N8317
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 1771 OF 2019

BETWEEN:
MURPHY MEMAFU
First Plaintiff

AND:
AGNES MEMAFU
Second Plaintiff

AND:
NATIONAL HOUSING CORPORATION
First Defendant

AND
MOREA SIAI
Second Defendant

AND:
ALE ANE as ACTING REGISTRAR OF TITLES, DEPARTMENT OF LANDS AND PHYSICAL PLANNING
Third Defendant

Lae: Dowa AJ
2020:  16th March &13thMay

PRACTICE AND PROCEDURE – ruling on second defendants notice of motion seeking to dismiss proceedings for disclosing no reasonable cause of action – consideration of issues – plaintiff has arguable case – there are issues that need to be tried – motion refused - Order 12 Rule 40 of the National Court Rules.

Cases Cited:

Mt Hagen Urban Local level Government v SekNo.15 SC 1007
Pius Tikili v Home Base Real Estate Ltd (2017) SC1563, 
PNG Bible Church Inc v Carol Mandi (2018) 
Rosemary John v James Nomenda (2010) N3851

Counsel:

L. Vava, for the First & Second Plaintiff
J. Kusip, for the Second Defendant

DECISION

13th May 2020

1.	DOWA AJ:	This is a ruling on the Second Defendants Notice of Motion filed 10th March 2020.
 
2.	On 16thMarch 2020, there were two motions for hearing before me. The first Motion was filed by the Second Defendant seeking to dismiss the proceedings for disclosing no reasonable cause of action pursuant to Order 12 Rule 40 of the National Court Rules.  The Second Notice of Motion filed 12 March 2020, was by the Plaintiff seeking various interim restraining orders against the Defendants.

3.  	I reserved the ruling on the Second Defendant’s Notice of Motion.  I granted certain interim restraining orders against the defendants generally until the ruling of the second Defendant’s Notice of Motion.

4.	The Plaintiffs were represented by Mr Vava of Vava Lawyers.  The second Defendant was represented by Mr Kusip of Kusip Lawyers.  The First and Third Defendants made no representation.

Facts

5.	The Plaintiffs are a married couple.  They are tenants of a National Housing Corporation property described as allotment 44 Section 35 Lae, pursuant to a Tenancy Agreement entered between them and the First Defendant. On 18th October 2018, the Plaintiffs executed a contract for sale to buy the said property, for the sum of K336,875.00.  They paid a deposit of K34, 687.50 on the property.

6.  	Whilst waiting for completion of the purchase, the Plaintiffs received a Notice to vacate on 9th December 2019 from Morea Siai, the Second Defendant. The Second Defendant produced a title to the property, which the plaintiffs did not know of at the material time.  The title of the property was transferred from the first Defendant to the Second Defendant on 2nd November 2017.

7.	The Plaintiffs allege, they being long term tenants, and having entered a Tenancy Agreement with the First Defendant, on the property, they have a legitimate and equitable interest in the property. The plaintiffs allege the transfer to and registration of Title in the name of the Second Defendant is fraudulent and in violation of Section 38 of the National Housing Corporation Act, and is irregular.

8.	The Plaintiffs are now seeking declaratory orders to nullify the sale and registration of the transfer of title. 

Defence 

9.	The Second Defendant filed a Defence, pleading that he is the registered proprietor, having purchased the property from the First Defendant on or about March 2017 for a purchase price of K350,000.00.

10.	The title was transferred from the First Defendant to the Second Defendant on 2nd November 2017.  The Second Defendant alleges he has an indefeasible title pursuant to section 33 of the Land Registration Act.

Second Defendants Notice of Motion

11.	The Second Defendant in his Notice of Motion is seeking the following orders:

1)	That the entire proceedings be dismissed for not disclosing a reasonable cause of action pursuant to Order 12 Rule 40(1)(a) of the National Court Rules and or alternatively

2)	The proceedings be dismissed in its entirety for being frivolous and or vexatious under order 12 rule 40(1)(b) of the National Court Rules.

3)	Costs of and incidental to the proceedings.

4)	Any other Orders the Court deems fit under Order 12 rule 1 of the National Court Rules.

5)	Consequently, the Plaintiffs vacate the property section 35 Lot 44 within 21 days from date of these Orders.

