in the alternative orders requiring the cross-defendants to compensate, repatriate and resettle them.
Held:
(1) Under Papua New Guinea’s Torrens Title system of land registration for alienated government land, registration of a lease vests, subject to limited exceptions, an indefeasible (unforfeitable) title in the registered proprietor subject only to the exceptions in Section 33(1) of the Land Registration Act. Most significantly Section 33(1)(a): “in the case of fraud”.
(2) “Fraud” means actual fraud or constructive fraud. Constructive fraud exists where the circumstances of a transfer or grant of title are so unsatisfactory, irregular or unlawful, it is tantamount to fraud, warranting the setting aside of registration of title. The onus of proving fraud rests on the party alleging it, in this case the defendants.
(3) The defendants failed to prove actual or constructive fraud as the only irregularity in the granting of the State Leases to the plaintiff was the failure to advertise the State Leases in accordance with Sections 68 and 69 of the Land Act. However, given the otherwise transparent way in which the State Leases were granted, the apparent irregularity was in the circumstances minor and the granting of title could not be properly regarded as so unsatisfactory, irregular or unlawful as to be tantamount to fraud
(4) As all the defendants’ arguments in support of the cross-claim had been incorporated into their defence to the plaintiff’s case, and the defence of fraud had been rejected, they were unable to prove any ground on which their cross-claim was based. The cross-claim failed. The plaintiff was granted an order for possession of the properties, to take effect at a specified date and time. All relief sought in the cross-claim was refused. The parties were ordered to bear their own costs.
Cases cited
The following cases are cited in the judgment:
Awaincorp Ltd v Jim Kas (2015) N5862
Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215
Gawi v png Ready Mixed Concrete Pty Ltd [1984] PNGLR 74
Kimas v Loa (2015) SC1475
Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120
Lae Rental Homes Ltd v Viviso Seravo (2003) N2483
Lelete Plantation Ltd v Paul Rame (2007) N5020
Levi Nanguan v Chairman, Board of Directors, PNG Maritime College (2017) N6711
Mosoro v Kingswell Ltd (2011) N4450
Niugini Properties Ltd v Jeffery Londari (2014) N5727
Paul Kamang v David Chan (2016) N6164
Paul Kamang v Madang Provincial Government (2011) N4394
Paul Kamang v Namba Tumu (2011) N4313
Pius Tikili v Home Base Real Estate Ltd (2017) SC1563
PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126
Tony Yagon & Settlers of Dylup Plantation v Nowra No 59 Ltd (2008) N3375
West New Britain Provincial Government v Kimas (2009) N3834
STATEMENT OF CLAIM & CROSS-CLAIM
This was a trial in which the plaintiff sought an order for possession of property and the defendants defended the claim on the ground of fraud and brought a cross-claim seeking annulment of the plaintiff’s title in the property.
Counsel:
D Wood, for the Plaintiff & the first Cross-Defendant
S Asivo, with leave, for the Defendants & the Cross-Claimants
10th April, 2018
1. CANNINGS J: This case is about 12 residential properties in the suburb of Newtown in the town of Madang. Each property has a house on it, which was built in 1974, with funding provided by the World Bank, for housing staff of the former Madang College of Allied Health Sciences (“Paramed”). The National Department of Health, which administered Paramed, was regarded as occupier of the properties under certificates authorising occupancy granted by the Secretary of the National Department of Lands and Physical Planning.
2. In 2002, under the National Government’s Higher Education Plan, Paramed was amalgamated with the Divine Word University (the plaintiff), which subsequently applied for State Leases over the properties. In April 2008 a delegate of the Minister for Lands and Physical Planning granted the applications and the plaintiff became the registered proprietor of State Leases over each property.
3. The Paramed staff or their families and descendants (the defendants) have been in continuous occupation of the properties since 1974. The plaintiff wants them to leave, so that the properties can be used for housing the plaintiff’s staff. The defendants refuse to leave. They say that they should have been given the opportunity to purchase the properties before the State Leases were granted to the plaintiff.
4. In view of the impasse, the plaintiff commenced proceedings by writ and statement of claim against the defendants. The plaintiff seeks an order for vacant possession. The defendants’ defence is that the plaintiff obtained title to the properties by fraud, in dubious circumstances. The defendants filed a cross-claim against the plaintiff and four other cross-defendants, relying (again) on fraud as the ground on which they seek declarations that the State Leases are null and void and in the alternative orders requiring the cross-defendants to compensate, repatriate and resettle them. A trial has been conducted of the statement of claim and the cross-claim.
