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North Fly Development Corporation Ltd v Kimas [2015] PGNC 249; N6122 (30 November 2015)

N6122

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (JR) NO 785 OF 2010

BETWEEN

NORTH FLY DEVELOPMENT CORPORATION LTD
Plaintiff

AND

PEPI KIMAS, as SECRETARY FOR LANDS AND PHYSCIAL PLANNING
First Defendant

AND

SAM TAISION, CHAIRMAN OF THE PNG LAND BOARD AND MEMBERS OF THE PNG LAND BOARD
Second Defendant

AND

HENRY WASA, REGISTRAR OF TITLES
Third Defendant

AND

NEW CENTURY INVESTMENT (PNG) LTD
Fourth Defendant

AND

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fifth Defendant

Waigani: Makail, J
2015: 23rd, 25th & 30th November

JUDICIAL REVIEW – Forfeiture of State lease – Review of decision to forfeit State Lease – Grounds of – Failure to serve notice to show cause – Whether notice to show cause served – Section 122(2) – Land Act, 1996.

Facts

In this application for judicial review, the Plaintiff claims that it is the registered proprietor of a piece of land described as State Lease Allotment 55, Section 2, Town of Kiunga, Western Province. It seeks review of two decisions of the First Defendant as a delegate of the Minister for Lands and Physical Planning in relation to first forfeit the State Lease on 22nd April 2008 pursuant to Section 122 of the Land Act 1996 and secondly exempt from advertisement the land pursuant to Sections 68 and 69 of the Land Act 1996.

Held:

1. The objection to competency of proceeding on the ground that the Plaintiff lacked authority to institute this proceeding is unsupported by evidence and is dismissed.

2. Before the First Defendant as a delegate of the Minister for Lands and Physical Planning forfeits a State Lease, he must serve a notice to show cause as to why a lease should not be forfeited on the registered proprietor and all persons to the knowledge of the First Defendant, have or claim to have a right, title, estate or interest in, to or in relation to the land under Section 122(2)&(4) of the Land Act 1996.

3. There is lack of and no evidence that the First Defendant served a notice to show cause on the Plaintiff and the mortgagee, Bank of South Pacific Limited prior to forfeiting the State Lease pursuant to Section 122(2)&(4) of the Land Act 1996.

4. The grounds on failure to serve the notice to show cause on the Plaintiff and mortgagee, Bank of South Pacific Limited are upheld. The failure constituted a fundamental breach in the decision making process of forfeiture as it goes to the validity of the title of the land in question and resulted in the Plaintiff and the Bank not being informed of the move by the First Defendant to have the State Lease forfeited. Highlands Produce Buyers Ltd v. Minister for Lands [1988] PNGLR 39 followed.

5. The assertion by the Plaintiff that there was no report submitted to the First Defendant before forfeiting the State Lease is not supported by the pleadings in the statement in support. That is to say the Plaintiff did not plead bad faith or ulterior motive as a ground to set aside the forfeiture of the State Lease and so it is not open to it to rely on it in this proceeding.

6. The application for judicial review is upheld and the decision of the First Defendant to forfeit the Plaintiff's lease over Allotment 55, Section 2, Town of Kiunga, Western Province and subsequent grant of State Lease to the Fourth Defendant is null and void and quashed: Yakananda Business Group Inc -v- Minister for Lands & Physical Planning and The State (2001) N2159 followed.

Cases cited:
Highlands Produce Buyers Ltd v. Minister for Lands [1988] PNGLR 39
In the matter of Piude Limited (2015) N5971
Mount Hagen Local-level Government v. Pepi Kimas, Secretary for Lands and Physical Planning & The State (2015) N6044
Mt Kare Head Trustee Co Limited v. Stan Nekitel as Registrar of Tenement & The State (2015) N6079
Yakananda Business Group Inc v. Minister for Lands & Physical Planning and The State (2001) N2159

Counsel:
Mr. J. Lome, for the Plaintiff
No appearance, for the First, Second, Third & Fifth Defendants
Miss. M. Sumbuk, for the Fourth Defendant

JUDGMENT

30th November, 2015

1. MAKAIL, J: In this application for judicial review, the Plaintiff claims that it is the registered proprietor of a piece of land described as State Lease Allotment 55, Section 2, Town of Kiunga, Western Province. It seeks review of two decisions of the First Defendant as a delegate of the Minister for Lands and Physical Planning in relation to first forfeit the State Lease on 22nd April 2008 pursuant to Section 122 of the Land Act, 1996 and secondly exempt from advertisement the land pursuant to Sections 68 and 69 of the Land Act, 1996.

2. The Plaintiff as the aggrieved party alleged that the Defendants failed to comply with the process of forfeiture under Section 122 of the Land Act, 1996 and subsequent grant of title of a State lease to the Fourth Defendant under Sections 69 and 70 of the Land Act, 1996. It seeks orders to first, declare the decisions null and void and secondly, certiorari to quash them. It seeks a further order in the nature of mandamus to compel the Defendants to restore its title.

