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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
WS NO. 971 OF 2018
BETWEEN:
JOHN ROSSO for himself and on behalf of the Papua Compound Community, Lae
First Plaintiff
AND
MOROBE PROVINCIAL GOVERNMENT
Second Plaintiff
AND
MOROBE PROVINSEL FISKEL PLENNIN BOD
Third Plaintiff
AND
KEPAS LUBANG
First Defendant
AND
PDA TRANSPORT LIMITED
Second Defendant
AND
PNG NATIONAL LAND BOARD
Third Defendant
AND
BENJAMIN SAMSON, REGISTRAR OF TITLES
Fourth Defendant
AND
NATIONAL PHYSICAL PLANNING BOARD
Fifth Defendant
AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Sixth Defendant
LAE: DOWA J
2022:19 JULY, 10 AUGUST 2022; 9 JUNE 2025
LAND LAW - Constructive fraud-Application to set aside grant of state lease based on constructive fraud-failure to follow planning process under Part VII of the Physical Planning Act-tender for lease in contravention of section 67 of the Land Act-false and misleading land inspection reports-grant of state lease for purpose not zoned-illegal amendments to state lease-subsequent approval for planning and development plans flawed.
Grant of Lease to an unincorporated entity-lacking legal capacity -under Sections 15, 16 and 17 of the Companies Act-the Defendants
failed to follow due process under section 67 of the Land Act and Part VII of the Physical Planning Act 1989- the actions of the Defendants also amounted to constructive fraud-decisions of the Defendants granting State Lease to the second
Defendants are brought before the Court and quashed and title over land issued to the second Defendant declared null and void.
Cases cited
Dumal Dibiaso Incorporated Land Group No 1664 v Kala Kuma & others (2005) SC805
Karaie v Kalandi (2024) SC2695
Malewo vs Faulkner (2009) SC960
Mineral Resources Development Company Ltd v Sisimolu (2010) SC1090
Ace Guard Dog Security Services Ltd v Lailai (2004) SC757
Mota v Camilus (2017) N6810
Mudge v Secretary for Lands [1985] PNGLR 387
Pius Tikili v Home Base Real Estate (2017) SC1563
PNG Bible Church Inc v Carol Mandi (2018) SC1724
Rosemary John v James Nomenda (2010) N3851
Simon Mali v State (2002) SC690
Toki v Helai (2016) SC1558
Vaki Vailala v NHC (2017) N6598
Counsel
N. David for the plaintiffs
J. Siki, for the second defendant
S. Maliaki, for the third, fourth, fifth and sixth defendants
Decision
Facts
Defence
9 The second Defendant filed a Defence opposing the reliefs sought.
Trial
10. The trial was conducted by the tender of the respective Affidavits of the parties.
Evidence-The Plaintiffs Evidence
11. The Plaintiff relies on the following affidavits:
| 1. | Affidavit of Tirah Baloiloi filed 12 August 2019 (marked as Document No.39) | P1 |
| 2. | Affidavit of David Poka filed on 9th July 2020 (marked as Document No.51) | P2 |
| 3. | Affidavit of John Rosso filed 4th September 2020 (marked as Document No.70) | P3 |
| 4. | Affidavit of Wendy Bue filed 5th July 2024 (marked as Document No.107) | P4 |
| 5. | Affidavit of Bart Impambonj filed 27 July 2021 (marked as Document No.108) | P5 |
12. This is the summary of the Plaintiffs’ evidence. The first Plaintiff John Rosso is a resident of Papuan Compound, city of Lae. He is a Member of Parliament for Lae Open Electorate. He brings this action for himself and on behalf of the residents of Papuan Compound suburb, Lae City. His evidence is supported by Tera Baloiloi, the Provincial Alienated Lands Officer attached to Provincial Lands & Physical Planning in the Morobe Province and Bart Impambonj, the Provincial Administrator for Morobe Provincial Administration. The proceedings concern a property Allotment 91 Section 39, formerly Lot 35. Allotment 35 Section 39 has been a Reserved/Open Space State land under Survey Cat.31/877 held by the Division of Lands, Lae in the Morobe Province for sports and recreational purpose for the residents of Papuan Compound.
13. In 2002, Lot 35 Section 39, was subdivided under Survey Cat. No 31/1275 to allocate additional land to Milfordhaven Primary School. The main parcel of the field remained Reserved/Open Space land, but the description was changed from Lot 35 Section 39 to Lot 91 Section 39 under the new Survey Plan.
14. In 2012, the first Defendant, Kepas Lubang, a filing clerk, employed by the Division of Lands, Lae, dubiously and without authority of the Provincial Lands Officer provided a false and misleading Land Inspection Report in respect of Lot 35 Section 39 as “Light Industrial Purpose”. He falsely stated in his Report that the land was vacant and unoccupied. He also signed the Report without the knowledge and authority of Jonah Suvi, the Acting Programme Advisor of the Division of Lands at Lae. On discovery, the first Defendant was eventually terminated from employment for falsifying the report.
