Report of the Administrative Inquiry into the Land Transactions and Deals Involving the Five Portions of Land by the Ministry of Defence and the Ministry of Public Enterprises and State Investments
Mentions of people and company names in this document
|Name||References in this document||Mentions in other documents|
834 other documents
766 other documents
P & O
557 other documents
396 other documents
379 other documents
357 other documents
INDEPENDENT STATE OF PAPUA NEW GUINEA
323 other documents
308 other documents
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
301 other documents
279 other documents
278 other documents
238 other documents
209 other documents
208 other documents
208 other documents
189 other documents
143 other documents
120 other documents
Peter O' NEILL
120 other documents
105 other documents
75 other documents
63 other documents
KUMUL CONSOLIDATED HOLDINGS
61 other documents
INDEPENDENT PUBLIC BUSINESS CORPORATION
59 other documents
PNG DEFENCE FORCE
58 other documents
53 other documents
MOTOR VEHICLES INSURANCE LTD
52 other documents
46 other documents
45 other documents
39 other documents
39 other documents
38 other documents
32 other documents
29 other documents
YOUNG & WILLIAMS
29 other documents
28 other documents
MOTOR VEHICLE INSURANCE LIMITED
28 other documents
INDEPENDENT PUBLIC BUSINESS CORPORATION (IPBC)
27 other documents
27 other documents
Romilly KILA PAT
26 other documents
KUMUL CONSOLIDATED HOLDINGS LTD
24 other documents
23 other documents
INDEPENDENT PUBLIC BUSINESS CORPORATION OF PAPUA NEW GUINEA
21 other documents
YOUNG & WILLIAMS LAWYERS
20 other documents
18 other documents
15 other documents
15 other documents
HARVEY NII LAWYERS
13 other documents
Independent Public Business CORPORATION OF PNG
13 other documents
12 other documents
12 other documents
11 other documents
10 other documents
10 other documents
GRAND PAPUA HOTEL
10 other documents
10 other documents
PNG PORTS LIMITED
10 other documents
9 other documents
8 other documents
6 other documents
6 other documents
6 other documents
5 other documents
3 other documents
3 other documents
3 other documents
3 other documents
2 other documents
2 other documents
2 other documents
1 other documents
1 other documents
1 other documents
1 other documents
KITORO NO. 64 LIMITED
1 other documents
1 other documents
1 other documents
TAKOA PASTORAL CO. LIMITED
1 other documents
0 other documents
ASIA PACIFIC VALUATIONS PTY LTD
0 other documents
BELDEN MEMI & ASSOCIATE VALUERS & AUCTIONEERS
0 other documents
0 other documents
0 other documents
FLYSTONE AMUSEMENTS LIMITED
0 other documents
0 other documents
Gabriel Du KARAP
0 other documents
GDK VALUERS AND PROPERTY CONSULTANTS
0 other documents
0 other documents
George Michael SARIMAN
0 other documents
0 other documents
JAJ & ASSOCIATES
0 other documents
0 other documents
0 other documents
0 other documents
0 other documents
KOPANA INVESTMENTS LIMITED
0 other documents
KOSI INVESTMENTS LIMITED
0 other documents
KURKURAMB ESTATES LIMITED
0 other documents
0 other documents
0 other documents
0 other documents
0 other documents
M & M INVESTMENTS LIMITED
0 other documents
SEROMU INVESTMENTS LIMITED
0 other documents
It is not suggested or implied that simply because a person, company or other entity is mentioned in the documents in the database that they have broken the law or otherwise acted improperly. Read our full disclaimer
REPORT OF THE
INTO THE LAND
TRANSACTIONS AND DEALS
INVOLVING THE FIVE
PORTIONS OF LAND BY THE
MINISTRY OF DEFENCE AND
THE MINISTRY OF PUBLIC
ENTERPRISES AND STATE
Page 2 of 101
Page 3 of 101
1. Letter to Prime Minister Forwarding Report pg 3
2. Establishment of Administrative Inquiry pg 4
3. Terms of Reference and Statement of Case pg 4
4. App oi n t m ent of P er sonnel pg 8
5. Background — PNG Defence Force Land and Naval Base Relocation
and Relevant NEC Decisions.
6. E xe cu t i v e S um m ar y pg 15
7. Lack of Cooperation by Kurkuramb Estates Ltd pg 19
8. Portion 154, Milinch of Manu, Fourmil of Aroa, Central Province pg 20
9. Portion 422 and 423, Milinch of Manu, Fourmil of Aroa, pg 22
10. Portion 406, Milinch of Manu, Fourmil of Aroa, Central Province pg 28
11. Defence Accounts pg 64
12. Valuation Considerations pg 67
13. Conspiracy Theory, and the Suspension of Departmental Heads pg 74
and Two Ministers
14. Portion 698 pg 80
15. Customary land owner claims pg 86
16. Specific Issues Raised by the Terms of Reference pg 87
17. Chronology pg 90
18. Abbreviations pg 97
Page 4 of 101
Page 5 of 101
INTO SALE AND PURCHASE OF LAND PORTIONS AND FINANCIAL TRANSACTIONS
INVOLVING STATE AGENCIES AND STATE OWNED ENTERPRISES
Muruk House, Kurnul Avenue
P.O BOX 782, Waigani, National Capital District, Papua New Guinea
Phone : 323 7000/76523694 Toll Free : 1803344
Facsimile: 323 6478 Email : firstname.lastname@example.org
REPORT OF THE ADMINISTRATIVE INQUIRY INTO THE LAND
TRANSACTIONS AND DEALS INVOLVING THE FIVE PORTIONS OF
LAND BY THE MINISTRY OF DEFENCE AND THE MINSTRY OF
STATE ENTERPRESES AND INVESTMENTS
The Honourable Peter O’Neill, CMG, MP
Prime Minister of the Independent State of Papua New Guinea
& Chairman of the National Executive Council
Office of the Prime Minister
P 0 B ox 639
National Capital District
Papua New Guinea
Dear Prime Minister
I have the Honour of submitting the Report of the Administrative Inquiry into the land
transactions and deals involving the five portions of land by the Ministry of Defence and the
Ministry of State Enterprises and Investments.
Mr John Anthony Griffin, Q.C .
Dated this 7th day of October 2017.
Page 6 of 101
Page 7 of 101
2. Establishment of Inquiry
2.1 On 7 March 2017, the National Executive Council, chaired by the Honourable
Peter O’Neill, Prime Minister of Papua New Guinea, appointed the
Administrative Inquiry into the transactions relating to the acquisition of land for
the relocation of the Papua New Guinea Defence Force land and naval bases,
particularly the Murray Barracks, Taurama Barracks and the Lancron Naval Base,
all of which had been located in Port Moresby [see Annexure 2(1)].
2.2 The establishment of the Administrative Inquiry was necessitated by the general
public’s perception and outcry that the sums paid to acquire the parcels of land
were exorbitant and the processes adopted were highly irregular. Matters raised
in the public outcry are referred to below.
2.3 It is understood that due to the then pending Supreme Court litigation as to the
validity of the Commissions of Inquiry Act (Chapter 31), the National Executive
Council considered it prudent and cost-effective to constitute an inquiry of an
administrative nature as opposed to a Commission of Inquiry appointed under the
Commissions of Inquiry Act (Chapter 31).
3. Terms of Reference
3.1 The Terms of Reference were settled in the following terms:
INQUIRY INTO LAND TRANSACTIONAL DEAL INVOLVING FIVE
PORTIONS OF LAND BY THE MINISTRY OF DEFENCE AND MINISTRY OF
STATE ENTERPRISE & INVESTMENTS
To: Mr John Griffin QC
STATEMENT OF CASE
Serious allegations of impropriety in five (5) land transaction deals have been raised on
the floor of Parliament and the Prime Minister is required to take appropriate action
to the Parliament through the National Executive Council, NEC.
The principles of accountability and transparency in the conduct of government
business have been seriously questioned in the land transactions warranting the
Prime Minister at the authority of the National Executive Council to take firm action.
The Prime Minister has appointed Mr John Griffin QC to inquire into and report on
the five transactions concerned.
Page 8 of 101
The appointment of the Inquiry will not prevent the Police Fraud Squad, the
Ombudsman Commission and the Department of Personnel Management from
carrying out investigation under their legislative powers.
The allegations are that between 2014 and 2016 five (5) land acquisition transactions
were entered into by the Ministries of Defence and State Enterprise & State
Investments on behalf of the Papua New Guinea Defence Force (PNGDF) under
alleged controversial circumstances. The land transactions which are the subject of this
Inquiry are related to and concerned with the National Government decision made in
2012 to relocate two Papua New Guinea Defence Force barracks and two other
facilities to new locations. These are Murray Barracks, Taurama Barracks, the Lancron
Naval Base at the Fairfax Harbour waterfront and the PNGDF Engineering Battalion in
Following the National Executive Council Decision of 2012, certain portions of land in
the Central Province were identified for the relocation by the various agencies of
Government including Department of Defence and State Enterprises and Investments.
The intention of the Government was for the Department of Defence as the lead
agency to work in close consultation and cooperation with relevant government
agencies to implement the NEC Decision on relocation in a planned and coordinated
However, it has come to light recently that land acquisitions were made by Ministry of
Defence which included the funding assistance from Ministry of State Enterprise between
2014 and 2016. These land transaction deals involving four (4) portions of land in
Kairiku-Hiri District of the Central Province and another portion near ATS in NCD have
become controversial raising serious questions on accountability and transparency in
the transactions. The portions of land are described as:
a) Portion 422, Milinch of Manu, Fourmil of Aroa, Central Province;
b) Portion 423, Milinch of Manu, Fourmil of Aroa, Central Province;
c) Portion 406, Milinch of Manu, Fourmil of Aroa, Central Province;
d) Portion 154, Milinch of Manu, Fourmil of Aroa, Central Province; and
e) Portion 698, Milinch Granville, Fourmil Port Moresby.
It is alleged that the Ministries and Departments of Defence and State Enterprise and
State Investments colluded with the proprietors of the said portions of land and paid
millions of Kina in both compensation and purchase price, and that the proprietors
were either associates, relatives and/or friends of persons holding responsible
positions within the Ministries of Defence; State Enterprise. Lands and Physical
Planning, Kumul Consolidated Holdings Limited, Motor Vehicle Insurance Limited,
State Solicitor and the Valuer General.
Page 9 of 101
The objective of the Inquiry is to inquire into the land transactions referred to above and
establish if there was impropriety in the transactions, The Inquiry will enquire into the
transactions relating to each of the portions of land and establish facts related to
issues of statutory compliance as regards the processes and procedures followed and
payments made in respect of each of the portions of land concerned. The inquiry will seek
to establish if there was impropriety on the part of any of those directly or indirectly
involved in the transactions including State Ministers, Heads of Departments and State
Agencies, Government officials and CEOs and Boards of State owned companies.
The Inquiry is to be completed within the time given and present its final report to the
Prime Minister for tabling at the National Executive Council.
Page 10 of 101
TERMS OF REFERENCE
I, Hon. Peter OWeill, CMG, MP, Prime Minster of Papua New Guinea, Chairman of the
National Executive Council reposing confidence in your integrity and ability to do so, hereby
require Mr John Griffin QC to inquire into the following matters:
a) Inquire into and establish whether the National Government through its agencies
approved for Defence to acquire the land portions identified as:
1) Portion 422, Millinch of Manu, Fourmil ofAroa, Central Province;
2) Portion 423, Millinch of Manu, Fourmil of Aroa, Central Province;
3) Portion 406, Millinch of Manu, Fourmil ofAroa, Central Province;
4) Portion 154, Millinch of Manu, Fourmil of Aroa, Central Province; and
5) Portion 698, Millinch Granville, Fourmil Port Moresby.
b) Inquire into and establish facts related to the role played by the Ministries for Defence and
State Enterprises and Investment, and other relevant Government Departments and their
Departmental Heads including Departments of Defence, Lands and Physical Planning,
Justice and Attorney General, Kumul Consolidated Holding Limited, Motor Vehicle
Insurance Limited, Central Supply and Tenders Board in the acquisition of land portions
154, 406, 422 and 423 at Manumanu in the Kairiku Hiri District of Central Province and
Portion 698 in the NCD.
c) Inquire into and establish whether there was statutory compliance in the land acquisition
d) Inquire into and establish the total cost of the acquisition of the five portions of land.
e) Inquire into and establish whether there were any circumstances of conflict of interest in
the land deals.
f) Inquire into and establish whether there were any wrong doings by Ministers and the
senior o zcers involved in the land transactions deal, in the best interest of the State
g) Inquire into whether there was any impropriety in the transactions and as to who
benefited from the transactions.
AND I FURTHER direct that the Inquiry be conducted in the National Capital District, or at
such other places in Papua New Guinea or elsewhere as to you may appear necessary and
AND I FURTHER direct that you shall commence with the Inquiry without delay and
proceed therein with all dispatch and render to me your final report within 4 weeks from the
date of commencement of inquiry.
Dated this 7th day of March 2017
Hon, Peter O’Neill, CMG, MP
Prime Minister & Chairman of the National Executive Council
Page 11 of 101
4, Appointment of Personnel
4.1 Mr John Griffin Q.C. was appointed Chairman of the Administrative Inquiry.
4.2 The Secretary to the Administrative Inquiry was Mr Mathew Yuangu.
4.3 Mr Gibson Geroro was appointed Leading Lawyer.
4.4 Mr Herbert Wally was appointed Lawyer Assisting.
4.5 Mr Jerry Fruanga was appointed Assistant Investigator.
Page 12 of 101
5. Background to PNG Defence Force land and naval bases relocation
5.1 When the Administrative Inquiry was established, the Department of Defence
furnished it with documentation.
5.2 A covering letter from the Department of Defence dated 20 April 2017 also set
out background matters: see Annexure 5(1).
5.3 It was made clear that the matters the subject of the Administrative Inquiry arise
primarily from the decision in 2012 to relocate military and naval installations
away from Port Moresby. The relocation involved a number of decisions being
made by the NEC, which commenced with a formal decision to relocate Murray
Barracks and the PNG Defence Force landing craft base (the Lancron Naval
Base) to new locations. Those locations were plainly intended to be selected by
the Defence Force.
5.4 The Defence Force letter stated that the Defence Force looked for possible sites.
It was said that there was a desire “to obtain sites which had State Leases for
them to be acquired easily as we did not want to be entangled in customary land
issues with landowners causing unnecessary delay in the program”.
5.5 The letter stated that the Department of Defence liaised with the State Solicitor
and Department of Lands and Physical Planning on the means and process
involved to obtain the selected land. It stated that “we were advised to use the
compulsory acquisition process.”
5.6 The letter then referred to land purchases at Manumanu including Portions 422,
423 and 406, Portion 406 being said to be the one selected for the maritime base.
5.7 The land the subject of the Administrative Inquiry consisted of four portions
(being Portions known as 154, 406, 422 and 423) located at Manumanu. The
other Portion, namely 698, was not part of the exercise of purchasing land for the
purpose of relocating Murray Barracks and the Lancron Naval Base. It was land
situated adjacent to the Port Moresby airport. Portion 154 was not purchased. It
was vacant State land, a State Lease over the land having expired in 2006.
5.8 During 2015, Portion 422 was compulsorily acquired for K7.4 million, Portion
423 was acquired for K9.2 million, and Portion 406 was acquired for K46.6
5.9 The transaction that was first brought to public attention was the purchase of
Portion 406 for K46.6 million. Portion 406 consisted of 847.25 hectares, and the
price reflected a per hectare rate of approximately K55,000. Portions 422 and 423
were smaller allotments but the per hectare rate paid for the land was much the
Page 13 of 101
same in their case. The details of these transactions are taken up in the body of
5.10 The fifth property was not one which was involved in the relocation of bases
outside Port Moresby. It is dealt with separately in Section 13 of the Report.
5.11 It is appropriate at this point to make reference to the decisions of the NEC that
were made in conjunction with the base relocations.
5.12 As stated above, in 2012, a decision was taken to relocate the naval and military
bases to new locations outside of Port Moresby. The decision was made on 18
October 2012 when the National Executive Council in NEC Decision number
70/2012, “Approved to relocate the Lancron Naval landing base and Murray
Barracks to a new location outside Port Moresby”.
5.13 The Decision also approved the establishment of a project management team to
co-ordinate and oversee the relocation. It also directed the Minister for Lands and
Physical Planning to assign officers to work with the project management team in
the conduct of valuation, physical planning, surveying, land lease and registration
5.14 Importantly it “allocated funding of K50 million to facilitate the relocation of the
PNGDF landing craft base and Murray Barracks including the purchase of land
and some initial construction works on roads and other engineer services.”
5.15 The NEC also directed the Minister for Treasury and Minister for Planning and
Monitoring to appropriate K50 million in the 2013 development budget to
Defence for the purpose of relocating the PNGDF land craft base and Murray
5.16 It gave approval to the Defence Council to sell the existing PNG Defence Force
land craft base and other non-core assets and negotiate concessional loans to fund
the new military base outside Port Moresby.
5.17 It approved the entry by the Defence Council and the Department of Lands and
Physical Planning into financial negotiation with parties interested in acquiring
the existing landing craft base and acquiring or leasing Murray Barracks
properties, with all proceeds of sale to be used for the purpose of developing the
new site for relocation.
5.18 It stated that PNG Ports would have the first call to purchase the block of land at
Lancron Naval Base at a price to be discussed and agreed by all parties.
5.19 The NEC Decision number 70 of 2012 is Annexure 5(2).
Page 14 of 101
5.20 By NEC Decision number 46/2013, on 21 February 2013, the NEC directed the
PNG Department of Defence and PNG Ports Corporation to urgently convene and
negotiate a sale contract for the Lancron Naval wharf, and directed the IPBC
Board and management to issue all statutory and legislative approvals to facilitate
5.21 NEC Decision number 46/2013 is Annexure 5(3).
5.22 By its Decision number 168/2014 made on 12 June 2014, the NEC noted that it
had approved the relocation of Murray Barracks and Lancron Naval Base in
5.23 By that same Decision number 168/2014, the NEC added Taurama Barracks to
the relocation arrangements. The Decision is Annexure 5(4).
5.24 By Decision number 95/2015 made on 29 April 2015, the NEC approved the
transfer of title to the existing Port Moresby precinct from PNG Ports to the
Independent Public Business Corporation (IPBC). The Decision stated that the
NEC approved IPBC’ s plans to purchase the Lancron Naval base site and develop
it. It also stated that “IPBC will lease the land back to PNG Ports so that they can
continue operation at Motukea for a fee of KI per annum.” NEC Decision
number 95/2015 is Annexure 5(5).
5.25 By Decision number 6/2016 made on 4 February 2016, the NEC noted the
existence of a Memorandum of Understanding between Kumul Consolidated
Holdings and the PNG Defence Force, for the relocation of HMPNGS Basilisk
(Lancron Naval Base).
5.26 Kumul Consolidated Holdings (KCH) was the successor to IPBC. Both were
5.27 The meeting also “directed KCH to factor the PNGDF Basilisk relocation site,
planning, funding, and construction requirements as part and partial (sic) of
KCH funding for the whole Port Moresby Port Redevelopment”. NEC Decision
6/2016 is Annexure 5(6).
5.28 By Decision number 360 of 2015 made on 10 December 2015, the NEC approved
the 2016 Annual Business Trust (GBT) and Kumul Consolidated Holdings
Operating and Expenditure Budget as part of the 2016 Annual Plans pursuant to
Section 34 of the Kumul Consolidated (Amendment) Act 2015 and by its Decision
208 of 2016, it approved the transfer of the Lae Development Port Project funds
to the general business trust which constituted a variation of S34(5) of the KCH
Act (as amended). The NEC Decision 360/2015 is Annexure 5(7).
5.29 Two decisions of the Defence Council should also be mentioned at this point.
Page 15 of 101
5.30 By Defence Council Order number 28 of 2014 made on 4 June 2014, the Defence
Council referred to the construction of a new Military Barracks and approved the
following minimum requirements for military barracks:
1. the land must be within 50km out of Port Moresby City;
2. the total land area must be not less than 150 hectares and not more
than 300 hectares either in parts or as a whole. The minimum for a
parcel of land is 100 hectares and preferably within close proximity to
3. the land must be accessible by road;
4. the land must be near water source for water supply;
5. the land must have terrain and jungle for warfare training and
6. the land must not be under disputes and preferably have a defined
ownership by way of registration and Title.
5.31 It also resolved that the land ownership be transferred to the Defence Force. The
Defence Council Order number 28 of 2014 is Annexure 5(8).
5.32 By its Decision number 1 of 2016 made on 22 January 2016, the Defence Council
approved the Memorandum of Understanding between PNGDF and Kumul
Consolidated Holdings (KCH) for the relocation of the Basilisk Maritime base.
The Defence Council Order 1/2016 is Annexure 5(9).
Public announcement and outcry
5.33 On 1 February 2017, the Post Courier reported that Prime Minister O’Neill had
ordered an investigation into two senior ministers over an alleged land fraud
contract worth K46.6 million. The Ministers were Dr Fabian Pok, Minister for
Defence, and Mr William Duma, Minister for Public Enterprises and State
Investments. It was reported that the Prime Minister had referred the matter to
Police for criminal investigations.
5.34 Allegations were made to the effect that the property was acquired for the
Defence relocation for K46.6 million. The Prime Minister spoke in terms of
seeking to recover the amounts paid to the company from which the land was
acquired. The property was Portion 406 Manumanu.
5.35 The Prime Minister was also reported as stating the Chief Secretary (Isaac
Lupari) was to investigate the matter.
5.36 The Opposition Leader, Hon. Don Polye, was reported as describing the deal,
purchase, payment and the involvement of State institutions and various Ministers
Page 16 of 101
5.37 There was the outcry from persons claiming to be customary landowners, who
were contending that their interests had been adversely affected.
5.38 The Prime Minister assured the traditional landowners, however, that no
customary interests had been affected.
5.39 On Friday, 3 February 2017, the Opposition Leader was reported as having
lodged a complaint with the Ombudsman Commission regarding the decision of
Kumul Consolidated Holdings to pay the K46.6 million for Portion 406.
5.40 The leader of the Peoples Progress Party, Hon Ben Micah, was ordered to be
ejected from Parliament by the Acting Speaker after he raised questions
implicating Dr Pok and Mr Duma.
5.41 Hon. Kerenga Kua was quoted as saying that “there were multiple issues, multiple
layers of fraud, multiple layers of non-compliance of all the requisite procedures
that one has to follow.”
5.42 On 7 February 2017, it was reported that the Prime Minister had recommended
that the NEC suspend Defence Secretary, Mr Vali Asi, Lands and Physical
Planning Secretary, Mr Luther Sipison, Valuer General, Mr Gabriel Michael,
Kumul Consolidated Holdings Managing Director, Garry Hersey, and MVIL
Managing Director, Jerry Wemin.
5.43 On 8 February 2017, the NEC directed the suspension of all the above-named
persons as well as the Land Titles Commissioner, Mr Benedict Betata [Annexure
5.44 The Chairman of the Central Supply and Tenders Board, Philip Eludeme, was
5.45 The Prime Minister was quoted as saying that “he had decided to establish a
Commission of Inquiry to examine the allegations that have been levelled against
senior ministers and senior members of departments.”
5.46 He reiterated that he had referred the matter to the Police Commissioner to enable
the Fraud Squad to carry out its own investigations and he also said that he had
referred the matter to the Ombudsman Commission.
5.47 The Post Courier reported on 10 February 2017 that a march of Manumanu,
Megabaira and Pinu landowners of the Kairuku-Hiri District had not eventuated
the previous day due to heavy police presence. The protest march was said to be
a protest against illegal land grabbing in Central Province, particularly the
Page 17 of 101
5.48 It was, on 8 March 2017, that the Prime Minister announced the establishment of
an “Administrative Inquiry”. The Post Courier is reported as saying that the
Prime Minister was not able to set up a Commission of Inquiry because of the
questioning of the validity of the Commissions of Inquiry Act. He said the
appointment would not prevent the ongoing investigations by the Police Fraud
Squad, the Ombudsman Commission, and the Department of Personnel
5.49 There were also allegations raised about the Portion 406 transaction in PNG
5.50 Both Dr Fabian Pok and Mr William Duma were reported as denying the
allegations of fraud.
