N10243
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

H.R. (WS) NO. 266 OF 2018

PHILIP SABA
Plaintiff

V

DR THOMAS KAIENGE
First Defendant

AND
PIEGELE KEWENGA INVESTMENT LTD (T/A MADANG BAKERY)
Second Defendant

AND
DEPARTMENT OF LANDS AND PHYSICAL PLANNING
Third Defendant

AND
THE INDPENDENT STATE OF PAPUA NEW GUINEA
Fourth Defendant

Waigani: Narokobi J
2022: 7th April
2023: 31st March

LAND REGISTRATION ACT, s 33(1) – Whether fraud includes actual fraud only or can also include constructive fraud

MODE OF PROCEEDINGS – whether allegations of constructive fraud should be commenced under Order 8 of the National Court Rules or as a Judicial Review under Order 16, Rule 3 of the National Court Rules

FRAUDS AND LIMITATION ACT 1989 – whether constructive fraud is an equitable remedy for purposes of s 18 of the said Act and therefore outside of the time limitations imposed by s 16 of the same Act 

Supreme Court Act, s 18(1), Conflicting Supreme Court authorities - Reference on points of law for the Supreme Court’s consideration 

The Plaintiff alleges constructive fraud against the Defendants and seeks orders for the title registered against the second defendant to be overturned for non-compliance with the Land Act 1996.

Held: 

(1) Due to the conflicting decisions of the Supreme Court on whether fraud under s 33(1) of the Land Registration Act 1981 is actual fraud only or also includes constructive fraud, the issue is appropriate to be reserved under s 15 of the Supreme Court Act 1975 for the consideration of the Supreme Court including two related questions on the mode of proceedings and the applicability of the Frauds and Limitation Act 1989 to constructive fraud.

Cases Cited:

Camillus v Mota (2022) SC2210
Emas Development Pty Ltd v. The State [1993] PNGLR 215
Mudge and Mudge v Secretary for Lands, The State and Delta Developments Pty Ltd [1985] PNGLR 387
Timothy v. Timothy (2022) SC2282

Statutes Cited:

Frauds and Limitation Act 1989
Land Act 1996
National Court Rules 1983
Land Registration Act 1981

Counsels:

Plaintiff in person
Mr A Daugl, for the First and Second Defendants

JUDGMENT
31st March, 2023

1.	NAROKOBI J: The Plaintiff has initiated proceedings against the Defendant claiming that he had a legitimate interest in the property described as Section 29, Allotment 20, Madang, Madang Province (hereafter “the property”), and that the First and Second Defendants obtained the property by fraud, constructively he says. 

2.	The facts as the Plaintiff sees it are as follows. The Plaintiff had applied for the property from the Land Bureau of the Madang Provincial government since 8 June 2004. Unknown to him, the property was allocated to the Second Defendant who says he applied for it after it was advertised in the National Gazette on Tuesday 15 January 2013, and it was allocated to him on 13 October 2013.

3.	The Plaintiff says that he had informed the First Defendant that he was applying for the property.  When he became aware of the property, he went ahead, and applied for it.  The Plaintiff says that the First Defendant colluded with the Lands Department and obtained title to the property without his knowledge.  He says, all along he had expressed interest for the land, and he should have been informed in good time so that he can apply for the land too. He has been occupying the property since 1994.  This was not done. 

4.	The First Defendant says that he has the legitimate title to the property and the Plaintiff is an illegal settler.  He says the Plaintiff has filed Judicial Review proceedings against him, but he had to withdraw proceedings with costs against him assessed at K 2,000 on 9 May 2018.  To this day, he has not been paid his costs. In another case, the plaintiff’s property was destroyed in a fire, and he sued the First Defendant for the damage caused to his property.  The case was dismissed because he did not have title to the property (WS No 179 of 2018, Philip Saba v Cecilia Paakule and Thomas Kainge).

5.	The plaintiffs submits that there is no evidence that the procedures set out in the Land Act 1996 has been complied with, especially s 68, which requires land to be advertised in the National Gazette. The plaintiff alleges constructive fraud on the part of the defendants.

6.	The starting point is the fact that the First Defendant already has title to the property.  This means that if anyone wants to challenge him, he or she has to show that there was fraud.  The Supreme Court is divided over the question of whether it is actual fraud or constructive fraud.  However, before we get to this stage, the Plaintiff must establish that it has a legitimate expectation.

7.	The first issue is therefore whether the plaintiff has legitimate expectation that he will be getting title to the property.

8.	After considering the long-standing interest of the Plaintiff with regards to the land, I am of the view that the plaintiff has a legitimate expectation in the property having resided on the property since 1994, and has during this time attempted to secure the property from the relevant State agencies and is therefore not a mere busy body. In relation to the earlier judicial review and the proceedings in WS 179 of 2018, they have not determined the substantive issue, so I do not consider them sufficient to raise the defence of res judicata in favour of the Defendants.

9.	The next question is whether the title to the property, can be overturned by constructive fraud.  I have had regard to the conflicting Supreme Court decisions relation to this matter.  Let me outline them as follows.

