N11674

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

WS NO. 275 OF 2021

BETWEEN:
GEORGE IPI
Plaintiff

AND
MICHAEL’S PROPERTY LIMITED
First Defendant

AND
BENJAMIN SAMSON, SECRETARY, DEPARTMENT OF LANDS & PHYSICAL PLANNING
Second Defendant

AND
THE DEPARTMENT OF LANDS & PHYSICAL PLANNING
Third Defendant

AND
INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Defendant

AND
BSP FINANCIAL GROUP LIMITED
Fifth Defendant

AND
GREEN REAL ESTATE LIMITED
Sixth Defendant

LAE: DOWA J
5 JUNE 2024; 20 JANUARY 2026

LAND LAW – Indefeasibility of title -plaintiff seeks reinstatement of his Title (First State Lease) and cancellation of the new title (Second State Lease) registered in the name of the first Defendant and mortgaged to the fifth Defendant on grounds of constructive fraud-whether fraud under section 33 of the Land Registration Act extends to constructive fraud—whether orders sought are appropriate where subject property has been subsequently transferred to innocent third party-indefeasibility of title under Section 33 of the Land Registration Act—whether prior instrument of title exists to be passed onto Plaintiff where first  State Lease forfeited

Held: 

Plaintiff acquired no proprietary interest in subject property after forfeiture and that third Party has acquired good title by registration. Proceedings dismissed. 

Cases cited

Mudge v Secretary for Lands (1985) PNGLR 387
Emas v Mea (1993) PNGLR 215
Pius Tikili v Home Base Real Estate Ltd (2017) SC1563
Jaro Investment Ltd v Ane (2022) SC2192 
Camilus v Mota (2022) SC2210
Timothy v Timothy (2022) SC 2282
Godowan Investment Ltd v Wambea (2018) N7263
Berr v Yango (2015) N5859
Papua Club Inc v Nusaum Ltd (2005) SC812 
Niugini Table Birds v Nasap (2000) N2018
Anego Company Ltd v Finance Corporation Ltd 2013) N5391

Counsel

S Japson for the plaintiff
B Poki for the first defendant
S Maliaki for the second & third defendants  
T Teine for the fifth defendant

JUDGMENT

1.	DOWA J.  The Plaintiff seeks reinstatement of his Title (First State Lease) and cancellation of the new title (Second State Lease) registered in the name of the first Defendant and mortgaged to the fifth Defendant over property described as Portion 222, Lae, Morobe Province on grounds of constructive fraud.

Background Facts

2.	The proceedings concern a property described as Portion 222, Lae, Morobe Province. There seems to be two State Leases over the same property.

3.	The Plaintiff alleges he is the registered owner of first State Lease Volume 34 Folio 183 issued in 1969. He purchased the property from the last owner, Niugini Produce Marketing Pty Ltd in September 2012. The Plaintiff alleges that the Department of Lands and Physical Planning wrongfully issued a second State Lease Volume 19 Folio 236 over the same land to Green Real Estate limited which eventually transferred the title to the first Defendant who mortgaged it to the fifth Defendant. The Plaintiff alleges that Green Real Estate was not an incorporated body and was not a legal entity when it was granted the State Lease.

4.	The Defendants deny the claim pleading that the Plaintiff’s State Lease Volume 34 Folio 183 registered in the name of Niugini Marketing Produce Pty Ltd at the material time was forfeited in August 2011. A new State Lease Volume 19 Folio 236 was issued in April 2012 in the name of Green Real Estate Limited, which was eventually transferred to Michaels Properties Limited. The property is currently mortgaged to BSP Financial Group Limited.

Evidence - Plaintiff 

5.	The parties by agreement rely on their respective Affidavits. The Plaintiff relies on the following Affidavits: 
 
a.	Affidavit of George Ipi filed 5th September 2023-Exhibit P1
b.	Affidavit of George Ipi filed 25th August 2022-Exhibit P2
			c. Affidavit of Andrew Kuno filed 2nd October 2023-Exhibit P3

6.	This is the summary of the Plaintiff’s evidence. Plaintiff deposed he bought the property from Niugini Produce Marketing Ltd, in September 2012. The Transfer was registered in his name on 6th September 2012. Some years later, around 2015, he was informed by late Michael Ekri, the then Managing Director of first Defendant, that the property was owned by the first Defendant.  Some years later, he was given notice to give up possession of the property by BSP Group in 2020. He learnt then that a second State Lease was issued to Green Real Estate Limited in 2012. He conducted a company search and found that Green Real Estate was incorporated in September 2012. It was not a legal entity when it was granted the State Lease in April 2012. He also learnt his State Lease was forfeited sometime in 2011. The forfeiture was not registered, and he was not informed of the forfeiture when he purchased the property.

