Vunaibul Incorporated Land Group v Wilson [2017] PGNC 141; N6806 (26 July 2017)

	Home \| Databases \| WorldLII \| Search \| Feedback National Court of Papua New Guinea

DECLARATION – trustee and beneficiary - beneficiaries agreement - purported beneficiary - fiduciary duty of a trustee - want of privity of contract - beneficiaries not parties to the proceeding - plaintiff seeking to claim trust funds held by the trustee based on ownership of land - no connection of plaintiff as a registered proprietor of land to the funds that are being held by the defendant as the trustee for the beneficiaries as per the arrangement or agreement that was entered into between the beneficiaries

Dumal Dibiaso Incorporated Land Group v. Kola Kuma (2005) SC 805
Mathew Poia v. ANZ Banking Group Ltd (2001) N2049
Mudge v. Secretary for Lands [1985] PNGLR 387
PNG Deep Sea Fishing Ltd v. Luke Critten (2010) SC 1126

1. ANIS AJ: The plaintiff is an incorporated land group. It was incorporated under the Land Groups Incorporation Act Chapter No. 147 (LGI Act). The plaintiff presently owns an agricultural lease described as Portion 794, Milinch Kokopo, Fourmil Rabaul, East New Britain Province (the property). The property was formerly known as Wongawonga Plantation. The plaintiff acquired the property on 15 August 2012. Prior to that, the property was State land.

2. The plaintiff seeks this main relief: A Declaration that the Plaintiff is legally entitled to monies paid by PNG Balsa Limited and held in trust by the Defendant. The second relief is consequential, that is, An order that the Defendant pay to the Plaintiff that amount held in trust forthwith from the date of this Order.

4. Both parties tendered their evidence by consent and without the benefit of cross-examination. I accepted and marked the evidence with the abbreviation "P" for evidence that was tendered by the plaintiff, and abbreviation "D" for evidence that was tendered by the defendant. I set them out herein in a table format:

Exhibit No.	Description	Date filed
“P1"	Affidavit of Blaise Vuvul	14/09/15
“P2”	Affidavit of Bernard Leba	19/02/16
“D1”	Affidavit of Derio Titi	28/06/17
“D2”	Affidavit of Robert Asa	28/06/17

5. At the hearing during presentation of submissions, there appeared to be confusion amongst the plaintiff and the defendant as to whether the title of the property was really in dispute. It was in fact put down as a central issue for trial and written submissions were filed to address that. However, I note that I had pointed out to the parties that the mode of the proceeding was not set in a manner that would raise any challenge on the validity of the title of the property. I note that I had also pointed out to the parties the principle of indefeasibility of title [see cases: Mudge v. Secretary for Lands [1985] PNGLR 387; PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC 1126].

6. I note that the parties, in particular, the defendant, has conceded to the suggestion or proposition put by the Court as I have summarised above. But it became clear during the defendant's submission that it was merely indicating possible or purported irregularities in the manner in which the title of the property was acquired by the plaintiff. The defendant in the end submitted that it may address the title issue later with those responsible and I believe that was where its submissions on the issue ended.

7. Evidence of ownership of the property by the plaintiff is disclosed at Annexure D to Exhibit P1. The attached document is a copy of the title of the property. I find the copy of the title to be in order. I also note that the defendant did not contest its authenticity, that is, apart from its comments as I have stated above.

8. I find that the plaintiff is the registered proprietor of the property. I find the principle of indefeasibility of title applicable to the title in question.

9. The property was originally a coconut plantation. As stated, it was called Wongawonga plantation. It was first acquired it seems as a freehold land in the 1900s or so from landowners within the area where the property is situated. It was later compulsorily acquired by the State under the now repealed Act namely the Land Acquisition (Development Purpose) Act Chapter No. 192 (LADP Act). The State had acquired and had given back the property to the landowners of the area, in 1978, to manage the plantation under a scheme known as the Plantation Acquisition and Redistribution Scheme.

10. Initially, there was no dispute. Evidence disclosed shows that the property, in the 1970's, was managed by a landowner trust company called the Wongawonga Plantation Ltd (WWPL). WWPL began managing the property (i.e., after the property was acquired by the State under the LADP Act) presumably under the Plantation Acquisition and Redistribution Scheme. In 2005, WWPL verbally entered into an arrangement with a third party called PNG Balsa Company Ltd, to plant and harvest balsa trees on the plantation where the property is situated. Based on the said verbal arrangement, PNG Balsa Company Ltd commenced planting balsa trees on the plantation.

