Noko No.96 Ltd v Temu [2012] PGSC 27; SC1192 (20 July 2012)

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SIR PUKA TEMU,
MINISTER FOR LANDS & PHYSICAL PLANNING
First Respondent

PEPI KIMAS,
SECRETARY, DEPARTMENT OF LANDS & PHYSICAL PLANNING
Second Respondent

APPEALS – appeal to National Court under Land Act, Section 142 against forfeiture of State Lease – effect of making of appeal on matter complained of – whether person appealing may continue lawfully to occupy the land – whether forfeited lease can be granted to another party while appeal against forfeiture pending.

INJUNCTIONS – application for interim injunction to restrain use of land subject to forfeited lease – relevant considerations to exercise of discretion by National Court whether to grant interim injunction.

The Minister for Lands and Physical Planning forfeited five State Leases held by the appellant and then exempted the land from advertisement and granted new State Leases over the land to the fourth respondent. The appellant appealed against the forfeitures to the National Court under Section 142(1) (appeal to National Court) of the Land Act and, while the appeal was pending, applied to the National Court for an interim injunction under Section 142(3) of the Land Act restraining the fourth respondent from developing the land the subject of the leases or dealing with or transferring the leases. The National Court failed to uphold the appellant's argument that an appeal under Section 142(1) operated by virtue of Section 142(3) as an 'automatic' stay on dealings with the land and held that the requirements for granting an interim injunction were not satisfied, as the undertaking as to damages was not a serious one and there were no serious issues for trial. The appellant appealed to the Supreme Court against the refusal of the National Court to grant an interim injunction, arguing that the primary judge erred in law in three respects: (1) regarding the appellant's undertaking as to damages as not serious; (2) not giving effect to Section 142(3); and (3) holding that the appellant's grounds of appeal to the National Court raised no serious issues for trial.

(1) It was within the discretion of the primary judge to regard as inadequate an undertaking as to damages given by a company that had next to no assets other than State Leases that had been forfeited. There was no error of law in that regard.

(2) Once an appeal is made under Section 142(1), by operation of Section 142(3) "the matter complained of [in this case the forfeitures] has no effect" until the appeal is determined and "the lessee [in this case the appellant] may in the meantime continue lawfully to occupy the land the subject of the appeal and to exercise his rights, and shall fulfil his obligations, under the lease". The primary judge erred by not giving effect to Section 142(3), the purpose of which is to stay a forfeiture pending determination of an appeal against it and to allow the lessee whose lease has been forfeited to continue to occupy the land.

(3) The grounds of appeal to the National Court (that show cause notices were not served on the appellant and there was a denial of natural justice and that the forfeitures were affected by fraud) were arguable and raised serious issues that appear to have reasonable prospects of success. The primary judge erred by holding that the appellant's grounds of appeal to the National Court raised no serious issues for trial.

(4) As the primary judge erred in two respects, the appeal was upheld and orders were made by the Supreme Court to give effect to Section 142(3) of the Land Act and grant the injunction refused by the National Court.

Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853
Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215
Gobe Hongu Ltd v National Executive Council & Ors (1999) N1920
Koitachi Ltd v Walter Schnaubelt (2007) SC870
MAS International Ltd v David Sode (2008) SC944
Mauga Logging Company Pty Ltd v South Pacific Oil Palm Development Pty Ltd [1977] PNGLR 80
Ramu Nico Management (MCC) Ltd v Eddie Tarsie (2010) SC1075
West New Britain Provincial Government v Kimas (2009) N3834

This was an appeal to the Supreme Court against refusal by the National Court to grant an interim injunction pending determination of an appeal to the National Court against forfeiture of State Leases.

F Griffin, for the appellant
M I Peipul, for the first, second and third respondents
P J Wright, for the fourth respondent

1. BY THE COURT: This is an appeal against the refusal of the National Court to grant an application for an interim injunction by the appellant, Noko No 96 Ltd ("Noko").

