Mamun Investments Pty Ltd and Warekia, President of National Council of the Young Men's Christian Association Inc v Ponda and Kombo, representing the Association known as the Mount Hagen Young Men's Christian Association Inc [1995] PGSC 15; [1995] PNGLR 1 (31 August 1995)

1995

PNG Law Reports 1995

[1995] PNGLR 1 - Mamun Investments Pty Ltd and Noa Warekia, President of National Council of the Young Men's Christian Association Inc v Paul Ponda and Elias Kombo, representing the Association known as the Mount Hagen Young Men's Christian Association Inc 

[1995] PNGLR 1

SC490

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

MAMUN INVESTMENTS PTY LTD AND

NOA WAREKIA, PRESIDENT OF NATIONAL COUNCIL OF THE YOUNG MEN’S CHRISTIAN ASSOCIATION INC

V

PAUL PONDA AND ELIAS KOMBO, REPRESENTING THE ASSOCIATION KNOWN AS THE MOUNT HAGEN YOUNG MEN’S CHRISTIAN ASSOCIATION INC

Waigani

Kapi DCJ Brown Injia JJ

24 April 1995

31 August 1995

PRACTICE AND PROCEDURE - Declaratory orders - Locus standi - Standing of Mount Hagen branch of the YMCA to intervene to prevent sale of national YMCA’s property situated in Mount Hagen and used by Mount Hagen branch.

REAL PROPERTY - State lease - Special purpose lease for youth centre purposes - Availability of property for sale to private company - Land Act Ch 185, ss 39(3)(d), 40, 46(1)(b)(i) and (ii), 63, 69.

REAL PROPERTY - Indefeasibility of title - Land Registration Act Ch 191, s 33.

Facts

The YMCA sold land in which it had a special purpose State lease for a youth centre to a private company. The purchaser registered its title. The Mount Hagen branch of the YMCA, which used the property for social purposes, purported that the new owner would use it for commercial purposes. It sought declarations to the effect that the property could not be sold for a business purpose and, therefore, the sale was invalid.

The trial judge held that (1) the sale was highly irregular, as it was contrary to the status of the special purpose lease; and (2) the lease must remain as a lease for its original purpose. The purchaser and the seller appealed.

Held

N1>1.       (Brown J dissenting) The Mount Hagen branch of the YMCA had sufficient interest in the occupation and use of the property for social purposes common to both the Mount Hagen branch and the National Council of the YMCA to bring the action.

N1>2.       There is no provision in the Land Act, including ss 63, 69, which prohibits a registered holder of a special purpose lease from selling the lease to a private company without first altering the purpose of the lease to a commercial or business purpose lease.

N1>3.       Mamun Investments Pty Ltd, having obtained a registered title over the special purpose lease, could only be divested of its title under one of the exceptions enumerated in s 33 of the Land Registration Act.

Cases Cited

Mudge v Secretary for Lands [1985] PNGLR 387.

NCDIC v Crusoe Pty Ltd [1993] PNGLR 139.

PNG Air Pilots Assn v Director of Civil Aviation [1983] PNGLR 1.

SCR No 4 of 1980; Re Petition of Somare [1981] PNGLR 265.

Counsel

P Dowa for the appellants

J Kawi for the Minister for Lands and The State

No appearance for the respondent

31 August 1995

KAPI DCJ INJIA J: The appellants appeal against the decision of the National Court at Mount Hagen in which the trial judge made certain declaratory orders, set out in Ponda v Mamun Investments Pty Ltd [1991] PNGLR 337 at 340. These include:

N2>1.       The property situated at allotment 1 and 2, section 13, Mount Hagen is a special purpose lease specifically for a youth centre and is not eligible for sale or for use for commercial or business purposes whilst such special purpose exists.

N2>2.       The purchase by Mamun Investments Pty Ltd of the land is subject to the special purpose designated in the lease as “The lease shall be used bona fide for youth centre purposes”.

N2>3.       The lease is, thus, subject to the interest of the applicants as representing the Mount Hagen Young Men’s Christian Association (YMCA) Inc, being operators of an organisation for youth and sporting purposes.

The grounds of appeal and orders sought are as follows:

N2>“(a)    The trial Judge erred in law in declaring that the property allotments 1 & 2 (Consolidated) section 13, Mount Hagen being a special purpose lease was not eligible for sale purpose as there is nothing illegal about the transferring of a special purpose lease for commercial use under the provisions of the Land Act or anywhere else.

