Narayan v Narayan [2011] FJCA 22; ABU0037.2010 (10 March 2011)

IN THE COURT OF APPEAL, FIJI ISLANDS

CIVIL APPEAL NO. ABU 0037 OF 2010
(High Court Civil Action No. 446 of 2005)

BETWEEN:

ATUL NARAYAN
APPELLANT

AND:

NAVEDETA ASHWINI NARAYAN
APRADETA ASWINI NARAYAN
RESPONDENTS

CORAM: Hon. Justice William R. Marshall, Justice of Appeal
Hon. Justice Izaz Khan, Justice of Appeal
Hon. Justice Kankani T. Chitrasiri, Justice of Appeal

COUNSEL: Mr S J Stanton and Mr N Prasad for the Appellant
Mr R Prakash and Ms P Kenilorea for the Respondents

Date of Hearing: Thursday, 24th February 2011

Date of Judgment: Thursday, 10th March 2011

JUDGMENT

William Marshall, JA

1. I agree with the judgment, the reasons and the orders proposed by Izaz Khan JA.
   

Izaz Khan, JA

2. This appeal involves the determination of a question of law which was decided by the trial Judge, His Lordship Hickie, J in favour of the respondents.
   
3. The appellant had sought a Ruling from His Lordship Hickie, J on a question of law which was determined on agreed facts and skeletal submissions and the question of law to be determined was stated as follows:
   

"Having regard to the provisions of Sections 6 and 7 of the Land Sales Act Cap.137 whether the document titled "Proposal to purchase the Dilkusha land" dated 8th August 2003 ("the Agreement") for sale and purchase of land was or is illegal, void and unenforceable at law as contended by the Defendants or was or is the Agreement a valid, legal and enforceable contract of sale and purchase of land as contended by the Plaintiff?"

4. It is obvious from the grounds of appeal filed by the appellant in this case, that he is exhorting this Court to hold that the trial Judge was wrong and that he should have held that the agreement before the Court below was valid and enforceable under Sections 6 and 7 of the Land Sales Act Cap. 137.
   
5. It was common ground that both parties to the subject contract were not residents of Fiji as defined by the Land Sales Act Cap.137 and the Minister's consent was not obtained prior to the agreement.
   
6. As such, the agreement is prima facie in breach of Sections 6(1) and 7(1) of the Land Sales Act Cap. 137 which prohibit the making of any contract to purchase or take on lease any land or enter into any contract for the disposition of any land in favour of another non-resident.
   
7. These provisions have been the subject of determination by the High Court and the Court of Appeal in various cases. To start off, there is a decision of the High Court in Hunter v. Apgar [1989] 35FLR 180 where Palmer, J ruled that the agreement was void and unlawful and therefore of no effect and was unenforceable on the reasoning at page 185A where His Lordship said:
   

"The Land Sales Act aims directly at the non-resident. It provides a mechanism to ensure that a non-resident cannot obtain any enforceable right in relation to land right at the outset, [unless] the Minister has had the opportunity of prohibiting any such transaction or imposing terms and conditions for his consent to the same".

8. In Sakashita v. Concave Investment Ltd (Unreported) High Court of Fiji at Suva, Civil Action No. HBC 0121 of 1998, 5th February 1999, where a Japanese businessman entered into a "Memorandum of Agreement" on 15th May 1997 to purchase land payable in instalments. The agreement was also subject to various conditions precedent one of which was that the purchaser would obtain "the necessary approval from the Minister of Lands for this purchase and also the approval from FTIB and the RBF". The Minister's consent was endorsed on 17th June 1997. The purchaser then sought a declaration that "the Agreement was in breach of Section 6(1) of the Land Sales Act Cap. 137 and was therefore null and void". Fatiaki, J held that the agreement was in breach of Section 6(1) of the Land Sales Act Cap. 137 in reliance upon Palmer, J's decision in Hunter.
   
9. In relation to the question whether the Minister's consent obtained after the agreement had been entered into was of any effect, His Lordship Fatiaki, J expressed the view, correctly in my opinion, that once a contract had been entered into without the Minister's consent the contract was illegal, void and unenforceable and the obtaining of consent after this was of no effect.
   
10. Gonzalez v. Akhtar [2004] FJSC2 is another case where the same issue arose. The purchaser, Mr Gonzalez was an American resident who entered into an agreement in 1985 to purchase some land from a Fiji resident without the Minister's consent. When dispute arose between the parties, Mr Gonzalez lodged a caveat. He also commenced proceedings seeking an order for specific performance or damages. The Supreme Court held that Hunter v. Apgar was correctly decided and applied it to the facts of Gonzales with the effect that the subject contract was illegal and unenforceable.
    
11. This case made it quite clear as did the other cases that once an agreement was held to be void for illegality no cause of action could be established upon it. Thus, no action for damages for breach of contract could be sustained. In Gonzalez damages were claimed for fraud and that would have succeeded as something outside the contract had the Court found any but the Court did not find any fraud and therefore did not award any damages on that ground.
    
12. Port Denarau Marina Ltd v. Tokomaru Ltd [2006] FJCA 27 is a decision of the Supreme Court of Fiji given on 6th December, 2006. It raised the same question as in Hunter. The question for it was whether an agreement entered into in 1999 between the parties, one of whom was a non-resident of Fiji infringed the provisions of Section 6(1) of Land Sales Act Cap.137.
    
13. The Agreement before the Court was described at paragraph [5] in the following terms:
    

"The Agreement is an elaborate document running to 38 pages with numerous schedules in addition. Following detailed conditions of terms, the agreement provided for payment in three stages:-

A payment on account of the deposit on execution, the balance of the deposit (which was 10% of the purchase price) upon satisfactory due diligence and the balance on the completion, which was to take place 10 days upon satisfaction of the Conditions, or such other date as may be agreed. The conditions were refined as the conditions precedent referred to Clause 4.1 of which the following is relevant....