Evidence

3. The trial was conducted on Monday 23rd November 2015 commencing at 9:30 am where evidence was received from the Plaintiff but for some unknown reason, the Defendants did not attend and lead evidence in defence to the application. The significance of mentioning this is that and as it will become apparent later the Defendants, had adduced no evidence to support their defence that the judicial review has no merit and should be dismissed.

4. And so the Court was left with the following evidence from the Plaintiff:

4.1. Affidavit of Paiyo Bale filed on 01st November 2010 – Exhibit "P1";

4.2. Affidavit of Darryl Kamen filed on 08th November 2010 – Exhibit "P2";

4.3. Affidavit of Jack Naiyep filed on 05th October 2011 – Exhibit "3";

4.4. Supplementary Affidavit of Paiyo Bale filed on 16th March 2012 – Exhibit "P4";

4.5. Affidavit of Ronald Dmonai filed on 16th March 2012 – Exhibit "P5";

4.6. Affidavit of Roger Otto filed on 06th July 2012 – Exhibit "P6";

4.7. Affidavit of Roger Otto filed on 16th November 2012 – Exhibit "P7";

4.8. Supplementary Affidavit of Ronald Dmonai filed on 12th April 2013 – Exhibit "P8";

4.9. Affidavit of Borok Pitalok filed on 12th April 2013 – Exhibit "P9"; and

4.10. Affidavit of Nukie Sakik filed on 12th April 2012 – Exhibit "P10".

Background Facts

5. The evidence established that the Plaintiff is a company incorporated under the Companies Act, 1997 and is the registered proprietor of the land until it was forfeited on 22nd April 2008. Subsequently a grant of a State Lease was made to the Fourth Defendant. Before it was forfeited, the First Defendant as a delegate of the Minister for Lands and Physical Planning issued to the Plaintiff a notice to show cause why the lease should not be forfeited. The notice required the Plaintiff to show cause within 28 days, failing which the lease would be forfeited. The Plaintiff denied receiving the notice.

Grounds of Review

6. The grounds relied upon by the Plaintiff to have the forfeiture set aside are pleaded in the statement in support filed 07th November 2010 and may be summarised as follows:

6.1. Failure to give notice to show cause by the First Defendant;

6.2. Breach of natural justice;

6.3. Improper and abuse exercise of power, in that, the First Defendant made the decision without giving the Plaintiff notice requiring it to comply with conditions of the lease; and

6.4. Failure to give notice to show cause to an interested party namely Bank South Pacific Limited as a mortgagee of the property to be heard before the decision was made.

7. The Plaintiff contended that non-compliance with these requirements constituted an error of law in the decision making process and the forfeiture should be set aside.

8. As to the decision on exemption, the Plaintiff relied on improper and abuse of power by the First Defendant, in that, the exemption was contrary to the requirements of Section 69 of the Land Act, 1996.

Defendants' Defence

9. The First to Third and Fifth Defendants did not attend trial and also final submissions and so this Court does not have the benefit of their evidence and submissions. It must be stated for the record that the Plaintiff seeks to review the decisions of the First Defendant. These decisions have led to the decision of the Second Defendant to recommend grant of a new lease to the Fourth Defendant. Consequently, the title was registered by the Third Defendant and all these events have given rise to this conflict and subject proceeding. Despite this, these Defendants have failed to attend and defend the decisions.

10. Save for brief submissions on the question of forfeiture which procedure it submitted was followed by the First Defendant to arrive at the subject decision, particularly, the compliance with the requirement to give notice to show cause to the Plaintiff, the Fourth Defendant did not address the rest of the grounds of review.

11. Instead, it objected to the competency of the proceeding on the ground that the Plaintiff lacked authority to institute it to challenge the forfeiture of the lease. It submitted that the Board of Directors of the Plaintiff had resolved against instituting any legal proceeding against the forfeiture of the lease and that the persons who purported to represent the Plaintiff are not Directors of the Plaintiff. The Board resolution was the basis of a deed of indemnity entered between the parties to have the land subject of the lease sold to it.

Competency of Proceeding

12. The competency of proceeding can be resolved first. The Fourth Defendant's submission on the lack of authority of the Plaintiff to institute this proceeding is unsupported by evidence. I come to this conclusion because the Fourth Defendant relied on affidavits which were not tendered at trial on 23rd November. In any case, at the final submissions, it did not seek leave to reopen the case and have them tendered. These are the affidavit of James Ukin sworn on 18th February and filed on 21st February 2012, affidavit of Peter Ambros sworn and filed on 28th February 2013 and affidavit of service of Emma Baratai sworn on 16th May and filed on 29th May 2014. For this reason, I give no consideration to these affidavits and dismiss the objection.

