N7227
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 565 OF 2009

BETWEEN:
ALU WONG, JELTA WONG, GREGORY WONG, ALEX WONG, and SARADHA WONG
Plaintiffs

AND:
WINIFRED LOI HAY WONG
First Defendant

AND:
ALBERT DOMINIC SABBAR WONG
Second Defendant

Kokopo:  Anis, J
2018:  20th, 21st & 27th February, 15th & 19th March, 27th April

ADVERSE POSSESSION – state lease - business lease for 41 years - Land Ordinance 1962-1967 - tenants in common with equal shares - lease expired in 2009 - parties unaware - effect of expiry of the state lease discussed - no legal interest in land when the lease expires - land becomes state land or vacant land that is available for lease - rights of parties under section 119 (120) of the Land Act 1996 - whether cause of action and cross-claim are affected by revelation that the lease has expired - claim and cross-claim based on the wrong premise - status quo on occupation and use of the property

Facts

The plaintiffs resided on a land at Kerevat in Kokopo in East New Britain.  They lived and ran their businesses on the land for about 45 years.  The land was subject to a business lease.  The lease was registered to the names of the first defendant and her late husband, in 1971.  In 2009, the defendants took steps or expressed their intentions to take back the land from the plaintiffs.  The plaintiffs filed this proceeding shortly after that same year and sought relief including an order for adverse possession.

Held

1.	The business lease, which was a state lease described as allotments 4 & 5, section 11, Kerevat, East New Britain expired on or about October of 2009.

2.	The parties were not made aware of the fact that the lease has expired so their claims and cross-claims were based on the wrong premise or assumptions that (i) the lease continued to exist and (ii) that the first defendant and the estate of her late husband have legal interests over the property.

3.	Consequently, the cause of action and the cross-claim were both regarded as unfounded and were dismissed.

4.	The parties were ordered to return to their original positions before the proceeding was commenced pending the outcome of any future legal dealings over the land where the lease once occupied.

Cases cited:

Waigani Centre Pty Ltd v. The Independent State of Papua New Guinea and the Minister for Lands (1997) SC517
Nambawan Super Ltd v. Benny Allan (2014) N5707
Papuan Club Inc v. Nusaum Holdings Ltd (No 2) (2004) N2603
First Assistant Secretary, Department of Prime Minister v. Michael Leahy (1981) N311
The Administration of the Territory of Papua New Guinea v. Tirupia [1971-72] PNGLR 229 Joseph Gene v. Gamo Koito (2017) N6863

Counsel:
Mr E Paisat, for the Plaintiffs
Mrs N Rainol, for the Defendants

JUDGMENT

27th April, 2018

1.	ANIS J:  This is an interesting matter.  The trial took 2 days to complete but I must say that it was not without some drama.  Days after the trial ended on 21 February 2018, one of the defendants' witnesses John Bosco Kauli made an indirect contact with the trial judge.  The matter was recalled on 27 February 2018.  I granted leave to re-open the trial whereby witness Kauli's evidence, which had earlier been tendered and marked as Exhibit D3, was struck out by consent of the parties.  I would refer to the transcript of proceeding on what transpired on that day.

2.	On 15 March 2018, the parties were not ready with their submissions so I had the matter further adjourned to 9:30am on 19 March 2018.  Submissions were presented on that day.  I reserved my ruling thereafter to a date to be advised.  Parties have been notified that the decision would be ready for pronouncement today at 1:30pm.

3.	This is my ruling.

Evidence

4.	The plaintiffs gave oral and written evidence.  Those that gave oral evidence were, (i), Alu Wong, (ii) Gregory Wong and (iii), Alexander Wong.  They were subject to cross-examination and re-examination in Court.  In addition, the plaintiffs tendered a total of 3 exhibits.  I have set them out below in my judgement.  Exhibits P1 and P2 were tendered by consent of the parties.  Exhibit P3 was tendered through the witness herself whilst she was giving her oral testimony in Court.

5.	The defendants gave all written evidence.  They tendered a total of 8 affidavits.  All their evidence were not subject to cross-examination and re-examination.  I set them out here including those of the plaintiffs.

