Kittika v Kavana [2010] PGNC 56; N4051 (11 June 2010)

N4051

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 628 OF 2008

BETWEEN

ROBERT KITTIKA
First Plaintiff

AND

PASTOR PETER KAPIA for and on behalf of BANZ CHRISTIAN LIFE CENTRE CHURCH, BANZ ELEMENTARY SCHOOL
Second Plaintiff

AND

RAGA KAVANA, REGISTRAR OF TITLES
DEPARTMENT OF LANDS & PHYSICAL PLANNING
First Defendant

AND

BENJAMIN SAMSON, DEPUTY REGISTRAR OF TITLES (HIGHLANDS)
DEPARTMENT OF LANDS & PHYSICAL PLANNING
Second Defendant

AND

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

AND

CHURCH OF THE NAZARENE
HIGHLANDS DISTRICT INC., TAIME DIRIYE, PASTOR ROBIN MULOM & SIMON GISPE
Fourth Defendant

Mount Hagen: Makail, J
2010: 7th May & 11th June

PRACTICE & PROCEDURE - Setting aside of ex-parte order - Ex-parte order dismissing proceeding for failure to disclose a reasonable cause of action - Principles of - Grounds of - National Court Rules - Order 12, rule 8(3)(a).

PRACTICE & PROCEDURE - Pleadings - Fraud - Actual or constructive - Mandatory to plead particulars - Sufficiency of - National Court Rules - Order 8, rules 29 & 30.

Cases cited:

Peter Malt -v- Dean Queen and Christian Union Mission Inc (2009) N3577
Thomas Rangip & Fountain Finance Ltd -v- Peter Loko & National Capital District (2009) N3714
Green -v- Green [1976] PNGLR 73
Motor Vehicles Insurance (PNG) Trust Limited -v- Joseph Bure [1999] PNGLR 273
Mudge -v- Secretary for Lands [1985] PNGLR 387
Michael Maki -v- Michael Pundia & PNG Motors Ltd [1993] PNGLR 337
Rosemary John -v- James Nomenda & Ors: WS No 1818 of 2005 & OS No 446 of 2005 (Consolidated) (Unnumbered & Unreported Judgment of 18th January 2010)
Emas Estate Development Pty Ltd -v- John Mea & Ors [1993] [PNGLR 215
Steamships Trading Company Limited -v- Garamut Enterprises Limited & Ors (2000) N1959
The Papua Club Inc -v- Nusaum Holdings Limited (No. 2) (2004) N2603
Hi Lift Co Pty Ltd -v- Miri Setae & Ors [2000] PNGLR 80; (2000) N2004
Ramu Nickel Limited & Ors -v- Honourable Dr Puka Temu & Ors (2007) N3252
Elizabeth Kanari -v- Augustine Wiakar & Registrar of Titles (2009) N3589
Koitachi Farms Limited -v- Walter Schnaubelt (2007) SC870

Counsel:

Plaintiffs in person
Ms J Y Doa, for 1st, 2nd & 3rd Defendants
Mr K Peri, for 4th Defendant

RULING

11 June, 2010

1. MAKAIL, J: This is an application by the plaintiffs by their notice of motion filed on 24th April 2010 to set side an ex-parte order of 12th March 2010 which dismissed the within proceeding for failure to disclose a reasonable cause of action pursuant to Order 12, rule 40(1)(a) of the National Court Rules. The application is made pursuant to Order 12, rule 8(3) (a) of the National Court Rules.

2. I have heard submissions from all the parties and have read the supporting affidavits for and against the application. From the submissions and the affidavits, it is noted that there is no dispute that the plaintiffs and the fourth defendant have a dispute over a property described as allotment 1, section 3, Banz in the Western Highlands Province. It is registered as a State lease in Volume 3, Folio 147. Upon it are a dwelling house and church building which houses the Banz Christian Life Centre church congregation. It also has a school run by the same church group and the plaintiffs are the pastors and caretakers of these facilities.

