Pale v Ya'a [2019] PGNC 386; N8133 (22 November 2019)

N8133

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (JR) NO. 514 OF 2018

BETWEEN
PULAKO PALE, Elder of Kesono Clan by Himself & Ors
of Kesono Clan of Simberiki, Erave Southern Highlands Province
First Plaintiff

AND
WAWI SEKE, Elder of Kapasapi Clan by Himself & Ors
of Kapasapi Clan of Simberiki, Erave Southern Highlands Province
Second Plaintiff

AND
JOHN YA’A & SEKINALO SAWALA
First Defendant

AND
BENARIA LOUIS & BERVELYN KILO
Second Defendant

AND
BENJAMIN SAMSON, Registrar of Titles,
Department of Lands & Physical Planning
Third Defendant

AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Defendant

Waigani: Thompson J
2019: 27^th September, 22^nd November

Application for replacement Certificate of Title - S162 of Land Registration Act - whether conduct was sufficient to amount to fraud - fraud must be actual fraud by registered proprietor - onus of proof of fraud is to a higher standard than balance of probabilities

Counsel:
Mr. R. Obora, for First and Second Plaintiff
Mr. P. Waraniki, for First Defendant
Mr. A. Rake, for Second Defendant
Mr. M. Tukulia, for Third and Fourth Defendants

22^nd November, 2019

1. THOMPSON J: This is an application by various clan members from Erave in the Southern Highlands Province, to judicially review the decision of the Registrar of Titles to issue a replacement Certificate of Title on or about 15 February 2018.

Background

2. The Plaintiffs are members of the Kesono and Kapasapi clans, which formed the Kesono Kapasapi (RO) Incorporated Land Group (“the ILG”) in 1997. On incorporation, the Chairman was John Ya’a, one of the First Defendants; the Secretary was Pulako Pale, one of the Plaintiffs; and one of the Committee Members was Sekinalo Sawala, the other First Defendant. The Constitution provided that four members constituted a quorum, and any document to be executed by the ILG had to be signed by the Chairman and one other member.

3. In 2004, the two clans each contributed K150,000.00, to enable the purchase of a property on Volume 27 Folio 6519 Lot 41 Section 79 Boroko (“the property”).

4. On 29 September 2004 the Certificate of Title was registered in the name of “Kesono Kapasapi of Boroko”, and not in the name of the ILG.

5. On 15 February 2018 the Registrar of Titles, the Third Defendant, (“ROT”), issued a replacement Certificate of Title pursuant to S162 of the Land Registration Act, on the basis that the registered proprietor’s copy had been lost or destroyed.

6. On 11 April 2018 the Title was endorsed with a transfer to Benaria Louis and Beverlyn Kilo, the Second Defendants. A mortgage to Bank of South Pacific Limited was entered on the title on the same date.

7. The Plaintiffs seek to quash the ROT’s decision to issue the replacement title, on the basis that the Certificate of Title was never lost or destroyed, they always held and continue to hold the Owners Copy of the title, and the ROT’s decision to issue a replacement title was based on documents which had been fraudulently obtained.

Issues

8. The First Defendants opposed the application on the basis that they validly applied for a replacement Certificate of Title, and then validly sold the property to the Second Defendants.

9. The Second Defendants opposed the application on the basis that they are bona fide purchases of the property for value without notice, and as registered proprietors they have indefeasible title.

10. The Third Defendant opposed the application on the basis that he complied with all the statutory requirements when making his decision.

11. Pursuant to S33 of the Land Registration Act, (“LRA”) the registered proprietor holds title absolutely free from all encumbrances except for those set out in S33 (1) (a) – (i), and under S33 (2), the indefeasibility of the title is not affected by the existence of an estate or interest of any other person which otherwise might have had priority.

12. Pursuant to S162 of the LRA, where an instrument of title has been lost, the registered proprietor may apply to the Registrar for a replacement title. An application for a replacement title must be accompanied by sufficient evidence of the loss, and 14 days notice of the intention to issue a replacement title must be given by advertisement in the Gazette and a newspaper.

