Mani v Director of Lands [2004] FJHC 237; HBC124J.2001L (20 August 2004)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC124 OF 2001L

CHANDRA MANI

V

DIRECTOR OF LANDS and

ATTORNEY GENERAL

Gates J.

Mr J. Sharma for the Plaintiff
Mr S. Kumar and Mr A. Tuilevuka for the Defendants

21 September, 21 November 2001
20 August 2004

JUDGMENT

Originating Summons seeking declaratory orders; Agricultural Landlord and Tenant Act Cap 270 [ALTA]; State Leases; rent; review clause; absent agreement, procedure for application to tribunal for re-assessment; time limits; whether notice to be given before end of relevant rent renew cycle; unilateral re-assessment by landlord; default in making application to tribunal; whether imposition of conditions for grant of consent to transfer by Director of Lands amounted to an unreasonable withholding of consent; section 94 Property Law Act Cap 130; purpose of provision; consent and indorsement; whether insistence on prior clearance of disputed rent arrears in the nature of a fine or penalty; tenant’s entitlement to an extension of State lease under ALTA; costs, special order for executrix.

Introduction

[1] The chief issue here is whether the Director of Lands could insist on the prior clearance of rent arrears arising from increases made unilaterally by the Director, before indorsing his consent to an assignment of a State Lease. Second, could the Director increase the rent for a lease subject to ALTA, without applying to the tribunal?

[2] The plaintiff seeks the following declarations and orders by originating summons:

"[i] A declaration that the rental for the State Lease Number 8199 covered by LD Ref 4/1/1557 is at present $ 295.00 per annum with effect from 1st April, 1983 in the absence of any agreement of the parties or assessment by the Agricultural Landlord and Tenant Tribunal and the defendants cannot demand any arrears in excess of the sum of $ 295.00 per annum.

[ii] A declaration that having failed to reach agreement from 1993 to date on an increased rental for State Lease Number 8199 or an order of the Agricultural Landlord and Tenant Tribunal allowing or ordering any increase the defendants are only entitled to seek a re-assessment under the terms of the Agricultural Landlord and Tenant Act Cap 270 on next 5th year anniversary of the said lease which would fall on 1st April, 2003.

[iii] A declaration that the plaintiff is entitled to an extension of State Lease Number 8199 for 20 years in terms of Agricultural Landlord and Tenant Act with effect from 1st January, 1996 and the defendants should process the same forthwith.

[iv] A declaration that the imposition of the conditions on grant of consent and endorsement thereof by the 1st defendant contained in the letter dated 23rd February, 2000 is tantamount to an unreasonable withholding of consent and is unlawful and the defendants should proceed to grant or endorse the consent forthwith.

[v] An order that the defendants pay the plaintiffs costs of these proceedings on a solicitor/client and/or full indemnity basis."

[3] The plaintiff deposed to an affidavit in support, sworn on 7 April 2001. The defendants filed an affidavit in opposition, that of Setefano Rauto, a Senior Valuer of the Lands and Survey Department of Lautoka, sworn on 27 August 2001. The plaintiff made answer with a further affidavit, sworn on 8 September 2001.

Background

[4] The dispute concerns State Lease No. 8199. This lease extends over land described as "part of Rarawai and Vunisamaloa formerly CT7822 (Farm 1281)" consisting of an area of 21 acres and 14 perches being Lot 13 on Plan BA 2353. The lease had been granted to the plaintiff’s father Chinsamy on 1 April 1973. Chinsamy died testate on 19 May 1976. By his will he had appointed the plaintiff as his sole executrix and trustee.

[5] The lease was granted for a term of 22 years and 9 months. Annual rental was to be $105.00. By article 1 the rent could be re-assessed in the years 1978, 1983, 1988, and 1993, "to a maximum not exceeding six (6) per centum of the unimproved value of the land." By article 30 the contract was made subject to the provisions of the Agricultural Landlord and Tenant Act (ALTA). Indeed the conditions of the lease dovetailed in with the requirements of the Act.

