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Wen's Holding Ltd v Agen [2019] PGNC 236; N7927 (31 July 2019)

N7927

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 499 of2018 and
WS NO 1828 OF 2015
(Consolidated)

BETWEEN:
WEN'S HOLDING LIMITED
Plaintiff/Third Cross Defendant

AND:
LUCY AGEN
Defendant/Cross Claimant/Plaintiff

AND:
JOHN DEGE in his Capacity as
Managing Director for National Housing Corporation
First Defendant/First Cross Defendant

AND:
NATIONAL HOUSING CORPORATION
Second Cross Defendant

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

Waigani: Thompson, J
2019: 16^th, 17^th & 31^st July

LAND LAW - Land title - registered proprietor - verbal agreement for sale of property - indefeasibility of title -fraud has to be pleaded and proved

Cases Cited:

Shell PNG Ltd) v Speko Investment Ltd (2004) PGSC 16
Steven Naki v AGC (Pacific Ltd) (2005) PGNC 163
Papua Club Inc v Nusuam Holdings Ltd (No.2) (2004) N 2603
Koitachi Ltd v Walter Schnaubelt and (2007 PGSC 11

Counsel:

Mr. Mukwesipu, for the Plaintiff/Third Cross Defendant
Mr. Donald, for the Defendant/Cross Claimant

31^st July, 2019

1. THOMPSON J: BACKGROUND: On 29 December 2015 Lucy Agen (LA) issued proceedings on WS 1828 of 2015 against the National Housing Corporation and the State. In those proceedings she claims that on 10 May 2008 she entered into a verbal agreement with the NRC whereby in consideration for payment of arrears and continuing rental, she could become a tenant of Flat 1 in an NRC duplex property at Section 95 Lot 6 Gordons (of which Flat 2 was occupied by another tenant) and would have the right of first refusal to purchase the property. It is implicit in her pleadings that by "property" she is referring to Flat 1.

2. LA and the NRC signed a Tenancy Agreement on 15 November 2010 which
provided, inter alia, that it was a weekly tenancy which was able to be terminated
by the NRC at any time on giving a week's notice. It also provided that the NRC
would have no responsibility for refunding the costs of any improvements done to
the property by the tenant. The tenancy was renewable if rentals were up to date,
but it remained a weekly tenancy.

3. LA says that on the same date as she signed the Agreement, the NRC
confirmed that she would have a right of first refusal on the property.

4. The Tenancy Agreement did not contain any term relating to a right of first
refusal, or any term at all relating to the possible sale of the property to the tenant,
and did not refer at all to Flat 2.

5. On 30 March 2014 LA wrote to the NRC, offering to buy the property, with
no mention of any agreement for a right of first refusal. No response was received.

6. On 14 October 2015 the NRC gave written notice to LA and the tenant of
Flat 2 that the property was unfit for habitation, the tenancies were terminated, and
allowing them a month to move out. LA did not move out. On 2 December 2015
she wrote to the NRC offering to buy the property. Her letter of offer did not refer
to any agreement for a right of first refusal.

7. On 9 December 2015 the NRC gave written notice to vacate the property
within 24 hours. On 29 December 2015 LA issued those proceedings, seeking
Declarations that she and the NRC had a valid contract giving her a right of first
refusal to purchase the property. On 31 December 2015 she obtained interim
injunctions restraining her from being evicted from Flat 1, and restraining the NRC
from selling the property until she had been given the right of first refusal. These
Orders were subsequently extended until the determination of the substantive
hearing. Since then, LA did not progress the matter, and there has not been a
substantive hearing.

8. Unknown to LA, on 7 December 2015 the NRC had already entered into a
contract for sale of the duplex at Lot 6 Section 95 to Wen Holdings Ltd, a transfer
was signed on 7 December, and the purchase price was paid by bank cheque on 17
December 2015. The transfer was entered on the State Lease for Lot 6 Section 95
Hohola on 21 December 2015.