First Defendant’s Evidence

7.	The first Defendant relies on the Affidavit of Noelyn Ekri filed 2nd June 2023-Exhibit 1D1.Ms Ekri is the Managing Director of the first Defendant. She deposed that the incorporated name for the first Defendant is Michaels Properties Ltd. The first Defendant as named in the proceedings does not exist. Michaels Properties Ltd is the registered proprietor of the property, Portion 222, Lae, under State Lease, Volume 19 Folio 236. The previous State Lease Volume 34 Folio183 registered in the name of Niugini Produce Marketing Limited was forfeited and published in the National Gazette on 17th August 2011. The result Niugini Produce Marketing Ltd didn’t have title to sell and transfer to the Plaintiff in 2012.  Also, Niugini Produce Marketing Ltd was deregistered in May 2011 and was in no position to sell or transfer the property to the Plaintiff. Following forfeiture, the PNG Land Board and Minister granted a new State Lease Volume 19 Folio 236 to Green Real Estate in October 2011. The lease was registered on 5th April 2012. On 28th November 2014, the property was sold by Green Real Estate Ltd to Michaels Properties Ltd. The Transfer of Title was registered on 28 January 2015. Michaels Properties mortgaged the property to Bank of South Pacific which was also registered on 29th January 2015. Michaels Properties obtained a clear title and is indefeasible except for the Mortgage to BSP. 

Second Defendant’s Evidence

8. The second Defendant relies on the Affidavit of Benjamin Samson filed 17th August 2023-Exhibit 2D1. Benjamin Samson is the Secretary for the Department of Lands and Physical Planning. He deposed that the first State Lease Volume 34 Folio 183 over Portion 222, Lae was granted to Tellmark Surveys Pty Ltd in 1969. The State Lease was forfeited in August 2011. The State Lease was registered in the name of Niugini Produce Marketing Pty Ltd when it was forfeited. Notice To Show Cause was issued on 20th May 2010 for failure to comply with the improvement covenants and for outstanding State Lease rentals. The State Lease was forfeited on 16th August 2011 and published in the National Gazette on 17th August 2011.

9.	After the forfeiture, the PNG Land Board Meeting No 3/2011 recommended grant of a new State Lease to Green Real Estate Limited. The State Lease Volume 19 Folio 236 was then granted and registered on 5th April 2012. The Title was then transferred to Michaels Properties Ltd. Samson deposed that the State Lease the Plaintiff claims to hold was long forfeited following due process and procedures under the Land Act and does not exist to be recognized. 

Fifth Defendant’s Evidence

10. The fifth Defendant relies on the Affidavit of Moah Sevua filed 31st May 2023-Exhibit 5D1. Moah Sevua is the Recovery Officer employed by the fifth Defendant. He deposed that the BSP Financial Group has a registered Mortgage over the property, Portion 222, Lae, State Lease Volume 19 Folio 236 under a Deed of Indemnity and Guarantee executed by Michaels Properties Ltd, the first Defendant in September 2014. The Mortgage was registered on 29th January 2015. The Borrower defaulted on the loan repayments. Bank commenced recovery proceedings against the first Defendant for vacant possession of the property. 

11.	In November 2019, BSP received a letter from IPA that Portion 222 is owned by Niugini Produce Marketing Ltd.  After further meetings with the first Defendant and advice from lawyers, it was established that the Sate Lease issued to Niugini Produce was forfeited and the forfeiture was published on 17th August 2011. A further search with IPA revealed that Niugini Produce Marketing Ltd was removed from the Register of registered companies in 2011. 

12.    It was also confirmed that the first Defendant was the registered owner of Portion 222. BSP proceeded to issue recovery proceedings in OS No 32 of 2020-Bank South Pacific Limited v Michael Ekri Ramsey Kwan and Michaels Properties Ltd. On 4th April 2022, the Court granted orders for the vacant possession of Portion 222. A Writ of Possession was issued thereafter. In September 2022, a buyer has been secured but the sale could not proceed because of a restraining order issued in these proceedings.