15. Early 2012, Lot 35 Section 39 was put up for tender for Light Industrial Lease even though no property under that description exited. On 12th May 2012 the Second Defendant applied for a Business (Light Industrial Purpose) Lease over Lot 35 Section 39.
16. At the time of tender and the second Defendant’s application, Lot 35 Section 39 did not exist. The description has been changed to Lot 91 Section 39 since 2002. There was no rezoning of the subject property from Reserved/Open Space to Business (Light Industrial) Lease.
17. On 4th June 2014, the PNG land Board recommended the grant of a Business (Light Industrial) Lease over Lot 35 Section 39 to the second Defendant which was eventually granted by the Minister for Lands and Physical Planning on 8th July2014. The recommendation and grant of the Business Lease over Lot 35 Section 39 was again flawed and erroneous because Lot 35 Section 39 did not exist and there was no rezoning from Reserved/Open Space to Business (Light Industrial) Lease. The Open space zoning remained even under the new description Lot 91 Section 39.
18. The Plaintiffs learnt of the second Defendant’s Title in September 2014 when the second Defendant applied to the Second Plaintiff for approval for fencing and development plan. The second Defendant’s application was refused because the application was made for a State Lease over a property that did not exist and for a purpose not specifically zoned. Despite being refused permission, the second Defendant proceeded to fence the field. The residents of Papuan Compound became agitated and pulled down the fences and petitioned the second Plaintiff, the Morobe Provincial Government for the return of the playing field.
19. On 24th October 2014, Mr. Jonah Suvi, the Provincial Programme Advisor, Lands Division, wrote to the Department of Lands & Physical Planning complaining about the proper processes not being followed by the officers of the Lands Department resulting in the Papuan Compound playing field being improperly and illegally acquired by the second Defendant.
20. From thereon several correspondences passed between, Jonathan Suvi, the Provincial Lands Programme Advisor, and the National Lands Department, and Patilias Gamato, the Provincial Administrator for Morobe Provincial Administration, the Chief Physical Planner and the second Defendant.
21. The Department of Lands & Physical Planning after conducting further investigations reached a conclusion that the State Lease granted to the second Defendant was improper and fraudulent in that there was no approval given for Lot 35 Section 39 to be rezoned from open space to business purposes and secondly that Lot 35 Section 39 was never in existence anymore as it had been changed to Lot 91 Section 39 under Survey Cat. No 31/1275.The Lands Department proposed to cancel the title. On 5th August 2015, Benjamin Samson, the Registrar of Titles, requested the Second Defendant to surrender the State Lease for cancellation.
22. In 2016, instead of giving up the title for cancellation, the second Defendant had the title amended through one Yanjol Apin, who was then the Acting Registrar of Titles. Mr. Apin, without following proper procedures, got the State Lease, Lot 35 Section 39 amended in the following terms:
a. deleting the words “Lot 35” and replacing it with “Lot 91”
b. deleting Survey Cat No. 31/43 and replacing with Survey Cat. No 31/1275
c. deleting the area of lease of “2.7350” and replacing it with “2.267” hectares.
23. The Plaintiffs’ witnesses depose that the amendments were improper and fraudulent because the unauthorized amendments have the effect of creating a new state lease by Mr. Apin who had no power and without following the proper procedures.
24. On 18th May 2016, after obtaining the amendment to the State Lease, the second Defendant applied to the Morobe Fiskel Plennin Bod for fencing. On 2nd June 2016, the Provincial Physical Planner refused the application stating that Lot 91 Section 39 was open space, and the second Defendant was required to apply for rezoning to industrial lease. On 3rd August 2016, the second Defendant applied for rezoning. While waiting for the appointment of the Provincial Physical Planning Board members to consider the application, the second Defendant applied to and obtained approval from the National Physical Planning Board without the knowledge and input of the second and third Plaintiffs. The second and third Plaintiffs were not consulted of the application to rezone Lot 91 Section 39 from Reserve/Open Space to Business (light Industrial) Lease. Had the second and Third Plaintiffs been notified of the application by the second and the fifth Defendants, they would have objected to the granting of the application.
The Second Defendants Evidence
25. The second Defendant relies on the following Affidavits:
2018 (Document No.13)
(Document No.38)
2020(Document No.44)
(Document No.48)
(Document No.49)
No.50
(Document No.60)
2020 (Document No.66)
2020 (Document No.81)
(Document No.121)
26. The evidence of the second Defendant, PDA Transport Limited, was presented by Paul Depo Aikal, the owner of the second Defendant company. This is the summary of the second Defendant’s evidence. The subject land was initially described as Lot 35 Section 39 Lae under the old Survey plan. The land was advertised for Business Lease (Light Industrial) in the National Gazette on 10th May 2012.The second Defendant tendered for the property on 12th May 2012. Second Defendants interest was gazetted as item No 198 in the National Gazette on 24th December 2012. On 5th December 2013, the second Defendant’s application was listed item No 238 in the National Gazette for the PNG Land Board hearing. The second Defendant’s application was successful, and PNG Land Board recommendation was published in the National Gazette on 4th June 2014. Following receipt and execution of the Lease Acceptance Forms, and payment of the relevant fees, Minister for Lands & Physical Planning granted a Business (Light Industrial) Lease over Lot 35 Section 39 to the second Defendant on 8th July 2014.
