N11178

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WS NO. 1489 OF 2015

BETWEEN:
GETRUDE NED
Plaintiff

AND:
EDNA MULAI BALIM
First Defendant

AND:
ANIS DAGE
Second Defendant

AND:
NATIONAL HOUSING CORPORATION
Third Defendant

MADANG:  NAROKOBI J
11 OCTOBER 2024;17 MARCH 2025

FRAUD – Constructive Fraud – Whether the facts as pleaded and led in evidence amount to constructive fraud.

CONTRACT LAW - 	Agreement to sell – Whether it is a contract of sale -Whether it is capable of being enforced given the requirements of the Frauds and Limitation Act 1988 and the National Housing Corporation Act 1990.

The Plaintiff paid the First Defendant K14,000.00 in an agreement to enter into a contract of sale, and then moved into her property, which was at that time a National Housing Corporation (NHC) property. K4,000.00 would be paid after the transfer of title. The First Defendant was a tenant of NHC. NHC did not transfer the property to the First Defendant, and after some time, the First Defendant went ahead and sold the property to the Second Defendant for K25,000.00. This time NHC issued the title to the First Defendant, who then transferred it to the Second Defendant.  

Held:

(1)	The transfer of title does not amount to constructive fraud. There is no irregularity in the way title was obtained. 

(2)	An agreement to enter into a contract of sale does not meet the requirements of s 4 of the Frauds and Limitation Act 1988.

(3)	Even if the agreement to sell in this case was valid and enforceable, it was statute barred under the Frauds and Limitation Act 1988 and void for not complying with s 65 of the National Houising Corporation Act 1990.

(4)	As there was some element of dishonesty on the part of the First Defendant, she will pay the Plaintiff’s costs in the fixed sum of K18,000.00. 

Cases cited

Camilus v Mota (2022) SC2210
Emas Estate Development Pty Ltd v Mea, Swokin, and The State [1993] PNGLR 215
H.R. Holdings Ltd v Taka (2023) SC2411
Kiso v Otoa (2011) N5098
Timothy v Timothy (2022) SC2282

Counsel

Mr Y Wadau for the plaintiff
Mr B Wak for the first and second defendants
No appearance for the third defendant

DECISION

1.	NAROKOBI J: This is a contested trial over a piece of property in Madang, described as Section 68, Allotment 31, Newtown, Madang, Madang Province (the property).

BACKGROUND

2.	The Plaintiff, Gertrude Ned has sued Edna Mulai Balim, Anis Dege and National Housing Corporation for constructive fraud, negligence and breach of agreement. Trial was conducted by affidavit. Only the Plaintiff and the First and Second Defendant, that is Edna Mulai Balim and Anis Dege tendered affidavits at trial. National Housing Corporation, the Third Defendant has not tendered any affidavit, nor did it participate in the proceedings. 

ISSUES

3.	The issue to determine is what is the appropriate cause of action in this matter? If the claim is for constructive fraud, then I will consider whether the elements of constructive fraud have been met? If it is not, then the claim will have to be for specific performance of the contract, in which case, the question arises as to whether the claim is statute barred for having been initiated after the six-year time limitation or if the agreement is at all valid under the Housing Corporation Act 1990.

THE LAW

4.	The law on whether fraud is actual fraud only or includes constructive fraud has not been settled by the Supreme Court (see Camilus v Mota (2022) SC2210 and Timothy v Timothy (2022) SC2282). Constructive fraud was first defined by Amet J (as he then was) in Emas Estate Development Pty Ltd v Mea, Swokin, and The State [1993] PNGLR 215 as acquisition of title where “...circumstances are so irregular and unlawful at the very outset to the subsequent transactions that it ought not to prevail.” Given the state of the law, it is open to me, to follow which of the Supreme Court decision, I should apply. The choice of which Supreme Court decision to apply was explained well in H.R. Holdings Ltd v Taka (2023) SC2411, which I adopt.

