Albright Ltd v Mekeo Hinterland Holdings Ltd [2017] PGNC 428; N8335 (8 June 2017)

N8335

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 258 OF 2012

BETWEEN:
ALBRIGHT LIMITED
Plaintiff

AND:
MEKEO HINTERLAND
HOLDINGS LIMITED
First Defendant

AND:
LUCAS DEKENA, MINISTER FOR
LANDS & PHYSICAL PLANNING
Second Defendant

AND:
ROMILLY KILA-PAT, SECRETARY FOR
LANDS & PHYSICAL PLANNING
Third Defendant

AND:
INDEPENDENT STATE OF
PAPUA NEW GUINEA
Fourth Defendant

Waigani: Hartshorn J.
2016: 21^st June
2017: 8^th June

LEASE– Trial – damages - plaintiff seeks declaratory relief and damages against the defendants for breaches alleged State defendants’ statutory duties of care to plaintiff – plaintiff contends defendants owe it common law duties of care

LEASE - plaintiff has sub sublease agreement with first defendant - State defendants contend amongst others, that they do not owe a statutory duty to plaintiff– state defendants contend the Sub sublease agreement between first defendants and plaintiff is their private commercial arrangement and does not concern the State or its agents

DUTY OF CARE – whether state owed a statutory duty to plaintiff - whether there was any negligence by the State defendants - whether breach of s10 and 11 of Land Act occurred giving rise to damages claim by plaintiff - breach of the relevant provisions of the Land Act cannot be enforceable by a private right of action by an entity in the position of the plaintiff – plaintiff could have a claim against first defendants but not against the state defendants – plaintiffs claim dismissed.

DUTY OF CARE – whether state owed a common law duty of care to the plaintiff - The plaintiff’s loss must be a reasonably foreseeable result of the defendant’s conduct - there must be a prior sufficient relationship of proximity between the plaintiff and the defendant - it must be fair, just and reasonable to impose liability on the defendant - no actions on behalf of the State that are able to be considered as being indicative of the State assuming any of the risk – no action has been taken by the State that exhibits it has special relationship with plaintiff – no existence of prior sufficient relationship of proximity between the State defendants and plaintiff – plaintiff has not satisfactorily established that State defendants owe a duty of care to it – proceedings dismissed with costs to the defendants

Cases Cited:
Papua New Guinea Cases

Mathias Goma & 703 Ors v. Protect Security & Communications Ltd (2010) N4606
Catholic Diocese Wabag Board of Trustees v. Enga Provincial Government (2011) N4562
Mathias Goma & 703 Ors v. Protect Security & Communications Ltd (2013) SC1300
Etepa v. Baki (2015) SC1502

Overseas Cases

Atapattu, R. (On the Application of) v. The Secretary of State for the Home Department [2011] EWHC 1388 (Admin)
Caparo Industries Ltd v. Dickman [1990] UKHL 2; [1990] 2 AC 605
X (minors) v. Bedfordshire [1995] 3 All ER 353
Customs and Excise v. Barclays Bank plc [2006] UKHL 28
Franklins Pty Ltd v. Metcash Trading Ltd [2009] NSWCA 407
Hope v. Revenue and Customs [2017] EWHC 812 (Ch)

Counsel:

Ms. M. Wal and Ms. H. Singut, for the Plaintiff
Ms. I. Mugugia, for the Second, Third and Fourth Defendants

8^th June, 2017

1. HARTSHORN J: On 30^th November 2007, the State issued to the first defendant, Mekeo Hinterland Holdings Ltd (Mekeo), a Certificate of Title for a Special Purpose Agriculture and Business Lease (SABL) (Sublease), over certain customary land. The land the subject of this Sublease had been leased by Customary Landowners to the State pursuant to an Instrument of Lease for Customary Land dated 16^th November 2007 (Lease).

2. The plaintiff Albright Ltd (Albright), entered into a sub sublease of the land with Mekeo (Sub sublease). Albright was to develop the land and was given exclusive rights by Mekeo to harvest timber and conduct agro forestry projects upon the land for a period of 98 years.

3. In December 2010 the National Court declared that Mekeo’s title to the land that had been granted to it by virtue of the Sublease, was null and void.

4. Albright seeks declaratory relief and damages against the defendants for breaches of what it is alleged are the State defendants’ statutory duties of care to Albright and what it is alleged are all of the defendants’ common law duties of care to Albright. These duties of care are alleged to be that the defendants ensured that Mekeo properly and legally acquired its SABL without any illegality and that the grant of the Sublease to Mekeo complied with sections 10 and 11 Land Act, thus enabling Mekeo to be able to grant a valid Sub sublease to Albright.

5. There was no appearance on behalf of Mekeo at the trial. As I was satisfied that orders of this court relating to service upon Mekeo had been complied with by Albright, the trial was permitted to proceed in the absence of representation of Mekeo.

6. As to the position of Mekeo in this proceeding, on 24^th October 2012, default judgment was entered against it and the State defendants. The State defendants successfully applied to set aside the default judgment against them but no such application was made by Mekeo. Subsequently, leave was granted to Albright to amend its statement of claim following an inter partes hearing at which counsel for Mekeo was present. Mekeo then purportedly filed an amended defence but no application has been made to set aside the default judgment against Mekeo. It is the case then that Mekeo has default judgment entered against it for damages to be assessed on the statement of claim filed on 22^nd March 2012. I therefore only consider the question of the State defendants’ liability.

7. The State defendants contend amongst others, that they do not owe a statutory duty to Albright, the Sub sublease agreement between Mekeo and Albright is their private commercial arrangement and does not concern the State or its agents and in any event there was no negligence by the State defendants. Further, the negligence of Albright in failing to ascertain that the tenure of the Lease was safe, by verifying that due process had been followed in the State’s acquisition of the customary land contributed to Albright’s loss.

Whether the State owed a statutory duty to Albright

8. The first issue raised is whether the State defendants owed a statutory duty to Albright. Albright contends that the State defendants owed a statutory duty to ensure that they complied with sections 10 and 11 Land Act to ensure that Mekeo acquired a Sublease without any illegality or encumbrances so that Mekeo was able to grant a Sub sublease to Albright.

9. Albright contends that the State defendants breached their statutory duty by not complying with sections 10 and 11 Land Act, when preparing and issuing the Sublease to Mekeo and as a consequence the court declared the SABL, the Sublease, a nullity and that it was void ab initio.

10. The State defendants contend that they do not owe and therefore did not breach any such duty to Albright.

11. Albright relies on the cases of Mahura v. Dekena (2013) N5305 and Maniwa v. Malijiwa (2014) N5687 which held amongst others that s. 10 Land Act contains mandatory requirements that are to be complied with by the Minister concerning the grant of an SABL. Albright contends that as the requirements are mandatory, a statutory duty is imposed upon the Minister to comply with those requirements. This duty, it is contended, is for the benefit and protection of:

a) Customary Landowners of the SABL, to ensure that they have a say in what happens on their land and to protect their usufructuary and customary rights to their land, and

b) Investors and developers of an SABL such as Albright.

12. Albright relies upon amongst others, the House of Lords opinions in X (minors) v. Bedfordshire [1995] 3 All ER 353 and contends that as the Land Act does not provide a remedy for breach of sections 10 and 11, a cause of action lies against the State defendants for breach of statutory duty. Further, the damages that sections 10 and 11 seek to prevent are the actual damages that Albright suffered as a direct consequence of the negligence of the State defendants and that the State defendants were negligent in their duties when issuing the SABL to Mekeo as no proper enquiries were made into the subject land, thereby breaching their statutory duty to Albright.

Consideration

13. The cause of action in tort known as breach of statutory duty was considered by the Supreme Court in Mathias Goma & 703 Ors v. Protect Security & Communications Ltd (2013) SC1300. This appeal was an appeal from my decision in Mathias Goma & 703 Ors v. Protect Security & Communications Ltd (2010) N4606. Both cases considered, and to varying degrees followed, X (minors) v. Bedfordshire (supra). It was held by a majority of the Supreme Court that amongst others:

a) the cause of action known as breach of statutory duty is a tort that is part of the underlying law of Papua New Guinea;

b) the elements of the tort are that:

i) a statute imposed an obligation on the defendant;

ii) the obligation was breached by the defendant;

iii) the purpose of the statute was to protect a particular class of person;

iv) the plaintiff was a member of that class of person;

v) the plaintiff suffered damage as a result of the breach; and

vi) the Parliament intended to create a private right of action for breach of the statutory obligation.

c) in determining whether there was such a parliamentary intention, the court is required to have regard to the purpose of the statutes and the principles of statutory interpretation provided for by Constitution. It must give effect to sections 25, 37, 63, 158(1) and (2) Constitution and the interests of justice require that persons for whose benefit a statutory obligation exists do not have to wait for some other person or authority to take action to enforce those obligations.

14. In deciding whether the elements of the tort of breach of statutory duty have been met in this instance, the first element I consider is the purpose of the relevant provisions of the Land Act. Section 10 Land Act provides for the acquisition of customary land by agreement and sections 11 and 102 concern the acquisition of customary land for the grant of a special agricultural and business lease.

15. From a consideration of the sections and particularly sections 10(3), (4), 11(2), 102(3) and (7), I am of the view that the intention of those provisions is to provide:

a) for the acquisition of customary land by the State which is not likely to be required by the customary landowners;

b) that a lease of customary land to the State, executed by or on behalf of customary landowners, shall be conclusive evidence that the State has a good title, and all customary rights are suspended for the period of the lease to the State;

c) that the entity to which the State grants an SABL is conclusively the entity to which the customary landowners agree the SABL should be granted;

d) that an SABL shall be effective from the date it is executed by the Minister and shall be deemed to commence on the date when the subject land was leased by the customary landowners to the State.

16. In summary, the intention of the above provisions was to allow customary landowners to lease their land to the State for a period not exceeding 99 years, which in turn would then lease that land to an entity to which the customary landowners agreed, and that entity would obtain a good title. Further, the customary rights in the land would be suspended for the term of the lease to the State.

17. The purposes of these sections are first, to protect customary landowners’ rights whilst providing a means for them to transfer their land to an entity of their choice. Secondly, to provide a good title to the customary land owner agreed entity that subleases the subject land from the State. It is these particular classes of person, the customary landowners and the customary landowner agreed entity that the purposes of these provisions of the Land Act are designed to protect.

18. Further, Albright may have an action against Mekeo for its failure to provide Albright with the Sub sublease to which it contracted. It is not the case then that Albright is without remedy.

19. As I am of the view that Albright is not a member of the particular class of person that it was the purpose of the relevant provisions of the Land Act to protect, I find that it was not intended that a breach of the relevant provisions of the Land Act was to be enforceable by a private right of action by an entity in the position of Albright. In making this finding, I have taken into account the interests of justice and in that regard, that Albright is not without remedy, notwithstanding this finding.

Whether the State has a common law duty to Albright

20. Albright contends that the State defendants owed a common law duty of care to Albright to ensure that the SABL to Mekeo was prepared and granted in accordance and in compliance with “all of the provisions of the Regulations, Acts and Laws of the country.”

21. Albright contends that it had a close relationship with the State defendants and as a result it was directly affected by the State defendants’ acts and omissions. It is contended that the State defendants ought reasonably to have contemplated that Mekeo would have been directly affected by these acts and omissions.

22. The close relationship is contended to have arisen by virtue of Albright being a Sub sublessee or Developer of the SABL which had been granted by the State to Mekeo. In the Lease Instrument between the Customary Landowners and the State, it is contended that the State guaranteed to the Sublessee and the Sub sublessee that the Instrument of Lease and Certificate of Title were prepared and granted in accordance and in full compliance with all of the provisions of the Regulations, Acts and Law of the Independent State of Papua New Guinea. It is contended that Albright relied upon the guarantee by the State provided in clause 1.10 of the Lease Instrument. It is further contended that by giving the guarantee, it was foreseeable by the State defendants that if they were negligent, then Albright would likely suffer damage. The relationship between the parties was sufficiently close that the State defendants would know that if the Sublease issued by the State to Mekeo was invalid, then Albright would suffer economic damage or loss.

23. Albright relies upon the case of Catholic Diocese Wabag Board of Trustees v. Enga Provincial Government (2011) N4562, a decision of Thompson AJ, and the following passage:

“9. These cases are consistent with the Constitution, and are appropriate to the circumstances of PNG. They establish that the Police and Government bodies such as local Councils, owe no general duty of care to members of the public, in the absence of any prior special relationship between them. Even in non-public bodies, the test to determine whether or not there is a duty of care, is based on similar principles. They were set out in Caparo’s case (supra), and followed in subsequent cases:

1. The Plaintiff’s loss must be a reasonably foreseeable result of the Defendant’s conduct.

2. There must be a prior sufficient relationship of proximity between the Plaintiff and Defendant.

3. It must be fair, just and reasonable to impose liability on the Defendant.

10. In the case of Police and public bodies, there is generally no prior sufficient relationship of proximity between them and the Plaintiff, and it would not be fair, just or reasonable to impose liability on them, as being against public policy. If public bodies such as the Defendants take positive action, they are able to be found liable for their negligent or wrongful acts.”

24. The State defendants contend that Albright cannot rely on the “guarantee” provided under clause 1.10 of the Lease Instrument as it is not privy to that agreement. Albright is a party to the Sub sublease agreement and so it has rights to enforce under the Sub sublease. Further, the State defendants contend that Albright has not produced evidence to show that approval by the Minister for Lands was given as was required in clause 16.3 of the Sub sublease and consequently the Sub sublease is null and void and of no legal effect.

Consideration

25. As referred to, Albright relies upon Catholic Diocese Wabag v. Enga Provincial Government (supra) for the principles that require to be proved to determine that the State defendants owed it a duty of care. These principles were set out in Caparo Industries Ltd v. Dickman [1990] UKHL 2; [1990] 2 AC 605 and are:

a) The plaintiff’s loss must be a reasonably foreseeable result of the defendant’s conduct;

b) There must be a prior sufficient relationship of proximity between the plaintiff and the defendant;

c) It must be fair, just and reasonable to impose liability on the defendant.

26. Catholic Diocese Wabag v. Enga Provincial Government (supra) was followed by the Supreme Court in Etepa v. Baki (2015) SC1502. Caparo’s case (supra) has been followed in numerous persuasive English cases including Customs and Excise v. Barclays Bank plc [2006] UKHL 28; Atapattu, R. (On the Application of) v. The Secretary of State for the Home Department [2011] EWHC 1388 (Admin), and Hope v. Revenue and Customs [2017] EWHC 812 (Ch).

27. As to the second principle and the relationship in this instance between Albright and the State defendants, Albright contends that it had a prior special relationship with the State defendants and places specific reliance in this regard, upon the alleged guarantee given to it by the State in clause 1.10 of the Lease Instrument between the Customary Landowners and the State.

28. Upon a perusal of the Lease Instrument that is in evidence, it is clear that clause 1.0 which contains sub clauses 1.1 to 1.10, is the Preamble or Recital to the Lease Instrument. The operative part of the Lease Instrument in my view, begins at and continues from paragraph 2 of the Lease Instrument.

29. In the persuasive decision of Franklins Pty Ltd v. Metcash Trading Ltd [2009] NSWCA 407 at [309] Campbell JA said:

“That a recital can be looked at as part of the surrounding circumstances of the contract still leaves room for the rule ....... that where the recital is in conflict with the true interpretation of an operative provision (according to the modern standards of interpretation), the operative provision prevails. Strictly speaking, that is not so much a rule of construction as a reflection of the fact that recitals are not operative provisions in a contract.”

30. Consequently, the reference in clause 1.10 to the State being a “guarantor” is not enforceable as it is in a Preamble, a Recital, and not the operative provisions of the Lease Instrument. Secondly, as contended by the State, Albright is not a party to the Lease Instrument and so is not the beneficiary of any binding guarantee given by the State, if indeed one could be construed from clause 1.10 which in my view, it cannot.

31. In addition, from the evidence, I am not satisfied that there have been actions on behalf of the State that are able to be considered as being indicative of the State assuming any of the risk of Albright or of any action being taken by the State that exhibits that it has a special relationship with Albright, as alleged. I am not satisfied upon the evidence that it has been properly made out that there existed a prior sufficient relationship of proximity between the State defendants and Albright.

32. Consequently, as one of the three principles set out in Catholic Diocese Wabag Board of Trustees v. Enga Provincial Government (supra) and Caparo’s case (supra) has not been met and all of those principles must be satisfactorily proved for a duty of care to be established, it has not been properly established that the State defendants owe a duty of care to Albright.

33. I mention, that in my view, if Albright was to some extent reliant upon a guarantee from the State as to the title it was to obtain by entering into the Sub sublease, as I believe is contended, and given the scale of the project that was envisaged upon the land the subject of the Sub sublease, and given that the land the subject of the Sub sublease had only recently been transferred by Customary Landowners to the State and then leased to Mekeo, one would have thought that Albright should have sought a guarantee directly from the State before proceeding further instead of relying upon a reference to the State being a guarantor, such reference merely being contained in a Preamble or Recital in a contract to which Albright is not a party.

34. I also make mention of the third principle set out in Catholic Diocese Wabag Board of Trustees v. Enga Provincial Government (supra) and Caparo’s case (supra) that it must be fair, just and reasonable to impose liability on a defendant, and refer to the consideration of this principle in Atapattu’s case (supra). At [112] the Court said:

“....... in considering whether it is fair, just and reasonable to impose a common law duty of care in these circumstances, it will or may be relevant to take into account one or more of the following factors: (1) whether to do so would be contrary to the statutory scheme and whether it would conflict with the duty owed to the primary beneficiaries of the scheme; (2) whether it would hamper the effective performance of the system and leave the authority to act defensively; (3) whether the error was operational or administrative rather than made at a policy level; (4) whether it would open “the floodgates” to similar claims leading to a diversion of the resources of public servants; (5) the litigation costs of such claims; (6) whether there is an alternative remedy; (7) whether there has been a voluntary assumption of responsibility; and (8) whether the general sense of public duty would be unlikely to be reinforced by liability.”

35. Following the relevant criteria in this instance:

a) the Land Act pursuant to which the State was operating does not impose any liability upon the State in regard to a Sub sublessee;

b) to impose such liability may hamper the effective performance of the SABL scheme under the Land Act and may lead the State by its officers to act defensively;

c) the error concerning the issuing of the SABL can be classed as operational or administrative rather than being made at the policy level;

d) to impose liability would likely open “the floodgates” to similar claims against the State leading to a diversion of the resources of public servants;

e) the litigation costs that the State would incur in defending similar cases could be substantial;

f) Albright has a claim against Mekeo in respect of the Sub sublease;

g) there has not been any voluntary assumption of responsibility by the State in respect of Albright’s claim;

36. Given the above, I am of the view that it would be against public policy for the State to have imposed upon it liability for the claim of Albright in the circumstances.

37. As to the arguments of Albright that the State defendants are estopped from denying that Albright is entitled to the guarantee provided in clause 1.10 of the Lease Instrument, as previously referred to, no such guarantee was given. The same also applies to the argument concerning a collateral contract.

38. Given the above, it is not necessary to consider the other submissions of counsel.

39. Consequently, as I am satisfied that Albright has not properly proved its claims against the State defendants, Albright’s claim against them should be dismissed.

Orders

40. It is ordered that:

a) The plaintiff’s claims against the second, third and fourth defendants are dismissed;

b) The plaintiff shall pay the costs of the second, third and fourth defendants of and incidental to this proceeding;

c) Time is abridged.

_____________________________________________________________

Wal & Associates Lawyers: Lawyers for the Plaintiff
Office of the Solicitor General: Lawyers for the Second, Third
and Fourth Defendants