27. In September 2014, the Plaintiff submitted fencing and development plans to the Morobe Provincial Physical Planning Board for approval. The application was refused on the basis that property Lot 35 Section 39 was superseded by Lot 91 Section 39 under a new survey plan. On 17th February 2023, the second Defendant wrote to Benny Allan, the then Minister for Lands seeking his assistance. The Minister, by letter dated 15th March 2015, directed the Secretary for Lands & Physical Planning, Romily Kila-Pat, to instruct Jonah Suvi, the Advisor for Lands in Morobe to assist the second Defendant in its fencing and development plans and for the change of description of property from Lot 35 to Lot 91. On 30th April 2015 and again on 11th June 2015, the second Defendant wrote to the Registrar of Titles for assistance.
28. Mr. Aikal deposes further that on 5th August 2015, the then Registrar of Titles, Benjamin Samson, wrote to the second Defendant to surrender the Title for cancellation. The reason given by Mr Samson was that the land was zoned as Recreational (Open Space) and the second Defendant had fraudulently obtained Title. This was the first time the second Defendant became aware that the land was zoned for Recreational (Open Space) contrary to what was initially published in the National gazette as Business Lease. The second Defendant sought further clarification with the Registrar of Title but received no response. The second Defendant then requested Secretary for Lands & Physical Planning to direct the Registrar for Titles to amend the description of the Title of the said land as per the new Survey Plan. On 17th February 2016, the second Defendant wrote to the Acting Registrar of Titles, Yansol Apin, requesting amendment to the title. Following Apin’s request, Second Defendant surrendered the title to the Acting Registrar who amended the description of land from Lot 35 to 91 and the size of the land to accord with the new survey plan.
29. Following amendment to the Title, the second Defendant resubmitted its fencing and development plans and for the rezoning of the subject land from Open Space to Business Lease (Light Industrial) to the Morobe Physical Planning Board for approval. The second Defendant was advised that the members of the Morobe Physical Planning Board was not yet appointed to sit and consider the application. On 21st September 2016, Second Defendant applied to the National Physical Planning Board for the rezoning of the land from Open Space to Business Lease (Light Industrial) and its development plans. The National Physical Planning Board approved the application on 12th April 2017.
30. Mr Aikal refuted all allegations of fraud and maintains that they have followed due process under the Land Act to obtain a Business (Light Industrial) Lease over property Section 39, Allotment 91, formerly Allotment 35, and the Plaintiffs have unreasonably delayed the development plans of the second Defendant.
31. At the direction of the National Court ordered 24th January 2020, the PNG Land Board met and resolved not to approve the application for variation of the purpose of the State Lease in its Board decision of 20th March 2020.
32. In respect of the issue of legal capacity, Mr. Aikal deposed that PDA Transport Limited was not incorporated as a company when it was granted the State Lease. PDA Transport was eventually incorporated in December 2015.
The Third, Fourth, Fifth and Sixth Defendants’ Evidence
33. The Third, Fourth, fifth and Sixth Defendants rely on the following affidavits:
(Document No.55)
(Document No.56)
(Document No.57)
(Document No.67)
(marked as Document No.108)
34. The State Defendants’ evidence was mainly presented by Benjamin Samson, Secretary for Department of Lands and Physical Planning, and former Registrar of Titles. His evidence is supported by Linus Billy, the Chief Physical Planner, Sam Wange, the Chairman of PNG Land Board and Walo Jasii, a Lands Officer. This is the summary of the State Defendants’ evidence. The land described as Allotment 35 Section 39; Lae also known as Allotment 91 Section 39 was zoned for public purpose as Open Space for sports for the residents of Papuan Compound. Surprisingly, while the parcel of land was still under the zoning as public purpose and open space, it was advertised in the National Gazette for tender as Business (Light Industrial) Lease. The second Defendant, PDA Transport Ltd, not an incorporated legal entity, lodged its application for the land. In PNG Land Board Meeting No 03/2013, PDA Transport Ltd was recommended the successful applicant and was granted a Business Light Industrial Lease while the land was still zoned as open space for public use.
35. After the grant, there was a public outcry from the Lae residents and people living around Papuan Compound. The Department of Lands & Physical Planning was then instructed to investigate and take corrective actions to rectify the problem on the issuance of the title on an Open space /Recreational land. As a result, the Chief Physical Planner investigated and established that the Business (Light Industrial) Lease granted to PDA Transport Ltd was in contravention of the existing zoning of the land. On 5th August 2015, Benjamin Samson, the then Registrar of Titles, summonsed PDA Transport to surrender the title for cancellation. Although PDA Transport responded to the Summons, it did not surrender the title.
36. On 2nd November 2015, the First Secretary of the Minister for Lands, wrote to the Acting Secretory, Luther Sipison, to check on the status of the land. On 5th November 2015, Mr Sipison, footnoted on the memo, directing the Deputy Secretary-Lands Services to investigate the status on the cancellation of the lease and advise Minister. On 7th October 2016, Tiri Wanga, the Deputy Secretary for Lands wrote to the Registrar of Titles to advise if the title was cancelled and if not, to provide reasons for not cancelling the title. Instead of cancelling the title, the Acting Registrar of Titles, Yanjol Apin, changed the description of the land from Allotment 35 to Allotment 91 Section 39 Lae. The Acting Registrar also changed the size of the land and the survey plan catalogue numbers.
