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Daniels v National Housing Corporation [2020] PGNC 291; N8473 (29 May 2020)

N8473

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO. 238 OF 2017

BETWEEN:
MARTIN DANIELS for himself and on behalf of 14 others
Plaintiffs

AND:
NATIONAL HOUSING CORPORATION
First Defendant

AND:
JV INVESTMENT CONSTRUCTIONS LTD
Second Defendant

AND
LUTHER SIPISON, SECRETARY FOR DEPARTMENT OF LANDS AND PHYSICAL PLANNING
Third Defendant

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Defendant

Lae: Dowa AJ
2020: 19^th & 29^thMay

PRACTICE AND PROCEDURE – application by second defendant seeking orders to dismiss plaintiffs proceedings for not particularising fraud and for being frivolous and vexatious and for not disclosing a reasonable cause of action – lack of particulars of fraud discussed – no reasonable cause of action and frivolity – discussion of - Plaintiffs allegation of sale and transfer of titles from First to Second Defendant was improper and irregular - plaintiffs also allege titles obtained by Second Defendant are invalid and is bona fide in dispute - Plaintiffs pleading constructive fraud – plaintiffs allegation of constructive fraud is maintainable if they bring necessary evidence - facts raised are triable issues as they disclose a reasonable cause of action in fraud as pleaded - proceedings are not vexatious or frivolous as the plaintiffs have an arguable case on the face of the pleadings - Second Defendant’s Notice of Motion is refused.

Cases Cited:

Mt Hagen Urban Local level Government v Sek No.15 SC 1007

Pius Tikili v Home Base Real Estate Ltd (2017) SC1563,

PNG Bible Church Inc v Carol Mandi (2018) SC1724

Rosemary John v James Nomenda (2010) N3851
Aisi v Nikent& NHC (2018) N7564

Counsel:

No appearance, for the Plaintiffs
G C Topa, for the Second Defendant
B Tamake, for the Third and Fourth Defendants

DECISION

29^th May, 2020

1. DOWA AJ: This is a ruling on the Second Defendants Notice of Motion filed 26^th September, 2019.

2. The Second Defendant, in its Notice of Motion is seeking the following orders:

“1. That the Plaintiffs entire claim be dismissed pursuant to Order 8 Rule 30 of the National Court Rules for not particularising Fraud and Order 12 Rule 40 (1)(a) and (b) of the National Court Rules for, (a) Disclosing no reasonable cause of action and (b) being vexatious and frivolous.

2. Pursuant to Order 12 Rule 1 of the National Court Rules, the Plaintiffs and their wantoks relatives and (or) associates be evicted forthwith and the Second Defendants be given vacant possession of the property described as section 1 Lot 70 and 75, Half street, Lae, Morobe Province forthwith.
   
3. And or alternatively pursuant to Order 13 Rule 3 (2) of the National Court Rules, the Second Defendant be granted Leave to issue a Writ of Possession
   
4. Cost be met by the Plaintiffs
   
5. Time be abridged.”
   

3. The Second Defendant was represented by Ms. Topa of Myles Lawyers. The Third and Fourth Defendants were represented by Mr. Kamate of the Solicitor Generals’ Office. The Plaintiff and First Defendant made no appearances. It is significant to note that the Plaintiffs’ Lawyers were notified by the Lawyers for the Second defendant of the hearing date. Yet there was no appearance by the Plaintiffs nor their lawyers. The court being satisfied with due notice being given to the Plaintiffs’ Lawyers proceeded to hear the application.

Facts

4. The Plaintiff, Martin Daniels, instituted these proceedings for himself and 14 others whose names are listed in the court document entitled “CONSENT OF CO-PLAINTIFFS TO PRINCIPAL PLAINTIFF. They are tenants of fifteen (15) low cost houses on a National Housing Corporation property described as allotments 70 and 75 Section 1, Lae, pursuant to various Tenancy Agreements entered between them and the First Defendant. They have been paying the usual rent on the houses to the First Defendant over the years.

5. The Plaintiffs allege they have also requested the First Defendant to sell and transfer the property to them as long time, existing tenants under the National Governments low cost give away scheme.

