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John v Nomenda [2009] PGNC 294; N3851 (18 January 2009)

N3851

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1818 OF 2005 & OS NO 446 OF 2005

BETWEEN

ROSEMARY JOHN
Consolidated Plaintiff

AND

JAMES NOMENDA & MAGGIE YAGGA
Consolidated First Defendants

AND

PHILIP KAMA, as NATIONAL HOUSING CORPORATION, MT HAGEN OFFICE MANAGER
Consolidated Second Defendant

AND

WALTER KAPTY, as MANAGING DIRECTOR OF NATIONAL HOUSING CORPORATION
Consolidated Third Defendant

AND

NATIONAL HOUSING CORPORATION
Consolidated Fourth Defendant

Mount Hagen: Makail, J
2009: 09th & 10th June & 2010: 18th January

REAL PROPERTY - Dispute over residential property - State lease - Registration of title to another person - Indefeasibility of title - Property earmarked for sale under government's home ownership scheme - Breach of statutory procedures and requirements - Irregularities - Constructive fraud - Proof of - Effect of - Land Registration Act, Ch 191 - Section 33 - National Housing Corporation Act, 1990 - Sections 1,2,27,28,37& 38.

Cases cited:

Mudge -v- Secretary for Lands [1985] PNGLR 387
Emas Estate Development Pty Ltd -v- John Mea & Ors [1993] [PNGLR 215
Steamships Trading Company Limited -v- Garamut Enterprises Limited & Ors (2000) N1959
The Papua Club Inc -v- Nusaum Holdings Limited (No. 2) (2004) N2603
Hi Lift Co Pty Ltd -v- Miri Setae & Ors [2000] PNGLR 80; (2000) N2004
Ramu Nickel Limited & Ors -v- Honourable Dr Puka Temu & Ors (2007) N3252
Elizabeth Kanari -v- Augustine Wiakar & Registrar of Titles (2009) N3589
Koitachi Farms Limited -v- Walter Schnaubelt (2007) SC870
Patrick Tomausi -v- Telikom PNG Limited (2003) N2394

Texts:

The Australian Pocket Oxford Dictionary (5th ed, 2001)
John James Stroud's Judicial Dictionary of Words and Phrases - Volume 2

Counsel:

Mr P. Kunai, for Consolidated Plaintiff
Mr J. Tonge, for Consolidated First Defendants
No appearance, for Consolidated Second, Third & Fourth Defendants

JUDGMENT
18th January, 2010

1. MAKAIL, J: These two cases raise from WS No 1818 of 2005 proceeding and OS No 446 of 2005 proceeding and were consolidated on parties' application on 9th June 2009 as the common issue is one of ownership of a residential property described as allotment 86, section 55, Mt Hagen, Western Highlands Province. It is on a State lease and formally registered as Volume 13, Folio 150 and one of those low cost single detached houses that the consolidated fourth defendant, namely, the National Housing Corporation ("NHC") sold under the National Government's Home Give Away Scheme. The consolidated plaintiff is Rosemary John, an employee of Telikom PNG Limited and works as a Finance & Administration Manager at its Mt Hagen office while the consolidated first defendants are husband and wife, whom I shall refer to as "the Nomendas" from now on. In either proceeding, each claims that they own the property.

2. The Nomendas claim that they purchased it from the NHC while Rosemary also claims that she purchased it from the NHC. As a result of these two competing claims, both parties decided to sue each other to assert their right of ownership of the property. The Nomendas commenced OS No 446 of 2005 proceeding on 20th June 2005 and sought the following reliefs:

"1. A declaration that the Plaintiffs are legal proprietors on Allotment 86 on Section 55 in Mount Hagen.

2. A declaration that the Defendant is currently illegally residing on the said Allotment 86 on Section 55 in Mt Hagen.

3. A declaration that there was a legally binding land sale contract with respect to Allotment 86 on Section 55 in Mt Hagen between the National Housing Corporation and the Plaintiffs.

4. An order evicting the Defendant, her servants, agents, associates or relatives from occupying the said property.

5. An order for damages.

6. Legal costs.

7. Such other order as the court deems fit."

3. Rosemary commenced WS No 1818 of 2005 proceeding on 22nd November 2005 and sought the following reliefs:

"1. A declaration that the transfer of the property described as Section 55, Allotment 86, Mount Hagen to the First Defendants was done by fraud.

2. An order declaring the transfer of the property described as Section 55 Allotment 86, Mt Hagen as void and of no effect.

3. An order directing the Defendants to deliver up possession of the said property described as Section 55 Allotment 86, Mt Hagen to the Plaintiff forthwith.

4. Alternatively, Damages to be assessed.

5. Costs of the action.

6. Such further or other Orders as the Court may think fit."

4. Mr and Mrs Nomenda gave oral evidence. Both were cross examined by counsel for Rosemary in relation to their oral evidence. In addition to that, Mr Nomenda's affidavit sworn and filed on 26th November 2006 was admitted into evidence and marked as exhibit "D1". Rosemary also gave oral evidence and was cross examined by counsel for the Nomendas. Her evidence also consisted of a number of documents which were tendered by consent and marked as exhibits. They were:

1. Her affidavit sworn on 10th February 2006 and filed on 17th February 2006 (exhibit "P1");

2. Application form for Homeownership Scheme (exhibit "P2");

3. NHC Approval Advice on Low Cost Ownership Scheme (exhibit "P3");

4. Letter from Managing Director of NHC to Financial Institutions dated 11th May 1998 (exhibit "P4");

5. Irrevocable Authority for Salary Deduction from NHC to Telikom PNG Limited (exhibit "P5"); and

6. Bundle of documents identified as Break Up of Rental Arrears and Receipts of Payment (exhibit "P6").

5. I should also mention here for the record that although the consolidated second and fourth defendants were served a copy of the writ of summons for WS No 1818 of 2005 proceeding on 24th March 2006 and 8th May 2006 respectively, and the consolidated third and fourth defendants were served the originating summons for OS No 446 of 2005 proceeding on 24th June 2005, they have not shown any interest in defending these proceedings. This is apparent from the lack of defence, affidavits and attendance at the trial. Hence, the trial was conducted without them: see affidavit of service of Pang Pawa sworn 30th March 2006 and filed on 5th April 2006, affidavit of service of Marere Ivaharia sworn on 16th May 2006 and filed on 30th June 2006 and affidavit of service of James Nomenda sworn and filed on 11th July 2005.

6. The parties, through their counsel have filed written submissions in accordance with the Court's direction of 10th June 2009, which I have read to assist me in my deliberations and thank them for their assistance. From the evidence and the submissions, I consider these as the issues:

1. Whether there was fraud in the sale of the property to the Nomendas by the NHC; and
   
2. If so, what is the effect of the fraud on the title of the property?
   
3. If there was no fraud, what are the other remedies available to Rosemary?
   

Whether there was fraud

7. I turn to the first issue of whether there was fraud in the sale of the property between the Nomendas and the NHC. Counsel for the Nomendas contends that throughout the trial, Rosemary never established a "clear case of fraud" against them and the NHC. What she was able to establish was that she participated in the Government's Home Give Away Scheme to purchase the property. She paid all compulsory fees and is currently paying rent of K40.00 through salary deduction on a fortnightly basis, but had never executed a contract of sale to formalize the sale so that the transfer of title of the property would be registered in her name. As such, she is not the registered proprietor of the property and not entitled to the reliefs she seeks.

8. He further contends that in their evidence, the Nomendas said that they intended to purchase a property in Mt Hagen after Mr Nomenda retired from the Correctional Services in 2000, and that, they approached the officers of NHC at the NHC's head office at Tokarara where they spoke to one Mr Paul Asakusa, the then Director for the Highlands Region, and that, they told him that as they were locals from Mt Hagen and they were looking for a property to buy in Mt Hagen and that, Mr Asakus advised them that, there were three properties vacant for sale in Mt Hagen for K1,000.00 each, and that, they were allotments 34, 57 and 86, section 55 and located at Newtown area, and that, these facts establish that there was no fraud involved.

9. Furthermore, he contends that without knowing that the subject property was occupied by Rosemary as the "sitting tenant", the Nomendas went ahead and purchased it along with two others. A contract of sale was executed between them and the NHC and they paid K1,000.00 for this property. After that, the title was transferred and registered in their name as joint proprietors. They did not know or were informed by the officers of the NHC that Rosemary was participating in the Government's Home Give Away Scheme with the aim of also purchasing it. They discovered Rosemary's interest after they arrived in Mt Hagen to take possession of it in August 2003. All along, they acted in good faith and became bona fide purchasers of the property. Given all these matters, counsel submits that Rosemary has failed to establish fraud and the case should be dismissed.

10. Counsel for Rosemary urges me to find that there was fraud involved in the sale of the property to the Nomendas by the NHC for a number of reasons. First, Rosemary was the "sitting tenant" at the time the property was sold to the Nomendas and subsequently the registration of title in their name as joint proprietors. Secondly, she was participating in the Government's Home Give Away Scheme to purchase the property. Thirdly, she paid all the compulsory fees including rental arrears and transfer fees of K2,173.74 by way of a cheque on 6th November 2002 and was paying rent by way of salary deduction on a fortnightly basis while waiting for the title of the property to be transferred to her. Fourthly, she was waiting for the NHC to send her the contract of sale for execution so that the title could be transferred and registered in her name but this did not eventuate. Fifthly, the Nomendas failed to check if the property was vacant before purchasing it. Finally, they were not eligible to purchase it because they were not sitting tenants. This is because only sitting tenants were eligible to participate in the Government's Home Give Away Scheme.

11. According to the law under Torrens title system of land registration for alienation of government land, where a person or entity is registered as the holder or proprietor of government land, he or it holds an indefeasible title. This protection is found in section 33 of the Land Registration Act, Ch 191. This is the doctrine of indefeasibility of title. Of course, there are exceptions to this doctrine and they may be also found in section 33 of the same Act. One is fraud, which Rosemary relies upon in this case. In order to determine this issue, it is necessary to ascertain the meaning of the word "fraud". What is fraud? The Australian Pocket Oxford Dictionary (5th ed, 2001) defines the word fraud as:

"(1) deception, use of false representation to gain an unjust advantage, (2)dishonest artifice or trick, (3)person who or thing which is other than he, she as it claims to be."

12. In John James Stroud's Judicial Dictionary of Words and Phrases - Volume 2, the word fraud is defined as:

"(1) A 'Fraud', in my opinion, is a term that should be reserved for something dishonest and morally wrong, and much mischief, is a thing, done, as well much pain inflicted, by its use where 'illegality' and 'illegal' are the really appropriated expressions." (per Will, J Ex p. Watson[1888] UKLawRpKQB 134; , 21 QBD, 301).

