Laba Holdings Ltd v Minister of Lands and Physical Planning [2019] PGNC 385; N8132 (22 November 2019)

N8132

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

CIA NO. 150 OF 2016

BETWEEN
LABA HOLDINGS LIMITED
Appellant

AND
MINISTER OF LANDS AND PHYSICAL PLANNING
First Respondent

AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Respondent

Waigani: Thompson J
2019: 8^th November, 22^nd November

Appeal against forfeiture of Certificate of Title – forfeiture under S122 of Land Act – interpretation of S122 (1)(d)(ii) of Land Act – whether non-compliance must be by the lessee – whether not meeting requirements of S72 of Land Act is non-compliance with a provision relating to the lease.

Counsel:

Mr. B. Geita, for the Appellant
Mr. M. Wangatau, for the Respondents

22^nd November, 2019

1. THOMPSON J: The Appellant is appealing against the Decision of the Minister for Lands to forfeit its Certificate of Title.

2. The Title was issued on 22 December 2015 by way of a gazettal notice which stated that it was being issued pursuant to S72 of the Land Act, and proceeded to describe the lease as a business lease.

3. A resource developer subsequently informed the Respondents that this area of land was required for resource development. The Respondents therefore considered whether or not to compulsorily acquire the land.

4. When considering this issue, they conducted an investigation and prepared a report to the Minister, which concluded that the Title had not been correctly granted in the first place.

5. Section 72 permits the direct grant of four specified types of leases, without referring them to the Land Board. A business lease was not one of the specified types, and so the Minister had no power to grant a direct State Lease for business purposes.

6. The Minister has the power to grant a lease for business purposes under S92 of the Act. This provides that the land shall first be offered for lease by tender, but pursuant to S69, the land can be exempted from advertisement by the Minister, including where the State has agreed to provide the land for the establishment of a business, or where the applicant has acquired the land from customary land owners in order to acquire the State Lease. The Appellant was a company owned by customary land owners, and established a business on the land.

7. Under S122 of the Act, the Minister may forfeit a State Lease if, “... a provision of this Act relating to the lease ... is not complied with ...”. The Respondents therefore formed the view that because the provisions of S72 of the Act had not been complied with, the Minister was entitled to forfeit the Lease, and thereby did not have to compulsorily acquire the land with the accompanying obligation to pay compensation.

8. Section 122 (2) of the Act provides that before the Minister can forfeit a lease, he must serve a Notice to Show Cause why it should not be forfeited. He may also serve a notice requiring the lessee to comply with the provisions of the Act.

9. The Minister did not issue a notice to the lessee requiring it to comply with any provision of the Act. It is doubtful whether or not such a notice could have been issued, because the non-compliance with S72 of the Act was prima facie a non-compliance by the Minister, not by the Appellant, and the Appellant had no power to effect compliance.

10. The Minister did issue a Notice to Show Cause. In response, the Appellant submitted that the gazettal notice was in error by referring to S72 instead of S92, and the notice otherwise validly gazetted the grant of the lease for business purposes in compliance with the provisions of the Act.

11. The Appellant made various other submissions in its response and in the Appeal, as to the merits of its entitlements to the land as a local landowner group, compared to the entitlements of the foreign-owned resource developers who dictated to the Respondents. The Appellant says that the real ground for forfeiture was that the Respondents had been informed that the land was required by a foreign developer, which was an improper motive. Forfeiture for the purpose of granting it to another person, was not a ground for forfeiture under S122 (1), and so the Minister took into account irrelevant considerations when making his decision.

12. The Appellant queried why the State did not forfeit a similar area of land adjacent to the Appellants’ land which could equally have been used by the developer, and which was owned by people from Madang, instead of forfeiting the land which was owned by the local landowners. The Appellant submitted that in reliance on the title, it had entered into various expenses and business transactions, which would render it liable to loss if the title was forfeited, thereby raising an estoppel against the Respondents.

13. The Minister was not satisfied that the Appellant had shown good cause, and proceeded to forfeit the lease within three days.

Issues

14. The main ground of appeal is that the Minister wrongly invoked his power under S122, because the forfeiture did not come within any of the prescribed matters.