ISSUES
5. Two issues arise:
1 Did the plaintiff obtain title to the 12 State Leases by fraud?
2 What declarations or orders should the Court make?
6. The defendants acknowledge that in April 2008, a 99-year State Lease was granted to the plaintiff over each of the 12 properties: Section 123, Allotments 14, 20, 27 and 35 and Section 124, Allotments 7, 8, 9, 10, 14, 16, 23 and 25, Newtown, Madang (“the subject land”). The plaintiff became the registered proprietor of the State Leases, and it still is.
7. 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. The defendants 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.
8. The defendants argue that “fraud” means actual fraud or constructive fraud and that this was a case of constructive fraud. By arguing a case of constructive fraud they seek to invoke the wide definition of “fraud” 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, they argue that the circumstances of the grant of the State Leases to the plaintiff were so dubious, unsatisfactory and irregular that it was tantamount to fraud, warranting the setting aside of registration of title. The wide view of the term “fraud” has been endorsed as correct in a number of subsequent Supreme Court decisions including PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126, Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120 and Pius Tikili v Home Base Real Estate Ltd (2017) SC1563. I was a member of the Court in the Tikili case and I have no difficulty with the proposition that registration of title can be set aside if constructive fraud is proven.
9. The plaintiff did not contest the proposition that its title could be set aside in a case of constructive fraud but argued, of course, that this was not such a case.
10. The onus of proving fraud always rests on the party alleging it (Niugini Properties Ltd v Jeffery Londari (2014) N5727). The issue becomes whether the defendants (and cross-claimants) have proven that the circumstances of the grant of the State Leases to the plaintiff were so dubious, unsatisfactory and irregular as to be tantamount to fraud. The defendants argue that there are three particular aspects of the granting of the State Leases to the plaintiff that are unsatisfactory:
(a) the State Leases were granted contrary to a decision of the National Executive Council (NEC) requiring that the defendants be given first opportunity to purchase the properties;
(b) the State Leases were granted contrary to the principles of natural justice and contrary to the defendants’ equitable interests in the properties arising from their long-term occupation of them;
(c) the State Leases were granted contrary to the Land Act as the subject land was in fact customary land and the State Leases were granted without first being advertised.
11. I will deal with these grounds of ‘un-satisfactoriness’ separately before determining whether this was a case of constructive fraud.
(a) Breach of NEC decision
12. The decision the defendants rely on is Decision No NG 78(a) of 1992, made as part of the National Government’s home ownership scheme, by which the NEC:
Reaffirmed its previous decision No 76/86 relating specifically to:
(a) the sale of houses to Provincial Governments and transfer of houses in out-stations to respective departments; and
(b) for all institutional houses outside of institutional grounds to be sold to current tenants.
13. The defendants say that the houses they occupy are “institutional houses” that the houses were “outside of institutional grounds” and they were, and still are, the “current tenants”. Therefore they should have been given the first option of buying the houses before the State Leases were granted to the plaintiff.
14. I reject this argument. I find that, as highlighted by the plaintiff, the NEC decision was concerned with the disposal to sitting tenants of National Housing Corporation (NHC) properties. This is apparent from the subject of the decision (adduced in evidence as an annexure to the affidavit of the first defendant, Terence Kuaru, exhibit D2):
DISPOSAL OF NATIONAL HOUSING CORPORATION DETACHED LOW COST HOUSES TO SITTING TENANTS AND SALE OF INSTITUTIONAL HOUSES NOT ON INSTITUTIONAL GROUNDS.
15. The 12 properties were not NHC properties. The NHC was not the registered proprietor of any State Leases over the properties and was in no position to sell the properties to anyone, including the defendants.
16. I conclude that the granting of the State Leases to the plaintiff involved no breach of the NEC decision. If I had concluded otherwise, this would not by itself render the granting of the State Leases unlawful, or even irregular. A decision of this nature by the NEC is a policy and administrative decision. It was not made under any specific law. It is not legally enforceable. It did not give rise to any enforceable rights or obligations.