13. It is clear from these definitions that fraud means being dishonest, and taking something by dishonest means thereby inflicting pain or injury on the victim.

14. The law in relation to establishing fraud affecting a registered title under section 33 of the Land Registration Act, Ch 191 seems pretty much settled in this jurisdiction although I note there appears to be two differing views on this issue. First, there is the Supreme Court decision in Mudge -v- Secretary for Lands [1985] PNGLR 387 which stands for the proposition that registration of title is final on all issues and that, only the exceptions provided under the Land Registration Act ch 191 can be invoked to overturn a registered title. One of these exceptions is fraud.

15. Then, there is Emas Estate Development Pty Limited -v- John Mea & Ors [1993] PNGLR 215 where the Supreme Court took a contrary view of the consequences of breaches of statutory procedures. In that case, the Supreme Court, while acknowledging the principles of indefeasibility of title nonetheless did (by a majority) consider irregularities tantamount to fraud as sufficient to over turn a registered title. The view expressed by the Supreme Court in Emas Estate's case (supra) was followed by Sheehan, J in the Steamships Trading Company Limited -v- Garamut Enterprises Limited & Ors (2000) N1959 and also Sevua, J in Hi Lift Co Pty Limited -v- Miri Setae & Ors [2000] PNGLR 08; (2000) N2004. In Steamships Trading's case (supra) after considering these two different views in relation to registration of title under the provisions of the Land Registration Act ch 191, Sheehan, J followed the decision in Emas Estate's case (supra). There, his Honour observed that:

"In neither of the Mudge or Emas Estate cases did the Supreme Court have argument before it or consider what conclusions should be drawn in the event that the breach of procedures under the Land Act were not just irregularities not going to jurisdiction, but breaches that resulted in a total nullity, such that no lease issued under the Land Act at all; that there was therefore no title to register. Nor was there argument or consideration of why Parliament having stipulated in one Act the only mode of granting of state leases, should be another act grant an indefeasible title by way of lease without any need to follow that process whether the obligations to follow the mandates of the Land Act could be wholly ignored and title achieved merely by registration of a document under the Land Registration Act."

16. His Honour made these observations because he was dealing with a case where the processes under the Land Act, 1996 in terms of rezoning of State land, tender by public advertisement, exemption from public advertisement and reasons for exemption were neither followed nor given, resulting in Steamships Trading Company Limited challenging the registration of title of the lease to Garamut Enterprises Pty Limited in the National Court. The critical issue before his Honour was whether or not the irregularities in the registration of title to Garamut Enterprises Pty Limited were sufficient to overturn the registered title of Garamut Enterprises Pty Limited. His Honour held that, irregularities in the registration of title were grounds sufficient to set aside the registration of title because they are tantamount to fraud. His Honour reached that conclusion this way:

"On the evidence before me, I am satisfied that and even if the Court were to follow the decision in Mudge's case that registration of a document alone creates an indefeasible title, not withstanding irregularities of process or documentation that would otherwise preclude the grant of title, it is clear from the facts before this Court that there has been fraud shown in this case.

It is true that the Plaintiff did not assert fraud in the statement filed in these proceedings. But the statement under O16 is a prayer for relief. It is not the pleading of a cause of action. Pleadings only arise in actions commenced by writ, not in any other originating process. (Order 9, r.1 National Court Rules). What the plaintiff has done however is to assert unreasonableness which includes bad faith, equitable and or constructive fraud.

Counsel for Garamunt cited the view of the Privy Council in the decision Assets Co. Ltd -v- Meri Roihi [1905] UKLawRpAC 11; [1905] AC 176 that the fraud required to defeat a registered title meant actual fraud - not equitable or constructive fraud - and actual fraud that must be brought home to the registered proprietor whose title is impeached. That view however was based in the Council's reading of the relevant New Zealand Act. Our own Land Registration Act only speaks of fraud and does not limit its meaning nor does it requires that fraud be shown in a particular party.

The 1st and 2nd defendants failed to follow the zoning laws and have displayed a total disregard for procedures the Land Act provides for the alienation of state land. Instead of the transparent process open to public participation that the Act provides, there has been exclusion and preference shown to the advantage of only one. There has not been just some minor administrative error but rather a subversion of the whole statutory process which the Court could not in good conscience support.

But I am satisfied that this case, registration on 23rd February 1999 did not grant indefeasible title in favour of Garamut. Because what issued and was registered was no lease, no title able to be registered. It was a nullity." (Emphasis added).

17. In the Hi Lift Co's case (supra) the plaintiff filed a complaint in the Port Moresby District Court seeking an order for possession of land described as portion 2413 located at Konedobu in the National Capital District. By an order of the District Court, the proceeding was transferred to the National Court because the title to the land was in dispute. The first and second defendants (Department of Agriculture & Livestock) had occupied that land since 1985. On 8th July 1998, the Department of Lands granted a business (light industrial) lease to the plaintiff over portion 2413 which was originally zoned Public Institutions. On 11th June 1999, the plaintiff issued a notice to quit and served it on the first defendant. The first defendant objected to the rezoning of the land by the National Capital District Commission Physical Planning Board. This led to the plaintiff commencing proceeding against the defendants to have them deliver up possession of the property.