3. It is further not disputed that the International Education Agency or International Education Agency of PNG Limited whom I shall refer to as the "IEA" for convenience sake, was the former registered proprietor of the property. On 24th January 2008, it transferred its title of the property to the fourth defendant and the title was registered in the name of the fourth defendant purportedly pursuant to an agreement of sale of land in consideration of K70,000.00. Aggrieved by the decision of the IEA to transfer the title to the fourth defendant, on 3rd June 2008, they commenced the within proceeding to challenge the transfer and registration of title to the fourth defendant.

4. It is also not disputed that on 12th March 2010, on the fourth defendant’s application for dismissal of the within proceeding, the National Court dismissed the within proceeding for failure to disclose a reasonable cause of action on the ground that, the plaintiffs failed to plead fraud against the defendants and a copy of the National Court transcript of 12th March 2010 is produced herein to confirm the decision of the Court. It is also not disputed that the plaintiffs were not present, and heard on the application before the Court dismissed the within proceeding.

5. The central issue therefore, is, should the ex-parte order be set aside? As noted, the application to set aside the ex-parte order is brought pursuant to Order 12, rule 8 of the National Court Rules which gives the National Court jurisdiction to set side its own orders. In Peter Malt -v- Dean Queen and Christian Union Mission Inc (2009) N3577, I heard an application to set aside an ex-parte order of 13th July 2007 which dismissed the proceeding for want of prosecution because the plaintiff failed to prosecute it. I dismissed the application, inter-alia, because I was not satisfied that the National Court had jurisdiction to set aside an ex-parte order dismissing the proceeding for want of prosecution. I had reached that conclusion because I was of the view that an order for dismissal of proceedings for want of prosecution was a final order, hence the dismissal brought to an end, the proceedings. In Thomas Rangip & Fountain Finance Ltd -v- Peter Loko & National Capital District (2009) N3714, Hartshorn, J took a different view where he held that the National Court has jurisdiction to set aside an ex-parte order dismissing a proceeding for want of prosecution.

6. The present case can be distinguished from those two cases on the basis that in the present case, the proceeding was not dismissed for want of prosecution but for failure to disclose a reasonable cause of action, on the ground that the pleadings did not disclose a case of fraud as required by Order 8, rules 29 & 30 of the National Court Rules. In other words, the Court heard substantive arguments from the fourth defendants on the application to dismiss the proceeding and upheld it in the absence of the plaintiffs. As it was made ex-parte, the National Court may set aside the order pursuant to its powers under Order 12, rule 8(3)(a) of the National Court Rules. In such an application, the onus is on the applicant to satisfy the Court:

1. why the order was allowed to be entered in the absence of the applicant;

2. if there is a delay in making the application to set aside, a reasonable explanation as to the delay; and

3. that there is an arguable case for the application on the merits of the substantive case.

7. These principles are applicable in applications for setting aside of default judgments established in Green -v- Green [1976] PNGLR 73 and many subsequent cases with modification: see Motor Vehicles Insurance (PNG) Trust Limited -v- Joseph Bure [1999] PNGLR 273.

8. Applying these principles to the present case, in so far as the first consideration is concern, I am satisfied with the plaintiffs’ explanation as to why the order was entered in their absence. I accept that they were not aware or given notice of hearing of 12th March 2010, and as a result, did not attend the hearing. This was because they were under the impression that Sino & Co Lawyers were retained by the fourth defendant and were waiting for them to inform them of the hearing date. Unbeknown to them, Warner Shand Lawyers were retained by the fourth defendant and moved the application without informing them of the hearing date. Further, as there were numerous adjournments of the application, the Court did not wish to delay the hearing and proceeded with the hearing of the application on 12th March 2010.

