National Housing Corporation v Asakusa [2012] PGSC 6; SC1165 (1 March 2012)

SC1165

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 84 0F 2010

NATIONAL HOUSING CORPORATION
Appellant

V

PAUL ASAKUSA, AS SUSPENDED MANAGING DIRECTOR,
NATIONAL HOUSING CORPORATION
First Respondent

FRANCIS PUMBU
Second Respondent

Waigani: Cannings, Manuhu & Kassman JJ
2011: 27 October,
2012: 1 March

PRACTICE AND PROCEDURE – summary dismissal – issue estoppel – whether issue estoppel must be pleaded as a defence – prerequisites for operation of issue estoppel – whether previous proceedings relied on to argue issue estoppel required to be between same parties.

The National Court upheld a motion by the respondent for dismissal of proceedings commenced by the appellant on the ground that the doctrine of issue estoppel applied. It was held that, as the central issue in the proceedings concerned ownership of land and that issue had been determined in prior judicial proceedings, the appellant was estopped (precluded) from challenging the respondent's title in the land. The appellant (which had been the plaintiff in the National Court) appealed on two grounds: (1) that issue estoppel had not been pleaded as a defence and could not be relied on as a ground for summary disposal of proceedings; and (2) issue estoppel did not apply as it was not a party to the prior proceedings.

Held:

(1) The question of whether issue estoppel should be pleaded as a defence is a matter of discretion for the primary Judge. If it appears obvious that issue estoppel should apply it will usually be unnecessary to require it to be pleaded. If it appears to be only an arguable proposition the desirable course of action would be a direction that it be pleaded.

(2) In the present case the issue of issue estoppel was open to be raised and determined without requiring that it be pleaded and the primary Judge made no error of law in not requiring it to be pleaded. The first ground of appeal was dismissed.

(3) There are three prerequisites to operation of the doctrine of issue estoppel: (a) the issue raised in the second proceedings is the same issue as that raised in prior proceedings; (b) the issue was finally determined in the prior proceedings; and (c) the parties in the two proceedings are the same or, if they are not the same, the party against whom the issue estoppel is sought to be applied was a privy of a party to the prior proceedings and reasonably expected to be aware of the prior proceedings and entitled to be joined but failed without explanation to do so.

(4) Here: (a) the issue raised by the second proceedings was whether the second respondent had become registered proprietor of the subject land in a case of fraud, which was not at issue in the prior proceedings; (b) there was no final determination of that issue; but (c) though the parties in the two proceedings were different, the rule about privies applied.

(5) As two prerequisites to operation of issue estoppel were absent the second ground of appeal was upheld.

(6) The appeal was allowed and the order dismissing the proceedings quashed and the matter remitted to the National Court.

Cases cited

The following cases are cited in the judgment:

AGC (Pacific) Ltd v Registrar of Titles (2009) N3807
Allan Alfred Daniel v Pak Domoi Ltd (2009) SC970
Boni v Tolukuma Gold Mines Ltd (2009) SC1005
Bougainville Copper Ltd v Commissioner General of Internal Revenue (2008) N3331
Dale Christopher Smith v Minister for Lands & Ors (2009) SC973
Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215
Helifix Group of Companies Ltd v PNG Land Board & Ors (2012) SC1150
Isidore Kaseng v Rabbie Namaliu & The State (No 1) [1995] PNGLR 481
Koitachi Ltd v Walter Schnaubelt (2007) SC870
Mark Ekepa v William Gaupe (2004) N2694
Mision Asiki v Manasupe Zurenuoc & Morobe Provincial Government (2005) SC797
Telikom PNG Ltd v ICCC & Digicel (PNG) Ltd (2008) SC906
Telikom PNG Ltd v ICCC (2007) N3144
Titi Christian v Rabbie Namaliu & The State OS No 2 of 1995, 18.07.96
West New Britain Provincial Government v Pepi S Kimas & Ors (2009) N3834

APPEAL

This was an appeal from the summary dismissal of proceedings by the National Court.

Counsel

M I Saka, for the appellant
M Pokia, for the second respondent

1 March, 2012

1. BY THE COURT: This is an appeal against the dismissal by Justice Kandakasi of proceedings in the National Court, which had been commenced by the appellant, the National Housing Corporation (NHC), against the respondents, Paul Asakusa as suspended managing director of the NHC, and Francis Pumbu.

2. At the centre of those proceedings (OS No 302 of 2009) was a block of land in Port Moresby, Allotment 31, Section 19, Hohola, on which there had been a block of four residential flats occupied by NHC tenants, ownership of which had been transferred from the NHC to Mr Pumbu at a time when Mr Asakusa was managing director. The NHC sought declarations and orders that would nullify the transfer to Mr Pumbu, claiming fraud and illegality in the transfer to him and breaches by Mr Asakusa of fiduciary and legal duties to the NHC which allegedly amounted to a conspiracy between him and Mr Pumbu to defraud the NHC. It was claimed amongst other things that Mr Asakusa had agreed to transfer the land to Mr Pumbu without NHC Board approval at a significantly undervalued price of K140,937.50, it being alleged that the actual market value was nine times that sum.

