Wauwe v National Housing Corporation [2022] PGNC 2; N9382 (7 January 2022)

N9382

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS (HR) NO 45 OF 2019

JOHN WAUWE
Plaintiff

V

NATIONAL HOUSING CORPORATION
First Defendant

ALPHONSE MOROI
Second Defendant

ROBERT KOPAOL & MARGARET KOPAOL
Third Defendants

TRUE VISION INVESTMENTS LIMITED
Fourth Defendant

REGISTRAR OF TITLES
Fifth Defendant

Waigani: Cannings J
2021: 10^th November, 22^nd, 24^th December
2022: 7^th January

LAND – government land within urban area – whether fraud involved in granting or transfer of State Lease – meaning of “fraud” in Land Registration Act – actual fraud – constructive fraud.

The plaintiff was a departmental head in the National Public Service, occupying an urban property of which the National Housing Corporation (NHC, the first defendant) was registered proprietor. He was in 1983 included in the Morgan Scheme under which the NHC was obliged to enter into a contract of sale of the property to him for a prescribed price and transfer it to him. He claims that by 1985 he paid the full purchase price but the property was not transferred to him and his repeated attempts to have it transferred came to nought. He claims that he or his family continued to occupy the property for many years until others moved in and drove them out. He commenced legal proceedings in 2019 to assert his rights in respect of the property, which he claims is lawfully his. It transpires that in 2007 the NHC entered into a contract of sale of the property to the second defendant, who moved in and occupied the property until 2014. However, no transfer to the second defendant ever occurred. Instead, the NHC entered into another contract of sale with the third defendants and title was transferred to them in 2008. In 2014, the third defendants entered into a contract of sale with the fourth defendant and title was transferred to it. At the time of trial in 2021, the fourth defendant remained the registered proprietor of the State Lease over the property. The plaintiff claimed that the fourth defendant’s title is defective and that this is a case of fraud as he by 1985 had met all conditions for transfer of the property to him under the Morgan Scheme and all subsequent transactions including the contracts of sale of the property by the NHC to the second and third defendants, and the transfers to the third defendant and the fourth defendant were dubious and irregular and affected by fraud. The plaintiff sought declarations and orders that would result in his being declared the registered proprietor of the property. The NHC failed to participate in the trial. The second, third and fourth defendants participated and all opposed the relief sought by the plaintiff.

Held:

(1) The starting point for resolution of any dispute over title to any government land, including the subject land, is the principle of indefeasibility of title: once a lease of land from the State is registered, an indefeasible title is conferred on the registered proprietor, subject only to the exceptions in s 33(1) (protection of registered proprietor) of the Land Registration Act, including s 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”.

(2) “Fraud” means actual fraud or constructive fraud (which refers to any transfer or acquisition of title in circumstances that are so unlawful, unsatisfactory, irregular or dubious, as to be tantamount to fraud), involving the registered proprietor.

(3) Here, even if the plaintiff’s allegations regarding his fulfilling all conditions under the Morgan Scheme for transfer of title to him, and various contracts for sale of the property to the second and third defendants, are upheld, and the various transactions are regarded as instances of fraud, there is no evidence or allegation of involvement by the fourth defendant, which is the registered proprietor. The plaintiff’s case fails.

(4) The proceedings were dismissed. The plaintiff and the NHC (a defendant which, being a government body, should be actively involved in cases such as this) shall pay the costs of the proceedings to the second, third and fourth defendants.

Cases Cited

The following cases are cited in the judgment:

Awaincorp Ltd v Kas (2015) N5862
Berr v Yango (2015) N5859
Elizabeth Kanari v Augustine Wiakar (2009) N3589
Emas Estate Development Pty Ltd v John Mea [1993] PNGLR 215
Eric Kiso v Bennie Otoa & Ken Wutnalom (2013) SC1222
Kapiura Trading Ltd v Bullen (2012) N4903
Koitachi Ltd v Walter Schnaubelt (2007) SC870
Kol Toki v Moeka Morea Helai (2016) SC1558
Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120
Mosoro v Kingswell Ltd (2011) N4450
Muku v Yama (2019) N7948
National Council of Young Men’s Christian Association of PNG (Inc) v Firms Services Ltd (2017) SC1596
Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109
PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126
Tikili v Home Base Real Estate Ltd (2017) SC1563
West New Britain Provincial Government v Kimas (2009) N3834

Counsel

S Phannaphen, for the Plaintiff
P P Yapa, for the Second Defendant
J Ole, for the Third Defendants
R J Mannrai, for the Fourth Defendant

7^th January, 2022

1. CANNINGS J: In the early 1980s, the plaintiff, John Wauwe, was a departmental head in the National Public Service, occupying a residential property in Lawes Road, Konedobu, National Capital District, of which the National Housing Corporation (NHC, the first defendant) was registered proprietor. The property is formally described as Section 34, Allotment 12, Granville.

2. The plaintiff was in 1983 included in the Morgan Scheme under which the NHC was obliged to enter into a contract of sale of the property to him for a prescribed price, K15,267.63, and transfer it to him. He claims that by 1985 he paid the full purchase price but the property was not transferred to him and his repeated attempts to have it transferred came to nought. He claims that he or his family continued to occupy the property for many years until others moved in and drove them out.

3. He commenced legal proceedings in 2019 to assert his rights in respect of the property, which he claims is lawfully his.

4. It transpires that in 2007 the NHC entered into a contract of sale of the property to the second defendant, Alphonse Moroi, who moved in and occupied the property until 2014. However, no transfer to the second defendant ever occurred. Instead, the NHC entered into another contract of sale with the third defendants, Robert Kopaol and Margaret Kopaol, and title was transferred to them in 2008.