11. It is important to state here firstly that WWPL was created and managed by a faction of the landowners within the area where the property is situated. Secondly and also of importance is the undisputed fact that the engagement and planting of the balsa trees by PNG Balsa Company Ltd was done or made possible through negotiations between WWPL and PNG Balsa Company Ltd.

12. In or about 2007, a dispute arose between the landowners over the property. Another faction of landowners in the area where the property is situated, called the Vunaibu landowners, disputed the use of the land by WWPL and of its plans to plant and harvest balsa trees. So there was this two (2) landowner groups who had disputed the use of the land where the property is situated. The first group, as I have stated, is known through its trust company WWPL (first faction). It is not named as a defendant in this proceeding. The second group is known as the Vunaibu landowners (second faction). It later created an incorporated land group under the LGI Act, which was originally known as the Vunaibu Land Group Incorporation. It later changed its name to the Vunaibu Incorporated Land Group (ILG), which is the plaintiff herein. I prefer the use of the terms "first faction" and "second faction" in my judgment from time to time, to distinguish the two groups of landowners from the plaintiff.

13. So following on from the dispute and based on two (2) separate letters, which I will shortly set out below in my judgment, the two (2) factions agreed that the proceeds of the balsa trees harvested on the property be-paid to the defendant. It was agreed that the defendant would hold the funds in trust until the two (2) factions resolve their dispute or differences. With the said arrangement in place, the first faction through WWPL continued to grow balsa trees on the plantation to sell to PNG Balsa Company Ltd. In 2012, the balsa trees were harvested. Following the arrangement, PNG Balsa Company Ltd paid the monies due to the landowners from the harvest, to the defendant to hold in trust. The two (2) factions, however, did not resolve their disputes or differences since 2012 or thereafter.

14. On 15 August 2012, the plaintiff acquired the title to the property as its registered proprietor. The plaintiff then went and demanded from the defendant the full payment of the balsa funds that were kept in trust. The defendant rejected the plaintiff's demand. That of course has led to this proceeding.

15. The issues are as follows: (i) whether the plaintiff is a beneficiary at all to the trust funds kept by the defendant, (ii) If so, whether the plaintiff, in acquiring the property, makes it the sole beneficiary of the trust funds.

16. The general terms of the arrangement or agreement and the consensus that had been reached between the two (2) factions for the funds to be kept in trust by the defendant, are not disputed. The arrangement is reflected in the two (2) letters that I have referred to above, which I will now discuss. The first letter is dated 26 July 2007. It was sent by the East New Britain Provincial Administration Division of Lands, to PNG Balsa Company Ltd. The letter is marked as Annexure A to Exhibit P1. The second letter is dated 14 March 2012. It was sent by PNG Balsa Company Ltd to the defendant. The letter is marked as Annexure B to Exhibit P1. The parties herein agree that the two (2) letters generally constitute the terms and conditions of the arrangement or agreement.

(1) Letter dated 26 July 2007 by the East New Britain Provincial Administration Division of Lands to the Managing Director of PNG Balsa Company Ltd

Re: Traditional Land Group to Wongawonga Plantation - Portion 794, M/I Kokopo F/M Rabaul

Responding to your letter dated the 5^th June 2007 referencing the above subject matter.

During the meeting, the disputing parties agreed for PNG Balsa to go ahead with its development plan while the parties sort out Land ownership and compromise on their differences.

(2) Letter dated 14 March 2012 from PNG Balsa Company Ltd to the defendant Warner Shand Lawyers

With regards to the above-mentioned subject, the Company hereby requests that the following Balsa proceeds be put in trust with your office as per prior arrangements.

This request is due to the existing ongoing land ownership disputes and the inability by the various disputing parties to confirm or provide legal evidence of ownership to the plantation being Portion 794 Millinch of Kokopo, commonly referred to as Wongawonga Plantation.

The proceeds stem from balsa harvested in January of 2012. A copy of the summary of all the balsa loads and invoices as per company records are attached for your convenience.

