Church the victim of land fraud

Cases of land fraud are all to common in Papua New Guinea. Often they carry the heavy stench of political corruption and usually it is the State, and particularly the Department of Lands or the National Housing Corporation who are at the centre.

A recent case, before the National Court in Madang, was unusual therefore for the fact the fraud was found to have been coordinated by a private citizen, Guner Gee, without any State actors being implicated. His victim was the Lutheran church.

The case concerned a residential property in Allamanda Street in Madang Town. In August 2017, a Frank and Marina Maru acquired the State lease over the property. Sale documents record they paid a purchase price of K600,000.

The court though has found that the circumstances of the purchase were so ‘peculiar, irregular and suspicious’ that they amounted to constructive fraud.

The transfer of the lease to the Maru’s has been quashed and the Registrar of Companies ordered to instead transfer the property to the Lutheran Church, who, the court found, is the rightful owner.

The background to the case was that the State lease was originally acquired by the Lutheran Church (Madang) Ltd, a registered company, in August 1978.

That company ceased operating in 1996. It became totally defunct and was removed from the register of companies. It was never restored to the register and was still defunct when its State lease was transferred to Mr and Mrs Maru in 2017.

That sale of the property was negotiated by one Gunar Gee, who held himself out to be the property manager of Lutheran Church (Madang) Ltd, even though that entity had been dead for over twenty years.

At trial, the lawyer for Gee claimed that, although it was deregistered in 1996, the Lutheran Church (Madang) still carried on business after that date and Mr Gee, an employee, properly conducted business on its behalf. The court had little time for those claims:

“Mr Wadau provided no authority for these startling submissions. I see no sense in them and I reject them outright”.

Instead the court found Mr Gee had no proper or lawful authority to enter into a contract of sale for the property or execute the instrument of transfer.

“The only reasonable conclusion to draw from these peculiar, irregular and suspicious circumstances is that the transfer of the State Lease to Mr and Mrs Maru was unlawful and so unsatisfactory and irregular as to be tantamount to fraud”.

As the Maru’s took no part in the trial and no evidence was presented or argument made on their behalf, the court found there was “no evidence that they acted genuinely or were innocent participants in the fraud”.

Instead, the court found that the rightful owner of the property was the Evangelical Lutheran Church (ELC). This was because, although the Lutheran Church (Madang) was a separate legal entity, it was established and obliged to support and promote the ELC and serve its members. The company was incorporated by the ELC and the special relationship between the two meant that all property in which the Madang church had a legal interest was held in constructive trust for the ELC.

This meant that when the company became defunct and was removed from the register by the Registrar of Companies, the Registrar had been obliged under the Companies Act to transfer the lease to the ELC.

The court duly ordered the Registrar of Companies to make good and effect a transfer of the title to the Evangelical Lutheran Church as soon as the Registrar of Titles had undone the fraudulent transfer to the Maru’s.