Tokomaru Ltd v Port Denerau Marina Ltd [2005] FJHC 676; HBC0145.2004L (29 April 2005)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

CIVIL ACTION NO. HBC0145 OF 2004L

BETWEEN:

TOKOMARU LIMITED
Plaintiff

AND:

PORT DENARAU MARINA LIMITED
Defendant

Date of Hearing: 30 March 2005
Date of Judgment: 29 April 2005

Counsel for the Plaintiff: Mr. M. Daubney, QC with Mr. W. Clarke
Counsel for the Defendant: Mr. S. Kos with Mr. N. Barnes

JUDGMENT

The parties to the above matters seek the determination of two preliminary questions. These questions are:

(a) Whether the sale agreement dated April 1999 between the plaintiff as Vendor on the defendant as Purchaser was and is void ab initio for illegality pursuant to section 6 of the Land Sales Act?

(b) In the event that it is void ab initio for illegality, is the plaintiff thereby entitled to recover possession?

There is no issue between the parties as to the relevant facts.

Background

The plaintiff, Tokomaru Limited (“Tokomaru”) is a Fiji registered company, which is a wholly owed subsidiary of Tabua Investments Limited which in turn is a wholly owed subsidiary of Brierley Investments Limited, a transnational company based in Singapore.

The defendant, Port Denarau Marina Limited (“PDML”) is a Fiji registered company, with a controlling interest held by a non-resident entity, The Skeggs Group Limited.

The plaintiff and the defendant are “non-residents” as that term is defined in the Land Sales Act, Cap. 137.

Tokomaru is the registered lessee from the State of certain property generally known as the Denarau Island Resort.

In April 1999, Tokomaru as Vendor and PDML as Purchaser entered into an agreement (“Sale Agreement”) for the purchase of the Marina at Port Denarau, Nadi, as a going concern for the price of FJ$1 million.

PDML entered into occupation of the land described in the draft sub-leases, Annexure 2 of the Sale Agreement, in or about September 1999 following the settlement of the Sale Agreement.

In accordance with the provisions of the Sale Agreement, Tokomaru as sub-lessor and PDML as sub-lessee entered into various sub-leases with respect to various component parts of the Marina.

It is not in issue that the consent in writing of the Minister for Lands was not obtained pursuant to section 6 of the Land Sales Act, prior to entering into the Sale Agreement and prior to entering the sub-leases.

It is similarly not in dispute that the consent in writing was required from the Minister for Lands prior to the entering into the Sale Agreement and the sub-leases.

Following completion, the sub-leases were registered pursuant to the provisions of the Land Transfer Act.

The Legislation

Section 6 of the Land Sales Act provides:

“6(1) No non-resident or any person acting as his agent shall without the prior consent in writing of the Minister responsible for land matters make any contract to purchase or to take on lease any land:

Provided that nothing contained in this subsection shall operate to require such consent or prevent a non-resident from making any such contract if the land together with any other land in Fiji of such non-resident does not exceed in the aggregate an area of one acre.”

Part V of the Land Transfer Act provides for a system of Torrens title in Fiji. It creates a system whereby by virtue of the registration of, relevantly, a transfer or lease, the then registered proprietor or lessee obtains “indefeasible title”.

The Contract

The following provisions of the contract would appear to be those most relevant to the issues before the court.

“1.1 Definitions

“Assets” means and includes individually and collectively:

........

(f) the rights and benefits under the Sub-Leases.

“authorization” includes:

(a) a consent, registration, filing, agreement, notice of non-objection, notarization, certificate, licence, approval, permit, authority or exemption form, by or with an Authority; and

(b) in relation to anything which an Authority may prohibit or restrict within a specified period, the expiry of that period without intervention or action.

“authority” includes any government, any semi or a local government, any statutory, public or any other Person, authority, instrumentality or body having jurisdiction over the Leased Properties or the Business or anything in relation to them.

“Leases” means:

(a) the Wet Lease;

(b) the Marina Services Site Lease; and

(c) the Terminal Site Lease.

“Marina Services Site Lease” means the Lease to be entered into between the Crown and the Vendor in respect of the Marina Services Site, in substantially the same form as the Lease contained within Schedule 6 and on terms and conditions satisfactory to the Vendor in its absolute discretion.

“Sub-Leases” means sub-leases of the leases in favour of the Purchaser (as Sub-Lessee) from the Vendor as (Sub-Lessor) in respect of the Leased Properties, in substantially the same form as the sub-leases contained within Schedule 12 or on such other terms as are agreed between the Vendor and the Purchaser.

2. SALE AND PURCHASE OF ASSETS AND BASIS OF SALE

The Vendor shall: -

(a) sell and assign to the Purchaser, and the Purchaser shall purchase and accept an assignment from the Vendor of the Assets; and

(b) the Vendor shall grant to the Purchaser the Sub-Leases in accordance with this Agreement;

(c) for the Purchase Price free of Encumbrances.

