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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
WS NO 1476 of 2019 (CC1)
BETWEEN
BUTUYA KASA
Plaintiff/Cross-Defendant
AND
BOLEWA FELA
First Defendant/Cross-Claimant
AND
DITHA NAYABBANUNG, in his former capacity as ACTING MANAGING DIRECTOR, NATIONAL HOUSING CORPORATION
Second Defendant
AND
NATIONAL HOUSING CORPORATION
Third Defendant
WAIGANI: MAKAIL J
18 AUGUST 2023; 31 MARCH 2025
STATE LEASES – Property dispute – State lease – Indefeasibility of title – Title procured by fraud – Constructive fraud – Proof of – Land Registration Act – Section 33(1)(a)
STATE LEASES – Property dispute – State lease – Property of National Housing Corporation – Dwelling – Criteria for sale of dwelling discussed – Eligible person – Approved applicant – Person offered to purchase a dwelling – Tenant – Spouse, widow or widower of tenant – Tenant and his spouse as joint tenant – Tenant and his next of kin – Tenancy agreement – Contract of sale – Outright purchase – Payment of purchase price by instalments – Payment of purchase price secured by mortgage or other security approved by the Corporation – National Housing Corporation Act, 1990 – Sections 1, 37 & 38(1)&(4)
CROSS-CLAIM – TRESPASS & MENSE PROFIT – General damages for distress and hardship and mesne profit sought – Illegal occupation and use of property – Deprivation of occupation and use of property – Proof of – Award of damages refused
Facts
Pursuant to an amended writ of summons filed on 28th February 2020 the plaintiff sues the defendants for procuring the title to a property by fraud and seeks to have the title set aside under Section 33(1)(a) of the Land Registration Act. The first defendant makes a cross-claim against the plaintiff seeking general damages for trespass and mesne profit because of the illegal occupation and use of the property by the plaintiff. The property is described as Allotment 23 Section 313, Toko Street, Gerehu Stage 5, National Capital District and registered as State Lease (Residence Lease) Volume 84, Folio 78.
Held:
(a) is the property a dwelling under Sections 1 and 37?
(b) is the plaintiff or defendant an eligible person under Sections 1 and 37(a)?
(c) is the plaintiff or defendant an approved applicant under Sections 1 and 37(b)?
(d) is the plaintiff or defendant offered to purchase the dwelling under Sections 37(c) and 38(1)?
Cases cited
Mudge v Secretary for Lands [1985] PNGLR 387
Emas Estate Development Pty Limited v John Mea & Ors [1993] PNGLR 215
Koitachi Limited v Walter Schnaubelt (2007) SC870
Rosemary John v James Nomenda & National Housing Corporation (2010) N3551
Vailala v National Housing Corporation (2017) N6598
Pacific Trade International Limited v James Waisime & Ors (2020) SC1935
James Waisime & Ors v Auskoa Enterprises Ltd & Ors (2019) N7727
PNG Ports Corporation Ltd v Charles Inni (2012) N7717
Counsel
Mr R Kasito for plaintiff/cross-defendant
Ms E Waeda for first defendant/cross-claimant
No appearance for second defendant
Mr L Tangua for third defendant
JUDGMENT
1. MAKAIL J: Pursuant to an amended writ of summons filed on 28th February 2020 the plaintiff sues the defendants for procuring the title to a property by fraud and seeks to have the title set aside under Section 33(1)(a) of the Land Registration Act. The first defendant makes a cross-claim against the plaintiff seeking general damages for trespass and mesne profit because of the illegal occupation and use of the property by the plaintiff. The property is described as Allotment 23 Section 313, Toko Street, Gerehu Stage 5, National Capital District and registered as State Lease (Residence Lease) Volume 84, Folio 78.
Definition of Fraud
2. Section 33(1)(a) of the Land Registration Act states that “The registered proprietor of an estate or interest holds it absolutely free from all encumbrances except in the case of fraud.” The word “fraud” in Section 33(1)(a) of the Land Registration Act has been defined as actual fraud or constructive fraud: Mudge v Secretary for Lands [1985] PNGLR 387, Emas Estate Development Pty Limited v John Mea & Ors [1993] PNGLR 215 and Koitachi Limited v Walter Schnaubelt (2007) SC870.