37. The State Defendants maintain that the State Lease granted to PDA Transport Ltd was wrongfully procured and registered, stating that the process of rezoning was not followed before the land was advertised. The advertisement and grant of the Lease was on a land description that no longer existed. The internal investigations revealed that the public advertisement of the land described as Allotment 35 Section 39 was procured outside of the Lands Department processes and procedures and not authorised, approved and sanctioned. It was procured in Lae Morobe Province by people and officers with sinister motives who cunningly used old land description to disguise the allocation process where it proceeded to the Land Board undetected. Had the land been advertised in its correct description, Allotment 91 Section 39, it would have been identified and the allocation process stopped as the land is designated for Open Space for Recreation and Sporting activities.
38. Linus Billy, the Chief Physical Planner, deposes that the subsequent approval by the Physical Planning Board to rezone the land from Open Space to General Industry, is administratively flawed because the State Lease was issued in contravention of the rezoning process under the Physical Planning Act.
39. On 24th January 2020, the National Court, by consent of parties referred to the PNG Land Board for its assistance to inquire and to advise on the issue of Variation of the Purpose of the State Lease described formerly as Allotment 35 Section 39 Lae now Allotment 91 Section 39, Business Lease (Light Industrial) Lae, Morobe Province. On 20th March 2020, the PNG Land Board Meeting No 1 of 2020 resolved not approve the Variation of Purpose for the following reasons:
(1) PDA was not a registered company to initially apply for the land in 2012
(2) The Physical Planning process was not followed by PDA during the time of tender of the land in 2012
(3) The grant of title to PDA as Business (Light Industrial) Lease in 2014 was in contravention of the Physical Planning Act.
(4) The initial tender of the land as Business (Light Industrial) Lease under tender number 11/2012 in 2012 is improper
(5) Wrongful tender and grant of a land (Allotment 35) that never existed.
(6) The former Acting Registrar of Titles fraudulently changed on the State Lease title:
- (a) The description of the land from Allotment 35 to Allotment 91 Section 39.
- (b) The survey plan catalogue number 31/14 to 1275
- (c) The size of the land from 2.755 hectares to 2.267 hectares
40. The State Defendants agree with and support the Plaintiffs that the State Lease granted to the second defendant was improper, unlawful and should be set aside.
Submissions of the Parties
41. The Plaintiffs submit that the procurement and grant of title over Lot 91 Section 39, formerly Lot 35, Lae is fraught with fraud and improper for the following reasons:
42. The third, fourth, fifth and Sixth Defendants concede and agree with the Plaintiffs that the Business (Light Industrial) lease over property known as Lot 91 Section 39, formerly Lot 35, Lae was procured and granted in contravention of the Physical Planning Act and the Land Act and is therefore improper for the following reasons:
ii the survey plan catalogue number 31/14 to 1275
iii the size of the land from 2.755 hectares to 2.267 hectares
43. The second Defendant, PDA Transport Ltd, submits that the Plaintiffs proceedings be dismissed arguing that:
a. the First Plaintiffs have no standing to institute the proceedings.
b. the second Defendant followed due process under the Land Act and the Physical Planning Act to acquire a State Lease, and its title is protected under Section 33 of the Land Registration Act.
c. The Plaintiffs have not proved fraud to set aside the title
Issues
44. The issues identified for consideration for consideration are:
45. The law on standing and representative capacity is settled in this jurisdiction by the Supreme Court in various cases including Simon Mali v State (2002) SC690, Malewo vs Faulkner (2009) SC960, Karaie v Kalandi (2024) SC2695, Dumal Dibiaso Incorporated Land Group No 1664 v Kala Kuma & others (2005) SC805, Mineral Resources Development Company Ltd v Sisimolu (2010) SC1090. The principles enunciated from the above cases are:
46. The first Plaintiff, John Rosso, is a resident of Papuan Compound, city of Lae. He is a Member of Parliament for Lae Open Electorate. He is also the Chairman of the Lae City Authority. He brings this action for himself and on behalf of the residents of Papuan Compound suburb, Lae City whose names are attached to Schedule endorsed onto the Writ of Summons. One hundred and sixty-five (165) residents of Papuan Compound who have a shared interest in the subject land Allotment 91, formerly Lot 35, Section 39, Lae signed and expressly authorised John Rosso to institute the current proceedings. The land is open space for sporting and recreational activities for the residents of Papuan Compound. I am satisfied that the Plaintiff as Member of Parliament representing the Lae city residents and Lae City Authority has standing to institute the current proceedings.
Whether the second Defendant had legal capacity to acquire State Lease
47. The Plaintiffs and the State Defendants submit that the second Defendant, PDA Transport Ltd, was not registered as company under the Companies Act when it applied for the State Lease. They submit that the second Defendant was wrongfully granted the State lease in 2014 when it was not a legal entity.
