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Muku v Yama [2019] PGNC 334; N7948 (13 August 2019)

N7948

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS (HR) NO 11 OF 2017

PRISCILLA MUKU, ANIAR MEDIR,
ELIZABETH WUKAWA, SCHOLAR ABIARI,
MELISSA JOSHUA, DESMA KASA & BILLY RAPURA
Plaintiffs

V

EMMANUEL DIYA YAMA
First Defendant

JIA HAO ENTERPRISES LIMITED
Second Defendant

BELINDA GUAN LIANGQIN
Third Defendant

BRANCH MANAGER, NATIONAL HOUSING CORPORATION
Fourth Defendant

MANAGING DIRECTOR, NATIONAL HOUSING CORPORATION
Fifth Defendant

SECRETARY, DEPARTMENT OF LANDS & PHYSICAL PLANNING
Sixth Defendant

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Seventh Defendant

Madang: Cannings J
2018: 8 December,
2019: 16 February, 8 March, 23 April, 11 May, 13 August

LAND – government land within urban area – whether fraud involved in granting or transfer of State Lease – meaning of “fraud” in Land Registration Act – actual fraud – constructive fraud.

NEGLIGENCE – whether registered proprietor of State Lease owes duty of care to occupiers of land.

HUMAN RIGHTS – whether human rights of long-term occupiers of public housing on government land breached by manner in which State Lease granted and transferred over land they occupied.

The plaintiffs were long-term occupiers of public housing on government land. They paid rent to the National Housing Corporation, which administered the land. In 2013, the first defendant, then the local branch manager of the National Housing Corporation, was granted a 99-year State Lease over the land. In 2015 he transferred the State Lease (ie sold the land) to the second defendant, which in 2017 commenced proceedings in the District Court seeking the plaintiffs’ eviction from the land. Soon after being served with the District Court summons the plaintiffs commenced proceedings by writ against the defendants, including the State and others, seeking amongst other things a declaration that the first defendant had acquired the State Lease by fraud, an order nullifying the second defendant’s title, a permanent injunction to restrain the defendants from entering the land and evicting them, and damages. They pleaded three causes of action: fraud, negligence and breach of human rights. They argued that the granting of the State Lease to the first defendant involved actual and constructive fraud and the transfer to the second defendant involved constructive fraud; that the second defendant had negligently acquired title without checking that the first defendant had good title; and that the defendants had breached the plaintiffs’ human rights by the manner in which the State Lease was granted and transferred and by the attempts to have them evicted. At the trial there was no evidence for any of the defendants. The defendants argued that the plaintiffs had failed to prove any of the three causes of action on which their case was based.

Held:

(1) The land was at all times government land. The State Lease granted to the first defendant in 2013 was the first State Lease over the land. The National Housing Corporation at no time held a State Lease or had any other legal interest in the land. Prior to the first defendant being granted the Lease, the land had neither been advertised as being available for lease nor been exempt from advertisement.

(2) The plaintiffs failed to prove actual fraud by the first defendant but proved that the circumstances in which he acquired title were unsatisfactory and irregular and amounted to constructive fraud.

(3) However, it was not proven that any breach of the Land Act was involved in the transfer of the State Lease to the second defendant or that the circumstances of the transfer were so unsatisfactory, irregular and unlawful as to warrant the setting aside of title or that the second defendant had committed any illegality. It was therefore not proven to be a case of fraud involving the registered proprietor.

(4) The plaintiffs failed to prove the tort of negligence against any of the defendants.

(5) The plaintiffs failed to prove that any of the defendants breached any of their human rights.

(6) As no cause of action was established, the proceedings were dismissed and all primary relief sought by the plaintiffs was refused. However, as the plaintiffs had acted in good faith in commencing the proceedings and exposed matters of concern regarding the creation and transfer of interests in government land, the parties were ordered to pay their own costs, and the defendants and all other persons were restrained for a limited period from removing the plaintiffs from the land.

Cases Cited

The following cases are cited in the judgment:

Anita & Andrew Baikisa v J & Z Trading Ltd (2016) N6181
Awaincorp Ltd v Kas (2015) N5862
Donoghue v Stevenson [1932] AC 562
Emas Estate Development Pty Ltd v John Mea [1993] PNGLR 215
Eric Kiso v Bennie Otoa & Ken Wutnalom (2013) SC1222
Koitachi Ltd v Walter Schnaubelt (2007) SC870
Kol Toki v Moeka Morea (2016) SC1588
Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120
Mosoro v Kingswell Ltd (2011) N4450
Mudge v Secretary for Lands [1985] PNGLR 387
PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126
West New Britain Provincial Government v Kimas (2009) N3834

STATEMENT OF CLAIM

This was a trial in which the plaintiffs sought declarations and orders regarding government land that they occupied, which was the subject of a State Lease.