Grounds of Fraud
3. The grounds which the plaintiff relies on to prove fraud are extracted from paragraphs 1 to 25 of the statement of claim as follows:
(a) the signed a contract of sale and transfer of title of the property were done without complying with the procedures in respect of properties of the third defendant sold under the “Home Give Away Scheme” under Section 37 of the National Housing Corporation Act, 1990 (“NHC Act”) and guidelines and criteria to eligible or approved applicants.
(b) the plaintiff was an approved applicant to purchase the property under the “Home Give Away Scheme” under Section 37 of NHC Act.
(c) the first defendant was not an eligible tenant or an approved applicant to purchase the property under the “Home Give Away Scheme” under Section 37 of NHC Act.
(d) the plaintiff and Mr Kasa Lewanaga were current sitting tenants of the property for over 26 years.
(e) the plaintiff and Mr Kasa Lewanaga paid rentals and outstanding arrears to the third defendant for their occupation of the property.
(f) Mr Kasa Lewanaga and the plaintiff requested the first defendant to change the tenancy to them on numerous occasions, but the first defendant refused.
(g) the first defendant was not a sitting tenant and did not pay rent since 1982.
(h) the first defendant did not apply to purchase the property under the third defendant’s “Home Give Away Scheme” while the plaintiff and Mr Kasa Lewanaga did.
(i) as sitting tenants, the plaintiff and her late husband were not given the first right of refusal by the third defendant.
First Defendant’s Cross-Claim
4. The first defendants filed a cross-claim, and alleges that:
(a) he is the registered proprietor of the property.
(b) he purchased the property from the third defendant under a contract of sale.
(c) the title was transferred from the third defendant to him and registered by the Registrar of Titles on 23rd May 2019.
(d) twice the officers of the third defendant inspected the property and discovered that the plaintiff/cross-defendant had erected illegal makeshift houses and a three-bedroom house and put them up for rent without the third defendant’s agreement/consent.
(e) by reason of the plaintiff/cross-defendant’s occupation and use of the property, he has been deprived of the occupation and use of the property.
(f) the plaintiff/cross-defendant is an illegal occupant and the first defendant/cross-claimant seeks an order to evict the plaintiff/cross-defendant from the property and further, entry of judgment for mesne profit.
Parties’ Evidence
5. The plaintiff relies on the following:
(a) affidavit of the plaintiff sworn on 23rd May 2022 and filed on 11th July 2022 (Exhibit “P1”),
(b) affidavit of Bagave Iyodeme sworn on 24th May 2022 and filed on 11th July 2022 (Exhibit “P2”),
(c) affidavit of Gabriel Gore sworn and filed on 11th July 2022 (Exhibit “P3”),
(d) affidavit of Niel Airo sworn and filed on 11th July 2022 (Exhibit “P4”), and
(e) supplementary affidavit of Niel Airo sworn on 15th July and filed on 18th July 2022 (Exhibit “P5”).
6. The first defendant relies on the following:
(a) affidavit of the first defendant sworn on 7th December 2020 and filed on 8th December 2020 (Exhibit “D1”),
(b) affidavit of Daro Anasi Detori sworn on 7th December 2020 and filed on 8th December 2020 (Exhibit “D2”),
(c) affidavit of Pastor Pausa Sivako sworn on 15th September 2020 and filed on 24th September 2020 (Exhibit “D3”),
(d) affidavit of Thomas Pokani sworn on 17th September 2020 and filed on 24th September 2020 (Exhibit “D4”), and
(e) affidavit of Henry Joseph Mokono sworn on 4th August 2022 and filed on 5th August 2022 (Exhibit “D5”).
Proof of Fraud
6. The plaintiff relies on Section 37 of the National Housing Corporation Act (“NHC Act”) and submits that he is an approved applicant for the property but missed out. Section 37 states in part:
“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).”
7. To reinforce her submissions, the plaintiff relies on Rosemary John v James Nomenda & National Housing Corporation (2010) N3551 which was reinforced in Vailala v National Housing Corporation (2017) N6598 and argues that a failure by the registered proprietor to comply with the procedure for procuring title of a property from the NHC under Section 37 of the NHC Act and the guidelines for “Home ownership Scheme” constitute constructive fraud and title can be set side under Section 33(1)(a) of the Land Registration Act.
