Port Moresby’s housing crisis just got worse – Duran Farm Development rotten to the core
The National Housing Corporation and the National Housing Estate Limited are two of the most corrupt institutions in the nation. For years they have treated the national housing estate as the private property of senior executives. Public servants from around the country have been made homeless at the behest of NHC head, John Dege, so land and property can be sold off to foreign speculators.
So where do public servants go, and where do the nation’s booming number of urban working families go? Never fear, the NHC and NHEL will now be working with the private sector to build low cost housing.
In June this year the Prime Minister announced that NHC/NHEL would facilitate the construction of 40,000 houses at Duran farm outside Port Moresby, through offshore financing to the tune of K1.3 billion. Worried yet?
The contractor awarded the job do oversee this mammoth development was Niule No 16, a shelf company owned by PNG lawyer Henry Hennry and Australian businessman Kamran Samimi. Nuile No 16 claims to have secured US$500 million in financing, and a ‘world class’ construction company, China State Construction & Engineering Company.
Did we mention, China State Construction & Engineering Company has been blacklisted by the World Bank for fraud and corruption.
So lets recap, the O’Neill government, in a bid to counteract a major housing crisis, entrusts John Dege and cronies at the NHC/NHEL, who then proceed to contract with a shelf company, Nuile No. 16. This shelf company of two little known figures, has managed to secure half a billion US dollars finance, and a construction company blacklisted by the World Bank. Good.
Now only several months after the PM’s historic announcement, the joint venture has gone to the courts, with Nuile alleging that NHC/NHEL have a) illegally sold land to be used for the project, and b) made identical joint venture agreements with other players, in violation of their contractual obligations.
Their statement of claim is included below.
While the state fails to provide working families with an affordable housing solution, people are forced to subsist in settlements, living day to day, knowing that at any time their world could be turned upside down by a corrupt deal, and a criminal developer, come to grab the land, and burn out the community.
The citizens of this country deserve better!
Niule No. 16 v National Housing Corporation, the National Housing Estate Limited, and the Independent State of Papua New Guinea, WS 1136 of 2014
STATEMENT OF CLAIM
The Plaintiff, Niule No. 16 Limited is a duly incorporated company under the Companies Act 1997 (“Niule”).
At all material times to these proceedings the First Defendant, National Housing Corporation (“NHC”) is;
(i) a corporation established pursuant to Section 5 of the National Housing Corporation Act 1990 (the Act); and
(ii) amongst others as stipulated under the Act mandated to facilitate the development of a private market in low to mid-cost housing that is affordable for housing finance for low to medium income citizens of Papua New Guinea; and
(iii) is capable of suing and being sued in its corporate name under s. 5(1 )(e) of the Act.
The Second Defendant, National Housing Estate Ltd, (“NHEL”):
(i) is a company duly incorporated under the Companies Act; and
(ii) is the business/commercial arm of NHC; and
(iii) has been charged by NHC with, amongst others, the responsibility to provide affordable housing in Papua New Guinea; and
(iv) capable of suing and being sued in its corporate name
The Third Defendant is the Independent State of Papua New Guinea
One the 5th of September 2013, Niule, NHC and NHEL (the Parties) entered into a written joint venture Agreement (the Tripartite Agreement) for Niule to construct 30 000 low to medium cost residential homes in Port Moresby, National Capital District on land to be provided by NHEL (the land).