18. In dismissing the proceeding, Sevua, J found that although the lease over portion 2413 was granted to the plaintiff on 8th July 1998, first, there was no evidence to show how the plaintiff acquired the land, that is, there was no evidence as to whether the land was advertised pursuant to section 68 of the Land Act, 1996 or whether the land was exempted from advertisement under section 69 (2) of the Land Act, 1996. Secondly, portion 2413 was a Public Institution zone but the lease granted to the plaintiff was a business (light industrial), which was contrary to the zoning requirement under section 67 of the Land Act, 1996. Thirdly, whilst there was no evidence of fraud, there was a presumption of fraud in the light of the irregular and suspicious dealing by the Department of Lands when it granted the lease over portion 2413 to the plaintiff. In reaching that decision, his Honour said:

"In my view, it would be morally wrong for this Court to sanction such irregularities by the Department of Lands by jumping onto the band wagon of indefeasibility of title and riding it despite the apparent breaches of statutory provisions. Therefore, in my view, whilst these irregularities and breaches may not be fraud, they are sufficient to overturn the indefeasible title of the Plaintiff. They must affect the registered title."

19. His Honour goes on:

"Registration of title, which gives indefeasible title under the Land Registration Act, is one thing, but breaches and or any irregularities under the Land Act, are quite significant that they ought to affect the subsequent registration of title. In my view, such breaches and irregularities under the Land Act, which go to the root of the granting of leases, affect the registration of the title so that a title no longer remains indefeasible."

20. In The Papua Club Inc -v- Nusaum Holdings Limited (No 2) (2004) N2603, Gavara Nanu, J observed that:

"It is not necessary for me to go into any detailed discussion or exposition of the principle in Emas Estate Development Pty Ltd -v- John Mea and Others (supra) as applied in the two subsequent cases referred to above, because the circumstances in the instant case are quite different to the circumstances in those cases.

However, it suffices to say that I do not find the two judicial precedents in Emas Estate Development -v- John Mea and Others (supra) and Mudge -v- Secretary for Lands (supra) in any way conflicting. The effect of the principle in Emas Estate Development -v- John Mea and Others (supra) as applied in Steamships Trading Company Ltd -v- Minister for Lands and Physical Planning and Others (supra) and Hi Lift Company -v- Miri Sata and Another (supra) is that, if there are serious and gross or flagrant breaches of the mandatory statutory procedures as set out in the Land Act, in the issuance of a title, then such breaches would operate to vitiate the validity and the indefeasibility of the title, although fraud may not be involved . Thus, the title would be invalid just like the title which is obtained through fraud. Thus, it is clear from this that, Emas Estate Development -v- John Mea and Others (supra) has introduced a new and added ground on which a title may be invalidated. It is new in the sense that it is outside the exceptions enumerated in s. 33 of the Land Registration Act.

I am of the opinion that the principle applied in Emas Estate Development -v- John Mea and Others (supra) is a good and sound principle to be adopted and applied in this jurisdiction, where such breaches are very common and are done deliberately. It is a novel principle providing a judicial precedent which is relevant and significant in the development of the underlying law.

In that regard, it is to be noted that the courts in this jurisdiction have broad equitable supervisory powers given to them by s.155 (4) of the Constitution. Thus, the courts can, in the exercise of such powers, invalidate titles which are issued in gross and serious violation of the mandatory statutory procedures as set out in the Land Act. Section 9 of the Constitution states the supremacy of the Constitution over all other laws, including the statutes. Thus, the courts in the exercise of their inherent powers under s.155 (4) of the Constitution can correct any such anomalies, although they may fall outside of the exceptions stated in s. 33 of the Land Registration Act.

These observations are only academic because in this case, there is no suggestion of any gross or serious violation or breach of the mandatory statutory procedures under the Land Act, by the first defendant in acquiring the title." (Emphasis added).

21. It is noted that although his Honour agreed with the view expressed by the Supreme Court in Emas Estate's case (supra), and subsequently applied in Steamships Trading's case (supra) and Hi Lift Co's case (supra), his Honour took the view expressed by the Supreme Court in Mudge's case (supra) and found that there was no fraud committed by the defendants and did not disturb the first defendant's title to the property in that case.

22. Before I turn to the facts of this case, there are two more cases which I wish to mention here that followed the decision in Emas Estate's case (supra). They are; Ramu Nickel Limited & Ors -v- Honourable Dr Puka Temu & Ors (2007) N3252, a decision by Injia, DCJ (as he then was) and Elizabeth Kanari -v- Augustine Wiakar & Registrar of Titles (2009) N3589, a decision by Cannings, J. In Ramu Nickel's case (supra), his Honour inter-alia, quashed the decision of the Minister for Lands and Physical Planning to grant a special agricultural and business lease to the second defendant in relation to a land in Madang because his Honour found that the title to the same land was issued and registered in the name of the first plaintiff under a special mining lease. The first plaintiff's title was registered first in time to that of the first defendant. In arriving at that decision, his Honour found that whilst there was no evidence establishing actual fraud or to use counsel for the Nomendas' expression, "clear case of fraud", the grant of the special agricultural and business lease to the first defendant was erroneous and to that extent, the Minister knew or ought to have known that there was a pre-existing special mining lease over the same land which amounted to constructive fraud.