(b) Natural justice and equity
17. I have no difficulty upholding the defendants’ argument that they hold equitable interests arising from their long-term occupation of the properties. This is an underlying law principle developed by the Supreme Court in Gawi v png Ready Mixed Concrete Pty Ltd [1984] PNGLR 74. An equitable interest, however, is not the equivalent of ownership or a legal interest in the properties. An equitable interest does not confer any right to long-term occupation. It confers only a right to be given reasonable notice of the requirement to vacate (Tony Yagon & Settlers of Dylup Plantation v Nowra No 59 Ltd (2008) N3375, Lelete Plantation Ltd v Paul Rame (2007) N5020, Levi Nanguan v Chairman, Board of Directors, PNG Maritime College (2017) N6711).
As for natural justice, I find no precedent or merit in the argument that the defendants’ equitable interests in the properties gave them the right to purchase the properties.
(c) Land Act
18. The defendants put two propositions in support of the argument that the granting of the State Leases to the plaintiff was contrary to the Land Act: (i) that the subject land was in fact customary land, and (ii) that the State Leases were granted without first being advertised.
(i) The customary land proposition
The proposition that the subject land is customary land is entirely without merit for two reasons. First there was no evidence put in support of this bold proposition. There would need to be clear and impeccable evidence that land divided into section and lot numbers, which has had State Leases granted over it, registered under the Land Act, is, in fact, customary land, before the National Court could seriously entertain such an argument. And then, if such evidence were adduced, the Court would need to refer the issue to a proper authority to determine the status of the land, as it has no jurisdiction to determine whether land is or is not customary land (The State v Lohia Sisia [1987] PNGLR 102, Kimas v Loa (2015) SC1475).
Secondly I take judicial notice of the declaration by the Minister for Lands in 1988 under the National Land Registration Act that Madang town land – and the subject land falls within the boundaries of that land – is National (or Government) land. This declaration became the subject of the Supreme Court case of Nakun Pipoi v Viviso Seravo (2008) SC909 in which an unsuccessful attempt was made to seek judicial review of the declaration. I have given effect to the declaration in a number of cases regarding Madang town land, including Paul Kamang v Namba Tumu (2011) N4313, Paul Kamang v Madang Provincial Government (2011) N4394 and Paul Kamang v David Chan (2016) N6164.
(ii) The advertising proposition
The defendants argue that that the Land Act was breached as the properties were not advertised as being available for leasing. In determining this argument, I refer to my decisions in three cases that highlighted the legal requirement to publicly advertise the availability of State Leases under Part X (State Leases) of the Land Act: West New Britain Provincial Government v Pepi S Kimas (2009) N3834 (where the decision to grant a State Lease and the State Lease itself were declared unlawful and void because land had been unlawfully exempted from advertisement); Mosoro v Kingswell Ltd (2011) N4450 and Awaincorp Ltd v Jim Kas (2015) N5862. The key principles are these:
68. Advertisement of lands available for leasing.
(1) Except where land has been exempted from advertisement under Section 69, the Departmental Head shall give notice, by advertisement in the National Gazette, of all lands available for leasing under this Act.
(2) An advertisement under Subsection (1) shall contain the following information:—
(a) the type of lease available to be granted;
(b) the purpose of the lease;
(c) the length of the lease;
(d) a description of the land to be leased;
(e) the amount of rent (if any) payable for the first period of the lease;
(f) in the case of a special purposes lease—any royalties that are payable;
(g) the terms and conditions of the lease;
(h) the reserve price;
(i) such other information as the Departmental Head thinks fit or the Minister directs.
(3) A statement contained in an advertisement under this Section does not in any way bind the State in the granting of a lease over land the subject of the advertisement or constitute an offer to lease land.
69. Duty to advertise State Leases.
(1) A State lease shall not be granted without first being advertised in accordance with Section 68 unless the land has been exempted from advertisement under Subsection (2).
(a) where the lease is granted to a governmental body for a public purpose; or
(b) where it is necessary to relocate persons displaced as a result of a disaster as defined in the Disaster Management Act (Chapter 403); or
(c) where a lessee applies for a further lease; or
(d) where the State has agreed to provide land for the establishment or expansion of a business, project, or other undertaking; or
(e) where the land applied for adjoins land owned by the applicant and is required to bring the holding up to a more workable unit, providing that the claims of other neighbouring landowners are considered and their views taken into account in deciding whether to exempt the land from advertisement in favour of the applicant; or
(f) where the Department responsible for foreign affairs recommends that land be made available to the applicant for consular premises; or
(g) where the land is required for the resettlement of refugees; or
(h) where the applicant has funded the acquisition of the land from customary landowners in order to acquire a State lease over it; or
(i) where a lease is to be granted under Section 99 or 102; or
(j) where a new lease is granted under Section 110, 130 or Section 131.