15. The Respondents’ response is that the ground for forfeiture did come within S122, namely, S122 (1) (d) (ii) that a provision of the Act relating to the lease, is not complied with.

16. The Appellant’s grounds were based on the premise that the forfeiture was not valid because the Respondents failed to comply with S122 (1) of the Act. However, the forfeiture did prima facie come within S122 (1) (d) (ii) of the Act, and the onus was on the Appellant to show in its response to the Notice, and in the Appeal, that there had not been non-compliance with a provision of the Act relating to the lease. To do this, the Appellant has to show that S122 (1) (d) (ii) refers to a provision of the Act relating to the lease after it was issued, and not to any provision at all, including not to a provision related to the grant of the lease.

17. The issue therefore now arises as to whether or not the Minister was entitled to forfeit the State Lease for non-compliance with S72 of the Act. This involves two elements –must the non-compliance be by the lessee, and, is not meeting the requirements for a direct grant under S72, a non- compliance with a provision relating to the lease.

Interpretation of S122 (1) (d)

18. The Notice to Show Cause said that the direct grant of the State Lease did not comply with the provisions of the Act, and that the Appellant did not satisfy the grounds under S72 to be granted a direct lease. The Notice was therefore stating that a failure to satisfy the requirements of S72 for a direct grant, was a non-compliance with a provision relating to the lease.

19. The Notice says that it was the grant of the State Lease which did not comply with the provisions of the Act. It does not say that it was the Appellant who did not comply with provisions of the Act.

20. On its face, as the lease was a business lease, then it was not one of the types of lease specified in S72 for which a direct grant could be made. However, the power of grant under this section can only be exercised by the Minister, not by an applicant. If an applicant for a direct grant fails to meet the requirements, it is an error by the Minister to grant it. There is no obligation on an applicant to meet the requirements. It is simply the case that if he wants a direct grant, he needs to meet the requirements.

21. Section 72 is not a provision relating to “the lease”. No lease exists until after the Minister has exercised his power to grant without referral to the Land Board.

22. If the Appellant did not satisfy the grounds under S72, the Minister erred in proceeding to grant the title, and it was therefore the Minister who did not comply with S72. It was not the Appellant’s error.

23. However, the entitlement to forfeiture under S122 is prima facie not based on non-compliance by the lessee, it is broadly stated as being any non-compliance.

24. The wording of S122 is not restrictive – if a provision of the Act relating to the lease is not complied with, the Minister may forfeit it. This section does not say that it has to be the lessee who has not complied with a provision of the Act. On its face, there is nothing to prevent the Minister from relying on his own non-compliance in order to forfeit.

25. Section122 (1) must be read together with S122 (2) and (3), because the Minister cannot forfeit under S122 (1) until he has complied with (2) and (3).

26. Section122 (2) and (3) are directed to non-compliance by the lessee, and not by the Minister. If a lessee’s response is to show that there was no non-compliance by the lessee, this should therefore amount to sufficient cause as to why the lease should not be forfeited, and a proper exercise of the Minister’s discretion would be not to forfeit.

27. The use of the present tense “is” and not the past tense “has been”, and the use of “the” lease instead of “a” lease, requires consideration. The reference to “the lease” can only mean the lease that was actually issued. It cannot refer to past matters before the lease was issued. The other two matters specified in S122 (1) (d) (i) and (iii) permit forfeiture if a covenant or condition of the lease, or a requirement of a S91 notice, is not complied with. These are matters which can only arise after the lease has been issued. If S122 (1) (d) (ii) was read ejusdem generis with (i) and (iii), the natural meaning would be that the Minister could forfeit if the lessee did not comply with a provision relating to the lease after it has been issued.

28. Section122 (1) (e) specifically refers to the past circumstances of the granting of the lease, before it has been issued. The Minister may forfeit, if in his opinion the grant was obtained as a result of statements which were known to the lessee to be false or misleading. No such allegation has been made here by the Minister, there is no evidence that the direct grant of the lease was obtained as a result of any false or misleading statements, and it is not a ground relied on by the Minister in the Notice to Show Cause.

29. The sole basis for his decision to forfeit is that there was non-compliance with a provision relating to the earlier grant of the lease.