23. In the case of Elizabeth Kanari (supra), Cannings, J declared the transfer of a property located at Buvussi oil palm settlement near Kimbe to the first defendant null and void because his Honour found that whilst there was no evidence of actual fraud, there was evidence of constructive fraud, in that there were obvious irregularities and breaches of statutory procedures in the transfer and registration of the title to the first defendant. This was after his Honour took the opportunity to review all the cases that I have referred to above and in the end, took the view in Emas Estate's case (supra). In reaching that decision, I note that his Honour did consider the Supreme Court decision in Koitachi Farms Limited -v- Walter Schnaubelt (2007) SC870, a decision which followed the view expressed in Mudge's case (supra) but decided not to follow it because the facts in the case he was dealing with did not permit him to take the view expressed in Mugde's case (supra) and Koitachi Farms Limited's case (supra).

24. Turning now to the present case, Rosemary as the party alleging fraud against the Nomendas and the NHC must prove the allegations of fraud pleaded in the statement of claim and more so, paragraph 7(a)-(d) in WS No 1818 of 2005 proceeding in order to succeed on the action. She relies on the following particulars of fraud against the Nomendas and the NHC:

(a) Conspired and knowingly transferred the property to the Nomendas when the property had already been sold to her,

(b) The title of the property was transferred to the Nomendas without her knowledge and consent,

(c) Knowingly executed the contract of sale and transfer instrument with the Nomendas when Rosemary had already paid for the purchase price, and

(d) Knowingly misled Rosemary to think that the title in the property would be transferred to her in due course after execution of the contract.

25. In essence, Rosemary must establish that, first, the Nomendas and the NHC agreed to transfer the property to the Nomendas and secondly, knew that the property had already been sold to her. Thirdly, the title to the property was transferred without her knowledge and finally, the NHC represented to her that the title to the property would be transferred to her. In my view, these allegations of fraud against the Nomendas and the NHC give Rosemary the basis to either prove actual fraud, which is the view expressed in Mudge's case (supra) and followed in Koitachi Farms Limited's case or breaches of statutory procedures or irregularities tantamount to fraud or in other words, constructive fraud which is the view expressed in Emas Estate's case (supra) and followed by the National Court decisions of Steamships Trading (supra), Hi Lift Co (supra), Ramu Nickel Limited (supra) and Elizabeth Kanari (supra).

26. From the evidence and submissions of both parties, the following facts are not disputed. The property was earmarked for sale under the Government's Home Give Away Scheme. The Government's Home Give Away Scheme was a result of a National Executive Council's (NEC) decision No. 78 (a) 92 of 16th December 1992. The property was sold to the Nomendas by the NHC for K1,000.00 and on 1st August 2003, the title was registered in their name as joint proprietors. As joint proprietors, they hold an indefeasible title to the property. Rosemary was and is the current occupant of the property since 1997. She was the approved purchaser of the property under the Government's Home Give Away Scheme. She paid all compulsory fees including rental arrears and transfer fees of K2,173.74 by way of a cheque on 6th November 2002 and has been paying rent of K40.00 by way of salary deduction on a fortnightly basis whilst waiting for the contract of sale to be forwarded to her for execution so that the transfer and registration of title would be effected.

27. However, the Nomendas claim that they were neither aware nor advised by the officers of the NHC that Rosemary was participating in the Government's Home Give Away Scheme to purchase the property and went ahead and purchased it. When they purchase it, Rosemary claims that they acted in breach of Government's Home Give Away Scheme policy or guidelines and intended to defraud her off the property. That being the case, the only contested issue is the second one, that is, whether the Nomendas and the NHC knew that the property was already sold to her.
28. To determine this issue, I must look at the evidence of both parties and decide which parties' evidence should be accepted. Rosemary unequivocally states at paragraphs 5 and 6 of her affidavit (exhibit "P1") that, whilst she was waiting for the execution of the contract of sale and transfer instrument to her name, the property was sold to the Nomendas and title transferred and registered without her knowledge by officers of the NHC. She became aware of the transfer of title to the Nomendas when a notice to vacate was served on her and her family to vacate the property by the Nomendas.

29. I find her to be a witness of truth because her demeanour from the witness stand was good and she was not evasive or argumentative during cross examination by counsel for the Nomendas. On the other hand, the Nomendas said that they were neither aware nor informed by the officers of the NHC that Rosemary was also purchasing the same property under the Government's Home Give Away Scheme.
Even in cross examination by counsel for Rosemary, they denied having any knowledge or been advised by the officers of the NHC of Rosemary's interest in the same property. But there is something that tells me that they did not tell the entire truth, at least, about their knowledge of Rosemary's interest in the same property.

30. In that regard, I make these observations. I am skeptical of their evidence because I do not think they told the entire truth. They were evasive during cross examination by counsel for Rosemary in relation to whether they were aware of the sale of the property to Rosemary. For example, when asked by counsel for Rosemary if the two NHC officers he spoke to did inform him that the property was not for sale as it was occupied, Mr Nomenda answered:

"Your Honour, I was asked to write a letter to them so I came back and wrote a letter."

31. In my view, this was a simple and straight forward question which required a "yes" or a "no" answer. Instead, Mr Nomenda gave a different answer. This shows that he did not want to say if the property was vacant or occupied. Because if he answered "yes", he would be admitting to the fact that he knew that the property was not vacant. But I think counsel's perseverance with this witness paid off in the end, in that, further questioning by counsel on this point in cross examination eventually led to Mr Nomenda saying that the property was vacant:

"Ans: Your Honour, I was told that there were two properties vacant and I was asked to buy.

Q: Were you not advised by NHC property section that the property you were trying to purchase was allocated for sale?

Ans: Your Honour, the NHC had advised me that this property was vacant. They have not advised me that it has been approved for sale to anyone."