9. As to the second consideration, I am also satisfied with their explanation that, there was no delay in bringing the application. This is because as soon as the proceeding was dismissed on 12th March 2010 and upon becoming aware of the dismissal of the proceeding, on 24th April 2010, they filed the application. This was about a month and a half after the ex-parte order for dismissal of proceeding was made. I am therefore, satisfied that the application has been made promptly.

10. It is the third consideration that requires a careful consideration. As noted, the proceeding was not dismissed for want of prosecution. It was dismissed for failure to disclose a reasonable cause of action, on the ground that, the plaintiffs failed to plead fraud as required by Order 8, rules 29 & 30 of the National Court Rules. In order words, the Court heard substantive arguments from the fourth defendant in relation to whether or not the proceeding was maintainable against the defendants and following that, it was not satisfied that the proceeding disclosed a reasonable cause of action and dismissed it.

11. The question therefore is, is there a reasonable cause of action disclosed in the pleadings against the defendants? Have the plaintiffs demonstrated that there is an arguable case in the substantive claim for the Court to allow it to go to full trial? The plaintiffs alleged that there was fraud in the grant of title to the fourth defendant. An allegation of fraud is a serious matter. In the context of a dispute over real property on State land, as in this case, the law is that, the registered proprietor holds title absolutely free of all encumbrances except where there is fraud: see section 33 of the Land Registration Act, Ch 191 and Mudge -v- Secretary for Lands [1985] PNGLR 387.

12. It is for this reason that a party who alleges fraud in relation to a grant of title of a property must sufficiently plead the particulars of fraud against the registered proprietor: see Order 8, rule 29 & 30 of the National Court Rules. In Michael Maki -v- Michael Pundia & PNG Motors Ltd [1993] PNGLR 337, Woods, J emphasized that fraud must be specifically pleaded and particularized. He said:

"An allegation of fraud is a very serious allegation, and the courts have required strict adherence to requirements for pleadings in such cases. Courts have never allowed general allegations of fraud. Courts have required that a person pleading fraud should set out the facts, matters, and circumstances relied on to show that the party charged had or was actuated by a fraudulent intention. The acts alleged to be fraudulent must be stated fully and precisely with full particulars. It is not enough just to say that the person lied or swore a false affidavit. The facts, matters and circumstances which make such statements lies must be particularised. Also, this being a challenge to the procedures under the Land (Tenure Conversion) Act, the fault or fraud in those procedures should be particularised. In such a challenge to a certificate of title to land, the court has traditionally insisted on strict rules for the protection of persons who are in possession of land against attacks from persons who, hoping to find some blot on the title, bring actions against them without any reasonable cause. I am not saying that this action may be being brought without reasonable cause, but if these rules which protect persons in possession of land from being wrongfully and improperly attacked work hardship on the plaintiffs, that is part of the general purpose of protecting property and persons from being improperly vexed. Surely, the rule is no such hardship. If the plaintiffs know anything, then they can and should plead it."

13. Given the strict requirement to plead fraud, what then is fraud? The Australian Pocket Oxford Dictionary (5th ed, 2001) defines the word fraud as:

"(1) deception, use of false representation to gain an unjust advantage, (2) dishonest artifice or trick, (3) person who or thing which is other than he, she as it claims to be."

14. In John James Stroud’s Judicial Dictionary of Words and Phrases - Volume 2, the word fraud is defined as:

"(1) A ‘Fraud’, in my opinion, is a term that should be reserved for something dishonest and morally wrong, and much mischief, is a thing, done, as well much pain inflicted, by its use where ‘illegality’ and ‘illegal’ are the really appropriate expressions." (per Will, J Ex p. Watson[1888] UKLawRpKQB 134; , 21 QBD, 301).

15. It is clear from these definitions that fraud means being dishonest, and taking something by dishonest means thereby inflicting pain or injury on the victim. In relation to proving fraud to overturn a title of a registered proprietor under section 33 of the Land Registration Act, Ch 191, there are two views held by the Court. There is one view, that a party who alleges fraud must prove actual fraud. There is the other view, that there need not be actual fraud. A proof of irregularities in the process of registration of title is sufficient. This is the constructive fraud.