Issues

13. The issues for consideration are:

a.	Whether the first Defendant’s State Lease Volume 19 Folio 236 over property Portion 222, Lae, Morobe Province be set aside.

b. Whether the Plaintiff’s forfeited State Lease Volume 34 Folio 183 be reinstated.

Consideration  	

14. I will deal with the issues together as they are interrelated. But first the facts. The land, Portion 222, Lae was a subject of two State Leases. The first Volume 34 Folio 183 was granted to Tellmark Surveys Pty Ltd on 11th June 1969.After a series of transactions, the property was eventually transferred to Niugini Produce Marketing Pty Ltd on 20th March 1986. On 20th May 2010, the Department of Lands & Physical Planning issued a Notice to Show Cause under Section 122 of the Land Act to Niugini Produce Marketing why the Lease should not be forfeited. The reason for Notice to Show Cause was for failure to comply with the improvement covenants and for outstanding State Lease rental arrears.   A year later, on 16th August 2011, Niugini Produce ‘s State Lease was forfeited and published on the National Gazette on 17th August 2011.  

15. 	 After the forfeiture, the PNG Land Board Meeting No 3/2011 granted a new State Lease Volume 19 Folio 236 to Green Real Estate Limited in October 2011. The State Lease was registered on 5th April 2012. On 28th November 2014, Green Real Estate sold the property to Michaels Properties Limited. The Transfer of Title of the State Lease to Michaels Properties Limited was registered on 28th January 2015. The property was mortgaged to BSP Group as collateral under a Deed of Indemnity and Guarantee by Michaels Properties Ltd. The Mortgage was registered on 29th January 2015. Michaels Properties defaulted and the BSP Financial Group has now repossessed the property.

16.	Meanwhile, the Plaintiff has on 4th September 2012 entered into a sale agreement with Niugini Produce Marketing for the purchase of the property under the first State Lease. The Transfer of Title was registered on 6th September 2012. When confronted with the information on the forfeiture and the grant of the new State Lease, the Plaintiff responded that he was not advised about the forfeiture and the new Lease. Plaintiff has also disputed that the new State Lease was wrongly issued to Green Real Estate Limited, which was not a registered entity until after the grant. The Plaintiff seeks an order that the grant of the new Lease and subsequent transfer to the first Defendant be nullified and set aside on grounds of constructive fraud and that his title be restored.

17.	Although the first Defendant is named as the current registered owner of Portion 222, the evidence shows the correct name is Michaels Properties Limited. That is the name registered on the Title Deed. I find the first Defendant is the wrong party. Be that as it may, what is important to note is that Michaels Properties Limited is the registered owner. 

Indefeasibility of Title

18.	Does Michaels Properties Limited, as the current registered proprietor of Portion 222, have indefeasible title? Section 32 of the Land Registration Act provides that where an instrument of title describes a person as the proprietor of an estate or interest, that person is the registered proprietor of the estate or interest.  Section 33 of the Land Registration Act provides that a registered proprietor of an estate or interest holds it absolutely free from all encumbrances except for fraud and other exceptions set out in subsection (1)(a) to (f). 

19.	The Plaintiff challenges the title currently held by the First Defendant under Section 33 (1)(a) and (c) of the Land Registration Act.  Section 33 (1) (a) and (c) reads:

“33.	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; 
……..”

Fraud- Section 33 (1) (a)  

20.	It has been held in Mudge v Secretary for Lands (1985) PNGLR 387 that under Section 33 of the Land Registration Act a registered proprietor of an estate or interest holds it absolutely free from all encumbrances except for actual fraud by the title holder and other exceptions set out in (1)(a) to (f). 

21.	In Emas v Mea (1993) PNGLR 215 the Supreme Court extended fraud to include constructive fraud based on irregularities which was followed by other cases like Tikili v Home Base Real Estate Ltd (2017) SC 1563, Jaro Investment Ltd v Ane (2022) SC2192 and Camilus v Mota (2022) SC2210. The decision in Emas v Mea is however not widely followed by others who tend to apply Mudge v Secretary for Lands. More recently Emas v Mea has been overruled by Timothy v Timothy (2022) SC 2282 which stated in no uncertain terms that fraud in Section 33 of the Land Registration Act means actual fraud by the registered proprietor.

22.	Since fraud involves dishonesty, there must be some overt act on the part of the title holder before his title is set aside. Where he or she is an innocent bona fide purchaser, his interest should not be disturbed. That is the protection offered by Section 33 of the Land Registration Act in the Torrens Titles registration system.