PARTICULARS OF THE TRIPARTITE AGREEMENT
(a) Niule and NHEL as joint ventures undertake to develop the land;
(b) NHC and NHEL are to make available to Niule 30,000 block of land for the development and construction of all civil works, infrastructure and the residential homes (cl. 7)(a) with 1,000 lots to be made available on or before 5th September 2014 and 5, 000 per annum thereafter (cl.7(b);
(c) NHC and NHEL to appoint and engage Niule as the exclusive contractor for planning, design, civil works and infrastructure development on the land (cl. 5);
(d) NHC and NHEL to appoint Niule as the exclusive contractor responsible for construction of dwelling houses on the land (cl. 6);
(e) NHEL to provide Niule a separate piece of land in its name upon which to construct a prefabrication factory for the construction and assembly of houses (cl. 8);
(f) NHC to meet regularly with Niule to determine the stages of the development, number and type of houses constructed at each stage and sale price (cl. 14);
(g) NHC and NHEL to make available to Niule land required as a lay-down area for the storage of materials plant and equipment (cl. 17);
(h) NHC to execute, sign and do all further or other acts, deed, documents, matters and things necessary, desirable or convenient to give effect to the provisions of the agreement and the matters and transactions contemplated by the agreement (cl. 29);
(i) NHC guarantees NHEL’s performance of and obligations under the terms of the Tripartite Agreement (cl. 35);
On 16th October 2013 Niule and NHC entered into a Deed of Guarantee with respect to the Tripartite Agreement (the Guarantee).
PARTICULARS OF GUARANTEE
Minister for Housing and Urbanization, Hon Paul Isikiel in his own capacity and for and on behalf of the State:
(a) Guaranteed NHEL and NHC’s performance of all of NHEL and NHC’s obligations under the Tripartite Agreement; and
(b) Indemnified Niule against any loss or damage it may suffer as result of NHEL and/or NHC’s failure to carry out all of their duties and obligations under the Tripartite Agreement.
On the 1st November 2013 the parties entered into and executed under seal the Supplementary Joint Venture Agreement in further performance of the parties obligations under the Tripartite Agreement and the Guarantee (Supplementary JV).
PARTICULARS OF SUPPLEMENTARY JOINT VENTURE
(a) The land upon which the development was to be carried out was to be Portion 528, Milinch Granville, Fourmil Moresby, National Capital District otherwise known as “Duran Farm” (rec 1) (the housing land);
(b) The Housing Land was to be provided to Niule to enable construction of infrastructure on the housing land and to construct thereon low/medium cost housing (rec. 2);
(c) NHC and NHEL to cause the transfer of Section 35 Allotment 03 Boroko, Granville, Moresby, National Capital District being all that land contained in Volume 45 Folio 224 comprising an area of 2.738 hectares to establish a factory for the manufacture and assembly of affordable houses (the factory land) (rec 3);
(d) By Deed of Guarantee & Indemnity dated 16 October 2013, The Independent State of Papua New Guinea through the Minister for Housing & Urban Development Hon. Paul Isikiel guaranteed & Indemnified Niule as to NHEL’s obligations and performance of the Tripartite Agreement (rec 4);
(e) NHC and NHEL to pay Niule directly for all civil works to be carried out on the housing hand (rec 5(c));
(f) NHC and NHEL to pay Niule a deposit not less than 40% of the costs of civil works on account of the costs of such works on or before January 2014 (rec 5(e);
(g) Upon receipt of invoices from Niule for civil and construction works, NHC and NHEL will pay in a prompt manner (rec. 5(f));
(h) NHC and NHEL take all necessary steps to facilitate Niule’s performance of civil and construction works (clause 8(j));
(i) NHC and NHEL to arrange for release of deposits from end buyers to Niule prior to beginning of construction to be uitilised by Niule to meet mobilization costs and expenses (clause 14);
(j) NHC and NHEL to grant Niule equitable interest in the Housing Land to enable Niule to use such title to the Housing Land as Security for any mortgage that Niule would seek to provide any third party financier or construction company (clause 15)
(k) To grant Niule “first right of option” for all infrastructure works on the housing land (clause 16)
(l) NHC and NHEL not to any time interfere with or obstruct any of Niule’s works on the housing land or elsewhere in Papua New Guinea, now or in the future (clause 18)
(m) NHC and NHEL not to compete with or have other compete with Niule either directly or indirectly with respect to any matter under the Tripartite Agreement or the Supplementary JV (clause 19).
