An Inquiry Into The Gerehu Recreational Land Grab

The cover story

On its face, the whole matter seems simple.

A residential property developer spied vacant land in Gerehu,  an area where everyone acknowledges there is a high demand for more housing.

The land was then acquired in a complex process that was laid out before the courts in 2017 when Konda’lane Properties took legal action against the National Capital District over a particular block of land known as Lot 1 Section 416 in Hohola.

The land had originally been zoned Open Space for Recreational Purposes, which meant it could not be developed.

In 2012, Konda’lane applied to have the land re-zoned and subdivided for a residential development of houses and apartments. The application was rejected but Konda’lane appealed the decision.

In June 2013, the appeal was upheld by the Minister and the land was subsequently re-zoned and subdivided.

In October 2013, one of the three subdivided lots (Lot 23 Section 416) was advertised for lease, subject to the condition that housing be built on the land within five years.

Konda’lane applied for, and was subsequently granted a lease. The lease was issued on 17 August 2015.

In October 2015, Konda’lane applied for planning permission to erect a fence around the land. The application was refused, apparently on the basis that the application would involve re-zoning the land from open space to residential.

When Konda’lane’s appeal against the refusal of planning permission was rejected, it issued court proceedings seeking to review and quash the decision.

Konda’lane claimed it was unable to build on the land as it had been refused permission to fence the boundary.

The NCD opposed the legal action. It claimed the decision of the Minister to uphold the appeal, against the NCD’s original decision to refuse Kond’lane’s re-zoning application was wrong and in breach of various laws, regulations and policies.

The court refused to entertain this defence, saying it was too late for the NCD to now raise this matters and the court had no power to review the Minister’s decision. If the NCD had felt aggrieved by the Minister’s decision, the court argued, it should have appealed or reviewed it at the time.

The court found the NCD had no power to deliberate on or refuse the fencing application as under the Physical Planning Act, the erection of a fence is activity for which permission is deemed to be automatically granted.

The court, therefore, quashed the decisions to refuse planning permission for the erection of the fence and ordered the planning permission be granted.

This though was not the end of the courts deliberations. Konda’lane also wanted a declaration from the court that the land had been validly rezoned and that it was the registered proprietor of the State lease.

Konda’lane was also claiming a substantial payment of almost K10 million in damages for lost income and lost use.

It was at this point that the court started to question some of the evidence presented by the plaintiff and the bona fides of it’s claims.

Dirty hands

It is a well established  legal principle that when a claimant wants the court to exercise its discretion to make a decision in its favour, the claimant must come to the court with ‘clean hands’.

After deliberating on the evidence presented by Konda’lane Properties, the court concluded its hands were rather dirty.

First, Konda’lane tried to convince the court that its State Lease had been mistakenly issued for residential purposes and was, in truth, a commercial lease.

As evidence Konda’lane said it had written to the Land Board in June 2016, some 10 months after its lease had been issued, saying  that it had been incorrectly advertised for tender as a residential lease when it should have been a commercial lease and this ‘error’ should be corrected.

Konda’lane then produced a letter from the Lands Department purporting to acknowledge the error and advising the plaintiff to lodge a formal application to vary the lease from residential to commercial.

While there was no evidence of any formal application for variation or any decision by the Land Board, Konda’lane did present the court with a photocopy of a State Lease dated 8 October 2018 which it claimed was its new commercial lease over the same Lot.

The court was not impressed.

This document was completely different from the 2015 State Lease. It showed a different spelling of the Plaintiff’s name, a different Volume and Folio number, a different commencement date, a different purpose, and different Conditions. It was stated to be a Business Lease for Commercial purposes, commencing on 16 July 2018, more than three years after the original Lease commencement date, with an improvement covenant being building for business purposes to be made, but without any time limit, and without any condition preventing the sale or lease of any part of the land before compliance with the covenant.

There was no evidence of how this document came to be issued. It was just an unsealed photocopy, not identified by the Registrar of Titles, which did not comply with S7 of the Land Registration Act.

The court refused to endorse the document as the current and valid title for the land at Lot 23, Section 416, Hohola.

As we will see later below, Lands Minister John Rosso, and the Department of Lands, have a rather different view and are treating the 2018 commercial lease as a valid document.

According to the court though, this was not the only dirt on Konda’lane’s hands.

The company claimed it was entitled to damages of K1.8 million for the income it is said to have lost as result of being unable to fence the land and then sub-lease it.

To support this claim Konda’lane produced a commercial lease it claimed to have signed with a business called Friendly Hire Cars_[1] to rent the land for K40,000 a month from January 2016.

The court though pointed out several glaring holes in this story.