Cheque payments drawn up to be paid into trust on the balance owing are as follows;

Please find attached a cheque payment to the sum of K8,455.05 made payable to Warner Shand Trust (Lawyers).

We hereby advise that the proceeds owing to Wongawonga Plantation be put in Trust and is not to be disbursed unless with the consent of the National Court or in an agreement signed by all disputing parties.

18. It is obvious in my view that the subsequent letter by PNG Balsa Company Ltd was sent to comply with the initial agreement made between the two (2) factions on 25 July 2007. I refer to the very first paragraph where it reads With regards to the above-mentioned subject, the Company hereby requests that the following Balsa proceeds be put in trust with your office as per prior arrangements. (Underlining is mine).

19. I note that the first letter dated 26 July 2007 by the Provincial Government was sent a day after the meeting between all the stake-holders including the two (2) factions.

20. At the hearing, I had sought clarity from counsel regarding the legal status and interest of the plaintiff. It is not disputed that the plaintiff was created under the LGI Act. I drew the parties' attention to section 11 of the LGI Act. It states and I quote:

(c) may sue and be sued in its corporate name as set out in its constitution; and

(d) for the purpose of the more effective exercise and performance of its powers and functions, may do and suffer all things that a corporation may do or suffer.

21. The plaintiff is obviously a legal person recognised by law. I inquired afterwards of when the plaintiff was incorporated. I was shown with two (2) certificates of recognition of the plaintiff as an incorporated land group. The one that is relevant for this purpose is attached as Annexure C to Exhibit P1. The document is the plaintiff's Certificate of Recognition of Incorporated Land Group. It is dated 4 September 2007. Was the plaintiff incorporated on 4 September 2007? I note that it was not argued to the contrary by the parties herein. "What does the law say?" I ask myself. Section 10(1) of the LGI Act states and I quote:

is, in the absence of proof to the contrary, conclusive evidence of the matters set out in it.

22. I find as a fact that the plaintiff was first incorporated on 4 September 2007. I note also that the plaintiff was later re-incorporated and had its name changed on 5 March 2015 to what it is now called. I will comment on that in the latter part of my judgment.

23. So with the said finding (i.e., plaintiff being incorporated on 4 September 2007), I now come to the question under the sub-heading, which is whether the plaintiff is a beneficiary of the arrangement or agreement. I would answer "no" to this question. The reason I believe is simple. The plaintiff is a legal person. It was incorporated on 4 September 2007. Evidence shows that the two (2) factions of landowners had negotiated the terms of their disputes well before the plaintiff was incorporated. As evident in the letter of 26 July 2007, representatives from the two (2) factions together with representatives from PNG Balsa Company Ltd and the provincial government, all met and reached a consensus on 25 July 2007. I ask myself this. If the plaintiff was incorporated after the negotiations and agreement between the two (2) factions and the others on 25 July 2007, how can it then claim or seek a declaration that it is legally entitled to monies paid by PNG Balsa Limited and held in trust by the Defendant? The plaintiff as a legal person did not exist then so it could never have been a party to the arrangement. This is despite any form of purported representation to that effect that may have been made by any of the two (2) factions at that time. Where is the privity of contract between the plaintiff, the two (2) factions and the others who were present on 25 July 2007? I recall that at the trial during the presentation of submissions, I had asked the plaintiff's counsel the same questions. Counsel, with respect, did not provide a direct answer. The plaintiff's main argument is that since it has now acquired the property upon which the plantation is situated, it is entitled to the trust funds that are kept by the defendant. The said argument, in my view, falls short and still does not answer the two (2) questions.

24. I find the plaintiff's argument misconceived. I find that it is made without regard to the principle or definition of a legal person or entity (see case: Dumal Dibiaso Incorporated Land Group v. Kola Kuma (2005) SC 805). The fact of the matter is that, the plaintiff, as a separate legal entity, is not the Vunaibu landowners or the second faction that had participated in the arrangement or agreement with WWPL on 25 July 2007. I recall pointing out to the plaintiff's counsel at the hearing that the arrangement had or may have involved landowners from the second faction, but I said that that may be different to the plaintiff who was a separate legal entity and who did not exist at that time. I recall that I had insisted upon counsel to assist the Court see the link or make the connection in regard to the plaintiff's contention.

