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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN NATIONAL COURTOF JUSTICE]
W.S NO. 880 OF 2015
BETWEEN:
JONATHAN TONNY
Plaintiff
AND
BILL HUA
First Defendant
AND
DEPARTMENT OF LANDS &
PHYSICAL PLANNING
Second Defendant
AND
NATIONAL HOUSING CORPORATION
Third Defendant
AND
THE INDEPENDENT STATE OF
PAPUA NEW GUINEA
Fourth Defendant
Lae: Dowa J
2021: 05th October
2023: 12th January
REAL PROPERTY – Indefeasibility of title-plaintiff seeking declaratory orders that the grant of State lease and registration of title to land be declared null and void and of no effect, and other consequential orders – plaintiff an approved tenant of NHC property the subject of proceedings –a property improved by Plaintiff on a Self-help Housing Scheme managed by NHC- plaintiff alleges he was not given opportunity pursuant to sections 37 and 38 of the National Housing Corporation Act -NHC holder of Undeveloped Lease granted under Part X1 of Land Act not being made aware of the application for state lease by the first defendant
FRAUD-ACTUAL AND CONSTRUCTIVE FRAUD- Whether grant of state lease to the First Defendant by the Second Defendant is fraudulent –– first and second defendants actions amounted to constructive fraud – grant of state lease declared null and void and of no effect and be quashed
Cases Cited:
Mota v Camilus (2009) N3851
Pius Tikili v Home Base Real Estate (2017) SC1563
PNG Bible Church Inc v Carol Mandi (2018) SC1724
Toki v Helai (2016) SC1558
Vaki Vailala v NHC (2017) N6598
Rosemary John v James Nomenda (2010) N3851
Counsel:
K. Kevere, for the Plaintiff
S. Simon, for the First Defendants
S. Maliaki, for Second & Fourth Defendants
M. Limu, for the Third Defendant
JUDGMENT
12th January, 2023
(c) right to immediate possession.
(d) Alternatively, payment of K86, 000.00 in damages for value of improvement.
Background Facts
2. The Plaintiff is a Senior Security Officer attached to Bank of South Pacific Limited at Lae Top Town Branch. The Plaintiff is until recently the legal tenant of the property described as Section 320 Allotment 06, Four (4) Mile, City of Lae. The property is managed by and under the custody of the National Housing Corporation, the Third Defendant. The Plaintiff and his late brother built a house on the said land. After the passing of the brother, the Plaintiff later entered into Tenancy Agreement with the National Housing Corporation in 2008 until he was evicted by the first defendant through an ejectment order issued by the District Court on 14th January 2014.
3. It is alleged that whilst the property was still in the custody of the National Housing Commission, the first defendant who is a stranger applied to the Department of Lands and Physical Planning and obtained a state lease to the said land in breach of both the National Housing Corporation Act and the Land Act. It is alleged that the title was obtained by fraud.
4. The First Defendant denies the claim and filed a defence. In his defence the First Defendant pleads that he has an indefeasible title to the property pursuant to section 33 of the Land Registration Act. The second, third and fourth defendants did not file any defence.
Issues
5. The issues for consideration are:
of claim.
Trial
6. The trial was conducted by affidavits only without cross-examination of the deponents of the various affidavits of the parties.
Plaintiff’s Evidence
7. The Plaintiff relies on the following affidavits:
8. The summary of the Plaintiff’s evidence is that some years earlier in the 1990s the Plaintiffs late cousin brother, Camilus Maim, was granted the Tenancy Agreement by National Housing Corporation for property Section 320 Allotment 06, Four Mile Urban settlement. It was under the National Housing Commission’s Self-Help Housing Scheme. The Plaintiff and his cousin brother built a permanent house on the property. After the passing of his brother, the Plaintiff entered a second tenancy Agreement with the National Housing Commission on 7th May 2008.
9. He has connected water and power to the property under his own name. The improvements done to the property was valued more than K86,000.00 in a valuation report done in May 2015. He also pays periodic rental payments to the National Housing Commission. He has since been waiting for the National Housing Corporation to prepare and transfer the title to the property to him. He has been a long-time resident until 2014 when he was forcefully ejected from the property by the first defendant because of a District Court summary ejectment order.
