N11262

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WS NO 52 OF 2019 (CC1)

BETWEEN
MAXAL HULA
Plaintiff

AND
NIGEL TREVOR BAUL
First Defendant

AND
NATIONAL HOUSING CORPORATION
Second Defendant

AND
OSWALD TOLOPA, Acting Secretary for Lands and Delegate of the Minister for Lands and Physical Planning
Third Defendant

AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Defendant

AND
ROSSO PROPERTY MANAGEMENT LIMITED
Fifth Defendant

WAIGANI: MAKAIL J
7 SEPTEMBER 2023; 30 APRIL 2025

STATE LEASES – Property dispute – State lease – Indefeasibility of title – Title procured by fraud – Constructive fraud – Conspiracy between registered proprietor and first purchaser of property – Proof of – Land Registration Act – Section 33(1)(a) 
  
STATE LEASES – Property dispute – State lease – Property of National Housing Corporation – Dwelling – Eligible person – Approved applicant – Person offered to purchase a dwelling – Tenant – Tenancy agreement – Contract of sale – Outright purchase – Payment of purchase price by instalments – National Housing Corporation Act, 1990 – Sections 1, 37 & 38(1)

Cases cited
Mudge v Secretary for Lands [1985] PNGLR 387 
Emas Estate Development Pty Limited v John Mea & Ors [1993] PNGLR 215 
Koitachi Limited v Walter Schnaubelt (2007) SC870
Rosemary John v James Nomenda & National Housing Corporation (2010) N3551
Vailala v National Housing Corporation (2017) N6598
Mapai Transport Limited v Romily Kila-Pat & Ors (2017) N6850

Counsel
Mr E Sassingian for plaintiff
No appearance for first, second & fifth defendants
Ms G Dusava for third & fourth defendants

JUDGMENT

1.	MAKAIL J: This is an undefended trial based on an action to recover property where its title was alleged to have been procured by fraud.  The property is described as Allotment 154 Section 51, Granville, Konedobu, National Capital District and registered as State Lease (Residence Lease) Volume 72, Folio 42. The plaintiff seeks the following orders:

(a)	general damages to be assessed.  

(b)	interest pursuant to the Judicial Proceedings (Interest on Debts and Damages) Act at commercial rate or at such rate and from such date as the Court considers proper.  

(c)	the transfer of title of the property by the second defendant to the first defendant on or about 13th March 2017 be declared null and void and be quashed.  

(d)	the subsequent transfer of title by the first defendant to the fifth defendant on or about 12th August 2017 be declared null and void and be quashed.

(e)	 the fifth defendant and any other person with possession or control of the official copy of the State Lease of the property shall within 14 days after date of this order return it to the third defendant.

(f)	the third defendant, as a delegate of the Minister, shall within 21 days after the date of service of this order:

(i)	execute a notice of forfeiture of the interest of the fifth defendant in the State Lease of the property stating that the fifth defendant’s interest in the State Lease is forfeited by order of the National Court at Waigani,

(ii)	publish the notice of forfeiture in the National Gazette,

(iii)	forward the notice of forfeiture to the Registrar of Titles, and

(iv)	forward a certified copy of the notice of forfeiture to the Registrar of the National Court at Waigani and to each of the other parties to these proceedings.

(g)	the Registrar of Titles shall within seven days after receiving the notice of forfeiture, amend the Register of State Leases and all other records of the State under his control to reflect the forfeiture of the interest of the fifth defendant in the State Lease over Section 52, Allotment 154, Granville, National Capital District.

(h)	the third defendant, as delegate of the Minister, shall within 21 days after the date of service of the order approve the Contract of Sale between the plaintiff and the second defendant dated 10th August 2017 and the Transfer Instrument by the second defendant dated 10th August 2017.

(i)	the Registrar of Titles shall within seven days after compliance with order above, enter and transfer the property to the plaintiff pursuant to the Contract of Sale dated 10th August 2017 and the Transfer Instrument by the second defendant dated 10th August 2017.

(j)	these proceedings shall be called for mention, to check compliance with the above orders, at the time to be appointed by the Court.
	
(k)	the fifth defendant is to pay the costs of these proceedings on full indemnity basis to be taxed, if not agreed.

	(l)	any orders this Court deems appropriate.