8. Before analysing the evidence of the parties, I want to revisit the Rosemary John v James Nomenda case (supra) where I discussed the legislative framework in which the third defendant operates in the context of its powers and functions of sale of its properties under its different sale and purchase schemes. The starting point is Section 37 of the NHC Act which confers authority on the NHC to sell a “dwelling” vested in it.
9. A “dwelling” is defined in Section 1 (Interpretation) of the NHC Act as:
“includes the appurtenances, outbuildings, fences and permanent provision of lighting, water supply, drainage and sewerage provided in connection with a dwelling, and in relation to the letting, selling, vacating or erecting also includes the land on which a dwelling is situated but does not otherwise include land”.
10. The NHC may sell a dwelling in three ways:
(a) it may sell a dwelling to an eligible person.
(b) it may sell a dwelling to an approved applicant.
(c) it may sell to a person who exercises the option offered to him under Section 38(1). (Emphasis added).
11. An eligible person is defined in Section 1 (Interpretation) of the NHC Act as:
“means a person declared under Section 3 to be eligible for assistance under Part IV”.
12. Section 3 of the NHC Act states:
“The Corporation may declare a person to be a person eligible for assistance under Part IV by reason of –
(a) his limited means; or
(b) his present unsuitable housing; or
(c) any other circumstances considered relevant by the Corporation”.
13. An approved applicant is defined in Section 1 (Interpretation) of the NHC Act as:
“means –
(a) the State; or
(b) an instrumentality of the State; or
(c) a Provincial Government; or
(d) an instrumentality of a Provincial Government, or
(e) a Local-level Government; or
(f) an organization or person declared under Section 2 to be an approved applicant for the purposes of this Act”.
14. The reference to an organization or person declared under Section 2 in Section 1(f) (supra) is by a Ministerial Declaration in the following terms:
“The Minister may declare an organization or person to be a person to be an approved applicant for the purpose of this Act.”
15. The reference to a person who exercises the option offered to him under Section 38(1) in Section 37(1) of the NHC Act is a person offered to purchase a dwelling. Section 38(1) states:
“38. OPTION 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) ........
(3) ........
(4) After 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”.
16. The above statutory provisions fix a criterion for sale of a dwelling of the NHC. The criterion is more or less what can be best described as a checklist for the NHC to tick for a sale of a dwelling to be lawful, legal or valid under the NHC Act. In the present case the check list can be summarised in a questionnaire form for an appropriate response in this way:
(a) is the property a dwelling under Sections 1 and 37?
(b) is the plaintiff or first defendant an eligible person under Sections 1 and 37(a)?
(c) is the plaintiff or first defendant an approved applicant under Sections 1 and 37(b)?
(d) is the plaintiff or first defendant offered to purchase the dwelling under Sections 1 and 37(c)?
(e) in a case where the plaintiff or first defendant is a person offered to purchase a dwelling under Sections 37(c) and 38(1):
(i) is the plaintiff or first defendant a tenant of the dwelling under Section 38(1)(a)?
(ii) if the plaintiff or first defendant is a tenant, is there a Tenancy Agreement between the plaintiff or first defendant and the third defendant?
(iii) is the plaintiff or first defendant a spouse, widow or widower of the tenant of the dwelling under Section 38(1)(b)?
(iv) if the plaintiff or first defendant is a spouse, widow or widower of the tenant of the dwelling, is there a Tenancy Agreement between the plaintiff or first defendant and the third defendant?
(v) is the plaintiff or first defendant the tenant an dhis spouse as joint tenants of a dwelling under Section 38(1)(c)?
(vi) is the plaintiff or first defendant the tenant and his next of kin of a dwelling under Section 38(1)(d)?
(f) is there a purchase price under Section 38(1)?
(g) is there a contract of sale between the plaintiff or first defendant and the third defendant under Section 38(1) and (4)?
(h) is there a contract of sale for the outright purchase of a dwelling under Section 38(1) and (4)(a)?
