The National Council of Young Men’s Christian Association of PNG (Inc) v Firms Services Ltd

• Jurisdiction: Papua New Guinea
• Judge: Gavara-Nanu, Kariko & Collier JJ
• Judgment Date: 13 June 2017
• Citation: (2017) SC1596
• Court: Supreme Court
• Year: 2017
• Judgement Number: SC1596

Full : SCA No 156 of 2014; The National Council of Young Men’s Christian Association of Papua New Guinea (Inc) v Firms Services Ltd and Florence Tomangana, Dotti Kero, Francis Tomangana and the National Council of Young Men’s Christian Association of Papua New Guinea (Inc) Cross-Appellants v Firms Services Ltd Cross-Respondent (2017) SC159

Supreme Court: Gavara-Nanu, Kariko & Collier JJ

Judgment Delivered: 13 June 2017

SC1596

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 156 of 2014

THE NATIONAL COUNCIL OF YOUNG MENS CHRISTIAN ASSOCIATION OF PAPUA NEW GUINEA (INC)

Appellant

v

FIRMS SERVICES LTD

Respondent

FLORENCE TOMANGANA

First cross-appellant

AND

DOTTI KERO

Second cross-appellant

AND

FRANCIS TOMANGANA

Third cross-appellant

AND

THE NATIONAL COUNCIL OF YOUNG MENS CHRISTIAN ASSOCIATION OF PAPUA NEW GUINEA (INC)

Fourth cross-appellant

v

FIRMS SERVICES LTD

Cross-respondent

Waigani: Gavara-Nanu, Kariko & Collier JJ

2017: 25 April & 13th June

PRACTICE & PROCEDURE – discontinuance of proceedings against a party – striking out paragraphs in statement of claim – paragraphs not irrelevant to cause of action against remaining defendant – error in striking out paragraphs – appeal allowed

PRACTICE & PROCEDURE – pleading fraud – acts alleged to be fraudulent must be stated fully and precisely with full particulars

LAND LAW – meaning of section 33 (1)(a) of Land Registration Act – constructive fraud – not necessary to prove actual fraud

Cases cited:

Papua New Guinea Cases

Emas Estate v. Mea [1993] PNGLR 219

Koitachi Ltd v. Walter Schnaubelt (2007) SC870

Kittika v Kavana (2010) N4051

Leahy v Otri (2009) N3860

Mudge v. Secretary for Lands [1985] PNGLR 387

Papua Club Inc v Nasaum Holdings Ltd (2004) N2603

Rainbow Holdings Pty Ltd v Central Province Forest Industries Pty Ltd (Provisional Liquidator Appointed) [1983] PNGLR 34

Tikili v Home Base Real Estate Ltd (2017) SC1563

William Maki -v- Michael Pundia and PNG Motors [1993] PNGLR 337

Overseas cases cited

Assets Company Ltd .v. Mere Roihi and Others [1905] AC 176

Bank of New Zealand Limited v Fiberi Pty Ltd (1994) 12 ACLC 48

Browne v Dunn (1893) 6 ER 67 (HL)

Butler v. Fairclough and Another (1917) 23 CLR 78

Conlan and Others v. Registrar of Titles and Others (2001) 24 WAR 299

Legislation

Order 2 rule 29 National Court Rules

Order 8 rule 30 National Court Rules

Section 33 (1)(a) Land Registration Act

Counsel:

Mr S Tedor, for the Appellants & Cross-Appellants

Mr L Manua, for the Respondent & Cross-Respondent

13th June, 2017

1. GAVARA-NANU J: I have had the benefit of reading the judgment of Kariko and Collier JJ in its draft form and I respectfully concur with their conclusions and the final orders they proposed. The background facts of the case before the primary judge and the findings of the primary judge have been succinctly discussed by my two colleague judges and I have nothing further to add. I only wish to make some observations regarding the meaning of the term “fraud” in s. 33 (1) (a) of the Land Registration Act, Chapter No. 191 (‘LRA’ hereon).

