Tikili v Home Base Real Estate Ltd [2017] PGSC 1; SC1563 (21 February 2017)

SC1563

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCA NO 128 OF 2015

PIUS TIKILI
First Appellant

BEZALLEL TIKILI
Second Appellant

V

HOME BASE REAL ESTATE LIMITED
First Respondent

PAUL WAGUN, PUBLIC CURATOR
Second Respondent

THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Respondent

Waigani: Cannings J, Yagi J, Neill J

2016: 15 December,
2017: 21 February

LAND – government land – State Leases – indefeasibility of title – meaning of “fraud” in Land Registration Act, Section 33(1)(a) – whether actual fraud must be proven – whether proof of constructive or equitable fraud is sufficient.

CONTRACTS – sale of land – two contracts for sale of same land – whether second contract entered into with knowledge of first contract.

WILLS AND PROBATE – intestate estates – role of Public Curator – Public Curator Act.

The first appellant entered into a contract with the Public Curator (the second respondent) to purchase a residential property that formed part of a deceased estate vested in the Public Curator. At that time the first and second appellant (son of the first appellant) occupied the property. The appellants paid the required deposit in accordance with the contract. That contract remained uncompleted, when seven months later the first respondent entered into a contract with the Public Curator to purchase the same property and paid the deposit required by the contract. Transfer of the property from the Public Curator to the first respondent took place. The first respondent then commenced proceedings by originating summons (OS) against the appellants in the National Court, seeking declarations that it is the registered proprietor and that the appellants are unlawful occupiers and an order for their eviction. Having obtained an interim injunction to restrain their eviction, the appellants then commenced proceedings by writ of summons (WS) against the first respondent and the Public Curator, seeking declarations that the transfer of title to the first respondent was null and void and an order for specific performance of their contract with the Public Curator. The first respondent then, in the WS proceedings, cross-claimed against the appellants, seeking damages for their unlawful occupation of the property. The OS and WS proceedings were consolidated and a trial was conducted, resulting in the following orders and declarations: the Public Curator is liable in damages to the appellants for breach of contract; the appellants’ claim for specific performance of their contract is refused; the first respondent is the registered proprietor; the appellants are liable in damages to the first respondent for unlawful occupation of the property (since the date of transfer of title to the first respondent); the appellants shall vacate the property within 28 days. The appellants appealed against the decision of the National Court on various grounds including that the trial Judge erred in law by refusing to cancel the first respondent’s title on the ground of fraud under Section 33(1)(a) of the Land Registration Act. The appellants were granted a stay of the National Court decision pending determination of the appeal and remain in occupation of the property. Prior to hearing the appeal the Supreme Court granted leave for introduction of fresh evidence by the appellants, including affidavits by the present Public Curator and a member of his staff suggesting that the contract of sale with the first respondent had been entered into irregularly without the knowledge of the then Public Curator in that there were no records of the transaction and the transaction yielded nil proceeds for the Public Curator.

Held:

(1) Under Papua New Guinea’s Torrens Title system of land registration for alienated government land, registration of a lease vests, subject to limited exceptions, an indefeasible (unforfeitable) title in the registered proprietor subject only to the exceptions in Section 33(1) of the Land Registration Act. Most significantly Section 33(1)(a): “in the case of fraud” (Mudge v Secretary for Lands [1985] PNGLR 387).

(2) “Fraud” means actual fraud or constructive fraud. Constructive fraud exists where the circumstances of a transfer of title are so unsatisfactory, irregular or unlawful, it is tantamount to fraud, warranting the setting aside of registration of title.

(3) The trial Judge erred by dismissing summarily the appellants’ argument that the first respondent’s title should be cancelled on the ground of fraud, as there was sufficient evidence before the Court on which a finding of constructive fraud could reasonably have been made and the statement of claim was couched in sufficient terms to ground a finding of constructive fraud. The ground of appeal alleging error of law by the trial Judge in that regard, was upheld. It was unnecessary to determine other grounds of appeal.

(4) The fresh evidence introduced for the appeal reinforced the availability of a finding of constructive fraud.

(5) The appeal was allowed, the decision of the National Court was quashed and the matter was remitted to the National Court for retrial.