2. The application was made in connection with an appeal Noko had made to the National Court under Section 142(1) (appeal to National Court) of the Land Act. The appeal was against decisions of the first respondent, the Minister for Lands and Physical Planning, and the second respondent, the Secretary for Lands and Physical Planning, to:

3. The application was made under Section 142(3) of the Land Act and Section 155(4) of the Constitution and sought an injunction restraining Kopana from developing the land the subject of the leases or dealing with or transferring the leases pending determination of the appeal. The primary judge failed to uphold the appellant's argument that an appeal under Section 142(1) operated as an 'automatic' stay on dealings with the land and held that the requirements for granting an interim injunction had to be complied with but were not satisfied, as the undertaking as to damages was not a serious one and there were no serious issues for trial.

4. Noko's notice of appeal states five grounds of appeal but some are repetitious, so they can be boiled down to three. Noko argues that the primary judge erred in law in three respects:

(1) regarding the appellant's undertaking as to damages as not serious (ground (i));

(3) holding that the appellant's grounds of appeal to the National Court raised no serious issues for trial (grounds (iii), (iv) and (v)).

5. Having embarked on a determination of Noko's motion for an injunction according to general equitable principles, one of the reasons the primary judge gave for refusing the motion was that the undertaking as to damages given by Noko was not a serious one. In taking that consideration into account his Honour was applying the principle that whenever a person applies for an interim injunction pending determination of substantive proceedings the applicant must either give an undertaking to the court to pay damages to the party who is disadvantaged by the injunction or suffers monetary loss because of it, or demonstrate that it is not in the interests of justice to require such an undertaking (Mauga Logging Company Pty Ltd v South Pacific Oil Palm Development Pty Ltd [1977] PNGLR 80, Gobe Hongu Ltd v National Executive Council & Ors (1999) N1920, Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853, MAS International Ltd v David Sode (2008) SC944).

6. We find no error in his Honour's assessment of the undertaking given by Noko as there was evidence before the National Court that it was essentially a shelf company which had few assets other than the land covered by the State Leases. We therefore dismiss ground (i) of the appeal to the Supreme Court.

7. Section 142 of the Land Act creates the right of appeal for a person whose lease has been forfeited, stipulates the time limit for appealing and prescribes the consequences of an appeal to the National Court. It states:

(a) a re-appraisal of imposition of rent, or a variation or imposition of royalty, under Section 100(5); or

(2) An appeal under Subsection (1) shall be made within 28 days after the matter complained of, or within such further time as the National Court for any special reason allows.

(3) Where an appeal is made under Subsection (1), the matter complained of has no effect until—

(b) where no further appeal is made to the Supreme Court—the period prescribed for making an appeal has expired; or

(c) where a further appeal is made to the Supreme Court—the Supreme Court has decided the appeal,

and, subject to Subsection (4), a lessee may in the meantime continue lawfully to occupy the land the subject of the appeal and to exercise his rights, and shall fulfil his obligations, under the lease.

(4) When an appeal is made under Subsection (1)(a) the decision of the National Court or of the Supreme Court shall be deemed to operate as from the date of the matter complained of.

8. In the present case the appellant made an appeal to the National Court against forfeiture of its leases. This meant that by virtue of Section 142(3):

The meaning of the words "the matter complained of" and "lessee" governs a determination of the consequences of making an appeal.

9. The words "the matter complained of" are capable of only one meaning. They refer to the decision being appealed against, which will be: (a) a reappraisal of imposition of rent, or a variation or imposition of royalty, under Section 100(5); or (b) the forfeiture of a lease. In this case it is the forfeiture of five leases which is the matter complained of. Thus the forfeiture has no effect.

