Waiqele Sawmills Ltd v Colonial Mutual Life Assurance Ltd [2002] FJHC 297; HBC0042.1999 (20 May 2002)

IN THE HIGH COURT OF FIJI
AT LABASA
CIVIL JURISDICTION

CIVIL ACTION NO. 0042 OF 1999

BETWEEN :

WAIQELE SAWMILLS LIMITED
Plaintiff

AND:

COLONIAL MUTUAL LIFE ASSURANCE LIMITED
Defendant

Mr. A. Sen for the Plaintiff
Mr. H. Lateef for the Defendant

JUDGMENT

The plaintiff company is the registered proprietor of a Crown Lease in the Business centre of Labasa Town on which is erected a double storey commercial building.

By Memorandum of Agreement dated 18th April 1995 the plaintiff leased the top floor of the building to the defendant company for a term of five (5) years from 1st May 1995 at a monthly rental of $4,600 (the ‘indenture’).

The indenture contains all the usual lessor’s and lessee’s convenants [except perhaps for Clause 4(13)] of which it is only necessary to set out the following three (3) clauses:

(1) Clause 18(5) [or perhaps more correctly 5(5)] which reads:

‘THE LESSEE paying the rent hereby reserved and performing and observing the covenants and provision herein expressed or implied and on the part of the Lessee to be performed and/or to be observed the Lessee shall have quiet enjoyment of the demised premises throughout the term hereby created without any interruption or disturbance by the lessor or anyone lawfully claiming by through under or in trust for the Lessor. (the ‘quiet enjoyment’ clause) ;

(2) Clause 10 which reads:

‘THAT either party to this Agreement may terminate this contract by giving at least three month’s clear notice in writing to the other upon expiry of original leasing agreement ; (the ‘termination’ clause) and

(3) Clause 11 which provides:

‘THAT this Agreement shall be subject to the consent of Director of Lands.’ (the `subject to consent’ clause)

Pursuant to the indenture the defendant company moved into the building. At the time the ground floor was already occupied by Rajendra’s Supermarket which used it as a supermarket business out-let.

The defendant company continued to occupy the top floor of the building for 2 years until January 1997 when its Property Investment Analyst wrote to the plaintiff company to the effect that the defendant company’s rented area was in excess of its requirements and he sought the plaintiff company’s agreement to mutually cancel the lease or a new lease be drawn up to cover the floor area actually occupied by the defendant with the balance vacant space reverting to the plaintiff company.

The plaintiff company rejected the proposal for what reason is not disclosed but it prompted the defendant company to indicate that ‘...... it may not consider extending the current lease once it expires in two (2) years time.’

Then followed a series of letters from the defendant company in April, June and December 1997 complaining inter alia about the failure of the plaintiff company to maintain the premises ‘(to) an acceptable hygenic and clean standard’ ; its failure to ‘properly secure carparks’ for the defendant company’s offices ; and its seeming lack of concern with ‘the dumping of refuse by the two nearby supermarkets at the rear (which was) ...... a source of bad smell and ill-health to the (defendant’s) office staff.’

Finally by letter dated 10th August 1998 [Exhibit (P) 8] the defendant company gave notice of its intention ‘(to) terminate the lease and vacate the premises by 31st December 1998.’ This prompted a letter from the plaintiff company’s solicitors denying any breach of the lease on the plaintiff company’s part and advising that the plaintiff company would hold the defendant company liable for the rental for the full term of the lease which had two (2) years remaining on it. On 31st December 1998 the defendant company vacated the premises.

On 18th May 1999 the plaintiff company issued a Writ of Summons claiming lost rental in the sum of $73,600, general damages, and costs. The defendant company filed a Statement of Defence asserting (1) that the lease ‘is unenforceable and/or void’, alternatively, (2) ‘...... the plaintiff breached its obligations by not providing a clear (sic) and reasonable premises for the defendant’s occupation’ and (3) the Agreement had been ‘...... validly determined by giving adequate notice in accordance with the Lease Agreement.’

As for (1) above which, for convenience, may be described as : the ‘Section 13, Crown Lands Act’ defence, defence counsel points to the provisions of Section 13 of the Crown Lands Act (Cap.132) ; the wording of the plaintiff company’s Crown Lease and the date of commencement of the indenture namely : ‘1st day of May 1995' ; the date on which the consent of the Director of Lands was endorsed on the indenture namely : ‘10/08/95' (i.e. 3 months later) ; and the undisputed evidence that the defendant company entered into occupation of the premises from 1st May 1995, as clear evidence of a ’dealing with the land’ in breach of the requirements of the Section 13 with the consequent result that the indenture was rendered ‘...... null and void.’