Definition of Fraud

2.	Section 33(1)(a) of the Land Registration Act states that “The registered proprietor of an estate or interest holds it absolutely free from all encumbrances except in the case of fraud.” The word “fraud” in Section 33(1)(a) of the Land Registration Act has been defined as actual fraud or constructive fraud:  Mudge v Secretary for Lands [1985] PNGLR 387, Emas Estate Development Pty Limited v John Mea & Ors [1993] PNGLR 215 and Koitachi Limited v Walter Schnaubelt (2007) SC870.

Grounds of Fraud

3.	The grounds which the plaintiff relies on to prove fraud are extracted from paragraphs 1 to 29 of the statement of claim and may be summarised as follows:

(a)	the first defendant had no good title to sell the property to the fifth defendant because the first defendant was neither a sitting tenant nor approved applicant to purchase the property under the second defendant’s “Home Give Away Scheme” under Section 37 of the National Housing Corporation Act 1990 (“NHC Act”) and guidelines and criteria to eligible or approved applicants.

(b)	in addition, at the material time, the first defendant was an employee of the Executive Security Systems Limited, an associated copy of the first defendant who purportedly purchased the property from the second defendant and the second defendant transferred the title of the property to the first defendant on or about 13th March 2017.  Subsequently, on 12th August 2012 the first defendant transferred the title of the property to the fifth defendant.

(c)	on the hand, the plaintiff was a sitting tenant and an approved applicant to purchase the property under the “Home Give Away Scheme” under Section 37 of NHC Act but missed out because of the conduct/actions of the defendants.

Parties’ Evidence

4.	The plaintiff relies on the following:

(a)	affidavit of the plaintiff sworn on 15th June 2021 and filed on 18th June 2021 (Exhibit “P1”), 

(b)	affidavit of Allen Kukwin Hula sworn on 15th June 2021 and filed on 18th June 2021 (Exhibit “P2”), 

(c)	affidavit of the plaintiff sworn and filed on 2nd July 2021 (Exhibit “P3”), 
	
(d)	affidavit of Kenneth Cooke sworn and filed on 11th July 2022 (Exhibit “P4”), 

(e)	affidavit of Percy Vagi sworn and filed on 11th July 2021 (Exhibit “P5”), 

(f)	affidavit of Gabriel Gore sworn and filed on 11th July 2022 (Exhibit “P6”), and

(g)	affidavit of Tarcissius Muganaua sworn and filed on 11th July 2022 (Exhibit “P7”).

5.	The first, second and fifth defendants did not tender any affidavits.

6.	The third and fourth defendants rely on the affidavit of Ala Ane sworn on 21st October 2022 and filed on 1st November 2022 (Exhibit “D1”).

Findings of Fact

7.	Based on the above affidavits, I find that:

•	the property has three units and were occupied by the employees of the then Department of Civil Aviation (“DCA”) at the material time.

•	the plaintiff occupied unit one and has been a sit in tenant since 1989.

•	the second and third units were occupied by Nanai Beka and Linda Giawi Pearson respectively.  

•	in the year 2000, the DCA was corporatised as Civil Aviation Authority (“CAA”) pursuant to the Civil Aviation Act 2000 and divided into three entitles called the National Airports Corporation Limited (“NAC”), Papua New Guinea Air Services Limited (“PNG Air Services”) or now called NiuSky Pacific Limited (“NiuSky”) and Civil Aviation Safety Authority (“CASA”).

•	while the reform took place there was no provision for the transfer of properties, especially those occupied by former DCA employees outside of institutional grounds.  This is evident by the absence of an Instrument of Transfer from the DCA to the three entities.

•	however, pursuant to a National Executive Council (“NEC”) Decision No. 76/86 dated 20th June 1986 on its National Housing Policy, the NEC approved that State properties outside of institutional grounds should be managed and sold to its occupants or current tenants as expressed at paragraph 3 of its Decision in these terms “……… the National Housing Commission becomes the land holding agency on behalf of the government prior to transfer.” 

•	subsequently, the National Housing Corporation Act 1990 (“NHC Act”) was enacted to give effect to the NEC Decision by giving the first right of refusal to the sitting tenant who has a tenancy agreement with the NHC and is over a period of two years.

•	the NEC Decision was reaffirmed on 16th December 1992 in the NEC Decision No. NG 78(a)/92 which approved the Disposal of National Housing Corporation Low Cost Detached Houses to Sitting Tenants and Sale of Institutional Houses not on Institutional Grounds.

•	in the case of former DCA houses, institutional grounds refer to houses within and around the airport area while houses outside of the airport area are to be sold to the current sitting tenants.

