JNS Ltd v Lae Builders & Contractors Ltd [2015] PGSC 79; SC1552 (18 December 2015)

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AND:
ANTHONY WAGAMBIE in his capacity as the Acting Commissioner of Police Department
Second Respondent

SUPREME COURT - APPEAL – validity of State Lease – whether exemption from advertisement valid – meaning of “has agreed” – whether exemption notice sufficient to constitute agreement – requirements for agreement – whether non-compliance a serious breach – whether non-compliance constitutes constructive fraud – whether title should be set aside – Land Act, sections 65,68 & 69 – Land Registration Act, section 33

Cases cited:
Emas Estate Development Pty Ltd v Mea [1993] PNGLR 215
Hi Lift Pty Ltd v Setae (2000) N2004
Marianne Mosoro v Kingswell Ltd (2011) N4450
Mudge v Secretary for Lands [1985] PNGLR 387
Steamships Trading Co Ltd v Garamut Enterprises Ltd (2000) N1959
WNB Provincial Government v Pepi S Kimas (2009) N3834

Counsel:
Mr J Haiara, for the Appellant
Mr N Kiuk, for the first Respondent
No appearance, for the second Respondent
Mr I Molloy and Ms C Copeland, for the third Respondent

1. BY THE COURT: This appeal concerns the land described as Section 54 Allotment 1 Granville N.C.D. contained in State Lease Volume 39, Folio 134 (“the Property”).

2. The decision appealed against is that of the National Court given on 12^th January 2011 at Waigani in proceedings OS No. 426 of 2010 – JNS Ltd v Lae Builders & Contractors Ltd & Anor by which the learned primary Judge found that the State Lease granted to the appellant JNS Limited (“JNS”) in respect of the Property was null and void for non-compliance with section 69(2)(d) of the Land Act 1996 (“the Act”). His Honour thereby ordered that the State Lease be delivered to the Registrar of Titles and cancelled.

3. The Police Department had occupied the Property pursuant to a Certificate Authorizing Occupancy issued by the Lands Department. That Certificate was revoked on 4^th July 2005 but not gazetted until 11^th February 2010. Four years earlier in 2006, the Police Department and the first respondent Lae Builders & Contractors Limited (“LBC”) entered into an agreement for LBC to occupy the Property to off-set monies due by the Department to LBC. On 4^th September, the Minister exempted the Property from advertisement purportedly under section 69(2)(d) of the Act. The Land Board recommended for JNS to be issued a State Lease in respect of the Property, which State Lease was granted to JNS on 4^th May 2010 and registered in its name the next day, 5^th May 2010.

4. In proceedings OS No. 426 of 2010 filed by JNS against LBC (and to which the Commissioner of Police was added as a defendant), JNS sought a declaration that it was the lawful owner of the Property and that it be given vacant possession. However as stated earlier, the primary Judge held that the State Lease granted to JNS was invalid and ordered that it be cancelled.

6. The issues necessary for our determination are whether the primary Judge erred in deciding that:

7. The relevant provisions relating to the granting of State Leases are found in Part X of the Act. By virtue of section 65, only the Minister or his delegate may grant a State Lease of Government land. Pursuant to section 68(1) and 69(1), gazettal notice is required to be issued all land available for leasing unless the land has been exempted from advertisement. The Minister may only exempt land from advertisement in limited circumstances set out under Section 69(2). Circumstances where the Minister may exempt land from advertisement include “(d) where the State has agreed to provide land for the establishment or expansion of a business, project, or other undertaking”.

I, HON. SIR DR. PUKA I TEMU, KBE CMG, MP, the Minister for Lands & Physical Planning, by virtue of the powers conferred by Section 69(2)(d) of the Land Act No: 1996 [sic]and all other powers me enabling hereby ‘Exempt from Advertisement’ the land described in the Schedule hereunder.

The special reason being that the land has been applied for by JNS LIMITED for a formal grant of lease who intends to develop the land for a Business (Commercial) purposes, with improvements of; a [sic] Office Complex. The estimated improvements value is between: [sic] Three to Five Hundred Thousand Kina.