N2>(b)      That the trial Judge erred both in law and fact in finding that the Lands Minister’s decision to approve the transfer of a special purpose lease to a commercial enterprise was improper as there was no evidence of impropriety or malpractice in the Minister’s decision nor was there any good reason to support such a finding.

N2>(c)      That the trial Judge erred in fact in holding that the respondents had locus standi in the proceedings against the weight of evidence in support of such finding.

N2>(d)      That the trial Judge erred in fact in declaring that the purchase by the first appellant of the said property is subject to the interest of the respondents because there are no sufficient evidence to support a finding that the respondents has any or any valid interest.

N2>(e)      Further, even if the respondent had an interest in the subject property, the trial Judge erred in law in recognising it, as that interest, if at all, was extinguished at the instance of registration of title in the name of the first appellant under s 33 of the Land Registration Act Ch No 191.

N2>(f)      That the trial Judge fell in error in not considering the issue of indefeasibility of title by registration which conclusively extinguished any interest that may have been held by the respondents, and clearly vested title in the first appellant.

N2>(g)      And such other relief that may become available after receipt of transcript of evidence.”

ORDERS SOUGHT

The appellants seek, in lieu of judgment appealed from, the following orders:

N2>1.       that the whole of the judgment be quashed;

N2>2.       that the purchase of allotment 1 and 2, section 13, Mount Hagen, by the first appellant is free from all encumbrances; and

N2>3.       that upon registration of transfer, the first appellant obtained an indefeasible title.

The brief facts of the case are as follows. Prior to 13 December 1990, the National Council of Young Men’s Christian Association of Papua New Guinea Inc, the second appellant, was the registered State leaseholder of a special purpose lease of the subject property. Pursuant to a contract of sale approved by the Minister for Lands on 27 August 1990 and transfer, registered on the State lease title on 13 December 1990, Mamun Investments Pty Ltd, the first appellant, acquired a registered title over the property. The special purpose lease status of the land was not changed to a lease for commercial or business purposes before the property was sold to the first appellant. The second appellant sold the property without the knowledge and consent of the Mount Hagen branch of the YMCA. On 17 December 1990, the Mount Hagen branch of YMCA was incorporated under provisions of the Associations Incorporation Act Ch 142. On 9 April 1991, Paul Ponda and Elias Kombo, in their capacity as president and secretary respectively, of the Mount Hagen YMCA Inc, filed proceedings in originating summons No 61 of 1991 at Mount Hagen National Court in which they sought declarations to the effect that the property, being a special purpose lease, was not eligible for sale for use for business purposes and that the purported sale of the property to the respondent was invalid. On 6 October 1991, the trial judge made the declaratory orders referred to. This appeal arises out of that decision.

At the hearing of the appeal, the respondent did not appear to oppose the appeal. In fact, there is evidence that both Mr Ponda and Mr Kombo informed the appellants’ lawyer that they would not oppose the appeal. Also at the hearing, Mr J Kawi of the Solicitor-General’s office appeared on behalf of the Minister for Lands and the Independent State of Papua New Guinea and made submissions in support of the first appellant’s appeal. Even though the Minister for Lands and the Independent State of Papua New Guinea were defendants in the original proceedings in the National Court, they did not appeal against the decision. However, they appeared as interested parties at the hearing of this appeal and were allowed to make their submissions.

We will deal with ground (c) first. The applicant must have sufficient interest in the matter to which the application relates. Such interest may be a property interest or proprietary interest, legal or equitable, or even a social or political interest. As Andrew J said in PNG Air Pilots Assn v Director of Civil Aviation [1983] PNGLR 1 at 3:

“[D]epending on the nature of the relief which he seeks, a plaintiff will in general have a locus standi when he can show actual or apprehended injury or damage to his property or proprietary rights, to his business or economic interests and perhaps to his social or political interests (per Mason J in Australian Conservation Foundation Inc v Commonwealth of Australia (1980) 146 CLR 493; 54 ALJR 176).”

The trial judge appears to have conceded the point that the plaintiffs did not have any or sufficient property or proprietary interest in the property. However, he said they clearly had a “social interest in the operation of the property as a youth centre”. The trial judge went on to say at p 339:

“Thus any person or organisation in Mt Hagen whose concern is for youth must have an interest in dealing with the land specifically if any dealing would appear to defeat the purpose of the lease. So whilst the applicants may not have been properly established or recognised by the original lessee of the lease namely the National Council of the YMCA, they have shown to this Court that they are persons who are concerned and affected by the intent and purpose of the lease and are in the position of a body and persons who have attempted to operate the property for the purposes for which the property is designated.”