4.1 Conditions Precedent

The Purchaser and the Vendor are only obliged to proceed to Completion if the following conditions are satisfied or waived.

(a) 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 enter into the Sub-Leases as Sub- Lessee,

(iii) are obtained either without condition or on terms reasonably acceptable to the Purchaser and are fully effective as at Completion.

(b) the Vendor at its cost:

................

(iv) obtaining the Authorization of all Authorities to the Sub-Leases.

4.2 Satisfaction of Conditions

(a) The Purchaser and the Vendor must each use its reasonable endeavours to satisfy the Conditions.

(b) The Purchaser and the Vendor must each promptly notify the other in writing if they become aware that a Condition is satisfied or become incapable of being satisfied.

(c) The Purchaser may terminate this Agreement if a Condition, which has not been waived:

(i) is not satisfied on the date specified in the Condition;

(ii) where no date is specified, the Condition is satisfied on or before the Termination Date;

(iii) if any condition is either not satisfied or not waive by the Purchaser on or before 1 March 2000 (“the termination date”) then either Party may terminate this Agreement by giving written notice to that effect to the other Party.

6.6 Sale and Purchase of Assets Interdependent

The sale and purchase of each of the Assets and the granting of the Sub-Leases to the Purchaser are interdependent and shall be completed simultaneously.

10.1 Leases

As soon as practicable after execution of this Agreement, the Vendor shall:

(a) use its best endeavours to obtain all Authorization to enter into the Leases and the Marina Channel Licence.

(b) use its best endeavours to enter into and validly execute the Leases and the Marina Channel Licence with the Crown;

(c) upon the valid execution of the Leases and Marina Channel Licence by the Crown and the obtaining of all necessary Authorizations, to use its best endeavours to attend to registration of the Leases and if possible the Marina Channel Licence with the Titles Office.

10.2 Sub-Lease

The Vendor shall: -

(a) Prior to or immediately upon registration of the Leases with the Titles Office submit the Sub-Leases to the Crown and any other relevant Authority for approval and all necessary Authorizations without conditions or upon terms and conditions satisfactory to the Vendor and the Purchaser.”

The First Question for Determination

The first question for determination by the court is whether the Sale Agreement made between the parties was and is void ab initio for illegality pursuant to section 6 of the Land Sales Act.

Counsel for the Defendant submits that the sale agreement does not infringe section 6 of the Land Sales Act. When considering the words of section 6(1) of the Land Sales Act, the Supreme Court of Fiji in Gonzalez v Akhtar & Ors – Civil Appeal No. CVB0011 of 2002S said at paragraph 112:

“In our opinion, the words of the subsection are clear and unambiguous. No non-resident shall, without the prior consent in writing by the Minister, make any contract to purchase land. Those words mean precisely what they say.”

The words of the section also include “or take on lease any land”. There is no reason why the additional words “or take on lease” do not similarly mean “precisely what they say”.

Counsel for the Defendant submits that the sub-leases provided for in the sale agreement are separate and subsequent instruments. This submission appears to be made notwithstanding the provisions of Clause 6.6 of the sale agreement which specifically provides that the sale and purchase of the assets and the granting of the sub-leases are interdependent and shall be completed simultaneously.

In Sakashita v Concave Investment Limited [1999] 45 FLR 13, Fatiaki J. held that an agreement was in breach of section 6(1) of the Land Sales Act if consent was not obtained prior to entering into the agreement and that any consent obtained after entering into the agreement was of no effect.

The agreement provides in Clause 2 that the Vendor assigned to the Purchaser the assets. The assets are defined in Clause 1 as relevantly including the rights and benefits under the sub-leases. Clause 2 also provides that the Vendor shall grant to the Purchaser the sub-leases in accordance with the agreement and Clause 4.1 sets out conditions precedent. The Clause provides that the Purchaser and the Vendor are only obliged to proceed to completion if the specified conditions precedent are satisfied or waived. Whilst these conditions include the obligation of the Vendor, at its cost, to obtain the authorization of all authorities to the sub-leases, the agreement was in fact completed which clearly shows that the parties waived the requirement of compliance with any conditions precedent in accordance with the terms of the clause.

Counsel for the Defendant seeks support from paragraph 19 of Gonzalez for the proposition that a conditional contract would not become effective unless and until the condition had been fulfilled. The proposition in paragraph 19 of Gonzalez is dependent upon Butts v O’Dwyer [1952] HCA 74; [1952] 87 CLR 267 at 279 - 280.

