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Supreme Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]
SCA NO. 09 OF 2021 (IECMS)
BETWEEN:
PNG SUSTAINABLE DEVELOPMENT PROGRAM LIMITED
Appellant
AND:
THE HONOURABLE JOHN ROSSO, MINISTER FOR LANDS AND PHYSICAL PLANNING
First Respondent
AND:
ALA ANE, ACTING REGISTRAR OF TITLES
Second Respondent
AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Respondent
Waigani: Yagi J, Bona J & Gora J
2022: 01st & 29th April
CIVIL APPEAL - State Lease – forfeiture of State Lease – Land Act, s. 122 – requirements of the Land Act are mandatory – strict application of the 22 requirements – non-compliance of mandatory requirement - effect of non-compliance - appeal allowed.
Cases Cited:
Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120
Mount Hagen Local-Level Government v Pepi Kimas (2015) N6044
Beecraft No 20 Ltd v Minister for Lands (2001) N2125
North Fly Development Corporation Limited v Pepi Kimas (2015) N6122
University of Papua New Guinea v John Ofoi (2016) N6303
Gumdale Ltd v John Ofoi (2017) N6696
Carter Holdings Ltd v Luther Sipison (2019) N7725
Markham Farming Company Ltd v Wanga (2019) N8103
Papindo Trading Co Ltd v Romly Kila Pat (2016) N6277
University of Papua New Guinea v John Ofoi (2016) N6303
Carter Holdings Ltd v Luther Sipison (2019) N7725
Counsel:
Mr I. R. Shepherd, for the Appellant
Mr R. Uware, for the Respondents
DECISION
29th April, 2022
1. BY THE COURT: The appellant appeals against a decision of the National Court (per Miviri J) in Waigani made on 01 December 2020 in proceedings OS (APP) No. 809 of 2019 wherein the Court dismissed the appellant’s appeal under s.142 of the Land Act 1996 (Act) relating to an action for forfeiture of a State Lease in Daru Western Province.
Legal Representation
2. The appellant is represented in this appeal by counsel Mr. Ian Shepherd of Ashurst Lawyers. Mr Russel Uware of counsel from the Office of the Solicitor General made appearance on behalf of all respondents, however, informed the Court that he had no instructions from the Department of Lands and Physical Planning (DLPP) consequently, despite orders made by the Directions Hearing Court, is in no position to make any submissions on behalf of the respondents.
Facts
3. The appellant was at the material time the registered proprietor of a parcel of land in Daru Western Province described as Allotment17 Section 65 Town Daru Western Province contained in State Lease Volume 30 Folio 240 (the Land). The previous registered proprietor was an individual named Norman May who sold his rights, interest and title in the Land to the appellant in March 2012. The State Lease is for residential purpose with a minimum improvement value of K66,300.00.
4. The appellant is an overseas company registered in Papua New Guinea and commenced carrying on business in the country in January 2002. It is a development and investment company established for the particular benefit of the people of the Western Province and Papua New Guinea in general. It held 63% of the shares in the Ok Tedi Mining Limited (OKML) whilst the remaining 37% of the shares was held by the Independent State of Papua New Guinea.
5. In September 2013, by legislation, the government of Papua New Guinea expropriated the entire shares in the appellant company thus depriving the company of its revenue stream, that is, the dividends from the OKML mining operations. The consequence is that the appellant was unable to carry out its development programs in the Western Province and the country as a whole. It goes without saying that the appellant’s development plans in respect to the Land including its obligations as the lease holder was frustrated and halted.
6. Being an overseas company registered in Singapore the appellant successfully challenged the expropriation action of the Independent State of Papua New Guinea in the Courts in Singapore. A decision in its favour was eventually made in April 2019.