The evidence was that the second appellant permitted the members of its Mount Hagen branch to occupy and use the property for Christian youth purposes, in accordance with the purpose of the lease, since the mid 1960s. The incorporation of the respondent on 17 December 1990 did not really affect the occupation and use of the property for youth purposes, as the members who constituted the incorporated association were the same as those who constituted the Mount Hagen branch of the second appellant. In the circumstances, we would agree with the trial judge that, although the respondent association did not have any property or proprietary interest in the property, it had sufficient social interest in the occupation and use of the property for social purposes common to both the second appellant and itself, in accordance with the purpose of the State lease, to bring the action.

We will now proceed to the other remaining grounds of appeal, namely, grounds (a), (b), (d), (e) and (f). The combined effect of the appellants’ submissions and the submissions advanced on behalf of the Minister for Lands and the Independent State of Papua New Guinea in relation to all these grounds of appeal is that there was no evidence of any improper, illegal, or irregular dealings in respect of the sale of the lease, the subsequent approval of the sale by the Minister for Lands, and the consequent registration of the transfer of the State lease title by the Registrar of Titles. Upon registration, the first appellant acquired an indefeasible title over the special purpose lease and was bound to use it for that statutory purpose. There is no provision in the Land Act Ch 185 prohibiting the approval of sale of a special purpose lease to a private corporation, except the restriction placed by s 63(2), which prohibits the grant of a special purpose lease for private residential purposes within a township. The appellants submit that there was no evidence before the trial judge that the property was going to be used by the first appellant for commercial purposes. They submit further that, if the appellant wished to use the property for some other purpose, then provisions exist in the Land Act which facilitate the alteration of the purpose of the lease.

The trial judge’s reasons for the decision are set out at p 339:

“This being a lease for a specific purpose, namely, youth centre purpose it is quite clear that the purchaser was most ill advised to have entered into such a purchase and I am amazed how any legal adviser could advise the purchaser that he was able to purchase a special purpose lease for a youth centre and expect to be able to use it for commercial purposes. Further the vendor, the National Council of the YMCA, would have had no power to sell the property the way it did and again their legal adviser must have realised this. Whilst the National Council of the YMCA may have not been legally bound to consult with any Mt Hagen YMCA the fact is that the property is not just for the purpose of the YMCA itself but by its special purposes is for the benefit of the community at large. My understanding of a special purposes lease of this nature which is clearly for a community or special purpose is that if the operating body wishes to divest itself of such lease it can only do so by returning it to the State for the State to determine a new person to take the purpose. If however it wishes to divest itself of the lease and sell it elsewhere for a non-commercial purpose it is bound to advertise that fact to the community at large and either seek an alternative operator that way or apply to change the purpose of the lease. And I am aware from my own experience of such leases and the Land Act that this was the practice that was and should be followed in such situations. However here this procedure was not followed and instead on 20 August 1990 an agreement to sell was entered into between the National Council of YMCA and Mamun Investments Pty Ltd, a transfer was executed on the same date and seven days later on 27 August the contract of sale and transfer received ministerial approval. So all the arrangements for the sale which as I have suggested were highly irregular have been compounded by the action of the Minister for Lands who approved such a sale which on its face was contrary to the intent and purpose of the Land Act and the status of the special purposes lease.

Therefore the lease must still remain as a lease for its original purpose, namely a youth centre purpose and any person holding such lease is bound by that purpose. Thus any holder of the lease of allotments 1 and 2, section 13, Mt Hagen is bound to hold the lease for the purposes of a youth centre and, in the application before me, the applicants have shown that they are an appropriate body for which the lease should be held.”

We would agree with the submissions made by the appellants’ counsel and the submissions made on behalf of the Minister for Lands and The State that there was no evidence before the trial judge that the property was going to be used for a purpose other than that contained in the special purpose lease. In fact, the approved transfer instrument contained a clause that the property was being transferred subject to the “covenants and conditions contained in the relevant State lease”, that is, that the lease was to be used bona fide for youth purposes. Indeed, there are provisions in the Land Act to ensure that the State leaseholder uses the property for its designated purpose. If, for instance, the leaseholder uses the lease for purposes other than its designated purpose, then the Minister for Lands may forfeit the State lease: Land Act, ss 39(3)(d) and 46(1)(b)(i), (ii). There is also provision in the Land Act to facilitate the alteration of the purpose of the State lease, for instance, to a lease for business or commercial purpose, if the leaseholder wishes to: Land Act, s 40.