[6] In 1984 a variation was noted on the registered lease marking the raising of the rental to $295.00 from 1.4.83. No other rent increases were noted. The plaintiff disputes the lawfulness of any further increases upon which the Director of Lands now insists as a condition of his indorsement of his consent to a requested transfer of the lease.

[7] The plaintiff has been trying to wind up the estate. This has involved other court proceedings. They are not relevant to the present matter, save that the beneficiaries were permitted by the High Court to put in offers for the lease and were allowed to outbid any tenders made. One of the beneficiaries, Florence Rajmani Kumaran, now a Canadian citizen, eventually put in the highest tender. Application was accordingly made to the Minister of Lands under the Land Sales Act for consent to the sale of the lease by the estate to Florence. This was granted on 29 March 1999 and extended further subsequently.

[8] On 3 December 1999 application was made to the Director of Lands for his consent to the transfer of the lease to Florence. The Director gave his consent. By letter of 23 February 2000 he wrote to the solicitors for the estate giving his consent to the transfer to Florence. However the letter stated his indorsement of the transfer document was to be subject to three conditions.

[9] They were:

"a) acceptance of annual rental of $1,528-00 from 1st April, 1993.

b) payment of a sum of $11,374-65 being rental arrears for the period ending 30th June, 2000.

c) an undertaking by the transferee that she will abide by the Tribunal ruling in respect of rental increased to $2,370 per annum with effect from 1st April, 1998."

[10] The estate solicitors protested these conditions and queried whether there had been any Tribunal ruling permitting such increases. The solicitors of the estate asked for the details of when the initial notices of re-assessment of rental for 1993 and 1998 were sent, to whom, and to which address. They also asked if the assessment had been accepted by the lessee, and if not whether the assessment was made by the Tribunal. Some answers, but not all, were provided by the Director’s officers.

Rent review procedure

[11] The contract is made specifically subject to ALTA. ALTA prescribes the procedure for the reassessment of rents. Section 9(1) (g)(i) provides:

"9. (1) The following conditions and covenants shall be implied in every contract of tenancy of an agricultural holding subsisting at or after the commencement of this Act:

(g) on the part of both (tenant and landlord)

(i) in relation to contracts of tenancy made after the commencement of this Act, that the rent shall be liable to re-assessment at the expiry of the fifth year of the term of the tenancy and thereafter at the expiry of each successive period of five years, on either party to the agreement serving notice on the other party at least three months prior to the expiry of the five-yearly period that he requires the rent to be re-assessed;"

[12] The functions of the tribunal are set out in section 22. Section 22(1)(a) provides in this regard:

"22. (1) In respect of its agricultural district, a tribunal may, upon the application of a landlord or a tenant of an agricultural holding

1. subject to the provisions of subsection (2), assess, fix and certify the maximum rent to be paid in respect of such holding and specify the date from which such assessment is to have effect;"
   

[13] Application can be made by the tenant or the landlord, if they cannot agree upon the re-assessment, whereupon the tribunal will assess, fix and certify the rent after investigating the application [section 24]. The tribunal will cause notice of the date, time, and place fixed for investigating the application. The investigation will then proceed following due notice [section 25].

[14] The lease contract was subject to the provisions of ALTA. In order to obtain a re-assessment of the rent, the landlord could first try to obtain agreement to the proposed increase by negotiation with the tenant. There is no evidence put forward of any such negotiation or agreement having taking place. In the absence of agreement the parties would have to employ the procedures of the Agricultural Tribunal in order to obtain a re-assessment, which could then be fixed and certified. Article 30 of the lease makes all disputes subject to the provisions of ALTA, but ALTA is to be followed also by virtue of section 9(2) which states:

"This contract is subject to the provisions of the Agricultural Landlord and Tenant Act, and may only be determined, whether during its currency or at the end of its term, in accordance with such provisions. All disputes and differences whatsoever arising out of this contract, for the decision of which that Act makes provision, shall be decided in accordance with such provisions.". (Section amended by 21 of 1967, s. 4 and 35 of 1976, s. 7.)