7. On 31 May 2017 a notice to show cause dated 26 March 2017 signed by Mr Tiri Wanga, as the delegate of the Minister for Lands and Physical Planning (Notice), was served on the appellant. It is pertinent that the content of the notice is produced. It states:
NOTICE TO SHOW CAUSE
I, TIRI WANGA, a delegate of the Minister for Lands and Physical Planning by virtue of the powers conferred by Section 122(2) of the Land Act 1996 (as amended) and all other powers me enabling, hereby call upon you:
PNG SUSTAINABLE DEVELOPMENT PROGRAM LIMITED
P. O. BOX 1786
PORT MORESBY
NCD
the lessee of the lease specified in the Schedule hereto to Show Cause why the lease should not be forfeited to the State on the ground(s) that -
(a) You have neglected or failed to comply with the improvement covenants or conditions as stipulated in the land lease agreement and
(b) Your land lease rental remains due and unpaid for a period of more than six (6) months and has now accumulated to a total of K42,380.00 as at the 1st of January 2017. Your annual rental is K200.00.
If sufficient cause is not shown within one (1) month from the date of this Notice, the lease shall be declared forfeited.
NOTE: Replies are to be directed to the Secretary, Department of Lands and Physical Planning P. O. Box 5665 BOROKO National Capital District or fax 3253299
SCHEDULE
A grant of Business Lease in respect of Allotment 17 Section 65, Daru, Western Province and being all of the land contained in the State Lease Volume 30 Folio 240 in the Department of Lands and Physical Planning Land File: AC/065/017
Dated this 26th day of March 2017
(Signed)
TIRI WANGA
A delegate of the Minister for Lands and Physical Planning
8. Upon receiving the Notice, the appellant engaged the law firm Dentons who wrote to the Acting Secretary, DLPP on 01 June 2017. The letter was made to the attention of Mr Tiri Wanga. In that letter it was highlighted, among others, that the time for a response had expired and a request for extension of time to be given. There were 2 letters forwarded both received no responses at all.
9. On 14 July 2017 the appellant obtained from the DLPP a copy of several documents. Among them was a copy of the statement of land rental arrears. The statement showed that the annual rental was charged at K3,315.00 and the total outstanding was only K16,575.00 and not K42,380.00 as stipulated in the Notice.
10. Additional documents include Forfeiture Approval Form dated 24 November 2017, Forfeiture of State Lease dated 22 January 2018 and National Gazette G530 dated 27 June 2019. From these documents the following material facts are patently obvious:
(a) The forfeiture action was taken on 22 January 2018.
(b) The notice of forfeiture was published in the National Gazette on 27 June 2019.
(c) The grounds of forfeiture were for non-compliance with improvement covenants and failure to comply with Notice to Show Cause.
11. The appellant appealed to the National Court against the decision to forfeit the Land. The appeal was pursued under s. 142(1)(b) of the Act on the grounds, among others, that:
(i) the forfeiture action was unlawful to the extent that it was taken contrary to the statutory requirements.
(ii) The exercise of the statutory powers by the Minister responsible was made in a mala fide manner
(iii) The exercise of the statutory powers by the Minister responsible was unreasonable in the Wednesbury sense.
(iv) The Minister responsible acted ultra vires his statutory powers
12. The respondents were duly served with the proceedings and accorded fair and reasonable opportunity to defend the appeal. There were at least 2 adjournments to allow the respondents to appear at the hearing of the appeal. Despite that, the hearing of the appeal proceeded ex parte. At the hearing the appellant relied on an affidavit sworn by John Malcolm Wylie filed on 11 November 2019 as evidence supporting its grounds in the appeal. There was no responding affidavit filed by or on behalf of the respondents nor was there any evidence presented during the hearing. In essence the evidence provided by the appellant was unchallenged and uncontroverted.
13. The learned primary judge heard the appeal on 18 November 2021 and delivered a decision on 01 December 2021 dismissing the appeal. In a nutshell the learned judge was of the opinion, despite the evidence presented, that the appellant failed to discharge the onus of proof on the balance of probabilities.
Grounds of appeal
14. There are 13 grounds of appeal before this Court which are set out in elaborate detail in the notice of appeal. These grounds allege errors of law and mixed fact and law. They may be summarised into 5 broad categories:
(i) error in terms of the failure to find non-compliance with statutory requirements under s. 122 of the Act.
(ii) error in terms of the failure or omission to take into account relevant facts and circumstances.
(iii) error in terms of taking into account irrelevant considerations.
(iv) error in terms of failure to accept and or act on uncontroverted evidence.
(v) error in terms of failure to give sufficient weight to matters of fact.