16. In Rosemary John -v- James Nomenda & Ors: WS No 1818 of 2005 & OS No 446 of 2005 (Consolidated) (Unnumbered & Unreported Judgment of 18th January 2010), I observed these two views after I considered past cases of Mudge (supra); Emas Estate Development Pty Ltd -v- John Mea & Ors [1993] [PNGLR 215; Steamships Trading Company Limited -v- Garamut Enterprises Limited & Ors (2000) N1959; The Papua Club Inc -v- Nusaum Holdings Limited (No. 2) (2004) N2603; Hi Lift Co Pty Ltd -v- Miri Setae & Ors [2000] PNGLR 80; (2000) N2004; Ramu Nickel Limited & Ors -v- Honourable Dr Puka Temu & Ors (2007) N3252; Elizabeth Kanari -v- Augustine Wiakar & Registrar of Titles (2009) N3589; Koitachi Farms Limited -v- Walter Schnaubelt (2007) SC870.

17. The point in making reference to these two views is that, before a party may lead evidence to prove fraud against another, it must plead all the material facts and particulars of actual or constructive fraud. For example, where a party alleges constructive fraud, it must plead the statutory breaches or irregularities in the process of registration of title. Once that is done, a case of fraud is established by way of pleadings and it is entitled to lead evidence to prove the allegations of breaches or irregularities in the process of registration of title.

18. In the present case, I have once again perused the pleadings of the plaintiffs in the statement of claim and must say that it is a very long narration of events running into 6 pages in total. Most are evidence rather than the material facts establishing a case of fraud either actual or constructive against the defendants, more so the fourth defendant as the current registered proprietor. In so far as constructive fraud is concerned, I see nothing in the pleadings to suggest that the defendants breached certain statutory requirements or there were procedural irregularities in the process of registration of title. Even the plaintiffs’ allegations at paragraphs 29, 33, 34, 35, 40 and 41 of the statement of claim, and their contention that the defendants breached a caveat placed on the property on 15th March 2005, which suggests procedural impropriety on the part of the defendants cannot stand.

19. This is because first, by operation of law, a caveat lapses after 3 months from the date it is accepted by the Registrar of Titles. This is clear from section 85 and section 91(1) of the Land Registration Act, Ch 191. Section 91 states:

"91. LAPSE OF CAVEAT

(1) Subject to Subsection (2), a caveat lapses after the expiration of three months from the time it came into force.

(2) Where -

(a) a caveat is lodged with a written consent of -

(i) an equitable mortgagee; or

(ii) the registered proprietor of the land affected by the caveat; or

(b) the caveator has, within the period specified in Subsection

(1), taken proceedings in the Court to establish his title to the estate or interest specified in the caveat and has given written notice of those proceedings to the Registrar,

the caveat does not lapse in accordance with Subsection (1)."

20. However, by operation of Subsection (2), it may remain in force beyond 3 months if first, an equitable mortgagee gives written consent or, secondly, the registered proprietor of the property concern gives written consent, or thirdly, a Court proceeding is commenced within 3 months of its coming into force. In my view, as the registered proprietor at that time, there was nothing preventing the IEA from selling the property to the fourth defendant and the caveat which the plaintiffs allege was in force and prevented the IEA from disposing or selling the property to a third party had no effect as it had lapsed. This is because, it ran for 3 months from 15th March 2005 and until on or around 15th June 2005. The sale and subsequent registration of title of the fourth defendant took place in January 2008; some 3 years after the caveat had lapsed.

21. Further, the present case, does not fall into any one of the situations described by Subsection (2) (a)(i)&(ii) and (b) above, and more so, the third situation because the plaintiffs did not commence any Court proceeding in relation to the property after the caveat came into force on 15th March 2005 to stop it from lapsing after the 3 months. Therefore, in my view, there was nothing illegal with the sale of the property to the fourth defendant, let alone a suggestion of constructive fraud in the grant of title.

