Tagau v Selon Ltd [2018] PGSC 97; SC1755 (19 December 2018)

SC1755

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 16 of 2016

SALI TAGAU
First Appellant

SELON LIMITED
Second Appellant

-V-

VITUS KAIS, PETER SIARUP, TOM BAMATU, WOLEF BAMATU, MANUEL AMBAT, JULIUS BAMATU, JOHN SAPURI,
SIM SIPIEL, MEPI VITUS, ERLBERTH SIARUP, TARIUS SIARUP,
JUAKIM BUNAM, JAUL SAGUI AND JOHN DAP
First Respondent

MASUBA LAND GROUP INCORPORATED
Second Respondent

Waigani: Batari, Kariko &Polume-Kiele, JJ
2018: 28^th, 29^th August & 19^th December

LAND LAW – state lease – indefeasibility of title – alleged fraud in granting of State Lease – meaning of section 33(1)(a) of Land Registration Act – actual fraud or constructive fraud

LIMITATION PERIODS – whether action time-barred – Frauds and Limitations Act, sections 16 & 18

REMEDIES – whether forfeiture of state lease appropriate - laches

Cases Cited

Awaincorp Ltd v Jim Kas (2015) N5862
Batteng Putto v Andrew Sallel (2015) N5845
Elizabeth Kanari v Augustine Wiakar (2009) N3589
Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215
Fred Angoman v IPBC of PNG (2011) N4363
Hi-Lift Company Pty Ltd v Miri Setae [2000] PNGLR 80
Julius Pololi v Bryan James Wyborn (2013) N5253
Kanive Pritori Yama v Joseph Gabut (2017) N6808
Kapiura Trading Ltd v Bullen (2012) N4903
Koitachi Ltd v. Walter Schnaubelt (2007) SC870
Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120
Lae Rental Homes Ltd v Viviso Seravo (2003) N2483
Mosoro v Kingswell Ltd (2011) N4450
Mudge v. Secretary for Lands [1985] PNGLR 387
Niugini Properties Ltd v Jeffery Londari (2014) N5727
Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109
Ramu Nickel Ltd v Temu (2007) N3252
Ronny Wabia v BP Exploration Operating Co. Ltd [1998] PNGLR 8
Victor Golpak v Patrick Alongerea and Ors [1993] PNGLR 491
West New Britain Provincial Government v Kimas (2009) N3834
Yakananda Business Group Inc v Minister for Lands (2001) N2159

Legislation Cited

Frauds and Limitations Act 1988
Land Act 1996
Land Registration Act (Chapter 191)

Counsel

Mr M Yalapan & Ms L Kauba, for the Appellants
Mr B Tabai, for the Respondents

JUDGEMENT

19^th December, 2018

1. BY THE COURT: This is an appeal from a decision of the National Court given on 15^th January, 2016 in proceedings WS No. 301 of 2010 in respect of an area of land described as Portion 237, Milinch of Kranket, Fourmil Madang, commonly known as Mililat Plantation (Mililat).
   
2. The trial Judge found in favour of the respondents (then the plaintiffs) and held that the second appellant Selon Limited (Selon), abetted by the first appellant Sali Tagau (Tagau), obtained title to the State Lease in respect of Mililat (the State Lease) by constructive fraud (the Decision).
   

The parties

3. Relevantly, the parties to the proceedings in the Court below were:
   
   • As first plaintiff: the first respondent (the Landowners), who claim to be members of clans who were the traditional owners of Mililat before it was acquired by the State. They were residing on a part of Mililat at the time the dispute between the parties arose.
   • As second plaintiff: the second respondent (Masuba ILG), which is an incorporated land group established apparently for the clans comprising the traditional landowners of Mililat.
   • As first defendant: Tagau, who is a member of one of the traditional landowner clans. He is also a businessman and co-owned the second appellant company at the time the State Lease over Mililat was obtained.
   • As second defendant: Selon, the company that was granted the State Lease.
   • As third defendant: Tropic Timbers Limited (Tropic Timbers), which apparently funded the purchase of Mililat by Selon.
   • As fourth defendant: the Secretary for the Department of Lands.
   • As fifth defendant: the State.
     