10. As to the words "the lessee" in the final part of Section 142(3), Mr Wright, for Kopana, submitted that they refer to the lessee who holds the lease at the date of the appeal, which in this case is Kopana. Mr Wright submitted that that interpretation is the proper one due to the following sequence of events:

27 March 2009	:	Notice to show cause why leases should not be forfeited, posted to Noko.
27 April 2009	:	Kopana submitted applications regarding land covered by Noko's five State leases to the Land Board.
1 July 2009	:	Department of Lands and Physical Planning sent reminder notice to Noko.
3 September 2009	:	Forfeiture notices published in National Gazette.
14 September 2009	:	Minister exempted land from advertisement.
29 September 2009	:	Land Board recommended leases be granted to Kopana.
12 November 2009	:	Publication in National Gazette of Kopana as successful applicant.
25 November 2009	:	Five State Leases (previously held by Noko) granted to Kopana.
11 March 2010	:	National Court allowed Noko further time to appeal.
16 March 2010	:	Noko appealed against forfeitures.

11. Mr Wright's argument is that on 16 March 2010, the date of the appeal, Kopana was "the lessee", so it was Kopana, not Noko, which was entitled by Section 142(3) to continue lawfully to occupy the land the subject of the appeal and to exercise its rights and fulfil its obligations under the leases.

12. We reject that argument as it relies on an overly literal interpretation of Section 142(3) that is only available due to the peculiar circumstances of this case, in which the appeal was not filed until almost six months after the forfeiture, during which time new leases had been granted. In a more common scenario an appeal would be filed within 28 days after forfeiture and the land would not have been made the subject of a new lease and it would be clear that "the lessee" refers to the person whose lease has been forfeited. That this is the proper interpretation of "the lessee" becomes apparent when the purpose of Section 142(3) is examined. It seems intended to impose a statutory 'stay' on the decision being appealed against, which it does in the first part of Section 142(3) by stipulating that "the matter complained of has no effect" until the appeal to the National Court (or any subsequent appeal to the Supreme Court) has been decided, and which purpose is reinforced by the second part of Section 142(3) through the stipulation that the relevant land may continue lawfully to be occupied and rights may be exercised and obligations shall be fulfilled under the lease. If the purpose of the legislature had been to protect a person who has become a lessee of the land after the forfeiture of a lease in respect of the same land, the sub-section would be superfluous. Section 142(3) is intended, in our view, to protect the person who is appealing. Without it the person appealing would lack protection, which is clearly not the intention of the legislature.

13. We find ourselves in agreement with the interpretation of Section 142(3) that was advanced by Mr Griffin, for Noko, to the National Court: once an appeal is made under Section 142(1), the matter complained of has no effect and the lessee, which in the case of a forfeiture is the person whose lease has been forfeited, may continue to occupy the land and exercise its rights and fulfil its obligations under the lease. Such an interpretation was not upheld by the primary judge, and his Honour proceeded to hear the motion for an injunction according to general equitable principles, without regard to the statutory stay or injunction that Section 142(3) imposes. With respect we consider that his Honour erred in that regard. His Honour should have granted an injunction in the terms sought by Noko (restraining Kopana and others from 'performing any developments, dealings or transfers' concerning the land) as to do so was the natural consequence of giving effect to the statutory stay or injunction imposed by Section 142(3). We therefore uphold ground (ii) of the appeal to the Supreme Court.

14. Another reason the primary judge gave for rejecting Noko's motion for an interim injunction was that there were no serious issues to be tried on the appeal. His Honour examined Noko's grounds of appeal but considered that they had little prospect of success.

15. The evidence suggested that Noko had held the five State Leases for 13 years and failed completely to honour the improvement covenants to which each lease was subject, so his Honour formed the view that the Minister, the Secretary and the State acted within their rights under the Land Act to forfeit the leases.

16. As to the grounds of appeal alleging fraud in forfeiture of the leases and subsequent exemption of the land from advertisement and granting of the State Leases to Kopana, his Honour held that there was no substantive evidence that the deals were fraudulent, only suspicion and innuendo.

17. We consider that his Honour, having embarked on a determination of the motion for an interim injunction according to general equitable principles, adopted a proper process of reasoning. After making an assessment of the adequacy of the undertaking as to damages (and finding that it was inadequate) his Honour correctly posed the question whether there were serious issues for trial, ie whether the appellant had a serious, as opposed to a speculative, case which had a real possibility of ultimate success. That is one of the major considerations to take into account when deciding whether to grant an interim injunction. The others are whether damages would be an adequate remedy if the interim injunction were not granted and whether the balance of convenience and the interests of justice require that the injunction be granted (Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853, Ramu Nico Management (MCC) Ltd v Eddie Tarsie (2010) SC1075).