23.	Turning to the present case, there is no allegation or evidence of dishonesty on the part of the first Defendant. Michaels Properties Limited is an innocent bona fide purchaser. The State Lease was issued to Green Real Estate Limited in April 2012. Michaels Properties Limited purchased the property from Green Real Estate in November 2014 and got the Transfer of Title registered in January 2015, a space of three years. There is nothing untoward happened in the conduct of the first Defendant to indicate any fraudulent dealing in the purchase of the property.

24.	The Plaintiff’s main contention is that Green Real Estate Limited was not a legal entity in April 2012, when it was granted the State Lease. The Plaintiff relies on a company extract he attached to his Affidavit, Exhibit P1. The extract shows Green Real Estate Ltd.’s date of incorporation was 26th September 2012. There is no other corroborative evidence. In my view an extract from the IPA Website is a relevant piece of evidence but corroboration is required to prove such an important allegation. Evidence can come from the Registrar of Companies, or through pleadings, discoveries and interrogatories or direct evidence from production of Certificates of Incorporation.

25. 	Green Real Estate was joined as a party later in the proceedings. It was not served the documents until 16th November 2023 when the documents were sent by post, just six days before trial. There is no evidence that Green Real Estate served notice of trial when the matter was rescheduled for trial on 18th March 2024, and eventually on 5th June 2024. The result Green Real Estate Ltd did not participate in the proceedings. I am not convinced that the Green Real Estate has been sufficiently informed of the proceedings and the allegations made against it.

26.	The decision to grant the State Lease to Green Real Estate Limited, regardless of its status, was made by PNG Land Board in its meeting No 3/2011 which made a recommendation, followed by the Minister’s decision granting the Lease on 5th April 2012. Those parties were not specifically named. Ideally those are matters a party would take up in a judicial review application under Order 16 of the National Court Rules. The proceedings having been commenced by Originating Summons under Order 4 Rule 3 of the National Court Rules involving multiple decisions, actions and legal and factual issues is not appropriate.

27.	Be that as it may, what is clear though is that Green Real Estate Limited	had legal capacity when it sold and transferred the property to Michaels Properties Limited in November 2014. 

28.	I find Michaels Properties Limited obtained good title and its title is indefeasible.

29.	There is another matter. BSP Financial Group, the fifth Defendant, has a registered mortgage over the property as security for loan advanced to the first Defendant. It is an interest recognised by law under various Statutes like Personal Property and Security Act, the Instrument Act, the Land Act and the Land Registration Act. Part VII of the Land Registration Act provides for registration of Security Documents like Mortgages and the protection and enforcement of secured interests. BSP is an innocent bona fide financier who has a secured interest in the subject property which shall be given due recognition for protection, integrity and confidence in our business financing laws and the security registration processes and systems. 

Prior Instrument of Title-Section 33 (1) (c)

30.	The next issue for consideration concerns prior instrument of title. Section 33 (1) (c) of the Land Registration Act provides an exception to indefeasibility of title on grounds of prior instrument of title. The Plaintiff alleges he has a prior instrument of title in State Lease Volume 34 Folio 183 that has been transferred to him in September 2012 and it must be recognised and validated. 

31.	There is overwhelming evidence that the first State Lease, Volume 34 Folio 183, held by Niugini Produce Marketing Pty Ltd was forfeited in August 2011. The Department of Lands and Physical Planning followed due process under Section 122 of the Land Act in forfeiting the Lease. I note the Plaintiff is not challenging the process but says he was not aware of that. There was no obligation on the Department of Lands & Physical Planning to advise him of the forfeiture because he was not the title holder at the time of forfeiture. Although he deposed, he conducted a search at the Lands Department before he bought the land, the evidence shows he was approached by one Andrew Kuno, the caretaker to buy the property. The evidence shows there was no official copy of the State Lease available at the time of transaction. The contract was signed on 4th September 2012, and a copy of the lost title was issued on 6th September 2012, the same day when the Transfer was registered in the Plaintiff’s name. This transaction was done very fast.

32. 	Despite the swift transaction, the Plaintiff did not acquire any title, let alone a good title. Niugini Produce Marketing Pty Ltd did not have a title to transfer to the Plaintiff when it executed the Transfer Instrument in September 2012, because by that time the interest held by Niugini Produce was extinguished by forfeiture a year earlier and did not exist. Niugini Produce could not pass on a title or interest in the subject land it did not have and thus no title passed on to the Plaintiff.

