Gaudi v The Minister for Lands and Physical Planning [2024] PGNC 185; N10854 (14 June 2024)

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BETWEEN:
HEAU GAUDI for herself and on behalf of Gaudi Edea, Vagi Frank, Tau Legu, Aria Manoka, Guba Biri and Mase Uda
Plaintiff

LAND – compulsory acquisition of freehold land – just compensation and just terms – three valuation reports – general principles in determining the amount of compensation payable – principles considered

Trial by affidavits where the plaintiff sought to prove just compensation for compulsory acquisition by the State of her freehold land.

Cases Cited
Baleen No 28 Ltd v Allan [2019] SC1868
Frame v Minister for Lands Surveys and Environment [1979] PNGLR 626
Minister for Lands v Frame [1980] PNGLR 433
Mogai Ltd v Tolopa [2021] N9360
Opi v Telikom PNG Ltd [2020] N8290
Paki v MVIL [2010] SC1015
Yal v Mission of the Holy Ghost (New Guinea) Property Trust [2020] N8342

Legislation
Constitution, National Goals and Directive principles, s53(2)
Judicial Proceedings (Interest on Debts and Damages) Act Chapter 52
Land Act 1996, ss14, 23, 47
Valuation Act chapter 327, s1

Counsel
Mr Allan Mana, for the Plaintiffs
Mr Russel Uware, for the First and Second Defendants

1. BRE, AJ: This matter concerns compensation for construction of the Taurama Road in the National Capital District through the Plaintiff's freehold land. Liability is not disputed as default judgement was entered against the first and second defendants on 13 December 2022.

2. The plaintiffs are owners of freehold land described as Portion 1074, Milinch Granville, Fourmil of Moresby, which is within the trajectory of the Taurama Road in the National Capital District. The first defendant compulsorily acquired the land on 24 May 2019. The evidence is that the plaintiffs have not been compensated by the compulsory acquisition of their land. The plaintiffs engaged a valuer in August 2021, who valued the land at K2,800,000.00

3. At this hearing for assessment of damages, the plaintiffs seek compensation of K2,800,000.00, pre-judgement interest of 3% pursuant to Section 47 of the Land Act 1996, 2% post judgment interest against the first and second defendants, 8% interest against the third defendant, and costs on full indemnity basis.
The Plaintiff relies on the following Affidavits: -

Moses Kila, the Acting Valuer General put in an Affidavit filed 03 March 2023(Doc 16) after Court directions were issued on 13 December 2022.

4. The main issue for deliberation concerns the value to be attributed as just compensation for the compulsory acquisition of the plaintiffs' land by the State defendants.

5. In my deliberations, I perused and have taken into account the following laws:- the Land Act, the Valuation Act Sections 1, 79 and 80, the Constitution section 53 and the National Goals and Directive Principles, Judicial Proceedings (Interest on Debts and Damages) Act Chapter 52 and the cases of Yal v Mission of the Holy Ghost (New Guinea) Property Trust [2020] N8342, Frame v Minister for Lands Surveys and Environment [1979] PNGLR 626, Minister for Lands v Frame [1980] PNGLR 433, Baleen No 28 Ltd v Allan [2019] SC1868, and Mogai Ltd v Tolopa [2021] N9360.

5. In deciding the quantum of compensation that the plaintiffs are entitled to, I am guided by what the law states ought to be the compensation payable for compulsory acquisition and in considering that, I have had regard to all the circumstances surrounding the land and its acquisition by the first defendant. My decision is guided by the evidence adduced, submissions of counsel and the law.

6. After a careful perusal of the law outlined above, I have compiled the following considerations to guide me in deciding the value of just compensation. These are:-

7. In considering these factors, the key evidentiary matters which will guide my determination are:-

8. There is sufficient evidence that the date of compulsory acquisition by the State through the Minister for Lands and Physical Planning of the plaintiffs' land is 24 May 2019.

9. Three valuation reports were obtained at various times some years after the acquisition date and produced into evidence. I summarise these below:

Evidence	Property	Area covered	Date of Valuation Report	Valuation rate	Total value
Affidavit of Heau Edea Gaudi filed 07 Dec 2022	P1074	2.0377ha	30 August 2021	1) K87.5/sqm or 2)K137.50/sqm	K2.8million
Affidavit of Allan Mana filed 10 Dec 2022	P1074	2.0377ha	30 August 2021	1) K87.5/sqm or 2)K137.50/sqm	K2.8million
Affidavit of Moses Kila filed 03 March 2023	P4145 (formerly P 1074)	0.9830ha or 9830sqm	28 February 2023	K100.00 - K130.00 but adopt K105/sqm	K1,030,000.00
Affidavit of Luke Ibi filed 11 Dec 2023	P4145 (formerly P 1074)	2.0363ha	08 August 2023	K100.00 - K130.00/sqm, adopted K130/sqm	(K2,646,800) -value not stated in report but arrived at by K130x20363

10. It can be seen that the valuation rate varies in all reports with an average rate of between K120.00 per square metres. There are variations in the area covered and the valuation basis. I have perused the three valuation reports and note that the two valuation reports relied on by the plaintiffs do not clearly indicate how many hectares of the land was compulsory acquired by the State.