Forfeiture

13. Turning to the decision on forfeiture, the grounds of review raise one fundamental issue and that is whether the notice to show cause was served on the Plaintiff. The issue of non-compliance with the conditions of the lease is dependent on the question of service of notice. Section 122 of the Land Act, 1996 set out the grounds and procedure for forfeiture of a State Lease. It states:

"122. Forfeiture of State Lease

(1) The Minister may, by notice in the National Gazette, forfeit a State lease —

(a) if rent on the lease remains due and unpaid for a period of six months; or

(b) if fees are not paid in accordance with this Act; or

(c) if the amount payable in respect of improvements is not paid in accordance with this Act; or

(d) if —

(i) a covenant or condition of the lease; or

(ii) a provision of this Act relating to the lease; or

(iii) a requirement of a notice under Section 91 relating to the lease, is not complied with; or

(e) if the granting of the lease has been obtained, in the opinion of the Minister, wholly or partly as a result of statements that were, to the knowledge of the lessee, false or misleading.

(2) Before forfeiting a State lease under Subsection (1), the Minister —

(a) shall serve notice on the lessee calling on him to show cause, within a period specified in the notice, why the lease should not be forfeited on the ground or grounds specified in the notice; and

(b) may, whether or not cause has been shown in accordance with a notice under Paragraph (a), serve on the lessee a notice requiring him, within a period specified in the notice, to comply with the covenants or conditions of the lease or the provisions of this Act.

(3) The Minister shall not forfeit a lease under this Section unless —

(a) the lessee has failed to comply with a notice under Subsection (2)(a) or (b); or

(b) the lessee has failed to show good cause why the lease should not be forfeited.

(4) Copies of a notice of forfeiture and a notice under Subsection (2)(a) or (b) shall be served on all persons who, to the knowledge of the Departmental Head, have or claim to have a right, title, estate or interest in, to or in relation to the land, or such of them as can with reasonable diligence be ascertained and found.

(5) No acceptance of rent by the State waives a right to forfeit a lease under this Act.

(6) For the purposes of this Section the grant of an application for a State lease shall be deemed to be the grant of the lease." (Underlining is mine).

14. For the present purposes, Section 122(2) is pertinent. Before the Minister or in this case, the First Defendant shall forfeit the lease, he must serve a notice on the lessee calling him to show cause why the lease should not be forfeited. This is a duty imposed on the Minister and the First Defendant by statute and must be complied with. The Plaintiff denied receiving the notice and so the issue is whether the First Defendant did serve it on the Plaintiff.

15. Section 122(2) does not prescribe the mode of service of the notice. The Plaintiff submitted that given the serious consequence that may follow following service of a notice to show cause, in that, a registered proprietor's lease may be forfeited, it is important that the mode of service should be personal service.

16. The Plaintiff is a company and according to Section 432 of the Companies Act, 1997, it states that notwithstanding the provisions of any Act, a document other than a document in any legal proceedings may be served on a company in a number of ways. Amongst them is delivery to a person named as director or secretary of the company on the register or by leaving the document at the company's registered office or address for service or by posting it to the postal address of the company. For further discussion on the mode of service, see the judgments of Hartshorn J in In the matter of Piude Limited (2015) N5971 and Mt Kare Head Trustee Co Limited v. Stan Nekitel as Registrar of Tenement & The State (2015) N6079.

17. In my view the notice to show cause is not a document used in a legal proceeding. Given this it may be served by using any one of the modes of service prescribed in Section 432 and the Plaintiff's submission that personal service should be the appropriate mode of service of the notice is clearly included in Section 432.

18. According to the notice which may be found in exhibit "P1" at page 40 of the Review Book, it was purportedly sent to the postal address of PO Box 144, Kiunga, Western Province. Counsel for the Plaintiff conceded that this is the correct postal address of the Plaintiff but maintained that the Plaintiff did not receive the notice. As the duty to serve the notice is imposed by statute and where service is being denied, the onus is on the Minister or in this case, the First Defendant to prove that the notice was served.

19. If it was posted, there must be evidence from the First Defendant that the notice was posted on such and such a date and time by an officer of the Department of Lands and Physical Planning to the stated postal address to prove service. Evidence of notice containing the postal address is not sufficient. Similarly, there must be evidence that the notice was delivered on a person named as director or secretary of the Plaintiff on the register of Companies or by leaving it at the Plaintiff's registered office or address for service.

20. There is no evidence from the First Defendant to prove that the said notice was served in accordance with any of these methods of service. Given the lack of evidence, I am satisfied that the Plaintiff has proven that the First Defendant has failed to serve the notice before making the decision to forfeit the State Lease.

