Timano v Sek No 15 Ltd [2009] PGSC 40; SC1038 (15 June 2009)

SC1038

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA No. 34 of 2009

BETWEEN:

GIDEON TIMANO
First Appellant

AND:

GREG APU
Second Appellant

AND:

SEK NO. 15 LTD
Respondent

Waigani: Injia, CJ
2009: 15th June

SUPREME COURT – practice and procedure – application for stay pending determination of appeal – interim orders granted by Court required first appellant to deliver possession to respondent and also issued other restraining orders to preserve property - principles of stay considered - grant or refusal of stay discretionary and exercised on proper principles and on proper grounds - Fraud of title is manifestly evident on the first appellants registered title - balance of convenience favors respondent - Application for stay refused with costs – s.19 Supreme Court Act

Cases Cited:

McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279

Counsel:

A Manase, for the appellants
K Gamoga, for the respondent.

15th June, 2009

1. INJIA, CJ: This is an application for stay pending determination of the appeal made under s 19 of the Supreme Court Act (the Act). It is contested by the respondent.

2. I have considered the material in the form of affidavits relied on by the parties and submissions made by both counsel.

3. The principles on grant of stay are set out in McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279 (McHardy case). The grant or refusal of stay is discretionary and it is exercised on proper principles and on proper grounds. The Court must start from the basic premise that the judgment creditor is entitled to enjoy the fruits of the judgment. There are ten (10) other considerations which are enumerated in that case which may be considered. The circumstances of a particular case may warrant greater or less or even no weight to a particular relevant factor(s) and then again, that is a matter of discretion. The onus is on the applicant to persuade the Court to exercise its discretion in his favor.

4. Counsel representing the parties made submissions on the application of the McHardy principles to the circumstances of this case. I apply the considerations set out in McHardy which are relevant to the circumstances of this case in the following manner.

5. The judgment appealed from favors the respondent.

6. Leave to appeal is not required. There has been no delay in making this application. These considerations favor the appellant.

7. The nature of the judgment is interim orders which purports to give vacant possession of a residential property situated on Allotment 6 Section 76 Lae to the respondents pending determination of the substantive proceedings. In the substantive proceedings which was commenced by Writ, the respondent sued the appellants for delivery of possession of the property.

8. The respondent held a registered title over the property which it acquired on 16 August 1990. The property was mortgaged to ANZ Bank which had its mortgage registered on the title on 23 April 1991.

9. On 13 June 2008, the second appellant was issued with a fresh Lease Title under the hand of Registrar of Titles under a fresh official State Lease Title which was issued after representations were made by him that the official copy had been lost or destroyed. Later the second appellant transferred the property to the first appellant. The first appellant paid the second appellant K80,000 in purchase price money for the property.

10. On the State Lease copy held by the appellants, the last two registered entries are the transfers to the second appellant and first appellant. The registered mortgage held by ANZ Bank is not discharged before the property was transferred to the second appellant and from the second appellant to the first appellant.

11. In the State Lease Title copy held by the respondent, the last registered entry is the mortgage to ANZ Bank.

12. The property was leased to the Morobe Provincial Government by the respondent. The respondent used the rent money to pay off its loan to ANZ Bank under the mortgage.

13. The first appellant used his copy of the State Lease Title to commence eviction proceedings in the District Court in Lae, which ordered the appellant’s tenant to vacate the property. The eviction was carried out and the first appellant obtained possession of the property on 4th December 2008 and carried out some improvements on the property. As a result the respondent lost its tenant and has been unable to pay its loan debt.

14. In the Writ of Summons the respondent claimed vacant possession and alleged fraud. Its case was that the second appellant falsified documents purporting to show he was a director of the respondent company and executed transfer documents. The respondent brought the matter to the attention of the Registrar of Titles. By letter dated 16th December 2008 addressed to the first appellant, the Registrar of Titles, for reasons given, established that the transfer to the second appellant was deemed to have been made fraudulently and he cancelled the Title issued to the second appellant and subsequently to the first appellant. The Registrar also restored the respondents registered title.

15. The interim orders granted by the Court required the first appellant to deliver possession to the respondent and also issued other restraining orders to preserve the property. Those interim orders are the subject of this appeal. In this application, the appellants seek an order staying those interim orders.

16. As to whether an arguable case on appeal is demonstrated, this consideration may be determined together with the consideration on demonstration of error in the judgment. These considerations are often determined by a quick perusal of the decision and reasons for decision of the trial judge. However a transcript of the oral reasons for decision is not before me and so is the written decision which the trial judge indicated to the parties would be published later. I am invited by the parties to form an opinion on this point by reference to the material placed before the trial judge which have been placed before me. I do so by considering the affidavit material and submissions on them put before me by both parties.

17. The appellants main submissions are that the trial Judge issued the substantive relief claimed in the Writ before the substantive issues pleaded in the Statement of Claim were tried and determined. Therefore there occurred a denied natural justice and a miscarriage of justice.

18. It is also submitted for the appellants that the trial judge did not grant the relief claimed in the Notice of Motion. The respondent did not claim orders for delivery of possession in its Notice of Motion but sought property preservation orders by vesting the property with the Court Registrar to be secured by a private security firm and for payment of rent money into Court. Instead the Court gave vacant possession to the respondent and issued other related interim orders. Mr Manase submits this amounted to a grave procedural error. An arguable case is established in that regard.

