Investment Corporation of Papua New Guinea (Cross–Claimant) v Jimmy Maladina, Bernard Avery, David Lightfoot, John Beattie and Kelly Naru Trading as Carter Newell Lawyers (First Cross–Defendants) and Nusaum Holdings Limited (Second Cross–Defendants) (2004) N2603

• Jurisdiction: Papua New Guinea
• Judge: Gavara–Nanu J
• Judgment Date: 03 September 2004
• Court: National Court
• Citation: (2004) N2603
• Docket Number: The Papua Club Inc v Nusaum Holdings Limited, Investment Corporation of Papua New Guinea, The Registrar of Titles, The Independent State of Papua New Guinea and The Minister for Lands
• Year: 2004
• Judgement Number: N2603

Full Title: The Papua Club Inc v Nusaum Holdings Limited, Investment Corporation of Papua New Guinea, The Registrar of Titles, The Independent State of Papua New Guinea and The Minister for Lands; Investment Corporation of Papua New Guinea (Cross–Claimant) v Jimmy Maladina, Bernard Avery, David Lightfoot, John Beattie and Kelly Naru Trading as Carter Newell Lawyers (First Cross–Defendants) and Nusaum Holdings Limited (Second Cross–Defendants) (2004) N2603

National Court: Gavara–Nanu J

Judgment Delivered: 3 September 2004

N2603

PAPUA NEW GUINEA

In the National Court of Justice

BETWEEN:

THE PAPUA CLUB INC.

Plaintiff

AND:

NUSAUM HOLDINGS LIMITED

First Defendant

AND:

INVESTMENT CORPORATION OF

PAPUA NEW GUINEA

Second Defendant

AND:

THE REGISTRAR OF TITLES

Third Defendant

AND:

THE INDEPENDENT STATE OF

PAPUA NEW GUINEA

Fourth Defendant

AND:

THE MINISTER FOR LANDS

Fifth Defendant

AND:

INVESTMENT CORPORATION

OF PAPUA NEW GUINEA

Cross-Claimant

AND:

JIMMY MALADINA, BERNARD AVEY,

DAVID LIGHTFOOT, JOHN BEATTIE

& KELLY NARU trading as CARTER NEWELL LAWYERS

First Cross-Defendants

AND:

NUSAUM HOLDINGS LIMITED

Second Cross-Defendants

WAIGANI: GAVARA-NANU J.

2002: 12th, 13th 14th, 15th & 16th August

17th, 18th, 19th & 20th September

2004: 3rd September

STATE LEASES – Land Act, 1966, PARTS II AND X – ss.4, 57 (2), 59(9), 68, 69(1), 70, 71, 73, 74, 75, 76, 77, 78, 79 and 119 – Scheme of the Land Act for State Leases– Upon the expiration of a State Lease, the ownership of land reverts back to the State - A lessee or a sub-lessee of a State Lease has no perpetual rights and interests in leasehold land.

LANDLORD AND TENANT – Lease – Duration – Uncertainty – No lease is created when the term of the lease is uncertain – Requirements of a valid lease – Right of the landlord to determine a lease – A lease which fetters such right is against public policy and the scheme of the Land Act.

REAL PROPERTY – Land Registration Act, 1981, s.33 – Fraud – Registration of land – Registered proprietor’s title is indefeasible, unless such title is obtained through fraud or through serious or gross irregularities arising out of the breaches of the mandatory statutory procedures under the Land Act - In the latter cases, fraud is not the essential element to invalidate title – Fraud means actual fraud or fraud by the registered proprietor.

PRACTICE AND PROCEDURE – Pleadings – Fraud - fraud is a serious matter and therefore the plaintiff who alleges fraud must plead the particulars of fraud by setting out the facts upon which fraud is alleged – Fraud must be strictly proven.

LANDLORD AND TENANT – Lease – Merger - Unregistered Deed of Lease merging in the registered Sub-Lease – Deed being executory or preparatory agreement to the Sub-Lease – Deed being superseded by the Sub-Lease – Sub-Lease being the governing document - Doctrine of merger – Definition and the applicability of merger.