18. However, we respectfully disagree with his Honour's assessment that the grounds of appeal raised no serious issues. The first ground of appeal alleges that no show cause notice was served on Noko prior to the forfeiture of the leases, which is an essential prerequisite to forfeiture under Section 122 (forfeiture of state lease) of the Land Act, and that there was a denial of natural justice. It would appear to raise serious issues of fact and law, which has a real possibility of ultimate success.

19. The three other grounds of appeal raise the issue of fraud in the forfeiture of Noko's five leases, exemption of the land from advertisement and granting of the leases to Kopana, a company owned and controlled by a person who appears to have been a ministerial colleague of the Minister in whose name these various decisions were made. When it is considered that this sequence of events occurred in less than eight months and that Kopana's application for new leases was made well before the leases were forfeited from Noko, we agree with the primary judge that there would appear to be reasonable grounds for suspicion and innuendo. We also agree with his Honour that suspicion and innuendo is not by itself evidence of actual fraud. But, with respect, it may amount to constructive fraud, ie where the circumstances of forfeiture or transfer of title are so unsatisfactory, irregular or unlawful as to be tantamount to fraud, warranting the setting aside of registration of title. That was the meaning of "fraud" favoured by the Supreme Court (Amet J and Salika J, Brown J dissenting) in the leading case Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215. A more restrictive view of "fraud" in Section 33(1)(a) of the Land Registration Act was taken by the Supreme Court (Gavara-Nanu J, Mogish J and Hartshorn J) in Koitachi Ltd v Walter Schnaubelt (2007) SC870. It appears to be the view taken by the primary judge in the present case: to disturb the title of a registered proprietor (such as Kopana), actual fraud must be proven. This divergence in judicial opinion has been discussed in a number of cases, eg West New Britain Provincial Government v Kimas (2009) N3834. However, it is not necessary or appropriate to consider which, if either, view of fraud should apply here. It is sufficient to say that having regard to the grounds of appeal and the affidavits filed in the National Court there are serious issues as to fraud, which have a real possibility of ultimate success.

20. We conclude that the learned primary judge erred in holding that there are no serious issues raised by Noko's appeal to the National Court. We therefore uphold grounds (iii), (iv) and (v) of the appeal to the Supreme Court.

21. We have concluded that the learned primary judge erred in law in two respects, not giving effect to Section 142(3) of the Land Act and holding that Noko's appeal to the National Court raised no serious issues for trial, and we have upheld four of the five grounds of appeal. It follows that the appeal will be allowed and the decision of the National Court will be quashed.

22. Ms Peipul, for the first, second and third respondents, submitted that if the National Court decision were quashed the most appropriate course of action would be to remit the matter to the National Court for a rehearing of Noko's application for an interim injunction. Mr Griffin, for Noko, opposed that submission, and so did Mr Wright, for Kopana. We are also not persuaded by it. It is in the interests of justice and, as reflected in the positions of the appellant and the fourth respondent, it is in the interests of the main protagonists, for the Supreme Court to stand in the shoes of the National Court and make a decision on the application for an interim injunction. Such an order is authorised by Section 16(c) (decision etc on appeal) of the Supreme Court Act, which allows the Supreme Court on hearing an appeal and inquiring into the matter to "give such judgment as ought to have been given in the first instance". We will grant an injunction in the terms sought in the National Court.

23. We encourage the parties to expedite the hearing of the appeal under Section 142(1) of the Land Act. Costs will follow the event.

Young & Williams Lawyers: Lawyers for the Appellant
Ketan Lawyers: Lawyers for the 1st, 2nd & 3rd Respondents
Posman Kua Aisi Lawyers: Lawyers for the 4th Respondent

Supreme Court of Papua New Guinea

Noko No.96 Ltd v Temu [2012] PGSC 27; SC1192 (20 July 2012)