10. The Plaintiff deposes that the first defendant resides on a portion of customary land adjacent to the land in dispute. He is not a tenant to the land and has obtained the title in secrecy and through fraud without the knowledge and approval of the National Housing Commission. The first defendant lied to the Lands Department that he did improvements to the property in his application form which is incorrect. The Plaintiff wants the title to the property to be cancelled and the status quo restored.
Bill Hua -First Defendant’s Evidence
11. The first defendant relies on his own affidavit sworn and filed on the 06/11/2017 (Doc. No. 27) -EXHIBIT 1D1.
12. The First Defendant did not give direct evidence on the issue before the Court. However, the evidence he relies on is a previous
affidavit sworn 10th September 2010 he filed in a District Court proceeding Summons No 937 of2010-Bill Hua v Jonathan Tony, which he annexed to the current affidavit as annexure “G”. This is the summary of the first defendant’s evidence.
That he resides on a customary land adjacent to Section 320 Allotment 06 at Four Mile Urban settlement. He deposes he bought the
disputed land from a Kabwum lady, Mankieu for K400 in 1987 with the intention of moving onto the property anytime. He deposes he
invited Camilus Maim to come and build a temporary house on the subject land. In 2006, he gave consent to Camilus Maim to build a
permanent house using Camilus Maim’s own money. Camilus Maim built and lived on the property until his death in July 2006.
13. He deposes that it was only after late Camillus’ death that the Plaintiff moved onto the property, claiming ownership.
He has ongoing disputes with the Plaintiff including Court proceedings. He then applied to the Lands Department for a state lease
over the property. He was granted the title in July 2013. He therefore has an indefeasible title under section 33 of the Land Registration Act. He has successfully obtained a summary ejectment order on I4 January 2014 which is in force.
SECOND DEFENDANT’S EVIDENCE
14. The second defendant, the Department of Lands and Physical Planning, relies on the Affidavit of Benjamin Samson, sworn and filed 30/09/2020 [Doc. No. 69] and referred to as EXHIBIT 2D1. He is the Secretary and Departmental head.
15. This is the summary of Mr. Samson’s evidence. According to their records, a physical site inspection on the subject property was done on 21 July 2008. The report shows the land was fully developed with a three-bedroom residential dwelling. However, the report does not state the name of the developer or the occupant of the land. The report has other discrepancies as well in that (a) No letterhead of Morobe- Division of Lands was used on the site inspection report (b) The report was signed by some unknown person on behalf of Lawrence Billy – Provincial Program Advisor. The authorized officer, the Provincial Lands officer or Advisor did not sign the report. (c)The inspection report did not state that the property was under the custodian of the third Defendant, NHC. The report misled the Head office, Department of Lands & Physical Planning, that the subject land was deemed to be unregistered State land.
16. Mr. Samson deposes that based on the misleading inspection report the subject land became available for leasing under public tender No. 020/2011 of 29th June 2011 in accordance with Section 68 of the Lands Act. It then went before the PNG Land Board Meeting No. 04/2011 and recommended the First Defendant as the successful applicant and was gazetted on 04th June 2012 in National Gazette No. G207 in accordance with Section 74 of the Land Act. On the 07th of June 2013 a letter of grant was issued, and Lease Acceptance Form was forwarded to the First Defendant and a State Lease was eventually issued on the 15th of June 2013.
17. The PNG Land Board and the Registrar of Titles were misled into believing that the First Defendant had developed the land resulting in the State Lease being granted to him accordingly.
THIRD DEFENDANT’S EVIDENCE
18. The Third Defendant, National Housing Corporation, relies on the affidavit of Paul Ero sworn 17/01/2019 and filed 22/01/2019 [Doc. No. 38] and referred to as EXHIBIT 3D1. Paul Ero is a senior officer from the Third Defendant’s regional office in Lae.