Cases cited

The following cases are cited in the judgment:

Emas Estate Development Pty Ltd v John Mea [1993] PNGLR 215
Eric Kiso v Bennie Otoa & Ken Wutnalom (2013) SC1222
Koitachi Ltd v Walter Schnaubelt (2007) SC870
Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120
Mudge v Secretary for Lands [1985] PNGLR 387
Pius Tikili & Bezallel Tikili v Home Base Real Estate Ltd, Paul Wagun as Public Curator & The State, OS No 780 of 2011 & WS No 944 of 2013 (consolidated), 06.10.15, unreported
PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126

APPEAL

This was an appeal against a decision of the National Court that refused to cancel the first respondent’s title in Government land.

Counsel:

D E Doiwa & A Gubag, for the Appellants
J Posi, for the first Respondent

21^st February, 2017

1. BY THE COURT: Pius Tikili and Bezallel Tikili, the appellants, have since 2008 occupied a residential property on Government land at Rainbow estate, near Gerehu, National Capital District: Section 482, Allotment 1. They appeal against a decision of the National Court, constituted by Justice Kariko, which, amongst other things, declared that Home Base Real Estate Ltd (the first respondent) is the registered proprietor of the property and ordered the appellants, who are father and son, to vacate the property (Pius Tikili & Bezallel Tikili v Home Base Real Estate Ltd, Paul Wagun as Public Curator & The State, OS No 780 of 2011 & WS No 944 of 2013 (consolidated), 06.10.15, unreported). That decision has been stayed pending the outcome of the appeal.

BACKGROUND

2. The property at the centre of this case was part of the deceased estate of Kalo Laiwa, who died intestate in 1995. The late Mr Laiwa’s estate was administered by the Public Curator under letters of administration granted by the National Court on 5 June 2006.

3. In August 2008 the appellants moved into the property. They paid rent to the first respondent, which, they understood, owned the property. In April 2009 the appellants were told that that the property was part of a deceased estate, and that the first respondent was only managing the property. They offered to purchase it from the Public Curator.

4. In May 2009 the first appellant entered into a contract with the Public Curator to purchase the property for K110, 000.00. The then Deputy Public Curator, Vuatha Leva, signed the contract on behalf of the Public Curator as a “duly authorised officer” under the common seal of the Public Curator. The first appellant signed the contract as purchaser. The first appellant paid the required deposit of K10, 000.00.

5. That contract remained uncompleted, when seven months later, in December 2009, the first respondent entered into a contract with the Public Curator to purchase the same property. Again, Mr Leva, the Deputy Public Curator, signed the contract on behalf of the Public Curator.

6. On 10 September 2010 the transfer of the State Lease over the property to the first respondent was registered.

7. The first respondent requested the appellants to pay their outstanding rent or to give vacant possession of the property. They refused. The first respondent then commenced proceedings by originating summons, OS No 780 of 2011,against the appellants in the National Court. The first respondent sought declarations that it is the lawful owner of the property and registered proprietor and that the appellants are unlawful occupiers and an order for their eviction.

8. Having obtained an interim injunction to restrain their eviction, the appellants, in 2013, commenced proceedings by writ of summons, WS No 944 of 2013, against the first respondent and the Public Curator. They sought a declaration that the transfer of title to the first respondent was null and void and an order for specific performance of the first appellant’s contract with the Public Curator.

9. The first respondent then, in WS No 944 of 2013, cross-claimed against the appellants, seeking damages for the appellants’ unlawful occupation of the property.

TRIAL

10. The OS and WS proceedings were consolidated and a trial was conducted. The trial Judge identified four central issues. We summarise his Honour’s determination of them as follows:

1. Did the Public Curator breach the contract of May 2009? Yes.
   
2. If so, is specific performance of that contact the appropriate relief? No, the first appellant is entitled to damages only.
   
3. Is there proper ground to defeat the title to the property registered in favour of the first respondent? No, the December 2009 contract between the first respondent and the Public Curator is lawful and valid. The first respondent has indefeasible title. The appellants’ argument that the first respondent had become registered proprietor in a case of fraud, is rejected as it was not pleaded and, in any event, there is no evidence of fraud.
   
4. If not, have the appellants unlawfully occupied the property since title was transferred to the first respondent? Yes, and the first respondent is entitled to damages and an order that the appellants vacate the property.
   

11. His Honour accordingly made the following orders and declarations:

1. The Public Curator is liable in damages to the appellants for breach of contract.
   
2. The first respondent is the registered proprietor of the property.
   
3. The appellants are liable in damages to the first respondent for unlawful occupation of the property since September 2010 (the date of transfer of title to the first respondent).
   