11. The survey done by the plaintiffs on 20 April 2021 agreed with the survey of the land by the Acting Valuer General of the length and area of the land compulsory acquired.

12. From the various maps relied on in the evidence, it is clear to me that the road construction did not run through the centre of the plaintiffs' lands but closer to a section of the border that was nearer to the Taurama Barracks area and covered some length of its boundary but not the whole area, more particularly on the boundaries of what is now known as Portion 4145.

13. It is not disputed that Portion 4145 is formerly Portion 1074. I accept the acting Valuer General's evidence that Portion 1074 has since been further subdivided. The subject land is freehold land held as tenants in common. Portion 4145 was registered, a year after the acquisition date, on 10 August 2020 to Heau Gaudi, Rev Frank Vagi, Legu Nou, Ovia Manoka, Kidu Idau and Rev Nou Mase.

Portion 1074 was registered earlier on 5 June 1972 to Gaudi Edea, Vagi Frank, Tau Legu, Aria Manoka, Guba Biri and Mase Uda as tenants in common. I note that some of the plaintiffs' names appear in both title deeds. I infer that the naming difference could be due to changes in family circumstances. There is no dispute about the title holders so I will not dwell any further on this.

14. There are some discrepancies between the valuation reports. It is not clear why the plaintiffs' Valuers did not reference Portion 4145, a recent title which covers the compulsorily acquired lands. The title existed for two years before the plaintiffs' valuers compiled the two valuations, and I infer that the plaintiffs would know of the change in registration status of Portion 1074 and Portion 4145.
15. Further, I could not deduce from the valuation reports the length of the plaintiff's property that the road was on. Was it 2.036hectares or 0.9830 hectares? What is clear from the evidence is that the road corridor is 40metres wide and occupies a total length of 12.260 hectares covering areas known as Taurama Bypass, Tuna Bay and Surf Club Road which I take as not running through the length and breadth of the plaintiffs' entire lands.
The plaintiffs' two valuation reports refer to site areas with measurements of 2.0377hectare and 2.036 hectares for Portion 1074. I could not ascertain from the title deed how many hectares Portion 1074 covered; however, it is clear from the title deed of Portion 4145 that it covers a total area of 51.44 hectares. On that basis, I infer that Portion 1074 covers a much larger area given its size on the map compared to Portion 4145.

16. The evidence of the Acting Valuer General is that the land compulsorily acquired is road access which covers 0.9830 hectares of Portion 4145 formerly Portion 1074. I am inclined to accept the evidence of the Acting Valuer General because he produces supporting maps which clarify the lands acquired and he also clarifies the basis of his valuation. He deposes that his valuation is on the unimproved value of the land as it was done two years after the construction of the road and he could not assume 'what structural, site improvements and other improvements were there beforehand'.
The plaintiff's valuation reports do not indicate this basis of valuing the land. The first of the plaintiffs' valuation report is based on the cost of construction of the entire road plus current open market rates while the second valuation report is based on current market evaluation of comparable sales of land. I deduce from the plaintiffs' valuation reports that they are based on the state of the land as developed and factor its potential increased value given what I infer would be an increase in the valuation brough about by the road access and improvements in reticulation services throughout the area.
Section 23 of the Land Act requires valuation of the land at the date of acquisition and to include or isolate any damage done to the severance of the land, and the enhancement or decrease to the value of the land at the date of acquisition. These aspects are not covered in the plaintiff's valuation reports.

17. As to the second criterion to decrease any increase in the value of the land because of the road, that was factored by the Acting Valuer General to an extent where he focused his valuation only on the unimproved value of the land. The term 'unimproved value' is defined in Section 1 of the Valuation Act to mean:-

“unimproved value”, in relation to land, means the capital sum that the fee simple of the land might be expected to realize if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that the improvements on the land (if any), other than ground improvements, did not exist at the date to which the valuation relates, less the Ground Improvements Allowance (if any) applicable to that land;

(Emphasis added)
18. The third consideration is to apply the National Goals and Directive Principles( 'NGDPs') and the public interest as required by Section 53(2) of the Constitution. In doing so, I must balance the competing interests of the plaintiffs and the State. It is a matter of the plaintiffs sacrificing their personal rights and interests in their land for the common good to bring about development to the area.

