CIA No. 7 of 2019; H.R. Holdings Limited v Dannie Iki Taka and Alex Tongayu as former Registrar of Companies and Investment Promotion Authority (2019) N8004

• Jurisdiction: Papua New Guinea
• Judge: Thompson J
• Judgment Date: 18 September 2019
• Court: National Court
• Citation: (2019) N8004
• Year: 2019
• Judgement Number: N8004

Full Title: CIA No. 7 of 2019; H.R. Holdings Limited v Dannie Iki Taka and Alex Tongayu as former Registrar of Companies and Investment Promotion Authority (2019) N8004

National Court: Thompson J

Judgment Delivered: 18 September 2019

N8004

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

CIA No. 7 of 2019

BETWEEN:

H.R. HOLDINGS LIMITED

Appellant

AND:

DANNIE IKI TAKA

First Respondent

AND:

ALEX TONGAYU

As Former Registrar of Companies

Second Respondent

AND:

INVESTMENT PROMOTION

AUTHORITY

Third Respondent

Waigani: Thompson J

2019: 4th & 18th September

APPEAL - Appeal under S408 of Companies Act - unregistered transfer of land - whether land vested in Registrar under S373 of Act on company’s deregistration - breaches of statutory requirements by Registrar of Companies for transfer of land - whether procedural breaches sufficient to amount to fraud - fraud must be of registered proprietor or actual fraud.

Counsel:

Mr L. Yandaken, for Appellant

Mr K. Makeu, for the First Respondent

18th September, 2019

1. THOMPSON J: BACKGROUND: The Appellant and its shareholder and director were shareholders in Olympic Stationery Ltd (“Olympic”), a company which was incorporated in 1972. Olympic became the registered proprietor of a property on State Lease Vol 82, Fol 50, Lot 1, S312 Gerehu (“the property”) in 1986, and held the Owners Copy of the State Lease.

2. On 6 August 1997 Olympic signed a contract of sale of the property to the Appellant, which was duly stamped in 1997.

3. In or about 2009, the Appellant underwent a corporate re-structure, involving the transfer of assets from what were said to be the subsidiary companies to the Appellant, and then winding up the subsidiary companies. A Transfer of the property from Olympic to the Appellant was signed on 3 June 2009, was duly stamped in 2009, was duly approved by the Minister on 27 October 2009, and was said to have been lodged with the Department of Lands for registration.

4. The Transfer did not become registered on the Title. The Owners Copy of Olympic’s State Lease was given to the Appellant, who continued to hold it, overlooking the fact that the Transfer had not been registered on it.

5. As Olympic had been wound down and ceased operations, it was removed from the Company Register on 13 May 2011.

6. Throughout this time, the Appellant proceeded on the basis that it was the registered proprietor of the property. The Appellant paid annual land rentals for the property, and the latest Lands Department receipt for the annual land rental for the property was issued to the Appellant in 2016.

Evidence

7. The Appellant said that in about August 2016, it advertised the property for sale for K300,000.00. The 1st Respondent said that after contacting the Real Estate agent, and after confirming bank finance for K370,000.00 following an earlier attempt to buy another property, he was informed that Olympic had agreed to the sale. The Appellant’s former lawyer prepared a Contract of Sale and Transfer, which the 1st Respondent said showed the vendor as Olympic, while the Appellant said that it showed the vendor as the Appellant. Neither party produced a copy of this contract, which was signed by the 1st Respondent in or about August 2016.

8. It was at this time that the Appellant realized that the Transfer of title from Olympic to the Appellant had not been registered, Olympic was still shown as the registered proprietor, and Olympic had been removed from the Register, giving rise to a prima facie presumption that the property had vested in the Registrar of Companies (“ROC”).

9. The Appellant’s former lawyer prepared another contract of sale, showing the vendor as Olympic by its representative the ROC, which the 1st Respondent signed.

10. The Appellant’s former lawyer contacted the ROC in or about 12 September 2016, provided him with the contract which had been signed by the 1st Respondent, and requested the ROC to sign the contract and transfer on behalf of Olympic. There is no evidence of what information or other documentation was provided by the Appellant’s former lawyer to the ROC. In particular, there is no evidence that the ROC was told of the Appellant’s claim that the property had already been sold pursuant to the 1997 contract and 2009 Transfer, and that as the Transfer had not been registered, the property had been held by Olympic since 2009 on constructive trust for the Appellant.

