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Awaincorp Ltd v Kas [2015] PGNC 8; N5862 (13 February 2015)

N5862

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO 515 OF 2013

AWAINCORP LIMITED
Plaintiff

V

THE HONOURABLE JIM KAS MP, GOVERNOR OF MADANG PROVINCE
First Defendant

MADANG PROVINCIAL GOVERNMENT
Second Defendant

MADANG URBAN LOCAL-LEVEL GOVERNMENT
Third Defendant

Madang: Cannings J
2014: 3 September, 3 December,
2015: 13 February

LAND – State Leases – indefeasibility of registered title – Land Registration Act, Section 31 (protection of registered proprietor) – Land Act, Section 69(2): exemption of land from advertisement.

The plaintiff applied by originating summons for declarations that it was the registered proprietor of two State Leases over land in the commercial business district of a provincial capital and injunctions to restrain the defendants from interfering with its development and use of the land. The plaintiff adduced evidence that State Leases had been granted to it and that the leases had been granted in accordance with procedures prescribed by the Land Act. The defendants adduced no evidence and did not file a cross-claim. However, they argued that the relief sought by the plaintiff should be refused as it had failed to discharge the onus of proving that none of the exceptions to the principle of indefeasibility of title in Section 33(1) of the Land Registration Act applied; in particular it was unable to prove that this was not a case of fraud as the evidence demonstrated that the land had been exempted from advertisement contrary to Section 69(2) of the Land Act.

Held:

(1) The onus of proving a case of fraud or that any of the other exceptions in Section 33(1) of the Land Registration Act applies rests with the person who challenges the title of the registered proprietor, in this case the defendants.

(2) Though they adduced no evidence, the defendants had a legitimate and sufficient interest in the proceedings and were permitted to argue a case of fraud based on the evidence adduced by the plaintiff. They were not 'mere busybodies', as contended for by the plaintiff.

(3) The evidence before the Court was sufficient on which to make findings that (a) one of the allotments of land had been exempted from advertisement contrary to Section 69(2) of the Land Act and (b) the other had not been exempted at all and (c) therefore the circumstances in which the State Leases had been granted were so unsatisfactory and irregular as to amount to constructive fraud.

(4) Despite those findings, it would be inappropriate to refuse to grant the declarations and injunctions sought, as the irregularities occurred more than three years before the State Leases were granted and no person including the defendants had taken any legal step in that time to challenge the plaintiff's title, and furthermore no steps were taken by the defendants to challenge the plaintiff's title in the five-year period after granting of the State Leases, and the defendants did not file a cross-claim in these proceedings or adduce any evidence to assist the Court.

(5) Declarations and injunctions, generally in the terms sought, were granted. Costs followed the event.

Cases cited

The following cases are cited in the judgment:

Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215
Hi-Lift Company Pty Ltd v Miri Setae [2000] PNGLR 80
Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120
Lae Rental Homes Ltd v Viviso Seravo (2003) N2483
Mosoro v Kingswell Ltd (2011) N4450
Mudge v Secretary for Lands [1985] PNGLR 387
Niugini Properties Ltd v Jeffery Londari (2014) N5727
Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109
Ramu Nickel Ltd v Temu (2007) N3252
Steamships Trading Co Ltd v Garamut Enterprises Ltd (2000) N1959
West New Britain Provincial Government v Pepi S Kimas (2009) N3834

ORIGINATING SUMMONS

The plaintiff sought declarations and orders to enforce its position as registered proprietor of two State Leases.

Counsel

D Levy, for the plaintiff
B W Meten, for the defendants

13th February, 2015

1. CANNINGS J: The plaintiff, Awaincorp Ltd, applies by originating summons for declarations that it is the registered proprietor of State Leases over two allotments of land in the commercial business district of Madang town. It also seeks injunctions to restrain the defendants from interfering with its development and use of the land. The plaintiff adduced evidence that State Leases had been granted to it and asserts that the leases were granted in accordance with procedures prescribed by the Land Act.

2. The two allotments are described as Section 22, Allotments 31 and 32. They are located opposite the M & S Tsang store. They are bounded by Nanulon Street, Bataden Road, Yam Street and Kaislan Avenue. They are intersected by Tilom Street. Allotment 31 is on the south side of Tilom St, Allotment 32 is on the north side. The allotments are presently used as public bus-stops.

3. The defendants are the Governor of Madang Province, Hon Jim Kas MP, the Madang Provincial Government and Madang Urban Local-level Government. They adduced no evidence and did not file a cross-claim. However, they argue that the relief sought by the plaintiff should be refused as it had failed to discharge the onus of proving that none of the exceptions to the principle of indefeasibility of title in Section 33(1) of the Land Registration Act applied; in particular it was unable to prove that this was not a case of fraud as the evidence demonstrated that the land had been unlawfully exempted from advertisement contrary to Section 69(2) of the Land Act.

