Heather v Fraser [1982] CKHC 4; HC Plaint 46.1982 (9 September 1982)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
CIVIL DIVISION
Plaint No. 46/82

BETWEEN

MARIA HEATHER,
as administratrix for the
Estate of ELIZABETH TETUPUARIKI
of Rarotonga, Landowner
PLAINTIFF

AND

DOROTHY ILEEN FRASER
of Rarotonga, Married Woman
DEFENDANT

Counsel: Tylor for the Plaintiff.
Arnold for Defendant.

Date of Hearing: 19^th & 20^th August 1982
Date of Decision: 9^th September 1982

JUDGMENT OF SPEIGHT C.J.

This action arises from disagreement between the personal representatives of parties to a sublease as to the term of the same. The document itself is dated in 1970, and purports to grant a term of 34 years from 1^st August 1969 but there are allegations in the pleadings of mistake leading to a claim for rectification and/or other equitable relief.

Part of the difficulty which arises is in obtaining accurate evidence concerning the circumstances preceding the execution of the sublease. The parties were Mrs Tetupuariki as sublessor and Mrs Dorothy Fraser as sublessee with her husband Judge James Fraser added as additional sublessee shortly thereafter. Mrs Tetupuariki and Judge Fraser are now dead, and Mrs Fraser is in hospital in New Zealand. She is very ill and unable to communicate and indeed it seems doubtful whether she is aware of these proceedings. Her affairs are currently being looked after by her sister Mrs McCann who holds a power of attorney and her obligation of course is to protect whatever she apprehends to be her sister's rights but that lady was not involved in the affairs of 1969/70. Consequently evidential difficulties in ascertaining the true situation have been considerable and I have had to allow a deal of latitude on the questions of admissibility - Section 3 Evidence Act 1968.

The property we are concerned with is a small house site of 35 perches and it was held as part of a block of two acres under a 60 year head lease granted to the late Mrs Tetupuariki on 1^st August 1953. I have inspected the property, which now has a house and garage which were erected by Judge and Mrs Fraser in the early 1970's. It is as witnesses described a small site and cannot be properly considered as totally separated from the balance of the land - for there is an unformed drive traversing it, providing the access to the main house behind and also, most importantly there is a substantial grave in a prominent place on the site. This grave is of Elizabeth Tetupuariki's grand father and other relatives and its proper care was at all times a matter of great concern to Mrs Tetupuariki, as such matters are too many Cook Islands people.

I accept that she and her family were for many years on friendly terms with the Frasers who, so some witnesses said, were regarded as almost members of the family. As Chief Judge the late James Fraser and his wife had had close ties with the Cook Islands and it seems that by 1969 their plans were to live out the balance of their lives here, circumstances permitting, and Mrs Fraser in particular had her heart set on this small plot of land as a house site. From the evidence given and from my observation it seems that anyone who built there would be in daily close contact with the Tetupuariki family and it would be desirable that the various occupants should be on good terms with each other. Over a considerable period Mrs Fraser pressed Mrs Tetupuariki for a sublease so that the Frasers could spend the balance of their lives in the island of their choice, and in reasonable proximity to friends - for one gathers that the Frasers were well liked by a large number of local people.

Eventually Mrs Tetupuariki agreed, although reluctantly to Mrs Fraser's overtures. It is said by witnesses on behalf of the Plaintiff that Mrs Tetupuariki firmly believe at all times that the Frasers only wanted tenure for their life time or until the unlikely event that they changed their plans and left Rarotonga for good. Witnesses from the family are quite agreed that she believed that that was all she was consenting to. Stress was also placed on her friendship with Mrs Fraser and the reliance she placed on promises given that the Frasers would carefully tend the family graves - which promise was indeed kept in the years that followed. Evidence was given though in somewhat general terms of remarks by Judge or Mrs Fraser, both before and after the sub-lease was signed, which supports the view contended for on behalf of the Plaintiff.

It is said that Judge Fraser said he was negotiating a lease which would "see Dorothy and I out". Mrs Brown and Mrs Heather were present when the sublease was signed. They say that the Judge "briefly" read out some of the terms of the lease. Mrs Tetupuariki had an inadequate command of English and her sight was poor. They both say that Mrs Tetupuariki asked the Judge to confirm that when he and his wife no longer required the land, it would be returned to her. The Judge agreed that this was so. Neither of these ladies heard anything said about a 34 year term.

