N7403
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1022 of 2011

BETWEEN:
NEW BRITAIN PALM OIL
LIMITED
Plaintiff

AND:
MELOKS LAND GROUP
INCORPORATED
Defendant

Waigani: Hartshorn J.,
2016: 18- 22 July & 1-3 November
2018: 25 June

LAND LAW – enforcement of sub-lease agreement - whether sub-lease agreement is void - meaning of “customary land owner”- consideration of -  Acquisition of Customary Land for the grant of special agricultural and business lease – consideration of process of acquisition – sub-lease agreement entered between plaintiff and defendant is not void - defendant by itself, its servants and agents forthwith deliver to the plaintiff the Special Agricultural Business Lease – orders granted

Case:	
Koang No 47 Ltd v. Monodo Merchants Ltd (2001) SC675

Counsel:

Mr. M. Varitimos QC and Mr. R. Bradshaw, for the Plaintiff
Mr. L. A. Jurth and Ms. M. Sumbuk, for the Defendant

TRIAL       

25th June, 2018

1.     HARTSHORN J:  The plaintiff New Britain Palm Oil Ltd (NBPOL) primarily seeks to enforce a Sub-Lease Agreement that it entered into with the defendant Meloks Land Group Incorporated on 16th February 2005 (Sub-Lease Agreement). Alternatively, compensation or damages are sought if the Sub-Lease Agreement is unenforceable.

2.    Meloks ILG claims that the Sub-Lease Agreement is unenforceable and void as it is contrary to statute. Meloks ILG cross claims seeking a declaration to that effect and an order for vacant possession.

3.    The Sub-Lease Agreement concerns land described as Portion 2564C Milinch of Megigi (SE) Fourmil of Talasea, West New Britain Province and comprises 1240 hectares (Land). 

4.    Meloks ILG claims that NBPOL’s case should be dismissed on various grounds:

a)	The Sub-Lease Agreement is void pursuant to s. 132 Land Act and cannot be enforced by an order for specific performance;

b)	The alternative relief founded on estoppel by conduct is not available as the Sub-Lease Agreement is void pursuant to statute;

c)	Sections 155(4) and 158(2) Constitution cannot be relied upon in 	respect of a contract that is contrary to statute;

d)	NBPOL is not entitled to restitution as it was a willing and conscious participant in entering and performing an illegal contract;

e)	NBPOL did not suffer any loss.	

Whether the Sub-Lease Agreement is void pursuant to s. 132 Land Act

5.    Section 132 Land Act is as follows:

“132.	Disposal Of Customary Land

Subject To Sections 10 And 11, A Customary Landowner Has No Power To Sell, Lease Or Otherwise Dispose Of Customary Land Or Customary Rights Otherwise Than To Citizens In Accordance With Custom, And A Contract Or Agreement Made By Him To Do So Is Void.”

6.    Meloks ILG, which was incorporated as an Incorporated Land Group pursuant to the provisions of the Land Groups Incorporation Act on 31st July 2002, submits that it is a customary land owner by virtue of the definition of “customary landowners” in s. 2 Land Groups Incorporation Act which includes “a land group incorporated under the Land Groups Incorporation Act (Chapter 147)”.

7.   Meloks ILG further submits that for the purposes of s. 132 Land Act, the Sub-Lease Agreement was either an agreement to lease customary land upon its registration or an agreement to “otherwise dispose of customary land or rights” by granting the right to register it to pass the interests specified therein upon its registration. It is submitted that the rights created upon the signing of the Sub-Lease Agreement, being the right to register the Sub-Lease Agreement, is the right which NBPOL seeks to be specifically performed. Meloks ILG in its submissions, does not dispute that Meloks ILG executed the last page of the Sub-Lease Agreement.  Meloks ILG submits that an agreement granting such rights is void pursuant to s. 132 Land Act if s. 10, s. 11 and s. 102 Land Act have not been complied with. The scheme of the Land Act, submits Meloks ILG, is that a Special Agriculture and Business Lease (SABL) must be in place prior to any agreement to lease or to otherwise dispose of customary land or rights, and any agreement that does not comply with that scheme is void. It is a protectionist policy enshrined in legislation which cannot be contracted out of by reliance upon equitable principles it is submitted.

8.   NBPOL submits that amongst others, on the proper interpretation of s.132 Land Act, it does not apply to the facts of this case as Meloks ILG is not a customary landowner. Further, s. 132 Land Act has no application as the customary rights in the Land were suspended as the Land was leased to the State.