Plaintiff’s counsel on the other hand referred to the terms of Clause 11 of the indenture which made it expressly ‘subject to the consent of the Director of Lands’ and submits that the effect of Section 13 of the Crown Lands Act would, at most, render the rental payments by the defendant company between May and August 1995 (i.e. 4 months) refundable but did not affect the enforceability of the lease after consent had been granted so as to deny the plaintiff’s claim for rental for the unexpired portion of the lease. There has however been no offer to refund the rental paid by the defendant company for the period prior to the Director of Land’s consent being endorsed on the indenture.

In counsel’s submission Section 13 of the Crown Lands Act does not render illegal or null and void, the making of the indenture between the parties, rather, the Section targets ‘(a) dealing effected without (the Director of Lands) consent.’ In other words this was not a case of ‘once illegal, always illegal’ rather, it is a case of an initial conditional occupation being retrospectively rendered legal by the subsequent grant of the Director of Land’s consent.

Section 13(1) of the Crown Lands Act (Cap.132) provides:

‘Whenever in any lease under this Act there has been inserted the following clause:

‘This lease is a protected lease under the provisions of the Crown Lands Act.’ (hereinafter called a protected lease) it shall not be lawful for the lessee thereof to alienate or deal with the land comprised in the lease or any part thereof, whether by sale, transfer or sublease or in any other manner whatsoever, nor to mortgage, charge or pledge the same, without the written consent of the Director of lands first had and obtained, nor, except at the suit or with the written consent of the Director of Lands, shall any such lease be dealt with by any court of law or under the process of any court of law, nor, without such consent as aforesaid, shall the Registrar of Titles register any caveat affecting such lease.

Any sale, transfer, sublease, assignment, mortgage or other alienation or dealing effected without such consent shall be null and void.’

The meaning and effect of the above provision and a similar provision in the Native Lands Trust Act (Cap.134) viz Section 12, has been the subject matter of numerous judgments of this Court, the Fiji Court of Appeal and even the Privy Council and the `principles’ enunciated in those decisions may be considered to be firmly established.

Thus, it may be stated that Section 13 of the Crown Lands Act is confined in its application to a ‘protected lease’ which bears on its face the statutory formulation : ‘This lease is a protected lease under the provisions of the Crown Lands Act’ [see : Damodaran Reddy v. Ragwa Nand applied in Ganpati v. Somasundaram (1976) 22 F.L.R.194].

Furthermore, the execution by the parties without more, of an agreement for sale and purchase of a ‘protected lease’ made subject to the consent of the Director of Lands, is not in and of itself a prohibited ‘dealing in land’ [see : Harnam Singh and Anor v. Bawa Singh (1958/59) 6 F.L.R.31].

Whatsmore, no transaction or negotiation can be held to be a ‘dealing in land’ unless it creates an immediate interest in land in some person other than the owner [per Marsack J.A. in Courts Bros. (Furnishers) Ltd. v. Sunbeam Transport Ltd. (1969) 15 F.L.R.206 at 209].

Accordingly, a verbal agreement by the lessee for another person to enter on the land comprised in a ‘protected lease’ and to carry out certain works - such as the erection of a building - thereon constitutes ‘a dealing in land’ in that it is a licence to occupy coupled with possession [Chalmers v. Pardoe (1963) 3 ALL E.R.352 (P.C.) and Ram Din v. Pyara Singh (1977) 23 F.L.R.128].

Similarly, a transfer of a mortgage is a transaction that affects an interest in the land and is thus a ‘dealing with the land’ which requires the prior written consent of the Director of Lands as would a mortgagee’s sale of a ‘protected lease’ although it involves the lease being dealt with other than by the lessee [Director of Lands v. Abdul Razak (1993) 39 F.L.R.292].

Returning then to the facts of the present case, the indenture bears on its face, the declaration ‘.... that this lease is a Protected Lease under the provisions of the Crown Lands Act.’ It was plainly a ‘protected lease’ in terms of Section 13 of the Crown Lands Act and, as such, it was unlawful for the plaintiff company to ‘deal with the land comprised in the lease or any part thereof’ in any way, without the prior written consent of the Director of Lands.