5.51 Mr Duma was given considerable press in the Post Courier on 2 February 2017. He
was reported as saying said that there was nothing fraudulent in the process of acquiring
the land for relocation of the Defence Force facilities. He said that the Government
started the process through the NEC Decisions to relocate the military facilities.
This had occurred before he became Minister for Public Enterprises and State
Investments. He said the transactions were in line with the NEC Decisions, and
that the Department of Lands and Physical Planning, Department of Defence
and KCH were merely implementing the Government’s decisions.
5.52 He said the NEC had already given approval to KCH for the purchase of the Naval
Base before he became the Minister for Public Enterprises and State Investments.
He identified Portion 406 as being suitable for the relocation of the military barracks
and associated facilities. He said the PNGDF had requested the compulsory
acquisition of Portion 406 and that the PNGDF requested KCH to assist in the
payment of the K46.6 million to the former owner. Mr Duma said he did not at any
stage direct or influence any of the directors of KCH to make the decision to take
over the prime land on which the naval base was located. Mr Duma contended no
one had specified which of the transactions had appeared illegal and fraudulent.
5.53 On Wednesday 7 February 2017, KCH is said to have provided a brief to the
Police Commissioner, and on 8 February 2017 KCH provided a brief to the
5.54 On 13 February 2017, the Police Commissioner said that the matter had been
raised with the Director of Fraud and Anti-Corruption.
Page 18 of 101
6. Executive Summary
6.1 The Administrative Inquiry centred on five parcels of land, especially three
parcels of land located at Manumanu said to be required by the Department of
Defence for relocation of naval and military bases then located in Port Moresby.
6.2 The occupancy of a fourth parcel of land at Manumanu mentioned in the Terms
of Reference (Portion 154) was at all relevant times already in the ownership of
the State. It was unaffected by an existing State Lease as the former State Lease
over the land had expired in 2006 and had not been renewed. The State gave that
occupancy to the Defence Department on 9 December 2015. The issues raised in
this Inquiry do not therefore directly arise in relation to that land.
6.3 The Terms of Reference also identified a parcel of land near the airport in Port
Moresby which was purchased by the Department of Defence. The
Administrative Inquiry considered that the purchase of that land did require
investigation. However, that land was not purchased for the purpose of the
relocation of the naval base or barracks away from Port Moresby, and the
transaction relating to it was outside the central theme of the Statement of Case
and Terris of Reference.
6.4 There was a public outcry which centred at that time on the compulsory
acquisition of Portion 406, which had been compulsorily acquired for the sum of
K46.6 million. It was alleged to be a corrupt transaction and that the Government
had paid an excessive amount to purchase the land. In statements made
subsequently to suspended heads of departments, it was alleged that there had
been corrupt conduct on the part of officers of the Defence Department and other
departments, in particular the Lands Department. The heads of relevant
departments were suspended, as were two ministers, Messrs Pok (Defence) and
Duma (Public Enterprises and State Investments).
6.5 Shortly after the Administrative Inquiry was set up, Ms Sheila Sukwianomb,
Director Policy & Legal Branch, of the Lands Department, advised the Inquiry
that the relevant files relating to the properties the subject of the Inquiry had
6.6 The Administrative Inquiry took the view that that fact alone demonstrated that
there had been considerable impropriety which almost certainly included
financial inducements to public servants.
6.7 The Administrative Inquiry also considered that there were other features that
pointed to a similar conclusion. These features are dealt with in the body of the
Page 19 of 101
6.8 At the time the Administrative Inquiry was appointed, the validity of the
Commissions of Inquiry Act was under challenge in the Supreme Court. The
argument had been heard, but the Court had reserved its judgment. The judgment
was handed down recently, upholding the legislation.
6.9 The Government appointed this Inquiry as an “Administrative Inquiry”. The
issues had already been referred to the Police, and the Ombudsman Commission,
for investigation, and those investigations are understood to be continuing.
6.10 It must be understood that the Administrative Inquiry did not have the powers of
investigation of a Commission of Inquiry. As a result, the Inquiry could not
subpoena witnesses or documents, and it could not examine persons on oath. In
essence, the only material put before the Inquiry were official documents and
such departmental documents as the departments chose to give to the Inquiry.
Some members of the public gave information and documents as well.
6.11 The Administrative Inquiry reached the conclusion that the amount paid by the
State for Portion 406 was plainly excessive. It considered that the most plausible
explanation was financial inducement causing manipulation of the valuation
6.12 The Portion 406 transaction was the one which involved by far the highest
amount of compensation. It was acquired by way of compulsory acquisition from
Kurkuramb Estates Ltd, whose sole director and shareholder was one Christopher
Polos. Examination of the Portion 406 transaction showed unusual features other
than the amount paid for the land, a notable one being that the interest in the State
Lease was acquired less than three months after it had been granted to Kurkuramb
Estates Ltd. Kurkuramb Estates Ltd paid valuation fees only to acquire the land,
and within three months a compulsory acquisition process was initiated which
resulted in it being awarded K46.6 million by way of compensation for its
acquisition at the instance of the Department of Defence.
6.13 The lawyers for Mr Polos, Bradshaw Lawyers, forwarded to the Inquiry a letter
which advised the Inquiry that Mr Polos would not assist the Inquiry. Mr Polos
was within his rights in taking that stance because, as stated above, the
Administrative Inquiry had no power to compel attendance or cooperation. The
non-cooperation of Mr Polos, as well as the lack of its powers to inquire into the
affairs of Kurkuramb Estates Ltd were severely limiting features in the
investigative capacity of the Administrative Inquiry in this matter.
6.14 The Inquiry also related to the earlier compulsory acquisition of two properties
that were adjacent to Portion 406, namely Portion 422 and Portion 423. They had
been acquired slightly earlier, and the Administrative Inquiry reached the
conclusion that the amount paid for those allotments was also excessive. In those
cases, the land had been purchased in 2011 for an amount which represented
Page 20 of 101
K488 per hectare, whereas the amount of compensation awarded in 2015
represented approximately K55,000 per hectare.
6.15 Insofar as the information provided to the Inquiry constituted potential evidence,
it was all of a circumstantial nature. It saw no actual instance of information as to
payments made to other persons. This perhaps is not surprising since most of the
information given to the Inquiry was from the Departments. However, the
Inquiry thought that the most plausible explanation for the size of the government
valuation of the properties was financial inducement.
6.16 At the time the Inquiry was appointed, the matters that are the subject of the
Inquiry had already been referred to the Police and the Ombudsman Commission.
As distinct from the Administrative Inquiry, the Police and the Ombudsman
Commission have substantial investigative powers. The Administrative Inquiry
was of the view that, in the circumstances, findings of impropriety ought only be
made after full investigations have been made by bodies with coercive powers.
Full investigation was required to establish the extent of the wrongdoing and the
6.17 Despite the limitations it operated under, the Administrative Inquiry was however
able to establish a large number of facts relating to the transactions, and has been
able to indicate areas in which, in its view, further investigation is plainly
6.18 The actions of the Government in obtaining the properties brought about a
number of claims by persons who were asserting customary interests in the land.
The full text of the claims are annexures to the Report. The Administrative
Inquiry concluded, however, that all of the land in question had been acquired by
the Colonial Administration, and in all instances at some stage the properties had
become subject of State leaseholds. State leases were current in four of the five
properties at the time of their acquisition at the instance of the Defence
Department, and as a result, the Administrative Inquiry reached the conclusion
that none of these claims are viable.
6.19 For reasons that will be apparent from the Report, the Administrative Inquiry
considered that there would plainly be a case of corruption against Mr Duma if it
were the case that he controlled the affairs of Kurkuramb Estates Ltd.
6.20 For reasons that will also be evident from the Report, the Administrative Inquiry
found it very strange that the direction to the Lands Department to compulsorily
acquire Portion 406 came from Minister Pok, especially as there was no Defence
Council recommendation for the acquisition of Portion 406 and there had been no
feasibility study. The Administrative Inquiry thought the allegation of corruption
against Dr Pok would be strengthened if Mr Duma were shown to have been in
control of the affairs of Kurkuramb Estates Ltd. The reasons for this conclusion
appear in Section 11.
Page 21 of 101
6.21 The position of the heads of departments involved in the matter is considered in
Section 13 of the Report.
Page 22 of 101
7. Lack of Cooperation by Kurkuramb Estates Ltd
7.1 On 18 May 2017 the Inquiry received a letter from Messrs Bradshaw Lawyers.
The letter indicated that Bradshaw Lawyers were acting on behalf of Kurkuramb
Estates Ltd. The letter made reference to the establishment of the Inquiry, and
noted that the term, “g”, of the Terms of Reference for the Inquiry stated:
“Inquire into whether there was any impropriety in the transactions and as to who
benefitted from the transactions”.
7.2 Bradshaw Lawyers stated that their client was concerned about the above term,
particularly the requirement that the Administrative Inquiry should inquire “as to
who benefittedfrom the transactions”.
7.3 Part of the letter pointed out that the client of Bradshaw Lawyers was a company,
and the client’s shareholder was a private individual.
7.4 The letter proceeded to state that “our client therefore cannot be subject to” an
Administrative Inquiry. The letter concluded: “We are instructed that our client
won’t agree to or participate in any investigation or inquiry into or concerning
terms (0 above”.
7.5 The analysis of the transactions made by the Administrative Inquiry shows that
the most significant transaction, especially in money terms, was the transaction
involving Kurkuramb Estates Ltd, namely the compulsory acquisition of Portion
406 at Manumanu. Also, Item (8) in the Terms of Reference is an aspect of the
company’s affairs with which the Inquiry was particularly concerned.
7.6 Not having the powers of a Commission of Inquiry, the Administrative Inquiry
was not in a position to dispute the content of the letter from Bradshaw Lawyers.
The consequence was that no information, or documentation, could be obtained
from either Kurkuramb Estates Ltd or its principal, Christopher Polos. The
Administrative Inquiry was not able to require Mr Polos to attend and give
evidence on oath.
7.7 It will be evident however from the analysis of the Portion 406 transaction in this
Report that the inquiry into Kurkuramb Estates Ltd, its registered principal and its
documentation would be an essential part of any proper investigation into the
compulsory acquisition of Portion 406.
7.8 The Administrative Inquiry wishes to make it clear that Mr Polos was perfectly
entitled to take the stance indicated above. In circumstances in which the
Administrative Inquiry was not entitled to require Mr Polos to cooperate, Mr
Polos was not bound to assist the Administrative Inquiry.
7.9 The letter of 18 May 2017 from Bradshaw Lawyers is Annexure 7(1).
Page 23 of 101
8. Portion 154
8.1 One of the areas of land which the Department of Defence proposed to utilise for
the relocation of the military installations is described as Portion 154. That land
is proximate to Portions 406, 422 and 423, Manumanu. Unlike the other parcels
of land at Manumanu referred to in the Terms of Reference, Portion 154 was not
acquired for the purpose of relocation of military installations. Instead, as a
previous State Lease over the property had expired in 2006 with no further
subsequent grant of lease the land, it was capable of being applied to Defence use
by means of the usual procedure followed in such instances, namely grant of a
Certificate of Occupancy by the State in favour of the Department of Defence.
That is what occurred in this case. A Notice of Reservation was signed by Mr
Sipison, the Secretary for Lands and Physical Planning, on 9 December 2015
[Annexure 8(1)], and advertised in the National Gazette on 10 December 2015
8.2 A submission was made to the Administrative Inquiry by Mr Java Beraro. Mr
Beraro stated he was the representative of “Magabaira Village — Kabadi”
8.3 The accompanying statement disputed the State title to the “Southern portion of
Portion 154, Land in Kabadi, Central Province”. [Annexure 8(3)]
8.4 As previously stated, the Administrative Inquiry was advised on 20 June 2017,
that the Lands Department files relating to Portion 154 were among the missing
files at the Department. That information was part of broader information given
to the Administrative Inquiry by Ms Sheila Sukwianomb, Director — Policy &
Legal Services, Department of Lands, as to the “files missing” in the department.
8.5 Accompanying documentation to Mr Beraro’s statement included a letter from
Central Provincial Administration Lands & Planning dated 24 January 2011. The
letter was signed by Gelu Raga, Lands Officer [Annexure 8(4)].
8.6 Mr Raga stated that Portion 154 was acquired State land. He stated that the
nature of the title was as documented in a document marked “DA213” . He stated
that the area was 2023.43 hectares, as shown by registered Survey Plan 48-19.
8.7 He stated that “the status of land under such acquisition is usually fully
8.8 Mr Raga further stated that “a registered manual lease” for 99 years had issued in
favour of Kanosea Estate in 1907. The term of the lease was from 19 April 1907
to 19 April 2006.
8.9 Mr Raga concluded that the land was “State land with an expired registered
Page 24 of 101
8.10 The Department of Lands has stated that the document “DA213” is a missing
document. Despite the fact that that document cannot be produced for
examination, the Administrative Inquiry sees no reason for going behind the
content of Mr Raga’s letter.
8.11 Accordingly, the Administrative Inquiry concluded that the claim described by
Mr Beraro is not a viable claim.
8.12 Other customary rights claims are dealt with in Section 14.
Page 25 of 101
9. Portions 422 and 423
9.1 Portions 422 and 423 may be dealt with together.
9.2 The recent history of Portions 422 and 423 Manumanu is that, prior to 2011, there
was an allotment of land in Manumanu which was owned by Seromu Investments
Ltd. Its property description was Portion 389, Milinch of Manu, Fourmil Aroa.
That land had been the subject of State Leases commencing in 1968. It was
proximate to Portion 154, the area referred to in the previous section of this
Report, and also proximate to Portion 406, which will be dealt with in Section 10.
9.3 In 2011, companies associated with Mr Philip Eludeme agreed to purchase part of
Portion 489, for the sum of K200,000. The land was then subdivided. Three
portions were created, Portion 422, Portion 423, and Portion 2724.
9.4 As a result of these arrangements, Portion 422 became the subject of a new State
Lease issued in favour of Flystone Amusements Ltd, and Portion 423 became
subject to a lease to Kosi Investments Ltd. Those companies were the companies
associated with Mr Eludeme.
9.5 The land purchased by Flystone Amusements Ltd contains 138.45 hectares. It
was initially called Portion 2722, but it became Portion 422. The portion acquired
by Kosi Investments Ltd was initially Portion 2723, and it became Portion 423. It
contained 170.5 hectares.
9.6 The third portion, being the portion that was not subsequently compulsorily
acquired, contained 100 hectares. It appears to have retained its portion number
9.7 The total area of the land purchased by the Eludeme interests was therefore 409
hectares. The purchase represented a per hectare purchase price of K488. Mr
Eludeme said he had incurred survey fees of K60,000 following the purchase and
also that he had fenced the land.
9.8 The two portions of land the subject of the Inquiry were advertised for sale in
November 2014 through Mr Eludeme’s agent, Belden Memi & Associate
Valuers, Auctioneers and Real Estate Agents.
9.9 Belden Memi & Associate Valuers, Auctioneers and Real Estate Agents
advertised Portions 422 and 423 for sale in November 2014. The advertisements
were published on 18 November 2014 and 20 November 2014. The
advertisements were identical and one of the advertisements is Annexure 9(1).
Portion 422 was advertised in the following terms:
“138.45 Hectares, boundary fence, access roads, 1 x cow paddock under
construction, 2 water ponds, adjacent to Hiritano Highway, fairly flat all
9.10 Portion 423 was advertised as follows:
Page 26 of 101
“170.85 Hectares, boundary fence, access roads, leads to sea, adjacent to
Hiritano Highway, and Portion 2722.”
9.11 A written submission was prepared in relation to this matter on behalf of the
Eludeme interests by Messrs Sirae and Co. Lawyers dated 11 May 2017.
9.12 In the submission, it is stated that, on 5 March 2015, Belden Memi & Associate
Valuers, Auctioneers and Real Estate Agents rejected an offer by the Department
of Defence to purchase the properties [Annexure 9(2)]. It is said that the
Department of Defence offered K7.2 million for Portion 422 and K9.2 million for
Portion 423 [Annexure 9(3)].
9.13 That was followed by the issue of a Notice of Compulsory Acquisition in respect
of each of the pieces of land. That notice, which also embraced other properties
not relevant to this matter, was signed by Romilly Kila Pat as delegate of the
Minister for Lands and Physical Planning. The Notice, which is annexed
[Annexure 9(4)], declared that the land was being “compulsorily acquired for
public purposes and purposes connected with the defence or public safety of the
Papua New Guinea being for the relocation of the Defence Force Murray
9.14 The Notice of Compulsory Acquisition was issued on 22 April 2015, following
which Belden Memi and Associates indicated, by letter dated 27 April 2015 to the
Defence Council, that the owners would agree to sell the land. The Defence
Council had approved the purchase of the two Portions on 27 February 2015
9.15 The Lands Department issued Notices to Treat dated 22 November 2015 to
Flystone Investments Ltd [Annexure 9(6)] and Kosi Investments Ltd [Annexure
9(7)]. These notices were signed by Mr Luther Sipison, the then Secretary of
Lands and Physical Planning in his capacity as delegate of the Lands Minister.
Presumably this step was taken because Notices to Treat had not been served
earlier in the year, notwithstanding the issue of Notices of Compulsory
Acquisition at that time.
9.16 A Notice of Compulsory Acquisition of Portion 422 and Portion 423 was reissued
on 30 November 2015 [Annexure 9(8)], after the Ombudsman had, on 9 October
2015, issued a clearance for the transaction to proceed on a compulsory
acquisition basis. The transactions were finalised on 3 December 2015 by way of
instruments entitled Sale and Transfer of Land [Annexure 9(9)] and Deed of
Release [Annexure 9(10)]. Subsequently, a Certificate under Section 13(6) of the
Land Act 1996 was published in the National Gazette on 24 December 2015
dispensing with the notice to treat process [Annexure 9(11)].
9.17 As stated above, Mr Eludeme was, until his suspension on 8 February 2017,
Chairman of the Central Supply and Tenders Board. The Central Supply and
Tenders Board had a prior involvement with the matter in that, at an earlier stage,
the Board advertised publicly for procurement of land for the Department of
Defence’s intended purposes, and a tender process was put into place.
Page 27 of 101
9.18 Mr Eludeme’ s lawyers dealt with this issue in the written submissions. They
“As far as our client is aware, in respect of CSTB tender process, CSTB
advertised publicly sometime back for procurement of land for the
Department of Defence ‘s intended purpose, however, there were no bids
for the tender. There being no bids for the tender, the Department of
Defence was advised of the same and that there was nothing else the CSTB
can do under its tender process. That it was now up to the Department to
acquire land on its own.”
9.19 Mr Eludeme also disclosed a letter he wrote to the Ombudsman Commission
dated 10 July 2015. In that letter Mr Eludeme disclosed as “major transactions”
the compulsory acquisition of Portion 422 for K7.2 million from Flystone
Amusements Ltd by the Defence Force of Papua New Guinea, and the
compulsory acquisition of Portion 423 from Kosi Investments Ltd by the Defence
Force for the sum of K9.2 million. He disclosed that the two companies were
owned by him and his family members, and he stated that the interest in those
companies had also been disclosed in his annual returns to the Chief
Ombudsman. He further stated that he disclosed the transactions under section 4
of the Organic Law on Duties and Responsibilities of Leaders and Public
9.20 He asked the office to inform him urgently should it wish to inquire, or require
further information, or did not agree with the transactions going through.
9.21 The letter concluded:
“Please be advised that should I not have any word from you within the
next 14 days, I will assume [the Ombudsman Commission] has no issues
and will allow the transactions to proceed.”
9.22 Copies of the letter were sent to various people, including Mr Romilly Kila Pat,
the then Secretary of the Department of Lands and Physical Planning.
9.23 Mr Eludeme also disclosed to the Inquiry the reply of the Acting Chief
Ombudsman. The reply letter referred to the fact that the Ombudsman
Commission had, on 1 October 2015, granted Mr Eludeme approval to go ahead
with the major transactions he declared to the Commission his letter of 10 July
2015. The letter had permitted Mr Eludeme to proceed with his arrangements
with the relevant government entities and the relevant banks “in finalising those
9.24 The Commission proceeded to advise Mr Eludeme that if, in the course of
conducting his leadership duties and responsibilities in the future, a conflict of
interest situation arose, he should notify the Ombudsman Commission as soon as
Page 28 of 101
9.25 The letter thanked Mr Eludeme for notifying the Commission of the “major
transactions involving you and your companies”.
9.26 Mr Gabriel Du Karap of GDK Valuers and Property Consultants, who is a private
registered valuer, valued Portion 422, as at 1 March 2015, at K7. 2million. He
valued Portion 423 at K9.2 million as at 1 March 2015.
9.27 Mr Du Karap’s valuations are Annexures 9(12) and 9(13) respectively.
9.28 These valuations represented K52,004.33 per hectare for Portion 422, and
K53,848.41 per hectare for Portion 423.
9.29 The wording on the Du Karap valuations would suggest that Mr Du Karap made
his valuations on behalf of the Department of Defence, but apparently he was
instructed by Mr Eludeme’s agent, Belden Memi and Associates. Mr Moses Kila,
the Assistant Valuer General, signed valuations at slightly higher figures than Mr
Du Karap’s figures. Mr Kila’s valuations are Annexures 9(14) and 9(15)
9.30 What the Panel finds strange about the transactions with respect to Portions 422
and 423 is the valuation evidence.
9.31 Mr Eludeme’s agent put forward to the Lands Department the valuations prepared
by Mr Du Karap, a former Lands Department employee who had become a
private valuer. His valuations reflected a value in excess of K50,000 per hectare.
For reasons advanced elsewhere in this Report, the Panel considers that that value
is vastly excessive.
9.32 It is not unusual in valuation for the owner’s valuer to put forward a high
valuation. As has often been said, valuation is not an exact science, and the
owner’s valuer can legitimately put forward a valuation which is as high as he can
genuinely support by way of argument.
9.33 One then expects the acquiring authority’s valuer to produce a valuation which at
least exposes the fact that the owner’s valuation is or may be excessive.
9.34 In this case, Mr Kila’s valuation did not achieve that effect because Mr Kila’s
valuation, in the case of both properties, was even higher than the owner’s
valuation. One would expect Mr Kila’s valuation to place emphasis on the fact
that the same land had been purchased by Mr Eludeme’s interests in 2011 for a
price which reflected K488 per hectare, particularly as Mr du Karap’s valuation
must have placed little if any emphasis on that.
9.35 The earlier transaction reflecting K488 per hectare was said by Mr Eludeme to be
a forced sale. However, it was also a sale in the market place, and it was the sale
of the same land only a few years earlier. Ordinarily, it would have to be viewed
as an extremely significant indicator of value, if not the most significant indicator.
9.36 The Administrative Inquiry was of the view that the most plausible explanation
for Mr Kila’s valuation and behaviour was financial inducement. On Mr Gabriel’s
Page 29 of 101
account, Mr Kila had no right to carry out valuations for amounts over K500,000
at all. The valuations he produced on their face appeared to be stamped and
signed in such a way as to convey the impression that they were prepared by the
Valuer General. They give no indication that they were prepared by Mr Kila. In
the case of Portion 422 and 423, he produced valuations which could not have
taken into account the previous sale of Manumanu land, of which the land being
valued was a part. He claims to have relied, for comparable sales, on land in, and
in the vicinity of, Port Moresby, whereas this land was 80 kilometres away.
9.37 When first interviewed by the Administrative Inquiry he did not mention his
valuation of Portions 422 and 423, but only his valuation of Portion 406.
9.38 Mr Kila stated that he had received no financial benefit from his valuations.
9.39 For his part, Mr Eludeme claimed that he had nothing to do with the valuation
9.40 The valuation issue is further addressed in Section 12. The Administrative Inquiry
questioned both Mr Kila and Mr Eludeme. Significantly, however, the
Administrative Inquiry was not entitled to cross-examine either Mr Eludeme or
Mr Kila on oath. That was a restrictive feature of the limited investigative
powers which applied to the Administrative Inquiry and which was of special
relevance in this instance.