•	a special working group known as the Task Force Team was established and on 17th October 2011 the NHC Board through its Meeting 04/2011 approved and established the Special Task Force Team to oversee former DCA properties nationwide.

•	the primary purpose of the Task Force Team was to identify, value, subdivide and offer to the longtime sitting tenants in the opportunity to purchase former DCA properties under the National Government Housing Policy Cash Outright Sales Scheme.  Because of this, ordinary Papua New Guineans will have the chance to own home of their own.
•	at the same time, the NHC will generate revenue from the sale of these houses occupied by mostly former public servants, and it was a win-win situation for the sitting tenants and the NHC.

•	the concept was the idea of the plaintiff, and he brought it to the Managing Director of the NHC and the latter accepted it and sought the approval of the Board of the NHC, and it was approved.

•	in consideration of the project, on 11th September 2011 the plaintiff and the NHC entered into a contract of employment for a period of three years.  

•	also, in a letter dated 7th August 2017, the plaintiff applied to the NHC for the property to be sold to him.  The Acting Managing Director of the NHC accepted the application and directed the conveyancing office to prepare a contract of sale and transfer instrument to facilitate the sale of the property to the plaintiff.

•	the plaintiff a 10% deposit of K14,000.00 to the NHC by cheque and was issued a receipt by the NHC.  On 10th August 2017 the plaintiff and the Acting Managing Director of the NHC signed a contract of sale for the plaintiff to purchase the property.

•	on the same date, the parties signed additional documents comprising of Transfer Instrument and Application for Remission of Rent.

•	on 5th September 2017 a letter by the Acting Managing Director of the NHC was delivered to the third defendant enclosing the following documents:

•	copy of K200.00 Transfer Receipt,
•	1 x original Application for Remission of Rent,
•	1 x original Transfer Instrument,
•	1 x original Contract of Sale,
•	Copies of supporting documents, and
•	Owners copy of State Lease Volume 72, Folio 42.

•	unbeknown to the plaintiff, a letter of offer to sell the property to the first defendant for K700,000.00 was issued on 15th August 2016 purportedly by John Dege following by a contract of sale with no date was entered into between the first defendant and Mr Dege purportedly on behalf of the NHC.

•	on 13th March 2017 a Grant of Remission of Rent was made, however, it is unclear as to whether the grant was issued by Luther Sipison or Tiri Wanga as the Delegate of the Minister for Lands and Physical Planning.

•	the first defendant was not a sit in tenant, nor did he have a tenancy agreement with the NHC.

•	Gabriel Gore who was the General Manager Human Resource of the NHC at that time did not sign the contract of sale between the NHC and the first defendant, Application for Remission of Rent, Transfer Instrument and Amended Settlement Statement between the NHC and the first defendant.

•	in addition, a sum of K323,750.00 was still outstanding before the title of the property was transferred from the NHC to the first defendant.

•	in his letter to the Registrar of Titles dated 3rd April 2018 the Acting Managing Director of the NHC Mr Kenneth Cooke pointed out these discrepancies and the title of the fifth defendant should be cancelled.  

•	however, the Registrar of Titles response was as Mr Cooke alleged that the title was procured by fraud, he did not have jurisdiction to do that and that the matter should be taken to Court.

•	on 13th March 2017 the title of the property was transferred from the NHC to first defendant.  Six months later, the first defendant entered into a contract of sale with the fifth defendant and obtained Ministerial Approval on 11th August 2017.

•	on the next day, 12th August 2017 the title of the property was transferred from the first defendant to the fifth defendant.

•	at the material time, the first defendant was the Operations Manager of the Executive Security Systems Limited.  According to the Company Extract, the Executive Security Systems Limited is a company owned by the fifth defendant. 

Proof of Fraud

8.	The plaintiff relies on Section 37 of the National Housing Corporation Act (“NHC Act”) and submits that he is an approved applicant for the property but missed out.  Section 37 states in part:

“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).”

9.	On the other hand, the first defendant was not a sitting tenant, nor did he have a tenancy agreement with the NHC and was not eligible to be awarded the right to purchase the property from the NHC.  Because of this, the contract of sale between the NHC and first defendant and Transfer Instrument to have the title of the property transferred from the NHC to the first defendant was in breach of Section 37 of the NHC Act.