13. In determining whether or not the ROT validly complied with these procedures, issues have arisen as to whether or not the application for a replacement title was made by the registered proprietor or someone else, and whether or not the evidence of the loss provided with the application was sufficient to establish the loss of the Owner’s copy of the title.

14. There was conflicting evidence on the legal status of the registered proprietor of the property, prior to the replacement title being issued.

15. The Plaintiffs’ evidence was that the ILG had at some time prior to 2003, been deregistered and ceased to exist, before the purchase of the property. They say that the two clans therefore set up a management committee “to be custodians of the properties” on behalf of the two clans, and that the lead Plaintiff and two other persons were the signatories on the bank accounts. They say that they continued to manage the property, and to hold the Owner’s copy of the certificate of title, which they produced.

16. The Plaintiffs say that after deregistration of the ILG, there was a meeting of clan leaders in June 2003. They say that there was agreement that the first Defendant, John Ya’a, had misused the clan funds, his resignation as Chairman was accepted, his claim for K150,000.00 compensation was rejected, but the two clans gave him K80,000.00, and he then had no further position in either the former ILG or with the clans.

17. The Plaintiffs said that after seeing the Notice of Intention to Issue a Replacement Title in a newspaper, they wrote and objected on 7 February 2018, and placed a caveat on the title. However, there was no evidence that such a letter had been received, and no evidence of any caveat application or receipt.

Application for replacement title

18. The 1^st Defendants’ evidence was quite different. They did not specifically say that the ILG had not been deregistered and that it remained in existence, but it is implicit in their evidence. They produced a copy of a letter dated 20^th January 2009 apparently from the ILG Registrar, although on Lands Department letterhead, informing a Bank that the bearer of the letter, John Ya, was the Chairman of the ILG, which was a genuine ILG. It did not attach a copy of the ILG certificate. They said that an ILG meeting was held on 17 December 2017 in which it was agreed to sell the property, to remove the Plaintiffs as executives, and to appoint the other 1^st Defendant, Sekinalo Sawala, to the executive. These decisions were said to have been made in the presence of 28 ILG members, but were signed only by the first Defendants, with the seal of the ILG. They said that they notified the ILG registrar of these changes, but there was no evidence from the Registrar that the changes had been recorded, or that the ILG was still registered.

19. The 1^st Defendants produced an Agreement to Sell Property “as it is: from this Date 28/9/2004 at reasonable purchase price”, but which also said that it was an Agreement to Sell “effective (8/11/2017)”. Neither the purchaser nor the purchase prices were identified. The document was signed by the 1^st Defendant and many other signatures but not the Plaintiffs.

20. On 18 January 2018, the 2^nd Defendants signed a contract produced by the 1^st Defendants for the purchase of the property, in which “Kesono Kapasapi” was shown as the vendor, the purchase price was K1.1m, and the stakeholder was Incentive Management Services. This contract had the vendor’s signature as “Kesono Kapasapi. John Ya”, which was witnessed by Sekinolo Sawala.

21. The 1^st Defendants say that they tried to discuss the matter with the Plaintiffs, but the Plaintiffs did not want to talk to them, and so they believed that the title must have been missing. The 1^st Defendants completed an Application for a Replacement Title on 30 January 2018, in which they stated that they had searched for the lost title and had asked the lead Plaintiff to release the title to them but he had not done so, so it appeared the title was lost or destroyed.

22. The Application for a Replacement Title showed “Kesono Kapasapi” as the owner. The name of the applicant who signed was shown as “Kesono Kapasapi” in the presence of Phillip Wariniki, although the signature was actually that of John Ya. Mr Wariniki was not called to clarify who had signed in front of him. The name and signature of the applicant was not stated to be the ILG, and there was no ILG seal. This gave the impression that the owner was a person.

23. The Application was signed on 30 January 2018, the application fee was paid on 31 January 2018, there is a Journal Number showing it was produced on 27 January but this has been overwritten to show 1 February 2018, and then the Lodgement Date is shown as 15 February 2018. It is difficult to see how an Application for which the fee was only paid on 31 January 2018 and subsequently lodged, was able to be published in the Government Gazette on the same day, on 31 January 2018.