4. The appellants shall vacate the property within 28 days.
   

APPEAL

Grounds of appeal

12. The appellants appealed against the decision of the National Court on nine grounds (per an amended notice of appeal filed 23 November 2015). It is argued that the trial Judge erred in fact and/or law, by:

1. finding that the first respondent, when it entered into the contract with the Public Curator, did not know of the earlier contract between the first appellant and the Public Curator;
   
2. finding that Paul Wagun acted for the Public Curator in the contract with the first respondent, when in fact Vuatha Levi acted for the Public Curator in both contracts;
   

100. finding that the contract between the first respondent and the Public Curator was valid;
     

4. finding that the first appellant’s interest in the property did not warrant cancellation of the transfer of title to the first respondent;
   
5. finding that specific performance was not an appropriate remedy for the breach of contract committed by the Public Curator;
   
6. finding that damages was an adequate remedy for the breach of contract committed by the Public Curator;
   
7. finding that the appellants unlawfully occupied the property;
   
8. finding that the appellants were liable in damages to the first respondent for unlawful occupation of the property;
   
9. finding that the Public Curator was not liable in damages for the unlawful occupation he had caused.
   

Relief sought

13. In addition to an order quashing the decision of the National Court, the appellants seek:

• declarations that the transfer of title to the first respondent is null and void and that the first respondent has no legal or equitable interest in the property;
  
• specific performance of the first appellant’s contract with the Public Curator;
  
• a declaration that ownership in the property is vested in the first appellant;
  
• a permanent injunction to restrain the first respondent from interfering with the appellants’ enjoyment of the property.
  

FRESH EVIDENCE

14. Prior to hearing the appeal, we granted an application by the appellants under Section 6(1)(a) (appeal to be by way of rehearing) of the Supreme Court Act to adduce fresh evidence for the purposes of the appeal. The application was opposed by the first respondent. But once the application was granted and the appellants’ fresh evidence was adduced, we also allowed the first respondent to adduce evidence that was not before the trial Judge. Consequently we allowed five affidavits, all filed on 10 October 2016, to be adduced as fresh evidence. Details of the affidavits, three tendered by the appellants and two tendered by the first respondent, are in the following table.

FRESH EVIDENCE ADDUCED UNDER SECTION 6(1)(a) SUPREME COURT ACT

No	Deponent	Description
A1	Jacob Pupuna	Public Curator
Evidence
He is the current Public Curator – he has checked the records of the Office of Public Curator to establish the mode of payment of consideration for the conveyance of the subject property, forming part of the estate of the late Kalo Laiwa – the deceased estate’s statement of account showed, as at 28 June 2016, that no money had paid into or out of the account – also there was no settlement statement on file; there were no original vendor copies of either contract of sale on file; there was no deed of indemnity and release re transmission of title – both contracts of sale were executed by the then Deputy Public Curator, Vuatha Leva, who has since been dismissed from office for various offences including official corruption – the fact that there were no monies paid into the estate account of Kalo Laiwa deceased is highly irregular. Mr Popuna’s opinion is that “all transactions [regarding the subject property] made to date are deemed illegal because title may have been fraudulently transferred”.
A2	Marina Kumbundu	Senior Accounts Officer, Office of Public Curator
Evidence
On 28 June 2016 she searched the estate ledger for Kalo Laiwa (deceased), which showed a balance of K9.60 – the only monies coming into the estate account were for payment of fees of K1,000.00 for the application for letters of administration.
A3	Pius Tikili	First appellant
Evidence
He deposes to the steps he took, after the decision of the National Court was handed down, to find out from the Public Curator how the property came to be transferred.
R1	Komeali Ropa	Owner/Managing Director, first respondent
Evidence
He deposes that the purchase price paid by the first respondent was K110,000.00 – this money was paid directly, in instalments of various amounts, on various dates in the period from 1 March 2006 to 9 July 2007, to beneficiaries of the deceased Kalo Laiwa (Wendy Kalo and Moses Kalo) at the first respondent’s office in Port Moresby – the Public Curator was fully aware of the arrangement for payment of the purchase price directly to the beneficiaries and, based on that arrangement, signed the contract of sale in December 2009.
R2	Wendy Kalo	Daughter, Kalo Laiwa (deceased)
Evidence
She and her brother, Moses Kalo, were recipients of the proceeds of payments made directly to them by the first respondent – she agrees with all the statements of Komeali Ropa in his affidavit [exhibit R1] – the Public Curator was fully aware of the arrangement for payment of the purchase price directly to herself and her brother.