Counsel

S Asivo, with leave, for the Plaintiffs
D F Waáu, for the First, Second & Third Defendants
S Maliaki, for the Sixth & Seventh Defendants

13^th August, 2019

1. CANNINGS J: The plaintiffs are long-term occupiers of public housing on government land in Madang town, Section 64, Allotment 29, Kibilak Crescent, Newtown. They have been paying rent to the National Housing Corporation, which has been administering the property. In 2013, the first defendant, Emmanuel Diya Yama, then the local branch manager of the National Housing Corporation, was granted a 99-year State Lease over the land. In 2015 Mr Yama transferred the State Lease (ie sold the land) to the second defendant, Jia Hao Enterprises Ltd, which in 2017 commenced proceedings in Madang District Court seeking the plaintiffs’ eviction from the land.

2. Soon after being served with the District Court summons, the plaintiffs commenced the current proceedings in the National Court against the defendants, including the State and others. A trial has been conducted of those proceedings.

3. The plaintiffs seek amongst other things a declaration that Mr Yama acquired the State Lease by fraud, an order nullifying Jia Hao Enterprises Ltd’s title, a permanent injunction to restrain the defendants from entering the land and evicting them, and damages.

4. The plaintiffs argue three causes of action: fraud, negligence and breach of human rights. They argue that the granting of the State Lease to Mr Yama involved actual and constructive fraud and the transfer to Jia Hao Enterprises Ltd involved constructive fraud; that Jia Hao Enterprises Ltd negligently acquired title without checking that Mr Yama had good title; and that the defendants breached the plaintiffs’ human rights by the manner in which the State Lease was granted and transferred and by the attempts to have them evicted.

5. Only the first defendant (Mr Yama) and the sixth and seventh defendants (the Secretary for Lands and the State) filed a defence. There was no cross-claim. At the trial there was no evidence for any of the defendants.

6. The defendants argue that the plaintiffs have failed to prove any of the three causes of action on which their case is based and the entire proceedings should be dismissed.

ISSUES

7. The following issues arise:

1 Have the plaintiffs proven fraud?

2 Have the plaintiffs proven negligence?

3 Have the plaintiffs proven any breach of human rights?

4 What declarations or orders should the Court make?

1. HAVE THE PLAINTIFFS PROVEN FRAUD?
   

8. The plaintiffs argue that the circumstances in which Mr Yama obtained title in 2013 are so suspicious and dubious as to amount to actual fraud, or at the very least constructive fraud, which means that his title was defective; and this has the consequence of rendering the title of Jia Hao Enterprises Ltd also defective.

9. To assess those arguments, I make the following findings of fact:

• On 22 July 2013 the Minister for Lands and Physical Planning (the sixth defendant) granted to Mr Yama a 99-year State Lease (commencing on 3 July 2012) over Section 64, Allotment 29, which has an area of 0.3467 hectares.
  
• The land has been at all relevant times government land.
  
• The State Lease granted to Mr Yama was the first State Lease over the land. Prior to that, it was vacant government land.
  
• The National Housing Corporation at no time held a State Lease or had any other legal interest in the land. It had, however, been administering the property for a period of ten to twenty years prior to 2013.
  
• In 2013 Mr Yama was Madang branch manager of the National Housing Corporation.
  
• Prior to Mr Yama being granted the Lease, the land had neither been advertised as being available for lease nor been exempt from advertisement and the question of its allocation was not the subject of any deliberation by the Land Board. Furthermore, the plaintiffs were given no prior notice of the transaction and were not given the opportunity to express any interest they might have had in acquiring the land. I base this finding of fact on the pleadings in the statement of claim and assertions made in the plaintiffs’ evidence and the failure of the defendants, in particular the first defendant, Mr Yama, to present evidence to rebut those assertions.
  
• Mr Yama was the registered proprietor of the State Lease for almost two years before transferring it to Jia Hao Enterprises Ltd, the transfer being registered on 15 June 2015.
  
• Jia Hao Enterprises Ltd remained the registered proprietor until the time of the trial, in May 2019.
  

Mr Yama’s title

10. I reject the argument that Mr Yama obtained the State Lease by actual fraud. There is insufficient evidence to support such a finding. There is, however, ample evidence to support the description of the circumstances in which he was granted the lease as ‘suspicious’ and ‘dubious’, and involving a violation of the procedures set out in the Land Act 1995 for allocation of government land. I have explained the procedures in a number of cases including West New Britain Provincial Government v Kimas (2009) N3834, Mosoro v Kingswell Ltd (2011) N4450 and Awaincorp Ltd v Kas (2015) N5862:

• Only the Minister (or a delegate of the Minister) may grant a State Lease of Government land (Section 65).
  