Subsequently Mrs Fraser is quoted by a witness as saying that she and her husband would live the rest of their lives there and then the house went back to the owners. There is also evidence from several sources that being apparently a jovial soul she would say in a joking manner that "You people are only waiting for me to die so you can get the place back." This of course was subsequent to execution of the sublease but it can be said that there was evidence that this was Mrs Tetupuariki's intention and understanding at the time of the execution and that she would not have allowed the Frasers the use of the land on any other basis, and that it was only because of the special relationship between the families that she finally was agreeable.

Yet against this, there is the clear expression in the document signed by the parties providing a 34 year term, the document was apparently prepared by the Judge himself and several of the Plaintiffs witnesses when crossed examined said that they would not accuse the Judge of "cheating". I am not sure that I take these concessions at face value. Many people, especially those who live a quiet life in a small community such as this, and who are not given to litigiousness are loath to be too out spoken on their thoughts about former neighbours and friends. Mr and Mrs Brown are middle aged quietly spoken folk and I was not surprised at their answers faced as they were with a Yes - No situation. On the same topic Mrs Heather, who is a much a younger person and has had considerable commercial experience obviously had reservations about the Frasers integrity when she was asked.

There are other indications which pose the question of whether the Judge or Mrs Fraser would have acted as alleged. I am told that the house was well built to good standard, and therefore likely to last for many years. It is still in excellent order. Would the Frasers spend a lot of money, if the property was to be surrendered at some undetermined and perhaps not too distant date? Against this is the fact that the Judge was only 60 years old at the time, apparently in good health, and he and Mrs Fraser had no children - so perhaps they took the view that they might as well enjoy their assets while they could and what happened after their deaths would be of no great concern to them or their relatives. Indeed their bond with the Tetupuariki family may have some relevance on this issue.

Then we have the fact that the Judge borrowed money on mortgage from the National Bank ($11,000) in 1971 to build the house. The then bank manager's diary shows that the security also included other assets but land tenure would be of importance and the Bank was told that the lease had 30 years to run. The present manager's evidence is that the bank would not have lent money if they had known the sublease was liable to cancellation or reversion.

There has been evidence of conversations and negotiations between persons other than the parties both before and after Judge Fraser's death.

As has been said we do not know what Mrs Fraser's attitude would be if she was able to give evidence.

It is true that after the Judge's death she told Mrs Heather that she should buy the house - but one does not know whom she thought to be the person entitled to sell, whether herself, or Mrs Tetupuariki's estate - and the evidence is she was very sick at that time and didn't seem to know exactly what was going on - as witness her remark that she would like a room held for her own use.

There was discussions between Mr Brown and Judge Fraser in 1976 with a suggestion that Mrs Tetupuariki's children could get a "cut" of the sale price if they would allow a sale - at a time when the Frasers were thinking of returning to New Zealand for health reasons. This can be argued either way. Perhaps it indicates knowledge by the children that the lease had a long time to run but equally it might be proof that the Judge knew that he had an obligation not to sell.

There is also conflicting opinion of the significance of the fact that no goodwill was paid for the sublease. Does that confirm it was limited to a personal right of occupancy with no right of assignment, or was it, as Mr Clarke says, not unusual with subleases in those days. It is equivocal.

It is surprising that after the Judge's death in 1981 and after the return of the ailing Mrs Fraser to New Zealand the administratrix and other members of the family, principally Mr Brown attempted to negotiate with the Frasers' solicitors to buy back the property to the extent of responding to an invitation to make an offer and did not until recently raise the matter so strongly contented for now. There is some justification for this perhaps in the explanation given by Mrs Heather, that the estate solicitors advised them quite firmly that they must face up to the reality of the written term and endeavour to raise finance and only of recent times have the lawyers been persuaded that there was evidence along the lines now given sufficient to take the matter to Court.

