PNG Institute of International Affairs Inc v High Tech Industries Ltd

• Jurisdiction: Papua New Guinea
• Judge: Injia CJ; Sawong & Kariko JJ
• Judgment Date: 31 October 2014
• Citation: (2014) SC1577
• Court: Supreme Court
• Year: 2014
• Judgement Number: SC1577

Full : SCA Nos 5 & 8 of 2012; Papua New Guinea Institute of International Affairs Inc and Ivan Pomaleu – Acting Registrar of Companies v High Tech Industries Limited (2014) SC1577

Supreme Court: Injia CJ; Sawong & Kariko JJ

Judgment Delivered: 31 October 2014

SC1577

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCA Nos. 5 & 8 OF 2012

BETWEEN

PAPUA NEW GUINEA INSTITUTE OF INTERNATIONAL AFFAIRS INC

First appellant

AND

IVAN POMALEU – ACTING REGISTRAR OF COMPANIES

Second appellant

AND

HIGH TECH INDUSTRIES LIMITED

Respondent

Waigani: Injia CJ; Sawong & Kariko JJ

2013: 18 February

2014: 31st October

COMPANY LAW– Decision of the Registrar - Real property owned by de-registered company vested in Registrar – Property subject of a Sub lease agreement between deregistered company and another company (Sub lessee) - Whether property held under express or constructive trust by deregistered Company for the benefit of the Sub lessee – Property sold by Registrar to another company for K1.00 - Whether registered tile should be set aside for constructive fraud – Registered State Lease set aside and title transferred to Sub Lessee by Court order – Whether order is valid – Companies Act ,ss 373, 374 & 408

Facts:

Long reach Clothing Company Ltd (LRCC) as the registered leaseholder of State leasehold land (the property) entered into a Sub lease agreement with the respondent (HTIL) for the occupation and use of the property. The term of the lease covered the balance of the term of the head lease (less one day), for a rent at K1.00 per year. Subsequently, the State Lease was surrendered for subdivision purposes and a separate registered lease issued over a portion of the land to LRCC. The existing Sublease was “transposed” on the new State Lease. Thereafter, LRCC was deregistered by the second appellant (Registrar of Companies/ROC). By virtue of s 373 (1) of the Companies Act, all properties of LRCC were vested in the ROC. By virtue of s 373(2) & (4) of the Companies Act, the ROC was entitled to deal with those properties except “property held on trust” by LRCC for the benefit of another person. The ROC sold the property to the first appellant (PNGIA) for K1.00. Although no valuation on the property was done, there was evidence that the property (inclusive of improvements) was worth several millions of Kina. HTIL brought an action in the National Court challenging the validity of the sale and sought orders setting aside the sale and orders transferring the property to HTIL. The primary judge found that the property was the subject of an existing constructive trust, set aside the registered State lease on the basis of constructive fraud and ordered the ROC to transfer the property to HTIL. PNGIIA and ROC appealed the decision.

Held:

(1) Upon the deregistration of LRCC, the property situated on Allotment 1 Section 54 contained in registered State Lease Volume 13 Folio 56 (formerly Allotment 4-9, Section 54 HOHOLA, State Lease Volume 19 Folio 4524) owned by LRCC was vested in the ROC by virtue of s 373 (1) of the Companies Act. The primary judge did not err in reaching this conclusion..

(2) “Property held on trust” in s 373(2) and (4) of the Companies Act means all types of property held under any trust arrangements and includes State leasehold land held under an express trust or constructive trust. The primary judge did not err in reaching the same conclusion.

(3) The leasehold property situated on Allotment 1 Section 54 HOHOLA contained in registered State Lease Volume 13 Folio 56 owned by LRCC, was capable of being held on constructive trust. The primary judge did not err in making this finding.

(4) The primary judge erred in finding that the property was in fact held on constructive trust.

(5) The primary judge erred in finding that the Sub lease agreement between LRCC and HTIL over the Crown Lease and transposed on the new State Lease was valid.

(6) The primary judge did not err in finding that the transfer of the property to PNGIIA by the ROC and the registration of the transfer by the Registrar of Titles (ROT) was vitiated by constructive fraud.

(7) The primary judge did not err in finding that the Court had wide discretionary jurisdiction given by s 408 of the Companies Act to make the orders he made the subject of the appeal.