Issues
15. The issues that arise for determination, in our view, are as follows:
(a) whether the statutory requirements under s. 122 of the Act had been duly complied with when the forfeiture action was taken.
(b) whether the learned primary judge erred in not taking into account relevant facts and considerations.
(c) whether the learned primary judge erred in taking into account irrelevant considerations.
(d) whether the learned primary judge failed to act on uncontroverted evidence.
(e) whether the learned primary judge erred by failing to give sufficient weight to factual matters.
Considerations and conclusion
16. We begin our discussion of the issues by stating the obvious by way of a general remark. The appeal proceeding OS (APP) No. 809 of 2019 in the National Court was conducted unopposed by the respondents. Although due process and procedural fairness was duly observed and implemented, the respondents and their lawyer for reasons only know to them decided not to participate in the hearing. The same applies in respect to the appeal before this Court. The respondents have been served with the notice of appeal and other interlocutory and procedural processes. They have failed to participate throughout the entire court process including at the directions hearing, listings hearing and the substantive hearing. Although court records show that appearance was made by counsel on behalf of the respondents during the interlocutory hearings, the appearances were merely on “watching brief” as nothing substantive or constructive was contributed during these hearing.
Issue 1 – due compliance with statutory requirements
.
17. The facts are that the appellant is the duly registered proprietor of the Land the subject of the appeal in both the court below
and in this Court. The appellant purchased the Land from the previous owner and had its status as the new owner registered on 20
March 2012.
18. On 31 May 2017 the appellant received the Notice issued by a delegate of the Minister for Lands and Physical Planning bearing the date 26 March 2017. The Notice indicated that the appellant had defaulted in terms of payment of outstanding land rentals for more than 6 months and compliance with the improvement covenant as stipulated in the State Lease. It directed that the appellant show cause to the Acting Secretary for Department of Lands and Physical Planning – Mr Tiri Wanga. Incidentally, it is Mr Tiri Wanga who signed the Notice as the delegate of the Minister for Lands. The show cause response had to take place within one (1) month as from the date of the Notice, that is to say, the deadline fell on 26 April 2017.
19. The Notice clearly showed that Mr Wanga invoked the forfeiture power under s. 122(2) of the Act. It is pertinent that this provision is stated in full:
“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.”
20. In our view, the power to forfeit a State Lease under s. 122 is expressly vested in the “Minister”. There is no specific provision, that we are aware of, providing for the power to be exercised by a “delegate” of the Minister. It is the Minister who is required “to serve the notice” on the defaulting lessee under subsection (2). If our understanding is correct, the Notice issued by Mr Tiri Wanga as a “delegate” maybe questionable as regards its validity. see Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120. However, this point was not raised nor argued by the appellant’s counsel and so it is irrelevant for the purpose of this appeal.
21. The exercise of the power under s. 122 of the Act has been judicially considered in numerous cases. These cases reflected a number of fundamental principles such as the requirements of s. 122 are mandatory and must be strictly observed and followed. The exercise of power under s. 122 by the Minister for Lands is not unfettered and must be exercised on proper and good reasons. A failure to comply with these mandatory requirements warrants voiding of or quashing of and setting aside the forfeiture action. Counsel for the appellant referred to and relied on the case Mount Hagen Local-Level Government v Pepi Kimas (2015) N6044. Some of the other cases dealing with the same provision are Beecraft No 20 Ltd v Minister for Lands (2001) N2125; North Fly Development Corporation Limited vs Pepi Kimas (2015) N6122; University of Papua New Guinea v John Ofoi (2016) N6303; Gumdale Ltd v John Ofoi (2017) N6696; Carter Holdings Ltd v Luther Sipison (2019) N7725 and Markham Farming Company Ltd v Wanga (2019) N8103.
22. In the Mount Hagen Local-Level Government case (supra) the applicant was the registered proprietor of two portions of State Lease which were consolidated. The Minister for Lands invoked his powers under s. 122 to forfeit the State Lease for alleged non-payment of land rents and failure to comply with improvement covenants in the State Leases. The applicant challenged the decision to forfeit the State Leases by way of judicial review on the ground that compliance with the mandatory requirements under s. 122 was lacking. He claimed that no notice to show cause was given as to any outstanding land rents and the failure to comply with the improvement covenant in the State Leases. The Court found that no notice to show cause was given as required by s. 122(2)(a) of the Act. Consequently, the decision to forfeit the State Leases was declared null and void and therefore quashed.