19. The other procedural errors relied upon by the appellants are that the Court erred in law in that the Court granted the relief claimed in the Writ without trial; that the Court erred in giving such summary judgment because summary judgment is not available on a claim based on fraud; the summary judgment was given without an application for summary judgment as such; that there was no undertaking as to damages given to support the grant of interim injunctions; and that the discretion was issued without regard to the first appellants interest as a bona fide purchaser for value, that he had purchased and lived in the property since December 2008 and made substantial improvements to the property.

20. Mr Gamoga of counsel for the respondent submits it was within the Courts jurisdiction given by O 14 Div. 2 of National Court Rules to issue interim orders to preserve the property pending suit. The kind of orders issued by the Court though not applied for in the exact terms granted, were preservative orders and were granted properly in view of the apparent fraud established by the evidence. No error of law or procedure is established. The grounds of appeal are therefore not arguable.

21. In my view, the Statement of Claim endorsed on the Writ pleaded fraud and sought orders for the delivery of possession of the property as its principal relief in paragraph 17 (a). In paragraph 17 (b) the respondent also sought interim orders for the property to be vacated by the defendants and security personnel be placed to secure the property pending determination of the claim. Therefore in terms of pleading, it was open for interim preservation orders to be issued. The Notice of Motion also sought property preservation orders. Therefore it is not entirely correct to say the substantive orders were granted. The orders issued were interim orders which was protective in nature so that the status quo was maintained pending determination of the substantive relief which was permanent delivery of possession of the property. That being the case, the grounds of appeal relating to grant of substantive relief without trial, summary judgment, etc are not arguable.

22. I agree that the effect of the interim order was to revert possession of the property back to the respondent. The Notice of Motion also sought property preservation orders. The trial judge saw it fit to vary the orders sought to vest possession of the property in the respondent in the interim. Was this an act of apparent error in the exercise of discretion? In my view, it was within the discretion of the trial judge to tailor the orders to suit the interest of justice in the circumstances of the case before him. The nature of the interim orders given in this case, particularly on delivery of possession is not surprising in that the respondent had been the registered owner of the property for more than 18 years under a valid registered title which title was never under question for fraud compared with the first appellants acquiring questionable title and had taken possession by force under a District Court order which was issued perhaps without knowledge of the respondents pre-existing title. Compare this situation with the first appellant’s situation where he had acquired the property under a questionable scheme and had been in occupation for only 3-4 months and his title was acquired subsequent to the respondent’s pre-existing valid title. The respondent was better placed to take possession of the property pending determination of the proceedings whereby the validity of the first appellant’s title would be determined. No issue of validity of the respondent’s title would properly arise for determination at the trial.

23. Fraud of title is manifestly evident on the first appellants registered title. I point out two clear evidence of this. First, the mortgage to ANZ Bank is still current on the first appellant’s copy of the Title. That mortgage has not been discharged to pave the way clear for the transfer to take place. The ANZ Bank still holds a registered mortgage over the property in favor of the respondent. Secondly, the Registrar of Titles had administratively cancelled the first appellant’s title and restored the respondents title. There is no reason why the respondent should be kept out of benefit of possession and use of the property in the interim pending determination of the substantive relief.

24. The other procedural issues raised including undertaking as to damages are of little or no significance compared with the apparent fraud on title.

25. For these reasons, I consider that the appellants do not have an arguable case on appeal and that no apparent error of law or procedure has been demonstrated.

26. In terms of possible hardship, inconvenience or prejudice to either party, the respondent stands to suffer more. It has a debt to pay which it has been paying from rent received which it is now unable to do. The first appellant has no such financial commitments having purchased the property from Mr Apu outright. The respondent had enjoyed uninterrupted possession and title for more than 18 years compared with the first appellants 3-4 month of possession under a questionable transfer of title for fraud. The respondent stands to suffer more prejudice, hardship and inconvenience than the first appellant.

27. In terms of the financial ability of the applicant, there is no question as to his financial ability. The same applies to the respondent.

28. The balance of convenience favors the respondent, for reasons already given above.

29. As to damages, the gist of the respondent’s action is to recover its property which it has been deprived of under fraudulent circumstances. Further, if the stay is granted, the property subjected to further structural alterations and possibly sold or dealt with by the first appellant whilst the trial proceedings are pending determination. In the end the respondent may loose its property and rental income. For these reasons I do not think damages would be an appropriate remedy.

30. In terms of the overall interest of justice, a person claiming under a subsequent issue of registered title issued under fraudulent circumstances and whose title has been cancelled by the Registrar of Titles should not be permitted to continue to enjoy fruits of the fraudulent transfer. The property should be preserved in the best way possible by reverting the property’s possession and use to its original registered owner whose pre-existing title is not in issue, until the Court determines the validity of the subsequent title acquired by the second appellant and transferred to the first appellant.

31. In summary notwithstanding the small number of considerations which favor the appellant, the weight of all the other considerations favors the refusal of stay. The application for stay is therefore refused with costs.

________________________________________________

Manase & Co Lawyers: Lawyer for the Appellants
Gamoga & Co Lawyers: Lawyer for the Respondent