(8) The primary judge did not err in the exercise of his discretion to set aside the ROC’s decision to transfer of title over the property to PNGIIA and the registration of the transfer by the ROT.

(9) The primary judge erred in ordering the transfer of the property to HTIL..

(10) This Court orders as follows:

(a) The appeal is dismissed in respect of that part of the decision of the primary judge to quash the decision of the ROC to sell the property to PNGIIA and to set aside the PGIIA’s registered title.

(b) The appeal is upheld and the decision quashed in respect of that part of the decision of the primary judge to find that the property was held on the constructive trust by LRCC for the benefit of HTIL.

(c) The appeal is upheld and decision quashed in respect of that part of the decision of the primary judge to order the transfer of the property to the HTIL.

(d) The matter is remitted to the National Court for a rehearing in accordance with this decision before another judge.

(e) Each party shall bear their own costs of the appeal.

Cases Cited:

PNG Cases Cited

Commissioner General of Internal Revenue v Bougainville Copper Limited (2008)

Dumal Dibiaso Incorporated Land Group v Kola Kuma (2005) SC805.

The Papua Club Inc v Nusaum Holdings Ltd (No.2) (2004) N2603

Overseas cases cited

Austin Nichols & Co. v Stitching Lodestar [2007] NZSC 103.

Davidson v Registrar of Companies [2010) NZHC 1497

Paragon Finance Plc v. D.B. Thakerar & Co (A Firm) [1998] EWCA Civ 1249

Text and Treatises cited

in Oxford Dictionary of Law , 2009, Oxford University Press, London, page 561,

Underhill’s Law of Trusts and Trustees (12th ed) R.T. Oerton, Butterworths, London, 1970, page 9-10.

Oxford Dictionary of Law , 2009, Oxford University Press, London, page 561.

Re Earnshaw-Wall [1894] 3 Ch 156;

Morrison v Hope, 4 D.G. & S. 234;

Stroud’s Judicial Dictionary of Words and Phrases, Seventh Edition Thompson, Sweet & Maxwell, London, 2006.

Legislations cited:

Constitution, Sch 2.1

Underlying Law Act.

Frauds and Limitations Act 1998

Companies Act.

Land Registration Act.

Counsel:

R Manrai , for the Appellant

A Kuria , for the Respondent

31 October, 2013

1. BY THE COURT: These two appeals arise from the decision of the primary judge (trial judge) sitting in the National Court given in proceedings CIA (COMM) No 189 of 2008 in which the Court allowed an appeal from a decision of the Registrar of Companies under s 408 of the Companies Act (the Act). In that decision the Registrar (ROC) sold a registered State Lease land owned by a de-registered company to another company pursuant to the powers vested in him by s 373 of the Companies Act. The primary judge quashed the decision and ordered that the property be transferred to the company with whom the de-registered company had a Sub lease agreement over the land prior to its de-registration.

2. In SCA No 5 of 2012, the first appellant appeals from the decision of the primary judge to uphold the appeal and set aside the registered State Lease and order the ROC to transfer the property to the company that had the Sub lease. In SCA No 8 of 2014, the ROC appeal the same decision and also an interlocutory ruling that dismissed an application to dismiss the appeal.

3. Sections 272, 373 and 374 deals with the property of deregistered companies. Section 373 (1), (2), (3), (4) and (5) is relevant to the issues raised in these appeals and it is in the following terms:

“373. Registrar as representative of defunct company.

(1) Property of a company that, immediately before the removal of a company from the register, had not been distributed or disclaimed, vests in the Registrar with effect from the removal of the company from the register.

(2) For the purposes of this Act, property of a company includes leasehold property and all other rights vested in or held on trust for the company, but does not include property held by the company on trust for any other person, or any money to which Section 364 applies.”

(3) Where property vested in the Registrar was held by the company on trust, the Registrar may—

(a) continue to act as trustee; or

(b) apply to the Court for the appointment of a new trustee.

(4) On proof to the satisfaction of the Registrar that there is vested in him by virtue of Subsection (1) any estate or interest in property, whether solely or together with any other person, of a beneficial nature and not merely held in trust, the Registrar may sell or otherwise dispose of, or deal with, the estate or interest or any part of it as he thinks fit.

(5) The Registrar may sell or otherwise dispose of, or deal with, property referred to in Subsection (1), either solely or in concurrence with any other person, by public auction, public tender or private contract and in such manner, for such...