(i) is there a contract of sale for the payment of the purchase price by instalment of a dwelling under Section 38(1) and (4)(b)?
(j) is there a contract of sale for the payment of the purchase of a dwelling to be secured by a mortgage under Section 38(1) and (4)(c)(i)?
(k) is there a contract of sale for the payment of the purchase of a dwelling to be secured by any other security approved by the NHC under Section 38(1) and (4)(c)(ii)?
17. Turning to the evidence, I have read the affidavits (Exhibits “P1” to “P4” and “D1” to “D5”) and discounting the accounts of the witnesses for being hearsay, irrelevant and lack of corroboration, I find that the majority of the accounts by the witnesses are not contested and make the following findings:
18. Based on the above summary of facts, it is abundantly clear that this case marks two opposite extremes. On the other hand, is the plaintiff’s plea for her, her children and grandchildren’s wellbeing having lived on the property for the last 30 or so years and the claim that the first defendant’s title smacks of fraud and on the other, the first defendant’s indefeasibility of title.
19. However, where the plaintiff relies on constructive fraud to set aside the first defendant’s title under Section 33(1)(a) of the Land Registration Act, it must be established that the conduct of the first defendant in procuring the title of the property was in breach of the established procedure identified in Sections 1, 2, 3, 37(1) and 38 of the NHC Act, highly irregular and suspicious such that it is reasonable to infer that the title was procured by fraud as was the case in Rosemary John v James Nomanda (supra).
20. Returning to the checklist, the questions can be answered in this way:
(a) is the property a dwelling under Sections 1 and 37? Yes.
(b) is the plaintiff or first defendant an eligible person under Sections 1 and 37(a)? First defendant.
(c) is the plaintiff or first defendant an approved applicant under Sections 1 and 37(b)?
(d) is the plaintiff or first defendant offered to purchase the dwelling under Sections 1 and 37(c)?
(e) in a case where the plaintiff or first defendant is a person offered to purchase a dwelling under Sections 37(c) and (38(1);
(i) is the plaintiff or first defendant a tenant of the dwelling under Section 38(1)(a)? First Defendant.
(ii) if the plaintiff or first defendant is a tenant, is there a Tenancy Agreement between the plaintiff or first defendant and the third defendant? No evidence of a Tenancy Agreement between the plaintiff and third defendant. Likewise, no evidence of a Tenancy Agreement between the first defendant and third defendant.
(iv) if the plaintiff or first defendant is a spouse, widow or widower of the tenant of the dwelling, is there a Tenancy Agreement between the plaintiff or first defendant and the third defendant? No, because it is inapplicable.
(v) is the plaintiff or first defendant the tenant and his spouse as joint tenants of a dwelling under Section 38(1)(c)? No, because it is inapplicable.
(vi) is the plaintiff or first defendant the tenant and his next of kin of a dwelling under Section 38(1)(d)? No, because it is inapplicable.
(f) is there a purchase price under Section 38(1)? Yes, K4,500.00.
(g) is there a contract of sale between the plaintiff or first defendant and the third defendant under Section 38(1) and (4)? Yes, one was signed on 10th July 2017.
(h) is there a contract of sale for the outright purchase of a dwelling under Section 38(1) and (4)(a)? Yes.
(i) is there a contract of sale for the payment of the purchase price by instalment of a dwelling under Section 38(1) and (4)(b)? No, because it is inapplicable.
(j) is there a contract of sale for the payment of the purchase of a dwelling to be secured by a mortgage under Section 38(1) and (4)(c)(i)? No, because it is inapplicable.
(k) is there a contract of sale for the payment of the purchase of a dwelling to be secured by any other security approved by the NHC under Section 38(1) and (4)(c)(ii)? No, because it is inapplicable.
21. Based on the above response to the questions from the checklist and without the benefit of submission from the third defendant’s counsel, it would appear that the third defendant recognised the first defendant as either:
(a) an eligible person because on 9th May 2019 the Minister for Lands issued a Grant of Remission of Rentals to the third defendant presumably to recognise the first defendant as a person of limited means under Sections 1 and 3 of the NHC Act, or
(b) an approved applicant because on 29th June 1995 the first defendant was gazetted in a notice No. G59 as an approved Transferee for the property under the Low Cost Give Away Scheme of the third defendant presumably under Sections 1(f) and 2 of the NHC Act, or
(c) a person who exercised the option offered to him under Section 38(1) because as a tenant, the first defendant was offered and he accepted to purchase the property. This is reinforced by the parties signing a contract of sale on 10th July 2017 and the payment of purchase price of K4,500.00.
