N6277

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
										           
OS NO. 84 OF 2014

BETWEEN

PAPINDO TRADING CO. LTD
First Plaintiff

AND
ROMILLY KILA PAT - SECRETARY
DEPARTMENT OF LANDS & PHYSICAL PLANNING
First Defendant

AND
BENNY ALAN MINISTER FOR LANDS & PHYSICAL PLANNING
Second Defendant

AND
INDEPENDENT STATE OF PAPUA NEW GUINEA
Third Defendant

Lae:  Sawong J.
2016:  4th April, 2nd & 12th May

Cases Cited:
 Highlands Produce Buyers Ltd vs Minister for Lands [1988] PNGLR 39
Mt Hagen Local Level Government vs Kimas [2012] N6044
North Fly Development Corporation Limited vs Kimas (2015) N6122

Counsels:
N. Tenige, for the Plaintiff
S. Maliaki, for the Defendants

12th May, 2016

1.	SAWONG J:	This is an application for judicial review, leave for which had already being granted by Poole J, on 9th May 2014.  It is a dispute between Papindo Trading Co. Limited (the applicant) and the Defendants being the Secretary for the Department of Lands and Physical Planning, the Minister for Lands & Physical Planning and the Independent State of Papua New Guinea.
  
2.	In its originating summons the applicant sought the following reliefs (leaving aside the relief for leave):

1.	 A declaratory order that the forfeiture of the said property by gazettal notice number G113 dated 19th March 2013 is void and of no effect, as the Minister for Lands and Physical Planning and or his delegates failed to serve a copy of the notice of forfeiture and notice to show cause on the Public Officers Superannuation Fund, (now Nambawan Super) who have a registered mortgage over the said property being registered billing number HR2588 entered 16th December 1996.

2.	A declaratory order that the forfeiture of the said property by gazettal notice is void and of no effect and the decision of the said Minister and of the Secretary for Lands and Physical Planning be brought before this Court and quashed.

3.	At the trial the applicant relied on the affidavit of its Chief Executive Officer Mr Wilson Chan.  Mr Chan gave oral evidence and through him, his affidavit was tendered and accepted into evidence.  Mr Chan was not cross examined on his evidence.  His evidence therefore was not disputed, nor contradicted in any shape or form whatsoever.

4.	The defendants did not offer any oral or affidavit evidence.

5.	The facts are therefore not much in dispute.  It is convenient to state the facts in chronological sequence.  

6.	On or about 4th of February 1988, the Independent State of Papua New Guinea through the Minister for Lands granted a business lease under section 54 to the Western Highlands Provincial Government over allotment 12, section 1 Fourmill, Mouth Hagen (the property).  The grant was for 99 years.  The Western Highlands Provincial Government constructed an office complex valued at approximately Five Million Kina (K5, 000,000.00) which housed the offices of the Provincial Government.

7.	In or about 1994 – 1995, the said office complex was destroyed by fire.

8.	On or about 27th August 1996, the Western Highlands Provincial Government transferred the property to Melpa Properties Limited and this was evidenced by registered dealing number HR 2357.

9.	On or about 16th December 1996, Melpa Properties Limited transferred the said property to Papindo Trading Co. Limited which is evidenced by registered dealing number HR 2587, after the applicant bought the property.

10.	On or about 16th December 1996, the said property was mortgaged to the Public Officers Superannuation Fund Board (now Nambawan Super), which was evidenced by dealing number HR2588.  All these dealings are appearing in the copy of the Title Deeds annexed to Mr Chan’s affidavit.  The mortgage has not been discharged.

11.	By a Notice to Show Cause dated 17th December 2012, the Minister for Lands forwarded a notice to the Plaintiff to show cause as to why the said property should not be forfeited.  On 14th January 2013, the applicant received the said notice to show cause by ordinary mail.

12.	On or about 15th January 2013, the applicant’s lawyers wrote to the defendants to the said show cause notice.

13.	By letter dated 2nd April 2013, the Secretary for Lands wrote to the applicant advising that:

1.	The response was received on 22nd March 2013.
2.	That forfeiture had been gazetted on 20th March 2013 for non compliance of the improvement covenant.

