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Evangelical Lutheran Church of Papua New Guinea v Maru [2020] PGNC 5; N8173 (31 January 2020)

N8173

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 296 OF 2019

EVANGELICAL LUTHERAN CHURCH OF PAPUA NEW GUINEA
Plaintiff

V

FRANK WAMAHEMBE MARU & MARINA MARU
First Defendants

GUNAR GEE
Second Defendant

Madang: Cannings J
2019: 7^th August, 16 October
2020: 31^st January

TRUSTS – CONSTRUCTIVE TRUSTS – whether real property of defunct company held in trust for another corporation.

REMEDIES – appropriate relief re title to government land held by defunct company – whether corporation having equitable interest in land held by defunct company ought to be granted order for vacant possession.

The plaintiff, a church entity incorporated by statue, claimed that it had an equitable interest in a State Lease over a residential property by virtue of a constructive trust between it and another company (not a party to these proceedings) that had been the registered proprietor of the State Lease. The other company became defunct in 1996. The plaintiff sought: (a) a declaration that the other company held its interest in the property in constructive trust for the plaintiff; and (b) an order for vacant possession and injunctions that would require the first defendants, who occupy the property, to vacate it and be restrained from interfering with the plaintiff’s enjoyment of the property. The first defendants argued that the proceedings ought to be summarily dismissed as the plaintiff lacked standing to commence the proceedings due to the statute under which the plaintiff was incorporated establishing a church council, which ought to have commenced the proceedings in its (the council’s) name. As to the merits of the case, the first defendants argued that all relief claimed by the plaintiff should be refused as the lease under which they occupy the property is a lawful and enforceable agreement.

Held:

(1) The plaintiff is a legal entity incorporated by statute and though its property must be managed and administered by the church council, the plaintiff is the appropriate entity to commence proceedings in its corporate name, which it has done. The plaintiff has standing. The proceedings are not frivolous or vexatious. The first defendants’ preliminary argument failed.

(2) The defunct company, prior to its removal from the register of companies, held its interest in the State Lease in constructive trust for the plaintiff, and if it still existed would be equitably bound to transfer that interest to the plaintiff. It was appropriate to grant a declaration to that effect.

(3) It is better that the plaintiff takes the necessary steps under the Companies Act and the Land Registration Act to get the property transferred to it and becomes the registered proprietor of the State Lease, before it asserts its rights to possession of the property, given that the first defendants are in occupation of the property and have apparently entered into a lease with the registered proprietor, in good faith.

(4) Accordingly the primary declaration sought by the plaintiff was granted and the order for vacant possession and other orders were refused. The parties were ordered to bear their own costs.

Cases cited:

The following case is cited in the judgment:

Evangelical Lutheran Church of PNG v Gee (2019) N7635

STATEMENT OF CLAIM

This was an application for declarations and orders regarding a State Lease.

Counsel

S Gor &B B Wak, for the Plaintiff
B S Lai, for the first Defendants

31^st January, 2020

1. CANNINGS J: This case is about a residential property in Cassia Avenue, Kalibobo in the town of Madang. The formal description of the property is Section 38, Allotment 14, Madang Town, Madang District. The first defendants, Frank Wamahembe Maru and Marina Maru, occupy the property under a five-year lease that they entered into on 1 August 2018 with the registered proprietor of the State Lease over the property, Lutheran Church (Madang) Ltd. The lease was negotiated on behalf of that company by the second defendant Mr Gee Gunar (aka Gunar Gee).
   
2. Lutheran Church (Madang) Ltd is a defunct company. It was removed from the register of companies in 1996.
   
3. The plaintiff is the Evangelical Lutheran Church of Papua New Guinea (“the Church”), a corporation established by the Evangelical Lutheran Church of Papua New Guinea Act 1992. The plaintiff claims that it has an equitable interest in the State Lease over the property by virtue of a constructive trust between it and Lutheran Church (Madang) Ltd. The plaintiff seeks two types of remedies:
   
   • (a) a declaration that Lutheran Church (Madang) Ltd held its interest in the property in constructive trust for the plaintiff; and
     
   • (b) an order for vacant possession and injunctions that would require the first defendants to vacate the property and be restrained from interfering with the plaintiff’s enjoyment of the property.
     