19. This is the summary of Mr. Ero’s evidence. Mr. Ero deposes that the said land is part of an Undeveloped lease (UDL) granted to the NHC and converted into the Self-Help Housing Scheme managed and administered by National Housing Corporation. In 1990 the NHC did not have money to erect houses for public servants and through the National Parliament they introduced the Self-Help Housing Scheme to assist low-income earners to build their own accommodations on land made available. The role of the NHC is to administer the Self-Help Housing Scheme and allocate blocks when available to tenants who enter into Tenancy Agreements with NHC. The NHC administers the blocks to ensure compliance of the terms and conditions of the tenancy agreements.
20. Once a property is fully developed, an inspection is done and a report with the recommendation of the Provincial Manager is sent to their Conveyancing Division for the preparation of contract for sale documents in preparation of transfer of ownership to the tenant. The parties will then sign the conveyance documents and pay the necessary fees including stamp duties. Thereafter the National Housing Commission will liaise with Lands Department for the grant of a state lease and the registration of the transfer to the tenant.
21. He deposes that the land the subject of these proceedings was initially tenanted by one Francis Michael. The Plaintiff, Jonathan Tony, was the second tenant who signed the tenancy agreement on the 07th May 2008 witnessed by the then Provincial Manger, Mr. Isaac Pologo, on behalf of NHC. As per the records of the NHC, the Plaintiff is the only recognized tenant of the land, Allotment 6 Section 320, 4 Mile, Lae Morobe Province.
Submissions of counsel
22. Mr. Kevere of counsel for the Plaintiff submits that the title to the subject land granted to the first defendant, Bill Hua, be declared invalid for being fraudulently obtained. He submits that the property was managed by and is in the legal custody of National Housing Commission and not available for the grant of a state lease by public tender by the Lands Department without the express consent of National Housing Commission. Further the National Lands Department and the Lands Board relied on a misleading and flawed lands inspection report to grant the state lease to the first defendant. Furthermore, the first defendant was not a tenant with the National Housing Commission and was not a qualified person under sections 37 and 38 of the National Housing Corporation Act to be entitled to ownership of the said property.
23. Ms. Maliaki of counsel for the Lands Department and the State concedes that, the Lands Department and the Lands Board relied on a misleading and flawed provincial lands inspection report to grant the state lease to the first defendant. The State, therefore, supports the Plaintiff’s claim submitting that the title issued to the first defendant be declared invalid and cancelled as it is tainted with constructive fraud.
24. Mr. Limu of counsel for the National Housing Corporation also supports the Plaintiff, submitting that the title issued to the First Defendant be declared invalid and cancelled because 1) NHC was the custodian of the property under an Undeveloped lease granted to NHC under part X1 of the Land Act and it was not available for tender and 2) the first defendant was not a tenant with the National Housing Commission and was not a qualified person under sections 37 and 38 of the National Housing Corporation Act to be given the property. That the Plaintiff was the only recognized tenant under a tenancy agreement.
25. Mr. Sengi of counsel for the First Defendant submits that the First Defendant is the original owner of the land and not the Plaintiff. The Plaintiffs brother built a house on his land (the first defendant’s) with his consent as they are in-laws. He followed due process in obtaining title to the property and has indefeasible title under section 33 of the Land Registration Act. The District Court has recognized his title and successfully ejected the Plaintiff from the property in 2014 which order is still in force and thus the proceedings be dismissed.
Law on Fraud
26. The Plaintiff is challenging the First Defendant’s title to the property. The First Defendant is now the registered proprietor of the property the subject of these proceedings and under section 33 of the Land Registration Act, the first defendant’s title is indefeasible except on grounds of fraud.
27. Section 33 (1) reads:
s33. 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; and
(b) the encumbrances notified by entry or memorial on the relevant folio of the Register; and
(c) the estate or interest of a proprietor claiming the same land under a prior instrument of title; and
(d) in case of the omission or misdescription of any right-of-way or other easement created in or existing on the same land; and
(e) in case of the wrong description of the land or of its boundaries; and
(f) as to a tenancy from year to year or for a term not exceeding three years created either before or after the issue of the instrument of title of the registered proprietor; and
(g) as provided in Section 28; and
(h) a lease, licence or other authority granted by the Head of State or a Minister and in respect of which no provision for registration is made; and
(i) any unpaid rates, taxes, or other money which, without reference to registration under this Act, are expressly declared by a law to be a charge on land in favour of the State or of a department or officer of the State or of a public corporate body.”