10.	In Rosemary John v James Nomenda & National Housing Corporation (2010) N3551 which was reinforced in Vailala v National Housing Corporation (2017) N6598 it was held that a failure by the registered proprietor to comply with the procedure for procuring title of a property from the NHC under Section 37 of the NHC Act and the guidelines for “Home ownership Scheme” constitute constructive fraud and title can be set side under Section 33(1)(a) of the Land Registration Act.  

11.	Section 37 of the NHC Act confers authority on the NHC to sell a “dwelling” vested in it.  A “dwelling” is defined in Section 1 (Interpretation) of the NHC Act as:

“includes the appurtenances, outbuildings, fences and permanent provision of lighting, water supply, drainage and sewerage provided in connection with a dwelling, and in relation to the letting, selling, vacating or erecting also includes the land on which a dwelling is situated but does not otherwise include land”.

12.	The NHC may sell a dwelling in three ways:

(a)	it may sell a dwelling to an eligible person. 
(b)	it may sell a dwelling to an approved applicant.
(c)	it may sell to a person who exercises the option offered to him under Section 38(1). (Emphasis added).

13.	An eligible person is defined in Section 1 (Interpretation) of the NHC Act as:

“means a person declared under Section 3 to be eligible for assistance under Part IV”.

14.	Section 3 of the NHC Act states:

“The Corporation may declare a person to be a person eligible for assistance under Part IV by reason of – 

(a)	his limited means; or

(b)	his present unsuitable housing; or

(c)	any other circumstances considered relevant by the Corporation”.

15.	An approved applicant is defined in Section 1 (Interpretation) of the NHC Act as:

“means – 

(a)	the State; or 

	(b)	an instrumentality of the State; or

	(c)	a Provincial Government; or

(d)	an instrumentality of a Provincial Government, or

(e)	a Local-level Government; or

(f)	an organization or person declared under Section 2 to be an approved applicant for the purposes of this Act”.

16.	The reference to an organization or person declared under Section 2 in Section 1(f) (supra) is by a Ministerial Declaration in the following terms:

“The Minister may declare an organization or person to be a person to be an approved applicant for the purpose of this Act.”

17.	The reference to a person who exercises the option offered to him under Section 38(1) in Section 37(1) of the NHC Act is a person offered to purchase a dwelling.  Section 38(1) states: 

	“38.	OPTION 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

(2)	…….. 
(3)	…….. 

(4)	After 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”.

18.	I uphold the plaintiff’s submissions because I am satisfied that the first defendant is neither:

•	an eligible person because of his limited means, or of his present unsuitable housing, or of any other circumstances considered relevant by the NHC under Sections 1, 3 and 37 of the NHC Act, nor, 

•	an approved applicant because there is no evidence of an Ministerial Declaration approving the applicant to purchase the property under Sections 1(f) and 37 of the NHC Act, or

•	a sit in tenant and absence of a tenancy agreement with the NHC under Sections 37(1) and 38 of the NHC Act.

19.	In addition, the sale of the property by the NHC to the first defendant is riddled with irregularities outlined as follows:

•	the contract of sale between the NHC and the first defendant is undated.  
•	the purchase price of K700,000.00 was not paid in full at the date of settlement.

•	K323,750.00 was outstanding when the title of the property was transferred from the NHC to the first defendant.

•	Mr Gore did not sign the contract of sale between the NHC and the first defendant, the Application for Remission of Rent, Transfer Instrument and Amended Settlement Statement.

20.	On the other hand, I am satisfied that the plaintiff has met the requirements in relation to the eligibility as a sit in tenant to be given the first right of refusal to purchase the property under Sections 1, 3, 37 and 38 of the NHC Act.

21.	When given this option, he accepted it and signed a contract of sale with the NHC and paid the purchase price of K14,000.00 and the requisite documents for the transfer and registration of title including the Transfer Instrument were signed by the Managing Director of the NHC and lodged with the Registrar of Titles to process the transfer and registration of the title from the NHC to the plaintiff but remained incomplete.

22.	However, this is only one part of the proof of fraud because the title of the property has passed from the first defendant to the fifth defendant and fraud must be proved against the fifth defendant as the current registered proprietor because Section 33(1)(a) of the Land Registration Act stipulates that “The registered proprietor of an estate or interest holds it absolutely free from all encumbrances except in the case of fraud.”