6)	Time be abridged.
Law

12.	The relevant Rule under Order 12 Rule 40 (1) of the National Court Rules, is set out below:

Frivolity, etc. (13/5)

“(1)	Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings-

(a)	No reasonable cause of action is disclosed; or
(b)	The proceedings are frivolous or vexatious; or
(c)	The proceedings are an abuse of the process of the Court,

The Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

(2)	The Court may receive evidence on the hearing of an application for an order under Sub-rule (1).

13.	The law on Order 12 Rule 40 of the National Court Rules is well settled in the Supreme Court in Mt Hagen Urban Local level Government v SekNo.15 SC 1007 in paragraphs 27-30:

“27.	The terms “vexatious”, “frivolous”, “abuse of the process of the court” and “reasonable cause of action” under O.12 r.40 of the National Court Rules have been judicially considered, defined and expounded in a number of decisions in both the National and Supreme Courts.  These cases include Ronny Wabia v. BP Exploration Co. Limited & 2 Others [1998] PNGLR 8 (N1697); PNG Forest Products Pty Ltd and Another v. The State and Genia [1992] PNGLR 85; Gabriel Apio Irafawe v. Yauwe Riyong (1996) N1915; Eliakim Laki and 167 Other v. Maurice Alulaku and Others (2002) N2001; Kiee Toap v. The Independent State of Papua New Guinea & Another (2004) N2766; Kerry Lerro trading as Hulu Hara Investments Limited v. Phillip Stagg, Valentine Kambori& The State (2006) N3050; Phillip Takori& Others v. Simon Yagari & 2 Others (2008) SC 905.  These cases say the same thing.

28.	The law with regard to an application for dismissal of proceedings based on O.12 R.40 is settled in our jurisdiction.  We note that the principles are succinctly set out in Kerry Lerro’s case (supra) and which has more recently been approved and applied by the Supreme Court in Phillip Takori’s case (supra).

29.	The phrase ‘disclosing a reasonable cause of action’ consists of two parts; cause of action and form of action.  A cause of action is defined as a legal right or form of action known to law whereby a plaintiff in a statement of claim must plead all necessary facts and legal elements or ingredients to establish or prove his claim.  The principles stated by these cases can be summarized as follows:

(i)	A plaintiff or claimant should not be driven from the judgment seat in a summary manner and that the Court should be cautious and slow in exercising its discretionary power.

(ii)	The Court has an inherent jurisdiction to protect and safeguard its processes from abuse.

(iii)	The purpose of O.12 r.40, is to give the court power to terminate actions or claims which are plainly frivolous or vexatious or untenable.

(iv)	A frivolous claim is one that is characterized as a claim that is plainly and obviously untenable, that cannot possibly succeed and bound to fail if it proceeds to trial.

(v)	A vexatious claim is on that is said to be a sham and cannot succeed where it seeks to merely harass the opposing party and put that party to unnecessary trouble and expense is defending or proving the claim.

30.	In an application under O.12 R.40 of the NCR, the Court may dismiss a proceeding or action where it is satisfied that the pleading in the statement of claim is seriously wanting where a necessary fact or legal element has not been pleaded.”
Issue

14.	Whether the Plaintiffs proceedings disclose no reasonable cause of action, are frivolous and or vexatious, such that they can be summarily determined.
Second Defendant’s Title

15.	The Second Defendant has a title, and under Section 33 of the Land Registration Act, it is indefeasible except on grounds of fraud.  Section 33 (1) reads:
	
s33.	Protection of registered proprietor.

“(1)	The registered proprietor of an estate or interest holds it absolutely free from all encumbrances except—
(a)	in the case of fraud; and
(b)	the encumbrances notified by entry or memorial on the relevant folio of the Register; and
(c)	the estate or interest of a proprietor claiming the same land under a prior instrument of title; and
(d)	in case of the omission or misdescription of any right-of-way or other easement created in or existing on the same land; and
(e)	in case of the wrong description of the land or of its boundaries; and
(f)	as to a tenancy from year to year or for a term not exceeding three years created either before or after the issue of the instrument of title of the registered proprietor; and
(g)	as provided in Section 28; and
(h)	a lease, licence or other authority granted by the Head of State or a Minister and in respect of which no provision for registration is made; and
(i)	any unpaid rates, taxes, or other money which, without reference to registration under this Act, are expressly declared by a law to be a charge on land in favour of the State or of a department or officer of the State or of a public corporate body.”