4. Tropic Timbers filed a cross-claim against the appellants which was not tried, while the fourth and fifth defendants did not appear in the proceedings.
   

Respondent’s claim in the National Court

5. Summarized, the respondents pleaded in their amended statement of claim that:
   
   • About 1974 the government purchased Mililat from its previous expatriate owners under the then Plantation Acquisition and Land Distribution Scheme, and made it available for purchase by the immediate traditional landowners.
   • Initially, Mililat Development Corporation was established on behalf of the landowners to manage and pay off the purchase price but failed to do so leaving an outstanding of K65,545.
   • In the end it was decided by the Provincial Minister for Lands to offer the land to Selon to complete purchase as a genuine landowner company.
   • The application to the Department of Lands for the State Lease for Mililat was supported by three documents lodged by the appellants to demonstrate the status of Selon Limited as a landowner company.
   • Two of the documents were executed by the landowners - a declaration dated 9^th December, 1999 under Selon’s letterhead that the landowner clans held interest in Selon and they agreed for Mililat to be transferred to that company (the Declaration); and a statutory declaration sworn 22^nd March, 2000 stating that Selon was a true landowner company representing the interests of the clan members (the Statutory Declaration).
   • The landowners were misled by Tagau into believing they genuinely held interests in Selon and they were thereby induced into signing the Declaration and the Statutory Declaration.
   • The third document was a letter dated 9^th December, 1999 written by Tagau as Chairman of Selon addressed to the Department of Lands – Northern Region advising that Selon Limited was a company registered in the names of the traditional landowner clans of Milalat (the Letter).
   • The reference in the three documents to Selon being a landowner company was in fact not true.
   • Based on the false representation, the State Lease was issued to Selon on 27^th September, 2000.
   • The appellants have since sub-divided Mililat into six new allotments, one of which was further sub-divided into four further allotments.
   • Three of the new allotments were sold to third parties.
     
6. As to relief, the respondents sought to have Selon’s title declared null and void and the allotments yet to be sold to be transferred to their landowner company to be incorporated.
   

Particulars of fraud

7. The respondents’ claim was that Tagau and Selon falsely and dishonestly represented to the State that Selon was a landowner company and that the State Lease was granted on that fraudulent representation.
   
8. Nine particulars of fraud were pleaded in paragraph 14 of the respondents’ amended statement of claim:
   

“(a) At the relevant times the landowner representatives signed the prepared Declaration on 9^th December 1999 and a Statutory Declaration on 22^nd March 2000 prepared by the First Defendant the signatories being representatives of the five (5) clans had no legal or equitable interest in the second defendant because neither of them were shareholders nor directors of the Second Defendant at the relevant time.

(b) The First Defendant in his letter of 9^th December 1999 to the Department of Lands – Northern Region made false and misleading statements for purpose of getting title to Portion 237, Milinch of Krangket, Fourmil of Madang (known as “Mililat Plantation”) in the name of the Second Defendant.

(c) The First and Second Defendants have subdivided the whole land (Portion 237) and created six (6) sub-divisions without consulting the landowners.

(d) The representatives of the landowners have never been included to participate in Board of Directors meetings of the Second Defendant to decide the business affairs of the Second Defendant.

(e) The Second Defendant is now owned by the First Defendant and a Jacob Z. Zabaia a man from the Philippines as having one share each with the First Defendant’s sons as directors and a Andrew Ngak making it a family company.

(f) The First and Second Defendant operate in isolation from the landowners including the Plaintiffs and the Plaintiffs and the landowners have no input in the development of Portion 237.

(g) The Second Defendant is selling land to Third Parties and as a result Portion 1058, one of the six (6) sub-divisions was sold to New Tribes Mission where substantive developments have been done and the Plaintiffs and landowners remain spectators without benefitting in any way.