4. The first defendants argue that the proceedings ought to be summarily dismissed as frivolous and vexatious as the plaintiff lacks standing to commence the proceedings due to the statute under which the plaintiff was incorporated establishing a church council, which ought to have approved the court proceedings and commenced the proceedings in its (the council’s) name. As to the merits of the case, the first defendants argue that all relief claimed by the plaintiff should be refused as the lease under which they occupy the property is a lawful and enforceable agreement.
   

ISSUES

The following issues arise:

1. Should the proceedings be summarily dismissed due to the plaintiff’s lack of standing?
   
2. Does the plaintiff have an equitable interest in the property by virtue of a constructive trust?
   
3. What orders should the Court make?
   

1 SHOULD THE PROCEEDINGS BE SUMMARILY DISMISSED DUE TO THE PLAINTIFF’S LACK OF STANDING?

5. The first defendants argue that the plaintiff lacks standing as, although the plaintiff was established as a corporation under s 2 of the Evangelical Lutheran Church of Papua New Guinea Act 1992, management and administration of its property is the responsibility of the Church Council under ss 3 (Church property), 4 (constitution of the council) and 21 (powers of Church)of that Act, which state:
   

3. Church Property.

Church Property shall be managed and administered on behalf of the Church by a Council to be known as the "Evangelical Lutheran Church National Council" and the Council may exercise all the powers of the Church in relation thereto.

4. Constitution of the Council.

(1) The Council shall consist of—

(a) the Bishop of the Church; and

(b) the Assistant to the Bishop of the Church; and

(c) the President of each District; and

(d) other Members of the Church appointed by the Synod and as specified by the Constitution and by-laws.

(2) The Bishop of the Church shall be the Chairman of the Council and the Assistant to the Bishop shall serve as Assistant Chairman.

(3) The members of the Council referred to in Subsection (1)(c) and (d) shall retire from office and may be eligible for re-election, in accordance with the Church Constitution. ...

21. Powers of Church.

The powers of the Church relating to property may be exercised for and on its behalf by the Council subject to the control and direction of the Synod, and those powers include the power in the name of the Church—

(a) to acquire, hold, manage and control, and grant, transfer, mortgage, demise, sell, surrender, dispose of, create trusts or create or reverse easements in or over or otherwise deal with property of any kind; and

(b) to establish and support, or to aid in the establishment and support of associations, institutions, funds, trusts and conveniences calculated to benefit employees or past employees, or the dependants or connects of any such persons, to grant pensions and allowances, and to make payments towards insurance; and

(c) to borrow or raise or secure the payment of money in such manner as the Church thinks proper, to secure such money or the repayment or performance of any debt, liability, contract, guarantee or other engagement incurred or to be entered into by the Church in any way, and to purchase, redeem and pay off any such securities; and

(d) to take or hold mortgages, liens and charges to secure payment of the purchase price or any part of the purchase price of any Church property sold by the Church, or any money due to the Church; and

(e) to enter into partnership or into an arrangement for sharing of income, union of interest, co-operation, joint venture or reciprocal concession, or otherwise, with any person carrying on or engaged in or about to carry on or engage in any business or transaction that is capable of being conducted so as directly or indirectly to benefit and further the purposes and work of the Church; and

(f) to carry on any business that seems to the Council capable of being conveniently carried on by the Church and calculated directly or indirectly to benefit and further the purposes and work of the Church; and

(g) to adopt such means of making known and advertising the purposes and work of the Church and any business carried on by the Church as seem expedient; and

(h) in relation to any Church property vested in it—

(i) to improve, manage, develop, turn into account or otherwise deal with or dispose of all or any of the property; and

(ii) to sell any asset or assets or any property or any part thereof, be it together or in parcels, by public auction or private contract, for cash or on credit, or on such terms and subject to such conditions as the Council thinks advisable; and