4. There are four issues:

1. Does the plaintiff hold State Leases over the land?
   
2. Who bears the onus of proof on whether the plaintiff has good title?
   
3. Was the land unlawfully exempted from advertisement? Was this a case of fraud?
   
4. Should declarations and injunctions be granted?
   

1 DOES THE PLAINTIFF HOLD STATE LEASES OVER THE LAND?

5. Yes. State Leases over the two properties were granted by a delegate of the Minister for Lands and Physical Planning on behalf of the State, to the plaintiff, for business purposes, on 18 August 2009. Both State Leases were registered on that day.

2 WHO BEARS THE ONUS OF PROOF ON WHETHER THE PLAINTIFF HAS GOOD TITLE?

6. I reject the argument that the plaintiff bears the onus of proof that it has good title. The fact that the leases have been granted to and registered in the name of the plaintiff gives rise to the presumption that it has good and indefeasible title subject only to the exceptions prescribed by Section 33(1) of the Land Registration Act (Mudge v Secretary for Lands [1985] PNGLR 387). The onus of proving a case of fraud or that any of the other exceptions in Section 33(1) applies rests with the person who challenges the title of the registered proprietor (Niugini Properties Ltd v Jeffery Londari (2014) N5727). In this case it is the defendants who bear the onus of proving that the plaintiff's title is defective.

3 WAS THE LAND UNLAWFULLY EXEMPTED FROM ADVERTISEMENT? WAS THIS A CASE OF FRAUD?

7. Before addressing this issue, I deal briefly with the submission of Mr Levy for the plaintiff that the defendants, though they are parties to the proceedings, are 'busybodies' without a sufficient interest in the case, and their submissions on the issue of fraud should not be entertained.

8. I reject that submission. The allotments at the centre of this case are in the central business district of the provincial capital. The land has been used for some time as a transport hub, as public bus-stops. If the plaintiff goes ahead with its plan to build a supermarket on the two allotments and gets Tilom Street closed off, this will surely have implications for what already is a busy and congested area of the provincial capital. Where are people going to catch their buses? This submission makes no sense at all. Though they adduced no evidence, all the defendants have a legitimate and sufficient interest in these proceedings. They are permitted to argue a case of fraud based on the evidence adduced by the plaintiff.

9. The very significant argument that the defendants make is that this land was unlawfully exempted from advertisement in 2005, and therefore the circumstances in which the State Leases were granted in 2009 were so unsatisfactory and irregular as to make this a case of constructive fraud, warranting the setting aside of the plaintiff's title. I find some merit in this argument, for two reasons.

10. First, I find as a fact that only one of the two allotments – Allotment 32 – was exempted from advertisement. A copy of the notice of exemption is annexed to the affidavit of the plaintiff's managing director, Mathew Minape, filed on 20 February 2014 (exhibit P2, annexure E). There is no equivalent notice regarding Allotment 31.

11. Secondly, the terms of the notice show that the decision to exempt Allotment 32 from advertisement was not in compliance with the Land Act. The notice stated:

LAND ACT NO 45 OF 1996

NOTICE OF EXEMPTION UNDER SECTION 69(2)(d)

I, ROMILLY L KILA PAT, a delegate of the Minister for Lands & Physical Planning by virtue of the powers conferred in by Section 69(2)(d) of the Land Act 1996 as amended to date, and other powers me enabling hereby exempt from advertisement, the parcel of land listed in the following schedule below.

The special reason for the purpose of this exemption is that the land is required by Awaincorp Limited for Business (Commercial) purposes. The company wishes to establish commercial buildings: a mini-supermarket, a warehouse for wholesale & retail and an office complex. The improvements value is K1 million.

SCHEDULE

All that piece of land described as Allotment 32, Section 22, Town of Madang, Madang Province. File Ref: MG/022/032.

DATED this 7th day of December 2005.

ROMILLY L KILA PAT

A delegate of the Minister for Lands & Physical Planning

12. I uphold the submission of Mr Meten for the defendants that the notice is in similar terms to exemption notices found in a number of other National Court cases to have been defective: Steamships Trading Co Ltd v Garamut Enterprises Ltd (2000) N1959, West New Britain Provincial Government v Pepi S Kimas (2009) N3834 and Mosoro v Kingswell Ltd (2011) N4450. The notices in those cases were found to be non-compliant with Section 69(2)(d) of the Land Act, which states:

The Minister may exempt land from advertisement for application or tender ... where the State has agreed to provide land for the establishment or expansion of a business, project, or other undertaking.

13. The notices were found to be not just non-compliant in a technical sense, but to be evidence of an unlawful decision and serious illegality, which warranted the setting aside of State Leases. I find evidence of the same sort of serious illegality in this case, in that:

• the exemption was not granted by the Minister, but merely by a person who described himself (without any apparent authority) as a "delegate" of the Minister;
  
• the notice did not state, as required by Section 69(2)(d), that "the State has agreed" to provide the land;
  
• there is no evidence of any agreement by the State to provide the land;
  
• the reference to "the special reason" was irrelevant and confusing and did not comply with the criterion spelt out in Section 69(2)(d).
  