9. We start discussing the issue by asking: Did the State agree to exempt the Land from advertisement under Section 69(2)(d)?

10. Mr. Haiara of Counsel for the appellant submitted that the Tender/Application Form and the Exemption Notice itself constituted an agreement for the exemption. He urged the Court to find that it the Exemption Notice constituted the requisite agreement, that it implied an agreement, for the purposes of section 69(2)(d).

11. The phrase “has agreed” is the present perfect tense of the verb “to agree”. We consider that the plain and ordinary meaning must be given to this verb and in our view it simply means “to consent (to)”. Therefore the phrase “has agreed” suggests that the act of agreeing or consenting to has already happened. Accordingly, we find in favour of the contrary argument by Mr. Molloy for the third respondent. He submitted that the Tender/Application Form and the Exemption Notice cannot on any reasonable construction constitute an agreement because by the use of the words “where the State has agreed” necessarily implies that that State must first agree to or consent to the exemption before that exemption is granted. The agreement must necessarily pre-date or precede the exemption notice, and therefore an exemption itself cannot constitute the agreement.

12. The next question is: What form should the agreement take? This question was addressed by his Honour Cannings, J in the cases of WNB Provincial Government v Pepi S Kimas (2009) N3834 and Marianne Mosoro v Kingswell Ltd (2011) N4450. Those are decisions given before the decision the subject of this appeal but they were not referred to by the parties or the primary Judge in the trial. However the respondents relied on them on this appeal.

13. In those cases his Honour decided that because the Act is silent on how the State is to agree for purposes of section 69(2)(d), a formal agreement in writing between the State and the applicant for land is required, executed on behalf of the State by the Governor-General as the Head of State acting with and in accordance with the advice of the National Executive Council. His Honour justified his view this way in WNB Provincial Government v Pepi S Kimas (supra) at [36]:

“36. I find no merit in that submission. Section 69(2)(d) requires that “the State” has agreed to provide land. Not “the Minister” or “the Departmental Head” or the “Land Board” or “a delegate of the Minister”. Agreements are usually executed for and on behalf of the State by the Governor-General, acting with and in accordance with the advice of the National Executive Council (see, for example, the Public Finances (Management) Act 1995, Section 47, which deals with execution of agreements on behalf of the State). As the Land Act is silent on how an agreement by the State to provide land should be made, executed or evidenced I think the usual practice regarding agreements by the State should apply. The Governor-General, as personal representative of the Queen and Head of State under Section 82(2) (Queen and Head of State) of the Constitution, should sign the agreement acting with and in accordance with the advice of the National Executive Council. And there should be an instrument – a memorandum of agreement – which records the terms of the agreement. This instrument should be separate and distinct from the notice of the agreement.”

14. Mr. Molloy (supported by Mr Kiuk for the first respondent) submitted that we endorse and apply his Honour’s views. While we accept the proposition that the agreement referred to in section 69(2)(d) must be an act separate from exemption notice, we are of the opinion that it is not necessary that such agreement must be in the formal form and follow the formal process suggested by his Honour Cannings, J.

15. As to the importance of complying with section 69(2)(d), the primary Judge at [68] of his judgement approved the following remarks of Sheehan, J in Steamships Trading Co Ltd v Garamut Enterprises Ltd (2000) N1959:

“The content and directives of the Act plainly demonstrate that the intention and purpose of the Act is to provide an open transparent system of access to State lands, and an orderly and fair process of disposition of those lands by the Minister on behalf of the State. Citizens, given due and adequate notice as to the availability of State land, are able to compete on an equal footing with one another by public open tender for a State Lease.”

16. At [64] the primary Judge considered it only necessary that the agreement “is reduced in writing and that such agreement be identified in the notice of exemption signed by the Minister.” His Honour elaborated at [71]:

“There will undoubtedly be suspicion when land is exempted from advertisement because that operates to prevent the ‘sunlight of transparency’ shone in the process which results in the grant of a State Lease and provide an opportunity for corrupt conduct. There is no doubt why section 69(2) provides a limited number of specific circumstances in which exemption can be granted. It is important that there is compliance with those provisions when the Minister decides to rely on them. In particular, the reliance on section 69(2)(d) requires an agreement by the State. It is plainly desirable that such agreement is properly made and that both the agreement and the reasons for it are documented if a suspicion of corruption are to be avoided, not to forget the prospect of the resulting State Lease and any consequently registered title being set aside if there is non-compliance with the relevant statutory requirements.”