Again just listing considerations pro and con one notes in the sublease there is a clause that, with the exception of short term tenancies, there was to be no assignment without consent. Given that Mrs Tetupuariki would be unaware of Section 110 of the Property Law Act 1952, this clause if read out in the Judge's summary would encourage belief in the view contended for on behalf of the plaintiff that the Frasers were the only long term occupants contemplated. Indeed if the Judge had Section 110 in mind, as ones assumes he would, one questions why he inserted into Clause 4 the references to the permissiveness of weekly or monthly letting unless this was an issue which had been troubling Mrs Tetupuariki.

I have of course given careful thought to the motives the plaintiffs witnesses might have for colouring their evidence or shading their recollection. Mr and Mrs Brown and Mrs Heather stand to benefit substantially if successful and to lose heavily if the Defendant can proceed through her attorney with a proposed sale of the balance of the term. The account from all five witnesses was consistent and to reject I would be required to conclude that they had all conspired to tell untruths - in considerable detail and with interlocking versions. I did not think Mrs Heather or the Browns to be untruthful, and no inconsistencies were revealed in cross-examination. They have the support of Mrs Te Tau who appeared independent, and of Mr MacCauley who has been a close friend of the Frasers and has held responsible positions in the Government Service with special emphasis on Native Land work. I am also much influenced by the nature of the property - mainly suitable for occupation by members of a family or near family group. And the presence of the graves, and the need for them to be under the control and care of a trusted person was of much importance to Mrs Tetupiariki.

I hope I have made it clear that I give weight to the opposing viewpoint and especially the pertinent comments by Mr Clarke in his evidence. I think the extraordinary figure of 34 years inserted by the Judge in the document can only be explicable upon the bases that it was a term of years which he was confident would "see him out" and was perhaps substantial and finite enough to assist in obtaining the bank finance he needed. After much consideration I have come to the firm view that assurances were given by the sublessees and were accepted by the sublessor that this was not an instrument for a fixed terms of years, but for the terms of the Fraser's lives for their occupation and then to revert.

I must now examine the consequences in the law of this findings.

At one stage of the proceedings I questioned whether this sublease was valid, because of certain formalities as to certification required by section 475 of the Cook Islands Act 1915. Mr Arnold's careful submissions on this point persuade me that the Section does not apply to this transaction.

The Statement of Claim recites the matters leading up the execution of the sublease and alleges that Mrs Tetupuariki was not aware of and did not intend either a 34 year term or a power of assignment.

The allegations then made are of common mistake by the parties as to power of assignment, alternatively unilateral mistake by Mrs Tetupuariki as to (a) power of assignment and (b) term.

There was also an allegation of fraud but this was withdrawn at the commencement of the hearing.

The relief sought is variously:-

Rectification

Rescission

Injunction against assignment

I take the wording of the Statement of Claim and the submissions by Mr Tylor to use the words common and unilateral mistake in the sense adopted by the learned authors of Cheshire and Fifoot's Law of Contract and not that used by Chitty. Adopting that phraseology, common mistake occurs when two contracting parties both make the same mistake - each knowing and agreeing with the other's understanding and intention. Generally speaking such a contract is not avoided unless the supposed subject matter is non existent. No discussion of the difficult cases of Bell v Lever Bros Ltd [1931] UKHL 2; 1932 AC 161 and Mc Rae v Commonwealth Disposals Commission [1951] HCA 79; 1951 84 CLR 377 is called for as it does not appear that common mistake arises here. It is only pleaded as to the meaning of clause 4 which relates to refusal to consent to assignment. The allegation is that both parties were mistaken as to the meaning of Clause 4. Mrs Tetupuariki may have been but it is hard to accept that the Chief Judge presiding in a country where problems of land tenure and lease holding comprise a substantial portion of judicial work could fail to be aware of the provisions of section 110 of the Property Law Act - and further as pleaded this is an allegation that there was a misunderstanding not of fact but of law - which cannot avail. In any event the point does not seem important for the crux of this case is the 34 year provision - and it is of little avail to the plaintiff to succeed unless she succeeds on that issue.

Of more relevance is the claim there was unilateral mistake on the part of Mrs Tetupuariki on the question of assignment and term.