(h) The Second Defendant has not in any way developed any part of Portion 237 or the six (6) sub-divisions of Portion 237 but has embarked on selling the land to Third Parties and the First Defendant and his children are the only beneficiaries and directors of the Second Defendant.”

9. Paragraph 14(a)&(b) refer to the misrepresentations contained in the Letter, the Declaration and the Statutory Declaration that Selon was a landowner company.
   
10. Paragraph 14(e) states the directors and shareholders of Selon are not landowners and do not represent landowner interests.
    
11. Paragraph 14(c)-(d) and (f)-(h) allege the landowners have not been involved in the decision-making and business of Selon, nor have they benefitted from the company’s operations.
    

Defence in the National Court

12. The appellants’ main argument in the National Court was that the respondents’ claim was based on the tort of fraud which claim was statute-barred pursuant to Section 16(1) of the Frauds and Limitations Act 1988 (Frauds Act) which provides that a court action based on tort must be brought within six years from when the cause of action accrued.
    

The Decision

13. The trial Judge determined that the plaintiffs’ amended statement of claim filed on 4 April 2012 did not plead the tort of fraud but rather pleaded constructive fraud which the Supreme Court in Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215 decided is a proper ground for cancelling a registered State Lease pursuant to Section 33(1)(a) of the Land Registration Act Ch. 191 (LR Act) which states that a registered title may be nullified in the case of fraud.
    
14. Further, his Honour found on the evidence that the manner in which title to Mililat was obtained amounted to constructive fraud, and he ultimately ordered the cancellation of the registration of Selon’s title.
    
15. His Honour found constructive fraud based on evidence that:
    
    • Tagau and Selon falsely represented to the relevant authorities (the Secretary for Lands and the State) that Selon was a landowner company and thereby obtained title to Mililat; [20] of the Decision.
    • In fact, Selon has never been a landowner company as shown by its directorship and shareholding; [21] of the Decision.
    • The State Lease was issued to Selon based on the false representation; [21] of the Decision.
    • Both Tagau and Selon failed to produce evidence to support their claim that they followed the tender process in securing the title; [22] of the Decision.
      
16. His Honour then concluded at [23] of the Decision that “the circumstances of the grant of the State Lease to Selon Ltd were so unsatisfactory and irregular that it was tantamount to fraud, warranting the setting aside of registration of title.”
    

Grounds of appeal

17. Summarized, the grounds of appeal allege that the trial Judge erred in law and fact:
    
    • in determining that the respondents’ claims were not based on the tort of fraud and were therefore not statute-barred pursuant to Section 16 of the Frauds Act;
    • in deciding that Selon obtained the title deed over Mililat by fraud;
    • in determining that the respondents are the customary landowners of Mililat when the National Court does not have jurisdiction to make such determination.
      

Consideration

18. Under the Torrens system of land registration, a registered proprietor holds an indefeasible title: Mudge v. Secretary for Lands [1985] PNGLR 387 unless one of the exceptions set out in Section 33(1) is established. The view by the majority in the Emas case is that “fraud” under Section 33(1)(a) of the LR Act includes equitable or constructive fraud. That view has been endorsed in many judgements but another narrower view has been promulgated in other cases such as Koitachi Ltd v. Walter Schnaubelt (2007) SC870 that state that “fraud” means actual fraud.
    
19. We do not intend or wish to discuss which of the two is the correct view. We would leave that to an appropriately constituted bench of the Supreme Court to decide.
    

Customary ownership

20. Of the grounds of appeal, we first deal with the argument regarding the National Court’s lack of jurisdiction in deciding issues of ownership and interest over customary land.
    