30. Should S122 (1) (d) be interpreted to mean non-compliance with a provision relating to the grant of a lease before it is granted, or non-compliance with a provision relating to the lease as granted?

31. The Appellant submitted that the reference to non-compliance with a provision of the Act relating to the lease is a reference to provisions which apply to the State Lease as granted. The Respondents do not allege, and there is no evidence to show, that the Appellant has not complied with any provisions of the State Lease as granted.

32. The Appellants’ interpretation is consistent with the provisions of S122 (2), which give the lessee the opportunity to rectify any non-compliance. Where the non-compliance is said to be in the earlier grant of the lease, it is not a matter which the lessee can rectify.

33. The fact that there is a separate sub-section, S122 (1) (e), which applies where the grant of the lease has been obtained as a result of false statements, made before its grant, lends support to the interpretation that the grounds in S122 (1) (d) are intended to refer to non-compliance with provisions relating to the lease after it has been granted, and not before.

34. The provisions of the Act relating to forfeiture show that it is an action of last resort. Even where any of the grounds for forfeiture under S122 (1) are shown, the Minister must still comply with S122 (2) and (3), and under S124, if a term of the lease is not complied with, the Minister may impose a non-compliance fee instead of forfeiture.

35. On the Respondents’ interpretation, an actual non-compliance by the lessee with a term, covenant, or condition of a lease can be dealt with leniently by the Minister, whereas a non-compliance by the Minister, without any non-compliance by the lessee, can result in forfeiture of the lessee’s lease. This would be an unjust result, which therefore does not favour that interpretation.

36. There are a number of National Court cases which have considered the forfeiture process under S122. However, none have been cited where it was in issue that the non-compliance only relates to the lease after it was issued.

37. It is not in dispute that the Respondents followed the procedures prescribed in S122 of the Act. It is only in dispute if those procedures could be validly invoked when the non-compliance was not by the lessee, and was not of a provision relating to the lease after its issue.

38. It is my view that, when interpreting S122 (1)(d)(ii) of the Land Act, the words “relating to the lease” are referring to the lease after it has been issued, and not to the circumstances of the earlier grant of the lease, before it was issued.

Response to Notice to Show Cause

39. If the Minister is entitled to forfeit where a provision of the Act relating to the grant of the lease is not complied with, then the Appellant’s submissions on the other matters, have little weight. If the Respondents had a valid ground for forfeiting the lease, it could not be said that the Minister had taken into account irrelevant considerations when making the decision to forfeit.

40. The Appellant’s response said that the lessee had made a valid application for the issue of the State Lease, and that any procedural non-compliance was the responsibility of the Minister. However, it did not provide any evidence to show that it had made a valid application for the issue of a State Lease under S92 of the Act. At its highest, the response said that there was an error in the document granting the lease under S72, but because a valid business lease could have been granted under S92, then the documents should be construed as granting a lease under S92.

41. The Appellant’s submission that there was an error in the Gazettal notice is not strong. The grant of the lease as published in the gazette of 22^nd December 2015, was headed “Notice of Direct Grant under S72”, and went on to say that the Minister’s powers were conferred by S72 of the Land Act. This is not a mere typing error for S92 of the Land Act, as S92 does not permit a direct grant.

42. The Appellant submitted that on a proper construction of the document, the lease was granted under S92, notwithstanding that it referred to being granted under S72. This argument would have had more weight if the Appellant had provided copies of documents showing the basis on which the application for the State Lease had been made by the Appellant, and if it had been made under S92. In the absence of those documents, there was nothing to support that construction, and it was open to the Minister to reject that part of the submission.

43. In relation to the estoppel, if there was an error of law in the Minister’s grant of the lease under S72, then even if the Appellant had not contributed to that error, it would not give rise to an estoppel against the Respondents. Estoppel by conduct is not available where the conduct is ultra vires. The equitable relief of estoppel cannot override the law, as equity simply follows the law (see Lae Bottling Ltd v Lae Rental Homes Ltd (2017) SC1641).

44. If the lease was validly forfeited on a ground set out in S122, it could not be said to be a forfeiture for an improper purpose. The fact that there were other matters considered by the Minister which were not set out in S122 (1) (d) (ii), would not change the fact that a forfeiture on the ground contained in S122 (1) (d) (ii) was a proper ground.