25. I see no evidence herein that shows that the second faction has or may have subrogated or assigned its beneficiary rights to the plaintiff, to claim. I also and perhaps most importantly, cannot see how the plaintiff, by owning the property in 2015, would entitle it to a past transaction that was made over the property, which the plaintiff was never a part of. I find no privity of contract existing or that has existed between the plaintiff and the parties to the arrangement or agreement.

26. To conclude under this sub-heading, let me say this. I find that the plaintiff has no interest whether legal or equitable to the trust funds. I also find, as I have pointed out to the plaintiff during the trial, that the second faction or the Vunaibu landowners may have a valid claim or interest in the arrangement or agreement, but that it may be a separate matter for them to take up if they wish.

27. The beneficiaries, based on the arrangement or agreement as per the two (2) letters, in my view are the two (2) factions or landowner groups. The first faction is represented by WWPL. The second faction is the Vunaibu landowners.

28. The defendant it seems, was appointed by PNG Balsa Company Ltd, as the trustee to the arrangement. It obviously has a fiduciary duty to ensure that the monies that it holds in trust are paid to the rightful beneficiaries subject to the terms of the arrangement or agreement. In support, I refer to the case of Mathew Poia v. ANZ Banking Group Ltd (2001) N2049. The late Justice Mark Sevua held and I read:

The essence of the trust therefore is the fiduciary relationship, that is, the relationship between the trustee and the beneficiary. The trustee is accordingly bound to exercise rights and powers and to act in good faith and in the interest of the beneficiaries. This means that the trustee has a duty of confidence, honesty and responsibility to act for the benefit of the beneficiary. This fiduciary relationship is breached if the trustee acts for his own advantage or for the advantage of a person or persons who are not beneficiaries where the action of the trustee results in some disadvantage to, or detriment suffered by the beneficiaries. A court of equity would not permit a person in a fiduciary position to make a personal profit or to be placed in a conflict of interest situation.

29. The defendant strenuously objects to funds being disbursed to the plaintiff. It submits that it has that fiduciary duty to ensure that the funds held are dispersed following due process and as per the terms of the arrangement or agreement. The defendant says that for it to pay the funds as is sought by the plaintiff herein would be contrary to the purpose or the reasons of why the funds were being kept by it in the first place.

30. In support, the defendant relies on Exhibits D1 and D2. Let me discuss Exhibit D1, which is the affidavit of Derio Titi. Mr Titi is the Chairman of the board of directors of WWPL. Mr Titi's group (i.e., the first faction) was not joined as a party to this Court proceeding. But as it is, his group is a beneficiary of the trust money. And it has come to the Court with its evidence through its Chairman to voice its concern. As a start, I find Mr Titi's evidence relevant. At the hearing, I note that the plaintiff did not dispute the historical background in terms WWPL running the plantation where the property is situated. In fact, the plaintiff has conceded that the plantation, before the dispute, was managed by WWPL. The plaintiff also did not contest the fact that it was WWPL that had negotiated the deal to plant and harvest balsa trees on the plantation. It became clear that the dispute had escalated after the said deal between WWPL and PNG Balsa Company Ltd. Mr Titi explains that clearly in his affidavit.

31. So this is how I have come to conclude on the history of the operation of the Wongawonga Plantation based on the evidence and submissions received. WWPL was and is the original trustee landowner company. It was initially created by the landowners in the 1970s or so to participate in the government's Plantation Acquisition and Redistribution Scheme of 1978. Whether WWPL is still the same person now (i.e., a trustee company for the landowners), there is no evidence before me. But that, in my view, is not relevant for this purpose. The scheme, as I have referred to above, was set up following compulsory acquisition of land by the State under the then LADP Act. One of the purposes for the establishment of WWPL was to acquire and operate the plantation so that WWPL can pay back the monies, which the State has incurred when it purchased the plantation for and on behalf of these landowners. It seems that WWPL has operated the plantation up until the time when the second faction was created and has challenged WWPL's right over the plantation. It is not clear whether the second faction was a "breakaway group" from the original group who were beneficiaries of WWPL, or whether it represents a new group of landowners who were not part of the original group who were beneficiaries of WWPL.