21. There is a further ground which supports that Plaintiff's case and that is this, the First Defendant failed to serve notice on the Bank of South Pacific Limited ("Bank") who had an interest in the land as mortgagee. According to Section 122(4), copies of a notice of forfeiture or a notice to show cause or a notice to comply with the covenants or conditions of a lease must be served on all persons to the knowledge of the First Defendant, have or claim to have a right, title, estate or interest in, to or in relation to the land.

22. There is no dispute that the Bank is the registered mortgagee of the land as noted in the certificate of title which may be found in Exhibit "P1" at page 25 of the Review Book. The mortgage was registered in favour of Papua New Guinea Banking Corporation, the predecessor of Bank of South Pacific Limited on 31st December 2001. The certificate of title is the official document held by the First Defendant and should have put him on notice of the interest of the Bank. Despite this, there is no evidence that the First Defendant served a copy of the notice to show cause on the Bank.

23. In Highlands Produce Buyers Ltd v. Minister for Lands [1988] PNGLR 39, it was held that the Minister for Lands and Physical Planning did not comply with the fundamental provision of proper notice, namely notice to the mortgagee who had interest in the land as noted in the lease. That was a case involving forfeiture of an agricultural lease by the Minister. The forfeiture was set aside by the National Court for non-compliance with this notice requirement to the PNG Banking Corporation who held a mortgage over the land.

24. Counsel for the Fourth Defendant did not give me any reasons to depart from that decision. Accordingly, I am persuaded to follow it and on this basis, I am satisfied that the First Defendant failed to serve notice to show cause on the Bank.

25. Finally, counsel for the Plaintiff relied on a recent decision of this Court in Mount Hagen Local-level Government v. Pepi Kimas, Secretary for Lands and Physical Planning & The State (2015) N6044 and submitted that in that case, the Court held that before the Minister forfeits a lease, there must be a report submitted to him to consider before forfeiting the lease under Section 122. In this case the forfeiture should be set aside because there was no report submitted to the First Defendant and the forfeiture of the lease was in breach of this requirement.

26. I reject this submission because it is not supported by the pleadings in the statement in support. That is to say the Plaintiff did not plead bad faith or ulterior motive as a ground to set aside the forfeiture of the State Lease and so it is not open to it to rely on it in this proceeding: see [6] above. This is where this case can be distinguished from the Mount Hagen LLG case.

27. In that case the Plaintiff relied on bad faith or ulterior motive by the First Defendant as a delegate of the Minster to forfeit a State Lease. The Court further held that before the Minister forfeits a State Lease, he must have a report in relation to compliance or no-compliance with the covenants and conditions of lease, amongst other things, before forfeiting it. This is to dispel any suggestion that he acted in bad faith or had ulterior motive to forfeit the State Lease. Nothing of that sort has been pleaded and alleged here and so I give no consideration to this issue and dismiss it.

28. Notwithstanding this, as regards the grounds on failure to serve the notice to show cause, I find that the failure by the First Defendant to serve the notice on the Plaintiff and the Bank constituted a fundamental breach in the decision making process of forfeiture as it goes to the validity of the title of the land in question and resulted in the Plaintiff and the Bank not informed of the move by the First Defendant to have the State Lease forfeited.

29. Further, I find that the forfeiture is illegal, null and void. The consequence is the forfeiture must be quashed and the original status quo must be restored: Yakananda Business Group Inc v. Minister for Lands & Physical Planning and The State (2001) N2159.

Conclusion

30. Given the above findings, it is not necessary to consider the second decision, that is, exemption from advertisement of the land. It is sufficient for now that the findings must nullify the subsequent grant of lease to the Fourth Defendant: Yakananda Business Group Inc. (supra).

Order

31. The orders sought by the Plaintiff will be granted in the following terms.

1. The application for judicial review is upheld.

2. A declaration that the decision of the First Defendant to forfeit the Plaintiff's lease over Allotment 55, Section 2, Town of Kiunga, Western Province and subsequent grant of State Lease over the same land to the Fourth Defendant is null and void.

3. A declaration that the Plaintiff is the registered proprietor of the State Lease over Allotment 55, Section 2, Town of Kiunga, Western Province.

4. An order in the nature of certiorari to bring into this Honourable Court and quash the decision of the First Defendant to forfeit the Plaintiff's lease over Allotment 55, Section 2, Town of Kiunga, Western Province and subsequent grant of State Lease over the same land to the Fourth Defendant.

5. A writ of mandamus requiring the First, Second, Third and Fifth Defendants to restore the Plaintiff's lease over Allotment 55, Section 2, Town of Kiunga, Western Province forthwith.

6. The Defendants shall pay the costs of the proceeding, to be taxed, if not agreed.

________________________________________________________________
Jefferson Lawyers: Lawyers for the Plaintiff
Acting Solicitor-General: Lawyers for First, Second, Third & Fifth Defendants
Young & Williams Lawyers: Lawyers for the Fourth Defendant