Consideration

9.    For s. 132 Land Act to apply as submitted by Meloks ILG, Meloks ILG must fall within the words “customary landowner” as those words are used in s. 132. Meloks ILG relies upon the definition of “customary landowners” in s.2 Land Groups Incorporation Act which includes “a land group incorporated under the Land Groups Incorporation Act (Chapter 147)”. That definition applies to that Act only and not the Land Act. In this regard, it should be noted that “customary land” is defined in both the Land Act and the Land Groups Incorporation Act and also in the Land Registration Act. Each of the three definitions in these Acts however, are different from each other. In this context, an attempt to apply a definition that is in one of these Acts to define “customary landowner” in another of these Acts, must be treated with caution given that the definition of what is owned by a “customary land owner” - “customary land” - has three different meanings in these three different Acts.

10.    There is no definition of “customary landowner” in the Land Act. The definition of “customary land” in s.2 Land Act relevantly is:

“means land that is owned or possessed by an automatic citizen or community of automatic citizens…”

11.    A “citizen” in s. 2 Land Act is defined as including “a land group”, however an “automatic citizen” is defined in s. 3(1) Interpretation Act as:

“means a person who is a citizen by virtue of Section 65 (automatic citizenship on Independence Day) or Section 66 (citizenship by descent) of the Constitution;”

12.    As Meloks ILG does not fall within the definition of “automatic citizen” as distinct from “citizen”, it is not an entity that owns “customary land”. Therefore, in my view, Meloks ILG does not fall within “customary landowner” as those words are used in s. 132 Land Act. Consequently, Meloks ILG is not caught by s. 132 Land Act.

13.    Further, for s. 132 Land Act to apply, the Sub-Lease Agreement must be concerning “customary land or customary rights” as those words are used in s.132 Land Act.

14.    Pursuant to the Sub-Lease Agreement, Meloks ILG purportedly subleased the Land to NBPOL. It is not in dispute that the Land was customary land, such as in 1999 when landowners of Rigula, which includes the landowners of Meloks land which includes the Land, approached NBPOL and proposed that their land be developed into palm oil estate. 

15.    The issues are whether the Land falls within “customary land or customary rights” as those words are used in s. 132 Land Act at the time that the Sub-Lease Agreement was entered into on 16th February 2005 and whether Meloks ILG had title to be able to sublease the Land. I consider the customary land or customary rights issue first.

16.    Sections 11(1) and (2) Land Act are as follows: 

“11.	Acquisition of Customary Land for the grant of special agricultural and business lease.

(1)	The Minister may lease customary land for the purpose of granting a special agricultural and business lease of the land.

(2)	Where the Minister leases customary land under Subsection (1), an instrument of lease in the approved form, executed by or on behalf of the customary landowners, is conclusive evidence that the State has a good title to the lease and that all customary rights in the land, except those which are specifically reserved in the lease, are suspended for the period of the lease to the State.”

17.    Section 102(7) Land Act is as follows:

“(7)	Notwithstanding anything in this Act, a special agricultural and business lease shall be effective from the date on which it is executed by the Minister and shall be deemed to commence on the date on which the land subject to the lease was leased by the customary landowners to the State under Section 11.”

18.    The State granted an SABL over the Land that at the time was leased to the State by the customary landowners. This was accepted by Darius Boas and David Kura in their oral evidence given on behalf of Meloks ILG. Messrs. Boas and Kura both admitted that the Land had already been leased by the customary landowners to the State prior to 2005. I am satisfied that the lease to the State occurred on 4th March 2004 when a letter to the Department of Lands and Physical Planning stated that the customary landowners:

“herewith lease their land to the State for a term of forty five (45) years as per the provisions of Section 11 (“Acquisition of Customary Land for the Grant of a Special Agricultural and Business Lease”) of the Land Act 1996…..”

19.    That letter was accompanied by a Land Investigation Report which consisted of an Agency Agreement and an Absentee Agreement signed by members of the Lavege, Rikau and Gule villages. The Land Investigation Report was certified by the District Officer Lands, West New Britain Provincial Administration on 18th December 2003. The Agency Agreement was signed by 163 landowners, members of Meloks ILG on 24th December 2003, including Darius Boas. Further, the Land had been given a State Lease description so that the Land could be identified.

20.    There is no instrument of lease in the approved form, as referred to in s.11(2) Land Act, in evidence. Notwithstanding that such an instrument is referred to as conclusive evidence in s.11(2) Land Act, the existence of such a lease may be proved by other evidence as s. 11(2) does not provide that an instrument of lease in the approved form is the only evidence for the purposes of that section. I am satisfied that sufficient evidence exists in this instance of the lease by the customary landowners to the State from 4th March 2004, as mentioned.

21.    Pursuant to s.11(2) Land Act, when the Land was leased to the State, the State had good title to the lease and all customary rights in the Land except for those specifically reserved in the lease which were suspended for the period of the lease to the State.