32. I find as a matter of fact that Mr Titi and his faction who is represented by WWPL are a beneficiary to the funds that is held by the defendant. I also find that it is possible that all or if not some of the Vunaibu landowners may also be part of the original landowners or beneficiaries under the WWPL. I make the latter finding or assumption, which I think is fair, given the inconclusive evidence on point disclosed herein. Let me explain. With the evidence, it is hard for this Court to see whether the two (2) factions were originally the same single group of landowners under WWPL, or whether they are not and that the second faction is a completely new group of landowners wanting to part take in the development of the plantation. I also find that even if the Vunaibu landowners may be a completely new group, since it has participated in the arrangement or agreement on 25 July 2007, it may also be regarded as having sufficient interest to the outcome of the trust funds.

33. Finally, I find as a fact that the two (2) factions who are beneficiaries to the trust funds are not parties to this proceeding. As such, I refuse to and will not consider or make findings regarding the terms and conditions of the arrangement or agreement as requested by the plaintiff. This is because I have found that the plaintiff is not a beneficiary and a party, to the arrangement or agreement. The plaintiff, as a non-party to the arrangement or agreement, has no right to ask this Court to interpret or enforce it.

35. I must admit that I was puzzled at first when I noticed evidence of the two (2) separate certificates of recognition of incorporation that were produced by the plaintiff. Evidence tends to suggest that the plaintiff may have been incorporated twice. But this is not the case. I accept the plaintiff's explanation (at paragraph 10 of Exhibit P1) that it had to re-apply for issuance of a new certificate of incorporation to comply with the amendments made to the LGI Act, that is, pursuant to the Land Groups Incorporation (Amendment) Act 2009 (No. 9 of 2009). This explanation is justified and is based on section 36 of the LGI Act as amended. It says and I quote:

(1) On and from the coming into effect of this Act, all current and existing incorporated land groups incorporated prior to the coming into force of this Act shall on the coming into force of this Act be allowed to continue for a transitional period of 5 years only and that such incorporated land groups shall automatically cease to exist at the fifth anniversary from the date of effect of this Act.

(2) Within the 5 years transitional period referred to in Subsection (1), all existing incorporated land groups shall apply for re-incorporation in full compliance of all the requirements of this Act.

36. But after that, something else struck me. I notice this. The plaintiff was first incorporated on 4 September 2007 under the name Vunaibu Land Group Incorporation. And presumably, Vunaibu Land Group Incorporation had existed from 2007 until it was re-incorporated and had its name changed to Vunaibu Incorporated Land Group (ILG), which is the plaintiff herein, on 5 March 2015. What I find odd is how it is possible that the plaintiff's new name could be registered in the title of the property on 15 August 2012 which is about two (2) years seven (7) months prior to the date of its re-incorporation and name change, which happened on 5 March 2015. Had the property been registered under the name Vunaibu Land Group Incorporation, it would have made sense because presumably the said entity had existed then or in 2012.

37. Of course, there may be a genuine explanation for this. I note that the issue is not properly before this Court to determine. As such, I will end my remark here.

38. I refer to the issues. In regard to the first, Whether the plaintiff is a beneficiary at all to the trust funds kept by the defendant, I would answer, "no it is not". In regard to the second issue, If so, whether the plaintiff, in acquiring the property, makes it the sole beneficiary to the trust funds, I find the issue inapplicable given my answer to the first issue. But I have this to say or add. This Court's ruling does not in any way prevent the Vunaibu landowners (i.e., the second faction) from making their claim as beneficiaries or potential beneficiaries to the trust funds as per the arrangement or agreement.

40. Cost is discretionary. I will order cost to follow the event on a party/party basis to be taxed if not agreed.

2. Cost of the proceeding is awarded to the defendant to be assessed on a party/party basis, which may be taxed if not agreed.

3. Time for entry of this order is abridged to the date of settlement by the Registrar of the National Court which shall take place forthwith.

The Court orders accordingly.
________________________________________________________________
Solwai Lawyers: Lawyers for the Plaintiff
Warner Shand Lawyers: Lawyers for the Defendant

National Court of Papua New Guinea

Vunaibul Incorporated Land Group v Wilson [2017] PGNC 141; N6806 (26 July 2017)