28. Fraud is defined in the head notes of the judgments in the case Vaki Vailala v NHC (2017) N6598 and Pius Tikili v Home Base Real Estate (2017) SC1563 to mean “actual fraud or constructive fraud. Constructive fraud exists where the circumstances of a transfer of title are so unsatisfactory, irregular, or unlawful, it is tantamount to fraud, warranting the setting aside of registration of title.”
29. The law on constructive fraud is now settled in this jurisdiction. Refer to Pius Tikili v Home Base Real Estate Ltd (2017) SC1563, PNG Bible Church Inc v Carol Mandi (2018) SC1724 and Rosemary John v James Nomenda (2010) N3851, Toki v Helai (2016) SC1558, and Vaki Vailala v NHC (2017) N6598 and Mota v Camilus (2017) N6810.
30. In the Pius Tikili case, the Supreme Court had this to say at paragraph 23 concerning constructive fraud:
“His Honour, we consider, should have addressed the meaning of “fraud” in section 33(1)(a) of the Land Registration Act more rigorously. There is now a strong line of Supreme Court decisions that have substantially qualified the concept of indefeasibility of registered title set out in Mudge v Secretary for Lands (1985) PNGLR387.Cases such as Emas Estate Development Pty Ltd v John Mea (1993) PNGLR215,PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126 and Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120 support the proposition that in many situations it will not be appropriate to insist on proof of actual fraud before the National Court considers cancelling the registered proprietor’s title. It will be sufficient if constructive or equitable fraud is proven. Constructive fraud exists where the circumstances of a transfer of title are so unsatisfactory, irregular or unlawful, it is tantamount to fraud, warranting the setting aside of registration of title.”
31. The Tikili decision is further endorsed and supported by the Supreme Court in the most recent case of PNG Bible Church v Carol Mandi (supra) that a failure to follow the process under the Land Act and the National Housing Corporation Act can render all dealings invalid because of constructive fraud. At paragraph 18 of the judgment, the Court said this:
“It is now well-established law in PNG that a failure to follow the process provided under the Land Act when dealing with State land amounts to fraud capable of undoing any title secured outside the statutorily prescribed process. The decision of the Supreme Court, drawn to our attention by learned counsel for the Church in Pius Tikili v Home Base Real Estate Ltd (2017) SC1563 is a case on point. There the Court comprising of Cannings, Yagi and Neill JJ., said:
“His Honour, we consider, should have addressed the meaning of “fraud” in Section 33(1)(a) of the Land Registration Act more rigorously. There is now a strong line of Supreme Court decisions that have substantially qualified the concept of indefeasibility of registered title set out Mudge v Secretary for Lands [1985] PNGLR 387. Cases such as Emas Estate Development Pty Ltd v John Mea [1993] PNGLR 215, PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126 and Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120 support the proposition that in many situations it will not be appropriate to insist on proof of actual fraud before the National Court considers cancelling the registered proprietor’s title. It will be sufficient if constructive or equitable fraud is proven. Constructive fraud exists where the circumstances of a transfer of title are so unsatisfactory, irregular or unlawful, it is tantamount to fraud, warranting the setting aside of registration of title.”
32. I adopt and will apply the above reasonings in determining the issues in the present case.
Consideration
33. In the present case, there are two main reasons forming the basis of the allegation that the State Lease obtained by the first
defendant was by fraud. First the subject property was in the custody of NHC and not available of being disposed of by public tender
by the Department of Lands without its consent. Second, the first defendant was not a qualified person under the National Housing Corporation Act to be transferred ownership of the subject property when compared to the Plaintiff.