Exhibit No.	Description	Date filed
	
“P1”	Affidavit of John Narme Ngok Wong	27/06/17
	
“P2”	Affidavit of Saradha Wong	02/08/17
	
"P3"
	Affidavit of Alu Wong 	03/08/17	
“D1”	Affidavit of Albert D.S. Wong	20/09/16
	
“D2”	Affidavit of Penias Erickson	11/11/16	
“D4”	Affidavit of Albert Wong	14/08/17	
“D5”	Affidavit of Winifred Loi Hay Wong	07/11/17	
“D6”	Affidavit of Dr Madoc Schlencker	07/11/17	
“D7”	Affidavit of Paul Vivian Watts	20/11/17	
“D8”	Affidavit of Winifred Loi Hay Wong	14/02/18	

Background

6.	The plaintiffs and the defendants are related as a family.  The dispute the subject of this proceeding is over a land.  It is described as business lease, allotments 4 & 5, section 11, Kerevat, East New Britain (the property).  The lease was created on 21 August 1968 for a period of 41 years and 56 days.  On 3 March 1971, the property was issued jointly to James Wong, who has since passed on, and to his wife Winifred Loi Hay Wong, the first defendant herein.  The property was registered under their names as tenants in common in equal shares.  

7.	The property was occupied shortly after by plaintiff Alu Wong and her late husband Anthony Wong, on or about 1973.  Late Anthony Wong was one of the sons of the first defendant and her late husband. In short, the co-owners of the property were his parents.  Several years later, the first defendant and her late husband moved out of the property and went on to live in Australia.  In 1990, the first defendant's husband passed on.  In 1993, plaintiff Alu Wong's husband had a car accident and he also passed on.  Since 1993, plaintiff Alu Wong continued to live on the property, conducted her businesses there and also raised her 6 children.  They still live there now and some of them are named as plaintiffs herein.

8.	On 5 May 2009, the first defendant sent a letter to plaintiff Alu Wong.  In the letter, the first defendant, amongst other things, demanded plaintiff Alu Wong and her children to vacate the property.  Around the same time, the first defendant bestowed upon her son, the second defendant, a power of attorney, and instructed him to take charge of the property.  These events plus others have caused the plaintiffs to file this court proceeding.

Preliminary matter

9.	Before the presentation of submissions hearing on 27 March 2018, it came to my attention that the business lease to the property may have long expired.  When the matter was recalled on 27 February 2018 to deal with issues involving witness Kauli, parties were notified of the Court's suspicion concerning the lease.  For whatever reasons, both parties were not aware of that fact or claim as it was then.  Both counsel undertook to come prepared to address the matter at the presentation of submissions hearing.  

10.	The issue was addressed as a preliminary matter on 19 March 2018.  I will get to that shortly after I set out the issues.

Issues

11.	The issues are as follows:

(i)	Whether the business lease has expired, and if so, what does that mean?
(ii)	Subject to the first issue, whether the plaintiffs have established a case of adverse possession.
(iii)	Subject to the above two issues, whether the plaintiffs are entitled to the outstanding rent and loss of business, and if so, whether they have proven these losses.
(iv)	Subject to the first issue, whether the defendants are entitled to their claim for loss of rent for the past 7 years as of 2009, and if so, whether they have proven the said loss.
(v)	Which party is entitled to the rent collected as well as to conduct normal business operations, on the property?

Expired lease

12.	Both parties now acknowledge that the lease to the property has expired.  They also confirm that they have not applied for a renewal to date.  So as it is, the business lease was granted on 21 August 1968 for 41 years and 56 days (or 8 weeks).  This therefore means that the lease expired on or about October of 2009.  I find that to be the case.