23.	Unlike Mapai Transport Limited v Romily Kila-Pat & Ors (2017) N6850 where the process adopted by the first registered proprietor of the State lease (the property) was grossly irregular and unsatisfactory such that constructive fraud was established and no good title passed to the fifth defendant as the second registered proprietor, in the present case, it is abundantly clear from the above findings that there is a direction relationship or nexus between the first defendant and the fifth defendant because first, the first defendant is the Operations Manager of Executive Security Systems Limited.  Executive Security Systems Limited is owned by the fifth defendant.  The sole shareholder of Executive Security Systems Limited is John Rosso who holds 2 shares. Secondly, John Rosso is a sole shareholder of the fifth defendant holding 100 shares.

24.	Given this, there is a strong inference that the first defendant was used as a conduit to move the property from the NHC to the fifth defendant to the detriment of the plaintiff. 

25.	Thirdly, the purported signing of contract of sale between the NHC and the first defendant on 15th August 2016 for the transfer and registration of title from the NHC to the first defendant on 13th March 2017 was swift.  Fourthly, the purported sale of the property from the first defendant to the fifth defendant six months later was also swift and unexplained. Fifthly, as the purchase price was K700,000.00, there is a no evidence of a Ministerial Approval.   

26.	Finally, the first defendant’s source of funding to finance the purchase price of K700,000.00 is also unexplained.  The unexplained rush to sell the property to the fifth defendant and the unexplained source of funding for the purchase price reinforces the plaintiff’s case that the fifth defendant conspired with the first defendant to move the property from the NHC to the fifth defendant to the detriment of the plaintiff.   

27.	For the foregoing reasons, I am satisfied on the balance of probabilities that the plaintiff has established that the fifth defendant procure the title to the property by fraud and the title will be set aside under Section 33(1)(a) of the Land Registration Act.

General Damages 

28.	Turning to the order sought for general damages to be awarded there is no evidence and submissions to establish general damages and for this reason, the order sought is refused.

Conclusion

29.	For the foregoing reasons, I am satisfied that the plaintiff has proved the fifth defendant’s title to the property has been procured by fraud.  Costs is discretion and as the plaintiff seeks costs on an indemnity basis, I order the defendants to pay the plaintiff’s costs of the proceedings on an indemnity basis because of their conduct/actions, they have deprived the plaintiff the opportunity to purchase the property.

Order 

30.	The Court orders that:

1.	The order sought for an award of general damages is refused.

2.	The transfer of title of the property by the second defendant to the first defendant on or about 13th March 2017 be declared null and void and be quashed.  

3.	The subsequent transfer of title by the first defendant to the fifth defendant on or about 12th August 2017 be declared null and void and be quashed.

4.	The fifth defendant and any other person with possession or control of the official copy of the State Lease of the property shall within 14 days after date of this order return it to the third defendant.

5.	The third defendant, as a delegate of the Minister, shall within 21 days after the date of service of this order:

(a)	execute a notice of forfeiture of the interest of the fifth defendant in the State Lease of the property stating that the fifth defendant’s interest in the State Lease is forfeited by order of the National Court at Waigani,

(b)	publish the notice of forfeiture in the National Gazette,

(c)	forward the notice of forfeiture to the Registrar of Titles, and

(d)	forward a certified copy of the notice of forfeiture to the Registrar of the National Court at Waigani and to each of the other parties to these proceedings.

6.	The Registrar of Titles shall within thirty days after receiving the notice of forfeiture, amend the Register of State Leases and all other records of the State under his control to reflect the forfeiture of the interest of the fifth defendant in the State Lease over Section 52, Allotment 154, Granville, National Capital District.

7.	The third defendant, as delegate of the Minister, shall within twenty-one days after the date of service of the order approve the Contract of Sale between the plaintiff and the second defendant dated 10th August 2017 and the Transfer Instrument by the second defendant dated 10th August 2017.

8.	The Registrar of Titles shall within thirty days after compliance with order above, enter and transfer the property to the plaintiff pursuant to the Contract of Sale dated 10th August 2017 and the Transfer Instrument by the second defendant dated 10th August 2017.

9.	These proceedings shall be called for mention, to check compliance with the above orders, on Monday 7th July 2025 at 9:30 am.

10.	The plaintiff shall pay the first defendant’s costs of and incidental to the proceedings on a party/party basis, to be taxed, if not agreed.

11.	Time for entry of these Orders shall be abridged to the date of settlement by the Registrar, which shall take place, forthwith.
________________________________________________________________
Lawyers for plaintiff: Sassingian Lawyers	
Lawyers for third & fourth defendants: Acting Solicitor General