34. The uncontested evidence shows that the subject land was a part of a portion of land granted to NHC under Part X1 of the Land Act 1996 in the form of an Undeveloped Lease (UDL). Sections 111,112 and 113 of the Land Act are relevant and they read:
“PART XI. – GRANT OF STATE LEASES OF IMPROVED GOVERNMENT LAND TO THE NATIONAL HOUSING CORPORATION.
The Minister may, by notice in the National Gazette, declare Government improved residential land to be land to which this Part applies.
Sections 70, 71, 74, 75, 84 and 95 do not apply to land the subject of a declaration under Section 111.
The Minister may, in respect of land to which this Part applies, grant a lease to the National Housing Corporation on such conditions
as he thinks proper.”
35. After the grant the NHC did the surveys and subdivided the portion into individual sections and allotments. Normally houses would
be constructed on the allotments with amenities. But in the present case the NHC did not have the necessary funds and with the National
Government’s blessing introduced the Self- Help Housing Scheme. This allowed for individuals to apply for allotments and build
on them under a tenancy agreement. The legal ownership and custody of the property remain with the NHC until such time when the properties
are transferred in accordance with the provisions of the National Housing Corporation Act.
36. In the present case the NHC was not involved when the title to the property was issued directly to the first defendant. The Lands Department did not have the consent of the NHC when they proceeded with the process of granting a state lease over the property that was already granted to NHC under Part XI of the Land Act.
37. The evidence shows the process was hijacked by the Department of Lands and Physical Planning in collaboration with certain officers
of the Department and the first defendant. Section 112 of the Land Act provides that sections 70,71,74,75,84 and 95 of the Act does not apply to a land granted to the NHC. These provisions concern the
process of applying for and obtaining state leases through public tender.
38. Furthermore, even if the Lands Department was entitled to grant a state lease over the said land, the subject land was not available
for public tender under sections 68 and 69 of the Land Act. There was no inspection or proper inspection of the property. If a genuine inspection was done it would have shown that the Plaintiff
was the occupant and legal tenant of the land and that the land was managed by and was in the legal custody of the NHC and that the
improvement to the property was done by the someone other than the first defendant. The Lands Department and the Land Board were
misled by its own officers. The state lease was granted on false and misleading information and is therefore highly irregular. The
senior officers from the Department have since admitted their mistake and have shown their readiness to correct the error.
39. The second complaint by the Plaintiff is that the first defendant is not a tenant of NHC and thus is not entitled to have ownership transferred to him. Sales of dwelling or residential properties are governed by sections 37 and 38 of the National Housing Corporation Act. These provisions read:
“37. Sale of dwellings.
Subject to this Division, the Corporation may sell a dwelling vested in it to—
(a) an eligible person; or
(b) an approved applicant; or
(c) a person who exercises the option offered to him under Section 38 (1).
38. Options to purchase.
(1) After a tenancy agreement has been in force for two years between the Corporation and a tenant, the Corporation may, in its discretion, offer to—
(a) the tenant; or
(b) the spouse, widow or widower of the tenant; or
(c) the tenant and his spouse as joint tenants; or
(d) the tenant and his next of kin,
an option to purchase the dwelling the subject of the agreement at a purchase price specified in the option, subject to the conditions imposed by this Division....
(4) A contract of sale under this section may provide—
(a) for the outright purchase; or
(b) for the payment of the purchase price by instalments; or
(c) for the payment of the purchase price to be secured—
(i) by mortgage, in the prescribed form, over the property in respect of which the advance is made; or
(ii) by any other security approved by the Corporation.”
40. The Plaintiff is the occupant of the property since 2006 and became a legal tenant in May 2008 when he signed a tenancy agreement with the NHC. The NHC has recognized him as the only lawful tenant of the property, meeting the requirements of the Tenancy Agreement. The Plaintiff is the most qualified person to apply for the transfer of ownership from NHC. The first Defendant, on the other hand is not qualified to be given ownership of the property by NHC. He is not an eligible person; or an approved applicant; or a tenant who qualify to be given the property by NHC pursuant to sections 37 and 38 of the NHC Act. He did not have the consent of the NHC when he applied for the state lease.