13.	Once a lease expires, by operation of the law, the land shall revert to the State.  The land in the present case has always remained state land, that is, after its creation as a business lease in 1968.  So after the term of the lease, the land, which is state land, shall become vacant and available for lease by the State.  The case law supports the findings and conclusions reached by this Court.  Let me refer to some.  I firstly refer to the case, Waigani Centre Pty Ltd v. The Independent State of Papua New Guinea and the Minister for Lands (1997) SC517.  The Supreme Court held and I quote:

It must be appreciated that once a lease expires (and) it extinguishes any rights of anyone over the property. The fact that the Minister has refused to renew the lease is a matter for his discretion because once the lease expired, the land in my respectful view became vacant land. Now that the land is vacant land the Minister may invite applications for the grant of a State lease (see s 66 of the Land Act)."

14.	In the second case, Nambawan Super Ltd v. Benny Allan (2014) N5707, Justice Makail said at paragraph 11 and I quote:

11.  Section 68(1) provides that where land has been exempted from advertisement, the Departmental Head shall give notice, by advertisement in the National Gazette, of all lands available for leasing.  (Emphasis added).  In my view it imposes an obligation on the Departmental Head to advertise all lands available for leasing and given that a land subject of an expired lease is, by operation of law, vacant, it becomes available for leasing and unless exempted, must be advertised.  It is therefore incumbent on the Departmental Head and his officers to keep records of the dates of expiration of leases and unless exempted, must advertise the lands when the leases expire. Of course the lessee or lease holder should be weary of the expiration date of the lease and bring it to the attention of the Departmental Head and his officers when expressing an interest to further extend the term of the lease.  But the significant point here is that it is the Departmental Head and his officers who must be able to determine from their records the expiration dates of leases and have them advertised as and when they are due.
(Underlining is mine)

15.	The third case is Papuan Club Inc v. Nusaum Holdings Ltd (No 2) (2004) N2603.  Justice Gavara Nanu stated these and I quote:

The scheme of the Land Act, as it relates to the State Leases is that, when a State Lease expires, the ownership of the property reverts back to the State. Similarly, when the current State Lease expires on 20th December, 2005, the ownership of the property will revert back to the State. This point is conceded by the plaintiff. (See: Transcript pages 805 and 806).  Thus, as a matter of law there is no right of renewal or reversion of the State Lease by or to the first defendant after 20th December, 2005.

Wrong premise

16.	Now, the cause of action herein is to assert rights over the business lease or over the property.  And the plaintiffs filed the proceeding on the premise that the first defendant and estate of her late husband were still tenants in common over the property, so based on that premise, they seek ownership under the principle of adverse possession.  It is now clear that the said premise is wrong.  Let me explain.  The writ of summons was filed on 21 May 2009.  Five months later in October of 2009, the business lease expired.  The property or the land where the business lease was issued over has reverted to the State as state land.  Its status as at October 2009 is vacant state land that is or may be available for lease under section 68 of the Land Act of 1996.

Extinguished legal rights

17.	The present status quo is that there is no business lease over the property.  The State now owns the property.  And the land is vacant land that is presumably available for lease.  The first defendant and the estate of her late husband, have no legal interests over the property.  They lost that in October of 2009.

18.	Legal instruments like the owner's copy of the title to the property has expired and is invalid.  In regard to the defendants' power of attorney that was registered on 6 May 2009, let me say this.  The purpose of which, which was bestowed in the power to attorney, was expressly limited to dealings concerning the property in Kerevat.  Because the first defendant and the estate of her late husband, no longer own the property, the power of attorney is ineffective and therefore ought to be cancelled.  

Adverse possession

19.	In the statement of claim, the plaintiffs seek (a), ownership of the property under the principle of adverse possession, (b), K119,720 being for outstanding rental payments, (c), loss of business, (d), interest at the rate of 8% pursuant to statute and (e) costs. 

20.	In response, I can only refer to what I have already said above in my judgment under the sub-heading "Wrong premise".  The only remark I wish to make is this:  As stated above, the State owns the property or the land in question.  But despite that, it is not named as a party to this proceeding.  However, regardless of that, I think it would be fatally incorrect to assume that the doctrine of adverse possession would apply to state land.  See the cases: First Assistant Secretary, Department of Prime Minister v. Michael Leahy (1981) N311; The Administration of the Territory of Papua New Guinea v. Tirupia [1971-72] PNGLR 229 and Joseph Gene v. Gamo Koito (2017) N6863. 