The question that arises therefore is did the plaintiff company ‘deal with the land’ in any prohibited way before obtaining the consent of the Director of Lands?

In this regard, it is common ground that after the indenture was executed by the parties, the defendant company moved into the building erected on the plaintiff company’s ‘protected lease’ and established its offices on the top floor and has paid its monthly rental since then until the end of December 1998 when it vacated the premises.

Furthermore endorsement of the consent of the Director of Lands at the top of the first page of the indenture [Exhibit P(1)] is clearly dated ‘10/08/95' which is a little over three (3) months after the date of commencement of the indenture ‘pursuant to (which) the defendant company (had) moved on to the said premises’ (see: para 2 of the Statement of Claim).

In light of the foregoing Defence Counsel forcefully submits that the defendant company’s occupation of the rented premises ‘pursuant to the Agreement’ occurred on 1st May 1995 which is a date prior to the written consent of the Director of Lands and amounts to an unlawful ‘dealing’ with part of the land comprised in the plaintiff company’s ‘protected lease’ in contravention of Section 13 of the Crown Land Act.

Plaintiff’s counsel whilst seeming to accept that the defendant company’s occupation of the premises was illegal prior to the date when consent was given, nevertheless, submits that ‘there can be subsequent consent to an illegal occupation and performance of a contract.’ I cannot agree.

Section 13 of the Crown Lands Act expressly requires that ‘the written consent of the Director of Lands (be) first had and obtained ......’ before a lessee of a ‘protected lease’ can deal with the land comprised in the lease and, whilst I accept that the execution of the indenture did not amount to a prohibited ‘dealing’ with the land, the entry into possession by the defendant company ’pursuant to the Agreement’ and the payment of rental therefor, amounted in my view to a prohibited ’dealing’ with the land in the absence of the prior approval of the Director of Lands.

In Phalad v. Sukh Raj (1978) 24 F.L.R.170 Henry J.A. in holding that the agreement in that case was null and void said at (p.175)

’The use of the term ‘in any other manner whatsoever’ gives a wide meaning to the prohibited acts. For myself I have no doubt but that the true construction of the agreement and the substantial implementation of such an agreement ...... under which possession is completely parted with to the (lessee) and immediate mutual rights and liabilities are created in respect of such exclusive possession, is a breach of (the) Section if done before the consent is obtained.’

Later in rejecting a submission not dissimilar to that of plaintiff’s counsel regarding the obtaining or granting of consent after performance or implementation of the indenture, his lordship said at (p.176):

‘For the argument of counsel to succeed it would be necessary to read into (the) Section words which would permit a conditional alienation or dealing with the land conditional upon the consent being later given. This would render the words in (the) Section ‘without the consent of (the Director of Lands) first had and obtained’ mere supplusage of no effect. Further the transaction would not be null and void but only so if the consent were not subsequently obtained.

The words ‘alienate’ and ‘deal with’ as elaborated in (the) Section are absolute and do not permit conditional acts in contravention. If before consent, acts are done, pending the granting of consent, which come within the prohibited transactions, then the Section has been breached and later consent cannot make lawful that which was earlier unlawful and null and void.’

And finally, in a reference to the effect of a provision in the agreement similar to Clause 11 of the present indenture, his lordship said:

‘The making of the agreement conditional upon consent being granted does not assist ...... because (the) Section does not permit the conditional doing of the acts prohibited by (the) Section. The time factor is plain and mandatory.’

Although the above dicta was spoken in relation to Section 12 of the Native Lands Trust Act (Cap.134), I respectfully adopt it as equally applicable to Section 13 of the Crown Lands Act [see also : Queens Road Properties Ltd. v. Anand Vikash Suva C.A. No. 100 of 1976 per Kermode J. at pp 5/6].

In light of the foregoing plaintiff counsel’s submissions are plainly incompatible with the `principles’ established by the above-mentioned decisions of the Courts and are therefore rejected as unsustainable. On this ground alone the claim must be dismissed.

If I should be wrong however, I turn next to consider the third defence pleaded in the Statement of Defence i.e. ‘the termination clause defence’ to the effect that the defendant company had properly invoked the provisions of Clause 10 of the indenture by giving the plaintiff company more than ‘three months clear notice in writing’ of its intention to terminate the agreement [see: Exhibit P(8)] and thereafter vacating the premises.