32. Further examples of Mr Nomenda's evasiveness may be seen from this line of questioning by counsel for Rosemary in cross examination:

"Q: Mr Nomenda, when did you first realize that section 55, allotment 86 was not vacant?

Ans: Your Honour, I was not aware.

Q: When did you first find out that the house had occupants?

Ans: Your Honour, I said, I did not know.

Q: Mr Nomenda, you now realize section 55 allotment 86 is not vacant?

Ans: Your Honour, I do not know."

33. To my mind, Mr Nomenda was evasive as these questions were simple and straight forward and he could have answered "yes" or "no". But, instead, he maintains that he did not know if the property was not vacant, even though, in his evidence in chief, he says at paragraph 3 of his affidavit (exhibit "D1") that, "[w]hen we tried to move into allotment 86, section 55, Rosemary John refused to move out. She claimed that our title as a faked one." So how can he say that he did not know that the property was not vacant when he discovered himself at the time he and his wife tried to move in that it was occupied? It doesn't make any sense and to my mind, goes to show that he was simply avoiding the issue. This makes me find him to be a less credible witness in so far as his evidence of the knowledge of the sale of the property to Rosemary is concern.

34. Mrs Nomenda is also in the same boat. I reproduce her answers to questions in cross examination by counsel for Rosemary below to illustrate the point:

"Q: When did you find out that this property, section 55, allotment 86 was not vacant?

Ans: At that time Mr Paul Asukusa saw it on his computer that the property was empty so told us to pay it.

Q: You realize that you were not eligible to buy these 3 properties including this one because you are not a sitting tenant?

Ans: The officials at NHC saw through the computer that those 3 properties were empty (vacant)."

35. The first question is not, "how did you find out?" but rather "when did you find out?", and she should have just given the time she found out or discovered that Rosemary was also interested in the same property. She did not. (Emphasis added). The second question is about whether she was eligible to buy three properties and not about what the computer records said about the vacancy of the three properties. I find her very defiant and evasive because she did not answer the questions put to her. This makes her evidence less credible and so I do not believe her evidence that she had no knowledge of Rosemary's interest in the property. On the other hand, I find as a matter of fact that the Nomendas were aware or knew that the property was not vacant. They knew that Rosemary was the sitting tenant or occupant of the property at that time and was participating in the Government's Home Ownership Scheme. Yet, they went ahead and purchased it.

36. The significance of this finding of fact is that, if the Nomendas were aware of Rosemary's interest in the same property, they should have stopping the sale from proceeding. When they did not, they intended to deprive Rosemary of the property which they did. The finding I make is fortified by first, the officers of the NHC's lack of interest in defending this case. The Court is entitled to draw an adverse inference from their lack of interest in defending this case and that inference is that, they have something to hide; that is why they did not turn up at trial to give evidence. They knew that the property was first, occupied by Rosemary and secondly, sold to her under the Government's Home Give Away Scheme. Yet they went ahead and sold it to the Nomendas.

37. As the vendor, the NHC through its officers knew or ought to have known whether the subject property or any property for that matter is vacant before putting it up for sale. That is why, clause 7 of the contract of sale executed between the Nomendas and the NHC which may be found at annexure "D" to the affidavit of Mr Nomenda (exhibit "D1"), states that, the property is sold with vacant possession. If that is the case, how comes, the NHC missed that very important term of contract by selling the property to the Nomendas when Rosemary was the "sitting tenant or occupant"?

38. I reject the submission of counsel for the Nomendas that as the records of this property at the NHC's head office at Tokarara were not updated, the NHC officers did not know that the property was occupied by Rosemary and sold it to the Nomendas under a misapprehension that it was vacant. For to accept this submission would run counter to the very point I made above, and that is that, it knew or ought to have known the property is not vacant. That means, it just cannot go ahead and sell it without ascertaining if it is vacant. There is a further reason for finding that the Nomendas and the officers of the NHC knew or ought to have known that the property was not vacant and that is, the Nomendas bought two other properties in the same area as this one. One of them is allotment 34, section 55 which the Nomendas improved and subsequently sold to a third party for K50,000.00.

39. This fact came to light during cross examination of Mr Nomenda by counsel for Rosemary. In other words, the Nomendas did not disclose this during their evidence in chief. This omission is fatal as to my mind, this shows that not only did the Nomendas intended to obtain these properties, so that they could improve them and sell them to make money (profit) without any regard to the sitting tenants or occupants but also shows that, they acted in bad faith. They were not bona fide purchasers, as they claimed. I am therefore, satisfied that the Nomendas obtained the title to the property by fraud.

40. Even if the evidence is not sufficient to prove actual fraud, I would still find the Nomendas and the NHC guilty of constructive fraud because the Nomendas and the NHC breached the guidelines established for acquisition of property under the Government's Home Give Away Scheme and statutory procedures and requirements under the National Housing Corporation Act, 1990. First, it is instructive to look at the process established by the NHC for acquisition of State owned residential properties under the Government's Home Give Away Scheme through the NHC. The criteria for purchasing "NHC Owned Stock of Single Low Cost Detached Houses" through out the country are these:

1. They will be given away free of charge to the current sitting occupants, only after settlement of certain compulsory fees plus the outstanding rental arrears, (see exhibit "P4");

2. The sitting occupants shall complete an application form for the give away NHC low cost single detached house scheme and forward to NHC for consideration and approval, (see exhibit "P2"). (Emphasis added).