9.41 The Portion 422 and 423 transactions, therefore, must be placed alongside other
items which require further investigation.
Mr Eludeme — Panel’s Conclusions
9.42 As stated above, Mr Eludeme informed the Administrative Inquiry that he had
nothing to do with the valuation of Portions 422 and 423. He also said that the
Du Karap valuations were obtained by his agent.
9.43 It would appear surprising that Mr Eludeme would have taken no interest in the
valuations, particularly as he was the Chairman of the Central Supply and
9.44 In the compulsory acquisition of Portion 422 and Portion 423 it was plainly a
highly desirable factor, from the point of view of the owner of the land, that Mr
Kila should produce valuations which were in higher sums than the amounts
contained in the valuations of the private valuer, Mr Du Karap. That factor in
real terms rendered the situation one in which it could not be successfully argued
by the State that the compensation should be any less than Mr Du Karap’s
9.45 Neither of those factors however proves that Mr Eludeme provided Mr Kila with
financial inducement to produce unduly favourable government valuations of
Portions 422 and 423.
Page 30 of 101
9.46 As the principal of the corporate owners of Portions 422 and 423, Mr Eludeme
would have benefited from any action directed at inflating the assessment of the
value of Portions 422 and 423 for the purpose of the compulsory acquisition of
those properties. Accordingly, further investigation of these transactions should
entail further investigation of the circumstances surrounding the compulsory
acquisitions of Portions 422 and 423, including the relationship (if any) between
these transactions and the Portion 406 transaction. That is not to say that it is
likely that further investigation will establish a case against Mr Eludeme. Further
investigations may in fact establish the reverse, namely that there is no case
against Mr Eludeme. But, for the reasons advanced, further investigation is
Page 31 of 101
10. The Portion 406 Transaction
(1) Former State Lease
10.1 In 2009 a State Lease was granted over Portion 406 in favour of M&M
Investments Pty Ltd. The commencement date was 6 August 2009.
10.2 The lease was made subject to the following conditions:
(a) The lease shall be used bona fide for Agriculture (Mix Farming) purpose.
(b) Rent shall be a One Thousand Five Hundred (1,500.00) Kina per annum for the
first ten (10) years of the lease at which time the annual rental will be
reassessed at five per centum (5%) of a reappraised valuation of the subject
land or at whatever other rate that maybe decided as being appropriate at the
time and such reappraisals shall be made every ten (10) years thereafter.
(c) Of the land suitable for cultivation the following proportions shall be planted in
a good and husbandlike manner with a crop or crops of economic value which
shall be harvested regularly in accordance with sound commercial practice.
i. One-fifth in the first period of five (5) years of the term;
ii. Two-fifths in the first period of ten (10 years of the term; and
iii. Three fifths in the first period of fifteen (15) years of the term.
(d) Provided always that at any time during the first period of two (2) years it
appears to the Land Board that reasonable efforts are not made to fulfil the
improvements conditions, it may recommend the Minister for Lands, may if he
thinks fit by Notice in the National Gazette in accordance with the provisions of
the Land Act No. 45 of 1996 forfeit the lease accordingly.
(e) The lessee or his agent shall take up residence or occupancy of his/her block
within six (6) months from the date of grant.
10.3 A map attached to the State Lease showed the area of Portion 406 to be 847.25
10.4 A Notice issued by the Secretary for Lands set out the application fees payable by
M&M Investments Pty Ltd as follows:
• Survey fee K600
n Lease preparation fee K 50
10.5 There was an accompanying document prepared by Mr Chris Kabaru, the then
Valuer General. That document stated that the land was located outside the
Page 32 of 101
physical planning development area and was classified as Rural and suitable for
agricultural development. It stated that no services were connected to the property
and all amenities like shops, schools, banks, general hospital, post office and local
market were provided from Port Moresby.
10.6 The document stated that the land is located approximately 75 kilometres west of
Port Moresby along the Hiritano Highway.
10.7 The Valuer General noted that the land was “generally level throughout”, a
feature which the Panel observed on inspection of the property.
10.8 The unimproved value of the land upon which the annual rental was based, was
assessed at K30,000 as at 25 February 2009. This assessment of the unimproved
value of the land amounted to a per hectare value of slightly more than K35 per
10.9 An accompanying Inspection Report stated that there were no improvements on
the land. It stated there once existed improvements consisting of a house, sheds,
gates, fencing and windmill. These items were all removed by people living
nearby after a cattle ranch had ceased its operation on the land in the early 1990s.
The Inspection Report states that the previous cattle ranch was known as the
Rorona Cattle Ranch. The report also stated that the Portion was mostly flat,
unoccupied and undeveloped.
10.10 M&M Investments Pty Ltd was said to be a 100% national owned company of
which the principal owners were from the Kenosi area.
10.11 The Inspection Report revealed that the company had lodged an expression of
interest letter which contained its proposals for the development of the area plus a
business plan. The business plan revealed that the company wished to establish a
10.12 The company had indicated it would secure funding of about K2 million through
the Livestock Development Corporation, a State-owned entity. In addition, it was
indicated that the applicant would like to procure stock and rebuild the ranch on
10.13 Mr George Michael Sariman was a director of M&M Investments Pty Ltd. Mr
Sariman provided the Administrative Inquiry with a number of development and
business proposals which had been prepared for Portion 406, one of which was
for the prospective cattle ranch development. Another development proposal was
a Poultry development including a feed mill. Another proposal was a cocoa
development and the fourth was a subdivision proposal.
10.14 It is a reasonable inference that none of the proposals was put into place before
the Lands Department took action to forfeit the M&M Investments Pty Ltd lease
10.15 Mr Sariman says that title was granted to his company on 13 October 2009,
following which he undertook a number of development plans and feasibility
Page 33 of 101
studies, and that the company consulted various financiers, potential development
partners and other potential stakeholders.
10.16 He says that, in 2011, his company commenced the “Rorona Redevelopment
Project” as planned, and was in dialogue with the Livestock Development
Corporation. He says that the project did not materialise when there was a
change in the hierarchy in that entity.
10.17 He states that the company then went into planning and researching other
agriculture options. He says the company was approached by a number of
potential development partners and financiers. Whilst those negotiations were
still pending the company undertook a chicken farming and poultry processing
operation, and cocoa development. He says the company also engaged the
services of a surveyor to do a ground re-survey of the land providing for
subdivision into 5 portions.
(2) Forfeiture of M&M Investments’ State Lease
10.18 Mr Sariman states that M&M’s surveyor was attending to the matter of the
registration of the prospective subdivision when he saw a Notice to Show Cause
dated 28 February 2014, a forfeiture notice dated 14 April 2014, and a gazettal of
the forfeiture notice G151 of 24 April 2014.
10.19 Mr Sariman said his company had not received or seen a notice of any kind in
relation to the forfeiture.
10.20 He subsequently saw a further notice, namely a “Notice of Compulsory
Acquisition”, which was published in The National newspaper.
10.21 Mr Sariman states he was shocked to learn that the company’s land had come into
the ownership of Kurkuramb Estates Ltd.
10.22 On 23 February 2016, the company engaged Wariniki Lawyers to act on its
10.23 M&M Investments Pty Ltd instituted proceedings in the National Court
challenging the forfeiture of the land by the Department of Lands, and the
subsequent compulsory acquisition. The defendants named in the proceedings
include the Independent State of Papua New Guinea, Kurkuramb Estates Ltd and
Kumul Consolidated Holdings.
10.24 The Administrative Inquiry does not propose to address the entitlement of the
State to effect the forfeiture of the interests of M&M Investments Pty Ltd partly
in view of the fact that that issue is before the National Court. Furthermore, the
unavailability of the Lands Department file would render any attempted
resolution of that issue difficult, as would the fact that the Administrative Inquiry
is not in a position to resolve factual issues that appear to be involved, in
particular as to whether a notice of forfeiture was served on M&M Investments
Pty Ltd in accordance with the requirements of s. 122 of the Land Act 1996.
Page 34 of 101
10.25 The Administrative Inquiry does however propose to comment on the separate
issue of the motive behind the forfeiture action taken by the Lands Department.
The issue in that regard is whether the forfeiture action was genuine forfeiture
action on the basis that M&M Investments Pty Ltd had not carried out the
improvement conditions or whether, on the other hand, officers of the Lands
Department effected the forfeiture for an ulterior motive or motives.
10.26 In support of the view that the forfeiture was a bona fide forfeiture procedure is
the fact that an inspection of the land at about the time of the forfeiture would
probably have revealed non-compliance with the improvement covenants. As
indicated above, the companies planned enterprises had not come to fruition as
planned. Furthermore, Mr Sariman has not suggested that he kept the Lands
Department informed of the progress he was making in his endeavour to establish
a commercial enterprise.
10.27 On the other hand, there was no evidence that the Lands Department made any
comprehensive inquiry to ascertain how the company was progressing. The
action of the Lands Department is also inconsistent with the Panel’s belief that
there were and are many cases in Papua New Guinea of landowners who have not
complied with improvement conditions but whose land has not been forfeited.
10.28 The forfeiture may have occurred because the Lands Department officers had
knowledge of the prospect that Portion 406 might become of interest to investors,
and may even have had advance warning of potential interest in the area by the
Defence Department. They may have wished to clear M&M Investments Pty Ltd
off the title for that reason. An illicit motive behind the forfeiture is more
consistent with the removal of the file relating to the forfeiture action. If the
forfeiture had been a genuine forfeiture based on non-compliance with covenants,
there would appear to be no reason why there would be any interest in causing the
removal of the file relating to that transaction.
10.29 An associated possibility is that Portion 406 was actually identified by Lands
Department officers as a property that could be recommended to Defence for
relocation purposes, and that the forfeiture action was taken for that reason. Of
course, another possibility is that the forfeiture was genuine, but an astute
observer of State Lease forfeitures observed that the forfeited land was land
which was or might become of interest to the Defence Department.
10.30 The file relating to the advertising of the land and its grant to Kurkuramb is
missing, although it is known that a State Lease was granted to Kurkuramb of
Portion 406 on 30 July 2015 [Annexure 10(1)]. It is also a very unusual feature
that Portion 406 was advertised for tender in circumstances in which adjacent
land (i.e. Portions 422 and 423) was being sought by the Department for defence
purposes. If the forfeiture of Portion 406 was genuine, one would have thought
the inquiries would have been made of the Defence Department at that point in
time. The Lands Department and its valuers were involved in the acquisition of
422 and 423. Those acquisitions took place over almost the whole of 2015, the
very period in which the grant of Portion 406, and the subsequent compulsory
acquisition of Portion 406, occurred.
Page 35 of 101
( 3) The Defence Decision in Favour of Manumanu
10.31 On 27 February 2015 the Defence Council, by decision number DCO 05/2015
had approved Portions 2722 and 2723, Milinch of Manu, and Fourmil Aroa, for
the new Defence Force site. The Defence Council noted that Portion 2722
comprised 138.45 hectares and its sale value was K9million. It also noted that
Portion 2723 comprised 170.85 hectares and its sale value was K 13million. As
indicated previously Portion 2722 subsequently became Portion 422, and Portion
2723 became Portion 423, and those Portions were acquired later in 2015 from
Flystone Amusements Ltd and Kosi Investments Ltd. As previously stated, these
Portions are adjacent to Portion 406. The detail of the purchase of those portions
was set out in section 8.
10.32 In relation to the relocation of the Lancron Naval Base the Defence Council
“… that the relocation of the Lancron Naval Base, HMPNGS Basilisk has
recommended investigation under the same program and may have a bearing on
the budget however discussions is ongoing with PNG Ports to provide upfront
payment for the sale of the Lancron which can be used to acquire land for the new
10.33 On 25 August 2015 a meeting occurred between Mr Hersey, the Managing
Director to Kumul Consolidated Holdings, a State Enterprise, the Commander of
the PNGDF, the Defence Secretary and the Defence Project Director, to discuss
the relocation of the Lancron Naval Base. Apparently further meetings occurred
over the next 12 months, but the records of any such meetings have not been
made available. Kumul Consolidated Holdings is a statutory corporation
established under the Independent Public Business Corporation of Papua New
Guinea (Kumul Consolidated Holdings (Amendment Act) 2015.
10.34 On or about 21 October 2015, presumably as a result of the above meetings, a
non-binding Memorandum of Understanding (“MOU”) was entered into between
KCH and the PNGDF to facilitate the relocation of the Lancron Naval Base. The
MOU was to operate for a period of 12 months. The relevant terms were as
“Article 4 The KCH to draft a Project Plan and Project Budget in relation to
the efficient relocation of HMPNGS BASILISK from Lancron to a
location to be nominated and selected by the Defence in
accordance with the mechanisms set out in the said Project Plan
and Project Budget. KCH will submit the Project Plan and
Project Budget for review within 3 (three) months from the
execution of this MOU
Article 5 The Defence will provide all the necessary information such as
the facility requirements, concept plans, cost estimates etc. if
Page 36 of 101
available, upon request by KCH to assist KCH in the preparation
of the project plan and budget.
The KCH and Defence are to jointly prepare a Business Case for
Article 6 review and adoption by the Parties within 3 (three) months from
the execution of this MOU.
Article 7 Both parties to work together in implementing a Business Case
for the sale of the navy base (Section 53 Allotment 9, Granville,
and NCD) and to relocate to a new site.”
10.35 It seems that no Project Plan and/or Project Budget was ever prepared as
envisaged by the MOU.
10.36 Further, the Inquiry has sighted no “Business Case”.
10.37 In a draft and unsigned submission to the Defence Council dated January 2016,
the following was noted in relation to “possible sites for the relocation of
15. Since the agenda for the relocation of BASILISK was first mooted a
number of persons and entities who have varying degree of interest in
the relocation have proposed potential sites for the relocation of
HMPNGS BASILISK These sites include:
15.1 Arutu Land, 226 hectares (Next to PNG Dockyard-Motukea)
15.2 Avenel Engineering Services, 10 hectares (Fairfax Harbour)
15.4 Bootless Bay
16. The suitability of the sites however have been subject to normal military
considerations such as strategic, tactical, logistic, base support and
security etc. Initial Plans Branch analysis reveals the follows:
16.1 Gabadi — no detail available
Page 37 of 101
16.2 Gavuone — Identified as not suitable
16.3 Gaba-Gaba — Details not available
16.4 Bootless Bay — Details not available
16.5 Rigo — Details not available
16.6 Avenel Engineering Services, 10 hectares (Fairfax Harbour) far too
16.7 Arutu Land, 226 hectares (on offer to PNGDF)
17. Initial analysis reveals that the best option among all the possible sites
being suggested is the Arutu Land comprising 226 hectares next to PNG
dockyard — Motukea. Land ownership has been confirmed by three (3)
Land Court cases, ILG registration and Landowners sponsored survey of
the customary land
18. Arutu Land is on offer to PNGDF for the relocation of HMPNGS
BASILISK Ownership issues of the other sites have not been
established, and if required to do so may take a lengthy period of time.”
10.38 The document is an example of the lack of mention of Portion 406 in Defence
documentation. As will be apparent from the discussion below, the Defence
Force was actively seeking to obtain land at Manumanu during 2015, and had in
fact recommended the purchase of Portions 422 and 423 for that purpose on 27
February 2015. Yet Manumanu is not mentioned on the list.
10.39 By letter dated 15 October 2015 the Minister for Defence, Hon. Dr Fabian Pok
MP, wrote to the Acting Secretary of the DLPP in the following terms:
“My Ministry and PNGDF have identified Portion 406 and 154, Milinch
Manu, Aroa, Central Province as suitable locations for the construction of a
new military barracks and associated facilities.
As Portions 406 and 154 are currently Agricultural Leases held by private
interests I request the Department of Lands to compulsorily acquire these
portions for the State (PNGDF) for military purposes under the compulsory
acquisition process provided in the Land Act.”
10.40 That statement was incorrect inasmuch as Portion 154 was always the property of
the State, having reverted to the State when the earlier State Lease expired in
10.41 The Minister’s response on 15 October 2015 appears to be the first time Portion
406 had been officially mentioned as a site. However, it will be recalled that on
Page 38 of 101
27 February 2015 the Defence Council appears to have approved Portions 2722
and 2723 for the new Defence Force site. As stated above, those portions (now
Portions 422 and 423 respectively) are adjacent to Portion 406 at Manumanu. Of
course, it may well be that Defence had shown interest in the Manumanu area
prior to 27 February 2015 and, as 27 February 2015 was the date of the approval
of Portions 422 and 423 for that purpose, it would be surprising if that had not
been the case. A review of facts given to the Prime Minister in this matter stated
that it was in 2014 that the Defence Ministry and Organisation had identified the
two portions of land that became Portion 422 and Portion 423 [See Annexure
10.42 The basis for the selection of Portion 406 is not clear. Its acquisition does not
appear to have been endorsed by the Defence Council, and there is no information
to suggest that its acquisition was ever supported by a feasibility study. Further,
at Manumanu the Defence already had 2331 hectares available, namely 2023
hectares on Portion 154, 138 hectares on Portion 422, and 170 hectares on Portion
423. Further, Portion 406 was well away from the sea.
10.43 As indicated below, KCH appointed an Independent Committee to investigate
allegations of misconduct by its Managing Director, Mr Hersey.
10.44 The Independent Committee appointed by KCH referred to the fact that Mr
Hersey was advised that the PNGDF had acquired land adjacent to Portions 422
and 423, namely Portion 154, Milinch of Manu, Fourmil Aroa, Central Province.
Such advice was given in February 2016.
10.45 Such advice was incorrect if only because, as stated above, Portion 154 was at all
material times owned by the State, the earlier State Lease having expired in 2006.
However, the advice demonstrated that Defence had realised for some time that it
would be in order for it to use the vacant Portion 154 for Defence purposes.
10.46 The advice to Mr Hersey was in the following terms:
“… [the PNGDF] has also identified another portion of land located adjacent to
those three (3) already acquired, that backs onto the sea there that would be very
conducive for our new naval base to be relocated there.
That land is described as Portion 406, Milinch of Manu, Fourmil Aroa,
Central Province which has been valued by the Valuer General for a sum of
K46,600,000.00, and it has a total land area of 2000 hectares.
We have done all the process required by the Department of Lands to transfer
the title of that agricultural State lease over to our organization already and
now have it reserved for PNGDF purposes awaiting payment to be made to the
former leaseholder so that it can give vacant possession of it [to] us.
There has been ongoing negotiations with PNG Ports Limited as your agent to
purchase our Naval base at Port Moresby harbour since that NEC decision to
Page 39 of 101
relocate it, and in that regard we propose that your organization purchase the
new location (Portion 406, Milinch of Manu, Fourmil of Aroa, Central
Province) for us to relocate our naval base there and we will liaise with the
Department of Lands to transfer our title over Lancron Naval Base over to our
organization to facilitate your redevelopment plan there to build Lakatoi city as
We leave this proposal unto your good self to bring before your board to
deliberation and approval if all is in order.”
10.47 The relevant letter is dated 26 February 2016 and co-authored by Mr Vali Asi,
Secretary for Defence and Brigadier General Gilbert Toropo [See Annexure
10.48 The terms of the proposal from the Secretary of Defence and PNGDF
Commander therefore provided that:
(a) the PNGDF (through the State via the DLPP) had compulsorily acquired
Portion 406 in accordance with the Land Act 1996;
(b) compensation would be payable to the landowner for the compulsory
acquisition, which would be paid by KCH on behalf of the PNGDF; and
(c) in exchange for the payment of such compensation on its behalf, the
PNGDF would arrange the transfer of ownership of the Lancron Naval
Base to KCH.
10.49 As the Independent Committee appointed by KCH pointed out, the proposal was
“problematic for several reasons”:
(a) The PNGDF did not own the Lancron Naval Base and had no right to
sell it. The land was owned by the State and was reserved for the
purpose of public defence. The PNGDF only had rights of occupation;
(b) The restrictions applicable to the Lancron Naval Base would equally
have applied to Portion 406;
(c) The Secretary for Defence had no power to bind the State unless
expressly so authorised. Without such express authorisation, any
purported power of sale exercised by the Secretary for Defence as
regards the Lancron Naval Base would be ultra vires or outside the
scope of the Secretary’s powers.
(4) Grant of Portion 406 to Kurkuramb Estates Ltd
10.50 As stated above Portion 406 was the subject of the issue of a State Lease issued
on 30 July 2015. The State Lease was expressed to be for agricultural purposes.
It was issued to Kurkuramb Estates Ltd (KEL) in respect of the whole of Portion
Page 40 of 101
10.51 It has not been possible to examine the chain of title for Portion 406 because the
file in the Lands Department cannot be found. Accordingly, it is not known
precisely how the land came to be in the hands of KEL. It is one of the files that
has “disappeared”. It is said that there were three applicants for the land, and the
Land Board recommended KEL as being the successful applicant. Precise details
of the dealings that preceded the issue of the title are also not known although, as
stated elsewhere, it is known that Portion 406 had earlier been the subject of
forfeiture when owned by Mr Sariman’s company, M&M Investments Pty Ltd,
such forfeiture being based on alleged non-compliance with development
conditions to which the State Lease was subject.
10.52 An examination of the State Lease reveals that the unimproved value of Portion
406 as at 30 July 2015 was said to be K84,420. The area comprised 847.25
hectares. This represented K99 per hectare.
10.53 Following receipt of Dr Pok’s letter, on 21 October 2015 a Notice to Treat for the
compulsory acquisition of Portion 406 had issued by the Department of Lands to
KEL, seeking to acquire Portion 406 for the declared public purpose of defence
[Annexure 10(4)]. The notice was thus given less than three months from the
grant. That notice commenced a compulsory acquisition process pursuant to the
Land Act 1996. In response to the Notice to Treat, KEL advised the Secretary for
(a) It was the registered owner of Portion 406;
(b) The land comprising Portion 406 was “very big” and was “located near
the Hiritano Highway” and was “suitable for large scale commercial
(c) KEL would accept K55 million as compensation for the State’s
10.54 On 28 October 2015, the predecessor of Kumul Consolidated Holdings (KCH),
namely Independent Public Business Corporation (IPBC), and the Department of
Lands, conducted a joint inspection of the Lancron Naval Base and prepared a
detailed report regarding the nature of the tenure underlying the lease. It also
made clear what had to be done to issue a lease to KCH. What would have been
required was a valuation, revocation of the reservation, reallocation and an
application to the Land Board for the issuance of a new State Lease.
10.55 On 3 November 2015, for the purposes of the compulsory acquisition the Valuer
General issued a Certificate of Valuation over Portion 406 valuing the land at
K46.6 million. The valuation was prepared by Moses Kila, the Assistant Valuer-
General. The valuation again represented approximately K55,000 per hectare.
The content of the valuation document is considered later. The valuation is
Annexure 10(5). The valuation is considered more fully in Section 12. The
Administrative Inquiry considered that the factors applicable to Mr Kila’s
valuation of Portion 406 were the same as those applicable to the valuation of
Portions 422 and 423 (above). Again, the Administrative Inquiry considered that
Page 41 of 101
the most plausible reason for Mr Kila’s behaviour and valuation was financial
inducement. Another possibility would be fear of retribution.
10.56 On 3 December 2015 a Notice of Compulsory Acquisition in respect of Portion
406 was published in the National Gazette No. G793 by the Secretary for the
Department of Lands as a delegate of the Minister for Lands [Annexure 10(6)].
Upon publication of the Notice, KEL’s interest in Portion 406 was converted to a
right of compensation under the Land Act 1996 which then enlivened the
principles under Part 4 Division 3 by which “just compensation” (as envisaged
under section 53 of the PNG Constitution) for compulsory acquisition should be
10.57 Notice of the compulsory acquisition of Portion 406 was also published in The
National Newspaper on 7 December 2015 [Annexure 10(7)].