33.	I note the Defendants’ contention that Niugini Produce Marketing Pty Ltd was removed from the register of registered companies on 13th May 2011 and thus it did not have legal capacity to contract and execute the transfer instrument rendering the transaction void. Again, while the extract relied on by the fifth Defendant is relevant, it requires further corroboration and I will not give much weight without further evidence especially where Niugini Produce is not a party to the proceedings.

34.	Furthermore, a year before the first State Lease was transferred and registered in the name of the Plaintiff, a new State Lease was issued and registered in the name of the sixth Defendant. The interests in the old State Lease have long been extinguished by the forfeiture and replaced by that time. The result the Plaintiff did not have a prior instrument of title to be protected by the exception in Section 33 (1) (c) of the Act.

Burden of Proof

35.	The onus of challenging the validity of title rests with the Plaintiff.  In Godowan Investment Ltd v Wambea (2018) N7263, Cannings J said this at paragraph 9 of his judgment.

“9.	The fact that the leases were granted to and registered in the name of the plaintiff gives rise to the presumption that it has good and indefeasible title subject only to the exceptions prescribed by Section 33(1) of the Land Registration Act (Mudge v Secretary for Lands [1985] PNGLR 387). The onus of proving a case of fraud or that any of the other exceptions in Section 33(1) applies rests with the person who challenges the title of the registered proprietor (Niugini Properties Ltd v Londari (2014) N5727).“

36.	There is no evidence of any wrongdoing on the part of the first Defendant when it purchased the property from Green Real Estate Ltd. The first Defendant is therefore an innocent third party, a bona fide purchaser, who bought the subject property for value. By registration of the transfer, Michaels Properties Limited is now the owner of the property and has indefeasible title under Sections 32 and 33 of the Land Registration Act. The Plaintiff failed to prove that the subsequent transfer of title from the sixth Defendant to the first Defendant was done fraudulently. 

37.	Even if the initial title granted to Green Real Estate Limited was affected by any fraud or illegality, which I have found none, Michaels Properties Limited remains innocent, and its interest should not be affected. The law is settled. The Court must exercise caution and judicial discretion in setting aside an innocent party’s interest. Refer: Berr v Yango (2015) N5859, Papua Club Inc v Nusaum Ltd (2005) SC812, Niugini Table Birds v Nasap (2000) N2018, Anego Company Ltd v Finance Corporation Ltd 2013) N5391.

38.	The case Berr v Yango (Supra) is like the present case. Canning J said at paragraph 15 of his judgement:

“15. …when the Court is asked to consider making a finding of constructive fraud and consider setting aside the registration of title, it must exercise a discretion and it must exercise the discretion judicially, not arbitrarily, and take into account principles of equity and fairness.   “

39.	In the present case, I find no evidence of fraud, be it actual or constructive on the part of the Defendants to set aside the title currently registered in the name of the first Defendant, or Michaels Properties Limited to be precise. 

Conclusion

40.	 For the reasons set out in my judgment, I am not satisfied that the Plaintiff is entitled to the reliefs sought in the Originating Summons. I am not convinced that the State Lease Volume 19 Folio 236 issued on 5th April 2012 to the sixth Defendant and subsequently transferred to the first Defendant on 28th January 2015 is void and invalid. I am not convinced that the Title under State Lease Volume 34 Folio 183 registered in the name of the Plaintiff on 6th September 2012 is valid and genuine. 

41.	On the contrary, I find the first State Lease Volume 34 Folio 183, was forfeited in August 2011 and no propriety interest passed onto the Plaintiff in September 2012. I also find the first Defendant acquired good title as bona fide purchaser from the sixth Defendant and has indefeasible title by registration under Section 33 of the Land Registration Act. I also find the Mortgage registered in favour of BSP, the fifth Defendant, is valid and enforceable by virtue of Part VII of the Land Registration Act.

42.	For the reasons given, I will dismiss the Plaintiff’s proceeding with costs.
  
ORDERS

43.    The Court orders that:

1.	The Plaintiff’s proceeding is dismissed. 
2.	The Plaintiff shall pay the Defendants’ costs, which shall be taxed, if not agreed.	
3.	Time is abridged.

Lawyers for the plaintiff: Japson & Associates Lawyers	
Lawyers for the first defendant: Warner Shane Lawyers	
Lawyer for the 2nd, 3rd & 4th defendants: Solicitor General 
Lawyer for the fifth defendant: BSP In-house Counsel