19. In this case, the plaintiff made the appropriate applications for State Leases and the applications went before the Land Board, which sat in Madang and made recommendations to the Minister that the State Leases be granted to the plaintiff, which were duly implemented by the decision to grant the State Leases to the plaintiff. To that extent, the procedures of Part X were followed. However, the evidence shows that the subject land was not advertised as being available for State Leases. Nor was it exempted from advertisement.
20. I uphold the defendants’ argument that the State Leases were granted contrary to the Land Act as the subject land was neither advertised nor exempted from advertisement.
Was this a case of constructive fraud?
21. I have found that the State Leases were not granted contrary to any NEC decision, and were not granted contrary to the principles of natural justice or the defendants’ equitable interests in the properties. I have found that the subject land is not customary land. It is Government land and State Leases can lawfully be granted over it. However the State Leases were granted contrary to the Land Act as they were granted to the plaintiff without the land being advertised as available for lease or being exempted from advertisement. The defendants have succeeded in proving an irregularity in the granting of the State Leases.
22. Does it follow that this is a case of constructive fraud? Not necessarily. In deciding whether the granting of State Leases was so irregular or unsatisfactory as to be tantamount to fraud, the Court must look at all the circumstances of the case. I consider that, given the otherwise transparent way in which the State Leases were granted, and that the granting of the leases to the plaintiff was an important part of the process of the amalgamation of Paramed and the Divine Word University, the irregularity, indeed illegality, was minor. In all the circumstances the granting of title cannot properly be regarded as so unsatisfactory, irregular or unlawful as to be tantamount to fraud. This was not a case of fraud for the purposes of Section 33(1)(a) of the Land Registration Act.
23. My determination that this was not a case of fraud means that the defendants’ defence to the plaintiff’s statement of claim fails. It also means that their cross-claim fails.
24. The plaintiff will be granted an order for possession of the properties, to take effect at a specified date and time. All relief sought in the cross-claim will be refused.
25. If I had decided that this was a case of constructive fraud, the defendants would have been hard pressed – because of the delay involved – in showing that they should be granted the remedies they sought. The issues of advertising and failure to exempt the land from advertisement should have been raised clearly a long time ago. The defendants did attempt to raise the issues through an originating summons, OS No 770 of 2008. But those proceedings were dismissed for want of prosecution in January 2017. It is now ten years since the State Leases were granted to the plaintiff. The defendants have continued to occupy the land, rent-free, so they have benefited from the delay in having these issues resolved.
26. The parties will bear their own costs as the defendants raised very significant issues, which were well argued and made in good faith.
ORDER
(1) The plaintiff shall have vacant possession of the land the subject of its State Leases over Section 123, Allotments 14, 20, 27 and 35 and Section 124, Allotments 7, 8, 9, 10, 14, 16, 23 and 25, Newtown, Madang (“the subject land”) in accordance with this order.
(2) The defendants and all other persons in occupation of the subject land, shall vacate the land, leaving the land and structures on it in the same condition they are in at the moment of this order, and removing all their personal properties and possessions, by 12 noon on 15 June 2018, failing which the plaintiff and the Police are authorised, from 12 noon on 15 June 2018, to take all reasonable steps necessary to remove the defendants and other persons in occupation of the subject land, from the land, including the use of reasonable force, and to seize and destroy any of their personal properties and possessions still on the land, provided that such steps are taken under the supervision and control of the most senior member of the Police Force available at that time in the vicinity of the subject land.
(3) All relief sought in the cross-claim is refused and the cross-claim is dismissed.
(4) Subject to any specific costs order made in the course of the proceedings the parties shall bear their own costs of the proceedings.
Judgment accordingly,
_________________________________________________________
Ashurst PNG: Lawyers for the Plaintiff & the First Cross-Defendant
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URL: http://www.paclii.org/pg/cases/PGNC/2018/117.html