14.	In 1997 the applicant applied for a building permit to commence construction but the said application was rejected by the Western Highlands Provincial Physical Planning Board by letter dated 14th January 1997.  On 3rd May 1999 the applicant lodge a further application to the Building Board but the Building Board did not respond to that application.

15.	By a letter dated 13th February 1997 a land owner company in Mount Hagen called Anugump Andakilimp Development Corporation Limited wrote to the applicant claiming traditional ownership over the said property and thus causing an empediament to further development.  Thereafter some leaders of this group made contact with the applicants to discuss issues and demanded the return of the property to them as customary land owners.  The applicant refuses to deal with those land owners.  

16.	In January 2013, the applicant applied to the Physical Planning Board in Goroka and received a conditional approval on 4th April 2013 to construct a building on the land.  The applicant commenced to mobilize equipment for construction but did not proceed any further because of the forfeiture notice.

17.	The Nambawan Super holds a mortgage over the property. It was not served with the Notice to show cause or the forfeiture notice.

Submissions

18.	Counsel for each of the parties have filed written submissions.  When given an opportunity to make oral submissions both counsels indicated they would rely on their written submissions and that it was unnecessary to make any further oral submissions.

19.	The submissions raised the following issues to be determined:

1.	Whether or not the notice to show cause was properly served on the plaintiff and the Nambawan Super.

2.	Whether or not the state lease held by the plaintiff was validly forfeited in accordance with section 1 22(2) (a) (b), (3) and (4) of the Land Act 1996.

3.	Whether the plaintiff has pleaded the costs jurisdiction in the originating summons.

4.	Whether or not the defendants show cause notice dated 17th December 2012 took into account “improvements” made or build by the original lease holder, being the Western Highlands Provincial Government, constituted due compliance with the improvement covenant, stipulated under the lease conditions contain in the subject lease when making their decision and whether or not it could apply to the plaintiff.
  
5.	Whether or not the plaintiff complied, that is, respondent within the time frame stipulated in the notice to show cause and whether or not the exercise of the Minister’s powers were proper.

20.	I propose to deal with the issues together because in my view although they relate to different subject matters, nevertheless they are related.  These involve consideration of section 122 and 142 of the Land Act.  Section 122 relates to the forfeiture of state leases and section 142 relates to appeals from such forfeiture.

21.	I begin with section 122.  Forfeiture of state leases is set out under Part XV Division 1 of the Land Act 1996.  It reads:

“122. Forfeiture of State Lease.
(1)	The Minister may, by notice in the National Gazette, forfeit a State lease-
(a)	If rent on the lease remains due and unpaid for a period of six months; or
(b)	If fees are not paid in accordance with this Act; or
(c)	If the amount payable in respect of improvements is not paid in accordance with this Act; or
(d)	If – 
(i)	 A covenant or condition of the lease; or
(ii)	A provision of this Act relating to the lease; or
(iii)	 A requirement of a notice under section 91 relating to the lease,  
Is not complied with; or
(e)	 If the granting of the lease has been obtained, in the opinion of the Minister, wholly or partly as a result of statements that were, to the knowledge of the lessee, false or misleading.

(2)	 Before forfeiting a State lease under Subsection (1), the Minister –
(a)	 Shall serve notice on the lessee calling on him to show cause, within a period specified in the notice, why the lease should not be forfeited on the ground or grounds specified in the notice; and

(b)	May, whether or not cause has been shown in accordance with a notice under Paragraph (a), serve on the lessee a notice requiring him, within a period specified in the notice, to comply with the covenants or conditions of the lease or the provisions of this Act.

(3)	 The Minister shall not forfeit a lease under this Section unless-

(a)	The lessee has failed to comply with a notice under Subsection (2)(a) or (b); or 
(b)	The lessee has failed to show good cause why the lease should not be forfeited. 

(4)	Copies of a notice of forfeiture and a notice under Subsection (2) (a) or (b) shall be served on all persons who, to the knowledge of the Departmental Head, have or claim to have a right, title, estate or interest in, to or in relation to the land, or such of them as can with reasonable diligence be ascertained and found.