[15] No documentary evidence has been exhibited by the landlord, showing that the rent had been further increased by the tribunal following proper procedures beyond the agreed increase of 1.4.83. Mr Rauto in his evidence for the defendants says the rent was re-assessed in 1988 "in accordance with the terms of the lease", and increased to $382.00 p.a. He went on "which re-assessment was done internally by the Lands Department valuers."

[16] He said a notice had been sent to the plaintiff C/- Koronubu Sector office (Farm 1281) FSC, Ba. A reminder was sent out he said, "the plaintiff however did not bother to acknowledge receipt of the reminder, nor did she bother to reply to it." Silence is not necessarily consonant with agreement. What information was there that she had received the notice, and was she properly served in compliance with ALTA? The landlord should have proceeded further and applied to the Agricultural Tribunal to have the rent re-assessed in accordance with the provisions of the Act. There was no power or right for the landlord himself to re-assess the rent unilaterally or by reason of the tenant’s supposed default.

[17] Therefore the purported increase of rent in 1988 was unlawful. No arrears can be claimed from what was an illegal re-assessment, in compliance neither with the lease document or ALTA.

[18] When the date of the next rent review came along, 1992, a notice of re-assessment was said to have been sent to the plaintiff. According to the Divisional Surveyor Western in his letter of 27 June 2000 to the plaintiff’s solicitors this rental re-assessment was also "done departmentally". He said the lessee had not so far accepted the 1993 and 1998 re-assessed rental. The plaintiff exhibited a standard letter of 2.6.93 in which the Director said that in view of the failure to return the acceptance slip, application would be made to the Agricultural Tribunal for the rent to be assessed, fixed and certified. This correctly set out the next step in the re-assessment procedure.

[19] But there is no evidence that such a step was taken, that such an application was ever made to the tribunal either for the 1993 review or for that of 1998. In 1993 the rent was re-assessed at $1,528 p.a. and in 1998 at $2,370 p.a.. These assessments were done internally, within the Department of Lands and not by the path provided in ALTA that they be done by application, as foreshadowed in the Director’s letter to the tenant, to the Agricultural Tribunal. Therefore none of the assessments for the years 1988, 1993 and 1998 were lawful or enforceable. No arrears could arise therefrom either. There had been lip service paid but otherwise non-compliance with the necessary rent review procedures of ALTA and the contract lease document.

Service of the Notice

[20] For service of a notice on an individual as opposed to an incorporated company service could be effected under section 39 of ALTA:

"(a) by sending it by registered post to the usual or last known place of abode of the person on whom it is to be served; (Inserted by 21 of 1967, s.10) or

(b) by delivering it to the person on whom it is to be served; or

(c) by leaving it at the usual or last known place of abode of that person;"

[21] The evidence of the defendants on this issue was unsatisfactory. Notices were sent to a variety of addresses and on one occasion the file was noted "unclaimed notice served to Vishwa on 16.2.93". No evidence was given as to who Vishwa was, why he was served, or where.

[22] The plaintiff says P.O. Box 535, Ba to which Mr Rauto says the notices were sent in 1993 and 1997, was neither her address nor that of the deceased. The plaintiff’s solicitors discovered all of these matters when the estate intended to sell the lease to Florence and inquiries were made. Even the notice to Vishwa, assuming service to him might have been correct, was short, and therefore defective and non-compliant. Of course non-service or short service is not the governing issue here. There was no provision for unilateral increase of the rent other than through the processes provided for in ALTA, and service of a notice that the rent had been increased departmentally would not suffice.