In this regard plaintiff’s counsel forcefully submits that the meaning of Clause 10 is clear and has no application to the prevailing circumstances insofar as the clause may be invoked only after ‘the expiry of (the) original leasing agreement’ which counsel claims is for a minimum term of five (5) years.

The function of a court in construing a written contract is conveniently summarised by Henry J.A in H.P. Kasabia Bros. Ltd. v. Reddy Construction Ltd. (1977) 23 FLR 235 when his lordship said at p.255 :

‘......the express words of the contract must first be construed in the surrounding circumstances but not on the basis of what the parties may have said was their intention at the time. Nor can any prior or subsequent conduct determine the meaning of their written contract unless there is more than one way in which the contract can be construed, that is unless there is an ambiguity in the way in which the terms are recorded in the event subsequent conduct may be looked at. The paramount task of the court is to consider the express words used, considering them, of course, in the context of the whole of the provisions in the writing and the relevant background. It is beside the point that the parties may consider their obligations to be different from the express terms of the recording instrument. That can only be a matter of rectification or perhaps estoppel. If the words are capable of being given a meaning then that is the intention and obligation in accordance with the writing.’

If I may say so Clause 10 is unfortunately worded in that, on one reading, it purports to be a termination clause that only becomes operative upon expiry of the lease. This is a contradiction in terms in so far as a lease that has expired through effluxion of time is incapable of being terminated unless it is automatically renewed or extended by mutual agreement of the parties (see: Clause 9). Quite simply there would be nothing to terminate!

When pressed with this apparent ‘contradiction in terms’ plaintiff’s counsel, at first, suggested that the clause may not have been intended for the benefit of the defendant company at all or, alternatively, the clause imposed a compulsory minimum three (3) month extension of the lease in the event that there was a ‘holding over’ after it had expired.

I cannot accept that such is or could be the intention or meaning of Clause 10 which plainly provides for the termination of the agreement by the giving of a written notice by either party. Moreso where Clause 9 expressly grants to the defendant company an option to renew the lease exercisable in writing ‘three calendar months before the expiration of the term’.

Needless to say if the construction suggested by plaintiff’s counsel is correct then a number of Clauses in the indenture which expressly contemplates ‘..the sooner determination of the term hereby created..’ would be rendered meaningless egs Clause 4(3) on page 1, Clauses 7(b)(ii) & 11 on pages 2 & 3 and Clause 18(4) on page 5.

Defence counsel for his part accepts that in order for the clause to make any sense and be workable it is necessary ‘to delete or ignore the last six (6) words’ namely, the phrase ‘.....upon expiry of (the) original leasing agreement’ . This would have the effect of enabling either party to the indenture to determine the agreement (during its existence) by giving not less than three months written notice to the other party.

Furthermore Counsel argues that even if the retention by the defendant company of the keys of the rented premises could be said to amount to a ‘holding over’ under the lease (which I very much doubt) so as to enable the lease thereafter to be terminated by notice, such ‘holding over’ would, at most, be on a monthly basis and therefore determinable on a month’s notice [see: Section 89 (1) (b) of the Property Law Act (Cap. 130)].

Having carefully considered the competing submissions I accept the submissions of defence counsel which not only gives effect to the substance of the clause but also avoids the manifest absurdity that arises from attempting to give some meaning to the phrase : ‘...upon expiry of original leasing agreement’.

In my view the last six (6) words of Clause 10 are, in the words of Denning L.J in Nicolene Ltd v Simmonds (1953) 1 All E R 822 at p.826:

‘...so vague and uncertain as to be incapable of any precise meaning. (They are) clearly severable from the rest of the (clause), and can be rejected without impairing the sense or reasonableness of the (clause) as a whole, and it should be so rejected.’

Such being the meaning of Clause 10, I am more than satisfied from the evidence including the plaintiff company’s letter dated 10th August 1998 and the undisputed fact that the plaintiff company vacated the premises at the end of December 1998 and paid rent up till 31st December 1998, that there has been a lawful termination of the lease pursuant to Clause 10. On this ground too, the plaintiff company’s claim cannot succeed.

For the foregoing reasons the claim is dismissed with costs which are summarily fixed at $750.00.

D. V. Fatiaki
JUDGE

At Labasa,
20th May, 2002.