11. On 20 September 2016, the 1st Respondent’s lawyers wrote to the ROC, informing him that the 1st Respondent had signed a contract with Olympic, had finance for K370,000.00, had found that the company was deregistered, and now wanted to purchase the property from the ROC. On 21 September 2016, the ROC acknowledged receipt and said that he would proceed by invoking his powers under the Act. The 1st Respondent replied on the same day, in agreement. On 23 September 2016, the ROC wrote, making an offer to sell the property for K250,000.00, plus a sum of K120,000.00 to be paid separately. On 26 September 2016, the 1st Respondent wrote, accepting the offer.

12. On 29 September 2016, the ROC signed a Memorandum of the Exercise of his Powers under S371-372 of Act to sell Olympic’s property to the 1st Respondent. The ROC then prepared a contract of sale to the 1st Respondent, which he signed on 29 September 2016 as Registrar on behalf of Olympic. The purchase price was K370,000.00, but there was a Special Condition that the property was only valued at K250,000.00, the purchaser had approved finance for K370,000.00, and the difference of K120,000.00 would be paid to the purchaser at settlement.

13. The 1st Respondent also signed a Transfer on 30 September 2016. The Transfer did not specify the consideration, which is an offence under S42 of the Land Registration Act (“LRA”). The Transfer was stamped, but there was no evidence of Ministerial approval, and no evidence that it was lodged for registration with the Registrar of Titles (“ROT”).

14. By an email of 6 October 2016, the ROC informed the Appellant’s former lawyer that the contract signed by the 1st Respondent with Olympic was not valid, that he had invoked his powers under S373 of the Act, and that the Appellant had “no jurisdiction” over the property.

15. By an email of 11 October 2019, the Appellant’s former lawyer informed the ROC that the Appellant was a former shareholder of Olympic, had an interest in Olympic, and was the beneficiary of the defunct company’s property. He said that on 10 October 2016 they had lodged an application to reinstate the company to the Register, and so no further action on the sale should be taken. It seems that the Appellant’s former lawyer was referring to action on the sale contract he had earlier sent to the ROC, and he may not have been aware that the ROC had already executed another contract of sale with the 1st Respondent.

16. A Notice of Intention to Reinstate was duly lodged on 10 October 2016, a caveat was signed on 11 October 2016, and the lodgment fee was paid on 18 October 2016. The caveat was not entered on the title.

17. Although the ROC had signed the sale documents, he did not have the Certificate of Title. On 27 October 2016 he wrote to the ROT informing him that the Owners Copy of the Title was not available due to the company being defunct, and requested a replacement title be issued. On 30 November 2016 the ROT advertised his intention to issue a replacement Title for the property, in a newspaper. On 6 December 2016 the issue of the replacement title was notified in the Government Gazette. On 21 December 2016 the replacement title was registered on the Certificate of Title, and the transfer of the Title to the 1st Respondent was registered on the same day. The Certificate of Title did not record that the title had been transmitted from Olympic to the ROC, prior to its transfer to the 1st Respondent.

18. Settlement appears to have taken place on 22 December 2016, when various Bank Cheques were distributed. After various payments, the remaining balance of K201,406.80 was paid into the ROC’s Trust Account, pursuant to S373 (10) of the Companies Act (“the Act”).

19. There is no evidence of what happened between December 2016 and December 2018.

20. On 19 December 2018 the Appellant obtained leave of the court to proceed with an appeal under S408 of the Companies Act. On 15 January 2019 the Appellant issued these proceedings, appealing against the 2nd Respondents decision of 29 September 2016 to sell the property to the 1st Respondent.

Issues

21. The Grounds of the appeal are:

(a) Because Olympic had transferred the property to the Appellant two years prior to Olympic’s deregistration, it was not property which immediately before its deregistration was not distributed by the company, within the meaning of S373 of the Act.

(b) As the Transfer had been validly effected by a Contract of Sale and Transfer, the Appellant was entitled to have had the Transfer registered on the title in 2009, the Appellant had an unregistered interest, and until the Title was registered, Olympic held the property on constructive trust for the Appellant.

(c) As...