The vendor and the purchaser were only obliged to proceed to completion if the following conditions are satisfied or waived:

1. All authorizations necessary for: –
   
   • (i) the parties to sign and complete this agreement; and
     
   • (ii) the purchaser to own operate and conduct the Business and entitled to Sub Leases or Sub lease
     

14. The Supreme Court was able to distinguish the decisions in Hunter v. Apgar, Sakashita and Gonzalez by reasoning that the conditions which had applied in this case was such that no contract had been entered into prior to the Minister's consent. At paragraph [40] the Court said:
    

"We conclude the Contract before us is distinguishable from those in issue in Hunter v. Apgar, Sakashita and Gonzalez. It is sufficiently plain that the obligation to grant the sub-leases did not arise unless and until satisfaction of the condition that the Minister of Lands consented to the grant. The Minister had the opportunity to consider proposed sub-leasing "right at the outset". The agreement did not infringe Section 6(1) and Question 1 should be answered in the negative".

15. Thus, the decision in Port Denarau stands on its own facts which allowed the court to conclude that the obtaining of the Minister's consent was a condition precedent to the formation of the contract.
    
16. As much argument had occurred in both Gonzalez and Port Denarau in relation to conditional contracts, as has taken place in the hearing of this case, it might be a good idea for me to clarify the position in so far as conditional contracts are concerned.
    
17. A condition to which the contract is subject could either be a condition precedent or a condition subsequent. Generally, if a contract is subject to the happening of some event and such a condition is regarded as a condition precedent to the formation of the contract, no contract will arise until the condition precedent has been fulfilled. An example is George v. Roche [1942] HCA 22; (1942) 67 CLR 253 which involved an agreement for the sale of a business. The agreement provided that a newspaper agency was required to be purchased at the value placed on it by a named Valuer. The named Valuer refused to value the agency and a majority of the High Court held that valuation by the person named was a "condition" precedent to the formation of a contract and that the refusal by the valuer to value had the result that there was no contract: see at paragraph[741] of Carter and Harland – Contract Law in Australia 3rd Edition.
    
18. Similarly, if a foreign entity entered into a contract to buy land in Fiji without the Minister's consent there could be a clause in the contract which clearly stipulated that the obtaining of the Minister's consent was a pre-condition for the contract to arise. In that situation, as there was no contract until the Minister's consent was obtained, no breach of Section 6(1) or 7(1) of the Land Sales Act Cap.137 would have been committed.
    
19. Conditions subsequent are conditions which are required to be fulfilled after the contract has been entered into. Thus a contract may have a stipulation that the consent of the local authority for the erection of a building on the subject land shall be obtained within six months of the date of the contract. In that event, the contract would have arisen but was voidable at the option of either party if the condition was not fulfilled within the stipulated time. Alternatively a condition which was capable of being waived could be waived by the person for whose benefit it was drafted and the contract could be made unconditional.
    
20. Where the contract is subject to say finance approval, it is usually a condition subsequent. Where negotiations were "subject to contract", this is a condition precedent to the formation of a contract. See Masters v. Cameron [1954] HCA 72; (1954) 91 CLR 353.
    
21. The difference between a condition precedent and a condition subsequent as it relates to the present issue is that in a condition precedent no contract arises until the Minister's consent is obtained and therefore there is no breach of Section 6(1) of the Land Sales Act Cap.137. In contradistinction, a contract does arise when a condition is

subsequent and therefore if the contract has been made without the consent of the Minister the conditions subsequent would not save it from illegality under Section 6(1) of the Land Sales Act Cap.137.

22. It was argued by counsel for the appellant that the instant agreement made the contract conditional upon the obtaining of the Minister's consent. I do not think that this advances the appellant's case in any way because even if an implied condition were to be granted, about which I have some doubts, it clearly could not be seen as a condition precedent to the formation of the agreement. Here the parties proceeded as if they had an agreement between them.
    
23. I am of the same view as His Lordship Palmer, J in Hunter v. Apgar. Clearly, the provisions of Section 6(1) are aimed at the making of any contract to purchase or to take or lease any land in Fiji without the written consent of the Minister responsible. The prohibition is mandatory as the use of the word "shall" indicates. Therefore any contract which is entered into by a non-resident or by two non-residents is illegal, void and of no effect.
    
24. Clearly the contract here was entered into prior to the Minister's consent and was therefore illegal under Section 6(1) of the Land Sales Act Cap.137.
    
25. It follows that once it is held that an agreement was illegal under Section 6(1) of the Land Sales Act Cap.137 it is void and unenforceable and therefore no action would lie

at the behest of either party for damages or any other consequential orders arising from a breach.

26. I would dismiss this appeal and order the appellant to pay costs of this appeal assessed at $2000 to the Respondents.
    

Kankani T. Chitrasiri, JA

27. I also agree with the judgment, the reasoning and the proposed orders of Izaz Khan JA.

William Marshall, JA
Orders of the Court

28. The orders of the Court are:

(1) that the appeal of the Appellant Atul Narayan be dismissed.

(2) that the Appellant Atul Narayan do pay costs of the appeal assessed at $2000 to the Respondents, Navedeta Ashwini Narayan and Apradeta Ashwini Narayan.

Hon. Justice William R. Marshall
Justice of Appeal

Hon. Justice Izaz Khan
Justice of Appeal

Hon. Justice Chitrasiri T. Kankani
Justice of Appeal