41. These criteria for acquisition of NHC properties have their origins in the National Housing Corporation Act, 1990. This means that, these criteria are not mere guidelines but are statutory procedures and requirements, and have the force of law. Hence, it is incumbent on all parties involved in the sale and purchase of "NHC Owned Stock of Single Low Cost Detached Houses" to strictly observe and adhere to these procedures and requirements to ensure that sales of "NHC Owned Stock of Single Low Cost Detached Houses" are legally done. In this regard, it is noted that one of the main functions of the NHC as a State instrumentality under section 28(f) of the National Housing Corporation Act, 1990, is "to provide adequate and suitable housing by way of sale or lease to approved applicants," and section 37 of the same Act authorizes the NHC to sell a "dwelling" vested in it. It reads:

"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)" (Emphasis added).

42. According to section 37, there are three categories of persons whom the NHC may sell a dwelling and they are first, an "eligible person", secondly, an "approved applicant" and thirdly, "a person who exercises the option offered to him under section 38(1)". In respect of the third category of persons, section 38 makes provision for the criteria to be met before the NHC may exercise its discretion to sell a dwelling to persons under this category. It states:

"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.

(2) Where a tenant, under Division 1, of a dwelling becomes a purchaser under this section, either along or jointly with his spouse, he is entitled -

(a) as from the date on which his tenancy of the dwelling commenced; or

(b) if he has been a tenant of the Corporation in more than one dwelling without interruption and the Corporation so approves-from the date of first occupation of an earlier dwelling,

and subject to any terms specified in the option, to be credited in reduction of the sale price of the dwelling with an amount equal to that part of the economic rent that represents the repayment of the amount of the capital cost included in the amortization allowance in accordance with Section Sch.2.4.

(3) Where a tenant has not been credited with an amount in accordance with Subsection (2) and his spouse, widow or widower becomes a purchaser under this section, the spouse, widow or widower is entitled to be credited with the same allowance under Subsection (2) as the tenant would have been entitled to if he had purchased the dwelling.

(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."

(Emphasis added).

43. In relation to the second category of persons, that is, an "approved applicant", section 1 of the same Act defines an approved applicant as:

"(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 purpose of this Act;" (Emphasis added)

44. And section 2 states that, "[t]he Minister may declare an organization or person to be an approved applicant for this Act". Once the Minister for Housing declares a person an "approved applicant", the NHC may sell the dwelling to this person. However, it is noted that there is no provision for determining an approved applicant. Nonetheless, in my view, the criteria for determining an approved applicant is found in the Government's Home Give Away Scheme which I have alluded to earlier and one of them is that, the applicant must be a "sitting tenant or occupant": see exhibit "P4". In my view, the facts of the present case show that Rosemary fell into the second category of persons, that is "approved applicant", although there is no evidence of a declaration by the Minister for Housing that Rosemary is an approved applicant in accordance with sections 1 and 2 cited above.

45. Be that as it may, there is evidence that she is an approved applicant of the property, if we go by the NHC Approval Advice on Low Cost Ownership Scheme (exhibit "P3"). In any case, it is not disputed that she is an approved applicant. As an approved applicant, in my view, Rosemary is entitled to purchase the property and the NHC is obliged to sell it to her pursuant to section 28(f) above. In so doing, the NHC would also be giving effect to or implementing the NEC decision to sell "NHC Owned Stock of Single Low Cost Detached Houses" to approved applicants including Rosemary pursuant to section 27 of the National Housing Corporation Act, 1990. Section 27 states:

"27. POLICY DIRECTIONS BY N.E.C.

(1) Subject to Subsections (2) and (3), the Corporation shall give effect to any direction given to it by the Head of State, acting on advice, or by the Minister on any matter of policy relating to the exercise or performance of its functions or powers."

46. Furthermore, since one of the criteria for eligibility for purchasing a property under the Government's Home Give Away Scheme is that, an approved applicant must be a "sitting tenant or occupant", I consider that this criteria is consistent with and compliments section 38 cited above, where it provides that the NHC may sell a property to a "sitting tenant or occupant" after a tenancy agreement has been in force for two years between the parties. Thus, I do not see anything wrong if Rosemary and the NHC follow the procedures under section 38 to complete the sale and registration of title to her since she has been considered the "approved applicant" under the Government's Home Give Away Scheme.

47. As it is not disputed that she was and is still the sitting tenant or occupant of the property, whilst the Nomendas are not, the Nomendas would not be, and are not eligible to purchase the property. There is also no evidence that they applied to the NHC for a property under the Government's Home Give Away Scheme. There is also no evidence that they were "approved applicants" under the Government's Home Give Away Scheme. So how can they claim that they were entitled to purchase the property from the NHC in the first place?

48. In my view, their evidence that first, they approached the officers of the NHC at Tokarara to purchase a property in Mt. Hagen, secondly, were advised that the property was vacant for sale and finally paid K1,000.00 as the purchase price fall short of meeting the criteria established for acquisition of "NHC Owned Stock of Single Low Cost Detached Houses" under the Government's Home Give Away Scheme: see exhibits "P2" and "P4". Further, it establishes that the Nomendas and the officers of NHC at Tokarara breached the established procedures and requirements on acquisition of "NHC Owned Stock of Single Low Cost Detached Houses" from the NHC. I find that they were not approved by the Minister for Housing to purchase the property under the Government's Home Give Away Scheme. In essence, the Nomendas have breached the guidelines under the Government's Home Give Away Scheme and also the statutory procedures and requirements on "NHC Owned Stock of Single Low Cost Detached Houses" leading up to the registration of title of the property to them under sections, 1, 2, 27, 28, 37 and 38 of the National Housing Corporation Act, 1990.