10.58 At that point, KEL and the State made an agreement dated 11 December 2015
entitled “Sale and Transfer of Land” [Annexure 10(8)]. By that agreement, KEL
agreed to sell and transfer Portion 406 to the State for K46.6 million. The
agreement was signed by Mr Luther Sipison, Acting Secretary for Lands, as the
delegate of the Minister for Lands on behalf of the State, and Mr Christopher
Polos on behalf of KEL. In the Panel’s experience, this step is often taken by
parties when compulsory acquisition has occurred and the parties, recognising
that the State is entitled to complete compulsory acquisition, make a contract for
the sale and purchase of the land. In this instance, the Panel is of the view that
the making of the contract of sale did not appear to have converted the
compulsory acquisition to a consensual purchase and sale arrangement. It was
merely an effective way of completing the acquisition. However, why the State
did not then simply pay the amount of K46.6 million directly to KEL is not made
10.59 On 11 December 2015, Kurkuramb Estates Ltd and the State entered into a “Deed
of Release” [Annexure 10(9)] which in part provided:
“A. THAT [the State] hereby pays to [KEL] a total sum of FORTY SIX
MILLION AND SIX HUNDRED THOUSAND (K 46,600,000.00) and
[KEL] accepts the payment as full and final Purchase Price of [Portion 406].”
10.60 The Deed of Release between KEL and the State also provided a break-up of the
consideration for Portion 406, which purports to have been based upon “the
Valuation Certificate” issued by the Valuer General. The break-up was as
“Payment details of K46,600,000.00 as per the Valuation Certificate
Land value = K46,600,000.00
Improvement = NIL
Total payable = K46,600,000.00”
Page 42 of 101
10.61 Thus, the entire purchase price for Portion 406 was attributed to land value only.
The Inquiry is not aware of any improvements to the land having been made.
10.62 On 4 February 2016 the NEC Decision No. 06/2016 had approved the PNGDF
Basilisk relocation site requirements as being “part and partial [sic] of KCH’s
funding for the whole of the proposed Port Moresby Port Redevelopment”.
10.63 On 8 February 2016, the Department of Lands issued a Notice of Reservation for
the PNGDF over the whole of Portion 406. Pursuant to that Notice, Portion 406
was reserved by the State for the purpose of public defence [Annexure 10(10)].
10.64 By letter dated 26 February 2016 from the PNGDF to Mr Hersey, KCH was
notified of the compulsory acquisition of Portion 406 for the amount of K46.6
million and was asked to finance the relocation on behalf of PNGDF in exchange
for title to the Lancron Naval Base.
10.65 The letter from the PNGDF also enclosed a copy of the Deed of Release between
the State and KEL wherein KEL agreed to release the State in exchange for
K46.6 million “as per a Valuation Certificate”. The letter was signed by Mr Vali
Asi, Secretary for the Department of Defence, and Brigadier General Gilbert
Toropo, Commander of the PNGDF. It was copied to the Minister for Defence
and the Minister for PEST.
10.66 The letter of 26 February 2016 gave an incorrect description of Portion 406:
“… we have also identified another portion of land located adjacent to those
three (3) already acquired, that backs onto the sea there that would be very
conducive for our new naval base to be relocated there.
That land is described as Portion 406 Milinch, Fourmil Aroa, Central
Province which has been valued by the Valuer General for a sum of K 46,
600,000.00 and it has a total land area of 2000 hectares”.
10.67 The view of the Inquiry is that Portion 406 does not “back onto the sea” as
claimed. The entire area of Portion 406 is in fact landlocked. It is several
kilometres further from the sea than Portion 154, which itself is several
kilometres away from any navigable water. Further, Portion 406 is not 2000
hectares in size, but 847.25 hectares.
10.68 On 20 January 2017, KCH appointed an Independent Committee to investigate
allegations made against Mr Hersey. The Independent Committee was critical of
Mr Hersey accepting these misrepresentations at face value. The Committee
apparently thought he should have instituted searches, or made an inspection of
the land, to ascertain exactly where the land was, its title, root or validity, its size
and its true value. The Independent Committee thought that such inquiry should
have been the subject of basic due diligence investigations.
10.69 The Independent Committee thought that the failure on the part of Mr Hersey to
ascertain basic facts or to apply any form of reasonable due diligence and
Page 43 of 101
competent analysis to the PNGDF’s proposal resulted in the Board ultimately
10.70 Following some other correspondence, by letter dated 24 May 2016 Mr Hersey
wrote to the State Solicitor seeking clearance of a proposed NEC submission for
approval to transfer the Lae Port Development Project Trust funds and GST
refunds for the purpose of, among other things, “funding the purchase of land
(K25 million of the K47 million purchase price) to enable the relocation of the
PNG Defence Force to commence”. The letter was copied to the Minister for
PESI and the Chief Secretary [Annexure 10(11)].
10.71 The Independent Committee pointed out that this letter did not mention Portion
406 or any details of the proposal from the PNGDF despite the fact that Mr
Hersey knew that the PNGDF intended to relocate to that land and that Kumul
Holdings were asked to provide funds for payment to pay for compensation to
KEL. The Independent Committee thought that basic and prudent due diligence
would have demanded that Mr Hersey would also have sought clearance from the
State Solicitor on the entire PNGDF proposal, yet this was never done until
January 2017, much later and after the payment of K46.6 million to KEL had
already been made.
(5) Payment of K46.6 million to Kurkuramb Estates Ltd
10.72 By letter dated 18 July 2016, Harvey Nii Lawyers on behalf of KEL served a
notice pursuant to section 5 of the Claims By and Against the State Act upon the
Attorney-General, Ano Pala MP, making known KEL’s intention to make a claim
against the State for payment of the outstanding purchase price of K46.6 million
for Portion 406. That letter was copied to the Acting Secretary for Lands, the
Secretary for the Department of Defence, and the Solicitor General.
10.73 By letter dated 10 August 2016, the Secretary for Defence wrote to Mr Hersey
and stated that “it has now come to my attention that KEL has given notice of its
intention to sue the State” for non-payment of compensation. The Secretary for
Defence further stated:
“My department and the PNGDF do not want to see such legal proceedings
complicate and delay our relocation programs any further …”.
10.74 On or about 15 August 2016, Harvey Nii Lawyers, on behalf of KEL, issued a
Writ of Summons against the Secretary for the Department of Lands, as First
Defendant, and the State, as Second Defendant, seeking payment, among other
things, of the then outstanding K46.6 million compensation amount that had been
agreed for Portion 406. KCH was not initially named as a party to the court
proceedings although its subsequent joinder, upon its application, is the subject of
pending Supreme Court proceedings.
10.75 In August 2016 a report on the proposed Lancron Naval Base Relocation had
been tabled before the KCH Investment Committee for consideration. The
Investment Committee report noted, relevantly, as follows:
Page 44 of 101
At this stage there is substantial work to be done. The project scope and
budget on the development of the new site is yet to be defined, which requires
funding to investigate. The PNGDF appears to have neither the funding nor
the resources to develop a set of requirements for the new base. The Lancron
Navy Base does not yet have a State title which allows it to be dealt with. It
will be required for the further redevelopment for the Port Moresby Port
precinct so these issues will have to be dealt with.
10.76 The Independent Committee thought that there should have been a properly
vetted Business Case, a Budget and Risk Analysis, together with expert advice on
the exact state of the Lancron Naval Base and how KCH should structure the
proposed transaction to project this position and the public monies of which it was
obliged to protect as trustee. However, no such documentation was sought or tabled.
10.77 In the circumstances, the Independent Committee did not think that the payment
of K46.6 million for Portion 406 should have been made.
10.78 The Independent Committee thought that the evidence strongly suggested that there
was a deliberate and calculated attempt on the part of Mr Hersey and certain senior
KCH staff members to not only deceive and mislead the Board, including by failure
to tender the Investment Committee Report to the Board, and failing to give full,
frank and material disclosure of relevant facts and circumstances that were within
Mr Hersey’ s direct knowledge. Instead, information was submitted to the Board
in a rushed, piecemeal and selective way that effectively concealed the true nature
of the entire Portion 406 transaction and did not disclose the unacceptable risks it
posed to KCH’s interests.
10.79 By an email dated 6 September 2016, Ms Tabari prepared and forwarded a draft
Board Paper to Ms Taunao for “review and comments”. The draft Board Paper had
the following specific and relevant comment in it under item 5:
“5 RISKS AND ISSUES
There have been months of internal division within PNGDF about where the
new site for relocation. Whilst all of their planning team have been working on
Arutu land (Portions 33270 — 3329C) near Motukea it appears that this have
been recently superseded by a new decision to purchase Portion 406 Milinch
of Manu, Fourmil of Aroa, Hiritano in Central Province. Furthermore,
KCH staff have been informed by the PNGDF Project team that another submission
in support of yet another alternate site is currently being developed and is
expected to be submitted to the Defence Committee soon. This uncertainty
could mean that KCH end up paying for land which is never used by PNGDF.
Page 45 of 101
By proceeding to purchase land before completion of the Masterplan and
Budget, it will be very difficult to gauge the degree of difficulty to implement
the ultimate goal of relocation Lancron Naval Base. It could mean that KCH
will have spent a considerable amount of money on a project that may never be
Relocation of Lancron Navy Base might be of commercial interest to KCH if
the site can be redeveloped into high value waterfront land. However, given the
uncertainties mentioned above, the timing of moving PNGDF may mean any
commercial return on this land might be delayed an indefinite period into the
10.80 The Independent Committee concluded that this email was not shown to the
10.81 The Board Paper dated 7 September 2016, signed by Mr Hersey, contained the
following item 5:
“5.1 RISKS AND ISSUES
It is worth noting that there appears to be some differences of opinion within
PNGDF about where the new site for relocation. Whilst all of their planning
team have been working on Arutu land (Portions 3327C-3329C) near Motukea
it appears that this have been recently superseded by a new decision to
purchase Portion 406 Milinch of Manu, Fourmil of Aroa, Hiritano in Central
Province. However, it should also be noted that there is political will for this
process to proceed as it is supported by the Government and responsible
Relocation of Lancron Navy Base might be of commercial interest to KCH if
the site can be redeveloped into high value waterfront land. However given the
uncertainties mentioned above, the timing of moving PNGDF may mean any
commercial return on this land might be delayed an indefinite period into the
10.82 The funding resolution had been amended to read:
“… it is recommended that the Board: …
approve for KCH to provide funding of K46.6 million to the PNG Defence
Force to finance the settlement of the compulsory acquisition process for
Portion 406, Milinch of Aroa, Manu, Central Province of which finalisation is
• Conclusion of Contract of Sale
• Consideration of novation of Deed of Settlement on land from PNG
Defence Force to KCH”
Page 46 of 101
10.83 At its meeting on 12 September 2016, the Board resolved in accordance with the
Investment Committee’s recommendations as set out in the final Board Paper. A
contentious issue has arisen as to whether this constituted a resolution to pay
Kurkuramb Estates Ltd the K46.6 million, or whether it was only a conditional
authorisation to do so.
10.84 In an email dated 19 September 2016, Mr Massa of Dentons Lawyers set forth his
preliminary advice as follows:
“This is where we are at, which is probably where we will end up assuming we
get the answers from Lands Department that we are expecting in the next day or
• Rather than the State either (a) assigning/novating the Deed of Sale and
Transfer of Land to KCH, or (b) the State on-selling the land to KCH, the
most appropriate course of action would be for the State to grant a 99 year
lease to KCH.
• The land rental payable by KCP to the State for the 99 year State Lease
would be K46. 6m (i.e. the amount which the State owes Kurkuramb
Estates Ltd (KEL) as compensation for the compulsory acquisition of
• The K46.6m land rental would be paid upfront in a single lump sum
payment at the direction of the State to KEL.
• The State Lease would include a covenant that the Department of Defence
be granted exclusive occupancy of the land for the duration of the lease
unless earlier surrendered by Defence.
• KCH would need NEC approval (in accordance with the KCH Act) to
enter into the lease and make the upfront lump sum rental payment to the
• The State uses the K46.6m received from KCH to settle its outstanding
liability to KEL.
• KEL then has no further claim against the State for compensation having
already discharged all prior interest in the land which vested in the State
when notice for the compulsory acquisition was published in the National
Gazette and National newspaper.
• A 99 year State Lease (rather than a sale or assignment) avoids any
concerns as to whether public procurement/CSTB is necessary for the
State to sell the land to KCH. It also avoids any consideration as to
whether stamp duty or Ministerial approval is necessary, although neither
should be in any event.
• Based on the information supplied to us, it appears that all necessary
steps in the State ‘s compulsory acquisition of the land from KEL were
complied with in accordance with the relevant provisions of the Land Act.
• We make no comment on whether KEL was the lawful owner of the land in
the sense that there is a clean chain of title to KEL and now the State.
However, we have no reason to suspect that there has been any fraud or
that KCH has constructive notice to the contrary such that the State’s title
Page 47 of 101
as recorded on title (and KCH’s leasehold interest once granted) is prima
10.85 By an email dated 22 September 2016 from Ms Taunao to Mr Hersey, Mr Hersey
received an unsigned copy of a further advice from Dentons Lawyers in relation
to the proposed acquisition of Portion 406. In essence, the advice was that, to
protect its interests, KCH should acquire title to Portion 406 by paying K46.6
million to the State, and then leasing it back to the PNGDF. The advice
specifically noted that KCH needed NEC approval for this arrangement and that it
needed to be specifically included in KCH’s annual plan.
10.86 The Independent Committee took the view that Mr Hersey thus knew that NEC
approval was required after receiving the advice from Dentons. However, that
advice was never acted upon or tabled before the Board for consideration.
10.87 In the meantime, by letter dated 23 September 2016, KEL had written to the
Secretary for the Department of Defence requesting that “K46 million” be paid to
KEL’s account as consideration for the compulsory acquisition of Portion 406.
Effectively the advice was that, to protect its interests, KCH should acquire title
to Portion 406 by paying K46.6 million to the State and then leasing it back to the
PNGDF. Among other things, the advice specifically noted that KCH needed
NEC approval for this arrangement and that it needed to be specifically included
in KCH’s Annual Plan.
10.88 The Independent Committee concluded that Mr Hersey certainly knew that NEC
approval was required after receiving the advice from Dentons. However, the
Independent Committee inferentially criticised the managing director because that
advice was never acted upon or tabled before the Board for consideration.
10.89 By letter dated 5 October 2016 Mr Hersey wrote to the Commander of the
PNGDF and noted that the MOU between KCH and the PNGDF dated 21
September 2015 had expired on 21 September 2016. The letter also specifically
noted that the “obligations under the MOU are incomplete and the KCH Board
would like, with your concurrence, to extend the MOU for another 12 months”.
10.90 The letter attached a variation to the MOU which purported to extend it for a
further 24 months. The letter was copied to the Secretary for Defence.
10.91 The Independent Committee thought that this communication by the managing
director was significant because it implied that he was cognisant of the need for a
proper “Project Plan”, “Project Budget” and “Business Case” to support the
proposed PNGDF relocation.
10.92 Pursuant to the variation agreement the MOU was in fact extended for a further
24 months. The variation agreement was signed on 5 October 2016 under the
common seal of KCH by Mr Jayaraj (Acting Corporate Secretary) and Mr
Hersey, and by the Secretary for Defence and the Commander of the PNGDF on
behalf of the PNGDF. However, despite the extension, the relevant documents
envisaged by the MOU were never completed. It appears they were ignored or
Page 48 of 101
(6) Lancron Naval Base
10.93 On 5 October 2016 under an instrument entitled “Revocation of Certificate
Authorising Occupancy”, the Secretary for the Department of Lands, as delegate
for the Minister for Lands, revoked the reservation for the Lancron Naval Base.
As a result, the land ceased to be reserved for defence purposes. Notice of the
revocation was published in the National Gazette on Friday, 7 October 2016. The
Lancron Naval Base is also referred to as HMPNGS Basilisk.
10.94 The Independent Committee found it difficult to understand why the reservation
status of Lancron Naval Base was revoked when defence personnel and naval
assets were still stationed at the base. This was further complicated by the letter
of the Secretary for Lands dated 29 September 2016 which stated his
understanding that “feasibility studies are underway at the relocation site and the
PNGDF is yet to move”. The Independent Committee drew attention to the lack
of tenure and potential national security issues this presented to defence assets.
10.95 On 11 October 2016 the Secretary for Defence wrote to Mr Hersey as follows:
“Our valuers have valued the Naval Base (Basilisk) at K50 million and we
have already provided KCH with copies of the valuation. As we have now
surrendered our Certificate of Occupancy in favour of KCH, KCH owes us K50
In accordance with NEC Decisions Nos 70/2016, 168/2014 and 06/2016, we
now request that you pay K46 million on behalf of the State to the former
owners of land (on which the new military base will be located) and K4
million to the PNGDF Trust Account to enable us to start preliminary works to
relocate to the new military barracks.”
10.96 By email dated 12 October 2016, Ms Bala advised what remained to be done to
“obtain (the) title deed” to the Lancron Naval Base including that:
“KCH should compile concept plans, development proposals and a detailed
KCH should obtain NCDC Physical Planning approval for the development
and a rezoning of the Lancron Naval Base to commercial use; and
After Planning permission is obtained, KCH should apply for a direct grant of
a State Lease from the Minister for Lands rather than making application to the
PNG Land Board”
10.97 The Independent Committee thought that this email from Ms Bala was the first
time that KCH senior management had been informed of the extent of the tasks
Page 49 of 101
remaining to be performed and the considerable delays that were inevitable. The
Independent Committee’s report states that “before this date, the Board and
presumably those in management had understood that the issue of the State Lease
over the Lancron Naval Base required only Land Board approval. However,
basic due diligence would have revealed the true state of affairs and the extent of
the requirements that needed to be complied with”. The Independent Committee
stated that the Board was induced to the belief that a State Lease for Lancron
Naval Base had been issued and was available for transfer to KCH, which was
not the case at all.
10.98 An application was then made by KCH for a Special Purpose Lease to be issued
to KCH. The application was lodged on 13 October 2016.
10.99 It is understood that that application remained pending at the time the payments
to KEL were made.
(7) KCH agrees to Pay K46.6 million to KEL
10.100 On 14 October 2016 KCH entered a Memorandum of Agreement with KEL and
PNGDF under which it agreed to pay K46.6 million to KEL. The Independent
Committee stated that this agreement was never tabled before the Board for
10.101 Mrs Kari Taviri, the Manager — Legal Services of Kumul, told the Independent
Committee that the document was not brought to the KCH legal team’s attention
until the morning of execution on 14 October 2016. She said that she was
adamant that the MOA was drafted without any legal due diligence or proper
10.102 Mrs Taviri also told the Independent Committee that Mr Hersey told her to take
out the anti-corruption clause in the document.
10.103 The Independent Committee thought that Mr Hersey’s decision to omit the clause
and depart from standard KCH practice was very disturbing.
10.104 The MOA was signed that day in the boardroom of KCH. It provided, amongst
other things, that KCH would pay (on behalf of the State) to KEL the unpaid
compensation amount of K46.6 million in two instalments, the first instalment
being K20 million and the second instalment of K26 million three months from
the date of the payment of the first instalment.
10.105 The MOA was signed under KCH’s common seal by Mr Jayapal Jayaraj, the
acting corporate secretary, Mr Hersey on behalf of KCH, the Secretary for
Defence on behalf of the Department of Defence, and Mr Christopher Polos on
behalf of KEL.
10.106 The common seal of KEL was not affixed to the document until later because Mr
Polos did not bring it to the signing venue.
Page 50 of 101
10.107 The NEC decision No. 95/2015 dated 29 April 2015 required all contracts
relating to the Lancron Naval Base relocation to be signed by the Managing
Director and the KCH Chairman, or two directors of KCH. In apparent breach of
this directive that did not occur, and it has been alleged that the Board was left in
the dark about the substantial liability that KCH had assumed under the MOA.
10.108 The Committee concluded that Mr Hersey embarked on an unauthorised and
intentional course of conduct to pay the K46.6 million to KEL.
10.109 Mr Hersey is alleged to have given instructions to release the K20 million
immediately, notwithstanding that the MOA had not been properly executed by
10.110 The funds were transferred, on 14 October 2016, to KEL.
10.111 An email from Mr Jayaraj informed Mr Hersey that the K20 million had been
transferred to KEL notwithstanding that the Kurkuramb seal had not been placed
on the document to complete the MOA execution.
10.112 That email from Mr Jayaraj was forwarded by Mr Hersey to Mr Duma:
“Further to text William
Funds gone but could they come on with the seal tomorrow please. Are you
going to Hagen this weekend per chance?”
10.113 Mr Duma responded:
I am in back in Porn now, and will wait for you to return before I leave for
Hagen over this weekend.
Please call me as soon as you can. […]
10.114 This is one of the matters which caused the Independent Committee to conclude
that it appeared that Mr Duma was in a position of influence over Mr Hersey.
10.115 It appears that the MOA was finally sealed by KEL and signed by its director,
Christopher Polos, on 18 October 2016.
10.116 There was a delay in the receipt of the K20 million into the KCH account.
Apparently the bank initially rejected the payment on the ground that KEL’s bank
account was inactive. That caused the bank to return the funds to KEL.
However, the problem was rectified, and on 19 October 2016 Mr Jayaraj was
advised that the payment of K20 million had been made to KEL’s account.
Page 51 of 101
10.117 As stated above, the prospective State Lease for the Lancron Naval Base in
favour of KCH had still not been issued.
10.118 With respect to the second tranche payment of K26.6 million Mr Jayaraj told the
Independent Committee that Mr Hersey called and instructed him to arrange the
payment for KEL that day. Mr Jayaraj advised Mr Hersey that there were
insufficient funds in the general business trust account to allow that to occur. Mr
Hersey then instructed that Mr Duma had a dividend cheque from MVIL, and to
send someone to collect and bank the cheque and have it cleared that same day.
10.119 In a statement dated 31 February 2017, Mr Jayaraj stated, in relation to the second
“(a) Garry Hersey was saying he was under pressure from the Minister and
wants the payment done at the earliest. He never mentioned the name of the
minister. I guessed he might be referring to Minister William Duma.
I was not involved in the matters leading up-to the signing of the MOA on this
land deal, hence and I am not aware of any Ministerial involvement during the
process. This process was managed by a separate transaction team working
closely with Garry Hersey.
Because Garry Hersey kept on calling and mentioning pressure from the
Minister, I responded in the email to tell the Minister the payment could be
done next week”
10.120 At the direction of Mr Hersey, a payment instruction dated 23 December 2016
was forwarded to Bank of South Pacific authorising payment of K26.6 million
from the general business trust account to KEL’s account at Kina Bank. The
Bank of South Pacific advised that the payment of K26.6 million was processed
and cleared on that date.
10.121 It is evident that a strange feature of the transaction is that no concern appears to
have been demonstrated about the prospect that Kumul was not at that time to
receive any form of title over the Lancron Naval Base notwithstanding that
substantial amounts of public money were being paid.
10.122 The Independent Committee received evidence to the effect that Mr Hersey
issued a direction to relevant personnel for all electronic files relating to the
Lancron Naval Base and Portion 406 to be deleted, and for all physical files in the
possession of those parties to be handed to him. Some of the electronic files were
saved by Ms Taunao onto an external hard drive. The Independent Committee
considered that that suggested a deliberate attempt to destroy and conceal
10.123 In a supplementary statement to the Committee dated 9 March 2017, Mr Jayaraj
attached a copy of the State Lease over Portion 406. The Independent Committee
Page 52 of 101
stated that this was the first time that the lease document had appeared in any of the
material provided to the Committee by KCH despite several prior requests. In a
supplementary statement to the Committee dated 9 March 2017, Mr Jayaraj stated
that he had received it from the Minister himself in addition to other documents.
Among the documents provided by the Minister to Mr Jayaraj was a copy of “the
Owner’s Copy” of the State Lease for Portion 406.
10.124 On or about 23 January 2017, Mr Jayaraj wrote to Dentons Lawyers and
O’Brien’s Lawyers purporting to withdraw the Board’s instructions to Dentons
Lawyers and 0′ Brien’s Lawyers, advising that they were to cease acting on the
matter. Upon learning of this, the Committee requested Mr Jayaraj to clarify why
the instruction to recover the monies had been terminated and at whose direction.