24. On 11 April 2018, John Ya signed a Transfer in the presence of Sekinolo Sawala, showing the transferor as “Kesono Kapasapi”. The supporting Statutory Declaration signed by the 1^st Defendants has crossed out the reference to the ILG as the party, and replaced it with the words “Kesono Sawala”, and states that Sekinolo Sawala is an executive member and John Ya is the Chairman, of “Keseno Sawala”. This was not the name of the ILG or of the registered proprietor, and so could not have validly supported the transfer.

25. The 1^st Defendant’s evidence was contradictory. They acted sometimes on the basis that the title holder was the ILG, sometimes that it was a person named Kesono Kapasapi, and sometimes that it was a non-existent entity called Kesono Sawala.

26. The ROT’s evidence was that he accepted the application as sufficient to show that the title was lost, on 31 January 2018 he advertised his intention in the Gazette, on 1 February 2018 he advertised it in a newspaper, giving 14 clear days notice of his intention to issue a replacement title, no objections were received, and the replacement title was issued on 15 February 2018. He denied receiving any objection or caveat.

27. In the absence of evidence of an objection or caveat in the ROT’s records, the Plaintiffs have not shown that the ROT disregarded them.

28. The adequacy of the ROT’s records was not entirely satisfactory. For instance, on 1 June 2016, the Acting Deputy ROT had written a letter “To whom it may concern” which was said to be in relation to queries raised “on the legitimacy of the title held by one Mr. Kesono Kapasi”, and proceeded to say that the title was registered to Mr. Kesono Kapasi, it was transferred to him on 29 September 2004, he held indefeasible title, and had the right to transfer or deal with the title or however he wished, and said that it attached the ROTs’ copy of the title. As the title was not in the name of “Kesono Kapasi”, and as Kesono Kapasapi was not a person, the contents of the letter were untrue.

29. The 2^nd Defendants say that they found that the property was for sale through agents, Incentive Management Services. They offered to purchase the property for K1m if the title was provided. This offer was accepted by the two 1^st Defendants who described themselves as Chairman and CEO and Landlords of the property, on the letterhead of Incentive Management Services. On 18 January 2018 the 2^nd Defendants signed the Contract of Sale.

30. On 25 January 2018 the 2^nd Defendants produced three bank cheques for payment of the outstanding rates. On 12 and 14 March 2018 they produced a Bank cheque for K100,000.00 payable to Ona Lawyers, a Bank cheque for K948,500.00, payable to Waraniki Lawyers, and a Bank cheque for K20,000.00 payable to Incentive Management Services.

31. The transfer of the title was registered in the name of the 2^nd Defendants on 11 April 2018.

The 1^st Defendants

32. There was no evidence that the ILG was still in existence prior to the purchase of the property. It is most likely that it had in fact been earlier deregistered, because the title was not issued in the name of the ILG in 2004. The 1^st Defendants did not attempt to produce any records from the ILG Registrar showing that it was still existing.

33. The 2004 purchase of the property was funded by the two clans. The property and the proceeds of the sale of the property, therefore belonged to “Kesono Kapasapi” as the registered proprietor, being the names of the two clans who paid the purchase price. It was not the name of a person.

34. The documents produced by the 1^st Defendant were not sufficient to establish that the ILG was in existence, that the ILG or the Kesono and Kapasapi clans had agreed on 8 November 2017 to sell the property, or that the ILG had resolved on 17 December 2017 to sell the property. At its highest, the “Agreement to Sell the Property” showed that the Kesono and Kapasapi clans had agreed that the property could be sold.

35. None of the documents showed that the registered proprietor had authorised a sale to the 2^nd Defendants, or for Incentive Management Services to prepare a Contract of Sale and act as stake holder, or be paid K20,000.00 for selling the property. Apart from an unverified document purporting to show a payment of K10,000.00 on 22 March 2018 to Mikili Moi, for which the signature was completely different from the signature of Max Mickii Moi, there were no documents showing that any of the proceeds of sale of the property were received by Kesono Kapasapi or the Kesono and Kapasapi clans or by the purported ILG.