I take unilateral to refer to mistake by one of the parties of which the other is aware - as distinct from mutual mistake (Cheshire and Fifoot) where each is at cross purpose with the other and is purporting to contract on different subject matters. This later would have no relevance to the present circumstances for we are concerned with a written document in clear terms apparently signed by both parties. Mr Tylor apprehends, and in my view correctly, that to succeed he must demonstrate that Mrs Tetupuariki misunderstood and that Judge Fraser acting at that stage as agent for his wife (who was present) must be taken to have realised it.

In the ordinary case it would be no argument for Mrs Tetupuariki or her successors to say that although she has signed an apparently unequivocal document she had misunderstood and thought the terms were otherwise.

But the facts here as I find them give support to the claim. I am quite persuaded that control over this property was of great importance to Mrs Tetupuariki partly because it was within the family compound and partly because of her proper concern over the family graves. The evidence shows that she was reluctant to allow its use to the Frasers and was only persuaded after long entreaty and because of their close friendship. Mrs Tetupuariki was old, incapable of reading English, and would have had very limited understanding of legal matters, she asked for assurance as to meaning from the other party, whom she trusted and whom she knew to be skilled in law. Had this case been pleaded as one of Non est factum careful consideration would have to have been given to principles applicable to such case particularly along the lines discussed by Lord Reid in Saunders v Anglia Building Society 1971 AC 1004.

But it was not so pleaded, and I think rightly, for although Mrs Tetupuariki was as disadvantaged a signatory as one could imagine, the difference between what she signed and what she intended was not as fundamental in my view as to bring it within the cases.

The crucial assertion therefore is whether the Frasers, and particularly the Judge, acting for his wife at the time of execution, knew what Mrs Tetupuariki's intentions were - albeit fraud is not pleaded.

The evidence of the remarks by the Frasers, both before and afterwards show that they knew the tenure was personal to themselves and limited to their lives. But of greatest importance is the evidence surrounding the execution of the sublease. I hope I have indicated that I have given full consideration to the contra indications - I cannot for certain say why Judge Fraser put 34 years in; the only suggestion, which may be the explanation is that it was done as a generous estimate of the maximum time he might need and also as essential in getting the bank to advance him money for building - but whatever the reason for so wording the document I am quite persuaded that the question was asked of him and he refrained from disabusing the lady of the belief which he knew she laboured under namely that there would be no assignment to a stranger, that the property was for use by himself and his wife for as long as they needed it, but thereafter it would revert.

The matter seems to fall squarely within the class of case exemplified in A. Roberts & Co. Ltd v Leicestershire County Council 1961 Ch. 555 where the misunderstanding has been contributed to by the conduct of the other, in circumstances where there was an obligation to speak. Knowledge of the error is of course crucial - see Riverdale Properties Ltd v Paul 1975 Ch. 133. Why the Judge conducted himself in the way he did, must be a matter of speculation. As I have said some of the Plaintiff's witnesses, particularly the older ones like Mr & Mrs Brown and Mr MacCauley who were friends of his, acquit him of dishonest intentions - so he may have had other non-sinister motives. Unfortunately we are without the benefit of evidence from the Judge or from Mrs Fraser, and as mentioned the action is at present defended and properly so, because Mrs MacCann, doubtless acting on advice, cannot waive what appear to have been defined rights. But the question is not why it was done - but what was done? Although the more generous view is that there was no fraudulent motive the crux of the matter is that it was apparent that Mrs Tetupuariki held a certain belief as to the document and her mind was not disabused of that belief. I am quite persuaded that the enquiry was made and answered in the manner I have found. In this connection one notes in some rectification cases that the court needs to be satisfied "beyond reasonable doubt" - for myself I think there is a validity in the challenge made on the desirability of using a phrase of well known connotation in a different field - see Spry on Equitable Remedies (2nd edition) at page 16. I content myself by saying I have certainty in my mind that the version of events contended for has been proved.

That being so I conclude it is a case where the remedy of rectification should be granted, but on terms - namely that that sublease should have a clause added providing for termination on the death of Mr & Mrs Fraser or 34 years whichever occurs sooner - or words to that effect and I leave it to counsel to confer and attend further if necessary - it being my intention that because she is unable to use the property personally, Mrs Fraser should have the rental there from for her support until her death. I will also grant an injunction restraining the Defendant from proceeding any further with the proposed sale. The question of costs is also reserved.

SPEIGHT CJ