Otto Benal Magiten v William Moses and Anton Anawon and Elizabeth Tovea and Rural Development Bank Limited (2006) N5008

• Jurisdiction: Papua New Guinea
• Judge: Cannings J
• Judgment Date: 20 October 2006
• Court: National Court
• Citation: (2006) N5008
• Docket Number: WS NO 938 OF 1999
• Year: 2006
• Judgement Number: N5008

Full Title: WS NO 938 OF 1999; Otto Benal Magiten v William Moses and Anton Anawon and Elizabeth Tovea and Rural Development Bank Limited (2006) N5008

National Court: Cannings J

Judgment Delivered: 20 October 2006

N5008

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS NO 938 OF 1999

OTTO BENAL MAGITEN

Plaintiff

V

WILLIAM MOSES

First Defendant

ANTON ANAWON

Second Defendant

ELIZABETH TOVEA

Third Defendant

RURAL DEVELOPMENT BANK LIMITED

Fourth Defendant

Kimbe: Cannings J

2005: 15 July, 22 August, 6 October;

2006: 20 October

LAND – agricultural lease – title to land – dispute as to title – role of bank – illegal occupation of land – fraudulent transfer of title – alleged facilitation of illegal occupation and fraud by bank – liability of bank – banker-customer relationship.

LIMITATION PERIODS – identification of cause of action – identification of date cause of action accrues – whether cause of action in negligence accrues when tortious act committed or when damage is done.

The plaintiff was granted an agricultural lease over a block of land and a bank lent him money to develop it. He moved on to the block, developed it, started repaying the loan, then left the block temporarily in the hands of a caretaker, the first defendant, and stopped repaying the bank loan. The bank tendered the block in the absence of the plaintiff and, without his knowledge or consent, allocated it to the first defendant, who took over the loan. The bank held no registered mortgage over the block. Title to the block was later transferred to the first defendant, without the plaintiff’s knowledge or consent. The plaintiff claimed that the first defendant illegally occupied the block, all dealings regarding the block were done without his authority and the transfer was executed fraudulently. He brought proceedings against the caretaker, the caretaker’s brother, an officer of the Department of Lands and Physical Planning and the bank, claiming that they facilitated unlawful occupation of the block and collaborated in fraudulently transferring title to it. He sought a declaration that the transfer was null and void and claimed damages. The plaintiff secured default judgment against the caretaker and his brother and did not pursue the claim against the departmental officer. This was a trial conducted to determine whether the bank was liable for damages.

Held:

(1) The statement of claim was poorly pleaded, making it difficult to ascertain the cause of action relied on by the plaintiff. However, the plaintiff appeared to have a legitimate grievance against the bank and it was in the interests of justice to regard the cause of action as the tort of negligence.

(2) The bank owed a duty of care to the plaintiff by virtue of the banker-customer relationship and breached that duty by negligently purporting to exercise the powers of a mortgagee, when it held no mortgage over the land. Other elements of the tort of negligence were established and therefore a cause of action in negligence was established against the bank.

(3) The action was not time barred as a cause of action in negligence accrues when the damage is done, not when the negligent act of the wrongdoer is committed. This was a case of recurring damage over a long period.

(4) The plaintiff succeeded in establishing liability against the bank. The claim will proceed to trial for an assessment of damages.

Cases cited

The following case is cited in the judgment:

Kembo Tirima and Others v Angau Memorial Hospital Board and The State (2005) N2779

STATEMENT OF CLAIM

These were proceedings in which the former registered proprietor of a block of land sought to establish liability for damages against a bank.

Counsel

K S Latu, for the plaintiff

H Nii, for the fourth defendant

20th October, 2006

1. CANNINGS J: This is a case about alleged illegal occupation and fraudulent transfer of land, an oil palm block in West New Britain. The plaintiff was granted an agricultural lease over the block more than 25 years ago. He obtained a loan from the Rural Development Bank to develop it. Then the block was occupied by someone else and eventually the lease was transferred to that person. The plaintiff claimed that the occupation and/or transfer were unlawful and fraudulent, due to the actions of four parties:

· the first defendant – William Moses – the occupier and transferee;

· the second defendant – Anton Anawon – the first defendant’s brother;

· the third defendant – Elizabeth Tovea – an officer of the Department of Lands and Physical Planning;

· the fourth defendant – Rural Development Bank Ltd.