    EVIDENCE

5.	Both the Plaintiff and the First and Second Defendants have filed affidavits, while the Third Defendant did not file any affidavit, let alone defended the matter in court. I have tabulated the affidavits tendered below. The specific reference to the evidence is taken up in my analysis of the law and facts under my “Considerations.”

No	Date 	Description of document/item tendered	Exhibit No	
1		30.03.23	Affidavit Statement of Gertrude Ned, sworn 27/2/17 and filed on 29/3/17	“P1”	
2		30.03.23	Affidavit in Support of  the Notice of Motion to Amend the Statement of Claim by Gertrude Ned, sworn 28/2/18 and filed on 2/3/18	“P2”	
3		30.03.23	Affidavit in Support to Amend the Statement of Claim by Gertrude Ned, sworn 20/2/19 and filed on 20/2/19	“P3”	
4		30.03.23	Affidavit in Defence by Anis Dege, sworn 20/3/18 and filed on 23/3/18	“D1”	
5		30.03.23	Affidavit in Support by Anis Dege, sworn 29/6/18 and filed on 19/10/18	“D2”	
6		30.03.23	Affidavit in Support by Edna M Balim, sworn 29/6/18 and filed on 19/10/18	“D3”	
7		30.03.23	Second Defendants Defence by Anis Dege, sworn 13/11/18 and filed on 13/11/18.	“D4”	

6.	In summary the evidence tells the following story. The property was initially owned by the Third Defendant, the National Housing Corporation.  The First Defendant was a tenant of the Third Defendant.  The property came under a Home Ownership Scheme Policy, under the Give Away Scheme. Without the benefit of the title on hand, but only with an equitable interest that the property will be transferred to the First Defendant, the First Defendant entered into an agreement to sell the property to the Plaintiff for K18,000.00.  Of the agreed amount K14,000.00 was paid and K4,000.00 was to be paid after issuance of the title. Whilst the Plaintiff was waiting and following up with the First Defendant and the Third Defendant, the First Defendant went ahead and sold the property again to the Second Defendant. Offer was made by the First Defendant to reimburse the Plaintiff her money, but she refused. The First Defendant says that the Plaintiff has been using the property for rental income, and this was without having title to it. Third Defendant issued the title to the First Defendant who then effected a contract of sale with the Second Defendant, and the title to the property was transferred to the Second Defendant.  Plaintiff presently resides on the property.

CONSIDERATIONS

7.	I have followed the chronology of events from the evidence filed by both the Plaintiff and the Defendants, I do not see any good reasons provided by the First Defendant why it breached its agreement with the Plaintiff.  It is obvious that the First Defendant intended to sell the property to the Plaintiff because the Plaintiff was allowed to occupy the property for many years now. After selling the property to the Plaintiff, and getting K14,000.00, the First Defendant, then went ahead and sold the property to the Second Defendant for K25,000.00.  This is dishonest, and the First Defendant should not have done that.  It is surprising that the Third Defendant did not facilitate the transfer of title to the Plaintiff despite repeated requests. 

8.	One wonders why the Third Defendant did not transfer the title to the Plaintiff, for many years but was quick to do it for the Second Defendant?  This raises many questions against the Third Defendant. No answer is provided by the Third Defendant as they have not participated in the proceedings.

9.	Having said that, the transfer of title does not amount to constructive fraud. There is no irregularity in the way title was obtained. While the Plaintiff pleads and submits that the Second Defendant bribed the Third Defendant to transfer the title, no evidence was led to support this assertion. The clam that the transfer was irregular being contrary to s 67 of the National Housing Corporation Act is not borne out by the evidence. Names of persons, amounts of money exchanging hands and who received it are not in evidence. The property was transferred from the Third Defendant to First Defendant who then transferred it to the Second Defendant, after the First Defendant sold the property to the Second Defendant under a contract of sale. There is no fraud committed by the National Housing Corporation or the Second Defendant.