14. As neither Allotment 31 nor Allotment 32 was advertised under Section 68 of the Land Act and Allotment 31 was not exempted from advertisement and Allotment 32 was unlawfully exempted from advertisement, I conclude that the defendants have proven – even though they presented no evidence – that the circumstances in which both State Leases were granted were so unsatisfactory and irregular as to amount to constructive fraud.

15. In drawing that conclusion I adopt the wider view of "fraud" in Section 33(1), developed by the Supreme Court in Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215 and Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120, and followed by the National Court in Hi-Lift Company Pty Ltd v Miri Setae [2000] PNGLR 80, Lae Rental Homes Ltd v Viviso Seravo (2003) N2483, Ramu Nickel Ltd v Temu (2007) N3252, Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109, as well as in the three cases referred to earlier: Steamships Trading Co Ltd v Garamut Enterprises Ltd (2000) N1959, West New Britain Provincial Government v Pepi S Kimas (2009) N3834 and Mosoro v Kingswell Ltd (2011) N4450.

16. As I have found that this was a case of constructive fraud, should the State Leases be now set aside or declared a nullity? Not necessarily. There is no application before the Court for such a declaration or order. That is quite surprising. The defendants could have filed a cross-claim to the originating summons under Order 4, Rule 34 of the National Court Rules, but have not done so. I am loathe to make such a declaration or order in the absence of an application. The plaintiff has not been put on notice that it needs to defend such an application. So I will not consider the question any further.

4 SHOULD DECLARATIONS AND INJUNCTIONS BE GRANTED?

17. The ultimate question to be determined is whether to declare that the plaintiff is the registered proprietor of the State Leases over the two allotments, and if that declaration is made, whether to grant the injunctions sought by the plaintiff. Mr Meten submits that I should refuse to grant that relief, and given that I have upheld his primary submission that this was a serious case of constructive fraud, this is on the face of it, a strong proposition. If the proposition had been made in a case commenced by the defendants soon after the State Leases were granted in August 2009, I would have little hesitation upholding it. But this is not 2009. The trial was completed in December 2014 and I am delivering judgment in February 2015. Time has moved on. The plaintiff has taken steps to develop the land. Money has been invested. Planning permission appears to have been obtained. This is all in evidence.

18. Despite the obvious irregularities in the granting of the Leases, the defendants have done nothing in the five-year period since the Leases were granted to challenge the plaintiff's title.

19. The grant of the State Leases was not a secret. Notices of meetings of the Land Board which preceded the granting of the Leases and resulted in recommendations that the plaintiff be granted the Leases were published in the National Gazette.

20. The inference to be drawn from the lack of action on the part of the second and third defendants in the five years after the Leases were granted is that the Madang Provincial Government and the Madang Urban LLG were asleep at the wheel. They were not paying attention to critical land transactions taking place in the provincial capital. The first defendant, the present Governor, has only been in office since mid-2012 so he cannot be blamed too much for the administrative inertia that appears to have allowed this unsatisfactory state of affairs to develop.

21. I have decided to grant the declarations sought. As to the injunctions, there is uncontradicted evidence that the first defendant on 15 and 16 September 2013 drove a vehicle on to the plaintiff's land and bumped it into drums and into a spike fence that the plaintiff had erected, to signal his protest at what was portrayed as a land grab by a private developer of public land. There is also evidence that the Governor incited his supporters to take similar forms of direct action. Fortunately common sense came to the fore and the Governor realised he had done the wrong thing. The 'Madang Way" prevailed. It was agreed by all concerned that the law should be allowed to take its course in a peaceful and orderly way.

22. I don't think it is necessary to make the very specific sort of injunctions sought by the plaintiff, such as stopping the Governor and provincial and local-level government officials coming within 50 metres of the land. The Court has every reason to think that its declarations and orders will be complied with. Draconian orders are not required. However, an injunction in general terms will assist in enabling all concerned to understand what the Court has decided.

CONCLUSION

23. The State Leases at the centre of this case were granted in unsatisfactory circumstances in 2009. The Leases could, and probably would, have been quashed if the defendants had acted quickly. But they did not. The plaintiff has been allowed to continue its plans to develop the land, without challenge. It would be unjust to stop it now, at this late stage. It was left to the plaintiff to bring this case into court, to prove that it was the rightful registered proprietor of the land. Even after commencement of the case, the defendants did not file a cross-claim. They did not present any evidence. This is bizarre. I have been left with no little choice but to grant the declarations and injunctions sought. Costs will follow the event.

ORDER

(1) The plaintiff is the registered proprietor of Sections 22, Allotments 31 and 32, Madang ("the land").

(2) The defendants and their servants and agents are restrained from unlawfully interfering in the plaintiff's enjoyment and development of the land.

(3) Other relief sought in the originating summons is refused.

(4) The defendants shall pay the plaintiff's costs of the proceedings on a party-party basis, which shall, if not agreed, be taxed.

_______________________________________________________
Manase & Co Lawyers: Lawyers for the Plaintiff
Meten Lawyers: Lawyers for the Defendant