49. In my view, the whole process by which the Nomendas went about to acquire the property was flawed from the start. I distinguish this case from Patrick Tomausi -v- Telikom PNG Limited (2003) N2394, where in that case, the plaintiff sought review of the Land Tenders Board's decision made on 09th September, 1993, to grant title on a property described as section 42, lot 62 Boroko, to the first defendant and also sought to quash that decision. The plaintiff claimed that he made an application under the Home Ownership Scheme introduced by the National Government pursuant to an NEC Decision No 19 of 1986 where it was decided that the National Government would sell its houses to existing tenants. He claimed that there was fraud involved when the title of the property was transferred from the National Housing Corporation to the defendant.

50. Gavara Nanu, J found that, first, the subject property was transferred from the National Housing Corporation to the defendant, as such, the property was not available for sale under the Government's Give Away Scheme and secondly, the plaintiff had been retrenched from the service of the defendant, as such, had no "standing" to apply for the property under either the Government's Give Away Scheme or the defendant's Give Away Scheme if it had one. In the end, his Honour found that the plaintiff was unable to establish fraud in order to overturn the registration of title of the property to the defendant and dismissed the application.

51. In the present case, the Nomendas not only breached the guidelines under the Government's Home Give Away Scheme but also the statutory procedures and requirements established under the National Housing Corporation Act, 1990 in acquiring the property and registering the title in their name as joint proprietors. Hence, whilst the above case and those of Steamships Trading (supra), Hi Lift Co (supra) Ramu Nickel (supra), and Elizabeth Kanari (supra) dealt with the breaches of statutory procedures and requirements under the Land Act, 1996 on registration of State leases and this case I am dealing with concerns acquisition of property and registration of title under the Government's Home Give Away Scheme and the provisions of the National Housing Corporation Act, 1990, I consider the principles relevant and applicable to this case.

52. I find there were serious or flagrant breaches of the guidelines under the Government's Home Give Away Scheme and statutory procedures and requirements under the National Housing Corporation Act, 1990 in the acquisition of the property and registration of title, which go to the roof of the title, tantamount to fraud or constructive fraud. In my view, such breaches or irregularities are so serious that they affect the registration of title of the property to the Nomendas and this Court, in its good conscience will not allow that to happen. For all the foregoing reasons, I also find the Nomendas and the NHC guilty of constructive fraud.

Effect of fraud

53. Having found that the Nomendas and the NHC guilty of actual fraud or alternatively, constructive fraud, the next issue is the effect of fraud on the title of the property registered to the Nomendas. This issue is pretty much straight forward as by section 33 of the Land Registration Act, Ch 191 and the decided cases on fraud referred to above, once fraud is established by the party alleging it, the title is ineffective or void and must be overturned. For this reason, I find the title registered to the Nomendas is void and must be overturned.

What other remedies are available to Rosemary?

54. As I have found in favour of Rosemary with respect to the first and second issues, it is therefore, not necessary for me to consider this last issue. However, I should say in conclusion that since Rosemary is the approved purchaser and has paid all the compulsory fees and has been waiting for the delivery of the contract of sale and transfer instruments for execution so that the transfer and registration of title to her could be effected, I consider that the NHC must facilitate the completion of the sale and registration of title of the property to her without further delay. This calls for appropriate orders to be made to ensure that the sale of the property and registration of title to her is concluded without delay.

Orders

Therefore, it is the judgment of the Court that:

1. The OS No 446 of 2005 proceeding is dismissed.

2. A declaration that the transfer and registration of title of the property described as section 55, allotment 86, Mount Hagen to the consolidated first defendants was done by fraud.

3. A declaration that the transfer and registration of title of the property described as section 55, allotment 86, Mt Hagen is void and of no effect.

4. An order directing the consolidated first defendants to deliver up possession of the said property described as section 55, allotment 86, Mt Hagen to the consolidated plaintiff forthwith.

5. An order that the incumbent Managing Director of the consolidated fourth defendant shall prepare a contract of sale and transfer instrument and forward them to the consolidated plaintiff to execute in order to facilitate the transfer and registration of title of the property to the consolidated plaintiff within one month from the date of this order.

6. A further order that the consolidated first defendants shall deliver the original title and transfer instrument of the property described as section 55, allotment 86, Mt Hagen to the incumbent Managing Director and/or the officer in charge of Highlands Region of the consolidated fourth defendant who shall upon receipt of the documents arrange with the Registrar of Titles for cancellation of the title within one month from the date of this order.

7. A further order that the Registrar of Titles shall register the title of the property described as section 55, allotment 86, Mt Hagen to the consolidated plaintiff and shall forward the original title and transfer instrument to the consolidated plaintiff.

8. The consolidated first and fourth defendants shall pay the costs of the proceedings to be taxed if not agreed.

9. The time for entry of these orders shall be abridged to the date of settlement by the Registrar which shall take place forthwith.

___________________________________________________________
Lawyers for the Consolidated Plaintiff: Paulus Kunai Lawyers
Lawyers for the Consolidated 1st Defendants: Jerry Tonge Lawyers
Lawyers for the Consolidated 2nd, 3rd & 4th Defendants: NHC in-house counsel: