Titi v Onglo [2018] PGNC 265; N7394 (2 August 2018)

N7394

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (HR) NO 6 OF 2016

BEN TITI, KEN GASO & 12 OTHERS
Plaintiffs

V

WILLIAM ONGLO
First Defendant

LUTHER SIPISON,
SECRETARY FOR LANDS & PHYSICAL PLANNING
Second Defendant

HON BENNY ALLAN,
MINISTER FOR LANDS & PHYSICAL PLANNING
Third Defendant

REGISTRAR OF TITLES
Fourth Defendant

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fifth Defendant

JOHN ADI GUSAVE
Sixth Defendant

AND

WILLIAM ONGLO
Cross-Claimant

V

BEN TITI, KEN GASO & 12 OTHERS
Cross-Defendants

Waigani: Cannings J
2017: 9 November,
2018: 11 April, 30 May, 2 August

LAND – Government land – State Leases – indefeasibility of title – alleged fraud in transfer of Agricultural Lease – meaning of fraud – whether a case of constructive fraud.

LIMITATION PERIODS – whether an action commenced more than six years after date of alleged fraud is time-barred – Frauds and Limitations Act, Sections 16, 18.

REMEDIES – appropriate relief where State Lease found to have been granted in a case of fraud – whether order for forfeiture of Lease should be made.

At issue in this case was an Agricultural Lease over a 4.092-hectare area of government land. The first defendant is the registered proprietor of that Lease. The plaintiffs commenced proceedings against the first defendant and five other defendants. They claimed to be long-term occupiers of the land covered by the Agricultural Lease, which was granted to an incorporated business group formed by their ancestors. They claimed that the sixth defendant and his family members secretly changed the name and membership of the business group, so that the Agricultural Lease was held by a newly named business group. They claimed that the sixth defendant then, without the knowledge or consent of the plaintiffs, arranged for the Agricultural Lease to be transferred secretly to the first defendant, who became the new registered proprietor. The plaintiffs claimed that the circumstances leading to the first defendant becoming the registered proprietor were so irregular and suspicious and non-transparent as to amount to a case of constructive fraud. The plaintiffs sought declarations and orders to the effect that the first defendant’s title was null and void and that the Agricultural Lease be held in constructive trust by the Registrar of Companies pending re-registration of the business groups involved with the land. The first and sixth defendants argued as preliminary issues that the proceedings should be summarily dismissed on various grounds including that: the plaintiffs lacked standing and were mere invitees or strangers; the plaintiffs’ statement of claim was defective as it failed to comply with the requirements of the National Court Rules regarding pleading of fraud; the proceedings were frivolous and vexatious as the plaintiffs had, at most, equitable interests in the land that had to yield to the superior legal interest of the first defendant and the plaintiffs had not exhausted procedures under the Land Registration Act for challenging the first defendant’s title. The second to fifth defendants (the State and various government officials) also argued preliminary issues that the proceedings be summarily dismissed, for: failing to disclose a reasonable cause of action; and being time-barred under the Frauds and Limitations Act. As to the merits of the claim, all defendants denied all allegations of fraud and argued that the first defendant had been lawfully granted the Agricultural Lease and had indefeasible title and that the plaintiffs had failed to establish a case of fraud. The first defendant filed a cross-claim against the plaintiffs (cross-defendants), pleading that their refusal to comply with reasonable requests to vacate the land over a number of years had led to substantial delays in implementation of the first defendant’s business and farming plan for the land, and seeking damages.

Held:

(1) All of the defendants’ preliminary arguments were dismissed. The plaintiffs were long-term occupiers of the land and had an equitable interest in the land, they did not lack standing and were not mere invitees or strangers. The statement of claim adequately pleaded a case of fraud. The fact that the plaintiffs had equitable interests did not mean that such interests could never prevail over the legal interest of the first defendant. The proceedings were not frivolous or vexatious. The procedures under Part VIII (caveats) of the Land Registration Act did not have to be exhausted prior to challenging the first defendant’s title through court proceedings. The statement of claim adequately disclosed a reasonable cause of action in constructive fraud. The proceedings were not time-barred under the Frauds and Limitations Act.