10.	Firstly, the cases concern s 33(1) of the Land Registration Act 1981. That provision states as follows:

33. Protection of Registered Proprietor.

(1) The registered proprietor of an estate or interest holds it absolutely free from all encumbrances except–

(a) in the case of fraud;…

11.	In Mudge and Mudge v Secretary for Lands, The State and Delta Developments Pty Ltd [1985] PNGLR 387 the Supreme Court established the doctrine of the indefeasibility of title.  It held that registration of leases under the provisions of the Land Registration Act 1981 conferred indefeasibility of title to the registered proprietor subject only to the exception enumerated in s 33(1). It was further held that:

Accordingly, notwithstanding that a State lease issued under the Land Act (Ch No 185) may have been issued irregularly and in breach of the provisions of that Act, registration under the Land Registration Act will confer an indefeasible title.

12.	 Irregularities and breaches of the Land Act will therefore not operate to defeat a grant of title to the existing registered proprietor.

13.	The Supreme Court later in Emas Development Pty Ltd v. The State [1993] PNGLR 215 questioned the applicability of the doctrine of indefeasibility of title  Papua New Guinea and set aside the title of the registered proprietor in that proceeding on the basis that it was irregularly registered. Salika J (as he then was) stating as part of the majority view, observed:

I agree, in principle, that where a title has been registered under one's name, it is not capable of being annulled, except where title has been acquired through fraud. I think other exceptions suitable for Papua New Guinea circumstances should be included such as:

•	where title has been registered fraudulently;
•	where title has been registered while a court or tribunal is deliberating on the subject land;
•	where title has been registered under influence of position of power or money;
•	where title has been registered under circumstances giving rise to possible breach of principles of natural justice.

I lay out these conditions because land is a very important commodity in this country. Government land is very scarce in this country, and people or corporations applying for lease of government land must be seen to be allocated such land without any fraud or outside influence, but simply on the merits.

14.	This approach has set the foundation for constructive fraud. Where the procedure to allocate land has been irregular, title has been set aside. This has over time come to be accepted as “constructive fraud,” by judicial opinion from a good number of case authorities in the Supreme Court.

15.	Since then, there has been a line of Supreme Court authorities that have reaffirmed Mudge and Mudge v Secretary for Lands, The State and Delta Developments Pty Ltd and held that fraud is actual fraud only, such as Timothy v. Timothy (2022) SC2282, and in other Supreme Court cases, it was held that fraud, can also include constructive fraud, Camillus v Mota (2022) SC2210. These are the two more recent decisions indicative of the conflicting views.

16.	In this particular case, I will be required to consider the issue of constructive fraud as it has been pleaded in the statement of claim, but I am mindful of the conflicting Supreme Court decisions on the issue.

17.	There is also the issue of whether constructive fraud is an equitable remedy and therefore outside the time limitations imposed by the Frauds and Limitation Act 1989. This issue came up in Camillus v Mota, where it held that:

Constructive fraud is fraud in equity to which s 16 of the Frauds and Limitation Act does not apply. The trial judge correctly held, that pursuant to s 18 of the Frauds and Limitation Act, a claim in equity, such as constructive fraud, is not affected by s 16.

18.	The other issue is the mode of proceeding. That is, whether instances of constructive fraud must be litigated by way of pleadings or should it be pursued as a judicial review matter under Order 16 Rule 3 of the National Court Rules. In Emas Development Pty Ltd v. The State it was a judicial review matter, but since that decision, constructive fraud has been pursued through cases commenced by pleadings in a writ of summons (see Camillus v Mota for example).

19.	In my view, this is an appropriate case to state questions of law for the Supreme Court comprised of a bench of five (5) Judges to determine the question of whether fraud under s33(1) of the Land Registration Act 1981 is actual fraud only, or can it also be interpreted broadly to include constructive fraud. Section 15 of the Supreme Court Act 1975 states:

15. Cases or Points of Law Reserved for Supreme Court.

(1) A Judge or Judges of the National Court sitting in the exercise of any jurisdiction other than criminal jurisdiction–

(a) may reserve any case or any point in a case for the consideration of the Supreme Court; or

(b) may direct any case or point in a case to be argued before the Supreme Court,

and the Supreme Court may hear and determine any such case or point so reserved or directed to be argued.

20.	I will therefore refer the following questions to the Supreme Court for its consideration.

1)	Is fraud under s 33(1)(a) of the Land Registration Act 1981 actual fraud, or can it also include constructive fraud?

2)	If it does include “constructive fraud” must such a claim be pursued under the provisions of Order 8 Rule 30 of the National Court Rules  or under Order 16 rule 3 of the National Court Rules, or is it dictated by the interests of justice in each particular case?

3)	Additionally, if it does include “constructive fraud” does s 18 of the Frauds and Limitation Act 1989 apply or does not apply, in terms of the six (6) year statutory limitation?

21.	In the meantime, the proceedings are stayed until the Supreme Court provides its opinion on the three questions of law.
________________________________________________________________
Kuria Lawyers: Lawyers for the First and Second Defendants