36. No explanation or evidence was provided by the 1^st Defendants in relation to the distribution of the K100, 000.00 paid to Ona Lawyers or K948, 500.00 paid to Wariniki Lawyers. There was no explanation for why the 1^st Defendants’ private business, Incentive Management Services, was paid K20,000.00 and there was no evidence that “Kesono Kapasapi” or the ILG had authorized any such payment.

37. There was no evidence that the ILG existed in 2017-2018, and in any event, the ILG was not the registered proprietor. The registered proprietor was the Kesono and Kapasapi clans, and there was no evidence that they had authorized the 1^st Defendants to obtain a replacement title. There was no reason for them to do this, when they held the Owner’s Copy.

38. The 1^st Defendants knew that the two clans held the Owner’s Copy. Even if they had asked the lead Plaintiff to give it to them, the fact that he did not give it to them, did not make it lost. It only meant that he did not authorize them to have it.

39. The 1^st Defendant’s conduct in then secretly applying for a replacement copy, without the knowledge or consent of the two clans, showed their dishonest intention to deal with the property without the registered proprietor’s knowledge or consent. This continued with the 1^st Defendant’s preparation and execution of a Contract and Transfer without the knowledge and consent of the registered proprietor.

40. There was no evidence that either the purported ILG or the Kesono and Kapasapi clans had received the proceeds of sale of their property, from the 1^st Defendants.

41. I am satisfied that the evidence is sufficient to raise a prima facie case of actual fraud by the 1^st Defendants. This would entitle the Plaintiffs to issue proceedings against the 1^st Defendants based on fraud, claiming damages for the loss which they have sustained, and an accounting of the monies received by the 1^st Defendants on behalf of the two clans or clan members.

The 3^rd Defendant

42. Possible irregularity in the Application for a Replacement Title signed on 30 January 2018, should have caused the ROT to make some enquiries. If the ROT believed that the registered proprietor was a person named Kesono Kapasapi, then the reference to “the executives of the owner ILG also requested Mr. Pulako Pale ...” to release the title, raised the possibility that the owner was an ILG, and not a person. If Mr. Pulako Pale was not the owner of the property, a question could have been raised as to why he was asked to release the title to them. Further, if the Application had been lodged on 31 January, it is difficult to see how the ROT could have received and considered the Application, satisfied himself that the Application was valid, prepared a Notice of Intention to Issue a Replacement, and allowed the 1^st Defendant to somehow have that Notice published in the Government Gazette all on the same day, on 31 January 2018. The Titles Office Work Sheet showed that the Official Copy – whether of the Application or of the State Lease is not clear– was lodged at 10.18am on 1 February 2018, after the Notice had already been gazetted.

43. These are all matters which may show that the ROT colluded with the 1^st Defendants, and did not properly satisfy himself that the Owner’s copy of the Lease had been lost, which could entitle the Plaintiffs to bring proceedings against the 3^rd Defendant for damages.

44. When determining fraud, the standard of proof requires a greater satisfaction depending on the gravity of the allegations made. It is insufficient to find fraud on the balance of probabilities, and may even require proof beyond reasonable doubt, (see Paga No. 36 Ltd v Joseph v Ealedona & ors (2018) PGSC 17).

45. There is sufficient evidence to find that the ROT did not detect fraud in the documents presented to him. However, the evidence is not sufficient to prove beyond reasonable doubt or even to a sufficiently high standard, that there was actual fraud by him.

The 2^nd Defendants

46. Similarly, the documents do not show actual fraud by the 2^nd Defendants. As was found in Koitachi Ltd v Zhang (2007) PGSC 11, when referring to the registered proprietor:

“The mere fact that he might have found out fraud if he had been more vigilant, and had made further enquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shewn that his suspicions were arised and he abstained from making enquiries for fear of learning the truth, ... fraud may be properly ascribed to him. A person who presents for registration a document which ... has been fraudulently or improperly obtained is not guilty of fraud if he honestly believes it to be a genuine document which can be properly acted upon.”