(2) The transfer of the Agricultural Lease to the first defendant was a case of constructive fraud as the circumstances of the transfer, including the change in name of the original registered proprietor without the knowledge or consent of the plaintiffs, were so unsatisfactory and irregular that it was tantamount to fraud, warranting the setting aside of transfer of title.

(3) A declaration was made that the transfer of the Lease and the subsequent granting of interests in the land covered by the Lease, including State Leases granted or transferred as a result of the subdivision of that land, are liable, subject to a further hearing or agreement between the parties, to be set aside, forfeited or transferred or subject to such other orders of the Court, as are necessary to do justice in the circumstances of the case.

(4) As all the first defendant’s arguments in support of the cross-claim had been incorporated into their defence to the plaintiff’s case, he was unable to prove any ground on which the cross-claim was based. Besides that, nothing was admitted into evidence on behalf of the first defendant. The cross-claim failed.

(5) The question of what further declarations and orders should be made will be addressed at a further hearing.

Cases cited

The following cases are cited in the judgment:

Dumal Dibiaso ILG v Kola Kuma (2005) SC805
Elizabeth Kanari v Augustine Wiakar (2009) N3589
Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215
Hi-Lift Company Pty Ltd v Miri Setae [2000] PNGLR 80
Institute of International Affairs Inc v High Tech Industries Ltd
Kapiura Trading Ltd v Bullen (2012) N4903
Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120
Lae Rental Homes Ltd v Viviso Seravo (2003) N2483
Mosoro v Kingswell Ltd (2011) N4450
Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109
Pius Tikili v Home Base Real Estate Ltd (2017) SC1563
Ramu Nickel Ltd v Temu (2007) N3252
Steamships Trading Company Ltd v Garamut Enterprises Ltd (2000) N1959
Vitus Kais v Sali Tagau (2016) N6159
West New Britain Provincial Government v Kimas (2009) N3834
Yakananda Business Group Inc v Minister for Lands (2001) N2159

STATEMENT OF CLAIM

This was a trial in which the plaintiffs challenged the granting of a State Lease over Government land on the ground of fraud.

Counsel

J J Lome & S Phannaphen, for the Plaintiffs & the Cross-Defendant
S Bonner & J Kep, for the First & Sixth Defendants & the Cross-Claimant
G Akia, for the Second, Third, Fourth & Fifth Defendants

2^nd August, 2018

1. CANNINGS J: This case is about an area of Government land of 4.092 hectares at Nine Mile, National Capital District, known as “Morobe Block”. Its formal description is Portion 957, Milinch of Granville, Fourmil Moresby, National Capital District.

2. The land was made the subject of a 99-year Agricultural Lease in 1988, granted to Nine Mile Farming Business Group Incorporated. In 2013 the Lease was transferred to William Onglo, the first defendant, who is the present registered proprietor.

3. Ben Titi and Ken Gaso and 12 other persons are the plaintiffs. They claim to be long-term occupiers of the land. They commenced proceedings by originating summons against the first defendant and other defendants, disputing the first defendant’s title. I directed the plaintiffs to file a statement of claim, which they did, and the proceedings have continued on pleadings. The other defendants are the Secretary for Lands and Physical Planning, the Minister for Lands and Physical Planning, the Registrar of Titles and the State (second to fifth defendants) and John Adi Gusave (the sixth defendant), who the plaintiffs allege colluded with the first defendant to arrange secret transfer of the Lease to the first defendant.