[23] It is clear from the express wording of section 9(1)(g)(i) that the notice requiring re-assessment of rent must be served on the tenant "at least three months prior to the expiry of the five-yearly period..." Notice could therefore be given earlier than 3 months but not later: First Property Growth Partnership LP v Royal and Sun Alliance Property Services Ltd [2003] 1 All ER 533. The statutory words imported into the lease contract are straightforward and lack ambiguity. It is not necessary for a construction to be sought as to the meaning that the words were intended to convey separate from their plain meaning: Mannai Investment Co Ltd v Eagle Star Life Insurance Co Ltd [1997] UKHL 19; [1997] AC 749 at p.779.

[24] In Danam and Company Ltd v AG (unreported) Lautoka High Court Civil Case No. HBC209.02L, 17 October 2003, Byrne J similarly found the Director of Lands’ insistence on a payment being made for non-compliance with a building condition could not be classified as compensation for the breach of a covenant under section 105(1) or (2) of the Property Law Act. His lordship said at paragraph 34 of the judgment:

"Compensation under Section 105 (1) is not payable until notice to forfeit the lease is served on the lessee. No such notice has been served. Likewise Section 105 (2) is inapplicable because the lessor has not proceeded to enforce the right of re-entry or forfeiture. In any event the Director himself does not claim the payment to be compensation but rather penalty for the breach."

[25] In upholding the need for compliance with ALTA’s provisions the Court of Appeal in Janardhan Gounder and Anor. v McElrath and Others (unreported) Civil App No. ABU0020.97, 27 November 1998 said (at p.7):

"it is clear that the tribunal has jurisdiction to reassess rent only in accordance with the implied conditions of the contract of tenancy, and it is plain from a study of section 9(1)(g) that under these conditions a separate notice must be given in respect of each specified 5-year period."

Withholding of consent

[26] The conditions that the Director imposed for his indorsement of consent to the transfer were no doubt intended to secure arrears of rental monies which he considered rightly due to the State. Had proper application been made to the tribunal, with correct service, and even without attendance of the tenant, the tribunal could have assessed, fixed, and certified increases which would in turn have become due. Thus proper returns from State property would have been achieved as a matter of efficient estate management.

[27] If the rent were to have been in arrears and rightly due, still the Director would not have been able to have withheld his consent insisting such conditions should first be met. To have done so would have been to have insisted on a payment in the nature of a penalty or fine.

[28] Section 94 of the Property Law Act Cap 130 provides:

"94. In all leases containing a covenant, condition or agreement that the lessee shall not, without the licence or consent of the lessor, assign, underlet, part with the possession or dispose of the demised premises or any part thereof, that covenant, condition or agreement shall, unless the lease contains an express provision to the contrary, be deemed to be subject to a proviso to the effect that no fine or sum of money in the nature of a fine shall be payable for or in respect of any such licence or consent; but this proviso shall not preclude the right to require the payment of a reasonable sum in respect of any legal or other expenses incurred in relation to the licence or consent."

[29] Section 94 applies to all leases in Fiji requiring consent: Wagner v NLTB [1976] 22 Fiji LR 45 at p.49-50. There has been no express provision to the contrary, and section 94 must be deemed to be implied in the lease: Danam (supra at para 35). A right to impose a pecuniary charge will not be inferred: The Queen v Barclay [1881] UKLawRpKQB 178; 8 QBD 306.

[30] It would be unlawful for the Director to seek to claw back increases that might have been due to the State had the ALTA procedures been followed, by insisting on notional arrears at the time of consent to transfer. The opportunity provided in the 5 year cycles had come and gone. If there are any outstanding arrears of the annual rent of $295 p.a. these are likely to be settled without dispute. But if disputed they can be enforced under the provisions of the lease. Article 27 allows for re-entry for any breach of any covenant or condition.