There was also no evidence of any alleged impropriety, irregularity, or malpractice on the part of the Minister for Lands and Physical Planning. The trial judge assumed that, because the purpose of the lease was not changed to a lease for business or commercial purpose before the property was transferred, it was contrary to the Land Act generally and, therefore, the transfer was invalid. In our view, there is no provision in the Land Act or any other relevant law which prohibits a registered leaseholder of a special purpose lease from transferring the land, by sale, to a private corporation. Indeed, s 69 of the Land Act, which empowers the Minister to approve dealings in land, does not place any limits on the type of dealings of State leases which may be approved by the Minister. Likewise, s 63 of the Land Act does not prohibit the grant of a special purpose lease in a township except where the land is sought for residential purposes. There was no evidence before the trial Judge that the property was going to be used for residential purposes. In our view, the trial judge erred in presuming the use of the lease by the first appellant for commercial or business purposes when there was no evidence on those matters. It is true that the first appellant, being a commercial entity, would naturally purchase the property for commercial use. However, that was a matter of conjecture only. We also consider that the trial judge fell into error and made findings as to impropriety on the Minister’s part, based on the presumed unethical conduct of lawyers advising the Minister and the Minister’s failure to appreciate the advice, if any, the lawyers gave, when there was no evidence concerning those matters. Further, the trial judge failed to take into account the evidence as a whole as to the indefeasible nature of the title conferred on the first appellant upon registration, which could only be set aside under the grounds stipulated under s 33 of the Land Registration Act Ch 191. None of those grounds were relied upon by the respondent. As the Supreme Court held in Mudge v Secretary For Lands [1985] PNGLR 387, even when a State lease issued under the Land Act may have been issued irregularly and in breach of the provisions of that Act, registration under the Land Registration Act will confer an indefeasible title. All these are fundamental errors of both fact and law, which warrant this Court to interfere with the trial judge’s decision.

For the above reasons, we would allow the appeal on the remaining grounds of appeal and grant the orders sought in the notice of appeal.

BROWN J: This is an appeal from the decision of Woods J sitting in the National Court at Mount Hagen on 6 September 1991. In that case, the respondents here sought declarations that the sale of certain land to the first appellant, Mamun Investments Pty Ltd, by the second appellant, the President for and on behalf of the National Council of the YMCA Inc., was null and void and, secondly, that the particular land which was the subject of a special purpose lease by the State was not eligible for sale for commercial or business purposes.

That application was brought before the National Court pursuant to s 155(4) of the Constitution. The constitutional provision is to the effect that both the Supreme Court and the National Court “have an inherent power to make, in such circumstances as seem to them proper, orders in the nature of prerogative writs and such other orders as are necessary to do justice in the circumstances of a particular case”.

I find, however, that the judge has been in error in purporting to exercise powers under that constitutional part, for existing legislation (which has not been shown to be unconstitutional) and decided case law are directly on point and suggest that he had misapprehended the respondent’s case.

The judge found that the lease by the State to the YMCA Inc over the land at Mount Hagen was to remain as a lease for its original purpose, namely a youth centre, and any person holding such lease is bound by that purpose. That is the factual situation, for the terms of the lease make clear the use to which the land may be put. He went on to make declarations that the property known as allotments 1 and 2, section 13, Mount Hagen, “is a Special Purposes Lease specifically for a youth centre and is not eligible for sale or for use for commercial or business purposes while such special purpose exists”. The finding is patently wrong, for the restriction on use goes with the title, and any purchaser is bound by it in any event. The restrictive use does not mean that the land cannot be sold. Part VI Division 7 of the Land Act deals with special purposes leases. There is no restriction on sale, but clearly a restriction on the use to which the land may be put.

The judge went on to say at p 340 that the purchase by Mamun Investments Pty Ltd of the subject land is subject to the special purpose designated in the lease, as the lease shall be used bona fide for youth centre purposes, and further declared that the lease held by Mamun Investments Pty Ltd is “thus subject to the interest of the applicants as representing the Mount Hagen YMCA Inc, being operators of an organisation for youth and sporting purposes”.