In performance of its obligations under the Tripartite Agreement and the Supplementary JV, Niule has:
(a) Sourced international funding of up to US$500,000,000;
(b) Secured and obtained Venture Finance Insurance with SINOSUR an internationally renowned venture finance insurer for the developments;
(c) Secured China State Construction & Engineering Company (CSCEC) an international leading construction company to carry out the developments;
SINOSUR as a further requirements to underwriting the venture requested through Niule that NHC and NHEL provide an addendum to the Guarantee signed by both the Minister for Finance and the Minister for Housing along with a proper law clause and jurisdiction clause and the Defendants were required under the Tripartite Agreement and the Supplementary JV to secure execution of that Addendum but did not and have not done so.
NHC as part performance of its and NHEL’s obligations under the Tripartite and JV Agreement did on 9th January 2014 execute a Contract for Sale and Transfer Instrument with Niule in respect of the Factory Land to Niule with an undertaking to immediately effect a transfer of title to the Factory Land to Niule.
On around late May 2014, Niule discovered that the Factory Land had been sold by the NHEL and NHC to a third party for approximately K3.5 million.
On around early August 2014, Niule became aware that NHC and NHEL were about to sign contracts similar to those signed with Niule with a number of Chinese construction companies.
On 10 September 2014, the NHEL and NHC informed Niule in person that they had no intention of performing their obligations under the agreements signed with Niule.
The Defendants have also refused, neglected and/or failed to ensure the Addendum to Deed of Guarantee and Indemnity of 16 October 2013 was signed.
NHC and NHEL have therefore breached the Tripartite Agreement and the Supplementary Joint Venture Agreement.
PARTICULARS OF BREACH OF AGREEMENTS (TRIPARTITE & JV)
In breach of their obligations under the Tripartite Agreement and the Supplementary JV the Defendants have;
a) Failed to provide Niule the land on which to construct the residential houses
b) Failed to make available to Niule 1,000 lots on or before 5 September 2014 for the development and construction of houses;
c) failed to make available to Niule land as lay down area for storage;
d) entered into negotiations with other contractors and companies to undertake civil infrastructure works and construction of the houses on the land;
e) failed to pay Niule a deposit of not less than 40% of the cost of civil works; and
f) Failed to ensure the Addendum to the Deed was executed and provided to Niule.
On 4th June 2014 the Plaintiff issued the First and Second Defendants a Notice of misleading and deceptive conduct (the Breach Notice).
It was an expressed term and condition of the Supplementary JV that the parties acknowledged that damages would be an adequate remedy for any breach and that Niule was entitled to seek order for specific performance by the Defendants of their obligations under the Tripartite Agreement, the Guarantee and the Supplementary JV.
Throughout the period from November 2013 to the date of issue of these proceedings the Plaintiff has attempted to mediate the dispute the subject to the Breach Notice but the Defendants have failed to proceed with any bona fide attempt at resolution or any attempt at resolution of the dispute as set out in the Breach Notice.
(i) An Order that the First and Second Defendants have breached the Joint Venture Agreement of 5 September 2013, the Guarantee of 1 October 2013 and the Supplementary Joint Venture Agreement of 1 November 2013.
(ii) An Order that the Joint Venture Agreement of 5 September 2013 is a valid and binding agreement enforceable as against the defendants.
(iii) An Order that the Guarantee of 16 October 2013 is a valid and enforceable deed enforceable as against the defendants
(iv) An Order that the Supplementary JV of 1 November 2013 is a valid and enforceable deed enforceable as against the Defendants.
(v) An Order for specific performance that the Defendants take all reasonable and appropriate steps to immediately rectify the respective breaches and fully perform their duties, responsibilities and obligations under the Joint Venture and Supplementary Joint Venture Agreements.
(vi) That the Defendants pay Niule damages caused by the notified breaches of the Joint Venture Agreement and the Supplementary JV. [Particulars of the damages to be provided prior to trial.
(vii) Special Damages. [Particulars of the damages to be provided prior to trial].
(viii) Costs of these proceedings.
(ix) Any other orders the Court deems appropriate.