10.125 Mr Jayaraj responded in a supplementary statement dated 28 February 2017, that he
had been summoned to the Office of the Minister, along with the CFO, Mr Apaitia
Veiogo, and the Board Secretary, Ms Lucy Sabo-Kelis.
10.126 At the meeting, Mr Jayaraj said that the Minister said the Board had no authority
to engage lawyers on the matter and should withdraw instructions.
10.127 Mr Jayaraj says that, on that basis, he wrote to Dentons Lawyers and O’Brien’s
Lawyers and withdrew instructions. The Independent Committee thought this
was an extraordinary intervention by the Minister into KCH’s internal affairs.
10.128 The Independent Committee pointed out that, under the KCH Act, the affairs of
KCH are to be conducted free of political influence or direction.
10.129 The Independent Committee considered that this was an extraordinary
intervention by the Minister into the internal affairs of Kumul, particularly when
there was standing resolution by the Board which was intended to recover the
10.130 By email dated 25 January 2017, Mr Duma wrote directly to Mr Erik Andersen of
Dentons Lawyers in the following terms:
“Dear Mr Andersen,
I do not normally as a Minister intervene in routine matters involving the
boards and the management of entities I have Ministerial responsibilities over
but I am forced to communicate with you directly as a result of a
sensationalised article in the PNG Blog yesterday.
The matter which you are familiar with starts with a decision of the KCH
Board to approve a transaction, which started even before I became Minister
responsible for KCH.
The management of KCH have in their Brief to both myself and the KCH
Board advised that the transaction in question is in order, and this supports
Page 53 of 101
the decision of the KCH Board. I am aware that the Board of KCH have not
yet resolved to engage the services your firm.
In the absence of a Board resolution to engage your services, no Director
(including the Chairman and Deputy Chairman) of KCH acting unilaterally on
his own, has the authority to engage our services, and KCH will not be
responsible for your fees. If the Board does not resolve to engage your
services in due course, then there should not be any issue.
As of today, you have no instructions to act on behalf of KCH, the Board and
the management of KCH.
10.131 The Independent Committee noted that, in his email to Mr Andersen, the Minister
referred to the “Brief’ that had been submitted to the Board and himself
apparently as proof that “the transaction in question is in order”. However, the
Independent Committee noted that the Minister had personal input on those briefs
before they were signed and submitted. It considered that the reliance that the
Minister placed on those documents was therefore improper.
10.132 The Independent Committee report refers to the fact that the Committee was
informed by Mr Jayaraj that the naval base land had previously been exempted
from public tender in favour of KCH by the Department of Lands.
10.133 Mr Jayaraj had also informed the Committee that it was only a formality for the
PNG Lands Board to grant a State Lease for the Lancron Naval Base in favour of
KCH, once the Land Board met and considered the matter.
(8) Mr Duma’s Account of Events to the Administrative Inquiry
10.134 Mr William Duma was Minister for Public Enterprises and State Investments. In
was reported in the Post Courier on 8 February 2017 that Mr Duma had been
suspended. Mr Duma states that he voluntarily stepped aside.
10.135 Mr Duma attended at the Administrative Inquiry’s Office at the Government
Printing Office, Waigani, on Tuesday, 30 August 2017 and Friday, 29 September
10.136 Mr Duma also held a discussion with the Chairman of the Administrative Inquiry
in Brisbane on 5 August 2017.
10.137 Following the recent election, Mr Duma was re-elected and was re-appointed
Minister for Public Enterprises and State Investments. Mr Duma stated that he
regarded his suspension as no longer applicable in circumstances in which there
had been an election, and he had been appointed as Minister following that
Page 54 of 101
10.138 Mr Duma provided the Administrative Inquiry with a lever arch folder containing
22 documents. On 22 August 2017 he provided some further documents in
relation to Kurkuramb Estates Limited. His letter of 3 February 2017 to the
Ombudsman Commission [Annexure 10(12)] succinctly set out his position. He
also produced further documents later, and the documents he produced formed
part of the record of the Inquiry.
(9) Kurkuramb Estates Ltd — Companies Register documents
10.139 Mr Duma agreed that the registered office address for Kurkuramb Estates Limited
was previously shown as Section 30, Allotment 6, Port Moresby, National Capital
District, and that that address was his home address. He made the point that the
current details in the Companies Register do not include his home address.
10.140 The previously registered company extract for Kurkuramb Estates Limited as at
24 October 2016 is Annexure 10(13).
10.141 The registration has since been changed 1.
10.142 Mr Duma also agreed that the registered company extract of his company,
Kopana Investments Limited, showed him as a director and gave his residential
address as the address referred to above, namely Section 30, Allotment 6, Port
Moresby. The Company Extract details of Kopana Investments Ltd as at 31
January 2017 show the residential address of Mr Duma as Section 30, Allotment
6, Granville, Port Moresby [Annexure 10(14)].
10.143 He said he was not aware until January of this year, when he met Mr Paul Nerau,
that his home address had even been registered as the address of the company,
Kurkuramb Estates Limited. He said it was a mistake and that it did not make
sense to provide a home address as the address of a company.
10.144 Mr Duma said he thought the Registrar should explain how it came about that his
private address had become the registered office of Kurkuramb Estates Limited.
10.145 He said he had nothing to do with the registration of the documents filed at the
company’s office in connection with Kurkuramb Estates Limited.
10.146 On 29 September 2017, Mr Duma said to the Inquiry: “I have got nothing to do
with Kurkuramb Estates”.
10.147 Mr Duma agreed that PO Box 556 Port Moresby had been his postal address for
many years. When it was put to him that that postal address was given to the
Registrar of Companies in connection with Kurkuramb Estates, he stated that he did
not provide that. Annexure 10(13), being the previous Company Extract for
Kurkuramb Estates Ltd, gives the registered postal address for Christopher Polos
as PO Box 556, Port Moresby, as well.
The change was part of changes registered on 15 January 2017.
Page 55 of 101
10.148 In his session with the Chairman on 5 August 2017 Mr Duma stated that he did
not dispute that he was related to Christopher Polos. On 30 August 2017, he was
asked whether it was the case that Christopher Polos was the biological brother of
his wife. Mr Duma answered: “Absolutely”.
10.149 The Chairman asked Mr Duma: “So Christopher Polos is your brothe•-in-law?”
and Mr Duma answered “Yes”.
10.150 In the course of his attendance on the Inquiry on 29 September, Mr Duma stated
that he had just found out that Christopher Polos was not his brother-in-law.
10.151 He stated:
“I have just found out that Christopher Polos — that is why I wanted to — I will
be writing to you. I found out after my meeting with you, the last time I
appeared before this tribunal, I found out that Christopher Polos is not my wife
‘s younger brother. He is someone who is from North Solomons Province, who
was educated at the Hutjena High School. He uses the name Christopher Polos.
He was adopted by one of my wife’s aunties. My wife’s younger brother ‘s
name is Kayboy — Kayboy Polos. After my meeting with you, I went and — there
was something that did not sound right to me so I had to check. So I will be writing
to you in this regard.”
10.152 He said that this meant that there is no biological connection between Christopher
Polos and his wife.
10.153 He reiterated that his wife’s younger brother is Kayboy Polos, not Christopher
10.154 Mr Duma was asked whether Christopher Polos lived with his family, to which
he replied in the negative. He said: “No, I have got no connection with him.
Kayboy also does not live with me. He is a married man, he lives on his own”.
10.155 Mr Duma was asked: “So Christopher Polos does not live with your family and
has not ever lived with your family?”
10.156 Mr Duma responded: “No, none whatsoever. In fact none of my wife’s relatives
live with me. I have got too many people from my electorate who live with me”.
10.157 One of the allegations in PNG Blogs was that Christopher Polos performed a
wide variety of functions, including personal aide, gardener, housekeeping,
repairs and maintenance for Mr Duma. When that was put to Mr Duma he said it
was “absolutely not true”. Mr Duma said he did not have any gardeners or
cleaners in his house, he did those things himself. He did have helpers who were
actually on the payroll, and Parliament paid them, but they were all in his
10.158 Mr Duma reaffirmed that he did not know Christopher Polos who, he said, lives
in North Solomons. He did not dispute that Christopher Polos was the sole
Page 56 of 101
director and shareholder of Kurkuramb Estates, but he said he had no connection
with Christopher Polos.
10.159 In a letter to the Administrative Inquiry dated 5 October 2017 [Annexure 10(15)],
Mr Duma said:-
“There was a misunderstanding which I need to clarify after my last
appearance at the Inquiry Office.
I have since made further inquiries and have realised that the correct name of
my brother in law is Kayboy Palos, not Christopher Polos who is related to
my spouse’s aunty and who lives in Bougainville and who uses my spouse’s
10.160 It was put to Mr Duma that there is a creek called “Kurkuramb” which flows into
the Rogen River at Mt. Hagen in close proximity to his village. Mr Duma
disputed that. He contended that there is a creek called “Rogen”, but that was
further away from his village on the other side.
10.161 Mr Duma confirmed that he had previously stated that Kurkuramb Estates
Limited is Mr Christopher Polos’ company.
10.162 He denied receiving any payments from Kurkuramb Estates Limited in relation to
the Portion 406 transaction.
10.163 He said he was not able to comment on the proposition that K20 million was
transferred to Kurkuramb even prior to the Kurkuramb seal having been placed
on the underlying document. He stated: “These are matters which are not within
my knowledge. I am not qualified to comment”.
10.164 Mr Duma agreed that he was asked whether he could find Mr Polos to bring
along the seal for the execution of the Memorandum of Understanding. He said:
“That is a matter that Polos and Garry should know. That has got nothing to do
10.165 He agreed that he knew that the first tranche of K20 million was returned,
initially, on account of the fact that it was rejected by the bank.
10.166 He denied that he knew that Mr Hersey had issued a direction to relevant
personnel for all electronic files related to the Lancron Naval Base and Portion
406 to be deleted and for all physical files in the possession of those parties to be
handed to him.
10.167 He had denied that he had said that he wanted any payment “done at the earliest”.
10.168 He denied that he was the one who produced the owner’s copy of the State Lease
in favour of Kurkuramb.
Page 57 of 101
10.169 On the allegation that he was involved in the payments, Mr Duma stated: “I was
not involved in the decision-making process”. He also said “I was not allowed to
take part so I never had an opportunity to disclose the fact that Christopher was a
10.170 He denied that there was any conflict of interest on the ground that he was not
involved in the decision-making process to pay the money to Kurkuramb. He
said that the fact that it was the chairman and the directors who approved the
payments had been ignored.
10.171 He disagreed with the proposition that the Lancron Naval Base was a long way
from obtaining a title. He said: “From what I have seen, they formally applied for
a State Lease, they paid the lease fees and it is registered and the exemption was
granted. So under the Land Act, once you are given an exemption, no one else
applies, only you. So it is only a matter of formality for you to appeal to the Land
Board, to make a formal submission, formal application to access that land. So
that is as good as having the title”.
10.172 As to the value of the Lancron Naval Base, he said that there were inconsistent
valuations, but he relied on the figure of K50 million that was used by the
Secretary for Defence when he wrote to KCH and said “This is the figure”.
10.173 When it was put to him that there were serious and potentially irreconcilable
differences within the PNG Defence Force as to the selection of Portion 406 for
the purposes of defence relocation, he said: “if that were the case, why did the
Commander and the Secretary sign the [Memorandum] of Variation? There is an
MOU that the Commander signed and I should point out that why was not the
Commander asked to step aside?” [Annexure 10(16) is the Memorandum of
Understanding dated 21 September 2015; Annexure 10(17) is a KCH letter from
Mr Hersey to Commander Defence Force dated 5 October 2016; and Annexure
10(18) is the undated executed Memorandum of Variation].
10.174 Mr Duma disagreed with the proposition that the Board’s resolution in relation to
the payment of the K46.6 million was a conditional approval of the payment.
10.175 He was of the view that it was necessary to look at the Memorandum of
Understanding signed by KCH, Defence and Kurkuramb Estates Limited.
10.176 He was very definite that there was nothing inappropriate in him, in the
circumstances, seeking to revoke the decision to brief Dentons Lawyers and
O’Brien’s Lawyers. The decision had been taken by KCH to make the payment,
and, in the opinion of Mr Duma, the Board should defend the decision. It was
really a case of the engagement of lawyers to investigate the Board’s own
decision. It was not appropriate, in his view, to have an investigation if the
Board’s conduct was not itself examined. He addressed the Chairman, Deputy
Chairman and Directors to the effect that he had not at any stage directed or
approached any of the members of the Committee to approve the transaction. He
told the Directors that if the Board wished to engage a law firm to investigate the
matter, it should be done in consultation with him as Minister because it was the
Board decision that was being questioned, not his. The Terms of Reference had
Page 58 of 101
to include their conduct as directors, given that they approved the transactions.
His position was that the law firms or lawyers should only be engaged by the
collective resolution of the Board.
10.177 Mr Duma was highly critical of the Independent Committee, including of the fact
that the Committee did not ask him to give his account.
10.178 Mr Duma said that he could not believe that an allegation had been made that, in
relation to the payment of the second tranche, namely the K26.6 million, the
cheque was collected by him and provided to Kumul staff to bank. He said: “I
cannot believe that such an allegation has been made”, and he proceeded to state
that he denied it “absolutely”.
10.179 With respect to his reliance upon the 2012 NEC Decision he was asked whether it
was the general practice of the NEC to make a decision in those terms, or whether
it was ordinarily the case that any land involved would be specified.
10.180 Mr Duma said that “depends” on what the policy of the Government was at that
particular time. It is the case that the State Solicitor, Mr Rolpagarea, had
expressed the view that, whilst the Portion 406 transaction had not been expressly
authorised by the NEC Decisions, it was broadly authorised by them. The State
Solicitor also referred to the approval of the KCH accounts by the NEC. See the
State Solicitor’s letter of 27 January 2017 [Annexure 10(19)].
10.181 In relation to the assertion that he had exerted undue influence over Mr Hersey,
Mr Duma stated: “And for them to say I have placed undue influence, I take
exception to that because honestly speaking, I did not. I have always been very
honest and I am also honest in saying these gentlemen is related to me. There is
nothing wrong with having relatives and as far as I know this fellow wanted to
develop that land. He acquired that, he applied to the Board like anyone else.
There were others too who applied for the same land and he comes from that
area, despite what others are saying. Polos is watchdog and he has not said
anything yet but he is from that area. He had his own plans to develop that area and
when the State came for the land, and when he realised that the other land had
been sold already, who would not — the process of acquiring title in the first place
no one was alleged of fraudulent conduct and that evidence of Sipison confirmed
that. Everything was above board, even the process of compulsory acquisition.”
10.182 It is correct that Mr Duma was not given the opportunity of responding to the
matters the Independent Committee raised with respect to his conduct. That is no
criticism of the Independent Committee because it was conducting an internal
investigation into the conduct of an officer of Kumul. Nonetheless the fact
remains that Mr Duma’s responses were not sought or provided.
10.183 The Administrative Inquiry did put the significant parts of Mr Duma’s alleged
conduct to him, and he denied all allegations of impropriety.
Page 59 of 101
(10) Mr Duna — Panel’s Conclusions
10.184 Mr Duma’s relevant conduct has been summarised above as were his responses to
the serious allegations that have been raised in this case.
10.185 For reasons given already, on the facts presently known to the Administrative
Inquiry, no conclusion ought to be reached about Mr Duma’s role in any
conspiracy or fraudulent misconduct. Mr Duma has denied any wrongdoing.
10.186 For reasons already given, the Administrative Inquiry is a very limited Inquiry
with extremely limited powers for investigation. In Mr Duma’s case, in
particular, there are complete areas of investigation that could not be undertaken
by the Administrative Inquiry, but which would need to be undertaken before any
conclusions could be reached.
10.187 Mr Duma’s true relationship with the company Kurkuramb Estates Limited is a
crucial area of investigation because Kurkuramb Estates Limited was the entity
which, on the face of the documentation, was entitled to the sum of K46.6 million
compensation by reason of the compulsory acquisition of Portion 406, of which it
held a State Lease. Investigation needs to include investigation as to whether,
contrary to the Minister’s claims, he controlled the affairs of Kurkuramb Estates
Limited. The Administrative Inquiry was of the view that there would plainly be a
case of corruption against Mr Duma, if contrary to his denials, he had control
over the affairs of KEL. That would demonstrate a link between Mr Duma and
the compulsory acquisition of Portion 406. As stated above, he said to the
Inquiry: “I have got nothing to do with Kurkuramb Estates.”
10.188 The Administrative Inquiry was not empowered to conduct such an investigation.
Furthermore, Christopher Polos, who is shown in the Companies Register to be
the sole director and shareholder of Kurkuramb Estates Limited, declined to
cooperate with the Administrative Inquiry. As already pointed out, Mr Polos was
perfectly within his rights in taking that stance since the Administrative Inquiry
was not vested with any powers to summons witnesses to attend, or to examine
them on oath.
10.189 As already stated, it cannot be assumed that further investigations will implicate,
rather than exonerate, Mr Duma. Mr Duma as well as the other affected parties,
and the public generally are entitled to have this matter fully investigated. The
issues are in the hands of the police, and the investigations should continue until
completion. The Administrative Inquiry expresses the hope that this Report will
be of assistance to the police in their continuing investigations.
10.190 As to the conflict of interest issue with respect to Mr Duma, who did not disclose
any relationship with Kurkuramb Estates Limited in circumstances in which he
was instrumental in payments being made by KCH to that company, Mr Duma
has put forward the contention that he was not obliged to make any disclosure in
that regard because he was not party to the decision of Kumul Consolidated
Holdings to pay the K46.6 million to Kurkuramb Estates Limited. This aspect of
the matter, in relation to which the question of control of Kurkuramb Estates Ltd
Page 60 of 101
is again highly significant, should be investigated and resolved by the
(11) Independent Committee Appointed by Kuntul Consolidated Holdings
10.191 It was on 20 January, 2017, that Kumul Consolidated Holdings appointed the
Independent Committee to investigate allegations made against the then
managing director of Kumul, Mr Garry Hersey.
10.192 The Independent Committee subsequently reported to Kumul the final version of
the Independent Committee’s report being dated 12 April 2017.
10.193 Part of the investigation conducted by the Independent Committee related to the
Portion 406 transaction.
10.194 To assist in its examination of the matter, the Independent Committee obtained a
report from an accounting firm, JAJ Associates. That report showed the financial
details relating to the Portion 406 transaction.
10.195 The Inquiry was informed that Mr Hersey had been suspended on full pay,
following which he had been refused entry to Papua New Guinea. The
Independent Committee expressed the view that that initial suspension appeared to
be in breach of Mr Hersey’s employment agreement. However, as indicated below,
Mr Hersey was eventually suspended and terminated by the NEC.
10.196 The Independent Committee proceeded upon the assumption that PNG Ports
Limited had effected a lawful assignment of its rights in respect of the Lancron
Naval Base to KCH. The Administrative Inquiry has proceeded upon the same
10.197 The Committee made the following recommendations:
“(a) the Board make a recommendation to the NEC for the immediate
termination of Mr Hersey by the Head of State, acting on advice, in
accordance with clause 21(D of the Employment Agreement;
(b) further or in the alternative, the Board make a recommendation to the
NEC for the immediate termination of Mr Hersey by the Head of
State, acting on advice, in accordance with clause 19( c)(V) of the
(c) the Board consider instructing Ashurst lawyers to immediately
commence legal proceedings against Mr Hersey for breach of
contract and that, pending determination of such action, KCH pays
the balance of Mr Hersey’s entitlements into the National Court Trust
Account as security for damages and applies for an immediate freeze
Page 61 of 101
of any of Mr Hersey’s assets in PNG that could potentially be used to
(d) the Board immediately refer the matter to appropriate law
enforcement authorities for further investigation with a view to
determining whether criminal charges, including fraud, should be
laid against persons involved in the Portion 406 transaction as well
as possible prosecution for breaches of the Leadership Code;
(e) a full, thorough and independent audit be undertaken on all KCH
books, accounts and records during the period of Mr Hersey’s tenure to
ascertain the legality of all major expenditure and all major
transactions entered into by KCH under Mr Hersey’s direction,.
0 the Board consider introducing appropriate policies, controls and
structures to ensure that future major commercial transactions are
comprehensively evaluated and vetted by appropriately skilled staff
within clearly established risk parameters, guided as necessary by
independent professional advice, and that public monies held in trust are
adequately and robustly protected from misuse; and
(g) clear and strict reporting lines and obligations are established within
KCH’s internal management structure to ensure that the Board
maintains complete and regular oversight and approval over critical
management decisions, including by requiring regular management
reports showing progress against approved Annual Plans and
10.198 At the time the Independent Committee was appointed, no actual allegations had
10.199 Having read the material that had been prepared, the Independent Committee
served Mr Hersey with a Notice of Allegations it had prepared.
10.200 The Independent Committee saw its primary function as establishing, on a prima
facie basis, whether or not the conduct alleged of Mr Hersey constituted serious
misconduct within the meaning of clause 19(c)(iv) of Mr Hersey’s employment
agreement, and that it was to report accordingly.
(12) Allegations against Mr Hersey in relation to the Portion 406
10.201 The Independent Committee particularised the allegations against Mr Hersey as
“(a) That Mr Hersey failed to give full, frank and material disclosure to the
Board on key legal and commercial risk issues that impacted the
Portion 406 transaction including the basis for payments that were
Page 62 of 101
made to KEL and the basis for valuations that had been obtained and
represented to the Board.
(b) That Mr Hersey failed in his duties as a director to ensure that KCH’s
interests were properly and adequately protected, including by not:
(i) disclosing any conflict of interest or bias as regard any aspect
of the transaction;
(ii) obtaining NEC and Board approvals before entering into
binding contractual arrangements;
(iii) obtaining and, where necessary, acting upon external
(iv) obtaining legal clearance from the State Solicitor before
entering into binding contractual arrangements;
(v) ensuring proper legal and financial due diligence was
conducted before monies were paid,.
(vi) ensuring that there was an adequate arms’ length agreement in
place between the parties before monies were paid;
(vii) ensuring that the Portion 406 transaction satisfied all necessary
legal requirements; and
(viii) ensuring that the transaction was structured in a way that
KCH’s interests were adequately protected including by
registering an appropriate security to protect its interests;
(c) That Mr Hersey failed in his duty as a director to ensure that the
relevant Board Paper was properly vetted by the Investment
Committee, and contained all information material to a reasonable and
prudent investor, before it was tabled before the Board for approval;
(d) That Mr Hersey ‘s conduct throughout the Portion 406 transaction
demonstrated a complete breakdown of proper legal, internal
management and accounting processes within KCH;
(e) That Mr Hersey failed to properly report and account to the Board in a
prompt and timely manner (or at all) as to the proposed initiating of
conduct of and execution of relevant transaction documentation
including changes in transaction structures and finances;
That Mr Hersey ignored or disobeyed Board resolutions or failed to
implement them properly or fully;
Page 63 of 101
(g) That Mr Hersey failed to properly and fully inform the Board of all
relevant matters which he knew or ought to have known;
(h) That Mr Hersey failed to perform any proper due diligence before
seeking Board approval;
• That Mr Hersey presented to the Board an inadequate, selective and/or
factually incorrect Board paper that did not accurately advise the
Board of the state of the transaction, the relevant risks and issues and
which recommended decisions which were either not required or
impossible to implement;
• Mr Hersey failed to advise the Board that NEC approval was required
for the transaction;
(k) That Mr Hersey exposed KCH to unacceptable legal and commercial
(l) That Mr Hersey failed to bring to the attention of the Board changes in
circumstances which impacted on or rendered unnecessary previous
Board decisions or conditions imposed by the Board;
(m) That Mr Hersey expended K46.6million without Board authority and
without legal authority so to do;
(n) That Mr Hersey failed to comply with internal KCH directive and
(o) That Mr Hersey acted in breach of his financial authority or limits.”