The High Court of Australia in Butts was considering the provisions of the New South Wales Crown Lands Consolidation Act 1913. That Act requires the Minister’s consent to be obtained to the transfer of certain land. It was there stated by the Court:

“If the sub-section simply provided that a transfer should not be effected unless the Minister’s consent thereto had been obtained, it would be open to the construction that every memorandum of transfer given without his previous consent should be invalid. But the sub-section also provides that such a transfer shall not be valid unless his consent thereto has been obtained. This provision appears to us to mean that an application may be made for the consent of the Minister not only before but also after the instrument of transfer has been given and that upon obtaining his consent the transfer shall be valid according to its tenor and, in the case of dealings under the Real Property Act, when registered effective to pass the legal estate or interest. In other words the parties may enter into a transfer subject to a condition that is not to become effective unless the Minister’s consent has been obtained.”

Clearly the provisions being considered by the High Court of Australia in Butts are quite different from those contained within section 6(1) of the Land Transfer Act and certainly as that section has been interpreted by Fatiaki J. in Sakashita which requires that the consent be obtained prior to the making of any contract.

It can be without doubt that the agreement was entered into without the consent having been obtained and accordingly, it is without doubt that the agreement is in contravention of the provision of section 6(1) of the Land Sales Act.

It is then necessary to consider the effect of the breach of section 6(1). It is therefore “a contract entered into in breach of s.6 (1) [and] is, in our view a clear example of a contract expressly prohibited by legislation “ – Gonzalez para 118. It follows therefore if the agreement is prohibited by legislation it is illegal.

In Gonzalez the Supreme Court of Fiji referred to Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 411 and at paragraph 125 said:

“Despite the fact that Yango Pastoral did not involve express prohibition, Jacob J. did refer to the principle regarding that doctrine in the following terms. His Honour said at page 430:

“When a statute expressly prohibits the making of a particular contract, a contract made in breach of the prohibition will be illegal, void and unenforceable, unless the statute otherwise provides either expressly or by implication from its language”.”

Section 6(1) expressly prohibits the making of the agreement. The effect of illegality arising as it does where the making of the agreement is expressly prohibited by statute is to avoid the contract ab initio – Archbolds (Freightage) Ltd v S Spanglett Ltd [1961] 1 Q.B. 374).

Counsel for the Defendant submits that if the contract is illegal then by virtue of Sajan Singh v Sardara Ali [1960] A.C. 167 at 177, the property the subject of the agreement remains where it falls.

“In this case, on the facts pleaded and the findings of the trial judge, the plaintiff had a clear cause of action. He had actual possession of the lorry at the moment when the defendant seized it. Despite the illegality of the contract, the property had passed to him by the sale and delivery of the lorry: ......When he commenced this action, he had the right to immediate possession.

Their Lordships think that in these circumstances, he had a claim in detinue. But he had also, as the Court of Appeal has found, a clear claim in trespass – p. 177”.

This decision can be distinguished, as the court pointed out it was a claim in detinue and trespass.

The situation is quite different where the making of the agreement is expressly prohibited by statute. This was not the case in Singh v Ali.

There can be no doubt, if there ever was, in the light of the decision of the Supreme Court of Fiji in Gonzalez that a contract in breach of section 6 of the Land Sales Act is a contract expressly prohibited by statute.

It is of significance that the words of section 6 of the Land Sales Act expressly prohibit the making of the contract. They prohibit the entry into the contract. As stated by Palmer J. in Hunter v Apgar [1989] 35 FLR 180 section 6 prohibits the making of the contract, not the transaction. This distinction was also highlighted by Fatiaki J. in Sakashita v Concave Investment Limited [1995] 45 FLR 13. In Tinsley v Milligan [1993] 3 All E.R. 69, the court was there considering an illegal transaction and the authorities therein relied upon are of little assistance when one is required to consider the effect of a contract expressly prohibited by statute and rendered illegal in its making.

It goes without saying that where a contract is entered into against an express statutory prohibition, it is the entire contract that is rendered illegal in its making.

If it were that the effect of the contract entered into in contravention of section 6 of the Land Sales Act was effective to transfer the property from the Vendor to the Purchaser then the whole purpose of section 6 and the Act generally would be circumvented.

The second question for determination

This question has been framed as follows:

In the event that it (sale agreement) is void ab initio for illegality is Tokomaru thereby entitled to recover possession?

The submissions of the defendant with respect to this question are based solely on the proposition that Port Denarau has obtained and indefeasible title upon registration of the sub-leases.

Part V of the Land Transfer Act creates a system of Torrens Title in Fiji. The effect of that part is to create an indefeasible title upon registration.

The concept is perhaps best described by the Privy Council in Frazer v Walker [1967] NZLR 1069 where it was said:

“It is these sections which, together with those next referred to, confer upon the registered proprietor what has come to be called “indefeasibility of title”. The expression, not used in the Act itself, is a convenient description of the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a registered proprietor enjoys. This concept is central in the system of registration.”