[31] To impose a condition in the nature of a fine amounts to a withholding of consent unreasonably: Jenkins v Price [1907] 2 Ch.229 at p.234. In Comber v Fleet Electrics Ltd [1955] 2 All ER 161 the tenant applied for the landlord’s consent to assignment of its lease and to a change of user. The landlord insisted as a condition of granting consent, of payment of half the tenant’s share of local authority compensation for a road widening scheme. The court held the undertaking by the tenant to pay the landlord such a share to be in breach of the English statute, which was similarly worded to that of Fiji’s section 94. The payment being in the nature of a fine was thus unenforceable.

[32] As was said in the Danam case (supra) at para 34:

"In my opinion Section 13 does not assist the Defendant in this case. The letter of 5th April 2001 is clear. Consent to the transfer is given. No condition of payment is attached to the consent. It is attached to the endorsement. The Director has demanded payment from the Plaintiff to endorse his consent on the transfer document but in my judgment neither Clause 3 nor the other provisions of the lease, nor the Crown Lands Act or the Property Law Act empower the Director to demand such a payment."

[33] The purpose of the provision for consent is "in order to protect the lessor from having his premises used or occupied in an indesirable way or by an undesirable tenant or assignee..." per A.L. Smith LJ in Bates v Donaldson [1896] UKLawRpKQB 131; [1896] 2 QB 241 at p.247. In Re Gibbs and Houlder Brothers and Company Ltd’s Lease [1925] 1 Ch.575 Warrington LJ considered the objection must be founded either in the personality of the intended assignee or in the user (at p.585). For instance in Bickel v Duke of Westminster [1976] 3 All ER 801 the Court of Appeal found the withholding of consent so as to prevent the lessees achieving enfranchisement of the leaseholds to be reasonable and to be clearly related to the property the subject matter of the lease. Enfranchisement would have meant the landlord would have lost the freeholds, and hence his remaining interest in the properties.

[34] In Re Gibbs (supra at p.583) Pollock MR thought that the fact that the reason was extraneous to the relationship of landlord and tenant was another factor making refusal unreasonable. The transfer of the lease to Florence here is not connected to any possible enforcement proceedings for arrears of rent from the estate of Chinsamy.

Extension of lease

[35] There is no real contest on this issue. The plaintiff’s lease came to an end on 31 December 1995. By virtue of section 13 of ALTA she is entitled as of right to a single extension for a further term of 20 years. Her lease was in existence before the 1976 amending Act to ALTA came into force.

[36] No evidence has been put forward suggesting that there has been a failure to cultivate the land in a manner consistent with the practice of good husbandry, the only relevant ground for refusing an extension [section 13(1)(a)]. In his affidavit Mr Rauto admits the estate is entitled to a further extension. But he is incorrect in law to state without qualification "extensions are not granted automatically as of right upon the expiry of a preceding term." Denial of the right must be based, in this case, on section 13(1)(a) alone, which disqualification has not been claimed or shown.

[37] The extension would commence on 1 January 1996, not 11 January 1996 as appears, in error perhaps, in Mr Rauto’s affidavit. All of the Director’s correspondence points to an acceptance of an extension to the lease. The rent has been paid by being deducted at source by the Fiji Sugar Corporation Ltd from the sugar harvest proceeds from the farm. If the rent has been paid at the rate fixed unilaterally in 1988 of $382.00 p.a.; the plaintiff might expect a refund for overpayment, the only lawful rent being $295.00 p.a.

[38] The requested Order 3 is one which this court has necessary jurisdiction to make Lotan v Garrick (unreported) Fiji Court of Appeal Civil App. No. 45 of 1984, 24 November 1984 at pp.6-7. The courts will try to synchronise their roles with regard to land subject to ALTA. In a clear case such as this, which is before the court on other issues, it is appropriate to grant the order sought now. The plaintiff is entitled in addition to the relief of an order that the defendants should process the extension of State Lease No. 8199 for 20 years in terms of ALTA with effect from 1 January 1996 forthwith: Abdul Kadir v NLTB (unreported) Fiji Court of Appeal Civil App. No. 79 of 1985, 18 July 1986.