Cross-claim

21.	The defendants claim a sum of K1.68 million for loss business on rentals for 7 years since 2009.  This is pleaded as a purported cross-claim at the end of their defence, which was filed on 21 October 2016.  I decline to grant this purported cross-claim for various reasons.  Firstly, I find that the purported cross-claim was not duly pleaded within the requirements of Order 8 Rule 39(1)(2) and (3) of the National Court Rules.  The said rules read and I quote:

39.	Form
(1)	A cross-claim shall be in Form 20 or 21 as the case requires.
(2)	A cross-claim shall be intituled in the proceedings with an addition showing the names of the parties to the cross-claim.
(3)	Where a cross-claimant cross-claims solely against a party who claims in the proceedings against the cross-claimant, the cross-claimant may add the cross-claim to his defence.

22.	I find that the defendants have breached all these 3 requirements.  Firstly, the correct form to fill out and file should have been form 20 following sub-rule 1 of Rule 39.  The form that was used by the defendants to file their defence was not form 20.  Secondly, I see no proper descriptions on the names of the parties to indicate that a cross-claim was also included with the defence that was filed.  It shows therefore that the defendants had failed to comply with sub-rules 2 and 3 of Rule 39.  For example, the names of the parties should read "plaintiffs/cross-defendants" and "defendants/cross-claimants".  And the main heading of the document should read "Defence and Cross-Claim" and there should also be separate sub-headings for the defence and the cross-claim respectively.  What I have set out are also reflected in form 20 of the National Court Rules.  The defendants are represented by counsel.  As such, I am not inclined to exercise discretion and make an exception to or that I should overlook this defect in the defendants' pleading.  That is not all.  I also note that the defendants' pleading for the purported cross-claim is vague, insufficient and it is without particulars to support their assertions and relief.  For example, what was the agreement or the basis for the defendants to have allowed the plaintiffs to live on the property from 1973 to 2009?  And on what basis are the defendants trying to seek rental payments after 2009?  Was there an agreement of some kind?  Where the plaintiffs leasing out the premises as agents of the defendants?  There is no such pleading by the defendants in their purported cross-claim.  I also found it difficult to rationalise the defendants' argument.  In their evidence and submissions, they argue on the one hand that the plaintiffs did not get their permission to lease out the premises and that their actions were unlawful or illegal, but on the other hand, they are directly interested in and want the rent takings that were earned based on the said purported unlawful or illegal actions of the plaintiffs as they have alleged.

23.	Even if I may be wrong, I note that my overall findings above in my judgment concerning the legal interests of the parties would suffice, in my view, for me to dismiss the purported cross-claim.  I will add that the defendants are seeking outstanding rent from 2009, which happens to be the year when their business lease expired.

Section 119 (120) - Land Act 1996

24.	What then are the interests of the first defendant and the estate of her late husband, to the property?  The obvious claim would be those that are provided by statute where they may apply to for a new lease, or otherwise receive compensation.  These options are provided for under section 119 of the Land Act 1996.  Compensation by the State would be for the improvements done to the land.  A former proprietor, like the defendants herein, may be entitled to compensation for the improvements but only if he or she had applied for a new lease on the land but the land was given away to a successful third party as the new leaseholder [see section 119(5)].

25.	In the present case, I note that both parties have interests over the land.

Current business operations

26.	At the start of the proceeding, the Court has ordered all the rents by the plaintiffs' various tenants who were occupying premises within the property, to be kept in or paid into the National Court Trust Account.  The monies are held pending the outcome of the proceeding.

27.	This Court has found the plaintiffs' and the defendants' claims to be unfounded.  

28.	Now, the undisputed facts remain as follows.  Prior to the dispute in 2009, the plaintiffs have operated their business on the property without any disturbance from the defendants.  Plaintiff Alu Wong has operated her businesses there starting with her late husband Anthony Wong in 1973.  Her late husband passed on in 1993 that was about 20 years later.  Since then and up to this present time, plaintiff Alu Wong has managed her businesses under the name Alu Wong & Sons trading as Blend PNG Ltd, with her children on the property.  From 1973 to 2009 is a total of 36 years.  If we add these up to the present day, it will be 45 years. 

