Lautoka City Council v Attorney General of Fiji [2005] FJHC 306; HBC0071.2005 (12 December 2005)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

ACTION NO. HBC0071 OF 2005

BETWEEN:

LAUTOKA CITY COUNCIL
a body corporate duly constituted under the Local Government Act Cap 125
with its registered office at Lautoka.
PLAINTIFF

AND:

THE ATTORNEY GENERAL OF FIJI
on behalf of the Director of Lands.
DEFENDANT

Ms N. Khan for the Plaintiff (o/i S B Patel & Co)
Mr F. Abu for the Defendant

Date of Hearing: 22 July 2005
Date of Submissions: 19 August, 16 September and 23 September 2005
Date of Judgment: 12 December 2005

JUDGMENT OF FINNIGAN J

This is an application by Originating Summons (as amended) for certain declarations and for a refund of a sum of money paid by the Plaintiff to the Defendant. There being no oral hearing time in 2005, the hearing was by written submissions. Both Counsel filed written submissions in accordance with the timetable for the hearing and this is my decision.

The Facts:

Two affidavits were filed and the facts are not in dispute. The Plaintiff is the successor in title to a Crown Lease No 1430, a seventy five year lease that commenced on 1 January 1946. It purported to sell its leasehold interest for which it needs the consent of the Director of Lands. The Director of Lands (through the Divisional Surveyor Western) replied on 17 June 2004. The consent letter stated;

“......consent has been granted to the dealing listed below The necessary consent will be endorsed subject to the following conditions;

1. Payment of $15,992.50 being penalty for non-compliance of building condition.
   
2. Undertaking letter to build within 6 months from the date of transfer.”
   

This arose because the Crown Lease contained the following particular clauses:

4. The lessee shall, within two years from the date of commencement of this lease, (1 January 1946) erect on the land hereby demised, to the satisfaction of the lessor, a building for residential purposes; and such building shall have a minimum floor space, exclusive of the area of any verandah, balcony or porch of ......(sic) square feet and shall be erected at a minimum expenditure of six hundred pounds (£600) exclusive of the expenditure for the erection of any accessory outbuilding.
   

5. ) etc

12. ) ..................

13. The lessee shall maintain and keep in good repair and tenantable condition, to the satisfaction of the lessor, all buildings erected upon the land hereby demised.
    
14. The lessee shall paint any fences erected and the roofs and external walls of the dwelling-house and of all accessory outbuildings erected on the land at intervals of not more than three years to the satisfaction of the lessor; provided that if at the end of that period the external appearance of the buildings or the appearance of any fences is in the opinion of the lessor satisfactory the interval of three years may be increased to such longer period as the lessor may determine.
    
15. ...............
    
16. Default by the lessee in the fulfilment of any covenant or condition expressed or implied herein shall render this lease liable to cancellation by re-entry and possession by the lessor or to the imposition of a penal rent.
    
17. Any building erected on the land hereby demised shall be removable by the lessee within three months after the expiration of the lease; provided that:-
    
    • (i) before the removal of any building the lessee shall have paid all rent owing by him and shall have performed or satisfied all his other obligations to the lessor in respect of the land hereby demised;
      
    • (ii) in the removal of any building the lessee shall not do any avoidable damage to any other buildings or other part of the land hereby demised;
      
    • (iii) immediately after the removal of any building the lessee shall make good all damage occasioned to any other building or other part of the land hereby demised;
      
    • (iv) the lessee shall not remove any building without giving one month’s previous notice in writing to the lessor of his intention to remove it;
      
    • (v) at any time before the expiration of the notice of removal the lessor, by notice in writing given by him to the lessee, may elect to purchase any building comprised in the notice of removal, and any building thus elected to be purchased shall be left by the lessee and shall become the property of the lessor who shall pay to the lessee the fair value thereof to an incoming lessee of the land; and any difference as to the value shall be settled by arbitration in the manner provided by Regulation 20 of the Crown Lands (Leases and Licences) Regulations, 1945.
      
    • (vi) If the lessee applies for a renewal of the lease the provisions of Clause 17 hereof shall be deemed to cease to apply as from the date of the application of the lessee for a renewal of the lease.
      

The facts are simple. The Plaintiff, previously the Lautoka Town Board, built a house on the land and paid the annual rent. In 2002 that house was demolished and the reason now given is that it had become unfit for habitation. The Plaintiff continued paying the full rent. It did not tell the Director of Lands that the house had been demolished. It sold the lease and sought the necessary consent. The Director’s reply is in part set out above. Written submissions went back and forth between the parties about the $15,992.50 penalty. Eventually the Plaintiff paid the money under protest to enable its sale to proceed. It now seeks refund of that money. Its case is that the Director had no right at law to impose that penalty.

In submissions Counsel for the Plaintiff states four issues which he says should be decided in the Plaintiff’s favour. These are:

(i) Whether the Director of Lands had granted its consent to the relevant dealing in land.

(ii) Whether the Director of Lands was entitled to impose conditions in the nature of a penalty or a fine in order that he endorses his consent to a transfer he had consented to.

(iii) Whether Clause 13 of the Crown Lease No 1430 imposed an obligation upon the Plaintiff to rebuild the house that the Plaintiff and/or its predecessors in title had constructed upon the demised land.

(iv) If (which the Plaintiff denies) that Clause 13 of Crown Lease 1430 imposes an obligation to rebuild the house previously constructed upon the demised land whether the right to impose a penal rent is void for uncertainty and whether the sum of $15, 992.50 claimed by Director of Lands from the Plaintiff was in respect of penal rent. (I am not quite sure what this means).