REAL PROPERTY – Sale of property – Allegations of unconscionable conducts against the vendor and the purchaser – No evidence of the plaintiff being at a disadvantage or at a special disadvantage – Parties dealing with each other on an equal footing – Conduct not unconscionable – Circumstances in which unconscionable conduct may arise.

LAWYERS – Lawyers’ Act, 1986 - Professional Conduct Rules, 1989, ss. 8, 9 and 10 – Ethics - Conflict of interest – ‘Chinese Wall’ arrangement – There is conflict of interest where a lawyer or a firm of lawyers acts for two clients who have conflicting and incompatible interests - Loyalty of the lawyers or the firm of lawyers being divided between the two clients – Breach of Professional Conduct Rules – Improper conduct resulting from technical breaches – No real prejudices being suffered by the clients – Clients acquiescing in the lawyers’ conduct - Such clients have no recourse to legal remedy against the lawyers or the firm.

The plaintiff owned the land described as Section 3, Allotment 4, Douglas Street, Granville, Port Moresby, through its trustees who held the Crown Lease (State Lease) over the land, which was contained in Volume 5 Folio 1027, for a term of 66 years commencing on 29th June, 1939, and expiring on 20th December, 2005. The land was held in trust for the plaintiff until 1975, when the plaintiff was incorporated under the Associations Incorporation Act, 1966. Upon the incorporation of the plaintiff, the title in the land became vested in the plaintiff.

In 1977, the plaintiff and the second defendant entered into negotiations for the plaintiff to transfer the land to the second defendant so that the second defendant could construct a high rise building on the land. In the negotiations, it was agreed that part of the building would, upon its completion, be leased back to the plaintiff for its exclusive use as its ‘new premises’ (‘the Club premises’).

On 5th July, 1978, the plaintiff and the second defendant signed a Deed of Lease (‘the Deed’) which provided the basis for the second defendant to construct the high rise building as was previously agreed to between them. One significant feature about the Deed was that the plaintiff would pay K1.00 per annum in rent to the second defendant for the Club premises thus reflecting the special and mutual arrangement between them. The Deed was not registered.

Then on 29th August, 1978, the plaintiff and the second defendant signed a Sub-Lease for the plaintiff to lease the Club premises. The Sub-Lease was registered on 5th October, 1978.

The unregistered Deed and the registered Sub-Lease each provided for the term of the lease for the Club premises.

The part of the Deed which provided for the term of the lease for the Club premises is Clause 2 (ii) which is in these terms:

2. Investcorp covenants and agrees that:-

(ii) It will lease to the Club at a nominal rental of One Kina (K1.00) per annum the new premises for the term of the unexpired portion of the Crown Lease over the property and for such period of any extension renewal or substitution therefore of such Lease, provided that it shall be a condition of such Lease that the New Premises are to be used solely for the operation of the Papua Club and for no other purpose.

The part of the Sub-Lease which provided for the term of the lease for the Club premises is the Second Schedule which is in these terms:

SECOND SCHEDULE

For the unexpired term of the Crown Lease over the subject property being Crown Lease Volume 5 Folio 1027 less one day together with any additional period of any extension thereof or for any period of any alternating or substituted Lease or License over the subject property in favour of the Investment Corporation of Papua New Guinea or any nominee thereof over the said property.

On 29th May, 1984, the second defendant and the plaintiff signed another Sub-Lease for the area on the nineth floor of the building, which was occupied by the Pacific Architects Consortium (‘the architects’ area’). The Pacific Architects Consortium appears to have been the sub-tenant to the plaintiff under an arrangement between them.

In 1997, Fiocco Posman and Kua Lawyers (‘FPK Lawyers’) who were acting for the second defendant drafted a substituted Sub-Lease for the architects’ area on behalf of the second defendant and forwarded it to the Secretary for the plaintiff with a covering letter dated 26th November, 1997. The substituted Sub-Lease was the amendment to the original Sub-Lease that was signed on 29th May, 1984. Blakes Dawson Waldron Lawyers (‘Blakes’) were acting for the plaintiff in respect of that Sub-Lease.

In the original Sub-Lease for the architects’ area, the Fourth Schedule...