The biggest was that Konda’lane Properties had no legal right to lease the land whether to Friendly Hire Cars or anyone else. Konda’lane’s State lease prohibited any lease or sublease of the land until it had complied with the improvement covenant by constructing a residential building. Konda’lane had not built anything on the land. Further, the 2015 State lease was specifically for residential, not commercial, use. Konda’lane was not entitled to lease the land to anyone for commercial purposes.

Any lease to Friendly Hire Cars was not only invalid as being in breach of the State lease, it made the plaintiff liable to have his lease forfeited for non-compliance.

Secondly, the lease document was ‘completely inappropriate’ as it was a standard lease for the rental of a building when in fact all that was being leased was an empty piece of ground.

Thirdly, there was no evidence produced to show the hire business would have the financial means to pay rent of almost K500,000 a year and ‘incur the substantial expense of constructing multiple buildings including a workshop, offices and a shop’. The business had only been registered 12 months before signing the lease and its only assets were said to be motor cars worth K1.5m.

Fourthly, by claiming K40,000 a month, the plaintiff was seeking to benefit from the commercial improvements the car hire business was obliged to build on the land under the lease. This, said the court, was ‘untenable’ when under the terms of the plantiff’s own State lease it was unlawful for any commercial buildings to be built on the land and the plaintiff was obliged to itself construct residential buildings worth at least K250,000 before the land could be leased.

The K1.8 million in lost income was not the only compensation that Konda’lane was claiming. It also wanted damages for loss of use of the land and claimed K129,000 per month as the market value of the property. This totalled a further K5.8 million.

The court disallowed this claim. It ruled there was no evidence that the defendants, the NCD, had been unlawfully occupying the land and excluding Konda’lane from occupation. Therefore, the claim was not justified.

Further, Konda’lane was guilty of ‘double-dipping’ said the court. It was claiming damages for both actual loss of rental income of K1.8m from the car hire business and K5.8 million for being deprived of the loss of use of the land.

If there had been a valid lease agreement for ten years, the Plaintiff would have been deprived of the use of the land for the whole of that period. If the Plaintiff used the land by renting it out, the Plaintiff cannot also recover damages for being deprived of the use of the land.

But Konda’lane wanted even more.

It claimed a further K2 million in damages which it said was a ‘weekly unlawful usage fee’ and K150,000 in general damages for distress. Both claims were summarily dismissed by the court.

The court accepted that Konda’lane Properties had suffered some delay in being able to develop the land since the date when the fencing application should reasonably have been approved. That delay though was only relevant to the plaintiff’s obligation to construct residential housing units.

There was no evidence that the Plaintiff ever intended to commence residential construction. In the very same month that the original 2015 Residential State Lease was issued to it, the Plaintiff was negotiating with FHC to lease the vacant land for commercial development, in breach of the conditions of the State Lease. The evidence does not establish that the Plaintiff has suffered any loss from a failure to construct residential housing units.

As a result, the court ruled the Plaintiff had not established any entitlement to damages and any loss it had suffered arose out of its own ‘unsatisfactory conduct’.

As further penalty, the court ordered that despite having won its case and established its entitlement to the fencing permit, Konda’lane would not have its legal costs paid by the NCD, but would have to pay its own legal bill.

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_{[1] Friendly Hire Cars is a business owned by Jessie and Yutilas Pok. It has previously featured in a PNGi exposé on the excessive spending on hire cars by the Konebada Petroleum Park Authority. In 2016, Friendly Hire Cars received K66,100 from KPPA, as part of an overall spend on hire cars by the organisation of almost K3 million.}

Giving a face to Konda'lane

Konda’lane Properties Limited was first registered in 2009.

The company’s two directors are Luther Makap, appointed in 2009, and Joe Kila, appointed in 2017. Kila is also the company secretary.

All the 1,000 issued shares in Konda’lane Properties Limited are owned by another company, Optimum Management (PNG) Limited.

Optimum Management was first registered in 2012. In 2018, it changed its name to MKP Group Limited. MKP Group is solely owned by Luther Makap. Mr Makap is the principal of Makap Lawyers.

In August 2014, 12 months before the residential development lease for Lot 23 Section 416 was issued, Optimum Management obtained an overdraft facility from Bank of South Pacific worth K2.73 million kina. The amount was secured through a mortgage over all the company’s assets.

In its 2014 Annual Return, the most recent on file, MKP declared assets of K3 million and liabilities of K400,000.

MKP is also the parent for six other subsidiary companies, all ultimately owned by Luther Makap; one of them, Amicus Legal Limited, is the registered owner of Makap Lawyers.

Luther Makap is also the owner of Nikint Investment Limited and Hayden Ridge Limited (previously known as Pennba Property Investments Limited); and joint owner, with Dakan Doiwa, of Ambient Ventures Limited, Konda 1 Limited and Konda 2 Limited.

Parkop's posturing

NCD Governor has reacted with apparent outrage to the news that a public space in Gerehu has been rezoned and leased to a private business.