• Notice must be given in the National Gazette of all land available for leasing unless the land has been exempted from advertisement (Sections 68(1), 69(1)).
  
• The Minister may only exempt land from advertisement under Section 69(2):
  

(a) where the lease is granted to a governmental body for a public purpose; or

(b) where it is necessary to relocate persons displaced as a result of a disaster as defined in the Disaster Management Act (Chapter 403); or

(c) where a lessee applies for a further lease; or

(d) where the State has agreed to provide land for the establishment or expansion of a business, project, or other undertaking; or

(e) where the land applied for adjoins land owned by the applicant and is required to bring the holding up to a more workable unit, providing that the claims of other neighbouring landowners are considered and their views taken into account in deciding whether to exempt the land from advertisement in favour of the applicant; or

(f) where the Department responsible for foreign affairs recommends that land be made available to the applicant for consular premises; or

(g) where the land is required for the resettlement of refugees; or

(h) where the applicant has funded the acquisition of the land from customary landowners in order to acquire a State lease over it; or

(i) where a lease is to be granted under Section 99 or 102; or

(j) where a new lease is granted under Section 110, 130 or Section 131.

• Irrespective of whether the land is exempt from advertisement the person wishing to acquire a State Lease must make an application in the prescribed form and pay a fee for registration of the application (Section 70).
  
• Subject to a few exceptions (set out in Section 72, allowing the Minister to directly grant leases) applications for State Leases are heard by the Land Board which recommends to the Minister the persons (if any) to whom leases should be granted (Section 71).
  

11. I reiterate the finding that Section 64, Allotment 29 was not advertised as being available for lease, it was not exempt from advertisement and the question of its allocation was not deliberated upon by the Land Board. That any person could be granted a State Lease in such circumstances makes the transaction suspicious and dubious. That the person granted the lease was at the time the branch manager of the National Housing Corporation, the authority that was at the time administering the land, makes the transaction seem doubly questionable. Was it a case of constructive fraud?

12. At this point, I pause to address the meaning of fraud. Under Papua New Guinea’s Torrens Title system of land registration the general principle is that once a lease of land from the State is registered, an indefeasible title is conferred on the registered proprietor, subject only to the exceptions in Section 33(1) (protection of registered proprietor) of the Land Registration Act, including Section 33(1)(a), which states: “The registered proprietor of an estate or interest holds it absolutely free from all encumbrances except ... in the case of fraud”. “Fraud” means actual fraud or constructive fraud.

13. Constructive fraud exists where the circumstances of transfer of title are so unsatisfactory, irregular or unlawful, it is tantamount to fraud, warranting the setting aside of registration of title. There is now a strong line of Supreme Court authority in support of the constructive fraud approach: Emas Estate Development Pty Ltd v John Mea [1993] PNGLR 215, PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126, Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120 and Kol Toki v Moeka Morea (2016) SC1588.

14. That line of authority is, in my view, binding on the National Court, more so than cases such as Koitachi Ltd v Walter Schnaubelt (2007) SC870 and Eric Kiso v Bennie Otoa & Ken Wutnalom (2013) SC1222, in which the Supreme Court has indicated that proof of actual fraud is necessary.

15. I find that Mr Yama was granted the State Lease in circumstances that were so unsatisfactory, irregular or unlawful, it was tantamount to fraud, and therefore it was a case of constructive fraud.

Title of Jia Hao Enterprises Ltd

16. The plaintiff’s argue that Mr Yama’s title was defective (in that he obtained title by constructive fraud), so it follows that the title obtained by Jia Hao Enterprises Ltd, upon the transfer of the State Lease to it by Mr Yama, is also defective. I reject that argument. There is no evidence of illegality or impropriety on the part of Jia Hao Enterprises Ltd. There is no evidence, for example, of its collusion with Mr Yama or any other person or public official, for the purposes of the grant to Mr Yama of the State Lease in 2013.

17. I find that there was no constructive fraud involved in the transfer of the State Lease to Jia Hao Enterprises Ltd on 15 June 2015. This means that Jia Hao Enterprises Ltd has indefeasible title.