The Privy Council were there dealing with the provisions of section 63 of the Land Transfer Act, 1952 of New Zealand. Provisions which are substantially the same as those in the Land Transfer Act of Fiji. An indefeasible title can be acquired by registration of a void transfer. In this regard, Frazer v Walker adopted Boyd v Wellington Corporation [1924] NZGazLawRp 58; [1924] NZLR 1174.

The Land Transfer Act 1971 was assented to on the 15^th April 1971. The Land Sales Act 1974 gained assent on the 21^st February 1974.

Section 6 of the Land Sales Act does not expressly exclude the operation of the Land Transfer Act however the repeal of an earlier statute by a later statute may be effected either expressly or by necessary implication. Whilst section 3 of the Land Transfer Act provides that that Act prevails over any inconsistent law, such a provision does not protect the Act in which it appears from an implied repeal by later inconsistent legislation.

In South-Eastern Drainage Board (SA) v Savings Bank of South Australia [1939] HCA 40; [1939] 62 CLR 603 Dixon J. said at 625:

“In interpreting any later enactment which might otherwise be construed as affecting land under the Act in a manner inconsistent with the Real Property Act, in order to give effect to sect. 6 the court should, in the absence from the enactment of the prescribed words, treat the general expressions as not including land under the Act. But, if the later enactment contains clear language from which it is plain that its provisions were intended to apply to land under the Act and to apply in a manner inconsistent with the Real Property Act, then they must operate according to their meaning. For the later enactment of the legislature must be given effect at the expense of the earlier.”

The issue was further considered by the High Court of Australia in Travinto Nominees Pty Ltd v Vlattas [1973] HCA 14; [1973] 129 CLR 1 where Gibbs J., when considering the effects of the Industrial Arbitration Act, the terms of which were inconsistent with the indefeasibility provisions of the Real Property Act, said at p. 33, 34:

“There can be no doubt that ss.3 (“proprietor”), 40, 41, 42, 53 and 124 of the Real Property Act have the effect that upon the registration of a lease the lessee obtains a title to the estate or interest specified in the lease notwithstanding that apart from registration the lease would be void and ineffective and that subject to the exceptions mentioned in the statute, none of which is here applicable, that title is immune from attack.. However, the Industrial Arbitration Act, 1940 was passed subsequent to the Real Property Act. According to ordinary principles of construction effect must be given to its provisions notwithstanding any contrary provision in the Real Property Act.”

The issue before the High Court of Australia was, as here, what is the effect of the registration of a void instrument. The court there concluded that the provisions of the later enactment override the inconsistent provisions of the earlier enactment, the Real Property Act.

Counsel for the Defendant submits that the High Court of New Zealand in Housing Corporation of New Zealand v Maori Trustee [1998] 2 NZLR 662 held that a mortgage became indefeasible on registration despite not complying with section 233 of the Maori Affairs Act 1953 (which required mortgages on Maori freehold land to be presented to the Maori Land Court Registrar for noting and endorsement).

There is a clear distinction between the provisions of section 233 of the Maori Affairs Act which merely required the presentation of a mortgage for noting and endorsement and section 6 of the Land Sales Act which requires Ministerial approval prior to the sub-leases being entered into.

In reaching the conclusion that he did, McGechan J. in Housing Corporation of New Zealand v Maori Trustee adopted Breskvar v Wall [1971] 126 CLR 376 which was distinguished by the High Court of Australia in Travinto Nominees Pty Ltd v Vlattas.

The Fiji Court of Appeal in Gonzalez said when describing the Land Sales Act:

“...is expressed in clear terms and, in our opinion, its purpose is to protect Fiji from the acquisition of land by persons thought to be undesirable. At least that is one of its purposes. There are no doubt others but we can understand the extensive public policy reasons for the legislation in question.”

A similar view was held by Fatiaki J. in Sakashita v Concave where he said:

“The fact that such dealings are singled out and made subject to the “prior consent in writing of the Minister responsible for land matters” suggests to my mind, that the Act also has a discernible protective or public policy purpose, namely, the prevention in the public interest, of the uncontrolled alienation of land in Fiji, to and by non-resident.”

The significance of the section was also highlighted by Palmer J. in Hunter v Apgar [1989] 35 FLR 180.

The whole purpose of section 6 of the Land Sales Act would be avoided if its provisions were to be read subject to the provisions of the earlier Land Transfer Act. Such an interpretation does not accord with the intent of section 6 of the Land Sales Act. The public policy significance of section 6 is overwhelming when compared to the recording function of section 223 of the Maori Affairs Act 1953 as considered by McGechan J. in Housing Corporation of New Zealand v Maori Trustee.

Conclusion

The questions before the court for determination are therefore answered.

1. Yes.

2. Yes.

JOHN CONNORS
JUDGE

At Lautoka
29 April 2005