21. The law is clear that the National Court has no jurisdiction in deciding ownership and interest over customary land: Victor Golpak v Patrick Alongerea and Ors [1993] PNGLR 491; Ronny Wabia v BP Exploration Operating Co. Ltd [1998] PNGLR 8. The question of the rightful customary landowners of Mililat was not an issue before the trial Judge. We are unable to deduce from the final orders of the Court that a determination was made recognizing the first respondents as the legitimate customary landowners of Mililat. We therefore disagree with the appellant’s contention that the Decision in effect determined the first respondents as legitimate customary landowners of Mililat.
    
22. We are of the opinion however that his Honour erred in both fact and law in other respects.
    

Amended statement of claim

23. First, the pleadings in the amended statement of claim and in particular under “Particulars of fraud” (paragraph 14) essentially raise two matters:
    
    • (1) The false representation by Selon that it was a landowner company in the application for the State Lease.
    • (2) The landowners have not been included in the ownership, decision-making and operations of Selon since the issue of the State Lease.
      
24. In our view, the false representation or misrepresentation alleged by the respondents is a claim alleging deceit, a tort of fraud. The lack of participation merely confirms the appellants’ alleged dishonesty when making the false representation. It is stressed however that the facts pleaded relating to the non-participation of the landowners, clearly disclose that they occurred after the issue of the State Lease.
    
25. We therefore find that his Honour the trial Judge erred in holding that Section 16(1) of the Frauds Act did not apply.
    

Constructive fraud

26. Second, we note that the many case authorities that have applied the principle of constructive fraud since the Emas case mostly concern non-compliance with the statutory provisions relating to the process and procedures in respect of the grant of state leases, such that the circumstances of the grant of the State Lease are “so unsatisfactory and irregular that it is tantamount to fraud”. Some of the cases were cited by the primary Judge:
    
    • Emas Estate Development Pty Ltd v John Mea & Ors [1993] PNGLR 215

State lease was forfeited and granted to a new lessor in dubious circumstances involving breaches of the Land Act 1996.

Steamships Trading Company Ltd v Garamut Enterprises Ltd (2000) N1959

Errors and breaches of the Physical Planning Act 1989 in the rezoning of the disputed land and in the issue of a state lease under the Land Act 1996.

• Hi-Lift Company Pty Ltd v Miri Setae [2000] PNGLR 80

Irregularities and breaches of statutory provisions in the issue of a business/state lease previously zoned public institution.

• Yakananda Business Group Inc v Minister for Lands (2001) N2159

The state lease was unlawfully forfeited contrary to the mandatory requirements of the Land Act 1996.

• Lae Rental Homes Ltd v Viviso Seravo (2003) N2483

The state lease was unlawfully forfeited and then granted to another party contrary to the Land Act 1996.

• Ramu Nickel Ltd v Temu (2007) N3252

A State Agriculture & Business Lease (SABL) was issued in respect of land over which a special mining lease already existed.

• Elizabeth Kanari v Augustine Wiakar (2009) N3589

Irregularities and breaches of statutory procedures in the transfer and registration of the title.

• West New Britain Provincial Government v Kimas (2009) N3834

Land was unlawfully exempted from advertisement under Section 69(2) Land Act 1996.

• Mosoro v Kingswell Ltd (2011) N4450

Land was unlawfully exempted from advertisement under Section 69(2) Land Act 1996.

• Kapiura Trading Ltd v Bullen (2012) N4903

Appeal from the Land Board was decided in breach of the principles of natural justice and the state lease was irregularly and unlawfully granted to a non-legal entity.

• Open Bay Timber Ltd v Minister for Lands & Physical Planning (2013) N5109

The state lease was granted contrary to the Forestry Act 1991 and in breach of the Land Act 1996 and the Land Registration Act (Chapter 191).

• Lae Bottling Industries Ltd v Lae Rental Homes Ltd (2011) SC1120

Title was issued following flagrant abuse and breaches of the relevant mandatory procedures set out in the Land Act 1996.

27. The present case does not involve any irregularities or breaches of any relevant statutory provision relating to the issue of a state lease.
    