47. There was no evidence that the 2^nd Defendants knew of any lack of authority by the 1^st Defendants. The 2^nd Defendants were aware that the persons holding themselves out as acting on behalf of the registered proprietor, did not have the Certificate of Title, because they said that it had been lost, but they produced a replacement Certificate of Title issued by the ROT. The Lands Department records showed no caveat or other registrable interest entered on the title.

48. There was no evidence that the 2^nd Defendants should have known that the property was owned by the ILG, which in fact it was not, or by the two clans. The Lands Department records showed that the proprietor was “Kesono Kapasapi” and this was the name shown on the Contract. There might have been a doubt raised by the fact that the Transfer showed Kesono Kapasapi as the transferor but was signed by John Ya. Nevertheless, the Transfer was accepted by the ROT, was stamped, was provided by the 2^nd Defendants’ Bank to the ROT on 4 April 2018, and was duly entered on the Certificate of Title by the ROT on the 11 April 2018. There was no evidence that the 2^nd Defendants did not honestly believe that the documents were genuine.

49. In John Soto and ors v Our Real Estate (2018) PGSC 55, the Supreme Court firmly found that:

“Contrary to the Appellant’s contention, the fraud concerned must be actual fraud by the registered proprietor in procuring registration, not constructive fraud.”

50. The Supreme Court approved the findings in Papua Club Inc v Nasaum Holdings Ltd (2004) PGNC 178 and Paga No. 36 Ltd v Joseph Ealedona and ors (2018) PGSC 17, that “fraud” means fraud committed by the registered proprietor. The court in John Soto’s case went further and expressly found that the fraud by the registered proprietor must be actual, and not constructive fraud.

51. The 2^nd Defendants entered into a Contract of Sale, obtained finance, paid the purchase price, received a Certificate of Title issued by the ROT and became the registered proprietors. There was no evidence of actual fraud by them in any of those transactions.

52. Pursuant to S33 of the Land Registration Act, indefeasible title vested in the 2^nd Defendants on 11 April 2018. The Plaintiffs have not established any of the exceptions set out in S33 (1) of the Act, so as to entitle them to set aside the indefeasible title of the 2^nd Defendants as registered proprietor.

Conclusions

53. The Plaintiffs have not established actual fraud by the 2^nd Defendants, or any collusion between the 1^st and 2^nd Defendants, in the issue of the replacement Certificate of Title.

54. The Plaintiffs have established actual fraud by the 1^st Defendants, in applying for a replacement Certificate of Title when the 1^st Defendants were not the registered proprietor, or authorized to apply on behalf of the registered proprietor; the 1^st Defendant prepared and signed a Contract for Sale of the property of which they were neither the registered proprietor nor authorized by the registered proprietor to sell; they prepared and signed a Transfer which was incorrect and which they were not authorized by the registered proprietor to sign; they signed a statutory declaration which was untrue; paid themselves the proceeds of sale of the property which they were not authorized by the registered proprietor to be paid; they failed to pass on the proceeds of sale to the registered proprietor, and they failed to account to the registered proprietor for the proceeds of sale.

55. The Plaintiffs have made out fraud against the 1^st Defendants, but not against the 2^nd Defendants. The Plaintiffs have not established actual fraud against the registered proprietor, and so have not established fraud within the meaning of S33 (1) of the Land Registration Act.

56. As no exception under S33 (1) of the Land Registration Act has been established, neither the 3^rd Defendants’ decision to transfer the title to the 1^st Defendant, nor the 2^nd Defendants indefeasible title, can be set aside.

57. As the Plaintiffs have not made out their Grounds for Review, the relief sought in the Amended Statement must be refused.
58. I therefore make the following orders:

(a) The Plaintiff’s application for Judicial Review is refused.
(b) Each party is to pay its own costs.

___________________________________________________________Raymond Obora Lawyers: Lawyers for the Plaintiffs
Waraniki Lawyers: Lawyers for the First Defendant
Lomai Attorneys: Lawyers for the Second Defendant
Solicitor General: Lawyers for the Third & Fourth Defendant