17. We agree with those views. There must be transparency and accountability in making government land available equally to all citizens. Indeed, there must be checks against the Minister or his delegate such as the Secretary acting “on a whim” when dealing with land (including exercising the power of exemption from advertisement). We therefore consider that the agreement or the decision agreeing or consenting to exempting land from advertisement must be appropriately recorded. That could be by way of an office memo or directive signed by the Minister (or his delegate). This record of the agreement or consent must also state the reasons (in line with section 69(2)(d)) for the exemption from advertisement. Those same reasons must then be spelt out in the notice of exemption.

18. We consider that the Minister has the delegated power on behalf of the State to agree or consent to the land being exempted from advertisement. We are satisfied that the scheme of the Act vests in the Minister various powers in dealing with land matters on behalf of the State, and these include:

Section 5	The Minister may declare State Land
Section 6	The Minister (on behalf of the State) may acquire customary land by compulsory process or by agreement
Section 25	The Minister may (on behalf of the State) enter into an agreement with the owner of land as to the amount of compensation
Section 49	The Minister may, by notice in the National Gazette, reserve from lease or further lease— (a) Government land; or (b) land that is the subject of a State lease
Section 65	The Minister may grant State leases of Government land as provided by this Act.
Section 67	The Minister may grant certain state leases without referring the applications to the Land Board
Section 76	The Minister shall execute State Leases on behalf of the State
Section 122	The Minister may forfeit a state lease

19. We are also of the opinion that the primary Judge was correct in re-stating what was pointed out in Steamships Trading Company Limited v Minister for Lands (supra) that “special reasons” is not proper a basis for exempting land from advertisement under section 60(2)(d). There is simply no reference whatsoever to “special reasons” in that section. If the exemption notice form used by the Department of Lands has not yet been corrected to be consistent with section 69, that should be attended to the soonest.

20. We therefore find no error in his Honour deciding that the exemption under section 69(2)(d) of the Act was not valid in that it did not comply with the requirements of that provision.

21. After determining that JNS did not have a valid State Lease, the primary Judge decided to set aside its title to the land on three grounds:

23. His Honour referred to the Steamships and Hi-Lift cases in his discussion of the law in relation to the principle of indefeasibility of title. His Honour noted that the leading case of Mudge v Secretary for Lands [1985] PNGLR 387 established that a registered title cannot be set aside unless one of the situations listed in section 33(1) of the Land Registration Act applied – one of this being the case of fraud; section 33(1)(a). His Honour further noted that since that case, the law has developed to cover situations where title to land has been obtained when requirements of the Act have not been met. The Steamships and Hi-Lift cases dealt with non-compliance with section 69(2) and decided that although the non-compliance did not show actual fraud, it amounted to constructive fraud which was a basis for setting aside title on the authority of the majority decision of the Supreme Court in the case of Emas Estate Development Pty Ltd v Mea [1993] PNGLR 215. His Honour found no reason why he should arrive at a different decision on the same issue. We do not consider that his Honour erred on this aspect.

24. For the very reasons that we discussed in [16] to [18] above, we concur with the primary Judge that non-compliance with section 69(2) amounts to a serious breach of a mandatory provision of the Act. The requirements of that provision were not met. There is a presumption of fraud that justifies the overturn of a registered title.

25. Accordingly, we consider that the primary Judge did not err in finding constructive fraud and ordering that JNS’ title to the Land be cancelled.

26. We conclude therefore that the appellant has not shown any error by the primary Judge in arriving at his decision, meaning that the grounds of appeal have not been made out.

Steeles Lawyers: Lawyers for the Appellants
Nikiuma Lawyers: Lawyers for first Respondent
Young & Williams: Lawyers for third Respondent

Supreme Court of Papua New Guinea

JNS Ltd v Lae Builders & Contractors Ltd [2015] PGSC 79; SC1552 (18 December 2015)