9. On 22 February 2016 Wen's Holding Ltd applied to the Lands Department
to correct the certificate of title by changing the name from Wen Holdings Ltd to
Wen's Holding Ltd. The application was supported by a Statutory Declaration
stating that the name had been inadvertently shown on the documents in error; a
copy of the Certificate of Incorporation showing the name as Wen's Holding Ltd,
incorporated on 24 October 2014; a Miscellaneous Application Form, and a receipt
showing that Miscellaneous Application fee ofK200 had been paid on 23 February
2016. The certificate of title was surrendered, and subsequently returned showing
that the name had been changed to Wen's Holding Ltd, ("WH") without any
change to the other particulars or any separate entry recording the correction and
change of name.

10. As LA remained in occupation, in 2017 WH issued eviction proceedings in
the District Court, which in June 2018 were ultimately unsuccessful. The District
court took the view that there was a bona fide dispute over title, and so it did not
have jurisdiction in the matter. (As it did not have jurisdiction, its purported order
for WH to apply to be joined in the National Court proceedings, was of no effect).

11. On 26 July 2018 WH issued proceedings on OS 499 of2018 against LA. On
7 November 2018 these proceedings were ordered to be consolidated with WS
1828 of 2015 and heard together, and the combined trial was heard on 16 and 17
July 2019.

WS 1828 OF 2015

12. I deal first with WS 1828 of 2015. WH is not a party to these proceedings.
Although the Defendants had filed Defences and Affidavits denying the claim,
they did not appear at the hearing.

13. LA has pleaded that the agreement she relied on to make her claim, was
made on 10 May 2008. As her proceedings were not issued until 29 December
2015, they were prima facie time-barred pursuant to Section 16 of the Frauds and Limitations Act ("the Act"). However, a statutory time-bar has to be pleaded, and
as it was not pleaded in the Defences, it cannot be relied on.

14. The agreement relied on by LA, was pleaded as a verbal agreement by
which she was entitled to purchase the property. Section 2 of the Act provides that
no interest in land can be created or disposed of except by writing signed by the
person creating or disposing of the interest. There was nothing in writing signed
by the NRC agreeing to dispose of its interest in the property to LA. Neither the
weekly Tenancy Agreement nor LA's letters offering to buy the property, created
an interest.

15. The evidence showed that LA was a weekly tenant, whose tenancy was
terminated on 14 October 2015. She has continued to occupy the property since
then, and to date. The last evidence of any rent paid by LA was in June 2015,
when she says she was in credit. There is no evidence of any rent paid to the NRC
up to December 2015, or to WH after December 2015.

16. LA asked why she would have paid the arrears and continuing rental
payments, if she was not intending to buy the property. The answer is simply that
the payments were a condition to her becoming a lawful tenant. The evidence was
that the NRC would not enter into a Tenancy Agreement with her, unless those
payments were made.

17. The alleged verbal agreement to be entitled to purchase the property is not
reflected in .the Tenancy Agreement or in any of the letters written by LA to the
NRC. There was no evidence that the person with whom she allegedly made the
agreement, the Manager of Evictions, was authorized or had the legal capacity to
bind the NRC to a sale agreement. This manager was not called by LA to give
evidence of the alleged agreement. There was no evidence supporting an
agreement to sell Flat 1, or to sell Flat 2 which did not form part of the Tenancy
Agreement. There was no evidence of any conduct by the NRC consistent with an
agreement to sell.

18. To establish the existence of a contract, LA had to establish 3 elements -
that there was a agreement between the parties, a mutual intention to create legal
relations which includes the element that each party must have the capacity to enter
into the contract, and support of the agreement with consideration (Chitty on
Contracts, 2ih edition, 1994). To establish if these elements exist, LA has to show
that one party made an offer which was clear and precise in its terms, which was unconditionally accepted by the other party, and valuable consideration was given.

(Shell PNG Ltd) v Speko Investment Ltd (2004 PGSC 16) and Steven Naki v AGC
(Pacific Ltd) (2005 PGNC 163).

19. LA has not shown that the NHC made an offer which was clear and precise
in its terms. She has not shown that valuable consideration was given for such an
offer. She has not shown that NBC had an intention to create legal relations, and
has not shown the element that the person allegedly making the offer had the
capacity to enter into the contract.

20. LA therefore failed to produce sufficient evidence to prove on the balance of
probabilities that she had either a verbal or written agreement with the NHC
entitling her to purchase the property, or to remain in occupation of the property
after the termination of the tenancy.