2. He seeks:

· a declaration that transfer of the lease to the first defendant is null and void;

· an order that the first and fourth defendants pay him for loss of oil palm earnings from the block; and

· damages against all defendants.

3. He obtained default judgment against the first and second defendants. He is not pursuing the claim against the third defendant. This is a trial to determine whether the fourth defendant, the bank, is liable.

THE FACTS

4. The story of this oil palm block – portion 1254, “Wilelo”, Milinch of Ulawan, Fourmil Talasea, an area of 6.54 hectares, located at Barema near Bialla, West New Britain – is long and complex. But most facts necessary for determination of liability of the bank, the fourth defendant, are not in dispute. The story begins on 23 October 1980 when the plaintiff, Otto Benal Magiten, an East Sepik man, was granted a 99-year State Lease over the block, under the Land Act, on condition that it be used for oil palm. He obtained a loan from the Rural Development Bank to develop it. He cleared the land, planted it with oil palm seedlings and lived with his family on the block. In January 1982 there was a problem back home so he decided to take himself and his family to Wewak. He appointed the first defendant, William Moses, his brother-in-law, as caretaker of the block. He notified the Bialla branch of the bank and OPIC at Barema of the arrangements, then went to Wewak in April 1982. After being in Wewak for a year the plaintiff received a letter of demand from the fourth defendant, requiring him to pay K3,095.38 regarding his loan, within 21 days. He replied that he had arranged for the loan to be repaid, the block was part of a national development project and the bank was in breach of its agreement with him by demanding payment on such short notice. The plaintiff and his family returned to Bialla on 13 April 1984, only to find that due to his failure to service the loan the bank had put his block to tender and allocated it to the first defendant. He was not given prior notice of those things. The fourth defendant told him it had exercised its powers as mortgagee. That was not correct as, in fact, the fourth defendant had no mortgage over the block. Having nowhere to stay in Bialla, the plaintiff took his family to Kimbe, then back to Wewak. According to his evidence, given both by affidavit and orally, he assumed the bank had followed normal procedures and he had lost the block to his brother-in-law, the first defendant. He was not to find out until some years later that the fourth defendant had no mortgage on the block.

5. He stayed in Wewak until 1990 when he was, to his surprise, called into the Wewak branch of the bank and asked to sign a document to surrender the lease to the bank, who was acting on behalf of the first defendant. The plaintiff refused to sign. Then he set about getting the ‘owner’s copy’ of the lease from the Department of Lands and Physical Planning. Evidently, he did not have it before this. He obtained the ‘owner’s copy’ on 9 August 1991. By then he was living in Madang. The lease showed no transfer to the first defendant so he sought assistance from the Madang branch of the bank, who contacted the Bialla branch on his behalf to try and sort out the matter. 6. Bialla did not respond, however. He tried without success to get the Department of Lands and Physical Planning to intervene. In August 1998 he tried a different tack. He enlisted the support of the District Administrator at Kimbe who served a notice-to-quit on the first defendant. That did not work, as the first defendant refused to leave the block, maintaining that he was the rightful tenant appointed by the fourth defendant. The plaintiff then commenced proceedings against the first defendant in the Bialla District Court under the Summary Ejectment Act. On 16 June 1999 an eviction order was made. The plaintiff has given uncontested evidence that the bank’s Bialla branch assistant manager was the first defendant’s key witness in those proceedings. The District Court order gave the first defendant two weeks to leave. However, he did not leave and it seems he is still living on and working the block. There was a dramatic turn of events shortly afterwards when, on 12 August 1999, the lease was transferred to the first defendant. The plaintiff says he did not authorise the transfer and had no prior knowledge of it. It was a false or fraudulent transfer effected by the actions of the first, second and third defendants, and facilitated by officers of the bank’s...