6. Whilst waiting for a response, the Plaintiffs received a Notice to vacate on or about 14^th February 2017 from the Second Defendant. The Second Defendant advised them that it has acquired the property from the First Defendant. Two separate titles were issued, Volume 23 Folio 173 for Allotment 70 and Volume 23 Folio 177 for Allotment 75. The titles of the properties were transferred from the first Defendant to the Second Defendant on 4^th December 2015 and on 22^nd March 2016 respectively.

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

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

Second Defendants Defence

9. The Second Defendant filed a Defence, pleading that it is the registered proprietor, having purchased the properties from the First Defendant between December 2015 and March 2016.

10. The Transfer of titles from the First Defendant to the Second Defendant were duly registered. The Second Defendant alleges it has indefeasible title pursuant to section 33 of the Land Registration Act.

Second Defendants Notice of Motion

11. The first leg of the Second Defendant’s Notice of Motion seeks dismissal of proceedings for:

1. Failing to particularize fraud pursuant to Order 8 Rule 30 of the National Court Rules
   
2. Failing to disclose a reasonable cause of action and for frivolity pursuant to Order 12 Rule 40(1)(a) and (b) of the National Court Rules.
   

12. If the application is successful the orders sought in the second and third leg of the motion shall become consequential orders. If the application is refused the additional orders may not be granted until final determination of the proceedings.

Lack of particulars of fraud

13. The first issue to consider is whether the proceedings be dismissed for failing to particularise fraud. The relevant rule under Order 8 Rule 30 of the National Court Rules is set out below:

Fraud, etc. (16/2)

“A party pleading shall give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which he relies.”

14. Ms Topa of counsel for the Second Defendant submitted that the Plaintiffs pleadings on fraud are vague and lack proper and better particulars. She referred to a string of National Court decisions, the most recent being that of Dingake J in Sheila Aisi v John Koi Nikent and NHC (2018) N 7564, which emphasise the necessity for proper particulars when pleading fraud.

15. I note in the present case, the statement of claim did not specifically particularise fraud, especially in paragraph 18. However, the facts pleaded from paragraphs 6 to 18 of the Statement of Claim when read together, generally disclose an allegation that the sale and transfer of titles from the First Defendant to the Second Defendant was irregular. The pleadings disclose constructive fraud. In accordance with recent decisions of the Supreme Court in Pius Tikili v Home Base Real Estate Ltd (2017) SC1563 and PNG Bible Church Inc. v Carol Mandi (2018), pleading constructive fraud is maintainable.

16. In the Tikili case the Supreme Court has this to say at paragraph 23 concerning constructive fraud:

“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 in Mudge v Secretary for Lands (1985) PNGLR387.Cases such as Emas Estate Development Pty Ltd v John Mea (1993) PNGLR215,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.”

17. At the hearing of this application, Counsel for the Third and Fourth Defendants submitted that the Plaintiffs were long time tenants of the subject properties and be allowed to prosecute their claim and not to be driven from the judgment seat at this stage of litigation.

18. For these reasons the proceedings will not be dismissed for lack of particulars of fraud.

No reasonable cause of action, Frivolity etc

19. The second issue for consideration is whether the Plaintiffs’ proceedings disclose a reasonable cause of action in law. 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 inrelation 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).

20. 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 Sek No.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 ApioIrafawe v. YauweRiyong (1996) N1915; Eliakim Laki and 167 Otheres v. Maurice Alulaku and Others (2002) N2001; KieeToap 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.”

Second Defendant’s Title

21. The Second Defendant has titles to both properties, 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

22. The Plaintiffs are alleging that the sale and transfer of titles from the First to the Second Defendant was improper and irregular, such that the titles obtained by the Second Defendant are 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 cases -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.

23. The Plaintiffs are alleging they were the existing tenants over many years. They have tenancy agreements with the First Defendant. The Plaintiffs allege they should have been given the first opportunity rather than the foreign company which does not qualify.

24. The Plaintiffs allege they were not notified of the actions taken by the first Defendant and were surprised by the actions of the First Defendant.

25. 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”.
26. Without looking at the evidence, the facts raised above are triable issues. The titles 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.

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

28. The formal orders:

(1) The Second Defendant’s Amended Notice of Motion filed 26^th September 2019 is refused.

(2) Cost be in the cause.

(3) Time be abridged.
________________________________________________________________
Solwai Lawyers: Lawyer for the Plaintiffs
Myles Legal Services: Lawyers for the Second Defendant
Solicitor General: Lawyers for the Third and Fourth Defendants