[39] Declaration (i) is granted without amendment. Declaration (ii) is granted with the amendments that 1988 is substituted for 1993, and 2008 for 2003. The parties have liberty to reapply generally and will inform me if agreement has already been reached, or procedures for re-assessment of the rent through an ALTA application have been put in train, for the rent review of 2003 so that this order can be rectified to reflect that situation.

[40] Declaration (iii) and its order should bear the date 1 January 1996. Declaration (iv) and order should have the words "grant or" deleted.

Costs

[41] The defendants oppose an order of costs. The plaintiff’s counsel seeks indeminity costs of $4,000. He argues the proceedings were unnecessary and the plaintiff as executrix was answerable to the beneficiaries for the administration of the estate. The plaintiff is not personally interested in the land. Orders in addition to declarations were being sought.

[42] The defendants officers’ conduct was careless and cavalier in the way that they ignored procedures. These procedures were well known to them, and were referred to in their standard letters to lessees notifying them of applications for re-assessments thereafter to be made to the tribunal. They should have known they had no power to make re-assessments internally, unilaterally, by themselves. However I do not regard the conduct as sufficiently "reprehensible" as in Police Service Commission v Beniamino Naiveli (unreported) FCA Civil App. No. ABU0052.95S where errors were pointed out and ignored, or as an abuse of process "for dragging others to court on the same matter": Jai Krishna & Anor. v FSC and 3 Others (unreported) Lautoka High Court Civil Action No. HBC0383.95L, 18 April 1997, per Lyons J.

[43] I refer to my ruling on costs in Frank R. Eggers Junior v Blue Shield (Pacific) Insurance Ltd (unreported) Lautoka High Court Civil Action HBC0094.97L, 11 March 2003 where I had cause to consider indemnity costs and special orders, and also Mahendra Pal Chaudhry v Laisenia Qarase and 2 Others (unreported) Lautoka High Court Civil Action No. HBC282.01L, 24 April 2002. I am mindful that the costs of enforcing the rights of the estate here have been borne by the estate whose only asset was the farm. From all of these circumstances I conclude a special order therefore is appropriate.

[44] The factual story was long and complicated. Both sides submitted helpful and again lengthy written submissions. Summarily, I order a gross sum pursuant to Order 62 rule 9(4) of $3,000 costs against the defendants.

Result

[45] The declarations and orders are as follows:

[i] A declaration that the rental for the State Lease Number 8199 covered by LD Ref 4/1/1557 is at present $ 295.00 per annum with effect from 1st April, 1983 in the absence of any agreement of the parties or assessment by the Agricultural Landlord and Tenant Tribunal and the defendants cannot demand any arrears in excess of the sum of $ 295.00 per annum.

[ii] A declaration that having failed to reach agreement from 1988 to date on an increased rental for State Lease Number 8199 or an order of the Agricultural Landlord and Tenant Tribunal allowing or ordering any increase the defendants are only entitled to seek a re-assessment under the terms of the Agricultural Landlord and Tenant Act Cap 270 on next 5th year anniversary of the said lease which would fall on 1st April, 2008.

[iii] A declaration that the plaintiff is entitled to an extension of State Lease Number 8199 for 20 years in terms of Agricultural Landlord and Tenant Act with effect from 1st January, 1996 and the defendants should process the same forthwith.

[iv] A declaration that the imposition of the conditions on grant of consent and endorsement thereof by the 1st defendant contained in the letter dated 23rd February, 2000 is tantamount to an unreasonable withholding of consent and is unlawful and the defendants should proceed to endorse the consent forthwith.

[ v] The defendants to bear the plaintiff’s costs of $3,000.

[vi] Liberty to apply generally and for further directions.

A.H.C.T. GATES
JUDGE

Solicitors for the Plaintiff: Messrs A.K. Narayan & Co., Ba
Solicitors for the 1st and 2nd Defendants: Office of the Attorney-General,
Lautoka