According to Heau Gaudi Edea's evidence, prior to the road, the lands were used for gardening and for fishing after their people moved from Pari Village to their ancestral lands in Taurama from 1972. There was little road access and travel was by sea or on foot to the nearest road to the Taurama Barracks. This demonstrates to me that the land was largely undeveloped, and the method of valuation used by the Acting Valuer General to focus only on the unimproved value of the land alone, reflects this and is one I find acceptable and meeting the requirements of Section 23 of the Land Act to determine the value at the date of acquisition, which is the unimproved value of the land.

19. In factoring the NGDPs principles, Principles 2 and 3 on equality and participation, and natural resources and environment require development for the common good and interests in land be considered when developing natural resources, which to me is catered for by the just compensation right guaranteed by Section 53 of the Constitution to those whose lands are compulsorily acquired by the State. The compulsory acquisition converts the plaintiffs' right in and to the land to a right to be compensated in monetary terms pursuant to Section 14 of the Land Act.

Freehold land provides for ownership of land without many restrictions that would typically apply to State Leases such the payment of fees and in observing improvement covenants. As to whether this warrants a higher value consideration or not, has not been addressed by the Valuers nor Counsel. Nevertheless, I find that it is not the entire or majority of the plaintiffs' land that has been compulsorily acquired. The plaintiffs still maintain most of their land.

The road is a good development that benefits a large population residing in the area to access land transport and basic essential reticulated services such as water, electricity etc,. The road development will also improve the value of landholdings in the area.

20. In Yal v Mission of the Holy Ghost, His honour Cannings J considered dicta in Minster for Lands v Frame and Section 53(2) of the Constitution to formulate a two-step process in ascertaining 'just compensation on just terms'. Step 1 involved determining compensation in the conventional sense from valuation reports and step 2 included considering the NGDP and the public interest. His honour considered that the K50million valuation report would cause a significant strain on State finances which would not be in the public interest and discounted it by 90%. His honour then considered the traditional landowners and considered that just compensation to all the plaintiffs under Section 53 Constitution would be to double the 90% discounted conventional amount. Here, I do not consider the amount of K1.030,000.00 a significant strain on the State's finances and accept it as just compensation in 'money value'^[1] for the land to the plaintiffs.

21. I am also bound to adopt the reasoning of the Supreme Court in Baleen No 28 Ltd v Allan to apply the following factors in considering the value of the land: -

" 4) When valuing the land at the date of acquisition, some of the matters that may be taken into account are:

Bullet points 2, and 4 do not apply as the land is not registered as a State Lease but freehold land. About the plaintiff's evidence, the second valuation relied on by the plaintiffs does present some comparable sale prices of properties, the two comparable sales I find may be relevant were comparable sales (3) and (4) which were sold as industrial land. However, I find that that valuation report fell short of clarifying whether it related to the entire acreage of Portion 1074 or more relevantly Portion 4145 or whether the 2.0363 hectares referred to in the report is the road access area.

Further, all three valuation reports do not indicate whether there are any differences in value between the sale of freehold land, customary land and State Lease. Freehold and customary land requires further steps to be taken to convert the land to State Lease and be more marketable, I infer these additional steps may affect the value of the land but have not been clarified in the reports.

22. In Baleen No 28 Ltd v Allan the Supreme Court held that the trial judge should not reject the valuation reports that were prepared after the acquisition date. The Supreme Court considered the surrounding circumstances of the case and settled at an average rate of the property as the true value of the property, after comparing the two valuation reports.

23. Here, all three valuations were compiled after the date of acquisition and road construction and do not provide any indication of what its value would be prior to the acquisition date or the commencement of the road construction. The valuation reports were respectively prepared two years and four years after the acquisition date. Therefore, I am careful to ascertain from the valuation reports if allowance or disallowance was made by the three Valuers for the increase or decrease to the value of the land after the road was completed. To me, the only report that came close to factoring that was the Acting Valuer General's report prepared four years after the acquisition date on directions by the Court.

24. From the caselaw I have perused, I have deduced that the Court has arrived at various ways to formulate what it considers just compensation in compulsory acquisition cases. In Minster for Lands v Frame the Court considered just compensation in money value of the land, in Yal v Mission of the Holy Ghost the Court considered what would be just compensation, settled for the lower of the two valuation reports but discounted it by 90% by balancing that with the State's interest than doubling the discounted amount to cater for all the plaintiffs and the traditional landowner beneficiaries. In Baleen No 28 Ltd v Allan the Court considered the true value of the land as the average rate from two valuation reports that were in evidence.

Counsel for the State submits that I should apply the 90% discount method in Yal v Mission of the Holy Ghost to the lower of the two plaintiffs valuation reports, while the plaintiffs counsel submits that I should accept the lower of the two plaintiff's valuation reports or rely on Baleen No 28 Ltd v Allan and apply the average valuation rate, which would be K130.00/sqm.

