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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
WS NO. 94 OF 2009 & WS 421 OF 2009
BETWEEN
SEK NO.15 LIMITED
First Plaintiff
AND
GREG APU
First Defendant
GIDEON TIMANO
Second Defendant
Lae: Sawong, J.
2013: 02nd July, 04th October,
2014: 5th June
LAND LAW – Registered Land – Mortgagee had in possession original title – Mortgage not discharged – Third Party Committed Fraud by fraudulently executing IPA documents to be named as Director of a Company– Third Party subsequently transferred property to himself and subsequently transferred it to another party – obtaining replacement title by third party
Held:
The third party had acquired no legitimate title to the property as the third party had committed fraud in obtaining the title.
Case Cited:
Emma's Estates development Pty Ltd v Mea [1993] PNGLR 215
Koitachi Ltd v Walter Schnaubelt (2007) SC 870
Papuan Club Inc v Nusaum Holdings (2) (2004) N2603
Steamships Trading Company Ltd v Garamut Enterprises Ltd (2002) N1959
Counsel:
K. Gamoga, for the Plaintiff
Greg Apu, in person as the First Defendant
No appearance, for the Second Defendant
S. Maliaki, for third & Fourth Defendants
5th June, 2014
1. SAWONG, J.: Introduction: This was a trial on both liability and damages brought by the plaintiff against all the defendants. The dispute is over a piece of land described as State Lease Volume 28, Folio 244, Section 76, Allotment 6 Kamarere Street, Lae, Morobe Province (hereafter referred to as the property).
Background
2. The plaintiff filed two actions against the defendants. These were:
In this action the plaintiff filed a Writ of Summons against the defendants as registered proprietor of the property. The plaintiff claimed that the said property was fraudulently transferred to Greg Apu and Gideon Timano. After the plaintiff learned of this fraud, the plaintiff made representation to the Registrar of Titles, who revoked the said fraudulent transaction. The plaintiff then filed this action seeking eviction orders against the defendants and a direction recommending that the defendants be referred to police for investigation. The plaintiff also claimed damages.
The first defendant Greg Apu (hereafter referred to as Apu) filed a defence claiming that he was a Director of the plaintiff and had the authority to sell the property to the second defendant Gideon Timano (hereafter referred to as Timano). The second defendant says he purchased the property from the first defendant in good faith.
By an interim Order of the Court dated 23rd of April 2009, the Court ordered Timano to vacate the said property and for the plaintiff to find a tenant and all rentals for the property to be paid into the Court. The Court further ordered that Aurthur Strachan be managing agents and continue to manage and collect rentals and pay them into the National Court Trust Account.
In this proceeding the plaintiff named the State and the Registrar of Titles Greg Apu and Gideon Timano as the defendants. Here the plaintiff claims that all defendants had conspired and committed fraud against the plaintiff's title to the property. The plaintiff claims that Apu and Timano conspired to defraud the plaintiff of the said property by transferring the property to the name of Apu and then subsequently from him to Timano. The plaintiff seeks damages and declarations that it is the duly registered proprietor of the property. The second defendant filed a defence denying the claim saying he has purchased the property in good faith. Default judgment was entered against the first defendant and the State on the 19th of November 2009.
3. On the 18th of April 2011, the Court ordered that the proceedings be consolidated and heard together.
4. At the hearing Apu appeared in person whilst Timano failed to attend at all. After the trial the Court directed parties to file written submissions. Counsel for the plaintiff, the Registrar of Titles and the State have filed written submissions. Apu and Timano have not filed their submissions. I will deal with their submissions in the course of the judgment.
Evidence
5. The trial in this matter proceeded by way of both affidavit and oral evidence. The plaintiff relied on the following affidavits:
6. Both these deponents also gave oral evidence and their affidavits were tendered through each of them. They were both cross-examined by counsel for the third and fourth defendants and by Greg Apu.
7. Greg Apu gave sworn oral evidence and was cross-examined.
8. Gideon Timano did not give any evidence.
9. The third and fourth defendants also did not call any evidence.
Plaintiff's Evidence
10. The first witness for the plaintiff was Robert William Bolling. Mr Bolling relied on his affidavits. The gist of his evidence is that the plaintiff company was incorporated on 3rd March 1986 and issued with the Company Number 1-11128. The registered office is located at Allotment 5 Section 84, Korobosea Drive, Port Moresby, National Capital District. The shareholders are Robert William Bolling and Catherine Bolling. The Directors are Robert William Bolling, Lydia Kisokau and Roger Gill Maguire.
11. He states that the plaintiff bought the property in 1986 with two other properties. After buying the property the company required funds to do maintenance and so obtained a loan from the ANZ bank. That loan was secured with a registered mortgage in favour of the ANZ bank. No official of the bank gave any evidence but there is a letter from the said bank dated 12 of December 2008 to Mr Bolling advising of an undischarged mortgage of the property still being held by the bank. Mr Bolling stated that the mortgage is yet to be discharged. He said that the original of the Title Deed to the property was still with the bank when the transfer from the company to Apu and subsequently from Apu to Timano occurred.
12. He then deposes that the property was leased to Sullivance Limited then to several other tenants. The last tenant was the Morobe Provincial Government whose officer, a Robin Calistus, who occupied and rented the property from the plaintiff at a rental of K3,000.00. However because Mr Calistus wanted to do some maintenance himself and this was accepted by the plaintiff, the rental was reduced to K2,000.00. In December 2008, Calistus was evicted from the property upon the first and second defendants obtaining an eviction order against Mr Calistus from the Lae District Court. A copy of the order was sent to Mr Bolling.
13. Upon receiving a copy of the Court order Mr Bolling, made enquiries with the Investment Promotion Authority office (IPA) in Port Moresby and the Lands Department to try and ascertain how Apu and Timano were able to acquire the title to the property. He deposed that both he and Company Secretary Tuaine Matagu attended this office on many occasions to ascertain answers. He deposes that on 5th of March 2008 he wrote a letter to IPA advising that there had been fraudulent activity conducted on the company's records. He investigated and found out that Apu had fraudulently lodged Form 15 and 16 with IPA to change the directorship of the plaintiff company. Subsequently on the 29th of April 2008 the Registrar of Companies wrote to Mr Bolling and gave him consent to have Apu prosecuted under the provision of the Companies Act for falsifying company records. Mr Bolling and the plaintiff relies on this piece of evidence of tampering and falsifying of company records by Apu.
14. Mr Bolling also gave evidence that his investigation with the Registrar of Tittles resulted in a letter being sent from the Registrar of Titles dated 16th of December 2008 to Timano in Lae. The Registrar of Titles in that letter advised that title was restored to Sek No. 15 Limited and asked Timano to voluntarily produce the official copy to the office of the Registrar of Titles for cancellation. A copy of the letter was sent to the plaintiff company.
15. He stated in evidence that a spare parts company was now occupying the property and that the lease arrangement had been arranged by Arthur Strachan since August 2008. He further stated that the rentals received have now been deposited in the trust account of the National Court.
16. Mr Bolling deposed that the transfer dated 5th of May 2008 lodged with the Registrar of Titles has the person signed as director for the plaintiff company by the name of Willie Ambence. He denies ever knowing such a person. He further deposed that Apu had paid a K100.00 in 2008 as registration fee.
17. It appears that another transfer instrument was lodged simultaneously by Apu in favour of Timano dated 5th of May 2008. There is a Department of Lands receipt which shows that Timano had paid K100.00 on the 6th of June 2008 as registration fee.
18. Mr Bolling gave evidence that Greg Apu had applied as a Director of the plaintiff company and lodged an application for replacement of title on the property on the 29th of March 2006. He says that he had never met Greg Apu before and that was his first time to have seen him.
19. Mr Bolling further deposed that after taking possession of the property from the second defendant, the plaintiff engaged the services of Kuima Security Services to provide security and also compile a report of the state of the property. Provisions for security over the period of five months came to K10, 000. 00. He also obtained quotations on how much maintenance and renovation of the property would cost to ascertain the damage that had been caused. Such a quotation was given by Noka Builders Limited who provided a quote for K 36,443. 00 but it did not include furnitures and fittings. However, he gave evidence that the actual maintenance done at the time was K7,000.00 on electrical maintenance and another K7,000. 00 on other maintenance. None of the illegal structures constructed by Timano have ever been removed. He also stated that it has cost the company approximately K300,000.00 – K400,000.00 in legal and associated fees. He also stated that he paid or the company paid AC Fox Limited K1,000.00 for searches that have been conducted.
20. He estimated that loss of rental of K18,000.00 for the six months at the rent of K3,000.00 per month and for a year of K24,000.00. He says that the company had forgone a profit of K72,000.00.
21. The next witness was Tuaine Matagu who swore two affidavits. She also gave oral evidence. She confirmed the evidence contained in her two affidavits. In summary her evidence is that, she is the Company Secretary of the plaintiff company. One of her duties is to prepare annual reports and returns of the company. She gave evidence that Apu is not a Director nor Shareholder and has never been anyone. She also confirms that she did not lodge Form 15 or Form 16 for change of Directors for Greg Apu to be a Director. She stated in her evidence that her signature that appeared on Forms 15 and 16 were forged. She also stated that there had never been any shareholders meeting which resulted upon appointing Apu as a Director nor Shareholder. She also confirmed and supported Mr Bolling's evidence that Sek No. 15 Limited is the registered proprietor of the said property. She also confirmed that the property is the subject of a registered mortgage with the ANZ bank. She stated in her evidence that Apu and Timano had conspired and fraudulently transferred the property through fraudulent contracts and transfers.
22. These witnesses were not cross-examined by the defendants as the defendants had not filed any notice to cross-examine.
Defence Evidence
23. The only witness was Greg Apu. He gave sworn oral evidence and he was cross-examined. His evidence was that some years ago he had purchased shares in a company called Universal Trading and Mr Bolling had issued share certificates to others who had shares in the company. Mr Bolling did not issue any share certificates to him. He said that he had been living on that property since 1999 and he did not receive any shares or dividends or refund of his monies for the shares with Universal Trading. He therefore went to the Lands Department and asked the officers to forfeit the property to him and assisted him with replacement title and transfer documentations. In cross-examination, he recalled that a Tera Baloiloi from the Lands Department assisted him but could not recall other individuals who assisted him. In cross-examination he was asked the following questions:
Q. You were a front man for a group of people who wanted to defraud and steal this property from Sek No.15 Limited.
Ans. I acted on the advise of the people and not intentionally to take over this property.
24. Apu was shown Forms 15 and 16, the transfer instrument from Sek No.15 Limited to Greg Apu dated 5th May 2008 and transfer instrument from Greg Apu to Gideon Timano dated 5th of May 2008. He recognized the four documents but he denied knowing a William Bans whose name appears in Form 15. He also stated that he did not know Tuaine Matagu's signature.
25. In cross-examination by Ms Maliaki for the State, Apu said:
Q. Your intention was to have your name as Director in Sek No.15 Limited and was by you alone.
Ans. People advised me so I had to do it.
Q. So you signed the documents.
Ans. Yes
Q. You know you a commiting fraud?
Ans. No, your Honour
Q. You had no right over the property to your name.
Ans. Because my money was there so I went ahead and did it.
26. Each claim arises out of alleged fraud by the first defendant and the second defendant in that they conspired to defraud and effect by false pretence a title transfer of registration on the property from the plaintiff to Apu and subsequently from Apu to Timano.
27. The plaintiff now claims damages, loss of rental, associated losses by engaging security personnel to secure and guard the property, general damages and special damages for maintenance and renovations to the property. The plaintiff claims that as a result of the fraud committed by Apu and Timano it has suffered substantial losses and destruction to the property caused by Apu and Timano and the state.
28. In their Agreed Statement of Facts and Disputed Facts the parties agreed that the State is vicariously liable for the actions of his employees namely the Registrar of Titles. They further agreed that the second defendant, Timano, filed eviction proceedings in the District Court and evicted Robin Calistus pursuant to a District Court Order and Warrant.
29. The parties in the pleadings have agreed that the following legal issues be determined by the court:
30. The issue of fraud relating to or involving title deeds over land is set out in Section 33 of the Land Registration Act 1981. It reads:
"(1) The registered proprietor of an estate or interest holds it absolutely free from all encumbrances accept
(a) In the case of fraud;".
31. In Koitachi Limited v Walter Schnaubelt (2007) SC 879, the Supreme Court said:
"There is not a definition of "fraud" in the Land Registration Act. Counsel for Mr Schnaubelt cites the Supreme Court case of Emma's Estates Development Pty Ltd v Mea [1993] PNGLR 215 in which Amet CJ (as he then was) said, "irregularaties that amount to fraud was (sic) sufficient to overturn a registered Title", and Steamships Trading Company Ltd v Garamut Enterprises Limited (2002) N1959 in which Sheehan J. said, "Section 33 only speaks of fraud and does not limit its meaning nor does it require that fraud being shown in a particular way".
The Emma Estates case in (supra) concerned an owner whose State Lease was forfeited and then allocated and registered in the name of a third party company. In a majority decision, Amet CJ, one of the majority was inter alia, of the view that the doctrine of indefeasibility should not be applied to that case. The Steamships case (supra) concerned a challenge to the issue of State Lease on the grounds that the procedure and the Lands Act were not complied with. Both cases are distinguished from this case on their facts.
The definition of "fraud" in Section.33 (1)(a) of the Lands Registration Act and the doctrine of indefeasibility of title and it's applicability in this jurisdiction were comprehensively considered by Gavara Nanu J in the Papua Club Inc. v Nusuam Holdings Limited (2)(2004) N2603. We take the liberty of reproducing a large part of his Honour's judgement as it is particularly apposite to the present case:
"The word fraud" in section.33(1)(a) of the Land Registration Act, is not defined anywhere in the Act, but section.45(1) makes it clear that fraud means more than constructive or equitable fraud. In this regard, it is noted that Section.146(d) and (e) also provide for the ejectment of a registered proprietor from land if the title is obtained through fraud. Section 146(4) makes it even more clear although not specially expressed that fraud in that section does not refer to fraud by the person from whom the registered proprietor acquired the title, rather, it is fraud by the registered proprietor himself when acquiring title.
Thus it is implicitly from these provisions that "fraud" in Section 33 (1)(a) means fraud committed by the registered proprietor or actual fraud. That is the only ground upon which a registered proprietor's title can be rendered invalid.
In Assets Company Limited v Mere Roihi and Others [1905] UKLawRpAC 11; [1905] AC 176, the case discuses what may constitute or amount to fraud under the Torrens System. The relevance and applicability of the Torrens System to this jurisdiction was quiet clearly expressed by Kidu CJ: In Mudge v Secretary for Lands [1985] PNGLR 387, at 390:
"That the third respondent has a State Lease registered under the Land Registration Act (Chapter No. 191) and although the appellants have raised eight questions of law (including Constitutional laws) the real question for determination by this Court is whether, apart from exceptions enumerated in the Land Registration Act, s.33, land once registered attracts the principle of indefeasibility of title. This Act and its forerunners – the Real Property Ordinance (Papua) and the Land Registration Ordinance (New Guinea) are based on Australian Acts. They all reflect what is commonly known as the Torrens System of land registration. Under legislation based on this system (in Australia and New Zealand) it is settled law that, a part of exceptions mentioned in the relevant legislations, once land is registered under the Torrens System the owner acquires indefeasibility of title".
32. In the Administration of the Territory of Papua New Guinea v Balius Tirupia and Others, In Revunapaiadig and Japalik Land [1972] PNGLR 229, the Supreme Court held that in the absence of fraud, the registered proprietor's title cannot be affected by actual or constructive notice of any claim, right, title or interest in the land acquired prior to it's registration. There, the Supreme Court was in effect echoing section 45(1) of the Land Registration Act. Again, this case illustrates the principle that fraud must be by the registered proprietor or actual fraud, and not by someone from whom the title was acquired. The principle also echoes s.146(4) of the Land Registration Act.
33. In Gwanzik Wiring v John Muingnepe and the State [2012] PGNC247; N4889; 26th July 2012, the plaintiff and the first defendant entered into a written contract for sale of a parcel of the plaintiff's land to the first defendant on terms of payment of a deposit and monthly installments. A deposit was paid but the monthly installment was not paid and the contract never completed. Some years later the first defendant arranged with the second defendant for the plaintiff's title to the land to be cancelled and the title issued to the first defendant on the basis that the plaintiff's title was lost. The plaintiff's title was always with him and not lost. His Honor Gabi J, held that:
34. There is really no issue between the parties, in particular the plaintiff and the third and fourth defendants on the applicable legal principles. Both counsels in their submissions rely on the same authorities which I have set out above.