3. His Honour on 23 June 2010 heard and upheld a motion by Mr Pumbu for dismissal of the proceedings, relying on the doctrine of issue estoppel. His Honour held that as the central issue in the proceedings concerned ownership of land and that issue had been determined in prior judicial proceedings the doctrine of issue estoppel applied and the NHC was precluded from claiming the relief that it was seeking. The prior proceedings were OS No 742 of 2008 which Mr Pumbu as plaintiff had commenced against the NHC tenants who had remained living on the land despite its transfer, seeking a declaration that he was the registered proprietor and an order for eviction of the NHC tenants. On 8 April 2009 those proceedings were concluded by the National Court declaring that Mr Pumbu was indeed the registered proprietor and ordering that the NHC tenants had two months to vacate.

4. The NHC has appealed against the dismissal of OS No 302 of 2009 on two grounds:

(1) that issue estoppel had not been pleaded as a defence and could not be relied on as a ground for summary disposal of proceedings; and

(2) that issue estoppel did not apply as it was not a party to the prior proceedings.

GROUND 1: ISSUE ESTOPPEL NOT PLEADED

5. The appellant argues that the primary Judge erred by entertaining the motion for dismissal and dismissing the proceedings when issue estoppel had not been pleaded as a defence. To appreciate this argument it is necessary to set out the background of the National Court proceedings.

6. The NHC commenced OS No 302 of 2009 on 12 June 2009 and subsequently filed a motion seeking an interim injunction that would amongst other things restrain Mr Pumbu from developing the land, pending trial. On 9 October 2009 the National Court refused that motion and directed that the NHC file a statement of claim and the proceedings continue by way of pleadings.

7. On 20 November 2009 the NHC filed an amended statement of claim in accordance with the Court's directions but neither Mr Asakusa nor Mr Pumbu filed a defence. Instead, on 16 March 2010 Mr Pumbu filed a motion under Order 12, Rule 1 of the National Court Rules (which allows the Court on the application of a party to amongst other things direct the entry of such judgment "as the nature of the case requires") seeking an order for dismissal of proceedings on the ground of issue estoppel. That motion was heard and upheld by granting of the order for dismissal on 23 June 2010.

8. Mr Saka, for NHC, submits that it was wrong in law for the primary Judge to have entertained the issue estoppel argument, let alone relied on it as the basis of dismissal of the proceedings, when it had not been pleaded as a defence. The departure from acceptable practice and procedure was acute in this instance, Mr Saka submits, as Mr Pumbu had not filed any defence in response to the NHC's amended statement of claim. In support of those propositions he relies on the judgment of Sir Salamo Injia in Telikom PNG Ltd v ICCC & Digicel (PNG) Ltd (2008) SC906, in which his Honour expressed the view that issue estoppel and the related doctrine of res judicata should be pleaded in a defence. Only by pleading such defences would the court and the parties be properly informed of the legal and factual bases on which the defence is grounded. Otherwise there is the risk of great injustice if arguments are rushed at a preliminary hearing due to an application for summary dismissal of the proceedings.

9. That view was expressed in a dissenting opinion and although we fully appreciate its underlying rationale we do not propose, with respect, to adopt it. In Telikom v ICCC and Digicel the other members of the Court, Kirriwom J and Cannings J, in a joint judgment, took the view that it was unnecessary in the circumstances of that case for res judicata to be pleaded as a defence; and we consider that their approach, which allows for each case being treated on its merits, is the preferable one.

10. The question of whether it is necessary for issue estoppel (or res judicata) to be pleaded as a defence is a matter of discretion for the primary Judge. If it appears obvious that issue estoppel should apply it will usually be unnecessary to require it to be pleaded. If it appears to be only an arguable proposition the desirable course of action would be a direction that the issue be pleaded.

11. In the present case the issue of issue estoppel was open to be raised and determined without requiring that it be pleaded and the primary Judge made no error of law in not requiring it to be pleaded. Ground (1) of the appeal is dismissed.

GROUND (2): ISSUE ESTOPPEL NOT APPLICABLE

12. The first thing we must do in determining whether the primary Judge erred in deciding that issue estoppel was applicable is to determine what the prerequisites for its application are. Having considered the competing arguments of the parties we consider that there are three prerequisites:

(a) the issue raised in the current proceedings is the same issue as that raised in the prior proceedings;

(b) the issue was finally determined in the prior proceedings; and

(c) the parties in the current proceedings are the same as those in the prior proceedings or, if they are not the same, the party against whom the estoppel is sought to be applied was a privy of a party to the prior proceedings and reasonably expected to be aware of the prior proceedings and entitled to be joined but failed without explanation to do so.