48. Sections 14, 15,16 and 17 of the Companies Act are relevant which are set out below:
“14. REGISTRATION.
After the Registrar receives a properly completed application for registration of a company, under Section 13 or Section 442, the Registrar shall–
(a) register the application; and
(b) issue a certificate of incorporation in the prescribed form.
“15. CERTIFICATE OF INCORPORATION.
A certificate of incorporation of a company issued under Section 14 is conclusive evidence that–
(a) all the requirements of this Act as to registration have been complied with; and
(b) on and from the date of incorporation stated in the certificate, the company is incorporated under this Act.
A company is a legal entity in its own right separate from its shareholders and continues in existence until it is removed from the register.
(1) Subject to this Act and to any other law, a company has, both within and outside the country–
(a) full capacity to carry on or undertake any business or activity, do any act, or enter into any transaction; and
(b) for the purposes of Paragraph (a), full rights, powers, and privileges.
(2) The constitution of a company may contain a provision relating to the capacity, rights, powers, or privileges of the company only where the provision restricts the capacity of the company or those rights, powers, and privileges.”
49. Turning to the present case, the Certificate of Incorporation of the second Defendant and the Company Extract from the IPA Website shows the second Defendant, PDA Transport Limited, was registered on 2nd December 2015. Paul Depo Aikal, the Managing Director for the second Defendant, admitted in his Affidavit filed 9th July 2020 (Exhibit 1D4), that the second Defendant was unincorporated at the time of the grant of the State Lease, but stated that they had plans to apply for incorporation after the grant of the State Lease which eventually took place on 2nd December 2015.
50. PDA Transport Limited while being unregistered and lacking legal capacity applied for the State lease over Allotment 35 Section 39 in May 2012. The PNG Land Board granted the recommendation for the State Lease in June 2014.The State Lease was granted on 8th July 2014.There is no dispute that the second Defendant did not have legal capacity to do business or apply for a State lease when it was granted the State Lease over Allotment 35 Section 39, Lae.
51. The law on legal entity is settled in that no proceedings can be brought and enforced against a party that lacks legal capacity to sue or be sued or conduct business. The case on point is Ace Guard Dog Security Services Ltd v Lailai (2004) SC757. The Supreme Court said at page 7 of the judgment, and I quote:
“For these reasons, the Appellant is not an incorporated company and therefore without any legal personality. The law in this regard is clear. Counsel for the Respondent submits that consequence of the non-existence of the Appellant is fatal to the appeal. He relied on passage from Halsbury, 4th Edition, Vol 37, para 241:
"A corporation, whether incorporated by charter, statute or registration, or a company, whether incorporated by special statute or registered under the Companies Act, must sue or be sued in its corporate title or registered name,, as the case may be. A corporation which has ceased to have any juristic existence cannot sue or be sued"
52. I find the decision by the PNG Land Board recommending the grant of State Lease and the subsequent grant of State Lease by the Minister for Lands & Physical Planning to the second Defendant, an unincorporated body, which lacked legal capacity to own property and conduct business, was improper and unlawful. I find the Business (Light Industrial) Lease State Lease Volume 21 Folio 122 over Allotment 91, formerly Allotment 35, Section 39, Lae, granted to the second Defendant is unlawful and invalid and declare it null and void.
c. Whether the second Defendant followed due process in obtaining the State Lease over Allotment 91, formerly Lot 35, Section 39, Lae.
The Law
Indefeasibility of Title
53. The second Defendant claims it is the current registered proprietor of Allotment 91, formerly Allotment 35, Section 39, Lae Morobe Province. Section 32 of the Land Registration Act provides that where an instrument of title describes a person as the proprietor of an estate or interest, that person is therefore registered proprietor of the estate or interest. Section 33 of the Land Registration Act provides that a registered proprietor of an estate or interest holds it absolutely free from all encumbrances except for fraud and other exceptions set out in subsection (1)(a) to (f). Refer: Mudge v Secretary for Lands (1985) PNGLR 387.
54. Section 33 (1) of the Land Registration Act is relevant, and it 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.”
Fraud
55. 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.”
56. 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.
57. In the Pius Tikili case, the Supreme Court has 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.”
58. 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 based on constructive fraud.
59. The above principles will be applied to determine whether the second Defendant followed due process in obtaining the State Lease over Allotment 91, formerly Lot 35, Section 39, Lae.
Consideration of the main issue
60. To determine the main issue, the following questions arise for immediate consideration:
a. Whether physical planning process was followed by the defendants during the time of tender of the land
b. Whether the grant of Title to PDA as Business (light Industrial) Lease contravened the Physical Planning Act.
c. Whether the initial tender of the land as Business (light Industrial) Lease under tender No 11/2012 proper
d. Whether it was lawful for the tender and grant of a state lease over land, Allotment 35, Section 39 that never existed
e. Whether it was lawful for the Acting Registrar of Titles to subsequently amend the state lease without following due process.
61. Section 67 of the Land Act 1996 is relevant in determining this issue and it reads:
“67. STATE LEASES NOT TO BE INCONSISTENT WITH ZONING, PHYSICAL PLANNING, ETC.