41. Section 65 of the National Housing Corporation Act provides that:
“Where, without the consent in writing of the Corporation, a person purports to—(a) sell or contract to sell; or(b) mortgage; or(c) lease or sub-lease; or(d) transfer; or(e) assign, any property in which the Corporation has an interest under this Part, the sale, contract, mortgage, lease, sub-lease, transfer of assignment is void and of no effect.”
42. It is clear the grant of a state lease of this land using the process under sections 70,71,74,75,84 and 95 of the Land Act was improper where the land was no longer available. The interest in the land was already granted to the NHC under Part XI of the Land Act and NHC has not given up its interest in the property. Even if the land was available, it would be subject to following of the process and the meeting of the requirement under sections 67 of the Land Act. The grant of a state lease to the First Defendant to the exclusion of the Plaintiff as an interested person based on a flawed and misleading inspection report is therefore improper and is in breach of the Land Act. Furthermore, the improper grant of the state lease under the Lands Act to the first defendant jeopardized the Plaintiff’s interest in the land pursuant to the provisions of the National Housing Corporation Act.
Conclusion
43. In conclusion, I find the first and second defendants hijacked the proper process under the Land Act and the National Housing Commission Act in granting the state lease to the first defendant to the exclusion of the Plaintiff who has demonstrated by evidence that he has
superior interest in the property than the first defendant. The circumstances surrounding the grant of the state lease over property,
Allotment 6 Section 320, 4 Mile, Lae to the first defendant is so unsatisfactory, irregular, and unlawful, such that it is tantamount
to fraud, warranting the cancellation of the State Lease. The Department of Lands and NHC have supported the Plaintiff’s claim in the proceedings, and I am satisfied that the Plaintiff
has successfully established his case and is entitled to the reliefs sought.
Costs
44. The Plaintiff sought cost of the proceedings. Normally, cost follow the event. In the present case the Plaintiff is successful
in the prosecution of his claim. He is entitled to costs. I note the second, third and fourth defendants supported the Plaintiff.
I note the NHC is an innocent party and is entitled to its costs.
What Orders should the Court make.
45. The Plaintiff claims the following reliefs in the statement of claim:
(a) The title issued to Bill Hua over property, Allotment 6 Section 320 Lae, Morobe Province be declared null and void and of no effect.
(b) An order that the Department of Lands and Physical Planning issue the Title to him (the Plaintiff).
(c) right to immediate possession.
(d) Alternatively, payment of K86, 000.00 in damages for value of improvement
46. In my view the relief (a) is available and can be granted. It is supported by the findings in the judgment. Relief (b) is not available for the same reasons that the property is still under the custody of NHC. The Plaintiff can liaise with NHC for the eventual grant of the title. Relief (c) is available but requires reason for decision. Relief (d) is not available because the main relief being granted renders the alternative relief removed from consideration. Finally, the Court can also make consequential orders because of the cancellation of the title deed issued to the First Defendant.
47. The Plaintiff is seeking an order for immediate possession. The Plaintiff is entitled to immediate possession of the property under the tenancy agreement with NHC. However, the Court notes there is in force a summary ejectment order issued against the Plaintiff by the District Court on 14th January 2014. The ejectment order was given upon production of the Title deed by the first defendant. The State Lease is now nullified by the decision of this Court and the status quo is restored. That is the property remains in the custody of the National Housing Commission while physical possession reverts to the Plaintiff under the tenancy agreement. By virtue of section 155 (4) of the Constitution and Order 12 Rule 1 of the NCR it is necessary for the Court to bring up to this Court the order for summary ejectment issued by the District Court on 14th January 2014 and quash same to give effect to an order for possession by the Plaintiff.
Orders
48. The Court orders that:
Public Solicitor: Lawyers for the Plaintiff
Simon S. Sengi & Associates: Lawyers for the First Defendant
Mathew Limu (inhouse): Lawyer for the Third Defendant
Solicitor General: Lawyers for the Second & Fourth Defendants
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