23. In Beecraft No 20 Ltd (supra) a State Lease was forfeited for alleged non-compliance with the improvement covenant and non-payment of land rentals. The facts were that the time for compliance with the improvement covenant has not expired and the land rents were paid up to date when the notice to show cause was issued. The Court found that the notice to show cause was issued prematurely without any valid grounds under s. 122(3) of the Act and accordingly ruled that the forfeiture was invalid and ordered the gazettal of the forfeiture notice to be revoked.
24. In Papindo Trading Co Ltd v Romly Kila Pat (2016) N6277 his Honour Justice Sawong in analysing s. 122 of the Act and stated:
“It is important to analyse section 122. The first point to note is that there are two processes involved in the forfeiture of a state lease. The first process to forfeit a state lease is commenced by serving a notice on the lessee and all other persons calling on the lessee to show cause within a specified period in the notice why the lease should not be forfeited. That is the first part required under subsection 2. That notice must then be followed by the steps specified in subsection 2(b). This is so because of the expression “and” which appear between subsection 2(a) and (b). In other words the two steps prescribed under subsection 2 must be complied with. Both requirements must be complied with. Failure to comply with both procedures would be fatal to the actions taken by the Minister or his delegate.” [Emphasis added]
25. The following passage in the judgment of her Honour Nablu J in University of PNG case (supra), in our view, succinctly states the legal position and its effect as regard s. 122 of the Act:
“16. The question of the validity of forfeiture of State Leases pursuant to the Land Act has been the subject of a number of decisions of the Supreme Court and this Court. The main legal principle applicable is that, the State can lawfully forfeit a State Lease if the mandatory process under Section 122 of the Land Act is complied with. It is trite law that the State has the ultimate power to forfeit a State Lease where the registered proprietor has either failed to comply with the mandatory requirement to pay land rental fees or failed to comply with the land covenants specified in the State Lease. The exercise of this ultimate power of forfeiture can only be validly exercised upon strict observance of the mandatory requirements that are specified under s.122 (2) of the Land Act. The State must give proper notice to the registered proprietor by duly serving a Notice to Show Cause under s.122 (2) of the Land Act.
17. There is a plethora of authority on the steps or procedure of valid forfeiture of a State Lease under the current Land Act and its predecessor Land Act (Chapter 185) (See Dent v. Kavali [1981] PNGLR 488;Davis v. Pitzz [1988-89] PNGLR 143;Yakananda Business Group Inc.v. Minister for Lands and Physical Planning (2001) N2159;Beecraft No. 20 Ltd v. Minister for Lands (2001) N2125; John Mur v. Les Kewa (2010) N4016).
18. The State’s failure to comply with the mandatory prescribed provisions under Section 122 of the Land Act, are grounds to invalidate the entire forfeiture process. Accordingly, this Court and the Supreme Court has invalidated and set aside a number of forfeitures for failing to comply with the mandatory requirement to show cause (See Emas Estate Development Pty Ltd v. Mea & The State [1993] PNGLR 215).”
26. The above passage (excluding paragraph 17) was repeated in Carter Holdings Ltd v Luther Sipison (2019) N7725. In the University of PNG case (supra), the central issue was whether the notice to show cause was given to the registered proprietor of the land (UPNG) prior to the forfeiture action. The Court found that no notice was served on the registered proprietor of the State Lease and consequently held that “failure to serve the Notice pursuant to Section 122 of the Land Act is a serious irregularity which renders the whole process of forfeiture invalid and void ab initio.”
27. In Gumdale Ltd (supra), Makail J dealt with a very similar situation to the facts of this case where the registered proprietor of a State Lease was not served the notice to show cause within the time prescribed in the notice document. In that case the plaintiff company received by registered post on 13 November 2012 a Notice to Show Cause bearing the date 5 June 2012. The notice required the registered proprietor of the State Lease to show cause why its State Lease should not be forfeited and gave notice in the following terms - “If sufficient cause is not shown within one (1) month from the date of this Notice, the lease be declared forfeited.” The one-month period stated in the notice to show cause expired on or about 5th July 2012. In other words, the registered proprietor received the notice to show cause well after the expiration of the time limit given to show cause. In that case it was late by approximately 4 months and 1 week. The Court held, in effect, that the action taken to forfeit the State Lease from the registered proprietor constitute a breach of the statutory requirement under s. 122(2)(a) of the Land Act. In the present case the notice to show cause was received late by approximately 2 months.