18. The plaintiffs have therefore failed to prove constructive fraud.

2. HAVE THE PLAINTIFFS PROVEN NEGLIGENCE?
   

19. The plaintiffs argue that:

• Jia Hao Enterprises Ltd, being the registered proprietor of the State Lease since 16 June 2015, owed a duty of care to the plaintiffs, as long-term occupiers of the land, to assist the plaintiffs and give them adequate notice if they were required to vacate the land and to ensure that it (Jia Hao Enterprises Ltd) had good title in the land;
  
• Jia Hao Enterprises Ltd breached that duty of care (acted negligently) by not offering any assistance to the plaintiffs, by not giving them proper notice to vacate and by not ensuring that there was no defect in the title that it acquired from Mr Yama;
  
• the breach of duty has caused stress, inconvenience and disruption to the plaintiffs, which are injuries that are of a type that is not too remote.
  

20. The plaintiffs argue that as a result of the commission of the tort of negligence against them by Jia Hao Enterprises Ltd, they are entitled to damages, in addition to other relief including orders quashing the title of Jia Hao Enterprises Ltd (and also Mr Yama’s title).

21. I have considerable difficulty with the plaintiffs’ arguments. They have provided no authority to support any of their propositions. While it can be said that the categories of negligence are never closed, and that the neighbourhood principle arising out of the seminal decision of the House of Lords in the snail-in-the-bottle case of Donoghue v Stevenson [1932] AC 562 is capable of application in any conceivable situation (see my discussion of it in the Madang fried rice case, Anita & Andrew Baikisa v J & Z Trading Ltd (2016) N6181), I know of no case, in PNG or elsewhere, where occupiers of land which has been purchased by a new owner have been held to be neighbours of the new owner, such that the new owner owes them a duty of care. Being unprecedented, of course, does not make a proposition wrong. So let it be presumed, for the sake of the argument, that a duty of care was owed by Jia Hao Enterprises Ltd to the plaintiffs.

22. The plaintiffs then have to prove that Jia Hao Enterprises Ltd breached that duty of care, ie that it acted negligently. This is where the plaintiffs’ arguments fall flat. Jia Hao Enterprises Ltd did not act unreasonably. It did not enforce its rights peremptorily, without notice. It took the plaintiffs to the District Court, seeking a court order to authorise the plaintiff’s eviction. It was not obliged to check for defects in Mr Yama’s title. Indeed there were no apparent defects in Mr Yama’s title as Jia Hao Enterprises Ltd was not, as I have found earlier, involved in the unsatisfactory circumstances in which Mr Yama was granted the State Lease.

23. The plaintiffs have failed to prove the tort of negligence.

3. HAVE THE PLAINTIFFS PROVEN ANY BREACH OF HUMAN RIGHTS?
   

24. This part of the plaintiffs’ case was poorly articulated in the statement of claim and was not pursued with vigour or greater articulation in submissions. The argument appears to be that the defendants, in particular Jia Hao Enterprises Ltd, have acted harshly and oppressively, in the sense that those terms are used in Section 41(1) (proscribed acts) of the Constitution. I am not persuaded that Jia Hao Enterprises Ltd or its owner (the third defendant, Belinda Guan Liangqin) are guilty of any wrongdoing or have acted harshly or oppressively.

25. The plaintiffs have failed to prove any breach of human rights.

4. WHAT DECLARATIONS OR ORDERS SHOULD THE COURT MAKE?
   

26. The plaintiffs have failed to establish any of the three causes of action on which their case is based. The proceedings will be dismissed and all primary relief sought by the plaintiffs will be refused. However, the plaintiffs have acted in good faith in commencing the proceedings and exposed matters of concern regarding the creation and transfer of interests in government land and public housing. Therefore the parties will pay their own costs. I will order that the defendants be restrained for a limited period from removing the plaintiffs from the land, as the plaintiffs need to be given time to digest this decision and prepare for an orderly exit from the land.

ORDER

(1) Subject to this order, the proceedings are dismissed and the relief sought by the plaintiffs is refused.

(2) The defendants and all other persons including the Police are restrained from evicting or removing the plaintiffs from Section 64, Allotment 29, Madang at any time before 12 noon on 30 September 2019, and the plaintiffs are entitled to remain in occupation of Section 64, Allotment 29, Madang until that time.

(3) The plaintiffs and all other persons occupying Section 64, Allotment 29, Madang shall vacate and remove all their personal property and possessions from Section 64, Allotment 29, Madang by 12 noon on 30 September 2019, failing which the Police are authorised, from that time, to use reasonable force to evict them and remove any of their personal property and possessions remaining on Section 64, Allotment 29, Madang.

(4) The parties shall bear their own costs of the proceedings.

Judgment accordingly.
________________________________________________________________
Ninerah Lawyers: Lawyers for the First, Second & Third Defendants
Solicitor-General: Lawyer for the Sixth & Seventh Defendants