(5)	No acceptance of rent by the State waives a right to forfeit a lease under this Act.

(6)	For the purposes of this Section the grant of an application for a State lease shall be deemed to be the grant of the lease.

22.	Section 122(1) sets out seven (7) conditions or grounds upon which the Minister may exercise his powers of forfeiture.  These are, if the:

1.	 The rent on the lease remains due and unpaid for a period of six (6) months or

2.	Fees are not paid in accordance with the Act.

3.	Amount payable in respect of improvements is not paid in accordance with the Act.

4.	A covenant or condition of that lease is not complied with.

5.	A provision of the Act relating to the lease is not complied with.

6.	A requirement of a notice under section 91 relating to the lease is not complied with.

7.	The granting of the lease has been obtained, in the opinion of the Minister, wholly or partly as a result of statements that were, to the knowledge of the lessee, false or misleading.

23.	Section 122(2) of the Act sets out the procedures to be taken by the Minister before the Minister exercises those statutory powers prescribed therein.  Essentially the first step is that the Minister must serve a notice on the lessee calling on him to show cause, within a specified period in the notice why the lease should not be forfeited on the ground or grounds specifically stated in the notice. 

24.	Secondly the Minister may, whether or not cause has been shown in accordance with the notice under paragraph 2(a), serve on the lessee a notice requiring him, within a period specified in the notice, to comply with the covenant or conditions of the lease or the provisions of this Act.

25.	Subsection 3 provides that the Minister shall not forfeit the lease unless

a)	A lessee has failed to comply with notice under subsection (2)(a) or (b) or

b)	The lessee has failed to show good cause why the lease should not be forfeited.
  
c)	Subsection 4 sets out in mandatory terms that copies of a notice of forfeiture and a notice under subsection (2) (a) or (b) shall be served on all persons who, to the knowledge of the departmental head, have or claimed to have a right, title, estate or interest in, too or in relation to the land or such of them as can be reasonable diligent be ascertained and found.

26.	It is important to analyse section 122.  The first point to note is that there are two processes involved in the forfeiture of a state lease.  The first process to forfeit a state lease is commenced by serving a notice on the lessee and all other persons calling on the lessee to show cause  within a specified period in the notice why the lease should not be forfeited.  That is the first part required under subsection 2.  That notice must then be followed by the steps specified in subsection 2(b).  This is so because of the expression “and” which appear between subsection 2(a) and (b). In other words the two steps prescribed under subsection 2 must be complied with.  Both requirements must be complied with.  Failure to comply with both procedures would be fatal to the actions taken by the Minister or his delegate.

27.	The publication of a notice in the national gazette is the second phase of the process.  

28.	The third important factor to note is that copies of the notice of forfeiture and a notice under sub-section 2 (a) or (b) must be served on all persons who have an interest, right, title or estate in or in relation to the land.  

29.	Section 122 has been considered and deliberated upon and applied in a number of National Court cases.  In Highlands Produce Buyers Ltd vs Minister for Lands [1988] PNGLR 39 it was held that, failure to notify a mortgagee, the interest of whom was clearly noted on the registered lease of a notice to show cause and a notice of forfeiture in accordance with the provisions of the Land Act (then S46 (4), was sufficient to ground a review of the decision to forfeit the lease.  It was further held in that case that the requirement in section 46(3) (now section 122(3)) that the lessee show cause why the lease should not be forfeited requires the Minister to give proper consideration to any cause shown and failure to do so may ground an application for judicial review.

30.	In Mt Hagen Local Level Government vs Kimas [2012] N6044, it was held, inter alia, that “the exercise of power to forfeit a lease is not unfettered because it has serious consequences on the registered proprietors proprietary interest in the property.  It is for this reason the Minister must have a proper and good reason to exercise the power of forfeiture”.  