21. Having failed to establish her claim, LA is not entitled to any of the relief
sought in WS 1828 of 20 15.

OS 499 OF 2018

22. I refer next to OS 499 of 20 18. WH has produced evidence that it is the duly
registered proprietor of Section 95 Lot 6 Hohola. Pursuant to Section 33 of the
Land Registration Act, the registered proprietor holds the title free from all
encumbrances except, relevantly, fraud. Cases such as Papua Club Inc v Nusuam
Holdings Ltd (No.2) (2004) N 2603 and Koitachi Ltd v Walter Schnaubelt and
(2007 PGSC 11) have held that in order to amount to fraud under Section 33, it
must be actual fraud or of the registered proprietor.

23. LA alleges actual fraud against WH, on the grounds that WH was not an
incorporated company at the date of the transfer, the transferee's signature was in
Chinese writing, and that the change of name from Wen Holdings Ltd to Wen's
Holding Ltd was fraudulent.

24. LA also alleges actual fraud against NHC by way of a cross-claim. She
alleges that the NHC falsely represented to her that the property was unfit for
habitation, that the NBC knowingly sold it to an unregistered company with no
company seal, that NRC did not carry out the due diligence checks on WH, that the purchase price was not paid, and the correction to the name and the title was fraudulent.

25. LA was not a party to the contract of sale for the property, did not at any
time have an interest in the property, and has no standing to challenge the validity
of the contract for sale of the property.

26. Order 8 Rule 14 of the National Court rules provides that in a defence, the
party pleading shall plead specifically any matter or fact showing illegality which
is alleged to make the Plaintiffs' case not maintainable. LA has not pleaded any
fact or matter showing that the contract of sale was illegal under the National
Housing Corporation Act. She has not pleaded any fact or matter showing that the
contract was illegal under the Land Registration Act, and has not pleaded any
specific breaches of the Land Registration Act showing illegality in the registration
process.

27. LA produced no evidence to refute the Condemnation Certificate issued by
Chief Health Surveyor or any other evidence that the property was not unfit for
habitation. She produced no evidence that the NRC was obliged to and had failed
to do due diligence checks. She did not identify any law preventing a signature
being signed in the language of the signer. She produced no evidence to contradict
WH's evidence of copies of the bank cheque and NRC receipt for payment of the
purchase price. She produced a copy of an online search dated 4 February 2016
showing no results for a search of Wen Holdings Ltd. This showed only that there
was no result for a search on that day. It was not sufficient to rebut the copy of the
Certificate of Incorporation produced by WH showing that WH was incorporated
with Company no. 1-104182 on 24 October 2014. There was evidence that WH
had a company seal, which was on the Miscellaneous Application.

28. LA produced no evidence from the Lands Department or anyone else that
incorrect procedures had been followed in the correction of the name of the
transferee. Even if the procedure had not been correctly followed, it did not have
any consequence for LA. Any error would have only affected Wen Holdings Ltd.
There was no suggestion by LA or anyone else that there was another company
called Wen Holdings Ltd, or of any adverse effect on anyone caused by the error in the name.

29. None of these matters were in any event sufficient to establish fraud against
WH. Fraud cannot be mere suspicion or innuendo. There must be evidence of
gross breaches of the procedures and processes for registration of the title
tantamount to fraud, or actual fraud.

30. Having failed to properly plead or produce sufficient evidence to prove on
the balance of probabilities that there was fraud by either WH or the NRC, LA has
not rebutted the presumption of the indefeasibility of title conferred on WH by
section 33 of the Land Registration Act.

Conclusion

31. For these reasons, I make the following orders:

1. The proceedings on WS 1828 of 2015 are dismissed.

2. A Declaration is granted that Wen's Holding Ltd is the registered
   proprietor of the property identified as Volume 68 Folio 141 Section 95
   Lot 6 Hohola.
3. Lucy Agen is to give vacant possession of the said property, within 10
   days.

4. Each party is to pay its own costs.

___________________________________________________________________

Mukwesipu Lawyers: Lawyer for the Plaintiff/Third Cross Defendant
Donald & Company Lawyers: Lawyer for the Defendant/Cross Claimant