Plaintiff’s Counsel relied upon seven authorities. He supplied full copies of each which is appreciated. Ultimately the decision is a decision in contract with assistance from the authorities with the interpretation. His primary authority is Danam & Co Ltd –v- Attorney General Civil Action No HBC0209.2002L, Judgment 17 October 2003. The Plaintiff in that case sold a Crown Lease and required consent to the sale. Reading from para. 15 of the judgment, the Director “granted his consent to the transfer .... But advised that the consent would not be endorsed on the executed Transfers until current rental had been paid and also until the Plaintiff as transferor had paid $72,000.00 being 20% of the sale price as penalty for non compliance with the building condition in the two leases”.

The Plaintiff refused to pay the $72,000.00 penalty and the Director refused to endorse his consent. The Plaintiff applied to the Court by Originating Summons or a decision whether the Director was entitled to impose the penalty.

Central to the decision was Clause 3 of the Lease which for all practical purposes was the same as Clause 4 in the present case (above). The Plaintiff had not within the first two years of the lease erected the required building. The issue for the Court was whether the Plaintiff’s breach was a continuing breach or a breach “once and for all”. The Court decided it was a single breach and that the Director had already extracted the penalty for that breach from the original lessees before they sold the two leases in question to the Plaintiff. Consequently the Court held that the Director was not entitled to demand a penalty from the Plaintiff for its failure to erect the building before in its turn it on-sold the lease.

The present case is quite different. Here the house was built and neither party had any complaint about the other for many years. Assuming the house was built within two years of 1 January 1946 and was demolished in 2002, it stood for about 54 years. It was then demolished and the Director was not told. So far as I can gather, the Director became aware when the transfer was referred to him for consent. He thereafter granted his consent but said it would not be endorsed until the penalty had been paid and the Plaintiff had undertaken to replace the demolished building.

The Director did not have recourse to Section 105 (1) of the Property Law Act Cap 130, which was highlighted in Danam (above). The Divisional Surveyor Western advised that the Director had consented and would endorse that consent once the two conditions were met. The answer to the Plaintiff’s first issue above is clearly yes. The Director has granted his consent.

The answer to issue (ii) above, whether the Director is entitled to impose a condition for endorsing a consent which he has already granted is set out clearly enough in Danam (above) and in Chandra Mani –v- Director of Lands and Attorney General Civil Action HBC0124.2001L, Judgment 20 August 2004. In the latter case Gates J summarized (at para. 24) the finding of Byrne J in the former case that the insistence by the Director on a payment for non-compliance with a building condition cannot be classified as compensation for the breach of a covenant under Section 105 (1) or (2) of Cap 130. The Court pointed out in both these cases that what the Director did was grant consent and then demand payment for endorsement of his consent. This amounts to imposing a condition in the nature of a fine which amounts to withholding consent unreasonably and is unenforceable.

That however is not the end of the matter as we shall see.

Issue (iii) above is whether Clause 13 (above) imposed an obligation on the Plaintiff to rebuild the house if and when it was demolished. Clause 13 is certainly the appropriate provision, there are no other provisions for this. It must be said therefore that there is in fact no provision in the terms of the lease for what has occurred in the present case. There is only provision (at Clause 14) for painting fences, roofs and external walls of the house itself and of all outbuildings, and (at Clause 17) for removal of the building at the expiration of the lease. There is no provision as for example in Norwich Union Life Insurance Society –v- British Railways Board (1987) 2 EGLR 137, to which Counsel for the Plaintiff has referred me (but which neither of us has been able to find and read). The covenant of the lessee in that case was “to keep the demised premises in good and substantial repair and condition and when necessary to rebuild, reconstruct or replace the same”. Those words were held by the Court to mean what they said. The words in the present lease must also be held to mean what they say and there is no obligation to obtain the satisfaction of the Director to any replacement house, so on its face the lease assumes the house will remain until and beyond the end of the term of the lease (75 years).

Therein lies the clue to the parties intentions. The clauses cited above (strengthened by clauses 5 to 12 which are not cited) make it plain that the lease was for lease of a housing lot with the house to be built by the lessee. Once built the house was to remain and be maintained, and after 75 years be removed unless the lessor chose to buy it, in which case it would have been leased by the next lessee (or removed by the lessor presumably for use elsewhere). The existence of the house (or a house) throughout the term underpins all the clauses 4 to 17 inclusive. Thus, to answer issue (iv) above I hold that clause 13 requires the lessee to keep the house on the land once it has been built to the satisfaction of the lessor. There is no right reserved to the lessee to decide for itself that the house has become uninhabitable and demolish it and not replace it.

What then is the consequence of the unauthorized demolition? That is provided in clause 16. In default of any covenant or condition the lessee is liable to imposition of a penal rent, i.e. a penalty for the default.

In my opinion the present case is different in its facts from Danam and Chandra Mani (above). Here the lessor complied with the condition and built the house, then, years later, demolished it. The Director imposed a penalty as he was entitled to. He did this when he found out about it, when the lease was put before him because the lessee wanted to transfer it, and he gave consent to the transfer. He was entitled to do both. In my view he was entitled to enforce the penalty, which was in the nature of rent by requiring that it be paid by the liable party before the transferee was allowed into possession and the Plaintiff ceased to be liable for rent.

In all this, I have found the submissions of Counsel for the Defendant very helpful and a guide to my conclusions. I have not overlooked them, rather expressed my conclusions in terms of Plaintiff’s Counsel’s submissions to show that even in terms of the Plaintiff’s good submissions the Plaintiff does not have a case.

I therefore decline the declarations sought. Judgment is entered for the Defendant with costs. I assess these summarily at $800.00.

D.D. Finnigan
JUDGE

At Lautoka
12 December 2005