29.	Because the Court has rejected both claims, the parties, in my view ought to remain or revert to their original positions, that is, their positions before the proceeding was commenced.  It is not disputed that the defendants tried to take over the property a few months before the lease was about to expire in 2009.  It is also not disputed that they have left the property at the hands of the plaintiffs for decades or since 1973.  The first defendant who is the sole survivor of the former lease, lives in Australia.  As for the plaintiffs, before the proceeding was commenced, they lived and operated their businesses on the property.  They continued operating their businesses and lived there after the proceeding was commenced.  They still continue to do so now.  Their businesses include receiving rents from their tenants on the property.  They have also developed the property by constructing a warehouse there in 1995.  They have since rented out the warehouse to tenants and have been receiving rent from it until they were prevented by an interim order from this Court, which is still binding at this time.  The plaintiffs' business dealings whether it be contracts or lease agreements were made between the plaintiffs and their customers or tenants.  They were not made by the plaintiffs on behalf of the defendants.  I make these assumptions because it seems to be the case and I note that the defendants have not pleaded otherwise or provided evidence to the contrary.  It is therefore my view that the plaintiffs should remain on the property. 

30.	The first defendant and the estate of her late husband, may argue on this point that they have made improvements to the property from the time they had acquired and lived on it in 1971 before they had left it with plaintiff Alu Wong and her late husband a year or so later.  The argument may be valid but would be a separate matter altogether.  Arguments on improvements to the land, as I have said earlier, may be raised with the State at an appropriate time in the event the parties invoke the provisions of section 119 of the Land Act of 1996.   During the hearing, I recall making the distinction to the defendants' counsel, that is, of ongoing business interest or dealings by the plaintiffs on the property, which did not concern the defendants, as opposed to the defendants' interests regarding improvements to the property, which are provided for under section 119.

31.	Therefore and in summary, I am inclined to and I will make a consequential order for the rent monies that are kept within the National Court Trust Accounts, to be released back to the plaintiffs.  

Summary

32.	In conclusion, I find that the plaintiffs' claim must fail.  That being the case, I find it not necessary to address other matters or issues that have been raised at the hearing by the parties.  I also find that the defendants do not have a valid cross-claim against the plaintiffs and I reject it.  Given that and except for what is stated in my judgment, I also find it pointless to address the other matters or issues that have been raised at the hearing concerning the cross-claim.

33.	Let me respond to the issues.  In regard to the first issue, Whether the business lease has expired, and if so, what does that mean?, my answer is, "yes, the business lease expired on or about October of 2009, and it means that the first defendant and her late husband's estate, have lost their legal interests over the property as of October of 2009."  Because my answer to the first issue is in the affirmative, my answers for issues (ii), (iii), and (iv) are all in the negative.  As for issue (v), which is, Which party is entitled to the rent collected as well as to conduct normal business operations, on the property?, my answer is this.  "The plaintiffs are entitled to the rent including those that are kept in the National Court Trust Account.  They should also be allowed to remain and continue to conduct normal business operations on the property until further notice is received from the State or from the new registered lease holder over the land."

Cost

34.	Cost is discretionary.  I will order each party to bear their own costs.

AND THE COURT ORDERS

I make the following orders:

1.	I refuse the principal claim of the plaintiffs.

2.	I also refuse the cross-claim of the defendants.

3.	The plaintiffs shall receive back their rental monies that is kept in the National Court Trust Account, and they are to continue with their business operations at allotments 4 & 5, section 11, Kerevat, East New Britain until such time they receive notice from the State or until such time a new lease is issued over the land.

4.	I order each party to bear their own costs of the proceeding.

5.	Time for entry of these orders is abridged to the date of settlement by the Registrar of the National Court which shall take place forthwith.

The Court Orders accordingly.
________________________________________________________________
Daniel & Associate Lawyers:	Lawyer for Plaintiffs
Nathphil & Associate Lawyers:	Lawyers for the Defendants