22. Notwithstanding the vagueness in which group the first defendant fell under, where the plaintiff is unable to show by evidence that the procedure by which the defendants have adopted to have the title of the property transferred from the third defendant to the first defendant were breached, this is where the Court will find that the plaintiff has failed to establish that fraud can be inferred in the procurement of title on the balance of probabilities.
23. On the other hand, the findings of the Court established that the relationship between the plaintiff and the first defendant is one of an invitee such that it can be revoked or terminated at the pleasure of the registered proprietor. This is the highest the plaintiff has put her case.
First Defendant/Cross-Claimant’s Cross-Claim
24. Turning to the cross-claim, the first defendant/cross-claimant strongly submits that by reason of the plaintiff/cross-defendant’s occupation and use of the property, he has been deprived of the occupation and use of the property. The plaintiff/cross-defendant is an illegal occupant and the first defendant/cross-claimant seeks an order to evict the plaintiff/cross-defendant from the property and further, entry of judgment for mesne profit. For mesne profit, he seeks a sum of K60,000.00 for one year of occupation and use of the property by the plaintiff in operating a tucker-shop. Further, he seeks general damages for distress and hardship in the sum of K10,000.00.
25. I accept the first defendant/cross-claimant’s submissions that, as a matter of law, he has a cause of action for trespass and mesne profit against the plaintiff/cross-defendant for illegal occupation and use of the property. The appropriate remedy at common law is general damages for trespass and mesne profit. In the case of trespass, general damages are awarded for distress and hardship and for mesne profit, it is generally based on the market value of the land: Pacific Trade International Limited v James Waisime & Ors (2020) SC 1935, James Waisime & Ors v Auskoa Enterprises Ltd & Ors (2019) N7727 and PNG Ports Corporation Ltd v Charles Inni (2012) N4717.
26. As a matter of proof, I am not satisfied that general damages for trespass and mesne profit should be award to the first defendant/cross-claimant for the following reasons:
(a) prior to 23rd May 2019, the first defendant/cross-claimant was not the registered proprietor of the property. Thus, he has no right to make a claim for general damages for trespass and mesne profit.
(b) after 23rd May 2019, the plaintiff/cross-defendant had spent money to build a three-bedroom house on the property and will need to be compensated for its loss if it is pulled down or the plaintiff/cross-defendant to vacate it.
(c) similarly, after 23rd May 2019, the plaintiff/cross-defendant had spent money to build a ticker shop on the property and will need to be compensated for its loss if it is pulled down or the plaintiff/cross-defendant to vacate it.
27. In the second part, the first defendant/cross-claimant submits that as the registered proprietor of the property, he is entitled to vacant possession of the property and seeks an order to evict the plaintiff and other occupants of the property within 14 days of the Order. Based on the above Court’s findings, despite being served several notices to vacate the property after the first defendant became the registered proprietor, the plaintiff and other occupants refused to vacate it. It follows that the first defendant/cross-clamant has establish this part of the cross-claim and there will be an order to evict the plaintiff and other occupants of the property within one month, rather than 14 days of this Order.
Conclusion
28. For the foregoing reasons, I am not satisfied that the plaintiff has proved fraud and dismiss the proceedings with costs to be paid by the plaintiff, to be taxed, if not agreed. On the other hand, I uphold first defendant/cross-claimant’s cross-claim in part and grant an order to evict the plaintiff and other occupants of the property within one month of this Order. The order sought for general damages for trespass and mesne profit is dismissed.
Order
29. The Court orders that:
1. The within proceedings is dismissed.
________________________________________________________________
Lawyers for plaintiff/cross-defendant: Rex Kasito Lawyers
Lawyer for first defendant/cross-claimant: Public Solicitor
Lawyers for third defendant: Tangua Lawyers
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