5. In 2014, the third defendants entered into a contract of sale with the fourth defendant, True Vision Investments Ltd, and title was transferred to it. At the time of trial in 2021, the fourth defendant remained the registered proprietor of the State Lease over the property.

6. The plaintiff claims that the fourth defendant’s title is defective and that this is a case of fraud as he by 1985 had met all conditions for transfer of the property to him under the Morgan Scheme and all subsequent transactions including the contracts of sale of the property by the NHC to the second and third defendants, and the transfers to the third defendants and the fourth defendant were dubious and irregular and affected by fraud. The plaintiff seeks declarations and orders that would result in him being declared the registered proprietor of the property. The NHC failed to participate in the trial. The second, third and fourth defendants participated in the trial and all opposed the relief sought by the plaintiff.

ISSUES

7. The following issues arise:

1 Has the plaintiff proven fraud by the registered proprietor?

2 Has the plaintiff proven fraud in any of the other transactions or transfer of interests in the property?

3 What declarations or orders should the Court make?

1. HAS THE PLAINTIFF PROVEN FRAUD BY THE REGISTERED PROPRIETOR?
   

8. This is the critical issue for two reasons. First, the principle of indefeasibility of title in regard to government land in Papua New Guinea dictates that under our Torrens Title system of land registration, once a lease of land from the State is registered, indefeasible title is conferred on the registered proprietor. Ours is a system of title by registration, not registration of title. This is subject only to the exceptions in s 33(1) (protection of registered proprietor) of the Land Registration Act, including s 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”.

9. The registered proprietor is in a very strong position whenever there is a dispute over title to land. It is presumed that the registered title is good title. Those who dispute registered title bear the onus of proving that one of the exceptions in s 33(1) applies and the most common one is fraud.

10. What does “fraud” mean? Is it confined to actual fraud? Or does it extend to constructive fraud? That question has been burning in PNG since the decision almost 30 years ago in Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215, which was the genesis of the notion of constructive fraud. The principle has been developed and applied in the Supreme Court in cases such as PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126, Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120, Kol Toki v Moeka Morea Helai (2016) SC1558 and Tikili v Home Base Real Estate Ltd (2017) SC1563.

11. I have applied the principle in numerous National Court cases in which the question has arisen whether the circumstances of registration of an interest in land are so irregular, unlawful, dubious or unsatisfactory as to be tantamount – in the absence of actual fraud – to fraud, eg 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, Awaincorp Ltd v Kas (2015) N5862.

12. But it seems that as many times as the Supreme Court upholds the principle of constructive fraud, differently constituted Supreme Court benches say the opposite: fraud means actual fraud. Cases in this category include Koitachi Ltd v Walter Schnaubelt (2007) SC870, Eric Kiso v Bennie Otoa & Ken Wutnalom (2013) SC1222 and National Council of Young Men’s Christian Association of PNG (Inc) v Firms Services Ltd (2017) SC1596.

13. Whichever approach is taken to the meaning of fraud, it needs to be proven that the registered proprietor was involved in it. This is the second reason I have framed the critical issue to be whether it is proven that the registered proprietor is involved in any fraud. A plaintiff might be able to prove constructive fraud, or even actual fraud, in transactions that preceded the transfer of title to the registered proprietor. But if there is no proof of involvement in the fraud by the registered proprietor, the plaintiff’s case will fail. Examples of application of this principle are found in my decisions in Berr v Yango (2015) N5859 and Muku v Yama (2019) N7948.

14. In the present case the plaintiff alleges fraud in:

• the failure of the NHC to transfer the property to him in 1985 pursuant to the directions given to the NHC under the Morgan Scheme;
  
• transfer of the State Lease from the NHC to the third defendants in 2008;
  
• transfer of the State Lease from the third defendants to the fourth defendant in 2014.
  

15. There is some evidence to support contentions (1) and (2) but none regarding contention (3). I assess the fourth defendant to be an innocent party who purchased the property for valuable consideration in good faith. I detect no illegality or irregularity in the registration of the transfer to the fourth defendant.

16. This means that even if the plaintiff’s allegations regarding his fulfilling all conditions under the Morgan Scheme for transfer of title to him, and various contracts for sale of the property to the second and third defendants, are upheld, and the various transactions are regarded as instances of fraud, there is no evidence or allegation of involvement by the fourth defendant, which is the registered proprietor. It follows that the plaintiff’s case fails. There is no basis for granting to him any of the relief he seeks.

2. HAS THE PLAINTIFF PROVEN FRAUD IN ANY OF THE OTHER TRANSACTIONS OR TRANSFERS OF INTEREST IN THE PROPERTY?
   

17. No, I find no evidence of actual fraud and insufficient evidence of constructive fraud in any of the instances of fraud alleged by the plaintiff.

3. WHAT DECLARATIONS OR ORDERS SHOULD THE COURT MAKE?
   

18. These proceedings must be dismissed. Costs will follow the event, subject to the proviso that the NHC, named as a defendant but not appearing, being a governmental body that should be actively involved in cases such as this but failed to cooperate, shall bear with the plaintiff the obligation of meeting the costs of those defendants that did appear and inevitably incurred costs in defending the proceedings.

ORDER

(1) The proceedings are dismissed and all relief sought by the plaintiff is refused.

(2) The plaintiff and the first defendant shall pay the costs of the proceedings of the second, third and fourth defendants, on a party-party basis, which shall, if not agreed, be taxed.

__________________________________________________________________
Lhyrn Lawyers: Lawyers for the Plaintiff
Nandi Lawyers: Lawyers for the Second Defendant
Redman Lawyers: Lawyers for the Third Defendants
Mannrai Lawyers: Lawyers for the Fourth Defendant