10.	Plaintiff’s allegations of bribery have therefore not been substantiated with any evidence at all. They are only assumptions surrounding the claim in the statement of claim and should not have been pleaded if no evidence was going to be led.

11.	What that means, is that the Plaintiff’s cause of action is in specific performance of a contract of sale. There is an agreement to sell, but there was no contract of sale. Money have exchanged hands, but it is not a contract of sale in the legal sense of the term. A contract of sale of land meets the requirements of the Land Act 1996, and under s 4 of the Frauds and Limitation Act 1988 must be in writing. An agreement to sell, does not meet this requirement.  Even if it did, two other difficulties remain.

12.	Firstly, under s 16(1)(a) of the Frauds and Limitation Act the cause of action has expired. It accrued when the agreement to sell was signed, that was on 22 April 2004. Plaintiff had until 22 April 2010, that is six (6) years to file proceedings. Proceedings were filed in 2015, some five (5) years later, well after required date, and they are therefore statute barred.   

13.	Secondly, the Plaintiff has not satisfied s 65 of the National Housing Corporation Act:

65. Restriction of transfer, etc.

Where, without the consent in writing of the Corporation, a person purports to—

(a) sell or contract to sell; or

(b) mortgage; or

(c) lease or sub-lease; or

(d) transfer; or

(e) assign,

any property in which the Corporation has an interest under this Part, the sale, contract, mortgage, lease, sub-lease, transfer of assignment is void and of no effect.

14.	When the Plaintiff and the First Defendant approached the Third Defendant’s representative in Madang, they should have obtained a written confirmation in compliance with s 65 of the National Housing Corporation Act. Failure to comply with this, would render any agreement to sell invalid under statute. In any case, there was no contract of sale. There was only an agreement to sell. The most that the Plaintiff is entitled to, is a reimbursement of the money she paid the First Defendant.

15.	I note that a similar set of facts occurred in Kiso v Otoa (2011) N5098 where an agreement to sell, was not recognised. The result of it all is that the proceedings are dismissed, as the Plaintiff has not established any of the causes of action pleaded in the statement of claim. 

16.	Except for any specific orders for costs that were made in the proceedings, each party should bear their own costs.  I am not very impressed with the way the Plaintiff has dragged this case.  It was commenced in 2015, and it is now 2025. If it were not for the dishonest actions of the First Defendant I would have ordered costs against the Plaintiff. The First Defendant will instead pay the Plaintiff’s costs, for having misled her into believing that she would sell the property to her. K18,000.00 fixed costs would be appropriate in the circumstances.

CONCLUSION

17.	The Plaintiff has not shown on the balance of probability a cause of action in fraud, breach of contract or negligence as pleaded. This will mean that the proceedings will be dismissed. Consequent orders made will not take effect until after the expiry of 40 days, to allow for any appeal and also considering that the Plaintiff has been occupying the property for a long period of time, 90 days will be given to vacate the property. 

ORDERS

18.	The formal orders of the court are as follows:

1.	The entire proceeding is dismissed.

2.	The title issued to Anis Dege for the property described as Section 68, Allotment 31, Newtown, Madang, Madang Province is confirmed.

3.	The Second Defendant, Anis Dege, is at liberty to enforce his title to the property, after the expiry of 90 days from the date of this order.

4.	Edna Mulai Balim, the First Defendant will pay Gertrude Ned, the Plaintiff, costs in the fixed sum of K18,000.00.

5.	The Second and Third Defendant will pay their own costs. 

6.	Orders for costs now, do not override any specific orders for costs made during the course of the proceedings.

7.	The matter is considered determined, and the file is closed.

8.	The time for the entry of the orders is abridged, which shall take place forthwith.

19.	Judgment and orders accordingly.

 ________________________________________________________________
Lawyers for the plaintiff: Young Wadau Lawyers
Lawyers for the first and second defendant: Bradley & Company Lawyers