13. The third is the most contentious. Mr Saka submitted that it is necessary that the parties in the two proceedings be the same. He relies principally on the judgment of Kapi DCJ, as he then was, in Titi Christian v Rabbie Namaliu & The State OS No 2 of 1995, 18.07.96, in which his Honour ruled that it was necessary for the parties to be the same before issue estoppel could apply.

14. However, that view was expressed in a dissenting opinion and we respectfully decline to adopt it. The Court decided 4:3 (Amet CJ, Doherty J, Andrew J, Sevua J; Kapi DCJ, Los J, Salika J dissenting) that issue estoppel applied to prevent the applicant in proceedings under Section 18(1) of the Constitution, the former Premier of Morobe Province, Mr Christian, prosecuting a challenge to the constitutional validity of the Organic Law on Provincial Governments and Local-level Governments 1995. In the leading judgment of Amet CJ it was held that Mr Christian was a privy of another former premier, Mr Isidore Kaseng (of Western Province), who had in prior proceedings, Isidore Kaseng v Rabbie Namaliu & The State (No 1) [1995] PNGLR 481 (Amet CJ, Hinchliffe J, Andrew J; Kapi DCJ, Los J dissenting) unsuccessfully challenged the constitutional validity of the same Organic Law; and Mr Christian was aware of the prior proceedings and would have been entitled to join them but had decided without explanation not to be joined.

15. In a number of National Court decisions the view has been expressed that the parties in the proceedings in which issue estoppel is raised need not be the same as in the prior proceedings, eg Mark Ekepa v William Gaupe (2004) N2694, Cannings J; Telikom PNG Ltd v ICCC (2007) N3144, Kandakasi J; Bougainville Copper Ltd v Commissioner General of Internal Revenue (2008) N3331, Hartshorn J). We are satisfied that that is the proper approach to take. We will now consider whether the three prerequisites applied here.

(a) Was the issue raised in the second proceedings the same issue as that raised in the prior proceedings?

16. No. The critical issue raised in the second proceedings, OS No 302 of 2009, would appear to be whether Mr Pumbu had become registered proprietor of the subject land in a "case of fraud" for the purposes of Section 33(1)(a) of the Land Registration Act.

17. Differing judicial opinions have been expressed as to what "fraud" entails (West New Britain Provincial Government v Pepi S Kimas & Ors (2009) N3834). On the one hand, in Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215 the Supreme Court (Amet J and Salika J, Brown J dissenting) held that if the circumstances of a forfeiture or transfer of title are so unsatisfactory, irregular or unlawful, it is tantamount to fraud, warranting the setting aside of registration of title. On the other hand, a narrower view was favoured by the Supreme Court (Gavara-Nanu J, Mogish J and Hartshorn J) in Koitachi Ltd v Walter Schnaubelt (2007) SC870: fraud means fraud committed by the registered proprietor or actual fraud.

18. Whichever approach is taken it is clear that "fraud" was the critical issue raised in OS No 302 of 2009. It was not, however, at issue in the prior proceedings, OS No 742 of 2008, where the issues were simply whether Mr Pumbu was the registered proprietor and whether the occupants of the land (the former NHC tenants) had any right to remain on it. Those issues were decided in Mr Pumbu's favour and no judicial determination was made whether he had become registered proprietor in a case of fraud. The issue was not raised.

19. Therefore the first prerequisite does not apply and for that reason alone issue estoppel did not apply.

(b) Was the issue finally determined in the prior proceedings?

20. No. The issue of whether Mr Pumbu became registered proprietor in a case of fraud did not arise at all, so there could be no final determination of it. None of the allegations of fraud and illegality pleaded in the NHC's amended statement of claim in OS No 302 of 2009, including alleged breaches of the National Housing Corporation Act 1990 and the Public Finances (Management) Act 1995, were raised or determined in the prior proceedings.

(c) Were the parties the same or did the rule about privies apply?

21. Yes. The parties were not the same in the prior proceedings but we are persuaded by Mr Pokia's submission that the rule about privies did apply. The NHC had a sufficient privity of interests with the defendants, its four former tenants, in the prior proceedings in that, like the former tenants, it had an interest in preventing Mr Pumbu from enforcing his rights as registered proprietor. So the NHC was a privy of the former tenants. It was reasonably expected to be aware of the prior proceedings and could readily have applied to be joined but failed without a good explanation to do so. The third prerequisite is satisfied.

Conclusion re ground 2

22. Only one of the three prerequisites for operation of issue estoppel is satisfied. The first two are not. We respectfully conclude that the learned primary Judge erred in deciding that the issues in both proceedings were the same and that those issues had been finally determined in the prior proceedings. This led his Honour to the erroneous conclusion that the doctrine of issue estoppel applied and that the proceedings should be dismissed. Ground 2 of the appeal is upheld.