10.202 It is to be noted that no direct allegation was made to the effect that Mr Hersey
received any form of benefit from the Portion 406 transaction. The Independent
Committee did however refer the Portion 406 transaction to law enforcement
agencies for further investigations with a view to determining whether criminal
charges, including fraud, should be laid against persons involved in the Portion
406 transaction. The Independent Committee was also critical of Mr Hersey for
telling a staff member to remove the anti-corruption clause from Kumul’s
10.203 It should be observed at this point that there were various allegations made
against Mr Hersey which did not relate to the Portion 406 allegation, such as
allegations relating to overseas travel, the appointment of consultants, overseas
borrowings, the breakdown and hostility in Mr Hersey’s relationship with State
owned enterprises, lack of interpersonal skills, the termination and alleged
intimidation of staff, exercise of scrutiny and vetting of Board powers, and in his
conduct of internal legal, management and accounting processes.
Page 64 of 101
10.204 The Independent Committee, having been requested to submit its report on 12
April 2017, did so prior to Mr Hersey being furnished with any detail of the
allegations against him, or having received his responses to such allegations.
This appears to have occurred because the Independent Committee was placed
under considerable time pressure to produce its report.
10.205 One must obviously be very careful in assessing the view of the Independent
Committee, having regard to the fact that the findings were made without hearing
Mr Hersey’s account of the events.
10.206 In relation to the Portion 406 transaction, the Committee was satisfied that there
was “more than sufficient evidence to substantiate each of the allegations raised
above” and that Mr Hersey had committed serious unlawful breaches of his
statutory, contractual and/or common law duties as a director. The Committee was
satisfied that such breaches amounted to fundamental breach and/or serious
misconduct within the meaning of clause 19(c)(iv) and (v) of the employment
agreement so as to warrant immediate termination by the Head of State acting on
the advice of the NEC.
10.207 The Committee considered that Mr Hersey had acted wilfully and intentionally, and
in concert with certain members of KCH management, to deliberately mislead
the Board on a range of critical issues relating to the Portion 406 transaction.
10.208 The Independent Committee found that the payment of K46.6 million to KEL at the
direction of Mr Hersey was both “grossly irresponsible and improper”. It said
that it was also done without prior NEC or Board approval, in circumstances in
which Mr Hersey knew this was a strict requirement.
10.209 The Independent Committee expressed the view that the Minister for PESI
appeared to exercise undue influence over the Portion 406 transaction. It stated that
the evidence suggested that the Minister was linked to KEL in some way at the
time of the relevant transaction, and that Mr Hersey was well aware of this. It stated
that the apparent conflict of interest on the part of the Minister was never disclosed
by Mr Hersey to the Board. It should be mentioned at this point that the Independent
Committee did not give Mr Duma the opportunity to appear before, or make
submissions to, the Independent Committee.
10.210 It is unnecessary to relay in this report the findings of the Independent Committee in
relation to the other allegations against Mr Hersey. In general, the Independent
Committee concluded that there was insufficient evidence to make findings or
recommendations in relation to those allegations. As a result, it would be correct to
say that the Independent Committee’s recommendations to the NEC to the effect
that Mr Hersey should be suspended and terminated were based on Mr Hersey’s
conduct in relation to the Portion 406 transaction.
10.211 It should however be observed that part of the alleged misconduct of Mr Hersey
was based on the term of his employment contract, and his duties as a director of
Page 65 of 101
(13) Hersey Response to Allegations
10.212 Mr Hersey has provided written responses to the allegations against him. That
response evidently did not reach the Independent Committee before it reported on
10.213 He states that he did, at all times, ensure that the interests of KCH were properly
protected, and he states that his actions, correspondence and interaction with
KCH staff, including the legal team and the third parties involved in the Portion
406 transaction, were reflective of this position.
10.214 He says he did provide all information available to KCH to the Board. He says
that the Board Paper sets out all information known to him and KCH to the Board
in detail. The Board Paper had stated that the Valuer General provided the
information in respect of the purchase of the land.
10.215 He maintains that there was no conflict or bias, and states that the committee did
not give proper details or facts supporting the claim that there was. He stated that
he obtained all NEC and Board approvals for the transaction.
10.216 He states that he obtained external legal advice from Gadens in regard to the
structuring. He took advice from the Legal Manager.
10.217 He instructed the KCH legal team to undertake due diligence of the transaction.
At no time did he act independently of that advice, nor did he enter into anything
without advice from the Legal Manager.
10.218 He stated that the agreement in place for the monies to be paid was “arm ‘s length
agreement”. The KCH Legal Department was instructed to prepare the
documentation for all aspects of the transaction, and he took advice from the
Legal Manager. He at no stage acted independently of that advice.
10.219 With Gadens and the General Manager, he ensured that the transaction was
structured in the most appropriate manner.
10.220 The transaction was properly vetted by the Investment Committee comprising of
Moses Maladina, Michael Koisen and Richard Tengdui, and the Committee
recommended the transaction to the Full Board. The Board Paper contained all
the information it should have contained for a proper and informed decision to be
made. The Paper was prepared by the relevant portfolio manager who was
meticulous in the preparation of her board papers.
10.221 He denied that the transaction demonstrated a complete breakdown of the proper
legal, internal management and accounting processes within KCH. The
appropriate processes were followed.
10.222 He had reported to the Board as and when required. The Board approved the
transaction and its implementation. He says he had never ignored or disobeyed a
Board resolution, or failed to implement a Board resolution.
Page 66 of 101
10.223 He conveyed to the Board all information known to him about the transaction.
10.224 There was considerable discussion between himself, the Portfolio Manager, the
CFO and the Legal Manager regarding the structure and financing of the
transaction, and consensus was reached and the transaction implemented.
10.225 Letters of Advice from the State Solicitor regarding the role of KCH and the
transaction confirmed that further NEC approval was not required given the
approval by NEC of the KCH Annual Plan.
10.226 He had NEC and Board approval to expend the K46.6million; he complied with
Board directives and he did not breach his financial authority.
(14) Administrative Inquiry Conclusions re Hersey
10.227 Mr Hersey’s suspension is in a different category from the other suspensions.
Going by the documentation made available to the Administrative Inquiry, he
appears to have been suspended and terminated on the ground of breaches of his
Employment Contract with Kumul. He has foreshadowed action for wrongful
dismissal. The suspension and termination were effected by the NEC.
10.228 The Administrative Inquiry is of the view that breach of contract, as such, does not
fall within its Terms of Reference. Accordingly, the Administrative Inquiry
considers it to be outside its scope to deliberate on Mr Hersey’s suspension or
10.229 The Independent Committee does not appear to have put to Mr Hersey that he
committed any breach of the criminal law, and Mr Hersey has denied all
wrongdoing. In those circumstances in particular, it would be inappropriate for the
Inquiry to deliberate on Mr Hersey’s suspension or termination.
10.230 In summary, the Administrative Inquiry makes no determination about Mr
Hersey’s conduct. This is not intended to render issues relating to Mr Hersey
immune from investigation by other investigative bodies should such bodies
consider that issues involving Mr Hersey warrant further investigation.
Page 67 of 101
11. Defence Accounts
11.1 It is necessary to examine the account given to the Inquiry by the Defence Force in
relation to the selection of Portion 406 for compulsory acquisition.
11.2 Brigadier General Toropo, the Commander of the PNG Defence Force, attended at the
Inquiry to give information on 9 September 2017.
11.3 The Brigadier General said he had been Commander for over 3 years. He referred to
the fact that the relocation decision came to involve both Murray Barracks and
11.4 The relocation of the Lancron Naval Base envisaged that Lancron would be given
over to commercial activity, and the Naval Base would be transferred out of Port
Moresby as well. Brigadier Toropo said the Lancron Naval Base was still being used
by the Navy. He said that was because an alternative site had not been found. He
agreed that, neither before nor after the acquisition of the Manumanu land had there
been any expert analysis of the suitability of Manumanu for naval purposes. No
written report had been prepared.
11.5 Although he had supported the decision to move the naval base to Manumanu, he
stated that it was preferable for the maritime base to be within the vicinity of the Port
Moresby area. He stated:
If there is any site available, Motukea should be a suitable site.
11.6 The Brigadier General appeared to be quite doubtful as to whether “bigger boats”
could be accommodated at Manumanu.
11.7 The late Mr Vali Asi, Secretary for Defence, gave his account to the Administrative
Inquiry on Thursday 20 July 2017. He said that, having been Secretary for Defence in
1986-1989 period, he was re-appointed on 14 October 2015.
11.8 His view was the Manumanu land was suitable for maritime purposes. He stated that
his view was based on “the advice we got from our technical people” and that “the
Commander will answer for that”. He said he was never involved in any decision as to
whether the land at Manumanu was suitable for naval purposes but his belief was that
it was suitable.
11.9 He was under the impression that “Portion 154 goes to the sea”. When it was put to
him that the nearest water was the Galley Reach River which was almost 4 kilometres
from Portion 154, Mr Asi appeared to have no real knowledge of the relationship
between land and sea in the area.
Dr Fabian Pok
11.10 On 15 October 2015, Dr Pok sent a letter to Mr Luther Sipison, the Secretary for
Department of Lands and Physical Planning.
Page 68 of 101
11.11 The letter reads as follows: –
Re: Intention to shift Murray Barracks and Lancron Navy base to Portion 406
The National Executive Council in its Decision 168/2014 has authorised the
PNGDF to relocate its current military establishments away from NCD.
My Ministry and PNGDF have identified Portions 406 and 154, Milinch
Manu, Aroa, Central Province, as suitable locations for the construction of new
military barracks and associated facilities.
As Portions 406 and 154 are currently Agricultural Leases held by private
interests, I request the Department of Lands and Physical Planning to
compulsory acquire these portions for the State (PNGDF) for military
purposes under the compulsory acquisition process provided under the Land
Act. Please therefore initiate the necessary process under the Land Act to
compulsorily acquire these portions for the PNGDF. ”
11.12 As previously stated, the content of the letter was incorrect insofar as Portion 154 was
at all material times the property of the State.
11.13 As also previously stated, the Defence Minister’s letter of 15 October 2015 appears to
be the first time Portion 406 had been officially mentioned as a site.
11.14 It is also highly significant that Dr Pok was a member of the Defence Council, and
accordingly must have known that Portion 406 had not been approved by the Defence
Council to be part of the new Defence site, although Portions 422 and 423 had been
approved on 27 February 2015.
11.15 In his account of events to the Administrative Inquiry, Dr Pok acknowledged that the
land was not approved by the Defence Council. He said that it was desirable land
because it had no real problems in relation to customary ownership. That was “one
point to consider”.
11.16 He referred to the fact that a feasibility study and design had been carried out on how
Murray Barracks would look in the future, but he did not suggest there was any
feasibility study performed as to the suitability of Portion 406.
11.17 The significant feature of Dr Pok’s account, therefore, is that it confirms that he gave
Ministerial impetus on the compulsory acquisition of Portion 406 in circumstances in
which there was no Defence Council approval of that purchase and no feasibility
11.18 In the absence of a Defence Council Decision and a feasibility study, it may be
inferred that it was Dr Pok who gave the necessary direction that Portion 406 be
compulsorily acquired, and thereby provided a cover for the lack of approval.
Page 69 of 101
Inquiry Conclusions re Dr Pok
11.19 It is very strange that Dr Pok should have authorised the compulsory acquisition of
Portion 406 at all, let alone that he should have done so in the absence of a Defence
Council decision and a feasibility study. However, such action would not have been
corrupt had Dr Pok been lending his support to the compulsory acquisition of Portion
406 solely for the purposes of what he considered to be in the bests interests of the
11.20 But if he was acting in the interests of another or others, including Kurkuramb Estates
and himself, his actions of course would have been corrupt. This therefore provides a
further reason as to why the affairs of Kurkuramb Estates need to be properly
11.21 The allegation of corruption against Dr Pok would be strengthened if it did transpire
that Mr Duma controlled the affairs of Kurkuramb Estates. Then it would have been a
case of Dr Pok having authorised compulsory acquisition of a property owned by a
company controlled by another minister, with that being a compulsory acquisition
which turned out very favourably to the property owner. In that event, an inference of
collusion between the two ministers could be drawn.
11.22 However, as stated above, Mr Duma has firmly denied that he controlled the affairs of
KEL. As matters stand, there is no basis for thinking that Dr Pok should have realised
that Mr Duma controlled the affairs of Kurkuramb Estates, because Mr Duma is very
firm that he did not do so. Accordingly, no basis for drawing such an inference arises.
Page 70 of 101
12. Valuation Considerations
12.1 Aspects of the valuations have already been referred to and considered in Sections 9
and 10 of this Report. The object of this Section is to add some additional matters.
12.2 Mr Gabriel Michael said that he had been with the Valuer General’s Office for over
20 years, and had been Valuer General since 2014.
12.3 Mr Michael stated that all compulsory acquisitions have to come to him by means of a
request from the Department responsible for organising the acquisition. The letter is
normally written to the Secretary of the Department, that is to say the Secretary for
Lands. The letter ordinarily asks for the Valuer General’s Office to prepare a
12.4 Mr Michael says that, in this instance, in respect of Portions 406, 422 and 423, he was
not informed of any such request, if there was one.
12.5 In his experience, “all compulsory acquisition is done by the State”, and the State is
liable for all compensation.
12.6 He said that the established procedure was that Mr Kila had to go through him to
obtain approval to prepare a valuation report for a compulsory acquisition. He could
sign for a compulsory acquisition valuation below K500,000, but not over K500,000.
In 2014 Mr Michael had circulated a document dated 25 February 2014 containing
this instruction: See Annexure 12(1).
12.7 He said that, when the three valuation reports relevant to the Inquiry were done in
November 2015, he was not on leave. He conceded that he may have gone on duty
travel, but he cannot recall doing so. When he went on duty travel, that would last for
a week or a few days. The reports were not referred to him. He had not signed the
12.8 This was the first time he was aware of any valuer in his office signing for a valuation
above K500,000. Any such valuation should have been signed by him.
12.9 So far as the stamp is concerned, he said that one stamp is kept in his office. The
other stamp was for Moses Kila to use when he signed off for valuations below
12.10 Mr Moses Kila attended on the Inquiry on two separate occasions.
12.11 He said that there was no working file of documents pertaining to Portion 406. The
reason was that he did the valuation in a hurry. When asked why he was in a hurry,
he said he was pressured by officers of the Defence Department.
12.12 Although he did not refer to any comparable sales in his report, he identified a
document as containing those sales he said he had examined. A copy of that
documentation is Annexure 12(2). The notable feature of all of the sales is that they
were properties in or on the fringe of Port Moresby.
Page 71 of 101
12.13 He stated that he signed the valuation certificate because Mr Gabriel was not
available. He claimed Mr Gabriel was away on duty travel.
12.14 On the second occasion he attended the Inquiry, which was on 30 August 2017, he
was asked why he had not revealed, on the first occasion, that he had signed
valuations for Portions 422 and 423.
12.15 The explanation that he gave was that Portions 422 and 423 had been valued by a
private valuer. He said that “they said for us to cancel” since the valuations had
already been done. He agreed that he had prepared the valuations, but said they were
“disregarded because it was said that a private valuer had already done it so we
should not be doing it and so we only did 406”. He said that he “never gave” the
reports for 422 and 423.
12.16 He agreed that he stamped reports for Portion 422 and Portion 423 and applied his
own signature to them, as he had for the Portion 406 report.
12.17 He said that subsequently the value for Portion 406 was set at K46 million because it
“was adopted from this private valuer”, the valuer being Gabriel Du Karap of GDK,
Valuers and Property Consultants.
12.18 It was put to him that the value that he placed on 422 and 423 was actually higher
than the value placed by Mr Du Karap on those properties. Mr Du Karap had placed
K7.2 million on Portion 422, whereas Mr Kila’s value was K7.615 million. As to
Portion 423, Mr Kila had placed a value of K9.397 million on the land, whereas Mr
Du Karap had given a value of K9.2 million.
12.19 Mr Kila found it difficult to explain why he had put a higher value than Mr Du Karap
on the 422 and 423 properties. He said:
“It is reasonable because, like I said, valuation is not exactly what — if you put it
on 9. 7, it does not mean that I will put on it 9.7 as well. It depends on how you
interpret the data and how you can reason to say that you use this rate or this,
whatever; depending on the factors that may influence some things. Like I do not
think the same way as you think, you see. It is a little bit like economics and
psychology and all these kinds of things. So if you think differently, I may have a
slightly different value because I think of it in a different way. So long as it does
not differ, not a very big difference is in there.”
12.20 He said the private valuation had been given to “people from Defence”. He said that
in this instance the requesting authority was the Secretary for the Department of
Defence. He said that, in this instance, Defence was “the client to this private
12.21 He said that the use made of the private valuer, and the adoption of the private
valuer’s figures, was done by “Defence Department”, the “personnel from the Office
of the Secretary of Defence”. He was not able to say who those people were.
Page 72 of 101
12.22 Mr Kila claimed that he did not know what the purpose of ascertaining the market
valuation of Portions 422 and 423 was. He did not know that those two allotments
were being purchased by the Government. He said he did not know, in the case of
422 and 423, that the valuations were for the purpose of compulsory acquisition. He
said that “all they asked was for the market value”.
12.23 When pressed as to why he did valuation documents himself and signed them in
relation to 422 and 423, he stated “Well, we thought we were going to give it to them
but then they said, ‘no it was already being done, so we cannot do it again’. That is
what they said.”
12.24 He said he did not adopt the figure just because it was given by a private valuer. He
claimed to have done his own analysis, including obtaining his own data. That was
the same set of data as he used for Portion 406.
12.25 He said there were not many sales in the area in relation to agricultural land. He was
challenged as to whether his valuation for Portion 406 was a one-page valuation, and
he said: “No, there are several pages to it-. There was not just the page with his
signature on it. He claimed to have given over copies of the other pages, but said “I
do not know if you people have copies”.
12.26 He produced the document which he said constituted the additional pages for his
valuation of Portion 406. They were the pages that contained the details of sales in
and close to Port Moresby. They are Annexure 12(2).
12.27 He said that he did take into account comparable sales, he just did “not put it in the
report”. This further material was “in the office”. He said he had given people copies
12.28 In relation to his valuation of Portion 406, he stated, referring to the valuations of
Portions 422 and 423, “we almost adopted the same rate”. When asked why he did
that he said: “Because we are just around the same area, just adjacent”.
12.29 He was asked whether, when he valued Portion 406, he just took the per hectare rate
that the private valuer had adopted for the other two properties, 422 and 423. He said:
“No, it is slightly different”. He said his reason was the variable sales.
12.30 He said he never obtained a copy of any minute sent by Mr Michael containing a
direction to the effect that nobody in the office should do a valuation over K500,000,
without that matter being referred to Mr Michael. Mr Kila said he was only verbally
informed to that effect. He said: “Verbally, he had mentioned that my limitations are
K500, 000” . That was around February 2014 that Mr Michael said that.
12.31 He said he did not comply with the requirement that he should refer a valuation over
K500,000 to Mr Michael. The reason he gave was: “Because in his absence I was like
pressured”. The pressure that occurred was applied by Defence Force officers
through Mr Moni.
Page 73 of 101
12.32 He said he was never paid any money in connection with the valuations and received
no benefits. He was not aware of anybody else in the Valuer General’s office
receiving any benefits.
12.33 When asked where Mr Michael was at the time he prepared his valuations, Mr Kila
said “he had some problems so he was away from the office”. He was away “a week
12.34 Mr Michael sent a letter to the Administrative Inquiry dated 26 July 2017. He gave
this description of the discussion between Mr Kila and himself concerning the
valuation of the Manumanu land prepared by Mr Kila. Mr Michael stated:
“For this letter of request officially requesting the Office of Valuer General to
carry out the Valuation, as I was not involved in this Valuations I called for Mr
Moses Kila the Assistant Valuer General who actually did the valuation to explain
as to how these valuations were done. He responded stating that the Defence
Secretary’s Office requested these valuations. An officer from the Defence
Secretary’s Office came to the Valuer General’s Office requesting for the
Valuation verbally and he was asked to fill in a Valuation Request Form and
Valuation Instruction Numbers were issued for Portion 406 with an
Instruction No. COR 2015144 and Portion 2722 with an Instruction Number
COR 2015142 and Portion 2723 with an Instruction Number of COR 215/43;
these Portions 2722 and 2723 were later changed to Portions 422 and 423 by
the Office of the Surveyor General. Moses Kila also stated that the Valuation
he did was for Portion 406 Milinch Manu Fourmil Aroa only and he did not do
the Valuations for Portions 422 and 423 Milinch Manu Fourmil Aroa as the
Defence Secretary’s Office said they have engaged private valuers to carry out
the reports. I therefore conclude here that Valuation Instruction Numbers were
issued based on the Defence Secretary’s Officer filling in an Official Valuation
Value of Land
12.35 The assessment of compensation arising from the compulsory acquisition of land is to
be determined in accordance with the provisions of the Land Act 1996, in particular
sections 23 and 24.
12.36 Under those provisions, the value of the land is to be determined at the date of
12.37 Under s. 23(2), “in determining the value of land acquired under this Act, regard shall
not be had to any increase in the value of the land arising from the carrying out of, or
the proposal to carry out, the public purpose for which the land was acquired”.
12.38 In other words, in the circumstances of the present case, the fact that the Department
of Defence demonstrated interest in the acquisition of the land, and in conducting
military operations on it, could not be relied upon to increase the value.
Page 74 of 101
12.39 The value to be ascribed to the land is the “market value” which is defined as being
“the estimated amount which the lessee’s interest in the State Lease might reasonably
be expected to realise on the date of valuation in an exchange between a willing
vendor and willing purchaser in an arm’s length transaction after proper marketing
wherein the parties had each acted knowledgeably, prudently and without
Relevant Comparable Sale
12.40 The Administrative Inquiry has had regard to the State valuation in relation to land
known as Portions 11 and 152, Milinch Granville, Fourmil Moresby, Central Province
in assessing the compensation payable as a result of compulsory acquisition of
agricultural leases. The property was situated on the north-western outskirts of Port
Moresby and the southern part of the holding was approximately 16 kilometres north-
west of the Port Moresby Central Business District. There was a bitumen road from
Port Moresby which went past the property. It was a sealed two-lane carriageway
with gravel shoulders. It was in good condition. Good access was available direct to
the property from the road.
12.41 The lease was expressed to be a “Pastoral Lease” and, as such, the property could
only be used for grazing or pastoral purposes.
12.42 Reticulated electricity and telephone services were available to the property. No town
water or sewerage services were provided.
12.43 The compulsory acquisition of Portions 11 and 152 was effective on publication of the
Notice of Acquisition in the National Gazette on 18 December 2007. The registered
proprietor was Takoa Pastoral Co. Limited.
12.44 The property had formerly been a grazing property (it had been called Fairfax Cattle
Station) and it had apparently been abandoned. The property was mostly cleared land
with some regrowth areas and indications of previous improved pastures in selected
areas. The property comprised extensive areas of gently sloping to gently undulating,
fully cleared grazing paddocks with reasonable natural grasses. The soils were of
moderate to low fertility and this, combined with the low rainfall, lack of permanent
water and lack of water storage facilities restricted the carrying capacity at the time.
12.45 The area of property was large, namely 4,323.078 hectares. The lease term was for 99
years, and the commencement date had been 29 March 1955.
12.46 The unimproved value of the land at the time had been assessed at K39,900 for
Portion 11, and K416,500 for Portion 152. The then current annual rental was
K22,700 per annum.
12.47 The valuation had been conducted on behalf of the State by Mr John F. Purcell of
Asia Pacific Valuations Pty Ltd. Mr Purcell was a certified practising valuer.
12.48 Mr Purcell valued the property at K565,000. This reflected a per hectare rate of K350
for Portion 11 and K300 per hectare for Portion 152.
Page 75 of 101
12.49 The report is Annexure 12(3).
12.50 It will be seen that the report analyses several comparable sales.
12.51 Mr Purcell concluded that the sales evidence for pastoral/grazing properties indicated
that the land rates ranged from around K300 to K600 per hectare. The range of values
reflected the size, quality and location of the holding.
12.52 Mr Purcell considered that discount had to be allowed for:
n The lower than average carrying capacity;
• A poorer (less fertile) soil quality;
• Absence of improved pastures;
• Low rainfall in the area;
n Limited stock watering facilities;
• Lack of any significant farm infrastructure;
n Deterioration whilst operative as a cattle farm.