Parkop says the land has been “sold fraudulently” and obtained under a “clever scam”:

As far as we are concerned, it appears to be an elaborate fraud and scam job.

Parkop says he has instructed the City Manager to lodge a criminal complaint over the matter and have the people responsible charged with fraud.

But why is Mr Parkop only crying foul now, when he and his officers have long known about the subdivision and leasing?

Mr Parkop must surely have known about the supposed re-zoning, subdivision and Konda’lane’s claim to have a valid lease since at least April 2017? That was when Konda’lane issued a court action against Powes Parkop, as first defendant, the NCD Chief Physical Planner and the NCD itself over its refusal to grant planning permission for its fencing application.

Why did Parkop and the NCD not cry foul then and refer the matter to the police?

Similar questions can be asked even earlier.

In October 2015, Konda’lane Properties applied to the Physical Planning Board that is chaired by Powes Parkop, for permission to fence the land. The application was refused. Konda’lane asked the Board to review its decision, pointing out the history of re-zoning, subdivision and leasing. The request was again denied.

Why did the NCD not act then to challenge the legality of the lease and refer the matter to the police, especially if they felt so strongly that fraud was involved and the lease invalid?

But we can date the NCD’s ‘complicity by silence’ back even further. The land was re-zoned and subdivided in 2013. The first sub-divided lot was then advertised for tender in the National Gazette and, in 2015, a State Lease was issued.

The National Court has reviewed these steps and not questioned their validity. The National Court has also noted:

The Defendants [Parkop and the NCD] did not appeal against or take any action to review either the Minister’s decision to uphold the Plaintiff’s appeal [against the refusal to subdivide], or the decision to grant the State Lease to the Plaintiff.

Rosso to the rescue, or not?

While Powes Parkop is apparently outraged, the Department of Lands and its Minister, John Rosso, are scrambling. Lands after all is the Department that has issued Konda’lane Properties with at least one, and maybe two, State leases over the Gerehu land.

But is the Department of Lands inadvertently muddying the waters even further?

The National Court, as we have seen, was very skeptical of the purported commercial lease which Konda’line Properties claims was issued by the Department of Lands as a replacement for its residential development lease over Lot 23, Section 416, Hohola.

The court pointed up numerous inconsistencies between the new lease and the original, including a different spelling of the leaseholder’s name, a different Volume and Folio number, a different commencement date, a different purpose, and different conditions. Unusually, the improvement covenant also lacked any time limit and there was no condition preventing sale or lease before compliance.

The court was so skeptical, it refused to endorse the document as the current and valid title for the land.

Lands Minister John Rosso though, appears to be endorsing the lease’s authenticity.

While the National Court said it had seen no evidence of any formal application for variation of the original lease or any decision by the Lands Board to vary it, Rosso says:

A variation of a lease from residential purpose to business purpose application lodged by Konda’lane Properties Limited went before the Land Board Meeting No.01 of 2018 and the application was successful.

Thereafter, a new State lease was registered and issued, says the Minister.

Rosso has issued a show cause notice to Konda’lane Properties to forfeit the lease back to the State.

A show cause notice under S.122 of the Land Act can be issued on various grounds including if rents have not been paid, a covenant not complied with or of the lease has been obtained as a result of false or misleading statements.

It is not clear which ground the Minister is relying on, but if he is seeking to have the commercial lease forfeited, the implication is the lease, as it exists, is valid. And if the commercial lease is valid, could that let Konda’lane off the hook for both its apparent failure to uphold the development covenant in its residential lease, and its breach of the subletting clauses by leasing the land to Friendly Hire Cars?

The Speculative Gold Mine

This is not the first case of public parks and community spaces being enclosed under questionable looking deals, that rob communities of recreational facilities, so developers can make a significant profit.

There is a long history of this kind of conduct.

Back in 2007 the Public Accounts Committee observed: ‘The [Lands] Department has, in the last decade, engaged in the planned and deliberate granting of Reserved Land, National Park, or Open Space land into private hands for little or no recompense to the State – and in many cases, quite unlawfully’.

While it cannot be inferred the grant to Konda’lane Properties was unlawful – that is a question only the courts can decide – it was certainly marked by official bungling and dubious private sector conduct.

And this must be set against a wider backdrop, where state land has been preyed upon through scam after scam, perpetrated by some of the most senior political figures in this country. Acquiring land far below market price and flipping it for a large profit has become a national sport for many in our political class, who live life large with luxury properties, holiday homes abroad, top tier private school education for their children in Australia, and medical treatment in Singapore or Australia if any health issues of concern arise – paid for in part by illegal speculation in land.

It is perhaps no wonder that beyond this epicentre of land theft, there are all sorts of fast and furious land deals walking a grey line, organised by middle rung actors from the professional classes, chancing their arm for a high return so they can live the Waigani high octane life too.