35. The only difference is whether on the evidence fraud can be attributed to all the defendants. This now leads me to the discussions on the evidence and the submissions.
36. Before I do so, in my opinion much of the facts are really not in dispute and accordingly bearing in mind the submissions that have been made on the evidence, I make following findings of facts which are not in dispute.
37. The plaintiff is and was at all material times the registered proprietor of the property. The ANZ bank at all material times held an undischarged mortgage over the title to the property. The ANZ bank also held the original Title in its possession.
38. On 28th February 2008, Apu lodged a Form 15; Certificate of Director, and a Form 16; a Notice of Change Of Directors and Particulars of Directors with Investment Promotion Authority under the Companies Act 1997 prompting a change in the name of Directors for Sek No.15 Limited.
39. Apu then proceeded to transfer, using his directorship obtained by fraud, the title to the property to his name. Subsequently he then transferred the property to the second defendant Timano.
40. In March 2008, Apu filed proceedings in the District Court in Complaint No. C152 of 2008. The proceeding was between himself trading as Sek No.15 Limited against Robin Calistus which was subsequently dismissed. The first defendant then held himself out to be a Director/Shareholder of Sek No.15 Limited.
41. Subsequently after the transfer from Apu to Timano, Timano then took out proceedings in the District Court in Complaint No. DC 835 of 2008 against Robin Calistus. Timano successfully obtained ex-parte eviction orders on the 4th of December 2008 giving Calistus two weeks to vacate the property.
42. On 1st January 2009 Timano forcefully evicted Robin Calistus and took possession and occupancy of the property. At that time the plaintiff was receiving K3,000.00 month rental from the Morobe Provincial Government.
43. The plaintiff having being aware of the fraud in December 2008 reported the matter to the Registrar of Titles. The Registrar of Titles having conducted it's own investigations, forwarded a letter to Timano cancelling the registration of the duplicate copy of the title and cancelling the transfer to Timano as being void abnitio.
44. At all material times Apu was not a Director nor Shareholder of Sek No.15 Limited.
45. In my view all the issues that I have listed maybe dealt with together as these are interrelated.
46. Mr Gamoga submits that the evidence of forgery, false pretence and conspiracy was not admitted by Apu but he admitted his signature on various documents and acknowledges that other people had helped him to create and prepare the documents. He urges the Court to make a finding of facts on the balance of probabilities that Apu was instrumental in fraudulently falsifying IPA documents to appoint himself as a Director of Sek No.15 Limited. He further submits and urges the court to make a finding of facts that having appointed himself fraudulently as a Director of Sek No. 15 Limited, Apu then fraudulently procured a transfer of the property from Sek No.15 Limited to himself and simultaneously to Timano on the 5th of May 2008. He submits that fraud is further aggravated as the evidence shows that in both transactions there was consideration. Mr Gamoga further submits that the letter from the Registrar of Titles to Timano dated 16th of December 2008 has never been challenged by both Apu and Timano in any Court since it was sent out. He submitted that it is clear and credible evidence that the Registrar has recognized the fraud in the dealings of Apu and Timano and have cancelled those dealings being transferred from Sek No.15 Limited to Apu and Timano. He invited the Court to make a finding of fact that the fraudulent transactions from Sek No.15 Limited to Apu and simultaneously to Timano had been cancelled from the records of Registrar of Titles.
47. Mr Gamoga further submits that the evidence from Apu and Bob Bolling state that a replacement title was issued and that there was no need for replacement title. He submits that the evidence relating to replacement of title also supports the plaintiff's allegations that the defendant Greg Apu and Timano had committed fraud. He submitted that this was particularly so in the light of the evidence that the title had always been with ANZ bank and had not been lost or destroyed. He submitted that the efforts by Apu and Timano to manoeuvre themselves simply goes to show yet another incident of fraud.
48. Mr Gamoga submits that the overall evidence by the plaintiff showed fraud being committed by Apu and Timano. He submitted that there was evidence that State employees may have assisted in this fraud and that at least one officer Tera Baloiloi an officer, from the Lands Department, may have helped Greg Apu.