WHAT ORDERS SHOULD BE MADE?

23. We have dismissed one ground of appeal and upheld the other. The appeal will therefore be allowed. As to what consequences flow from this, Mr Pokia submitted that if we reached this stage we should nonetheless not quash the decision of the National Court to dismiss the proceedings or remit the matter to the National Court. This would be a futile exercise, Mr Pokia submitted, as the NHC had filed no affidavits in response to Mr Pumbu's motion for dismissal, so it can safely be presumed that the NHC has no evidence worthy of the National Court's consideration. So it would just be a waste of time to remit the matter to the National Court; the result would be the same: issue estoppel would apply. The Supreme Court always has discretion to exercise. Relying on the decision of the Supreme Court (Jalina J, Cannings J, Manuhu J) in Mision Asiki v Manasupe Zurenuoc & Morobe Provincial Government (2005) SC797 Mr Pokia submitted that upholding an appeal does not necessarily result in the Supreme Court granting the relief sought by the appellant.

24. On the last point we agree without difficulty with Mr Pokia's submission. Determination of an appeal by the Supreme Court involves a two-step decision-making process. It first decides whether one or more of the grounds of appeal are upheld. If yes, it proceeds to exercise its discretion as to what relief, if any, should be granted (Dale Christopher Smith v Minister for Lands & Ors (2009) SC973).

25. In a civil appeal the Court's discretion is exercised under Section 16 (decision etc on appeal) of the Supreme Court Act, which states:

On the hearing of an appeal, the Supreme Court shall inquire into the matter and may—

(a) adjourn the hearing from time to time; or

(b) affirm, reverse or modify the Judgement; or

(c) give such judgement as ought to have been given in the first instance; or

(d) remit the case in whole or in part for further hearing; or

(e) order a new trial.

26. The earlier part of Mr Pokia's submission seems to presume that the discretion of the Supreme Court upon upholding an appeal is limited to Section 16(d): deciding whether to remit a case for rehearing. The submission fails to appreciate that the Supreme Court has the power under Section 16(c) to give such judgment as ought to have been given in the National Court. Section 6(2) of the Supreme Court Act is a complementary source of power. It states:

For the purposes of hearing and determining an appeal, the Supreme Court has all the powers, authority and jurisdiction of a Judge exercising the jurisdiction of the National Court.

27. We will exercise the powers in Sections 6(2) and 16(1)(c). We see no point in remitting to the National Court the question of whether Mr Pumbu's motion for dismissal should be upheld. It has no prospect of success. We have had access to the evidence before the National Court and we are safely able to conclude that the motion must be refused.

28. In addition to the absence of two of the three prerequisites for operation of the doctrine of issue estoppel, other important considerations convince us to order its refusal.

29. In exercising the discretion whether to dismiss proceedings the court before which an application for dismissal is made should consider the nature and circumstances of the case and the consequences of dismissal (Boni v Tolukuma Gold Mines Ltd (2009) SC1005). Here there were serious allegations of fraud and illegality involving a governmental body and a leader. As Davani J highlighted in AGC (Pacific) Ltd v Registrar of Titles (2009) N3807 selling a property at a highly undervalued price can amount to fraud. In Helifix Group of Companies Ltd v PNG Land Board & Ors (2012) SC1150 the Supreme Court commented on the current shortage of land for development purposes in the National Capital and widespread suspicion as to corrupt land deals.

30. It is very important to adhere to proper statutory procedures for the transfer of land. Disputes over the ownership of land and the process by which it is transferred do not usually lend themselves to summary determination. A trial is usually required (Allan Alfred Daniel v Pak Domoi Ltd (2009) SC970).

31. The discretion to dismiss proceedings of the nature involved in the National Court in this case should therefore be exercised with an abundance of caution. We will therefore under Sections 6(2) and 16(c) of the Supreme Court Act refuse all relief sought in the notice of motion of Mr Pumbu in OS No 302 of 2009 filed on 16 March 2010. Costs will follow the event.

ORDER

32. For the reasons outlined above, we order that:

(1) The appeal is allowed.

(2) The order of the National Court of 23 June 2010 in OS No 302 of 2009 is quashed.

(3) All relief sought in the notice of motion of the second defendant in OS No 302 of 2009 filed on 16 March 2010 is refused.

(4) The Registrar of the National Court shall list OS No 302 of 2009 for mention within 14 days after the date of this order.

(5) The second respondent shall pay the appellant's costs of the proceedings, on a party-party basis, which shall, if not agreed, be taxed.

Judgment accordingly.
_____________________

M Saka Lawyers: Lawyers for the Appellant
Mirupasi lawyers: Lawyers for the Second Respondent