28. Counsel for the appellant in this case submits that notice to show cause was not served on the appellant by the Minister for Lands within the time prescribed by the Notice and consequently the appellant was denied the right and opportunity to show cause. The failure is tantamount to a breach of the mandatory requirement under ss. 122(2)(a) and 122(4) of the Act.
29. The learned primary judge in his reasons for decision, with respect, did not consider the issue of whether the requirements of s. 122 of the Act were complied with by the Minister for Lands. The learned judge instead determined the appeal on the basis that the copy documents that were relied upon by the appellant at the trial (which were not disputed, unchallenged and uncontroverted) were unverified and not credible and lacked integrity and otherwise unreliable. Moreover, the learned primary judge took the view that the payment of K16,575.00 on 20 November 2017 was late which was an implied admission that it failed to comply with its obligation to pay land rents and that was in itself a lawful ground justifying forfeiture of the Land. The learned primary judge reasoned in his concluding opinion:
“It means in essence reliance on the law submitted by the appellant will be as good as the evidence which is not the case of the evidence relied by the appellant here so as to entail: Nambawan Super Limited v Kimas [2013] PGNC 23: N5062 (27 February 2013), or for that matter Mount Hagen Local Level Government v Kimas [2012] PGNC356: N6044 (14 August 2012).
This is particularly more so with the notice of appeal drafted as, if the Respondent or DLPP had responded to the Letters and issued fresh amended Notice as requested, the appellant would have been able to explain both the delay in payment of the land rent and non-compliance with the improvements which evidence is now before the Court. This is acceptance by the appellant that he was late in the payment of the land rental and has not complied with improvements agreed to initially when the lease was granted. He is bound to observe and here is clear acknowledgement by the plea in the grounds of appeal of that fact. He acknowledges he is in the wrong and there is no room for argument for what the responded did in forfeiting but only on second thoughts a second opportunity could be given in response to the letters he has submitted pleading to make well.
The totality of all is that this appeal has not discharged the balance by the appellant as he has pleaded as set out above. The evidence does not support and accordingly the appeal is dismissed forthwith with costs.”
30. We accept the submission of the appellant. In our opinion, with respect, the learned primary judge had clearly misconstrued and misapplied the law to the facts of the case. The evidence is clear, glaring, and uncontroverted. The facts are undisputed. It is a mandatory requirement under s. 122(2)(a) of the Act that before any action for forfeiture is taken, the registered proprietor of the State Lease must be given notice and an opportunity to respond within the “period specified in the notice”.
31. In this case, no notice was served on the registered proprietor (appellant) within the time specified in the Notice. The Notice was, in fact, given “after” the expiration of the prescribed time specified in the Notice.
32. In our opinion, the requirement to give notice within the prescribed time under s. 122(2)(a) is not only the first but an important fundamental step. Non observance or compliance with this fundamental step constitute a breach of the mandatory requirement. The effect of non-compliance with the fundamental step is that all subsequent steps are a nullity, void, and invalid. Any exercise of power thereafter can only be deemed ultra vires: see Gumdale Ltd (supra).
33. In our respectful opinion, the learned primary judge, with respect, clearly erred in law and fact. We uphold the appeal on this aspect alone.
34. Given what we have expressed as to the effect and consequence of non-compliance with the requirement of s. 122(2)(a), in our opinion, it is not necessary to consider all other issues (including the principle of natural justice, which undoubtedly was also breached, and which, with respect, the learned primary judge failed to consider) raised in the appeal. In other words, the first issue is determinative of all other issues. We therefore uphold the appeal and grant the orders sought by the appellant.
35. Accordingly, we make the following orders:
1. The appeal is allowed.
__________________________________________________________________
Ashurst Lawyers: Lawyer for the Appellant
Solicitor General of PNG: Lawyer for the Respondents
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