4. The plaintiffs claim that the Nine Mile Farming Business Group Inc was formed by their ancestors in the 1980s. They claim that the sixth defendant and his family members later secretly changed the name and membership of the business group, so that the Agricultural Lease was held by another entity, Gusae Family Farming Business Group Inc. They claim that the sixth defendant, in 2013, without the knowledge or consent of the plaintiffs, arranged for the Agricultural Lease to be transferred secretly to the first defendant, who became the new registered proprietor.

5. The plaintiffs claim that the circumstances leading to the first defendant becoming the registered proprietor were so irregular and suspicious and non-transparent as to amount to a case of constructive fraud. The plaintiffs seek declarations and orders to the effect that the first defendant’s title is null and void and that the Agricultural Lease be held in constructive trust by the Registrar of Business Groups pending re-registration of the business groups involved with the land.

6. The first and sixth defendants argue as preliminary issues that the proceedings should be summarily dismissed on various grounds including that:

• the plaintiffs lack standing and are mere invitees or strangers;
  
• the plaintiffs’ statement of claim is defective as it fails to comply with the requirements of the National Court Rules regarding pleading of fraud;
  
• the proceedings are frivolous and vexatious as the plaintiffs had, at most, equitable interests in the land that had to yield to the superior legal interest of the first defendant; and
  
• the plaintiffs have not exhausted procedures under the Land Registration Act for challenging the first defendant’s title.
  

7. The second to fifth defendants (the State and various government officials) also argue the proceedings should be summarily dismissed, for:

• failing to disclose a reasonable cause of action; and
  
• being time-barred under the Frauds and Limitations Act.
  

8. All defendants argued that if the proceedings survived their arguments for summary dismissal, all of the plaintiffs’ claims should still be dismissed, as they are without merit. They asserted that the first defendant was the registered proprietor of the Agricultural Lease and had indefeasible title and the plaintiffs failed to prove any ground on which his title should be disturbed.

9. The first defendant filed a cross-claim against the plaintiffs (cross-defendants), pleading that their refusal to comply with reasonable requests to vacate the land over a number of years had led to substantial delays in implementation of his business and farming plan for the land. He sought damages against the plaintiffs.

ISSUES

10. The following issues arise:

(1) Should the proceedings be summarily dismissed?

(2) Is the first defendant’s title affected by constructive fraud?

(3) Does the plaintiff’s claim of constructive trust have merit?

(4) Should the first defendant’s cross-claim be granted?

(5) What declarations or orders should the Court make?

1. SHOULD THE PROCEEDINGS BE SUMMARILY DISMISSED?
   

11. I dismiss all the defendants’ preliminary arguments and rule as follows:

• there is good evidence that the plaintiffs are long-term occupiers of the land, with equitable interest in the land; they do not lack standing and are not mere invitees or strangers;
  
• the statement of claim adequately pleads a case of fraud;
  
• the fact that the plaintiffs have equitable interests does not mean that such interests can never prevail over the legal interest of the first defendant, so the proceedings are not frivolous or vexatious;
  
• the procedures under Part VIII (caveats) of the Land Registration Act did not have to be exhausted prior to challenging the first defendant’s title through court proceedings;
  
• the statement of claim adequately disclosed a reasonable cause of action in constructive fraud; and
  
• the proceedings are not time-barred under the Frauds and Limitations Act, as: this was not an action founded on simple contract or tort or any other form of action covered by Section 16(1) and the proceedings are properly regarded, for the purposes of Section 18 of that Act, as a claim for an injunction and other forms of equitable relief, in which case Section 16 does not apply (Vitus Kais v Sali Tagau (2016) N6159); in any event the principal act of constructive fraud relied on by the plaintiffs is the transfer of the lease to the first defendant, which occurred in 2013, only three years prior to commencement of the proceedings in 2016.
  