With the greatest respect to the trial Judge, the finding is a non sequitur, or illogical inference, for the applicants before the judge had no legal or equitable interest in the land, which had been effectively sold and transferred by its legal owner. (The purchaser certainly is bound by the use to which the land may be put by virtue of the terms of the lease.) Nor had the respondents been proved to be “representatives” of the YMCA Inc, for that body is here separately represented and named as a party. What the respondents have is a genuine interest in the use to which the land may be put. They could, for instance, notify the Town Council of the “restriction as to user” so that the Building Committee would be aware of that before considering any fresh building application for commercial purposes. The Committee should be aware in any event, for the restriction is set forth on the lease.

The lease had been granted to the national body, YMCA Inc. The sale was completed pursuant to a contract entered into by the President on behalf of the national body, as vendor, and Mamun Investments Pty Ltd, as purchaser. It cited a consideration of K100,000, and settlement has been effected. The purchaser has been registered as the proprietor of the land the subject of the lease.

On the hearing of the appeal, the respondent has filed a document indicating that it does not wish to contest or oppose the appeal and, accordingly, will abide by the orders of this Court.

The second appellant, the President of the YMCA Inc, joins with and supports the first appellant, the aggrieved proprietor (which has not been able to take possession of the subject land) in prosecuting this appeal.

The trial judge allowed the respondent (by those two named persons) to appear on the original application, finding as he did that those two named persons had “sufficient interest” in the matter to be heard. The appellants say that the trial judge erred in fact in holding that the two named respondents had locus standi. The appellants refer this Court to a series of decisions, SCR No 4 of 1980; Re Petition of Somare [1981] PNGLR 265; PNG Air Pilots Assn v Director of Civil Aviation [1983] PNGLR 1; and NCDIC v Crusoe Pty Ltd [1993] PNGLR 139, for dealing with locus standi involving commercial interest in property. The named respondents have no proprietary interest, either legal or equitable, in the subject land. In fact, YMCA Inc, the previous registered proprietor, was a legal entity at the time of contract for sale. The YMCA Inc was the registered proprietor of the subject land and held the lease. In these circumstances, the legal and equitable interest in the subject land lay in the registered proprietor, YMCA Inc. By virtue of the law relating to indefeasibility of title in the absence of fraud or mistake (which is not asserted in this instance), the registered proprietor is entitled to deal with the land as it may. Consequently, to give standing to these two named representatives (the respondents), as the trial judge has done in this instance, is not an avenue open to him, for it goes against the intent and tenor of the Land Registration Act and the commonly accepted principles of locus standi. That argument of the appellants must succeed.

The indefeasibility of title obtained by registration under the Land Registration Act is, as the appellants say, well settled. The appellants relied on Mudge v Secretary of Lands [1985] PNGLR 387, where this Court, considering s 33, ruled that upon registration of leases in the terms of the Act, an indefeasible title reposes in the registered proprietor, subject only to those exceptions enumerated in the section. There has been no argument in the National Court as to those exceptions touched on in s 33 (fraud, mistake etc) and, consequently, we see no reason to impugn the dealing following upon registration of the transfer. The first appellant has an indefeasible title.

The question paramount in the trial judge’s mind (and which gave, it would seem, colour to his reasons and may have led him into error) is the use to which the first appellant intends to put the subject land. The trial judge appears to have made a reasonable inference that the property would be used for commercial purposes, an anticipatory breach of the lease. The consideration of matters of that nature should not concern the trial judge nor this Court, for there are avenues available to the first appellant to seek approval for a variation of use and, if need be, a fresh lease. What has happened, however, is uncontradicted. The vendor, the YMCA Inc, has effected a sale of the subject land to the first appellant for valuable consideration, and the transfer has been registered. The leasehold interest held by the first appellant is one which has particular conditions attached. Whether the first appellant is happy to hold the land in that form or if it will seek to obtain a variation of those conditions and, impliedly, a fresh lease freed from restrictions, is a matter for it. It need not concern this Court, nor should it have been a factor for the National Court’s consideration in the first instance.

Whether the YMCA Inc has acted in accordance with its charter in selling the land in this fashion is a matter for the body itself. No proceedings have come before the Court raising that question.

For the foregoing reasons, I would uphold the appeal and quash the earlier decision of 6 September 1991.

ORDER OF THE COURT

N1>1.       The appeal is upheld.

N1>2.       The order of the National Court dated 6 September 1991 per Woods J is quashed.

N1>3.       The appellants shall have their costs of the appeal.

Lawyer for the first and second appellants: Paulus M Dowa Lawyers

Lawyer for the Minister for Land and The State: Solicitor-General