22.    Section 2 (1) Land Act defines “customary land” and “customary rights” as follows:

“"customary land" means land that is owned or possessed by an automatic citizen or community of automatic citizens by virtue of rights of a proprietary or possessory kind that belong to that citizen or community and arise from and are regulated by custom;

"customary rights" means rights of a proprietary or possessory kind in relation to land that arise from and are regulated by custom;”

23.    By virtue of s. 11(2), as “customary rights” in the Land are suspended, the rights to the Land that are owned or possessed by virtue of rights of a proprietary or possessory kind and arise from custom are suspended. Upon the suspension of the “customary rights” the Land no longer falls within the definition of “customary land”. I am satisfied therefore, that the Sub-Lease Agreement between Meloks ILG and NBPOL was not a sublease or lease of “customary land or customary rights” as referred to in s. 132 Land Act.

24.    Consequently, for the above reasons, I find that the Sub-Lease Agreement is not void pursuant to s. 132 Land Act and is not contrary to statute. The submissions made by Meloks ILG on this issue are rejected.

25.    As to whether Meloks ILG had title to enter into the Sub-Lease Agreement, it is not in dispute that on 20th May 2009, the State issued an SABL over the Land to Meloks ILG pursuant to s. 11 Land Act. By virtue of s. 102(7) Land Act, an SABL amongst others: 

“…shall be deemed to commence on the date on which the land subject to the lease was leased by the customary landowners to the State under Section 11.”

26.    I have found that the lease by the customary landowners to the State occurred on 4th March 2004. The SABL from the State to Meloks ILG is deemed to commence on that date. Meloks ILG was therefore able to sublease the Land to NBPOL when it purportedly did so by virtue of the Sub-Lease Agreement.

27.    Meloks ILG has defended this proceeding primarily on the grounds that the Sub-Lease Agreement is illegal as being contrary to statute and is therefore void and unenforceable. It has cross claimed for a declaration to that effect and seeks an order for vacant possession although no submissions were made in support of its cross claim. As I have found against Meloks ILG and given the lack of submissions on the cross claim, the cross claim should be dismissed.

28.    As to whether NBPOL is entitled to specific performance of the Sub-Lease Agreement, NBPOL submits that by force of s. 17(2) and s. 26(1) Land Registration Act, the Sub-Lease Agreement, which is an instrument, does not create an estate or interest as it is not registered. Until registration it confers upon the person intended to take under the instrument, in this instance NBPOL, a statutory right to the registration of an estate or interest in accordance with s. 17(2). Reliance is placed upon the Supreme Court decision of Koang No 47 Ltd v. Monodo Merchants Ltd (2001) SC675.

29.    It is submitted that this authority, together with the proper interpretation of s. 17(2) and s. 26(1) Land Registration Act, results in the conclusion that an unregistered instrument will create a “right to register” the interest passed by the instrument. NBPOL therefore has a right to register the Sub-Lease Agreement and the SABL is required to be delivered so that the Sub-Lease Agreement may be registered in accordance with sections 17 and 26 Land Registration Act.

30.    From a perusal of s. 17(2) and s. 26 Land Registration Act and Koang No 47 Ltd v. Monodo Merchants Ltd (supra), I concur with these submissions.

31.    Consequently, I am satisfied that NBPOL is entitled to the orders sought concerning specific performance.

32.    Given all of the above, it is not necessary for me to consider the other submissions of counsel apart from as to costs. NBPOL seeks its costs on an indemnity basis, however I am not of the view that it has satisfactorily made out its claim in that regard.

Orders

33. The Court:

a)	Declares that the Sub-Lease Agreement entered into between the 	plaintiff and the defendant on 16th February 2005 is for the sub-lease 	by the defendant to the plaintiff of the land described as Portion 	2564C Milinch Megigi Fourmil Talasea West New Britain, the subject 	of a Special Agricultural Business Lease.

b)	Orders by way of specific performance of the Sub-Lease Agreement 	entered into between the plaintiff and the defendant on 16th February 	2005 that the defendant by itself, its servants and agents forthwith 	deliver to the plaintiff the Special Agricultural Business Lease for the 	land described as Portion 2564C Milinch Megigi Fourmil Talasea 	West New Britain.

c)	Orders that the defendant by itself, its servants and agents forthwith 	do all necessary acts and things and sign all necessary documents to 	enable the Sub-Lease of the land described as Portion 2564C Milinch 	Megigi Fourmil Talasea West New Britain to the plaintiff to be 	registered in accordance with the Land Registration Act, Chapter No. 	191.

d)	Dismisses the defendant’s Cross-Claim filed in the proceedings herein 	on 11th December 2014.

e)	Orders that the defendant pay the plaintiff’s costs of and incidental to 	these proceedings (including the Cross-Claim) on a party party basis.

f)	Time is abridged.
_____________________________________________________________
Bradshaw Lawyers:  Lawyers for the Plaintiff                                        
Young & Williams Lawyers:  Lawyers for the Defendant