28. We again find that his Honour the trial Judge erred in finding that the appellants had committed constructive fraud in obtaining the State Lease.
    

Onus of proof

29. Third, it is trite law that the onus is on a claimant to prove his case on the balance of probabilities. Where the title of the registered proprietor of land is disputed on the ground of fraud under Section 33(1)(a) of the LR Act, the onus is on the person challenging the title to prove the fraud; Niugini Properties Ltd v Jeffery Londari (2014) N5727 and Awaincorp Ltd v Jim Kas (2015) N5862.
    
30. The fact that the appellants alleged they properly followed a tender process to obtain the State Lease did not require them to prove that unless it was the respondents’ case that the proper procedures for obtaining a state lease were not followed and evidence was adduced in support of that allegation. But that was not part of the respondents’ claim, they did not lead any evidence on this aspect, nor did they argue the point.
    
31. While it is correct that the appellants did not rebut the evidence of the false representation based on the documentary evidence – the Declaration, the Letter, the Statutory Declaration and the company extracts – that evidence was only relevant to support the respondents’ claim of misrepresentation or deceit.
    
32. We consider the primary Judge again erred in holding against the appellants their failure to lead evidence supporting their claim that they properly tendered for the state lease.
    

Declarations

33. In Julius Pololi v Bryan James Wyborn (2013) N5253, cited by the trial Judge, it was held that “As to whether the declaratory relief sought can be categorised as equitable relief, it is necessary to examine the pleadings in order to determine the true nature of the relief sought”.
    
34. The trial Judge considered the declaratory orders sought by the respondents to be equitable relief and therefore ruled that Section 18 of the Frauds Act rendered the time-bar under Section 16 inapplicable.
    
35. In the Wyborn case, the court held that where the common law claim of fraud is pleaded, declaratory relief cannot be described as equitable relief for the purpose of Section 18 of the Frauds Act.
    
36. It is obvious that the primary Judge, having erred in classifying the respondents’ claim as one of constructive fraud, again fell into error in determining the declarations sought amounted to equitable relief and operated to render Section 16(1) of the Frauds Act inapplicable.
    

Appropriate relief

37. If constructive fraud was properly established, the State Lease should have reverted to the State after cancellation of the registration of title in favour of Selon. In our view, that would be subject to the consideration of the principle of laches because:
    
    • some 10 years passed before Selon’s title was legally challenged; and
    • in the meantime the disputed land had been sub-divided and some of the new allotments sold off to bone-fide third party purchasers.
      
38. Two recent decisions - Kanive Pritori Yama v Joseph Gabut (2017) N6808 and Batteng Putto v Andrew Sallel (2015) N5845 – confirm that pursuant to the equitable principle of laches, a court may exercise its discretion against ordering equitable relief such as a declaration, if the plaintiff is guilty of undue delay in commencing the proceedings or prosecuting his claim. Other relevant considerations in deciding whether or not to grant the equitable relief would be whether the defendant has been prejudiced or it would now be unjust or unreasonable to grant the relief; Fred Angoman v IPBC of PNG (2011) N4363.
    

Conclusion

39. We consider the errors by the primary Judge, highlighted in the foregoing, warrant the appeal being allowed.
    
40. Costs should follow the event. Accordingly, the costs of the appellants of and incidental to the appeal and the trial should be paid by the respondents.

Order

41. The Court orders that:
    
    • (1) The appeal is allowed.
    • (2) The decision of the National Court of 15^th January, 2016 in proceedings W.S. No. 301 of 2010 is quashed.
    • (3) The appellants’ costs of this appeal and proceedings W.S. No. 301 of 2010 are to be paid by the respondents, such costs to be taxed if not otherwise agreed.
    • (4) The time for entry of these orders is abridged to the time for settlement by the Registrar which shall take place forthwith.
      

_____________________________________________________________
Yalapan & Associates Lawyers: Lawyers for the Appellants
Tabai Lawyers: Lawyers for the Respondents