A State lease shall not be granted for a purpose that would be in contravention of zoning requirements under the Physical Planning Act 1989, any other law relating to physical planning, or any law relating to the use, construction or occupation of buildings or land.”
62. Section 67 of the Land Act is clear and mandatory. No State lease shall be granted for a purpose that contravenes the zoning requirements under the Physical Planning Act 1989. Part VII of the Physical Planning Act 1989 provides for the zoning and planning process to be followed. For example, where a person applies for a land for a purpose that is
different from the existing zone, he must first apply for rezoning or planning permission before applying for a grant.
63. The property Allotment 35 Section 39, Lae also known as Allotment 91 Section 39, Lae was a parcel of land zoned as Open Space for sporting and recreational activities for the Papuan Compound residents. The land was previously described as Allotment 35 Section 39, Lae, under Survey Catalogue 31/877 held by the Lands Department. In 2002, Lot 35 Section 39, was subdivided under Survey Cat. No 31/1275 to allocate additional land to Milfordhaven Primary School. The main parcel of the field remained Reserved/Open Space land, but the description was changed from Lot 35 Section 39 to Lot 91 Section 39 under the new Survey Plan.
64. Despite the change in the description of the land and despite the land being zoned Open Space for recreational and sporting purpose, the Department of Lands & Physical Planning proceeded to advertise the land for public tender for Business (Light Industrial) Lease in the old land description. As a result, the second Defendant applied for a Business (Light Industrial) Lease on Allotment 35 Section 39, Lae.
65. The land, Allotment 35, now Allotment 91, Section 39, is zoned Reserved/Open Space for Sports and Recreation purpose and not
for Busine/Commercial purpose. The land was not rezoned from Open Space to Business/Commercial when it was advertised for public
tender. The Department of Lands & Physical Planning either on its own initiative or on application by an interested party failed
to apply and obtain approval for rezoning for business lease before putting up the land for tender as required by Part VII of the Physical Planning Act 1989 and Section 67 of the Land Act. The process is succinctly explained by Bejamin Samson in his Affidavit filed 20th July 2020 (Exhibit 3D1) at paragraphs 16 to 29
which is reprinted below:
“The Physical Planning Process of rezoning and registering legal descriptions of land.
16. I further would want to assist the Court to explain the physical planning process in the Department of Lands & Physical Planning where it relates to rezoning of a land from one zoning (use) to another zoning.
18. The Physical Planning Board then considers the applicants application. If the application for rezoning is successful, then a rezoning permission or approval is granted in favor of the applicant (normally under the applicants’ name) by the Physical Planning Board. This process is applicable for both land a legal description or without a legal description.
19. Where approval is granted on land that has a legal description, the Applicant proceeds to lodge its application where the land is tendered in accordance with the new zoning of the land.
20. On the other hand where approval is granted for land that do not have a legal description (regarded as white land), the applicant proceeds to survey the land and then have it registered with the Office of the Surveyor General for a legal description to be registered and issued by the Surveyor General, then it goes to the public tender process of advertising the land as available for leasing.
21. For the subject land unfortunately, the above important physical planning processes of rezoning was not followed prior to the public advertisement of the land, hence the land still remained as open space for sporting and recreation purposes. Even PDA Transport Ltd did not make any application to rezone the land and did not have a rezoning approval or permission under its name by the relevant Physical Planning Board at the time the land was advertised.
22. I advise the Honorable Court that the Department do not advertise a land through public tender until the correct and proper zoning of the land is confirmed with the Office of the Chief Physical Planner and the correct legal description with the Office of the Surveyor General.
23. I am surprised to learn that the subject parcel of land in this proceeding was not rezoned, and yet advertised in the National Gazette with a legal description which had already been superseded by a new description.
25. These issues pushed me to investigate further, so I wrote a letter to the Government Printer at the Government Printing Office where in a letter dated 18th February 2020 where I inquired on the public advertisement of Allotment 35 Section 39 Lae, MP so that the issues of the tender of the land could be authenticated.
Annexed and marked “M” is a true copy of the letter to the Government Printer
Annexedand marked “N” is a true copy of the reply from the Government Printer enclosing the public advertisement notice
and the deposit slip butt showing the deposit made in Lae.
27. This piece of evidence clearly showed that the public advertisement of the land described as Allotment 35 Section 39 Lae, MP was procured outside of the Department processes and procedures and was not authorised, approved and sanctioned by the Departments processes. It was actually procured in Lae Morobe Province.
28. The normal process of tendering a land through public advertisement is through the Departments internal process where the tender of the land is prepaid through an account held with the Government Printer for all publication purposes in the National Gazette. Especially for tender of land, we normally pay the fees from our account in the National Capital District and not from Lae.
The Position of the Department of Lands & Physical Planning
29. The Department do not put on public tender a land without firstly confirming its proper zoning and its proper description. Then it goes through the vetting process before a land is put on public advertisement.
30. The subject lands tender process was procured in Lae without the knowledge and consent of the Department prior to the land being tendered. People and Officers with sinister motives cunningly used a superseded land description Allotment 35 Section 91 Lae, to disguise the allocation process where it went to land board undetected.