With due respect, I do not consider the discount method in Yal v Mission of the Holy Ghost nor the average rate method in Baleen No 28 Ltd v Allan applicable to this case as the factual circumstances and landholdings are different and can be distinguished.

I am therefore left with considering which of the three reports reflect the 'true value' or 'money value' of the land which will render just compensation to the plaintiffs. Although counsel for the plaintiffs criticised the valuation rate of K105.00/sqm applied by the acting Valuer General, I do not consider the critique sufficient to ignore the Acting Valuer General's Valuation. The evidence does not support counsel's critique. The plaintiffs' second valuation did not criticise the Acting Valuer General's report. An expert report criticised by another expert in the field will have merit. Nevertheless, I understand the Acting Valuer General's use of the K105/sqm rate as discounting the normal market rate of K100-K133.00/sqm as factoring the unimproved value of the land. I infer that the rate of K130/sqm and the rates relied on in the plaintiffs' valuation reports are the normal market rates at that time which would factor the road development and any improvements. Again, these aspects were not clarified in the plaintiffs’ valuation reports but is a reasonable inference to be drawn.

25. Given all these considerations, I give reasonable weight to the Acting Valuer General's report and conclude that it sufficiently provides valuation for the road access and meets the requirements of the law and the considerations covered. Therefore, it is my judgement that a fair and just compensation to the plaintiffs is the amount of K1,030,000.00 for 0.9830 hectares as valued by the Acting Valuer General which I consider to be the true value of the land or closest to its true value as near as possible at the date of the acquisition.

26. In terms of the final consideration of conduct by the State in compulsorily acquiring the land, there is no contest that the State has breached the compulsory acquisition process of the Land Act. The plaintiffs have not sought any remedy for breach of these provisions but have produced evidence to demonstrate their efforts to inform the defendants so the compulsory acquisition process and compensation can be organised. Efforts to bring the State to comply with due process failed resulting in the plaintiff incurring costs to defend its rights to just compensation. On that basis, the plaintiffs submission for costs on an indemnity basis is considered. Caselaw dictates that costs on an indemnity basis are awarded as a punishment for blameworthy conduct by a party or its lawyer. See Paki v MVIL (2010) SC 1015 and Opi v Telikom PNG Ltd [2020] N8290. Çounsel for the defendants submits that there were attempts to settle but failed. However, that evidence is not adduced by the State but given from the bar table which I place less weight to. I accept the plaintiffs' submissions that it incurred costs as a result of the defendants' inaction. There is evidence that the plaintiffs' had forewarned the State earlier by letter dated 10 December 2021 to the first and third defendants, that it would be seeking costs on an indemnity basis. I find there is blameworthy conduct on the part of the defendants in not complying with the compulsory land acquisition process. Therefore, my judgement is that costs on an indemnity basis are an appropriate award against the defendants.

27. I consider interest pursuant to Section 47 of Land Act of 3% per annum is the appropriate rate to award as it specifically relates to the amount of compensation for land that has been compulsory acquired. I do not consider that the Judicial Proceedings (Interest on Debts and Damages) Act Chapter 52 applies here as it is of a more general application. To apply both would to me cause a conflict of laws. The statutory law of interpretation provides that where there is a conflict of laws, the specific law applies to the exclusion of the general law.

(1) Subject to this Division, an amount of compensation payable in respect of an acquisition by compulsory process under this Act (other than an amount payable to a mortgagee on which interest is payable under Section 39) bears interest at the rate of 3% per annum from the date of acquisition of the land to–

28. Thus, consistent with Section 47 of the Land Act, I award interest at a rate of 3% per annum on the amount of K1,030,000.00 to commence from the date of acquisition of the land, been 24 May 2019, to the date on which payment in full is made by the defendants to the plaintiffs.

1) The amount of compensation to be paid to the plaintiffs is K1,030.000.00 as just compensation for the compulsory acquisition of 0.9830 hectares of land described as Portion 4145 Milinch of Granville, Fourmil, Moresby, NCD (formerly known as Portion 1074).

2) Judgement is entered in favour of the plaintiffs, to be paid by the defendants, for the amount of K1,030.000.00

3) Interest is awarded to the plaintiffs at a rate of 3% per annum on the amount of K1,030,000.00 to commence from the date of acquisition of the land, been 24 April 2019, to the date on which full payment is made by the defendants to the plaintiffs.

4) Costs of and incidental to these proceedings are awarded to the plaintiffs to be borne by the defendants on an indemnity basis.

5) Time for entry of the orders is abridged to the date of settlement by the Registrar of the National Court which shall take place, forthwith.

Judgement accordingly,.
__________________________________________________________________________________
Allan Mana Lawyers: Lawyers for the Plaintiff
Acting Solicitor General: Lawyers for the First and Second Defendants.

National Court of Papua New Guinea

Gaudi v The Minister for Lands and Physical Planning [2024] PGNC 185; N10854 (14 June 2024)