2. IS THE FIRST DEFENDANT’S TITLE AFFECTED BY CONSTRUCTIVE FRAUD?
   

12. The plaintiffs acknowledge that the first defendant became registered proprietor of the State Lease over Portion 957 in September 2013. They also acknowledge that under Papua New Guinea’s Torrens Title system of land registration the general principle is that once a lease of land from the State to a person is registered, an indefeasible title is conferred on the registered proprietor, subject only to the exceptions in Section 33(1) (protection of registered proprietor) of the Land Registration Act. They rely on Section 33(1)(a), which states:

The registered proprietor of an estate or interest holds it absolutely free from all encumbrances except ... in the case of fraud.

13. In support of their argument that this was a case of fraud, the plaintiffs rely on four allegedly irregular events. First the change in name of Nine Mile Farming Business Group Inc to Gusae Family Farming Business Group Inc on 17 May 1989. Secondly the change in name of the registered proprietor of the State Lease, endorsed on the State Lease on 18 August 1993. Thirdly the signing of the instrument of transfer in September 2013 of the Lease from Gusae Family Farming Business Group Inc to the first defendant. Fourth, the fact that when the Lease was transferred in 2013, Gusae Family Farming Business Group Inc was no longer a registered corporate entity under the Business Groups Incorporation Act. I am persuaded by the submissions of Mr Phannaphen for the plaintiffs that the first three events occurred without the knowledge and consent of the original office-holders of Nine Mile Farming Business Group Inc and their descendants including the plaintiffs. As to the fourth event highlighted – the lapse in registration of Gusae Family Farming Business Group Inc – this is another irregularity in the series of events culminating in the transfer to the first defendant.

14. I am satisfied in these circumstances that the plaintiffs have proven a case of “fraud”, according to the meaning of that term formulated by the Supreme Court in Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215. That is, the circumstances of the transfer of the Agricultural Lease to the first defendant were so unsatisfactory and irregular that it was tantamount to fraud, warranting the setting aside of registration of title.

15. This wide view of “fraud” – it includes irregularities that are tantamount to fraud and constructive fraud – has been applied in many National Court cases. For example: Steamships Trading Company Ltd v Garamut Enterprises Ltd (2000) N1959, Hi-Lift Company Pty Ltd v Miri Setae [2000] PNGLR 80, Yakananda Business Group Inc v Minister for Lands (2001) N2159, Lae Rental Homes Ltd v Viviso Seravo (2003) N2483, Ramu Nickel Ltd v Temu (2007) N3252, Elizabeth Kanari v Augustine Wiakar (2009) N3589, West New Britain Provincial Government v Kimas (2009) N3834, Mosoro v Kingswell Ltd (2011) N4450, Kapiura Trading Ltd v Bullen (2012) N4903, Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109.

16. In Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120 the Supreme Court confirmed that the wide view of fraud emanating from Emas Estates is the relevant test to apply; and this was confirmed as being the most appropriate view of fraud in PNG in the recent Supreme Court case of Pius Tikili v Home Base Real Estate Ltd (2017) SC1563.

17. I apply the wide view of fraud and find that the transfer of the Agricultural Lease to the first defendant was a case of constructive fraud as the circumstances of the transfer, including the change in name of the original registered proprietor without the knowledge or consent of the plaintiffs, were so unsatisfactory and irregular that it was tantamount to fraud, warranting the setting aside of transfer of title.

3. DOES THE PLAINTIFFS’ CLAIM OF CONSTRUCTIVE TRUST HAVE MERIT?
   

18. The plaintiffs argue that a relationship of constructive trust existed between Gusae Family Farming Business Group Inc (and its principal representative, the sixth defendant) and the plaintiffs, which was breached by the sixth defendant when he, acting on behalf of Gusae Family Farming Business Group Inc, engineered the ‘secret’ transfer to the first defendant.

19. The plaintiffs relied on dicta of the Supreme Court in Dumal Dibiaso ILG v Kola Kuma (2005) SC805 and Institute of International Affairs Inc v High Tech Industries Ltd (2014) SC1577:

• A constructive trust is a trust raised by construction of law or arising by operation of law, as distinguished from express trust. They do not arise by agreement or from intention of the parties but by operation of the law.
  