(iii) to exchange the property or any part of it for property; and

(iv) to transfer and assure the property when sold or exchanged or otherwise dealt with or disposed of to the purchaser or to the person taking it, freed and discharged from any trusts affecting it in the hands of the Church; and

(v) to demise, let, hire or loan the property or any part or parts of it for such periods, at such rents and on such terms and conditions as the Council thinks advisable; and

(vi) to mortgage the property or any part of it, or otherwise give security over it, and for the purpose of any such mortgage or security to assure the property to the mortgagee and his assigns freed and discharged from any trusts affecting it in the hands of the Church; and

(vii) to accept surrenders of leases on such terms and subject to such conditions as the Council thinks advisable; and

(viii) to lend or advance money to any person, and to secure in any way the repayment of moneys lent or advanced to or the liabilities incurred by any person, and otherwise to assist any person; and

(ix) to invest and deal with the money of the Church not immediately required including, in addition to any powers of investment conferred on trustees by law, taking or otherwise acquiring and holding shares, stocks, debentures, debenture stock, notes or other securities of any company or incorporated body or association and units of any fixed or flexible trust, and depositing money with any such company, incorporated body or association; and

(i) to draw, make, accept, endorse, sign, discount, execute and issue cheques, drafts, promissory notes, bills of exchange, bills of lading, warrants, debentures or other negotiable or transferable instruments; and

(j) to appoint by instrument under the seal of the Church, any person as the attorney of the Church, generally or in respect of specified matters, and to act in any place, and all deeds signed by the attorney on behalf of the Church and under this seal are binding on the Church and have the same as if they were under the seal of the Church; and

(k) to do all or any of the things referred to in the preceding provisions of this Section in—

(i) any part of the world; and

(ii) as principal, agent, trustee or otherwise; and

(iii) by or through trustees or agents or otherwise; and

(iv) alone or in conjunction with others; and

(l) to procure the Church to be registered or legalised at such places outside the country as the Council or Synod thinks proper; and

(m) for all or any of the purposes referred to in this Section to sign, seal and execute all such transfers, contracts and other deeds, documents and instruments as are necessary; and

(n) to do all such other things as in the opinion of the Synod or the Council are incidental or conducive to the purposes and work of the Church.

6. The first defendants argue that because these proceedings are to do with property that the plaintiff claims to have an interest in, the proceedings are about “Church property”, and therefore it is the Church Council, constituted by s 4 of the Act, which should have commenced these proceedings in the exercise of powers and functions conferred on the Church Council by ss 3 and 21 of the Act.
   
7. I reject that argument. The plaintiff is a legal entity incorporated by s 2 of the Act, which states:
   

(1) The Church is hereby established as a corporation by the name of "The Evangelical Lutheran Church of Papua New Guinea".

(2) The Corporation—

(a) has perpetual succession; and

(b) shall have a seal; and

(c) may sue and be sued in its corporate name; and

(d) may do and suffer all such other acts and things as corporations may by law do and suffer; and

(e) has the power to promulgate, amend, adopt, create and otherwise devise a Constitution including Rules and by-laws.

8. The plaintiff is expressly authorised by s 2(2)(c) to sue in its corporate name. Though its property must be managed and administered by the Church Council, the plaintiff is the appropriate entity to commence proceedings in its corporate name, which it has done. The plaintiff has standing. The proceedings are not frivolous or vexatious. The first defendants’ preliminary argument fails.
   

2 DOES THE PLAINTIFF HAVE AN EQUITABLE INTEREST IN THE PROPERTY BY VIRTUE OF A CONSTRUCTIVE TRUST?

9. The plaintiff claims that it has an equitable interest in the property, Section 38, Allotment 14, by virtue of a constructive trust between it and Lutheran Church (Madang) Ltd. That company acquired the State Lease through a transfer registered on 7 August 1978. But Lutheran Church (Madang) Ltd was removed from the register of companies and became defunct on 11 March 1996. It has never been restored to the register. However, it remains the registered proprietor of the State Lease.
   