2. I consider it incumbent on me to make these observations given that there are two competing views on the meaning of fraud both by the National Court and this Court. One has been regarded as the narrow view based on the decisions in Papua Club Inc. v. Nusaum Holdings Limited (2004) N2603 and Koitachi Ltd v. Walter Schnaubelt (2007) SC870. These cases said fraud in s. 33 (1) (a) of the LRA means actual fraud or fraud committed by the registered proprietor. The other has been regarded as the wider view based on the majority decision in Emas Estate v. Mea [1993] PNGLR 219, that fraud in s. 33 (1) (a) of the LRA also means equitable or constructive fraud.

3. It is important to appreciate that LRA reflects what is commonly known as the Torrens system of land registration. The Act is modelled on Australian Acts. Relevantly, both New Zealand and England have similar legislations having similar provisions as s. 33 (1) (a) of the LRA providing fraud as an exception to the indefeasibility of title. Under the Torrens system a registered proprietor holds an indefeasible title upon registration. This is the essence of the Torrens system and it constitutes a firmly established principle of land registration which the courts in all the above named jurisdictions including this jurisdiction have consistently affirmed: Mudge v. Secretary for Lands [1985] PNGLR 387. The principle therefore forms part of the underlying law. The principle therefore reflects a settled law in this jurisdiction that a registered proprietor acquires indefeasible title upon registration.

4. This law is reflected clearly in the heading under which s. 33 appears in LRA, viz; “Protection of the registered proprietor”. Section 33 reads:

33. Protection of the registered proprietor

(1) The proprietor of an estate or interest holds it absolutely free from all encumbrances except -

(a) in the case of fraud; and

5. This section lists nine exceptions, including fraud under which a title of a registered proprietor may be avoided. The clear legislative intent in this provision and the scheme of the LRA is to protect the interests of the registered proprietor. A long line of decided cases in all the jurisdictions including Papua New Guinea have consistently reiterated and affirmed this principle.

6. In giving effect to the clear legislative intent, the courts in all jurisdictions have stated that, fraud in s. 33 (1) (a) of the LRA and similar legislations in other jurisdiction, if relied upon to avoid the title of a registered proprietor must be strictly proved and must attach to the personal conduct, actions and or knowledge of the registered proprietor and or his agents. In other words fraud must be committed personally either by the registered proprietor or his agents. This would constitute actual fraud. It follows that any fraud committed by the previous owner of the property or any other third party or person, cannot operate to vitiate or invalidate the registered proprietor’s title if the registered proprietor or his agents played no part in such fraud or had no knowledge of it: Assets Company Ltd .v. Mere Roihi and Others [1905] AC 176. Thus the courts in all jurisdictions have interpreted fraud under their respective legislations to mean actual fraud and not constructive or equitable fraud. I discussed the law quite in detail in Papua Club Inc. v. Nusaum Holdings Limited (supra) which this Court subsequently adopted with approval in Koitachi Ltdv Walter Schnaubelt (supra).

7. I remain unconvinced that fraud in s. 33 (1) (a) of LRA also means constructive or equitable fraud.

8. The issue of indefeasibility of the registered proprietor’s title that arose under the New Zealand legislation in Assets Company Ltd, was initially tried in New Zealand, it then went on appeal to the Privy Council. Lord Lindley in interpreting fraud said:

“….fraud in these Acts meant actual fraud, i.e., dishonesty of some sort, not what is called constructive or equitable fraud – an unfortunate expression and one very apt to mislead, but often used, for want of better term to denote transactions having consequences in equity similar to those which flow from fraud”. Further, it appears to their Lordships that the fraud which must be proved in order to invalidate the title of a registered purchaser for value, whether he buys from a prior registered owner or from a person claiming under a title certified under the Native Lands Acts, must be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shewn that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud maybe properly ascribed to him. A person who presents for registration a document which is forged or has been fraudulently or improperly obtained is not guilty of fraud if he honestly believes it to be a genuine document which can be properly acted upon” (my underlining).

9. In Conlan and Others v. Registrar of Titles and Others (2001) 24 WAR 299 at 328 Owen J, in discussing the indefeasibility of title under Torrens system said:

“The exception “in fraud cases” is limited to fraud by or on behalf of the party who obtains registration: see Breskvar (at 384). Put in a slightly different way, the fraud...