45. In relation to the Appellant’s allegation of apprehension of bias, the evidence shows that the Minister considered a report prepared by the Respondents which set out all the various matters including what could be done with the Land if it was forfeited, which were not prescribed under S122 (1) (d). However, once the Minister found that there had been a non-compliance with a provision of the Act, it was not manifestly unreasonable or biased for him to find that the Appellant had not shown cause as to why the lease should not be forfeited.

46. When considering whether or not he should exercise his discretion to find that the lessee has failed to show good cause, any fault by the lessee which contributed to the Minister’s non-compliance with S72 would be a relevant matter to be taken into account. The Appellant’s response did not show any fault by the lessee which contributed to the Minister’s non-compliance, and nor was such a fault identified by the Minister.

Clean Hands

47. When considering the options available to the Respondents in response to the foreign developer’s request for the land, the Respondents fully considered that there were valid grounds for a compulsory acquisition, a process which was commonly applied in relation to significant government projects. However, the Respondents concluded that it was more important for the State to avoid paying compensation to the Appellant, that it would be cheaper and quicker to forfeit the lease, and that the land should not be compulsorily acquired if it had been invalidly issued in the first place.

48. If the land had been compulsorily acquired, the Appellants’ title would have been converted to a right to compensation. It was not compulsorily acquired, and so there was no such right. Nevertheless, the Respondents say that as a form of compensation, and having regard to their desire to assist land owners in the resource development area, they offered to allocate a similar area of land to the Appellant. They offered a much larger area of land, and said that they would issue a business lease in the correct way, after properly exempting it from advertisement.

49. There was conflicting evidence on this proposal. The Respondents say that the Appellant accepted it, supported by evidence showing that the Appellant submitted a written application in the required form for the grant of a business lease over the alternative land, the application was successful, and the Appellant was sent a Notice of Acceptance for signing and return. There was no evidence if it was signed and returned or if the lease was subsequently issued and gazetted.

50. Neither party had instructions on this point. The Appellant did not give evidence that it had rejected the proposal. It merely said that the land which had been offered, while being much bigger, was not in as good a position because it had no access to the shoreline, and the annual land rental was K1.4m compared to their annual land rental of K450.00. However, the fact that the Appellant had applied and been accepted for a business lease over that land, resulted in the Respondents submitting that the Appellant had not come to court with clean hands because it had accepted the offer of the larger area of land, but at the same time issued proceedings to retain the existing land.

51. The evidence was insufficient to enable any finding to be made, on this point.

Conclusion

52. An application for a business lease, even if made under S72, cannot be said to be a non-compliance with S72 of the Land Act.

53. The grant of a business lease under S72, is a non-compliance by the Minister with S72 of the Land Act.

54. The non-compliance referred to in S122 (1) (d) (ii) is a non-compliance with a provision relating to the lease after it has been issued.

55. A non-compliance with S72, is therefore not a non-compliance with a provision relating to the lease, within the meaning of S122 (1) (d) (ii) of the Land Act.

56. Even if a non-compliance with S72 was a non-compliance with a provision of the Act relating to the lease, it was a non-compliance by the Minister and not by the lessee. It would be an improper exercise of the Minister’s discretion to find that the lessee failed to show cause, when the only non-compliance was by the Minister himself, and not by the lessee.

57. As non-compliance with a provision relating to the lease had not been shown, the decision by the 1^st Respondent to forfeit the lease was not a valid exercise of his powers under S122 (1) (d) (ii).

58. The Appellant has not shown an entitlement to be registered as the lessee of the land under the terms of a business lease granted by the Respondents.

59. If the State Lease was granted under S72 in error by the Minister, he has other remedies available to him, including legal proceedings to set aside the decision to grant the title, or compulsory acquisition with the payment of compensation.

60. Pursuant to S142 of the Land Act, I make the following orders:

(a) The 1^st Respondent’s decision to forfeit the Appellant’s State Lease Volume 69 Folio 132 Portion 2747 Milinch of Granville, made and published in the National Gazette No. G883 dated 18 November 2016, is set aside.

(b) Its party is to pay its’ own costs.
DTY Lawyers: Lawyer for the Plaintiff

Solicitor General: Lawyer for the Defendant