DETERMINATION

15. We deal first with ground of appeal (d):that the trial Judge erred in fact and law by finding that the first appellant’s interest in the property did not warrant cancellation of the transfer of title to the first respondent;

Appellants’ submissions

16. The appellants argue that the trial Judge erred by failing to adequately take into account that:

• the Public Curator did not give the first appellant the opportunity to complete the contract of sale;
  
• the Public Curator did not terminate the contract with the first appellant before entering into the contract with the first respondent;
  
• the first respondent was aware of the existence of the earlier contract under which the Public Curator agreed to sell the property to the first appellant, yet went ahead and also entered into a contract of sale with the Public Curator;
  
• the Public Curator was also aware of the existence of the earlier contract under which the Public Curator agreed to sell the property to the first appellant, yet went ahead and entered into a contract of sale with the first respondent.
  

17. Ms Doiwa for the appellants submitted that the existence of the prior contract of sale and the knowledge of that prior contract by both the first respondent and the Public Curator was a major irregularity, which warranted cancellation of the first respondent’s title. Ms Doiwa submitted that, even without the fresh evidence adduced for the purposes of the appeal, there was sufficient evidence before the National Court on which the trial Judge could, and should, have made a finding of constructive fraud, sufficient to set aside title under Section 33(1)(a) of the Land Registration Act.

First respondent’s submissions

18. Mr Posi, for the first respondent, submitted that the appellants cannot rely on the issue of alleged fraud in the transfer of title to the first respondent, as it was not pleaded in the statement of claim in the National Court. He submitted that the trial Judge properly found that fraud was not pleaded and that the case could not be determined on that issue. In any event, there was no evidence of fraud before the National Court; and the fresh evidence was not evidence of fraud.

19. Mr Posi submitted that it is settled law that the registered proprietor of a State Lease has an indefeasible title to the land subject only to the exceptions in Section 33(1) of the Land Registration Act, including in a case of fraud; and that if the registered proprietor’s title is to be set aside on the ground of fraud, there must be proof of actual fraud on the part of the registered proprietor. He cites a line of Supreme Court authority in support of those propositions: Mudge v Secretary for Lands [1985] PNGLR 387, Koitachi Ltd v Walter Schnaubelt (2007) SC870 and Eric Kiso v Bennie Otoa & Ken Wutnalom (2013) SC1222. Mr Posi submitted that there was in the National Court no evidence of actual fraud by any person, let alone by the registered proprietor, the first respondent. Therefore the trial Judge made no error of law.

Trial Judge’s reasoning

20. As the hearing of this appeal progressed, especially after the fresh evidence was adduced, the issue of whether the transfer of title to the first respondent was a case of fraud became the dominant issue. We note that the trial Judge dealt with it in determination of what his Honour identified as the third central issue: is there proper ground to defeat the title to the property registered in favour of the first respondent? His Honour stated:

Under Papua New Guinea’s Torrens Title system of land registration, the general principle is that when a State Lease is registered, the registered proprietor is conferred an indefeasible title subject only to the exceptions provided in Section 33(1) of the Land Registration Act (Mudge v Secretary for Lands [1985] PNGLR 387). The question arises whether any of those exceptions apply. In submissions, two exceptions were suggested by counsel for the [appellants]: Section 33(1)(a) in the case of fraud – and Section 33(1)(c) – interest in the same land under a prior instrument of title.

However, those claims were not pleaded by the plaintiffs and cannot be considered by the Court. A party cannot raise a claim, defence or relief that has not been properly pleaded (Uma More v UPNG [1985] PNGLR 41, PNGBC v Jeff Tole (2002) SC694).

In any case there is no evidence of fraud or a prior instrument of title in favour of the plaintiffs. I am also unable to agree with the submission that the contract itself is a prior instrument of title contemplated by Section 33(1)(c).

This Court’s position

21. In determining whether the trial Judge erred, we must acknowledge that we in a much better position than his Honour to appreciate the argument about constructive fraud. We have had the benefit of assessing the fresh evidence, which, on the face of it, reveals substantial irregularities in the arrangements and transactions culminating in the registration of title in favour of the first respondent and gives rise to reasonable suspicion about the propriety of those arrangements.

22. However, putting aside, for the moment, the effect of the fresh evidence, we have concluded that, with respect, his Honour erred in law by not giving sufficiently detailed consideration to the appellants’ arguments concerning fraud.