The Plaintiffs claim

16.	The Plaintiffs are alleging that the sale and transfer of title from the First to the Second Defendant was improper and irregular, such that the title obtained by the Second Defendant is invalid, and is bona fide in dispute.  The Plaintiffs are pleading constructive fraud.  I am of the view that it is maintainable if they bring necessary evidence.  See case -Pius Tikili v Home Base Real Estate Ltd (2017) SC1563, PNG Bible Church Inc v Carol Mandi (2018) and Rosemary John v James Nomenda (2010) N3851.

17.	The Plaintiffs are alleging they were the existing tenants over more than 40 years, especially the first Plaintiff.  They have a tenancy agreement with the Second Defendant signed on 20th September 2013.  The Plaintiff signed a contract for the Sale for the outright purchase of the property on 11th October 2018.  The Plaintiffs paid 10% of the purchase price to the first Defendant.

18.	The Plaintiffs also obtained a restraining order from the District Court on 15th June 2017.  The Plaintiffs allege that the transfer of property from First Defendant to the Second Defendant was indirect breach of a District Court Order given 15th June 2017.

19.	As long-term tenants, the Plaintiffs interest can be protected under Section 37 and 38 of the National Housing Corporation Act.  These sections provide:

“37.	Sale of dwellings.
Subject to this Division, the Corporation may sell a dwelling vested in it to—
(a)	an eligible person; or
(b)	an approved applicant; or
(c)	a person who exercises the option offered to him under Section 38(1).
38.	Options to purchase.
(1)	After a tenancy agreement has been in force for two years between the Corporation and a tenant, the Corporation may, in its discretion, offer to—
(a)	the tenant; or
(b)	the spouse, widow or widower of the tenant; or
(c)	the tenant and his spouse as joint tenants; or
(d)	the tenant and his next of kin,
an option to purchase the dwelling the subject of the agreement at a purchase price specified in the option, subject to the conditions imposed by this Division.
(2)	Where a tenant, under Division 1, of a dwelling becomes a purchaser under this section, either along or jointly with his spouse, he is entitled—
(a)	as from the date on which his tenancy of the dwelling commenced; or
(b)	if he has been a tenant of the Corporation in more than one dwelling without interruption and the Corporation so approves—from the date of first occupation of an earlier dwelling,
and subject to any terms specified in the option, to be credited in reduction of the sale price of the dwelling with an amount equal to that part of the economic rent that represents the repayment of the amount of the capital cost included in the amortization allowance in accordance with Section Sch.2.4.
(3)	Where a tenant has not been credited with an amount in accordance with Subsection (2) and his spouse, widow or widower becomes a purchaser under this section, the spouse, widow or widower is entitled to be credited with the same allowance under Subsection (2) as the tenant would have been entitled to if he had purchased the dwelling.
(4)	A contract of sale under this section may provide—
(a)	for the outright purchase; or
(b)	for the payment of the purchase price by instalments; or
(c)	for the payment of the purchase price to be secured—
(i)	by mortgage, in the prescribed form, over the property in respect of which the advance is made; or
(ii)	by any other security approved by the Corporation”.

20.	Without looking at the evidence, the facts raised above are triable issues.  The title to the land obtained by the Second Defendant is bona fide in Dispute.  The facts disclose a reasonable cause of action in fraud as pleaded.  The proceedings are not vexatious or frivolous as the plaintiffs have an arguable case on the face of the pleadings.

21.	For these reasons, the Second Defendant’s Notice of Motion, is refused.

22.	I now will deal with the Plaintiffs Notice of Motion, and hear parties on the interim restraining orders issued on 16th March 2020, and give directions for the further conduct of substantive matter.

23.	The formal orders:

(1)	The Second Defendant’s Notice of Motion filed 10/03/20 is dismissed.

(2)	The Matter proceed to the hearing of the Plaintiffs Notice of Motion and for further conduct of the proceedings.

(3)	Cost be in the cause.

(4)	Time be abridged.
________________________________________________________________
Vava Lawyers		:	Lawyer for the First & Second Plaintiff
Kusip Lawyers		:	Lawyer for the Second Defendant