12.53 Conversely, some of the attributes of the subject property had to be recognised
• Close proximity to Port Moresby;
• Good all weather access roads;
n Some underlying capital appreciation to recognise the increasing
development in the general locality.
12.54 Mr Purcell’s valuation was prepared some eight years prior to the relevant valuations
in the present case. However, the Administrative Inquiry is not aware of any major
alterations in value of agricultural land within driving distance of a major city that
would justify the huge difference between the per hectare value determined in that
case, and that determined in relation to the Manumanu land.
12.55 From the description given in Mr Purcell’s valuation, the quality of the land acquired
from the Takoa Pastoral Co. Limited was probably slightly inferior to the Manumanu
land. On the other hand it was 16 kilometres from Port Moresby, whereas the
Manumanu land is 80 kilometres from Port Moresby. Like Portions 11 and 152,
Portion 406 Manumanu was a failed cattle property.
12.56 It is beyond argument that the values attributed to Portions 406, 422 and 423 for the
Manumanu land in the du Karap and Kila valuations, reflecting as they do a per
hectare rate in the region of K55,000, cannot possibly be sustained. A more
appropriate per hectare value is the rate per hectare paid by Mr Eludeme’s interests to
purchase Portions 422 and 423 in 2011, namely K488 per hectare.
12.57 The unimproved values applied by the Valuer General to State Leases of Portions
406, 422 and 423 were totally inconsistent with the Du Karap and Kila valuations.
Whilst it is appreciated that such valuations are often assigned administratively
without there being any requirement of detailed value assessment, the valuations are
intended to reflect the unimproved value of the land. They form the basis for the
Page 76 of 101
calculation of the annual rental. As previously stated, the values were generally
consistent with the K488 per hectare figure paid by the Eludeme interests, and totally
inconsistent with the K55,000 per hectare figure.
12.58 The valuation evidence therefore also requires further examination by an authority
with full investigative powers. One reason for that is that it does involve conflicts in
accounts. As has been seen, there is a conflict between the account given by the
Valuer General, Mr Michael Gabriel, and that given by the Assistant Valuer General,
Mr Moses Kila. For reasons given in relation to the Administrative Inquiry’s general
lack of powers, the Administrative Inquiry is not capable of resolving a conflict of
that kind, not having the power to examine persons on oath or the power to require
attendance of other persons to give evidence about particular matters.
Page 77 of 101
13. Conspiracy Theory and Suspension
13.1 As has already been indicated, several heads of department were suspended pending
investigation into matters the subject of this Administrative Inquiry.
13.2 As stated above, the departmental heads suspended on 8 February 2017 were the
Defence Secretary, Mr Vali Asi, Lands and Physical Planning Secretary, Mr Luther
Sipison, Valuer General, Mr Gabriel Michael, Kumul Consolidated Holdings
Managing Director, Garry Hersey, MVIL Managing Director, Jerry Wemin, Central
Supply and Tenders Board Chairman, Mr Philip Eludeme, Lands Titles Commission
Chairman, Mr Benjamin Betata, and the State Solicitor, Mr Daniel Rolpagarea. The
remarks in this section do not apply to Mr Eludeme or Mr Hersey, who are considered
separately in this Report.
13.3 The very fact that those senior officers covering a number of departments and State
entities were suspended demonstrate that there was an allegation of suspicion of
conspiracy including corruption on a large scale.
13.4 That the allegation or suspicion was nothing short of large scale conspiracy is clear
from the content of the allegations. This is exemplified by the “Show Cause” letter of
15 May 2017 which Mr Luther Sipison, the Secretary of the Department of Lands &
Physical Planning received from his Minister, Mr Benny Allan.
13.5 The Show Cause notice given to Mr Sipison is Annexure 13(1). Looked at in
conjunction with known facts, it shows that the central allegations were that the
compulsory acquisition of Portion 406 was corruptly contrived, and that a high
valuation was corruptly obtained, thereby enabling a corrupt party or parties to receive
the high amount of compensation assessed in respect of the value of the land. The
contriving included the prior obtaining of the grant of the land, which may never have
been intended to be used for agricultural purposes, but, rather, was intended to be
available to be compulsorily acquired at the instance of the Department of Defence.
The letter began:
“In a letter to you dated 3 February 2017, the Prime Minister directed you to
respond to allegations and to explain your involvement with others in the
compulsory acquisition of land at Manumanu to facilitate the relocation of the
Defence Force Lancron Naval Base, namely:
a) compulsory acquisition of Land Portion 406, Milinch Aroa, Central
b) execution of the MOA between the Department of Defence, Kumul
Consolidated Holdings Limited, and Kurkuramb Estates Limited;
c) valuation of the said land through the Valuer General’s Valuation Report,.
d) Transfer of the Title to Kumul Consolidated Holding Limited of Lancron
Naval Base (Section 53 Allotment 9 Granville);
e) related acquisition of other land by the Department of Defence for the
purpose of relocation of Lancron Naval Base; and
0 availability of other information relevant to the said land acquisition.”
Page 78 of 101
13.6 The paragraph setting out the allegations against Mr Sipison appears at the top of page
2 of the letter:
“The evidence in the possession of the State shows that you have used your
position of power and influence as a senior officer of the national public
service, in conspiracy with others, for the purpose of defrauding the State and
defrauding customary land owners in that you participated in and/or
facilitated the compulsory acquisition of the said Manumanu land’ at Portion
406, Mil inch Aroa, Central Province.”
13.7 These were extremely serious allegations. They were allegations of criminal conduct.
13.8 Of all the heads of department that were suspended, the allegations against Mr Sipison
and Mr Vali Asi, the Secretary for Defence, might be thought to carry the most
traction inasmuch as the facts point mostly to facilitative actions within the Lands
Department and the Defence Department. In particular, substantial manipulation
appears to have occurred in the Lands Department.
13.9 The Inquiry turns therefore to the responses by Mr Sipison and Mr Asi.
13.10 Mr Sipison’s responses to the allegations are comprehensively set out in a letter he
sent to the Administrative Inquiry dated 18 May 2017. That letter is Annexure 13(2).
13.11 In that letter Mr Sipison states it was not his intention to defraud the State in any way.
He considered the relocation of the Force to be a matter of national interest, and
officers were designated to administer specific functions within his department.
13.12 He did not in any way or manner exert pressure or threats to officers.
13.13 The valuation of Portion 406 was carried out in the Valuation Division which he says
functions independently of the Lands Department.
13.14 He stated that the valuation of Portion 406 and other land of interest to the PNGDF
was “only an indicative figure to assist and guide the State Agency involved in this
compulsory acquisition which will form the basis of them to negotiate with the lease
13.15 He continues:
“Therefore, it is not the intention of my Department to allow PNGDF
and its stakeholders to fix their pricing of the private land solely on the
valuations done by the Valuation Division. The same applies to all
other valuations on any property to serve as the basis of owners and
buyers to negotiate and agree within themselves.”
13.16 He continued:
“It was a private and individual decision of the management of
PNGDF and its leadership to agree on the final acquisition price,
which they themselves will pay for and on behalf of the State. As such
Page 79 of 101
my Department and I had very little or no involvement in the
negotiation of the final price of the Portion 406 and all other land that
were of interest to PNGDF for their relocation exercise.”
13.17 He said the Memorandum of Understanding signed between the Department of
Defence and Kumul Consolidated Holdings and Kurkuramb Estates Ltd were private
dealings to which neither he nor the Lands Department were parties.
13.18 Mr Sipison denied that he had conspired with others to defraud the State and
customary landowners in facilitating the compulsory acquisition of the Manumanu
13.19 Further, he denied he had personally benefitted and enriched himself from the
acquisition payment by Kumul Consolidated Holdings Limited to Kurkuramb Estates
13.20 Before his unfortunate death of 6 August 2017, Mr Vali Asi had attended on the
Administrative Inquiry on 28 July 2017 to give his account of relevant matters.
13.21 In his discussions with the Administrative Inquiry, he said that he had trusted the
correctness of the valuation to the Valuer General.
13.22 He said he had seen no evidence of anyone in the Defence Department getting any
money out of the Manumanu transaction. He said he had no dealings with Kumul
Consolidated Holdings Ltd about the matter. He did not know Mr Christopher Palos
and knew nothing about the company, Kurkuramb Estates Ltd.
13.23 The Government acted swiftly by suspending the heads of several departments. In
most of the departments, some action had taken place which apparently facilitated the
Portion 406 transaction.
13.24 The fact that the Government acted so swiftly was not surprising, because it was
presented with a transaction which suggested that it had been caused to purchase land
for K46.6million for a naval base when the land was landlocked and several
kilometres from the sea. Features of the transaction appeared to show that at least two
departments must have been manipulated to bring about that effect, and that many
public servants could have been involved in the process. The manipulation included
causing the Defence Department to make a seemingly irrational decision as to the
purchase. On any basis, the amount paid appeared to evidence manipulation of the
valuation process, and the result was nothing short of an expensive and operational
13.25 As to the heads of department, assuming that they were not knowing participants in
the fraud, the fact that their departments became vehicles through which fraud was
committed had to be seen as raising questions of the adequacy of the administration of
their respective heads.
13.26 The Administrative Inquiry does not consider that it is to sit in judgment on the
Government’s suspensions. The Administrative Inquiry would not dispute that, in the
Page 80 of 101
situation described above good governance required the Government to act promptly
and decisively to express its concern at the lack of proper administration that was
13.27 The suspension of the heads of departments may have been made on an alternative or
different basis from the “conspiracy” basis, namely that the departmental heads had
not adequately administered their respective departments.
13.28 It will be recalled that the “Statement of Case” referred to the fact that “the principles
of accountability and transparency have been seriously questioned in the land
transactions warranting the Prime Minister at the authority of the National Executive
Council to take firm action”.
13.29 However, the fundamental allegation in this matter is of criminal conduct, probably of
a conspiratorial nature. Perpetrators of such conduct are likely to seek to ensure that
others who are not part of any conspiracy or criminal conduct are not alerted to the
true nature of the actions that are being taken. That being so, the disclosure of the
alleged conduct can hardly indicate, in itself, that the heads of departments were at
fault. Having regard to those considerations, the Panel takes the view, on the basis of
the information supplied, that none of the heads of departments currently on
suspension have been shown to have been derelict in their duty in this way.
13.30 In short, the expression of the Government’s reasoning behind the suspensions it
made of departmental heads was based on the proposition that those departmental
heads were parties to a conspiracy to defraud the Government. In the limited
investigation it was able to make, the Administrative Inquiry saw no direct evidence,
and insufficient circumstantial evidence, to show that the departmental heads were
party to a conspiracy to defraud the Government.
13.31 That was particularly the case with State entities such as the MVIL, Land Titles
Commission and the State Solicitor’s office.
13.32 The Panel sees no reason for declining at this stage to act upon the denials of
misconduct made by Messrs Luther Sipison and Vele Asi, and sees no basis for
thinking that the allegations against them would suffice to prove that they were parties
to a conspiracy of a kind described in Mr Allan’s Show Cause notice. Having reached
that conclusion in relation to Mr Sipison and the late Mr Asi, the Panel does not
consider it necessary to deal explicitly with each of the departmental heads. In short,
on the material presently available, there would be no prospect of any conspiracy
allegation being sustained against any of them either.
13.33 The State Solicitor, Mr Daniel Rolpagarea, was also suspended. Mr Rolpagarea gave
some advices with respect to the Portion 406 transaction at the point at which it came
to involve KCH. The Panel has considered the advices, and sees no reason why any
allegations could be sustained against Mr Rolpagarea either. Mr Rolpagarea, for
example, advised in a letter to Kumul Consolidated Holdings dated 27 January 2017
(copied to the Minister for Public Enterprises and State Investments, Mr Duma) that,
taking a broad view, the acquisition of Portion 406 could be said to be authorised by
the 2012 NEC Decision. The Administrative Inquiry considers that view to be fairly
Page 81 of 101
open. The expression of that view certainly falls well short of evidence that Mr
Rolpagarea was party to any criminal conduct.
13.34 The Administrative Inquiry sees no reason to doubt the account of events given by Mr
Michael Gabriel, the Valuer General. It saw no irregularity in Mr Joe Wemin
releasing an MVIL dividend to KCH simply because it partly funded the payment of
K46.6 million to Kurkuramb Estates Ltd by KCH. The Administrative Inquiry failed
to discern any relevant connection between Mr Betata and the assertions of fraud and
illegality the subject of the Inquiry.
13.35 All that is not to say that there was no large conspiracy of the kind referred to in the
letter to Mr Sipison. The prospect that there was such a conspiracy cannot be
excluded. All that is being said is that the Administrative Inquiry did not see
sufficient evidence to support the expressed allegation that the departmental heads
were party to a conspiratorial agreement.
13.36 The Administrative Inquiry certainly does not intend to suggest that a considerable
amount of manipulation and dishonesty was not involved. There are features of the
transactions that make it obvious that manipulation and dishonesty were definitely
involved. Features such as the fact that the Portion 406 purchase was not approved by
the Defence Council and that there was no feasibility study supporting it, and that it
appears to result in the Defence Department having far more land than it needs at
Manumanu, strongly support the proposition that the compulsory acquisition of land
recently granted to Kurkuramb Estates Ltd was contrived. The fact that the valuation
was so far in excess of the true value suggests that the valuation was fraudulently high.
The fact that the Lands Department files disappeared strongly supports the proposition
that there was corruption involved.
13.37 It is to be recalled that, in June 2015, Kurkuramb was granted Portion 406 paying no
more than application fees of K650. Approximately three months later, the State
commenced the process of compulsorily acquiring the interest and agreed to pay the
company K46.6 million by way of compensation. Any conclusion that that occurred as
a result of mere luck strains credulity. Then one goes back to the further fact that a pre-
requisite to the success of the transaction was apparent pressure on the
government exerted by the Defence Department to acquire Portion 406 for the
purposes of relocating military and naval installations in circumstances in which there
was no qualified opinion to support the appropriateness of the land for that purpose.
13.38 As stated above, the action against the various senior officers of the State, and the
allegations made against them, are plainly based on the theory that a large number of
personnel across a number of departments, including the Heads of some departments,
and in two cases Ministers, conspired together (and presumably with several others) to
manipulate the compulsory acquisition of Portion 406 at an inflated price and to divert
the proceeds of the acquisition of the property into their hands.
13.39 There is circumstantial evidence which supports the notion that there was a wide-
ranging conspiracy, such as the lengths some personnel in the Lands Department have
gone to in removing all the files containing evidence relating to the transactions. If
there was a large and wide-ranging conspiracy of that kind, it could only be
demonstrated to the requisite degree by an exercise of full investigative powers. As
Page 82 of 101
has been indicated, the Administrative Inquiry does not have these powers. There are
other possibilities. One such possibility is that one person, or a small number of
persons, garnered sufficient cooperation from public servants across the relevant
departments, particularly in Lands and Defence, to achieve the same ends. Once
again, circumstantial evidence also supports that possibility. Again, however, that also
could only be demonstrated by a full investigation.
13.40 The Panel is therefore strongly of the opinion that full investigations of this matter
should be completed by the Police and the Ombudsman Commission, as appropriate.
13.41 Whether the suspensions were and are justified on a “good governance” basis, or on
the footing that the departmental heads must take responsibility for such events when
they occur, is a matter for the Government. The Panel simply makes it clear that, in its
opinion on the facts presently known to it, the suspensions cannot be justified on the
basis that the nominated departmental heads were parties to a conspiracy. Of course,
that view would need to be altered if further investigations demonstrated otherwise.
13.42 It should be added that the Administrative Inquiry also seeks to make it clear that its
analysis is in no way intended to bind others who are charged with the duty of
investigating these serious matters.
Page 83 of 101
14. Portion 698
14.1 The final property transaction the subject of the Administrative Inquiry relates to
Portion 698, Milinch Granville, Fourmil, Moresby. This transaction is a stand-alone
transaction in that the acquisition of the property had nothing to do with the relocation
of the Naval Base or the Taurama or Murray Barracks.
14.2 It is also different from the Manumanu transactions because, whilst it attracted
criticism by settlers living on the land, to the Panel’s knowledge it has not been the
subject of public criticism.
14.3 It is however another instance of an acquisition of land for the purposes of the
Defence Force which deserves criticism. According to correspondence supplied to the
Administrative Inquiry by the Department of Defence, the Defence needed a property
in Port Moresby to house a long-range recon (reconnaissance) unit. Mr John Porti, in
a letter dated 13 August 2014 to Mr Romilly Kila Pat [Annexure 14(1)] suggested the
compulsory acquisition of Portion 698, a block of land adjacent to the airport
containing 30.6 hectares. The owner of the land was Kitoro No 64 Ltd. The principal
of Kitoro No 64 Ltd was Mr Tim Neville. His company had purchased the land in
2009. Mr Neville held a Valuer General valuation in the sum of K9 million as at 28
October 2011. The valuation report is Annexure 14(2). The valuation report recited
that the term of the State Lease was for a period of 69 years commencing 7 May 1964.
14.4 The report recited that there were no improvements on the land, but that some areas of
the land parcel were occupied by squatter settlers.
14.5 The valuation, which is under the hand of Mr Kwapena, stated that the valuation was
based on sales of similar State Leases and land transactions within the vicinity of the
subject property at 7/8 mile and neighbouring 9 mile in Bomana or Bomana/Laloki
14.6 The land was actually situated in 8 mile.
14.7 On 12 August 2014, Mr Douglas Ure, Secretary of Kitoro No. 64 Ltd, wrote to the
Secretary for Defence, Mr John Porti, in the following terms:
I am aware that the National Executive Council under the O’Neill/Dion
Government made a decision some two years ago to relocate sections within the
Papua New Guinea Defence Force unit to help alleviate the current
congestion and also to facilitate the natural expansion of the forces units.
I believe that the PNGDF under its approved white paper is currently seeking
expressions of interest for suitable and affordable land packages to be able to
undertake such an exercise. Obviously as you are undoubtedly aware State
lease with a current title is becoming in reality a critical issue;
1. Prohibitive in price; and
Page 84 of 101
2. A highly scarce resource
The Company can currently offer I believe an extremely suitable portion of land
that could be highly beneficial for the PNGDF’s requirements. The said land is
currently located immediately adjacent to the existing Defence Force ATS Unit
at the Jackson’s International Airport, Port Moresby.
The Portion of land is under State Lease and is currently unencumbered and
comprises of 75 acres 1 rod 20 perches or approximately 37 hectares. The land
is under State Lease Portion 698 Granville Port Moresby. I believe that the
proximity to the existing ATS plus the size of land would be extremely valuable
to the PNGDF’s relocation and urgently needed expansion programs.
The Company is therefore offering the said Portion of Land for sale at K14
million Kina to meet the PNGDF’s requirements.
Should you be interested we await your favourable response at which time we
would be happy to enter into further discussions to proceed to Contract and the
conclusion of the sale to the benefit of both parties.
We have also attached a current copy of the same Titles for your perusal.
In the meantime, we await your response.”
14.8 On 19 September 2014, Mr G J Sheppard of Messrs Young & Williams Lawyers
wrote to Mr Dairi Vele, Secretary and departmental head of the Department of
Treasury, as follows:
“Dear Mr Secretary,
ACQUISITION OF PORTION 698, MILINCH GRANVILLE, FOURMIL
We act for and are instructed by Kitoro No.64 Limited (“Kitoro’).
Kitoro is the leaseholder of Portion 698, Milinch Granville, Fourmil Moresby
We are instructed that our client had reached agreement with the respective
Departments of Lands, Treasury and Defence that the State would acquire and
purchase our client’s Portion 698 at the agreed price of K14 (fourteen)
million kina and that such payment would be made upon the acquisition of
Kitoro instructs that on 5 September 2014 the Minister for Lands acquired
Portion 698 by issuance of a Notice under section 12(1) of the Land Act 1996.
To date, our client has not been paid for the purchase of Portion 698.
Page 85 of 101
By this letter we write to respectfully request that your Office issue payment to
our client for Portion 698 at the earliest.
Failing a satisfactory and timely response, we are instructed to commence
immediate Court proceedings against the State for breaching the terms and
conditions for purchase of our client ‘s Portion 698.
Please let us have your response to this letter by and before 4.00pm on 23
We look forward to your positive and timely response. Our client reserves all
of its rights.”
14.9 It would seem that the Department of Defence then paid a sum of KI5.4 million for
the purchase of the land. It would appear from a letter from Mr Vali Asi, then
Secretary of the Department of Defence, to Messrs Young & Williams Lawyers, that
the purchase price was paid over without any arrangements being made that would
effect the transfer of title. This appears to follow from the letter dated 9 February
2016 from the Department of Defence to Messrs Young & Williams Lawyers:
RE DEMAND TO TRANSFER THE TITLE FOR LAND PORTION 698,
MILINCH GRANVILLE, FOURMIL MORESBY FROM KITORO NO 64 LTD
TO DEPARTMENT OF DEFENCE
We understand that you acted for Kitoro No 64 Ltd to sell their
aforementioned land to our organisation in around September 2014 when
settlement was reached and we paid a sum of K15,400,000.00 to your client as
full and final payment for the purchase of their land located at the back of the
Jacksons Airport for our PNGDF Warrior Training depot to be relocated
We further note that only a Notice of Compulsory Acquisition was issued on the
05th of November 2014 and no Sale and Transfer of that land including a Deed
of Release over that portion of land were executed.
Also, a Notice of Reservation of that land for our purposes so a Certificate
Authorizing Occupancy (COA) or a title proper can be issued to our
organisation has not been done to date.
Those necessary steps as required under the Land Act to formalize transfer of a
State lease over to our organisation has not been completed by yourself on behalf
of your client, with the concerned officers at the Department of Lands &
Physical Planning to date.
You have failed to comply with your end of this land sale contract to have the
title transferred to us and only pushed consistently for payment to be made
with our previous management who made it to your client who has made off with
that money without completing the sale properly.
Page 86 of 101
It is also surprising that the State Solicitor was never involved in the whole
process to guide you along in the process involved in compulsory acquisition of
land and hence no legal clearance is on file to support that sale.
As such, we now demand that you liaise with your client to complete the
compulsory acquisition process with the concerned Lands Department officers
to have the title transferred and given to us within a month from the date of this
Failing that we will have no option but to commence legal proceedings against
your client and yourself for failing to hold up your contractual obligations and
claim for associated damages as a result of that.
Please do not hesitate to contact our Principal Legal Officer, John Sebby who
has carriage of this matter if need be to further discuss this or clarify any issues
Your consideration and prompt action in this regard is highly appreciated.”
14.10 A letter from Mr Sheppard to the Principal Legal Officer, Department of Defence
dated 3 March 2016 appears to confirm that is the case. That letter [Annexure14(3)]
contained the following paragraphs:
“We confirm that we acted for Kitoro No. 64 Ltd in the conveyance transaction
of the above portion of land. Our Mr. Kenneth Frank (now His Honour
Justice Frank) had carriage of this matter and has since left the firm.
We note from your letter the transaction is yet to be completed for formalise
transfer of a state lease over to your organisation. We will now liaise with our
client to complete the compulsory acquisition process with the relevant
Department Lands Officers.
We understand the severity of this transaction and will undertake to complete the
conveyance process as timely and swiftly as possible. Please bear in mind that
we will be dealing with the Lands Department and most lodgements can take a
considerable amount of time to settle, in this instance the Registrar of Titles.”
14.11 So far as the Administrative Inquiry is aware, there still has been no transfer of the
title from Kitoro No 64 Ltd to the State. The transaction appears quite irregular, at
least on the following bases:
(a) There is no contract or other document specifying the terms on which the land
was purchased and sold;
(b) Insofar as the transaction was sometimes referred to as a compulsory
acquisition, it did not appear to comply with the requirements of the Land Act
1996 relating to compulsory acquisition.
Page 87 of 101
(c) The consideration was paid over by the Defence Department to the lawyers for
Kitoro No 64 Ltd without the usual exchange taking place which would have
enabled the obtaining of title.