22. In so far as actual fraud is concern, first, I ask; where in the pleadings do the plaintiffs allege that the fourth defendant conspired or colluded with the IEA, the first, second and third defendants to transfer and register the title in its name? Secondly, where in the pleadings do the plaintiffs allege that the fourth defendant induced the IEA to transfer the title to it? These questions must be asked to assist the Court to determine whether or not the pleadings as they stand establish a cause of action of actual fraud against the defendants. Ideally, it would have been better and clearer if the plaintiffs had set out material facts addressing these questions in the statement of claim but they have not because as one may appreciate, they are lay persons or non lawyers. They are elders of a church group and cannot be expected to comply with the procedural requirements in relation to pleadings.

23. As far as I am concern, they have raised many factual matters and have repeated many of them in the statement of claim. That is why the statement of claim is very lengthy. Most of them may not be relevant but at the same time, some of them to some extent have vaguely answered some of the questions raised above. For example, first, in relation to whether or not the plaintiffs pleaded if the fourth defendant conspired or colluded with the IEA, the first, second and third defendants to transfer and register the title of the property in its name, there are vague statements at paragraphs 21-28 of the statement of claim suggesting conspiracy or collusion amongst these parties. But in relation to the second question of whether or not the plaintiffs pleaded if the fourth defendant induced the IEA to sell the property to it, there are no allegations of that nature in the statement of claim.

24. Given the state of the pleadings, the question is, are they sufficient? In my view, the pleadings are inadequate as far as material facts giving rise to actual fraud are concerned. From what I am able to work out from what has been pleaded and summarizing them, the plaintiffs seemed to allege that there was actual fraud in the grant of title because:

1. Since they had been occupying the property since the early 90’s and had put up improvements, they had expressed interest in purchasing the property from the IEA.

2. This was after the IEA took them to Court for illegal occupation and asked them to vacate the property in proceeding OS No 615 of 2000, but on 22nd February 2002, Amet, CJ directed both parties to settle the dispute out of court.

3. They entered into negotiations with the IEA to purchase the property at a reasonable price. They asked that the costs of putting up improvements on the property be deducted from the purchase price and they pay K60,000.00.

4. While they were negotiating with the IEA, the fourth defendant, who were their neighbours at Banz, without their knowledge entered into negotiations with the IEA to purchase the same property as some of the IEA officials were members of the fourth defendant and used their position and influence to obtain the property.

5. Upon discovery of the fourth defendant’s interest in the property, they placed a caveat on the property on 15th March 2005 but despite that, the IEA went ahead and sold the property to the fourth defendant and subsequently had the title transferred and registered in the fourth defendant’s name.

25. But they have vaguely pleaded that the fourth defendant had knowledge or was aware of their interest in the property at paragraphs 34-40 of the statement of claim. They claimed that the presence of knowledge is suggestive of an intention to deprive them of the property.

26. Dishonesty involves the state of mind of a person as no man can read the mind of another except God. The law then requires the Court to look at the entire circumstances of a case and ascertain the state of mind of the person. In the case of fraudulent transfer of title of property, the Court must draw an inference based on the entire facts of the case if a party intended to deprive the other of the property.

27. Relating that to this case, it is said that, in the world of real estate, the market is very competitive when it comes to buying and selling of property as the demand for real property is very high. One cannot look far to see and feel the impact of the rising costs of housing in this country. One just needs to step out of the door of the Court room and walk next door and ask for the selling price or rent of a house and will appreciate what I am taking about. The cost of housing is very high in this country and so when it comes to selling, the vendor will, on all probabilities, accept the highest price on offer for the property. That means, whoever has the money, and I mean, "big" money and puts it on the table will get the property. It seems to me that this is what had happened in this case.