66. Clearly the State Defendants admit they did not follow the planning process under the Physical Planning Act when the land was put up for public tender. I find the planning process was not followed when the land was advertised for public tender.
b. Whether the grant of Business (light Industrial) Lease to PDA contravened the Physical Planning Act and the Land Act.
67. On 12th May 2012, the second Defendant, PDA Transport Limited, applied for a Business (Light Industrial) Lease over Allotment 35 Section 39 on 12th May 2012. On 4th June 2014, by Gazettal Notice, PNG Land Board recommended the grant of Business (Light Industrial) Lease over Allotment 35 Section 39 to PDA Transport Limited. On 8th July 2014, the Minister for Lands & Physical Planning granted the Business (Light Industrial) Lease to PDA Transport over Allotment 35 Section 39, Lae.
68. At the time of the grant of the Business Lease, Allotment 35 Section 39 under Survey Plan Cat No. 31/877 no longer existed. A small portion of Allotment 35 was allocated to Milfordhaven Primary School and the bulk of the land remained Reserved/Open Space under a new description, Allotment 91, in a new Survey Plan Cat No.31/1275. The purpose of the land remained Reserve /Open Space, whether as Allotment 35 or Allotment 91, Section 39, and it was not zoned or rezoned for Business (Light Industrial) Lease when the state lease for Light Industrial Lease was granted to PDA, the second Defendant. I find the grant of Business (light Industrial) Lease of the subject land to the Second Defendant was in contravention of the PART VII of the Physical Planning Act 1989 and Section 67 of the Land Act 1996.
69. There is overwhelming evidence that the initial tender of the land as Business (light Industrial) lease was not done properly. The important physical planning process under PART VII of the Physical Planning Act 1989 was not followed before tender. The Court notes the Department of Lands & Physical Planning admits to the failure but shifts the blame to its officers who procured the tender process especially the officers who prepared the Land Investigation Report. The evidence shows, the Department of Lands relied on a misleading Lands Investigation Report prepared by the first Defendant, Kepas Lubang. Kepas Lubang was a Filing Clerk employed by Provincial Lands Office, Lae. Mr. Lubang carried out the inspection of Allotment 35 Section 39, prepared and signed the Inspection Report without the knowledge, consent and authority of the Senior Provincial Lands Officer, Mr. Jonah Suvi. The Report was not just flawed but it was false as it stated Allotment 35 Section 39 was found to be vacant and undeveloped. He failed, whether mistakenly or deliberately, to state that the land was Reserved/Open Space. The Report failed to state that Allotment 35 no longer exists as it was superseded by Allotment 91 in Survey Plan No.31/1275.
70. Although the Inspection Report contained misleading information, the National Lands Department failed to do due diligence check to verify the report before putting up the land for tender. Even the second Defendant, as applicant, failed to satisfy itself as to the zoning before applying for the tender for a Business Lease.
71. I accept the evidence of the Plaintiffs that although the tender was gazetted, the Gazettal Notice was not brought to the attention of the Plaintiffs including the Morobe Provincial Lands and Physical Planning office, giving them the opportunity to raise objections or to provide the correct information surrounding the subject land.
72. In the circumstances, I find the initial tender of the land as Business (light Industrial) Lease under tender No 11/2012 flawed and improper.
73. Without repeating the evidence and the findings above, there is no dispute that Allotment 35 Section 39, Lae under Survey Plan No 31/877 ceased to exist as of 2002. While the zoning remained Reserved/Open Space, the land description changed to Allotment 91 Section 39, Lae, due to a sub-division under Survey Plan Cat No 31/1275. The land area was also reduced from 2.7350 hectares to 2.267 hectares. Senior Officers of the Department have conceded that there was a serious procedural breach which was cleverly carried out by certain officers of the Department undetected resulting in the grant of a state lease over a land that did not exist.
74. In the circumstances, the grant of the State Lease by PNG Land Board and Minister for Lands over land that did not exist at the time of the grant is improper and unlawful.
e. Whether it was lawful for the Acting Registrar of Titles to subsequently amend the state lease without following due process.
75. When the Plaintiffs learnt of the grant of the State Lease to the second Defendant, they protested both physically and through
correspondence. The Department of Lands & Physical Planning investigated and concluded that they made a mistake in granting a
Business Lease to the second Defendant. The Department took steps to cancel the State Lease. The Registrar of Titles summonsed the
second Defendant to deliver up the Owner’s Copy of the State Lease for cancellation. Instead of delivering up the Title for
cancellation, the second Defendant sought amendment to the State lease through the Acting Registrar of Titles, Yanjol Apin. Mr. Apin
amended the State Lease Allotment 35 Section 39, Lae in the following terms:
a. deleting the words “Lot 35” and replacing it with “Lot 91”
b. deleting Survey Cat No. 31/43 and replacing with Survey Cat. No 31/1275
c. deleting the area of lease of “2.7350” and replacing it with “2.267” hectares.