(d) There was no approval of any kind to authorise the transaction, whether by the
Defence Council, the Minister or the NEC. As to the NEC, the Decision
70/2012 could not be relied on to support the transaction if only because the
transaction was not a transfer of a base away from the city of Port Moresby.
14.12 The Administrative Inquiry was asked to identify whether there was statutory
compliance in the transactions.
14.13 The documentation produced in relation to this transaction is somewhat ambiguous.
Some of it speaks in terms of compulsory acquisition, and some of it speaks in terms
of contract. The uncertainty emerges for example, in Mr Dairi Vele’ s letter dated 10
September 2014 [Annexure 14(4)] .
14.14 Looked at in terms of compulsory acquisition, whilst Mr Romilly Kila Pat, the then
Secretary for Lands executed on 5 September 2014 a Notice of Compulsory
Acquisition, there is no evidence of a Notice to Treat under S13 of the Land Act, or
the publication of a Notice for Compulsory Acquisition in the National Gazette in
accordance with S 12(1) of the Land Act 1996.
14.15 Looked at in terms of contract, the Administrative Inquiry has not been provided with
any contract of sale and believes there was no such contract brought into existence.
14.16 The failure to serve a notice to treat in accordance with Section 13 of the Land Act
1996, and the failure to publish the notice in the National Gazette appears to carry the
consequence that any compulsory acquisition procedure was flawed.
14.17 Although there was no valid compulsory acquisition or a contract of sale, the
Secretary for Defence, Mr John Porti, appears to have yielded to the demands for
payment made by the lawyers for Kitoro No. 64 Ltd, and K15.4 million was evidently
paid to Messrs Young and Williams Lawyers. The payment may have represented
K14 million plus a further K1.4 million for GST. The payment was demanded in a
letter from Young & Williams Lawyers dated 19 September 2014, but the actual date
of payment is not specified in the material supplied to the Administrative Inquiry.
14.18 As indicated above, no appropriate arrangement appears to have been made for the
State to obtain title to the land.
14.19 It seems the Department of Defence has never taken possession, and that the land
remains occupied by settlers.
14.20 The Administrative Inquiry endeavoured to obtain the cooperation of Mr Tim Neville,
the principal of Kitoro No. 64 Ltd, but despite the fact that he was given ample
opportunity to cooperate with the Administrative Inquiry, he did not do so. He plainly
also declined to instruct his lawyers to provide documentation in their file to the
Administrative Inquiry. He was entitled to take that stance because the
Administrative Inquiry had no power to compel the cooperation of informants.
Page 88 of 101
14.21 Some information relevant to this matter was provided by Dr Fabian Pok. Dr Pok
stated that he had been called to a meeting at the Grand Papua Hotel. At the time he
knew of the proposed transaction, because he knew that it had been the subject of
discussion between the Secretary for Lands and the Secretary for Defence. The
Secretary for Lands at the time was Mr John Porti. When he attended at the meeting,
he met Messrs Tim Neville and Ben Micah.
14.22 Dr Pok says that they asked him to sign papers relating to the sale and purchase of the
land. However, he declined to do so. He said words to the effect that the NEC
Decision was very straight forward in referring to land outside the National Capital
14.23 Dr Pok said that the transaction proceeded despite his refusal to approve it. The
Department of Defence had K25 million in its trust account. Dr Pok was aware of the
fact that the purchase price was made available out of those funds by Mr Porti, acting
along with the Secretary for Treasury, Mr Vele, and the Secretary for Lands, Mr
Romilly Kila Pat.
14.24 Dr Pok confirmed to the Inquiry that Portion 698 had not been applied to any Defence
Force purpose. He also said that he knew about the 28 October 2011 valuation by the
Valuer General which valued Portion 698 at K9 million.
14.25 Dr Pok said he was very angry about the transaction.
14.26 Because of the nature of the transaction, Dr Pok demanded that the purchase price of
K14 million be restored in the next budget.
14.27 The Administrative Inquiry endeavoured to have Mr Porti attend to give his version of
this matter, as well as some other matters. However, Mr Porti no longer lives in Port
Moresby, and the Administrative Inquiry did not succeed in its endeavours to have
14.28 The analysis of the transaction cannot be taken further in the absence of a right to
exercise coercive powers. It should be among the matters investigated by the Police
and the Ombudsman Commission.
14.29 The Administrative Inquiry is of the view that the investigation it has been able to
carry out demonstrated a lack of discipline in the Department of Defence in relation to
the acquisition of land for the Department’s purposes. The purchase transactions
displayed no due diligence on the part of relevant Defence parties, rendering the
system liable to corruption. The major transaction, in monetary terms, namely the
Portion 406 transaction, in which compensation was assessed at K46.6 million, had
not been the subject of any feasibility study showing that the land was suitable for
Defence purposes. The lack of discipline is further demonstrated by the Defence
acquisition of Portion 698.
14.30 The Administrative Inquiry received documents from some of the settlers who reside
on Portion 698. The Inquiry regards the claims by the settlers as being outside the
Terms of Reference.
Page 89 of 101
15. Claims by Customary Landowners of Magabairi and Pinu Villages, Kabadi, Hiri
District, relating Claims to Portion 154, Milinch of Manu, Fourmil of Aroa, Central
15.1 In Section 8 the Panel expressed the view that the landowners represented by Mr
Beraro have no viable claim to Portion 154 or any part thereof
15.2 The Panel has also examined documents submitted to the Administrative Inquiry by
persons claiming customary interests in land the subject of the transactions, namely:
(a) Adu Charlie, Deputy Chairman, representing landowners of Magabairi
village, Kabadi, in submitted documents dated 11 April 2017 [Annexure
(b) Reverend John Gape Ovia of Oviakubuna Clan of Vanuapaka Tribe,
representing Pinu landowners, in submitted documents dated 19 April
2017 [Annexure 15(2)];
(c) Mr Abel Ao Ovia, Secretary of the Abadi Pinu Pressure Group
Committee representing Pinu village, in submitted documents dated 19
April 2017 [Annexure 15(3)];
(d) Mr George Ure, chief of Kerekubuna clan of Pinu Village, in submitted
documents dated 23 April 2017 [Annexure 15(4)].
15.3 The customary landowners question the process followed in the alienation of their
land in the early years of the twentieth century.
15.4 They also seek review of the proposed establishment of military facilities on
Manumanu-Gabadi customary land.
15.5 They have asked for all the subject land to be returned to the legitimate landowners,
and have asked that all the perpetrators be referred for criminal prosecution.
15.6 They asked that compensation be paid to the customary landowners for the unlawful
deprivation of their land.
15.7 The Panel refers again to the letter of Mr Raga sent in connection with Portion 154. It
is apparent that the land the subject of Portions 406, 422 and 423 was all acquired by
the State about 100 years ago. That fact alone means that there are no viable
customary claims to the land. Of course, in the case of Portions 406, 422 and 423,
there is a difference in that, at the time of acquisition, registered State Leases existed
on the land. This merely rendered customary claims even less viable, because of the
indefeasibility conferred upon registered State Leases.
15.8 The Panel is of the opinion that in no instance can there exist any viable customary
claim to any of the land the subject of the Inquiry.
Page 90 of 101
16. Specific issues raised by the Terms of Reference
16.1 The following addresses the particular matters raised in the Terms of Reference. As in
the rest of this Report, the answers provided assume the correctness of material that
has been supplied to the Administrative Inquiry:
Term of Reference (a)
16.2 The National Government did not expressly authorize the Department of Defence to
acquire the land at Manumanu, especially Portion 406. It is argued however that it did
so inferentially in NEC Decision 70/2012 and later Decisions. This issue was
addressed by Mr Rolpagarea, State Solicitor, in a letter dated 27 January 2017. Mr
Rolpagarea was of the view that the wording was in the nature of a broad
authorisation and that the proposition that the NEC had sufficiently authorised the
acquisitions was broadly open. The Administrative Inquiry sees no reason to go
behind that view of that aspect of the matter.
16.3 Portion 154 was at all relevant times owned by the National Government, and the land
was unaffected by the existence of any State Lease. As it was entitled to do, the
National Government authorised Defence to use the land pursuant to a Notice of
Reservation dated 9 December 2015. The National Government did not authorise the
acquisition of Portion 698.
Term of Reference (b)
16.4 Matters relating to the role played by the National Government and department heads are
dealt with in the body of the Report. The position of the departmental heads is
specifically addressed in Section 12.
Term of Reference (c)
16.5 There was apparent statutory compliance in the acquisition of Portions 422, 423 and 406.
Portion 154 was not compulsorily acquired. Statutory compliance appears not to have
occurred in the case of Portion 698. That issue is dealt with in Section 13.
Term of Reference (d)
16.6 The cost of acquisition in each case was: –
Portion 422 K7.2 m
Portion 423 K9.2 m
Portion 406 K46.6 m
Portion 154 Inapplicable
Portion 698 K15.4 m
Page 91 of 101
Term of Reference (e)
16.7 Conflict of interest issues arise in connection with Mr Philip Eludeme and Mr William
Duma. They are dealt with in Sections 8 and 9 respectively.
Terms of Reference (f) and (g)
16.8 Issues of wrongdoing and impropriety, and the limitations the Administrative Inquiry
laboured under in dealing with those issues, are dealt with in Sections 9, 10, 12 and 13
of the Report.
16.9 As to who benefitted from the transactions, it is apparent that Mr Eludeme and his
associated companies benefitted from the Portions 422 and 423 transactions. The
Administrative Inquiry’s limited powers prevented it from establishing who benefitted
from the Portion 406 transaction especially because it was unable to conduct a proper
investigation into the affairs of Kurkuramb Estates Ltd. The Administrative Inquiry
was likewise unable to establish who may have benefitted from the Portion 698
transaction. The former owner of Portion 698, Kitoro No 64 Ltd, was the entity that
was entitled to benefit from that transaction.
Page 92 of 101
lcsovo eisiicl ity
Lo a l l . a – ,ziwyee A*.ti s
A 3 1 1t m I r sgy4 N t l g a w r
Page 93 of 101
1. 25 February 2009
The Valuer General Mr Chris Kabaru, in an Inspection Report
notes that Portion 406 is “generally level throughout”, and
assesses the unimproved value of the subject land at market
value of K30,000
2. 6 August 2009 Issue of State Lease over Portion 406 in favour of M&M
Investments Pty Ltd, commencement date of 6 August 2009
3. 23 March 2011 Eludeme interests purchase part of Portion 389 from Seromu
Investments Ltd at selling price of K200, 000
4. 28 October 2011 Valuation Report as to Portion 698 done by Valuer General of
the Department of Lands and Physical Planning and a
Valuation Certificate of Portion 698 issued
5. 18 October 2012 NEC Decision number 70/2012
6. 21 February 2013 NEC Decision No 46/2013
7. 4 July 2013 Portion 389 surveyed and subdivided into several portions
8. 28 February 2014 Notice to Show Cause as to why M&M Investments’ State
Lease should not be forfeited
9. 14 April 2014
Mr Sariman states he became aware of the forfeiture notice
when the M&M’s surveyor was attending to the matter of the
registration of the prospective subdivision, where he saw a
Notice to Show Cause dated 28 February 2014 and other
10. 14 Apri12014 Date of Forfeiture Notice directed to M&M Investments
11. 24 April 2014 Forfeiture Notice published in the National Gazette G151 of 24
12. 4 June 2014 Defence Council Order No. DCO 28 of 2014
13. 12 June 2014 NEC Decision No. 168/2014
14. 6 August 2014 State Lease over Portion 422 granted to Flystone
15. 6 August 2014 State Lease over Portion 423 granted to Kosi Investments
Page 94 of 101
16. 6 August 2014 Seromu Investments Ltd granted State Lease over Portion
17. 12 August 2014 Letter by Mr. Douglas Ure, Secretary of Kitoro No. 64
Limited, to Mr. John Porti, Secretary for Department of
Defence, making an offer for the sale of Portion 698 to
Department of Defence
18. 13 August 2014 Defence Secretary John Porti replies to Mr. Douglas Ure of
Kitoro No. 64 Limited re acquisition of Portion 698 for
19. 13 August 2014 Defence Secretary John Porti writes to Mr. Romilly Kila Pat,
Secretary for Department of Lands and Physical Planning re
intention to acquire Portion 698, Milinch of Granville, Fourmil
20. 18 November 2014
& 20 November 2014 Portions 422 and 423 advertised in the National and Post
Courier for sale by the owners, through their agent, Belden
Memi & Associates
Defence Council Decision number DCO 05/2015 approving
21. 27 February 2015
Portion 422 and 423 as Defence site
22. 1 March 2015 Two Valuation Certificates issued by GDK Valuers and
Property Consultants valuing Portion 422 at K7,200,000
and Portion 423 at K9,200,000
23. 5 March 2015 Of f er s t o pur ch as e P o r t i on s 4 22 an d 4 2 3 by t h e
Department of Defence were refused by way of a letter by
Philip Eledume’s agent, Belden Memi & Associates.
24. 22 April 2015
Lands Dep art ment i ssues Not i ces of Com pul sory
acquisition of land signed by Secretary Romily Kila Pat on
the 22nd of April 2015, to acquire Portions 422 and 423
totalling and published the same in National Gazette No.
G786 of 1st December 2015
25. 29 April 2015 NEC Decision No. 95/2015
?6. 10 July 2015 Philip Elud eme, as Ch airman of CSTB wr ites to
Ombudsman Commission, disclosing dealings
27. 30 July 2015 State Lease issued to Kurkuramb Estates Ltd (KEL) in respect
of the whole of Portion 406
Page 95 of 101
28. 25 August 2015 Meeting between Mr Hersey, the Managing Director to Kumul
Consolidated Holdings, the Commander of the PNGDF, the
Defence Secretary and the Defence Project Director, to discuss
the relocation of the Lancron Naval Base
29. 9 October 2015 Ombudsman Commission responds to Mr Eludeme’s letter
dated 10 July 2015, giving clearance to go ahead with the
transactions relating to the two portions of Manumanu land
30. 15 October 2015 Dr Pok, Minister for Defence, forwards letter to Secretary of
Lands Department informing him that Portion 406 has been
identified for military purposes and seeking compulsory
31. 21 October 2015 Non-binding Memorandum of Understanding (“MOU”) entered
into between KCH and the PNGDF to facilitate the relocation
of the Lancron Naval Base
32. 21 October 2015 Notice of Treat issued for Portion 406.
33. 28 October 2015 The predecessor of Kumul Consolidated Holdings (KCH),
namely Independent Public Business Corporation (IPBC), and
the Department of Lands and Physical Planning, conduct a joint
inspection of the Lancron Naval Base and prepare detailed
34. 3 November 2015 Mr. Moses Kila, Assistant Valuer General of Valuer
General Office of the Department of Lands & Physical
Planning signs Valuation Report for Portion 422 in the sum of
35. 3 November 2015 Mr. Moses Kila, Assistant Valuer General of Valuer
General Office of the Department of Lands & Physical
Planning signs Valuation Report of Portion 423 at K9,397,
36. 22 November 2015 Lands Department issues Notices to Treat to Kosi
Investments Ltd and Flystone Amusement Ltd.
37. 24 November 2015 Kosi Investments Ltd and Flystone Amusements Ltd
respond to the Notice to Treat
38. 27 November 2015 Defence Council Order No. DCO 05/2015, notes NEC
Deci si on 70/ 201 2, app ro vi ng r el ocat i o n of Murr ay
Barracks, Taurama Barracks and PNGDF Naval Landing
39. 30 November 2015 Notice of Compulsory Acquisition of Portion 422 and 423
by the State reissued
Page 96 of 101
40. 3 December 2015
Notice of Compulsory Acquisition in respect of Portion 406
published in the National Gazette No. G793 by the Secretary
for the Department of Lands and Physical Planning as a
delegate of the Minister for Lands
41. 3 December 2015 Purchase of both Portions 422 and 423 finalised
42. 7 December 2015 Notice of Compulsory Acquisition of Portion 406 referred to in
The National Newspaper
43. 9 December 2015 Notice of Reservation of Portion 698 for military purposes and
Certificate Authorising Occupancy issued by Department of
Lands and Physical Planning to PNG Defence Force
44. 9 December 2015 Notice of Reservation under Section 49 of Land Act issued
regarding Portion 154 by Mr. Luther Sipison, a delegate of the
45. 10 December 2015 Notice of Reservation dated 9th December 2015, by Mr. Luther
Sipison, a delegate of the Minister, published in the National
Gazette No. G806
46. 10 December 2015 NEC Decision 360 of 2015
47. 11 December 2015 KEL and the State make an agreement entitled “Sale and
Transfer of Land”. By that agreement, KEL agreed to sell and
transfer Portion 406 to the State for K46.6 million. The
agreement was signed by Mr Luther Sipison, Acting Secretary
for Lands, as the delegate of the Minister for Lands on behalf of
the State, and Mr Christopher Polos on behalf of KEL.
48. 11 December 2015 Kurkuramb Estates Ltd and the State enter into a “Deed of
49. 22 January 2016 Defence Council Decision number 1 of 2016
50. 4 February 2016 NEC Decision No. 6/2016
51. 08 February 2016
Notice of Reservation under Section 49 of Land Act 1996
issued by Mr. Luther Sipison, Secretary of Department of
Lands & Physical Planning
52. 8 February 2016
The Department of Lands and Physical Planning issues Notice
of Reservation for the PNGDF over the whole of Portion 406
53. 9 February 2016 Mr. Vali Asi, Secretary for Defence writes to Messrs Young
and Williams Lawyers demanding transfer of Title for Portion
698 Milinch of Granville, Fourmil Moresby from Kitoro No. 64
Ltd to Department of Defence
Page 97 of 101
54. 23 February 2016
M&M Investments Ltd engages Wariniki Lawyers to act on its
behalf to institute proceedings in the National Court
challenging the forfeiture of Portion 406 by the Department of
Lands and Physical Planning, and the subsequent compulsory
55. 26 February 2016
By letter from the PNGDF to Mr Hersey, KCH is notified of
the compulsory acquisition of Portion 406 for the amount of
K46.6 million and asked to finance the relocation on behalf of
PNGDF in exchange for title to the Lancron Naval Base
56. 3 March 2016
Mr. Greg Sheppard of Messers Young & Williams Lawyers
writes to Mr. John Sebby Principal Legal Officer of
Department of Defence re completion of conveyance re Portion
57. 15 August 2016
Harvey Nii Lawyers, on behalf of KEL, issues a Writ against
the Secretary for the Department of Lands and Physical
Planning, as First Defendant, and the State, as Second
Defendant, seeking payment, among other things, of the then
outstanding K46.6 million compensation amount that had been
agreed for Portion 406
58. 30 August 2016
Report on the proposed Lancron Naval Base relocation tabled
before the KCH Investment Committee
59. 19 September 2016 Mr Massa of Dentons Lawyers sets forth preliminary Advice to
60. 23 September 2016
KEL writes to the Secretary for the Department of Defence
requesting that “K46 million” be paid to KEL’s account as
consideration for the compulsory acquisition of Portion 406
61. 5 October 2016 The Secretary for the Department of Lands and Physical
Planning, as delegate for the Minister for Lands, revokes the
reservation for the Lancron Naval Base
62. 7 October 2016 Notice of revocation published in the National Gazette
63. 11 October 2016
Letter Secretary for Defence to Mr Hersey seeking that KCH
pay K46million on behalf of the State to the former owners of
64. 14 October 2016 KCH enters Memorandum of Agreement with KEL and
PNGDF tinder which it agrees to pay K46.6 million to KEL
Page 98 of 101
65. 14 October 2016
Email from Mr Jayaraj informs Mr Hersey that K20 million has
been transferred to KEL notwithstanding that the Kurkuramb
seal had not been placed on the document to complete the
MOA execution. That email from Mr Jayaraj was forwarded by
Mr Hersey to Mr Duma
66. 18 October 2016 MOA finally sealed by KEL and signed by its director,
67. 8th December 2016 Mr. Garry Hersey, Managing Director of KCH writes to Acting
Chairman of Motor Vehicle Insurance Limited requesting
MVIL to pay its interim and final dividends for years 2009,
2011, 2014 and 2016
68. 19 December 2016 Mr. Garry Hersey, Managing Director of KCH, sends letter to
Mr. Eno Darea, Acting Chairman of MVIL
69. 22 December 2016 State Solicitor, Mr. Daniel Rolpagarea by letter to Mr.
Sipison, Secretary for Department of Lands & Physical
Planning gives legal clearance for settlement of Portions
422 and 423
70. 23 December 2016
Payment of K26.6million by KCH to KEL, funded by MVIL
dividend paid to KCH
71. 20 January 2017
KCH appoints Independent Committee to investigate
allegations made against Mr Hersey
72. 23 January 2017 Letter Mr Jayaraj to Dentons Lawyers and O’Brien’s Lawyers
73. 25 January 2017 Email by Mr Duma to Mr Erik Andersen of Dentons Lawyers
74. 1 February 2017
The Post Courier reports that Prime Minister O’Neill has
ordered an investigation into two senior ministers over an
alleged land fraud contract worth K46.6 million
75. 2 February 2017 Press statement by Mr Duma
76. 3 February 2017
Opposition Leader reported as having lodged a complaint with
the Ombudsman Commission regarding the decision of Kumul
Consolidated Holdings to pay the K46.6 million for Portion
77. 7 February 2017
It was reported that the Prime Minister had recommended that
the NEC suspend Defence Secretary, Mr Vali Asi, Lands and
Physical Planning Secretary, Mr Luther Sipison, Valuer
General, Mr Gabriel Michael, Kumul Consolidated Holdings
Managing Director, Garry Hersey, and MVIL Managing
Director, Jerry Wemin
Page 99 of 101
78. 7 February 2017 KCH said to have provided a brief to Police Commissioner
79. 8 February 2017 KCH said to have provided a brief to the Ombudsman
80. 10 February 2017 The Post Courier reports a cancelled march re Manumanu
81. 13 February 2017 Police Commissioner states the matter has been raised with the
Director of Fraud and Anti-Corruption
82. 8 March 2017 The Prime Minister announces the establishment of
83. 12 April 2017 Independent Committee makes recommendations re Hersey
Page 100 of 101
Administrative Inquiry means the administrative investigative body chaired by Mr John
Griffin QC, as appointed by the Prime Minister and Chairman of the National Executive
Council on 7 March 2017, to inquire into the land transactions involving five portions of land
by the Ministry of Defence and Ministry of State Enterprises and Investments
Board means the Board of Directors of KCH
CSTB means Central Supply and Tenders Board established under the PFMA
DLPP means Department of Lands & Physical Planning
Independent Committee means the Committee appointed by the Board to investigate certain
allegations of misconduct
IPBC means the Independent Public Business Corporation of PNG (now named KCH)
K means the Kina
KCH means Kumul Consolidated Holdings (formerly named IPBC) a statutory corporation
established under the KCH Act
KCH Act means the Independent Public Business Corporation of Papua New Guinea
(Kumul Consolidated Holdings (Amendment Act) 2015 (as amended)
KEL means Kurkuramb Estates Limited
Kina means the currency of PNG
Land Act means the Land Act 1996 (as amended)
Land Board means the Land Board established under the Land Act 1996 (as amended)
MOA means the Memorandum of Agreement made on 14 October 2016 between KCH, KEL
and PNGDF under which KCH agreed to pay K46.6 million to KEL.
MOU means the non-binding Memorandum of Understanding dated 21 October 2015
between KCH and PNGDF
MVIL means the Motor Vehicles Insurance Ltd established under the Motor Vehicles (Third
Party Insurance) Act (Chapter 295), a State owned enterprise under the KCH Act
NEC means the National Executive Council of PNG established under section 149 of the
Panel means the members of the Administrative Inquiry who conducted the inquiries
constituted by Messrs John Griffin QC, Gibson Geroro, Herbert Wally and Jerry Fruanga.
PEST means Public Enterprises & State Investments
PFMA means the Public Finance (Managemen) Act 1995 (as amended)
PNG means Papua New Guinea
Page 101 of 101
PNGDF means the Papua New Guinea Defence Force State means the Independent
State of PNG
Valuation Act means the Valuation Act (Chapter 327)