10. I uphold the gist of the plaintiff’s claim as to the nature and extent of its interest in the property. A similar claim was upheld in Evangelical Lutheran Church of PNG v Gee (2019) N7635. That case concerned another property in a similar part of Madang, where Lutheran Church (Madang) Ltd had been the registered proprietor.
    
11. I find that the property at the centre of this case, was held in constructive trust for the benefit of the plaintiff. Though Lutheran Church (Madang) Ltd was a separate and distinct legal entity from the Church, its objects were “to support and promote in Papua New Guinea and in particular, in Madang Province ... the works, beliefs and articles of faith of the Evangelical Church of Papua New Guinea”. There is ample evidence before the Court regarding the special relationship that existed between Lutheran Church (Madang) Ltd and the plaintiff.
    
12. I am satisfied that Lutheran Church (Madang) Ltd was established and obliged as a matter of law and equity to conduct its affairs and business in such a way as to support and promote the works, beliefs and articles of faith of the plaintiff Church. It was established to serve the plaintiff and its members in Madang Province and act in the interests of the plaintiff and its members in Madang Province. There is ample evidence to prove that Lutheran Church (Madang) Ltd was incorporated in 1977 by the plaintiff. It follows that all property in which Lutheran Church (Madang) Ltd had a legal interest was held in constructive trust for the plaintiff. This includes Section 38, Allotment 14. Clearly the plaintiff has an equitable interest in the property.
    

3 WHAT ORDERS SHOULD THE COURT MAKE?

13. The plaintiff is seeking two sorts of remedies: (a) declarations as to its interest; and (b) orders for vacant possession and injunctions.
    

(a) Declaration as to nature of plaintiff’s interest

14. In Evangelical Lutheran Church of PNG v Gee (2019) N7635 I declared that Lutheran Church (Madang) Ltd, prior to its removal from the register of companies, held its interest as registered proprietor of the State Lease in the property the subject of that case in constructive trust for the plaintiff, and that Lutheran Church (Madang) Ltd, if it still existed, would be equitably bound to transfer that interest to the plaintiff. I see no good reason not to make a similar declaration in the present case.
    

(b) Orders for vacant possession

15. The plaintiff argues that once a declaration is made as to its equitable interest in the property, it follows as a matter of course that it should be granted an order for vacant possession and the first defendants should be ordered to give up the property forthwith and permanently restrained from interfering with the plaintiff’s enjoyment of it.
    
16. I don’t see it as simple as that. The first defendants have occupied the property for the last 18 months pursuant to a lease that they entered into, presumably in good faith, with Lutheran Church (Madang) Ltd, which is still the registered proprietor, even though it has been defunct for many years. It is better that the plaintiff takes the necessary steps under the Companies Act and the Land Registration Act to get the property transferred to it and become the registered proprietor before it asserts its rights. I am not sure why the plaintiff did not seek in this case the sorts of orders that were sought and granted in Evangelical Lutheran Church of PNG v Gee (2019) N7635, calculated at getting the property transferred to it.
    
17. I decline to make the orders sought by the plaintiff. Only the declaration will be granted. The parties will bear their own costs.
    

DECLARATIONS AND ORDERS

(1) It is declared that Lutheran Church (Madang) Ltd, prior to its removal from the register of companies, held its interest as registered proprietor of the State Lease over Section 38, Allotment 14, Madang Town, Madang District in constructive trust for the plaintiff, and that Lutheran Church (Madang) Ltd, if it still existed, would be equitably bound to transfer that interest to the plaintiff.

(2) Other relief, including orders for vacant possession and damages, sought in the statement of claim, is refused.

(3) Subject to any specific costs orders made in the course of the proceedings, the parties shall bear their own costs of the proceedings.

Judgment accordingly.
_____________________________________________________________
Fiocco & Nutley Lawyers: Lawyers for the Plaintiff
B S Lai Lawyers : Lawyers for the First Defendants