76. The Acting Registrar was aware that the Registrar of Titles has issued a Statutory Summons to the second Defendant for the surrender of the Title for cancellation. The reasons advanced in the Summons for surrender of Title were clear and the position taken by the Department was made known. Despite that, the Acting Registrar of Titles acted improperly when he proceeded to amend the State Lease as though they were insignificant errors or omissions falling within the ambit of Section 161 of the Land Registration Act. The grant of a state lease over land that never existed and for a purpose not zoned prior to the grant of the lease are not trivial matters of errors or omissions envisaged by Section 161(1) of the Land Registration Act.
77. I accept the submissions of the Plaintiffs that the amendments were improper and fraudulent because amendments have had the effect of creating a new state lease by Mr. Apin, the Acting Registrar, who had no power to do so.
What is the effect of subsequent approvals by the National Physical Planning Board.
78. After securing the amendments to the Title, PDA Transport applied to Morobe Provincial Physical Planning Board for rezoning from Open Space to Business (Light Industrial) Lease. The Provincial Board was not yet appointed to consider the application, and it was told to wait. PDA then applied directly to the National Physical Planning Board which granted the application. However, Mr. Linus Billy, the Chief Physical Planner, gave evidence that the subsequent approval by the National Physical Planning Board is flawed because the State Lease was already issued in contravention of the planning processes of rezoning. Mr. Billy stated that an application for rezoning must precede the application for the grant of the state lease and not the other way around.
79. I accept the evidence of the Chief Planner that the subsequent approval to rezone from Open Space to Light Industrial is flawed because the grant of the initial Business Lease was issued without following the planning process. Secondly the third Plaintiff, Morobe Provincial Planning Board and the Provincial Land Division was not consulted.
80. On 24th January 2020, the issue was raised before the Court. The Court (per Kandakasi DCJ) with the consent of parties referred the matter to PNG Land Board to inquire and advise on the issue of Variation of the Purpose of the subject State Lease. On 20th March 2020, the PNG Land Board met and resolved not to approve the Variation of Purpose for the following reasons:
(1) PDA was not a registered company to initially apply for the land in 2012
(2) The Physical Planning process was not followed by PDA during the time of tender of the land in 2012
(3) The grant of title to PDA as Business (Light Industrial) Lease in 2014 was in contravention of the Physical Planning Act.
(4) The initial tender of the land as Business (Light Industrial) Lease under tender number 11/2012 in 2012 is improper
(5) Wrongful tender and grant of a land (Allotment 35) that never existed.
(6) The former Acting Registrar of Titles fraudulently changed on the State Lease title:
- The description of the land from Allotment 35 to Allotment 91 Section 39.
- The survey plan catalogue number 31/14 to 1275
- The size of the land from 2.755 hectares to 2.267 hectares
81. Based on the findings above, the approval for the rezoning from Open Space to Light Industrial by the National Physical Planning Board is flawed and ineffective.
Conclusion
82. In conclusion, I find, based on the evidence and submissions of parties, that the circumstances of the grant of Business (Light Industrial) Lease over Allotment 91, formerly Allotment 35, Section 39, Lae to the second Defendant are so unsatisfactory, irregular or unlawful that it is tantamount to fraud, warranting the setting aside of the grant of the State Lease without hesitation and order for cancellation of same. For clarity, I find the Business (Light Industrial) Lease issued to the second Defendant is unlawful, invalid, void and in effective for the following reasons:
Observation
83. Alienated State land is a scarce commodity. State land must be properly identified, zoned, surveyed, secured and managed. That is the primary function of the Department of Lands & Physical Planning, supported by the Surveyor General and the National Physical Planner and other agencies. The creation and grant of the state leases are an important part of the Lands Department’s primary function. The type and purpose of leases granted must be in conformity with the town planning requirements and in meeting the needs of the community. State leases once granted confer rights and interests to the Title holders. In some cases, it is rather a privilege to be granted such interests. It is not a light matter and those tasked with the management of limited land resources and the distribution of such interest have an onerous duty in ensuring that due process is always followed to avoid such actions as surfaced in this proceeding.
What orders should the Court make
84. That said, what orders should the Court make. The Plaintiffs have proved their claim and are entitled to the reliefs claimed in the proceeding. The orders sought in paragraph 20 of the statement of claim shall be granted with modification.
Costs.
85. The Plaintiffs are entitled to the costs of the proceedings. There are multiple defendants with different interests. The first Defendant has since passed away. The second Defendant has vigorously opposed the proceedings whereas the third, fourth, fifth and sixth Defendants admitted and conceded to the reliefs sought by the Plaintiff. Although the State Defendants supported the Plaintiffs in the current proceedings, the initial irregular actions and decisions were made by State servants. As for the second Defendant, it was insistent on its rights and interest despite being informed of the mistakes resulting in a prolonged litigation. In the circumstances, I propose to apportion costs between the second and the state Defendants on 50/50 basis.
Orders
86. The Court orders:
____________________________________________________________
Lawyers for the plaintiff: David & David Company Lawyers
Lawyers for the second defendant: Greg Manda Lawyers
Lawyer for the 3rd , 4th, 5th and 6th defendants: Solicitor General
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