• Where the circumstances of a transaction are such that the person who takes the legal estate in property cannot also enjoy the beneficial interest without necessarily violating some established principles of equity, the court will raise a constructive trust, and fasten it upon the conscience of the legal owner, so as to convert him into a trustee for the parties who in equity are entitled to the beneficial enjoyment.
  

20. The problem with the plaintiffs’ argument is that one of the primary parties said to be a trustee under the alleged constructive trust – Gusae Family Farming Business Group Inc – is not a party to these proceedings. I am not persuaded by the argument. The cause of action in breach of constructive trust is dismissed.

4. SHOULD THE FIRST DEFENDANT’S CROSS-CLAIM BE UPHELD?
   

21. The first defendant’s arguments in support of the cross-claim were essentially incorporated into his defence to the plaintiffs’ case, which I have not been moved by. The first defendant is unable to prove any ground on which the cross-claim is based. Besides that, nothing was admitted into evidence on behalf of the first defendant. The cross-claim fails.

5. WHAT DECLARATIONS OR ORDERS SHOULD THE COURT MAKE?
   

22. I will make a declaration to the effect that the Agricultural Lease over Portion 957 was transferred to the first defendant in a case of fraud. The question of what orders should flow from that is rather a complex matter. I am not persuaded by the plaintiffs’ argument that the land should be held in trust by the Registrar of Business Groups. A further hearing will be necessary to determine what further declarations or orders should be made. I will make orders designed to ensure that the status quo remains until the proceedings are finally determined and that all parties preserve the peace.

ORDER

23. The Court declares and orders that:

(1) The transfer, on or about 20 September 2013, of the Agricultural Lease over Portion 957, Milinch of Granville, Fourmil Moresby, National Capital District, commonly known as “Morobe Block”, (“the Agricultural Lease”) to the first defendant, was, for the purposes of Section 33(1)(a) of the Land Registration Act, a case of fraud.

(2) The transfer of the Agricultural Lease to the first defendant and the subsequent transfer, if any, of interests in the Agricultural Lease, are liable, subject to a further hearing or agreement between the parties, to be set aside, annulled or subject to such other orders of the Court as are necessary to do justice in the circumstances of this case.

(3) The question of what further declarations and orders should be made, including the option of referring all remaining issues in dispute to mediation, shall be addressed at a further hearing, and for that purpose there shall be a directions hearing on 25 September 2018 at 9.30 am.

(4) Other relief sought in the plaintiffs’ statement of claim filed on 10 August 2016 is refused.

(5) The first defendant’s cross-claim is dismissed.

(6) For the avoidance of doubt, the order of 1 June 2016, which amongst other things restrains eviction of the plaintiffs from Portion 957, continues in full force and effect until further order of the Court.

(7) The plaintiffs and the first and sixth defendants shall peacefully jointly occupy Portion 957 and shall not intimidate or threaten each other or take the law into their own hands and shall take all steps necessary to peacefully resolve the dispute before the Court in these proceedings.

(8) In the event of any dispute or trouble between the parties or any doubt about the meaning or effect of these orders, all parties are at liberty to apply by notice of motion for appropriate orders aimed at peaceful resolution of all issues; and in the event that such a notice of motion is filed, the Registrar shall refer the notice of motion to the Judge Administrator, Civil Proceedings, so that the notice of motion shall be heard expeditiously and if necessary before 25 September 2018.

(9) The question of costs is deferred for submissions at a later hearing.

Judgment accordingly.
_____________________________________________________________
Jeffersons Lawyers: Lawyers for the Plaintiffs & Cross-Defendants
Sam Bonner Lawyers: Lawyers for the First & Sixth Defendants & Cross-Claimant
Solicitor-General: Lawyer for the Second, Third, Fourth & Fifth Defendants