28. I say this because there were two parties interested in purchasing the property, one the plaintiffs and the other, the fourth defendant. The IEA as the vendor sold the property to the fourth defendant for a higher price. The plaintiffs allege that, because they were in negotiations with the IEA to purchase the property for a lesser price, the IEA was wrong and cheated on them when it sold the property to the fourth defendant. At the same time, the fourth defendant had no right to buy the property from the IEA. Given this scenario, can there be fraud?

29. As I observed above, where a real property is up for sale, any party is entitled to bid for it. In this case, both parties were entitled to bid for it and where there is no contract of sale entered between the plaintiffs and the IEA to tie down the IEA and force it to sell the property to them, there was nothing stopping the fourth defendant from bidding for it, even if there were officials within the IEA who were church members of the fourth defendant who may have expressed interest in buying the property as was suggested by the plaintiffs in their evidence. It is an open market and anyone was perfectly entitled to bid for it and it was up to the IEA to make a decision.

30. It is very easy for one to cry foul and say that there was fraud when a third party is also interested in the same property and the vendor sells it to a third party instead of the other party. It is also easy for one to say that he or she was not aware of the "secret deal" and yet, have no contract of sale to bind the vendor to the promise to sell the property to him or her to protect his or her interest in the first place. It is also easy for one to make these sorts of allegations when he or she is in no better position financially, to fulfill the promise to purchase the property.

31. These concerns or rather allegations of "foul play" become so real and very convincing when two church groups or denominations are involved in the dispute, like in this case. One group accuses the other of hypocrisy, dishonesty and stealing. The other, does the same or gets offensive. It leads to animosity, hatred, bitterness and rivalry leading to disunity and division in the family of God. But, I reiterate, in this case, all these concerns will be in vain if there is no contract of sale between the parties which would tie down the IEA to sell the property to the plaintiffs. As far as the pleadings are concerned, there is no mention of a contract of sale between the IEA and the plaintiffs for the sale of the property, except mere "negotiations".

32. Further, I am not satisfied with the first plaintiff’s assertion that the plaintiffs executed a contract of sale with the IEA for the sale of the property because there is no evidence of a duly executed contract of sale placed before me. Furthermore, I am not satisfied that by the Court order of Amet, CJ of 22nd February 2002, the Court ordered the IEA to negotiate and sell the property to the plaintiffs to the exclusion of others. That is not my reading and understanding of the order. It merely directed parties to negotiate and return to Court after a month. It is therefore, wrong to suggest that the Court had directed IEA to negotiate and sell the property to the plaintiffs to the exclusion of other interested parties as was suggested by the plaintiffs in their submissions.

33. In addition, the plaintiffs have not explained to my satisfaction why it has taken so long to purchase the property from the IEA when the opportunity was presented in 2002 following the Court’s directions. Is it because they did not have the required funds to meet the purchase price put by the IEA, or were there other reasons? The fourth defendants suggested that it was the inability of the plaintiffs to secure funds to meet the purchase price that caused the delay and I would like to think that, that was the case. Be that as it may, the IEA also had another offer from the fourth defendant and so, there was nothing stopping the IEA from accepting the offer and selling the property to the fourth defendants and in an open real estate market, anyone who walks in with "big" money will walk away with the property. The pleadings in the present state depict this case scenario and in my respectful opinion, there cannot be any fraud against the defendants if that is the basis of the cause against the defendants.

34. To conclude, I am satisfied with the explanation give by the plaintiffs for their failure to appear at the hearing date, and I am also satisfied with their explanation that they filed the application promptly, but I am not satisfied that they have sufficiently pleaded a case of fraud against the defendants. I find they have not established an arguable case and for this reason alone, I am not persuaded that I should set aside the ex-parte order and re-instate the proceeding. I dismiss the application with costs.

Ruling accordingly.

____________________________________
Plaintiffs in person
Acting Solicitor-General: Lawyers for 1st, 2nd & 3rd Defendants
Warner Shand Lawyers: Lawyers for 4th Defendant