49. He has submitted that the actions by the Registrar in revoking the entries and restoring the property to the plaintiff includes the matter and the Court should grant the plaintiff the declaration sought. He further invited the Court to adopt the principles set out in Koitachi Ltd v Walter Schnaubelt (supra) and find that Apu had committed fraud and that whatever title he held was not indefeasible and therefore did not have the protection under section 33 of the Land Registration Act nor the doctrine of indefeasibility of title.
50. There has been no submissions from Greg Apu or Gideon Timano.
51. Counsel for the third and fourth defendants submits that the overall evidence is that the fraud was committed by Greg Apu and Gideon Timano. It was submitted that there was no or little evidence and on the balance of probabilities it would be unsafe to make any finding on the evidence that the employees of the State had assisted in or conspired with Greg Apu and Gideon Timano to commit the fraud. The essence of the submissions from the defendant is that there was insufficient evidence on which to find any liability or award any damages against the State and its employees.
52. There is overwhelming evidence from Mr Bolling and Matagu and to some extent from Apu that, Apu was the initiator of this fraud. He firstly falsified forms 15 and 16 under the Companies Act and lodged them with the Registrar of Companies to effect changes in the particulars of the Directorship of the plaintiff company. Having done so and after having himself registered as a Director of the plaintiff company he then facilitated the transfer of the Title Deed of the property from the company to himself. Thereafter or simultaneously, the transferred title which was registered in his name was transferred to Timano. Timano then compounded the fraud by instituting proceedings in the District Court and obtaining an Order from the District Court to evict the tenant of the plaintiff one Robin Calistus. I find that there is overwhelming evidence that Apu and Timano conducted a well orchestrated fraud to obtain title over this property.
53. There is no doubt that the title was never lost. It was at all material times held by ANZ bank as security over monies it had advanced to the plaintiff. There is also overwhelming evidence that the plaintiff was at all material times the legitimate registered title holder over the property.
54. It follows that the purported transfer No.12715 from Sek No.15 Limited to Greg Apu was false and fraudulent. Furthermore there is overwhelming evidence that the transfer No.N1449 from Greg Apu to Gideon Timano was also fraudulent and false. It follows that the replacement title entry No.12715 dated 10th October 2006 was also a fraudulent.
55. In my view, there is overwhelming evidence that Greg Apu and Gideon Timano committed fraud over the property of the plaintiff.
56. For those reasons I would find that Greg Apu and Gideon Timano committed fraud against the plaintiff's property and I would enter judgment for the plaintiff against Apu and Timano.
57. As for the Registrar of Titles and the State, there is already a default judgment against them in place.
58. The next issue is whether, the plaintiff has proved its claim for damages against them. This now leads me to address the issue on assessing damages
Damages
59. As to damages, the starting point is to see what the plaintiff has claimed in its Statement of Claim.
60. Here the plaintiff has claimed "damages" for the loss of rentals, general special and damages. See paragraph 19(f) of the Statement of Claim. Thus the plaintiff's claim falls under the following headings:
a) General damages
b) Special damages
c) Loss rental
61. As to damages, the plaintiff has proved that it has suffered loss and damages. The extent, degree and the amount it is entitled to would have to be properly assessed on the evidence.
62. A plaintiff, is also under a duty to mitigate its losses.
63. Mr Gamoga in his submissions has urged the Court to award certain sums, consisting of general damages, special damages and punitive damages against all the defendants. He urges the Court to apportion the award of damages accordingly to the degree of each defendants participation in the commission of the fraud.
| K42,000.00 K 7,000.00 K10,000.00 K 1,000.00 K60,000.00 |
A total of | K20,000.00 K20,000.00 K40,000.00 |
Grand Total | K 60,000.00 K 20,000.00 K 40,000.00 K120,000.00 |
| Special Damages Loss of Management time etc. Punitive Damages Interest Grand Total of | K 60, 000.00 K 20,000.00 K 40, 000.00 K 43,534.92 K 163,534.92 |
____________________________---_____________________________________
Gamoga & Co. Lawyers: Lawyers for the Plaintiff
Lawyers for the 1st Defendant : In Person
Lawyers for the 2nd Defendant : No Appearance
Solicitor General: Lawyers for the State
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