31.	In North Fly Development Corporation Limited vs Kimas (2015) N6122 the Court held inter alia that:

“1..
2.  	Before the first defendant as a delegate of the Minister for Lands and Physical Planning forfeits a state lease, you must serve a notice to show cause as to why a lease should not be forfeited on the registered on proprietor and all persons to the knowledge of the first defendant, have or claim to have a right, title, estate or interest in, to or in relation to the land under section 122(2) and (4) of the Land Act 1996.
3. …

4.    The grounds and failure to serve the notice to show cause on the plaintiff and mortgagee, bank of South Pacific Limited are upheld.  The failure constituted a fundamental breach in the decision making process of forfeiture as it goes to the validity of the title of the land in question and resulted in the plaintiff and the bank not being informed of the move by the first defendant to have the state lease forfeited.  Highlands Produce Buyers Limited vs Minister for Lands [1988] PNGLR 39 followed”.

32.	In this case Mr Tenige for the applicant submits that the uncontested evidence from the applicants show that the original lessee, namely the Western Highlands Provincial Government had build an office complex valued at approximately five million kina (K5,000,000.00) which housed the offices of the government then.  It was submitted that the requirement to erect buildings to a minimum of one hundred thousand kina (K100, 000.00) as set out in the covenant in the lease had been complied with.  It was submitted that although the original owner had erected or constructed and complied with the improvement governance the improvement governance were destroyed by fire.

33.	Furthermore, after the applicant bought the land, it had applied to the Western Highlands Provincial Physical Planning Board for a building permit but that board did not respond did not approved the application.  Subsequently, they applied to the Goroka Physical Planning Board which approved the building permit and they were in the process of mobilizing equipment etc for construction to commence when the forfeiture notice was issued.
  
34.	Further it is submitted that the Secretary for Lands had not served the copy of the notice on the mortgagee that is Nambawan Super Limited.  On that basis alone it is submitted the forfeiture notice should be quashed.

35.	Ms Maliaki submitted that the defendant had acted properly.  She submitted that after the applicant had bought the property it did not improve the land as was required under the terms of the lease.  

36.	The submissions on these aspect, that is the requirement to comply with the improvement covenant, raises the issue of whether the improvement covenant is to be complied with by the original owner or a subsequent registered proprietor.  As this issue has not been fully argued, in my view, as the improvement covenant is endorsed on the title deed when it is granted to the original lease holder, therefore it would mean, that the improvement covenant must be complied with by the original lease holder. In this case, I find and accept the uncontested evidence from the applicant that the original proprietor, namely, Western Highlands Provincial Government had improved the land by constructing thereon a Five Million Kina (K5, 000,000.00) office complex.  This was destroyed in or about 1994/1995.  I therefore conclude that the original owner had complied with the building covenant as stated on the Title.

37.	I therefore hold that the Notice to Show Cause issued by the Secretary on the 17th of December 2012 was erroneous and ought to be quashed.

38.	As to service of the notice to show cause and the forfeiture notice, Ms Maliaki in her submissions conceded that the mortgagee, Nambawan Super Limited had been served with neither the notice to show cause nor the notice of forfeiture.

39.	It follows therefore that the forfeiture notice and the notice to show cause cannot be sustained and they must also for that reason be quashed.  This was clearly in breach of section 122(4) of the Act.

40.	For these reasons it is unnecessary to consider the rest of the issues and submissions by the parties.  I therefore declare and make the following orders:

1.	I Declare that the forfeiture of state lease volume 1110, follio 146, allotment 12, section 1, Mount Hagen Western Highlands Province registered in the name of Papindo Trading Co. Ltd by gazettal notice number GU 113 dated 19th March 2013 is void and of no effect.

2.	I Declare the forfeiture of the said property by gazettal notice is void and of no effect and the decision of the said Minister and of the Secretary for Lands be brought before this court and are quashed.

3.	I Direct and Order that the Minister for Lands or his delegate, the Secretary for Lands or his delegate and the Registrar of Titles or his delegates:

i)	 Cancel the entry of forfeiture on the Title Deed, and
ii)	  Enter in the Title Deed the name of the applicant forthwith.

4.	Costs shall follow the event.

 _________________________________________________________
Gamoga Lawyers: Lawyers for the Plaintiff
Solicitor General:  Lawyers for the Defendants