23. His Honour, we consider, should have addressed the meaning of “fraud” in Section 33(1)(a) of the Land Registration Act more rigorously. There is now a strong line of Supreme Court decisions that have substantially qualified the concept of indefeasibility of registered title set out Mudge v Secretary for Lands [1985] PNGLR 387. Cases such as Emas Estate Development Pty Ltd v John Mea [1993] PNGLR 215, PNG Deep Sea Fishing Ltd v Luke Critten (2010) SC1126 and Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120 support the proposition that in many situations it will not be appropriate to insist on proof of actual fraud before the National Court considers cancelling the registered proprietor’s title. It will be sufficient if constructive or equitable fraud is proven. Constructive fraud exists where the circumstances of a transfer of title are so unsatisfactory, irregular or unlawful, it is tantamount to fraud, warranting the setting aside of registration of title.

24. In the present case there was evidence before the National Court that an officer of the Office of Public Curator – not the Public Curator himself – had signed two contracts to sell the same property to different purchasers in the space of six months. When it is considered that the Office of Public Curator is a governmental body and that the powers, functions, duties and responsibilities of the Public Curator are prescribed by statute (the Public Curator Act Chapter No 81), the signing of the two contracts in those circumstances was, we consider, capable of supporting a finding of constructive fraud, warranting cancellation of the first respondent’s title.

25. We consider that the statement of claim – though not drafted with the precision that would ideally be expected in a case based on alleged fraud – was couched in sufficient terms to ground a finding of constructive fraud.

26. We therefore find that, without considering the effect of the fresh evidence, ground of appeal (d), alleging error of law by the trial Judge in rejecting the proposition that the first respondent’s title ought to be cancelled, should be upheld.

Effect of fresh evidence

27. We now consider the effect of the fresh evidence. It is relevant to ground (d), as it suggests that:

• Despite letters of administration being granted in favour of the Public Curator on 5 June 2006, which had the effect of authorising and requiring the Public Curator to administer the estate and manage the property constituting the estate, the first respondent evidently entered into an arrangement of some sort with two of the deceased’s children (Wendy Kalo and Moses Kalo). By that arrangement the first respondent purports to somehow have purchased the property from them – though they were not the registered proprietors – by paying them in instalments of various amounts over a period of more than 12 months (from 1 March 2006 to 9 July 2007), in circumstances where it is not known, and is unverifiable on the evidence, whether those persons were authorised beneficiaries of the deceased estate, and if they were, whether they were the only authorised beneficiaries.
  
• The contract of sale of December 2009 between the first respondent and the Public Curator was irregular, not only because it was a contract for sale of the same property that was the subject of the May 2009 contract of sale between the first appellant and the Public Curator, but because it has the appearance of a sham transaction. The first respondent had already, from 1 March 2006 to 9 July 2007, purported, it seems, to have purchased the property from two of the deceased’s children.
  
• The arrangements and transactions regarding the subject property that were entered into from 2006 to 2009 appear to have taken place without the knowledge or approval of the then Public Curator, Paul Wagun, without any official records in the Office of the Public Curator, exemplified by there being no proceeds from the sale of the property and no distribution of the proceeds of sale of the property being recorded in the estate account of the deceased: no settlement statement; no original vendor copies of either of the two contracts of sale; and no deed of indemnity and release regarding transmission of title have been found in the file.
  

Ground (d) upheld: appeal upheld

28. The fresh evidence reinforces the availability of a finding of irregularity and illegality, and thus constructive fraud. It provides further support for our decision to uphold ground of appeal (d), and to allow the appeal. It is unnecessary to determine the other grounds of appeal.

CONCLUSION

29. We will allow the appeal. We decline to make all the declarations and orders sought by the appellants. Though the fresh evidence adduced for the appeal appears relevant and significant, it is still to be tested at a trial. We will quash the orders of the National Court and remit the matter for retrial. Costs will follow the event. We make two final comments. First, we urge the Public Curator to be actively involved in all future proceedings, not to be a passive bystander. Secondly, we urge the National Court and the parties to consider referring these complex proceedings to mediation under the ADR Rules.

ORDER

(1) The appeal is allowed.

(2) The order of the National Court of 6 October 2015 in OS No 780 of 2011 & WS No 944 of 2013 (consolidated) is quashed.

(3) The proceedings in OS No 780 of 2011 & WS No 944 of 2013 (consolidated) are reinstated and the case is remitted to the National Court for retrial.

(4) The Registrar shall forthwith bring the case to the attention of the Judge Administrator of the Civil (general) track.

(5) Costs of the appeal shall be paid by the first respondent to the appellants on a party-party basis, which shall, if not agreed, be taxed.

Judgment accordingly,

___________________________________________________________
Makap Lawyers: Lawyers for the Appellants
Rageau Manua & Kikira Lawyers: Lawyer for the 1^st Respondent